TMI Tax Updates - e-Newsletter
December 25, 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:
Activity amounts to manufacture or not - Whether conversion of pure gold into jewellery amounts to manufacture or processing - Held Yes - HC
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Income Tax:
Nature of payment of ₹ 6.60 crores – abusive tax avoidance - entire amount would be taxed in the hands of the assessee, and would be treated as part of the sale consideration received on transfer of the shares in CDBL, held by him - HC
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Income Tax:
Whether the Tribunal was correct in placing reliance on surveyor’s report for the purpose of determining the actual cost of the asset acquired by the assessee from M/s Wimco Ltd. - Held Yes - HC
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Income Tax:
Restriction of penalty imposed u/s 140A(3) to 25% - when the authorities were justified in restricting the penalty to 25% based on cogent material and finding, more so when it is discretionary as the same is clearly rendered u/s 221 order of tribunal sustained - HC
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Income Tax:
Validity of show cause notice – Revenue had the jurisdiction to decide the case, but omitted to confront the assessees with the material in his possession - the action of the respondents is violative of principles of natural justice and fair play and therefore not sustainable in the eyes of law - HC
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Income Tax:
Deletion of penalty u/s 271D – violation of section 269SS - in view of the payments to the creditors, book entries were made in the journal of the assessee - there is no cash payment - penalty cannot be imposed - HC
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Income Tax:
Whether the Tribunal was justified in holding that the loss incurred on the sale of shares of Camelot a wholly owned subsidiary was a business loss when the investment made in the latter was not a business asset, but investment for obtaining an enduring benefit - Held yes - HC
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Income Tax:
Deduction u/s 80-O - submission of survey report to foreign agencies - Place for rendering services - mere fact that the submission of report was within India, does not take away the matter from the purview of Section 80-O - HC
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Income Tax:
TDS u/s 194B - paying price money to the owners of winning horses - activity of owning and maintaining horses cannot by any stretch of imagination fall in the definition of 'card game or other game of any sort' found in Section 194B - HC
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Income Tax:
Where income liable to tax has escaped in the original assessment due to oversight and inadvertence or a mistake committed by the AO, then he has jurisdiction to reopen the assessment - AT
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Customs:
Denial of refund claim - effective date of change in the rate of duty on export goods - Since 'Let Export Order' has been given on 13/06/2008, the rate of duty relevant for assessment would be the rate prevalent on 13/06/2008. - AT
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Customs:
Stay application - Recovery of incineration charges of the waste oil contained in 39 containers - the recovery is sought to be made in terms of the Apex Court order - this Tribunal has no jurisdiction, whatsoever, to deal with this matter - AT
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Service Tax:
Parallel assessment proceedings for the same transactions, same period and in respect of the same amount by different Jurisdictional authority i.e. Delhi - Proceedings / order quashed - HC
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VAT:
Collection of VAT by way of TDS - Constitutional Validity - the statutory provision is not a charging provision but a provision for collection and recovery of tax - petition dismissed - HC
Articles
News
Case Laws:
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Income Tax
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2014 (12) TMI 858
Activity amounts to manufacture or not - Whether conversion of pure gold into jewellery amounts to manufacture or processing – Held that:- Following the decision in Commissioner of Income-tax Versus Lovlesh Jain [2011 (12) TMI 93 - DELHI HIGH COURT] - manufacture as well as production of goods, articles or things is covered under Section 10A/10B - The activity for converting gold bricks, biscuit or bars, into jewellery amounts to “production or manufacture” of a new article - The gold, silver or platinum in bar, biscuit or brick form, is converted by manual labour and by the use of implements/tools or by machinery, culminating into an entirely new article/thing called jewellery or ornaments. Jewellery is a wearable item and is used by both men and women - a commercially different saleable product comes into existence - the activity of the respondent assessee amounts to “manufacture or production” and, therefore, qualifies for deduction under Section 10A/10B – thus, the assessee was engaged in processing of goods or merchandise as activity of converting raw gold into jewellery or ornaments amounts to processing, if not manufacture of goods or merchandise. Jewellery has distinctive name, character and use and is a different and new commercially saleable product. Deductions u/s 80HHC(3)(a) – Whether the Tribunal was right in holding that manufacture of gold jewellery on job work basis amounts to manufacturing activity by the assessee entitling it to deductions u/s 80HHC(3)(a) and Whether the assessee was engaged in manufacture or processing of jewellery or was merely procuring jewellery from the market as a trader and thereafter exporting the same – Held that:- A manufacturer of jewellery or ornaments might not require huge investment in machinery etc. Mode and manner of engaging and undertaking manufacturing activity could be variable - sub-clause (a) to sub-section (3) to Section 80 HHC of the Act, would be applicable in view of the factual finding recorded by the Tribunal that the aforesaid work was undertaken by the job workers under the supervision and control of the assessee and under their directions/check – Decided against revenue.
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2014 (12) TMI 857
Nature of payment of ₹ 6.60 crores – Business income or consideration paid for transfer of shares - Whether the payment of ₹ 6.60 crores, ostensibly stated to be non-compete fee under the MOU dated 13th April, 1994, can be treated and regarded as payment covered under sub-clause (a) to clause (ii) of Section 28 of the Act, or consideration paid for transfer of shares – Held that:- Assessee had indulged in abusive tax avoidance - The real and true nature of the transaction or event was the sale of shares and transfer of control and management of CDBL in favour of the SWC Group - The consideration of ₹ 6.60 crores was not a fee paid towards non-compete - It would not be exempt - transfer of majority shares holding would include consideration receivable towards the controlling interest - The price paid by the SWC Group and received by the respondent-assessee was for purchase of shares, including the controlling interest - The price paid would include the right to control and manage CBDL - Any division or bifurcation would result in the court or Revenue stepping into the arm chair of the assessee and the SWC Group for splitting the amounts between capital gains and Section 28(ii)(a) – in 2012 (1) TMI 52 - SUPREME COURT OF INDIA [2012 (1) TMI 52 - SUPREME COURT OF INDIA] the position has been crystallized, when a majority shareholder transfers the said shareholding to another party - intrinsic to transaction of transfer of shares in a given case would include rights and entitlements which constitute and were themselves capital assets within the meaning of Section 2(14). The transaction was structured as a case of sale of shares and not an asset sale - Ownership of shares in such situations constitutes and partake character of a controlling interest - The controlling incident is an incident of controlling shares which flows out from the said holding - controlling interest, is not identifiable as a distinct asset independent of holding of shares - The control of the company resides in the voting power of the shareholders as the shares represent an interest of the shareholder and are made of various rights - Shares and the rights which emanate include the right of a shareholder in the character of controlling interest and cannot be dissected - Control and management is a facet of controlling shares - Thus, the SWC Group had acquired by entering into an agreement for purchase of shares, also the controlling interest - It would, therefore, include the price paid for the same - More importantly, it also included the price paid for acquiring control of a competitor, who henceforth would not be a competitor but a part of the SWC Group - the capital gains tax on sale of shares where controlling interest has resulted in transfer of control of management would form part of the consideration received. It should not be segregated or bifurcated - ₹ 6.60 crores to be treated as consideration paid for sale of shares, rather than a payment under Section 28(ii) of the Act - the sale consideration for transfer of shares was artificially and deceitfully bifurcated under a sham agreement/ documentation, which was unreal and not a true record of the intention. Whether ₹ 6.60 crores should be taxed in the hands of the assessee as an individual or should be bifurcated as per the shareholding between the assessee and his family members, i.e. wife, son, daughter-in-law and two daughters – Held that:- The assessee, having chosen the taxable event, i.e. to receive the entire sale consideration in his name, must therefore bear and face the tax consequence - Thus, the entire amount would be taxed in the hands of the assessee, and would be treated as part of the sale consideration received on transfer of the shares in CDBL, held by him - ₹ 6.60 crores was taxable as capital gains in the hands of the assessee being a part of the full value sale consideration paid for transfer of shares – Decided in favour of revenue.
