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2005 (11) TMI 444
Issues:
1. Imposition of penalty under section 65 of the Rajasthan Sales Tax Act, 1994 based on the authenticity of C forms received from a purchasing dealer.
2. Assessment of the collusion of the selling dealer in the submission of fake C forms.
3. Adequacy of the explanation provided by the assessee regarding the receipt of C forms through commission agents.
4. Lack of further inquiry and reliance on assumptions by the assessing authority in imposing penalties.
5. Justification of setting aside the penalty by the Deputy Commissioner (Appeals) and the Tax Board.
6. Applicability of revisional jurisdiction under section 86 of the Rajasthan Sales Tax Act based on concurrent findings of the appellate authorities.
Analysis:
1. The revision petition challenged the order rejecting the Revenue's appeals and the assessee's cross-objections regarding the penalty under section 65 of the Rajasthan Sales Tax Act. The Tax Board set aside the penalty imposed by the assessing authority due to the authenticity concerns of C forms received from a Kerala dealer, affecting the concessional tax rate for the selling dealer.
2. The Revenue contended collusion of the selling dealer in the submission of fake C forms, seeking restoration of the penalty. However, the Tax Board rejected the appeal, citing the failure of the assessing authority to establish such collusion, leading to the imposition of additional tax and interest but not the penalty.
3. The assessee explained that the goods were sold through commission agents involved in inter-State trade, and the C forms were received through these agents, claiming ignorance of the forms' authenticity issues. The assessing authority dismissed this explanation based on the frequency of transactions with the purchasing dealer, assuming physical meetings that contradicted the assessee's claim.
4. Despite the lack of further inquiry or witness summoning by the assessing authority, penalties were imposed based on unfounded assumptions. The Deputy Commissioner (Appeals) and the Tax Board set aside the penalty, highlighting the absence of evidence supporting the collusion allegation against the selling dealer.
5. The appellate authorities justified their decisions by emphasizing the lack of effort by the assessing authority to establish the selling dealer's involvement in the production of fake C forms. The absence of a formal inquiry supported the setting aside of the penalty under section 65 of the Rajasthan Sales Tax Act.
6. Given the concurrent findings of the appellate authorities, the High Court found no legal grounds for interference in the revision petition under section 86 of the Rajasthan Sales Tax Act. Consequently, the court dismissed the revision petition, upholding the decisions of the Deputy Commissioner (Appeals) and the Tax Board regarding the penalty imposition.
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2005 (11) TMI 443
Issues Involved:
1. Validity of Exhibit P9 Notice and Exhibit P13 Letter.
2. Entitlement to Tax Exemption under S.R.O. No. 1729/93.
3. Impact of Amendments to S.R.O. No. 1729/93.
4. Applicability of Promissory Estoppel.
5. Authority of the Board of Revenue's Orders.
Detailed Analysis:
1. Validity of Exhibit P9 Notice and Exhibit P13 Letter:
The appellant sought to quash Exhibit P9 notice issued under section 45A of the Kerala General Sales Tax Act, 1963 (KGST Act) proposing a penalty of Rs. 49,39,45,410 for failing to pay tax on the purchase turnover from 1997-98 to 2001-02. The notice stated that the turnover was not exempt as it did not constitute "manufacture" after January 15, 1998, due to amendments under S.R.O. No. 39 of 1998. The first respondent rejected the appellant's objection (Exhibit P12) and directed the appellant to file further objections by January 31, 2002.
2. Entitlement to Tax Exemption under S.R.O. No. 1729/93:
The appellant argued that they were entitled to tax exemption based on Exhibit P4 eligibility certificate and Exhibit P5 order issued by the Board of Revenue (Taxes). Exhibit P5 granted sales tax exemption for compound rubber and other products, purportedly under S.R.O. No. 1729/93. Clause 5 of S.R.O. No. 1729/93 provided a seven-year exemption for medium and large-scale industrial units undertaking diversification, expansion, or modernization.
3. Impact of Amendments to S.R.O. No. 1729/93:
The Government of Kerala amended S.R.O. No. 1729/93 via S.R.O. No. 38/98 and S.R.O. No. 491/98, effective from January 15, 1998. These amendments excluded the process of converting rubber into compound rubber from the definition of "manufacture." The court held that the appellant could only benefit from the unamended S.R.O. No. 1729/93 until January 14, 1998. Post this date, the amended notification applied, and the appellant's processes did not qualify for exemption.
4. Applicability of Promissory Estoppel:
The appellant invoked the doctrine of promissory estoppel, arguing that the government's notifications and orders induced them to make substantial investments. However, the court noted that no factual foundation or evidence supported this claim. The court also emphasized that statutory notifications cannot be overridden by estoppel, especially when the government retains the power to amend or cancel notifications under section 10(3) of the KGST Act.
5. Authority of the Board of Revenue's Orders:
The court examined whether the Board of Revenue's order (Exhibit P5) could override statutory amendments. It concluded that Exhibit P5, issued based on the eligibility certificate (Exhibit P4), was valid only until January 14, 1998. After this date, the statutory amendments took precedence. The court cited precedents affirming that subordinate authorities must comply with statutory notifications, and the Board of Revenue's orders cannot contravene statutory provisions.
