TMI Tax Updates - e-Newsletter
December 1, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Contribution made to staff benevolent fund - h such fund was not recognised nor approved in terms of Section 2(5) and (6) of the Income Tax Act - Section 40A(9) is not applicable - deduction allowed - HC
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Income Tax:
Computation of LTCG - capital asset acquired by the assessee through succession, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset - HC
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Income Tax:
Addition made only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (11) TMI 952
Grant of stay of demand Stay petition rejected Cardinal test for granting stay, prima facie case and balance of convenience - Whether the first respondent ignoring its earlier order in respect of the AYs 2009-10 to 2011-12 is required to pass an order on the Stay Petition to stay the demand - Held that:- A notice was issued to the assessee on 19.9.2014, calling upon the assessee to produce copies of Books of Accounts maintained by them, to verify the balances/fund available as on date - unless and until the assessee places materials before the first respondent, pleading financial incapacity or inability to pay the demand, pending decision of the Appeal, the authority who is consider the Stay Petition cannot be faulted for having taken a decision that the petitioner/applicant has not established a prima facie case - Section 220 of the act would treat an assessee to be an assessee in default when he does not meet the tax liability in respect of the demand raised by demand notice under section 156 of the Act - The discretion conferred on the AO u/s 220(6) is not an arbitrary power, but a power coupled with responsibility and the assessing officer concerned should take all the circumstances into account and all the considerations that could be urged by the assessee as to why he should not be treated as "not being in default" and then make an order as is provided to the facts of the case. Though the reasoning of the first respondent while rejecting the Stay Petition cannot be faulted in its entirety, but the fact that on the date when the order was passed, the CIT(A) ought to have noted that the appeal arising out of the assessment orders for the years 2007-08 and 2008-09, has been entertained and interim order has also been granted - If the legal issue is now pending before the Hon'ble Division Bench of the Court and order of interim stay has been granted, subject to certain conditions, that should have been considered by the first respondent while passing the impugned order dated 17.10.2014 certain questions of law admitted for consideration Assessee is directed to deposit 50% of the entire demand in respect of all the three AYs viz. 2012-13, 2013-14 and 2014-15 and the remaining amount demanded shall remain stayed till the disposal of the appeal partial stay granted.
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2014 (11) TMI 951
Scope and jurisdiction of CIT Exercise of power u/s 264 Held that:- In normal circumstances, the Commissioner, after condoning the delay in filing the revision petition, should take up the revision petition on merits and consider the claim of the assessee, in terms of Section 264 - the Commissioner did not examine, as to whether the claim of the petitioner that it has been taxed twice for the amount was bonafide, but the Commissioner proceeded with the aspect, as to whether the revised return for the AY 2002-03 filed by the petitioner on 24.3.2005 was valid - the Commissioner relied on Section 139(5) of the Act and observed that the revised return was filed beyond the time limit and the AO did not take any action on the revised return and the same was in confirmity with the law - the Commissioner should have gone into the factual aspect as to whether the assesssee was taxed twice for the amount - the Commissioner has wide power u/s 264 and in exercise of such power, the Commissioner ought to have considered the claim of the petitioner, as to whether it has been taxed twice for the amount of ₹ 11,41,607/- under the head installation charges relating to KG Hospital thus, the matter is remitted back to the CIT for fresh consideration in exercise of power u/s 264 Decided in favour of assessee.
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2014 (11) TMI 950
Validity of notice for reopening of assessment u/s 148 - Failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment or not Held that:- The essential ingredient of there being a failure to disclose fully and truly all material facts necessary for assessment is conspicuous by its absence - there is not even an allegation or a whisper or suggestion with regard to this in the reasons recorded in Haryana Acrylic Manufacturing Company v. CIT [2008 (11) TMI 2 - DELHI HIGH COURT] it has been held that the reasons must record that there was such a failure on the part of the assessee or, in the least, the reasons must lead to the clear and direct inference that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment - the reasons must indicate which material fact was not fully and truly disclosed in the reasons recorded, there is neither any allegation that the assessee had failed to truly and fully disclose material facts at the time of the assessment - one of the essential ingredients for re-opening an assessment beyond the period of four years has not been satisfied - The re-assessment proceedings are bad in law the notice u/s 148 and the re-assessment order is set aside Decided in favour of assessee.
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2014 (11) TMI 949
Addition made is deleted by Tribunal Rejection of books of accounts by AO Reference made to DVO for valuation - Held that:- The Tribunal rightly relied upon Sargam Cinema Versus. Commissioner of Income-tax [2009 (10) TMI 569 - Supreme Court of India] - AO could not have referred the matter to the DVO without rejecting the books of account in Dr. Raghuvendra Singh Versus Commissioner of Income Tax, Central Circle, Ludhiana [2014 (1) TMI 491 - PUNJAB AND HARYANA HIGH COURT] - the AO has not applied his mind as to the correctness or completeness of the accounts of the assessee and no dissatisfaction has been recorded by the AO - Nothing has been brought on record as regards to the conditions laid down in section 145(3) of the Act - no reference could have been made by the AO and reference made by the AO is not legal and assessment so framed on valuation report is bad in law - the difference in cost of construction declared by the assessee or as valued by the Valuation officer will be correct amount of investments made by the assessee - no defect has been pointed out by any of the authorities below with regard to the investments made by the assessee and therefore, no addition is required to be made u/s 69 - the benefit of valuation of raw structure existing at the site had not been allowed by the DVO as such no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 948
Addition u/s 40(a)(ia) deleted Applicability of section 194C TDS not deducted on payment to sub-contract business of hiring, plying goods carrier - Held that:- The Tribunal rightly relied upon Commissioner of Income Tax v. Poompuhar Shipping Corporation Ltd. [2006 (1) TMI 60 - MADRAS High Court] wherein it has been held that hiring of ships for the purpose of using the same by Company would not amount to a contract for carrying out any work and payment of hire charges for taking temporary possession of the ships by the assessee would not fall within the provision of Section 194C of the Act - the assessee has hired trucks on payment of hire charges for utilizing the same in its business, such payment of hire charges would not fall within the provisions of Section 194C of the Act thus, no substantial question of law arises for consideration Decided against revenue.
