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2006 (10) TMI 466
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... ... ..... Aggarwal, Advocate ORDER No substantial question of law arises in this appeal. The appeal is, accordingly, dismissed.
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2006 (10) TMI 465
Issues Involved:
1. Validity of initiation of proceedings u/s 148 without mentioning reasons.
2. Non-communication of recorded reasons and violation of natural justice.
3. Addition u/s 69C based on the statement of Sri Mohd. Shamim Khan without cross-examination.
4. Legality of Tribunal's observations regarding cross-examination.
5. Reliance on the statement of Sri Mohd. Shamim Khan without cross-examination.
6. Accuracy of Tribunal's observation about the opportunity for cross-examination.
7. Justification of addition u/s 69C.
8. Applicability of section 69C when no expenditure incurred.
9. Tribunal's failure to adjudicate on interest charged in the notice of demand.
Summary:
1. Validity of initiation of proceedings u/s 148 without mentioning reasons:
The appellants argued that the Tribunal was not justified in holding the initiation of proceedings u/s 148 valid without mentioning the reasons for initiation. The Court found that the appellants had not challenged the initiation of proceedings u/s 147/148 and were only concerned with the non-supply of full reasons. The gist of the reasons had been supplied, and the appellants had full knowledge of the matter, thus no prejudice was caused. Therefore, the substantial questions of law Nos. 1 and 2 were not considered substantial questions of law.
2. Non-communication of recorded reasons and violation of natural justice:
The appellants contended that the reasons recorded were not communicated to them, violating the principles of natural justice. The Court held that the gist of the reasons was sufficient and the appellants were not prejudiced. The Tribunal's decision was upheld.
3. Addition u/s 69C based on the statement of Sri Mohd. Shamim Khan without cross-examination:
The appellants argued that the addition u/s 69C was based on the statement of Sri Mohd. Shamim Khan, which was taken at the back of the appellant without giving an opportunity for cross-examination. The Court found that the opportunity for cross-examination was provided but not availed by the appellants. Therefore, the Tribunal's decision was upheld.
4. Legality of Tribunal's observations regarding cross-examination:
The Tribunal observed that the right to cross-examine a witness is not an invariable attribute of natural justice. The Court agreed, stating that formal cross-examination is part of procedural justice and not natural justice. The Tribunal's observations were found to be legally correct.
5. Reliance on the statement of Sri Mohd. Shamim Khan without cross-examination:
The appellants argued that the statement of Sri Mohd. Shamim Khan, taken at the back of the appellant, could not be relied upon without cross-examination. The Court held that since the opportunity for cross-examination was provided but not availed, the appellants had no cause to complain. The Tribunal's decision was upheld.
6. Accuracy of Tribunal's observation about the opportunity for cross-examination:
The Tribunal observed that the Assessing Officer provided an opportunity for cross-examination, which was not availed by the appellants. The Court found this observation to be correct and based on material evidence. The Tribunal's decision was upheld.
7. Justification of addition u/s 69C:
The appellants questioned the addition u/s 69C, arguing that no expenditure was incurred. The Court found that the Assessing Officer's finding that the gifts were purchased by paying a 10% commission was upheld by the Tribunal. Therefore, the addition u/s 69C was justified.
8. Applicability of section 69C when no expenditure incurred:
The Court found that the provisions of section 69C were applicable as the appellants had incurred expenditure in purchasing the NRI gifts. The Tribunal's decision was upheld.
9. Tribunal's failure to adjudicate on interest charged in the notice of demand:
The appellants argued that interest could not be charged in the notice of demand. The Court found that the Tribunal held the levy of interest to be consequential and the appellants could not disprove the levy of interest. The Tribunal's decision was upheld.
Conclusion:
The Court concluded that no substantial question of law arose in the present appeals and dismissed all the appeals in limine.
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2006 (10) TMI 464
Issues: Imposition of penalty on both the company and its proprietor.
The judgment deals with an appeal regarding the imposition of penalties on a company and its proprietor by the Joint Commissioner under the Central Excise Rules, 2002. The Joint Commissioner had confiscated polyester fibre yarn and imposed a duty on polyester textile yarn, along with penalties on the main assessee and the proprietor. The Commissioner (Appeals) confirmed the confiscation and redemption fine but set aside the penalties on the company and its proprietor. The Revenue appealed, contending that penalties should be imposed on either the company or the proprietor, not both. The Tribunal agreed, confirming the penalty on the proprietor while setting aside the penalty on the company under Section 11AC of the Central Excise Act read with Section 14A of the Customs Act. The Revenue's appeal was allowed, modifying the Commissioner (Appeals) order accordingly.
