TMI Tax Updates - e-Newsletter
May 2, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Law of Competition Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. DISPOSAL OF APPEAL AT THE STAY STAGE BY THE TRIBUNAL

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. President to Inaugurate IIFT’S 50 Years Celebration Function Tomorrow to Unveil ‘Wings of Wisdom’ Anand Sharma, D. Purandeswari to be Guests of Honour

2. Index of Eight Core Industries (Base: 2004-05=100), March 2013

3. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Gold and Silver Notified

Notifications

Customs

1. 51/2013 - dated 30-4-2013 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Highlights / Catch Notes

Income Tax

• High Court: Assessing Officer Must Review All Relevant Documents for Special Auditor Appointment Under Income Tax Act Section 142(2A.

  Case-Laws - HC : Appointment of Special auditor - satisfaction - AO while referring the matter u/s 142(2A) it is not only the books of accounts, but even by other documents which are available during the course of an assessment and at any stage subsequent thereto may become available to the AO - HC
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• MAT Credit to Be Applied Before Interest Calculation, Says Court: Sections 115JA, 115JAA, 234A, 234B, 234C Explained.

  Case-Laws - HC : Interest under Section 244A denied - MAT credit under Section 115JA - MAT credit admissible in terms of section 115JAA has to be set off against the assessed tax payable, before calculating interest under Sections 234A, 234B and 234C. - HC
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• Assessing Officer Can Reopen Tax Assessments Accepted u/s 143(1) Without Prior Scrutiny.

  Case-Laws - HC : Re opening of assessment - Even in case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment - HC
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• Interest on Unused HSIDC Plot Installment is Capital; No Deduction Allowed u/s 36 of Income Tax Act.

  Case-Laws - AT : Interest paid to HSIDC on installment of plot which was yet to be put to use - whether is of capital nature? - Held yes, deduction u/s 36 not allowed. - AT
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• Interest Calculation Based on Returned Income, Not Assessed Income, u/ss 140A and 234B.

  Case-Laws - AT : In view of the provisions of section 140A r.w.s. 234B, the interest that could have been charged/ adjusted as part of interest under section 234B will have to be calculated on the returned income but not on the basis of assessed income. - AT
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• Officer's Tax Decision on Forfeited Money Lacked Justification Due to Inconsistent Application of Tax Principles.

  Case-Laws - AT : Tax an 50% of the money forfeited by assessee from the defaulted members - Had AO excluded the amount offered during the year on the same principles in which he brought the balance 50% of the amount to tax, there could have been some justification in the action of AO - AT
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• Cash Discounts to Dealers Not Considered Commissions: Section 194H Tax Deduction Rules Don't Apply.

  Case-Laws - AT : TDS - Cash discount allowed to the dealers and sub-dealers for promotion of goods - cash discount is not commission - provisions of section 194H are not applicable - AT
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• Court Rules Agreement to Sell Doesn't Equal Property Transfer, Affects Tax Assessment Applicability.

  Case-Laws - HC : Re-opening of assessment - An agreement to sale without there being anything more,obviously cannot be equated with transfer of property. - HC
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Customs

• Commissioner Denies Drawback Claim, Overlooks Rule 13 and Natural Justice, Hastily Decides u/r 15, Drawback Rules 1995.

  Case-Laws - AT : Drawback claim denied - Commissioner without looking into the gravity of the matter under Rule 13 and also to the violation of natural justice, proceeded to decide the issue under Rule 15 of Drawback Rules, 1995 hurriedly burring justice. - AT
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• Quotation Alone Insufficient to Reject Transaction Value Without Additional Evidence of Contemporaneous Import: Legal Principle Explained.

  Case-Laws - AT : Valuation - It is settled law that the quotation cannot be the basis for rejection of transaction value unless any other positive evidence of contemporaneous import. - AT
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• Importer's Refund Claim Denied Due to Time Bar u/s 27 of the Customs Act.

  Case-Laws - AT : Refund claim rejected as time bared - Since amount was paid as duty to Custom by the importer, the provision of section 27 of the Custom Act, are applicable - AT
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Corporate Law

• Secured Creditors Can Petition for Company Winding Up Without Relinquishing Security for Unpaid Debts.

  Case-Laws - HC : Winding up – The law does not impose an unreasonable condition of requiring a secured creditor to forsake his security before he asserts a right to urge that a company which is unable to pay its debts should be wound up. - HC
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Service Tax

• Cenvat Credit Allowed on Service Tax for Access Deficit Charges (ADC) as a Recognized Service.

  Case-Laws - AT : Cenvat Credit of Service Tax paid to BSNL on Access Deficit Charges (ADC) - a facility or a service - Revenue cannot turn around and argue that that this is not a service. - AT
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• Vocational Training Institutes Not Required to Prove Student Employment for Service Tax Notifications Compliance.

  Case-Laws - AT : Vocational training - notification does not require establishment of the fact whether one or some or all of the students of the assessee institute have obtained employment or have pursued self-employment after conclusion of the course - AT
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Central Excise

• Suo-Moto Cenvat Credit Action Upheld by First Appellate Authority in Central Excise Case.

  Case-Laws - AT : Admissibility Suo-moto credit – suo-moto admissible Cenvat credit taken, after getting a favourable decision from the first appellate authority, is correct. - AT
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• Non-compliance with Central Excise procedures cannot deny CENVAT credit; procedural lapses aren't enough to reject entitlements.

  Case-Laws - AT : Violation of Central Excise procedures - CENVAT credit - It is settled law that for failure to follow the procedures, cenvat credit cannot be denied - AT
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VAT

• Court Rules Gas Sales as Inter-State; Orders VAT Refund for Unauthorized Tax Collection on Andhra Pradesh Deliveries.

