Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 29, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Offense u/s 276B - principal officer - failure to pay the tax deducted at source - both the Courts erred in acquitting the directors of the company only because they were not issued separate notices - HC
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There is a distinction between setting up of a business and commencement of a business - it is only after the business is set up, that the expenses incurred in the business can be claimed as permissible deduction u/s 37 of the Act - HC
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The cutting of trees, leaving the stump as required by the condition imposed by the forest department is not for generating income out of the trees, but for felling of the wood for own consumption - it is not a case of business income - HC
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Partial disallowance u/s 14A r.w Rule 8D since the exempt income does not form part of the total income, the expenditure which is directly related to income which does not form part of the total income could not be debited to the profit or loss account in view of the provisions of Section 14A of the Act - HC
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Reopening of assessment u/s 148 Where there is even a modicum of enquiry on an issue arising during assessment proceeding under Section 143(3) of the Act, it shall follow that there has been formation of opinion - HC
Customs
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Validity of SCN - Non application of mind - At the stage of show cause notice, the first respondent should only have an open mind. If his mind is closed with predetermined conclusions, the requirement of giving an opportunity to show cause becomes nugatory - HC
Service Tax
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Levy of service tax on bill discounting facility - collection of interest, against bill discounting facility - this activity is exempted from service tax - AT
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Export of Insurance Auxiliary Services - receipt of re-insurance brokerage commission - brokerage received from overseas re-insurers - appellant does not have a prima facie case - AT
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Works contract services - lift irrigation schemes - lift irrigation schemes are within the socope of Notification No. 41/2009-S.T. - strong prima facie case in favour of the appellant/petitioner - AT
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Supply of Tangible Goods service - rental charges/hiring charges on the water meters installed in the places where water is supplied - Prima facie case is against the appellants - AT
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Refund of service tax - refund of service tax paid on Terminal Handling Charges besides Business Auxiliary Services would be available when received in or in relation the export of goods. - AT
Central Excise
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The Cenvat credit of duty, if any paid on the intermediate products by the job workers, cannot be denied to the principal manufactures - AT
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Recovery of excess refund claim sanctioned - after grant of refund, tribunal modified the order and reduced the amount of refund - there is no need for issuance of Show Cause notice - respondents should have refunded the excess amount on their own - AT
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Stay application - Denial of CENVAT Credit - Jurisdiction in respect of input services distributor (ISD) - since the jurisdiction itself is in dispute, the applicant has made out a strong case for grant of stay - AT
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CENVAT Credit - duty paying documents - appellant has taken the credit on the basis of extra copy invoices, capital goods and invoices were on the name of other unit - credit denied - AT
Case Laws:
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Income Tax
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2014 (9) TMI 795
Validity of Notification dated 25 July 2014 Introduction of new format for Tax audit reports Extension of time to file return u/s 44AB - Held that:- The Madras High Court has already directed the CBDT to examine the representation of the assessees in general, before 30 September 2014 it is appropriate that the representation of the Petitioners is also considered by CBDT- there will be substantial hardship caused to the assessees, if the date of filing Return is not suitably extended - CBDT will look into all the practical difficulties and take a just and proper decision on the matter, before 30 September 2014, as already directed by the Madras High Court Decided in favour of petitioner.
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2014 (9) TMI 794
Offense u/s 276B - principal officer - show cause notices addressed to The Principal Officer regarding failure to pay the tax deducted at source - Liability of the Director of a company u/s 276-B r.w Section 194A and 200 Principle officer - Held that:- Section 278 B of IT Act makes the directors of the company in charge of its affairs liable for the offence committed by it unless the presumption is able to be rebutted by such director - when in the show cause notice it was stated that the directors were to be considered as Principal Officers under the Act, and a complaint was filed, such complaint is entertainable by a Court provided it is otherwise maintainable - The purpose of making explicit either in the SCN or in the complaint, the intention of the ITD that it was proceeding against the directors was to enable the directors to explain why they should not be proceeded against relying upon Madhumilan Syntax Limited And Others Versus Union of India And Another [2007 (3) TMI 205 - SUPREME Court] - the proceedings against the Directors would be maintainable as long as the complaint clearly stated that they were being treated as principal officers of the company - Even otherwise for the purpose of Section 278 B of the IT Act, once the offence is shown to have been committed by the company, then the liability of the directors in charge of its affairs is attracted - The burden then shifts to such directors to show that the offence occurred without their knowledge or that they had exercised all due diligence to prevent the commission of such offence both the Courts erred in acquitting the directors of the company only because they were not issued separate notices It is seen that both directors have signed the Companys balance sheets. Their defence that they were not in charge of the affairs of the company is, therefore, untenable. - Decided in favour of revenue.
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2014 (9) TMI 793
Date of setting up of business - Whether the Tribunal was right in holding that the assessee had not set up its business till 31.03.2008 Held that:- There is a distinction between setting up of a business and commencement of a business - it is only after the business is set up, that the expenses incurred in the business can be claimed as permissible deduction u/s 37 of the Act - the assessee company was incorporated on September 19, 2007 - It rented out the office premises in the month of October, 2007. Bank account was opened on October 04, 2007. Employees were also appointed during the said period. TDS deduction for the said employees was also placed on record. Registration under the Shops and Establishment Act was also effected. These activities are the first stage activities which would lay foundation for placing orders for procuring the stock and storing them in a warehouse/shop followed by the third stage of marketing them. Suffice to state for a foreign entity without establishing itself under the local laws, appointing personnel, identifying the prospective manufacturers, clients etc. obtaining storage facilities followed by stock-in-trade, the business of trading cannot commence. The Tribunal missed the point that the assessee as a prudent trader could not have made purchases without undertaking the aforesaid exercise - The exercise was a precursor to commencement but post set up reling upon COMMISSIONER OF INCOME-TAX Versus ESPN SOFTWARE INDIA P. LTD. [2008 (3) TMI 90 - DELHI HIGH COURT] the activities demonstrate setting up of the business by the assessee with a commitment to commence the business - nothing barred or prevented the appellant from making first purchase, after necessary legal approvals, but the fact that the appellant wanted to commence actual trading after negotiations with several parties, would not postpone the date when the business was set up - the orders of the authorities below do not indicate that it was the case of the revenue that the assessee has claimed deduction of expenditure, prior to the setting up of business Decided in favour of assessee.
