TMI Tax Updates - e-Newsletter
May 1, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Commencmen of business - When the assessee in the present case was in a position to apply for the tender, borrowed money for interest albeit from its holding company and deposited the same with NGEF Ltd. on the same day, it shows that the assessee's business had been set-up and it was ready to commence business. - HC
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Income Tax:
Sale of paintings - excluded from the purview of personal effects and consequently included as one of the capital asset under Section 2(14) w.e.f. 1.4.2008 - when the amendment itself was brought in with prospective effect, the same cannot be applied retrospectively. - HC
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Income Tax:
Reconstitution of partnership firm - one partner retired and two were continue - provisions of Section 45(4) is applicable as it amounts to transfer - capital gain is applicable- AT
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Income Tax:
Sale of shares - Business income v/s Long Term Capital Gain - it is relevant to see the intention of the assessee at the time of making of investment - AT
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Income Tax:
The provision for warranty claims and free services charges were allowable as deduction on the facts that quantification of warranty claim and liability of free services has been made on scientific basis. - AT
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Income Tax:
Levy of penalty u/s 271(1)(c) - no satisfaction as required by law has been recorded by AO during the assessment proceedings, hence, imposition of penalty is bad in law. - AT
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Income Tax:
Export incentives Duty Drawback/DEPB u/s 80lB - DEPB/Duty Drawback benefits did not form part of net profit of eligible industrial undertaking for the purposes of section 80-I/80-IA/80-IB - AT
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Income Tax:
Share application money - if the identity of the non-resident remitter is established and the money has come in through banking channels, it would constitute a capital receipt and ordinarily cannot be treated as deemed income under sections 68 or 69 of the Act. - AT
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Income Tax:
Addition u/s 68 - The grievance of the AO is, why he has not deposited the amount in the bank on the date of receipt itself is too be hyper technical in his approach - AT
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Customs:
Imports of used digital multifunction and copying machine under the Foreign Trade Policy 2009-2014 - there is no conflict between the policy and the procedure laid down. - HC
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Customs:
Prior to budget 2012, benefit of customs duty exemption on road construction equipment was not available in cases where the contract for such construction was awarded by a Metropolitan Development Authority. - AT
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Indian Laws:
FINANCE BILL, 2013 passed by the Loksabha as on 30-4-2013
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Service Tax:
The activity of the appellant in construction of roads on BOT basis is not leviable to service tax either under commercial or industrial construction service, works contract service, maintenance, management or repair of immovable property service or under Business Auxiliary Service. - AT
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Service Tax:
Denial of abetment in terms of Notification No. 32/2004-ST - there is no such conditions in the notification for making declaration on each consignment note. - AT
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Service Tax:
Cenvat Credit - Appellant could be under bonafide belief to avail the Cenvat credit which cannot be questioned - the demanding the same is held to be hit by limitation. - AT
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Service Tax:
Waiver of penalty u/s 80 – once the adjudicating authority has exercised his discretion for setting aside the penalty under Section 80 of the Finance Act, 1994, that attains finality - AT
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Central Excise:
Merchant Overtime Tax Charges (MOT) - if services are rendered by the Customs Officer at a place which is not his normal place of work or a place beyond the Customs area, overtime is levied even during the normal working hours - otherwise not - HC
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Central Excise:
Refund claim – the amount which has been paid to pursue the appeal before the higher judicial fora, needs to be refunded to the assessee - AT
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Central Excise:
Manufacture - Marketability - The processes undertaken for treatment of water did not result in the emergence of new product. - AT
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Central Excise:
A ordinary citizen, in our view, under the ordinary course of circumstances cannot be expected to keep track of the judgment of various Courts. - Demand set aside being beyoind the normal period of limitation - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (4) TMI 678
Cash discount allowed to the dealers and sub-dealers for promotion of goods - Non deduction of TDS - CIT (A) deleted the addition - Held that:- As goods had been sold to dealers/ sub-dealers at arm’s length on principal to principal basis and they were not acting on behalf of the assessee, therefore, there was no agency relationship with them. As per the policy of the assessee company, no commission was payable to the dealers / sub-dealers for promotion of the selling of the goods & this cash discount was for the prompt payment for the goods supplied to them as abetment of cost and not in the nature of commission, therefore provisions of section 194H are not applicable. In favour of assessee. Interest invested on capital work in progress out of its interest bearing funds - disallowance as the capital work in progress has not been put to use by the assessee for its business - CIT (A) deleted the addition - Held that:- There was an opening balance at the beginning of the year under the head ‘capital work in progress’. Further as per the audited accounts of the assessee, there was no closing balance under the head ‘capital work in progress’. This shows that the work was completed during the relevant year & assets were ready for use or used for the business purposes during the year. Since there was nothing under the head ‘capital work in progress’, therefore, there is no question of establishing the nexus between the borrowed fund and the investment made - order of the CIT (A)sustained. In favour of assessee. Disallowance of un-vouched expenses under the sub-head leakage and wastage - CIT (A) deleted the addition - Held that:- CIT (A) has rightly deleted the addition as these leakages and wastages debited in the books of account are part and parcel of manufacturing activity of the assessee. In favour of assessee.
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2013 (4) TMI 677
Re opening of assessment - evasion of tax on the short terms capital gain arising in its hand on sale of land - as per AO Actual sale deeds executed by the society in favour of other signatories to the MOU was only a device to avoid liability to pay tax on short term capital gain - Petitioner had filed return of income for the said assessment year 2005-06 which was accepted without scrutiny - Held that:- Merely because an assessment was not previously framed after scrutiny, would not give unlimited right to the AO to reopen by merely issuing a notice without valid reasons. As decided in Inductotherm (India) Pvt. Ltd. Vs. M. Gopalan, Dy. CIT [2012 (9) TMI 16 - Gujarat High Court] referring to Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME Court) it is well settled that absence of notice under section 143(2) within the time permitted, scrutiny assessment under section 143(3) cannot be framed. However, merely because no such notice was issued, to contend that the assessment cannot be reopened, is not backed by any statutory provisions. Thus AO has committed a grave error in issuing impugned notice as petitioner had first entered into MOU to form a consortium of different entities to bid for a large piece of land which would require sizable investment & thereupon, entered into an agreement to sale with the society. Ultimately, as per the terms of the agreement and the understanding between the petitioner and other signatories to the MOU at the instance of the petitioner, the society entered into a separate sale deeds in favour of various parties. Thus failure to see how the revenue can contend that under such circumstances, there was escapement of income under the head of short term capital gain. Merely because the petitioner entered into an agreement with the said society which agreement contained a clause that the final sale deed would be executed in favour of such other persons as the petitioner may indicate, by itself cannot give rise to a presumption that the land in question stood transferred in favour of the petitioner on the date of such agreement as contended by the revenue. The society had not, by virtue of agreement dated 08.04.2004, transferred the property in favour of the petitioner. The society had only agreed to do so on certain terms and conditions. Most important condition being that of the purchaser paying remaining purchase price without which the sale could never be completed. In the meantime the possession of the land was retained by the society. An agreement to sale without there being anything more,obviously cannot be equated with transfer of property. Section 5 of the Transfer of Property Act also enforces this view. Reassessment notice quashed. In favour of assessee.