The main issue in this case was whether penalties could be imposed on both the company and its proprietor for the same violation. The Revenue argued that established legal principles dictate that penalties should be imposed on either the assessee or the proprietor, but not on both. The Tribunal agreed with this contention, stating that the penalty of &8377; 10,000 imposed on the proprietor of the firm would be confirmed, while the penalty on the company was set aside. This decision was based on the interpretation of Section 11AC of the Central Excise Act read with Section 14A of the Customs Act, which governs the imposition of penalties in such cases.
The Tribunal's analysis focused on the legal principle that penalties should be imposed on either the assessee or the proprietor, but not on both. The judgment emphasized that the penalty on the proprietor of the firm was confirmed while the penalty on the company was set aside. This decision was made to ensure consistency with established legal principles and to correct the order of the Commissioner (Appeals) in this regard. By allowing the Revenue's appeal and modifying the Commissioner (Appeals) order, the Tribunal clarified the correct application of penalty provisions under the relevant statutes, thereby resolving the issue of dual penalties on the company and its proprietor.
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2006 (10) TMI 463
Partition Suit - Execution of sale deed - Grand-father as lineal heirs - lawful heirs entitled to the bequests under the Will - Order of permanent injunction the defendants, their agents, servants from demolishing, altering, constructing or reconstructing the suit schedule property - grant cost of the suit - bungalow which was the subject mater of the suit was demolished by Appellants - HELD THAT:- Plaintiffs who are the daughters of the original defendant No. 1, in law was not entitled to inherit their father's share in the properties but for the provisions of the Hindu Succession Act, which brought statutory change. Admittedly, by reason of Section 8 of the Hindu Succession Act, they became heirs of their father in terms whereof the sister's share is equal to that of the brothers. If they were to be excluded, it would have been said so in the Will.
The decision of this Court in N. Krishnammal [1979 (4) TMI 177 - SUPREME COURT] is binding on this Court. The meaning of the expression "heir" in the context of the Hindu Succession Act has been considered therein. The expression "heir" would mean a legal heir. In construing a document, this Court cannot assign any other meaning. A document as is well-known must be construed in its entirety. Although some parts thereof should not be read in isolation, the contents of Clause (7) of the Will are really important. It may be true that in the last part of the Will, the propounder while placing his sons adduced the words 'Putra Poutra'. But the same cannot control the unequivocal expression contained in Clause (7) thereof.
We fail to understand as to how in the year 1975 the sale deed could be executed. The original defendant No. 1 knew the implication of Will. He was aware that an embargo had been created in his right to transfer the property to any other person. In view of the injunction contained in the said document he could not have alienated the property. He could only be in enjoyful possession thereof. The original defendant No. 1, therefore, thought that if his son is impleaded as one of the executant of the document; probably the embargo created under the Will would not come in his way. In law, he was not right there. His son also did not inherit the property as he was alive. In terms of Clause (7) of the Will, the question of his son's inheriting the property from the original defendant No.1 did not arise. Mr. Bhat is correct in his submission that the suit was pre-mature as no cause of action for the suit arose for the plaintiffs for obtaining a decree to set aside the deed of sale dated 3.12.1975.
The cause of action arose on the death of the original defendant No.1 which took place during pendency of the suit. If the cause of action arose during pendency of the suit and if having regard to the facts and circumstances of this case, the suit keeping in view the subsequent event could not have been dismissed on the ground that it was barred under the law of limitation, we are of the opinion that it would not be proper for us to interfere with the impugned judgment.
An appeal is in continuation of the suit. The appellate court in view of Order VII Rule 7 of the Code of Civil Procedure may take into consideration subsequent events with a view to mould the relief. The High Court, therefore, could not be said to have acted illegally and wholly without jurisdiction in passing the impugned judgment.
The son of the original defendant No.1 was not a party but he is a party before us now. He supports the plaintiffs but then he himself did not challenge the deed of sale. So far as his interest in the property is concerned, the same may be claimed by the appellants herein having regard to the principles contained in Section 41 of the Transfer of Property Act. It is, therefore, not a case where Articles 59 and 60 of the Schedule appended to the Limitation Act would apply.
Submission of Mr. Lalit that his clients are bona fide purchasers is not of much significance in this case. If the deed of sale executed by the original defendant No.1 and the Respondent No.3 is void and thus, not binding upon the plaintiffs-respondents, the consequences therefor would ensue. What would be the effect of the sale deed vis-`-vis the Respondent No.3, as we have noticed hereinbefore, would be different having regard to the provisions contained in Section 41 of the Transfer of Property Act. In the event a partition suit is filed, which property shall be allowed in the share of the Respondent No.3 is not a matter wherewith this Court's attention is required to be engaged. Such question shall appropriately fall for consideration in appropriately constituted suit.
Thus, we are of the opinion that no case has been made out for exercise of our discretionary jurisdiction under Article 136 of the constitution of India. This appeal is dismissed.