Conclusion:
The court dismissed the appeal, upholding the validity of Exhibit P9 notice and the amendments to S.R.O. No. 1729/93. It ruled that the appellant was not entitled to tax exemption for the period after January 14, 1998, and rejected the plea of promissory estoppel. The Board of Revenue's orders were deemed subordinate to statutory amendments, and the appellant's processes did not qualify as "manufacture" under the amended notification.
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2005 (11) TMI 442
Issues Involved:
1. Legality of the proceedings under section 10-B of the U.P. Trade Tax Act, 1948.
2. Relationship between proceedings under sections 10-B and 21 of the Act.
3. Discrepancies in the assessment order and their handling by the Tribunal and Deputy Commissioner (Executive).
Detailed Analysis:
1. Legality of the proceedings under section 10-B of the U.P. Trade Tax Act, 1948:
The revision was filed against the Tribunal's order which had set aside the Deputy Commissioner (Executive)'s order under section 10-B of the Act. The Tribunal held that the initiation of proceedings under section 21 of the Act precluded action under section 10-B. The Tribunal observed that the order under section 10-B was passed hastily and without proper consideration of the details verified in the proceedings under section 21. The Tribunal concluded that the objections raised in the notice under section 10-B had already been examined in the order passed under section 21, and therefore, the proceeding under section 10-B was not justified.
2. Relationship between proceedings under sections 10-B and 21 of the Act:
The Standing Counsel argued that sections 21 and 10-B operate on different footings. Section 21 deals with escaped assessment based on new material, while section 10-B allows the revising authority to examine the legality or propriety of an order based on the existing record. It was contended that the Tribunal erred in holding that the initiation of proceedings under section 21 precluded action under section 10-B. The Tribunal's view that the Deputy Commissioner should have considered the order under section 21 before passing the order under section 10-B was also challenged.
3. Discrepancies in the assessment order and their handling by the Tribunal and Deputy Commissioner (Executive):
The Deputy Commissioner (Executive) issued a notice under section 10-B based on discrepancies found in the dealer's records, including the selling rate of diesel engines and the closing balance. The dealer's counsel argued that the notice under section 10-B was unjustified as the discrepancies were already addressed in the proceedings under section 21. The Tribunal accepted this argument, noting that the assessing authority had verified the details and concluded that the objections were explained. However, the court held that the Tribunal should have either examined the objections independently or remanded the matter back to the Deputy Commissioner for reconsideration.
Conclusion:
The court concluded that both sections 21 and 10-B of the Act serve different purposes and can be invoked under different circumstances. The Deputy Commissioner (Executive) is not barred from examining the existing record to determine if the order was improper or illegal, even if a notice under section 21 was issued. The Tribunal's decision that the initiation of proceedings under section 21 precluded action under section 10-B was incorrect. The matter was remanded back to the Deputy Commissioner (Executive) to provide the dealer an opportunity to explain the discrepancies and to pass a fresh order in accordance with the law. The revision was allowed, and the Tribunal's order was set aside.
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2005 (11) TMI 441
Issues:
Interpretation of check-post entries for determining inter-State sales tax liability.
Analysis:
The High Court judgment pertains to a revision petition where the Tax Board rejected the Revenue's appeal, upholding the order of the Deputy Commissioner (Appeals). The issue at hand was whether the sales in question could be considered inter-State sales exigible to Central sales tax based solely on entries in the check-post record showing the movement of goods from the assessee to other parties outside the State.
Both appellate courts unanimously held that the assessing authority failed to provide any material establishing taxable inter-State sales by the respondent-assessee. The assessing authority deemed the movement of goods as inter-State sales solely because the assessee did not produce books of account during assessment proceedings to rebut the allegations based on check-post entries.
The judgment emphasizes that the burden of proof lies with the Revenue to establish taxable sales before imposing tax. Since the assessing authority did not discharge this burden and failed to gather material from other sources to prove inter-State sales, the appellate authorities were correct in ruling that the movement of goods could not be taxed as inter-State sales in the hands of the assessee.
The Court highlighted that even if the assessee did not produce books of account, the assessing authority could have obtained evidence from alternative sources like purchasing dealers at the destination station. However, as no such efforts were made by the assessing authority, the taxable inter-State sales could not be established.
Consequently, the Court found no error in the appellate orders, as the assessing authority failed to provide any material to prove taxable inter-State sales by the respondent-assessee. As a result, the revision petition was dismissed, affirming the decision that the sales in question could not be taxed as inter-State sales due to lack of evidence.
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2005 (11) TMI 440
Validity of Notification No.10/2004-CE (NT) - Prospective or retrospective amendment - Applicability of provisions of Rule 19 of the Central Excise Rules, 2002 - Seeking ex-parte ad-interim relief - HELD THAT:- On a plain reading of both the Rules i.e. Rules 18 and 19 it is apparent that the said Rules operate in separate fields. Rule 18 of the Rules comes into play only in relation to the final products or the inputs which are not only liable to duty but on which duty has been paid. The said Rule viz. Rule 18 of the Rules, cannot be invoked in case of either final products or inputs on which no duty is paid even though the goods are liable to duty. The insistence of the respondent authorities, in the circumstances, that in a case where an exporter exercises option under sub-rule (2) of Rule 19 of the Rules in relation to inputs, which may be duty free, or which are removed without payment of duty on execution of bond, when used for the purposes of manufacture or processing of final products which are exported, the exporter must export the goods only under Rule 19(1) of the Rules is not borne out by the provisions of the Rules.