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2014 (11) TMI 947
Contribution made to staff benevolent fund - Whether the Tribunal is right in deleting the disallowance made u/s 40A(9) being contribution to the staff benevolent fund even though such fund was not recognised nor approved in terms of Section 2(5) and (6) of the Income Tax Act Held that:- A payment of ₹ 14 lakhs was made to the Staff Benevolent Fund - The assessee in order to meet with the requirements of the employees formed a fund for the benefit of the staff - the assessee maintained complete accounts of the fund and also got it audited regularly the Tribunal was rightly of the view that the object of the statute vide the circular was to discourage creation of bogus trust for the purpose of availing deduction only - the assessee contributed the amount to the staff benevolent fund which was created for the benefit of the staff and family members relying upon the Circular No. 307 issued by CBDT on 06.07.1904 and Cheran Engineering Corporation Ltd. vs. Commissioner of Income tax [1998 (2) TMI 74 - MADRAS High Court] Section 40A(9) is not applicable thus, the order of the Tribunal is upheld Decided against revenue
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2014 (11) TMI 946
Condonation of delay Delay of 276 days Repeated delays by Revenue - Revenue places a Notice of Motion for seeking the condonation of delay of 276 days in seeking restoration of the Review Petition and thereafter seeks to quash and set aside the conditional order - Held that:- The Revenue did not do anything after the order dated 23rd July, 2009 and after a lapse of more than two years, found that this is a fit case to seek review of the order passed by this Court dismissing the Appeal, as barred by limitation - there is substance in the grievance of the Assessee that the Notice of Motion should be dismissed - The Assessee has rightly complained that the Revenue has never adhered to the time limit or prescription in Law of Limitation - It defaulted repeatedly. Whether the proceedings have been filed in time, whether they are in order and whether the requisite steps have been taken by all concerned including the Advocates is a matter which must be equally looked into and attended the contention cannot be accepted that the negligence and lapse of the Advocate should not visit the Revenue with drastic consequences - Government or Revenue is not a special litigant - It cannot seek condonation of delay on any excuse or cause and as of right or as a matter of course - That there is indifference, lack of interest or some deliberate intentional act of its officers by itself and without anything more is therefore no ground to condone the delay - There is no magic formula and which can be applied to every case filed by the Government Decided against revenue.
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2014 (11) TMI 945
Revision u/s 264 - Application for revision was rejected on the ground of delay by the CIT - Earlier the application of rectification rejected by AO Held that:- The order dated 13 December 2011 of the AO rejecting the rectification application is bereft of any reasons - The AO is obliged to deal with the submissions of the assessee in its rectification application before rejecting the application for rectification - the manner the assessee has been dealt with by the Respondent Revenue is to say the least most unfair - the Authorities under the Act being creatures of Statutes are obliged to follow the statutory periods provided under the Act and cannot set up periods of limitation different from that provided under the Act - the AO while passing the order dated 13 December 2011 on the rectification application has given no reasons whatsoever in support of its conclusion that the intimation dated 21 November 2008 under Section 143(1) of the Act calls for no rectification - It is only when the AO gives reasons in support of his order in the context of the application before him, could the same be tested by higher forums such as the CIT while dealing with an application for revision u/s 264 - the orders of the CIT dated 27 March 2014 and 17 July 2014 passed u/s 264 of the Act is set aside and on a rectification application made - the order dated 13 December 2011 of the AO rejecting the rectification application to Intimation u/s 143(1) is also set aside thus, the matter is remitted back to the AO Decided in favour of assessee.
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2014 (11) TMI 944
Computation of indexed cost of acquisition on transfer of capital asset - Whether the tribunal is right in concluding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee through succession, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee actually became the owner of the asset through succession Held that:- The Tribunal was rightly of the view that the decision in CIT v. Manjula J. Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] relied upon wherein it has been held that the Commissioner was not justified in not following the decision of the Hon'ble Bombay High Court, as the ratio of the decision of the Bombay High Court rendered in the context of acquisition of property by way of gift will apply with greater force when property devolves by succession - though in the definition of 'indexed cost of acquisition', the word used are, "in which the asset was held by the assessee" a harmonious reading of Sections 48 and 49 makes it clear that, for the purpose of 'Indexed Cost of Acquisition', it has to be understood as the first year in which the previous owner held the said property - Otherwise, if the date of inheritance is taken into consideration, then the cost of acquisition of the asset on that date corresponding to the market value is to be taken into consideration - Otherwise, take the cost of acquisition on the day the previous owner acquired it and apply the "Indexed Cost of Acquisition" and then calculate the capital gains and the tax payable - the CIT was not justified in exercising his jurisdiction u/s 263 Decided against revenue.