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2013 (4) TMI 668
Assessment of income - when a business can be said to have been set-up? - whether act of depositing earnest money while participating in the tender floated by the official liquidator of the Karnataka High Court and the act of borrowing monies from the DLF Ltd. for the purpose can be construed as acts constituting setting-up of the business of real estate development? - Held that:- The actual acquisition of the land may be a first step in the commencement of the business, but section 3 of the Act does not speak of commencement of the business, it speaks only of setting-up of the business. When the assessee in the present case was in a position to apply for the tender, borrowed money for interest albeit from its holding company and deposited the same with NGEF Ltd. on the same day, it shows that the assessee's business had been set-up and it was ready to commence business. The revenue contention that till the land is acquired, the business is not set-up is not acceptable as an assessee may not be successful in acquiring land for long period of time though he is ready to commence his business in real estate, and that would result in the expenses incurred by him throughout that period not being computed as a loss under the head “business” on the ground that he is yet to set-up his business. The other argument for the revenue that the tax auditors of the assessee have themselves pointed out that the assessee is yet to commence its business is also irrelevant because of the distinction between the commencement of the business and setting-up of the same. Under section 260A an appeal lies to the High Court only on a substantial question of law. The finding of the Tribunal in the present case is a finding of fact and it cannot be said that the finding was without any basis or material. Appeal dismissed - no substantial question of law arises. Against revenue
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2013 (4) TMI 666
Sale of paintings - personal effect - whether be treated as capital asset for the computation of computed the capital gains - Tribunal held that that the paintings would be personal effects and sale of the same would not attract the capital gains - Held that:- The relevant assessment year in the present case is 2005 -2006 and during such assessment year, the definition of capital asset found under Section 2(14) does not specifically exclude paintings from the purview of personal effects. The paintings were excluded from the purview of personal effects and consequently included as one of the capital asset under Section 2(14) only in pursuant to the amendment made under the Finance Act 2007 that too with effect from 1.4.2008, the above said amendment was not made with any retrospective effect. Thus when the amendment itself was brought in with prospective effect, the same cannot be applied retrospectively. Moreover, it being a taxing liability, the same cannot be applied retrospectively as held in Guffic Chem P. Ltd., Vs. Commissioner of Income Tax (2011 (3) TMI 6 - Supreme Court) - no merits in the appeal. Against revenue.
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2013 (4) TMI 665
Validity of assessments u/s.153C - search and seizure operation u/s.132 covering the residential premises as well as business premises of assessee - appellant challenged the proceeding initiated u/s.153C on the ground that no satisfaction was recorded by the A.O. of case in which a search conducted - Held that:- For initiating proceeding u/s.153C, it is not necessary that these books of account should be incriminating. When books of account of the appellant found and seized from the search place of the partner of the firm, the A.O. is fully empowered to initiate proceeding u/s. 153C against the firm i.e. other person. The A.O. of the both partners as well as firm was same therefore, no separate satisfaction is required to be recorded as held in case of CIT v. Panchajanyam Management Agencies & Services [2010 (11) TMI 366 - Kerala High Court]. In assessee's case, in all the years, no scrutiny assessment has been made by the A.O. The return of the appellant had been process u/s. 143 (1) (a) and it was held by in case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007 (5) TMI 197 - SUPREME Court] intimation u/s.143(1)(a) cannot be treated to be an order of assessment and there being no assessment u/s.143(1)(a). The Section 153D has been amended w.e.f. 01.06.2007 whereas the A.O. has passed orders u/s. 153C in all the years on 24/03/2006. Thus, no approval of JCIT/ACIT is required. Thus CIT(A) was right in confirming the action of the A.O. u/s.153 - Against assessee. Addition of capital gain u/s. 45(4) relying on CIT v. A.N. Naik Associates [2003 (7) TMI 46 - BOMBAY High Court] - Held that:- As per Section 2(47) the distribution of capital assets that dissolution of a firm would be regarded as transfer. It is now clear that when the assets are transferred to a partner that falls within the expression 'otherwise' and the rights of the other partners in those assets of the partnership firm extinguished. In appellant's case, the land and building had been revalued as against book value and credited the amount on account of revaluation in the respective partners' capital account in their ratio in the firm. The retiring partner paying his share. As decided in Suvardhan v CIT [2006 (8) TMI 142 - KARNATAKA High Court] any distribution of capital assets and dissolution of firm was chargeable tax as the income of the firm in the light of the fact that a transfer had taken place. In this case, one partner retired and two were continue in the partnership firm. The Court held that provisions of Section 45(4) is applicable as it amounts to transfer. Hence, capital gain is applicable - the assessee's case is fully covered u/s. 45(4) - Against assessee. Disallowance of salary and wages - Held that:- Nothing incriminating documents for inflating on wages were found, whatever found incriminating has been considered in case of partner who had disclosed the additional income under this head. A.O. made addition on the basis of presumption that in case of firm also such types of inflation on wages had been made. But the burden on the revenue to prove that wages expenses had been inflated by the appellant which has not been discharged by bringing out any evidence on record. Thus the order of the CIT(A) reversed. The assessee's appeal on this ground is allowed.
