TMI Tax Updates - e-Newsletter
January 1, 2015
Case Laws in this Newsletter:
Income Tax
Benami Property
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Principle of mutuality - contribution paid or made by the members to the co-operative society was occasioned by transfer of the flat - amount not chargeable to tax - HC
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Income Tax:
Determination of Rent - in case the owner of the premises is willing to lease them to the Government or its agencies, for reasons of safety and security or assured payment of rent, the discretion of the AO to determine the reasonable rent of his choice, gets virtually restricted - HC
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Income Tax:
Disallowance on expenses on adhoc basis under manufacturing, trading and other expenses – The AO could not have made any ad-hoc disallowances without pointing out even a single instance of inflation of expenditure - AT
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Income Tax:
Determination of agricultural income – coffee plantation - in the absence of positive evidence by the assessee to support the assessee’s argument, the order of the CIT(A) cannot be reversed - the estimation of agricultural income made by the CIT(A) is confirmed - AT
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Income Tax:
Establishment of PE in terms of Indo-USA DTM – Before bringing a foreign company to tax in India on its business profits, it is for the revenue to establish that it has PE in India - AT
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Income Tax:
Where two views are possible on an issue, the view in favour of the assessee has to be preferred - AT
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Income Tax:
Penalty u/s 271(1)(b) - Delay in filing return - The delay in filing the information/documents etc. called for by the AO would be naturally delayed when a person has been subjected to search and documents are with the Department - no penalty - AT
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Customs:
Denial of refund claim of excess duty - Bar of limitation - the time limit under Section 27(1) of the Customs Act would be for the first application and the appeal is a continuation of the original proceedings and therefore there can be no limitation in respect of the proceedings pursuing the refund claim. - HC
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Corporate Law:
Dishonor of cheque - no clear case was made out that at the material time, the Directors were not in charge of and were not responsible for the conduct of the business of the company by referring to or producing any uncontrovertible or unimpeachable evidence which is beyond suspicion or doubt or any totally acceptable circumstance - matter remanded back to HC - SC
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Service Tax:
Valuation - Telephone connection service - telegraph authority - Inclusion of amounts collected from its subscribers towards 'club membership' and 'club privileges' charges in value of taxable services - The remedy against the deceptive advertisements is not under the Act - AT
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Service Tax:
CENVAT Credit - Any expenditure incurred by a manufacturer is deemed to be included in the price charged by him from his customers and therefore the manufacture is not required to prove that the expenses incurred by him on various inputs and input services used in the manufacture of the final product has been included in the price charged by him - AT
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Service Tax:
Denial of refund claim - Admissibility of refund claims of the service tax paid under the exemption notification 41/2004 is subject to production of certain documents and fulfilling prescribed conditions - refund denied - AT
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Central Excise:
Valuation of goods - Undervaluation - MRP based valuation of ceramic tiles - For the period prior to 1.3.2008, the provisions of Section 4A will be applicable and there is being no prescribed valuation rules under the said Section, the MRP/RSP cannot be re-determined - AT
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Central Excise:
Demand of CVD and SAD on the goods cleared by 100% EOU - to own DTA Unit under stock transfer -Demands of CVD raised by invoking extended period of limitation are not sustainable and only the demand of CVD under normal period would survive - AT
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Central Excise:
CENVAT Credit -services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(l) of 2004 Rules - AT
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Central Excise:
Denial of rebate claim - Rule 18 - rebate is admissible only to the extent of duty paid at the effective rate of duty i.e. 4% or 5% - excess amount paid to be re-credited in cenvat credit account - CGOVT
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VAT:
Constitutional validity of restriction on input tax credit (ITC) when goods are sold below the purchase price - RVAT - validity upheld - HC
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VAT:
Petition for lifting the order of attachment of property - The contention raised by the revenue that Mrs. Jayshreeben Magiya would have no funds of her own, is also not acceptable as she also possibly can have her ‘Stridhan’ or can own property inherited from her father - HC
Articles
Notifications
Circulars / Instructions / Orders
News
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Index of Eight Core Industries (Base: 2004-05=100), November, 2014
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Two Day Bankers’ Retreat in Pune on 2nd and 3rd January, 2015 to Focus on Achieving Universal Financial Inclusion, Leveraging Technology & Digital to Improve Banking Operations Efficiency,Rethinking Priority Sector Lending and Improving Risk Management, Asset Quality and Recovery Among Others;
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Indicative Calendar for Auction of Government of India Treasury Bills for the Quarter Ending March 2015 Issued
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Quarterly Report on India’s External Debtas at End-September 2014 Released;
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Government Appoints MD & CEO of Four Nationalised Banks
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RBI Reference Rate for US $
Case Laws:
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Income Tax
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2014 (12) TMI 1114
Reopening of assessment u/s 147 - AO after examining the records and the documents filed by the Assessee, allowed the expenses as revenue expenditure – Whether, merely because the audit party has raised objections in relation to the allowability of the expenditure, the assessment cannot be reopened on the basis of change of opinion – Held that:- The Tribunal was rightly of the view that there is much substance in the contention of Assessee's representative – revenue could not produce the reasons recorded for reopening the assessment and opportunity was given to the departmental representative by the Tribunal to produce these reasons or a copy of thereof - However, beyond producing a copy of the letter written by the AO to the CIT seeking permission for reopening the assessment, nothing was produced by the revenue - the AO has initially given his own reason in the body of assessment order - the AO in the assessment has mentioned that the assessment was reopened with the prior approval of CIT(A) on the objections raised by the audit - the assessment made u/s. 143(3) r.w.s. 147 is devoid of any application of mind on the part of AO - AO has no reason to believe that income has escaped assessment or the assessee has filed inaccurate particulars of income as no new facts are brought on record - all the expenses claimed by the assessee have been verified in detail in the original assessment therefore the reopening of assessment to disallow the same merely on the basis of audit report is not justifiable. The Tribunal proceeded to consider the correctness of the submission of the departmental representative that compliance u/s 148 was made in this case and by relying on the audit report - The audit objections could form the basis for initiation of the proceedings was the Department's stand and further that reasons are recorded in the letter which has been addressed by the AO to the Commissioner - an opinion was given by the audit party with regard to the receipts from the occupation of conference hall and rooms - in every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment - The basis of his belief must be the law of which he has not become aware - The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law - the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO - It is his belief and the statutory exercise contemplated by section 147(1) and 148(2) must be carried out by him - The Tribunal has rightly held that once the audit party raised objections, one of which was not accepted, then, the AO was expected to record reasons for his belief - Those reasons have not been recorded, as is clear from the material placed before the Tribunal – as such no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 1113
Validity of notice for reopening of assessment u/s 148 – Failure on its part to disclose truly and fully all material facts necessary for assessment or not - Held that:- The condition precedent to clothe the AO with jurisdiction to reopen an assessment are reason to believe that income chargeable to tax has escaped assessment (a mere change of opinion would not be reason to believe) - An additional jurisdictional condition for reopening of an assessment beyond a period of four years from the end of the relevant assessment year is the failure to truly and fully disclose all material facts necessary for assessment – the notice has been issued beyond a period of four years from the end of the relevant AY - the reasons itself indicate that it is on perusal of record and details filed by the Petitioner that claim of the Petitioner in respect of export of trading goods is concerned, is disproportionately higher - there has been no failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. No invoice wise details of purchase of trading goods exported and failure to corelate the trading export with the purchases has resulted in failure to make a true and full disclosure - the reasons for re-opening cannot be supplemented by affidavits - The reasons have to be read as they are and cannot be improved upon by filing affidavits in Ajanta Pharma Ltd. Versus Assistant Commissioner of Income-Tax And Others [2003 (11) TMI 32 - BOMBAY High Court] wherein it has been held that the petitioners have categorically stated about the disclosure of details of trading goods exported along with direct cost of purchases for the assessment year along with their return and the fact also finds corroboration from the affidavit of the Assistant Commissioner of Income Tax wherein he has made a grievance only of non-furnishing of documents in support of those details - the reasons for issuance of notice did not disclose to be borne out from the records - the so called reasons are totally flimsy, as has been contended on behalf of the petitioners, and, by no stretch of imagination, can be said to be sufficient to draw the conclusion about escapement of income which could empower the authorities to invoke powers under Section 148 - there was no material on the basis of which the Department could have reopened the case in exercise of powers u/s 148. Set off of trading profits against the loss of manufactured exports for purposes of claiming deduction u/s 80 HHC – Held that:- The Petitioner had pointed out in its return of income that the loss on account of export of manufactured goods is ignored for the purpose of calculation of deduction u/s 80HHC of the Act as it is an incentive provisions - there was a complete disclosure – the notice is hit by the first proviso to Section 147 – in IPCA Laboratories v/s. Deputy Commissioner of Income Tax [2001 (7) TMI 99 - BOMBAY High Court] - the loss in any of the two segments has to be set off against the other for the purpose of determining the deduction available u/s 80HHC – thus, the notice u/s 148 is unsustainable in view of no failure on the part of the Petitioner to fully and truly disclose all facts necessary for assessment, the notice is set aside on the above ground alone – Decided in favour of assessee.
