TMI Tax Updates - e-Newsletter
October 5, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Penalty u/s 271(1)(c) - The “concealment“ was detected only during the scrutiny. The assessee has given the false statement. On false estimate/statement, the penalty is justifiable - HC
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Income Tax:
Unexplained expenditure u/s 69C - expenditure of stamp duty paid for registration of property sold - additions confirmed - HC
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Income Tax:
Disallowance of revenue expenditure - Non commencement of business - even if the entire stretch of canal is yet to come into existence, in a project of this big a size, it will surely be not right to hold that the business of the assessee respondent has not been set up - HC
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Income Tax:
Violations of condition specified in section 11(5) of the Income Tax Act - exemption u/s 10(23C)(vi) - advance against purchase of property - application of income - matter remitted back - HC
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Income Tax:
Reassessment u/s 147 - Classification of head of Income – Income to be assessed under the head of ‘Income from House property’ or ‘Income from the business’ - reopening confirmed - HC
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Income Tax:
Penalty u/s 271(1)(c) - merely because assessee's claim has been disallowed, it cannot be said that the assessee is also guilty of concealment of income or furnishing of inaccurate particulars of income - HC
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Income Tax:
Additions made u/s 69B - excess stock found during survey - assessee contended that as per the books during the course of survey was without the opening stock - no merit - additions confirmed - HC
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Income Tax:
Additions u/s 68 - unsecured loans - unexplained cash credit - proof of source of source or origin of the cash credits – Very genuineness of the transaction was not established - additions confirmed - HC
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Income Tax:
Power of Settlement commission to rectify or review its order - Settlement commission did not take into account the unabsorbed depreciation – This is a fit case where the power of rectification could and should have been exercised - HC
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Income Tax:
Direction u/s 142(2A) - special audit - principal of natural justice – t the principles of natural justice has to be followed as it is not expressly excluded. - HC
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Income Tax:
Addition u/s 68 - purchase of gold ornaments - stock in trade - payment of local taxes – even if tax is paid, it is open to the tribunal to take a view in favour of the Revenue - HC
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Income Tax:
Applicability of section 50C of the Income tax act on trading transaction of sale and purchase of land - Section 50C is not applicable during the relevant assessment year - HC
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Customs:
Discretionary Power - The adjudicating authority had used his discretionary power to come to reasoned conclusion not to confiscate the goods - the decision cannot be called in question in the facts and circumstances of this case - AT
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Customs:
Penalty u/s 112(b) of Customs Act – allegation that he was using an imported bike which could not have been established as legally imported into India - stay granted - AT
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Customs:
Reduction in Fine and Penalty – One cannot beat another with a stick which does not exist – there was no reason to interfere with the order - AT
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Corporate Law:
Lifting of Corporate Veil – It would be improper and unsafe to draw the conclusion, merely from the statement of the General Manager (Marketing), that both the companies were one and the same- HC
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Service Tax:
Benefit of Notification No. 1/2006-ST – Waiver of Pre-deposit - The appellant was laying optical fibre cables for BSNL and other telecom service providers - prima facie activity was not taxable - stay granted - AT
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Service Tax:
Taxability of Service - The applicant was engaged in the business of constructing residential villas – it cannot be said that these buildings were independent housing units - stay granted partly - AT
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Service Tax:
Mandap Keeper Service u/s - in the temple some stalls were let out to different persons for the business of selling toys, garlands, flowers, food etc - it is not a mandap keeper service - AT
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Central Excise:
Cenvat Credit - Credit was denied on the ground that supplier of craft paper should have availed the exemption notification - prima facie assessee was eligible to pay concessional rate of duty - stay granted - AT
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Central Excise:
MRP based duty u/s 4A - Stay - CESTAT directed to make Entire Duty as Pre-deposit - when the issue as to whether the 1977 Rules were applicable itself was in doubt and during the relevant period - this was a fit case for granting waiver of pre-deposit - HC
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Central Excise:
Penalty - whether wrong mentioning of provisions for invoking penalty would render the order illegal – Held No - tribunal is wrong in deleting the penalty - HC
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Central Excise:
Cenvat Credit on M.S. scrap - first stage / second stage dealer - dealer could not produce purchase invoice of M.S. scrap supplied to the applicant - prima facie case is against the assessee - AT
Articles
News
Case Laws:
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Income Tax
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2013 (10) TMI 166
Penalty u/s 271(1)(c) - Held that:- assessee has not furnished any evidence pertaining to the ticket / vouchers to travel in foreign country. Similarly, no evidence was furnished that what services were rendered by the recipient of the commission. How much business was obtained by incurring such expenses. The interest bearing borrowed funds were given to the wife without any interest for personal purpose - it appears that the assessee makes the claim of the said expenses in the profit and loss account with an intention to reduce the taxable income by concealment of facts. The "concealment" was detected only during the scrutiny. The assessee has given the false statement. On false estimate/statement, the penalty is justifiable as per the ratio laid down in Londu Lal R. P. vs. CIT [2006 (8) TMI 169 - ALLAHABAD High Court] and Shyam Biri Works Pvt. Limited vs. CIT [2002 (12) TMI 75 - ALLAHABAD High Court] - Decided against assessee.
