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Income Tax
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2013 (12) TMI 202
Estimation of profits - Held that:- The CIT(A) has directed the assessee to produce the quantitative stock and value-wise details of major items traded which constituted more than 20% of the turnover - The CIT(A) forwarded the details submitted by the assessee and rejoinder from the assessee to the Assessing Officer for filing remand report - Sales Tax assessment order was sent to the Assessing Officer for his comments too - Following ITO vs. Vijay Kumar Mesar [2009 (8) TMI 675 - CHHATTISGARH HIGH COURT] 231 CTR 165 - Confession made by the assessee during survey proceedings is not conclusive and it is open to the assessee to establish by filing cogent evidence that the same was not true and correct - The Tribunal after confirming the fact finding done by CIT(A) deleted the addition - Decided against Revenue.
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2013 (12) TMI 201
Concealment of income - Held that:- It appears from the order passed by the AO that there are no losses of earlier years which the assessee has set off against its income - All the returns filed by the assessee in earlier years have either been treated as non-est or the losses if any have already been set off - The assessee has furnished the false information pertaining to the income and thereby is liable to levy the tax on the amount of Rs.29,91,572/-. Thus, concealment is willful and the assessee has also furnished the inaccurate details of the income – The AO had examined and verified the issue regarding earlier years. There was no loss in the earlier year, which was supposed to be carried forward - The assessee has failed to bring any material on record to prove that losses were carried forward from the earlier years - There was malafide intention on furnishing the false particular – Following CIT vs. Ananthan Chattier [2003 (12) TMI 12 - MADRAS High Court] - The burden always lies with the assessee to prove that there was no concealment – Decided in favour of Revenue.
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2013 (12) TMI 200
Determination of accumulated profits - Deemed dividend - Whether depreciation is allowable while computing taxable income - Held that:- Following Commissioner of Income Tax vs. Jamnadas Khimji Kothari [1972 (10) TMI 24 - BOMBAY High Court] - The depreciation arising from the wear and tear of the business assets is a first charge on profits, without deducting which it is not possible to arrive at a profit in a year - The normal depreciation as provided under the Income Tax Act and not as per the Companies Act, has to be taken into consideration while computing the Income Tax of an assessee - Decided against Revenue.
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2013 (12) TMI 199
Application of income - Held that:- The expenses were incurred on the foreign tour undertaken by the president of the assessee trust - Decided in favour of Revenue. Expenses for telephones, securities and membership of Indian Habitat World Centre - Held that:- If there were sufficient reasons for withdrawal of the exemption under Section 11 of the Act, then necessary proceedings will have to be started under Section 13 of the Act - The proceedings u/s 13 are independent - Decided in favour of Revenue.
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2013 (12) TMI 198
Gift from brother - Creditworthiness and genuineness of donor - Held that:- The assessee could not produce the statement of cash flow to show that the gift was genuine one - The assessee had not placed any material before the Authority to substantiate the receipt of Rs.7,50,000/- as gift from his brother - In the absence of any compelling reason and materials to show as regards the genuineness of the gift - The addition was made u/s 68 - Decided against assessee.
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2013 (12) TMI 197
Lack of proper investigation - Held that:- The A.O. didnot examine the person who made the unsigned agreement - The Assessing Officer did not make addition of the amount mentioned in the ‘draft agreement to sell’ but addition of Rs.1.15 crores was made - The draft agreement to sell could have been the starting point of investigation and further detailed verification was not been carried out - In the absence of the said investigation and evidence - Decided against Revenue.
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2013 (12) TMI 196
Penalty u/s 271(1)(c) - Held that:- There was delay in supply of material - There was no delay in installation as it was done within the date of final acceptance - The delay in supply occasioned due to the delay committed by them being delay in placement of orders, delay in approval material etc., and the sub-suppliers were no way responsible, liable or cause for the delay - The assessee voluntarily made provision in their books of accounts. The assessee had not concealed any particulars either in its accounts or in other particulars and the contract was made available before the Assessing Officer - HMIL did not invoke the provision of claiming damages for delay - The assessee took precaution and provided for the penalty, claimed the same as deduction at the earliest point of time being the assessment year 1998-99 - The precaution taken by the assessee could not be compared with concealment of income In its good faith, the assessee was claiming the deduction at the earlier point of time by furnishing all the details - Mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide - The assessee's claim for deduction at the earliest point of time for the assessment year 1998-99, cannot be stated to be lacking in bonafides or with the malafide intention with intent to conceal in particulars of income for the purpose of avoiding payment of Tax - Decided against Revenue.
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2013 (12) TMI 195
Valuation of stock of spares - Held that:- Following assessee's own case for the assessment year 1994-95 - Decided in favour of Revenue. Pre-operative expenses - Revenue or capital - Held that:- Following The Commissioner of Income Tax, Patiala Vs. Vardhman Spinning & General Mills, Ludhiana [2008 (8) TMI 202 - PUNJAB AND HARYANA HIGH COURT] - The expenses incurred by the assessee for exploring the possibility of setting up of a project is a revenue expenditure as no asset of permanent nature with enduring benefit is acquired by the assessee - Decided against Revenue.
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2013 (12) TMI 194
Deduction u/s 54B – The land was continuously used by the assessee for agricultural purposes - The agricultural income from the said property has been declared by the assessee in his return of income - Held that:- The land was entered in the revenue records as agricultural land - The land was always treated as agricultural land and that only limited cultivation was possible on account of scarcity - The assessee had in fact cultivated a part of its lands according to the Adangal Register and no further cultivation was possible because of lack of water. The use referred to in the section can only be regarded as such use as the lands are capable of with the aid of facilities available and the assessee cannot be denied the relief – The assessee was actually unable to put the land to use due to vagaries of nature and non-availability of resources – It is not the fault of the assessee if rained lands are not actually put to use during the drought – Decided against Revenue.
