TMI Tax Updates - e-Newsletter
February 14, 2015
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Royalty u/s 9(1)(vi) - acquisition of a partial right in the intangible property or know-how without the transferor fully alienating as the ownership rights - lump-sum payments are covered under the term royalty - it is not a case of outright sale - HC
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Income Tax:
TDS on payment made doctors drawing variable pay with or without contract - doctors drawing fixed plus variable pay - TDS required to be deducted u/s 194J and professional services and not u/s 192 since there existed no relationship of employer and employee - HC
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Income Tax:
Capacity Sales Agreement - under the C&MA the VSNL satisfies the characteristic of a “owner” and “ownership” in respect of the capacity in the cable system - not taxable as royalties u/s 9(1)(vi) - AT
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Income Tax:
Benefit under section 54F - A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit - AT
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Income Tax:
Treatment of rental income - business income v/s income from house property - the appellant society is eligible for exemption u/s 11 and 12 of the Act, the necessary corollary is that treatment of heads of income become irrelevant - AT
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Income Tax:
Activities are meant for general public utility, i.e. whoever wants to advance his/her qualifications in the banking industry - assessee is a charitable organization and eligible for deduction u/s 11 - AT
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Income Tax:
Voluntary donations included in income of the assessee - registration under section 12A of the Act was not available with the assessee for the impugned assessment year - Benefit of exemption under section 11 of the Act cannot be given to the assessee - AT
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Income Tax:
Registration u/s 12AA rejected - when the order was passed by the Commissioner within the period of six months it cannot be held to be violative of section 12AA of the Act. - however, Since such an opportunity was not given, this Tribunal is of the considered opinion that the matter needs to be reconsidered. - AT
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Income Tax:
Method of accounting - project completion method - The matter would thus stand to be decided on the basis of the entirety of the terms and the conditions of the contract/s, to determine the question if there has been transfer of all significant risks and rewards of ownership, coupled with the absence of the uncertainty associated with the realization of the revenue, so that sale can be said to have taken place. - AT
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Customs:
Import of Silicon Electrical Steel Strips/Scrap originated from old and used dismantled transformer - Commissioner did not think it proper to get the goods examined by an expert or by a person, who dealt in such goods instead of relying on his own perception - matter remanded back - AT
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Central Excise:
Independent processor - taking knitting unit on lease - Respondent was an independent processor during the period of dispute and was required to discharge duty liability in terms of the notification issued under Section 3A - AT
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Central Excise:
Valuation - Denial of the deduction of trade discount and turnover discount - t the discounts passed on by credit notes and not shown in the invoices would be admissible. - AT
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Central Excise:
Refund of credit on export of goods - absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law - AT
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Central Excise:
Denial of CENVAT Credit - Shortage of raw material - Marginal difference noticed - marginal variation due to weighment by different machines to be ignored if within tolerable limits - AT
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Central Excise:
CENVAT Credit - there is inspection, repacking and relabeling of the container from unit to unit container or bulk to unit container - prima facie such activity is manufacturing activity - AT
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VAT:
While NECL is liable to pay tax on the turnover relating to execution of the works contract for KPCL, the provisions of the Act and the Rules obligate KPCL to deduct tax at source from the running account bills of NECL. However both NECL and KPCL cannot be subjected to tax on the very same transactions. - HC
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VAT:
TDS on works contract - APVAT - The fact that NECL could seek refund of the tax paid did not absolve KPCL of their statutory obligation to deduct tax at source - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (2) TMI 458
Royalty u/s 9(1)(vi) - India-Federal Republic of Germany DTAA - acquisition of a partial right in the intangible property or know-how without the transferor fully alienating as the ownership rights - Technology Transfer and Technical Assistance Agreement - Held that:- We do not think the present case is one of absolute or full transfer of ownership in technology made available under Article 3 of the agreement. The proprietorship or ownership rights continued to vest with ADC, but right to use with trade name, technology etc. was granted by ADC to HCL. There was no transfer of the ownership in the intellectual property rights. In fact, the agreement stipulated that the HCL could protect the patents and intellectual property rights of ADC. The manufacturing and other activities undertaken by HCL was subject to quality control and inspection by ADC. Clause 4.1 clearly stipulated that technical and other information was to remain ADC’s proprietary. Information/knowhow was to remain confidential during the term of the agreement and even after expiry or termination thereof, until the same entered public domain or was otherwise generally known. HCL could not have breached the said confidentiality clause. A material breach by HCL would have resulted in an earlier termination of the agreement and reversion of all rights granted to HCL. It entailed ceasure of right to manufacture, use or sell the licensed products. Tangible technical information was to be returned. The agreement permitted HCL to disclose the said confidential intellectual property rights to the sub-contractors or sub-licensees only to the extent required for proper and authorised use of technology.Clause 2.3 was similarly worded and stated that HCL might sub-licence or sub-contract in whole or in part production of the licensed products and might disclose the technology provided that such disclosure would not confer upon the sub-contractor or the sub-licencee any rights other than those accorded to HCL. As noticed above, lump-sum payments are covered under the term ‘royalty’. The agreement postulated grant of permission to use or right to use intellectual property rights or knowhow and it is not a case of outright sale. Mode and manner is not determinative, but nature and character of the right acquired is definitive and decisive criteria, thus to hold that HCL Ltd. was only permitted and allowed use and right to use. Tribunal was right in holding that the lump sum payment of ₹ 1,11,38,650/- to the assessee, by M/s Apollo Domain Computers West Germany, under agreement, dated 11th May, 1987, was liable to tax under the Act - Decided in favour of revenue.
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2015 (2) TMI 457
TDS on payment made to doctors u/s 192 or 194J - doctors drawing variable pay with or without contract - doctors drawing fixed plus variable pay - Assessee treated the same as professional services and deducted TDS u/s 194J - AO and CIT(A) treated them as employees of the hospital and observed that TDS was required to be deducted u/s 192 - ITAT found that there existed no relationship of employer and employee between the assessee and Consultant doctors employed in the hospital - Held that:- Second category of doctors drawing fixed plus variable pay with written contracts the terms and conditions of Dr Zirpe and Dr Phadke have been referred and the Tribunal concluded that neither of the doctors was entitled to provident fund or any terminal benefits. Both were free to carry on their private practice at their own clinic or outside Hospitals but beyond the Hospital timings. Both doctors treated their private patients from the hospital premises. All of which could be seen as indicators that they were not employees but independent professionals. Now, it is inconceivable that merely because for a certain period of time or required number of hours the doctors have to be at Ruby Hall Clinic means they will not be entitled to visit any other hospital or attend patients at it necessarily. The anxiety appears is not to inconvenience the patients visiting and seeking treatment at the Ruby Hall Clinic. If specialized team of Doctors, Experts and Experienced in the field are part of the Assessee's Clinic, then, their availability at the clinic has to be ensured. The Doctor or Expert Medical Practitioner is then obliged to denote his time and energy to the clinic whole heartedly. If handsome remuneration, fee is prescribed in return of readymade facilities even for professionals, then, such insistence is not necessarily to treat highly qualified professionals as servants. It is a relationship of mutual trust and confidence for the larger interest of the patient being served efficiently. From this contract or any clause therein no such conclusion could have been arrived at. We do not see how there was any express bar from working at any other hospital and if the contracts would have been properly and carefully scrutinized. Merely because their income from the hospital is substantial does not mean that ten out of the fourteen criteria evolved by the Commissioner have been satisfied. The Assessing Officer and the Commissioner, therefore, were in complete error. All that the assessee admitted is the existence of a written contract and with the above terms. Those terms have also been perused by us minutely and carefully. We do not find that any stipulations regarding working hours, academic leave or attachments would reveal that these doctors are employees of the assessee. In fact, Dr Zirpe was appointed as a Junior Consultant on three years of contract. He was paid emoluments at fixed rates for the patients seen by him in the OPD. That he would not be permitted to engage himself in any hospital or nursing home on pay or emoluments cannot be seen as an isolated term or stipulation. In case of Dr Uday Phadke, we do not find any such stipulation. In these circumstances, the only agreement between the parties being that certain private patients or fixed or specified number seen by the consultant could be admitted to the assessee hospital. That would not denote a binding relationship or a master servant arrangement. A attractive or better term to attract talented young professionals and too in a competitive world would not mean tying down the person or restricting his potential to one set up only. - there existed no relationship of employer and employee between the assessee and Consultant doctors employed in the hospital - Decided in favour of the Assessee.
