TMI Tax Updates - e-Newsletter
October 14, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax:
Validity of Assessment order u/s 143(3) – since the AO failed to serve the notice u/s 143(2) of the Act to the assessee within the stipulated time limit prescribed, therefore, CIT(A) rightly quashed the assessment framed by the AO - AT
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Income Tax:
Restriction of deduction u/s 10B – 100% Export Oriented Unit (EOU) - assessee will not be entitled for exemption u/s 10B in respect of turnover sold to 100% EOU in India - AT
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Income Tax:
Accrual of capital gain - transfer - Nowhere there is mentioned in the allotment letter that the possession of the plot is given to the prospective buyers - no capital gain accrued by mere issuing allotment letter - AT
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Income Tax:
Refund on TDS made - - there is a detailed procedure that has to be followed for the purposes of getting a refund of T.D.S amounts erroneously paid - HC
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Income Tax:
Penalty u/s 271(1)(c) – assessee has bonafide belief in making the claim that gain arising out of sale of agricultural land is exempt from tax - no penalty - AT
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Income Tax:
Depreciation - whether an individual asset is put to use in a particular year or not is of no consequence inasmuch as the requirement of law is to establish the use of concerned block of assets and not use of particular assets individually. - AT
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Customs:
Confiscation of goods - Appellant has sent a letter for relinquishing title of the goods after more than ten years of the expiry of the warehousing period - relinquishment shall not be allowed - AT
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Service Tax:
At every stage of rendering service or manufacture of goods, the duty/tax liability has to be discharged and at the subsequent stage the credit of the duty/tax paid is taken. This is the premise on which the entire service tax regime at the Central level operates - AT
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Service Tax:
Import / Export of services - with effect from 20/06/2012 a specific Rule has been prescribed called Place of Provision of Service Rules, 2012. Though these Rules are only prospective in nature, the provisions of these Rules can be gainfully used to understand the concept of place of provision. Rule 3 of the Rule says that the place of a provision of a service shall be the location of the recipient of the service. - AT
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Service Tax:
Levy of tax under ‘tour operator service’ and ‘rent-a-cab’ service - transportation of employees of SEZ units to-and-fro from the places of employment within the SEZ - prima facie tax is not leviable - AT
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Service Tax:
CENVAT Credit - input service - Goods Transport Agency Service - is the assessee entitled to claim Cenvat credit of the service tax paid on the GTA-service even though it was not integral part of the price of goods - Held NO - HC
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Central Excise:
Condonation of delay - Inordinate delay of 439 days - it is the adequacy of the explanation that matters and not the length of delay - condonation denied - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (10) TMI 296
Validity of Assessment order u/s 143(3) – Notice served beyond the time prescribed – Held that:- The AO claimed to have served the notice u/s 143(2) of the Act to one Shri Bherulal on 24/09/2010 fixing the date of hearing for 07/10/2010 - The notice u/s 143(2) of the Act was to be served on the assessee before 30/09/2010 whereas notice dated 07/10/2010 was received by the assessee first time on 11/10/2010 i.e. after the statutory time limit prescribed u/s 143(2) of the Act for service of notice – as decided in ACIT & another Vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] –it has been held that after the return is filed, clause (b) of section 158BC provides that the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and "the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section145 shall, so far as may be, apply. The omission on the part of assessing authority to issue notice u/s 143(2) of the Act cannot be procedural irregularity and is not curable - Therefore, requirement of notice u/s 143(2) of the Act cannot be dispensed with - since the AO failed to serve the notice u/s 143(2) of the Act to the assessee within the stipulated time limit prescribed, therefore, CIT(A) rightly quashed the assessment framed by the AO on the basis of invalid notice u/s 143(2) of the Act – Decided against revenue.
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2014 (10) TMI 295
Restriction of deduction u/s 10B – 100% Export Oriented Unit (EOU) - sales made by assessee to two 100% EOUs inside the country against Indian currency, who in turn had actually exported the goods outside India - Held that:- assessee will not be entitled for exemption u/s 10B in respect of turnover of ₹ 3,37,46,108 sold to 100% EOU in India. The contention of the ld. AR that decision of the Hon’ble AP High Court being factually distinguishable will not apply to assessee’s case, in our view, is devoid of merit. The conditions of sub-section (3) of section 10B has not been fulfilled in respect of the turnover sold to two other 100% EOU in India – relying upon Swayam Consultancy (P) Ltd vs. ITO [2011 (4) TMI 683 - Andhra Pradesh High Court] -the language of s. 10B(3) of the Act is plain - It does not admit any other meaning than what is conveyed by the language used - The benefit u/s 10B(1) of the Act is available to 100 per cent EOUs only if the sale proceeds of articles or things exported out of India are received in convertible foreign exchange - Two conditions should be satisfied before the benefit under s. 10B(1) of the Act is claimed. - Decided against the assessee. Deduction in respect of amount on sale of packing material to Nambia disallowed – Held that:- The only reason on which they have held that the amount would not be eligible for exemption u/s 10B is packing materials were not manufactured by assessee - the products manufactured by assessee could not have been exported without packing materials, hence, the observation by the lower authorities that it cannot be considered as part of the export turnover is not correct - When a particular article or thing cannot be exported without its container/packing, same has also to be considered as part of the product and consequently has to be treated as part of the export turnover of assessee - the turnover being part of the export turnover of the assessee would be eligible for deduction u/s 10B – Decided in favour of assessee.
