TMI Tax Updates - e-Newsletter
January 29, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Highlights / Catch Notes
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Income Tax:
Presumptive Taxation – India US DTAA - No Permanent establishment (PE) in India – not taxable even it received any remuneration in connection with any matter provided in Section 44BB. - HC
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Income Tax:
Reopening of assessment - Speculation loss - Transactions for trading in gold and silver futures on commodities exchange MCX - section 43(5)(a) - reopening must stand or fail on the basis of reasons recorded by the A.O. - HC
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Income Tax:
TDS u/s 194A on Interest – Rate of TDS - Merely because the interest is compounded quarterly does not mean that the interest is payable on quarterly basis. - AT
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Income Tax:
Revision of order by CIT u/s 263 – Computation of Period of limitation – from the date of the order of original assessment or from the order of assessment passed after remanded back by Tribunal - HC
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Income Tax:
Disallowance u/s.40(a)(ia) – TDS u/s 194C - what was necessary was a relationship between the contractor and sub-contractor and not merely be hiring of an agency by the contractor during the course of execution of the work. - HC
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Income Tax:
Foreign travel expenses – Revenue or personal expenditure - CIT allowed 50% - An effort was made by the revenue to submit that 50% had been allowed without any basis. - Order of CIT sustained - HC
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Customs:
Apex Court issues Directions as the Law declared under Article 141 of the Constitution of India. regarding proceedings under the NDPS Act. - SC
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Indian Laws:
Macroeconomic and Monetary Developments: Third Quarter Review 2012-13
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Service Tax:
Cenvat Credit of - scope of 'input service' - Rule 2(1) - The expression ‘includes’ cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression ‘means’. - HC
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Service Tax:
Pre-deposit of penalty imposed u/s 78 - Tribunal was not justified in directing the petitioner to deposit the entire amount of penalties in addition to the service tax and interest. - HC
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Central Excise:
Reversal of CENVAT Credit - input credit legally taken and utilised on dutiable final product, need not be reversed on the final product becoming exempt under Notification No. 50/2003-C.E., dated 10-6-2003. - AT
Articles
News
Case Laws:
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Income Tax
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2013 (1) TMI 610
Deductions u/s 80HHC - production of scrap - assessee was a 100% EOU - Held that:- As decided in CIT, Ludhiana Vs. Bicycle Wheels [2010 (10) TMI 496 - PUNJAB AND HARYANA HIGH COURT], Kar Mobiles' case [2010 (1) TMI 618 - KERALA HIGH COURT] the profits arising from the sale of scrap shall form part of business profits referred to in the formula for determining admissible deduction under Section 80HHC. It was also recorded that the sale of scrap and shall also form part of the total turnover of the assessee. Income from scrap sale is part of the business income from which exclusion of 90% thereof is not called for by operation of Explanation (baa)(i) to Section 80HHC, but at the same time, scrap sales turnover, if not included in the total turnover, should be added to the total turnover as denominator in the computation of eligible relief under Section 80HHC (3).
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2013 (1) TMI 601
Presumptive Taxation – Permanent establishment (PE) in India – India US DTAA - PGBP of the business of exploration, etc., of mineral oils – Deemed profit - 10% of any remuneration received by an assessee – A US enterprise, has no permanent establishment in India - Held that:- Article 7 of DTAA requires a non-resident US enterprise to have a permanent establishment in India for being taxed in India, otherwise it is not taxable in any view of the said treaty, even it received any remuneration in connection with any matter provided in Section 44BB. In favour of assessee
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2013 (1) TMI 600
Disallowance of Interest income – Interest free advance to group companies – Commercial expediency - Held that:- Assessee also taken a plea before us that though the advances made by the assessee to its sister concerns at free of interest in earlier year, however, the interest on these advances has been accounted in subsequent years. The assessee is following mercantile system as such interest has to be accounted on accrual basis. If there is a mutual transaction between the assessee and the sister concerns to whom the assessee made interest free advances then it has to be considered as advances made by the assessee on account of commercial expediency. Issue back to the file of the A.O. to consider the issue afresh. Remand back Disallowance of advances written off - creditor advances written off – Held that:- The assessee only furnished list of debts and the details called for by the authorities have not been furnished. The claim of the bad debts has been disallowed by considering the material on record by finding as a fact that the debt has not been proved as bad debt. Following the decision in case of Sirpur Paper Mills (1971 (12) TMI 37 - ANDHRA PRADESH HIGH COURT) that only the debt which constitutes trade debt could be claimed