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2009 (8) TMI 983
The Appellate Tribunal CESTAT Bangalore allowed the condonation of a 15-day delay in filing an appeal by the department. The appeal was dismissed, and the matter was remanded to the original authority for cross-examination of the Deputy Director, Textile Committee, and a fair decision after hearing both sides.
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2009 (8) TMI 982
Issues involved: Appeal against demand of duty and penalties imposed, denial of natural justice during adjudication proceedings.
Demand of duty and penalties:
The case involved M/s. Meenakshi Re-rollers Pvt. Ltd. and Shri Nikhil Bansal aggrieved by a demand of duty over Rs. 7.5 crores for clandestinely manufactured MS Ingots. The show-cause notice invoked Section 11A(1) of the Central Excise Act and proposed penalties u/s 11AC and Rules 25, 26 of the Central Excise Rules, 2002. The department relied on an expert opinion for determining energy consumption and proposed a total duty of over Rs. 7.5 crores, including appropriation of the amount already paid by the appellants.
Denial of natural justice:
The appellants raised grievances regarding denial of natural justice during adjudication proceedings. They requested copies of documents, English translations, and cross-examination of witnesses, which were partially allowed by the Commissioner. The main contention was the denial of cross-examination of key witnesses and the lack of English translations hindering effective participation in the proceedings. The appellants argued that they were not given a fair opportunity to respond to the show-cause notice, emphasizing the importance of English translations for effective participation.
Judgment:
Upon examination, the Tribunal found merit in the appellants' grievances regarding denial of natural justice. The Commissioner's order was set aside, and the appeals were allowed by way of remand. The Tribunal directed the Commissioner to pass a fresh order of adjudication, providing the appellants with a reasonable opportunity for obtaining English translations, cross-examining witnesses, and being personally heard. Emphasis was placed on the need for a speaking order addressing all issues and ensuring that evidence collected through the Panchnama is duly considered.
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2009 (8) TMI 981
Issues involved: Determination of redemption fines and penalties for import of old and used photocopiers without license.
Summary:
The Appellate Tribunal CESTAT NEW DELHI heard four appeals by the Department against a common order involving the same respondents regarding the import of used photocopiers. The photocopiers were examined by a Chartered Engineer, and their value was enhanced, leading to payment of duty on the enhanced value. The original authority held the consignments liable for confiscation due to lack of import license, but allowed redemption on payment of fines and penalties. The Commissioner (Appeals) upheld the confiscation but reduced the redemption fines and penalties imposed.
The Department argued that the reduction of fines and penalties was unjustified, considering the respondents' history of importing multiple consignments in the past. They sought to set aside the Commissioner (Appeals) order and restore the original authority's decision. The respondents' Advocate supported the Commissioner (Appeals) findings.
After considering both sides, the Tribunal acknowledged that import of old photocopiers without a license warrants confiscation. The dispute centered on the quantum of redemption fines and penalties. The Department wanted the original authority's decision reinstated, citing the party's frequent imports as justification for higher fines. However, the Commissioner (Appeals), exercising discretion, reduced the fines and penalties while upholding the confiscation in each case. The Tribunal found no valid grounds to interfere with the Commissioner (Appeals) decision, deeming the reduction not arbitrary. Consequently, the Department's appeals were rejected.
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2009 (8) TMI 980
Issues involved: Confirmation of duty against the appellant for transit losses exceeding condonable limit, challenge to interest amount confirmed under Section 11AB of Central Excise Act, 1944 for late payment of differential duty on re-warehoused goods.
Confirmation of duty: M/s. I.O.C.L. confirmed duty against the appellant for transit losses exceeding the condonable limit of 1%. The learned Advocate for the appellant did not contest the confirmation of duty.
Challenge to interest amount: The challenge was to the interest amount of Rs. 31,73,215/- and Rs. 3,26,786/- confirmed under Section 11AB of the Central Excise Act, 1944, for late payment of differential duty on re-warehoused goods.
Provisions of Rule 20: The Advocate for the appellant drew attention to Rule 20 of the Central Excise Rules, 2001, which provides for warehousing provisions. He highlighted that the benefit of removal of excisable goods from one warehouse to another without payment of duty is subject to conditions specified by the Board, including interest.
Board Circular No. 579/16/2001-CX: The Advocate referred to this circular issued under Rule 20(2) of the Central Excise Rules, 2001, emphasizing that failure to receive a warehousing certificate would only cause duty liability on the consignee, as outlined in the circular.
Interest confirmation under Section 11AB: The Advocate argued that since there was no circular specifying any interest rate as required by Rule 20(2), the interest cannot be confirmed against the appellant under Section 11AB. He contended that the rule is a complete code providing for warehousing facilities subject to conditions specified by the Board.
