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2010 (4) TMI 941
Issues:
- Transfer of duty paid DG set from one unit to another within the same company
- Liability for duty payment and penalties under Cenvat Credit Rules and Central Excise Rules
- Interpretation of Rule 3(5) of Cenvat Credit Rules regarding clearance of capital goods
Analysis:
The case involves an appeal by the Department against an order confirming a demand of duty and penalties imposed on the transfer of a duty paid DG set from one unit to another within the same company. The appellant had taken modvat credit in 1997 and used the set for about eight years before transferring it to another plant. The original authority confirmed the duty demand and penalties, which were partially upheld by the Commissioner (Appeals).
The appellant argued that the transfer was within the same company and did not involve a sale, thus no duty was payable. They relied on precedents to support their position, emphasizing the depreciation value concept introduced later and the treatment of inter-unit transfers within the same company differently. The Department contended that since the DG set was cleared as such, the full credit amount along with interest was recoverable, and penalties were justified.
The Tribunal considered the facts and applicable precedents. It recognized the usage of the DG set for the intended purpose and the importance of not negating the credit on capital goods. Referring to relevant cases, the Tribunal distinguished between different scenarios of goods transfer and upheld the concept of revenue neutrality in certain situations. Ultimately, the Tribunal directed the appellant to pay duty on the depreciated value as per Rule 3(5) of Cenvat Credit Rules.
Regarding penalties, the Tribunal found that the initial credit availed was not irregular, and the question of sustaining the penalty under Rule 15(2) of Cenvat Credit Rules did not arise in this case. Consequently, the appeal was partly allowed, with the appellant instructed to pay duty on the depreciated value and applicable interest, while the penalties were set aside.
In conclusion, the judgment clarified the liability for duty payment on transferred capital goods within the same company, emphasizing the importance of following relevant rules and precedents to determine the appropriate duty amount and penalties in such cases.
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2010 (4) TMI 940
Issues:
Appeal against Commissioner (Appeals) order dated 30-10-2007, Refund claim rejection, Unjust enrichment issue, Classification of tyre cord fabrics under Tariff Item 68, Set-off of duty under Notification No. 201/79, Doubt regarding payment of disputed amount, Passing on duty incidence to customers, Variance in credit taken by respondents.
Analysis:
The case involves an appeal against the order of Commissioner (Appeals) dated 30-10-2007. The respondents were purchasing tyre cord fabrics, and a dispute arose regarding the classification of the fabrics under Tariff Item 68 instead of Chapter 22. The Department issued show cause notices in 1981, challenging the credit taken by the appellants. The respondents obtained a favorable order from the High Court of Delhi in 2002, leading to a refund claim. The original authority rejected the refund claim citing the lack of essential documents and doubts about unjust enrichment. However, the Commissioner (Appeals) allowed the refund, emphasizing that the doubt regarding payment and PLA credit lacked basis.
The key issue of unjust enrichment was addressed by the Commissioner (Appeals) by considering the history of the case and the High Court's order, concluding that passing on duty incidence to customers was irrelevant in the context of set-off under Notification No. 201/79. The judgment highlighted that the Department did not take any action against the suppliers, making the variation in credit taken by the respondents unjustified. The appellate tribunal upheld the Commissioner (Appeals) decision, stating that the Department's grounds of appeal lacked material to challenge the factual findings.
In conclusion, the appellate tribunal rejected the appeal, finding no merit in the Department's contentions. The judgment emphasized the importance of factual findings and the lack of justification for varying the credit taken by the respondents. The issue of passing on duty incidence to customers was deemed irrelevant in the given circumstances, leading to the dismissal of the appeal.
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2010 (4) TMI 939
Issues:
Inclusion of bagging charges in the assessable value for imported Di-Ammonium Phosphate (DAP).
Analysis:
The Commissioner (Appeals) dropped the inclusion of bagging charges in the assessable value, leading to the Revenue appealing against this decision. The Revenue argued that packing was done before unloading, making it includible in the assessable value. They cited previous judgments, including one by the Hon'ble Supreme Court regarding duty collection for liquid cargo. The advocate for the respondent referenced a Tribunal decision in their favor on a similar issue. The Tribunal noted that the Supreme Court's decision on warehoused goods was not directly applicable, and the Mumbai High Court's decision on counter-veiling duty was not comparable to the present case.
