TMI Tax Updates - e-Newsletter
May 26, 2012

Case Laws in this Newsletter:

Income Tax Customs FEMA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. GRANTING REWARD IS AN EX-GRATIA PAYMENT BUT NOT A MATTER OF RIGHT.

   By: DR.MARIAPPAN GOVINDARAJAN

2. DLF – BCCI (IPL) Sponsorship Service Tax Case Analysis

   By: CA.Ankit Gulgulia

3. SUBSIDY IS NOT INCLUDIBLE IN GROSS AMOUNT FOR PROVIDING TAXABLE SERVICES.

   By: DR.MARIAPPAN GOVINDARAJAN

4. TOLL COLLECTED ON BEHALF OF NATIONL HIGHWAYS AUTHORITY OF INDIA IS SUBJECT TO SERVICE TAX.

   By: DR.MARIAPPAN GOVINDARAJAN

5. Construction Activities - A Comprehensive Service Tax Perspective

   By: CA.Ankit Gulgulia

News

1. India and Netherlands sign Protocol Amending DTAC.

2. DGFT Notification to Help Areca Nut Growers.

3. GPF and SDS Interest Rates Revised for the Financial Year 2012-13.

Notifications

Customs

1. 46/2012 - dated 24-5-2012 - Cus (NT)

Amends Notification No. 68/2011-Customs (N.T.) - Determines the rates of drawback in supersession of the notification No. 84/2010-Customs (N.T.), dated the 17th September, 2010.

2. 45/2012 - dated 24-5-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 25th May, 2012 .

Income Tax

3. 19/2012 - dated 24-5-2012 - IT

Double taxation agreement - Agreement for avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign countries - Japan - Amendment in Notification No. GSR 101(E).Amendment in Notification No. GSR 101(E) -

4. 18/2012 - dated 23-5-2012 - IT

Income-tax (sixth Amendment) Rules, 2012 - Insertion of rule 10AB.

Circulars / Instructions / Orders

Income Tax

1. 02/2012 - dated 22-5-2012

Finance Act, 2011 - Explanatory notes to the provisions of the Finance Act, 2011.

FEMA

2. 130 - dated 25-5-2012

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR.

Highlights / Catch Notes

Income Tax

• Finance Act 2011: Amendments to Income Tax Provisions Enhance Compliance, Modify Rates, and Address International Taxation Issues.

  Circulars : Finance Act, 2011 - Explanatory notes to the provisions of the Finance Act, 2011. - Circular
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• Income-tax (Sixth Amendment) Rules, 2012 introduces Rule 10AB to update and refine existing Income Tax regulations.

  Notifications : Income-tax (sixth Amendment) Rules, 2012 - Insertion of rule 10AB. - Notification
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• Amendment to Double Taxation Agreement with Japan: Modifies Notification No. GSR 101(E) for Smoother International Tax Compliance.

  Notifications : Double taxation agreement - Agreement for avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign countries - Japan - Amendment in Notification No. GSR 101(E).Amendment in Notification No. GSR 101(E) - - Notification
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• Tribunal Misinterprets Agreement Clauses, Leading to Incorrect Income Assessment of Closing Stock Value by Assessee.

  Case-Laws - HC : Treatment of an amount as income even though the assessee has disclosed the value of goods as part of closing stock - held that:- Tribunal misconstrued the clauses in the agreement to hold that the value of the closing stock had to be treated as income of the assessee.- HC
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• Court Allows Deduction for Unfulfilled Hank Yarn Obligation; Deadline Extended to March 31, 1995.

  Case-Laws - HC : Accrual of expenses - whether provision for hank yarn obligation is allowable as a deduction in this assessment year when the assessee has not fulfilled its obligation and textile commissioner had extended the time for fulfilment till 31.3.95 - held yes - HC
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Customs

• New Customs Notification Amends Drawback Rates, Replacing Prior Rates from September 2010.

  Notifications : Amends Notification No. 68/2011-Customs (N.T.) - Determines the rates of drawback in supersession of the notification No. 84/2010-Customs (N.T.), dated the 17th September, 2010. - Notification
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• New Currency Exchange Rates for Customs and Tax Effective May 25, 2012: Key Info for Foreign Transactions.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 25th May, 2012 . - Notification
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• Court Rules Against Importer on MRP Compliance and CVD Valuation for Goods Sold to Institutional Consumers.

  Case-Laws - AT : Affixing of MRP on imported goods - sale to institutional consumers - Valuation for the purpose of levy of CVD - Manufacture - decided against the assessee - AT
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FEMA

• India-USSR Deferred Payment Agreements from 1981 & 1985 Key to Bilateral Trade Under FEMA Regulations.

  Circulars : Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR. - Circular
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Corporate Law

• Company Cheque Dishonored Due to Single Signatory; No Guilt u/s 138, Possible Cheating u/s 420 IPC.

  Case-Laws - HC : Dishonor of cheque - joint signatory - cheque was signed by only one signatory - The respondents may have committed an offence of cheating punishable under section 420 IPC but by no means it can be said that they are guilty of offence under section 138 N.I. Act. - HC
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Indian Laws

• Interest Rates Revised for GPF and SDS for 2012-13, Impacting Financial Planning and Savings Strategies.

  News : GPF and SDS Interest Rates Revised for the Financial Year 2012-13.
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Service Tax

• CENVAT Credit Approved for Security Services Provided to Farmers Under Agreement.

  Case-Laws - AT : CENVAT credit - input services of security services provided to group of farmers under an agreement - appellant entitled for credit as input service - AT
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• Cenvat Credit Valid on Debit Note Cum Bills and Duplicate Invoices if Essential Verification Details Present.

