TMI Tax Updates - e-Newsletter
December 4, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax:
Waiver of interest u/s 220(2A) - as per section 220(2A), the authorities are empowered to reduce or waive the interest amount - thus, the revenue is directed to reduce the amount of interest - HC
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Income Tax:
Conversion of a firm in Part-IX Company - resultant company is further merged with another company - violation of proviso to sec. 47 (xiii) r.w.s 47A(3) - The capital gain shall be assessed in the hands of successor company in the previous year in which violation had taken place - AT
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Income Tax:
Transfer of assessee’s business – Slump sales - non-transfer of the cash and bank balances of the three firms would not remove the assessee’s case from the purview of section 50B, which envisages the transfers of all the assets and liabilities, so that exclusion of even one may operate to preclude the same. - AT
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Income Tax:
Reopening of assessment u/s 147 - merely because a new incumbent AO has a different view, the Revenue cannot take benefit of its own wrong and arbitrarily assume that there is escapement of income, without bringing on record any fresh tangible material - AT
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Income Tax:
Express provision of Section 50-C enabling the revenue to treat the value declared by an assessee for payment of stamp duty, ipso facto, cannot be a legitimate ground for concluding that there was undervaluation, in the acquisition of immovable property - AT
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Income Tax:
Land was purchased and sold by the assessee and two other co-owners for and on behalf of VEPL - Therefore, the income thereof was not liable to be assessed in the hands of the assessee- AT
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Customs:
Import of goods for manufacture of specified goods at concessional rate of duty - demand raised and confirmed under Section 11A of the Central Excise Act instead of Section 28 of the Customs Act, 1962 are not valid being not issued under proper provisions of law - AT
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Service Tax:
Maintainability of appeal - Classification of service - The issue involved in the present case has, therefore, a direct and proximate relation to the rate of service tax and the value of services and as such, this court lacks the jurisdiction to entertain this appeal - HC
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Service Tax:
Validity of levy of service tax on Money changing activity - Legality of valuation rules - conversion of foreign currency to Indian rupee - banking and other financial services - amounts of foreign currency remitted to India - writ petition dismissed - HC
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Central Excise:
Availment of CENVAT Credit - Returned goods - provision of Rule 16 does not require maintenance of any records - submission of the Revenue is based upon the statement of the employee - demand set aside - AT
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Central Excise:
Manufacture of patta and patti - Compounded levy - Appellant failed to succeed on its claim of SSI exemption benefit, due to unregistered status and due to dubious practice followed - AT
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Central Excise:
Classification of metal rolling mills and its various parts - items would be correctly classifiable under sub-heading No. 8455.90 as parts of rolling mills and not under heading No. 8428.00/8428.90 - AT
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (12) TMI 107
Computation of sums under the component non-compete – Held that:- The Tribunal has rightly appreciated the matter in the factual background - the Tribunal referred to the agreement under which the transfer took place together with the clauses - in the teeth of composite arrangement and of this nature it would not be possible to sustain the exercise of the AO and the Commissioner - when there is no specific consideration paid as non-compete amount, that the exercise carried out by the AO and upheld by the Commissioner to the above extent was interfered with – the order of the Tribunal is upheld – as such no substantial question of law arises for consideration - Decided against revenue.
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2014 (12) TMI 106
Waiver of interest u/s 220(2A) - Whether the assessee is entitled to waiver of interest, which has been levied by the Department for belated payment of the income tax dues – Held that:- The assessment was completed, for the AYs 1977-78 and 1978-79, when the assessee's father was alive – the petitioner was a partner of the firm, though at the time when he was admitted as a partner, he was a minor - the petitioner co-operated with the Department and did not contest the matter, but sought for information, such as copy of the assessment order, etc. - This was not furnished, despite the petitioner's pointing out that the matter has been racked up, after a period of 27 years - the petitioner sought for waiver of the demand on interest, for the subsequent period, i.e., January 1990 to October 2005. In B.M. Malani v. CIT [2008 (10) TMI 2 - SUPREME COURT] it has been held the genuine hardship inter-alia means a genuine difficulty, that per se would not lead to the conclusion that a person having large assets would never be in difficulty as he can sell those assets and pay the amount of interest levied - when the Department, for the first time issued the demand on the petitioner in the year 2005, the petitioner did not contest the demand, though he submitted representations requesting for furnishing of details - the tax and interest up to that date (January 1990) was paid in the year 2005 - the revenue have not placed any material to show that as to why no action was initiated for 27 years - the relevant date for considering the genuine hardship was also not taken into consideration - the question of demanding interest for the period up to 2005 does not arise - the petitioner paid the tax and interest only in October 2005 – as per section 220(2A), the authorities are empowered to reduce or waive the interest amount - thus, the revenue is directed to reduce the amount of interest at ₹ 25,000 – decided partly in favour of assessee.
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2014 (12) TMI 105
Estimation of income - Telescopic benefit not considered – Books of accounts not maintained - Whether the investment in assets and expenditure had been incurred out of disclosure made after search operation - Held that:- When both the receipts and withdrawals from the Bank Account have been taxed the Tribunal found that this is a case of double taxation and which could not have been permitted in the given facts and circumstances - the Assessee approached the CIT(A) and though it raised several grounds including liability of M/s. Sonal Fin. Cap. Pvt. Ltd. and addition of on account of unexplained stock these were not pressed and withdrawn - the balance sum and in relation to which the claim for telescopic has been examined reveals that there is no substance in the contention of Mr. Ahuja that without any application of mind or materials the claim of telescopic benefit has been allowed. The Tribunal has extensively referred to the AO’s order and the exercise carried out by him - with regard to expenses relating to service apartment at Hotel Hilton a similar exercise is carried out and the assessee's contentions have been accepted - with regard to expenditure on household items that aspect also has been considered and the Tribunal concluded that the declaration of income is more than sufficient to take care of the expenditure - every single item or addition has been considered and with extensive reference to the findings of the Assessing Officer and that of the Commissioner - The finding of double taxation has been rendered after examining the matter in details namely, scrutiny of the bank accounts - either the inflows have been explained with evidence and then the question of taxing the withdrawals will not arise or because there is no evidence, the taxing of the deposits in the bank was justified – Decided against revenue.
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2014 (12) TMI 104
Deduction u/s 80HH and 80I Held that:- What becomes entitled to claim exemption u/s 80HH of the Act, is an industrial undertaking, as is evident from the very heading of the Section, than the nature of activity taken up by it - once the assessee answers the description of an industrial undertaking, it is immaterial whether it is manufacturing, or producing or processing - The amount that qualifies for deductions is the profits and gains of such an undertaking to the extent of 20% - Things would have been different altogether, had the deduction been restricted only to the activity of manufacturing - the activity was not restricted to the one of multiplying the yarns that were already produced by someone else - the respondent has been manufacturing yarn, from cops, and then, multiplying the yarns, depending upon the customer demand there is no ground to interfere in the order of the Tribunal Decided against revenue.
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2014 (12) TMI 103
Validity of notice u/s 158BC - Valuation of cost of construction of house – Reference made to DVO for estimated cost of construction – Held that:- The occasion to interfere with the proceedings under the Act in a writ petition under Article 226 of the Constitution of India would arise, if only the notice is issued or the order is passed by an authority, who is not conferred with the jurisdiction under the Act - what is challenged is a notice requiring the petitioner to file a block return - as a matter of fact, the assessee filed such a return with his own effort to contradict the facts alleged against him on the basis of the search - The mere fact that it is filed under protest does not make much of difference - these are the matters, which can be dealt with before the concerned Forum under the Act. Satisfaction recorded or not – Held that:- In Manish Maheshwari vs. Asst. Commissioner of Income-Tax [2007 (2) TMI 148 - SUPREME COURT OF INDIA] it has been discloses that they arose out of the regular appeals preferred u/s 260-A of the Act before the High Court and other proceedings under the Act before the concerned authority earlier thereto –Decided against assessee.
