Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 28, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
Indian Laws
Articles
News
Highlights / Catch Notes
Income Tax
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Penalty for concealment of Income u/s 271(1)(c) - claims were ex facie wrong being contrary to fundamental/basic principles of accounts and Act, would not have escaped notice or missed - penalty confirmed - HC
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Revision u/s 263 - no books of accounts maintained in regular course of business and prepared in due discharge of their duties by their Accountant or their C.A, had in fact been produced much-less for examination, as recorded in order of the AO - revision upheld - HC
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Excessive Expenses - transaction with related parties - disallowance u/s 40A(2) - the rate at which, the assessee purchased electricity from M/s OPG Energy Pvt. Ltd., was lower than the tariff fixed by the Tamil Nadu Electricity Board. - no addition - HC
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Cessation of loan liability - waiver of loan taken for purchase of assets - OTS it does not amount to a benefit arising out of business and it is also not even remission of the liability, which could attract Section 41(1) of the Act - HC
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Whether transfer of shares by the assessee is transfer of a capital asset within the meaning of Section 2(14) of the Act or a transfer of business that falls within the ambit of Section 28(va) of the Act - decided against the assessee - HC
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Indexation year for computation of long term capital gain in case of gift of capital asset H Assessee must be treated to hold the capital asset in the year of acquisition of previous year - HC
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Allowability of Scholarship expenditure as business expense - revenue contended that Scholarship was given to only one student namely, Akash Kumar for getting education in U.S.A. - expenditure allowed - HC
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Applicability of section 10A(2)(i) of the Income Tax Act - Date of commencement - Section 10A(2)(i) of the Act shows that it has relevance to industry that has begun to manufacture or produce articles or things or computer software on or after the 1st day of April, 1994 - HC
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Regarding allow-ability of 1/3 of the total expenditure - Once a finding of fact has been recorded that the expenditure is of revenue nature and has been spent wholly and exclusively for the purposes of the business, the same is allowable expenditure and has to be deducted while computing the total income - HC
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Unexplained expenditure u/s 69C of the Income Tax Act - Appellant submitted difference between the excess of expenditure over receipts, should be brought to tax and treated as undisclosed income and the two amounts should not be separately taxed - appeal dismissed - HC
Customs
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Licence for import of raw materials - import of waste/scrap/discarded/ obsolete plastic items. - at the relevant time, the units located in EPZ did not require license for import of raw materials as permitted under the approval of LoP - HC
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Condonation of Delay The appellant was not entitled to the benefit of Section 14 of the Limitation Act - The appeal was barred by limitation by 697 days, which had not been sufficiently explained by the appellant. - SC
Corporate Law
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Petition for Permission to Undertake Business as a Stock Exchange - The effect of the non-disclosure of the buyback agreements to SEBI should be considered having regard to the fact that a genuine attempt has been made by the promoters by tendering an undertaking to the Court that their shareholding together shall not exceed five per cent of the equity capital, notwithstanding the exercise of the options - HC
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Winding up - Stay on Winding up Petition The desire to cash on the lands with a view to fully exploit their potential was not matched with the same approach as far as the creditors of the company are concerned - petition dismissed - HC
Service Tax
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Whether the assessee is a commercial concern or not - Business Auxiliary Service - Classification of establishment - H. P. Ex Servicemen Corporation - matter remanded back for reconsideration - HC
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Insurance services - revenue alleged that the assessee had received the amount - appellant submits that the basis on which Revenue stated that they received payment from PACL, Nayanangal. is not disclosed to them - revenue failed to provide evidence - demand set aside. - AT
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Utilization of Cenvat Credit for payment of service tax paid under Reverse charge mechanism - import of services - prima facie case is against the assessee - stay granted partly - AT
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CENVAT credit - Input Service Distributor - 4 years delay in availing cenvat credit - prima facie case is against the assessee - stay granted partly - AT
Central Excise
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CENVAT Credit - input services - scope of the terms 'means and includes' - Rule 2(l) of CCR - the expression includes cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression means - HC
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Interest from the Date of Deposit on Delayed Refund - there was no error in the order of the Tribunal refusing to grant interest from the date of deposit - HC
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Classification of Goods - manufacturing of stainless steel paddy parboiling and drier plant Revenue was of the view that the goods attract the excise duty and are not exempted from the duty, as these goods fall in CET Heading 8419 and not 8437 - assessee may clear goods without payment of duty subject of furnishing of bod - revenue to issue SCN - HC
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Export of goods - proof of export - The Central Excise Officer has to record a satisfaction that the claim is in order - It is question of fact as to whether the claim is genuine or not - Such satisfaction can be recorded even in the absence of original/duplicate copy of ARE-1 Form - matter remanded bak - HC
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Penalty u/s 11AC abatement claimed u/s 3A towards non production under compounded levy scheme - The authorities do not have discretion in fixing the penalty, and that where the penalty is impermissible, it cannot be levied equal to the duty under Section 11AC of the Act - HC
Case Laws:
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Income Tax
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2013 (9) TMI 902
Search and seizure - compliance of directions issued by the High Court in [2011 (5) TMI 620 - ORISSA HIGH COURT] When Petitioner complied with the orders/directions of the court Held that:- Petitioner complied with the orders and directions issued by the High Court Petitioner re-deposited the amount seized from the bank account of the respondent-company - Petitioner has completed the proceedings under Section 132(5) of the Income tax Act Petition becomes infructous
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2013 (9) TMI 901
Penalty for concealment of Income u/s 271(1)(c) of the Income Tax Act Held that:- levy of penalty u/s 271(1)(c) of the Act in respect of loss on account of investments, vehicle and disallowance under Section 43B confirmed - The claims were ex facie wrong being contrary to fundamental/basic principles of accounts and Act, would not have escaped notice or missed. - Decided in favor of revenue. However, penalty was not justified and proper on the wrong claim for depreciation of plant and machinery as the legal position on the said claim was debatable. - decided in favor of assessee.
