TMI Tax Updates - e-Newsletter dated: February 17, 2014 - with Direct Tax, Indirect Tax and GST Updates and Updates on FTP, FEMA, IBC & Corporate Laws etc. published on TMI with Latest Case Laws

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TMI Tax Updates - e-Newsletter February 17, 2014 Case Laws in this Newsletter: Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes Income Tax: AO himself admitted that the provision for pension liability and deduction under Chapter VI-A had been wrongly allowed - So it cannot be said that it was wrongly allowed on the mistake of the assessee particularly - Notice u/s 148 bad in law - AT Visit to Get Source Income Tax: Claim of expenditure on advertisement u/s 37 - Just because, assessee has claimed the amount as deferred revenue expenditure in the Profit & Loss Account, the nature of expenditure does not change - Entire amount allowed as revenue expenditure - AT Visit to Get Source Income Tax: Nature of profits STCG or LTCG - the appellant held the Units for period of 12 months and 1 day thus, capital assets in question were long term capital assets and consequently the gain was long term capital gains - AT Visit to Get Source Income Tax: Deduction u/s 80IA – Manufacture Activity OR not - Assembling the various parts of air-conditioners freezers, blowers - merely because anciliary goods are manufactured, it does not mean that the assessee is manufacturing air conditioning plant - HC Visit to Get Source Income Tax: TDS u/s 194C - Ocean freights and Inland Haulage Charges - ship belongs to Foreign Shipping Companies and payment is made to agents - the provision of section 172 not come into picture and assessee - No TDS - AT Visit to Get Source Income Tax: Compensation received on losing its right to receive income in respect of services being rendered by the assessee to the Bank is a loss of source of income - held as capital in nature - AT Visit to Get Source Income Tax: Charitable activity - An elocution contest appears to be the only activity sponsored by the trust over the years, which again does not imply undertaking any activity per se - AT Visit to Get Source Income Tax: Tax on profit distributed as dividend u/s. 115-O is allowable as deduction in computation of book profits for the purpose of section 115JB of the Act - AT Visit to Get Source Customs: Revocation of CHA License - delivery to a transporter for carriage of goods at the direction of the importer would not by itself resulted in non-compliance of the Customs Act - HC Visit to Get Source Service Tax: Cenvat Credit in respect of GTA service - the fact was disclosed by them in their ST-3 Returns, they cannot be accused of having suppressed any relevant facts from the department. - AT Visit to Get Source Service Tax: In respect of transaction of providing DSNG vehicles on hire to the customers, the appellants have paid the VAT - prima facie not be covered by the definition of supply of tangible goods service - AT Visit to Get Source Service Tax: Condonation of delay - assessee is an illiterate lady and took sometime to sought legal advice for the purpose of filing of appeal - delay condoned - AT Visit to Get Source Central Excise: Classification of goods - Manufacture of printed ATM Rolls, printed lottery ticket rolls and printed bus ticket rolls - prior to enactment of Finance Bills 2012 merit classification as "products of the printing industry" - AT Visit to Get Source Central Excise: Revenue appeal - there is no application of mind by the Committee of Commissioners and they have merely appended their signatures to the note sheets prepared by the subordinate officers - appeal dismissed - AT Visit to Get Source Central Excise: Penalty u/s 11AC - Shortage in stock - Activities of evasion are carried out in the darkness of night and the person tried their best to not to leave any evidence - Mens rea is clearly imputed - AT Visit to Get Source Articles APPOINTMENT OF DIRECTOR'S RELATIVE AND EXEMPTION FROM APPROVAL UNDER SECTION 314 OF COMPANIES ACT, 1956 SECTION 119 - INJUDICIOUS CBDT TAXPAYERS' WELFARE OR WARFARE Notifications Customs 11/2014 - dated 14-2-2014 - Cus (NT) Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 Circulars / Instructions / Orders FEMA - 104 - dated 14-2-2014 Foreign investment in India by SEBI registered FII, QFI and long term investors in Corporate Debt News Tariff Value of Crude Palm Oil, RBD Palm Oil, Others Palm Oil, Crude Pamolein, RBD Palmolein, Others Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified Case Laws: Income Tax 2014 (2) TMI 612 Addition made u/s 68 of the Act - Unexplained cash credits - Gifts made by mother to son – Held that:- The mother of the assessee made gift to the assessee out of natural love and affection and it cannot be doubted - the assessee has to discharge the onus cast on him with regard to identity of the donor, capacity of the donor and genuineness of the transaction - all the ingredients are duly discharged by the assessee – thus, the gift made by the mother to the son out of natural love and affection cannot be doubted so as to make addition u/s. 68 of the Act – Decided in favour of Assessee. Addition towards disallowance of interest - Funds diverted for non- business purposes – Held that:- The assessee advanced an amount and there was also opening balance - The AO computed interest on the amount owed by the assessee to Smt. Annapurna as the net balance - the total interest liability incurred by the assessee in the assessment year under consideration is Rs. 7,18,000 on total borrowings – thus, the AO is directed to disallow proportionate interest as attributable to the amount advanced to Smt. Annapurna instead of disallowing at 18% on total outstanding - interest is to be disallowed proportionately on the amount advanced to Smt. Annapurna which bears to the total borrowings i.e., Total Interest Paid x Amount advanced to Smt. Annapurna Total amount borrowed – Decided partly in favour of Assessee. 2014 (2) TMI 611 Addition made u/s 68 of the Act – Unproved sale of car – Held that:- The decision in RANBAXY LABORATORIES LIMITED vs. COMMISSIONER OF INCOME TAX [2011 (6) TMI 4 - DELHI HIGH COURT] followed - no addition could be made in re-assessment if no additions in respect of the grounds on which the proceedings u/s 147 were initiated has been made by the AO - the complete material not being and none having represented the assessee in the appeal proceedings the matter remitted back to the AO - The assessee shall also be at liberty to produce any other evidence to prove sale of car by him to Shri Bhasin – Decided in favour of Assessee. 2014 (2) TMI 610 Reopening of Assessment u/s 147 of the Act – Notice u/s 148 issued - Held that:- The decision in Hindustan Lever vs. Assistant Commissioner of Income Tax[2004 (2) TMI 41 - BOMBAY High Court] followed - the Assessing Officer must disclose in the reasons as to which material facts were not disclosed by the assessee fully and truly, which was necessary for assessment of that assessment year to establish vital link between the reasons and evidence - the vital link is to safeguard against arbitrary reopening of the concluded assessment - the assessing officer has not received any further evidence or information so as to say that the assessee at the time of making original assessment did not disclose truly and wholly the material facts which has come to the notice to the AO later on and due to which the income chargeable to tax has escaped assessment – thus, the initiation of reassessment proceedings by issuing notice u/s 148 of the Act for the assessment year is barred by limitation as the original assessment was made u/s 143(3) of the Act - there is no evidence to establish that the assessee failed to disclose fully and truly the material facts necessary for the assessment – thus, the order set aside – Decided in favour of Assessee. Validity of Reassessment – Held that:- No new material has come to the notice of the Assessing Officer for initiating the reassessment proceedings and the reassessment has been initiated after expiry of more than 4 years on the same materials which was furnished by the assessee, at the time of falling the return - there is nothing to show that alleged escape of income was owing to the failure on the part of the assessee to disclose material facts truly and fully - No tangible material has been brought on record which has come to the notice of the Assessing Officer after the return was processed u/s 143(1) of the Act – thus, the action of the Assessing Officer to initiate reassessment proceedings is not in accordance with law - the contention of the assessee is accepted that the initiation of reassessment proceedings is not valid – Decided in favour of Assessee. 2014 (2) TMI 609 Validity of Re-Assessment – No failure in disclosing Material facts – Held that:- Reopening of the assessment was beyond the period of four years from the original assessment completed u/s 143(3) of the Act and in the reasons recorded nothing is brought on record that there was a failure on the part of the assessee to disclose fully and truly all material facts - it cannot be said that the assessee did not disclose the correct figure of the business loss - the reopening was not justified. Provision for pension liability u/s 37(i) of the Act – Held that:- It cannot be said that there was a failure on the part of the assessee - Similarly in the revised return of income, the assessee had restricted its claim for deduction under Chapter VI-A to Nil in view of the negative gross total income - So it cannot be said that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of the income – Relying upon Hindustan Lever Ltd. v. ACIT & Ors. 2004 (2) TMI 41 - BOMBAY High Court] - the notice issued u/s 148 of the Act was beyond the period of four years and the reasons recorded by the AO nowhere stated that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year - the AO himself admitted that the provision for pension liability and deduction under Chapter VI-A had been wrongly allowed - So it cannot be said that it was wrongly allowed on the mistake of the assessee particularly, when all the figures and material was truly disclosed by the assessee – thus, the reopening beyond four years by issuing notice u/s 148 of the Act was bad in law and the learned CIT(A) rightly cancelled the assessment framed by the AO on 30.12.2003 – there is no reason to interfere in the findings of the CIT(A) – Decided against Revenue. 