TMI Tax Updates - e-Newsletter
February 18, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Reopening of Assessment - It is not open to the assessee to urge fresh objections before the Court which the Assessing Officer had no occasion to deal with - HC
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Income Tax:
The University is a 'body corporate' having perpetual succession and a common seal but the University is not a 'State' within the meaning of Article 289(1) of the Constitution - HC
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Income Tax:
Depreciation - where it is possible to reasonably allocate the cost of acquisition between that of building and of land, the depreciation should be allowed only after making such allocation - AT
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Income Tax:
Deduction u/s 80G(5) - assessee trust are religious in nature and for the benefit of Hindu community thus, the assessee did not exist and established for charitable purposes - AT
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Income Tax:
TDS u/s 195 - Foreign remittances made for design and development expenses in order to bring a fees for technical services to taxability in India, not only that such services should be utilized in India but these services should also be rendered in India - AT
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Income Tax:
Reopening of Assessment - Inclusion of Rental income Sub-letting of property - Assessability of notional income on account of self-occupancy - The dispute has a long and chequered history spanning over half a century - revenue appeal dismissed - AT
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Income Tax:
Continuity of Business activity Allowability of Expenses entire manufacturing business sold to related concern - This means that the business was closed immediately - AT
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Income Tax:
Cancellation of registration u/s 12AA - There is no whisper about the genuineness of the activities of the assessee in the order the two conditions for invoking the provisions of section 12AA(3) of the Act are totally absent - AT
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Customs:
Revalidation of two Duty Free Replenishment Certificates - The petitioner failed to utilize the DFRCs before the expiry date. The petitioner has furnished no justification for its own delay. - HC
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Indian Laws:
To encourage domestic production of specified road construction machinery, exemption from CVD withdrawn - Interim Budget 2014-2015
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Indian Laws:
To stimulate growth in the capital goods and consumer non-durables, excise duty rated reduced from 12% to 10% on all goods falling under chapter 84 and chapter 85 of CETA - Interim Budget 2014-2015
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Indian Laws:
Production / Manufacturing of mobile handsets - The rates of Excise duty will be 6 percent with CENVAT credit or 1 percent without CENVAT credit. - Interim Budget 2014-2015
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Indian Laws:
Proposed to exempt loading, unloading, packing, storage and warehousing of rice from service tax - Interim Budget 2014-2015
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Indian Laws:
Services provided by cord blood banks are also healthcare services and should be exempt from service tax - Interim Budget 2014-2015
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Indian Laws:
Budget Speech - Interim Budget 2014-2015
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Central Excise:
ISD - Service Tax credit can be distributed only if the services were received at the manufacturing premises and if it is received elsewhere, it is not permissible to avail of the Service Tax credit - AT
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Central Excise:
Classification - 'pentane' as other 'petroleum gases and other gaseous hydrocarbons' - classification under sub-heading 2711.19 or 2710.90 - classification under 2711.19 is correct - AT
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Central Excise:
CENVAT Credit on capital goods - assessee has availed 100% credit in the first year itself instead of 50% - Levy of interest and penalty amounting to Rs. 5000/- confirmed. - AT
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Central Excise:
Benefit of exemption Notification No. 61/86-C.E., dated 10-2-1986 - Benefit to driver's seats meant for hydraulic excavators - demand within the normal period of limitation is only confirmed - AT
Articles
Notifications
Central Excise-
04/2014 - dated
17-2-2014
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CE
Seeks to amend Notification No. 12/2012-Central Excise, dated the 17th March, 2012
Customs-
06/2014 - dated
17-2-2014
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Cus
Seeks to amend Notification No. 21/2012-Customs, dated the 17th March, 2012
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05/2014 - dated
17-2-2014
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Cus
Seeks to amend Notification No. 12/2012-Customs, dated the 17th March, 2012
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12/2014 - dated
17-2-2014
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Cus (NT)
Amends Notification No. 40/2012-Customs (N.T.), dated the 2nd May, 2012
Income Tax-
11/2014 - dated
13-2-2014
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IT
Seeks to amend Notification No. 61/2013 - S.O. 2424(E) dated 8th of August, 2013.
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10/2014 - dated
10-2-2014
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IT
U/s 90 of the IT Act, 1961 - Double Taxation Agreement - Amendment of Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with foreign countries - United Kingdom & Northern Ireland - Amendment in Notification No. GSR 91(E), dated 11-2-1994.
Service Tax-
04/2014 - dated
17-2-2014
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ST
Seeks to amend notification No. 25/2012- Service Tax dated 20.06.2012
Circulars / Instructions / Orders
News
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RBI Reference Rate for US $ and Euro
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Receipts budget 2014-15; correct figures of net borrowing is Rs. 457321.43 crore
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Indian Economy to be Third Largest by 2043 UPA Outlines Ten Steps for a Vibrant Economy
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Surmounting Challenges, A Major Goal
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Indian Economy Steers Out of Troubled Waters Despite Global Impact
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Adequate Plan Funds for Flagship Programmes
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Food, Fertilizer and Fuel Subsidies
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Rs 11,200 Crores Provided for Capital Infusion in the Public Sector Banks
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Public Sector General Insurance Companies Open 1849 Offices in Towns With Population of 10,000 Or More
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Direct Taxes Code (DTC) to be put on the website of the ministry for public discussion
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Major Economic Initiatives in the Current Financial Year Public Sector Enterprises Achieve a New Record in Capital Expenditure
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A NonStatutory Public Debt Management Agency to be Established
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Forward Contracts (Regulation) Act to be Amended
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Number of Steps Envisaged to Deepen The Indian Financial Market
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More Than 41 Lakh Women Self Help Groups Provided Credit By December 2013
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Venture Capital Fund to Promote Entrepreneurship Among the Scheduled Castes Mechanism for Marketing Minor Forest Produce Introduced
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Government Succeeds in Obtaining Information in Dozens of Cases of Illegal Off-Shore Accounts
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Government Took Path Breaking Decisions in the Current Financial Year 2013-14
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A Research Funding Organisation to be set up to fund Research Projects Selected through a Competitive Process
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Government Steps Up Project Clearances
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Additional Assistance of Rs. 1,200 Crore to North Eastern States, Himachal Pradesh and Uttarakhand
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Agricultural GDP to Grow at 4.6 Per Cent During the Current Financial Year
Foodgrain Production Expected to Touch 263 Million Tonnes
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Loading, Unloading, Packing, Storage and Warehousing of Rice also Exempted from Service Tax;
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168,043 Youth had Enrolled and 77,710 Completed Their Training Under National Skill Certification and Monetary Reward Scheme
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UPA Government has Delivered Above the Trend Growth Rate Says Finance Minister;
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Adequate Allocation for SC/ST Sub-Plans
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Rs. 3,370 Crore has been Transferred to 2.1 Crore LPG Beneficiaries 57 Crore Aadhaar Numbers have been Issued so far
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Funds for Railways
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Defence Allocation Enhanced by Ten Percent
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Mordernisation of Central Armed Police Forces
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Relief to The Manufacturing Sector; Cars and Scooters to be Cheaper Excise Duty on Mobile Handsets to be Restructured
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Fiscal Deficit to be Contained at 4.6 Per Cent of GDP in 2013-14
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Several Flight Tests, Navigational Satellites and Space Missions are Planned for 2014-15
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Additional Central Assistance to State Plans for Centrally Sponsored Schemes
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Exports Show Recovery, to Grow by 6.3 Per Cent in 2013-14
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Rs. 1000 Crore Allocated to Nirbhaya Fund
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The Interim Budget 2014-15 Shows an Estimated Plan Expenditure of Rs. 5,55,322 Crore and Non-Plan Expenditure of Rs. 12,07,892 Crore
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ONE RANK ONE PENSION ACCEPTED FOR DEFENCE SERVICES.