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2006 (10) TMI 462
Recovery of dues - Validity Of clause 21A of the terms and conditions of Supply could incorporated - Consumer defaulted in paying the consumption charges - consequent disconnection of supply - Advertisement for the undertaking - offered for sale on "as is where is basis" - Possession given by the Financial Corporation - Seeking mandatory injunction directing the appellant- Company to give a fresh electric connection to the first respondent without insisting on the clearing of the dues of the prior owner of the premises - HELD THAT:- We are of the view that the decision in Isha Marbles [1995 (2) TMI 442 - SUPREME COURT] cannot be applied to strike down the condition imposed and the first respondent has to make out a case independent on the ratio of Isha Marbles (supra), though it can rely on its ratio if it is helpful, for attacking the insertion of such a condition for supply of electrical energy. This Court was essentially dealing with the construction of Section 24 of the Electricity Act in arriving at its conclusion. The question of correctness or otherwise of the decision in Isha Marbles (supra) therefore does not arise in this case especially in view of the fact that the High Court has not considered the question whether clause 21A of the terms and conditions incorporated is invalid for any reason.
Thus, we think that the proper course to adopt is to set aside the judgments of the learned Single Judge and that of the Division Bench and remit the writ petition filed by the first respondent to the High Court for a fresh decision in accordance with law. The first respondent would be free to amend its writ petition including the prayers therein and in the case of such an amendment the appellant would be entitled to file an additional statement in opposition. The writ petition will be considered afresh by the High Court in the light of what we have stated above.
It is seen that after the High Court allowed the writ petition, the connection was restored to the first respondent in obedience to the writ, even though subsequently, this Court stayed the operation of the judgment of the High Court by its order dated 5.7.2006. It is now brought to our notice that a fresh connection has been provided to the first respondent in the light of the direction in the judgment under appeal without collecting the arrears that were due from M/s L.L.C. Steel Pvt. Ltd. Strictly, in view of the fact that we have set aside the judgment of the High Court, the first respondent should lose the benefit of the fresh connection. But considering that the first respondent is an industrial undertaking and taking note of the plea that investments have been made by it to make the unit workable, we think that it will be appropriate to direct the first respondent to deposit a portion of the amount in arrears as a condition for continuance of the supply to it by the appellant on payment of regular monthly bills as per the terms and conditions between the parties.
We, therefore, direct that if the first respondent pays to the appellant, without prejudice to its contentions in the writ petition, a sum of ₹ 25 lakhs (rupees twenty five lakhs) within a period of six weeks from today, the fresh connection given to the first respondent will not be disconnected by the appellant, until the writ petition is disposed of afresh by the High Court pursuant to this order of remand. In case the High Court accepts the challenge of the first respondent to clause 21A as inserted in the terms and conditions of supply, the appellant will refund the sum of ₹ 25 lakhs with six per cent interest thereon from the date of payment by the first respondent till the date of its return by the appellant. In case the writ petition is dismissed by the High Court, the appellant would be entitled, at the volition of the first respondent, to adjust the amount of ₹ 25 lakhs towards the dues claimed from the previous consumer, M/s L.L.C. Steel Pvt. Ltd. and maintain the fresh connection given to the first respondent on it fulfilling its obligations in terms of clause 21A and act on that basis.
If the first respondent, does not desire to have a power connection based on clause 21A of the Terms and Conditions of Supply, the appellant will refund the sum of ₹ 25 lakhs to the first respondent without interest within two months of the judgment of the High Court and would disconnect the power connection now given. Of course, if the first respondent fails to deposit the sum of ₹ 25 lakhs within the time fixed by us, the appellant would be free to disconnect the power supply granted to the first respondent pursuant to the judgment of the High Court which we have set aside herein and take all steps that may be permissible in law for recovery of the amounts due.
The appeal is allowed. The High Court is requested to expeditiously dispose of the writ petition afresh according to law and in the light of the observations contained herein.
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2006 (10) TMI 461
Issues involved: Interpretation of Section 54B(1) of the Income Tax Act, 1961 regarding entitlement to exemption for Hindu Undivided Family (HUF).
Judgment Summary:
The High Court of Punjab and Haryana addressed the issue referred by the Income Tax Appellate Tribunal regarding the entitlement of exemption under Section 54B(1) of the Income Tax Act, 1961 for the assessee-HUF. The revenue's counsel cited the Madras High Court judgments to argue that Section 54B was not available to HUFs but only to individuals. The High Court noted a similar issue was previously examined in Raghunath Dass Sethi v. CIT, where it was held that prior to the 1988 amendment, the benefit of Section 54 was not applicable to HUFs. This view was supported by decisions from various High Courts. As no representation was made for the assessee, the Court concurred with the previous decision and ruled in favor of the revenue.
The Court's decision aligned with the interpretation that Section 54B(1) of the Income Tax Act, 1961 does not extend the exemption benefit to Hindu Undivided Families (HUFs) and is applicable only to individuals. The judgment emphasized the historical perspective and legal precedents from different High Courts to support the conclusion that HUFs are not entitled to the exemption under Section 54B(1) of the Act. The ruling was based on the consistent interpretation across various cases and the absence of representation from the assessee in the current matter.
