TMI Tax Updates - e-Newsletter
April 15, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Set off of business loss - STP unit against Non-STP unit – loss from an ineligible unit can be carried forward and set off against the profits of eligible unit or ineligible unit in accordance with the provisions of the Act - AT
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Income Tax:
Deduction u/s 37(1) AO invoked the provisions of section 4(7) of the Companies Act, 1956 and reached at the conclusion that the assessee company is to be treated as public company and the managerial remuneration paid in contravention to provisions of Companies Act, 1956 was an offence/prohibited in law - deduction allowed - AT
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Income Tax:
Addition of LTCG – Surrender of tenancy rights – the working by the AO as to the long term capital gain earned by the assessee on relinquishment of tenancy right is sustainable. - AT
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Income Tax:
TDS u/s 194C - assessee paid labour charges through mukadam without any profit margin - The mukadam has further distributed these payments in labourers - individual payment is not exceeding the prescribed limit - No TDS u/s 194C - AT
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Income Tax:
TPA - there is no provision in the Statute to show that in case of an assessee whose income is exempt u/s 10A and international transaction made with an AE should not be benchmarked with ALP determined on the basis of the provisions of Transfer Pricing. - AT
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Income Tax:
Addition made u/s 69 - reference to DVO - reference to valuation cell u/s. 142A can be made during the course of assessment and reassessment and not for the purpose for initiating assessment - AT
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Customs:
Classification of a vessel ‘Pride of Goa’ (POG) - Temporary use of POG in a stationary position will not change the classification of POG when the same is capable of moving across the seas/oceans but has to be mostly made stationary due to the restrictions imposed by the local laws. - AT
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Service Tax:
Levy of service tax on service provided or to be provided to any person by a restaurant having the facility of air-conditioning is not unconstitutional - levy is valid - HC
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Service Tax:
Cargo Handling Agent / Port Service - scope of the term “authorized by the port“ - license issued to the appellant for undertaking stevedoring operations - appellants were not authorized by the port for providing such services - demand set aside - AT
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Service Tax:
Passing of service tax as paid by the contractors to the buyers of flats - Revenue cannot be allowed to receive service tax twice in respect of same construction activities, once from the contractor and the second time from the person who has collected the same. - AT
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Central Excise:
Suppression of facts - when there are divergent views of tribunal / HC on a legal issue, the mala fide intention cannot be attributed to the assessee so as to invoke the longer period of limitation. - AT
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Central Excise:
CENVAT Credit - Receipt of free materials - it cannot be concluded that the inputs or capital goods have to be acquired by a manufacture only by purchase, for taking the Cenvat credit. - AT
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Central Excise:
Exciability - As such, the emergence of sludge and pulper waste during the course of manufacture of paper or paper board cannot be held to the result of any manufacturing activity. - AT
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Central Excise:
Manufacturing of Needles - In our prima facie view, ' Atraumatic Needle (Eyeless)' is a part required for manufacturing 'needled sutures' - Exemption under Notification No.6/2006-CE would be available - AT
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VAT:
Concessional Rate of Taxation - as diesel is specifically and intentionally included in the definition of raw material u/s 2 (34) by the legislature, the question that whether it is directly or indirectly used in the process of manufacture is irrelevant - HC
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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Income Tax
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2014 (4) TMI 442
Disallowance of set off of business loss of STP unit against Non-STP unit – Held that:- The CBDT circular No. 279/Misc/M-116/2012- ITJ dtd. 16. 07. 2013 has tried to remove confusion that has arisen in granting deductions u/s. 10A/10B/10AA/10BA - irrespective of their continued placement in Chapter III, section 10A and 10B as substituted by Finance Act, 2000 provide for deduction of the profits and gains derived from the export of articles or things or computer software for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such article or thing or computer software - The deduction is to be allowed from the total income of the assessee – the provisions of Chapter IV and Chapter VI shall also apply in computing the income for the purpose of deduction under section 10AA and 10BA of the Act subject to the conditions specified in the said sections - the Circular has clearly laid down that the loss from eligible unit would be eligible for carry forward and set off in accordance with the provisions of section 72 of the Act that loss from an ineligible unit can be carried forward and set off against the profits of eligible unit or ineligible unit in accordance with the provisions of the Act – Decided in favour of Assessee. Disallowance u/s 14A of the Act r.w Rule 8D – Dividend income – Held that:- FAA was of the view that AO had made disallowance as per the provisions of the Act, that disallowance was made as per the calculation provided by it, that reduction in addition requested by the assessee was not in conformity with the scheme of calculating disallowance - a request was made by the assessee before the FAA to reduce the addition, as the assessee was of the opinion that addition was on higher side - By stating that addition was higher side assessee had impliedly accepted the addition in principle - Non submission of any argument before the FAA also indicates the acceptance of the assessee with regard to the addition made, though it had reservation about the quantum – the order of the FAA does not suffer from any legal infirmity – Decided against Assessee.
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2014 (4) TMI 441
Unexplained investment in jewellary – Held that:- The amount of Rs.4,94,900 forms part of the amount of Rs.10,51,295/- declared by the assessee towards unexplained investment in jewellery for assessment year 2008-09 - jewellery worth Rs.4,94,900/- was acquired during the financial year 2006-07 relevant to the assessment year - This factual position has not been controverted by the assessee – thus, there is no infirmity in the direction of the CIT (A) in reducing the amount from the income assessed in the assessment year 2008-09 and assess it for the year under dispute – Decided against Assessee. Determination of sale consideration received in kind – Held that:- Neither the AO nor the CIT (A) has brought any material on record to show that the actual market value of the plots in question is either at Rs.1000/- per sq. yard or at Rs.800 per sq. yard - No comparable instances of sale of plots in the same locality or nearby locality has been brought on record - purely on guess work and presumptions, the value of the plots cannot be fixed either at Rs.1000 or Rs.800/- per sq. yard - At least the value adopted by the assessee at Rs.350/- per sq. yard is on the basis of SRO’s rate - the value of Rs.800 per sq. yard adopted by the CIT (A) cannot be accepted – thus, the AO is directed to accept the value disclosed by the assessee of Rs.12,54,050/- at the rate of Rs.350 per sq. yard - the amount of Rs.12,54,050/- should be considered as the cost of acquisition while computing the capital gains when the assessee actually sells the land in future – Decided in favour of Assessee.
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2014 (4) TMI 440
Addition u/s 69C of the Act – Unexplained purchases – Deletion of disallowance of 100% expenditure and depreciation – Held that:- The decision in ACIT, Central Circle-21 Vs. Blue Luxury Index Pvt. Ltd. [2012 (7) TMI 467 - ITAT DELHI] followed - The entire purchases added by the AO are accounted for the books of account - The AO, without rejecting the books results added the entire purchases, source of which, according to the CIT(A), was duly explained - CIT(A) found that sales had been made by account payee cheques and duly reflected in stock registers and supported by sale and purchase vouchers – the AO in his remand report did not comment adversely on the contentions of the assessee in respect of purchases and sales – thus, the CIT(A) rightly deleted the additions - source of the expenditure incurred in purchases is obviously explained - the Revenue did not place any material for controverting the findings of facts recorded by the CIT(A) – Decided against Revenue. Disallowance of expenses – Held that:- CIT(A) found that in the assessment of the assessee for Assessment Year 2002-03, no disallowance of expenses was made while the AO, did not point out any item of expenditure, warranting disallowance – thus, in the absence of any basis, when the Revenue did not even identify any specific amount of expenditure, which was not related to the business of the assessee, any interference cannot be called for – Decided against Revenue.