as bad debt if it is irrecoverable. In the present case it is observed by the lower authorities that the debts which were written off were not trade debts as seen. In favour of revenue Disallowance of advances given to employees written off - tour advance – Held that:- If it is an expenditure incurred in respect of its business, it should have been claimed during the relevant assessment year and if it is a debt it should have been advanced in respect of trade or business of the assessee and it should have gone to computation of income of the assessee in the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year or represents money lent in ordinary course of business The assessee is not able to lead any evidence how it has gone into computation of income of the assessee in the assessment year under consideration or in any other assessment year. Being so, we are of the opinion that findings of the lower authorities in disallowing the claim of the assessee are justified Addition u/s 68 - The A.O. called for information at the time of assessment - The assessee failed to produce the same – Held that:- The A.O has no occasion to examine the evidence produced before the CIT(A) by the assessee. The CIT(A) ought to have called for a remand report before deleting the addition. In the interest of justice, we remit the entire issue back to the A.O. for fresh consideration. Remand back
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2013 (1) TMI 599
Deduction u/s 80IB - Whether in the absence of any completion certification showing completion of project before 31/03/2009 by the local authority, the assessee is entitled for claim of deduction u/s 80IB(10) - Assessee obtained approval from Municipal Authorities for construction of the project on 26/06/2004 - Structural Engineer certified that the project is completed on 15.9.2008 i.e. six months prior to the due date - The GHMC authorities issued completion certificate on 31.11.2009 i.e. 14 months after submission of completion certificate by the Structural Engineer Held that:- Following the decision in case of Satish Bora & Associates (2011 (1) TMI 1215 - ITAT PUNE) has set a legal principle under the provision of relevant Municipal Laws, where there is no concept of completion certificate but only the occupancy certificate. It also contains the provisions for deemed issue of completion certificate if Municipal Authorities did not raise objections if any after filing of the Completion Certificate by the concerned Architect It is not clear as to why the GHMC took only 14 months to issue the certificate and if there are any deviations from the approved plans by the assessee. One must examine, if the relevant Municipal Laws / Rules / Guidelines specify any time limitation for processing the certificate filed by the Architect / Structural Engineer as the case may be and issue of the final completion certificate. AO must also examine, if there is any provision in local laws for deemed acceptance of the Completion Certificate filed by the Structural Engineer of the project in local laws. All these issue requires the explanation of the assessee with the supportive evidence of law rules. The minor deviation if any ought not to disentitle the assessee for availing deduction. For fresh adjudication remand back to AO
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2013 (1) TMI 598
Validity of notice u/s 148 – Reopening of assessment - Escaped assessment – Speculation loss - Assessee had claimed loss from speculative transaction - Transactions for trading in gold and silver futures on commodities exchange MCX – Held that:- It is trite law that the notice for reopening must stand or fail on the basis of reasons recorded by the A.O. for issuing such a notice. The case of the assessee was that by virtue of clause (a) of sub-section (5) of section 43, the same would not be treated as speculative transaction. It is not the case of the A.O. in the reasons recorded for reopening the assessment that for any particular reason such claim under clause (a) was not acceptable. A transaction of hedging to fall under clause (a), there are certain conditions to be fulfilled. However, we are afraid such a contention cannot be accepted for two reasons. Firstly, any attempt on the part of the Assessing Officer now to fall back on the conditions required to be satisfied for application of clause (a) would amount to change of reasons recorded for reopening. Secondly, any such inquiry would be wholly a fishing inquiry - In favour of assessee
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2013 (1) TMI 597
TDS u/s 194A – Rate of TDS - Whether tax has to be deducted as the rate in force in quarterly basis where the interest is payable on 31st March every year and compounded with quarterly rest – After amendment the deduction for interest payable u/s 194A at the rate of 10% w.e.f. 1/10/2009 as against 20% before the said date - Assessee company had moved application u/s 154 seeking rectification as the A.O. had computed the tax deductible in terms of the rates that were in force before 1/10/2010 and had not considered the rates in force as per the amendment made by Finance Act, 2009 Held that:- Merely because the interest is compounded quarterly does not mean that the interest is payable on quarterly basis. The interest was accruing quarterly and therefore, the tax has to be deducted as the rate in force in quarterly basis, is not correct. The interest on ICD was payable on 31st March, although the interest was compounded with quarterly rests It can be seen from the ledger account that the assessee company had credited the interest payable on the ICD only on 31st March, 2010; thus the claim of the assessee company that it was liable to deduct tax at source at the rate of 10%, which was the rate in force on the date of credit to the account of the payee. The liability of the assessee to deduct tax at source with reference to the interest payment is only at the rate of 10%. In favour of assessee Delay in payment of TDS – Interest u/s 201(1) – Held that:- Following the decision in case of Hindustan Coca Cola Beverage Pvt. Ltd (2007 (8) TMI 12 - SUPREME COURT OF INDIA) that assessee cannot be made liable u/s 201(1), since the payee had disclosed the interest income in its return of income - In favour of assessee
