TMI Tax Updates - e-Newsletter
January 17, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Capital gains tax - dissolution of firm - Transactions not regarded as transfer - The finding that there was no distribution of assets does not lead to a conclusion that there is no transfer at all, particularly when it is not even disputed that the sale as such has taken place, with the participation of the appellant. - HC
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Income Tax:
The mere ipse dixit of the Officer is not a ground to deny the claim made by the assessee - expenses incurred towards foreign travel of the wife of the partner along with other persons should be treated as expenditure incurred wholly and exclusively for the purpose of the business. - HC
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Income Tax:
The contribution received by way of sponsorship, advertisement, sale of tickets etc. and user charges on the facts of this case, do not convert the charitable activity into “trade, commerce or business” activity - AT
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Income Tax:
Eligibility to claim of exemption u/s 11 - justification of incurrence of certain expenses - payments made by the assessee Society to its members have not been shown to be unreasonable - AT
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Customs:
Goods abandoned - Relinquishment of the warehoused goods - Chief Commissioner had allowed the relinquishment of the goods and the goods were auctioned and therefore, the demand of duty is not sustainable - AT
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Central Excise:
Denial of rebate claim - Area based exemption - goods were manufactured by a manufacturer who has availed benefit of Notification No.39/01-CE(NT) - benefit of rebate denied - CGOVT
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VAT:
Nature of cooperative society, dealer or not - society acted as an intermediary, bringing together the agriculturists-principals and the buyer, and they have no authority to sell the goods - not liable to be taxed - HC
Articles
Notifications
Circulars / Instructions / Orders
News
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WTO should be more responsive to needs of developing and least-developed countries: Nirmala Sitharaman
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Finance Minister Shri Arun Jaitley Stressed the need for Long Term Investment in Agriculture for Meeting the Food Related Demands of the Country in the Future;
Asks NABARD to Continue to address the Inadequacies in Rural Finance Market
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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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Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified
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JBIC Survey Ranks India as No. 1 Destination for Future Investments
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RBI Reference Rate for US $
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Finance Minister Stresses the need to Give Impetus to Credit Growth; Reassures the Banks and Financial Institutions About Government’s Commitment of Non-Interference in Matters of Commercial Decisions, Transfers and Postings Etc.
Case Laws:
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Income Tax
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2015 (1) TMI 618
Determination of G.P. rate - rejection of books of accounts - addition of ₹ 19,08,583/- G.P. rate at 4.9% as against 2.58% declared by the assessee - Held that:- Contention of the Department that in similar line of business, the G.P. rate, as accepted by the Tribunal, is in the range of 3.61% to 3.63% and, therefore, the same should be accepted is acceptable because when G.P. rate is applied for similar line of business, then for same assessment year there could not be any wide variation in the G.P. rate. Merely because assessee has shown better result for the current year cannot be the sole criteria and due regard has to be given to the G.P. rate adopted in same line of business for same assessment year. The G.P. rate in the case of Sat Paul & Sons (selected as comparable cases) has been taken at 3.53%. The AO has considered the case of Sat Paul & sons as one of the comparable cases and we find that in the similar line of business the G.P. rate accepted by the Tribunal in the case of Krishan Kumar [2012 (9) TMI 548 - ITAT, DELHI] is 3.61% and in the case of Jai Parkash 3.63%. Therefore, considering all comparable cases, we are of the opinion that it would serve the interest of justice if the G.P. rate of 3.53% is adopted in the case of the assessee as was in the case of Sat Paul & Sons. We order accordingly. - Decided partly in favour of assessee as well as the Revenue.
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2015 (1) TMI 617
Opinion formation in terms of Section 158BB of the Income Tax Act, and the time within which it had to be recorded was complied with - Hon’ble Supreme Court which had by its judgment and order reported as CIT V. Calcutta Knitwear (2014 (4) TMI 33 - SUPREME COURT) questioned - Held that:- On going through the alleged office note available it is found that the office note has been allegedly signed on 29th Aug., 2002 that is the date on which the assessment order in the case of M/s Friends Portfolio (P) Ltd. was completed. On closer scrutiny of the facts and circumstances mentioned above including the fact regarding the mention of satisfaction note in the case of "this company" and proposal for centralization of the case in the circle in which the cases of searched persons fell, as referred to above, and also in view of the circumstances relating to this issue, we find force in the submissions of the learned Counsel for the assessee made before us and conclude that no satisfaction note was prepared on 29th Aug., 2002 and this note has been prepared even after 26th Nov., 2002. In the present case the revenue’s contention are not different from what they were in the main appeal, which was decided in the judgment reported as CIT V. Radhey Shayam Bansal (2011 (5) TMI 416 - DELHI HIGH COURT ). It is sought to be reported that the opinion formation contained in the letter dated 15.7.2003 accords with the opinion of Section 158BB. the appellant-revenue has not discharged the onus that there was valid satisfaction as required under Section 158 BD. Therefore, the irresistible conclusion is the pre-requisite of “satisfaction” as engrafted under Section 158B for the purpose of initiation of block assessment proceeding is non-existent or absent. - Decided against revenue.
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2015 (1) TMI 615
Unaccounted income - comparison of assessee with other two concerns connected with the assessee company - rejection of books of accounts - Assessee company is engaged in the business of grey cloth manufacturing and also selling dyed and printed cloth after processing in other dyeing houses on job work basis - ITAT deleted the addition - Held that:- Tribunal has rightly held that the books of account, which were sought to be rejected only on the ground of excessive fuel charges, were not according to law and the Tribunal has held that the books of account of the assessee were wrongly rejected and in that view of the matter, the question of Gross Profit will not arise, in our view, while considering the case of other sister concerns or units, the Tribunal has rightly analysed the facts and figures and has rightly held in favour of the assessee. We are in agreement with the same and accordingly we answer the question of law holding that in the facts on record, the Tribunal has rightly deleted the entire addition of ₹ 3,23,01,330/- made on account of unaccounted income generated by the assessee. - Decided in favour of assessee.
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2015 (1) TMI 614
Deduction under Section 80IA - Disallowance on the ground that the printing work of various type is not a manufacturing activity, eligible for deduction u/S 80IA and that the assessee employed lesser number of workers than required as per the provisions of Section 80IA(2)(v) - Held that:- Tribunal was right in law in holding that the business activity of the assessee was manufacturing within the meaning of Section 80IA(2)(iii) of the I.T.Act. The assessee had complied substantial compliance with the provisions of Section 80IA(2)(v) of the Income Tax Act. Therefore, considering the facts of the case and the principle laid down in the case of Harit Synthetic Fabrics Pvt. Ltd. (1985 (10) TMI 69 - BOMBAY High Court) and Bajaj Tempo Ltd. (1992 (4) TMI 4 - SUPREME Court), we are of the opinion that the present appeal deserves to be allowed. Therefore, we hold that the Tribunal was not right in holding that that the assessee had not fulfilled the condition of 10 or more workers stated in Section 80IA(2)(v) of the Income Tax Act. - Decided in favour of assessee.
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2015 (1) TMI 613
Deduction under Section 80HHC - ITAT allowed the claim of the assessee for 10% of the expenditure relating to indirect cost for computing deduction - Held that:- under section 80HHC(3)(b) one has to balance the "principle of attribution" with the concept of "allocation". The concept of allocation is meant to reduce the incentive. However, when "allocation" has to be balanced with the "principle of attribution", the object is to reduce the incentive and not to eliminate it. The question of law raised in this appeal is thus answered in favour of the assessee and against the revenue. Accordingly, we hold that the Tribunal was right in law in allowing the claim of the assessee for 10% of the expenditure relating to indirect cost for computing deduction under Section 80HHC. - Decided in favour of assessee. Penalty u/s 271(1)(c) - addition made in the quantum proceedings - Held that:- As the said addition was subsequently deleted by the Tribunal in ITA No.45/Ahd/2005. Since the penalty was a consequential action of the addition made, the same would not survive when the addition itself has been deleted by the Tribunal.Tribunal was right in cancelling the order of penalty imposed on the assessee. - Decided in favour of assessee.
