TMI Tax Updates - e-Newsletter
December 19, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
TMI SMS
Highlights / Catch Notes
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Income Tax:
Liability to deduct TDS on discount/commission made u/s 194H - sale of SIM Cards - Trade discount for bulk sales within the scope or not – matter remanded back to AO for ascertaining that how the books of accounts are being maintained - HC
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Income Tax:
Addition u/s 68 – Amount claimed to be exempted as gift received from non-resident Indians - genuineness of the transaction is not established by the assessee - HC
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Income Tax:
Interest charged u/s 234B(4) though no interest levied at the time of framing of regular assessment u/s 143(3) - advance tax - it is a mandatory and while giving the consequential effect, AO has rightly charged the interest - HC
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Income Tax:
Whether the Tribunal was right in holding that the AO can pass a rectification order modifying the original assessment order carried into appeal and having already merged with the order of the CIT(A) - Held No - HC
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Customs:
Valuation of goods - If the royalty is computed excluding the cost of imported material and is based on the indigenous value addition which clearly shows that the payments made by the appellant for the collaboration and consultancy services has nothing to do with the imports undertaken by the appellants - AT
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Customs:
Re-export of goods - just because the Commissioner in this case has chosen just to sit over the appellant's request for extension and not take any decision, the benefit of the exemption cannot be denied to the appellant on the ground that they failed to re-export within the extended period in terms of the notification - AT
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Customs:
Penalty on CHA - If the importers had misused the facility by obtaining a duplicate license by misrepresentation and fraud, so also, manipulation of documents and with a view to avoid customs duty, then, it cannot be said that the Customs House Agent and its Director were totally innocent or unaware of these acts. HC
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Indian Laws:
Lok Sabha passes the Companies (Amendment) Bill, 2014
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Service Tax:
Demand of service tax in respect of the same transaction on the ground that the deposit of service tax was under a different category whereas a different category of service has been provided cannot be held to be justifiable - AT
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Service Tax:
Condonation of delay - Delay of 472 days - delay condoned subject to payment of cost of Rs . 25,000/-to be deposited in the Hon'ble Prime Minister's Relief Fund - AT
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Service Tax:
Classification of service - Business support service - Cleaning services of toilets and coaches in trains - demand set aside - AT
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Service Tax:
Banking and Financial Institution Services - Admittedly, the guarantees issued by the applicant does not bear or does not have any party as a bank. In these circumstances, prima facie applicant has made out a case for complete waiver of pre-deposit. - AT
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Central Excise:
Aluminium Dross and Skimmings or similar Non-ferrous Metal Dross and Skimmings - Merely selling does not mean dross and skimming are marketable commodity as even rubbish can be sold. Everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in. - HC
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Central Excise:
Validity of circular bearing No.145/56/95-CX - the power under section 37B cannot be used to interfere with the exercise of quasi judicial power of adjudication and as the impugned circular is contrary to well settled principles, the impugned circular is bad for want of jurisdiction. - HC
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Central Excise:
Rejection of application by the Settlement Commission - As long as the petitioner has failed to fulfil the twin essential tests, the application before the Settlement Commission was not maintainable and therefore, the Commission was fully justified in refusing to entertain the application - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (12) TMI 642
Liability to deduct TDS on discount/commission made u/s 194H - sale of SIM Cards - Trade discount for bulk sales within the scope or not – assessee M/s Bharti Airtel Limited is a Public Limited Company engaged in the business of telecom operations – Relationship of assessee or distributor or not – Scope of term ‘income’ u/s 2(24) –Survey conducted for verification of compliance of TDS provisions – Held that:- On delivery of the prepaid card, the assessee raises invoices and updates the accounts - In the first instance, sale is accounted for ₹ 100/-, which is the first account and ₹ 80/- is the second account and the third account is ₹ 20/- the sales is for ₹ 100/-, commission is given at ₹ 20/- to the distributors and net value is ₹ 80/- The assessee's sale is accounted at the gross value of ₹ 100/- and thereafter, the commission paid at ₹ 20/- is accounted - the essence of the contract of the assessee and distributor is that of service and therefore, Section 194H of the Act is attracted - however, in the first instance, if the assessee accounted for only ₹ 80/- and on payment of ₹ 80/-, he hands over the prepaid card prescribing the MRP as ₹ 100/-, then at the time of sale, the assessee is not making any payment - the distributor is not earning any income - this discount of ₹ 20/- if not reflected anywhere in the books of accounts, in such circumstances, Section 194H of the Act is not attracted The assessees sell prepaid cards/vouchers to the distributors - at the time of the assessee selling these pre-paid cards for a consideration to the distributor, the distributor does not earn any income - In fact, rather than earning income, distributors incur expenditure for the purchase of prepaid cards - Only after the resale of those prepaid cards, distributors would derive income - at the time of the assessee selling these pre-paid cards, he is not in possession of any income belonging to the distributor - Therefore, the question of any income accruing or arising to the distributor at the point of time of sale of prepaid card by the assessee to the distributor does not arise. The condition precedent for attracting Section 194H of the Act is that there should be an income payable by the assessee to the distributor – the income accrued or belonging to the distributor should be in the hands of the assessees - the assessee sells SIM cards to the distributor and allows a discount of ₹ 20/-, that ₹ 20/- does not represent the income at the hands of the distributor because the distributor in turn may sell the SIM cards to a sub-distributor who in turn may sell the SIM cards to the retailer and it is the retailer who sells it to the customer - The profit earned by the distributor, sub-distributor and the retailer would be dependent on the agreement between them and all of them have to share ₹ 20/- which is allowed as discount by the assessee to the distributor - There is no relationship between the assessee and the sub-distributor as well as the retailer. Thus, it is a sale of right to service - The relationship between the assessee and the distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to the distributor, he is not paying any commission; by such sale no income accrues in the hands of the distributor and he is not under any obligation to pay any tax as no income is generated in his hands - The deduction of income tax at source being a vicarious responsibility, when there is no primary responsibility, the assessee has no obligation to deduct TDS - the right to service can be sold then the relationship between the assessee and the distributor would be that of principal and principal and not principal and agent – thus, the order passed by the authorities holding that Section 194H of the Act is attracted to the facts of the case is unsustainable. The matter is remitted back to the assessing authority only to find out how the books are maintained and how the sale price and the sale discount is treated and whether the sale discount is reflected in their books - If the accounts are not reflected Section 194H of the Act is not attracted. - Decided in favour of assessee.