  Case-Laws - HC : Inter-State v/s Intra state sales - movement of GAS from Andhra Pradesh to UP / Gujarat - Place of delivery - Place of transfer to title of goods - held as interestate sale - Revenue directed to refund the tax collected without authority under VAT - HC
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• Court Affirms Seizure Orders: Transit Declaration Form Not Available, No Illegality Found in Seizure Process.

  Case-Laws - HC : Seizure orders - the transit declaration form which was not in existence when the goods were detained cannot be regarded as a bona fide one - No illegality or error of law in the order of seizure - HC
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• Bone meal isn't organic manure under Entry 17 of KGST Act; assessee not liable for interest on classification.

  Case-Laws - HC : Bone meal - Bone meal cannot qualify as an organic manure for the purpose of Entry 17 of the Third Schedule to the KGST Act. - assesee relieved of the liability for the payment of the interest. - HC
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Case Laws:

• Income Tax

• 2013 (5) TMI 23
  Appointment of Special auditor - Discrepancies in maintaining of accounts pointed by the Comptroller & Auditor General of India - Held that:- The discrepancies in the account books have already been pointed out by the Comptroller and Auditor General as well as in the Auditor's report and further on perusal of the accounts, the Assessing Authority has come to the conclusion that the accounts are complex and difficult to understand. The Assessing Authority before passing the impugned order for appointment of Special Auditor has made genuine attempt to understand the accounts so maintained. Thus discrepancies in maintaining the accounts have been pointed by the Comptroller & Auditor General of India. With regard to the satisfaction of the Assessing Authority, while referring the matter under Section 142 (2A) it is not only the books of accounts, but even by other documents which are available during the course of an assessment and at any stage subsequent thereto may become available to the Assessing Officer. Further, it is settled principle of law that while exercising its jurisdiction under Article 226 of the Constitution of India, the High Court does not sit as a Court of appeal and a patent illegality or lack of inherent jurisdiction in passing the impugned action/letter would be a limited ground for invoking the jurisdiction. In view of these facts, the impugned order does not suffer from illegality or infirmity - writ petition is dismissed.

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• 2013 (5) TMI 22
  Interest under Section 244A denied - MAT credit under Section 115JA - AO found that the claim for MAT credit can be considered only after charging the surcharge on Income Tax - whether surcharge should have been calculated after deducting MAT credit and interest under Section 244A should have been granted - AO also given credit to TDS and accordingly ordered for refund - Held that:- As decided in Commissioner of Income Tax Vs. Tulsyan NEC Ltd. (2010 (12) TMI 23 - Supreme Court of India) MAT credit admissible in terms of section 115JAA has to be set off against the assessed tax payable, before calculating interest under Sections 234A, 234B and 234C. It is further held therein that if an assessee is entitled to a tax credit as a consequence of the assessee making payment of tax under Section 115JA(1) in year one, then, the set off such tax credit follows as a matter of course once the conditions mentioned under Section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the Assessing Officer. Thus, the Apex Court decided the issue in favour of the assessee therein. Also see Commissioner of Income Tax Vs. Chemplast Sanmar Ltd (2009 (4) TMI 61 - MADRAS HIGH COURT) It appears that the Tribunal had concentrated only on the issue as to whether giving credit for MAT before set off of TDS and advance tax from the tax payable by the assessee is correct or not. The Tribunal adverted its attention to the Chemplast Sanmar Ltd., case to answer the said issue and consequently rejected the Revenue's appeal. The grounds of appeal raised in this appeal by the Revenue also indicate that the issue before the Tribunal was only with regard to interest payable under Section 244A and not with regard to the adjustment of MAT credit - no merits in this appeal and accordingly reject the same by answering the question of law accordingly.

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• 2013 (5) TMI 21
  Re opening of assessment - failure to deduct TDS on commission payment - Held that:- No hesitation in believing and upholding the petitioner’s factual assertion that during the previous year relevant to the assessment year under consideration, the petitioner had not paid any commission as even at the time of issuing notice such contention had formed part of the objection raised by the petitioner before the AO also & despite such stand of the petitioner from the outset, the respondent has totally failed in dislodging this clear and unequivocal factual assertion, therefore, there was no question of deducting tax at source. The entire basis for issuance of impugned notice thus lack validity. As decided in in case of Ratna Trayi Reality Service Pvt. Ltd. [2013 (4) TMI 677 - GUJARAT HIGH COURT] as relying on ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. [2007 (5) TMI 197 - SUPREME Court] it is equally well settled that merely because an assessment was not previously framed after scrutiny, would not give unlimited right to the Assessing Officer to reopen by merely issuing a notice without valid reasons. Even in case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. In favour of assessee.

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• 2013 (5) TMI 20
  Unsecured loan - addition u/s 68 - Held that:- The matter is very old and assessee had submitted complete details of depositors along with names & bank account details alongwith PAN numbers, cheque numbers with amounts. Due to long time gap the assessee was not able to produce these creditors in spite of the fact that at the instance of assessee the notices u/s 131 were issued. It is also observed that complete details were available with the AO regarding names, PAN numbers of the depositors. The AO could verify the transaction from the assessment records of the depositors and from the bank account of the depositor which was provided by the assessee and these were part of earlier directions of ITAT which the AO did not comply. Therefore, in view of the above fact, once again remit back the file to the office of AO with the direction to comply with directions of earlier Tribunal order with respect to verification from the concerned bank account and assessment files of the concerned depositors and if he is still not satisfied, he should confront the assessee - assessee appeal allowed for statistical purposes.