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2013 (4) TMI 664
Sale of shares - Business income v/s Long Term Capital Gain - Held that:- The valuation of the investment in shares is reflected in the balance sheet at cost and not as cost / market value whichever is lower. Furthermore, all the shares which have been sold were delivery based and the shares have been held for the period ranging between few months to more than 3 years by the assessee. Thus, the assessee has only made investment in equity shares and not in stock in trade, this is depicted and identifiable and the books of accounts in this regard. As the magnitude of the transactions in the investment account in comparison to the turnover disclosed trading account were negligible, LTCG has arisen on account of sale of 10000 shares in Ind Swift ltd. forming only 0.28% of the total holding and all these shares have been transferred only through one transaction and shares of Micro Tech. have been transferred through 3 transactions. In case of shares of paramount the shares have been sold through total 9 transactions between 3.4.06 to 28.4.06. Thus CIT(A) has rightly concluded that number of transactions are not large enough and neither they are frequent to hold that there has been any intention on part of the of the assessee to indulge into business of trading in shares & has earned substantial dividend income of Rs. 20,14,851/- during the year which is indication of the assessee's intention of investment in shares for earning dividend income. See C.I.T. vs. Rohit Anand (2010 (8) TMI 232 - Delhi High Court) wherein said that it is relevant to see the intention of the assessee at the time of making of investment so as to determine whether the transactions was for dealing in shares or making investment for earning dividend - No infirmity in the conclusion that profit arisen on sale of shares held as investment by the assessee deserves to be assessed as short term capital gain and long term capital gain as disclosed by the assessee. Against revenue. Addition u/s.14A by applying Rule 8D - CIT(A) deleted the addition - Held that:- Addition made by the AO is not sustainable as Rule 8D is not applicable for asstt. year 2007-08. The interest related to loan of Rs. 2.5 crore taken by the assessee from M/s Cholamandalam Investment during the previous financial year 2005-06. The CIT(A) gave a finding that this has been used for the purpose of business and not for making any investment in shares. This was substantiated by the assessee through various details & opined that assessee had sufficient source of its own through which investment in shares have been made and these sources are interest free funds - No infirmity in the order of the CIT(A) - Against revenue.
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2013 (4) TMI 663
Disallowance of warranty provision which are contingent and unascertained liability - CIT(A) deleted the disallowance - Held that:- Assessee is engaged in the business of manufacturing and sale of air conditioners, compressors etc. and gives a free of cost repair and replacement warranty as per the agreed terms and conditions with the customers for a minimum period of one year at the time of sale. The provision for warranty has been recognized based on past warranty trends, warranty claims received during the year and the unspent provision for warranty for prior years. Thus, agree with the CIT(A) that the treatment of warranty provision is in consonance with accepted principles of commercial practice and accountancy followed year after year consistently. It is undisputed that the warranty clause is a part of the sales document and imposes a liability upon the assessee to discharge its obligations under that clause for the period of warranty. As decided in Rotark Controls India P Ltd. vs. C.I.T. [2009 (5) TMI 16 - SUPREME COURT OF INDIA] & C.I.T. vs. Majestic Auto Ltd. (2006 (7) TMI 568 - PUNJAB & HARYANA HIGH COURT) has affirmed that the provision for warranty claims and free services charges were allowable as deduction on the facts that quantification of warranty claim and liability of free services has been made on scientific basis. In favour of assessee.
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2013 (4) TMI 662
Levy of penalty u/s 271(1)(c) - disallowance of deduction u/s 54F, disallowance on 60% of car insurance and depreciation, disallowance of business promotion expenses, disallowance on 'discount' bills and disallowance on generator expenses and depreciation thereon - Held that:- A perusal of the notice issued u/s 271(1)(c) by the AO demonstrates that the penalty notice u/s 271(1)(c) was not issued related to the addition pertaining to the disallowance of claim of exemption from capital gain. The notice has been issued only on concealment of particulars of income of Rs.40823 which is disallowance of generator expense and depreciation thereon. Thus, reading of assessment order along with the notice issued u/s 271(1)(c) and reply filed by the assessee clearly demonstrates that the AO had no intention to levy penalty during the course of assessment proceedings on this particular issue of Section 54F even by reading section 271(1B). Thus,to conclude no satisfaction as required by law has been recorded by AO during the assessment proceedings, hence, imposition of penalty is bad in law. As from the computation that the land at Haridwar was sold on 7.5.2004 (A.Y. 2005-06) and exemption u/s 54F was claimed. The period of three (3) years stipulated under the Act expires on 7.5.2007 related to AY 2008-09. Technically and legally, the assessee has time to invest on or before 7.5.2007. Meaning thereby that section 54F(3) cannot legally be invoked for AY 2007-08. Thus, there is no concealment by the assessee on account of non-declaration of the said income in this assessment year. Accordingly, the appeal of the assessee deserves to be accepted & penalty order is set aside. In favour of assessee.
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2013 (4) TMI 661
Export incentives Duty Drawback/DEPB u/s 80lB - denial of claim placing reliance on Liberty India vs. CIT [2006 (9) TMI 487 - PUNJAB & HARYANA HIGH COURT] - Held that:- The judgment of Liberty India has been upheld by the Hon'ble Supreme Court (2009 (8) TMI 63 - SUPREME COURT) considering the ratio of its own judgment in the case of Sterling Foods (1999 (4) TMI 1 - SUPREME Court), Ritesh Inds. Ltd. (2004 (9) TMI 36 - DELHI High Court) and CIT vs Lakhwinder Singh (2007 (7) TMI 302 - PUNJAB AND HARYANA HIGH COURT) to held that section 80-IB provides for allowing a deduction in respect of profits and gains derived from the eligible business. Import of the words "derived from" is narrower as compared to that of the words "attributable". Thus DEPB/Duty Drawback benefits did not form part of net profit of eligible industrial undertaking for the purposes of section 80-I/80-IA/80-IB - in favour of the revenue. Whether disclosures of income can be said to be derived from business for the purposes of computation of deduction u/s 80-IB - assessee voluntarily surrendered additional income of Rs.15 lakh for taxation on account of difference in stock, cash and unexplained investment in factory building - Held that:- Amount of surrender was due to valuation difference as accepted by AO and it was specifically stated that this was not unexplained investment u/s 69. A bare perusal of the assessment order shows that it was on estimate basis on GP rate of earlier years. It is nothing but business profit, hence it was derived from business and deduction u/s 80-IB should be granted on the same. In favour of assessee. Additions made u/s 69 related to the difference in cash and undisclosed income - Held that:- The assessee has not explained as to how these unexplained items have a nexus with the business of the assessee. As the assessee has not discharged the burden of proof that these items were received from business, the assessee is not eligible for deduction u/s 80-IB. In favour of the revenue.
