TMI Tax Updates - e-Newsletter
December 8, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Highlights / Catch Notes

• Income Tax:

  TDS - the labour contract given by the assessee is in the nature of separate contract of work and assessee was not liable to deduct TDS under the provisions of section 194C - AT
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• Income Tax:

  Benefit of deduction u/s 80IB – assessee will be eligible to claim deduction u/s 80IB on the income accruing from refund of excise duty. - AT
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• Income Tax:

  Appeal dismissed as being time barred u/s 249 - once CIT(A) not admitted the appeal as barred by limitation, he should not have adjudicated on merits - AT
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• Income Tax:

  Tariff adjustment u/s 115JB deleted - Once AAD is considered as income as is being alleged by Revenue the obvious implication will be that such income in the Balance Sheet is a reserve. - AT
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• Income Tax:

  The provisions of section 36(1)(vii) do not contain the requirement of writing off the bad debts to the profit and loss account of the Assessee what the provision mandates that the amount of any bad debt or part thereof should be written off as irrecoverable in the Accounts of the Assessee for the previous year - AT
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• Income Tax:

  Whenever the assessee incurs expenditure for repair and maintenance of a building taken on lease for carrying on its business activity, it has to be allowed u/s 30(a)(i) -- AT
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• Income Tax:

  Disallowance u/s 40(a)(ia) – TDS on commission paid to directors - Merely because the directors have shown the said commission income in their hands as “income from other sources”, it cannot be a ground to exclude the commission paid to the directors from the ambit of salary - AT
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• Customs:

  Confiscation of goods - breach of principles of natural justice or not - It will not be correct to hold that irrespective of the facts and circumstances and in all inquiries, the right of cross examination can be asserted. - HC
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• Service Tax:

  Export of services - claim refund of the service tax paid on various input services under rule 5 of Cenvat Credit Rules, 2004 - since all the conditions are satisified, refund allowed - AT
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• Service Tax:

  Import of servcies - there is no evidence as to why the payment was made in 2008-09 in respect of the service received in 2004-05 - demand of service tax confirmed - AT
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• Service Tax:

  The question of demanding interest does not arise when there is no final assessment order or the full amount of duty has been discharged before final assessment order passed by the proper officer. - AT
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• Service Tax:

  BAS - nature of subsequent sale - Benefit of section 6(2) of CST Act - Activity of the appellant cannot be considered as a Business Auxiliary Services and liable for Service tax under the Finance Act, 1994. - AT
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• Central Excise:

  Manufacturing of pan masala - whether the carton shrink wrap machines are packing machines - Held No - AT
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• Central Excise:

  The refund that amount is not payable to the assessee for the reason that he had passed on the incidence of that duty to the customers, the deduction of the admissible trade discount cannot be refused and what is to be refused is the refund. The department has mixed-up the two issues which is not correct. - AT
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• Central Excise:

  The canvas canopies specially designed for lorries, tool bags and web equipment of textile material are classifiable under sub-heading 6306/6307 and not as ‘parts or accessories of motor vehicles’ under heading 8708 - AT
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• Central Excise:

  Since the order of the appellate Commissioner confirming levy of Excise duty, on invocation of the extended period of limitation and on the basis of the recorded finding that the appellant had suppressed relevant facts while short remitting duty, has become final, levy of penalty confirmed - AT
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Articles

• Tribunal has no inherent power to put a condition for depositing an amount for adjudicating the case afresh
• CONSTITUTIONAL VALIDITY OF TAXATION OF SERVICES BASED ON NEGATIVE LIST
• INTERPERSONAL RELATIONS

Notifications

• FEMA

• 323/2014-RB - dated 17-10-2014 - FEMA
  Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Fifteenth Amendment) Regulations, 2014

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• Service Tax

• 23/2014 - dated 5-12-2014 - ST
  Service Tax Third Amendment Rules 2014

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News

• Chairman and Vice-Chairman of SIT Reviewed the Progress of Investigations being Conducted by the Central Board of Direct Taxes (CBDT) with Respect to Shri Yadav Singh, Former Engineer-in-Chief, Noida Authority, with Chairperson, CBDT ; Directed her to Monitor the Search, Seizure and Further Appropriate Proceedings against Shri Yadav Singh and Other Connected Persons

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• Bank Branches in Rural Areas

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• Rajiv Gandhi Equity Scheme

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• Video Conference Meeting with Executive Directors of Public and Private Sector Banks held to Review Progress of Pradhan Mantri Jan-Dhan Yojana (Pmjdy);

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• OFS for Divestment of 5% of Government of India Equity in Sail Successfully Concluded; Issue Oversubscribed more than two Times;. To Fetch ₹ 1715 crores Approximately for the Government

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Case Laws:

• Income Tax

• 2014 (12) TMI 226
  Surcharge on sales tax and turnover tax – Held that:- The State Government has made any amendment to the Act so as to write back the entire profit of the assessee to the State Government - the assessee quantified the liability - If it is paid within the due date, the payment of the same is to be allowed in terms of sec. 43B - assessee follows the mercantile system of accounting and is entitled to deduct sales tax from the profit and gains of the business which had accrued during the financial year relevant to the assessment year subject to the provisions of section 43B - while computing the profit and gains of the business, whether the assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the assessee might take of its rights nor can the existence or absence of entries in its books of account be decisive or conclusive in the matter - Since the assessee is following the mercantile system of accounting, the assessee is fully justified in claiming deduction towards surcharge on sales tax and turnover tax which is payable in the financial year corresponding to the relevant AY – relying upon Kedarnath Jute Manufacturing Company Limited Versus Commissioner of Income-Tax (Central), Calcutta [1971 (8) TMI 10 - SUPREME Court] – Decided in favour of assessee. Laboratory expenses – Held that:- The assessee had incurred expenses for purchasing and handing over the equipment to the Government Chemical Examination Laboratory at Trivandrum, Ernakulam and Calicut - the contentions of the assessee cannot be accepted because the nexus of expenditure with the business cannot be a reason to allow the expenditure - The expenses incurred should be wholly and exclusively laid out or expended for the purpose of business - The expenditure incurred by the assessee shall be for carrying on the business of the assessee, i.e., to enable the assessee to earn profit in that business - It is not enough that the disbursements are made in the course of or arise out of or concerned with profits made out of the business. But it means also is to be for the purpose of earning profit from the business – a mere liability to satisfy the obligation by the assessee is not "expenditure", it only when the assessee satisfies the obligation to incur expenses for the purpose of business, it is business expenditure - though the expenses were incurred by the assessee, it cannot be said that they were incurred for the purpose of business or earning goodwill – Decided against assessee.

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• 2014 (12) TMI 225
  Admission of additional ground – Held that:- No fresh investigation is required for the additional grounds raised by the assessee and the facts are clear from the material available on the record, thus, additional grounds are admitted. Penalty u/s 271(1)(c) – Assessee could not furnish the details relating to cash credits and agreed for the addition - Held that:- The AO made the addition and initiated the penalty proceedings u/s. 271(1)(c) - from the above observations of the AO, it is crystal clear that the penalty proceedings u/s 271(1)(c) of the Act were initiated in respect of addition of ₹ 5,40,000/- and the AO clearly mentioned that the assessee tried to make clear concealment of income by way of claiming unexplained credits - both the conditions i.e. concealment of income and furnishing inaccurate particulars of income by way of claiming unexplained credits existed and the penalty u/s 271(1)(c) of the Act was rightly initiated by the AO. Cash credits voluntarily surrendered by assessee – Amount received from many relatives and list of them could not be shown – Held that:- Assessee contended that the voluntary surrender of income was not acceptance of incorrectness of these cash creditors, but it was offered to buy peace of mind by herself and her relatives and this does not mean that the cash credits were the assessee's own income and she attempted to conceal the same in the disguise of cash credits - the assessee had shown cash credits of ₹ 5,40,000/-, but failed to explain the names of the persons from whom those credits were received - when the assessee was unable to explain those cash credits to the satisfaction of the AO, she preferred to surrender the income and offered the same for taxation. AO did not accept the explanation of the assessee and credited the same as concealment of income and accordingly initiated the penalty proceedings u/s. 271(1)(c) of the Act - had the case been not selected for scrutiny and the AO did not ask for explanation from the assessee, the addition was not possible because only when the assessee was cornered the amount was surrendered and merely on this basis that the assessee made the surrender, it cannot be said that there was no concealment of income - relying upon MAK Data P. Ltd. Versus Commissioner of Income Tax-II [2013 (11) TMI 14 - SUPREME COURT] - only on the basis that the assessee made surrender when cornered by the Department, it cannot be said that the penalty u/s. 271(1)(c) of the Act was not leviable – thus, the order of CIT(A) is upheld – Decided against assessee.

