TMI Tax Updates - e-Newsletter
April 13, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Amortisation u/s section 35D - Euro issue expenditure - the expenditure that qualified for consideration under section 35D is restricted by reason of use of the phrase "being" - HC
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Income Tax:
Interest on FDRs - The deposit of money in present case was directly linked with the business activity of the company. The same is intricately connected with the business activity of the company - held as part of business profit - AT
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Income Tax:
Receipt of commission income from tenant - income of commission received is to be assessed as business income and not as income from house property - AT
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Income Tax:
The onus is upon the assessee to establish that the money was borrowed for the purpose of business - assessee failed to prove the onus - Claim of Interest disallowed - AT
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Income Tax:
Provisions of AS-7 cannot override the provisions of section 145 in so far as the computation of business income under the Income Tax Act for the purpose of determining income is concerned. - AT
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Income Tax:
Re-opening of assessment u/s 147 - failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) - AT
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Customs:
The Commissioner of Customs (General), Mumbai, has no jurisdiction to suspend the licence of the appellant, as the same has been issued by the Commissioner of Customs (General), New Delhi - AT
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Customs:
Interest on refund - Since Section 27A of the Customs Act itself came into force only in May, 1995 and the appellant has claimed the interest w.e.f. 1-12-1995 onwards - Interest on refund allowed - AT
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Service Tax:
Providing ‘Life insurance coverage’ to the employees of the State Government as part of its statutory obligation giving effect to Rule 22A of Part I KSR is not a ‘taxable service’ so as to attract tax liability. - HC
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Service Tax:
CBEC extended the last date of e-filing of Service Tax Return (ST-3) for the period July-September 2012, from 15th April to 30th April, 2013.
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Central Excise:
Removal of capital goods as such to another units - non Reversal of Cenvat Credit - there is a revenue-neutral situation, demand set aside. - AT
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Central Excise:
Short payment of duty due to wrong availment of Excess Cenvat Credit - Payment of duty in Cash - default mentioned under Rule 8(3A) is applicable in short payment of duty also - AT
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VAT:
Adjust of tax paid on purchase of paddy with sales tax on sale of rice - In the absence of furnishing of a Form ‘C’, the conclusion would be that the sale is not an inter-State sale. - in respect of such sale, the State Law will apply. - HC
Articles
Notifications
Customs-
05/2013 - dated
10-4-2013
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ADD
seeks to extend the levy of anti-dumping duty imposed vide notification No. 127/2008-Customs, dated the 3rd December, 2008 on imports of ‘Sulphur Black’, originating in, or exported from, People’s Republic of China for a further period of one year i.e. upto and inclusive of 10th April, 2014
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04/2013 - dated
10-4-2013
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ADD
Seeks to extend the levy of anti-dumping duty imposed vide notification No. 49/2008-Customs, dated the 10th April, 2008 on imports of ‘Sodium Nitrite’, originating in, or exported from, European Union for a further period of one year i.e. upto and inclusive of 10th April, 2014
Circulars / Instructions / Orders
Case Laws:
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Income Tax
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2013 (4) TMI 268
Unexplained share application money - notice u/s 153C - as contested by assessee that the share application money was brought forward from the previous year, therefore, what is appearing in the balance sheet is only opening balance - Held that:- It appears from the order of CIT(A) that he has proceeded on the footing that an assessment u/s 153C has to be made only on the basis of materials found as a result of search operation. As per the CIT(A), AO while completing the assessment order u/s 153C has to confine himself to the seized material and cannot examine any other material relying on case of Vijaybhai N. Chandrani V/s ACIT (2010 (3) TMI 770 - GUJARAT HIGH COURT). However, as find that in the case of Gopal Lal Bhadruka V/s. DCIT,[2012 (6) TMI 657 - ANDHRA PRADESH HIGH COURT] it is held that while completing assessment u/s 153C AO will not be confined to the seized materials only but can consider all the material as may be available before him. In this view of the matter, the conclusion arrived at by the CIT(A) is not to be accepted. However, it appears from the order of the CIT(A) that the assessee has raised a specific contention that Rs.5,00,000/- which was added on account of unexplained share application money are only opening balances as they continued from previous year. Similarly, the CIT(A) has also not gone into the merits of the addition made on account of loan creditors and disallowance of expenses on the basis of evidences produced before him or as may be available on record as he has deleted the additions only on the ground that the assessment u/s 153C has to be on the basis of seized material. Therefore, considering the totality of the facts and circumstances remit the matter back to the file of the AO, who shall reconsider the issue afresh on the basis of all the materials available on record including the seized material.
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2013 (4) TMI 267
Transfer pricing adjustment u/s. 92CA(3) - Enhancing the income of the appellant - resorting to arbitrary rejection of low profit / loss making companies from comparables - Held that:- As in this case the assessee sought permission to file additional evidence in support of the grounds of the said appeal with regard to Annual Repot of comparables i.e. Oil Field Instrumentation (India) Limited for Financial year 2006-07,Year 2007-08, Annual Report of Fugro Geotech Limited for Financial year 2006-07, Internet reference for products and services for Furgo Geotech Limited & Relevant extract of OECD guidelines (Para 3.59) Thus assessee should be granted permission to file the additional evidences as the same will go to the root of the matter and facilitate adjudication of the issue raised in the appeal. Henc the additional evidences admitted & the AO should be provided an opportunity to go through the same and give his perspective in this regard. The AO shall adjudicate the issue afresh, after considering the additional evidences submitted by the assessee - Assessee's appeal allowed for statistical purposes.