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• 2013 (5) TMI 19
  Interest paid to HSIDC on installment of plot which was yet to be put to use - whether is of capital nature? - Held that:- As from the plain reading of section 36 it is clearly established that interest on loan taken for acquisition of such assets which are acquired by the assessee for extension of its existing business are not allowable till they are put to use. In the present case, there is no doubt and there is no dispute regarding the fact that assets were not put to use. Therefore, in AO had rightly made the disallowances and Ld CIT(A) had rightly confirmed the same. Assessee's reliance on Capital Bus Service v. CIT, New Delhi [1980 (2) TMI 69 - DELHI High Court], India Cements Limited Versus Commissioner Of Income-Tax, Madras [1965 (12) TMI 22 - SUPREME Court] & Bombay Steam Navigation Co. Pvt. Ltd. v. CIT [1964 (10) TMI 12 - SUPREME Court] were misconceived as the all are altogether on different facts. In favour of revenue. Disallowance of processing charges - Held that:- They are allowable business expenditure which were incurred by the assessee during the course of business. The nature of expenses is similar to expenses as incurred in the case of India Cement Ltd. V. CIT (1965 (12) TMI 22 - SUPREME Court) as relied upon by the assessee. In favour of assessee.

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• 2013 (5) TMI 18
  Addition in respect of share capital, unsecured loans, sundry creditors & cash & bank balance for want of verification of genuineness - CIT(A) deleted the addition - Held that:- As assessee had not filed any return of income and as per assessment order the case was selected as per guidelines of CBDT/ AO vide notice dated 6.12.2010 asked the assessee to submit return of income on or before 10.12.2010. As the case was becoming time bared, AO completed the assessment u/s 144 by adding the balances as appearing in the balance sheet. As per P&L account it appears that company had no business income. It had only interest income on income tax refund against which certain expenses were claimed. In the earlier year also, there was no business income. The copy of balance sheet strengthen the findings of CIT(A) that AO had just taken the balances appearing as on the date of balance sheet and computed the income which is totally wrong and unjustified. All balances appearing in the balance sheet are old outstanding balances. The only difference is in the amount of unsecured loan, the amount of which had reduced from Rs.15,63,835/- to Rs.13,,98,835/- and similarly there is a reduction in the amount of sundry creditors due to payment of some of them. Similarly, there is some change in the amount of cash and bank balances which seems to be on account of part payment of sundry creditors. CIT(A) had rightly deleted the addition - Against revenue.

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• 2013 (5) TMI 17
  Disallowance u/s 14A r.w.r. 8D - Held that:- As from profit and loss account of assessee it can be farly concluded that total expenses incurred by assessee other than interest were Rs.9,16,546/- out of which assessee had already made a disallowance of Rs.7,42,023/- which is quite reasonable, keeping in view the other taxable income of the assessee. The calculation made by AO gives absurd results which cannot be the intention of the legislature. In favour of assessee.

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• 2013 (5) TMI 16
  Deduction claimed under section 80IA - CIT(A) passed order u/s 263 as the assessment made by the AO is erroneous inasmuch as it is prejudicial as the deduction claimed u/s 80IA has wrongly being allowed - assessee had set-up a Wind mill and commencement of its operation was started on 29th September 2006 i.e., assessment year 2007-08 - Held that:- Decision heavily relied upon by the DR of Hyderabad Chemical Supplies Ltd. (2011 (1) TMI 173 - ITAT HYDERABAD) will not apply to the facts of the present case, as in that case, the wind mill started its operation on 31st March 1999 and the first year of operation was assessment year 1999-2000. Thus, in the assessment year 1999-2000, the definition of "initial assessment year" was already there in the Act and there was no provision through which the assessee could have chosen its initial assessment year. This provision was brought in statute w.e.f. 1st April 2000, by virtue of section 80IA. In assessee's case, as specifically stated is for initial assessment year i.e., assessment year 2008-09 and its claim for deduction under section 80IA made for the first time from assessment year 2008-09, has not been disputed. Claim of deduction u/s 80IA was based on possible legal view which has been allowed by the AO, therefore, it cannot be held erroneous. Merely because the AO in the subsequent assessment year has followed Special Bench decision of ACIT v/s Goldmine Shares [2008 (4) TMI 405 - ITAT AHMEDABAD] which admittedly was rendered with regard to the claim of deduction starting from the assessment year 1996-97 wherein there was no concept of assessee choosing his option of initial assessment year in view of the provisions prior to the amendment, it cannot be held that the assessee's claim of initial assessment year being assessment year 2008-09 and its claim for deduction allowed by the AO under section 80IA is erroneous in law. In favour of assessee. Disallowance of foreign travel expenses has been made on fixed percentage of 4% of the expenses despite that the AO has noted that the desired details / documentary evidences were not submitted - Held that:- Such a view taken by the AO cannot be disturbed without any difference in the facts and circumstances of the case. Thus, no merits in the impugned order passed under section 263 by CIT for cancelling the assessment and to re- examine the same. In favour of assessee.

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• 2013 (5) TMI 15
  Rectification of orders - as per assessee AO of recomputing interest u/s 234B at Rs.6,72,07,276 as against Rs.6,59,46,319 charged per order dated 28th March, 2008 passed under section 143(3) i.e. completed assessment - whether the interest payable under section 234B which has to be first adjusted against the payment made under section 140A has to be calculated with respect to total income as declared in the return or total income determined in the regular assessment? - Held that:- In view of the provisions of section 140A r.w.s. 234B, the interest that could have been charged/ adjusted as part of interest under section 234B will have to be calculated on the returned income but not on the basis of assessed income. AO, who originally completed the assessment, has correctly calculated as per the provisions of section, whereas the present AO wrongly interpreted the provisions in the order under section 154. This issue was elaborately discussed in ACIT vs. M/s C.C. Chokshi & Co (2010 (5) TMI 698 - ITAT MUMBAI) wherein held that the interest payable under section 234B for the purpose of adjustment against the tax paid under section 140A has to be computed with respect to assessed tax determined on the basis of total income declared in the return. but only for the limited purpose of adjustment of payment made u/s. 140A against interest payable under section 234B while making computation of interest payable by the assessee which has to be computed with respect to the total income determined in regular assessment as per the definition of assessed tax given in section 234B. Thus the orders of AO under section 154 and the CIT (A) are bad in law. The order under section 143(3) originally passed by AO has correctly worked out the interest under section 234B which has to be upheld. Therefore order u/s 154 passed by AO canceled - Assessee's grounds are allowed.

