TMI Tax Updates - e-Newsletter
March 7, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Reopening of assessment - in those situations where there is no assessment order passed, there cannot be a notice for re-assessment inasmuch as the question of re-assessment arises only when there is an assessment in the first instance - SC
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Income Tax:
Claim of sales tax liability for earlier years - Accrual of liability - assessee had failed to justify how the amounts claimed were transferred to the recoverable account when these were not the liability of the assessment year in question and they were not paid or were payable in this year. - Deduction not allowed - HC
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Income Tax:
Accrual of liability - whether contingent - Merely because the asseessee was negotiating with the ONGC alongwith other members of the association for softer terms and for charging simple interest instead of compound interest would not mean that this liability was in any manner contingent. - HC
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Income Tax:
Deduction u/s 80IA - Revision u/s 263 - To constitute reconstruction, there must be transfer of assets of the existing business to the new industrial undertaking. In our opinion, generation of power unit is separate and distinct undertaking for which separate approval was obtained and it cannot be said that splitting of existing business structure - AT
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Income Tax:
Disallowance u/s 14A - without establishing any nexus between the expenditure incurred and investment, Rule 8D cannot be invoked - AT
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Bill:
Amendment of Act 13 of 1976 - SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY) ACT, 1976 - provides for establishment of Appellate Tribunal for hearing appeals against the orders made under the aforesaid Act.
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Bill:
Amendment of Schedule to Act 47 of 1974 - OIL INDUSTRY (DEVELOPMENT) ACT, 1974 - to levy cess at the rate of twenty per cent. ad valorem instead of the present rate of ₹ 4500 per tonne, on domestically produced crude oil.
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Bill:
Amendment of Act 74 of 1956 - CENTRAL SALES TAX ACT, 1956 - where the gas sold or purchased and transported through a common carrier pipeline or any other common transport or distribution system becomes co-mingled and fungible with other gas in the pipeline or system and such gas is introduced into the pipeline or system in one State and is taken out from the pipeline in another State, such sale or purchase of gas shall be deemed to be a movement of goods from one State to another.
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Bill:
Amendment of section 58 - RESERVE BANK OF INDIA ACT, 1934 - consequential provisions
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Bill:
AMENDMENTS TO THE RESERVE BANK OF INDIA ACT, 1934 - Insertion of new Chapter III F - MONETARY POLICY - to insert a new Chapter IIIF in the Act consisting of sections 45Z to 45-O relating to monetary policy to meet the challenge of an increasingly complex economy and to maintain price stability.
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Bill:
Amendment of section 2 - definition to various terms inserted - AMENDMENTS TO THE RESERVE BANK OF INDIA ACT, 1934
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Bill:
Amendment of Preamble - AMENDMENTS TO THE RESERVE BANK OF INDIA ACT, 1934
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Bill:
Clauses 216 to 220 of the Bill seeks to amend certain provisions of the Reserve Bank of India Act, 1934. It is proposed to amend section 2 of the Act so as to insert therein certain definitions to the expressions “Consumer Price Index”, “inflation”, “Monetary Policy Committee”. It is further proposed to insert a new Chapter IIIF in the Act consisting of sections 45Z to 45-O relating to monetary policy to meet the challenge of an increasingly complex economy and to maintain price stability.
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Power to make rules - Clause 215 of the Bill
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Consequences of order made under Scheme - Clause 214 of the Bill - Any amount paid in pursuance of a declaration made under sub-section (1) of section 211 shall not be refunded. - Any order passed under sub-section (4) of section 211 shall not be deemed to be an order on merits and has no binding effect.
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Immunity from other proceedings under Act - Clause 213 of the Bill
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Scheme not to apply in certain cases - Clause 212 of the Bill
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Procedure for making declaration - Clause 211 of the Bill - The declarant shall pay tax due alongwith the interest thereon at the rate as provided in the Act and penalty equivalent to twenty-five per cent. of the penalty imposed in the impugned order, within fifteen days of the receipt of acknowledgement under sub-section (2)
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Definitions - Clause 210 of the Bill
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Bill:
INDIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Clauses 209 to 215 of the Bill seeks to insert new Chapter XI to provide for the Indirect Tax Dispute Resolution Scheme, 2016. - The said Scheme provides for settlement of the disputes pending before the Commissioner (Appeal) as on the 1st March, 2016, on payment of tax dues along with interest and twenty-five per cent. of the penalty imposed by the impugned order. The said scheme is applicable to the declarations made upto the 31st day of December, 2016.
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Power to make rules. - Clause no. 208 of the Bill
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Power to remove difficulties - Clause no. 207 of the Bill
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Power of Central Government to issue directions, etc. - Clause 206 of the Bill
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Scheme not to apply in certain cases - Clause no. 205 of the Bill - where assessment has been made under section 153A or 153C of the Income-tax Act - where a survey conducted under section 133A of the Income-tax Act or section 38A of the Wealth-tax Act, has a bearing if it relates to any tax arrear - where prosecution has been instituted on or before the date of filing of declaration under section 199 - certain other circumstances
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - No other benefit, concession or immunity to declarant - Clause 204 of the Bill - Save as otherwise expressly provided in sub-section (3) of section 201 and section 202, nothing contained in this Scheme shall be construed as conferring any benefit, concession or immunity on the declarant in any proceedings other than those in relation to which the declaration has been made.
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - No refund of amount paid under Scheme - Clause 203 of the Bill - Any amount paid in pursuance of a declaration made under section 199 shall not be refundable under any circumstances.
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases - Clause 202 of the Bill - Immunity will be provided in respect of an offence and penalty under the Income-tax Act or the Wealth-tax Act,
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Time and manner of payment - Clause 201 of the Bill - The declarant shall pay the sum determined by the designated authority as per the certificate granted under clause (a) of sub-section (1) within thirty days of the date of receipt of the certificate and intimate the fact of such payment to the designated authority along with proof thereof.
