TMI Tax Updates - e-Newsletter
June 21, 2013

Case Laws in this Newsletter:

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

Articles

1. Form DP-1, Delhi Value Added Tax

   By: Shubham Garg

2. Rent is not keeping pace with inflation- a cause of serious concern

   By: DEVKUMAR KOTHARI

News

1. Disinvestment of 5 percent paid up equity in Neyveli Lignite Corporation Ltd.

2. Approval for two laning with paved shoulders of Uniara-Nainwa-Hindoli-Jahajpur-Shahpura-Gulabpura section of NH-148D in Rajasthan

3. Continuation of the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) in XII / XIII Plan

4. Facilitation of harmonious substitution of Concessionaire in the ongoing and completed National Highway Projects

5. CCEA approves mechanism for coal supply to power producers

6. Disinvestment of 5 percent paid up equity in Neyveli Lignite Corporation Ltd.

7. Request for Proposal (RFP) for Evaluation Study of Industrial Package of Incentives under North East Industrial Investment Promotion Policy (NEIIPP), 2007 for the States of NER (including Sikkim)

8. RBI Reference Rate for US $ and Euro

Notifications

Customs

1. 64/2013 - dated 20-6-2013 - Cus (NT)

Amends notification No. 92/2012- Customs (N.T.), dated the 4th October, 2012

Circulars / Instructions / Orders

FEMA

1. 112 - dated 20-6-2013

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

Highlights / Catch Notes

Income Tax

• Advance Against Depreciation Excluded from MAT Calculations u/s 115JB; Not Part of Income Stream.

  Case-Laws - AT : Advance Against Depreciation - MAT u/s 115JB - AAD is income received in advance - the amount did not enter the stream of income - clause (b) of the Explanation 1 is not applicable to AAD - AT
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• CIT's Power Limited to Necessary Inquiries for Section 12A Registration; No Need to Examine Income Nature or Application.

  Case-Laws - AT : Registration u/s 12A - The scope of power of CIT is limited in this regard to make enquiries as he may deem fit & not required to look either into the nature of income of the assessee or its application - AT
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• Section 251(2) ensures appellants can contest assessment increases or refund decreases before the Commissioner of Income Tax (Appeals).

  Case-Laws - AT : Section 251(2) requires that CIT(A) shall not enhance the assessment or a penalty or reduce the amount of refund unless the appellant had a reasonable opportunity of showing cause against such enhancement. - AT
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• CIT Uses Section 263 to Remand Case to AO for Reconsideration; No Prejudice to Assessee Found.

  Case-Laws - AT : Revisionary powers of Commissioner u/s 263 - contradictory statements - AO did not considered these statements - CIT has remanded back the matter to AO - no prejudice caused to the assessee - AT
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• Income Estimates in Best Judgment Assessments Require Reasonable Basis, Not Just Mathematical Formulas.

  Case-Laws - AT : Best judgement assessment - simply on mathematical formula income cannot be estimated. - one should have reasonable nexus to the available material and circumstances. - AT
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Customs

• Commissioner Allows Re-export of Ozone-depleting R22 Gas After Fine and Penalty Payment.

  Case-Laws - AT : Importe of R22 gas (an Ozone Depleting Substance) - The Commissioner rightly allowed re-export upon payment of redemption fine and penalty. - AT
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Service Tax

• Receipts from Plot Holders: Maintenance Charges or Lease Rentals? Service Tax Implications Discussed in Detail.

  Case-Laws - AT : Nature of receipt - wither in the nature of collection of the maintenance and service charges from the plot holder or of lease rental - prima facie case is not in favor of assessee - AT
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• Agents Can Settle Service Tax Liabilities on Behalf of Principals, Direct Involvement Not Required.

  Case-Laws - AT : Service Tax Liability - who is liable to discharge - service tax liability discharged through the agent is sufficient - AT
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• Stay Granted on 50% Service Tax: Transportation Services Prioritized Over Cargo Handling in Assessment.

