TMI Tax Updates - e-Newsletter
February 4, 2015
Case Laws in this Newsletter:
Income Tax
Customs
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Redemption of Stock Appreciation Rights - capital gain or perquisite under Sec.17(2)(iii) - Tribunal was not justified in holding that capital gain arose to the assessee on redemption of Stock Appreciation Rights which were having no cost of acquisition - HC
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Income Tax:
Activity of growing roses, chikkus - whether an agricultural income exempt from tax? - sale proceeds from the business of nursery carried on by the assessee constitute income from agriculture. - HC
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Income Tax:
Deemed dividend - legal fiction of section 2(22)(e) does not extend to “shareholder”. The fiction is not to be extended further for broadening the concept of shareholders - AT
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Income Tax:
Non-est return of income - Assessee had never applied for PAN, the return of income was not verified and the return being not filed by the Assessee stand established and the return of income filed has to be treated as a scrap of paper filed by anonymous person reflecting fictitious income, assets and liabilities. - AT
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Income Tax:
Maintainability of the appeal - undeniably the order under section 271FA of the Act was passed by the Director of Income-tax who is equivalent in rank with the ld. CIT(A) - The only forum where this order of the Director of Income-tax can be challenged is the ITAT which is higher in rank to the Director of Incometax. - AT
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Income Tax:
Adjustment of notional interest on account of extended credit period allowed to the AE - When the assessee is not making any difference for not charging the interest from AE as well as non-AE then the only difference between the two can be considered is the average period allowed along with outstanding amount - AT
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Income Tax:
Additional depreciation on plant and machinery - intermediary Bitumen mix is not article or thing manufactured or produced by the assessee - additional depreciation not allowed - AT
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Income Tax:
The purpose of the payment of loyalty commission was clearly for business of the assessee, and it is not for the department to sit over the judgment of the assessee that how the business has to be conducted and the expenditure incurred could not be disallowed, till it shows that the payment itself was not genuine - AT
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Income Tax:
Accommodation entry - bogus purchases - an amount which has not been debited in the P&L account and therefore not claimed as expenditure cannot be disallowed even though the invoice may be in the nature of accommodation entry - AT
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Customs:
100% EOU or free trade zone - there was no manufacturing operation at all carried out by the appellant - When the goods imported were declared to be used in manufacturing process, but not so used, the duty foregone on import thereof is recoverable - AT
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DGFT:
Guidelines for processing of online IEC applications and IEC check list - Circular
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Indian Laws:
Method for quantification of petroleum oil - when the Rules framed under the Act themselves are providing for measurement of vehicle tanks in litres, how can it be said that the unit of litre being used by the respondent oil companies is in contravention of the Act. - HC
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Wealth-tax:
Interest claim of Refund - Interest claim - Whether the assessee is entitled to interest under Section 34A(4B)(a) of the Wealth-Tax Act, 1957 self assessment return has been submitted - Held Yes- HC
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Service Tax:
Proceedings for recovery of service tax demand - When the demand of tax is yet to be adjudicated, it cannot be said as tax payable, for which resort to section 87 of the Act may be available. - HC
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Service Tax:
Denial of benefit of VCES - If an issue, which was the subject matter of an earlier notice or on which the determination has already been done in respect of any period, the designated authority was not obliged to issue declaration for any subsequent period on the same issue. - HC
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Service Tax:
If the Bank requires the appellant to verify and report on the financial position of the prospective/potential customer identified by the Bank and got the report within the time frame/format, it cannot be said that the appellant is marketing/promoting the business of the Bank. - prima facie, we find that the Service Tax cannot be demanded under BAS. - AT
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Service Tax:
Denial of CENVAT Credit - Merchant Banking Services - denial of credit on the basis of a challan for the reason of fraud, collusion, suppression of facts, etc., would not be applicable prior to the notification, dated 31-3-2011. - AT
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Service Tax:
Rent a cab service - whether the service of providing buses on contract basis by the appellant to various factories and firms on monthly rental basis can be classified as rent a cab service or not - main business of the appellant is transporting of passengers with the city of Bangalore and nearby mofussil areas - demand set aside - AT
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Service Tax:
Utilisation of Cenvat credit for payment under Reverse charge - the situation is revenue neutral in as much as even if the impugned service tax was paid in cash, the same indisputedly was available as CENVAT credit, which in case the same could not be utilised, would prima facie be available for refund in cash - stay granted - AT
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Service Tax:
The expression inclusive of taxes only means that there would be no further rise in the value of the contracts and there is nothing in the said contract that service tax have collected from the customers. - AT
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Central Excise:
Manufacture - fixation of glass in already manufactured doors cannot be held to be emerging of a new product inasmuch as doors remain doors and windows remains windows. - AT
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Central Excise:
Adjustment of refund with interest due on belated duty - adjustment of sanctioned rebate claims against the interest amount, which never stand adjudicated by the department, cannot be upheld - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (2) TMI 72
Payment of uniform allowance etc. to the employees by the assessee - whether liable for FBT? - whether the payment of uniform allowance was nothing but additional salary paid in the form of an allowance within the meaning of section 17(1)(iv) attracting the TDS provisions of section 192 of the IT Act ? - Held that:- The respondent is a Government undertaking, operating all over India, and there is nothing on record that this issue had arisen in any State other then the State of Gujarat. In that view of the matter, it is required to be looked very seriously inasmuch as the benefits which are conferred to the other employees of the respondent-company throughout the country are accepted by the Revenue as benefit deductible and has not been considered as part of salary. Since assessee was governed FBT provision and the applicability of provision for salary will not apply and contention raised by assessee is rightly accepted by the Tribunal. We have gone through the provisions of section 12H and benefits which are conferred under section 115WB(2)(E) of the Income Tax Act. While reading clause(E), the provisions of section 17(2)(vi) whether the payment made under FBT is excluded or not, in our view, it is excluded. - Decided in favour of the assessee
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2015 (2) TMI 71
Entitlement to claim under section 32AB - Held that:- Examination of the facts of the present case shows that so far as the AO is concerned, he did consider the said aspect and disallowed the amount for the purpose of computation under section 32AB for an amount of ₹ 1,96,117/-. The CIT (Appeals) except observing that the AO was not justified in ignoring the actual accounting procedure and denying the deduction of ₹ 1,96,117/-, has not further examined the matter in context to the span and ambit of the period of the assessment year. In the decision of the Tribunal also, there is no consideration except the reproduction of the observations of the CIT (Appeals). The Tribunal has only recorded that the finding recorded by the first appellate authority calls for no interference, but why and in what basis is not considered by the Tribunal. In any case, AO had power or authority to inquire the aspects in relation to a transaction beyond the scope and span of the assessment year, then also, whether the transaction could be considered for the present assessment year or not and what is the nature of the transaction and the effect in the assessment year are also the aspects, which may be required to be considered. The Tribunal being the final fact finding authority needs to reexamine the matter as per the observations made by us herein above and it may not be possible for this Court to consider the aspect of finding of fact in the present appeal for which the scope of judicial scrutiny is limited to substantial question of law. In view of the aforesaid, we find that when the AO had the authority or power to examine, but nature of transaction, effect on the profit of the assessment year and the other incidental aspects, which may touch to the finding of fact, are not examined by the Tribunal, it would be just and proper to remand the matter to the Tribunal for the limited aspect of admissibility of the amount of ₹ 1,96,117/- for the purpose of calculating the investment allowance available under section 32AB of the Act. - Decided in favour of revenue for statistical purposes.