The Tribunal found that the Commissioner (Appeals) relied on relevant decisions and logically concluded the issue. They emphasized the Supreme Court's stance that the value of imported goods must be determined when they touch Indian landmass post-unloading. Since the bagging did not occur before unloading in this case, the appeal by the Revenue was deemed meritless and rejected.
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2010 (4) TMI 938
Validity of second SCN - invocation of extended period of limitation - proviso to Section 11A of Central Excise Act, 1944 - penalty - Held that:- The fact that the show cause notice had been issued in 2000 cannot be taken as the issue of show cause notice on the same subject since the show cause notice and the proceedings under consideration in the present proceedings relate to duty demand on past clearances before the date of seizure - Since the first show cause notice relates to only confiscation of seized goods and penalty and duty thereon, department cannot be prevented or barred for issuing another show cause notice in respect of clearances of goods prior to the date of seizure.
Penalty - Held that:- An option to pay duty, interest and penalty within 30 days and in the event of such payment, the penalty gets reduced to 25%, has not been made in the Order in Original - the option is required to be given to the Company to deposit entire duty amount with interest (if any) and penalty to the extent of 25% within 30 days, from the date of receipt of this order.
Decided partly in favor of Revenue.
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2010 (4) TMI 937
Issues:
1. Validity of proceedings under Section 21
2. Classification of Dish Antenna as electronic goods
3. Distinction between Dish Antenna and Satellite Receiver
Validity of proceedings under Section 21:
The High Court considered whether the proceedings under Section 21 were justified and valid. The Court noted that there was no fresh material on record to support the issuance of the notice under Section 21. The notice did not indicate any new information but only discussed the similarity between Dish Antenna and Satellite Receiver. Relying on a Division Bench decision, the Court ruled in favor of the assessee, setting aside the Section 21 proceedings.
Classification of Dish Antenna as electronic goods:
The Court analyzed whether Dish Antenna could be classified as electronic goods not covered by any other notification. Expert opinions were cited to establish that a Dish Antenna and a Satellite Receiver are distinct items with different functionalities. The Court emphasized that a Dish Antenna is a simple machine for receiving signals, while a Satellite Receiver is more complex, capable of receiving, emitting, and forwarding transmissions. The Tribunal's decision treating both as the same was deemed incorrect, and the Court decided in favor of the assessee on this issue.
Distinction between Dish Antenna and Satellite Receiver:
Lastly, the Court addressed the question of whether the Tribunal was justified in considering Dish Antenna as a Satellite Receiver. The Court clarified the technical and functional differences between the two devices, supporting the assessee's position that they are not the same. Consequently, the Court set aside the Tribunal's decision on this matter, ruling in favor of the assessee.
In conclusion, the High Court allowed the revision filed by the assessee, finding in their favor on all three issues raised in the case. The judgment highlighted the importance of fresh material for initiating proceedings, the distinction between different types of electronic devices, and the need for accurate classification based on technical characteristics.
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2010 (4) TMI 936
Whether validity of Section 112 is liable to be rejected?
Held that:- If the amount would not have been deposited within thirty days as provided under clause (b) of sub-section (2) of Section 112 the petitioner would be liable for interest. The petitioner is not able to show that the Legislature was not competent to make such amendment and such amendment violates the fundamental right of the petitioner. No foundation has been laid down in this respect in the writ petition. Therefore, the submission of the petitioner about the validity of Section 112 of the Finance Act, 2000 has no substance and is liable to be rejected. It is settled principle of law that the Legislature is competent to make the amendment with retrospective effect. The amendment with retrospective effect has been held valid and held within the ambit of the legislative power in the various cases, referred herein above. Appeal dismissed.
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2010 (4) TMI 935
Issues:
Admissibility of credit reversal as pre-deposit under Sec. 35F of Central Excise Act; Entitlement to take credit suo motu; Lower appellate authority's failure to pass order on stay application.
Analysis:
The judgment involves the admissibility of credit reversal as a pre-deposit under Sec. 35F of the Central Excise Act, the entitlement to take credit suo motu, and the lower appellate authority's failure to pass an order on the stay application.
Issue 1: Admissibility of credit reversal as pre-deposit under Sec. 35F
The original authority disallowed certain credits taken by the assessee, leading to a series of events culminating in a penalty imposed on the assessee. The lower appellate authority rejected the plea to treat amounts reversed in the CENVAT account in 1999 as pre-deposit under Sec. 35F. The judgment noted that the lower appellate authority should have completed preliminary proceedings under Sec. 35F before examining the case on merits. The error in the impugned order was identified, leading to the direction to dispose of the appeal afresh on merits after properly addressing the pre-deposit issue.
