TMI Tax Updates - e-Newsletter
May 19, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Validity of reassessment of order - When the discrepancies are there, it will have to be clarified by the assessee - the notices were rightly issued u/s 148 of the Act - HC
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Income Tax:
Deduction u/s 80P(2)(a)(i)- the objections of the Revenue that the ‘members’ defined in sub-clause(i) of section 80P(2) should only include voting members would amount to a classification within classification which is beyond the purview of tax statute - AT
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Income Tax:
Applicability of section 94(7) - loss from units which were held for more than three months after the record date and sold thereafter cannot be subjected to disallowance as per the amended provision of section 94(7) - AT
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Income Tax:
Nature of receipt - capital receipt or revenue receipt - On the sale of excess Carbon Credits the income was received and it is capital receipt and it cannot be business receipt or income - AT
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Income Tax:
If there was no material difference between Sections 80HHC and 80HHE, there was no reason to legislate Section 80HHE because export of computer software in any event would have been covered by Section 80HHC - HC
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Income Tax:
Deduction u/s 10B - ready to print books exported by the appellant in the form of a CD or e-mail are customised electronic data eligible for claiming benefit of deduction - AT
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Income Tax:
Penalty u/s 271(1)(c) of the Act – assessee’s claim that no penalty is leviable when unproved income is offered for taxation to purchase peace is not at all sustainable - AT
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Customs:
Refund of SAD - notification no. 102/07-Cus - it was evident from the invoices that necessary condition prescribed in the notification has not been fulfilled by the importer - refund denied - AT
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Service Tax:
Cenvat Credit - After the whereabouts of service provider and if it was found that they had not paid the tax, appellant would have reversed the credit in which case they would not be liable to penal action at all. - AT
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Service Tax:
Adjustment of excess service tax - matter remanded back - Appellant directed to produce all the relevant documents shown excess payment and to satisfy that it conforms to the provision of Rule 6(3) - AT
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Central Excise:
Interest demand - whether the liability to pay interest on differential excise duty already paid at the time of issue of supplementary invoices would continue - demand is not sustainable beyond normal period of limitation - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (5) TMI 557
Validity of reassessment of order - Held that:- Assessee prima-facie has reduced its tax liability by escalating the debit and other expenses in the book of accounts - the revenue has verified the information u/s 133(6) of the Act - After receiving the information, the discrepancies were recorded - The amount of liability does not tally with the accounts of creditors and debtors for the assessments year - The discrepancies will have to be explained by the assessee - When the discrepancies are there, it will have to be clarified by the assessee - the notices were rightly issued u/s 148 of the Act - The assessee has an opportunity to explain the same by filing the reply to the notices or during the proceedings u/s 147 of the Act – Decided against Assessee.
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2014 (5) TMI 556
Denial of claim of deduction u/s 80P(2)(a)(i) of the Act – Restriction of deduction u/s 80P(2)(c)(ii) of the Act – Held that:- once the ‘nominal’ members or non-voting members are themselves included in the definition of ‘members’, they satisfy the relevant condition imposed by the legislature u/s 80P(2)(a)(i) - the objections of the Revenue that the ‘members’ defined in sub-clause(i) of section 80P(2) should only include voting members would amount to a classification within classification which is beyond the purview of tax statute, unless provided specifically by the legislature – Relying upon CIT vs Punjab State Co-operative bank Ltd [2008 (3) TMI 45 - HIGH COURT PUNJAB AND HARYANA] - under the provision that for the purpose of deduction, it is irrelevant so far as classification of the members in ‘A’ or ‘B’ category is concerned – Decided partly in favour of Assessee.
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2014 (5) TMI 555
Allowability of carry forward of unabsorbed depreciation – Held that:- CIT(A) rightly followed General Motors India P. Ltd V/s DCIT [2012 (8) TMI 714 - GUJARAT HIGH COURT] and was of the view that Section 32(2) as amended by Finance Act, 2001 is applicable from assessment year 2002-03 and subsequent assessment years - Central Board of Direct Taxes Circular clarified the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of eight years for carry-forward and set off of unabsorbed deprecation - any unabsorbed depreciation available to assessee on the date 1.4.2002(assessment year 2002-03), will be dealt with in accordance with the provision of section 32(2) as amended by the Finance Act, 2001 and not by provisions of section 32(2) as it stood before the amendment - there was no material produced by the CIT(A) – Decided against Revenue.
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2014 (5) TMI 554
Applicability of section 94(7) of the Act – Disallowance of claim of loss - Whether the amended provision of section 94(7) incorporated in the statute w.e.f. 1-4-2005 would be applicable to the assessment year for disallowing the claim of loss even in respect of units held for more than three months – Held that:- Under the un-amended provision, if units were sold within three months of the record date, then loss claimed to the extent of dividend income would be disallowed - in respect of units purchased prior to 3 months from the record date the provision of sec. 94(7) will not be applicable - as per the amended provisions if units are sold within the period of 9 months from the record date, then loss to the extent of dividend income will be disallowed. Relying upon Suri Sons. & others Versus Additional Commissioner Of Income-Tax [2009 (4) TMI 502 - ITAT AMRITSAR] - the amended provision u/s 94(7) as brought into the statute w.e.f. 1-4-2005 would apply prospectively w.e.f assessment year 2005-06 - the amended provisions u/s 94(7) which has been brought to the statute w.e.f. 1-4-2005 will not be applicable to the impugned assessment year 2004-05 - loss from units which were held for more than three months after the record date and sold thereafter cannot be subjected to disallowance as per the amended provision of section 94(7) – the matter is remitted back to the AO for verification of the details of period of holdings of units from the record date and compute the disallowance of loss u/s 94(7) of the Act as applicable for the assessment year 2004-05 – Decided in favour of Assessee.