2014 (2) TMI 608 Claim of expenditure on advertisement u/s 37 of the Act – Held that:- The entire expenditure is incurred for the purposes of advertising the assessee's merchandise in the newspaper - The assessee company is a corporate merchandise provider, advertising about various brands and products being provided by the assessee is a must, in order to attract business - Just because, assessee has claimed the amount as deferred revenue expenditure in the Profit & Loss Account, the nature of expenditure does not change – the decision in Amar Raja Batteries Ltd. V/s. ACIT [2004 (4) TMI 280 - ITAT HYDERABAD-B] followed - the assessee has written off the expenditure in its books of account over a period of five years, it must be allowed in its entirety in the year in which it was incurred - if it is revenue expenditure, and if it is wholly and exclusively incurred for the purposes of business - the assessee has correctly claimed the expenditure and it should be allowed in its entirety – Decided in favour of Assessee. 2014 (2) TMI 607 Nature of profits STCG or LTCG - Whether the profit arisen out of sale of shares is to be assessed as short term capital gain or long term capital gain – Held that:- The CIT(A) treated the profit arising from sale of shares as Long Term Capital Gain - the period of holding must necessarily include the date of purchase of the capital asset as well - the appellant held the Units for period of 12 months and 1 day thus, capital assets in question were long term capital assets and consequently the gain was long term capital gains - The same therefore qualified for exemption u/s 10(38) of the Income Tax act - The assessee has held the assets i.e. shares for more than twelve months, may be even for one day – thus, there is no need to interfere in the order of CIT(A) – Decided against Revenue. Disallowance of expenses u/s 14A of the Act – Held that:- CIT(A) restricted the disallowance - As the issue is covered u/s 14A of the Act only 1% disallowance is to be restricted but here, the assessee itself has disallowed a sum which is more than 1% - The entire addition made by AO is deleted – Decided in favour of Assessee. 2014 (2) TMI 606 Additions on estimated basis - Held that:- The additions were deleted partly by the CIT(A) and further by the Tribunal - The assessee was engaged in the electronic business and the additions were made on estimate basis which were substantially deleted by the appellate authorities - the addition was made pertaining to the rate of interest - The assessee has shown the rate of interest @ 23% and the A.O. has allowed 18%, the difference of 5% is based on estimate basis - There was no reason to interfere with the order passed by the Tribunal and the same is sustained along with the reasons – there was no substantial question of law is emerging from the order – Decided against Revenue. 2014 (2) TMI 605 Entitlement for benefit of Section 80IA of the Act – Manufacture Activity OR not - Assembling the various parts - Whether the air-conditioning system or plant delivered constitute a separate and distinct product involving manufacturing or production and eligible for deduction – Held that:- It has an in-built capacity to manufacture ducting, erection of systems, providing electrical paneling controls, installations etc. – it purchases air conditioners, blowers, freezers, Cooling equipment etc. - The case of the assessee is after purchasing these parts it manufacures an air-conditioning plant and delivers the same to his customers - after these parts are purchased they are transformed into an altogether new product - the assessee is entitled to the benefit as it satisfies the above requirement of the Section. The air-conditioners freezers, blowers which are purchased as raw materials for the said air condition plant are not processed - They are used as it is - No manufacturing activity takes place insofar as those items are concerned - They are installed as it is and only they are connected with these panels and ducting - Though the assessee calls it as an air-conditioning plant, the air-conditioners, which are purchased as raw material continues to perform the very same function after its installation - No new product comes into existence after the assessee purchases these goods - the authorities have called it as assembly and for the purpose of assembly, they may manufacture ducting and electrical panel controls and other installations - But merely because those anciliary goods are manufactured, it does not mean that the assessee is manufacturing air conditioning plant - the authorities were justified in declining to extend the benefit of Section 80IA to the assessee – there was no error committed by the authorities in holding that the assessee is not involved in manufacturing or production and therefore is not entitled to benefit of tax deduction – Decided against Assessee. 2014 (2) TMI 604 Explanation for fall in GP rate – Held that:- The assessee pointed out that when the price of the kappas had increased, there was no corresponding increase in the price of cotton - there was a mix up of different variety of cotton too - The First Appellate Authority rightly came to the conclusion that the allegation made by the Assessing Officer for rejecting the books were too general in nature - the Assessing Officer had not stated that the purchases had not been made nor had rejected the accounts - Relying upon R.M.P.Perianna Pillai & Co., vs. Commissioner of Income Tax [1961 (1) TMI 69 - MADRAS HIGH COURT] - the system of accounting adopted by an assessee could not be rejected - the assessee did not maintain all through the year a separate variety-wise stock account either on the basis of counts of yarn, or prices or classes of goods - the absence of such stock books did not prevent the acceptance of the book results in the previous assessment years - no attempt was made to verify the particulars given by the assessee by way of statements and the only ground on which the book results were rejected was that the gross profits were low – thus, the Department had not proved the case by any substantive materials – Decided in favour of Assessee. 2014 (2) TMI 603 TDS u/s 194C - Ocean freights and Inland Haulage Charges - ship belongs to Foreign Shipping Companies and payment is made to agents - Deletion made on account of violation of section 40(a)(ia) of the Act – Held that:- The CIT(A) has rightly upheld that the Circular talks about the payments made or to be made to non-resident shipping companies or their resident agents covered u/s 172 of the Act - the assessee has neither made any payment to any non-resident shipping company or their resident agents acting on behalf of non/resident shipping companies - Nothing has been brought on the records by the assessee by adducing any evidence that the parties to whom the payments of freight is being made are non- residents or acting as agents of non-resident shipping companies - the provision of section 172 of the Act does not come into picture and assessee - Bill of Lading clearly mentioned the name of the Carrier and the name of the port in India – Decided against Revenue. Confirmation of addition paid to legal agents –Held that:- The portion of the amount paid to various Cargo Consultants towards consultancy charges recovered from the assessee - Some portion of the amount is towards reimbursement of expenses but the details are not available readily – thus, the CIT(A) has correctly confirmed the addition of this amount – Decided against Revenue. 2014 (2) TMI 602 Allowability of software expenses - Whether the expenses are in the nature of research and development expenditure and allowed as revenue expenditure u/s 35(1)(iv) of the Act – Held that:- The decision in 3i Infotech Ltd. Versus Deputy Commissioner of Income-tax, Circle 10(3) Mumbai [2010 (7) TMI 843 - ITAT MUMBAI] followed - The assessee will be entitled to depreciation in the year of capitalization - the expenditure incurred by the assessee during the years under consideration which has been treated as work-in-progress is held to be capital expenditure and depreciation is held to be allowable to the assessee only in the year of capitalization of such expenditure - the expenditure incurred by the assessee during the year under consideration treated as capital work-in-progress are capital expenditure - However, the assessee will be eligible for depreciation on these expenditure in the year when these have been capitalized – the claim of allowability of the expenditure as per section 35(1)(iv) is rejected - Decided partly in favour of Assessee. Allowability of depreciation on capital work in progress – Held that:- The Tribunal is clear that the depreciation is allowable to the assessee – thus, the AO is directed to grant depreciation to the assessee. Claim of exemption u/s 10A of the Act – Held that:- The decision in of CIT vs.Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] followed – the assessee is entitled to exemption under section 10A with reference with reference to addition of disallowance of PF/ESIC payments as the plain consequence of the disallowance and add back made by the AO has increased the business profits of the assessee - the exemption under section 10A is to be calculated accordingly. Transfer Pricing Adjustment – Held that:- The decision in 3i Infotech Ltd. Versus Deputy Commissioner of Income-tax, Circle 10(3) Mumbai [2010 (7) TMI 843 - ITAT MUMBAI] followed -The determination of ALP in respect of the transaction by which the Assessee deputed three of its employees to ICICI infotech, USA, by the TPO is therefore non est to that extent and cannot form the basis for making an addition to the total income - The AO therefore could not have made the impugned addition on the basis of the order of the TPO - Since the addition has been made by the AO only by placing reliance on the report of the TPO, the addition cannot be sustained. Whether the report of the TPO can be considered as material, information or document based on which the addition made by the AO could be sustained – Held that:- U/S.92C(3) the AO has power to determine ALP on the basis of material or information or document in his possession - but exercise of such power is conditional on the AO. CUP method could not be applied under the facts of the case as the Assessee has not transferred/seconded employees to any other independent enterprises - To test the arm's length pricing in the case of transfer/seconding of the employee's, it may be possible to use the CUP method where the same entity has undertaken similar transaction under comparable circumstances to independent enterprises - the similar transaction on the basis of which the TPO determined ALP was not with an independent enterprise and the said transaction was also with an Associated enterprise - even the determination of ALP by the TPO was not proper – the addition made by AO deleted – Decided in favour of Assessee. Pre-determined contract with the Bank – Compensation received – Nature of Amount received – Held that:- The assessee was providing back office support services to ICICI Bank in respect of retail lending business of ICICI Bank and was receiving payment as per agreement entered into by the assessee with the said Bank - This was one of the activity of the assessee - Thus it was a case where the compensation has been received by the assessee on losing its right to receive income in respect of services being rendered by the assessee to the Bank – the compensation received is a loss of source of income to the assessee and compensation has been determined on the basis of the said loss – Relying uponKettlewell Bullen And Company Limited Versus Commissioner Of Income-Tax, Calcutta [1964 (5) TMI 4 - SUPREME Court] - it is irrelevant that the assessee continued similar activity with the remaining agencies - the assessee has lost its source of income with respect to its agreement entered into by it with the bank - it has never rendered such services to any other person right from the inception and there is no material on record to contradict such argument of the assessee – there was no infirmity in the order passed by CIT(A) – thus, compensation received by the assessee was in the nature of capital – Decided against Revenue. Disallowance u/s 14A of the Act r.e Rule 8D of the Rules – Held that:- The decision in Godrej & Boyce Mfg. Company Ltd vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - the provisions of Rule 8D are prospective and can be applied from A.Y 2007-08 onwards, however, disallowance 14A is to be made in the earlier years based on reasonable basis for computation of expenses relating to earning of exempt income – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Revenue. 2014 (2) TMI 601 Application of income for Charitable purpose - Business activity eligible for exemption u/s 11 of the Act – Held that:- The assessee was required to exhibit in the set aside the assessment proceedings was of the publication business as being incidental to the attainment of its other objects, i.e., as a fact, toward satisfaction of the requirement of the law u/ss. 11(4) and 11(4A), for the said business to be considered as property held under trust – the business does not by itself constitute a charitable object or purpose – The decision in IDEAL PUBLICATIONS TRUST Versus COMMISSIONER OF INCOME-TAX [2008 (2) TMI 297 - KERALA HIGH COURT] followed – there was no basis, nor any material on record, to justify the same, which also forms the basis of the orders by the Revenue. An elocution contest, even the subject of which is not known, as also the total expenditure involved, appears to be the only activity sponsored by the trust over the years, which again does not imply undertaking any activity per se - there is no charitable activity being undertaken, much less a regular activity toward charitable purposes, for the said business to be considered as an adjunct or incidental to the attainment or any specific objective - the claim of business expenses as or toward application of income would suggest non-maintenance of separate books of account, another qualifying condition u/ss. 11(4) & 11(4A) - even if the assessee's undertaking of publishing business was found as meeting the requirement of law and, as such, a property held under the trust, only its income to the extent applied for its charitable purposes would qualify for exemption u/s.11, which again is conspicuous by its absence – Decided against Assessee. There would be no surplus from the business as the profits generated would be required to meet the funding requirements of its capital expenditure as well as concomitant financial obligations, including servicing of debt - No wonder the assessee has not been able to generate a 'surplus' (for charitable purposes) in the two decades of its functioning, and despite being run on commercial lines - The plea of no surplus, which is even otherwise not maintainable, is false – Decided against Assessee. 2014 (2) TMI 600 Disallowance of deduction u/s 10B of the Act - Sale of hoops and wrappers – Held that:- The contention of the Assessee accepted to the extent that Hoops & Wrappers are the packing materials like other Store Bardana - The income from the sale of the said packing material has consistently been allowed to the assessee in the earlier years - The revenue could not bring any point to the effect that sales from Hoops & Wrappers is different from the sales of Store Bardana Sales – thus, the income derived from the sale of Hoops & Wrappers Sales is directed to be allowed. Discount/Bonus on Store Items – Held that:- In the earlier years also, the issue has already been restored back to the file of the A.O., so it will be just and proper for this year also to direct the A.O. to decide the same as per the directions given by the co-ordinate bench of this Tribunal for the earlier years relating to the same issue – the matter remitted back to the AO. Staff Agreement Deposit Forfeited – Held that:- The decision in Century Textiles & Industries Ltd. Versus Asstt. Commissioner of Income Tax [2013 (10) TMI 549 - ITAT MUMBAI] followed – the amount did not qualify for exemption under section 10B as these are not held to be the receipts derived from the industrial undertaking – Decided against Assessee. Unclaimed Salary Forfeited – Held that:- The receipts on this account are in the nature of the receipts credited in ‘staff agreement deposited forfeited’ as well as ‘notice period salary received from staff’ – assessee could not bring as to why these receipts should not be disallowed, especially when the receipts of this nature have already been disallowed in the earlier years - the disallowance under this head is upheld. Treatment of capital receipt as revenue receipt – Reduction in claim of mining lease expenses - Treating business Income as ‘Income from house property – Disallowance of interest paid on income tax – Disallowance of Interest paid to SSI units on delayed payments –Disallowance of provision in respect of difference of electricity duty on colony consumption payable to CSEB and provison for reimbursement to consignment agent on account of entry tax - Held that:- The decision in Century Textiles & Industries Ltd. Versus Asstt. Commissioner of Income Tax [2013 (10) TMI 549 - ITAT MUMBAI] followed - The CIT(A) confirmed the action of the AO of treating capital receipt being security deposit forfeited, as revenue receipt as against capital receipt treated by the appellant – the deduction has not been made by the appellant, there would not be any effect on the total income – the decision of the CIT(A) upheld. Disallowance of amounts paid to various authorities - Disallowance of leasehold amount written off - Held that:- In the earlier years aslo, the issue has already been restored back to the file of the A.O., so it will be just and proper for this year also to direct the A.O. to decide the same as per the directions given by the co-ordinate bench of this Tribunal for the earlier years relating to the same issue – thus, the matter is remitted back to the AO. Disallowance of foreign travelling expenses – Held that:- As decided in assessee’s own case, the expenditure on foreign travel expenses of Director’s wife may be allowed, depending on the status of the parties, nature or character of the trade or venture, the purpose for which the expenses were incurred and the object sought to be achieved by incurring such expenses. In the present case, the ITAT after considering all facts on record has allowed the claim –Decided in favour of Assessee. Disallowance of deduction u/s 80HHC of the Act – Computation of book profit u/s 115JB of the Act - Held that:- The decision in Century Textiles & Industries Ltd. Versus Asstt. Commissioner of Income Tax [2013 (10) TMI 549 - ITAT MUMBAI] followed - The deduction u/s 80HHC in the case of MAT assessment, is to be worked out on the basis of adjusted book profit and not on the basis of profit computed under the regular provisions of law applicable to the computation of 'profit and gains of business or profession' – Decided in favour of Assessee. Addition of sales tax to the total turnover for the purpose of Section 80HHC of the Act – Held that:- The decision in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] followed – amendments to section 80HHC(3) indicate exclusion of book profits -sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc. - It is important to bear in mind that excise duty and sales tax are indirect taxes - They are recovered by the assessee on behalf of the Government - if they are made relatable to exports, the formula under section 80HHC would become unworkable – Decided against Revenue. Claim for DEPB incentive as per section 80HHC of the Act – Held that:- Relying upon Topman Exports Vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - DEPB is chargeable to income tax under the head ‘Profits and Gains of Business or Profession’ even before it is transferred by the taxpayer - Under Section 28(iiid) of the Act, any profit on transfer of DEPB is chargeable to income tax under the head ‘Profits and Gains of Business or Profession’ as an item separate from cash assistance under Section 28(iiib) of the Act - The face value of the DEPB will fall under Section 28(iiib) of the Act, the difference between the sale value and the face value of the DEPB will fall under Section 28(iiid) of the Act - The cost of acquiring DEPB is not nil because the person acquires it by paying customs duty on the import content of the export product and the DEPB which accrues to a person against exports has a cost element in it – thus, the AO is directed to compute the income of the assessee. Deletion made for arrears of depreciation – Computation of Book profits u/s 115JB of the Act – Held that:- The decision in Apollo Tyres Ltd. vs. CIT [2002 (5) TMI 5 - SUPREME Court] followed – the AO has limited powers of making increases and reductions as provided for in the Explanation to the said section - the AO does not have the jurisdiction to go beyond the net profits shown in the P&L a/c, except to the extent provided in the Explanation to s.115J of the IT Act – Decided against Revenue. Deduction in computation of profit u/s 115JB of the Act - Tax on profit distributed as dividend u/s 115O of the Act – Held that:- The decision in Asstt. CIT vs Balarampur Chini Mills Ltd [2007 (3) TMI 295 - ITAT CALCUTTA-A] followed - tax on profit distributed as dividend u/s. 115-O is allowable as deduction in computation of book profits for the purpose of section 115JB of the Act – thus, tax on profit distributed as dividend u/s. 115-O is required to be reduced while computing the book profits u/s. 115JB of IT Act – there was no infirmity in the finding of the CIT(A) on the issue. 