TMI Tax Updates - e-Newsletter
April 3, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Highlights / Catch Notes
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Income Tax:
Deficit in the yield at 9.1% to 9.5% - AO could not have made additions on the basis of estimates without rejecting book results or without finding out any fault with the books of account. - HC
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Income Tax:
Computation of capital gain Sale of land - Valuation - AO has blindly placed reliance on the comparable cases collected from the Sub Registrar, without factoring in the price advantage commanded by the impugned property due to its strategic location. - AT
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Income Tax:
If the addition made based on the principle of accretions of wealth then unless there is a fresh accretion of wealth, during the assessment year 1987-88 the same amount cannot be once again added to the income of the assessee - AT
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Income Tax:
GP addition - Comparative figures were on record to substantiate the hike in the expenses. - the assessee was able to substantially explain the fall in GP rate in manufacturing activity. - AT
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Income Tax:
Interest free finance to subsidiary company - The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. - AT
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Income Tax:
Depreciation - when the depreciation is allowed on the block of assets, Revenue cannot segregate a particular asset therefrom on the ground that it was not put to use - AT
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Income Tax:
Disallowance of Interest u/s 36(1)(iii) - interest free loan to related parties - the amount appearing as security deposit is not in the nature of any amount advanced as loan or deposit by the assessee but is in the nature of receivable. - AT
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Customs:
Refund Claims of SAD levied u/s 3(5) Customs Tariff Act, 1975) - Notification No. 102/2007-CUS - Sale after processing - HR/CR coils - refund to be allowed if sold after cutting and slitting process only - AT
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Customs:
Applicant sold the goods on high-sea sale basis - When the Bill of Entry has not been filed in the name of the applicant, therefore, they are not liable to pay duty - AT
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Customs:
Undervaluation - Import of “Whey Protein” - appellant deposited the entire amount prior to issue of demand - The Applicant and co-applicant are granted immunities from prosecution - Sett
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Corporate Law:
Winding up petition – Inability to pay debt - One of the tests to determine whether the dispute is genuine, and real and is raised bona fide and whether the refusal to pay is for genuine reason and dispute or to hide inability to pay, is to direct the respondent to pay-deposit the amount. - HC
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Wealth-tax:
Deduction under 2(m) of the Wealth Tax Act - the debt incurred directly for releasing the mortgage over the property can safely be treated as debt incurred in relation to the property. - HC
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Service Tax:
Penalty - appellant immediately reversed the Cenvat credit to satisfy the point arise in audit. - The appellant may not be denied the benefit of Section 80 - penalty waived - AT
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Service Tax:
Classification - C&F Agent - mere procuring or having orders for the principal by an agent on payment of commission basis would not amount to providing services as “clearing and forwarding agent” - HC
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Service Tax:
Cenvat Credit - Input Service - Rule 2(l) - The words 'directly or indirectly' and 'in or in relation to' are words of width and amplitude. - The subordinate legislation has advisedly used a broad and comprehensive expression while defining the expression 'input service'. - HC
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Central Excise:
Central Excise – Captive Consumption - Enhancement of Duty - Valuation - CAS 4 - interest cost is not liability of included. - AT
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Central Excise:
Classification - Differential duty - manufacture of Centrifugal Pumps - Power driven pump - classificable under Chapter 84.13 - benefit of notification No. 10/2006-C.E. allowed - AT
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VAT:
KVAT Act - Refund of the excess input tax paid - even though purchase value is calculated including the elements specified in Section 2(n) of the Entry Tax Act, the final figure represents the purchase value only. - HC
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (4) TMI 43
Deficit in the yield at 9.1% to 9.5% - As per AO production and wastage which was not accurate. - Held that:- Tribunal was of the opinion that the actual wastage in the form of dust and stone would come to 2.10% and not 8.46%. Tribunal noted that byproduct consisting of chuni, dust and waste together comes to 8.46% whereas Kurma or Chuni is by-product and not waste. Tribunal was of the opinion that Assessing Officer could not have made additions on the basis of estimates without rejecting book results or without finding out any fault with the books of account. Tribunal found that the Assessing Officer and CIT(Appeals) both had committed error in treating by product Kurma as waste whereas same was sold in the market fetching considerable sale proceeds to assessee. This has resulted into erroneous working out of wastage. Tribunal also compared similar data and figures of another assessee carrying on similar activities. - Decided against the revenue.
