TMI Tax Updates - e-Newsletter
November 25, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
-
Income Tax:
The department, which did not participate in the verification proceedings, or raise any timely objection to it before the Settlement Commission, cannot be heard to complain of any violation of procedure by the Settlement Commission, at this belated stage - HC
-
Income Tax:
TDS under section 194H – assessee had paid commission to HDFC on payments received from customers who had made purchases through credit cards - TDS is not required - HC
-
Income Tax:
If the loss on sale of investments has been booked in the hands of the Holding Company or any of the Subsidiary Companies, on the ground that they are the real owners, then the dividend income has to be taken in their account - AT
-
Income Tax:
TPA - this is not a pure reimbursement of cost but cost sharing exercise in implementing ERP systems in the group - It certainly involves services by assessee company - mark up is warranted under the TP provisions. - AT
-
Income Tax:
Exemption against the sale of property u/s 54 – Whether purchasing of share of the son who is co-sharer in the flat amounts to purchase or not - exemption allowed - AT
-
Income Tax:
The view taken by the AO in computing book profit u/s 115JB being an acceptable view, the assessment order passed cannot be considered to be erroneous - revision set aside - AT
-
Income Tax:
TDS u/s 194 - Failure to prove regarding forwarding of Form No. 15G/H or not - merely because there are some technical defects in the declaration or they have been received after the date of credit of interest to the account of the payee they cannot be rejected - AT
-
Income Tax:
When a loan which is the term loan is waived by a financial institution, then it shall not treated as income in the hands of the assessee; whereas if working capital loan is waived, then that loan amount which is waived will be treated as 'income' in the hands of the assesse - AT
-
Customs:
Redemption fine and penalty - import of medical equipment claiming the benefit of Notification 64/88-Cus dated 01/03/1998 - conditions of the notification not fulfilled - fine and penalties confirmed - AT
-
Customs:
Denial of refund claim - after passing of final assessment, the Bill of Entries were audited on 5.4.2007 and it was forwarded to refund section - period of limitation will be calculated from the date of audit - AT
-
Customs:
Import of casing pipes - since the Anti Dumping Duty has not been imposed on the margin of dumping, but at a rate less than of margin of dumping and is “with Reference price” - any other interpretation will defeat the purpose of Anti Dumping Duty Notification - AT
-
Service Tax:
Business Auxiliary Services - collection of toll charges on behalf of CIDBI or not - there was no such commission paid at all - demand set aside - AT
-
Service Tax:
Management Consultancy Services - activity of helping in marking of granite blocks and rendering assistance in execution of the export orders does not fall under Section 65(105)(r) read with Section 65(65) - AT
-
Service Tax:
Hire purchase and financial lease service - Interest on loan is exempted from service tax is not to be included in the taxable service - stay granted - AT
-
Service Tax:
C&F Agency Services - The activity of the sales representative, by no stretch of imagination, can be called clearing and forwarding service - AT
-
Central Excise:
CENVAT Credit - Reversal of credit when finished goods became exempt - While the provisions of sub-rule (3)(ii) of Rule 11 of the Cenvat Credit Rules, 2004 are not applicable, the provisions of sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2004, would be applicable - AT
-
Central Excise:
Classification of goods - Classification of Horn Controller - Horn Controller manufactured and cleared by the appellants is rightly classifiable under Heading 85.12 of the CETA, 1985 - AT
-
Central Excise:
Dismissal of appeal - Non compliance with pre deposit order - As the dismissal of appeal is automatic and on account of failure to comply with said order of pre-deposit, the challenge to order dismissing the appeal for said failure also cannot be sustained - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
-
Income Tax
-
2014 (11) TMI 734
Interference made in the order of Settlement Commission u/s 245D - Nature of jurisdiction exercised - Whether the exercise of its jurisdiction under Article 226 of the Constitution of India, will interfere with orders passed by the Settlement Commission under Section 245D of the Income Tax Act, 1961 and if so, to what extent – Held that:- This court would be concerned with the decision making process, adopted by the Commission, and not the decision itself – in Jyotendrasinhji v. S. I. Tripathi and Others - [1993 (4) TMI 1 - SUPREME Court] it has been held that the scope of enquiry, whether by the High Court under article 226 or by this Court under article 136, is also the same - the power of judicial review is not to be exercised to decide the issue on facts or on an interpretation of the documents available - the enquiry by this Court can only be with regard to whether or not the Settlement Commission exercised a jurisdiction that it did not have or, alternatively, if it did have the jurisdiction, whether it erred in the exercise of that jurisdiction. Full and true disclosure of income made or not – Jurisdiction of Commission – opportunity to conduct further investigation refused by Settlement Commission - Held that:- The department had not adduced cogent evidence to substantiate their contentions with regard to alleged unaccounted transactions of the assessees with goldsmiths/manufacturers - there was no instance of unaccounted sales or purchases detected - There was also no difference noticed in the quantitative stock in any of the branches of the assessees - There was only the uncorroborated deposition of two employee goldsmiths of the assessees that pointed to a possibility of some transactions having been unaccounted - the offer of additional amounts made by the assessees was only to put a quietus to the litigation with the department and in the spirit of settlement - The suggestions by the Settlement Commission, and the acceptance of the offer of additional amounts from the assessee for the purposes of settlement, cannot be seen as having rendered invalid the original declaration made by the assessees before the Commission either for the purposes of settlement of the tax liabilities or for the grant of immunity from penalty and prosecution under the Act, especially when the Commission finds that the assessees had co-operated in the proceedings before it - there was no requirement of any further investigation and that a verification, of the material already available, would suffice for the purposes of determining whether the assessees had failed to disclose any income for the purposes of settlement - The department, which did not participate in the verification proceedings, or raise any timely objection to it before the Settlement Commission, cannot be heard to complain of any violation of procedure by the Settlement Commission, at this belated stage - the order of the Settlement Commission to be legal and valid in all respects, including the grant of immunity to the assessees, and not liable to be interfered. Undervaluation of closing stock - Whether the findings of the Settlement Commission with regard to the alleged undervaluation of closing stock by two of the assessees is liable to be interfered with – Held that:- The settlement commission found that the accounting method was followed consistently for many years in the past and, had been accepted by the department as well - the AS-2 accounting standard did not prohibit the LIFO method, and further, the AS-2 accounting standard was not mandatory for the purposes of the IT Act, the assessees had not committed any irregularity by following the LIFO method - it has dealt with the objections of the department at some length and given reasons as to why it felt that there was no merit in the contention of the department that the adoption of the LIFO method of valuation of closing stock did not have the effect of distorting the real profits earned by the assessees - the commission found that the declaration of the assessees, vis-a-vis this objection of the department, was full and true disclosure for the purposes of settlement – the order of the Commission is upheld – Decided against revenue.
-
2014 (11) TMI 733
Entitlement for depreciation - Whether a charitable institution, which has purchased capital assets and treated the amount spent on purchase of the capital asset as application of income, is entitled to claim depreciation on the same capital asset utilised for business – Revenue was of the view that this would amount to double deduction – Held that:- The issue has been examined in depth and detail twice and thus there is no error in the orders passed by the Tribunal - in Director of Income Tax (Exemption) Versus Charanjiv Charitable Trust [2014 (3) TMI 760 - DELHI HIGH COURT] the Tribunal has overlooked that the cost of the assets has already been allowed as a deduction as application of income, as held by the CIT(A) as well as the AO - allowing depreciation in respect of assets, the cost of which was earlier allowed as deduction as application of income of the trust, would actually amount to double deduction - the cost of asset had been allowed as a “deduction” and thereafter depreciation was being claimed - where any income is required to be applied, accumulated or set apart for application, then for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of an asset, the acquisition of which has been claimed as application of income under this Section in the same or any other previous year - The legal position would undergo a change in terms of Section 11(6), which has been inserted and applicable with effect from 1st April, 2015 and not to the assessment years in question - The newly enacted sub-section relates to application of income – Decided against revenue.
