TMI Tax Updates - e-Newsletter
March 29, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Jurisdiction of AO u/s 142(1) - once AO has arrived at conclusion that the jurisdiction is vested with him, the provisions of Section 127 are not attracted, unless competent authority exercises his power u/s 127 - HC
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Income Tax:
Claim of 100% deduction u/s 80IA(2)(iv)(c) - transformer oil has been purchased by the assessee from market and centrifuging had been done by centrifugal machine in order to make it usable in Transformer - Not a manufacturing activity - no deduction - HC
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Income Tax:
Validity of order - principle of natural justice - nature of an order passed by AO after an inquiry made with another AO about the Assessee as per direction given by CIT(A) - matter remanded back - HC
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Income Tax:
Validity of notice for reassessment u/s 148 - attempt to revisit this issue a third time is nothing but the tax authorities’ effort to overreach the law and resultantly a sheer harassment of the assessee - HC
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Income Tax:
Registration u/s 12A – Interpretation and Scope of section 24(iv) of Delhi Sikh Gurudwara Act, 1971 – such trust was ultra vires the Committee’s powers and beyond its statutory mandate - denial of exemption u/s 12A by DIT(E) restored - HC
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Income Tax:
Validity of Tribunal’s order - the judgment of the ITAT being the stereo typed, nonspeaking, unreasoned, arbitrary and whimsical, and there is no option except to remand the matter back to the ITAT to re-visit the issue afresh de-novo - HC
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Income Tax:
Assessee had filed two sets of final accounts before the AO - one of the sets was audited statement of accounts - the CIT(A) has very correctly considered the audited statement of account - AT
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Income Tax:
Exemption u/s 54EC of the Act – there is nothing in the context of section 256(2) to warrant the conclusion that the word 'month' in it refers to a period of 30 days, therefore, refers to six months in Section 256(2) is to six calendar months and not 180 days - AT
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Customs:
Acquittal of accused - offences under Sections 23 and 29 of the NDPS Act. - the expression “tranships” occurring therein must necessarily be understood as suggested by the learned counsel for the respondent. - SC
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Customs:
Recovery of Duty drawback - realisation of export proceeds within the period stipulate - matter remanded back to verify the receipt of foreign exchange within period as extended by the RBI - HC
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Customs:
Principle of natural justice - CHA - Once the suspending authority has decided that CHA can operate in other places, a prohibitory order, in our opinion, cannot be justified. - AT
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Indian Laws:
Arbitration - if a claim is to be decided on the basis of an order of sales tax assessment, the claimant as well cannot be denied the right to seek a direction to the party concerned to produce the assessment order - SC
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Indian Laws:
Necessity of impleadment person in charge of company – dishonor of cheque - a reading of the complaint should show that the substance of the accusation discloses that the accused person was in charge of and responsible for the conduct of the business of the company at the relevant time - SC
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Service Tax:
Commercial training or coaching - vocational training institute - courses which is to impart procedural and practical skill based training in areas such as export import management, retail management and merchandising - Upto September 2008 - exempted granted - HC
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Service Tax:
Waiver of pre deposit - abatement of 67% - revenue denied the abatement on the ground that finishing service is not eligible for abatement - construction activity - stay grated - AT
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Service Tax:
Assistance in providing labourers for cutting sugar cane - The amount of Rs.4/- PMT charged appears to be for transportation of the employees from one site to the other and not towards consideration of services rendered by the applicant - stay granted - AT
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Service Tax:
Quashing of the summons issued under Section 14 - whether the petitioner’s reason for not responding to the summons issued in this case on 26.02.2014 was justifiable or valid reasons cannot be considered in the writ proceedings - HC
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Central Excise:
Penalty - appellant’s failure to pay interest on the differential duty paid under supplementary invoices on the differential amount received on account of price revision does not fall in any of the contraventions - penalty waived - AT
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Central Excise:
Whether reprinting of dial and change of strap on the duty paid watches is a repair activity or the same amounts to manufacture of a new wrist watches - Held No - AT
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Central Excise:
Whether conversion of motor spirit into motor spirit power and of HSD into HSD turbojet by mixing small quantities of multifunctional additives would amount to manufacture - Held No - AT
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Central Excise:
Denial of refund claim - Unjust enrichment - Merely because the Chartered Accountant's certificate does not give the details of costing etc., will not turn it into a bad certificate. - AT
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Central Excise:
Benefit of exemption on HAR Cement, Refractories, Mortars & Concentrate, Prepared Refractory Bricks and Refractory Bricks - appellant has failed to prove that these items can be covered as parts of any machinery producing non-conventional energy device - AT
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Central Excise:
Denial of refund claim - overvaluation of the goods - Area based Exemption in Jammu and Kashmir - credit taken by the applicant relates to the duty allegedly excess paid by the applicant in PLA - prima facie case in favor of assessee - AT
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VAT:
Tax Exemption Notifications - Explanatory and/or clarificatory Notifications - second notification, therefore, being clarificatory would apply retrospectively to the appellant(s) - SC
Articles
Notifications
Companies Law-
File Number 1/21/13-CL-V - dated
31-3-2014
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Co. Law
Chapter III - The Companies (Prospectus and Allotment of Securities) Rules, 2014.
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File No. 1/32/2013-CL.V - dated
31-3-2014
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Co. Law
Chapter XII - The Companies (Meetings of Board and its Powers) Rules, 2014.
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File No. 1/31/2013-CL.V - dated
31-3-2014
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Co. Law
Chapter VIII - The Companies (Declaration and Payment of Dividend) Rules, 2014.
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File No. 1/22/2013-CL-V - dated
31-3-2014
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Co. Law
Chapter XI - The Companies (Appointment and Qualification of Directors) Rules, 2014.
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File No. 01/34/2013 CL-V - dated
31-3-2014
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Co. Law
Chapter VII - The Companies (Management and Administration) Rules, 2014.
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File No. 01/13/2013 (Part-I) CL-V - dated
31-3-2014
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Co. Law
Chapter I - The Companies (Specification of definitions details) Rules, 2014.
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File No. 01/10/2013 CL-V - dated
31-3-2014
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Co. Law
Chapter VI - The Companies (Registration of Charges) Rules, 2014.