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2013 (4) TMI 42
Computation of capital gain on sale of land - Valuation - CIT(A) adopted the average of four values and determined the value as on 01-04-1981 at Rs. 49,000/- per cent as against Rs. 15,000/- per cent determined by the AO - assessee submitted that the land sold by the assessee is located on the main road whereas the two lands referred by the Sub-Registrar are located on the side roads - Held that:- The land sold by the assessee is located on a main road called "Keston Road" and the lands referred by the Sub-Registrar are located in the side roads of Belhaven Gardens. Before the CIT(A), the assessee has filed valuation reports given by two different registered valuers and also the assessment record pertaining to Dr. Nirmala Devi Ravindran who had also sold a property located in that area. Hence, on a conspectus of the matter, the CIT(A) has determined the value as on 01-04-1981 at Rs. 49,000/- by taking average of all available datas. Thus it can be fairly concluded that CIT(A) has taken a conscious decision after taking into consideration all the factors relating to the issue. AO has blindly placed reliance on the comparable cases collected from the Sub Registrar, without factoring in the price advantage commanded by the impugned property due to its strategic location. Thus no necessity to interfere with the decision taken by the CIT(A), as the principle of averaging generally evens out the abnormalities - against revenue.
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2013 (4) TMI 41
Addition on account of construction activities, account of Misc. Receipts , unaccounted cash receipts, unexplained investment in vehicles,cash found and seized in various premises during the course of search, income of six entities taxed substantively in the hands of the assessee - Search conducted at the premises of Patel group (AOP) - It was the contention of the assessee that, since the income added by the AO in the assessment year 1987-88 was due to the construction of projects either on the basis of disclosure of the assessee or on the basis of accretion of wealth for the period 1980- 81 to 1986-87, this amount cannot be added once again in the assessment year 1987-88 - Held that:- The contention of the assessee is quite reasonable. If the amount of Rs.1,42,01,312/- forms part of the disclosure of Rs. 4.5 Crores for the period 1980-81 to 1986-87 based on the principle of accretions of wealth then unless there is a fresh accretion of wealth, during the assessment year 1987-88 the same amount cannot be once again added to the income of the assessee in the assessment year 1987-88, which will amount to double taxation. However this aspect requires verification at the AO's level based on the materials on record with the Revenue in hand and therefore remit back the matter for such limited purpose. No income shall be taxed in the hands of the assessee twice without the operation of law and if such circumstance prevails it will lead to miscarriage of justice. Assessee's claim to allow credit of the taxes paid in whose income were clubbed in the assessee rejected - Held that:- Assessment in the hands of the AOP is a substituted assessment for all the group entities. In this circumstance, the assessment of all group entities will not survive and obviously taxes if any paid by those entities for the years under appeal has to be given credit while computing the tax liability of the assessee AOP. The learned AO is directed to pass such necessary orders for giving tax credit to the assessee subject to verification and in accordance with law. Inclusion of proportionate income assessed for the AYs 1987-88 and 1988-89 in spite of specific direction of the CIT(A) which was not reversed by the Tribunal - Held that:- As the additions made for the assessment year 1987-88 and 1988-89 by invoking the provisions of section 150 of the Act this ground raised by the assessee has become redundant.
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2013 (4) TMI 40
Addition on account of fall in GP rate - absence of stock register as demanded by the AO - Held that:- As the assessee was in a position to substantiate its sales as also the purchases. Rather, the undisputed fact was that the month-wise quantitative details of the manufactured article was kept by the assessee. The assessee was subject to Excise Duty, hence under obligation to maintain such records. It has also been noted that stock records for each segment, i.e. sizing, texturising, TFO and weaving activity has also been maintained by the assessee. Thus as held by several Courts that the absence of stock register as demanded by the AO, per se would not lead to an inference that rest of the accounts of the assessee were also false or incomplete. The absence of the stock register should be coupled with the other facts to demonstrate that there was falsity in the book result, then only the AO is empowered to apply an estimation to determine the profit of the assessee. On the contrary, the assessee has informed that the slight fall in the GP was because of hike in the rate of payment of salary and wages as also there was hike in the cost of the material. Comparative figures were on record to substantiate the hike in the expenses. Therefore CIT(A) has rightly held that the assessee was able to substantially explain the fall in GP rate in manufacturing activity. On this count, no addition is required in the hands of the assessee - against revenue. Invocation of the provisions of section 40A(2)(b) - increase in lease-rent - Held that:- While applying the provisions of section 40A(2)(b), CIT(A) has not examined the lease agreement, if any, as also the reason for increase in lease-rent from Rs.35.83 lacs to Rs.59.19 lacs. Only this much was stated that 52 water jet-looms. were utilized. There was a mention of a contract on the basis of which the lease-rent was paid, but that fact remained uninvestigated. From the tone and tenor of the arguments of both the sides, it was noticed that the Revenue as also the Assessee both remained unsatisfied as expressed from both the sides that before invocation of section 40A(2)(b), certain information were required to be collected and in the absence of those information it was not fair on the part of the CIT(A) to assess an amount by holding that the increase in the lease-rent was not justified. Thus restore this issue back to the file of CIT(A) for de novo adjudication - in favour of assessee for statistical purposes only. Disallowance of depreciation on the machinery under TUF Scheme - CIT(A)restricted it to 50% - Held that:- As decided in assessee's case for AYs 2004-05 & 2006-07 that the assessee is entitled for depreciation on plant & machinery purchased under TUF Scheme @ 50%.