  Case-Laws - AT : Cenvat credit - duty paying documents - debit note cum bills - duplicate copies of invoice - credit allowed - AT
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Central Excise

• Manufacturer Settles Duty and Penalty; No Additional Penalty for Director After Show Cause Notice.

  Case-Laws - AT : Personal penalty on Director - held that:- Admittedly the manufacturer having paid the entire duty, interest along with 25% of penalty within a period of 30 days from SCN - separate imposition of penalty on the Director is not called for. - AT
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VAT

• High Court Rules in Favor of Assessee: DVAT Act Section 74A Revision Powers Apply Prospectively, Not Retrospectively.

  Case-Laws - HC : Rejection of refund claim under DVAT by invoking revision powers - period of limitations - Power of revision of cases under DVAT Act after repeal of Delhi Sales Tax Act - section 74A - prospective or retrospective - Decided in favor of assessee. - HC
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Case Laws:

• Income Tax

• 2012 (5) TMI 403
  Reconstitution of firm - relinquishment of right and interest in the erstwhile firm - transfer u/s 2(47) - admission of the new partners and assignment of right in the firm to the new partners out of the rights of the assessee for consideration - held that:- the firm is not taxed. It is the individual partners who are taxed. More over, in the instant case, the erstwhile partners have not retired, they also continued to be the partners along with the incoming partners. All that has happened is that the shares of the erstwhile partners are reduced. - No transfer - decided in favor of assessee. Decision in the matter of Commissioner of Income-tax v. Gurunath Talkies (2009 (7) TMI 738 (HC)) distinguished.

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• 2012 (5) TMI 397
  Power of the AO to make Adjustments u/s 143(1)(a) - held that:- Where it is evident from the return as filed, along with the documents in support thereof, that a claim of the assessee is inadmissible, only then an adjustment under the said proviso can be made. If proof in support of the claim is not, furnished by an assessee, then for the lack of proof, no dis-allowance or an adjustment can be made. The only option which is open to the Income-tax Officer, in such a case, is that he can require the assessee to furnish proof in which case he will presumably have to issue notice under section 143(2). - Decided in favor of assessee. Adjustment with reference to section 43B - retrospective amendment - it has been held by the Supreme Court that the first proviso to Section 43B has to be treated as retrospective and should be read as a part of the Act with effect from 1.4.1984 itself. The Supreme Court observed that the amendment would not serve its objective unless it is construed as retrospective. Without first proviso, and explanation 2 would not obviate the hardship of Section 43B. - Addition made u/s 143(1)(a) deleted.

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• 2012 (5) TMI 396
  Disallowance u/s 40(a) while computing exemption u/s 11 on account of non deduction of TDS - held that:- Section 40 is applicable only when deductions under Sections 30 to 38 are being made in computing the income chargeable under the head "profits and gains of business or profession" under Section 28. The exception in Section 40 is carved out, only for the purpose of Section 28 and not for computing the exemption of income of a charitable trust under Section 11. - Decided in favor of assessee.

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• 2012 (5) TMI 395
  Revenue or capital expenditure - current repairs u/s 31 - overhead expenditure on construction - held that:- total replacement of damaged machinery/ship or an asset may not constitute repair. - but substitution of old/worn out parts of a machine/building/factory etc. is an expenditure of deductible nature, meaning thereby for claiming the deduction under the provisions of this Act, no new asset should come into existence and the expenditure must have been incurred on the existing asset. - Decided in favor of assessee. Claim of bad debts - held that:- there is uncontroverted finding in the impugned order that the assessee in fact write off the bad debt in its books of accounts. - after 1.4.1989, it is not necessary for the assessee to establish that the debt in fact has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in accounts of the assessee. - Decided in favor of assessee.

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• 2012 (5) TMI 394
  Trading additions - rejection of books of accounts - held that:- The first two reason recorded by the Assessing Officer by themselves do not justify rejection of the books of accounts. Low gross or net profit may be a ground or reason to conduct a detailed and thorough investigation and verification, but on stand alone basis cannot be a ground for rejecting the books. - Decided in favor of assessee.

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• 2012 (5) TMI 393
  Nature of income from share transactions - business income or capital gains - held that:- the details of share transactions holding period wise have been given by the assessee which is placed in the paper book. It is clear from these transactions that the assessee was regularly purchasing and selling shares in more than 50 scrips. Most of the shares have been sold within three months and in many cases within a month and in some cases within few days. The assessee had also done repetitive transactions in the same scrips which clearly shows trading character. The transaction run into 10 pages and are substantial - The assessee had also speculated in stocks. Considering all the factors mentioned above, it can be reasonably be concluded that the assessee was trading in stocks and was not an investor. - Decided in favor of revenue.

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• 2012 (5) TMI 392
  Penalty u/s 271(1)(c) - Exemption u/s 54 - A show cause notice was issued to the assessee after recording the satisfaction to the effect that the assessee had furnished inaccurate particulars of income/concealed its income to explain the said amount - assessee was unable to prove the authenticity of the said iqrarnama before the authorities below as the transaction was executed in cash and the assessee had failed to produce the said seller - it was held that there is nothing on record to establish that the assessee had actually taken possession of the house in question as the backside of page 7 of the paper book revealed that the possession had to be given only at the time of registration, which never took place - The genuineness of the iqrarnama was in doubt and there was no material to establish that possession of the said property was taken over by the assessee and on this point also the assessee could not be held to have fulfilled the conditions of section 54 of the Act - levy of penalty confirmed - Decided against the assessee

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• 2012 (5) TMI 391
  Revenue expenditure or capital expenditure - expenses incurred for acquiring the shares of other company treating - held that:- there was no clarity in the material facts relevant to the acquisition of shares made by the assessee in relation to which the impugned expenses were claimed to be incurred. - the assessee, therefore, was required by us to clarify the factual position. The material facts of the case relevant to the issue under consideration have not been appreciated by the authorities below in the right perspective. This might have happened because of the lack of clarity in the submissions made on behalf of the assessee and the factual position has become clear only when the factual contradictions were brought to the notice of the learned counsel for the assessee by us and explanation was sought from him to clarify the position. Claim of the assessee company needs to be examined afresh in the light of clear factual position which has now emerged at this stage. - matter remanded back to AO.

