TMI Tax Updates - e-Newsletter
May 22, 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
Penalty u/s 271(1)(c) - Disallowance of claim of various expenses – The assessee has huge accumulated losses and depreciation which further strengthen the view that there was no incentive for assessee to make such claims for the benefit of tax - no penalty - AT
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When the assessee was not required to compute profits and gains of business or profession under the Income Tax Act, mere passing of accounting entry made for depreciation in the books of accounts was not the depreciation “actually allowed” - AT
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Central Excise
Denial of refund claim - price variations - There is no provision under the law for issuance of supplementary invoices reducing the price - refund denied - AT
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Refund - non-supply of documents/ information by the appellant to the Revenue to ascertain appellant’s eligibility to refund claim under Rule 5 of the CENVAT Credit Rules, 2004 - refund denied - AT
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Whether the Cenvat credit is admissible in respect of explosive, Ammonium Nitrate and Detonators, which are used in mines for blasting/fragmenting the solid lime rocks situated outside the factory - held yes - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (5) TMI 672
Jurisdiction of commissioner u/s 263 of the Act - Validity of notice u/s 148 of the Act – Opportunity of being heard – Held that:- The Commissioner received the records prior to the issuance of the show cause notice and opined that the AO failed to apply his mind objectively and failed to conduct an inquiry over the subscription of the shares to various subscribers at a high premium - Section 263 of the Act never envisages the separate recording of the satisfaction before issuance of the show cause notice - the order of the AO appears to be erroneous and a prejudice is caused to the revenue, it would render the said show cause notice legal and valid - Commissioner has indicated the same sufficiently in the show cause notice and afforded the opportunity to the assessee to file reply - Whether the order can sustain on legal parameters or not, can be tested by a Higher Authority who have been bestowed with the power of appeal - Section 253 of the Act provides a remedy of appeal against an order passed u/s 263 of the Act by the Commissioner, such remedy is required to be resorted by the asseessee - Decided against Assessee.
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2014 (5) TMI 671
Disallowance u/s 40(a)(ia) of the Act – Failure to deduct TDS - Interpretation of the term fee for professional and fee for technical services u/s 194J of the Act – Held that:- Both the CIT(A) as well as the Tribunal have completely failed to even refer to the essential ingredients of the definitions of the expressions 'fees for professional services, and 'fees for technical services' - There has been no independent evaluation of whether the services which are rendered by the Federation are technical services or professional services - the CIT(A) merely recorded submissions and arrived at a conclusion without any reason whatsoever - The Tribunal has chosen to affirm that conclusion without any independent reasons of its own – thus, the matter is liable to be remitted back to the CIT(A) for fresh evaluation – Decided in favour of Revenue.
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2014 (5) TMI 670
Admissibility of appeal - Monetary limit for filing appeal – Held that:- Under Instruction No. 3/2011 dated 9th February, 2011 issued by the CBDT u/s 268A(1) of the Income Tax Act it has been mentioned that the appeal cannot be filed if the tax effect of the appeal is less than Rs.10 lakh - Revenue has not disputed the fact that the tax effect is less than Rs.10 lakhs –thus, the appeal cannot be entertained – Decided against Revenue. Sale of assets – Benefit of capital gains u/s 54EC of the Act – Held that:- The Tribunal was rightly of the view that the provisions of the computation of capital gains as Long term capital gain cannot be denied to the assessee in so far as it was nobodys case to foresee what was to be gained after the business assets have been used claiming deprecation alone makes the sale of assets which gain on the sale thereafter has to be as capital gains - Once the capital gains have been computed the consideration for their investment is to be in accordance with the provision of the Income Tax Act cannot be disregarded in so far as the provisions do not disallow claiming of deduction u/s 54 EC of the Act whether has to be first termed as long term capital assets and then the re-computation whether could be as short term capital gain for taxation purpose – Relying upon DCIT vs Himalaya Machinery (P) Ltd [2012 (12) TMI 607 - GUJARAT HIGH COURT] and CBDT Circular No.469 dated 23rd September, 1986 - the claim of deduction u/s 54EC of the Act was rightly claimed by the assessee – Decided against Revenue.
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2014 (5) TMI 669
Appeal pending before Tribunal - Power of the AO to pass assessment order – Stay already granted – Held that:- Stay order granted by the ITAT was placed before the AO and was within the knowledge of ACIT as well - Neither ACIT nor AO was competent to proceed with the assessment proceeding in view of the stay granted by the ITAT vide order dated 26.12.2013 - ACIT, in violation of stay granted by the ITAT, granted permission to the AO to proceed with assessment and the AO has passed the order dated 14.03.2014 – revenue is granted two weeks’ time to file personal affidavits specifically stating as to how permission was granted to proceed with the assessment despite stay order granted by the Tribunal dated 26.12.2013 – Decided in favour of Assessee.
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2014 (5) TMI 668
Validity of notice for reopening of assessment – Income escapement – Loss arisen due to fluctuation in rate of exchange – Deduction in computation of business income - Held that:- Following CIT Versus M/s Woodward Governor India P. Ltd. & M/s Honda Siel Power Products Ltd [2009 (4) TMI 4 - SUPREME COURT] - the loss suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance sheet is an item of expenditure u/s 37(1) of the Act - under the mercantile system of accounting, what is due is brought into credit before it is actually received - it also brings into debit an expenditure for which a legal liability has been incurred before it is actually disbursed - the assessment years being prior to the amendment in Section 43A of the Act with effect from 1st April, 2003 the Assessee would be entitled to adjust the actual cost of the imported capital assets, acquired in foreign currency, on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates pending actual payment of the varied liability – thus, the notice is set aside – Decided in favour of Assessee.