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2013 (4) TMI 39
Interest free finance to subsidiary company - disallowance u/s 36 - whether would fall within the ambit of assessee's business expediency? - CIT(A) granted relief to the assessee - Held that:- CIT(A), in the second round while deleting the addition, held that the A.O. has not given any finding as to whether the advance to subsidiary was for its revival or not. He has further held that the contention of the assessee that the business of subsidiary got revived and the advances got fully recovered (consequent to merger) remained uncontroverted. The coordinate Bench of ITAT has observed that allowing interest free finance to subsidiary company could fall within the ambit of assessee's business expediency. The aforesaid finding of CIT(A) could not be controverted by the Revenue by bringing any contrary material on record. CIT(A) while deleting the addition has also relied on the decision S.A. Builders Pvt. Ltd. vs. CIT [2006 (12) TMI 82 - SUPREME COURT] wherein held that to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern (e.g., a subsidiary of the assessee) should be allowed as a deduction under section 36(1)(iii) one has to enquire whether the loan was given by the assessee as a measure of commercial expediency. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. Thus no reason to interfere with the order of CIT(A) - in favour of assessee.
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2013 (4) TMI 38
Surplus from IPO Investment and secondary market investment - Short Term Capital Gains v/s Business Income - Held that:- The factual matrix of the case is that the assessee has entered into numerous transactions of purchase and sale of shares. The A.O. has given a finding that the assessee has done transactions through 3 brokers, assessee has dealt in numerous scrips, holding period of shares is very less, the scrips that were purchased have been sold during the year itself. The assessee has also done trading in commodity transactions, derivates and futures and options. A.O. has also observed that assessee had advanced money to relatives and friends who in turn applied for shares in IPOs in their names. On allotment of shares, the shares were transferred by the friends and relatives to the demat account of the assessee and the same were sold immediately by the assessee. In case the shares were not allotted in IPO the friends and relatives refunded the money back to the assessee. These facts could not be controverted by the assessee by bringing any contrary material on record. Considering the totality of the aforesaid facts the systematic activity of purchase and sale of shares, making application in IPOs directly as well as through relatives and on allotment selling them, the volume and frequency of transaction do not appear to be an investment activity but on the contrary appears to be business activity - therefore view that the action of A.O. in treating the activity of purchase and sale of shares as business activity cannot be faulted and therefore the profit and sale of shares were rightly treated by him as business income - against assessee. Dis allowance of depreciation - Held that:- The undisputed fact is that the assessee is in the business of oxygen gas since A.Y. 2000-01, there was no business activity of oxygen gas during the year in appeal. The submission of the assessee that the electricity connection was surrendered in January,2006 and till Dec.,2005 the assessee was having electricity connection and no business activity during the year was on account of business conditions has not been controverted by Revenue by bringing any contrary material on record. It is also not in dispute that in earlier year the assessee has been allowed depreciation and during the year under appeal the machinery was kept ready to use. In view of the totality of facts and as decided in CIT vs. Oswal Agro Mills Ltd. [2010 (12) TMI 947 - DELHI HIGH COURT] wherein held that the depreciation is allowed on the block of assets, and the Revenue cannot segregate a particular asset therefrom on the ground that it was not put to use - assessee is entitled to depreciation. Disallowance u/s 14A invoking Rule 8D - Held that:- In the present appeal the assessment year involved is A.Y. 2006-07. The A.O. has worked out the disallowance by following the method prescribed in Rule 8D. In the case of Godrej & Boyce Mfg.Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) wherein held that the provisions of Rule 8D are applicable from A.Y. 2008-09 thus when provision of Rule 8D were not applicable the A.O. should make reasonable disallowance - the matter be remitted to the file of A.O. to work out a reasonable disallowance - ground of assessee is allowed for statistical purpose. Violation of provisions of Sec. 269T - penalty levied u/s. 271E - assessee had shown receipt of unsecured loan which was adjusted against the sale of shares thus the repayment of loan was otherwise than by an account payee cheque or account payee bank draft as it was by way of journal entry - CIT(A) deleted the penalty levy - Held that:- CIT (A) has given a finding that the profit earned on sale of shares were offered to tax and the same was accepted by the Revenue and thus the genuineness of the transaction was not in doubt. He has further held that the amount of advances even if taken as loan have been adjusted by selling of shares and since there was no transfer of money, it cannot be said that such deposit or loan comes within the purview of Sec.269T. The revenue could not controvert the submission of assessee that the disclosure made in the Balance Sheet was contrary to the provisions of Companies Act, 1956. As decided in CIT vs. Saini Medical Stores (2005 (2) TMI 72 - PUNJAB AND HARYANA HIGH COURT ) the deletion of penalty when there was no doubt about the genuineness of transactions which have been fully accepted in the assessment made and when no tax evasion of tax avoidance was involved and when the default was of technical or venial nature - in favour of assessee.
