TMI Tax Updates - e-Newsletter
May 17, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Mismatching of TDS amount - By denying the benefit of TDS to the assessee because of the fault of the deductor causes not only harassment and inconvenience, but also makes the assessee feel cheated - HC
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Income Tax:
Deduction under Section-43B - provision for the duty as well as for the interest is allowable u/s 43B only on the basis of actual payment and it is irrelevant that the assessee has followed the mercantile system of accounting - HC
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Income Tax:
Applicability of Transfer pricing provisions - Transactions with joint venture - transactions between the assessee and IJMII do not fall under section 92B(2) - Provisions of transfer pricing not applicable - AT
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Income Tax:
Denial of claim of deduction u/s 54F of the Act Construction completed prior to sale of original asset - matter remanded back for re-verification of facts - AT
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Income Tax:
Transfer of Lift Division Slump sale - The parties were agreed that the assessee was to transfer the undertaking and take bonds/preference shares as consideration - it was a case of exchange and not a sale - HC
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Income Tax:
Disallowance of depreciation - No production of manufacture activity depreciation had to be allowed though assessee had discontinued its business - AT
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Income Tax:
Registration u/s 12AA - For a society running schools, the building construction become integral part of the activity for which purchase of land becomes an essential feature - Thus, the adverse inference on nexus is misconceived - AT
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Customs:
When the import is against the transferred DFIA (Licence) it is not necessary to establish that the material imported was actually used in the export product unless the resultant product figures in the sensitive list and the theory of broad nexus being settled by Apex Court - AT
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Customs:
Rate of Anti-dumping duty - Import of rubber chemicals CBS - at the time of import the rate of anti-dumping duty was nil - stay granted - AT
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Central Excise:
CENVAT Credit - when the audit team of the department visited the establishment, all the information had been duly made available by the assessee and hence, there was no intent to evade duty - HC
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VAT:
The corporate veil under the patronage of BIFR was used as subterfuge to avoid payment of taxes - the corporate veil can be lifted to recover the dues from the persons responsible for such illegal acts - HC
Articles
Notifications
News
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RBI Reference Rate for US $ and Euro
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others Palm Oil, Crude Palmolein, RBD Palmolein, Others Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver
Case Laws:
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Income Tax
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2014 (5) TMI 522
Disallowance of 50% of payment made to contractor Contractor has stopped doing the work - Held that:- The Tribunal had directed the AO to estimate the expenditure reasonably, even if the assessee was not able to produce the bill - neither the AO nor the FAA has given any reason for restricting the expenditure at 50% - the assessee is following project complete method and as per the method it has to consider the expenditure in a peculiar manner - By restricting the expenditure to 50%, AO has admitted that some expenditure was incurred by it for business purposes - the estimate of AO has been challenged by the assessee - the AO and the FAA have accepted that 50% expenditure under the head labour charges was justified - the assessee is following project complete method of accounting - on completion of the project, all the expenses have to be accounted for - the expenses are restricted to 12. 5 lakhs Decided partly in favour of Assessee.
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2014 (5) TMI 521
Admission of appeal - Rejection of books of accounts u/s 145(3) of the Act - Cash memo for individual sales was not issued Held that:- It is not necessary that a cash memo is required to be issued for each and every sale - books of accounts could not be rejected on the sole ground that only one consolidated cash memo was issued at the end of the day Relying upon Ramji Lal and Sons Vs. Commissioner Sales Tax [1978 (5) TMI 116 - ALLAHABAD HIGH COURT] - the order of the AO rejecting the books of account u/s 145(3) of the Act and consequently, making an addition of the income on estimate basis was reversed by the Tribunal - addition made on estimate basis is a question of fact as decided in COMMISSIONER OF CUSTOMS (IMPORT) Versus STONEMAN MARBLE INDUSTRIES & ORS. [2011 (1) TMI 15 - SUPREME COURT OF INDIA] no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 520
Mismatching of TDS amount - Refund of TDS - Application for rectification of mistake u/s 154 of the Act Held that:- Following COURT ON ITS OWN MOTION Versus COMMISSIONER OF INCOME TAX AND OTHERS [2013 (3) TMI 316 - DELHI HIGH COURT] - no effort was made by the AO to verify the fact as to whether the deductor had made the payment of the TDS in the government account - Department has shown their helplessness in not refunding the amount on the sole ground that the details of the TDS did not match with the details shown in Form 26AS - it is apparent that there is a mismatch between the details uploaded by the deductor and the details furnished by the assessee in the income tax returns - when the assessment was processed and a refund was issued, no intimation was given by the department as to why the balance TDS amount could not be credited the AO was under a duty to verify whether or not the deductor had made the payment of the TDS in the government account. Assessee has suffered a TDS, but has not been given due credit inspite of the fact that he has been issued a TDS certificate by a government department- There is a presumption that the deductor has deposited TDS amount in the government account especially when the deductor is a government department - By denying the benefit of TDS to the assessee because of the fault of the deductor causes not only harassment and inconvenience, but also makes the assessee feel cheated - the mismatching is not attributable to the assessee and the fault solely lay with the deductor assessee is entitled for refund of the TDS amount - The assessee has also made out a case for payment of interest since there was delay in refunding the amount which was attributable solely with the Department and there is no fault on the part of the assessee Decided in favour of Assessee.