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2013 (12) TMI 193
Whether the long term capital gain on sale of property purchased in the name of partner taxable in the hands of assessee – The property was reflecting in the books of assessee firm as assets – Held that:- The property was not owned by the assessee-firm - The registered deed always showed that the property was purchased, held and sold by Shri Irudayaraj as the sole owner of the property - The ownership of the property cannot be assigned to the assessee-firm only on the basis of the accounting entries - To acquire right in immovable properties and releasing right in immovable properties, etc. need to be strictly construed in the light of the Indian Registration Act and the Transfer of Property Act – Following CIT v. S. Rajamani and Thangarajan Industries [1997 (11) TMI 20 - MADRAS High Court] – The immovable property cannot be transferred without registered deed of conveyance - Decided in favour of assessee.
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2013 (12) TMI 192
Industrial undertaking - Applicability of section 80IA (3)(ii) – Whether the new industrial undertaking can be formed by the transfer to a new business of machinery or plant previously used for any purpose u/s 80IA (3)(ii) of the Income Tax Act - Held that:- The assessee had earlier sold the business the windmill plant stood transferred to its sister concern. The sister concern leased back the windmill to the assessee - The assessee had also produced wind power in the year 2003 - As per section 80IA(3)(ii), once the machinery or plant previously used for 'any purpose' is transferred to a new business, the concerned undertaking is not entitled for deduction - Decided against assessee.
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2013 (12) TMI 191
Stay of penalty proceedings u/s 271(1)(c) – Held that:- As per the provisions of Section 275(1)(a) of the Act Assessing Officer cannot pass an order imposing penalty u/s 271(1)(c) of the Act till relevant assessment is subject matter of appeal before ld. CIT(A) (i.e. the first appellate authority). By the same analogy CIT(A) shall not undertake penalty proceedings till the disposal of appeal by the Tribunal – In view of the powers conferred u/s 254(1) and Following M.K. Mohammad Kunhi [1968 (9) TMI 5 - SUPREME Court] – To prevent multiplicity of proceedings and harassment to the assessee - Decided in favour of assessee.
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2013 (12) TMI 190
Loss in share trading - Loss in Futures & Options activity – AO disallowed appellant's claim of share trading and F&O losses along with OD interest as personal in nature since these transactions were not routed through P&L a/c – Held that:- The appellant had followed the consistent method of computation of income/loss from the earlier year for which necessary evidence has been placed on record - the appellant had filed all the evidence of claiming loss before the AO from the accounts of brokers' books which includes a copy of contract note issued by the brokers containing unique client code and PAN of the appellant - In audit report the nature of activity had been mentioned as professional consultant and share trading - For share loss, the appellant had not submitted any evidence whether any delivery of shares has been taken or not - the loss on future trading was supported by evidences with time stamped contract notes issued by the brokers containing unique client code and PAN of the appellant. From asst. yr. 2005-06, under s. 43(5), the future and option transaction had been excluded from the purview of speculation, if the transactions are carried out at recognized stock exchange and time stamped contract notes were issued - The appellant had routed the transaction through recognized stock exchange notes - appeal on future and option transaction is dismissed - the appellant had not proved before the AO as well as CIT(A) that share loss was not speculative loss or delivery of shares has been taken by the appellant or not – decided partly in favour of Revenue.
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2013 (12) TMI 189
Disallowance of Interest u/s 14A – The assessee invested Rs. 10,99,00,000 in shares and also paid share application money of Rs. 47,51,00,000 of one M/s. Sringaravalli Consultants P. Ltd. - Held that:- The assessee was doing investment as well as share trading as a part of its business - The assessee is a trader in share - Even if the shares were held as a part of its investment, such holding of shares could still be considered only as a part of its business – The dividend earned by the assessee was a small amount of Rs. 10,11,449/- as compared to the amount of investment in shares – It was not proved that this amount was earned on investment in the said company only – Following CCI Ltd. [2012 (4) TMI 282 - KARNATAKA HIGH COURT] - There could be no disallowance when shares were held not with an intention of earning dividend income - The acquisition of shares and placing share application money were in the course of business of the assessee - Decided in favour of assessee.
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2013 (12) TMI 188
Income accrues/arises or is deemed to accrue/arise in India – Assessee-company is receiving the remittances of tickets sold by the Indian company outside India – Held that:- Assessee was not having any ‘business connection’ in India within the meaning of section 9(1)(i) of the Act - No income has been accrued to the assessee in India in respect of booking or sale of tickets for ‘tour packages’ of the cruises in India which was done through Star Cruises (India) Travel Services Pvt. Ltd. (SCITC) - Decided in favour of assessee.
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2013 (12) TMI 187
Whether reopening of assessment proceedings u/s 148 valid or not – The assessee has claimed refund on excess depreciation wrongly calculated on valuation of securities by the assessee – After completing assessment u/s 143(3) the AO reopened the assessment u/s 147 - The original assessment for the assessment year 2001-02 was completed under section 143(3) on February 13, 2004 determining the total income at Rs. 26,35,49,42,360 - A search and seizure action was initiated in the assessee's case by the Department on July 2, 2005 on which date the assessment for the assessment year 2001-02 was not pending - Held that:- Following All Cargo Global Logistics Ltd. [2012 (7) TMI 222 - ITAT MUMBAI(SB)] - In view of the non obstante clause of sub-section (1) of section 153A the Assessing Officer has no jurisdiction to issue notice under section 148 of the Act in respect of those six assessment years which falls within the exclusive jurisdiction of section 153A - The Assessing Officer was not justified in issuing notice under section 148 on August 28, 2006 and in completing the impugned assessment under section 143(3) read with section 147 of the Act on October 31, 2006 - The Assessing Officer instead of complying with the requirement of section 153A proceeded with the provisions of section 147/148 which are not applicable in the assessment under section 153A – Decided in favour of assessee.
