TMI Tax Updates - e-Newsletter
April 3, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Stay of recovery of demand - Tribunal has granted partial relief staying 50% of tax liabilaity as determined by AO - Total demand is Rs. 2,57,57,53,13 - further relief denied - HC
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Income Tax:
Deduction u/s 80-O – Foreign receipts - applicant represented the remuneration of the work which the company had done for a foreign client in India - assessee is not entitled for any deduction u/s 80-O - HC
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Income Tax:
Direction of special audit challenged – AO are not Chartered Accountants and when required and permissible, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee - HC
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Income Tax:
Onus to prove – the revenue has to prove the existence of a fact that undervaluation of asset was made by the assessee - When that fact is proved, the burden shifts to the assessee to prove otherwise - HC
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Income Tax:
Deduction u/s 80IB(10) - Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from such housing project. - HC
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Income Tax:
Exemption u/s 54F - Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property - AT
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Income Tax:
Penalty u/s 271D – Violation of Provisions – levy of penalty where loans/deposits are genuine - Assessee could not justify byepassing of banking channels - Being 'sick industrial unit’ is not sufficient for deviating from banking channel. - AT
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Income Tax:
Deletion of disallowance of labour charges – assessee could not substantiate with corroborative evidences the genuineness of the cash components of the labour charges - 10% disallowed - AT
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Customs:
Waiver of pre-deposit - Classification dispute - import of various information technology goods including Facsimile machines -Prima facie demand is barred by limitatio - AT
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Service Tax:
Waiver of pre deposit - excavation for foundation in soil & soft rock including tree removing. - activity would be squarely covered by the definition of ‘Site preparation, excavation and earth moving, demolition service' - AT
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Service Tax:
Demand of service tax - providing security services to other group companies - No profit motive - Bonafide belief is not blind belief but has to be based on reasonable measures taken to entertain such belief - demand confirmed invoking extended period of limitation - AT
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Central Excise:
100% EOU - Appellant shall be required to furnish such evidence as may be required by learned adjudicating authority to satisfy him that appellant was not enriched at the cost of Revenue availing duty exemption - AT
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Central Excise:
CENVAT credit - Goods become exempted after taking cenvat credit - Demand of 8% of the price of exempted goods under Rule 6(3) - This reversal done by the respondent is perfectly legal - AT
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Central Excise:
Benefit of Notification No.10/97-CE dated 1.3.97 - Production of requisite certificate - applicants are manufacturers of optical fibre & optical fibre cables and they supplied the same in the running length of approximately 88 km - exemption denied - AT
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Central Excise:
Clandestine removal of goods - appellant was caught red handed in clearing two winch machines - appellant have recovered more duty from their buyer and have paid less to the exchequer - demand confirmed - AT
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VAT:
Eligibility clause in relation to an exemption notification is given strict meaning - however, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally - SC
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VAT:
Environment and health cess - Retrospective effect of notification is valid only when it has been issued within legislative powers - The words “time to time” does not empower the government of issue retrospective notification - SC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (4) TMI 83
Condonation of delay – Delay of 12 days – Held that:- Sub-section 2A has been inserted in Section 260A we.f. 1-10-1998, which provides that the High Court may admit an appeal after the expiry of the period of one hundred and twenty days – HC has not indicated any reason as to why the cause shown in the affidavit for condonation of delay in support of the notice of motion was not sufficient – thus, the delay condoned and the matter is restored to the HC for adjudication – Decided in favour of Revenue.
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2014 (4) TMI 82
Benefit of Exemption u/s 10(26) of the Act - Whether the assessee is entitled to take the benefit of Section 10(26) of the Act – Held that:- The assessee should approach the AO who is otherwise seized of the assessees’ cases for realization of the income tax on their total income earned and after examining the issue on the basis of the evidence adduced by the petitioners in support of their contentions seeking exemption from payment of income tax on the basis of Section 10(26), then pass appropriate orders in the cases of each individual assessee – thus, the matter is remitted back to the ITO(TDS) for fresh consideration in the light of the judgement delivered in Pradip Kr. Taye Versus Union of India [2009 (12) TMI 285 - GAUHATI HIGH COURT] – Decided in favour of Assessee.
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2014 (4) TMI 81
Stay of recovery of demand - Tribunal has granted partial relief staying 50% of tax liabilaity as determined by AO - Total demand is Rs. 2,57,57,53,136/ - Taxability of payments made - DTAAs with the NTOs for interconnectivity capacity transfer agreements - Failure to deduct income u/s 5(2) of the Act – Held that:- The source of payment is in India - for services rendered by the NTOs abroad, and towards such services utilized, petitioner has made payments - Section 5(2) of the Act referred to deals with the source from which income is derived - The word Source' means the place from which something is obtained – The decision in Sheth Shiv Prasad .v. C.I.T. [1971 (3) TMI 16 - ALLAHABAD High Court] followed - in section 2(11) the definition of "previous year" envisages a different previous year in respect of each separate source of income - Sec.4, which concerned with the application of the Act, declares that the total income of the person includes all profits and gains, from whatever source derived, which falls within the categories set out there. The source of income will be from the payer - Payer is the person from whom income is received and earned - income originates from the payer and such payer becomes the source of income - the payer is in India and payment undoubtedly is made to NTOs who have received payments abroad for and towards provision of EIG capacity and IUC from the payer in India - payments become income' of the NTO arising in India which reaches the hands of the NTO - the term ‘Accrue' or ‘arise' have to be understood in the context in which it is used - payments made to NTOs is payment Accruing' or Arising' in India – assessee has made payments towards services availed by it even though there may be no territorial nexus between the facilities and infrastructure available in the hands of India - Assessee has not been able to make out prima facie case to opine that assessment of tax liability as determined by the assessing officer vide Annexure-A is wholly untenable or illegal - payments made by the assessee qualify as having been paid by the ‘payer' and the payment made to NTOs/Belgacom is the amount ‘received' and fall within the definition of income' under Section 5(2) of the Act. It must be observed that granting interim orders which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other relevant considerations is unwarranted. Even if we give a margin to the petitioner's contention to hold that petitioner may have a prima facie case against the impugned orders Annexures 'A' and 'B', yet, there is no circumstances or material placed before me to show that petitioner will suffer irreparable hardship and injuries to his favour nor any other circumstances made out to show balance of convenience is in his favour. - Assessee to make pre-deposit as per tribunal order - Decided against Assessee.
