TMI Tax Updates - e-Newsletter
September 30, 2013

Case Laws in this Newsletter:

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

Articles

1. SECRETARIAL AUDIT UNDER NEW COMPANIES ACT, 2013

   By: Dr. Sanjiv Agarwal

News

1. D. Purandeswari Presents EPCES Export Awards to EOUS and SEZS

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

3. Index of Eight Core Industries (Base: 2004-05=100), August, 2013

4. Due-Date for Filing Returns of Income in Cases of Income Tax Assessees in Gujarat Extended upto 14th October 2013

5. India, Mozambique Bilateral Trade to Reach USD 3 Billion by 2016

6. Payment Systems in India: Reflecting on some recent trends and future challenges (Inaugural address delivered by Shri. Harun R Khan, Deputy Governor of the Reserve Bank of India at the International Seminar on Adoption of ISO 20O22 in RTGS held at the College of Agricultural Banking, Pune on September 30, 2013)

7. RBI Reference Rate for US $ and Euro

8. ASSOCHAM 10th INTERNATIONAL TAX CONFERENCE 21 - 22 October 2013.

Circulars / Instructions / Orders

Income Tax

1. F. No. 225/117/2013/ITA.II - dated 30-9-2013

Extension of Due Date for Filing of Returns in cases of Income Tax assessees in the state of Gujarat.

2. F. No. 225/117/2013/ITA.II - dated 30-9-2013

Extension of Income Tax Office Hours On 30th September 2013.

FEMA

3. 56 - dated 30-9-2013

Trade Credits for Imports into India – Review of all-in-cost ceiling

Highlights / Catch Notes

Income Tax

• Court Rules Section 194-I TDS for Rent Not Applicable; Correct Deduction u/s 194-C for Vehicle Use Confirmed.

  Case-Laws - HC : TDS u/s 194I or 194C - nature of payment for use of vehicles - the provisions of Section 194-I could not be applied to the facts of the present case and it has to be held that assessee has rightly deducted tax at source under the provisions of Section 194-C - HC
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• Court Grants 100% Depreciation on Shuttering Material Ready for Use to Assessee Owner.

  Case-Laws - HC : Allowability of depreciation on shuttering material - he assessee was the owner of the shuttering which was ready to use - Assessee is entitled for 100% depreciation - HC
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• Court Orders Release of Seized Jewellery in Section 132 Income Tax Act Case, Resolving Stridhan Ownership Dispute.

  Case-Laws - HC : Search conducted u/s 132 of the Income Tax Act - Ownership of jewellery in dispute – seizure of Stridhan - jewellery ordered to be released subject to conditions - HC
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• Court Affirms Section 80IC Deduction for RFID Device Manufacturing Due to Material Transformation.

  Case-Laws - HC : Deduction u/s 80IC - manufacture - various materials that had gone into making of the radio frequency identification device having thus undergone a change and that they had lost their original identity, therefore, deduction u/s 80IC allowed - HC
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• High Court Rules Departmental Valuation Report Alone Insufficient for Income Additions; Corroborative Evidence Required.

  Case-Laws - HC : Addition solely on the basis of Departmental valuation report – addition cannot be justified solely relying upon the valuation report - HC
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• Court Clarifies Evidence Requirement u/s 68 of Income Tax Act; Absence of Proof Not Automatic Justification.

  Case-Laws - HC : Addition u/s 68 of the Income Tax Act – Lack of evidence to prove the case - proof of agricultural activities – The assessee was not required to submit proof of agricultural operations every year - HC
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• Exemptions for Charitable Trusts: No Additions u/s 68 with Full Donation Disclosure & Valid Section 12-A Registration.

  Case-Laws - HC : Additions u/s 68 - charitable or religious trust - If there is full disclosure of the donation for whatever purpose and that the registration under Section 12-A is continuing and valid, exemptions cannot be denied - HC
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• High Court Confirms No Errors in Tax Treatment of Government Grants Under AS-22; Compliance with AS-12 Upheld.

  Case-Laws - HC : Taxability of government grants – following Accounting Standard (AS)-22 one forth was offered for tax - Revenue has not been able to point out and state, how and why the reasoning can be faulted as the assessee had followed AS-12 - HC
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• Lessee's switch from leasehold to freehold is an improvement, not a change; gains classified as Long Term Capital Gains.

  Case-Laws - HC : Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG) - The conversion of the rights of the lessee in the property from having lease hold right into free hold is only by way of improvement of her rights over the property - property remains as long term - HC
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• High Court Rules Sub-Agents Not Required to Deduct TDS on Payments to Advertising Agencies u/s 194C.

  Case-Laws - HC : Sub-agent to deduct TDS – Assessee acting as sub agent was not supposed to deduct TDS from the payment so made to various advertising agencies as per the provisions of Section 194C of the Act - HC
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• Section 36(1)(vii) Income Tax Act: No Need to Prove Debt Irrecoverable for Bad Debt Deduction.

  Case-Laws - HC : Allowance of Bad-debts u/s 36(1)(vii) - There is no requirement to establish that debts has become irrecoverable in the accounts of the assessee for the previous year. - HC
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Customs

• Appellant's Claim Denied: CENVAT Credit Requires Actual Payment of CVD, Court Rules Against Appellant's Argument.

  Case-Laws - AT : Levy of CVD - appellant argued that he is eligible to avail cenvat credit of the CVD paid, even if CVD is not paid, it does not matter - Held that:- This view is totally incorrect and has dangerous portents - AT
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Indian Laws

• Attorney Holder Can't Be Complainant in Cheque Dishonor Cases u/s 138; Must Act for Principal Party.

  Case-Laws - SC : Complaint under Section 138 of the N.I. Act - Dishonour of cheques - the attorney holder cannot file a complaint in his own name as if he was the complainant, but he can initiate criminal proceedings on behalf of his principal. - SC
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Wealth-tax

• Commercial Property Value Excluded from Net Wealth Under Wealth-tax Act, Sec 2(ea) Explanation 5(1), Regardless of Owner Occupancy.

  Case-Laws - HC : Commercial property u/s 2(ea) Explanation 5(1) – Exclusion of Value of Property – Net Wealth - it nowhere provides that only if such commercial complex was occupied by the owner then alone the exclusion shall take effect - HC
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Service Tax

• High Court Confirms Tribunal's Order Allowing Appellant to Pay 25% Penalty with Interest and Dues in 30 Days.

  Case-Laws - HC : Option to Deposit Dues Along with Interest and 25% of penalty - Since the option has been extended to the appellant to pay 25% of the penalty along with interest and other dues within 30 days – there was no infirmity in the order of the Tribunal - HC
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• Subcontractor Granted Stay on Service Tax Payment, Believed Main Contractor Paid; Case Involves Maintenance Services.

  Case-Laws - AT : Non payment of service tax by the sob-contractor under a bonafide belief that main contractor has paid the service tax - Management, maintenance or repair service - stay granted - AT
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• Taxable Status for Construction Services Starts July 1, 2010; Prior Tax Demands Unsustainable.

  Case-Laws - AT : Construction Service - prima faice services rendered by the appellant would be taxable from 1.7.2010 only and any demand prior to that period prima facie seems to be not sustainable - AT
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• Court Grants Stay: No Taxable Service Found for Labor Database and Routing in Manpower Supply Case.

  Case-Laws - AT : Manpower Supply or Recruitment Agency - Prima facie it appeared that no taxable service was rendered because having a database of labourers or routing of the labourers or payments for the labourers may not be sufficient to make the assesse a manpower supply agency - stay granted - AT
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• Dispute Over Service Tax Valuation: Partial Stay Granted as Assessee Gains Prima Facie Favor in Finishing Services Case.

  Case-Laws - AT : Valuation - Department viewed that the services provided by them was in the nature of finishing services and denied the benefit abatement - prima facie case in favor of assessee - stay granted partly - AT
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Central Excise

• MODVAT Claims: Shared Electricity from Common Generator Benefits Both Units at Same Location Under Excise Regulations.