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2014 (11) TMI 943
Application of section 254(2) Income remains undisclosed or not - Bar of limitation u/s 158BD - Whether the Tribunal is right in entertaining and allowing the application filed by the assessee u/s 254(2) and holding that amount of ₹ 13,62,865/- was not undisclosed income and further directing the AO to assess the amount while framing regular assessment for the AY 1995-96 and whether inclusion of proposed amount as undisclosed income for the block period is barred by Explanation (b) below sub-section (2) of Section 158BA read with section 139 (5) Held that:- The assessee had filed return of income for AY 1995-96 showing total income at ₹ 101792 - Later on the assessee filed a revised return showing income of ₹ 14,64,657/- on 16.01.1996 including capital gain taking the sale price of land at ₹ 1821101 The Tribunal was rightly of the view that the Block period for the purpose of assessment has been taken as the period ending 5-1-1996 which is the date of search in the case of Shri B.B. Solanki (father of the assessee) and the assessee. The seized paper did contain reference to plots of land belonging to the assessee in relation to which cheque payments were received by the assessee and accounted for in his return filed in the normal course of business, but there were also other notations on the seized paper which points to the transfer/payment of ₹ 45 lacs cash, may be form the purchasers to Shri. Vijay C. Shah or to the assessee and as such the AO was justified in issuing notice u/s 158BD to the assesee on the basis of information which came into his possession consequent to the search and seizure operation in the case of Shri Vijay C. shah whose premises were searched on 22-10-1995 - the order u/s 158BD has also passed on 29- 1-1998 i.e. within one year from the date service of the notice u/s. 158, it is within the limitation provided in the Act and as such cannot be held to be time barred the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 942
Order u/s 119(2)(a) r.w section 234B and 234C Prayer to waive interest charged on assessee Held that:- Prior to commencement of the business activities, the assesses had received interest income from their investment in share capital in temporary loan and advances, which have been shown as capital receipt in the return - the assesses filed revised return in view of the decision in Tuticorin Alkali Chemicals & Fertilizers Ltd Versus Commissioner of Income-Tax [1997 (7) TMI 4 - SUPREME Court] - the revised returns filed by the assesses were, though, accepted by the AO, while doing so he levied penalty on the assesses by invoking provisions of Sections 234B and 234C - the Chief Commissioner committed no error, much less any jurisdictional error in passing the orders Decided against assessee.
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2014 (11) TMI 941
Entitlement for depreciation - determination of date of purchase - date of delivery taken for the assets or date of payment made for the transactioin Whether the Tribunal was right in holding that when the sale consideration is paid subsequently, the entire sale transaction becomes conditional and the date of such would be the date on which the payment is made Held that:- The assessee has taken delivery of the machine on 28.8.1993 and the payment was made on 22.2.1994 and the insurance policy which was taken in October was amended with effect from 1.11.1993 - there is nothing on record to show that there was any contract between the appellant and the seller, so that the same can be said to be contingent contract - No condition is produced on record whether it was a conditional sale or not - The letter written by the assessee to the AO is on record - the contention of Mr. Mehta that it was a conditional sale is misconceived - The finding of Tribunal is not borne out from the facts and is contrary to the law of Contract and the Income-Tax Act relating to depreciation - the delivery is taken prior to 31.10.1994, the appellant-assessee is entitled for 100% depreciation for the relevant year Decided in favour of assessee.
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2014 (11) TMI 940
Allowability of deduction u/s 36(1)(iii) - Interest paid on borrowings of capital assets not put to use - Held that:- Following the decision in DEPUTY COMMISSIONER OF INCOME-TAX Versus CORE HEALTH CARE LTD. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] - interest on borrowings utilized for purchase of machines are allowed to be deducted because these machines have been used in business. Option to claim partial depreciation or not - Whether assessee had an option in law to claim partial depreciation in respect of any block of assets Held that:- The Tribunal was rightly of the view the that in Surat Textile Mills Ltd. v. Income tax Officer [2014 (5) TMI 481 - GUJARAT HIGH COURT] it has been held that what the assessee had done was well within thin the legal framework - It was open for the assessee not to claim depreciation till the amendment was made by explanation 5 in section 32(1) of the Act which had the effect only from 1.4.2002 thus, the order of the Tribunal is upheld Decided against revenue.
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2014 (11) TMI 939
Unaccounted business income and unexplained investment - Sales of silver ornaments not reflected in the books of account - Held that:- Assessment made is just and proper - The statements made in the affidavits are not based on any record or corroborated with cogent evidence - The presumption raised by the papers which were seized from the custody of the assessee had not been rebutted Decided against assessee. Penalty u/s 271(1)(c) Held that:- The penalty has been wrongly imposed u/s 271(1)(c) in Commissioner of Income-tax Versus Krishi Tyre Retreading and Rubber Industries [2014 (2) TMI 21 - RAJASTHAN HIGH COURT] it has been held that as the addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty u/s 271(1)(c) of the Act could be said to be leviable on such guess work or estimation Decided in favour of assessee.