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2014 (4) TMI 80
Entitlement for exemption u/s 11(1)(a) of the Act – Held that:- Income derived from sale of residential and commercial units – Held that:- Clause (2) of the Memorandum of Association speaks about the objects for which the Society is formed and sub-clause (c) of clause 3 confers power on the respondent-assessee to improve, manage, cultivate, develop, exchange, grant on lease, mortgage, charge, sell, dispose off, grant rights and privileges in or otherwise dealing with all any part of the property, movable or immovable, patents or copy rights held by or belonging to the assessee or donated to it - the construction of the complex would fall within the scope of the objects enumerated in the memorandum of association – Decided against Revenue. Whether the Tribunal was justified in granting exemption u/s 11 of the Act, holding that an amount which had been accepted by the respondent-assessee as additional income, never reached the trust – Held that:- There is no material on record to show that this amount and the misappropriated amount is one and the same - That, perhaps, appears to be the reason why the CIT (A) observed that the assessee had claimed exemption u/s 11(2) of the Act to the extent of 25% of the assessee’s income - the respondent-assessee would be entitled for deduction to the extent of 25% on the amount added, to the income declared by them in their returns - the order of the Tribunal as well as the order of the CIT (A) to that extent are set-aside – Decided partly in favour of Revenue.
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2014 (4) TMI 79
Deduction u/s 80-O of the Act – Foreign receipts - Held that:- The decision in ANAND & ANAND v/s COMMISSIONER OF INCOME-TAX [2005 (11) TMI 55 - DELHI High Court ] followed – The amounts received by the applicant represented the remuneration of the work which the company had done for a foreign client in India - The professional services could not be said to have been rendered from or outside India so as to qualify for a deduction under section 80-O of the Act - It would depend upon the nature of the service and not on whether the provider and the recipient of the service are located in two different countries – The Tribunal, the First Appellate Authority and the Assessing Authority on examining the matter concurrently held that the assessee is not entitled for deduction u/s 80-O of the Act – thus. There is no infirmity in the order – thus, the assessee is not entitled for any deduction u/s 80-O of the Act – Decided against Assessee.
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2014 (4) TMI 78
Direction of special audit challenged – Pre-conditions u/s 142(2A) not satisfied - Whether or not keeping in view the nature and complexity of accounts and the interest of Revenue direction for special audit is justified – Held that:- No merit in the contention raised by the petitioner that related party transactions or reasonableness of interest paid to the petitioner on loans and advances by its subsidiary was an issue which was never raised in the show cause notice and therefore, there was violation of principles of natural justice. This question was specifically raised in the show cause notice and answer or reply was called for. The claim of the petitioner was that he has complied with all the queries. Thus it is accepted and admitted position that detailed queries in writing and orally were raised. This shows due application of mind and focus on the issues and aspects that arose for consideration. The AO had applied his mind to various aspects like nature of accounts, method of maintaining accounts, entries recorded etc. and reached the conclusion that the accounts were complex and it was in the interest of the Revenue that special audit u/s 142 (2A) of the Act, should be directed - in the past also special audit was directed but the AO has not directed special audit in the assessment year without examining the accounts for the year, the entries made, peculiarity involved etc. Special audit has not been directed for getting over the limitation or in routine. The business transactions have become more complicated and accounting entries more complex than ever before - This may be one of the causes why possibly the frauds could not be detected in some cases - Indeed such cases have made the audit work more comprehensive, intrusive and investigative - Ethical managements may at times regard such enquiries as an unwarranted intrusion or a hounding approach - Section 142(2A) does not permit fishing or roving inquiry approach or a witch hunt but is a regulated provision which accepts the need and necessity of the Assessing Officer to take help of an expert accountant i.e. a Chartered Accountant, a person who is academically qualified and has practical experience to understand accounts and unearth tax evasion or furnishing of inaccurate particulars etc. The provision balances the right of the Revenue with the inconvenience which the assessee may face – AO are not Chartered Accountants and when required and permissible, can take help and assistance from the qualified specialists to complete the assessment and determine the taxable income of an assessee – thus, there is no merit in the appeal – Decided against Assessee.
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2014 (4) TMI 77
Onus to prove – Actual expenses not declared – Undervaluation made by the assessee – Undisclosed investment - Held that:- The oral evidence, which is supported by Section 132(4) statement and the affidavit of Mr. Noushad, which is uncontroverted even during cross examination, can be treated as sufficient evidence to show that the property has been sold for ₹ 78,20,000 - The first appellate authority had gone a little further and had indicated that the revenue has not adduced any further evidence to show that Mr. Noushad had paid ₹ 66,20,000/- to Smt. Mariamma Kurian for purchasing the property and the assessee has paid the differential amount to Mr. Noushad - these are all instances where the parties do not maintain any records and they deal in undisclosed amounts – Relying upon Commissioner of Income-tax v. Medical Trust Hospital and others [2008 (3) TMI 645 - KERALA HIGH COURT] the evidence made available by the Revenue is a probable evidence. If at all the assessee wanted to disprove the evidence given by Mr. Noushad, the assessee could have proved otherwise by giving some evidence to show the market value of the land in the locality. No such evidence is adduced by the assessee - the revenue has to prove the existence of a fact that undervaluation was made by the assessee and that the assessee has paid more amounts for purchase of property amounting to ₹ 54,20,000 - When that fact is proved, the burden shifts to the assessee to prove otherwise - even in the absence of any other material produced by the revenue, the uncontroverted evidence of Mr. Noushad was in favour of coming to a finding that the assessee has not declared the actual investment made for acquiring the building – thus, the order of the CIT(A) set aside – Decided in favour of Revenue.
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2014 (4) TMI 76
Deduction u/s 80IB(10) r.w. Section 80IB(1) of the Act – Approval and completion certificate granted to landowner - Whether the Tribunal was right in law in allowing deduction u/s 80IB(10) r.w.s. 80IB(1) to the assessee when the approval by local authority as well as completion certificate was not granted to the assessee but to the landowner – Held that:- The decision in Commissioner of Income tax v. Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT] followed - While interpreting the statute nothing can be read into the provisions which has not been provided by the Legislature - The condition which is not made part of Section 80IB(10) of the Act, namely that of owning the land, which the assessee develops, cannot be supplied by any purported legislative intent – the title in the land had not yet passed on to the assessee - It is equally true that such title would pass only upon execution of a duly registered sale deed - the ownership has been understood differently in different context - For the limited purpose of deduction u/s 80IB(10) of the Act, the assessee had satisfied the condition of ownership also, even if it was necessary - the Tribunal committed no error in holding that the assessees were entitled to the benefit u/s 80IB(10) of the Act even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners – Decided against Revenue. Profit derived from sale of unutilized FSI - Whether the Tribunal was right in law in allowing deduction u/s 80IB(10) r.w.s. 80IB(1) to the assessee on profit derived from sale of unutilized FSI not being the element of profits derived from the business activity of development and construction of the housing project relating to the sale of tenements – Held that:- What is available for deduction under section 80IB(10) of the Act is the profit of an undertaking derived from developing and building a housing project. Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from such housing project. Terms derived from, arising out of and attributable to are often times used in the context of income tax in different connotation – Decided in favor of revenue.