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2014 (12) TMI 641
Validity of addition u/s 68 – Amount claimed to be exempted as gift received from non-resident Indians - Genuineness of transaction not proved by assessee - Held that:- The Tribunal was rightly of the view that these two persons are not related to the assessee - They are residing in two different countries - one in Dubai and the other in Singapore - There is no business relation or any other blood-relation between the assessee and these donors and there is no explanation as to why these two unknown persons, who are infact strangers, would give such a huge amount to the assessee as 'gift' - a simple 'gift-deed' on a plain paper has been placed on record and under normal circumstances such a 'gift-deed' can be accepted - However, ongoing through the 'gift-deed', the Tribunal found that no witnesses are there to identify the execution of the 'gift-deed' in accordance with law - The execution of the 'gift-deed' is not established in accordance to the requirement of law as may be applicable in the countries where the 'gift-deed' is executed. Originally in the transaction there is no mention of the word 'gift', but thereafter the word 'gift' has been added by way of interpolation – Tribunal rightly relied upon Commissioner of Income-Tax Versus P. Mohanakala [2007 (5) TMI 192 - SUPREME Court] - for the purpose of applying the provisions of Section 68 of the Income Tax Act, apart from there being a proper identity of the creditor and his credit-worthiness, the genuineness of the transaction should also be established - genuineness of the transaction is not established by the assessee – thus, the Tribunal has given cogent reasons for disbelieving the transaction and for holding that the transaction does not amount to a 'gift' – as such no substantial question of law arises for consideration – Decided against assessee.
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2014 (12) TMI 640
Applicability of provision of section 145(3) - Income derived from execution of contract work awarded by different departments of the Government – Held that:- The AO invoked the authority u/s 145(3) being not satisfied about the correctness and completeness of the accounts of the assessee – u/s 145(3), the requirement is that the AO must be satisfied about correctness and completeness of the accounts of the assessee - mere submission of vouchers is not sufficient to arrive at the conclusion that the trading result shown by the assessee are true - The rejection of accounts would always be justified when the accounts books are found unreliable, incorrect or incomplete for valid reasons – the AO by relying upon several errors and incompleteness in the books of accounts decided to invoke the authority as per Section 145(3) - no plausible reason was extended by the assessee for errors in the vouchers and in other accounts books – the Tribunal without examining the errors pointed out by the AO reversed the order of assessment and its affirmance by CIT(A) by relying upon the principle that the vouchers submitted are not required to be treated untrue - The tribunal did not choose to examine the fact that no plausible reason was extended by the assessee to satisfy the Assessing Officer about their truthfulness – thus, the order passed by the Tribunal is set aside – Decided in favour of revenue.
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2014 (12) TMI 639
Deletion of penalty u/s 271(1)(c) - Assessee concealed particulars of income or not - claim of depreciation on assets transferred to Government of Rajasthan for the first time during the previous year - Held that:- The Tribunal rightly deleted the penalty and allowed the relief as the assets were brought into the books of accounts and details of all assets were provided and therefore it cannot be said that the depreciation was claimed wrongly by the assessee so as to be subjected with penalty u/s 271(1)(c) - merely because title has not been transferred or properties not registered in the name of the assessee under the Indian Registration Act, depreciation cannot be disallowed - possession and user is of the assessee – in assessee’s own case as decided in Commissioner of Income Tax Jaipur-II Vs. M/s. Jawahar Kala Kendra [2014 (6) TMI 292 - RAJASTHAN HIGH COURT] the finding of the Tribunal for allowing depreciation to the assessee is upheld - the claim of depreciation was allowable and as such it cannot be said that the claim made by the assessee was wrong or inadmissible since beginning - merely because the assessee did not challenge further, is no reason to come to the conclusion that assessee is to be visited with penalty – thus, the order of the Tribunal is upheld and the assessee neither concealed income nor furnished inaccurate particulars of income, therefore penalty cannot be levied – Decided against revenue.
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2014 (12) TMI 638
Additions of inflated labour charges and unproved cash credits – Genuineness of expenses not proved - Held that:- Assessee had met the entire expenditure towards labour charges in cash and had not produced any vouchers to prove the genuineness of the expenditure claimed – the AO made addition of ₹ 1.00 lakh out of ₹ 17,28,696/- claimed by the assessee - assessee had also accepted the same at the time of assessment – thus, the Tribunal is upholding the order of assessee is correct. Addition made u/s 68 on unsecured loans - Held that:- The assessee had proved the creditworthiness of majority of lenders except 19 persons, from whom the assessee had borrowed funds - assessee is able to prove the creditworthiness of majority of lenders, but there is no material to prove the creditworthiness of the remaining persons - after considering the explanation submitted by various lenders enclosing the cash book indicating the date of lending, the AO allowed the claim in part - in respect of the persons who have not shown any material to prove the genuineness of the loan given, the AO declined to grant the benefit - – thus, the Tribunal is upholding the order of assessee is correct – the issues raised by assessee are pure questions of fact and does not raise any substantial question of law – Decided against assessee.
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2014 (12) TMI 637
Interest charged u/s 234B(4) though no interest levied at the time of framing of regular assessment u/s 143(3)- Whether the Tribunal was justified in holding that interest was rightly charged u/s 234B(4) – Held that:- The Tribunal was rightly of the view that the income of the assessee in the original assessment was determined at NIL there was no occasion for charging the interest under the provisions, otherwise as far as levy of interest is concerned, it is a mandatory and while giving the consequential effect, AO has rightly charged the interest – relying upon Commissioner of Income Tax Versus Anjum MH Ghaswala And Others [2001 (10) TMI 4 - SUPREME Court] – thus, the order of the Tribunal is upheld – Decided against assessee.
