TMI Tax Updates - e-Newsletter
January 10, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Highlights / Catch Notes
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Income Tax:
Validity of notice u/s 143(2) - The last date for service of the notice was 30/9/2012 which was postal holiday – Sunday - The notice u/s 143(2) has been served on the first available working day i.e. on 1/10/2012 being Monday - Service of notice is Valid - HC
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Income Tax:
Interest on refund u/s 244(1A) - The reading of Sections 237, 240 and 244(1A) casts a duty on the Assessing Officer to charge that much of tax which the assessee is liable to pay and mandates the refund of the excess amount along with interest - HC
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Income Tax:
Exemption u/s 54F - Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house - HC
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Income Tax:
Depreciation - the assessee was eligible for depreciation on the ‘Right to collect Toll’, being an ‘intangible asset’ falling within the purview of section 32(1)(ii) of the Act - AT
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Income Tax:
Payment on account of ‘Visa charges and others’ are legitimate business expenses and cannot be considered as paid to the employees or incurred for the benefit of employees - No FBT - AT
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Income Tax:
Exemption u/s 10(23C) – If donations are received compulsorily for the admission of students, by whatever name it may be called, the assessee would not be entitled for exemption either under S. 10(23C) or under S.11 - AT
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Income Tax:
Benefit of indexation – To constitute a capital asset assessee must not be the owner by way of a conveyance deed - The benefit of indexation has to be granted on the basis of payments made for acquiring the said asset - AT
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Income Tax:
Deduction u/s 80-P – The assessee is not a co-operative Bank - To meet any eventuality, the assessee was required to maintain some liquid funds - benefit of deduction u/s.80P(2)(a)(i) granted - AT
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Customs:
Denial of refund claim - The fact that the appellant could have challenged the assessment under section 128 of the Customs Act cannot be a reason to deny processing of a refund claim if filed within the four corners of the provisions under section 27 of Customs Act - AT
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Customs:
Duty demand - Import of capital goods under EPCG - the rate of duty that can be charged on the goods being debonded would be the rate applicable to the capital goods under EPCG scheme at the time of debonding on depreciated value - AT
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Customs:
Duty demand - Import of aluminium dross - cost for extracting aluminium from dross cannot be equated with the cost of copper from copper dross - no reason to reject the transaction value - AT
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Service Tax:
Condonation of delay - Non delivery or order - No illegality in the order passed by the 1st Appellate Authority declining to condone the delay and to hear the case on merits - HC
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Service Tax:
Contractual agreement between the service provider and service receiver - who will bear the burden of service tax - partial reverse charge after 1.7.2012 - Court finds no ground to decide the academic questions raised in the writ petition even of interpretation of provisions of law and Notification - HC
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Service Tax:
Whether the value of the services can be split as ‘cost of spare parts’ and ‘cost of services’ and as to whether the applicant has the option not to pay tax on the value of the spare parts used - stay granted - AT
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Service Tax:
Availment of CENVAT Credit - Abatement of 67% - Cenvat credit is allowable to avoid cascading effect. If taxability does not arise admissibility of Cenvat credit does not arise. Therefore, adjudication has rightly been done on this count also denying the benefit - AT
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Service Tax:
Denial of benefit of Rule 6(3) of the Service Tax Rules, 1994 - the appellants as recipients of Goods Transport Service are liable to pay Service Tax, they come under the category of “assessee” and, therefore, Rule 6(3) squarely applies to them - AT
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Central Excise:
Clandestine manufacture and removal - When RTO authorities have specifically stated that they have registered so many numbers of Chakado Rickshaws manufactured by the appellant, the entire issue needs to be gone into detail as to who issues the sales invoices of Chakado Rickshaws and how these Chakado Rickshaws got registered with the RTO authorities - AT
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Central Excise:
Refund of duty rejected – it was the cost of the product which was reduced by the appellant during the relevant period and the that the refund claim is not admissible on the basis of unjust enrichment where reduced cost along with leviable excise duty was being recovered by them - AT
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Central Excise:
Capital goods cleared as scrap – There is absolutely no evidence on record to show that the Cenvat Credit had been availed in respect of the capital goods which were subsequently cleared as scrap - demand set aside - AT
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VAT:
Levy of Value Added Tax (VAT) - The State Government cannot enrich by wrongly bringing the transportation charges and the installation charges as part of sale price of the goods - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (1) TMI 462
Validity of notice u/s 143(2) - Held that:- Following Mohd. Ayub Versus State of Uttar Pradesh through Principal Secretary and others [2009 (11) TMI 820 - SUPREME COURT] - The last date for service of the notice under section 143(2) was 30/9/2012 which was postal holiday – Sunday - The notice u/s 143(2) of the Act has been served on the first available working day i.e. on 1/10/2012 being Monday - There is sufficient compliance of section 143(2) of the Act - The notice has been issued within the prescribed period as mentioned in the first proviso to section 143(2) of the Act - There is sufficient compliance and therefore, notice issued under section 143(2) of the Act is not invalid - Decided against petitioner.
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2014 (1) TMI 449
Payment of LIP to cover leave encashment expenditure - Held that:- The payment of the premium is not an expenditure of the nature described in Sections 30 to 36 - Section 43B contains non-obstante provision and there in Clause (f) payment by the assessee as employer in lieu of any leave to the credit of its employees has been recognized as a revenue expenditure – The expenditure has been certified as an expenditure not for personal expenses of the assessee and that the same is wholly and exclusively for the purpose of the business or profession of the assessee – The expenditure is deductible u/s 37 - Decided against Revenue.