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Bill:
Particulars to be furnished - Clause 200 of the Bill - consequent to such declaration, appeal in respect of the disputed income, disputed wealth and tax arrear pending before the Commissioner of Income-tax (Appeals) or the Commissioner of Wealth-tax (Appeals), as the case may be, shall be deemed to have been withdrawn. - Subject to the condition that Appeals and All other cases will be withdrawn - Declaration may rejected if found false or violates the provisions of the scheme.
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Clause 199 provides for Declaration of tax payable - Determination of tax, interest and penalty that is payable under the scheme.
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Bill:
DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 - Clause 198 defines various terms
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Bill:
Clauses 197 to 208 of the Bill seeks to insert a new Chapter X in the Finance Bill, 2016 which deals with the Direct Tax Dispute Resolution Scheme, 2016. - The Scheme is proposed to come inforce from 1st June, 2016 and be open for declaration made up to a date to be notified by the Central Government in the Official Gazette.
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Service Tax:
Return of the refund application to the appellant sans sanction or rejection - The orders of the lower authorities would appear to be no whit more than printing on a piece of paper. The claim itself is symptomatic of a lack of faith in the fairness of the institution in dealing with refund claims. - AT
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Service Tax:
Import of services - Advertising Agency services - Since the appellant has no requirement of 'advertising agency service' for manufacture and export of goods, the tax demanded in the impugned order is not on the consideration for a service received in India but a tax on the funds transferred in a cross-border transaction. Such a tax is not contemplated in Finance Act, 1994. - AT
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Service Tax:
Management, Maintenance and Repair Services - Whether notional interest to be taken as value of service - prima facie case is against the appellant since Notional interest is to be included in the value of services - AT
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Service Tax:
Cenvat credit - The service received by the Appellants from their dealers is Business Auxiliary Service which has to be treated as an input service for the Appellant used in or in relation to manufacture of their final products, as free warranty repair and maintenance during warranty period, has enriched the value of the goods. - AT
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Service Tax:
Cenvat credit - the service received by the Appellant from these sub-contractors (Business Auxiliary Service) is to be treated as “input service” for the output service of repair and maintenance under AMC and the ground on which the Commissioner has denied the service tax in respect of these services is totally wrong. - AT
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Central Excise:
Refund claim - there is no case for unjust enrichment against the appellant both on the reason of the appellant being a State Organization and also on merit of not passing on the duty to another person - AT
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Central Excise:
Interest on differential duty demanded before finalization of order - It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible - AT
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Central Excise:
Eligibility for exemption - import of “sutures” cleared to the Government under the project funded by the World Bank for Cataract Blindness Control Project - Any attempt to deny such benefits on technical grounds would contribute to the alarming growth in loss of vision, which no progressive society can afford. - AT
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Central Excise:
Demand of education cess - the goods in question were manufactured prior to 09.07.2004, the confirmation of demand on Education Cess along with interest and imposition of penalty on the appellant is not legally sustainable - AT
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Central Excise:
Assessable value - the “master charges” are collected for producing specific holograms for their clients and the masters are returned to the clients once the required supplies are made. When the appellant receive these charges as additional consideration for holograms, they are liable for inclusion in the assessable value. - AT
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Central Excise:
Cenvat Credit - capital goods acquired on lease basis - Rule 4(3) only further enlarges scope by stating that the credit would not be disallowed even if capital goods are cleared from the financing company. It does not mean that the capital goods must be acquired from a financing company and any other acquisition of capital goods from the company who is not a financing company will disentitle the availment of credit. - AT
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Central Excise:
Remission of duty - Rule 21 - loss of molasses - No assessee would cause loss of its own final product for the reason of not paying the excise duty. As such, as long as the accident is not deliberate and there is no mala fide on the part of the assessee to make the accident occur resulting in loss of the goods, the assessee would be entitled to the remission of duty - AT
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Central Excise:
Differential duty demand - valuation under Section 4 or Section 4A - it is only the organic surface active products and preparations for use as soap, which are in the shape of bars, cakes, moulding pieces or shapes, which would get covered under MRP based duty - it does not cover organic surface active products, in liquid form and as such, their assessment to duty under Section 4A - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (3) TMI 150
Reopening of assessment - HC reversed the view taken by the Tribunal holding that even if there was no original assessment order passed under Section 10 of the Act, there could be re-assessment - Held that:- High Court has wrongly not acted upon the ratio laid down in Trustees of H.E.H. The Nizam's Supplemental Family Trust's which squarely applies in the instant case in favour of the assessee [2000 (2) TMI 4 - SUPREME Court ]. The ratio of the said judgment is that in those situations where there is no assessment order passed, there cannot be a notice for re-assessment inasmuch as the question of re-assessment arises only when there is an assessment in the first instance. - Decided in favour of assessee
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2016 (3) TMI 149
Penalty u/s 271 - Amount disclosed under Section 132(4) - Held that:- A perusal of the order of the Tribunal shows that the order passed by the Tribunal in the factual matrix involved herein requires to be re-adjudicated in the light of the interpretation given by the Apex Court in Gebilal Kanhaialal's case (2012 (9) TMI 297 - SUPREME COURT ) to clause (2) of Explanation 5 to Section 271(1)(c) of the Act as the Tribunal is the final fact finding authority who is required to deal with all aspects of facts and law before recording its conclusions based thereon. Accordingly, the impugned orders are set aside and the matter is remanded to the Tribunal to decide the same afresh after hearing the parties and by passing a speaking order in accordance with law.