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2013 (1) TMI 595
Revision of order by CIT u/s 263 – Computation of Period of limitation – from the date of the order of original assessment or from the order of assessment passed after remanded back by Tribunal, and CIT exercising his revisional jurisdiction u/s 263 reopened the order of assessment only in relation to the issue which was not subject matter of the appeal or issues remand back Held that:- Yes, the order is barred by limitation. Following the decision in case of Alagendran Finance Ltd. (2007 (7) TMI 304 - SUPREME COURT) that the CIT exercising his revisional jurisdiction reopened the order of assessment only in relation to issue which was not subject matter of the reassessment proceedings, it was held that the period of limitation provided for under sub-section (2) of section 263 would begin to run from the date of the order of assessment and not from the order of reassessment. The scope of remand pursuant to the order of the Tribunal remitting the matter to the A.O., was limited to the addition of Rs. 59,56,000/-, evidently, therefore, such deduction u/s 80I was not in issue in the remand proceedings. Under the circumstances, the limitation qua the issue of grant of deduction u/s 80I would have to be computed from the date of the original assessment order wherein the Assessing Officer had granted 30% deduction on the total income inclusive of the income u/s 68, that is, from 28th March, 1995. When so computed, the order dated 30th March, 2007 passed u/s 263, is hopelessly time barred, the prescribed period of limitation for making such order being two years from the end of the financial year in which the order sought to be revised was passed - In favour of assessee
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2013 (1) TMI 594
Penalty u/s 271(1)(c) – Concealment of income - Bonafide claim - Furnishing of inaccurate particulars - Deduction u/s 80HHC had been claimed without reducing deduction u/s 80IB – Held that:- The claim of the assessee for deduction u/s 80HHC was a bona fide claim. The claim of the assessee though later on was found to be untenable on the basis of subsequent decision of the Court, thus, it could not be held that the assessee had intentionally claimed deduction under Section 80HHC of the Act which was legally not permissible. This did not amount to furnishing of inaccurate particulars of income. Under the circumstances, no penalty, thus, could be levied u/s 271(1)(c) - In favour of assessee
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2013 (1) TMI 593
Rectification of order by Tribunal u/s 254(2) - Computation of deduction u/s 80HHC - Whether it is the net interest which has to be taken into account while computing deduction u/s 80HHC as per Explanation (baa) to Sec. 80HHC(4C) – Revision application filed by assessee contended to work out deduction u/s 80HHC, 90% of receipt by way of interest had to be excluded from profits of business taking net interest income and not the gross interest receipts – Held that:- The effect of the same would be that it is the net interest which has to be taken into consideration while computing deduction u/s 80HHC as per Clause (baa) of the explanation to Section 80HHC. The order passed by the Tribunal in the miscellaneous application being in conformity with the order in case of ACG Associated Capsules Private Limited (2012 (2) TMI 101 - SUPREME COURT OF INDIA). In favour of assessee
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2013 (1) TMI 592
Disallowance u/s.40(a)(ia) – TDS u/s 194C - Scope of sub-section (2) of section 194C – Assessee is individual and engaged in the business of construction - To transport construction material at the site, assessee had availed the services of transporters - Made payments to such transporters under the head transport charges - Payment made to contractor and sub-contractor - Assessee had only availed of the services of such transporters for carrying out the material to the site Held that:- Section 194C(2) what was necessary was a relationship between the contractor and sub-contractor and not merely be hiring of an agency by the contractor during the course of execution of the work. Such vital requirement of relationship of a contractor and sub-contractor between the assessee and the transporters was missing Till introduce of Clause (k) of sub-section (1) of section 194C, the category of individual, HUF or AOP was not included. Such amendment was made with effect from 1st June 2007 and obviously, therefore, would not apply to the case on hand. The Tribunal, therefore, correctly came to the conclusion that the case of the assessee was not covered u/s 194C(1) In favour of assessee
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2013 (1) TMI 591
