TMI Tax Updates - e-Newsletter
May 20, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
Income Tax
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Unabsorbed depreciation - whether unabsorbed depreciation should be allowed before the allowance of the unabsorbed investment allowance - This scrambled egg cannot be unscrambled now. - SC
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Once the unabsorbed carried forward depreciation has become a part of the depreciation of the current year, it is not open to the assessee to bifurcate the two again and exercising its choice to claim the depreciation of the current year under Section 32(1) of the Act and take a position that since unabsorbed depreciation of the previous years is not claimed, it cannot be thrusted upon the assessee. - SC
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Prosecution proceedings under section 276B - TDS default - If the offence is compounded before institution of the proceedings there would be no question thereafter of instituting proceedings for a failure referred to in section 276B of the Act. - HC
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Period of limitation for rectification of mistake u/s 154 - doctrine of merger - where the re-assessment under Section 147 is done, the initial order of assessment under Section 143 (3) ceases to be operative - HC
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Penalty u/s 271(1)(C) - The assessee is not a proprietary concern, where one can think of disallowances made on personal use. In such a circumstance, penalty is not exigible. - AT
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Disallowance of claim of royalty payment - The royalty amount is paid to provide operational and commercial support. Under these set of facts, we are of the view that the royalty amount paid by the assessee should be treated as revenue expenditure only - AT
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Disallowance u/s 40A(2)(b) - excessive remuneration - AO had not brought any material on record to substantiate that as to how and in what manner the remuneration paid to the Directors was excessive. He had also not given any basis for allowing the remuneration @ 20% of the total receipts - No addition - AT
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Unexplained loans - assessee was required to prove the capacity of the creditors to advance money, but the assessee could not produce the bank statement or other evidence to prove the financial creditworthiness - additions confirmed - AT
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TDS on Payment made for transfer of user rights of software - no liability can be fastened on the assessee to deduct tax at source on the basis of subsequent amendments made in the Act, in relation to earlier payments made to Non-residents, when the said amendment was not in force - AT
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Revenue expenditure or capital expenditure - mere increase in the room size due to inclusion of balcony area would not result in creation of any new asset or increased profit yielding capacity so as to render the expenditure capital in nature. - AT
Service Tax
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The increase in Service Tax rate will come into effect from 1st June, 2015. - Except (i) services provided by the Government or local authority to a business entity and (ii) Swachh Bharat Cess - Date in respect of these two shall be notified later.
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Exempts taxable services provided under the Power System Development Fund Scheme of the Ministry of Power - Notification
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Amendment in the Mega Exemption Notification relating to (i) Job work (alcoholic liquors for human consumption) and (ii) Services by way of right to admission shall be effective from 1-6-2015 - Notification
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Revised rates of compounded levy of service tax under Rule 7, 7A, 7B and 7C shall be effective from 1.6.2015 - Notification
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Increased rate of service tax from 12.36% to 14% shall be effective from 1-6-2015 - Date in respect of (i) services provided by the Government or local authority to a business entity and (ii) Swachh Bharat Cess shall be notified later - Notification
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Amends Abatement Notification no. 26/2012 ST dated 20-6-2012 - Removes the entry related to Chits in the definition part - Notification
Central Excise
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Amends notification no. 12/2014 CE(NT) - Refund of Unutilized Cenvat Credit under Rule 5B of Cenvat Credit to the Service Provider - No refund in respect of supply of manpower for any purpose or security services w.e.f. 1-4-2015 - Notification
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Amends Rule 6 of the Cenvat Credit Rules, 2004 - Rate of amount of reversal of Credit increased from 6% to 7% - Notification
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Rule 8(3A) is ultra vires of Article 14 on the ground of arbitrariness. - all the proceedings initiated by the Department in respect of the respective assessees, invoking the said rule by demanding duty along with interest by denying the benefit of CENVAT credit have to be necessarily set aside - HC
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Disallowance of CENVAT Credit - Capital Goods - Welding electrodes - it cannot be said that "Welding Electrodes" satisfy the requirement so as to constitute 'component' - HC
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Clandestine manufacture and removal of goods - The appellant failed to satisfy to the authority below that its entries in the excise records were correct - Genuinity of sale of iron ore at the railway sliding was failed to be proved - prima facie case is against the revenue - AT
Articles
Notifications
Central Excise-
15/2015 - dated
19-5-2015
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CE (NT)
Amends notification no. 12/2014 CE(NT) - Refund of Unutilized Cenvat Credit under Rule 5B of Cenvat Credit to the Service Provider - No refund in respect of supply of manpower for any purpose or security services w.e.f. 1-4-2015
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14/2015 - dated
19-5-2015
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CE (NT)
Amends Rule 6 of the Cenvat Credit Rules, 2004 - Rate of amount of reversal of Credit increased from 6% to 7%
Customs-
18/2015 - dated
18-5-2015
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ADD
Supersedes notification No. 10/2012- Customs (ADD), dated the 24th January, 2012 so as to withdraw levy of anti-dumping duty on imports of morpholine, originating in or exported from USA and to continue levy of anti-dumping duty on imports of morpholine, originating in or exported from the People’s Republic of China and European Union up to the 19th September, 2016
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46/2015 - dated
18-5-2015
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Cus (NT)
Modification in the Shipping Bill (Electronic Declaration) Form - Amends Notification No. 80/2011-Customs(N.T.)dated 25.11.2011
Service Tax-
17/2015 - dated
19-5-2015
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ST
Exempts taxable services provided under the Power System Development Fund Scheme of the Ministry of Power
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16/2015 - dated
19-5-2015
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ST
Amendment in the Mega Exemption Notification relating to (i) Job work (alcoholic liquors for human consumption) and (ii) Services by way of right to admission shall be effective from 1-6-2015
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15/2015 - dated
19-5-2015
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ST
Revised rates of compounded levy of service tax under Rule 7, 7A, 7B and 7C shall be effective from 1.6.2015
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14/2015 - dated
19-5-2015
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ST
Increased rate of service tax from 12.36% to 14% shall be effective from 1-6-2015 - Date in respect of (i) services provided by the Government or local authority to a business entity and (ii) Swachh Bharat Cess shall be notified later - Prescribes effective date as 1-6-2015 on which the provisions of clauses (a), (c) and (f) of section 107, section 108, sub-sections (2), (3) and (4) of section 109, section 153 and section 159 of the Finance Act, 2015 shall come into force.
