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Showing 281 to 300 of 848 Records
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2010 (10) TMI 975
Issues:
Inclusion of reimbursement revenue and mobilization of rig amount in total income under Section 44BB of the Income Tax Act.
Analysis:
The appeal concerned the inclusion of reimbursement revenue and mobilization of rig amount in the total income under Section 44BB of the Income Tax Act for charging tax. The assessee, a non-resident company engaged in exploration and production in India, contested the inclusion of &8377; 2,24,21,980/- as reimbursement revenue and &8377; 5,35,40,616/- as mobilization revenue in the total amount under Section 44BB. The Assessing Officer had included both amounts in the total receipt, which the assessee challenged before the CIT(A) (Commissioner of Income Tax - Appeals).
The CIT(A) relied on the decision of the Hon'ble Uttarakhand High Court in the case of CIT Vs. Halliburton Offshore Services Inc. and rejected the assessee's contentions. The CIT(A) held that both the reimbursement revenue and mobilization revenue were includible in the total receipt for tax levy at 10% under Section 44BB. The assessee, in response, mentioned that the matter was under litigation in the Hon'ble Supreme Court but acknowledged that the jurisdictional High Court's decision applied for the time being.
During the appeal before the ITAT Delhi, the counsel for the assessee failed to challenge the CIT(A)'s findings or present any contradictory decision from the Hon'ble Supreme Court. The counsel mentioned the pending issue in the Supreme Court but did not provide any new evidence. Consequently, the ITAT Delhi upheld the CIT(A)'s decision, stating that the appeal lacked merit as the CIT(A) correctly relied on the decision of the jurisdictional High Court. Therefore, the ITAT Delhi dismissed the appeal of the assessee, affirming the inclusion of both reimbursement revenue and mobilization revenue in the total income under Section 44BB.
In conclusion, the ITAT Delhi's judgment upheld the inclusion of reimbursement revenue and mobilization of rig amount in the total income under Section 44BB of the Income Tax Act based on the decision of the jurisdictional High Court, despite the pending issue in the Hon'ble Supreme Court.
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2010 (10) TMI 974
Issues Involved:
1. Disallowance of proportionate administrative expenses u/s 14A.
2. Disallowance of bad debts written off.
3. Exclusion of sales tax and excise duty in total turnover for deduction u/s 80HHC.
4. Exclusion of 90% of miscellaneous income from adjusted profits for deduction u/s 80HHC.
5. Exclusion of furnace erection, commissioning, and service charges from business profits for deduction u/s 80HHC.
Summary:
Issue 1: Disallowance of proportionate administrative expenses u/s 14A
The Learned Commissioner of Income Tax (Appeals) directed to delete the disallowance of Rs. 81,750/- u/s 14A, observing that no specific expenditure was attributable for depositing just 2 interest warrants and 4 dividend warrants. The Tribunal upheld this decision, noting that the amendment to section 14A by way of insertion of sub-section (2) and (3) is prospective and applicable from Assessment Year 2007-08. The Tribunal also cited the Hon'ble Punjab and Haryana High Court's decision in CIT vs. Hero Cycles Ltd., which held that disallowance u/s 14A requires a finding of incurring of expenditure.
Issue 2: Disallowance of bad debts written off
The assessee claimed bad debts of Rs. 1,63,620/-, which the Assessing Officer disallowed due to lack of justification on how the debts became bad. The Learned Commissioner of Income Tax (Appeals) deleted the disallowance, noting that the debts were small, time-barred, and similar disallowances had been deleted in earlier years. The Tribunal confirmed this decision, emphasizing that the amounts in question were written off in the books of account during the year under consideration.
Issue 3: Exclusion of sales tax and excise duty in total turnover for deduction u/s 80HHC
The Assessing Officer included sales tax and excise duty in the total turnover for computing deduction u/s 80HHC, which the Learned Commissioner of Income Tax (Appeals) directed to exclude, following the Hon'ble Supreme Court's decision in CIT Vs Laxmi Machine Works. The Tribunal upheld this decision, stating that section 145A does not specifically provide that "total turnover" for the purposes of section 80HHC shall include excise duty and sales tax.
Issue 4: Exclusion of 90% of miscellaneous income from adjusted profits for deduction u/s 80HHC
The Learned Commissioner of Income Tax (Appeals) directed to delete 90% of bad debts recovered, discount earned from suppliers, insurance claim received, sundry credit balances written back, miscellaneous charges recovered, scrap sold, and kasar income from adjusted profits for section 80HHC deduction. The Tribunal confirmed this decision, noting that these amounts were assessable under "profits and gains of business or profession" and 90% of such receipts are to be excluded for arriving at eligible profits of business.