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2014 (12) TMI 102
Claim of set off of unabsorbed depreciation from another company – Held that:- Assessee has not amalgamated M/s. GVK Novopan Industries P. ltd. - Provisions of section 72A relating to carry forward and set off of accumulated losses and unabsorbed depreciation allowance in amalgamation or demerger will apply only in the case of amalgamation of companies or demerger of companies - amalgamation is in relation to companies, means merger of one or more companies with any other company - in the scheme of arrangement, there is only one company which got merged with assessee company by way of amalgamation i.e., Novopan Furniture Ltd. - as far as GVK Novopan Industries P. Ltd., or GVK Petro Chemicals P. Ltd., are concerned, those companies still exist with its own identity and has not amalgamated into assessee company - even though part of the properties were acquired by assessee company, this can only be considered as acquisition by way of sale or as a scheme but not by way of amalgamation - provisions of section 72A pertaining to carry forward depreciation of M/s. GVK Novopan Industries P. Ltd., cannot be set off in assessee’s case, as that company is in existence and has not amalgamated and it only can claim carry forward and set off depreciation available to it – Decided against assessee. Claim to increase WDV of assets acquired by unabsorbed depreciation – Held that:- Assessee has only acquired the manufacturing units and has not amalgamated the two companies, the question of enhancing the WDV does not arise - assessee has acquired assets and liabilities and has issued shares in lieu thereof - Therefore, the cost at which the assets were acquired, was the cost of Assets for the purpose of depreciation - The contention that WDV of assets should be increased by unabsorbed depreciation of M/s. GVK Novopan Industries P. Ltd., which has not amalgamated with the company cannot be accepted – Decided against assessee. Claim of loss of surrender of lease – Held that:- The unit which assessee has proposed to set up has inextricable linkage with the existing business of assessee - following the decision of Hon’ble Bombay High Court in the case of CIT vs. ESSAR Oil Ltd. [2008 (10) TMI 387 - Bombay High Court] such expenditure was allowed as revenue expenditure - The expenditure on project report, initial expenditure for travelling, salary etc., incurred on the project could have been claimed as revenue expenditure by assessee as there is no dispute on expenditure - assessee company paid an amount of ₹ 1.72 crores as an advance towards land - since the expenditure is for acquiring land which was not acquired subsequently, the expenditure is correctly categorised as capital expenditure and the loss thereof, is to be treated as capital loss - In the normal course if the project took off, the amount would have been shown in asset schedule only and could not be claimed as revenue expenditure – Decided against assessee. Non-exclusion of incentives not accrued from the income offered – Held that:- This issue requires examination by AO afresh - Since, so much of the amount which was accounted as income has not been received by assessee, naturally that amount cannot be brought to tax - However, the entries made in the books of accounts not only in this year but also reversal of entries in later year require examination - the claim can be examined by AO afresh, keeping in mind the entries during the year as well as entries made in books of accounts in later year and allow the deduction in this year and in case, such deduction was already allowed in a later year, the same is required to be withdrawn – thus, the matter is remitted back to the AO for consideration – Decided in favour of assessee.
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2014 (12) TMI 101
Addition u/s 40(a)(ia) – TDS not deduction on payment u/s 194C - Held that:- The assesse has made the payments to the various transporters towards transportation charges for the purpose of his business of transportation of goods - These transporters are kind of subcontractors who are engaged by the assessee on random basis for transportation of the goods - the assessee has not deducted the TDS u/s 194C - Even though the assessee has not furnished Form 15-J, intimating to the income authorities after receiving Form 15-I from the parties, it cannot be held that for the purpose of u/s 194C, assesse was in default. Also in CIT Vs. Vali Bhai, Khan Bhai, Mankad [2012 (12) TMI 413 - GUJARAT HIGH COURT] it has been held that once the conditions of further proviso of S. 194C(3) are satisfied, the liability of the payer to deduct tax at source would cease - The requirement of such payer to furnish details to the IT 'authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable u/s 194C(2) - the assessee was not at default for deduction of tax at source - It cannot be held that, despite receiving Form 15-I from the parties, assessee should have ignored these forms and deducted tax - no disallowance u/s 40(a)(ia) can be made – Decided against revenue. Bogus purchases in contravention of section 102 of Evidence Act or not – Held that:- Neither the purchases could be confirmed nor the assessee could file any confirmation or details from such a party - This itself was a good ground for rejecting the book result as the purchase was not verifiable – the AO has rightly made the addition after applying GP rate of 5% - as the assessee has failed to discharge his primary onus of filing the confirmation, the order of the CIT(A) is upheld – Decided in favour of revenue.
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2014 (12) TMI 100
Addition u/s 41(1) - Admission of additional evidence under Rule 29 – Held that:- In the absence of the assessee furnishing any details in its respect, or leading any evidence to the contrary, the entire unpaid amount is to be therefore considered as the loss arising to the assessee - thus, i.e., on account of defective work and, accordingly, sought to be compensated to it by paying the creditor less by that amount, so that it was not paid - there is no question of admission of additional evidence under rule 29 of the Rules - the claim of payment, which cannot be regarded as genuine merely because the transaction is per cheque, contradicts the assessee’s own claim of the amount being disputed on account of defective/improper work - there is no explanation as to the basis or the circumstances under which the payment stands made, and for the entire disputed sum - The claim is completely inconsistent with the admitted and exhibited facts and circumstances of the case - the assessee’s application for admission of additional evidence u/r. 29 is denied. It would also need to be explained as to how and why the balance amount of ₹ 1.07 lacs paid by BS to DAC as and by way of interest had not been accounted for or otherwise adjusted between the assessee and BS - The assessee’s accounts for FY 2009-10, as well as for the subsequent years, would only have crystallized and, in fact, also been furnished to the Revenue since - again, what adjustment entries, if any, has BS, an assessee with the Revenue, correspondingly passed in his books of accounts - The onus to establish its’ case, though, would be on the assessee - the assessee shall neither be allowed to raise any new plea, nor one inconsistent with its accounts - The journal entries, purportedly passed on 31/3/2010, are ostensibly corrective entries, passed after due deliberation - The purport of the exercise is to establish the existence or otherwise of the assessee’s liability to DAC as on 31/3/2006, or, as explained, to BS in lieu thereof; the assessee’s accounts being admittedly deficient, with even the ‘corrected’ accounts being in contradiction to the stated position - The AO shall adjudicate the matter by issuing definite findings of the fact after allowing the assessee an opportunity to present its case – decided partly in favour of assessee.