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2014 (12) TMI 856
Determination of actual cost of asset – Reliance placed upon surveyor’s report - Whether the Tribunal was correct in placing reliance on surveyor’s report for the purpose of determining the actual cost of the asset acquired by the assessee from M/s Wimco Ltd. – Held that:- Obligations relating to NRDC royalty, warranties and gratuity were to be claimed as ‘business expenditure’ as and when incurred or accrued - the consideration paid was not bifurcated and divided into different heads, as it was a case of a purchase of a running business with all assets and liabilities - The agreement stipulates that the assessee would acquire the assets including the land allotted in district Rampur, buildings comprising coating shop, fabrication shop, DG set room etc., plant and equipments as per the details, stock-in-process, stock-in-trade, ram materials, contractual rights with customers and suppliers, receivables from trade or others and petty cash related to the business - the consideration paid of ₹ 6,03,21,910 was for a running and going concern and to acquire an undertaking - ₹ 6,03,21,910/- was not sub-divided or bifurcated under the said agreement under different heads - Value of the fixed assets, which were transferred and on which depreciation was earlier claimed by Wimco Ltd. and after acquisition by the assessee was not specified or so stated in the agreement itself – It was lump sum payment. What was purchased by the appellant asseessee was an undertaking there being slump sale and the entire business including assets and liabilities were transferred for a lump sum amount - There was no break-up or division of the said amount in the agreement itself - The amount paid would be the sale consideration paid after taking into account value of the plant, machinery, dead stock as well as work in progress, stock in trade etc., and intangible items like goodwill, manpower, values of different licences etc. - This cost paid would be for both depreciable and non-depreciable assets - difficulties do arise in computing the actual cost of the assets on which depreciation is to be allowed to the purchaser i.e. the appellant assessee. Assessee and the seller had evaluated the plant and machinery on the date of the sale - Therefore, the authorities and the Tribunal deemed it appropriate to rely upon the surveyor’s report for computing actual cost and we agree with the said conclusion. – thus, the order of the Tribunal is upheld – Decided against assessee.
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2014 (12) TMI 855
Restriction of penalty imposed u/s 140A(3) to 25% - Held that:- Assessee has earned substantial income in the year but he did not pay the due tax within the stipulated time after service of demand notice - assessee paid the admitted tax by 28.04.2011 before the issuance of the show cause notice by the AO on 22.11.2011 - it is a case of ‘proportionality’ - the assessee paid advance tax of ₹ 14,00,000/- after the return was processed u/s 143(1) of the Act, the intimation was sent to the assessee on 01.02.2011 calling upon him to make payment by 01.02.2011 - The assessee deposited the tax due by April 28, 2011, which is much before the date of issuance of notice u/s 140A(3) of the Act by the AO i.e. November 22, 2011 - when the authorities were justified in restricting the penalty to 25% based on cogent material and finding, more so when it is discretionary as the same is clearly rendered u/s 221 - the discretion so exercised is within the mandate of law and based on good, valid and cogent ground – the order of the Tribunal is upheld. Revenue perhaps harbours the belief that maximum penalty must be imposed in all cases, which is not the legislative mandate. – decided against revenue.
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2014 (12) TMI 854
Issuance of certificate for deduction at lower rate u/s 197 for FY 2014-15 - Held that:- Assessee claimed that the rate of tax deducted at source insofar as their receipts are concerned should be Nil, whereas, the AO has directed that TDS be deducted at the rate of 5.5 per cent, which, although is a lower rate than prescribed, is not the Nil rate desired by the assessee – revenue seems to have added up the tax liabilities of the previous three years, whereas, in fact, according to the assessee, two out of the three years’ liability has already been deleted in appeal and in respect of the third year also an appeal is pending on the same ground and is likely to be deleted - since the assessee is entitled to file a revised application u/s 197 within one week – Decided in favour of assessee.
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2014 (12) TMI 853
Justification of transfer of cases - Validity of show cause notice – Principles of natural justice – assessees were not provided necessary material during the course of investigation and inquiry – revenue relied upon extraneous material in order to justify the transfer of the cases - Whether at the time of issuance of show-cause notices and passing of impugned order, the requirements of natural justice have been complied with because non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary – Held that:- Once show cause notice has been sought to be issued, then it was incumbent upon the respondent to have set out in detail and with precision the various acts of commission and omission to the notice of the petitioner so as to afford him an effective opportunity to meet the case of the department - the show cause notice is the foundation on which the department has to build up its case, therefore, if the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/ or unintelligible or do not disclose the real material upon which a proposed action is contemplated to be drawn, then it is sufficient to hold that the noticee was not given proper opportunity to meet the allegations indicated in the show cause notice - the fundamental principle of law is that adjudication has to be within the four corners of the allegations set out in the show cause notice - Any finding given beyond the terms of show cause notice will be hit by violation of principles of natural justice. The requirement for recording of reasons in the order and making the reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under article 226 of the Constitution so as to enable him to challenge the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations - furnishing of specific and intelligible reasons for the proposed transfer of the case is only a concomitant of the concept of reasonable opportunity enshrined in section 127 (1) and (2) - unless the assessee knows the precise reasons for the transfer, he would be handicapped in putting forth his objections effectively and in case the transfer of case is based on extraneous considerations then issuance of show cause notice becomes meaningless and is reduced to an idle formality. If prejudicial allegations are to be made against a person, he must be given particulars of that before hearing, so that he can prepare his defence - The fair procedure and principle of natural justice are inbuilt into the rules - show cause proceeding is meant to give a person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice - statutory authority must exercise its jurisdiction within the four corners of the law - unless a party is informed of the reasons for the proposed action, it would be impossible for the noticee to put-forth its point of view with regard to reasons for the proposed action of show-cause notice - It must be adequate so as to enable a party to effectively object/respond to the same - the show cause notices issued to the assessees were only an empty formality as the basis and foundation of the transfer of the cases is not the one for which the petitioners in fact had been asked to show-cause - The impugned order has been passed after taking into consideration the extraneous material which had never been brought to the notice of the petitioners prior to passing of the impugned order - Therefore, the action of the respondents is violative of principles of natural justice and fair play and therefore not sustainable in the eyes of law. Revenue had the jurisdiction to decide the case, but omitted to confront the assessees with the material in his possession and proceeded to pass impugned order which was founded on grounds at variance from the one in the show-cause notices which however, does not affect the ab-initio, jurisdiction enjoyed by the respondent in respect of the proceedings – thus, the order passed by respondent is not sustainable – Decided in favour of assessee.