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2013 (12) TMI 186
Penalty u/s 271(1)(c) - The assessee filed his return of income for assessment year 2004-05 on December 12, 2006 showing income of Rs.4,99,140 and for the assessment year 2005-06 filed a return of income on December 31, 2007 showing income of Rs. 10,49,250 – The penalty was levied for not filing the return within the time allowed for filing of return - Held that:- The returns of income were not valid returns as they were not filed within the time allowed under section 139(4) - In view of Explanation 3 to section 271(1)(c) the entire assessed income constitutes concealed income – The assessee failed to explain as to why the penalty u/s 271(1)(c) shall not be levied when the return is not filed within the time allowed under section 139 when the assessee had taxable income - The default is not mitigated by filing the return before the time limit of completion of assessment specified under section 153(1) - Decided against assessee.
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2013 (12) TMI 185
Deduction u/s 80HHC – The assessee has made export of certain music rights through one M/s. Galaxy Timber Trading International, his proprietary concern - Held that:- Following Abdulgafar A. Nadiadwala v. Asst. CIT [2004 (3) TMI 58 - BOMBAY High Court] – The payments were made by M/s. Sound of Arts to the assessee for transfer of masters tape - The assessee had provided reasonable evidence to show that masters tapes were delivered by him to the party in Sharjah - The assessee produced copy of certificate of foreign inward remittance by ANZ Grindlays Bank - The assessee had received the consideration for export of the masters tapes which contained the title and rights of songs - Decided against Revenue.
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2013 (12) TMI 184
Validity of proceedings u/s 263 – The net income had been shown at Rs. 3,43,51,89,619. Against this income the company has claimed brought forward unabsorbed depreciation for the earlier years amounting to Rs.35,58,19,560 - The company has claimed deduction under section 80-IA (100 per cent.) amounting to Rs. 307,93,70,059 and the taxable income has been shown as nil - The Assessing Officer accepted the returned income of the assessee – The assessment order was passed under section 143(3) dated September 3, 2007 - Held that:- No inquiry or investigation was made by the Assessing Officer while considering the eligibility of claim of deduction under section 80-IA of the Act in the hands of the assessee - The fulfilment of the various conditions laid down under section 80-IA of the Act including the provisions of sub-sections (2), (2A) and (4)(ii) of section 80-IA of the Act, were not considered and adjudicated upon by the Assessing Officer - The assessment order passed by the Assessing Officer is without making any investigation and without application of mind in granting the deduction under section 80-IA of the Act, both on the profits of the business and also on the interest income and other income earned by the assessee – The order of the Assessing Officer did not show the verification of closing stock, purchases and transportation and other items mentioned above – Decided against assessee.
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2013 (12) TMI 183
Jurisdiction u/s 263 – Held that:- There is no finding in the order under section 263 as to how the assessment order u/s 147 is erroneous and prejudicial to the interests of the Revenue - The defect for assumption of jurisdiction in so far as all the materials were available to the AO which in the audited financial statements were verified - The doubts in the mind of the learned CIT to issue show-cause notice after the issue having been deliberated upon by the learned CIT was known to it when a copy of the order of the learned CIT(A) was also sent to the concerned CIT - Assumption of jurisdiction has been on misinterpretation of facts and non-application of mind because the learned CIT himself has directed the AO without pointing out any error prejudicial to the interests of the Revenue either to the assessee or to the AO – Decided in favour of assessee.
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2013 (12) TMI 182
Disallowance u/s 40(a)(ia) – assessment u/s 144 - Whether within the meaning of section 144 while making an assessment of taxable income to the best of his judgment the Assessing Officer is lawfully debarred to invoke the provisions of section 40(a)(ia) - Held that:- when having rejected the book result it was not the case of the Assessing Officer to go back to those very books of account which indicated nondeduction of tax at source on certain expenditures that had ripened to be disallowed under section 40(a)(ia). Following Sanjay Kumar Pradhan v. Asst. CIT [2011 (12) TMI 422 - ITAT CUTTACK] - A change of stand cannot be taken up later when the finding of fact remains the same as were available to the Assessing Officer - Part deduction of tax on certain payments do not lead to the finding that all the expenditures incurred were susceptible to be disallowed under section 40(a)(ia) for want of deduction of tax at source – Decided against Revenue.
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2013 (12) TMI 181
Assessment u/s 263 – Held that:- Following Tips Cassettes and Record Co. [2000 (7) TMI 210 - ITAT BOMBAY-E] - the assessee was a dealer of music and the nature of capital or revenue vis-a-vis various expenditure has to be considered on this point. Since the assessee was dealer in music, the master plate or in turn the rights which enable the assessee to obtain the master plate (assignment of copyrights) become raw material of the assessee. The assessee sells music purchased on master plate and transmits on a different device called cassette or record. The raw material, i.e. master plate is integral part of the profit earning process and not the capital field. The Commissioner of Income-tax was not correct in holding that the assessment order is erroneous - For invoking the provisions of section 263 two conditions have to be satisfied - The order of the Assessing Officer sought to be revised is erroneous ; and The order of the Assessing Officer is prejudicial to the interests of the Revenue – Following Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court] - The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue – Decided in favour of Revenue.
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2013 (12) TMI 180
Deduction u/s 80HHF – Whether the duty draw back has to be excluded or included in the business income of the assessee while computing profits of business u/s 80HHF - Held that:- Following Liberty India Vs. CIT [2009 (8) TMI 63 - SUPREME COURT] – According to explanation to section 80HHF - Duty drawback should be treated as separate items of revenue or income and accounted for accordingly - Duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between profits and the industrial undertaking - Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB – The issue restored for fresh decision. Interest income to be treated as business income – Held that:- Following CIT Vs. K. Ravindranathan Nayar [2007 (11) TMI 10 - Supreme Court of India] – The issue restored for fresh decision.