Issue 2: Entitlement to take credit suo motu
The appellant claimed entitlement to take credit suo motu of the amount allowed by the original authority, which was not appealed against by the department. The appellant cited support from a Board's Circular, while the department relied on a Tribunal's Larger Bench decision. The judgment highlighted the absence of a provision allowing suo motu taking of credit or refund without sanction by the proper officer under the Central Excise Act and Rules. The case raised questions regarding the procedural requirements for taking credit suo motu, emphasizing the need for proper authorization.
Issue 3: Lower appellate authority's failure to pass order on stay application
The judgment noted that the lower appellate authority had not passed an order on the stay application filed by the assessee. Despite this, the appellate authority proceeded to reject the plea regarding the treatment of credit reversal as a pre-deposit under Sec. 35F. The judgment emphasized the importance of addressing procedural requirements, such as stay applications, before delving into the substantive merits of the case. The direction to dispose of the appeal afresh underscored the need for a comprehensive consideration of all procedural aspects before proceeding to the substantive issues.
In conclusion, the judgment allowed the appeal by way of remand, emphasizing the necessity of addressing procedural requirements, such as pre-deposit under Sec. 35F, before delving into the substantive merits of the case. The detailed analysis of the issues involved highlighted the complexities surrounding credit entitlement, pre-deposit requirements, and the procedural obligations of appellate authorities in adjudicating such matters.
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2010 (4) TMI 934
SSI exemption - CENVAT credit - simultaneous benefit - case of assessee is that the branded specified goods stand excluded from entitlement of benefit under SSI exemption notification and they are cleared on payment of duty and that, therefore, they cannot be denied the Cenvat credit facility and for availing such facility in relation to the specified goods for which the benefit is assured under the SSI exemption notification cannot be denied - Held that: - The specified goods manufactured simultaneously in the brand name of the assessee himself are not excluded from availing the benefit of exemption under the said notification even though in case of the former goods, the assessee seeks to avail the Cenvat credit facility in respect of the duty paid on the inputs utilised in the manufacture of the branded specified goods on which the full duty is paid while clearing the same.
The conclusion that the notification in question in relation to the branded specified goods and simultaneous manufacture of non-branded specified goods even in a situation where Cenvat credit is sought to be availed in respect of the duty paid on the inputs utilised in the branded specified goods, whereas the SSI exemption is sought to be availed in relation to the other goods, finds support in the case of COMMISSIONER OF C. EX., HALDIA Versus SPRING KLEIN AQUA PVT. LTD. [2007 (9) TMI 169 - CESTAT, KOLKATA].
The demand of duty made while denying the benefit under the said notification cannot be sustained - appeal allowed - decided in favor of appellant.
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2010 (4) TMI 933
Issues:
1. Maintainability of the Writ Petition under Section 35G of the Central Excise Act, 1944.
2. Acceptance of Bank Guarantee in lieu of pre-deposit under Section 35F.
3. Jurisdiction of the Appellate Tribunal and interference by the High Court.
Analysis:
1. The judgment addresses the issue of the maintainability of the Writ Petition under Section 35G of the Central Excise Act, 1944. The respondents raised an objection to the maintainability of the Writ Petition, citing the availability of an alternate remedy of filing an appeal under Section 35G. The petitioners had approached the Appellate Tribunal seeking modification of an order under Section 35F, which was rejected. The petitioners then moved the High Court through the Writ Petition, arguing to accept a Bank Guarantee in place of pre-deposit as compliance with Section 35F. The Court considered the Division Bench's finding that an order under Section 35F is treated as an order in appeal under Section 35G, making the Writ Petition not maintainable.
2. Another issue discussed in the judgment is the acceptance of a Bank Guarantee in lieu of pre-deposit under Section 35F. The petitioners contended that by offering a Bank Guarantee, they were complying with the provisions of Section 35F, and the refusal by the Appellate Tribunal to modify its earlier order was an error of jurisdiction. However, the Court upheld the objection raised by the respondents, emphasizing that the Division Bench had already determined that challenging an order under Section 35F must be through an appeal under Section 35G, and not through a Writ Petition.