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2013 (4) TMI 266
Deemed income - difference between the receipts in the Profit and Loss account and the amount of receipt shown in the TDS certificates furnished by the payer of the income - assessee has pleaded that adequate opportunity was not given to the assessee to substantiate its claim with respect to the notices that were issued to the vendors of the assessee u/s. 133(6) and no confirmation was received from such vendors - penalty proceedings under section 271 (1 )(c) - Held that:- In this case the AO issued notices u/s. 133(6) to all the vendors of the assessee. Vendors numbering 18 were found acceptable. It is seen that indeed, AO collected evidence at the back of the assessee and never confronted the same to the assessee. The assessee was not allowed any opportunity to rebut the evidence. However, AO went on to make the addition on account of the alleged short receipts declared in the profit and loss account.Thus this is entirely in violation of the natural justice principles of audi alterem parterm. As the parties who have paid the said advance has clearly informed that the amount in question has been treated as expenses incurred by them during the year. Hence, the plea of the assessee to treat the amount received as advance is not very cogent. However,as found that there is considerable cogency in the assessee's submissions that proper credit of pass through cost should be taken, if the amount is being treated as revenue receipt. Since first issue in this case is remitted to the file of the AO, this issue is also remitted to the his file to examine the assessee's submission in this regard regarding the pass through cost in this case - in favour of assessee for statistical purposes.
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2013 (4) TMI 265
Interest on FDRs - Addition under the head income from "other sources" by treating it pre- operative income earned - CIT(A) deleted the addition - Held that:- The decision of CIT Vs. Jaypee DSC Ventures Ltd. [2011 (3) TMI 309 - DELHI HIGH COURT] wherein held that case is not one where the assessee had made the deposit of surplus money lying idle with it in order to earn interest, on the contrary, the amount of interest was earned from fixed deposit which was kept in the bank for furnishing the bank guarantee. It had an inextricable nexus with securing the contract. The view expressed by the Tribunal cannot be found fault with by holding that the interest earned by the assessee on the FDRs has intrinsic and inseggregable nexus with the work undertaken and, therefore, the interest earned by the assessee is capital in nature and shall go towards adjustment against the project expenditure and the same cannot be assessed as income from other sources. The above case is squarely applicable to the facts of the assessee's case as it is not a case where any surplus share capital money which was lying idle had been deposited in the bank for the purpose of earning interest. The deposit of money in present case was directly linked with the business activity of the company. The same is intricately connected with the business activity of the company. The interest was a capital receipt, which would got reduce the cost of asset. Hence interest earned should not form part of profit & loss account and accordingly cannot be taxed as income - in favour of assessee.
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2013 (4) TMI 264
Re opening of assessment - assessee's objection to reopening that all details with regard to advertisement expenditure had been submitted during the course of regular assessment u/s 143(3) - CIT(A) quashed notice for reopening - Held that:- It is evident that the assessee has disclosed all the relevant facts in the original assessment itself. The advertisement expenses which were capitalized in the books of account were claimed as revenue expenditure in the return of income. Therefore, the assessee made a legal claim in the return of income which was accepted by the AO in the original return. From the above reasons recorded, it is evident that there was no failure on the part of the assessee to disclose fully and truly all material facts. The CIT(A) has allowed the relief to the assessee following the decision of of Atma Ram Properties Pvt.Ltd. Vs. DCIT (2011 (11) TMI 51 - DELHI HIGH COURT) that in order to initiate proceedings for reassessment after four years, there should have been a failure on the part of the assessee to disclose material facts necessary for assessment. If the Assessing Officer had failed to apply legal provisions/section of the Income-tax Act, 1961, the fault cannot be attributed to the assessee. CIT(A) has rightly quashed the reassessment proceedings - in favour of assessee.
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2013 (4) TMI 263
Receipt of commission income from tenant - nature of receipt - "income from business or profession" OR "income from house property" - Held that:- The decision of CIT Vs. Faith Real Estate (P) Ltd. [2008 (4) TMI 669 - DELHI HIGH COURT] would be squarely applicable to the facts of the assessee's case because here also, the assessee had given the premises owned by it to M/s Sant Enterprises and is getting 3% commission on the sales made by M/s Sant Enterprises. Before the CIT(A), partner of M/s Sant Enterprises affirmed that the staff member of the assessee used to check and supervise daily sales. There is no doubt about the genuineness of the franchise agreement between the assessee firm and M/s Sant Enterprises. Therefore, the CIT(A) rightly followed the above decision of Hon'ble Jurisdictional High Court and held that the income of commission received from M/s Sant Enterprises is to be assessed as business income.