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2014 (5) TMI 519
Addition u/s 68 of the Act Unexplained cash credits Admission of additional evidence - Held that:- All the details and evidences has to be admitted as per Rule 46A considering the fact that appellant was prevented by sufficient cause for non-submission of such details and evidences before AO assessee has been prevented by sufficient cause for not producing these details before the AO and the same being crucial and material evidences against such addition, the same be admitted as additional evidences as per Rule 46A. The assessee has produced the details / explanation with supporting evidences in respect of each & every entry in the bank account for which the addition was made - The same were not furnished before AO during assessment proceedings therefore the same should not be admitted - The bifurcation under various heads were examined by AO in the remand report with details / explanations and supporting evidences in the form of contra account, confirmation, PAN of various parties from whom assessee received the sum in cash as well as cheque - All the evidences were found satisfactory to AO and no adverse finding or comment is offered by him in his remand report - It is after admission of additional evidence, there remains no ground for any such addition either u/s 68 or 69 of the Act - The AO is directed to delete the addition there was no reason to interfere in the order of the CIT(A) Decided against Revenue.
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2014 (5) TMI 518
Deduction under Section-43B of the Act - Provision for interest as it is a fictional liability Held that:- The assessee has exported the spirit and I.M.F.L. to Delhi from U.P. - The duty is chargeable on the transactions but no excise duty was paid - the assessee has neither paid the duty nor interest, but enjoyed the deduction of Section 43B in the name of mercantile system of accounting - The AO has already allowed the deduction u/s 43B pertaining to the duty which has wrongly been done - the interest is nothing but an extended liability of the duty for the belated payment - It is compensatory in nature. The interest having accrued is a part of the main liability Relying upon Dinesh Mill Ltd. COMMISSIONER OF INCOME TAX Versus DINESH MILLS LIMITED [2008 (2) TMI 190 - GUJARAT HIGH COURT] - the provision for the duty as well as for the interest is allowable u/s 43B only on the basis of actual payment and it is irrelevant that the assessee has followed the mercantile system of accounting - the object of Section 43B is to override to provision of mercantile system of accounting where the statutory liability was not actually discharged - The assessee is not entitled to claim the deduction u/s 43B pertaining to the interest payable during the AY Decided in favour of Revenue.
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2014 (5) TMI 517
Applicability of Transfer pricing provisions - Transactions with joint venture - Transaction with associated enterprises - International transaction - DTAA with Malaysia - Held that:- Following IJM (India) Infrastructure Ltd. Versus Assistant Commissioner of Income-tax [2013 (9) TMI 564 - ITAT HYDERABAD] All the decisions relating to the affairs of the Joint Venture are taken in India and the business is executed in India through a Joint Venture Agreement in India. Indisputably, Joint Ventures are residents in India. Even otherwise, Clause 3 of Article 4 of Malaysia provides that a person which includes AOPs also shall be deemed to be residents of the State in which its place of effective management is situated. On perusal of the Joint Venture agreements, it can be seen that all the decisions relating to the Joint Venture are taken in India and, therefore, the JVs are to be treated as "residents" only. The primary condition for attracting transfer pricing provisions is that there should be a transaction between two or more AEs in terms of section 92A(1) and 92A(2) of the Act. After considering the entire facts and circumstances of the present case and the findings of the DRP, we are of the opinion that the transactions taken place are with domestic enterprises and at least one among the AEs are not non-resident. Both the assessee and other parties which whom the assessee entered into transactions are the residents for the purpose of Indian Taxation. Any transaction between them will not constitute an international transaction. The transactions between the assessee and IJMII do not fall under section 92B(2) of the Act and same is the position in case of other entities with whom assessee carried on the impugned transactions - Provisions of transfer pricing not applicable - Decided against the revenue.
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2014 (5) TMI 516
Denial of claim of deduction u/s 54F of the Act Construction completed prior to sale of original asset - Held that:- It is obvious from the orders of the revenue authorities that they have come to their respective conclusions mainly relying upon BPS application made by the assessee before the Municipal Authorities - the original asset was sold on 15-9-2008, the departmental authorities have concluded that the construction of new house was completed prior to the sale of original asset, On a perusal of the bank account copy, it is noticed that the amount was credited to the accounts of the assessee on 16-9-2008 - the assessee has also enclosed the electricity bill copy and municipal assessment to prove the fact that the construction of the first and second floors has started after sale of original asset. The documents were furnished before the AO as well as the CIT (A) but on perusal of the assessment order and order of the first appellate authority, there was no mention of the facts - revenue without considering the facts and materials placed before them were not justified in coming to the conclusion that the assessee has completed construction of the first and second floors prior to the sale of original asset solely relying upon the application made before the municipal authorities under BPS scheme - the CIT (A) has not given any specific finding thus, the matter is required to be remitted back to the CIT(A) for fresh adjudication Decided in favour of Assessee.
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2014 (5) TMI 515
Deduction u/s 80IB of the Act Profits and gains from industrial activities Infrastructural undertaking Held that:- The Tribunal was rightly of the view that assessee does not satisfy and fulfill the condition of manufacturing or producing articles or things which have been specified in the Central Government Notification - Though the Assessee may be held to be manufacturing or producing articles or things from 1.4.1991 and ending on 31.3.1995, it is not engaged in manufacturing or production of articles or things which have been specified in the Notification published by the Central Government in the official Gazette - the deduction has been rightly disallowed - No assistance can be derived from Section 80IA because that is in relation to the undertakings which are engaged in infrastructure development - Such of the industrial undertakings or enterprises which are engaged for infrastructure development alone are covered by Section 80IA - the disallowance has been rightly confirmed throughout no substantial question of law arises for consideration Decided against Assessee.