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2013 (4) TMI 37
Long term capital gain on transfer of property - addition made as case of the assessee was selected for scrutiny - assessee contested against addition in absence of any sale consideration received by the appellant but simply on the basis of inclusion of his name in the sale document - Levy of interest u/s 234A/B/C - Initiation of penalty u/s. 271(1)(c) - CIT (A) erred in law and on facts in rejecting application made under rule 46A of the Act to place additional evidence on record by the appellant - Held that:- Though the deed has been created after passing of assessment order, but to meet the ends of justice one more opportunity be granted to assessee to represent the case before the CIT (A). Thus remit back the issue involved in this appeal to the file of CIT (A) for deciding the issue afresh after considering the relinquishment deed and other material as deemed fit and after giving sufficient and reasonable opportunity of hearing to the assessee - in favour of assessee by way of remand.
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2013 (4) TMI 36
Disallowance made u/s. 14A r.w.r. 8D - Held that:- From the copy of the computation of income and balance sheet placed it is find that the assessee has earned dividend income and the same has been considered as part of the total income for the purpose of tax. As per the provisions of Sec.10 (38) dividend income is exempt. It is a settled law that income can only be taxed as per the provisions of Income Tax Act if an income is specifically excluded for the purpose of taxation the same cannot be considered while computing the tax. See Chokshi Metal Refinery vs. CIT (1976 (3) TMI 35 - GUJARAT HIGH COURT) wherein relying on the decision Navnitlal Zaveri vs. K.K. Sen (1964 (10) TMI 16 - SUPREME COURT) stated that it is incumbent on ITOs to follow the circular No.14 (XL-35) of 1955 and draw the attention of the assessee concerned to all the reliefs and refunds to which the assessee seems to be entitled on the facts of the case even though the assessee might have omitted to claim refund or relief. In the present case, though the assessee has considered the dividend income as taxable and offered it to tax though the same is exempt u/s.10(38), relying on the aforesaid decision assessee should be granted the benefit of exemption. Accordingly direct the A.O. to treat the dividend as exempt u/s. 10(38). So far as taxing of dividend is concerned, since the assessee is eligible to claim the dividend as exempt u/s.10(38) and for which the A.O. directed to grant the exemption to assessee but so as far as the matter of disallowance u/s. 14A is concerned, the issue is remitted to the file of A.O. so that he can consider the disallowance under Sec. 14A in the light of the decision of Godrej & Boyce Mfg.Co.Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT). Thus the appeal of the assessee is allowed for statistical purposes.
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2013 (4) TMI 35
Income on sale of shares - capital gain or business income - Addition on account of short term capital gain and long term capital gain - CIT(A) deleted the addition - Held that:- It is undisputed fact that the assessee in A.Y. 2006-07 has also entered into transaction in the purchase and sale of shares which thought treated by him as capital gain was considered by the A.O. as business income. CIT(A) while passing the order has held that the facts of the case in the year under appeal are identical as compared to that of preceding year. CIT(Appeals) has not adverted any thing on the case laws as relied upon by the Assessing Officer as to why they are not applicable under the facts and circumstances of the present case. Also find force in the contention of A.R. that in the event of treating capital gain as business income then computation has to be made in accordance with Section 28 of Act. As under the aforementioned facts and circumstances it would be appropriate in the interest of natural justice that matter is remitted back to the file of the CIT(Appeal) to pass a speaking order after giving opportunity of hearing to the concerned parties. Appeal of the revenue is allowed for statistical purpose.
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2013 (4) TMI 34
Interest u/s 36(1)(iii) - interest free loan to related parties - as per AO the interest bearing funds have been utilized by the assessee to give interest free loans and advance as the assessee has paid interest of 12% to other person on unsecured loan but no interest was charged on loans and advances which have been given to Amritlal R. Patel, Tarang Plast corporation and Security deposit-NL Account - Held that:- From the copy of the ledger account of security deposit placed on record it is seen that the assessee was entitled to receive incentive of Rs.13,97,394/- for the period April, 2006 to March, 2007 and the same was reflected in the security deposit account. The credit note of Nirma Ltd. also states that the amount is credited to the incentive deposit account. From these facts, it is clear that the amount appearing as security deposit is not in the nature of any amount advanced as loan or deposit by the assessee but is in the nature of receivable. In view of these facts, no disallowance on account of notional interest can be made as far as amount of security deposit is concerned. With respect of advance to Amritlal R. Patel (Rs. 150057/-) and Tarang Plast corporation (Rs.1,35,972) is concerned, the assessee has given a general statement that it is on account of business expediency but has not placed any evidence to substantiate it. The perusal of the ledger account in case of Tarang Plast reveals that the balance of Rs.1,35,972/- is an opening balance without any transactions during the year. In case of Amritlal Patel, the opening balance receivable at the beginning of the year was to the extent of Rs.4,58,000/- and on account of repayments made during the year, the balance as on 31st March, 2007 was of Rs.150057/-. Assessee could not substantiate its stand with respect to the commercial expediency nor could it demonstrate by means of any evidence that the amounts have been lent out of interest free funds. In view of these facts the A.O.'s action in making disallowance on account of interest in case of Amritlal Patel and Tarang Plast Corporation cannot be faulted - the addition on account of interest in case of security deposit is directed to be deleted. Assessee's appeal is partly allowed.