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2014 (11) TMI 938
Direction to give credit of amount w.e.f 28.02.2009 Calculation of amount of interest u/s 234A, 234B, 234C Held that:- Revenue contended that explanation 2 to Section 132B(4)(a) of the Act clearly states that for the removal of doubts and that existing liability does not include advance tax payable in accordance with the provisions of Part-C of Chapter-XVII and therefore the amount of ₹ 27,00,000/- seized, has to be calculated as per Section 132B(4)(a) of the Act and the same cannot be taken as advance tax from the date of seizure of the amount revenue is directed to consider the application of assessee in accordance with the provisions of the Income Tax Act and in the decision of Shri Mahesh Choudhary Versus Commissioner of Income Tax, Bihar II, Ranchi [2014 (11) TMI 906 - JHARKHAND HIGH COURT] - the assessee is directed to appear before the 3rd respondent - Decided in favour of assessee.
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2014 (11) TMI 937
Land of assessee acquired under Land Acquisition Act Fixation of market value by the Land Acquisition Officer Claim of benefit u/s 54H - [Extension of time for acquiring new asset - Whether the word compensation as referred to in Section 45(5)/54H includes the additional compensation or not - Held that:- The compensation received by the owner of the property whenever it is acquired under the Act is treated as capital gains and it is made subject to levy of capital gains tax - the determination of the compensation for the land acquired from the assessee occurred at three stages viz., Land Acquisition Officer, Civil Court and the High Court - Naturally the payment of compensation was also made in a staggered manner depending on the nature of adjudication - the assessing authority took the view that it is only amount which is determined by the Land Acquisition Officer, that can be the subject matter of the exemption u/s 54 - it is a misnomer to call the enhanced amount as additional compensation thus, the order of the Tribunal is set aside and the benefit u/s 54-H of the I.T. Act shall be extended to the entire amount of compensation Decided in favour of assessee.
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2014 (11) TMI 936
Recovery of arrear of tax from third party - garnishee order - The contention of the petitioner is that the amount payable under the EMIs cannot be said to be the independent income of the 3rd respondent (assessee) - Held that:- The 3rd respondent, which was under obligation to pay the instalments of loan to the petitioner, has chosen to channelize that liability directly from the 2nd respondent. No exception can be taken to such an arrangement. The second important factor is that the 3rd respondent is under liquidation. The companies Act stipulates the priorities of the secured and unsecured creditors vis-a-vis the assets of a company, under liquidation. Whatever may have been the permissibility and legality of the arrangement between the petitioner and respondents 2 and 3, for direct payment of EMIs to the petitioner, the same cannot be continued once the liquidation proceedings are in progress. The petitioner on the one hand and the 1st respondent on the other hand shall be entitled to submit their claims before the official liquidator and he in turn shall make the payments out of the available sources to the petitioner and the 1st respondent in accordance with the priorities that are provided for under the Companies Act. This exercise shall be completed within a period of three months.
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2014 (11) TMI 935
Addition made Difference in the amount declared in books of accounts and statement furnished to Bank - Whether the Tribunal has substantially erred in law in restoring the addition by way of difference between the stock as on March 31, 1990 shown in the regular books of accounts of the appellant and that declared in the statement furnished to the Bank in respect of hypothecation facility availed of by it Held that:- Assessee rightly contended that in Commissioner of Income Tax - III Versus Riddhi Steel And Tubes Pvt. Ltd. [2013 (10) TMI 291 - GUJARAT HIGH COURT] the same matter has been decided - No errors were found at any stage in the report submitted by these auditors and for the past eight years, the assessee had been following continuously/ consistently the method of accounting, as provided u/s 145 of the Act, valuing the closing stock and inventory, as provided u/s 145 A of the Act - only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities the order of the Tribunal is set aside Decided against revenue.
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2014 (11) TMI 934
Requirement to issue notice u/s 143(3) - Whether the proceedings of the department for the purpose of assessment u/s 143(3) would be justified without the issuance of the mandatory notice u/s 143(2) of the Income Tax Act Held that:- Following the decision in Commissioner of Income Tax, Trichy v. M/s Fathima Thanga Maaligai, Karaikal [2014 (11) TMI 905 - MADRAS HIGH COURT] wherein reliance upon Commissioner of Income Tax v. Hotel Bluemoon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] - the issuance of notice u/s 143(2) is mandatory thus, the order of the Tribunal is set aside Decided in favour of assessee.
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2014 (11) TMI 933
Rate of depreciation on computer peripherals - Whether the printing machinery, namely printer and scanner, should be treated as an integral part of computer and eligible for 60% depreciation as against 25% - Held that:- The printer and scanner is used as an office equipment in business and that is part and parcel of the computer system as decided by the Tribunal in all the subsequent AYs viz., 2003-04, 2004-05 and 2005-06 - the printer and scanner should be treated as an integral part of the system and cannot be used without a computer and depreciation at 60% should be allowed as such no substantial question of law arises for consideration Decided against revenue.
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Customs
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2014 (11) TMI 956
Valuation of goods - - Enhancement in value of goods - Held that:- Commissioner (Appeals) earlier remanded the matter to the adjudicating authority. It is seen that the adjudicating authority again accepted the value declared by the respondent - Decided against Revenue.