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2014 (4) TMI 439
Validity of Revision by the CIT u/s 263 of the Act - Jurisdiction – Held that:- The order of the AO was not at all a speaking order - On a specific enquiry from the Bench with regard to any questionnaire or explanation asked by the Assessing Officer in respect of the sale returns which was found to be abnormal feature in respect of a business of contractor - It will be proper to admit the additional evidences –it would be appropriate to remit back the matter to the AO for fresh adjudication - the CIT has estimated gross profit @ 20% which cannot be found in order – The CIT was justified in invoking the provisions of section 263 of the Income-tax Act, 1961 as the Assessing Officer’s order was completely nonspeaking and there was no evidence that enquiries have been made on certain issues which were prima facie abnormal in the assessee’s case - the action taken by the CIT u/s 263 of the Act upheld - the additional evidences filed by the assessee be admitted and the issue is remitted back to the AO for verification of facts – Decided in partly favour of Assessee.
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2014 (4) TMI 438
Disallowance of expenses – Held that:- There was no infirmity in the finding of CIT(A) - The CIT(A) has considered all the facts in detail - the AO has not pointed out any defect or expressed even doubt with regard to any particular expenses - The disallowance has been made purely on adhoc basis - the adhoc disallowance was found to be without basis – thus, there is no need to interfere in the order of the CIT(A) – Decided against Revenue. Validity of Assessment u/s 153A of the Act – No pending proceedings – Held that:- The AO is directed to verify whether there is any credit during the accounting year relevant to the assessment year under consideration either in the books of the assessee or in the books of the partnership firm, viz., M/s BLK Furnishers and Contractors - If there is no fresh credit during the year either in the assessee’s books or in the books of the firm taken over by the assessee, the addition for the unexplained credit cannot be made in the hands of the assessee in the assessment year - if there is a fresh credit, then the Assessing Officer will certainly examine the same in accordance with the provisions of Section 68 – Decided in favour of Assessee. Disallowance of expenses on wages – Held that:- As decided in assessee’s own case for the previous assessment year, it has been held that, the disallowance has been set aside – thus, by following the same the disallowance is set aside – the order of the CIT(A) upheld - Decided against Revenue.
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2014 (4) TMI 437
Disallowance of various expenses – Held that:- All the relevant details asked for by the AO were duly produced before the assessment - It is unjustified on the part of AO that conclusive evidence or complete evidence was not produced - The AO is obliged to give the nature of non-compliance made by the assessee vis-a-vis what is filed by the assessee - A sweeping statement cannot be given that the assessee failed to file conclusive evidence or proper evidence as such observation becomes non-specific having no objective basis – CIT(A) observed that the assessee has made due compliance before the AO - When the compliance is made and is not considered by the Assessing Officer, it cannot be held as fault on the part of the assessee - CIT(A) rightly appreciated the situation and granted partial relief –Decided against Revenue. High ad-hoc disallowance – Held that:- The AO has failed to act in a judicious and objective manner to point out the exact nature of non-compliance and its effect on expenditure - he has substantially disallowed the expenditure on ad hoc basis - there is no justification in such disallowance – thus, there is no justification in again retaining small disallowance on ad hoc basis without giving any reason - there is no justification to retain any disallowance of expenditure made by the assessee without any objective finding about the disallowability - The assessee’s books of accounts are audited and not rejected - the AO in the first part of the order has mentioned about the assessee’s provision of all necessary details – Decided in favour of Assessee.
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2014 (4) TMI 436
Deduction u/s 37(1) of the Act – Remuneration paid in contravention - The AO invoked the provisions of section 4 (7) of the Companies Act, 1956 and reached at the conclusion that the assessee company is to be treated as public company and the managerial remuneration paid in contravention to provisions of Companies Act, 1956 was an offence/prohibited in law – Held that:- The decision in CIT vs. Papilion Investments Pvt. Ltd.[2009 (8) TMI 832 - BOMBAY HIGH COURT] followed - The total equity shares of the assessee company were 76,36,000 out of which 76,35,999 equity shares were held by NTT Communications Corporation, Japan and only one equity share was allotted to the Managing Director of the assessee company - The money for allotment of this one equity share to MD of the company was paid by NTT Communications Corporation, Japan - This single share was allotted to the MD in the capacity of a nominee of the assessee company to meet the requirement of minimum two shareholders in the case of a private limited company in view of Section 12 of the Companies Act – the fact has been clearly mentioned in the Memorandum & Article of Association. There cannot be any company in India which has less than two members i.e. shareholders - the requirement of section 4(7) is that the whole of the share capital of the subsidiary company should be held by the holding company - The whole of the share capital being held by the holding company is certainly not the same thing as whole of the share capital being held in the name of the holding company - the situation is a legal impossibility in India - in case one is to proceed on the basis that entire share capital of the subsidiary should be held in the name of the holding company, there cannot be any situation in which section 4(7) can apply - That is certainly not an interpretation which can be termed as to make the statute effective rather than making it redundant - Thus, there was no fault in the order of the CIT (A) for granting the relief to the assessee – thus, the order of the CIT(A) upheld – Decided against Revenue.
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2014 (4) TMI 435
Addition of LTCG – Surrender of tenancy rights – Held that:- All the transactions are contained in a single document, just by differently wording that the assessee got the reversionary right by paying small amount for improvement in the title to the ownership cannot support the contention of the assessee that he has acquired only lease hold interest as the reversionary right - the working by the AO as to the long term capital gain earned by the assessee on relinquishment of tenancy right is sustainable. The decision in CIT Vs. D.P. Sandu Bors. Chembur P. Ltd. [2005 (1) TMI 13 - SUPREME Court] followed - the tenancy right is a capital asset, the surrender of the tenancy right is a transfer and a consideration received is a capital receipt within the meaning of section 45 – thus, the contentions of the revenue is accepted that the assessee had acquired the new flat in lieu of the surrender of tenancy right in addition to the payment of the consideration and the difference in value that is Government value of the flat purchased by the assessee which is determined as the fair market value of the flat minus the consideration paid by the assessee is to be equated with the consideration received by the assessee for the relinquishment of the tenancy right in the erstwhile flat possessed by the assessee and the same is liable to be taxed as long term capital gain – there is no infirmity in the order of the CIT(A) – Decided against Assessee.