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2014 (12) TMI 852
Benefit of investment on capital gains u/s 54EC(1) - Intention of the legislature is to limit the investment in the long term specified asset to ₹ 50 Lakhs or not - Whether the first proviso to Section 54EC(1) of the Act would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period – Held that:- The Tribunal rightly held that the exemption granted under proviso to Section 54EC(1) of the Act should be construed not transaction-wise, but financial year-wise - if an assessee is able to invest a sum of ₹ 50,00,000/- each in two different financial years, within a period of six months from the date of transfer of the capital asset, it cannot be said to be inadmissible - Following the decision in Commissioner of Income Tax v. C. Jaichander and another [2014 (11) TMI 54 - MADRAS HIGH COURT] - Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months - There is no cap on the investment to be made in bonds. The first proviso to Section 54EC(1) of the Act specifies the quantum of investment and it states that the investment so made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees - as per the mandate of Section 54EC(1) of the Act, the time limit for investment is six months and the benefit that flows from the first proviso is that if the assessee makes the investment of ₹ 50,00,000/- in any financial year, it would have the benefit of Section 54EC(1) - The intention of the legislature probably appears to be that the amendment should be for the AY 2015-2016 to avoid unwanted litigations of the previous years - from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. The decision of this Court in Areva T and D India Ltd. v. Assistant Commissioner of Income tax, [2008 (9) TMI 510 - Madras High Court] is not applicable to the facts of the present case, as in the decision the writ petitions filed for issuance of writ of declaration declaring that the conditions occurring in Notification No. 380 of 2006 F. No. 142/09/ 2006-TPL, dated December 22, 2006, along with the words 'subject to the following conditions, namely,' issued by the Central Board of Direct Taxes are ultra vires Section 54EC of the Income-tax Act, 1961, and arbitrary and violative of Articles 14 and 265 of the Constitution of India and consequently unenforceable , were dismissed as infructuous taking note of the subsequent amendment to Section 54EC of the Act, incorporating the limit on amount of investment in bonds in the section itself – thus, no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 851
Treatment of income – LTCG or business income – Property acquired for dealing in real estate investment - Held that:- Both the Commissioner and the Tribunal have rightly found that the reliance placed by the Revenue in the case of Rajputana Textile Agencies Ltd. v/s. CIT [1961 (4) TMI 7 - SUPREME Court] was misplaced - partnership firm of husband and wife undertook only one project and completed it only after more than eight years - They did not have any business -They realized that developing the property cannot be their business - The period of nine years coupled with the fact that barring one project nothing more was undertaken, leave alone, completed by the firm, that the property was acquired for dealing in real estate investment – thus, the order of the Tribunal is upheld and as such no substantial question of law arsies for consideration - Decided against revenue.
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2014 (12) TMI 850
Deletion of penalty u/s 271D – Whether Section 269SS is violated if there is a book entry through journal and when there is no actual payment in cash - Held that:- The Tribunal rightly was of the view that penalty cannot be imposed u/s 271D on the ground that merely passing a journal entry would not lead to violation of Section 269SS of the Act as there was no transfer of money - There was no cash transaction - the decision in Commissioner of Income Tax vs. Noida Toll Bridge Co. Ltd. [2003 (1) TMI 46 - DELHI High Court] followed - in view of the language of Explanation to Section 269SS, it has been held that the provision would apply to loan or deposit of money, and not mere formal entries resulting in debit or credit –thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 849
Surrender made can be considered as voluntary or not - Held that:- The Tribunal has confirmed the finding of fact which has been arrived at by the CIT (A) - The only submission which was urged was that in view of the lapse of two years between the date of original assessment and the date of revised computation, the surrender cannot be regarded as voluntary – there was no substance in the submission - the submission requires the Court to re-appreciate the factual material which is impermissible – as such no substantial question of law arises for consideration – Decided against revenue.
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2014 (12) TMI 848
Deletion of penalty u/s 271D – Revenue was of the view that assessee had taken unsecured loan of ₹ 8,52,71,500/- from M/s Oswal Agro Mills Ltd., otherwise than by an account payee cheque or bank draft in violation of Section 269SS – Whether Section 269SS is violated if there is a book entry through journal and when there is no actual payment in cash - Held that:- Bona fides of the transactions and book entries were accepted by the Revenue – the provision would not be violated –mere book entries would not result in violation of Section 269SS and accordingly penalty u/s 271D cannot be sustained - there were mere book entries which had resulted in an amount becoming due and payable by the assessee to M/s Oswal Agro Mills ltd. - M/s Oswal Agro Mills Ltd. had not given any loan or deposit in cash or by way of money to the assessee - M/s Oswal Agro Mills Ltd. had made payments to third party creditors of the assessee - in view of the payments to the creditors, book entries were made in the journal of the assessee, acknowledging their liability to pay the amount to M/s Oswal Agro Mills Ltd. – Decided against revenue.
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2014 (12) TMI 847
Estimation of NP @ 11.5% against 12.5% - Grant of deduction on account of partners’ capital and salary to partners and also interest and financial charges – Whether in an assessment made by an AO u/s 145 and 144, deductions provided for u/s 30 to 38 of the Act are permissible - Held that:- There is evidence to show that the AO himself was not consistent - If in fact, the exercise undertaken u/s 145 and 144 of the Act is so comprehensive, there was no occasion to allow any deduction at all - depreciation u/s 32 was allowed by him, in the order of assessment itself - Secondly, none of those two sections contain any provision to the effect that the deductions u/s 32 to 38 are deemed to have been made - once a provision of that nature is not incorporated u/s 144 and 145 of the Act, the contention of the revenue cannot be accepted - once it was held that even where the assessment is done u/s 145 of the Act, normal deductions are to be allowed, there is no way that the AO could have denied deduction of the salaries to the partners and interest on financial charges - It is not even mentioned that the claims are not factually correct – thus, the order of the Tribunal is upheld - Decided against revenue.
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2014 (12) TMI 846
Loss incurred on sale of shares business loss or not - Whether the Tribunal was justified in holding that the loss incurred on the sale of shares of Camelot a wholly owned subsidiary was a business loss when the investment made in the latter was not a business asset, but investment for obtaining an enduring benefit – Held that:- The Commissioner and the Tribunal concurrently found that the Camelot was fully owned subsidiary of the assessee and engaged in the manufacturing of tooth brushes exclusively for the sole client namely the assessee - Shares purchased of Camelot were also sold by the Assessee to one Ramesh Sukharam Vaidya for consideration of ₹ 45,00,000/- merely because it was made in the normal course of business, it cannot be termed as anything but long term investment - since the Assessee was relying on Camelot for manufacturing of tooth brushes to be traded by the assessee, the investment is nothing but a measure of commercial expediency to further business objectives and primarily related to the business operations of the Assessee - at no point of time the investment in Camelot was made with an intention to realize any enhancement value thereof or to earn dividend income - the investment was made to separately house the integral part of the business activity – thus, the loss of ₹ 5.50 crores is a business loss in the hands of the Assessee – the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 845
Deduction u/s 80-O - submission of survey report to foreign agencies - Place for rendering services - Whether the services are said to have been rendered within India or outside India – Held that:- Explanation (iii) to section 80-O places an important role - It maintains a distinction between the service rendered from India on the one hand, and the service rendered in India on the other - Even if the services are rendered from India, the activity comes within the purview of Section 80-O of the Act - The distinction is that it must be from and not within - The first part of it i.e. service rendered from India connotes that the agency that is rendering service is within India, but the beneficiary thereof is from outside - The second part, namely service in India, takes in its fold, a situation where the agency that is rendering of service and the one who avails it are in India - It is only the former that qualifies - the words outside India become relevant - the mere fact that the submission of report was within India, does not take away the matter from the purview of Section 80-O – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (12) TMI 844
Additions accepted and penalty proceedings initiated u/s 271(1)(c) – Penalty proceedings initiated against deemed dividend and agricultural income - Held that:- Assessee rightly contended that the penalty proceedings u/s 271(1)(c) cannot be pursued when the plea was specifically abandoned at the first instance without reserving any right pending appeal, the orders of both the first and second appellate authorities cannot be sustained, as the point had not been considered at all - the proceedings of the CIT(A) and the Tribunal only state that the explanation offered by the assessee was not correct, meaning thereby that both the authorities went into the merits of the explanation offered by the assessee on penalty and not on the issue whether the original authority had reserved his right to proceed u/s 271(1)(c) relating to the deemed dividend - since there is no consideration by the Tribunal on the ground raised by the assessee, the matter is to be remitted back to the Tribunal to consider the scope of the second penalty order – Decided in favour of assessee.