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Interim Budget 2014-2015 - Speech of P. Chidambaram - Minister of Finance - February 17, 2014
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Major Relief for Education Loan Borrowers, 9 Lakh Student Borrowers to Benefit
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Lending to Minority Communities soar to Rs 66,500 Crores
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Target of Agriculture Credit of 8 Lakh Crore For 2014-15
Case Laws:
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Income Tax
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2014 (2) TMI 663
Rectification of order u/s 154 of the Act Error apparent on record Addition of expenditure Held that:- Allowance of expenses on account of leave encashment whether the expenses are allowable in relevant assessment year on payment basis or an earlier year Held that:- A question which involved interpretation of law and determination of controversial facts could not be rectified under section 154 of the Income-tax Act, 1961 - Relying upon Deva Metal Powders (P.) Ltd. v. Commissioner, Trade Tax, UP [2007 (12) TMI 221 - SUPREME COURT OF INDIA] a rectifiable mistake must exist and the same must be apparent from the record - It must be a patent mistake, which is obvious and whose discovery is not dependent on elaborate arguments - a rectifiable mistake is a mistake which is obvious and not something which has to be established by a long drawn process of reasoning or where two opinions are possible. Cancellation order passed u/s 154 of the Act Held that:- The assessee explained before the AO that the brokerage and commission income earned by it in the relevant year - It was explained before the AO that the discount from dealers and manufacturers was also derived by assessee in the relevant assessment year by placing order on behalf of its customers for purchase of cars/vehicles - The discount is basically in the nature of commission given by manufacturer/dealer on the value of every vehicle booked by assessee. According to assessee, due to long term policy and to maintain long term business relations an understanding has evolved between the assessee company and the dealers which entitles the latter to a certain percentage of discount/commission on every booking of vehicles made by it. Discount from dealer/manufacturer Held that:- The manufacturer/dealer discount is included in the TDS certificates and also accounted for by the assessee under the head brokerage and commission - Whether the discount is allowable as discount from dealer/manufacturer is clearly an allowable deduction - Even though, if at all, it is to be considered not to be allowable, it is a highly debatable issue and this cannot be disallowed u/s. 154 of the Act because this is not a mistake apparent from record - CIT(A) has rightly deleted the addition and we confirm the same Decided against Revenue.
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2014 (2) TMI 662
Lumpsum disallowance out of total crane operating expenses Held that:- The net profit rate declared by the assessee company is on very higher side in the year and the expenses are fully vouched and in some cases self-made vouchers are where proper vouches are not possible - adhoc disallowance is not justified - The assessee has disclosed better net profit rate as company to assessment year 2007-08 - When net profit rate has increased in this year, the tallying of percentage wise expenditure in two years is also not justified - the AO has not been able to pinpoint any bogus or fake vouchers or it does not related to the assessee business thus, the expenses have to be allowed Decided in favour of Assessee. Disallowance u/s 36(i)(iii) of the Act Held that:- When the assessee has not paid any interest either on borrowed funds or on the capital of the partners then any sum advanced to the family members of the partners without interest cannot terminate in charging notional interest and making the addition - the advance has been made on account of business expediency Relying upon S.A. Builders Ltd. vs CIT [2006 (12) TMI 82 - SUPREME COURT] - only real income is to be taxed - When interest bearing funds have not been diverted then such notional disallowance is not justified thus, the disallowance made u/s 36(1)(iii) is not justified Decided in favour of Assessee. Deletion made on account of excess depreciation Held that:- Numerous pieces of evidences have been filed by the assessee in support of its claim which includes RTO registration wherein the cranes are registered under the head 'Truck Crane' which shows that crane is mounted on vehicle - A certificate of the Distt. Transport Officer, stating the crane registered under Vehicle No. for which fitness is not required thus, there was no infirmity in the order of the CIT(A) Decided against Revenue.
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2014 (2) TMI 661
Enhancement of disallowance u/s 14A of the Act Dividend income - Held that:- The decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - the satisfaction of the Assessing Officer with regard to the correctness or otherwise of the claim made by the assessee must be based on reasons and on relevant considerations - the invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is to be understood as being conditional on the objective satisfaction of the Assessing Officer with regard to the incorrectness of the claim of the assessee, having regard to the accounts of the assessee - Also in Maxopp Investment Ltd. & Ors. vs. CIT [2011 (11) TMI 267 - Delhi High Court ] - the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income in term of rule 8D of the Rules would be triggered only if the Assessing Officer records a finding that he was not satisfied with the correctness of the claim of the assessee in respect of such expenditure. The assessee made detailed submissions to the Assessing Officer that the determination of disallowance u/s 14A of the Act was based on the employee costs and other costs involved in carrying out this activity - assessee also explained that the shares which have yielded exempt income were acquired long back out of own funds and no borrowings were utilized - All the points raised by the assessee have not been addressed by the Assessing Officer and the same have been brushed aside by making a bland statement that the disallowance is "not acceptable" - the Assessing Officer has not recorded any objective satisfaction in regard to the correctness of the claim of the assessee, which is mandatorily required in terms of section 14A(2) of the Act and therefore his action of invoking rule 8D of the Rules to compute the impugned disallowance is untenable thus, the order set aside and the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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2014 (2) TMI 660
Reopening of Assessment - Whether there was a reasonable belief on the part of the Assessing officer to come to a prima facie view that the income chargeable to tax has escaped assessment Held that:- The notice dated 28 September 2012 seeks to reopen assessment beyond the period of 4 years i.e. beyond the period of four years from assessment year 2007-08 assessee contended that that the loan transaction has in fact been reflected in their financial statement as margin money which they had received from its directors and their family members while carrying on its business of share and stock broker - this contention is being made for the first time as in their objections to the reasons for reopening filed on 5 November 2012 the petitioner did not state that the loan amount mentioned in the reasons for reopening is nothing but margin money which stands reflected as margin deposits in Schedule 8 of the balance sheet. It is not open to the assessee to urge fresh objections before the Court which the Assessing Officer had no occasion to deal with, unless of course the notice to reopen is exfacie without jurisdiction not requiring consideration of any argument such as beyond limitation thus, there was substance in the contention of revenue that the Assessing Officer had tangible material to come to prima facie view that income chargeable to tax has escaped assessment thus, There was no reason to interfere with the notice issued to the petitioner under Section 148 of the Act Decided against Assessee.
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2014 (2) TMI 659
Reopening of completed assessment Power of the AO u/s 147 and 148 of the Act Held that:- The power to reassess cannot be exercised on the basis of mere change of opinion i.e. if all facts are available on record and a particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer notice under Section 147/148 of the Act is not permissible - Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment - It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised - If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. The notice dated 28 March2013 under Section 148 of the Act seeking to reopen the assessment for A.Y.2008-09 and the order dated 20 November 2013 rejecting the petitioner's objection to reopen the assessment for A.Y. 2008-09 are not sustainable in law - The entire proceeding for reopening the assessment for A.Y. 2008-09 had emanated only on account of change of opinion on the part of the Assessing Officer thus, the assessment order set aside - there was no reason for the Assessing Officer to have had a reasonable belief that income chargeable to tax has escaped assessment thus, the Notice issued u/s 148 of the Act also set aside Decided in favour of Assessee.