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2014 (5) TMI 667
Validity of re-opening of assessment – Mere change of opinion – Deduction 80IB(10) of the Act – Held that:- The Tribunal has properly appreciated the facts on the record and has given its findings which are in consonance with law - revenue has not been able to point out any new fact/material or information which came to the knowledge of the AO on the basis of which the assessment was re-opened - the CIT(A) has given a finding of fact based on cogent appreciation of the material on the record that the plot of land on which the Housing Project is undertaken if more than one acre in area - the Assessee is eligible to claim the deductions u/s 80IB(10) of the Act – the order of the Tribunal is upheld – Decided against Revenue.
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2014 (5) TMI 666
Ex-parte order passed u/s 263 of the Act – Opportunity of being heard not provided – Held that:- The assessee had submitted a letter seeking adjournment before the Commissioner – the Commissioner without giving further opportunity, on the basis of show cause notice itself, has set aside the assessment order – thus, the matter is required to be remitted back to the Commissioner and directed to provide due and effective opportunity of hearing to the assessee – Decided in favour of Assessee.
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2014 (5) TMI 665
Levy of penalty u/s 271D of the Act – Cash loan taken for purchase of property - Held that:- Assessee relied upon MOU dated 2.7.2008 - the assessee alongwith Mr. R.M. Zafarullah had jointly invested money to purchase property and thereafter share profit from its sale - The property was purchased on 11.7.2008 in the name of assessee - the assessee repaid the amount invested by Mr. R.M. Zafarullah. Mr. R.M. Zafarullah has sworn an affidavit dated 27.06.2011 which was produced before the AO wherein he has admitted the execution of MOU for purchase of property – AO in assessment order dated 26.09.2011 has accepted the contention of assessee with regard to investment of Mr. R.M. Zafarullah in the property - There is nothing on record to show that the assessee has taken loan from Mr. R.M. Zafarullah - Penalty proceeding have been initiated by drawing inferences from the transaction between the assessee and Mr. R.M. Zafarullah - penalty u/s. 271D has been levied on assumption that the assessee has violated the provisions of section 269SS by taking cash loan from Mr. R.M. Zafarullah - the penalty cannot be levied on the basis of presumptions and probabilities – thus, penalty u/s 271D of the Act is set aside – Decided in favour of Assessee.
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2014 (5) TMI 664
Penalty u/s 271(1)(c) of the Act - Disallowance of claim of various expenses – Sharing of expenses - Genuineness of the expenses – Held that:- The quantum additions in penalty proceedings are two separate and distinct proceedings - Penalty cannot be levied for every disallowance made in the assessment order - revenue authorities have not brought anything on record which could prove the non-genuineness of the documents - The expenses payable to M/s. APR Limited were shown separately by the assessee in the profit and loss account and the same has been also discussed by the auditor in the audit report – the assessee has made a claim which was transparent and bona fide - Assessee has not concealed anything in the regard - it cannot be a case of concealment of facts - as far as the filing of inaccurate particulars of income is concerned, assessee was having huge carry forward losses and depreciation and the return was filed at nil income - there cannot be a motive or incentive for the assessee to make any bogus claim in the return of income - The facts show that whatever claim made by the assessee was under good faith and with the advice of the auditors and the employees - assessee has furnished an explanation which has not been found false. Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETRO PRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] – the assessee has made a genuine claim of write off with regard to the obsolete items - The fact has been disclosed in the return of income - the assessee has failed to obtain approval from the excise authorities shall not make assessee’s claim as bogus - It was a bonafide claim and no penalty u/s 271(1)(c) can be levied on the bonafide claim made in the return of income - with regard to the disallowance out of the unpaid amount, the claim was also not false claim - The assessee is following mercantile system of accounting where principle of accrual of expenses is allowable - Simply by stating that liability was unascertained, no penalty can be levied on the assessee on the ground - there is no concealment of income or filing of any inaccurate particulars of income which could bring the assessee under the provisions of section 271(1)(c) of the Act - The assessee has huge accumulated losses and depreciation which further strengthen the view that there was no incentive for assessee to make such claims for the benefit of tax – Decided in favour of Assessee.
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2014 (5) TMI 663
Miscellaneous application - Claim of deductibility of expenses - Whether the order has been passed inadvertently directed the AO to verify the claim of deductibility of the expenditure in the hands of the Hazira entities if in case the amounts do not qualify as FTS – Held that:- An apparent mistake has been committed by exceeding the jurisdiction in directing the AO to enquire independent tax entities who is not in appeal - the observation made shall remain confined to the facts of the case, particularly when the enquiries shall be sufficient to arrive at the correct conclusion by the AO in respect of the claim made by the applicant - the AO has also to find out that if the services rendered by the assessee were not made available to those Hazira parties for their business purpose then under what ground they have claimed business expenditure, if any – Decided in favour of Assessee.