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2014 (1) TMI 448
Condonation of delay - Held that:- In the Application for condondation of delay, no cogent reason for delay has been furnished - Decided against Revenue.
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2014 (1) TMI 447
Interest on refund u/s 244(1A) - Held that:- Following Commissioner of Income-tax Vs. Govindarajulu Chetty (T.N.K.) [1987 (2) TMI 3 - SUPREME Court] - The liability to pay interest would arise when the compensation amount due to the assessee had not been paid, in each of the relevant years - The accrual of interest has to be spread over the years between the date of acquisition till it was actually paid - When a statute brings to charge certain income, its intention is to enforce the charge at the earliest point of time - If the income has accrued earlier and the assessee treats it as taxable during the year of accrual, it is not open to the revenue to treat it as an income in the year of receipt in a case where the assessee follows the mercantile basis of accounts, If such an option is given, the same income becomes taxable twice, once on the basis of accrual and another on the basis of receipt. The reading of Sections 237, 240 and 244(1A) casts a duty on the Assessing Officer to charge that much of tax which the assessee is liable to pay and mandates the refund of the excess amount along with interest - Decided in favour of assessee.
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2014 (1) TMI 446
Exemption u/s 54F - whether the respondent-assessee can be denied benefit of Section 54F because construction of the house had commenced before the sale of the shares i.e., on 17th September, 2008 - Held that:- Following CCE v. Favourite Industries [2012 (4) TMI 65 - SUPREME COURT OF INDIA] - It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally - Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in form of a residential house - Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted - Decided against Revenue.
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2014 (1) TMI 445
Whether income tax component in technical know how fees is allowable u/s 35AB - Held that:- Following assessee's own case for earlier years [1996 (12) TMI 132 - ITAT PATNA] - The amounts in question payable to M/s. ESW, Austria, were not subject to taxation in India and no deduction of tax at source was called for in the case - As per the D.T.A.A between India and Austria amounts paid to M/s. ESW, Austria, for technical services rendered in Austria were taxable in Austria and not in India - There was no question of deduction of tax at source, from the payments made as M/s. ESW, Austria, did not maintain permanent establishment in India - Decided against Revenue.
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2014 (1) TMI 444
Restricting the deduction – Expenses claimed under provision for bad and doubtful debts u/s 36(1)(viia) of the Act – Held that:- Following Kannur District Co-operative Bank Ltd. v. Asst. CIT [2012 (5) TMI 22 - ITAT COCHIN] – As per Part V of the Banking Regulation Act, 1949, the term 'banking company' also includes a 'co-operative bank' - Thus a co-operative bank falls under the definition of "banking company" - the definition given in the Explanation under section 36(1)(viia) of the Income-tax Act, a 'banking company' as defined in section 5(c) of the Banking Regulation Act, which is not a scheduled bank, is classified as a 'non-scheduled bank' - a co-operative bank, would be classified as a 'non-scheduled bank' for the purpose of section 36(1)(viia) of the Act. Netting of provisions made for bad and doubtful debts – Held that:- The provision is created at the end of every year by analysing the quality of advances or debts on certain parameters - the fresh provisions created during the year under consideration alone can be considered for the purpose of provisions of section 36(1)(viia) of the Act - the assessee has credited the entire amount of balance available in the "provision for bad and doubtful debts" account to the profit and loss account - all the debts on which the provisions were created in the earlier years have become quality assets, meaning thereby the provision is no longer required on those debts - only the net accretion to the provisions account for the purpose of section 36(1)(viia) of the Act - The net accretion has to be ascertained by analysing the quality of each asset – decided partly in favour of Assessee.
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2014 (1) TMI 443
Eligibility to claim depreciation u/s 32(1)(ii) of the Act – Right to collect toll treated as intangible asset – Held that:- The ‘Right to collect the Toll’ is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility - The right is not of the nature referred to in section 32(1)(ii) of the Act for the reason that the agreement with the Government of Madhya Pradesh only allowed the assessee to recover the costs incurred for constructing the road facility whereas section 32(1)(ii) of the Act required that the assets mentioned should be acquired by the assessee after spending money - it is wrong to say that right acquired by the assessee was without incurrence of any cost. It is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility - section 32(1)(ii) permits allowance of depreciation on assets specified being ‘intangible assets’ which are wholly or partly owned by the assessee and used for the purposes of its business - The condition is fully satisfied by the assessee - the assessee was eligible for depreciation on the ‘Right to collect Toll’, being an ‘intangible asset’ falling within the purview of section 32(1)(ii) of the Act – Decided against Revenue.
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2014 (1) TMI 442
Reference to the valuation officer not made u/s 50C(2) of the Act - Value adopted by valuation authority exceeds the fair market value of the property – Held that:- Relying upon Meghraj Baid. Versus Income-Tax Officer. 2008 (2) TMI 476 - ITAT JODHPUR] - The assessee has made a claim before the Assessing Officer that the value adopted or assessed by the stamp valuation authority was higher than the fair market value - it is also not the case whether the value adopted by the stamp valuation authority has ever been disputed by the assessee in any appeal or revision or otherwise as referred to in section 50C(2) of the Act - it was incumbent upon the Assessing Officer to refer the matter for valuation to a Valuation Officer has provided in sub-section 50C(2) of the Act - the view taken by the Assessing Officer as well as the Commissioner of Income Tax(A) is not correct - the Assessing Officer failed to refer the matter to the valuation officer u/s 50C(2) of the Act, it would be fit and proper to restore the matter back to the file of the Assessing Officer for a fresh adjudication after referring the matter to the Valuation Officer u/s 50C(2) of the Act – Decided in favour of Assessee.