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2014 (9) TMI 792
Income from sale of trees to be treated as income from business or not Held that:- The Tribunal was rightly of the view that the assessee was not felling trees for the sale of wood to any outsider for generating income and the fact that the cut trees are used for own consumption is admitted by the Revenue - the wood cut from the tree is used by the company as fire-wood - the cutting of trees, leaving the stump as required by the condition imposed by the forest department is not for generating income out of the trees, but for felling of the wood for own consumption relying upon CIT Vs Ambat Echukutty Menon [1979 (9) TMI 2 - SUPREME Court] it is not a case of business income the order of the Tribunal is upheld Decided against revenue.
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2014 (9) TMI 791
Partial disallowance u/s 14A r.w Rule 8D Held that:- The AO has noted that the assessee had invested a certain amount of its funds in shares and that the dividend which has been received or receivable did not form part of the total income - The AO noted that there were certain expenses on account of interest etc. which were directly attributable to the exempt income - The assessee had debited the entire expenditure to the profit or loss account - The AO noted that since the exempt income does not form part of the total income, the expenditure which is directly related to income which does not form part of the total income could not be debited to the profit or loss account in view of the provisions of Section 14A of the Act This constituted a clear fulfillment of the requirement in sub-section (2) of Section 14A as well as sub-rule (1) of Rule 8D that the AO was not satisfied with the correctness of the claim of the assessee, on the basis of the accounts of the assessee The order of the Tribunal to the extent to which it confirms the disallowance to the extent of ₹ 96,000/- is unexceptionable - The Tribunal has deleted the disallowance to the extent of ₹ 66.79 lacs on the ground that on this aspect the borrowed funds were used for business purposes and no part thereof was used for making investment and, hence, the interest expenditure could not be considered for proportionate disallowance under Rule 8D - The remaining disallowance of ₹ 96,000/- was on account of other expenditure - In making this allowance, representing 0.5% of the average value of the investment, the AO had applied the provisions of Rule 8D(iii) - The disallowance which was made in the aforesaid terms of ₹ 96,000/- has been confirmed by the Tribunal - the disallowance under Rule 8D(iii) which was made by the AO was entirely in consonance with the prescribed method and correctly affirmed by the Tribunal Decided against assessee.
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2014 (9) TMI 790
Penalty for concealment u/s 271(1)(c) authenticity and genuineness of the expenditure on interest payment and miscellaneous expenses Held that:- The assessee was following mercantile system of accounting and the miscellaneous charges pertained to stationery, filing fee, bank charges etc., whereas the interest income was paid on account of money borrowed for purchase of land, which was held as stock-in-trade Tribunal rightly held that the assessee has been able to discharge the onus under Explanation No.1 to Section 271(1)(c) of the Act and, therefore, penalty should not have been imposed thus, the order of the Tribunal is upheld Decided against revenue
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2014 (9) TMI 789
Reassessment proceedings u/s 148 r.w. section 147 - MAT assessment made u/s 115JB Held that:- The Tribunal had rightly set aside the re-assessment notice/order on the grounds that it is a case of change of opinion and the assessee cannot be faulted for failure to fully and truly disclose of all material facts - at the time of original assessment, the AO had gone into the question of interest accrued while computing income under MAT - the AO had formed an opinion and had accordingly computed the income under the applicable provisions - The assessment order may be wrong, but then it could have been corrected if it was erroneous and prejudicial to the interest of the Revenue u/s 263 of the Act - Power for re-opening u/s 147/148 of the Act is circumscribed by jurisdictional pre-conditions, two of them being that it should not be a case of change of opinion and there should be failure on the part of the assessee to fully and truly disclose all material facts- there was no merit in the appeal Decided against revenue.
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2014 (9) TMI 788
Claim of deduction u/s 80HHC Manufacture and trading of diamonds Rejection of rough diamonds - Held that:- The Commissioner and Tribunal was rightly of the view that the nature of the transaction is not being speculative in character - once the main business is identified, if some incidental activities or transaction or dealing in foreign exchange is undertaken but that is also related to some extent to the main business activity, then, it could not be said that the assessee is in speculative business or speculative dealings is ordinarily a part of his business. The deduction of the value of the export of rough rejected diamonds from the cost of purchase of rough diamonds is held to be correct - the alternate plea that apart from reducing the import cost from the total export turnover, it shall also be reduced from the total turnover which exceeds the export income - once again the question has been considered and decided in the peculiar facts and in relation to the present assessee - No general rule has been laid down - The matter has to be decided on case to case basis - rough diamond constitutes only 0.78% of the total turnover and if those diamonds which are found to be incapable for further processing are sold in unfinished form, that conclusion cannot be termed as perverse or vitiated by any error of law apparent on the face of record Decided against revenue.
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2014 (9) TMI 787
Revision petition rejected Jurisdiction of AO to pass order u/s 144 Held that:- It is incumbent upon the Petitioner to approach the Court with utmost good faith and make complete disclosure in the Petition while seeking relief - no mention has been made of when the attachment of the film was done by the Revenue - This attachment would have been fatal to the marketability of the film 'Shehzaade' - The Assessment Order dated 19th March, 1993 passed by the AO has merged into the impugned order dated 30th March, 2006 of the CIT - the issue before the CIT was whether or not the Revision Application filed against the order dated 19th March, 1993 was within time - The averments of the Petition that he received the order dated 19th March, 1993 only on 5th January, 2004, is in the face of the xerox copy of the postal acknowledgment given by the postal authorities, evidencing the receipt of the order by the Petitioner as fat as back 1st April, 1993 - The Petitioner after filing his Return of Income for the AY 1990-91 and giving a particular address therein, makes himself unavailable at that address - Nor does the Petitioner inform the Revenue of the address where communication relating to his Return of Income for the AY 1990-91 could be sent - the absence of notice being served upon him, the entire proceedings are bad in law - the order dated 30th March 2006 of the CIT cannot be held as perverse or suffering from any flaw in the decision making process Decided against assessee.