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2014 (10) TMI 294
Accrual of capital gain - transfer - sale proceeds of plots - Whether that the assessee should have recognized the revenue when the allotment letters were issued to the prospective buyers - Mercantile system followed - Held that:- The sale deeds in respect of the plots of which letter of allotments were given have not been registered, the transaction would not qualify as sale because the risks and rewards are not transferred to the buyers legally, the AO mentioned that there is no provision in the income tax Act saying that registration is compulsory for the purpose of transfer/sale of immovable property - A letter of the allotment is nothing but it is a first stage of acceptance of the offer of the buyer by issuing him to letter - the assessee company has undertaken a project GIRIVAN and as per the facts on record it appears that the GIRIVAN project is the farming or agricultural project - The assessee company acquired the huge land in the Village – Dongargaon/Hotale, Tal. - Mulshi, Distt. – Pune and after developing the infrastructure like road, water provision etc. made the plots and offer the same for sale - On the basis of the survey action u/s. 133A the AO issued the notice u/s 148 to the assessee on the charge that for these six assessment years the assessee has not properly declared the income - the AO has re-casted the entire profit and loss account of the assessee which is merely basis of the allotment letter issued by the assessee to the prospective buyers. Both the authorities have not at all understood the nature of the allotment letter - The allotment letter is issued on company letter head. On perusal of the contents of the allotment letter, it is like a booking letter accepting the offer of the buyer - Nowhere there is mentioned in the allotment letter that the possession of the plot is given to the prospective buyers - The assessee has filed the copy of allotment letter dated 26-07-2002 issued to one Mr. Arun Ramdas Pangarkar - As per the allotment letter said Mr. Arun Ramdas Pangarkar has applied for the allotment of the plot and booking an amount was paid to the assessee company and the assessee agreed to allot him the plot of agricultural land as per the particulars given - It is stated in the allotment letter that the said buyer has inspected the plot and the same is allotted as per his choice. In respect of the private roads there is mentioned in the allotment letter - even the allotment letters were issued when the project was under developed that there were no proper roads but demarcation was done - It appears that the electricity poles and water facility was under progress - The cost of the plot is mentioned as well as administrative and security expenses are mentioned - There is condition that the said person has to use the plot for an agricultural purpose and for construction of his own farm house as per rules and regulations and prospective buyer has to prove that he is agriculturist - It is in clear terms clarified that the assessee company will execute sale deed of the said plot depending upon the buyers agriculture status and claiming the amount towards cost of plot administrative expenses etc. It is also mentioned that the buyer has to become member of GIRIVAN project. The assessee is following consistent method of accounting in respect of the GIRIVAN project recognizing income on execution of sale deed and save these six assessment years the same has been accepted - Allotment letter cannot be said to be conferring the possession on the prospective buyers but it is only accepting the offer of the buyer to sale the specific plot - As per the Transfer of Property Act the title is transferred only on the completion of the terms and conditions agreed between the parties - authorities below have referred to Sec. 2(47) of the Act - the income is computed under the head business hence, the definition is not applicable at all - as the letter of allotment does not disclose nor it is meant for conferring the right of the enjoyment or possession on the date of issue - the method of accounting regularly employed by the assessee cannot be disturbed - The AO did all the exercise merely on the basis of the survey action u/s. 133A which he could have done in normal assessment proceedings u/s. 143(3) by verifying method of accounting adopted by the assessee for recognizing income - the assessee has filed the copies of letters from the buyers of the plots and as per the letters given by the buyers of the plots, the possession of the plot is given only on the execution on the sale deed - both the authorities below have misunderstood the provisions of law nor they have properly appreciated the letter of allotment issued by the assessee to the prospective buyers – thus, the order of the CIT(A) is set aside and the AO is directed to accept the method of accounting regularly followed by the assessee and also to accept the return/loss declared – Decided in favour of assessee.