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2014 (12) TMI 843
TDS u/s 194B - paying price money to the owners of winning horses - it is contended that due taxes have already been paid by the recipients of Stake Money and a payment of the same by the petitioner Club prior to the payment of Stake Money would have led to double taxation which would be ultra vires to the provisions of Article 265 of the Constitution. - Maintainability of petition - Whether writ petitions are liable to be dismissed on the ground that petitioners have an alternate remedy of appeal u/s 246A. Held that:- When an alternate or efficacious remedy is available to a litigant same should be exhausted before invoking the extraordinary jurisdiction and when such jurisdiction is invoked the existence of adequate alternate remedy will be taken note of before issuing writ or exercising the extraordinary jurisdiction - where such alternate remedy is available it would be normal to refrain from exercising extraordinary jurisdiction unless there are good grounds - the exercise of extraordinary jurisdiction by the writ Court would depend upon variety of individual facts which is pre-eminently one of discretion - No inflexible rule can be laid down or in other words there cannot be any straight jacket formula in this regard. Where proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the High Court under Article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course – assessee cannot be held to be deductor u/s 201 since according to the revenue, assessee is required to deduct tax at source u/s 194B - it cannot be gainsaid by the revenue that writ petitions are not maintainable and the contention raised by the revenue is rejected. TDS deduction on payment of stake money to the owners of horses u/s 194B - Whether order passed by 3rd respondent u/s 201(1) of the Act is liable to be set aside on the ground of "stake money" paid by the Turf Clubs to the race horse owners cannot be construed as winnings from 'games of any sort' as defined u/s 2(24)(ix) and as such it would not fall within ambit of Section 194-B – Held that:- Assessee-clubs (hereinafter referred to as 'Turf Club') in the course of its activities of organising and carrying on horse racing, has been offering and paying price money to the owners of winning horses - Price money is also referred to as 'stake money' which is earned by the horse owners, whose horses win in a race - This money paid to the race horse owners would be in addition to the trophy that is given for some of the races - words namely, 'card game and other game of any sort' which came to be inserted in Section 194B was already in existence in the definition clause namely, Section 2(24)(ix) with effect from 01.04.1972 and Section 115BB from the year 01.06.1987 introduced by Finance Act, 1986 itself - explanation (i) and (ii) also came to be inserted to Section 2 (24) (ix) of the Act by Finance Act, 2001 with effect from 01.06.2001 which is an inclusive definition. Harmonious reading of the statutory provisions would indicate that from the year 1972 itself, the term 'other game of any sort' was taxable under the head 'income from other sources' and TDS was not attracted on such income - insertion of the words 'card game or other game of any sort' to Section 194B with effect from 2001 would have no bearing on payment of stake monies paid by the Turf Clubs to the race horse owners - Explanation (ii) to sub-section (ix) of Section 24 came to be inserted by Finance Act, 2001 - It is an inclusive definition - The term "or any other similar game" found in explanation (ii) will have to be ejusdem generis and so also the term "any other similar game" found in Section 2(24)(ix) of the Act - this position becomes clear from the budget speech of the Finance Minister which came to be rendered on the Floor of Parliament in the backdrop of amendment brought to Section 194B and Section 2(24)(ix). Explanation (ii) inserted by Finance Act, 2001 is perused and also read along with Section 194B it can be easily inferred the legislature has intended to bring such income earned by the prize winning members who compete with each other and win prizes in any game show or entertainment programme on television or electronic media and games similar to it - Hence, "stake money" which is paid to race horse owners on their horses being placed 1, 2 or 3 onwards in a horse race cannot form the genus of the words found in Explanation II to Section 2(24)(ix) nor it can be held that such winnings would fall within the words "and other game of any sort" found in Section 194B - amendment brought about by Finance Act of 2001 to Section 2(24) and 194B would have no bearing on the income earned from 'owning and maintaining horses'. In other words, the term 'any other similar game' found in explanation (ii) to Section 2(24)(ix) has to be held as inclusive definition and has to be read ejusdem generis and as such, activity of owning and maintaining horses cannot by any stretch of imagination fall in the definition of 'card game or other game of any sort' found in Section 194B - "stake money" or "prize money" paid by race clubs to horse owners would not attract the provisions of Section 194B of Income Tax Act, 1961 – assessee cannot be treated as 'assessee in default' u/s 201 of the Income Tax Act, 1961 – revenue is directed not to demand TDS from the petitioners u/s 194B of the Income Tax Act, 1961 since stake money is outside the purview of Section 194B – Decided in favour of assessee.
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2014 (12) TMI 842
Validity of reopening of assessment u/s 147 r.w section 148 – failure on the part of the assessee to disclose fully and truly all facts or not - Held that:- The reasons in support of the impugned notices do not in any manner indicate failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment - the reasons recorded that the original claim for deduction made by the Petitioner for AY 1998-99 was for ₹ 1.66 Crores and the AO allowed deduction of only ₹ 1.64 Crores while the claim for deduction in AY 1999-2000 was ₹ 2.69 Crores and the AO allowed deduction of ₹ 2.39 Crores – in Sesa Goa Ltd. v. CIT [2004 (5) TMI 54 - BOMBAY High Court] it was held that a subsequent decision cannot justify re-opening of an assessment beyond a period of four years from the end of the relevant AYs unless there is a failure to disclose fully and truly all facts necessary for Assessment - This is a jurisdictional requirement – thus, there was no failure on the part of the assessee to disclose fully and truly all facts for assessment –thus, the impugned notices dated 25th January, 2006 and subsequent impugned orders dated 7th March, 2006 for Assessment Years 1998-99 and 1999-2000 are not sustainable – Decided in favour of assessee.
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2014 (12) TMI 841
Nature of shares held by assessee – Scope of Section 2(42A) - Whether the shares held by the assessee is a Short Term Capital Asset or a Long Term Capital Asset – Held that:- A capital asset held by an assessee for not more than 36 months immediately preceding the date of transfer is treated as Short Term Capital Asset - the shares held in a company is a capital asset - shares held in a company which may be a private limited company, a public limited company or a listed company or any other security other than those shares listed in a recognized Stock Exchange in India, if it is held for a period of 12 months, then it ceases to be a Short Term Capital Asset and it becomes a Long Terms Capital Asset - the authorities have not kept this distinction in mind - They have misread the Section resulting in the interpretation which they have placed - the interpretation is contrary to the express words used in the statutory provision which runs counter to the intent behind the provision – thus, the order of the Tribunal is set aside and the assessee is entitled to the benefit of her capital asset being treated as Long Term Capital Asset – Decided in favour of assessee.