Decision: While acknowledging the merit in the Advocate's contention, the Tribunal noted that the issue was not raised before the Commissioner. Therefore, the matter was remanded to the Commissioner to adjudicate the appellant's liability to interest, considering the overall provisions of the law. The demand for duty was confirmed as uncontested, and the appellant was granted the opportunity to present their case.
Conclusion: The appeal was disposed of in the above manner, with the Tribunal directing the Commissioner to address the appellant's plea regarding interest liability after considering all relevant legal provisions.
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2009 (8) TMI 979
Area based exemption - N/N. 39/2001 dated 31-7-2001 - Whether the benefit of exemption would be available to goods/product that unit starts manufacturing after the cut of date for the commencement of commercial production i.e. 31-12-2005? - Held that: - Even though we are aware of the fact that Tribunal is not bound by the clarification issued by the Board, we find that in this case clarification issued by the Board is elaborate and expands the scope of Notification and makes intention clear. Basically what emerges from the clarification is that the purpose of the clarification is to ensure that plant and machinery is installed within the duty date, commercial production started and the value of the plant and machinery is as per the requirement of the Notification. The intention behind the Notification is to encourage investment and industrial growth in Kutchh area of Gujarat State and this development should take place within a particular date. Thus going by the intention behind the Notification read with clarification issued by the Board, we find that in this case, except for the fact that these two products produced were at a later date, all other conditions have been fulfilled. What is required to be considered is whether the products have been produced by using the same plant and machinery. We find that the appellants have fulfilled all the conditions of the Notification. Therefore, we do not find any merit in the appeal filed by the Revenue - appeal rejected - decided against Revenue.
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2009 (8) TMI 978
Issues: Compliance with pre-deposit order, Financial hardships in making deposits, Bank's requirement of 'assessee code' for deposit, Grant of further time for pre-deposit.
Compliance with pre-deposit order:
The judgment addresses the compliance with the pre-deposit order issued in a previous order dated 21-4-2009. The Counsel for the appellant in Appeal No. C/754/08 expressed inability to deposit the required amount of Rs. 1,00,000 due to financial hardships. The Counsel requested a modification or further time for deposit, which was opposed by the DR. The Tribunal, considering the circumstances, allowed the appellant one more month from the receipt of the order to make the pre-deposit, with a compliance report due on 22-9-2009. The modification application was disposed of accordingly.
Financial hardships in making deposits:
The judgment also dealt with the issue of financial hardships faced by the appellants in making the required deposits. Some appellants were unable to deposit the amounts due to a peculiar problem where the Bank required an 'assessee code', which they did not possess as they were not assessees. Despite seeking advice from the Commissionerate, they were unable to deposit the amounts. The Tribunal, after hearing the submissions, acknowledged the readiness of the parties to make the pre-deposit but recognized their inability due to reasons beyond their control. As a solution, the Commissioner concerned was directed to permit these appellants to pre-deposit the amounts in an alternative manner as an exceptional case. A further time of 10 days was granted to the appellants in Appeal Nos. C/812, 813 & 814/08 to pre-deposit the respective amounts as prescribed by the Commissioner, with a compliance report due on 17-8-2009.
Bank's requirement of 'assessee code' for deposit:
The issue of the Bank's insistence on an 'assessee code' for deposit was highlighted in the judgment. The parties facing this problem were not allowed to deposit the amounts as they lacked the required 'assessee code'. Despite seeking guidance from the Commissionerate, they were unable to proceed with the deposits. The Tribunal recognized this as a hindrance beyond the appellants' control and directed the Commissioner to permit them to pre-deposit the amounts in an alternative manner to ensure compliance with the pre-deposit order.
Grant of further time for pre-deposit:
In response to the challenges faced by the appellants in making the pre-deposit, the Tribunal granted further time for compliance. The appellants in Appeal No. C/754/08 were given an additional month, while the appellants in Appeal Nos. C/812, 813 & 814/08 were granted a 10-day extension to pre-deposit the respective amounts. These extensions aimed to accommodate the financial constraints and the unique problem faced by the appellants regarding the Bank's requirement of an 'assessee code', ensuring a fair opportunity for compliance with the Tribunal's orders.
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2009 (8) TMI 977
Implementation of Tribunal's Order - provide registration to the assessee with a period of one month from the date of passing the order on 19-6-2009 - Held that:- The order allowing the appeal was passed on 2-5-2008 and it is more than one year, which has passed without implementation of the Tribunal’s order. Admittedly, there is no stay of operation of the said order by the Hon’ble High Court. In this scenario, Revenue was duty bound to carry out the implementation within a period of one month from today, as directed in the order dated 19-6-2009 - the period extended by another one month for compliance - appeal dismissed - decided against Revenue.