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• 2014 (12) TMI 224
  Treatment of foreign currency gain - Business income from separate business activity or not – Held that:- Both the authorities have held that such a gain is not out of shipping activity but it has to be considered as separate business income - the only business activity which is being carried out by the assessee is shipping business i.e., operation of ships, which is its core activity - The foreign exchange gain has arisen to the assessee on account of sundry creditors and debtors which were in the course of shipping business only - the nature of transactions are charter hire income, charter hire deposits and insurance during the course of transaction of goods - once the assessee’s shipping income is taxed under a special provision, then also, it will not make a difference as only the shipping income is to be taxed - There can be no separate assessment on foreign exchange gain on the ground that it is different from operation of ships - the foreign exchange gain or loss directly relates to the export and same is qualified for the purpose of deduction - any foreign exchange gain or loss has to be in relation to the shipping income - There is no basis for separately taxing it as some other kind of business activity – thus, the order of the CIT(A) is upheld – Decided in favour of assessee. Disallowance u/s 14A – Held that:- The interpretation of the AO that sub–section (3) independently provides that in case no claim of expenditure has been made by the assessee than also the disallowance u/s 14A has to be made, is completely misplaced and is legally not tenable - only when the precedent conditions of sub–section (1) are satisfied, then only provisions of sub–section (2) and (3) will come into foreplay, for the purpose of determination of quantum of disallowance - no disallowance u/s 14A is warranted when the assessee has not claimed any expenditure, towards taxable income i.e., it has not claimed any deduction of expenditure debited in the Profit & Loss account while computing the total income – Decided in favour of assessee.

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• 2014 (12) TMI 223
  Validity of reopening of assessment u/s 147/148 – Held that:- The assessee had furnished the return of income declaring total income of ₹ 3.46 Cr on 13.12.2006 - the re-opening of assessment u/s 147/148 of the Act is valid because of the fact that diversion of funds was not properly disclosed by the assessee and therefore proviso to section 147 is not applicable – thus, the proceedings initiated u/s 147/148 of the Act have been validity initiated and completed. Capital work in progress disallowed u/s 36(1)(iii) – Held that:- Following the decision in Amartex Industries Limited Versus The Addl. CIT, Range 1, Chandigarh & Others [2012 (11) TMI 626 - ITAT CHANDIGARH] - section 36(1)(iii) clearly provides that where harrowed funds have been utilized for investment in the fixed assets for the period from the date of utilization of the funds till the date of putting the assets to use interest relatable to such deployment of funds is to be disallowed – thus, the matter is to be remitted back to the AO to re-work the disallowance u/s 36(1)(iii) of the Act by applying pro-rata day product method and not by applying flat rate of interest on the closing balance of each day – Decided partly in favour of assessee. Depreciation on fixed assets installed at Baddi unit disallowed – Held that:- During the year, no manufacturing activity was carried out at the unit and part of the assets were transferred to the Dera Bassi unit by the assessee - However, balance assets were lying in Baddi unit and the assessee claimed depreciation on the same which was disallowed by the AO and CIT(A) - assessee had temporarily suspended the activities at Baddi unit and had re-started manufacturing activity in AY 2011-12 – relying upon COMMISSIONER OF INCOME TAX Versus YAMAHA MOTOR INDIA PVT. LTD. [2009 (8) TMI 27 - DELHI HIGH COURT] wherein it was held that as long as the machinery was available for use, though not actually used, it fill within the expression "used for the purpose of the business" and the assesses could claim the benefit of depreciation – thus, the AO is directed to allow depreciation on the fixed assets remaining at Baddi unit – Decided in favour of assessee. Interest on monthly balances of capital WIP - Held that:- The chargeability of interest on the amounts debited to work-in-progress is upheld - the contention of the assessee that the amounts debited to work-in-progress had been transferred to the fixed assets and the balance amount left under the head was only on account of interest – thus, the matter is remitted back to the AO for verification of claim of assessee – Decided in favour of assessee.

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• 2014 (12) TMI 222
  Disallowance u/s 40(a)(ia) – TDS to be deducted on labour charges or not - Held that:- The assessee is an individual carrying out job work business - The assessee receives the orders from various companies for roughing and finishing of the raw material provided by the customer - The raw material is supplied by the customer and the assessee does the machining work through use of CNC machines - Sometimes, the raw material provided by the customer is required to be roughened and the roughing cannot be done at the assessee's premises since the assessee does not have the requisite plant and machinery - in F.Y. 2006-07, the assessee being an individual was not liable to deduct TDS on the payments to contractors and he was liable to deduct tax only on the payments made to sub-contractors. Nature of contract - Whether the labour charges paid by the assessee are in the nature of contract awarded by the assessee or sub contract awarded – Held that:- The customer provides the raw material to the assessee for carrying out certain job work - Since the assessee do not have certain machines and hence, the assessee in turn, gives the contract to other labour contractors to carry out part of the job - Ultimately the assessee is liable for the work carried out by them - This is evident from the purchase order from Jinabakul Forge Pvt. Ltd. for whom the assessee do the job work, wherein it is clearly mentioned that rejection upto 1% is allowed and rejection more than 1% would be to the assessee's account - the labour contract given by the assessee is in the nature of separate contract of work and assessee was not liable to deduct TDS under the provisions of section 194C. The assessee has engaged various labour contractors for which, the assessee himself was responsible for executing the contract and the labour contractors had no privacy of contract with Principal customer - For a contract to qualify as a subcontractor, the subcontractor should spend their time and energy and also undertake the risk attached with the main contract - As the element of risk taking was missing, the contract could not be held as subcontract – thus, the payments made to the labour contractors are not in the nature of sub-contracts and there was no obligation on the assessee to deduct TDS on the said payments and consequently, no disallowance could be made u/s. 40(a)(ia) of the Act – relying upon Mr. Vijay Ramchandra Shirsth, C/o. Shah Khandelwal Jain & Associates Versus ACIT, Circle -2, Nashik [2011 (9) TMI 904 - ITAT PUNE] - there is no written or real agreement to substantiate the view taken by the AO and it could not be held to be a contract - thus, the authorities below were not justified in making disallowance u/s 40(a)(ia) – Decided in favour of assessee.

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• 2014 (12) TMI 221
  Validity of invocation of section 263 by AO – Revision/reopening of assessment made u/s 143(3) – opportunity of being heard provided to assessee or not - Assessee contended that notice has been issued u/s 263, and assessee submitted detailed reply raised on various issues by the CIT, Kota for P.F. and E.S.I. – Held that:- The AO made additions in original assessment under three heads - on verification of facts, both the parties i.e. revenue as well as appellant are silent whether these enclosures were furnished by the appellant before the AO and considered these evidences before passing the order u/s 143(3) – it has already been held in various judgments that the AO is a quasi-judicial authority as well as investigator of the case - He simply does not put it on record the details on record but make proper inquiry before passing order u/s 143(3) of the Act, which is not reflected from the order itself as he has not applied his mind even he has not mentioned date of order in the order itself, there was a lack of inquiry and AO made this assessment within 15 days from the reply submitted by the assessee even query letter was issued by him on 01/6/2011 – AO completed this assessment because it was barred by limitation by 31st December, 2011without appreciating the fact of the case - CIT has provided reasonable opportunity of being heard and order was passed within time by the CIT under subsection (2) of Section 263 – thus, the order of the CIT is upheld – Decided against assessee.

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• 2014 (12) TMI 220
  Benefit of deduction u/s 80IB – Excise duty refund directly related to manufacture of goods or not – Held that:- AO has denied 80IB deduction on excise duty refund for the sole reason that it cannot be treated as income derived from eligible business of the undertaking - assessee has paid the excise duty on the goods manufactured and sold and as such it forms part of the sale price of assessee - payment of central excise duty is integrally connected with the manufacturing and sale of goods produced by assessee - as per the industrial policy resolution declared for the state of J&K and consequent to Central Excise Department Notification, assessee became eligible for refund of excise duty paid after set off of CENVAT credit - in sum and substance, it is only a refund of an amount already paid by assessee and reduced from the sale price while computing the profit - therefore, when assessee gets refund of an expenditure already incurred the same has to be deemed to be the profits and gains of business or profession carried on by assessee in terms of section 41(1)(a) of the Act – after excise duty refund received by assessee has to be treated as part of the business profit, hence, eligible for deduction u/s 80IB - assessee will be eligible to claim deduction u/s 80IB on the income accruing from refund of excise duty. Issue covered by the decision of SC in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] or not – Held that:- The facts are clearly distinguishable and do not apply to the facts of the present case - In case of Liberty India, the hon’ble Supreme Court was considering the profits derived from sale/transfer of DEPB/Duty Draw Back Benefits - DEPB/Duty Draw Back Benefits, is given under a scheme framed under the Customs Act and it is transferable, in other words, it is a marketable commodity - Excise duty refund by assessee in the present case is neither a marketable commodity nor transferable - It is only a refund of expenditure already incurred by assessee, hence the decision will not apply – the order of the CIT(A) is upheld – Decided against revenue. Taxability of excise duty refund – Capital receipt or not – Held that:- Assessee has not only treated excise duty refund as a revenue receipt in its books of account but has also shown it as income in the return of income filed for the AYs - This issue was never raised by assessee at the assessment stage - Though, before the FAA assessee raised this issue by way of an additional ground, but, the CIT(A) neither examined nor considered the issue by making a detailed analysis - Since for arriving at proper conclusion as to whether excise duty refund is in the nature of capital or revenue, factual aspects relating to industrial policy resolution and notification granting incentives have to be looked into, which has not been done either by AO or by CIT(A), we are not inclined to enter into this issue at this stage - the order of CIT(A) allowing assessee’s claim of deduction u/s 80I is upheld, thus, the issue becomes academic – Decided against revenue. Validity of proceedings u/s 154 – Held that:- Exercise of jurisdiction u/s 154 of the Act for withdrawing benefit u/s 80IB in respect of excise duty refund is not valid as it is a debatable issue, though, considering the fact that CIT(A)’s order granting benefit u/s 80IB to assessee is upheld – the issue becomes academic – Decided against assessee.