  Case-Laws - HC : MODVAT Claim on the portion of Furnace Oil/LDO used for generation of electricity - It was logical that if two units were being run at one place, producing two different items and the electricity was supplied to both of them by a common generator, the Modvat facility shall be available to both the manufacturing units, unless statutorily provided otherwise - HC
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• Board Oversteps Authority: Circular Undermines Tribunal Decision, Legal Challenge Required for Tribunal's Ratio.

  Case-Laws - HC : Validity of Circular - The Board could not have issued the circular for rendering a decision of the Tribunal as irrelevant and nugatory - The remedy actually was to challenge and question the ratio in appropriate proceedings - HC
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• Tribunal Rules Violation of Natural Justice; Case to be Remanded for Reconsideration with Full Document Disclosure.

  Case-Laws - HC : The Tribunal, while holding that principles of natural justice have been violated, should have remanded the matter to the Adjudicating Officer after serving all relevant documents upon the respondent to decide the matter afresh instead of setting aside the demand - HC
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• Show Cause Notice Demand Set Aside Due to Limitation Bar for Related Manufacturing and Marketing Companies.

  Case-Laws - HC : Bar of Limitation – Subsequent show cause notice in that case was also issued on the same ground namely that manufacturing company and marketing company were related persons - demand set aside - HC
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• Court Confirms Assessee's Right to MODVAT Credit with Superintendent Preventive's Certificate Approval.

  Case-Laws - HC : MODVAT Credit - Whether MODVAT Credit can be availed by the assessee on the basis of certificate issued by superintendent preventive – Held yes - HC
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Case Laws:

• Income Tax

• 2013 (9) TMI 977
  Validity of issue of Notice u/s 148 to assess the income escaped assessment – Held that:- No any material was discovered by A.O, prior to issuing notice under Section 148 nor any such material was discovered from any other source, which may have given him reason to believe that the income has escaped income. The A.O. based his findings on the same material, which were disclosed in the return after making some more enquiries and which was not permissible as the limitation of 4 years had expired - Not only primary evidence but all details and documents were before the A.O. and that it was obvious that no discrepancies or defects have been noted by the AO in respect of such details/ documents - Contention of the AO that the shares of the companies, which were private limited were not traceable in the stock exchange did not have conclusive evidentially value – Decided against the Revenue.

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• 2013 (9) TMI 976
  Applicability of section 194I or 194C of the Income Tax Act - nature of payment for use of vehicals - whether rent or not – Held that:- the word 'rent' has not been defined in Section 2 of the Act. The definition of the word 'plant' under sub section (3) of Section 43, falls in Chapter IV - Computation of Total Income, which is neither relatable nor applicable to the Chapter XVII, relating to collection and recovery of tax. Even otherwise, it is difficult to believe that the word 'plant' defined in Chapter IV - computation of total income, falling under Section 43 of the Act, includes buses hired by the educational institutions. According to the facts of the present case, assessee itself has not utilized the buses being plants but they were used by the transport contractor for fulfilling the obligations set out in the contract agreement. Therefore, the provisions of Section 194-I could not be applied to the facts of the present case and it has to be held that assessee has rightly deducted tax at source under the provisions of Section 194-C of the Act.

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• 2013 (9) TMI 975
  Addition u/s 68 of the Income Tax Act - Assessee-firm has not explained these credits and, therefore, the amount was added as unexplained credit – Held that:- Sri Dule Chand Pandey has sold the land to the assessee-firm. The amount of Rs.2,40,000/- was taken as a loan from Smt. Shyam Kumari Dubey, who was regularly assessed to the income-tax. M/s. Dube Lands and Finance Ltd., was also regularly assessed to the income-tax. The said amount was duly reflected in their income-tax returns, as mentioned by the CIT(A). Necessary confirmation certificate was furnished before the appellate authority, who has asked the remand report from the AO. The AO has accepted the credits in the name of Sri Dule Chand Pandey, and Smt. Shyam Kumari Dubey. M/s. Dube Lands and Finance Ltd., has duly shown the amount in question in their books of accounts - No justification to make any addition – Decided against the Revenue.

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• 2013 (9) TMI 974
  Allowability of depreciation on shuttering material - Assessee, a State Corporation, is engaged in the business of Civil Construction work specially for the constructing the bridges in India as well as abroad – Held that:- Construction of the bridge is the main business activity of assessee for which the shuttering is an essential item. The assessee is the complete owner of the shuttering. Without shuttering, no building or bridge can be erected. Shuttering material was treated as a plant on which 100% depreciation is allowable as per the ratio laid down in the case of Harijan Awam Nirbal Varg Avas Nigam Vs. CIT [1995 (12) TMI 2 - ALLAHABAD High Court] – Decided in favor of Assessee. Shuttering was not used, it was kept unused, therefore no depreciation allowance – Held that:- Reliance has been placed upon the judgment in the case of Dinesh Kumar Gulabchand Agarwal Vs. CIT [2003 (1) TMI 19 - BOMBAY High Court], wherein it has been held that The word "used" in section 32 of the Income-tax Act, 1961, denotes that the asset has been actually used and not that it is merely ready for use. The expression "used" means actually used for the purpose of the business - In the instant case, the assessee was the owner of the shuttering which was ready to use - Assessee is entitled for 100% depreciation – Decided against the Revenue.

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• 2013 (9) TMI 973
  Search conducted u/s 132 of the Income Tax Act - Ownership of jewelry in dispute – seizure of Stridhan - Held that:- The petitioner No.2 is permitted to take the jewelleries seized on 20.6.2012 from the premises of Petitioner No.1, on supurdgi on furnishing bank guarantee to the amount of the value of the jewelleries. Petitioner No.2 shall also file an undertaking before the respondents that till the decision of the assessment proceedings, petitioner No.2 shall not sell or transfer the jewelleries without seeking prior permission of the respondents

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• 2013 (9) TMI 972
  Applicability of Gift tax on transfer of shares to 100% subsidiary company – Held that:- Under Section 47(iv) of the Income Tax Act, for the purpose of capital gains, the transfer of capital asset between the holding company to subsidiary company is not treated as a transfer. But the relevance of Section 47 of the Income Tax Act has to be seen only in the background of the provisions relating to the charge on capital gains under Section 45 that given the inclusive definition on transfer under Section 2(47), but for Section 47, these transactions would certainly attract Section 45. Thus, this Section would not apply to a case where no capital gain is involved. When one reads the definition of 'transfer of property' appearing under Section 2(xxiv) of the Gift Tax Act, it would reveal that any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person is also included within the meaning of transfer of property. It is not denied by the assessee that by transfer of shares held by the holding company, there is a diminution in the asset held by the holding company. Even though learned counsel for the assessee immediately replied that ultimately the assessee company is the owner of 100% owned subsidiary company, still, being two different entities, no any justifiable ground to extend the provisions of Income Tax Act to the assessment under the Gift Tax Act for the purpose of understanding the definition of 'transfer of property' as available under the Gift Tax Act - When two companies are treated as two different entities and when the facts are clear, there arises no necessity for lifting the corporate veil to know the nature of transactions or the existence of two entities – Decided against the Assessee.

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• 2013 (9) TMI 971
  Disallowance of deduction u/s 80IC of the Income Tax Act - scope of the term manufacture - Assessee is engaged in the business of manufacture and service of communication and networking products, mainly to State Government and Central Government undertakings. It supplied communication device to TNEB and BSNL to the extent of Rs.37.62 crores, out of the total sale of Rs.52.61 crores - Assessee is stated to have purchased imported PCBs, RAMs, high and low transmission wireless adaptors, wireless antennae components, flash ram software, Red Hat Linux software and other networking components – Held that:- Using purchased components, the assessee redesigned, developed and manufactured a single product to suit the requirement of the project. As the end product was a distinct article and a marketable product, the assessee claimed deduction under Section 80 IC of the Income Tax Act. Under Section 2(29BA) of the Income Tax Act, under Finance (No.2) Act of 2009, with effect from 01.04.2009, the definition 'manufacture' was inserted to mean, a change in a non-living physical object or article or thing resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. Even though the said amendment would not be of relevance to the assessment year under consideration, namely, 2006-2007, yet, the intention of the Revenue being very clear on the scope of the expression 'manufacture', on the findings of fact that the various materials that had gone into making of the radio frequency identification device having thus undergone a change and that they had lost their original identity, therefore, deduction u/s 80IC allowed.