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2013 (4) TMI 660
Assessability of income pertaining to the proprietorship concern(SI)- whether should be assessed as the income of the late Shri S.P.Goyal or in the hands of the assessee [second wife of Shri S.P.Goyal] - Held that:- Once the issue about assessability of income pertaining to the said proprietorship concern SI in the hands of late Shri S.P. Goyal stands concluded by ITAT's directions in 2007 (9) TMI 533 - ITAT DELHI, no addition in respect of any income attributable to SI can be made in the hands of the assessee. Therefore, the impugned order of CIT(A), which is passed without considering the assessee's legal stand in this behalf and without properly appreciating the ITAT's order and confirming the additions again, is without justification and cannot be sustained. The assessing officer in the second round should not have made the additions in the first place in the hands of the assessee and should have rightly been made in the hands of late Shri S.P. Goyal, as directed by the ITAT. Thus, the assessing officer's order also runs contrary to the findings of the ITAT. In favour of assessee.
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2013 (4) TMI 659
Proceedings initiated u/s 153A - search and seizure u/s 132 - Whether AO has all powers to go beyond the seized material during the search? - Addition in respect of share capital received - admission of additional evidence - whether on the basis of material furnished by the assessee and available on the record, the assessee has discharged its onus as cast by sec. 68 in terms of identity and creditworthiness of the shareholders and genuineness of the transaction - Accrual of income - Held that:- The availability of balance-sheet, certificate of incorporation, confirmations and certificates of good standing etc. filed by the assessee in respect of shareholders establish that they are non-resident entities, having independent and legal existence. The moneys have come to assessee through banking channels as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of the remitting bank. FIPB approval that too with a liberty to collect share capital up to 600 crores and ROC compliance etc. clearly indicate the stand of the assessee. Merit in the contentions of assessee and reliance on the decisions of Finlay Corporation [2003 (1) TMI 266 - ITAT DELHI-D], Smt. Sushila Ramaswamy [2009 (4) TMI 554 - ITAT CHENNAI] and Saraswati Holding (2007 (7) TMI 345 - ITAT DELHI-F) and the import of CBDT Circular No. 5 in F. No. 73A/2(69)-IT (A-ll), dt. 20th Feb., 1969 that whenever remittances are made by the non- resident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and if documents like FIRC etc are produced, it can safely be stated that the said money came in through banking channels. In the absence of any evidence to show that the money remitted by the non-resident accrued in India, it cannot be held to be taxable in India. Hence, moneys remitted by non-residents whose identity is not in question through their bank accounts outside India have to be held as capital receipts not exigible to tax. It therefore naturally follows that if the identity of the non-resident remitter is established and the money has come in through banking channels, it would constitute a capital receipt and ordinarily cannot be treated as deemed income under sections 68 or 69 of the Act. Thus the share application money as raised in the grounds of appeal cannot be held as non-genuine and added as income of the assessee u/s 68 - In favour of assessee. Disallowance of various expenses holding that no business activity was carried out - Held that:- For A.Y. 2002-03 & 2003-04 the assessee was not granted registration as vendor by the Ministry of Defence as suppliers. Besides, no supply had taken place. Thus the expenditure has been rightly disallowed as business of the assessee was not set up. Apropos A.Y. 2005-06, the assessee had obtained the registration and participated in the tenders invited by the Ministry of Defence for which necessary evidence has been referred in the form of correspondence demonstrating the negotiations at various stages. Thus, in A.Y. 2005-06, the assessee was in a state of readiness to obtain the orders if found successful for tendering/ bidding and the expenditure incurred by it is to be allowed as revenue expenditure for the defined period. Addition on unsecured loans from M/s Claridges SEZ Pvt. Ltd. (CSEZ), as creditworthiness of M/s CSEZ was not established - Held that:- Merit in the arguments of assessee that CSEZ also being searched on the same date and the seized record being with the department, department could have verified the same from its record. The interest of justice will be served if the issue is remitted back to the file of AO to verify from the seized record about the bank statement of CSEZ and decide the issue after giving the assessee fair and reasonable opportunity of being heard. In favour of assessee for statistical purposes. Disallowance of Interest - Held that:- In the absence of the details about disallowance of interest, it will not be possible to adjudicate this ground. Therefore, set aside the issue of interest back to the file of AO to decide the same afresh, considering our conclusion on applicability of sec. 68, commencement of business in 2007- 08, after giving the assessee reasonable opportunity of being heard. Addition of US$ 3360 found at assessee's premises at the time of search - Held that:- The contention of the assessee that the confirmation and statement of Sri Govind Singh director of M/s Alpcord Network being on record, has not been denied by the department. The addition has been made on the basis that assessee could not produce necessary evidence & if the record is available with the department and assessee pointed out towards it, then as a principle of natural justice, lower authorities should verify that evidence and decide about the allowability. In favour of assessee for statistical purposes.
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2013 (4) TMI 658
Re opening of assessment - assessing officer formed an opinion that income of the assessee is only Rs.2,96,246/-, whereas he has deposited an amount of more than 27,24,750/- in two saving bank accounts in cash, thus the income has escaped assessment - Held that:- As during the course of hearing a query being put to the assessee that, whether assessee has annexed the copy of the bank statement with the return or made any note on the computation of income showing as to how a large number of amounts have been deposited in cash replied in negative. The information received from the investigation wing suggest deposits of Rs.27,24,750/- in cash in two banks accounts. It could be cross verified with the bank statements along with the disclosure of facts that this amount was received on account of sale proceeds of the hotel etc. In absence of complete information, assessing officer has to make an inquiry. Thus the assessing officer has concrete information which enable him to form an opinion that income has escaped assessment. Against assessee. CIT(A) deleted the addition - cash deposited in cash in two bank accounts - Held that:- The assessee has explained the source in this case. The grievance of the AO is, why he has not deposited the amount in the bank on the date of receipt itself is too be hyper technical in his approach, once assessee has demonstrated the availability of cash in hand more than the one deposit in the bank account, though subsequently, then probably explanation of the assessee ought to be accepted, unless some other incriminating facts brought on record. AO has simply disbelieved and the explanation of the assessee and simple denial is a no denial, he has to assign the reason which is acceptable in law. No merit in this appeal of the revenue.
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2013 (4) TMI 657
Unexplained cash credit - addition u/s. 68 - Held that:- Assessee company has submitted that the share application money was received through the proper banking channel. The above also establishes the identity of the share application money provider company which are duly incorporated Company under the Companies Act. In this regard, confirmation by way of affidavit, PAN No., resolution passed by the share application provider company and the evidence of share allotment to the share company provided by the assessee company was duly submitted. In this regard, we note that Assessing Officer has not made any further independent enquiries to substantiate that the assessee has received bogus share application entry. Thus as decided in CIT Vs. Lovely Exports [2008 (1) TMI 575 - SUPREME COURT OF INDIA] that that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. Also see C.I.T. vs. Gangeshwari Mtetal (P) Ltd. [2013 (1) TMI 624 - DELHI HIGH COURT] & C.I.T. vs. Goel Sons Golden [2013 (4) TMI 571 - DELHI HIGH COURT] . Thus as Assessee has submitted enough cogent material before the AO which substantiate the identity, creditworthiness and genuineness of the transactions who in turn has not done any exercise to bring on record any evidence which refute the above submissions of the assessee - In favour of assessee.
