TMI Tax Updates - e-Newsletter
April 12, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Exemption under section10A - computation of five consecutive years - amendment to section 10A(3) - the amendment is not retrospective in nature - Decided in favor of revenue. - HC
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Income Tax:
Order of settlement commission - immunity from prosecution - the Settlement Commission will have to examine the application by lifting the corporate veil to see as to whether there has been an intention to evade tax and then arrive at a conclusion. - HC
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Customs:
Levy of SAD - 100% EOU - clearance of machine as scrap - SAD is not payable on the capital goods as there was no levy of that duty at the time of its importation. - AT
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Corporate Law:
Restraining infringement of patent - similarity of pharmaceutical composition of the products cannot be a ground for infringement. - HC
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Corporate Law:
Invocation of Arbitration clause - non reference to an arbitration clause in the counter affidavit filed by the Delhi Jal Board does not result in waiver of the defendant’s right to rely upon the arbitration clause in the present suit. - HC
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Service Tax:
Levy of service tax on interest charged by credit card company for late payment of dues - prima facie in favor of assessee - stay granted - AT
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Service Tax:
Refund - export of services - foreign exchange ICICI Bank (their banker) confirms that payment of Canadian company was converted into Indian currency and paid to the appellant. - refund allowed - AT
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Central Excise:
Manufacturing of exempted as well as dutiable goods - Cenvat Credit - No separate accounts - demand equal to 10% of exempted goods confirmed, though the amount of credit was not much - AT
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Central Excise:
Valuation - inclusion of cost of software in the value hardware - equipments have been cleared from the factory without the software being loaded in the equipments - no addition - AT
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Central Excise:
Manufacture - Marketability - Sale of the paper waste and plastic waste and scraps - merely because no classification list was filed, that by itself was no ground for invocation of longer period of limitation. - HC
Articles
Notifications
Central Excise-
06/2013 - dated
10-4-2013
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CE (NT)
Amends forms for filing appeal in the CESTAT (E.A.-3, E.A.-4, E.A.-5)
Customs-
37/2013 - dated
10-4-2013
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Cus (NT)
Amends forms for filing appeal in the CESTAT (C.A.-3, C.A.-4, C.A.-5)
Service Tax-
05/2013 - dated
10-4-2013
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ST
Amends forms for filing appeal in the CESTAT (S.T.-5, S.T.-6, S.T.-7)
VAT - Delhi-
F. 5(54)/Policy-II/VAT/2012-13/28-39 - dated
3-4-2013
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DVAT
AMENDMENTS in the Sixth Schedule of the Delhi Value Added Tax Act, 2004 (Delhi Act 03 of 2005), in the entry at Sl. No. 1 in Part-A, a new sub-entry after serial No. 20 shall be inserted, namely:-"(20-A) REPUBLIC OF CONGO, New Delhi for exemption/refund of VAT in favour of official purchases of its Embassy and personal purchases of its diplomats".
Circulars / Instructions / Orders
Case Laws:
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Income Tax
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2013 (4) TMI 232
Exemption under section10A - computation of five consecutive years - amendment to section 10A(3) - whether retrospective or prospective - The case of the assessee is that it had made a declaration that it would not like to avail of the benefit of section 10A of the Act for assessment years 1984-85 and 1985-86 but would prefer to avail of the said benefit for the subsequent five assessment years. Held that – The first question that arises for consideration is as to whether it is possible to give retrospective operation to sub-section (3) of section 10A of the Act as substituted with effect from 1st April, 1987. - Permitting an assessee to exercise option even after he has started to avail of the benefit of section 10A of the Act would either amount to breaking the block of five consecutive assessment years or permitting the assessee to withdraw benefit granted in the earlier assessment years without there being any statutory basis therefor. - Thus, on the contrary if sub-section (3) of section 10A of the Act is construed to be retrospective in effect it would make the provision unworkable which could never have been the intention of the legislature. - Decided in favor of revenue and against the assessee.
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2013 (4) TMI 231
Deduction u/s. 80IB - CIT(A) allowed the claim - Held that:- On perusal of the assessment order passed by the A.O. it is found that he has held the assessee to be engaged in the assembling and not manufacturing. CIT (A) while granting the deduction has held that the goods manufactured by the assessee are subject to payment of Excise Duty. He has further given a finding that as per the Registration Certificate for the Sales Tax and Central Sales Tax Act the business of the is shown to be "manufacturing activity", the assessee has been granted provisional SSI Registration prior to 31st March, 2004 the assessee has been granted electrical connection vide letter dated 30-12-2003 with load of 50 HP. He has further given a finding that though most of the job has been got done by the assessee from outside parties final process has been undertaken at the assessee's factory premises and which is evident from the Excise Duty payment made by the assessee. He has also given a finding after considering the bills of raw material used and the sales bills that the product sold by the assessee is distinct and different from the original raw material. After conversion of raw material assembling of parts and after testing the machineries the same are packed in various parts and dispatched to the customers where the erection is done. The aforesaid facts could not be controverted by Revenue by bringing any contrary material on record. What is find from the process indicated hereinabove is that there are various stages through which the blocks have to go through before they become polished slabs addition tiles. In the circumstances there is certainly an activity which will come in the category of 'manufacture' or 'production' under section 80-IA of the Income Tax Act. As find from the facts of the case in the year under appeal are identical to that of A.Y. 2005-06 also find that certain new facts were brought on record by the Assessing Officer like on production of lorry receipts by assessee before A.O. to prove that the goods have not been manufactured by the assessee. CIT (A) has followed the order of A.Y. 2005-06 while deciding the appeal of A.Y. 2006-07. Thus the additional facts brought on record by A.O. should have been considered by CIT (A) while passing the order. Therefore in the interest of justice, the matter be remanded back to the file of CIT (A) for considering the additional facts brought by A.O. and pass a speaking order thereafter. Thus this ground of the Revenue is allowed for statistical purpose. In the result, appeal of the Revenue for A.Y. 2005-06 is dismissed and appeal of Revenue for A.Y. 2006-07 is allowed for statistical purposes.