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2014 (12) TMI 840
Validity of notice u/s 158BC r.w Section 158BD – Direction made to assessee to file the correct return of the total income including the undisclosed income - Assessee contended that he and his minor children filed declaration under the Voluntary Disclosure of Income Scheme with regard to silver coins, silver utensils, gold sovereign and cash in his individual capacity and paid various sums of money as tax - Held that:- The assertions has been made for the first time at the stage of hearing of the petition - Such assertions has not been made anywhere in the pleadings – assessee has admitted that the search and seizure operation was conducted at the premises of Bishan Chand Mukesh Kumar as well as in the supplementary affidavit dated 28.7.2008. Such assertions can only be considered, if it is brought on record by means of an amendment application, but, the assessee insisted in arguing the matter without bringing such facts on record -The original record indicates the satisfaction of the authority in issuing the notice - during the course of search in the firm M/s Bishan Chand Mukesh Kumar, Delhi it was found that the firm was providing bogus accommodation for purchase of jewellery on commission basis – assessee did not sell the jewellery to M/s Bishan Chand Manoj Kumar has not been disputed - assessee has admitted that he and his minor children had sold silver utensils and gold coins to the firm M/s Bishan Chand Mukesh Kumar – there was no error in the issuance of a notice u/s 158-BD read with Section 158-BC – the order of the Tribunal is upheld – Decided against assessee.
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2014 (12) TMI 838
Validity of initiation of reassessment proceedings by the AO u/s.147 – Bar of limitation - Change in opinion by AO or not on same set of facts - Held that:- There is no bar for the CIT(A) to pass a consolidated order - doing so will not render the initiation of reassessment proceedings illegal or void - assessee has sought to invoke the condition laid down by the proviso to reopen an assessment completed u/s.143(3) of the Act after expiry of 4 years from the end of the relevant assessment year - the AY is 2003-04 and the period of 4 years from the end of relevant AY is 31.03.2008 - The proceedings u/s 147 were initiated by issue of notice u/s 148 on 14.02.2008 which is well within the period of 4 years from the end of the relevant AY - revenue rightly contended that in CIT v. Rinku Chakraborthy [2011 (1) TMI 1160 - Karnataka High Court] wherein held that the omission to form an opinion in the original assessment on the basis of existing material then, cannot be termed as change of opinion - for reopening assessment, it is not necessary that the information must be derived from external source of any kind or that there must be disclosure of new and important matters, subsequent to original assessment - Where income liable to tax has escaped in the original assessment due to oversight and inadvertence or a mistake committed by the AO, then he has jurisdiction to reopen the assessment - the argument advanced by the assessee that initiation of reassessment proceedings us/. 147 of the Act is on a change of opinion and therefore not valid, cannot be accepted – Decided against assessee. Deduction on computation of income from business expenditure incurred on Employee stock option plan – Held that:- As decided in assessee’s case wherein it has held that the expenses on account of ESOP is allowable expenses - while passing the order u/s. 143(3) of the Act, the AO has disallowed the sum and added the same to the total income of the assessee - in the assessment order u/s.147 of the Act no addition on account of ESOP expenses was made – Decided against assessee. Re-computation of relief u/s 10B in respect of deduction u/s 35(2AB) – Held that:- When the provisions of section 10A/10B of the Act are held to be exemption provisions, the provisions of section 35(2AB) of the Act which are contained in Chapter IV of the Act will not be applicable- Resultantly, the weighted deduction at 150% u/s. 35(2AB) of the Act will not be allowed while computing income of section 10A/10B unit - The 10A/10B unit will get only 100% deduction of revenue expenditure - The excess 50% allowed as deduction u/s. 35(2AB) of the Act has to be withdrawn as it will pull down the profits of the non-10A/10B unit which is taxable - Therefore, the withdrawal of 50% deduction allowed u/s. 35(2AB) of the Act while computing income of non-10A/10B unit has to be upheld both on general principles as well as by relying on the provisions of section 14A of the Act – the order of the CIT(A) is upheld – Decided against assessee. Allwoability of deduction on expenses u/s 35(2AB) – Whether assessee furnished concrete evidence regarding commissioning of the machine & carrying out the research activity during the year using those machines – Held that:- Following the decision in Belpahar Refractories Limited Versus Commissioner Of Income-Tax [1993 (11) TMI 52 - ORISSA High Court] it has been held that expenditure incurred during the previous year is eligible for deduction u/s. 35 of the Act and the fact that the liability in respect of expenditure incurred during the previous year was discharged by the assessee by actual payment in a subsequent assessment year cannot be the basis to deny the claim of the assessee for deduction u/s. 35 of the Act - the aforesaid judicial pronouncements which are rendered in the context of section 35(2), the wordings of which are in pari materia to that of section 35(2AB) of the Act, there is no substance in the appeal by the revenue – Decoded against revenue. Consequential relief not provided - depreciation on energy saving device disallowed – Held that:- The assessee seeks consequential relief in respect of depreciation on energy saving devices disallowed in the previous AY - In the A.Y. 2005-06, the assessee had claimed depreciation at 100% on energy saving devices of the value of ₹ 13,75,111. Since these machineries were purchased after 1.10.2004, depreciation was restricted to 50% - The assessee in this assessment year had claimed the remaining 50% depreciation which was not allowed by the AO - Despite a specific ground, the CIT(Appeals) did not adjudicate the issue – this, the CIT(A) is directed to consider the claim of the assessee – Decided in favour of assessee. Denial of carry forward of unabsorbed depreciation – Eligibility for relief u/s 10B - Whether the provisions of Sec.10B of the Act are deduction provisions or exemption provisions will assume great importance - Held that:- If the provisions are considered as exemption provisions then they will not enter the computation of total income and therefore the loss of the eligible unit cannot be set off against the profits of the non-eligible unit - the issue has already been decided in Commissioner of Income-tax Versus Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] - the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit – Decided in favour of assessee.
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2014 (12) TMI 837
Addition of unexplained investment in bank account u/s 69 -Whether the amount deposited in the bank account comprises mainly of loan received from business associates - Held that:- Assessee rightly submitted that deposits amounting to ₹ 10,43,994/- in the account were made by assessee during the AY 2005-06 and therefore addition cannot be made during the year under appeal - therefore addition cannot be made during the year under appeal for unexplained investment – thus, the addition made by CIT(A) is set aside – Decided in favour of assessee. Addition of ₹ 50,000/- on unexplained expenditure – Held that:- Assessee rightly submitted that there were totaling/arithmetic error by AO while making the addition - relevant pages of paper book correctly shows that there was totaling error by AO while taking the purchases of the assessee amounting to ₹ 15,69,618/- as per the seized documents - the purchases as per books of accounts and as per seized documents were of ₹ 15,19,618/- only and therefore no addition was called for – thus, the addition made by CIT(A) is set aside – Decided in favour of assessee.