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• 2013 (5) TMI 14
  Disallowance under section 40(a)(ia) - Non dedction of TDS - whether the contract need be written and oral contract? - CIT(A) deleted the addition - Held that:- AO has not given any finding of fact as to whether these payments are pursuant to a contract between the appellant and these parties. The assessee argued and submitted that no written or oral contract is made with these parties therefore, the provisions of section 194C are not attracted at all. Besides this, the labour charges includes the major chunk of purchases also. Therefore, in the absence of clear finding of fact, it cannot be presumed that the payments to first five parties are made in pursuance of a contract between the contractor and the appellant. In favour of assessee. Difference in capital a/c - CIT(A) deleted the addition - Held that:- Force in the arguments of assessee that there cannot be made any addition because only the balance was reflected in the firms capital a/c whereas in the proprietary capital account two separate entries shown. These copies were furnished by appellant during the course of assessment proceedings too. Hence explanation furnished by the appellant is correct and the mistakes are bonafide and feasible one. Thus, the impugned addition is deleted in view of the facts and circumstances of the instant case. In favour of assessee. Addition on account of alleged unexplained cash credit - Held that:- It was submitted before the CIT (A) that the amount of Rs.2.50 lakhs was part of the amount taken from the proprietary concern on which AO had already made the addition (Ground No.2) and further capital a/c shows opening balance of Rs.6,54,618. It was also further submitted that assessee has discharged its onus and AO on a misconception made the addition.In favour of assessee. Addition on loan - Held that:- Credit does not pertain to the year and there is no cessation of liabilities during the year so as to bring the amounts under the provisions of section 41(1). The Revenue has not made out any case why the same is taxable as income. Appeal of Revenue dismissed.

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• 2013 (5) TMI 13
  Disallowance u/s 40(a)(ia) - reimbursement of expenditure paid to Prestige Holidays Resorts - Held that:- Since it is a fact that assessee has reimbursed the telephone charges, printing and stationery and business promotion expenses in terms of Clause 7 of the marketing agency agreement to the said Prestige Holidays Resorts Pvt Ltd, the reimbursement of the expenditure does not call for any deduction of tax, as held by in SIEMENS AKTIONGESELLSCHAFT case [2008 (11) TMI 74 - BOMBAY HIGH COURT] relied upon by the CIT (A). Whatever commission was paid by assessee, that amount was already covered by the TDS on which there is no dispute. In favour of assessee. Tax an 50% of the money forfeited by assessee from the defaulted members - Held that:- Assessee is consistently following the accounting treatment in a rationale manner as 50% of the retention money was kept aside by assessee to meet the eventuality of having to refund the amounts to prospective customers who do not pay the remaining installments because of genuine reasons of emergency, accident, hospitalization etc. This method of accounting has been followed by assessee right since its inception and has always been accepted in earlier years. Had AO excluded the amount offered during the year on the same principles in which he brought the balance 50% of the amount to tax, there could have been some justification in the action of AO. He did not do so. In favour of assessee

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• Customs

• 2013 (5) TMI 12
  Drawback claim denied - As Authority viewed that query raised to the exporter appellant while processing the shipping bills was deficiency memo and when the appellant did not reply to the same drawback claim was deniable - Held that:- Reading of the order dated 17.3.2010 passed by the Asst. Commissioner denying the claim it is conceivable that the claim of drawback made by the appellant suffers from deficiency which was brought to the notice of the appellant on 15.01.2010. It appears that annexure ‘A’ appearing in appeal folder was accompanying document to the show cause notice dated 15.10.2010. It is not possible for a common man to understand as to the nature of deficiency of drawback claim conceived by Adjudicating Authority from a simple reading of show cause notice and annexure thereto to lead defence. Asst. Commissioner noticed that while processing shipping bills queries raised to the exporter resulted in deficiency memo which remained un-replied. On the ground of no reply, he rejected the claim of the appellant. Commissioner without looking into the gravity of the matter under Rule 13 and also to the violation of natural justice, proceeded to decide the issue under Rule 15 of Drawback Rules, 1995 hurriedly burring justice. As the circumstance of Rule 15 has not arisen because the appellant has been directed to resubmit the claim with the requisite documents he should not have been in a hurry to dismiss the prayer of the appellant. Once the original claim is under dispute and that reaches to its logical conclusion, supplementary claim is inconceivable. Thus resend the matter back to Asst. Commissioner directing him to issue a fresh notice stating clearly deficiency in respect of each shipping bill within 3 months of receipt of this order so that the appellant shall get recourse to natural justice.

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• 2013 (5) TMI 11
  Enhancement of assessable value as appellant failed to produce the invoice issued by the manufacturer - confiscation of goods - Held that:- It is settled law that the quotation cannot be the basis for rejection of transaction value unless any other positive evidence of contemporaneous import. The price declared by the importer cannot be disbelieved on the ground that the manufacturers invoice had not been produced particularly when the goods were purchased from a trader on high sea sales. Revenue failed to produce any material to discard the declared price - enhancement of the declared value is not sustainable. In favour of assessee.

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• 2013 (5) TMI 10
  Refund claim rejected as time bared - whether limitation under section 27 of the Custom Act will be applicable? - Held that:- Appellant being importer filed Bill of entry No. 864954 dated 28.05.2010. Since the goods were found mis-declared, case was Adjudicated by the Additional Commissioner by the order in original 26.08.2010. Thereafter goods were ordered to be re-exported to the original supplier. The amount of Rs. 3,26,954/- was paid by the importer as duty against the Bill of entry in question. Since amount was paid as duty to Custom by the importer, the provision of section 27 of the Custom Act, are applicable to the present case. Since the duty was paid 01.06.2010 and refund was filed on 26.09.2011 case is hit by the time limitation as provided under the Custom Act. Accordingly the Commissioner (Appeal) has rightly rejected their appeal on the ground of time bar. Against assessee.