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2009 (8) TMI 976
Issues:
1. Incorrect quantification of interest rate by the Assistant Commissioner in accordance with the Tribunal's order.
2. Dispute regarding the date from which interest would be payable to the appellant.
3. Applicability of the correct rate of interest for delayed refund as specified in Notification No. 75/2003-N.T.
Issue 1: Incorrect quantification of interest rate by the Assistant Commissioner
The appellant filed a miscellaneous application challenging the Assistant Commissioner's quantification of interest at 6% per annum instead of the correct rate of 12% as per the Tribunal's order. The Tribunal clarified that its order only decided the date from which interest would be payable, not the correct rate of interest. The Assistant Commissioner correctly implemented the Tribunal's order by granting interest from the specified date. The appellant's claim for 12% interest was rejected based on Notification No. 75/2003-N.T., which specified 6% per annum for delayed refunds. The Tribunal held that since the rate of interest was not the subject matter of its order, the application for implementing the Tribunal's order with 12% interest cannot be allowed and was thus rejected.
Issue 2: Dispute regarding the date from which interest would be payable to the appellant
The Tribunal clarified that the only dispute resolved in its order was the date from which interest would be payable to the appellant. The Assistant Commissioner correctly granted interest from the specified date and dealt with the appellant's claim for a 12% interest rate. The Tribunal emphasized that the Assistant Commissioner's detailed order was appealable, and if the appellant was aggrieved, they could challenge it before the Commissioner of Customs (Appeals) as per the law. Since the Tribunal did not direct the grant of interest at 12% per annum, the application for implementing the Tribunal's order with a higher interest rate was rejected.
Issue 3: Applicability of the correct rate of interest for delayed refund
A separate miscellaneous application filed by another appellant raised the same issue of incorrect quantification of interest by the Assistant Commissioner. The Assistant Commissioner had granted the refund to the appellant in accordance with the Tribunal's order but at a rate of interest specified in the notification. The Tribunal found no merit in the application as the rate of interest was not the subject matter of the Assistant Commissioner's detailed order. Consequently, the application was rejected.
This judgment clarifies the distinction between the issues decided by the Tribunal and those left to the adjudicating authority. It underscores the importance of adhering to the specified interest rates for delayed refunds as per relevant notifications, even if claimants seek higher rates. The Tribunal's decision emphasizes the need for parties to follow the correct legal procedures for challenging orders they find unfavorable.
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2009 (8) TMI 975
Issues involved: Application for waiver of predeposit of duty u/s Rule 8 (3A) of the Central Excise Rules, 2002 for default in payment of duty for specific months.
Summary:
The judgment by the Appellate Tribunal CESTAT CHENNAI dealt with an application for waiver of predeposit of duty amounting to Rs. 59,90,246/- + Rs. 20,80,628/- along with interest and penalty. The demand arose due to default in payment of duty for the months of Nov., '06, Dec., '06, and Jan., '07, invoking Rule 8 (3A) of the Central Excise Rules, 2002. The department also relied on sub-rule (4) of Rule 3 of Cenvat Credit Rules, 2004 regarding utilization of Cenvat credit for duty payment on final products.
The applicants argued that there was no prohibition on using Cenvat credit for arrears payment and contended that a significant sum had already been paid. They cited a Tribunal decision to support their stance. The opposing view highlighted that Cenvat credit cannot be utilized in case of default beyond 30 days from the due date, which was the situation in this case.
After considering the submissions, the Tribunal found the cited decision applicable to the present case and decided to waive the pre-deposit, staying the recovery of the disputed amounts pending the appeal.
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2009 (8) TMI 974
Issues involved: Appeal against cancellation of penalty u/s 271(1)(c) by ITAT Mumbai.
Issue 1: Cancellation of penalty u/s 271(1)(c) by Commissioner of Income-tax (Appeals)
The assessee, a company engaged in investment and trading in shares, filed a return declaring a loss. The Assessing Officer disallowed a claim for set-off of business loss, treating it as speculation loss. Penalty u/s 271(1)(c) was imposed for furnishing inaccurate particulars of income. The Commissioner of Income-tax (Appeals) cancelled the penalty, considering the negative income returned and assessed. The Revenue appealed, arguing that the penalty should not have been cancelled.
Issue 2: Retrospective applicability of Explanation 4 to section 271(1)(c)
The ITAT Mumbai held that the cancellation of penalty by the Commissioner of Income-tax (Appeals) was not justified. Referring to the decision in CIT v. Gold Coin Health Food P. Ltd., it was established that Explanation 4 to section 271(1)(c) applied retrospectively, even during the period before its amendment in 2003. The penalty could be levied even if the addition of concealed income reduced the returned loss.