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2014 (1) TMI 441
Imposition of penalty u/s 271(1)(c) of the Act – Held that:- Regarding unsecured loan in both years, the assessee has not even made an attempt to fulfill the requirement of law by establishing the identity and creditworthiness of the loan creditors and genuineness of the transaction - There is one more addition, i.e., regarding unaccounted income credited by the assessee and not declared the same for tax purpose and similarly the assessee had negative cash balance in Assessment Year 2008-09 shown under that head in Balance sheet without including the same in the income of the assessee - There is no explanation of the assessee as to how the penalty is not leviable and there is a clear cut case of concealment of income as well as furnishing of inaccurate particulars of income - As per explanation 1 to Section 271(1), if the explanation is given, which is not found to be false and some other conditions are fulfilled by the assessee, it can be said that 271(1)(c) is not applicable - no explanation is given by the assessee – Thus, Section 271(1)(c) is clearly applicable – Decided against Assessee. Applicability of Section 41(1) of the Act – Held that:- Penalty in respect of this addition is not justified because such liability is appearing in the balance sheet of the assessee - it cannot be said that the liability has conclusively ceased to exist and hence although the addition is not in dispute - it does not amount to concealment – Thus, Penalty invoking the provision of Section 41(1) of the IT Act set aside – decided in faovur of Assessee.
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2014 (1) TMI 440
Deletion of disallowance u/s 40(a)(i) of the Act – Liability to deduct tax at source on the commission payments made to non-residents u/s 195 of the Act – Held that:- The non-residents are only procuring orders for the assessee and following up payments, no other services are rendered other than procuring the orders and collecting the amounts - The non-residents are not providing any technical services to the assessee - The commission payment made to non-residents also does not fall under the category of royalty or fee of technical services, therefore the Explanation to sub-section (2) of section 9 has no application to the facts of the assessee's case – Following GE India Technology Cen. (P.) Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - the assessee is not liable to deduct TDS when non-residents provided service outside India - when the services are provided outside India, the commission payments made to non-residents cannot be treated as income deemed to accrue or arise in India, therefore, the provisions of section 195 has no application - In order to invoke the provisions of section 195 of the Act, the income should be chargeable to tax in India - the commission payments to non-residents are not chargeable to tax in India, thus, the provisions of section 195 are not applicable – order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 439
Payment made for visa charges liable to fringe benefit tax or not u/s 115WB(2)(F) of the Act - Held that:- Following Assistant Commissioner of Income Tax, Circle 11(4), Bangalore. Versus M/s. Infosys Technologies Ltd. [2012 (12) TMI 804 - ITAT, BANGALORE] - The expenses incurred under the head “Visa Charges and Others” is a legitimate business expenditure incurred by the assessee - They are statutory in nature and are neither paid to the employees nor incurred for the benefit of the employees of the assessee company - These charges are not incurred or paid as a consideration for employment - the expenses under the head “Visa Charges and Others” are not liable for FBT are correct, for the above reasons and is in accordance with law” - Payment on account of ‘Visa charges and others’ are legitimate business expenses and cannot be considered as paid to the employees or incurred for the benefit of employees - These payments are not consideration for employment – Decided against Revenue.
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2014 (1) TMI 438
Difference in the rates of the depreciation - Selection of comparable – Held that:- Honda Siel Power Products Ltd. v. CIT [2007 (11) TMI 8 - Supreme Court of India] - failure to consider a decision of a co-ordinate Bench cited by the assessee is a mistake apparent from record - There is a mistake apparent from record in the order of the Tribunal dated July 22, 2011 on account of non-consideration of the decision of the Special Bench in the case of Quark Systems - the order of the Tribunal dated July 22, 2011 in relation to these two issues is modified, and it is held that since contentions in relation to these two issues are raised by the assessee for the first time before this Tribunal, and as such the Revenue authorities did not have an opportunity to examine the same – thus, the matter is remitted back to the file of the Assessing Officer, for reconsideration of the entire matter in relation to these two issues. Quantification of the amount of risk – Held that:- There was no mistake apparent from record in the order of the Tribunal - the Tribunal has taken a conscious view on the consideration of all the relevant factors – Decided partly in favour of Assessee.
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2014 (1) TMI 437
Exemption u/s 10(23C) – Held that:- If donations are received compulsorily for the admission of students, by whatever name it may be called, i.e. donation, building fund, auditorium fund, etc. over and above the prescribed fee, from the students, the assessee would not be entitled for exemption either under S.10(23C) or under S.11 – Following T.M.A. Pai Foundations and others Vs. State of Karnataka & Others [2002 (10) TMI 739 - SUPREME COURT] - The institution which are collecting capitation fees for admission of students over and above the fees prescribed cannot be construed as charitable/education institution – Since the Revenue authorities have not examined the collection of capitation fees in this case for both the years – The matter was restored for re-examination of the fact whether the assessee is collecting the capitation fees from students or not.