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2014 (5) TMI 662
Non-speaking order - Enhancement of income u/s 251(2) of the Act – levy of penalty u/s 271(1)(c) of the Act - CIT was not properly briefed about the facts of the case, otherwise he would have not mentioned that assessee’s appeal was disposed of by the FAA - His order for rejecting the petition is not a speaking order – the order of the CIT-16 is silent about the opportunity given to the assessee, before an adverse view was taken against it. Even if he had heard the assessee the fact is not apparent from the order - the assessee has not been heard and the order of the CIT-16 is very short and cryptic - the guidelines issued in KEC International Limited. Versus BR. Balakrishnan And Others [2001 (3) TMI 32 - BOMBAY High Court] – the matter is required to be remitted back to the CIT to pass a speaking and reasoned order – Demand arising out of the order of the penalty order of the FAA, is stayed - Decided in favour of Assessee.
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2014 (5) TMI 661
Calculation of depreciation – Adjustment of grants-in-aid received towards cost of asset u/s 43(6) of the Act – Held that:- Interpreting the issue of depreciation ‘actually allowed’ in a case where assessee was not taxable under the Income Tax Act till a particular A.Y. in Kandla Port Trust vs. ACIT [ 2006 (4) TMI 243 - ITAT RAJKOT] it has been held that in the case of such previously exempt entity, since there was no liability to tax, there was no occasion to compute the income of such assessee under the provisions of Income Tax Act - the depreciation provided in the books in the years when the income was exempt cannot be treated as the depreciation “actually allowed” - when the assessee was not required to compute profits and gains of business or profession under the Income Tax Act, mere passing of accounting entry made for depreciation in the books of accounts was not the depreciation “actually allowed” as there was no liability to tax and hence, no assessment for the period - written down value for the purpose of assessment would be the original cost, less, NIL - the original cost becomes WDV. Assessee was exempt from Income Tax u/s 10(20) up to A.Y. 2002-03 - Explanation-6 to section 43(6) is applicable to the assessee’s case - the amount of depreciation provided in the books of accounts up to the previous year relevant to the AY shall be considered as depreciation ‘actually allowed’ under the Act - the WDV as per the books at the beginning of the A.Y.2003-04 becomes WDV for the purpose of section 43(6) - since Explanation-6 has overriding effect and is clearly applicable to the assessee’s case, the entire exercise of re-determining the WDV from year of inception till AY 2002-03 cannot be upheld at all - assessee’s contention that WDV at the beginning of A.Y. 2003- 04 in the books of accounts should be considered as WDV for the purpose of Income Tax Act is upheld – the AO is directed to verify and allow the depreciation keeping in mind facts and law, specifically the Explanation-6 of Sec.43(6) - the claim of depreciation is to be remitted back to the AO for adjudication – Decided in favour of Assessee. Validity of re-opening of assessment – Held that:- Assessee raised various issues on reopening of the assessment in A.Y. 2003-04 considering that depreciation details were not given fully even as of today so as to consider the depreciation allowable - the reopening of assessment is to be upheld at least for the purpose of determining the depreciation allowable in A.Y. 2003-04, so that WDV for A.Y. 2004-05 can be arrived at - even though assessee has raised certain legal issues on issue of reopening, the reopening for A.Y. 2003-04 is also upheld on the same reasons as in AY 2004-05 – Decided in favour of Assessee.
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2014 (5) TMI 660
Applicability of proviso 3rd and 4th to Section 80HHC(3) of the Act – Held that:- Following AVANI EXPORTS & OTHERS Versus COMMISSIONER OF INCOME TAX RAJKOT & ORS [2012 (7) TMI 190 - GUJARAT HIGH COURT] - the amendment brought in by the Finance Act 2005 by inserting 3rd and 4th proviso of section 80HHC(3) have no applicability with retrospective effect - The amendment is prospective in nature - the amendment is liable to be quashed to the extent that the operation of the section could be given effect from the date of amendment and not in respect of earlier assessment - in case of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessees but not in a case where it affects even a fewer section of the assessees - the retrospective amendment should not be detrimental to any of the asesseees – the order of the CIT(A) is upheld – Decided against Revenue.
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2014 (5) TMI 659
Refusal to grant registration u/s 12AA of the Act – Scope of the term charitable purpose u/s 2(15) of the Act – Held that:- The loan grant/ funds provided by the assessee trust are towards achieving the object of establishing the infrastructure projects – creation of infrastructure projects is certainly towards achieving the objects of ‘general public utility’ since by development of such infrastructure projects, the public at large will be benefitted - The funds received by the Trust under the schemes are given as grants/loans with nominal interest to Municipalities and Municipal Corporations for developing infrastructure facilities under the schemes - the activity of the assessee can be considered to be advancing the objects of general public utility without any profit motive – Relying upon COMMISSIONER OF INCOME TAX Versus GUJARAT MARITIME BOARD [2007 (12) TMI 7 - SUPREME COURT OF INDIA] - the objects of the assessee trust as mentioned in the trust deed would certainly make it clear that they are in the nature of ‘general public utility’ since the funding of different projects ultimately are for the benefits of general public - the DIT (E) was not correct in refusing the registration on the aforesaid grounds - the DIT (E) was not justified in not granting registration to the assessee u/s 12AA of the Act – thus, the DIT(E) is directed to grant registration to the assessee trust u/s 12A of the Act. Addition of expenses claimed towards EPF – Held that:- Assessee contended that the amount towards employees contribution to PF was paid to the government account within the due date of filing the return of the AY – Relying upon Commissioner of Income Tax Versus AIMIL Limited and others [2009 (12) TMI 38 - DELHI HIGH COURT] - the expenditure claimed is allowable u/s 43B of the Act – Decided in favour of Assessee. Disallowance of commission payment to agents – Genuineness of payment not proved - Held that:- The assessee cannot be held responsible if the government departments/PSUs failed to provide any information - the AO has taken up an enquiry with the Government departments/PSUs it is the duty of the AO to obtain necessary information from the concerned departments/PSUs by making necessary enquiry with them - the entire issue relating to payment of commission requires examination at the hands of the AO – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (5) TMI 658
Exemption u/s 10B - Exclusion of freight - Export and insurance from export turnover – Held that:- CIT(A) rightly directed the AO to exclude freight expenses from export turnover as well as from total turnover - Whatever is to be reduced from export turnover has to be reduced from total turnover as well – Following Income-Tax Officer. Versus Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] - there was no infirmity in the order of CIT(A) – Decided against Revenue. Disallowance u/s 14A r.w. Rule 8D of the Act – Dividend income – Held that:- The assessee has made investments of yielding tax free income for the AY – Following Godrej and Boyce Manufacturing Co. Ltd vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the provisions of Rule 8D are applicable from AY 2008-09 onwards - the provision of Rule 8D cannot be applied in the present AY i.e. 2006-07 - disallowance u/s.14A has to be made keeping in view huge investments made by the assessee – CIT(A) has made disallowance at the rate of 5% of dividend received by the assessee for AY which is a fair and reasonable view – Decided against Revenue.