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2014 (4) TMI 434
Deduction u/s 80P(2)(a)(i) of the Act - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 – Held that:- Sec. 80P(2)(a)(i) provides two types of activities in which the co-operative society must be engaged to be eligible for deduction under sub-clause (i) - These two activities are not alternates ones because the section allows deduction to the co-operative society on the whole of profits and gains of business attributable to any one or more of such activities - This pre-supposes that eligible co-operative society can carry on either one of these two businesses or can carry both these businesses for the members - If the Assessee co-operative society carries on one or both of the activities, it will be eligible for deduction. Where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. Whether the Assessee is a co-operative bank or not – Held that:- In case, the assessee does not comply with the three conditions of being a cooperative society, it cannot be regarded to be a co-operative bank and the provisions of Sec. 80P(4) will not be applicable in the case of the Assessee - Once, the Assessee will not fall within the provisions of Sec. 80P(4), the Assessee, will be eligible to get deduction u/s 80P(2)(a)(i) in respect of whole of the income which the Assessee derives from carrying on the business of banking or providing credit facilities to its members. The Assessee has accepted before the authorities that the Assessee was accepting deposits of money not only from the members but also from the general public who are non-members - it is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act for carrying on banking business - If licence is not obtained it may be an illegal banking business under the other statute – the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac - Sec. 20 of The Karnataka Souharda Sahakari Act, 1997 permits admission of any other co-operative society as a member - the assessee society complied with all the three conditions – thus, the assessee society becomes a primary co-operative bank and in view of explanation (a) of section 80P(4) it has to be regarded as a co-operative bank and is hit by section 80P(4) - the Assessee has to be regarded to be a primary co-operative bank as all the three basic conditions are complied with, it is a co-operative bank and the provisions of Sec. 80P(4) are applicable in the case of the Assessee and Assessee is not entitled for deduction u/s 80P(2)(a)(i) – thus, the order of the CIT(A) upheld – Decided against Assessee.
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2014 (4) TMI 433
Addition u/s 68 of the Act - Unexplained cash credits – Held that:- If there is an entry in the accounts of the assessee, which shows the receipt of a sum the burden is on the assessee to explain the nature and source of such credit - the cash creditors shown in the name of Hira Bai Meghji Savla at Rs.2 lacs where no copy of return had been filed only copy of PAN card given to the AO - The source of income has not been explained - The full copy of bank account maintained with HDFC, Vapi has not been filed by the assessee - there were cash deposits also in bank account – thus, there is no reason to interfere in the order of CIT(A) – Decided against Assessee. Disallowance of labour expenses u/s 40(a)(ia) of the Act – Held that:- The assessee is in construction business - The expenses debited in the P&L account and had not been doubted by the A.O - In construction business, the labour is required and it is an unorganized sector and some persons are required to arrange the labour for construction work - The assessee paid this amount through mukadam - The mukadam has further distributed these payments in labourers - The mukadam had not given any margin money as profit on distribution of labour charges among labourers - When there is no profit element in payments, the TDS is not required to be deducted – the decision in DCIT vs. Laxmi Protein Products (P.) Ltd. 2010 (2) TMI 989 - ITAT AHMEDABAD] followed – The individual payment is not exceeding the prescribed limit and once this is not the case, the assessee is not supposed to deduct tax under section 194C of the Act - The assessee is not required to deduct TDS u/s. 194C on labour payments made through the mukadam – Decided in favour of Assessee. Restriction of addition u/s 68 of the Act – Held that:- The decision in BLESSING CONSTRUCTION Versus INCOME TAX OFFICER [ 2013 (10) TMI 154 - GUJARAT HIGH COURT] followed - there is no creditworthiness of the cash creditor to give loan of Rs.1,30,000/- to the assessee - the assessee had not proved creditworthiness of the cash creditor as he had shown only income of Rs.99,260/- in the return - The bank account shows that cash has been deposited in the bank account of the cash creditor - the identity and the genuineness of the transaction had been proved by the assessee but cash creditor did not have creditworthiness to advance Rs.1,65,000/- to the assessee and also in bank account substantial cash has been deposited and thereafter loan was advanced by the cash creditor to the assessee - it is not the duty of the AO to prove that unaccounted income of the assessee routed through this cash creditor as held by various Courts - the creditworthiness has not been discharged by the assessee - Thus, the order of the CIT(A) is reversed – Decided in favour of Revenue.
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2014 (4) TMI 432
Penalty u/s 271(1)(c) of the Act –Interest income on borrowed funds – Inaccurate particulars filed - Held that:- The assessee had filed the confirmation at the time of loan taken from the outsider parties and interest paid to them - thus, the claim of interest was genuine and was for business purposes - The AO had not brought on record any evidence that assessee had concealed income and furnished inaccurate particulars of income - the assessee used the loans for business purposes and interest had been paid on it after making TDS - The genuineness of the loan has not been doubted by the AO - explanation furnished by the assessee is not false as per Explanation 1 of Section 271(1)(c) – thus, the order of the CIT(A) set aside – Decided in favour of Assessee.
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2014 (4) TMI 431
Deletion of disallowance of Deduction u/s 80IA(4) of the Act – Held that:- As decided in assessee’s own case for the previsous assessment years’, it has been held that the deduction u/s 80IA(4) of the Act is allowed on captive power plant, where the profit was calculated on the basis of market rate of power unit on captive power plant production of unit – thus, the deduction u/s 80IA is allowed on the basis of market rate of power unit computing the profit from the eligible unit u/s. 80IA(4) – Decided in favour of Assessee. Disallowance u/s 14A of the Act – Interest and other expenses incurred in relation to exempted income of dividend and tax free interest – Held that:- The decision in Godrej and Boyce Mfg Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] Rule 8D is not applicable retrospectively and applicable for A.Y. 08-09 - reasonable disallowance is to be made by the AO after analyzing the borrowed fund used for the business purposes, non-business purposes and interest paid and also other disallowance for under the administrative head - the assessee did not supply the information called for by the AO at the time of assessment - the issue cannot be decided at this level – the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Allowability of adjustment under Explanation to section 115JB of the Act – Wealth tax liability – Held that:- As decided in assessee’s own case for the previsous assessment years’, the decision in JCIT vs. Usha Martin Industrial Ltd.[2006 (12) TMI 171 - ITAT CALCUTTA] followed – Decided against Revenue. Deduction u/s 80HHC of the Act – Book profits u/s 115JB of the Act – Held that:- The AO rightly held that that assessee had claimed deduction u/s. 80HHC while calculating its book profit u/s. 115JB by filing revised e-return - deduction u/s.80HHC was not available under the normal provisions of the IT Act w.e.f. 01.04.2005 - The assessee gave reasonable opportunity of being heard on the issue, which was afforded by the assessee - After considering the assessee’s reply, no deduction was allowed - The amendment made u/s 115JB is effective from 01.04.2005 and as per item no. iv of Explanation 1, the deduction u/s. 80HHC is not allowed and is to be reduced from 115JB profit – thus, the order fo the CIT(A) set aside – Decided in favour of Revenue. Disallowance u/s 14A for computing profit u/s 115JB of the Act – Held that:- As the issue has been set aside to the AO for re-computation of disallowance u/s. 14A, however, for making adjustment u/s. 115JB, in M/s. Essar Teleholdings Ltd. Versus The DCIT, Mumbai [2013 (5) TMI 116 - ITAT MUMBAI] it has been held that, provisions of sub-Section 2 & 3 of Section 14B cannot be imported into Clause (f) of the Explanation to Section 115JB of the Act - As per Clause (f) of Explanation 1 to Section 115JB refers to amount debited to the P&L account, which can be added back to the book profit while computing the book profit u/s. 115JB - adjustment made by the AO is not as per law – Decided against Revenue. Addition of provision for doubtful debts – Computation of book profits u/s 115JB of the Act – Held that:- The decision in CIT vs. Yokogawa India Ltd. [ 2011 (8) TMI 766 - KARNATAKA HIGH COURT ] followed - provision made for bad debt cannot be added back in accordance with Explanation (c) to Section 115JB(1) as same is not an ascertained liability - the provision for bad debt has been analyzed and as per Section 36(1)(vii), the assessee has to show net of the provision for bad debt in the balance sheet - Even Explanation (c) has been inserted retrospectively, then no increase can be made u/s. 115JB or 115JA - The amendment came by the Finance Act, 2008 w.e.f. 01.04.2001 - The assessee had made provisions for bad debt in earlier year and added back in the computation of income of that year and actual bad debt had been claimed by debited the provision for bad debt and claimed u/s. 36(1)(vii) of IT Act – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (4) TMI 430
Deletion of penalty u/s 271(1)(c) of the Act – Bogus transaction – Held that:- The AO has established that assessee has taken bogus purchase bill to reduce the tax liability - The AO made detailed investigation on it and when the assessee cornered by the AO through investigation, it revised the return and accepted the loss – Relying upon MAK Data (P.) Ltd. vs. CIT [2013 (11) TMI 14 - SUPREME COURT] - the surrender of income not have been voluntary in nature as detected by the AO in search conducted - penalty held justifiable – the assessee has revised his return when witnesses had admitted having been given accommodation entry to the assesse – CIT(A) was not right in deleting the penalty – Decided in favour of Revenue.