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2014 (10) TMI 293
Refund on TDS made - seeking refund of the amounts paid to the Income Tax Department by way of tax deduction at source (TDS), while effecting payment of compensation amounts to the Sub Court – Held that:- The T.D.S amounts were deducted from payments that were due pursuant to an award that was passed under the Land Acquisition Act - The TDS amounts were then paid over to the Income Tax Department - The compensation amount, as per the award passed in terms of the Land Acquisition Act was not actually paid but was deposited before the Sub Court, Thiruvalla which would have considered the reference applications, if any, preferred by awardees of compensation amounts - Subsequently, however, the award passed under the Act was set aside by this Court in proceedings that challenged the acquisition proceedings - where the payment of T.D.S, by the petitioners to the Income Tax Department, was not actually required but had already been effected at the time of payment of the compensation amount to the Sub Court, Thiruvalla - there is a detailed procedure that has to be followed for the purposes of getting a refund of T.D.S amounts erroneously paid - there was no tax that the 3rd and 4th respondents would have to pay to the Income Tax Department in respect of the compensation amounts. - Refund to be granted subject to verification that whether TDS credit was availed or not - Decided in favor of assessee.
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2014 (10) TMI 292
Bad debts written off disallowed – Amount covered by State Government Guarantee – Held that:- The claim of the assessee for deduction on account of bad debts written off was disallowed by the AO mainly on the ground that the relevant debts written off by the assessee had not actually become bad during the year – relying upon TRF Limited V/s. CIT [2010 (2) TMI 211 - SUPREME COURT] - every assessee, prior to 1.4.1989 had to establish that the debt advanced by him, had in fact become irrecoverable in order to claim deduction u/s 36(1)(vii) - this position has got altered by the amendment made in S.36(1)(vii) of the Act with effect from 1.4.1989 and it is not necessary for the assessee after 1.4.1989 to establish that the debt in fact has become irrecoverable - if the bad debt is written off as irrecoverable in the accounts of the assessee, it is enough for the assessee to claim deduction on account of bad debts u/s 36(1(vii) - the relevant debts were written off by the assessee in the books of account and since the same represented the money lent in the ordinary course of business of banking carried on by the assessee, the assessee is entitled to claim deduction on account of bad debts written off u/s 36(1)(vii) r.w. section 36(2) – the order of the CIT(A) is set aside – Decided in favour of assessee. Amount paid to LIC towards Employees Gratuity Fund disallowed – Held that:- The amount paid by the assessee to LIC towards Employees Gratuity Fund was disallowed by the AP on the ground that the Fund was not approved by the prescribed authority under the Income tax Act, although application seeking such approval was filed by the assessee – assessee contended that the Employees Group Gratuity Fund has since been approved by the Commissioner of Income-tax II, Hyderabad with effect from 1.3.2009 vide letter dated 1.3.2013 - both the sides have agreed that the matter should be sent back to the AO – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. Bad debts written off under the Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Held that:- As per clause (v) of sub-section (2) of S.36, no deduction for a bad debt or part thereof can be allowed, where such debt or part thereof relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, unless the assessee has debited such debt or part of the debt in that previous year to the provision for bad and doubtful debts account made under that clause – assessee contended that the provisions of S.36(1)(viia) introduced in the statute book with effect from 1.4.1979 are made applicable to cooperative banks only from 1.4.2007, and therefore, the CIT(A) ought to have directed the AO to satisfy himself about the fulfilment of the conditions stipulated in S.36(2)(v) by the assessee keeping in view that S.36(1)(viia) was applicable in the case of the assessee only with effect from 1.4.2007 - this contention raised by the assessee is duly supported by the Board Circular No.258/1979 dated 14.6.1979 and No.3 of 2008 dated 12.3.2008, clarifying that the provisions of S.36(1)(viia) introduced from 1979 would not be applicable to cooperative banks from 1.4.1979, but only from 1.4.2007 – thus, the direction given by the CIT(A) is modified to the extent that the AO shall satisfy himself about the fulfillment of the condition stipulated in S.36(2)(v) by the assessee, keeping in view that S.36(1)(viia) is applicable in the case of the assessee only with effect from 1.4.2007 while considering the claim of the assessee for deduction on account of bad debts under the Agricultural Debt Waiver and Debt Relief Scheme, 2008 – Decided partly in favour of assessee. Computation of business income – Investment depreciation and profit on sale of investments to be included or not – Held that:- CIT(A) has directed the AO to consider the claim of the assessee for relief on the issues after verifying the same from the relevant records – as decided in assessee’s own case for the similar issue was restored by the Tribunal also to the file of the Assessing Officer in assessee’s own case The Andhra Pradesh State Co-operative Bank Ltd. Versus The Asst. CIT, Circle-2(3), Hyderabad [2014 (1) TMI 295 - ITAT HYDERABAD] the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee.