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2014 (5) TMI 553
Nature of receipt - capital receipt or revenue receipt - addition under carbon credits scheme – Switching of Fossil Fuel from Naptha & Diesel to Biomass (agriculture produce) - Held that:- Following My Home Power Ltd. Versus Deputy Commissioner of Income-tax, Central Circle – 7 [2012 (11) TMI 288 - ITAT HYDERABAD] - Carbon Credit is not an offshoot of business but an offshoot of environmental concerns - No asset is generated in the course of business but it is generated due to environmental concerns - the assessee is carrying on the business of power generation - The Carbon Credit is not even directly linked with power generation - On the sale of excess Carbon Credits the income was received and it is capital receipt and it cannot be business receipt or income - the receipt on sale of carbon credits is a capital receipt and deleted the addition made by the AO – Decided against Revenue.
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2014 (5) TMI 552
Disallowance out of ticket incentives u/s 40A(3) of the Act – Opportunity to submit additional evidences under Rule 46A not given – Held that:- The disallowance of expenses in the form of ‘ticket incentives’ has been made by the AO for want of confirmation letters and even basic information such as names, addresses and PAN of the recipients of the said incentives, claimed as expenditure by the assessee - CIT(A) has considered further material furnished by the assessee - the powers of the CIT(A) are coterminous with that of the AO, and he is empowered to entertain any fresh evidence adduced by the assessee - the CIT(A) ought to have given the AO an opportunity to verify the same and submit his remand report – it has not been done by the CIT(A), the order of the CIT(A) is set aside and the matter is remitted back to the AO for redetermination of the disallowance – Decided in favour of Revenue.
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2014 (5) TMI 551
Difference between section 80HHC and 80HHE of the Act - Whether there is any material difference between Section 80HHC(3) and Section 80HHE(3) of the Act – Held that:- Section 80HHC is a provision intended to encourage export of any goods or merchandise except minerals and mineral oil – the provision is general in nature - If there was no material difference between Sections 80HHC and 80HHE, there was no reason to legislate Section 80HHE because export of computer software in any event would have been covered by Section 80HHC – there is no reason to treat them identically nor is it open to hold that there is no material difference between the language of 80HHC(3) and that of Section 80HHE(3) - There may not be any material difference between sub-Section 3 of each of the sections but they certainly operate in different fields – Decided in favour of Assessee. Determination of admissible deduction u/s 80HHE(1) of the Act - Whether the turnover and profit or loss arising out of the business of gear box etc. is to be taken into account for the purpose of determining admissible deduction u/s 80HHE(1) of the Act – Held that:- The turnover of business which can be taken into account is only the turnover of the computer software or in respect of providing technical service as the case may be - Any reference to Section 80HHC for the purpose of understanding the mechanism of sub-Section (3) of Section 80HHE is likely to lead to wrong conclusion - The object of providing the mechanism in sub-Section 3 for the purpose of computing the profits was to provide adequate safeguard to prevent jugglery or manipulation of the books of account - in order to stop any such attempt, the legislature has provided for a special mechanism for the purpose of assessing the profits from out of which deductions can be claimed - Deductions were obviously provided for in order to generate foreign exchange - neither the turnover nor the profit nor loss arising out of the business activity relating to gear box had anything to do with the computation of the admissible deduction u/s 80HHE (3) of the Act – Decided in favour of Assessee.
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2014 (5) TMI 550
Applicability of section 28(va)(b) of the Act - Nature of income – Business receipts or capital gains - Consideration towards transfer of motherboards sales and marketing – Held that:- Tribunal has considered all the relevant aspects and has recorded a finding of fact holding that the claim made by the assessee company as “Capital Gains” in respect of the amount received by it in terms of the Transfer of Business Agreement, is proper - the findings of fact recorded by the CIT (A) and the Tribunal are based on proper appreciation of the material on record and in consonance with the provisions of Section 28 (va) First proviso of the Income Tax Act. Deduction u/s 80IB of the Act – Apportionment of R&D expenses – Held that:- The order of CIT(A) and Tribunal are also based on proper appreciation of the material on record - the product has been manufactured in 80 IB units since 1/9/1999 and the expenditure on research and development has been incurred since 2007 - the expenditure on research and development cannot be said to be on a product which is commercialized – as such no substantial question of law arises for consideration – Decided against Revenue.
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2014 (5) TMI 549
Unexplained credits – Creditworthiness of creditors not proved – Held that:- The assessee has not only produced confirmation letter of the creditor Mr. Mohd. Abdul Khuddus confirming loan of Rs. 10 lakhs but the loan transaction was through banking channel - Assessee has also furnished income tax assessment particulars of the creditor - in respect of loan of Rs.2,00,000/- from Mr. Faizuddin also assessee has furnished confirmation from the creditor - the assessee having discharged the initial burden cast upon him to prove the genuineness of loan transaction by identifying the creditors, furnishing evidence with respect to their creditworthiness - the burden shifts to the AO to prove that loan is not genuine, either because creditors are not identifiable or they do not have creditworthiness - From the assessment order it is clear that the AO has not done any such exercise to establish on record that the credits are unexplained – thus, there is no reason to interfere with the finding of the CIT(A) – Decided against Revenue.