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2014 (12) TMI 1112
Principle of mutuality - Contribution paid towards heavy repair fund chargeable to tax or not - contribution paid or made by the members to the co-operative society was occasioned by transfer of the flat – Revenue argued that:- If the amount is received on account of transfer of a flat and which is not restricted to ₹ 25,000/- but much more, then different consideration may apply - what has been argued and vehemently is the amount was received by the Society when the flat and the garage were transferred – it must be presumed to be nothing but transfer fees - It may have been credited to the fund and with a view to demonstrate that it is nothing but a voluntarily contribution or donation to the Society, but still it constitutes its income. Held that:- for rendering such a conclusive finding there has to be material brought by the Revenue on record. Beyond urging that it has been received at the time of a transfer of the flat and credited to such a fund will not be enough to displace the principle laid down in the decision of Sind Cooperative Housing Society [2009 (7) TMI 15 - BOMBAY HIGH COURT]. The attempt of the Revenue therefore is nothing but overcoming the binding judgment of this Court. It is a typical relationship between the member of the Co-operative Society and particularly a Housing Society and the Society which is a body Corporate and a legal entity by itself that is forming the basis of the principle laid down by the Division Bench - Co-operative movement is a socio economic and a moral movement - It has now been recognized by Article 43A of the Constitution of India - It is to foster and encourage the spirit of brotherhood and co-operation that the Government encourages formation of Co-operative Societies - The members may be owning individually the flats or immovable properties but enjoying, in common, the amenities, advantages and benefits. The Society as a legal entity owns the building but the amenities are provided and that is how the terms "flat" and the "housing society" are defined in the statute in question - following the decision in Sind Coop. Hsg. Society Versus Income Tax Officer [2009 (7) TMI 15 - BOMBAY HIGH COURT] - there is substance in the argument that the AO had before him the material in the form of the bye-laws of the Society - The bye- laws also are in consonance with the Government Resolution and stipulate a sum of ₹ 25,000/- towards transfer fees – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 1111
Determination of Rent - AO enhanced the rent on the presumption that actual rent is low - taxable in the hands of deceased assessee as well as the Trust - double taxation – Held that:- Where the premises, are leased to the Government or its organisations, the scope for an assessee to show the rent at a lower figure, does not arise - there does not exist any particular standard, to fix the rent of any premises - much would depend upon the location and condition of the building and the demand in the locality - where the lessee is a Government, the transaction is regulated by the fixed parameters - even if the building has potential to fetch a higher rent, the Government departments are not expected to pay such rent - in case the owner of the premises is willing to lease them to the Government or its agencies, for reasons of safety and security or assured payment of rent, the discretion of the AO to determine the reasonable rent of his choice, gets virtually restricted - He cannot ignore the actual payments and fix an imaginary figure, based upon the alleged information or potential of the building - once the penalty proceedings were dropped, the suggested figure virtually loses its significance - the rent for the premises must be taken at ₹ 13,500/-, unless there was any enhancement by the lessee itself, for any subsequent period. Period regarding which the assessee is under obligation to pay the tax – Held that:- The original assessee died on 16.09.1994 and her legal representative filed returns for the period from 01.04.1994 to 16.09.1994 - Tax was also paid on the income derived from house property - For the subsequent period, the Trust, which became the legatee, filed returns and paid the tax - once that is so, there was absolutely no basis for the AO to levy tax for the same period on the testator also - The Commissioner did not address this issue and the Tribunal refused to take that into account, on the ground that it was not raised earlier - being a last authority on facts, the Tribunal was supposed to deal with every aspect, that arises for consideration, uninhibited by any such restrictions – thus, the matter is remitted back to the AO for the limited purpose of verification of the Will Deed and the factum of the bequest of the property on the Trust – Decided in favour of assessee.
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2014 (12) TMI 1110
Invocation of power of CIT for revision u/s 263 - Erroneous or prejudicial to the interest of the Revenue – Held that:- The Tribunal rightly was of the view that the Commissioner's power u/s 263 could not have been exercised - The exercise of powers was based merely on change of opinion - If the Commissioner held the particular opinion, but on the same transaction and same dealing, then that was not enough to enable him to exercise this power, is the conclusion reached - firstly the Commissioner rendered a particular finding - an agreement for sale confers no title in the immoveable property - The Commissioner possibly is not aware of the nature of the transaction and in immoveable property in the city of Mumbai - This agreement for sale definitely confers rights and which are capable of being enforced - it is not clear as to why the Commissioner held another opinion - apart therefrom only his view and opinion will not enable him to exercise the power u/s 263, that is not found to be permissible in law by the Tribunal - if his view on the same set of facts pertaining to the transaction alone have gone into in the exercise undertaken by him and for invoking the power u/s 263 of the Act, then, there was no error in reversing his order and not upholding his view – thus, the AO’s order is not erroneous and in so far as it is prejudicial to the interest of the Revenue, but the Commissioner proceeded to exercise his power on mere change of opinion – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 1109
Disallowance on expenses on adhoc basis under manufacturing, trading and other expenses – Held that:- The A.O. disallowed on ad-hoc basis 10% of the total expenditure for the reason that the assessee could not furnish item-wise details of purchase and sale of goods - the books of account were accepted by the AO and no adverse inference in maintenance thereof was pointed out - the entire expenses incurred during the year was duly vouched and supported by necessary documents - The AO could not have made any ad-hoc disallowances without pointing out even a single instance of inflation of expenditure - the gross margin was worked out on the basis of books of account which were duly audited and accepted as correct and complete - The gross profit with regard to sale and purchase of goods in the trading division was at rate of 31.57% and there were various in direct expenses in the nature of high rental for retail outlets in prominent location - This had pushed down the net profit rate - CIT (A) has categorically found gross profit earned from the trading division of the assessee is reasonable and has also examined the vouchers of purchase and sale of goods made by the assessee on a sample basis and has found same is to be correct – the order of the CIT(A) is upheld – Decided against revenue. Restriction of addition u/s 14A r.w. Rule 8D – Held that:- The dividend which is exempt from taxation is earned on account of investment made in share in the earlier years - The additional shares allotted to the assessee's company in the current AYs were on account of amalgamation of subsidiary companies - Therefore, no portion of the interest expenses incurred was in relation to investments in shares - the AO has not established any nexus between the investment and the borrowed funds - the assessee had enough interest free funds in the form of reserves and surplus and there was no relation between the interest expenditure and the dividend income - therefore, disallowance of interest expenditure, by invoking the provision of Section 14A, was uncalled for and the order of the CIT(A) I s upheld – Decided against revenue. Disallowance of repair and maintenance expenses related to building and office equipment – Capital expenses or not – Held that:- The assessee had acquired the land at Ballabgarh in the year 1979 on which factory building was constructed and, accordingly, capitalized in the books on the year ending 31.3.1981 for an aggregate amount of ₹ 85,99,124/- since then the building was put to use in the course of business carried on by the assessee and for the continuous use of the building for a long period of over 20 years, the factory building had naturally required certain repairs and alterations for uninterrupted and smooth operations of the business in the building - Considering the life of the building and the total amount of expenditure of ₹ 6,84,504/- incurred on repair of the factory during the year was nominal compared to the total construction cost of building of ₹ 85,99,124/- in the year 1981 – the expenditure cannot be said to be capital in nature - an expenditure incurred on repair of building for the purposes of business, which is not capital in nature is allowable deduction u/s 30 or 37(1) – in Ramaraju Surgical Cotton Mills [2007 (8) TMI 39 - SUPREME COURT OF INDIA] it has been held that if a repair expenditure does not fall within the meaning of 'current repair' under section 30, but does not result in acquisition of any new capital asset, can be allowed as revenue expenditure under the residuary provision of section 37(1). The assessee is engaged in the business of manufacturing/ publishing and sale of city maps, manufacturing and trading of furnishing items, etc. - the assessee is not engaged in the business of manufacturing software or rendering services, through use of softwares - The softwares, if any, acquired by the assessee during the relevant year or up-gradation of existing software acquired in the earlier year, were merely application of softwares which enabled the assessee to execute tasks in the field of accounting, purchases, inventory maintenance, etc. and, thus, facilitating smooth carrying on of the business operations - such application of software did not result in creation of any new profit-earning apparatus or source of income for the assessee - the assessee only acquired license to use the softwares, it did not amount to have any ownership right in such software, and that the assessee cannot even be said to have acquired any capital asset to consider such licence fee paid as capital expenditure - the expenditure incurred on up-gradation of existing softwares or payment of license fee for new softwares for additional users cannot be said to be capital in nature – Decided in favour of assessee.