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2013 (4) TMI 230
Re-opening the assessment - addition as undisclosed income on account of unaccounted receipts - Held that:- Taking into account the submissions of the assessee, the stand of the AO, reasoning of the CIT (A) in sustaining the action of the AO and also in conformity with the rulings of the Hon'ble jurisdictional High Court of CIT v. S.C. Sethi (2006 (3) TMI 60 - HIGH COURT, RAJASTHAN), CIT (A) was not justified in sustaining the addition of ₹ 57.5 lakhs made by the AO in the hands of the assessee as the AO had solely depended upon the information received from the Investigation Wing of Pune. AO had failed to substantiate the same with any credible documentary evidence to the effect that the assessee had indeed received the alleged cash payment of ₹ 57.5 lakhs from Shri Sohanraj Mehta as the assessee had categorically pleaded before the AO that he was making purchases through Ambika Distributors who were the C & F Agents for Gujarat Region. The total unaccounted sales effected by Shri Sohanraj Mehta C & F of RMD Gutkha on behalf of Dhariwal Industries Limited for the period of April 2003 to Feb 2008 was ₹ 345.72 crores (approx). The unaccounted income for the AY 2004-05 was arrived at ₹ 40,88,32,514/-, the same was added substantively in the case of M/s. Dharival Industries Limited and concluded the assessment for the AY 2004-05 u/s 153A r.w.s. 143 (3) of the Act, dated 29.12.2011 by the ACIT, C.C. 1(1), Pune. Thus once the alleged sum of ₹ 57.5 lakhs was subjected to tax in the hands of Dhariwal Industries Limited, the same cannot be subjected to suffer further tax. This view has been fairly conceded by the CIT (A) that the appellant is right to the extent that no income can be taxed twice......" The AO had candidly admitted that during the course of assessment proceeding itself the assessee had sought permission to cross examine Shri Sohanraj Mehta which was summarily rejected by taking refuge ".....Due to paucity of time, the cross examination could not be granted". This stand of the AO, to view it mildly, is against the spirit of judicial pronouncements. Thus the AO had merely come to a conclusion based on a statement of a third party, without bringing any credible documentary evidence to the contrary on record to nail the assessee. No reliance can be placed on the statements of a third person whose premises were subjected to a search since he had retracted his own statement made earlier on oath and precisely the assessee has been denied to cross-examine him to bring out the truth. Thus the addition made for ₹ 57,50,000/- by the AO on account of undisclosed income, which was further sustained by the CIT(A) requires to be deleted - also ground No.1 raised by the assessee with respect to reopening of the assessment u/s 148 is dismissed and ground No.2 with respect to addition on account of undisclosed income is allowed in favour of the assessee.
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2013 (4) TMI 229
Unexplained cash credit received from American Mannequin Co. - CIT(A) deleted the addition - Held that:- Nature and source of funds have been explained to the AO with documentary evidences, which have not been fully appreciated by the AO to arrive at a logical conclusion. Nothing on record to suggest that the impugned transaction of shares are sham or bogus and/or simple paper transactions, and amount to hawala transaction, therefore, the findings of the CIT(A) cannot be said to be erroneous and perverse. The case laws cited by the learned DR are of no help, as they revolve around issues of identity and credit worthiness of the parties, which are not the issue in the present case. In this view of the matter no reason to interfere in the order of the CIT(A) on this issue, which is upheld - against revenue. Disallowance made by the A. O. under section 43B - deduction on account of interest payment disallowed - CIT(A) deleted the addition - Held that:- On perusal of the Annexure and ledger account as on 31-03-2002 it reveals that the assessee had paid the accrued interest on its borrowings from GIIC which is a State Industrial Investment Corporation before the date of filing of its return of income which the learned AO failed to appreciate and by wrongly invoking the provision of section 43B made the additions. The CIT(A) on proper appreciation of the facts of the case as well as the provisions of section 43B had directed the AO to delete the addition so made by the AO. No justification to interfere with the findings of the CIT(A). In favour of assessee.