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• 2014 (12) TMI 219
  Nature of receipt of grant - Chargeability of other income to tax - assessee’s contention that the income from internal sources was nothing, but a reduced portion of the Grant given by the Government of India for the purposes of meeting its expenses, was jettisoned. - Revenue was of the view that the ‘Other income’ is distinct from Grants and hence is chargeable to tax - Held that:- the unspent balance of previous grants has been taken into account while sanctioning this grant. If we see ‘Other income’ is isolation, it is undoubtedly income chargeable tax in view of the Tribunal holding in its first order dated 31.7.2006 that the grant of registration by the CIT is prospective and does not extend to the year under consideration and the consequential assessment of the assessee as AOP. But when we view ‘Other income’ in the setting and the context of the Scheme of the Government allowing Grants for meeting all of the assessee’s expenses as reduced by the amount of such ‘Other income’, in conjunction with the fact that the tribunal has held the amount of Grant to be not chargeable to tax, the irresistible conclusion which follows is that such ‘Other income’ partakes of the character of Grant only. There is a need to draw a line of distinction between the amount of ‘Other income’ adjusted by the Government against grant and the amount not so adjusted. Whereas, the first amount is to be considered as part and parcel of the amount of grant and hence not chargeable to tax, the second amount cannot be so considered. The reason is simple that the amount of such second part of ‘Other income’ does not bear the character of grant so as to avail any immunity from taxation. – Decided in favour of assessee. - Such second part, which is not considered by the Government as part of the grant, in our considered opinion is rightly chargeable to tax in view of the tribunal treating the status of the assessee as AOP. - Decided partly in favor of assessee.

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• 2014 (12) TMI 218
  Survey u/s 133A - Addition made on the basis of material found during survey deleted – addition of expenses incurred on purchase and renovation of new office deleted - Held that:- CIT(A) rightly was of the view that the assessment order is an ad verbatim reproduction of the survey report on this point - there is no basis given in the survey report for estimating the net profit for the entire year on the basis of some rough calculations for one month only - in the survey report, the estimation of net profits by extrapolation has been done for AY 2006-07, and thereafter, the same has been repeated for AY 2005-06 without assigning any reasons whatsoever for doing so – the AO was not justified in estimating the net profit – revenue could not controvert the factual finding of the CIT(A) - The estimation of profit is not sustainable for the various reasons given – Decided against revenue. CIT(A) rightly observed that the assessee has not been able to give any proper explanation in regard to these entries except stating that the black diary was kept only for memory purpose, wherein the entries relating to enquires, ticket bookings and miscellaneous items till the transaction didn’t conclude were noted, but on conclusion they were duly entered in the regular books of accounts, and , therefore, no adverse inference should be drawn against the entries jotted in the black diary - While this argument may hold good in respect of the regular business transactions and sundry debtors, it cannot be accepted in respect of the entries written under the narration Ärun-Vishal Khoye Wala, New Office expenses, which, thus, appear to be amounts incurred on new office expenses - The appellant has not been able to show/co-relate these entries with his books of account - The addition in respect of the entries will have to be confirmed as unexplained expenditure u/s 69C of the Act – Decided against revenue.

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• 2014 (12) TMI 217
  Appeal dismissed as being time barred u/s 249 - violation of principles of natural justice – Admission of appeal - Held that:- It is immaterial to discuss, whether assessment order was served through affixture validly or not but the assessee obtained the copy of assessment order from the AO for the first time and filed appeal within the limitation period after obtaining the assessment order - the assessee's wife was under treatment for cancer at Christian Medical College, Vellore during this period of delay - the cause is reasonable for filing of appeal belatedly i.e. after expiry of limitation period, if there is any – the delay is condoned and the CIT(A) is directed to admit the appeal. In case CIT(A) chose not to condone the delay, he has no business to adjudicate the appeal on merits - first of all, the appeal should be admitted for making a decision on merits because the right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications - The right to appeal is statutory right and it can be circumscribed by the conditions in the grant - If the statute gives a right to appeal upon certain conditions, it is upon fulfillment of those conditions that the right becomes vested in and exercisable by the appellant - the assessee's appeal is delayed as alleged by CIT(A) and without admitting the appeal he has adjudicated the same on merits - Once the appeal is not admitted nothing is pending before him – relying upon CIT Vs. Mysore Iron & Steel Works [1949 (3) TMI 17 - BOMBAY HIGH COURT] - once CIT(A) not admitted the appeal as barred by limitation, he should not have adjudicated on merits - The findings given by CIT(A) on merits will have no bearing on fresh adjudication by CIT(A), in the set aside appellate proceedings – thus, the morder fo the CIT(A) is set aside and the matter is remitted back for adjudication – decided in favour of assessee.

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• 2014 (12) TMI 216
  Interest on PDCs paid out of books of account deleted – Held that:- CIT(A) was rightly of the view that there is no evidence which proves that interest is paid from the date of sale to date of encashment of postdated cheques - where ever the date of PDCs are extended interest is paid @ 15% per annum in cash out of books of accounts which are evident from seized material - therefore, interest on PDCs to the extent of extension period appears to quite reasonable and logical - The ground raised by the Revenue is misconceived because CIT(A) has not deleted the addition but has only directed to recalculate the interest - after examining the loose papers seized at the time of search at the assessee’s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs – CIT(A) rightly directed the AO to re-compute the interest on PDCs at the time of extension of the PDCs - if it is not possible to work out the extension of PDCs in each case, then the AO is directed to recomputed interest on PDCs after six months from the date of issue of the PDCs – the order of the CIT(A) is upheld – Decided against revenue. Additional payment in violation of Stamp Duty Act, 1899 deleted u/s 37(1) – Held that:- When no expenditure is claimed by the assessee, the question of disallowing the same by the AO does not arise - the assessee was purchasing the land for and on behalf of another company of BPTP Group viz., M/s Countrywide Promoters Pvt. Ltd. and whatever payment is made by the assessee to land owners or their relatives for purchase of land was debited by the assessee to the account of CWPPL and the payment for purchase of land whether as per stamp duty or additional payment has not been claimed as an expenditure by the assessee - on this factual aspect, there is neither any finding by the CIT(A) nor by the AO – in Westland Developers Pvt. Ltd. Versus ACIT, Central Circle-23, New Delhi [2014 (12) TMI 254 - ITAT DELHI] - the principle is also accepted that when the expenditure is not claimed by the assessee, the same cannot be disallowed - However, the question still remains whether such payment i.e. additional payment made by the assessee to land owners or their relatives is claimed by the assessee as a deduction or not – thus, the matter is remitted back to the AO for verification and adjudication – Decided against revenue.