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2015 (1) TMI 612
Unexplained cash credit - CIT(A) deleted the addition - Held that:- Commissioner of Income Tax (Appeals) has gone into the individual transaction on merits holding that payments were made through banking transactions and deleted the addition. The Tribunal has also once again verified the same and held in favour of the assessee. Being pure question of fact, which was verified by the Commissioner of Income Tax (Appeals) and again verified by the Tribunal and confirmed the same, we find no question of law much less any substantial question of law arises for consideration in this appeal. - Decided in favour of assessee.
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2015 (1) TMI 611
Capital gains tax - dissolution of firm - Transactions not regarded as transfer - appellant sold its assets, worth ₹ 33,02,349/-; the actual sale value thereof is ₹ 1,12,93,389/- - makeover of assets from the firm to its own sister company - Held that:- The Tribunal held that the sale took place, before the dissolution of the firm and it is not a case of distribution of assets, contemplated under Section 45 (4) of the Act. The argument on behalf of the appellant that once the case does not fall under Section 45 (4) of the Act, the matter must be left at that, cannot be accepted. The finding that there was no distribution of assets does not lead to a conclusion that there is no transfer at all, particularly when it is not even disputed that the sale as such has taken place, with the participation of the appellant. In the instant case, the consideration in the form of allotment of shares was paid to the partners of the appellant on its instructions. There was no direct transaction between the partners on the one hand and the transferee company, on the other. An attempt is made to apply the concept underlying Clause (xiii) of Section 47 of the Act. Firstly, the provision was not in vogue in the relevant assessment year. Secondly, assuming that the concept was in the offing and in a given case, it may be applied if the facts support. The case of the appellant does not fall into that. It was not a case of succession of the firm by the appellant firm by the transferee company, much less there was any exercise of corporatisation or demutualization, which are essential to attract Clause (xiii) of Section 47 of the Act. The appellant is not able to demonstrate that the figures mentioned by the Assessing Officer are incorrect. Appeal dismissed. - Decided against assessee.
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2015 (1) TMI 610
Foreign travel expenses incurred towards the wife of the partner - whether allowable expenditure? - Held that:- As per the partnership deed, the wife of the assessee was one of the partner of the firm. Hence, the Tribunal was justified in granting the benefit to the assessee on the basis of the partnership deed. We find no reason to discredit the finding of fact, more so, after perusing the assessment order passed under Section 143(3) read with Section 147 of the Income Tax Act, which contains no reason as to why it should not be treated as business income. The mere ipse dixit of the Officer is not a ground to deny the claim made by the assessee. Hence, the expenses incurred towards foreign travel of the wife of the partner along with other persons should be treated as expenditure incurred wholly and exclusively for the purpose of the business. - Decided in favour of assessee.
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2015 (1) TMI 609
Determination of capital gain on transfer of plot of land at Ghaziabad - Held that:- By executing the sale deed in June, 2005, the assessee has only completed the contractual obligation imposed upon it by virtue of the sale agreement, Since the process of sale has been initiated from the date of sale agreement, in our opinion, the character of the transaction vis-a-vis Income tax Act should be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into. Accordingly, the applicability of the provisions of section 50C should be looked at only on the date of sale agreement. The assessee has filed a certificate obtained from the Joint Sub Registrar, Visakhapatnam, regarding market value of the impugned property as on the date of the sale agreements. The said certificate was not produced before the tax authorities. As already held that the provisions of section 50C should be applied to the impugned sale transactions as on the date on which sale agreements were entered into. Since the applicability of section 50C as on the date of sale agreements is required to be examined by the AO, we set aside the issue to the file of the AO with a direction to compute the capital gains on sale of impugned properties after applying the provisions of section 50C as on the date of sale agreements. Accordingly, the order of Ld CIT(A) is reversed. - Decided in favour of assessee for statistical purposes. Disallowance of prior period expenses - Held that:- Though expenditure incurred is reported as prior period expenditure, yet expenditure is allowable in the instant year. It is seen that the expenditure claimed represent bills settled during the course of business during the year under consideration. It is otherwise too well settled law that a contractual liability is allowable in the year of crystallisation of liability [Kedarnath Jute Manufacturing Company Limited Versus CIT (Central), Calcutta - 1971 (8) TMI 10 - SUPREME Court]. Having regard to the aforesaid factual and judicial positions, we delete the disallowance made and sustained by the authorities below and allow the ground raised by the assessee. Decided in favour of assessee. Disallowance u/s 14A - Section 14A to be worked for the period prior to the introduction of Rule 8D - Held that:- Sub-sections (2) & (3) of section 14A and Rule 8D would operate prospectively (and, not retrospectively) does not mean that the assessing officer is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure. If he is satisfied that the assessee has correctly reflected the amount of such expenditure, he has to do nothing further. On the other hand, if he is satisfied on an objective analysis and for cogent reasons that the amount of such expenditure as claimed by the assessee is not correct, he is required to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment. Remit this issue back to the file of the AO, to decide the matter afresh. - Decided in favour of assessee for statistical purposes. Addition of ₹ 11 lakhs out of loan written off in the instant year - Held that:- Amount of loan utilized for capital assets shall be non-taxable, but the sum utilized for working-capital shall be brought to tax as a revenue receipt. Needless to state that AO, shall afford adequate opportunity to the assessee, while adjudicating the issue afresh. - Decided in favour of assessee for statistical purposes. Belated payments of employees contribution of PF etc. - Held that:- Addition on this account made by the AO cannot be sustained as the assessee was entitled to claim the benefits of the amounts contributed to PF before filing the return. [ see CIT Versus Vinay Cement Ltd. - 2007 (3) TMI 346 - Supreme Court of India] . - Decided in favour of assessee.
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2015 (1) TMI 608
Cancellation of the registration granted under Section 12A - assessee incorporated under Section 25 of the Companies Act, 1956 with an aim to promote the game of Cricket in and around Delhi - Held that:- The entire receipts have been received for the promotion of game of cricket. The assessee is not free to use it as per its convenience for any purpose other than for promotion of cricket. Thus, the amounts received in this manner cannot be characterized as business receipts. The amount has been received as the voluntary contribution on discretion of the contributor (for e.g. BCCI). These have been received for raising the funds for meeting its costs and expenses. In none of the cases there is any quid pro quo. The ultimate beneficiary is either the cricketer or the game of the cricket. The assessee is not charging any fees or revenue from the cricketer who is ultimate beneficiary. Thus, there is no quid pro quo relationship with the cricketer. The assessee is promoting cricket on charitable basis as far as real beneficiary is concerned.vWhenever the revenue is earned these are not earned on commercial lines and these are earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not fully. The assessee has not entered any transaction with any person on profit motive. The other person may be an entrepreneur or may be doing business but the assessee has entered the transaction only for the sole and dedicated purpose i.e. for the promotion of cricket. Regarding sale of tickets the assessee explained that no tickets are sold for Ranji Trophy and only in case of international matches, ₹ 200/- per ticket are levied, with a sole intention to control the crowds and that the cost incurred per ticket is much more than the amount which is charged for ticket. Under these circumstances, the sale of tickets cannot be considered as an activity of “trade, commerce or business”. We agree with the submissions of the assessee. Regarding playing cards, it is an incidental recreation activity undertaken in most Clubs and what is charged by the assessee, goes to recover the costs for providing such recreational facility to its member. The receipts are miniscule and hence negligible. Similarly as far as receipts from health club is concerned, we find that, only a part of the expenditure incurred on health club is recovered by way of charges from Members, who are using the health club facility. These are all, at best be called user charges. In our view these receipts cannot be termed as an activity in the nature of “trade, commerce or business”. In fact Health Club facility is recognized to promote the game of cricket. Thus all the receipts of the assessee are intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. User charges are required for maintaining the facilities that are provided as part of the infrastructure, for conducting the activities of the assessee. Thus to conclude the assessee is not carrying of the activities with any profit motive or with any self interest. The contribution received by way of sponsorship, advertisement, sale of tickets etc. and user charges on the facts of this case, do not convert the charitable activity into “trade, commerce or business” activity. Quash the impugned order passed by the DIT(E) u/s 12AA(3) r.w.s. 12 of the Act, as it is bad in law. - Decided in favour of assessee.