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2015 (2) TMI 70
Redemption of Stock Appreciation Rights - capital gain or perquisite under Sec.17(2)(iii) - short term capital gain or long term capital gain - Held that:- The questions posed for consideration before us reproduced hereinabove and considering the decision of the Hon'ble Supreme Court in the case of Infosys Technologies Ltd. (2008 (1) TMI 17 - SUPREME COURT OF INDIA), the questions, which are raised in the present appeals are required to be answered in favour of the assessee wherein held that the revenue had erred in treating amount being difference in market value of shares on the date of exercise of option and total amount 'paid' by employees consequent upon exercise of the said options as perquisite value as during the lock-in period there was no cash inflow to employees to foresee future market value of shares and the benefit if any which arose on date when option stood exercised was only a notional benefit whose value was unascertainable. In view of the above, the questions raised for consideration in the present appeals are answered in favour of the assessee and against the revenue. The Tribunal was correct in treating the amount received on redemption of Stock Appreciation Rights as capital gain as against treated as perquisite under Sec.17(2)(iii) of the I.T. Act and in treating the amount received on exercising the opinion of Employee's Stock Option Plan (EOSP) as long term capital gains instead of treating the same as short term capital gains. However, the Tribunal was not justified in holding that capital gain arose to the assessee on redemption of Stock Appreciation Rights which were having no cost of acquisition. - Decided in favour of assessee.
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2015 (2) TMI 69
Benefit of Section 54E - date of investment - whether the deduction under Section 54E is available when the investment in the specified asset is made within a period of 6 months from the date of transferor from the date of receipts of sale consideration ? - Held that:- , the contention of learned advocate for the appellant-assessee is misconceived inasmuch as the six months’ period will have to be counted when sale-deed was executed i.e. from 07.08.1982. Therefore, we are of the opinion that the contention of learned advocate for the appellantassesee is not acceptable. The Tribunal has not committed any error in dismissing the appeal of the assessee. Hence, the present appeal is dismissed. The questions of law raised in this appeal is answered in favour of the revenue and against the assessee. Accordingly, we hold that the Tribunal was right in law in holding that benefit of Section 54E is available where the assessee has invested or deposited the whole or any part of net consideration in any specified asset within six months from the date of consideration received and not from the date of such transfer. - Decided against revenue.
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2015 (2) TMI 68
Capital gain on transfer of beneficial interest in the trust - Held that:- CIT(A) rightly held that taking 1/34 share will be improper as this is not the cost to the previous owner i.e. settler as far as appellant are concerned. Therefore, we are of the considered opinion that no capital gains can be levied on the assesees. The question of law involved in these appeals is answered in favour of the assessee and against the revenue. Therefore, we hold that the Tribunal was not right in holding that the capital gain is chargeable to tax on transfer of beneficial interest in the trust. - Decided in favour of assessee.
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2015 (2) TMI 67
Activity of growing roses, chikkus - whether an agricultural income exempt from tax? - Held that:- No hesitation in holding that the sale proceeds from the business of nursery carried on by the assessee constitute income from agriculture. See CIT vs. Soundarya Nursery (1998 (8) TMI 37 - MADRAS High Court) wherein the decision in the case of CIT vs. Raja Benoy Kumar Sahas Roy (1957 (5) TMI 6 - SUPREME Court) was considered and also SHRI PURANSINGH M. VERMA Versus THE CIT [ 2014 (11) TMI 901 - GUJARAT HIGH COURT] holding that the sale proceeds from the business of nursery carried on by the assessee constitute income from agriculture. Therefore the question of law framed in the reference and the tax appeal is answered against the Revenue and in favour of the assessee.
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2015 (2) TMI 66
Penalty u/s.271(1)(c) - Revenue’s appeal in-asmuch as it disputes the cancellation of the penalty in the sum of ₹ 3,36,107/-, may not be maintainable in view of section 268A prescribing monetary limit for the filing of appeals by the Revenue - Held that:- As a plain reading would show, it is the Instruction No.3/2011 dated 09.02.2011 which should apply in the instant case; the monetary limit for appeals before the appellate tribunal per which is at ₹ 3 lacs. Again, without doubt, the right to appeal is a statutory right, and it is trite law that vested right cannot be divested. Even granting so, the same could only be on the basis, and in terms, of or by an express provision of law. Section 268A of the Act clearly requires the appellate forums, being the appellate tribunal, high court and supreme court, to, while deciding the appeals by the Revenue preferred before them, have regard to, inter alia, the directions, instructions, etc. by the Board prescribing the monetary limits for filing its appeals before the said forums. The said directions, instructions, etc. thus assume part of and have the force of law. Further, the monetary limit prescribed is for regulating the filing of appeals or references by an income tax authority under the Act. - Whatever be the merits of the Revenue’s case, the appellate tribunal as a lower court is bound by the decisions by the hon’ble jurisdictional high court, which has taken a consistent view in favour of the Instructions by the Board in the matter, both prior and subsequent to section 268A, brought on the statute by Finance Act, 2008, being retrospective, so that they shall apply to appeals by the Revenue filed prior to the date of their issue and coming in to effect. Put differently, shall apply to pending appeals. In other words, the monetary limit prescribed per a circular/instruction issued u/s. 268A that shall apply qua an appeal is that in force at the time the appeal is heard and not when it is filed. The only recourse therefore for the Revenue would be to pursue the matter before the hon’ble court under review jurisdiction or before the hon’ble apex court, and not before the tribunal. - Decided against revenue.
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2015 (2) TMI 65
Deemed dividend - CIT(A) deleted the addition made by the AO u/s. 2(22)(e) - Held that:- Find considerable cogency in the contention of the Ld. Counsel of the assessee that the issue in dispute in the present case has been squarely covered in favor of the assessee by the decision of the Hon’ble Delhi High Court in CIT vs. Ankitech P Ltd. [2011 (5) TMI 325 - DELHI HIGH COURT ] stating that the legal fiction of section 2(22)(e) does not extend to “shareholder”. The fiction is not to be extended further for broadening the concept of shareholders. - Decided in favour of assessee.
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2015 (2) TMI 64
Disallowance of Provision for Doubtful Debt - Held that:- As decided in Vijaya Bank Vs. Commissioner of Income-tax [2010 (4) TMI 46 - SUPREME COURT] to understand the dichotomy, one must understand `how to write off'. If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor's account, it would constitute a write off of an actual debt. However, if an assessee debits `provision for doubtful debt' to the profit and loss account and makes a corresponding credit to the `current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after April 1, 1989. Since both the lower revenue authorities have not examined the issue in the light of the above decision, therefore, in the interest of justice, the matter is restored back to the file of the Assessing Officer for examining the issue de-novo. - Decided in favour of assessee for statistical purposes. Penalty u/s 271(1)(c) - Held that:- Since we have already set aside the addition towards provision for doubtful debts as aforesaid vide para no. 7 to 7.3, the penalty levied on this account is hereby quashed accordingly.- Decided in favour of assessee. Disallowance of Provision for Contractual Obligations - Held that:- The fact that the assessee had incurred a sizable portion of the provision as expenditure and the same has been allowed by the Assessing Authority itself is supporting the claim of the assessee that the expenses are accrued and the liability ascertained and the provisions are made on factual basis and they were not in the nature of any contingency of future expenses. The legal character of the provision for contractual obligation is in a way similar to the provision for warranty/ guarantee. Therefore, the discussion made in respect of the issue regarding provision of warranty equally applies to the provision for contractual obligations also. we restore back the issue to the file of the Assessing Officer for examining the issue de-novo. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 63
Transfer Pricing Adjustment - international transaction of ‘Sale of finished goods’ - Held that:- When we advert to the facts of the instant case, it is found that the TPO proposed the transfer pricing adjustment with the Nil ALP of the Commission transaction on the ground that no evidence was furnished about any services rendered by the foreign AE. The AO in his final assessment order dated 30.11.2012 has taken the ALP at Nil without anything further. Applying the ratio decidendi of Cushman and Wakefield India Pvt. Ltd. (2014 (5) TMI 897 - DELHI HIGH COURT) to the facts of the instant case, we find that the TPO was required to simply determine the ALP of this transaction unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1) of the Act. Since the authorities below have acted in contradiction to the ratio laid down by the Hon’ble Jurisdictional High Court in the case of Cushman (supra), we set aside the impugned order on this score and remit the matter to the file of AO/TPO for deciding it in conformity with the law laid down by the Hon’ble jurisdictional High Court in the case of Cushman (supra). - Appeal is allowed for statistical purposes.