3. The judgment also delves into the jurisdiction of the Appellate Tribunal and the potential interference by the High Court. The petitioners argued that when there is a question of jurisdiction or violation of natural justice, the High Court can interfere even if an alternate remedy exists. However, the Court, after considering the arguments from both sides, concluded that the Division Bench's finding regarding the nature of orders under Section 35F as orders in appeal under Section 35G was decisive. Therefore, the Court dismissed the Writ Petition as not maintainable, following the precedent set by the Division Bench.
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2010 (4) TMI 932
Issues involved: Department appealing against order of Commissioner (Appeals) regarding excess duty payment by Unit I, applicability of Section 11D of Central Excise Act, 1944, time-barred demand for the period 13-6-05 to 17-2-06.
Summary:
Issue 1: Excess Duty Payment
The case involved two units of the respondent undertaking job work for M/s. Bayer Crop Science (India) Ltd. Unit I transferred inputs to other units and job workers at a value of 110% of landed cost, paying higher duty. Department alleged excess duty payment by Unit I, enabling other units to take excess credit. Original authority confirmed demand from Unit I and Unit II, imposing penalty on Unit I. Commissioner (Appeals) set aside original authority's orders, leading to the department's appeal.
Issue 2: Applicability of Section 11D
Respondents argued that the higher value adoption while transferring inputs was precautionary due to past duty objections. They contended that excess duty paid was credited to the Central Government, with no recovery beyond the deposited amount. Respondents claimed Section 11D did not apply, citing no excess collection. The Tribunal agreed, stating Section 11D applies when a person collects excess duty from buyers, which was not the case here.
Issue 3: Time-Barred Demand
The demand for the period 13-6-05 to 17-2-06, proposed in a show cause notice dated 15-6-07, was challenged as time-barred. The Tribunal found in favor of the respondents, noting no suppression of facts to evade duty payment. The demand for that period was considered time-barred, as per the Commissioner (Appeals) decision.
In conclusion, the Tribunal rejected the department's appeals, upholding the Commissioner (Appeals) orders. The Cross Objections supporting the Commissioner's decisions were also disposed of accordingly.
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2010 (4) TMI 931
Issues:
- Declaration of low price for imported fabric
- Enhancement of declared price by the department
- Appeal against the enhanced value
- Compliance with provisions of Section 17(5) of the Customs Act, 1962
Analysis:
- The case involved three appeals filed by the department regarding the imported non-texturised polyester lining fabric with a declared price of 0.13 US $ per meter. The department contended that the price was low and enhanced it to 0.16 US $ per meter based on contemporaneous import prices. The respondents protested against the enhancement and filed an appeal before the lower appellate authority, which ruled in their favor citing Section 17(5) of the Customs Act, 1962. However, it was noted that the Customs authorities did not pass a speaking order within the required timeframe.
- The learned Consultant for the respondents argued that the enhancement was protested from the beginning, and the lower appellate authority should have remanded the matter to the original authority for a reasoned speaking order as per the provisions of Section 17(5). The department argued that the Bills of Entries were filed right after the introduction of the new provisions under Section 17(5) in July 2006.
- Upon considering the submissions, the Tribunal found that the Customs authorities failed to comply with Section 17(5) by not passing a speaking order within the stipulated time frame. Therefore, the Tribunal set aside the lower appellate authority's decision, allowed the appeals, and remanded the matter to the original authority for a reasoned speaking order after providing a reasonable opportunity of hearing to the respondents.
- Ultimately, all three appeals were allowed by way of remand, emphasizing the importance of compliance with procedural requirements under the Customs Act and the necessity for proper adjudication processes in cases of value enhancement for imported goods.
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2010 (4) TMI 930
Issues:
Classification of stators and rotors under Tariff Item 68 or 30D, denial of exemption benefit, payment of duty under protest, execution of B-13 bond, provisional assessment, unjust enrichment, refund claim.
Classification Issue:
The appellants were engaged in manufacturing power driven pumps and claimed classification of stators and rotors under Tariff Item 68, while the department argued for classification under Tariff Item 30D. Various legal proceedings ensued, including a writ petition and appeals. Ultimately, the Tribunal allowed the appeal of the assessees, confirming classification under TI 68, which was upheld by the Supreme Court. Subsequently, a refund claim was filed, leading to further disputes over time-barred claims and unjust enrichment.