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Customs
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2014 (12) TMI 861
Denial of refund claim - effective date of change in the rate of duty on export goods - Notification No. 77/2008 dated 13/06/2008 - Held that:- In respect of six refund claims on which also the respondent has discharged export duty liability, Revenue hadsuo motu sanctioned refund without taking the ground that the original assessment had not been challenged. The only ground taken in the Assistant Commissioner's order for refusing the refund in respect of two shipping bills was Notification 77/2008 dated 13/06/2008 is effective from the midnight of 13/06/2008. It is a settled position in law that a Notification issued on a particular date takes effect from the said date unless otherwise specified in the said Notification. In the present case, there is no other date specified in the Notification as to the date of its effect. Therefore, Notification 77/2008 dated 13/06/2008 is effective from 00 hours of 13/06/2008. Since 'Let Export Order' has been given on 13/06/2008, the rate of duty relevant for assessment would be the rate prevalent on 13/06/2008. Consequently, the respondent would be eligible for the benefit of the said Notification. In these circumstances, we do not find any infirmity in the order passed by the lower appellate authority. Revenue cannot at the same time take the view that in respect of six refund claims which they had sanctioned, the assessment order need not be challenged and the party would be entitled for the refund whereas in respect of two shipping bills only, the question of non-challenging of assessment order arise. In any case, this was not the ground on which refund claim had been rejected. Revenue has not challenged the sanction of six refund claims by the original refund sanctioning authority. Therefore, they cannot be found to entertain a different ground for rejection of refund claim in respect of two refund claims alone. - Refund granted.
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2014 (12) TMI 860
Penalty u/s 112 - Confiscation of goods - High toxic goods - Commissioner upheld redemption fine and penalty - Held that:- No merit in the observation of the Commissioner (Appeals). Merely because there was a checking clause by quality surveyor, the same does not lead to indicate any malafide on the part of the importer. Further, we have to keep in mind that quality inspection and certification is done at the exporter’s end and the importer in India has no hand in the same. Further, it is also on record that waste paper was also in the nature of road sweeping as also toxic plastic substance. In the absence of any evidence on record to reveal that the appellant was a party to the presence of such plastic contents in the consignment of waste paper, the Revenues finding are based upon assumption and presumptions for which the appellant cannot be penalized. Inasmuch as the appellant is not interested in clearance of the goods, we set aside the penalty imposed upon him by modifying that part of the impugned order only - Decided in favour of assessee.
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2014 (12) TMI 859
Stay application - Recovery of incineration charges of the waste oil contained in 39 containers - Held that:- Tribunal granted stay in respect of dues adjudged namely, duty, interest and penalty. There is no provision for grant of stay under Rule 41 of the CESTAT (Procedure) Rules, 1982. In the present case, the issue relates to recovery of incineration charges and there is no provision under the Custom Act to stay recovery of such charges. Further, the recovery is sought to be made in terms of the Apex Court order. Therefore, this Tribunal has no jurisdiction, whatsoever, to deal with this matter - Decided against the assessee.
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Service Tax
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2014 (12) TMI 876
CENVAT Credit - Goods Transport Agency Service - Held that:- Rule 3 of the Cenvat Credit Rules, 2004 pertains to Cenvat credit. Sub-rule (1) thereof allows the manufacturer or purchaser of final products or provider of output service to take credit of Cenvat of various duties specified therein. Sub-rule (4) of Rule 3 of the said Rules provides that the Cenvat credit may be utilized for payment of various duties specified in clauses (a) to (e) thereof; clause (e) pertains to “service tax on any output service”. A combined reading of these statutory provisions would, therefore, establish that though the assessee was liable to pay service tax on G.T.A. Service, it could have utilized Cenvat credit for the purpose of paying such duty. In view of the decisions of Punjab and Haryana High Court and Delhi High Court noted [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT], we do not find any error in the view of the Tribunal - Decided against Revenue.
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2014 (12) TMI 875
Waiver of pre-deposit of service tax, interest and penalty - Input service credit on the medical insurance paid for the employees - for the period prior to 1.4.2011 input service credit on insurance premium paid for employees is admissible for input service. Therefore, the applicant has made out a case for complete waiver of pre-deposit. Accordingly, we waive the requirement of entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeals. - Following decision of KPMG Vs. Commissioner of Central Excise, New Delhi reported in [2013 (4) TMI 493 - CESTAT NEW DELHI] - Stay granted.
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2014 (12) TMI 874
Waiver of pre-deposit of penalties u/s 77(2) - Held that:- during the relevant period, there was no provision under the Finance Act, 1994 to impose personal penalties on the directors of the company and the said provisions came into force with effect from 10.05.2013, therefore, personal penalty is not imposable - Following decision of Diwan Rahul Nanda [2012 (7) TMI 470 - CESTAT, MUMBAI] - Stay granted.
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2014 (12) TMI 873
Waiver of pre deposit - Man power recruitment services - Held that:- agreement, between the appellant and their foreign entity, who has sent employees to the applicant but the agreement between the parties clearly shows that the employees which are sent to the applicants are on principal to principal basis and the applicant is having full control over the employee and all the salaries of the employees are paid by the applicant directly to the employee only. - prima facie we are of the view that the applicant does not fall under the category of manpower recruitment service under the reverse charge mechanism. Therefore, the amount paid by the applicant is sufficient in compliance with Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, we waive the requirement of pre-deposit of balance amount of service tax, interest and penalty and stay recovery thereof during the pendency of the appeal. - Stay granted.
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2014 (12) TMI 872
Maintainability of appeal - Non compliance of pre deposit order - Held that:- appellant has already paid a sum of ₹ 3.67 lakhs and same has been appropriated in the impugned order, therefore appellants are not required to make any further pre-deposit. Accordingly, we hold that the appeal is maintainable. - Decided in favour of assessee.
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2014 (12) TMI 871
Waiver of predeposit of tax - Commercial and Industrial Construction Service - Held that:- Exemption Notification No. 45/2010-ST dated 20.07.2010 is relating to the transmission and distribution of electricity provided by the service provider to the service recipient. The Tribunal in the case of K. Shanmugavelu (2014 (7) TMI 936 - CESTAT CHENNAI), allowed the appeal in respect of contract with TNEB to facilitate erection of electricity transmission tower. In the present case, it is construction of buildings. Therefore, the said case law and the exemption Notification, prima facie, would not apply to the facts of the present case. Regarding demand of tax on Gandhigram Rural University, we find from the impugned order that the Gandhigram Rural University was collecting certain fees prescribed for imparting skills/ working knowledge on different fields. The case of Viswanathan Constructions Pvt. Ltd. (2013 (12) TMI 47 - CESTAT CHENNAI), as relied upon by the Ld. Advocate is in respect of construction of building by local municipal authorities for training of industrial workers, prima facie, would not apply to the facts of the present case - Partial stay granted.