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2014 (1) TMI 436
Disallowance on account of cess on green leaf – Held that:- Following assessee's own case for AY 2006-07 and AFT Industries Ltd. Vs. CIT [2004 (7) TMI 81 - CALCUTTA High Court] – the deduction is eligible after computing the income under rule 8 and the apportionment is to be made only after the income is so computed. Such apportionment cannot be made before the deduction. Rule 8 of the Income-tax Rules, 1962, requires that the computation is to be made as if by fiction the entire income out of the tea grown and manufactured as income assessable under the Income-tax Act, 1961 - Decided against Revenue. Disallowance on account of notional interest on sticky loans – Held that:- Following assessee's own case for AY 2006-07 in ITA No.2248/K/2010 – Decided against Revenue. Disallowance of depreciation – Plant purchased from amount withdrawn from account with NABARD – Held that:- Following assessee's own case for AY 2006-07 in ITA No.2248/K/2010 – Decided against Revenue. Disallowance on account of the expenses u/s. 14A – Held that:- Following assessee's own case for AY 2006-07 in ITA No.2248/K/2010 – Decided against Revenue. Mismatch in ITS details – Transaction of purchase of shares - Held that:- Assessee being a Public Limited Company and its account being subject to audit by internal Auditor as well as statutory auditors, no unaccounted transactions can be done by assessee - the AO has not made any enquiry qua these transactions – Decided against Revenue. Disallowance u/s 14A – Without establishing nexus of expenditure incurred with the earning of exempted income - Held that:- The assessee did not raise any specific issue regarding nexus before CIT(A) - Rule 8D is applicable from AY 2008-09 – Following Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] – Decided against assessee.
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2014 (1) TMI 435
Deduction u/s 80HHC – Held that:- Hon'ble High Courts of Gujarat and Bombay have quashed the amendment and which is affirmed by Hon'ble Supreme Court and the assessee being member of the Association was under the impression that it is pursuing the alternative remedy - Necessary details in respect to deduction u/s. 80HHC of the Act are not available on records and are also to be verified by the AO – The issue was restored for fresh decision.
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2014 (1) TMI 434
Benefit of indexation – To be given from the dates of payment of instalments or from the date of possession - Held that:- To constitute a capital asset the assessee must not be the owner by way of a conveyance deed in respect of that asset for the purpose of computing capital gain - The assessee had acquired a right to get a particular flat from the builder and that right of the assessee itself is a capital asset - By making the payment to the builder and having received allotment letter, the assessee will be holding capital asset - The benefit of indexation has to be granted to the assessee on the basis of payments made by him for acquiring the said asset– Following Praveen Gupta vs. ACIT [2010 (8) TMI 820 - ITAT DELHI] – Decided in favour of the assessee.
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2014 (1) TMI 433
Deduction u/s 80-P – Interest earned on Bank Fixed Deposit - Held that:- The assessee is not a co-operative Bank, but its nature of business was coupled with banking with its members, as it accepts deposits from and lends the same to its members - To meet any eventuality, the assessee was required to maintain some liquid funds - The assessee had invested in short-term deposits – The interest income is not taxable u/s 56 - benefit of deduction u/s.80P(2)(a)(i) was rightly granted by ld.CIT(A) - Decided in favour of assessee.
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2014 (1) TMI 432
Disallowance u/s 14A – Disallowance on account of administrative expenses for managing the portfolio - Held that:- Following Maxopp Investment Ltd. v. CIT [2011 (11) TMI 267 - Delhi High Court] - The Assessing Officer have to indicate cogent reasons for the same – The determination of the amount of expenditure in relation to exempt income under rule 8D would be done when the Assessing Officer rejects the claim of the assessee in this regard - The operation of Rule 8D is applicable prospectively w.e.f. A.Y. 2007-08 - The assessee suo motu had made the disallowance of administrative expenses - Decided in favour of assessee.
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2014 (1) TMI 431
Penalty u/s 271(1)(c) – The assessee has claimed expenditure comprising of bank charge, legal and professional expenses, telephone and trunkcall expenses, account writing charges and interest on bank O/D - These expenses were claimed as expenditure u/s 57 against the income earned from other sources - Held that:- The expenses do not have any direct nexus with the income shown under the head income from other sources - Following CIT vs. Reliance Petro Products [2010 (3) TMI 80 - SUPREME COURT] - Merely because the assessee has claimed the expenditure and the claim has not been accepted or was not acceptable to the Revenue by itself would not attract penalty u/s 271(1)(c) – Decided in favour of assessee.
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Customs
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2014 (1) TMI 430
Waiver of pre-deposit - Imposition of penalty - Smuggling of Micro Brand SD Memory cards of 2GB concealed in the refrigerators - Confiscation of goods - Imposition of redemption fine - Held that:- Assessee is an authorised unit under SEZ for trading activities and has been allowed to import goods for trading purpose and the said goods were used for concealing later on being cleared without proper declaration. The findings recorded by lower authorities, who came to the conclusion for imposing penalties as indicated herein above, needs to be gone into detail along with the law, which, in our view, can be done only at the time of final disposal of the appeals - appellants have not made out prima facie case for complete waiver of the amounts of penalties imposed - Partial stay granted.
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2014 (1) TMI 429
Denial of refund claim - Non provisional assessment of Bill of Entry - Duty under protest not paid - Reassessment of refund claim - Held that:- where there was no lis between the two parties at the time of assessment of the Bill of Entry or at the time of clearance of the goods from the warehouse because it appears that the fact that a notification was issued on the date of clearance was not known to either side. Therefore, it cannot be said that the assessment finalized a dispute which was existing between the two parties - There is nothing in the order which would suggest that a patent mistake which was not adjudicated upon could not be rectified through the refund mechanism under section 27 of the Customs Act In fact in that case the assessee’s refund claim was rejected on the ground that the claim was filed beyond the time limit prescribed and not for the reason that the order was not challenged under section 128. Duty was paid under protest which implies that there was a dispute between the department and the importer initially. In the facts of the present case there was no dispute between the appellant and the Department at the time of import but an assessment was done based apparently on wrong figures which both sides did not notice. By processing the refund claim there is no review of an adjudication done earlier because no dispute was adjudicated by the assessment order. The fact that the appellant could have challenged the assessment under section 128 of the Customs Act cannot be a reason to deny processing of a refund claim if filed within the four corners of the provisions under section 27 of Customs Act - if there was a dispute between the two parties at the time of import where there are inadvertent errors, the remedy under Section 27 can be resorted to without challenging the so called assessment order on the Bill of Entry - matter is remitted to the adjudicating authority for examining the refund claim to see whether the requirement under section 27(1A) of the Customs Act has been complied with and then decide the claim - Decided in favour of assessee.