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2013 (12) TMI 163
Depreciation on capital expenditure - Double deduction or not - Held that:- Following CIT v Institute of Banking [2003 (7) TMI 52 - BOMBAY High Court] - The income of the trust is required to be computed under section 11 on commercial principles, without reference to the heads of the income specified under section 14 of the Act - As per the CBDT Circular No.5-P (LXX-6) issued dated 19th June, 1968 - The income of the trust is to be computed on the commercial basis i.e. as per normal accounting principles which clearly provide for deducting depreciation to arrive at income. The income so arrived at (after deducting the depreciation) is to be applied for charitable purpose. Capital expense is application of the income so determined. The application of the income so determined cannot be stated to be a deduction to arrive at the income. The depreciation is to be deducted to determine the income under section 11 of the Act and it is not an application of income - There is no double deduction as claimed by the DIT(E) - Decided in favour of assessee.
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2013 (12) TMI 162
Valuation of stock of spares - Held that:- The items may be small in nature, may be numerous but each item which is in stores of the assessee is required to be valued - The assessee cannot be permitted to assert that the stock of spares is not required to be valued in the closing stock - The assessee retains stock of spares for 15 days - The CIT(A) valued the stock not for 30 days but for 15 days - The valuation accepted by the Commissioner of Income Tax (Appeals) is correct - Decided in facour of Revenue.
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2013 (12) TMI 161
Expenses u/s 37(1) - Held that:- The expenditure are in the nature of salary, electricity, audit fee etc. incurred for expansion of existing line of business that is setting up of more number of stores/speciality stores or for maintenance of already established stores - Operations of these stores at various locations is one composite business and once business had been started then the expenditure can not be linked only to the stores which became operational during the year under consideration. When the expenditure is incurred for the purpose of expansion of business which is already in existence and, which is in the nature of revenue, then the same is allowable as revenue expenditure irrespective of the treatment given by the assessee to such expenditure in its books of account - Following CIT vs. Kothari Auto Parts Manufacturers Pvt. Ltd. [1975 (12) TMI 28 - BOMBAY High Court] - These expenditures did not create any asset and also did not provide enduring benefit to the business of the assessee so as to say that the expenditure was capital in nature - Assessee has filed the details mentioning job description of each of the employees alongwith amount paid to him describing also that how much TDS has been deducted. Without pointing out any defect and without bringing any adverse material on record, Ld. CIT(A) has observed that assessee has failed to prove that the expenditure was made wholly and exclusively for the purpose of business of the assessee - The observation of CIT(A) cannot be upheld - The assessee itself has disallowed a sum of ₹ 51,23,957/- out of the aforementioned amount of ₹ 3,64,49,545/- under the provisions of section 40A(7)/40A(9)/43B of the Act - An amount of ₹ 3,13,25,588/- should be allowed to the assessee on account of revenue expenditure - Decided in favour of assessee.
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Customs
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2013 (12) TMI 179
Imposition of penalty - Export consignment found to partly contain red sanders in addition to declared goods - Held that:- Consignment was found to have red sanders which were prohibited for export. The earlier consignment also contained red sanders. The conduct of the appellant-firm appears to be not bona fide and, therefore, penalty is, prima facie, warranted. However, there is no justification for separate penalty on the proprietor when there is a penalty on the proprietary-firm - Prima facie case not in favour of assessee - Stay granted partly.
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2013 (12) TMI 178
Clandestine removal of goods - Unauthorized removal of goods from Airport - Attempt to smuggle goods - Appellants role in this act - Held that:- It is not in dispute that on 13.6.2003, two consignments valued over Rs.44 lakhs were successfully and clandestinely removed from the airport by Y. Raju who was employed in the airport as contingent. The appellant's proximity with the said Y. Raju stands confirmed by the appellant inasmuch as he was found attending to work at his residence as well. The initial statements of Shri Abdul Kader and Y. Raju implicate the appellant in the smuggling.activities, Further, the appellant was found to have used the cell phone in the name of a friend inasmuch as, from the said phone, calls were made to his residence and calls were received from his residence. The reasons for disowning the use of the phone by the appellant are not convincing - no prima facie case in favour of the appellant has been made out for full waiver of the penalty sustained against him. Considering the financial hardship to appellant, he is directed to make a partial deposit - Stay granted partly.
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2013 (12) TMI 177
Refund of excess duty paid – Imports under DFIA scheme in terms of Notification No. 40/2006-Cus., dated 1-5-2006 - Refund claim on basis of exemption from payment of Basic Customs Duty as well as Additional Customs Duty - Held that:- the refund claim of the appellant was maintainable under Section 27 of the Customs Act and the non-filing of the appeal against the assessed bill of entry does not deprive the appellant to file its claim for refund under Section 27 of the Customs Act, 1962 and which claim will fall under clause (ii) of sub section (1) of Section 27 - Following decision of AMAN MEDICAL PRODUCTS LTD. Versus COMMISSIONER OF CUSTOMS, DELHI [2009 (9) TMI 41 - DELHI HIGH COURT] - refund allowed
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2013 (12) TMI 176
Refund claim of Additional duty of Customs - Refund claim of SAD - Limitation - The appellants paid the duty when the Notification 93/2008 dated 1-8-2008 was not in operation - Therefore, the payment of duty in this case is not bound by Notification 93/2008 as the Notification came into force only on 1-8-2008 - Any payment of duty made after 1-8-2008, refund of the same shall be entitled, if the same is filed within one year but the duty is payable pursuant to Notification 102/2007 dated 14th September ‘07 prior to 1-8-2008, the limitation period is not applicable in the ratio laid down by the Hon’ble Supreme Court in the case of Suchitra Components Ltd. Decisions of the Tribunal as well as of the Hon’ble Apex Court particularly in the case of Suchitra Components Ltd. v. CCE, [2007 -TMI - 1061 - SUPREME COURT OF INDIA], and AUDIOPLUS Versus COMMISSIONER OF CUSTOMS (IMPORTS), RAIGAD [2010 (11) TMI 361 - CESTAT, MUMBAI ] - It was held that beneficial circular to be applied retrospectively while oppressive circular applicable prospectively - Thus, the impugned order rejecting the refund claim of the appellant holding time bar, is set aside - Decided in favour of assessee.