-
2014 (11) TMI 732
TDS under section 194H – assessee had paid commission to HDFC on payments received from customers who had made purchases through credit cards - Whether the Tribunal was right in holding that the AO was wrong in invoking Section 40(a)(ia) of the Act – Held that:- Section 194H of the Act would not be attracted - HDFC was not acting as an agent of the respondent-assessee - Once the payment was made by HDFC, it was received and credited to the account of the assessee - In the process, a small fee was deducted by the acquiring bank, i.e. the bank whose swiping machine was used - On swiping the credit card on the swiping machine, the customer whose credit card was used, got access to the internet gateway of the acquiring bank resulting in the realisation of payment - the acquiring bank realised and recovered the payment from the bank which had issued the credit card - HDFC had not undertaken any act on “behalf” of the respondent-assessee. The relationship between HDFC and the respondent-assessee was not of an agency but that of two independent parties on principal to principal basis - HDFC was also acting and equally protecting the interest of the customer whose credit card was used in the swiping machines - the bank or their employees were not present at the spot and were not associated with buying or selling of goods as such - Upon swiping the card, the bank made payment of the bill amount to the respondent-assessee - assessee received the sale consideration - the bank had to collect the amount from the bankers of the credit card holder - The Bank had taken the risk and also remained out of pocket for sometime as there would be a time gap between the date of payment and recovery of the amount paid. There is another reason as to why Section 40(a)(ia) of the Act should not have been invoked in is the principle of doubtful penalization which requires strict construction of penal provisions - The detriment in the present case would include initiation of proceedings for imposition of penalty for concealment, as was directed by the AO - a person should not be subjected to any sort of detriment unless the obligation is clearly imposed – the principle should be applied as HDFC would necessarily have acted as per law – thus, the order of the Tribunal is upheld – Decided against revenue.
-
2014 (11) TMI 731
Source of income not disclosed – Claim of custody of gold ornaments by the income tax authority for the purpose of enquiry under the Income Tax Act - Criminal petition under Kerala Value Added Tax Act – Whether the release of gold to the first respondent in the latter Crl. M.C. would in any way affect the power of Income Tax Authority to continue with the proceedings u/s 132A - Held that:- The power of the Magistrate under Section 451 Cr.P.C. does not extend to the determination of ownership of the property seized and what was done under the impugned order is only granting the interim custody of the seized gold bars and ornaments to the first respondent in the latter Crl. M.C. subject to the conditions in the order at this distance of time viz., more than five years since the order - the release of gold to the first respondent in the latter Crl. M.C. would not in any way affect the power of Income Tax Authority to continue with the proceedings under Section 132A of the Income Tax Act and also the right to realise the amount due to Government, if any, as income tax from him out of the guarantee - the pendency of the criminal proceedings in Crime No.51 of 2008 of South Railway Police Station and all further actions pursuant thereto will not stand in the way of the Income Tax Department in initiating appropriate proceedings for the purpose of assessing tax liability of the persons concerned including the first respondent in the latter Crl.M.C., in accordance with law, besides the proceedings under Section 132A - if such proceedings are initiated by the Department it shall be concluded as expeditiously as possible and the gold seized shall be released finally only subject to the outcome of such proceedings.
-
2014 (11) TMI 730
Taxability of cash incentive and duty draw back - Whether the amount on account of cash incentive and duty draw back, though claimed but not received actually by the assessee, would be taxable under the Income Tax Act – Held that:- As decided in Commissioner of Income-tax, Patiala Versus Sriyansh Knitters (P.) Ltd. [2010 (10) TMI 638 - PUNJAB AND HARYANA HIGH COURT] It has been decided that before quantification based on verification, no income could be held to have accrued to the assessee - no income accrued till claim of the assessee was quantified and verified - assessee submits that the cash incentive and duty draw back, for AY 1983-84, was eventually adjusted in AY 1986-87 – Decided against revenue.
-
2014 (11) TMI 729
Exclusion of loan written back to credit of P&L a/c – Applicability of section 41(1) – Loans waived by group companies - Held that:- In the audited financial statements the Trustees of the assessee have recognised liabilities written back, dividend and bank interest as income - Loss on sale of investments was claimed as expenditure - No doubt entries in the books of accounts do not determine the taxability or otherwise of a transaction, but at the same time the entries give a good indication as to the understanding of the management of the nature of the transactions - The assessee claims that it is a pass through entity - the parent company, has taken into account the income, expenditure and losses of the assessee Trust while computing its income - The assessee for the AY 2009-10 has disclosed dividend income as well as interest income - If the arguments of the assessee has to be accepted, then it has to be seen as to in which entitity’s hands this income has been offered to tax - From the facts on record this is not clear - If the loss on sale of investments has been booked in the hands of the Holding Company or any of the Subsidiary Companies, on the ground that they are the real owners, then the dividend income has to be taken in their account - This needs verification. Be it as it may, when the loan taken by the assessee is written off, the same cannot be treated as income of the assessee u/s 41(1) as the loan was taken on capital account – in Logitronics Pvt. Ltd. vs. CIT [2011 (2) TMI 12 - DELHI HIGH COURT] has laid down the principle that if a loan was taken for acquiring a capital asset, waiver thereof would not amount to any income exigible to tax - the liabilities written off cannot be brought to tax - The assessee is not claiming any deduction on the loss on sale of investments - The issue now boils down to dividend income and bank interest - As the facts are not clear, the issue of taxability of dividend and interest should be set aside to the file of the AO for fresh adjudication after verification – Decided in favour of assessee.
-
2014 (11) TMI 728
Transfer pricing adjustment -Payment of royalty and technical service fee disallowed –Held that:- Following the decision in Kirby Building Systems India Ltd. Versus Additional Commissioner of Income-tax, Range-8, Hyderabad [2014 (10) TMI 696 - ITAT HYDERABAD] - Kirby Building Systems India P. Ltd., is a wholly owned subsidiary of Alghanim Industries, a Kuwait based Multi-Billion Conglomerate - It is one of the world’s largest producers of Pre- Engineered Steel Buildings (in short “PEB”) and has been operational for more than 38 years since 1976 - There is no dispute with reference to the fact that assessee was promoted by the Kirby Building Systems, Kuwait and its original technical service agreement for payment of lump sum amount of $ 2 million dollars as technical knowhow fee and royalty of 2.5% in the first year and 5% from second year onwards up to March 31, 2007 was approved by the RBI and Ministry of Industries - assessee did not remit any of those amounts in those years and the agreement was amended periodically - in the year assessee has paid $ 1 lakh dollars as technical knowhow fee and royalty at 7.5% on domestic sales as per the agreements entered into and approved by the authorities - apart from legal position, even on merits the disallowance of entire technical knowhow payment and part disallowance of royalty payment to AE was not warranted. The agreements were periodically approved by RBI and by Ministry of Industry and assessee was paying the amounts as per the agreements - Even though approval by the other Governmental authorities does not prevent TPO in examining the ALP as per the provisions of the Act, TPO did not examine the issue under the T.P. provisions at all but took upon the role of an A.O. in analyzing the commercial expediency of payment of royalty and technical knowhow under the provisions of section 37(1) - Since the agreements were approved by the authorities and the royalty fee and technical knowhow are at arm’s length and that assessee’s claim should be allowed as such - There is no information brought on record by the TPO that the payment at 7.5% on the net sales is not at arm’s length as there was no other comparable case brought on record - Generally, the Government of India is approving the royalty payments at 7.5% of the sales and this approval given by the RBI and Ministry of Industry is at par with similar agreements being approved in other contracts/agreements - royalty and technical knowhow payments made by the assessee to its AE are considered at arm’s length and the grounds raised by the assessee on this issue are allowed – Decided in favour of assessee. Reimbursement costs – TPO was of the opinion that the services provided by Kirby India in implementation of SAP comes under support services which are required to be marked-up - Held that:- Assessee allocated costs on man-month basis for implementation expenses and man-hour basis for license cost - there is no denial of executing the work by assessee - assessee also extended credit to AEs and TPO charged interest for the credit period - this is not a pure reimbursement of cost but cost sharing exercise in implementing ERP systems in the group - It certainly involves services by assessee company - mark up is warranted under the TP provisions. Rate of markup – Held that:- Some services are certainly required and assessee has to incur cost in the beginning there by extending some credit facility, a markup of 5% on the reimbursement cost would justify the facts of the case – Decided in favour of assessee.