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2016 (3) TMI 148
Addition on account of claim of interest and sales tax recoverable from IFCI - Held that:- The position which obtains is that the liability in respect of interest has been incurred in the respective years though paid but not charged to profit and loss account of those years. The liability in respect of those years was charged to profit and loss account of this year although no amount was paid by way of interest to the IFCI in this year in so far as the amount of ₹ 22,04,344/- is concerned. In other words, there is no foundation to hold that the liability was inchoate in those years which crystalized in this year, the reason being that the assessee was required to pay interest at the agreed rate and no rebate was admissible in view of non fulfilment of export obligation which was also clear in those years. Therefore, we do not find ourselves in agreement with the learned counsel that the liability was otherwise allowable under this Act in this year. The liability was also not paid in this year. Therefore, correctly held that the assessee is not entitled to deduct this amount in computation of its income - Decided against assessee Claim of sales tax liability - Accrual of liability - Held that:- assessee had failed to justify how the amounts claimed were transferred to the recoverable account when these were not the liability of the assessment year in question and they were not paid or were payable in this year. - The assessee has followed mercantile system and there is no dispute in this matter. If the liabilities of earlier three years in respect of interest or earlier year in respect of sales tax is allowed merely on the basis of Board resolution, it will lead to distortion of the picture of profits of this year. Therefore, we are of the view that the amounts were not deductible as neither the liability accrued in this year nor it was paid in this year. - Decided against assessee Addition under the head 'entertainment expenditure' - Held that:- We find that the expenditure was incurred on staff members for providing tea etc. Further expenditure was also incurred on lunch and dinner for staff as well as for others. The assessee has not culled out the expenditure incurred on outsiders which will be in the nature of entertainment expenditure while the expenditure on the staff members during office hours or for late sitting in the office will not be in the nature of entertainment expenditure. However, in the absence of proper working furnished by the assessee, the estimate of entertainment expenditure at 25% of the total expenditure is reasonable.- Decided against assessee
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2016 (3) TMI 147
Revision u/s 263 - Accrual of liability - whether contingent - interest liability debited in profit and loss account and accordingly allowed the same on the principle of mercantile accounting by AO - Held that:- At any rate the assesse’s liability to pay interest computed at simple rate was crystallized on 26.7.2001, and at no later point of time. Merely because the asseessee was negotiating with the ONGC alongwith other members of the association for softer terms and for charging simple interest instead of compound interest would not mean that this liability was in any manner contingent. The assessee when debited such amount in the profit and loss account towards interest liability, the same was therefore rightly granted by the assessing officer. The Commissioner therefore committed legal error in disturbing such order of assessing officer. - Decided in favour of assessee
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2016 (3) TMI 146
Presumptive Income u/s 44BB - whether service tax being statutory levy should not form part of gross receipts as per provision of section 44 BB? - Held that:- The relevant operative part of this order read as under service tax is not an amount paid or payable or receipt or deemed to be received by the assessee for the services rendered by it. Rather, the assessee is only collecting the service tax for passing on the Government therefore the service tax collected by the assessee on the amount paid to it for rendering services it not to be included in the gross receipts in the terms of section 44BB (2) Read with section 44BB(1) of the Act. In this situation we decline to accept contention of Ld CIT-DR and hold that the issue is covered on all for corners in favour of the assessee and against the revenue by the decision of the ITAT in assessee’s own appeals for AY 2008-09 (Supra) and 2009-10 (Supra) hence we are unable to see any valid reason to interfere with the impugned order of the CIT(A) and thus we uphold the same - Decided in favour of assessee
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2016 (3) TMI 145
Revision u/s 263 - reconsider the deduction claimed by the assessee u/s.80-IA - splitting of existing business structure - Held that:- If an assessment order is passed by AO without making requisite enquiries or examining the claim of assessee perse an erroneous order and hence, it is amenable to revisionary jurisdiction u/s.263 of the Act; AO having simply accepted the income declared by the assessee and without any application of mind or enquiry, though the assessee company was not granted with the similar deduction in earlier assessment years, therefore, the CIT can exercise his jurisdiction u/s.263 of the Act. But every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. If the AO adopted one view of the course permissible in law and it is resulted in loss to the Revenue, where two views are possible and with which CIT does not agree, it cannot be treated as an erroneous order, prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. In the present case as the facts brought on record suggests that the similar claim of assessee u/s.80-IA for assessment year 2009-10 to held that new unit established by the assessee for manufacturing articles used as intermediate products in the old division, which the assessee was buying from the market earlier, is not reconstruction of business already in existence. To constitute reconstruction, there must be transfer of assets of the existing business to the new industrial undertaking. In our opinion, generation of power unit is separate and distinct undertaking for which separate approval was obtained and it cannot be said that splitting of existing business structure. Therefore, in our considered opinion, the lower authorities are not correct in denying the deduction under section 80IA of the Act - Decided in favour of assessee
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2016 (3) TMI 144
Penalty under section 271(1)(c) - gratuity payment claimed twice - Held that:- The assessee in this case claimed the above expenditure in the P&L A/c and once again claimed it as allowable expenditure in the statement of income which leads to double claim of the same expenditure. During the assessment proceedings, the assessee was questioned by the AO, it was stated that inadvertently the claim was made on the basis of which the penalty was levied by the AO and confirmed by the CIT(A). The explanation given by the assessee for claiming the same expenditure for two times is very cryptic and too general in nature. There is no cogent and reliable evidence shown by the assessee how such claim has been made by the assessee. There is no base for such claim. Being so, in our opinion such an unadmissible claim could not have been claimed ad deduction by inadvertence for the second time Binding judgemnet of jurisdictional High Court in the case of Lanxess India Pvt. Ltd. (Successor of Bayer Indian Syntans Ltd.) v. ACIT reported in [2014 (12) TMI 571 - MADRAS HIGH COURT ]wherein held that the assessee should first show by cogent and reliable evidence that there was neither concealment of particulars of income nor furnished inaccurate particulars of income in order to repel penalty proceedings u/s.271(1)(c) of the Act. In view of this, we have no hesitation in confirming the levy of penalty u/s.271(1)(c) of the Act. - Decided against assessee
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2016 (3) TMI 143