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2013 (10) TMI 165
Additions u/s 69 - unexplained investments - Reference to valuation officer - Rejection of book of accounts - whether the Tribunal was right in taking a view that in the absence of rejecting the books of account which are audited, the Assessing Officer cannot resort to estimation - Held that:- Supreme Court in the case of Sargam Cinema v. CIT [2009 (10) TMI 569 - Supreme Court of India], wherein the Supreme Court has held that the assessing authority cannot refer the matter to the Departmental Valuation Officer without first rejecting the books of account - Following decision of CIT v. Lucknow Public Educational Society [2011 (3) TMI 1326 - Allahabad High Court] and Sargam Cinema v. Commissioner of Income Tax [2009 (10) TMI 569 - Supreme Court of India] - Decided in favour of assessee.
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2013 (10) TMI 164
Unexplained expenditure u/s 69C - expenditure of stamp duty paid for registration of property sold - Held that:- order dated 25-09-2001 issued by the Inspector General of Registration, Delhi clearly discloses that the transfer duty @ 5% has to be levied on the transfer deeds of immovable property and also surcharge on stamp duty imposed by the Indian Stamp Act, 1899. The appellant has paid stamp duty of Rs.17,65,000/- and Rs.10,59,000/- was paid in the form of surcharge on stamp duty and it is not the Corporation Tax. As per Clause 5 of the sale deed, till handing over of the Unit, the Vendor has to pay the dues. As per clause 6, all expenditures with regard to execution and registration had to be borne by the Vendee. The contention of the appellant that the sale price is inclusive of registration expenditure and surcharge on stamp duty is totally incorrect. No document has been produced before the Assessing Authority to show that the Stamp Duty and Corporation Tax are inclusive of the sale price as contended by the appellant. All the three authorities concurrently held that the appellant has failed to disclose the expenditure incurred with regard to the Stamp Duty as well as Corporation Tax. Accordingly, income was assessed - Decided against assessee.
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2013 (10) TMI 163
Rejection of books of accounts - Computation of net profit - books of accounts rejected due to non maintenance of records of wages paid to labors, description in stock records and value of stock - Held that:- Decision of all the three authorities below on rejection of books of account is on facts which is not required to be interfered with by this Court as cogent reasons have been given by all the authorities below in rejecting the books of accounts under section 145(3) of the Act - No substantial question of law arises - Decided against assessee.
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2013 (10) TMI 162
Disallowance of revenue expenditure - Non commencement of business - Construction of DAM and canal - whether the appellant company was of preoperative nature and the commencement of the business would start only when the appellant company starts exploitation of the project - Held that:- activities mentioned in the object clause of Memorandum of Association do not contemplate a single activity. Under the fiscal legislation when it is vital to determine what is the business of the assessee and what are the activities which constitute such business, it can be noted that execution of the Sardar Sarovar Project comprises of a dam across the river Narmada, canal system as also the power house at the foot of the dam and at the canal head and all other works. It can not be said that such objects could be achieved without contemplating different stages of completion. It would be wholly wrong to uphold the contention of the revenue that only on completion of work of entire canal, the assessee' business can be said to have set up. In a project like Sardar Sarovar, there are bound to be different stages where different activities take place and those activities being integral parts of the business and when they are set up phase vice, assessee cannot be deprived of benefits of fiscal legislation in disregard to well settled principles on the issue by adopting over technical approach. For determining as to when the business can be said to have been set up, the flow of the water from Narmada Canal in the given circumstances needed to be viewed as an integral and inseparable activity of the business of the assessee. - It is apparent from the record that the assessee supplied water through its main canal, one of the purposes of setting up the company is to supply the water through the canal & even if the entire stretch of canal is yet to come into existence, in a project of this big a size, it will surely be not right to hold that the business of the assessee respondent has not been set up. The construction of dam and canal are essential and inseparable parts of the activity which would necessarily precede other activities - Those of the activities which form integral part of entire term business when preceded other activities - deduction of expenses allowed - decided against the revenue.
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2013 (10) TMI 161
Violations of condition specified in section 11(5) of the Income Tax Act - exemption u/s 10(23C)(vi) - advance against purchase of property - During the year no purchase of property had been made and it remained as advance. - whether such advance amount can be treated as utilized for educational purpose – Held that:- When two fact finding authorities recorded a categorical finding that there is violation of Section 11(5) of the Act, the Tribunal committed a serious error by ignoring the same holding that the assessee is entitled to the benefit - If the Tribunal was not inclined to go into the merits of the case, the proper course would have been to set- aside the order of the authorities, remit the matter back to the Assessing Authority to take note of the exemption and then to see whether the violation of Section 11(5) of the Act. - matter restored to AO to reconsider the issue and pass fresh orders – Decided in favor of Revenue.
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2013 (10) TMI 160
Reassessment u/s 147 - Classification of head of Income – Income to be assessed under the head of ‘Income from House property’ or ‘Income from the business’ – Held that:- Keeping in mind the settled legal position that the income is received by the partnership firm and this is the only income of the partnership firm and the said income is coming from letting out of the commercial complex, the assessing authority held the income is to be assessed under the heading 'income from house property' which was erroneously assessed as 'income from business' - The said order has been confirmed by both the Appellate Authorities after dwelling into the statutory provisions as well as law on the point – No merit in appeal – reassessment confirmed - Decided against the Assessee.
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2013 (10) TMI 159
Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- merely because assessee's claim has been disallowed, it cannot be said that the assessee is also guilty of concealment of income or furnishing of inaccurate particulars of income - Nothing is brought on record to indicate that there is any concealment on the part of the assessee. Certain additions have been made rejecting certain claims in the case of the assessee, however, that would not lead to imposition of penalty in absence of either concealment or non-furnishment of the particulars of income by the assessee – Decided against the Revenue.