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2014 (5) TMI 548
Disallowance of deduction u/s 10B of the Act – Held that:- The assessee after collecting raw data and pictures has utilized its expert designing skills in producing a ready to print e-book - The final product is intended for use of a particular customer and it does not fit in the category of production of “any customized electronic data” as per the definition of computer software defined in Explanation 2 to section 10B of the Act - even if it is said that the assessee has merely customized the data, which was already available and has not created altogether new software then too the appellant cannot be deprived of the benefit of deduction – the definition of "produce" is wider than the term manufacture – Relying upon CIT vs. Lovesh Jain [2011 (12) TMI 93 - DELHI HIGH COURT ] it does not require to produce or manufacture altogether a new product - but if the outcome of the process is a different product than the input, it would fall under the definition of 'produce' - whatever form the input data is, so long as the end product is in the form of electronic data which is customised by the appellant for the end use of a particular customer, then benefit of deduction u/s 10B of the Act cannot be denied - the final product of the assessee was in electronic form. The Assessee’s business involved export of ready to print books which in the instant case is the “customized electronic data” - The nature of activity done by the assessee in the EOU was that of producing designs, drawings, layouts and scanning for the projects of foreign clients on the basis of their parameters and specifications - This activity is done by taking into consideration the data collected by the assessee itself or from clients – the assessee is entitled to claim deduction u/s 10B of the Act - the ready to print books exported by the appellant in the form of a CD or e-mail are customised electronic data eligible for claiming benefit of deduction – Decided in favour of Assessee.
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2014 (5) TMI 547
Invocation of section 145(3) of the Act - Disallowance of interest expenses - Addition made u/s 68 of the Act – Unexplained cash credits – Held that:- There is no clarity on facts relating to the details of the additions made in the substantive assessment either of the assessee or of others, if any - it is an undisputed fact that the assessment is a protective assessment- In the remand proceedings, AO shall examine all the above contentions of the assessee and examine afresh the applicability of the provisions of section 145(3) and consequent best judgment assessment, if any - So far as the additional grounds are concerned, it would be required to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (5) TMI 546
Penalty u/s 271(1)(c) of the Act –Search and seizure - Unexplained entries - Held that:- The assessee has surrendered Rs. 82,22,450/- u/s. 153A on account of cash found in lockers and unexplained entries in diaries - This was done during the course of search and seizure operation, where some books, documents, cash were found and impounded during the course of search – The findings of the CIT(A) is upheld that it was only due to incriminating documents found / seized in the search action that persuaded the assessee to make a clear cut declaration u/s 132(4) - some pages of the diaries entries were also found to be incorrect and to that extent were added back by the AO and the assessee has conceded to the same - the assessee’s claim that no penalty is leviable when unproved income is offered for taxation to purchase peace is not at all sustainable - section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. Assessee has been clearly been guilty of concealment and the same came to the light only during search operation where diaries and documents were seized - Explanation 5A to Section 271(1)(c) clearly covers the situation - the income declared by the assessee in his return of income furnished after the date of search was solely on the basis of cash found during the search and entries in documents and diaries seized - There is no cogent explanation as to why these incomes were not disclosed earlier in the respective assessment year - assessee is clearly liable for levy of penalty u/s. 271(1)(c) of the Act – the order of the CIT(A) is upheld – Decided against Assessee.
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2014 (5) TMI 545
Addition made u/s 68 of the Act - Additions not supported by seized and incriminating material u/s 153A of the Act - Unexplained sundry creditors and unexplained share application money – Held that:- Following Shri Govind Agarwal Versus ACIT [2014 (2) TMI 810 - ITAT MUMBAI] - The basis for addition on account of ‘sundry creditors’ (purchases) is merely the ‘financial statements’ filed by the assessee - Similar is the case with regard to the addition on account of ‘share application money’ - there is no seized material or incriminating material to support the additions made by the AO on account of ‘unexplained sundry creditors’ (purchases) and on account of ‘share application money’ - the additions are not sustainable – Decided in favour of Assessee.
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2014 (5) TMI 544
Addition made under the agency commission as business expenses – excessive - Held that:- There was no formal written agreement between the assessee and the agent, but commission has been paid on regular basis to the agent in earlier as well as subsequent assessment years - Mere existence of an agreement cannot decide the allowability of commission payment it is the presence of surrounding circumstances and basic facts that decide the issue in conclusive manner – non-existence of written agreement cannot be sole base for disallowance of commission payment, if other evidences prove the fact of incurring of such expenditure wholly and exclusively. Following ACIT-18(2), Mumbai Versus M/s. Anand Enterprises [2011 (1) TMI 1270 - ITAT MUMBAI] - The fact that the assessee did pay commission to its foreign agent has been acknowledged by the AO as is apparent from his decision in restricting the deduction to 2. 88% of the turnover - Once the commission is accepted to have been paid, there is no logic in disallowing such expenditure by holding that it was excessive - It is for the assessee to determine the way in which it has to carry on its business - commission paid by the assessee to its agent is an allowable expenditure - The Circular of the RBI is on record and that the absence of the said circular was one of the reasons for disallowance – the order of the FAA is set aside – Decided in favour of Assessee.