Issue 3: Merits of penalty imposition under section 271(1)(c)
The ITAT Mumbai considered the merits of the penalty imposed by the Assessing Officer. Relying on rule 27 of the Income-tax (Appellate Tribunal) Rules, the assessee argued that the penalty was not sustainable on the merits. Despite the Commissioner of Income-tax (Appeals) rejecting the case, the rule allowed the assessee to support the order on grounds decided against him. The ITAT Mumbai permitted arguments on the merits and decided the matter after hearing both sides.
Issue 4: Comparison with judicial pronouncements
In support of the assessee's case, various submissions and judicial pronouncements were considered. CIT v. Auric Investment and Securities Ltd. was cited, where a similar issue was decided by the Delhi High Court. The Court held that the treatment of business loss as speculation loss did not automatically indicate concealment of income. As the facts were similar to the Auric case, the ITAT Mumbai upheld the cancellation of penalty imposed by the Assessing Officer, leading to the dismissal of the Revenue's appeal.
This judgment highlights the complexities involved in penalty imposition under section 271(1)(c) and the importance of considering legal precedents and rules in such matters.
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2009 (8) TMI 973
TDS u/s 195 - Liability to deduct tax at source - "make available" clause - DTA Agreement for logistics services - Nature of services - Whether logistics services agreement is `fees for technical services' as per article 12(4) of the Double Taxation Avoidance Agreement between India and Singapore - whether the assessee was liable to deduct tax at source in view of the logistics services agreement entered between the assessee and Sun Singapore - appellant entered into an agreement for availing of the logistics services from Sun Singapore - all the payments were in respect of spare parts only - CIT (A) held that the nature of services are such that it makes available technical knowledge, experience, skill, know-how and processes to the appellant and also enables it to apply the technology contained therein. The services are therefore covered under article 12(4) of the Double Taxation Avoidance Agreement and therefore, the payment is fees for technical services liable for tax deduction.
HELD THAT:- Following the decision of the Bangalore Bench in the case of ITO v. Cepha Imaging P. Ltd.[2009 (7) TMI 1277 - ITAT BANGALORE] and other decisions referred, we hold that the interpretation of the word "make available" as given in memorandum of understanding between India and USA treaty can be applied in the instant case and as per the facts on record, it has not been established by the Revenue that the technology, experience or skill has been made available to the assessee.
Hence, as per article 12(4) of the DTA Agreement between India and Singapore, the payments made by the assessee were not liable to be taxed under the head "Fees for technical services". Sun Singapore is not having any permanent establishment and therefore, the payments which were required to be taxed under the head "Business" were not taxable in view of article 7 of the DTA Agreement between India and Singapore.
The Hon'ble jurisdictional High Court in the case of Jindal Thermal Power Co. Ltd. v. Deputy CIT (TDS) [2009 (3) TMI 401 - KARNATAKA HIGH COURT] held that rendering of services and utilisation should be both in India and the Explanation to section 9(2) does not dilute such requirements as laid down by the apex court in Ishikawajima-Harima Heavy Industries Ltd.'s case [2007 (1) TMI 91 - SUPREME COURT] though the Explanation has been introduced subsequently. It was held that technical services provided off-shore does not require any deduction of tax at source.
In the instant case, the services have been rendered off-shore though these are utilised in India and as per the decision of the jurisdictional High Court, no TDS was required to be made. It is true that through e-commerce, the services can be rendered in India without any geographical boundary but no facts have been put before us to establish that Sun Singapore provided such services in India. When the income of the recipient is not taxable in India then the appellant was not required to deduct tax at source.
Hence, it is held that the appellant was not required to deduct tax at source u/s 195. In the result, both the appeals of the assessee are allowed.
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2009 (8) TMI 972
Issues Involved:
1. Maintainability of the appeal due to less fee filed by the assessee.
2. Merits of the penalty u/s 271(1)(c) of the Income-tax Act, 1961.
Summary:
1. Maintainability of the Appeal:
During the hearing, the Departmental representative contended that the appeal was not maintainable due to a less fee filed by the assessee. However, the assessee's counsel cited the decision from the Hon'ble High Court of Patna in the case of Dr. Ajit Kumar Pandey v. ITAT [2009] 21 DTR (Pat) 103, which concluded that for the imposition of penalty u/s 271(1)(c) of the Act, there is no connection or bearing with the total income of the assessee. Therefore, the appeal against the levy of penalty u/s 271 is covered by clause (d) of section 253(6) and the fee payable is Rs. 500 only. No contrary decision was cited by the Departmental representative, leading to the withdrawal of the defect memo issued to the assessee.