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2014 (5) TMI 657
Deletion made as unexplained/ unproved purchases - Painting purchased by assessee – Held that:- CIT(A) has noted that the assessee company during the year was not engaged in the business of trading in paintings and no deduction was claimed by it on account of expenses incurred on purchases of painting which was treated by AO as unproved /unexplained – revenue has not been able to controvert or rebut this position - CIT(A) rightly held that when no deduction was claimed by the assessee on account of purchases of painting, addition could not be made to the total income of the assessee even if the said purchase of painting was found to be unproved /unexplained - payment against purchase of painting was made by the assessee company by cheque and the same was duly reflected in its books of account – the order of the CIT(A) is upheld that the addition made by the AO on account unproved purchases of painting was not sustainable – Decided against Revenue.
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2014 (5) TMI 656
Addition made u/s 41(1) of the Act - Liability not proved – Profits chargeable to tax - Held that:- The liability has been outstanding since six to seven years - the assessee has not filed any confirmation from the concerned party to the effect that the liability remains outstanding and due from the assessee - CIT(A) has observed that the copy of account of Sujas Members Association Ltd. in the books of Shri Sudhir Chaddha filed by the assessee shows that on various dates in 2009 amounts have been paid in cash - there is no evidence regarding the name/signature of the recipient to support the fact that such payment is in fact made to Sujash Member Association Ltd. - from the entry known as “To DD Rs.6,12,500/-“, it is not ascertainable as to in which name the DD has been issued and encashed by whom - if the assessee is able to make payment in cash, or deliver a DD, it is certain that it would definitely know the address of the party, however the same is not furnished - the assessee has not proved that the liability has remained during the year under consideration - there was no reason to interfere with the decision of the CIT(A) confirming the action of AO in taxing the amount u/s 41(1) – Decided against Assessee.
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2014 (5) TMI 655
Levy of Fringe benefit tax – Sales promotion expenses – Business expense did not result into any benefit to employees – Held that:- Following Intas Pharmaceuticals Ltd. Versus DCIT, Cent. Cir. 2(1), Ahmedabad [2014 (3) TMI 685 - ITAT AHMEDABAD] - The provision of "FBT" could not be invoked in respect of the expenses which were not incurred on employees or their family members - the "FBT" could not be invoked on expenses which were not incurred on the employees or their family members - there is no clear cut finding recorded by the AO or the CIT(A) in their order that whether the addition made were relating to the expenditure in relation to non-employees and for the business purpose of the assessee - assessee contended that the expenses were not related to its employees and were incurred only in relation to non-employees and for business purpose of the assessee - thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (5) TMI 654
Admission of additional evidence - Unexplained credits in the books of accounts – Held that:- CIT(A) rightly examined the facts on remand and has given detailed reasons deleting the amount in his order - the AO noticed that the assessee had transferred balances standing in the names of persons to the share capital account - there were no sufficient balances in the accounts to transfer to the share capital account - The AO made the addition only on account of the fact that the assessee did not furnish any information as to why it transferred amounts from the accounts of Sainath Trading to shareholders account - the information furnished during the assessee proceedings cannot be considered as additional evidence, as even during the proceedings only account copies of the shareholders in the books of M/s. Srinadh Trading Co. have been produced - Revenue has not brought anything on record to controvert the findings of the CIT(A) – Decided against Revenue. Restriction of disallowance of depreciation – Held that:- Most of the payments were made through bank accounts and relevant invoice of the assets were also filed before the CIT(A) - AO and CIT(A) erred in restricting the depreciation as claimed - As the assessment was completed ex-parte u/s 144, AO should have examined the additional evidence furnished in the course of remand proceedings – the assessee was put to unnecessary inconvenience in the regard by restricting genuine claim - there is no need for restricting the depreciation and the AO is directed to allow depreciation – Decided in favour of Assessee. Validity of notice u/s 143(2) of the Act – Defective notice - Held that:- There is indeed mistake in mentioning the date of posting as 02.09.2008 - the mistake should not be considered as making the notice as invalid one, as the assessee got the notice u/s 143(2) before 31.10.2008 and the assessment was reopened by issuing a notice - The distinction between an invalid notice and a defective notice is difficult to draw – the notice is only a defective and does not invalidate the proceedings – the assessment cannot be considered as bad in law only by reason of mistake in the notice – Decided against Assessee.