2014 (2) TMI 599 Nature of Income – Business Income OR STCG – Income from sale of shares – Held that:- The decision in Tikuchand D. Jogani Versus ACIT [2014 (1) TMI 1599 - ITAT MUMBAI] followed - the assessee has shown all the purchases under the investment portfolio - Nowhere it is provided that if the transactions are frequent and voluminous then the claim of the assessee is not allowable as short term capital gain or long term capital gain as the case may be - the gain on account of sale of shares has to be treated as short term capital gain – thus, the AO is directed to treat the gain on account of sale of shares as short term capital gain – Decided in favour of Assessee. 2014 (2) TMI 598 Addition as unexplained receipt – Held that:- The assessee's case is built on presumption i.e. that the first payment was usually in cash that receipt had been accepted by Smt. Reema Aggarwal to be issued against cheque but not against the cash etc. -The CIT(A) was not satisfied that these presumptions can assist the appellant in the discharge of the onus cash upon it - a credit of this amount has been introduced in the books of the assessee and the onus lies squarely upon the assessee to prove the genuineness of the transaction recorded in its books - The assessee was running a business for a long time. Even though it had suffered losses, it had a running operation, stock in trade of the value of more than Rs.79 lacs and several other fixed asset - thus, the assessee firm and its partner did have access to money - In the face of clear denial by Smt. Reena Aggarwal and absence of any positive evidence with the assessee, the CIT(A) rightly upheld the addition made by the AO as unexplained money received by the assessee – Decided against Assessee. Application of section 36(2)(i) of the Act - Addition made on account of payment – Held that:- The Ld. CIT(A) has passed a well-reasoned order that the claim made by the assessee is not allowable as deduction u/s 36(1)(vii) of the Act since the condition prescribed u/s 36(2)(i) of the Act relating to bad debts is not satisfied in respect of the excess payment - The debt due to be paid by the assessee to M/s. Mahindra & Mahindra Ltd; was lesser than the amount actually paid by the assessee - The excess amount was never taken into account in computing income of the assessee in the present assessment year or in the earlier year prior to present assessment year - there is nothing to show that any sales were made by the assessee to M/s. Mahindra & Mahindra Ltd. Claim for deduction u/s 37(1) of the Act – Held that: Deduction u/s 37(1) of the Act is allowed in respect of expenditure incurred wholly and exclusively for the purpose of assessee's business - The assessee has not able to throw any light on the purpose for which the excess payment was made - It has not informed as to how the payment resulted in an expenditure incurred wholly and exclusively for the purpose of assessee's business or even as to how it was expenditure – thus, the CIT(A) has rightly rejected the claim of the assessee – Decided against Assessee. 2014 (2) TMI 597 Validity of Reassessment proceedings u/a 147 of the Act - Held that:- The assessee in the return filed has claimed deduction u/s 10B of the Act which is supported by an audit report submitted in Form No.56G of the Act - the Assessing Officer after causing necessary enquiry has completed the assessment u/s 143(3) of the Act accepting the income returned by the assessee - The facts and materials clearly indicate that because of the fact that in the assessment order passed for the assessment year 2006-07 a different view has been taken with regard to the claim of deduction u/s 10B of the Act only on that basis the assessment for the assessment year has been reopened - There is no independent application of mind by the Assessing Officer on the basis of the fats and materials in possession of him that income has escaped assessment – Relying upon CIT vs.SFIL Stock Broking Ltd. [2010 (4) TMI 102 - DELHI HIGH COURT] - while recording reasons for initiating action u/s 147 of the Act, the Assessing Officer has to apply his mind to the information and independently arrive at the belief that on the basis of the material which he had before him income had escaped assessment. The reasons recorded for initiating proceedings u/s 147 of the Act is not a valid reason as there is no tangible material before the Assessing Officer for coming to believe that income has escaped assessment - The Assessing Officer has merely adopted the reason for denial of exemption u/s 10B for the assessment year 2006-07 for initiating action u/s 147 of the assessment year which is not valid – thus, the initiation of proceedings u/s 147 of the Act is without authority of law and consequently the assessment order passed u/s 143(3) read with section 147 of the Act is also invalid in law and quashed – Decided in favour of Assessee. Denial of exemption u/s 10B of the Act – Profits derived from Medicinal Chemistry and Clinical Pharmacology Division – Requirement of production of article or thing or computer software – Held that:- The assessee had given up its claim in respect of the disallowance of exemption u/s 10B of the Act by not pressing the ground before the CIT (A) - Relying upon National Thermal Power Company Limited Versus Commissioner of Income-Tax [1996 (12) TMI 7 - SUPREME Court] - if the additional ground is purely on legal issue and does not require investingation into fresh facts and can be decided on the basis of facts already on record, then such additional ground can be entertained - the facts on record clearly reveal that the assessee has consciously given up its claim u/s 10B of the Act by not pressing the ground before the CIT (A) – there was no merit in the assessee’s contention for entertaining the issue. Rejection of claim of deduction u/s 80IB(8A) of the Act – Held that:- The assessee has obtained approval from the prescribed authority as a research and development company for availing deduction u/s 80IB (8A) of the Act – the claim of deduction is subject to fulfilment of other conditions as prescribed u/s 80IB(8A) and Rule 18BA of I T Rules - the CIT (A) cannot over-ride the approval/renewal granted by the prescribed authority and deny the benefit to the assessee by merely stating that the assessee has not been able to furnish evidence – The statutory authority cannot deny such benefit to the assessee during subsistence of such approval granted by the prescribed authority Relying upon ACIT vs. Small is Beautiful 2013 (8) TMI 809 - ITAT HYDERABAD] - there is no material on record to show that the approval granted by the assessee has been withdrawn by the prescribed authority - the deduction claimed u/s 80IB(8A) cannot be denied to the assessee till such time the assessee is approved as research and development organisation by the prescribed authority – thus, the order of the CIT(A) set aside and the AO is directed to allow the claim of deduction u/s 80IB(8A) of the Act – Decided partly in favour of Assessee. 2014 (2) TMI 596 Disallowance of expenditure - Search u/s 132 of the Act made - Application for condonation of delay not considered – Held that:- The CIT(A) has disposed of the appeals of the assessee before him, without considering the letter of the assessee and observing that there was violation of provisions of S.249(4)(a) of the Act, on account of non-payment of admitted taxes - Revenue could not controvert the submissions of the assessee – Relying upon CIT V/s. Filmistan Ltd. [1961 (2) TMI 2 - SUPREME Court] - The order of the CIT(A) set aside and the matter remitted back to the CIT(A) for adjudication after considering the request of the assessee for condonation of delay in filing the appeal, in accordance with facts and law – Decided in favour of Assessee. Quantum of disallowance – Held that:- The disallowance is not invoking the provisions of Section 40A(3) but disallowance is u/s 37(1) being unverifiable nature of expenditure - Since the details are not furnished before the authorities earlier, the AO is directed to examine the aspects and exclude the cheque payments out of the disallowance - considering the nature of business of the assessee and the details of expenditure incurred on various site development and construction activities, including labour payments and the difficulty in maintaining proper vouchers , it would be fair to restrict the disallowance to 15% of the cash payments so made out of the items of expenditure considered by the assessing officer – Decided partly in favour of Assessee. Amount disallowed to be added in the income returned or not – Held that:- The assessee has fairly admitted that the assessee firm could not bifurcate the expenditure - part of the opening work-in-progress could have resulted in sale of flats, whereas part of the expenditure claimed in this year under various head could have gone into the construction work-in-progress - In the absence of clear cut demarcation given by the assessee, it may be presumed that 50% of the expenditure claimed in this year would have gone into the closing work-in-progress, being mainly construction of houses, (as there was no sale of open plots of land as in earlier years) – thus, out of the disallowance sustained by the CIT(A), 50% should be added to the income of the year and the balance amount should be adjusted in the closing work-in progress – Decided partly in favour of Assessee. 