Disallowance of depreciation to trust - whether while computing income under section 11(1) (a) of the Income tax Act, 1961, depreciation has to be allowed? - Held that:- it is explicitly clear that Section 11 (1) (a) of the Act provides a condition for claiming exemption of income in the case of certain assessees from their total income for a particular assessment year under Chapter III of the Act viz. “incomes which do not form part of total income”, while as depreciation is a deduction allowable u/s 32 of the Act while computing income under the head “income from business or profession” as provided under Chapter V of the Act viz., computation of total income under various heads. Thus, both the sections 11(1) (a) of the Act and section 32 of the Act are applicable on different issues and under different circumstances. Accordingly, both these sections will be applicable independently when conditions stipulated therein are fulfilled - Decided in favour of assessee
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2016 (3) TMI 142
Disallowance u/s 14A - Held that:- DR has not controverted the fact that the assessee has not received any exempted income during the year under consideration. In view of the judgment of the Hon'ble Jurisdictional High Court in the case of Cheminvest Ltd Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT ] and in the case of CIT Vs. Holcim India Pvt Ltd [2014] (9) TMI 434 [Del] wherein it has been held that no disallowance u/s 14A of the Act can be made in a year in which no exempt income has been earned or received by the assessee, we concur with the ld. AR submissions. We also agree with the contention of the ld. AR that without establishing any nexus between the expenditure incurred and investment, Rule 8D cannot be invoked. - Decided in favour of assessee Disallowance of interest - Held that:- We note that the interest free advances given to six companies during F.Y. 2006-07 pertained to A.Y 2007-08. When the assessee’s company established that no interest bearing funds were utilised for these impugned interest free advances, then disallowance can be held as sustainable. When the CIT(A) himself has recorded a finding of fact at Pg 8/9 of the order that amounts advanced to six companies was out of internal accruals/ redemption of Mutual Funds and not out of Borrowed funds, we do not find any valid reason to interfere with his finding in the absence of any material brought on record by the ld. DR to contradict the same. - Decided in favour of assessee
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Customs
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2016 (3) TMI 151
Condonation of delay of 373 days - Justification given is department has initiated for further proceedings - Held that: as appellant had already accepted the liability to pay the Customs duty and discharged the same with interest as also penalties imposed by the adjudicating authority, so, the reason given for the delay in filing the appeal before the tribunal is not convincing as appellant has accepted that there is liability of differential duty due to apprehension for which subsequent proceedings may be initiated. Therefore, no condonation of delay in lack of valid ground. - Application dismissed in devoid of merits
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Corporate Laws
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2016 (3) TMI 123
3rd party rights over Swami Samarth Nagar property - whether the appellants are not parties to the company petition pending before the Company Law Board - Held that:- The Company Law Board has passed the order on the basis that there was no entry showing that the money of ₹ 9,51,00,000/- shown as consideration to respondent no.3-company has come into the account of the company. The Company Law Board has also passed the order on the basis that prima facie it was satisfied that respondent no.4 had no authority to create rights in favour of appellants for development of Swami Samarth Nagar and that Respondent no.4 has acted prejudicial to the interest of respondent no.1 & respondent no.2 and also respondent no.3 company. In fact, the Company Law Board has appreciated that the appellant no.1 is required to be shown as a party and to be heard. I do not find any perversity in that order. Until the matter is properly heard, the Company Law Board has passed the interim arrangement order. The counsel for the appellants stated that the appellants have received IOD from the municipal authorities, they have spent lot of money etc. and therefore, the interim order passed by the Company Law Board is hurting them and the balance of convenience is in their favour. But none of these facts have been placed before the Company Law Board by the appellants. The Company Law Board has given them an opportunity to place all these facts by including them in the reply to the issue as to whether the appellants can be impleaded as a party at all. I do not find any patent error on a fundamental principle of law. The Company Law Board in exercise of its discretion at the preliminary or interlocutory stage of the company application, awaiting the pleadings of the respondents viz. the appellants herein, has passed the impugned order. Therefore, as it is not a final verdict on the interim application, it lacks the essential precondition to maintain an appeal under Section 10F- “existence of a question of law arising from the decision”. In my view, therefore, this appeal is not maintainable.
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2016 (3) TMI 122
Transfer of shares - Transfer of assets and liabilities between a transferor and transferee company in the case of amalgamation - whether transfer of assets in the case of a scheme of amalgamation between transferor and transferee companies is a voluntary transfer and not an involuntary transfer by operation of law? - Held that:- A proper reading of the Articles seems to be that any transfer of shares occasioned by a scheme of amalgamation sanctioned by the court is not a transfer of shares within the meaning of Article 21 to 38 but a case of under Article 39 of transmission of shares 'by any lawful means other than by transfer in accordance with' the earlier Articles. After all the 'transmission clause' contained in Article 39 does not necessarily apply to the case of an involuntary transfer which is by operation of law. It rather provides for a case where the entitlement of any person to the shares arises on account of any lawful means other than by transfer in accordance with the foregoing Articles. Such transmission merely requires production of evidence that the claimant sustains the character in respect of which he proposes to act under Article 39 or has the requisite title. In other words, all entitlements to shares other than by virtue of transfers in pursuance of Articles 21 to 38 are covered by Article 39 and must abide by it. Even if its case be covered under the transmission clause of Article 39, it can be registered as a member in respect of the shares only with consent of the Directors. The Directors are not under any obligation to give such consent. If the Directors refuse to give such consent, the first Respondent would be free to invoke the regulations which apply to transfer of shares. Accordingly, the CLB had to give an option to the Board of Directors of the Appellant to register the first Respondent as a member or in the alternative, to purchase the shares through any purchasing member or otherwise at a fair value to be determined by the auditors of the company within the meaning of Article 25. Accordingly, whilst the findings of CLB in the impugned order are not disturbed, the operative order passed by CLB is modified by substituting Clause 'C' of para 21 of the impugned order by the following clause “C The Appellant company at its option shall either register the first Respondent as a shareholder in its register of members or allow the first Respondent to sell 1980 shares held by the first Respondent in accordance with the Articles of Association to a person named by the first Respondent or buy the said shares through a purchasing member at a fair value to be determined by the auditors of the Appellant company in accordance with Article 25. Such option shall be exercised within 28 days from today.”