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• 2013 (9) TMI 970
  Disallowance of petty miscellaneous expenses – Held that:- Assessee agreed to the said addition on the ground that it was difficult to collect details from their offices all over India for all expenses over Rs.5000/-. However, some details were furnished vide letter dated 29.10.1999 - Turnover of the assessee was substantial, nearly Rs.68 Crores. Rs.34.9 lacs was a trivial amount, only 0.5% of the total turnover – Assessee-respondent suffered substantially high losses of Rs.372 Crores in last ten years and therefore addition of Rs.34.9 lacs was not material as the respondent assessee was not to pay any tax - Accepted the explanation given by the respondent-assessee and were satisfied about the bonafides of the said explanation – Decided against the Revenue.

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• 2013 (9) TMI 969
  Addition solely on the basis of Departmental valuation report – Held that:- Relying upon the decisions in the case of Commissioner of Income Tax vs. Navin Gera [2010 (8) TMI 194 - Delhi High Court], CIT vs. Suraj Devi [2010 (8) TMI 217 - Delhi High Court], it has been held that addition cannot be justified solely relying upon the valuation report – Decided against the Revenue.

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• 2013 (9) TMI 968
  Addition u/s 68 of the Income Tax Act – Lack of evidence to prove the case - proof of agricultural activities – Held that:- If in the previous years the agricultural income from the same land on which agricultural crops were produced by the appellant was accepted by A.O., then, the income could be treated as agricultural income for want of proof of records of fertilizer and chemicals and expenditures incurred on tube-well boring, construction of store house, levelling of field etc - Even if each assessment year is treated to be a separate unit, the findings in respect of previous years based on the record of title and possession of agricultural land, and the evidence led for proving that agricultural operations were carried out and crops were produced could not be disbelieved in the subsequent year, for want of primary evidence. The assessee was not required to submit proof of agricultural operations every year, in the absence of any material, which may suggest that the agricultural operations were stopped or was not carried out in the relevant period. There was no evidence to establish that the assessee has sold the agricultural land or that the assessee had stooped the agricultural operations. Further, assessee as a Private Company was maintaining regular books of accounts as required under the Companies Act, which were also audited and accepted in the AGM of the Company. The entries in the books were not proved to be bogus. There is nothing under the Income-tax Act debarring the assessee from selling agricultural produce in cash, and thus additions based only on suspicion could not be sustained – Decided against the Revenue.

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• 2013 (9) TMI 967
  Addition u/s 68 of the Income Tax Act – Lack of evidence to prove the case - proof of agricultural activities – Held that:- If in the previous years the agricultural income from the same land on which agricultural crops were produced by the appellant was accepted by A.O., then, the income could be treated as agricultural income for want of proof of records of fertilizer and chemicals and expenditures incurred on tube-well boring, construction of store house, levelling of field etc - Even if each assessment year is treated to be a separate unit, the findings in respect of previous years based on the record of title and possession of agricultural land, and the evidence led for proving that agricultural operations were carried out and crops were produced could not be disbelieved in the subsequent year, for want of primary evidence. The assessee was not required to submit proof of agricultural operations every year, in the absence of any material, which may suggest that the agricultural operations were stopped or was not carried out in the relevant period. There was no evidence to establish that the assessee has sold the agricultural land or that the assessee had stooped the agricultural operations. Further, assessee as a Private Company was maintaining regular books of accounts as required under the Companies Act, which were also audited and accepted in the AGM of the Company. The entries in the books were not proved to be bogus. There is nothing under the Income-tax Act debarring the assessee from selling agricultural produce in cash, and thus additions based only on suspicion could not be sustained – Decided against the Revenue.

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• 2013 (9) TMI 966
  Addition u/s 68 of the Income Tax Act – Addition of amount of Rs. 20,05,000/- - proof of investment in shares – Held that:- no evidence about the distinctive share numbers or photocopy of share certificates was available, nor any evidence was led to establish that the shares were actually transferred in the name of the assessee. The burden was clearly on the assessee to explain the amount withdrawn by him, and to satisfy the AO - Merely on the basis of the bank account that also belonging to business concern one cannot conclude that the assessee has duly explained the source of the deposit specially when the assessee has not filed Wealth Tax return showing cash in hand amounting to Rs.20,20,000/- as on 31.3.1999 which was chargeable to Wealth Tax – Decided against the Assessee.

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• 2013 (9) TMI 965
  Additions u/s 68 of the Income Tax Act – Exemptions u/s 11 of the Income Tax Act – Held that:- Reliance has been placed upon the judgment in the case of Director of Income-Tax (Exemption) v. Keshav Social and Charitable Foundation [2005 (2) TMI 84 - DELHI High Court], wherein it was held that under Section 11 (1) every charitable or religious trust is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. This is, subject to accumulation up to a specified maximum which was 25 per cent. In the present case that the assessee had applied more than 75% of the donations for charitable purposes as per its objects - The Delhi High Court in the abovementioned case, further held that Section 68 of the Act has no application in such case where the assessee had disclosed donations as its income - If there is full disclosure of the donation for whatever purpose and that the registration under Section 12-A is continuing and valid, exemptions cannot be denied – Decided against the Revenue.

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• 2013 (9) TMI 964
  Taxability of government grants – Accounting Standard (AS) - 22 - Held that:- There was no dispute that the grant given to the respondent was based upon operations from which net profit/income had to be arrived at after deducting the expenditure - The grant had to be utilised over five years – Hon’ble Tribunal, accordingly accepted that amount of Rs.7.29 crores declared by the respondent, out of grant of Rs.35 crores should be treated as income of the year in question - Counsel for the Revenue has not been able to point out and state, how and why the reasoning can be faulted as the assessee had followed AS-12 - Revenue has not disputed that the accounting standard, as prescribed by the institute, has been followed – Decided against the Revenue. Addition on the basis of auditors report - Addition of Rs.534.79 lacs - In the notes of the Auditor, they had qualified the accounts stating that details of inventories of Rs.534.79 lacs could not be ascertained – Held that:- On the question of inventories of Rs.534.79 lacs, the CIT (Appeals) has recorded that this amount was duly reflected in the Annual Report. He has made reference to Schedule IV of the Annual Report where under the head ‘inventories’ full details had been given. It is pointed out that the inventories were maintained by Indian Airlines and the figures given by them have been taken in the books. The Auditor had hedged his report and had stated that they could not ascertain inventories of Rs.534.79 lacs in view of the said factual position, i.e., they had taken the figures given by Indian Airlines and had not examined the accounts/books of Indian Airlines. A remand report from the Assessing Officer was called for. The Assessing Officer did not submit the remand report to contest the contention of the respondent-assessee – Decided against the Revenue.

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• 2013 (9) TMI 963
  Power of the High Court to direct ITAT to decide the case expeditiously – Held that:- The Income Tax Appellate Tribunal, Jabalpur is directed to decide the aforesaid appeals expeditiously as far as possible within a period of three months from the date of communication of this order.

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• 2013 (9) TMI 962
  Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG) - Taxability on conversion was by way of improvement of title on capital assets – Held that:- The difference between the 'short-term capital' asset and 'long-term capital asset' is the period over which the property has been held by the assessee and not the nature of tittle over the property. - The lessee of the property has rights as owner of the property subject to covenants of the lease, for all purposes. He may, subject to covenants of the lease deed, transfer the lease hold rights of the property with the consent of the lessor. The conversion of the rights of the lessee in the property from having lease hold right into free hold is only by way of improvement of her rights over the property - It would not have any effect on the taxability of gain from such property, which is related to the period over which the property is held. If the period is less than 36 months, the gain arising from such transfer would be of short-term capital gain. In the present case, the property was held by the assessee as a lessee since 1984, and the same was transferred on 31.03.2004, after the lease hold rights were converted into free hold rights on the same property which was in her possession, in her favour on 29.03.2004. The conversion was by way of improvement of title, which would not have any effect on the taxability of profits as short term capital gain – it is long term capital gains - Decided against the Revenue.