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2014 (5) TMI 543
Validity of order u/s 245D(4) of the Act - order of Settlement Commission - Full and true disclosures not made – Held that:- The report u/s 245D(2B) of the Act which had been submitted by the Commissioner to the Settlement Commission indicates that the property was acquired for ₹ 90 crores - Mr Sahni referred to the order of the Income Tax Settlement Commission dated 31.12.2010 in which it has been specifically mentioned that the Commissioner in his report under Rule 9 pointed out that the initial acquisition of the property was of ₹ 90 crores and that the premium had been calculated at ₹ 40 crores taking the valuation to ₹ 130 crores at the time of the induction - The order dated 21.05.2012 does not call for any interference - The fact that Smt. Lata Jain and Sh. Roshan Agarwal had together declared a sum of ₹ 16 crores as undisclosed income in respect of the transaction cannot bind the assessee and her husband Sh. Gopal Gupta – In any event, what the Settlement Commission has said in the order in respect of Smt. Lata Jain and Sh. Roshan Agarwal, is that as per their calculations the premium amount came to ₹ 13.3 crores but since the applicants had declared more than that, the disclosure needed no disturbance. Rs 6.5 crores had been disclosed in the initial statement given by Sh. Gopal Gupta at the time of the search and seizure operation and the figure was subsequently enhanced to ₹ 7.61 crores at the time the application for settlement was made before the Settlement Commission - The Settlement Commission in its order dated 31.12.2010 did not fix any figure as to the amount of undisclosed amount - the amount declared by the applicants was much more than what had been surrendered by Sh. Gopal Gupta and what had been computed by the Department, the disclosure made by them needed no disturbance - The Revenue cannot attempt to add anything more to this value in the absence of any concrete evidence - If the stand taken by the Revenue were to be accepted, then the value of the property would come to ₹ 158.19 crores - there is not an iota of evidence to indicate that the value of the property was anything but ₹ 130 crores – there is no perversity in the order dated 21.05.2012 passed by the Settlement Commission u/s 245D(4) of the Act – Decided against Revenue.
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2014 (5) TMI 542
Deletion of disallowance on account of variation in closing stock – Held that:- Revenue has not been able to refute the findings of fact recorded by the CIT (A) - as per the audited balance sheet of the assessee, the value of closing stock is Rs. 2,27,92,346 - The quantity of closing stock tallies with the figure of excise records in RG-23, Part II and RG- 1 - CIT (A) is correct in holding that the AO wrongly took the value of stock of the assessee, as shown in the original return of income - CIT (A) rightly directed the AO to adopt the figure of the assessee’s closing stock at Rs. 2,27,92,346/-, as declared in the revised return filed on 14.12.09, as against the value of closing stock of Rs. 2,65,61,073/-, as taken by the assessee in its original return of income – the order of the CIT(A) is upheld – Decided against Revenue. Deletion of disallowance of fuel expenses – Held that:- CIT (A) has rightly considered the contention of the assessee that the figure of Rs. 26,27,504/- was not the figure of fuel consumption and the correct fuel consumption was of Rs. 6,32,63,773/-, as compared to that of Rs. 5,46,31,886/- for the immediately preceding assessment year - The sales of the assessee company during the year were of Rs. 56,09,71,932/-, as compared to those of Rs. 39,34,31,972/- for the preceding year - Percentagewise, it worked out to 11.28% for the year, as compared to 30.89% for the preceding year - The AO had made the addition out of the closing stock incorrectly- All the fuel expenses had been made on regular bills from the suppliers and the payment had been made through account payee cheques - A copy of the assessee’s fuel account was filed – the order of the CIT(A) is upheld – Decided against Revenue. Deletion of disallowance of stores and spares expenses – Held that:- CIT(A) was of the view that all the purchase transactions were through cheque payment, but for some small purchases done on urgent basis at the plant itself, in cash, through regular cash memos, entry qua which was duly made in the assessee’s books of account - the assessee had not claimed this stock as expense u/s 37(1) of the IT Act - an asset was created in the inventory to be claimed in the next year- The expenditure found by the CIT (A) to be the figure of closing stock as per the assessee’s books of account - The financial statement produced showed that the assessee had incurred an expenditure during the year on stores and spares as against a similar expenditure in the immediately preceding year - There was also no finding to the effect that the expenses had been incurred for any non-business purpose – the details include description of the stores and spares, the party from whom they were purchased, the bill No., the billing date, the quantity, the rate and the amount - None of the above evidence produced by the assessee in support of its claim, as considered in detail by the CIT (A) – the order of the CIT(A) is upheld – Decided against Revenue.
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Customs
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2014 (5) TMI 563
Confiscation of goods - import of consignment of Digital Multifunction Printing and copying Machines - whether the Digital Multifunction Printing and copying Machines (Old and used), imported prior to 05.06.2012 are hit by Para 2.17 of the Foreign Trade Policy, which placed the same under the restricted category with effect from 05.06.2012 - Difference of opinion - Matter referred to larger bench with following question:- Whether the Digital Multifunction printing and photocopying machines imported prior to 6.6.2012 do not require a license for importation of the same as held by Member (Judicial) or the same require a license for importation as held by Member (Technical)?.