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• 2014 (12) TMI 215
  Claim of exemption u/s 54F disallowance - Assessee already owned two houses as on the date of purchase of new house – Held that:- The AO as well as the CIT(A) has noted that the assessee was owning three other residential properties - there is no clear finding regarding ownership of these two properties claimed to be belonging to the HUF - It is a factual aspect and it needs to be thrashed out at AO level - the flat no.201, B-1, Lotus Pond, 2A Vabhav Khand, Indirapuram, Ghaziabad was purchased by the assessee by Flat Buyer Agreement between Shourya Towers Pvt. Ltd. and Dr. Neeta Sharma and Dr. Sunil Sharma and as per Annexure ‘B’ to this Agreement, the assessee has paid ₹ 25,45,226.25 up to 17.10.2005 as a base sale price and has also paid other charges like PLC, IFMS and other charges - the total payment up to 17.10.2005 paid was ₹ 29,53,001.25 – the AO himself has visited the site to verify the existence of residential building - The assessee claimed that two properties were belonging to HUF and these were acquired by the father of the assessee which was bequeathed in favour of the HUF by way of Will. It was also canvassed that this assessment has been completed in a very short period between 13.12.2010 to 29.12.2010 - Therefore, assessee could not get the benefit of effective and proper hearing - the Income-tax Inspector as well as AO has carried out inspection at the site, but the findings of visit have not been confronted with the assessee which clearly shows that there was inadequate opportunity provided to the assessee - the findings of the AO as well as the Income-tax Inspector were not confronted with the assessee - Since this is a factual aspect and without bringing all relevant facts on record, it is difficult to arrive at a justified reasoning with regard to the claim of exemption u/s 54F of the Income-tax Act, 1961 – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Unexplained advances deleted – Held that:- CIT(A) rightly was of the view that assessee had sufficiently discharge onus of proving the identity and creditworthiness of late Sh. Jaipal Sharma - Sh. Jaipal Sharma was having sufficient land holding and therefore, creditworthiness was also explained - identity and genuineness of transaction had been established - the AO could have enforced summon to Sh. Dushyant Tyagi for any further verification - this credit is also treated as sufficiently explained - CIT (A) has granted the relief to the assessee that assessee has sufficiently discharged the onus proving the identity and creditworthiness of Shri Jaipal Sharma - The genuineness of transaction was established - CIT (A) was justified in deleting the addition - assessee has also explained sufficiently the source of credit of ₹ 5 lacs taken from Shri Dushyant Tyagi – revenue is unable to produce anything contrary to the findings of the CIT(A) – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 214
  Tariff adjustment u/s 115JB deleted - Taxability of advance against depreciation (AAD) – depreciation on land amortized - Advance against depreciation is reserve or not for computation of MAT u/s 115JB - Held that:- Following the decision in ACIT, Range II, Faridabad Versus M/s. NHPC Limited [2014 (11) TMI 92 - ITAT DELHI] - Advance against depreciation is an amount that is under obligation right from the inception as the same shall be adjusted in future, hence, cannot be designated as reserve - advance against depreciation is nothing but an adjustment by reducing the normal depreciation including in the future years in such a manner that at the end of the useful life of the plant the same shall be reduced to nil - assessee cannot use the advance against depreciation for any other purposes except to adjust the same against future depreciation so as to reduce the tariff in future years. Once AAD is considered as income as is being alleged by Revenue the obvious implication will be that such income in the Balance Sheet is a reserve. It can’t be that AAD is an income and then it vanishes. Income has to be carried to the Balance Sheet and such income carried to Balance Sheet will form part of the ‘Reserve’. Since ‘AAD’ has been held by Supreme Court is not a reserve, this contention of the Revenue can’t be accepted – Decided against revenue. Computation of book profit u/s 115JB on provision for gratuity, leave encashment and post-retirement benefits – Held that:- In Bharat Earth Movers Versus Commissioner of Income-Tax [2000 (8) TMI 4 - SUPREME Court] it has been held that the liability incurred by the assessee under the Leave Encashment Scheme determined on actuarial valuation is an ascertained liability and cannot be considered as a contingent liability - the amount of such provision can be claimed as deduction only on actual payment and not on the simple creation of provision - in the computation of book profit u/s 115JB, deduction is available for such provision of ascertained liability – revenue has not drawn attention towards any part of the provisions of section 115JB, which makes the provisions of section 43B(f) applicable to the computation of book profits - if the income under the normal provisions of the Act turns out to be more than the book profit u/s 115JB and the total income is to be computed as per the normal provisions, then no deduction for such provision would be admissible unless the amount of such provision is paid before the due date u/s 139(1) of the Act. Provision for loss in hedged transaction – Held that:- The loan was taken as a general purpose loan "and not for purpose of acquisition of any asset" - The finding returned by the CIT(A) remained uncontroverted by the revenue - as the loan was taken not for acquisition of any capital asset but on revenue account, the loss suffered on hedging for payment of interest and repayment of principal amount of loan in foreign currency is deductible as an ascertained liability relying upon CIT Vs. Woodward Governer India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] - such amount, being a provision for an ascertained liability, is deductible in the computation of income, both under the normal provisions and also u/s 115JB of the Act – the order of the CIT(A) is upheld. Disallowance u/s 14A – Computation of income under MAT provisions – Held that:- It can be seen from the assessee's balance sheet as on 31.03.2008 that the amount of Share capital with Reserves and surplus stands at ₹ 17,275.83 crore - the amount of Shareholders funds is far in excess of the amount of Investment yielding exempt income – relying upon CIT Vs. Suzlon Energy Ltd [2013 (7) TMI 697 - GUJARAT HIGH COURT] - there can be no question of disallowance of interest u/s 14A because the amount of Shareholders fund is much higher than the amount of Investments yielding exempt income - the disallowance on account of interest expense is to the tune of ₹ 19.65 crore - If such disallowance is deleted, the remaining amount of disallowance comes to ₹ 5.25 crores - the assessee itself voluntarily made disallowance of ₹ 17.89 crore u/s 14A - as the remaining amount disallowable as per rule 8D is less than the amount suo motu disallowed by the assessee, there is no need for making any further disallowance – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 213
  Deductions on bad debts disallowed – Held that:- Relying upon TRF Ltd. vs. CIT [2010 (2) TMI 211 - SUPREME COURT] wherein the AO was directed to verify whether the debt has been written off in the accounts of the assessee or not - the accounts of the assessee culminate in P&L account and balance sheet - The claim of bad debts is not reflected in P&L account whereas any account relating to expense or loss has to be debited to P&L account - Since there is no debit of bad debts in the appellant's P&L account it cannot be said that the claim was written off in the accounts - assessee contended that the finding of CIT(A) that there was no break-up extra-ordinary and exceptional items in the Audit Report is ex-facie incorrect - assessee further contended that the notes contain the complete details of the amount debited as exceptional and extra-ordinary items in the profit and loss - the only reservation of the AO is that the appellant has shown the amount of bad debts written of under the head of exceptional and extra-ordinary items in the P&L A/c and thereby has debited only ₹ 33,25,76,167/- in the profit and loss account that too in the profit and loss appropriation account. The provisions of section 36(1)(vii) do not contain the requirement of writing off the bad debts to the profit and loss account of the Assessee what the provision mandates that the amount of any bad debt or part thereof should be written off as irrecoverable in the Accounts of the Assessee for the previous year - assessee emphasized that the provision requires writing off in the accounts of the assessee not in the profit and loss account, the ledger accounts of the parties form part of the accounts, maintained by the assessee - Therefore, the requirements of Section 36(1)(vii) are duly complied with – the contentions of assessee is upheld and the findings of CIT(A) is set aside and the matter is remitted back to AO for verification – Decided in favour of assessee.

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• 2014 (12) TMI 212
  Selection of comparables – CRISIL Ltd. – Held that:- CRISIL Limited was proposed by the assessee itself in its transfer pricing document after considering functional, assets, risk and economic analysis of the comparable company – it has already been held that in case of comparables having different year ending, the same should be ignored – the matter is remitted back for reconsideration of CRISIL Limited as comparable after considering assessee’s contention regarding different year ending being followed by the assessee vis-à-vis CRISIL Limited. ICRA Online Limited – Held that:- The information services segment was used for computation of margin in the transfer pricing study - The assessee itself has used it as a comparable in its transfer pricing study/comparables - Since functionally it is comparable with that of assessee, therefore, assessee’s contention for exclusion of ICRA Online Limited has no merit. In House Productions Limited – Benefit of economic data adjustment and +5% variation - Held that:- Keeping in view the computation of margin and also the activities in which In House Productions Limited is engaged which is stated to be basically healthcare services, not comparable to the assessee, the matter is remitted back to the AO/TPO/DRP for fresh consideration - also, after re-computation, assessee should be considered for benefit of 5% range from the transfer price, if the same falls within + 5% as per the proviso to Section 92C(2). Adhoc disallowance of 25% of foreign travelling expenses – Held that:- The disallowance has been made merely on the plea that evidence has been filed by the assessee on sample basis – after considering the detailed information furnished in the form of statement giving details and purpose of foreign travelling expenses, place of foreign travelling, purpose of visit, name of person visited, amount incurred on travelling, boarding and lodging etc. the observation of the lower authorities were that some of the airways bills were not in the name of assessee company - Keeping in view the nature of assessee’s business vis-à-vis necessity of journey undertaken which was essentially for the purpose of business, the AO is directed to restrict the disallowance to the extent of 10% of the expenditure so incurred in place of 25% made by the lower authorities – Decided partly in favour of assessee