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2013 (9) TMI 900
Excessive expenses - disallowance u/s 40A(2) - Revenue contended that the State Advised Price [S.A.P.] is determined on the basis of the price recommended by the assessee(s) after the finalisation of accounts and, therefore, the differential amount between S.A.P. and S.M.P. would constitute appropriation of profits and not expenditure/expense under Section 37 of the Act. Held that:- None of these questions have been examined by the Authorities below. These questions are required to be examined because, in these case, we are not only concerned with the applicability of Section 40A(2) of the Act but we are primarily required to consider whether the said differential payment constitutes an expense or distribution of profits? Ordinarily, we would not have remitted these matters, particularly when they are for Assessment Year 1992-1993, but, for the fact that this issue is going to arise repeatedly in future. It will also help the assessee(s) in a way that they will have to re-write their accounts in future depending upon the outcome of this litigation. Therefore, in the interest of justice, matter remanded back.
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2013 (9) TMI 899
Deduction u/s 80HHC of the Income Tax Act profits on transfer of DEPB - Held that:- It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee In view of the decision in Topman Exports Vs. Commissioner of Income-Tax [2012 (2) TMI 100 - SUPREME COURT OF INDIA] matter remanded back - Decided in favor of Assessee.
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2013 (9) TMI 898
Rejection of books of accounts u/s 145(3) of the Income Tax Act Held that:- Reliance has been placed upon the judgment of Honble Supreme Court in the case of Keshav Mills Ltd v. CIT [1953 (1) TMI 5 - SUPREME Court] and CIT vs. A. Krishnaswamy Mudaliar [1964 (4) TMI 7 - SUPREME Court], wherein it has been held that measurement of periodic income is, to some extent, a matter of estimation, based on certain acceptable principle of accounting. The computation of business income may differ depending upon the method of accounting employed. It is not the legal position that on identical facts, the same amount of income should be assessable in the cases of all the assessees - Adoption of the gross profit of account would not depend only upon the net profit. In the present case, from the chart of the gross profit, it is found that the gross profit was increasing progressively from the years 2007-08 to 2009-2010 Decided against the Revenue.
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2013 (9) TMI 897
Revision u/s 263 of the Income Tax Act - erroneous nor prejudicial order - non availability of records - Plea of the assessee is that when books of accounts had been impounded on 27.3.2008 (Annexure A-6) during survey proceedings under Section 133-A of the Act, the Assessee was handicapped to put up its case effectively and thus entire exercise by the revenue under Section 263 of the 1961 Act, was a farce. Held that:- This plea has no merit. Consistent case of the appellant is that computer backup of all the books/accounts whatever the Assessee had, was available with them. In this backdrop, mere impounding of books of accounts vide Annexure A-6 and their retention with the authorities vide Annexure A-12 had caused no prejudice to the appellant in conduct of proceedings under Section 263 of the 1961 Act. Plea of the appellant that contents of show cause notice under Section 263 of the 1961 Act and the findings arrived at by the Commissioner on conclusion of these proceedings are divergent again is mis-founded. Assessing Officer should have rejected the books of accounts under Section 145 of 1961 Act or could have made proper examination and scrutiny of the same, in whatsoever form those had been produced before him. It is evident by now that no books of accounts maintained in regular course of business and prepared in due discharge of their duties by their Accountant or their C.A, had in fact been produced much-less for examination, as recorded in order of the Assessing Officer Decided against the Assessee.
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2013 (9) TMI 896
Correctness of order of Settlement commission passed u/s 245D of the Income Tax Act Held that:- With some hesitation, we record that the order under challenge is cryptic and is not focused on the issues and contentions, which were raised by the petitioners and by the Commissioner. - The Settlement Commission has rejected the applications for all assessment years, without referring to facts and issues relating to each year. Revenue accepted that there were some factual errors in the impugned order like opening and closing stock were on record, and accepts that the Commissioner had not objected to inflation of stock issue. However, he has submitted that assessment proceedings under Section 153A read with Section 143(3) are pending and all issues and questions can be thrashed out and decided there. - The submission of the revenue cannot accepted as the petitioners have a right to invoke jurisdiction of the Settlement Commission, which is provided under the statute, i.e., Income Tax Act. The petitioners must come clean and be honest and admit their faults and cannot but declare their true and full undisclosed income. However, their plea and explanation that their declarations are genuine and truthful, cannot be rejected without a legitimate and fair consideration - The matter is remanded to the Settlement commission again.
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2013 (9) TMI 895
Difference in exchange rate due to conversion of foreign currency into Indian rupee had been kept in the exchange reserve account Taxability of credit figure in the exchange reserve account Held that:- It is of the capital nature and is not allowable as deduction as per the ratio laid down in the case of Atlas Cycle Industries vs. CIT [2004 (2) TMI 21 - PUNJAB AND HARYANA High Court] - Also, in a different case, fluctuation in rate of exchange amounts to capital expenditure as per the ratio laid down in the case of Seshasayee Board Ltd. Vs. CIT [1997 (11) TMI 48 - MADRAS High Court] the assessee could not provide any details as directed by the Tribunal and at the time of hearing - assets tried to submit the details before the high court - matter remanded back for reconsideration. Allowance of Interest as expenditure in which year - Assessee has taken the overdraft in the earlier years and claimed the interest payment during the assessment year under consideration Held that:- Once the assessee has claimed the payment and debited the same then at least the same should have been allowed in any year - Once the payment is genuine and debited in the books of account, the same is allowable.
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2013 (9) TMI 894
Excessive Expenses - transaction with related parties - disallowance u/s 40A(2) - Price paid by the assessee to sister concern for electricity is excessive or not Held that:- Tribunal viewed that such an isolated instance could not be a basis for making a meaningful comparison. On facts, thus, the Income Tax Appellate Tribunal held that the supplier had reasons for charging different rates. The Income Tax Appellate Tribunal further pointed out that the rate at which, the assessee purchased electricity from M/s OPG Energy Pvt. Ltd., was lower than the tariff fixed by the Tamil Nadu Electricity Board. Decided against the Revenue.