Payment of Duty Under Protest:
The appellants paid duty under protest during the relevant period, as per court directions and communication from the Superintendent of Central Excise. The issue of executing a B-13 bond arose, with the appellants contending that they were not required to do so due to the pending classification issue before the High Court. Despite reminders to execute the bond, the appellants maintained their stance based on the classification dispute.
Provisional Assessment and Unjust Enrichment:
The Tribunal analyzed the provisional nature of the assessments during the disputed period, citing legal precedents such as Metal Forgings v. Union of India and other relevant cases. It was held that in the absence of a formal order under Rule 9B for provisional assessment, the assessments were to be treated as provisional. Consequently, the burden of proving unjust enrichment was not on the assessees, leading to the rejection of the refund claim being overturned. The Tribunal ruled in favor of the appellants, granting them the refund claimed.
In conclusion, the judgment addressed the complex issues surrounding the classification of goods, payment of duty under protest, the requirement for executing a B-13 bond, the nature of provisional assessments, and the concept of unjust enrichment in the context of a refund claim. The detailed analysis provided clarity on each issue, leading to a favorable outcome for the appellants based on legal principles and precedents.
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2010 (4) TMI 929
Issues: Confiscation of goods under DEPB scheme, applicability of Sections 113(i) and 114 of the Customs Act, 1962, imposition of penalty.
Confiscation under DEPB Scheme:
The appellate tribunal addressed the issue of the confiscation of 'quilted made-ups' entered for export under the DEPB scheme. The authorities had confiscated the goods on the grounds that they were not covered under Sl. No. 47C of the DEPB scheme. The challenge in the appeal was against the confiscation and penalty imposed, arguing that since the goods were neither dutiable nor prohibited, the provisions of Section 113(i) of the Customs Act, 1962, were not applicable. The tribunal examined whether the goods fell within the scope of Section 113(i) for confiscation.
Applicability of Sections 113(i) and 114:
The tribunal analyzed the provisions of Section 113(i) of the Customs Act, 1962, which cover goods entered for exportation that do not correspond in value or material particulars with the entry made under the Act. It was noted that prior to a specific date, the section applied to any dutiable or prohibited goods not corresponding with the entry. The tribunal considered the argument that since the goods in question were neither dutiable nor prohibited, they should not be liable to confiscation under Section 113(i) and that penalty under Section 114 was not sustainable. The tribunal accepted the contention that the goods did not fall under the purview of Section 113(i) and consequently set aside the impugned order, allowing the appeal.
Conclusion:
In conclusion, the appellate tribunal ruled in favor of the importers, holding that the goods were not subject to confiscation under Section 113(i) of the Customs Act, 1962, as they were neither dutiable nor prohibited. The tribunal also determined that the penalty imposed under Section 114 was not sustainable in this case. As a result, the impugned order of confiscation and penalty was set aside, and the appeal was allowed.
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2010 (4) TMI 928
The Appellate Tribunal CESTAT NEW DELHI declined permission to BHEL to pursue an appeal regarding a refund claim. The Committee directed the Department to consider the refund claim in accordance with the law. The appeal and stay application were disposed of accordingly.
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2010 (4) TMI 927
Issues:
1. Denial of exemption under Notification No. 76/86-C.E. for sludge obtained in the sewage or effluent treatment plant.
2. Classification of the product as carbon dust instead of carbon sludge.
3. Determination of whether the product was obtained in an effluent treatment plant.
4. Interpretation of Chemical Examiner's report.
5. Eligibility for exemption irrespective of goods classification.
Analysis:
1. The judgment revolves around the denial of exemption under Notification No. 76/86-C.E. for sludge obtained in the sewage or effluent treatment plant. The assessees, urea manufacturers, were denied the exemption on the grounds that the product cleared was carbon dust, not sludge, and was not obtained in an effluent treatment plant. This denial led to a significant demand for duty and penalties raised through show-cause notices.
2. The dispute over the classification of the product as carbon dust instead of carbon sludge was a crucial point of contention. The assessees provided explanations supported by an affidavit and historical process changes to justify the product's description as sludge. The Chemical Examiner's report describing the sample as an aqueous paste of carbon dust played a pivotal role in determining the nature of the product.
3. The question of whether the product was obtained in an effluent treatment plant was central to the case. The assessees presented evidence, including a certificate from the Tamil Nadu Pollution Control Board, asserting that the tanks and processes in their factory constituted an effluent treatment plant. This certification played a significant role in establishing the origin of the product.