The reference regarding the entitlement of exemption under Section 54B(1) for HUFs was disposed of in favor of the revenue, in line with the established legal interpretation and precedents. The Court's decision reinforced the understanding that the exemption provision in question is not applicable to Hindu Undivided Families, as clarified by previous judgments and the absence of contrary arguments from the assessee.
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2006 (10) TMI 460
The Appellate Tribunal CESTAT Bangalore ruled in favor of the appellants who were required to pre-deposit Service Tax. The Tribunal granted waiver as the Service Tax is only applicable on the commission received by the appellants, not on other elements like building rent, freight charges, etc. No recovery until appeal disposal. Stay application allowed.
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2006 (10) TMI 459
Issues involved: Interpretation of Service Tax rules regarding inclusion of loading expenses, cost service charges, and godown charges in the value of tax to be charged for payment by Clearing and Forwarding Agents.
Summary:
Issue 1: Inclusion of incidental charges in Service Tax calculation
The appellants, Clearing and Forwarding Agents, were required to pre-deposit Service Tax for loading expenses, cost service charges, and godown charges. They contended that these charges should not be part of the service rendered by them, and they should only pay tax on the commission received. The Chennai bench's stay in a similar case supported the appellants' argument, citing Trade Notices, DGST clarifications, and Rule 6(8) of Service Tax Rules, 1994. The Tribunal found merit in the appellants' argument and granted a full waiver of pre-deposit, instructing the Revenue not to recover any amount until the appeal is disposed of.
End of Summary
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2006 (10) TMI 458
The High Court of Punjab and Haryana ruled in favor of the revenue, stating that income from wheat procurement as an agent of the government is not exempt under section 10(29) of the Income-tax Act. This decision was based on a previous judgment in a similar case involving Haryana Warehousing Corporation.
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2006 (10) TMI 457
The High Court Kerala dismissed the appeal regarding the addition of Rs. 1 lakh in the petitioner's income-tax assessment for 1988-89. The addition was limited to the balance Rs. 1 lakh disowned by the creditor, and the appellant failed to prove the transaction, leading to the dismissal of the appeal.
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2006 (10) TMI 456
Issues Involved:
1. Jurisdiction of the Arbitrator to award escalation.
2. Absence of an escalation clause in the contract.
3. Payment of minimum wages versus wage increase through settlement.
4. Ex-gratia payments and their impact on escalation claims.
5. Legal precedents on escalation and arbitrator's jurisdiction.
6. Award of interest rates by the Arbitrator.
7. Conduct and representations of the FCI regarding escalation claims.
8. Res judicata and previous judicial decisions on arbitrability of the dispute.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Arbitrator to Award Escalation:
The Supreme Court addressed the argument that the arbitrator exceeded his jurisdiction by awarding escalation in the absence of a specific clause in the contract. The Court noted that the issue of jurisdiction had already been settled in earlier proceedings, where it was determined that the claim for escalation was arbitrable. The Court held that the FCI is barred by res judicata from raising this issue again.
2. Absence of an Escalation Clause in the Contract:
The appellant argued that the absence of an escalation clause in the contract precluded the arbitrator from awarding any amount towards escalation. The Court, however, found that the arbitrator's decision was justified based on the subsequent acceptance of responsibility by the FCI to compensate for the increased wages due to statutory revisions. The Court cited precedents where escalation was allowed despite the absence of an explicit clause, emphasizing that escalation is a normal incident in contracts due to inflation.
3. Payment of Minimum Wages versus Wage Increase through Settlement:
The appellant contended that Clause 7 of the contract, which deals with payment of minimum wages, did not cover the wage increase through settlement. The Court rejected this argument, noting that the statutory wage revision was a significant factor that warranted compensation. The arbitrator had considered the correspondence and actions of the FCI, which indicated an acknowledgment of the need to address the wage increase.
4. Ex-gratia Payments and Their Impact on Escalation Claims:
The appellant argued that the High Court erred in considering ex-gratia payments to support the escalation claim. The Court found that the FCI's actions, including the appointment of committees and interim payments, demonstrated an implicit acceptance of the need for escalation. The arbitrator's award was based on a thorough examination of the facts and the FCI's conduct.
5. Legal Precedents on Escalation and Arbitrator's Jurisdiction:
The Court referred to several precedents, including Hyderabad Municipal Corporation vs. M. Krishnaswami Mudaliar and P.M. Paul vs. Union of India, to support the arbitrator's jurisdiction to award escalation. These cases established that escalation due to statutory wage revisions is a legitimate claim, even in the absence of an explicit escalation clause, provided the arbitrator has jurisdiction over the matter.