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2014 (4) TMI 75
Disallowance u/s 36(1)(iii) - interest expense towards work in progress - Held that:- Assessee has not discharged onus on it to establish that no part of its borrowings stand utilized toward capital work-in-progress, so that no part of interest thereon is properly attributable thereto, so as to warrant being disallowed u/s.36(1)(iii) read with proviso thereto - Do not find any substance in assessee's case - Onus to prove its return and claims preferred thereby being only on assessee refer: CIT v. Calcutta Agency Ltd. [1950 (12) TMI 4 - SUPREME Court] - Matter restored back to allow assessee an opportunity to substantiate its case before assessing authority – Decided partly in favor of assessee. Transfer pricing adjustments - determination of ALP - operating margin - Held that:- The difference in the operating margin, as per the TPO's order itself, is within the range of 5% and, accordingly, no adjustment under law is required to be made. No doubt, the safe harbor rule of 5% is with reference to the arm's length price; the same however translates to an equivalent difference in the operating margin, as the costs toward the same are not disturbed. In fact, if a part of the interest cost, as contended by the Revenue, is to be excluded from the operating cost, being a part of the capital cost, the assessee's profit margin would rather stand further improved. - Addition is not valid - Decided in favor of assessee.
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2014 (4) TMI 74
Additional evidence - Whether CIT(A) has rightly rejected petition under Rule 46A for permission to file additional evidence - Held that:- There has been a time gap of one year and four months for assessee to file necessary confirmations, verifications and all other documents on record so as to raise claims of expenses and deductions. Since no evidence was forthcoming, Assessing Officer had made all additions and issued notice. Arguments raised by assessee qua bank dispute and other factors are nowhere pleaded in additional evidence petition. Rule 46A qua admission of additional evidence confined to peculiar circumstances and does not apply in each and every case. Assessee had sufficient time from 1.9.2009 to 27.12.2010 to produce on record all relevant material. Since assessee had availed sufficient opportunities in course of ‘regular’ assessment which also stands corroborated by remand report, no material prejudice has been caused to its interest. No fault with order under challenge - CIT(A) rightly rejected prayer for admission of additional evidence raised by assessee – Decided against assessee.
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2014 (4) TMI 73
Estimated Income - Whether, CIT(A) erred in estimating income of assessee by calculating profit at 7% of net receipts as against 8% of gross receipts – Held that:- Special Bench decision of Tribunal in case of Arihant Builders V/s. ACIT [2006 (11) TMI 253 - ITAT INDORE] covers issue - It has been held therein that in case of sub-contractor, rate of 5% for estimating income from construction contract would be reasonable - Considering totality of facts and circumstances of case, particularly fact that assessment in this case was framed ex-parte under S.144 of Act, set aside impugned order of CIT(A) - Restore matter to file of Assessing Officer for framing assessment afresh - Assessing Officer shall give reasonable opportunity of hearing to the assessee and pass fresh assessment order in accordance with law – Decided in favour of assessee and against Revenue.
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2014 (4) TMI 72
Transfer pricing adjustment - Method to determine ALP - Selection of comparable - application of turnover filter - Assessee adopted Cost Plus Method (CPM) for computing arm's length price for its international transactions - Whether, CPM is most appropriate method to determine ALP and not Transactional Net Margin Method (TNMM) – Held that:- CPM is most appropriate method to determine ALP and not TNMM - This issue is squarely covered by decision of Tribunal in Deputy Commissioner of Income-tax, Circle-2(2) Versus Hellosoft India (P.) Ltd.[2013 (10) TMI 747 - ITAT HYDERABAD] which has been accepted by learned AR - Following earlier order TNMM is most appropriate method to determine ALP - Set aside order of CIT(A) and remit matter back to file of AO/TPO who shall determine ALP afresh – Decided against the assessee. Regarding Turnover Filter - Held that:- Tribunal in assessee's own case [2013 (10) TMI 747 - ITAT HYDERABAD] has accepted turnover filter as a relevant factor following the decision of the ITAT, Hyderabad Bench in case of Dy. CIT v. Deloitte Consulting [2011 (7) TMI 583 - ITAT HYDERABAD] The Hon'ble Delhi High Court has also upheld this view in case of Agnity India Technologies (P.) Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] - while applying the turnover filter a fixed upper limit cannot be applied uniformly and across the board in all cases. The upper limit has to be fixed reasonably, keeping in view the turnover of the assessee in a given case. - Decided in favor of assessee. Regarding onsite revenue filter and employee cost filter - Held that:- the issues are squarely covered by the decision of the coordinate bench in assessee's own case [2013 (10) TMI 747 - ITAT HYDERABAD] - CIT (A) was correct in holding that rejection of comparables selected by the assessee by applying this filter is not correct. - loss making companies and companies having super normal profits cannot be considered as comparables - AO to decide the said issues following the earlier decision - Matter remanded back - Decided against the revenue.
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2014 (4) TMI 71
Deletion of Additions - Unexplained Investments - purchase of plot on account of unexplained investment – Whether CIT(A) ought to have not admitted fresh evidences submitted by assessee which is against Rule 46 of Act - Held that:- additional evidence was not placed by assessee before assessing officer - Hence CIT(A) ought not to have admitted fresh evidences and should have followed procedure under Rule 46A - CIT(A) observed that during appeal proceedings, ld.AR filed copies of sale deed relevant bank statement and cash book to show that payments are duly recorded in books of account and properly explained - Here again, CIT(A) has violated provisions of Rule 46A - Set aside order of CIT(A) and restore matter to file of assessing officer and thereafter decide issues in accordance with law - Decided in favour of revenue. Estimation of ncome as a percentage of turnover, after rejecting the book results disclosed by the assessee - Held that:- CIT(A) has adopted the net profit rate of 8% for construction business following the consistent view taken by the Tribunal in similar cases - Decided against the revenue. Capital Gains - valuation - The owners got four flats along with appurtenant lands in lieu of sale consideration of flats which was partitioned between the co-owners. For registration purpose, the flats and appurtenants lands were valued at different rates depending upon the floors. This value has been wrongly taken as the sale value of the land transferred by the assessee to the developer by the assessing officer and the CIT(A) has rightly deleted the addition made by the assessing officer. - Decided against revenue. Exemption u/s 54F - whether the property purchased by the assessee was capable of being used as residential accommodation. - Held that:- no infirmity in the view taken by the CIT(A) as to the residential nature of the property purchased by the assessees, considering the factual aspects - Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT [2005 (10) TMI 231 - ITAT DELHI-G]. - Decided against the revenue. Undisclosed investment - search and seizure was conducted on the premises of another person - additions, on the basis of cost of construction - assessees pleaded before the CIT(A) that the construction of Punnaiah Plaza was done as per MOU wherein the amount was contributed by various individuals/owners in certain ratio. - Held that:- The CIT(A) placed reliance on the third member decision of this Tribunal in the case of Rama Traders V/s, first ITO [1988 (2) TMI 142 - ITAT PATNA], wherein it was held that presumption provided in Section 132(4) is only in respect of persons from whose custody the document was seized and the presumption cannot be extended to third parties. - Decided against the revenue.