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2014 (12) TMI 636
Validity of rectification order – Doctrine of merger of orders - Whether the Tribunal was right in holding that the AO can pass a rectification order modifying the original assessment order carried into appeal and having already merged with the order of the CIT(A) while giving effect to the order passed by CIT(A) – Held that:- Assessee rightly contended that the Tribunal has gravely erred in confirming the action of revenue by holding that if a mistake apparent on record has occurred while giving effect to the order of CIT(A) then the AO is competent to rectify the order giving effect to the order of CIT(A) – after considering the decision in TS Balaram, Income-Tax Officer, Company Circle IV, Bombay Versus Volkart Brothers And Others [1971 (8) TMI 3 - SUPREME Court] it has to be held that the Tribunal and the CIT(A) have committed an error in upholding the rectification made by the AO - A decision on a debatable point of law is not a mistake apparent on the record - after the implementation of order passed by CIT(A), it was not appropriate on the part of AO to review the earlier order under the guise of rectification and in arriving at new facts and new order could not be passed unless order of CIT(A) was challenged or modified – thus, the order of the Tribunal and the rectification order passed by the AO is set aside – Decided in favour of assessee.
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2014 (12) TMI 635
Validity of questions of law framed by Tribunal - Waiver of interest by creditors TDS not deducted on the component of interest Held that:- Assessee no doubt was paying interest to its sister concerns on the loans borrowed by it year after year - However, for the three AYs 1989-90, 1990-91 and 1991-92 it did not deduct any tax on the ground that it did not pay any interest at all - In the relevant assessment years, non-deduction of tax at source was not found fault with - It was only at a subsequent stage that a notice was issued proposing action u/s 201 - it was nearly seven years thereafter that a notice was issued - For an assessee to be required to pay the amount, even if due five or six years preceding the demand, would be a serious problem questions of law framed by the Tribunal for the adjudication are upheld Decided against revenue.
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2014 (12) TMI 634
Entitlement for deduction u/s 80IB(10) – Held that:- Following the decision in The Commissioner of Income Tax Business Ward XV(3), Chennai. Versus M/s. Sanghvi and Doshi Enterprise [2012 (12) TMI 84 - MADRAS HIGH COURT] wherein it has been clearly held that for the purpose of considering the deduction, it is not necessary that the assessee, engaged in developing and construction of housing project, should be the owner of the property – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 633
Validity of Tribunal’s order for remitting order to AO for fresh consideration – Issues considered on merits or not – Held that:- Revenue contended that the Tribunal following its earlier order in respect of the very same assessee for the previous AYs allowed the appeal filed by the assessee - the main issue is whether the interest and finance charges are an allowable deduction – the same issue was already a subject matter of appeal before the Tribunal - The Tribunal in respect of the AYs 2000-01, 2001-02 and 2003-04 dismissed the appeals filed by the Revenue on the ground of limitation and not on merits – therefore, the Tribunal has misdirected itself to hold that the assessments in respect of the previous years were quashed and answered the issue in favour of the assessee – thus, the order of the Tribunal is set aside and the matter is remitted back to the Tribunal for fresh adjudication – Decided in favour of assessee.
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2014 (12) TMI 632
Addition of provision made for NPAs u/s 36(viia) - Whether the Tribunal was justified in holding that the provision made for Non-Performing Assets (NPAs) u/s 36(viia) cannot be added back to the net profit as shown in the profit and loss account prepared u/s 115JB (2) - Held that:- In M/s. Trent Ltd. [2014 (12) TMI 631 - BOMBAY HIGH COURT] the same question of law admitted for adjudication - The Tribunal was rightly of the view that section 263 could not have been invoked by the Commissioner in respect of depreciation of investment and to the extent of ₹ 81.32 crores, that amount has already been added back to the assessee's income and by giving the effect to the Appellate order - the claim of the Department that section 115JB applies also to Dena Bank, which may be a banking company, cannot be prima facie straightway accepted – after the perusal of sub-section (2)(b) of section 115JB of the Income Tax Act, 1961 and sub-section (2) of section 211 of the Companies Act, 1956, it is extremely doubtful as to why these powers under section 263 of the Income Tax Act, 1961 have been invoked by the Commissioner – the view taken by the Tribunal is upheld and as such the question raised cannot be termed as substantial question of law – Decided against revenue.
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2014 (12) TMI 631
Substantial questions of law framed for adjudication by HC – Held that:- The appeal challenges the order passed by the Tribunal – substantial questions of law admitted for adjudication regarding the provision for bad and doubtful debts – service of notice waived – decided in favour of revenue.
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2014 (12) TMI 630
Grant of registration u/s 12AA – Charitable purpose u/s 2(15) - charitable activity of imparting education and other allied activities carried by assessee - Held that:- The Tribunal has rightly set out the object of the trust in detail and also set out the classes conducted by the trust and the number of students - nearly 80 teaching and non-teaching staffs are also working - the trust is carrying on the objects for which it is established and therefore, the trust is entitled to be registered u/s 12AA - once the object of the trust is fulfilled, the trust cannot be denied the benefit of Section 12AA – thus, the order of the Tribunal is upheld – Decided against revenue.
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Customs
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2014 (12) TMI 649
Valuation of goods - Inclusion of royalty amount - Technical knowhow service - import of parts and components for various compressed air and gas equipments, construction and mining equipments, generators, industrial tools and assembly systems etc. - Rule 10(1)(c) of Custom Valuation Rules, 2007 - Held that:- Royalty is required to be paid only on the sale of the manufactured goods and royalty is not relevant to the import of the components. For arriving the value for calculation of royalty, amongst other elements, cost of standard bought out components and the landed cost of imported components are deducted. The above clause also makes it clear that this method of deduction is adopted even if the procurement of components are made from any source other than the related foreign suppliers. Therefore from the clause referred above, it is amply clear that the royalty is not paid “as a condition of the sale of the goods being valued”. Thus the royalty has nothing to do with the value of the imported raw-materials procured from the related foreign supplier or value of the imported components procured irrespective of origin. In these set of facts, Rule 10(1)(c) of Customs Valuation Rules, 2007 is not applicable. If the royalty is computed excluding the cost of imported material and is based on the indigenous value addition which clearly shows that the payments made by the appellant for the collaboration and consultancy services has nothing to do with the imports undertaken by the appellants and therefore, the same could not be included in the assessable value of the goods imported under Rule 9 (1) (c) & 10 (1) (e) of the Customs Valuation Rules. - Decided in favour of assessee.