2014 (2) TMI 595 Survey u/s 133A of the Act - Eligibility of the project to deduction u/s.80IB(10) of the Act – Effect of amendment – Requirement of completion of the housing project - Held that:- The assessee obtained the permission for construction of buildings A, B, C, D, E, F and 17 row houses on 12-12-2001 - The assessee constructed building Nos. A,C, D and E and the 17 row houses and dropped the idea of construction of Building Nos. B and F being uneconomical and had not submitted any revised plan to PMC - the assessee applied for completion certificate on 22-01-2004, the same was not received by the assessee before 31-03- 2008. Completion certificate from PMC – Held that:- The decision in City Development Corporation Vs. ACIT [2013 (7) TMI 198 - ITAT PUNE] followed - The completion certificate was applied for before 31-3- 2008 i.e. on 12-3-2008 - denial of deduction u/s 80-IB(10) on such score is uncalled for – thus, the assessee has complied with the condition of completing the construction of the project within the mandated date of 31-3- 2008 even with regard to building 'E' - since the assessee has done whatever possible on his part, i.e. duly applied to PMC for issue of completion certificate, handed over possession of the flats/row houses to the respective buyers, PMC has started levying municipal taxes and electricity bills paid by respective owners – thus, the deduction u/s.80IB(10) cannot be denied to the assessee for non-receipt of completion certificate from PMC before 31-03-2008 which was beyond the control of the assessee – thus, the order of the CIT(A) denying benefit of deduction u/s.80IB(10) for non-receipt of completion certificate is set-aside and the grounds raised by the assessee on this issue are allowed. The decision in M/s. Rahul construction Co. Vs. ITO [2012 (6) TMI 319 - ITAT PUNE] followed - The approval of the housing project and approval of building plan are two different concepts – the housing project does not necessarily have to be various group of buildings constructed on that particular land, but it can also be a particular building or any building which is part of a large project - whatever portion of the housing project is otherwise found to be eligible has to be considered as a housing project for the purpose of deduction u/s. 80 IB (10) of the Act - the use of the words “residential units” in cl.(c) of s.80IB(10) means that deduction should be computed unit-wise – Thus, if a particular unit satisfies the condition of s.80IB, the assessee is entitled for deduction and it should be denied in respect of those units only which do not satisfy the conditions - whatever portion completed by the assessee which satisfies the conditions prescribed u/s.80IB(10) is eligible for deduction – thus, the assessee is eligible for deduction u/s 80IB(10) in respect of building No. A,C,D, E and the 17 row houses – Decided partly in favour of Assessee. 2014 (2) TMI 594 Deletion of Penalty u/s 271(1)(c) of the Act – Various additions made - Held that:- The CIT(A) has given categorical findings before deleting the penalties in respect of the additions made by the AO in the assessment – there was no infirmity in the order of the CIT(A) in deleting the penalties levied by the AO u/s 271(1)(c) against the additions - In so far as depreciation claim is concerned, it is a legal claim made by the assessee and even the same claim was made in the earlier years - the assessee neither concealed its income nor furnished inaccurate particulars of income and the claim is a continuous one, he deleted the penalty levied on the depreciation claim by the AO - With regard to the Proportionate swap cost on the outstanding swap contracts is concerned, the addition made only on the difference of opinion between the department and the assessee - If the AO is correct the assessee is entitled for deduction and the balance amount in the next accounting year – it is clear from the order of CIT(A) that the assessee neither concealed its income nor furnished any inaccurate particulars of income – Decided against Revenue. 2014 (2) TMI 593 Disallowance of deduction claimed u/s 80IB(10) of the Act - Effect of amendment - Non receipt of completion certificate – Held that:- The law as it existed in the A.Y.04-05 when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the Assessee commenced development is to be applied – the legislature would not have intended to take away a vested right without clear words to that effect in the provisions of Sec. 80-IB(10) as amended by the Finance Act, 2005, w.e.f. 1-4-2005 – The decision in Saroj Sales Organisation. Versus Income-Tax Officer [ 2008 (1) TMI 420 - ITAT BOMBAY-E] followed - the law as it existed in the A.Y. 04-05 when the Assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the Assessee commenced development is to be applied. The decision in Hiranandani Akruti J.V v/s. DCIT [2010 (3) TMI 876 - ITAT MUMBAI] followed- a housing project will also consist of commercial area to a permissible limit - the assessees had started the project in the year 2001 when sub-clause (d) to Section 80IB(10) was not in existence, hence it cannot be applied on such projects - By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005, the Legislature always intended that the project must be approved by the local authority - thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved – thus, the amended provisions under Section 80 IB(10) w.e.f. 1.4.2005 are not applicable and the assessees are eligible for the claimed deduction u/s 80 IB (10) of the Act – Decided in favour of Assessee. Customs 2014 (2) TMI 627 Valuation of goods - undervaluation of the goods - Determination of correct value of the PU belts with buckles of Chinese origin - Held that:- As per the appellant, the supplier of the goods is the manufacturer of the same and the value declared by them in the Bill of Entry is the same value which is reflected in the invoice raised by the foreign supplier. The Revenue has not advanced any evidence to show that the said declared value is not correct value. In terms of the provision of 3 of the Customs Valuation Rules, 2007, the value of the imported goods shall be the transaction value and the same is required to be accepted unless there are strong reasons to reject the same. Revenue has not produced any evidence to show that there was any additional consideration flowing back from the appellant to the foreign supplier, in which case the Revenue is bound to accept the declared transaction value. Apart from that we note that the attention of the lower authorities was drawn to the fact of another import made by the appellant at Tuglagabad wherein the value of the identical goods declared by them @ US$ 1.50 per dozen were accepted and there is no appeal of the Revenue against the said assessment order. If that be so, we really fail to understand as to why the said imports at Tuglagabad, which is in respect of the same very goods and from the same supplier, would not constitute contemporaneous import so as to adopt the same for the purposes of assessment. There is nothing in the said market enquiry to reveal that the belts purchased by the officers were of the same type, which stands imported by the appellant except the fact that the brand name was ‘Tuff Line’. Further, the same would reflect the retail sale price in India and would have no bearing on the wholesale price of the manufacturer - in the absence of any evidence on record to reflect upon the undervaluation of the goods, we set aside the impugned order - Decided in favour of assessee. 2014 (2) TMI 626 Violation of principle of natural justice - Submission of assessee not considered - Held that:- A perusal of the impugned order reveals that the learned Tribunal has held that the appellant is not cooperating as he has not put in appearance nor filed an application for adjournment. It appears that written submissions, filed by the appellant containing a prayer that it did not wish to address arguments in person and the appeal may be decided on the basis of written submissions, was not placed before or brought to the notice of the Tribunal. The learned Tribunal, therefore, fell into error in recording that the appellant is not cooperating with the Tribunal. This apart, the pleas raised by the appellant on merits of the controversy have not been considered. The appellant’s plea of bona fide purchase without notice of the fraud perpetuated by his vendor has not been considered or decided - Parties are directed to appear before the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi - Decided in favour of assessee. 2014 (2) TMI 625 Seizure of passports - Detention of petitioners - Held that:- it is necessary to deal with the issue with regard to the power and authority of the Customs to seize the passports - respondent directed to return passport to the petitioner forthwith, at any rate, within ‘one week’ from the date of receipt - Decided in favour of assessee. 