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2015 (2) TMI 62
Non-est return of income - CIT(A) treated assessment framed on its basis u/s. 144 as ab-initio void - annulling the assessment order by CIT(A) - A.O. did not accept the appellant's contention that the appellant HUF never existed and that the ROI was never filed by it - Held that:- We find that CIT(A) after considering the submissions made by the Assessee has noted and given a finding that Assessee had never applied for PAN, the return of income was not verified and the return being not filed by the Assessee stand established and the return of income filed has to be treated as a scrap of paper filed by anonymous person reflecting fictitious income, assets and liabilities. He has further noted that the copy of statement of Shri Vinod Modi, ITP which was relied by the A.O for making the additions was never furnished to the Assessee nor the Assessee was afforded opportunity to cross-examine Shri Vinod Modi. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A). We therefore find no reason to interfere with the order of ld. CIT(A). - Decided against revenue.
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2015 (2) TMI 61
Non deduction of TDS on clearing and forwarding charges - disallowance u/s 40(a)(ia) - assessee’s submission that the amount paid to C & F agents includes the expenditure which has been reimbursed to the clearing and forwarding agents and there is no element of profit in it - Held that:- We find that there is no finding of Ld. CIT(A) that the amount paid by the assessee was not in the nature of reimbursement but on the contrary he has held that there cannot be any exemption from TDS even in case of reimbursement. As find that the issue of disallowance u/s. 40(a)(ia) amount paid to the clearing and forwarding agents with respect to the reimbursable expenditure was also before the Co-ordinate Bench Tribunal in the case of Gujarat Narmada Valley Fertilizer Company Ltd [2015 (2) TMI 1 - ITAT AHMEDABAD] held that on pure reimbursement of expenses no TDS is deductable. Against the aforesaid order of Tribunal, the matter was carried before Hon’ble Gujarat High Court by the Revenue who accepted the finding of Tribunal and dismissed the appeal of Revenue [2014 (4) TMI 235 - GUJARAT HIGH COURT]. Considering the aforesaid facts, we are of the view that the assessee’s contention that the expenditure which are on account of reimbursement and on which no TDS has been deducted needs to be re-examined de-novo. We therefore remit the issue to the file of AO to consider the submissions of the assessee and thereafter decide the issue in accordance with law and if the expenditure incurred by the assessee is on account of reimbursement, the same be allowed. The assessee is also directed to furnish all the required information to the AO so as to enable him to decide the issue. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 60
Reopening of assessment - assessee has made transaction of ₹ 10,24,100 (deposits in cash) in his saving bank account but no return of income was filed by the assessee - Held that:- All that the reasons recorded for reopening indicate is that cash deposits aggregating to ₹ 10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment donot make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we donot have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The Assessing Officer has opined that an income of ₹ 10,24,100 has escaped assessment of income because the assessee has ₹ 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment.- Decided in favour of assessee.
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2015 (2) TMI 59
Maintainability of the appeal - Tribunal jurisdiction to entertain an appeal filed against the order passed by the Director of Income-tax under section 271FA - Held that:- The appellate jurisdiction always lies with the forum who is higher in rank than the forum whose order is under challenge; meaning thereby the appellate court or jurisdiction can examine the order of the inferior court and not of the court or authority who is equivalent in rank. In the instant case, undeniably the order under section 271FA of the Act was passed by the Director of Income-tax who is equivalent in rank with the ld. CIT(A). On carefully examining the provisions of section 253(1) of the Act, in which the order of the Assessing Officer, which has been passed with the approval of the Commissioner of Income-tax pursuant to the Dispute Resolution Panel comprising of the Commissioner of Income-tax, can only be challenged before the ITAT by filing an appeal. In the light of these facts, when the order of the Assessing Officer passed with the approval of the Commissioner of Income-tax can only be challenged before the Tribunal, then how the order of the Director of Income-tax who is equivalent in rank with the ld. CIT(A) can be challenged before the ld. CIT(A). The only forum where this order of the Director of Income-tax can be challenged is the ITAT which is higher in rank to the Director of Incometax. Thus the appeal by the assessee has been rightly filed before the Tribunal and the Tribunal is competent to adjudicate the appeal on merit. - Decided against revenue.
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2015 (2) TMI 58
Adjustment of notional interest on account of extended credit period allowed to the AE - whether the aggregate period extended by the assessee to the AE which is more than the average credit period extended to the non-AE would constitute international transaction - Held that:- After the insertion of explanation to section 92B(1), the payment or deferred payment or receivable or any debt arising during the course of business fall under the expression international transaction as per explanation. Therefore, in view of the expanded meaning of the international transaction as contemplated under clause (i) (e) of explanation to section 92B(1), the delay in realization of dues from the AE in comparison to non-AE would certainly falls in the ambit of international transaction. However, this transaction of allowing the credit period to AE on realization of sale proceeds is not an independent international transaction but it is a closely linked or continuous transaction along with sale transaction to the AE. The credit period allowed to the party depends upon various factors which also includes the price charged by the assessee from purchaser. Therefore, the credit period extended by the assessee to the AE cannot be examined independently but has to be considered along with the main international transaction being sale to the AE. The transaction of sale to the AE and credit period allowed in realization of sale proceeds are closely linked as they are inter linked and the terms and conditions of sale as well as the price are determined based on the totality of the transaction and not on individual and separate transaction. The approach of the TPO and DRP in analyzing the credit period allowed by the assessee to the AE without considering the main international transaction being sale to the AE will give distorted result by disregarding the price charged by the assessee from AE. Though extra period allowed for realization of sale proceeds from the AE is an international transaction, however, for the purpose of determining the ALP, the same has to be clubbed or aggregated with the sale transactions with the AE. Even by considering it as an independent transaction the same has to be compared with the internal CUP available in the shape of the credit allowed by the assessee to non AE. When the assessee is not making any difference for not charging the interest from AE as well as non-AE then the only difference between the two can be considered is the average period allowed along with outstanding amount. If the average period multiplied by the outstanding amount of the AE is at arm’s length in comparison to the average period of realization and multiplied by the outstanding from non AEs then no adjustment can be made being the transaction is at arm’s length. The third aspect of the issue is that the arm’s length interest for making the adjustment. Both the TPO and DRP has taken into consideration the lending rates, however, this is not a transaction of loan or advance to the AE but it is only an excess period allowed for realization of sales proceeds from the AE. Therefore, the arm’s length interest in any case would be the average cost of the total fund available to the assessee and not the rate at which a loan is available. Accordingly, we direct the Assessing Officer/TPO to re-do the exercise of determination of ALP in terms of above observation. - Decided in favour of assessee for statistical purpose.