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2014 (4) TMI 70
Reopening of Assessment – Whether, reopening of assessment of assessee u/s 147 justified when CIT (Appeals) had not adjudicated grounds relating to reopening - Held that:- CIT(Appeals) was duty-bound to adjudicate on each and every ground raised by assessee unless assessee had given in writing that he was not pressing grounds - When there is a non-disposal of ground by CIT(Appeals), level of adjudication is lost - If Tribunal proceeds to adjudicate issue straightaway, it is loosing wisdom of an intermediary level of adjudication - Issue regarding reopening of assessment was never adjudicated by CIT(Appeals) - Matter has to go back to file of CIT(Appeals) and he has to adjudicate ground raised by assessee regarding jurisdiction of A.O. to reopen assessments – Decided in favour of assessee. Depreciation on Securities – Investments - Whether differentiation attempted by CIT(Appeals) between “permanent” and “current” categories of investments warranted interference - Held that:- in case of Nedungadi Bank Ltd. and CIT v. Karnataka State Cooperative Apex Bank [2001 (8) TMI 9 - SUPREME Court], no bifurcation was attempted between “permanent” and “current” category for valuation - Differentiation attempted by CIT(Appeals) between “permanent” and “current” categories of investments was not warranted - Its investments can be valued at cost or market value whichever is lower and depreciation arising can be deducted from its profit before arriving at its total income - Similarly, if such valuation results in appreciation, profits would also go to increase its total income - Issue regarding depreciation on securities is decided in favour of assessee. Validity of decision taken by the committee of disputes (COD) prior to decision of Apex Court - Held that:- Once a decision has been taken by the COD, during its period of utility, after exercising its mind, that certain issues need not be taken up in appeals, it cannot be given a go-bye. Decision of Hon'ble Apex Court in Electronics Corporation of India’s case [2011 (2) TMI 3 - Supreme Court] cannot be so interpreted to render nugatory decisions already taken by COD. In other words, net effect of the Apex Court decision, in our opinion, is that all applications pending before COD as on 17th February 2011 shall abate, all permissions already granted and all denial of permission already communicated will have to be taken cognizance and effect given. - the ground relating to disallowance under Section 80M of the Act stands dismissed. Provisions for Bad debts relating to foreign branch - Held that:- There is no dispute that income from foreign branches was not included in the total income of the assessee taxable in India. Therefore, there is no relevance for any addition for provision of bad debts made of such foreign branches in their accounts. - This issue need verification by AO - matter remanded back.
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2014 (4) TMI 69
Undisclosed professional receipts – Difference between the Annual Information Return and professional receipts - Held that:- CIT(A) failed to exercise his appellate jurisdiction u/s 250 of the Act - The duty was also cast upon the CIT(A) to admit and consider the evidence produced before him by the assessee - There is no doubt about the legal position that if any document furnished by the assessee before the Commissioner (Appeals) is in the nature of clinching evidence, which goes to the root of the case then in the interest of justice such types of evidence should not be rejected - The documents relied upon by the assessee were very much relevant and necessary for the just and proper decision of the case - All the receipts as per AIR information except the receipt of Rs.4,975/- were reconciled by the assessee before the CIT(A) - The assessee has also given a reasonable explanation of regarding the non-reconciliation of the remaining meager amount – thus, the action of the CIT(A) in rejecting the confirmations/reconcilement of the amount was not justified – Decided in favour of Assessee. Disallowance on account of premium paid for professional indemnity insurance - Personal insurance of the partners – Held that:- The firm is providing professional services and as such the professional indemnity insurance premium thus was related to the professional activity of the partners of the firm and was for indemnification of any loss arising out of any claim of damages or compensation payable by the assessee firm or its partners in relation to the professional services provided by them to their clients – the observation that the expenditure was in relation to personal expenditure is wrong – Decided in favour of Assessee. Restriction in disallowance of expenses - expenditure incurred on travelling, motor-car and telephone – Held that:- The assessee has not given any specific explanation as to why there should not be any disallowance in respect of expenditure - CIT(A) has rightly observed that the personal element in use of motor car and telephone expenses and travelling expenses cannot be ruled out – CIT(A) reduced the disallowance to 1/10th of the total expenses – there was no infirmity in the order of the CIT(A) – Decided against Assessee.
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2014 (4) TMI 68
Default for non-deduction of TDS - additions u/s 40(a)(i) - Indo-UK DTAA - Deemed income u/s 9(1)vi)/(vii) – Assessee in Default u/s 201 for Non-Deduction of tax at Source - assessee did not deduct tax with regard to two phases on the ground that the technical designs and drawings which were prepared in London were to be transported to India - Held that:- in case of Ishikawajima-Harima Heavy Industries v. DIT(IT) [2007 (1) TMI 91 - SUPREME COURT] stated that that if entire services rendered by foreign company to assessee in respect of phase one and two outside India, then same cannot become chargeable to tax in hands of foreign company in India - Unless amount paid by assessee company to foreign company does not become chargeable to tax in India then question of applicability of section 195 does not arise - No liability of assessee to deduct tax at source on payment made by it with respect to work relating to phase one and two - Amount in question paid by assessee to SSA was not taxable in India in hands of SSA either u/s.9(l)(vi) or 9(1)(vii) - Assessee therefore was not liable to deduct tax at source from said amount paid to M/s. SSA and there was no question of disallowing amount by invoking provisions of sec.40(a)(i) - Delete disallowance made by AO u/s.40(a)(i) and confirmed by Ld. CIT (A) - Assessee was not liable for deduction of tax under section 195 of Act – Decided in favor of assessee.
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2014 (4) TMI 67
Penalty u/s 271D – Violation of Provisions – levy of penalty where loans/deposits are genuine - Waiver of penalty u/s 273B - reasonable cause - Held that:- no phrase occurring in section 269SS to indicate that provisions will not apply to genuine transactions as pleaded by assessee - If deposits are proved to be not genuine same could be considered for addition u/s.68 or 69 of Act as deemed income of assessee from other sources and cannot be regarded as loan or deposit within meaning of section 269SS and 269T - Assessee has not brought on record any circumstances which prevented him to violate provisions of section 269SS by bye-passing banking channel while accepting amount - Assessee could not justify byepassing of banking channels - Being 'sick industrial unit’ is not sufficient for deviating from banking channel. In absence of reasonable cause, assessee cannot take benefit of provisions of section 273B of Act - CIT(A) was justified in upholding penalty levied u/s.271D – Decided against Assessee.