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2014 (2) TMI 658
Claim of Exemption u/s 10(23C)(iiiab) of the Act Purpose of University Held that:- Whether rejecting the claim of the University seeking exemption/deduction u/s 10(23C) (iiiab) of the Act was justified and Whether the University is existing solely for educational purposes and not for purposes of profit and that the surplus in its accounts in any given year would not constitute profit to deny exemption/benefit under section 10 (23C) (iiiab) of the I.T. Act Held that:- The intention of legislature is primarily to be gathered from the words used in the statute - Once it is shown that an assessee falls within the letter of law, he must be taxed, however, great the hardship may appear to the judicial mind to be - kThe University earns income from different sources every year - The expressions, "existing solely for educational purposes and not for purposes of profit", is common in all the three sub-clauses - Thus the common element in sub-clauses (iiiab), (iiiad) and (vi) is that the University or education institution must exist "solely for educational purpose and not for the purposes of profit" Relying upon Additional Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association [1979 (11) TMI 1 - SUPREME Court] the test that must be applied is not "whether as a matter of fact an activity results in profit" but "whether the activity is carried on with the object of earning profit". According to the revenue the University gets about 1% financial aid/ grants from the Government of the total receipts - even without grants, the surplus amount is more than double the expenditure incurred during 2004-05 till 2009-10. In 2005-06 the surplus amount is almost four times more than the actual expenditure - without actual compliance of a taxing provision, such as Section 10 (23C) (iiiad) of the Act, the provision, such as Section 23 of the 1994 Act, would not entitle any person, such as the University to seek any benefit of the taxing provision. Section 10(23C) (iiiad) of the Act, uses the word/expression 'financed', which is a clear indication of the intendment of the legislature - an exemption under Section 10(23C) (iiiab) cannot be either claimed or granted unless all the ingredients as reflected therein are satisfied/fulfilled. The expression 'not for purposes of profit' will have to be read in the light of the word 'existing' used in sub-clause (iiiab) - the University used the financial aid extended by the Government only for development purpose and not for meeting the other expenditure for which they are entitled to seek grants as provided for under Section 23 of the Act of 1994 - The fees they are receiving from the students routed through colleges affiliated to it and the Examination Authority cannot be treated as financial aid from the Government to the University - the amount is not coming from Government corpus/treasury thus, the University cannot be treated as an institution wholly or substantially financed by the Government. Whether the appellant is a State or part of the State, within the meaning of Article 289(1) of the Constitution of India so as to seek exemption from taxation under this Article Held that:- The University is a 'body corporate' having perpetual succession and a common seal with a power to acquire and hold property and to enter into contract in its name as contemplated under Section 3 of the Act of 1994, and in the light of the meaning of the word state in Article 289 of the Constitution, the University is not a 'State' within the meaning of Article 289(1) of the Constitution and it cannot be exempted from taxation as envisaged thereunder - The word "State" employed in the Article cannot be extended so as to include the University Decided against Assessee.
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2014 (2) TMI 657
Block Assessment - Requirement to serve Notice u/s 143(2) of the Act - Held that:- The decision in Asstt. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] followed - The AO must necessarily issue notice u/s 143(2) of the Act within the time prescribed in the proviso to s. 143(2) - by making the issue of notice mandatory, s. 158BC, dealing with block assessments, makes such notice the very foundation for jurisdiction - Such notice is required to be served on the person, who is found to have undisclosed income - The requirement of notice under s. 143(2) cannot be dispensed with - The non-consideration of s. 292BB, which is rule of evidence and a deeming provision to cannot validate the notice in certain circumstances - the very foundation of the jurisdiction of the AO is on the issuance of the notice under s. 143(2) Decided against Revenue.
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2014 (2) TMI 656
Disallowance of depreciation - Erroneous and insufficient grounds Held that:- The decision of the CIT(A) upheld that depreciation is allowed in respect of building and not on land because building is a wasting asset, whereas land is a permanent asset - where it is possible to reasonably allocate the cost of acquisition between that of building and of land, the depreciation should be allowed only after making such allocation, on the value of the building so determined - Relying upon Commissioner of Income-Tax, Punjab, Jammu And Kashmir And Himachal Pradesh Versus Alps Theatre [1967 (3) TMI 6 - SUPREME Court] building, for the purpose of depreciation, means only the superstructure constructed on the land and does not include land - the action of the AO in allocating the cost of acquisition of the immovable property between that of land and the superstructure and allowing depreciation only in respect of the cost of the superstructure is rightly upheld Decided against Assessee. Disallowance of salary paid to employees Held that:- The findings of the CIT(A) upheld that no explanation has been furnished as to why the vouchers even for the one month were not signed by the three employees - The assessee had obviously employed more persons than the aforesaid three employees and the other employees could have carried out the work stated to be done by these three employees - There is nothing on record to show that vouchers for only one month were examined by the AO assessee was not able to produce any evidence to show that salary was paid to these three persons thus, the disallowance righty upheld Decided against Assessee.
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2014 (2) TMI 655
Additions u/s 41 - Forfeiture of advance due to cancellation of agreement - CIT(A) Deletion the additions - Held that:- The CIT(A) and the AO in the remand report has relied upon a chart of stock-in-trade and the AO in the remand proceedings had made the assumptions that due to shortage of time, the evidence may not have been filed by the assessee and due to the shortage in the original assessment proceedings must have made assumption that the amount has not been returned but has been forfeited - The findings of the AO in the remand proceedings and consequently by the CIT(A) that the amount of Rs. 20 lacs have been returned and the additions have been deleted is perverse of the facts - if the amount has been returned the source of said Rs.20 lacs given as advance against the purchase of property at 749C GTB Nagar remains unexplained -The AO in the remand report as well as the CIT(A) has missed this aspect that ultimately there is shortage of Rs.20 lacs which has rightly been added to the income of the assessee by the AO - The CIT(A) is not justified in deleting the additions made by the AO thus, the order of the CIT(A) set aside Decided in favour of Revenue.
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2014 (2) TMI 654
Deduction u/s 80G(5) of the Act Held that:- The assessee did not dispute that the assessee trust exists and was established having dominant objects, which are religious in nature and for the benefit of Hindu community - the assessee did not exist for the charitable purpose only - The conditions of section 80G(5) are not satisfied Relying upon Commissioner Of Income-Tax, Central I, Calcutta Versus Upper Ganges Sugar Mills Limited [1984 (12) TMI 61 - CALCUTTA High Court] - Section 80G of the Income-tax Act, 1961, sets out the deductions to be made, in accordance with and subject to its provisions, in computing the total income of an assessee in respect of donations to certain funds, charitable institutions, etc - The CIT has given specific finding that dominant objects of the assessee trust are religious in nature and for the benefit of Hindu community thus, the assessee did not exist and established for charitable purposes - It is clear that the assessee has failed to satisfy the conditions of section 80G(5) of the IT Actand is not entitled for approval under the provisions Decided against Assessee.
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2014 (2) TMI 653
Deletion of disallowance u/s 40(a)(ia) of the Act - Foreign remittances made for design and development expenses TDS not deducted u/s 195 r.w.s. 9(1)(vii) of the Act Held that:- The decision in Ishikawajima Harima Heavy Industries Ltd Vs DIT [2007 (1) TMI 91 - SUPREME COURT ] relied - in order to bring a fees for technical services to taxability in India, not only that such services should be utilized in India but these services should also be rendered in India - the assessee did not have any tax withholding liabilities from foreign remittances for fees for technical services unless such services were rendered in India, and a fortiori no disallowance can be made under section 40(a)(i) for assessee's failure to deduct tax at source from such payments. The assessee did not have any liability under section 195 r.w.s. 9(1)(vii) to deduct tax at source from these payments thus, no disallowance can be made in respect of these payment - there is no need to deal with the taxability of incomes embedded in these payments under the provisions of the applicable tax treaties thus, the conclusions arrived at by the CIT(A) upheld Decided against Revenue.