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2013 (4) TMI 262
Disallowance of entire interest expenditure claimed in the Profit & Loss Account - assessee company is in the business of financing and investment - Held that:- As from the balance sheet of the assessee, it is evident that the total loans and advances are only Rs.8,212/-. The sundry debtors is also only Rs.1,38,574/-. As already stated that the onus is upon the assessee to establish that the money was borrowed for the purpose of business. The assessee has not established how the huge sum of Rs.34 crores was utilized for the purpose of business because the total investment in business of trading in shares/financing is in lakhs. The total investment in shares, sundry debtors, cash and bank balance and loans and advances taken together is only Rs.2,65,323/-. Thus agreeing with the finding of the lower authorities that the assessee has not been able to discharge the onus which lay upon it to establish that the borrowed money has been utilized for the purpose of business. The various decisions relied upon by the assessee are altogether different on facts - against assessee.
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2013 (4) TMI 261
Maintainability of notice under Section 143(2) - CIT(A) quashed the assessment holding that the first notice u/s 143(2) was issued on 12/11/2007 beyond the statutory period of 12 months which expired on 31.07.2007 - Held that:- As from the remand report dated 23rd April, 2010 where the AO had intimated the date - wise details of the proceedings in this case it is evident that notice under Section 143(2) was issued on 12th November, 2007 as mentioned by the CIT(A) in his order. The Revenue could not produce any evidence for issue of notice under Section 143(2) on 29th June, 2007. The order of CIT(A) is based upon the facts given by the AO himself in the remand report. In view of the above, wno infirmity in the order of CIT(A). The same is sustained and the Revenue's appeal is dismissed.
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2013 (4) TMI 260
Interest claimed on unsecured loan @ 16% disallowed - Held that:- Admittedly, the amount of deposit of JK Paper Ltd. is not a loan but it is a deposit by the distributor to the manufacturing company under selling and distributor agreement which is mandatory to obtain a distributorship. The DR has not disputed this point that the assessee was allowed interest on unsecured loan @16.5% during the earlier two years to the year under consideration. From the statement of bank loan account, it is also observed that the assessee is reasonably maintaining its liquid cash to meet his business requirements. Also from the written submissions of the assessee submitted to the AO it is observed that the assessee is paying 24% per annum interest to M/s JK Paper Ltd. if payment is made beyond 30 days from the date of invoice. This vital point has not been considered by the authorities below - Thus revenue authorities should reasonably follow the principle of consistency until and unless there is a valid reason to take a different view in the subsequent years. Thus addition made in this regard is deleted - in favour of assessee. Disallowance of Car expenses - CIT(A) restricted the disallowance of Rs.68,110 to Rs.30,000 - Held that:- As the appellant has not been able to establish that the car was exclusively used for the business purposes by producing the log book of the car before the authorities below. A part of car expense and depreciation had been disallowed during the preceding years and the same finding has not been challenged by the assessee on any count. Thus addition as partly confirmed by the Commissioner of Income Tax(A) cannot be held as highly excessive and unreasonable. Disallowance of telephone expenses - CIT(A) restricted the disallowance of Rs.24,449 to Rs.10,000 - Held that:- DR has not disputed the fact that the entire telephone expenses have been allowed by the AO during the preceding years to the year under consideration. Thus unable to see any valid reason to make a part disallowance of Rs.10,000 by the CIT(A), thus was not justified and it was made without any reasonable basis. Disallowance of freight and cartage and traveling expenses - CIT(A) confirmed a part disallowance - Held that:- On specific query from the Board, the assessee's counsel admitted that the appellant and her family members made visits to various places and stayed there for many days which was not for business purposes. He has not contended this fact that the appellant has not furnished any specific details of the nature of such visits either before the authorities below or before this Tribunal. In this position, observations made by the CIT(A) be accepted and part disallowance as restricted to Rs.15,000 deserves to be upheld.
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2013 (4) TMI 259
Addition on account of business income by computed percentage Completion Method - CIT (A) deleted the addition - whether the A.O. is justified in changing the method of accounting of its profits in the year under consideration particularly when profits have been accounted for by appellant on the basis of project completion method in the subsequent year i.e. A.Y. 2007-08? - D.R. submitted assessee was following two separate methods for income taxable under one head following the percentage completion method in one and project completion method in other - Held that:- CIT (A) has given a finding that assessee has disclosed in A.Y. 2007-08 profits on the basis of project completion method. He has further given a finding that the system of accounting which has been followed by the assessee has been accepted in A.Y. 2005-06 in the scrutiny assessment. He has further noted that the assessee is acting as developer of property and therefore Accounting Standard 7 as prescribed by ICAI are not applicable to the assessee. The assessee has been consistently and regularly employing the project completion method and the Department has also accepted the said method in the past. Further the Revenue has not pointed out any defect in the system of accounting followed by assessee. As decided in Vraj Developers [2010 (5) TMI 697 - ITAT AHMEDABAD] the option for choosing the system of account is with the assessee and not with the A.O. provided the system chosen by the assessee is consistently followed by him and such system is not a defective system. Provisions of AS-7 cannot override the provisions of section 145 in so far as the computation of business income under the Income Tax Act for the purpose of determining income is concerned. Thus as A.O. has brought no material on record to show that the system of accounting adopted by the assessee for the year under appeal was not consistently followed by the assessee or the system adopted was a defective system. Even a project completion method is also a recognized system of accounting. Simply the Institute of Chartered Accountants of India has recommended percentage completion method does not mean that project accounting or the same is a defective system of accounting. As the Revenue could not controvert the findings of CIT (A)no reason to interfere with the order of CIT (A) - appeal of the Revenue is dismissed.