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2014 (12) TMI 648
Extension of time for re-export of goods - Duty free import of the goods for repair and re-export - Consignment of alloy steel spanners had been exported out of India - Denial of exemption - Notification No.158/95-CUS dated 14/11/95 - Held that:- the goods which should have been cleared for repair and re-export by the end of January 2012 were cleared in first week of April, 2012. Though the appellant on 04/10/12 had applied for extension of the period by another six months, it is seen that absolutely no decision was taken by the Customs. Since, the bill of entry has been filed on 14/12/11 and the goods had been presented to the customs for re-export on 27/11/12, in our view the goods should be treated as having been exported within a period of one year and the benefit of notification should be extended as the notification stipulates the re-export within a period of six months period which can be further extended by the Commissioner by another six months and just because the Commissioner in this case has chosen just to sit over the appellant's request for extension and not take any decision, the benefit of the exemption cannot be denied to the appellant on the ground that they failed to re-export within the extended period in terms of the notification. The another plea of the Department is that it is the date of IGM -dated 24/11/11 which has to be treated as the date of import. In our view this plea is not acceptable, as the IGMs can be filed under prior entry system even before the arrival of the vessel and, therefore, the date of IGM cannot be treated as the date of import. It is the date on which the entry inward is granted which has to be treated as date of import, which in this case is not known. - impugned order denying the exemption is not sustainable. The same is set aside - Decided in favour of assessee.
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2014 (12) TMI 647
Penalty on Customs House Agent - Fraud - penalties under Section 112(a) and/or 112(b) - Held that:- Tribunal as also the Adjudicating Authority concluded that it is the appellant who had filed the Bills of Entry in respect of the importers. The importers were transferees of the license. The Customs House Agent has to advise the client and particularly assist in complying with the provisions of the Customs Act and other import regulations/prohibitions. When there was no valid license in the name of the importers, then the Customs House Agent should have cautioned him. Further, the term of license was to expire on 21st November, 1999, yet the Bills of Entry were filed in December, 1999 claiming the benefit of duty exemption under advance licensing scheme. Thus, when no valid license existed in the name of the importers, the benefit could not have been derived and which has been derived with the assistance of the Customs House Agent. Thus the role of the Customs House Agent in this case has been dealt with extensively by both the adjudicating authority and the Tribunal. They have rendered concurrent finding of fact that the Customs House Agent in this case cannot be said to be innocent. If the importers had misused the facility by obtaining a duplicate license by misrepresentation and fraud, so also, manipulation of documents and with a view to avoid customs duty, then, it cannot be said that the Customs House Agent and its Director were totally innocent or unaware of these acts. - Decided against appellants.
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2014 (12) TMI 646
Interest under Section 18(4) - Delay in sanction of refund - Held that:- In this case the show cause notice dated 7th April, 1995 proposing recovery of duty, imposition of fine and penalty under the provisions of the Customs Act, 1962 as also another show cause notices dated 9th May, 1995 on the same allegations, were adjudicated and withdrawn on 14th November, 1996. It is the department's stand throughout that this does not constitute a final assessment within the meaning of sub-section (2) of Section 18 because it was challenged and the challenge raised by the department was rejected by the final order of the Tribunal on 27th September, 2001. Therefore, we do not see any reason as to how any assistance can be derived from the proceedings and which are in any event of 1995-1997 and before the Directorate General of Foreign Trade. Since the payment of interest was withheld till 8th October, 2003 and released only on 11th November, 2003, we find that even otherwise the direction to pay interest cannot be faulted and the Tribunal was in no error of modifying the order of the Customs (Appeals) in the given facts and circumstances. This additional submission also therefore does not raise any substantial question of law. - Decided against Revenue.
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2014 (12) TMI 645
Restoration of appeal - Dismissal of appeal by Tribunal - Non compliance of pre deposit order - Did the Tribunal fall into error in declining to restore the appeal dismissed on 1-11-2006 for non-compliance of the previous conditional stay of pre-deposit order - Held that:- Post facto approval to the appellant to receive the amount, was concededly given much later, in 2013. Immediately on becoming aware of the same, an application was moved before the Tribunal to have the appeal restored. It is evident that the receipt of remittances and more importantly the extension of time were factors entirely beyond the appellant’s control. Undoubtedly, the order dated 2-1-2007 passed by the Tribunal achieved finality; at the same time we are of the opinion that in the facts of the case the Tribunal did not cease to have any discretion in the matter and having taken into account these facts could have restored the appeal given that the post facto approval in respect of almost 90% of the amount in question was received in 2013. We are also of the opinion that Lindt Export (2011 (9) TMI 609 - DELHI HIGH COURT) is not an authority for the blanket order that in every case where the order achieved finality the Tribunal is bereft of jurisdiction. We also note that in that case the assessee/appellant had approached this Court feeling aggrieved by the CESTAT order after its appeal met with no success. The assessee carried the matter to Supreme Court, which had rejected its claim. Further more, the order was premised upon entirely different set of circumstances - the adjudicating authority in that case had held that the claim itself was bogus. In view of the above discussion, we are of the opinion that the substantial question of law has to be answered in favour of the appellant and against the Revenue. - Appeal restored.
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2014 (12) TMI 644
Imported of computer controlled HTHP yarn dyeing machines along with dye kitchen tank and accessories - Exemption under Notification No. 97/2004-Customs, dated 17-9-2004 - respondent has not claimed benefit of Notification No. 6/2002-C.E. when the respondent has filed Bill of Entry No. 901018, dated 14-10-2005 - Tribunal allowed assessee's claim - Held that:- Authorities have passed the orders in question on the basis of remand order made in [2007 (2) TMI 44 - CESTAT, CHENNAI]. It is the bounden duty of the Department to challenge the same either by way of seeking amendment or by way of preferring an Appeal. But the Department has not done it. Under the said circumstances, the Department is totally precluded from challenging the present Final Order. Therefore, from cumulative reading of the Section 129B to earlier as well as Chapter 15 of the Customs Manual, it is needless to say that the contention put forth on the side of the appellant is not factually and legally sustainable and altogether, the present Civil Miscellaneous Appeal deserves to be dismissed and the substantial questions of law settled in the present Civil Miscellaneous Appeal are not having substance - Decided against Revenue.