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File No. 01/04/2013 (Part-I) CL-V - dated
31-3-2014
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Co. Law
Chapter IV - The Companies (Share Capital and Debentures) Rules, 2014
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File 1/19/2013-CL-V - dated
31-3-2014
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Co. Law
Chapter IX - The Companies (Accounts) Rules, 2014.
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File No. 01/09/2013 (Part –I) CL-V - dated
30-3-2014
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Co. Law
Chapter II - The Companies (Incorporation) Rules, 2014.
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S.O. (E) - dated
27-3-2014
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Co. Law
Nomenclature of various forms prescribed under the provisions of Companies Act, 2013 being notified.
DGFT-
77 (RE-2013)/2009-2014 - dated
27-3-2014
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FTP
Exemption for export of pulses to the Republic of Maldives.
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (3) TMI 859
Jurisdiction of AO u/s 142(1) of the Act – Place of initiation of inquiry - Held that:- A bare perusal of the record shows that notice dated 24.12.2013 issued u/s 142 of the Act speaks that in connection with the assessment for the assessment year 2011-12 the petitioner was required to furnish in writing and verify in the prescribed manner information called for – u/s 142 (2), the AO has been empowered to make such enquiry as he considers necessary for the purpose of obtaining full information in respect of the income or loss of any person - the main place of profession during the year of assessment in question shall be the place for assessment – thus, the has rightly exercised his power u/s 142 of the Act - once the AO has arrived at conclusion that the jurisdiction is vested with him, which he has correctly arrived at, the provisions of Section 127 of the Act are not attracted, unless competent authority exercises his power u/s 127 of the Act – Decided against Assessee.
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2014 (3) TMI 858
Claim of 100% deduction on transformer oil u/s 80IA(2)(iv)(c) of the Act - Process amounts to manufacture or not - Whether the Tribunal is legally correct in its view that the assessee's business is an industrial undertaking within the meaning of Section 80IA of the Act – Held that:- The assessee company performs work in the nature of business for repairing and manufacturing of transformer – assessee contended that the company has been manufacturing aluminium HT/LT Leg Coils, which were used in old burnt transformers and in this regard, it had also submitted in detail before the assessing - the inclusive definition of "Manufacture" or "Produce" as enunciated and elaborated in Section 10-A and 10-B of the I.T. Act is applicable to provisions of section 80-I or section 80-IA because these words have been defined with a particular purpose or with reference to the limited/particular context i.e. free trade Zone and 100% Export Oriented Undertakings - prima-facie, there appears to be a discrimination yet this is a reasonable/discrimination because it is well within the competence of the legislature to define a word for specific purposes or object or section and not for general connotation where ever these words occur in the I.T. Act. Relying upon CIT Vs. Venkateswara Hatcheries (P) Ltd. [1999 (3) TMI 12 - SUPREME Court] - the word "Manufacture" and "produce" has not been defined in section 80-IA and there is no specific mention in it that the definition of these words as given in Section 10-A and 10-B will apply to section 80-IA, the Dictionary Meaning and understanding of common parlance has been taken/construed to be the logical/reasonable meaning/interpretation/definition - by means of continuous and regular action or succession of action taking place or carried on in a definite manner and leading to the accomplishment of some result then only some benefits could be conferred in favour of the assessee. The definition of processing would not be applicable especially in the background that the transformer oil has been purchased by the assessee from market and centrifuging had been done by centrifugal machine in order to make it usable in Transformer, but in substance no new substance or articles or things has been emerged from the said processing, only some special processing or treatment had been given to transformer oil through a particular method – thus, it cannot be construed that due to this transformation or activity there was change in the substance and new substance or article had come out - the assessee did not indulge in any manufacturing activities or producing any new articles or things – thus, the assessee is not entitled to the benefits of 100% deduction under section 80IA (2)(iv)(c) of the Act – Decided in favour of Revenue.
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2014 (3) TMI 857
Surplus wastage – 1/3rd addition made by the AO – Consumption of Tendu patta – Held that:- The Tribunal was of the view that the turnover gross profit and gross profit rate declared by the assessee were better than the earlier years - the items in which the assessee is dealing are subject to the Excise and no discrepancy had been noted in the excise record maintained by the assessee by the concened authorities - assessee maintained the proper books of account and the same method of accounting was followed which the assessee followed consistently in the earlier years – the CIT(A) sustained the addition to the extent of 1/3rd on the basis that similar type of additions were sustained in the earlier year but he ignored this fact that the addition sustained by him in the earlier years were deleted by the Tribunal – The Tribunal after considering all the relevant facts including the details of the consumption register of 'Tendu Patta' recorded a finding that the addition was unsustainable - 1/3rd addition which was maintained by the CIT (A) was also set aside by the Tribunal – thus, the order of the Tribunal is upheld – no question of law arises for consideration - Decided against Revenue.
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2014 (3) TMI 856
Disallowance of interest expenses u/s 14A of the Act r.w. Rule 8D of the Rules – Held that:- The decision in CIT vs. Winsome Textile Industries Ltd. [2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT] followed - the assessee did not make any claim for exemption – thus, section 14A could have no application - subsection( 1) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act - the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax - It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made – no question of law arises for consideration – Decided against Revenue.
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2014 (3) TMI 855
Disallowance of interest u/s 14A of the Act – Held that:- Revenue contended that the principal amounts were initially used for the purpose of business, without further proof of the use in the relevant previous year, interest could not have been allowed as a business expense - CIT(A) and the Tribunal was of the view that for the previous years as well as for the years when the funds were borrowed, there was no adverse finding against the assessee necessitating its adding back – thus, as such no substantial question of law arises for adjudication as the issue is already remitted back to the AO for reconsideration – Decided against Revenue.
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2014 (3) TMI 854
Rate of disallowance of expenses – Held that:- The AO had gone into the matter in quite some detail after obtaining the responses pursuant to notices issued to the suppliers of the goods - in respect of large number of notices only 4 suppliers came forward and supplied the details - That forms the basis for analysis - As to whether the percentage was rightly kept at 3% or 6% is not a substantial question of law arises for consideration – the assessee itself did not appeal to the Tribunal against the disallowance of 3% sustained by the CIT (A), a position which can be prima facie taken as indicative of the reliability of its books and the evidence there was no merit in the appeal - Decided against Assessee.