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2014 (4) TMI 429
Condonation of delay – Delay of 135 days – Held that:- Assessee by the affidavit contended that the first appellate order was served on the erstwhile consultant and there was a change in the assessee company's tax consultant - The assessee, being a dormant company had no turnover in the last 4 years - the company does not have any staff or full time professionals to look into the tax matter – thus, the assessee has been prevented by sufficient cause for not filing the appeal – Delay condoned. Disallowance u/s 14A of the Act r.w. Rule 8D of the Rules – Held that:- The decision in Godrej & Boyce Ltd. Mfg. Co. VS. DCIT [(2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - the disallowance has to be worked out by the AO on some 'reasonable basis' and not rule 8D in so far as the assessment years prior to 2008-09 are concerned – as the authorities below have computed the disallowable amount as per rule 8D, such computation cannot be upheld – thus, the order is set aside and the matter is remitted back to the AO for fresh consideration – Decided in favour of Assessee. Denial of benefit of set off - Unabsorbed depreciation against capital gains – Held that:- The decision in M/s Suresh Industries Pvt Ltd Vs ACIT [2012 (11) TMI 674 - ITAT MUMBAI] followed - unabsorbed depreciation can be set off against any income and the brought forward of unabsorbed depreciation is treated as current year's depreciation because of the legal fiction, therefore the treatment given to the current year's depreciation is equally applicable to brought forward depreciation after application of Finance Act, 2001 – thus, the AO is directed to allow the set off of unabsorbed depreciation – Decided in favour of Assesse.
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2014 (4) TMI 428
Claim of interest on borrowed amount – Amount paid to another sister concern - Revision of order by CIT u/s 263 – Held that:- Assessee did borrow funds to pay M/s. Salivahana Associates for completion of the building, which was leased out - there is no diversion of funds as alleged by the CIT - there is no other activity for the assessee except owning 50% share of the property which was leased out - since assessee is owning the property of 50% of the share of the building and lease rent was also offered accordingly on the same area, finding by CIT that the supplementary agreement is not a real deed is not based on record - these aspects were examined by the A.O. in A.Y. 2005-06 which was the first year, of not only rental income but also claim of interest on the borrowed funds, the observations of the CIT cannot be upheld – the opinion of the CIT is not based on the facts on record and AO examined the issue and given a finding that assessee owns 50% of the constructed area – thus, the CIT has not exercised the jurisdiction correctly – the order of the CIT set aside – Decided in favour of Assessee.
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2014 (4) TMI 427
Transfer pricing adjustment – Eligibility for tax holiday u/s 10A of the Act – Offshore business process outsourcing service – Assessee rendered data support services - Held that:- Relying upon CBDT vide its Circular No.14 of 2001, dated 09.11.2001 and the decision in Philips Software Centre ( P.) Ltd. Vs. ACIT, [2008 (9) TMI 466 - ITAT BANGALORE-B] The provisions of the Transfer Pricing were introduced in the Statute to ensure that due to any arrangement made by the assessee with its AE in the course of an international transaction income taxable in India is not reduced for any reason -in a case where the income derived from an international transaction is exempt from tax in India because of provisions of Section 10A, then it cannot be held that because of an arrangement between the assessee and its AE any income taxable in India had been under reported - there is no provision in the Statute to show that in case of an assessee whose income is exempt u/s 10A and international transaction made with an AE should not be benchmarked with ALP determined on the basis of the provisions of Transfer Pricing. The assessee has not reported any excess exempt income from its international transactions with AE - as per the opinion of the lower authorities exempt income declared by the assessee when benchmarked with the ALP determined in accordance with the provisions of Transfer Pricing, the assessee has declared lesser exempt income and thereby no taxable base in India was eroded - no adjustment with the exempt income of the assessee was required to be made as per provisions contained in Chapter X of the Act – thus, the AO is directed to treat the income declared from the business at the amount as shown by the assessee in its return of income – Decided in favour of Assessee.
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2014 (4) TMI 426
Rejection of book results – Estimation of Gross profit @ 22% instead of 21.15% - Held that:- The loss of fire and expenses are debited by the assessee in its Profit & Loss Account and not in the Trading Account - the items do not affect the working of the Gross Profit of the assessee – the AO as well as the CIT(A) has observed that the yield of the assessee was not verifiable - No material has been brought on record by the assessee to show that the yield of the assessee was verifiable from the books of accounts and records maintained by the assessee. The AO has estimated the gross profit of the assessee after rejecting the books of accounts at the rate of 23.04% which was the gross profit rate shown by the assessee itself in the immediately preceding assessment year 2005-06 - The CIT(A) estimated the rate of gross profit of the assessee at 22% without any basis - the rejection of books of accounts by the AO was fully justified as no material was brought on record to show that the yield of the assessee was verifiable - the average of gross profit rate shown by the assessee in the immediately preceding two assessment years i.e. 2004-05 and 2005-06, and after including the gross profit rate for the assessment year 2006-06, works out to 21.79% - thus, the order of the CIT(A) is modified and the AO is directed to re-compute the income of the assessee by adopting the Gross Profit rate of the assessee at 21.79% - Decided partly in favour of Assessee.
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2014 (4) TMI 425
Deletion of disallowance u/s 10B of the Act – Held that:- The contention of the assessee that the benefit u/s 10B is no more available to the assessee in view of the later judgment of CIT Vs Regency Creations Ltd. [2012 (9) TMI 627 - DELHI HIGH COURT] is accepted – CIT(A) granted relief u/s 10A in principle contrary to its specific denial by the AO - thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for examination of the assessee’s claim as per section 10A of the Act – Decided in favour of Revenue.