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2014 (9) TMI 786
Computation of undisclosed income of the block period u/s 158BB Held that:- The record is not clear as to whether there existed any unabsorbed loss or carried forward depreciation, that spilled over the block period of the assessee - If there exists any such components, they are not liable to be adjusted - If, on the other hand, the losses or depreciations are those which are referable to the block period, they are liable to be worked out, as though it is a regular assessment which, in fact, is a mandate u/s 158BH of the Act direction has been made to pass the consequential order keeping in view the aspects pointed by the court Decided in favour of assessee.
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2014 (9) TMI 785
Reopening of assessment u/s 148 Gifts received from siblings Change of opinion - Held that:- The AO asked for various details in respect of the gift of ₹ 12.80 lakhs received from Mr. Arun Mehra - the AO had formed an opinion that the gift received by the Petitioner from Mr. Arun Mehra was genuine during the assessment proceeding leading to order dated 31st March, 2006 - the notice seeking to reopen the assessment for the AY 2001-02 is clearly without jurisdiction as it is based on a mere change of opinion - The formation of the opinion is to be of an AO who passes the Assessment Order - At the time of reopening of assessment what has to be examined before issuing the notice u/s 148 of the Act, is whether the AO had formed an opinion - If yes, then the assessment is not amenable to jurisdiction u/s 148 of the Act - The enquiry for the purposes of forming of an opinion will different from person to person and in any case the depth of enquiry is not the test to determine the issue of formation of opinion - Where there is even a modicum of enquiry on an issue arising during assessment proceeding under Section 143(3) of the Act, it shall follow that there has been formation of opinion Decided in favour of assessee.
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2014 (9) TMI 784
Non-extension of the period of filing of the ITR Extension of period beyond the period of 30th September, 2014 while exercising the powers conferred u/s 119 of the Act by the CBDT while extending such period for the purpose of furnishing the Tax Audit Report to be filed u/s 44AB of the Act to 30th November, 2014 Held that:-The requirement of filing of documents, statements, receipts, certificates, reports of audit or any other documents, etc. by virtue of the powers given to the CBDT under section 139C & 139D have been done away with - though otherwise the requirement is of furnishing TAR either prior to the filing of ITR or when so done along with ITR have been provided by these provisions, later insertion of provision made the return annexure-less and the rule provides the same to be furnished electronically - There would be no requirement of furnishing these documents, particularly, TAR with ITR - with the details required in the computation of income and other details and complex working are for all practical purposes, if filled-in, in absence of the availability of TAR, the possibility would be manifold where this non-extension may give rise to multiplicity of proceedings - On making available the TAR subsequent to the filing of ITR, more and more revised returns, if are filed even though it is provided statutorily, this rise in the proceedings on account of non-extension of the due date cannot be left sight of. The impact of any extension of the due date, if at this stage, requires serious consideration as well - the entire situation is arising not on account of any contribution on the part of either the professionals or the assesses leading to such a situation - with the advancement of the technology, it is always commendable that the department takes recourse to the technology more and more - With the possible defects having been found in utility software in use in the previous year, the required changes in the clarification or the new format of such utility, if brought to the fore, the same would be desirable - At the same time, the complete black out for nearly a month's time would not allow accessibility to such utility software to the assessees, which has put them to a great jeopardy. In absence of any remedy available, much less effective to the stakeholders against the non-use of beneficial powers by the Board for the larger cause of justice, exercise of writ jurisdiction to meet the requirements of circumstances has become inevitable - The Board is directed to modify the notification dated 20th August, 2014 issued in exercise of powers u/s 119 of the Act by extending the due date for furnishing the return of income to 30th November, 2014 Decided in favour of assessee. Scope and effect of insertion of section 44AB Held that:- Section 44AB of the Act provides for getting the accounts of an assessee of the previous year audited by an accountant before the specified date and to furnish report of such audit by that date in the prescribed form, setting forth such particulars as may be prescribed - As to what is the "specified date" is provided under clause (ii) of the Explanation to section 44AB which postulates that "specified date" in relation to the accounts of an assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under sub-section (1) of section 139 - the expressions "specified date" in section 44AB and "due date" in section 139 of the Act are inextricably linked together - The legislative intent is clear - the due date for filing return of income and the specified date for furnishing tax audit report u/s 44AB of the Act should be the same. The Board in exercise of powers u/s 119 of the Act, it cannot issue any circular or notification which is contrary to the legislative intent and the scheme of the enactment which envisages that the "specified date" and "due date" should be the same - The inevitable conclusion, therefore, is that the Board could not have extended the due date of filing tax audit report alone without extending the due date for filing return of income as that would amount to overriding the provisions of the Act. Moreover, the very fact that section 119 of the Act does not empower the Board to relax the provisions of section 44AB of the Act, clearly reflects the legislative intent not to permit relaxation of the "specified date" without relaxing the "due date". Had the legislature intended to permit relaxation of the specified date for furnishing tax audit report alone, it would have included section 44AB in section 119 of the Act. The Board has no power to relax the provisions of section 44AB of the Act, it would be in the fitness of things if with a view to bring the notification dated 20th August, 2014 within the ambit of its jurisdiction, the Board relaxes the provisions of section 139(1) of the Act by extending the due date for filing the return of income till 30th November, 2014 as a direct consequence whereof, the "specified date" for obtaining and furnishing the report of audit under section 44AB of the Act would get automatically extended decided in favour of assessee. The respondent Board is directed to modify the notification dated 20th August, 2014 issued in exercise of powers under section 119 of the Act by extending the due date for furnishing the return of income to 30th November, 2014. It would, however, be open for the Board to qualify such relaxation by extending the due date for all purposes, except for the purpose of Explanation 1 to section 234A of the Act. decided in favour of assessee.