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2014 (2) TMI 652
Allowability of benefit of brought forward loss - Computation of book profits u/s 115JB of the Act Held that:- The assessee to be entitled to deduction of such loss - there were no accumulated losses at the end of the year because the reduction in paid up capital took place during the said year - thus, the benefit of brought forward loss cannot be denied for the purposes of computation of books profit u/s 115JB - the Assessing Officer is directed to verify the correctness of the figure so claimed thus, the order set aside and the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee. Nature of Profit - Is it cash profit or net operating profit under TNMM - whether the adoption of Cash profits as the numerator under the TNMM is in accordance with law Held that:- The assessee's calculation of the so called 'Cash profit' by simply reducing the amount of depreciation from the amount of net profit does not stand anywhere - The assessee is a limited company - it is required to maintain its account on mercantile basis - Under such method of accounting, the expenses `incurred' are considered for deduction irrespective of the actual payment - Income is recognized when right to receive income is acquired notwithstanding the actual receipt of the amount - Such items of incurring of expenses or accrual of income have not been taken out of the amount of net profit to characterize the numerator as `Cash profit' - the profit so deduced by the assessee and claimed as `cash profit' is strictly speaking neither cash profit nor profit under mercantile system, but hybrid of both. Whether any adjustment towards higher depreciation is called for Held that:- Sub-clause (iii) to rule 10B(1)(e) clearly provides that the normal gross profit mark-up of comparables is adjusted to take into account the functional and other differences, if any, between the international transaction and the comparable uncontrolled transactions etc - To ask for adjustment, it is sine qua non that there should be some independent and substantial reason for claiming adjustment in profit rate of comparables - The singular effect of higher quantum of an item of expenditure de hors the other relevant factors, is not permissible - In the context of depreciation, one can rightly appreciate the need to make adjustment, if rate of depreciation charged by the assessee vis-ΰ-vis its comparables is different - But the simplicitor difference in the amount of depreciation is inconsequential - there is nothing to show that the assessee did charge depreciation at higher rates in comparison with its comparables. Rule of consistency Held that:- The major ingredient of the operating cost is remuneration to employee and the assets play minimal role in the process of rendering of such services - The depreciation component in such cases becomes quite insignificant - the application of such PLI was accepted because in that case there was an isolated year in which such change in the numerator was objected to - For the subsequent years, the same was accepted - no material in that case was placed on record to show that the acceptance of cash profit to sales as the correct PLI worked to the prejudice of the Revenue in terms of the sacrifice of transfer pricing adjustment, unlike it is the case of the Revenue. The assets play significant role in manufacturing - In such a situation, the depreciation cost plays a major role in the overall operating cost and as such cannot be excluded - If the amount of depreciation, which is otherwise an important item of the operating nature, is expelled from computation, then no meaningful analysis is possible under TNMM. Transfer pricing adjustment - Determination of the ALP Held that:- It can also be seen from the assessee's submissions as recorded by the CIT(A) that the correctness of such OP/sales of comparables was not disputed - The rightness of this calculation by the TPO has also not been controverted - the determination of ALP by the TPO by considering OP/Sales at 6.17% of the comparables with the operating loss shown by the assessee, thereby determining TP adjustment amounting to ₹ 1.95 crores (as rectified), does not require any interference - The order on this issue is set aside and the addition made by the AO is restored Decided in favour of Revenue. Confirmation of disallowance of consultancy charges Held that:- The expenditure was incurred for conducting feasibility study for undertaking the same activity of manufacturing in Mauritius - The plans did not fructify and the project was abandoned Revenue could not draw our attention towards any part of sections 35D or 37(1), which prohibits the allowability of expenses simply for the reason that it was incurred outside India thus, the reasoning adopted by the CIT(A) cannot be upheld for sustaining this addition. Whether the expenditure should be allowed u/s 37(1) in entirety or should be allowed as preliminary expenditure u/s 35D Held that:- The decision in CIT Vs Priya Village Roadshows Ltd. 2009 (8) TMI 765 - Delhi High Court ] followed - Where expenditure was incurred on feasibility study on new project development connected with the existing business with a common administration and common fund, and the new project was shelved with no new asset being created, the impugned expenditure was allowable as revenue expenditure - the assessee incurred such expenditure for the extension of the existing business on conducting market feasibility study for the same products in Mauritius thus, the decision taken by the ld. CIT(A) cannot be upheld Decided in favour of Assessee.
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2014 (2) TMI 651
Transfer pricing addition on account of Arms's Length Price - Held that:- For this year also, the assessee adopted Profit Level Indicator (PLI) of cash profit to sales by applying transactional net margin method (TNMM) in respect of the Tooling Division. The Ld. CIT(A) deleted the addition by giving the same reason as were given by him for the preceding year. No difference in the facts and circumstances for the instant year has been shown vis-ΰ-vis that for the assessment year 2003-04. We have allowed this ground of the Revenue for the immediately preceding year. Following the view taken for such earlier year, this ground is allowed. Disallowance of deduction u/s 80HHC of the Act Held that:- The decision in Ajanta Pharma Ltd. Vs CIT [2010 (9) TMI 8 - SUPREME COURT ] followed - `Clause (iv) of the Explanation to s. 115JB covers full export profits of 100 per cent as "eligible profits" and the same cannot be reduced to 80 per cent by relying on s. 80HHC(1B) - 100% of the export profit should be allowed to be reduced from the book profits for the purpose of computation u/s 115JB - thus, the order on this issue set aside and the matter remitted back to the AO for fresh adjudication. Deletion on account of transfer pricing adjustment made by the TPO Held that:- The assessee adopted `Cash profit to sales' as PLI in respect of Tooling Division, which was not accepted by the TPO, who proceeded to compute ALP with the PLI of `OP to sales' thus the addition of ₹ 1.11 crore restored Decided partly in favour of Assessee.
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2014 (2) TMI 650
Disallowances made u/s 37 and section 40A(3) and section 40(a)(ia) of the Act Held that:- The CIT(A) considered the disallowance under S.37(1) as if it is a disallowance under S.40A(3) - Even though the assessee requested for giving an opportunity to submit the bills, the same was also not accepted - the vouchers pertaining to payment to Vaseem is for Roller Rent - the payment is for more than one year, and partly covers the previous year, the Assessing Officer seems to have not noticed this and disallowed the entire amount under S.40A(3) - the orders set aside and the matter remitted back to the AO for fresh adjudication after giving due opportunity to the assessee, to explain the nature of payments and why provisions of Rule 6DD apply to each of the cash payments Decided in favour of Assessee.
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2014 (2) TMI 649
Reopening of Assessment - Inclusion of Rental income Sub-letting of property - Assessability of notional income on account of self-occupancy - Whether the CIT(A) has erred in deleting the addition made by the Assessing Officer for Assessment Year 1991-92 and 1994-95 to 2000-01 by including the rental income received on account of sub-letting the property Held that:- The tax demands in question have already been paid by Smt. Adarsh Kaur for the relevant assessment years - There is no evidence or arguments brought to bear that in case such re-accounting is done, the tax demands for the relevant assessment years qua the said property would have increased, and some benefit would have accrued to the exchequer - As such, it is evident that this effort of re-accounting, even if successful, may yield no benefit to the exchequer, whatsoever, and is merely an academic exercise sans any benefit - this sort of adjudication cannot be permitted the findings of the CIT(A) upheld that had the rental income been separately assessed in the hand of the estate then the tax payable would be lower than what has been paid by Smt. Adarsh kaur Gill because she has other income also, than the rental income thus, CIT(A) has found that there is no reduction of tax on account of rent from sub-letting of property assessed in the hand of Smt. Adarsh Kaur Gill as an individual. The dispute has a long and chequered history spanning over half a century - Despite courts having tried to resolve the controversy many times, the basic dispute between the parties is coming under challenge again and again, albeit under new and in genuine grounds - it is only under exceptional grounds that any court or authority can re-open the dispute thus, the appeal of the revenue is devoid of merits and dismissed Decided against Revenue.