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2014 (4) TMI 424
Addition made u/s 69 of the Act - Unverifiable payments and stocks - Reference made to DVO u/s 142A of the Act – Difference on cost of construction – Held that:- The decision in M/s. Legend Estates Pvt. Ltd. Versus Dy. Commissioner of Income-tax, Circle-16(1), Hyderabad [2014 (4) TMI 154 - ITAT HYDERABAD] followed – No proceedings were pending at the time of reference made to the DVO, regarding ascertainment of cost of construction of the project as the return of income - for the purpose of making an assessment or reassessment under this Act, once the process of assessment is initiated, the word ‘making’ should be presumed to be associated with both ‘assessment’ or ‘reassessment’, the reference u/s. 142A of the Act can be made - When there is process of assessment, which is initiated after filing of the return of income or issuance of notice u/s. 142(1) - the process of reassessment could be initiated only after issuance of notice u/s. 148(1) after duly fulfilling the formalities mentioned, the reference u/s. 142A of the Act can be made - the invoking of Sec. 142A is a process after the initiation of the assessment proceedings. Relying upon Umiya Co-operative Housing Society Ltd. v ITO [2005 (3) TMI 382 - ITAT AHMEDABAD-B] - A reference to DVO u/s. 142A can be made only when a requirement is felt by the AO for making such reference. Requirement would arise or could be felt only when there is some material with the AO to show that whatever estimate assessee has shown is not correct or not reliable - The use of word ‘require’ is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the AO is necessary which requires him to make a reference to the DVO u/s 142A - It can only be during the course of pendency of assessment or reassessment that the AO frame his mind to refer the property to valuation cell of the Department - if there is a basis to think that the assessee may have understated the cost of construction or whatever is declared by him in this regard is not believable - reference to valuation cell u/s. 142A can be made during the course of assessment and reassessment and not for the purpose for initiating assessment –Decided against Revenue.
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2014 (4) TMI 423
Validity of reopening of assessment u/s 148 of the Act – assessment year 2002-03 and 2003-04 - Duty to make full disclosure - The decision in Bhor Industries Ltd. vs. ACIT [2003 (2) TMI 8 - BOMBAY High Court] and Cadila Healthcare Ltd. vs. DCIT [2010 (5) TMI 570 - Gujarat High Court] followed - The duty of the assessee is only to make full and true disclosure of all material facts necessary for the assessment - the act does not required that the assessee should inform the AO as to what legal inference should be drawn from the facts disclosed by him - The assessee cannot gave advise to the AO on question of law – the AO has completely failed to ascribe any failure on the part of the assessee to disclose fully and truly material facts - such “reason” recorded do not clothe him to acquire jurisdiction u/s 147 – thus, the order passed u/s 148 is set aside – Decided in favour of Assessee. Validity of reopening of assessment u/s 148 of the Act - assessment year 2004-05 - Held that:- The assessee company has been allowed deduction u/s10A in respect of three units of IT Division by the AO – Section 10A of the Income Tax Act, 1961 provides deduction of such profits & gains as are derived from the eligible activities performed by an undertaking - the deduction allowed u/s 10A, does not form part of the total income, the loss in respect of Section 10A undertaking should also be ignored while computing total income – section 10A income is exempt from tax, the loss should also have been ignored, which has not been done - this has resulted in underassessment of income – thus, there is reason to believe that income to the extent of Rs,5,62,75,564/- has escaped assessment and it is a fit case for reopening u/s 147 of the Act – the materials, prima-facie, are sufficient to acquire jurisdiction u/s 147, because they give rise to “reason to believe” that the prima-facie assessee’s claim for exemption has not been examined properly in the course of the assessment proceedings – Decided against Assessee. Disallowance of claim of deduction u/s 10A of the Act – Registration not taken for new industrial undertaking – Held that:- Both the parties had admitted that the matter has to be remitted back to the AO for fresh adjudication – decided in favour of Assessee.
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Customs
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2014 (4) TMI 422
Exemption – export of dyed printed fabric made from 100% polyester filament yarn under DEPB scheme - Mis-declaration in quantity of the goods – Confiscation and redemption of fine - Held that:- Goods were found to be 20% less than what was declared - Since the quantity of goods being exported was mis-declared, the goods are liable to confiscation and redemption fine is imposable – In the present case, the goods were very much available at the time of export and in fact were released only after payment of redemption fine - The law does not stipulate that only the differential quantity which has been mis-declared is to be confiscated - Once there is a mis-declaration with respect to the quantity, the entire consignment is liable to be confiscated - However, the benefit that would have accrued to the appellant would have been approximately ₹ 1.07 lakhs and in view of this position, redemption fine and penalty imposed are on the higher side - Accordingly, redemption fine reduced to ₹ 1,50,000/- (Rupees one lakh fifty thousand only) and penalty to ₹ 1,07,000/- (Rupees one lakhs seven thousand) – Decided partly in favour of assessee.
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2014 (4) TMI 421
Classification of a vessel ‘Pride of Goa’ (POG) - Whether the vessel POG should be considered as a passenger ship primarily designed for the transport of persons (CTH 8901) or it should be classified as vessel for pleasure or sport under CTH 8903 - Held that:- On the issue of classification of the vessel POG, the adjudicating authority has mainly relied upon the fact that the vessel is a Casino vessel and is intended to be made stationary for use as a casino even if it is capable of making voyages in the open sea. On the other hand, importer has come out with the argument that the end use of the vessel should not be made as the basis for classifying a vessel under the Customs Tariff Act - appellants imported transhippers which were vessels used for carrying cargo loaded from the harbour and carry the same for unloading cargo into the large vessels. Temporary use of POG in a stationary position will not change the classification of POG when the same is capable of moving across the seas/oceans but has to be mostly made stationary due to the restrictions imposed by the local laws. It will be a strange situation to classify a vessel under CTH 8901 if used for making trips to open sea, with a night halt arrangement in the sea, but classify the same vessel under CTH 8903 if used in a predominantly stationary position. In view of the above observations, we are of the opinion that Casino vessel POG imported by the importer is principally designed to carry passengers and has been correctly assessed under CTH 8901 - classification of POG and its assessments have been correctly made and it is held that any value addition will not have effect on duty when the vessel of CTH 8901 imported by the appellant stood exempted under an exemption notification - Decided in favour of assessee.