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13/2005 - dated
19-5-2015
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ST
Amends Abatement Notification no. 26/2012 ST dated 20-6-2012 - Removes the entry related to Chits in the definition part
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (5) TMI 600
Disallowance u/s 35D - assessee is not an industrial undertaking as it is dealing in the business of finance and leasing - Held that:- This is a recurring issue in the case of the assessee coming from the earlier years. In the A.Y. 1991-92, the Tribunal has set aside this issue to the file of the AO observing that the issue as to whether or not the activities of the assessee amounted to the assessee being an industrial undertaking has not been examined at all either by the Assessing Officer or the learned CIT(A). The Assessing Officer simply assumed that the assessee has not an industrial undertaking or that there was no extension of an industrial undertaking. The same course has been followed by the learned CIT(A). The assessee has also not relied upon any specific material produced before the authorities below in this context. Thus consistent with the view taken in the earlier years we also set aside this issue to the file to the AO with the similar directions. - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A - Assessee claimed deduction u/s 10(23)G on gross basis, whereas the AO held that in view of insertion of section 14A w.r.e.f. 01.04.1962 only the net income has to be included for the purpose of deduction against the gross interest and is to be reduced from the total income - Held that:- From the perusal of the accounts, it is prima facie seen that assessee’s net worth including reserve and surplus is more than the average investments. In such a situation, the applicability of decision of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT) and Reliance Utilities and Power Ltd. ( 2009 (1) TMI 4 - HIGH COURT BOMBAY) needs to be considered. Since this aspect has not been looked into either by the AO or by the Ld. CIT(A), therefore, we are of the opinion that this matter should be restored back to the file of the AO to examine this contention of the assessee - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A while computing the book profit u/s 115JA - Held that:- This issue had also come up for consideration before the Tribunal in assessee’s own case wherein after taking note of the decision of Hon’ble Delhi High Court in the case of CIT Vs. GOETZ India Ltd. [ 2013 (12) TMI 607 - DELHI HIGH COURT ] held that the amount disallowance u/s 14A under the normal provisions of the act is required to be added while computing the book profit u/s 115JA, has restored the matter to the file of the AO. Accordingly, we also restore this matter to the file of the AO, as the issue of disallowance u/s 14A has already been set aside to the AO. - Decided in favour of assessee for statistical purposes. Disallowance of club expenses - CIT(A) deleted the disallowance - Held that:- This issue too has been decided in favour of the assessee by the Tribunal after relying upon the decision of OTIS Elevator, reported in [1991 (4) TMI 53 - BOMBAY High Court ]. In the A.Y. 2002-03, the Tribunal following the decision of Hon’ble Supreme Court in the United Glass Mgf. [2012 (9) TMI 914 - SUPREME COURT] has held that, club membership fee for employees incurred by the assessee is allowable u/s 37(1). Accordingly, we hold that such expenses are allowable as business expenditure, which has rightly been deleted by the Ld. CIT(A). However, the order by the Revenue authorities do not indicate if any part of the impugned expenditure includes expenditure by way of entrance fees, which, where so, would assume the character of a capital expenditure, inadmissible u/s 37(1). - Decided in favour of assessee. Deduction of interest u/s 36(1)(iii) - CIT(A) allowed the claim - Held that:- As consistent with the precedence in assessee’s own case and also the fact that similar interest claim on the same borrowed funds have been held to be allowable u/s 36(1)(iii), we uphold the order of the Ld. CIT(A). - Decided in favour of assessee. Disallowance of depreciation on leased assets - CIT(A) allowed the claim - Held that:- it is an undisputed finding of fact that, the assets has been leased under operating lease and such lease transaction have been found to be genuine transaction. In such a case, the claim of depreciation on these assets is to be allowed in view of the decision of Hon’ble Supreme Court in the case of ICDS Ltd.[2013 (1) TMI 344 - SUPREME COURT] This view has been reiterated by the Tribunal in all the earlier years and also in the subsequent years. If depreciation has been allowed on the lease assets in the earlier years, then in this year same depreciation cannot be disallowed on the WDV of the leased assets. - Decided in favour of assessee.
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2015 (5) TMI 590
Unabsorbed depreciation - whether unabsorbed depreciation should be allowed before the allowance of the unabsorbed investment allowance in computing income when the assessee had not claimed the unabsorbed depreciation in its income-tax return though it had claimed depreciation for the current year as held by ITAT? - Held that:- By legal fiction unabsorbed depreciation becomes depreciation of the year in question and gets added to the depreciation of the current year. If that be so, is it the right of the assessee to partly invoke the provisions of Section 32 when it comes to depreciation of the current year and still claim that it has right not to claim unabsorbed depreciation allowance? On a plain reading of Section 32, it does not appear to be the position. Once the entire depreciation, namely, unabsorbed depreciation allowance of the previous year gets merged into the depreciation of the current year, it would become an integral part thereof. Legal fiction makes it one whole thereby making it possible to the assessee to claim set off of unabsorbed carried forward depreciation as well. A fortiorari, bifurcation thereof with option to claim depreciation of current year only and contending at the same time that portion of unabsorbed carried forward depreciation is not to be thrusted upon him as it is not claimed, would not be permissible. Once the unabsorbed carried forward depreciation has become a part of the depreciation of the current year, it is not open to the assessee to bifurcate the two again and exercising its choice to claim the depreciation of the current year under Section 32(1) of the Act and take a position that since unabsorbed depreciation of the previous years is not claimed, it cannot be thrusted upon the assessee. The position would have been different if the assessee had not claimed any depreciation at all. However, once the depreciation is claimed and while giving deductions the depreciation is to be set off against the profits of the current year prior to the unabsorbed carried forward investment allowance, it is the entire depreciation, namely, the depreciation of the current year as well as the unabsorbed carried forward depreciation, which is to be taken into account as by virtue of the fiction created under Section 32(2) of the Act, carried forward depreciation also partakes the character of depreciation of the current year. This scrambled egg cannot be unscrambled now. Otherwise, it would amount to negating the legal fiction that is created by the said provision, even to the limited extent. In fact, the case falls within the ambit of the said limited extent of legal fiction and gets covered by it. - Decided in favour of the Revenue.
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2015 (5) TMI 589
Prosecution proceedings under section 276B - tax deducted by the petitioner of an amount of ₹ 1.04 crores had been deposited by it into the Central Government Account after the due date prescribed under the Income Tax Act, 1961 - Held that:- Sub section (1) of Section 279 provides that a person shall not be proceeded against for an offence under section 276B “except with the previous sanction of the Commissioner or Commissioner (Appeals) or the appropriate authority”. Thus, if there is no sanction from the Commissioner or Commissioner (Appeals) or the appropriate authority, a person cannot be proceeded against for an offence under section 276B. This indicates that launching a prosecution is not mandatory. Sub section (1) clearly contemplates cases where prosecution may not be launched though there is a failure as contemplated by section 276B. That it is not mandatory to launch prosecution proceedings is clearer still from sub section (2) of Section 279 of the Act which provides that any offence under the Chapter, which includes one under section 276B, may be compounded by the Chief Commissioner or a Director General “before or after institution of proceedings”. The authority to compound the offence before institution of the proceedings makes it abundantly clear that it is left to the discretion of the authorities concerned whether or not to institute prosecution proceedings in respect of an offence under section 276B of the Act. If the offence is compounded before institution of the proceedings there would be no question thereafter of instituting proceedings for a failure referred to in section 276B of the Act. Even assuming, therefore, that there was an offence by the petitioner as alleged in the show cause notice, it is not necessary that the prosecution proceedings would be launched against it. It will be open, for the petitioner to contend that in the facts and circumstances of the case it ought not to be proceeded against for the alleged failure referred to in section 276B of the Act. It would also be open to the petitioner to apply to have the offence, if any, compounded. If the application is accepted, there would be no question of instituting prosecution against the petitioner.These are issues, however, which must in the first instance be decided by the authorities under the Act. Interference with the show cause notice at this stage is not warranted - Decided in favour of assessee.