Addition on account of foreign travel expenses – Revenue or personal expenditure - Foreign travel expense incurred by assessee and his wife which has been allowed to the extent of 50% by the CIT(A) and upheld by the Tribunal - Assessee was a heart patient and was looking after the business of the firm - His wife had to accompany for looking after him on visit to the foreign country – Held that:- Foreign visit resulted in increase in the business and after analyzing the factual matrix had allowed 50% expenses as revenue expenditure which was wholly and exclusively expended for business purposes. An effort was made by the revenue to submit that 50% had been allowed without any basis. He, however, could not substantiate the said plea - In favour of assessee Addition on account of late deposit of PF & ESI – Held that:- Following the decision in case of Alom Extrusions Limited (2009 (11) TMI 27 - SUPREME COURT) wherein it has been held that Second Proviso to Section 43B of the Act omitted by Finance Act, 2003 with effect from 1.4.2004 was clarificatory in nature and was to operate retrospectively. CIT(A) was right in deleting the addition made by the A.O. u/s 36(1)(va) and u/s 43B on account of late payment of employee's as well as employer's contribution to PF & ESI as the same had been deposited prior to the filing of the return u/s 139 (1) - In favour of assessee
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Customs
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2013 (1) TMI 590
Apex Court issues Directions as the Law declared under Article 141 of the Constitution of India. regarding proceedings under the NDPS Act. - Directions and detailed process about - (i) Adjournment - (ii) Examination of Witnesses - (iii) Workload - (iv) Narcotics Labs - (v) Personnel - (vi) Re-testing Provisions - (vii) Monitoring - (viii) Public Prosecutors - (ix) Other Recommendations. For the simplification of the above detailed process, we direct that the filing of the charge- sheet and supply of other documents must also be provided in electronic form. However, this direction must not be treated as a substitute for hard copies of the same which are indispensable for court proceedings. We expect and hope that the aforesaid directions shall be complied with by the Central Government, State Governments and the Union Territories, as the case may be, expeditiously and in the spirit that these have been made.
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2013 (1) TMI 589
Stay petition - Import goods like Smart Cards and Cards from parent company – Valuation of imported goods – Purchase from related party – Held that:- The transaction between the appellant-company and the parent company were at arms length and the supplies made to the Indian buyers were of personalised Sim Cards / Smart Cards. Differential duty would come out to Rs. 6.42 crores of which a sum of Rs. 5.2 crores stands deposited during the earlier proceedings including a sum of Rs. 2 crores paid during the course of investigation. We do not find any justification to waive pre-deposit of the balance of Customs duty demanded from the assessee. In favour of revenue
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2013 (1) TMI 588
Classification - Fire detection and quenching system - Respondents have claimed the same as 'security system' - Notification No.140/91 Cus dt. 22/10/1991 - Granted exemption when imported by a 100% EOU - Held that:- Any security system is designed to protect persons/property from against threat, theft or damage. The imported equipments are very much used for protection of property and humanbeings, inasmuch as they are undisputedly used in detection of fire and extinguishing the fire as and when it breaks out. In favour of assessee
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Corporate Laws
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2013 (1) TMI 587
Depositories Act, 1996 - role and power of NSDL - Respondent No. 1 filed the company petition before the CLB against L&T, Ultratech Cement, Sharepro Service, the appellant-NSDL and seven others seeking an order for decision on title of Respondent No. 1 and rectification in respect of 431 shares of L&T which were held/dematerialized by various persons - Respondent No. 1 claimed to have made a bona fide purchase of 650 shares of L & T from his broker on 4-10-1999 got delivered and claimed to have misplaced in the year 1999 and inturn received new transfer deeds for 229 shares. However, being unable to obtain fresh transfer deeds in respect of 431 shares - Respondent No. 1 sought rectification order from the Company Law Board in respect of the balance 431 shares - CLB directed NSDL to issue notices to respondent Nos. 5 and 6 and take appropriate decision in the matter - Held that:- The role and power of the NSDL is quite restricted and limited as they are not empowered to decide or adjudicate the claim of title in respect of demated shares. Any dispute with regard to the ownership or title of any share including demated, the proper forum is somewhere else. Unless the title and/or any objection regarding transfer of shares is decided finally in case of dispute and in case there is no dispute, it cannot be forwarded by the company for further transfer. As the parties concerned unless clears the position about the ownership and/or title of the shares, NSDL is no way in a position to accept and/or permit the transfer of demated shares. Their role, in view of the above position, just cannot be enlarged in such a fashion, as done by the impugned order. Thus considering the role and scope, if NSDL is not in a position to adjudicate and/or decide the title of any shares, there is no question of issuing notice to the concerned and hear them for deciding the title/ownership. Therefore, there is also no question of taking any decision with regard to the same. Everything will be, without jurisdiction and authority. Therefore, order passed by the Board against NSDL is quashed and set aside - liberty granted to the concerned Respondents/Original Petitioners to take out appropriate proceedings to get their dispute settled with regard to the title of the demated shares and/or such other shares - company appeal partly allowed.