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2013 (10) TMI 158
Penalty u/s 271(1)(c) – penalty on the basis of additions sustained by CIT (Appeals) - However, CIT(A) cancelled the penalty observing that the assessment which formed the basis of the penalty order has been set aside by the ITAT with the direction to make assessment afresh and there was no justification for levy of penalty. - ITAT sustained the order of CIT(A) – Held that:- In view of the judgment of this court dt.l8th August, 2010 since the appeals preferred by the revenue have been dismissed, the present appeal preferred against the order of ITAT on account of these changed circumstances, does not hold any merit. However, the ITAT itself while dismissing the appeal vide order dt.20th March, 2009 granted liberty to the department to initiate fresh penalty proceedings U/s.271(l)(c) of the Act in case they succeed in appeal before the High Court but that appeal has been dismissed by this court, therefore, the present appeal deserves to be dismissed as having become infructuous – Decided against the Revenue.
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2013 (10) TMI 157
Additions made u/s 69B of the Income Tax Act - excess stock found during survey - assessee contended that as per the books during the course of survey was without the opening stock. Since the computer programme had some problem at the time of survey, it had given wrong figure – Held that:- Said letter does not throw any light other than suggesting that due to computer error, the opening stock was not included in the stock statement - Assessee was maintaining accounts not only in the computer but also manually. Nowhere in such manually maintained accounts also such discrepancy was brought on record - In presence of the assessee, the survey party had carried out physical stock taking. Valuation thereof and method of computation of valuation has never been in dispute either before the Revenue authorities or before this court - Even after taking into consideration such opening stock, admittedly, there was discrepancy in the physical stock found at the time of survey, even as per the assessee, to the tune of Rs. 11 lakhs – Decided against the Assessee.
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2013 (10) TMI 156
Additions u/s 68 of the Income Tax Act - share application money received for the year under consideration - Held that:- Reliance has been placed upon the judgment in the case of Lovely Export (P.) Ltd.[ 2008 (1) TMI 575 - SUPREME COURT OF INDIA] - In the present case also, the respondent assessee has received share application money from different subscribers. It was found that large number of subscribers had responded to the letters issued by the Assessing Officer or summons issued by him and submitted their affidavits. In some cases such replies were not received through posts. Rs. 9 lacs represented those assessees who denied having made any investment altogether - Ratio of Hon'ble Apex Court decision in the case of CIT v. Lovely Export Pvt. Ltd., is squarely applicable to the facts of this case except in the case of category-A of the share holders who have denied to have subscribed to the shares of the company, respectfully following the same, addition is to be restricted to that extent of Rs.9,00,000/- in respect of only those applicants of shares who have denied to have made any investment in the share of the company – Decided against the Revenue.
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2013 (10) TMI 155
Allowability of warranty expenses in excess of the provision of warranty - Assessee deals in manufacturing of machines and spares/components and the warranty requires replacement of spares, which is replaced by the assessee and debited to spare account, therefore, the assessee would not be required to bear warranty expenses separately – Held that:- Though, assessee had not produced any scientific method for arriving at the estimation of the warranty liability, in the present case, salient features are that the assessee had a gross sale of Rs.9722.32 lakhs during the year under consideration and the provision for warranty was calculated @ 0.5% thereof. Actual warrant expenditure during the same period was to the tune of Rs.177.17 lakhs. In the previous period also, consistently, the actual expenditure exceeded the provision made for warrant - Assessee had produced various details of the past working out provisions, which form the basis for the present year. In that view of the matter – Decided against the Revenue.
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2013 (10) TMI 154
Additions u/s 68 - unsecured loans - unexplained cash credit - proof of source of source or origin of the cash credits – Held that:- Revenue authorities as well as the Tribunal found the entire transaction not genuine. There was sufficient evidence on record to suggest that in case of all the depositors, their bank accounts contained meager balance shortly before sizable amount of Rs. 1 lakh and upward were given to the assessee through such account. In such bank accounts, cash amounts were credited and immediately entire amounts were withdrawn through issuance of such cheques in favour of the assessee - It was noticed that such creditors did not maintain any books of account. Nowhere their capacity to raise such amount for drawing cheque of sizable amounts was established - Very genuineness of the transaction was not established. This therefore, is not a case where the Revenue makes addition on the assessee failing to establish source of the source. All issues are essentially based on facts and appreciation of evidence on record. No question of law arises – Decided against the Assessee.
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2013 (10) TMI 153
Power of Settlement commission to rectify or review its order - Order of Settlement commission did not take into account the unabsorbed depreciation – Held that:- This is a fit case where the power of rectification could and should have been exercised - While passing the order, the Settlement Commission overlooked an important fact which would go to the root of the matter - If the petitioner was entitled to set-off income against the carry forward unabsorbed depreciation, the Commission was bound to look into the same and accord such treatment as under the law was required - Commission was required to bear in mind this important aspect which would have a bearing on the assessment orders. Under such circumstances, the Commission ought to have recalled its order of settlement for the assessment years 2009-10 and 2010-11 by granting the application for rectification – Ordered accordingly.