2. Merits of the Penalty u/s 271(1)(c):
The Tribunal sustained the addition of Rs. 15,00,000 against the addition of Rs. 20 lakhs made by the Assessing Officer and partly sustained by the learned Commissioner of Income-tax (Appeals). The further addition of Rs. 2,44,555 for outstanding labour payable was deleted. The penalty proceedings u/s 271(1)(c) were initiated against the assessee, imposing a penalty of Rs. 8,76,319, which was deleted by the learned Commissioner of Income-tax (Appeals). However, on appeal by the Revenue, it was restored back to the file of the learned Commissioner of Income-tax (Appeals), who dismissed the appeal by following the decision from the Hon'ble apex court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277.
The Tribunal noted that the assessee-firm disclosed transportation receipts of Rs. 1,88,54,650 and declared a net profit of Rs. 78,160 after debiting expenses. The Assessing Officer disallowed Rs. 20,00,000 of labour expenses due to incomplete records. The learned Commissioner of Income-tax (Appeals) reduced the addition to Rs. 18,77,480, and the Tribunal further reduced it to Rs. 15,00,000. The Tribunal observed that the assessee had no conscious act leading to the concealment of income or furnishing of inaccurate particulars of income. The decision from the Hon'ble apex court in K. C. Builders v. Asst. CIT [2004] 265 ITR 562 and other cited cases supported the assessee's case.
The Tribunal concluded that there was no justification in imposing the penalty, especially when necessary information/particulars were furnished by the assessee. It was noted that quantum and penalty proceedings are different. Therefore, the Assessing Officer was directed to delete the penalty imposed.
Conclusion:
The appeal of the assessee was allowed, and the penalty u/s 271(1)(c) was directed to be deleted. The order was pronounced in the open court on August 24, 2009.
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2009 (8) TMI 971
Issues Involved:
1. Validity of the Commissioner's order under Section 263 of the Income-tax Act.
2. Legality of the assessment order passed under Section 143(3) read with Section 263.
3. Levy of penalty under Section 273(2) of the Income-tax Act.
4. Addition of the value of a Mercedes Benz car as income of the assessee.
Detailed Analysis:
1. Validity of the Commissioner's Order under Section 263:
The primary issue was whether the Commissioner of Income-tax (CIT) could exercise jurisdiction under Section 263 to revise an assessment order passed under Section 143(1) of the Income-tax Act. The CIT's revision was based on the view that the assessment order was erroneous and prejudicial to the interests of the Revenue because it failed to include the US $1 lakh and the value of the Mercedes Benz car received by the assessee from M/s. Chesebrough Pond's Inc., USA (CPI).
Arguments by the Assessee:
- The assessment order was passed under Section 143(1), which only allows for rectification of arithmetical errors.
- The CIT cannot direct the Assessing Officer (AO) to do something beyond the scope of Section 143(1).
- The revisionary order was passed beyond the statutory time limit prescribed under Section 153.
Tribunal's Findings:
- The Tribunal agreed that under Section 143(1), the AO could only make adjustments for arithmetical errors, and the omission to include the amounts received from CPI did not constitute such an error.
- However, the Tribunal also noted that the AO's failure to issue a notice under Section 143(2) to verify the correctness and completeness of the return was an error that the CIT could correct under Section 263.
- Despite this, the Tribunal found that the CIT's order was invalid because the time limit for completing the assessment had expired on March 31, 1990, and the CIT's order was passed on March 22, 1991. Therefore, the AO could not pass a fresh assessment order beyond the statutory time limit.
2. Legality of the Assessment Order Passed under Section 143(3) read with Section 263:
The subsequent assessment order passed by the AO under Section 143(3) read with Section 263 was challenged on the grounds that it was passed after the statutory time limit.
Tribunal's Findings:
- The Tribunal annulled the assessment order passed on December 31, 1992, as it was based on the revisionary order under Section 263, which had already been quashed.
- The Tribunal held that the AO could not pass an assessment order under Section 143(3) without issuing a notice under Section 143(2) within the prescribed time limit, which had expired on March 31, 1990.
3. Levy of Penalty under Section 273(2) of the Income-tax Act:
The penalty was levied for the shortfall in the payment of advance tax due to the non-inclusion of the US $1 lakh in the income.
Tribunal's Findings:
- Since the assessment order under Section 143(3) was annulled, the demand for additional tax became nullified.
- Consequently, there was no basis for the levy of penalty, and the Tribunal deleted the penalty.