  Case-Laws - AT : Cargo Handling or (GTA) service - In any transportation, loading and unloading is incidental and, therefore, the predominant and essential nature of service is transportation and not ‘Cargo Handling' - stay granted 50% - AT
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Central Excise

• Cenvat Credit on Capital Goods: No Full Duty Reversal Required After Eight Years of Use u/r 3(5.

  Case-Laws - AT : Cenvat credit - Removal of capital goods after use - Rule 3(5) - put to use for approximately eight years - the demand for reversal of entire duty is not justified. - AT
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• Cenvat Credit Disputes on Input Dutiability and Cost Inclusion Not Contestable During Final Product Manufacturing Stage.

  Case-Laws - AT : Cenvat Credit - questions like whether the input is dutiable, whether any element of cost is includable in the assessable value of the input etc. cannot be agitated at the end of manufacturer of the final product. - AT
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• SSI Exemption Confirmed for Manufacturers of Branded Goods Under Central Excise Laws: PP Caps Qualify for Benefits.

  Case-Laws - AT : SSI Exemption - manufacturing of printed/branded goods having the name of other brand owner - PP caps - exemption allowed - AT
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• Product Development and Consultancy Charges Excluded from Job Work Valuation Under Central Excise Rules.

  Case-Laws - AT : Valuation - Job Work - inclusion of product development charges and consultancy charges - any expense which is not attributable to the job work cannot be included in the cost of conversion - AT
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VAT

• Dyes and Chemicals in Cloth Processing: Consumed, Not Transferred, Impacting VAT and Sales Tax in Works Contracts.

  Case-Laws - HC : Works contract - dyes and chemical used in the bleaching, colouring and dyeing etc. on gray cloth are consumed in the process and not transferred. - HC
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Case Laws:

• Income Tax

• 2013 (6) TMI 481
  Reopening of assessment - Adoption of incorrect total turnover resulted in excess allowance of deduction u/s 80HHE entailing short levy of tax - CIT(A) quashed reassessment notice - Held that:- CIT (A) quashed the assessment order by allowing the appeal of the assessee not only on the issue of reopening have been barred by limitation but also on the issue of that reopening is based on change of opinion without giving any opportunity to the AO in this regard. The CIT(A) appeal has also not given any specific finding after investigating the facts whether there is failure on part of the assessee to make the return u/s 139 or in response to notice issued under (1) of section 142 or section 148 or there is failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment. Such specific finding could have been given after giving the opportunity to the AO, thus in the absence of such opportunity being given CIT(A) has acted against the principle of nature justice in reaching the conclusion that the reopening is barred by limitation. The clear cut finding of the CIT(A) is necessary. Assessee has taken the ground that the assessment has been made without issuing the notice under section 143(2) but the CIT(A) has not adjudicated this issue also. Thus set aside the order of the CIT(A) and restore this issue to the file of the CIT(A) to re adjudicate the issue afresh after giving the appropriate and reasonable opportunities to both the parties - in favour of revenue for statistical purposes.