-
2014 (11) TMI 727
Allowability of exemption against the sale of property u/s 54 – Purchase agreement beyond one year before the date of sale or not – Held that:- The assessee had purchased a residential flat on 08.01.1981, which was sold on 07.02.2007 for a sale consideration of ₹ 1,25,00,000 – revenue was of the view that firstly, the purchase agreement for new flat on was 28.12.2005, which is beyond the period of one year before the date of sale and secondly, the purchasing of undivided share in the flat from the son does not amount to purchase of a flat; and therefore on these two counts, exemption u/s 54 is not available to the assessee - CIT(A) rightly held that the payment of purchase consideration to the extent of ₹ 5 lakhs which was made on 16.05.2006, falls within the period of one year before the date of sale of original flat and hence this amount is eligible for exemption u/s 54 - The other part of the ₹ 5 lakhs paid on 13.10.2005 was denied by him, as it was beyond period of one year - the finding of the CIT(A) is upheld. Whether purchasing of share of the son who is co-sharer in the flat amounts to purchase or not – Held that:- In CIT Vs. T.N. Aravinda [1979 (10) TMI 1 - SUPREME Court] it has been held that the word ‘purchase’ in section 54(1) had to be given a common meaning, that is, buying for a price or equivalent of a price on by payment in kind or adjustment towards debt or for other monitory consideration - the elder brother would be entitled to relief u/s 54(1) – CIT(A) rightly held that Shri Gurdeep Singh, son of the assessee had made the payment of ₹ 1,22,38,750/-, towards the purchase consideration for the flat, which was reflected in his books of account and in his balance sheet before the date of sale of undivided share in the flat to his mother - The purchase agreement did not specify the shares of co-owners, that is, they are 1/3rd each - When the assessee had made the payment of ₹ 1,10,00,000/- to her son for purchasing of undivided share, it tantamount purchase only - the reasoning and the conclusion drawn by the CIT(A) is legally correct – Decided against revenue.
-
2014 (11) TMI 726
Validity of notice for reassessment u/s 148 - Discrepancies in the transportation receipts and TDS certificates - Held that:- The AO made additions which were deleted by the CIT(A) – revenue relied on the CIT(A)’s order to hold that the proceedings u/s 148 of the Act are valid in law - there is no merit in the objections raised by the assessee inasmuch as the issue on which notice u/s 148 of the Act was issued and the additions in that respect have been made by the AO – Decided against assessee. Admission of additional evidence under Rule 46A – Held that:- The admission of additional evidence by the ld. CIT(A) is not in conformity of Rule 46A of Income Tax Rules - There is neither any finding that the assessee was prevented by sufficient cause in not producing the additional evidence before the AO – revenue rightly contended that if the assessee's books mysteriously vanished a couple of days before assessment and the computer back up was ready regarding storage of data then a request to that effect should have been made by the assessee before the AO so as to submit the books of account - Such computer record ought to have been produced before the AO but it was no so - there is some doubt in assessee's activities - CIT(A) has not considered this relevant aspect and total relief has been granted to the assessee without appreciating the remand report properly – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue.
-
2014 (11) TMI 725
Permanent establishment - Whether the assessee had a permanent establishment in India or not – Held that:- Following the decision in Linklaters LLP Versus ITO (Int’l Taxation) [2010 (7) TMI 535 - ITAT, MUMBAI] - in a situation where specific provisions for professional services or independent personal services or included services exist under article 15, when services are rendered by the enterprise, article 5(2)(k) will come into play, and when services are rendered by an individual, article 15 will find application - article 15 will not be applicable, as the assessee did have a PE in India under article 5(2)(k) of the India-UK tax treaty, and profits attributable to the PE are taxable under article 7 of the India-UK tax treaty - the assessee did have Permanent Establishment in India. Computation of income – Held that:- Following the decision in Linklaters LLP Versus ITO (Int’l Taxation) [2010 (7) TMI 535 - ITAT, MUMBAI] - the plea put forth by the assessee proceeds on fallacy that arm’s length price adjustment can be made in respect of the transactions with the clients of the assesse - the revenues earned by the assessee are to be taken at actual figures and no adjustment is permissible in respect of the same - the order of CIT(A) is upheld. Validity of Receipts – Reimbursement of expenses – Held that:- Following the decision in Linklaters LLP Versus ITO (Int’l Taxation) [2010 (7) TMI 535 - ITAT, MUMBAI] - The reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark up, there is reasonable control mechanism in place to ensure that these claims are not inflated, and the assessee has furnished sufficient evidence to demonstrate the incurring of expenses - There is no reason to make any addition to income in respect of these reimbursements of expenses - the AO is directed to delete the disallowance of expenses as sustained by the CIT(A) and hold that no part of reimbursements of expenses received by the assesse is to be treated as income of the assessee. Assessment of Professional receipts – Held that:- Following the decision in Linklaters LLP Versus ITO (Int’l Taxation) [2010 (7) TMI 535 - ITAT, MUMBAI] - only that portion of the income relating to the services performed in India is assessable - the entire profits directly or indirectly attributable to the Permanent Establishment is assessable and accordingly upheld the order of the AO – the matter is remitted back to the AO. Interest u/s 234B – Held that:- Following the decision in Director of Income tax Vs. Alcatel LUCENT USA Inc. [2013 (11) TMI 734 - DELHI HIGH COURT] - Assessee have denied its liability to pay income tax right from the beginning, should not take the plea that the Indian payers should have deducted tax at source from the remittances made to it - where the revenue has been deprived of use of monies and thereby put to loss for no fault on its part and where loss arose as a result of vacillating stands taken by the assessee, it is not expected of assessee to shift responsibility to Indian Payers - the levy of interest u/s 234B of the Act upheld – Decided against assesse.