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2013 (9) TMI 893
Interpretation of provisions of Section 115-J Minimum alternate tax (MAT) - the stand of the respondent-assessee that they were entitled to carry forward of unabsorbed losses, including investment allowance in view of the fact that income taxable had been computed on book profits under Section 115-J and not under the normal provisions. - Held that:- Reliance has been placed upon the judgment in the case of Karnataka Small Scale Industries Development Corporation Limited versus Commissioner of Income Tax, 2002 [2002 (12) TMI 4 - SUPREME Court], wherein it has been held that Section 115-J (1) commences with the non-obstante clause and provides for two stage assessment. The first stage requires computation of income under the normal provisions and the second stage requires computation of book profits as per provisions of Section 115-J. In case the income computed under the normal provisions is less than 30% of the book profits, then the assessees deemed total income chargeable to tax for the relevant previous year would be equal to 30% of the book profits. At the first stage, profits are computed under the normal provisions and deductions allowable under the Act have to be taken into consideration. The deduction, which are allowed, do not get disturbed or obliterated even if the assessee pays tax on the book profits under Section 115-J. Thus, when Section 115-J is invoked and is applied, it does not affect the computation made under the normal provisions. They stand on their own legs and do not get effected. Accordingly, the unabsorbed loses, including investment allowance, which were duly taken into consideration and accounted for while computing tax under the normal provisions, do not get displaced or erased and adjustments made have to be given full effect to In the instant case, investment allowance, etc. which has to be adjusted while computing the deduction under the normal provisions will not be allowed to be carried forward Decided in favor of Revenue.
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2013 (9) TMI 892
Taxability of interest received as compensation - Assessee received an interest of Rs. 1,17,49,161/- in the financial year 2004-05 from Oriental Bank of Commerce, Sangrur on FDRs/MIDRs, which had been made out of the compensation amount from the disputed property - Assessee submitted that the interest had been released on submission of security bond and he was not the final owner of the amount as court proceedings were still going on Held that:- Relying upon the judgment in the case of CIT v. Karanbir Singh, [2007 (12) TMI 184 - PUNJAB AND HARYANA HIGH COURT] interest is chageable to tax matter remanded back for reconsideration - Decided in favor of Revenue.
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2013 (9) TMI 891
Addition u/s 68 as unexplained cash credit Held that:- The Tribunal has not discussed and found whether repayments were made in cash or otherwise, or whether the entire amount were repaid. The test laid down by Supreme Court in CIT Vs. P. Mohanakala [2007 (5) TMI 192 - SUPREME Court] does not appear to be satisfied. The assessee has not discharged the burden placed on him and did not prove the genuineness of transactions found to be circular transactions by the assessee Matter remanded to Commissioner(A) to decide afresh in the light of above observation Decided in favor of Revenue.
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2013 (9) TMI 890
Cessation of loan liability - waiver of loan - addition under section 41(1) - one time settlement scheme Held that:- Rs.4.93 Crores stand waived off in furtherance to One Time Settlement resulting in cessation of liability could not be treated as revenue receipt under Section 41(1) of the Act Reliance has been placed upon the judgment in the case Iskraemeco Rent Limited Vs CIT reported in [2010 (11) TMI 43 - Madras High Court], wherein it has been held that assessee had taken loan for purchase of capital asset and later on the loan was waived off by the Bank, it does not amount to a benefit arising out of business and it is also not even remission of the liability, which could attract Section 41(1) of the Act Decided against the Revenue.
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2013 (9) TMI 889
Penalty u/s 271(1)(c) of the Income Tax Act for concealment of Income - Assessee had purchased the capital gain bond in NABARD worth Rs.20.00 lacs, the same was duly disclosed in the return. - proof of investment Held that:- When the assessee has shown the investment, then the purchases are genuine and the same cannot be treated as bogus - The sale proceedings were made through the bank channel as M/s. CMS Security Ltd., was duly registered in the Stock Exchange. The confirmatory letter dated 16.08.2004 received from M/s. CMS Security Ltd., was produced before AO, where it was confirmed that they have sold the instruments. The only fault of the assessee is that the assessee's name did not appear in the record of the broker. For this act, the assessee cannot be held responsible as there is no fault on her part. In the instant case, there is no concealment on the part of the assessee regarding the transactions - If the income as per law is exempted, then the offer of the assessee is meaningless as the law will prevail and will supersede the "offer" made by the assessee. In the instant case, surrender was to buy the peace as the assessee is not an expert in income tax matter. The Department cannot take the advantage of the ignorance of the assessee as per CBDT Circulr No.14(XL-35)/1955 dated 01.04.1955 mentioned in Parekh Brothers Versus Commissioner Of Income-Tax, Kerala II, Ernakulam, And Others [1983 (8) TMI 17 - KERALA High Court] Decided against the Revenue.
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2013 (9) TMI 888
Whether transfer of shares by the assessee is transfer of a capital asset within the meaning of Section 2(14) of the Act or a transfer of business that falls within the ambit of Section 28(va) of the Act Held that:- Transaction in question was not mere transfer of capital asset within the meaning of section 2(14) of the Act but was in fact transfer of business as it was the assessee who was prevented from doing business - A cursory perusal of the agreement between the assessee and the purchaser leads to a singular conclusion that the agreement is not an innocent transfer of share holdings that would place it within section 2(14) of the Act read with the explanation but a transfer of the business with all pervasive control being entrusted to the purchaser to the complete and absolute exclusion of the seller whether as a share holder or for its management and control Appeal is dismissed Decided against the Assessee.
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2013 (9) TMI 887
Whether the provision of warranty as claimed is based upon scientific and rational basis or not Held that:- Provision for warranty on the basis of principle for matching can be allowed but the amount claimed should have some rational and scientific basis and it cannot be on mere ipsi dixit Reliance has been placed upon the judgment in the case of Woodward Governor India Limited [2010 (1) TMI 33 - DELHI HIGH COURT], wherein it has been held that provision for warranty has to be on actuarial valuation. Matter requires in-depth and proper factual examination For, the purpose, the matter remitted to the Assessing Officer, who will examine the provision for warranty as claimed, including the actual warranty expenses incurred during the year and then determine and decide the quantum of the claim.