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Customs
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2014 (5) TMI 677
Valuation of goods - imported goods on the basis of US list price - Undervaluation of goods - Held that:- Section 122A specifically provides that ‘the adjudicating authority shall, in any case proceed under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires’. In view of the specific provisions under the law, in this case, there is a clear violation of principles of natural justice. - matter remanded back to the original authority to pass orders after observing principles of natural justice in accordance with law. - Decided in favour of assessee.
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2014 (5) TMI 676
Valuation of goods - Redemption fine - Penalty - Held that:- Matter is referred to larger bench with following questions of law:- Whether on assessable value as determined in adjudication by the revenue is to be set-aside and redemption fine and penalty are to be reduced to 10% and 5% respectively as held by Learned Member (Judicial). OR Whether the valuation as enhanced by revenue based on Chartered Engineer's Certificate are to be upheld as importations have taken place without licence and no land port Chartered Engineer's Certificate has been produced and further redemption fine and penalty as ordered by Commissioner is to be upheld as held by Member (Technical).
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2014 (5) TMI 675
Implementation of the order by Tribunal - Interest on refund claim - Held that:- On a specific query made to the applicant that under which Rule he is claiming interest, for which the applicant has failed to answer. In these circumstances, I hold that the adjudicating authority has implemented the order passed by this Tribunal dated 25.04.2013. Therefore, the application filed by the applicant deserves no merit - Decided against assessee.
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2014 (5) TMI 674
Classification – Refrigerator originating from Thailand - benefit of notification No. 85/04-Cus - assessing officer classified the goods under CTH 84181090 on the ground that the goods under importation were combined refrigerators-freezers, fitted with separate external doors and therefore, not eligible for the aforesaid exemption – Held that:- Following decision of assessee's own previous case [2012 (12) TMI 554 - CESTAT, MUMBAI] - goods under importation are classifiable under CTH 8418 10 90 and consequently the appellant is not eligible for the benefit of Notification No. 85/2004 - Decided against assessee.
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2014 (5) TMI 673
Redemption fine - Penalty - Restriction on import of Secondary/Defective HR Coils covered under CTH No. 7208 through the JNPT, Nhava Sheva - Revenue contends that Import Licensing Note 4 of Chapter 72 and the goods should also be accompanied by a pre-shipment certificate - Held that:- as per the Import Licencing Note 4 of Chapter 72, the import of the impugned items from Nhava Sheva Port is restricted but as per Public Notice No. 16/2004-09, dated 15-10-2004, the impugned items have been allowed to be imported from Nhava Sheva Port subject to compliance of certain conditions - The appellant has also complied with the conditions as per the Public Notice cited herein above by way of Pre-shipment Inspection Certificate dated 21-11-2010 and in the case of MTC Business Pvt. Ltd. (2011 (5) TMI 796 - CESTAT, MUMBAI) the import of melting scrap was allowed to be imported from Nhava Sheva Port. Therefore, the impugned goods are also entitled for import from Nhava Sheva subject to the fulfilment of the conditions mentioned in Public Notice No. 16/2004-09, dated 15-10-2004. - Redemption fine and penalty set aside - Decided in favour of assessee.
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Service Tax
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2014 (5) TMI 691
Denial of benefit of Notification No. 45/2010-S.T. dated 20.7.2010 - services relating to transmission and distribution of electricity - Held that:- Appellant is, prima facie, eligible for the benefit of notification cited by the appellant and the matter requires fresh consideration as regards the applicability of notification as well as re-quantification. Accordingly, the requirement of pre-deposit is waived and the appeal itself is taken up for final decision - both sides agree that the matter is required to be remanded to the original adjudicating authority to consider the issue whether the benefit of exemption Notification would be available in respect of the services rendered to Power Distribution Company and also the original authority can consider the issue of re-quantification claimed by the appellant. Accordingly, the matter is remanded to the original adjudicating authority to consider the issues afresh and pass an appropriate order in accordance with law after giving reasonable opportunity to the appellant to present their case - Decided in favour of assessee.
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2014 (5) TMI 690
Reversal of CENVAT Credit - Information Technology and Software service - Sponsorship service - Held that:- Since all the issues above have not been considered by the original adjudicating authority because they were not placed before him and the Commissioner (A) because he considered the same as additional evidence, we consider that the request made by the learned CA to remand the matter at this stage itself is reasonable. Accordingly, we consider the deposits already made by the appellant sufficient and set aside the impugned order and remand the matter to the original adjudicating authority for fresh consideration of all the issues that have been raised and that may be raised at the time of adjudication by the lower adjudicating authority - Decided in favour of assessee.