It is not disputed that the original notification issued by CBEC under sub-rule (3) of Rule 19 of the Rules on 26th June, 2001 and made effective from 1st July, 2001 has been operating without any difficulty and nothing has been brought on record to show why the impugned amendment became necessary. At the cost of repetition it requires to be stated that nothing has been brought on record nor has the learned counsel been in a position to point out as to how and in what circumstances an exporter can claim double benefit.
The power to issue notification under Rule 18 of the Rules is available with the Central Government while power under Rule 19(3) of the Rules is available with the CBEC. The Board is a creature of the statute and cannot go beyond the powers granted under the statute. If the Central Government has, in its wisdom, provided for granting rebate upon fulfillment of certain conditions and subject to certain procedural safeguards, CBEC cannot be permitted to render the Notification issued by the Central Government redundant by issuing a notification in exercise of powers under Rule 19 of the Rules. Nor can CBEC exercise such powers so as to render Rule 18 otiose. Hence, for this reason also, the impugned Notification cannot be upheld.
Thus, impugned Notification being Notification No.10/2004-CE(NT) dated 3rd June, 2004 is bad in law for the aforestated reasons, namely, it is not in consonance with the principal provisions, namely, Rules 18 and 19 of the Rules, and it is, even otherwise, Revenue neutral. The CBEC cannot exercise power under Rule 19 of the Rules to negate a notification issued by the Central Government under Rule 18 of the Rules. The same is, therefore, declared to be bad in law and is quashed and set aside. As a consequence the impugned show cause notices (Annexure-C Collectively) are also quashed and set aside.
The petition is allowed, accordingly, to the aforesaid extent.
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2005 (11) TMI 439
Arbitration petition filed before this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of the Arbitrator
Held that:- In the present case, as per the Agency Agreement dated 14.4.2000, Clause 6.2 categorically states that if any dispute arises between the parties then the same shall be submitted to Arbitration Court under the Chamber of Commerce and Trade of the Russian Federation. Therefore there is a specific clause mentioned in the Agency Agreement as to which court will have jurisdiction to try and dispose of the matter.
In view of the specific provision specifying the jurisdiction of the Court to decide the matter, this Court cannot assume the jurisdiction. Whenever there is a specific clause conferring jurisdiction on particular Court to decide the matter then it automatically ousts the jurisdiction of other Court. In this agreement, the jurisdiction has been conferred on the Chamber of Commerce and Trade of the Russian Federation as the authority before whom the dispute shall be resolved. In view of the specific arbitration clause conferring power on the Chamber of Commerce and Trade of the Russian Federation, it is that authority which alone will arbitrate the matter and the finding of that arbitral tribunal shall be final and obligatory for both the parties.
This Court has no jurisdiction and the Chamber of Commerce and Trade of Russian Federation alone has jurisdiction to act as an arbitrator and resolve the dispute. Hence this application is rejected.
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2005 (11) TMI 438
Issues Involved:
1. Applicability of Explanation to Section 73
2. Classification of Loss as Speculation Loss
3. Determination of Principal Business
4. Allocation of Interest Expenditure
5. Interpretation of Legislative Intent and Judicial Precedents
Issue-wise Detailed Analysis:
1. Applicability of Explanation to Section 73:
The primary issue revolves around whether the Explanation to Section 73 of the Income-tax Act applies to the assessee's case. The Explanation deems certain businesses involving the purchase and sale of shares as speculation businesses. The assessee contends that since it solely deals in shares of one company, the Explanation should not apply. However, the Tribunal rejects this argument, emphasizing that the Explanation applies even if the business consists solely of trading in shares of a single company. The Tribunal supports its stance by referring to Section 13 of the General Clauses Act, which states that words in the singular shall include the plural and vice versa. Therefore, the term "companies" in the Explanation includes the singular "company."
2. Classification of Loss as Speculation Loss:
The assessee argues that the loss incurred from trading in shares should not be classified as speculation loss. The Tribunal, however, upholds the Assessing Officer's decision to treat the loss as speculation loss. The Tribunal refers to the decision in CIT v. Arvind Investments Ltd., which states that if the entire business activity of a company consists of the purchase and sale of shares, then the entire business will be treated as speculation business. Additionally, the Tribunal notes that the Explanation to Section 73 introduces a legal fiction, treating certain transactions in shares as speculative for the purpose of Section 73, regardless of actual delivery or transfer of shares.
3. Determination of Principal Business:
The assessee claims to be an investment company, arguing that its principal business is not trading in shares but earning dividend income. The Tribunal examines the composition of the assessee's gross total income, which includes dividend income of Rs. 13,73,200 and business income/loss of Rs. 20,38,420. The Tribunal concludes that the loss due to trading in shares has a greater figure than the dividend income, thus invoking the Explanation to Section 73. The Tribunal follows the decisions of the Calcutta High Court in Eastern Aviation and Industries Ltd. and Aryasthan Corporation Ltd., which state that for the purpose of the Explanation, absolute figures should be considered, and losses should be treated as negative income.