4. The interpretation of the Chemical Examiner's report was crucial in determining the nature of the product. The report's description of the sample as an aqueous paste of carbon dust containing traces of carbon compound was pivotal in accepting the assessees' claim that the product was sludge, not dust, as initially contended by the authorities.
5. The judgment also clarified that the eligibility for exemption under the notification was not dependent on the classification of the goods. Even though the product was classified as "carbon" attracting duty, its eligibility for exemption was upheld based on the nature of the product and its origin in the effluent treatment plant. The decision to set aside the impugned orders and allow the appeals highlighted the importance of factual evidence and proper interpretation in tax disputes.
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2010 (4) TMI 926
The Appellate Tribunal CESTAT CHENNAI upheld the classification of "surface miner" under chapter heading 84.30 of the CETA'85. Goods not eligible for MODVAT credit as per Rule 57Q of the Central Excise Rules, 1944. The appeal was rejected.
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2010 (4) TMI 925
Issues:
1. RTI application seeking information on 335J register, pending cases, and adjudication orders.
2. CPIO citing exemptions under Sections 8(1)(d), 8(1)(h), and 8(1)(j) of RTI Act.
3. Appellate Authority invoking Sections 8(1)(d), 8(1)(h), 8(1)(j), and 8(1)(g) to deny disclosure.
4. Appellant's argument for disclosure based on the importance of Register 335-J.
5. Central Information Commission's analysis and decision on the disclosure of requested information.
6. Evaluation of CPIO's unpreparedness and lack of understanding of RTI Act provisions.
7. Direction for the Chief Commissioner to take appropriate action regarding the CPIO.
Analysis:
The case involved an RTI application by the Appellant requesting information on the 335J register, pending cases, and adjudication orders. The CPIO initially declined disclosure citing exemptions under Sections 8(1)(d), 8(1)(h), and 8(1)(j) of the RTI Act. The Appellate Authority also refused disclosure based on Sections 8(1)(d), 8(1)(h), 8(1)(j), and 8(1)(g), referencing a previous decision. The Appellant argued for disclosure, emphasizing the significance of the Register 335-J as highlighted in a CBEC letter.
The Central Information Commission disagreed with the Appellate Authority's reasoning, noting that the requested information was essential for public scrutiny of the authority's functions. The Commission found no justification for withholding basic details from the 335-J register, as they did not compromise any individual's interests. Consequently, the Commission ordered the disclosure of the information requested in the RTI application within a week.
During the hearing, the CPIO, Shri N.C. Verma, displayed unpreparedness and a lack of understanding of RTI Act provisions. The Commission observed that the CPIO was unaware of the applicant's right to seek information without providing a specific purpose. Despite refraining from immediate action against the CPIO, the Commission directed the Chief Commissioner to assess and address the CPIO's conduct appropriately, with a warning to monitor future actions closely.
In conclusion, the Central Information Commission disposed of the matter by instructing the disclosure of the requested information, emphasizing transparency in public authority functions. Additionally, the Commission directed the Chief Commissioner to take necessary action regarding the CPIO's conduct and provided copies of the order to the concerned parties for compliance and awareness.
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2010 (4) TMI 924
Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in law in giving the assessee benefit of 'reasonable cause' for the delay in preventing it from complying with the provisions of section 44AB of the Incometax Act, 1961, for the assessment years 1990-91 and 1991-92 ?
Held that:- The facts stated in the order of the Tribunal has not been disputed, namely, that the books of account has been delivered by the assessee for statutory audit on August 14, 1989 (in time), which is referred in the order of the Tribunal and the report was received from the auditors on March 31, 1991. On this fact, the Tribunal arrived at a conclusion that the delay was caused on the part of the auditors and it amounts to reasonable cause. We do not see any error in the order of the Tribunal. The finding of the Tribunal on the facts and circumstances that there was reasonable cause, is the finding of fact. No substantial question of law is involved. The order of the Tribunal is accordingly upheld. Appeal dismissed.
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2010 (4) TMI 923
Issues Involved:
1. Deletion of disallowance of depreciation on leased assets.
2. Addition of license fee receivable from ITC Ltd.
3. Validity of assessment under section 153A of the Income-tax Act.
Detailed Analysis:
1. Deletion of Disallowance of Depreciation on Leased Assets:
The primary issue raised by the Revenue in the assessment years 2001-02 and 2002-03 was the deletion of disallowance of depreciation on leased assets amounting to Rs. 6,66,488 and Rs. 5,79,590 respectively. This issue was also connected with the assessee's grievance for the assessment years 2003-04 and 2004-05, where the Commissioner of Income-tax (Appeals) upheld the disallowance of depreciation amounting to Rs. 5,06,309 and Rs. 4,43,912.