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2015 (2) TMI 57
Calculation of indexed cost of property - CIT(A) enhanced the rate of land to ₹ 17/- wherein, the AO adopted fair value of ₹ 11/- per sq. mtr for undeveloped big area for the year 1981 - whether land transferred by the assessee as agricultural land and not coming within the provisions of sec 2(24)(iii)(a) or 2(14)(iii)(b) of the income Tax Act, 1961 and as such not liable for Capital Gains Tax? - Held that:- In cross objection the assessee has taken the additional ground that the assessee has sold the agricultural land property, thus assessee has taken a legal issue in the cross objection for the first time before us. Therefore, as per decision of the Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Tollaram Hassomal reported in ( 2006 (3) TMI 136 - MADHYA PRADESH High Court) the matter is remitted to the file of the AO for verification of the same. - Decided in favour of assessee for statistical purposes. AO directed to work the fair market value as on 1-4-1981 at ₹ 25/- per.sq.mtr. - Held that:- he Fair Market Value in relation to a capital asset means the price that capital asset would ordinarily fetch on sale in the open market on the relevant date. It is also a fact that there is no rule prescribed for the determination of the Fair Market Value. In this regard, under these facts and circumstances of the case, in our opinion, it will be fair and reasonable to adopt the Fair Market Value as has been worked out by the Inspector of the Department. Trinal corectly directed AO to o work out the Fair Market Value as on 1.4.1981 at ₹ 25/- per sq. mtr. - Decided against revenue.
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2015 (2) TMI 56
Additional depreciation on plant and machinery - disallowance as appellant was not engaged in "manufacture or production of an article or thing" as required under Section 32(1)(iia) - Held that:- the post amended provision of Section 32(1)(iia) clearly stipulate that there should be manufacture or production of article or thing. The Tribunal in AY 2004-05 had categorically held that the intermediary Bitumen mix is not article or thing manufactured or produced by the assessee, therefore, the order of the Tribunal in assessee’s own case for AY 2004-05 is squarely applicable to the instant case. Therefore, we uphold the order of the CIT(A) in upholding the disallowance of additional depreciation as correct and in accordance with law and no interference is called for. - Decided against assessee. Re-computation of normal depreciation u/s 32(1)(ii) with reference to the enhanced value of the assets on which additional depreciation was disallowed in the earlier assessment year - Held that:- Under the scheme of the act, depreciation is to be allowed as a percentage of written down value of the assets. Thus, for one year if the claim of depreciation is not allowed then the opening written value of the same assets in the succeeding year to the extent of disallowance gets enhanced. In the instant case, in the earlier assessment years additional depreciation claimed by the assessee was not allowed by the Assessing Officer. The view of the Assessing Officer was confirmed by the ITAT. Since the additional depreciation was disallowed in earlier years to the extent of disallowance the written down value is to be enhanced and the depreciation is to be computed accordingly. This claim of the assessee is reasonable and justified and accordingly we direct the AO to compute normal depreciation u/s 32(I)(II) of the Act with reference to the enhanced value of the assets on which additional depreciation is disallowed in the earlier assessment year. - Decided in favour of assessee.
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2015 (2) TMI 55
Discount on assigned liabilities disallowed - Held that:- The difference between amount received by the assessee and total amount payable at a future date represents the cost of borrowings which is deductible expenditure over a period for which the amount received initially has been used, thus we do not find any merit in the order of the lower authorities for disallowing discount on ascertained liability u/s.37(1) of the I.T. Act. - Decided in favour of assessee.
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2015 (2) TMI 54
Loyalty commission - non genuineness of expenditure - whether be treated as capital expenditure and to allow depreciation on it? - Held that:- In this case genuineness of the payment claimed to have been made to “PSL” as loyalty commission is not disputed. It is also undisputed fact that it is an arm’s length transaction. We find that “PSL” has made purchases from the assessee-company to the tune of ₹ 1.60 crores in financial year 2005-06, ₹ 2.92 crores in financial year 2006-07, ₹ 2.70 crores in financial year 2007-08 and ₹ 1.17 crores in financial year 2008-09 (till November, 2008). Considering the high volume of supplies made by the assessee-company to “PSL”, it could not be said that the purpose of the said payment of commission could not be established by the assessee. It is not abnormal to enter into an agreement with intending heavy-weight purchaser party before entering into actual sale transacton with the said party. The purpose of the payment of loyalty commission was clearly for business of the assessee, and it is not for the department to sit over the judgment of the assessee that how the business has to be conducted and the expenditure incurred could not be disallowed, till it shows that the payment itself was not genuine or was made for some purpose other than the business purpose of the assessee. No valid reason for the said disallowance could be made out by the Revenue. In these facts, we are of the view that the amount of loyalty commission paid by the assessee could not be disallowed. CIT(A) has passed a well reasoned speaking order on this issue. The assessee has derived enduring benefits by paying loyalty commission to PSL and has effected sales in crores in the subsequent years to PSL. It is not the case of the assessee that PSL has procured the goods from the assessee-company only for relevant Asstt.Year 2006-07. We find that the assessee is well aware of the fact that by paying loyalty commission, it shall be entitled to enduring benefits for subsequent many years, and PSL will retain as its customer. In these facts of the case, we confirm the order of the CIT(A) in holding that the assessee has paid the amount for enduring benefits for many years, and therefore, it should be treated as capital expenditure and depreciation to be allowed on this amount. Levy of penalty u/s.271(1)(c) - Held that:- The only dispute was whether the expenditure of loyalty commission was capital or revenue in nature. There can always be an honest difference of opinion on this issue between the parties. Merely because certain expenditure was held to be capital in nature and allowed depreciation thereon, it could not be said that the assessee is guilty of concealment of income or filing of inaccurate particulars of income. - Decided in favour of assessee.
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2015 (2) TMI 53
Accommodation entry - bogus purchases - whether CIT(A) has erred in deleting the addition of ₹ 1.40 crore without fully appreciating the fact that the MD/Chairman of the assessee company, surrendered this amount of ₹ 1.40 crore as undisclosed income - Held that:- At the time of survey it was clearly noted by the I.T. Authority conducting survey that the amount of RS.1 ,40,00,000/- was not reflected in the books of account although the cheque payment has been made by the appellant company. This fact has been mentioned by the AO in the order itself. Time and again it has been reiterated by the appellant, its Accounts Manager and it's Chairman/MD during the time of survey and during assessment proceedings also that the payment under reference made to B.T.Technet Ltd is advance only. This clearly means that the same has not been debited in the profit and loss account. (From perusal of the assessment order it appears that AO has not bothered to see the P&L account and b/s of the appellant.) Even final printed balance sheet has also been produced before the undersigned and on going through the P&L account, it is seen that amount of ₹ 1.40 crores has not been debited in the P&L account; rather the same has been shown as advance in the balance sheet and grouped under the sub head 'Loans and advances' in the asset side. [Thus as per principle of accountancy also an amount which is appearing as advance could not have been debited in the P&L account.] Thus, though on the day of survey this invoice was not recorded in the books of the appellant company (the intention of the appellant might be to claim this sum as bogus expenditure but in view of the survey conducted by the department on 27.12.2006, in the final books of accounts which is finalised as on 31;10.2007, this amount has not been claimed as an expenditure and therefore shown as advance) but subsequently when the books are finalised, the payment made against this invoice has been shown as advance. The reasons for the same may be the survey conducted by the Department, but the facts remains that this amount has not been debited in the P&L account; rather it has been directly shown as advance. (Based on this P&L Account and balance sheet the appellant has re-revised its return on 29th March 2008.) Therefore, an amount which has not been debited in the P&L account and therefore not claimed as expenditure cannot be disallowed even though the invoice may be in the nature of accommodation entry. Therefore without commenting on the correctness or otherwise of the conclusion of the AO that this invoice is in the nature of accommodation entry, the addition made by the AO cannot be upheld. We further find that Ld. CIT(A) has further observed that this amount has not been capitalised also as if it is capitalised then it will not appear in the balance sheet as 'advances'. Even otherwise no addition is found in the schedule of fixed assets during the year corresponding to this payment. Thus no depreciation has also been claimed. Thus there is no case of any disallowance of depreciation also. We find that Ld. CIT(A) has observed that there is no revenue effect in the case of the assessee based on this invoice. Therefore, he rightly held that the addition so made by the AO is, therefore, directed to be deleted. In view of the above, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by dismissing the appeal filed by the Revenue. - Decided in favour of assessee.