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2013 (12) TMI 175
Confiscation u/s 113(g) and Penalty u/s 114(iii) - Held that:- vessel has sailed on 25-12-2009 whereas the LEO was given only on 26-12-2009. As per the provisions of Section 113(g) “any goods loaded or attempted to be loaded on any conveyance, or water-borne, or attempted to be water-borne for being loaded on any vessel, the eventual destination of which is a place outside India, without the permission of the “proper officer” of the Customs is liable to confiscation. In the case before me, the goods have been loaded and the vessel has sailed before the LEO was given by the Customs officer and, therefore, the goods are liable to confiscation. Once the goods are held to be liable to confiscation as per Section 113(g), any person who in relation to any goods, does or omits to do any act, which act or omission would render such goods liable to confiscation under Section 113 or abets or aids such acts, shall be liable to penalty not exceeding the value of the goods declared by the exporter or the value as determined by the Customs Act, whichever is greater. If the exporter chooses to export goods without obtaining LEO from the proper officer of Customs, he is liable for the consequences - both the exporter and the CHA failed in the responsibility to comply with the requirement of Section 51 of the Customs Act, 1961 and therefore, they are liable to penalty under Section 114(iii) of the Customs Act. Thus the appellant has not made out a case for complete waiver of the pre-deposit of the penalties adjudged against them - Stay granted partly.
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Corporate Laws
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2013 (12) TMI 174
Maintainability of Petition u/s 237 (a) (ii) of the Companies Act, 1956 or not – Held that:- Under Section 237(1) (a) of the Companies Act, petitioner has the remedy of approaching the Central Government at the first instance for investigation of the affairs of the company by an inspector to be appointed by the Central Government - The power of the Court to issue such a direction under Section 237 (a) (ii) of the Companies Act would arise only if the Central Government fails to take appropriate action. Relying upon Alembic Glass Industries Ltd., In re [1971 (8) TMI 124 - HIGH COURT OF GUJARAT ] - the Court may decline to exercise jurisdiction under Section 237 (a) (ii) of the Companies Act till the Central Government disposes of the matter pending before it under Section 237 (b) - allegations made are vague and general, they do not make a case for any investigation being directed by this Court - The petition is dismissed and it is left open to the petitioner to approach the Central Government or the Tribunal if he so desire, with making specific case – Decided against Petitioner.
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Service Tax
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2013 (12) TMI 215
Stay application - Demand of service tax - Commercial Training and coaching service - Held that:- The applicant has not been able to demonstrate that 50% of the course fees collected is actually cost of course of the material sold. Further, the material appears to be a type which has no separate value when dissociated with the service provided which matter can be examined during the hearing of the appeal. At this stage, we do not consider this a fit case for full waiver of pre-deposit for admission of appeal - Prima facie case not in favour of assessee - Stay granted partly.
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2013 (12) TMI 212
Disallowance of irregular cenvat credit availed - Nexus with software exports - Rejection of a refund claim - Held that:- since the several services in respect of which cenvatable tax was remitted by the appellant and these are input services having a proximate nexus with the software exports service provided by the appellant, the appellant is legitimately entitled to avail cenvat credit and is also entitled to refund of cenvat credit - The matter in any way stands remitted to the adjudicating authority for verification of the bills/invoices for correlation and establishment of the appellant s claim to the extent allowed by the Commissioner (Appeals) - Decided in favour of assessee.
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2013 (12) TMI 211
Waiver of pre deposit - Demand of service tax - Discretion under Section 35 (F) - renting of immovable property - Held that:- Since in the light of the declared law as at present, and in particular, the retrospectively amended provisions of Section 65(105)(zzzz) of the Act, the Adjudication Order and the liability of the Petitioner determined thereunder, suffer from no infirmity whatsoever, we find no justification or warrant for exercising discretion to waive the pre-deposit requirement. The discretion conferred on this Tribunal is the discretion of law and not the subjective discretion of incumbents of the Tribunal - entire amount of service tax directed to be deposited - stay denied.
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2013 (12) TMI 210
Stay application - Waiver of pre deposit - erection, commissioning and installation service - Held that:- there are two separate agreements with the MEPL. One is for supply of material and other is for erection, commissioning and installation service. Applicant had paid the appropriate service tax on erection commissioning service. Revenue wants to adding the value of material supplied for the purpose of service tax. We find that the supply of material is under a separate agreement and applicant paid Vat/Sales tax - applicant had undertaken the activity for railway line at railway siding. As per the Finance Act, Railways are not covered under the construction service. Further as per the Indian Railway Act 1989, siding is a part of railway - applicant has taken the activity of sinking of shaft of mines much before the mining services became taxable. In view of the above facts and circumstances of the case, the pre-deposit of dues are waived and recovery of the same is stayed during the pendency of appeal - Prima facie case in favour of assessee - Stay granted.
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2013 (12) TMI 209
Application for modivation of stay order [2013 (12) TMI 215 - CESTAT CHENNAI] - Demand of service tax - Commercial Training and Coaching Service - 50% tax liability not paid as claimed to be cost of materials supplied - Held that:- activity relates to testing of software and is primarily connected with computer software development and hence is prima facie covered by the exclusion clause under Notification No.24/2004-ST as amended by Notf. 19/2005-ST - it will not be proper to make any modification of the stay order, in view of the observation of the Bombay High Court in the case of Baron International Ltd. [2003 (9) TMI 97 - HIGH COURT OF JUDICATURE AT BOMBAY] - However the time-limit for complying with the stay order is extended by another six weeks - Following decision of Rayudu Vision Media Ltd. Vs Commissioner of Central Excise, Hyderabad [2013 (12) TMI 52 - CESTAT BANGALORE] - no case for modification in the stay order.