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2014 (5) TMI 514
Deduction u/s 80IB(10) of the Act Held that:- CIT(A) and the Tribunal found that the reliance only on the brochure or copy would not be enough to uphold the exercise undertaken by the AO - the Tribunal as also the Commissioner has clarified that in the facts and circumstances the deduction could not be disallowed - the finding of fact cannot be construed as allowing deduction in all cases of the present nature - The payments have been made on the same date - there are separate agreements and that some of them may be that of related persons - there is no prohibition in law in the related persons purchasing different units or units adjacent to each other - Commissioner and equally the Tribunal's order should not be construed to mean that the deduction can be claimed on the footing that in all the cases where the construction as per the plan denotes the residential units of maximum built up area but on the site the position being different then still the deduction can be claimed as such no question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 513
Penalty u/s 271(1)(c) of the Act STCG not offered in original return but in revised return Held that:- The issue has been taken up by the Assessee for the first time before the tribunal as an additional ground - The order of the Court confirming the amalgamation has also been produced before us for the first time - tribunal was not prevented in any manner and in law from considering a purely legal issue for the first time, moreso, if the legal issue goes to the root of the matter - an impact and legal effect of an order of amalgamation and winding up of the Assessee thereto on the penalty proceedings have been initiated and were continuing has to be seen - only two documents which required to be looked into were the scheme of amalgamation and the order passed in pursuance thereof by the Court. If that was the admitted factual position and based on which the legal issue was raised, then, the tribunal was obliged to answer the legal question - Its omission to answer is vitiated in law - The tribunal is a last fact finding Court and equally if it could have been approached by the Assessee Court on law and fact, then, in the given circumstances, the tribunal should have answered this issue and its failure to do so can safely be termed as not performing its duty in law - The direction to remit and to remand it to the Assessing Officer is not justified and in the peculiar facts thus, the order is set aside and the matter is remitted back to the Tribunal for adjduciation Decided in favour of Assessee.
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2014 (5) TMI 512
Deduction of provision for warranty estimated present value of contingent liability - Held that:- Following M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims Decided against Revenue. Transfer of Lift Division Slump sale - The argument of the petitioner was that this is a transfer under the Scheme of Arrangement but is not a sale - Held that:- Relying upon Commissioner of Income Tax, Andhra Pradesh v/s Motors & General Stores (P) Ltd. [1967 (5) TMI 3 - SUPREME Court] the tribunal was rightly of the view that it is only if there is a sale of the cinema house and the other assets that the taxable profits and gains are to be computed u/s 10(2)(vii) as the amount by which the written down value exceeds the amount for which the assets are actually sold - the word "sale" or "sold" have not been defined in the Indian Income Tax Act, 1922 - These words have to be construed by reference to other enactments - a reading of the clauses in the Scheme of Arrangement shows that the transfer of the undertaking has took place in exchange for issue of preference shares and bonds. Merely because there was quantification when bonds/preference shares were issued, would not mean that the monetary consideration was determined and its discharge was only by way of issue of bonds/preference shares - The Scheme does not refer to any monetary consideration for the transfer - The parties were agreed that the assessee was to transfer the undertaking and take bonds/preference shares as consideration - it was a case of exchange and not a sale - Section 2(42C) of the Act was inapplicable - If that was not applicable and was not attracted, then, Section 50B was also inapplicable - the Tribunal was of the view that the transfer of Lift Division comes within the purview of Section 2(47) of the Act but cannot be termed as a slump sale the finding of fact cannot be said to be perverse or based on no material as such no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 511
Validity of notice u/s 148 of the Act Reopening of assessment Bar of limitation Whether there was failure on the part of the assessee to disclose truly and fully all material facts for assessment Held that:- The entire modality of disclosing undisclosed income was placed before AO during the proceedings of assessment itself - This included a sum as an amount admitted during the survey - If the AO had any doubt or dispute pertaining to valuation of the undisclosed stock and the disclosure of additional income by the assessee, he ought to have pursued the issue further during the assessment itself - By no stretch of imagination can it be stated that the issue that the AO now desires to raise for which the notice for reopening has been issued, flows from failure on the part of the assessee to disclose necessary facts. The assessee made a disclosure during survey of unaccounted stock - He forwarded it by filing a return maintaining such disclosure giving shape of declared income - If the AO felt that valuation of the stock was inaccurate - the disclosure was not full and he could as well have taxed the additional income, which in his opinion was not reflected by the assessee - it cannot be said that the income chargeable to tax had escaped the assessment due to failure on the part of the assessee to disclose truly and fully all material facts notice is set aside - Decided in favour of Assessee.
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2014 (5) TMI 510
TDS u/s 194C or 194J - comprehensive maintenance contracts for its various equipments, installations, viz. Air Conditioners, Lifts, Vehicles and Engine alternator services - Failure to deduct TDS Held that:- the work of a cobbler, a carpenter, barber, weaver, et. al. is all highly skilled and specialized, when considered from the stand point of a common, lay person. However, the technology involved or, rather, the interface therewith, as required, is fairly simple and of low calibre; the gadgets involved being of everyday use and, therefore, of common user and repair. That is, the job involves work of regular, low-technical nature, which could thus be contracted out on a pre-determined basis in-as-much the routines involved or to be followed are well established. - Relying upon Tata AIG General Insurance Co. Ltd. Versus Income-tax Officer (OSD) 3(2) [2010 (10) TMI 359 - ITAT, MUMBAI], the payments made have been correctly classified for the purpose of deduction of tax at source u/s.194-C, as against u/s. 194-J - Decided in favor of assessee. TDS on vehicle hiring charges - Held that:- the arrangement is not toward the provision of carriage services, as understood by the first appellate authority, but for making available cars for the assessee's personnel. At the same time, clearly, the arrangement also includes making available services of a chauffeur as well as meeting the fuel cost of transportation. The same cannot by any means be considered as toward car rental. Subject to a reasonable deduction in respect of charges in its respect, based on the materials and/or information led by the assessee, which would though stand to be considered as toward contractual services covered by section 194-C, the balance amount would fall to be governed by u/s.194-I. - Decided against the assessee. Recovery of TDS where the tax on the relevant income stands paid by the deductee. - Held that:- The TDS provisions are only a mode and manner of collecting the tax of the deductee (through the deductor), so that there could be no double payment of tax, even as in fact clarified by the Board itself per its circular - The onus to exhibit that the tax on the relevant income has been assessed or brought to tax, so that no further tax is required to be deducted/paid in its respect, is on the assessee - The AO directed to allow the assessee reasonable opportunity to satisfy him ans decide the matter after due verification Decided partly in favour of Assessee.