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2015 (1) TMI 607
Provision for reward point redemption disallowed as unascertained liability - Held that:- The assessee had made a provision on the basis of opinion expressed by the Expert Advisory Committee of Institute of Chartered Accountants of India on the issue of reward point provided by Banks in order to promote their credit cards as contained at pages 159 to 163 of paper book. As clearly demonstrated by ld. Counsel for the assessee, the provision made by assessee was an allowable deduction. Therefore, the submission of ld. Counsel for the assessee that the provision was made on bona fide basis cannot be disputed. However, since ld. Counsel for the assessee has not seriously pressed this ground as deduction on actual payment basis has already been allowed to assessee and the taxes were already paid by the assessee, therefore, this ground is dismissed. Decided against assessee. Card acquisition expenses - change of accounting policy - Held that:- There is no concept of deferred revenue expenditure under the Income Tax Act except under certain specific provisions like section 35D. Therefore, unless statutory provision is there to defer the revenue expenditure over a period, the entire amount is to be allowed in the year in which it is incurred for running the business as per section 37 of the Income Tax Act. It is well settled that the entries in the books of account cannot be the basis whether a receipt is taxable or not or whether expenses are allowable as a deduction or not. Courts are compelled to go by the true nature of receipts and not to go by the entries made in the books of account. - Decided in favor of assessee. Credit investigation expenses - CIT(A) deleted the disallowance being 75% of the total expenditure - Held that:- We are in agreement with the submissions of ld. Counsel for the assessee that the reasoning given by AO in regard to impugned amount is akin to treating the amount as deferred revenue expenditure inasmuch as the AO himself has observed that there was necessity of this expenditure and while so holding, the AO himself has allowed 25% of this expenditure impliedly 1/4th of the impugned amount has been considered as expenditure relating to current assessment year and the balance being allowable in subsequent three years. Therefore, the finding of AO that the impugned amount was capital in nature was not correct but he has primarily treated the expenditure as deferred revenue expenditure. As discussed in assessee’s appeal for A.Y. 2006-07, this treatment is not permissible in law and the entire amount had to be allowed u/s 37 of the Income Tax Act being incurred wholly and necessarily for the purpose of business. In view of above discussion, we uphold the order of ld. CIT(A). - Decided against revenue. Expenditure on application capture - CIT(A) deleted the disallowance being 75% of the total expenditure - Held that:- The nature of this expenditure, reasons for making disallowance by AO and the reasons for allowing this expenditure by ld. CIT(A) are identical to the issue relating to credit investigation expenses and, therefore, for the reasons given in regard to ground no. 1, this ground is also dismissed. -Decided against revenue. Creation of brand and advertisement expenses - CIT(A) deleted the disallowance being 75% of the total expenditure - Held that:- As is evident from the findings of AO, he has allowed 25% of the expenses treating the same being relating to current year under consideration and balance has been disallowed. This implies that he has primarily treated this amount as deferred revenue expenditure and, therefore, for the reasoning given in regard to ground no. 3 of the assessee’s appeal for A.Y. 2006-07 and also after taking into consideration the various decisions relied upon by ld. Counsel for the assessee, the entire amount was rightly allowed by ld. CIT(A) particularly because 79% of the expenditure was in the nature of commission paid to marketing agent for procuring new cardholders. It cannot be denied that this expenditure though classified under the head “advertising expenditure” was essential for running of assessee’s business. - Decided against revenue.
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2015 (1) TMI 606
Disallowance of unaccounted business expenditure on repairs and renovation of factory shed - CIT(A) confirmed the action of the Assessing Officer and further held that the expenditure is also not allowable in view of the Proviso to Section 69C of the Act - Held that:- AR of the assessee has not made any submission as to why even in view of the above Proviso to Section 69C the expenditure incurred from deemed income whose source has not been explained should still be allowed as deduction to the assessee. In absence of the same, we do not find any good reason to interfere with the order of the CIT(A) which is confirmed and the ground of appeal of the assessee is dismissed. - Decided against assessee. Addition of income - Held that:- Addition of ₹ 39,882/- made only on the basis of statement recorded u/s 133A is unsustainable in law; accordingly, we delete the addition of ₹ 39,882/- and allow this ground of appeal of the assessee. - Decided in favour of assessee. Addition on account of low gross profit which includes disallowance of deliberate loss of ₹ 31,35,469/- incurred on sale of gray cloth in the post-survey period - CIT(A) deleted the addition - Held that:- he Revenue could not point out any specific error in the order of the CIT(A). The Revenue could not point out the amount of loss incurred on sales made to sister concerns and that to other parties. Further, no material was brought on record by the Revenue to show that on the date of sale made to sister concerns the assessee had made sales to other parties at a price more than that charged from sister concerns. In absence of the same, we do not find any good reason to interfere with the order of the CIT(A) which is confirmed and thus, these grounds of appeal of the Revenue are dismissed. - Decided against revenue. Disallowance made out of the excess claim of expenditure under the head 'Brokerage' to its sister concerns - CIT(A) deleted the disallowance - Held that:- Assessing Officer made disallowance out of brokerage expenses of ₹ 2,60,385/- u/s 40A(2)(b) of the Act as he observed that the brokerage paid to sister concerns was at the rate of 5.25% of the job receipt; whereas the brokerage paid to other persons was at the rate of 4%. The CIT(A) has deleted the addition merely by observing that the expenditure was incurred wholly and exclusively for promoting the business activities of the assessee. The CIT(A) has given no reason or brought out any distinguishing fact for which the assessee had paid higher brokerage of 1.25% to the sister concern. Thus, we find that the order of the CIT(A) is an unreasoned and cryptic order which is not sustainable in law. We, therefore, set aside the order of the CIT(A) and restore the matter back to his file for adjudication afresh by passing a well reasoned and speaking order, after allowing a reasonable opportunity of hearing to the assessee. Decided in favour of revenue for statistical purposes. Penalty u/s 271(1)(c) - claim of deduction on account of repairs and renovation of factory shed - Held that:- Mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. We, therefore, delete the levy of penalty. - Decided in favour of assessee.
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2015 (1) TMI 605
TDS u/s 194J - payments made for professional services - assessee is an insurance company - Held that:- Section 194J under sub-section 1 applies when payment is made to a resident towards any sum by way of fee for professional services. The object of the definition clause Explanation (a) is not to identify the ‘resident’, or the recipient, who receives or is paid fee for professional services but to define the services. Thus assessee is liable for payment of TDS for professional services. Default in deducting tax at source - liability to pay interest under section 201(1A) - Held that:- CIT(A) keeping in view the complexity of the issue involved and the feasibility of evidence to be available in the given facts considered the entire issue on the basis that 90% of the advance tax must have been paid by the hospital and, therefore, he has computed the interest on short fall of 10% of TDS amount. Considering the entire conspectus of the case and the voluminous exercise required in obtaining the details, we do not find any infirmity in these findings of ld. CIT(A) as the final conclusion, in any case, will not be materially different from that arrived at by ld. CIT(A) and, accordingly, confirm the same, as the interest has been charged up to the due date of filing of return by the deductees. We are not in agreement with the submissions of ld. counsel for the assessee that the interest should have been charged only up to the 31st March of financial year because as held by Hon’ble Madras High Court in the case of CIT Vs. Chennai Metropolitan Water Supply and Sewerage Board [2011 (9) TMI 224 - CHENNAI, HIGH COURT], interest is required to be paid up to the date on which the return had been filed by the payee. Decided against revenue as well as assessee.