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Customs
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2014 (9) TMI 800
Validity of SCN - Non application of mind - contents of the show cause notice disclose a pre-conceived and closed mind - Held that:- any useful purpose would not be served in asking the petitioner to submit a reply to the show cause notice. At the stage of show cause notice, the first respondent should only have an open mind. If his mind is closed with predetermined conclusions, the requirement of giving an opportunity to show cause becomes nugatory. In SBQ Steels Ltd., Vs. Commissioner of Customs, Central Excise and Sales Tax, Guntur reported in [2013 (1) TMI 359 - ANDHRA PRADESH HIGH COURT] a Division Bench of Andhra Pradesh High Court took exception even to use of the words it is clear in the show cause notice. Therefore, the impugned show cause notice is liable to be set aside - It is open to the first respondent to issue a fresh show cause notice, keeping the object of issuing show cause notice in mind. - Decided in favour of assessee.
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2014 (9) TMI 799
Invocation of bank guarantee - Confiscation of goods - Held that:- Bank guarantee was given to release the goods. The petitioner has no case that bank guarantee was invoked before releasing the goods. The Customs Department have released the goods, after furnishing bank guarantee. In view of the order passed by the Commissioner of Customs, the petitioner has no case that CESTAT was pleased to stay the recovery pending statutory appeal. When it is made out that CESTAT has not stayed the order passed by the Customs Department, the petitioner cannot be heard to say that the second respondent erred in invoking the bank guarantee - Decided against assessee.
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2014 (9) TMI 798
Confiscation of currency - Redemption fine - Held that:- On facts, there appears to be no dispute that the foreign currency was attempted to be exported by the first respondent - passenger (since deceased) without declaring the same to the Customs Department and therefore, it resulted in seizure - Section 113 of the Customs Act imposes certain prohibition and it includes foreign exchange. In the present case, the jurisdiction Authority has invoked Section 113 (d), (e) and (h) of the Customs Act together with Foreign Exchange Management (Export & Import of Currency) Regulations, 2000, framed under Foreign Exchange Management Act, 1999. Section 2(22)(d) of the Customs Act, defines goods to include currency and negotiable instruments, which is corresponding to Section 2(h) of the FEMA. Consequently, the foreign currency in question, attempted to be exported contrary to the prohibition without there being a special or general permission by the Reserve Bank of India was held to be liable for confiscation. The Department contends that the foreign currency which has been obtained by the passenger otherwise through an authorized person is liable for confiscation on that score also. Provision is made under the Foreign Exchange Management (Current Account Transactions) Rules, 2000, which imposes prohibition in respect of Schedule I, restriction in Schedule II transaction, which are to be done on prior approval and Schedule III also come with the rider that prior approval of the Reserve Bank of India should be obtained. Assuming that a person is permitted to carry 25,000 US $ for business purpose, the fact remains, that the said drawal of the foreign currency should be only from an authorized person in terms of Rule 2(b) of the Foreign Exchange Management (Current Account Transactions) Rules, 2000. The passenger, in this case, attempted to take the money out of India without a proper declaration and has not obtained from an authorized person, thereby, he has violated the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 - Tribunal fell into error by setting aside the order of absolute confiscation - Decided in favor of Revenue. Regarding redemption fine and penalty u/s 114(i) - Held that:- Original Authority imposed fine of ₹ 5.00 lakhs and the Tribunal has thought it fit to reduce the same as ₹ 1.00 lakh. - when the appeal is taken up, the first respondent had actually died and the appeal was pursued by the wife of the first respondent - widow. Therefore, while restoring the order of the Original Authority in respect of absolute confiscation, we set aside the order of the Tribunal insofar as allowing the redemption on payment of fine of ₹ 2.00 lakhs. Insofar as imposition of penalty is concerned, taking note of the plea made by the learned counsel appearing for the first respondent, we are not inclined to interfere with the order of the Tribunal insofar as reduction of penalty. - Decided against the revenue.
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2014 (9) TMI 797
Retention of goods - payment of admitted duty done - Undervaluation of goods - provisional assessment of duty - Held that:- Petitioner, was before this Court when the "Proper Officer" had initiated proceedings under Section 18. This Court by judgment directed consideration of the petitioner's representation, in accordance with law. The petitioner's representation essentially sought for release of the goods on provisional assessment. Going by the provisions and the interpretation placed on it by the Division Bench of this Court, what has to be done, in accordance with law, is to make a provisional assessment, if the officer is satisfied that an enquiry has to be conducted - assessee is conferred with no right to seek a provisional assessment but that would be solely in the realm of the satisfaction of the 'Proper Officer'. Exhibit P4 reflects the satisfaction of the 'Proper Officer' that a provisional assessment is to be made. It has to be noticed that such an offer made by the Officers of the Department is not one sanctioned by the Act or the Rules. The mere practice of such an offer having been extended over the years would not give it the sanctity it requires, under law, especially when the Act and the Rules contemplate the passing of a provisional assessment - In any circumstance, it has to be noticed that even Ext.P2 judgment directed consideration of the representation in accordance with law. The Department ought to have then passed a final order under Section 17 or a provisional order under Section - Decided partly in favour of assessee.
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2014 (9) TMI 796
Duty drawback claim - Whether in the facts and circumstances of the case the CESTAT was right in holding that drawback claimed under sec.74 of the Customs Act, 1962, once sanctioned to the appellant after due verification can be reopened subsequently without contesting the original assessments made - Held that:- The case is entirely based on factual matrix. It could be noticed that CESTAT has well laid down foundation of facts to conclude that nothing could be pointed out, which would lead to prove any of the allegations made in the show cause notice. The question that had been raised is whether the drawback claimed under section 74 of the Customs Act, which was already sanctioned to the respondent after the due verification could be reopened subsequently without contesting the original assessment. The main contest was to the identity of the imported goods, which was established at the time of reexport from the evidence which were before the authorities. There were examination reports where the authorities had compared the, weight, size, marks and numbers with respect of bills of entry and concluded beyond doubt that those were the cases of re-export. The Tribunal, therefore, was right in holding that once having accepted that the identification of the imports goods was duly verified, the reopening was not sustainable. No opportunity was made available for the cross-examination in respect of some of the statements said to have been recorded by the authorities. On the strength of this entire material, it concluded that there was no justification in upholding the grounds raised by the Revenue. It is a settled position that any party which seeks to rely upon any statement for the purpose of examining veracity of the contents of such documents, otherwise surely requires to give an opportunity to the concerned party to cross-examine the makers of such statements. Denying such opportunity may jeopardize in a major way the right of the concerned party. Hence, such denial would further vindicate the conclusion of the Tribunal. - No substantial question of law arises - Decided against Revenue.