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2014 (2) TMI 648
Determination of ALP u/s 92C(2) r.w. Section 92C(2A) of the Act - Selection of Comparables - Whether Motilal Oswal Investment Advisors Pvt. Ltd. can be considered as a comparable for the determination of ALP Held that:- The three comparables considered by the TPO shows that M/s. Future Capital Investment Advisors Ltd., has operating profit at 21.79% whereas OPM of Motilal Oswal Investment Advisors Pvt. Ltd. is 72.33% - The comparables used by the TPO themselves are showing extreme OPM - A perusal of the Directors report of Motilal Oswal Investment Advisors Pvt. Ltd. shows that the company has completed 23 assignments successfully as against 14 completed in the immediately preceding year - the income from operations have been shown only as advisory fees whereas it is admittedly an undisputed facts that the said company is engaged in diversified activities - Segmental reporting is not available. Profit and loss account appears to be only of consolidated accounts - The company is registered with SEBI as a merchant banker and the Directors report show that it is into takeover , acquisitions, disinvestments etc. - In the absence of specific data it is not possible to make comparison - the company being into merchant banking and cannot be considered as a comparable thus, the AO is directed not to consider Motilal Oswal Investment Advisors Pvt. Ltd. as a comparable for the determination of ALP and redetermine the Arms Length price excluding Motilal Oswal Investment Advisors Pvt. Ltd. Decided partly in favour of Assessee
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2014 (2) TMI 647
Continuity of Business activity Allowability of Expenses Held that:- The CIT(A) has well appreciated the facts - The CIT(A) has also given very sound reasons for not accepting the order of the Tribunal in assessees own case for A.Y. 2006-07 - CIT(A) held that the facts as existing in F.Y.2005-06 are different from the facts which are existing in the relevant F.Y. i.e. F.Y.2008-09 - The appellant has not incurred expenses on account of maintaining old business establishment - These expenses were incurred for a new line of business from which no income was earned by the appellant either during the relevant previous year or even in future years - When appellant has never earned any income from the activity on which expenses were incurred, the same cannot be allowed in case of appellant. It is not a case where there was a slowdown in the business - In F.Y.2004-05 appellant earned only royalty income - In subsequent years i.e. from F.Y.2005-06 till F.Y.2008-09 neither any regular business activity has been carried out by the appellant nor any business income is earned - The reason of slow down or lull in the business does not exist in the case of appellant and in any case such a reason cannot be a valid ground for several years - the appellant claimed to have sold its entire manufacturing business to one of its related concern named Sigma Laboratories Ltd. on w.e.f. 01-04- 2009 - The expenses have been claimed by the appellant for F.Y.2008-09 and immediately thereafter the entire business was transferred by the appellant to its related concern - This means that the business was closed immediately after the relevant previous year as far as the case of the appellant is concerned - Relying upon M.M. Ipoh V. CIT [1967 (7) TMI 8 - SUPREME Court] that facts of each year are only important in order to decide the income of that year thus, there is no reason to interfere with the findings of the CIT(A) Decided against Assessee.
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2014 (2) TMI 646
Power of Revision in u/s 263 of the Act Declaration of LTCG Held that:- The long term capital gains declared by the assessee in the computation of income included the sum which the assessee received under the Sale Deed - the AO was apprised of the monies received under the Sale Deed - There is nothing on record to suggest that the sum ought to be treated as income from business - the property was held by the assessee as a capital asset and any income from transfer of the said property would give rise to income under the head capital gains - when the sum received under the joint development agreement was treated as capital gain, there is no reason why the sum received over and above the sum received under the joint development agreement at the time of sale on the very same property should be treated as income from business - sale consideration received on sale of property cannot be bifurcated as partly giving rise to income from business and partly giving rise to income from capital gain - there is nothing on record to indicate the basis on which the CIT comes to the conclusion in the order u/s. 263 of the Act that the sum is to be assessed as income from business - The order of the AO was therefore was not erroneous. Jurisdiction u/s. 263 of the Act cannot be sustained on the basis that there was no enquiry made by the AO on the issue considered in the order u/s. 263 of the Act - in the course of assessment proceedings necessary details had been furnished by the assessee - the CIT is of the view that an enquiry made by the AO is inadequate Relying upon CIT v. Sunbeam Auto Ltd.[2009 (9) TMI 633 - Delhi High Court] - jurisdiction u/s. 263 of the Act cannot be invoked for inadequate enquiry - the jurisdiction u/s 263 was not properly invoked thus, the order of the CIT u/s. 263 of the Act is quashed Decided in favour of Assessee.
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2014 (2) TMI 645
Deletion made on account of shares not included in closing stock - Reduction of valuation of scripts - Held that:- The assessee has been dealing into the business of shares through two share brokers namely M/s Vogue Commercial Co. Ltd. and M/s Divya Portfolio Pvt. Ltd. as is apparent from assessment order - The CIT(A) while giving relief to the assessee has relied upon only copy of Demat A/c with M/.s Vogue Commercial Co. Ltd. and Demat account with other broker i.e. M/s Divya Portfolio Pvt. Ltd. does not find its mention in the order of CIT(A) - The Assessing Officer has clearly mentioned number and names of scripts which were in the Demat Account of the assessee and were not part of list of closing stock submitted by the assessee - in the list of shares of closing stock prepared on estimated basis and on actual basis there is significant difference between the valuation of certain scripts though the quantities in both lists remained same - valuation of certain scripts were reduced to accommodate the valuation of additional scripts found in the Demat Account of assessee - This aspect of lower valuation has not been examined by CIT(A) thus, the matter remitted back to the CIT(A) who would require the assessee to file copy of Demat Account of assessee with M/s Divya Portfolio Pvt. Ltd. Decided in favour of Revenue.
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2014 (2) TMI 644
Cancellation of registration u/s 12AA of the Act - Denial of Exemption u/s 80G of the Act Held that:- The assessee, the definition of 'charitable purpose' has several limbs - Proviso to section 2(15) of the Act is applicable only in respect of a charitable institution which has the object of 'any other object of general public utility' - Relying upon Krupanidhi Educational Trust v. DIT (E) 2012 (11) TMI 460 - ITAT BANGALORE] - in case of charitable purpose of providing education, the fact that educational institutions are being run on a commercial scale cannot be a ground to invoke the provisions of section 12AA(3) of the Act and cancel registration granted to a trust - the assessee has been pursuing the objects as per the objectives of the trust viz., providing medical relief. There is no whisper about the genuineness of the activities of the assessee in the order thus, the two conditions for invoking the provisions of section 12AA(3) of the Act are totally absent - the complaint of the revenue in the order is only with reference to the hospital being run on commercial lines - so long as the income of the trust is applied for charitable purpose, there can be no question of any tax liability on the assessee - If there is any shortcoming in the application of income for charitable purpose, then to that extent the Assessing Officer in the assessment of the assessee, is free to tax such income which is not applied for charitable purpose thus, canceling the registration u/s. 12AA of the Act would not be the appropriate course of action for the revenue - the order u/s. 12AA(3) of the Act deserves to be cancelled thus, the order for restoring registration u/s. 12AA of the Act, recognition granted u/s. 80G of the Act should also be restored Decided in favour of Assessee.