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2015 (1) TMI 604
Definition of export turnover and total turnover - exclusion of foreign exchange gain of ₹ 10,36,754 from the ‘export turnover’ for the purpose of computing the deduction u/s.10A - Corporate tax issues - Held that:- Since the issue is covered by various decisions as accepted by DRP we direct the A.O. to exclude the same amounts from total turnover also. Transfer Pricing Issues - selection of comparable - Held that:- Kals Info Systems Ltd., and Accel Transmatics Ltd. are to be excluded for the purpose of comparison while determining the ALP of the impugned transaction in this appeal as they are developing software products and not purely or mainly software development service provider. For Megasoft Ltd. it is found that it has two separate segments i.e. product and services. Therefore, if at all, the AO/TPO considers the aforesaid company to be a comparable, then, he is directed to consider software development services segment alone for comparability analysis. For Infosys Technologies Ltd.as accepted the fact that the assessee is purely a software development service provider to its AE whereas Infosys is not a captive service provider like assessee. It is a fact that Infosys is engaged in diversified activities and also engaged in development of products consultancy and solution. That apart, the size, reputation and brand value of Infosys, in no way makes it comparable to a small captive service provider like assessee therefore excluded. For Tata Elxsi Ltd. (Seg.)is also to be excluded from the list of comparables while determining the, ALP of the international transaction. For Flextronics Software Systems Ltd., (seg) it is functionally different and A.O. could not have taken this company as comparable company without making suitable adjustments for the differences. Therefore, this comparable has to be excluded. However, since, this aspect was not examined by any Coordinate Bench in A.Y. 2006-07, restore this to the file of TPO to examine the functions of the above company and determine whether that is comparable or not, keeping in mind the decision of Coordinate Bench of earlier A.Y. and later A.Y. about the functional differences. The issue is restored to the file of TPO. Working capital adjustment - Held that:- There is no reason why negative working capital adjustment was made. Moreover, as already decided to exclude certain comparables which may result in varying working capital adjustment. Therefore, the issue is restored to the file of TPO to rework out it. - Decided in favour of assessee for statistical purposes.
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2015 (1) TMI 603
Cost of construction and indexation thereon disallowed - computation of capital gain - Held that:- Relevant balance sheet for arriving at the conclusion required that these companies constructed the buildings can only be examined from the balance sheet of 31.3.1997. If the examination of these balance sheets as of this year reveals that there was no building appearing in the fixed assets, then the obvious conclusion is that initially building was constructed by assessee and further these tenant companies had made further additions, the value of which is represented in the balance sheets of these companies as on 31.3.2005. Therefore, for this verification we set aside the issue to the office of Assessing Officer with a direction to verify the balance sheets of these companies for the years 31.3.1997 and if there is no amount appearing with respect to buildings, then he should allow the benefit to the assessee as all other evidences are in favour of assessee. Regarding cost incurred, the Assessing Officer can get verified the valuation report for the purpose of rates taken by valuer as the constructed area matches with the occupancy certificate. Regarding indexation, the same can be given from financial year 1996-97 as the occupancy certificate dated 28.5.1997 establishes the completion of building before 28.5.1997. - Decided in favor of assessee for statistical purposes. Cost of improvement disallowed - Held that:- Disallowance on the account that payments were not made by the assessee and these were made by the husband of the assessee is not a valid disallowance as the Assessing Officer has not otherwise doubted the payments. Cost of building as appearing as on 1.4.2006 as per paper book page 140 is ₹ 1,17,77,207/- and on receipt of compensation of ₹ 1,30,00,000/- the assessee reduced the total amount from building account in subsequent year , therefore, there is nothing wrong in it as when an asset is sold for an amount which exceeds the cost price, the only amount which can be reduced from the cost price is maximum up to cost price appearing in the balance sheet. Therefore, upholding of disallowance relying upon these findings is not correct. - Decided in favor of assessee.
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2015 (1) TMI 602
Dis allowance u/s 14A - further disallowance in terms of rule 8D - Interest to the extent of ₹ 14,82,540/- as attributable to earning of dividend income on mutual fund - Held that:- The facts for the year under consideration are exactly similar to those present for Assessment Years 2005-06 and 2007-08, i.e., the immediately preceding and the immediately succeeding Assessment Years. The Tribunal has held Rule 8D of the Income- tax Rules to be prospective in nature and the assessee’s challenge of CIT (A)’s action in increasing the amount of disallowance u/s 14A of the Act without pointing out any valid basis for such further disallowance was upheld. The reliance by the assessee on ‘Maxopp Investment Ltd. vs. CIT’(2011 (11) TMI 267 - Delhi High Court ) and ‘Godrej & Boyce Manufacturing Co. Ltd vs. DCIT’ (2010 (8) TMI 77 - BOMBAY HIGH COURT) in this regard is correct. - Decided in favour of assessee. Depreciation claim rejected - Held that:- Remit this issue to the file of the Assessing Officer for decision afresh, before whom, the assessee has agreed to file evidence of user of the property in question. - Decided in favour of assessee for statistical purposes. Treatment of income - treat income of ₹ 4,04,382/- as capital loss as against business loss - Held that:- For Assessment Year 2005-06, under circumstances similar to those present for the year under consideration, the Tribunal has upheld the CIT (A)’s direction for treating the loss as a capital loss. Respectfully following the said Tribunal order, in the assessee’s own case for Assessment Year 2005-06, Ground No.2 raised by the department is rejected. - Decided in favour of assessee. Unexplained credits in the bank account - CIT (A) deleted the addition by accepting the additional evidence filed by the assessee - Held that:- CIT (A) correctly arrived at the conclusion that the amount of ₹ 4,91,02,322/- had been received by the assessee company from Hotline CPT Ltd. On the basis thereof, it was correctly observed that this amount could not be treated as unexplained cash credit u/s 68 of the IT Act. The department has not been able to successfully refute the well reasoned findings of fact recorded by the Ld. CIT (A) in this regard and we hereby confirm the same. - Decided in favour of asssessee.
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2015 (1) TMI 601
Penalty levied under section 271E - penalty order challenged as barred by limitation - repayment of loan or advance in contravention of the provisions of section 271E - Held that:- In the absence of any date of reference by the AO to the JCIT for initiating action for imposing penalty under section 271E of the Act, the notice issued by the JCIT is to be taken as the date for initiation of action for imposing penalty under section 271E of the Act. On a reference of the Assessing Officer, the Joint Commissioner of Income-tax has to take a decision with regard to the imposition of penalty under section 271E of the Act and thereafter he has to issue a notice to the assessee to initiate proceedings for imposition of penalty under section 271E of the Act. It is also apparent from the penalty order that the Joint Commissioner of Income-tax has issued a notice under section 274 of the Act for imposing penalty under section 271E of the Act on 15.4.2011. Therefore, in the real sense action for imposing penalty was initiated by issuance of notice by the Joint Commissioner of Income-tax. If that date is taken, then the penalty order is passed within the period of limitation. - Decided against assessee. Cash Receipt in violation of section 269T - repayment of loan or advance in cash - Held that:- The provisions of section 269T of the Act were invoked on the basis of certain entries found on certain seized documents. Unless and until it is proved that the seized documents relate to the assessee-company, the repayment of loan or advance in cash to different parties cannot be held to be done in violation of the provisions of section 269T of the Act, for which penalty under section 271E of the Act can be invoked. Even the ld. CIT(A) does not deliberate on the issue and having made reference to various pronouncements on this aspect, he confirmed the penalty. Under the given facts and circumstances of the case, we find no merit in the penalty levied under section 271E of the Act. We accordingly set aside the order of the ld. CIT(A) and delete the penalty. - Decided in favour of assessee.