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Service Tax
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2014 (9) TMI 820
Levy of service tax on bill discounting facility - collection of interest, against bill discounting facility - cenvat credit on common input services used in providing both taxable and exempted services - Whether service tax is payable on the value of interest received on bill discounting facility extended by the Appellant to its Customers - Whether the amount of CENVAT credit reversed being attributable to the input service used in or in relation to the provision of exempted service, under Rule 6(3A) of the CENVAT Credit Rules,2004, is correct or otherwise - Held that:- Analysing the meaning of lending, loan, bill discounting , as cited above, and taking into consideration the arguments advanced by both sides, we are of the opinion that even though under the bankers domain and practice, discounting of bills might be a form of advancing money to the customers and akin to some or most of the characteristics of a loan, but under the Finance Act, the service of lending & bill discounting have been considered as separate services, placed under the umbrella of taxable service of banking and financial services; accordingly, these service for the purpose of service tax should be treated differently. The interest received in providing the bill discounting facility cannot be excluded in computing the value of taxable service treating it as loan under Section 67 of the Finance Act, 1994 for the period prior to 18.04.2006 and under Rule 6(2) of the Service Tax (Determination of Value) Rules, 2006 Scope of Exemption Notification No.29/2004-ST dated 22.09.2004 - whether the exemption to the value equivalent to interest, is limited only in relation to the services of overdraft facility & cash credit facility and not applicable to discounting of bills; and the value equivalent to discounts only is exempted for rendering the service of bill discounting facility. - Held that:- it is the value of interest or discount, in connection with providing the services overdraft facility, cash credit facility, or bill discounting facility etc. would be exempted from service tax under Sec.66 of the Finance Act,1994. - it has been informed that no demand has been issued to other banks for rendering similar services. We also find that in the new negative list regime introduced w.e.f 01.07.2012, there is no scope for any ambiguity and call for interpretation as the position has been made clear in the respective provision 66D of the Finance Act,1994. The confirmation of demand on the value of interest received in rendering bill discounting facility and imposition of penalty by the Ld. Adjudicating authority, deserves to be set aside - Decided in favor of assessee. Reversal of cenvat credit - common input services - Held that:- A simple reading of the definition of exempted service reveals that it also includes services that are exempt under Section 66 of the Finance Act, 1994. In the present case, interest on overdraft facility and cash credit facility are exempted from service tax under Section 66 of the Finance Act,1944 by virtue of Notification No.29/2004 ST dt.22.09.2004. Therefore, these services would definitely come under the scope of the definition of exempted service, hence, the argument that to attract Rule 6(3) of the CENVAT Credit Rules, 2004, the entire taxable service i.e. banking and financial services should be exempted and not few services mentioned under the categories of clause (ix) of the said Banking and Financial Services, is untenable. - Decided against the assessee. Extended period of limitation - Held that:- the Appellant be allowed a fair chance to present these evidences and be subjected scrutiny/verification by the department. Accordingly, we set aside the confirmation of demand of CENVAT Credit and imposition of penalty and remand the case for redetermination of the liability, if any, only on the issue of limitation - Decided partly in favour of assessee.
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2014 (9) TMI 819
Export of Insurance Auxiliary Services - receipt of re-insurance brokerage commission - brokerage received from overseas re-insurers - Held that:- the decision in the case of National Engg. Ind. Ltd. [2009 (3) TMI 93 - CESTAT NEW DELHI] cannot be applied to the present case. In that case, services were provided to foreign company for whom orders were received from Railways. The Foreign supplier received the amount from Indian Railways for the goods supplied, the discount / remuneration for the Indian company was paid by Railways in Indian rupee instead of paying consideration in foreign exchange to the foreign supplier and thereafter, the foreign supplier sending the discount/brokerage in foreign currency to the broker/agent. In that case, service was provided to the service receiver abroad and consideration was in fact indirectly received in foreign currency. In the present case, the appellant provided service to Indian Insurer who has paid the remuneration to the appellant in Indian currency. Prima facie, the facts are not comparable and therefore, the decision is not applicable. In the appellants own case as well as in the case of Suprasesh G.I.S. & Brokers P. Ltd. (2008 (11) TMI 82 - CESTAT, CHENNAI), this Tribunal in similar circumstances has taken a view that the appellant does not have a prima facie case - stay granted partly - matter remitted back to Commissioner (Appeals) subject of deposit of 50% as pre-deposit.
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2014 (9) TMI 818
Online information and data base access and retrieval services - computerised reservation systems/Global Distribution System - Held that:- while the services provided by the CRS/GDS Companies merited classification under online information and data base access/retrieval services, since the service providers and the service recipients are situated outside India and the consideration for the services rendered has also been paid outside India, the said activity would be not taxable in India under reverse charge mechanism or otherwise. - Stay granted.
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2014 (9) TMI 817
CENVAT Credit of Service Tax paid - Port services - Penalty u/s 78 - Held that:- Appellant was entitled to take credit of the input service on or after 14.5.2003. Further, the appellant draws my attention to para 1 of the show-cause notice wherein it is admitted fact that the appellant applied for Service Tax Registration on 9.1.2004 and they were granted registration vide certificate dated 12.1.2004. Further argument by the appellant is that, as an output service provider duly recognized by the Service Tax Department, it was entitled to take credit of tax paid on input service from the date of registration as well as prior to date of registration as held by this Tribunal in Imagination Technologies India Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III [2011 (4) TMI 406 - CESTAT, MUMBAI]. Admitted case of the Revenue that the appellant is a output service provider, in view of the certificate of registration granted dated 11.1.2004, which has not been cancelled thereafter, I hold that the appellant has taken Service Tax credit for input services in accordance with law and have also utilized the same in accordance with law under the provisions of Rule 11 of the Cenvat Credit Rules, 2004. On the ground of limitation also I hold in favour of the appellant in view of the proper declaration made before the Revenue by regularly filing of returns. In this view of the matter, the impugned order is set aside - Decided in favour of assessee.