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2013 (4) TMI 656
Penalty u/s 271(1)(c) - assessee has claimed depreciation on technical know-how of @ 25% & as observed by AO that technical know-how fees was to be allowed u/s. 35AB deduction was to be allowed in six equal installments - CIT(A) deleted the penalty levy - Held that:- CIT(A) is correct in observing that the claim of the assessee for depreciation on account of payment of third installment of technical know-how was bonafide viewed in the context of history of the assessee's case on the issue. It was with respect of the third installments which was paid during the financial year 1991-92 that the assessee capitalized the amount of Rs. 1,78,61,880/- to the plant and machinery being technical know-how fees treating the same as pre-operative expenses. AO however, on perusal of the details filed observed that Section 35AB was specific provision for allowability of expenditure on acquisition of know-how. Therefore, the deduction was required to be given by spreading it equal of six years. Thus, it is clear that the assessee has made the claim for payment of technical know-how under the bonafide belief that its claim for payment of third installment was also allowable as deduction on the same basis as in the previous year. Thus, the assessee cannot be held guilty of furnishing of inaccurate particulars or concealment of income in this case. See CIT vs. Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT], Dilip N. Shroff Versus Joint Commissioner of Income-tax And Another [2007 (5) TMI 198 - SUPREME Court] wherein held that mensrea was a essential requirement of penalty u/s 271(1)(c). Also see Hindustan Steel vs. State of Orissa [1969 (8) TMI 31 - SUPREME Court] - In favour of assessee.
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Customs
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2013 (4) TMI 655
Imports of used digital multifunction and copying machine under the Foreign Trade Policy 2009-2014 - Whether the import of these goods is restricted as per Para 2.17 of the Foreign Trade Policy or not? – As per Notification No.35 (RE02012)/ 2009-2014 the Government had amended Para 2.17 of the Foreign Trade Policy. Held that:– It is no doubt true that in exercise of the powers conferred under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, read with paragraph 2.1 of the Foreign Trade Policy, 2009-2014, under Notification No.35 (RE02012)/ 2009-2014 the Government had amended Para 2.17 of the Foreign Trade Policy that under the Head of "second hand goods", in the category of "second hand capital goods", import of (i) personal computers/ laptops, including their refurbished / reconditioned spares; (ii) photocopier machines/Digital multifunction print and copying machines (iii) Air conditioners and (iv) Diesel generating sets can be imported only as against authorisation. Taking the said amendment further, rightly, the Hand Book of Procedures (Vol.1) omitted Clause 2.33. The amendment to the policy has no relevance to the import under consideration. A comparative study of Notification No.35 (RE02012)/2009-2014 dated 28.02.2013 amending Para 2.17 of the Foreign Trade Policy and the provision that existed prior to 28.02.2013, show that the amended notification made the import policy regime as subject to an authorisation for import as against the original requirements viz., allowed to be imported only as per provisions of FTP, ITC(HS), HBPv1, Public Notice or an authorisation issued for import of the specified second hand item. In the light of the amendment and the clear provision, we do not find any justifiable ground to accept the case of the appellants to interfere with the order of the learned single Judge. We have already held that there is no conflict between the policy and the procedure laid down.
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2013 (4) TMI 654
Appellant claimed benefit of Notification 21/2002-Cus on imported goods – Rejection of granting the benefit of exemption as the importer did not have a valid contract at the time of importation and he did not satisfy the condition 40(b) stipulated in the said Notification, which stipulates that only a person who has been awarded a contract for the construction of roads in India by a or on behalf of the Ministry of Surface Transport, by the NHAI, by the PWD of a State Government or by a road construction corporation under the control of the Government of a State or Union Territory is eligible for the exemption. Accordingly, the claim of the appellant was rejected and duty demand was confirmed against the appellant. Revenue further points out that Notification 21/2002 was re-issued in the budget 2012 and in the new notification No.12/2012,. "Metropolitan Development Authority" was also specifically included. Therefore, it is clear that the notification distinguishes between a Metropolitan Development Authority and a Road Construction Corporation. Otherwise, there is no need to use these two expressions specifically and separately and, therefore, he contends that prior to Budget 2012, when Notification No.21/2002 was in force, benefit was not be available in case the contracts for road construction were awarded by MMRDA. Held that - In the light of the notifications issued, we hold that prior to budget 2012, benefit of customs duty exemption on road construction equipment was not available in cases where the contract for such construction was awarded by a Metropolitan Development Authority. Thus the appellant in the present case is not eligible for the benefit of duty exemption under notification No. 21/2002-Cus. Accordingly, we dismiss the appeal as devoid of merits.
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2013 (4) TMI 653
Mis - declaration & undervaluation proceedings – enhancement on value of goods - entire case is built on the premise that the impugned goods are other than ‘Old and Used garments’ claimed to be classifiable under Chapter 6309 of CTA 1975. The import of ‘worn clothing’ is restricted in terms of Foreign Trade Policy provisions, the subject consignment was pending adjudication by the Additional/Joint Commissioner of Customs, Custom House, Kolkata. In terms of Board’s Circular No. 36/2000-Cus., dated 8th May, 2000 while importing old and used garments under CTH 63.09, the imposition of fine and penalty for violation of EXIM policy. The DRI working on information came to conclusion that M/s. A.N. Impex ought to have declared the various articles of consignments in the import documents. Giving the declaration of subject goods as old and used worn garments, the conceding by the DRI to be vague and complete. Held that - In the case before us, it is not alleged that the appellant has mis-declaced the price actually paid nor was there a mis-description of the goods imported. We find that value was sought to be enhanced by treating the impugned goods as other than old and used garments; and by comparing the sale price of earlier imported old and used garments. There is no specific findings as to how many articles are other than old and used articles, therefore, this aspect is required to be determined followed by valuation thereof. In these circumstances the case is remanded to ld. Commissioner for deciding the issue afresh while keeping in view our above observations. It is made clear that all the issues are kept open. Both sides are at liberty to produce documents in their support. Needless to say a reasonable opportunity of hearing may be granted to the appellant. The appeal is allowed by way of Remand.