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2014 (10) TMI 291
Penalty u/s 271(1)(c) – Inaccurate particulars furnished or not – Bonafide belief - Held that:- There is a bonafide claim made by assessee that sale of agricultural lands does not yield any taxable income by virtue of provisions of section 2(14) – relying upon Raghotham Reddy vs. ITO [1987 (10) TMI 47 - ANDHRA PRADESH High Court] - the profit or gain resulting from sale of agricultural land is a revenue derived from land i.e., agricultural income within the meaning of clause (1) in section 2 of the I.T. Act - assessee was under bonaifde impression that gain resulting from sale of agricultural land was exempt from tax - It was only AO on interpretation of the information available considered that assessee is indulging in adventure in nature of trade – the agricultural land is registered as such in Revenue Records - There was payment of land revenue, leasing of land for agricultural purpose and also assessment under wealth tax returns exempting the asset for the purpose of wealth tax - assessee has bonafide belief in making the claim that gain arising out of sale of agricultural land is exempt from tax – thus, there is no scope for levy of any penalty u/s 271(1)(c) – Decided in favour of assessee.
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2014 (10) TMI 290
Determination of income from business – Estimation of Net profit @ 10% of WIP – Administrative and financial charges and depreciation disallowed - Held that:- The assessee has been estimating profit with reference to the advances received - The profit is worked out on the advances but while showing the same in Profit and Loss A/c. it was wrongly mentioned as notional profit on work-in-progress - the AO correctly mentioned in the assessment order that the profit was estimated at 10% of advances and for A.Ys. 2003-04 to 2006-07, the estimation was accepted by the AO while completing assessment u/s. 153A of the Act - the order of the AO is set aside and to rectify the mistake of taking 10% of work-in-progress instead of 10% of advances keeping in mind that the method of accounting followed should be consistent as in earlier years. The CIT(A) has pointed out with respect to income from rent that nothing has been submitted to establish that it is in the nature of income from house property so as to get deduction u/s. 24 - Similarly with respect to miscellaneous recoveries the assessee's explanation that they were from regular business has not been substantiated - interest earned being part of the business income is also not established – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided partly in favour of assessee.
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2014 (10) TMI 289
Invocation of section 14A r.w Rule 8D – Held that:- The assessee has made investment to the tune of ₹ 2,18,16,75,912/-. It is claimed that ₹ 2,16,09,61,251/- was received from redemption of investments - The assessee’s claim that investments were from the proceeds of redemption of old investments and cash surplus generated by way of interest income on UTI Bonds and dividend income on mutual funds investment - Rule 8D is applicable for AY 2008-09 and earlier decision on the disallowance u/s 14A shall not have impact for applicability of Rule 8D for the year under consideration - Rule 8D of the Income-tax Rules, 1962 is mandatory by using the word “shall” in section 14A(2), the legislature made it mandatory for the AO to determine the amount of expenditure incurred in relation to exempt income according to the prescribed method - the AO has not considered all relevant facts on record and has also not verified the claim of the assessee with regard to the source of investment - To reach at the conclusion that he was not satisfied with the claim of assessee with regard to expenses incurred to earn exempted income, then only he can invoke Rule 8D for working out the disallowance – the matter requires a relook at the level of AO – thus, the matter is remitted back to the AO for fresh adjudication. Administrative and other expenses disallowed – Held that:- Being 0.5% of average value of investment, the assessee’s claim is that average value of investment taken by the Assessing Officer was ₹ 2,50,20,59,294/- instead of ₹ 41,88,44,725/- which is only 16.94% of the average value of investment taken by the Assessing Officer - for this aspect also, the matter is remitted back to the AO for fresh adjudication. TDS deducted disallowed u/s 194J – Amount deposited on or before due date of filing of return – Held that:- Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress - Nevertheless the Section 40(a)(ia) has to be given full play keeping in mind the object and purpose behind the section - At the same time, the provision can be and should be interpreted liberally and equitable so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates - it must be so construed so as to effectuate the liability imposed by the charging section and to make the machinery workable - when the machinery section results in unintended or harsh consequences which were not intended, the remedial or correction action taken is not to be disregarded but given due regard - the amendment to be interpreted liberally and retrospective – Decided in favour of assessee. Loss on sale of investment – Held that:- CIT(A) rightly was of the view that loss on sale of investment has already been considered as it has shown Net Profit on Sale of Investment is correct - In the Computation of Income, the appellant while computing the business income has excluded Net Profit on Sale of Investment and has also considered the same under the head Capital Gains - revenue has not controverted the findings of the CIT(A) that the loss on the sale of investment has been excluded in computation of business income and the same has been considered under the head ‘capital gains’- Decided against revenue. Valuation of closing stock – Held that:- Assessee valued the closing stock on cost or net realizable value whichever is lower - since the appellant is following the method of valuation consistently on cost or net realizable value whichever is lower, which is a prescribed method under AS -2 issued by the Institute of Chartered Accountants of India, the addition on account of Closing Stock of ₹ 10,79,68,722 is hereby deleted - the assessee is valuing closing stock on cost or net realizable value whichever is lower since 1993 - assessee should compute the closing stock on cost basis i.e. Net realizable Value plus reimbursement, which is nothing but the cost price - there is no fault in the order of the CIT(A) – Decided against revenue.