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• Corporate Laws

• 2013 (5) TMI 9
  Informant avail Loan at the rate of 5.7% - Informant fell in defaults and therefore his loans were adjusted at the rate of 9% - as per informant respondent was charging excessive interest at the rate of 9% and the agreement which was got signed under the duress and he was actually asked to sign on the dotted lines with the attitude of take it or leave it – Abuse of dominance position - Contravention of Section 4 of the Act Held that:- Commission has gone thoroughly into the report of the DG and has found fault with the finding of the DG that the respondent was in a dominant position. The CCI found that there were number of entities both in public and private sector providing finances for the commercial vehicles throughout the country and as such market share of 8% could not be a pointer to the respondent enjoying a dominant position in the relevant market. Thus, the CCI has dismissed the matter suggesting that there has been no contravention of either Section 3 or 4 of the Act. As for the matter of interest charged, the CCI was not expected to examine the rates of interest or as to whether the interest was excessively charged unless the CCI came to the conclusion that this was nothing but the abuse of the dominance. Appeal is dismissed.

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• 2013 (5) TMI 7
  Maintainability of Winding up petition – Petition for winding up was filed before the Company Court on the ground that the company(appellant) was unable to pay its debts - In affidavit opposing admission was filed contending that since the Respondent was a secured creditor, a Company Petition for winding up at its behest was not maintainable. – This defense was rejected by the Company Judge, while relying upon a judgment of a Division Bench of this Court in Bharat Overseas Bank Ltd. v. Shree Arcee Steels P. Ltd. [1985 (3) TMI 191]. Held that - Having regard to the position in law as consistently followed in the judgments of the Madras High Court in Karnatak Vegetable Oils and Refineries Ltd. v. Madras Industrial Investment Corpn. [1953 (12) TMI 14] and in Calcutta High Court in Techno Metal India (P.) Ltd. v. Prem Nath Anand [1973 (8) TMI 65] and as reiterated in the judgment of the Company Court in Canfin Homes Ltd. v. Lloyds Steel Industries Ltd. [2001 (3) TMI 933].,it is not possible to accept the submission which was urged on behalf of the Appellant. The law does not impose an unreasonable condition of requiring a secured creditor to forsake his security before he asserts a right to urge that a company which is unable to pay its debts should be wound up. The Respondent has stated before the learned Company Judge, when the petition for winding up came up for hearing that it was not possible for the Respondent to recover her dues by the sale of the land in respect of which a security has been created in favour of the Respondent. The claim of the Respondent is still to be proved in the course of the winding up proceedings. A secured creditor who has a mortgage, charge or lien on the property of the company as security for her debt may either: (a) enforce the security and prove in the winding up for the balance of the debt after deducting the amount realised; or (b) surrender the security to the Liquidator and prove for the whole of the debt as an unsecured creditor; or (c) estimate the value of the property subject to her security, and prove for the balance of the debt after deducting the estimated value; or (d) rely on the security and not prove in the winding up proceedings. A secured creditor has the option of relinquishing his security and/or proving the entirety of his debt in the course of winding up. If the secured creditor does so in the course of winding up proceedings, the security will ensure for the benefit of the body of creditors. On the other hand, it is open to a secured creditor to prove in the course of winding up proceedings to the extent of his debt which has not been realised outside proceedings for winding up by either accounting for the amount that has been so realised or by estimating the value of the property subject to security so as to enable him to prove in respect of the balance of the debt. On either view of the matter, that stage is still to arrive. For these reasons, we are of the view that the learned Company Judge was not in error in initially admitting the Petition and thereafter making the Company Petition for winding up absolute. No case for interference in appeal.

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• Law of Competition

• 2013 (5) TMI 8
  Unfair trade practice - Application is filed u/s 19(1)(a) of the Competition Act, 2002 Franchisee agreement territorial exclusivity to the informant for a period of 3 years. - As per information a dispute arose between the informant and the OP when the informant came to know that the OP had initiated process of setting up its own Company-Run and Company-Operated (COCO) Saloon in breach of the territorial exclusivity given under the agreement. The informant initiated arbitration proceedings against the OP. During pendency of the arbitration proceedings the OP terminated the franchisee agreement. The informant has alleged that the action of OP to set up COCO Saloon in contravention to the terms of the agreement was an unfair trade practice and an abuse of its dominant position under the Franchisee Agreement. Thus, as per the informant the acts and conduct of the OP were in contravention of the provisions of sections 3 and 4 of the Act. Held that It is necessary to consider as to what will be the relevant market in this case and in this case would be the market of beauty and wellness services exclusive for women through saloon in the territory of Gurgaon as well as Delhi. The next issue to be considered is about dominance of OP in the relevant market. There are very few corporations in this market and these corporations cater to the need of only small category of customers and their presence is only by way of few saloons. One can find beauty saloons/parlours almost in every street/mohalla of Delhi. Some examples of such saloons and parlours running in Delhi and Gurgoan are Trends Beauty Point, Cure Curve, Radiance, Shreyas Shanhnaz Husian Signature Salon etc. Many of these beauty saloons are one person show and many have employed several women beauticians to cater to the needs of their clients. Thus the question of abuse of dominance by Lakme would not arise. In view of the above discussion, there does not exist a prima facie case for investigation by the Commission. It is a fit case for closure under section 26(2) and is hereby closed.