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Service Tax
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2013 (1) TMI 607
Cenvat Credit of Service Tax paid on GTA services - Outward freight - scope of 'input service' - Rule 2(1) of Cenvat Credit Rules, 2004 - period before 1.4.08 - held that:- When we hold that outward transportation would be an input service as covered in the expression 'means' part of the definition, it would be difficult to exclude such service on the basis of any interpretation that may be offered of the later portion of the definition which is couched in the expression includes . The expression includes cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression means . In other words, the expression includes followed by means in any definition is generally understood to be expanding the definition of the term to make it exhaustive, but in no manner can the expression includes be utilized to limit the scope of definition provided in the main body of the definition. To our mind this was also not the intention of the Legislature in the present case. The outward transport service used by the manufactures for transportation of finished goods from the place of removal upto the premises of the purchaser is covered within the definition of input service provided in rule 2(l) of the Cenvat Credit Rules, 2004.
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2013 (1) TMI 605
Waiver of pre-deposit - Penalty u/s 78 - Intellectual Property Right - Activity of transfer of trade secret i.e. technology and information - Reverse charge - Held that:- The intellectual property right means any right to intangible property namely trade marks, designs, patents or any other similar intangible property under any law for the time being in force but does not include copyright. While framing the charge against the applicant, the adjudicating authority has not specified specifically under which part of the Intellectual Property Right applicable in India the applicant is covered. Therefore, prima facie the applicant has made out a case for waiver of pre-deposit. Stay granted
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2013 (1) TMI 604
Provisions of section 78 - Against an order of the Commissioner (A), the petitioner filed appeal before the Tribunal along with stay application seeking waiver of pre-deposit of the amount of service tax - Tribunal after hearing the parties, by the order directed the petitioner to deposit the entire amount of service tax, interest and penalty - Held that:- The Tribunal was not justified in directing the petitioner to deposit the entire amount of penalties in addition to the service tax and interest. This court is of the view that impugned order passed by the Tribunal deserves to be modified to the extent the petitioner has been directed to deposit the entire amount of the penalties u/s 76 and 78. Tribunal's order of dismissing the appeal for non-compliance is hereby quashed and set aside. Order shall stand modified to the extent that instead of depositing the entire amount of penalties u/s 76 and 78, the petitioner shall deposit 25% of the penalty u/s 78.
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2013 (1) TMI 603
Waiver of Pre-deposit - Extended period of limitation - Bonafide belief - Business auxiliary services - Business support services - Assessee received credit notes in July and June 2004, for rendering the service of customer relationship services - Non-speaking order - Principles of natural justice Held that:- The SCN was issued in the year 2009 for the credit notes and payment received by the appellant in 2004. Appellant has been consistently taking a plea before both the lower authorities that they were having a bonafide belief that these services would fall under business support services and not under business auxiliary services. Adjudicating authority has not recorded any reasoning for rejecting the claim of the appellant as regards the limitation and the first appellate authority has not even recorded a single sentence on the question of limitation. Both the orders are non speaking orders, having not addressed the question of limitation before raised. Hence remand back to AO
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2013 (1) TMI 602
Waiver of pre-deposit - Stay of recovery - Management, Maintenance or Repair Service - Business Auxiliary Service - Power plant belonging to the appellant's subsidiary was being operated and maintained by the appellant under the agreement - Held that:- It appears that the transaction in question was on principal-to-principal basis and the appellant was required to operate and maintain the power plant of its subsidiary by using their own work force. Decision in case CMS (I) OPERATIONS & MAINTENANCE CO. P. LTD.(2007 (5) TMI 74 - CESTAT, CHENNAI) is in favour of assessee. Waive of pre-deposit and stay granted
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Central Excise
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2013 (1) TMI 609