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2015 (5) TMI 588
Unaccounted bank account - addition to income - AO held that it had not been clarified by the assessee as to why he chose to open an account with Axis Bank, Kapurthala alongwith one Lakhbir Singh by giving his own PAN number. Lakhbir Singh was a joint account holder - Tribunal did not accept the assessee's case regarding the source of sum of ₹ 8.75 lacs - Held that:- This is a pure question of fact. It was a question of appreciation of evidence to be decided on a balance of probabilities. We are unable to hold that findings of the Tribunal are perverse or absurd. It is important to note that the HDFC Bank account was in the joint names of the assessee/appellant and his wife. There is no explanation as to why that amount was deposited in the joint account of Lakhbir Singh. This assumes even greater significance in view of the fact that there is no business relationship even claimed between Lakhbir Singh and appellant/assessee. The appellant claims to have added his name only to accommodate Lakhbir Singh because he did not have PAN card number. Even according to the appellant, Lakhbir Singh was entitled to operate the account. There is no explanation as to why Lakhbir Singh would have been entitled/permitted to operate the account although the amount of ₹ 10 lacs withdrawn from HDFC Bank and alleged to have been deposited with Axis Bank belonged only to the appellant and his wife and in respect whereof Lakhbir Singh had no interest whatsoever. - Decided against assessee.
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2015 (5) TMI 587
Period of limitation for rectification of mistake u/s 154 - doctrine of merger - whether the limitation of four years u/s 154(7) would commence from the date of the assessment order dated 26.03.2007 and not from the date of re-assessment order, u/s 147 r.w.s. 148? - Incorrect set off of unabsorbed depreciation against Income (under normal provisions) - Held that:- In the present case, the assessment was reopened by issue of notice under Section 148 of the Act on 20-10-2009 and the re-assessment order was passed on 19.03.2010. Before that, the assessment under Section 143 (3) was concluded vide order dated 26.03.2007. Having regard to the position of Law settled by the Supreme Court, the effect of reopening the assessment under section 148 would be to vacate or set aside the initial order for assessment under Section 143(3) and to substitute in its place the order made under Section 147 of the Act. Once a notice under Section 148 is issued for the purpose of making re-assessment, the earlier proceedings get reopened and where the re-assessment under Section 147 is done, the initial order of assessment under Section 143 (3) ceases to be operative. Thus, the result of reopening the assessment under Section 148 is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of turnover escaping the assessment. Apart from that, in the present case, the notice under Section 154 clearly states that the order under Section 147 of the Act made on 19-03-2010 requires amendment as there is a mistake apparent from the record and the notice also referred to the details of mistake. The difference between the words any order in section 154 and the words the order in section 263 of the Act would also have to be noticed and read to understand the words any order to mean even an order of re-assessment or the amended/rectified order passed by an Income-Tax authority. There cannot be any doubt that the re-assessment order under Section 147 read with Section 148 of the Act is also any order which could be rectified by issuing a notice under Section 154 of the Act. In other words, the words any order in Section 154 (1) (a) of the Act would mean even the re-assessment order under Section 147 of the Act. Merely because in the case under Section 154, it is the same Officer who invokes the jurisdiction and in the case under Section 263, it is a superior Officer, would not mean or it cannot be stated that both the expressions, any order and the order, as occur in Sections 154 and 263 respectively would have the same meaning. The word the clearly denotes the specific order, while the word any would mean any order passed by the Income-Tax Authority. The facts of our case are similar to Hind Wire Industries Limited (1995 (1) TMI 2 - SUPREME Court ) and so also the other judgments referred to in the foregoing paragraphs, in particular Kundan Lal Srikishan [1987 (2) TMI 448 - SUPREME COURT OF INDIA] and H.R. Sri Ramulu (1977 (1) TMI 112 - SUPREME COURT OF INDIA), and in view thereof we hold that the doctrine of merger would apply to the facts of the present case. The limitation, therefore, would start to run from the date of re-assessment order dated 19.03.2010 and since the notice under Section 154 was issued on 31.08.2012, it was well within the time stipulated under sub-section (7) of Section 154 of the Act. We answer the first question in the negative. - Decided against assessee. Scope of section 154 - whether the issues, which are highly debatable could be the subject matter of the proceedings under Section 154 of the Act? - Held that:- The questions whether the mistake, pointed out in the impugned notice is an obvious and patent mistake, and whether to establish such mistake a long drawn process and reasoning would require, in our opinion, cannot be and need not be gone into in writ jurisdiction under Article 226 of the Constitution, when a notice under Section 154 of the Act would have to be decided on merits. It is true that the jurisdiction under Article 226 of the Constitution can be exercised in a case where the action complained of is without jurisdiction or is taken/initiated on assumption of power not vested in the Officer. It is well settled that where the exercise of power ex facie appears to be without jurisdiction, the Court would be inclined to interfere but even in that case lack of jurisdiction would have to be revealed from the notice and reasons on the face thereof and not by discussion on merits. Challenge to the notice under Section 154 of the Act, in the present case, is not on the ground of jurisdiction or assumption of power not vested in the authority. The petitioners have already filed their objections, which respondent No.1 will have to decide, after following due procedure and taking into consideration the reply filed by the petitioners, by passing a speaking order. The 1st respondent is bound to furnish reasons for deciding the notice and deal with all contentions urged by the petitioners in their reply. In the circumstances, we are not inclined to entertain the second question raised for our consideration, and we keep all contentions of the parties, in respect thereof, open to be considered by the 1st respondent. W.P. dismissed.
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2015 (5) TMI 586
Valuation of closing stock of Sugar - appellant being covered under Sampat Incentive Scheme - closing stock of levy sugar and work in progress (WIP) were directed to be taken at the same as in force for free sugar by CIT(A) - Held that:- A relying on case of CIT, Coimbatore vs. M/s Bannari Amman Sugars Ltd. [2012 (9) TMI 848 - SUPREME COURT] wherein following the judgment of this Court in Ponni Sugars & Chemicals Ltd.(2008 (9) TMI 14 - SUPREME COURT ) held that the closing stock of incentive sugar should be allowed to be valued at levy price, which on facts, is found to be less than the cost of manufacture of sugar (cost price). We find merit in this contention. In Ponni Sugars & Chemicals Ltd. (supra), this Court, on examination of the Scheme, held that, the excess realization was a capital receipt, not liable to be taxed and in view of the said judgment, thus the assessee is right in valuing the closing stock at levy price. The stock valuation of incentive sugar has a direct impact on the manufacturer's revenue or business profits. If to accept the case of the Department that the excess amount realized by the manufacturer(s) over the levy price was a revenue receipt taxable under the Act then the very purpose of the Incentive Scheme formulated by Sampat Committee would have been defeated. One cannot have a stock valuation which converts a capital receipt into revenue income - thus remit the issues in dispute to the file of AO with the directions to decide the issues in dispute, in accordance with the law laid down in the case M/s. Bannari Amman Sugars Ltd(Supra) - Decided in favour of assessee for statistical purpose.