Issue 5: Exclusion of furnace erection, commissioning, and service charges from business profits for deduction u/s 80HHC
The Assessing Officer excluded 90% of furnace erection, commissioning, and service charges from business profits for section 80HHC deduction. The Learned Commissioner of Income Tax (Appeals) reversed this, stating that these charges are part of sales and cannot be excluded from business profits. The Tribunal upheld this decision, noting that these charges were part and parcel of the main business of manufacturing and sale of furnaces and were allowed in earlier years.
Conclusion:
The appeal of the Revenue was dismissed on all grounds.
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2010 (10) TMI 972
Issues Involved:
Interpretation of Rule 3(5) of the Central Credit Rules, 2004 in relation to the payment of duty on capital goods used for a certain period.
Analysis:
The appeal was filed by the Revenue challenging the decision of the Commissioner (Appeals) who dropped the demand against the respondent based on the judgment in Madura Coats Pvt. Ltd. v. CCE. The Commissioner held that duty should be paid on the transaction value at the time of clearance of capital goods, which had been used by the respondent for almost five years in accordance with Rule 3(5) of the Central Credit Rules, 2004.
The Department's representative argued that the decision in Madura Coats Pvt. Ltd. is under challenge before the Hon'ble Madras High Court, and hence, requested to keep the appeal pending. However, upon hearing both sides, the Tribunal made a query to the Departmental Representative regarding the status of the Madura Coats Pvt. Ltd. case before the High Court. It was revealed that no stay had been granted by the High Court, and the representative sought time to ascertain the status of the appeal.
In the case of Cummins India Ltd. v. CCE, the Tribunal had previously dealt with a similar issue, holding that the provisions of Rule 3(4) of Cenvat Credit Rules, 2002 and Rule 3(5) of Cenvat Credit Rules, 2005 do not apply to the removal of capital goods after use, where duty has been paid on the transaction value. This view was upheld by the Mumbai High Court in a subsequent case. Consequently, the Tribunal found no merit in the Department's appeal and rejected the same, affirming the decision of the Commissioner (Appeals).
The judgment highlights the importance of interpreting and applying the relevant rules concerning the payment of duty on capital goods, especially in cases where goods have been used for a significant period before clearance. It also underscores the significance of precedent set by previous decisions in similar matters, providing clarity and consistency in tax-related disputes.
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2010 (10) TMI 971
Review application against ex parte decree - Held that:- It is for the first time contended in the application for review by the petitioner that there was a concluded contract between the parties and the rate, as quoted, was inclusive of excise duty and other taxes and after acceptance of the unit price which is inclusive of excise duty, the opposite party in effect has given a go-bye to clause 10 of the general condition of contract. The said order was further sought to be reviewed on another ground that the opposite party being state cannot stand on twofolds i.e. on one hand accepting the quotation which is inclusive of the excise duty and on the other hand after coming to know that the petitioner has got the exemption on excise duty, asking for refund of the excise duty. Another ground which was taken in the review application is that subsequent to the passing of an ex parte decree the competent authority under the Central Excise Act, 1944 has held that the petitioner has not charged any extra amount as Central Excise duty.
The discovery of a new and important matter or an evidence does not mean the discovery of a matter or evidence subsequent to the passing of the decree otherwise the next sentence “after the exercise of the due diligence was not within his knowledge or could not be produced by him at the time within the decree was passed” shall render superfluous. Thus once a case is decided it is hardly permissible to review that decision merely on the ground that subsequent to the said decision some other decisions have to be taken. Revisional application dismissed.
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2010 (10) TMI 970
Issues involved: Interpretation of penalty provisions under Section 11AC of the Central Excise Act, 1944.
Summary:
The High Court considered the issue of whether the penalty leviable under Section 11AC of the Central Excise Act, 1944 can be reduced even when duty evasion is proven, and if the authority reducing the penalty must provide reasons for the reduction. The Supreme Court had authoritatively ruled in the case of Union of India v. Dharamendra Textile Processors that the penalty specified under Section 11AC cannot be reduced by authorities, and mens rea is not a necessary element for imposing the penalty. The Supreme Court further clarified in Union of India v. Rajasthan Spinning & Weaving Mills that the penalty under Section 11AC must be imposed if conditions like fraud, collusion, wilful misstatement, or suppression of facts are satisfied, leaving no discretion with the authority to impose a lesser penalty. Therefore, the High Court held that the penalty under Section 11AC cannot be less than the determined amount under Section 11A(2) of the Act, and 100% penalty must be imposed in such cases, with no discretion for reduction. The Court set aside the Tribunal's order reducing the penalty, as the conditions under Section 11AC were not examined in the present proceedings. The appeal was allowed with no costs.