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2015 (2) TMI 456
Eligibility for deduction u/s 80 IB (2) (iv) - as per revenue basic conditions for claiming the deduction is that the industrial undertaking employs ten or more workers in the manufacturing process and that the same does not include the Manager or Supervisor - Held that:- In the instant case, admittedly, a Works Manager is like a highly technical qualified worker having managerial responsibility, likewise, a Supervisor is also like a highly skilled supervisory worker. Therefore, both these persons cannot be taken out from the categories of workers. It is well known that 'manufacturing process' includes all activities in relation to manufacture, therefore, the same encompasses the entire process of converting raw material into finished goods to make it commercially expedient and even handling and transfer of raw material is integrally connected with the process of manufacture. In the aforementioned background, we see no reason to disagree with the finding recorded by the ITAT upholding the findings of the CIT (A) qua deduction under Section 80 IB - Decided in favour of assessee. Disallowance u/s 69A - ITAT deleted the addition - Held that:- The ITAT while upholding the order of CIT (A) observed that it was very clear that the Assessing Officer had not pointed out any defect or discrepancies in the books and that even the availability of cash of ₹ 25,000/- with each member of the family was also considered to be reasonable, therefore, in the circumstances, there was no justification in partly accepting the entries made in the memoranda books and partly rejecting the same. According, the finding of CIT (A) in respect of deletion of addition of ₹ 6,55,270/- was upheld by the ITAT by dismissing the appeal of the revenue.- Decided in favour of assessee.
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2015 (2) TMI 455
Stay staying recovery - Held that:- Since appeal is fixed for hearing before the Tribunal on 16th February, 2015, therefore, I direct that meanwhile learned Tribunal shall explore every possibility to decide the Appeal, in question, at its own merit in accordance with law either on the date fixed itself or within thirty days thereafter. Thus direct that till the next date of listing of the present petition, recovery of the disputed amount shall not be insisted upon. - Decided in favour of assessee.
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2015 (2) TMI 454
Income from capacity sales earned under the Capacity Sales Agreement - ‘royalties’ under section 9(1)(vi) - assessee and VSNL entered agreement - joint ownership of the capacity in the cable system - taxability in India as ‘business income’ or income under the head “Royalties “ or “Free for Technical Services” (FTS) - Held that:- From the clauses of the agreement it is absolutely clear that the benefit and the burdens of the ownership has shifted from seller to the buyer. Here the buyer, VSNL has all the risks and rewards of ownership which is unfettered by the Flag, inasmuch as the VSNL has not only the exclusive domain on the rights to use but also right to resale or transfer its interest in the capacity in the cable system to the exclusion of the Flag. The assessee has no right on the capacity once sold. It does not retain any ownership, control and possession of the capacity sold to the VSNL. Under the terms of the C&MA, the VSNL also has right to vote on important matters relating to the management of cable system. The VSNL in all terms becomes absolute owner after the purchase of the capacity to the exclusion of the Flag and others. Thus, under the C&MA the VSNL satisfies the characteristic of a “owner” and “ownership” in respect of the capacity in the cable system. All the facts and circumstances and the intent of the parties as evidenced from the agreements, clearly goes to show that assessee has sold the capacity with benefit and burden of ownership of the capacity to the VSNL. Thus, it can very well be inferred, that the payment received from the VSNL is from sale of capacity in the cable system. Had there been intention of giving only ‘right to use’ of capacity, the Flag would have retained the ownership, control and possession of the capacity and VSNL would have allowed to use its network. Once a right to use is given to a party, then there is no requirement of passing the ownership with all the risks, rights and obligations. Thus the payment of US $ 28.94 million received by the assessee from VSNL is on account of sales and hence constitutes business income of the assessee. The finding and the conclusion of the Ld.CIT(A) based on the terms of the agreement and facts of the case on this score, that the receipts in question is “business income” of the assessee and not “royalty” is upheld. Accordingly, the said payment cannot be taxed as “royalty” under section 9(1)(vi). Unless the deeming income falls within the parameters of section 9(1)(i), no attribution can be made. Thus, so far as payment of US $ 28.94 million received by the assessee from sales of capacity made to VSNL is not taxable either as ‘royalty’ u/s 9(1)(vi) or ‘business income’ accruing or arising in India within the deeming provision of section 9(1)(i). Accordingly, assessee’s ground no.1 on this score is allowed. It cannot be held that payment in question falls within the realm of FTS - Decided in favour of assessee Taxability of ‘standby maintenance charges’ as fees for technical services u/s 9(1)(vii) - Held that:- On the facts and circumstances of the case as well as looking to the nature of standby maintenance cost, we hold that the receipts from standby maintenance charges from VSNL cannot be taxed as FTS, within the definition and meaning of section 9(1)(vii) as there is no rendering of services. However, whenever payment is received on account of actual repair or maintenance carried out, then same would definitely fall within the ambit of FTS chargeable to tax u/s 9(1)(vii). Accordingly the order of the CIT(A) is set aside - Decided in favour of assessee Interest u/s 234B - Held that:- As assessee has not committed any default in payment of advance tax and hence there is no liability to pay interest u/s 234B. - Decided in favour of assessee
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2015 (2) TMI 453
Interest on refund - principles for awarding compensation - Held that:- From the conjoint reading of the decision of Sandvik Asia Limited Vs. Commissioner of Income Tax & Others ( 2006 (1) TMI 55 - SUPREME Court) and the latter decision of the Larger Bench in the case of Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT) it appears that the liability to pay interest on interest by the Revenue is not approved and to that extent the contention of the Revenue can be maintained. But the further contention of the Revenue that no interest whatsoever would be payable if the refund of the amount of tax or refund of the amount deposited towards tax is to be made, no interest whatsoever would be available by way of compensatory measure. The general principles for awarding compensation to the Assessee for the delay in receiving monies properly due to it is not disapproved by the Larger Bench of the Apex Court in the case of Commissioner of Income Tax, Gujarat Vs. Gujarat Fluoro Chemicals (supra). Thus the petitioner - Assessee would be entitled to compensation and the interest can be awarded by way of compensation, but would not be entitled to further compensation by way of interest on such interest, which is awarded as compensation. Respondents are directed to grant compensation by way of interest at the rate of 9% p.a., to the petitioner on the amount refunded for the period from July 1, 1987 to November 13, 1990. - Decided in favour of assessee.
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2015 (2) TMI 452
Prescribed monetary limits for filing of appeal before ITAT - Whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board’s Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not? - Held that:- On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,or that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions, or that this is a case, where, in the case of revenue, where constitutional validity of the provision of the Act or I.T. Rules 1962 are under challenge,or that Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge. The Ld. DR could not point out any of the exceptions as provided above. Accordingly, this being a low tax effect case, the appeal of the revenue dismissed in limine without going into merits. - Decided against revenue.
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2015 (2) TMI 451
Benefit under section 54F - whether the amount of consideration received on transfer invested by the assessee in a flat constructed within three years would amount to construction of a residential house within the time limit of three years? - Held that:- A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit viz., flat instead of house in the present state of affairs. Further, as already pointed out even if only advance is given the benefit still will be available for exemption u/s. 54F. Considering chart of statement of payment made to M/s. Emaar MGF Land Ltd. the assessee will get the benefit u/s. 54F for payment made till 12.9.2011. Hence the AO may verify the exact amount invested by the assessee up to 12.9.2011 and allow the claim under sec. 54F, accordingly. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 450
Eligibility for exemption u/s 11 - as per AO assessee is operating a Dharamshala which is general public utility as a commercial activity and so the entire surplus is taxable - source of receipt are from accommodation charges, rent receipt, bed charges and other incidental income - Held that:- Assessee society is a charitable society, which is not engaged in any business, trade or commerce so as to disentitle the claim of exemption u/s 11 and 12 of the Act. Surplus alone cannot be a ground to conclude that activities are commercial in nature. In the instant case it is undisputed that the activities are charitable in nature, but solely on the ground of surplus, such activities have been held to be of commercial in nature. We already have found that there was no surplus per-se from the operation of Dharamshala. In any case the incidental surplus cannot be termed as commercial activity. Thus allow the claim of the assessee and direct the AO to allow exemption u/s 11 and 12 of the Act. - Decided in favour of assessee. Treatment of rental income - business income v/s income from house property - Held that:- Since already held that the appellant society is eligible for exemption u/s 11 and 12 of the Act, the necessary corollary is that treatment of heads of income become irrelevant. The Hon'ble Supreme Court in CIT Vs. Programme for community organization (2000 (11) TMI 4 - SUPREME Court) while approving the Kerala High Court decision reported in (1996 (10) TMI 41 - KERALA High Court) as to the manner of computation of charitable institution held that income has to be computed on commercial basis and not head-wise on statutory basis. (refer CBDT Circular No.5P, dated 19.06.1998). Depreciation claim by the appellant society on capital assets - Held that:- As relying on case of Vishwa Jagriti Mission [2012 (4) TMI 289 - DELHI HIGH COURT ] claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles. Judgment of the Supreme Court in Escorts Limited Vs. Union of India (1992 (10) TMI 1 - SUPREME Court)holding that depreciation under Section 32 of the Act can be denied only in cases where the provisions of Section 35(2)(iv) are applicable held to be inapplicable to the present case. - Decided in favour of asseesse.