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• 2012 (5) TMI 390
  Application u/s 254(2) - It has been mentioned that the revisionary order was passed to withdraw deduction u/s 80-IB granted by the AO on export incentives received by the assessee - It is true that a subsequent decision of the jurisdictional High Court or the apex Court forms a valid basis for rectification of an order under s. 254(2) - The decision of the Supreme Court in the case of Liberty India (2009 -TMI - 34471 - SUPREME COURT) was rendered on 31st Aug., 2009, i.e., three years and five months after passing the revisionary order - Appeal is dismissed

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• 2012 (5) TMI 389
  Reassessment - Deduction u/s 10B - period of ten consecutive Assessment Years - During the course of reassessment proceedings, the validity of notice issued by the Assessing Officer u/s 148 was challenged by the assessee by raising certain objections - Held that: Tribunal vide its order dated 30.9.2011 passed in ITA No.2544/Mum/2006 has upheld the order of the learned CIT (A) for Assessment Year 2002-03 deciding the similar issue in favour of the assessee - Decided in favor of the assessee. Regarding deduction u/s 80HHC - this issue is squarely covered in favour of the Revenue and against the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs Dresser Rand India P. Ltd (2010 -TMI - 76637 - BOMBAY HIGH COURT) wherein it was held that service charges received by the assessee which constitutes independent income has no element of export turnover and the same is consequently liable to be excluded to the extent that is stipulated in Explanation (baa) to Section 80HHC - Appeal is dismissed

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• 2012 (5) TMI 388
  Whether the Tribunal was correct in holding that when computing relief u/s 10-A the expenditure incurred by the assessee should not form part of the total turnover and as such it should be excluded from the total turnover if the same are reduced from export turnover - In the case of the CIT v. Tata Elxsi Ltd. [2011 -TMI - 210706 - KARNATAKA HIGH COURT ] wherein it was held that ITO v. Sak Soft Ltd.(2009 -TMI - 70680 - ITAT MADRAS-D), There should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator - Decided in favor of the assessee

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• 2012 (5) TMI 370
  Reassessment - notice u/s 148 - held that:- The assessee had filed and furnished all details and particulars relating to the royalty payment including agreements, calculation and the approval. There was no failure on the part of the assessee to furnish true and correct all material facts. - Writ of certiorari issued and the notice issued under Section 148 of the Act and order dated 24.3.2011 dismissing the objections to the reassessment proceeding passed by the Assessing Officer quashed. - The re-assessment order also quashed.

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• 2012 (5) TMI 369
  Treatment of an amount as income even though the assessee has disclosed the value of goods as part of closing stock - held that:- Tribunal misconstrued the clauses in the agreement to hold that the value of the closing stock had to be treated as income of the assessee. - Decided in favor of assessee.

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• 2012 (5) TMI 368
  Accrual of expenses - whether provision for hank yarn obligation is allowable as a deduction in this assessment year when the assessee has not fulfilled its obligation and textile commissioner had extended the time for fulfilment till 31.3.95 - held that:- when the liability admitted is of reasonable certainty, the mere fact that the actual quantification might take place in the next year, per se, would not stand in the way of the assessee being granted the deduction. The assessee, admittedly, is maintaining the account on mercantile basis. In that event, the decision of the Apex Court in Bharat Earth Movers Vs. C.I.T.) (2000 (8) TMI 4 (SC)), directly applies to the facts of the case. - Decided in favor of assessee.

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• 2012 (5) TMI 367
  Revision u/s 263 - on the issues regarding assessment of capital gain on mutual funds as business income and the capital contribution received from partner companies as deemed dividend U/S 2(22)(e) of the Act though both the issues are highly debatable and two opinions are possible - The only activity carried on by the assessee during the year under consideration was purchase and sale of mutual funds and securities - It is the claim of the assessee that by modifying clause (2) of the partnership deed the transactions entered into by the assessee become investments made by the assessee and recouping of the same investment - On the issue of applicability of section 2(22)(e) of the Act, it was contended by the Ld DR that the Assessing Officer did not examine this issue at all. It was submitted by him that if the Assessing Officer failed to make enquiry which was required to be made, the Ld CIT can assume jurisdiction u/s 263 - Held that: the Ld CIT was justified in coming to the conclusion that the impugned assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue as the Assessing Officer has failed to take into consideration Circular No.4/2007 dated 15.6.209097 and Instruction No.1527 dated 31st August, 1989 of the CBDT while computing the total income of the assessee - Appeal is rejected Regarding applicability of section 2(22)(e) - Ld CIT in his order u/s 263 of the Act has directed the Assessing Officer to enquire as to whether the partnership deed by which the assessee came into being was a device or not and if it was a device whether section 2(22)(e) of the Act was attracted in assessee's case - Held that: Ld. CIT has given specific finding on certain issues even though he has directed the AO to reframe the assessment as per the correct provisions of law and after giving the assessee adequate opportunity of being heard. We are of the considered opinion that he was not justified in giving such specific findings - Decided in favor of the assessee by way of remand to AO