-
2014 (11) TMI 724
Restriction in amount of disallowance u/s 14A – Computation of book profit u/s 115JB – Held that:- AO was of the view that the provisions of Rule 8D of the Income tax Rules are applicable to the year - as decided in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D of the Rules cannot be applied for the instant year - the disallowance of reasonable amount is required to be made under the provisions of section 14A of the Act - for earning a dividend income certain amount of human resources is deployed and so it would be fair to attribute 2% of the expenditure in salary, wages and bonus to be that which can be attributed for managing the investments and the corresponding dividend income - though the dividend is credited to the Bank directly, but certain portion of bank charges can be attributed for rendering this service - the total disallowance comes to ₹ 3,46,741/-. Since the assesse has already offered ₹ 13,554/-, hence the net disallowance which can be considered to be on scientific and reasonable basis would be ₹ 3,33,187. Since the disallowance of ₹ 83.14 lakhs made by the AO u/s 14A of the Act was reduced to ₹ 3,46,741 - FAA held that the amount to be added to the net profit towards the disallowance made u/s 14A of the Act for computing the book profit u/s 115JB of the Act should also be restricted to the amount determined by him – the FAA is justified in directing the AO to adopt the same figure for computing the book profit u/s 115JB of the Act – the order of the CIT(A) is upheld – Decided against revenue. Carry forward off of the loss of the unit eligible for deduction u/s 10B of not – Held that:- The AO has recorded in the computation portion of the assessment order that the loss pertaining to 10B unit is not allowed to be carried forward as the same pertains to exempted income - the provisions relating to set off of loss and also carry forward of loss are provided in the Act in sections 70 to 75 of the Act – AO has not drawn support of any of the provisions of the Act or any other authority in support of his decision - the approach adopted by CIT(A) is not correct - the provisions of the Act should be construed strictly - it is the duty of the AO to record the basis of his decision - Since the AO has not cited relevant provision or any authority to support his decision – the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of revenue. Claim of deduction u/s 10B – Computation of book profit u/s 115JB – Held that:- The Form No.56G submitted by the Assessee shows that the Assessee is not eligible for deduction u/s 10B of the Act - the computation of book profit u/s 115JB is altogether a separate exercise - Section 115JB is a separate code by itself and the book profit has to be computed as per the methodology provided in that section - the profit and loss account is required to be prepared as per part II and Part III of Schedule VI of the Companies Act –while computing the profit u/s 115JB, the reference is to be made only to profit and loss account prepared in accordance with Companies Act, 1956 - while computing Book Profit under section 115JB of the Act, the amount to be reduced is income, which is eligible for exemption u/s 10B, as computed on the basis of Book Profit as per Parts II and III of Schedule VI of the Companies Act and not on the basis of provisions of the Act - the amount of income which can be reduced by AO for computing the book profit under Clause (ii) of Explanation to section 115JB(2) of the Act will be amount which is credited to Profit and Loss Account and not amount of income which is claimed by Assessee or determined by AO while assessing the income under regular provisions of Act - there appears to be no dispute on the fact that the amount of ₹ 5.82 crores claimed by the assessee was related to the 10B unit – the order of the CIT(A) is upheld – Decided against revenue. Set off of brought forward loss – Held that:- The AO was of the view that the Assessee did not have any brought forward loss eligible to be set off against the current years’ income and accordingly disallowed the claim - CIT(A) directed the AO to allow the loss finally computed for AY 2006-07 while computing the total income for the current year - CIT(A) has given a direction to allow set off of losses finally computed for AY 2006-07 - the AO has determined the total income of the assessee at ₹ 1.33 crores, yet it may change depending upon the orders, if any, passed by CIT(A) or any other higher appellate authorities - if there is no loss to be carried forwarded in AY 2006-07, then the question of allowing set off of brought forward loss will not arise for the current year – the order of the CIT(A) is upheld – Decided against revenue.
-
2014 (11) TMI 723
Addition of unaccounted consignment sales – Income included in P&L account or not – Held that:- The assessee has been consistently following a particular method of accounting - Its accounts are audited u/s 44AB of the I.T. Act - Auditors have been consistently certifying that the assessee has been regularly following the method of accounting and that the annual profits can be properly deduced from such method of accounting employed by the assesse - assessee was regularly employing the system of accounting as per the Accounting Standard - The AO was not justified and rejecting the books of account by holding that the correctness and completeness of the account was not satisfied - The addition for consignment sales not included in the turnover of the assessee is against the guidelines issued by the Institute of the Chartered Accountants of India - The goods received on consignment basis belongs to consigner and assessee was entitled for commission – Decided against revenue.
-
2014 (11) TMI 722
Determination of ALP – International transaction – Assessee is carrying on the business of providing services for in-bound, out-bound and local travels - Held that:- Following the decision in Destination of the World (Subcontinent) (P.) Ltd. Versus Assistant Commissioner of Income-tax, Circle 10(1), New Delhi [2011 (7) TMI 576 - ITAT, DELHI] - the assessee was justified in undertaking internal comparison on standalone basis by placing on record working of operative profit margin from international transactions with AEs and transactions with uncontrolled parties undertaken in similar functional and economic scenario - Such internal comparison is valid in all the methods - TNMM is the most appropriate method deserves to be upheld – earlier the matter has been restored the issue to verify the calculation as they had not been vetted either by the AO or by the CIT(A) – the order is upheld – Decided against revenue.
-
2014 (11) TMI 721
Transfer pricing adjustment – Corporate guarantee provided by the company – Held that:- DRP did not take into consideration any of the objections raised by the assessee including the internal CUP provided to it - the matter was also sent back to the TPO on a different issue for fresh consideration – it is difficult to understand as to how the TPO could arrive at the credit rating of the A.E. at BBB-without there being any analysis on the creditworthiness of the A.E – TPO/A.O. did not analyse the issue properly and the DRP also has not applied his mind to the objections raised by the assessee, the matter has to be set aside to the TPO to analyse the issue afresh – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assesse. Classification of ESOP - Expenses treated as revenue expenses – Held that:- DRP rightly followed the decision in Commissioner of Income Tax - III Chennai Versus M/s. PVP Ventures Limited [2012 (7) TMI 696 - MADRAS HIGH COURT] wherein it has been held that ESOP expenditure is a revenue expenditure which is allowable while computing the business income of the company as per provisions of the Act – the order of the DRP is upheld – Decided against revenue.
-
2014 (11) TMI 720
Disallowance u/s 40(a)(ia) – Tax withholding obligations u/s 194C and 194J discharged or not - Lab testing charges and printing the stationery expenses – Held that:- Following the decision in Rajeev Kumar Agarwal Versus Additional Commissioner of Income Tax [2014 (6) TMI 79 - ITAT AGRA] - the second proviso is declaratory and curative in nature and has retrospective effect from 1.4.2005 - a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax Withholding lapse - the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced – thus, the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005 – thus, the AO is directed to verify whether the payee has filed his return of income and paid taxes within the stipulated time – Decided in favour of revenue.
-
2014 (11) TMI 719
Disallowance u/s. 14A – Held that:- The AO has applied Rule 8D while computing the disallowance u/s. 14A – as decided in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the applicability of Rule 8D is prospective with effect from 2008-09 - at the same time a reasonable disallowance has to be made - since the AO has accepted 10% of the salary paid to the G.M (Finance) as a reasonable disallowance – the AO is directed to disallow 10% of the salary paid to G.M. (Finance) for all the years under consideration – Decided partly in favour of assesse. Denial of deduction u/s 80IA – Held that:- The requirement of filing the audit report along with return of income is declaratory and if the assessee complies with the same before completion of the assessment and offered a satisfactory explanation for his failure to submit the same in time, the ITO may consider the same and examine the claim of the assesse – relying upon CIT Vs Shivanand Electronics (Bombay) [1993 (9) TMI 30 - BOMBAY High Court] - once the audit report is filed before framing of the assessment, the requirement of the provisions stands complied - the claim of deduction u/s. 80IA cannot be denied because the assessee did not file the audit report along with return of income – Decided in favour of assesse.