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• 2013 (9) TMI 961
  Depreciation on spare parts u/s 32 of the Income tax act – Whether spares can be capitalized and depreciation claimed on it even when they are not used – Held that:- Accounts were maintained as per the accounting standard II issued by the Institute of Chartered Accountants of India, and the said standard is mandatory for all the companies. Hence, the assessee has capitalized the value of spare parts along with the equipments. The spare parts were supplied along with the equipments to keep the same in workable conditions. It may be mentioned that the spare parts cannot be utilized independently and the same will have to be used along with the equipments. When the depreciation is allowed on the equipments, then it is also allowable on its spare parts – Decided against the Revenue. Addition towards short provision of interest on Government loan for Financial Year 2001-02 and towards short provision of DA arrears of employees – Held that:- Section 43B is not applicable to the interest on government loans and for DA arrears of employees. If the liability had finalized in the year under consideration, then the same would be allowed. The short fall in the provision was pointed out by the AG Auditors, so the A.O. made an addition - But fact remains that assessee has filed the revised return - Interest if any earned on the loan, the same will go to the State and it is the duty of the assessee to return it to the State as per G.O. issued in 1976 as well as terms and conditions of the loan – Decided against the Revenue.

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• 2013 (9) TMI 960
  Sub-agent to deduct TDS – Deduction of TDS to be made u/s 194C of the Income Tax Act - Assessee was engaged in the business of advertising working as an agent in some newspapers – Disallowance of the expenses i.e. Rs.29,78,272/- and added to the income of the assessee under Section 40(a)(ia) of the Act – Held that:- Assessee acted as sub agent and whatever amount was received from the client the same was paid to the five agencies, who in fact deducted the TDS from the payment - Assessee acting as sub agent was not supposed to deduct TDS from the payment so made to various advertising agencies as per the provisions of Section 194C of the Act - Various advertisement agencies of whom the assessee worked as sub agent they deducted the TDS from the payment of such advertisement – Decided against the Revenue.

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• 2013 (9) TMI 959
  Limitation period for applicability of section 263 for revision by Commissioner – Held that:- Except the issue of non genuine purchases all other issues dealt by Commissioner of Income Tax in the order dated 30 March 2009 were not a subject matter of the assessment order passed on 28 June 2006 under Section 143(3)/147 of the Act. All the other issues on which the Commissioner of Income Tax is seeking to exercise jurisdiction under Section 263 of the Act were concluded by virtue of an intimation under Section 143(1) of the Act which admittedly was done beyond a period of two years prior to notice dated 17 March 2009 issued under Section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of jurisdiction under Section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. Commissioner of Income Tax has not exercised revisional jurisdiction in respect of order/intimation passed Section 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under Section 263 of the Act is time barred as held by this Court in CIT vs. Anderson Marine & Sons (P) Ltd. [2003 (12) TMI 47 - BOMBAY High Court] – Decided against the Revenue.

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• 2013 (9) TMI 958
  Allowance of Bad-debts u/s 36(1)(vii) of the Income Tax Act – Evidence to be presented before A.O. - The assessee has turnover of more than Rs.19 crores, and had filed return of income, declaring income of Rs. 1,64,80,293/-. The amount of Rs. 11,52,901/-, which has been written off as bad debt, and could not be recovered was mostly from departments, which are government/semi government entities – Held that:- There is no requirement to establish that debts has become irrecoverable in the accounts of the assessee for the previous year. Sub section (vii) of Section 36 (1) of the Act provides for allowing deductions subject to provisions of sub-section (2), the amount of any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. There is no requirement under sub section (2) of Section 36 of the Act that assessee should produce evidence before the AO that he has made sufficient effort to recover the amount. As a prudent business man in carrying out business and maintaining accounts, the reasons for which the amount, which was actually written off as irrecoverable, is not subject to scrutiny by the AO, unless and until there was some material, which could suggest that writing off debt as irrecoverable was not for bonafide purpose or that the assesee was in fact suppressing the income to be taxed – Decided against the Revenue.

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• Customs

• 2013 (9) TMI 946
  Condonation of delay - Filing of Appeal u/s 129A - Classification of Goods - The issue was still pending consideration before the Apex Court - The petitioner’s appeal u/s 128A of the Customs Act had been rejected by the respondents on the ground that it was not filed within a period of two months plus one month - The petitioner had a right of appeal under Section 129A of the Customs Act but had come straight to the writ court - The writ court condones the delay made by the petitioner and permitted the petitioner to file its appeal before the Tribunal under Section 129A - The Tribunal may consider the matter on merits and in accordance with law.

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• 2013 (9) TMI 945
  Condonation of Delay - Delay and Laches - Reduction of Penalty – Held that:- The petition suffered from gross delay and laches - If at all the petitioner was aggrieved by the order of the Tribunal dated 23-10-1998 the petitioner ought to have challenged the said order within the time stipulated or within a reasonable time - By no stretch of imagination the delay of more than 14 years in filing the petition to challenge the order of the Tribunal can be said to be a reasonable period, especially when the sole ground for delay is the unsubstantiated ill health of the petitioner.

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• 2013 (9) TMI 944
  Mis declaration of goods – enhancement of value – confiscation of goods u/s 111(m) – redemption fine – penalty u/s 112(a) – Held that:- The order passed by the lower appellate authority was contradictory in terms - On the one hand, the appellate authority records a finding that confiscation u/s 111(m) of the Customs Act was not sustainable and consequently redemption fine and penalty was not applicable - At the same time the appellate authority also gives a finding that the appellant had to pay appropriate duty as applicable on the enhanced value as per the final assessment - Section 111(m) deals with mis-declaration of value or any other material particulars - If there was no mis-declaration Section 111(m) was not applicable and consequently the question of payment of duty on enhanced value does not arise at all - there was no application of mind by the appellate authority while passing the order – order was not sustainable – matter remanded back for fresh consideration – decided in favour of assessee.

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• 2013 (9) TMI 943
  Classification of goods - Misdeclaration - Penalties u/s 112(a) and 114AA – Confiscation u/s 111(d) and 111(m) - Revenue was of the view that the goods which were imported are classifiable under sub heading No.27101190 - Whether the goods which were imported were classifiable under Customs Tariff Heading No.2710 as claimed by the department - Held that:- The chemical examiner had given a report that the samples were other than crude mineral oil gas condensed and natural gasoline - It was seen that there was a neutral test report issued which would indicate that the product which was imported had completely distilled much before the temperature as indicated for the products which were classifiable under Customs Tarff Act 2709. - the issue needs thorough in depth consideration, which can be done only at the time of final disposal of the appeals. - stay granted partly. Re-export on Payment of Fine - The plea for the re-export of the goods on payment of the fine as imposed by the adjudicating authority, seems to be in accordance with the law as the adjudicating authority had already held it so - But since the adjudicating authoritys order was not complied within the thirty days limit - the lower authorities were directed to allow re-export of the goods on payment of redemption fine.