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Customs
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2013 (4) TMI 51
Refund Claims of SAD levied u/s 3(5) Customs Tariff Act, 1975) - Notification No. 102/2007-CUS - Sale after processing - HR/CR coils - process of cutting and slitting - change in the classification - Held that – It is a settled law that what is required to be seen while considering whether the process amounts to manufacture is whether a new article with distinct name, character and use has emerged or -not and not whether the tariff heading has changed. Therefore, just because after cutting and slitting, the tariff heading changes we cannot say that the -products do not remain the same. No doubt there is an obligation on the importer to show that what he has sold are the goods which were imported by him. When the importer imports goods, for further manufacture they would get modvat credit or cenvat credit of SAD paid by them. In the case of an importer who imports the goods for selling, the SAD was exempted under Notification No.34/98 and under Notification No. 102/2007 they are eligible for refund. The domestic manufacturers are not affected by the SAD since they can take cenvat credit whereas the importer who sells the goods as such does not get the benefit of credit and therefore either exemption has to be extended or he is to be given refund. On this account also the appellant is eligible for refund. In view of the above discussions, the impugned order is set aside and appeals are allowed and the matter is remanded to the original adjudicating authority for the limited purpose of verifying as to whether the appellant is able to show that the imported goods only have been sold by them after cutting and slitting and nothing else.
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2013 (4) TMI 33
Waiver of Pre-deposit - high sea sale - diversion - The applicant imported polyester fabrics and sold the goods to broker of other Company and the bill of entry for the same is filed by the other company, and then goods are diverted to other states. Held that:- applicant sold the goods on high-sea sale basis and the Bills of Entry had been filed by M/s. Suman Designs. When the Bill of Entry has not been filed in the name of the applicant, therefore, they are not liable to pay duty. - stay granted.
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2013 (4) TMI 32
Undervaluation - Import of “Whey Protein” - The applicant has further submitted that he has deposited the entire amount prior to issue of demand and prays that the case may be admitted and settled as a whole once and for all, grant of immunity from imposition of any fine, penalty & prosecution under Customs Act, 1962. Held that :- Considering cooperation extended by the applicant and co-applicant during settlement proceedings and willingness of the applicant to accept duty liability as worked out by Revenue coupled with real possibility of getting lower negotiated price, the Bench finds it a fit case for settlement. However, considering the attitude and conduct of the applicants in totality, the Bench is inclined to consider the request for immunities favorably. Order is passed for paying differential amount of custom duty, interests and penalties. The Applicant and co-applicant are granted immunities from prosecution under the Customs Act, 1962, in so far as this case is concerned. order of settlement shall be void in terms of Section 127C(8) of the Act, if the Settlement Commission subsequently finds that it has been obtained by fraud or mis-representation of facts.
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Corporate Laws
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2013 (4) TMI 31
Winding up petition – Inability to pay debt - The petitioner has alleged that the respondent Company has despite repeated reminders and even after statutory notice failed and neglected to discharge its financial liabilities and obligations and has not made payment and that the respondent's failure to make the payment establishes its inability to discharge its debts. The petitioner has preferred present petition and prayed for order of winding up against the respondent Company. Held that - Court before taking the decision made reliance on following judgement of Conart Engineers Ltd. v. Laffans Petrochemicals Ltd. [1998 (10) TMI 395 - HIGH COURT OF GUJARAT] where court considers it appropriate to allow an opportunity to the respondent company to deposit the amount in question and on the judgment of Supreme Court in IBA Health (I) (P.) Ltd. v. Info-Drive System Sdn. [2010 (9) TMI 229 - SUPREME COURT OF INDIA], where it was decided that what possible ground is there in which a company may wound up. One of the tests to determine whether the dispute is genuine, and real and is raised bona fide and whether the refusal to pay is for genuine reason and dispute or to hide inability to pay, is to direct the respondent to pay-deposit the amount. In view of the facts of this case and the findings of the Court and in light of the above quoted observations and on judgment of it appears appropriate and necessary to direct the respondent, to deposit the amount in question within 4 weeks from the date of present order. If the directions are complied with by the respondent, then further and appropriate order shall be passed by the Court after hearing the petitioner and the respondent. During the said time limit the petitioner shall also take appropriate steps to remove the defects of which reference is made hereinabove earlier. The petitioner shall, inter alia, place on record the resolution by the company which might have been passed resolving to institute winding up petition against the respondent and authorizing Mr. Uto Baader to take necessary steps for the said purpose including appointing a Constituted Attorney and to make proper affirmation of the petition and file affidavit in accordance with Rule 21 read with Form 3. So far as the respondent's allegation that petitioner has subsequently made corrections or additions in the affidavit which constitutes contempt, are concerned, it is clarified that the said aspect will be considered by the Court at the time when the petition is heard and adjudicated on merits.