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2014 (3) TMI 853
Genuineness of transaction - Assessment of income derived from sale of jewellery – Held that:- The decision in Manoj Aggarwal and others Versus Deputy Commissioner Of Income-tax, Central Circle - 3, New Delhi [2008 (7) TMI 446 - ITAT DELHI-A] followed - the order requires to be set aside and the matter remitted to the Tribunal for considering all aspects so that a clear finding as to whether transaction for sale of jewellery was genuine or not in this case – Decided in favour of Revenue. Jurisdiction of the AO to reopen the assessment – Held that:- The assessee’s conduct in not preferring any cross objections when the appeal was being heard precludes it from now contending that it has a grievance in respect of the jurisdiction of the Assessing Officer – Decided against Assessee.
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2014 (3) TMI 852
Validity of order - principle of natural justice - nature of an order passed by AO after an inquiry made with another AO about the Assessee as per direction given by CIT(A) – Exercise of power u/s 251 of the Act – Held that:- The AO had addressed a letter on 11 July 2013 to the ITO, Ward-VI(I), Chennai, who had jurisdiction over the proprietor of the two parties in respect of whom the CIT (A) had directed an inquiry to be made - Thereafter, a letter was addressed on 21 February 2014 to the ITO, Ward-25(2), New Delhi regarding the verification of transactions of the aforesaid two parties with the assessee since the PAN had been transferred to the aforesaid ITO at New Delhi. Admittedly, these facts were not disclosed to the assessee nor was the assessee given any opportunity to controvert the material. The Assessing Officer has acted in haste by passing an order without notice to the assessee and in clear breach of the principles of natural justice. Even if we treat the impugned order of the Assessing Officer dated 24 February 2014 as an order under Section 143 (3), it is clear that there has been a violation of the principles of natural justice and it would not be necessary to relegate the assessee to an appeal under Section 246. On the other hand, if the order is treated as an order under Section 251, which is the provision which was invoked by the Assessing Officer, the order would be clearly without jurisdiction and would not be subject to an appeal under Section 246. Hence, in either view of the matter, the impugned order dated 24 February 2014 is unsustainable. – thus, the order is set aside and remanded back to decide afresh – Decided in favour of Assessee.
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2014 (3) TMI 851
Validity of notice for reassessment u/s 148 of the Act - Held that:- The decision in Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd [2010 (1) TMI 11 - SUPREME COURT OF INDIA] followed - a tax administrator would act within jurisdiction if notice of reassessment is issued in a given case, based on “tangible” or fresh material - Re-appraisal of previously assessed returns, based on a change of opinion or an improved understanding of the law, would not pass muster as the basis for a valid reassessment proceeding, because the law would not uphold such change of opinion as it amounts to an impermissible review - an erroneous previous view warranting exercise of revisional jurisdiction cannot authorize a valid reassessment notice. During the assessment proceeding, and the first reassessment proceeding, the question of dealers’ commission as well as TDS on those amounts, had been gone into - The attempt to revisit this issue a third time is nothing but the tax authorities’ effort to overreach the law and resultantly a sheer harassment of the assessee – the notice and all further proceedings conducted pursuant to it are without jurisdiction – Decided in favour of Assessee.
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2014 (3) TMI 850
Denial to grant registration u/s 12A of the Act – Interpretation and Scope of section 24(iv) of Delhi Sikh Gurudwara Act, 1971 – Powers of the committee to enter into JV on revenue sharing basis - Held that:- Reliance placed by ITAT on Section 24 (iv) of the Act is misplaced – neither Section 24 nor Section 40 (which empowers the Committee to frame regulations) enables the Committee to efface their duties and create other entities for carrying out their functions - Even more importantly, such creations cannot do what Committees are not permitted to perform, i.e utilize Committees’ properties or monies through the device of trusts and societies, to engage in indirect commercial activity, which the trust was authorized and created to indulge – the ITAT clearly fell into error in holding that the Act permitted the Committee to enter into the agreement which enabled it to set up a joint venture for a hospital, on revenue sharing basis - such trust was ultra vires the Committee’s powers and beyond its statutory mandate – thus, the order of the Tribunal set aside and the denial of exemption u/s 12A by DIT(E) restored – Decided in favour of Revenue.
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2014 (3) TMI 849
Validity of Tribunal’s order - Liquor contractors – Rejection of books of accounts - Whether the Tribunal and the Commissioner (Appeals) were justified in deleting the additions exorbitantly without stating any logic reason or arguments despite the fact that the application of Section 145(2) of the Act was not disputed – Held that:- The Tribunal has not recorded any finding of fact and no reasons are assigned as to why the Tribunal does not agree with the finding recorded by the AO or CIT (Appeals) as the case may be - In an order of affirmation, repetition of the reasons elaborately may not be necessary but even then the arguments advanced/points urged deserves to be dealt with. Reasons for affirmation have to be indicated, though in appropriate cases they may be briefly stated - Recording of reasons is part of fair procedure and reasons are harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at and they always substitute subjectivity with objectivity - the judgment of the ITAT being the stereo typed, nonspeaking, unreasoned, arbitrary and whimsical, and there is no option except to remand the matter back to the ITAT to re-visit the issue afresh de-novo - All the orders passed by the ITAT, wherein appeals (Schedule-A) have been filed either by the revenue or by the assessees cannot be sustained in the eyes of law and are set aside to be decided afresh and de-novo in accordance with law – Decided in favour of Revenue.
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2014 (3) TMI 848
Validity of adjustment made by the TPO – Need for remitting back in case of no other comparable company - Held that:- Assessee contended that some justification that the matter was referred to the TPO u/s 92CA of the Act and based on the findings of TPO, a draft assessment was made which the assessee challenged before the DRP u/s 144C of the Act - the TPO had taken MALCO as a comparable unit. DRP has also accepted that MALCO was a comparable unit - because there is no other comparable company, there was no necessity of remanding the matter - the contention made by the assessee must prevail - Whether there was any other comparable unit or any other method, might be a question to be considered by the TPO once the matter is remanded to him. It was not a proper exercise of discretion on the part of the learned Tribunal to have given a quietus to the matter after deleting the additions.