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• 2013 (9) TMI 942
  Exemption from CVD - misdeclaration of goods - import of Molybdenum concentrate classifiable under CTH 2613 declared as s ‘Molybdenum Ore’ or ‘Roasted Molybdenum Ore’ - Scope of exemption from excise duty under notification No. 4/2006-CE - Held that:- the exemption contained in notification No. 4/06-CE applies only to ores and not to concentrates. Levy of CVD - appellant argued that he is eligible to avail cenvat credit of the CVD paid, even if CVD is not paid, it does not matter - Held that:- This view is totally incorrect and has dangerous portents. The taxable event for levy of CVD is import of the goods into India. The eligibility to credit of CVD cannot and does not obliterate the liability to pay CVD if the taxable event for the levy of CVD has taken place. Reliance on the order of Commissioner(Appeals) - The Commissioner (Appeals) without understanding the scope of the remand, presumed that the Tribunal has passed an order on classification and on the basis of such presumption granted the benefit of notification No.4/2006 to imported molybdenum concentrate even without awaiting for the test report of the chemical examiner. If the lower appellate authority mis-read and mis-understood the order of the Tribunal, the appellant cannot place any reliance on such orders. In any case, the order of the lower appellate authority is not binding on this Tribunal and this Tribunal can independently arrive at a decision on the matter based on the facts placed before it. Limitation period - Whether the demand of CVD is barred by limitation of time - Held that:- The time period for issue of demand in a case where the duty is short levied or short paid, not levied or not paid or erroneously refunded is one year from the relevant date, which , in the present case, is the date of clearance of the goods. The bills of entry were filed during 6-4-2011 to 6-9-2011 in respect of the previous imports and the show cause notice was issued on 9-3-2012, that is, within a period of one year. Whether confiscation of the impugned goods with an option to redeem the same on payment of fine and imposition of penalty is warranted - Held that:- No reason for confiscation of the goods under section 111(d) which is for violation of the provisions of any law for the time being in force and no such reasons are forthcoming from the records of the case. Accordingly, we set aside the confiscation of the goods in the impugned order. Once the order of confiscation is set aside, the question of imposing redemption fine under section 125 or imposition of penalty under section 112/114A would not arise at all - Following decision in case of Northern Plastic Ltd. [1998 (7) TMI 91 - SUPREME COURT OF INDIA] Demand of duty and interest confirmed but order of confiscation and redemption fine set aside - decided partly in favor of assessee.

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• Corporate Laws

• 2013 (9) TMI 941
  Validity of CLB Order - public limited company or private limited company - allotment of shares - Two conclusions can be drawn from the above discussion. The first is that there is a clear violation of Section 108 of the Act. HQR did not have the share certificates along with the duly executed share transfer forms when a decision was taken at the Board meeting held on 10th May, 2005 to approve the transfer of shares from Moral to Mr. R.P. Mittal. The said decision therefore is invalid. The second conclusions that Mr. R.P. Mittal has, prima facie, made a false statement in his affidavit dated 5th March, 2013 and counter affidavit dated 30th April, 2013 before this Court that the share certificates pledged with IOB were returned to him on 23rd June, 2003. This Court is, therefore, inclined to institute suo motu proceedings under Section 340 of the Code of Criminal Procedure, 1973 ('CrPC') against Mr. R.P. Mittal for making a false statement before the Court on affidavit. Allotment/transfer of share - Voting rights not given - Held that:- independent of the prima facie finding of the Supreme Court that HQR is not a private but a public limited company, the Court finds that the impugned order dated 31st January 2006 of the CLB cannot be sustained in law. Pursuant to the orders of the DB as confirmed by the Supreme Court, the management of HQR is presently with the appellants in Co. Appeal (SB) No. 4 of 2006. They are also presently the majority shareholders. In light of the changed circumstances, the Court directs that status quo will be maintained as regards the BoD as well as the shareholding of HQR till such time the suits concerning the status of HQR as a private or public limited company are finally decided. The parties are, however, at liberty to seek any variation or modification of this direction from the court in which the suits are pending.

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• 2013 (9) TMI 940
  Non-Repayment of the Loan - Proper Procedure - the petitioners had failed to repay the debt thus the Department Invoked the provisions of sections 13(4) and 14 of the Act and the notice was issued u/s 13(2) of the Act - The issue was related of the requisite procedure to be followed prior to taking possession of a secured asset under the provisions of the SARFAESI Act, 2002 - Whether the borrower ought to know as to when exactly possession of the secured asset would be taken, when once the demand u/s 13(2) was not complied with by the borrower - Held that:- Indubitably no notice had been issued under sub-rule (1) or any publication had been made under sub-rule (2) of rule 8 of the Rules, informing the petitioners on which date possession of the secured asset would be taken - Instead section 14 had been directly resorted to by the respondent, which was clearly without the mandate of the law and was an infraction of the same - There had been violation of the principles of natural justice in the case - Hence, the order passed on December 27, 2008 by the Deputy Commissioner was quashed. Consequently, the order passed by the DRAT was also quashed and the order of the DRT was restored - The department was directed to comply with sub-rules (1) and (2) of rule 8 by indicating the date on which possession of the secured assets would be taken and thereafter proceed in accordance with law. The receipt of notice under sub-section (2) results in a virtual attachment of the secured asset - If the demand made in section 13(2) was not complied with and the representation as well as the objections filed by the borrower were also not accepted and communicated to the borrower, then in that case, steps could be initiated u/s 13(4) – 13(6) enabled a secured creditor to transfer the secured asset after taking possession would imply that the possession of the secured asset vests with the secured creditor prior to any such transfer - The procedure for taking possession or control of the secured asset by the secured creditor was envisaged in section 14 after the date mentioned in the possession notice at which stage, it was not necessary to actually inform or indicate to the borrower, the taking of possession by the secured creditor - Section 14 in fact does not prescribed an opportunity of hearing the borrower before an order was passed with regard to taking of possession - Relying upon Mardia Chemicals Ltd. v. Union of India [2004 (4) TMI 294 - SUPREME COURT OF INDIA ] and Transcore v. Union of India [2006 (11) TMI 349 - SUPREME COURT OF INDIA ] and United Bank of India v. Satyawati Tondon [2010 (7) TMI 829 - SUPREME COURT ] The mandatory requirement under the Act read with the Rules, that in order to enabled the borrower to know the date on which possession would be taken by the secured creditor, sub-rules (1) and (2) of rule 8 would have to be complied with by issuance of notices indicating the date on which possession would be taken - There was another purpose for issuing the notice prior to taking possession and that was to enable the borrower to discharge the liability to the secured creditor. The issuance of notice in terms of rule 8 of the Rules was a mandatory requirement having regard to the purpose of following the principles of natural justice so as to prevent miscarriage of justice and so as to ensure fair play in action - Issuance of notice prior to initiation of action u/s 13 was a mandatory processual requirement, the non-observance of which would invalidate the exercise of power - The taking of possession of a secured asset of a borrower under sub-section (4) of section 13 was a drastic measure and the exercise of such a power would definitely visit the borrower with civil consequences. Requirement of Issuing Notice - Whether the Magistrate was required to issue notice to the borrower before passing an order u/s 14 – Held that:- In the absence of any provision in the Act or the Rules framed thereunder requiring such notice, the Magistrate was not required to issue any notice to the borrower before passing an order under section 14 - the borrower had sufficient notice regarding the steps being initiated, the amount sought to be recovered and the consequences of not discharging the liability within the period stipulated in the notice under sub-section (2) - the safeguards satisfied the principles of natural justice and no further notice by the Magistrate was required before passing an order under section 14 - Decided in favour of Assessee.

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• Service Tax

• 2013 (9) TMI 955
  Option to Deposit Dues Along with Interest and 25% of penalty - - Whether the Tribunal committed substantial error of law in granting option to the assessee to deposit the entire dues along with interest and penalty equal to 25% relying upon CCE & C, Rohtak v. M/s. J.R. Fabrics Pvt. Ltd. [2009 (4) TMI 72 - PUNJAB AND HARYANA HIGH COURT] – Held that:- Neither the Adjudicating Authority nor the Commissioner (Appeals) gave any option to the respondent - the Tribunal was justified in giving option to the respondent which was accepted by the respondent - Since the option has been extended to the appellant to pay 25% of the penalty along with interest and other dues within 30 days – there was no infirmity in the order of the Tribunal – the Tax Appeal was not required to be entertained.

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• 2013 (9) TMI 954
  Demand - Non payment of service tax on GTA services under reverse charnge - Held that:- Considering the fact that the applicant has already deposited the service tax amount along with interest, I consider such deposit sufficient for admission of appeal. Therefore, predeposit of balance dues is waived and its collection stayed during the pendency of the appeal - stay granted.