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2015 (2) TMI 449
Eligibility for deduction u/s 11 - claim denied on the ground that that the appellant's primary activities were not for the benefit of the public at large and were also not of charitable nature - Held that:- To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of the community sought to be benefitted must be sufficiently definite and identifiable by some common quality of a public or impersonal nature”. The AR submitted that since the assessee was giving benefit to persons perusing banking industry, is not only education but by not making any profit, it was charitable in nature. Since the Institute does not undertake any other activities other than what is stated above. The activities as seen are educational in nature, which leaves no apprehensions. In our view the activities would squarely be covered by the definition of “charitable purpose”, as defined in Section 2(15) of the Act, as these activities are meant for general public utility, i.e. whoever wants to advance his/her qualifications in the banking industry. From the above details and description, we are of the opinion that the assessee is a charitable organization and eligible for deduction u/s 11 of the Act. - Decided in favour of assessee.
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2015 (2) TMI 448
Penalty u/s 271(1)(c) - inaccurate particulars of income - CIT(A) deleted the levy - Held that:-Income of the assessee was finally assessed u/s 115JB of the Act and not under the normal provision of the Act. The addition made by the AO in the order were confirmed to the income determined under the normal provision of the Act and not in respect of the Books profits u/s 115JB of the Act. It is not the case of the Revenue that the assessee has concealed any particulars or furnished any inaccurate particulars while computing the book profit u/s 115JB. In such circumstances the ratio of Hon ble Delhi High court in Nalwasons (2010 (8) TMI 40 - DELHI HIGH COURT) has been rightly relied upon by the ld CIT(A) and therefore no penalty is leviable. Moreover, it has been brought to our notice that the quantum appeal preferred by the Department against the assessee for the relevant assessment year has been dismissed and the appeal of the assessee has been allowed by the Tribunal vide order dated 14.3.2014. Therefore, in such circumstances we are inclined not to interfere in the order of the ld. CIT(A) and we confirm the same and dismiss the appeal of the revenue. - Decided in favour of assessee.
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2015 (2) TMI 447
Unexplained investment u/s 69 - unexplained expenditure through Credit Card u/s 69C - CIT(A) deleted addition - Held that:- The bank statement of the appellant and it is found that the appellant had made all his credit card expenses out of his HSBC Bank Account by cheques (Page no. 6). The appellant had also invested ₹ 12,30,000/- in mutual fund and not ₹ 28 lakh as claimed by the AO from AIR. There is a mistake of getting the information through AIR which was collected by the appellant’s AR from bank. The transaction reported in the AIR was wrongly reported by the department. The AO should inform DGIT(System) to verify such information from the department server and correct it in future. The appellant investments of ₹ 12,30,000/- (page no. 8) is out of his bank amounts through SIP (Systematic Investment Plan) by the cheques. The appellant’s all the investments made by the appellant stands explained. The appellant’s written income during the year is ₹ 16,47,190/-. She is now settled in Singapore with her husband and both are in Chartered Accountant Firm. She is software engineer, considering her explanation and evidence No good reason to interfere with the findings arrived at in the impugned order. It is seen that no evidence controverting the facts as taken into consideration by the CIT(A) has been placed before us. The relevant documents relied upon by the CIT(A) support the case of the assessee wherein the assessment order is u/s 144 and the Remand Report in regard to relevant evidences has been obtained and considered. In the aforementioned peculiar facts and circumstances the departmental ground is dismissed. - Decided in favour of assessee.
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2015 (2) TMI 446
Undisclosed investment on purchase of Flats - reopening of assessment u/s 147 - Jurisdiction of AO - Held that:- In the reason for reopening there was no material whatsoever in the possession of the AO which suggests that assessee has invested unaccounted money in the purchase of flats. The reason mentions that it was from "discreet enquiry" . AO has found that assessee has owned the flats but the cost thereof seems to the AO as unreasonable. Thus there is no reason whatsoever in coming to this conclusion. Now it is mandated through section 142A of the Act that AO can refer to the valuation cell for an estimate of the value of the investment in connection with section 69,69A and 69B of the Act. However, this power of the AO cannot be applied indiscriminately without any reason. The AO has found that the investment was made into the flat in the name of the assessee and assessee's father. AO has also given a finding that except for a small amount of booking father has not made further investment and the bulk of the investment was made by the son. AO has drawn adverse inference on the basis that father was not aware of the actual investment. When the investment has been done by the assessee and the same is reflected in the assessee's books it is not understood as to how the father has to give a categorical statement regarding the actual investment in the property. In this situation AO has referred the matter for valuation vide letters dated 13.12.2010 and 16.12.2010. The valuation cell's report was received on 21.12.2011 and 27.12.2011 respectively. Thus there is no satisfaction of the AO nor there is any basis to make reference to valuation cell. Thus we hold that there was no reason or basis for the AO to hold that he was satisfied that the investment in flats reflected by the assessee in his books was unreasonable as compared to fair market value and the AO has not rejected the books of account. In such situation the mandate emanating from the case laws referred above clearly provide that the AO cannot make a reference to the Valuation Officer u/s 142A of the Act. Accordingly we hold that reference to the Valuation cell was bad and AO cannot make addition in this case on the basis of the Valuation report obtained under such reference . - Decided in favour of assessee.
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2015 (2) TMI 445
Voluntary donations included in income of the assessee - registration under section 12A of the Act was not available with the assessee for the impugned assessment year. - Held that:- Benefit of exemption under section 11 of the Act cannot be given to the assessee. Though the assessee has claimed that the donations were made to the assessee-society directly to the corpus and are not assessable to tax, but this argument can only be considered when the benefit of exemption under section 11 of the Act is available to the assessee. In the absence of any benefit of exemption under section 11 of the Act, this argument has no relevance and the entire receipts in the hands of the assessee are to be examined as a normal cash credit introduced in the books of account, for which assessee is required to furnish the relevant information with regard to the identity and creditworthiness of the creditors and genuineness of the transaction. But in the instant case, the assessee has not furnished the required information before the Assessing Officer and the Assessing Officer was constrained to treat the entire receipts as unexplained cash credit under section 68 of the Act, which was later on confirmed by the ld. CIT(A). Since the ld. CIT(A) has adjudicated the issue in the light of the relevant provisions of the Act, we find no infirmity therein. - Decided against assessee. Scope of Revision u/s 263 - Held that:- Scope of jurisdiction of the Assessing Officer is limited and he cannot examine other issues of Advertisement expenses, Rent and other expenses which were not rather referred to in the order passed under section 263 of the Act. The other issues cannot be examined by the Assessing Officer while framing the assessment consequent to the order passed under section 263 of the Act. We, therefore, set aside the order of the ld. CIT(A) in this regard and delete the additions made on account of Advertisement, Rent and other expenses. - Decided in favour of assessee.