-
2014 (11) TMI 718
Power of CIT to invoke section 263 - Computation of book profits u/s 115JB – Prior paid expenses reduced – Held that:- Following the decision in Apollo Tyres Ltd. Versus Commissioner of Income Tax [2002 (5) TMI 5 - SUPREME Court] – While assessing a company for income-tax u/s 115J the correctness of the P&L a/c prepared by the assessee-company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Sch. VI to the Companies Act cannot be examined by the AO; AO does not have the jurisdiction to go behind the net profit shown in the P&L a/c except to the extent provided in the Explanation to s. 115J - Starting point for computation of book profits for purposes of s. 115JB should be the amount which is the final balance in the P&L a/c carried to balance sheet and in doing so even the extraordinary items have to be debited to the P&L a/c. When the P&L A/c of the assessee is drawn up in accordance with the provisions of Part II of Schedule 6 to the Companies Act, 1956 and is certified by Auditor, then, the AO cannot make any other modification to the book profit computed in the P&L A/c except as provided under Explanation 1 of section 115JB - the AO after examining the details has computed the book profit in the assessment order - Therefore, there cannot be non-application of mind by the AO - The view taken by the AO in computing book profit u/s 115JB being an acceptable view, the assessment order passed cannot be considered to be erroneous - Therefore, one of the conditions for invoking jurisdiction u/s 263 of the Act is not satisfied – thus, exercise of power u/s 263 of the Act is not justified – thus, the order of the CIT is set aside – Decided in favour of assessee.
-
2014 (11) TMI 717
TDS u/s 194 - Failure to prove regarding forwarding of Form No. 15G/H or not - Order u/s 201(1) and 201(1A) – assessee in default - Held that:- The assessee has furnished declarations in the prescribed format in respect of interest payment/credit made to depositors wherein tax was not deducted at source - instead of pointing out certain defects, deficiencies/technical objections, the AO should have accepted the declaration - Once a declaration is received from the depositor in the prescribed manner, the deductor is under a statutory obligation not to deduct tax - the assessee cannot be penalized or saddled with liability u/s 201(1) or 201(1A) of the Act when the depositors to whom interest has been paid/credited have furnished declarations in the prescribed manner requesting not to deduct tax - merely because there are some technical defects in the declaration or they have been received after the date of credit of interest to the account of the payee they cannot be rejected – thus, the order of the CIT(A) is upheld – Decided against revenue. Deletion of penalty u/s 271C – Demand already set aside, so penalty cannot be levied - Held that:- Before the AO u/s 201(1) & 201(1A) of the Act, the assessee had produced declaration in form 15G in respect of the payments/credits where tax has not been deducted at source – the AO has not accepted the declaration by observing that at the time of survey, only some of the declarations were found and others were obtained by the assessee only after the date of payment/credit of the interest - Even out of the declarations found at the time of survey, the AO refused to accept many by pointing out certain defects and deficiencies - the demands have been deleted, the penalty also cannot survive - once the depositors have furnished the declaration in prescribed manner requesting the deductor not to deduct tax at source, the deductor is under a statutory obligation not to deduct tax – thus, the order of the CIT(A) is upheld – Decided against revenue.
-
2014 (11) TMI 716
Computation of deduction u/s 10A/10B - Exclusion of telecommunication charges from export turnover – Expenses incurred in foreign currency – Held that:- CIT (A) rightly directed the AO to recompute the deduction u/s 10A by excluding telecommunication charges from both export turnover in the numerator and total turnover from the denominator while applying the relevant formula – the order of the CIT(A) is upheld – Decided against revenue. Transfer pricing adjustment – Determination of ALP by exclusion of M/s.Eclerx Services Ltd. – Abnormal profits – Held that:- M/s.Eclerx Services Ltd., has an operating profit of 89.36% which is abnormal comparing to the operating profit of other companies - the assessee has also brought out the reasons as to why M/s.Eclerx Services Ltd., enjoy higher profit when compared with the assessee company - TPO has not dealt with these factors in a reasoned manner but rejected the same abruptly - The share holding pattern of the company is a decisive factor to determine the goodwill earned by the company which will directly attribute to the profit of the company - When the majority of the shares are held by Renowned Personalities in the field of business it will definitely influence the profitability of the company. The fact that 80% of the shares of M/s.Eclerx Services Ltd., is held by local business magnets of great prominence is not disputed - the turnover of the company will also determine the strength of the company to earn more profit - when a business entity is totally depended on a single client, the bargaining power of the company will be very limited to secure higher rates for services rendered - The capital infrastructure of the company will also influence the profitability of the company - Higher the capital infrastructure, higher will be the profitability - CIT(A) is justified in deleting the addition made by the AO – Decided against revenue.
-
2014 (11) TMI 715
Addition of waiver of loans – Loans granted as one time settlement by BIFR order - AO was of the view that the sum is to be treated as income u/s 28(iv) of the Act - Held that:- The company was declared a sick company which was registered under BIFR and in terms of BIFR order, there was a onetime settlement of outstanding loan of ₹ 941.27 lacs, which was settled for payment of ₹ 300.72 lakhs - there was a waiver of ₹ 640.55 lacs - Following the decision in Logitronics P. Ltd. Vs. CIT and Ant. [2011 (2) TMI 12 - DELHI HIGH COURT] - CIT(A) ignored the fact that the amount was ₹ 3,00,72,095/- was paid by the assessee and so the balance amount comes to ₹ 2,39,46,429/- and erroneously held that ₹ 5,40,60,301/- is taxable - when there is a waiver of loan by financial institution as far as the 'term loan' is concerned, it cannot be treated as "income" at the hands of the assesse - Whereas, waiver or writing off loans on "working capital" which was received for carrying out day to day operations of the assessee, will be treated as 'income' in the hands of the assesse - To that extent, CIT(A) has been correct in bifurcating the loan into 'Term Loan' and 'Working Capital Loan' - the onetime settlement of outstanding loan was to the tune of ₹ 941.27 lacs and it comprised of the term loan of ₹ 401.08 lacs and working capital loan of ₹ 540.19 lacs and the assessee infused payment of ₹ 300.72 lacs to the banks - Though there was waiver of ₹ 640.55 lacs comprising of the term loan and working capital loan, the AO had erroneously added the entire amount of ₹ 640.55 lacs as the income of the assessee. When a loan which is the term loan is waived by a financial institution, then, that amount pertaining to the term loan shall not treated as income in the hands of the assessee; whereas if the loan which is waived is the working capital loan which is used for day to day operations of the assessee, then that loan amount which is waived will be treated as 'income' in the hands of the assesse – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for verification – Decided in favour of assessee.