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2014 (4) TMI 66
Deletion of disallowance of labour charges – Genuineness of the cash payments made – Held that:- The assessee has effected turnover of Rs.22.83 crores during the year and has declared a GP rate of 4.85% as against the turnover of Rs.19.36 crores with GP rate of 3.82% in the immediately preceding year - The "loose sheets" of labour payments did not have the address of the payees - The payments were made in cash to the extent of Rs.2,94,34,800/- during the year - The cash payments made to various persons without having proper record of their addresses etc., could not possibly be verified by the department - The onus is on the assessee to prove the genuineness of the labour payments claimed as deduction by the assessee - the assessee could not substantiate with corroborative evidences the genuineness of the cash components of the labour charges – thus, the disallowance at 10% of the cash components of the labour charges is made – Decided partly in favour of Revenue. Exclusive method of accounting - Deletion of disallowance of service tax payment – Held that:- The CIT(A) was of the view that the assessee has duly accounted for the outstanding service tax payable in his books of accounts - The payment of service tax was made by the assessee through bank account of the assessee duly accounted for in its books of accounts and the copies of the challan and service tax return were also submitted by the assessee before the Revenue authorities - there is no harm in following exclusive method because in no way the picture of state of affairs was getting distorted – there is no infirmity in the order of the CIT(A) – Decided against Revenue. Violation of Rule 46 of the Act – Remand report not called for – Held that:- It could not be pointed out by the Revenue that what evidences the CIT(A) has accepted during the course of appellate proceedings without confronting the same to the AO - the assessee has filed details asked for by the AO, but certain further queries by the AO requiring more details, were not submitted by the assessee before the AO - in the absence of any details of specific evidence which may have been accepted by the CIT(A) - the violation of Rule 46A could not be established – Decided against Revenue.
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Customs
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2014 (4) TMI 58
Waiver of pre-deposit - Classification dispute - import of various information technology goods including Facsimile machines - extended period of limitation - Held that:- the present case is the one where there was no clarification on the issue of classification and benefit of exemption notification and that it is not a case where the appellant had misdeclared the goods, it would not be appropriate to invoke extended period. In a similar case, but relating to printers, the CBEC had to examine the matter and come out with CBEC Circular No. 11/2008-Customs, dated 1.7.2008. The instant case appear to be equally complex and it appear to me that there was no clarity, whatsoever, on the classification aspect, either to the Department or to the appellants. I find that in the instant case, the show Cause notice was issued on 17.01.2012 in respect of demand for the period from 27.01.2007 to 25.05.2009, as per the Annexure A attached to the SCN. The SCN as well as the impugned order do not elaborate as to why there was willful suppression or fraud except that in the impugned order, it is stated that the appellant had suppressed the full details of Fax machine and claimed specific tariff heading provided for Fax machine capable for connecting to an ADP machine or to a network. No other evidence is on record to support the ground of suppression - Prima facie demand is barred by limitation - stay granted.
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2014 (4) TMI 57
Waiver of pre deposit - Valuation of goods - Enhancement in value of goods - Held that:- Lower authorities have also relied on the confessional statements given by the partner of the firm, wherein he had admitted having paid extra consideration to the supplier in respect of the subject consignment. According to the authorities, these confessional statements coupled with the fax message would be enough to raise differential duty demand on the importer and to penalise them - the aforesaid fax message pertained to later imports - valid reason for the appellants to claim prima facie case. Accordingly, there will be waiver of pre-deposit and stay of recovery in respect of duty and penalty amounts - Stay granted.
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Service Tax
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2014 (4) TMI 63
Waiver of pre-deposit - levy of service tax on sub-contractor - Erection, commissioning and installation services, man power recruitment & supply agency services, commercial or industrial construction services - Held that:- the claim of the appellant that prior to 23.08.2007, the sub-contractor need not discharge Service Tax liability if the Service Tax liability is discharged by the main contractor, prima facie, seems to be law which has been settled by the various decisions of the Tribunal. Post 23.08.2007, there are views expressed by the Tribunal as to the Service Tax liability on the sub-contractor that needs deeper consideration. Keeping in mind that the appellant has already deposited an amount of Rs.10 lakhs, we still find that the appellant needs to be put to condition of depositing further amount for hearing and disposing the appeal by the first appellate authority - appellant directed to deposit an amount of Rs.5 lakhs - On such compliance being reported, the first appellate authority will restore the appeal to its original number and dispose of the same on merit, after following the principles of natural justice - Decided partly in favour of assessee. - Matter remanded back.
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2014 (4) TMI 62
Penalty u/s 78 - Commissioner set aside penalty - Held that:- whatever service ax would have been paid would have been taken as credit, if paid in time. Therefore, the respondents are entitled for the benefit of Section 80 of the Finance Act, 1994. Therefore, I do not find any infirmity in the impugned order - Decided against Revenue.
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2014 (4) TMI 61
Waiver of pre deposit - excavation for foundation in soil & soft rock including tree removing. - Held that:- in addition to amount of Rs. 2,59,158/- paid by the appellant, the appellant has also paid an amount of Rs. 1,17,151/- as interest on the Service Tax demand of Rs. 2,59,158/-. However, this payment has not been adjusted against the Service Tax demand or the interest thereon. We have perused the work order given to the appellant and as per the work order, the activity undertaken by the appellant is excavation for foundation in soil & soft rock including tree removing. Therefore, the activity would be squarely covered by the definition of ‘Site preparation, excavation and earth moving, demolition service'. Therefore, the contention of the learned Counsel for the appellant that they are not liable to Service tax is prima facie not correct. Hence, the appellant has not made out a case for complete waiver of pre-deposit of the dues adjudged against them - Conditional stay granted.
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2014 (4) TMI 60
Modification of stay order - Held that:- appellant has not made out any case for modification of our stay order dated 1.10.2013 as we have come to the conclusion based upon our understanding of the fact that the appellants had not deposited the amount of service tax liability collected by them from the service recipient during the period 2006-07 to 2010-11. The Revenue authority started investigation, though they may have paid some amount periodically. Assuming to not agreeing with the contention of the learned counsel that service tax liability to be reduced to some extent, we find that the appellants are also liable for interest on the amounts of service tax liability which gets fastened on them and also penalty which needs to be imposed. Keeping in mind that our order dated 1.10.2013 directing the appellant, SISAPL to deposit an amount of Rs. 83 lakhs and the appellant, SISA to deposit Rs. 72 lakhs does not require any reconsideration - Modification denied.