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• 2013 (6) TMI 480
  Addition on account of gross profit rate by applying the provision of Section 145(3) - Held that:- Non-maintenance of proper stock register and production register as well as the records showing monthwise consumption of fuel and power is certainly the defects in the books of account maintained by the assessee and therefore, in our view the AO was justified in rejecting the books of account by invoking the provision of Section 145(3). Applying of higher gross profit rate - Held that:- In the case where the correct results of the activity of the assessee cannot be ascertained from the books of account due to certain defects then the only option left with the AO is to adopt the reasonable gross profit rate. In view of the facts and circumstances of the case, average gross profit rate for earlier years shall be taken as gross profit rate for the year under consideration instead of adopting the highest gross profit rate amongst earlier years. AO is directed to take average of gross profit rate of earlier years which was accepted by the Revenue. Disallowance u/s 40A(2)(b) - Held that:- Bank rate cannot be applied in the case of loan taken from related parties because of the reason that in case of bank loan, the assessee has to furnish guarantee as well as security whereas in the case of loan taken from related parties, the guarantee and physical security are not required. Accordingly, there is a difference in the rate of interest when the loan is taken without guarantee or security. Thus the interest on the loan taken from relatives which is without guarantee and security as against bank loan is always higher and therefore, the reasonable rate of interest in such a case is justified @ 18%. Accordingly direct the AO to apply the fair market rate of interest at 18% while applying the provision of Section 40A(2)(b). Disallowance of depreciation on subsidy account - CIT(A) has confirmed the addition made by the AO - Held that:- The subsidy was granted by the State Govt. to the assessee towards the eligible fix capital investment of the proposed unit of the assessee. Even otherwise, the calculation of the subsidy is based on the cost of the plant and machinery which clearly suggests that object and scheme of subsidy was to promote capital investment and accordingly the subsidy amount was dependent on the amount of investment made by the assessee in purchase of plant and machinery. Thus it is evident that there is a clear nexus between subsidy received by the assessee and investment made in the plant and machinery. Order of the CIT(A) is upheld on this issue. Disallowance on account of various expenses - Held that:- Since the assessee has not maintained proper records with respect to the expenses of telephone and usage of vehicle, therefore, the personal use of telephone as well as vehicle cannot be ruled out because the assessee is not having separate private vehicle. Further since certain expense are claimed to be made in cash and supported by self prepared vouchers, therefore, adhoc disallowance of 10% made by the authorities below on this account is also justified. Appeals of the assessee partly allowed.

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• 2013 (6) TMI 479
  Addition on account of gross profit rate by applying the provision of Section 145(3) - Held that:- As the assessee himself has accepted that books of account regarding trading account are not maintained properly and further there was discrepancies found in the closing stock. Further the assessee failed to furnish proper bills for purchases of stones and therefore, in the absence of verifiable documents for purchases of stones as well as proper maintenance of books of account and the discrepancies in the stock, AO has rightly invoked the provision of Section 145(3) - Against assessee. GP rate of 30.50% (as applied by the AO) as against 24.98% declared by the assessee - Held that:- When the assessee's own comparable gross profit rate accepted by the Revenue is available then in the facts and circumstances of the case, the average of earlier years gross profit rate would be reasonable and proper gross profit rate for the purpose of determining the income by applying the provision of Section 145(3) of the Act. Accordingly in our view the average gross profit rate for the assessment year 2006- 07 and 2007-08 which comes to 25.50% would be applied for the year under consideration - partly in favour of revenue. Accident related expenses disallowed - Held that:- As apparent from the reasoning given by the CIT(A) which manifests that when the expenditure on the repair of existing vehicle whether major or minor has to be treated as Revenue expenditure and not capital. Even otherwise, when the expenditure is incurred for the repair of the accidental vehicle, the same cannot be treated as capital nature. Accordingly, no reason to interfere with the order of CIT(A) whereby the said addition was directed to be deleted. Against revenue. Disallowance of expenditure for replacement of old and damaged body of trucks - Held that:- The replacement of body of the trucks is accumulated wear and tear expenditure and therefore, it does not fall under expression current repair in terms of Section 31 of the Act. However, since expenditure has been incurred for replacement of the parts of the truck which does not bring any new asset into the existence but only made the existing asset as fit for use in the business of the assessee. Therefore, the expenditure is allowable under the provision of Section 37(1). Disallowance of 20% of the car expenses and depreciation - Held that:- The assessee is an individual and it has not brought on record that he is maintaining separate private car for his personal use. Thus concur with the views of the authorities below that perusal use of the vehicle cannot be ruled out. Disallowance on account of diwali and office expenses for want of proper vouchers and personal element - Held that:- Though in principle when the assessee has failed to produce the relevant evidences in support of the claim of the expenditure, the disallowances made by the authorities below cannot be faulted with however, disallowance of 10% of the same would be reasonable and meet the ends of justice.