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2015 (1) TMI 600
Transfer pricing adjustment - selection of comparables - Held that:- Infosys Ltd. as having turnover far in excess of the assessee and assessee was a miniscule company when compared to Infosys Ltd., thus cannot be considered as a comparable and has to be excluded for working out the average PLI of the comparables. KALS and Accel Transmatics Ltd being a software product company, thus excluded from the comparables. Tata Elxsi Ltd. has to be excluded from the list of comparable chosen by the TPO as the assessee before us is not developing any niche product. Lucid Software Ltd. was not functionally similar to the assessee and the same has to be excluded from the comparables There is no dispute that RPT filter in the case of Megasoft Ltd. was 17.08%, that of Aztech Software Ltd. was 17.78% and that of Geometric Software Ltd. was 19.34%. Coordinate Benches of the Tribunal are consistently following 15% as cut off mark for applying the RPT filter. Accordingly, we direct exclusion of Megasoft Ltd., Aztech Software Ltd. and Geometric Software Ltd. from the comparables. Based on the above, direct the AO to recomputed the Profit Level Indicator and work out the arithmetic mean margin of the comparables. Thereafter, the AO has to decide whether the PLI of the assessee is within +/- 5% range of the arithmetic mean of the comparables as set out u/s. 92C(2) of the Act and decide on the adjustment, if any, required on the ALP. - Decided in favour of assessee for statistical purposes. Exclusion of telecommunication expenditure from its export turnover - Corporate tax issues - Held that:- Alternative ground taken that if such expenditure is excluded from the export turnover, it has to be excluded from the total turnover also is acceptable in view of the judgment in the case of CIT v. Tata Elxsi Ltd.[2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein held that if export turnover in the numerator was to be arrived at after excluding certain expenditure, it should also be excluded from the total turnover. Decided partly in favour of assessee.
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2015 (1) TMI 598
Rejection of books of accounts - trading addition of ₹ 35,40,410/- made by the assessing officer by applying average gross profit rate of 4.90% upheld by CIT(A) - non proving of adequate opportunity of being heard to the appellant - Held that:- It is pertinent to note that AO has not rejected the books solely on account of non maintenance of stock register but also because the AO was not satisfied about the correctness and completeness of the accounts of the assessee also because of the relevant details not being mentioned in the sales invoices though in the purchase invoices all such details were available. Therefore, the AO rightly rejected the assesee’s books of account. The AO’s finding regarding incorrectness or incompleteness of the accounts is to be examined considering the various factors obtaining in a particular case keeping in view the nature of the assesse’s business. However, the broad principle is that if it is impossible or infeasible to maintain the stock register, keeping in view the nature of assessee’s business, then the maintenance of stock register can be dispensed with else not. - Decided against assessee. Considering the entire conspectus of the case including the comparables cases relied upon by the assessee as well as the decisions of Tribunal in the case of Suresh Jindal Prop. (2015 (1) TMI 618 - ITAT DELHI), we are of the opinion that it would serve the interest of justice if the GP rate of the assesee is taken at 3.53% as was in the case of Suresh Jindal Prop. - Decided partly in favour of assessee.
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Customs
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2015 (1) TMI 622
Goods abandoned - Relinquishment of the warehoused goods - Demand of duty set aside by the Commissioner (A) - Held that:- warehousing period was expired on 15.03.2002. The respondent by letter dated 15.03.2002, requested the Chief Commissioner of Customs for abandoning of the imported goods as per Section 23(2) of Customs Act, 1962 - Though the imported (warehoused) stocks noted in the enclosed statement physically remain in the warehouse, the period of warehousing has already expired. In these circumstances, these stocks are to be considered as ‘Imported Goods’ as per Section 2 (25) of the Customs Act, 1962. The owners of the goods have the right to abandon the ‘Imported Goods’ as per Section 23 (2) of Customs Act, 1962 at any time before the order of clearance of the said goods for home consumption had been made or an order for deposit of the goods in the warehouse is made. - The Central Board of Excise & Customs in their letter (F.No. 473/88/72-Cus. III dated 15th Sep.1972 have upheld the right of the owners (Imported Goods) to abandon such goods (Goods which are in warehouse after the expiry of Bond period). Therefore, we exercise our right in terms of Boards circular and abandon the goods (details as per enclosed statement) under Section 23(2) of Customs Act, 1962. Chief Commissioner had allowed the relinquishment of the goods and the goods were auctioned and therefore, the demand of duty is not sustainable - no reason to interfere with the order of the Commissioner (Appeals) - Decided against Revenue.
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2015 (1) TMI 621
Import of Car - Benefit of notification 21/2002 - Confiscation u/s 111(m) read with Rule 2(c), Rule 11; Rule 12, Rule 14(1) and Rule 14(2) - Undervaluation of goods - supplier and the appellant are brothers - Held that:- department has obtained invoice from some source (informer). The said invoice in turn was sent to the manufacturer of the car who has confirmed the genuineness of the same. The details of the invoice have been given to the appellant. In fact, original of the said invoice or equivalent invoice should be available with the appellant or his brother. The appellant has not produced any evidence to counter the same. The very fact that the vehicle was purchased on 31st May 2008 from the manufacturer and was thereafter shipped in July 2008 from U.K., the said invoice or original invoice would be available with the appellant’s brother i.e. supplier and it should have been possible for the appellant to produce the same during investigation or in reply to the show cause notice. The appellant could have obtained copy of the invoice from manufacturer in case it is lost. In fact this Tribunal did ask the appellant if he has got the invoice or can obtain the same from his brother supplier and matter adjourned. Vehicle is new as is evident from the odometer reading. The fact that the vehicle was registered prior to importation is only for the purpose of completing the formalities in that country. We also note that C.B.E. & C. Circular 1/2005-Cus., dated 11-1-2005 clarifies that when the registration in the country of export is done with a view to export the same that should not be come in way of extending the benefit of Notification No. 21/2002. In the present case also the registration has been done only with a view to transfer the vehicle to the port of export. We accordingly hold that the appellant will be eligible for the benefit of Notification No. 21/2002. Thus valuation and confiscation is upheld. Redemption fine and penalty are not excessive. As for benefit of notification 21/2002 is concerned, the same would be available - Decided partly in favour of assessee.
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2015 (1) TMI 620
Restoration of appeal - Appeal dismissed in 1989 for non compliance with pre deposit order - Held that:- It appears that the petitioner himself was negligent in pursuing the appeal. For the laches, I impose a cost of ₹ 5,000/- which shall be paid to the learned counsel for the respondent within two weeks from the date of receipt of a copy of this judgement. It appears that the petitioner was not aware of disposal of the appeal and remitting the appeal to challenge the appellate order after keeping the case pending for a decade in this court will not enure to the benefit of the parties. - Petition disposed of.
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2015 (1) TMI 619
Imposition of penalty - Violation of principle of natural justice - Non issuance of SCN - Held that:- Nothing in the records to suggest that the writ petitioner was interested in issuance of a formal show cause notice. There was not a single letter inquiring as to why the show cause notice had not been issued. Even after the representatives of the writ petitioner allegedly met the customs officials, there was no correspondence on record making a complaint that the adjudication process was continuing without issuance of a show cause notice. Issuance of the show cause notice had been expressly or impliedly waived by the writ petitioner. - If that is the situation then there is no element of natural justice involved by which the jurisdiction of this Court under Article 226 of the Constitution can be invoked. - Decided against appellants.