4. Addition of the Value of a Mercedes Benz Car as Income of the Assessee:
The issue was whether the value of the Mercedes Benz car provided by CPI should be added to the income of the assessee.
Arguments by the Assessee:
- The car was a gift and not a payment for services rendered.
- CPI had filed a gift-tax return and paid gift-tax on it.
- The value of the car should be depreciated due to wear and tear.
Tribunal's Findings:
- The Tribunal found that the car was provided to the assessee in the capacity of his employment with CPI.
- However, the Tribunal agreed that the value of the car should be depreciated and reduced the value to Rs. 7.50 lakhs for the purpose of addition.
Separate Judgments:
The Judicial Member disagreed with the Accountant Member on certain aspects, particularly regarding the applicability of the time limit under Section 153(1)(a) in relation to the Commissioner's order under Section 263. The matter was referred to a Third Member, who agreed with the Accountant Member that the CIT's order under Section 263 was invalid due to the expiration of the statutory time limit for completing the assessment.
Conclusion:
- The Tribunal quashed the CIT's order under Section 263.
- The subsequent assessment order and penalty were annulled.
- The value of the Mercedes Benz car was reduced to Rs. 7.50 lakhs for the purpose of addition to the income.
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2009 (8) TMI 970
Issues Involved:
1. Approval from the Committee on Disputes.
2. Reopening of assessment.
3. Confirmation of disallowance of depreciation.
4. Denial of deduction under section 80HHC.
Detailed Analysis:
1. Approval from the Committee on Disputes:
The Revenue's appeals (I.T.A. Nos. 1967/Mds/06 and 1643/Mds/07) were dismissed due to the lack of approval from the Committee on Disputes, as mandated by the Supreme Court in ONGC v. CCE [1992] Suppl. 2 SCC 432. The Tribunal noted, "Nothing was placed before us to demonstrate what action the Revenue took for obtaining the approval of the Committee on Disputes."
2. Reopening of Assessment:
In I.T.A. No. 1822/Mds/2006, the assessee contested the reopening of the assessment. However, the learned Departmental representative pointed out that no permission was given by the Committee on Disputes for contesting this issue. The Tribunal held, "Since we have decided the issue on the merits without going into the controversy whether permission was granted to contest the issue of reopening, we are of the view that the same has been rendered of academic nature."
3. Confirmation of Disallowance of Depreciation:
The primary issue was whether the gas sweetening plant, which was ready for use but not actually used due to non-availability of raw material, was eligible for depreciation. The Tribunal considered various judicial precedents:
- The assessee argued that the plant was ready for use and cited cases like CIT v. Heera Financial Services Ltd. [2008] 298 ITR 245, where depreciation was allowed on assets ready for use but not actually used.
- The Department contended that the word "used" in section 32 denotes actual use, citing Dineshkumar Gulabchand Agrawal v. CIT [2004] 267 ITR 768 and Deputy CIT v. Yellamma Dasappa Hospital [2007] 290 ITR 353.
The Tribunal ultimately held, "In view of the above detailed discussion and considering the fact of wear and tear since gas sweetening plant was kept ready for use and must have suffered some wear and tear, the decision of the hon'ble jurisdictional High Court in the case of Heera Financial Services Ltd. [2008] 298 ITR 245 as well as the concept of block of assets, we are of the view that the assessee is entitled to depreciation on the gas sweetening plant."
4. Denial of Deduction Under Section 80HHC:
In I.T.A. No. 1823/Mds/2006, the Tribunal addressed the exclusion of certain receipts from business profits for calculating deduction under section 80HHC. The Tribunal followed the Supreme Court's observations in CIT v. K. Ravindranathan Nair [2007] 295 ITR 228 and examined individual items:
- Sale of Power: Excluded as it had nothing to do with export activities.
- Sale of Scrap: Excluded for the same reason.
- Unclaimed/Unspent Liabilities: Required re-examination to include only revenue items as business profits.
- Crane Hire Charges: Excluded as it was unrelated to export activities.
- Recoveries from Employees Furniture: Required re-examination to determine if it reduced expenditure on furniture.
- Recoveries from House Rent: Included as it offset the rent expenditure.
- Liquidated Damages and Other Recoveries: Required re-examination to include only revenue items.
- Participation Fees for Training Programme: Required re-examination to verify if it was reimbursement of training expenses.
- Reimbursement from PII and Others for Deputation of Employees: Required re-examination.
The Tribunal concluded, "These grounds are partly allowed as indicated above."
Conclusion:
The Tribunal dismissed the Revenue's appeals due to lack of approval from the Committee on Disputes, allowed the assessee's appeal regarding depreciation on the gas sweetening plant, and partly allowed the assessee's appeal on the denial of deduction under section 80HHC, with several items remitted for re-examination. The issue of reopening the assessment was rendered academic due to the decision on the merits.