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2014 (12) TMI 643
Interest on duty drawback claim - Jurisdiction of Tribunal to hear appeal from Commissioner's order on drawback claim - Section 129A(1) of Customs Act - Held that:- Department has paid drawback amount only as per orders passed by the Tribunal and Department has not preferred any appeal. Simply because an appeal has not been preferred by the Department with regard to payment of drawback amount, the Court cannot come to a conclusion that the Department is precluded from raising a point with regard to the orders passed by the Tribunal in respect of payment of interest on drawback amount as per provision of Section 129A of the said Act. Therefore, viewing from any angle, the contention putforth on the side of the appellant is really having attractive force and the common substantial questions of law raised on the side of the appellant are legally sustainable - Decided in favour of Revenue.
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Service Tax
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2014 (12) TMI 668
Stay application - banking and financial services - Conflicting decisions - Held that:- Tax liability has been confirmed on the ground that the appellant has accepted pre-payment charges towards the settlement of the loan extended to their customers. We find that in the appellants own case, the co-ordinate bench of the Tribunal has taken a view holding that such activity of fore-closure of the loan does not attract Service Tax liability. This bench in the case of HUDCO has taken a diagonically opposite view after considering the judgment in the case of Small Industries & Development Bank of India (2011 (1) TMI 495 - CESTAT, NEW DELHI). Since there are two different views expressed by two different benches, we are constrained to refer the matter to Hon’ble President for constituting a Larger Bench to decide as to which view is correct. Since the appellant has already deposited the amount of Service Tax liability, interest and 25% of the tax liability and as we have referred the matter to Larger Bench, we consider the amount deposited by the appellant as enough deposit to hear and dispose the appeal on merit. Accordingly, application for waiver of pre-deposit of the balance amounts involved is allowed and recovery thereof stayed till the disposal of appeal. - Stay granted.
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2014 (12) TMI 667
Sponsorship service - sponsor of the cricket team Kings XI Punjab - Held that:- Payment of service tax in respect of the same service is not being disputed by the Revenue in precedent case. However, their contention is that the sponsoring of the cricket team amounts to providing sponsoring service and as such the liability would fall upon the appellant. Commissioner (Appeals) has also held that sponsoring of a cricket team is not outside the scope of sponsorship service. Apart from noting that the issue of sponsorship of cricket has been held to be not covered by the sponsorship service, by the Tribunal in the case of Hero Motocorp Limited vs. CST, Delhi reported in [2013 (6) TMI 447 - CESTAT NEW DELHI], which would not cast any obligation on the appellant to discharge service tax, we also note that the service tax on the same transaction already stands deposited by M/s KPH, under the category of Business Auxiliary Services. Demand of service tax in respect of the same transaction on the ground that the deposit of service tax was under a different category whereas a different category of service has been provided cannot be held to be justifiable. - Decided in favour of assessee.
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2014 (12) TMI 666
Banking and Financial Institution Service - Business of lending securities and earning interest - Held that:- Transaction held by the CCIL for collateral borrowing and lending obligation is nothing but giving loans and advance against securities. Therefore, prima facie the amount of charges retained by the lender constitute as interest on loan. In these circumstances, the applicants are not required to pay service tax. Another issue for demand of service tax is that the applicant, HDFC Bank Ltd., discounts the account receivable (invoice) of their client and at the time of maturity, they get full value of the amount of the invoice. Revenue is of the view that as they have discounted the invoice, the same does not form part of the interest, the same is commission earned by them for discounting the invoice. The revenue has termed this transaction as factoring i.e a financial transaction in which a business in need of funding sells its accounts receivable as discount. On that they are required to pay service tax. As per the Notification 29/2004-ST dated 22.09.2004, discount of bill is exempted from levy of service tax. The only contention of the revenue is that while discounting the applicant has earned commission. We have seen the said notification. As per the Notification, it deals only the interest for lending the money for certain period of time. In the facts of the case, the discount is nothing but interest for lending the money. Therefore, the applicants have made out a case for complete waiver of pre-deposit on this issue. Penal interest is payable on delay of the advance given by the applicant to their clients. Therefore, same also form part of the interest of loan. Accordingly, service tax is not payable. In these circumstances, the applicant has made out a case for complete waiver of pre-deposit on this issue also - Stay granted.
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2014 (12) TMI 665
Condonation of delay - Delay of 472 days - Shifting of office - Held that:- In the case of Living Media (2012 (4) TMI 341 - SUPREME COURT OF INDIA), the hon'ble apex court dismissed the application for condonation of delay on the ground that at each and every stage the departmental officers has not taken any step to proceed with the case therefore the conduct of the departmental officers are found not to be reasonable. In these circumstances the hon'ble apex court came to the conclusion that in the said case delay cannot be condoned. But the general principle as, has laid down by the hon'ble apex court is that if the delay has been explained then the delay can be condoned. In this case, although the applicant has tried to explain the reasons for causing the delay which are not found to be satisfactory but in the interest of justice, we are condoning the delay in filing the Cross Objections subject to payment of cost of Rs . 25,000/-to be deposited in the Hon'ble Prime Minister's Relief Fund. - Delay condoned conditionally.
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2014 (12) TMI 664
Waiver of pre-deposit - Business Auxiliary Service - Service of providing JP miles to trade partners - Held that:- Applicants are selling the JP miles to their business partners and business partner is providing JP Miles free of cost to their customers for availing free tickets from the applicant. In these circumstances, we are not convinced by the argument of the learned A.R that the applicant is providing any business service to their business partners and remuneration received towards sales of JP Miles by the applicant is not covered under the Business Auxiliary Service. For the remaining demands the applicant has paid substantial amount. In these circumstances we waive the requirement of pre-deposit of the balance service tax, interest and penalties and stay recovery thereof during the pendency of the appeal. - Stay granted.
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2014 (12) TMI 663
Commercial training or coaching services - benefit of small scale exemption Notification No. 6/05-ST does not stand extended by lower authorities on the ground that the services provided by them are the branded services and as such excluded from the applicability of the notification - Bar of limitation - Held that:- There is a clear finding by the Appellate Authority about the absence of malafide on the part of the appellant, the same finding would be applicable for the purpose of limitation. If there was no malafide for the purpose of penalty, there cannot be any malafide for the purpose of limitation also. Accordingly, we set aside the impugned order on the ground of demand being barred by limitation - Decided in favour of assessee.