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2014 (5) TMI 509
Validity of reopening of assessment u/s 147 of the Act Mere change of opinion Held that:- There is no dispute that reopening of assessment in this case has been done within 4 years - AO while allowing claim of the assessee u/s 80HHC on traded goods - while allowing the claim of the assessee u/s. 80HHC detailed inquiry was made as to why all the other expenses which were not directly attributable to export of trading goods should not be considered as indirect cost and be apportioned accordingly and only after verifying the assessees contention which was found to be correct as the assessee was able to identify and co-relate every export with specific purchases made from Baroda office, AO allowed the claim of the assessee - reopening of the assessment on the part of the AO was nothing but a case of change of opinion which is not sustainable in law. Following Gujarat Power Corporation Ltd vs. ACIT [2012 (9) TMI 69 - Gujarat High Court] and CIT Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the AO did not give any specific finding accepting the claim of the claim of the assessee makes no difference if the issue was processed at the time of original assessment proceedings - if the entire material has been placed by the assessee before the AO at the time when the original assessment was made and the AO applied his mind to that material and accepted the view taken by the assessee - Merely because he did not express this in the assessment order that by itself would not come as a ground to a conclude that assessee has escaped assessment and therefore, the assessment needed to be reopened - order passed by AO u/s 143(3) read with section 147 is not sustainable in law Decided in favour of Assessee.
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2014 (5) TMI 508
Genuineness of cash credits - 100% EOU into Manufacturing and export of shoes Difference of opinion Held that:- The issue relating to the cash credit was also examined by the Tribunal, who observed that the assessee had filed the confirmation list from the creditors, all the creditors are assessed to tax - The money was paid through account payee cheque - the identity of the creditor is established when the confirmation has been filed in each case - The payment was made through account payee cheque, so the transaction is genuine - The creditors were the income tax assessees and they have shown the amount in their accounts - creditworthiness has been proved - All the three ingredients of cash credit have been established thus, there is no reason to interfere with the order passed by the Tribunal - no substantial question of law arises for consideration Decided against Revenue.
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2014 (5) TMI 507
Disallowance of depreciation - Assets other than plant and machinery No production of manufacture activity Buildings and other assets were used by the employees engaged in the closure operations of the company - Held that:- Assessee had only been ordered to be closed down by the Government of India but had not gone into liquidation - claim in respect of voluntary separation scheme expenses had been allowed by CIT (A) - it cannot be denied that for implementing the scheme necessary infrastructure must have been maintained by assessee - merely on the ground that the company was directed to be closed down, it could not be inferred that till the time of final closure, no activities were being carried out by the assessee - minimal staff had to be kept for proper survival and security of all the assets of the company. The assessee company being a juristic entity incorporated under the Companies Act, did not cease to exist, merely on passing of the order by Government of India for closure of the company - It had to fulfill all the obligations imposed by the Companies Act till it was finally dissolved - Necessary staff had to be maintained - depreciation had to be allowed though assessee had discontinued its business Relying upon CIT Vs. Kirti Resorts (P.) Ltd. [2011 (7) TMI 39 - HIMACHAL PRADESH HIGH COURT] - that as long as the company is in existence, it is entitled to depreciation though it has discontinued its business - the AO is directed to allow assessees claim of depreciation Decided in favour of Assessee.
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2014 (5) TMI 506
Rejection in grant of registration u/s 12AA of the Act Educational institutions - Held that:- No adverse finding has been given to the effect that the assessee societys aims and objects are not charitable in nature - Books of A/Cs are properly maintained on which there are no adverse comments - A certified copy of memorandum is proper compliance to furnish the documents - The assessee having accumulated surplus in past has no effect on the registration in as much as the surplus has been kept by the assessee either in FDRs or investment in purchase of land. There was no merit in the observation that the assessee has not demonstrated any nexus between the purchase of land and objects - For a society running schools, the building construction become integral part of the activity for which purchase of land becomes an essential feature - Thus, the adverse inference on nexus is misconceived in any case the issues about surplus or claiming depreciation become issues relevant for the assessment proceedings and have no bearing at the time of initial registration u/s 12A - Relying upon Shri Gian Ganga Vocational & Educational Society Versus Commissioner of Income-tax, Rohtak [2013 (11) TMI 165 - ITAT DELHI] - the assessee society is eligible for registration u/s 12AA which should be granted Decided in favour of Assessee.