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2014 (1) TMI 428
Confiscation of goods - Order of re export - Contravention of provisions of Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008 - Held that:- goods have already been released as per the order of Hon'ble High Court. Further, Commissioner (Appeals) set aside the adjudication order after following the order of the High Court and directed the respondent to follow the procedure to get the goods examined in the presence of the appellant. We do not find any reason to interfere with the order of Commissioner (Appeals) - Decided against Revenue.
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2014 (1) TMI 427
Duty demand - Import of capital goods and consumables under Notification No. 126/94-Cus., dated 3-6-1994 - Procurement of similar items domestically under Notification No. 136/94-C.E., dated 10-11-1994 - Debonding of gods - Held that:- where the goods were permitted to be taken outside by the Development Commissioner on debonding, the duty has to be charged on the depreciated value inasmuch as the goods have been imported under Notification No. 126/94. In case of non-fulfilment of export obligation and in case where debonding were permitted by the Development Commissioner, the duty liability has to be computed on the depreciated value as is clear from the above Notification - Notification Nos. 52/2003 and 22/2003 have no application whatso-ever (in respect of goods imported/procured indigenously prior to the date of issue of these notifications) and (duty liability will have to be determined) under the provisions of Notifications under which the goods were imported/procured indigenously and wherever the units were allowed to be debonded, depreciation should be granted in terms of Board’s Circular No. 43/98-Cus., dated 26-6-1998. Appellant is liable to pay duty only on the depreciated value of the capital goods - both the Development Commissioner and the Joint DGFT have permitted the appellant to clear the capital goods under EPCG scheme. Therefore, the rate of duty that can be charged on the goods being debonded would be the rate applicable to the capital goods under EPCG scheme at the time of debonding - no duty liability would accrue in regard to raw materials, consumables etc. imported/indigenously procured which have been consumed for the production of cut flowers, as the goods have been used for the intended purpose - Matter remanded back for duty computation - Decided in favour of assessee.
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2014 (1) TMI 426
Duty demand - Import of aluminium dross - Liability for Additional Duty of Customs equal to Excise duty - Held that:- value was enhanced on the basis of a circular which is in respect of copper dross and copper residues and after taking into consideration that the dross contains 50% of the aluminium. The Revenue is not relying upon any other import made by other importers for the same goods during the same period. The Commissioner (Appeals) also noted the fact that there was no reason given by the Adjudicating Authority for enhancement of the value. Further we find that the cost for extracting aluminium from dross cannot be equated with the cost of copper from copper dross and that circular cannot be blindly applied. In these circumstances we find no reason to reject the transaction value as declared by the appellants in the Bill of Entry in view of the decisions of Hon’ble Supreme Court in the case of Eicher Tractors reported [2000 (11) TMI 139 - SUPREME COURT OF INDIA] - Decided against Revenue.
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Service Tax
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2014 (1) TMI 460
Condonation of delay - Non delivery or order - Construction of complex services - Registration not obtained with the Department of Service Tax - Held that:- order dated 2-1-2008 was dispatched by registered post and the same was delivered to the petitioner-company on 3-1-2008. The delivery of the said order has not only been presumed but it has also been proved from the certificate of the Postal Department duly indicating that the said order was delivered to the assessee. It has been found as a fact that the address on which the said order was sent is admittedly correct and, therefore, the Appellate Authorities were fully justified that in view of Section 37C of the Act it is to be presumed that the said order was duly delivered to the petitioner-company. The presumption under Section 37C of the Act is rebuttable, but to rebut the same, the petitioner-company did not lead any cogent evidence. Merely an affidavit of the Director of the petitioner-company had been filed again stating that they had not received the order dated 2-1-2008 any time before 14-8-2008. Thus, it cannot be taken as an evidence to rebut the evidence led by the Revenue department which clearly established that the registered letter through which the order dated 2-1-2008 was sent was duly delivered to the petitioner-company on 3-1-2008 - No illegality in the order passed by the 1st Appellate Authority declining to condone the delay and to hear the case on merits - Decided against assessee.