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2013 (4) TMI 258
Re-opening of assessment u/s 147 - Held that:- The original return of income filed by the assessee was processed u/s 143(1)(a). In view of the amendment brought in by the Taxation laws (Amendment) Act, 2005, the assessing officer had reason to believe that the income has escaped the assessment. In this factual situation, no infirmity in the decision of CIT(A) in upholding the validity of reopening. The view taken by the CIT(A) gets support from the decision of Asst. CIT Vs. Rajesh Jhaveri Stock Brokers P Ltd (2007 (5) TMI 197 - SUPREME COURT) wherein held that failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) Denial of deduction u/s 80HHC on import entitlements of DEPB receipts - retrospective amendments questioned - Held that:- The issue relating to the taxability of DEPB benefits and the applicability of the 3rd and 4th proviso to sec. 80HHC(3) during the years under consideration need to be examined afresh. Accordingly restore the same to the file of the Assessing Officer with the direction to examine the issue afresh in the light of the decisions rendered in the case of AVANI EXPORTS & OTHERS [2012 (7) TMI 190 - GUJARAT HIGH COURT] wherein held that impugned amendment exists only to be given effect from the date of amendment and not in respect of earlier assessment years of the assesses whose export turnover is above Rs. 10 Crore. In other words, the retrospective amendment should not be detrimental to any of the assessees Also see Vikas Kalra Vs. CIT [2012 (2) TMI 99 - SUPREME COURT OF INDIA]and Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA] and decide the same in accordance with law after affording necessary opportunity of being heard to the assessee .
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Customs
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2013 (4) TMI 257
Suspension of CHA Licence - The licence has been issued by the Commissioner of Customs (General), New Delhi and the same has been suspended by the Commissioner of Customs (General), Mumbai - Jurisdiction of commissioner - large scale of fraudulent exports of various types of fabrics wherein certain unscrupulous exporters have grossly overvalued their export goods so as to avail higher DEPB/Drawback benefit which otherwise are not admissible. - Held that:- In the case of International Shipping Agency (2011 (8) TMI 933 - CESTAT, MUMBAI ), the issue came up before this Tribunal where the CHA licence was issued by the Commissioner of Customs (General, New Delhi and the same was suspended by the Commissioner of Customs (General), Mumbai - In that case, the Commissioner of Customs (General), Mumbai, has no jurisdiction - Therefore, the impugned order was not sustainable and set aside. Following the decision in the case of Excel India Pvt. Ltd.(2008 (6) TMI 399 - CESTAT, MUMBAI ) - Held that:- we hold the Articles of Charges framed against the CHA had been proved as held by Commissioner. However, we find that the Commissioner has sought to revoke the licence under Regulation 22 by issuing a show cause notice but has prohibited the appellant from conducting business in Mumbai Custom House which cannot be considered as prohibiting the agent from working in a section or more sections of the Custom House. The Commissioner of Customs (General), Mumbai, has no jurisdiction to suspend the licence of the appellant, as the same has been issued by the Commissioner of Customs (General), New Delhi - Decided in favor of CHA.
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2013 (4) TMI 256
Interest on refund - at the time of clearance benefit of exemption notification not extended - appellant was forced to pay the duty involved - Held that:- It is seen that the appellant had filed refund applications - Therefore, the provisions of Section 27A of the Customs Act, 1962 is clearly attracted and the said section provides for grant of interest on the expiry of three months from the date of refund application till the date of grant of refund irrespective of when the order for refund was actually passed. The ratio of the judgment of the Hon’ble Apex Court in the case of Ranbaxy Laboratories cited (2011 (10) TMI 16 - Supreme Court of India ) and of the Hon’ble High Court of Bombay in Voltas (2004 (9) TMI 116 - HIGH COURT OF JUDICATURE AT BOMBAY ) would apply to the facts of the case. Since Section 27A of the Customs Act itself came into force only in May, 1995 and the appellant has claimed the interest for the period from 1-12-1995 onwards - Interest on refund allowed - Decided in favor of assessee.