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2014 (12) TMI 662
Classification of service - Business support service - Cleaning services of toilets and coaches in trains - Whether cleaning of railway coaches and toilets and supply of bed-rolls to the passengers of AC and other coaches would get covered by Business Support Service or Business Auxiliary Service so as to make the appellant liable to service tax - Held that:- Following decision of Deepak & Co., Vs. CST, Delhi [2014 (7) TMI 493 - CESTAT NEW DELHI] demand set aside - Decided in favour of assessee.
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2014 (12) TMI 661
Waiver of pre-deposit - storage & warehousing charges - Held that:- On factual matrix, random invoices which have been produced before us indicate that the appellant has raised and billed separately for storing charges and other charges towards composite stuffing charges for export consignment and it also indicates that for the export cargo storage chargers they have discharged the Service Tax liability. The entire order of the adjudicating authority has not considered this submission in its correct perspective as we find no reasoning given for rejecting such a submission made before him. Appellant has made out a prima facie case for waiver of the pre-deposit of the amounts involved. Application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.
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2014 (12) TMI 660
Waiver of pre-deposit of service tax - denial of Cenvat Credit - Input services - Held that:- Services namely Brokerage for sale/purchase of shares & securities for Trading, Custodian charges, Event management services paid by them are in nature of input services having nexus to their business activity. Therefore, they are entitled to avail input service credit. We further find that as per Rule 4A of the Service Tax Rules, the required document that has been mentioned is the debit note issued by lead bank i.e. State Bank of India for Custodian charges and it contains all details. Therefore applicants are entitled to take Cenvat Credit on the said document. As the applicant had already reversed a sum of ₹ 44,620/- against the maintenance charges for residential flat of the Managing Director, therefore, the applicant has made out a case for complete waiver of pre-deposit. Accordingly, we waive the requirement of pre-deposit of service tax, interest and penalties and stay recovery thereof during the pendency of the appeal - Stay granted.
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2014 (12) TMI 659
Waiver of pre-deposit of service tax, interest and penalties - Banking and Financial Institution Services - Held that:- Applicant is not a banking company and service tax is payable only on the issuance of the bank guarantee issued by the bank. Further, we have seen the impugned order wherein in one case, the guarantee has been given by the bank; in that case service tax has been paid by the bank and credit of the said service tax has not been availed by the applicant. Further, we find that in the Guarantee the word "Bank" is mentioned wrongly instead of applicant itself. Admittedly, the guarantees issued by the applicant does not bear or does not have any party as a bank. In these circumstances, prima facie applicant has made out a case for complete waiver of pre-deposit. Accordingly, we waive the requirement of pre-deposit of entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeals. - Stay granted.
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Central Excise
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2014 (12) TMI 658
CENVAT Credit - Credit taken on all inputs including inputs exclusively used in the manufacture of exempted final products contrary to the provisions of Rule 6(1) of CENVAT Credit Rules 2004 - Non maintenance of separate accounts - Held that:- Explanation III to sub-rule (3) of Rule 6 is of no avail to the department on the facts of the present case. Therefore, on the first substantial question of law, we concur with the finding of the Tribunal that the first respondent-assessee in this case has shown on facts that the inputs on which CENVAT credit was availed had been used in the manufacture both in respect of exempted goods as well as goods cleared on payment of duty, however, they did not maintain separate account of inputs, which is a pre-requisite in terms of Rule 6(3) and having satisfied the conditions enumerated in the said rule, they are entitled to avail the credit. Assessee has not availed CENVAT credit on the inputs used exclusively in the manufacture of exempted final product. On the contrary, the finding of the Tribunal, which is not disputed by the department, is that the inputs have been used in the manufacture both in respect of exempted goods as well as goods cleared on payment of duty without maintaining separate accounts. Since we have held that it is a case falling under Rule 6(3)(b), Rule 6(1) does not get attracted to the facts of the present case. - Following decision of Life Long Appliances Ltd., v. Commissioner of Central Excise, Delhi-III [2000 (4) TMI 90 - CEGAT, COURT NO. II, NEW DELHI] - Decided against Revenue.
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2014 (12) TMI 657
Manufactured goods - Marketability - Aluminium Dross and Skimmings or similar Non-ferrous Metal Dross and Skimmings - Explanation added to Section 2(d) of the Central Excise Act, 1944 - whether the definition having been either amended or an Explanation inserted thereto would result in any change in the legal position - Held that:- Dross and skimmings may be capable of fetching some sale price. for that matter any rubbish can be sold. But that is not the criterion. It cannot be said that dross and skimmings are the result of treatment, labour or manipulation whereby the end product is dross and skimmings. They are merely the scum thrown out in the process of manufacture of aluminium sheets. Therefore it cannot be said that dross and skimmings are transformation resulting in a new and different article with a distinctive name, character or use or that they ordinarily come to the market to be bought and sold and are known to the market. The article or goods manufactured from the aluminium ingots was not dross and skimmings but the aluminium sheets. It was the aluminium sheets therefore that were the endproduct or the finished product and not the dross and skimmings which were merely the refuse or scum or rubbish thrown out in the course of the manufacture of the finished product, namely, the aluminium sheets. As stated earlier, in the affidavitinreply, there has throughout been a repeated emphasis that the dross and skimmings are a byproduct and that the aluminium ingots were used by the company in the manufacture of dross and skimmings. To be subjected to levy of excise duty 'excisable goods' must be produced or manufactured in India. For being produced and manufactured in India the raw material should have gone through the process of transformation into a new product by skilful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone through the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty. - Merely because the goods satisfying the test of being marketed and saleable, it does not mean that the test of being manufactured in India has been satisfied. Merely selling does not mean dross and skimming are marketable commodity as even rubbish can be sold. Everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in. - When the Hon'ble Supreme Court holds and as in Grasim Industries Ltd. (2011 (10) TMI 2 - SUPREME COURT OF INDIA) that the conditions contemplated under Section 2(d) and Section 2(f) have to be satisfied conjunctively in order to entail imposition of excise duty under section 3 of the Act, then, we cannot agree with the Tribunal. The larger Bench decision does not take into account the fact that the authoritative pronouncement by the Supreme Court and repeatedly rendered is binding on it. - Decided in favour of assessee.