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2014 (5) TMI 562
Waiver of pre-deposit - Penalty u/s 114(iii) - applicant is Superintendent of Customs and who gave Let Export Order in respect of the consignment which were highly overvalued to get undue drawback. - Held that:- In view of the statement by the co-noticee where he implicate himself as well as the applicant, that applicant was allowing the shipment of overvalued the goods for monetary consideration. We find that applicant had not made out a case for waiver of penalty. The Applicant is directed to deposit ₹ 25,000 within a period of eight weeks - stay granted partly.
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2014 (5) TMI 561
Denial of refund claim - notification no. 102/07-Cus dated 14.09.2007 - Held that:- Adjudicating Authority has granted refund relating to the SAD duty. There is a condition in Notification No. 102/207-Cus dated 14.9.2007, that if the importer had passed on the duty to the buyer and stipulation is made in the invoice in the form of stamp ‘No credit of Additional duty levied under Sub-section (5) of Section 3 of Customs Tariff Act, 1975 shall be available - it was evident from the invoices referred above that necessary condition prescribed in the notification has not been fulfilled by the importer. Therefore, grant of refund to the respondent is not proper and is liable to be rejected - Decided in favour of Revenue.
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2014 (5) TMI 560
Denial of refund claim - Excess anti-dumping duty - Held that:- In the case of Priya Blue Industries Ltd. Vs. CC - [2004 (9) TMI 105 - SUPREME COURT OF INDIA] wherein the Hon'ble Supreme Court held that the refund claim cannot be entertained unless the assessment is appealed against. Admittedly, this case relates to the year 2005 and the said assessment was not challenged after the issuance of Notification 11/2007 dated 31.01.2007. Therefore, I find that both the lower authorities have rightly rejected the refund claim as per the decision in the case of Priya Blue Industries Ltd. - Decided against assessee.
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2014 (5) TMI 559
Import of goods - DEPB scrips/advance Licences – Non-payment of duty - Procurement of license by forged and fabricated documents - Bar of Limitation - Show cause notices to present assesses - Held that:- Assessee purchased the advance licences, i.e. DEPB scrips/advance licences, from the market and made import of the goods by utilizing these licences without payment of duty - As the DEPB scrips/advance licences were obtained by submitting false/fabricated documents - Relying upon New India Insurance Co. v. Kamala [2001 (3) TMI 1014 - SUPREME COURT] - Forgery is antithesis to legality and law cannot afford to validate a forgery, therefore no merit found in the contention of assessee that demands are time barred – Decided against assesse.
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Service Tax
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2014 (5) TMI 580
Cenvat Credit of Service Tax - duty paying document - input services - Security Service - service provider had not deposited the Service Tax in the treasury of Govt of India. - bona fide belief - Penalty - Held that:- After the whereabouts of service provider and if it was found that they had not paid the tax, appellant would have reversed the credit in which case they would not be liable to penal action at all. The fact that appellant did not make any efforts to locate the service provider nor did they make any effort to intimate the department nor did they debit the amount of credit taken goes against the appellants and therefore it has to be held that the invocation of extended time limit for demand in this case is sustainable. - Decision in the case of Lacto Cosmetics (Vapi) Pvt Ltd., vs, CCE., Daman [2012 (12) TMI 642 - CESTAT AHMEDABAD ] followed. - Demand confirmed with penalty - Decided against the assessee. Levy of personal penalty on employee - Held that:- individual will not benefit in any way by availing cenvat credit by the company and the ratio of M/s Lacto Cosmetics (Vapi) Pvt. Ltd., will apply, in the case of M/s Lacto Cosmetics (Vapi) Pvt. Ltd., Bench has set aside the penalties imposed on the employee.
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2014 (5) TMI 579
Waiver of pre-deposit of Service Tax - Penalty u/s 76, 77 & 78 - Held that:- Prima facie, it cannot be lost sight of the fact that the appellant had not been serious from the date of issuance of the first SCN i.e. on 30th April, 2010 in responding to the allegations of the Department about short payment of service tax. Both sides at this stage, agree that the matter be remanded to the adjudicating authority for consideration of the evidences which were not earlier placed before the adjudicating authority. Therefore, in the interest of justice, we are of the view that the case may be remitted to the adjudicating authority for deciding the issue afresh - Matter remitted back with order of pre deposit - Decided partly in favour of assessee.
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2014 (5) TMI 578
Adjustment of excess service tax - Whether the appellant could adjust the excess service tax paid during April 2006 to September, 2006 against its service tax liability for the month of October, 2006 in terms of provisions of Rule 6 (3) of the Service Tax Rules, 1994 - Held that:- reason for excess payment of service tax was mistake in computing service tax liability for the period April 2006 to September 2006, which is not disputed by the Revenue. There is no evidence on record that the appellant had received/ retained any amount in excess of the value declared by it in its Half Yearly Return for the period ending 30.09.2006. Therefore, in this case the question of refunding the value of taxable service and service tax thereon to any person (service recipient) did not arise. Appellant could not produce any documentary evidence to show that the value of taxable service and service tax thereon had been refunded to any recipient of its taxable service inasmuch as the excess paid service tax did not correspond to any service provided or agreed to be provided by the appellant to any service recipient. First appellant authority has observed that appellant had not produced evidence related to the occurrences of said excess payments before the lower authorities otherwise the issue could have been looked into the entirely of prevailing Rule 6(3) of the Service Tax Rules 1994. The matter is, therefore, required to be remanded to the Adjudicating Authority. Appellant is also directed to produce all the relevant documents shown excess payment and to satisfy that it conforms to the provision of Rule 6(3). - Decided in favour of assessee.