6. Award of Interest Rates by the Arbitrator:
The appellant challenged the interest rates awarded by the arbitrator as excessive. The Court agreed partially, modifying the interest rate to 9% per annum throughout, instead of 12%. The Court directed that the balance amount, after adjusting the amount already received by the claimant, be paid within two months, failing which it would attract 12% interest until realization.
7. Conduct and Representations of the FCI Regarding Escalation Claims:
The Court examined the FCI's conduct, including its communications and interim payments to the claimant. The FCI had repeatedly assured the claimant that the issue of wage revision was under consideration, which led the claimant to continue the work despite incurring losses. The Court found that the FCI's actions and representations justified the arbitrator's award of escalation.
8. Res Judicata and Previous Judicial Decisions on Arbitrability of the Dispute:
The Court emphasized that the issue of arbitrability had been conclusively determined in earlier proceedings, where the claim for escalation was deemed arbitrable. The FCI's attempt to re-litigate this issue was barred by res judicata. The Court upheld the arbitrator's jurisdiction to address the escalation claim based on the earlier judicial decisions.
Conclusion:
The Supreme Court modified the High Court's judgment by adjusting the interest rate awarded by the arbitrator to 9% per annum throughout. The Court upheld the arbitrator's award of escalation, finding it justified based on the statutory wage revisions and the FCI's conduct. The appeals were partly allowed, and the parties were directed to bear their own costs.
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2006 (10) TMI 455
Issues Involved:
1. Legality of the Collector's order disapproving the classification list.
2. Entitlement to exemption under Notification No. 76/72.
3. Validity of the Tribunal's order upholding the Collector's decision.
4. Jurisdiction and authority of the Collector to revise the classification list.
5. Interpretation of the term "fresh unused re-rollable scrap."
6. Procedural compliance under Rule 56-A of the Central Excise Rules, 1944.
7. Impact of non-challenge to the revised classification list by the appellant.
8. Effect of prolonged litigation and interim orders on the merits of the case.
Issue-Wise Detailed Analysis:
1. Legality of the Collector's Order Disapproving the Classification List:
The Collector, Central Excise, Jaipur, disapproved the classification list No. 219/80 submitted by the appellant, which claimed exemption under Notification No. 76/72. The Collector held that cutting larger plates into smaller sizes did not convert them into "scrap" and imposed a penalty of Rs. 5000 for willful mis-declaration. The Tribunal upheld this decision, except for the penalty, which it set aside, stating that the mis-declaration was not deliberate or willful.
2. Entitlement to Exemption under Notification No. 76/72:
The appellant claimed exemption for hot and cold rolled sheets manufactured from "fresh unused re-rollable scrap" under Notification No. 76/72. The Collector and Tribunal held that the raw materials used (SS flats/plates/pattas) were not "scrap" within the meaning of the notification. The High Court, however, found that the raw materials, even after being cut into smaller pieces, remained "fresh unused re-rollable scrap" and were thus entitled to the exemption.
3. Validity of the Tribunal's Order Upholding the Collector's Decision:
The Tribunal upheld the Collector's decision, except for the penalty. The High Court noted that the Tribunal did not find any deliberate or willful mis-declaration by the appellant, which was crucial in setting aside the penalty. The High Court ultimately quashed both the Collector's and Tribunal's orders, granting relief to the appellant.
4. Jurisdiction and Authority of the Collector to Revise the Classification List:
The appellant argued that the Collector was not competent to revise the approved classification list. The High Court found that the Collector's reasoning for disapproving the classification list was flawed, as it did not properly interpret the term "fresh unused re-rollable scrap."
5. Interpretation of the Term "Fresh Unused Re-rollable Scrap":
The High Court held that "fresh unused re-rollable scrap" included smaller pieces of semi-finished steel plates/flats/pattas, which were capable of being re-rolled without being remelted. This interpretation was contrary to the Collector's view that only left-over products from primary producers could be considered as such scrap.
6. Procedural Compliance under Rule 56-A of the Central Excise Rules, 1944:
The respondents argued that the appellant did not follow the procedure under Rule 56-A, which was necessary for claiming set-off of duty. The High Court found that the appellant's raw materials were presumed to be duty-paid, and thus, there was no need to follow Rule 56-A for claiming the exemption under Notification No. 76/72.
7. Impact of Non-Challenge to the Revised Classification List by the Appellant:
The learned Single Judge dismissed the writ petition partly because the appellant did not challenge the revised classification list issued by the Assistant Collector. The High Court held that this did not preclude the appellant from challenging the basic order of the Collector, which was the root cause of the dispute.
8. Effect of Prolonged Litigation and Interim Orders on the Merits of the Case:
The learned Single Judge also dismissed the writ petition on the grounds that the appellant had benefited from the interim stay on the differential duty for over ten years. The High Court found this reasoning flawed, emphasizing that the delay in adjudication should not prejudice the appellant's right to a decision on the merits.