The facts of the case reveal that the assessee-company, owning the "Hotel Sea Rock" in Mumbai, had entered into a hotel operator agreement with ITC Ltd. effective from July 1, 1986. The hotel was damaged in a bomb blast in 1993, leading to disputes and subsequent arbitration. The arbitrator's award, dated May 24, 2005, stipulated that ITC Ltd. would hand over possession of the hotel and the assessee would pay Rs. 42.10 crores to ITC Ltd., among other terms.
The Assessing Officer disallowed the depreciation in the assessment years 2003-04 and 2004-05 on the grounds that no business income was generated due to the arbitration award, which stated that no license fee was receivable. However, the Commissioner of Income-tax (Appeals) deleted the disallowance for the assessment years 2001-02 and 2002-03, noting that the license fee was assessed as business income in the original assessment.
The Tribunal, considering various judicial precedents, held that the depreciation could not be denied merely because the license fee was not received. The business assets were used for the hotel business, and the non-receipt of the license fee did not negate the use of the assets. Therefore, the Tribunal allowed the assessee's appeal for the assessment years 2003-04 and 2004-05 and rejected the Revenue's appeal for the assessment years 2001-02 and 2002-03.
2. Addition of License Fee Receivable from ITC Ltd.:
In the assessment years 2003-04 and 2004-05, the Assessing Officer added Rs. 32,21,213 and Rs. 34,13,764 respectively as license fee receivable from ITC Ltd. The Commissioner of Income-tax (Appeals) deleted these additions, referencing the arbitrator's award, which stated that no license fee was due to the assessee.
The Tribunal upheld this deletion, noting that similar additions in the assessment years 1995-96 and 1997-98 were also deleted by the Tribunal. The arbitrator's award made it clear that the assessee was not entitled to any license fee, and hence, no addition could be made on this account.
3. Validity of Assessment Under Section 153A:
The assessee challenged the validity of the assessment under section 153A, arguing that no assessment or reassessment was pending as of the date of the search initiation, which could have abated. Therefore, the Revenue authorities had no right to review or reconsider the issue of depreciation when no new material was found during the search.
However, the assessee's counsel did not press these grounds during the hearing, and thus, these grounds were rejected by the Tribunal.
Conclusion:
The Tribunal dismissed the Revenue's appeals and the assessee's cross-objections. It partly allowed the assessee's appeals for the assessment years 2003-04 and 2004-05, granting the depreciation claim. The Tribunal upheld the deletion of the addition of license fees receivable from ITC Ltd. based on the arbitrator's award and prior Tribunal decisions.
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2010 (4) TMI 922
Validity of Assessment u/s 153C - addition of unexplained cash balance for want of proof - as argued satisfaction as required u/s 153C was not recorded - absence of requisite satisfaction for invoking the provisions of section 153C - HELD THAT:- The notice obviously does not speak of any satisfaction at all. As already mentioned by us, the order sheet entries would not be sufficient to hold that the Assessing Officer was satisfied on any items of the nature mentioned in section 153C of the Act, to belong to the assessee.
On the date of recording of the so-called satisfaction, viz, November 21, 2005, the assessee had already filed revised returns disclosing such deposits as its income and taxes due thereon stood paid. No doubt, the satisfaction need not be specifically stated in so many terms, but it should be discernible from the recordings made by the AO.
We are therefore of the opinion that CIT(A) rightly held the satisfaction required under section 153C was never reached or recorded. We are persuaded to agree that once there is no proper assumption of jurisdiction, an assessment made pursuant to such proceedings would have to be annulled.
Though we hold that assessment stands quashed, in line with the decision of Shelly Products [2003 (5) TMI 4 - SUPREME COURT] we have to add that the assessee would be entitled to a refund only of the amount of tax paid, in excess of the tax due by him, on the basis of the income disclosed in his return. Appeal of the Revenue is dismissed.
Levy of penalty - As we have already upheld the order of the Commissioner of Income-tax (Appeals) and quashed the assessment made on the assessee under section 153C read with section 143(3) of the Act for the impugned assessment year. Therefore the substratum for the levy of penalty has disappeared. Decided in favour of assessee.
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