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2014 (12) TMI 99
Transfer pricing adjustment - International express delivery services, freight forwarding services and domestic distribution services to the customers worldwide and in India – Held that:- The assessee-company is engaged in the business of courier services, which involves transportation of time sensitive packages, documents and cargo to various destinations in the domestic and international sectors - The assessee has carried out, international express services and freight forwarding services with its AE, on which it had earned a huge profit margin - In the domestic freight services / distribution services, the assessee has suffered heavy losses - the assessee had suffered a loss of ₹ 5,30,05,227 on a total revenue of ₹ 95,83,69,199 - on other two segments, which were mainly international transactions, the assessee had shown huge profit margin of 26.5% in express segment and in freight segment, it had shown profit margin of more than 27% - For benchmarking the express segment, the assessee has selected five comparables having average mean margin of 0.07% - For the freight segment, the assessee has taken internal TNMM as it had transactions with the third parties also and reported that the assessee’s margin with the AE as compared to the unrelated parties was far better. The TPO has mainly discussed the losses as a premise for applying the Arm’s Length at the entity level - this cannot be a ground for rejecting the segmental results, unless the losses itself has been found to be superficial on the basis of material or evidence on record - Even the books of account for the domestic results, or as a matter of fact, for the entire entity level have not been rejected - Loss in a particular segment sans any material to doubt cannot be the basis for rejecting the segmental results, especially when they are duly audited and certified. Delivery of shipments free of charge – Held that:- The AE have rendered similar services for the assessee for its international services - The assessee has also given the following details to demonstrate that, ultimately if overall inbound and outbound services are taken into consideration, which are free of charge, the assessee has benefitted on a net consideration - such an arrangement has been accepted under arm’s length conditions among the related parties - The only factor which is to be seen that, only the net gain or loss has to be considered for assessing the tax liabilities - If under the arm’s length situation, the tested parties, the assessee has benefitted overall, then there cannot be any reason for doubting the transaction or making the transfer pricing adjustment - the AE has also provided similar kind of services to the assessee, no adverse inference should be drawn insofar as ground for rejecting the segmental results. Allocation of costs / expenses for all the three segments – Held that:- The assessee has mainly allocated the costs mostly on the basis of volume and weight - because there are huge salary expenses, which has been debited on the basis of weight and volume, which cannot be said to be based on purely actuals - the margin of express segment is 5.25%, which is comparable to the finally determined margin by the TPO, which is less than 5.25%, and therefore, the margin of express segment is at arm’s length - the assessee’s margin on the basis of revenue is 15.78%, which again, is on much higher side as compared to the average margin of comparables finally adopted by the TPO - This computation of segmental margin was given before the DRP, the figures of which have not been rejected or doubted - the assessee’s overall segmental results are liable to be accepted and the margins shown in the freight segment and expenses segment are at arm’s length margin. The transfer pricing adjustments can be made only on the international transactions with the AE and not for the entire sales at entity level - the deeming provision of transfer pricing is to be applied only on the international transactions among group concerns, i.e., the associated enterprises, because the transactions with the uncontrolled party is always assumed that they are at arm’s length - the assessee had suffered losses in the domestic segment which is with the third parties and this had led to shifting of profit to the AE - This premise of the income tax authorities cannot be sustained either in law or in facts - the transfer pricing adjustment of ₹ 8,91,71,424 made in pursuance of DRP’s order is deleted – Decided in favour of assessee.
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2014 (12) TMI 98
Disallowance u/s 14A – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that while working out the disallowance u/s. 14A of the Act, the net interest should be considered – thus, the matter is remitted back to the AO to work out the disallowance on the basis of net interest – Decided in favour of assessee. Disallowance out of interest payment – Held that:- The total amount of ₹ 4,87,53,200/- borrowed by the appellant on different dates and paid interest, the inadmissible rate of interest which requires to be added to appellants income comes to ₹ 32,31,486 – in assessee’s own case for the earlier assessment year, it has been held that the need of business is to be judged from the point of view of businessmen - The amount which the assessee may need for his business may not be available always to the assessee - the assessee has to avail the loan amount when it is available by keeping in view the future needs which may arise in the course of business - merely as because the assessee had sufficient own funds on the date of the borrowings it cannot be concluded that borrowings it cannot be concluded that borrowings were not for the purpose of business - CIT(A) was not justified in sustaining the disallowance and is to be set aside – Decided in favour of assessee. Rate difference/commission paid to peta dealers – Held that:- CIT(A) rightly was of the view that the payment of ₹ 34,78,373/- is relatable to appellants sale of 623.02 crore bidi’s - their exist a direct relationship between commission paid and the corresponding sales - once there existed an evidence that an amount of commission flowed from appellant to peta dealers through agents, a disallowance on the absence of commercial expediency was not required to be made - For establishing genuineness of a commission, what is required to be proved is whether it was actually paid, whether the payment was relatable to a genuine business transaction, whether the party to whom payment was made is identifiable, whether the payment was made using banking channels and necessary entries recorded in the books of a/c and whether requisite TDS if any, was made on the amounts of commission paid, whether the parties to whom commission was paid have in turn included the same in their books of accounts / return of income etc. – the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 97
Computation of capital gain – Cost of acquisition on land sold adopted – Held that:- The land admeasuring two acres was allotted to partnership firm M/s Bimco Products in the year 1973 at the cost of ₹ 10,000 per acre - assessee joined as a partner in M/s Bimco Products on 01/04/1991 and ultimately on dissolution of firm on 01/10/1991 took over the assets and liabilities of partnership firm which was converted into a private limited company - the land was revalued in the year 1987 in the books of the partnership firm at ₹ 13,40,000 and it was apportioned to the capital account of the partners - when the assets and liabilities of partnership firm was taken over by assessee in the year 1991-92, which also included the land, the value of the land in the books was ₹ 13,40,000. Under no circumstances rate of ₹ 10,000 per acre which is the cost to the original owner i.e. partnership firm in the year 1973 can be considered as cost of acquisition at the hands of assessee - the transfer of asset to the assessee company has taken place on dissolution of partnership firm in FY 1991-92, the provisions of section 49(1)(iii)(b) will not apply - as the transfer has taken place in terms of section 45(4) of the Act, on dissolution of partnership firm in the FY 1991-92, the value of the asset as per the books on the date of transfer has to be taken as cost of acquisition – relying upon Suvardhan Vs. CIT [2006 (8) TMI 142 - KARNATAKA High Court] - AO and CIT(A) were not justified in adopting the cost of acquisition of land at ₹ 10,000 per acre as against ₹ 13,40,000 as shown in the books at the time of transfer on dissolution of the partnership firm – the AO is directed to compute capital gains by adopting the cost of acquisition at ₹ 13,40,000 for two acres of land. Deemed dividend u/s 2(22)(e) – Advances received from sister concern - Held that:- Following the decision in Assistant Commissioner Of Income-Tax. Versus Bhaumik Colour (P) Limited [2008 (11) TMI 273 - ITAT BOMBAY-E] - assessee is not a registered shareholder of M/s Bimco Isolators Ltd. - only because both the companies are having common shareholders will not be a ground to treat advances received as deemed dividend at the hands of assessee u/s 2(22(e) of the Act - as conditions of section 2(22)(e) are not satisfied, addition of ₹ 18,82,901/- cannot be sustained – the AO is directed to delete the same – Decided in favour of assessee.
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2014 (12) TMI 96
Allowability of deduction u/s 10B – Business activity carried by assessee amounts to manufacture or not – Applicability of section 10B(7) r.w.s.80IA(10) - Held that:- The word “industry” has a wide import, where there is a systematic activity, organized by cooperation between employer and employee (the direct and substantial element is commercial), for the production and/or distribution of goods and services calculated to satisfy human want and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss), prima facie there is an “industry” in that enterprise - The true focus is functional and the decisive test the nature of activity - manufacturing and processing are not clearly demarcated fields - The test of manufacturing lies in the answer to the question whether what is processed or produced as the end product is commercially known differently from the raw material out of which the end product is produced - various items are mixed in a specified quantity with the help of man power and machine and the end product is commercially known differently, therefore, it can be said that the assessee is manufacturing unit. The observation made in the assessment order is that in comparison to sales of ₹ 5,83,65,060/- the total manufacturing expenses are merely ₹ 2,66,913/- which is only 0.45% of the sales expenses - the assessee is mixing the perfumery compounds in a specified required ratio with the help of man power and machine, therefore, it is always not necessary that manufacturing can be said to be complete only when there is comparatively high manufacturing expenses - It is like blending of compounds – Decided against revenue. Adoption of profit earned by the sister concern - Restriction of claim u/s 10B to 19.06% of sales – Held that:- In the case of sister concern net profit was earned/disclosed @ 19.03%, which is having the same management and also having same activity, whereas the net profit disclosed by the assessee at 38.86% and if the foreign exchange gain is excluded then the net profit comes to 25.09% - the assessee has disclosed more profit than the ordinary profit which might be expected to arose in such business more specifically when the sister concern M/s Pragati Aroma Oil distillers Pvt. Ltd. is dealing in the same business, itself shows the profit @ 19.03%, also having similar management and is not claiming any exemption - the assessee is supporting the conclusion of the CIT(A) itself, where the benefit was extended to the assessee and in the same breath opposing the conclusion on the taxability of profit, more specifically in the case of sister concern, in identical market conditions/management the net profit was disclosed at 19.03% - the assessee disclosed more profit, with different intention, which can be expected from a similar line of business without bringing any cogent material on record. Computation of capital gains in the hand of Successor Company – conversion of a firm in Part-IX Company - resultant company is further merged with another company - violation of proviso to sec. 47 (xiii) r.w.s 47A(3) - Held that:- The capital gain shall be assessed in the hands of successor company in the previous year in which violation had taken place - the successor company is liable for capital gain, if any and not the assessee - the computations made by the AO in respect of estimated sale consideration, cost of acquisition and tenure of holding of assets so as to constitute as short term capital gain or long term capital gain are no hypothetical basis only – CIT(A) held that the capital gain, if any, shall be liable to be assessed in the hand of the successor company, in the previous year in which violation took place - since, the assessee was not held liable therefore, how the assessee is aggrieved is not known – the order of the CIT(A) is upheld – Decided against assessee.