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2013 (10) TMI 152
Allowability of deduction u/s 36(1)(iii) - interest on borrowed capial – Held that:- Deduction allowed relying upon the decision in the case of Core Health Care Ltd.[ 2008 (2) TMI 8 - SUPREME COURT OF INDIA], wherein it has been held that irrespective of purpose of borrowing - whether for capital or revenue expenditure, interest on such borrowings is always an allowable deduction under Section 36[1](iii) of the Act. Allowability of premium paid on redemption of debenture – Held that:- As per Hon’ble Supreme Court decision in the case of Madras Industrial Investments Corporation Limited v. Commission of Income tax [1997 (4) TMI 5 - SUPREME Court] it has been held that where the company undertakes to pay more amount than what it has borrowed, and liability to pay the excess amount undertaken to be paid by the company to fulfil its needs for borrowed money is an allowable expenditure under section 37 of the Income Tax Act – Decided accordingly. Allowability of deduction u/s 35D of the Income Tax Act – Held that:- Since last several years, the Assessing Officer granted such claim on the same consideration, therefore, such claim could not have been suddenly disallowed - Income-tax Act recognizes the principle of consistency – Decided against the Revenue.
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2013 (10) TMI 151
Direction u/s 142(2A) - special audit - principal of natural justice Held that:- The assessee was not heard before the order passed under Section 142(2A) of the Act - Such a procedure was resorted to extend the period of limitation. Therefore viewed from any angle, the assessment order passed is void as being barred by limitation and the, Tribunal was justified in setting aside the order of the Appellate Authority - The Supreme Court in the case of Rajesh Kumar Others -vs- Deputy Commissioner of Income Tax others reported in[2006 (11) TMI 135 - SUPREME Court] has ruled that the principles of natural justice has to be followed as it is not expressly excluded. Now the law has been amended expressly providing for an opportunity The position continues to be the same assessee was not heard before the order passed under Section 142(2A) of the Act - Decided against the Revenue.
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2013 (10) TMI 150
Application for rectification of tribunal order u/s 254(2) - Addition on account of section 69 of the Income Tax Act – unexplained purchase - additions on the basis of octroi receipts found during receipt - ITAT observed that onus is on the assessee to explain as to on which purchases, recorded in the books, octroi was charged by octroi department during spot inspection. - Since spot inspection was carried out on 17.7.99 and books and documents were examined by the octroi department, this impugned purchase could only be pertained to dates prior to 17.7.99. Where assessee fails to discharge the onus lying on him then Assessing Officer will be within his right to infer that the impugned purchases are unexplained and, therefore, liable to be taxed under section 69. Held that:- if the assessee had any dispute on the final conclusion, it was always open to seek further remedy of appeal in accordance with law. However, invoking the jurisdiction of the Tribunal for rectification was rightly not permitted by the Tribunal. - Decided against the assessee.
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2013 (10) TMI 149
Addition u/s 68 of the Income Tax Act - purchase of gold ornaments - stock in trade - payment of local taxes – Held that:- If the transaction is genuine, the assessee would have accounted purchase of old gold paying tax under Section 5A and paid sales tax on corresponding sales turnover of new jewellery - This is of course only a corroboration of facts and even if assessee has paid sales tax accounting bogus purchases, nothing stands in the way of the Income Tax Department in making addition under Section 68 - Court had found that if deposits had been received, it would have been included as old stock of gold and tax would have been paid under Section 5A and thereafter the court also proceeded to hold that this could been corroboration of the appellant's case. Thereafter, the court also observed that even if tax is paid, it is open to the tribunal to take a view in favour of the Revenue - Even though sales tax records revealing purchase of gold from nine persons and payment of tax under Section 5A of the KGST Act was made available, there is no reference at all to the same - Appellant can move under Section 254(2) of the Income Tax Act for rectification – Decided against the Assessee.
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2013 (10) TMI 148
Re-opening of assessment u/s 147 of the Income tax Act – Held that:- Relying upon the judgment in the case of Sadbhav Engineering Ltd. [2010 (7) TMI 521 - Gujarat High Court], it has been held that such reopening of the assessment under Section 148 of the Income Tax Act beyond the period of four years from the end of relevant assessment year only on the ground that explanation given below sub-section (13) of Section 80-IA of the Act substituted by the Finance (No. 2) Act, 2009 with retrospective effect i.e., from 1st April 2000 would not be admissible – Decided against the Revenue.
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2013 (10) TMI 147
Applicability of section 50C of the Income tax act on trading transaction of sale and purchase of land - Held that:- Section 50C of the Act gives rise to a deeming fiction and such deeming fiction is to be applied in case of computation of capital gain under Section 48 of the Act. It is well known that a deeming fiction provided by the statute has to be applied for the purpose of which it is provided and no other. In the present case, if the Assessing Officer had utilized juntry rate as a starting point, to enquire further and ascertain the true market value of the land so sold and having brought some evidence in this direction, surely, the case of the Revenue would have been justified - Except for making reference to the juntry rates and pointing out that the juntry rate is 2.2 times higher than the sale consideration disclosed by the assessee, the Assessing Officer has brought no evidence on the record to establish that the sale deed did not reflect the full sale consideration - All that the assessee did was to apply a deeming fiction provided under Section 50C without admitting so, it was not in dispute that the plot was held as "stock in trade" and therefore sale thereof gives rise to the business income and not to capital gain – Decided against the Revenue.
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Customs
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2013 (10) TMI 183
Stay Application– Bank Guarantee - Overvaluation of Goods – Excess Drawback - Revenue was of the view that the appellants had overvalued the goods in order to claim excess drawback – Held that:- The bank guarantee executed by them had been encashed by the department towards the redemption fine and penalty and therefore, such amounts should serve as sufficient security for admission of their appeals and stay petitions may be allowed - The Revenue had not yet disbursed the drawback claim sanctioned and the bank guarantee executed by the applicant was also encashed by the department, these were sufficient for the purpose of admission of these appeals - Further, there shall be stay on collection of dues arising out of both the impugned orders during the pendency of the appeals – Stay Granted.