2014 (2) TMI 624 Revocation of CHA License - Violation of provisions of Regulation of CHALR 2004 - Import of zinc ingots under Advance Licence Scheme - CESTAT set aside the revocation of the CHA Licence - Whether the order of the CESTAT is sustainable in law when it was found that the goods imported have been delivered at a place other than the one shown in the scrip of Advance Licence and the CHA had not bothered to inform the Deputy Commissioner of Customs/Assistant Commissioner of Customs about the same, the CHA being obliged to do so under regulation made in this regard - Held that:- once the goods have been cleared out of customs charge and handed over by the CHA to his client, obligation of the CHA to CHALR comes to an end. It is not the obligation of the CHA to assume that post the clearance of imported goods it would not be taken to the address given in the Advance licence. Moreover, in this particular case, imported zinc ingots had on clearance from the Customs Department taken to the office of the transporter. In these circumstances, there could be no occasion for the CHA to suspect that the imported zinc ingots were not being taken to the destination as declared in the Advance licence namely the factory at Surat in Gujarat. Further under Regulation 13(d) of CHALR the occasion to advice the importer would not arise because there was no occasion for the CHA to know or even suspect that the importer was not complying with the provisions of the Customs Act and/or advance licence under which the goods were cleared. This is more so as delivery to a transporter for carriage of goods at the direction of the importer would not by itself resulted in non-compliance of the Customs Act - Decided against Revenue. 2014 (2) TMI 623 Exemption from payment of 10% basic customs duty - Notification No.25/2005Cus dated 01.03.2005 - Reassessment in terms of Section 17(5) - Held that:- Petitioner had cleared the goods on payment of duty under protest on 04.04.2012. Its application for reassessment was made on 04.09.2014. The entire tenor of the order of 12.09.2012 is that since the assessment had become final, refund cannot be allowed. Whilst the Deputy Commissioner could arguably take that position in the refund claim, the same reasoning cannot be applied to deny the statutory right of the petitioner for reassessment and a determination under Section 17(4) and (5). That the petitioner has appealed against the order of the Deputy Commissioner vis-a-vis refund would not in any manner relieve the customs authority of their obligation to deal with the application under Section 17(4) and (5). In view of the above discussion a direction is hereby issued to the concerned Assistant/ Deputy Commissioner entitled to deal with the application under Section 17(4) and (5) made by the petitioner on 04.04.2012 to consider the same on its merits and pass a reasoned order in accordance with law - Decided in favour of assessee. Service Tax 2014 (2) TMI 622 Waiver of pre-deposit - tribunal irected to make pre-deposit of 50% of the confirmed Service Tax demand - services by imparting training in MBA Course - institution rendering for charitable purposes - Held that:- interests of justice would be served if the amount of predeposit on Commercial Training or Coaching Service is reduced from 50% to 25%, but this reduction will apply in respect of service tax payable for commercial training or coaching quantified at Rs.4,80,63,080/for the period between October 2006 to March 2012. So far as the other services are concerned, no submissions were made by the appellant before us or even before the Tribunal for dispensing with predeposit of demand. Therefore, the appellant shall deposit the entire amount of Rs.54.01 lakhs attributable to the other services. 2014 (2) TMI 621 Levy of service tax on receipt of commission from M/s BSNL for selling pre-paid Sim Cards and Recharge Coupons to eventual users - Held that:- activity of purchase and sale of Sim Cards belonging to BSNL, where BSNL had discharged the full value of Sim cards, does not amount to providing Business Auxiliary Service and no interference was called for. - Decided in favor of assessee. 2014 (2) TMI 620 Applications for modification of Stay Order - Residential complex service - agreement to sell Undivided Share in land (‘UDS’ for short) - Held that:- we have considered cases of construction activity where counsels made submissions of similar nature that sale of UDS was registered towards the end of construction activity and hence no service tax was payable. In those case also, we called for pre-deposit of almost 50% of the tax dues. Considering such position, we do not find any reason to modify our stay order dt. 29.7.2013 in the operative part of the order. The applicant had entered into an agreement for construction of the flats and they had collected money for construction and they are rendering services to other persons. In view of that, the contention of the learned advocate based on point of registration of UDS is not relevant. - application rejected. 2014 (2) TMI 619 Cenvat Credit in respect of GTA service - extended period of limitation - Held that:- availment of Cenvat Credit in respect of GTA services and its utilization for payment of service tax on scientific & technical consultancy service has been disclosed by them in their ST-3 Returns, they cannot be accused of having suppressed any relevant facts from the department. In view of this, neither the extended period under proviso to Section 11A(1) of the Central Excise Act, 1944 and proviso to Section 73 (1) of the Finance Act, 1994 would be available to the department for recovery of allegedly wrongly taken Cenvat Credit and non-paid service tax nor the penal provisions of Section 11 AC of the Central Excise Act, 1944 or of the Section 78 of the Finance Act would be attracted. - Demand set aside - Decided in favor of assessee. 2014 (2) TMI 618 Rectification of mistake - Re-calculation of the Service Tax liability - Held that:- there is an error apparent on the face of record, in as much as the Bench had recorded clearly that the appellant had contested the Service Tax liability on the basis of value to be considered as cum-tax. To that extent, we find that there is an error apparent on the face of record in our final order. In view of this, the said error needs to be rectified in this application. Accordingly, we allow the application for rectification of mistake to correct the error apparent on the face of record - Service Tax liability, if any, on the appellant as per our Final order, needs to be re-computed based upon the amounts which have been received by the appellant from M/s GSPC and also on the evidence which will be produced by the appellant before adjudicating authority - Partial rectification made. 2014 (2) TMI 617 Rectification of mistake - Whether the assessee is having the original declaration as filed by the transporter - Copies of the transporter’s declarations were photo-copies - Held that:- declarations filed by the appellant are taken into consideration by the adjudicating authority in Order-in-Original which is recorded at Para 14.1 of the said impugned order. It can be seen from the said paragraph that the adjudicating authority has only dismissed the said declaration on the ground that they filed only photo-copies. We were of the view the adjudicating authority should have considered the declaration in proper perspective and should have arrived at a judicious conclusion - This issue cannot be raised in an application for rectification of mistake, claiming that it is a mistake apparent on the face of record and is not in consonance with the law - there is no mistake apparent on the face of record - Decided in favour of assessee. 2014 (2) TMI 616 Demand of service tax - Infrastructure support service - Held that:- As regards the Service tax demand of Rs.1,45,16,699/- on the basis of alleged providing of infrastructure support service, we are of the view that an amount of Rs.67.39 lakh already paid is sufficient for the purpose of hearing this appeal. Remaining portion of the Service Tax demand of about Rs. 2.37 crores, on the alleged providing of service of supply of tangible goods service, since there is no dispute that in respect of transaction of providing DSNG vehicles on hire to the customers, the appellants have paid the VAT, we are of the prima facie view that same would not be covered by the definition of supply of tangible goods service under section 65 (105)(zzzzj) of the Finance Act, 1994 - stay granted. 2014 (2) TMI 615 Stay application - Waiver of pre-deposit - Improper availment of cenvat credit - Cenvat credit bill of entry on which actual duty paid was nil - Held that:- appellant had reversed the cenvat credit which they have wrongly availed on being pointed out by the audit party. Subsequently they wrote a letter to the authorities stating that this was a clerical error due to which said credit was availed - there is no evidence of such non availment of the cenvat credit for discharge of duty liability. At the same time, it is the statement of the ld. counsel that in the letter they are specifically stating that this amount is discharged under Section 11A (2B) would mean that the interest may arise. The interest of liability is on the appellant needs to be considered from various angles. As regards the penalty, we find that the appellant has made out a prima facie case for the waiver of the equivalent amount of penalty imposed by the adjudicating authority on the ground that the appellant themselves have reversed the cenvat credit - Conditional stay granted. 2014 (2) TMI 614 Service Tax liability - Renting of immovable property - Held that:- Following decision of assessee's own in [2013 (12) TMI 503 - CESTAT AHMEDABAD] - Stay granted. 