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2014 (12) TMI 95
Validity of notice for reopening of assessment u/s 147/148 – Proper application of mind by AO or not for issuing notice - Held that:- The AO has not made any addition with regard to donations as has been mentioned in the reasons recorded by the AO for issuance of notice u/s 148 of the Act - the AO has made addition of ₹ 26,10,000 in the reassessment order with regard to unsecured loans shown by the assessee in the balance sheet but in the reasons recorded by the AO, the issue of unsecured loan has not been mentioned - the AO issued notice u/s 148 of the Act on the basis of same material which was before him during the assessment proceedings and the AO made additions on account of unsecured loans which has not been mentioned in the reasons recorded for issuance of notice u/s 148 of the Act - the AO has recorded his satisfaction without any verification and examination of the information received and mentioned that he has reason to believe that the income chargeable to tax for AY 2003-04 has escaped assessment - the AO issued notice u/s 148 of the Act without application of mind to the information received from the Director of Investigation, New Delhi and the AO has not made any addition in this regard in the reassessment order but the addition has been made on account of unsecured loan which was not mentioned in the reasons recorded – revenue has not disputed the fact that the detail of donors was submitted before the AO during original assessment proceedings - the AO has his own jurisdiction without any basis which was not valid and bad in law, hence, notice u/s 148 of the Act and all subsequent proceedings are not sustainable and the notice u/s 148 is set aside – Decided in favour of assesse.
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2014 (12) TMI 94
Deletion of deposits made in PF/ESI payment beyond prescribed time – As per section 36(1)(va) employees contribution should have been deposited in time as prescribed – Held that:- CIT(A) rightly was of the view that the assessee made payment before due date of return – assessee relied upon CIT Vs. Udaipur Dugdh Udpadak Sahkari Sangh Ltd. [2014 (8) TMI 677 - RAJASTHAN HIGH COURT] - the assessee has paid employees’ contribution towards ESI paid before due date of return, therefore, it is allowable - the assessee should have paid this amount before due date of return, is allowable u/s 43B – the order of the CIT(A) is upheld – Decided against revenue. Payment made for transmission/wheeling/SLDC charges to RRVPN – Applicability of section 40(a)(ia) - Technical services or not – Liability to deduct TDS u/s 194J – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of State Load Dispatch center and the Regulatory commission for achieving the economy and efficiency in the operation of power system and therefore question of any person rendering service to another does not arise - The operation and maintenance of transmission lines by RVPNL and the user of these lines by assessee for transmitting energy does not result into any technical services being rendered to the assessee - The technical staff of RVPN by operating and maintaining its grid station and transmission lines simply discharge thereon functioning - They do not render any technical service to the assessee – the order of the CIT(A) is upheld – Decided against revenue. Deletion of front end fees to HUDCO for raising loan – Revenue expenses or not – Held that:- CIT(A) rightly was of the view that front end fees had been paid to HUDCO in connection with the money borrowed - There was no extension of the existing business, therefore, proviso to Section 36(i)(iii) of the Act is not applicable - The revenue expenditure, which was incurred wholly and exclusively for the purpose of business could be allowed in its entirety in the year in which it was incurred - It could not be spread over in number of years, even if the assessee had written it off in his books over a period of years - assessee has raised loan of ₹ 300 crores for improvement in transmission, network and infrastructure - The assessee paid this amount to HUDCO, which was pre-decided condition on the loan sanctioned – thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 93
Transfer of assessee’s business – Slump sales - computation of capital gains in case of slump sale u/s 50B - Held that:- The assessee has transferred its’ business of manufacture/stitching of garments (on job work basis), undertaken through its three proprietary firms - The transactions being considered as disparate or, at least separate stood so perceived by both the authorities below on account of the disjointed manner in which the transaction has been structured, i.e., by executing three separate agreements of even date, for parts of the same business, and on like terms, between the same parties - The sale of all the three firms has therefore to be viewed as a part of one and the same slump sale - the non-transfer of the cash and bank balances of the three firms would not remove the assessee’s case from the purview of section 50B, which envisages the transfers of all the assets and liabilities, so that exclusion of even one may operate to preclude the same. The assessee, in abkari business, had mortgaged his immovable property to the State Government (in the Excise Department), which in the recovery proceedings under the Excise Act auctioned the same, and deducting there-from its dues, paid over the balance to the assessee - the assessee transferring its’ business carried on through three undertakings - The provisions of section 50B shall apply, there being no finding of any asset or liability of the said business as having not been transferred, with we having already clarified the aspect of ‘non-transfer’ of cash and bank balance/s - The sale consideration is a single sum of ₹ 78.45 lacs, i.e., the combined net worth of all the three firms as at the completion date, received by the assessee in cash - as this net worth is also deemed as the cost of acquisition and/or improvement u/s. 50B(2), no capital gain would stand to arise. The assessee rather itself pleading it as so in the appellate proceedings, it would be incumbent on her to satisfy the said requirement, albeit procedural, of the section - The matter is restored back to the file of the FAA, which had found s. 50B to be applicable in the first instance - in case of any difference between the sale consideration, since crystallized and received at ₹ 78.45 lacs, and the net worth as so determined, if any, the same shall be the capital gain or capital loss, as the case may be, chargeable u/s. 45(1) r/w s. 50B – Decided partly in favour of revenue.
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2014 (12) TMI 92
Addition of value of purchases made on credit – Burden to establish that purchases made on credit discharged by assessee or not - Held that:- CIT(A) has confirmed the addition on the basis of remand report submitted by AO and CIT(A) held that payment of ₹ 46 lacs in the form of two cheques of ₹ 19 lacs and ₹ 27 lacs were issued by assessee on behalf of M/s. Sandeep Agarwal & Sons (HUF)/ The payments were held to be against sales made by M/s. Kay Dee Traders to M/s. Sandeep Agarwal & Sons (HUF) - from the bank certificate filed by the assessee, two cheques of ₹ 27 lacs and ₹ 19 lacs were issued by assessee and these were a/c payee cheques and these were credited to the account of M/s. Kay Dee Traders - there is no doubt about the fact that cheques were issued by the assessee were debited to its bank account and further the cheques were credited in the account of M/s. Kay Dee Traders – CIT(A) has not even mentioned about the fact that these cheques have been issued and debited in the bank account of assessee - He simply relied upon the statement of M/s. Kay Dee Traders that these payments were received by them on behalf of Sandeep Aggarwal & Sons (HUF) - On the contrary, he did not consider the documentary evidence in the possession of assessee - section 28(iv) read with section 41(1) as applied by Ld. CIT(A) are not applicable to the assessee as there is sufficient evidence of making the payments against credit balance - CIT(A) has wrongly upheld the addition – Decided in favour of assessee.