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2014 (9) TMI 816
Waiver of predeposit - Works contract services - lift irrigation schemes - Held that:- An amount of ₹ 20,09,246/- out of the total demand confirmed is attributable to consideration received on works contract services provided in respect of Rajiv Sagar Lift Irrigation Project. The petitioners claim for exemption on this aspect predicated on the basis of exemption Notification No. 41/2009-S.T., was rejected by the adjudicating authority on the ground that lift irrigation schemes are outside the purview of canals which are the subject matter of Notification No. 41/2009-S.T. - Works contract works undertaken in relation to canals would include pump houses and other facilities erected for lifting the water from lower to higher level of the canals, as would be the case in lift irrigation projects. For reasons alike as recorded in the interim order of this Tribunal dated 1-10-2013, we find a strong prima facie case in favour of the appellant/petitioner for waiver of the demand of ₹ 20,09,246. Effective date of notification - Held that:- It is axiomatic that an exemption Notification issued under Section 93(1) has no retrospective operation or reach. In the circumstances, we are not pursuaded, prima facie, that service provided prior to 23-10-2009, the date of Notification No. 41/2009-S.T. are immune to the levy of service tax on the mere circumstance that the consideration for the earlier provided service was received after the date of issue of this Notification. - stay granted partly.
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2014 (9) TMI 815
Supply of Tangible Goods service - rental charges/hiring charges on the water meters installed in the places where water is supplied - appellant submitted that, the appellant is performing statutory function and within the meaning of statute, appellant has to be treated as State. What is collected by them is a statutory levy and he submits the charges collected by them are prescribed by the statute and therefore it cannot be liable to tax at all - Held that:- It is nobodys case at present that there is an exemption notification applicable to water supply meters. In such a situation the Board circular would not be applicable. The fact of the matter is that requirements of statutory definition of supply of tangible goods are fulfilled in this case. In this case there is no dispute that the right of possession and effective control has not been transferred to the customer and are retained by the Board itself. - The meter installed in the premises where the water is supplied and so long as the water is being supplied, the meter would be there and the ownership of the meter and effective control would be with the Board only since officials of the Board take the meter reading at frequent intervals. Prima facie we find that hiring charges collected for water meters fulfilled the requirement of definition. The discussion above would show that appellant has not been able to make a prima facie case at this stage. However as regards extended period, it requires a detailed consideration of statutory provisions, entitlement of the appellant to entertain a bona fide belief and applicability of circular etc. which can be done only at the time of final hearing. At this stage we consider that in the absence of prima facie case on merits, the appellant should be required to deposit at least the amount attributable to the normal period of limitation. - Partial stay granted.
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2014 (9) TMI 814
Refund of service tax - Receipt of Terminal Handling Charges, Documentation Charges and Bill of Lading Charges - Held that:- Serial No. 2 of the table annexed to the schedule to the Notification No. 41/2007-S.T. grants exemption to services provided for export of goods and there are no condition attached for claiming the refund. The Board vide Circular No. 112/6/2009, dated 12-3-2009 also clarified that irrespective of the categorization of services under which the taxes have been paid, if the services received are notified in Notification No. 41/2007-S.T., the benefit of refund would be available. This Tribunal in the four cases (cited supra) has also consistently held that refund of service tax paid on Terminal Handling Charges besides Business Auxiliary Services would be available when received in or in relation the export of goods. In view of the above, I do not find any merit in the appeal filed by the Revenue - Decided against Revenue.
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2014 (9) TMI 813
Waiver of pre-deposit - disallowance of Cenvat credit - various input services for construction of the airport and the passenger terminal building - Held that:- Insofar as input services used in respect of hotel construction prima facie since that contractor had availed benefits under the conditional Notification No. 1/2006 prima facie, availment of Cenvat credit by the petitioner appears unauthorized. Similar disentitlement prima facie applies in respect of input services in relation to construction of Fuel farm; on ATF fuel and credit on Volvo chassis. Insofar as ineligible input Service Tax credit of ₹ 4,00,83,247/-, the finding is that these input services were not established to have been utilized in any output service. Insofar as the disallowed component of ₹ 2,60,00,996/- the finding is that capital goods credit taken on goods used in the construction of hotel could not be availed by the petitioner since the contractor who provided the commercial or industrial construction service in relation to the hotel had availed benefits under the conditional Notification No. 1/2006; the dispute on this aspect is of ₹ 2.04 crores. Prima facie, the petitioner appears to have an arguable case in relation to the quantum of ₹ 10,81,22,098/- i.e. in respect of the 16 input services pertaining to the construction of the airport. These services appear to have a more direct and proximate nexus to construction of the airport than to the eventual output service provided from the completed airport, by the petitioner. - stay granted partly.
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Central Excise
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2014 (9) TMI 810
Confiscation of goods - Redemption fine - violation of principles of natural justice - Non supply of relied upon documents - Held that:- matter could not be decided for a long period on account of the injunction by the Honble High Court, which was vacated on 16/09/10 only. Thereafter the appellants have made requests for the supply of relied upon documents. Though the Commissioner refers the supply of the documents, but it is not clear as to whether the same was supplied to the main assessee M/s R.K. Cigarettes P. Ltd. or not. The statement made by the learned advocate, at bar, is to the effect that there are no acknowledgements given by them, evidencing any receipt of relied upon documents. This fact is required to be verified and if the acknowledgement receipts referred to by the Commissioner in his order are not by M/s R.K. Cigarettes P. Ltd., they have to be provided the relied upon documents. As regards the supply of non-relied upon documents, the said fact stand accepted by the Commissioner but he has referred to the fact that the appellant had refused to take delivery of the notice, sent to them for collection of the said documents. Without commenting upon the same, we note that the non relied upon documents do not stand supplied to the appellant and as such they have to be given a chance for the same. Appellants request for cross-examination has not been dealt by the Adjudicating Authority at all. We further note that as recorded in para 6.12 of the order there is no defence reply by the appellant. As per the learned advocate the reply was not filed as the inspection was not completed and the supply of the relied upon documents as also the non relied upon documents was not completed. He also submits that the matter was pending for a long 12 years not on account of any fault by the appellant as made out by the Adjudicating Authority but the adjudication proceedings could not be completed on account of the injunction by the Honble High Court till 16/09/10 - Matter remanded back - Decided in favour of assessee.