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2009 (8) TMI 969
Issues Involved:
1. Validity of the assessment order under sections 143(3), 158BC, and 158BD due to non-issuance of notice under section 158BD.
2. Jurisdiction of the Assessing Officer to complete the assessment in the absence of a valid notice under section 158BD.
3. Notification and transfer of the case to the Deputy Commissioner of Income-tax, Central Circle-2(1), Bangalore.
4. Various procedural and substantive grounds raised by the assessee in the cross-objections.
Issue-wise Detailed Analysis:
1. Validity of the Assessment Order:
The primary issue was whether the assessment order passed under sections 143(3), 158BC, and 158BD was valid given the contention that no notice under section 158BD was issued to the assessee. The Commissioner of Income-tax (Appeals) quashed the assessment order on the grounds that:
- No search warrant or panchanama was issued in the name of the assessee.
- The search was conducted in the name of Shri Lalchand Balar.
- The only notice issued was under section 158BC, not 158BD.
- Procedural defects, such as the non-issuance of a proper notice, invalidate the proceedings.
The Tribunal examined whether the notice under section 158BD was a prerequisite for initiating proceedings against the assessee. It was established that the Assessing Officer had recorded satisfaction and issued a notice under section 158BC read with section 158BD, which was deemed sufficient. The Tribunal held that non-mentioning of section 158BD in the notice was not fatal and any defect in the notice was curable under section 292B of the Act.
2. Jurisdiction of the Assessing Officer:
The Commissioner of Income-tax (Appeals) held that the Assessing Officer lacked jurisdiction to complete the assessment due to the absence of a valid notice under section 158BD. However, the Tribunal found that:
- The satisfaction of the Assessing Officer was recorded, and the notice under section 158BC read with section 158BD was issued.
- The jurisdiction to assess undisclosed income in search cases is conferred under section 158BA, and section 158BC is procedural.
- The Tribunal referred to various judicial precedents, including the Gujarat High Court and the Supreme Court, to support that the notice under section 158BC read with section 158BD was valid.
3. Notification and Transfer of the Case:
The Revenue contended that the case was notified to the Deputy Commissioner of Income-tax, Central Circle-2(1), Bangalore, along with the rest of the Bhansali Group cases. The Tribunal noted that:
- The same Assessing Officer had jurisdiction over both the searched person and the assessee.
- The transfer of the case was valid, and the assessment was completed by the appropriate authority.
4. Procedural and Substantive Grounds in Cross-Objections:
The assessee raised several cross-objections, including:
- The block assessment was without jurisdiction.
- Mandatory satisfaction was not recorded.
- The notice issued was under section 158BC and not section 158BC read with section 158BD.
- Mere noting without notice under section 158BD does not confer jurisdiction.
- The Commissioner of Income-tax (Appeals) admitted an additional ground regarding the non-issuance of notice under section 158BD.
- The transfer of the case without giving an opportunity to the assessee.
The Tribunal addressed these objections as follows:
- The block assessment order was held to be within jurisdiction.
- Satisfaction was recorded, and the same Assessing Officer had jurisdiction.
- The notice under section 158BC read with section 158BD was procedurally valid.
- The Commissioner of Income-tax (Appeals) was justified in admitting the additional ground.
- The transfer of the case was valid and did not affect the legality of the assessment.
Conclusion:
The Tribunal partly allowed the appeal of the Revenue and the cross-objections of the assessee. The assessment order was held to be valid, and the procedural defects were deemed curable. The issue of disallowance of expenses was remanded back to the Commissioner of Income-tax (Appeals) for consideration on merits.
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2009 (8) TMI 967
Issues involved: Stay application for penalty and interest on service tax payment delay.
The judgment addresses the issue of stay application for penalty and interest on service tax payment delay. The Appellant had paid the service tax amount but sought a stay on the penalty and interest. The Department argued that the entire commission received was taxable under Business Auxiliary Service, and the Appellant had deliberately breached the law by not paying the service tax until investigated by Revenue. The Commissioner found the Appellant liable for suppression of facts and defiance of the law.
The Tribunal considered the findings and directed the Appellant to make a pre-deposit of penalty and interest. The Appellant was instructed to deposit Rs. 20 lakhs as penalty within six weeks and the entire interest amount within one month. The adjudicating authority was tasked with calculating the interest component promptly and communicating the same to the Appellant. The Appellant was required to make the interest deposit within one month of receiving the order. Compliance deadlines were set for the penalty and interest payments.