Rate of ad valorem duty of central excise on cranes covered under the Heading No. 84.26 Sub-heading No. 8426 - 12% or 15% - difference in English & Hindi version of the Bill introduced in the Lok Sabha - no such specific order of the Hon’ble Speaker of rectification of the error - Held that:- The authoritative text which is published of the Bill passed by Lok Sabha is a corrected version which specifies the rate of duty as 15% ad valorem against the concerned sub-heading. The authoritative text of the Act which received the assent also contains the same rate. The note of the Joint Secretary shows that the proof copies of English and Hindi versions of the Bill forwarded by Ministry of Law to Lok Sabha contained rate of 15% ad valorem against the sub-heading 8246. Mistake occurred while printing the Bill by Lok Sabha Secretariat before introducing the same in the House. The only flaw is that while correcting the mistake which had crept in the English version of the Bill introduced before the Lok Sabha, there was no specific order of the Hon’ble Speaker obtained for accepting the error as patent error. As the Hindi version of the Bill presented before the Lok Sabha contained the correct rate of 15%. The printed version in English and Hindi of the Bills passed by Lok Sabha forwarded to Rajya Sabha contained the correct rate of 15%. The assent of the Hon’ble President of India has been received to the Bill which contains the rate of 15%. Failure to obtain sanction of the Hon’ble Speaker under Rule 95 of the Rules of Procedure in the facts of this case is thus, only a procedural defect. There is no illegality attached to it. At highest, there is an irregularity of the procedure. Therefore, bar of Article 122(1) of the Constitution of India will be squarely attracted in the present case. Direction to pay costs may be recalled - This request cannot be acceded to inasmuch as the orders passed by this Court from 13th July, 2006 onwards show that there was failure on the part of the Respondents to produce relevant documents. The correspondence on record shows that even no heed was paid to the correspondence made by the learned Additional Solicitor General of India. Therefore, not inclined to revoke the said order of payment of costs - no merit in the challenge to the impugned order.
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2013 (1) TMI 586
Goods used as paint on the shop floor - whether be treated as inputs under Modvat Credit Rules, 2001/2002? - Held that:- As decided in Flex Engg. Ltd. Versus CCE [2012 (1) TMI 17 - SUPREME COURT OF INDIA] the word 'input' has to be examined with the word 'manufacture'. From the definition of 'manufacture' it is clear that not only the materials used in the final product but incidental and ancillary requirements for the completion of the final product are also falls within the definition of the manufacture. As such the materials used in making the dust free hall are incidental and ancillary for the completion of the manufactures of the final product. As decided in assessee's own case [2013 (1) TMI 554 - ALLAHABAD HIGH COURT] the paints used on the floor of the production hall to make it dust free and fire retardant, was used for manufacture of final products. As such, the Cenvat Credit was admissible on it - in favour of assessee.
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2013 (1) TMI 585
Refund claim on wrong reversal of CENVAT Credit - rejection of refund invoking period of limitation - whether the claim for refund of wrongly reversed Cenvat Credit/Modvat Credit is subject to the limitation period prescribed under section 11B - Held that:- As decided in Indo-Nippon Chemicals Co. Ltd. Vs. Union of India reported [2002 (2) TMI 136 - HIGH COURT OF GUJARAT AT AHMEDABAD]that refund/re-credit of Cenvat Credit wrongly reversed, would be subject to the provisions of Section 11B, as Modvat/Cenvat Credit is nothing but a constituent of duty. In view of this, the refund/re-credit of the wrongly reversed Cenvat Credit would be subject to the provisions of Section 11B and the limitation period prescribed in Section 11B would be applicable for filing the refund claim for Modvat Credit. Relevant date from which the limitation period has to be counted - Held that:- Hon'ble High Court in the case of Indo-Nippon Chemicals Co. Ltd.(Supra) has held that when reversal of Modvat Credit was on insistence of Department and subsequently the reversal was found to be wrong, the provisions of Section 17 of Limitation Act would be applicable and limitation period would run from the date on which the mistake was discovered by the appellant. Ascertainment as to whether the reversal was on the insistence or instructions of the Departmental Officers - Held that:- On this point there is dispute, as while the Department claims that the reversal in both the cases had been made by the appellant on their own without any instructions in this regard to them, Contrary to this, the appellant in their reply dtd. 02.09.01 to the Show Cause Notice have made the submissions that reversal of credit was done without any protest but on the context of wrong interpretation of rule by departmental officers advising reversal of such credit. The learned DR had been asked file his written submissions on this point but the same have not been filed in view of this, the matter has to be remanded once again to the Commissioner (Appeals) and ascertain as to whether the reversal was on advice or instructions of the Departmental Officers or made by the appellant on their own, as per their own interpretation of rules without any advice or any instructions.