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2014 (11) TMI 955
Determination of assessable value of export goods - Held that:- Regarding determination of the assessable value of the export goods on the basis of bench mark price of CCCMMC without supplying the said evidence/ data to the Respondent, we had remanded the matter to the ld. Adjudicating Authority for re-determination of the assessable value, after supplying the necessary date to the Respondent, in the appellants own case [2014 (8) TMI 213 - CESTAT KOLKATA]. Accordingly, following the said precedent, for determination of the value, we remand the case to the ld. Adjudicating Authority for deciding the issue afresh after supplying the relevant data to the Respondent. Needless to mention a reasonable opportunity be allowed to the Appellant. This issue may be decided, preferably within three months from the date of communication of this Order - Decided in favour of Revenue.
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2014 (11) TMI 954
Denial of refund claim - CENVAT Credit - Held that:- Without a building, no manufacture can take place and therefore the service relating to building lease rent can be definitely said to be in or in relation to the manufacture. Similarly other services also are eligible. The observation of the original authority that fumigation charges has to be held as post-manufacturing expenses is not correct since without fumigation, the goods cannot be cleared and exported. In this case since the goods are exported, place of removal would be port and therefore the services upto the place of the removal would be covered. Overall, I find that all the services can be said to be in or in relation to the manufacture or are covered by the definition of input service - Decided against Revenue.
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2014 (11) TMI 953
Waiver of pre deposit - benefit of Notification No. 94/96-Cus - Held that:- If the assessee had paid Central Excise duty instead of fulfilling the obligation under Notification No. 158/95-Cus dated 12.11.1995, no further action is needed since the appellant can claim the benefit of Notification No. 94/96 as an alternative to Notification No. 158/95-Cus. The case before us is somewhat similar except for the fact that the appellant has not paid Central Excise duty but is seeking approval to do so. At this stage, since the issue is covered by precedent Tribunals decision [2007 (2) TMI 451 - CESTAT, BANGALORE], we consider that if the appellant deposits the amount of Central Excise duty payable by them in accordance with Notification No. 94/96-Cus with interest, that would be sufficient for the purpose of hearing the appeal. Accordingly, the appellant is directed to deposit the entire duty plus interest payable by them. - Partial stay granted.
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Service Tax
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2014 (11) TMI 973
Validity of tribunal's order - Decision given on the basis of precedent decision - Port services - Classification of service - Held that:- Tribunal has committed no error. Firstly the decision of Ramdev Food Products Pvt. Ltd. (2010 (6) TMI 178 - CESTAT, AHMEDABAD) on which Tribunal has placed reliance has been upheld by this Court vide decision dated 6-12-2012. Secondly as finding of fact Commissioner has held that services were provided by port itself. That being the position and in view of the fact that Tribunal had upheld this finding, entire controversy is substantially narrowed down. Further we notice that definition of taxable service contained in Section 65(105)(zn) came to be amended with effect from 1-7-2010 - in the clarification issued by the Board in its circular dated 12-3-2009 to a query the services provider providing services to the exporter provides various services. But he has registration of only one service. The refund is being denied on the grounds that the taxable services that are not covered under the registration are not eligible for such refunds. - No question of law arises - Decided against Revenue.
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2014 (11) TMI 972
Waiver of pre-deposit of service tax - Discrepancies in the ST-3 returns and the balance sheet submitted by the petitioner - Security agency and manpower supply services - Held that:- Adjudicating authority contemplates that service tax under the services of Security Agency and Manpower Supply Services have not been paid as shown in the balance sheet which attracts violation of the provisions of Sections 67, 68, 69 and 73 of the Finance Act, 1994. The adjudicating authority cannot travel beyond the show cause notice and should have confined its consideration within the compass thereof. The Tribunal ought to have taken into account the above aspect and should not have shirked its responsibility by mere saying that the aforesaid services were culled out from the balance sheets submitted by the petitioner before the adjudicating authority. - Tribunal ought to have given a total waiver of pre-deposit of the service tax relating to the Cleaning Services, Supply of Tangible Goods Services, Business Auxiliary Services and Consulting Engineers Services amounting to ₹ 29.44 lakhs. The adjudicating authority has given the dictionary meaning of the word Watch and Ward; and the meaning attribute to the security services and has held that those cannot stand on a separate pedestal. The finding does not appear, prima facie, to be perverse and without any basis. Once the Tribunal found that the petitioner should be directed to deposit 25% of the service tax, the petitioner shall deposit the same on the Security Service component, excluding the said sum of ₹ 29.44 lakhs. - stay order modified.
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2014 (11) TMI 971
Service Tax Voluntary Compliance Encouragement Scheme, 2013 - Declaration of tax - Held that:- The scheme makes no difference between tax dues which are short-paid due to bona fide error and one which flows from deliberate inaction. There is no power for waiving or relaxing the condition of depositing 50% tax dues flowing from Section 107. It would not be possible for this Court to exercise writ jurisdiction to direct the authority, in plain terms, which the statutory provision does not permit. Only after the taxes are fully deposited stage-wise that the declaration under Section 107 would be accepted. Section 110 only pertains to recovery of the taxes declared, but not paid. This provision has no bearing on the invalidity of declaration when the declarant fails to deposit the taxes as provided in sub-sections (3) and (4) of Section 107. If we interpret Section 110, as urged by the learned counsel for the petitioner, that it encompasses both the cases of delay in depositing the taxes at the first stage of sub-section (3) of Section 107 and second stage of sub-section (4) of section 107, the proviso to sub-section (4) would be rendered wholly redundant. If as suggested, shortfall in the taxes could be accepted after charging interest under Section 110, there was no need to make special proviso for extending time for depositing the remaining of the taxes under sub-section (4) of Section 107. Further, Section 110 pertains to compulsory recovery of taxes with interest. Sub-sections (3) and (4) of Section 107 refer to voluntary tax deposit by a declarant in terms of the scheme. Both these operate in separate fields. - Decided against assessee.