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2010 (10) TMI 968
Issues:
Interpretation of Service Tax Rules regarding liability to pay service tax for services received from non-residents before and after April 18, 2006.
Analysis:
1. Issue of Liability Before April 18, 2006:
The case involved a dispute regarding the liability of the recipient of services to pay service tax for services received from non-residents before April 18, 2006. The Revenue authorities contended that the recipient should discharge the service tax liability under rule 2(1)(d)(iv) of the Service Tax Rules, 1994. However, the Commissioner (Appeals) set aside the demand of service tax, relying on various judgments and the interpretation of the relevant provisions. The Tribunal noted that the law was settled that the provisions of rule 2(1)(d)(iv) could not be applied for recovery of service tax before April 18, 2006, when section 66A came into effect.
2. Judicial Precedents and Interpretation of Law:
The Tribunal considered the judgments of the High Court of Bombay and other cases cited by the respondent's consultant, which clarified the liability of the recipient for service tax on services received from non-residents. These judgments established that the liability to pay service tax on such services arose from April 18, 2006, onwards. The Tribunal found that the issue was conclusively settled by the Supreme Court's dismissal of the Revenue's Special Leave Petition (SLP) against the High Court's judgment, reinforcing the legal position established by the earlier decisions.
3. Dismissal of Revenue's Appeal:
Based on the legal precedents and the dismissal of the Revenue's SLP by the Supreme Court, the Tribunal concluded that the appeal filed by the Revenue lacked merit. Consequently, the Tribunal dismissed the Revenue's appeal and disposed of the cross-objection. This decision affirmed the position that the liability to pay service tax for services received from non-residents before April 18, 2006, did not fall on the recipient, as clarified by the relevant legal provisions and judicial interpretations.
This detailed analysis of the judgment highlights the key issues surrounding the interpretation of Service Tax Rules and the liability of recipients for service tax on services received from non-residents, providing a comprehensive overview of the legal reasoning and conclusions reached by the Tribunal.
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2010 (10) TMI 967
Order dated February 11, 1991 and the minutes of the meeting dated November 22, 1991 and has further sought direction to the District Level Screening Committee to grant eligibility certificate to the petitioner-company under the Sales Tax Incentive Scheme for Industries, 1987 challenged
Held that:- Since the matter of evasion of tax was compounded on January 5, 1991, therefore, it could not be said that the petitionercompany had been penalised for avoidance or evasion of tax or any case of avoidance or evasion of tax was pending against it. The said compounding order dated January 5, 1991 was passed prior to the rejection of the application for the eligibility certificate on December 11, 1991. Therefore, the rejection of the application of the petitioner-company by invoking clause 7(e) is illegal. The issue of retrospective application of clause 7(e) of the notification dated May 23, 1987 is insignificant as per the aforesaid finding on the issue of compounding of tax evasion prior to the rejection of the eligibility certificate.
In the result, the writ petition is allowed. The rejection order dated December 11, 1991, issued pursuant to the meeting dated November 22, 1991, is quashed and set aside. So far as denial of eligibility certificate to the petitioner-company is concerned, the case is remanded back to the District Level Committee with the direction to reconsider the case in the light of the aforesaid judgment, within a period of three months from the date of receipt of copy of this order
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2010 (10) TMI 966
Whether it was an inter-State sale or intra-State sale, obviously cannot be decided by the mobile squad and it is for the assessing authority to record a finding on the aforesaid issue during the course of assessment?
Held that:- In the present case, it cannot be said that either of the two conditions given in the aforesaid section 48(2) of the Act did exist. We are, therefore, prima facie satisfied that neither the goods could have been detained by the mobile squad nor the seizure order have been passed on such not existent facts and incorrect reading of entries in 6R and 9R and merely on conjectures and surmises that purchases could not have been done in one day.
The writ petition is, therefore, admitted.
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2010 (10) TMI 965
Whether purchase of tendu leaves by the petitioners, who are registered exporters under the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 (for short, "the Adhiniyam 1964") read with the provisions of the Chhattisgarh Tendu Patta (Vyapar Viniyaman) Niyamavali, 1966 (for short, "the Niyamavali, 1966"), falls within the definition of inter-State sale or intra-State sale?