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2014 (12) TMI 656
Demand of interest for delayed payment of tax - Payment of interest through CENVAT Credit - Subrule (3A) of Rule 8 of the Central Excise Rules, 2002 - Held that:- When the entire showcause notice, order in original and appellate order are based on Subrule (3A) of Rule 8, the portion of which came to be struck down in [2014 (12) TMI 585 - GUJARAT HIGH COURT], such orders cannot survive. We have narrated facts only to demonstrate that the facts of the present case squarely fall within the portion of the Rule which was declared as ultra vires by the Court. It was only because the petitioner paid interest of barely about ₹ 12,000/through Cenvat Credit instead of paying it in cash, their all subsequent clearances were stigmatized. This was solely relying on the portion of Subrule (3A) of Rule 8, which required that the future clearances of a defaulter must be without utilization of the Cenvat Credit. - Decided in favour of assessee.
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2014 (12) TMI 655
Challenge to the vires of Sub rule (3A) of Rule 8 of the Central Excise Rules, 2002 - assessee has not paid monthly excise duty by due date and has further defaulted by period of 30 days thereafter - Decision in the case of Indsur Global Ltd. [2014 (12) TMI 585 - GUJARAT HIGH COURT] relied upon by Revenue - Held that:- there is vital difference between the two sets of facts. In the present case, the petitioner had raised the challenge to the statutory provisions even before the adjudicating authority had taken a final decision. He had, along with rule, also challenged the show cause notice. In the case of Indsur Global Ltd. (Supra) the petitioner had unsuccessfully challenged the order of the adjudicating authority. The appeal was dismissed by the Commissioner on the ground of delay beyond his power to condone. The Tribunal had dismissed further appeal on the ground of gross delay of three years in preferring the appeal before the Tribunal as also on the ground that in any case the Commissioner was right in not entertaining the appeal of the assessee which was presented along with the application for condonation of delay after the maximum period which the Commissioner could have condoned. It was in this background the Court held that the issues which are closed cannot be reopened. It was noted that there were other proceedings between the same assessee and department pending at various stages on same issue. It was, therefore, provided that the particular order in challenge would not be disturbed but that the benefit of declaration of invalidity of the rule would be available to the petitioner in other pending proceedings. Modus adopted in the said case in case of Indsur Global Ltd. (Supra) cannot be applied in the present case. The impugned tax demands and show cause notice are set aside - Decided in favour of assessee.
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2014 (12) TMI 654
Imposition of penalty - Section 11AC - non levy of penalty or levy of penalty below the minimum limit prescribed - Applicability of decision of Supreme Court in the case of Union of India and Others V. M/s Dharamendra Textile Processors and Others reported in [2008 (9) TMI 52 - SUPREME COURT ] - Held that:- Decision was rendered by the Supreme Court on 29.9.2008. At the time of admission of these appeals, this Court did not have the benefit of this decision. Apparently, the Tribunal was also deciding the issue on the basis of law that was prevailing at that point of time and the various Tribunals took a view that the element of discretion was available while imposing penalty under Section 11AC of the Central Excise Act. Since that issue stands resolved by the Larger Bench of the Supreme Court, the first substantial question of law admitted by this Court does not bear any significance, since the levy of penalty under Section 11AC, has therefore become mandatory, nevertheless, the Tribunal has chosen to impose lesser amount of penalty, against which the Department has not filed any appeal. - Decided against the assessee. Levy of interest - Section 11AB - Held that:- Appellant contended that Section 11AB could not be invoked for the period prior to the enactment of Finance Bill, 2001, to mean thereby, prior to 2001, Section 11AB was not applicable. The provisions of Section 11AB of the Central Excise Act came into effect from 28.9.1996 by Finance (No.2) Act, 1996. No doubt that in the year 2001, there is a change in the rate of interest from 11.5.2001 from 10% - 36% to 18% - 36% that is irrelevant. Therefore, the plea of the appellants that the Tribunal ought not to have been imposed interest under Section 11AB of the Central Excise Act is misconceived. - Decided against the assessee. once Penalty is imposed under Rule 173Q of the Central Excise Rules, no penalty could be imposed under Section 11AC of the Central Excise Act, when Section 11AC was introduced by Finance (No.2) Act, 1996 with effect from 28.9.1996, there is no bar in Section 11AC of the Central Excise Act to impose of penalty under Rule 173Q of the Central Excise Rules. Nevertheless, when Finance (No.2) Act 1996 brought in amendment by way of introduction of Section 11AC and other provisions, there was no corresponding amendment to Rule 173Q holding that if penalty is leviable under Section 11AC, no penalty could be levied under Rule 173Q of the Central Excise Rules. - The penalty under Rule 173Q of the Central Excise Rules is consequent to confiscation of goods, whereas penalty under Section 11AC of the Central Excise Act is equivalent to the duty determined. Therefore, there appears to be no mutual exclusion in relation to levy of penalty under Rule 173Q and Section 11AC. Accordingly, we answer the third substantial question of law in favour of the Revenue and against the assessee. - Decided against assessee.
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2014 (12) TMI 653
Validity of circular bearing No.145/56/95-CX dated 31.8.1995 - Classification of coconut oil packed in small container of sizes upto 200 ml - jurisdiction of CBEC to issue orders or circular in exercise of power under section 37B - violation of Article 14 of the Constitution of India - Held that:- the power under section 37B cannot be used to interfere with the exercise of quasi judicial power of adjudication and as the impugned circular is contrary to well settled principles, the impugned circular is bad for want of jurisdiction. Coconut oil is excluded from the purview of Chapter Note 2 of Chapter 33 and the same falls under Chapter 15 in the absence of any indication to show that it is meant for the use as cosmetics and irrespective of packings and the first respondent has no jurisdiction to issue circular, which has the effect of nullifying the decisions rendered by the Tribunal. Coconut oil in such small packs being purchased by poor people both for personal and domestic use, the nature of the use favourable to the assessee to be adopted in preference to other use as held by Gauhati High court in Shalimar Chemical Works Ltd case [2011 (7) TMI 1062 - GAUHATI HIGH COURT]. At the risk of repetition, it is stated that the small packs, having been mainly meant for economically poor and down trodden, the presumption that it is used as cosmetics than as edible oil, has no rhyme, reason or logic in the same. By doing so, the poor purchaser of small packs are burdened by levying additional service tax. The first respondent has through the impugned circular, proceeded to impose tax for the coconut oil packed in the container upto 200ml and thus usurped the function of the legislative body. The first respondent has sought to impose duty indirectly, which, the legislature would intend to impose directly in accordance with law. Thus way, the same amounts to indirectly legislating, which is not legally permissible. - Decision in the case of Delhi High court in Faridabad Iron and Steel Traders Association v. Union of India case [2003 (11) TMI 107 - HIGH COURT OF DELHI] followed. Impugned circular issued by the first respondent is held to be arbitrary, unreasonable, without jurisdiction, null and void and contrary to the provisions of the Central Excise Act, 1944, and ultra vires of Articles 14, 19(i)(g) and 21 of the Constitution of India and Section 37B of the Central Excise Act 1944 and the rules made thereunder and the Central Excise Tariff Act 1985, as such, the petitioner is entitled to the declaratory relief as sought for in this writ petition in respect of impugned circular passed by the first respondent. - Decided in favour of assessee.