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2013 (4) TMI 228
Depreciation on Testing equipment - Held that:- Respectfully following the Tribunal order passed in another group concern of the assessee, whose facts have not been distinguished by the DR the depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. Disallowance towards executive retirement scheme (ERS) - Held that:- It is important to note that section 35DDA has been inserted by the Finance Act, 2001 with effect from 01.04.2001. This section provides for amortization of expenditure incurred under Voluntary Retirement Scheme (VRS). As per this section, the entire amount of expenditure incurred on VRS cannot be allowed as deduction in the first year. Only 1/5th of the same is to be deducted in first year and then equal amounts in four immediately succeeding previous years. The assessee contended that the provisions of section 35DDA are not applicable as ERS is different from VRS. No discussion on the facts of the instant ground in the orders of the authorities below. Since section 35DDA has been inserted by the Finance Act, 2001, which is relevant from assessment year 2001-2002 therefore, set aside the impugned order and remit the matter to the file of A.O. for deciding this issue afresh in the light of section 35DDA, if applicable. Provision of cash discount - Held that:- As dealt with this issue in the appeals for the assessment year 2000- 2001, by which the matter has been restored to the file of A.O. for allowing deduction of cash discount on actual payment basis. Disallowance of payments made to the persons specified u/s 40A(2)(b) - Held that:- In so far as royalty payment is concerned, it is observed that the assessee made payment to Johnson & Johnson, USA after due approval from RBI. If the RBI has given approval to such payment, the AO, without any cogent material, cannot take a stand that such payment was excessive, thus CIT(A) was justified in deleting disallowance to this extent. Now, disallowance at 10% of the value of goods purchased from sister concerns. The onus is on the AO to demonstrate that the payment was excessive. There is no warrant for making any disallowance under this section without pointing out as to how payment was excessive. There is really no mention by the authorities below as to the excessive amount of payment made by the assessee for purchases made from its two sister concerns. Denial of deduction u/s 80- IB on certain items of miscellaneous income - Held that:- DR did not object to the restoration of the matter but requested that the decision be taken by considering the judgment in the case of Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT]stating that Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB of the 1961 Act . Reduction/denial of deduction u/s 80HHC on the amount of Write back of liabilities and Miscellaneous income with Service charges and Recovery of R & D cost - Held that:- Both the sides raised arguments similar to those advanced qua the assessee's appeal for assessment year 2001-2001. Once again it was requested that these items be considered afresh one by one for their eligibility u/s 80HHC as per the relevant judgments. Disallowance u/s 80HHC on rent - Held that:- The Tribunal, following the judgment in the case of ACG Associate Capsules Private Limited v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] has held that "netting off" of rent paid should be done against the rent received and only 90% of such net rent income should be considered for disallowance u/s 80HHC - remit the matter to the AO for deciding this issue in accordance with the view taken by the tribunal in its order for the earlier years. Disallowance of expenses for repairs and maintenance for Building and Plant & Machinery - Held that:- As it is seen from the details of expenses disallowed by the A.O. that all are of revenue nature. Amounts has been incurred on items of revenue nature, such as, false ceiling, paneling and monsoon shed of temporary period. CIT(A) was justified in deleting the disallowance. 10% of ad hoc disallowance of traveling expenses - CIT(A) deleted the addition - Held that:- There is no doubt that the assessee is a limited company. In such a situation, there cannot be any question of sustaining any disallowance even by treating the expenditure for non- business purposes. It has been held so by the Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. (2001 (7) TMI 70 - GUJARAT HIGH COURT), which view has been reiterated in Dinesh Mills Ltd. v. CIT [2002 (10) TMI 10 - GUJARAT HIGH COURT] - against revenue. Disallowance of hotel expenses - CIT(A) deleted this addition - Held that:- No infirmity in the impugned order on this issue. When the guests are entertained by the assessee, it is but natural to arrange for their stay. This ground is, therefore, not allowed. Disallowance of club entrance fee - Held that:- The case is covered by the judgment of of Otis Elevator v. CIT 195 ITR 682 (1991 (4) TMI 53 - BOMBAY HIGH COURT) as per which deduction of such entrance fee paid for club is allowable in the year of incurring. Therefore, the view taken by the CIT(A)approved. AO is directed to ensure that no deduction is allowed for the 4/5th of the total amount in the succeeding years. Disallowance of 10% of professional sponsorship expenses - Held that:- It is amply borne out that the AO accepted the incurring of such expenses towards the promotion of assessee's business. Once the expenditure is held to be for business purposes, there is no question of disallowing 10% of such expenses by treating the same as for non-business purposes - against revenue. Exclusion of excise duty and trade discount from the total turnover for deduction u/s 80HHC - Held that:- Decided in favour of assessee as relying on Laxmi Machine Works case[2007 (4) TMI 202 - SUPREME COURT] that the excise duty is not includible in the 'total turnover' in the formula contained in section 80HHC - against revenue.
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2013 (4) TMI 227
Addition being profit on sale out of the books of account - unexplained investment in purchase and sale - Held that:- The CIT(A) has made detailed discussion regarding the profit material of the assessee. CIT(A) called for the remand report from the A.O. and finally the A.O. found that on the basis of impounded material found during course of survey in the case of sister concern that the assessee has made purchases from it. On the basis of impounded material, the assessee herself has calculated unaccounted purchases on the basis of loose paper of Rs.8,94,405/- and the same working has been given by the assessee to the CIT(A) vide letter dated 31.03.2011. In the said letter maximum profit was also calculated which was Rs.62,608/- being 7% of profit rate. The finding of CIT(A) is based on loose paper found at the time of survey in the premises sister concern and on the basis of these documents and statement of the concerned parties in the impounded document, it was clearly mentioned the name of the assessee. Before us, the assessee relied upon various decisions which does not help to the assessee as those decisions were made on the basis of facts of respective cases. The assessee has failed to discharge the burden by furnishing necessary financial statement, books of account and other material to support that the Books of accounts maintained by the assessee was perfect and there was no mistake in maintaining books of account. The assessee has also failed to furnish any supporting evidence regarding purchase and sales - appeal filed by the assessee is dismissed.