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2014 (12) TMI 1108
Determination of agricultural income – Held that:- The assessee is cultivating coffee plantation in 150 acres - AO estimated the agricultural income at ₹ 4000/- per acre which worked out ₹ 6 lakhs as against the estimation of income by the assessee at ₹ 23,07,737/- CIT(A) considered the agricultural income at ₹ 8252/- per acre working out at ₹ 12,37,850/- when the assessee has not maintained proper books of accounts regarding actual income generated from the coffee plantation, it is inevitable that the estimation of income is to be done - CIT(A) after considering the report of the Coffee Board observed that the actual production of coffee in the Annamalai area was 0.64 MT/hectare. Since the assessee’s area is rocky and barren area in the estate, the CIT(A) considered 70% of 150 acres, i.e. 105 acres of area wherein coffee plantation was carried on by the assessee and since the yield in this area is less, he considered the yield from this area as only 0.38 MT/hectare - the estimation made by the CIT(A) is very reasonable based on the report from Coffee Board - assessee has not produced contrary material to controvert his findings - in the absence of positive evidence by the assessee to support the assessee’s argument, the order of the CIT(A) cannot be reversed - the estimation of agricultural income made by the CIT(A) is confirmed – Decided against assessee. Disallowance of expenses and telescoping the same against the agricultural income of the assessee under the head “Other Sources” – Held that:- The disallowance was made by the Revenue authorities on account of lack of proper evidence like vouchers/bills produced by the assessee in support of the expenditure - when the assessee claims any expenses, it is the duty of the assessee to prove that the expenses were actually incurred for the purpose of earning income. - there is every chance of inflating expenses incurred for agricultural purposes to business purposes - If the assessee has placed necessary evidence to show that it was incurred for the purpose of business, then the Revenue would be in a position to pinpoint the discrepancies if any - most of the expenses are unvouched for and are supported by self-vouchers - when the assessee makes self-vouchers, there is every chance of inflating the same - being so, in the absence of necessary evidence to show that it was actually incurred for business purposes, the order of the CIT(A) cannot be reversed – Decided against assessee. Disallowance of 50% of the increase in traveling expenses – Held that:- The CIT(A) has very reasonably considered that no disallowance of salary, rent, electricity charges, rates and taxes, repairs and maintenance, bank charges and commission, legal expenses, labour welfare fund internal audit fee, tax audit fee, telephone charges, cash transfer tax, printing and stationery etc can be made for the reason that they are duly vouched - CIT(A) found that self-made vouchers were made only for traveling expenses of staff and Directors and hence she disallowed 50% increase in traveling expenses at ₹ 1,54,464/- CIT(A) has taken a reasonable view and the same is confirmed – Decided against assessee. Disallowance of foreign travel expenses – Held that:- Assessee has not produced any evidence to prove that the above expenses were incurred for the purpose of business - the assessee’s business is confined to Kerala - the Directors went abroad to mobilize deposits for the purpose of assessee’s business - what are the activities done by the assessee’s Directors with regard to the business of the assessee are not brought on record - in the absence of the details of the activities carried out by the assessee’s Directors with regard to the business at abroad, the order of the CIT(A) is upheld – Decided against assesse. Disallowance of depreciation on vehicles – Held that:- The assessee is a limited company - the lower authorities have disallowed 1/4th of the total expenses on vehicles - assessee is a limited company and the vehicles are used by the Company for frequent visits to its 78 branches in Kerala for business purpose - Being so, disallowance is not warranted towards depreciation on vehicles for personal use - the running expense of vehicle was allowed by the Assessing officer and it was held that the expenses were incurred solely for the purpose of business –Decided in favour of assessee. Addition of payment made for consultation charges without deduction of TDS deleted – Held that:- The reason for deleting the disallowance was that the payment was made to the person who has retired from PF Department who has no professional qualification and it was not paid for rendering professional services and hence, provisions of sec. 194J was not attracted so as to apply the provisions of sec. 40(a)(ia) - if the payment has been made to the person in excess of the prescribed limit for which sec. 194J is applicable, relief cannot be given on the reason that the person who has rendered services is not a professional person - there is no necessity of professional qualification for rendering services and receiving payment - provisions of sec. 194J is directly applicable and the assessee is duty bound to deduct tax - assessee failed to deduct tax and hence the payment would attract the provisions of sec. 194J and non-deduction of tax under the section would attract the provisions of section 40(a)(ia) – the order of the CIT(A) is upheld – Decided partly in favour of revenue.
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2014 (12) TMI 1107
Disallowance on trade mark fee deleted – Revenue expenses or not - Right to use the trade mark acquired by the assessee was an intangible asset as defined u/s 32 or not - Held that:- CIT(A) rightly deleted the disallowance of ₹ 55,70,045/- on account of trade mark fee by holding that it was a revenue expenditure and without considering that “right to use the trade mark” acquired by the assessee was an intangible asset as defined u/s. 32 - following the decision in THE COMMISSIONER OF INCOME TAX-IV NEW DELHI Versus G4S SECURITIES SYSTEM (INDIA) PVT. LTD. [2011 (7) TMI 65 - DELHI HIGH COURT] - under the terms of the agreement, the ownership rights of the trade mark and knowhow throughout vested with G4F and on the expiration or termination of the agreement the assessee was to return all G4F knowhow obtained by it under the agreement - The payment of royalty was also to be on year to year basis on the net sales of the assessee and at no point of time the assessee was entitled to become the exclusive owner of the technical knowhow and the trade mark - hence, the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable u/s 37(1) – Decided against revenue. Disallowance of license fee deleted – Revenue expenses or not - assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 or not – Held that:- CIT(A) rightly deleted the disallowance of license fee by holding it as revenue expenditure and without considering that the assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 – Following the decision in COMMISSIONER OF INCOME TAX Versus M/s ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] - it cannot be said that the expenses brought about in an enduring benefit to the assessee - the mere fact that the assessing officer records that the expenditure, in financial year 1997-98 (assessment year 1998-99), was incurred towards what he terms as an “on-going project” would not ipso facto give it a colour of capital expenditure - after noticing the submission of the assessee that the expenditure incurred in the AY was for removing deficiencies which were found in the software installed in the earlier assessment year, and that, out of a sum of ₹ 1.71 crores a sum of ₹ 49 lacs was incurred to modify, customize and upgrade the software installed, while the balance expenditure was used for development and implementation – it returned a finding that the expenses were incurred to upgrade and run the system – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 1106
Establishment of PE in terms of Indo-USA DTM – Services rendered by company liable to be taxed in India or not - Held that:- Following the decision in assessee's own case as decided in Whirlpool India Holdings Ltd. Versus Dy. DIT (IT)[2011 (1) TMI 529 - ITAT, DELHI] - The term “PE” in general terms to mean a fixed place of business through which the business of an enterprise is wholly or partly carried on - the assessee has a fixed place of business in India in the form of the branch office - there seems to be nothing on record to show that the business of the assessee has been conducted wholly or partly through this branch - The reason is that only expenditure debited to profit and loss account is payment of salaries, stated to have been reimbursed by the parent company - The employees are the employees of WIL and look after its business - The conclusion which can be drawn is that the employees are that of the parent company which has disbursed the payment of salaries through the assessee - the employees are those of the WIL - It is equally plausible to argue that since salaries have been paid by the parent company, the economic reality overtakes the legal reality - the employees are those of the parent company - it will be difficult to come to a conclusion that the employees are those of the assessee company. Before bringing a foreign company to tax in India on its business profits, it is for the revenue to establish that it has PE in India - This has not been done – the branch office of the assessee is responsible for formulating policy and taking strategic decision for operations of WIL in India, Nepal, Sri Lanka, Bangladesh and Pakistan - The manufacturing operations of Whirlpool group extend to more than 11 countries and the products are being sold in more than 125 countries - The branch office creates export opportunities for raw material, components and finished products for overseas requirements and would ultimately generate export revenue for the assessee company - It is also responsible for identifying supplier of goods etc. both for export and local consumption of the group companies - the parent company and the Indian branch assist the suppliers to introduce new technologies etc. - The branch office acts as a coordinating agency between the parent company and the assessee for providing latest management information in respect of technology, legal, commercial and political fields. The assessee has made payment to WIL of the salaries of the seconded employees - it has not been established in any manner that these employees are those of the assessee company - it cannot be said that the assessee has rendered any service either to WIL or to the parent company - the assessee is not chargeable to tax in India in terms of the provision contained in Article 5 of the tax treaty, it is not necessary to go into the question whether transfer pricing adjustment could be made in determining such profit - since there is no profit, there would be no question of transfer pricing adjustment – it is not necessary to go into Rule 10 of the Income-tax Rules, recognized methods of determining arm’s length profits - the assessee is not liable to pay tax in India in the year – Decided against revenue.
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2014 (12) TMI 1105
Disallowance u/s 40(a)(ia) - outstanding balance as on 31st March – Failure to TDS u/s 194H - Held that:- As decided in DCIT vs. Shri Ananda Marakala [2014 (12) TMI 613 - ITAT BANGALORE] wherein the applicability of section 40(a)(ia) has been discussed and held that the provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS Hon’ble Allahabad High Court has however upheld the view taken by the Special Bench ITAT in the case of Merilyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) in the case of M/s. Vector Shipping Services Pvt. Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT) Thus there are two views on the issue, one in favour of the assessee expressed by the Hon’ble Allahabad High Court and the other against the assessee expressed by the Hon’ble Gujarat & Calcutta High Courts. - following the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court), we hold that where two views are possible on an issue, the view in favour of the assessee has to be preferred. - Decided in favour of assessee.
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2014 (12) TMI 1104
Disallowance of consultancy charges expenses - Charges not been incurred wholly and exclusively for the purpose of business of the assessee - Held that:- We have gone through the application as well as the documents which are sought to be produced by the assessee company by way of additional evidence, which are consisting of copies of correspondence, agreements etc. done by the said two companies with government agencies as well as the assessee company. The above said documents as has been pleaded by the assessee company were not traceable at the time of proceedings before the lower authorities. Keeping in view the application of the assessee as well as the nature of the documents, we feel that the documents sought to be produced in evidence by the assessee are necessarily required to be looked into, as the same go to the root of the case and are vital for the just and proper decision of the case. We therefore allow the application of the assessee for additional evidence and the matter is remanded back to the file of the AO for decision afresh on the issue. - Decide din favour of assesse.
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2014 (12) TMI 1103
Disallowance of depreciation - Goods not used by the assessee company for its business purposes - Held that:- The car and TV was in the name of Director but was appearing in the balance sheet of company. Thus, the funds of company were utilized for acquiring these assets though in the name of Director. I find that this issue is squarely covered by the decision of Hon’ble Allahabad High Court in the case of M/s Varanasi Auto Sales Pvt. Ltd. (2010 (1) TMI 19 - ALLAHABAD HIGH COURT), and, therefore, Assessee was entitled for depreciation on TV and Car. - Decided in favour of assesse.