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2015 (2) TMI 444
Registration u/s 12AA rejected - date of the order on which the application was disposed should be served on the assessee before the period of limitation provided u/s 12AA - Held that:- Identical issue was examined by the Madras High Court in DIT (Exemption) vs Anjuman-E-Khyrkhah-E-Aam (2010 (12) TMI 957 - Madras High Court) and found that when the order was passed by the Commissioner within the period of six months it cannot be held to be violative of section 12AA of the Act. This Tribunal is of the considered opinion that in view of the language employed by the Parliament consciously, wherever there is prohibition from passing the order after the specified period, the order shall go out of the control of the officer who has passed the order before the specified period. However, wherever, “the order shall be passed” is mentioned, then, it shall be served on the assessee within a reasonable period so as to enable the concerned person to challenge the same in case the concerned person felt aggrieved. Once the order is served on concerned person, the effect of the order will come into force. Since the order is admittedly served within a period of two weeks this Tribunal is of the considered opinion that the impugned order passed by the Commissioner is not barred by limitation. - Decided against assessee. Violation of provisions of section 13(1)(c) - report called for by the Commissioner was not confronted to the assessee and that the financial transaction of the assessee with the managing director which was found in the assessment order of the managing director, was not admitted - Held that:- Though the assessment order relied upon by the Commissioner is that of the managing trustee, the ld.representative now claims that no admission is made in respect of cash deposit of ₹ 38,81,545. As rightly submitted by the ld.representative for the assessee, an opportunity shall be given to the assessee to explain the circumstances under which the deposit was made in SBI to the extent of ₹ 38,81,545. Since such an opportunity was not given, this Tribunal is of the considered opinion that the matter needs to be reconsidered. Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 443
Deduction u/s. 24(b) - Interest on second loan claimed as deduction from house property income - Held that:- As observed that the claim of the assessee for deduction on account of interest under S.24(b) was allowed by the learned CIT(A) relying on the CBDT Circular No.28 dated 20.8.1969, wherein it is clarified by the CBDT that if the second borrowing has really been used merely to repay the original loan taken for the acquisition or construction of the house property, and this fact is proved to the satisfaction of the AO, the interest paid on the second loan would also be allowed as deduction. - Assesse submitted that all the fixed deposits were mobilised by the assessee during the respective earlier years when the construction of the hospital building was carried on and the assessee is in a position to establish that the said deposits were utilized for the construction of hospital building, if opportunity is afforded to him in this regard. - matter remanded back to the file of the Assessing Officer with a direction to decide the same afresh in the light of the CBDT Circular dated 20.8.1969, after giving the assessee proper and sufficient opportunity to establish that the fixed deposits mobilized during the earlier years were utilize for the construction of the hospital building. - Decided in favour of revenue for statistical purposes. Unexplained cash deposit found to be made by the assessee in his bank account - Held that:- Before us, the learned counsel for the assessee has submitted that besides pointing out the mistake in the amount of cash deposit taken by the Assessing Officer, explanation as regards to the source of the cash deposit of ₹ 1,56,000 made in the bank account with DCB Bank was also offered by the assessee before the CIT(A). He has contended that the learned CIT(A) however, has failed to consider said explanation and urged that the matter may therefore be restored to the file of the Assessing Officer for verifying the explanation of the assessee as regards the cash deposit of ₹ 1,56,00 made in the bank account. Since the DR has not raised any objection in this regard, we restore this issue also to the file of the Assessing Officer for deciding the same afresh after giving the assessee proper and sufficient opportunity to explain the source of the cash of ₹ 1,56,000 deposited in the bank account on 4.7.2007. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 442
Penalty under section 271(1)(c) - disallowance of interest u/s 43B as there is variation between the amount stated to have been adjusted by the assessee to that of amount adjusted by the bank in their books - Held that:- Assessee adjusted towards the interest and did not disallow any amount under section 43B whereas, the said Bank adjusted the amount towards principal, restricting the adjustment to the interest to a smaller amount i.e., to the extent of ₹ 83,51,795/-. A.O. also disallowed only the balance amount in the assessment order invoking the provisions of section 43B, while allowing the above amount. Therefore, principles laid down in the case of Reliance Petro Products Ltd vs. CIT (2010 (3) TMI 80 - SUPREME COURT) equally applies to this as it is only a mere disallowance under provisions of section 43B which resulted in an addition. On these facts of the case, there is neither a concealment of income nor furnishing of inaccurate particulars. Assessee cannot be faulted if the Bank adjusts the amounts towards principal but not towards interest. In these circumstances, assessee’s explanation/actions can be considered as bonafide and accordingly, we are of the opinion that there is no scope for levy of penalty under section 271(1)(c). - Decided in favour of assessee.
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2015 (2) TMI 441
Application for registration u/s 12A rejected - assessee is a society registered under the Societies Registration Act - Held that:- The provisions contained u/s 12A and 12AA would make it clear that at the time of grant of registration u/s 12AA, the CIT/DIT(E) can only look into the charitable object and genuineness of activities of a trust or institutions. At that stage the CIT/DIT(E) cannot step into the shoes of AO to examine whether assessee has violated any of the conditions of section 13 of the Act. That aspect can be examined by the AO at the time of computation of total income in an assessment proceeding while considering assessee’s claim of exemption u/s 11. Grant of registration u/s 12AA does not automatically entitle the assessee for exemption u/s 11 though, it is one of the conditions. It is only the AO who can examine assessee’s claim of exemption u/s 11 at the time of assessment subject to fulfillment of conditions imposed u/s 11 to 13 of the Act. It is evident from the order of DIT(E), he has not raised any doubt whatsoever with regard to the charitable object of the society or genuineness of its activity. In the aforesaid view of the matter, we hold that the DIT(E) was not correct in rejecting assessee’s application for grant of registration u/s 12A of the Act. - Decided in favour of assessee.
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2015 (2) TMI 440
Rectification of mistake - rectification v/s review - Held that:- By the present miscellaneous Application, assessee is seeking a review in the guise of rectification, by criticising the action of the Tribunal, firstly in rejecting its MA and secondly in setting aside the issue relating to determination of the status of the assessee, whether as a developer or as a works contractor, instead of deciding the same by itself. The Tribunal has taken a conscious decision to set aside the matter to the file of the Assessing Officer for redeciding the issue in accordance with its directions, and that course adopted by the Tribunal cannot constitute a mistake susceptible to rectification under S.254(2) of the Act. Similarly, when the Tribunal rejected the earlier application of the assessee under S.254(2) of the Act, it again went into several aspects of the matter raised by the assessee before it, and ultimately rejected the same, holding that what the assessee is seeking is a mere review and not rectification of any mistake apparent from record. Assessee is seeking a mere review of this order of the Tribunal on its earlier application under S.254(2) of the Act. Since such a review, whether in the context of original order dated 22.3.2013 or order in MA dated 27.1.2014 is not permissible in these proceedings for rectification under S.254(2) of the Act, we find no merit in the present application of the assessee, which is accordingly rejected. Maintainability of the present application against the order rejecting the earlier application, and so on, the same has no application to the facts of the present case, in which assessee is merely disputing the conscious view taken by the Tribunal while deciding the appeal, and for other reasons discussed hereinabove. We accordingly reject the present application of the assessee. - Decided against assessee.
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2015 (2) TMI 439
Method of accounting - While the assessee admittedly follows project completion method, which it claims to do so consistently, the Revenue’s stand is that the percentage completion method is to be adopted - Held that:- The first is the transfer of all significant risks and rewards of ownership. Income arises on exchange. Risk and reward are incidents of ownership. Income, thus, can be said to have accrued when there has been, i.e., given the binding legal contract, transfer of these incidents, wholly or substantially so. It is only then that the consideration received in exchange, i.e., the compensation for the release/transfer of ownership, can be said to have been so in one’s own right, and the income embedded therein, accrued to the recipient. In fact, it matters little even if the consideration stands not actually received inasmuch as a debt has inured in favour of the transferor. Then, again, income cannot be said to have arisen if uncertainty to any significant extent exists as to the ultimate realization of income, so that the existence of a legal debt or a civil liability is itself not sufficient to hold of accrual of income. The Standard is thus set in terms broader than the legal concept of accrual, though is principally in agreement therewith. ICAI has also issued a Guidance Note on recognition of income for real estate developers. The matter would thus stand to be decided on the basis of the entirety of the terms and the conditions of the contract/s, to determine the question if there has been transfer of all significant risks and rewards of ownership, coupled with the absence of the uncertainty associated with the realization of the revenue, so that sale can be said to have taken place. The exercise having not been undertaken at any stage, we only consider it fit and proper under the circumstances to restore the matter back to the file of the A.O. for the purpose to adjudicate the same per a speaking order qua each project after allowing proper opportunity to the assessee to state its case. We may clarify that in doing so we have in effect only sought to determine if the conditions of accrual of income, as legally defined, stand satisfied. AS-9 only articulates the antecedent conditions thereof, and is in conformity with the legal concept of accrual of income. - Decided in favour of revenue allowed for statistical purposes.