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2014 (5) TMI 577
Services of maintenance of greenery on road divider - Held that:- Services in relation to the maintenance of road divider is covered under the provisions of Section 97 of the Finance Act, and the garden which is part of the Raj Bhavan forms part of the Government building. Accordingly, this maintenance service is exempt under Section 98 of the Finance Act. It is vehemently argued by the appellant that the appellate Commissioner have failed to consider the case under Sections 97 & 98 and ordered pre-deposit without considering the important aspect in this case - In the interest of justice, the appellate Commissioner should have considered the applicability of the Sections 97 & 98 before passing any order for pre-deposit as the same goes to the root of the matter. Thus, the impugned orders of Commissioner (Appeals) are set aside - Decided in favour of assessee.
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2014 (5) TMI 576
Penalty u/s 76, 77 & 78 - Construction of residential complexes /finishing activity - Malafide intention - Fraudulent activity - Held that:- There is no case made out of fraud, collusion and/or active concealment on the part of the appellant. Further, the appellant has paid the Service Tax along with interest before the issue of show-cause notice and accordingly they are entitled to benefit under Section 73 (3). Thus the penalty levied under Sections 76, 77 and 78 of the Finance Act are hereby set aside - Decided in favour of assessee.
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2014 (5) TMI 575
Service tax demand - banking and financial services - reverse charge mechanism - activity of issue of credit card - Held that:- Prima facie, we are of the view that the applicants are liable to pay service tax on the above said activity for the period 18/04/2006 to 30/04/2006 under the category of banking and financial services. Therefore, we direct the applicant to make a pre-deposit of Rs.5,98,087/- within four weeks - Conditional stay granted.
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2014 (5) TMI 574
Demand of Service Tax and education cesses - extended period of limitation - Held that:- It is submitted that, at no stage of audit, any objection regarding the fees collected from SWIPL was raised. In this connection, the learned Deputy Commissioner (AR) refers to the various documents relied upon in the show cause notice and submits that it was only at the stage of investigation that the appellant came forward to disclose the relevant facts through statements. These statements were given only in August 2009. At no stage during the period of dispute did the appellant voluntarily disclose the material facts to the department and, therefore, the extended period of limitation was correctly invoked in this case. After considering the submissions, we have found a valid point in the submissions made by the Deputy Commissioner (AR) and, therefore, the plea of limitation is prima facie unacceptable at the present stage - Conditional stay granted.
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Central Excise
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2014 (5) TMI 568
Waiver of pre deposit - maintainability of writ petition before the High Court against the decision for refusal to grant stay by the commissioner (appeals) - Held that:- A careful scrutiny of the provisions of Section 35-B which provides for an appeal to the Appellate Tribunal against the orders of the Commissioner (Appeals) and Section 35-G which provides for a remedy of appeal to the High Court against the orders of CESTAT would show that both sections are not in pari materials. The provisions of Section 35-Bvirtually list out the orders against which an appeal would lie to the Appellate Tribunal. An order passed under Section 35-F is not included as one of the order under Section 35-B(1). The section also does not use the expression “any” or “every order”. On the contrary, Section 35-G (1) uses the expression “every order”. It is a fundamental principle of law that statutory authorities derive powers of appeal or revision, only in terms of statutes. If the statutes do not clearly confer power of appeal or revision, they cannot be conferred through interpretation. Hence, the objection with regard to maintainability is overruled. The CESTAT granted waiver of 100% and also granted stay. As against the 3 rd order, in view of the amount involved, the petitioner had to go before the Commissioner (Appeals). Therefore, the Commissioner (Appeals) ought to have followed the precedents provided by the Tribunal. When the provisions in respect of which duty is levied are one and the same and when the CESTAT has granted absolute stay without any condition in respect of two Orders-in-Original, it is not fair for the Commissioner (Appeals) to impose a condition when the third case comes up. - Decided in favour of assessee.
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2014 (5) TMI 567
Interest demand - whether the liability to pay interest on differential excise duty already paid at the time of issue of supplementary invoices would continue and if so can such interest liability be demanded beyond the normal period of limitation of one year from the date of supplementary invoice under Section 11A read with Section 11AB of the Act - Held that:- As the period of limitation that applies to recovery of the principal amount shall also apply to the claim for interest thereon, the demand is time barred - Issuance of show cause notice for interest on the delayed payment should also be within a period of one year as stipulated under Section 11-A of the Act - Therefore, department has absolutely no jurisdiction to issue show cause notice after expiry of the period of limitation for interest on the delayed payment for the period - period of limitation, unless otherwise stipulated by the statute, which applies to a claim for the principal amount should also apply to the claim for interest thereon - Decided in favour of assessee.
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2014 (5) TMI 566
Rebate - Quantum of refund - Export of watches and clocks - Jurisdiction of tribunal to grant refund - Held that:- It appears that from the beginning, the stand of the Department had been that the Tribunal does not have jurisdiction for this case falls essentially under proviso (b) to Section 35B(1) of the Act and that stand had also been upheld by the Tribunal when it chose to dismiss the appeal ex parte on 21st June, 2005 and later on, when the present opponents made a request for restoration, it had recalled its earlier order and later on decided the matter on merit against the Department. And therefore, both the orders would have an effect of merging and even if there is no separate challenge made by the Revenue, that may not deprive the Department from raising such an issue at this stage with this effect - On examination of the material clearly it appears essentially a question of refund of rebate and not of the duty as sought to be argued - issue since pertains to rebate, the Tribunal had no jurisdiction - Decided in favour of Revenue.