4. Allocation of Interest Expenditure:
The assessee contends that the interest expenditure incurred should be allocated towards earning dividend income, thereby reducing the income chargeable under "Income from other sources" and consequently reducing the loss under "Profits and gains of business." The Tribunal rejects this argument, stating that the entire interest expenditure is allowable under Section 36(1)(iii) as the shares are held as stock-in-trade. The Tribunal emphasizes that the onus lies on the assessee to establish that the interest is attributable to dividend income and allowable under Section 57(iii), which the assessee has failed to do.
5. Interpretation of Legislative Intent and Judicial Precedents:
The Tribunal addresses the assessee's argument regarding the legislative intent behind the Explanation to Section 73. The assessee argues that the Explanation is intended to curb manipulative practices to reduce taxable income. The Tribunal refers to Circular No. 204 and the decision in Aman Portfolio P. Ltd. v. Deputy CIT, which was overruled by the Division Bench in Deputy CIT v. Frontline Capital Services Ltd. The Tribunal concludes that it is not necessary for the Assessing Officer to establish manipulative intent to invoke the Explanation to Section 73. The Tribunal also emphasizes the need to follow the decisions of higher courts, even if they are non-jurisdictional, unless there is a contrary decision from another competent High Court.
Conclusion:
The Tribunal dismisses the appeal, confirming the order of the Commissioner of Income-tax (Appeals) that the loss from trading in shares is to be treated as speculation loss under the Explanation to Section 73. The Tribunal's decision is based on a detailed analysis of the legal provisions, judicial precedents, and the facts of the case.
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2005 (11) TMI 437
Capital gain on sale of property - Transfer u/s 2(47)(v) - whether there was a transfer of property when the bank had a lien on the property? - mortgage of the property with the bank would in any way affect the rights of the transferee ? - HELD THAT:- There is an agreement of sale dated November 27, 1997, the transferee has paid sale consideration in March 1998, and is willing to fulfil other conditions and has taken over possession of the same on March 31, 1998 and subsequently undertaken renovation of the same. Therefore, the transferee gets the rights over the property and the transferor-assessee can only enforce the rights expressly provided by the terms of the contract. But that has nothing to do with the ownership of the proposed transferor who remains the full owner of the lands till they are legally conveyed by a sale deed to the proposed transferee.
Any mortgage of the property would not invalidate the contract of agreement of sale or part performance thereof, but would only give the right of preference for the satisfaction of the debt. Section 2(47)(v) of the Income-tax Act or section 53A of the Transfer of Property Act, do not speak of transfer of title of ownership, but only speaks of transfer of possession of the property. Section 53A of the Transfer of Property Act, deals with part performance of a contract of transfer and not a final transfer. Final transfer of the property could be only with the execution of the registered sale deed as provided under the law and that can be done only after the bank issues the no-lien certificate. Section 2(47)(v) of the Income-tax Act, refers to transactions in the nature of contracts referred to in section 53A of the Transfer of Property Act.
Therefore, in our opinion, the condition u/s 53A of the Transfer of Property Act is satisfied in this case and as per section 2(47)(v), there is a transfer of immovable property in the assessment year 1998-99 only. Hence, the capital gains arise in this year only and not in 1999-2000.
Thus, it is clear that the Assessing Officer was enthusiastic to tax the capital gains in the assessment year 1999-2000 since it had taxable positive income and the assessee would not be able to set off the business loss from the capital gains. In our opinion this approach of the Assessing Officer is not correct. The Revenue authorities have to follow the provisions of law and should not be guided by revenue collection only. In this case, we find that the capital gains arise in 1998-99 only and therefore, the business loss in the year 1998-99 can be set off from the capital gains. In this view of the matter, the assessee’s appeal is allowed.
In the result, the appeals filed by the assessee are allowed.
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2005 (11) TMI 436
Whether the appeal by DCC against the eviction decree was defective or invalid?
Whether such defect could be permitted to be rectified?
Held that:- Appeal dismissed. High Court was justified in setting aside the dismissal and restoring the first appeal to the file of the Additional District Judge with a direction to decide the matter on merits. If the representation was found to be defective or non-existent, the appellate court ought to have granted an opportunity to the second appellant DCC, to rectify the defect.
There is yet another reason to hold that the appeal by DCC against the eviction decree was validly filed. DCC was represented by Shri Bindeshwar Prasad Singh and his colleagues in the trial court. The same counsel filed the appeal. The Vakalatnama granted by DCC in favour of the said counsel in the trial court was sufficient authorization to the said counsel to file the appeal having regard to Order 3 Rule 4(2) CPC read with Explanation [c], even without a separate vakalatnama for the appeal.
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2005 (11) TMI 435
Issues:
1. Rejection of refund claim based on invalid grounds.
2. Failure to entertain appeal by Commissioner (Appeals).
3. Remand of the matter to the original authority for reconsideration.
Analysis:
1. The Appellate Tribunal found that the appellant's refund claim was rejected under a letter dated 5-2-1997 for an invalid ground. The original authority had initially issued a letter on 29-1-1990 stating that the refund claim cannot be considered without a waiver of interest. Subsequently, the rejection was based on the appellants' failure to produce a copy of the Customs Act to the Assistant Commissioner. The Tribunal noted that since no duty was payable, the demand for interest was unwarranted, citing a Supreme Court decision in a similar case. Therefore, the rejection of the refund claim was deemed improper.