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Corporate Laws
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2013 (4) TMI 652
Irregularities in books of accounts - Market abuse - company charged with inflated profits and revenues in the financial statements and lured the general public to invest in the shares of the company based on such false financial statements thereby violated the provisions of SEBI(Prohibition of Fraudulent and Unfair Trade Practice - violation of Section 12A of SEBI Act and Regulation 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(e), 4(2)(f), 4(2)(k), 4(2)(r) of Regulations 2003 - Held that:- As in this case that the Directors of the company had clearly violated provisions of Section 12A of SEBI Act read with Regulations 3 and 4 of 2003 Regulations. Companies whose securities are traded on a public market, disclosure of information about the company is crucial for the accurate pricing of the companies’ securities and also for the efficient operation of the market. The facts clearly indicated that the company had made false corporate announcement stating that it had entered into agreements with 802 theatres and that false corporate announcement gave false figures relating to advance, security deposit and income pertaining to the theatres which were not inexistence. The deposits shown were turned out to be not genuine but mere book entries to hide receivables in the balance sheet. Responsibility is cast on the Directors to prepare the annual records and reports and those accounts should reflect ‘a true and fair view’. As decided in Official Liquidator v. P.A. Tendolkar (1973 (1) TMI 53 - SUPREME COURT OF INDIA) a Director as so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of business of the company even though no specific act of dishonesty is provide against him personally. The facts in this case clearly reveal that the Directors of the company in question had failed in their duty to exercise due care and diligence and allowed the company to fabricate the figures and making false disclosures by overlooking the numerous red flags in the revenues, profits, receivables, deposits etc. which should not have escaped. Profit as on quarter ending June 2007 was three times more than the preceding quarter, it doubled in the quarter ending December 2007 over the preceding quarter. Further, there was disproportionate increase in the security deposits i.e. ₹ 36.05 crore in September 2007 to ₹ 270.38 crore in December 2007 as compared to increase in the number of theatres during the same period. They have participated in the board meetings and were privy to those commissions and omissions. Thus conduct of the appellant and others was, therefore, fraudulent and the practices they had adopted, relating to securities, were unfair, which attracted the penalty provisions contained in Section 15 HA read with 15J of the SEBI Act. Books of accounts were maintained in the Tally accounting software and for the financial year 2007-08 separate books of accounts were maintained for each region/unit. As already indicated, after the declaration of financial results on January 31, 2008, containing inflated profits, revenues for the quarter ended on 31.12.2007, MD of the company, his wife and the appellant had together pledged 72,75,455 shares of the company with various banks and financial institutions and raised 97.30 crores as loans. Thus the Directors and the Chief Financial Officers of the company had caused to publish forged and misleading results of the company, various quarterly financial results and the annual results for the year 2007-08, were reported to the stock-exchanges containing inflated figures of the company’s revenue, profits, security deposits and receivables and those financial statements which were relied upon by investors in making investment decisions, which did not reflect a true and fair view of the state of affairs of the company. Thus the SEBI has rightly restrained the appellant for a period of two years from the date of that order from buying, selling or dealing with any securities, in any manner, or accessing the securities market, directly or indirectly and from being Director of any listed company and that the adjudicating officer has rightly imposed a penalty of ₹ 50 lakhs under Section 15HA of SEBI Act. The appeals are, therefore, dismissed. However, there will be no order as to costs.
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2013 (4) TMI 651
Infringement of copyright - Persistent breach and default of the terms of the licence - Held that:- The judgement of a Division Bench of this Court in Music Choice India Private Limited v. Phonographic Performance Limited () similarly emphasises that exclusive jurisdiction to grant a licence is vested with the Copyright Board - Defendant has prima facie been guilty of a persistent breach of its obligation - The Plaintiff has made out a strong prima facie case - The balance of convenience must necessarily weigh in favour of the Plaintiff since, to allow the Defendant to broadcast songs on the basis of the terms of the compulsory licence which has been validly terminated would amount to an infringement of the copyright of the Plaintiff - Moreover, admittedly the Plaintiff does not command a monopoly in respect of the entire market - The grant of an injunction may at worst be a matter of inconvenience but would not result in the closing down of the business of the Defendant. Learned Single Judge was in error in allowing the Defendant the continued use of the repertoire of the songs of the Plaintiff - We set aside the operative direction contained in paragraphs 9 and 10 of the impugned order of the learned Single Judge allowing the Defendant to broadcast sound recordings from the repertoire of the Plaintiff subject to the deposit of an amount of Rs.11.50 lakhs - For the reasons indicated earlier, we grant an ad-interim order in terms of prayer clause (a) of the Notice of Motion - We also clarify by way of abundant caution that this order shall not come in the way of the final disposal of the Notice of Motion on merits. The appeal filed by the Defendant stand dismissed - Cross-Objection of the Plaintiff is allowed.
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2013 (4) TMI 650
Winding up petition – Maheshwari/appellant could not repay the dues to their creditors/Tata resulting in litigations at the instance of creditors - Whether the secured creditors could file the petition for winding up and if so, what would be the role of the company Court in the matter of admission of the winding up proceeding? Held that:- Winding up is a discretionary remedy. Section 443 of the Act empower the Court to pass appropriate order that would be just in the facts and circumstances of the case as there exist no dispute to the ascertained/ claim of the creditor. The company also could not make any positive effort on that score. However, the Court should use its discretion judiciously. After following considering the case of Kotak Mahindra Bank Limited and Eastern Spining Mills & Industries Limited [2012 (11) TMI 82] We are inclined to give one more opportunity to Maheshwari to repay the dues of Tata. As Maheshwari would pay the dues of Tata as quantified and adjudicated by His Lordship by the order and judgement impugned by monthly installment of Rs.10 lakhs per month for one year commencing from April 10, 2013 and thereafter on the 10th day of the succeeding month. For the next financial year Maheshwari would pay Rs.12.5 lakhs per month on the date fixed as above. In the third financial year Maheshwari would pay Rs.15 lakhs per month until the entire dues are cleared off but if, any dues are still outstanding, that would be paid in four equal monthly installments payable on the date fixed as above. The payment of interest at the contractual rate would be at the yearly rest and be paid on the reducing claim. Frozen amount as on the date of the foregoing order would be taken as a principal sum and would be cleared off first and the subsequent interest component would be paid thereafter. So long the installments are paid off the winding up petition would remain permanently stayed. In default of payment of anyone installment this order would stand recalled and the parties would be at liberty to proceed before the learned company Judge.