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2015 (5) TMI 585
Penalty u/s 271(1)(C) - disallowance was a case of concealment and that the assessee had furnished in accurate particulars of income - Held that:- The assessee valued its closing stock at cost or market value whichever is lower and on that basis adopted the market value of obsolete stock is also not disputed. The revenue authorities were of the view that the cost should have been taken, according to us, was an infirm presumption. The assessee during regular proceedings and in penalty proceedings showed the value & reasonable value of its products. This information and detail was always there with the revenue authorities. In so far as disallowance of items of P&L account are concerned, it is fact that the AO had made the disallowances on ad-hoc basis, because the assessee could not provide necessary details.No doubt the assessee could not provide the necessary details, but the fact remains that these expenses were routine administration expenses. The assessee is not a proprietary concern, where one can think of disallowances made on personal use. In such a circumstance, penalty is not exigible. Thus penalty is not exigible. - Decided in favour of assessee. Penalty u/s 271(1)(C) - disallowance the payment of office Rent - Held that:- Before us, except for making submissions that the CA firm Todarwal & Todarwal had made the submissions. This according to us does not serve any purpose. Unless the assessee is able to fully substantiate from his records, which are worth consideration with, the evidence, the query of the AO/ revenue authorities remain uncomplied with and getting and expecting a relief is a happy presumption by the assessee. Since, even before us the assessee was unable to bring anything worth the salt to substantiate the expenses, we do not intend to interfere with the order of the CIT(A), which we sustain. - Decided against assessee.
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2015 (5) TMI 584
Disallowance of claim of royalty payment - Revenue or capital expenditure - payment made by the assessee in pursuance of the agreement entered by the assessee with “PPME” - Held that:- In the instant case, the duration of the agreement was utmost for two years only. The assessee does not become owner of the technical knowhow. It had to return back all data, information etc. on completion of the agreement. It has to maintain strict confidentiality about the technology. Further, the assessee itself has capitalised the technology transfer fee. The royalty amount is paid to provide operational and commercial support. Under these set of facts, we are of the view that the royalty amount paid by the assessee should be treated as revenue expenditure only. We find support for our view from the decision rendered by the Hon’ble Supreme Court in the case of CIT Vs. I.A.E.C (pumps) Ltd (1997 (4) TMI 14 - SUPREME Court ). - Decided in favour of assessee.
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2015 (5) TMI 583
Applicability of provisions of section 44BB - interpretation of the legislative intent behind the scheme of taxation envisaged in 9(1)(vii) rw 44DA and 44BB - whether the provisions of Section 44BB will apply to the facts or whether Section 44DA will be applicable on the facts of this case? - whether hire of equipment and personnel was not in the nature of FTS and equipment Royalty squarely covered u/s 9(1)(vii)? - Held that:- The CIT(A) following the decision of a coordinate bench in the case of CGG Veritas (2012 (4) TMI 280 - ITAT DELHI ) and noting that the assessee has a PE in India and that the case pertains to assessment year prior to 2011-12), correctly upheld the contention of the assessee, and has, accordingly, held that the income is liable to tax@ 10% under section 44 BB of the Act - Decided in favour of assessee. Interest under section 234B - CIT(A) deleted interest levy - Held that:- The issue is covered, in favour of the assessee, by a full bench decision of DIT Vs Maersk Co Ltd [2011 (4) TMI 886 - Uttarkhand High Court ] and the CIT(A) has merely followed the said decision, but yet the Assessing Officer is aggrieved that, as this decision has been challenged in appeal before Hon’ble Supreme Court, the CIT(A) ought not to have followed the same. Such a plea can only be stated and rejected. The mere fact that a binding judicial precedent has been challenged before a higher forum does not dilute, curtail or otherwise affect its binding nature. Once Hon’ble jurisdictional High Court has expressed a considered view on an issue, all the lower authorities in the judicial hierarchy, including this Tribunal as indeed the CIT(A), have to loyally follow this. There is no scope for deviating from this solemn duty. On this aspect of the matter, thus, the stand of the CIT(A) cannot be faulted - Decided in favour of assessee.
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2015 (5) TMI 582
Applicability of provisions of section 44BB - interpretation of the legislative intent behind the scheme of taxation envisaged in 9(1)(vii) rw 44DA and 44BB - whether the provisions of Section 44BB will apply to the facts or whether Section 44DA will be applicable on the facts of this case? - whether hire of equipment and personnel was not in the nature of FTS and equipment Royalty squarely covered u/s 9(1)(vii)? - Held that:- The CIT(A) following the decision of a coordinate bench in the case of CGG Veritas (2012 (4) TMI 280 - ITAT DELHI ) and noting that the assessee has a PE in India and that the case pertains to assessment year prior to 2011-12), correctly upheld the contention of the assessee, and has, accordingly, held that the income is liable to tax@ 10% under section 44 BB of the Act - Decided in favour of assessee. Interest under section 234B - CIT(A) deleted interest levy - Held that:- The issue is covered, in favour of the assessee, by a full bench decision of DIT Vs Maersk Co Ltd [2011 (4) TMI 886 - Uttarkhand High Court ] and the CIT(A) has merely followed the said decision, but yet the Assessing Officer is aggrieved that, as this decision has been challenged in appeal before Hon’ble Supreme Court, the CIT(A) ought not to have followed the same. Such a plea can only be stated and rejected. The mere fact that a binding judicial precedent has been challenged before a higher forum does not dilute, curtail or otherwise affect its binding nature. Once Hon’ble jurisdictional High Court has expressed a considered view on an issue, all the lower authorities in the judicial hierarchy, including this Tribunal as indeed the CIT(A), have to loyally follow this. There is no scope for deviating from this solemn duty. On this aspect of the matter, thus, the stand of the CIT(A) cannot be faulted - Decided in favour of assessee. Inclusion of service tax in the gross receipts for determining income under section 44BB - Held that:- Learned consel’s defence consists only of the decision of a coordinate bench of this Tribunal, in the case of Sedco Forex International Drilling Inc Vs ADIT (2012 (7) TMI 250 - ITAT, DELHI) but then in this case, the earlier binding precedent in the case of DDIT Vs Technic Offshore Contracting BV (2009 (1) TMI 533 - ITAT DELHI) was not brought to their notice. Such a decision, in view of the Hon’ble Andhra Pradesh High Court Full Bench decision in the case of CIT Vs BR Construction (1992 (6) TMI 13 - ANDHRA PRADESH High Court ), is per incurium and not a binding precedent - Decided against assessee.
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2015 (5) TMI 581
Disallowance u/s 40A(2)(b) - excessive remuneration to Directors - Held that:- In the present case, it is noticed that one of the Directors, namely, Ms. Dilpreet Singh is a Chartered Accountant and also qualified CPA from the USA. She was earlier employed with Febindia Overseas Private Ltd. as a Chief Financial Officer and another Director, Mr. Prakash Tripathi is a commerce Graduate, he started his career with the Indian Institute of Management, Ahmedabad as a Research Investigator in various projects. Later on, he joined the Desert Artisans Handcrafts Pvt. Ltd., Jodhpur in 1991 and grown to Managing Director in the said company by 2007, therefore, both the Directors were well qualified and having the requisite experience in finance and community managed company. It is also noticed that Ms. Dilpreet Singh was getting a remuneration of ₹ 29,54,990/- when she was earlier employed with M/s Fabindia Overseas Pvt. Ltd. and Mr. Prakash Tripathi was getting a remuneration of ₹ 13,02,471/- from M/s Desert Artisans Handicrafts Pvt. Ltd. Jodhpur wherein he was earlier employed. Therefore, the remuneration amounting to ₹ 11,40,000/- and ₹ 15,68,050/- respectively received by them from the assessee cannot be said to be excessive by keeping in view, their previous experiences and earlier employment. Moreover, the AO had not brought any material on record to substantiate that as to how and in what manner the remuneration paid to the Directors was excessive. He had also not given any basis for allowing the remuneration @ 20% of the total receipts. Thus the disallowance made by the AO and sustained by the Ld. CIT(A) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee.