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2013 (4) TMI 226
Assessment of status - Whether the Tribunal was right in sustaining the order of the AAC directing the assessing officer to assess the status of Registered Firm against A.O.P.? - Held that:- In the present case, it is clear that the Tribunal, after rectifying its mistake and taking into consideration the material on record, which it had failed to consider earlier has come to a conclusion that the assessee-firm was a genuine firm. This is purely a finding of fact and in such a situation, no question of law as such arises and, in this connection, reference may be made to the decisions in CIT vs. M. P. Bidi Leaves & Company (1981 (11) TMI 9 - MADHYA PRADESH HIGH COURT); India Cements Ltd. vs. CIT (1965 (12) TMI 22 - SUPREME COURT); ClT vs. Chander Bhan Harbhajan Lai (1966 (1) TMI 20 - SUPREME COURT); Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1982 (4) TMI 43 - ALLAHABAD HIGH COURT); Chimanlal Umaji vs. CIT (1978 (10) TMI 16 - MADHYA PRADESH HIGH COURT) and Shri Paramanand Bhai Patel and Smt. Jyotsna Devi Patel vs. CIT (1984 (1) TMI 40 - MADHYA PRADESH HIGH COURT). Also to consider the comments of the learned author in his book Law of Income Tax by Kanga & Palkhivala (7th edn.) vol. I, at page 1159. Thus, the Tribunal having taken all the facts and circumstances into consideration while deciding the appeal on merits, the question proposed by the Revenue being not a question of law as such does not call for a reference. The order passed by AAC affirmed by the Income Tax Appellate Tribunal, Indore Bench, Indore, appears to be correct and in accordance with law - the question referred to this Court deserves to be answered in negative, in view of the law laid down by the Division Bench in the matter of respondent reported as Mithalal Ashok Kumar (1984 (11) TMI 16 - MADHYA PRADESH HIGH COURT) relating to the same assessee for the assessment year 1978-79 had held that the assessee M/s Mithalal Ashokumar was a genuine firm and directed I.T.O., to grant registration to the assessee and also allowed the appeal on the question of quantum.
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2013 (4) TMI 225
Order of settlement commission - Writ Petition - This Intra Court Appeal under Section 4 of the Karnataka High Court Act. - Single Judge has quashed the order passed by the Income Tax Settlement Commission (Additional Bench), Chennai dated 04.02.2008 in so far as it relates to granting immunity from penalty and prosecution and remanding the matter to the Settlement Commission for limited purpose of reconsidering the question of penalty, Settlement Commission took up the application of the assessee for hearing and after considering the arguments passed order under section 245D(1) and 245D(4) of the Act determined the additional income and the tax payable thereon. Maintainability of the application filed by the assessee was also upheld. Being aggrieved by the order revenue preferred writ petition before the court where, learned Single Judge has quashed the order passed by the Settlement Commission for which intra Court appeal is filed by the assesse. Held that - In a given case if such immunity is not granted the Department would proceed to prosecute the assessee in a jurisdictional court. Once prosecution is lodged the presumption is that there was mens rea on the part of the assessee to conceal the income by a smoke screen or evade tax. Thus the Settlement Commission will have to examine the application by lifting the corporate veil to see as to whether there has been an intention to evade tax and then arrive at a conclusion. In the absence of such exercise being undertaken by the Settlement Commission the intention underlined behind section 245H(1) would become otiose or redundant. As per the provision of section 245D, the Settlement Commission on receipt of an application filed under section 245C had to call for a report from the Commissioner and on the basis of that report, the Settlement Commission was empowered to reject or allow the application to be proceeded with, within the prescribed period and it is in this background the granting of immunity from prosecution ought to have been scrutinized by the Settlement Commission which the learned Single Judge has found not to be so and as such remanded the matter for de novo adjudication which does not suffer from any material irregularity or illegality so as to invite the attention of this court for exercising the Appellate jurisdiction which is limited in scope. In that view of the matter also the point herein above deserves to be answered in the negative i.e., against the assessee/appellant. - Decided against the assessee.
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2013 (4) TMI 224
Rectification of mistake - Whether ITAT was right in setting aside order of CIT(A), who restored the matter to the file of AO for passing fresh orders u/s 154 after allowing opportunity of being heard to the assessee - Held that:- The order passed by the AO on 31.12.1990 leaves no manner of doubt that an amount of Rs.40,29,208/- was disallowed by the AO by detailed discussion. It was only while computing the total disallowances, an amount of Rs.40,29,208/- was left from the final calculations. Such mistake could very well be corrected by the AO in exercise of the powers conferred under Section 154. The only procedural irregularity can be said to be of not granting any opportunity of hearing to the parties. Though, it is doubtful that any opportunity was required for correction of such inadvertent and clerical mistake, but since the CIT (A) has granted such opportunity, we restrain ourselves to opine any further on the issue. Therefore, Tribunal is not right in setting aside the order passed by the CIT (A), which only contemplated that an opportunity of hearing should be provided to the assessee.