2. The Commissioner (Appeals) was criticized for dismissing the subsequent appeal on the grounds that the appellants should have appealed against the original letter dated 29-1-1990. The Tribunal held that the Commissioner erred in not entertaining the appeal and should have considered the case on its merits. Consequently, the impugned order passed by the lower authorities was set aside.
3. In light of the above findings, the Tribunal decided to remand the matter to the original authority for a fresh consideration of the refund claim. The appellants were instructed to be given a fair hearing, and the Supreme Court decision referenced by them was to be taken into account during the reconsideration process. The appeal was allowed by way of remand, emphasizing the need for a proper review of the refund claim.
This judgment highlights the importance of valid grounds for rejecting refund claims, the duty of appellate authorities to consider appeals on their merits, and the necessity for a fair reconsideration process by the original authority.
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2005 (11) TMI 434
The Appellate Tribunal CESTAT, Mumbai ruled that if an assessee reverses modvat credit related to inputs used for exempted goods, Rule 57CC does not apply. The Commissioner's order was upheld, rejecting the Revenue's appeal.
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2005 (11) TMI 433
Issues Involved:
1. Reopening of assessment under section 147.
2. Treatment of leave and license fee as income from house property vs. business income.
3. Disallowance of expenditure on repairs to premises taken on leave and license basis.
4. Allowance of depreciation on let out premises.
5. Addition on account of value of alleged unaccounted silver recovery on film processing.
6. Addition on account of saving of raw films.
7. Addition of notional interest income of security deposit.
8. Addition on account of expenditure incurred on repairs to leasehold premises.
9. Treatment of sale of shares as capital gains vs. speculation income.
Issue-wise Detailed Analysis:
1. Reopening of Assessment under Section 147:
The primary objection raised was the reopening of the assessment under section 147 due to a lack of valid satisfaction. The Assessing Officer (AO) believed that the expenditure on repairs of premises taken on leave and license basis should be treated as capital expenditure, not revenue expenditure, leading to under assessment of income. The CIT(A) upheld the reopening, stating that the failure to take action under section 143(2) does not render the AO powerless to initiate reassessment proceedings. However, it was argued that the AO's belief was legally incorrect as Explanation 1 of section 32(1) does not classify such expenditure as capital expenditure. The Tribunal concluded that the reasons recorded by the AO were not legally valid, as they were based on an incorrect interpretation of the law. Thus, the reopening of the assessment was deemed bad in law and quashed.
2. Treatment of Leave and License Fee:
The issue was whether the leave and license fee should be treated as income from house property or business income. The Tribunal noted that in the assessee's own case for previous assessment years, the issue had been decided in favor of treating it as business income. Following the precedent, the Tribunal decided the issue in favor of the assessee.
3. Disallowance of Expenditure on Repairs:
The Tribunal addressed the disallowance of expenditure on repairs to premises taken on leave and license basis. It referred to previous decisions in the assessee's own case, where such expenditure was allowed as revenue expenditure. Consistent with these decisions, the Tribunal allowed the expenditure as revenue expenditure.
4. Allowance of Depreciation:
Since the income from leave and license fee was treated as business income, the natural consequence was the allowance of depreciation on the let-out premises. The Tribunal allowed this ground in favor of the assessee.
5. Addition on Account of Unaccounted Silver Recovery:
The issue of alleged unaccounted silver recovery on film processing had been decided in favor of the assessee in several previous assessment years. The Tribunal followed the precedent and rejected the revenue's ground.
6. Addition on Account of Saving of Raw Films:
The Tribunal noted that the issue of saving of raw films had been consistently decided in favor of the assessee in numerous previous assessment years. Following these decisions, the Tribunal rejected the revenue's ground.
7. Addition of Notional Interest Income:
The addition of notional interest income of security deposit had also been decided in favor of the assessee in previous years. The Tribunal upheld the CIT(A)'s decision and rejected the revenue's ground.
8. Addition on Account of Expenditure on Repairs to Leasehold Premises:
This issue had been resolved in favor of the assessee in prior assessment years. The Tribunal, adhering to the previous decisions, rejected the revenue's ground.
9. Treatment of Sale of Shares:
The final issue was whether the sale of shares should be treated as capital gains or speculation income. The CIT(A) had held that the shares were held as an investment, not as stock in trade. The Tribunal upheld this finding, treating the income from the sale of shares as capital gains and rejecting the revenue's ground.
Conclusion:
The appeal filed by the assessee was allowed, and the appeal filed by the revenue was dismissed.
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2005 (11) TMI 432
Unexplained investments - cash credit - disallowance u/s 40A(3) - taxable profits - deduction u/s 80HHC - purchases by making cash payments - HELD THAT:- The case of the assessee is that the assessee is not bound to prove the source of sources. The immediate parties, from whom the assessee made purchases, confirmed their sales. revenue authorities are in fact doubting the capacity of the parties who sold diamonds to the assessee and also the assessee perhaps purchases the diamonds from open market and obtained bills from these parties. None of these facts, except the reasoning, are based on any evidence.