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2015 (5) TMI 580
Disallowance of deduction u/s 54B - non utilization of capital gain before the due date of furnishing of the return - investment in the agricultural land - CIT(A) deleted the disallowance - assessee sold urban agricultural land and claimed the deduction u/s 54B on account of investment made in agricultural land - Held that:- The assessee can furnish the return of income at any time before the expiry of one year from the end of the relevant assessment year or be fore the completion of assessment whichever is earlier. In the present case, the assessment year assessment year 2007-08 which ends on 3118/2008 . Therefore, the period extended by one year end on to 31 st March 2009 and in the present case the assessee made the investment in the agricultural land before the extended due date for filing the return of income u/s139(4) of the Act i.e. 31/3/2009. Therefore, the Ld. CIT(A) was fully justified in directing the AO to allow the deduction u/s 54B of the Act. We do not see any infirmity in the impugned order of the Ld. CIT(A) on this issue. See CIT Vs. Rajesh Kumar Jalan [2006 (8) TMI 126 - GAUHATI High Court] - Decided in favour of assessee.
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2015 (5) TMI 579
Unexplained loans - non production of creditors after lapse of more than 10 years - Held that:- Despite opportunities afforded to the assessee, no evidence was placed. Initially, the assessee sought adjournment before the Assessing Officer on the ground that the two persons have gone out of station and they would be back in the first week of November. The request for adjournment was acceded to by the Assessing Officer, but despite affording opportunities, the assessee could not produce these creditors. As per direction of the Tribunal, the assessee was required to prove the capacity of the creditors to advance money, but the assessee could not produce the bank statement or other evidence to prove the financial creditworthiness. Since the assessee could not discharge its onus to prove all the ingredients i.e. identity of the creditors and capacity of the creditors to advance the money and genuineness of the transaction, the Assessing Officer has treated the deposit as unexplained and made addition of the same. Also before the ld. CIT(A), the assessee could not improve his case and for want of creditworthiness of the depositors, the addition was confirmed by the ld. CIT(A). - Decided against assessee.
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2015 (5) TMI 578
Income under section 2(24) - contribution in the form of commission" received from Sugar Mills and co-operative cane growers society and "Grants", received from State Government and Central Sugar Cane Committees for specified purposes being "construction of road" and "other development works" in the "assigned area" - Held that:- Since the above Grants or receipts are received by the assessee either from the government or any other agency for a particular purpose and assessee has no independent right over it to use the grant in a manner in which it likes. It has to be utilized for a particular purpose in terms of grants, thus it would not partake the character of income u/s 2 (24) of the Act. Since these arguments are raised first time before the Tribunal, we are of the view that this aspect should be examined by the Assessing Officer while Assessing the income of the assessee. Accordingly, we set aside matter to the file of the Assessing Officer with the direction to the reexamine the claim of the assessee in the light of the new argument - Decided in favour of assessee for statistical purposes.
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2015 (5) TMI 577
Rectification of error - order was pronounced beyond the period of 60 days - Held that:- Merely because, there is a delay due to some exceptional circumstances, would not render the decision of the Tribunal as illegal or void. The contention of the Ld. Counsel that since the order was pronounced beyond the period of 60 days from the date of hearing and hence, the same was barred by limitation has no force and as such is not tenable. We may point out here that the function of ‘pronouncement or orders’ is not like of a nature such as an ‘actionable legal claim’ which if not claimed within the period of 60 days or 90 days, can be said to have been barred by limitation. Further such a contention that the order was pronounced beyond the period of 60 days can not validly be raised in a petition u/s 254 of the Act, as the same can not be said to be an error apparent on record. If the assessee has any grievance against the impugned order, proper course to agitate the same is by filing an appeal before the next appellate authority but not with the present application under section 254(2) of the Income Tax Act. The Hon’ble Bombay High Court in the case of ‘Commissioner Of Income-Tax vs Ramesh Electric And Trading Co.’ 1993 (1992 (11) TMI 32 - BOMBAY High Court), while relying upon the decision of ‘T. S. Balaram, ITO v. Volkart Brothers’ [1971 (8) TMI 3 - SUPREME Court] and further relying upon the decisions of the various High Courts has categorically held that the power of rectification under section 254(2) of the Income-tax Act can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake which is apparent from the record, and not a mistake which requires to be established by arguments and a long drawn process of reasoning on points on which there may conceivably be two opinions. Failure by the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment and under such circumstances the Tribunal has no jurisdiction under section 254(2) to pass the second order. - Decided against assessee.
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2015 (5) TMI 576
Unaccounted cash deposit in the bank account - CIT(A) deleted the addition - Held that:- The dates of withdrawal from the companies cash book matches with the dates of equivalent deposited in ICICI bank account of the assessee. A finding has also been recorded to the effect that the amount withdrawn in the company’s cash books has been duly considered in the ledger account of the assessee in the books of company. The CIT(A) has also recorded a finding to the effect that the expenditure incurred by assessee on various trips expenses, diesel and oil of the trucks has duly been considered in the ledger accounts of the assessee in the book of the company and also such expenses has been claimed by the company by the deduction in its P & L account. Thus, there was a clear nexus between withdrawal made from cash book of the company and its deposit in the ICICI bank account of the assessee. The finding recorded by the CIT(A) is as per material on record and the same has not been controverted by the ld. DR by bringing any positive material on record - Decided against revenue. Unexplained investment in shares of the company M/s Sona Transport - CIT(A) deleted the addition - Held that:- From the record, we found that the company M/s Sona Transport Pvt. Ltd was promoted by his father Shri Pal Singh Saini and after the death of his father in the year 2000, all the 26,113 shares of the company held by father and father's HUF were transferred in the name of the assessee on 1st April, 2000 i.e. 8 years back. The register of the shares maintained by the company along with board resolution dated 1-4-2000 also indicating transfer of shares in the name of son. Thus, the shares received by the assessee from his father eight years back on father’s death cannot be said to be undisclosed investment on assessee. Since the shares were received as inheritance and no value was paid for the same, it was not shown in the balance sheet of the assessee filed during the course of assessment proceedings. Since there was no investment by the assessee in the shares of the company either during the year or in earlier year, there is no infirmity in the order of CIT(A) for deleting the addition - Decided against revenue.
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2015 (5) TMI 575
Disallowance u/s 40(a)(ia) - since no additional taxes on the disallowance in question were paid by the assessee in the preceding assessment year, the assessee cannot be allowed to reduce its tax burden by claiming deduction of the said amount against taxable income of the current year by utilizing the proviso to section 40(a)(ia) as per revenue - Held that:- Ostensibly, the present claim of the assessee in the current assessment year is for deduction of ₹ 70,35,997/- in terms of the proviso to section 40(a)(ia) of the Act. There is no claim under any of the provisions covered in section 80A(4) of the Act. Therefore, invoking section 80A(4) of the Act in the present case to deny assessee’s claim is anyway not justified. So however, even if for a moment, we accept the invoking section 80A(4) of the Act by the Revenue yet it would cover a situation if multiple deductions are claimed for same profits in the same assessment year. Ostensibly, that is not the case in the present situation because there is no multiple deductions claimed by the assessee qua the impugned amount in the assessment year under consideration i.e. 2010-11. Therefore, we find that there is no relevance of section 80A(4) of the Act in order to test the efficacy of the claim for deduction of ₹ 70,35,997/- made by the assessee on the strength of the proviso to section 40(a)(ia) of the Act. Thus, this stand of the Revenue is liable to be rejected. - Decided in favour of assessee.