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Corporate Laws
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2013 (4) TMI 254
Negligence of official liquidator - The fact of the matter is that the land that was advertised, auctioned and purchased by the applicant - Society under orders of this Court is not available on the spot, to the extent of the measurement advertised as a substantial part of it had been allotted to IPCL (now Reliance Industries Limited) as far back as in 1988. The applicant has been given to believe that 13759 square mtrs of land was available whereas it now transpires from the Report of the Official Liquidator, and affidavits of the GIDC and the Collector, Vadodara, that 8000 square mtrs of the said land is in possession of Reliance Industries Limited, and was never a part of the parcel of land belonging to the Company in liquidation. No attempt appears to have been made by the office of the Official Liquidator to ascertain the factual position, make proper inspection and inquiry or measurements of the land in question. The explanation given by the Official Liquidator is that he was under a bona fide impression that measurements, as mentioned in the Valuation Report. First prayer made by the applicant regarding setting aside of the sale is concerned. - Held that - In view of the facts and circumstances as discussed hereinabove, and as the applicant cannot be made to suffer for lapses committed by the office of the Official Liquidator, the interest of justice would demand that the sale be set aside, and the amount that has been deposited by the applicant which has been invested in a Fixed Deposit, be refunded, with interest. Consequently, the sale, confirmed, is set aside. The Registry is directed to refund the amount deposited by the applicant, that has been invested in a Fixed Deposit, along with interest, upon the applicant making an application for this purpose. The second prayer made by the applicant is for initiation of an inquiry into the manner in which the office of the Official Liquidator has conducted itself by auctioning of the property in question without ascertaining the correct status of the land in question. - Held that - A copy of this order be handed over, learned Assistant Solicitor General of India, for communication to the Secretary, Ministry of Corporate Affairs, Government of India, for information and further necessary action, as considered appropriate.
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2013 (4) TMI 253
Supplementary show cause notice - Collective Investment Schemes - Held that:- Having heard the learned counsel for the respective parties, we are convinced that the order of the High Court impugned in these appeals should be set aside and the proceedings dated 30.11.1999 and 10.12.1999 can themselves be treated as show cause notices apart from permitting the appellant to issue a comprehensive supplementary show cause notice to the first respondent Company within a period of three months after carrying out necessary inspection, investigation, inquiry and verification of the accounts and other records of the first respondent Company. We also make it clear that the appellant shall pass fresh orders as regards the business activity of the first respondent Company as to whether it falls under the category of CIS or not and depending upon the ultimate order to be passed it may proceed further in accordance with law. The appellant shall before taking any future action give prior notice to the first respondent Company. Since the earlier orders of the appellant were of the year 1999 and long time gap has occurred in between, such time gap shall not cause any prejudice to either of the parties - The appeals stand disposed of
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2013 (4) TMI 252
Mis-management and oppression U/s 397 & 398 of the Companies Act, 1956 - Preliminary issue of maintainability - the issues of limitation and the locus standi of the appellant - Held that:- It was not permissible for respondent no.1 to agitate the issue with respect to the fact that as the Supreme Court had not set aside the orders dated 16.11.1993 and 18.11.1993, passed by the division bench of the Calcutta High Court, the same remained intact. Such an argument could not have been advanced by respondent no.1 before the division bench, in view of the legal maxim, ‘Actus Curiae Neminem Gravabit i.e. an act of Court shall prejudice no man’. This Court dealt with the said maxim in Jayalakshmi Coelho v. Oswald Joseph Coelho, AIR 2001 SC 1084. In view of the above, we are of considered opinion that the Division Bench erred in holding that after the judgment of this Court dated 26.4.1996, it was permissible for the High Court to hold that the Company Petition under Sections 397/398 of the Act 1956, was non- existence in the eyes of law while placing reliance on the earlier judgments of the Division Bench of the High Court dated 16.11.1993 and 18.11.1993. Thus, the appeals are allowed - The impugned judgment and order of the High Court dated 24.11.2003 is hereby set aside - The matters are remanded to be decided by the High Court of Calcutta afresh giving strict adherence to judgment of this Court dated 26.4.1996 - While deciding the case afresh, the Division Bench shall not take note of the earlier judgments of the High Court dated 16.11.1993 and 18.11.1993. As the matters are pending since long, in the facts and circumstances of the case - We request the Hon’ble High Court to decide the appeals expeditiously preferably within a period of six month from the date of filing of certified copy of this judgment and order before the High Court.
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Service Tax
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2013 (4) TMI 273
Renting of immovable property service - Writ petition - Extended period of limitation - Wrong Interpretation of Section 11(A)(1) of the Central Excise Act and Section 73(1) of the Finance Act, invoking the extended period for demanding tax and also wrongly concluded that the petitioner has an intention to evade the payment of tax, - Held that:- There is an appeal remedy available to the petitioner - Learned counsel also pleaded that subsequent to the filing of the writ petition, the petitioner preferred an appeal on 28.12.2012 with a delay of 34 days before the appellate authority and the same is pending consideration - If the appeal is disposed of on merits, entire claim of the petitioner as put forth before this court would be redressed. These are merits of matter, which can be looked into by the Appellate Authority and hence this writ petition is not maintainable in view of the effective alternate remedy available and the petitioner has also filed appeal - Accordingly, the writ petition is disposed of with a direction to the appellate authority to dispose of the appeal preferred by the petitioner on merits - Both parties are at liberty to raise all the points that are raised in the writ petition.