Held that:- The purchase of tendu leaves was an independent transaction, which was complete in the State of Chhattisgarh. Movement of tendu leaves thereafter was a different transaction and independent of the contract of sale. There is no link between the contract of sale and movement of leaves from State of Chhattisgarh to outside the State of Chhattisgarh. Further, the movement of leaves to outside State of Chhattisgarh was not occasioned by sale of tendu leaves, as it was not on account of covenant of the contract of sale. Thus, the sales are intra-State sales. The petitioners are liable to pay all the taxes accordingly under the provisions of the State Acts. All the interim reliefs granted earlier stand vacated. The petitioners are accordingly directed to make payment of balance amount of taxes to the respondentState, as aforestated.
In the result, all the writ petitions are liable to be and are hereby dismissed.
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2010 (10) TMI 964
Issues:
Imposition of penalty under section 4B(5) of the U.P. Trade Tax Act, 1948 for misuse of recognition certificate.
Analysis:
The case involved a revision filed by the assessee against an order imposing a penalty for violating section 4B(5) of the U.P. Trade Tax Act, 1948. The assessee held a recognition certificate under section 4B for manufacturing cycle and moped parts, allowing purchase of raw materials like furnace oil. The issue arose when the assessee used the purchased material for job-work basis, leading to a penalty notice under section 4B(5). The first appellate authority set aside the penalty, stating the material was used for manufacturing cycle parts as intended. The Tribunal, however, upheld the penalty, triggering this revision.
Upon examination, the court noted that section 4B(5) mandates using purchased goods for the specific purpose mentioned in the recognition certificate. In this case, the certificate was for manufacturing cycle parts, and the material was indeed used for that purpose, albeit on a job-work basis. Citing precedent, the court emphasized that as long as the purpose remains aligned with the certificate, even job-work manufacturing is permissible. The standing counsel argued that sale of manufactured goods by the assessee is crucial for penalty imposition under section 4B(5), but the court disagreed.
After hearing arguments from both sides, the court concluded that using purchased materials for manufacturing items specified in the recognition certificate is sufficient compliance. Given the Deputy Commissioner's finding that goods were indeed produced from the purchased raw material, the penalty was deemed unjustified. Consequently, the court allowed the revision, setting aside the Tribunal's penalty order and deleting the penalty imposed on the assessee.
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2010 (10) TMI 963
Whether in view of the language of the Explanation the burden of establishing that the appellant is not liable for penalty is on the appellant and the appellant is bound to prove all the necessary facts in order to discharge that burden including the fact that the goods in question were in fact used in the Union Territory of Lakshadweep?
Held that:- Neither of these factors were indicated in the show-cause notice and therefore could not have validly formed part of the grounds which could lead to the conclusion that the sales in issue were not genuine apart from the fact that it was not the case of the Department in the show-cause notice that the sales were not genuine. Their simple case as already noticed from the show-cause notice is that the goods did not actually reach the Union Territory of Lakshadweep. It is possible in a given case where the sales are undisputedly genuine, the purchaser after purchasing the goods may change his intentions originally communicated to the vendor and alter the destination of the goods. Merely because the goods did not reach the destination in such a case it cannot be said that the sale itself was not genuine.
Thus we are of the opinion that the order dated December 28, 2006 levying penalty on the company cannot be sustained and the same is required to be set aside. For the same reasons, we are of the opinion that the order of assessment cannot be sustained.
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2010 (10) TMI 962
Whether, in facts and circumstances of the case, especially when the first appellate authority has examined all the documents in respect of the local RD purchases of materials for use in the interior decoration works and given the finding that the materials have been used in the same form, can the order of the second respondent revising/setting aside the first appellate order and restore the assessment order sustainable in law?
Considering the documents produced in respect of purchase of materials in other States for execution of works in those States and not brought the materials to this State as is visible from the finding of the first appellate authority, whether the order of the second respondent sustainable in law?
When there is voluntary disclosure of the turnover in the monthly return and there is no change in the same during assessment, is it legal to impose penalty under section 12(4) of the KST Act?
Held that:- If at all the purchase bills outside the State of Karnataka are part of the record, unless there is material to show that those goods were brought into local area, opinion of the first appellate authority that for the contract works executed by the appellant-assessee outside Karnataka, such goods must have been used, which is evident from the contract agreement between the parties is just and proper. Similarly, unless there is material to show that the goods purchased by the appellant were used resulting in a different form, the appellant-assessee was entitled for deduction of the cost of the material as per the Explanation III to rule 6(4) of the KST Rules of 1957.
