TMI Tax Updates - e-Newsletter
March 23, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Addition u/s 69B - there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition - no addition - HC
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Income Tax:
Explanation inserted u/s 80IA(4) by FA (No.2) of 2009 - execution of works contract - explanation only supplied clarity where, at best confusion was possible in the unamended provision, not unconstitutional - HC
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Income Tax:
MAT - Retrospective amendment to section 115JB by the Finance (No. 2) Act, 2009 - the amendment made is not ultra vires or unconstitutional. - HC
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Income Tax:
Transfer of the 74% shares to the Singapore company - transactions were part of a design of 'treaty shopping' as having regard to the DTAA between India and Singapore, the capital gain would only be taxed at Singapore and not in India. - HC
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Customs:
To hold that digital photocopier machine was covered by the restriction on imported second hand photocopiers is not correct in as much as the digital multifunctional machines imported in this case are not digital photocopier machines. - AT
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Customs:
Confiscation of the goods – repair works on barges or breaking activity - scrap generated during the repair work was not exigible to customs duty when brought in India. - HC
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Corporate Law:
Official Liquidator can only take recourse to the mode of appeal and further appeal under the RDB Act and not approach the Company Court to set aside the auction or confirmation of sale when a sale has been confirmed by the Recovery Officer under the RDB Act. - SC
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Indian Laws:
RTI - Gujarat riots - copy of letters sent by the former President of India, Shri K.R. Narayanan, to the then Prime Minister, Shri A.B. Vajpayee - CIC cannot direct the petitioner to produce the correspondence between the President and the Prime Minister - HC
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Central Excise:
CENVAT Credit - input services - duty paying documents - The denial of credit on the technical objection, when it is otherwise available, should not be upheld. - AT
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Central Excise:
Valuation - captive consumption, though not for production or manufacture of other articles - Valuation to be made under Rule 8 read with Rule 11 of valuation rules - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2013 (3) TMI 418
Addition u/s 69B - Tribunal deleted the addition ignoring district valuation officer’s report under section 142A - whether the valuation rendered by the DVO is to be taken into account or not? - Held that:- There must be a finding that the assessee had received an amount over and above the consideration stated in the sale deed and for this the primary burden was cast on the revenue. It is only when this burden is discharged by the revenue that it would be permissible to rely upon the value as given in the valuation report of the DVO. The law seems to be well settled that unless and until there is some other evidence to indicate that extra consideration had flowed in the transaction of purchase of property, the report of the DVO cannot form the basis of any addition on the part of the revenue. As in the present case there is no evidence other than the report of the DVO and, therefore, the same cannot be relied upon for making an addition - in favour of the assessee.
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2013 (3) TMI 417
Profit on sale of shares - capital gain v/s business income - whether assessee eligible for exemption under section 47(v)? - Held that:- As decided in Sutlej Cottom Mills Supply Agency Ltd. (1975 (7) TMI 2 - SUPREME COURT) while holding that even single transaction of purchase and sale may constitute adventure in the nature of trade, yet, the same has to be decided taking into account all the facts and circumstances of the case and not on the application of any single principle or test. As in the present case the Tribunal has considered the cumulative effect of all the facts and arrived at a conclusion that the transaction was not an adventure in the nature of trade as the shares sold by the respondent-assessee to its holding company was not tradeable in the market like any other normal trading asset, concluded that the gains arising from the sale of shares has to be tax under the head capital gains. Exemption under section 47(v) is to be allowed to assessee as the same applies only to capital gains and not to income taxed as business income - in favour of assessee.
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2013 (3) TMI 416
Explanation inserted in sub-section (4) of section 80IA by Finance Act No.2 of 2009 challenged - Sub-section (4) of section 80IA provides for certain deduction of income from the eligible business and primarily pertains to infrastructure development & by adding the impugned explanation it is provided that that nothing contained in the section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person and executed by an undertaking or enterprise - petitioner contested against retrospective effect of such amendment - Held that:- It is true that with effect from 1.4.2002 some significant changes were made in the said provisions. As already noticed three of these changes which are material such were (i) that sub-section (4) of section 80IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road' and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. Thus to conclude these changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction. Nevertheless, the basic requirement of the enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining infrastructure facility was not done away with. In other words, even the amended section 80IA(4) with effect from 1.4.2002 could be construed as not including execution of works contract as one of the eligible activities for claiming deduction. The explanation attempts to clarify that deduction under section 80-IA(4) would not be available in case of execution of works contract. The fact that such interpretation of the existing provisions of sub-section (4) of section 80IA of the Act, even without the aid of the explanation was possible is not disputable. Even without the aid of the explanation, it was possible to contend that such expression did not include an enterprise executing a works contract. The impugned explanation was purely explanatory in nature and did not a mend the existing statutory provisions, the question of levying any tax with retrospective effect would not arise. The explanation did not restrict or aim to restrict the provisions of deduction. If it did so, certainly a question of reasonableness in the context of retrospective operation would arise. In the present case, the explanation only supplied clarity where, at best confusion was possible in the unamended provision. In the result, petition dismissed.