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2014 (4) TMI 59
Demand of service tax - providing security services to other group companies - No profit motive - Suppression of facts - Invocation of extended period of limitation - Interest u/s 75A - Penalty u/s 76, 77, 78 - Held that:- the nature of service rendered by the appellant was only security services and nothing else. - If the appellant had indeed rendered a multiplicity of services, the charges would have varied every month which also is a pointer towards the fact that the appellant rendered only one type of service. As regards the claim of the appellant that they were operating on no profit no loss basis and therefore, cannot be considered as a commercial concern, this argument is without any merit. - the appellant cannot claim that they were not operating as a commercial concern. - there is no evidence available on record to show that the income received by the appellant was completely disbursed by way of payment of salaries. - it is difficult to conclude that the appellant was operating on no profit and no loss basis. Bonafide belief is not blind belief but has to be based on reasonable measures taken to entertain such belief. There is nothing in the records to show that the appellant consulted either the department or obtained any legal opinion as their liability towards service tax. Inasmuch as the appellant did not obtain any registration nor did they follow any of the statutory procedures, the appellant had clearly suppressed the facts from the department with an intent to evade service tax. In these circumstances, the confirmation of duty demand invoking the extended period of time along with interest thereon cannot be faulted. Consequently, the appellant is also liable to penalty under the provisions of the Finance Act, 1994 - Decided against the assessee.
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Central Excise
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2014 (4) TMI 56
Waiver of pre deposit - discrimination in stay order - tribunal directed the appellant to to deposit a sum of Rs.45 lakhs. - Tribunal further required two other entities to deposit Rs. 1 lakh and Rs. 50,000/respectively. In case of rest of the appellants, predeposit was completely waived. - Held that:- From the impugned order of the tribunal dated 24.10.2013, we notice that no reasons are recorded by the tribunal for providing different yardsticks for predeposit in case of different entities. The petitioner is asked to deposit Rs. 45 lakhs as against the rest of entities in whose cases (barring two where predeposit requirement was Rs.1 lakh and Rs.50,000/respectively) have not been asked to deposit any amount whatsoever. It is therefore, not possible to appreciate on what basis the tribunal has made such distinction. Only on this short ground, we are inclined to remand the proceedings before the tribunal for fresh consideration and disposal in accordance with law - rectification application would not survive - matter remanded back - Decided in favour of assessee.
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2014 (4) TMI 55
100% EOU - Recovery of the duty exemption - benefits of Customs Notification No.53/97-Cus dt. 03/06/1997 - Excise Notification No.1/95-CE dt. 04/01/1995 - Violation of provision of Chapter No.IX of EXIM Policy 1997-2002 - Failure to to comply with the condition No.2(i), (ii) and (vi) of the LOP and agreement dated 26/03/1998 - no discharge of export obligation - Held that:- appellant did not produce DTA sales permission before learned adjudicating authority nor satisfied that authority about earning of foreign exchange making exports. Some of the figures of the foreign exchanged claimed to have been earned by the appellant could not be justified by it as to whether such earning was from export of shrimp feed or from any other source. Neither appellant showed export evidence except merely relying on state Bank Certificate nor learned adjudicating authority examined the source of foreign exchange if any earned as certified by State Bank of India. It should be ruled out that no hawla transaction had occurred. The appellant had already faced penalty for the patent violation of terms of LOP, undertaking and agreement entered into with the Government, but made sale of shrimp feeds without permission of Development Commissioner. There was no nexus of shrimp/prawn processing unit with shrimp feed unit which was expected to export entire product manufactured. The plea of broad banding of the activity of the appellant did not find support of Board of Approvals to treat the shrimp/prawn processed unit as EOU. Development Commissioner held that there was violation of conditions of EOU by the appellant. Keeping in view earnest prayer of the appellant to satisfy learned Adjudicating Authority on various allegations made against it and also noticing certain materials facts borne by record requiring fresh examination granting fair opportunity of hearing to the appellant, matter is remanded to that authority to examine various issues. Appellant shall be required to furnish such evidence as may be required by learned adjudicating authority to satisfy him that appellant was not enriched at the cost of Revenue availing duty exemption under respective notification and complete the re-adjudication by 31/10/2014. Burden of proof lies on the appellant. - Matter remitted back - Decided in favour of assessee.
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2014 (4) TMI 54
CENVAT credit - Goods become exempted after taking cenvat credit - Demand of 8% of the price of exempted goods under Rule 6(3) - Revenue contends that if any credit of duty paid on the inputs used in the manufacture of dutiable final product is taken and utilized then it cannot be got reversed or denied on the ground that such final product became exempted subsequently - Held that:- At the time of taking of the credit, the goods manufactured by the appellant were dutiable and, therefore, the appellant has rightly taken the credit. However, at the time of clearance of the goods, the goods were exempt and, therefore, the appellant reversed the credit attributable to the inputs contained in the exempted final products. This reversal done by the respondent is perfectly legal - law itself was amended retrospectively vide Finance Act, 2010 providing for reversal of the credit attributable to the inputs contained in the exempted final products - Following decision of Chandrapur Magnet Wires (P) Ltd. vs. Commissioner of Central Excise [1995 (12) TMI 72 - SUPREME COURT OF INDIA] - Decided against Revenue.
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2014 (4) TMI 53
Benefit of Notification No.10/97-CE dated 1.3.97 - Production of requisite certificate - Held that:- Respondents cleared the goods by availing the benefit of Notification NO.10/97-CE. As per the Notification, the manufacturer has to produce necessary certificate issued by the office not below the rank of Dy. Secretary to the Government of India at the concerned department at the time of clearance of the goods. In the present case, necessary certificate was not produced at the time of clearance of the goods. In the invoice, the respondents specifically mentioned that the goods are cleared by availing the benefit of Notification NO.10/97-CE. During investigation, when the Revenue found that the respondents are not having the necessary certificate the respondents applied for the certificate. Show-cause notice was issued in September, 2001 demanding duty by denying the benefit of Notification. Thereafter, the respondents produced the certificate issued by the Project Director, ISSA, DRDO, Ministry of Defence. The facts shown that at the time of clearance of the goods even the respondents have not applied for the necessary certificate and claimed the benefit of Notification by suppressing the material fact. As the condition of the Notification was to produce the necessary certificate from the competent authority at the time of clearance of the goods, the respondents applied for the certificate after start of investigation. Further, we find that the applicants are manufacturers of optical fibre & optical fibre cables and they supplied the same in the running length of approximately 88 km. The Notification provides exemption to scientific and technical instruments, apparatus, equipment including computers and also to accessories and spare parts of the above mentioned goods. The optical fibres and cables in running length cannot be considered as accessories and spare parts of the goods specified in the Notification - Decided in favour of Revenue.