We have recorded the statement obtained by the revenue from Shri Rajan A. Pawaskar, chartered accountant, wherein he stated that the assessee is not engaged in diamond business activity rather the said transactions were merely used to launder black money of the assessee. But the fact remains that the assessee exported the goods, which is certified by the Customs Department. They rejected Shri Pawaskar’s statement. Therefore, the issue that whether assessee exported or not does not arise. The question is whether the assessee purchased the diamonds by paying cash. There is nothing on record to suggest to the above conclusion. The reasoning however powerful cannot take the force of evidence. No evidence has been brought on record to this effect.
As we have already noted, not even a single question was put to any of the parties from whom the statements were recorded by the Assessing Officer, as to whether the payment made by the assessee by cheque was withdrawn and paid back to the assessee. In the absence of any other evidence on facts, we are unable to accept the reasoning of the Assessing Officer that the assessee made the cash purchases.
Thus, further addition made by the revenue authorities, resorting to section 40A(3) also does not survive. Hence, we also hold that there is no material to recompute the profits for the purpose of deduction u/s 80HHC.
We have also noted hereinabove that the Assessing Officer worked out the peak credit and the CIT(A) enhanced the peak investment holding that the difference of 18 per cent (i.e. profit proposed to be restricted to 5.4 per cent as against 23.4 per cent declared by the assessee) is to be considered as inflated profit. Since we have already held that there is no basis for making any addition on account of cash purchases, this excess peak investment worked out by the CIT(A) automatically does not survive.
There is no case for the revenue that the assessee is hot maintaining books of account. The purchases are recorded in the books of account. Payments are made by cheque to the immediate purchasers. They accepted and confirmed the sale. To hold otherwise, there should be some evidence in the possession of the revenue. Suspicion, however strong, cannot take the place of evidence and that alone cannot be the criteria for deciding the matter.
According to the Assessing Officer, the diamonds worth crores of rupees, if they claimed to have transported, these diamonds should have been insured and the mode of transportation or at least the details of tickets, etc. of the persons who brought diamonds should have been mentioned. Be that as it may, we are not making any proposal. No question has been put to immediate suppliers to the assessee whether they purchased the material from the open market other than the parties who said to have supplied them from Surat. Therefore, the proposition that in the absence of insurance, mode of transportation, etc. the claim that the diamonds came from Surat cannot be accepted, is not a sound conclusion arrived at.
It is true, the profit shown by the assessee is extremely high, which may not be possible in this line of business, at least not a general trend m the market. But then, no similar cases of export have been mentioned anywhere by the Assessing Officer or by the CIT(A) to discredit the assessee’s claim of higher profit. Export of the assessee is accepted by the Customs Department, which shows that the export of diamonds cannot be doubted.
Coming to the decision in the case of Chanana Associates [1996 (7) TMI 106 - PUNJAB AND HARYANA HIGH COURT]), the assessee did not produce any material to show that belief that section 40A(3) was not attracted where the profit was determined on estimate basis after rejecting the book results of the assessee. The facts in the instant case of the assessee are not so. So also in the case of Chanana Associates (supra) there was no dispute that the payments were made in cash in excess of the prescribed limit under section 40(A)(3); whereas in the instant case of the assessee there is no evidence as record to show that the payments were made in the cash but it is an assumption, resorting to the modus operandi adopted by the business circle in diamonds.
Coming to the purchases made by the assessee on payment of cash also cannot be accepted as there is no evidence to this effect because the payment is made by the assessee by cheque, which is also reflected in the books of account of the purchasers as well as of the assessee.
In the result, appeal of the assessee stands allowed.
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2005 (11) TMI 431
Issues:
- Demand of duty when no production was made
- Applicability of Section 3A of the Central Excise Act, 1944
- Finality of assessment before the omission of Section 3A
Analysis:
Issue 1: Demand of duty when no production was made
The appellants, engaged in manufacturing M.S. Ingots, opted to work under Rule 96-ZO(1) requiring a duty payment of Rs. 750/- per M.T. during goods clearance. A demand-cum-show cause notice was issued for duty of Rs. 2,24,159/- during a period of no production, under Rule 9(2) read with Rule 96ZO(1)(c). The adjudicating authority confirmed the demand, penalty, and interest, upheld in appeal. The appellants argued for abatement due to closure, citing late intimations and machine breakdowns, but the authorities did not discuss abatement. The order-in-appeal upheld the demand, penalty, and interest, rejecting the appeal.
Issue 2: Applicability of Section 3A of the Central Excise Act, 1944
The appellants argued that Section 3A was omitted by the Finance Act, 2001, and thus, the demand cannot be enforced. Citing the case of Air India v. UOI, the appellants contended that once a parent statute is repealed, subordinate legislation does not survive. The learned Advocate relied on the case of M/s. Mitra Steel & Alloys Pvt. Ltd. v CCE, Raigad, for support. However, the JDR highlighted that the assessment was completed before the omission of Section 3A, making the demand enforceable.