In conclusion, the stay application was disposed of with the Appellant being directed to make the necessary penalty and interest deposits within the specified timelines to protect the revenue's interests.
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2009 (8) TMI 966
Interest on belated payment of interest - relevant date - Held that:- The non-payment of refund to the applicant claimant within three months from the date of such application or in the case governed by proviso to Section 11BB, non-payment within three months from the date of the commencement of Section 11BB brings in the starting point of liability to pay interest, notwithstanding the date on which decision has been rendered by the competent authority as to whether the amount is to be transferred to Welfare Fund or to be paid to the applicant needs no interference. SLP dismissed.
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2009 (8) TMI 965
The Appellate Tribunal CESTAT Chennai heard an application for waiver of pre-deposit of service tax of Rs. 26,691/- along with interest and penalties. The tax demand was confirmed on the ground that the appellants were liable to pay tax on GTA service. The tribunal directed a pre-deposit of Rs. 3,052/- within four weeks, with waiver of interest and penalty, pending appeal. Failure to comply would result in vacation of stay and dismissal of the appeal. Compliance to be reported by 18-9-2009.
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2009 (8) TMI 964
Issues Involved:
1. Denial of Cenvat credit on input services related to handling of boiler ash and compost.
2. Imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004.
Issue-wise Detailed Analysis:
1. Denial of Cenvat Credit on Input Services Related to Handling of Boiler Ash and Compost:
The appellant, engaged in manufacturing excisable goods, availed input service credit on 'man power recruitment or supply agency' services used for handling, loading, and unloading of boiler ash and compost. The lower authority denied the credit on the grounds that these services were used for exempted goods, as per Rule 6(1) and Explanation III of Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant contended that:
- There was no explanation in the SCN or OIO justifying the denial of credit.
- Pollution control activities, mandated by the Pollution Control Board, are integral to manufacturing, supported by the Apex Court decision in Indian Farmers Fertilizers Co-Op. Ltd. v. CCE.
- The service was used in relation to the manufacture of dutiable final products like sugar and molasses.
- Boiler ash and compost are non-excisable, supported by various tribunal decisions and the Apex Court decision in UOI v. Ahmedabad Electricity Co. Ltd.
The judgment agreed with the appellant, emphasizing that:
- Boiler ash and spent wash cannot be considered excisable commodities as they do not involve manufacturing activity and cannot be marketed in their emerged form.
- The input service was used to comply with pollution control regulations, forming part of the manufacturing activity.
- The appellant is eligible for Cenvat credit as the service was used in relation to the manufacture of final dutiable products.
2. Imposition of Penalty under Rule 15 of the Cenvat Credit Rules, 2004:
The appellant challenged the penalty of Rs. 80,640/- imposed under Rule 15, arguing:
- No specific sub-clause of Rule 15 was mentioned in the SCN or OIO.
- The issue involved interpretation, with no mala fide intention or suppression of facts.
- The SCN was issued within the normal period of limitation.
The judgment found the appellant's contentions valid, noting:
- The SCN covered the period within the normal limitation period.
- The issue was debatable and involved interpretation, negating any mala fide intention.
- The penalty imposed without specifying the sub-rule was unjustifiable, as per the Apex Court decision in Amrit Foods v. CCE.
- The maximum penalty under Rule 15(3) for availing wrong credit is Rs. 2,000/-, making the equal penalty imposed unsustainable.
Conclusion:
The appeal was allowed, and the impugned order was set aside, granting the appellant eligibility for Cenvat credit and nullifying the penalty.
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2009 (8) TMI 963
Issues: Stay petition against Order-in-revision confirming a demand, interest, and penalty under the Finance Act.
Analysis:
1. Nature of Services Provided: The revisionary authority concluded that the appellants were providing services under clause II of Section 65(19) of the Finance Act 1994, specifically 'promotion or marketing of services.' The appellants argued that they were only marketing the initial public offer of shares issued by companies.
2. Prima Facie Case for Waiver: Upon reviewing the records, it was found that the applicant was managing the IPO issue and collection of application money. The services provided were to companies offering shares, which may not be considered a taxable service during the relevant period. Consequently, the applicant established a prima facie case for the waiver of pre-deposit of the amounts involved.
3. Decision and Stay: The Tribunal allowed the application for waiver of the pre-deposit of the amounts involved and stayed the recovery until the appeal's disposal. This decision was made after considering the nature of services provided and the prima facie case presented by the applicant.
In conclusion, the Tribunal granted the stay petition, allowing the waiver of pre-deposit of the amounts involved and staying the recovery until the appeal's final disposal. The decision was based on the nature of services provided by the appellants and the finding that they had made out a prima facie case for the waiver.
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