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Service Tax
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2013 (4) TMI 673
Service tax/interest/penalty - Business Auxiliary Service - Allegation is that the appellants have been authorized by the government or NHAI to collect toll charges on the use of the highways/roads constructed by them and, therefore, they have rendered a service and liable to pay tax. Held that- Appellants have undertaken the construction of roads. To finance/compensate for the cost of construction, the contractors have been permitted by the Government/NHAI to collect toll charges from the users of these roads. Thus the toll charges have been collected by the appellants on their own account. If that be so, they cannot be said to have rendered any 'Business Auxiliary Service'. Thus, we are of the considered view that the activity of the appellant in construction of roads on BOT basis is not leviable to service tax either under commercial or industrial construction service, works contract service, maintenance, management or repair of immovable property service or under Business Auxiliary Service. Accordingly, the impugned orders is set aside.
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2013 (4) TMI 672
Denial of abetment in terms of Notification No. 32/2004-ST - As per revenue transporters have not filed the requisite certificate and have not stamped the individual GRs, certifying that no credit stand availed by them on GTA services - Held that:- In the case of Arani Agro Oil Industries Ltd. vs. CC, Visakhapatnam in [2011 (1) TMI 715] has observed that GTA service provider is not required to furnish evidence of non-availment of Cenvat scheme to qualify the benefit of Notification No. 32/2004-ST in as much as there is no such conditions in the notification for making declaration on each consignment note. In any view of the matter, we note that in the present case such certificates were produced by the GTA service provider. However, the same do not accepted by the lower authorities. Thus, the impugned orders is set aside and allow both the appeals with consequential relief to the appellant.
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2013 (4) TMI 671
Availment of credit – Revenue submitted that services rendered to the residential complex is not in relation to the manufacturing or output services and directing the appellant to reverse the credit availed by them – Appellant contention the same was hit by limitation. Held that - Contentions raised by the appellant that the entire case is hit by limitation is correct. It is on record that the appellant has been filing regularly returns during the relevant period, wherein they have shown the availment of Cenvat credit. I find that there is nothing on record to show that appellant had availed Cenvat credit which was not due to them during the relevant period. At the same time, during the material period, there were various decisions which were in favour of the assessee as regards the Cenvat credit of the service tax paid by the service provider at the residential colony. Appellant could be under bonafide belief to avail the Cenvat credit which cannot be questioned and such a bonafide belief prompted the appellant to avail Cenvat credit. Thus, the demanding the same is held to be hit by limitation.
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2013 (4) TMI 670
Waiver of penalty - Invocation of section 80 – As per revenue appellant has not discharged service tax liability on the commission amount reimbursed by Vodafone to them. - adjudicating authority, after confirming the demand and appropriating the amounts paid by the appellant, dropped the proceeding of imposition of penalty by invoking the provisions of Section 80 - Held that - Hon’ble High Court of Karnataka in the case of Sunitha Shetty [2009 (9) TMI 1],and Tanaton Vision [2012 (12) TMI 233] clearly lay down the proposition that once the adjudicating authority has exercised his discretion for setting aside the penalty under Section 80 of the Finance Act, 1994, that attains finality. - Thus, the impugned order is set-aside. appeal is allowed.
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2013 (4) TMI 669
Sole selling agent - Change in percentage of rate of commission - Demand of tax - As per appellant the demand of tax on the presumption that they received commission for the month of March 2010 is totally wrong - Held that:- In my considered view, the matter is required to be examined by the lower authority on this issue. Accordingly, the impugned order is set aside and the matter is remanded back to the original authority to consider the submission of the appellant in this issue amongst other and to pass order in accordance with law.
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Central Excise
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2013 (4) TMI 649
Merchant Overtime Tax Charges (MOT) - whether the Central Excise Officer has discharged his duty in the factory premises of respondent & has functioned as a “Customs Officer”, as such, MOT is leviable? - Held that:- It is an admitted position that stuffing work was done in the factory of respondent under the supervision of jurisdictional Central Range Officer during working hours only. The place of working/supervision was at the factory of the respondent which is at Mayapuri. Respondent has pointed out that as per Notification No.14/2002-CE(NT) dated 08.03.2002 as amended by Notification No.22/2002-CE(NT) dated 04.06.2002, the jurisdiction of Delhi II, Range 26 of Central Excise division-V includes Mayapuri Indl. Area Ph.-II where the factory of respondent is located, the services were rendered by the officer within his range only. The same fell within the jurisdiction of the Central Excise Range Officer who supervised the work. Chapter 13 of the CBEC's Customs Manual deals with “Merchant Overtime Fee” wherein it is provided that if services are rendered by the Customs Officer at a place which is not his normal place of work or a place beyond the Customs area, overtime is levied even during the normal working hours. Thus none of the conditions for levy of MOT is satisfied.
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2013 (4) TMI 648
Rejection of refund claim – refund of amount deposited during the pendency of the case - Held that - Assessee herein had paid the dues/amount voluntarily through PLA on contention raised by the revenue related to excisibilty of its manufactured goods. It is also seen that once the Tribunal has held that the activity is not amounting to manufacture and is not being upturned by higher judicial fora, the amount which has been paid to pursue the appeal before the higher judicial fora, needs to be refunded to the assessee, is the law which has been settled. I find that the first appellate authority has correctly followed the law in this case. The appeal filed by the Revenue is rejected.
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2013 (4) TMI 647
Cenvat credit of service tax paid – Waiver of pre-deposit & stay of duty/interest/penalty - credit has been denied to appellant in respect of services like port service, storage and warehousing service, cargo handling service, CHA service, export freight charges and outward courier charges on the ground that these services have been rendered after the ‘place of removal'. Held that - The present case are already held by the Hon’ble Gujarat High Court in Customs vs. Mundra Port & Special Economic Zone Ltd. [2010 (5) TMI 483 - GUJARAT HIGH COURT] has held that credit in respect of these services cannot be denied to the assessee. Following the decision of the stay petition is allowed and pre-deposit is waived and stay of recovery of dues is ordered till the disposal of the appeal.