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2014 (12) TMI 866
Parallel assessment proceedings for the same transactions, same period and in respect of the same amount by different Jurisdictional authority i.e. Delhi - Assessee was registered at Allahabad - Rent-a-cab-operator service - Penalty u/s 76 & 77 - Held that:- There is no dispute at all that the respondent no. 3 (at Delhi) has initiated parallel assessment proceedings against the petitioner and passed ex-parte order in original dated 22.5.2008 in respect of the same transactions and for the same period for which the petitioner was assessed by the jurisdictional assessing authority i.e. respondent no. 2. The only objection taken by the respondents department is that since the petitioner has failed to challenge within limitation the unauthorized ex-parte order dated 22.5.2008 passed by the respondent no. 3 and appeal against it was also rejected on the ground of delay and as such the demand created under the said orders cannot be withdrawn and is liable to be recovered from the petitioner. Jurisdiction with respect to recipient of services - Held that:- Section 66 is charging section which provides for levy of tax on the value of taxable service rendered by a person to another. Section 67 provides for valuation of taxable service. Section 68 provides that every person providing taxable service shall pay service tax at the prescribed rates and in the manner prescribed. Neither the Act nor the rules provides for any double assessment nor it can be permitted in view of the fact that the transaction in question have been assessed by the jurisdictional authority. Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. Thus the order dated 22.5.2008 passed by the respondent no. 3 was a complete nullity and therefore, the demand created thereunder was not legally recoverable from the petitioner. If an authority or court lacks inherent jurisdiction to pass a decree or order, the decree or order passed by such authority or court would be non est and void ab-initio. The defect of jurisdiction goes to the root of the matter. It strikes at the very authority of the court to pass the order. Competence of a court to try a case goes to the very root of the jurisdiction, and where it is lacking, it is a case of inherent lack of jurisdiction. Such defect has always been treated as basic and fundamental. Since the respondent no. 3 was not the assessing authority of the petitioner and has passed the impugned order dated 22.5.2008 without jurisdiction and without authority of law and also since the petitioner was assessed by the jurisdictional assessing authority in respect of the same transactions and for the same period and as such the impugned order dated 22.5.2008 and all consequential proceedings initiated by respondent no. 3 were nullity. It may be clarified that there is difference between irregular or wrong order and the order passed without jurisdiction. An erroneous and illegal decision is not necessarily void but if an order is passed by an authority without jurisdiction or without authority of law then it is void. Impugned order dated 22.5.2008 was wholly without jurisdiction and same was passed by the respondent no. 3 in respect of the same transactions and for the same periods with respect to which the petitioner was assessed by the jurisdictional assessing authority i.e. respondent no. 2; I hold that the impugned order dated 22.5.2008 is a complete nullity. The order dated 10.10.2013 passed by the respondent no. 3 rejecting the recall application also cannot be sustained - The proper course for the respondent no. 3 was to recall the order dated 22.5.2008 when wholly undisputed facts came to his notice that respondent no. 2 is jurisdictional assessing authority who has assessed and passed assessment order in respect of the same transactions and for the same periods. It was a case of creation of a demand of service tax without jurisdiction. The respondent no. 1 in its order dated 30.1.2014 and respondent no. 5 in the short counter affidavit dated 16/18.7.2014 have accepted these facts. - Decided in favour of assessee.
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Central Excise
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2014 (12) TMI 869
Denial of rebate claim - procedure prescribed under the Notification 21/2004(NT) dated 06.09.2004 had not been followed - non submission of original and duplicate copy of Form A.R.E.-2 - procurement of the input from a firm who was neither a registered manufacturer nor a registered dealer with the department - Held that:- Rebate sanctioning authority shall not reject the rebate claim on the ground of non-submission of original and duplicate copies of ARE-1 forms if it is otherwise satisfied that conditions for grant of rebate have been fulfilled. - Following decision of UM Cables Ltd. Versus Union of India And Others [2013 (5) TMI 459 - BOMBAY HIGH COURT] In order to avail benefit of import stage rebate under notification No. 21/2004-CE (NT) the exporter needs to follow certain condition and procedure one of the substantial requirement was to procure the goods directly from manufacturer place. In this case, M/s Sudhir Gensets Limited raised invoices to M/s. Neptro Renewable Energy India Pvt. Ltd. on 9.02.2010, while M/s Neptro has raised invoices to the applicant on 26.02.2010. The applicant could not give any satisfactory explanation regarding such gap of time in issuance of invoices to support their contention that goods were procured directly from manufacturer. As such applicant failed to produce any evidence to show that they procured the goods directly from factor premises. Under such circumstances, Government finds that the applicant failed to fulfill substantial condition of the said notification No. 21/2004-CE (NT) and therefore, rendered themselves liable for rejection of this rebate claim. - Matter remanded back - Decided partly in favour of assessee.
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2014 (12) TMI 868
Rebate claim - Bar of limitation - Held that:- As per explanation (a), to section 11B, refund includes rebate of duty of excise on excisable goods exported out of India or excisable materials used in the manufacture of goods which are exported.' As such the rebate of duty on goods exported is allowed; under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-CE(NT) dated 06.09.2004 subject to the compliance of provisions of section I1B of Central Excise Act, 1944." The explanation (a) of section 11B has clearly stipulated that refund of includes rebate of duty on exported goods. Since the refund claim is to be filed within one year from the relevant date, the rebate claim is also required to be filed within one year from the relevant elate. There is no ambiguity in section 11B of Central Excise Act, 1944 read with Rule 18 of the Central Excise Rules, 2002 regarding statutory time limit of one year for filing rebate claims and the relevant date for this purpose. - rebate claim filed after one year being time barred cannot be sanctioned. When the rebate claims are filed after stipulated one year as mentioned in Section 11B of the Central Excise Act, the rebate claims are liable to be rejected on limitation. Though there is specific provision regarding time limit; of Bing rebate claim, there is no specific provision of filing rebate claim within 1 year from date of payment of duty as contested by the applicant. Under such Circumstances, Government finds that original authority has rightly rejected this rebate claim which was filed beyond stipulated one year period and is clearly hit by limitation clause. As such it is rightly rejected and government does not find any infirmity in the impugned order-in-appeal upholding the rejection of said claim as time barred. - Decided against assesse.
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2014 (12) TMI 867
Validity of order of settlement Commission - refusal to grant any relief and requiring the petitioner to avail the remedies under the Act - Held that:- The Commission, in the instant case, arrived at the conclusion that the petitioner is not extended the cooperation by undertaking comparison of the facts and figures mentioned in the application on the one hand, and those in the report submitted by the Commissioner, on the other. This could have been certainly appreciated if only the Commission furnished a copy of the report to the petitioner enabling it to offer its own remarks. When the investigation is into the affairs of the petitioner, the only party which is immediately affected is the petitioner itself. Whatever may be the entitlement of any other agency to receive copy of such report, an agency which is immediately affected cannot be denied a copy thereof. If the report is so inaccessible or confidential for that very reason, it should be kept outside the purview of the adjudication also. - order of the Commission suffers from a serious infirmity on account of non-furnishing of the report of the Commissioner to the petitioner - Matter remanded back - Decided in favour of assesse.
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2014 (12) TMI 865
Denial of benefit of the Notification No.175/1986 CE, dated 1.3.1986 - Goods cleared in brand name of other companies - Imposition of penalty - Held that:- The plea of the appellant does not merit consideration for the simple reason that the original order is composed of three components. The first two components are in relation to the use of the brand names PAL and SUZUKI , against which an appeal was filed by the appellant and that challenge was dismissed by the Tribunal confirming the finding of the Collector of Central Excise. With regard to the third component, namely, goods cleared with the brand name containing the word COX at the top and the word MARUTI at the bottom, the Revenue has chosen to file an appeal against that portion of the order of the Collector of Central Excise whereby benefit of exemption under Notification No.175/86, dated 1.3.1986 was given to the appellant and that appeal of the Revenue was allowed and the Tribunal held that the appellant herein is ineligible for the benefit of exemption under Notification No.175/86, dated 1.3.1986. Symbol/brand name, extracted above, shows that the word MARUTI has been used along with the word COX . From a reading of the above explanation, what is required to be established is that by usage of such symbol/brand name, there should be a connection with the brand name of some other person. In the case on hand, the usage of the symbol/brand name of MARUTI is apparent. Mere absence of the letters MARUTI in Devanagari, as used by M/s.Maruti Udyog Ltd., does not make the case of the appellant any better as the explanation provides for such interpretation in respect of use of name or mark such as symbol, monogram, labels, etc., which show indication in respect of the specified goods, which we find is apparent in the case on hand. Therefore, the Tribunal was justified in upholding the department's contention that the benefit of notification will not be available in respect of hub caps and show caps bearing the symbol/brand name MARUTI . - Decided against assessee.