Issue 3: Finality of assessment before the omission of Section 3A
The Tribunal examined the case records and submissions. The appellants reiterated their arguments based on the case of M/s. Mitra Steel & Alloys Pvt. Ltd. v. CCE, Raigad. The Tribunal noted that the assessment was finalized before the omission of Section 3A and its rules, making the demand valid. Relying on the decision in M/s. Mitra Steel & Alloys Pvt. Ltd. v. CCE, Raigad, the Tribunal rejected the appeal, stating that interfering with finalized assessments would amount to reopening them, which is not warranted.
In conclusion, the Tribunal upheld the demand of duty during no production, citing the finalized assessment before the omission of Section 3A, and rejected the appeal based on the arguments presented by both parties.
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2005 (11) TMI 430
Issues:
Denial of credit based on stock transfer invoices, rejection of refund claim as time-barred, application of unjust enrichment principle in refund cases.
Analysis:
1. The case involves an appeal by the Revenue against the order of the Commissioner of Central Excise (Appeals) Mumbai, which set aside the rejection of a refund claim as time-barred. The issue arose when the respondents paid duty under protest, but the Deputy Commissioner did not acknowledge it, leading to the rejection of the claim solely on the basis of being time-barred without considering unjust enrichment.
2. The Commissioner, in the impugned order, highlighted that the rejection of the refund claim as time-barred was not a ground stated in the show cause notice. The Commissioner emphasized that when an assessee pays duty following an adjudication order and seeks a refund upon succeeding in an appeal, the refund is a form of restitution not bound by the time limit under Section 11B. Consequently, the Commissioner allowed the appeal and ordered consequential relief.
3. The Revenue contended that the Commissioner erred in granting consequential relief without assessing the unjust enrichment aspect, which is crucial in refund cases. The argument was based on the principle established by the Hon'ble Supreme Court that a refund should only be granted if the assessee has suffered an injury and not passed on the burden to consumers.
4. The core issue in this case pertains to the denial of credit based on stock transfer invoices and the subsequent refund claim of Rs. 40 lakhs. The respondents, upon succeeding in their appeal, sought a refund, which was challenged by the Revenue on the grounds of unjust enrichment. The Deputy Commissioner's rejection of the claim as time-barred was deemed a new ground, leading to the Commissioner setting aside the lower authority's decision.
5. During the hearing, the argument was raised that the Commissioner should not have ordered the refund without considering the aspect of unjust enrichment. Referring to the Supreme Court's decision, it was emphasized that any refund claim must be scrutinized for unjust enrichment to ensure that the party seeking the refund has not passed on the burden to consumers and would suffer a loss if the refund is not granted.
6. The Tribunal agreed with the Commissioner's finding that the respondent was entitled to the refund of the MODVAT Credit but emphasized that such a refund is subject to the principle of unjust enrichment. Therefore, the Tribunal confirmed the entitlement to the refund but remanded the matter to the original authority for a thorough examination considering the bar of unjust enrichment.
7. Ultimately, the appeal of the Revenue was allowed with the condition that the claim for refund should be assessed in light of the unjust enrichment principle, ensuring that the refund is granted only if the party seeking it has not passed on the burden to others and would suffer a loss without it.
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2005 (11) TMI 429
Issues:
1. Allegation of error apparent in Tribunal's final order regarding limitation.
2. Consideration of all documents by the Tribunal.
3. Whether the extended period of limitation was rightly invoked.
4. Mistake apparent from the record.
5. Filing of ROM application for review of order.
Analysis:
1. The applicants contended that an error apparent from the record existed in the Tribunal's final order due to the non-consideration of all documents supporting their claim of complete departmental knowledge to refute suppression allegations for invoking the extended period of limitation.
2. The Tribunal acknowledged the limitation plea raised by the appellants, emphasizing that the Department knew about their activities since April 1991, yet the show cause notice was issued in 1996. The Tribunal rejected the argument that the Commissioner's letter and the Padmini Products case supported the appellants' stance, noting the concealment of material facts by the appellants.
3. The Tribunal held that the extended period of limitation was rightly invoked against the appellants due to their failure to disclose crucial details of their manufacturing process and the produced commodity to the Department, as mandated by legal precedents.
4. Referring to the precedent set by the Larger Bench decision in Om Prakash Bhatia v. CC, New Delhi, the Tribunal clarified that the failure to address all grounds or documents in the final order did not constitute a mistake apparent from the record. The Tribunal emphasized that the appeal process was available to challenge the final order, and filing a ROM application for review was not appropriate in this context.
5. The Tribunal dismissed the applications, highlighting that pursuing appellate remedies was the correct course of action rather than seeking a review through a ROM application, which was deemed improper in this case. The judgment emphasized the importance of following the prescribed legal procedures for challenging orders and decisions.
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2005 (11) TMI 428
Issues: Revenue's appeal against Commissioner's order regarding utilization of imported squids for export order on job work basis.
Analysis:
1. The Revenue appealed against the Commissioner's order regarding the utilization of imported squids for executing export orders on a job work basis. The Revenue alleged that the appellants did not fully utilize the imported squids as per Customs Notification No. 32/97-Cus. The Deputy Commissioner accepted the plea regarding the exported goods except for a specific quantity used for manufacturing rings, strips, tips, and tentacles. The Commissioner, after considering the assessee's plea, found that the Revenue failed to provide evidence that a certain quantity of squid was diverted for other purposes. The Commissioner noted that the standard input and output norms for rings could not be automatically applied to strips, tips, and tentacles. Moreover, the imported California Squid was of inferior quality, as confirmed by the assessee's request for re-export of the remaining raw material.