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2013 (4) TMI 272
Entitlement to utilize the centralized CENVAT credit account for payment of service tax liability denied - assessee engaged in ‘Commercial or Industrial Construction Service' and ‘Construction of Complex Services' - demand confirmed against assessee - Held that:- As decided in Bharat Heavy Electricals Ltd. Vs. CCE [2012 (4) TMI 197 - CESTAT, MUMBAI] wherein held that the appellant are entitled to utilize centralized Cenvat credit for payment of service tax for the service availed under the category of ‘Commercial or Industrial Service' and ‘Construction of Complex Services'. Non maintenance of separate account of their input/input service received - Held that:- As the appellant has been able to produce showing that they are maintaining separate account for input/input service during the impugned period for providing the taxable/exempted services by them he issue is remanded back to the adjudicating authority to ascertain the fact whether the appellant are maintaining separate account for input/input service for providing the output services.
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2013 (4) TMI 271
Services of constructing the flat - demand has arisen due to the order-in-revision passed by the Commissioner - Held that:- The agreement is a combined agreement for sale of undivided share of land and subsequent building of the flat in the same land belonging to the prospective buyer. It has not been shown that the flat as such is being sold to the individual clients. It appears to be a case where undivided share of land alone is registered on sale and the constructed flat is merely handed over. Therefore, the merits of the case are arguable in nature. However, in view of the apparently contradicting clarifications of the Board, the invocation of extended period of limitation may not be justified. It was submitted that about Rs.13.5 lakhs was the demand within the normal period of limitation. Thus taking into account plea of financial hardship, the appellant directed to pre-deposit a sum of Rs.6,00,000/- within six weeks from today and report compliance to the Assistant Registrar on 7.8.2012 and Assistant Registrar to report to the Bench on 13.8.2012.
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2013 (4) TMI 270
Service tax liability on insurance service - whether the petitioner a Department of the Govt of Kerala, established for providing ‘Life Insurance’ coverage to the State Government employees and also for providing General Insurance coverage for the assets of the Government/Governmental Institutions is liable to pay ‘service tax’ - Held that:- From the Circular No. 89/7/2006-Service Tax, dated 18-12-2006 issued by the Central Government, it is clear that, when the Insurance Department is collecting premium, providing insurance coverage as part of the duty cast upon them, it assumes a character of compulsory levy as per the relevant provisions of the Act. Such activity is purely in public interest and is undertaken as mandatory and statutory function and in those cases ‘Service Tax’ is not leviable. The said proposition has been highlighted in Karnataka Government Insurance Department (K. G. I. D.) Versus ACCE [2011 (11) TMI 307 - KARNATAKA HIGH COURT] making it clear that, if a Government authority performs a service, which is not in the nature of statutory activity and the same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, Service tax could be leviable and it falls within the ambit of ‘Taxable Service’. It was accordingly, that a finding was rendered that the particular type of insurance coverage being undertaken by the Karnataka State Insurance Department, in respect of ‘motor vehicles’ was liable to be reckoned as a ‘Taxable Service’. Thus the activity being pursued by the petitioner in providing ‘Life insurance coverage’ to the employees of the State Government as part of its statutory obligation giving effect to Rule 22A of Part I KSR is not a ‘taxable service’ so as to attract tax liability. However, with regard to any other service/insurance coverage provided to the General Insurance business extended to commercial institutions/individuals, even if it is a Government Company, such activities are liable to ‘Service Tax’ as no statutory duty is involved and the same cannot be avoided, unless exemption is obtained under Section 93 of the Finance Act, 1994.
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Central Excise
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2013 (4) TMI 255
Demand on semi-finished herbal extracts - Demand on clearance to DTA - Demand on black phenyl - Penalty U/s 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002 - confiscation and redemption fine - Held that:- Their challenge to the demand of duty on the semi-finished herbal extracts on the ground of non-excisability & job-worked herbal extracts were further processed by Bayir chemicals’ Peenyan Unit and exported or cleared on payment of dutymust fail. - no merit in their alternative claim that the job-worked herbal extracts were further processed by Bayir chemicals’ Peenyan Unit and exported or cleared on payment of duty. There is no evidence to substantiate this claim. - This apart, job work itself is outside the scope of a 100% EOU’s activities (as rightly held by the lower authorities) inasmuch as the EOU’s entire production is meant for export. - Demand of duty confirmed - Decided against the assessee. Retraction of statement - clarification on statement - held that:- Any clarificatory statement should have been given, without delay, to the authority which recorded the original statement. Moreover, there should not be any inconsistency between the original and ‘clarificatory’ statements. In the present case, we have found inconsistencies also. Therefore the view taken by us with regard to the evidentiary value of the Managing Director’s original statement remains intact. Regarding demand on clearance to DTA - brought to any other place in India versus allowed to be sold in India - Held that:- The impugned demand of duty was quantified under the proviso even for the period prior to 11-5-2001, which cannot be sustained. As per the provisions interpreted by the Hon’ble Supreme Court CCE v. M/s. NCC Blue Water Products Ltd.(2010 (9) TMI 13 - Supreme Court of India ), the demand of duty on oleoresins cleared from EOU premises from April 1999 to 10-5-2001 requires to be requantified in terms of the main part of Section 3(1) of the Central Excise Act and we shall direct the adjudicating authority to do so. Regarding Demand on black phenyl - Held that:- we have found this dispute to be similar to the one pertaining to semi-finished herbal extracts and, therefore, there is no reason for a different view. Consequently, the above demand has only to be sustained. As regards interest on duty - Held that:- there is no specific grievance against Section 11AB having been invoked for levy of interest on duty. In the result, the assessee is liable to pay interest on duty under the aforesaid provisions for the relevant periods. Regarding Redemption Fine - Held that:- These goods were admittedly not used for the declared purpose and hence liable to confiscation under Rule 25. These capital goods were used for job work on raw materials supplied by a third party, which was not permissible under the EOU scheme and amounted to contravention of Notification No. 1/95-C.E. Regarding Penalty U/s 11AC - Held that:- The proviso to Section 11A(1) of the Act was rightly invoked on the ground of wilful suppression of facts by GNCO/BEPL, for recovery of duty and, for that matter, the requirements of Section 11AC were satisfied.