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2014 (1) TMI 459
Jurisdiction u/s 73 - Bar of limitation - Whether the show cause notices issued to the respondents, seeking to recover service tax under Section 73(1A) of the Finance Act, 1994, as amended with effect from 10.9.2004, for failure to pay service tax and file return as required by the proviso to Section 68(1) and 71A of the Finance Act, 1994, read with Rule 7A of the Service Tax Rules, 1994, could be sustained as within the period of limitation - Held that:- by virtue of the amendment to the word "assessee" in Section 65(5) and the amendment to Section 66(3), the liability to pay the tax is not on the person providing the taxable service but, as far as the service provided by clearing and forwarding agents and goods transport operators are concerned, on the person who pays for the services - even the amended Section 73 of the Act covered only those assessees who were liable to file returns under Section 70 of the Act and in the case of availers of Goods Transport Service, the liability to file return was under Section 71A of the Act and the class of persons coming under Section 71A of the Act were not brought under the service tax net under Section 73 of the Act - Revenue has necessary jurisdiction under Section 73 of the Act, particularly with reference to the limitation prescribed thereunder. Considering the limited purpose for which Section 71A of the Act was introduced to cover the period of six months and in terms of Sub-section (1) of Section 73 of the Act where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the proper officer, within one year from the relevant date, is entitled to serve notice, requesting the assessee to show cause why he should not pay the amount specified in the notice. For the purposes of Section 73 of the Act, ‘relevant date’ has been defined under Sub-section (6) of Section 73 of the Act. Therefore, the contention of the assessee that Section 71A of the Act is just a procedural provision and hence there could be no jurisdiction on the Authority to pass an assessment, is a plea to be stated only to be rejected. In order to levy penalty under Section 78 of the Act, it is necessary to establish that Service Tax had not been paid by reason of fraud or collusion or wilful mis-statement or suppression of fact or contravention of any of the provisions of the Act, with an intent to evade payment of Service Tax - there is no such finding against the assessee of it being guilty of wilfully not paying tax by reason of any of the matters provided in clauses (a) to (e) of Section 78(1) of the Act. Furthermore, Section 80 of the Act, which starts with a non-obstante clause, states that notwithstanding anything contained in the provisions of Sections 76, 77 and first proviso to Sub-section (1) of Section 78 of the Act, no penalty shall be imposable for any failure referred to in the said Provision viz., for failure to pay service tax, for contravention of Rules and Provisions of the Act, or for suppression of facts etc., if the assessee proves that there was reasonable cause for such failure. There was wilful evasion to pay tax or not to comply with the provisions of the Act. As may be seen from the preceding paragraphs, the assessees appeared to have been under the bona fide belief that they are not liable to pay Service Tax and in support of their claim - there was no justification for imposition of penalty, especially when there was no allegation of fraud, mis-representation, etc., Accordingly, the penalty imposed on the respondents/assesees shall stand deleted - Decided partly in favour of Revenue.
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2014 (1) TMI 457
Contractual agreement between the service provider and service receiver - who will bear the burden of service tax - partial reverse charge after 1.7.2012 - Deduction of 50% of the Service Tax - Liability of 12% leviable under Section 66B - Service Tax not separately charged or shown in the Bills raised by the contractors - Reverse Charge Mechanism - Section 68 - Held that:- one does not know, whether all the members of the petitioner Association are individual contractors, HUF or Partnership firm or are body corporates. In the absence of said material on record, the very foundation of applicability of the said Notification falls on the ground and cannot be decided in the present case. The entire dispute raised by the petitioner Association that the liability to pay Service Tax to the extent of 50% has been fixed on the service receiver, namely the Nigam, therefore, the respondent-Nigam should bear the 50% of the tax liability on its own and cannot deduct the same from the bills of the contractors depends upon the terms of contract itself, but since no material has been placed on record in this regard, therefore, this Court cannot be expected to decide such academic and hypothetical questions, which essentially depend upon the intricate terms of the contract. Prima facie, since Section 68(1) of the Act affixed the liability to pay the Service Tax on a person providing the taxable service, the liability to pay such tax would be on the contractors and the Notification No. 30/2012, dated 20-6-2012 dividing the liability to pay such Service Tax to the extent of 50% by both service providers and service receivers, which is issued under Section 68(2) of the Act, quoted above, will not absolutely absolve the petitioner contractors from their liability to bear the entire Service Tax liability - taxable event is the providing of service, which in the present case would be point of time of execution of works contract itself, which is prior to 1-7-2012. Mere payment of such Bills for work already done after 1-7-2012 would not alter the applicability of law as applicable to the petitioner contractors prior to 1-7-2012. For this reason also the action of respondent-Nigam cannot be challenged by the petitioner-Association on the basis of change of legal position after 1-7-2012. Court finds no ground to decide the academic questions raised in the writ petition even of interpretation of provisions of law and Notification, since such questions are merely academic and hypothetical questions and no proper factual foundation or relevant evidence is available on record to decide such questions, which are essentially the questions of facts based on terms of the contract. The individual contractor can very well raise these questions either before the assessing authority, who implement those provisions of Service Tax of Central Excise Department and if they have lis against the respondent-Nigam, the arbitration clause in the contract can take care of such disputes - Decided against the petitioner association.
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2014 (1) TMI 456
Denial of Cenvat credit – Input services not relatable to final product – Waiver of Pre-deposit – Held that:- Following Suzuki Motorcycle (I) Pvt. Ltd. vs. CCE, Delhi-III, Gurgaon [2011 (2) TMI 56 - CESTAT NEW DELHI] – maintenance of R.O. plant is for providing pure water to the employees of the company - canteen is one of the essential requirements for running a factory - prima-facie supply of pure water is one of the essential requirements for running of the factory – Pre-deposits waived till the disposal – unconditional stay granted.
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2014 (1) TMI 455
Demand of service tax - Cost of the service paid by M/s. Tata Motors - whether the value of the services can be split as ‘cost of spare parts’ and ‘cost of services’ and as to whether the applicant has the option not to pay tax on the value of the spare parts used - Held that:- Debit Notes raised by M/s. Tata Motors for cost of the goods and the components of such Debit Notes is not disputed. That being the case, prima facie, the applicant is eligible for exemption under Notification No.12/2003 and, therefore, we grant waiver of pre-deposit of dues arising from the impugned order for the purpose of admission of the appeal and there shall be stay of collection of such dues during the pendency of the appeal - Stay granted.
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2014 (1) TMI 454
Waiver of pre deposit - Security agency service - Section 65(94) - Held that:- Police department of State of Rajasthan does not appear to have carried out any business of providing such service. This is our prima facie view subject to testing of the matter further if Police Act of Rajasthan provides otherwise. Accordingly, stay application is allowed and there shall be waiver of pre-deposit of Service tax demand during pendency of the appeal - Stay granted.