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• 2012 (5) TMI 366
  Additions made by the AO due to non-submissions of confirmations by the parties against enquiry letters issued u/s 133(6) – treating the entire transactions to the said 17 parties as bogus entries and made an addition of Rs.3,72,31,524/ - CIT(A) held the findings of the AO in the assessment order and in the remand report to be unsubstantiated – Held that:- AO’s contention that there is no further verification possible due to absence of contact details provided in the affidavits of the concerned parties is not reasonable as he himself had issued inquiry letters u/s 133(6) – verification of the books of accounts and bills and vouchers could be done during the remand - CIT(A) gave a finding that the books of account are found to be audited by the tax auditors, wherein no such infirmities are noted in the maintenance of the books of account and depicting no change in G.P - findings given by the CIT(A) are proper and no infirmity in the order - against revenue .

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• 2012 (5) TMI 365
  Penalty u/s.271(1)(c) - The main thrust of the argument by the Ld. Counsel of the assessee is that penalty is required to be knocked down simply on the basis that AO has failed to apply his mind because notice has been issued without specifying the allegation as AO has simply tick marked the column "for concealing the particulars of income or furnishing inaccurate particulars of income" in the show cause notice - it is clear that what court observed was that "concealment and filing of inaccurate particulars" are two different requirements - A plain reading of the above clearly shows that the combined meaning of sec.271(1)(c) read with Explanation 1 is that if assessee has filed inaccurate particulars and such person offers an explanation which is not bona fide or offers no explanation, then penalty is leviable - Noticing that the assessee had given an explanation, vide its letter dated March 22, 2006, giving reasons for claim-ing the interest as a deduction, the Tribunal was of the view that the onus shifted on the Revenue to prove that the explanation offered by the asses-see was false - if a claim is patently wrong, as in the case before us, then merely because such claim has been made through books of accounts cannot be said that assessee has disclosed full and true particulars of income - Decided against the assessee

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• 2012 (5) TMI 364
  Transfer pricing - arm's length price - Principle of natural justice - Deduction u/s 10A - international transactions in the nature of provision of contract software development - High Court in the case CIT v. Dalmia Promoters Developers (P.) Ltd. [2006 -TMI - 9467 - DELHI High Court] wherein it was held that for rejecting the view taken in earlier assessment years, there must be material change in the fact, situation or in law. In this case, clearly there is neither any change in the fact, situation or in law. Decided in favor of the assessee by way of remand to AO Regarding short recognition of income under BSNL project - Held that-: on this issue it has been urged by the assessee that the addition to income was made on the basis of revenue, as per advance purchase order. In this regard, it has been argued that this was done without considering the actual purchase order, produced before the DRP by way of application u/r 4 of the IT (DRP) Rules, 2009. Regarding marketing expenses - During the year under consideration, the Assessing Officer has considered the cost of mobile handsets issued to employees, AMSCs and Dealers free of cost and stock scrapped as capital assets on the basis that the assessee continues to be the owner of theses handsets and these handsets are not part of the trading activities of the assessee. Held that: High Court had remitted the matter for Assessment Year 2000-01 and 2001-02 to the file of the ITAT and the ITAT vide order dated 22.9.2011 has remanded back the matter to the file of the Assessing Officer to fresh consideration. – Decided in favor of the assessee by way of remand to AO. Regarding disallowance of 25 per cent of the provision for obsolescence – Held that: - dismissal of the ground raised by the assessee in respect of provision for obsolescence would not preclude the assessee from giving the information to sustain the claim in subsequent assessment years and that once such information is provided, the Assessing Officer would give due consideration to the same. - Decided in favor of the assessee by way of remand to AO. Regarding disallowance of excess depreciation - Held that this issue is squarely covered by the decision of the Hon'ble Jurisdictional High Court in [2010 - TMI - 78240 - DELHI HIGH COURT - Income Tax] C.I.T. v. BSES Rajdhani Powers Ltd. wherein it was held that the Court was in agreement with the view of the tribunal that the computer peripherals such as printer, scanner etc. form an integral part of computer system. – Decided in favor of the assessee

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• 2012 (5) TMI 363
  Penalty u/s 271(1)(c) - delay in service of notice - period of limitation for initiating penalty proceedings - CIT(A) observed that delays in service of notices and orders are routine and natural, even if they are sent by speed post or courier, and much cannot be inferred based just on such delay in service. - CIT(A) has extracted order sheet entries from the record and took note of the sequence of events and concluded that it is almost impossible for the Assessing Officer to back date the order, since the Assessing Officer would have to change too many records, which is again impossible to do. - Decided against the assessee. Regarding penalty - Held that: the words 'return of income to be furnished before the expiry of time specified in clauses (a) and (b) of sub section (1) of s. 139', cannot be read without the words 'income which has not been disclosed so far in his return of income' preceding the aforesaid words and if we read the complete sentence which is comprising out of words "has been acquired out of his income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in clause (a) or (b) of sub section (1) of section 139" - So far as assessee's case is concerned it is an admitted fact that the assessee has disclosed an additional income and, therefore, the assessee is entitled to the immunity available under clause (2) of Explanation 5 of S.271(1)(c) of the Act for all these assessment years - Appeals are partly allowed

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• 2012 (5) TMI 362
  Revision u/s 263 - Disallowance u/s 14A - speculation loss - carry forward of the balance of speculation loss - held that:- since the eligibility period of carry forward of speculation loss incurred in the year 2001-02 has already expired in the assessment year 2005-06, the ld. AO had wrongly allowed the assessee to carry forward of the balance speculation loss of Rs.80.15 crores as claimed by the assessee beyond 2005-06. - it is evident that the AO has not applied his mind on the issues. - The ld. AO has not made a clear finding whether the assessee is entitled to carry forward the speculation losses beyond four years by virtue of the amendments brought in the Act for the relevant assessment year. Further the ld.CIT has also not adjudicated the issue but only remitted the matter back to the file of the AO to re-do the assessment after due consideration and as per law. - matter remanded back.