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• 2013 (6) TMI 478
  Deduction u/s 80IA - interest income received against late payment from customers - Held that:- This issue came up for consideration before various High Courts and it was pointed out that when the interest is received from delayed payment from customers then it would have direct nexus with such sale and would be eligible for deduction u/ s Chapter VI. As relying on Nirma Industries Ltd. Vs. CIT [2006 (2) TMI 92 - GUJARAT High Court] & PHATELA COTGIN INDUSTRIES P. LTD. VERSUS CIT [2007 (5) TMI 226 - PUNJAB AND HARYANA HIGH COURT] it becomes clear that when interest is received on account of delayed payments from customers then it would definitely constitute income from eligible business because such interest has direct nexus with the receipt from eligible business. Provision of leave encashment - whether an ascertained liability and therefore, need not to be added back to the book profits u/s 115 JB - Held that:- As relying on Bharat Earth Movers v CIT [2000 (8) TMI 4 - SUPREME Court] wherein the Court considering the issue where provision for leave encashment was allowable as admissible deduction referred to the another decision of Metal Box Company of India Ltd. V Their Workmen (1968 (8) TMI 53 - SUPREME Court). Thus the principles laid down in these cases show that the provision for leave encashment would constitute a liability and if the same has been determined on the basis of actuarial valuation then same cannot be considered as unascertained liability. Provision for staff incentive - whether unascertained liability or not? - Held that:- As no evidence has been filed before AO in respect of particular policy followed by the assessee- company in respect of staff incentive. The copy of scheme has also not been filed before us. However, at the same time the AO also rejected the issue summarily without asking for the scheme for incentive claimed from the assessee and the ld. CIT(A) has allowed the relief without examining the scheme. Therefore remand the matter back to the file of AO with a direction to re-examine the issue after obtaining the scheme of staff incentive from the assessee. Adjustments for working the book profit u/s 115 JB by adding Advance Against Depreciation to the book profits - Held that:- As the issue was decided in favour of the assessee by following the decision of case of National Hydro Electric Power Corporation V CIT [2010 (1) TMI 281 - SUPREME COURT] wherein held that AAD is income received in advance & since the amount of AAD is reduced from sales, there is no debit to the profit and loss account and the amount did not enter the stream of income for the purposes of determination of net profit at all. Hence clause (b) of the Explanation 1 is not applicable to AAD. The decision is directly on the issue of advance against depreciation and whether the same is required to be added u/ s 115 JB to the book profits & as decision of Hon'ble Supreme Court is the Law of land therefore bound to be followed. Sale of scrap from profits for the purpose of deduction u/s 80IA - Held that:- No force in the submissions of assessee because the CIT(A) has clearly observed that admittedly scrap was generated out of stores and from repair of plant and therefore, same cannot be said to have been generated during the process of manufacture. Further the decision of CIT V. Bicycle Wheels (2010 (10) TMI 496 - Punjab and Haryana High Court) as relied by assessee involves all together different issue i .e. whether sale of scrap should be included in the total turnover or not? But in the present case CIT(A) has observed that the scrap was not out of manufacture but only from stores and repairs of plants - against the assessee.

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• 2013 (6) TMI 477
  Registration u/s 12A denied - CIT rejected the registration as no charitable activities were carried on by the trust and further there were cash credits in each depositors' bank account from whom trust had obtained interest free loans - Held that:- The objects of the trust are imparting of education which is included under the definition of charitable object u/s 2(15) and CIT has not made any adverse findings to that effect. The trust has also been issued letter of intent for establishment of new technical institution vide letter dated 30.3.2009 issued by Al India council for Education. The trust is also in the process of constructing buildings on acquired land which is apparent from balance sheet dated 31.3.2009 which shows the value of work in progress at Rs.210.33 lakhs. Sub clause (a) & (b) of section 12AA makes it clear that the CIT has to satisfy himself about the genuineness of the activities of the trust and also about the objects of the trust. The scope of power of CIT is thus limited in this regard to make enquiries as he may deem fit & not required to look either into the nature of income of the assessee or its application if the object of the trust or institution falls within the definition of charitable purpose u/s 2(15). Also the assessee has submitted names and address of the persons along with their PAN numbers & addresses from whom unsecured loans were obtained and their statements on oath were also recorded by Addl. CIT. Therefore, for the reason that there was cash credit in the account of depositors before advancing loan to the assessee, registration u/s 12AA cannot be denied. In favour of assessee.