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• 2013 (9) TMI 953
  Non payment of service tax by the sob-contractor under a bonafide belief that main contractor has paid the service tax - Management, maintenance or repair service - Held that:- the appellant has paid the entire service tax liability with interest. It is also seen that they are contesting the issue on merits. - appellant could have entertained a bona fide belief in not discharging the service tax liability as was indicated in Clause No15.2 of the agreement entered into with M/s. Mech Engineers & Erectors Ltd., which specifically states that the main contractor will discharge the service tax liability. On perusal of the records, we find that such a Clause has been implemented by the main contractor. In view of the fact that appellant could have entertained a bona fide belief, we find that the show cause notice which is issued on 13.1.2012 for the demands of service tax for the period April 2007 to March 2008, seems to be hit by limitation - stay granted.

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• 2013 (9) TMI 952
  Waiver of pre-deposit - Service Tax liability - Construction of Complex Service" or "Commercial or Industrial Construction Service" - The demand has arisen on the ground that the appellant has taken advances from the buyers as a builder/developer - Held that:- The deeming provision would be applicable only from 1-7-2010. Our attention has also been taken to the texts of certain other Explanations figuring under Section 65(105). In some of these Explanations, there is an express mention of retrospective effect. Therefore, there appears to be substance in the learned counsel’s argument that the deeming provision contained in the explanation added to Section 65(105)(zzq) and (zzzh) of the Finance Act, 1994 will have only prospective effect from 1-7-2010. Apparently, prior to this date, a builder cannot be deemed to be service provider providing any service in relation to industrial/commercial or residential complex to the ultimate buyers of the property. - Services rendered by the appellant would be taxable from 1.7.2010 only and any demand prior to that period prima facie seems to be not sustainable - Following decision of MOHTISHAM COMPLEXES (P) LTD Versus COMMISSIONER OF CENTRAL EXCISE, MANGALORE [2011 (5) TMI 549 - CESTAT, BANGALORE] stay granted.

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• 2013 (9) TMI 951
  Nature of services - Routing payments from farmers to labourer and maintaining database of labourers - stay - Manpower Supply or Recruitment Agency Service u/s 65(105)(k) - Whether the assistance so provided was covered under the definition of “Manpower Supply or Recruitment Agency Service” under Section 65(105)(k) of the Finance Act, 1994 read with Section 65(68) of the Act - Revenue was of the view that the applicant was providing service under the category - Held that:- Prima facie it appeared that no taxable service was rendered because having a database of labourers or routing of the labourers or payments for the labourers may not be sufficient to make the assesse a manpower supply agency and also for the reason that for a service to be taxable at least there should be some part of the value of service retained by the service provider. - stay granted.

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• 2013 (9) TMI 950
  Commercial & Industrial Construction Services - Held that:- As regards the Service Tax demand on the services rendered by the appellant for laying the drainage pipeline - this was brought into the category of laying of pipelines of the Gujarat Water Supply Sewerage Board - Following DINESH CHANDRA AGARWAL INFRACON PVT LTD Versus CCE, AHMEDABAD [2010 (8) TMI 54 - CESTAT, AHMEDABAD] and Larsen & Toubro Ltd. Versus Commissioner of Service Tax, Ahmedabad [2011 (1) TMI 188 - CESTAT, AHMEDABAD] - Prima facie The Service Tax liability was not liable to be discharged by the appellant. As regards the other demands raised for Service Tax liability - we find that the construction of housing colony for police personnel and others also, prima facie, seems to be covered by the judgment of this Tribunal in the case of KHURANA ENGINEERING LTD. Versus COMMR. OF C. EX., AHMEDABAD [2010 (11) TMI 81 - CESTAT, AHMEDABAD]. As regards the Service Tax liability on the Construction of Control room, Bus stand and earth filling for Sabarmati river front, we find that the issue needed to be gone in detail vis-a-vis definition of these services – this had to be done only at the time of final disposal of appeal. Stay granted partly.

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• 2013 (9) TMI 949
  Valuation - abatement - Department viewed that the services provided by them was in the nature of "finishing services" falling under one of the clauses of section 65 (25b) defining "commercial or industrial construction" - abatement under Notification No.15/2004-ST as amended by Notf No.1/2006-ST was not available for finishing services and therefore service tax should have been paid on the entire value of the consideration received instead of on 15% of it – Held that:- The focus has been more or less on legal issues rather than on facts - the whole of the materials used in executing impugned contracts may not be consumables and there may be materials like plywood which are sold and thereafter work like portioning was done. - there is scope for claiming abatement towards value of materials. However, the appellant has not been forthcoming in producing records showing actual value of such goods and the nature of goods by which a proper estimate of the taxable value can be arrived at. - stay granted partly.

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• Central Excise

• 2013 (9) TMI 939
  Cenvat Credit - Duty under Protest – Refund of Duty- waste bagasse emerged - Applicability of Rule 6 for production of exempted and non-dutiable goods – Held that:- Following Balrampur Chini Mills Ltd. vs. Union of India and others [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] - Bagasse is a waste product and no more duty will be imposed over it - Bagasse and 'press mud' are not final products of the manufacturer – Bagasse is classified under sub-heading 2303 20 00 of Central Excise Tariff Act. In the notice, it has been mentioned that as per Rule 6 of the CENVAT Credit is availed on the inputs which are used in the manufacture of both dutiable and final products, then an amount equal to 10% (upto 6th July, 2009) or 5% (w.e.f. 7.7.2009) of the sale value of exempted final products is required to be paid - Therefore, neither the penalty nor the interest can be charged from the petitioners, in view of the fact that the petitioners are not liable to duty either by payment or by reversal in respect of bagasse sold by the petitioner - As the petitioners have paid the entire duty and interest under protest, the entire deposited amount shall returned to them – Decided in favour of Assessee.

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• 2013 (9) TMI 937
  MODVAT Claim on the portion of Furnace Oil/LDO used for generation of electricity supplied to other units - Interpretation of Rules - Held that:- It was well-settled that tax law should be interpreted in conformity with the normal commercial practice - Therefore, the manner of use should be accepted as to economical, efficient and convenient manner of use. A contrary interpretation would lead to frustrating the purpose of law in granting exemption/Modvat credit - Relying upon In SRF Ltd. versus Commissioner of Central Excise, Chennai [2005 (7) TMI 215 - CESTAT, CHENNAI] and Mahabir Jute Mills Ltd. versus Commissioner of C. Ex., Allahabad [2006 (2) TMI 591 - CESTAT, NEW DELHI ]. The learned counsel produced various orders passed by the different Tribunals and they all do support the impugned order of the Tribunal - The learned counsel for the appellant could not refer any statutory regulation or rule to take a different view of the matter - It was logical that if two units were being run at one place, producing two different items and the electricity was supplied to both of them by a common generator, the Modvat facility shall be available to both the manufacturing units, unless statutorily provided otherwise - It was neither expedient nor desirable unless provided otherwise statutorily to have separate electricity generating sets for different manufacturing units - The approach of the Tribunal was pragmatic and in the interest of efficiency and economy – there was no error in allowing Modvat Credit on Furnace Oil and other eligible inputs used in the generation of electricity – Decided against the revenue.