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2014 (5) TMI 689
Del Credre Agent - Market Research Agency - Lower appellate authority concluded that the services rendered by a Del Credre Agent does not merit classification as a Market Research Agency - Held that:- From the agreement entered into by the respondent with RIL, it is clear that the respondent has been appointed as Del Credere Agent and has undertaken the functions of a Del Credere Agent for which the commission has been paid. No doubt, the agreement includes a clause that at the request of the Principal, they shall also undertake market survey. However, from the facts recorded by the lower appellate authority, it is clear that the respondent has not undertaken any such activity even though the agreement provided for the same. Even otherwise, when a number of services are rendered, for the purpose of classification, the principal service which gives the essential character to the service has to be seen. From the documentary evidence available on record, it is seen that the essential character of the service is that of a Del Credere Agent which is classifiable under Business Auxiliary Service. Following decision of CST, Bangalore v. N.K. Agencies Pvt. Ltd. reported in [2010 (7) TMI 192 - KARNATAKA HIGH COURT] - Decided against Revenue.
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2014 (5) TMI 688
Waiver of pre-deposit - Cenvat credit - Chartered Accountant Services, Company Secretary Services, Convention Services and Share Transfer Agency Services - Held that:- these services are required by the appellant for smooth running of the business i.e. running of the refinery. appellant has made out a case for the waiver of pre-deposit of the amounts involved and accordingly the application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.
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2014 (5) TMI 687
CENVAT Credit - input services - authorized service station - GTA service, advertisement services, Insurance services, audit fee, Valuation charges, repair and maintenance, AC machine repairing, Courier service etc. - Held that:- The respondents are authorized dealer of M/s. FIAT India Pvt. Ltd. engaged in sale of cars and car parts and besides this, they are an authorized service station for servicing of motor vehicles, which is a taxable service. The services, in question, received by the respondent cannot be said to be exclusively used in or in relation to providing the output service, while they would be eligible for Cenvat credit only in respect of those services which are in or in relation to providing their output services of authorized service station. They would not be eligible for Cenvat credit in respect of the value of the services which have been received in connection with their trading activity. We find that this aspect has not been discussed in the impugned order. The impugned order is, therefore, set aside and the matter is remanded to the original adjudicating authority for fresh adjudication after verification as to what extent, the services, in question, have been used in or in relation to the providing of output services of authorized service station by the respondent and Cenvat credit would be available only to that extent. However, as regards the Commissioner (Appeals)’s order setting aside the penalty on the respondent under Section 76, since this is dispute regarding availment of Cenvat credit, penalty under Section 76 has called for, and the same has been correctly set aside. The Commissioner of Central Excise (Appeals)’s order setting aside the penalty under Section 76 is upheld. - Decided partly in favour of assessee.
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Central Excise
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2014 (5) TMI 683
Denial of refund claim - price variations - Whether appellant is entitled to the refund claims where lower duty is payable on the goods cleared at a price, when subsequently a lower price is settled due to price variations - Held that:- it is not shown that clearance of the goods was made on provisional basis. Once this is so, reduction of price at a later date could not be made foundation for seeking refund - The provisions of law are very clear to the effect that the assessment of duty is to be on the basis of transaction value as disclosed in the invoices issued at the time of clearance of goods unless there is suppression of correct value in the invoices. It is nobody s case that there was any suppression of the correct value. Clearance was on the basis of provisional price. As regards the provision of law, there is no concept called provisional price. In case there is any doubt about the price of the goods at the time of clearance, then it is the duty of the manufacturer to seek provisional assessment. The provisional assessment is different from the provisional price. Any arrangement between the parties in relation to the price of the goods cannot override the statutory provision. Once the law requires that duty should be paid based on the price disclosed in the invoice issued at the time of clearance of the goods, mere subsequent reduction in price on the basis of some understanding arrived at between the parties cannot affect the duty liability in terms of the price disclosed in the invoice. Only exception to this is in a case where the manufacturer collects additional price by issuing a supplementary invoice. There is no provision under the law for issuance of supplementary invoices reducing the price - Following decision of Mauria Udyog Ltd. Vs. Commissioner of Central Excise [2006 (8) TMI 49 - HIGH COURT OF PUNJAB & HARYANA (CHANDIGARH)] and Commissioner of Central Excise, Raipur Vs. Blastech (India) Pvt. Ltd. [2011 (8) TMI 873 - CESTAT, DELHI] - Therefore, refund claims of the appellants are not maintainable - Decided against assessee.
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2014 (5) TMI 682
Denial of refund claim - CENVAT Credit - Bar of limitation - non-supply of documents/ information by the appellant to the Revenue to ascertain appellant’s eligibility to refund claim under Rule 5 of the CENVAT Credit Rules, 2004 - Held that:- time-bar of one year will be applicable to the refunds filed under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification issued under this Rule - as per the provisions of the Rule 5 of CENVAT Credit Rules, 2004, refund of CENVAT credit taken on inputs/ input services used in the manufacture of export goods is only to be made. Therefore, the person claiming refund is bound to prove that a particular quantity of inputs/ input services involving CENVAT Credit have gone into the production of exported goods - on the basis of these documents Revenue cannot ascertain that particular quantities of various inputs/ input services involving particular amount of various duties/tax have been used in the export goods - at page 29 of the appeal papers, there is a detail of various duties involved in the refund claim of ₹ 4,74,415/-, but the supporting Annexures ‘A’, A1, and A2 are not there. Similarly, there are no such details on record before this bench in respect of refund claim - Decided against assessee.