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2014 (1) TMI 453
Availment of CENVAT Credit - Abatement of 67% from the value of commercial or industrial construction service under Notification No. 15/2004-S.T., dated 10-9-2004 - Held that:- Upon examination of the Circular No. 80/10/2004-S.T., dated 17-9-2004 read with the Notification No. 15/2004-S.T., dated 10-9-2004 Revenue intended taxation by value addition, but the assess refuted the same. Adjudicating authority appears to have rightly decided the issue against the assessee following taxation of incremental value principle. In sofar as taxing of the advance is concerned, there is no ambiguity in the law. Law prescribes that the consideration received before, during and after providing of taxable service should enter into the net of the service tax - Cenvat credit is allowable to avoid cascading effect. If taxability does not arise admissibility of Cenvat credit does not arise. Therefore, adjudication has rightly been done on this count also denying the benefit - Decided against assessee.
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2014 (1) TMI 452
Receipt of services of banking and financial services from the foreign banks - Imposition of penalty under Sections 75A, 77 and 78 - Held that:- amount on which the service tax is demanded had been paid by the Appellant to ICICI Bank Ltd. against the bills raised by the bank. We also find that there is a letter from ICICI Bank addressed to the jurisdictional Range Superintendent informing that in respect of the amount recovered from the appellant, they had paid the service tax to the Government. When the appellant had received the service of opening letter of credit from ICICI Bank Ltd. and it is through ICICI Bank Ltd. that they had received the export proceeds and the charges for the services availed had been paid to the ICICI Bank Ltd., we are, therefore, of the prima facie view that there is no banking and financial services, which have been received by the appellant from any foreign bank and as such, the impugned order confirming service tax demand is not correct. In view of this, the requirement of pre-deposit of service tax demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - Stay granted.
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2014 (1) TMI 451
Waiver of pre-deposit of Service Tax - MODVAT Credit of Service Tax - C & F agent services - Held that:- as the applicant satisfies the condition of service, the benefit of the credit of Service Tax paid by C & F agent has to be extended to the assessee - Since this would be in relation to business, in addition to the activities relating to the manufacture, the appellants’ action of availing Cenvat credit on the service tax paid by the C&F Agency on such activities cannot be considered as irregular. Thus, the impugned orders are liable to be set aside - Following decision of RASHTRIYA ISPAT NIGAM LTD. Versus COMMR. OF C. EX., VISAKHAPATNAM [2010 (3) TMI 356 - CESTAT, BANGALORE] - Stay granted.
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2014 (1) TMI 450
Denial of benefit of Rule 6(3) of the Service Tax Rules, 1994 - Service recipient or provider - Held that:- Rule 6(3) applies to an “assessee” and the term “assessee” has been defined under Section 65(7) of the Finance Act, 1994 to mean ‘a person liable to pay service tax’. In view of the fact that the appellants as recipients of Goods Transport Service are liable to pay Service Tax, they come under the category of “assessee” and, therefore, Rule 6(3) of the Service Tax Rules, 1994 squarely applies to them in the facts of the present case - Decided in favor of assessee.
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Central Excise
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2014 (1) TMI 425
Modification of stay order - Reduction in the amount of pre-deposits ordered to be submitted – Held that:- The directions to deposit an amount of Rs. 10,00,000/- and to give bank guarantee of Rs. 10,00,000/- out of the total confirmed demand of more than Rs. 1,00,00,000/- cannot be held to be harsh – Decided against Assessee.
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2014 (1) TMI 424
Shortage of stock of finished goods - Waiver of Pre-deposit of Penalty u/s 11AC of the Central Excise Act, 1944 – Personal penalty u/s 26 of the Central Excise Rules, 2002 – Held that:- The entire amount of duty has been paid during the course of investigation by the applicant, M/s Impex Ferro Tech. Ltd. and the same has not been disputed by the A.R. for the Department - the applicant has made an offer to deposit an amount of Rupees two lakhs fifty thousand in addition to Rs.1.00 lakh already paid by them - The offer made by the assessee is accepted - the applicant, is directed to deposit the pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2014 (1) TMI 423
Clandestine manufacture and removal of ‘Chakado Rickshaw’ from the factory premises – Waiver of pre-deposit – Held that:- The evidence which has been relied upon is not only the statement of the proprietor but also of the dealer, who had recorded that they had forwarded the Chakado Rickshaws manufactured by the appellant for registration - for registration of Chakado Rickshaws, RTO authorities insist upon sales invoice of the manufacturer of a particular vehicle - When RTO authorities have specifically stated that they have registered so many numbers of Chakado Rickshaws manufactured by the appellant, the entire issue needs to be gone into detail as to who issues the sales invoices of Chakado Rickshaws and how these Chakado Rickshaws got registered with the RTO authorities - Prima-facie, the appellant has not made out a strong case for complete waiver of pre-deposit of amount – the appellant directed to deposit an amount of Rupees fifty lakhs as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.
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2014 (1) TMI 422
Inclusion of Bonus in the assessable value – Waiver of Pre-deposit – Held that:- Following Burn Standard Co. Ltd. Versus Commissioner of Central Excise, Salem [2012 (11) TMI 636 - CESTAT, CHENNAI ] – Held that:- Full waiver of predeposit of duty, interest and penalty granted - the pre-deposit of duty, penalty and interest amounts and stay its recovery during the pendency of the appeals – Stay granted.