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Customs
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2014 (2) TMI 643
Smuggling of goods - Conviction u/s 135 - Co accused gave statement that applicant received goods from him earlier also - whether the evidence of co-accused can be read against an accused or not - Held that:- co-accused of this case Vikram Chaudhary was examined by the offices of D.R.I, under Section 107/108 of the Act. In his statement the co-accused has stated that all the foreign origin goods recovered from his possession were to be delivered to the applicant. He has also said that in the past he had delivered such goods to the applicant four or five times - statement of co-accused can be used against the accused of a case. Such opinion has been given in respect of Section 108 of the Act. From perusal of paras 1 and 4 of the said case law it is evident that if a Customs Officer examined any person under Section 107/108 of the Act and there is admission on the part of the co-accused, the same can be read against the co-accused - there is nothing on the record in favour of the applicant on the basis of which the complaint filed against him also under Section 135 of the Act may be quashed and set aside. Non bailable warrant issued applicant on first date of case - Held that:- It is true that under Section 204 of Cr. P.C. a Magistrate can issue a non-bailable warrant on the very first date if he is of the opinion that a case before him is a warrant case but such power is not limitless keeping in view the provisions as contained under Section 87 of the Cr. P.C. Keeping in view the spirit of law it is desirable that there should be some genuine grounds to issue a non-bailable warrant against the accused on the very first instance where normally a summon should be issued. If the accused does not respond to the summon in that event a warrant may be issued which may be bailable or not. It was not appropriate in the facts and circumstances of the case to issue a non-bailable warrant outrightly on the first date - Decided partly in favour of petitioner.
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2014 (2) TMI 642
Revalidation of two Duty Free Replenishment Certificates - request rejected by the Joint Director General of Foreign Trade on 25 May, 2005, 15 May, 2006 and 27 October, 2006 - Held that:- It was open to the petitioner to have utilized the DFRCs for cleance of imported goods provided they were despatched or shipped on or before 31 January, 2005. As a matter of fact, no shipment was made in terms of Para 9.11 of the Handbook of Procedures before 31 January 2005. The petitioner failed to utilize the DFRCs before the expiry date. The petitioner has furnished no justification for its own delay. The narration of dates in the affidavit in reply does not indicate that there was any delay on the part of the Customs authorities or the DGFT in processing the request of the Petitioner. In this view of the matter and particularly having- regard to the fact that the DFRCs have expired as far back as in January, 2005, it would not be appropriate for the Court to entertain the petition, particularly when even on merits, the grievance is lacking in substance - Decided against assessee.
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2014 (2) TMI 641
Condonation of delay - delay is not intentional but is on account of in-depth scrutiny of the order-in-appeal dated 28-5-2008 at various levels and involves administrative procedures - Held that:- Elsewhere in the application, it has been stated that the Committee of Commissioners directed appeal to be filed on 16-7-2008 but the same could not be effectively communicated to the appellant-Commissioner. It has been further stated that the approval given by the Committee of Commissioners for filing the appeal was unearthed during the periodical scrutiny of the records. These averments contained in the application cannot constitute sufficient cause for condonation of the heavy delay of the appeal. They only indicate the lackadaisical manner in which important matters, like this, were handled by the department - Condonation denied.
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2014 (2) TMI 640
Denial of drawback claim - Classification of goods - Classification under Heading 610602 or under 610607 - Misdeclaration of goods - original authority held that there was a misdeclaration of the goods inasmuch as the blending was not at the yarn stage - Confiscation of goods - Imposition of redemption fine - Held that:- no reason to conclude that blending of the material should be done before the spinning of yarn for claiming drawback as per item 610601. This interpretation is canvassed by reading extra words into the relevant entry of the Drawback Schedule. While interpreting such entries extra words cannot be read into any such entry - Decided in favour of assessee.
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Service Tax
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2014 (2) TMI 668
Waiver of pre-deposit of service tax - Penalty under Section 78 - Stock Broker Services - Held that:- Following decision of Saurin Investments Pvt. Limited [2009 (7) TMI 131 - CESTAT, AHMEDABAD] - Conditional stay granted.
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2014 (2) TMI 667
Waiver of pre deposit - Demand of service tax - Quantum of service tax - Assessee agrees to service tax demand but contenst quantum of demand - Held that:- Prima facie case not in favour of assessee - Conditional stay granted.
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2014 (2) TMI 666
Waiver of pre deposit - Demand of service tax - Industrial or commercial construction service - Held that:- For an activity to be classified as industrial or commercial service, it should be shown that it was performed to construct a complex meant primarily for commercial/industrial use. The food grain godowns constructed by the appellant for FCI, prima facie, cannot be considered to be meant primarily for commercial use - appellant has made out prima facie case against the entire demand - Stay granted.
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2014 (2) TMI 665
Waiver of pre-deposit of Service Tax - Availment of CENVAT Credit of the Service Tax paid - Management Consultancy Services - Classification of service - Whether service be classified under Business Auxiliary Services - Held that:- invoice raised by M/s The Indian Hotels Company Ltd specifically states that the service tax category would be Section 65(105)(r) of Finance Act, 1994, and service would fall under Management Consultancy service. Be that as it may, we find from the Para 24 of the Order-in-Original that the adjudicating authority has proceeded on the ground that M/s The Indian Hotels Company Ltd should not have classified the services under Management or Business Consultancy service and should have discharged Service Tax liability under Business Auxiliary Service - appellant has made out a strong prima facie case in their favour - Stay granted.
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2014 (2) TMI 664
Rectification of mistake (ROM) u/s 35C(2) of the Central Excise Act, 1944 - Penalty under Rule 27 of the Central Excise Rules, 2001 - Held that:- Held that:- Tribunal find that in the present case the points raised in the ROM application were not urged by the applicant at the time of hearing of the application and in their written submissions submitted on the date of hearing. The issue relating to the Rectification of Mistake under Section 35C(2) of the Central Excise Act, 1944 was examined by the Honble Supreme Court in the case of Commissioner of Central Excise, Belapur, Mumbai v. RDC Concrete (India) Pvt. Ltd. reported in [2011 (8) TMI 25 - SUPREME COURT OF INDIA] and observed that a mistake apparent on record must be an obvious and patent mistake and the mistake should not be such which can be established by a long drawn process of reasoning - Following decision of RASHTRIYA CHEMICALS & FERTILIZERS LTD. Versus C. C. E. & S. T., LTU, MUMBAI [2013 (3) TMI 478 - CESTAT MUMBAI] - Decided against assessee.
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Central Excise
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2014 (2) TMI 639
Denial of CENVAT Credit - ineligible credit - Input service distributor (ISD) - Interest u/s 11AB - Credit on Insurance policy - Held that:- CENVAT Credit taken on the Insurance Policy, he submits that Shri Newton Misquitta, Senior Manger (Accounts) had confirmed that the Insurance Policy taken pertained to insurance of empty containers in respect of imported vitrified tiles. Similarly, marine cargo policies pertained to mainly imports of vitrified tiles, which were traded by the appellant. Again some of the policies pertained to insurance of their showrooms located all over India, which was used for sale of the imported goods as well as domestically manufactured goods. Thus, it is clear that the appellant took ineligible CENVAT Credit on the insurance services received by them - availment of CENVAT Credit on ineligible documents, the adjudicating authority has observed that the documents on the strength of which credit was taken are not proper documents and these facts were also admitted by the employees and, therefore, the credit taken on ineligible documents needs to be reversed. Service Tax credit can be distributed only if the services were received at the manufacturing premises and if it is received elsewhere, it is not permissible to avail of the Service Tax credit. Input Service Distribution scheme is a special scheme and if anyone wants to avail the benefit thereof, the terms and condition should be complied with completely. From the statements of the officials of the appellant firm, it clearly emerges that the credit was distributed by the Head Office without any registration and without ascertaining the receipt of the services at the Alibag factory. Services received at the depots were also distributed to the Alibag factory and also services received at the other factories of the appellant. Thus, as regards the denial of CENVAT Credit of ₹ 2.92 Crore, the appellant is not prima facie eligible for the benefit of the same - Following decision of SQL Star International Ltd. Vs. Commissioner of Customs, Hyderabad [2011 (7) TMI 868 - Andhra Pradesh High Court] - Conditional stay granted.