For the reasons above, we are of the opinion that the revisional authority was incorrect in setting aside the orders of the first appellate authority. Accordingly, the appeal is allowed confirming the orders of the first appellate authority-Joint Commissioner of Commercial Taxes.
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2010 (10) TMI 961
Revision under section 41 of the Kerala General Sales Tax Act, 1963 aggrieved by the order dated January 25, 2010 passed by the Kerala Agricultural Income-tax and Sales Tax Appellate Tribunal, Additional Bench, Palakkad
Held that:- In the instant case, neither the petitioner nor the transporter could establish the bona fides of the transport that it was during the course of the inter-State sale by producing the appropriate documents including the exit of the goods from the State of Kerala. In such a case, the language of subsection (4) of section 30B is very categoric and makes the owner of the goods liable for assessment.
The fact that such a declaration in form C is given need not necessarily establish that the content of the declaration is true. When the truth of the content of the declaration is in doubt, the burden is on the parties to the declaration or persons claiming the benefit of such declaration to establish the truth of the content of the document. In view of the nature of the trans action a statutory fiction is created, i.e., unless the exit of the goods is established, in all the cases where admittedly the goods enter the State of Kerala, it is to be presumed that the goods are sold in the State of Kerala. In the absence of any proof to the contrary a mere declaration in form C does not override the statutory presumption.The revision petition is dismissed at the admission stage
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2010 (10) TMI 960
Penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 - Held that:- Since the assessee produced the declaration form ST 18C before the assessing officer in response to showcause notice then the Deputy Commissioner (Appeals) was fully justified in setting aside the order of the assessing authority levying penalty under section 78(5) of the Act.
In these circumstances, I find that although the order of the Tax Board is liable to be set aside in view of judgment of the honourable apex court in the case of Assistant Commercial Taxes Officer v. Bajaj Electricals Ltd. [2008 (11) TMI 374 - SUPREME COURT OF INDIA], but order of the assessing authority was rightly set aside by the Deputy Commissioner (Appeals), in view of judgment of the honourable apex court in State of Rajasthan v. D.P. Metals [2001 (10) TMI 881 - SUPREME COURT OF INDIA].
Consequently, the impugned order of the Tax Board is set aside, but revision of petitioner/Revenue is also dismissed in view of judgment of the honourable apex court in the case of State of Rajasthan v. D.P. Metals [supra]. The order of Deputy Commissioner (Appeals) to the above extent is upheld.
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2010 (10) TMI 959
Issues involved: Challenge to the order of the Special Tribunal regarding exemption u/s 5(3) of the Central Sales Tax Act, 1956 for conversion of chassis into a bus.
Summary:
The petitioner, an assessee, challenged the Special Tribunal's order which held that after the conversion of a chassis into a bus, the petitioner was not entitled to the exemption u/s 5(3) of the Central Sales Tax Act. The Tribunal referred to a decision of the Karnataka High Court, which was later taken on appeal to the Supreme Court. The Supreme Court, in its judgment, emphasized the connection between the penultimate sale and the export of goods, stating that the burden is on the assessee to establish this link. The Court remitted the matter back to the assessing authority for fresh consideration, allowing the petitioner to present all materials to establish the connection. If successful, the petitioner can seek a refund of tax and penalty paid.
In conclusion, the writ petition was allowed with no costs.
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2010 (10) TMI 958
Whether the petitioner is not liable to be assessed and in fact he is entitled to refund?
Held that:- In view of the Explanation to sections 32 and 33, in our opinion, the assessee can file objections before the competent authority as provided under section 74 of the Act.
After the certified copies are received, the assessee shall file objections as contemplated under the Explanation to sections 32 and 33 within 30 days from the date of receipt of the certified copies of the orders as asked for by the assessee. It is open to the petitioner to raise all possible contentions including the facet of jurisdiction and limitation before the said authority.
Till the matter is finalised, no coercive steps shall be taken for realization or recovery of any sum that has been demanded.
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2010 (10) TMI 957
Issues:
Whether packing material sold along with cement is subject to sales tax or not?
Analysis:
The case revolves around the taxation of packing material sold along with cement. The assessing officer had separated the sale of bags from the cement and levied tax on the packing material, leading to a challenge by the assessee. The Deputy Commissioner (Appeals) and the Tax Board both found that the Department failed to prove the separate sale of bags, resulting in no tax being leviable on the packing material. The Revenue challenged these decisions, citing precedents such as Udaipur Distillery Co. Ltd. and ACTO v. M.B. & Co., where similar issues were addressed.