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• 2014 (12) TMI 211
  Foreign tour expenses disallowed – Nexus between foreign expenses with the business carried out by the assesse – Held that:- CIT(A) rightly considered that while adjudicating the issue, the AO has stated that the travelling payments incurred and claimed also included the expenses incurred towards the foreign tour of the Director Saleem Bakshi, in support of which, the assessee company had also filed a copy of bill dated 06.06.2008 – the dealer was required to bear the cost of travelling to and from Beijing, China, and the other expenses were being borne by the Company for their stay at Beijing from 13th June, 2008 to 16th June, 2008, in respect of their boarding, lodging, and local travelling, etc. - it was obligatory on the Director to go and attend the conference, and the tour was having no personal element - In support, the copy of bill dated 06.06.2008 was also filed along with the copy of cash memo dated 11.06.2008, towards the payment of to and fro expenses from Delhi to China and for having the currency also, from which, it was wrongly inferred by the Assessing Officer, that the Director had gone to Thailand on his personal tour, without appreciating, that the Director had gone to China by Thai Airways, as appeared in the Travelling bill - since only a part of the claim made by the assessee has been allowed, it is obvious that the AO himself did not dispute the nature of the expenditure as a business expenditure –the order of the CIT(A) is upheld – Decided against revenue. Classification of repairs and maintenance – Capital in nature or not – Held that:- The premises whereat the repairs and maintenance were carried out, was a rented premises - Tiles, adhesive and other raw-material were purchased for improvement and beautification of the premises - this expense did not amount to capital expenditure, just because the bills were raised for renovation - The repairs were found to have been carried out as a business necessity of the assessee - whenever the assessee incurs expenditure for repair and maintenance of a building taken on lease for carrying on its business activity, it has to be allowed u/s 30(a)(i) - CIT(A) correctly noted that it was only for the year under consideration, that a sum had been disallowed out of the total expenditure incurred and claimed of ₹ 22,55,710/-, wrongly presuming it to be expenditure capital in nature, without going through the records, and that the premises owned were all leased out premises and not owned by the assessee company – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 210
  Validity of reopening of assessment u/s 147 - Validity of addition u/s 40(a)(ia) – Income enhancement – Held that:- Original assessment was made u/s 143(3) of the Act - AO has dealt with the disallowance in respect of sundry creditors - there is a clear mention of payment to M/s. Paramount Film (India) Pvt. Ltd. wherein the outstanding amount has been shown at ₹ 10,59,716 - The AO has noted that the assesse has given the names and address details very late - the AO has duly considered the payment to M./s. Paramount Film (India) Pvt. Ltd. – assessee submitted that the agreement under which payment was made to M/s. Paramount Film (India)Ltd. was also submitted before the AO - He was also aware of the payments and balance outstanding in the name of the company - it cannot be said that the AO was not aware of the nature of payments made to the party - AO has also considered and chosen not to make any addition u/s 41(1) of the Act in the name of the party, despite noting that the Inspector has reported that payment made during the year to the party was ₹ 55,54,177 - Thus AO after conscious application of mind has chosen not to make any disallowance - the AO has applied his mind regarding the nature of payment and chosen not to make any disallowance. Validity of reopening of assessment u/s 147 – change of opinion – Held that:- No new fact has come to the notice of AO for reopening the issue of payment to M/s. Paramount Film (India) Ltd. - The nature of payments, licencee agreement made with the party were all available with the AO in the original assessment u/s 143(3) of the Act - AO consciously made a decision not to make any disallowance in this regard - Hence on the same issue when the reopening is done and the AO changes his opinion and comes to the decision that the assessee should have been deducted TDS u/s 195 of the Act, it is clearly a change of opinion - It is a fresh application of mind on the same set of facts which is impressible - thus it is not open for the officer to reopen the assessment just because he does not agree to the decision of the previous officer - reopening on mere change of opinion between two officers is not legally permissible. Relying upon CIT vs Kelvinator of India Ltd [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - if the AO has considered the payment and nature of the payment to M/s. Paramount (India) Ltd. and chosen not to make any disallowance, reopening and addition on this account is merely a change of opinion and is not permissible – thus, the reopening is set aside – Decided in favour of assessee.

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• 2014 (12) TMI 209
  Disallowance u/s 40(a)(ia) – TDS not deducted on commission paid to directors - Held that:- The assessee has paid Commission to the 4 directors on which no TDS has been deducted for which the AO disallowed the same u/s.40(a)(ia) which has been upheld by the CIT(A) – the contention of the assessee is accepted that the assessee has made payment to its employee directors not for selling any goods or articles but for managing the affairs of the assessee company - The amount is not paid for selling any particular goods/articles and therefore the amount paid by the assessee company to its directors does not come within the ambit of provisions of section 194H - Merely because the directors have shown the said commission income in their hands as “income from other sources”, it cannot be a ground to exclude the commission paid to the directors from the ambit of salary - the commission paid to the directors should be treated as salary in their hands and treated accordingly and the provisions of section 40(a)(ia) are not applicable. Relying upon Jahangir Biri Factory (P) Limited. Versus Deputy Commissioner Of Income-Tax [2009 (3) TMI 215 - ITAT CALCUTTA-C] – wherein it has been held that the commission paid to directors as per terms of employment for the work done in their capacity as whole time directors is to be treated as incentive in addition to salary etc. and did not come within the purview of commission and brokerage as defined in section 194H or fee for professional or technical services as defined in section 194J and therefore the same cannot be disallowed u/s.40(a)(ia) - one of the director Shri Mahendrapal Tank has claimed an expenditure against the receipt of commission - once the commission paid to the directors is held as part of salary income, the Director is not entitled to claim any expenditure from such salary income –Decided partly in favour of assessee.

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• 2014 (12) TMI 208
  Rejection of claim of exemption u/s 54 – Purchase of new residential property against payment in installments - A.O. noted that the assessee has made payment of ₹ 5,07,825/- only within two years from the date of transfer of property for acquisition which cannot be treated as substantial portion of ₹ 35,72,240/- - assessee submitted that he has paid substantial amount to the builder before the completion of period of 3 years from the date of sale of original asset i.e. before 24-10-2010 and the flat was in his possession at the time of hearing. - Recently delivered judgment by SC relied upon by assessee - Held that:- the assessee has claimed the deduction u/s.54F of the I.T. Act whereas the Assessing Officer has proceeded with the provisions of section 54 of the I.T Act. The assessee has received an amount being her share in the joint property sold on 25-10-2007 - assessee kept the money in her savings account and did not deposit the money in the specified capital gain account scheme within the stipulated time – AO was of the view that since it has not paid substantial amount within a period of 2 years from the date of transfer of property for acquisition of the residential flat nor deposited the money in the specified capital gain account with any specified bank and the money was deposited in her saving bank account which was upheld by the CIT(A) – assessee entered into an agreement for purchase of flat on 14-10-2009 - the details of payment made towards the purchase flat are already given – Assessee relied upon the decision delivered by SC in Sh. Sanjeev Lal Etc. Versus Commissioner of Income Tax & Another [2014 (7) TMI 99 - SUPREME COURT] - However, it is a very recent decision and was neither available before the AO nor before the CIT(A) - Revenue authorities had no opportunity to go through the ratio laid down in the said case, vis-a-vis the facts of the case of the assessee – thus, the matter is remitted back to the AO with a direction to decide the issue in the light of the decision of the SC – Decided in favour of assessee.

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• 2014 (12) TMI 207
  Quantification of the disallowance u/s. 14A(1) – Exclusion of certain expenditure - assessee is a non-banking financial company (NBFC) - Held that:- The method followed by the assessee, which gets in fact validated by its adoption by the A.O., has a strong rationale to it - the assessee's explanation and method of apportionment is to that extent arbitrary and de hors its accounts - a proximate cause, i.e., with the tax exempt income - which does not fall under any head of income, which is required to satisfy the test of 'in relation to', specified in section 14A(1), including both direct and indirect expenditure, is eminently satisfied - the expenses falling for allowance under any provision, i.e., from sections 15 to 59, would qualify for disallowance u/s.14A, which is a separate and complete code in itself - an identity or unity, i.e., in principle, between the working of the assessee and the A.O., so that what remains is to eliminate the errors inflicting their respective workings, doing which would lead to the same result. In the absence of any factual basis to the assessee's claim, the same, it was explained, would not even qualify to be one - The matter is factual, so that where, the initial onus has not been discharged by the assessee, the disallowance u/s. 14A(1) cannot be impugned for non-compliance of the procedure laid down u/s. 14A(2) – relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the disallowance u/s.14A(1) is upheld.

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• Customs

• 2014 (12) TMI 230
  Appeal before Commissioner (appeals) - period of limitation - Rejection of the refund claim - commodity imported by the petitioner was not exigible to customs duty - Maintainability of appeal u/s 128 - Whether the petitioner had actually approached the competent authority for getting the assessment order/Bill of Entry modified and what transpired thereafter - Held that:- date of service of the impugned order has been clearly mentioned by the petitioner against 'column No. 4', that the same was served to the petitioner on 23.03.2012. The appeal was preferred on 8.5.2012, which is well within the time prescribed under the statute. The same was rejected by the appellate authority stating that Section 128 was not attracted. - The appeal preferred by the petitioner against Ext.P1 is well within time and as such, it ought to have been considered, passing appropriate orders on merits. Commissioner directed to reconsider the matter with regard to the claim for refund preferred by the petitioner passing appropriate orders in accordance with law. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 229
  Payment of ground rent paid - Detention of cargo - clearance of the container - payment of demurrage charges - Held that:- The position that emerges on the facts in this case is the Port Authority should have sold the goods within two months from 12th February, 1996 being the date of the said earlier order wherein the submissions made on behalf of the Customs were recorded, that their detention of the goods had been set aside by this Court upon being challenged. The Port Authority having had collected demurrage charges from the petitioners by debiting their marine account till then, had two months therefrom to sell the goods or in any event cause the 78 containers to be released thereafter. At least it was not brought to the notice of this Court that any sum on account of demurrage charges was outstanding as had not been debited to the petitioners’ marine account for the period prior to filing of the writ petition. The period beyond in which the goods were kept in the containers requiring them to be detained was at the instance of the Port Authority when it had no lien and demurrage charges for that period cannot be fastened on the petitioners. The petitioners having admitted their liability to pay de-stuffing charges to the tune of ₹ 6,84,849.80/- on account of cost of de-stuffing 78 containers in terms of the said order dated 4th December, 1996, there will be a direction upon the learned Advocate on record of the petitioners to pay the said sum to the Port Authority along with demurrage charges payable in respect of 78 containers for a period of two months commencing on and after 12th February, 1996, at the relevant prescribed rate out of the proceeds of the short term fixed deposit kept renewed from time to time which the said learned Advocate on record will encash- Petition disposed of.