-
Customs
-
2014 (11) TMI 738
Confiscation of goods - Redemption fine and penalty - import of medical equipment claiming the benefit of Notification 64/88-Cus dated 01/03/1998 - Held that:- As per the records produced by the appellant before the investigating authority, the total number of OPD patients given free treatment amounted to 2.2%, 5.57% and 2.64% for the years 1997, 1998 and 199 respectively. Similarly, the number of in-patients given free treatment having income below ₹ 500/- were 1.2%, 0.36% and 0.81% for the above mentioned years. This position has been admitted by Dr. Y.C. Mahajan, Hospital Administrator in his confessional statement recorded on 13/12/1999. Therefore, it is clear that the appellant has not fulfilled the post-importation conditions of giving free treatment to 40% of the OPD patients and 10% of the IPD patients. As regards the reliance placed on a letter dated 16/02/2000 wherein the appellant has claimed to have furnished details of the OPD patients treated freely, we have perused an unsigned copy of the said letter. The said letter also gives certain details of the patient categories who have been given free treatment. However, there is no mention in the said letter as to from where this data have been obtained and what is the basis for these data and therefore, this claim of the appellant is only a mere averment without any basis or supporting evidence. Whereas, as per the records maintained by the appellant in the hospital, which was produced before the investigating authority, it was found that the appellant had not fulfilled the terms and conditions of the Notification 64/88-Cus. Notification 64/88 imposes a continuing obligation on the importer with regard to provisions of free medical treatment, as held by the hon'ble apex Court in the case of Jagdish Cancer & Research Centre [2001 (8) TMI 113 - SUPREME COURT OF INDIA], the question of time-bar will not arise. In the present case, the imported goods were confiscated under Section 111(o) of the Customs Act, 1962 and allowed to be redeemed. The order for payment of duty under Section 125(2) would be an integral part of the proceedings relating to confiscation and consequential orders thereon, on the ground that the importer had violated the conditions of notification subject to which the exemption on goods was granted. adjudicating authority has very fairly considered applicability of Notification 65/88-Cus and extended the benefit of the same. We also note that the redemption fine and penalties imposed on the appellant are very reasonable - Decided against assessee.
-
2014 (11) TMI 737
Denial of refund claim - finalization of provisional assessment - The adjudicating authority rejected the refund claim on the ground that the finalization of amount was done on 5.1.2007 and the appellant filed refund claim on 10.9.2007. - period of limitation - Commissioner (Appeals) mainly following the Public Notice No.45/2004 dt. 10.3.2004 observed that the Bills of Entry were audited on 5.4.2007 and the importer had time upto 4.10.2007 for filing the refund claim and allowed the refund claim - Held that:- In the case of Indian Oil Corporation Ltd. (2012 (1) TMI 31 - DELHI HIGH COURT), the Hon'ble Delhi High Court observed that "Explanation-II" of Section 27 of the Act deals with the 3rd category of situations. Such situation may occur after the passing of the final assessment, on account of rectification under Section 154 of the Act or because of any other reasons, as a result of which the final order suffers an amendment or a change and some amount becomes refundable. It is seen from the file note as reproduced in the impugned order that after passing of final assessment, the Bill of Entries were audited on 5.4.2007 and it was forwarded to refund section. Then, it is apparent after final assessment and group audit that the Respondent is eligible for refund of excess amount paid by them. In this context, it is noted that by Public Notice No.45/2004, the procedure was laid down for filing refund claim arising out of finalization of provisional assessment - After going through Section 27 of the Customs Act, 1962 and on perusal of File Note and Public Notice No.45/2004, it is clear that after finalisation of assessment, same will be audited and thereafter, the assessing group will issue relevant orders of excess duty refundable, if any. - Decided against Revenue.
-
2014 (11) TMI 736
Levy of Anti dumping duty - mode of calculation - import of casing pipes - Notification No. 91/2000-Cus dated 21.6.2000 - Held that:- Anti Dumping Duty has not been imposed based upon the margin of dumping but Anti Dumping Duty has been imposed less than that and is based upon the reference price of the domestic producers. We also note that para 18 of the recommendation of the designated authority very clearly states that the landed value of imports is proposed to be determined after charging the actual level of Customs duty prevalent. We also note that the present appellant as also other parties connected with oil exploration/exploration business had also participated in the proceedings for imposition of Anti Dumping Duty and has provided lot of details to the designated authority. Casing pipes are mainly imported by the appellants and other units connected with the oil and gas exploration work. Notification provides exemption not only Basic Customs Duty but also from additional duty/CVD leviable. Therefore the appellant will continue to get the benefit of exemption in respect of additional/countervailing duty. Secondly, the Anti Dumping duty Notification is specific to the imports of casing pipes and some other varieties of seamless pipes, while Notification No. 16/2000-Cus is a generalized Notification covering large number of goods required for oil and gas exploration/exploitation work. Moreover, the Anti Dumping Duty Notification is applicable only when the imports are made from specific sources/countries and not from all sources. In view of these facts and circumstances, the provisions of Notification No. 91/2000-Cus would prevail over the provisions of Notification No. 16/2000-Cus. Moreover, we also note that since the Anti Dumping Duty has not been imposed on the margin of dumping, but at a rate less than of margin of dumping and is “with Reference price”. In our view any other interpretation will defeat the purpose of Anti Dumping Duty Notification. - Decided against assessee.
-
2014 (11) TMI 735
Violation of principle of natural justice - Opportunity for cross examination not given - over valuation of the export consignment - Imposition of penalty - Held that:- Commissioner has not allowed cross-examination of the deponents, whose statement were relied upon, on the ground that the said statements were recorded under Section 108 of the Customs Act and have not been retracted. We are afraid that we find no merits in the said observation of the Adjudicating Authority. Every statement, during the course of investigations in matters related to Customs, is recorded under Section 108 of the Customs Act only and if the said ground is adopted as a reason for denial of cross-examination, there would be never ever be any cross-examination of any deponent during the proceedings. This cannot be allowed to be happened. Revenue by not allowing the cross-examination of the witnesses and the experts whose statements and opinions are being relied upon by them, have committed the gross violation of principles of natural justice. On this limited ground and without expressing any opinion on the merits of the case, we set aside the impugned order and remand all the appeals to the Adjudicating Authority for fresh decision - Decided in favour of assessee.
-
Service Tax
-
2014 (11) TMI 757
Business Auxiliary Services - collection of toll charges on behalf of CIDBI or not - Held that:- The appellants relied on the various provisions of Memorandum of Agreement, Tripartite Assignment Agreement, and also adduced additional evidence in the form of letters from the lead Banker M/s. IDBI, wherein they are treating the appellant only as the Concessionaire and accordingly the funds have been released to them. The appellants have also produced the letter from the Income Tax department, wherein the income tax concessions available to the Concessionaire has been granted only to the appellant and not to CIDBI. even as per the department’s allegations that they were acting as collection agents, though not admitting, the demand should have been made only of the commission charges, if any, paid by CIDBI. As a matter of fact, there was no such commission paid at all. Following decision of assessee's own previous case [2013 (1) TMI 166 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee.
-
2014 (11) TMI 756
Management Consultancy Services - activity of helping in marking of granite blocks and rendering assistance in execution of the export orders - Penalty u/s 76, 77 & 78 - Held that:- Organization to whom Management Consultancy service is alleged to have been provided is not specified. Moreover, the service provided has to be in relation to the Management of an organization including advice, Consultancy or technical assistance for rectification or improvement of system of the organization. Mere helping a client in executing the export orders or in selecting granite blocks is not at all covered by the Management Consultancy Service, as there is no element of any consultancy with objective of management, rectification or improvement of the working system of an organization. The activity of the appellant therefore does not fall under Section 65(105)(r) read with Section 65(65). As such, the impugned order is not sustainable. The same is set aside - Decided in favour of assessee.