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• 2013 (6) TMI 476
  Jurisdiction power u/s 263 by CIT(A) - Commuted value of pension paid directly to the retired Employees paid by direct debit to the P&L A/c have been disallowed on account of the fact that it was not allowable as an expenses u/s. 37 (General Clause), Contribution to Pension Fund of Rs. 25 crores was made in violation to Rule 3 of Part 8 of IVth Schedule and Provision for gratuity payment was made being in violation of 40A(7)(a) - Held that:- As it was not shown that the AO did examine the issues pointed out by CIT and has taken a plausible view on them. Referring to the decision of Toyoto Motor Corporation (2008 (4) TMI 231 - DELHI HIGH COURT) wherein held that the proceedings before the AO are quasi judicial proceedings and a decision taken by the AO in this regard must be supported by reasons also being approved by the Hon'ble Supreme Court in(2008 (8) TMI 56 - SUPREME COURT) with the observation that AO should pass a reasoned order. These decisions clearly bring out that the assessment order should be passed with or contain proper reasons on various issues. In the instant case, admittedly, no discussion in the assessment order on the issues pointed out by CIT. Thus no infirmity in the revision order passed by CIT and accordingly upheld. Against assessee.

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• 2013 (6) TMI 475
  Direct expenses debited to P&L A/c disallowed - assessee contested against not been afforded a reasonable opportunity of showing cause against enhancement - disallowance of entire direct expenses - Held that:- As between issuance of notice of enhancement and passing of appellate order there was only a period of 15 days which is a very short period and assessee had stated on oath that they have not received notice for enhancement of income. Sub section (2) of section 251 requires that Commissioner (appeals) shall not enhance the assessment or a penalty or reduce the amount of refund unless the appellant had a reasonable opportunity of showing cause against such enhancement. In the present case, though notice of enhancement was given by CIT(A) but assessee has stated that it has not received the notice. Therefore, necessary opportunity was not given to the assessee, therefore case may be re-adjudicated by CIT(A).In favour of assessee for statistical purposes.

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• 2013 (6) TMI 474
  Revisionary powers of Commissioner u/s 263 - assessee questioned jurisdiction of CIT(A) to revise the assessment - AO initiated proceedings in the some cases of the Members of the AOP individually and the AOP by issuing notices u/s 148 - Held that:- As seen from the orders of the AO passed in the hands of the two members of AOP had clearly stated that the assessee has not given any information and in the ex-parte order u/s 144, brought to tax 1/5th of the amount in the respective hands, and the same was not done in the case of all the five members of the AOP, and this aspect was not examined by the AO in the hands of the firm at all. In fact, if one peruses the order of the AO, it is to be noticed that there is no mention of even the proceedings u/s 133A, nor there is any mention of submissions in this regard. The assessee's assessment has been completed simply accepting the commission at Rs.6 per sq. yard, without there being any discussion about the various advances paid by the AOP or enquiry about the sources thereof, etc., as rightly pointed out by the Commissioner. Also the explanation given by the assessee has not been correlated or examined. There is variation in the square yards sold in the respective years. In the orders of the AO in the hands of the members of the AOP dated 31.12.2008, it was mentioned that the assessee sold 284 plots (as against 216 stated in the firm's letter) and the total extent of land sold was 64,483 sq. yards (as against 63,076 sq. yards stated in the firm's letter) for the total amount. But there is no evidence on record nor enquired by the AO, about the source of the initial amount of Rs.32 lakhs has been paid. Even though the sale documents and date of sales were available, from whom exactly the initial advance was received was not on record. The details were neither enquired nor placed on record. As stated from the two statements one member on the day of survey (Shri G.Raji Reddy) stated that they have purchased the land and developed plots, whereas after six months, the other member submitted that they have not purchased the land, and development was done by the owners themselves, and they have only received commission. There is variation in the statements within a period of six months from the day of survey to the date of second statement. Absence of cash receipts for development charges by the owners also gives rise to a doubt whether the assessee undertook the development. These aspects were not at all enquired by the AO. Since there is no proper enquiry on various aspects and no findings by the AO about these, CIT has exercised the revisionary jurisdiction under S.263 correctly, by setting aside the orders of the Assessing Officer. Since the CIT has set aside the assessment for redoing the same afresh, there is no prejudice caused to the assessee, as held in the case of CIT V/s. Infosys Technologies Ltd.(No.2)(2012 (1) TMI 76 - KARNATAKA HIGH COURT). Against assessee.