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2014 (9) TMI 809
Denial of CENVAT Credit - duty paid by the job worker on the goods job worked on behalf of the appellant - Inclusion of cost material - whether the Appellant would be eligible for Cenvat credit of the duty paid by the job workers on the intermediate products which had been paid on the value equal to the cost of the free supply inputs excluding excise duty (the credit of which had been taken by the Appellant) plus job charges plus value of any other inputs of their own used by the said job workers for manufacture of the intermediate products - Held that:- manufacturer who has availed Cenvat credit in respect of inputs, can send those inputs to his job worker for further processing, testing, repair, reconditioning, etc. or for manufacture of intermediate goods necessary for the manufacture of final products or for any other purpose, provided the processed inputs or intermediate products are returned back within a period of 180 days. There is no condition that for availing the facility of this Rule, the job worker should avail full duty exemption under Notification No. 214/86-C.E. There is no dispute that intermediate products made out of the inputs supplied by the Appellant were received back from the job workers within the stipulated period. There is no condition in Rule 4(5)(a) of the Cenvat Credit Rules, 2004 that job worker should necessarily avail of full duty Exemption under Notification No. 214/86-C.E. This exemption being a conditional exemption, is not required to be compulsorily availed by job workers. If the job worker decides to pay the duty on the intermediate products manufactured by him on job-work basis for the principal manufacturer, in terms of the judgment of the Apex Court in case of Ujagar Prints v. Union of India, reported in [1989 (1) TMI 124 - SUPREME COURT OF INDIA], they would be required to pay duty on the cost of input plus job charges including the cost of their own inputs used in manufacture. This is what the job workers have done in the present case. First in the hand of input manufacturers from whom the Appellant had procured the inputs and second time in the hand of job workers who at the time of clearance of intermediate products made out of the inputs paid duty on value which included the cost of the inputs, the credit of the duty paid on the intermediate product cannot be denied when such intermediate were made out of those inputs, even if the Appellant had earlier taken the Cenvat credit in respect of inputs while receiving the same. In any case, the intermediate products made out of inputs are different from inputs and just because the Appellant have availed Cenvat credit in respect of the inputs, the Cenvat credit of duty, if any paid on the intermediate products by the job workers, cannot be denied to the principal manufactures. - Decided in favour of assessee.
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2014 (9) TMI 808
Availment of in-eligible CENVAT Credit - Denial of cross examination request - Held that:- Merely because the Commissioner was of the opinion that the petitioners had made such a request somewhat belatedly, would not permit him to, in the facts of the present case, deal with such an application only in the final order itself. Sum total of this discussion is that we are inclined to set-aside the impugned order and request the adjudicating authority to pass a separate order on the petitioners application/request letter for granting cross-examination of the named witnesses. We are conscious that the Commissioner has already decided such an issue, however, since we are quashing the order, this part of the order would also not survive and hence, the requirement of a fresh order. We are informed that the same officer continues to hold the office of the Commissioner of Customs & Central Excise, Surat-II. It would therefore, be not necessary to separately hear the petition once again before passing any such order. This would, however, not preclude the Commissioner from requiring the petitioners to show relevance for seeking cross-examination of the witnesses. Reasoning adopted by the adjudicating authority for coming to conclusion in the matter is incorrect and entire issue needs reconsideration as per the allegations put forth in the show cause notice in the case in hand - matter remanded back - Decided in favour of assessee.
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2014 (9) TMI 807
Maintainability of appeal before Commissioner (Appeal) - Determination of date of receipt of order in original - Bar of limitation - condonation of delay - Held that:- There is no dispute that the Order-in-Original against which the appeal had been filed before the Commissioner (Appeals) had been dispatched by Registered AD and there is also no dispute about receipt order by the appellant. The dispute is only about the date of receipt. While according to the appellant, they received this order on 01.06.2000, according to the Department this order should be deem to have been received within one week from the date of dispatch which according to the Commissioner (Appeals) is the normal period of delivery of latter by the Postal Authority. In my view, this presumption of the Commissioner (Appeals) is totally incorrect and there is no base for the same. If an order or letter has been despatched by the Department to an assessee by Registered Post AD, in term of the provisions of Section 114 of the Indian Evidence Act, it can be presumed to have been received by the assessee, and if the assessee claims that he did not receive the order/letter, the burden of proof is on him. even if the date of receipt is assumed to be on 14.04.2000 i.e. within a weeks time from the date of the order i.e. 07.04.2000, since the appeal had been filed on 14.09.2000, there would be delay of only two months which was within the condonation limitation and the Commissioner (Appeals) should have heard the appellants plea for delay and should not have been dismissed the appeal as time barred on the ground that the period of delay is the beyond his power of condonation. - Matter remanded back - Decided in favour of assessee.
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2014 (9) TMI 806
Recovery of amount due - stay application pending before tribunal - Appropriation of an amount - Held that:- The sub-section which was introduced in terrorem cannot be construed as punishing the assessees for matters which may be completely beyond their control. For example, many of the Tribunals are not constituted and it is not possible for such Tribunals to dispose of matters. Occasionally by reason of other administrative exigencies for which the assessee cannot be held liable, the stay applications are not disposed within the time specified. The reasoning of the Tribunal expressed in the impugned order and as expressed in the Larger Bench matter, namely, IPCL v. Commissioner of Central Excise, Vadodara (2004 (6) TMI 52 - CESTAT, NEW DELHI) cannot be faulted. However we should not be understood as holding that any latitude is given to the Tribunal to extend the period of stay except on good cause and only if the Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Tribunal for reasons not attributable to the assessee. - Decided against Revenue.