-
2014 (11) TMI 755
Refund claim - period of limitation - repair and maintenance of light, electric installation etc - appellant was under the impression that they are required to pay service tax, they kept paying the service tax till 15.06.2005. Later-on, when they realized that as the street lights are immovable property and they are not required to pay service tax, they filed a refund claim of the service tax erroneously paid by them which was not payable at all. - refund claim was rejected as time barred - Held that:- in this case the provisions of Section 11B of the Central Excise Act, 1944 are not applicable as the appellant has paid the service tax which was not payable during the relevant time. Further arguments advanced by the learned A.R. that this Tribunal has not authority to sanction the refund claim, I find that as per Section 35B of the Central Excise Act, 1944, if any person aggrieved by the order of the Commissioner (Appeals) can filed an appeal before this Tribunal. Obviously, the appellant before me is aggrieved by the order of the Commissioner (Appeals), therefore, the appeal is maintainable. - refund allowed.
-
2014 (11) TMI 754
Waiver of pre deposit - hire purchase and financial lease service - Held that:- On perusal of the decision of the Hon'ble Apex Court in the case of Association of Leasing & Financial Service Companies Vs. Union of India (2010 (10) TMI 4 - SUPREME COURT OF INDIA), various provisions of Finance Act, and Service Tax Rules. Prima facie we do agree with the contention of the Ld. Counsel for the applicant that applicant is engaged in the activity of giving loan for earning interest through leasing the vehicles under financial leasing services. As per explanation to Section 67 of the Finance Act, 1994. - Interest on loan is exempted from service tax is not to be included in the taxable service and same has been followed by Rule 6 (2)(iv) of the Service Tax Valuation Rules, 2006. In these circumstances, prima facie we find that applicants have made out a case for complete waiver of pre-deposit. Therefore, we waive the requirement of pre-deposit of entire amount of service tax, interest and penalty and stay recovery thereof during the pendency of the appeals - Stay granted.
-
2014 (11) TMI 753
Waiver of pre deposit - Club or Association Service - Held that:- Ranchi Club Ltd. Vs. Commissioner of Central Excise & Service Tax, Ranchi Zone reported in [2012 (6) TMI 636 - Jharkhand High Court], Sports Club of Gujarat Ltd. Vs Union of India reported in [2013 (7) TMI 510 - GUJARAT HIGH COURT] - In view of that, we waive the pre-deposit of tax along with interest and penalty till disposal of the appeal - Stay granted.
-
2014 (11) TMI 752
CENVAT Credit - construction service and consulting engineer service - Held that:- Appellant is entitled to take CENVAT Credit on the construction services and consulting engineering services availed by it during the financial year 2007-08 being prior to 1.4.2011 when such CENVAT Credit was expressly disallowed by amendment of the Rules. Further, I hold that the whole proceedings against the appellant were misconceived. Hence, the impugned order is set aside - appellant is permitted to take CENVAT Credit - Decided in favour of assessee.
-
2014 (11) TMI 751
C&F Agency Services - Commissioner set aside demand - Held that:- sales representative appointed by the respondent were only canvassing orders and they were not received or clearing and forwarding the goods manufactured by the appellant. For canvassing the orders and pursuing the delivery of the goods, the sales representatives were paid a commission. This activity of the sales representative, by no stretch of imagination, can be called clearing and forwarding service and, therefore, we do not find any infirmity in the order passed by the lower appellate authority - Decided against Revenue.
-
2014 (11) TMI 750
Remission of tax - On the basis of previous order Commissioner ordered remission of tax without issuing SCN - Held that:- Inasmuch as the relied upon order has already been set aside and the matter is remanded back to the adjudicating authority, and the said order is the basis for issuance of the notice, the notice also would not survive and consequently the order passed by the Commissioner also would not survive and the matter has to be re-considered afresh by the Commissioner in terms of the directions given in the order of this Tribunal - Matter remanded back - Decided in favour of assessee.
-
Central Excise
-
2014 (11) TMI 758
Modification of stay order - Waiver of pre deposit - non compliance of pre deposit order - Financial Hardship - Held that:- The plea of financial hardships was also considered in the above stay order wherein it was noted that this plea was not supported by any documentary evidence. The same plea has been reiterated by the appellant in the present miscellaneous application but it is not accompanied by any documentary evidence. As rightly pointed out by the Superintendent (AR), no further reason has been stated by the appellant in support of their plea - Appeal dismissed for non-compliance - Decided against assessee.
-
2014 (11) TMI 749
CENVAT Credit - Reversal of credit when finished goods became exempt - Methol Flakes and Menthol Crystals - Applicability of Rule 11 (3) - Held that:- Sub-rule 3 would be applicable if the some cenvat credit availed inputs are being used for manufacture of a final product and that final product has become fully exempt from duty. In such a situation, the assessee would be liable to pay an amount equal to the cenvat credit involved in respect of the inputs lying in stock or in process, or contained in the final products lying in stock on the date of exemption, and after deducting this amount from the cenvat credit balance, if any, as on the date of exemption, if any cenvat credit balance still remains, it shall lapse and the same shall not be allowed to be utilized for payment of duty on any goods whether cleared for home consumption or for export. In our view, this sub-rule would not apply when out of common cenvat credit availed inputs, more than one final products are manufactured and while some final products have become exempt, others have remained dutiable. Since in terms of sub-rule (4) of Rule 3 of the Rules, the cenvat credit may be utilized for payment of any duty of excise on any final product, if out of the same cenvat credit availed inputs, more than one final product are manufactured and out of those final products, one final product has become fully exempt from duty, the cenvat credit can be utilized for payment of duty on the other final products, which are dutiable and as such, the manufacturer’s right to utilize the cenvat credit for payment of duty on the final products which are still dutiable cannot be taken away just because out of several final products, one final product has become exempt from duty. We, therefore, hold that the Revenue’s interpretation of Rule 11(3) is not correct. While the provisions of sub-rule (3)(ii) of Rule 11 of the Cenvat Credit Rules, 2004 are not applicable, the provisions of sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2004, would be applicable , if during the period of dispute, the appellant were clearing their finished products for home consumption. However, the provisions of either sub-rule (1) or of sub-rule (2) read with sub-rule (3) of Rule 6 would not be applicable, if the appellant were exporting their finished products out of India under bond or under Letter of Undertaking. However, the Appellant have not produced any evidence in support of their plea that during the period of dispute, the finished products were being exported under bond/LUT. The impugned order is, therefore, set aside and the matter is remanded to the original adjudicating authority for de novo adjudication after ascertaining as to whether during the period of dispute, the appellant were exporting their final products and keeping in view our observations in this order. - Decided in favour of assessee.