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• 2012 (5) TMI 361
  Application for waiver to an amount which was the balance amount due from the deceased assessee. - Application under section 220(2A) - learned counsel for the Revenue would but contend that with respect to the question of hardship the Commissioner has found the hardship only with respect to further payment of interest and no hardship has been found with respect to the amounts already adjusted towards the interest - In the instant case, what was stated by the Commissioner was that certain amounts were already paid by way of adjustment or otherwise and that certain amounts remained unpaid - Held that: The standing counsel for the Revenue would also contend that the waiver of interest was limited to that remaining unpaid since the amount adjusted cannot be taken to be having been paid - Decided in favor of the assessee

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• 2012 (5) TMI 360
  Business income or capital gain - appellant has purchased and sold shares to realize the profit based on share price movements. Normally, this is done by some one who is the activity of share trading - principally it does not seems to be a case of mistake because if it was really a mistake then the broker would not have given the profit to the assessee because in the reverse situation i.e. if it was a case of loss assessee would not have made payment of loss to the broker. Moreover, there is no evidence to show that the broker has accepted that it was a case of mistake by him - When these few transactions are considered with the transactions regarding sale of shares of Wyeth Ltd., which were held for almost 10 years, it becomes clear that assessee is only an investor and cannot be called a trader - transactions of sale and purchase of shares have to be assessed under the head "capital gains" only - Appeal is allowed

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• Customs

• 2012 (5) TMI 386
  Import of brand new vehicle or not - exemption under notification no. 21/2002 CUS dated 1 March 2002 - held that:- Whether a vehicle is or is not new is a pure finding of fact. The facts which have been found by the Settlement Commission indicate that the car was in fact a new car which was transshipped from the manufacturer in Italy to the Ferrari dealer in the U.K. who sold the car to a dealer in the U.K. The Respondent purchased the car from the dealer in the U.K. The Settlement Commission has noted that the registration of the car in the U.K. was only to comply with the requirement of the licensing authorities in the U.K. who require registration even for the purposes of exportation. The car was not used in the U.K. The finding that the vehicle was a new motor vehicle is not perverse or contrary to the evidence. - Decided in favor of assessee.

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• 2012 (5) TMI 385
  Suspension of CHA licence - nearly three years ago contemplating inquiry against the CHA, there is no progress of inquiry against the appellant and, consequently, the appellant remains without livelihood – Held that:- appellant has not been able to carry on the business of CHA for nearly three years on account of the impugned suspension order of the Commissioner. Though an inquiry officer was appointed by the Commissioner in August 2009, it appears, he is yet to initiate action. It is also unfortunate that no post-decisional hearing was given to this party by the learned Commissioner after keeping them under ex parte suspension order for nearly three years, suspension order against the present appellant is liable to be revoked. It is ordered accordingly, appeal is allowed

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• 2012 (5) TMI 359
  Waiver of pre-deposit and stay of recovery – Held that:- appeals filed with the Commissioner (Appeals), the assessee did not mention the date of speed post, nothing stood in the way of the appellate authority verifying the records of the department relating to the above dispatch to find out the correct date of dispatch of the Orders-in-Original. It appears from the impugned order that no attempt was made in this regard. There is yet another infirmity in the appellate Commissioner's order. After holding the appeals to be time-barred, he embarked on discussion on merits and took a view on the substantive issue. If an appeal filed with the Commissioner (Appeals) is really belated beyond the condonable period of limitation prescribed under Sec.128 of the Customs Act, it has only to be rejected on that ground and there shall be no discussion on merits, appeals are allowed by way of remand

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• 2012 (5) TMI 358
  Affixing of MRP on imported goods - sale to institutional consumers - Valuation for the purpose of levy of CVD - Manufacture - meaning to the definition of 'manufacturer' given under Rule 2(h) – Held that:- appellant has given a distorted meaning to the definition of 'manufacturer' given under Rule 2(h) - There is nothing in the definition of 'manufacturer' to show that mere affixture of trade mark would suffice the requirement of the inclusive definition. - Decided against the assessee.

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• FEMA

• 2012 (5) TMI 387
  FEMA – allegations against the respondent are that on 30-8-1996 the appellant herein had served summons on the respondent through his counsel under section 40 of the Foreign Exchange Regulation Act, 1973 ('the 'Act') requiring him to appear - summons were served at 8.35 P.M. by the appellant on the respondent who was in Jail No. 2 through his counsel who made an endorsement on the summons that the respondent would appear on 31-8-1996 at 2.00 P.M. It is alleged that the respondent neither appeared on 30-8-1996 nor on 31-8-1996, this led to filing of a complaint under section 56 of the Act against the respondent – Held that:- before a person can be held to be guilty of disobeying the summons, the summons must be served on him and he must have wilfully disobeyed the summons with a view to hamper the investigation or not to produce the document. possibility of the respondent being in Jail is reflected by the endorsement of the counsel, who mentions Jail No. 2 on his endorsement which prima facie can be taken to show that at the relevant time the respondent was in Jail. petition is dismissed