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2013 (10) TMI 182
Jurisdiction of Tribunal – Interpretation of Section 129A of Customs Act - Goods Short Landed - Revenue raises a preliminary objection that Tribunal had no jurisdiction to hear the appeal in view of the provisions in the first proviso to section 129A of the Appellate Tribunal – Held that:- After going through the provisions of Section 129A of the Customs Act - The bar in jurisdiction of the Tribunal was in all matters decided by Commissioner (Appeal) relating to cases where goods have been short landed and such bar was not with reference to any specific sections of the Customs Act under which the orders are passed - Tribunal had no jurisdiction to hear the appeal – the appeal was dismissed as not maintainable before the Tribunal - However, liberty was given to the appellant to seek remedy before the appropriate authority.
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2013 (10) TMI 181
Discretionary Power - Confiscation of Goods – Penalty u/s 112 of Customs Act - The adjudicating authority had used his discretionary power to come to reasoned conclusion not to confiscate the goods, relying upon the judgment of the KESORAM RAYON Versus COLLECTOR OF CUSTOMS, CALCUTTA [1996 (8) TMI 109 - SUPREME COURT OF INDIA ] - the confiscation of the goods was a discretionary power and which had been invoked by the adjudicating authority cannot be called in question in the facts and circumstances of this case - Since there was no confiscation order of the capital goods, non-imposition of penalty under Section 112 of Customs Act 1962 also seems to be correct - the order was correct, legal and does not suffer from any infirmity. The goods become liable for confiscation under Section 111(o) of the Customs Act, 1962 for violation of the provisions of Notification No.140/91 Cus (Now Notification No.52/2003 Cus.) read with the provisions of Section 61 of the Customs Act, 1962 - Taking into consideration the fact of payment of full duty together with interest - a lenient view to be taken as regards confiscation of the impugned goods and also regarding imposition of penalty - Decided against Revenue.
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2013 (10) TMI 180
Penalty u/s 112(b) of Customs Act – allegation that he was using an imported bike which could not have been established as legally imported into India. - Held that:- Invoking Section 112(b) of the Customs Act, 1962 against the current appellant before the Tribunal seems to be incorrect - inasmuch as the appellant could not have had any knowledge that the vehicle which was used by him, was improperly imported - It was also on record that the said vehicle had the registration number of Karnataka - On this factual matrix, it cannot be said that the appellant had any knowledge as to the improper import of the said motorcycle / bike. - Stay Granted.
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2013 (10) TMI 179
Reduction in Fine and Penalty – Held that:- The learned Commissioner (Appeals) has reduced the redemption fine and penalty in proportion to redemption fine and penalty imposed on the ground that the same have been imposed without ascertaining the margin of profit on market verification - The grievance of the department was if that was so the learned Commissioner (Appeals) could have determined the margin of profit if need or could have remanded back the case – the Department had also not made any efforts to ascertain the margin of profit before/after filing the appeal - One cannot beat another with a stick which does not exist – there was no reason to interfere with the order - The learned Commissioner (Appeals)'s order was upheld and the Revenue's appeal was dismissed.
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Corporate Laws
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2013 (10) TMI 178
Maintainability of the Petition - Winding up Petition u/s 433(e)/434(1)/439(1)(b) of the Companies Act - Whether the petition was maintainable against the respondent-company - Held that:- Following Ram Sarup Gupta (decd.) by LRs v. Bishun Narain Inter College and others [1987 (4) TMI 476 - SUPREME COURT] - The general principle was that in the absence of pleadings, no party shall be permitted to travel beyond the pleadings and raise a new point and that the necessary and material facts should be pleaded specifically, it was necessary to have the object of this principle in mind, which was that the opposite party should not be taken by surprise - having regard to this object and with a view to ensuring a fair trial, however, a pedantic approach should not be adopted to defeat justice or hair-splitting technicalities - It was further held that undue emphasis on the form, sacrificing the substance of the dispute, should be avoided - It was another matter that there was no merit – the company petition was dismissed as not maintainable against the respondent. Lifting of Corporate Veil – Held that:- It would be improper and unsafe to draw the conclusion, merely from the statement of the General Manager (Marketing) of Infrastructure, that both the companies were one and the same - It must be remembered that it was not uncommon or unusual for businessmen to form separate corporate entities to carry out different aspects of the same business - Such a practice, driven by business exigencies must be recognised and given effect to, so long as there is no motive of evasion of lawful liabilities - This does not, per se and without anything more, necessarily mean that both the companies were one and the same.