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2013 (4) TMI 223
Disallowance of notional loss - Held that:- Finding merit in the plea of assessee that in the statement showing details of loss in open position of F&O as on 31-3-2008 appearing in assessee's paper book the assessee has shown profit of Rs. 6342/- in one transaction and in remaining three transactions the assessee has shown loss of Rs. 1,77,002/- and after adjusting the profit of Rs. 6342/- the net loss of Rs. 1,70,660/- was claimed as a loss in open position of F&O. In Bank of Bahrain and Kuwait (2010 (8) TMI 578 - ITAT, MUMBAI) it has been held that that where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period, i.e., before the date of maturity of the forward contract is allowable. In the absence of any distinguishing feature brought on record by the Revenue the said loss claimed by the assessee is allowable and allow the ground taken by the assessee.
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2013 (4) TMI 222
Leave encashment benefit - A.O.treated the impugned liability as contingent liability and accordingly disallowed the claim of the assessee - Held that:- It is not in dispute that the assessee has made provision for leave encashment on the basis of the report of the actuarial valuation. Applying the settled principles of case of M/s. Bharat Earth Movers Ltd. [2000 (8) TMI 4 - SUPREME COURT] & Metal Box Company Of India Limited Versus Their Workmen [1968 (8) TMI 53 - SUPREME COURT] to the facts of the present case it is satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability - in favour of assessee.
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Customs
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2013 (4) TMI 238
Valuation - extended period of limitation – 100% EOU - dismantling of machine as scrap and sale of scrap on payment of excise equal to customs duty - Levy of SAD - Held that - The Tribunal held that M/s. Ashima Fabrics (100% EOU) [2002 (6) TMI 144 - CEGAT, MUMBAI] was not liable to pay SAD on the capital goods as there was no levy of that duty at the time of its importation. In the result, the demand of CVD and SAD raised on the assessee in the present case is not sustainable. As it is not in dispute that the machinery was dismantled under the supervision of the Central Excise Range officers and cleared from the factory as scrap, in our view, it should be considered to be a DTA clearance by the EOU attracting Central Excise duty. It was not clearance of the capital goods as such from the factory. Therefore the payment of Central Excise duty by the assessee at the time of clearance of the scrap to M/s. SJCM cannot be faulted. The Department has no case that there was short-payment of this duty by the assessee. - entire demand is beyond the normal period of limitation - Decided in favor of assessee.
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2013 (4) TMI 237
Liabiltiy of pay demurrage charges - illegal confiscation - reimbursement of payment of Containers’ Detention Charges along with ground rent - Held that - in view of the order of this court declaring the confiscation illegal, and such judgment of this court having attained finality, the customs authorities cannot escape the liability to bear the burden of demurrage charges for such seized and ultimately confiscated goods which would include container charges and ground rent. - the seizure orders pertained to the containers also. To the extent such demand is found genuine and payment actually made, the customs authorities shall reimburse the petitioner with simple interest at the rate of 9% per annum from the date of payment by the petitioner till its reimbursement by the respondents. - Decided in favor of assessee.
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Corporate Laws
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2013 (4) TMI 236
Maintainability of writ petitions filed challenging the orders of SEBI - orders passed against the company as well as Mr. A. Venkatramani, the promoter - Held that:- Section 29 of the Act, 1992, enables the Government to make Rules for carrying out the purposes of the Act and the notification issued by the Central Government under Rule 5(2) is valid in law. The petitioners herein have not challenged the Rules nor the notification issued thereunder. In the absence of that, the petitioners are bound to follow the provisions of law by filing an appeal before the Appellate Tribunal. The contention that only one member that too, a non-judicial member is functioning as on today would not hold water as the Appellate Tribunal is functioning as on today and discharging its functions as per law. Any rule has to be read meaningfully and what is applicable to two members is applicable to one member. It is a necessity which has to be accepted. It is an admitted fact that, a number of appeals have been filed before the Appellate Tribunal and the same are heard and orders passed. Whether alternative remedy of appeal as provided in Act 15 of 1992 is a bar to entertain these writ petitions - Held that:- On a perusal of the Act and the Rules made thereunder, it is a considered view that a fully-fledged appeal is provided under the Act, that too, with member having special and technical knowledge in the relevant field. In such circumstances, no reason found to waive on the appeal remedy and to entertain the writ petition. Therefore, the two writ petitions are not maintainable before the Court and the petitioners have to avail the statutory appellate remedy available under the Act - both the writ petitions are to be dismissed as not maintainable.