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2014 (12) TMI 1102
Penalty u/s 271(1)(b) - Delay in filing return - Search and seizure of premises - Held that:- It is noticed from the impugned order that the assessee submitted before the ld. CIT(A) that adjournments were requested on the ground that search and seizure operation had taken place and it was not possible to furnish the necessary details as all the documents and computer hard discs etc. were seized/impounded at the time of search operations. The assessee further submitted that several requests were made to the AO to release certain documents, but to no avail. These findings have not been controverted by the ld. DR with any cogent evidence. From the above recording of the factual position obtaining in this case, it is crystal clear that the assessee was prevented by a reasonable cause in not complying with the directions of the AO which led to the imposition of penalty u/s 271(1)(b) of the Act. The cause pleaded by the assessee before the ld. CIT(A) which led to the commission of default u/s 271(1)(b) of the Act constituted a reasonable cause. The delay in filing the information/documents etc. called for by the AO would be naturally delayed when a person has been subjected to search and documents are with the Department. As the assessee proved a reasonable cause for failure to comply with the directions of the AO which culminated into the imposition of the instant penalty, we are of the considered opinion that this penalty cannot be upheld. We, therefore, set aside the impugned order and order for deletion of this penalty. - Decided in favour of assesse.
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2014 (12) TMI 1101
Violation of principle of natural justice - ex parte order passed without providing sufficient opportunity of hearing to the appellant - Held that:- CIT(A) has passed ex parte appellate order in a summary manner and has not decided the issue before him on merits. In these facts of the case, we set aside the order of the CIT(A) to his file with direction to pass de novo appellate order in accordance with law after providing opportunity of hearing to both the parties. The CIT(A) is directed to decide the issue before him on merits thereof. The assessee is directed to cooperate with the revenue authorities in finalization of the appellate proceedings before the CIT(A) and on its own approach the office of the CIT(A) to obtain the notice of hearing within the period of 60 days, from the receipt of this order of the Tribunal, and to place all the details before appellate authority - Matter remanded back - Decided in favour of assesse.
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2014 (12) TMI 1100
Withdrawal of petition - Held that:- Additional Solicitor General, on instructions, seeks permission of this Court to withdraw these special leave petitions with liberty to the petitioner to file review Petitions before the High Court bringing to Reason: the notice of the High Court the latest three-Judge Bench decision of this Court in the case of CIT v. Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT]. - Leave granted.
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Benami Property
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2014 (12) TMI 1143
Petition for direction to be made for lifting the order of attachment of property or not - Direction to be made for quantification of the stamp duty to be paid - The transfer of the property and registration of the sale deed transferring the title in the property to be allowed or not - Validity of transaction u/s 47 of the Gujarat Value Added Tax Act Held that:- There is no explicit provision made under the GVAT Act as is provided under the IInd Schedule of the Income Tax Act, however, it is a well settled law that in the event of any dispute in relation to the title of any property, it is the civil court which shall have a jurisdiction as already held in Tax Recovery Officer v. Gangadhar Viswanath Ranade [1998 (9) TMI 1 - SUPREME COURT] - the suit property is a tenement, admeasuring 127.05 square metres, situated at Bhavnagar - The purchase was made by Mrs. Magiya on 29.06.1995 by a registered sale deed - tax dues of Mr. Deepak Magiya have been finalized somewhere in the month of October, 2009. The contention raised by the revenue that Mrs. Jayshreeben Magiya would have no funds of her own, is also not acceptable as she also possibly can have her Stridhan or can own property inherited from her father - the provision of section 3 of the Benami Transactions Act makes it obligatory on the part of the person to prove otherwise when such property is purchased in the name of the wife as legal presumption favours the wife and unmarried daughter - such presumption can be rebutted by the person who alleges by production of evidence or other material before the court, that the property was purchased for the benefit and interest of the person other than the wife and the unmarried daughter - unless the presumption gets rebutted by successfully producing cogent evidence that the suit property was purchased benami by the husband / father for his own benefit, such presumption would continue. The property had been transferred in the name of the present petitioner by way of a registered sale deed on payment of due consideration and, this was done in absence of any charge, registered with the office of the Sub Registrar in respect of the said property - Prima facie, it shall have to be termed as the bona fide purchase of the immovable property for value without notice - in absence of any explicit provision under the GVAT Act and in the wake of the fact that the outstanding dues of Mr. Deepak Magiya, nearly to the tune of ₹ 5 crores, having been finalized somewhere in the year 2009 for the assessment years 2005-06, 2006-07 and 2007-08 - serious question of limitation also would stare in the face of the respondent the Court chooses not to adjudicate on disputed questions of title which shall have to be necessarily decided by the court of law in the civil suit rather than concluding on this aspect in the present petition - the respondents ae allowed to take recourse if permissible under law and for both the parties to argue all these aspects at an appropriate stage before appropriate forum thus, the direction issued by the respondent No.1 to the respondent No.2 for the attachment of the impugned property is set aside - respondent No.2 is also further directed to permit the execution of the sale deed in favour of the proposed purchaser Decided in favour of petitioner.
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Customs
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2014 (12) TMI 1121
Denial of refund claim of excess duty - Bar of limitation - Commissioner sanctioned refund claim - Assessee filed separate refund claims after 7 years - Held that:- When there is no provision for filing a second refund application, the question of limitation does not arise. Further, the time limit under Section 27(1) of the Customs Act would be for the first application and the appeal is a continuation of the original proceedings and therefore there can be no limitation in respect of the proceedings pursuing the refund claim. Accordingly, both the questions of law are answered in favour of the assessee and against the Revenue. - Decided against Revenue.
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2014 (12) TMI 1120
Petition filed against SCN - SCN alleges several acts of omission and commission at different places namely within the Commissionerate of Nhava Seva Port, Mumbai, at Kandla Port in the State of Gujarat, at Tuglakabad , New Delhi and at Kolkata - Held that:- Apart from settled principles, which indicate as to how the writ jurisdiction has to be exercised and for interfering with the show cause notice, we are satisfied that the apprehension of the Petitioner that the noticees may have to travel and face adjudication at several venues at the hands of different adjudicating officers is taken care of by the statement made, on instructions, by Mr.Jetly . We accept it as an undertaking given to this Court. We direct that the Respondents shall take the requisite steps so as to comply with their own guidelines and circulars to ensure that the adjudication will be held and concluded at one venue and not requiring the Petitioner to travel and attend the offices of several adjudicating authorities, bodies or officers, particularly at Delhi, Mumbai, in the State of Gujarat or at Kolkata. The argument that there is a pre-adjudication and predetermination of the issues raised in the show cause notice need not detain us. That may require us to go into the contents and particularly merits of the show cause notice, which is not permissible at this stage. We clarify that it would be open for the Petitioner to raise all contentions including those based on the grounds in the Writ Petition at the adjudication of the show cause notice, it would also be open to them to contend that despite their appearance before the adjudicating authority, the show cause notice and to several persons, combining several issues, several acts of omission and commission alleged to have been committed by the persons and entities having no business connection or business relation makes the show cause notice itself vulnerable. Show cause notice purports to level certain allegations and serious doubts, but there is already determination or adjudication with regard thereto and issuance of such notice is, therefore, a mere formality. These and all contentions are kept open for being raised by the Petitioner before the adjudicating authority and equally at an appropriate stage thereafter. - Petition disposed of.
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2014 (12) TMI 1119
Imposition of redemption fine and penalty - contravention of Section 75 of the Customs Act, 1962 - Drawback claim - Misdeclaration of goods - Commissioner reduced redemption fine - Held that:- Two antiques valued at ₹ 883 were concealed under 673 old and used furniture attempted to be exported claiming drawback. Customs found that such antiques were prohibited goods and liable to confiscation. Ld. Commissioner (Appeals) held that such a low value goods were not conceivable to be concealed for which conclusion of ld. adjudicating authority was wrong. Accordingly, he held that confiscation of 673 items of furniture was unwarranted. His finding is totally contradictory when he holds that under Section 103(f) of the Customs Act, 1962 old and used furniture were not eligible to draw back claim for which those were liable to confiscation. It is strange that how the ld. Commissioner (Appeals) came to a conclusion that the small value goods does not cause prejudice to the interests of justice when those prohibited goods were attempted to be exported. Once there was mis-declaration of description of goods, that calls for confiscation. Therefore, ld. Commissioner’s finding is erroneous in so far as non-concealment of the antique is concerned. The materials on record suggest that the antiques were two pillars with engraved architecture therein and the 673 furnitures were old and used. It is surprising how ld. Commissioner reduced the redemption fine from ₹ 12 lakhs to ₹ 5 lakhs when there was a deliberate mis-declaration of the goods in the shipping bills - Redemption fine and penalty upheld - Decided against assessee.
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2014 (12) TMI 1118
Allegation on both sides - Held that:- Departmental Representatives are made helpless without instructions from the field and Revenue is unable to defend its cases for the lapses of the field staff. We request ld. Chief Departmental Representative to take up the matter before the higher authorities so that the Departmental Representatives shall be prepared with full information and instruction to assist the Bench. - Matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 1117
Violation of principle of natural justice - order did not take into consideration various grievances raised in the reply to show cause notice. So also cross-examination of two officers were not allowed. Even the appellant was not allowed to file respective documents prior to filing of reply to show cause notice - Held that:- Reasonable opportunity of hearing was not allowed and cross-examination not granted, we have directed appellant to file a note justifying the reason why cross-examination is required and also the chronology of the dates on which the appellant was required to appear and outcome thereof - The fact of existence of video recording in respect of search to the premises of appellant came to be noticed from record. If the appellant chooses to produce the same that should be produced on the next date of hearing. Appellant further says that certain other relevant documents shall also be filed. In view of the prayer of the appellant to allow opportunity to produce certain documents, matter is posted to further date - appeal disposed of.