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2014 (3) TMI 847
Disallowance of interest expenditure u/s 14A of the Act – Dividend income received – Held that:- Both the authorities have correctly approached the issue in as much as the record clearly had reflected from the balance sheet of the assessee-company that the interest free funds available was much larger to the extent of Rs. 84,45,567 lakhs as compared to the investment which was only Rs. 22.707 lakhs - Both the authorities have also noted faultlessly that the dividend income which was earned out of the investments made in the earlier years and there was no investment made in the year under consideration – Relying upon CIT v. Gujarat State Fertilizers & Chemicals Ltd. [2013 (7) TMI 701 - GUJARAT HIGH COURT] – no substantial question of law arises for consideration – Decided against Revenue.
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2014 (3) TMI 846
Revisional powers u/s 263 of the Act - Netting and set off of interest towards interest paid - Whether the assessee is entitled for netting of interest by setting off of interest earned towards interest paid – deposits made by the assessee were made due to compulsion for procuring import licence and letter of credit - Held that:- Revenue rightly contended that the Tribunal committed grave error of law in directing the AO to allow netting of interest and grant set off of interest earned towards interest paid without verifying whether the deposits made by the assessee were made due to compulsion for procuring import licence and letter of credit and that the assessee had borrowed the amount from the bank on interest. The assessee did not place any material on record to show that the fixed deposits were made due to compulsion for procuring import licence and letter of credit and for that purpose the assessee had borrowed the amount from the bank on interest - the jurisdictional Commissioner of Income Tax shall examine the case/record if he deems fit and proper and in exercise of his revisional powers u/s 263 of the IT Act – the Commissioner shall examine whether the assessee is entitled for setting-off of interest earned towards interest paid – Decided in favour of Revenue.
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2014 (3) TMI 845
Deletion made on account of difference in final accounts – Held that:- CIT(A) was of the view that the AO has gone totally by the provisional account and added the differences to the income. Since the account has been audited u/s 44AB - the assessee had filed two sets of final accounts before the AO - one of the sets was audited statement of accounts - the CIT(A) has very correctly considered the audited statement of account – thus, there is no infirmity in the findings of the CIT(A) – Decided against Revenue. Addition made on account of difference in balance of creditors -Difference in purchase and sales Held that:- Revenue contended that the CIT(A) has admitted certain evidences which were in violation of Rule 46A since these details were never filed before the AO - the details ought to have been filed before the AO – thus, the matter is remitted back to the AO – Decided in favour of Revenue.
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2014 (3) TMI 844
Stay of outstanding demand – Disallowance of broken period interest – Held that:- Assessee contended that already in his own case for the previous years, stay has been granted - Relying upon American Express International Banking Corporation vs. CIT [2002 (9) TMI 96 - BOMBAY High Court] - in A.Y. 2002-03 a similar disallowance was made by the AO on account of broken period interest which was deleted by the CIT(A) and the department did not prefer any appeal against the order of ld. CIT(A) for A.Y. 2002-03 on this issue - the assessee thus has a good prima facie case to succeed in its appeal on the main issue of broken period interest and once it is decided in favour of the assessee, it will result in refund of tax for the year under consideration instead of the present outstanding demand - the balance of convenience lies in favour of the assessee and it is a fit case to stay the outstanding demand as sought by the assessee – thus, the outstanding demand stayed till the disposal of appeal – Decided in favour of Assessee.
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2014 (3) TMI 843
Rectification of order – Bar of limitation - Whether the orders u/s. 201(1) and 201(lA) passed by the AO were barred by limitation – Held that:- The Tribunal observed that the order passed for the A.Ys. 2002-03 and 2003-04 is within the time limit, it is incumbent upon the Tribunal to remit the issue back to the CIT(A) to decide the same on merit with reference to the issue of TDS deduction - As the Tribunal failed to do so, it is fair to correct the error committed by the Tribunal and remit the issue back to the file of the CIT(A) to decide the issue raised by the assessee. The powers of the Tribunal are co-extensive with the powers of the AO and that of the first appellate authority and are, in fact, wider powers than those authorities, subject to the limitation that the Tribunal does not have the power to enhance the assessment which power has been specifically conferred upon the Commissioner (Appeals) u/s 251(1)(a) of the Act – Relying upon CIT v. Mahalaxmi Textile Mills Ltd. [1967 (5) TMI 4 - SUPREME Court] - the doctrine of incidental or implied power has been recognized for the exercise of powers by the Appellate Tribunal - On the same logic it can be said that the Tribunals which has wide powers in respect of the subject-matter of an appeal before it, can decide any question which is material to the subject matter even though it was not raised - Where particular issue has been omitted to be considered or has not been adjudicated properly or where perverse findings have been recorded in total disregard of the material on record, the Tribunal is competent enough to set aside the order of the lower appellate authority to that extent, although no specific ground is taken for that purpose by the concerned party. Whether a mistake can be pointed out on the part of ITAT even when the assessee did not seek any relief from the Tribunal – Held that:- The Tribunal while reversing the order of Commissioner (Appeals) on the point of validity of notice u/s 148, should have also directed the Commissioner (Appeals) to decide the other grounds on merits - The omission to do so i.e., not restoring the matter to the file of Commissioner (Appeals) and not issuing direction for adjudicating the grounds on merit, therefore, amounted to be a mistake on the part of the Tribunal – thus, the CIT(A) is directed to decide the appeals relating to A.Ys. 2002-03 and 2003-04 on merit of the issue raised by the assessee – Decided partly in favour of Assessee.