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2013 (9) TMI 886
Indexation year for computation of long term capital gain in case of gift of capital asset Held that:- Reliance has been placed upon the judgment in the case of Commissioner of Income Tax v. Manjula J. Shah,[ 2011 (10) TMI 406 - BOMBAY HIGH COURT], wherein it has been held that indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was 'held by the assessee'. Since the expression 'held by the assessee' is not defined under Section 48 of the Act, that expression has to be understood as defined under Section 2 of the Act. Explanation 1(i)(b) to Section 2(42A) of the Act provides that in determining the period for which an asset is held by an assessee under a gift, the period for which the said asset was held by the previous owner shall be included Assessee must be treated to hold the capital asset in the year of acquisition of previous year - The counsel for the revenue is not able to point out any distinguishing features in this case which would require not following the binding decision of this court in Manjula Shah Decided against the Revenue.
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2013 (9) TMI 885
Power of Tribunal to consider amended grounds of appeal - section 254 - tax-ability of rental income Held that:- Amended ground of appeal filed on 25.4.2007 was allowed as has been noticed by the Tribunal in its order dated 12.3.2010 - However, a perusal of the order dated 25.10.2010 which has been impugned in this appeal shows that the Tribunal failed to consider the amended ground of appeal - The order dated 25.10.2010 passed by the Tribunal is set aside and the matter is remanded to the Tribunal for passing a order afresh after considering the amended ground of appeal in accordance with law.
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2013 (9) TMI 884
Allowability of Scholarship expenditure as business expense - revenue contended that Scholarship was given to only one student namely, Akash Kumar for getting education in U.S.A. - according to revenue the said expenditure cannot be claimed as business expenditure. Held that:- Scholarship scheme resulted in higher receipt in the subsequent years, which shows that business has increased tremendously. It means that by providing foreign Scholarship, more students were attracted. It is a business strategy/intelligentsia - Yardstick will have to be seen from the businessman's point of view, as observed in the case of CIT v. M/S. Walchand & Co. (Pvt.) Ltd.[2013 (9) TMI 450 - ITAT AHMEDABAD] Expenditure allowed Decided against the Revenue.
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2013 (9) TMI 883
Applicability of section 10A(2)(i) of the Income Tax Act - Software Technology Park (STPI) Unit the contention of the Revenue is that the assessee, which is already in existence cannot take the benefit of Section 10A of the Act - AO denied the exemption on the ground that assessee commenced its business even before the date of registration i.e., on 27.03.2002 - Held that:- The assessee took advantage of the scheme notified by the Government of India in the Ministry of Commerce and Industry of the "software technology park" and sought for registration as STPI on 2002 - In order to claim deduction, an undertaking in hardware technology park or software technology park must be in existence commencing its production on or after the 1st day of April, 1994. Given the fact that the assessee is not formed by splitting up or transfer to a new business and got registration even since 2002, the fact that it has been in existence ever since 1999, does not militate against the applicability of Section 10A of the Act. The case on hand falls under Section 10A(2)(b) of the Act - Section 10A(2)(i) of the Act shows that it has relevance to industry that has begun to manufacture or produce articles or things or computer software on or after the 1st day of April, 1994 Decided in favor of Assessee.
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2013 (9) TMI 882
Allowability of Research and Development expenditure - CIT(A) observed that expenses can be allowed u/s 35D in three installments Held that:- Section 35-D has no application on the facts of the present case. The assessing officer has not recorded any finding based on any material whatsoever in support of his observation as to applicability of Section 35D of the Act. Regarding allow-ability of 1/3 of the total expenditure - held that:- Expenditure incurred by the assessee was of revenue nature. As per provision of Section 37 of the Act, any expenditure not being expenditure of the nature described under Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly or exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head of "profits and gains of business or profession - Once a finding of fact has been recorded that the expenditure is of revenue nature and has been spent wholly and exclusively for the purposes of the business, the same is allowable expenditure and has to be deducted while computing the total income. Reliance has been placed upon the judgment in the case of Kedarnath Jute Mfg. Co. Ltd. Vs. The Commissioner of Income Tax ( Central) Calcutta [1971 (8) TMI 10 - SUPREME Court], wherein it has been held that Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter - Entire expenditure incurred by the assessee being revenue in nature was allowable and the assessee was entitled to claim the entire expenditure as deduction Decided against the Revenue.
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2013 (9) TMI 881
Time limit for receipt of foreign convertible exchange for deduction u/s 80HHC Time limit for filing an application for extension of time before commissioner Held that:- As per Honble Madras High Court in the case of Sarathy Palayacat Company versus Chief Commissioner of Income Tax and Others, [1998 (10) TMI 5 - MADRAS High Court], it was observed that wide discretion is vested with the Commissioner/Chief Commissioner and the time can be extended on more than one occasion - In Leather Trends Private Limited versus Commissioner of Income Tax and Another, 1995 [1995 (4) TMI 54 - ALLAHABAD High Court], Allahabad High Court has held that rejection of the application should be after giving valid reasons Honble Allahabad High Court in Azad Tobacco Factory Private Limited versus Commissioner of Income Tax and Others, 1997 [1995 (4) TMI 6 - ALLAHABAD High Court], it was viewed that no time limit has been mentioned for moving an application for extension of time under Section 80HHC(2)(a) and it is not necessary that the application should be moved within six months from the end of previous year Decided in favor of Assessee.