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Service Tax
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2016 (3) TMI 141
Legality and propriety of the direction in the impugned order - Return of the refund application to the appellant sans sanction or rejection - Assessee pleaded that the claim be held in abeyance but without demur and with ingenuity, lower authorities have devised the outcome of returning the application for refund without dealing with the ground for such claim - a course of action not thought of in the law and borders on impossibility of implementation. Held that: The claim having been filed and taken on record, its return can be said to be complete only when its custody is transferred back to the claimant. It is moot whether an order can render it to be so without the willing participation of the claimant in a custodial transaction. That the claimant has been pursuing appellate remedies is a clear indication of lack of such willingness. The orders of the lower authorities would appear to be no whit more than printing on a piece of paper. The claim itself is symptomatic of a lack of faith in the fairness of the institution in dealing with refund claims. Every conceivable reason is assigned to justify the unwillingness to open the purse strings and not the least used are ‘limitation' and ‘pre-requisite of challenging the assessment.' It would appear that the claim has been filed to forestall recourse to these justifications. That the claim has been filed and that it has been preceded by payment of tax is undeniable. That the content of the order passed in relation to the refund claims is unimplementable is uncontestable. The eligibility for refund should have been decided taking into consideration the taxability of the service and the procedures laid down in law relating to tax collection and refund. The order of the original authority has merged with that of the first appellate authority and the merged order lacks legal sanctity for reason. Therefore, the return of the refund claim is not said to be legal and to be decided as afresh by the original authority. - Appeal disposed of
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2016 (3) TMI 140
Demand of Service tax - Inadmissible Cenvat credit taken - Appellant took Cenvat credit on electricity and water charges during the period 2004-05 and paid service tax along with interest - Held that: the demanded amount relating to Cenvat credit taken on electricity and water charges alongwith interest was paid on 04.05.2007/ 07.08.2007 i.e. before the issuance of the show cause notice. It is seen from the show cause notice and from the impugned order that these both record the fact of payment of said amount alongwith interest and the allegation of suppression of facts has been invoked only in respect of other two components of the impugned demand and therefore in terms of sub-section 3 of Section 73, this amount need not have been made part of the show cause notice; in other words, no show cause notice was required to be served to the appellant in respect of this amount. Therefore penalty cannot be imposed in respect of this component of demand. Demand of Service tax - Brokerage/ commission paid to commission agent - Appellant pleaded that it paid commission to various agents, foreign as well as Indian, against services received from them for finalising deals with reinsurers but Such agents would not come in the category of insurance agents defined in Section 65(54) of the Finance Act, 1994 - Held that: the agents in question were not soliciting or procuring insurance business including business relating to the continuance, renewal or retrieval of policies of insurance rather they were engaged to help out is finalising deals with reinsurers. This component of demand has been confirmed under reverse charge mechanism in terms of Rule 2(1)(d)(iii) of Service Tax Rules, 1994 where the liability of the appellant would arise only in relation to service rendered to it by insurance agent. As the commission was paid by the appellant to persons who did not qualify to be called insurance agents the reverse charge mechanism was not applicable and therefore, the appellant being service recipient was not liable to pay service tax. In addition the liability to service tax in respect of commission paid to persons based abroad would not fall on the appellant also because reverse charge mechanism in such cases became applicable from 18.04.2006 referred to Supreme Court Judgment in the case of Indian National Shipowners Associations 2009 (12) TMI 850 - SUPREME COURT OF INDIA while period involved here is prior thereto. Therefore demand is unsustainable. Demand of Service tax - Difference while reconciling the figures coming from its regional office for the period 2002-03 - Appellant contended that there was no wilful mis-statement or suppression of fact as he only after reconciling the figures noticed the discrepency and informed the revenue about the same. Further he pleaded that the short payment can be adjusted out of the excess amount of ₹ 1.25 crores of service tax made during the period 2004-05 - Held that: the payment of excess amount in 2004-05 shows the bonafies of the appellant and there is no evidence which supports the allegation of wilful mis-statement or suppression of facts on the part of the appellant with regard to the short payment of the said amount of duty.Therefore, the extended period of five years is not invocable making atleast this component of demand time barred by stating the case of BSNL vs. CCE, Ahmedabad 2008 (12) TMI 87 - CESTAT, AHMEDABAD, where it has held that malafide intention to evade tax is not attributable to public sector undertaking owned by Government of India. - Decided in favour of appellant
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2016 (3) TMI 139
Import of services - Advertising Agency services - Appellant manufactured pharmaceutical products and exported to Ukraine under an agreement for market promotion and publicity - Demand raised considering the services as advertising agency services taxable under Section 65 (105)(e) of Finance Act, 1994 - Held that: the goods are manufactured by the appellant and has deemed the services rendered in Ukraine to have been imported into India for business and commerce. The scheme of 'deeming of import of services' for taxation, can be reasonably inferred that the 'business or commerce' in Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 is not intended tax services that are rendered in connection with business or commerce outside the territory of India. Since the appellant has no requirement of 'advertising agency service' for manufacture and export of goods, the tax demanded in the impugned order is not on the consideration for a service received in India but a tax on the funds transferred in a cross-border transaction. Such a tax is not contemplated in Finance Act, 1994. Therefore, no Service tax can be demanded. - Decided in favour of appellant
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2016 (3) TMI 138
Refund claim - Entitlement of appellant to claim refund as service recipient when wrongly collected from him - Held that: as the appellant has paid the Service Tax which was not liable to be collected from him, and the same is admittedly deposited with the Revenue, the appellant is entitled to refund of the Service Tax wrongly collected from him. - Decided in favour of appellant
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2016 (3) TMI 137
Waiver of pre-deposit - Management, Maintenance and Repair Services - Whether notional interest to be taken as value of service - Appellant contended that there is no provision under Service Tax law to adopt notional interest as value of taxable service and as per Notification No.8/07-ST dated 1.3.2007 taxable services specified in clause (zzze) of section 65(105) of the said Finance Act provided or to be provided by a resident welfare association subject to the condition that the total consideration received from an individual member by the said society for providing the said services does not exceed three thousand rupees per month is exempt - Held that: as the appellant provided Management, Maintenance and Repair Services and is not a resident welfare association, the Notification No.8/07-ST dated 1.3.2007 is not applicable to it. The fact is that the service was rendered, and only amount of ₹ 3 lakh per flat owner was collected for this purpose although corpus fund was to be transferred to the welfare association as contended by the appellant but the corpus amount was not transferred by the appellant during the period and it earned interest thereon. Therefore, the notional interest reasonably represents the value of the said taxable service. - Stay granted partly.