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2013 (4) TMI 251
Recovery proceedings - Circular dated 1-1-2013 - Held that:- Tribunal is not functioning on account of a vacancy in the office of the Technical Member; and the Tribunal is unable therefore to take up the petitioners applications for waiver for pre-deposit and for grant of stay of levy of the tax, interest and penalties, as the case may be - A fact not disputed by the Revenue We consider it appropriate to dispose of the writ petitions directing the respondents not to initiate any coercive measures for recovery of the Central Excise liability or Service Tax liability or interest and penalties, as the case may be, as assessed in the Orders-in-Original or as confirmed in the appeals, as the case may be, pending disposal of the applications filed by the petitioners for waiver of pre-deposit and wherever filed, the applications for stay of the Central Excise or Service Tax, interest and penalties, as the case may be. The liability of the petitioners to remit the tax, interest and penalties, as assessed or confirmed, as the case may be, shall be subject to orders to be passed by the Tribunal in the interlocutory applications preferred by the petitioners - The writ petitions are disposed of as above. But in the circumstances without costs.
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2013 (4) TMI 250
Recovery proceedings - Circular No.967/01/2013-CX, dated 1.1.2013 - Correct time limit for initiating recovery proceedings - Held that:- The Court after considering the various circulars issued from time to time and the present circular/instruction, which is more in the nature of a guidance to the department authorities insofar as the recovery is concerned, is of the firm opinion that the said circular/instruction should not be taken as a mandate to initiate recovery proceedings automatically after expiry of the period specified - The circular/instruction is accordingly clarified to state that while there is a power to initiate recovery proceedings on an erring assessee, the department should refrain from taking coercive steps if due diligence is shown by the assessee in prosecuting the appeal and the stay/waiver application. In all these cases, it is shown that appeals are pending before the Tribunal, it has been functioning without full complement of members and, therefore, the petitioners were not able to list their cases on board and seek interim orders. The situation is beyond the control of the writ petitioners/assessees and they were not responsible for the delay in prosecuting the matter.Insofar as the Commissioner (Appeals) is concerned, it is to be noticed and it is fairly conceded by the learned Standing Counsel for the respondents that large number of appeals and stay petitions are pending and dates have been given. Therefore, the petitioners are not at fault - In no case there is a breach alleged on the part of the petitioners herein -The time limit specified in the circular/instruction insofar as it relates to appeals filed along with stay/waiver application is concerned should be interpreted in such a manner that it should not cause hardship to the genuine assessee In such situation, the Court has no hesitation to hold that the respondent/department should refrain from proceeding further in the recovery proceedings pending disposal of the stay/waiver application before the Commissioner (Appeals) or the Tribunal, as the case may be - However, with a rider that each one of the petitioners shall inform the respondent/department the stage of the pending applications for stay/waiver from time to time, preferably every month, if there is an inordinate delay. The authorities are directed to take up the waiver/stay applications at an early date and dispose of the same preferably within eight weeks from the date of receipt of a copy of this order, if not already disposed of. Till the disposal of the stay/waiver applications as indicated above, the respondent/department shall not take coercive steps for recovery - All these writ petitions are disposed of in the above terms - No costs - Consequently, the connected miscellaneous petitions are closed.
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2013 (4) TMI 249
Admissibility of credit - 'structural steel' and ‘cement' used for construction of foundation and supporting structure - Held that - issue is no longer res integra in view of the decision of Vandana Global Ltd. Vs Commissioner of Central Excise, Raipur - [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) Tri.-LB] and the decision of Hon'ble Supreme Court in the case of Saraswati Sugar Mills Vs Commissioner of Central Excise, Delhi - [2011 (8) TMI 4 - SUPREME COURT OF INDIA] - demand of duty and interest confirmed. In view of the decision in The India Cements Ltd. Vs Commissioner of Central Excise [2005 (5) TMI 384 - CESTAT, CHENNAI] levy of penalty waived.
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2013 (4) TMI 248
Admissibility of credit in respect of alleged short quantities received through pipelines without allowing adjustments for excess quantities received Cenvat Credit - Held that:- tolerance in respect of hygroscopic, volatile and such other cargo have also to be allowed as per industry norms excluding, however, unreasonable and exorbitant claims. Similarly, minor variations arising due to weighment by different machine will also have to be ignored if such variations are within tolerance limit. Therefore appeal was to be returned to the original authority to view the matter in the light of the cited decision of the Larger Bench in Commissioner of Central Excise, Chennai vs Bhuwalka Steel Industries Ltd [2009 (11) TMI 177 - CESTAT, CHENNAI [LB].