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2014 (12) TMI 91
Reopening of assessment u/s 147 - Applicability of section 40(a) - Whether utilisation of services in India is enough to attract its taxability in India and thus the assessee is duty bound to deduct tax at source as otherwise provisions of section 40(a) are liable to be attracted or not - Held that:- During the course of original assessment proceedings the assessee furnished all the required details with regard to advertisement expenditure incurred and the commission paid to non-resident - the reason as to why section 40(a) is not applicable was also mentioned - the AO has thoroughly examined the facts of the case and had also noted that the assessee is having transactions with non-resident, which implies that the AO had taken note of Annexure-9 to Tax Audit Report – in Praful Chunilal Patel Versus MJ Makwana / Assistant Commissioner Of Income-tax [1998 (2) TMI 538 - GUJARAT High Court] it has been rightly held that when a regular assessment is made in terms of section 143(3) of the Act a presumption can be raised that such an order has been passed by application of mind since judicial and official acts are deemed to have been regularly performed - merely because a new incumbent AO has a different view, the Revenue cannot take benefit of its own wrong and arbitrarily assume that there is escapement of income, without bringing on record any fresh tangible material to show that there is justification for forming an opinion that assessee’s income escaped assessment - mere subjective satisfaction of the AO, on the basis of the same set of material, would amount to change of opinion and cannot be equated to the expression “reasons to believe”, in which event the reassessment proceedings is to be treated as void ab initio. Since the AO had taken note of the fact that the assessee had business connection with certain foreign clients and some expenditure was also incurred in that connection – thus, the view taken by the CIT(A) that change of opinion can result in reopening of assessment within four years, is held to be not in consonance with the spirit of provisions of section 147/148 of the Act – following the decision in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] wherein it has been held that the AO sought to reopen the assessment on mere change of opinion which is not permissible and the notice issued u/s 148 of the Act is not in accordance with law – thus, the reassessment proceedings to be set aside – Decided in favour of assessee.
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2014 (12) TMI 90
Validity of reopening of assessment u/s 148 - Held that:- Section 151 clearly states that no such notice shall be issued unless the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice which means that the satisfaction of the Commissioner is paramount for which the least that is expected from the Commissioner is application of mind and due diligence before according sanction to the reasons recorded by the AO - the order sheet which is placed on record show that the Commissioner has simply affixed "approved" at the bottom of the note sheet prepared by the ITO technical - Nowhere the CIT has recorded his satisfaction - the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner - the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice u/s 148 - The notice issued u/s 148 was invalid. Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are protected by safeguards against unnecessary harassment of the assessee - They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147 - The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer - the Commissioner has simply put "approved" and signed the report thereby giving sanction to the AO - Nowhere the Commissioner has recorded a satisfaction note not even in brief - it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction – thus, the contention of the assessee that the reopening is bad in law is upheld – Decided in favour of assessee.
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2014 (12) TMI 89
Deletion of unexplained investment – Penalty u/s 271(1)(c) - Whether the CIT(A) erred in accepting self-serving documents not corroborated by cross examination or produced before the AO - Held that:- Following the decision in THE COMMISSIONER OF INCOME TAX DELHI-II Versus KHOOBSURAT RESORTS PVT. LTD. [2012 (11) TMI 590 - DELHI HIGH COURT] - with the amendment to the Act, and insertion of Section 50-C, a presumption can be drawn that property was sold for a higher value for determining capital gains, in case of the valuation indicated by the assessee to the stamp authorities, being higher than the consideration disclosed in the sale deed or conveyancing instrument - the express provision of Section 50-C enabling the revenue to treat the value declared by an assessee for payment of stamp duty, ipso facto, cannot be a legitimate ground for concluding that there was undervaluation, in the acquisition of immovable property. If Parliamentary intention was to enable such a finding, a provision akin to Section 50-C would have been included in the statute book, to assess income on the basis of a similar fiction in the case of the assessee who acquires such an asset - the declaration of a higher cost for acquisition for stamp duty might be the starting point for an inquiry in that regard that inquiry might extend to analyzing sale or transfer deeds executed in respect of similar or neighbouring properties, contemporaneously at the time of the transaction - the finding cannot start and conclude with the fact that such stamp duty value or basis is higher than the consideration mentioned in the deed - The compulsion for such higher value, is the mandate of the Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates - the order of the CIT(A) is upheld – Decided against revenue.
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2014 (12) TMI 88
Assessability of transaction in respect of sale of lands – Co-owner of the land – Assessee or M/s Viraj Estates Pvt. Ltd. liable to be taxed – Held that:- Following the decision in Income Tax Officer, Ward- 4 Versus Shri Manohar Shridhar Patil [2014 (12) TMI 71 - ITAT PUNE] wherein it has been held that the CIT(A) correctly came to conclude that the sale of land was assessable in the hands of the M/s Viraj Estates Pvt. Ltd. and not in the hands of the assessee - CIT(A) rightly accepted the plea of the assessee that the transaction does not belong to the assessee inasmuch as the land has been purchased and sold for and on behalf of VEPL, having regard to the facts and circumstances of the case - the sale-deeds showed that payments for acquisition of land were made by VEPL through their bank accounts - payments have been recorded in the books of account of M/s VEPL - in the Balance-Sheet of VEPL, the transaction has been reflected as advances against purchase of land - CIT(A) rightly has concluded that purchase of land by the assessee and two other co-owners is for and on behalf of the VEPL – the land was purchased and sold by the assessee and two other co-owners for and on behalf of VEPL - Therefore, the income thereof was not liable to be assessed in the hands of the assessee – thus, the order of the CIT(A) is upheld – Decided against revenue.
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Customs
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2014 (12) TMI 116
Import of goods for manufacture of specified goods - Denial of concessional rate of duty under exemption Notification No. 25/99-Customs, dated 28-2-1999 (S. Nos. 17 & 54 of Part A of the Notification) - Revenue contends that raw materials were not eligible for exemption under the said S. No. (17 and 54) of the Notification as the said S. Nos. covered the finished goods ‘Ferrites’ and not Soft Ferrites or Ferrite powder whereas these final products were, instead, properly covered under S. No. 148 of the same exemption notification - Held that:- for recovery of the differential duty of Customs for the goods imported under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, it is the Deputy/Assistant Commissioner having jurisdiction over the factory of production, with whom the importer assessee had filed bond for the purpose, is the proper officer for such recovery and that the recovery proceedings are to be in terms of Section 28 of the Customs Act, 1962. - demands have been confirmed by the original Adjudication Authority under Section 11A of the Central Excise Act. Hence we hold that the ratio of the Tribunal decision in the case of Molex India Ltd. [2010 (12) TMI 1046 - CESTAT, BANGALORE] as referred by the Ld. Counsel squarely applies. We hold that demand raised and confirmed under Section 11A of the Central Excise Act instead of Section 28 of the Customs Act, 1962 are not valid being not issued under proper provisions of law. - Decided in favor of assessee. Extended period of limitation - Held that:- Exemption from Customs duty for import of inputs for their use in Ferrite under Notification No. 25/99-Cus. was availed only after due approval from the jurisdictional authorities. Importation at concessional rate was allowed under notification No. 25/99-Cus. only after jurisdictional authorities issued CT3 certificate. Such certificates were issued after checking availability of concession as specified in the notification along with other conditions. Invocation of extended period of limitation has been alleged in the Show Cause Notices on the grounds that assessee did not disclose full facts to CT3 issuing authority. It is observed that it was for concerned authorities to check the veracity of the declaration. Normally such permissions are granted only after due verifications by the jurisdictional authorities. Once importation was allowed with proper authorization by the competent authority, to invoke extended time of limitation is not permissible. Thus on this account, we find force in the contention of counsel that demands are time barred as invocation of extended period was not justified. - Decided in favor of assessee. Demand for subsequent period where SCN has been issued under the provisions of Customs - Held that:- For the period after amendment to the notification vide amending Notifications No. 26/2002 w.e.f. 1-3-2002 and specifically vide No. 9/2004-Cus., dated 8-1-2004 in the impugned notification, Ferrites are to be held as distinct and different from the Soft (Pre Calcined) Ferrite Powder and Parts. - Demand for differential duty of customs for the normal period of limitation for Appeal No. E/334/2008 is recoverable from the assessee. As no such computation is available in records, we propose to remit the matter back to the original adjudicating authority to re-quantify the demand. It is ordered accordingly. Assessee is also directed to submit necessary records before adjudication authority within three months of the order for such quantification. However, as we have already held that there is no suppression mis-statement or mala fide on the part of the appellant, we set aside the penalty imposed in the present appeal. - Decided partly in favour of assessee.