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2016 (3) TMI 136
Real Estate Agent Service - Whether services rendered by appellant comes under ambit of Real Estate Agent Service - Appellant was providing service of facilitating the purchase of land - Held that: as per the MoU entered into by the appellant on 2-12-2005 shows that the services rendered thereunder falls within the scope of ‘Real Estate Agent’ service and there was no scope for any ambiguity or confusion which could have created any doubt in the mind of the appellant about the taxability of the service rendered. - Decided against the appellant
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2016 (3) TMI 135
Appropriate authority to decide a case - Refund of Cenvat credit availed on inputs and input services for the services exported - Held that: as per Section 117 of the Finance Act, 2015, these cases need to be decided by the Joint Secretary (R), Department of Revenue, Ministry of Finance, Government of India as per Section 35EE of the Central Excise Act, 1944. - Appeals disposed of
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2016 (3) TMI 124
Eligibility for cenvat credit of the service tax paid on the services received from sub-contractors - treatment as “input service” for the output service of repair and maintenance under AMC - Held that:- There is no dispute that the appellant during the period of dispute were paying service tax on their output service on repair and maintenance under AMC Contract. In our view, the service received by the Appellant from these sub-contractors (Business Auxiliary Service) is to be treated as “input service” for the output service of repair and maintenance under AMC and the ground on which the Commissioner has denied the service tax in respect of these services is totally wrong. In view of this, the cenvat credit demand is not sustainable and has to be set aside. - Decided in favour of assessee Cenvat credit demand in respect of the service tax paid by the commission agents on the service of procuring sales orders provided to the Appellants - Held that:- We are of the view that this service is nothing but sales promotion service which is specifically mentioned in the definition of “input service” . This issue has been discussed at length in its judgement in the case of Ambika Overseas (2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COUR) and Birla Corporation (2014 (6) TMI 385 - CESTAT NEW DELHI), wherein it has been held that this service is covered by the definition “input service” and would be eligible for cenvat credit. In view of this, the cenvat credit demand is also not sustainable. - Decided in favour of assessee Cenvat credit demand is in respect of the service received from the dealers who had provided repair and maintenance service during warranty period on behalf of the appellant to the customers - Held that:- The sale price of the air conditioners sold by the appellant to their consumers during the period of dispute included the warranty charges. There is no dispute that central excise duty had been paid on the value which included the warranty charges. During the warranty period, the appellant were under obligation to provide free repair and maintenance services to the consumers, who had purchased the air conditioners from them. However, instead of providing the free repair and maintenance service directly in discharge of their obligation, the appellant roped in the dealers who provided free repair and maintenance to the consumers on their behalf and the dealers for providing this service on behalf of the appellant, received the payment from the appellant and on that amount, they paid the service tax. The point of dispute is as to whether the service provided by the dealers to the Appellant is an input service and whether the appellant would be eligible for cenvat credit in respect of the same. The service received by the Appellants from their dealers is Business Auxiliary Service which has to be treated as an input service for the Appellant used in or in relation to manufacture of their final products, as free warranty repair and maintenance during warranty period, has enriched the value of the goods. See Danke Products (2009 (7) TMI 137 - CESTAT, AHMEDABAD ) - This issue stands decided in favour of the appellant assessee
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Central Excise
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2016 (3) TMI 134
Refund claim - whether claim filed by the appellant is hit by the bar of unjust enrichment in terms of Section 11B of the Central Excise Act, 1944? - Held that:- It is apparently not possible to point out as to out of which exact fund the Central Excise Duty was paid to the Government. The appellants derived their income mainly from supply of electricity. They also apparently get subsidy from the Government. As already noted, these two funds/ income have no linkage to the excise duty paid under protest by the appellant. We find that the ld. Commissioner (Appeals) observed the appellants would be deemed to have discharged the onus of absence of unjust enrichment, if excise duty payment was proved to be out of the appellants own fund. We are unable to appreciate such observation. The duty has been paid by the appellants apparently from their fund. There is no identity of different funds and individual records for different receipts for a one to one co-relation as to which money has gone to which expenditure. Such stipulation will be impracticable. The Hon’ble Madras High Court in Sescot Sheet Metal Works Ltd. vs. CESTAT, Chennai (2015 (4) TMI 386 - MADRAS HIGH COURT) held in the case of State owned Undertakings which are funded, controlled and monitored by the State Government, the doctrine of unjust enrichment will not arise. Based on the analysis and discussion as above, we find that there is no case for unjust enrichment against the appellant both on the reason of the appellant being a State Organization and also on merit of not passing on the duty to another person. - Decided in favour of assessee
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2016 (3) TMI 133
Interest on differential duty demanded - Held that:- From the reading of the Rule 7 (4) of CENTRAL EXCISE RULES, 2002 it is seen that interest is payable only when any amount is payable consequent to the order for final assessment. When no amount is to be paid consequent to the order of final assessment, sub-rule 4 is not attracted at all. As decided in J.K. Synthetics Ltd. Vs. CTO [1944 (5) TMI 21 - SUPREME COURT OF INDIA] so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under Section 7 of the Act and, therefore, it would be difficult to hold that the “tax payable” by him ‘is not paid’ to visit him with the liability to pay interest under Clause (a) of Section 11 B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible. - Decided against revenue