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• Service Tax

• 2013 (5) TMI 28
  Cenvat Credit of Service Tax paid to BSNL on Access Deficit Charges (ADC) - a facility or a service - Held that:- Not in agreement with the argument of dept. that BSNL is providing only a facility and not any service to the appellant. After classifying the facility provided by BSNL as Telecom services and collecting the service tax under such head, Revenue cannot turn around and argue that that this is not a service. Even otherwise, the service provided by BSNL to the appellant is a Telecom service as defined in section 65 (109a) of Finance Act, 1994. Since this service is required by the appellant for providing output services to appellants customers, it is obviously an input service as per definition at Rule 2 (l) of Cenvat Credit Rules, 2004. Therefore the appellant is entitled to take Cenvat credit on such services. In favour of assessee. Demand of Service Tax on account of common recharge facility with M/s.Aircel Ltd., Coimbatore & Demand of Service Tax under reverse charge on amounts paid to foreign telecom companies for international outbound roaming service - Held that:- Remand the matter to the respondent-Commissioner i.e. Commissioner of Service Tax, Chennai who has already examined similar matter to give a detailed finding whether the issue involved in this appeal is in any way different from the one already adjudicated by Order-in-Original No.68/2011 dt. 30.11.2011 and pass appropriate orders keeping in view the Apex Court’s decision in the case of Jayaswals Neco Ltd. (2006 (1) TMI 133 - SUPREME COURT OF INDIA).

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• 2013 (5) TMI 27
  Vocational training - Exemption/immunity on the basis of Notification Nos. 9/2003-ST dated 20.6.2003 and 24/2004-ST 10.9.2004 denied as the course offered by the appellant cannot be described as a vocational course - appellant is a commercial training and coaching centre which imparts commercial training and coaching within the meaning of the expression as defined in Section 65(27) read with Section 65 (26) of the Finance Act, 1994 - Held that:- The exemption Notification merely requires that to be eligible for such exemption the institution must be a commercial training or coaching centre (which the appellant admittedly is, even according to Revenue) which provides vocational coaching or training that imparts skills which would enable the trainee to seek employment or undertake self-employment, directly after such training or coaching & does not require establishment of the fact whether one or some or all of the students of the assessee institute have obtained employment or have pursued self-employment after conclusion of the course of instruction. Thus exemption benefit allowed - In favour of assessee.

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• 2013 (5) TMI 26
  Condonation of delay of 657 days in filing appeals before Commissioner (Appeals) - Held that:- Appeals in the present case not filed in time. There is abnormal delay even after receipt of impugned orders on time. An appeal shall be presented within three months from the date of receipt of the order of such adjudicating authority, relating to service tax, interest or penalty & further period of three months on sufficient cause. Accordingly the appeals have not been filed in stipulated period as has been dealt with in Section 85 of the Finance Act 1994. As the delay occurred at in filing appeal before Commissioner (Appeals) level and Tribunal cannot use its power of condonation of delay which is exercisable for orders passed by Commissioner (Appeals). COD Application rejected.

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• 2013 (5) TMI 25
  Service Tax liability under reverse charge mechanism on the GTA services - Held that:- Documents produced indicate that the transport agencies have discharged the Service Tax liability and these documents seems were not produced before the lower authorities thus need factual verification and the adjudicating authority should be given an opportunity to appreciate such evidence. Remit back the case back to adjudicating authority to reconsider the issue afresh.

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• 2013 (5) TMI 24
  Failure of pre-deposit - Held that:- As it is represented petitioner /appellant that an appeal to the Punjab & Haryana High Court was preferred against the order dated 11.12.2012, in April 2013 directing to deposit service tax within stipulated time but no order was placed, thus mere filing of an appeal does not eclipse the order dated 11.12.2012. Thus there is default in compliance with the order dated 11.12.2012 of this Tribunal. Consequently, there is failure of pre-deposit by Municipal Council, Karnal.

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• Central Excise

• 2013 (5) TMI 6
  Admissibility Suo-moto credit –Department submitted that the same could have been taken by following the refund procedure under Section 11B of the Central Excise Act, 1944. Held that – Following the judgement of Shyam Textile Mills & ANR vs. UOI & Ors [2004 (6) TMI 590], it is held that suo-moto admissible Cenvat credit taken, after getting a favourable decision from the first appellate authority, is correct. Accordingly, the Order in appeal is upheld and appeal filed by the Revenue is rejected.

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• 2013 (5) TMI 5
  Condonation of delay - Held that:- Unable to look into the merits of the matter even if delay condoned as FAA has dismissed the appeal for filing the appeal before him after 173 days of receipt of order in original. Thus the applicant has no case to argue. An appeal filed belatedly before the first appellate authority and beyond the time period delay cannot be condoned by either Commissioner (Appeals) or Tribunal or direct first appellate authority to hear the appeal. See Singh Enterprises (2007 (12) TMI 11 - SUPREME COURT OF INDIA) - COD dismissed.

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• 2013 (5) TMI 4
  Violation of Central Excise procedures - CENVAT credit denial - case of the revenue that manufacturing of DG Sets was being carried out in the factory premises of Appellant No. 1, whereas the Central Excise registration was taken at the name and address of appellant No.2 - as per dept. entire Central Excise duty due on the finished goods has been discharged by the appellants - Held that:- It is clear from the facts that Appellant No.2 was having a very small area in the registered premises which was not sufficient for any manufacturing/ storage activity. During investigation also the premises of Appellant No.2 was visited but neither the finished goods nor raw materials were found present. All the manufacturing activities and the records of Appellant No.2 were being maintained at the factory premises of Appellant No.1. There is nothing on record to show that any goods manufactured at the premises of Appellant No.1 were not made out of raw materials received in the name and address of Appellant No.2. It is established from the above observations that Appellant No.1 and Appellant No.2 have not followed the Central Excise procedures but the inputs have been completely used in the manufacture of final products which are cleared on payment of duty. It is settled law that for failure to follow the procedures, cenvat credit cannot be denied - thus cenvat credit with respect to inputs received in the name and address of Appellant No.2 is admissible to the Appellant No.1 from where the manufactured goods were cleared on payment of duty - no further duty liability is attracted from the appellants once the duty of the finished goods is discharged - enalties imposed upon the appellants under Section 11AC, under Rule 15, Rule 25 & personal penalty upon Shri Manoj C. Phutane, Managing Director are required to be set-aside.