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Corporate Laws
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2014 (12) TMI 1116
Dishonor of cheque - Directors at the time of commission of offence were in-charge or not – Complaint u/s 138 r.w. 141 of NI Act – Validity of assertions made - Whether the High Court was justified in quashing the proceedings initiated by the Magistrate on the ground that there was merely a bald assertion in the complaint filed under Section 138 r.w. Section 141 of the Negotiable Instruments Act, 1881 that the Directors were at the time when the offence was committed in charge of and responsible for the conduct and day-to-day business of the accused-company – Held that:- The decision delivered in SMS Pharmaceuticals Ltd. Versus Neeta Bhalla [2005 (9) TMI 304 - SUPREME COURT OF INDIA] holds good wherein it has been held that it is necessary to specifically aver in a complaint u/s 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. The Court quashed the complaint filed under Section 138 read with Section 141 of the NI Act relying on the certified copy of the annual return which was a public document as per the Companies Act read with Section 74(2) of the Evidence Act, which established that the appellant/Director therein had resigned from the Directorship much prior to the issuance of cheques. High Court did not go into the second question raised before it as to whether the Director, who has resigned can be prosecuted after his resignation has been accepted by the Board of Directors of the company. Pertinently, in the application filed by the respondents, no clear case was made out that at the material time, the Directors were not in charge of and were not responsible for the conduct of the business of the company by referring to or producing any uncontrovertible or unimpeachable evidence which is beyond suspicion or doubt or any totally acceptable circumstances. It is merely stated that Sidharth Mehta had resigned from the Directorship of the company on 30/9/2010 but no uncontrovertible or unimpeachable evidence was produced before the High Court as was done in Anita Malhotra to show that he had, in fact, resigned long before the cheques in question were issued. Similar is the case with Kanhaiya Lal Mehta and Anu Mehta. Nothing was produced to substantiate the contention that they were not in charge of and not responsible for the conduct of the business of the company at the relevant time. In the circumstances, we are of the opinion that the matter deserves to be remitted to the High Court for fresh hearing. It is however, necessary for the High Court to consider the cases of other Directors in light of the decisions considered by us and the conclusions drawn by us in this judgment. However, the order passed by the High Court quashing the process as against Shobha Mehta is upheld - Shobha Mehta is stated to be an old lady who is over 70 years of age - Considering this fact and on an overall reading of the complaint in the peculiar facts and circumstances of the case, making her stand the trial would be an abuse of process of the court – the order to the extent it quashes the process issued against Shobha Mehta is confirmed – Decided partly in favour of appellant.
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2014 (12) TMI 1115
Validity of appointment of arbitrator for adjudication of dispute u/s 11 of the Arbitration and Conciliation Act, 1996 – Arbitrable dispute existed to invoke section 11 or not - Whether the discharge upon acceptance of compensation and signing of subrogation letter was not voluntary and whether the claimant was subjected to compulsion or coercion and as such could validly invoke the jurisdiction u/s 11 - Held that:- Following the decision in National Insurance Co. Ltd. Versus M/s. Boghara Polyfab Pvt. Ltd. [2008 (9) TMI 864 - SUPREME COURT] wherein it was held that when we refer to a discharge of contract by an agreement signed by both the parties or by execution of a full and final discharge voucher/receipt by one of the parties, we refer to an agreement or discharge voucher which is validly and voluntarily executed If the party which has executed the discharge agreement or discharge voucher, alleges that the execution of such discharge agreement or voucher was on account of fraud/coercion/undue influence practiced by the other party and is able to establish the same, then obviously the discharge of the contract by such agreement/voucher is rendered void and cannot be acted upon - Consequently, any dispute raised by such party would be arbitrable. The plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion - there was no protest or demur raised around the time or soon after the letter of subrogation was signed, that the notice dated 31.03.2011 itself was nearly after three weeks and that the financial condition of the respondent was not so precarious that it was left with no alternative but to accept the terms as suggested, the discharge and signing of letter of subrogation were not because of exercise of any undue influence - such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence - upon execution of the letter of subrogation, there was full and final settlement of the claim – thus, no arbitrable dispute existed so as to exercise power u/s 11 of the Act - The High Court was not therefore justified in exercising power u/s 11 of the Act and the order of the HC is set aside - Decided in favour of appellant.
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Service Tax
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2014 (12) TMI 1142
Condonation of delay - Inordinate delay of 175 days - Held that:- Tribunal has committed an error by rejecting the application filed by the petitioner for condonation of delay caused in filing the appeal and also committed an error by not considering the grounds set out in paragraph nos. 2 and 3. In paragraph nos. 2 and 3 of the application for condonation of delay, the applicants have shown sufficient cause for not preferring the appeal within the limitation period. Thus we are of the considered opinion that sufficient cause is shown by the original appellants applicants in the application for condonation of delay. Even otherwise, opportunity is required to be given to the petitioners to submit their case on merits before the Appellate Tribunal. - Order passed by the Tribunal is hereby quashed and set aside - Decided in favour of assesse.
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2014 (12) TMI 1141
Valuation - Telephone connection service - telegraph authority - The respondent appointed M/s. Reliance Industries Ltd. (RIL) as an agent to market the TRAI approved Tariff Plans with respect to telephone connections services provided by it by means of various schemes floated by the agent in this regard. - These services were provided through Code Division Multiple Access (CDMA) technology and could be availed by the subscribers only on a handset specially programmed and designed. - the agent of the respondent (i.e. M/s. RIL) was allowed to combine certain products, services and privileges offered by it. - Other than an amount of ₹ 14,400/- per subscriber, which was for rental and usage charges of telephone connection service, all other charges collected by the agent from the subscribers of the respondent were retained by the agent as 'club membership' and 'club privileges' charges. - Inclusion of amounts collected from its subscribers towards 'club membership' and 'club privileges' charges in value of taxable services. Held that:- any service which has not been provided by telegraph authority and that have no relationship with connecting telephone apparatus is not covered under telephone connection service. In this case allegation against the respondent is that through their agent, they have provided additional service such as club membership and pioneer offer. The Revenue wants to include the value of club membership and club privilege charges in the value of service relating to telephone connection. All the goods and services provided by the agents of the respondent are the goods and services that have been provided by a person other than the telegraph authority, hence one of the conditions of the definition of service of telephone connection is not fulfilled. On this ground alone the attempt to include the value of 'club membership' and 'club privileges' gets defeated. Inclusion of charges on account of Deceptive advertisements practice - Held that:- The privilege at point (b) is one relating to the service of the telephone connection but its value had always been included in the value of the service provided by the respondent. The agents of the respondent were remitting ₹ 14,400/- per subscriber to the respondent. This amount was towards rent and usage charge of ₹ 400/- per month for 36 months. Out of the amount ₹ 400/-, an amount of ₹ 240/- was the rent of the service provided by the respondent and ₹ 160/- was towards the usage charges. Showing a paid service as a privilege of the DAP Club could at the worst be an alluring and illusory advertisement. Such an advertisement cannot change the real character of the service. The privilege at point (iii) free incoming calls, free unlimited SMS, free CLIP & call waiting service was also the part of Tariff Plan of the respondent. The agents of the respondent had shown it separately as a privilege of the DAP Club but it was part of the approved Tariff Plan of the respondent. The remedy against the deceptive advertisements is not under the Act. - Decided against Revenue. Inclusion of value of telephone instrument - Held that:- The services relating to providing of the service of telephone connection is not only a transaction for providing a service but also involves sale of goods. - the allegation is that the handset is so designed that without it the service provided by the respondent could not have been be availed by their subscribers. The value of the telephone handset is discernable in this case and the sale tax has also been levied on such transactions. Inadequacy of the value on which the sale tax has been imposed cannot be the ground for inclusion of the value of goods in the value of the service. - Decided against Revenue. Whether the amount of goods and services can be vivisected - Held that:- The agents have paid sale tax on the value declared by them in relation to the supply of goods. The remaining amounts are either for collection charges for financing of the scheme or for the privileges or services provided to the members of the DAP Club. In such a scenario, it is not correct to say that the transactions under which he agents sold the Tariff Plans along with their own goods and services cannot be vivisected and the entire value of such goods and services be added to the value of the services of the respondent. - Decided against Revenue. Whether the respondents are liable to pay penalty on account of due service tax collected from the subscriber on fixed wireless service by way of adjustment from the security deposits. - Following decision of CCE & ST., LTU, Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. reported in [2011 (9) TMI 114 - KARNATAKA HIGH COURT] - as entire amount of service tax and interest has been paid by the respondent before issuance of the show cause notice on pointing out by the revenue, the penalty are not imposable. - Decided against Revenue.
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2014 (12) TMI 1140
Condonation of delay - Delay in receipt of order - Held that:- It is seen that though in respect of the order-in-original dated 15.02.2008, the department’s plea is that the same had been delivered to Shri Ramesh Kumar of the appellant company on 26.03.2009, no evidence in this regard, has been brought on record. Similarly, in respect of the order-in-original dated 13.03.2009, the department s plea is that the same was dispatched to the appellant by speed post on 26.07.2012. However, under Section 37 C of the Central Excise Act, 1944, the permitted mode of communication of the adjudication order is registered post with acknowledgement due (RPAD) and since the order was not dispatched by RPAD, it cannot be deemed to have been served on the appellant. Both these orders have been received by the appellant on 2.3.2013 and, therefore, the appeals have to be treated as having been filed in time and as such, the impugned order dismissing the appeals as time barred, without going into the merits of the case, is not correct. The impugned order, therefore, is set aside and both these matters are remanded to the Commissioner (Appeals) for decision on merits. - Delay condoned.