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Service Tax
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2013 (4) TMI 47
Classification of Services - Availed abatement of 67% - erection, commissioning and installation agency and the industrial construction service. - taxability prior to 1-5-06 - - Held that:- Apparently there was a mistake in the assessment and therefore in the absence of any revision of assessment by the Revenue, it may not be fair to deny the appellant to claim classification under either of the heads at this stage. On this ground also, there is a need to examine the claims made by the appellants that what they had erected was structures and not plant, machinery or equipment. Since the issue as to whether the appellant had erected only structures or major portion of the work done was structures is required to be examined by screening of the contracts entered into, relevant records and the evidences that may be produced by the appellants - The matter is remanded to the original adjudicating authority for fresh consideration after giving reasonable opportunity to the appellants to present their case. It is made clear that - Appeal is allowed by way of remand in favour of Assessee.
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2013 (4) TMI 46
Penalty - Wrong availment of Cenvat Credit - appellant immediately reversed the Cenvat credit to satisfy the point arise in audit. - Revenue impose penalty - Held that - There is no whisper about deliberate breach of law by the appellant which normally is consideration while invoking penalty provision. The appellant may not be denied the benefit of Section 80 of the Finance Act, accordingly penalty is waived out appeal is allowed.
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2013 (4) TMI 45
Classification - Consignment agent or selling agent - clearing and forwarding (C & F Agent) - Held that – the Tribunal has concluded that the case of the respondent/assessee is clearly covered by the ratio of the decision in the case of M/s. Raja Rajeshwari Intl. Polymers Pvt. Ltd [2005 (1) TMI 423 - CESTAT BANGALORE] wherein it has been observed that the dealer agent falls within the purview of Clearing and forwarding operation as the goods not directly or indirectly handled by him and no service tax is leviable on commission received by him on account of Del Credre Agency. Moreover, the said conclusion/observation stands settled by Larger Bench of the Tribunal in the case of Larsen & Toubro Ltd. v. Commissioner of Central Excise, Chennai reported in [2006 (6) TMI 3 - Appellate Tribunal, New Delhi] wherein it has been held that services of commission agent are included in the definition of “business auxiliary service” and mere procuring or having orders for the principal by an agent on payment of commission basis would not amount to providing services as “clearing and forwarding agent”, within the meaning of definition of that expression under section 65(25) of the Finance Act, 1994. In the present case, from the different clauses of agreement between the parties and nature of acts performed by the assessee, it cannot be stated to be a Clearing and Forwarding Agent of BALCO. He was selling the goods received from BALCO to his own customers and receiving a discount in the process. - Assessee not liable to service tax - Decided against the revenue.
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2013 (4) TMI 44
Cenvat Credit - Input Service -setting up of storage tanks - Held that:- Rule 3(1) allows a manufacturer of final products to take credit inter alia of service tax which is paid on (i) any input or capital goods received in the factory of manufacturer of the final product; and (ii) Any input service received by the manufacturer of the final product. Tribunal was not justified in holding that the Appellant would not be entitled to avail of CENVAT credit in respect of services utilized in relation to ammonia storage tanks on the ground that they were situated outside the factory of production. The definition of the expression 'input service' covers any services used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. The words 'directly or indirectly' and 'in or in relation to' are words of width and amplitude. The subordinate legislation has advisedly used a broad and comprehensive expression while defining the expression 'input service'. Rule 2(l) initially provides that input service means any services of the description falling in sub clause (i) and (ii). Among those services are services pertaining to the procurement of inputs and inward transportation of inputs. The Tribunal, proceeded to interpret the inclusive part of the definition and held that the legislature restricted the benefit of CENVAT credit for input services used in respect of inputs only to these two categories viz. for the procurement of inputs and for the inward transportation of inputs. This interpretation which has been placed by the Tribunal is ex facie contrary to the provisions contained in Rule 2(l). The input services in the present case were used by the Appellant whether directly or indirectly, in or in relation to the manufacture of final products. The Appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process - in favour of assessee.