-
2014 (11) TMI 748
Classification of goods - Classification of Horn Controller - Whether the Horn Controller manufactured and cleared by the appellants was classifiable under Chapter sub-heading 8512.00 or under chapter sub-heading 8708.00 of the CETA during the relevant period - Held that:- Horn Controller through Electronic Circuit actuates the relay in the controller which in turn activates the solenoid valve to open or close the air passages. The appellant's main contention is that Horn Controller are used in the motor vehicles and classifiable under 87.08 as parts of Motor vehicles. It is pertinent to note that the Heading 87.08 of CETA as it stood during the relevant period covers "parts and accessories of the motor vehicles of Heading 87.01 to 87.05". It is relevant to see the section notes of Section XVII of CETA. As per the Section note 2(f) above electrical machinery or equipment of Chapter 85 are excluded from this Section (which governs Chapter 87). As evident from the above technical write up on Horn Controller, it is apparent that it contains electronic circuit and switches i.e. auto relay which actuates the controller which is used to control the airflow of the Horn. Therefore, by virtue of the exclusion provided under section note 2(f) of Section XVII of the Schedule, the Horn Controller do not fall under Ch. 87.08 of CETA as parts of motor vehicles. HSN Explanatory Notes to be given due weight for determination of any product especially when entry in HSN is fully aligned to corresponding Tariff heading in the Central Excise Tariff Act. Therefore, it is relevant to look into the HSN Explanatory Notes of Heading 85.12, which covers electrical apparatus and appliances specialised for use on cycles or motor vehicles for lighting or signalling purposes. The heading includes interalia electrical wind screen wipers, defrosters and demisters of motor vehicles. Sl.No.12 of the heading covers items viz. Horns, sirens and other electrical sound signalling appliances. - Horn Controller manufactured by the appellants is used as parts for Horns. From the description of the goods, it is evident that by use of the Horn Controller in the Horn, the Horn is selectively operated. The Horn Controller contains electronic circuit which actuates the auto relay in the controller which in turn controls the solenoid valves for producing sound horn. The different switches fitted in the controller itself confirms that without electrical energy, it cannot actuate the valves to create different sounds or musical sounds of different frequencies depending on the usage. - Horn Controller manufactured and cleared by the appellants is rightly classifiable under Heading 85.12 of the CETA, 1985. Hence, we do not find any infirmity in the impugned order passed by the Commissioner (Appeals) - Decided against assessee.
-
2014 (11) TMI 747
Validity of Tribunal's order - appellant, argued that the Tribunal has no jurisdiction to ask the appellant to make the deposit as a pre-condition for fresh adjudication - held that:- Tribunal does not have any inherent power like Civil Court to pass appropriate order for the ends of justice. The Tribunal is a creature of a Statute with specific powers mentioned in the Statute itself. From the grounds of the appeal and the Statute, we do not find any provision for depositing ₹ 5crores for adjudication and the same is without jurisdiction and accordingly the same is deleted - Decided in favour of assessee.
-
2014 (11) TMI 746
Clearance of goods without payment of duty - Extended period of limitation - Fabrication at site - Supply of Concrete Armoured Units (CCA Units) - Interest u/s 11AB - Penalty u/s 11AC - Held that:- Admittedly, there was an adjudication order No. 7/89, dated 23-6-1989 passed by the Additional Collector, Guntur for the period 1987-88 when the respondent had executed work awarded by VPT including casting of CCA Units, holding that the respondent was only a works contractor and not the manufacturer and VPT was the manufacturer of the CCA Units. This order was confirmed by the CESTAT, Delhi in decision reported in [2001 (7) TMI 176 - CEGAT, COURT NO. IV, NEW DELHI]. Respondent is a manufacturer, he should be entitled for exemption under Notifications No. 5/99-C.E., dated 28-2-1999 and Notification No. 6/2000-C.E., dated 1-3-2000 in respect of the CCA Units as they were manufactured at the site of construction for use in construction works at site as clarified by the CBEC Circular dated 18-5-1999. We also hold that where earlier proceedings on the same subject matter have already been decided against a party, there is no question of suppression of facts, wilful mistake, fraud, etc., warranting invocation of the larger period of limitation of five years under proviso to Section 11A(1) of the Act (as it stood then) instead of period of one year prescribed under Section 11A(1) of the Act - respondent is supplying manufactured CCA Units on contract basis to VPT and that he is only a works contractor and not a manufacturer. This finding of fact by the Tribunal cannot be said to be perverse or based on inadmissible material or ignoring of material evidence. - Decided against Revenue.
-
2014 (11) TMI 745
Reversal of MODVAT Credit - Penalty u/s 11AC - Interest u/s 11AB - Whether the lower appellate authority was right in setting aside the mandatory penalty under Rule 57-I(4) of the Central Excise Rules, 1944 and Section 11AC of the Central Excise Act, 1944 for the entire period subsequent to 28-9-1996 - Held that:- Department has contested the matter regarding imposition of penalty prior to the date of introduction of the said provision, viz., 57-I(4) of the Central Excise Rules, 1944 and thereafter. Therefore, the Revenue having raised such a ground before the Tribunal, the Tribunal ought to have considered the issue and rendered a finding. Without doing so, the Tribunal merely observed that they need not interfere with the decision of the lower appellate authority as regards the penalty for the brief period from 23-7-1996 to 28-9-1996 when the contention of the Department that post 28-9-1996 also the Department was entitled to levy penalty and that the period covered for adjudication was from 1-4-1994 to 30-9-1998. Hence, this question requires consideration of the Tribunal. - Matter remanded back - Decided in favour of Revenue.
-
2014 (11) TMI 744
Waiver of pre-deposit - Penalty u/s 11AC - Non production of clearance from CoD or any document that the application seeking clearance is pending - Held that:- Following decision of Electronics Corporation of India Ltd. Versus Union of India & Ors. [2011 (2) TMI 3 - Supreme Court] - stand of the Tribunal that the application is not maintainable because of non-production of clearance from CoD is not sustainable. - Matter restored before the tribunal.
-
2014 (11) TMI 743
Maintainability of appeal - Dismissal of appeal - Non compliance with pre deposit order - Held that:- How mere closure or then taking over by the financial institution ipso facto is sufficient to demonstrate undue hardship. In the light of material produced before us, we find that there is no jurisdictional error or perversity in the application of mind by the CESTAT. However, CESTAT has thereafter proceeded further, noted adjudication by this Court in the case of another unit and asked the present appellant to deposit 25% of the duty within eight weeks. The appellant has sought waiver of duty of ₹ 3,09,23,873/- plus interest and penalty. Thus, the order-in-original, which required him to pay equal amount as penalty and then interest with further penalty, has been substantially modified by the CESTAT. No error or perversity in the impugned order. As the dismissal of appeal is automatic and on account of failure to comply with said order of pre-deposit, the challenge to order dismissing the appeal for said failure also cannot be sustained. We find no substantial question of law arising in the appeal - Decided against assessee.
-
2014 (11) TMI 742
Cenvat credit - credits were taken without satisfying the procedure provided under Rule 57R(3) of the Central Excise Rules, 1944 - Supreme Court dimissed appeal filed by assessee against the order of high Court [2009 (1) TMI 520 - PATNA HIGH COURT] where it has been held that provision of Rule 57R(3) of the Rules is required to be followed even when the capital goods were acquired by the assessee under a loan agreement from the bank. Supreme Court held that presently no order for early hearing of the Appeal deserves to be passed.
-
2014 (11) TMI 741
Waiver of pre deposit - Order of pre deposit to pursue matter afresh - High Court upheld order of pre deposit [2011 (11) TMI 317 - PUNJAB AND HARYANA HIGH COURT] - Supreme Court dismissed appeal as infructuous since in pursuance of the previous order, the adjudicating authority has already decided the matter.
-
2014 (11) TMI 740
MRP based valuation - Recall of order - Supreme Court after condoning the delay restored the appeal to its original number and recalled the order passed by the CESTAT Banglore in [2010 (4) TMI 418 - CESTAT, BANGALORE] where it was held that requirement of not printing of retail sale price not applicable to the respondent as goods sold to Andhra Pradesh State Housing Corporation Ltd.
-
2014 (11) TMI 739
Valuation of goods - Assessable value of physician samples - Supreme after condoning the delay dismissed the appeal of the Revenue where CESTAT AHMEDABAD in [2010 (6) TMI 741 - CESTAT AHMEDABAD] held that assessable value of physician’s samples is required to be arrived at in terms of Board’s circular dated 1-7-2002, qualifying adoption of value at 115% cost of the production.
|