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2014 (5) TMI 681
Waiver of pre deposit - Tribunal insisted on deposit of 20% of the penalty levied by the Commissioner in his Order-in-Original. - Clearances on principal to principal basis v/s job workers to principal basis - duty demand on differential value with interest & penalty - Duty evasion - activity of selling and exporting air-coolers under the brand name ‘Symphony’ - Mis declaration of goods - Tribunal demanded 10% duty as pre deposit - Held that:- neither of the two companies have either pleaded or proved any ground of financial hardship before the Tribunal. Even before us, no such case was made out - The order of the Tribunal does not suffer from any material illegality. At this stage, it is not necessary to examine the contentions of the petitioners finally. A mere fact that the petitioners have prima facie case and some arguable points would not be the ground for insisting on waiver of entire pre-deposit. It was the discretion of the Tribunal in terms of the statutory provisions of Section 35F of the Central Excise Act, 1944 to waive either full or partial pre-deposit requirement. The Tribunal to safeguard the interest of Revenue having imposed certain conditions which cannot be stated to be so onerous that the petitioners cannot weigh them, granted waiver of the pre-deposit. - However, time period to make pre deposit is extended - Decided partly in favour of assessee.
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2014 (5) TMI 680
Validity of Section 3 and 3A - Challenge to vires of Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that:- Section 3 and Section 3A are placed in Chapter III dealing with levy and collection of duty. Section 3 is about duties specified in the First & Second Schedule to the Central Excise Tariff Act, 1985 to be levied. Proviso to its sub-section 1 and its sub-section (1A) specifies that a duty of excise would be levied on all excisable goods which are produced or manufactured in India Section 3(1) itself permits mode & manner of levy as also collection to be decided by or through subordinate legislation when it states that “There shall be levied & collected in such manner as may be prescribed”. This Section 3A therefore severs the so called nexus of levy, which is essential according to petitioner, with quantity actually produced and subjects “deemed annual production” to levy. Even Rule 5 of 2008 Rules is about the quantity deemed to be produced. Recovery of duty in advance in this situation on deemed production in systematic manner does not offend & has no connection with Section 3. Legislature found it in public interest to subject notified goods to a different treatment & there is no challenge to this treatment or classification in S. 3-A. If any challenge to the legislative wisdom is possible & open, it is also not an issue presented before us. We are not called upon to consider validity of 2008 Rules in the light of S. 3A or then validity of S. 3A in any way, in above perspective under Central Excise Act, 1944. - Decided against assessee.
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2014 (5) TMI 679
Cenvat/Modvat Credit - Capital goods - Whether the Cenvat credit is admissible in respect of explosive, Ammonium Nitrate and Detonators, which are used in mines for blasting/fragmenting the solid lime rocks situated outside the factory - mines is situated far away from the factory i.e., 40 Kms - Held that:- Supreme court in the case of Vikram Cement Vs Commissioner of Central Excise, Indore reported in [2006 (2) TMI 1 - Supreme court] has held that, credit is eligible if the mines are captive mines so that they are integrated with the concerned cement factory. - Decided in favour of assessee.
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2014 (5) TMI 678
Valuation of goods - Inclusion of freight charges - Whether equalized freight separately charged to be included in the assessable value in case of sale on FOR destination basis for the period from July, 2000 to February, 2003 - Held that:- cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value even though cost of transportation has been calculated on average basis and not on actual basis. Same finding was reflected by the Tribunal in the case of Majestic Auto Ltd. cited [2003 (6) TMI 114 - CESTAT, NEW DELHI]. We have also perused board's circular wherein it has been stated that the deductions are permissible only for the actual cost so collected from his buyers - Decided against Revenue.
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CST, VAT & Sales Tax
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2014 (5) TMI 686
Levy of penalty – Whether the Tribunal was justified in passing order ignoring the inclusion of items in the Certificate of Registration immediately after passing the impugned order of assessment in accordance with G.O.Ms.No.61 CT & RE dated 24.01.1984 - Bona fide belief – Section 10(B) of CST Act - Held That:- Judgment in State of Tamil Nadu Vs. NU-Tread Tyres [2006 (7) TMI 578 - MADRAS HIGH COURT] followed - The use of the word "falsely" u/s 10(b) itself implies that the person making the representation knew that the certificate of registration does not cover that item, but knowing fully well that it is not, nevertheless contends that it is covered - What is required plainly u/s 10(B) is knowledge that the item is not covered by the certificate and the representation that it is covered by the certificate. The Revenue does not deny the fact that the items purchased by the assessee have a close link with the business activity of the assessee - The first Appellate Authority found out that the use of furnace oil, distribution pipes, copper cable, transformer and electrical goods are purchased to facilitate generating electricity and demineralising plant used in different processes have a bearing in the assessee's business - Therefore, read in the context of the enumerated Entries in the Registration Certificate and the items in question purchased established that assessee were under a bona fide impression that the enumerated Entries in the Registration Certificate would include the above items too - In view of instruction under Office letter D.Dis.Acts.Cell.IV/87729/84 dated 06.07.1984, that wherever a dealer had purchased goods on the basis of 'C' form without including them in the Certificate under the CST Act either inadvertently or out of ignorance, no penalty need be levied u/s 10-B - The assessee is entitled to succeed in this Tax Case Revision that in respect of enumerated items there can be no levy of penalty - However, aluminium sheets cannot be brought the enumerated entries, to contend that the assessee was under a bona fide belief that they would get included in the enumerated entries - In the circumstances, we reject the assessee's contention in respect of aluminium sheets - As far as the levy of penalty is concerned, we restrict the levy of penalty at 50% to purchase of aluminium sheets alone - Revision stands disposed of – Decided in partly in favour of assessee.