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2013 (9) TMI 880
Unexplained expenditure u/s 69C of the Income Tax Act - Appellant submitted difference between the excess of expenditure over receipts, should be brought to tax and treated as undisclosed income and the two amounts should not be separately taxed Held that:- Assessing Officer in the present case did not tax the unaccounted sales and has only taxed unaccounted expenses/expenditure/withdrawals - The appellant has not, in the present case, furnished details or explained nature and purpose behind the expenditure. Some expenses have been incurred towards kabadi etc. Names of persons do find mention but the nature of activities undertaken why and for what purpose the payment was made, are not known. It was for the appellant assessee to produce relevant material or produce the said person to justify the payment and show and establish that the expense was not personal in nature but related to or was pertaining to unaccounted business - Findings of fact recorded by the tribunal cannot be categorized as perverse Decided against the Assessee.
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Customs
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2013 (9) TMI 921
Licence for import of raw materials - import of waste/scrap/discarded/ obsolete plastic items. - SEZ unit - Whether a SEZ unit is required any licence for import of raw materials and whether it was required to pay any Custom duties on such raw materials - Held that:- requirements of license under the public notice was not made applicable to imports of plastic waste and scrap by 100% EOU and units situated in EPZ, and they were continued to be governed by the provisions contained in paragraph 94 of the Export Import Policy. It is, however, true that such paragraph also provided with parameters for import of such plastic waste and scrap as specified in the public notice shall be kept in view of the Board of Approval while approving such units under the relevant scheme. Thus, the specific units of 100% EOU and those located in EPZ continued to get the benefits of the approval granted under the relevant scheme. It was, of course, open for the Government to impose additional conditions in tune with the public notice. Tribunal committed error in holding that the appellants breached the conditions of the public notice - at the relevant time, the units located in EPZ did not require license for import of raw materials as permitted under the approval of LoP. In the present case, approval was for plastic waste. We have also taken into consideration the language used in the specific LoP granted to the appellants, the conditions of such license, as also the language used in the public notice in question. If by virtue of some other policy declared by the Government of India from time to time, any additional requirements or restrictions were imposed on the industries even located in the EPZ, the same obviously would be governed by such policy pronouncements - Decided in favour of assessee.
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2013 (9) TMI 919
Seizure of Goods Held that:- The petitioner was entitled for release of the goods subject to furnishing of the bank guarantee of 30% of differential duty and a bond of value of goods as required under condition Relying upon Navshakti Industries Pvt. Ltd. Versus Commr. of Cus., ICD, TKD, New Delhi [2010 (5) TMI 592 - DELHI HIGH COURT ] - It was clarified that the condition no. (b) of the provisional release order shall be kept in abeyance - The order was without prejudice to the contention of the petitioner's counsel that he was not liable to pay duty of customs in view of Section 26 of the Special Economic Zones Act, 2005. Subject to fulfillment of the directions as stated above, the goods will be released within a week from the date of fulfilling of the conditions - Respondent shall intimate the amount of 30% of differential duty within a period of three days from the date of production of certified copy of this order before him.
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2013 (9) TMI 918
Principles of Natural Justice Finalisation of Assessment Held that:- Having regard to the well settled position that where an order had been passed in breach of the principles of natural justice, it would be open for the writ Court to interfere - Hence, without expression of any opinion on the merits of the rival contentions, the order of assessment was set aside - the adjudicating authority shall pass fresh orders after furnishing to the petitioner an opportunity of being heard - No further notice of hearing was required to be communicated to the petitioner Decided in favour of Petitioner.
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2013 (9) TMI 917
Waiver of pre-deposit - Enhanced duty draw back - Over-invoicing the export goods - Held that:- If on the same set of facts the duty demand is confirmed by the adjudicating authority in respect of all the three entities and penalty is also imposed and the Tribunal in the case of two entities and its proprietor/partners grants full waiver of pre-deposit, then, it is just and proper that even in the third case, total waiver of pre-deposit ought to be granted. No valid reasons are given by the Tribunal for demanding pre-deposit - stay granted.
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2013 (9) TMI 916
Party in Proceedings - Case against the proprietorship firm where the proprietor has died - Nature of Business - Held that:- The firm itself being a sole proprietorship business was not a sui juris - Therefore, it cannot be a party in any proceeding - In a sole proprietorship business the proprietor himself was the sui juris and should have been made a party - Since the appeal had been filed against the person who was not a sui juris the appeal itself was dismissed.
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2013 (9) TMI 915
Condonation of Delay Benefit of Section 14 of Limitation Act - Held that:- The appellant was assisted and had the services of the counsel's, who were expert in the central excise and customs cases - They first filed a writ petition, and then without converting it into appeal obtained an interim order - They kept on getting the matter adjourned and thereafter inspite of specific objection taken - they took more than one year and three months, to study the matter to withdraw the appeal - The Supreme Court had strongly deprecated practice of forum shopping - In this case also there was no pleading that the writ petition and thereafter appeal was filed in Delhi High Court, under bonafide belief that it had jurisdiction to hear the appeal and that the appellant was pursuing the remedies in wrong court with due diligence - The appellant was not entitled to the benefit of Section 14 of the Limitation Act - The appeal was barred by limitation by 697 days, which had not been sufficiently explained by the appellant.
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Corporate Laws
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2013 (9) TMI 914
Petition for Permission to Undertake Business as a Stock Exchange - Validity of Section 4 SCR Act and Section 11(1) and 19 of SEBI Act Held that:- Whether the Petitioner was a fit and proper person for the grant of recognition, the finding which had been arrived at in the impugned order was inter alia based on a conclusion as to the illegality of the buyback agreements on the ground that they were forward contracts, which is found to be erroneous in the present judgment - The effect of the non-disclosure of the buyback agreements to SEBI should be considered having regard to the fact that a genuine attempt has been made by the promoters by tendering an undertaking to the Court that their shareholding together shall not exceed five per cent of the equity capital, notwithstanding the exercise of the options - The application filed by the Petitioner shall be reconsidered afresh in terms of the observations contained in this judgment. Upon remand, a fresh decision shall be arrived at after furnishing the Petitioner an opportunity of being heard.