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2013 (3) TMI 415
Deduction under section 10A disallowed - non computation of deduction u/s 10A in accordance with the provisions of sub-section (4) of section 10A - Held that:- In the case of the assessee, the CIT(A) has pointed out a new aspect to the issue for the first time during the AY under consideration that the assessee has formed a consolidated unit by restructuring of two existing units. But this fact is not clear from the record whether this new development had occurred during the year under consideration or it was already in existence right from the first year of assessment. Since it is not clear whether the non-eligible unit at Andheri was still in existence or closed by the assessee to bring into existence the alleged consolidated unit as held by the CIT(A) therefore, this fact is required to be examined by considering inter alia the number of employees working in the two units when the new unit was established by the assessee at vikroli only after comparing the number of employees and machinery installed in both the units, it can be determined whether the two existing units were merged and consolidated to bring into existence a new unit and thereby a new unit has been set up by restructuring of the existing unit during the year under consideration - the matter is remanded to the records of the AO for examination, verification and then decide the issue as per law. Technical fee and satellite link charges excluded from export turnover - Held that:- After considering the facts of the case and the principles established by the Coordinate bench in the case of Patni Telecommunication (P) Ltd. v. ITO [2008 (1) TMI 452 - ITAT HYDERABAD-A] it is held that the expenses on satellite link charges does not come within the scope of 'telecommunication charges' as provided in clause (iv) of Explanation 2 to section 10A and accordingly, the A.O. is directed not to exclude the same from export turnover A.O. is directed to recalculate the deduction under section 10A -in favour of assessee. Selection of comparables – TP Adjustment - Assessee company was providing Information Technology Enabled Services (ITES) to overseas affiliates/Associated Enterprises aggrieved by transfer pricing adjustments made by TPO who had accepted 8 out of the 11 comparables of assessee & concluded that the number of comparables was insufficient thus conducted a fresh search and added 22 comparables to the list of 8 – Held that:- As per the provisions of section 92CA(3), the TPO has jurisdiction/power to gather and consider all relevant material and information apart from the evidence, information and documents produced by the assessee to determine the ALP in relation to the international transaction. TPO for the purpose of determining the ALP to exercise any of the powers specified in clause (a) to (d) of sub-section (1) of section 132 or sub-section (6) of section 133 or 133A. Thus, under the TP regulations, there is no limitation on the powers of the TPO in carrying out fresh search for gathering more relevant information, documents etc., while determining the ALP in relation to international transactions. TPO is not justified in carrying out fresh search and adding 22 more comparables cannot be accepted as there cannot be a fixed number of comparables to be considered as sufficient or appropriate number for determination of the ALP as a general parameter. There is no fixed criteria or parameter for number of comparables, which can be universally applied to each and every case for determination of the ALP. Thus there is no upper limit prescribed under section 92C of the IT Act. One of the comparables selected by TPO had undergone merger/dermerger - Held that:- If merger and de-merger or amalgamation took place during the financial year and because of that the company became functionally different then the said company should be excluded from the comparables. However, if the merger of the two functionally similar companies took place then the event of merger itself cannot be taken a factor for exclusion of the said comparable - Matter remanded to TPO to verify this aspect that whether the merger or demerger is between two functionally similar companies or not. Some of the comparables selected had more than 15% related party transactions – Held that:- The related party transaction ranging from 10 to 25% of the total revenue can be considered having regard to the facts and circumstances of the given cases, 10% is the lowest limit and can be taken in the case where abundance number of comparables are available. Therefore, when there is no difficulty in searching the comparables, then the entity having more than 10% of the related party transaction should be excluded because the comparable should be an uncontrolled transaction and therefore, so far as it is possible, its result should not be influenced by related party transaction. In the normal circumstances, where a good number of comparables are available, then the limit of related party transactions should be 15% of the total revenue. In a extreme case where only one or few comparables are available, then an entity having related party transactions not exceeding 25% of the total revenue can be considered so that the ALP should be determined having comparison broad based, though this extreme limit of 25% can be considered only in exceptional cases. Where the comparable is operating in two or more segments, the above tolerable percentages to be applied to transactions in relevant segment (assessee's segment-ITES segment in this case). TPO has found sufficient number of comparables and finally took 30 companies as comparables; therefore, this