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2016 (3) TMI 132
CENVAT credit on the basis of in-genuine documents - demand barred by limitation - Held that:- Hon’ble Gujarat High Court in the case of Prayagraj Dyeing & Printing Mills Pvt. Ltd. Vs. Union of India ( 2013 (5) TMI 705 - GUJARAT HIGH COURT ) on the identical situation held that the demand as barred by limitation. In the present case, the submission of the appellants as revealed from the adjudication order, was not considered by the Commissioner (Appeals). In our considered view, the facts of the case and the decision of the Hon’ble Gujarat High Court as cited by the Learned Advocate are required to be examined by the adjudicating authority in the interest of justice - Decided in favour of assessee way of remand
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2016 (3) TMI 131
Eligibility for exemption Notification No. 108/95 dated 28.08.1995 on “sutures” cleared to the Government under the project funded by the World Bank - Held that:- The purpose of the beneficial notification is for the successful implementation of various welfare measures which are intended to be carried out bearing in mind the laudable spirit which in this case is that the project was for controlling the “cataract blindness” Taking cognizance of the sore fact that the victims of cataract blindness in this country is registering staggering height, year after year. As vision in the eyes is of paramount importance, than any other limbs to the human beings, bestowing sufficient concentration on this vital aspect should receive the utmost attention of the authorities by being liberal in passing benefits of such notifications. Any attempt to deny such benefits on technical grounds would contribute to the alarming growth in loss of vision, which no progressive society can afford. Keeping this in mind, the solitary ground that led to the denial of the benefit under the said notification was that the certificate was not countersigned by an Officer of stipulated rank viz., not below the rank of a Joint Secretary to the Govt. of India. In the instant case, the said certificate had been signed by the Under Secretary to the Govt. of India. There is understandably difference between an unsigned certificate and a certificate which was signed but not countersigned. Taking into the account the well settled principle that procedural infirmities such as the present one should not be allowed to the extent of denying the very benefit offered by the above said notification which is beneficial in nature, and only granting, rather than non-granting, will be in consonance with the legislative intent. Thus the appellants are eligible for exemption Notification No. 108/95 dated 28.08.1995 on “sutures” cleared to the Government under the project funded by the World Bank - Decided in favour of assessee
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2016 (3) TMI 130
Compounded Levy Scheme for textile in terms of Rule 96 ZNA of the Central Excise Rules - application for the scheme was rejected - penalty imposed on the appellant - Held that:- In the present case, the penalty equal to the duty is not legally sustainable. When the application of the appellant for the scheme was rejected, it is clear that the appellants were not governed by the provisions of the Scheme. Invoking one of the provisions of the Scheme for imposing penalty is thus legally not sustainable. Further, during the pendency of their application, they were discharging duty only provisionally in terms of the Scheme as permitted by the Rules itself. In fact, the appellants paid much higher duty than the actual liability as arrived at after rejection of their application. Considering the above position, we find the impugned order is not sustainable and set aside the same. - Decided in favour of assessee
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2016 (3) TMI 129
Demand of education cess and imposing equal amount of penalty - the disputed goods cleared during the period from 09.07.2004 to 31.07.2004 were out of stock manufactured in the refinery prior to 09.07.2004 - Held that:- Since, the appellant had maintained adequate records to show that the goods removed during 09.07.2004 to 31.07.2004 are out of stock of goods manufactured prior to 09.04.2004, it is of the view that action on the part of the adjudicating authority in rejecting the statutory documents maintained by the appellant, who is a public sector undertaking under the Ministry of Petroleum is not legal and proper. In view of the above and in view of the fact that the appellant had maintained the proper records to demonstrate that the goods in question were manufactured prior to 09.07.2004, the confirmation of demand on Education Cess along with interest and imposition of penalty on the appellant is not legally sustainable - Decided in favour of assessee
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2016 (3) TMI 128
Assessable value - Mastering Charges not included in the assessable value for payment of excise duty on holograms - Held that:- Regarding the appellant’s contention that there could be no amortization of these charges in view of the indefinite life span of the master is not directly relevant as the appellant themselves are admitting that these “master charges” are collected for producing specific holograms for their clients and the masters are returned to the clients once the required supplies are made. When the appellant receive these charges as additional consideration for holograms, they are liable for inclusion in the assessable value. As such, we find that the appellant’s plea on these grounds is un-sustainable. Extended period of limitation - Demand being time bar - Held that:- When an investigation is conducted regarding duty liability of the appellant after resuming all the relevant records, it cannot be argued later that the intention behind the investigation was limited to a specific issue and the other aspects like valuation, etc. were not examined. It is a fact that at least some of the documents relevant to the present demand were available with the Department in March, 2000 itself and hence, we find that the demand for extended period invoking suppression, fraud, collusion, etc. is not sustainable in this case. Accordingly, we restrict the demand to the normal period holding that the demand for extended period is not sustainable.