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2014 (12) TMI 1139
Denial of CENVAT Credit - Manpower supply service - cleaning of the yard within the factory - weighment of sugar cane - cane area survey and sugar can development - Held that:- As regards cleaning of the yard within the factory, as per the provisions of the factories act provision of Section 11 of the Factories Act it is the responsibility of a manufacturer to keep the factory premises neat and clean, therefore, the cleaning of the factory has to be treated as activity in or in relation to manufacture of the final product. Therefore, the Cenvat credit in respect of this activity would be admissible. - As regards the weighment of sugar cane and its unloading at the factory, this activity has to be treated as activity in relation to manufacture of sugar and molasses. Therefore, I hold that Cenvat credit would be admissible in respect of this activity also and the same has been wrongly denied. As regards the cane area survey and sugar can development by educating the farmers and by other means, the purpose of this activity is to ensure supply of good quality sugar cane, which is a must for any sugar manufacturing business. In view of this, this activity has to be treated as having nexus with manufacturing business of the appellant - question of eligibility for Cenvat credit of the activities of sugar cane area survey and sugar cane development has to be seen on the basis as to whether these activities have nexus with the business of manufacture of sugar. In my view, while these activities may not have nexus with manufacture of sugar, these activities certainly have nexus with the business of manufacture of sugar, as the supply of good quality sugar cane with good sugar recovery is a must for the business of manufacture of sugar. Therefore, I hold that the Cenvat credit in respect of these activities would be admissible. Any expenditure incurred by a manufacturer is deemed to be included in the price charged by him from his customers and therefore the manufacture is not required to prove that the expenses incurred by him on various inputs and input services used in the manufacture of the final product has been included in the price charged by him. - the impugned order is not sustainable - Decided in favour of assessee.
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2014 (12) TMI 1138
Denial of refund claim - Notification No. 41/2007-ST dated 06.10.2007 - Held that:- Appellant have failed to produced required documents, accordingly the adjudicating authority has rejected the case on grounds of non-submissions of the documents and sans the same it could not be ascertained the vital aspects of the admissibility of the refund claim in accordance with the conditions as stipulated in the Notification No. 03/2008-ST dated 19.02.2008, as amended. The appellant have not adduced any further documents to this stage of appeal in support of their claim of refund, in the circumstances, the admissibility of the claim is not ascertainable. I find that the adjudicating authority has decided the case not only after considering each and every facts of the case but also discussed the matter at length and correctly rejected the refund claim. I do not find any infirmity with the findings of the adjudicating authority; as such the impugned order deserves to be upheld. Admissibility of refund claims of the service tax paid under the impugned exemption notification is subject to production of certain documents and fulfilling prescribed conditions. First appellate authority has clearly given findings that appellant has not fulfilled the specified conditions by adducing required documentary evidences. I do not find any reason to interfere in the order passed by the first appellate authority, as nothing new has been brought on record by the appellant that documents required and conditions prescribed are fulfilled. - Decided against assesse.
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2014 (12) TMI 1137
Imposition of penalty - Invocation of Section 80 - GTA service - Payment of tax as service recipient - Held that:- Appellant is a proprietary concern and not assisted by any professionally qualified officer. Even though, ignorance of law is not an excuse, yet the statutory provisions under Section 80 of Finance Act, 1994 have been made to enable officers to take a lenient view when assessees make omissions/commissions in payment of service tax. Normally, assumption of a layman would be that tax is to be paid by the service provider and if an assessee proceeds on this basis, they cannot be found fault with. At the same time, it has to be noted that each case has to be considered on its own merits and the conduct of the parties in relation to the demands made by the Department etc. In this case, in the month of October-November, 2009, the requirements of payment of service tax were pointed out and in December-January, thereafter, the appellant paid the entire amount of tax with interest. In view of the promptness of the appellant in paying the tax with due interest and in view of the peculiar circumstances which I have already considered above, I consider this is a fit case of invoking the provisions of Section 80 of Finance Act, 1994 - Decided in favour of assessee.
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2014 (12) TMI 1136
Penalty u/s 78 - Enhancement of penalty - transmission and distribution of electricity - Notification No. 45/2010-S.T., dated 20-7-2010 - whether the appellant is required to pay revised penalty - Held that:- in view of the Notification which exempts service tax upto 21-6-2010, the activity undertaken by them would not have been leviable to service tax at all if the appellant was not to pay the tax with interest and 25% of the penalty. Needless to say that the question of imposition of a revised penalty would not arise in such a situation since it would amount to imposing penalty on assessees who pay the tax as and when demanded with interest without questioning the right to collect and without any delay - Decided in favour of assessee.
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2014 (12) TMI 1135
Commercial Training or Coaching Service and Technical Testing and Analysis Service - exemption Notification No. 6/2006-Service Tax, dated 1-3-2006 - Held that:- Prior to introduction of Explanation to clause (zzc) of Section 65(105), by provisions of the Finance Act, 2010, there was considerable conflict as to whether an institute/establishment could be said to have provided Commercial Training or Coaching or where such coaching or training was provided without any commercial purpose or a profit motive. To clarify the issue legislature intervened and introduced the Explanation which clarifies that the expression “Commercial or Coaching Centre” includes any Centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organization under any law for the time being in force and is carrying on its activity with or without any profit motive. The provision enjoins that the expression “commercial training or coaching” shall be accordingly construed. This Explanation was introduced with retrospective effect, from 1-7-2003 i.e. the nativity of the relevant taxing provision. No prima facie case in favour of the petitioner/appellant insofar as its assessed liability to service tax under the category of Commercial Training or Coaching is concerned. As the assessed liability to service tax under the head Technical Testing and Analysis is directed to be recomputed de novo, by the order of the Appellate Commissioner, the levy of this component of service tax is at present in eclipse - Conditional stay granted.
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2014 (12) TMI 1134
Penalty u/s 77 & 78 - Held that:- Assessee has paid the entire amount of Service Tax, interest and penalty imposed by the Commissioner. In view of the payment of all dues we are of the opinion that the present case would fall under second proviso to Rule 7C of Service Tax Rules, 1994. Besides we do not find merit in the Revenue’s plea that penalty is necessarily to be imposed under Section 77 of the Finance Act, the said provision is prescribed in dealing circumstances where no penalty is specified elsewhere and the maximum penalty leviable at the relevant time under the said provision was maximum ₹ 5,000/-. In these circumstances, we do not find substance in the appeal filed by the Revenue - Decided in favour of assessee.
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2014 (12) TMI 1133
Waiver of pre deposit - Site clearance and preparation service - Held that:- Appellant had sub-contracted the entire contract on a back-to-back basis to another contractor who executed the work and demand has been raised against the contractor who executed the work also. In view of the fact that the appellant had not executed the work and demand has been raised against the contractor who did the work, we consider that the appellant has made out a case for waiver - Stay granted. Works contract service - Held that:- unless the procedure as prescribed under the relevant rules is followed, according to which the appellant was required to opt for composition scheme before making the payment of tax, they cannot avail the benefit. Under these circumstances, the claim for composition scheme may not be admissible to appellants at all. Hence, we find that appellant has not made out a case for waiver in respect of this amount. No financial difficulty has been pleaded. - Partial stay granted.
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Central Excise
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2014 (12) TMI 1132
Valuation of goods - Undervaluation - MRP based valuation of ceramic tiles - Demand of differential duty - Held that:- For the period prior to 1.3.2008, the provisions of Section 4A will be applicable and there is being no prescribed valuation rules under the said Section, the MRP/RSP cannot be re-determined; for the period post 1.3.2008, the value needs to be re-determined as per the valuation rules prescribed under Section 4A of Central Excise Act 1944, for which we remand the matter back to the lower authorities to follow the direction given by this Bench in the case of Acme Ceramics & Others (2014 (3) TMI 164 - CESTAT AHMEDABAD). Confirmation of the duty liability as indicated hereinabove needs to be upheld; as appellant-assessees are not contesting the demand on the clandestine removal as has been confirmed by the adjudicating authority. As we are upholding the confirmation of the demand on the clandestine removal of the goods, we uphold the interest liability and equivalent penalty under Section 11AC of Central Excise Act 1944. We also state that wherever the adjudicating authority has not extended the benefit of discharge of penalty @ 25% of the confirmed duty liability, the same is extended to those assessees - Decided partly in favour of assessee.
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2014 (12) TMI 1131
Rebate under Rule 18 of Central Excise Act – Procedural infraction do not prohibit the Assessee from the benefit of rebate - Goods had not been directly exported from a factory or warehouse. The warehouse from which the goods had been exported was a dealer’s godown in which duty paid goods were being stored and it was not a warehouse approved under Rule 20 of Central Excise Rules, 2002 – As per Adjudicating Authority, the identity/correlation of the goods originally cleared from the manufacturing unit with goods cleared from the godown could not be established - The Jurisdictional Superintendent has not supervised/verified the goods – Held that:- No advantage can be derived from an order passed by the Government in the case of Philip Electronics India Ltd. [2010 (3) TMI 862 - GOVERNMENT OF INDIA, MINISTRY OF FINANCE]. Once the exporter submits proof of the goods having been actually exported to the satisfaction of the rebate sanctioning authority, the goods were clearly identifiable and co-relatable with the goods cleared from factory on payment of duty, then, para 6 of the Circular issued by the Board enables waiving of or technical departure from procedural requirements. Those not having any revenue implications that they can be condoned. All the statutory requirements emerging from Rule 18 of the Central Excise Rules 2002 are satisfied and neither the Commissioner nor the Revisional Authority has committed any error of law apparent on the face of the record so also their orders cannot be termed as perverse enabling us to interfere in our Writ Jurisdiction - Decided against the revenue.