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Customs
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2014 (5) TMI 526
Demand of anti dumping duty - goods are of Malaysian origin and stamped as such - brought into India from China - revenue relied only on the statement of said Mr.Ashok D. Jain which was retracted later. - Held that:- it is erroneous to assume that the revenue relied only on the statement of said Mr.Ashok D. Jain which was retracted later. There were other materials and they are clearly referred in the Customs, Excise and Service Tax Appellate Tribunal's order. The certificates produced from the authorities in Malaysia stated that these certificates do not mention that the authorities confirmed the accuracy of the information contained therein. In such circumstances, the Tribunal relied upon the statement of Mr.Ashok D. Jain. Apart therefrom, the Tribunal has, at internal page Nos.7 and 8 of the order under challenge, assigned reasons for upholding the demand. There is not just the statement of the partner of the importing firm but the certificates of the origin furnished by the appellant have been termed as dubious. That is because of the fact that the enquiry conducted by an investigating agency revealed that M/s.M.K. Plastic Machinery (M), Malaysia is registered as a trader in machinery and equipment and the Company does not have any manufacturing facility. The machinery imported into India by M/s.Jalaram Appliances Polymers is not manufactured by this entity in Malaysia. It is in these circumstances that the finding of fact cannot be said to be perverse or vitiated in law - No substantial question of law arises - Decided against assessee.
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2014 (5) TMI 525
Eligibility for duty exemption - import of Amygluten 160 (Wheat Gluten) - Held that:- The DFIA was issued to the exporter on the basis of SION E-5 for Biscuits. Having completed the export obligation, on 02.07.2013, the exporter (authorization holder) obtained endorsement of transferability from the licensing authority on the said DFIA, and the transferrable DFIA was transferred to the appellant. The appellant being a bona fide transferee sought duty free clearance of Amygluten 160 (wheat gluten) imported by it. The same was denied by putting conditions. The technical data on record and the communication dated 30.10.2013 from the Ministry of Food processing clearly support the appellant s contention that Wheat Gluten is Wheat Flour in which most of the starch is removed, and even the office of Jt.DGFT, at Hyderabad has clarified in a communication dated 30.7.2007 that Wheat Gluten Flour is nothing but Wheat Flour with specific technical characteristics, and thus eligible for import against Wheat Flour and merits exemption under DFRC scheme. The Commissioner (Appeals) in the instant case has therefore clearly erred in ignoring the settled position. These decisions and clarifications backed by technical literature which are available on record, leave no room for doubt that Wheat Gluten under import is Wheat Flour with specific technical characteristics. Once it is concluded that the imported goods are covered under the scope and ambit of permissible item Wheat Flour, and also that it was capable of being used in the manufacture of Biscuits, it is to be seen whether exemption could still be denied on the ground of nexus and Public Notice no. 35 dated 30.10.2013 - Apart from the DGFTs Circular 72/2008 and CBECs Circular 46/2007-Cus, relevant portion of which is extracted, which have been according to us rightly relied upon by the appellants, we note that it is settled law that when the import is against the transferred DFIA (Licence) it is not necessary to establish that the material imported was actually used in the export product unless the resultant product figures in the sensitive list and the theory of broad nexus being settled by Apex Court - The fact situation in the instant case is also similar. Exemption under DFIA under Notification No. 98/2009-Cus.dated 11.9.2009 would thus be available - Decided in favour of assessee.
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2014 (5) TMI 524
Waiver of pre-deposit of duty Levy of interest and Penalty Import of Induction cooker - Mis-declaration in description - Undervaluation - Held that:- The submission of learned counsel on the importation of induction furnace in SKD condition is a factual matter which will be looked at the time of final hearing of appeal - Hence, assessee has failed to make out a prima facie case for total waiver of pre-deposit - Accordingly, applicant is directed to make a further deposit of ₹ 2,00,000/- (Rupees two lakhs only) - Upon such deposit, pre-deposit of balance amount of duty along with interest and penalty stands waived and recovery thereof stayed during pendency of appeal - Accordingly, early hearing application is dismissed as infructuous Conditional Stay granted.
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2014 (5) TMI 523
Waiver of pre-deposit Rate of Anti-dumping duty - Import of rubber chemicals CBS - Notification No. 133/2008, dated 12-12-2008 Held that:- Revenue is demanding duty in view of Notification dated 12-12-2008 on the ground that the anti-dumping duty imposed under the notification is to be liable with effect from date of imposition of provisional anti-dumping duty i.e. 5-5-2008 - During the import the anti-dumping duty as per the notification was nil - Hence demand is not sustainable. As per the Rule 21 of Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 if there is an increase of anti-dumping duty on the basis of final findings and in respect of the goods imported duty already imposed and collected the differential is not Leviable - In view of the above Rule at the time of import the rate of anti-dumping duty was nil - Therefore the pre-deposit of dues are waived and there shall be waiver of pre-deposit and stay against recovery during the pendency of appeal stay granted.
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Service Tax
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2014 (5) TMI 541
Denial of refund claim - CENVAT Credit - nexus between output service being Pre publishing services and input services - Revenue contends that services used have not been proved to be used in relation to output services exported by the respondent. Held that:- It is noted that there is no dispute that cenvat credit is eligible on the input service used in the output service. The Commissioner (Appeals) had given a detailed finding of use of the input service for output service. I find that Revenue has not placed any material to prove that the above services were not used in relation to output service - Decided against Revenue.