In the Udaipur Distillery Co. Ltd. case, the court considered the composite sale of beer and liquor in bottles, concluding that there is no presumption of the separate sale of bottles. Similarly, in the ACTO case, the assessing officer had levied tax on packing material as an implied sale, but the Deputy Commissioner (Appeals) and the Tax Board set aside this decision. The Rajasthan High Court dismissed the Revenue's revision petition, and the Supreme Court upheld this decision, ruling that packing material is not subject to tax.
Therefore, the court in the present case found that the legal question had already been settled by previous judgments, both at the state and apex court levels. As the issue was fully covered by the decisions in Udaipur Distillery Co. Ltd. and ACTO v. M.B. & Co., the court concluded that there was no merit in the revision petition and dismissed it accordingly.
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2010 (10) TMI 956
Whether the assessment is done only when it is completed and signed?
Whether estimation of turnover made by the assessing officer which is essentially bifurcation of taxable and non-taxable turnover based on findings of facts during inspection?
Held that:- If the assessment is initiated for any return period in the financial year itself, rule 39(5)(iv) does not apply and the assessment can be completed for such return period or return periods through separate orders for each return period. So much so, we do not find any merit in the challenge against the validity of the assessment on the ground that the assessment is completed for each return period, i.e., for each month by separate orders. There is also merit in the finding of the Tribunal that the assessee having not raised any objection against single assessment during the course of assessment, cannot raise a technical objection after monthly assessments are completed through separate orders. We, therefore, answer this question in favour of the Revenue by upholding the validity of separate assessments and rejecting the contentions of the assessee to the contrary.
Since the exempted goods, namely, textile, on physical inspection was found only in one of the five shops, we feel the relief granted by the first appellate authority and confirmed by the Tribunal is reasonable and in any case it is not proper for us to interfere with the findings on facts, that too based on data gathered on inspection. We, therefore, do not find the second question raised is a substantial question of law warranting interference under the revisional jurisdiction under section 63 of the KVAT Act. Appeal of assessee dismissed.
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2010 (10) TMI 955
Penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 - Held that:- As the learned counsel for the Revenue does not dispute this factual aspect that declaration form ST-18C was produced by the assessee before the assessing authority along with the reply to show-cause notice. In these circumstances, the assessing officer was not right in levying penalty under section 78(5) of the Act.
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2010 (10) TMI 954
Issues:
Challenge to the order of assessment under the Haryana General Sales Tax Act, 1973 regarding the taxability of the turnover of purchase of paddy husk used as fuel in the manufacture of liquor.
Analysis:
The judgment delivered by the High Court addressed the challenge in Civil Writ Petition No. 7720 of 1989 concerning the order of assessment under the Haryana General Sales Tax Act, 1973. The petitioner, engaged in the manufacture of liquor using paddy husk as fuel, contested the taxability of the turnover of purchase of paddy husk under section 9 of the Act. The Assessing Authority deemed the purchase of paddy husk as liable to purchase tax, a decision upheld by the appellate authority and the Tribunal. The petitioner argued that section 9 of the Act applies only when goods are purchased and used in the manufacture of goods or disposed of in the course of inter-State sale or export, contending that goods purchased as fuel cannot be considered used for manufacturing goods. Reference was made to a Supreme Court case to support this argument.
The State, in its reply, stated that the petitioner did not argue before the lower authorities that paddy husk was used as fuel in the manufacture of liquor, hence justifying the imposition of purchase tax under section 9 of the Act. The High Court, after hearing arguments from both parties, deliberated on whether paddy husk used solely as an aid in the manufacturing process falls under section 9 of the Act. The assessment order highlighted the acquisition and use of paddy husk in the manufacture of tax-free country liquor, leading to the imposition of tax by treating it as a supply by contractors to the dealer.
The High Court found merit in the petitioner's contention that paddy husk used as fuel in the liquor manufacturing process cannot be considered a raw material, as its sole purpose was as fuel. Drawing parallels from a Supreme Court judgment involving cashew shells used as fuel, it was reasoned that goods used for ancillary purposes like fuel do not fall under the section pertaining to the levy of tax on raw materials. Therefore, paddy husk used as fuel in liquor manufacturing was not deemed to be used as a raw material, leading to the allowance of the writ petitions and the quashing of the purchase tax levy on the turnover of paddy husk purchase by the petitioner.
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