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2013 (10) TMI 177
Winding up Petition u/s 433(e) and 433(f) read with Section 434(1)(a) of the Companies Act – Held that:- There was no merit in the defence sought to be raised by the respondent-company - Even assuming for the sake of argument that the lease deed, being an unregistered document, cannot be looked into for the purpose of ascertaining the monthly rent, since the respondent-company never disputed the amount of rent payable for the premises and in fact even admitted the same in the counter, the petition must be held to be maintainable - Firstly, in the notice issued by the petitioner, it was clearly mentioned that the monthly rent was exclusive of the maintenance charges directly payable to the maintenance agency and the electricity and water charges. Amount of Rent - There was no denial about the amount of the rent - There is no denial in the counter, denying the averment of the petition that the rent in respect of the premises was fixed by the parties at Rs.3,25,000/- per month - Considering these facts, it was clear that even if the lease deed was not to be looked into, it had otherwise been proved that the rent for the premises was Rs.3,25,000/- per month. The petitioners have not been negligent in attending to the requests of the respondent-company - In any case that was not a justification for not paying the agreed rent in time - These were not substantial issues or defences which can successfully be put forth in answer to the present petition for winding up on the ground that the respondent-company was neglecting to pay the rental amounts - It may also be noted that the respondent, despite all the protests about the repairs and maintenance not being properly carried out, vacated the property only in March, 2013 and that too only under orders of this Court. In Manju Bagai vs. Magpie Retail Ltd. [2010 (11) TMI 845 - DELHI HIGH COURT] - upon which reliance was placed by the learned counsel for the respondent deals with the question of the liability to pay liquidated damages in the form of rent for the unexpired portion of the lease period of three years - The main question examined in that case was whether the rent payable for the unexpired portion of the lease can be said to be liquidated damages - This was negatived by the Court which held that it cannot be considered as liquidated damages – the other issue as to whether an unregistered lease deed can be relied upon by the petitioner was also considered and it was observed that it cannot be - This however was not an impediment to the petitioner in the present case since I have earlier found that even de hors the lease deed there was an admission by the respondent that it had agreed to pay a monthly rent of Rs.3,25,000 - there was no force in the defence sought to be put up on behalf of the respondent - The petition was admitted.
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Service Tax
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2013 (10) TMI 191
Benefit of Notification No. 1/2006-ST – Waiver of Pre-deposit - The appellant was laying optical fibre cables for BSNL and other telecom service providers – Held that:- The appellant had claimed that this activity does not amount to rendering of any service but had also paid service tax claiming the benefit of Notification No. 1/2006-ST after availing the benefit of abatement of 67% - CBEC Circular dated 24/5/2010 clarified the issue which was in favour of the assessee - On considering the circular, this Tribunal in the case of Nicco Corporation Ltd. Vs. Commissioner of Service tax, Kolkata [2012 (7) TMI 347 - CESTAT, KOLKATA] - contracts were for laying the cables and the Board vide Circular dated 24/5/10 clarified that laying of cables were not liable to service tax - The appellant had made out a strong prima facie case for waiver of the pre-deposit – Stay Granted.
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2013 (10) TMI 190
Business Auxiliary Services - Job worker - Applicants were engaged in the manufacture of processing of scrap in the premises of their customers - Revenue was of the view that the assesses were engaged in rendering services of business auxiliary services particularly, production of goods on behalf of the applicants – Held that:- Following Sonic Watches Ltd. Vs. Commissioner of Central Excise, Vadodara [2010 (9) TMI 397 - CESTAT, AHMEDABAD ] and Rathour Engg. Works Vs. Commissioner of Central Excise, Chandigarh [2012 (9) TMI 413 - CESTAT, NEW DELHI] - Production of goods on behalf of the clients which does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 - services undertaken by the appellants was not covered by the definition, no service tax was attracted – Stay Granted.
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2013 (10) TMI 189
Taxability of Service u/s 65 (105) (zzh) r.w section 65 (91a) - The applicant was engaged in the business of constructing residential villas – Revenue was of the view that such activity was taxable under section 65 (105) (zzh) read with section 65 (91a) of Finance Act, 1994 – Held that:- The definition of residential complex will cover residences where 12 units in the complex were in one building or in many buildings, if there were common facilities - in the project there were common amenities viz. roads, pathways, open area, garden, septic tanks, sewers, drains pump sets, water lines, general lighting, electricity generator etc. as approved by local competent authority - Therefore, it cannot be said that these buildings were independent housing units - this was a highly contentious issue which can be examined only at the final hearing of appeal with reference to relevant facts - stay granted partly.
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2013 (10) TMI 188
Service Tax Liability - Rent-a-Cab Service – Waiver of Pre-deposit - appellant contended that they were under a bona fide belief that such services were not liable to be taxed in their hands, as they were procuring cabs and supplying them to BBMP and bear all the expenses involved on such cabs - Assessee contended that the entire demand was hit by limitation as there was a bona fide belief – Held that:- The issue needs consideration in depth, as there were various case laws holding a view that such services were taxable – Keeping in mind that there was a claim of entire demand being hit by limitation, which was an arguable point, the appellant should be put to some condition for hearing and disposing the appeal – stay granted partly.
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2013 (10) TMI 187
Validity of Order – Held that:- The first appellate authority had categorically recorded that the order-in-original was the repetition of an adjudication in respect of the very same assessee, for the very same issue and for the same period, if that be so, there cannot be any other view than to set aside the order - The first appellate authority had erred while holding that the appeal filed by the appellant as infructuous - Such an order was not sustainable and liable to be set aside – Decided in favour of Appellant.