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• Service Tax

• 2012 (5) TMI 404
  Activity of sponsoring the IPL - sponsorship service - section 65 (99a) of Finance Act, 1994 read with sub-clause (zzzn) of section 65(105) - sponsorship is in relation to sports events - Circular Letter D.O.F. No. 334/1/2010-TRU, dt. 26.2.2010 - held that:- admittedly, sponsorship of sports event, is not covered by the definition of sponsorship appearing in the relevant provisions of the Finance Act. The adjudicating authority for arriving at finding against the appellant has simpliciter followed the Board's circular. - IPL was considered a cricket tournament, as is clearly shown in the official website of IPL and as such, has to be considered as sport event. The Commissioner, as independent quasi-judicial authority was under legal obligation, independently was required to examine the issue before him instead of following the Board's circulars. It is only in respect of those circulars which are in favour of the assessee that the departmental officer cannot take view against the same and are required to follow the said circulars in favour of the assessee. Prima facie, the existing provisions of Finance Act provide an exclusion of said cricket match etc. from ambit of service tax and legislative intent is there to amend the same so as to bring the same into service tax net. - Stay granted unconditionally.

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• 2012 (5) TMI 402
  Cenvat Credit on outward GTA – Held that:- in ABB Ltd (2011 - TMI - 203985 - KARNATAKA HIGH COURT - Service Tax) held that, till the amendment (effective from 1/4/2008) of clause (ii) of Rule 2(l) of the CCR through substitution of the word 'upto' for the word 'from', transportation charges incurred by a manufacturer for clearance of final products from the place of removal stood included in the definition of 'input service' Availment of Cenvat credit on outward transportation of goods and C&F Agent service – Held that:- in Metro Shoes Pvt. Ltd. (2008 - TMI - 4278 - CESTAT, MUMBAI - Service Tax) wherein it had been held that services rendered by various service providers like C&F agents during the course of transportation of the final products from the factory of the manufacturer to their own showrooms located at various places were 'input services' for the manufacturer as these services were used by the manufacturer, directly or indirectly, in or in relation to the clearance of the final product from the place of removal. appeals are allowed

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• 2012 (5) TMI 401
  Waiver of pre-deposit of Service Tax - Cenvat credit - applicant has contended that regarding mobile phone that it is for the official use or director of the company. Board has issued a Circular allowing the CENVAT credit on mobile phones. So far as insurance premium on vehicles is concerned the applicant has admitted that the vehicles are used for transportation of inputs and capital goods except in case of one vehicle. pre-deposit of service tax, interest and penalty is waived

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• 2012 (5) TMI 400
  Whether the assessee is entitled for input service credit on outward transportation service - Held that:- in the case of CCE&ST v. ABB Ltd. (2011 -TMI - 203985 - KARNATAKA HIGH COUR) assessee is entitled to take input service on outward transportation service. appeal filed by the Revenue is dismissed

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• 2012 (5) TMI 399
  Refund claim - Additional Commissioner stated that 'the revenue involved in this appeal is only Rs.2.6 lakhs and there is no point of law involved, therefore, it has been decided, following the guidelines issued under Office Memo No. F.No. 1/26/5-T/2008-LC dated 07.04.2008, not to make reference to the Committee of Dispute for approval as the amount involved in this case is less than Rs.5 lakhs - SDR submitted that the Revenue may be given liberty to withdraw the appeal. appeal is dismissed as withdrawn

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• 2012 (5) TMI 398
  Manpower Recruitment and Supply Agency services - non payment of service tax - extended period of limitation - suppression of facts - contention of the appellants is that, since the issue pertains to interpretation of relevant clauses of Finance Act, 1994, neither could penalty under Section 76, 77 and 78 of Finance Act, 1994 be imposed nor the extended period of limitation, for the purpose of confirming demand be invoked – Held that:- in the case of Lanxess ABS Limited (2010 - TMI - 202555 - CESTAT, AHMEDABAD - Central Excise) issue involves interpretation of relevant clauses of Finance Act, appellant cannot be held responsible for interpreting the same in such that it could be beneficial to them. no penalty under Section 78 of the Finance Act, 1994 is imposable as also extended period of limitation for the purpose of confirming demand is also not invokable. appeal filed by the appellant is allowed

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• 2012 (5) TMI 377
  Whether Tribunal has committed substantial error of law in setting aside penalty under section 78 of the Finance Act, 1994 imposed upon the respondent in ignorance of jurisdictional facts indicating intention of respondent to evade payment of service tax under provisions of the Finance Act, 1994 – Held that:- Under Section 78 of the Finance Act, 1994, penalty can be levied where any service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or the Rules with an intent to evade payment of service tax. In the present case, the Tribunal came to the definite finding that no such factors exist. that Section 80 provides that such penalty shall not be imposed if the assessee proves that there was reasonable cause for failure to pay such tax. Tax Appeal dismissed

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• 2012 (5) TMI 376
  Application for waiver of pre-deposit - demand of interest is on the ground that the assessees delayed in paying the service tax on transactions between associated enterprises - contention of the assessees is that there has been no delay on their part as the amendment to Section 67 by which service tax liability was to be discharged in the case of transactions with associated enterprises immediately on entry in the books of accounts is only prospective i.e. w.e.f. 10-5-2008, which is that date of amendment to the statutory provision and not retrospectives - prayer for waiver of pre-deposit granted

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• 2012 (5) TMI 375
  Cenvat credit - technical knowhow imported - assessee paid service tax on royalty and took CENVAT credit thereof under the head 'Intellectual Property Service – Held that:- technical knowhow imported by the appellant consisted of product technology and process technology. If that be so, it requires to be examined as to whether these technologies had any nexus with the manufacture of automobile parts as required by the statutory definition of input service. This aspect could be examined only with reference to the terms and conditions of the licence agreement. appeal stands allowed by way of remand