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2014 (10) TMI 288
Depreciation on second hand machinery – Failure to produce WDV – Invocation of explanation 3 of section 43 – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the AO disallowed depreciation to the extent of ₹ 1,59,54,775/- by allowing depreciation whereby depreciation was allowed on WDV of assets in the hands of the Ceat Ltd. and not on the basis of actual cost paid by the assessee – CIT(A) was rightly of the view that the assessee was eligible for depreciation on actual cost paid for the assets taken over from Ceat Ltd. – Decided against revenue. Depreciation on machinery used for production of two-three wheeler tyres used for part of year – Held that:- The AO has not appropriately appreciated the concept of allowance of depreciation in section 32 with the introduction of block of assets w.e.f. 01.04.1988. The depreciation in terms of the block of assets concept is to be allowed on the 'actual cost' or WDV of the particular 'block of assets', even if it is found that a particular asset comprised in the block of asset has not been put to use - The proposition is founded on the concept that depreciation is allowable with respect to the block of assets and not the individual assets – relying upon COMMISSIONER OF INCOME TAX Versus BHARAT ALUMINIUM COMPANY LTD. [2010 (8) TMI 26 - DELHI HIGH COURT] - certain Plant & Machinery was not put to use in the relevant year and therefore depreciation thereupon was not allowed - whether an individual asset is put to use in a particular year or not is of no consequence inasmuch as the requirement of law is to establish the use of concerned block of assets and not use of particular assets individually. It has been explained before us that the production of two-three wheeler tyres was abandoned by the assessee and hence the nonuse of such machinery - the assets are forming part of block of assets and there is no requirement of law, each of the item of assets comprised in the 'block of asset' is put to use in order to claim depreciation - CIT(A) made no mistake in allowing assessee's claim for depreciation in relation to part of the machinery relating to the manufacture of two-three wheeler tyres - the assets were already in use and were forming part of the block of assets at the beginning of the year under consideration and on such 'block of assets', depreciation was being claimed and allowed in the past - the fact that assets were not in use hereinafter cannot be a reason to deny depreciation on such assets which form part of the block of assets, i.e. Plant & Machinery – the order of the CIT(A) is confirmed – Decided against revenue.
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Customs
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2014 (10) TMI 299
Confiscation of goods - Relinquishment of title of goods - Interest on warehoused goods - Held that:- Section 72 (1) (b) states that any warehoused goods not removed from a warehouse at the expiration of the period permitted under Section 71 are considered as goods improperly removed and the owner of such goods is required to pay, the full amount of duty chargeable together, with all penalties, rent, interest and other charges payable in respect of such goods. 1 st proviso to Section 68 introduced w.e.f. 14.5.2003, provides for relinquishment of title of warehoused goods at any time before clearance of goods for home consumption. Section 72 (1) (b) does not stipulate filing of Bill of Entry for payment of duty. Further, since the goods are considered as improperly removed from the warehouse, the same cannot be considered as warehoused goods. Appellant has sent a letter for relinquishing title of the goods after more than ten years of the expiry of the warehousing period. We also note that even when the letter for relinquishing the title was sent the appellants have not made payment of rent, interest and other charges and penalties. We also note that the second proviso to Section 68 of the Customs Act, 1962 which was introduced with effect from 18.4.2006 also provides that relinquishment shall not be allowed where offence appears to have been committed. In this case in the impugned order goods have been held to be confiscated under Section 111 (m) of the Customs Act, 1962 and are confiscated. - Decided against assessee.
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2014 (10) TMI 298
Seizure of cigarettes - Held that:- Goods involved were 99 Intel Premium processors, whereas in the present case, it is 5,76,000 cigarettes which were seized from the possession of the respondents. Certainly those cigars were not meant for personal consumption, but were meant for business and they had foreign markings - Following decision of COMMISSIONER OF CUSTOMS, BANGALORE Versus TV. MOHAMMED [2014 (9) TMI 376 - Karnataka High Court] - Decided in favour of Revenue.