case does not fall under the category of exceptional cases where criteria of related party transactions can be relaxed more than 15% of the total revenue of the entity. Hence, when there is no shortage of comparables, an entity can be considered as uncontrolled, if the related party transaction do not exceed 15% of the total revenue. Having applied this criteria, the company Allsec Technologies Ltd having related party transactions constituting 17.77% of the total revenue would be excluded from the comparables on this ground alone. Some of the comparables selected by TPO had much higher turnover than assessee-company while some were loss-making/high profit-making companies – Held that:- The factors for determining inclusion or exclusion of any case in the list of comparables are specifically provided under Rule 10B(2). Thus unless and until there are specific reasons and factors as provided under the Rule 10B, an entity cannot be excluded or eliminated from the list of comparables solely on the basis of high profit making unit or loss making unit because no such factor finds place either in Rule 10B(2) or 10B(3) of IT Rule. One of the comparables selected by TPO was engaged in software services and IT consultancy not functionally similar to assessee-company – Held that:- As from the annual report of this comparable company it can be concluded that is engaged in the business of GIS activity. As per the notification no. SO 890(E), dated 26-9-2000 of CBDT, GIS is one of the ITES notified by the Board. Thus when GIS is notified ITES/product, then undisputedly, this comparable and the assessee both are engaged in the ITES services therefore, there is no substance or merit in the contention of the assessee that this company is functional different and cannot be considered as a comparable.
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2013 (3) TMI 414
MAT - Retrospective amendment to section 115JB by the Finance (No. 2) Act, 2009 by insertion of clause (i) to Explanation 1 with retrospective effect from 1-4-2001 inserted so as to provide that any provision for diminution the value of any asset will also be included in the computation of book profit under section 115JB challenged – Held that:- There is no merit in the contention of the petitioner that the amendment has brought into effect a new tax levy which is outside the scope of section 115JB. The purpose of the Explanation is to broaden the base amount on which tax is payable by the company. No new levy is imposed. The tax-base stands widened by the amendment in as much as the amount or amounts set aside as provision for diminution in the value of any asset and debited to the profit and loss account shall be added to the book profit. Since the amendment does not provide for any new levy of income tax, there is no question of it being struck down on the ground of retrospectivity. The nature of the tax has not undergone any change and it still remains a tax on the book profit of the company. It is perfectly open to the legislature to prescribe how the book profit of a company can be computed and this it has done by first enacting that the book profit should be the figure of the profit as per the profit and loss account prepared in accordance with parts II and III of the Companies Act and then by prescribing, in Explanation 1, the items by which the said book profit may either be increased or reduced. Section 4 of the Income Tax Act, 1961 lays the charge of tax on the total income of the previous year of every person. Section 2(45) defines "total income" as meaning "the total amount of income referred to in section 5, computed in the manner laid down in this Act". To challenge the retrospectivity of the amendment it is necessary for the petitioner to show that the retrospective operation so completely alters the character of the tax as to take it outside the limits of the entry which gives the legislature competence to enact the law. Section 115JB is not a beneficial provision intended to give a fiscal incentive to the assessee as it targeted corporate entities for imposing a Minimum Alternate Tax on their book profit. Therefore, assessee's reliance on judgement of Lohia Machines Ltd. & Anr. v. Union of India [1985 (1) TMI 1 - SUPREME COURT] doesn't help his case. The present case is not one of encroachment of the legislature upon the judicial power. Parliament did not attempt to validate the add-back of the provision for bad and doubtful debts by validating the action of the income tax authorities without changing the statutory basis. The amending Act cured the statutory provision of the vice from which it suffered and it was given retrospective effect which was quite within the competence of the legislature. The usefulness of the statement of objects and reasons is limited to these aspects and no authority has been cited before us to show that the absence of any reason or justification given in the statement of objects and reasons for an amendment would invalidate the legislative action and would render the amendment unconstitutional on that ground alone. Reading more into the statement of objects and reasons would lead to this absurd result, namely, that if sufficient justification for the law is shown in the statement of objects and reasons, then the law must be held to be valid and constitutional irrespective of the question whether it offends the relevant provisions of the Constitution or exceeds the judicially recognised limitations on the legislative powers. It would result in an absurd situation which cannot be countenanced. Thus The amendment made is not ultra vires or unconstitutional. In the result Writ Petition dismissed but with no order as to costs.