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2014 (12) TMI 110
Maintainability of appeal - Section 128 of the Customs Act, 1962 - Held that:- appellant is not aggrieved by the order passed by the Adjudicating authority. Therefore, appeal is not maintainable as per Section 128 of the Customs Act, 1962. Accordingly, I do not find any infirmity in the impugned order, the same is upheld - Decided against assessee.
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2014 (12) TMI 109
Denial of refund claim - Unjust enrichment - Provisional assessment - Held that:- reconversion of the vessel from foreign run to coastal run, if the duty paid on provisional basis is found to be excess at the time of final assessment, then the same would be refunded - grounds of the Revenue is mis-placed and mis-conceived. From the case made out by the Revenue, the whole scheme of provisional assessment is to be given a go bye and render meaningless. This will be against the scheme of the Act and the Rules made thereunder - Following decision of Assessee's own previous case [2013 (12) TMI 1244 - CESTAT AHMEDABAD] - Decided against Revenue.
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2014 (12) TMI 108
Valuation of goods - Enhancement of valuation - Held that:- Foreign supply is having uniform policy wherein the buyers from their foreign supplier are getting some rate of discount and we have inspected the invoice issued to Brazil and Italy where some rate of discount of 65% given on the price list. Further in precedent case where foreign supplier was having holding 35% of the equity are also getting 65% discount clearing policy on list price and the same has been accepted by the Revenue. Therefore we hold that in this case the transaction value declared by the appellant is not influenced being related person and the transaction value is the correct assessable value. - Decided in favour of assessee.
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Service Tax
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2014 (12) TMI 127
Maintainability of appeal - Classification of service - Real Estate Agent or Commercial and Industrial Construction services - Nature of amount received by the assessee as development charges - Withdrawal from work contract composition scheme - switching over from "Commercial or Industrial Construction Service" and "Construction of Complex Service" to "Works Contract Service" for the projects which were already under execution on 01.06.2007 - In-eligible benefit of abatement from the gross value - Benefit of Notification No.12/2003 - Held that:- The Tribunal, in the impugned order has held that the service rendered by the assessee does not get covered under the category of real estate agent services. Evidently, therefore, the dispute involved in the present case relates to whether the activity carried out by the assessee is a service within the meaning of such expression as defined under the Finance Act, 1994; or whether such service falls under the category of taxable service under sub-section (105) of section 65 of the Finance Act, 1994. Therefore, the controversy involved in the present case is a classification dispute which has a direct and proximate relation to the rate of service tax or the value of any service. Consequently, this court has no jurisdiction to adjudicate upon the said controversy. However, on behalf of the appellant, the learned counsel has submitted that the impugned order passed by the Tribunal is a non-reasoned and non-speaking order and as such, if the court considers the appeal to the limited extent of the above infirmities in the impugned order, no question of rate of duty or value of service would be required to be adjudicated and this court would be duly empowered to decide the same. On a plain reading of the impugned order passed by the Tribunal, it is apparent that the contention raised by the learned counsel for the appellant that the order passed by the Tribunal is a non-reasoned and non-speaking one and that merely after reproduction of the decision of this Court in the case of Sujal Developers (2011 (4) TMI 1023 - Gujarat High Court), the Tribunal has held that the issue involved in the present case is squarely covered by the said judgement, lacks merit and is contrary to the facts of the case. Under the circumstances, the submission that the impugned order suffers from the infirmity of being a nonspeaking and non-reasoned one, is not borne out from the record of the case. The contention advanced by the learned counsel for the appellant that the appeal be limited to the question as to whether the impugned order passed by the Tribunal is non-reasoned and nonspeaking one, does not merit acceptance. The issue involved in the present case has, therefore, a direct and proximate relation to the rate of service tax and the value of services and as such, this court lacks the jurisdiction to entertain this appeal and the appeal would lie before the Supreme Court under section 35L of the Central Excise Act, 1944. - Writ petition dismissed.
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2014 (12) TMI 126
Condonation of delay - Inordinate delay of 256 days - Delay in receipt of order - Held that:- The specific case of the petitioner is that he received the impugned order passed by the second respondent on 2-2-2011. Since in the order passed by the first respondent it is observed to the effect that the order passed by the second respondent has been received on behalf of assessee, this court is of the view that the reason given for dismissal by the first respondent cannot be accepted and further, no relevant document has been filed on the side of the respondent to the effect that the petitioner has received the order passed by the second respondent immediately after 24-2-2010. Therefore, viewing from any angle, the order passed by the first respondent is liable to be set aside and the substantial questions of law raised on the side of the appellant are having substance. - Delay condoned - Decided in favour of assessee.
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2014 (12) TMI 125
Waiver of pre-deposit - Period of limitation - Section 73(1) - Held that:- Reading of the Section 73(1) clearly indicates under what circumstances period of one year limitation could be considered and when period of five years has to be read instead of one year. Without referring to what exactly was the case of the appellant, so far as issue of limitation is concerned, the Tribunal proceeded to opine in one line that the demand is not time barred as contended by the appellant. As a matter of fact, the appellant also raised a contention that no prima facie case as shown in the show cause notice was forthcoming. If once the Tribunal decides the limitation issue, even if the demand is in order, then the department may not be entitled to collect the amount of service tax and then further impose any penalty. Therefore, the issue of limitation as provided under Section 73 read with the proviso is very relevant and unfortunately, nothing is said about this aspect of the matter in the impugned order. Accordingly, we set aside the order dated 19-8-2013 directing the Tribunal to consider Section 73 of the Finance Act with reference to the date of demand and other relevant facts so far as the present case is concerned and then proceed with the conditional order of stay or otherwise. - Decided in favour of assessee.
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2014 (12) TMI 124
Waiver of pre deposit - Held that:- Petitioner had submitted that the petitioner would comply with the conditions imposed by the second respondent Tribunal, by its order, dated 23-6-2006, made in Stay Order [2006 (6) TMI 498 - CESTAT CHENNAI], within the period specified by this Court. In such circumstances, the second respondent Tribunal may be directed to take on file the appeal filed by the petitioner, in [2013 (11) TMI 1258 - CESTAT CHENNAI] and dispose of the same, on merits and in accordance with law, on the petitioner complying with the conditions imposed by the second respondent Tribunal while granting the stay order, on 23-6-2006. - Writ disposed of.
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2014 (12) TMI 123
CENVAT Credit - Whether the Tribunal below committed substantial error of law in holding that the respondent had paid service tax on ‘input service’ by way of utilization of cenvat credit despite the fact that as per Rule 3(4)(e) of the Cenvat Credit Rules, 2004, the utilization of payment of service tax is available on output service - Held that:- appellant has placed reliance on the instructions of the Board dated 3-10-2005, which has clarified Section 68(2) of the Finance Act, 1994. These instructions of the Board are not relevant for the purpose of deciding this Tax Appeal. For the aforesaid reasons, no substantial question of law arises - Decided against Revenue.
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2014 (12) TMI 122
Waiver of pre deposit - Invocation of extended period of limitation - Interest u/s 75 - Penalty u/s 78 - Held that:- Discretion exercised by the appellate authority in passing the inter-locutory order does not suffer from any legal infirmity warranting interference of this Court. The claim made by the petitioner before the Commissioner (Appeals) has not been substantiated so far. The documents in support of the claim are yet to be co-related to the duty which might have been paid by the petitioner’s corporate office, transporter or vendor. The aforesaid documents are yet to be produced before the Appellate Authority. There is no document on the record for us to presume that the petitioner has discharged the liability through anyone else of paying service tax - Decided against assessee.