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2013 (4) TMI 646
Admissibility of SSI Exemptions – Waiver of pre-deposit of duty/education Cess/interest/penalty - .Department is of the view that the benefit of small scale notification will not be admissible to the appellant as their value of all the excisable goods is more than the amount stipulated in the said notification as the appellant has not included the value of chasis supplied by the customer while computing the aggregate value of the clearances. - Held that - the person who does not avail the benefit of exemption notification of special purpose vehicle or is not eligible for the same and if he does not avail the Cenvat credit of the duty paid on chasis, the value of the motor vehicle so fabricated in his factory premises would be the value excluding the value of the chasis; but if a person who wants to avail the benefit of exemption notification, value needs to be enhanced by inclusion of the value of chasis. Tribunal find that this is not the intent of the legislation at least in this Chapter heading note and Chapter 87. Accordingly, the application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of the appeals.
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2013 (4) TMI 645
Manufacture - Marketability - Chargeability of duty on treated water whether it was marketable for the very purpose or not. - Held that - the department's case in this batch of appeals is no better than what was noted by this Bench in the earlier case of the main assessee Hyderabad vs. Hindustan Coca-Cola Beverages (P) Ltd [2009 (6) TMI 509 - CESTAT, BANGALORE]. There is always a distinction between packaged water and treated water. Packaged water has minerals added to it. The treated water cleared by the respondents are not marketable as such. We also find force in the contention that the name "cococola" is only a house mark of the company. It cannot be said that the treated water is marketed under the brand name of cococola in the light of the Hon'ble Supreme Court's decision in the case of Crane Betel Nut Powder Works v. CCE cited (2007 (3) TMI 6 - SUPREME COURT OF INDIA). The processes undertaken for treatment of water did not result in the emergence of new product. Therefore, we are constrained to follow our own earlier decision affirmed by the apex court. Accordingly, the demands of duty and the connected penalties are set aside and these appeals are allowed.
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2013 (4) TMI 644
Valuation - inclusion of charity/dharmada in the valuation for the purpose of excise duty - Extended period of limitation - held that:- Held that - A ordinary citizen, in our view, under the ordinary course of circumstances cannot be expected to keep track of the judgment of various Courts. He is not expected to know about the law laid down by judicial pronouncement unless he comes across the judgment itself. The judgment of Supreme Court in the matter of Panchmukhi Engineering Works [2002 (11) TMI 122 - SUPREME COURT] was published in the year 2003 - Even Central Board of Excise & Customs issued clarificatory circular pursuant to aforesaid judgment on 21-11-2003, therefore, it would be unfair to infer that the appellant was aware the law laid down by the Supreme Court in the matter of Panchmukhi Engineering Works (supra) immediately after the pronouncement of judgment on 28-11-2002. There is no reason to impute mala fide intention on the party of the appellant to evade the excise duty by deliberately not included the “Dharmada charges” in the transaction value. Undisputedly, it is not a case of fraud or dishonest concealment of fact. - Demand set aside being beyoind the normal period of limitation - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2013 (4) TMI 676
Sales Tax – section 44 of the M.P. General Sales Tax Act The respondent was assessed to tax in relation to the item drift eliminator under the provisions of M. P. General Sales Tax. The A.O. while making the assessment applied the rate of 12% applicable to residuary items and accordingly framed the assessment. Respondent submitted that the item in question is in fact "iron and steel" and hence liable to be taxed accordingly at the rate of 4% in place of 12% as wrongly assessed by the assessing officer under the residuary clause of the Schedule. Respondent filed various appeals to the authorities and succeeded in the same. Department aggrieved by the order file the appeal before the High Court. Since none appeared for the respondent/assessee despite repeated notices sent to them in last more than 15 years. Court do not wish to keep this reference pending anymore. Held that:- Having heard the learned counsel for the State and on perusal of the record of the case (statement of case), court are inclined to answer the referred question in negative i.e. against the Revenue and in favour of the assessee.
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2013 (4) TMI 675
Detention orders - transit pass not shown by assessee - Held that:- As per Section 70(2) of TNVAT Act, 2006 petitioner has to necessarily obtain a transit pass in the prescribed form and in the prescribed manner, thus the plea of the petitioner that the Circular Act Cell-IV/69980/2000 dated 23.11.2000 issued by Commissioner of Commercial Taxes, Chennai stating no transit pass is required will apply, does not merit consideration as it will have no force in law after coming into force of the 2006 Act. Therefore, the above said plea is rejected. However, an opportunity is given to the petitioner to approach the competent authority for release of goods in terms of Section 67(4) of the TNVAT Act, 2006 on payment of tax. If the petitioner pays the tax as required under Section 67(4) of the Tamil Nadu Value Added Tax Act, 2006, the authority is bound to release the goods forthwith. Composition of offence - A detailed procedure has been prescribed for composition and an opportunity should be given before passing an order under Section 72 of the TNVAT Act, 2006. The said section prescribes that an order should be passed on composition either way on merits and the petitioner is entitled to pursue the same on merits, if aggrieved. Thus composition of the offence, as per notice issued, it has to be dealt with independently.
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2013 (4) TMI 674
Belated return - non-compliance of Rule 98(1) on the part of the petitioner rendering him liable for interest - KVAT Act - Held that:- As from Ext.P3 endorsement made by the authorised signatory of ICICI Bank, it is seen that the cheques presented by the petitioner could have been collected in any location of ICICI Bank including at Manjeri. Therefore, when the cheque was presented by the 1st respondent to SBT, Manjeri, its Bank, the SBT could have locally collected the cheque and avoided any delay in realising the amount. On the other hand, they chose to send it to Kottayam for encashment and it was in that process the delay has occurred. Thus once payment has been made as above, for reasons beyond the control of the petitioner, if realization has been delayed, either for reasons which are attributable to the respondents or the Bank, the dealer cannot be made liable on the basis that on account of the delay in realising the tax due, delay has occurred. If the payment made by the petitioner was in any manner defective, the 1st respondent had an obligation to issue demand notice,as per Rule 22(7) which requirement has not been complied with. Secondly, Rule 98 at the relevant time provided that the cheques shall be of a Bank which is a member of the clearing house situated within the jurisdiction of the authority before whom it is presented and petitioner has made available SRO 318/05 issued under Section 3(3) of the KVAT Act, which show that while the headquarters of the 1st respondent is at Malappuram, his functional jurisdiction extended to functions assigned by the Commissioner. Thus the functional jurisdiction of the 1st respondent is not confined to Manjeri alone, going by the terms of the SRO. It is apparently on account of the above vagueness in the matter that the expression "within the jurisdiction" occurring in Rule 98 was substituted with the expression "in the headquarters" by SRO 7/08 dated 31/2/07 - non-compliance of Rule 98(1) not proved.
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