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• 2014 (12) TMI 228
  Confiscation of goods - breach of principles of natural justice or not - Sections 111(d) and (m) of the Customs Act, 1962 - penalty under Section 112(a) - Denial of duty exemption under Notification No. 55/2003-Cus., dated 1-4-2003 - Redemption fine - Held that:- when the dispute was raised with regard to the other material and contents of these certificates relied upon that it was decided by the department to form an expert panel. That also included the representatives of the assessee. The opinion of the expert panel, after examination, was taken on record. After conclusion of this, show cause notice was issued and impugned order was passed. In these circumstances, we are unable to accept the argument of Mr. Kantawala that any prejudice has been caused to the assessee by not permitting the panel members to be cross-examined. The Tribunal did not commit any error in holding that right to defend the proceedings which are inherent in such adjudication are in no way prejudiced, leave alone the conclusion of the department. The assessee could have in the teeth of this material and which was placed by it before the department was in a position to defend itself effectively. It had in its possession several documents including from the suppliers abroad. It is in these circumstances and where several opportunities were given to the assessee/appellant to make submissions with regard to the findings of the report of the expert panel that refusal to permit cross examination of some of the panel members was justified. It will not be correct to hold that irrespective of the facts and circumstances and in all inquiries, the right of cross examination can be asserted. Further, as held above which rule or principle of natural justice must be applied and followed depends upon several factors and as enumerated above. Even if there is denial of the request to cross examine the witnesses in a inquiry, without anything more, by such denial alone, it will not be enough to conclude that principles of natural justice have been violated. - Decided against assessee.

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• Service Tax

• 2014 (12) TMI 247
  Denial of refund claim - export of services - claim refund of the service tax paid on various input services under rule 5 of Cenvat Credit Rules, 2004 - Held that:- Services rendered by the appellant, namely, "Business Auxiliary Service" and "Scientific and Technical Consultancy Service" come under Rule 3(i) (iii) of the Export of Service Rules. To qualify as exports, two conditions are required to be satisfied, that is, such services should be provided from India and used outside India and the payments for the service is received in convertible foreign exchange. As regards the receipt of the payment in convertible foreign exchange, there is no dispute. As regards the first condition, when the service provider is located in India and the service recipient is located in abroad, use of the service rendered by the service provider is by the recipient located abroad and therefore, the services can said to be used outside India. Respondent herein undertakes only exports of services and is not rendering any services in India. Therefore, all the input services on which he has taken the credit is in relation to the exports made by him. Consequently the appellant would be eligible for refund of the input service tax paid under Rule 5 of the Cenvat Credit Rules, 2004. - Decided against Revenue.

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• 2014 (12) TMI 246
  Waiver of pre deposit - application for recalling the stay order - earlier entire amount of tax was directed to be deposited - Insurance as well as reinsurance broker - export of service or not - Held that:- High Court had passed the interim order in 2009 insofar as it directed the Revenue for quantification of the dues and there is a temporary stay of the recovery. The matter was adjourned on several occasions and by Note Sheet order dated 2.6.2014, this Bench directed the learned special counsel to verify the latest position before the Hon’ble High Court. We find that the Tribunal in the earlier order, in the applicant’s own case [2008 (11) TMI 82 - CESTAT, CHENNAI], after considering the Board’s circular and the decision of the Hon’ble Supreme Court, on merit, held against the assessee. Period of dispute in the present case is prior to the circular dated 16.4.2010. On a query from the Bench, the learned counsel submits that the demand of tax in the present case is within the normal period of limitation. Hence the applicant failed to make out a strong prima facie case for waiver of predeposit of entire amount of dues. - stay order modified - Partial stay granted.

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• 2014 (12) TMI 245
  Import of services - Technical Testing and Analysis service - Service performed outside India - Design Service - there is no evidence as to why the payment was made in 2008-09 in respect of the service received in 2004-05. There is no evidence on record by way of agreement or copy of order placed or any other correspondence to prove that the service was performed prior to 1-6-2007. In these circumstances, we find no infirmity in the impugned order, whereby the demand with interest and consequent penalty in respect of Design service - No merit in the appeal filed by the assessee. Taxable service provided from outside India and received in India, shall, in relation to taxable specified in sub-rule (ii) be such services as are performed in India. We find the Technical Testing and Analysis service covered under sub-clause (zzh) of Section 65(105) of the Finance Act, as specified in Rule 3 above. The contention of the assessee is that the entire test was performed outside India. In these circumstances as per the first proviso to Rule 3(ii) for taxable service if it is partly performed in India, it is to be treated as performed in India. We find that there is no allegation in the show cause notice of evidence on record to show that part of the service was performed in India. In view of this we find that as per the provisions of Rule 3 of Import of Service Rules, the Service Tax is not leviable on the Technical testing and analysis. In these circumstances, we find no infirmity in the impugned order whereby the demand in respect of Technical testing and analysis is set aside. - Decided partly in favour of Revenue.

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• 2014 (12) TMI 244
  Cargo handling charges - Appellant render composite service and charge a lump sum amount - Held that:- Appellant collected transportation charges and cargo handling charges separately and discharged Service Tax liability on cargo handling charges. This amounts to tax planning and not tax evasion as alleged by the Revenue. Further, the activity of the appellant was made known to the department as early as in March, 2003 and nothing prevented the department in issuing a show cause notice as soon as they came to know of the activity of the appellant. However, the department waited till 3-8-2005 to issue a show cause notice for the period from 2002 to 31-3-2005. It is thus seen that bulk of the demand pertains to the period beyond the normal period of limitation. We have perused the show cause notice issued to the appellant. Apart from making a bland statement that the appellant has suppressed the facts from the department, no evidence has been led by the Revenue to show that the appellant in fact suppressed the facts with an intention to evade tax. The appellant being a Public Sector Undertaking of Government of India, it would not be correct to infer any evasion of duty or intention to do so as held by the Hon’ble High Court of Punjab & Haryana in the case of Markfed Refined Oil & Allied Industries cited [2009 (7) TMI 1204 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of assessee..

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• 2014 (12) TMI 243
  Interest on delayed payment of tax - Section 75 - Provisional assessment - Held that:- There is no final assessment order at all. This situation is covered by the decision of Hon’ble High Court of Bombay in the case of Commissioner Central Excise, Nagpur v. ISPAT Industries Ltd. - [2010 (10) TMI 178 - BOMBAY HIGH COURT] wherein Hon’ble High Court took the view that if differential duty was paid even before final assessment was made, the assessee is not liable to pay interest. Further, this decision was followed by the Tribunal in the case of Tata Motors Ltd. [2011 (3) TMI 531 - CESTAT, MUMBAI]. In the present case, there is no final assessment order at all and the assessee has paid the interest before final assessment. Therefore, the question of demanding interest does not arise when there is no final assessment order or the full amount of duty has been discharged before final assessment order passed by the proper officer. - Decided in favour of assessee.

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• 2014 (12) TMI 242
  Waiver of pre deposit - Classification of service - Clearing and forwarding agency service - GTA Service - Held that:- Appellant does not undertake any of activities clarified by Board’s Circular No. B-43/7/97-TRU, dated 11-7-1997 to be a C&F Agent service and therefore, there is merit in the contention of the appellant that the activity does not come within the purview of “clearing and forwarding agency service” as proposed by the department. In the Sendoz Impex Ltd. [2011 (4) TMI 1151 - CESTAT, KOLKATA] case and Karam Chand Thappar & Bros (Coal Sales) Ltd. case (2010 (4) TMI 452 - CESTAT, KOLKATA) a similar view was taken by the Tribunal on the question whether transportation of coal from colliery to customers premises by arranging for the transportation through rail would amount to “clearing and forwarding agency service” or not and it was held that the same would not be classifiable under “clearing and forwarding agency service”. Appellant has made out a strong case in their favour for grant of stay against the dues adjudged in respect of “clearing and forwarding agency service”. - In any case, the appellant has discharged Service Tax on the consideration received under the category of GTA service on 25% value of the service. As regards the demand under GTA service, the appellant has already discharged a sum of about ₹ 77 lakhs as against the demand of ₹ 94 lakhs approximately - Stay granted.