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• 2013 (9) TMI 936
  Validity of Circular dated 27th July, 1995 - process amount of manufacture or not - manufacturer of electro thermo appliances used for domestic purposes, had diluted imported insecticides under sub-heading 3808.10 of the Central Excise Tariff Act, 1985, to make them marketable. In this process, solvent, perfume and stabilising agents etc. were added. - revenue contended that the process is amounting to manufacture - Whether the circular was legal and valid as it specifically seeks to override and disputes ratio and declares decision of the Tribunal in the case of Markfed Agro Chemicals v. Collector of Central Excise. Chandigarh, [1993 (9) TMI 192 - CEGAT, NEW DELHI] as an incorrect and a wrong decision – Held that:- We need not examine this issue in great depth and deal as similar contention was raised and answered by a Single Judge of this Court in Kissan Chemicals v. Union of India [1996 (5) TMI 91 - HIGH COURT OF DELHI AT DELHI ] - The Board could not have issued the circular for rendering a decision of the Tribunal as irrelevant and nugatory - It was observed that issuance of the circular by the Board in the present facts was not an appropriate remedy - The remedy actually was to challenge and question the ratio in appropriate proceedings. The petitioner had drawn attention to the judgment of the Supreme Court in Union of India v. Pesticides Manufacturing & Formulators Association of India [2002 (10) TMI 95 - SUPREME COURT OF INDIA] - wherein post-amendment of the tariff, the same issue was examined and it was held that amendments to Chapter 38 in 1996 and 1997 had not resulted in any difference in classification of bulk pesticides and insecticides etc. - The writ petition was allowed and the circular was quashed as well as the show cause notice issued to the petitioner - Decided inf favour of Assessee.

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• 2013 (9) TMI 935
  Violation of principle of natural justice - Held that:- negligence or collusion by officers, enjoined with duty to collect taxes, detect evasion and/or to impose penalties etc., cannot be a ground to allow a delinquent to go scot-free. Where an order discloses violation of principles of natural justice, it is incumbent, while setting aside such an order, to remand the matter instead of allowing a defaulting party to go scot-free. The appellate authority as well as the Tribunal, while holding that principles of natural justice have been violated, should have remanded the matter to the Adjudicating Officer after serving all relevant documents upon the respondent to decide the matter afresh - order passed by the Adjudicating Officer is vitiated for violation of principles of natural justice, however, order passed by the Tribunal is modified by directing that the matter shall be taken up by the Adjudicating Officer from the stage of issuance of show cause and after furnishing all relevant documents to the respondent and granting adequate opportunity to present its defence - Decided partly in favour of Revenue.

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• 2013 (9) TMI 934
  Order of Pre-deposit – Credit Availed on Inputs - Whether the CESTAT was justified in directing the appellant to make pre-deposit on the prima facie opinion that the credit availed on inputs used in construction of supporting structure which is embedded to the earth is not available to the assessee – Held that:- Prior to the amendment of Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 - this Court in the case of Commissioner of Central Excise v. Ispat Industries Limited [2010 (4) TMI 169 - BOMBAY HIGH COURT ] - credit of duty paid on angels, channel and plates, etc. which are used in the construction of supporting structure would be available - the amendment to Explanation (2) to Rule 2(k) of the Cenvat Credit Rules, 2004 by notification dated 7th July, 2009 is retrospective in nature, the issue is debatable - In any event, dispute in the present case relates to the period prior to 7th July, 2009 - it is a fit case to hear the matter on merits without insisting on any pre-deposit - the order of CESTAT was quashed and set aside and the CESTAT was directed to hear the appeal on merits without insisting on any pre-deposit.

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• 2013 (9) TMI 933
  Bar of Limitation – Clandestine Removal of Goods - Extended period - Valuation - A show cause notice beyond the period of limitation was issued on the ground of clandestine removal of goods – Held that:- Following Sheffield Appliances v. CCE, Kolkata [2003 (3) TMI 373 - CEGAT, NEW DELHI ] - The Tribunal has recorded the findings that the department (the Commissioner himself) was aware of the marketing pattern of the company as the earlier decision was rendered in the case of company belonging to the same group - The show cause notice in that case was also issued on the same ground namely that manufacturing company and marketing company were related persons and that sale price to the related marketing company could not have constituted correct assessable value. On the ground of limitation to be sufficient and held that the demand beyond the normal period under Section 11A of the Central Excise Act is barred by limitation - The penalty on the appellant as well as its directors and officials was not found sustainable - The department is dealing with the same group of companies and thus the finding that it was aware of the marketing pattern is a finding of fact, which does not call for interference – there was no illegality in the findings recorded by the Tribunal, that in the circumstances the demand beyond the normal period under Section 11A, was barred by limitation – Decided against Petitioner.

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• 2013 (9) TMI 932
  MODVAT Credit - Whether MODVAT Credit can be availed by the assessee on the basis of certificate issued by superintendent preventive – Held that:- The Tribunal had not committed any error in allowing the credit, as it has recorded the findings that the glass shells were not going to any customer but were to be shifted to a location outside the factory - Non-generation of invoice was the only deficiency in the whole transaction, but this does not erase the duty-paid character of the glass shells, which were received from outside the factory - The re-entry of these glass shells in the factory for use in the manufacture of final product has to be held as entry of duty-paid inputs and the credit cannot be disallowed. Levy of penalty - Whether the finding of facts for clandestine removal of goods recorded by adjudicating authority and the same has been upheld upto CEGAT can be overlooked in subsequent proceedings – Held that:- In the order awarding penalty, there is no such finding that the goods were brought from outside the factory, without payment of duty - It was only because of reversal of entry on duty-paid goods, the penalty was imposed. An affidavit has been filed enclosing certificate of Superintendent (Preventive), verifying that the glass shells were stored outside the factory due to shortage of space in the factory premises - The penalty order could not be a ground, for not allowing Modvat Credit on the finished goods - The grounds raised in the appeal do not raise any substantial questions of law to be considered in the appeal.

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• 2013 (9) TMI 931
  Condonation of Delay – Delay of 425 days - Held that:- The reasons for delay were spelt out in the application more particularly - the delay in filing restoration application occasioned unintentionally and failure to remove the office objection could be said to be inadvertent can be fully relied - The main Tax Appeal was, therefore, dismissed even before it could be considered for admission by the Court - there was no question of other side appearing in the matter - The other side was not given any notice and appeal was dismissed at the stage of removal of office objection – Decided in favour of Assessee - Delay condoned.

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• 2013 (9) TMI 930
  Time-barred Appeal – Condonation of delay - Held that:- Following Raj Chemicals v. Union of India [2012 (3) TMI 307 - BOMBAY HIGH COURT] - where the appeal filed against the order-in-original was dismissed as time-barred, the court in exercise of writ jurisdiction can neither direct the Appellate Authority to condone the delay nor interfere with the order passed by the Adjudicating Authority – there was no reason to entertain this writ petition.

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• 2013 (9) TMI 929
  Rebate Claim - Proof of export - Rule 18 - Whether the Joint Secretary to the Government of India by his order was justified in holding that the assessee was entitled to the rebate claim – Held that:- The certificate issued by the Additional Commissioner (Export) established the co-relation between the duty paid documents and the goods exported by the petitioner - Correctness of the above certificate was not disputed by the Revenue - no fault can be found with the decision of the Joint Secretary to the Government of India in allowing the rebate claim of the respondents – there was no merit in the appeal.

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• CST, VAT & Sales Tax

• 2013 (9) TMI 956
  Power of commissioner - Valuation of goods - Held that:- Commissioner have authority under the Act or Rules to constitute a Committee for the purposes of valuation of the goods. The powers can be traced to sub-rule (5) and (6) of Rule 4, 53 (c) and 54 (5), for constituting a Committee of the officers for valuation of the goods - The powers may be exercised by the Joint Commissioner, provided sufficient evidence is produced before him regarding the valuation of the goods. There is no basis to the apprehension that he may not be able to exercise his independent mind to the valuation. In any case there is an appeal provided to the Commercial Taxes Tribunal under Section 57 of the Act - Decided against assessee.

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• 2013 (9) TMI 938
  Classification - Rate of Tax / VAT on while importing the diesel and Furnace oil within the territory of the State of Himachal Pradesh. - Rate of tax 7% or 2% (later 1%) - Validity of Entry 14 in Schedule II - Classification - Whether entry No. 14 in Schedule II, framed in exercise of powers under Sections 2 & 3 of the Act, was applicable – Held that:- in Schedule II, there is a specific entry covering import of diesel and Furnace oil and provides for tax at the rate of 7%. It is not possible to countenance the argument of the petitioner that inspite of that specific entry, the product/goods, imported by the petitioner, within the territory of the State of Himachal Pradesh, would be covered by entry No. 14, which, in our opinion, is a residuary entry. Entry No. 14 to schedule II vide Notification, issued on 22nd September, 2012 cannot be considered as new entry incorporated in Schedule II. However, the purport of the Notification is explanatory in nature, which is stating the obvious that product/goods, specifically covered by entry I in Schedule II, cannot be covered under residuary entry No. 14 - Decided against the assessee.