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Customs
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2015 (2) TMI 82
Maintainability of appeal - Waiver of pre-deposit - Penalty u/s 11AC - Clearance from COD not obtained - Held that:- Stand of the tribunal that the application is not maintainable because of nonproduction of clearance from CoD. is not sustainable. - The tribunal is directed to dispose of the said application afresh in accordance with law within two months from the date of communication of this order after giving an opportunity of hearing to all the interested parties. - Following decision of STEEL AUTHORITY OF INDIA LTD. Versus CESTAT, KOLKATA [2013 (10) TMI 1097 - Calcutta High Court] - Writ disposed of.
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2015 (2) TMI 81
Rejection of the request of the importers for retesting of samples of the imported goods in any laboratories other than CRCL - Held that:- Representative samples were drawn and same were sent to CRCL laboratories. The test report of CRCL has been objected by the appellant. It was also revealed from the records that CRCL has no equipment to test the represented samples of the appellant. Therefore, the test report given by CRCL is in doubt. The appellant is having a right to ask retest of the samples from any other laboratory other than CRCL when the CRCL is not having equipments to examine required product. In these circumstances, the test report of CRCL is not acceptable - Therefore, the impugned order is set aside - Decided in favour of appellant.
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2015 (2) TMI 80
100% EOU or free trade zone - DTA Clearances without permission - there was no manufacturing operation at all carried out by the appellant - Held that:- CPT and PMC were removed from DTA without carrying out any manufacture activity because the CPT and cabinet imported were not mentioned to be any raw-material in the Bill of Entry as well as invoices of the exporter. Degaussing does not amount to manufacture because it does not change the character and nature of the input. CPT itself were imported. Those were capable of performing their own function without undergoing any processing. - Appellant did not get any permission for carrying out degaussing and alignment of CRT from the appropriate authority. Similarly, plastic cabinets were imported without indicating any manufacturing process to be carried thereon in absence of entry in LOP in that regard. Similarly spray painting does not amount to manufacture. Those were neither meant for export nor independently manufactured but used as accessories. As per LOP, CPT and moulded cabinets were raw-materials and those were not subjected to a manufacturing process for which those are not included in the list of items to be manufactured while LOP was granted. Therefore, CPT and PMT cleared in DTA were mere imported materials and components only. The appellant also did not inform to the Department about carrying out of any activity to be called ‘degaussing’ and ‘spray painting’ as manufacture. The terminology ‘degaussing’ and alignment of CRT and spray painting of plastic moulded cabinets were only nomenclature given by appellant to give an impression that certain processes were carried out on such goods imported and sold in the DTA. There was failure to fulfil the conditions of the Notification 52/2003-Cus., dated 31/03/2003. The duty free goods not being used in manufacture violation of condition of export calls for recovery of the customs duty foregone by the Department. - The citations relied on by the appellant are not profitable to it when there was no manufacturing of CPT and cabinet activity carried out by them. Degaussing and spray painting is not known in trade parlance as manufacturing activity. When the goods imported were declared to be used in manufacturing process, but not so used, the duty foregone on import thereof is recoverable. The goods sold in DTA were the imported CPT and PMC misconceiving that manufacturing was done. Thus, the benefit of Notification claimed is not tenable and plea of excise duty is immaterial. Customs duty is recoverable. - Decided against assessee.
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2015 (2) TMI 79
Denial of duty exemption under Notification 21/2002-Cus – As the goods imported was secondary or defective – import of Non-alloy steel bars / rounds / flats / squares - Held that:- In view of the submissions made by the learned counsels appearing on either side, the respondent is directed to dispose of the Appeal, in C/61/2006 MAS, filed by the petitioner, on merits and in accordance with law, within a period of three months from the date of receipt of a copy of this order. The petitioner is directed to furnish a copy of the Appeal, in C/61/2006 MAS, filed by the petitioner, to the respondent, along with a copy of this order - Petition disposed of.
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2015 (2) TMI 78
Stay application - Held that:- It is seen that in all these cases, the appellants have deposited 7.5%/10% of the duty or penalty as pre-deposit as required under the law and therefore the stay application filed by them was not required to be filed. Accordingly, all the stay applications are rejected as infructuous - Stay denied.
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2015 (2) TMI 77
Demand of differential duty - Clearance of imported coal - Supreme Court vide interlocutory order directed the appellants to furnish security by way of fixed deposit receipt in the name of Commissioner of Customs for an amount of ₹ 3,03,45,130/- & ₹ 9,10,423/- and thereafter provisional assessment was resorted to and coal was allowed to be cleared - Proceedings initiated have culminated in confirmation of differential duty demand of ₹ 6,35,22,913/- with interest and penalty equal to the same amount. Further, goods have been confiscated and redemption fine has been imposed after confiscation - Held that:- When the matter was called, nobody is present on behalf of the appellant and instead, a letter has been received from the learned counsel stating that an appeal has been filed against the [2014 (8) TMI 246 - CESTAT BANGALORE] with respect to a similar and identical issue and the SLP is listed for hearing on 13-10-2014. Since the outcome would have an impact on the appeal, the learned counsel has requested that matter may be kept pending. This is a valid ground for keeping the appeal pending, because appeal has been filed on 11-8-2014 and on 6-8-2014, the Finance Bill, 2014 became an Act and consequently, the procedure of granting waiver of pre-deposit and granting stay is no longer required to be followed. The appellant is required to deposit an amount of 7.5% (in this case the order was passed by the Commissioner and this is the first appeal) of the duty. In this case, appellants have not deposited the amount and the fixed deposit receipt in the name of Commissioner of Customs cannot be considered as a pre-deposit in terms of the provisions of Customs Act, 1962. - appellant should be given time to make good the omission so that appeal can be heard in due course. Accordingly appellants are directed to deposit 7.5% of the duty demanded within eight weeks and report compliance on 29-12-2014. If no compliance is reported on that date, appeal shall be rejected without any further extension of time for making the payment - Decided conditionally in favour of assessee.
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2015 (2) TMI 76
Rectification of mistake - Non consideration of issue raised by the appellant - Held that:- It is admitted fact that while passing the final order by this Tribunal, both the Members have not given their finding on the issue whether the impugned goods are liable for confiscation under Section 111(d) of the Customs Act, 1962 read with Rule 11 of the Foreign Trade (Regulation) Rules, 1993 in the facts of the case. If both the Members have considered the issue and given their finding and both the Members agrees that goods are not liable for confiscation under Section 111(d) of the Customs Act, 1962, in that case the matter is not required to be referred to the Third Member for consideration. Therefore, it is quite necessary to answer the issue whether the goods are liable for confiscation under Section 111(d) read with Rule 11 of Foreign Trade (Regulation) Rules, 1993 or not. Matters are required to be relisted for consideration of the issue whether the goods are liable for confiscation under Section 111(d) of the Customs Act, 1962 read with Rule 11 of Foreign Trade (Regulation) Rules, 1993 or not; thereafter, if required, to be referred to the Third Member to answer the reference. - Following decision of Suzlon Infrastructure Ltd. [2009 (5) TMI 64 - BOMBAY HIGH COURT] - Matter remanded back - Decided in favour of appellant.