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Service Tax
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2014 (4) TMI 447
Constitutional validity of levy of service tax on service provided or to be provided to any person by a restaurant having the facility of airconditioning in any part of the establishment - Sub clause (zzzzv) of clause (105) of Section 65 - power of state government to levy Sales Tax / Value Added Tax (VAT) - Subclause (f) of Clause (29A) of Article 366 - Held that:- When the State imposes or levies the sales tax on goods, it is not charging or taxing the services, but sale thereof. The service tax does not charge or tax the sale of goods. It charges or taxes the services and which may or may not be provided in sale of goods. It was argued and prior to the Constitution (FortySixth Amendment) Act, 1982 that the State cannot impose the sales tax on the establishments like restaurants or hotels because they do not sell goods. They only provide services and while rendering and providing such services, they may be incidentally selling the goods. However, their predominant activity is rendering services and not selling the goods. While selling, supply thereof is contemplated and covered by Article 366(29A) (f) of the Constitution of India. It does not mean that the service during the course of or while supplying the goods is taxed, but the tax is and remains on sale of goods. That is why the State Legislatures were held to be empowered to impose, levy, assess and recover a tax on sale of articles of food and drink which have been termed as “goods”. Once the observations of the Honourable Supreme Court and the Constitutional definition is understood in this context, then, we do not feel that any assistance can be derived by the Petitioners from the judgment in K.Damodarasamy Naidu [1999 (10) TMI 598 - SUPREME COURT OF INDIA]. This judgment of the Honourable Supreme Court in no way decides the controversy before us far from holding that the Parliament is incompetent to impose and levy a tax on services provided in an airconditioned Restaurant. The Parliament cannot be said to have transgressed into leave alone encroached upon the power of the State Legislature to impose a tax on sale or purchase of goods vide Entry 54 of List II. The taxing power of the Parliament and traceable to Article 248 of the Constitution of India r/w Entry 97 of List I of the Seventh Schedule enables it to impose a service tax. So long as there is no prohibition against imposition of service tax on the services rendered, then it must be held that the Parliament is competent to impose a service tax in question. In the case of Association of Leasing and Financial Service Companies v/s Union of India [2010 (10) TMI 4 - SUPREME COURT OF INDIA], apex court elaborately discussed the imposition of tax on hirepurchase/ leasing of goods. Equally, same also discussed the imposition of service tax on the services rendered by the Banks and Financial Institutions during the course of such leasing. Levy of service tax on service provided or to be provided to any person by a restaurant having the facility of air-conditioning is not unconstitutional - Decided against the assessee.
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2014 (4) TMI 446
Waiver of pre deposit - demand on account of wrongly availing the Cenvat Credit of Inter Usage connection (IUC) charges - Whether the discretion exercised by the Tribunal for complete waiver of pre-deposit is judicious - Held that:- Tribunal had recorded that there was a prima facie case in favour of the assessee in view of the decisions of the Chennai and Bangalore Tribunals in BSNL [2011 (2) TMI 791 - CESTAT, CHENNAI] and Manipal Advertising Services Pvt. Limited's cases (2009 (10) TMI 434 - CESTAT, BANGALORE). In such a situation, the order of the Tribunal waiving of the pre-deposit in the case of BSNL-respondent cannot be said to be erroneous or perverse in any manner. - Decided against Revenue.
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2014 (4) TMI 445
Cargo Handling Agent / Port Service - scope of the term "authorized by the port" - reference to Gujarat Maritime Board (GMB) - principle of pari-materia statute - interpretation of law - non payment of service tax on lighterage and local transportation within the port - stevedoring, unloading and loading charges - appellant contended that amendment made by Finance Act, 2010 clearly brings out the legislative intent of not taxing services other than those provided by port or a person authorized by the port prior to 01.07.2010. - Held that:- The law is laid down by the Apex Court in the case of Aphali Pharmaceuticals vs. State of Maharashtra [1989 (9) TMI 212 - SUPREME COURT OF INDIA] that a statute has to be interpreted contextually and that it is unjust to decide or respond as to any particular part of law without examining the whole, to interpret and in such a way as to harmonize laws with laws, is the best mode of interpretation. The expression authorized by the port has a specific connotation under the Major Port Trusts Act, 1963 (which governs all Major Ports) as also under GMB Act, 1980, Maharashtra Maritime Board Act, Tamilnadu Maritime Board Act, and other similar Maritime Board Acts issued by various State Governments governing Minor Ports. Section 42(3) of the Major Port Trust Act, 1963 and Section 32(3) of the GMB Act, 1980 provide for an authorization from the Port for performing specified services. The said provisions further provide that the person authorized by the port shall charge or recover for the service rendered by them in accordance with the scale of rates which have been framed. There is no infirmity in referring to provisions of the GMB Act while deciphering the meaning of the expression authorized by the portused in the definition of port service under the Finance Act, 1994. It is an undisputed position that the Ports Act specifically provides for services which a Port would render and also provides for grant of an authorization in favour of a third person for rendering services. It is these services which the Finance Act seeks to tax and therefore the two statutes are with respect to the same person / thing or class of person / things and are thus pari-materia statutes. The license issued to the appellant for undertaking stevedoring operations as also lighterage has been issued under Rule 6(1)(kk) of the Indian Ports Act which deals with the power to make regulations for licensing purposes which is distinct from an authorization under Section 32(3). Decision in the case of VELJI P. & SONS (AGENCIES) P. LTD [2007 (8) TMI 35 - CESTAT, AHMEDABAD] followed. - appellants were not authorized by the port for providing such services - Decided in favor of assessee. Extended period of limitation - Held that:- a substantial portion of the demand against them is barred by limitation as the dispute in hand is one of interpretation and high judicial forums have at different time taken a different view. The Apex Court has in the case of Jaiprakash Industries Ltd. Vs. CCE [2002 (11) TMI 92 - SUPREME COURT OF INDIA] held that in such cases where different statutory authorities have taken divergent view extended period cannot be invoked. - Demand set aside - Decided in favor of assessee.
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2014 (4) TMI 444
Cenvat Credit - Restriction on utilizing the credit upto 20% - Rule 6(3) - Commercial training and coaching services - Exempted activities i.e. documents, applications etc -Held that:- if the provider of the output service avails CENVAT Credit of common input services, then he can utilize only the amount as specified under Rule 6(3)(c). In the case in hand, it is also undisputed that the appellant utilizes the services of courier for his entire business activity. It is also undisputed that the appellant is discharging the Service Tax on the services i.e. commercial coaching services. If that be so, the provisions as reproduced hereinabove would mandate that the appellant is eligible to avail the CENVAT Credit but can utilize only 20% of the same for paying the Service Tax liability on the services rendered by him. In the entire case record, there is no allegation or finding which indicate that the amount which has been confirmed by the lower authorities is the amount which has been utilized by the appellant more than the stipulated 20% under Rule 6(3)(c). In the facts & circumstances of this case, I am of the considered view that entire CENVAT Credit on the common input services i.e. courier services cannot be denied to the appellant - Decided in favour of assessee.
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2014 (4) TMI 443
Demand of service tax reimbursement collected by the appellant from the buyers of the commercial property - whether or not a person, who is not an assessee, can recover any amount from anyone as representing service tax. - Passing of service tax as paid by the contractors to the buyers of flats - Held that:- The Revenue cannot be allowed to receive service tax twice in respect of same construction activities, once from the contractor and the second time from the person who has collected the same. As such, we do not agree with the adjudicating authority that the appellant was required to deposit the service tax collected by him from his customers, once again in terms of provisions of section 73A, even though the same stand already deposited with the Revenue, through the contractors. Appellants have taken a categorical stand that the service tax received by them was to the tune of ₹ 3.24 crores approximately whereas the service tax paid from various contractors is to the tune of ₹ 3.48 crores. For the above proposition they have placed reliance on the Chartered Accountants certificate and has also placed various documentary evidence before the adjudicating authority - Revenue directed to verify facts - Matter remanded back - Decided in favour of assessee.