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• Wealth tax

• 2013 (9) TMI 957
  Property in Commercial Area u/s 2(ea) Explanation 5(1) – Exclusion of Value of Property – Net Wealth - Whether the Tribunal was right in law and in fact in holding that the property of the assessee in commercial area let out falls under the exception clause “any property in the nature of commercial establishments or complexes” as per explanation 5(i) of section 2(ea) of the Wealth Tax Act - Held that:- To our mind sub-clause(5) of clause(i) of section 2(ea) nowhere requires that a commercial establishment or a complex cannot be established in a house property - It only provided that any property in the nature of commercial establishment or complexes shall be excluded from the term ‘assets’ as defined in clause(i) of section 2(ea) - Further that it nowhere provides that only if such commercial complex was occupied by the owner then alone the exclusion shall take effect - On both counts thus contention of the Revenue cannot be accepted - It was significant to note that exception sub-clause(3) of clause(i) of section 2(ea) pertains to any house which the assessee may occupy for the purposes of any business or profession carried on by him - Thus whenever legislature desired that exclusion may apply only if property was self occupied, it was so provided. Significantly, in sub-clause(5), there was no such insistence - No question of law arises. Revenue tried to overcome the assessee’s contention that since the property does not belong to her as per section 4 of the Wealth Tax Act, same cannot form part of her assets - However, since the Commissioner (Appeals) as well as Tribunal both have centered their focus only on alternative legal contention, we have examine the same without concerning ourselves with the first contention of the assessee - Tax Appeal was dismissed.

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• Indian Laws

• 2013 (9) TMI 948
  Complaint under Section 138 of the N.I. Act - Dishonour of cheques - Case instituted by power of attorney holder - Held that:- the attorney holder cannot file a complaint in his own name as if he was the complainant, but he can initiate criminal proceedings on behalf of his principal. We also reiterate that where the payee is a proprietary concern, the complaint can be filed (i) by the proprietor of the proprietary concern, describing himself as the sole proprietor of the “payee”; (ii) the proprietary concern, describing itself as a sole proprietary concern, represented by its sole proprietor; and (iii) the proprietor or the proprietary concern represented by the attorney holder under a power of attorney executed by the sole proprietor. Whether power of attorney holder can delegate the powers further - Held that:- whether the power of attorney holder will have the power to further delegate the functions to another person will completely depend on the terms of the general power of attorney. As a result, the authority to sub-delegate the functions must be explicitly mentioned in the general power of attorney. Otherwise, the sub-delegation will be inconsistent with the general power of attorney and thereby will be invalid in law. Nevertheless, the general power of attorney itself can be cancelled and be given to another person. In the light of section 145 of N.I Act, it is open to the Magistrate to rely upon the verification in the form of affidavit filed by the complainant in support of the complaint under Section 138 of the N.I Act and the Magistrate is neither mandatorily obliged to call upon the complainant to remain present before the Court, nor to examine the complainant of his witness upon oath for taking the decision whether or not to issue process on the complaint under Section 138 of the N.I. Act.

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• 2013 (9) TMI 947
  Scope of Corrupt Practices u/s 123 - Whether the promises made by the political parties in their election manifestos would amount to 'corrupt practices' as per Section 123 of the Representation of the People Act, 1951 – Held that:- The promises made by the political parties in their election manifesto cannot be stated as corrupt practice u/s 123 of the RP Act - If we are to declare that every kind of promises made in the election manifesto is a corrupt practice, this will be flawed - Since all promises made in the election manifesto were not necessarily promising freebies per se - it will be misleading to construe that all promises in the election manifesto would amount to corrupt practice - The manifesto of a political party is a statement of its policy - The question of implementing the manifesto arises only if the political party forms a Government - It was the promise of a future Government - It was not a promise of an individual candidate - Section 123 and other relevant provisions, upon their true construction, contemplate corrupt practice by individual candidate or his agent. The provisions relating to corrupt practice were penal in nature and, therefore, the rule of strict interpretation must apply and hence, promises by a political party cannot constitute a corrupt practice on the part of the political party as the political party was not within the sweep of the provisions relating to corrupt practices. As the rule of strict interpretation applies, there was no scope for applying provisions relating to corrupt practice contained in the said Act to the manifesto of a political party. It was settled law that the courts cannot issue a direction for the purpose of laying down a new norm for characterizing any practice as corrupt practice - Such directions would amount to amending provisions of the said Act - The power to make law exclusively vests in the Union Parliament and as long as the field was covered by parliamentary enactments, no directions can be issued as sought by the appellant. It was imperative to refer to the intention of the legislature behind incorporating the respective section -The purpose of incorporating Section 123 of the RP Act was to ensure that elections were held in a free and fair manner - The object of provisions relating to corrupt practices in Patangrao Kadam vs. Prithviraj Sayajirao Yadav Deshmukh and Ors.[2001 (2) TMI 983 - SUPREME COURT] - Fair and free elections were essential requisites to maintain the purity of election and to sustain the faith of the people in election itself in a democratic set up - Clean, efficient and benevolent administration were the essential features of good governance which in turn depends upon persons of competency and good character - Hence those indulging in corrupt practices at an election cannot be spared and allowed to pollute the election process and this purpose was sought to be achieved by these provisions contained in the RP Act. Whether the schemes under challenge were within the ambit of public purpose and if yes, was it violative of Article 14 – Held that:- The measures relate to implementation of Directive Principles of State Policy - Therefore, the principle of not to treat unequals as equal had no applicability as far as State largesse was concerned - This principle applies only where the law or the State action imposes some burden on the citizen either financial or otherwise - Besides, while implementing the directive principles, it was for the Government concerned to take into account its financial resources and the need of the people - There cannot be a straight jacket formula - If certain benefits are restricted to a particular class that can obviously be on account of the limited resources of the State - All welfare measures cannot at one go be made available to all the citizens - The State can gradually extend the benefit. The argument of the appellant that giving of colour TVs, laptops, mixer-grinders etc. by the Government after adhering to due process was not an expense for public purpose could not be accepted - Judicial interference was permissible when the action of the government was unconstitutional and not when such action was not wise or that the extent of expenditure was not for the good of the State - all such questions must be debated and decided in the legislature and not in court. The founding fathers of the Constitution have also thought it fit to keep a check on Government accounts and expenses through an agency outside the Legislature also - Article 148 has created a constitutional functionary in the form of the Comptroller and Auditor General of India (CAG) - CAG examines the propriety, legality and validity of all expenses incurred by the Government - The office of CAG exercises effective control over the Government accounts. Inherent Powers of the Court - Whether this Court had inherent power to issue guidelines by application of Vishaka principle – Held that:- There was no legislation to punish the act of sexual harassment at work place, therefore, the judiciary noting the legislative vacuum framed temporary guidelines until the legislatures passed a bill in that regard - However, in the case at hand, there was a special legislation, namely, the Representation of People Act wherein Section 123 enumerates exhaustively a series of acts as "corrupt practice" - Therefore, this was not a case of legislative vacuum where the judiciary can apply its inherent power to frame guidelines. Duties of CAG of India - Whether Comptroller and Auditor General of India had a duty to examine expenditures even before they were deployed – Held that:- The functioning of the Government was controlled by the Constitution, the laws of the land, the legislature and the Comptroller and Auditor General of India - CAG examines the propriety, legality and validity of all expenses incurred by the Government - The office of CAG exercises effective control over the government accounts and expenditure incurred on these schemes only after implementation of the same - As a result, the duty of the CAG will arise only after the expenditure had incurred.

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