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• 2013 (6) TMI 473
  Best judgement assessment, Addition towards the income from liquor business - Held that:- It is found that estimation made by the A.O. is based on mathematical formula and simply on mathematical formula income cannot be estimated. The A.O. made the addition of entire/gross sale whereas as decided in Manmohan Sadava vs. CITR, (2007 (10) TMI 246 - MADHYA PRADESH HIGH COURT) following CIT vs. Balchand Ajit Kumar (2003 (4) TMI 76 - MADHYA PRADESH High Court) entire sale proceeds of the assessee cannot be added to the income, only net profit is to be added. Thus, the A.O's finding is contrary to finding of judgement of Hon'ble M.P. High Court. The CIT(A) on one hand rejected the working of estimation of the A.O. and, on the other hand, he relied upon rejected working of the A.O and addition was sustained. Under the circumstances, both the orders of the A.O. and CIT(A) connote be sustained. As stated while making best judgement one should have reasonable nexus to the available material and circumstances. In the case under consideration, both A.O. and CIT(A) have ignored the past history of the assessee, thus on perusal of comparative chart, it is noticed that in the year under consideration the assessee has shown comparatively better result, as G.P. is 7.34% and not profit 2.13%. Thus it will be fair and just if addition to the extent of Rs. 20,00,000/- is sustained which will cover all deficiencies and lapses noticed by the A.O. and balance addition of Rs. 6,94,40,512/- (7,14,40,512 - 20,00,000) made by the A.O. is deleted. Thus, ground of the assessee's appeal are partly allowed. Estimation of agricultural income - in absence of evidence provided by assessee the A.O. taken 40% of the said amount of which calculation comes to Rs. 4,84,124/- and the same was treated as income from other sources - Held that:- Since the A.O. himself has accepted the agricultural income in A.Y. 2008-09 and to maintain consistency the A.O. should follow the same formula in the year under consideration as followed in A.Y. 2008-09 since the land holding and other facts are similar. Therefore, the A,O, is directed to calculate the agricultural income in accordance with the income determined in A.Y. 2008-09. In favour of assessee for statistical purposes Addition u/s 68 - It was submission of the assessee that considering the nature of business of the assessee, some time such loans are necessary and assessee has sufficient material to prove the same - Held that:- It will be appropriate to send back this issue to the file of A.O. with the direction to decide the issue afresh as complete facts of the issue has not been brought on record considering the business expediency and nature of business of the assessee. The A.O. may also consider the alternate contention of the AR for set off of addition, if any, against the addition sustained on account of profit as in the case under consideration which has been sustained at Rs. 20,00,000/-. The A.O. may decide the issue after providing reasonable opportunity of hearing to the assessee. In favour of assessee for statistical purposes.

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• 2013 (6) TMI 472
  Penalty u/s 271 (1) (c) - not including provision for doubtful debts and advances in the book profit u/s 115JB - CIT(A) deleted the addition - Held that:- Additions in the cases of assessee were confirmed due to retrospective amendment in the provisions of section 115JB and CIT (A) has very categorically made his findings and has deleted the penalties as per law. The reliance put by the DR on different case laws do not match with the facts and circumstances of present case as the present cases relates to calculation of profits u/s 15JB wherein the assessee had excluded provisions for diminution in the value of assets from profits u/s 115JB on the basis of judicial rulings which were in favour of assessee and, therefore, facts of the present cases are different from the facts and cases relied upon by = DR. No infirmity in the orders passed by the CIT (A). Therefore, the appeals filed by Revenue are dismissed.