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2014 (5) TMI 565
Denial of refund claim - Maintainability of appeal - Limit below than prescribed limit by CBEC - Held that:- by issuing such instructions, the C.B.E. & C. provided for certain directives for the Department to prefer appeals before the Tribunals. High Courts and Supreme Court, essentially to reduce the number of small appeals and to filter conditions of frivolous appeals, minimum tax effect was prescribed below which, it would not be open for the Department to file appeal to the High Court. - Department was unable to controvert the contention of the counsel for the respondents that in each case, the revenue effect involved was less than Rs. 2 lakhs - Decided against Revenue.
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2014 (5) TMI 564
Denial of CENVAT Credit - Notification No. 58/97 - supplied of goods did not pay duty - Held that:- even if the manufacturer-supplier had not paid Central Excise duty and given a wrong certificate/no certificate on the body of invoices about discharging of its liability, the assessee could not be held liable for the payment of the Central Excise duty on the goods cleared. - where deemed credit is claimed in terms of Notification No. 58/97-C.E. and the supplier has issued the invoices certifying that inputs had suffered excise duty, then there is no requirement in the said notification that the assessee is required to establish that the supplier has discharged its excise duty liability. The appellant-assessee had discharged the duty liability. The Tribunal disallowed the benefit thereof to the appellant on the ground that belated payment of compounding levy by input supplier shall not entitle the appellant to the deemed credit in respect of input subjected to such levy - Tribunal was not right and the benefit of discharge of the duty liability by the appellant could not be denied to the appellant - Tribunal was not right in holding that the appellant was liable to pay excise duty - Decided in favor of assessee.
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2014 (5) TMI 558
Denial of CENVAT Credit - Service availed from CHA - Held that:- the place of removal of the goods is the port where the goods have been exported - service availed by the exporter upto the loading port where the goods are being exported, any service availed by exporter is entitled for inputs service credit - appellants are entitled for inputs service credit of the service of CHA availed by them during the course of export of goods, as the service has been availed for exported goods at loading port - Following decisions of Modern Petrofils Vs. CCE, Vadodara, reported in [2010 (2) TMI 328 - CESTAT, AHMEDABAD], CCE, Surat Vs. Colour Synth Industries Pvt Ltd., reported in [2009 (1) TMI 130 - CESTAT AHMEDABAD] and Kuntal Granites Ltd. Vs. CCE, Bangalore reported in [2007 (3) TMI 540 - CESTAT, BANGALORE], Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (5) TMI 573
Claim of input tax credit/set-off – Hawala transactions – Publication prior to F.I.R. - Initiation of proceedings u/s 73 of the MVAT Act, 2002 - The Assessee was confronted with 13 purchase invoices and stated that these bills were given to him by agents in the market and were accounted in the purchase register for the claim of input tax credit - Held that:- Judgment in M/s. Mahalaxmi Cotton Ginning Pressing and Oil Industries, Kolhapur. Versus The State of Maharashtra & Ors. [2012 (5) TMI 152 - BOMBAY HIGH COURT] followed – At least seven of the 34 vendors whose invoices were relied upon by the Asseesse to claim input tax credit were bogus entities - There were no deliveries of goods or actual sales and bogus invoices were raised to get input tax credit - The publication by the State on the web-site falls within the enabling provisions of Section 73(1) - Electronic filing by the Department was put into place to promote greater transparency in and efficient handling of claims for input tax credit. This Court had recorded a statement of AG in Mahalaxmi Cotton (supra) where it was made clear that envisaged modalities were not to apply to transactions by dealers where the certificate/invoice is not genuine (including hawala transactions), no set-off should be granted to the dealer claiming to be a purchaser - The assessee cannot possibly assert that its assessment in accordance with law must be deferred until an assessment is carried out in the first instance against hawala dealers - The assessee has no case whatsoever to make such an assertion - The State is justified in taking necessary steps to complete the assessment in accordance with law – The court is satisfied from the disclosures made by the Government in the affidavits that steps are being taken by the State for pursuing the remedies lawfully open even against the hawala dealers - A web of complex transactions has been put into place to defraud the revenue and in the course of this judgement, it is not intended to circumscribe in any manner whatsoever the full range of powers vested in the State Government through its Department for ensuring that due steps are taken to curb or as the case may be deal with hawala transactions which pose a serious threat to the revenue of the State - No merit found - The petition is dismissed – Decided against Assessee.