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2014 (4) TMI 52
Demand in respect of press mud, bagasse and compost fertilizer cleared without payment of duty by the sugar manufacturers - Availment of credit on common inputs which are used in the manufacture of excisable as well goods cleared at nil rate of duty in view of Rule 6(3) of the Cenvat Credit Rules, 2004 - Held that:- Commissioner (Appeals) in the impugned order relied upon the earlier decisions of the Tribunal on the same issue. The tribunal in the case of Indian Potash Ltd vs CCE, Allahabad [2012 (12) TMI 347 - CESTAT, NEW DELHI] set aside the demand in respect of bagasse on the ground that bagasse is nothing but waste obtained at the time of manufacture of sugar - Decided against Revenue.
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2014 (4) TMI 51
Exemption under Notification No. 10/97-CE dated 01.03.97 - Clearance of computer system for research purpose - Assessee did not produce a certificate from DSIR but they have only produced a certificate from the Registrar of Nagarjuna University - Held that:- respondent would require to produce a certificate from the Head of the Institution in each case at the time of clearance of the goods that they are intended to use exclusively for research purpose only. The institution is required to be registered with DSIR. The contention of the Ld. AR that the respondent produced the certificate of the Registrar of the University and therefore they have not fulfilled the condition of the said notification. The contention of the Ld. AR that a certificate of registration from DSIR is required, is not sustainable. It is not the case of Revenue that institution is not registered with DSIR. We agree with the finding of the Commissioner (Appeals) that they have fulfilled the condition of the notification that essentiality certificate was obtained from the Registrar of the University to clear the impugned goods. The Revenue has not challenged the authenticity of the certificate in any manner and therefore they have to accept the certificate from the Registrar of the University - Decided against Revenue.
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2014 (4) TMI 50
Waiver of pre deposit - Revenue has contended that PVC granules do not stand received by the appellant and credit so availed was not available to them - Held that:- The entire evidence relied upon is required to be examined for coming to final conclusion which can only be done at the time of disposal of the appeals. Suffice it to say at this stage that the applicants have not been able to make out a good prima facie in their favour so as dispense with condition of pre-deposit of entire amount of penalty and duty - Conditional stay granted.
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2014 (4) TMI 49
Waiver of pre-deposit of duty - Denial of benefit of Notification No. 23/2003-CE dated 31.3.2003 - Whether the applicant is entitled for the benefit of Notification No. 23/2003-CE - Held that:- contention of the applicant is that the goods in question i.e. tractors are not exempted under the State Sales Tax. The applicants submitted that as per Schedule “C” of the State Act, tractors are liable to pay state tax @ 4% upto 31.3.2012 and thereafter @ 5%. The state government has granted exemption to the unit from their sales tax liability under the Package Scheme of Incentive 1993 - The fact that the tractors which are cleared to DTA by the applicants are not exempted from payment of sales tax or VAT under the Act. Therefore, prima facie the applicant has made out a case for waiver of the dues. Pre-deposit of the dues is waived and recovery thereof stayed for hearing of the appeals - Stay granted.
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2014 (4) TMI 48
Waiver of predeposit of CENVAT credit - Denial of the credit - Held that:- There is no dispute of the fact that the applicant received the materials under the cover of the invoice issued under the CENVAT Credit Rules. It is further not in dispute that the duty paid goods was used in the manufacture of the finished products. The allegation of violation of the rules, as submitted by the learned AR, would be looked into at the time of hearing the appeal. We also notice that the dealer was not made a party during the period of investigation. In view of that, we find that it is a proper case for waiver of predeposit of the dues arising from the impugned order and for staying its recovery during the disposal of the appeal - Stay granted.
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2014 (4) TMI 47
Waiver of pre deposit - Statement of various persons was recorded indicating that they are not making entry in their statutory record showing the exact consumption of raw material resulting in excess production of final product & on the above basis proceeding was initiated - Held that:- recovery of documents from the appellant premises has not been disputed by them. When the same read alongwith statement of various persons including the Production Manager of the appellant, it becomes clear that the basis of which input output ratio adopted by the Commissioner is not in vacuum, but is made on the basis of the admission on part of various persons connected with the production of the sponge iron. As such at this prima-facie stage, we do not find a good case in favour of the appellant so as to dispense with the pre-deposit of entire amount of duty demand - Conditional stay granted.
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2014 (4) TMI 46
Duty demand - Clandestine removal of goods - Held that:- appellant was caught red handed in clearing two winch machines. Further, the statement of Managing Director is very clear, disclosing the name of the purchaser of clandestinely removed goods. The inquiries made at the end of buyer also supported the Revenue’s case. The credit memos in the name of the appellants clearly reveal that they have received the payment of clandestinely removed goods from the buyers. As such, I find that there is sufficient material on record, corroborating each and every act, to uphold the finding of clandestine removal and consequent confirmation of demand - appellant have recovered more duty from their buyer and have paid less to the exchequer. The above finding are based on the invoices issued by the appellants. The said allegation was also not disputed by the appellant and as such, I find that the confirmation of demand on the above ground is in accordance with the law - Decided against assessee.
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2014 (4) TMI 45
Waiver of predeposit and stay of recovery in respect of duty - Availment of CENVAT Credit - Held that:- No prima facie case for the appellant against the said demand of duty. It is not in dispute that CENVAT credit should not have been utilized during the said period. The aforesaid amount of Rs. 2,16,472/- should have been paid towards duty by debit in PLA. The appellant has not debited equivalent amount or any part thereof in PLA at any later stage. The learned counsel for the appellant submits that they have since wound up their business and surrendered registration certificate to the department. These facts, however, have not been stated in the memo of appeal or the stay application despite the fact that the surrender of registration certificate occurred prior to filing of the appeal. Even in the context of pleading financial hardships in the stay application, the appellant chose not to mention the above facts. Be that as it may, the fervent plea of financial hardships, raised by the learned counsel, will be considered to a reasonable extent - Conditional stay granted.
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2014 (4) TMI 44
Waiver of pre deposit - Denial of benefit of cenvat credit of duty - Held that:- prior to the amendment of Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004, this Court in the case of commissioner of Central Excise vs. Ispat Industries Limited (2007 (7) TMI 633 - BOMBAY HIGH COURT) has held that credit of duty paid on angles, channels and plates etc. which are used in the construction of supporting structure would be available. Though the Larger Bench in the case of Vandana Properties has held that the amendment to explanation (2) to Rule 2(k) of the Cenvat Credit Rules, 2004 by notification dated 7th July 2009 is retrospective in nature, the issue is debatable. In any event, dispute in the present case relates to the period prior to 7th July 2009 and, therefore, in our opinion, it is a fit case to hear the matter on merits without insisting on any pre-deposit - Stay granted.