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2014 (11) TMI 970
Maintainability of appeal - refund claim or levy of service tax - Export of services - marketing of foreign Principals products in India - Rule 3(1)(iii) of the Export of Service Rules, 2005 - Held that:- The precise issue, which had arisen was whether the assessee was engaged in export of services and, therefore, whether service tax was payable. Reliance was placed by the respondent-assessee on the Rules to make the claim for refund. Prayer for consequential refund could only be granted in case the service rendered was an export and, therefore, no service tax was payable and leviable on the said service in terms of the Rules and the circulars/notifications. In these circumstances, we do not think that the appeal is maintainable before the High Court and the same is accordingly directed to be returned. The appellant, if aggrieved and wants, can take appropriate steps as per law. - Decided against Revenue.
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2014 (11) TMI 969
Intellectual Property Services - Trade marks and brand name - Supreme Court admitted the appeal of the assessee against the decision of Tribunal in [2012 (4) TMI 198 - CESTAT, NEW DELHI], wherein Tribunal held that permission to use the said trade mark to the oil companies is covered by the definition of Intellectual Property right and intellectual property services as appearing in the Finance Act.
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2014 (11) TMI 968
Cenvat Credit - Input Services - 2(l) of CCR - catering services - Supreme Court after condoning the delay granted leave to the Revenue in the appeal filed against the order of High Court [2010 (10) TMI 13 - BOMBAY HIGH COURT] wherein the High Court held that once the service tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. - Proportionate credit to the extent embedded in the cost of food recovered from the employee/worker not allowed.
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Central Excise
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2014 (11) TMI 964
Waiver of pre deposit - manufacture of motor vehicles - body building activity on the duty paid chassis falling under CH 8706 - Exemption under benefit of Sl No. 39 of Notification No. 6/2006-CE dated 01.03.2006 and Sl. No. 276/2012 CE dated 01.03.2012 - Suppression of facts - Held that:- AB Volvo owns the technology relating to manufacture of Volvo Buses and the fact that both the parties supplying chassis and building chassis are subsidiaries of AB Volvo would result in a situation that there cannot be any sales transactions between two subsidiaries. No judicial decisions or provisions of Statute have been cited to come to the conclusion that two subsidiaries of one company are to be considered as one and there cannot be sale and purchase between the two. We are also unable to understand how the transactions between the two companies result in a situation that ownership of the chassis does not change hands. Even if it remains within the group, it does not mean that the supplier of chassis did not sell the busses to the appellants who built the chassis on the same. The Notification clearly provided exemption when the chassis is sold and body is built on it and no CENVAT credit is taken. The whole case is built on the premise that there cannot be a sale and purchase between two subsidiaries and transfer of ownership does not take place. It is not supported by any statutory provision. even if VBT and VIPL are related persons, that will be applicable only for valuation of the goods and the very fact that provisions of Section 4 recognizes sales to related persons and provided that value in such cases has to be arrived at on the basis of the price at which goods are sold by related persons itself would show that there can be transfer of ownership, transfer of possession and sale and purchase between two related persons. appellant has been able to make out a case on merits for complete waiver - Stay granted.
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2014 (11) TMI 963
Cenvat Credit of Service Tax - Availment of credit in respect of various services - Penalty under Rule 15 - Held that:- Insisting on quality control methods, is normal business practice in many products, but that does not mean that in all such cases the activity of business performed and used in the manufacture of products of the customers can be so interpreted to allow Cenvat Credit to appellant. - Similarly in the case of mango pulp testing service there is hardly any integral connection between manufacture of Concentrate and the testing of mango pulp supplied by a third party directly to the bottling plant. - Prima facie credit of service tax does not appear to be admissible in case of QMS Audit, inventory audit at bottlers' end, mango pulp testing at suppliers' end and verification of assets at retailers. Credit of service tax towards maintenance, charges for coffee vending machines would be admissible because the machines are owned by the appellants and used for dispensing the tea/coffee for retailers. As it has nexus to their business activity. The credit of service tax paid by an event management company for organizing events such as functions to honour employees at Bombay whereas the manufacturing activity is at Pune cannot be seen to any nexus connected with the business of the appellant. Reliance is placed of the judgment in the case of Manikgarh Cement (2010 (10) TMI 10 - BOMBAY HIGH COURT) wherein Hon'ble High Court held that rendering taxable services at the residential colony for the benefit of employees is not integrally linked to the business of the assessee. The next service on which credit was denied is the security service at the Kondhwa godown. We note that the godown is outside the factory and no evidence was shown to prove that the godown was the place of removal. Input service under Rule 2(l) include service used in storage up to the place of removal. No evidence was produced as to show what was stored in the godown and whether it had any relation to the manufacturing activity of the appellant. The Cenvat credit is inadmissible. Cenvat credit is admissible for services used in the premises or precincts thereof for landscaping - Prima facie credit of service tax does not appear to be admissible in case of QMS Audit, inventory audit at bottlers' end, mango pulp testing at suppliers' end and verification of assets at retailers - Partial stay granted.