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2013 (4) TMI 235
Restraining infringement of patent - pharmaceutical composition - Held that:- if the infringing product are made with the same object in view which is attained by the patented article, then a minor variation does not mean that there is no infringement. Trifling and unessential variations are to be ignored. Conversely, a miniscule advancement could be recognized as an invention. The defendant pointed out that the patent of the plaintiff Merck was not in the pharmaceutical composition as described on plaintiff‟s product but only in a part thereof and which fact was not denied by the plaintiff. Thus, similarity of pharmaceutical composition of the products cannot be a ground for infringement. It has emerged that the plaintiff Merck itself has in USA taken an independent patent for Sitagliptin Phosphate and similarly applied in India and which has been rejected and while applying for independent patent in Sitagliptin Phosphate in USA, India and Europe having claimed it to be a new invention and a different product than SITAGLIPTIN. Whether in the absence of the plaintiff having pleaded so, can interim relief be granted on the basis of such explanation. The answer has to be an emphatic no. - plaintiffs have not made out a case for grant of interim relief. - The application is accordingly dismissed but with a direction to the defendant to diligently maintain accounts of the manufacture/production and sales of the infringing products and to file the same every quarter before this Court with advance copy to the counsel for the plaintiffs.
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2013 (4) TMI 234
Invocation of Arbitration clause - plaintiff states that defendant has waived its right to invoke the arbitration clause as plea of Section 8 of the Arbitration and Conciliation Act, 1996 was not taken in the writ proceedings filed by the plaintiff. - Held that:- It is settled law that a writ petition cannot be referred to arbitration and consequently non reference to an arbitration clause in the counter affidavit filed by the Delhi Jal Board does not result in waiver of the defendant’s right to rely upon the arbitration clause in the present suit. In Vishwanath Sood (1989 (1) TMI 314 - SUPREME COURT) the Supreme Court held that arbitrator could not decide those disputes which had to be decided by a third party and whose decision was final and binding on the parties - The Superintending Engineer has computed the amount payable by the plaintiff as compensation but in the opinion of this Court there is no clause in the contract which attaches any finality to the Superintending Engineer’s decision. The plaintiff is free to challenge the decision of the Superintending Engineer after invoking the arbitration clause. Accordingly, the present suit of the plaintiff’s as well as all the pending applications filed by the parties are referred to arbitration in terms of Arbitration Clause 9 of the agreement dated 3rd February, 2000 and the defendant is directed to appoint an arbitrator within four weeks - The present suit and all pending applications stand disposed of.
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Service Tax
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2013 (4) TMI 241
Refund of unutilized credit availed on 'input services' in terms of Notification No. 5/2006-CE (NT) dated 14.03.2006 issued under Rule 5 of CENVAT Credit Rules 2004 - denial of claim as the details given in Foreign Inward Remittance Certificate (FIRC) were not tallied with the export documents & that 'Group Medical Insurance' applicable to the employees and the families could not be treated as 'input services' in respect of the 'Information Technology Services' exported by them - Held that:- The service tax paid on Group Insurance/Mediclaim Policy is eligible to be treated as 'input service' as decided in Stanzen Toyotetsu India Pvt. Ltd. 1/s. CCE, Bangalore-III [2008 (12) TMI 118 - CESTAT BANGLORE], Fiamm Minda automotive Ltd. Vs. CCE, Delhi-Ill [2011 (1) TMI 246 - CESTAT, NEW DELHI], Commissioner of Central Excise & Service Tax Versus Micro Labs Ltd. [2011 (6) TMI 115 - KARNATAKA HIGH COURT] - in favour of assessee.
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2013 (4) TMI 240
Levy of service tax on interest charged by credit card company for late payment of dues - Credit Card, Debit Card, Charge Card or other payment card service - valuation - Held that:- Agreeing with the point made by the assessee that bank’s customers holding credit cards purchase goods from shops and the bank pays to the shop keeper on their behalf. Till the customers pay up the money to the bank, they are debtors and they stand in the shoes of borrowers. If that be the case, the amount transacted is a “loan” and interest must accrue to the bank in the event of delay in repayment thereof. In this scenario, the legal provisions cited by assessee become relevant. During the period of dispute, “interest on loans” was in the excluded category and was not to be included in the gross value charged by the bank for rendering ‘credit card services’. The appellant having made out a prima facie case is therefore, entitled to waiver and stay.
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2013 (4) TMI 239
Refund of service tax paid on various input services - export of services - foreign exchange - Held that:- According to the RBI instructions no Indian firm can be paid in foreign currency in India. The certificate issued by ICICI Bank (their banker) confirms that payment of Canadian company was converted into Indian currency and paid to the appellant. Thus the rejection of refund claims on this ground is unwarranted. Refund claim is time barred - Held that:- The total amount held to be ineligible is Rs. 1.05 lakhs only, the appellant is willing to forego the same and will not contest the same. Thus this portion of the appeal is held as uncontested and rejection is upheld. Non maintenance of proper accounts in respect of input services - Held that:- As a statement showing details maintained in computer was produced containing all the details which are required for verifying the type of service received, the amount of consideration paid, Service tax payable and paid, date of payment of Service tax by the appellant, name of service provider, etc. Also the invoices received by the appellant contain all the details and the account maintained in the computer also contains all the details. Thus as appellant is maintaining detailed account in the computer system, this is not a valid ground for rejection of refund claim.