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2015 (5) TMI 574
Computation of log term capital gains - transfer of share of the assessee [co-owner of the property having 1/24th share] in property situated at Survey No.1611, Shivaji Nagar, Pune. Held that:- As submitted by assessee he did enter into an agreement with Shri Sanjay Kakade for sale of his share in the property and the consideration was fixed between the parties at ₹ 93,75,000/-. In furtherance to the said contract, assessee received ₹ 60,00,000/-, however the balance amount was not received by the assessee. The family members had approached the civil court to restrain the assessee from selling the property without offering them the right to purchase. The learned Authorized Representative for the assessee has emphasized that the civil court vide its order dated 18.02.2008 restrained the assessee from going ahead with the sale. On this basis, the case set up is that the sale has not indeed fructified and therefore, no capital gain required to be taxed. It is also submitted at the time of hearing that the proceedings in the civil court are yet continuing. Documents, as submitted now, which bring out in detail the dispute is pending in the civil court, has been furnished before the Tribunal and it was not available before the lower authorities. Thus the points raised by the assessee is quite significant because if assessee is able to demonstrate that the sale agreement could not be fructified in view of the pendency of civil suit in question, obviously, no cognizance of the same can be taken for assessing any income from such an agreement till the outcome of the civil proceedings crystallized. Thus set-aside the order of CIT(A) and restore the matter back to the file of Assessing Officer to make an assessment afresh with regard to the transaction in question. - Decided in favour of assessee for statistical purposes.
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2015 (5) TMI 573
Payment made for transfer of user rights of software - whether the same are taxable as royalty under Article 12/13 of Double Taxation Avoidance Agreement (DTAA) between India and USA/UK/Singapore - non-deduction of tax at source - whether the assessee is liable to the demand raised u/s 201(1) and interest u/s 201(1A) - CIT(A) allowed assessee appeal - Held that:- Following the ratio laid down by the Mumbai Bench of the Tribunal in New Bombay Park Hotel Pvt. Ltd. Vs. ITO (Intr. Taxation) (2014 (4) TMI 68 - ITAT MUMBAI ) we hold that no liability can be fastened on the assessee to deduct tax at source on the basis of subsequent amendments made in the Act, in relation to earlier payments made to Non-residents, when the said amendment was not in force. We confirm the order of CIT(A) albeit on different grounds. The grounds of appeal raised by the Revenue are thus, dismissed. - Decided in favour of assessee.
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2015 (5) TMI 572
Disallowance of renovation or maintenance expenditure of a part of the hotel building - revenue expenditure or capital expenditure - Held that:- As relying on Comfort Living Hotels P. Ltd. vs. CIT, (2014 (3) TMI 585 - DELHI HIGH COURT ) mere increase in the room size due to inclusion of balcony area would not result in creation of any new asset or increased profit yielding capacity so as to render the expenditure capital in nature. In-fact, the benefit to the assessee accruing as a result of the impugned expenditure, though spread over a number of years, is certainly in the revenue field and therefore such an expenditure provides the assessee with an advantage in a commercial sense and therefore the expenditure has to be held to be revenue in nature, following the principles laid down by the Hon’ble Supreme Court in the case of Empire Jute Co. (1980 (5) TMI 1 - SUPREME Court ). As a consequence, we therefore set-aside the order of the CIT(A) and direct the Assessing Officer to delete the disallowance and treat the expenditure of ₹ 1,44,03,077/- as revenue in nature in terms of section 37(1) of the Act. - Decided against revenue.
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2015 (5) TMI 571
Capital gain arising out of the acquisition of land - sale of rights in the property - acquisition of property but transfer deed was not registered - short term capital gain or long term capital gain - Held that:- In the facts of the present case, where the possession of land had been given to the assessee in line with the terms agreed upon between the parties consequent to which an irrevocable Power of Attorney was executed, which has not been cancelled till date and also where the land was mutated in 7/12 records in the name of assessee by way of entry No.1777, dated. 04.11.1996 establishes the case of assessee of having acquired rights over the land as per section 53A of the Transfer of Property Act. The arrangement between the parties confirms the handing over of the possession of land though in the sale deed executed on 31.08.2000, the control and possession of land was given to the assessee as absolute owner. Applying the ratio laid down by in Chaturbhuj Dwarkadas Kapadia Vs. CIT (2003 (2) TMI 62 - BOMBAY High Court), where the assessee had acquired certain rights over the property under the Development Agreement and the irrevocable Power of Attorney and the part possession of the property having been given to the assessee, we hold that there was effective transfer on the date of execution of Agreement dated 18.01.1996. Consequently, the assessee acquired certain rights in the said property from 18.01.1996 and the compensation received by the assessee in view thereof, is to be taxed in the hands of the assessee as income from long term capital gains. We uphold the order of CIT(A) - Decided against revenue.
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Corporate Laws
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2015 (5) TMI 591
Application for rectification of the register of members u/s 111 r/w section 402 & 403 of the Companies Act, 1956 - Illegally allotment of shares - Wrongly admitted as a member / shareholder of company - No provision u/s 111A regarding allotment is valid or not - Held that:- The allegation of the petitioner is that it has been Illegally allotted shares of the Respondent company without notice to the petitioner; therefore, sought for rectification of register. The case of the petitioner is about allotment, but not on transfer as laid under sub-section (l11A) of the Companies Act. It is clear that there are two provisions under the Companies Act dealing with rectification of share register, one is section 111 of the Act 1956 deal with private limited companies, another is section 111 A of the Act 1956 deal with public limited companies. It is true sub-section (4) of section 111 has not said rectification is limited transfer and transmission of the shares, whereas the heading of section 111A of the Act itself says rectification of register is on transfer, therefore, an issue in relation to allotment in public limited companies will not fall within the ambit of section 111A of the Act 1956. There is no provision in section 111A analogous to sub-section (4) of Section 111 of the Act 1956, therefore there being no provision under section 111A to go beyond transfer and transmission cases, I believe CLB is not conferred with jurisdiction under section 111A either to say allotment is invalid or valid.n view of the same, this Bench is of the opinion that the issue being related to allotment of the shares to the petitioner, the impugned allotment of shares being in relation to the Public Limited Company, Company Law Board has no jurisdiction to adjudicate as to whether allotment made to the petitioner is valid or not. - Decided against the appellant.
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Service Tax
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2015 (5) TMI 599
Demand of service tax - Held that:- service tax demanded has already been satisfied under protest, but the adjudication is still to be finalised, it is made clear that in the course of such adjudication exercise, if the authority arrives at a finding that the petitioner is not liable to satisfy the service tax, the amount already satisfied by the petitioner shall be refunded at the earliest, at any rate, within one month thereafter. - Decision in the case of [2015 (5) TMI 564 - KERALA HIGH COURT] followed - Appeal disposed of.