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2014 (5) TMI 540
CENVAT Credit - Whether the Service Tax credits on services of Insurance for residential colony buildings is admissible, when such services are not related directly or indirectly to the manufacture of final product, as input service defined under Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that:- Decision of Gujarat Heavy Chemicals Ltd. [2011 (5) TMI 132 - GUJARAT HIGH COURT] followed - though there is somewhat difference in the nature of services involved in the present appeals, insofar as all material aspects are concerned, the entire issue has been discussed threadbare and decided in the above-mentioned judgment in the case of Gujarat Heavy Chemicals Ltd. As already noted, in the case of Gujarat Heavy Chemicals Ltd., the Court was considering the eligibility of the manufacturer to avail Cenvat credit on the Service Tax credit on security services in residential colony of the Company. In the present case, the issue presented before us pertains to Service Tax credit on insurance of the vehicles. We may notice that such vehicles are used only for the residents of the colony and not for the business purpose of the Company. - assessee would not be entitled to Cenvat credit on Service Tax paid on such services - Decided against the assessee.
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2014 (5) TMI 539
Maintainability of appeal before Tribunal - Power to review order - Power of the Chief Commissioner to call upon the Committee of Commissioners to take a second look to review - In the second Review there was a difference of opinion between the Commissioners. Thereafter the Chief Commissioner decided to file an appeal before the Tribunal on 13-8-2008. Accordingly, the appeal was filed on 20-8-2008. There was a delay of 78 days in preferring the appeal. - Denial of rebate claim - Tribunal allowed claim by way of remand - Commissioner allowed rebate claim - Held that:- It is settled law that the power of review cannot be implied. It is the power which should be expressly provided under the Statute. Merely because there is no prohibition under the Act for any authority to exercise the power of review, the authority would not get jurisdiction to review its own orders. It is only if such an express power is conferred under the Statute on the authority it can review its order. If no such power is conferred there is no power of review. In that view of the matter, once the Committee of Commissioners on a careful examination of the order of the Commissioner of Appeals did not differ in their opinion and decide to accept the said order the matter ends there. The Chief Commissioner is not vested with any power to call upon the Committee of Commissioners to take a second look to review the order so that he could take decision to prefer an appeal. Such a procedure is not contemplated under law. In the nature of proceedings such a power cannot be conferred on the Chief Commissioner also - the Tribunal was justified in holding that the appeal filed on the basis of the second review is not maintainable - Decided against Revenue.
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2014 (5) TMI 538
Extension of stay order - Waiver of pre-deposit - Cenvat credit on the service tax paid on the input services - appellant herein has sent 'Piston Rings in coil form' under material movement challans - appellant availed the credit of service tax paid by the Job Worker - Revenue is seeking to recover the same on the ground that M/s. FMGIL is not liable to pay any service tax - should have availed the benefit of Notification No. 8/05-S.T., dated 1-3-2005 - Held that: - The appeal should have been disposed of at any rate before 180 days when there is an order of stay as contemplated under Section 35C of the Act. The contention that due to the stay order, the application is not disposed is not acceptable and there is no substance in the said contention. At any rate as already sufficient time has elapsed, in the circumstances of the case, we deem it proper to direct the Tribunal to dispose off the appeal on or before 30th of September, 2011 positively. The Assessee shall co-operate with the Tribunal in disposing of this appeal. If the assessee does not co-operate and the Tribunal does not dispose off the appeal within 30 days, the impugned order passed in this appeal stands set aside and the assessee shall deposit the amount, which is the subject matter of the appeal before the Tribunal. - Decided partly in favour of Revenue.
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2014 (5) TMI 537
Demand of Service tax - Revenue contended that the services rendered by appellants to other person fall under the category 'Business Auxiliary Service' - Held that:- since the point that arise for determination is in regard to the dispute as to classification of services whether the services rendered by the assessee is information technology service or business auxiliary service, we hold that this appeal is not maintainable. Following decision of Commissioner of Service tax Versus Scott Wilson Kirkpatrick (India) (P.) Ltd. [2011 (4) TMI 500 - KARNATAKA HIGH COURT] - Decided against Revenue.
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2014 (5) TMI 536
Waiver of pre-deposit of Service Tax - CENVAT Credit - Revenue disputes the said fact alleging that they have not rendered civil construction services, but rendered only installation and commissioning services for which they have availed CENVAT Credit on the inputs - benefit of Notification No.15/2004 and 1/2006-ST dated 01.03.2006 - Held that:- Prima facie, we find that the conclusion of the ld.adjudicating authority rests on a letter issued by M/s.NTPC dated 23.11.2011. We also find that after completion of the adjudication proceeding, the Appellants had also obtained a letter from M/s.NTPC, whereby, it is clarified that the services rendered by the Appellant to them against the contract dated 29.03.2004, comprises of both installation services as well as construction services - deduction on account of advances claimed by the Appellant also needs to be scrutinized. At this stage, the offer made by the Ld.Sr.Advocate for the Appellant seems to be reasonable, consequently, we direct the Appellant to deposit Rs.20.00 Lakhs within a period of eight weeks from today and report compliance directly to the Ld.Commissioner. The Ld.Commissioner after recording compliance would proceed with the adjudication afresh taking into consideration the evidences on record and also the evidences that may be placed by both sides - Matter remanded back to commissioner (appeals) after granting stay partly.