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2014 (3) TMI 842
Exemption u/s 54EC of the Act – Investment in NHAI bonds - Whether the investment of ₹ 45 lacs was made within six months from the date of the transfer of the "Long Term Capital Asset" so as to qualify for the exemption u/s.54EC of the Act and whether the word "month" refers in this section a period of 30 days or it refers to the months only – Held that:- The decision in Munnalal Shri Kishan Mainpuri [1987 (3) TMI 81 - ALLAHABAD High Court] followed - there is nothing in the context of section 256(2) to warrant the conclusion that the word 'month' in it refers to a period of 30 days, therefore, refers to six months in Section 256(2) is to six calendar months and not 180 days - in the absence of any definition of the word ' month' in The Act, the definition of General Clauses Act 1897 shall be applicable and by doing so there is no attempt on our part to interpret the language of Sec. 54EC - what to say a liberal or literal interpretation - the Legislature has in its wisdom has chosen to use the word ' month' - the word 'month' to be read within the recognized ways of interpretation. There is no dispute about the investment which had actually been made by the assessee - The investment had been made in the month of December, 2008 - alleged to be few days late from the date of transfer in the month of June, 2008 - Once the purpose of the introduction of the section was served by making the investment in the specified assets then that purpose has to be kept in mind while granting incentive - the investment in question qualifies for the deduction U/s 54EC – Decided in favour of Assessee.
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Customs
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2014 (3) TMI 841
Acquittal of accused - offences under Sections 23 and 29 of the NDPS Act. - appellant submitted that the High Court grossly erred in coming to the conclusion that in the absence of proof that the Ganja allegedly seized from the custody of the respondent is of foreign origin, Section 23 of the NDPS Act is not attracted. - construction of Section 23 of the NDPS Act - Held that:- the expression “tranships” occurring therein must necessarily be understood as suggested by the learned counsel for the respondent. It can be seen from the language of the Section 9(1) that the Central Government is authorized to make rules which may permit and regulate various activities such as cultivation, gathering, production, possession, sale, transport, inter state import or export of various substances like coca leaves, poppy straw, opium poppy and opium derivatives etc., while the Parliament used the expression transport in the context of inter-state import or export of such material in sub- Section 1(a)(vi), in the context of importing to India and export out of India, Parliament employed the expression transhipment in Section 9(i)(a)(vii). Therefore, the High Court rightly concluded that the conviction of the respondent under Section 23 of the NDPS Act cannot be sustained. - Decided against the revenue.
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2014 (3) TMI 840
Recovery of Duty drawback - failure to produce bank realisation certificates evidencing the realisation of export proceeds within the period stipulated - Rule 16A of the Drawback Rules, 1995 - Held that:- The petitioner had moved the Reserve Bank of India for granting extension of time to realise the payments of export proceeds. From the order of the Revisional Authority, it appears that the Reserve Bank had initially allowed the extension of time for realisation of the proceeds until 13 June 2013. Subsequently, on 5 March 2014 the Reserve Bank extended the time for receipt of the export proceeds until 31 March 2014 - The case of the petitioner, as set up in the writ petition, is that the petitioner has in fact realised the sale proceeds. Matter remanded back to the Revisional Authority to verify the documentary evidence which has been relied upon by the petitioner for the purposes of establishing the realisation of the export proceeds within the extended period of time as granted by the Reserve Bank of India in respect of the shipping bills covered by the duty drawback which has been received. - Decided partly in favor of assessee.
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2014 (3) TMI 839
Principle of natural justice - CHA - Appeal against the order of prohibition passed under the provisions of Regulation 23 of the Customs Broker’s Licensing Regulations, 2013 (the Regulations) against the appellant prohibiting them from operating within the jurisdiction of Bangalore Customs Commissionerate with immediate effect until further order. - Held that:- Either suspension or prohibition in a particular Commissionerate should precede an enquiry and if prohibition succeeds suspension and revocation of suspension, in our opinion, the prohibition should be for specific period and should be subject to the conclusion that will be reached after the enquiry is over and final decision is given by the Commissioner who should specifically indicate the quantum of punishment and nature of punishment of the CHA. There was no provision for prohibition in the earlier Regulations and there are no precedent decisions before us to consider the issue. Therefore, we have no option but to take a holistic view after considering the relevant provisions of Regulations to come to a logical conclusion which, in our view, would meet the ends of justice. Revocation of suspension is subject to the condition of the CHA undertakes to pay the differential duty along with fine and penalty in respect of the two Bills of Entry filed in Bangalore if it is found they are in anyway responsible to revenue loss. Such being the case, prohibiting the CHA from operating in the jurisdiction of Bangalore Commissionerate totally, in our opinion, is not justified. In fact, the provisions of Regulations 19 & 20 are considered, the suspension can continue till the enquiry is over, which, going by Regulation 20 can take up to 330 days. Once the suspending authority has decided that CHA can operate in other places, a prohibitory order, in our opinion, cannot be justified. Order of prohibition set aside subject to an undertaking to make good the loss of revenue, if any, caused by them because of their activity in Bangalore Customs till the enquiry and proceedings thereon are over. - Decided in favor of CHA.
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2014 (3) TMI 838
Stay application - Confiscation of goods - Penalty - Held that:- Prima facie, it appears that there was no intention to contravene any of the provisions of the law and the applicant had complied with the provisions to the best of their knowledge though there is a technical violation. The issue whether fine and penalty needs to be imposed in such circumstances can be examined at the time of appeal hearing. I consider it proper to waive the requirement of pre-deposit of penalty arising from the impugned order for admission of appeal. It is so ordered. There shall be stay on collection of such dues arising from the impugned order during the pendency of the appeal - Stay granted.
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Service Tax
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2014 (3) TMI 863
Commercial training or coaching - Whether the term “vocational training institute” in Notification No.24/2004 - ST covers the respondent and whether the courses offered by it are exempt for the period 01.07.2003 to September, 2008 - running courses which is to impart procedural and practical skill based training in areas such as export import management, retail management and merchandising. Concededly, these courses were not accredited or certified by any Central or State Government or statutory authority such as AICTE - Held that:- It is evident that the term “vocational training institute” included the commercial training or coaching centers which provide vocational coaching or training meant to “impart skills to enable the trainees to seek employment or to have self employment directly after such training or coaching”. The notion of such training institute having been recognized or accredited to nowhere emerges from such a broad definition. The further Notification of 2010 substitutes the existing explanation to the term “vocational training institute” and narrowing it to those institutes affiliated to National Council for Vocational Training offering courses in designated trade in fact supports the assessee. Had the intention been to exempt only such class or category of institutions, the appropriate authority would have designed such a condition in the original Notification of 2003 and Notification No.10 of 2004 which had been relied upon in this case - Tribunal did not fall into error in following its previous ruling in Wigan & Leigh (2007 (8) TMI 61 - CESTAT, BANGALORE) - Decided against the revenue.