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Customs
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2015 (2) TMI 464
Import of Silicon Electrical Steel Strips/Scrap originated from old and used dismantled transformer - Whether the imported goods are in the nature of scraps and freely importable or should be treated as old and used CRGO Strips whose import is restricted under the provisions of FTP, 2009-2014 read with Steel and Steel Products Quality Control Orders and the impugned Board s Circular - Held that:- While observing that the impugned items are not scrap, the Ld.Commissioner has mainly relied upon the importer s declaration and the fact that no evidence could be produced to the effect that the said goods were going for re-melting. He has observed that importer in this case himself has not claimed the benefit of the customs Notification which is applicable to the scrap . However, this view of the Ld.Commissioner has been challenged before us on the ground that the dock officers have categorically reported the items to be scrap and no further examination of the impugned goods was got conducted by the Ld.Commissioner before arriving at his conclusion that the impugned items are scrap. Commissioner did not think it proper to get the goods examined by an expert or by a person, who dealt in such goods instead of relying on his own perception. - Issue requires fresh adjudication by the Ld.Commissioner and before adjudication representative sample of the imported goods should be examined in presence of the importer s representative by the person/technical experts dealing in the relevant field to ascertain whether the items were usable as such or after their processing, mentioning inter alia the length, width, thickness and other physical/technical character of the representative samples to arrive at the conclusion whether the imported items are scrap or otherwise. Since the facts of the present case are not clear in the light of above discussion hence the examination of applicability of judgements cited by both sides to the facts in our opinion, at this stage would be pre-mature. Accordingly the order of the Ld.Commissioner is set aside with the direction to pass a fresh order - Matter remanded back - Decided in favour of assessee.
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2015 (2) TMI 463
Utilization of DEPB credit - Misrepresentation of facts - Respondent has denied any knowledge of the fraudulent activities of the said exporter; that the DEPB licences were purchased from a mediator and the same were duly verified by Revenue and found to be genuine - Revenue has demanded payment of Customs duty with applicable interest in addition penalty was imposed on the respondent under the provisions of the Customs Act, 1962 - Held that:- Following decision of M/s Friends Trading Co. [2011 (2) TMI 382 - PUNJAB & HARYANA HIGH COURT] - Decided in favour of assessee.
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2015 (2) TMI 462
Maintainability of appeal - Refund claim of SAD in terms of Notification 102/2007-Cus dated 14/07/2007 - Held that:- four appeals were dismissed on the ground that there is no power vested to the Commissioner (Appeals) to review his own order considering that the Revenue has filed four separate appeals against Orders-in-Original and not against order of the Commissioner (Appeals). The Revenue has followed the direction of the Commissioner (Appeals) and filed four appeals. It clearly appears from the impugned order that four appeals before the Commissioner (Appeals) were filed against Orders-in-Original only and not against the Commissioner (Appeals) order. Therefore the Commissioner (Appeals) gravely erred in giving the said findings which is against the fact appearing on record. As per the submission of the respondent I am of the view that monetary limit will apply only in case the order has passed on merit. In the present case the impugned order was not passed on merit. Therefore the appeals are maintainable. As regard time bar, the Revenue in the first round had filed consolidated appeal against four Orders-in-Original, all the four orders-in-original were in challenged. It is only technical requirement to file four numbers of appeals. Therefore in these facts and circumstances, it can not be said that there is delay in filing in the appeal. - Matter remanded back - Appeal disposed of.
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2015 (2) TMI 461
Failure to discharge the export obligation enumerated in notification No 28/97 - Held that:- As per the Export and Import Policy, the licensing authority is authorised to extend the period to fulfilment of conditions for a certain period. It is seen from the order of the Commissioner (Appeals) that the appellant admitted that they have exported the goods worth of only ₹ 50.68 lacs, which is not more than 5% as per licence. We find that the applicant failed to fulfil export obligations. The appellant in their appeal contended that they have fulfilled the export obligation partly. Even though, there was a short fall of fulfilment of the export obligation. It appears that this fact was not placed before the lower authorities. - Decided against the assessee.
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FEMA
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2015 (2) TMI 460
Imposition of penalty jointly and severally - failure to take reasonable steps for repatriation of export proceeds of US $ 23580.02 in respect of goods exported under 3 GRIs - Held that:- While going through the order of penalty, I have noted that there is hardly any discussion on the role of the partners that led to non-realisation of the export proceeds of the 3 GRs and the ld. adjudicating officer has not arrived at any finding to show that the partners were responsible for non-realisation of the export proceeds. Section 68(1) of FERA, 1973 lays down the provision for monetary penalty on the partner only when it is found that he was in charge of, and was responsible to, the company for the conduct of business of the company. On this finding only, he shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. While sub-section (2) of Section 68 of FERA, 1973 lays down a provision that where it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Provisions of Section 68 of FERA, 1973 are more explicit in this regard. I, therefore, find that the impugned order imposing joint penalty on the partners before proving that non-realisation of the three GRs was attributable to each of them, is liable to be quashed and set aside. It appears to me from the correspondence exchanged between the appellants and the authorized dealer Punjab National Bank that the appellants had been realizing full amounts of export proceeds against all other exports made under different GRs but payment against three GRs in question could not be realized due to taking delivery of the goods by the foreign buyer fraudulently. That there had been fraudulent delivery of the goods is proved by the certificate dated 20-1-2003 issued by the authorized dealer whereunder they have confirmed the same and also the fact of original complete set of documents in their possession. Therefore, I am led to believe that the appellants were making all reasonable efforts for realizing the export proceeds but realization in respect of three pending GRs could not be made due to circumstance beyond their control. On plain reading of the sub section (2) and sub section (3) of Section 18 of FERA, 1973, it is crystal clear that the Act does not render non-realisation of export proceeds per se punishable thereunder. The essential ingredients of the sub-section (2) of Section 18 is doing or refraining from doing anything or taking or refraining from doing anything or taking or refraining from taking any action which has the effect of securing the result which is envisaged either in clause (a) or (b) of the said sub-section. It would be sufficient for an exporter to discharge the adverse presumption under Section 18(3) of the Act when he shows that reasonable steps within his limitations have already been taken. In the instant case the learned adjudicating officer has failed to correctly appreciate the nature and extent of the presumption to be drawn in terms of Section 18(3) of the Act. In these circumstances, the ld. adjudicating officer appears to have erred while holding the appellant company guilty of the alleged contravention for not taking reasonable steps. - appellants have taken all reasonable steps to rebut the presumption under Section 18(2) of FERA, 1973 and therefore, the view taken by the ld. adjudicating officer in the impugned order is not tenable on the facts and circumstances of the case. - Decided in favour of appellants.
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Service Tax
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2015 (2) TMI 479
CENVAT Credit - Whether the appellant is entitled to credit of service tax paid on outdoor catering service.I find that the issue is covered by the Larger Bench decision of the Tribunal in the case of Commissioner of Central Excise vs. GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] - Held that:- Commissioner (Appeals) has rejected the appeal by following the some decisions of the Tribunal which are not exactly on the point. Inasmuch as the issue is covered, I deem it fit to set aside the impugned order on merits as also on limitation inasmuch as the demand for the period 1.4.08 to 31.3.09 stand issued by way of show cause notice dated 31.8.2010. - Decided in favor of assessee.
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2015 (2) TMI 478
Refund claim - Duty paid under protest - Goods Transport Agency - whether the appellant is entitled for refund of the service tax already paid - Held that:- Users of the service rendered by the Goods Transport Operators are liable to pay service tax. In the present case, the appellant is using the services of the Goods Transport Operators during different periods between 1997 to 1999. Hence, the appellant is liable to pay service tax. Since the appellant has already paid the service tax, as per the law laid down by the Supreme Court in the case of Gujarat Ambuja Cements Ltd. V. Union of India reported in [2005 (3) TMI 492 - SUPREME COURT], the question of refund will not arise and the appellant is not entitled for refund. Hence, the Tribunal is justified in confirming the order of the Original Authority declining to grant refund. - Decided against assessee.
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2015 (2) TMI 477
Refund claim - Whether the Tribunal committed error in applying and extending the provisions of Rule 5(1)(D) of C.C.R. 2004 for the period prior to 17.3.2012; though Clause (D) of Rule 5(1) of C.C.R. 2004 is inserted later on - Held that:- Once it is 100% Export Unit, all expenses for such technical, testing and analysis services would be a part of the turn-over and the services exported cannot be separately connected on the ground as sought to be canvassed. - substantial questions of law as sought to be canvassed would not arise for consideration in the present appeals. It may also be recorded that the questions formulated by the Revenue are, as such, inter-connected, but based on the principal contention that unless it is established that a particular service was exported and foreign exchange was realized, the amount pertaining to technical, testing and analysis services by connecting therewith, the services exported would not be available. - There is no change in the provisions as it existed by Circular and subsequently incorporated in the Notification. Therefore, no such question would arise as sought to be canvassed. - Decided against Revenue.