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• Customs

• 2013 (6) TMI 471
  Evasion of payment of huge amount of customs duty - detention of goods - per unit value of the apples has been priced at U.S. Dollars 25 to 27, whereas in the agreement entered into between the foreign supplier and the petitioner shows the price of apples per unit is between 11 to 19 U.S. Dollars, in various grades and sizes - Held that:- As as the goods in question are perishable in nature provisional release of goods is to allowed with a condition for petitioner to pay 30% of the differential duty, and for the balance amount, the petitioner shall furnish a personal bond. On compliance of both the conditions, the respondents shall release the goods in question, forthwith. However it would be open to the respondents to pass final orders, on completion of the adjudication process, in respect of the payment of customs duty, liable to be paid by the petitioner, if any, and to initiate other appropriate proceedings against the petitioner, if he is found to have evaded payment of the customs duty, as alleged by the respondents, in accordance with the relevant provisions of law. The petitioner shall co-operate, fully, in the proceedings that may be initiated by the respondents, for the assessment of customs duty.

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• 2013 (6) TMI 470
  Re-determination of total value of import - enhancement of declared value from USD 1.70 per kg. (CIF) to USD 2.42 per kg. (CIF) of imported R22 gas (an Ozone Depleting Substance) a single Hydro Chloro Flouro Carbon compound (HCFC) classifiable under Tariff Heading 2903 49 10 - confiscation of entire goods and allowed to redeem the goods on payment of redemption fine of Rs. 10 lakhs for the purpose of re-export and also imposed penalty on the appellant-company and Directors of company accordingly - Held that:- Rule 10 of Ozone Depleting Substances (Regulation) Rules 2000 provides no person shall import or cause to import such ozone depleting substance unless he obtains licence issued by the authority. It is noted that R22 is a powerful greenhouse gas with a global warming potential 1810, and indicates that it is 1810 times as powerful as carbon-di-oxide, and this regulates as an additional environmental threat. In the present case, the appellant is a trader and imported R22 refrigerant gas without a licence and also not fulfilled the actual user condition and therefore, considering the larger environmental perspective, there is no need to accede the request of the appellant to release the goods for home consumption or ship stores. The attempt of the assessee that some item is available in the market and therefore this consignment R22 should be allowed for home consumption cannot be accepted. It is settled that the concept of equity cannot be pressed to commit another illegality. Also that the appellant took the plea before the Commissioner that they are able to procure the licence for import of R-22 but no licence was produced. The initial request of the appellant was to allow re-export which the adjudicating authority has allowed. Thus no merit in the appeals filed by the appellants. The Commissioner rightly allowed re-export upon payment of redemption fine and penalty. As Directors of the company and the appellant herein were involved for improper importation of goods and imposition of penalty under Section 112(a) of the customs Act, 1962 is justified. Accordingly, all the appeals filed by the appellants are dismissed and the adjudication order is upheld.

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• Service Tax

• 2013 (6) TMI 491
  Nature of receipt - wither in the nature of collection of the maintenance and service charges from the plot holder or of lease rental - Held that:- the issue involved in this case is contentious one and needs to be gone into detail as the findings recorded by the adjudicating authority indicate that the services rendered by the appellant and the amount charged annually, prima facie, may not be covered under the head 'lease rent'. At the same time, we find that the appellant is a Government of Gujarat undertaking as per Gujarat Industrial Development Act, 1962 and hence, prima facie, can also be considered as a public authority as envisaged by the Board in circular dt.18.12.2006. - prima facie case is not in favor of assessee - directed to make predeposit a token amount of Rs. 15 lakhs.

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• 2013 (6) TMI 490
  Service Tax Liability - who is liable to discharge - appellant submits that as per the definition under Section 65 (7) of the Finance Act, 1994 “assessee means a person liable to pay service tax and includes his agent”. As per the tripartite agreement, he has appointed three agencies as agents not only for the purpose of negotiating with the corporate for the services to be undertaken by him but also for the discharge of tax liability. Held that:- service tax liability discharged through the agent is sufficient - the assessee includes his agent and therefore, if the tax liability has been discharged by the agent on the service rendered by his principal, that is sufficient for discharge of service tax liability by the principal. Therefore, following the decision in the case of Ms.Katrina R Turcotte (2012 (12) TMI 579 - CESTAT MUMBAI), we allow this appeal with consequential relief, if any. - Decided in favor of assessee.