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2014 (3) TMI 862
Waiver of pre deposit - notification 15/2004-ST - abatement of 67% of the gross value received - revenue denied the abatement on the ground that finishing service is not eligible for abatement - Held that:- in the first paragraph of SCN itself, it is mentioned that applicant is engaged in fabrication and erection of items viz. sliding gates and rolling shutters. Therefore, prima facie, the finding in the adjudication order that they were doing construction activity appears to be not proper. Further, the argument that for claiming exemption Notification No.12/03-ST dt. 20.6.03, the value of goods should be shown separately in the invoice is specified in the notification. The condition given in the notification is that ‘there is documentary proof specifically indicating the value of the said goods and materials’. The reason to reject VAT returns as a valid proof is not specified by the lower authorities. Therefore, we find merit on both the issues raised by the applicant. We are of view that this appeal should be admitted without any pre-deposit - Stay granted.
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2014 (3) TMI 861
Stay application - assistance in providing labourers for cutting sugar cane - Whether the assistance so provided is covered under the definition of "man-power supply or recruitment agency service" under Section 65(105)(k) of the Finance Act, 1994 read with Section 65(68) of the Act - Held that:- Prima facie, we are of the view that the applicant is not engaged in the business of supply of man-power for consideration. Though a relationship between the applicant and labourers as employer and employee may not be an essential criterion for the service to fall under the definition at section 65(68), in the absence of employer employee relationship the payment for the labourers cannot be considered to be paid to the applicant. The payment is only routed through them. As per section 67 of the Finance Act 1994, service tax can be demanded only on consideration received by the service provider. The amount of ₹ 4/- PMT charged appears to be for transportation of the employees from one site to the other and not towards consideration of services rendered by the applicant - Following decision of the case of M/s. Thiru Arroraran Sugars Ltd. [2013 (9) TMI 951 - CESTAT MUMBAI] - Stay granted.
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2014 (3) TMI 835
Quashing of the summons issued under Section 14 - It is contended that the petitioner is a service tax compliant company and has been regularly filing returns which were duly assessed to service tax under the provisions of Finance Act, 1994. - It is further contended that Appearance on its behalf could not be ensured on account of an ongoing investigation into another company - Held that:- whether the petitioner’s reason for not responding to the summons issued in this case on 26.02.2014 was justifiable or valid reasons cannot be considered in the writ proceedings. However, it is open to the petitioner or its Directors to duly bring the reasons to the notice of the concerned official at the earliest available opportunity, even in ongoing investigations in the matter of M/s Vigneshwara Developwell Pvt. Ltd., cooperate and produce all the necessary materials in support of their contentions - Decided against appellant.
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Central Excise
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2014 (3) TMI 837
Waiver of pre deposit - Extension of time period for pre deposit - Held that:- A prayer was made by the learned counsel for the appellant to extend the time for pre-deposit. However, in the interest of justice, we extend the time to deposit the amount - Decided partly in favour of assessee.
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2014 (3) TMI 836
Quantum of pre-deposit - Waiver of pre deposit - Extension of time period for pre deposit - Held that:- A prayer was made by the learned counsel for the appellant to extend the time for pre-deposit. However, in the interest of justice, we extend the time to deposit the amount - Decided partly in favour of assessee.
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2014 (3) TMI 834
Waiver of pre deposit - Held that:- appellants have deposited ₹ 10 lacs and undertaken to deposit ₹ 50 lacs - Upon CESTAT being satisfied that the appellant has deposited ₹ 60 lacs, order dated 15.04.2013, passed by the CESTAT, dismissing the appeal, shall be deemed to have been set aside - Decided partly in favour of assessee.
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2014 (3) TMI 833
Denial of CENVAT Credit - Inputs not received in factory and not utilized in final product - Held that:- As the Tribunal in the case of Ajinkya Enterprises vs. CCE - [2013 (6) TMI 610 - CESTAT MUMBAI] wherein this Tribunal held that if any inputs on which the assessee has paid the duty and the same has been cleared and availed credit thereof which were cleared by them “as such” on payment of duty, the duty paid by them shall amounts to reversal of credit taken on these inputs. Therefore, in the light of Ajinkya Enterprises, the issue is no more res integra. Accordingly, I hold that the appellant is entitled to take credit on bought-out items which have been cleared on payment of duty - Decided in favour of assessee.
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2014 (3) TMI 832
Duty demand - Penalty under Rule 25(1) of the Central Excise Rules, 2002 - Interest paid before personal hearing - Held that:- appellant had paid the differential duty under supplementary invoices on the escalation amount received in respect of goods cleared and this had been done on their own. The original Adjudicating Authority also has treated the failure to pay the interest at the time of payment of duty under supplementary invoices, as default under Rule 8 of the Central Excise Rules. However, for failure to pay interest alongwith delayed payment of duty under Rule 8 no penalty is imposable under any clause of Rule 25(1) of Central Excise Rules - appellant’s failure to pay interest on the differential duty paid under supplementary invoices on the differential amount received on account of price revision does not fall in any of the contraventions. Moreover, we find that the appellant had paid the interest, in question, before the hearing of their appeal by the Commissioner (Appeals) - Decided in favour of assessee.
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2014 (3) TMI 831
Availment of CENVAT Credit - Duty demand - Suo moto credit - Held that:- appellant had not taken suo motu credit but credit was taken under sanction of Scheme of Amalgamation by Hon’ble High Court of Allahabad in terms of order [2005 (3) TMI 475 - HIGH COURT OF ALLAHABAD]. Considering such aforesaid aspects and also reading para 5.18 of copy of order of Hon’ble High Court (which is a photo-copy available on record), it is understood that the appellant was granted right over the assets and had undertaken to discharge the liabilities as a transferee company as a party to Scheme of Amalgamation, Rule 10 of the Cenvat Credit Rules, 2004 permits availability of Cenvat credit to the transferee company who is present appellant - Decided in favour of assessee.