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2014 (4) TMI 412
Demand of interest and levy of penalty for late payment of service tax - Extended period of limitation - Penalty u/s 76, 77, 78 & 80 - Waiver of penalty u/s 80 - Held that:- as per the findings arrived at by the Joint Commissioner, Service Tax was not deposited due to unawareness which has been taken as a reasonable cause for failure to deposit of Service Tax. As such, he has not imposed any penalty by invoking Section 80 of the Finance Act, 1994. Section 80 is to the effect that no penalty shall be imposed on the assessee for any failure referred to any Section 76, 77 or 78 of the Act, if the assessee proves that there was reasonable cause for the said failure. The demand of duty stands invoked and confirmed in terms of Section 73 of the Finance Act. The proviso to Section 73 of the Finance Act allows the Revenue to raise the demand within the extended period of 5 years for fraud, wilful mistake, suppression of facts or contravention of provisions of the Act, with intent to evade payment of duty. As such, it is clear that provision of Section 73 is invokable when there is no reasonable cause on the part of the assessee not to pay the duty inasmuch all the circumstances mentioned in the said proviso relate to mala fide intention. As such, it can be reasonably concluded that proviso to Section 73 and Section 80, if interpreted in a harmonious manner lead to only one fact that is absence of mala fide and presence of bona fide - Invocation of extended period not invocable - Matter remanded back - Decided in favour of assessee.
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Central Excise
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2014 (4) TMI 420
Suppression of facts - Invocation of extended period of limitation - Denial of Small Scale Exemption - Whether when the manufacturing units were using the brand name ‘Rider’, ‘Rider Seals’ and ‘Rider Hose’ in respect of the goods manufactured by them, the benefit of Small Scale Notification will still be available to them or not - Clandestine removal of goods - Held that:- during the relevant period, there were decisions of the Tribunal holding that if the brand is being used with a little variance and in respect of different types of goods, the Small Scale Industries Exemption would still be available. The said law was reversed by the Hon'ble Supreme Court in the case of CCE, Trichy Vs. Rukmeni Pakkwell Traders [2004 (2) TMI 69 - SUPREME COURT OF INDIA] as also in the case of CCE, Chandigarh-I Vs. Mahaan Dairies [2004 (2) TMI 73 - SUPREME COURT OF INDIA]. It becomes clear that during the period relevant for the purposes of the present appeals, the law was in favour of the assesses and was reversed subsequently by the Hon'ble Supreme Court. As such, the question which arises is as to whether in such a scenario, any mala fide can be attributed to the assessee and whether the extended period of limitation would be available to the Revenue or not. Similarly, in the case of Jaiprakash Industries Ltd. Vs. CCE, Chandigarh [2002 (11) TMI 92 - SUPREME COURT OF INDIA], it was held that when there are divergent views of various High Courts on a legal issue, the mala fide intention cannot be attributed to the assessee so as to invoke the longer period of limitation. The Hon'ble Supreme Court of in the case of Continental Foundation Joint Venture Vs. CCE, Chandigarh-I [2007 (8) TMI 11 - SUPREME COURT OF INDIA] has held that the expression ‘suppression’ used in proviso to Section 11A of Central Excise Act, 1994 is required to be construed strictly. When there are various circulars operating at different points of time, leading to scope for entertaining the doubt, the extended period of limitation cannot be invoked. Demand confirmed on the basis of use of brand name against various manufacturing units along with imposition of penalties on various persons, on the said ground is set aside on the point of limitation. The issue of clandestine removal is being remanded to the original adjudicating authority for fresh decision - Decided in favour of assessee.
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2014 (4) TMI 419
Refund of amount deposited before filing an appeal before Commissioner (appeals) as per order in original after getting favorable decision - unjust enrichment - Repacking of Zinc sulphate from bulk to retail - With the budget changes with effect from 1.1.2007, such an activity of repacking from bulk to repair was deemed to be a manufacturing activity - Held that:- The fact of filing of appeal before higher appellate forum itself amounts to lodging of protest. If the law requires an assessee to deposit amount in question before going in appeal, against the orders confirming such demands and after lawful citizen abide the said dictate of law, he cannot be deprived of his rights to get back the said deposited amount on success of his appeal. The entire idea of filing an appeal gets defeated if the litigant is not allowed to avail or retain the fruit of such litigation. It is well settled law that neither the provisions of limitation nor the provisions of unjust enrichment would be applicable to the amounts of pre-deposit - The fact whether such payments were made pre-adjudication or post adjudication will not change the nature or character of said deposits - Decided in favour assessee.
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2014 (4) TMI 418
CENVAT Credit - Receipt of free materials - Held that:- There is nothing in this Rule which says that the inputs have to be received by the way of purchase. Rule 57AE(3), which has been invoked by the Revenue mentions that the manufacturer of final product has to maintain proper records for receipt, disposal, consumption and inventory of the inputs and capital goods in which the relevant information regarding the value, duty paid, the person from whom the inputs or capital goods has been purchased has been recorded and the burden of proof regarding the admissibility of Cenvat credit shall lie on the manufacturer taking such credit. This provision is with regard to the maintenance of the records of receipt, disposal and consumption of the inputs and capital goods purchased, in respect of which Cenvat credit has been taken from the use of the word – ‘purchase’, in this Rule, it cannot be concluded that the inputs or capital goods have to be acquired by a manufacture only by purchase, for taking the Cenvat credit. There is no such condition in Rule 57AB of Central Excise Rules, 1944 and corresponding provisions of Cenvat Credit Rules 2001/2002. Therefore I do not find any infirmity in the impugned order - Rule 57AE(3) is a procedural rule using the expression ‘purchased’, whereas in the substantive provision, there is no such stipulation regarding purchase for the grant of input duty credit - Following decision of Exide Industries Vs. CCE, Haldia [2008 (1) TMI 190 - CESTAT, KOLKATA] - Decided against Revenue.
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2014 (4) TMI 417
Manufacture of chewing tobacco - compounded levy scheme - Closure of factory - Period of closure - Held that:- the period of 15 days closure, need not fall within the same calendar month - the Rules required a manufacturing unit to deposit the entire duty for that particular month by 5th day of that particular month. If subsequently the unit is closed, they are given liberty to file abatement and seek refund of duty. However, in a scenario where a manufacturing unit is aware of the closure of its unit, before the duty is deposited by him for the entire month, he may seek abatement at that particular point of time, make deposit of duty for working days only. The non following of the said procedure, may result in confirmation of interest against the assessee, but will not result in denial of the substantive benefit available to him in terms of the rules, in question. As the appellant have already deposited the interest amount and is not contesting the same, we find no justification for confirmation of demand against him for the period of admitted closure of the factory. - Decided in favour of assessee.
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2014 (4) TMI 416
Manufacture pulper waste and refuse - Exciability - During the process of manufacture of paper, pulper waste and refuse also emerges - Exemption under Notification No.76/86-CE, dated 10.02.1986 - Held that:- Admittedly, the sludge as also pulper waste emerges during the course of manufacture of paper and paper board and such emergence is inevitable. The same cannot be held to be any incidental or ancillary process to the completion of a manufactured product. Similarly, there is no deeming provision under any section or Chapter notes so as to hold the said emergence of waste in the shape of sludge or pulper waste, as amounting to manufacture. Admittedly, the third situation involving packing or re-packing, labelling or re-labelling or declaring MRP, etc. on the said sludge and paper waste is not involved in the present cases. As such, the emergence of sludge and pulper waste during the course of manufacture of paper or paper board cannot be held to the result of any manufacturing activity. Lower authorities have classified the sludge and pulper waste as falling under the Head 4707 90 00. The said heading 4707 relates to (recovery of waste and scrap) paper or paper board. The sub-heading 47 07 90 00 specifies unsorted waste and scrap. In as much as the entry relates to waste and scrap of paper or paper board and not to sludge and pulper waste, the same cannot be held to be covered by the said entry - Decided in favour of assessee.