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2014 (12) TMI 864
Condonation of delay - meager delay of 23 days - Delay caused since Committee of Commissioners were engaged in Budget work - Held that:- Reasonable cause for delay as explained by the Department is justified. In any event, we find that the delay is marginal and the Department is serious in pursuing the matter at the earliest point of time. We are not commenting on the plea of frequent power cuts, which factor need not be questioned, as it is apparent that we are suffering from shortage of power for a long number of years. We find that the Tribunal was not justified in dismissing the application on the plea of delay of 23 days. - Following decision of The Collector, Land Acquisition v. Katiji [1987 (2) TMI 61 - SUPREME Court] - Delay condoned.
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2014 (12) TMI 863
Penalty u/s 11AC - Confiscation of seized goods under Rule 173Q(2) of Central Excise Rules, 1944 - penalty for contravention of Rule 173Q of the Central Excise Rules - Interest u/s 11AB - Held that:- In view of the categorical statement of law and taking note of the specific provision of Section 11AC where there is a specific mandate that the assessee shall be liable to pay penalty, the mere payment of duty even after the show cause notice is not a ground to waive penalty. Hence, the Tribunal is not justified in deleting the penalty imposed under Section 11AC of the Central Excise Act. Such a mandate under the Statute cannot be given a go-by by the Tribunal. We therefore, answer the question of law in favour of the Revenue - Decided in favour of Revenue.
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2014 (12) TMI 862
Condonation of delay - Inordinate delay of 1409 days - Held that:- Only reason stated is that the delay is neither willful nor wanton, but due to the above stated facts. We find that the facts narrated clearly show that at no point of time the petitioner showed sincerity in pursing the matter by participating into the adjudication proceedings. Time and again on the basis of plea of some return of unrelied upon documents, he has sought for postponement of the proceedings or filed petitions to scuttle the adjudication process. No doubt at the first instance, the Tribunal showed some indulgence calling upon the parties to give relied upon and unrelied upon documents, but after the first round of litigation, we find that the petitioner seems to be harping on the same issue again and again much to the annoyance of the Original Adjudicating Authority, who passed the order on 17.12.2009 as well as the Tribunal, who had to suffer the consequence of repeated application under Rule 41 of the CESTAT Procedure Rules. The Tribunal was very much annoyed on the conduct of the petitioner which we have already extracted above. In fact, we find that by jumbling various dates and events, the petitioner was attempting to confuse this Court as if there was a bona fide reason for the delay. After thorough examination and wasting the valuable time of this Court for more than 1 = hours, we are able to find that there is absolutely no justification for the delay of 1409 days and the entire exercise seems to be to further scuttle the Department's demand for duty, penalty and interest. Petitions for condonation of delay appear to be a dilatory tactics and there is no bona fide reason for the inordinate unexplained delay of 1409 days. In any event, the explanation given appears to be self-serving and to defeat the adjudication process. The time of the Original Adjudicating Authority, the Appellate Tribunal and this Court is wasted in this process, which we find lack bonafides on the part of the petitioner. The delay of 199 days in filing the appeal as against the order of the Tribunal dated 27.2.2013 also is based on the same plea and none of the documents relied upon in the typed set has been enclosed and the delay has been casually stated in the affidavit - In both the cases, we find that the plea for condonation of delay is not bona fide, but with the defiant intention to delay the process of recovery. We are constrained to dismiss both the petitions with cost. - Condontion denied.
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2014 (12) TMI 839
Denial of refund claim - Deduction of freight and insurance etc from assessable value of goods - By paying duty on the higher assessable value, they have claimed refund of the excess amount of duty - Held that:- as much as the sale was on FOR destination basis and the invoices mentioned only one consolidated FOR price, the said price has to be taken as the proper assessable value and the duty paid by the assessee has to be taken as the correct quantum of duty - invoices are on FOR destination basis and there is only one composite price charged by the appellants from its customers. As such, by adopting the ratio of above referred decision, we are of the view that the impugned orders are required to be set aside - Following decision of M/s Ultimate Flexipack Ltd. vide [2014 (4) TMI 654 - CESTAT NEW DELHI] - Decided in favour of assesse.
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CST, VAT & Sales Tax
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2014 (12) TMI 870
Collection of VAT by way of TDS - Constitutional Validity of provisions of section 34 of U.P. Value Added Tax Act, 2008 and notification dated 7 October 2013 – Claim of petitioner being private unaided institutions - Section 34 violates Article 14 of the Constitution and suffer from arbitrariness or not – Held that:- The validity of legislation cannot be determined on the basis of its crudities or inequities, particularly when matters of classification in fiscal legislation are involved - The legislature is not bound to bring within the fold of a provision for the deduction of tax at source, all possible transactions in order for the collection or recovery machinery to be lawful and valid - It is open to the legislature to impose a requirement that the liability to deduct tax at source would be attracted in those cases where the legislature or its administrative agency appointed under the law believes that the possibility for evasion must be plugged - Here again, it would be impossible for the legislature to envisage a situation where every possibility for evasion is ruled out - the legislature, by conferring a degree of latitude or discretion on the executive, does not breach the requirement of a valid classification under Article 14 of the Constitution. Shashikant Laxman Kale And Another Versus Union of India And Others [1990 (7) TMI 3 - SUPREME Court] it has been held that in a taxing statute a greater degree of latitude in matters of classification is permissible, noted that in order to tax something it is not necessary to tax everything - prior to the notification which was issued on 7 October 2013, an earlier notification was issued u/s 34(1) of the VAT Act on 4 March 2008 under which a liability to deduct tax at source was imposed on every person responsible for making payment to a contractor in discharge of a liability under a works contract - The categories of works contracts covered by the notification included transactions between a contractor and several other entities including a University, educational institution and training centre - when the legislation has conferred upon the State a discretion to issue a notification to bring within the purview of section 34(1) certain specific transactions where a liability to deduct tax at source would arise, it is not necessary for the State, in order to sustain the validity of its action, to impose such a liability on every transaction with every conceivable entity - The notification cannot also be read down as sought. The challenge either to the validity of the provisions of section 34(1) or to the validity of the notification dated 7 October 2013 cannot be accepted - the statutory provision is not a charging provision but a provision for collection and recovery of tax - The legislature was entitled to leave it open to the State to fasten a requirement of deducting tax at source in certain specified situations or transactions - sufficient safeguards have been introduced particularly in sub-sections (2) to (6) of section 34, as noted earlier in the course of the judgment - The notification which has been issued on 7 October 2013 has not transgressed either the parameters set out in section 34(1) or the norms of Article 14 - The challenge on the ground that there has been a violation of Article 14 failed – Decided against petitioner.
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