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2014 (12) TMI 1130
Demand of CVD and SAD on the goods cleared by 100% EOU - Clearance of goods to own DTA Unit under stock transfer - Held that:- in show cause notice and the impugned order no allegation or reasoning of any nature in raising such a demand was indicated and the demand was confirmed merely by relying upon demand chart which is an annexure to the SCN. As we find no allegations for demand has been stated either in the show cause notice nor there are any reasoning in the impugned orders for confirmation of such demand, we are of the considered view that such demand cannot be confirmed as it is not in accordance with law. - as there is no dispute that clearances were made by M/s STI to their own DTA Unit and the credit of SAD and CVD was available to the DTA Unit, hence the entire issue is revenue neutral. In such case it cannot be said that there has been intentional evasion of payment of duty by the appellant-assessee. We find that the goods were cleared on invoices indicating all the particulars and we do not find any deliberate act on the part of the assessee to evade payment of duty. We are of the view that the demands raised by invoking extended period of limitation on this count are not invokable. For the foregoing reasons also we hold that the demand of SAD and CVD is unsustainable. However in respect of demand of CVD, based upon our above findings we hold that only the demand falling under normal period of limitation is sustainable, we hold it so. Since the most of the demand is set aside, having held that there was no intention to evade duty, we find that penalties imposed are unwarranted and they are set aside. Demands of CVD raised by invoking extended period of limitation are not sustainable and only the demand of CVD under normal period would survive. We also set aside the penalty imposed under Section 11AC. - Decided partly in favour of assesse.
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2014 (12) TMI 1129
CENVAT Credit - banking and financial services - Held that:- Eligibility of banking and financial services for cenvat credit, it is seen that this issue stands decided in favour of the respondent by the judgement of the Tribunal in the cases of JSW Steel Ltd. (2008 (9) TMI 74 - CESTAT, CHENNAI) and Jenson & Nicholson (India) Ltd. [2014 (10) TMI 331 - CESTAT NEW DELHI] & MPI Machines Ltd. [2014 (1) TMI 718 - CESTAT NEW DELHI]. In view of this, the impugned order allowing the cenvat credit in respect of these services is correct and as such, there is no infirmity for the same. - definition of "input service" is very wide and covers not only the services which are directly or indirectly used in or in relation to the manufacture of final products, but also includes various services used in relation to the "business of manufacture of final product", be it prior to the manufacture of final products or after the manufacture of final products and that the definition of 'input service' is not restricted to the services used in or in relation to the manufacture of final products but extends to all services used in relation to the business of manufacturing the final product. No doubt that the inclusive part of the definition of "input' is restricted to the inputs used in or in relation to the manufacture of final products, whereas the inclusive part of the definition of 'input service' extends to services used prior to/during the course of/after the manufacture of the final products. The fact that the definition of "input service' is wider than the definition of "input" would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (2009 (8) TMI 14 - SUPREME COURT) while interpreting the scope of 'input service'. Accordingly, in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra) , we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(l) of 2004 Rules. - Since during the period of dispute, definition of "input service" included the activities relating to business, in view of the judgement of the Hon'ble Bombay High Court [2010 (10) TMI 10 - BOMBAY HIGH COURT], it has to be held that definition of "input service" would cover not only the services which are used in or in relation to the manufacture of final products but also all the services which are used in or in relation to the business of manufacture of final products, irrespective of whether those services are used before the manufacture, during the manufacture or after the manufacture. - No infirmity in the impugned order - Decided against Revenue.
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2014 (12) TMI 1128
Rebate claim - effective rate of duty - Applicable Notification - Notification No. 2/08-CE dated 1.03.08 or Notification No.4/06-CE dated 1.03.06 - Held that:- Instructions issued by CBEC regarding assessment of export goods are quite relevant to decide the issue involved in these cases - plain reading reveals that the export goods shall be assessed to duty in the same manner as the good cleared for home consumption are assessed. Further the classification and rate of duty should be as stated in schedule of Central Excise Tariff Act, 1985 read with any exemption notification and /or Central Excise Rules, 2002. The CBEC instructions clearly stipulate that applicable effective rate of duty will be as per the exemption notification. Notification No. 2/08-CE dated .1.03.08 as amended prescribed General Tariff rate of duty @10% which was in fact brought down from 16% to 14% and then to 8% and finally to 10% by different amending notifications. The notification No. 4/06-CE dated 1.03.06 as amended prescribed effective rate of duty from initial rate of 0% to 8%, 8% to 4% and finally to 5% by different amending notifications. As such it is not correct to say that it is a case of applicability of two notifications only and assessee is at liberty to choose anyone notification which is beneficial to. him. In this case, notification No. 2/08-CE as amended provided for General tariff rate of duty and Notification No. 4/06-CE as amended provided for effective rate of duty and they have to be strictly construed.as such. when two notifications co-exit simultaneously, the, assessee has the option to choose anyone of the notifications beneficial to him. Hon'ble Apex Court [2001 (3) TMI 971 - SUPREME COURT OF INDIA] has categorically held that in such a situation assessee has option to choose anyone notification. Apex court has not stated that assessee can avail both the notifications simultaneously. In the instant case applicant has not chosen one notification or all the clearance but decided to avail benefit of both the notifications. There is no merit in the contentions of applicants that they are eligible to claim rebate of duty paid @10% i.e. General Tariff Rate of Duty ignoring the effective rate of duty @4% or 5% in terms of exemption notification No.4/06-CE dated 1.03.06 as amended. As such Government is of considered view that rebate is admissible only to the extent of duty paid at the effective rate of duty i.e. 4% or 5% in terms of Notification No.4/06-CE dated 1.03.06 as amended, as applicable on the relevant on the transaction value of exported goods determined under section 4 of Central Excise Act, 1944. - the amount paid, in. excess of duty payable on one’s own volition cannot be retained by Government and it has to be returned to manufacturer applicant in the manner in which it was paid. Accordingly, such excess paid amount/duty which is required to be returned to the applicants, has already been allowed by the original authority - Decided against assessee.
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2014 (12) TMI 1127
Denial of rebate claim - Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004 –CE( NT) dated 06.09.2004 - effective rate of duty - Applicable notifiction - Notification No 2/08-CE dated 01.03:2008 or Notification No. 4/2006 –CE dated 01.03.2006 - Held that:- instructions issued by CBEC regarding assessment of export goods are quite relevant to decide the issue involved in these cases - plain reading reveals that the export goods shall be assessed to duty in the same manner as the good cleared for home consumption are assessed. Further the classification and rate of duty should be as stated in schedule of Central Excise Tariff Act, 1985 read with any exemption notification and /or Central Excise Rules, 2002. The CBEC instructions clearly stipulate that applicable effective rate of duty will be as per the exemption notification. Notification No. 2/08-CE dated .1.03.08 as amended prescribed General Tariff rate of duty @10% which was in fact brought down from 16% to 14% and then to 8% and finally to 10% by different amending notifications. The notification No. 4/06-CE dated 1.03.06 as amended prescribed effective rate of duty from initial rate of 0% to 8%, 8% to 4% and finally to 5% by different amending notifications. As such it is not correct to say that it is a case of applicability of two notifications only and assessee is at liberty to choose anyone notification which is beneficial to. him. In this case, notification No. 2/08-CE as amended provided for General tariff rate of duty and Notification No. 4/06-CE as amended provided for effective rate of duty and they have to be strictly construed.as such. when two notifications co-exit simultaneously, the, assessee has the option to choose anyone of the notifications beneficial to him. Hon'ble Apex Court [2001 (3) TMI 971 - SUPREME COURT OF INDIA] has categorically held that in such a situation assessee has option to choose anyone notification. Apex court has not stated that assessee can avail both the notifications simultaneously. In the instant case applicant has not chosen one notification or all the clearance but decided to avail benefit of both the notifications. There is no merit in the contentions of applicants that they are eligible to claim rebate of duty paid @10% i.e. General Tariff Rate of Duty ignoring the effective rate of duty @4% or 5% in terms of exemption notification No.4/06-CE dated 1.03.06 as amended. As such Government is of considered view that rebate is admissible only to the extent of duty paid at the effective rate of duty i.e. 4% or 5% in terms of Notification No.4/06-CE dated 1.03.06 as amended, as applicable on the relevant on the transaction value of exported goods determined under section 4 of Central Excise Act, 1944. - the amount paid, in. excess of duty payable on one’s own volition cannot be retained by Government and it has to be returned to manufacturer applicant in the manner in which it was paid. Accordingly, such excess paid amount/duty which is required to be returned to the applicants, has already been allowed by the original authority - Decided against assessee.
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2014 (12) TMI 1126
Valuation of goods - Non inclusion of amount charged for development of the tools, moulds and dies in the assessable value of the motor vehicle parts manufactured - Held that:- For manufacture of motor vehicle parts as per the designs given by the individual customers, the appellant had, first, developed moulds, dies and tools and the cost of developing moulds, dies and tools had been fully paid by the customers. Thus, this amounts to receiving the required moulds, dies and tools free of cost from the customers for use in the manufacture of goods for them. In terms of Rule 6 of the Central Excise Valuation Rules, where the excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section 4 of the Central Excise Act except that the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Value of the moulds, dies and tools developed for each customer for manufacture of the motor vehicle parts for him and whose cost has been fully reimbursed by the customers, would have to be treated as additional consideration and their amortized value should have been included. But this has not been done. Thus, the appellant have not been able to establish prima facie case in their favour and conditions have to be imposed for safeguarding the interests of the Revenue - Partial stay granted.