2014 (2) TMI 613 Condonation of delay - Held that:- Impugned order was passed by Commissioner (Appeals) on 14/3/11 and received by the applicant on 5/4/11. The normal period of limitation to file the appeal expired on or around 5th July, 2011, whereas the appeals stand filed on 4th August, 2011. It is seen that vide the impugned order the lower authorities have confirmed the service tax liability and has imposed penalty on Shri Brahmadeen Dwivedi. The said Shri Brahmadeen Dwivedi had expired on 7th July, 2010. It is also seen that the appeal before Commissioner (Appeals) was filed by his son Shri Buddhasen Dwivedi, who is also absconding subsequently. After the passing of the present impugned order, the present appeal stands filed by the wife of Shri Brahmadeen Dwivedi, who is an illiterate lady and took sometime to sought legal advice for the purpose of filing of appeal by the Power-of-Attorney holder Shri Jay Prakash Shukla. In view of the above explanation, we deem it fit to condone the delay of 30 days - Decided in favour of assessee. Stay application - Held that:- Total duty involved in both the cases is Rs. 4,88,372/- alongwith penalty of identical amount. The said duty stands confirmed against Shri Buddhasen Dwivedi, Proprietor of a Proprietary firm, in the name of Shri Brahmadeen Dwivedi. As the Proprietor had expired, the proprietary firm also stops existing with effect from the date of death of the Proprietor - Stay granted. Central Excise 2014 (2) TMI 592 Default in payment of duty - Rule 8 (3A) of the Central Excise Rules, 2002 - Default continued for more than 30 days - Held that:- Rule 8 (3A) of the Cenvat Credit Rules, provides that if the appellant had defaulted in payment of duty and if the default continues for more than 30 days, in subsequent clearances of excise goods, duty liability has to be discharged through PLA and amount lying in Cenvat Credit amount cannot be utilised for payment of duty. If the contention of the appellant is accepted, the provisions of 8(3A) of the Central excise Rules, 2002 would be rendered otiose. It is a well settled position of law that statutory provisions should not be interpreted in such a way as to make the provisions a nullity or surplusage - However, liability should be only ₹ 2.22 crore, which can be verified subsequently at the time of final hearing - Conditional stay granted. 2014 (2) TMI 591 Duty demand - Imposition of equivalent penalty u/s 11AC - Held that:- appellant is in appeal against the impugned order where the claim of excess reversal of credit has not been contested by the appellant before the Commissioner (Appeals). Therefore the same is not a subject matter before me. Accordingly, I reject the claim of excess reversal of the credit. Further, I find that in the case of J.K. Cement Works (2008 (12) TMI 624 - CESTAT NEW DELHI) this Tribunal has considered the issue in hand before me and in that case the goods were destroyed in the floods before the inputs could be used in manufacturing of final product and in that case also no information was given and the credit was reversed on being pointed out by the department. In that case, this Tribunal held that penalty is not imposable in such situation - Therefore, mandatory penalty under Section 11AC of the Act is not imposable on the appellant - Decided in favour of assessee. 2014 (2) TMI 590 Reversal of CENVAT Credit - Assessee availed CENVAT Credit in two installments - Assessee imported Glass Printing Machine - Appellant exported this machine in 2006 under bond without reversal of CENVAT Credit taken - Held that:- capital goods imported by the appellant has been exported. On export of capital goods, the appellant is eligible for rebate of the duty paid thereon under Rule 18 of the Central Excise Rules or the appellant can export the goods without payment of duty under bond under Rule 19 of the said Rules. In respect of the goods on which credit has been taken, Circular issued by Board in 1996 as well as in 2000, clearly says that the manufacturer assessee is entitled to clear the inputs or capital goods for export (on which credit has been taken) under bond without payment of duty - appellant has made out a strong case in their favour for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Following decision of Videocon International Ltd. [2008 (7) TMI 275 - CESTAT, AHMEDABAD] - Registry is directed to list the appeal for final hearing - Decided in favour of assessee. 2014 (2) TMI 589 Classification of goods - Manufacture of printed ATM Rolls, printed lottery ticket rolls and printed bus ticket rolls - Classification under CETH 49019900 or 48234000 - Adjudicating authority dropped proceedings against assessee - Held that:- From the HSN explanatory notes, it is seen that heading 4823 excludes products like lottery tickets, scratch cards, raffle tickets and tombolo tickets. Similarly, HSN explanatory notes to heading 4901 clearly shows that "certain printed articles may be intended for completion in manuscript or typescript at the time of use but remain in this heading provided they are essentially printed matter. Thus, printed forms, travel tickets, circular letters, identity documents and cards printed with messages, notices, etc. requiring only the insertion of particulars, eg. Dates and names are classified in this heading. The said notes further say that tickets for admission to places of entertainment, tickets for travel by public or private transport or other similar tickets are also included in Chapter 49. Therefore, printing is not merely incidental to the use of the product as such printing imparts a substantial character and quality to the product. It is true that while actually using, certain particulars are required to be entered in these rolls by the ATM or the lottery machine or in the bus ticket vending machine. Nevertheless the product is specifically meant to be used as ATM receipts, lottery tickets and bus ticket. It is the printing done on the thermal paper which has imparted these characteristics and therefore, it has to be held that printing is not merely incidental to the use of the products - impugned goods prior to enactment of Finance Bills 2012 merit classification as "products of the printing industry" - The said amendment introduced by way of Note 14 to Chapter 48, was only prospective and was not given any retrospective effect. This itself indicates that prior to the insertion of Note 14 to Chapter 48, the impugned products merit classification under Chapter 49 - Decided against Revenue. 2014 (2) TMI 588 Waiver of predeposit - trading activity or manufacturing activity - Liability to pay duty - digital Thermometer, indicator, digital scaler etc. - Held that:- it is not the case where the Applicant was merely purchasing various items and selling them as such; but they were processing the said goods further to make them fit to be marketable. The resultant products were classifiable under various chapter sub-headings of Central Excise Tariff Act, 1985. We find that the Applicant has itself treated the activities carried by them as a manufacturer and subsequently, taken the Central Excise Registration for manufacture of the excisable goods - Applicant were not merely doing the trading activities of the goods - Applicant has not been able to make out a case for full waiver of the dues adjudged - Conditional stay granted. 2014 (2) TMI 587 Non Compliance of provisions of Section 35 B(2) by the committee of Chief Commissioners while passing the review orders - Committee of Commissioner has simplicitor signed the proposals presented before them by the junior officer to file an appeal against the Order of Commissioner (Appeals) - Held that:- Commissioner of Central Excise-I and Commissioner of Central Excise-II who allegedly constitute the Committee of Commissioners, simply appended their signatures to the aforesaid note on 7th January and 8th January, 2008 respectively. This shows that there was no meeting of the aforesaid two officers to consider the case. The record also does not disclose that these two officers applied their mind to the issue and recorded any opinion, as per the requirement of Section 35B of the Central Excise Act that the order of the Commissioner (A) was not legal or proper and warranted to be challenged by filing an appeal. there should be a meaningful consideration which should be reflected on the note sheets in order to comply with the requirement of Section 35(2) of the Act. In this case, the file does not show any such satisfaction or opinion having been recorded by the Committee of Commissioners - commissioner merely signed the proposals placed before him by the junior officer by writing the words ‘accepted’ - there is no application of mind by the Committee of Commissioners and they have merely appended their signatures to the note sheets prepared by the subordinate officers. In that view of the matter, the review order has to be held as not sustainable and consequently appeals have to be held as not maintainable - Decided against Revenue. 2014 (2) TMI 586 Excisability - Manufacture - dispute regarding manufacturer - demand imposed in relation to availing the facility of Cenvat credit of duty paid on the furnace oil used in the manufacture of electricity - Held that:- no reversal liability of Cenvat credit would arise in respect of assessee where no separate accounts are being maintained in case of fuel which is being used for dutiable as also for exempted final product. If the expert bodies, judicial as well as quasi judicial, have interpreted the law in favour of the assessee, the assessee cannot be held guilty of any suppression or mis-statement etc. Inasmuch as the show cause notice stand issued by invoking the longer period of limitation, I hold that demand is barred by limitation - Following decision of M/s. Diamond Cements Ltd. Versus Commissioner of Central Excise Bhopal [2012 (6) TMI 73 - CESTAT, NEW DELHI] - longer period of limitation was not available to the Revenue. Consequently, the imposition of penalty upon them would not be justified. However, inasmuch as a part of the demand would fall within the limitation period, the matter is being remanded for quantification of the same - Decided in favour of assessee. 2014 (2) TMI 583 Exemption under Notification No. 56/2002-CE dated 14/11/2002 - Reversal of CENVAT Credit - Held that:- We have perused the Notification 56/2002-CE and the conditions prescribed therein for availing of exemption by way of refund, reversal of refund wrongly availed, submission of statement, determination by the jurisdictional Assistant Commissioner of the refund due to the appellant and so on. As per these conditions, the appellant is required to reverse the credit of the excess amount taken within 5 days from the date of date of determination by the Assistant Commissioner. In the instant case, the determination by the Assistant Commissioner was vide order dated 02/04/2012 whereas the appellant had reversed the excess credit taken in July, 2011 itself. Therefore, in terms of the conditions of sub-para 2C, the appellant is not prima facie liable to pay any interest nor the appellant liable to any penalty. Therefore, the appellant has made out a strong case in their favour for grant of stay - Stay granted. 