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2014 (4) TMI 415
Waiver of predeposit of duty - manufacturers of Kraft Paper (plain uncoated) - Benefit of Exemption Notification No.6/2002-CE dt. 1.3.2002 and another Notification No.4/06-CE dt. 1.3.2006 - Stage of manufacturing - Held that:- in view of the Board circular, exemption benefit would not be denied on the ground that the pulp itself is manufactured in the same factory. The learned advocate on behalf of the applicant submits that the Commissioner denied the exemption benefit on different reason which is beyond the scope of the SCN. In this context, we have perused para-13 of the impugned order wherein it has been alleged that the applicant had not made any test either on their own or through other sources to test the content/quantity of the pulp which is a major requisite to the avail concession irrespective of the fact that pulp is manufactured in the same factory or not. It appears that the finding of the Commissioner in the impugned order in respect of the content of weight of pulp is beyond the scope of show cause notice. Prima face, we find that the applicant has made out a case for waiver of predeposit of entire amount of duty and penalty. Accordingly, predeposit of duty and penalty is waived and recovery thereof is stayed till pendency of the appeal - Stay granted.
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2014 (4) TMI 414
Denial of refund claim - unjust enrichment - finalization of provisional assessment - Held that:- Commissioner (Appeals), rightly allowed the amount of refund upto 24.06.1999 following the decision of the Hon'ble Supreme Court in the case of Mafatlal Industries (1996 (12) TMI 50 - SUPREME COURT OF INDIA). Thereafter, the principle of unjust enrichment is applicable as per amendment of Rule 9B of the erstwhile Central Excise Rules, 1944 by Notification No.45/99- CE( NT), dated 25.06.1999 - principle of unjust enrichment would be applicable even in the case of captive consumption - consistency of price of final goods of the assessee did not materially lead to the conclusion that incidence of duty had not passed on to the customers. We find that in the instant case, no serious attempt has been made on the part of the appellant neither before the Commissioner (Appeals) nor before this Tribunal so as to establish that the incidence of duty has not been passed on to the customers - Decided against assessee.
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2014 (4) TMI 413
Manufacturing of Needles - Eyed Suture Needles - Atraumatic Needles (Eyeless) - Benefit of Exemption under Notification No.6/2006-CE, dated 01.03.2006 (S.No.59) - Classification of goods - Held that:- classification adopted by the applicant at eight digit level for ' Atraumatic Needles - (Eyeless)', is 9018 9019, is wrong and the correct classification appears to be 9018 3210. But this change of classification at eight digit level with common four digit level for both the rival classifications does not have any impact on the decision to be made in this application because at any rate, the item is admitted to be falling under Chapter Heading 9018 and the exemption in question is applicable to such goods. Whether the item which is specified in a Tariff Entry can be considered to be part of another item for the purpose of an exemption notification - Held that:- In our prima facie view, ' Atraumatic Needle (Eyeless)' is a part required for manufacturing 'needled sutures'. On a perusal of the different entries in the said notification it is seen that wherever there is an intention to restrict the scope of exemption to specified parts it is done by specifying the classification of the goods - In this case the impugned goods satisfy such condition - Stay granted.
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CST, VAT & Sales Tax
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2014 (4) TMI 453
Quashing of order and consequential Demand Notice - Writ of certiorari – mandamus to direct the revenue to pass a fresh assessment order, after affording opportunity to the petitioner – Held that:- The authority has not acceded to the request of the petitioner to grant personal hearing - Although the authority has referred to the books of accounts but as the petitioner is going to be saddled with tax liability hearing of the petitioner is essential and Revenue has considered the answers given by the petitioner to the Inspection Report – the impugned order and consequent demand notice set aside – Matter remanded back to revenue for fresh opportunity to the petitioner of personal hearing and the authority may also summon such of the records as deemed necessary for taking final decision, Rule is made absolute - Decided in favour of assessee.
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2014 (4) TMI 451
Leviability of penalty u/s 78(5)of Rajasthan Sales Tax Act, 1994 - Held that:- Relying upon State of Rajasthan & Anr. vs. D.P. Metals, [2001 (10) TMI 881 - SUPREME COURT OF INDIA] the penalty u/s 78(5) is levied under two circumstances - if there is non-compliance with Section 78(2)(a) i.e. not carrying the documents mentioned in that clause or - if false or forged documents or declaration is submitted - documents submitted have not been found to be false or forged one - thus the penalty u/s 78(5) of the said could not be levied – Decided against revenue.
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2014 (4) TMI 450
Intention to evade sales tax - revision u/s 86 Rajasthan Sales Tax Act,1994 - Held that:- The incharge of the goods had produced all the documents pertaining to the goods - it could not be said that there was any intention on the part of the assessee for evasion of the sales tax - Relying upon Tajinder Pal Vs. State of Raj. & Ors. [2002 (9) TMI 834 - RAJASTHAN HIGH COURT] - concurrent findings of facts recorded by the appellate authority as well as by the Tax Board – no need to interfere - no question of law involved –Revision Petition Dismissed – Decided against revenue.
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2014 (4) TMI 449
Setting off of excise duty under Notification No. A-5-11-78(23)ST-V - Section 12 of Sales Tax Act- Granting of Reference u/s 44 of MP General Sales Tax - Notice could not be served for 15 years – Held that:- The liability to pay entry tax was by virtue of the provisions of the Act and that the amount, namely 2.5% was exempted by virtue of the Notification issued u/s 12 of the Sales Tax Act – No question of law involved - Interference into the matter not required now when the respondent is not being served and his whereabouts are unavailable - Decided against revenue.
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2014 (4) TMI 448
Concessional Rate of Taxation - purchase of diesel and lubricants used for power generation in the DG Set - u/s 10(3) or 10(1) of the Rajasthan Sales Tax Act, 1994 – Held that:- Decision in Commercial Taxation Officer, Udaipur Vs. Rajasthan Taxchem Ltd. [2007 (1) TMI 187 - SUPREME COURT OF INDIA] followed - the diesel and lubricant is used to generate electricity through DG sets which is used for the purpose of manufacturing yarn -as diesel is specifically and intentionally included in the definition of raw material u/s 2 (34) by the legislature, the question that whether it is directly or indirectly used in the process of manufacture is irrelevant – Decided against Revenue.
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Indian Laws
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2014 (4) TMI 452
Transit fee - Method of Realisation of Transit fee – Transit Fee on transportation/imports of misc. coal, marble stones - Held that:- Order of this court in M/s Rama Traders Vs. State of U.P. & 7 Ors followed - In terms of the directions issued by the Supreme Court on 29 October 2013, the realisation of the transit fee as directed by the Supreme Court will be subject to the final decision of the Supreme Court in the pending Special Leave Petitions against the judgment of this Court - The writ petition is disposed of.
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