Conclusion:
The High Court allowed the special appeal, set aside the judgment of the learned Single Judge, and quashed the orders of the Collector and the Tribunal. The appellant's writ petition was allowed, and the respondents were restrained from realizing the differential duty. The High Court emphasized that the merits of the case should have been addressed, and the prolonged litigation should not have prejudiced the appellant.
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2006 (10) TMI 454
Payments to associate concerns - reimbursement of day-to-day expenses - cash payments exceeding ₹ 10,000 - Interpretation of the r. 6DD(j) - whether cash payments made by the assessee to the associate concerns would attract s. 40A(3)? - HELD THAT:- In our considered opinion, even though s. 40A(3) of the Act is not absolute, payments made in cash cannot automatically be allowed merely for the reason that the payments were made to associate concerns and such reason that weighed the CIT(A) is not only illogical, but also outside the scope of s. 40A(3) of the Act. If such reason is accepted, the transactions which frustrate s. 40A(3) would pave way for evading tax which is contrary to the object of s. 40A(3). The cumulative effect of Circular of CBDT dt. 31st May, 1977, r. 6DD(j) and s. 40A(3) is that the assessee should satisfy that there were exceptional and unavoidable circumstances of transactions in which payments were made in cash and that payment by way of crossed cheque or crossed bank draft was not practicable or the same would have caused genuine difficulty to the payee having regard to the nature of the transaction or there was necessity for expeditious settlement. In addition to that, the assessee should also furnish evidence to the satisfaction of the AO as to the genuineness of payments as well as the identity of payee.
We fail to see that the assessee has satisfactorily explained the exceptional and unavoidable circumstances warranting the payment by cash; the payments by way of crossed cheque or crossed bank draft was not practicable; such payments would have caused genuine difficulties to the payee; and there was necessity for expeditious settlement. Even though it is found that the assessee made cash payments for day-to-day affairs of associate concerns, the reason given by the CIT(A) for deleting 20 per cent disallowance that the payments were made to associate concerns and hence, they were allowable cannot be a justifiable reason as it is outside the scope of s. 40A(3) of the Act. We are satisfied that the deletion of disallowance of 20 per cent the total amount frustrates s. 40A(3) of the Act.
In the result, we answer the questions of law referred to above in favour of the Revenue and against the assessee. The appeal stands allowed. No costs.
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2006 (10) TMI 453
Issues involved: Complaint u/s 138/141/142 of Negotiable Instruments Act challenging summoning orders.
Details of the judgment:
Issue 1: Challenge to summoning order
The petitioners challenged the summoning order based on an Agency Agreement between M/s. Bumpi Udyog and M/s. Exports India. The agreement required the petitioner to provide two black cheques, including the cheque in question, as security. The complaint alleged dishonour of the cheque by the petitioner, but the petitioners argued that the complaint was not maintainable because the cheque was given to M/s. Bumpi Udyog, not the complainant M/s. Surbhi Wears Pvt. Ltd. Additionally, at the time of handing over the cheque, there was no debt or liability owed by the petitioner to M/s. Bumpi Udyog, making the complaint under Section 138 invalid.
Issue 2: Court proceedings
The Court issued a notice to the complainant, directing a stay of proceedings before the Trial Court. Despite proper service, the complainant did not appear for several dates. After hearing the petitioner's counsel and examining the Trial Court record, the Court found merit in the petition.
Issue 3: Judgment
The Court observed that the agreement between M/s. Bumpi Udyog and the petitioner specifically mentioned the provision of black cheques as security. As there was no violation of the agreement's terms, the complaint's claim of dues payable by the petitioner to the complainant was unfounded. The complaint alleged that the cheque was issued to discharge a liability, but it was actually a blank cheque given at the agreement's signing. The Court noted that the complainant had not disclosed the petitioner's reply to a legal notice in the complaint, indicating suppression of facts. Citing a similar case, the Court ruled in favor of the petitioners, quashing the summoning order and dismissing the complaint filed by the respondent.
Conclusion
The petition succeeded, and the summoning order was quashed. The complaint was dismissed, and the Trial Court record was to be returned.
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2006 (10) TMI 452
Issues involved: Determination of whether the appellants' activity as an Indenting Agent should be treated as that of a Clearing and Forwarding Agent for the purpose of Service Tax.
Issue 1: The appellants' activity of Indenting Agent being treated as Clearing and Forwarding Agent u/s Order-in-Appeal No. 48/2003.
The appellants changed their activity to Indenting Agent and sought to cancel their license and cease payments. However, a show cause notice was issued asserting that the activity of Indenting Agent falls under the category of Clearing and Forwarding Agent. The appellants argued that they were not involved in handling or taking responsibility for goods, but only received and passed on orders. The Tribunal rejected their plea based on a previous ruling in the case of Prabhat Zarda Factory (India) Limited v. CCE, Patna. The matter was referred to a Larger Bench due to conflicting judgments. The Larger Bench, in the case of Larsen & Tourbo Ltd. v. CCE, Chennai, held that an Indenting Agent solely booking orders for the principal cannot be considered a Clearing and Forwarding Agent, and set aside the demands.