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2014 (11) TMI 962
Denial of rebate claim - Revenue contends that no duty was paid at the time of export as is clear from the ARE-1s. Further the duty shown to be payable in the ARE-1s is @ 16% and not at the rate of duties of customs at which the assessee had paid the duty at the time of debonding vide challans - Held that:- applicant, a 100% EOU, has exported the goods under bond without payment of duty in terms of Rule 19 of Central Excise Rules, 2002. Applicant has himself admitted that being 100% EOU they were not entitled to rebate claim under Rule 18 of Central Excise Rules, 2002. applicant has exported goods under bond without payment of duty. The duty paid during debonding of goods was for DTA clearance of goods and not for export of goods. Since goods were exported under bond under Rule 19, the applicant has become disentitled for the benefit under Rule 18 as no duty was paid on clearance of goods for export. The refund of custom duties paid at the time of de-bonding the goods by 100% EOU is not covered under the provisions of Rule 18 of Central Excise Rules, 2002. As such the contention of applicant for grant of rebate claim of such duty is not acceptable. Government finds support from the observations of Honble Supreme Court in the case of M/s. ITC Ltd. v. CCE reported as [2004 (9) TMI 103 - SUPREME COURT OF INDIA], and M/s. Paper Products v. CCE reported as [1999 (8) TMI 70 - SUPREME COURT OF INDIA] that the simple and plain meaning of the wordings of statute are to be strictly adhered to - rebate claims have been rightly held inadmissible to the applicant by the Commissioner (Appeals). Government do not find any infirmity in the impugned orders-in-appeal and therefore upholds the same - Decided against assessee.
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2014 (11) TMI 961
Denial of rebate claim - Non following of the procedure for self removal and the conditions of Notification No. 19/2004-C.E., (N.T.), dated 6-9-2004 - goods are not directly exported from the factory of manufacturer - Date of approval of interest - Held that:- Regarding sanction of rebate clams applicant department has raised the same objection which were decided in the Revision Order No. 198/2011-CX, dated 24-2-2011. Department has challenged the said order dated 24-2-2011 before High Court. As per available record said order is neither stayed or set aside by Honble High Court. In such a situation there is no infirmity in the sanction of rebate claims as upheld by Commissioner (Appeals). The revision application filed in second round is thus not maintainable in the eyes of law. Moreover this authority has become functus officio after passing the order and no pleadings against said order can be entertained. As such Commissioner (Appeals) has rightly rejected the appeal of department. Government do not find any infirmity in the said Order-in-Appeal No. 142/2011, dated 4-8-2011 and therefore upholds the same. Whether interest liability under Section 11BB of Central Excise Act arise after three months of the order passed by Commissioner of Central Excise or after 3 months of the date of filing refund application - Held that:- once the rebate claim is held admissible under Section 11B of the Central Excise Act, 1944, interest liability starts after the expiry of three months of the date of receipt of application for rebate in the Divisional Office in terms of Section 11BB - as per Explanation to Section 11BB, where the refund/rebate claim is allowed consequent to the order of appellate authority or any Court against the order of the Asstt./Dy. Commissioner, Central Excise, the order of the appellate authority/Court shall be deemed as an order passed under sub-section (2) for the purposes of this Section - Following decision of of M/s. Ranbaxy Laboratories Ltd. v. UOI reported on [2011 (10) TMI 16 - Supreme Court of India] - Decided against Revenue.
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2014 (11) TMI 960
Validity of Tribunal's order - Whether in the facts and circumstances of the case, the Tribunal has committed substantial error of law by ignoring the High Courts decision in case of Elson Packaging Industries Pvt. Ltd. [2004 (4) TMI 137 - CESTAT, MUMBAI] - Held that:- once High Court has directed the Tribunal to consider the decision in the case of M/s. Elson Packaging Industries Pvt. Ltd. and the Tribunal records this fact in Paragraph 1 of its judgment, but again fails to consider the said judgment, therefore, the impugned order of the Tribunal cannot be maintained. Under the circumstances, the impugned order of the Tribunal is set aside - Matter remanded back - Decided in favour of Revenue.
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2014 (11) TMI 959
Benefit of circular No. 306/22/97-CX, dated 20-3-2007 - Notification No. 214/86-C.E., dated 25-3-1986 - Held that:- There are findings of fact recorded by the authorities that there was no evidence to show that the job worked goods were used in manufactured duty paid goods. In the absence of any such evidence there was no possibility of extending the benefit of circular dated 25-3-1986 to the appellant. No substantive question of law warranting admission of the appeal would arise. - Decided against assessee.
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2014 (11) TMI 958
Manufacturer of spring and exporting the same against letter of undertaking - Non- submission of statement in Annexure 19 along with relevant documents in terms of para 13.2 of Chapter VII (Export without payment of duty) of the Supplementary Instructions, 2005 read with Rule 19 of Central Excise Rules 2002 and notification No. 42/2001 CE(NT) dated 26.6.01. - penalty imposed under Rule 27 Delhi High Court after condoning the delay dismissed the appeal on account of low tax effect filed by the Revenue against the order of CESTAT New Delhi [2011 (11) TMI 336 - CESTAT, NEW DELHI].