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Central Excise
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2013 (4) TMI 221
Manufacturing of exempted as well as dutiable goods - Cenvat facility - Rule 6 - the appellant did not maintain separate accounts as required under Rule 6 (2) of the Cenvat Credit Rules, 2004 in respect of common inputs service used in the manufacture of exempted products as well as dutiable products. - Appellant made reliance on the case of Shree Rama Multi tech Ltd., Vs. UOI, reported in [2011 (2) TMI 575 - GUJARAT HIGH COURT] wherein proportionate credit was allowed to be reversed instead of 10% of the price of exempted goods. Held that – as per the provisions of Rule 6 (3) of the Cenvat Credit Rules, appellant were required to pay an amount equivalent to 10% of the value of the exempted goods cleared. Therefore, the confirmation of demand in their regard along with interest thereon cannot be faulted. In the decision of the Hon'ble High Court of Gujarat in the case abovementioned the appellant therein had reversed the proportionate credit at the time of clearance of the goods, though the same was not provided for in Rule 57CC of the Cenvat Credit Rules at the relevant time. However, in view of the retrospective amendment by Section 69 of the Finance Act, 2010, they became entitled for such a facility. In that context, the Hon'ble High Court held that the appellant be permitted to file an application for regularization of the credit taken but here the case is completely different. The appellant herein, has not reversed proportionate credit attributable to exempted goods at the time of clearance of the exempted goods nor have they sought to regularize the same even after the enactment of Finance Act, 2010 within the time period stipulated therein. The only relief that can be given to the appellant is with regard to the penalties imposed since there is no intention to evade any duty. - Penalty waived - demand confirmed.
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2013 (4) TMI 220
Valuation - inclusion of cost of software in the value hardware - Customized software - manufacture and supply of Digital Loop Carriers (DLC) - supply of Hardware and also the operating software and spare parts - Appellant are of the opinion that the value of the software supplied by them cannot be charged to Central Excise as held by the Hon'ble Supreme Court in the case of PSI Data Systems Ltd. Vs. Collector of Central Excise [1996 (12) TMI 47 - SUPREME COURT OF INDIA], wherein, it was held that the value of computers will not include the value of the software supplied in the form of floppies, discs, tapes, along with the computer. Held that - the dispute arose consequent to an objection raised after audit of the appellants' unit. DLC equipments manufactured by the appellants were supplied to BEL who in turn supplied to MTNL. When the equipments were received by MTNL, the software was loaded into the equipments and testing completed. It is the consistent stand of the appellant that the equipments have been cleared from the factory without the software being loaded in the equipments. No evidence is relied upon by the department to disprove this claim. The impugned software is no doubt customized software usable only with the DLCs. However, the DLCs do not become dysfunctional without the impugned software as they can be used as 2W type of DLC. In view of the above, the appellants claiming separate classification of the impugned software under Chapter subheading 8524 and clearing the said software without payment of duty is in order. There is no justification for including value of such software in the value of DLC equipments. - Decided in favor of assessee.
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2013 (4) TMI 219
Cenvat Credit of various input services - Penalty imposed under Rule 15(3) of Cenvat Credit Rules, 2004 - Held that:- As regards construction service, it was submitted that appellant had constructed a factory building on the other side of the road. According to the definition of ‘input service’ included service used in relation to setting up of a factory also. It was also submitted that subsequently the factory has been registered and the registration number for the existing factory on the other side of the road and for the new factory set up is one and the same. So long as the manufacturer has used the service for setting up of a factory, the credit is admissible. As regards security services, the learned DR fairly admitted that this service is one of the services recognized as common service which when used by a manufacturer in respect of exempted goods as well as the dutiable goods credit can be taken. Therefore Cenvat credit of service tax paid on security service is held to be admissible and allowed. As regards GTA service and telephone service, both sides agree that these two services are not covered by the list of common services in respect of which credit would be admissible that used for exempted as well as dutiable goods. In such a situation, assessee is required to maintain separate records for taking the credit and its utilization. Since assessee has failed to maintain separate accounts, the credit availed in respect of these two services has to be disallowed and has rightly been disallowed. Since the demand comes down subsequently to less than Rs. 35,000/-, having regard to the size of the appellant and the amount involved, I consider it appropriate that the penalty is to be set aside. While doing this I also take note of the fact that the show-cause notice has been issued within the normal limitation time. The appeal is disposed of in the above terms.
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2013 (4) TMI 218
Unaccounted goods – Confiscation and Penalty - The respondents are manufacturers of various products of mild steel. - Central Excise visited the factory of the respondents and conducted verification of physical stock as compared to accounted stock and found discrepancies and proposed confiscation of goods found in excess and also demanding duty on the goods found short. Held that - In the case of unaccounted goods seized the adjudicating authority has not imposed any penalty under Section 11AC. So tribunal limit the examination of the issue to the question whether penalty provisions of Rule 25 will apply in the facts of the case. - respondents were liable to pay duty on the goods considering the quantum of goods already cleared in the financial year. When at such stage the goods are not recorded in account books and are found in the premises of the factory, the presence of the goods is not satisfactorily accounted for. So the goods are liable to confiscation under Rule 25 and also liable to pay penalty under Rule 25 and thus uphold the confiscation of goods found in excess of recorded stock. However tribunal reduce the redemption fine. In the matter of finished goods found short, tribunal is of the view that in the facts and circumstances of the case the finished goods recorded in books but not found have to be considered as cleared without payment of duty. So the demand for duty is maintainable. Further penalty equal to duty involved is imposable under provisions of Section 11AC of the Act. However tribunal give an option to the respondent to pay 25% of this duty amount within 30 days of receipt of this order for final closure of the matter as per provisions in Section 11AC of the Act. The appeal filed by Revenue is allowed partially.