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Service Tax
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2015 (1) TMI 644
Waiver of pre deposit - Renting of Immovable property - Held that:- Show cause notice was issued to the notices Shri G. Soundarapandian and G. Kanagavel, and both of them claimed the exemption separately. Both the applicants entered into an agreement with M/s. Adlabs Films Ltd. for screening of the cinematic film. Prima facie, we find that the demand was not raised on M/s. Ganesh Theatre and both the applicants received the amount separately by cheques. We find that the Tribunal on the identical situation in the case of Vamini Nitinkumar Shah (2013 (9) TMI 68 - CESTAT AHMEDABAD), granted unconditional stay - In view of the above discussion, following the Tribunal’s decision, we waive predeposit of tax along with interest and penalty and stay its recovery till the disposal of the appeals - Stay granted.
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2015 (1) TMI 643
Waiver of pre-deposit - Business Auxiliary Service - Held that:- On examination of the agreement of amalgamation we find that as per Clause 2 of the scheme the amalgamation shall be effective from the appointed date which means although the proceedings may take place for amalgamation later on, but it shall be effective on 01.04.2010. Prima facie we are convinced with the argument of the ld. counsel that the applicant is manufacturing goods for themselves. Therefore, they cannot provide service to themselves. Accordingly, service tax demand is not sustainable under the category of Business Auxiliary Service. We further find that as per Clarification in CBEC circular on 27.10.2008 that the definition of manufacture has to be considered while demand service tax under Business Auxiliary Service. It is no doubt the goods produced by the applicant covers under the definition of Section 2(f) of Central Excise Act, 1944. In fact, Section 2(f) of the Central Excise Act, 1944, at the relevant time, talks about goods and not excisable goods. Therefore, the definition of Section 2(f) is squarely applicable to the facts of this case, therefore, the applicant activity does not falls under the category of Business Auxiliary Service prior to 01.04.2010 also. In these circumstances, the applicant has made out a case for complete waiver of pre-deposit. Accordingly, we waive the pre-deposit of entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeal. - Stay granted.
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2015 (1) TMI 642
Waiver of pre deposit - transport of goods by rail services - Held that:- Applicant raised the consignment notes for transport of goods to M/s. Sterlite Industries (I) Ltd. The applicant claimed that M/s. Sterlite Industries (I) Ltd. paid the tax on the basis of consignment notes after availing abatement. The Section 65(50)(b) of the Finance Act, 1994, provides ‘Goods Transport Agency Service means any person who provides service in relation to transport of goods by road and issues consignment note by whatever name called’. In the present case, prima facie, we find that the applicant raised the consignment notes for transport of the goods by road and partly by rail. It is seen that M/s. Sterlite Industries (I) Ltd., paid the tax on the consignment notes as claimed by the applicant. In view of that, the applicants made out a case for waiver of predeposit of tax along with interest and penalty. Accordingly, predeposit of tax along with interest and penalty is waived and its recovery stayed till the disposal of the appeal - Stay granted.
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2015 (1) TMI 641
Terminal charges collected from various Airline companies for the facilities provided in the AIR Cargo Terminal - whether would attract service tax for "storage and warehousing" provided under section 65(102) of the Finance Act, 1994 - Held that:- matter remanded back to the original adjudicating authority for fresh adjudication taking note of the decision of the Hon’ble High Court of Kerala in assessee's own case [2011 (7) TMI 563 - KERALA HIGH COURT] - Decided in favour of assesse.
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2015 (1) TMI 640
Demand of service tax - Imposition of penalty - Management, Maintenance or Repair Service - Held that:- Following decision of assessee's own previous case [2015 (1) TMI 293 - CESTAT BANGALORE] - Matter remanded back - Decided in favour of assesse.
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Central Excise
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2015 (1) TMI 636
Reversal of CENVAT Credit - Availability of service tax credit on GTA service - Held that:- There is no imputation that the service tax credit has been availed or utilised wrongly. Further there is no provision in the Finance Act, 1994 which would render availment of such service tax credit erroneous for the reason that some of the inputs, transport of which yielded GTA service tax credit are returned as such on being found not suitable. Commissioner (appeals) also relied upon the judgments of the Tribunal in the case of J.S.Khalsa Steels (P) Ltd. Versus CCE, Chandigarh-[2009 (7) TMI 487 - CESTAT, NEW DELHI] and Hon’ble High Court of Punjab & Haryana in the case of CCE vs. Punjab Steels-[2010 (7) TMI 252 - PUNJAB AND HARYANA HIGH COURT] wherein it has been held that Rule 3(5) of the Rules only talks about the Cenvat credit taken on inputs or capital goods. It does not refer to the Cenvat on input service. Hon’ble High Court further observed that it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language - once there is no legal provision requiring reversal of credit in respect of input service credit, there is no authority to take back such input service tax credit. - Decided against Revenue.
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2015 (1) TMI 635
CENVAT Credit - Non maintenance of separate accounts for common input services used for dutiable and exempted final products - benefit of Rule 6 (5) of the Cenvat Credit Rules, 2004 - Reversal of credit pertaining to the exempted goods under Rule 6(3) (b) - Held that:- The appellants by their letter dated 21.04.2006, informed that they have reversed the input credit attributable to the exempted goods and paid according to their calculations, which was recorded in the show cause notice. The Adjudicating authority conducted verification of reversal of credit through the jurisdictional Assistant Commissioner. By letter dated 20.01.2011, the Assistant Commissioner informed that the input service credit attributable to the exempted goods cleared during the relevant period would be ₹ 16,64,309/- instead of ₹ 2,85,985/-. After accepting the claim of the appellants under Rule 6(5) of the said Rules, the Adjudicating authority reduced the amount to ₹ 4,33,778/-. We find that the verification report of the Assistant Commissioner was not disclosed to the appellants. The amount of ₹ 4,33,778/- as observed by the Adjudicating authority was also not informed to the assessees for compliance of the retrospective amendment under Section 73 of the Finance Act, 2010. In our considered view, the appellants should be given an opportunity to defend the report dated 20.11.2011, for determination of the amount of reversal of credit under retrospective amendment under Section 73 of the Finance Act, in the interest of justice. - Matter remanded back - Decided in favour of assesse.
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2015 (1) TMI 634
Clandestine removal of goods - Shortage of goods found - it is contended that merely on the basis of their statements and the statement of the proprietors of certain transport companies duty liability cannot be fasten on to the appellant company - Held that:- Goods covered under these GRs had been loaded from the factory of the appellant company and this is based on the statements of the transporters as well as the statements of Shri. Kulbhushan Jain, a person who is alleged to have been a confidential employee of the appellant company and Shri Subhash Agarwal of M/s. VK Steels, a dealer. The appellant had sought cross-examination of the transporters as well as of Shri Subhash Aggarwal and Shri Kulbhushan Jain, but the same was not allowed, even though Shri Kulbhushan Jain had retracted his statement. In terms of Section 9D (1) of Central Excise Act, 1994, a statement made and signed by a person before a central excise officer of a gazetted rank during the course of any enquiry or proceedings under this Act, shall be relevant for the purpose of proving in any prosecution for an offence under this Act, the truth of the facts which it contains, when the person who made this statement is examined as a witness in the case before the court and the court is of the opinion that having regard to the circumstance of the case, the statement should be admitted in the interests of justice. The only situation in which the statement of the person can be accepted by the court without his examination is when the person, who made the statement is dead or cannot be found or incapable of giving evidence or is kept out of the way by the adverse party or whose presence cannot be obtained without an amount of delay or expense, which under the circumstances, the court considers unreasonable. - Since in this case, the cross-examination of Shri Kulbhushan Jain and Shri Subhash Agarwal and also of the proprietors of the transport companies, whose statement have been relied upon was not allowed, the impugned order confirming duty demand based on their statement would not be sustainable. Moreover, other than the statements of Shri Kulbhushan Jain and Shri Subhash Agarwal and the proprietors of the transport companies, there is no other evidence linking the GRs issued by M/s. Pehalwan Transport and M/s. New Pooja Transport with the appellant company. Therefore, I hold that the impugned order upholding the confirmation of duty demand of ₹ 8,35,865/- based on 38 GRs issued by transport companies and one GR issued by New Pooja Transport is not sustainable and has to be set aside. GRs can not be linked to appellant company and the duty demand based on the same cannot be confirmed. - Commissioner (Appeals) has dropped the demand on the ground that the appellant company had produced invoices showing the payment of duty and the particulars of the invoices, the names of the consignees and the consignors, the quantity transported, vehicle number etc. tally with these particulars in the GRs. I am, therefore, of the view that the ground on which the duty demand based on these GRs has been dropped is absolutely correct as such, there is no infirmity in the same. - Decided in favour of Assessee.