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• 2012 (5) TMI 374
  CENVAT credit - appellant has a scheme of having tobacco of good quality produced by a select group of farmers. Under this scheme, they supply tobacco seeds free of cost to the farmers and also arrange necessary advice to be given to them by experts - agreement between the appellant and M/s. Supreme Detective and Security Services. Under this agreement dated 18.04.2006 between the appellant and M/s. Supreme Detective and Security Services (SDSS for short), the latter was liable to provide certain services mentioned in an annexure to the agreement, to the farmers within the prescribed time – Held that:- appellant is the service-recipient as they paid for the services of M/s. SDSS and did not recover the same from the farmers and (b) that they have established a nexus between the services and the manufacture of their final product (cigarettes) by showing that the services were ultimately utilized for producing good quality tobacco which was required for the manufacture of good quality cigarettes and also by including the cost of services in the cost of production of cigarettes. The services thus fit in the definition of 'input service' under Rule 2(1) of the CENVAT Credit Rules, 2004. Hence the appellant rightly availed CENVAT credit of the service tax paid on the services. appeal is allowed

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• 2012 (5) TMI 373
  CENVAT credit on "Workmen Compensation Insurance Policy services – Held that:- in the case of Stanzen Toyotetsu India Pvt. Ltd [2011 (4) TMI 201 - KARNATAKA HIGH COURT] wherein the credit on the Group Insurance Health Policy was allowed. department has not taken whether Service Tax paid on the Workmen Compensation Insurance Policy was included in the assessable value or not was not part of the show-cause notice or any other subsequent proceedings, the department rake up the same now. Appeal is dismissed.

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• 2012 (5) TMI 372
  Demand of service tax - Clearing and Forwarding services received - Commissioner (Appeals) has taken a view that the demand is not sustainable since the show cause notice was issued under Section 73 of Finance Act, 1994 and on the day on which show cause notice was issued, the Section 73 was not applicable in respect of short levy arising in respect of the ST - 3 returns filed under Section 71A – Held that:- if provisions of section 71A are not incorporated under section 73, no demand can be raised for the violation of the same, the liability does not arise and demands cannot be sustained. provisions of Section 73 of the Finance Act, 1994 were amended from 10.09.2004 by incorporating violation of Section 71A, for issuance of show cause notice. show cause notice has been issued on 19.05.2004, i.e., prior to amendment of Section 73. appeal filed by the revenue rejected

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• 2012 (5) TMI 371
  Whether the group insurance service provided to them under 'medi-claim policy' for the welfare of assessee's employees by the insurer was an input service under Rule 2 (l) of the CENVAT Credit Rules, 2004 for the assesse – Held that:- After considering the nexus of the service to the business of the assessee, the Bench included the service within the ambit of the inclusive part of the definition of 'input service' and granted the consequential benefit of CENVAT credit to the assessee. assessee's appeal allowed CENVAT Credit on GTA Service - whether GTA Service could be considered as an 'input service' as defined under Rule 2 (l) of the CENVAT Credit Rules, 2004 – Held that:- in the case of M/s. ABB Ltd. GTA Service is an ‘input service' within the statutory definition of this expression. appeal is dismissed

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• 2012 (5) TMI 352
  Cenvat credit - duty paying documents - debit note cum bills - duplicate copies of invoice - department was of the view that these documents are not the valid documents for availing Cenvat credit – Held that:- documents called “debit notes cum bills” contain all the information which is required to be mentioned in the invoices and except for the name of the document, there is no difference between the debit note cum bill and invoice. The nature and value of the service provided and the service tax paid has been shown in these documents and it is not disputed that the service tax has been paid to the Government, Revenue’s appeal is dismissed, cross-objection also stands disposed of

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• Central Excise

• 2012 (5) TMI 384
  Credit of service tax paid on different services for the purpose of paying duty in respect of various goods manufactured - held that:- In view of decision in MURUGAPPA MANAGEMENT SERVICES LTD & Others (2011 (10) TMI 501 (Tri)) and Ultratech Cement Ltd. (2010 (10) TMI 13 (HC)) while decided the issue in favor of assesse, matter remanded back for fresh decision.

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• 2012 (5) TMI 383
  Credit of service tax paid on different services for the purpose of paying duty in respect of various goods manufactured - held that:- In view of decision in MURUGAPPA MANAGEMENT SERVICES LTD & Others (2011 (10) TMI 501 (Tri)) and Ultratech Cement Ltd. (2010 (10) TMI 13 (HC)) while decided the issue in favor of assesse, matter remanded back for fresh decision.

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• 2012 (5) TMI 382
  Refund - limitation - unjust enrichment - appellant have deposited the amount under protest on differential value of the goods cleared by them to their sister unit/group companies – Held that:- duty incidence has not been passed on to their sister concern/group companies by producing relevant certificates from the Range Superintendent and from the balance sheet as the same is shown as receivable from the Government. Therefore, the appellant are able to pass the bar of unjust enrichment, on that ground also their refund claim is maintainable, appeal is allowed

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• 2012 (5) TMI 381
  Exemption Notification No. 4/97-C.E. - condition for availment of availability of this exemption is that no credit of duty paid on the chassis had been taken - appellant had received chassis on which LPG tank fabricated had been mounted and there is no dispute that no MODVAT credit of duty paid on chassis had been taken - objection of the department is that the explanation to this entry does not cover the running gear and hence the value of running gear would be includable in the assessable value of the goods - Held that:- for the purposes of exemption under this Notification, it is not correct to make distinction between chassis and running gear, when what was supplied by the assessee to the customers was chassis and the assessee had only done the body building on the chassis, therefore, the benefit of exemption under Notification No. 4/97-C.E., cannot be denied [Mukul Engineering Works (2010 (3) TMI 605 - CESTAT, MUMBAI)] appeal is allowed