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Central Excise
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2014 (5) TMI 531
Waiver of pre deposit - Duty demand - Splitting up of demands - Held that:- The enquiry according to the tribunal revealed that the appellant had availed cenvat credit of service tax paid on services which were used for trading activity of imported goods and relating to their real estate business and the credit so taken was utilized towards discharge of excise duty on goods manufactured at their factory at Alibag. Prima facie some admissions have also referred and in the statements of the officers of the appellant. Taking an overall view of the matter, the tribunal has found that out of the duty, interest and penalty demanded a case for complete waiver has not been made out. One can't at this stage break up the demand and hold that in so far as the sum of ₹ 3,23,00,000/- out of the sum of ₹ 6½ crores there is a strong prima facie case. The demand cannot be considered after broken up and in isolation. It may be, that the appellant would ultimately succeed. However, what the tribunal has gone by is the principle that prima facie case is not a case which would ultimately succeed but which merits require serious consideration and deeper investigation. It is in doing that the tribunal has observed that the interest of both sides can be protected by its interim order - appeal does not raises any substantial question of law - Decided against assessee.
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2014 (5) TMI 530
CENVAT Credit - Whether on the facts and in the circumstance of the case the CESTAT, New Delhi was justified in law in holding that the extended period of limitation under proviso to Section 11A(1) of the Central Excise Act, 1944 readwith Rule 15(2) of the Cenvat Credit Rules, 2004 in the present case is not invokable as there was no intention of the assessee to evade payment of duty - Held that:- when the assessee cleared inputs on which cenvat credit had been availed of, it was required to reverse the credit equal to the duty of excise on the assessable value as determined by the original manufacturer at the time of removal of the goods, namely the credit originally taken and not the duty on transaction value at the time of sale of inputs. Hence, the credit of ₹ 22.20 lacs was found to be correct - Tribunal has also as a matter of fact found that when the audit team of the department visited the establishment, all the information had been duly made available by the assessee and hence, there was no intent to evade duty. Both on law and on facts, the view of the Tribunal is sustainable - Decided against Revenue.
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2014 (5) TMI 529
CENVAT Credit - proof of receipt of inputs at premises - proof of existence of premises - Whether the Customs, Excise and Service Tax Appellate Tribunal was right in dismissing the appeal filed by the appellant holding that he is not entitled to Cenvat Credit on the inputs - Held that:- Sale of building is one aspect, but the other question, which is important and relevant, is whether or not the appellant had continued to operate or do business from the said premises during the period in question. The invoices, etc., have to be examined along with the other material and evidence. If the appellant had continued to operate from the premises in question, then a different outcome/result may be possible. It is possible that the appellant had continued to operate from the premises in question for some more time before completely surrendering the possession or stopping the business - M/s. Shree Ganesh industries is a sole proprietorship - Matter remitted back - Decided in favour of assessee.
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2014 (5) TMI 528
Maintainability of appeal - Substantial question of law - manufacturing and clearance of goods without payment of excise duty - Whether it involves any substantial question of law within the meaning of Section 35G ibid - Held that:- once the Tribunal upheld the current finding of adjudicating authority and that of CCT (Appeals), then it would not involve any substantial issue of law as such and it would be binding on this Court. In other words, this Court in its appellate jurisdiction under Section 35G ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which did not find acceptance to the Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out, such is not the case here. - Decided against assessee.
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2014 (5) TMI 527
Penalty u/s 11AC - whether the assessee would be absolved from the liability to pay interest and penalty in view of their payment of differential duty before the issuance of show cause notice - Held that:- Section 11AB deals with interest on delayed payment of duty. Similarly Section 11AC deals with penalty for short-levy or non-levy of duty in certain cases. Both these provisions indicate that in case the duty has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of the Central Excise Act or the Rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty shall also be liable to pay penalty equal to the duty so determined. The assessee is also liable to pay interest for the period in question. Inspection was conducted on 19th August, 2000. The assessee paid the differential duty on 22nd August, 2000. The show cause notice was issued only on 20th February, 2004. In spite of payment of the entire duty amount even before issuance of show cause notice, and in fact within three days of inspection, the Original Authority imposed penalty equal to the duty amount determined - When the assessee is having the benefit of payment of penalty at 25% of the duty determined, in case the duty is paid within a period of thirty days after the issuance of show cause notice, it is beyond logic as to why they should not be given the indulgence to pay penalty at 25%. The prompt payment of duty after pointing out suppression and before issuance of show cause notice cannot be taken as a negative factor against the assessee to claim penalty at 100%. In case, the penalty is paid even before issuance of show cause notice, necessarily, the assessee should be given the benefits of the first proviso to Section 11AC of the Act. - Penalty reduced to 25% - Decided partly in favour of Revenue.
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CST, VAT & Sales Tax
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2014 (5) TMI 535
Writ petition - Against default assessment of tax and interest issued u/s 32 of the Delhi VAT Act, 2004 - Held that:- Judgment in RICOH INDIA LTD. Versus COMMISSIONER OF C. EX., DELHI [2010 (9) TMI 293 - CESTAT, NEW DELHI] followed - We have to look at the dominant/principal purpose for which the machine was designed and manufactured - Depending upon the said factual finding, it has to be determined and decided whether or not the said machine would fall under Entry No.41A or should be treated as falling in other or general category - These writ petitions should not be entertained - The petitioners relegated and asked to exhaust statutory remedies where both questions of law and facts can be elucidated and examined - Normally when alternate remedy is available, writ petitions, in taxation matters are not entertained. (See Bafna Healthcare Pvt. Ltd. and ors. versus Commissioner of Central Excise, Delhi- IV [2011 (8) TMI 327 - DELHI HIGH COURT] - Writ petitions dismissed with a direction that the petitioners should take recourse to the statutory remedies - The interim orders shall remain in force for a period of 60 days to enable the petitioners to approach the departmental/appellate authorities for stay of the impugned demand - Appeals/objections will not be dismissed in case the same are filed within a period of four weeks from today - No order as to costs Decided in favour of assessee.