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2014 (2) TMI 638
Manufacture - Packing from loose receipt in unit boxes - Held that:- Appellants have clearly admitted that in respect of shoes which are received in loose form and which are re-packed in cardboard boxes wherein details such as brand name, MRP, size of the shoes, colour of the shoes, etc. are affixed, they are liable to pay excise duty - Therefore, bulk of the demands confirmed in the impugned orders have been admitted to by the appellants and are not disputed. They are disputing the liability only in respect of shoes received in pre-packed form i.e. in card board boxes where the MRP is affixed and the appellant undertakes affixing of stickers on the shoes indicating bar codes, MRP and logo of the appellant on the bottom of the sole. However, in the statements recorded under the provisions of the Central Excise Act, the appellants have clearly admitted that they have no evidence in respect of this claim. Further, it is also an admitted fact that opportunity was given to them by the adjudicating authority to lead evidence about the receipt of shoes in pre-packed form; however, the appellants were not able to lead any evidence in spite of sufficient time being granted and the appellants admitted that they have no evidence in this regard. Therefore, the claim of the appellant that they had received about 10% to 15% of the shoes in pre-packed form from the karigars is only a mere claim without any supporting evidence. In the absence of any supporting evidence, such a claim cannot be entertained and, therefore, the adjudicating authority was right in concluding that the activities undertaken by the appellants amounted to manufacture' as defined in Section 2(f) (iii) of the Central Excise Act, 1944 read with Third Schedule thereof - Following decision of RAFIQUE MALLICK Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I [2005 (6) TMI 466 - CESTAT, MUMBAI] - Decided against assessee.
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2014 (2) TMI 637
Availment of CENVAT Credit - Waiver of pre deposit - Held that:- Shri Mukesh Sangla has clearly admitted the issue of cenvatable invoices without supply of goods, and these statements have not been retracted. The statement of Shri Kirti Kala, Cashier recorded on 8.3.2009 as also of Shri Paras Patidar, Marketing Manager of M/s Signet Overseas Ltd. dated 22.2.2009, also confirmed the issue of cenvatable invoices without supply of goods. From these statements also it comes out that this has been done on instruction of Shri Mukesh Sangla, the MD. The investigation has also brought on record that LRs issued for transportation of goods were in names of the companies which were found non-existent. Based on the evidences available on record, the charge against the appellant Shri Mukesh Sangla stands clearly established. Therefore, the appellant has not made out a case for complete waiver of pre-deposit of the penalty imposed on him. The fact that the main appellant has made pre-deposit and the same should be considered as sufficient for hearing the appeal of the present appellant, has no legal basis. Since prima facie Shri Mukesh Sangla is found instrumental in issuing the bogus invoices, we direct him to pre-deposit an amount of Rs.1 lakh within a period of six weeks towards the penalty imposed on him and report compliance on 1.1.2014. On such compliance, pre-deposit of balance of amount of penalty shall stand waived and recovery thereof stayed during the pendency of the appeal - Conditional stay granted.
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2014 (2) TMI 636
Classification - product 'pentane' cleared by the appellant under sub heading 2711.19 of the Central Excise Tariff as other 'petroleum gases and other gaseous hydrocarbons' - revenue issued SCN after audit objections classifying under sub heading 2710.90 - Held that:- product 'pentane' cleared by the appellant under sub heading 2711.19 of the Central Excise Tariff as other 'petroleum gases and other gaseous hydrocarbons' and paying Central Excise duty @ 8% ad valorem after availing of the benefit of sl. No. 24 of notification No.6/2000-CE dated 1.3.2000 and sl. No.34 of notification No.3/2001-CE dated 1.3.2001 - The 'pentane' disputed product, in question is being classifiable by other units of M/s. GAIL India under sub-heading 2711.19 only. They have also filed the same classification. If the Revenue was not in agreement with the said declaration of such classification, it was open to the officers to raise the objection to the same and to initiate proceeding for change in classification. SCNs proposing change in classification from 2711.19 to 2710.90 was issued because of Audit objection. The Department had initially classified the Pentane under Chapter sub-heading 2711.19 only. The above technical aspect was explained to Audit and they have accepted the technical aspect and have agreed to classification under 2711.19 and audit objection has been closed. I am also in agreement with the technical description of Pentane and its correct classification under 2711.19. In view of the settlement of dispute, the show cause notice in question deserves to be dropped - there was no suppression or misstatement on the part of the appellant so as to justifiably invoke the longer period of limitation - Decided in favour of assessee.
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2014 (2) TMI 635
Waiver of pre-deposit of demand on account of penalties - under-valuation and clandestine removal - Difference of opinion - Held that:- matter referred to larger bench with the following questions: Whether in view of the facts of active involvement of M/s Suraj Medical Agencies, Sh. Roshan Lal Kawatra, Sh. Kashmir Chand and Sh. Ashok Kumar in the clandestine manufacture and clearance of medicaments by M/s Gold Star Pharmaceuticals Pvt Ltd, pre deposit of penalty imposed upon them under rule 26 of the Central Excise Rules 2002 is demandable as recorded by the Member (Technical). Whether considering the case laws cited by the ld. Advocate Stay is to be granted to M/s Suraj Medical Agencies, Sh. Roshan Lal Kawatra, Sh. Kashmir Chand and Sh. Ashok Kumar as held by the Hon'ble Member (Judicial).
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2014 (2) TMI 634
CENVAT Credit on capital goods - assessee has availed 100% credit in the first year itself instead of 50% - levy of penalty - Held that:- Respondent are entitled to take CENVAT credit of duty paid on capital goods up to 50% in the financial year in which the capital goods have been procured and remaining 50% of duty paid on capital goods is entitled as CENVAT credit in the subsequent year. As in this case, the respondent have availed the CENVAT credit of 100% of the duty paid on capital goods in the year in which the capital goods have been procured. - respondents are not entitled to take credit more than 50% in the year in which the capital goods have been procured. But in the subsequent year, they are entitled for the said credit. - Therefore, the argument advanced by the AR that they are required to reverse entire credit is not correct. - Levy of interest and penalty amounting to ₹ 5000/- confirmed.
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2014 (2) TMI 633
Exemption of goods vide serial No. 214 of Customs Notification No. 21/2002 dated 01/03/2002 - goods supplied against International Competitive Bidding (ICB) - Lower appellate authority had denied the benefit on the ground that the appellant has not produced essentiality certificate from the DGHC - Imposition of of interest and equivalent amount of penalties - Held that:- From the certificate given by the Project Implementing Authority, it is clear that the appellant has made the supply in respect of a contract awarded under International Competitive Bidding and the goods are required in connection with the petroleum operations undertaken under petroleum exploration licence or mining leases and the certificate had been issued by the General Manager (Project), Oil and Natural Gas Corporation. Therefore, it is clear that the goods have been supplied against a contract granted under International Competitive Bidding. From the said certificate is also seen that the appellant's name figures as a sub-contractor and the goods supplied by the appellant is also covered by the said certificate. It is clear from the project authority certificate that the goods are required in petroleum operations undertaken by ONGC. As regards the condition No.29 referred to in Notification No.21/2002, those conditions have been stipulated to be complied by the importers of goods and do not apply to domestic manufacturers. So long as the goods are exempt, the condition to be satisfied by the domestic suppliers is that they should be supplied under International Competitive Bidding which the appellant has fulfilled in these appeals. Therefore, we have to uphold the contention of the appellant and reject the contention of the Revenue - Following decision of CST LTD. Versus COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [2008 (2) TMI 755 - CESTAT, BANGALORE] - Decided in favour of assessee.