2. The Revenue contended that the Commissioner's findings were incorrect and legally flawed. They argued that there was no obligation on the Department to prove the diversion of the imported squids by the party. The Revenue claimed that the norms were correctly applied, and duty payment was necessary.
3. The Respondent filed a cross-objection seeking the dismissal of the Revenue's appeal. They reiterated their arguments before the Commissioner and relied on his conclusions.
4. Upon careful consideration, the Tribunal found that the Commissioner's findings on the utilization of the imported squids for manufacturing the exported items were appropriate. The Tribunal agreed that the raw material imported was of low quality, discolored, and smaller in size. Therefore, the Commissioner's decision that production norms for rings could not be directly applied to strips, tips, and tentacles was deemed correct. The Revenue failed to present any evidence to support the claim that a specific quantity of squid was diverted for other purposes by the Respondent. Consequently, the Tribunal upheld the Commissioner's decision, rejecting the Revenue's appeal as lacking merit.
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2005 (11) TMI 427
Issues:
1. Refund claim rejection on the grounds of limitation and unjust enrichment.
2. Appeal against rejection of refund claim.
3. Failure to file an appeal against the order of the Commissioner (Appeals).
4. Department's appeal against the order in appeal dated 28-9-98.
Analysis:
1. The Respondent filed a refund claim for excess customs duty paid by mistake on goods used in their factory. The original adjudicating authority rejected the claim due to late filing, unjust enrichment concerns, and missing original documents. The Commissioner (Appeals) later allowed the appeal, stating no delay in filing and no unjust enrichment. Subsequently, a second refund claim was rejected by the adjudicating authority, but the Commissioner (Appeals) again allowed it. The Revenue appealed against this decision.
2. The Tribunal noted that the Revenue failed to appeal the Commissioner (Appeals) order dated 19-6-98, which limited the adjudicating authority's discretion. The Tribunal found the rejection of the second refund claim improper due to the absence of an appeal against the earlier decision. The Tribunal criticized the Revenue's attempt to challenge the previous order indirectly through the current appeal, emphasizing the importance of following legal procedures and respecting judicial discipline.
3. Despite the Revenue's arguments, the Tribunal upheld the Commissioner (Appeals) order dated 23-10-2003, emphasizing that the failure to appeal the earlier decision restricted the adjudicating authority's actions. The Tribunal dismissed the Revenue's appeal against the order dated 28-9-98, highlighting the need to follow established legal principles and not circumvent previous decisions through subsequent appeals.
In conclusion, the Tribunal affirmed the Commissioner (Appeals) order and dismissed the Revenue's appeal, emphasizing the importance of adhering to legal procedures and respecting previous judgments to maintain judicial discipline.
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2005 (11) TMI 426
The Appellate Tribunal CESTAT, Mumbai directed the appellant to deposit the entire duty amount of Rs. 1,80,588 by a specified date, with consequences for non-compliance. Failure to comply would result in dismissal of the appeal without further notice, but if the deposit is made, the appeal would be remanded for decision on merits.
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2005 (11) TMI 425
Issues:
Claim for payment of interest on redemption fine refunded.
Analysis:
The appeal before the Appellate Tribunal CESTAT, Mumbai involved a claim for payment of interest on a redemption fine refunded to the appellants. The appellants, Vijay Industries & Projects Ltd., had paid a redemption fine of Rs. 1 lakh under protest on 19-2-1992, which was later refunded to them after their case was decided in their favor by the Tribunal. The issue at hand was the rejection of their claim for interest on the refunded redemption fine by the Commissioner (Appeals).
The learned Advocate representing the appellants referred to relevant case laws to support their claim for interest payment. The case of CCE, Hyderabad v. I.T.C. Ltd. highlighted a draft Circular of C.B.E.C. proposing payment of interest on delayed refunds beyond 3 months. Additionally, the case of Eastern Coils Private Ltd. v. CCE, Kolkata-1 emphasized that when an amount is to be refunded by an appellate authority or Tribunal, the governmental authority should not refund the same without interest. The Advocate also presented Circular No. 802/35/2004-CX issued by C.B.E.C., which supported the appellants' claim for interest.
The Joint Commissioner of Central Excise and Customs informed the Tribunal about a stay granted by the Hon'ble Supreme Court in a related case, which led to a stay on the payment of interest. However, the Tribunal found the information provided incomplete and insufficient to determine the applicability of the stay on the interest payment in the present case. After examining the case record and considering the arguments from both sides, the Tribunal held that the appellants' claim for interest was legally valid. The Tribunal relied on the case laws cited by the appellants and the Board's Circular to direct that interest be granted to the appellants as per the prescribed procedure. Consequently, the appeal was allowed, and the appellants were granted the interest on the refunded redemption fine.
In conclusion, the Appellate Tribunal CESTAT, Mumbai ruled in favor of the appellants, directing the payment of interest on the redemption fine refunded to them. The decision was based on legal principles, relevant case laws, and the Circular issued by C.B.E.C., ensuring that the appellants received the interest as per the prescribed procedure.
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