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2013 (12) TMI 208
Demand of service tax - Manpower recruitment or supply Agency Services - Ship Management Services - Whether the services rendered by the appellant is covered within the definition of 'Manpower Recruitment and Supply Agency Service' prior to 1.5.2006 - Held that:- the appellant was engaged as a Manning Manager for providing competent, certified and experienced personnel on the vessel as required for running and maintenances of the vessel and the agreement was valid for a period of 12 months. The responsibilities included engagement and providing the required personnel including Master, Chief Engineer, other Officer, Petty Officers and crew and to attend to all matters pertaining to their discipline, labour relations, welfare and amenities. In the case of M/s SICAL as per the Letter of Intent, the appellant was required to arrange for masters, officers and crew on-board the vessel as required a consideration of Rs.7.10 lakhs per month per vessel and the contract was for a period of one year. The appellant was also responsible to ensure that morale of the crew on-board is maintained so that they are able to discharge the functions efficiently. From these contracts/agreements entered into by the appellant with his clients, it is clear that the appellant was engaged in supply of skilled/unskilled manpower. Therefore, the said activity is specifically and clearly covered under 'Manpower Recruitment or Supply Agency Service' as defined under section 65(68) read with Section 65(105)9k) of the Finance Act, 1994 prior to 1.5.2006. - Decided against the assessee. Extended period limitation - Held that:- appellant had collected the Service Tax from the customers but failed to remit the same at the relevant time. - The appellant did not self-assess the tax liability nor did they file any returns declaring the correct and true facts. There is thus gross failure on the part of the appellant. This conduct of the appellant very clearly shows their intention to defy the law and evade Service Tax. Therefore, the extended period of time has been rightly invoked in the present case and accordingly, the Service Tax demand is liable to be upheld. Penalty u/s 78 - Held that:- appellant has suppressed the facts of rendering the service and collection of service tax in a few cases and even where they had collected the Service Tax, they did not remit the same to the exchequer. Therefore, there is suppression and willful mis-statement of facts on the part of the appellant with an intent to evade Service Tax. Hence, the mandatory penalty under Section 78 is justified - Decided against assessee.
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2013 (12) TMI 207
Demand of service tax - Receipt of GTA Service - Contract entered with TMV to move ready mix from assessee's premises to TMV's various customers - Held that:- Therefore, Prima facie, TMVs are on lease basis and they serve not merely the purpose of transporting the ready mix concrete but they are used for “mixing” and the amounts paid by them to the TMV owners cannot be treated as freight - appellant cannot be treated as recipient of GTA services and, therefore, there shall be waiver of pre-deposit of dues as per the impugned order and stay of recovery thereof till the disposal of the appeal - Stay granted.
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2013 (12) TMI 206
Penalty u/s 76 - Simultaneous penalty u/s 76 and 78 - Held that:- penalty under Section 76 is not imposable and Section 78 has been invoked - Therefore, Commissioner (Appeals) has rightly waived penalty imposed under Section 76 of the Finance Act, 1994 being guided by Section 80 of the Finance Act, 1994. His action does not call for impeachment without any legal infirmity patent from the first appellate order - Decided against Revenue.
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2013 (12) TMI 205
Waiver of pre deposit - Stay of recovery - Denial of Cenvat credit - Input service credit - Held that:- impugned demand is not supported by any legal provision. In each case, the amount of duty is found to have been estimated on the basis of a formula based on turnover of manufacturing activity and trading activity. It has been assumed that 40% of the Cenvat credit on common input services has been utilized for trading activity. The demand is based on this formula. The DR has not shown us any supporting legal provision. Hence, prima facie, there is substance in the submission of the learned counsel that the demand of duty is bad for want of machinery provision for recovery - Stay granted.
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2013 (12) TMI 204
Waiver of pre deposit of penalty - Credit of service tax - Man power recruitment agency services - Held that:- if the activity is provided under the statutory obligation, such activity would have nexus with manufacturing activity of the assessee has to be treated as input service - Following decision of CCE v. GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] - Stay granted.
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2013 (12) TMI 203
Stay application - Demand of service tax - Site Formation services - Mining services - Held that:- On perusal of the contract which has been treated as covering activities of mining services, we find that the same relate to activities of quarrying in rocks by drilling and blasting of rocks and recovery of stones and like materials for the purpose of laying roads and building port. This, in our view, may not fall under the category of mining services - However, the other activities prima facie fall under site formation services. The appellant is claiming that some of the main contractors have paid service tax on the whole value. However, ld. Chartered Accountant is not able to give exact details relating to payment of service tax by the main contractors. Therefore, we hold that the applicant has not made out a case for full waiver of the dues as per the impugned order in this regard - Conditional stay granted.
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Central Excise
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2013 (12) TMI 216
Cenvat Credit - profit of receipt of inputs / raw material - Requisite form i.e; ST XXVI-A form not supplied to department – Held that:- Denial of credit on the basis of ST XXVI-A form issued by Sales Tax Department cannot be on the sole ground of non-production of such forms – COMMISSIONER OF C. EX., CHANDIGARH Versus HITKARI INDUSTRIES LTD. [2008 (2) TMI 124 - CESTAT, NEW DELHI] - the appellant had taken a categorical stand that the payments for such receipt of raw materials were made by cheque/draft and the Revenue has not made any inquiry from the supplier of the raw materials - the appellants having taken a categorical stand of payments having been made by cheque/draft, it was for the Revenue to prove otherwise - They have not even bothered to approach the supplier of the raw materials so as to find out the correct position - Revenue’s sole reliance on the absence of ST XXVI-A forms, as retrieved from the sales tax department is not justified. There is no documentary evidence on record to reveal that what was received by the manufacturer is reprocessed granules and not the virgin granules as reflected in the records - order set aside – Decided in favour of Assessee.