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2014 (3) TMI 830
Duty demand - Whether reprinting of dial and change of strap on the duty paid watches is a repair activity or the same amounts to manufacture of a new wrist watches so as to attract duty liability again - Held that:- there is no denial of fact that apart from putting their customers logo on the dial and change of strap, no other process is undertaken on the said wrist watches. The appellate authority has held that there is intermixing of various other parts and a particular part which was originally with a particular wrist watch may find its place in another wrist watch. However, we find that the above cannot be made the basis for holding that the activity amounts to manufacture. The duty paid cleared watches were received back by the appellants and after undertaking some process on the same, wrist watches were cleared from the factory. No new product having a different name, use and character comes into existence. Wrist watches remains wrist watches in spite of dial of the watch having been embossed with the customers logo - activity undertaken by the appellant does not amount to manufacture. As such, confirmation of demand of duty against them on the said ground is not sustainable - Decided in favour of assessee.
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2014 (3) TMI 829
Duty demand - Bar of limitation - Held that:- Duty of Rs. 34 lakhs initially paid by the assessee also stands availed as Modvat credit by M/s. Monga Brothers Ltd., there could be no occasion or reason available to adjust their duty liability less by Rs. 80,650/-. As such, it cannot be held that there is any suppression of facts on their part. Otherwise also, we find that the duty was paid by the appellant in the year 2001 whereas the show cause notice questioned the correctness of the cost and was issued in the year 2005. As such, we are of the view that the demand is barred by limitation and the same is not sustainable - Decided in favour of assessee.
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2014 (3) TMI 828
Whether conversion of motor spirit into motor spirit power and of HSD into HSD turbojet by mixing small quantities of multifunctional additives would amount to manufacture or not - Held that:- mixing of polymers and additives to base bitumen does not result in manufacture of a new marketable commodity - Revenue has not been able to show any other contrary decision on the issue. As such, by following the earlier decision, we set aside the impugned order, confirming demand against the oil company and imposing penalties on various officials of the oil company - Following decision of CCE, Bangalore v. Osnar Chemical Pvt. Ltd. [2012 (1) TMI 27 - Supreme Court of India] - Decided in favour of assessee.
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2014 (3) TMI 827
Penalty under Section 209A of the Central Excise Rules - Appellant dealing with the accounts relating to the glass tubings being manufactured by an unregistered unit rendering the same liable for confiscation - Held that:- there is no specific finding by the adjudicating authority against the appellant. Mere undertaking the work relating to purchase of raw materials and other requirements of the company cannot be held to be an offence covered under the provisions of Rule 209A unless there is a specific finding, based upon the evidence and the role played by the appellant. We find no reasons to uphold the said imposed penalty upon the appellant. The same is accordingly set aside - Decided in favour of assessee.
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2014 (3) TMI 826
Recovery of 8% on sale price - Amendment in Rule 57AD - Held that:- After this retrospective amendment to Rule 57AD, for clearance of exempted goods at the material time, the assessee is required to pay an amount equal to the CENVAT credit attributable to the inputs used in, or in relation to the manufacture of, exempted goods before or after the clearance of such goods along with interest from the date of clearance till the payment of the said amount - Matter remanded back - Decided in favour of Revenue.
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2014 (3) TMI 825
Denial of refund claim - Unjust enrichment - Commissioner allowed refund claim - Held that:- It does not stand contended by the revenue that the certificate given by the Chartered Accountant is not correct. Merely because the said certificate does not give the details of costing etc., will not turn it into a bad certificate. It stands clearly held by the Chartered Accountant that the assessee has not issued any supplementary invoices and have not passed on the burden to the clients. The said part of the certificate does not stand rebutted by the Revenue by referring to any evidence to the contrary - Decided against Revenue.
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2014 (3) TMI 824
Benefit of exemption on HAR Cement, Refractories, Mortars & Concentrate, Prepared Refractory Bricks and Refractory Bricks under Notification No. 3/2001-C.E., dated 1-3-2001 - Revenue contends that items cannot be considered as parts of conversion device producing energy - Held that:- the claim that the impugned items should be treated as parts for manufacture of industrial device producing energy appears not convincing. As rightly held by the Commissioner (Appeals), the appellants are engaged in the manufacture of refractories material and not any machine and machinery. They are not manufacturing any non-conventional energy device or system or waste conversion device energy as understood in common parlance. Therefore, the appellant has failed to prove that the impugned items can be covered as parts of any machinery producing non-conventional energy device. Therefore, the exemption has been rightly stands rejected as unsubstantiated - Decided against assessee.
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2014 (3) TMI 823
Recovery of refund already granted - overvaluation of the goods - Area based Exemption in Jammu and Kashmir - Assessee paid in excess in the first place and taken credit of the same and subsequently utilised - Benefit of Notification No. 56/2002-C.E., dated 14-11-2002 - Held that:- burden to prove the allegation of overvaluation is clearly on the department. Mere non-receipt of money from the buyer partly or fully cannot be the basis to conclude overvaluation. We have not been shown any other evidence in support of their overvaluation. The records do not indicate that the merchant exporter has been paid any rebate - credit taken by the applicant relates to the duty allegedly excess paid by the applicant in PLA - prima facie we do not find any merit in the order for recovery of allegedly excess paid refund and imposition of penalty - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (3) TMI 865
Validity of High Court Order - Permissibility of clubbing production - Whether production of two different units can be clubbed to meet the requirement of the Rule - Rule 28A (11) (a) (i) of Haryana General Sales Tax Rules, 1975 - Benefit of tax exemption during concession period – Failure to maintain the requisite production - Held that:- The conditions which are imposed have been enumerated in the Rule 28A 11(a) I(ii) to the effect that in the event of non-maintenance of the quality of production after the expiry of the exemption, the assessee has to pay the tax benefit availed with interest - Rule 28A(11)(b) clearly stipulates that in case of violation of clause 11(a)(i) of Rule 11, the assessee shall be liable for making, in addition to the full amount of tax-benefit availed of by it during the period of exemption/deferment, with interest chargeable. The production of the beneficiary unit had failed to fulfil the stipulation incorporated in Rule 28A 11(a)(i) - The production of the expanded unit has been computed and clubbed with the first unit to reflect the meeting of the criterion - The expanded capacity had been created to show that the rate of production is maintained but it is fundamentally a subterfuge - The authority has also taken into consideration the different items produced and how there has been loss of production of EPBT in the first unit - The High Court has failed to appreciate the relevant facts and without noticing that the assessee had clubbed the production of the units, lancinated the orders passed by the forums below. Clubbing is not permissible - It amounts to a violation of the conditions under Rule 11(a)(i) of Rule 28A and the assessee has to pay the full amount of tax benefit and interest -The appeal is allowed and the judgment and order passed by the High Court is set aside and those of the tribunal and other authorities are restored – Decided in favour of Revenue.