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2014 (5) TMI 534
Evasion of Tax - Lifting of Corporate veil - Quashment of recoveries & recovery certificate Held That:- This Court is informed that the assets of the company have been sold for realisation of the dues of IFCI (the secured creditor) - The dues of Department are still to be recovered - The order passed by AO lifting the corporate veil was successfully challenged by only two of the directors namely Shri I.M. Puri and Shri G.L. Tandon - The appeal filed by Shri A.S. Solanki-the petitioner in Writ Tax No. 1499 of 2005 was dismissed - Shri Jagbir Singh-the petitioner in Writ Tax No. 1464 of 2005 had not challenged the order - Shri A.S. Solanki has also not challenged the order by which the appeal was dismissed - Thus, there is no good reason to interfere with the recovery certificates issued in their individual names from their personal assets. Relying upon M/s Meekin Transmission Ltd, Kanpur Nagar and another vs. State of UP and ors 2008 (2) TMI 406 - ALLAHABAD HIGH COURT] - Where the circumstances so warrant, in which, the persons are found evading tax under veil of corporate personality; the corporate entity is employed to circumvent statute or to evade the existing obligation to commit illegality or defrauding others; and have resorted to dubious methods to artifice or subterfuge to avoid payment of taxes, the corporate veil can be lifted to recover the dues from the persons responsible for such illegal acts. Relying upon Calcutta Chromotype Ltd vs. Collector of Central Excise Kolkata [1998 (3) TMI 138 - SUPREME COURT OF INDIA] - There is no doubt that the petitioners and other directors persuaded the BIFR to allow them to run the sick industrial company with fresh infusion of funds from IFCI with two nominee directors of IFCI - The application for eligibility certificate u/s 4-A was made with false declaration that the plant and machinery is new - The eligibility certificate was not granted - Initially the company was doing well but as soon as Shri I.S. Gambhir and Shri L.K. Luthra took over successively as Managing Directors of the company, they started defrauding in payment of sales tax both State and Central; the excise dues and electricity dues - They incurred liability of several crores of rupees and did not participate in the proceedings of assessment - The date, when the company again stopped production, has not come on record - However, the company started production with fresh capital given by IFCI, only to defraud the secured creditors to avoid taxes and electricity dues - The directors of the company hiding behind the corporate veil made use of the corporate entity under the umbrella of BIFR to circumvent statutes, commit illegality and evade the liability of payment of taxes, central excise dues and electricity dues - The returns were not filed - The entire amount was utilised for personal gains - The directors used the State resources for enriching themselves - They robbed the coffers of the State while sitting in Delhi - The corporate veil under the patronage of BIFR was used as subterfuge to avoid payment of taxes No ground is found to interfere with the recoveries from the personal assets of the petitioners Decided against assessee.
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2014 (5) TMI 533
Whether Tribunal is correct in deleting the turnover on the basis of statement given subsequent to the assessment - Deletion in Turnover - Suppression of turnover - Nature of business No evidence - Held that:- Except for contention that the seized materials had to be proved by the assessee, there are no materials pointed out by the Revenue to hold that the entries in the materials established any sale or purchase having been effected by the assessee, resulting in suppression - A reading of the order of the Tribunal, shows that the Tribunal had gone into the records to hold that the business of assessee consistently being one of a job work, there was no material to hold otherwise - Being pure question of fact, there is no justification to accept the plea of the Revenue to set aside the order of the Tribunal - The details given by the assessee in support of the entries represented dealings of other dealers, who had entrusted the job work with the assessee - Statements were recorded for the assessee to show that they are not in the business of making new ornaments from the old gold ornaments for sale - The jewels which were recovered during inspection were sample jewellery given by other dealers for the purpose of manufacture of similar jewellery items - No steps were taken by the Revenue to elucidate further information on the materials produced - Therefore, there exist no case for this Court to interfere with the order of the Tribunal - Revisions are dismissed - Decided against Revenue.
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2014 (5) TMI 532
Recovery of difference in tax with interest Alternative remedy in fiscal matters Jurisdiction under Article 226 - Held That:- This court is afraid it cannot go into the merits in the appeals - Admittedly, the orders impugned are appealable orders and there is no proper explanation given as to why the factual aspects cannot be decided by the appellate authority - Relying upon Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement & another [2010 (4) TMI 432 - SUPREME COURT] and Titaghur Paper Mills Co. Ltd. v. State of Orissa and another [1983 (4) TMI 49 - SUPREME Court] - The power under Article 226 of the Constitution of India is both extra-ordinary and discretionary in nature - When a statute specifically provides for an appeal by the legislature, then such a remedy cannot be bye-passed for a mere asking - This Court cannot act as a substitute for an appellate authority constituted under the statute - Such a self-imposed restriction has to be followed more particularly in a fiscal Statute - Therefore, the orders passed by the learned Single Judge do not warrant interference. Raising of new grounds in a Writ appeal - Writ Court is a Court of Record Held that:- Merely based upon an additional ground is raised at the time of hearing the appeal filed this Court cannot accept the contention that the request made by the learned counsel for assessee was only for the purpose of getting orders to file Writ Appeals - In fact a perusal of the orders passed by the learned Single Judge would clearly show that specific directions have been given for the return of the original orders impugned passed by AO - Further, such a contention cannot be raised and decided before this Court as the appellant for the reason known to it has not chosen to file any review Therefore, no reason is found to interfere with the orders passed by the learned Single Judge Therefore, these Writ Appeals are dismissed - Consequently, connected M.Ps.(MD) No.1, 1, 1 and 1 of 2011 are dismissed Decided against Assessee.
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