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2014 (4) TMI 43
Waiver of pre deposit - Penalty u/s 11AC - Clandestine removal of goods - Held that:- As regards the demand of duty evaded on the ground of clearance of Texturised Yarn in the form of job work done for M/s. S.B. Textiles, I find that both the lower authorities have recorded findings which indicate that M/s. S.B. Textile, though registered, did not file any return before the lower authorities or filed a nil return. It is also on record that it is admitted fact that S.B. Textile is fake and non-existent unit. If that be so, in my view, the job work which has been carried for him, needs to be substantiated, which has not been done in this appeal - Conditional stay granted.
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2014 (4) TMI 42
Benefit under the SSI Notifications - Clubbing of different units - Held that:- Revenue wants to club the clearance of three units i.e. M/s Mahavir Group of Industries, M/s Rupani Metal Reed Manufacturing Works and M/s Rupani Textile Industries. The Revenue filed one appeal i.e. against M/s Mahavir Group of Industries and there is no appeal filed by the Revenue against M/s Rupani Textile Industries for clubbing their clearances with M/s Mahavir Group of Industries - in the absence of appeals the clearances of these units cannot be clubbed with M/s Mahavir Group of Industries - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (4) TMI 65
Rate of tax – “types of glass” versus “forms of glass” - Exemption Notification – Eligibility to fall under Notification - Interpretation - Whether the notification would at all be applicable to the sale of product in question - construction of “types of glass and glass-sheets” under notification – u/s 8(5)(b) of the Act – Held that:- It could not be agreed that a notification which grants tax incentives should to be liberally construed - At the outset a strict approach ought to be adopted in administering whether a dealer/ manufacturer is covered by notification at all and if the dealer/manufacturer falls within it, then the provisions of the notification be liberally construed - Relying on Union of India v. Wood Papers Ltd., [1990 (4) TMI 55 - SUPREME COURT OF INDIA] It was observed that construction of an exemption notification or an exemption clause in contrast with the charging provision has to be tested on different touchstone and held that the eligibility clause in relation to an exemption notification is given strict meaning and the notification has to be interpreted in terms of its language, however, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. Relying upon M/s GAMMON INDIA LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI [2011 (7) TMI 17 - SUPREME COURT OF INDIA] SC while rejecting the plea of the appellant that the exemption notification should receive a liberal construction to further the object underlying it relied upon NOVOPAN INDIA LTD. Versus COLLECTOR OF C. EX. AND CUSTOMS, HYDERABAD [1994 (9) TMI 67 - SUPREME COURT OF INDIA] -The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee, assuming that the said principle is good and sound—does not apply to the construction of an exception or an exempting provision; they have to be construed strictly - A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State - This is for the reason explained in Mangalore Chemicals and other decisions viz. each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it - Constitution Bench in Hansraj Gordhandas v. CCE and Customs [1968 (9) TMI 112 - SUPREME COURT OF INDIA] held such a notification has to be interpreted in the light of the words employed by it and not on any other basis - In a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption. Whether the notification would at all be applicable to the sale of product in question – Held That:- The State Government has issued a notification and has used the expression “types of glass” and not the expression “forms of glass” - Thus, what requires to be examined is whether the two terms would be identical in their connotation and import - In taxing statutes the terms and expressions must be seen in their common and popular parlance and not be attributed their scientific or technical meanings - In common parlance, the two words “type” and “form” are not of the same import – Glassware is a form of glass and it is contended by the assessee that forms of glass are also covered by the said notification - The term glassware would generally encompass ornaments, objects and articles made from glass. The New Oxford Dictionary, the Merriam-Webster Dictionary and the Macmillian Dictionary refer to the said general meaning while defining it - Glassware would include crockery such as drinking vessels (drinkware) and tableware and general glass items such as vases, pots, etc. - Thus, it cannot be accepted that the expression “types of glass” could have been intended to refer to or include “forms of glass”. The glassware so manufactured by the assessee, though made of glass cannot be considered or called as a “type of glass” and since the notification only provides for the reduction in the rate of tax of types of glass and not for “forms of glass” which is manufactured by the respondent as glassware, the respondent would not be covered by the notification – It is held that the assessee is not entitled to derive the benefit of the notification dated 25.06.2001 - Judgment and order passed by the High Court set aside and appeal allowed – Decided in favour of Revenue.
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2014 (4) TMI 64
Environment and health cess - Retrospective applicability of the notification - Delegation power - Whether the amended notification has been issued in consonance with the power given under the Act - Constitutional validity of Chapter VII of the Rajasthan Finance Act, 2008 - Words “time to time” u/s 16 interpretated - Held That:- Notification as far as it covers the period prior to the date of publication of the notification in the official Gazette is really a transgression of the statutory postulate – There can be no cavil that the legislature has the authority to pass a law both retrospectively and prospectively within the constitutional parameters. There is no doubt that unlike legislation made by sovereign legislature, subordinate legislation made by a delegate cannot have retrospective effect unless the rule-making power in the concerned statute expressly or by necessary implication confers power in this behalf - The Court opined that the same did not affect the vested rights as nothing had been done earlier and hence, no right had vested in the citizens - We may state that the said enactment was treated to be valid as it did not invite the wrath of Article 14 of the Constitution - We are really not testing the retrospective applicability of the law made by the legislature but a notification issued by the State Government in exercise of power conferred under a statutory provision. Needless to say, there is a sea of difference between the two - The aforesaid authority is of no assistance to the appellant-State because the controversy that has emanated in that case is altogether a different one - To put it differently, the proposition laid down in the aforesaid authority does not buttress the submission sought to be urged - In fact, it is farther away from the “North Pole”. Words “time to time” u/s 16 of the Act - We really cannot discern from the language employed in the said provision that because of the use of the words “time to time” a notification can be issued imposing a rate of tax with retrospective effect or apply the notification retrospectively - A notification can only be issued prospectively, and we are inclined to think so as legislature has deliberately used the words “from time to time”. The use of the said words in the Section 16 of the Act cannot be said to have conferred the jurisdiction on the State Government or delegate to issue a notification in respect of the rate with retrospective effect - Such an interpretation does not flow from the statute which is the source of power - Thus, the notification as far as it covers the period prior to the date of publication of the notification in the official Gazette is really a transgression of the statutory postulate – Thus, we find that the view expressed by the High court on this score is absolutely flawless and we concur with the same - The lis in these appeals fundamentally pertain to the retrospective applicability of the notification issued by the State Government as regards the rate of cess on the major mineral, i.e. Rock Phosphate - The appeals, being devoid of merit, stand dismissed – Decided against revenue.
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