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2015 (2) TMI 476
Tour Operator Services - Appellant had conducted "Outbound Tours" of Haj-Umrah to Makkah and Madina, during the material period and did not discharge the service tax liability on the amounts so collected - Held that:- Following decision of M/s Cox & Kings India Ltd. vs. CST, New Delhi [2013 (12) TMI 1024 - CESTAT NEW DELHI] and this ratio has been followed by the Mumbai Bench in the case of Travel Corporation (India) Ltd. Thomas Cook (India) Ltd. vs. CST, Mumbai [2014 (8) TMI 826 - CESTAT MUMBAI] - this issue is squarely covered in favour of the appellant. Accordingly, in view of the foregoing and the judicial pronouncements, we find that the impugned orders are unsustainable and liable to set aside - Decided in favour of assessee.
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2015 (2) TMI 475
Waiver of pre deposit - Business Auxiliary Service - difference between the discount extended by the automobile manufacturers and the discount extended by the appellant to the customers. - Held that:- The findings of the adjudicating authority as well as the first appellate authority indicates that the amount which has been shown by the appellant in his balance sheet as income is the difference between the discount which has been extended by the automobile manufacturers and the discount given by the appellant to the customers. This amount is shown as discount given by the appellant. We find that the learned CA is correct in bringing to our notice that identical issue in the case of Tata Motors Insurance Services Ltd. Vs. CST, Bangalore - [2007 (8) TMI 638 - CESTAT BANGALORE], the co-ordinate bench of this Tribunal has granted unconditional stay. Prima facie, we find that the appellant has made out a case for waiver of pre-deposit of the amount confirmed as service tax liability of approximately ₹ 3.70 lakhs. We consider the amount deposited by the appellant in respect of first two issues as enough deposit to hear and dispose of appeal on merits. Accordingly, the application for waiver of pre-deposit of balance amount is allowed and recovery thereof stayed till the disposal of the appeal. - Stay granted.
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2015 (2) TMI 474
Denial of Refund claim - SEZ - appellant claimed refund of service tax paid on the input services received by them in terms of provisions of Notification No. 9/2009 dated 03.05.2009 as amended by Notification 15/2009-ST dated 20.05.2009 - Since the amended Notification provided for refund only in those cases where the services were not wholly consumed within the SEZ, the authorities below rejected the refund claim - Held that:- The Government has two schemes for granting exemption to services provided to SEZ Units where the services are wholly consumed within the SEZ the services being provided from outside are exempted from payment of service tax. Where these services were not wholly consumed within the SEZ, Notification 9/2009 read with Notification 15/2009 provided that the service receiver in the SEZ is eligible for refund of the tax paid on the input service. The matter is settled by the decisions of the Tribunal to the effect that even where the services are wholly consumed within SEZ, the Unit will be eligible for refund when tax has already been paid by the service provider. - Decided in favour of assessee.
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Central Excise
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2015 (2) TMI 471
Clandestine removal of goods - Shortage of goods found - Captive consumption - After withdrawal of Compounded Levy Scheme assessee cleared goods without payment of duty - CENVAT credit involved in less quantity of inputs received and comparison of quantity mentioned in Form IV register vis-`-vis Purchase Ledger is not matching - Held that:- After physical verification of stock, it was found that the assessee has taken excess credit of ₹ 2516/- only and the same has not been contested by the assessees. In these circumstances, the learned Commissioner (Appeals) has rightly set aside the penalty as the adjudicating authority has not alleged against the assessees that these shortages of silicon manganese is due to fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules with intent to evade payment of duty. Therefore, the learned Commissioner (Appeals) has rightly dropped the penalty. Accordingly, the order quo dropping the penalty on shortage of silicon manganese is upheld. Difference of weighment slip is only 0.05% which is negligible in this trade. Further there may differences in weightment on various balances. In these circumstances, I do agree with the findings of the Commissioner (Appeals). Therefore, I upheld the order of the Commissioner (Appeals) on this issue. Court has verified the invoices produced by the assessees which were also produced before the lower authorities. These invoices shows that these Runners and Raisers are excisable goods which emerges during the process of manufacturing of their final product i.e. M.S. Ingots. Therefore, they are not liable to pay duty as they have raised Central Excise invoices in their own name as the assessee is entitled for the benefit of Notification 67/1995 and is not required to pay duty thereon. In contrary to that the Revenue has failed to produce any evidence that these Runners and Raisers have been cleared without payment of duty outside their factory. As there is an evidence produced by the assessee that the central excise invoices were issued in their own name and have been captively consumed for manufacturing of final product. In these circumstance, I set aside the impugned order quo demand of ₹ 30,95,597/-. As the demand is not sustainable, therefore, penalty is also not sustainable. With regard to the demand of duty on the quantity of 87.86 MTs of M.S. Ingots, the learned Commissioner (Appeals) has verified the fact on the basis of evidence produced by the assessee such as RG I register which shows that the assessee has paid duty on these M.S. Ingots when the compounded levy scheme was applicable. Therefore, the duty cannot be demanded twice on the same goods. Therefore, I do agree with the order of Commissioner (Appeals) on this issue and the same is upheld. With regard to the comparison of quantity of CENVAT credit shown in the form IV Register and purchase ledger, the learned Commissioner (Appeals) has not considered the reconciliation statement produced merely on the ground that the same is not signed. In these circumstances, I set aside the order confirming the demand of ₹ 4,32,575/- as the assessee has produced reconciliation statement which may be verified on production of various records (on basis of which the reconciliation statement is prepared by the adjudicating authority. Therefore, it would be in the interest of justice to remand the matter back to the adjudicating authority on this issue only for verification purpose whether the variance of Cenvat Credit in Form IV Register and purchase ledger are correct or not? The assessees are also directed to produce the authenticated copy certified by a Chartered Accountant to that effect and the same is to be considered by the adjudicating authority. - Appeal disposed of.
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2015 (2) TMI 470
Independent processor - Whether the respondent having their processing unit at 269A, East Mohan Nagar, Amritsar could be treated as independent processor in terms of definition of this term as given in the Notification No. 41/98-CE (NT) dated 10/12/98 issued under Section 3A (1) of the Central Excise Act, 1944 even though they had taken on lease the knitting unit of M/s Adarsh Textiles located at 18B, East Mohan Nagar, Amritsar under a lease deed - Held that:- Exclusion clause in the definition of independent processor covers the processor acquiring proprietary interest in a factory engaged in spinning of yarn or weaving fabrics and does not cover the knitting units. Knitting of fabrics is totally different from weaving and since in this case, the respondent have taken on lease a knitting unit and not a weaving unit or spinning unit, in our view, they would be not be covered by the exclusion clause. - Moreover a person by acquiring a property on lease, only acquires the right to use without acquiring the ownership. Unless the person has acquired the title to the property i.e. the ownership, he cannot be said to have acquired proprietary interest. - Thus proprietary interest means acquiring the ownership or exclusive proprietary rights to a property. A lessee has acquired only the right to use for a specified period without the transfer of ownership/title to the property to him. Therefore, a person by acquiring a factory under a lease agreement does not become its owner or proprietor and does not acquire proprietary interest. We, therefore, hold that from this angle also, the respondent would not be covered by the exclusion clause in the definition of independent processor. Respondent was an independent processor during the period of dispute and was required to discharge duty liability in terms of the notification issued under Section 3A and as such the impugned order passed by the Commissioner is not correct. The impugned order is, therefore, set aside
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2015 (2) TMI 469
Valuation - Denial of the deduction of trade discount and turnover discount - Penalty u/s 11AC - ground on which the deductions of these discounts has been disallowed is that the appellant had not intimated to the Department about the discount which they intended to passed on through credit notes, after the sales through depot and they have not resorted provisional assessment - Held that:- Grounds on which the deduction of the discounts passed on through credit notes has been disallowed are totally wrong. In terms of the Apex Court s judgment in the case of Union of India and Ors. vs. Bombay Tyre International Ltd. reported in [1983 (10) TMI 51 - SUPREME COURT OF INDIA] a trade discount would be admissible for deduction if it is known prior to clearance of the goods and for permitting the deduction of trade discount, it is not material that it must be given at the time of sale and the deduction would be permissible even if the trade discount is quantified after the sale and is given subsequently. It is seen that the Tribunal in the case of Bipico Industries (Tools) Pvt. Ltd. vs. CCE & CUS, Vapi (2009 (6) TMI 772 - CESTAT, AHMEDABAD), CCE, Coimbatore vs. Texmo Industries (2008 (2) TMI 105 - CESTAT, CHENNAI) and Gujarat Borosil Ltd. vs. CCE, Surat II (2009 (12) TMI 379 - CESTAT, AHMEDABAD) has taken same view holding that the discounts passed on by credit notes and not shown in the invoices would be admissible. In view of this, the impugned order confirming the duty demand of ₹ 35,62,555/- alongwith interest and imposing penalty of equivalent amount on the appellant under Section 11AC is not sustainable and is set aside.. The penalty under Section 11AC cannot be imposed when the amount of Cenvat credit wrongly taken or duty short paid on being pointed out was paid forthwith alongwith interest and intimation in this regard was given to the Department and such short payment of duty/wrong availment of credit is not deliberate with intent to evade the duty, for which in this case, there is no evidence. In view of this, we hold that penalty of ₹ 4,42,534/- is also not sustainable. - impugned order is set aside. - However, extension of stay denied - Decided partly in favour of assessee.