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• 2014 (12) TMI 241
  Business Auxiliary Services - nature of subsequent sale - Benefit of section 6(2) of CST Act - Whether the appellant is liable to be taxed under the category of Business Auxiliary Services or not for the transactions of purchasing final goods manufactured by the subsidiary company and delivered directly to their purchaser in Jharkhand - Held that:- Appellant is a manufacturer; that due to production constraints, order placed by ACC Jharkhand for supply of manufactured goods by the appellant was procured by them from their subsidiary company WSL in Karnataka; appellant placed a purchase order in the name of WSL for the finished goods to be delivered directly to ACC Jharkhand; purchase order also indicated discharge of Central Excise duty as also CST @ 4% and the goods should be delivered directly to ACC Jharkhand. WSL delivered the goods to ACC Jharkhand and raised the commercial invoices to the appellant and duty paying documents indicated appellant s name as buyer. The bone of contention between the dept and the appellant is an amount which has been offered as discount to the appellant by WSL on the transactions of sale of Grinding Media to ACC Jharkhand. ACC has issued the C-Form in the name of the appellant for the self same transactions entered by appellant with WSL. Holistically, reading of the three documents which were statutory forms required to be filed by the appellant to the state government authorities i.e., Sales Tax/VAT authorities, we find that the appellant has recorded the transactions between them and WSL as a purchase transaction and transaction between them and ACC as sales transaction for the goods delivered by WSL to ACC directly from Karnataka to Jharkhand. The entire transactions as reproduced by us herein above indicates that the said transactions is nothing but an activity of purchase and sale of the goods. Adjudicating Authority has not correctly appreciated the positions of Section 6 of the CST Act in as much as, on perusal of said section, we note it provides interstate sales transactions effected by transfer of documents of title to such goods during the movement from one state to another. In the case in hand, the goods moved from Karnataka to Jharkhand the transfer of documents took place during such movement is not in dispute. Adjudicating Authority has illustrated the transactions in Paragraph No 41 of the OIO. On perusal of such illustrative documents, we find that the WSL has raised the Excise duty paying invoice on which they have indicated discharge of CST @ 3% and invoiced the same to the appellant herein. The appellant herein has in turn invoiced the entire amount with CST to ACC and submitted C-Forms given by ACC to the VAT authorities. The VAT authorities have not disputed these transactions and has accepted that this is an interstate sales transactions though there was no movement of goods from Karnataka to Gujarat and Gujarat to Jharkhand. Activity of the appellant cannot be considered as a Business Auxiliary Services and liable for Service tax under the Finance Act, 1994. Apex Court in the case of State of Tamil Nadu vs Dharangadhara Trading Co Ltd (1988 (5) TMI 352 - Supreme Court of India) has held that benefit of section 6(2) of CST Act cannot be denied for subsequent sale made to predetermined buyer, is the ratio that will be applicable. - Decided in favour of assessee.

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• 2014 (12) TMI 240
  Tour operator service - Service done in two pats - Stage Carriage and Contract carriage service - Whether contract carriage operation can be considered as tour and subject to Service Tax under the category of tour operator - Held that:- ‘stage carriage’ and ‘contract carriage’ are the terms used for the type of operation. Tourist vehicle is a term in which certain specifications have been prescribed under Rule 128 of the Central Motor Vehicles Rules. There are certain broad specifications provided in general for motor vehicles. However, for tourist vehicle, the specifications provided relate to more comfort etc. It is important to note that a vehicle meeting the tourist vehicle specifications can also be used for stage carriage operation. Similarly, vehicles meeting the tourist vehicle specifications can also be used for contract carriage operation. Keeping in view the nature, tours would normally be conducted in a contract carriage and not in the stage carriage operation. In some of the impugned orders, we observe that the assessee has given the table indicating the specifications of the ordinary buses of MSRTC and the corresponding specifications for tourist vehicle. Certain certificates have also been produced from independent engineer/persons relating to the specifications of MSRTC buses. In fact the Commissioner (Appeals) in some cases based upon such statement, has allowed the assessee’s appeals on the grounds that there is nothing to prove that the vehicles are tourist vehicles. We also note that these certificates are general in nature and not specific to the actual vehicles which were given for contract carriage operation. MSRTC will have not only ordinary buses but deluxe buses or luxury basis or air-conditioned buses. Some of these vehicles may or may not be meeting the specifications of tourist vehicle. In view of this position, we consider it necessary to set aside the matter in all the nine appeals and remand the matter to the original authority to examine whether any of the contract carriage operation was carried out by MSRTC using a vehicle which meets the specifications prescribed for tourist vehicle under Rule 128 of the Central Motor Vehicles Rules. - matter remanded back - Decided in favour of assessee.

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• Central Excise

• 2014 (12) TMI 239
  Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - Held that:- stay was granted to the appellant on 16.04.2012. After granting of stay to the appellant this appeal has never been listed for final hearing. The appeal could not be listed for final hearing by the Registry due to heavy work load as the appeals filed for the earlier period are being listed. Hon'ble Gujarat High Court [2014 (8) TMI 737 - GUJARAT HIGH COURT] have held that extension can be allowed by the Bench looking to the facts and circumstances of this case, there is no fault of the appellant in seeking extension of the stay already granted. The request made by the appellant is genuine and extension of stay is granted for further period of 180 days - Stay granted.

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• 2014 (12) TMI 238
  SSI exemption - user of similar brand name as the brand name of others - notification no.175/86-CE - Held that:- Even the use of the brand name by a SSI unit, which is similar to the brand name used by some other person or is a part of the brand name of another person would debar him from the benefit of the SSI exemption. However, during the period of dispute, in a case where a small scale unit used the brand name of another manufacturer, the benefit of SSI exemption could be denied to that unit only if the brand name owner was not eligible for the SSI exemption. In this case, there is no dispute about the fact that the brand name owner - M/s PRIPL, Bombay was registered with the Directorate of Industries as a small scale unit. However, during that period, that unit was not availing SSI exemption for the reason that its product had been classified by the Assistant Commissioner under Heading no.4009.99 where rate of duty is nil and this classification has been affirmed by the Commissioner (Appeals) as well as by the Tribunal as a result of which they were not paying any duty. For the purpose of SSI exemption to the respondent, what is material is as to whether during that period, the brand name holder (M/s PRIPL) was eligible for SSI exemption. It is not disputed that if as per the provisions of the SSI exemption, the value of the exempted goods is excluded from the aggregate value of the clearances of PRIPL, during each preceding financial year, the same would be well within the exemption limit. Therefore, it cannot be said that, during the period of dispute, the brand name holder, PRIPL was not eligible for SSI exemption and for this reason, it would not correct to deny the benefit of the SSI exemption to the respondent unit. Tribunal in the year 1998 vide order dated 19.3.98 held that the Synthetic Rubber Aprons and Cots are parts of the textile machinery and would be classifiable under Heading No.84.48, in our view, on the basis of this decision, the classification of the goods, during the period of dispute, cannot be revised and it has to be held that during the period of dispute, PRIPL, Bombay were eligible for SSI exemption and hence, use of their brand name ‘Precitex’ by the respondent unit would not debar them from the benefit of the SSI exemption - Decided against Revenue.

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• 2014 (12) TMI 237
  Valuation of goods - Revenue entertained a view that inasmuch as the freight expenses retained by M/s. Dhampur Alco Chem Ltd. were more than the freight expenses incurred by them, the differential amount has to be treated as part of the assessable value of the goods cleared by sugar factory from their factory premises directly to the customers - Held that:- Revenue has not produced any tangible evidence on record to show that the value of chemicals sold by M/s. Dhampur Sugar Mills Ltd. were being collected by M/s. Dhampur Alco Chem Ltd. under the guise of freight charges. It is also not the Revenue’s case that excess freight recovered by M/s. Dhampur Alco Chem Ltd. was being transferred to M/s. Dhampur Sugar Mills Ltd. We also note that two appellants are public limited companies and as such, are independent legal entities in the eyes of law. They do not have any common Directors and are operating independently in their own fields. As such, any amount collected in excess by M/s. Dhampur Alco Chem Ltd. in the name of freight cannot be held to be a part of assessable value of the chemicals being manufactured and cleared by M/s. Dhampur Sugar Mills Ltd. - excess charges are not being collected by the manufacturer himself but as per the admitted position, the same are being collected by M/s. Dhampur Alco Chem Ltd. and there being no evidence of further movement of the said excess collection to M/s. Dhampur Sugar Mills Ltd., we find no merits in the Revenue’s stand. Accordingly, the impugned orders are set aside - Decided in favour of assessee.

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• 2014 (12) TMI 236
  Remission of duty - Demand of duty - Loss of semi-finished goods in factory the job worker on 3-8-2004 on account of heavy rains and floods - Extended period of limitation - Held that:- Appellants have sent the inputs to M/s. Alfa Drugs for conversion into semi-finished goods and such semi-finished goods, to be received by them in their factory, were to be put to further use in the manufacture of final product. The Additional Commissioner while arriving at the above finding had sought confirmation from the jurisdictional Assistant Commissioner of the appellants, who had clarified that goods to be received from job worker were semi-finished goods and they were not being entered in the RG-I register. The same were never cleared by the appellants “as such” from their factory. Rule 21 relates to the remission of duty liability to be paid only in respect of goods manufactured by the assessee. As such, it can be safely concluded that though the said Rules does not use the expression “finished goods” and simplicitor use the expression “goods”, the same has to be held as applicable to the finished goods only. Remission can be sought only when there is liability to pay the duty. The correspondence between the original adjudicating authority and the appellants jurisdictional Central Excise authorities clearly establish that the goods manufactured by the job worker were only semi-finished goods and the same were to be further used by the appellants in the manufacture of their final product. As such, even if the appellants would have received the said semi-finished goods from their job worker, there was no duty liability in respect of said goods and there was no question of remission of duty. The appellants have intimated the department about the loss of goods, and did not receive any advise from the department authorities for filing of formal remission application. In such a case, subsequent issuance of show cause notice raising demand cannot be upheld. - Following decision of IG Petrochemicals Ltd. v. CCE, Mumbai-VII [2001 (4) TMI 127 - CEGAT, MUMBAI] - demand is hopelessly barred by limitation. Admittedly, the appellants immediately informed their jurisdictional authorities for the loss of damaged goods. As such, raising of demand in the year 2009 by invoking the extended period of limitation cannot be appreciated - Decided in favour of assessee.