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Service Tax
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2014 (10) TMI 313
Business Support Service - Courier agency service - it is argued that when the service tax liability was discharged by the courier agency on the consideration received there is no separate tax liability on the franchisee in respect of the courier services provided by him to the courier agency. - Held that:- Service tax regime in India operates on the principle that whosoever is rendering a taxable service is liable to discharge service tax liability on the consideration received. If the service received is an input service for the recipient of the service, he can avail CENVAT credit of the service tax paid on the input service. The availability of CENVAT credit on the input service does not obliterate or negate liability to pay service tax on the input service. At every stage of rendering service or manufacture of goods, the duty/tax liability has to be discharged and at the subsequent stage the credit of the duty/tax paid is taken. This is the premise on which the entire service tax regime at the Central level operates. appellant has not made out any prima facie case for complete waiver of pre-deposit adjudged against them. - stay granted partly.
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2014 (10) TMI 312
Import or Export of services - Commission received - reverse charge mechanism - transfer of money from abroad to persons situated in India - Held that:- The service recipient in the transaction is M/s. Western Union, who is situated abroad. There is also no dispute that consideration for the service rendered has been received in convertible foreign exchange. The only dispute is where the service has been rendered. At the relevant time, there were no specific rules to determine the place of provision of service in service tax law. However, with effect from 20/06/2012 a specific Rule has been prescribed called Place of Provision of Service Rules, 2012. Though these Rules are only prospective in nature, the provisions of these Rules can be gainfully used to understand the concept of place of provision. Rule 3 of the Rule says that the place of a provision of a service shall be the location of the recipient of the service. In the facts of the case before us, the service receiver is M/s. Western Union, who has paid the consideration for the service and who is situated outside India and therefore, the place of provision of service should be treated as falling outside India - Following decision of Paul Merchants ltd. (2012 (12) TMI 424 - CESTAT, DELHI (LB)) and Fine Forex Pvt. Ltd. (2014 (4) TMI 34 - CESTAT NEW DELHI) - Decided in favour of assessee.
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2014 (10) TMI 311
Waiver of pre deposit - Commercial or industrial construction service - Held that:- Appellant has undertaken commercial construction service for HAL and the services include supply of material also while computing the service tax demand, abatement has been given in respect of the material supplied. Therefore, prima facie the confirmation of demand appears to be sustainable in law. As regards the plea of time bar, it is on record that the appellant has been a service tax registrant since 2005. In his statement recorded before the investigating authorities, he has also admitted to the tax liability and also undertook to make goods the service tax liability. Thereafter, the show cause notice was issued and the appellant did not even bother to file any reply to the notice or appear before the adjudicating authority. Similarly, before the appellate authority also, the appellant did not choose to appear for personal hearing. This conduct of the appellant does not reflect well on him. In these circumstances, we are of the prima facie view that the appellant has not made out any case for complete waiver of pre-deposit - partial stay granted.
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2014 (10) TMI 310
Waiver of pre-deposit - Import of service - Courier service - dispute is in respect of import of shipment where customers pays consideration to the local DHL entity abroad. Held that:- The shipments were booked by the service recipient with service provider i.e., DHL entity and both are located outside India. The applicants are only receiving such consignments and delivering in India. As per the agreement The DHL will compensate to the applicants in case the applicants fail to make up the cost. In the present proceedings there is no evidence on record to show that the applicants received any such compensation. In view of the decision in the case of Paul Merchants Ltd vs CCE, Chandigarh & others reported in - [2012 (12) TMI 424 - CESTAT, DELHI (LB)] as the service provider and service recipient is outside India we find prima facie merit in the contention of the applicant that the applicant are not liable to service tax. In respect of other shipments mentioned are (iii) of para 3 where overseas customers pay consideration to overseas DHL entity we find that the service provider and service recipient is within India though consideration for service is paid by the recipient of the shipment. As per the applicants such shipments were only 7 or 8%. Prima facie we find that the applicants had not made out a case in respect of such shipments. Taking into facts and circumstances of the case the applicants are directed to deposit the amount equal to 10% of the demand confirmed within eight weeks and report compliance on 18.11.2014. On deposit of the above mentioned amount, the pre-deposit of the remaining dues are waived and recovery thereof stayed for hearing the appeal - Partial stay granted.