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2015 (5) TMI 598
Classification of service - whether the services provided by the noticee during the period from 1.10.2006 to 31.3.2011 fall under the category of 'Construction of Complex Services' or any other service according to nature of work undertaken by them - Held that:- Certificate issued by the Rajasthan Housing Board satisfies that the construction was of individual residential housing unit and the issue has been covered by the decision in the case of A.S . Sikarwar (2012 (11) TMI 1000 - CESTAT, NEW DELHI) and same has been considered by this Tribunal in the case of Kami Construction [2015 (5) TMI 570 - CESTAT NEW DELHI] while considering the stay application. Therefore, following the precedent decision of this Tribunal in the case of Karni Construction (Supra) we waive the requirement of pre deposit of entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeal. - Stay granted.
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2015 (5) TMI 597
Rectification of mistake - Imposition of penalty - Calculation of period of limitation - Held that:- If there is a mistake apparent on record the application for rectification of mistake can be filed within 2 years of the date of which such order was passed. Admittedly in this case the appellant has filed the application on Rectification of Mistake within two years of the order of adjudication - On going through the calculation shown in the calculation sheet for imposition of penalty I find that for the month of July 2006 the due date is 05.08.2006 whereas service tax was paid by the appellant on 28.09.2006. Therefore, the number of days for period paid were 54 days whereas it is shown as 115 days. Therefore, there is a mistake apparent on record for which impugned order is required to be reconsidered for calculation purpose whether the penalty has been imposed by calculating 54 days or 115 days for appellant and thereafter to arrive at the correct amount of penalty imposable on the appellant - matter remanded back - Rectification done.
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2015 (5) TMI 570
Waiver of pre deposit - Demand of service tax - Construction of Residential Complex service - Held that:- Considering the fact that as the certificate issued by Rajasthan Housing Board that the construction was individual residential units and the issue was covered by the decision of the Tribunal in the case of A.S. Sikarwar, [2012 (11) TMI 1000 - CESTAT, NEW DELHI], we waive the pre-deposit of adjudicated liability and stay the recovery thereof during pendency of the appeal - Stay granted.
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Central Excise
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2015 (5) TMI 603
Constitutional validity of Rule 8(3A) of the Central Excise Rules, 2002 - Violation of Article 14 - Held that:- Petitioners-assessees have not illegally or irregularly taken the CENVAT credit. It is to be mentioned herein that sub-rule (1) of Rule 8 provides for the manner of payment of duty on the goods removed from the factory or the warehouse as provided thereunder. Sub-rule (2) of Rule 8 extends the benefit of duty to the third party purchaser, who buys the excisable goods removed by the assessee and such goods are deemed to have suffered duty of excise. Under sub-rule (3) of Rule 8, interest is liable to be paid on the outstanding amount, if the assessee fails to pay the duty by the due date. - The right to pay duty by utilising the CENVAT credit that had accrued cannot be defeated, unless it is a case of illegal or irregular credit (See the decision of the Supreme Court in Dai Ichi Karkaria Ltd., referred [1999 (8) TMI 920 - SUPREME COURT OF INDIA]). To that extent, we find this sub-rule (3A) arbitrary and therefore violative of Article 14. The right that has accrued to an assessee by way of CENVAT credit, that is duty paid on the inputs, cannot be taken away under a rule, which only provides for the manner and method of payment of duty and for levying of interest, if there is a default - It is a legitimate right that has accrued to an assessee and that cannot be denied arbitrarily under the provision under challenge. We, therefore, have no hesitation to concur with the reasoning of the Gujarat High Court [2014 (12) TMI 585 - GUJARAT HIGH COURT] that Rule 8(3A) is ultra vires of Article 14 on the ground of arbitrariness. - all the proceedings initiated by the Department in respect of the respective assessees, invoking the said rule by demanding duty along with interest by denying the benefit of CENVAT credit have to be necessarily set aside - Decision in the case of Precision Fasteners Ltd., v. Commissioner of Central Excise [2014 (12) TMI 655 - GUJARAT HIGH COURT] followed - Decided in favour of assessee.
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2015 (5) TMI 602
Waiver of pre deposit - whether the goods cleared by the appellant falls under the category of other fertilizers or not - Held that:- Factual issues have to be gone into by the Tribunal taking into consideration the relevant materials placed by the appellant - no reason to interfere with the order passed by the Tribunal. Being pure question of fact, we find no question of law much less any substantial question of law arises for consideration in this appeal - Decided against assessee.
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2015 (5) TMI 601
Waiver of pre deposit - Supreme Court after granting another four weeks' time dismissed the appeal filed by the assessee against the order of High Court [2015 (5) TMI 567 - CHHATTISGARH HIGH COURT] wherein High Court upheld the pre deposit demand made by the Tribunal [2015 (5) TMI 568 - CESTAT NEW DELHI] - Decided against assessee.
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2015 (5) TMI 594
Waiver of pre deposit - Valuation of goods - dealers of Maruti Suzuki are charging price over and above the ex-showroom price from the ultimate customers of the vehicles - whether part of the promotional discount paid from the dealer's margin is includible in the assessable value for the purpose of payment of central excise duty or not - Held that:- Once the whole issue prima facie has been considered by the Tribunal and has been decided against the appellants, the Tribunal, thereafter, has given the benefit of reducing the deposit to the tune of ₹ 150 crores, out of the duty of ₹ 240,57,84,802/-, levied along with equal amount of penalty plus interest. Though the Tribunal also took into account the handling charges issue, which was not subject matter of the notice, but it has on merits also prima facie discussed the main issue of transaction value for the purpose of deciding the stay application and therefore, in the absence of any question of law arising, this Court would not interfere in the discretion which has been exercised, keeping in view the facts and circumstances of the present case - Under Section 35G of the Act, this Court would only interfere if there is a substantial question of law involved and the appeal is only to be heard on the questions so formulated. Keeping in view the above discussion, this Court is of the opinion that the substantial questions of law which have been raised by the appellant, do not arise for consideration of this Court in an appeal against an order of pre-deposit. - However, extension of time is granted.
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2015 (5) TMI 593
Denial of MODVAT Credit - Welding electrodes - Held that:- Welding Electrodes" as such have nothing to do with manufacture of 'sugar' and 'molasses' and other products, but, same is used for the purpose of repair and maintenance of machines, worn out during the process of running of factory. If no repair or maintenance is required for certain period, "Welding Electrodes" shall never be used. Thus, for the purpose of manufacture of 'sugar' and 'molasses' and other by-products in which business the appellant is engaged, the requirement of "Welding Electrodes" is not at all necessarily an integral part. It is only when repair or maintenance of machines is needed that requirement of "Welding Electrodes" may be necessary. - it can be safely said that under Rules 57A and 57B, there is no term within which 'Welding Electrodes', as such, may fall. Our attention was drawn to Rule 57B(1)(iv), where MODVAT credit has been allowed to 'inputs' used for manufacture of final products or for any other purpose within the factory of production. Similarly, our attention was also drawn to Rule 57B(1)(vi) which allowed MODVAT credit on accessories on final products cleared alongwith such final products, value of which is included in the assessable value of final products. Learned counsel for appellant could not explain as to how 'Welding Electrodes' can be said to be used for manufacture of final products or accessories of final products, so as to bring within provisions. 'Capital goods' and 'inputs' as defined in Rule 2 of Rules, 2001, includes the same items, to which Rule 57A, 57B and 57Q were applicable. No substantial distinction, we have found so as to find that during the period when Rules, 2001 are applicable, "Welding Electrodes" stand included within the definition of 'capital goods' or 'inputs' as the case may be, so as to entitle for MODVAT credit - Decision in the case of M/s Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise [2015 (5) TMI 569 - ALLAHABAD HIGH COURT] followed - Decided against assessee.