Issue 2: Reliance on the judgment and classification as a Del Credere Agent.
The appellants' counsel relied on the aforementioned judgment and argued that they operate as a Del Credere Agent, not falling under the category of Clearing and Forwarding Agent. Reference was made to the bench judgment in the case of Sreenidhi Polymers Pvt. Ltd. v. CCE, Bangalore-III and Raja Rajeshwari Intl. Polymers (P) Ltd. v. CCE, Bangalore.
Issue 3: Reiteration of findings by lower authorities.
The learned JDR reiterated the findings of the lower authorities regarding the appellants' activity and classification.
Issue 4: Consideration of the appellants' role as an Indenting Agent and the impact of the Larger Bench judgment.
Upon careful consideration, it was observed that the appellants did not physically handle or sell goods, nor were they responsible for their receipt or dispatch. They functioned solely as an Indenting Agent, akin to a Del Credere. The lower authorities had based their decision on the Prabhat Zarda Factory judgment. However, in light of the Larger Bench ruling in the case of L & T Ltd., which clarified that booking orders by an Indenting Agent does not constitute Clearing and Forwarding Agent services, the demands against the appellants were set aside, and the appeal was allowed with consequential relief.
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2006 (10) TMI 450
Issues involved: Interpretation of the definition of "tour" under Section 65(115) of the Finance Act, 1994 in relation to the usage of a vehicle for carrying employees of a factory, determination of whether the appellant was operating a tourist vehicle or a contract carriage, applicability of a previous decision by the Madras High Court, and consideration of waiver of pre-deposit of service tax.
Interpretation of the definition of "tour": The appellant argued that they were not operating a "tourist vehicle" under a permit granted under the Motor Vehicles Act, but rather a contract carriage. The Tribunal noted that the definition of "tour" under Section 65(115) includes a journey from one place to another, regardless of distance. The issue was whether the appellant was using the vehicle as a tourist vehicle, which requires a special permit in form 47 and compliance with Rule 28 of the Central Motor Vehicles Rules. It was not clear from the record whether the vehicle met the specifications for a tourist vehicle under Rule 128. The Tribunal considered the appellant to be a tour operator based on prima facie evidence and applied a previous decision of the Madras High Court in a similar case.
Applicability of previous decision: The authorities below had applied the decision of the Madras High Court in a specific case, which led to the conclusion that there was no basis for a total waiver of pre-deposit of service tax. The Tribunal considered the circumstances of the present case in light of the previous decision and found no grounds for a complete waiver.
Waiver of pre-deposit of service tax: The Tribunal directed an interim stay of the impugned order on the condition that the appellant deposits 50% of the service tax payable within eight weeks. Failure to comply would result in dismissal of the appeal. Upon depositing the required amount, the remaining service tax and penalty would be waived. The application was disposed of accordingly, with a reporting compliance date set for a later time.
Separate Judgement: No separate judgment was delivered by the judges in this case.
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2006 (10) TMI 449
Issues involved: Appeals under Section 260A of the IT Act pertaining to assessment years 1995-96, 1996-97, 1998-99, 1999-2000, 2000-01, 2001-02, regarding the deduction of tax at source, interest under Section 201(1A), and penalty proceedings.
Issue 1 - Deduction of Tax at Source:
The duty is cast under Section 201(1) of the IT Act to deduct tax at source within the prescribed time and rate. Failure to do so makes the assessed liable to pay income tax, interest, and penalties if found to be an "assessed-in-default." In this case, the deductee had paid the income tax which the assessed was supposed to deduct under Section 201(1) of the Act.
Issue 2 - Interest under Section 201(1A):
The principal question raised by the Revenue was regarding the direction to charge interest under Section 201(1A) from the date of deductibility of tax till the payment by the deductee. The Tribunal, citing relevant case law, clarified that interest can only be claimed until the date on which the tax is actually paid, whether by the assessed or the deductee. The issue of interest beyond the date of actual payment was not raised before the Tribunal.
Separate Judgment by T.S. Thakur and Shiv Narayan Dhingra, JJ.:
The decision in CIT v. Majestic Hotel Ltd. emphasized that interest under Section 201(1A) is inevitable if the assessed fails to deduct or pay the deducted amount. The payment of tax by the deductee absolves the assessed from paying it again, and interest ceases once the tax amount is deposited with the Revenue.
Issue 3 - Penalty Proceedings:
The Revenue contended that penalty proceedings can still be initiated even after the payment of tax and interest by the deductee, based on the declaration that the assessed is an "assessed-in-default." However, this specific question was not raised before the Tribunal, and therefore, was not considered in the present proceedings under Section 260A of the IT Act.