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2013 (3) TMI 413
Writ petition filed against the advance ruling order [2011 (5) TMI 561 - AUTHORITY FOR ADVANCE RULINGS] - 74% shares of Goodyear India Limited were held by a USA company who has a 100% subsidiary in Singapore - whether the transfer of the 74% shares to the Singapore company, which was without any consideration, even if the same was for consideration would be exempted from income-tax in view of the specific provisions of section 10(38) read with Chapter VII of the Finance (No.2) Act, 2004 - Held that:- Charge of 'securities transaction tax' as given in section 98 of Chapter VII of Finance (No.2) Act, 2004 r.w.s. 10(38) states that income arising from the transfer of a long term capital asset, if it is an equity share in a company or a unit of an equity oriented fund, where the transaction of sale of such equity share is chargeable to securities transaction tax, then such income would be exempt. Thus if income arises out of the transfer of a long term capital asset being an equity share in a listed company, the said income would be exempt under section 10(38) of the said Act. There is no doubt that the shares of Goodyear India Limited are listed shares and therefore even if a consideration had been charged for the transfer of the 74% share, the income arising therefrom would be exempt by virtue of the provisions of section 10(38) of the said Act. The A.A.R. also observed that for the same reason this was a complete answer to the revenue's argument that the transactions were part of a design of 'treaty shopping' as having regard to the DTAA between India and Singapore, the capital gain would only be taxed at Singapore and not in India. Thus, according to the revenue, the transaction was proposed to be entered into to avoid being taxed in India. No interference is called for with the ruling given by the A.A.R.
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2013 (3) TMI 412
Nature of addition - unexplained cash credits or income of the assesses - In the first ground of appeal it was noticed that these assessees shown the amounts in the books of accounts as the advances received against the sales. Since the required information was not produced by the assessee, the assessing officer added these amounts under section 68 of the Act as unexplained cash credits - Held that :- we set aside this issue to the file of the assessing officer for fresh consideration who is directed to afford an opportunity of being heard to the assessee and decide the same in accordance with law. The next ground is with regard to the addition of Rs.4 lakhs as unexplained cash credit in - Held that:- the onus cast on the assessee is not discharged. In the circumstances, we have no hesitation in confirming the addition on this count. In view of the above, this ground of the assessee is hereby dismissed. The last ground is with regard to confirmation of disallowance of 15% of development expenses without appreciating the fact that such expenses were not debited to Profit & Loss account and the same was being shown in the balance sheet - Held that:- we set aside this issue to the file of the assessing officer to examine whether this is an expenditure claimed by the assessee in the Profit & Loss A/c or shown as an item in the balance sheet. - Decided partly in favor of assessee.
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2013 (3) TMI 411
Reassessment - Period of Limitation - sec. 147 - Held that :- The Tribunal without giving any finding on the controversy, simply declared that the notice for reopening which was issued beyond four years was barred by limitation.It was possible for the Tribunal to examine the facts on record and to come to a conclusion that the CIT [A] was incorrect in holding. The Tribunal committed grave error in declaring the notice of reopening invalid without coming to the conclusion that CIT [A] had erred in holding that there was failure on the part of the assessee to truly and fully disclose the facts necessary for assessment Appeal of the Revenue is restored to the Tribunal for fresh consideration - decided n favor of revenue.
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2013 (3) TMI 410
Unrecognized Gratuity Fund - Deduction Under Sec. 36(1)(v) or Section 37 of the Income-tax Act - Provision created towards excise duty payable on closing stock of finished goods - contingent liability - Disallowance of proportionate interest on the investments made and loans advanced to its subsidiary - Depreciation on the goodwill - Held that :- Regarding Unrecognized Gratuity Fund We have also carefully gone through the provisions of sec. 37 of the Income-tax Act. Sec. 37 provides for deduction of expenditure not being in the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenditure of the assessee, but laid out and expended wholly and exclusively for the purposes of the business or profession - In our opinion, even if any payment is made to an unapproved gratuity fund, it has to be allowed under sec. 37. Regarding addition of excise duty payable tothe closing stock - held that:- Following the judgement in ACIT vs. D & H Secheron Electrodes (P) Ltd (2007 (11) TMI 546 - MADHYA PRADESH HIGH COURT ) wherein the issue was decided in favour of the assessee. It was held that the Excise Duty payable should not be added to the closing stock. Accordingly, this ground of the Revenue is dismissed. Interest on amount advanced to subsidiary company - held that:- In our opinion, the assessee used its own non interest bearing funds and there is no cost to the assessee and it is a business decision taken by the assessee to make an investment in subsidiary company and that even if it is resulted in no income to the assessee, the notional interest cannot be disallowed on the reason that the assessee should have used its non interest bearing funds for the purpose of its own business purpose instead using borrowed funds for its business. Regarding Depreciation on goodwill - held that:- The true nature of the assets which are acquired by the assessee is business and commercial rights which is nothing but goodwill on which the assessee is entitled for depreciation u/s. 32(1)(ii) of the Act. There is no dispute in this case regarding the payment of Rs. 14,55,21,444 and the total value of the tangible assets is lesser than Rs. 5,57,38,146 and this is nothing but intangible assets in the form of technical knowhow, copy right, trademark, licences, franchisees and the claim of depreciation on these items is admissible and it fits within the description of section 32(1)(ii) of the Act. Our view is supported by the various judgements relied on by the assessee's counsel. Accordingly this ground of the Revenue is dismissed. - Decided against the assessee.