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2014 (2) TMI 632
Benefit of exemption Notification No. 61/86-C.E., dated 10-2-1986 - Benefit to driver's seats meant for hydraulic excavators - Appellants are engaged in activities involving purchase of various parts of Loaders, Backhoe Loaders, Road Rollers from different suppliers in India and abroad, repacking these parts with new packing material and affixing their Logo, fixing of MRP and selling under their own brand name - Held that:- all the items in question viz. Loader, Backhoe Loader and Road Roller are self propelled, work with internal combustion engine using fuel such as diesel, have four wheels and are rubber tyred (road roller may have two rubber tyres and one roller, or only rollers). These move also on roads. Thus, these have all the characteristics of motor vehicles. In addition, these items have attachments which enables to execute and move earth, mud etc. from one place to another. In case of road rollers, it helps in compacting and setting the road due to vibrating techniques in compaction jobs. "Parts, components and Assemblies of Automobiles" is further qualified by "falling under any heading of the tariff", both in the third Schedule to the Central Excise Act as also Notification No. 11/2006. Thus the expressions used are very very wide and does not restrict to few parts or assemblies but to all parts and falling under any heading of the whole schedule to Tariff. We also note that a large number of such parts, components and assemblies are interchangeable indifferent types of vehicles (though manufacture assign their part numbers). Thus keeping in view the way the two expression "parts, components and Assemblies of Automobiles" and "Any heading" is used, we consider that Parts, components, and assemblies of Loader, Backhoe Loader and Road Roller are covered by the said entry/expression. In order to avoid the terminology automobile, (being not defined in Act/Tariff) specific heading of the Central Excise Tariff were introduced in the Notification No. 49/2008-C.E. (NT) in February 2010 vide Notification NO. 9/2010-C.E.(NT). Apparently this was done in haste and Government had to further amend the amendment made in February, 2010 within two months to specifically include headings relating to earth moving machinery. Not only this, corresponding amendment in Third Schedule was forgotten and the next year retrospectively amendment had to be brought with effect from 27.02.2010/29.04.2010. Thus a holistic look of these amendments, only supports that Parts, components and assemblies of automobiles included that of Loader, Backhoe Loader & Road Roller and were covered from June, 2006 onwards. Circular dated 16.12.2008 was not issued in 2006 when "Parts, components and assemblies of Automobiles" were brought into Third Schedule to the Central Excise Act or specified under Section4A (which would have indicated the objects and purpose of amendments). It has been issued after almost three years. In any case, it is settled legal position, that Circular contrary to the judicial decision are not binding - Circular dated 16.12.2008 is with reference to Hydraulic Excavators which are motor vehicle, the same is required to be ignored in view of decisions on the issue by Higher Judicial forumsParts, components and assemblies of Loader, Backhoe Loader and Road Rollers are covered by "parts, components and assemblies of Automobiles - this is not a fit case for invoking the extended period of limitation as ingredients to invoke the same are absent. Accordingly, demand within the normal period of limitation is only confirmed. We also do not consider the case fit for imposing penalty under Section 11AC or Rule 25 or confiscation of goods under Rule 25 - Following decision of KRISHNA FABRICATORS P. LTD. Versus COLLECTOR OF C. EXCISE, BANGALORE [1991 (4) TMI 270 - CEGAT, NEW DELHI] - Accordingly, penalties and confiscation are set aside - Decided against Revenue.
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2014 (2) TMI 631
Duty demand - Exemption under notification No.8/2003-CE dated 01/03/2003 - Imposition of equivalent amount of penalty - Held that:- Notification No.10/2013-CE(NT) dated 02/08/2013 issued under Section 11C of the Central Excise Act, 1944, extends the benefit of small scale exemption under notification No. 8/2003-CE dated 01/03/2003 to plastic containers and plastic bottles meant for use as packing material by the person whose brand name such goods bear during the period 16/06/2003 to 26/02/2010. Therefore, the appellant is rightly entitled to the benefit of the said exemption. Therefore, the impugned order is not sustainable in law - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (2) TMI 669
Penalty u/s 12(3)(b) of the Tamil Nadu General Sales Tax Act - Exemption in Notification No. 528 dated 21.11.1997 - Tax payable on the purchase of raw materials - Held that:- without considering the claim of the assessee on exemption based on Notification No.528 dated 21.11.1987, passing of an order on the penalty appeal preferred by the State thereby restoring penalty would be totally illegal and hence, cannot be sustained at all. In the circumstances, with no decision rendered on the claim of exemption, the proper course herein would be to set aside the order of the Tribunal and remand the matter back to the Tribunal for de novo consideration of the levy of penalty along with the claim of the assessee in the Cross Appeal - Tribunal is directed to pass orders on the Cross Objection filed by the assessee by following Notification No.528 dated 21.11.1997 - Decided in favour of assessee.
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Indian Laws
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2014 (2) TMI 630
Deduction in gratuity amount - Gratuity amount deducted for earned leaves - Held that:- No counter affidavit has been filed on behalf of Respondent nos.1 to 5. However, on record, an affidavit shown by the Dy. Superintendent of Police (Headquarters), Nalanda purported to be filed on behalf of Respondent no.6 is available. Respondents have not controverted the statement made in the writ petition specifically in its paragraph-8 that the husband of the petitioner was on duty in Police Line, Nalanda between the period for which recovery order has been passed. Fact remains that the recovery of Rs.99,858/- was directed to be made from the gratuity amount of husband of the petitioner, who died in harness. The death of the husband of the petitioner had occurred on 27.12.2004 and recovery order has been passed after about two years from the death of her husband. There is no ambiguity that the amount payable under the head of gratuity is not even liable to be attached in execution of decree or order. It is evident that right to receive the payment of gratuity amount is protected right and it cannot be taken away by the employer. Moreover , in peculiar facts and circumstances of the present case, the Court is of the opinion that the order for deduction of Rs.99,858/- from the gratuity amount was not sustainable in the eye of law and, as such, the writ petition stands allowed directing the Respondents to refund the deducted amount of Rs.99,858/- to the petitioner within a period of two months from the date of receipt/production of a copy of this order, failing which the petitioner shall be entitled to get interest on the said amount @ 6 % per annum from the date of order till the date of realization - Decided in favour Appellant.
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2014 (2) TMI 629
Difference in payment of gratuity amount - Competent authority allowed the application filed by petitioner determining the total gratuity payable by the petitioner-corporation at Rs.4,59,078/- and if not paid within 30 days simple interest at 10% p.a. was granted - Held that:- While arriving at the above period service of 4 years 6 months and 12 days rendered by third respondent has been deducted from out of the total number of years of service i.e., 33 years 5 months and 17 days and then arrived at active years of service at 28 years 11 months. Corporation also found that amount of gratuity payable under the Gratuity Act, was Rs.2,53,855/- and the gratuity payable under the regulation being more beneficial to the employee, said amount was determined. Controlling authority as well as appellate authority have rightly rejected the said contention of the corporation by taking into consideration the definition of the word Rs.continuous service' and holding that there is no interruption in service rendered by third respondent. Said finding is based on scrutiny of records and not being contrary to Exhibit R-1, I do not find any other good ground to interfere with the said finding in exercise of writ jurisdiction. In that view of the matter the finding of the controlling authority by taking active years of service at 33 years 5 months deserves to be accepted. Petitioner Corporation shall ascertain from the office of the Commissioner of Income Tax, the income tax deductable on the gratuity amount prevalent during the said relevant period and pay the balance amount to third respondent from out of the amount already deposited before the controlling authority - However, Controlling authority shall forthwith pay the difference of gratuity in so far as active years of service is concerned and amount that has been deducted towards group insurance and identity card charges as determined herein above to the third respondent forthwith - Decided partly in favour of petitioner.
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