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• 2012 (5) TMI 380
  Rebate of duty paid on export goods - Petitioner paid lesser duty on domestic product and higher duty on export product which was not payable - Commissioner appeal allowed refund of full amount paid - held that:- Assessee not entitled to refund thereof in cash regardless of mode of payment of said higher excise duty - He is entitled to cash refund only of the portion deposited by it by actual credit and for remaining portion, refund by way of credit is appropriate, Government set aside the impugned order-in-appeal and allows the revision application of revenue, excess amount paid being voluntary deposit with Government was rightly ordered to be returned as re-credit in the Cenvat Credit account by original authority.

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• 2012 (5) TMI 379
  Revision application - Commissioner (Appeals) has rejected the rebate claim merely because duty paying documents were not produced before him – Held that:- in case goods are cleared for export from a place other than factory or warehouse then the goods will be cleared for export under Central Excise supervision and the triplicate copy of ARE-1 will be verified for payment of duty by the Central Excise Range Supdt. in-charge of factory where goods are manufacture. No such procedure is followed in this case, duty paid character of exported goods is not proved in this case, the rebate of duty is not admissible under Rule 18 of Central Excise Rules, 2002, revision application is rejected

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• 2012 (5) TMI 357
  Whether the appellants are entitled to take CENVAT credit on the strength of supplementary invoices which has been raised on them by their supplier as per the agreement - there was an agreement between the supplier and the appellants that if the appellants failed to lift the required quantity, the price of the cracked ammonia gas will be changed and extra amount for that shall be charged from the appellants for which these supplementary invoices has been raised on the appellants on which proper duty has been paid by the supplier – Held that:- in the case of MDS Switchgear Ltd. (2008 (8) TMI 37 - SUPREME COURT - Central Excise) as the supplementary invoice has been raised for the minimum agreed quantity by the appellant is nothing but the escalated amount of the goods received by them, appellants are entitled to take the credit on the strength of the supplementary invoices, appeals are allowed

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• 2012 (5) TMI 356
  Personal penalty on Director - held that:- Admittedly the manufacturer having paid the entire duty, interest along with 25% of penalty within a period of 30 days from the date of issue of show cause notice, the proceedings are required to be held as conclusive in respect of the manufacturer as also in respect of the co-noticees. As such, separate imposition of penalty on the Director is not called for. - The Revenue's appeal rejected.

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• 2012 (5) TMI 355
  Appellant states that the lower appellate authority has not dealt with the appellant s claim for full quantum of SSI exemption. Further, he states that the appellant was of bonafide belief on the basis of a newspaper report that the impugned goods were exempted from duty and therefore, the question of applying the extended period of limitation cannot arise. - matter remanded back to pass a proper and detailed speaking order.

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• 2012 (5) TMI 354
  Credit of service tax paid on different services for the purpose of paying duty in respect of various goods manufactured - held that:- In view of decision in MURUGAPPA MANAGEMENT SERVICES LTD & Others (2011 (10) TMI 501 (Tri)) and Ultratech Cement Ltd. (2010 (10) TMI 13 (HC)) while decided the issue in favor of assesse, matter remanded back for fresh decision.

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• 2012 (5) TMI 353
  Cenvat credit - wrongly taken Cenvat credit - department was of the view the credit on the basis of endorsed invoices/bill of entry is not correct – Held that:- Cenvat credit in respect of capital goods which are alleged to have been used exclusively for manufacture of the goods on job work basis, which were cleared at nil rate of duty, since the appellant during that period were regularly filing the ER-1 returns and the fact of clearance of goods without payment of duty under job work challan under Notification No. 214/86-C.E., was known to the department, it is difficult to accept the department’s contention that the relevant information with regard to availment of the capital goods Cenvat credit was deliberately suppressed by the appellant, show cause notice is time barred and as such the Commissioner (Appeals)’s order upholding the Cenvat credit demand is not sustainable, appeal is allowed

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• CST, VAT & Sales Tax

• 2012 (5) TMI 378
  Rejection of refund claim under DVAT by invoking revision powers - period of limitations - Power of revision of cases under DVAT Act after repeal of Delhi Sales Tax Act - section 74A - prospective or retrospective - held that:- no revisional proceeding had been initiated under the Delhi Sales Tax Act, 1975 on the date (01.04.2005) on which the DVAT Act was brought into operation. However, since the Full Bench had indicated that proceedings could be initiated under section 74A of the DVAT Act, all that has to be seen is as to whether the said proceedings have been initiated during the period of limitation as stipulated under section 74A of the DVAT Act or not. Section 74A(2)(b) of the DVAT Act and not Section 46 of the Delhi Sales Tax Act, 1975 would apply. In fact, the impugned show cause notice dated 02.02.2010 could not have been issued under Section 46 of the Delhi Sales Tax Act, 1975. However, even if it is assumed that the impugned show cause notice was issued in exercise of the powers of revision under Section 74A of the DVAT Act, the period of limitation would be that which was in vogue when the said notice was issued. The period of limitation that would apply would, therefore, be the one prescribed under Section 74A(2)(b) of the DVAT Act. And, that being the case, as we have mentioned above, the impugned show cause notice dated 02.02.2010 is barred by time. - Decided in favor of assessee.

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