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Customs
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2013 (3) TMI 408
Identification and valuation of the goods imported - Imported the second hand photocopier machines machines without license - Chartered Engineer for identification and valuation - Goods were liable for confiscation under Foreign Trade Policy - An option to redeem the same on payment of redemption fine and penalty – Held that:- To hold that digital photocopier machine was covered by the restriction on imported second hand photocopiers is not correct in as much as the digital multifunctional machines imported in this case are not digital photocopier machines. The primary contention of the respondent is that no one function of the Multi-Functional Machines, even printing, can be seen as predominant. This has clearly been shown to be incorrect on facts, and in light of the submissions by the appellants, there has been no case made out for classification of the goods under the residuary Heading 84.79.89. In view of the foregoing, the impugned orders to the extent of confiscation and consequent penalties challenged in respect of ‘old & used digital multifunctional print and copier machines’ are incorrect - Decided in favor of assessee.
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2013 (3) TMI 407
Confiscation of the goods – repair works on barges or breaking activity - Department is of the opinion that as per the provision of Notification 21/2002-Cus., if the vessels are intended to be broken up after their importation, such goods shall be chargeable to Customs duty. Aggrieved by the order of Adjucating authorities the appellant made an application to High Court. Held that :- Court are of the opinion that scrap generated during the repair work was not exigible to customs duty when brought in India. We are confining our observations on the basis of the facts of the case where it is stated that approximate weight of each barge was 100 metric tones and it was during repair work of four such barges that total scrap of 40 metric tones was generated. Court are also influenced by the fact that during such repair work substantial amount of indigenously manufactured parts were fitted in the barges and the value of such replaced parts would also be part of the value of the barges as and when they are brought for breaking and on which value the customs duty would be assessed. - Decided in favor of assessee.
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2013 (3) TMI 401
Rejection of Transaction value under Section 14 of the Customs Act - Absence of documentary evidence - Contractual price under Section 14 of the Customs Act - Rule 4(2) of the Customs Valuation Rules - Confiscation or Penalty - Fine in lieu of confiscation of the goods - Held that:- the declared price cannot be rejected except on any of the grounds particularized under Rule 4(2) of the Customs Valuation Rules - no such ground having been stated in these appeals. - There is no question of confiscation or penalty in respect of any of the respondents. We find that the show cause notice alleged that M/s. Standard Industries Ltd. along with others misdeclared the value of the goods so as to evade Customs duty. It was alleged that the dates of bills of lading were misdeclared thereby rendering the goods liable to confiscation under Section 111(m) of the Customs Act. The adjudicating authority did not record any finding of misdeclaration of value as against M/s. Standard Industries Ltd. and the appellant has not raised any ground against this. In the circumstances, the plea for imposing a fine in lieu of confiscation of the goods cannot be granted. Needless to say that the prayer for imposing penalty on the above company is also not liable to be allowed. - Decided against the revenue.