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2013 (1) TMI 584
Rebate claim adjusted against the demand of interest - whether the appropriation of sanctioned rebate claim as held to be bad by the Commissioner (Appeals) would be entitled to payment of interest from the date of refund claims made by them - Held that:- As decided in Nijrang Print Pack Pvt. Ltd. Vs. Union of India [2002 (10) TMI 113 - HIGH COURT OF GUJARAT AT AHMEDABAD] such adjustments are not appropriate, and the refund is actually not given to the assessee, assessee is entitled to the interest on the same. In the present case also, refund has actually been sanctioned to the appellant but stand adjusted. And as such, the appellants are entitled to the refund claim as also interest on the delayed refund - remand the issue to the original authority for deciding the issue of interest and the quantum of interest as the interest issue was never agitated before the original adjudicating authority inasmuch as the refund was never sanctioned by him.
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2013 (1) TMI 583
Waiver of pre-deposit - Applicants are engaged in the manufacturing of ‘sponge iron’ - During process of manufacturing of ‘sponge iron’, flue gas is generated - For cooling down the said gas, the ‘Water Heat Recovery Boiler’ is installed – Assessee claimed it as a pollution control device - Rule 2(a)(A)(ii) of CENVAT Credit Rules, 2004 – Held that:- Primafacie, agree with the assessee that they are entitled to CENVAT credit on the ‘Water Heat Recovery Boiler”. Steam has been generated during the course of cooling down of flue gases - The steam, so generated is sold by the applicants without payment of duty - Notification No. 6/2002-C.E – Revenue demanding payment of an amount equal to 10%/5% of the value of the exempted goods - Rule 6(3)(i) of die CENVAT Credit Rules, 2004 – Held that:- Following the decision in case of HI-TECH CARBON (2003 (3) TMI 238 - CEGAT, NEW DELHI) that that the above gases are burnt out, which generate heat and in turn the same is used in the boiler to generate steam. No doubt, the steam has been generated by the applicants as a conscious act but it cannot be claimed by the Revenue that any part of the inputs has gone into the manufacture of steam Applicants have made out a case for 100% waiver of pre-deposit. In favour of assessee
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2013 (1) TMI 582
Demand - Clandestine removal - Intention to evade excise duty liability – Bona fide belief - Assessee is manufacturer of Patent and Proprietary medicines – Valuation of physician samples - Manufacturing both exempted products and dutiable products - Issuing two sets of invoices - One set called ‘central excise invoices’ for paying excise duty - Another set of invoices called challan-cum-invoices for other commercial purposes - Clear the goods under his challan-cum-invoice rather than under excise invoice – CENVAT Credit short reversed under rule 57CC of the Central Excise Rules, 1944 - Free replacements of defective goods without payment of duty - Assessee was not paying duty on goods which was cleared free Held that:- Following the decision in case of Kalvert Foods India Pvt. Ltd. (2011 (8) TMI 24 - SUPREME COURT OF INDIA) and we are not in agreement that the assessee entertained a bona fide impression that he need not pay excise duty on manufactured goods if it was cleared free. This is because the legal position that liability to excise duty arises when any goods are cleared from a factory whether for consideration or for free is a long settled issue. Further the excise liability on physician samples cleared free, was always known to the drug industry for decades. There were disputes only about method of valuation to be followed and not about the duty liability. The respondent is not a tiny manufacturer with no awareness of what happens in the industry. The fact that the respondent took care to clear the goods under his challan-cum-invoice rather than under excise invoice showing nil payment of duty shows his clear intent to evade excise liability. Valuation of physicians sample – Held that:- Following the decision in case of BLUE CROSS LABORATORIES LTD. (2006 (8) TMI 220 - CESTAT, MUMBAI) that goods have to be valued on the basis of value of identical goods. Free replacement of damaged/defective goods - Time expired medicines – Held that:- we hold that extended period of time could not have been invoked for demanding duty short paid. Demand on account of improper reversal of credit under Rule 57CC – Lapsed credit - Held that:- The liability is for the period before the lapsing of credit though determined after the date of lapsing. In such situation it is only proper that a set off on account of such lapsed credit is given because of such liability was determined correctly during the relevant time the credit would have been available for discharging such liability. In favour of assessee
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2013 (1) TMI 581