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2015 (5) TMI 592
Duty demand - MIsdeclaration of goods - Wrong claim of exemption - Held that:- duty admitted by the petitioner before the CCESC was ₹ 37,38,184/- which was settled at ₹ 36,90,325/-. The CCESC has accepted that the petitioner had extended co-operation in the proceedings before them. However, section 32K(1) of the Act requires both co-operation and full and true disclosure of the duty liability. It cannot be possibly said that while observing as above, the CCESC took into account any irrelevant material or ignored relevant material. The conduct of the petitioner was a relevant factor to be taken into account. The fact that the petitioner had indulged in evasion of central excise duty by clearing nylon monofilament yarn of cross sectional dimension above 1 mm under the guise of nylon nil rate of duty and thereby, it is clear there was a deliberate intention to evade duty by mis-declaring the goods in order to avail exemption and but for detection by the department during investigation by the department, the evasion would have gone unnoticed, is also a relevant factor to be taken into account - Decided against assessee.
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2015 (5) TMI 569
Disallowance of CENVAT Credit - Capital Goods - Welding electrodes - Whether 'welding electrodes' can be treated to be 'capital goods' under Rule 57Q for the purpose of allowing MODVAT/CENVAT Credit thereon to the appellant assessee during the period of August 1999 to September, 1999 - Held that:- The scheme was introduced by inserting Chapter AA containing Rules 57A to 57J. Initially MODVAT scheme was introduced with a view to avail credit on duty paid on exisable goods used as 'input' in manufacture of final products. From 1st March, 1987, similar scheme for allowing credit of money in respect of certain raw materials used in manufacture of certain exisable goods was introduced and Chapter AAA having Rules 57K to 57P was inserted. Scheme was further enlarged by inserting Chapter AAAA with Rules 57Q to 57U w.e.f. 01.03.1994 so as to permit availment of credit on duty paid on 'capital goods' which are used in manufacturing process. - credit admissible on 'capital goods' and therefore, we are confining ourselves with the relevant provisions contained in Rule 57Q to 57U, as stood in 1999. As per own admission of appellant, these 'Electrodes' are used for welding of machines and machine parts which form part of repair work. If there is no damage in machine or no welding is required, "Welding Electrodes" would not be used at all. Meaning thereby, it fails the test of being a constituent of machine etc. or the manufacturing process of finished goods. It thus cannot be said that "Welding Electrodes" form constituent of plant and machinery. One user mentioned is hardening of surface of mill rollers, trash plates, scrappers so that smooth crushing of cane can be carried out. Meaning thereby, that though machines are otherwise workable for the purpose of manufacture of sugar, for smooth functioning, "Welding Electrodes" are used to form a layer over the surface of mill rollers etc. to harden it. It does not mean that without user of 'Electrodes', the machines are unworkable. "Welding Electrodes" do not constitute an integral part necessary to the constitution of whole article and without which, article would not be complete, as observed by Apex Court in paragraph no. 13 of the judgment in Saraswati Sugar Mills (2011 (8) TMI 4 - SUPREME COURT OF INDIA ). Consequently, we are of the view that present matter is squarely covered by what has been said by the Court in Saraswati Sugar Mills (Supra) and applying observation and test laid down therein it cannot be said that "Welding Electrodes" satisfy the requirement so as to constitute 'component' of items mentioned in column nos. 1 to 4 of table in Rule 57Q(1) of Rules, 1944. - Decided against assessee.
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2015 (5) TMI 568
Waiver of pre deposit - Clandestine manufacture and removal of goods - captive consumption - Held that:- Investigation established that there were serious irregularities in the entries on records maintained at the plant site and excise wing of the appellant proving falsified recording of entries in the central excise records. Production figures appearing in the plant records did not tally with the statutory records maintained under Central Excise Act 1944. Lower quantities of production were recorded in the excise records to discharge small amount of duty liability and evade to the extent of duty stated herein before. Even plant operation days and all technical reports were suppressed. The appellant failed to satisfy to the authority below that its entries in the excise records were correct. Genuinity of sale of iron ore at the railway sliding was failed to be proved before learned adjudicating authority which proved un-accounting of receipt of iron ore at the plant site. Such act of the appellant paved the way to scientifically fabricate all other records to show production of lower quantity of blooms, billets and ingots compared to higher quantity thereof manufactured. Entire plea of appellant as to sale of iron ore, arise of fines etc was proved to be false. The material fact, outcome of investigation, gravity of allegation and strength of evidence on record prima facie show that interest of revenue has been prejudiced by the appellant causing loss to it to the extent aforesaid. This calls for predeposit to work out an interim modality since balance of convenience tilts in favour of Revenue and without pre-deposit order; irreparable injury may be sustained by Revenue - keeping in view prejudice caused to Revenue, Appellant is directed to deposit ₹ 12 crores within four weeks of receipt of this order and make compliance - Partial stay granted.
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2015 (5) TMI 567
Waiver of pre deposit - clandestine removal and short stock goods - Held that:- The question of undue hardship has been considered by the Tribunal and has held that in case of deposit of ₹ 12,00,00,000/- , it would not cause any undue hardship to the Assessee. - The Tribunal was not passing order on the appeal on merits. It was passing order on the application for waiver of pre-deposit of the amount of duty and penalty. The question of prima facie case is to be dealt with broadly. - no justification to interfere with the order passed by the Tribunal - Decided against assessee.
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CST, VAT & Sales Tax
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2015 (5) TMI 596
Waiver of pre deposit - According to the petitioner, in respect of assessment years 2006-07, 2007-08 and 2008-09 petitioner's appeals are still pending wherein they have already remitted 30% of the demand to obtain stay of further proceedings - Held that:- some leniency can be shown to the petitioner, especially since the petitioner's security is already available with the department in regard to the conditional orders passed in the previous years appeals. Hence Ext.P10 shall stand modified, directing the petitioner to pay ₹ 4,00,000/- and to furnish security for the balance amount within a period of three weeks from the date of receipt of a copy of this judgment. - Decided partially in favour of assessee.
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2015 (5) TMI 595
Denial of exemption claim - contravention or non-observance or non-compliance to the notifications - Held that:- The assessee purchased furniture from the seller who is a dealer in furniture. The exemption notification relied upon is in respect of sale of raw materials, component parts and packing materials by the registered dealer to 100% Export Oriented Units. It has no application to the sale or purchase of furniture. The seller acting on the said notification which has no application, had granted exemption of tax to the assessee. He is at fault and primary liability to pay tax is on the seller only. If the case falls under Section 8-A(5)(a) of the Act, the liability could be foisted on the purchaser-assessee. In the instant case, as the notification on which, reliance was placed is not applicable to the furniture, the assessee has not contravened any restrictions or conditions stipulated in the said notification. Because the said notification is not applicable at all. Therefore, the Tribunal was justified in holding that the tax is to be collected by the seller but action to be taken against the assessee for producing the certificate and a notification which has no application insofar as furniture is concerned. Since Section 8-A(5)(a) of the Act is not attracted to the facts of the present case, no liability could be foisted on the assessee. - Decided against Revenue.
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