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2015 (2) TMI 468
Classification of goods - Whether the grey knitted fabric in running length which emerges in the factory of DTEPL and the processed knitted fabric which emerges in the factory of M/s S. Kumars is classifiable as textile made up articles not elsewhere specified under heading 6307.90 of the tariff or whether the same are classifiable as knitted pile fabrics under heading 60.01 - Held that:- in the Tribunal in the case of S. Kumars Ltd. Vs CCE Indore vide its judgment reported [2003 (2) TMI 268 - CEGAT, NEW DELHI]. after considering the above facts has held that the knitted pile fabrics in running length are classifiable under heading 60.01 and not heading 6307.90, and though the department has filed an appeal to Hon ble Supreme Court against this judgement, the same is still pending. In our view this judgment of the Tribunal is binding on us. As regards the judgements of the Tribunal in the cases of CCE Guntur vs. city tax pvt. Ltd and CCE Madras vs. Binni ltd. (BMC Mills) (2005 (12) TMI 360 - CESTAT, BANGALORE) cited by the Ld. Jt. CDR we find that the dispute in these cases was as to whether the tere-towel cloth in running length with dividing thread was classifiable as textile made up under heading 63.02 in view of note 5(b) of Section XI of the tariff or whether the same was classifiable as terry-towelling similar woven fabrics other than narrow woves fabrics of heading 58.06 under heading 58.02. The issue involved in these cases is totally different and in our view the Tribunal s judgements in these cases are not applicable to the facts of this case, as in this case the dispute is as to whether the grey knitted pile fabrics in running length and processed knitted pile fabrics in running length are classifiable as textile made up or not in view of note 5(f) section XI of the Central Excise tariff, and it is precisely this issue which stands decided in favour of the respondent by the Tribunal s judgement in case of S. Kumars Ltd. Vs. CCE Indore - Decided against Revenue.
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2015 (2) TMI 467
Refund of the input service tax credit on export of goods - Notification No. 5/2006-CE(NT) dt. 14.3.2006 - whether the input service tax credit which gets accumulated is refundable under NotificationNo. 5/2006 - Held that:- From the amendment of notification issue under rule 5 of the CENVAT Credit Rules, 2004, is apparent that the scope of the admissibility of input services used in providing export services has been broadened to include of input services used for providing output services. On going through the list of 21 services, we find no reason to come to any sort of conclusion that these input services are not used in providing the services exported by the respondent. Further, on referring to the definition of input services we also find that input services used in relation to business are covered in the definition. Even, all input services used for modernization, renovation or repair to the office premises are also covered. We note that Revenue's appeal raises a doubt whether the services have actually been used for providing taxable output services. We find no finding of this point in the adjudication order or in the appellate order. This is totally a new ground. There being no doubt expressed whatsoever either in the show cause notice or in the adjudication order, we do not find this point of appeal as relevant at this stage. Non Registration - Held that:- Respondents have rightly relied on Rule 4 of the Service Tax Rule under which registration is deemed to be granted within seven days of the application for registration. - In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. - Decided against Revenue.
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2015 (2) TMI 466
Denial of CENVAT Credit - Shortage of raw material - Marginal difference noticed - Held that:- In this case although at the time of annual stock taking the respondents found shortage of raw materials and taken the same stocks in the account books. But there is no allegation of diversion of inputs which were found short at the time of annual stock taking. Further as per the Circular No. 367/87/1997 dated 19.12.1997 the CBEC, the issue was examined and was explained that for measurement of the goods for variation of temperatures and densities. From the facts of the case it is not coming out whether the respondent has done adjustment as per the Circular dated 19.1.1997 of the CBEC but it is submitted by the learned counsel that these are on actual basis. - variance in measurement is marginal. Impugned period is 2000-01 and the Show Cause Notice came to be issued in October 2003 by invoking the extended period of limitation. In these circumstances, the case law relies upon by the learned A.R. in the case of Philips Carbon Black Ltd vs CCE reported in [2013 (3) TMI 140 - CESTAT KOLKATA] also gives the benefit of limitation to the respondent. Credit admissibility dependent on various factors to see whether entire consignment received in factory without diversion and tolerance for hygroscopic, volatile and such other cargo to be allowed as per industry norms excluding unreasonable or exorbitant claims. It was also held that marginal variation due to weighment by different machines to be ignored if within tolerable limits. In these circumstances I do not find any infirmity in the impugned order. - Following decision of CCE vs Bhuwalka Steel Industries Ltd [2009 (11) TMI 177 - CESTAT, CHENNAI [LB]] - Decided against Revenue.
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2015 (2) TMI 465
Waiver of pre deposit - CENVAT Credit - manufacturing activity or not - whether the activity of inspection, labelling, affixing of stickers or re-labelling amounts to manufacture or not and whether the applicant is eligible to avail CENVAT credit. - Held that:- after receiving the imported goods in the warehouse, the applicant undertook the activity of inspection, quality check and repacked it. While repacking, the applicant affixed sticker Marketed by and also affixed the tape having the markings of HONDA. Similarly, when the goods were imported in any of the warehouse situated at Mumbai, Kolkata, Greater Noida and Bhiwadi, and in that case Imported and Packed by sticker was affixed by respective warehouse and the goods were transferred on stock transfer basis to Chennai from where it was marketed by affixing sticker/labeling. On plain reading of clause (iii) of Section 2(f) of the said Act, it is clear that manufacture would include packing / repacking of such goods in unit container or labeling / re-labelling of containers including the declaration or alteration of retail sale price on it for rendering the product marketable to the consumer. With effect from 1.3.2003, the definition of manufacture under Section 2(f) has wide amplification. Note 5 of Chapter 30 insofar as prior to amendment on 1.3.2003, it would be repacking from bulk packs to retail packs . But after the amendment, it includes packing or repacking of such goods in a unit container . In other words, it includes any repacking in unit container. - prima facie, we find there is inspection, repacking and relabeling of the container from unit to unit container or bulk to unit container. Thus, there is repacking of such goods in container and covered within the definition of manufacture under Section 2(f) of the Act, 1944. - applicant has made out a strong prima facie case for waiver of predeposit of entire dues. Accordingly, predeposit of duty along with interest and penalties are waived and recovery thereof stayed during the pendency of the appeals. - Stay granted.
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CST, VAT & Sales Tax
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2015 (2) TMI 480
Validity of Tribunal's order - Jurisdiction of Tribunal - Whether the Hon'ble Tribunal was right in adjudicating the appeal on merits instead of restricting itself to the issue of predeposit - Held that:- Following decision of ANIL KUMAR Versus STATE OF GUJARAT [2014 (4) TMI 730 - GUJARAT HIGH COURT] - Judgement of the Tribunal is set aside. Appeal is restored before the Tribunal for fresh consideration bearing in mind the observations - Decided in favour of Revenue.