Conclusion:
In this case, no substantial question of law arises for consideration as the issues raised were already covered by previous decisions. The appeals were dismissed accordingly.
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2006 (10) TMI 448
The Appellate Tribunal CESTAT Bangalore granted waiver of pre-deposit of service tax amount of Rs. 21,31,306 to the appellant who imported technology. The issue was covered by a previous ruling, so the recovery was stayed until the appeal was disposed of. The matter was scheduled for final hearing on 14-12-2006.
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2006 (10) TMI 447
Issues Involved:
1. Disallowance of interest on loan for purchase of office premises.
2. Legitimacy of the borrowing for business purposes.
3. Abandonment of the project and its implications.
4. Location and nature of the premises.
5. Refund of earnest money by book adjustment.
6. Alleged diversion of loan funds.
7. Speculation on the purpose of property purchase.
Summary:
1. Disallowance of Interest on Loan for Purchase of Office Premises:
The Revenue appealed against the CIT(A)'s order, which deleted the disallowance of interest of Rs. 25 lakh on a loan obtained by the assessee for purchasing office premises in Sumit Apartments, Carmichael Road, Bombay. The initial assessment allowed the interest u/s 143(3), but the CIT revised it u/s 263, leading to a fresh assessment where the interest was disallowed, considering the borrowing non-business related.
2. Legitimacy of the Borrowing for Business Purposes:
The CIT(A) found the borrowing was for acquiring new business premises to meet the need for additional office space for installing modern information technology, thus aiding the business. The abandonment of the project due to a market crisis was deemed immaterial.
3. Abandonment of the Project and Its Implications:
The Tribunal had earlier remitted the matter to the Assessing Officer, who repeated the disallowance, alleging the borrowing was for non-business purposes. The CIT(A) disagreed, stating the borrowing was for business purposes despite the project's abandonment.
4. Location and Nature of the Premises:
The Revenue argued that the office space in a residential apartment was unsuitable for business. The CIT(A) countered that there is no legal compulsion for a trader to purchase business premises only in business areas. The Tribunal noted the assessee's business expansion required larger office space, which justified the purchase.
5. Refund of Earnest Money by Book Adjustment:
The CIT(A) found the refund of earnest money by book adjustment unexceptionable, as it is common in commercial transactions. The Tribunal agreed, noting no adverse inference could be drawn from this method of refund.
6. Alleged Diversion of Loan Funds:
The Revenue contended that the loan was intended for a different property (Madhuli Building) but was used for Sumit Apartments. The Tribunal found this confusion resolved, as the loan agreement correctly referred to Sumit Apartments.
7. Speculation on the Purpose of Property Purchase:
The Revenue speculated that the property might be for earning rental income. The Tribunal dismissed this, noting the assessee's business required substantial liquidity, and the bearish market condition led to the project's abandonment, precluding such a probability.
Conclusion:
The Tribunal upheld the CIT(A)'s order, finding no material to substantiate the Assessing Officer's suspicion of a collusion or a device for lowering profit by bogus interest. The appeal by the Revenue was dismissed, affirming the deletion of the Rs. 25 lakh disallowance of interest.
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2006 (10) TMI 446
Issues involved: Application for dispensing with pre-deposit of duty amount and penalty confirmed by Commissioner of Central Excise, Pune. Dispute regarding entitlement to credit of service tax paid on advertisement expenses.
Issue 1: Pre-deposit of duty amount and penalty
The appellants sought dispensation of the pre-deposit of duty amount and penalty totaling Rs. 75,15,733 and Rs. 10,000 respectively, as confirmed and imposed by the Commissioner of Central Excise, Pune.
Issue 2: Entitlement to credit of service tax on advertisement expenses
The dispute revolves around the appellants' entitlement to take credit of the service tax paid on advertisement expenses by advertising agencies. The Commissioner disallowed the credit, stating that the advertisement was for the final product, aerated waters, and not for the concentrate manufactured by the appellants.
The definition of "input service" under Explanation 2 to rule 2 of the Cenvat Credit Rules, 2004 was crucial in this case. It includes services used directly or indirectly by the manufacturer in relation to the manufacture of the final product. The wide connotation of "in relation to the manufacture of final product" has been upheld by various authorities. Notably, the definition explicitly includes advertisement or sale promotion, which is significant in this context.
The appellants' advertisement of aerated water, though not directly related to the concentrate, is crucial as the consumption of concentrates is linked to the sale of aerated water. The contradictory stances taken by the revenue department regarding the inclusion of advertisement charges in the value of the concentrate further complicated the matter. The reliance on a previous Supreme Court decision was deemed improper as the circumstances differed significantly from the present case.
After considering the arguments presented, the Tribunal found that the appellants had established a prima facie case in their favor, warranting the unconditional allowance of the stay petition. Given the recurring nature of the issue and the pending notices, the appeal was scheduled for final disposal on 13-11-2006.
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