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2014 (5) TMI 572
Whether deletion of estimation made for loss of Form XX and not intimated as per Rule 37(2) of the TNGST Rules and thus unaccounted for by the dealer is legally sustainable - Taxable Turnover – Suppression of turnover - Loss of form XX – No evidence - No sufficient ground for Revenue - Held that:- Tribunal in its order had pointed out that, even though the assessee is personally responsible for the loss of such forms, there was no loss of Revenue to Government - Further, there were no good reasons shown by the Department to invoke the best of judgment assessment in determining the taxable turnover - The Tribunal had further held that there was no clinching evidence, except the circumstantial evidence, for estimating the taxable turnover - Assessee had shown sufficient reasons for the loss of the leaves of Form XX - It had been shown that there was a change of Managing Agents and as a consequence many records and books had been misplaced and were untraceable - It is also found that there was no evidence to show that the assessee had misused the missing leaves for the sale of tea. Relying upon Tata Iron and Steel Co., Ltd., Vs. Assistant Commissioner (CT) Central Assessment, Circle V, Chennai and others [2003 (11) TMI 566 - MADRAS HIGH COURT] - This Court had found there were no materials to show that the forms, not produced or furnished by the assessee, had been used for the movement of the goods in question - Further, it was not open to the AO to conclude that the goods had been moved and sold by assessee, without accounting for the same – Thus, assessee was not be held to have misused the missing leaves for the sale of tea and that he had suppressed the turnover to result in best of judgment assessment - Therefore, Revenue has not shown sufficient grounds to interfere with the order of Tribunal - Revision stands dismissed – Decided against Revenue.
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2014 (5) TMI 571
Reduction in Taxable turnover - Suppressions of documents – Documents produced at the stage of second appeal - Held that:- A reading of the order of the Tribunal shows that it accepted the documents from the assessee without verifying the original records and granted the relief – AAC went through the objections of the assessee along with the materials produced - Thus, with the materials produced for the first time, AAC rightly remanded the assessment back to the AO for the purpose of checking the details with reference to D7 records and with the regular books of accounts - When that being the case, No justification found in the order of the Tribunal to allow the case of the assessee as a matter of course and without even checking the same with reference to the material records and accounts regularly maintained by the assessee – Therefore, the proper course herein would be to reaffirm the view of the AAC to allow the Assessing Officer to look at the details produced by the assessee with reference to D7 records as regards despatch of cashew kernal made to the Head Office at Quilon. The documents produced before the Tribunal were only photocopies - Tribunal should have tested the claim of the assessee with reference to the originals and with reference to the accounts - Without verifying the originals and with the entries in the account, Tribunal committed a serious legal flaw in allowing the appeal by accepting the case of the assessee as a matter of course, thereby, granting the relief - As a final fact finding body, the Tribunal should have either called for a report on the materials produced and the account checked or at least remanded the matter for fresh consideration, as had been done by AAC - In the absence of any of these courses adopted, with perversity writ large, the order of the Tribunal, calls for interference by this court – Order of Tribunal set aside restoring the matter to the files of AO to do the assessment in accordance with law after giving opportunity of hearing to the assessee - Revision is allowed – Decided in favour of Revenue.
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2014 (5) TMI 570
Whether there is transfer of right to use the driling unit of assessee to the ONGC per agreement so as to attract the levy of Lease tax u/s 3A of the TNGST Act - Levy of Lease tax – Intention of Transfer of right to use drilling unit - Transfer of effective control for goods - Terms and conditions put forth in agreement – Held That:- Judgment in in [Bharat Sanchar Nigam Ltd. Vs. Union of India (S.C.) 2006 (3) TMI 1 - Supreme court] followed - In the case of deemed sale relating to transfer of right to use any goods for any purpose, what is required to be seen is the intention of transfer of right to use the goods, which in turn imply transfer of effective control for goods - Relying upon [STATE OF A.P. v. RASHTRIYA ISPAT NIGAM LTD 2002 (3) TMI 705 - SUPREME COURT OF INDIA] - So long as the owner retains effective control over the goods, mere possession given without a right accompanying thereto to result in the transfer of right to use the goods as he likes, the question of bringing the transaction within the corners of the charging provision does not arise. Evidencing the fact that the effective control of the rigs remained with the contractor, that the assessee merely gave a directions where the rigs were to operate, even in the context of the assessee giving directions to the contractor to take the rigs to the specified points, the said direction per se does not mean that the assessee had complete control over the machinery – Thus, a reading of the various terms show that what is given to the assessee by the contractor was his services through the rigs owned by the contractor and going by the decision referred to above, there is no hesitation in accepting the assessee's case. Considering the various clauses in the agreement, indicating that the effective control ever remained with the assessee, the mere fact that the area of operations were as stated by ONGC does not make rigs as come under the effective control of the ONGC to bring transactions as assessable under Section 3-A of the Act - Thus, applying the decision of the Apex Court reported in [2002] 126 STC 114 STATE OF A.P. v. RASHTRIYA ISPAT NIGAM LIMITED and the subsequent decision reported in BHARAT SANCHAR NIGAM LIMITED v. UNION OF INDIA [2006 (3) TMI 1 - Supreme court] - It is hold that the transactions did not amount to transfer of right to use the goods to fall under Section 3-A of the Tamil Nadu General Sales Tax Act - There is no hesitation in accepting the assessee's contention thereby the order of Tribunal is set aside - Revision stands allowed - Consequently, connected TCMP is closed – Decided in favour of assessee.
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Indian Laws
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2014 (5) TMI 569
Renewel of liquor license - Creation of new shop - Held that:- earlier as per the report of the Deputy Commissioner the shop was at the distance of about 400 meters and on the representation being made and in pursuance of the report of Deputy Commissioner, the Commissioner vide order 6th March 2013 has directed to shift the shop and in pursuance thereof the newly created shop has been further shifted to 150 meters. There is nothing in the rejoinder affidavit that the shop has not been shifted from the old place. Whether it has been shifted further 150 meters and now the newly created shop is beyond 500 meters or within 500 meters is a question of fact, which cannot be adjudicated in the writ jurisdiction. - Decided against assessee.
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