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Central Excise
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2013 (4) TMI 30
Stay - Cenvat Credit - Fraud - Department is of the opinion that the appellants has done a well-organized fraud under which invoices are issued without actually supplying any material, on the basis of which appellant have availed Cenvat credit. The department, therefore, issued a show cause notice seeking recovery of the allegedly wrongly taken Cenvat credit alongwith interest, imposition of penalty on appellant under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 and also for imposition of penalty under Rule 26 of the Central Excise Rules, 2002. Held that:- In view of these circumstances, though the show cause notice issued to appellant by then Commissioner, Central Excise, Jammu is still pending adjudication, probability is more that the allegation against appellant of issuing bogus invoices is correct, as at this prima facie stage for deciding the question of dispensation from the requirement of pre-deposit under Section 35F, the question which has to be decided is as to whether the evidence on record indicates the likelihood of the allegations of the duty evasion being upheld and if there is slightest risk to the Revenue, the dispensation from the provisions of Section 35F should not be given and if it has to be given the stiff conditions have to be imposed to safeguard the interests of the Revenue. If the allegation against appellant of having issued bogus invoices are proved, the allegations against other appellant of having availed Cenvat credit in a fraudulent manner would also stand proved. In view of these circumstances, we are of the view that this is not the case for total waiver.
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2013 (4) TMI 29
Central Excise – Captive Consumption - Enhancement of Duty - Valuation - CAS 4 - inclusion of interest on loan - Appellant, pleaded that the impugned order of the Commissioner confirming the duty demand by including the interest on loans in cost of the castings is not sustainable for the reason that the same is not required to be included in the cost. That in this regard, reliance is placed on the judgment of the Tribunal in the case of Nirma Ltd. v. C.C.E. reported in [2005 (8) TMI 337 - CESTAT, MUMBAI] and of Hon’ble Supreme Court’s judgment in the of C.C.E., Pune v. Cadbury India Limited reported in [2006 (8) TMI 2 - SUPREME COURT OF INDIA]. Held that:- The impugned order confirming duty demand on the basis that costing of the product would also include the interest cost, even though it is not required to be included as per CAS-4, is not sustainable. The same is set aside. The appeal is allowed.
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2013 (4) TMI 28
Ascertainment of the term ‘’CVD’’ under Rule 3(7) of the CENVAT Credit Rules for calculating actual amount of CENVAT credit. - 100% EOU unit - The dispute mainly relates to whether the term ‘’CVD’’ used in the formula under Rule 3(7) of the CENVAT Credit Rules is admissible as for calculating the total amount of credit or not. Held that:- The term “CVD” has not been specifically defined in the CENVAT Credit Rules and Board’s Circular No. 818/15/2005-CX., dated 15-7-2005 also refers to 4% levied in terms of Section 3(5) of the Customs Tariff Act as CVD/Special CVD. we prima facie hold both the CVDs should be taken into account while determining the eligible amount of credit under Rule 3(7) of the CENVAT Credit Rules.
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2013 (4) TMI 27
Classification - Differential duty - manufacture of Centrifugal Pumps - Power driven pump - benefit of notification No. 10/2006-C.E., dated 1-3-2006 for discharge of duty liability at concessional rate of duty than the rate fixed by the tariff. - Department found that appellant is not eligible for the benefit as mentioned in the notification. Held that:- Applying the ratio of judgment of Larger Bench in CHIEF ENGG. RANJIT SAGAR DAM Versus COMMISSIONER OF C. EX., JALANDHAR[2006 (1) TMI 356 - CESTAT, NEW DELHI], it can be seen that the product manufactured by the appellant is undoubtedly classificable under Chapter 84.13 which was covered by Notification No. 10/2006-C.E., dated 1-3-2006, and eligible for benefit of reduced rate of duty. The exemption has been denied to the appellant on the ground that the notification provides the exemption only when the pumps are power driven i.e. the pumps should have the motors attached to them. This requirement does not flow from the exemption notification at all. ‘Power driven pump’ does not necessarily mean that the source of power for the pump should be attached to the pump. What is required is that it should be a pump driven by power, which can be an IC engine or an electric motor or some other source of power. A pump which is designed to handle the water and is power driven viz. it could be a mono block pump where the pump and electric motor are integral parts of the pump set or a pump set where the provisions are made for fitting an electric motor can be considered as power driven pumps even when the source of power is not fitted. Quite often, the customer purchases only pumps from the manufacturer independently. In such cases, a pump purchased by him does not become a non-driven power pump just because the customer bought it without a motor. - Benefit of exemption allowed - Decided in favor of assessee.