Reversal of CENVAT Credit - Whether the respondent was required to reverse the Cenvat credit involved in the inputs lying in stock as well as contained in finished goods/semi-finished goods lying in stock as on 9-9-2004, the date when the assessee opted for exemption under Notification No. 50/2003-C.E., dated 10-6-2003 – Held that:- Following the decision in case of SABOO ALLOYS PVT. LTD. (2009 (12) TMI 125 - HIGH COURT OF HIMACHAL PRADESH) that input credit legally taken and utilised on dutiable final product, need not be reversed on the final product becoming exempt under Notification No. 50/2003-C.E., dated 10-6-2003. In favour of assessee
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CST, VAT & Sales Tax
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2013 (1) TMI 606
Kerala Tax on Luxuries Act, 1976 - Levy and demand of luxury tax - Whether liability for luxury tax on room rentals and other charges for accommodation and facilities provided therein is applicable only for "hotels" and not on a club to pay luxury tax on the room rent - Whether luxury tax is payable for the rent and other charges collected from guests occupying rooms and cottages attached to the club - Whether the cottages and rooms attached to the club answer the description of "hotel" within the meaning of Section 2(e) attracting liability for luxury tax - Club is specifically made liable for luxury tax for luxury provided to the members which is at the rate of ₹ 100/- per member per year payable u/s 4(2A) Held that:- The cottages and rooms attached to clubs answer the description of "hotel" attracting tax u/s 4(2) (a). In fact, even though hotels are run as a business activity for earning profit, for the purpose of levy of luxury tax there is nothing to indicate that the hotel should in fact make profit from the sales and all what is required to prove is that the rooms are rented out in excess of the charges provided in the Act attracting liability for luxury tax. The principle is same for cottages and rooms attached to clubs by virtue of the wide meaning of "hotel" contained in the definition clause and in the charging section All clubs are not providing cottages and guest rooms to their members or to guests. However, there are ever so many big clubs which extensively provide accommodation to their guests and to members of affiliated clubs. Such of the clubs which do not have rooms, cottages, auditorium or kalyanamandapam will be liable to luxury tax only on membership u/s 4(2A). On the other hand, those clubs which provide accommodation in cottages, rooms, auditorium, kalyanamandapam or halls for use of members or guests, will be liable to pay luxury tax not only for every member u/s 4(2A), but will also be liable for luxury tax as provided u/s 4(1)(i) Therefore confirm the levy of luxury tax for the rent and other charges collected for cottages and rooms by the Club – In favour of revenue
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Wealth tax
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2013 (1) TMI 608
Gift tax on the value of the bonus shares - fundamental question before the High Court in [2002 (5) TMI 42 - PUNJAB AND HARYANA HIGH COURT] that whether there was in fact a gift of 14,000 bonus shares made by the assess to the transferee? - reopening of assessment - Held that:- A perusal of the impugned judgment and order facially indicates that there has been no consideration of the provisions of Section 4(1)(c) of the Act. From the rather elaborate narration of facts, it is quite clear that the assessee had made a valid revocable gift of 6000 equity shares in the company on 20th February 1982 to the transferee. This is a finding of fact conclusively determined by the High Court in the assessee’s own case. The only event that took place in the previous year relevant to the AY 1989-90 was the revocation of the gift by the assessee on 15th June 1988. Whether this event enough for the Gift Tax Officer, in 1996, to re-open the assessment for the year 1989-90, while keeping in mind the fact that bonus shares were allotted to the transferee on 29th September 1982 and 31st May 1986 is possible, on an interpretation of Section 4(1)(c) to answer this question either way, but unfortunately the High Court did not even notice this provision of the Act. Thus this case cannot be decided finally as the view of the High Court on the interpretation of Section 4(1)(c) is missing. Nor the view of the High Court on the applicability or otherwise of the principle laid down in McDowell & Co [1985 (4) TMI 64 - SUPREME COURT]. As far as the applicability of Escorts Farms is concerned [1996 (9) TMI 4 - SUPREME COURT] the question that arose for consideration in that case was the determination of the cost of acquisition of the original shares when bonus shares are subsequently issued. That is the second part of Section 4(1)(c) and that question would arise (if at all) only after a finding is given by the High Court on the first part of Section 4(1)(c) - remand the matter for de novo consideration by the High Court keeping in mind the provisions of Section 4(1)(c) of the Act as well as the orders passed in the case of the assessee for the Assessment Year 1982-83.
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