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2013 (10) TMI 186
Admissibility of Cenvat Credit on Canteen Services (Catering Services) - Held that:- Admissibility of Cenvat Credit of Canteen Services (Catering Services) goes in appellants favour - However, the aspect whether appellant had recovered any charge for the subsidized food from the Employees/ Staff/ Worker of the appellant, is required to be verified by the original adjudicating authority in view of the law laid down in the case Cadmach Machinery Company (P) Limited vs. CCE, Ahmedabad Cadmach Machiner Co. (P) Limited vs. CCE, Ahmd [2011 (8) TMI 709 - CESTAT AHMEDABAD] - For the purpose of verification of this aspect, the case was remanded back to the original adjudicating authority to pass suitable order after giving an opportunity of personal hearing to the appellant. Service Tax Credit on Travel Agency (Rent-a-Cab Service) – Held that:- Following CCE vs. Schatt Glass India (P) Limited [2012 (11) TMI 78 - CESTAT, AHMEDABAD] - CENVAT Credit benefit will be available if the service can be related to the business of manufacture – As regards the service in issue it can be said that the service had a relation to the business of manufacture and had a nexus - assessee’s factory was situated at a distance of 38 Kms. from Vadodara on Padra-Jambusar road at a remote place and it was a necessity to provide transportation from Vadodara to the factory and the same cannot be considered as a facility or an employee welfare activity - the Department had not made out a case for rejection of the claim.
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2013 (10) TMI 185
Mandap Keeper Service u/s - 65(67) and 65(105) - Charitable Trusts - in the temple some stalls were let out to different persons for the business of selling toys, garlands, flowers, food etc - Held that:- The demands were confirmed under the "mandap keeper service" - As per the provisions of Sections 65(67) and 65(105) of the Finance Act, ‘mandap keeper' means a person who allows temporary occupation of a mandap for a consideration for organizing any official, social or business function - even in reply to show cause notice, the appellants stated the facts that certain stalls were allotted to different persons for selling different items such as toys, garlands, flowers, food etc. and produced evidence in support of this claim - In view of this, we find merit in the contention of the appellants that the appellants were not covered under the scope of “mandap keeper service” - The orders were set aside – Decided in favour of Assessee.
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Central Excise
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2013 (10) TMI 176
Restoration of Appeal – Delay in Pre-deposit – Delay Condoned - A sum of Rs. one crore had already been deposited by the appellants with the Registry of this Court - The learned counsel for the appellants had submitted that the delay caused in depositing the notified amount be condoned in the interest of justice and the appellants be not asked to deposit any further amount as it was not possible for the appellants to deposit any further amount but in the interest of justice, the appeals filed by the appellants before the CESTAT be kindly restored - in the interest of justice, the order was quash and set aside whereby the appeals of the appellants had been dismissed for not depositing the amount of pre-deposit.
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2013 (10) TMI 175
Waiver of Pre-deposit - CENVAT Credit – credit on the basis of duty paid documents issued by M/s. Chennai Steels a second-stage dealer - Held that:- M/s. EIFCO Machine Tools used the non-duty paid scrap and availed CENVAT credit on the basis of Central Excise invoice issued M/s. Chennai Steels describing as MS wire, coil etc. Commissioner (Appeals) proceeded on the basis of the statements of various persons – following the order in Sueera Alloys Global Pvt. Ltd. [2013 (10) TMI 167 - CESTAT CHENNAI], assessee was directed to made the pre-deposit of 50% – stay granted partly.
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2013 (10) TMI 174
CENVAT Credit – Waiver of Pre-deposit - The issue involved was admissibility of cenvat credit on items like SS Plates/ MS Plates/ HR Plates/ HR Coils/ Aluminium coils/ GI Earthing Strips etc. used in the repair and maintenance of capital goods – Held that:- Following Hindustan Zinc Limited vs. CCE Jaipur [2013 (3) TMI 427 - CESTAT NEW DELHI] - welding electrodes used for repair and maintenance of the plant and machinery are entitled for Cenvat credit - Thus the items used for repair and maintenance of plant and machinery would be eligible for Cenvat credit and the Commissioner (Appeals)’s order denying Cenvat credit in respect of the same was not sustainable - a prima facie case was made in the favour of assessee for complete waiver of the confirmed dues and penalties - Accordingly, there will be a stay on recoveries of confirmed dues and penalties till the disposal of the appeal.
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2013 (10) TMI 173
Cenvat Credit - Benefit of Notification No.4/2006 – Credit on Craft Paper - Waiver of Pre-deposit - The applicant was engaged in the manufacture of printed labels and printed cartons - They availed credit on the kraft paper used in the manufacture of their final product - Credit was denied on the ground that supplier of craft paper should have availed the exemption notification - Held that:- The Tribunal in the case of Sripathi Paper and Boards Pvt. Ltd. Vs CCE Tirunelveli [2011 (3) TMI 102 - CESTAT, CHENNAI ] granted unconditional stay - the applicant was engaged in the manufacture of craft paper and paid concessional rate of duty under Exemption Notification No.4/2006-CE instead of claiming NIL rate of duty under Sl.No.90 of the Table appended to the said notification and the Tribunal observed prima facie that assessee was eligible to pay concessional rate of duty - Prima facie credit cannot be denied on the ground that supplier had not availed the exemption notification - stay granted.
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2013 (10) TMI 172
Differential Demand Duty – Imposition of Penalty – Abatement Claims - Whether the Tribunal was justified in confirming the order of Differential Demand of duty and imposition of penalty when the Abatement Claims for the relevant period are lying as such for decision – Held that:- The matter relating to abatement claim was remanded by the Tribunal to the Commissioner Adjudication – there was no condition under Rule 96ZP(2) of the Central Excise Rules, which provided that deposit of duty was the condition precedent for the claim of the abatement - levy of the penalty as also the demand of differential duty for the period during which the appellant had been allowed the claim of abatement was not justified - levy of the penalty as also the demand of differential duty for the period during which the appellant had been allowed the claim of abatement was not justified - The order of the Tribunal was set aside - The appeal succeeds and was allowed.