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2013 (9) TMI 913
Winding up - Power to stay winding up - Stay on Winding up Petition Held that:- it was apparent that the applicants do not desire to revive the business of the company in liquidation by developing part of its properties or portions of its lands, but desire to take over the said lands for exploitation in the real estate market - It was clearly their motive that these lands should be taken over without offering the market price, but via this application so that once the permanent stay of winding up was obtained or granted, that would mean that the companys prime assets and properties can no longer be controlled by the court - They would develop these lands by constructing buildings and sell off the units therein and earn profits. The desire to cash on the lands with a view to fully exploit their potential was not matched with the same approach as far as the creditors of the company are concerned - By not reviving the company after taking it out of winding up shows that the applicants were primarily concerned with the benefits attached to these lands. Thus, to avoid participation at a public auction and at a sale which will be conducted in a transparent and fair manner, that the application had been filed - If ultimately it was impossible to revive the company, then, it was better that the liquidator carries on its affairs till the dissolution of the company - It was only through the mechanism and participation of the liquidator, that the court can ensure settlement of claims of the secured and unsecured creditors in accordance with law - when claims of certain workmen have been given a preference over others or non-consenting employees, then, all the more it would not be in public interest and commercial morality to grant any reliefs - Relying upon Shaan Zaveri v. Gautam Sarabhai (P.) Ltd. [2009 (5) TMI 543 - HIGH COURT OF GUJARAT] - The scheme was found to be not contravening any of the provisions of law that the discretion was exercised on the sound judicial principles - That must be seen in the facts of that case and that this judgment does not lay down any general rule - None of the grounds enabling exercise of discretion under section 466 have been made out, this company application was dismissed but without any order as to costs - The official liquidator should now proceed expeditiously and adjudicate the claims received and take all such steps as were necessary and permissible in law for winding up the company in liquidation.
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FEMA
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2013 (9) TMI 920
Refund of seized amount - Investigation procedure - Held that:- Though the money was seized on 09/05/2011 at about 11 O'clock in the night, till date the investigation is not completed. If the respondent authorities are of the opinion provisions of FEMA Act are violated by the appellant, investigation must be completed within a reasonable time. It is more than one year since the investigation is pending. In that view of the matter, though we are not agreeing with the relief sought by the appellant - there has to be time frame for completion of the investigation by the respondent authorities that is Directorate of Enforcement - Appeal is disposed of directing respondents 1 and 2 to complete the investigation as expeditiously as possible not later than four months from the date of receipt of a copy of this judgment. - Decided partly against petitioner.
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Service Tax
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2013 (9) TMI 928
Stay - Extention of time for making predeposit - Held that:- The petitioner had an opportunity to deposit the 50% of the amount within six weeks of the order dated 25.6.2013. If there were any deposit, which were not brought to the notice of the Tribunal earlier, the same could be adjusted by the appellant and the remaining amount could be deposited by him. He has deposited the remaining amount of ₹ 7,05,180/- on 23rd August, 2013. The impugned order was passed on 15th July, 2013 - In the application for extension of time, the appellant did not offer any explanation at all for delay or for seeking further time in deposit - petitioner was given sufficient time to deposit the balance amount - Decided against assessee.
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2013 (9) TMI 927
Whether the assessee is a commercial concern or not - Business Auxiliary Service - Classification of establishment - Himachal Pradesh ExServicemen Corporation Act, 1979 - promotion of GTA servcies for its members - Held that:- Appellate Tribunal has passed a cryptic order and has not even bothered to analyze the reasons recorded by the Commissioner (Appeals). Unless those reasons were to be reversed by the Appellate Tribunal, it was not open to the Appellate Tribunal to take a contrary view on the question raised by the appellant - Without expressing any opinion on the question, as formulated in the fact situation of the present case, we deem it appropriate to quash and set aside the decision of the Appellate Tribunal and relegate the parties before the Appellate Tribunal for reconsideration of the issue afresh on its own merits in accordance with law - Decided in favour of Revenue.
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2013 (9) TMI 926
Waiver of pre-deposit - Renting of Immovable Property - Held that:- applicant collected tax on the rental charges and retained with them collected by them. Hence, the applicant is directed to pre-deposit a further amount of Rs.40 lakhs within a period eight weeks from today. Upon deposit of the same, the balance adjudged dues shall remain waived and recovery thereof stayed during the pendency of the appeal. - stay granted partly.
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2013 (9) TMI 925
Insurance services - Tax not paid services provided but payment not received - revenue alleged that the assessee had received the amount - appellant submits that the basis on which Revenue stated that they received payment from PACL, Nayanangal. is not disclosed to them - Held that:- SCN alleged non-payment of service tax on services provided to PACL, Nayanangal and payment received from PACL. SCN does not allege any payment directly from PACL, Nayanangal. During the adjudication stage, after the appellant has given submission that they were issuing policies to PACL New Delhi and receiving payment from that office, a finding was given that payment was received by the appellant directly from PACL, Nayanangal. No evidence to come to a finding other than what is alleged in the SCN is recorded in the adjudication order. In fact, if there is any finding, records relied upon should have been specified. Instead, Revenue has adopted a strategy of making allegation that the appellant have received payment directly from PACL, Nayanangal and then asking the appellant to prove that they have not received any such payment. I am of the view that such approach of asking the appellant to prove the absence of a fact is not in conformity with any judicial principle. If an allegation by Revenue was good enough to shift the burden of proof, then affirmation to the contrary by the appellant was also good enough to shift the burden back to Revenue, though I do not agree with either proposition. Revenue should have led evidence to prove that there was payment made directly by PACL, Nayanangal and that those were consideration for service provided on which service tax was not paid - Decided in favour of assessee.
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2013 (9) TMI 924
Stay application - Utilization of Cenvat Credit for payment of service tax paid under Reverse charge mechanism - import of services - Held that:- It is evident from Rule 5 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 that Service Tax paid on the services provided from outside India and received in India are not to be treated as output services. - Prima facie, the appellant with whom CENVAT Credit is available in Cenvatable account is with respect to the activities being done in India and appellant is not provider of the services on which he is paying Service Tax under reverse charge mechanism. Therefore, the credit available with the appellant in its CENVAT account has not been earned in relation to the services received from abroad - prima facie case is against the assessee - stay granted partly.