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2013 (4) TMI 26
Area based exemption - North East Industrial and Investment Promotion Policy (NEIIPP), 2007 - manufacture of excisable goods namely, Mixed Gauge Sleeper and Waste of HTC Wire. - Held that:- In the present case the Appellant manufactured railway sleepers in the month of January 2007 and cleared to Railways. This production quantity was reflected in RG-1 record and ER-1 returns. There is no evidence on record to show that the sleepers were cleared for non-commercial consideration. As the appellant commenced commercial production prior to that mentioned in the notification hence are not entitled for the benefit of Notification. In these circumstances we find no infirmity in the impugned order thereby the benefit of Notification is denied, the appeal is dismissed. - Decided against the assessee.
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2013 (4) TMI 25
Demand of differential amounts of cess , interest on cess and penalties - u/s 15 of the Oil Industry (Development) Act, 1974, the relevant provisions of the Central Excise Rules and under Rule 26 Central Excise Rules by the Department on crude oil cleared by the respondent. Department provides the Tribunal’s decision in the case of ONGC Ltd. v. CCE, Mumbai [2000 (12) TMI 148 - CEGAT, COURT NO. III, NEW DELHI]. The demands are contested by the respondent and also respondent asked for the refund of differential cess in respect of such shortages and the differential amounts of cess admissible and also pointed out that a plea for set-off the excess quantity of crude oil against shortage as refund should be adjusted against the differential amounts of cess demanded by department in the event of the quantity of crude oil actually received by the refinery being adopted as the basis for demands of cess under Section 15 of the Oil Industry (Development) Act, 1974. In this connection, the respondent referred the decisions of this Bench in their own cases viz. Final Order No. 1472/2006 dated 12-9-2006 (Cairn Energy India Pvt. Ltd. v. CCE & C, Visakhapatnam-II) reported in [2006 (9) TMI 41 - CESTAT,BANGALORE (Tri.-Bang.)]. Held that:- The excess quantities were considered for recovery of differential cess from the respondent and the shortages were ignored. If the assessee was liable to pay differential cess on the excess quantities of crude oil in terms of Section 15(2) of the Oil Industry (Development) Act, 1974, they could claim refund of differential cess in respect of the shortages. Therefore, the assesses claim for adjustment was liable to be considered by the proper officer of Central Excise at the time of finalization of provisional. There is also two more citations which are considered by department before taking the decisions [2007 (3) TMI 538 - CESTAT, KOLKATA,] & [2010 (8) TMI 226 - CESTAT, AHMEDABAD]. Any such adjustment between demand and refund of cess is not hit by the bar of unjust enrichment as mentioned in the decision of the Larger Bench of Tribunal Excel Rubber Ltd. v. CCE, Hyderabad [2011(3)TMI 527]. - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2013 (4) TMI 49
Detention of goods - assessee seeking release the goods detained - Held that:- As the petitioner is willing to pay the tax demanded under protest and seeks release of the goods in terms of Section 67(4) of the Tamil Nadu Value Added Tax Act, 2006 which provides for release of goods on payment of appropriate tax as the respondent is directed to release the goods forthwith as and when the petitioner pays the tax as demanded.
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2013 (4) TMI 48
KVAT Act - Refund of the excess input tax paid - excess amount claimed by the petitioner is on account of the fact that they sold the goods at a price lower than the price estimated at the check post for the purpose of advance tax - Held that:- The special rebate available u/s 12 of the Act shall not exceed the output tax payable in respect of such goods or goods manufactured out of such goods. If that be so, the claim made by the petitioner, does not appear to be tenable. Unable to accept this argument of the counsel for the reason that even though purchase value is calculated including the elements specified in Section 2(n) of the Entry Tax Act, the final figure represents the purchase value only. It is on that basis that entry tax is determined. If that be so, for the purpose of determining whether sale of the commodity was at a reduced rate, it is always open to the respondents to reckon the purchase value as determined in terms of Section 2(n) of the Entry Tax Act. In so far as this case is concerned, it is on that basis, it has be concluded that the sale has been at a reduced rate - rejection of the petitioner's application for refund confirmed.
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Wealth tax
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2013 (4) TMI 50
Deduction under 2(m) of the Wealth Tax Act - The assessee company borrowed loans from the directors for the purpose of discharging bank loans and releasing mortgage over the land - Held that:- On going through the provision of the definition clause of "net wealth" above - We are of the view that the debt incurred "in relation to the asset" should enjoy a wide meaning to cover all debts incurred for acquiring, securing and retaining the property free of charge. If the assesee had not borrowed funds from the directors and released the mortgage over the property the bank was absolutely free to attach and sell the property in exercise of it's mortgage right and recover the arrears which was more than double the actual amount paid under one time settlement to release the charge. So much so, the debt incurred directly for releasing the mortgage over the property can safely be treated as debt incurred in relation to the property. We, therefore allowed the deduction and uphold the finding of the Tribunal in this regard - The Revenue's appeal is dismised .
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