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2013 (10) TMI 171
Admissibility of MODVAT Credit - Whether the Modvat credit is admissible without filing the declaration before receipt goods as statutorily requirement under the erstwhile Rule 57T – Held that:- Following Commissioner, Central Excise, Allahabad v. M/s. Hindalco Industries Ltd. [2012 (4) TMI 254 - ALLAHABAD HIGH COURT] - This Court after referring to Rule 57G and amendment made by Notification No. 7/99 dated 9th February, 1999 had held that the benefit of notification dated 9th February, 1999 would be available to all pending cases - The decision related to Rule 57G of the Rules but in our considered opinion the principle laid down in the aforesaid case squarely applies to the provisions of Rule 57T also as the amendment made by Notification dated 9th February, 1999 was in similar words. MODVAT Credit on Capital Goods - Whether Modvat credit is admissible on the capital goods falling under S.H. 7219.20 which are not recovered under the definition of capital goods - Held that:- he Tribunal had not committed any legal infirmity in allowing Modvat credit in respect of stainless steel plates, stainless steel aisis - So far as the question of Modvat credit in respect of CI coils/Plates of stainless steel was concerned we may mention here that the Tribunal had remitted the same to the Adjudicating Authority to decide as to whether they were integral part of plant and machinery or not - The Tribunal had not given any definite finding nor it had held that the Modvat credit was admissible – the question does not call for any adjudication.
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2013 (10) TMI 170
Non Speaking Order – No Evidence of Clandestine Removal of Goods – Held that:- The judgment and order the learned Tribunal had upset the order of the Commissioner of Appeal without assigning any reason as to why the reasoned order of the Commissioner was not acceptable - we think the learned Tribunal should rehear the matter - We set aside the judgment and order, and remand the matter and restore the Tribunal Appeal - We record that we have not decided anything in the matter as we feel the judgment and order was a non-speaking one and particularly when the Commissioner of Appeal had decided in favour of the assessee with reasons and unless those reasons were held to be absurd and perverse on the facts and circumstances of the case this cannot be brushed aside so lightly.
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2013 (10) TMI 169
MRP based duty - section 4A - CESTAT directed to make Entire Duty as Pre-deposit - Revenue was of the view that the goods manufactured by the assessee were governed by the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and, therefore, the assessee was obliged to affix maximum retail price (MRP) on the goods manufactured and cleared by the assessee - Held that:- Following Subhash Arjandas Kataria v. State of Maharashtra & Ors. [2011 (8) TMI 922 - SUPREME COURT OF INDIA ] - In these circumstances, when the issue as to whether the 1977 Rules were applicable to the case of the appellant itself was in doubt and during the relevant period - this was a fit case for granting waiver of pre-deposit – Accordingly the order was set aside and CESTAT was directed to dispose of the appeal filed by the assessee on merits and in accordance with law, without insisting pre-deposit of the duty demand confirmed by the Adjudicating Authority.
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2013 (10) TMI 168
Penalty under Rule 173Q - whether wrong mentioning of provisions for invoking penalty would render the order illegal – Held that:- The law is well settled that if there are various sources of power to impose penalty, merely mentioning a wrong section will not make the order invalid - In case the power to levy penalty can be legitimately connected with the proper source then the authority will have the power to levy penalty. Whether the Tribunal was legally right in vacating the penalty imposed upon the Managing Director – Held that:- When a person was repeatedly guilty of an offence, in the case of second offence he cannot be treated so leniently that no penalty was imposed upon him - It was urged that there can be no reference on the question of imposition of penalty and only an appeal could be filed - We are not in agreement with this view - this is a fit case where the Appellate Tribunal should be directed to refer the questions of law raised in the application for decision.
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2013 (10) TMI 167
Cenvat Credit on M.S. scrap - stay - credit denied on the ground that they had availed credit on the basis of dealer’s invoices, with description of goods as M.S. scrap. On investigation, it was found that dealers purchase invoice shown M.S. coils/wires and they issued cenvat invoice of M.S. scrap to the applicant, which was purchased from open market without any duty paying document. - Held that:- It appears that M.S. scrap received by the applicant is bazaar scrap and no duty was paid. The dealer produced the purchase invoice of M.S. coils/wires. They could not produce purchase invoice of M.S. scrap supplied to the applicant. The statements of the dealer were corroborated with the manufacturer. It appears from the statements of applicant No.2 and the employees of Applicant No.1 that they had knowledge of such irregularity. - prima facie case is against the assessee - stay granted partly.
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Indian Laws
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2013 (10) TMI 184
Maintainability of Writ Petition – Availability of Alternate Remedy – Licences for Retail Sale of Foreign Liquor (Excluding Beer and Wine) Rules, 2001, has been cancelled. - Held that:- A perusal of the Section 11 shows that against the orders passed by the Collector, Appeal lies to the Excise Commissioner under sub-section (1) of the said Section - It is thus, evident that against the Order dated 3rd November, 2012, the petitioner has an alternative remedy of filing Appeal before the Excise Commissioner and thereafter a further remedy of filing Revision before the State Government - Having regard to the facts and circumstances of the case and having considered the submissions made by the learned counsel for the parties and keeping in view the nature of controversy involved in the present case - it will be appropriate that the petitioner be relegated to the alternative remedy available to the petitioner under Section 11 of the U.P. Excise Act, 1910 - The Writ Petition is liable to be dismissed on the ground of availability of alternative remedy to the petitioner, and the same is dismissed on the said ground – Decided against Petitioner.
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