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2013 (9) TMI 923
CENVAT credit - Input Service Distributor - 4 years delay in availing cenvat credit - Held that:- there is inordinate delay of about 4 years in claiming Cenvat credit which would make it almost impossible for Revenue to verify whether these credits have been taken in any other offices of the applicant. Moreover, the decisions of the Tribunals Larger Bench and the Madras High Court are to the effect that a reasonable time has to be adopted. The order relied upon by the counsel for applicant the facts are not quite clear. It appears to be in a situation where the delay was marginally higher than six months and in a situation where time limit of six months was prescribed just before taking credit. Having regard to various decisions in the matter, I direct the applicant to make a pre-deposit of Rs.1,50,000 within 6 weeks and report compliance on 8.11.2013. Subject to such deposit, pre-deposit of balance dues arising from the impugned order is waived and there shall be stay on collection of such dues during pendency of the appeal - stay granted partly.
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Central Excise
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2013 (9) TMI 912
CENVAT Credit on GTA services - upto the place of removal - scope of the terms 'means and includes' - Rule 2(l) of CCR - Services of Outward Transportation of Goods Rule 2(1) of CENVAT credit Rules - Whether CESTAT was right in holding that the credit of service tax in respect of service tax paid on services of outward transportation of goods beyond place of removal in the office is admissible by overlooking the statutory provisions of Rule 2 (1) of CENVAT Credit Rules, 2004 which does not cover these services in the definition of input service for the purpose of allowing Cenvat Credit thereon and ignoring various decisions as referred - Held that:- Following Commissioner of Central Excise & Customs vs. Parth Poly Wooven Private Limited [2011 (4) TMI 975 - GUJARAT HIGH COURT] - Main body of the definition of term input service is wide and expansive and covers variety of services utilized by the manufacturer - By no stretch of imagination can it be stated that outward transportation service would not be a service used by the manufacturer for clearance of final products from the place of removal. Outward transportation would be an input service as covered in the expression means part of the definition, it would be difficult to exclude such service on the basis of any interpretation that may be offered of the later portion of the definition which is couched in the expression includes - the expression includes cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression means - the expression includes followed by means in any definition is generally understood to be expanding the definition of the term to make it exhaustive, but in no manner can the expression includes be utilized to limit the scope of definition provided in the main body of the definition - This was also not the intention of the Legislature. - Decided against the revenue.
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2013 (9) TMI 911
Challenge against Pre-deposit - There was nothing wrong in the conditional order passed by the Tribunal - Therefore, the question of interference with the conditional order does not arise - However, as the appellant has filed the two appeals, it would be appropriate to set aside the order dismissing the appeal for non-compliance of the conditional order to make deposit as ordered by the Tribunal - On such deposit, the appeal shall be restored to its original file and the Tribunal shall hear the appeal on merits and in accordance with law Decided against Assessee.
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2013 (9) TMI 910
Interest from the Date of Deposit on Delayed Refund - Whether the pre-deposit made as a condition precedent for the hearing of the appeals under the Central Excise Act, 1944 was, on the assessee being ultimately successful, refundable to the assessee with interest Held that:- The said point is concluded by a judgment of this Court in the case of Commissioner of Central Excise, Hyderabad versus I.T.C Ltd[2004 (12) TMI 90 - SUPREME COURT OF INDIA] - the Central Board of Excise & Customs has also issued a circular bearing No.802/35/2004-CX, dated 8th December 2004 allowing payment of interest on delayed refund of amount of pre-deposit - there was no error in the order of the Tribunal refusing to grant interest from the date of deposit - The points raised in the appeal are decided against the appellant Decided against Assessee.
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2013 (9) TMI 909
Condonation of Delay Delay of 8 Years Held that:- It does not explain the steps taken within said period of 8 years - The only reason pleaded in the application is that there was litigation between the applicant and the bank - Reason disclosed to us is of fire breaking out in industry in 1997 - Both the events are much before the directions to deposit 25% of total amount - The steps taken after that direction to comply with it are not pleaded anywhere - Facts show that after eight years suddenly on one day application has been filed before the CESTAT There was no perversity or jurisdictional error - No substantial question of law arises in this appeal Decided against Assessee.
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2013 (9) TMI 908
Classification of Goods - manufacturing of stainless steel paddy parboiling and drier plant Revenue was of the view that the goods attract the excise duty and are not exempted from the duty, as these goods fall in CET Heading 8419 and not 8437 - What should be the arrangement made in the interregnum, inasmuch as, the petitioner is not permitted to clear the goods without payment of excise duty - Held that:- The respondents are not permitting the petitioner to clear the goods without payment of excise duty, the respondents should issue show cause notice and conclude the proceedings at the earliest - Further, there should be some condition imposed upon the petitioner for clearing the goods in the interregnum The respondents shall issue show cause notice to the petitioner - the respondents shall take decision on the show cause notice and pass final speaking orders within one month thereafter in the interregnum, the petitioner shall be entitled to clear the goods without payment of duty in cash, instead the petitioner shall furnish bank guarantee equivalent to the amount of duty so that in case the matter is decided against the petitioner, the respondents are in a position to encash the said amount.
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2013 (9) TMI 907
Unaccounted Inputs - Whether the Tribunal was correct in restricting the demand to correspond to the production of final products that was possible from unaccounted inputs demonstrated to be received by the respondent Held that:- Once the Tribunal had maintained the order of duty, production of final products from the unaccounted inputs demonstrated to be received on the basis of show cause notice served by the Revenue that question does not arises for consideration only a question of fact. Benefit of Cum duty Price - Whether the Hon'ble Tribunal is correct in allowing benefit of cumduty price when this benefit stands already given at the time of working out of duty demand at the time of issue of Show Cause Notice Held that:- The findings recorded by the Tribunal are based upon proper appreciation of facts and do not give rise to any substantial question of law for consideration by this Court Appeal rejected Decided against the revenue.