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2014 (12) TMI 121
Validity of levy of service tax on Money changing activity - Legality of valuation rules - conversion of foreign currency to Indian rupee - banking and other financial services - Export of service or not - amounts of foreign currency remitted to India - Held that:- The argument that sub-clause (iv) of clause (a) of sub-section (12) of Section 65 applies only to private “money changers” is to be rejected at the outset. There is no warrant for such assumption from the words employed in sub-clause (iv). It takes in securities and foreign exchange broking and purchase or sale of foreign currency, including money changing, whether such service be rendered by a private company or one exclusively dealing in money changing operations or a Bank; nationalised or otherwise, who is authorised to carry on such activity. The emphasis is on the service provided and the taxing event is also the service rendered. The provision does not distinguish establishments; nor confine the levy to those establishments exclusively conducting money changing operations. The contention raised, hence, has absolutely no legs to stand and is rejected. The further contention is with respect to exemption provided to activities including transaction in money. Going by Explanation 2 of Section 66B(44), such exemption does not apply to conversion of currency from one form to another. Hence, no exemption can be claimed by the petitioner with respect to the service it receives, in so far as the respondent-Bank converts its foreign remittances to Indian currency. - This Court cannot confuse the remittance with the conversion, since both are distinct events and it is the latter that is the taxable event. Valuation - legal validity of taking entire transaction value into consideration - Held that:- The petitioner is correct, in so far as accepting that the petitioner is liable to the tax on the charges [“commission” and “exchange”] levied by the respondent-Bank; which levy is made on the gross amount charged by the service provider by sub-clause (i) of Section 67(1) and that consideration is in terms of money. But such levy and collection, does not prevent the taxation authorities from looking into whether there is any other ostensible consideration for the service provided, which is not in terms of money or which is not ascertainable, in which event tax will have to be levied as prescribed in the rules. The petitioner’s contention, hence, with respect to the tax being levied on the entire remittances has to be negatived. The entire remittance is taken, only for the purposes of valuation and that too the units of currency alone and the tax is levied only on that component, which the Bank stands to gain by purchasing the currency at a lower rate than the RBI reference rate. As per the illustration, 50 paise per US Dollar is the ostensible consideration received by the Bank for each dollar conversion and when 1000 Dollars are converted, the taxable value would be ₹ 500; 0.50 paise for each US Dollar. The petitioner’s contention on that count fails, since the prescription of the measure in the rules as sanctioned by the statute, is perfectly in consonance with the statutory provisions. Legality of sub-rule (7B) of Rule 6 of the Rules of 1994, which provides for an option to pay service tax, in relation to the services provided on purchase or sale of foreign currency, including money changing - Held that:- This Court does not find any illegality in the levy of ‘service tax’ made and collected by the respondent-Bank on the services provided, of the conversion of foreign currency, to the petitioner. When the foreign currency is entitled to an exchange rate, in the market, as notified by the RBI, and a ‘money changer’ including a Bank involved in such activity purchases that foreign currency at a lower rate, then that difference is the ostensible consideration the service provider derives, which is not in terms of money but still determinable on its money equivalent. Whether it is actually received or not in terms of money; the rules prescribe a value determination on that consideration, to be expressed in terms of money, for the purpose of levy of service tax. No challenge on such determination can be sustained and the levy made is perfectly in consonance with the statute and the rules. Writ petition dismissed - Decided against the assessee.
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2014 (12) TMI 117
CENVAT Credit - GTA - input services - Revenue is of the view that the shortage has occurred of inputs, consequently the input service credit was denied to the appellant - Held that:- There is no dispute on account of availment of CENVAT credit on inputs. When there is no dispute regarding receipt of inputs, therefore, whatever transportation has been paid by the appellant on Inward Transportation Service are entitled for input service credit. Further, the measurement Tolerance is on account of receipt of inputs and supply of finished goods. In these terms, it cannot be said the appellants have received the input in short quantity. Therefore, service tax on inward transportation is entitled as input service. Appellants have rightly taken the CENVAT credit on input service on Inward Transportation Service. Accordingly, impugned orders are set aside - Decided in favour of assessee.
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Central Excise
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2014 (12) TMI 120
Denial of CENVAT Credit - removal of capital goods after being put to use - Whether the appellant is required to pay duty under Rule 3(4) of the Cenvat Credit Rules, 2002 with respect to those capital goods on which cenvat credit is taken but are cleared as waste and scrap after its long usage in the factory of manufacture - period before 13-11-2007 - Held that:- There is no evidence relied upon in the show cause notice that part of capital goods cleared was not put to use - cenvat credit of ₹ 13,79,969/- was taken by respondent with respect to the entire De-linking Plant imported whereas a part of De-linking plant was sold which is described as ‘De-linking Cell’ on which respondent paid duty amount of ₹ 1,84,000/-. There is no allegation in the show cause notice dated 23.09.2004 that De-linking plant was sold as such and not after use. There is no specific finding of the lower authorities that De-linking plant was sold as such in the guise of scrap. There is no evidence on record that entire De-linking plant on which service tax credit ₹ 13,79,969/- was removed by the respondent. Thus for removing a part of De-linking plant after use on payment of duty, entire cenvat credit can not to be denied - Following decision of CCE, Chandigarh vs. Raghav Alloys Limited [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] - Decided against Revenue.
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2014 (12) TMI 119
Availment of CENVAT Credit - Returned goods - Rule 16 of the Central Excise Rules - Revenue was of the view that is inasmuch as after entering the goods in their Cenvat Account, the assessee has simplicitor shown the issuance of the said inputs for further manufacture, without maintaining any records about the same - Commissioner held that duty demand for Cenvat credit on returned goods is not sustainable under law and deserves to be set aside - Held that:- no reasons to disagree with the finding of the appellant authority. As rightly observed by him, Revenue on one hand, is contending that no records were being maintained by the assessee after receipt of the returned goods, so as to show the further process taken by them and on the other hand, they are contending that 80% of the receipt material was cleared as scrap. The said submission of the Revenue is based upon the statement of the employee, without verifying as to whether the waste and scrap so cleared by the appellant emerged during the course of remanufacture or the not. The provision of Rule 16 does not require maintenance of any records. The returned goods have to be treated as inputs and the assessee having shown the issuance of the said inputs from their RG-I; had deemed to have manufactured their final product. In the absence of any documentary evidence in support of revenue’s stand, I find no justification for setting aside the impugned order of Commissioner (Appeals). - Decided against Revenue.
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2014 (12) TMI 118
CENVAT Credit - reversal of credit on obsolete inputs / WIP - suppression of fact - Invocation of extended period of limitation - effective date of introduction of Rule 3(5B) of the Cenvat Credit Rules by Notification NO. 26/2007-CE(NT) dated 11.5.2007 - Held that:- Issue on merits is already settled in favour of the respondent as is evident from the judgment of the Hon'ble Bombay High Court in the case of Hindalco Industries Ltd.(2011 (6) TMI 662 - BOMBAY HIGH COURT) as also by the Hon'ble Gujarat High Court in the case of Ingersoll Rand (India) Ltd. (2013 (2) TMI 32 - GUJARAT HIGH COURT), wherein the Hon'ble Courts have taken the view that the said provisions are applicable only from the date of introduction. The demand in this case is for the period prior to the date of introduction. I also find that the Revenue has not been able to elaborate what is the misrepresentation or misstatement done by the respondent. Similarly, I do not find any suppression of fact with intention to evade duty in the whole case - Decided against Revenue.