2014 (2) TMI 582 Penalty u/s 11AC - Interest u/s 11A - Shortage in stock - Held that:- shortage was detected in the finished product as well as raw material referred supra and then the shortages were admitted by the Director of the company who was present at the time of check. Later on , duty involved on shortages as well as 25% of the duty amount towards penalty was also deposited by them. However, in appeal proceeding before Commissioner (Appeals), imposition of penalty was challenged on the ground of absence of mens rea and lack of departmental evidence pinpointing with intent to evade duty. Activities of evasion are carried out in the darkness of night and the person tried their best to not to leave any evidence and such person cannot be expected faithfully to put the details of such clearances in some register and append their signatures. The clandestine activity can at best be established by the substantial evidence. Evidence forthcoming clearly establish the clandestine nature of activities by the respondents. Such grave irregularities could not be there if persons involved in he controlling of company are not part of such design. Mens rea is clearly imputed. In the strict sense, the provisions of Section 11AC get attracted . However it is observed that duty amount and 25% of duty amount as penalty have already been paid even prior to issue of show cause notice, benefit of payment of 25% of duty as penalty is available. Regarding imposition of penalty under Rule 26 on the Director, I find from facts detailed above that large scale of shortages are detected total valued at Rs.66 lakhs (approx.). Such type of anomalies cannot happen without the involvement of Director. In this case, Mr. Harish Jugran has been overseeing the activities of the company. Without his involvement, such shortages could not be justified. Further Shri Harish Jugran admitted the shortages without any justification. There will be no economic sense left if affairs are allowed to drift in such way. Accordingly I feel , penalty under Rule 26 is imposable on Shri Harish Jugran, director - Revenue s appeal regarding imposition of penalty on the company as well as Director as this is a clear case of invocation of Section 11AC. Order of the Commissioner (Appeals) is modified to that extent - Decided partly in favour of Revenue. 2014 (2) TMI 581 Duty demand - Imposition of redemption fine, interest and penalties - Whether physician samples manufactured on behalf of another manufacturer on principal to principal basis, the value of such samples is to be considered as transaction value under section 4 or deemed value under Seciton4A of the Central Excise Act - Held that:- Drug (price control) Order, 1995 in paragraph 7 specified how the retail price of formulation is to be determined. Further paragraph 8 of the said order empowers the Government to fix the retail price of a scheduled formulation in accordance with paragraph 7. Further paragraph 9 of the said order empowers Government to fix ceiling price of scheduled formulations. Further paragraph 14 provides for Carrying into effect the price fixed or revised by the Government, its display and proof thereof - requirement of displaying the retail price is only for the goods intended for sale. Since, physician samples are not intended for sale, requirement to indicate the retail sale price does not exist, in the law - Tribunal has been taking a view that physician samples manufactured on principal to principal basis are required to be assessed under Section 4(1)(a) of the Central Excise Act - Decided in favour of assessee. CST, VAT & Sales Tax 2014 (2) TMI 628 Reduction in rate of tax - Under a Notification in G.O.P.No.306(c), dated 5.10.1976, the government reduced the rate of tax to 10% as against 15% leviable on the sale of television sets - Whether, on the facts and in the circumstances of the case and in law, the Tribunal ought to have held that the petitioners are entitled to deduction under Rule 6(c) of the Tamil Nadu General Sales Tax Rules in respect of freight and delivery charges since the charges were charged for and collected separately in the invoices without including in the price of the goods sold - Held that:- Admittedly, Entry V of the First Schedule covers many items, one of which is the television set - Thus, when the Notification granting the reduced rate of tax from 15% to 10% was made in exercise of the powers under Section 17 of the Tamilnadu General Sales Tax Act, 1959, the Government though it fit to restrict the same to the sale of television sets alone. Thus, when the Notification does not cover the accessories specifically, going by the decisions of the Apex Court as what accessory would mean, we do not think that the assessee could justify its claim for reduced rate of tax as considered in the Notification to cover the case of sale of accessories too - having regard to the specific reference in the Notification restricting the reduced rate of tax to sale of television sets alone, we do not find any reason to interfere with the order of the Tribunal - Following decision of Mehra Bros. Vs. Joint Commercial Tax Officer, Madras [1990 (11) TMI 144 - SUPREME COURT OF INDIA] - Decided against assessee. Indian Laws 2014 (2) TMI 585 Industrial dispute – Legality of dismissal from service - Petitioner contended that the only thing established during the enquiry was that the petitioner was found in possession of some chocolates at the time when her bag was checked by the security guard Mr. Vinay Kumar and that mere possession of chocolates by the petitioner did not mean that those chocolates were stolen by her - Held that:- The findings of the Labour Court are totally unreasonable and so unsustainable since it was required to be seen by the Labour Court whether the charge of theft of chocolates, and not merely the recovery of chocolates, had actually been established or not in the enquiry since as far as the possession of chocolates by the petitioner is concerned, the same even as per the management’s own witnesses was made known to them by the petitioner herself when she was asked to have her bag checked - this is not a case where there was some evidence before the enquiry officer on the basis of which the petitioner could be held guilty of having committed theft and, in fact, this is a case of no evidence at all, as far as the charge of chocolates found with the petitioner being stolen ones is concerned. It was for the management to prove that the chocolates in possession of the petitioner were stolen chocolates and not for her to show that they were not stolen and the management cannot be said to have discharged its burden even on the basis of preponderance of probabilities - there was actually no complaint of theft of chocolate – since the misconduct of the petitioner cannot be said to have been established by the respondent-management, the petition deserves is allowed – thus, the petitioner is ordered to be reinstated in service since by declining the relief of reinstatement to her this Court would be in fact punishing her even after she stands exonerated of the charge of theft – Decided in favour of Petitioner. 2014 (2) TMI 584 Suspension of employee - College property goes missing while petitioner was on leave - Petitioner lodged police complaint - Petitioner was held responsible for missing property - Tribunal upheld dismissal of petitioner - Held that:- person who is accused of a misconduct must clearly know the charges levelled against him. It is only when a person is made known to the charges, he will be able to submit his explanation and upon the said explanation, if it is not satisfactory, the Management can hold an enquiry. On the other hand, right from the beginning of the proceedings, the allegation of the Management against the petitioner was that he was responsible for the loss and that he should make good the loss. A charge of theft is a serious misconduct and it goes into the character of an employee and it cannot be lightly alleged. It is one thing to say that if there was entrustment of a property and there was loss of the same, then in respect of such loss of the property, an employee must make good the loss, that is somewhat a civil liability. But when an allegation of criminal liability is fixed, then there must be a charge to that effect and only when that charge is made, the question of Enquiry Officer going into the charges will arise. Under Section 7(2)(c) of the Payment of Wages Act, deductions from the wages of an employed person can be made for loss of goods expressly entrusted to an employed person for custody or where such loss is directly attributable to his neglect or default. But there is nothing wrong on the Management holding the petitioner responsible for the loss but before making any deduction towards loss, the payment of Wages Act also provides procedure under Section 10(1)(a), wherein the employee must be given an opportunity of showing cause against the deduction or otherwise than in accordance with such procedure as may be prescribed for making such deduction - no exception can be taken with reference to the petitioner moving the Police station with a criminal complaint. For his causing notice issued through his trade union can never be said to be a misconduct. In so far as the loss of material is concerned, it can be only fixed by civil liability as there was no allegation of theft under any part of the proceedings. Since no enquriy was held by giving a notice and on that score the finding rendered by the Labour Court in this regard are perverse and the impugned Award is liable to be set aside. Since this Court has held that the findings of the Lbaour Court itself are perverse and charges were not proved, the question of going into any proportionality of punishment does not arise - petitioner is entitled for reinstatement with backwages, continuity of service and other attendant benefits. However, it is open to the Management to proceed against the workman for recovery of loss of the coils entrusted to him after following due procedure established by law. This order will not stand in the way of the Management in proceeding against the recovery which is only a civil liability - Decided in favour of Petitioner.
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