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2014 (1) TMI 421
Classification of Goods – Chapter 9 OR Chapter 21 - Duty demand on Sambar powder, Rasam powder, Garam masala – Waiver of Pre-deposit – Held that:- Following CCE Mumbai-III Vs Narendrakumar & Co. [2008 (7) TMI 224 - CESTAT MUMBAI] – the issue would be looked into at the time of appeal hearing - the requirement of pre-deposit of duty along with interest and penalties waived – Stay granted.
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2014 (1) TMI 420
Cenvat credit on MS plates, channels, sheets, angles - Goods used for Fabrication of storage tanks and columns of Atmospheric Suction Unit plant - Capital goods as per Rule 2(a)(A) (iii) of the CENVAT Credit Rules, 2004 – Waiver of Pre-deposit – Held that:- The focus was on time-bar - The counsel has submitted that only an amount of Rs.6 lakhs can be demanded for the normal period - the appellant can pre-deposit an amount of Rs.10 lakhs for the present purpose – the offer made by the appellant accepted and the appellant directed to pre-deposit the amount of Rupees ten lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2014 (1) TMI 419
Refund of duty rejected – Doctrine of unjust enrichment – Held that:- The merits of the case stand held in favour of the assessee, the issue of unjust enrichment is required to be examined - the appellant bifurcated the total consideration received from their customers into the value of the goods as also excise duty shown separately on the invoices - The total of the cost plus excise duty was being recovered from their customers - examination of invoices clearly show that the excise duty paid by the appellant was being recovered from their customers - the appellant has not been able to discharge the onus placed upon it for proving that excise duty has not been recovered from their customers - total consideration received by them from their customers prior to disputed period stand bifurcated into the cost and excise duty (though the total remained the same) makes it very clear that it was the cost of the product which was reduced by the appellant during the relevant period and the that the refund claim is not admissible on the basis of unjust enrichment where reduced cost along with leviable excise duty was being recovered by them – Decided against Assessee.
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2014 (1) TMI 418
Denial of Cenvat credit on the capital goods - Plant and machinery not used in the manufacture of Denatured Spirits, but in fractionated pure/impure spirit which is a non-excisable product – Held that:- Following RANA SUGAR LTD. Versus COMMISSIONER OF CENTRAL EXCISE, LUDHIANA [2012 (11) TMI 299 - CESTAT, NEW DELHI] - as much as the capital goods were used in the process of manufacture of intermediate exempted products, which were further used in the manufacture of dutiable final products, credit cannot be denied – order set aside – Decided in favour of Assessee.
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2014 (1) TMI 417
Capital goods cleared as scrap – Notice issued under Rule 57S(2)(C) of Central Excise Rules, 1944 – Duty demand on transaction value of the scrap – Held that:- The demand has been confirmed by invoking Rule 57S (2)(C) of the Central Excise Rules 1944 on the ground that scrapped capital goods were Cenvat credit availed - There is absolutely no evidence on record to show that the Cenvat Credit had been availed in respect of the capital goods which were subsequently cleared as scrap - if the department alleges that the scrap of capital goods was Cenvat credit availed, it was for the department to prove so –Following Shahabad Coop. Sugar Mills Ltd. vs. CCE, Panchkula [2010 (8) TMI 561 - CESTAT, NEW DELHI] – Orders set aside – Decided in favour of Assessee.
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2014 (1) TMI 416
Belated filing of appeal - Inability to justify the delay of 29 days – Held that:- The first appellate authority has held that the reason given for belated filing the appeal as to the Consultant being not well, without any documentary evidence, cannot be accepted as a justifiable reason - for the error of advocate/consultant, an assessee should not be put to difficulty - this is a fit case wherein the first appellate authority should have condoned the delay and the matter is remitted to the first appellate authority to dispose the matter on merit – Decided in favour of Assessee.
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CST, VAT & Sales Tax
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2014 (1) TMI 458
Disallowances of installation charges and transportation charges - Levy of Value Added Tax - Held that:- Petitioner is engaged in trading of house hold articles, electrical and electronic goods etc. manufactured by other companies. Petitioners have produced the price lists issued by the manufacturers. A perusal of these price lists specify that the prices are exclusive of installation charges. Further the invoices raised by the petitioners specifies that the prices of goods are ex-showroom price. It further specifies that transfer of title in goods takes place at the place of seller. Therefore, the sale price of the goods at the ex-showroom price attracts sales tax. Subsequent to the transfer of title in the goods at the place of seller they Act as agents of customers for transportation of goods and to installation purpose. Therefore the transportation charges and the installation charges do not become the part of sale price of the goods. The invoices produced by the petitioner specifies under different heads, the sale price of the goods, the transportation charges and the installation charges. Petitioners have collected transportation charges and the installation charges from the customers under different heads in the invoices raised by them. Further it is not in dispute that the petitioners have paid service tax on these transportation charges and installation charges. Thus the petitioners have discharged their legal obligation of paying the service tax on the services rendered by them. The State Government cannot enrich by wrongly bringing the transportation charges and the installation charges as part of sale price of the goods. Therefore the impugned orders are liable to be quashed - Decided in favour of assessee.
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Wealth tax
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2014 (1) TMI 461
Jurisdiction under Section 18-B - Imposition of penalty - Deposit of wealth tax after due date - Held that:- A perusal of Section 18B of the 1957 Act would reveal that it commences with a non-obstante clause thereby indicating that while considering a prayer for reduction/waiver of penalty, a Commissioner shall consider such factors as are enumerated in Section 18-B of the 1957 Act and no other factor. A perusal of the impugned order, reveals that factors enumerated in Section 18-B of the 1957 Act have not been considered - Therefore, matter is remitted back - Decided in favour of assessee.
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