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• 2013 (5) TMI 3
  Application for waiver partly allowed - Held that:- Appellant No. 1 has been given the benefit of waiver of pre-deposit of the duty amount. The transactions of the other appellants have been found to be bogus, therefore, the order passed by the Tribunal calling upon the other appellants to deposit 50% of the duty imposed and 10% of the penalty against some of the other appellants cannot be said to be suffering from any patent illegality giving rise to any substantial question of law.

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• 2013 (5) TMI 2
  Application of waiver of pre-deposit as directed to deposit Rs.1 crore within a period of 8 weeks - benefit of the outward transportation denied on or after 01.04.2008 in view of the amendment in the Rules - as argued by assessee that the goods were to be delivered by the appellant F.O.R. and the place of removal of goods shall be the destination of the consumer - Held that:- The question which arises for consideration in appeal before the Tribunal is whether the place of removal is the factory premises of the appellant or the point of delivery to the consumer. Such question is a disputed question of law and facts - No substantial question of law arises for consideration at the stage of waiver of pre deposit of the amount of duty. Grant four weeks’ time to the appellant to deposit the amount of Rs.1 crore as directed by the Tribunal.

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• 2013 (5) TMI 1
  Recovery - Irregular availment of CENVAT Credit of Service Tax - demand notice calling upon the petitioner to deposit the amount together with penalty within 10 days during the pendency of the appeal - Held that:- As decided in Larsen and Toubro vs. Union of India and Others [2013 (2) TMI 188 - BOMBAY HIGH COURT] the provisions contained in the impugned circular dated 1 January 2013 mandating the initiation of recovery proceedings thirty days after the filing of an appeal, if no stay is granted, cannot be applied to an assessee who has filed an application for stay, which has remained pending for reasons beyond the control of the assessee. Thus this petition allowed as demand notice directed to be kept in abeyance until such time the appellate authority passes an order on the interlocutory application filed by the petitioner in the appeal

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• CST, VAT & Sales Tax

• 2013 (5) TMI 32
  Inter-State v/s Intra state sales - movement of GAS from Andhra Pradesh to UP / Gujarat - Place of delivery - Place of transfer to title of goods - petitioner is a public limited company engaged in business of extracting and refining petroleum and petro-chemical products - liability to VAT - assessee claimed refund claim on VAT paid - Held that:- As from the reading of contractual obligation in terms of GSPA, there appears to be no reason to disagree with the petitioner's contention that the delivery point of the natural gas to the buyer is at Gadimoga. The quantity of gas delivered to the buyer is measured in accordance to MMBtu Scale at delivery point and according to GSPA, it is the buyer who owes responsibility with regard to damage or loss caused, if any. Supply of natural gas by the petitioner is subject to execution of gas transportation agreement requiring the transporter to transport gas from delivery point to the inlet of buyer. It is for the buyer to make necessary arrangement for supply of gas from delivery point to buyer's facility. Delivery of gas from one pipeline to other in the course of transportation of gas to buyer's facility according to GSPA is for the purpose of making integrated and continuous movement of gas from delivery point to buyer's facility. From the aforesaid reading of the contract, it appears that the petitioner or the seller is relieved from its liability immediately after delivery of possession of gas to the buyer at the sale point, i.e., Gadimoga in Andhra Pradesh. The seller or the petitioner shall be entitled for payment of cost of gas supplied at Gadimoga for the measured quantity. Virtually, the seller or the petitioner is absolved of the liability after delivery of gas at Gadimoga to the transporter, i.e. RGTIL and shall be entitled for payment of sale consideration on the basis of delivery made to RGTIL and not at Orai in the State of U.P. Accordingly, in view of the provisions contained in Section 3 of the CST Act readwith definition of sale given in the CST Act or the VAT Act or even Sales of Goods Act, sale takes place in Gadimoga itself so far as petitioner is concerned. Delivery point being at Gadimoga, the sale consideration also co-relates to the delivery point and thereafter natural gas is transported to outside the State of Andhra Pradesh and comes to Uttar Pradesh via Gujrat, thus it appears to be inter-State sale. It has rightly been argued by the petitioner that GSPA has been entered into between the parties in pursuance to statutory compulsion under 2008 Regulation read with PSA. Argument of learned Senior Counsel for the State i.e. it is merely an agreement to sale seems to be misconceived argument. It has been rightly submitted Senior counsel that the terms of contract should be treated on their face value and be presumed to mean what they say and must be acted upon unless proved to be sham or farce vide. A combined reading of all three agreements reveals that the petitioner provides gas at Gadimoga to the buyer and payment is made in terms of measurement done at the entry point situated at Gadimoga by the 4th day of receipt of invoice. The movement of goods, in the present case, is for outside the State of Andhra Pradesh but the sale in terms of Section 3 takes place in the State of Andhra Pradesh at Gadimoga in pursuance to the conditions contained in GSPA. In view of Section 7 of the VAT Act, the State Government may not impose tax to a sale or purchase taking place outside its territory. In exercise of its legislative power to impose tax on sale or purchase of goods under Entry 54 of the State List read with Article 366(29-A)(b), the State Legislature, while imposing a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract is not competent to impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. As admittedly the natural gas is handed over to bailee or transporter in terms of agreement at Gadimoga and after travelling a long distance it reaches State of U.P. Movement of lean gas from Gadimoga itself is indicative of the fact that the sale in question of inter-state sale. As there is no material on record nor there is any substance in the argument advanced on behalf of the State of U.P. that they have jurisdiction or statutory right to impose VAT ignoring statutory mandate of Central Sales Tax Act,1956 read with constitutional provisions (supra) and 2008 Regulation. Hence, the sale transaction which is the subject matter of the instant case is not an intra-state sale but is an inter-state sale and State of U.P. lacks jurisdiction to impose tax (VAT). Section 43 of the VAT Act provides that the amount deposited by assessee which is not due as a tax be held by the State Government as a trustee and in case claimed, should be refunded. Thus, in case, tax realised is not passed on the consumer then under the statutory mandate assesse seems to have got right to seek refund but if it is passed on to the consumer then it may be refunded to consumer in such a manner as may be prescribed in the statute for the purpose. It has been submitted by the petitioner's counsel that it has not been passed on to the consumer while selling the fertilizers but reliance has recovered from the respondents no. 4 to 10 who are also assessee. Accordingly, there appears to be no reason to held that state is not liable to refund the tax which has been charged without jurisdiction.