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2014 (9) TMI 805
Recovery of excess refund claim sanctioned - after grant of refund, tribunal modified the order and reduced the amount of refund - Commissioner (Appeals) observed that without issue of a show cause notice under Section 11A, the respondents are not liable to pay the excess refund sanctioned to them. - Held that:- After the respondents lost the case before the Tribunal and this Tribunal decided that appeal filed by the Revenue was to be allowed, the respondents should have refunded the excess amount on their own. I find that not only they have not paid back the amount but they have put up a new argument that no notice has been issued under Section 11A. In fact the respondents did not even challenge the order of this Tribunal upholding the stand of the Departments appeal whereby the order of the Tribunal had attained finality and it is to be implemented. Therefore the observation of the Commissioner (Appeals) in the impugned order that a show cause notice should be issued is contrary to the law and he had no power to pass an order which was in contravention of an order which had attained finality in the absence of an appeal filed against the same - Decided in favour of Revenue.
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2014 (9) TMI 804
Stay application - Denial of CENVAT Credit - Jurisdiction in respect of input services distributor (ISD) - Held that:- Tribunal in a number of cases have held that the Commissioner having jurisdiction of the units receiving the input services credit does not have jurisdiction and it is the Commissioner having jurisdiction over the ISD with whom the ISD is registered has jurisdiction to decide the matter. It is also noted that the Chief Commissioner of Central Excise, Mumbai has also referred this matter to the Central Board of Excise & Customs vide letter dated 24-10-2013 seeking clarification in the matter. In view of the decisions of this Tribunal in this regard, since the jurisdiction itself is in dispute, the applicant has made out a strong case for grant of stay. The other issue relating to the eligibility to the credit can be gone into only once the jurisdiction issue is resolved, which can be done at the time of hearing of the appeal. - Stay granted.
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2014 (9) TMI 803
Exemption under Notification No. 74/93, dated 28-2-1993 - whether MSEB would be eligible for the benefit of Notification No. 74/93-C.E - Held that:- In view of the Larger Bench decision in the case of Asstt. Engineer (Civil) v. CCE, Raipur (cited supra), which prevails over the decision relied upon by the lower appellate authority in the case of Electricity Poles Manufacturing v. CCE, it has to be held that the appellant is not eligible for the benefit of Notification No. 74/93-C.E. as use of the PSC poles by MSEB is not used by the department of a State Government as MSEB is not a State Government department. In the appellants own case this Tribunal vide order dated 3-9-2012 has followed the ratio of the Larger Bench decision. In view of the above decision, we hold that the appellant is not eligible for the benefit of Notification No. 74/93-C.E. and therefore, the impugned order is not sustainable in law and accordingly, we set aside the same - Decided in favor of Revenue.
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2014 (9) TMI 802
Levy of tax on fuel supplied - Penalty under Rule 25 of the Central Excise Rules, 2002 - Held that:- No tax is leviable either by the Central Government or the State Government in respect of fuel supplied to foreign aircraft registered in any country other than in India, who is a party to the Convention of International Civil Aviation and operating a scheduled or non-scheduled international air service to or fro from India. Therefore, there is no need for a separate exemption under the Central Excise Act and provisions of the Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants) Act, 2002 and the Notification issued thereunder shall prevail over all other laws. Therefore, the appellant is rightly entitled for benefit of exemption under Notification dated 18-11-2002. However, it is responsibility of the appellant to give the details of the aircrafts to which the ATF is supplied and country of registration of the, aircraft so as to ascertain the eligibility to exemption. Appellant has not given these details to the adjudicating authority - Matter remanded back - Decided in favour of assessee.
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2014 (9) TMI 801
CENVAT Credit - duty paying documents - appellant has taken the credit on the basis of extra copy invoices, capital goods and invoices were on the name of other unit - Held that:- As appellant has got five units and credit is taken on the basis of extra copies of invoice, or on the basis of invoices in the name of other units, Department has every right to ask the appellant to justify the receipt of the inputs/capital goods in the factory and its use in the factory of the appellant. In certain cases, excess Cenvat credit is taken over and above what is admissible in the documents. Under Rule 9(5) of the Cenvat Credit Rules, 2004, the onus is on the appellant to take appropriate care and satisfy himself properly regarding admissibility of credit before taking the credit. Cenvat credit has been correctly denied by the lower authorities to the appellant, as its receipt and use in the factory of the appellant is not established. - Decided against the assessee. Levy of penalty - Rule 15(2) of Cenvat Credit Rules, 2004, read with Section 11AC of Central Excise Act, 1944 - Held that:- Though, there is allegation in the show cause notice about intention to evade Central Excise duty but it has not been specifically explained in the show cause notice and the adjudication order as to how intention to evade Central Excise is established when the appellant is subjected to periodical audits by the Department and the documents on the basis of which credit is taken was available for inspection/audit. - penalty set aside - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (9) TMI 812
Tamil Nadu Value Added Tax Act, 2006 - Section 25 - turnover - objections filed - Held that:- Respondent has passed the impugned order in piece-meal for particular months and not for the entire year, I am of the view that this is a fit case, where the impugned order can be set aside and the matter can be remitted back to the respondent to decide the matter afresh. Decided in favour of assessee.
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2014 (9) TMI 811
Cancellation of the 'C' form - Whether in the circumstances, the direction to pre-deposit 15% of the tax liability and 5% of the penalty liability made by the DVAT Tribunal was justified - Held that:- prima facie the appellants contentions are merited and strong. There is no allegation of wilfulness or culpability on the part of the appellant. In the circumstances, the direction to deposit 15% of the tax amount and interest and 5% of the penalty amount, are hereby set aside. The impugned order is modified to that extent - Decided in favour of assessee.
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