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Corporate Laws
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2013 (3) TMI 406
Whether the Company Judge has jurisdiction at the instance of the Official Liquidator to set aside the auction or sale held by the Recovery Officer under the Recovery of Debts due to Banks and Financial Institutions Act, 1993(RDB) or whether the Official Liquidator is required to follow the route as engrafted under the RDB Act by filing an appeal assailing the auction and the resultant confirmation of sale - Held that:- The Official Liquidator whose association is mandatorily required can indubitably be regarded as a person aggrieved relating to the action taken by the Recovery Officer which would include the manner in which the auction is conducted or the sale is confirmed. Under these circumstances, the Official Liquidator cannot even take recourse to the doctrine of election. It is difficult to conceive that there are two remedies. It is well settled in law that if there is only one remedy, the doctrine of election does not apply and the Official Liquidator has only one remedy, i.e., to challenge the order passed by the Recovery Officer before the DRT. Be it noted, an order passed under Section 30 of the RDB Act by the DRT is appealable. Thus, we are inclined to conclude and hold that the Official Liquidator can only take recourse to the mode of appeal and further appeal under the RDB Act and not approach the Company Court to set aside the auction or confirmation of sale when a sale has been confirmed by the Recovery Officer under the RDB Act. Taking notice of the decision in M.V. Janardhan Reddy (2008 (5) TMI 401 - SUPREME COURT OF INDIA) wherein the sale was aside by the Company Judge. It may be stated here that the Company Court had imposed a condition that the permission of the Company Court shall be obtained before the sale of the properties, immoveable or moveable, is confirmed or finalized. On the aforesaid basis, this Court opined that when the bank was permitted to go ahead with the proposed sale of the assets of the company under liquidation by way of auction but such sale was subject to confirmation by the Company Court and all the parties were aware about the condition as to confirmation of sale by the Company Court, it was not open to the Recovery Officer to confirm the sale and, therefore, the sale was set aside by the Company Court, being in violation of the order. Thus, the facts in the said case were absolutely different and further this Court did not deal with the jurisdiction of the Company Court vis-à-vis DRT as the said issue really did not arise. Hence, it is not an authority for the proposition that the Official Liquidator can approach the Company Court to set aside the auction or sale conducted by the Recovery Officer of the DRT. Thus to conclude the Official Liquidator can prefer an appeal before the DRT. As he was prosecuting the lis in all genuineness before the Company Court and defending the order before the Division Bench, four weeks' time to file an appeal after following the due procedure is allowed. On such an appeal being preferred, the DRT shall deal with the appeal in accordance with law.
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Service Tax
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2013 (3) TMI 423
Demand on the basis of difference between ST-3 return and Balance Sheet - Applicant submitted that the demand is time barred. He further submitted that demand is on amount collected as “Vyaj Badla Transactions”. At that time there was confusion prevailing in the market and applicant was under bonafide belief that such transaction would not attract Service Tax. Held that :- After hearing both sides, Tribunal find that the issue involved in the appeal is non payment of Service Tax on “Vyaj Badla Transactions”. Tribunal find that the demand is for the period from 1995-96 to 1996-97 and the show-cause notice was issued on 12.03.2001. Tribunal also find that for the period up to 26.12.1997 the applicant was a proprietorship concern and with effect from 26.12.1997 it was converted into Pvt. Ltd. Company. The contention of the learned advocate that after the death of the proprietorship concern its liability cannot be transferred to B.H.H. Securities Pvt. Ltd. under Section 11 of the Central Excise Act, has some force. Tribunal finds that the applicant has a strong prima facie case. - stay granted.
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2013 (3) TMI 422
Dissallowance of credit of service tax - Empty trolleys necessary for manufacture and sale of final products - Held that:- The ratio of the following cited two decisions squarely apply to the facts of this case, inasmuch as, in all the three cases, it is the transportation of ‘empty cylinders’ or ‘empty containers’ or ‘empty trolleys’, which are involved and the dispute relates to taking credit of service tax paid on such transportation charges. (i) Kerala Minerals and Metals Ltd. v. Commissioner of Central Excise, Thiruvananthapuram - (2009 (12) TMI 301 - CESTAT, BANGALORE) (ii) Commissioner of Central Excise, Jaipur-II v. Nitin Spinners Ltd. - 2009 (5) TMI 411 - CESTAT, NEW DELHI ) As such, applying the ratio of the cited two decisions, I set aside the impugned order and allow the appeal.
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2013 (3) TMI 421
Short payment of service tax - Deposited an amount without waiting for show cause notice - Proceedings were initiated by issue of show cause notice - Penalties under Sections 76, 77 & 78 - Section 73(1A) of Finance Act, 1994 - Held that:- view has to be taken that appellant has deposited the entire amount of service tax interest and penalty to the extent of 25%. If there is any surplus is left, the amount is required to be refunded. Since this requires the calculation of service tax interest and penalty, the matter is remanded to the original adjudicating authority for the limited purpose of calculating the actual service tax liability
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2013 (3) TMI 420
Utilization of services in SEZ - Exemption under Notification No. 4/2004-S.T. - Services rendered were not consumed within the Special Economic Zone - No Service Tax on the software used for rendering the service - Rule 3(2) of the Export of Services Rules - Demand, interest & penalty under sec. 73(1), 75 & 76 of the Finance Act, 1994 - Held that:- It is evident that the service of the appellant was utilized by these units only for SEZ operations and are consumed within the SEZ. It is also seen that in the instant case the Lower Adjudicating Authority has not disputed the fact of utilization of services by the SEZ units. If that be the case, then it clearly amounts to consumption of services within SEZ. Hence, I hold that the appellant is eligible for Service tax exemption under Notification No. 4/2004-S.T - Decided in favor of assessee.