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2013 (12) TMI 173
Maintainability of Reference made by CESTAT – Winding up proceedings - Held that:- The Reference, is not an appeal so as to fall within the exception contained u/s 446 (4) of the Companies Act - without obtaining leave of the Company Court, proceedings are not maintainable – Following Deutsche Bank Vs. S.P. Kala and another [1991 (1) TMI 364 - HIGH COURT OF BOMBAY] - If the suit that is already filed against the company along with other defendants, where particularly the company under liquidation is the principal defendant is under the control of the company court - it is difficult to see why such a suit where there are defendant other than the company under liquidation is not contemplated under sub-sections (2) and (3) of Section 446 of the Companies Act, particular when the company under liquidation is a principal defendant in such a suit and the plaintiff insist upon execution of its decree against the company under liquidation also - in appropriate cases, the company court can itself entertain and dispose of a suit in which there are defendants other than the company under liquidation.
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2013 (12) TMI 172
Opportunity of being heard – Personal hearing notice not received – Adjudication made before filing reply – Held that:- There seems to be a tearing hurry on the part of the adjudicating authority to decide the issue even without waiting for reply from the main appellant as well as from the other appellant - this is a gross violation of principles of natural justice – there was nothing on record that the adjudicating authority had directed the appellants to file reply after the date mentioned in the show cause notice for filing reply - Matter remitted back to the adjudicating authority for proper adjudication after proper hearing – Decided in favour of Assessee.
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2013 (12) TMI 171
Assessee manufacturer OR fabricator – Job Work - Held that:- From the work-orders, it is evident that the appellant has supplied all the raw materials and consumables for the fabrication of the racks and trolleys - They have also provided drawings and specifications and the work was carried out in appellant's own factory premises as per the instructions issued by the appellant - there was control over the activities of the fabricators by the appellant – Relying upon Maruti Udyog Ltd. vs. Collector of Central Excise, New Delhi [1998 (12) TMI 332 - CEGAT, NEW DELHI] - Thus, the appellant is the manufacturer and not the fabricators. Eligibility to the benefit of Notification No. 67/95 - The racks and trolleys manufactured by the appellant is held to be classifiable under Heading 9403 of the Central Excise Tariff which is one of the inputs specified in the said Notification - the appellants are manufacturing goods falling under Chapter 51, 55 and 58 of the Central Excise Tariff - In the Notification only Chapter 55 is excluded but goods falling under Chapters 51 and 58 are notified final products - if racks and trolleys were used in or in relation to the manufacture of goods falling under Chapter 51 and 58, the appellant would be eligible for the benefit of the aforesaid Notification – Thus, the assessee is eligible for the benefit of exemption under Notification 67/95 - Decided in favour of Assessee.
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2013 (12) TMI 170
Review/Rectification of order – Stay application – processing of waste oil consisting of various types of oil like base oil, transformer oil, etc. - Held that:- When amendment to the tariff entry under Chapter 27 was made for no consideration of statute law, renders the decision to be per incuriam - The Chapter Note using the word ‘treatment’ has widened the scope of that entry to cover within its fold all process adopted to render that process to be manufacture. Prima facie there is no balance of convenience in favour of appellant and the process of treatment adopted by appellant was manufacture - Following Apex Court decision in Oracle India Software Ltd. [2010 (1) TMI 9 - SUPREME COURT OF INDIA ] - the legislative entry and chapter note should be interpreted in a manner to achieve the object sought to be achieved by that note without defeating object - it is not possible to agree with the appellant that it requires dispensation of pre-deposit when interest of revenue cannot be sacrificed on the facts situation - The only benefit that can be extended to the appellant today is to allow some more weeks time to make deposit of 50% of the duty demand - Appellant is accordingly directed to make above deposit within another four weeks time from today to protect interest of Revenue - modification in stay order denied.
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2013 (12) TMI 169
Confiscation of goods under Rule 25 of CE Rules 2002 – Whether confiscation can be ordered when goods are already cleared and have to be treated as clandestinely removed only because of default and delay in payment of duty - Held that:- Confiscation of goods would mean that propriety of the goods shall rest with the Government and therefore if goods for confiscation are not available, redemption fine in lieu of confiscation cannot be imposed – Following Shiv Kripa Ispat Put. Lid V/s C.C.E., Nasik [2009 (1) TMI 124 - CESTAT MUMBAI] - fine was not imposable when goods were allowed to be cleared - there was not any merit in the appeal and accordingly reject the same - if the fine is paid, the goods have to be returned - it is nobody's case that if the respondent pays redemption fine the goods will be returned by the Revenue - if the goods have been seized and released provisionally after execution of bond confiscation order can be made and fine can be imposed but not otherwise –the order operating the confiscation and the redemption fine imposed in lieu of confiscation is unsustainable – Decided in favour of Assessee.
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2013 (12) TMI 168
Refund claim u/s 11B of the Central Excise Act – Claim time barred - Held that:- The refund claim filed by the respondent on 28/10/2010 is beyond one year from the date of pronouncement of the Final Order of the Tribunal - The statute does not provide for condonation of any delay, however marginal it may be - The law made by the Parliament is supreme and has to be given full effect to – Following Dena Snuff (P) Ltd. Vs. CCE, Chandigarh [2003 (9) TMI 84 - SUPREME COURT OF INDIA] - The protest is irrelevant inasmuch as the refund claim filed by the respondent is consequential to a Final Order passed by the Tribunal and there is a specific definition of ‘relevant date’ in factual situation wherein the period of limitation should run from the date of such Final Order - This mandate of law is irresistible and no amount of protest can help the claimant to get over it – Order set aside – Decided in favour of Revenue.