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2014 (10) TMI 309
Levy of tax under ‘tour operator service’ and ‘rent-a-cab’ service - transportation of employees of SEZ units to-and-fro from the places of employment within the SEZ - Held that:- Prima facie, in view of the provisions of Rule 31 of the Special Economic Zone Rules, 2006, issued in conformity with provisions of Section 26(1)(e) of the SEZ Act, 2005; provisions of exemption Notification No. 4/2004-S.T., dated 31-3-2004 [providing exemption from liability to Service Tax on providing of any taxable service to a developer of the Special Economic Zone or a unit (including a unit under construction) of a Special Economic Zone by any service provider, for consumption of service within the Special Economic Zone]; and the judgment of the learned Division Bench of this Tribunal in Norasia Container Lines v. Commissioner of Central Excise, New Delhi reported in [2011 (3) TMI 639 - CESTAT, NEW DELHI], (the judgment having explained the scope of the provisions of SEZ Act, 2005 and of Rule 31 and the scope of Exemption Notification No. 4/2004-S.T.), the petitioner is seen to have made out a strong prima facie case for grant of waiver and stay - Stay granted.
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2014 (10) TMI 308
Denial of CENVAT Credit - mediclaim policy and transportation of employees - Held that:- Facility of transport was provided to the workers to take them to the factory. When such a welfare measure is not provided to workers no Cenvat credit shall be admissible looking to spirit of Rule 21 of Cenvat Credit Rules defining input service. No relation to manufacture having been established from the transportation activity, first appellate order to this extent is erroneous. So far as Revenue’s grievance of mediclaim policy is concerned that does not indicate from the fact that the mediclaim was granted to anybody else other than workers. This clearly is welfare measure to the workers. In absence of any cogent finding that the mediclaim relates to employees not working in the factory, Revenue’s appeal on this count is not sustainable - Decided partly in favour of Revenue.
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2014 (10) TMI 307
Refund of accumulated credit - Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006 - registration certificate did not contain the addresses of other branches - Held that:- appellants have exported the services from the STPI units at different places and that they have also applied for common registration. Prima facie, the violation, if any, is of procedural nature, and the same may not be justified recovery of refund already granted to them - there shall be waiver of pre-deposit of dues as per the impugned order and stay of recovery thereof till the disposal of the appeal - Stay granted.
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2014 (10) TMI 297
CENVAT Credit - input service - Goods Transport Agency Service - is the assessee entitled to claim Cenvat credit of the service tax paid on the GTA-service even though it was not integral part of the price of goods - Held that:- Fundamental principle of cenvat credit is to avoid double taxation i.e. cenvat credit may be taken only of those inputs, whose price was added in the price of the goods or was included towards the price of the goods and not otherwise. It is also clear from the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (the Valuation Rules). Assessee has not treated the GTA-services of transporting goods to the destination as a part of the input service. In case it had so treated then it should have added this value in the price of the goods or in the valuation for calculating duty. Assessee has not included the amount paid for the GTA-service in the price of the goods. It has not chosen it to be a part of the price and as such, the Assessee was not entitled to claim Cenvat credit for the same. There is no illegality in the order of the Tribunal. This is also clear from the Circular. an assessee is only entitled to claim cenvat credit on service tax paid for the Goods Transportation Agency service provided amount paid was integral part of the price of the goods - the amount paid for the GTA service was not integral part of the price of the goods - Assessee was not entitled to claim cenvat credit of the service tax paid - Decided against assessee.
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Central Excise
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2014 (10) TMI 306
Cenvat Credit - Input services - general insurance services - Held that:- Insurance premium on vehicles owned by them either for transportation their employees or for transportation of goods which was an integral part of business of appellant firm and input service credit will be available. Accordingly service tax paid on insurance premium of such vehicles was a ‘input service’ as defined under rule 2(i) of Cenvat Credit Rules, 2004. Considering the facts on the matter in its broader contour, Input service credit will be available on insurance of vehicles. Necessary documentary evidence and other factual information has not been provided by the appellants. Without proper information/documents, it is not possible to decide the matter at this end. Both sides agree that justice will be met, if matter is remanded back to original adjudicating authority to re-examine the matter. For this, both sides are directed to provide necessary documents/information to the adjudicating authority. So that matter is examined afresh to consider eligibility of input service credit on services other than vehicle insurance - Matter remanded back - Decided in favour of assessee.
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2014 (10) TMI 305
Waiver of pre-deposit of duty - Notification No.4/2006-CE, dated 01.03.2006 as amended by Notification No.10/2010-C.E., dated 27.10.2010 - Concessional rate of duty - Held that:- vide Circular No.60/95, dated 4th June, 1995 and Circular No.9/96-Cus., date 313.02.1996, it has been clarified that the benefit of exemption will be available to goods where the goods are squarely covered by the description even though the goods mentioned in the notification are not covered by the Chapter/Heading Nos./Sub-heading Nos. mentioned in the notification or if the Heading No. indicated against the description is ‘incorrect’. Board has clarified that the benefit of Notification would be extended on the basis of the description of the goods as mentioned in the Notification even though the goods mentioned in the Notification are not covered by Chapter/Heading Nos. mentioned in the notification. Prima facie, we find that in this case amended Notification No.4/2011-CE (supra) extended benefit of concessional rate of duty to the impugned goods, and the Boards clarification would not help the case of the applicant - Assessee directed to make pre deposit - Partial stay granted.