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2013 (9) TMI 906
Claim of Rebate of Duty under Rule 18 - Export of goods - proof of export - Held that:- The production of original and the duplicate copy of ARE-1 Form duly endorsed by the Officer of the Customs is prima-facie proof of the fact that the goods have been exported - Even if the documents are produced, the adjudicating authority can still come to the conclusion that the goods were not exported - On the other hand, if the documents such as original or the duplicate copy of ARE-1 Form is not produced, the adjudicating authority can still come to the conclusion that the goods were in fact exported - The Central Excise Officer has to record a satisfaction that the claim is in order - It is question of fact as to whether the claim is genuine or not - Such satisfaction can be recorded even in the absence of original/duplicate copy of ARE-1 Form - The express language of the notification is the recording of the satisfaction of the Central Excise Officer that the claim is in order so as to sanction the rebate either in whole or in part. Such exercise has not been undertaken by the Adjudicating Officer or any of the authorities under the Act, therefore the orders passed was set aside and the matter was remitted back to the Adjudicating Authority to record a satisfaction to the effect whether the claim of the petitioner for rebate is in order or not Decided in favour of Petitoner.
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2013 (9) TMI 905
Adjustment of CENVAT credit towards Pre-deposit Held that:- The assessee had not complied with the order of this Court in letter and spirit, it cannot seek a modification of the order before the Tribunal. In such circumstances, the question of adjustment of CENVAT credit towards the satisfaction of the condition on pre-deposit does not arise - Considering all the submissions of the learned Senior Counsel as regards the compliance of the order, since the fact has not been taken note of by the Tribunal, the proper course would be to set aside the order of the Tribunal and restore the appeal back to the files of the Tribunal for it to consider the claim of the appellant afresh and pass an appropriate order therein to the actual compliance of the order of this Court.
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2013 (9) TMI 904
Condonation of Delay Held that:- The AR who deals with the case had gone abroad for about a month - On his return, his mother had expired - The reason shown cannot be considered as unreasonable - There does not appear to be any deliberate latches or neglect to file the appeals - the order of the Tribunal is set aside the matter is remanded back to the Tribunal Decided in favour of Assessee.
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2013 (9) TMI 903
Penalty u/s 11AC abatement claimed u/s 3A towards non production under compounded levy scheme - Held that:- If a manufacturer does not produce non-alloyed hot re-rolled steel during any continuous period of not less than seven days and wishes to claim abatement under Section 3A of the Act, he has to give intimation under Rule 96ZP(2) about closure of the units - either prior to the date of closure, or on the date of closure - If the manufacturer starts production again, he is required to give intimation about the same - either prior to the date of starting production or on the date of starting production. In the present it is not denied, nor there was any material to show that the factory continued production after October, 1997 - Even if the intimation was given subsequently, unless there was some material to show that the factory had run for a period beyond those two months the penalty could not be levied. In Union of India v. Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA ] and State of Madhya Pradesh v. Bharat Heavy Electricals [1997 (8) TMI 252 - SUPREME COURT OF INDIA ] - Penalty under Section 11AC of the Act can be imposed only when conditions mentioned in Section 11AC exist - The authorities do not have discretion in fixing the penalty, and that where the penalty is impermissible, it cannot be levied equal to the duty under Section 11AC of the Act - since the Tribunal recorded the findings that the penalty itself was not leviable - The Tribunal, therefore, erred in reducing the amount of penalty.
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Indian Laws
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2013 (9) TMI 922
Penalty of Reduction in Rank - from Commercial Trade Tax Officer-II to a Class III post - Held that:- The enquiry report stands vitiated for violation of the provisions of Rule 7 read with Rule 9(1) of the U.P. Government Servant (Discipline and Appeal) Rules, 1999 - On this ground alone, the order reducing the rank of the petitioner to that of a Class III post, cannot be sustained and was liable to be quashed - when an order of punishment was found to be vitiated for violation of principles of natural justice or on technical grounds, and was set aside on that ground, the matter was to be remitted back to the point where the error had crept in so as to complete the proceedings from the point that they stood vitiated - However, there were always exceptions to such general rule - The court must examine the magnitude of misconduct alleged against the delinquent employee - the essence of the matter was that the court must take into consideration all relevant facts and to balance and weigh the same, so as to determine if it was in fact in the interest of clean and honest administration, that proceedings were allowed to be terminated only on the ground of delay in their conclusion. Already 14 years have passed from the date of the incident and the petitioner was found not guilty in the first enquiry and now, it may be very difficult for the petitioner to lead complex evidence in defense and it may also be difficult for the department to lead such complex evidence in support of the allegation and, more importantly, when on the charge, penalty of dismissal or removal from service was not awarded by the department itself, we do not consider it to be a fit case to remit the matter for completing the enquiry again, particularly, when the petitioner had already retired from service and had served on the post pursuant to interim order of this Court. Opportunity of Being Heard Held that:- The petitioner was deprived of an opportunity of personal hearing in the re-inquiry that was ordered - No material had been brought on record - ordinarily, where a person pleaded innocence and denies the charges, a date was fixed for leading of evidence - Taking a reply from a Government servant charged with such charges which may result in imposition of a major penalty and proceeding straight away to record a finding of guilt, without fixing a date for leading of defense evidence or otherwise giving opportunity to lead evidence, amount to gross violation of principles of nature justice, particularly, when the charged employee had denied the charges and had prayed, in writing, that if his reply was not found satisfactory then he may be given opportunity of personal hearing to provide his defense - If the respondents had produced some material, by way of minutes of the enquiry proceedings, to show that the charged employee was offered opportunity to lead evidence which he availed or refused to avail, then, perhaps, such conclusion of inquiry could be justified - Nothing in the counter-affidavit or on the record, which may show that after receipt of reply from the petitioner, on 27.11.2001, evidence was led by either side - If there was no evidence to infer collusion of the petitioner with other officials, till submission of first inquiry report, it was all the more necessary to collect additional evidence in that regard in the re-inquiry, as was directed Petition allowed.
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