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2014 (12) TMI 652
Rejection of application by the Settlement Commission - Power of High Court to interfere exercising jurisdiction under Article 226 - no allegation of violation of principles of natural justice - Held that:- After considering all the facts, which were placed, the Commission recorded that the petitioner has not made a full and true disclosure. In the light of the said finding, this Court is not inclined to exercise its jurisdiction under Article 226 of the Constitution of India and examine the factual finding recorded by the Settlement Commission, as if, this court is the Appellate Authority over the findings of fact recorded by the Settlement Commission, by which the Settlement Commission declined to entertain the petitioner's application and directed the matter to be proceeded by the second respondent under the normal procedure under the Act. The petitioner has not challenged the order passed by the Commission on any technical grounds such as violation of principles of natural justice, failure to afford reasonable opportunity etc. The contention that the Commission has not examined the merits of the case is also not sustainable, as a bare reading of the order passed by the Commission would reveal that the merits of the case has been gone into and this Court is not inclined to go into the factual aspects of the matter, as it has to be adjudicated on merits. As long as the petitioner has failed to fulfil the twin essential tests as pointed out earlier, the application before the Settlement Commission was not maintainable and therefore, the Commission was fully justified in refusing to entertain the application. - writ petition dismissed - Decided against the assessee.
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2014 (12) TMI 651
Valuation of goods - Whether the value of goods cleared by the appellants to their interrelated unit/sister concern at Baddi during the material period should have been assessed under Rule 8 or Rule 4 of the Valuation Rules - Held that:- Appellants had cleared goods to their sister concern (related person) and also to independent buyers during the material period and had assessed the value of the goods cleared by them to related person as per Rule 8 of the Valuation Rules. The adjudicating authority has held that valuation of goods cleared by the appellants to related person, had to be done under Rule 4 of the Valuation Rules i.e. at the price at which the identical goods were sold by the appellants to the independent buyers. It is applicable in cases where goods are not sold but used for captive consumption by the assessee or are captively consumed on his behalf. In the instant case, the goods in respect of which the valuation is disputed, have neither been captively consumed by the appellants, nor had been consumed captively on their behalf. I find that the appellants have tried to lay stress on the point that the goods had been consumed in another unit of the same company, hence the goods had been captively consumed. The contention of the appellants is not tenable as the words ‘captively consumed’ are used in the context to consumption within the same factory/unit and would not be applicable in cases where the goods are consumed in another factory of the appellants. It is evident from the opening sentence of the above quoted rule that these provisions are applicable only to cases where goods are not sold by an assessee except to or through a related person. Thus, the provisions of Rule 9 are applicable only if goods are sold solely through a ‘related person’, and the said provisions cannot be applied to the instant case where the goods were also sold by the appellants to independent buyers. As such, I find that the provisions of Rules 8 & 9 of the Valuation Rules are not applicable to the facts of the instant case and the clarifications issued by the Board in respect of Rules 8 & 9 of the Valuation Rules cannot be made applicable to these cases. The appellants have referred to clarification at S. No. 5 of the Board’s Circular No. 643/34/2002-CX, dated 1-7-2002 whereas clarification given at S. No. 12 of the said Circular is more appropriate to the facts of the instant case. Appellants had cleared part of the goods to unrelated buyers and part of the goods to a related person. It is clear from the legal provisions contained in Rule 9 of the Valuation Rules that these provisions are to be invoked only in cases where goods are sold exclusively to or through related persons. It is not in dispute that such a case does not exist here. Therefore, taking resort to provisions of Rule 9 of the Valuation Rules was not justified. - Valuation Rules have been formulated as a guide for the determination of value of goods which would yield a reasonable and commercial value. Rule 11 of the Valuation Rules specifically states, “Value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of Section 4 of the Act”. The principle laid down in the Section 4(1) of the Act is to adopt the sale price, where price is the sole consideration as the assessable value of the goods. I also find that in situation similar to the present cases, the Hon’ble Tribunals have held that if independent sale price is available then that should be adopted as assessable value for clearance to related buyers. Conclusion of the adjudicating authority that valuation of goods cleared by the appellants was required to be done under Rule 11 read with Rule 4 of the Valuation Rules i.e. price at which goods were sold by the appellants to the independent buyers, is as per the relevant provisions of law and also in harmony with the above judgments of the Hon’ble Tribunal on this issue. The appellants have also argued that valuation of goods sold to independent buyers depends upon the credit period involved and also needs adjustments in price due to cash or deferred payments, but this plea of the appellants has no relation with the method to be adopted for valuation of goods where similar goods are sold to independent buyers as well as to related persons. - conclusion of the adjudicating authority is upheld. Further, the argument of the appellants that Rule 4 of the Valuation Rules has no application in the instant case where goods have been removed to their own unit, also does not succeed in view of the above discussion of legal provisions and case laws. Regarding the case laws referred to by the appellants in support to their contention that the Circulars are binding on the department, I find that the appellants would not get any help from the said case laws as it is clear from the above discussion that clarification issued by the Board in the matter is in consonance with provisions of law and also with the judicial decisions on the matter and accordingly the impugned orders are upheld. - Decided against assessee.
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