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2014 (12) TMI 115
Valuation of goods - Clearance of goods to sister concerns - Section 4(1)(b) of the Act read with Rules 8 and 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Held that:- Rule 8 of the Valuation Rules, which has been invoked in the show cause notice for determination of value is not the appropriate rule, especially when the supplies made to the sister concerns formed only a small portion of total supplies effected by the appellant manufacturer. In Ispat Industries Ltd. - [2007 (2) TMI 5 - CESTAT, MUMBAI], a question arose before the Tribunal whether the assessable value in respect of goods which were transferred to another plant of the same assessee is required to be determined as per Rule 4 of the Valuation Rules, 2000 or as per the Rule 8 of the said Rules, in a case where the same goods were also sold to independent buyers. The Larger Bench held that Rule 8 would apply only in a case where the entire production of a particular commodity is captively consumed. - valuation in the instant case has to be done in terms of Rule 4 of the Central Excise Valuation Rules, 2000 and not under Rule 8 as proposed in the show cause notice - Decided in favor of assessee. Ascertainment of value at nearest time - Held that:- If more than one price to independent buyer is available, the lowest of such price should be taken as the basis. Inasmuch as the appellant was not put to notice about the basis for determination - matter remanded back to adjudicating authority for this purpose. Penalty u/s 11AC - Invocation of extended period of limitation - Inasmuch as the entire show cause notice has been issued consequent to the decision of the Hon’ble Apex Court decision in the case of IFGL Refractories case (2005 (8) TMI 112 - SUPREME COURT OF INDIA), the question of invoking the extended period of time would not arise. The ratio of this Tribunal’s decision in the case of KDL Biotech Ltd. - [2010 (9) TMI 931 - CESTAT MUMBAI] would apply to the facts of the present case also. Consequently, the question of imposition of penalty under Section 11AC also would not arise. - matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 114
Manufacture of patta and patti - Compounded levy - SSI exemption - Captive consumption - Appellant misconceived that it was eligible to the exemption and wrongly availed the benefit - violation of Notification No. 214/86-CE, dated 25-3-1986 - Held that:- Fiction was only created by the appellant that SS circles were not marketable goods. Such plea was discarded by learned Adjudicating Authority when buyers thereof confirmed that they had purchased such goods from the appellant. To determine the assessable value of SS circles, department did not resort to any arbitrary process but followed the guidelines of CAS 4. Law is very clear that benefit of compounded levy is extendable subject to compliance to the procedure of law, which cannot be given go-by. Admittedly, the appellant not being registered manufacturer under the law, failed to avail the benefit of compounded levy scheme, if any applicable. Prima facie, Appellant failed to succeed on its claim of SSI exemption benefit, due to unregistered status and due to dubious practice followed. Learned authority determined assessable value of hot rolled Patta Patti following CAS 4 guideline. This shows that the authority has not acted arbitrarily. He has given appropriate concession to the traded goods to determinate the value of dutiable goods. From the material facts and evidence on record, it appears that balance of convenience tilts in favour of Revenue for which dispensation of pre-deposit shall cause prejudice to the interest of Revenue. Therefore considering totality of the facts and circumstances of the case and also considering quantum of duty of ₹ 2,37,56,152 levied followed by equal amount of penalty and interest, appellant is directed to make deposit of ₹ 1,50,00,000 within 4 weeks of receipt of this order and make compliance on 4-8-2014. - Following decision of Benara Valves Ltd. v. CCE - [2006 (11) TMI 6 - SUPREME COURT OF INDIA] - Partial stay granted.
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2014 (12) TMI 113
Valuation of goods - Captive consumption - dispute is about how to determine the cost of production - valuation of the HDPE pipes cleared for captive consumption for use in the manufacture of parts of Sprinkler Irrigation System (HDPE Coupled pipes). - Held that:- The value of the goods for the purpose of assessment of duty and the cost of production are different. In this case, while the assessable value of the goods is cost of production plus manufacturer’s profit during period till 30-6-2000 and 115%/110% of the cost of production during period w.e.f. 1-7-2000, the cost of production is that which has to be determined in accordance with the principles of costing i.e. CAS-4 standard of ICWAI and for determining the cost of production, Apex Court’s judgment in case of UOI & Ors. etc. etc. v. Bombay Tyre International Ltd. etc. etc. (1983 (10) TMI 51 - SUPREME COURT OF INDIA) has no application. In view of this, the Commissioner’s order with regard to the issue of valuation is also incorrect and the matter has to be remanded for de novo adjudication - matter remanded back - Decided in favour of assessee.
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2014 (12) TMI 112
Classification of metal rolling mills and its various parts - whether the items, are to be classified as “part of the rolling mills” under Heading No. 8455.90 or the same are to be classified under Heading No. 84.28 - Held that:- The respondent manufacture rolling mills and their parts. During the period of dispute while Heading No. 84.55 covered metal rolling mills and rolls thereof, sub-heading No. 8455.10 covered “all goods other than parts” and sub-heading No. 8455.90 covered “parts”. All these items are not the rollers through which the metal passes but are the equipments for lifting, handling, loading and unloading of the materials which are in the nature of auxiliary equipment, essential for operation of rolling mills - “charging and discharging machines for hot strips rolling mills” which are also in the nature of auxiliary equipment essential for operation of rolling mills, would be classifiable as “part of the rolling mills” under sub-heading No. 8455.90 and not only a civil appeal filed by the assessee against this judgment was dismissed by the Apex Court vide judgment reported in [2003 (3) TMI 704 - Supreme Court of India], but the review petition against the dismissal of civil appeal was also dismissed vide judgment reported in [2003 (10) TMI 633 - Supreme Court of India]. In view of this, keeping in view the principles laid down by the Apex Court in the case of Kunhayammed v. State of Kerala, reported in [2000 (7) TMI 67 - SUPREME Court], the Apex Court’s order in case of Beekay Engineering & Castings Ltd. (2002 (4) TMI 546 - CEGAT, NEW DELHI) affirming the Tribunal judgment becomes a binding precedent. Therefore, we hold that the items mentioned above would be correctly classifiable under sub-heading No. 8455.90 as parts of rolling mills and not under heading No. 8428.00/8428.90 as held by the Commissioner (Appeals). The impugned order of the Commissioner (Appeals) is, therefore, not correct as the same is contrary to the law laid down by the Apex Court on this issue. - Decided in favour of Revenue.
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2014 (12) TMI 111
SSI Exemption - use of Brand Name of others - Confiscation of goods - Redemption fine - Penalty u/s 11AC - Held that:- Brand name or trade name need not be registered. So long as the said name indicates a connection in the course of trade between the goods and some person using such name it would suffice. - there is a connection between the name ‘Electron’ and M/s. Electron Industries Ltd. during the course of trade. Therefore, the name ‘Electron’ printed on the carboys satisfies the definition of brand name as defined in law. Inasmuch as the said name does not belong to M/s. Chemipol, they are not eligible for the benefit of Notification Nos. 9/2001 and 9/2002 and, therefore, they are liable to discharge full duty liability on the goods manufactured and cleared. In this view of the matter, the demand of duty confirmed on the appellant of ₹ 1,32,919/- under Section 11A(2) is clearly sustainable in law. Once the duty demand is held sustainable, interest liability automatically accrues and consequently, the appellant is liable to discharge interest liability on the duty demand confirmed against them. As regards the liability to confiscation of the goods seized from the premises of M/s. Chemipol and M/s. Electron Industries Ltd., the said goods have been cleared without payment of appropriate duty. Therefore, the goods are correctly liable for confiscation. The question is since the goods have been provisionally released, whether the redemption fine imposed is reasonable or excessive. The redemption fine of ₹ 60,000/- has been imposed on M/s. Chemipol in lieu of confiscation in respect of goods valued at ₹ 2,37,850/- and a fine of ₹ 30,000/- has been imposed on M/s. Electron Industries Ltd. in respect of the goods valued at ₹ 1,18,000/-. The purpose of imposing of redemption fine is to take away the profit margin which is available on goods. There is no evidence on record to show what is the profit margin on the impugned goods. In the absence of any such evidence, normally this Tribunal has been imposing a fine equal to 10% of the value of the goods. Therefore, following the same, in the present case also, we reduce the redemption fine. Since it relates to interpretation of law, we do not find any reason for imposition of penalty. Accordingly, the penalty is set aside on M/s. Chemipol and Shri Sajjan Kothari. As regards the penalty imposed on M/s. Electron Industries Ltd. and Shri Anil Patel, the liability to pay duty is on M/s. Chemipol and not on the buyer; therefore, it cannot be said that the buyer has violated any provision of the law. Therefore, the penalty on M/s. Electron Industries Ltd. and Shri Anil Patel are not sustainable. - Decided partly in favour of assessee.
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