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2015 (2) TMI 473
Exemption from sales tax - works contract - doctrine of promissory estoppel - assessee argued that they were informed that the turnover, regarding the port contract, was exempt from tax ; they did not, therefore, disclose the turnover relating to port construction in their returns - AP VAT Act, 2005 - Option to revise the return - Held that:- On the AP VAT Act coming into force, KPCL was no longer entitled to claim exemption from tax, as no such power to grant exemption is available to the Government under the Act; the only benefit which KPCL was entitled to under the Act, was for refund of the tax under Section 15(1) of the Act, that too on a notification being issued by the Government in this regard; and the doctrine of promissory estoppel or legitimate expectation could not be invoked to implement a contractual provision which is contrary to law. The claim of NECL for exemption from tax, for the works executed by them for KPCL, does not merit acceptance as a similar relief claimed by KPCL has been negatived by this Court in [2015 (2) TMI 472 - ANDHRA PRADESH HIGH COURT]. CAN THE POWER OF REVISION BE EXERCISED WHEN THE ORDER OF THE STAT HAS ATTAINED FINALITY? - Held that:- Even in the absence of a provision, similar to the proviso to Section 32, the decision of the STAT, on a question of law, would bind the assessing authority. However, as noted hereinabove, the order of the STAT was passed in ignorance of the relevant statutory provisions, and is contrary to the law declared by the Supreme Court in Gannon Dunkerly [1992 (11) TMI 254 - SUPREME COURT OF INDIA] and the Full bench of this Court in Seven Hills Constructions [2014 (9) TMI 110 - ANDHRA PRADESH HIGH COURT], and is not a decision on a question of law which alone would bind the revisional and assessing authorities. As the orders of the revisional and assessing authorities are in accordance with the statutory provisions both plenary and subordinate, and the law declared in the aforesaid judgments, the impugned revisional and assessment orders do not necessitate interference on this score. Clarification the Advance Ruling Authority - whether Binding - Held that:- Under Section 67(4)(iii) of the A.P. VAT Act, the order of the Advance Ruling Authority binds officers in the Commercial Tax Department below the rank of the Commissioner of Commercial Taxes. In the exercise of his revisional powers, under Section 32(1) of the Act, the Commissioner of Commercial Taxes is not bound by the Ruling of the Advance Ruling Authority. Use of the word officers in Section 67(4)(iii) makes it clear that the order of the Advance Ruling Authority would not bind the STAT or this Court in the exercise of its jurisdiction under Section 34 of the Act. Orders of the STAT would bind all officers/quasi-judicial authorities of the Commercial Taxes department, including the Commissioner, notwithstanding a ruling of the Advance Ruling Authority to the contrary, more so as an appeal lies to the STAT against the ruling of the Advance Ruling Authority. (Tirupati Chemicals16). The decision of the STAT on a question of law would bind officers in the commercial taxes department even if there be a decision of the ARA to the contrary. However as noted hereinabove the order of the STAT is not a decision on a question of law and would not, therefore, bind the revisional or the assessing authority. Denial of Composition of Tax - Held that:- The revisional authority has erred in denying the petitioner the benefit of payment of tax under Rule 17(2)(b), merely on the ground that they had not disclosed the turnover in their returns, particularly when there is no statutory sanction for denial of such a benefit. No statutory provision either plenary or subordinate, which confers power on the authorities to deny the assessee the benefit of composition on this ground, has been brought to our notice. - The revisional authority shall, to this limited extent, examine the matter afresh and, in case the petitioner has opted for composition before commencement of the execution of the work and has notified the authority on Form VAT 250 prior thereto, consider extending them the benefit of composition, and for payment of tax under Rule 17(2)(b) & (c) of the Rules. Doctrine of promissory estoppel - Held that:- As NECL is not a party to the revised concession agreement, they are not entitled to invoke the doctrine of promissory estoppel more so as no promise has been made to them by the GoAP. In any event, a similar claim by KPCL has been negatived by this Court in its order in W.P. No.34680 of 2013. The claim of NECL, for application of the doctrine of promissory estoppel, must therefore fail. Conclusion - Held that:- While NECL is liable to pay tax on the turnover relating to execution of the works contract for KPCL, the provisions of the Act and the Rules obligate KPCL to deduct tax at source from the running account bills of NECL. However both NECL and KPCL cannot be subjected to tax on the very same transactions. The respondents shall grant NECL reasonable time to produce TDS certificates from KPCL. In case NECL fails to submit the TDS certificates within such stipulated period, it is open to the respondents thereafter to recover the said amount, along with other tax dues, from them in accordance with law. The impugned orders of the revisional and assessing authorities subjecting NECL to tax under Rule 17(1)(e) of the Rules, on completion of the financial year, is upheld. With regards payment of tax, for the works executed by them for KPCL, the respondents shall consider the claim of NECL for composition, provided they have complied with the requirements of Rule 17(2) of the AP VAT Rules. It is made clear that this order shall not preclude the respondents from instituting penal proceedings, if they so choose, against NECL for their having suppressed the turnover, relating to the works executed for KPCL, in their returns. - Petition disposed of.
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2015 (2) TMI 472
Demand of tax deducted at source along with interest in terms of Section 22(2) read with Section 22(4) of the Andhra Pradesh Value Added Tax Act, 2005 - violation of principles of natural justice - Works contract - Running Account Bills - Exemption from payment of Sales tax - Suppression of facts - Held that:- As NECL was liable to pay tax under the AP VAT Act, for execution of the works contract of construction of the Krishnapatnam Port, KPCL was statutorily obligated, under Section 22(3) of the AP VAT Act, to deduct tax at source from the running account bills of NECL, and remit the deducted tax amount to the Government. The fact that NECL could seek refund of the tax paid, in view of G.O.Ms. No.609 dated 29.05.2006, did not absolve KPCL of their statutory obligation to deduct tax at source. Even on a notification being issued under Section 15(1) of the AP VAT Act, the contractee is statutorily obligated, under Section 22(3) thereof, to deduct tax at source from the running account bills of the contractor, and the contractor is entitled, thereafter, to claim refund. If a statute has conferred a power to do an act, and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any manner other than the one prescribed. Likewise KPCL/NECL cannot claim a legitimate expectation to be continued to be exempt from payment of sales tax, as the revised concession agreement itself provides for a change of law, and the steps required to be taken by the parties to the agreement in this regard. As grant of exemption is contrary to law (ie the A.P.VAT Act), KPCL cannot claim to have a legitimate expectation that GoAP would continue to grant it exemption. If a denial of legitimate expectation, in a given case, amounts to denial of a right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 but a claim based on mere legitimate expectation, without anything more, cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider but the court must lift the veil and see whether the decision is violative of these principles warranting interference. - the revised concession agreement provides for a situation where there is a change in law. It requires the agreement to be suitably amended to bring it in conformity with the change in law. Having failed to do so, it is not now open to KPCL to contend that exemption from payment of sales tax should be continued, notwithstanding that it would then fall foul of the provisions of the A.P. VAT Act, on the application of the doctrine of legitimate expectation. The contention that the doctrine of legitimate expectation and promissory estoppel are attracted does not, therefore, merit acceptance. The petitioner has not only suppressed relevant facts regarding their having deducted tax at source from the running account bills of NECL, they have made false statements on oath before this Court that there is no deduction of tax at source from NECL. - They have, by resort to such dishonest means, secured interim stay of all further proceedings and have thereby avoided remitting the tax deducted at source, from the running account bills of NECL, to the Government. The undeserved benefit and advantage obtained by KPCL, by abusing the judicial process, must be neutralized. As they have suppressed facts, made false statements on oath, and have thereby abused the process of Court, KPCL shall pay exemplary costs of ₹ 75,000/- to the Commissioner, Commercial Taxes within three weeks from the date of receipt of a copy of this Order, failing which it shall be open to the Commissioner, Commercial Taxes to recover the said amount from them in accordance with law. - Decided against assessee.
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Indian Laws
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2015 (2) TMI 459
Offenses under Sections 173, 174 and 175 IPC - Statement of petitioner not recorded - Held that:- even on the last date of hearing Court directed the petitioner to appear before the DRI, once again, on 2-8-2013 for tendering his statement. Pursuant to the same, the petitioner did appear before the DRI on 2-8-2013 and tendered his statement before Shri Kamaljit Singh, Senior Intelligence Officer, who directed him to, once again, put in appearance on 12-8-2013. Even on 12-8-2013, the petitioner appeared before the Senior Intelligence Officer and tendered his statement. All these facts have been stated by the petitioner in his duly sworn affidavit dated 16-8-2013, which has been produced and taken on record and a copy thereof supplied to counsel for the respondent. These facts are also not disputed by counsel for the respondent. - Court has no other option but to quash complaint No. 51, dated 24-2-2010 and set-aside the summoning order dated 24-2-2010 passed by the trial Court - Decided in favour of appellant.
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