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2013 (4) TMI 217
Admissibility of Cenvat Credit – Service Tax paid to commission/selling agent against the services received – Respondent took the credit for the same which was denied by revenue services of selling agent has been availed by the respondents outside their factory premises. Appeal is preferred to Commissioner (Appeals), who set aside the adjudication order. Against the appeal, revenue is before tribunal. Held that - the assessee is entitled to take Cenvat credit of service tax paid by them on the services availed by them in the course of business of manufacturing as held by the Hon'ble High Court of Bombay in the case of Ultra Tech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT]. Appeal as well as the stay application filed by the revenue is dismissed.
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2013 (4) TMI 216
Manufacture - Marketability - levy of duty of excise - Sale of the paper waste and plastic waste and scraps - Extended period of limitation - Held that - In the present appeal, the appellant/department relied on various judicial pronouncements in which the tests of marketability have been laid down by the courts. However, we find it not necessary to delve into that aspect, when in our view the Tribunal was justified in holding that merely because no classification list was filed, that by itself was no ground for invocation of longer period of limitation. As stated above, the assessee was agitating his case before the Excise authorities resting on the belief that the paper and plastic wastes in question were not excisable items, by contending that they were not marketable. There was neither a willful misstatement nor suppression of facts with intent to evade payment of duty. The demand was, therefore, clearly time barred under section 11A(1) of the Act. - Decided against the revenue.
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CST, VAT & Sales Tax
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2013 (4) TMI 244
Detention of goods and vehicle - TNVAT Act, 2006 - notice for composition has been issued demanding both tax as well as compounding fee - Held that:- The larger relief sought for to quash the impugned notice for composition is declined and a direction is issued to the respondent to release to goods forthwith if the tax is paid voluntarily or under protest. Insofar as the composition fee is concerned, the authorities will proceed in accordance with the provisions of Section 72 of the TNVAT Act, 2006 for concluding the composition proceedings separately, after following the procedure prescribed. The petitioner is entitled to file a revision under Section 54 of the TNVAT ACT, 2006, if so advised.
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2013 (4) TMI 243
Maintainability of rectification applications filed u/s 6(6) of the Kerala Tax on Luxuries Act - petitioner's submission that its establishment is a hospital and not a hotel thus inclusion of treatment expenses in the taxable turnover of hotel is erroneous - Held that:- Power to rectify its order has been conferred on the assessing authority and appellate authority with the legislative mandate that the exercise of power under this Section shall be only for the purpose of "rectifying errors apparent on the face of the records." Error is a mistake or deviation from accuracy or correctness. Thus if the error is so apparent that without further investigation or enquiry, only one conclusion can be drawn in favour of the applicant, such an error is one apparent on the face of the record. As in the present case order reveals that, the appellate tribunal has referred to statutory provisions and has given reasons for its conclusion that it is a hotel. Similarly, after discussion, the tribunal held that ayurvedic treatment given to the guests in the hotel is a service. As far as levy of interest is concerned, contention was that assessment was completed only when order was passed in compliance with Tribunal's order and therefore levy of interest from the assessment year concerned is illegal. Thus at best the petitioner can only say that the orders are illegal and not vitiated by errors apparent on the face of it. Therefore, the answer to the question should be in the negative.
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2013 (4) TMI 242
Purchase tax credit - assessee, while manufacturing rice bran oil, was also producing de-oiled cake - Held that:- De-oil cake is only a bye-product of the main product of the assessee, namely, rice bran oil. Assessee was not attempting to manufacture the de-oiled cake, but was attempting to manufacture rice bran oil. In the process of manufacturing rice bran oil, it was also manufacturing de-oiled cake. The product manufactured by the assessee was rice bran oil and, while selling the same, it was entitled to, under the Uttarakhand VAT Act, the purchase tax credit.
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2013 (4) TMI 233
Amendment in West Bengal Taxation Tribunal Rules, 1998 - They claim that the amendments in Rule 28 would result in their suffering huge business losses. Rule 28 of the Rules providing for “Issue of country spirit only on payment of duty” was amended by notification no. 320-EX/O/1R-5/10 Sub-rule (2) of Rule 28 was substituted and sub-rule (3) thereof was deleted. Feeling aggrieved thereby, this writ petition was presented before this Court Held that - The business loss that the petitioners say they are suffering or likely to suffer, without any iota of doubt, is incidental to a levy i.e. payment of excise duty in terms of amended Rule 28. Thus, even an order for consideration of their grievance cannot be passed by this Court in view of the provisions of Section 5 of the Act. The contention of appellant based on Section 8 of the Act read with Rule 5 as aforesaid does not appeal to me to be acceptable. I find substance in the submission of respondent that even for an order for consideration of their grievance by the official respondents, this Court is not the proper forum. The writ petition stands dismissed, without costs.
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