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2015 (1) TMI 633
Appropriation of rebate claim against duty demand confirmed by Commissioner of Central Excise - Recovery of dues when stay application is pending - Held that:- once the applicant made pre-deposit by way of debit of cenvat account and earlier cash deposit of ₹ 25.00 lakhs, it was not open for adjudicating authority to decide the eligibility of such payment on his own. If the adjudicating authority was not satisfied with the mode of the deposit, he could have waited for the directions of CESTAT. Subsequently, vide order dated 13.12.2012, the CESTAT directed the applicant to pay the pre-deposit in cash in 8 weeks upto 18.01.2013. However, the CESTAT has not vacated the stay. Applicant has claimed to have deposited the said amount on 31.12.12. Recovery proceedings cannot be initiated during the pendency of stay application. As such, original authority has erred in ordering recovery of said amount ignoring the factual position as discussed in above para. Government finds that stay against order of Commissioner of Central Excise was still in force at the time of appropriation of sanctioned rebate claims vide impugned Order-in-Original. Hence, the order of appropriation by original authority is not legal and proper and liable to be set aside on this account alone. In view of above position, Government sets aside impugned Order-in-Appeal and directs that said sanctioned rebate claim may be paid to the applicant provided he has complied with the CESTAT order - Decided conditionally in favour of assessee.
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2015 (1) TMI 632
Denial of rebate claim - non-submission of original/duplicate copies of AREsd-1 - Held that:- Following decision of UM Cables Ltd. Versus Union of India And Others [2013 (5) TMI 459 - BOMBAY HIGH COURT] - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.
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2015 (1) TMI 631
Denial of rebate claim - Area based exemption - Goods exported after Notification No.19/04-CE(NT) dated 6.9.04 was amended vide Notification No.37/07-CE(NT) dated 17.9.07 by inserting condition (h) in para 2 of said Notification. The said clause (h) specifically stipulates that rebate shall not be admissible under this Notification if manufacturer has availed the benefit of various areas based exemption Notification including Notification No.39/01-CE(NT) dated 31.7.2001 - Held that:- Goods were exported on 4.10.07 when the amended Notification No.19/04-CE(NT) was effective. In this case goods were manufactured by a manufacturer who has availed benefit of Notification No.39/01-CE(NT) dated 31.7.01 and as per clause (h) of para 2 of Notification No.19/04-Ce(NT) inserted vide Notification No.37/07-CE(NT) dated 17.9.07, in such case rebate shall not be admissible. The ratio of above said GOI Revision Order No.576/12-Cx dated, 18.5.12 is squarely applicable to this case. It is pertinent to mention that said GOI order dated 18.5.12 was upheld by Hon’ble High Court of Gujarat vide order [2013 (5) TMI 378 - GUJARAT HIGH COURT] filed by M/s Welspun Corp. Ltd. - rebate claim in the instant case is rightly held as inadmissible by the lower authorities. Government do not find any infirmity in the said order-in-appeal and therefore upholds the same. - Decided against Assessee.
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2015 (1) TMI 630
Waiver of pre deposit - Undue hardship - Relief granted in similar previous situations - Held that:- Merely because an interim order has been passed and granting unconditional waiver of pre-deposit and stay of recovery to one assessee does not mean that the others similarly situated can claim this relief as a matter of right. We have clarified in several orders passed by us that the judgment of this Court in the case of M/s. Wardha Coal Transport Private Limited - [2009 (1) TMI 47 - BOMBAY HIGH COURT] and the other orders relied upon cannot be construed as granting a legal right to approach the Higher Court on denial of interim relief raising this ground. We have referred to the judgment of the Hon’ble Supreme Court in the case of Empire Industries Ltd. reported in [1985 (5) TMI 215 - SUPREME COURT OF INDIA] and the attention of the Division Bench in M/s. Wardha Coal Transport Private Limited was not invited to this Supreme Court judgment. Therefore, there is no such rule and particularly as claimed. There may be some practice of passing consistent orders and that is what the Supreme Court brings to the notice of the authorities. However, by that itself and without anything more, we do not think that the appeal raises any substantial question of law. The order passed by the majority in this case is imminently fair and the reasons assigned for the same from the majority judgment do not raise any substantial question of law. - assessee is granted six weeks time to comply with the condition - Decided against assessee.
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2015 (1) TMI 629
Challange to Show Cause Notice - Power of Additional Director General of Revenue Intelligence to issue the subject show cause notice - Held that:- Petition rejected - But it will be open for the writ petitioner to raise either of the above two objections before the Commissioner of Customs. Mr. Chowdhury submits that he should decide these objections as preliminary issues. In my opinion, it will be up to the adjudicating authority to decide, whether to resolve these issues as preliminary issues or to resolve them along with other issues involved in the show cause notice. - Decided against Petitioner.
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2015 (1) TMI 628
Clandestine removal of goods - Imposition of penalty - petitioner filed a recall application before the Tribunal stating that though the petitioner had no notice of the hearing before the Tribunal - The restoration application is pending - In the meantime, the Assistant Commissioner by an order issued directions for the detention of certain goods of the petitioner for the recovery of the outstanding dues - Held that:- There can be no objection to a direction that the recall application should be disposed of, one way or the other. However, the petitioner in our view, cannot claim a stay on the recovery proceedings merely because a recall application has been filed. Whether or not, the petitioner was prevented from appearing before the Tribunal for sufficient cause is a matter to be decided by the Tribunal itself and this Court cannot issue any direction as sought. Hence, we only direct, at this stage that the Tribunal may make all endevours to dispose of the recall application expeditiously and preferably within a period of two months from the receipt of a certified copy of this order. Any recovery made in the meantime, shall necessarily abide by the final result of the proceedings before the Tribunal. This, however, will not prevent the petitioner from applying before the Tribunal for such relief as is considered necessary. - Petition disposed of.
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2015 (1) TMI 627
Imposition of personal penalty - Wrong classification of goods - Held that:- Tribunal accepted the stand of the manufacturer that it had bona fidely believed that hulk cleared by the manufacturer would be classified under the Chapter Heading 89.06 and not 89.03. It was not a case of deliberate misdeclaration - Tribunal committed no error. The issues involved interpretation of the entries. The Tribunal when therefore, ordered deletion of personal penalty in our opinion, no question of law can be stated to have been arisen. - Decided against Revenue.
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2015 (1) TMI 626
Restoration of appeal - application for restoration of the appeal after making the pre-deposit was not allowed by the Tribunal by holding the view that it was filed after about 16 years - Held that:- When there cannot be any dispute regarding the financial constraints of the appellant, that resulted in the inability of the appellant to make the deposit, the question is only whether the reasons pointed out by the appellant in seeking restoration are justified or not. It is informed by the learned senior counsel for the appellant that during the entire period the department has also not taken any step to enforce the liability as against the appellant. This shows that apparently the financial difficulty of the Company was a matter within the knowledge of the Department also. Therefore, when there cannot be any dispute with regard to the sufficiency of the reasons and when there is ample power for the Tribunal to restore the appeal, merely because there happened to be a delay of 16 years, the application should not have been rejected. The delay has been explained in detail in Annexure I. The Company which was functioning from 1888 went into red sometime in early 1990’s and now the appellant herein has entered into a MOU with the State Government also and it has revived its affairs. - Appeal restored.