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• 2014 (12) TMI 235
  Manufacturing of pan masala - whether the carton shrink wrap machines are packing machines - Discharge of duty liability on the pan masala being manufactured by them in terms of the provisions of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that:- the packing of the pan masala into pouches meant for retail sale or repacking of such pouches into multi piece packages for retail sale would amount to manufacture and Pan Masala Packing Machines Rules, 2008 would be applicable only to those machines which bring into existence such pan masala pouches or multi-piece packages for retail sale, as it is these processes only which would amount to manufacture. The machines, which merely shrink wrap the cartons containing pan masala pouches would not be covered by the definition of ‘packing machines’ in Rule 2(c) of the Pan Masala Packing Machines Rules, 2008, as the shrink wrapping of the cartons containing pan masala pouches is not a process which amounts to manufacture under Section 2(f)(iii). The impugned order, therefore, is not sustainable. - Decided in favour of assessee.

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• 2014 (12) TMI 234
  Denial of refund claim - Discounts given to customers - Provisional assessment - Finalization of provisional assessment - Duty paid at the factory gate on a higher assessable value while clearing the goods to their depots/consignment agent’s premises, as at that time, the quantum of permissible deduction was not known - Held that:- deduction of turnover discount is admissible even if such discounts are not given in the invoice, but are subsequently paid to the buyers by issuing credit notes for the equivalent amounts. Thus, the impugned order in so far as upholding the deductions of these discounts is concerned is correct. Neither in the order passed by the Assistant Commissioner nor in the order passed by the Commissioner (Appeals), any refund arising out of finalization of the provisional assessment has been sanctioned. In terms of sub-rule (6) of Rule 7 of the Central Excise Rules, if finalization of provisional assessment results in some amount becoming refundable, this refund would be subject to the principles of unjust enrichment and it will be payable to the assessee only if the incidence of the excise duty whose refund is sought, has not been passed on, to any other person. Thus, the finalization of the provisional assessment and grant of refund, if any, arising on account of finalization of provisional assessment, are two separate issues and should not be mixed-up. Assistant Commissioner and the order-in-appeal passed by the Commissioner (Appeals) are purely on the issue of admissibility of the discounts for deduction. Just because on permitting the deduction of these discounts while finalizing the assessment, some duty becomes refundable and it appears that the refund that amount is not payable to the assessee for the reason that he had passed on the incidence of that duty to the customers, the deduction of the admissible trade discount cannot be refused and what is to be refused is the refund. The department has mixed-up the two issues which is not correct. In fact the grounds on which the order of the Commissioner (Appeals) is sought to be challenged are absurd. The appeal filed by the Revenue is, therefore, without any merit. - Decided against Revenue.

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• 2014 (12) TMI 233
  Waiver of pre deposit - MRP based valuation of goods u/s 4A - Inclusion of warranty charges - Invocation of extended period of limitation - Held that:- Merely because the inclusive part of the definition describes certain elements to be included in the retail price, it does not mean that whatever is not specifically stated therein cannot be included in the retail sale price. As per the main definition, retail sale price means maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer. If that price includes warranty charges, obviously the same cannot be excluded from the retail sale price. In the instant case it is an undisputed fact that retail sale price, which was declared by the appellant/assessee included the warranty charges. Thus, as per the appellant’s declaration, the retail sale price included warranty charges. As per the provisions of sub-section (2) of Section 4A, what can be deducted is the abatement of 30% to 35% notified by Central Government. This means that from the total retail sale price only the abatement of 30% to 35% can be deducted to arrive at the assessable value. There is no provision whatsoever under the law to exclude warranty charges from the retail sale price while computing the assessable value. The ld. Advocate has contended that since they are paying service tax on the warranty charges they should be permitted to exclude the same from the assessable value. This contention is again totally irrelevant. Appellant did not inform the department about the exclusion of warranty charges from the retail sale price nor did they declare the same in ER-1 return filed with the department. In fact the appellants were earlier paying duty on the value inclusive of warranty charges and in the ER-1 return what is reflected is only the assessable value and not the MRP/RSP. In view of the above, we are prima facie of the view that the appellant has suppressed the fact of excluding the warranty charges from the MRP to arrive at the assessable value and, therefore, the extended period of time has been rightly invoked. We also notice that the case laws relied upon by the department, namely, Gujarat Goldcoin Ceramics Ltd. [2007 (7) TMI 23 - CESTAT, AHMEDABAD] and Sony India Ltd. [2000 (6) TMI 236 - CEGAT, NEW DELHI], supports the department’s case - prima facie of the view that the appellant has not made out any case for complete waiver of pre-deposit of the dues adjudged. - Partial stay granted.

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• 2014 (12) TMI 232
  Classification of goods - Whether the canvas canopies specially designed for lorries, tool bags and web equipment of textile material are classifiable under sub-heading 6306/6307 and hence fully exempt from duty under Notification No. 30/2004-C.E. or the same are classifiable as ‘accessories of motor vehicle’ under heading 8708 - Held that:- As regards the canvas canopies specially designed for lorries, we find that these canopies made from canvas tarpaulin, are basically the tarpaulins cut into special shapes for covering goods loaded into open lorries of different models. All tarpaulins are covered by heading 6306 of the Central Excise Tariff. This heading of Central Excise Tariff is identical to heading 6306 of the HSN. In terms of HSN explanatory notes to HSN heading 6306, tarpaulins are used to protect goods stored in the open or loaded in ships, wagons, lorries, etc. against bad weather, that they are generally made of coated or uncoated man-made fiber fabrics, or heavy to fairly heavy canvas (of hemp, jute, flex or cotton) and are waterproof, that tarpaulins are generally in the form of rectangular sheets, hemmed along sides and may be fitted with eyelets and that the Tarpaulin which are specially shaped (e.g. for covering hayricks, decks of small vessels, lorries etc.) also fall in this heading provided they are flat. The canvas Tarpaulins, in question, are specially shaped for different model of lorries and though the Department’s contention is that the same are not flat, no evidence in this regard has been produced. In our view, therefore, these Tarpaulin would be correctly classifiable under heading 6306 and not as ‘parts or accessories of motor vehicles’ under heading 8708. When a heading in Central Excise Tariff is patterned on HSN, the HSN explanatory note would have persuasive value for ascertaining the scope of the corresponding heading in the Excise Tariff heading and accordingly in this case, the canvas canopies specially shaped for lorries of different models would be classifiable under sub-heading 6306 and accordingly the same would be eligible for exemption under Notification No. 30/2004-C.E. - Decided in favour of assessee.

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• 2014 (12) TMI 231
  Valuation - Challenge to levy of penalty u/s 11AC - Suppression of the actual figures of forwarding charges collected on Ex-mill sales and of the depot handling charges collected, with intent to evade Excise Duty - contravention of provisions of Section 4 - Penalty u/s 11AC - Held that:- Show cause notice dated 27-3-2001 alleged suppression of material facts and short remittance of duty with an intent to evade the same. This allegation was the basis for invoking the extended period of limitation, under the proviso to Section 11A(1) of the Act. The proceedings culminated in the primary adjudication order which confirmed levy of the specified quantum of deficit Excise duty. An unsuccessful appeal against the primary order resulted in confirmation of the duty. The appellate Authority recorded clear reasons and conclusions, as to suppression of material facts by the appellant justifying invocation of the extended period. The appeal to this Tribunal is, as earlier recorded by us herein, confined to the validity of penalty imposed under Section 11AC. The appellant did not challenge the order of this Tribunal. Since the ingredients for confirmation of the duty liability, on invoking the extended period of limitation; and for imposing penalty under the provisions of Sections 11A and 11AC, respectively, are in pari materia, in our considered view, the conclusion/finding that the appellant had suppressed material facts while under-remitting the Excise duty, constitutes the generic integer for confirmation of penalty under Section 11AC. None of the decisions presented by the appellant expound a contrary ratio nor is any decision brought to our notice expounding the proposition that where confirmation of the liability to tax/duty is founded on a conclusion as to existence of ingredients which are in pari materia the ingredients for imposition of penalty as well, in a challenge to imposition of penalty alone (and when the confirmation of tax/duty has attained finality), the correctness of finding of suppression etc. on the basis of which the confirmation of tax/duty is recorded, is liable to be reconsidered. no error in the impugned order imposing penalty under Section 11AC of the Act, since the order of the appellate Commissioner confirming levy of Excise duty, on invocation of the extended period of limitation and on the basis of the recorded finding that the appellant had suppressed relevant facts while short remitting duty, has become final - Decided against assessee.

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• 2014 (12) TMI 227
  Extension of stay order - Whether from the initial grant of stay and extension thereof, which is in force beyond 7.8.2014, whether any application is required to be considered by the Bench for extending stay order; on the fact of omissions of 1st, 2nd and 3rd proviso to Section 35C(2A) of the Central Excise Act 1944 - Held that:- stay order passed by this Tribunal, if it is in force beyond 7.8.2014, it would continue till the disposal of the appeals and there is no need for filing any further applications for extension orders granting stay either fully or partially. - Following decision of Krishna Processors (2012 (11) TMI 954 - GUJARAT HIGH COURT) and Kolhapur Canesugar Works Ltd (2000 (2) TMI 823 - Supreme Court of India) - Application disposed of.

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