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2014 (10) TMI 304
Condonation of delay - Inordinate delay of 439 days - reason adduced for this delay is that the authorized representative of the appellant company, was unwell and was advised bed rest due to hyper tension with diabetics mellitus with infected wound in right foot with cellulites due to gangrene and was immobile - held that:- it is not the length of the delay but the adequacy of the explanation that should be considered for condonation of delay. In the present case, the only ground adduced by the appellant is that Shri Jagdish Sharma was sick and he was advised bed rest due to hyper tension with diabetics mellitus and was immobile. This is no explanation as to why the Directors who were looking after the affairs of the company could not have filed the appeal. Further it is on record that Shri Jagdish Sharma, attended the personal hearings before the excise authorities in October, 2013. In these circumstances, the argument of the appellant that because of Shri Jagdish Sharma's illness, there was a delay in filing the appeal is not convincing. The Hon'ble Apex Court in the case of Balkrishnan Vs. Krishna Murthy - [1998 (9) TMI 602 - SUPREME COURT OF INDIA] had held that it is the adequacy of the explanation that matters and not the length of delay. The Hon'ble Apex Court held that "condonation of delay is a matter of discretion length of the delay is no matter, acceptability of the explanation is the only criterion" - condonation denied.
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2014 (10) TMI 303
CENVAT Credit - Appellant has utilized Cenvat credit which should have been paid in cash - Held that:- Appellant could not deposit the amount in cash. According to learned counsel, this happened because the customers did not pay the dues for goods received by them. I find that this Tribunal in the case of Meenakshi Associates v. Commissioner of C.E., Noida [2012 (6) TMI 275 - CESTAT, NEW DELHI], has taken a view that instead of depositing entire amount of Cenvat credit utilized in cash, if the assessee deposited the interest, that can be taken as compliance of requirement of Rule 8(3A) of Central Excise Rules and it can be accepted since the amount is paid in cash and immediately the same can be taken as Cenvat credit and therefore, the exercise is revenue neutral. In this case, since the interest has been deposited, the obligation as decided by this Tribunal in the case of Meenakshi Associates (supra) has been fulfilled and therefore, question to be decided is only relating to penalty. As far as the penalty is concerned, the appellant has already deposited an amount of ₹ 1,00,000/-. In my opinion, having regard to the quantum of default and assessee’s conduct, the penalty already paid is sufficient to meet ends of justice - Decided partly in favour of assessee.
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2014 (10) TMI 302
Strictures against Government - Casual approach towards litigation - Held that:- It is high time for Revenue to rise to the occasion and reduce its litigation without burdening the Tribunal to list the matters frequently in cause list to know status of compliance to stay orders. Aforesaid scenario exhibits laxity of the Commissioners to pursue the litigations before the High Courts. Therefore we direct the Registrar to send a copy of this order expeditiously to the Revenue Secretary, Ministry of Finance for appropriate action so that Revenue shall be litigation free and its blocked Revenue shall be realised as early as possible.
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2014 (10) TMI 301
Recovery of Central Excise duty - Addition of transportation charges to the assessable value - Board’s circular No. 643/34/2002-C.X., dated 1-7-2002 - Held that:- Commissioner (Appeals) in the impugned order gave a finding of fact that the transportation charges are separately shown in the invoice. Further we find that there is no evidence on record that the value of the goods is suppressed to the extent the amount of freight is shown. In the absence of such evidence, we find no infirmity in the impugned order - Decided against Revenue.
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2014 (10) TMI 300
Restoration of appeals - Appeal dismissed for bar of limitation - Held that:- When a final order has been passed on merits, unless there is an error apparent from the order, the same cannot be modified or reviewed. In this case even though the appellant was not represented, the order has been passed on merits. The submissions made by the appellants in the appeal memorandum and the papers have been taken into account. If the appellant did not file affidavit of the consultant and did not file the affidavit of the Director by that time and if the same is submitted now it would only mean that the defects or omissions on the part of the appellant have been made good subsequently. This cannot be considered as an error on the part of the Tribunal at the time of passing the order. I cannot go into the merits of the case for the appellant in seeking condonation of delay when there is no error apparent from the order passed by the Tribunal. Any such order that may be passed would amount a review of the order passed by the very same Tribunal which is clearly the Tribunal is not empowered to do - Restoration denied.
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