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2013 (4) TMI 247
Assessee is manufacturing MS ingots from duty paid steel scrap and taking Cenvat credit on such scrap. Revenue visited the premises of assesse and during stock taking there was shortage of finished goods and scrap out of accounted stock. Revenue made out a case that the excise duty is payable on the quantity of finished goods found short and Cenvat credit is to be reversed when the quantity of scrap found short and accordingly demanded the duty under Rule 14 of Cenvat Credit Rules and penalty. Held that - It is also possible that the shortage is due to the fact that the appellant has been taking credit without actual receipt of raw material. Tribunal note that no such evidence has been adduced by Revenue. No co-relation of quantity of raw materials consumed and quantity of final products manufactured over a reasonable period is examined. In the absence of such corresponding evidence or any evidence of clandestine removal and the nature of commodity involved, tribunal inclined to give the benefit of doubt to the appellant and hold that the demand is not sustainable. Thus the appeal of the assessee is allowed.
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2013 (4) TMI 246
Removal of capital goods as such to another units - Reversal of Cenvat Credit - whether the main unit was liable to reverse the Cenvat credit taken on the capital goods at the time of its clearance under delivery challan to the other unit. Held that - Admittedly, all the units are separately registered with the Department. Therefore, all of them are registered manufacturers. Each unit, therefore, has to maintain the relevant statutory records including Cenvat credit accounts. Each unit is entitled to take Cenvat credit and is liable to pay duty of excise on the manufactured products. In this scenario recognized by Central Excise law, if one unit clears its capital goods 'as such' to another, it has to reverse the CENVAT credit taken thereon. of course, the recipient unit can take such credit. Ultimately, the situation emerges as revenue neutral. On the facts of the present case as already discussed, there is a revenue-neutral situation and, therefore, the Department will not be justified in enforcing the subject demand of duty against the appellant. - Decided in favor of assessee.
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2013 (4) TMI 245
Short payment of duty due to wrong availment of Excess Cenvat Credit - Payment of duty in Cash - whether the Rule 8(3A) is applicable only for the non-payment of the total duty - held that:- It is true that word “default” is not found in sub-rule (1). However, merely because the said word is not found in sub-rule (1) that cannot be a justification to arrive at a conclusion that the provisions of sub-rule (3A) would not be attracted in spite of non-compliance of sub-rule (1). - It is also pertinent to note that there is no expression “short payment” or “less payment” used in sub-rule (1) and rightly so because question of considering whether there is short payment or less payment can arise only after there is default in complying with the obligation prescribed under sub-rule (1). Following the decision in Godrej Hershey Ltd. v. Commissioner of Central Excise [2010 (11) TMI 263 - CESTAT, NEW DELHI] held that the default mentioned under Rule 8(3A) of the Central Excise Rules is applicable in short payment of duty also. The assessee has contravened the provisions of Rule 8(1) and 8(3A) of the Central Excise Rules and excisable goods were removed from the factory in contravention of the Rule 8 and 8(3A) of the Central Excise Rules. - under Rule 8(3A) of the Central Excise Rules if assessee defaults in payment of duty beyond 30 days from due date the assessee shall pay excise duty for each consignment at the time of removal of goods without utilizing Cenvat credit till outstanding amount is paid along with interest and if this is not done then such goods shall be deemed to have been cleared without payment of duty and consequences and penalties as provided in these rules shall follow and accordingly - Demand of duty with interest confirmed - penalty reduced. - Decided against the assessee.
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CST, VAT & Sales Tax
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2013 (4) TMI 274
Adjust of tax paid on purchase of paddy with sales tax on sale of rice - Requirement of furnishing Form C - The Assessing Authority held that since Form ‘C’ has not been furnished by the revisionist, it was not entitled to claim that it indulged in inter-State sale. - The Assessing Authority, accordingly, imposed tax. - Held that - In the absence of furnishing of a Form ‘C’, the conclusion would be that the sale is not an inter-State sale. - in respect of such sale, the State Law will apply. - The reason is that Section 14 of the said Act has declared that paddy, rice and wheat, amongst others, are goods of special importance. In Section 15 (a) of the said Act, all the State Governments have been restrained from imposing tax on sale or purchase of such goods of special importance at a rate exceeding 4 per cent and the State Government too has imposed tax on paddy, rice and wheat at the rate of 4 per cent. Therefore, in fact, revisionist was not seeking to come within the purview of sub-section (1) of Section 8 of the said Act. In other words, in the absence of furnishing of Form ‘C’, the matter will not be dealt with under the Central Sales Tax Act, 1956, but under the State Law dealing with the matter. It is clarified that law, as propounded herein, was in vogue since 1st April, 1973, when sub-section (5) of Section 8 was substituted. Since penalty, if any, leviable under the Central Sales Tax Act, 1956 for effecting inter-State sale without furnishing Form ‘C’ was not the subject matter of the revision, we have not considered the same.. With the direction, as above, the revision is disposed of.
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