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2014 (11) TMI 957
Constructions services provided by the appellant to the SEZ units - CENVAT Credit - Held that:- though these appeals have been listed for admission along with office objections, these appeals may be dismissed as not pressed in view of the subsequent development, particularly, in the light of the amendment of Rule 6 of CENVAT Credit Rules, 2004 and Validation Provisions in terms of the Finance Act, 2012 having put an end to the controversy, which had arisen between the revenue and the assessee in the context of Rule 6 of CENVAT Credit Rules, 2004 - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (11) TMI 967
Exemption in respect of receipts from labour contract - revenue denied the benefit of exemption to the person opting for compounded rate as per section 8(a)(i) of Kerala Value Added Tax - charging section 6 and concessional rate of tax payable under section 8(a)(i) - Held that:- one has to carefully analyse and understand the words used at section 6 and also at section 8(a) (i) of the Act. Section 8(a) (i) only refers to tax payable on the whole contract amount without referring to turnover. Once he chooses to seek benefit under section 8 to pay concessional rate of tax, it has to be on the whole contract amount which would mean value of entire contract done by him in respect of a particular contract or with respect to the work done in a year, without any bifurcation claiming exemption. But, in an instance where during an assessment year the assessee does only labour contract for one person and composite work for another person, there is no obligation to pay compounded tax for the said labour work, but in respect of the composite work, the compounded tax has to be paid. The liability to pay compounded tax arises only if there is a liability to pay tax. If it is a composite contract involving a labour contract and supply of materials, the assessee will become liable to pay tax. If the labour contract is pure and simple there is no liability to pay tax and consequently there is no liability to pay compounded tax as well. Under these circumstances, we are of the view that the assessing officer has to verify the contract in question especially the contract with Indian Oil Corporation and verify whether it amounts to works contract or a pure and simple labour contract. - Decided partly in favor of assessee.
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2014 (11) TMI 966
Valuation - sale price in relation to sale of petrol and diesel by a retail outlet - Haryana Value Added Tax Act, 2003 - The petitioner-association has raised a plea that motor- spirit and high-speed diesel sold by the companies to them gets evaporated during storage, transit and sale of such products and thus these products to such an extent are not subjected to sale and sequelly the retail outlets are not able to get credit of input tax for loss in quantity of petrol/diesel because of evaporation, resulting in ever increasing gap between the input tax paid and credit taken thereof. Held that:- The argument has no merit. It is a conceded fact that Ministry of Petroleum had allowed such losses to the extent of 0.6% in case of motor-spirit and 0.2% in case of high speed diesel. Vide separate instructions issued in this behalf to the assessing authorities, they were asked to ensure that the VAT payable at the hands of dealers, on this account, does not remain unassessed. Whether tax is being levied on commission paid to dealers - held that:- Neither the price structure nor the taxation regime gets affected by the quantum of commission disbursed to the dealers because gross turn over in terms of Section 2(1)(u) after certain deductions in terms of Section 6 is computed to arrive at a figure of taxable turn over in terms of Section 2(1) (zn). Thus, there is no case of payment of tax on the amount of commission paid to the dealers by the oil companies. The plea regarding notional or artificial sale value or price of the diesel/petrol on which pursuant to the explanation, tax is levied, is also incorrrect. Rather, the levy of tax is on the sale price of petrol/diesel price whereof is fixed by oil companies and is declared and predetermined by oil companies and VAT is charged on the said actual value and not on the notional/ artificial value. The amendment brought about in the term "sale price" vide the impugned notification is in conformity with term 'sale' as is understood in the Sales of Goods Act, 1930. The evaporation loss is fully taken care of by the provisions of the Principal Act. The petrol outlets/dealers receive the commission as per quantity of petrol/diesel sold which aspect is also duly taken care of in the procedure for arriving at input as also output tax credit. - There is no merit in the petition - Decided against the assessee.
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2014 (11) TMI 965
Recovery of sales tax - illegal attachment and auction of property - plot belong to partner of the firm - suit is pending between the partners of the partnership firm - Held that:- it is apparent that an illegal procedure has been adopted by the officer of the State in attaching the property in question for recovery of sales tax and forcing its auction. Therefore, the proceeding of attachment and auction were not according to the law and such proceeding cannot be sustained. By such proceeding, no effect was caused on the ownership of the plaintiff on the suit property and therefore, a declaration may be given in favour of the plaintiff, relating to the suit property. Similarly, the officers of the State has created the third party interest (interest of respondent No. 5) on the property and the officers of the State as well as respondent Nos. 5 and 6 were interested to dispossess the plaintiff from the property by adopting illegal method and therefore, it is a case in which a perpetual injunction may also be issued in favour of the plaintiff. However, as discussed above, the plaintiff cannot get any relief against the officer concerned because no sanction was received by the plaintiff under section 48(1) of the Act and therefore, no compensation can be granted to the plaintiff for illegality caused by respondent No. 3. Consequently, the appeal filed by the appellant is hereby partly allowed. It is declared that the suit property, i.e., plot No. 39, Punjab Bank Colony, Idgah Hills, Bhopal having area 38 X 68 square feet is of the plaintiff and its attachment and auction as done by respondent No. 3 was void and illegal, which makes no effect upon the title of the appellant. - Decided in favor of appellant.
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