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• 2013 (5) TMI 31
  Seizure orders - goods not accompanied by proper documents/invoices - assessee contested that he produced desired documents - Held that:- The mandate to consider the documents produced in response to the show cause notice is only with regard to existing genuine and bona fide documents which for one reason or the other could not be produced when the goods were detained but this mandate would not apply to documents which were not in existence at the relevant time and were procured or manufactured subsequently. Thus the transit declaration form which was not in existence when the goods were detained cannot be regarded as a bona fide one. In its absence the goods were rightly detained. No illegality or error of law in the order of seizure. Estimation of market value of goods - Seizing authority assessed the estimated market value to be around Rs.72 lacs on the basis of the value appearing in the news paper but the Tribunal refused reduced it to Rs.25 lacs - Held that:- Tribunal in reducing the value to Rs.25 lacs has not assigned any reason and no material has been referred to for so assessing the market value. There is no dispute that the assessee before the passing of the seizure order has produced three invoices relating to the goods. The authorities could have verified and assessed the value of the goods on the basis of the said invoices but the said exercise was not undertaken. Standing Counsel is unable to justify the estimation of Rs.72 lacs or 25 lacs as the value of the goods.In view of the aforesaid facts and circumstances, the estimation of the market value of the seized goods at Rs.25 lacs is not acceptable and the same is prima facie taken to be Rs.9 lacs as per the invoices relating to the goods produced at the time of seizure.

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• 2013 (5) TMI 30
  Provisional assessment challenged - petitioner is registered under the Tamil Nadu General Sales Tax Act, 1959 and Central Sales Tax Act, 1956 importing Superior Kerosene Oil and suppling to various industries - as per department the sale had occasioned inside the State of Tamil Nadu and it is not a case of inter-State sale - Held that:- The order of provisional assessment suffers from total non-application of mind as well as non-consideration of the documents and records produced by the petitioner. The authority states that she had examined the objections and copies of records and therefore the production of records is not in dispute. If the records were taken for consideration, it is not clear as to how the authority can state that no evidence was filed to show the movement of goods from other States to the local purchasers based on the covenant. This statement appears to be a fallacy, as the purchase orders had already been produced showing the origin of goods from Cochin to the purchaser at the State of Tamil Nadu. No evidence to show that the purchase orders were transmitted to the Cochin branch is not acceptable as the petitioner has submitted the central excise records to show the delivery of goods after import and the payment of central sales tax at 4% supported by the certificate issued by the Assistant Commissioner (Assessment), Special Circle-II, Commercial Taxes Department, Ernakulam. Those records have not been taken into consideration by the authority. Records have been camouflaged to show that they were inter-State sales from Cochin is also rejected as the authority has not taken pains to state as to which document has been camouflaged and in what manner to show the inter-State sales from Cochin. It is, therefore, clear that all these allegations are mere conjectures and surmises on the part of the authority, without analysing the documents produced by the petitioner and what makes the matter worse is that, there are no reasons recorded as to which of the documents are invalid under law and which of the documents have been camouflaged to show the inter-State sales and how those documents are inadmissible in law. The question of suppression, which is also the reason for levy of penalty, appears to be unsupported by any material. Thus the first respondent-Commercial Tax Officer has passed a non-speaking order, bereft of reasons, without application of mind to the records produced. The entire findings are in the realm of conjectures and surmises and, therefore, the petitioner was justified in approaching this Court to interfere with the same - the impugned order is set aside and the matter is remitted to the first respondent-authority for re-consideration of the entire issue with a direction to pass a reasoned order on merits after affording opportunity to the petitioner - in favour of assessee.

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• 2013 (5) TMI 29
  Bone meal - whether lies under Entry 17 of the Third Schedule to the KGST Act or under Entry 57 to the first Schedule among fertilizers - exemption from tax disallowed - Held that:- The judgement of Arya Vaidya Pharmacy and Another Versus State of Tamil Nadu [1989 (3) TMI 355 - SUPREME COURT OF INDIA] as relied by assessee have had application to the facts of this case, if Court had accepted that 'bone meal' had qualified to be an organic manure and which case alone its exclusion would be discriminatory. Since it has been held that 'bone meal' did not qualify to be an organic manure for the reason that it is not produced by a natural process, the principle laid down by the Apex Court has no relevance. Going by the words of the statute only those items which are produced or derived naturally are eligible for inclusion in Item 17. Even if the case of the petitioners is accepted that would only mean that certain items which are ineligible to be included are also included in the Third Schedule. In view, even if what is contended is factual, petitioners cannot say that yet another ineligible items should also be included through the intervention of this court. Therefore, this argument raised by the learned counsel for the petitioners also cannot be accepted and the relief sought for cannot be granted on that basis. Bone meal cannot qualify as an organic manure for the purpose of Entry 17 of the Third Schedule to the KGST Act. These writ petitions were entertained by this Court and on the prima facie case made out, this Court also granted stay. Therefore, it will not be fair to penalise the petitioners by making them liable for interest on the tax amount. Thus direct that if the petitioners pay the tax due under the assessment orders, which are stayed by this Court within four weeks from today, they will be relieved of the liability for the payment of the interest.

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