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PMLA
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2015 (2) TMI 75
Attachment of certain immovable properties - Single Judge held that continued attachment of the property was unsustainable - Held that:- Single Judge in the impugned order has returned categorical findings on interpretation of the provisions of the Act. It is also argued that in other petitions entailing the same question coming up before the learned Single Judge, the learned Single Judge is proceeding on the premise that the findings returned in the impugned order are final. - interpretation adopted by the learned Single Judge of the provisions of the Act, is erroneous and that though the learned Single Judge has taken note of the contention of the appellant of the amendment of the year 2013 to Section 8 thereof but has not adjudicated on the said aspect. - senior counsel for the respondent / writ petitioner agrees that the impugned order be set aside and the writ petition filed by the respondent / writ petitioner as well as this appeal be disposed of by directing the Appellate Authority under the PMLA to decide the appeal already preferred by the respondent / writ petitioner against the order aforesaid of attachment of properties within the time to be fixed by this Court. Accordingly, we dispose of this appeal by setting aside the impugned order / judgment and by disposing of the writ petition (from which this appeal arises) filed by the respondent / writ petitioner by directing the Appellate Authority under PMLA to dispose of the appeal preferred by the respondent / writ petitioner against the order of attachment within a period of eight weeks - Appeal disposed of.
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Service Tax
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2015 (2) TMI 101
Exercise of power u/s 87 - Proceedings for recovery of service tax demand - adjudication for the final demand with penalty or without penalty is yet to be finalised by the competent authority - Held that:- When the demand of tax is yet to be adjudicated, it cannot be said as tax payable, for which resort to section 87 of the Act may be available. - The competent authority before whom the proceedings under section 73 of the Act for adjudication of the tax and other demands are pending shall be finalised preferably within a period of three months from the receipt of the order of this Court and if either party is aggrieved by the adjudication proceedings, the remedy available shall be available before the competent authorities in accordance with law. - Henceforth, the operation of the impugned orders (AnnexureA) shall remain stayed and suspended with the further observation that the amount already recovered pursuant to the orders (AnnexureA) shall be subject to the final quantification of the demand of the tax, if any. - The question for applicability of section 87 of the Act before adjudication proceedings are finalised, shall not get concluded by the present order. - Petition disposed of.
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2015 (2) TMI 100
Rent a cab service - whether the service of providing buses on contract basis by the appellant to various factories and firms on monthly rental basis can be classified as rent a cab service or not - main business of the appellant is transporting of passengers with the city of Bangalore and nearby mofussil areas. - Held that:- Words used are services provided by a rent-a-cab scheme operator. Therefore firstly we have to decide whether BMTC can be considered as a rent-a-cab operator which according to the Finance Act means any person engaged in the business of renting of cabs. Apparently BMTC cannot be considered to be a person engaged in renting of cab service at all. The business undertaken by BMTC is to provide bus facility/transport facility to the citizens of Bangalore city and the main activity is running the buses in the city for the convenience of citizens and not a rent-a-cab scheme operation. We find that the definition itself excludes BMTC from the category of service providers. Appellant did not collect a monthly rent as observed by the Commissioner in his order. The charges are made on the number of kilometers actually run is multiplied by the amount fixed per kilometer. A rent-a-cab scheme a monthly rent is fixed and minimum number of kilometer may also be fixed crossing which the customer may have to pay extra. If the number of kilometers falls below the number and even if it is substantially low, yet the customers would be liable to pay the entire rent. That is not the case here. Moreover as submitted by the learned counsel even in such cases where buses are given on kilometer basis, passengers have to be picked up from various points and dropped destination as in the case of stage carriage. Further, we also find that the show-cause notice was issued in September 2011 and the demand relates to the period substantial portion what was taken is time-barred. - For the same reasons, imposition of penalties under various sections of Finance Act also cannot be sustained. Appellants have made out a strong case and we find that the impugned order cannot be sustained - Decided in favour of assessee.
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2015 (2) TMI 99
Utilisation of Cenvat credit for payment under Reverse charge - demand was confirmed on the ground that the appellants had not paid the service tax in cash on Business Auxiliary Service (BAS) received from commission agents appointed abroad under reverse charge mechanism (but paid the same from CENVAT credit which was not permissible) - Held that:- The contentions of Departmental Representative that the ratio of various judgements of the High Courts referred [2013 (8) TMI 215 - MADRAS HIGH COURT] and [2014 (5) TMI 461 - Karnataka High Court] holding that the service tax under GTA services can be paid out of CENVAT credit under reverse charge mechanism does not hold for payment under reverse charge mechanism in terms of provisions of section 66A ibid requires a detailed analysis. However, having regard to the fact that the decision of the Tribunal in the case of Indian Acrylic Ltd. (2013 (1) TMI 460 - CESTAT, NEW DELHI) (involving same issue) that the CENVAT credit can be utilised for paying such service tax and in view of the fact that the situation is revenue neutral in as much as even if the impugned service tax was paid in cash, the same indisputedly was available as CENVAT credit, which in case the same could not be utilised, would prima facie be available for refund in cash, we are of the view that the appellants have made out a good case for complete waiver of pre-deposit and we order accordingly, staying recovery of the impugned liabilities during pendency of the appeal. - Stay granted.
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2015 (2) TMI 98
Demand of inadmissible CENVAT Credit - Revenue contends that raw materials sent to job worker making finishing goods for the use of the appellant in commercial construction services shall not make the appellant eligible to claim cenvat credit on such finished goods - Held that:- Prima facie, it appears from para 7.16 read with para 7.4, 7.10, as well as para 7.13 and 7.15, that direction for predeposit is warranted in view of prejudice caused to Revenue. Accordingly, appellant is directed to deposit ₹ 20,00,000 within 8 weeks from today and make compliance on 8.3.2015. Subject to compliance with the above direction, there shall be waiver of predeposit and stay of recovery of balance demand during pendency of appeal - Partial stay granted.
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2015 (2) TMI 97
Service tax demand - Pre deposit order - Held that:- Considering the gravity of the matter and the taxability of the receipts, appellant is directed to deposit ₹ 40,00,000/- (Rupees Forty lakhs only) in two equal monthly instalments of ₹ 20 lakhs each payable by 25.1.2015 and 25.2.2015 and make compliance on 9.3.2015. Failure to make deposit any of the instalments will render this order vacated and appeal shall stand dismissed. Within a week of deposit, appellant shall produce challan before the learned adjudicating authority to satisfy that this order is carried out. Upon deposit of both the instalments, appellant shall make compliance before Tribunal on 9.3.2015 - Decided partly in favour of assessee.
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2015 (2) TMI 96
Waiver of pre deposit - Management, Maintenance or Repair Service and Erection, Commissioning and Installation Service - Service tax on the entire contracted value inclusive of materials - Held that:- they were entitled to exemption notification no. 45/210 ST dated 20.072010. The expression inclusive of taxes only means that there would be no further rise in the value of the contracts and there is nothing in the said contract that service tax have collected from the customers. In the absence of any indication of collection of service tax from customers, the demand fixed by adjudication authority cannot be appreciated. It is further seen that in any case the value of the materials, is not required to be added in the value of the services, in terms of provision of Notification No.12/2003-ST dated 1.3.2003. The contract itself shows the value of the materials separately and the value of the service separately. The appellants have also furnished copies of the VAT documents showing that VAT stands paid by them in respect of such materials. The adjudicating authority has denied the benefit of the same on the sole ground that the appellants have not claimed the Notification in the ST-3 returns filed by them. - At the time of filing the ST-3 Returns, the appellant was admittedly paying duty only on the value of the services, which fact itself is indicative that value of materials was not being taken into consideration. Otherwise also, mere non-mention of the Notification in the ST-3 Returns, does not give a reason to the adjudicating authority to deny the benefit of the same, without otherwise examining the applicability of the Notification in question. Admittedly, the Notification is applicable and as such, we are of the view that appellant has a good prima facie case so as to allow this stay application unconditionally - Stay granted.