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2014 (3) TMI 864
Validity of High Court order – Tax Exemption Notifications - Explanatory and/or clarificatory Notifications - Whether Notifications of 2001 and 1999 should be treated as independent Notification or Notification explaining the Notification of 1999 and thus operative from the date of the original Notification – Held that:- The subsequent notification was only to further clarify that the exemption was available only in relation to the products which were manufactured by the industries and for which exemption was availed prior to 1999 - By virtue of the first notification, Entry 68 stood deleted from the second schedule - The second notification issued on the same day restored the exemption already availed under Entry 68 - The said notification under Clause XI also empowered the Government to issue directives from time to time to clarify the scope of the second notification of 1999 - Third notification brought out the terms more explicitly to fall within the terms 'clarificatory' or 'explanatory' notification - An explanation should only explain or clarify - If it excepts, excludes or restricts, it is not an explanation, but a proviso, and should be considered as operative only from the date of its coming into effect - Therefore, had the notification issued by the Government, instead of removing the ambiguity in the earlier notification, introduced fresh conditions bringing substantial changes in the Notification then the notification would not have been explanatory or clarificatory. It is manifest that the intention of the Government was not only to extend the benefit of exemption under Entry 68, Clause XI of the second notification to those dealers who had obtained the certificate of registration and had been enoying exemption on a class of goods prior to 31.12.1999 but also those who have not effected any change in the product manufactured by them after 30.04.2000 - The appellant(s) did not manufacture prior to the issuance of the first notification and further obtained the registration for a different class of goods which included computer stationeries and other related products after 30.04.2000 and therefore such industry would not be entitled to claim the benefit under the Entry 68 by taking shelter of Clause IX of the second notification of December - The second notification, therefore, being clarificatory would apply retrospectively to the appellant(s) - Judgment and order passed by the High Court affirmed and the appeal is dismissed - No order as to cost – Decided against assessee.
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Indian Laws
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2014 (3) TMI 866
Validity of High Court & Arbitration Tribunal order - Quantification of claim - production of sales tax assessment order - Competence of the Arbitration court – Seeking assistance of the court in taking evidence u/s 27 of the Arbitration and Conciliation Act - Hypothetical calculation versus actual Tax Assessments – According to the first respondent, the appellant had obtained from the Sales Tax Department set-off/refund on the sales tax paid on packaging material, and such setoff/ refund operated to reduce the sales tax liability of the appellant, which was ultimately being borne by the respondent No.1. The respondent No.1 therefore, claimed that it was entitled to the benefit of the said set-off/refund, and accordingly debited the appellant for the amount of setoff/ refund. Held that:- The documents sought were required to arrive at the decision on the claim of the respondent - Since, the quantification in support of the claim had been done by the respondent on a theoretical basis - A hypothetical calculation should not be resorted to when actual Assessments are available, which would show as to whether the quantum of set-off allowed and claimed was in fact justified - There is no substance in the order passed by the earlier Arbitrator dated 27.3.2007, and the subsequent enabling order passed by the Arbitral Tribunal dated 16.9.2011 permitting the respondent to apply under Section 27 could not have been passed. Confidentiality of assessment documents – Held that:- Judgment in Tulsiram Sanganaria and Another v. Srimati Anni Rai and Ors. [1971 (1) TMI 2 - SUPREME Court] followed - Section 71 of the Maharashtra VAT Act and its pre-cursor Section 64 of the Bombay Sales Tax Act, clearly state that particulars contained in any return or statement made by a party, or document produced along therewith are confidential and no court shall pass any order requiring the Government or a Government servant to produce any such statement, document or return - The words used in a statute are to be read as they are used, to the extent possible, to ascertain the meaning thereof - Both these provisions contained a bar only against the Government officers from producing the documents mentioned therein - There is no bar therein against a party to produce any such document Therefore, if a claim is to be decided on the basis of an order of assessment, the claimant as well cannot be denied the right to seek a direction to the party concerned to produce the assessment order - It is this very prayer which has been allowed by the earlier order dated 27.3.2007 passed by the Arbitrator, and also by the subsequent order dated 16.9.2011 passed by the Tribunal and rightly so - There is no substance in this objection. Attitude of Respondent - When the first respondent made an application for production of the assessment orders, the defence taken by the appellant was that those documents were confidential documents, and could not be directed to be produced - It was not stated at that time that the said documents were not available - It is ten months thereafter, that when the second affidavit was filed in the High Court that the respondent for the first time contended that the said documents were not available - This was clearly an after thought and this attitude of the Respondent in a way justified the earlier order permitting an application u/s 27 passed by the Tribunal - The Single Judge rightly allowed the petition directing the appellant to produce the documents which were sought by the respondent no. 1 – no merit in the appeal - Decided against appellant.
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2014 (3) TMI 860
Necessity of impleadment person in charge of company – dishonor of cheque - complaint filed under Sections 138 and 141 of the Negotiable Instruments Act, 1881 - Substance of accusation - There is no allegation worth the name against any of the appellants in either of the complaints - The appellants were not even made parties in the first complaint and therefore there is no question of any allegations being made against them in that complaint - Held that:- Judgment in A.K.Singhania vs. Gujarat State Fertilizer Company Ltd. 2013 (10) TMI 895 - SUPREME COURT] followed - It is necessary for a complainant to state in the complaint that the person accused was in charge of and responsible for the conduct of the business of the company - Although, no particular form for making such an allegation is prescribed and it may not be necessary to reproduce the language of Section 138 of the Negotiable Instruments Act, 1881, but a reading of the complaint should show that the substance of the accusation discloses that the accused person was in charge of and responsible for the conduct of the business of the company at the relevant time - From the averment made in the complaint, it can be said that there is no specific or even a general allegation made against the appellants – Decided in favour of appellants.
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