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2015 (1) TMI 625
Refund claim - Unutilized CENVAT Credit - manufacturer/exporter has not tried to utilize the credit for payment of duty - Held that:- Goods had been exported under bond without payment of duty. During the relevant period all clearances had been made by the assessee on payment of duty from Modvat account. It had not effected any clearance for export on payment of duty. The Modvat credit on inputs contained in the goods exported was, thus, not capable of being utilized within the meaning of Rule 57F(13) of the Rules. All the conditions required under Rule 57F(13) and notification No. 85/87-C.E., dated 1-3-1987 as amended had been satisfied i.e. export of goods under bond, utilisation of credit of inputs used to manufacture export goods for domestic clearances, inability of the assessee to utilise the Modvat credit as set out in the Modvat scheme and availability of excess credit with the assessee even thereafter. - The findings recorded by the Tribunal have not been shown to be illegal or perverse in any manner. Consequently, the substantial questions of law are answered against the revenue and thus, the appeal is devoid of any merit - Decided against Revenue.
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2015 (1) TMI 624
Clandestine clearance of goods - Imposition of penalty - Invocation of Rule 173Q and 209 of the Central Excise Rules, 1944 so as to impose penalty on the appellants - Held that:- The reliance on the final order of the Commissioner and the directions in that behalf of imposition of penalty cannot be faulted. Rules 173Q and 209 on which reliance is placed permits imposition of penalty on any manufacturer, purchaser, registered person of a warehouse or registered dealer responsible for removal of excisable goods in contravention of provisions of the rules and also without payment of duty, if any, leviable on the same. Once we find that there is no specific case as of the Central Excise Rules, then prevailing have not been contravened, and there is no intention to evade payment of duty, then, the argument of Shri Shah raised for the first time before us cannot be accepted. The findings are not based only on the admitted contravention of the rules with intention to evade payment of duty but also removal of excisable goods in contravention of the provisions of the rules themselves and not accounting the same. There is a clear case where both rules have been invoked and applied and merely because the duty liability is determined that is of M/s. S.R. Industries Ltd. and not of appellant No. 1, does not mean that in the facts and circumstances the imposition of penalty was not called for. The imposition of penalty was the cumulative effect of all the events and totality of the circumstances which enable the Commissioner to record the findings that fictitious entity was floated. It was shown to be export-oriented unit and though in its activity it did not require PTY/PFY, these goods were ordered for the alleged requirement of such unit. They were diverted firstly through the six units from Gujarat/Silvassa and by producing the documents and certifying and evidencing their supply for export-oriented unit and secondly in connivance with all concerned, such goods were diverted to Bhiwandi local market. In addition to their role in facilitating the other parties in diversion of such goods which were admittedly excisable that the penalty has been imposed, merely because the appellant No. 1 has not been held guilty of any evasion or non-payment of duty, does not mean that the penalty imposed was illegal and unjustified. - In the given facts and circumstances it could be for the positive act and it would also be for a collective failure of the obligations or rather active participation in bringing about this situation. Therefore the intention was to evade payment of duties. - no substantial question of law arises - Decided against assessee.
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2015 (1) TMI 623
Rebate - The assessee took credit of duty paid on menthol and utilized the said credit in paying the duty on clearance of the final products namely, menthol crystals and peppermint oil - Assessee has cleared menthol crystals for export under bond without payment of excise duty and cleared peppermint oil for export on payment of excise duty by debiting the input credit availed on menthol used in the manufacture of final products - Supreme Court after condoning the delay dismissed the appeal of Revenue against the order of High Court [2011 (4) TMI 27 - BOMBAY HIGH COURT].
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CST, VAT & Sales Tax
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2015 (1) TMI 639
Taxability of Women's Horlicks - Classification of product - Clarification regrading rate of tax - Whether Women's Horlicks can be taxed under residuary entry as against the specific entry arrived tax at 4% on Part B of the First Schedule. - Petitioner contends that Women's Horlicks is not made up of milk alone but with other ingredients, therefore, it is taxable under the residuary entry - Held that:- Under the Exemption Notification dated 17th March, 1986 the goods would attract tax at 4 percent if it falls under item (viii) or 10 pecent if it falls under item (x). The High Court has taken into consideration the manner in which 'Horlicks' was treated as falling within milk food occurring in the earlier Entry 24 and has come to find against the Revenue. - respondent is required to apply the proper tests, ascertain the essential character of the product bearing in mind the certificate filed by the petitioners under the provisions of the Milk and Milk Products 92, take note of the principles laid down by the Hon'ble Supreme Court [2007 (3) TMI 260 - SUPREME COURT OF INDIA] in the decisions referred, with regard to the manner in which the clarification of the products is to be done and the decision of Hon'ble Division Bench of this Court in H.M.M Limited (1990 (10) TMI 331 - MADRAS HIGH COURT) confirmed by the Hon'ble Supreme Court and then take decision on merits and in accordance with law after affording an opportunity of personal hearing. Further the petitioner has placed reliance on the decisions of Authority for Clarification and Advance Ruling, where they have clarified regarding the rate of tax for milk based products and held that product is a milk product since it is pre-dominently milk In the light of the above, the Writ Petitions are allowed and the impugned clarification is quashed and the 2nd respondent is directed to place the matter before the Authority for Clarification and Advance Ruling - decided in favour of petitioners.
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2015 (1) TMI 638
Validity of Tribunal’s action on decided appeal on merits – Appeal already dismissed by FAA on failure to make the pre-deposit - Held that:- The appeal before the Tribunal was directed against the order of the first appellate authority imposing certain condition of pre-deposit before entertaining the appeal on merits - The Tribunal, instead of deciding the correctness of such an order, proceeded to decide the appeal on merits and allowed it as well – as it has been already held in ANILKUMAR Versus STATE OF GUJARAT [2014 (4) TMI 730 - GUJARAT HIGH COURT] wherein it has been held that the Tribunal committed serious error in examining the appellants grievances on the merits of the order of assessment – the Tribunal could not have bypassed the FAA and statutory requirement of pre-deposit, unless it was waived by an order in writing – thus, the order passed by the Gujarat Value Added Tax Tribunal is set aside – the matter is remitted back to the Tribunal for fresh consideration and disposal in accordance with law – Decided in favour of petitioner revenue.
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2015 (1) TMI 637
Nature of cooperative society, dealer or not - Whether the respondent/society, which is a co-operative marketing society, is a dealer falling within the definition of Section 2(g) of the TNGST Act and liable to pay tax under the provisions of the TNGST Act – Held that:- Tribunal was right in setting aside the turnover relating to auction sale of agricultural produce by the assessee who had acted as agents of agriculturists with complete dominion over the goods - In The Tiruchengode Co-operative Marketing Society Limited Versus The State of Tamil Nadu [1977 (3) TMI 144 - MADRAS HIGH COURT] wherein the assessee rightly contended that in respect of the sales covering the turnovers in dispute, the society merely acted as an intermediary, bringing together the agriculturist-principals and the respective purchasers is auction held in the presence of the members and that the society did not actually do any business of purchasing or selling to make itself liable to assessment under the TNGST Act - the respondent/society acted as an intermediary, bringing together the agriculturists-principals and the buyer, and they have no authority to sell the goods and, therefore, the respondent/ society is not a 'dealer' as defined under Section 2(g) of the TNGST Act - as the respondent/society has not effected any sale, they have not acquired any turnover liable to sales tax – Decided against revenue.
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