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2015 (2) TMI 95
Site formation and clearance, excavation and earth removing and demolition - top soil removal and excavation of mud/soil upto the level of dolomite stone - Invocation of extended period of limitation - assessee contended that services provided by it do not fall within the ambit of “site formation and clearance, excavation and earthmoving and demolition” but fall more appropriately within the ambit of “mining” service, which was introduced subsequently w.e.f. 1-6-2007. “Mining” services is defined in Section 65(105)(zzzy) as a service provided in relation to mining, mineral oil or gas. Held that:- On a consideration of the services provided by the appellant to M/s. Lafarge India, it is clear that the service does not fall within the ambit of “mining” service, since no part of the petitioner’s obligation under the agreement with M/s. Lafarge India Pvt. Ltd., relates to mining or extraction of minerals. The agreement provides only for removal of overburdens, an activity falling clearly within the ambit of Section 65(97a) of the Act, prima facie. - Stay granted partly.
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2015 (2) TMI 94
Storage or warehousing service - facility of storage of liquid oxygen in the hospital premises - Held that:- The undisputed facts are that the respondent are manufacturers of various gases including medical grade liquid oxygen which during the period of dispute was supplied to KHRC, Noida. There is also no dispute the respondent had also supplied storage tank to KHRC and in terms of their agreement with the hospital were responsible for its maintenance of the tank and its regular inspection as per the provisions of Explosives Act. The oxygen gas sold by the respondent to KHRC was being stored in the tank and as such the same was in the custody or control of the hospital. Therefore, the respondent cannot be treated as storage or warehouse keeper in respect of the oxygen stored in the tank installed in the premises of KHRC. In view of this, we do not find any infirmity in the impugned order. The Revenue’s appeal is dismissed. - Decided against Revenue.
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2015 (2) TMI 93
Extension of time to file reply to the show cause notice. - Adjudicating Authority without accepting or rejecting their requests for such extensions, passed the order - Held that:- If an assessee has been causing appearance before the Adjudicating Authority on each and every date of hearing so fixed by him, and is making a request for extension of time, the Adjudicating Authority is under a legal obligation to respond to the said request either by extending the period or by rejecting the request. If the Adjudicating Authority was of the view that the appellants are intentionally delaying the proceedings, he could have rejected the request and made the same known to the assessee at the time of hearing on 24-10-2013. Non-communication of the decision, on the said requests, keeps an assessee in dark, who may entertain a view that such request stands granted by the Adjudicating Authority and he would file the reply within the extended period. - Matter remanded back - Decided in favour of assessee.
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2015 (2) TMI 92
Availability of Cenvat credit of service tax paid on outdoor catering - charging of the cost of outdoor catering from the employees - Held that:- As regards the availability of credit, where the employees are not charged, I find that the issue is covered in favour of the assessee. The appellants are not contesting the credit involved in respect of the cases where the cost is being recovered from the employees. Accordingly, I set aside the impugned order and direct the authority below to quantify the exact quantum of credit required to be reversed and also to verify the appellants’ claim of reversal of the same. As regards interest, if the credit stands reversed before utilisation, the interest would not be leviable in terms of Karnataka High Court decision [2011 (4) TMI 969 - KARNATAKA HIGH COURT]. The adjudication authority would also get the said fact verified and would pass fresh orders accordingly. - As regards penalty, I agree with the ld. Advocate that it is not a case of any mala fide intention so as to invoke the penal provision. Accordingly penalty imposed is set aside. - Decided in favour of assessee.
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Central Excise
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2015 (2) TMI 90
Waiver of pre deposit - Penalty u/s 11AC - Held that:- It is evident from the materials available on record that this is a case where the demand is more than ₹ 6 Crores, and it is evident from the record that the appellant, has been sincere and diligent in pursuing the appeal. The said fact is fortified by the action of the appellant in filing an application for early hearing of the appeal and this action of the appellant only shows his bona fides in prosecuting the appeal as well as the miscellaneous application. The Tribunal has merely ordered pre-deposit of the entire amount of ₹ 6 Crores without taking into account any one of the plea as made by the appellant in the application for waiver of pre-deposit. As pleaded by the learned counsel for the appellant, the Tribunal has neither gone into the merits of the case nor considered the undue hardship of the appellant. That apart, the main plea of the appellant that the activity carried out by them could not be said to be manufacture within the meaning of Section 2 (f) (iii) of the Act has not at all be considered by the Tribunal. To that extent, this Court is of the considered opinion that the appellant's plea of prejudice deserves to be accepted. - order under challenge is set aside and this appeal is disposed of and the Tribunal is requested to re-hear the miscellaneous application for stay and waiver of pre-deposit during the 2nd week of February, 2015. - Appeal disposed of.
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2015 (2) TMI 89
Penalty u/s 11AC - Whether the CESTAT was right in reducing the penalty to ₹ 1,00,000/= contrary to the mandatory provision of Section 11AC of the Central Excise Act, 1944 and in view of the decision of the Supreme Court in the case of Sony India Ltd. - Vs - Commissioner of Central Excise, Delhi reported in [2004 (5) TMI 69 - SUPREME COURT OF INDIA] - Held that:- Following decision of The Commissioner of Central Excise Versus M/s. Mefco Engineers (P) Limited [2014 (12) TMI 863 - MADRAS HIGH COURT] - and Union of India - Vs - Dharamendra Textile Processors (2008 (9) TMI 52 - SUPREME COURT) substantial question of law raised and admitted is answered in favour of the Revenue and against the assessee - Decided in favour of Revenue.
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2015 (2) TMI 88
Whether the Tribunal is justified in allowing the assessee's appeal against the impugned O.I.A. on account of the doctrine of merger while the subject matters of the assessee's appeal and the department's appeal before the Commissioner appeal against the common order in original are entirely different - Held that:- It is seen that the order of the Adjudicating Authority resulted in two appeals, one at the instance of the assessee and the other at the instance of the Revenue. In the earlier appeal filed by the assessee, namely Appeal No.63 of 2006 dated 12.7.2006, the Commissioner (Appeals) clearly held that the transportation charges should not be included in the assessable value for payment of duty. He further held that the work site could be a "place of delivery" and not "place of removal" and hence the cost of transportation from factory to the work site should not be included in the value for payment of duty. Hence, the entire show cause notice came to be dropped. In the light of such order, the plea of the Revenue is that there is no doctrine of merger in the present case cannot be countenanced. What the Revenue seeks to review in the further appeal against the adjudication order is that the demand was made in the show cause notice on the basis of sale price. When the Commissioner (Appeals) vide order dated 12.7.2006 in Appeal No.63 of 2006 has already held that the demand in the show cause notice is not maintainable, there is no scope for the Commissioner (Appeals) to review that order in the appeal filed by the Department. No reason to fall back upon this decision, as the facts in the present case, as stated above, are distinguishable. In the present case, the issue raised by the assessee and the Revenue is one and the same. When once the first Appellate Authority has set aside the order of the Adjudicating Authority setting aside the demand, thereby upholding the assessable value, it should be treated as the order passed by the Adjudicating Authority is merged with the Order-in-Appeal. Accordingly, we find no infirmity in the order of the Tribunal. - Decided against Revenue.
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2015 (2) TMI 87
Penalty u/s 11AC - Held that:- Issue stands covered by the decision of the Supreme Court in Union of India - Vs - Dharamendra Textile Processors (2008 (9) TMI 52 - SUPREME COURT) and Union of India- Vs - Rajasthan Spinning and Weaving Mills (2009 (5) TMI 15 - SUPREME COURT OF INDIA). - Decided in favour of Revenue.