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2013 (3) TMI 409
Service tax was paid only on ‘Guarantee Commission’, and not on the ‘Commitment charges’ - Valuation - Rule 6(2) - Held that:- The Board has already clarified that interest would remain excluded from taxable value. Moreover, the appellant has also pointed out that TDS has been deducted on commission under Section 194H and TDS has been deducted on interest under Section 194A of the Income-tax Act, 1961. This shows the difference of the item which is in the nature of commission and which is in the nature of interest. Section 2(28A) of the Income-tax Act, 1961 has clarified as under : “The term interest has been defined in new clause (28A) inserted, in Section 2 of the Income-tax Act with a view to removing doubts about the true character of fees or other charges paid in respect of monies borrowed or in respect of credit facilities which have not been utilized. The definition is very wide and covers interest payable in any manner in respect of loans, debts, deposits, claims and other similar rights or obligations. It also includes any service fees or other charges in respect of such loans, debts, deposits, etc. as also fees in the nature of commitment charges on unutilised portion of credit facilities. In view of the above discussions and also in conformity with the decision in the appellant’s own case for the earlier period by this appellate forum in the very same issue, appeal was allowed.
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Central Excise
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2013 (3) TMI 405
Denial of credit of duty paid on intermediate products - non follow of prescribed procedure under Notification No. 44/2001-CE (NT) dated 26.6.2001 as amended by Notification No. 32/2003 dated 9.4.2003 and Notification No. 23/2009 dated 25.9.2009 - Held that:- The manufacturers cleared the goods on payment of duty and the applicants availed the credit. Further, the allegation of collusion between the applicants and manufacturer-suppliers is in the show-cause notice, however, the manufacturer-suppliers have not been made party to the present proceedings. In these circumstances, the allegation of collusion is also not sustainable. As the manufacturers, who cleared the goods on payment of duty, are not party in the present proceedings and the applicants have only availed the credit of duty paid hence prima facie the applicants have a strong case for waiver of pre-deposit of dues. Accordingly, the pre-deposit of dues is waived and recovery of the same is stayed during pendency of the appeals. Stay petitions are allowed.
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2013 (3) TMI 404
Waiver – Pre-deposit of duty, interest & Penalty - failure to pay duty within prescribed time - The department noticing default, intimated the appellant that if he failed to deposit the balance amount of duty, he would have to clear the goods by paying excise duty through PLA account in cash. Appellant while pressing for the waiver of pre-deposit of duty, interest and penalty has contended that that instead of paying excise duty in cash he has paid the same through his Cenvat credit and hence liability has been discharged and there is no need for insisting on the pre-deposit of amounts as a pre-condition to hearing of appeal. Held that:- The purpose behind the condition of pre-deposit of the duty demand, interest and penalty by the assessee as a pre-condition of hearing of his appeal is to secure the interest of the Revenue. In the instant case admittedly the excise duty liability has been discharged by the appellant through his Cenvat credit account though as per the Rules, he was required to pay the excise duty in cash but the fact remain that excise duty has been paid. Therefore, taking into account overall facts and circumstances of the case, we find it to be a fit case where the condition of pre-deposit should be waived.
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2013 (3) TMI 403
CENVAT Credit - input services - duty paying documents - Department denied the service tax credit to the appellant company on the four invoices issued, on the ground the out of these four invoices, three is not mention in the nature of service and other has been taken in respect of Service Tax on the insurance premium for insurance of the finished goods during the transportation from the factory to the customers’ premises which is not covered by the definition of input service. Appellant made application to Commissioner (Appeals), Commissioner (Appeals) confirmed the entire Cenvat credit demand along with interest and imposed penalty. Appellant file the application before Tribunal. Held that:- appellants are entitled to availment of credit in respect of all of its invoices - there is no dispute about the admissibility of credit or availment of service. - The denial of credit on the technical objection, when it is otherwise available, should not be upheld. - Decided in favor of assessee.
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2013 (3) TMI 402
Valuation - captive consumption, though not for production or manufacture of other articles - Rule 11 of the Central Excise Valuation Rules, 2000 - Held that:- the original authority adopting the principles of Rule 8 and applying the method of valuation on the basis of 115% of the cost of production of the impugned goods, is reasonable, since the said goods have been captively used by the respondents even though not for production or manufacture of other articles. Rule 11 of the Central Excise Valuation Rules, 2000 which is a residuary rule which provided that the value shall be determined using reasonable means consistent with the principles and general provisions of the rules and sub-section (1) of Section 4 of the Act. Further we find that the Tribunal in appellant’s own case (CCE, Nagpur v. P.C. Pole Factory - (COMMISSIONER OF C. EX., NAGPUR versus P. C. POLE FACTORY) after taking into consideration Rule 11 of the Central Excise Rules, 2000 which are applicable to the facts and circumstances of the present case held in favour of the Revenue.