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2016 (3) TMI 127
Cenvat Credit - capital goods acquired on lease basis from other two entities involved in manufacturing activity is correctly taken or not - Held that:- In the case of Leamak Healthcare Pvt. Ltd. (2010 (6) TMI 424 - CESTAT, AHMEDABAD) the Tribunal held that the Rule 4(3) only further enlarges scope by stating that the credit would not be disallowed even if capital goods are cleared from the financing company. It does not mean that the capital goods must be acquired from a financing company and any other acquisition of capital goods from the company who is not a financing company will disentitle the availment of credit. The Tribunal held that the interpretation adopted by the Revenue would defeat the very legislative intent of allowing credit in respect of capital goods. Similar findings were recorded earlier in the case of Kalyani Seamless Tubes Ltd. (2004 (8) TMI 217 - CESTAT, MUMBAI ). Considering the above settled position we find no ground for disallowing the credit availed by the appellant in respect of capital goods taken on lease. Regarding denial of credit on certain items of structural steel on the grounds that they do not fall under the definition of capital goods, we find that no categorical finding with specific items and quantum of credit attributable to such items have been made. Considering the credit on these items have already been availed by the units who have later leased them out to the appellant, we find no justification for the observation by the original authorities on these aspects. - Decided in favour of assessee
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2016 (3) TMI 126
Remission of duty - loss of molasses - whether such rupture could have been avoided by the appellant or not - Held that:- The drain nipple had bursted due to the high static pressure exerted on it by the stored molasses resulting in loss of the molasses. Needless to say that all accidents occur on account of lack of precautions of the personnel responsible for avoiding such incidents and nobody indulges in such accidents purposely. If such a strict measure is adopted, there would be no accident at all. It may be that the appellant were thinking of changing the nipple and before the same could be done, it led to the accident. As is famous saying - Nobody invites accident. If such a restrictive construction is made applicable to the provisions of Rule 21 of CENVAT Credit Rules, the same would make the said rule inoperable and redundant. No assessee would cause loss of its own final product for the reason of not paying the excise duty. As such, as long as the accident is not deliberate and there is no mala fide on the part of the assessee to make the accident occur resulting in loss of the goods, the assessee would be entitled to the remission of duty in terms of the provisions of Rule 21. As such, the appellant is entitled to the remission of duty. - Decided in favour of assessee
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2016 (3) TMI 125
Differential duty demand - valuation under Section 4 or Section 4A - appellant is engaged in the manufacture of cleaning liquids like floor cleaners, utensil cleaners, glass cleaners, etc. - Revenue felt that the appellant’s products attracted duty on MRP, in terms of Notification No. 49/2008 (N.T.), dated 24-12-2008 issued in terms of Section 4A of Central Excise Act - Held that:- There is no dispute about the fact that the Entry 3402, under which the appellant’s products fall, is one of the specified entry under Sl. No. 40. The said entry relates to organic surface active products. The description of the goods appearing against the said entry clearly reflects upon the intention of the legislation that it is only the organic surface active products and preparations for use as soap, which are in the shape of bars, cakes, moulding pieces or shapes, which would get covered under the said entry. If the Revenue’s contention is correct, the entry, according to us, would have read as “preparations for use as soap in the form of bars, cakes, moulding pieces or shapes and organic surface active products”. In other words if the legislature intended to cover all the organic surface active products, which may be in a shape other than bars, cakes, moulded pieces or shapes, they would have referred to the organic surface active products, after describing the preparations for use as soap in the form of bars, cakes, moulding pieces or shapes. There is no warrant to hold that the expression “in the form of bars, cakes, moulding pieces or shapes” referred to only preparations for use as soaps and not to organic surface active products. The overall reading of the entry clearly reveals that both the products should be in the form of bars, cakes, moulding pieces or shapes so as to attract the said Sl. No. 40. In view of the above, we find that Sl. No. 40 does not cover organic surface active products, in liquid form and as such, their assessment to duty under Section 4A is not called for. Accordingly, the impugned order of Commissioner (Appeals) is set aside and the order of the original authority is restored.
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Indian Laws
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2016 (3) TMI 121
Auction sale - whether the auction was conducted in a fair and transparent manner? - introduction of a different buyer - Held that:- Considering that the petitioner had defaulted in making good the offer of deposit ₹ 21 lacs within one week and he had moved the second application after more a year of the auction, the Recovery Officer rightly found that the intention of the petitioner was not bona fide and he merely intended to delay the proceedings. Tribunal has rightly held that the attempt by the petitioner to introduce a different buyer (Sh. Shivam Aggarwal), with the offer of ₹ 18 lacs after one year of the auction, and that too after his failure to make good the initial offer of ₹ 21 lacs within the stipulated period had been unfairly entertained. Resultantly, the petitioner even successfully misled the Appellate Tribunal also to urge that he had a better buyer which led to inter se bidding. Thereafter, he introduced the father of Sh. Shivam Aggarwal and still later Mr. Anand Goyal as the intending buyer. Thus, introducing a new purchaser every time. Despite many legal hurdles in the maintainability of his appeals the petitioner has been given more than a fair latitude to furnish a better buyer. Clearly this process of inter se bidding cannot be carried on ad infinitum. The auction was held on 05.02.2007. No legal or procedural infirmity having been found in the auction proceedings, it is high time that the proceedings attain finality. As against the original auction price of ₹ 12.10 lacs, the auction purchaser has now been held bound to deposit a sum of ₹ 25 lacs.
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