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2014 (12) TMI 1125
Cenvat Credit - Bogus invoices - respondent has received the invoices but has not received the inputs physically - evidence with the department is that the statements of the transporters wherein they said that the vehicle Nos. shown in the invoices is wrong and confirmed that the vehicle had not transported the goods to the respondent’s factory - Held that:- Mode of transport of inputs into the factory of the main respondent has been explained but the same has been controverted by the Revenue. Further, all the payments of inputs procured by the respondent have been made through banking channel. I also find that there is no shortage or excess inputs are found in their factory during the investigation. Moreover, the inputs have been used for the manufacture of final product. The main respondent has filed RT-12 returns regularly and the same has been accepted by the department. In these circumstances, relying on the decision in the case of Neepaz Steels Ltd. (2008 (7) TMI 410 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH) wherein the Hon’ble High Court held that when findings of the Commissioner (Appeals) clearly established that the RT-12 returns have been assessed finally by the Range Officer which contains all the documents including the invoices under dispute on the basis of which the Modvat credit has been availed and utilized and that payments for the purchase of inputs have been made through cheque/demand draft. In these circumstances, it cannot be alleged that the goods have not been received in the factory of the respondent. Therefore, following the decision of the Hon’ble P&H High Court in the case of Neepaz Steels Ltd. (supra) I do not find any infirmity with the impugned order and the same is upheld. - Decided against Revenue.
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2014 (12) TMI 1124
Waiver of pre deposit - Penalty u/s 11AC - Whether the penalty is imposable on the appellant for the delay in payment of duty - Held that:- Appellant did not discharge duty liability for the months of June, 2010 and October, 2010 to April, 2011. However, in the monthly ER-1 Returns, they misdeclared that they had discharged the duty liability. However, the factual position was otherwise. The cheques, which the appellant had deposited towards payment of duty, were dishonoured by the Bank for want of funds in the account and these cheques were also returned to the appellant. The appellant were fully aware about non-payment of the duty. In spite of this knowledge, they did not inform this fact to the department. Further, in the monthly ER-1 Returns, they misdeclared that they had actually discharged the duty liability. This conduct on the part of the appellant is a wilful misstatement of facts with an intent to evade payment of duty. Therefore, the provisions of Section 11AC are clearly attracted. Merely because the appellant discharged the duty liability along with interest prior to the issue of notice, the misconduct on the part of the appellant cannot be obliterated. As per the provisions of Section 11A(6), only on payment of duty, interest and penalty equal to 10% of such duty per month for which the default continued not exceeding 25% of the duty, the balance amount of penalty can be waived. In the present case, even though the appellant had discharged the duty and interest levied, they have not paid any penalty as stipulated in law. Therefore, the question of waiving of penalty would not arise at all. appellant had not made out a case for complete waiver of penalty adjudged against the appellant - Partial stay granted.
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2014 (12) TMI 1123
Waiver of pre deposit - benefit of Notification No. 6/2006-C.E., dated 1-3-2006 - Penalty u/s 11AC - Held that:- Parts cleared by the appellants have been used for some other purpose or diverted to the market. In fact no evidence has been collected. Further, HAL was directly addressed by the Revenue and HAL has also replied that these items are parts of PTA Lakshya and they have been used for purpose for which they were obtained. Appellants have taken the precaution of getting an end-use certificate to show that the requirements of Notification are fulfilled. It has to be noted that on their own the appellant could not have ensured that the parts are to be for end-use for which exemption was allowed. Indian navy has also certified that these are parts of aircrafts. The only ground for the Revenue is that appellants have not shown any evidence that the parts have been used for service or maintenance or repair. It has to be noted that appellants could not have done more than what they have already done since investigation powers are not with them and they cannot ensure that the goods are to be for end-use for which they are meant. The department which has the power to investigate has not done so but is relying on technicalities to hold appellants are ineligible for exemption. Prima facie, we find that the appellant have made out a case for eligibility to the exemption Notification benefit which they have claimed. Therefore, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.
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2014 (12) TMI 1122
Waiver of pre deposit - 100% EOU - exemption from the aggregate duties of Customs - Notification No. 10/97-C.E., dated 1-3-1997 - Delay in filing of the ER-2 return - order beyond the scope of SCN - Held that:- decision in Webel-SL. Energy Systems Ltd. (2010 (1) TMI 417 - CESTAT, KOLKATA) the said Circular was not before the Bench. Further the said Order does not consider the Final Order in Shanta Biotechnics Ltd. [2010 (7) TMI 334 - CESTAT, BANGALORE] either. The stay order in Webel-SL. Energy Systems Ltd., was considered by the Tribunal in A.R. Stahchem (P) Ltd. [2012 (4) TMI 523 - CESTAT KOLKATA], and overruled. Prima facie, we are also not in agreement with the prima facie ruling in Webel-SL. Energy Systems Ltd. In the circumstances, we waive the requirement of pre-deposit of dues arising from the impugned order for admission of appeal. Further there shall be stay on collection of such dues during the pendency of the appeal. - Stay granted.
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CST, VAT & Sales Tax
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2014 (12) TMI 1144
Constitutional validity of restriction on input tax credit (ITC) when goods are sold below the purchase price - Constitutional validity of section 18(3A) of the Rajasthan VAT Act, 2003 inserted by Finance Act 7(iii) w.e.f. 9.3.2011 – Violative of Articles 14, 19(1)(g) and 300A of the Constitution of India - Whether sales made by him at lesser rates do not amount to sale at 'subsidized rates', falling foul to Section 18(3A) of the VAT Act, 2003 – Held that:- The entire arguments, put forward by the petitioner that he has not made sales at a price lower than the purchase price, has been advanced without looking into the reply filed by the petitioner on 17.6.2014 to the show cause notice dated 6.6.2014 given by the Commercial Taxes Officer (Anti Evasion), Bikaner, in which it was pleaded and argued that the goods were sold at a lesser price than the purchase price, in anticipation of getting quantity discount, or sales incentive, on achieving a particular sale figure or reaching the target, which cannot be treated as subsidized price - the assessee has not sold the goods at a price below the purchase price - The net amount of trading account has been arrived at, after making adjustments of discount, purchase returns and other direct expenses. There is distinction between the scheme of tax on sale of goods both under the VAT regime and under the Sales Tax Act existing prior to that - Under the Sales Tax Act except a few items, all other goods were taxable at the point of first sale in the State - Therefore tax was levied and collected only from the first seller - Contrary to this, the scheme under the VAT regime is that the tax collected by the first seller is given as Input Tax Credit to the second seller, and the tax paid by the second seller is given as Input Tax Credit to the third seller and ultimately the entire tax is borne by the consumer - the tax paid on the value addition by a series of dealers is ultimately passed on to the consumer and dealers get reimbursement of the tax paid by them. ITC is not a concession granted under the scheme of Rajasthan VAT Act, 2003 - No set-off is given in respect of the tax paid by the appellant on the purchases of the raw material made by him outside the State of Maharashtra evidently for the reason that such tax is paid to such other States - While considering the provisions for grant of setting off under Rule 41 of Bombay Sales Tax Rules and observing that such set-off is a concession or indulgence and that it is open to the Legislature while granting concession to restrict or curtail the extent of entitlement as condition for availing the concession. A person claiming benefit of exemption must show that he satisfies the eligibility criteria and for that purpose the provision must be strictly construed - If exemption is available on complying with certain conditions, the conditions have to be mandatorily complied with - when there is a challenge to the constitutional validity of the provisions of a Statute, the Court exercising power of judicial review must be conscious of the limitation of judicial intervention, particularly, in matters relating to the legitimacy of the economic or fiscal legislation - while enacting fiscal legislation, the Legislature is entitled to a great deal of latitude - The Court would interfere only where a clear infraction of a constitutional provision is established - The burden is on the person, who attacks the constitutional validity of a statute, to establish clear transgression of constitutional principle. Legislative entries in the Seventh Schedule to the Constitution have to be read in a broad and comprehensive sense to include all subsidiary and ancillary matters - an entry, which authorises the imposition of a tax, such as Entry 54 of List II, also authorises an enactment, which prevents the tax evasion or taking excess credit - Regulating the claim of Input Tax Credit is within the powers of legislative competence - The Legislature consciously enacted Section 18(3) and (3A) of the Rajasthan VAT Act, 2003, with an object of incorporating the time frame and conditionalities for availing the ITC - Prescribing such conditions for availing ITC is well within the legislative competence of the State - R.K. Garg vs. Union of India [1981 (11) TMI 57 - SUPREME Court] - there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles - Laws relating to economic activities should be viewed with greater attitude than laws touching civil rights such as freedom of speech, religion etc. The legislature should be allowed some play in the joints and there is no straitjacket formula particularly in case of legislation dealing with economic matters and having regard to the nature of the problem required to be dealt with, greater play in the joins has to be allowed to the legislature - The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas, where fundamental human rights are involved - the word 'subsidize' would mean the price to be subsidized by the government, under any scheme - The word 'subsidize', in sub-section (3A) of Section 18, has not been used in a sense, in which the goods are sold on any concession, exemption, or subsidy, given by the State Government under any scheme - the constitutional validity of sub-section (3A) of Section 18 of the Rajasthan VAT Act, 2003 is upheld – Decided against petitioner.
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