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2013 (12) TMI 167
Penalty u/s 11AC r.w. Rule 15 of the Cenvat Credit Rules, 2004 - transfer of capital goods to other unit without reversing cenvat credit – Held that:- The entire case can be decided on the question of revenue neutrality - it is not disputed that the capital goods on which credit was availed was transferred/cleared for the purpose of doing job work to the appellant’s own unit - there is no dispute as two of the units being the same i.e. M/s. Patel Alloys (Steel) (P) Ltd. - if the appellant’s other units have taken the credit of the capital goods and subsequently reversed the same and credit has been taken - this itself would prove that the appellant’s other units were registered with Central Excise Authority - the entire issue is revenue neutral - the ground of revenue neutral is a strong ground for setting aside any penalty imposed on the appellant as there cannot be any intention to evade duty - Penalty u/s 11AC read with provisions of Rule 15 of the Cenvat Credit Rules, 2004 directed to be waived – Decided in favour of Assessee.
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2013 (12) TMI 166
Activity amounting to manufacture or not - Manufacture of Aluminium door and window frames – Held that:- The appellants were undertaking the identical activities at Noida also and no demand stands raised by the excise authorities at Noida till date - This fact itself can be considered to be sufficient for the appellant to entertain a reasonable belief that the activity undertaken by them does not amount to manufacture so as to attract duty of excise - the appellant has no regular factory and the fabrication activities were being done at site of the customers – there was bonafide belief on the part of the assessee as regards non-excisability of the product - Revenue has not produced on record any positive evidence reflecting upon the malafide of the assessee – Thus, Demand beyond the period of limitation would not be sustainable. Benefit of Exempted Clearance for SSI Exemption – Held that:- The matter needs to go back for re-quantification of the demand - Such re-quantification would be done, after excluding the value of Aluminium curtain walls as also after considering the fact that the benefit of initial clearance of Rs.50 Lakhs having been not extended to the assessee in respect of their Delhi activities on account of non-manufacturing of curtain walls, the same has to be extended.
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2013 (12) TMI 165
Nexus between freight and Assessable value - whether the deduction of equalized freight is required to be restricted to the actual freight incurred and the excess amount so collected has to be added to the assessable value – Held that:- Following Baroda Electric Meters Limited Vs. CCE [1997 (7) TMI 126 - SUPREME COURT OF INDIA] - Excess recovery of freight than the actual expenses on account of freight cannot be said to have any nexus with the value of the excisable goods. Laffa Charges to be included in the value of Assessable value - Whether the Laffa charges collected from the customers which are for the purpose of avoiding of the glass shifted during transit by placing wooden baton in between the two sheets are required to be added in the assessable value or not, where the goods are delivered at the buyer’s premises – Held that:- The expenditure incurred on this account cannot form part of the value, as it is not a part of primary packing – Relying upon Window Glass Ltd. Vs. CCE [1988 (10) TMI 154 - CEGAT, NEW DELHI] - Deduction on account of Jam packing charges allowed - blocking of loose space between the two glass sheets is transportation essentiality and is more in the nature of the transportation charges - The same cannot be held to be a regular packing of the goods so as to add the value of the same in the assessable value – there was no infirmity in the order – Decided against Revenue.
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2013 (12) TMI 164
Refund claim rejected – Unjust enrichment - Reconditioning amounts to manufacture or not – Held that:- No cost of the reconditioned drums stands charged by the appellant from their customers at the time of clearance of the reconditioned drums - If that be so, it has to be hold that no duty stands charged by them from their customers - Even if the appellant would not have discharged duty liability on the said reconditioned drums, under protest, at the insistence of the Revenue, their agreement of Full Service Maintenance with their customers would have remained the same - the appellant’s have not recovered the amounts of duties from their customers so as to attract the unjust enrichment principles - Decided in favour of Assessee.
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CST, VAT & Sales Tax
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2013 (12) TMI 214
Penalty u/s 57 (15) Madhya Pradesh Value Added Tax Act, 2002 – goods detained being not supported by the documents - Held that:- After the order imposing the penalty against the petitioner was passed - The petitioner had opted to pay a lump sum amount as per Section 57 (17) of the Act and paid the penalty amount - once the petitioner had paid the penalty imposed upon it by the Check Post Officer, it was incumbent upon the Check Post Officer to have exercised its power under Section 57 (11) of the Act to release the goods seized by it in favour of the transporter. Dues of tax against the seller - Before expiry of period of Notice of Demand issued to seller, as required under Section 27 of the Act read with Rule 41 of the MP VAT Rules, 2006 the goods were already sold by M/s. Shri Hari Enterprises to M/s. Mahajan Traders and its ownership no more remained with M/s. Shri Hari Enterprises - the seller having already received the price of the goods and having handed over the goods to the petitioner / transporter for being delivered to the buyer, the goods could not have been detained by the Check Post Officer for realization of the tax assessed by it against the seller - The amount of tax against M/s. Shri Hari Enterprises was crystalized and became payable after the sale of the goods was already complete - The action of the revenue in not releasing the goods in favour of the petitioner / transporter is violative of Section 57 (11) of the Act – Revenue is directed to release the tankers with goods – Decided in favour of Petitioner.
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2013 (12) TMI 213
Interest u/s 24 (4) of the Tamil Nadu General Sales Tax Act - Rejection of issuance of refund vouchers – Held that:- The Certificate was issued with respect to the application made for settlement of interest - The refund was ordered on 03.10.2008 even before the Ordinance was published - The Certificate would cover only the claims relating to any amount quoted in order determining the amount to be paid under the Scheme - The bar emphasised under Sections 9 and 10 shall be applicable only if the dealer wants to claim refund of the amount paid under the Samadhan Scheme and not the refund which was ordered even before the application for Settlement - there was no request for interest earlier, the single Judge had rightly disallowed the claim of interest granting liberty to the respondent and directed the appellants to issue refund voucher - there is no infirmity in the order passed by the single Judge – decided against Petitioner.