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CST, VAT & Sales Tax
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2013 (3) TMI 425
Reassessment - Adjustment of tax paid on purchase of paddy - it was contended that the authorities below was not justified in initiating the proceedings under Section 21 of the Act, even if there is an escapement of turnover. The authorities should have invoked jurisdiction under Section 10-B of U.P. Trade Tax Act i.e. revisional jurisdiction of the Act. The counsel of petitioner through the decision of [M/s Aryaverth Chawal Udyog & others versus State of U.P2008 (5) TMI 602 - ALLAHABAD HIGH COURT] submitted that the Commissioner of Trade Tax has exceeded in its jurisdiction. Held that:- It is a case where the Assessing Authority has wrongly allowed deduction of tax paid on purchase of paddy while computing the payment of sales tax liability of central sales tax. The assessment order would show that the Assessing Officer did not satisfactorily deal with the point whether such deductions are permissible or not within the meaning of Section 15(c) of the Central Sales Tax Act. Section 21(2) under which the permission has been granted for opening of the assessment, provides that permission can be granted even in the case where there is change of opinion. In M/s S.K. Traders, Modi Nagar, Ghaziabad versus Additional Commissioner Grade-I, Trade Tax, Zone Ghaziabad and another,[2007 (7) TMI 573 - ALLAHABAD HIGH COURT] it has been held that the change of opinion may arise even if some material has been brought on record after assessment has been completed or it may be because of result of lack of care or inadvertence on the part of the Assessing Officer. - Decided in favor of revenue.
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2013 (3) TMI 424
Refund of excess tax paid and Interest U/s Sections 39-A and 24(4) of Tamil Nadu General Sales Tax Act, 1959 - Held that:- the respondent is directed to refund the amount of ₹ 47,407/-, to the petitioner, along with the interest, if any, payable as per the relevant provisions of law, within a period of eight weeks from the date of receipt of a copy of this order, if there are no legal impediments to do so. - Decided in favor of assessee.
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Indian Laws
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2013 (3) TMI 419
RTI - Writ Petition – Certiorari. - In this writ petition, Petitioner Union of India, seeking the quashing of the order/judgment passed by the Central Information Commission, directing the production of the document/correspondences, disclosure of all the letters sent by the former President of India, Shri K.R. Narayanan, to the then Prime Minister, Shri A.B. Vajpayee, relating to ‘Gujarat riots. which was sought by Shri C. Ramesh, under the provisions of the Right to Information Act, 2005. Held that:- Right to Information Act, 2005 which was enacted by the Legislature under the powers given under the Constitution of India cannot abrogate, amend, modify or change the bar under Article 74(2) as has been contended by the respondent no. 1. Even if the RTI Act overrides Official Secrets Act, the Indian Evidence Act, however, this cannot be construed in such a manner to hold that the Right to Information Act will override the provisions of the Constitution of India. The Learned Counsel for the respondent no. 2 is unable to satisfy this Court as to how on the basis of the provisions of the RTI Act the mandate of the Constitution of India can be amended or modified. Amendment of any of the provisions of the Constitution can be possible only as per the procedure provided in the Constitution, which is Article 368 and the same cannot be deemed to be amended or obliterated merely on passing of subsequent Statutes. There can be no doubt about the proposition that the Constitution is supreme and that all the authorities function under the Supreme Law of land. The plea of the respondents that since the Right to Information Act, 2005 has come into force, whatever bar has been created under Article 74(2) stands virtually extinguished is not tenable. The correspondence between the President and the Prime Minister will be the advice rendered by the President to the Council of Ministers or the Prime Minister and vice versa and cannot be held that the information in question is a material on which the advice is based. In any case the respondent no. 2 has sought copies of the letters that may have been sent by the former President of India to the Prime Minister between the period 28th February, 2002 to 15th March, 2002 relating to the Gujarat riots. No exception to Article 74(2) of the Constitution of India can be carved out by the respondents on the ground that disclosure of the truth to the public about the stand taken by the Government during the Gujarat carnage is in public interest. CIC cannot direct the petitioner to produce the correspondence between the President and the Prime Minister, and since the CIC is not entitled to peruse the correspondence between the President and the Prime Minister, as it is barred under Article 74(2) of the Constitution of India, the application of the petitioner seeking such an information will also be not maintainable.
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