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2015 (2) TMI 86
Discharge of duty liability on subsequent fixation of glass as also use of metal/rubber products amounts to further manufacture - Held that:- Appellant was manufacturing doors, windows and frames of the same at their factory located at Bhiwadi, Rajasthan. The same were being cleared by them on payment of duty, to their head office located at Gurgaon where glass and other rubber/metal fitments were being done at site so as to fix the doors and windows. - fixation of glass in already manufactured doors cannot be held to be emerging of a new product inasmuch as doors remain doors and windows remains windows. There is nothing on record to show that after the fixation of glass on the doors and windows, the same can be removed as such, without breaking, etc., or in the same position in which case it has to be held that they have become immovable property. - no infirmity in the views of the Commissioner (Appeals). Admittedly, the said doors and windows have discharged the appropriate duty at the time of their removal from Bhiwadi factory. After putting glass in the same, they do not acquire a different name or character or different use so as to held that activity undertaken by the assessee at the site has resulted in any manufacturing activity. - Decided against Revenue.
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2015 (2) TMI 85
CENVAT Credit - Validity of invoices on which credit is taken - Held that:- Chassis manufactured and cleared from Jamshedpur were actually received by the appellant for the purpose of fabrication of the body. The order of the original adjudicating authority reveals that he has co-related the invoices issued by Jamshedpur and Bombay and has found that all the requisite particulars establish that the same chassis were received by the Bombay office from the Jamshedpur office. We note that the provisions of Rule 57G were amended by way of introducing sub-rule (11) of the said Rule on 9-2-1999 which is to the effect that if there is no dispute about the duty paid character of the inputs and receipt of the same by an assessee, and if the Assistant Commissioner is satisfied about the above facts, the Cenvat credit shall not be disallowed on the technical and procedural ground of the invoices not being proper invoices. As such, we are of the view that in the absence of any dispute about the availability of credit, duty paid character of the chassis their receipt by the appellant and their subsequent clearance after fabrication of bodies on the same, denial of credit would not be justified. We accordingly, set aside the impugned order - Decided in favour of assessee.
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2015 (2) TMI 84
Condonation of delay - Improper advice - Held that:- there is nothing which instills confidence in our mind that the appellant has bona fide reasons for not filing the appeals in time before the Bench. It is also not explained as to how the said impression was carried forth for long period despite there is being a huge confirmation of the demand. We are not convinced by the reasons given by the ld. Counsel during hearing as well as from the affidavit and the applications. We are of the view that no justifiable reasons have been given for condoning the delay. - Condonation denied.
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2015 (2) TMI 83
Adjustment of refund with interest due on belated duty - Held that:- Advocate has drawn my attention to letter dated 29-3-2012 addressed by the Superintendent to the appellant giving details of interest against which the balance amount of rebate of ₹ 8,01,573/- was adjusted. The said letter also mentions that “higher officers at the relevant time were of the opinion that no show cause notice be issued for recovery of interest, hence no show cause notice was issued for the above amount. Learned Advocate has also made a statement at bar that even subsequent to the said letter, they have not been issued a show cause notice for confirmation of any demand of interest. It is well settled law that any demands from an assessee are required to follow the principle of natural justice, which includes issuance of show cause notice, affording a reasonable opportunity to the assessee to put forward its case and adjudicating the matter thereof. Such type of interest confirmation without following due principles of natural justice cannot be appreciated inasmuch as they represent only one sided view of the Revenue. As such, the adjustment of sanctioned rebate claims against the interest amount, which never stand adjudicated by the department, cannot be upheld in terms of law declared by the Hon’ble Karnataka High Court [2011 (3) TMI 571 - KARNATAKA HIGH COURT ]. Accordingly, all the appeals are allowed to the extent of rebate claim of ₹ 8,01,573/- with consequential relief to the appellants.
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CST, VAT & Sales Tax
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2015 (2) TMI 91
Exemption from payment of tax under the Kerala General Sales Tax Act - Notification withdrawing exemption granted by previous Notification - Held that:- petitioner being a packaged drinking water unit is thus undoubtedly entitled to the exemption granted under S.R.O. No. 731/2004. This is the purport and import of exhibit judgement [2008 (7) TMI 946 - KERALA HIGH COURT] annulling S.R.O. No. 377/2005 which has to be given full effect in letter and spirit. It is reported that order of assessment for the year 2000-01 stands remitted to the first respondent under exhibit P5 appellate order. Nothing prohibits the first respondent from taking into consideration the effect of SRO No. 731/ 2004 by virtue of judgement [2008 (7) TMI 946 - KERALA HIGH COURT] - Decided in favour of Assesse.
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Wealth tax
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2015 (2) TMI 73
Interest claim on refund - Whether the assessee is entitled to interest under Section 34A(4B)(a) of the Wealth-Tax Act, 1957 when the assessee had submitted return of self assessment - Held that:- With respect to refund and interest payable on refund, the nature of assessment is not very relevant. The assessee may submit return on self assessment. Some others may submit return belatedly. Yet some others may not file it at all. In some cases scrutiny becomes necessary. But in some other cases, scrutiny as provided under Section 16(2) does not arise since the self assessment is accepted under Section 16(1) itself. If the benefit of interest on refund is confined only to cases where an order is passed by the Assessing Officer and a consequent demand is made from the assessee, then it would have the effect of depriving that benefit to a person who has volunteered and filed the return on self assessment. Such a restrictive interpretation is not contemplated under sub-section (4B) of Section 34A of the Act. - ground to interfere with the judgment passed by the Single Judge. - Decided against Revenue.
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Indian Laws
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2015 (2) TMI 74
Non compliance of mandatory provisions of the Legal Metrology Act, 2009 - Method for quantification - Application for direction to be sought to the respondent oil companies to supply petrol/diesel to the members of the appellants on weight basis and alternatively to give temperature adjustment at the time of preparing invoice of the dealers and seeking a direction to the Ministry of Petroleum and Natural Gas to ensure compliance by the respondent oil companies of the provisions of the Legal Metrology Act. Held that:- Can not issue a direction to the respondent oil companies to, under their contract, supply diesel/petrol to the appellants by weight without being satisfied that the same will not affect the other terms and conditions of the said contract and which the appellants have chosen not to place before us.Further it is find that the appellants even under the Legal Metrology Act have failed to make out any case. Rule 12 of the Legal Metrology (Packaged Commodities) Rules, 2011 which in Clause (2)(a) provides that except in the cases of commodities specified in the Fourth Schedule of the Rules, the declaration of the quantity shall be in terms of the unit of mass if the commodity is solid, semi-solid, viscous or a mixture of solid and liquid and which is again indicative of the reference to measurement in units of mass in the Act being to solids, semi-solids, viscous or mixture of solid and liquid. Rule 12(2)(d) categorically provides that the declaration of the quantity shall be in terms of the unit of volume, if the commodity is liquid or is sold by cubic measure. The Fourth Schedule to the said Rules provides that Industrial Diesel Fuel is to be measured in terms of volume, though again it does not refer to petrol and diesel or so with which we are concerned but is again indicative of the measurement in volume in litres being very much in the domain of standard units with which the legal metrology system is concerned. As far as the grievance of the appellants of use by the respondent oil companies of the dip-rod method is concerned, we find that Rule 14 of the Legal Metrology (General) Rules provides that the procedure for carrying out calibration of vehicle tanks etc. as may be specified in the Ninth Schedule thereto. The Ninth Schedule itself, while referring to maximum permissible error, refers to the capacity of vehicle tanks in litre; not only so, it also provides the detailed procedure for measurement by dip-rod method. We have wondered that when the Rules framed under the Act themselves are providing for measurement of vehicle tanks in litres, how can it be said that the unit of litre being used by the respondent oil companies is in contravention of the Act. - No merit in appeals - Decided against Appellant.
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