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2014 (5) TMI 685
Rate of Tax – Suppression of turnover - Exemption - Purchase of raw hides and skins from outside the State – Bogus claims - Furnishing of declaration forms - Amendment of Provisions – Hearing of Proceedings - "pending proceeding" – Interpretation of Statutes - Whether there had been any initiation of proceedings u/s 34 of the TNGST Act – Levy of penalty - Submission of incorrect or incomplete return - Section 12(3)(b) of TNGST Act – Held That:- Judgment in State of Tamil Nadu and another V. K.Damodarasamy Naidu & Bros and another [2007 (9) TMI 542 - MADRAS HIGH COURT] followed – The proceedings initiated on 31.3.1998, even though served subsequently, is a "pending proceeding" on the files of the Joint Commissioner – Given the fact that a decision was already taken and a notice had been signed by the Joint Commissioner on 31.3.1998 initiating revisional proceedings, applying the decision of this Court as to the meaning of the phrase 'pending', the proceedings of the Joint Commissioner are saved by the provision u/s 14 of the Amending Act 60 of 1997 - Section 14 of Act 60 of 1997 saves all actions in the present case as one falling u/s 14 of Act 60 of 1997. The mere fact that the turnover was drawn in the books of accounts, by itself, would not save the assessee from the operation of the provisions of Section 12(3)(b), which is concerned about the submission of incorrect or incomplete return - Thus going by the Explanation to Section 12(3)(b) of the Act, estimation of turnover and rejection of claim for exemption or concessional rate, which are subject to the furnishing of declaration forms, would not invite penal provisions and that actual suppressions alone would attract penal provision - Since the explanation to the said provision was inserted under Act 60 of 1997, effective only from 1.4.1998, the benefit of the same could not be extended to assessee herein - Thus, accounts maintained by the assessee is of relevance both on the aspect of the nature of transaction stated therein as well as to the turnover given therein for the purpose of understanding Section 12(3) of TNGST Act. The turnover of ₹ 49,06,107/- treated as local sales in the assessment, was considered by the Appellate Assistant Commissioner - On this, the turnover of ₹ 21,62,834/- was exempted as export turnover on the basis of the materials produced by the assessee - However, in respect of the balance of the turnover, AO pointed out that the assessee had created records that it had purchased raw hides and skins from outside the State - Thus, the Assessing Authority levied tax under TNGST Act. This Court do not find any justification to allow the Revision - However, the Joint Commissioner considered restoring the levy of penalty as given in the order, which means, the relief granted to the assessee on quantum assessment also was taken in for restoring the penalty - As far as the Revenue is concerned, the Appellate Assistant Commissioner's order, granting relief to the turnover of ₹ 36,36,259/-, was not the subject matter of revision - JC should have considered Section 12(3)(b)(i) of TNGST Act, as to the quantum of penalty payable by the assessee - In fairness to the claim of the assessee, the proper course herein would be to set aside the levy of penalty and thereby direct AO to quantify the penalty payable in respect of the turnover - Thus, AO shall re-fix the penalty in tune with the order of the Appellate Assistant Commissioner by granting relief to the assessee on the turnover of ₹ 36,36,259/-, and pass orders on the portion which was upheld by the Appellate Assistant Commissioner – Decided partly in favour of Assessee.
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2014 (5) TMI 684
Rate of Tax - Entitlement to concessional rate of tax u/s 3(3) of Tamil Nadu General Sales Tax Act, 1959 – Classification of – Interpretation of Statute - Held that:- A reading of Section 3(3) of the Act shows that it opens with a non-obstante clause, but subject to the provisions of Sub Section (1), concessional rate of tax at 3% is available to sale of any goods - There is nothing to read from Section 3(3) that the Legislature intended to restrict the applicability of the provision to the sale of only those goods falling under the First Schedule for the purpose of use in the manufacture of goods - A reading of Section 3(3) shows that the tax payable by a dealer in respect of sale of any goods including consumables, packing materials and labels other than capital goods for use in the manufacture and assembling, packing and labelling in connection with such manufacture for sale of the goods falling under the First Schedule other than the excluded goods, inside the State, would qualify for concessional levy. Going by Section 3(3), there is no hesitation in holding that the assessee is entitled to concessional rate of tax as given u/s 3(3) of the Act - The relevancy or otherwise of the Sixth Schedule, hence, loses its significance in the matter of considering the claim for concession - Even though timber was brought under the Sixth Schedule during the assessment year 1994-95, for the reasons already stated, such amendment does not stand in the way of considering the claim of the assessee; that even assuming for a moment that veneer is a timber falling under the Sixth Schedule, in the absence of any restriction to be read in the first part of Section 3(3) viz., 'in respect of sale of any goods', there is no hesitation in allowing the contention of the assessee – It is held that the goods dealt with by the assessee could not be called as timber - A mere look at the material produced before us shows that it is only a scrapped material which is under commercial parlance, called veneer to be used at the top of the plywood that had been sold by the assessee - Given the fact that the timber and veneer are commercially a different goods and that the entry in the Sixth Schedule contemplates "timber including sized timber, but excluding fire wood", the item dealt with by the assessee would not fall either under timber or sized timber - Revision stands allowed- Consequently, connected TCMP is closed – Decided in favour of assessee.
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