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• 2013 (6) TMI 489
  Cargo Handling or transportation (GTA) service - Stay - Extended period of limitation - computation of period for issuance of Show cause notice (SCN) - held that:- . In any case, demand for the period October 2008 to December 2009 is within the normal period of time. Further, time-bar is both a question of fact and question of law which can be considered only at the time of final disposal of the appeal. As regards, the contention of the appellant that the service rendered is ‘Cargo Handling' and not ‘transportation', we do not find any merit in this argument. The work order given by them to the transporters clearly indicates that it is for loading and transportation of clinkers and rate for transportation is far higher than that for loading. In any transportation, loading and unloading is incidental and, therefore, the predominant and essential nature of service is transportation and not ‘Cargo Handling'. - Prima facie case against the assessee - directed to make predeposit of 50% of demand.

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• 2013 (6) TMI 488
  Commercial construction activity - bulk of constructions undertaken are School buildings, Ayurvedic Medical Colleges and Engineering Colleges and so on. - on other commercial constructions the principal contractor has discharged the Service Tax liability - Held that:- From the above circular, it is clear that educational institution, government building etc. do not come under the category of ‘Commercial or Industrial Construction services'. Therefore, prima facie services rendered in respect of educations institutions would not come within the purview of tax liability and, therefore, the demand of Service Tax, in this regard, without verifying the nature of construction as certified by the local authorities, cannot sustain in law. Regarding other construction - matter remanded back - The appellant is also directed to co-operate with the department and submit all the documentary evidence with regard toe classification of the buildings they have constructed within a period of one month from the date of receipt of this order and thereafter, the adjudicating authority shall decide the matter in accordance with law after granting a reasonable opportunity of hearing to the appellant to make their submissions.

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• Central Excise

• 2013 (6) TMI 487
  Cenvat credit - Removal of capital goods after use - Rule 3(5) - reversal of credit on depreciated value - put to use for approximately eight years - Held that:- the issue is now settled by the Hon’ble High Court of Punjab & Haryana in the case of Raghav Alloys Ltd. [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] - the demand for reversal of entire duty is not justified. - Decided in favor of assessee.

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• 2013 (6) TMI 486
  Cenvat Credit - denial of CENVAT credit on certain input (printed aluminium foils) which was supplied DLL and received in the appellant’s factory and used in the manufacture of P or P medicaments during the period from December, 2005 to October, 2008. - The demand is on the ground that M/s. DLL did not undertake any manufacturing activity and hence should not have paid duty on printed aluminium foils and consequently credit of such duty was not admissible to the appellant. Held that:- Following the decision in Kwality Biscuits Limited vs. Commisisoner - [2005 (12) TMI 467 - CESTAT, BANGALORE], Indian Oil Corporation Limited vs. Commissioner - [2006 (5) TMI 400 - CESTAT, BANGALORE], Commissioner vs. MDS Switchgear Ltd. - [2008 (8) TMI 37 - SUPREME COURT], Commissioner vs. Hylite Cables - [2007 (2) TMI 409 - CESTAT, AHMEDABAD], etc. The ratio of these decisions is that any duty actually paid (whether or not payable) on input which has been received in the factory of the manufacturer of final product and used in or in relation to manufacture of the final product must be allowed as MODVAT/CENVAT credit to be utilized for payment of duty on the final product. It also emerges from the cited decisions that questions like whether the input is dutiable, whether any element of cost is includable in the assessable value of the input etc. cannot be agitated at the end of manufacturer of the final product. - Demand set aside - decided in favor of assessee.

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• 2013 (6) TMI 485
  Non compliance of predeposit - Commissioner (appeal) rejected the appeal - Held that:- we accept the offer made by ld. counsel i.e. 50% of the duty amount involved in this case and accordingly we direct the appellant firm to deposit 50% of the duty amount involved within eight weeks from today and report compliance on 09.5.12. - Since, the ld. first appellate authority has dismissed the appeals only for non-compliance of the said orders, we deem it fit to direct the appellant firm to report compliance of the pre-deposit of the said amount before the first appellate authority, who on such compliance being reported restore the appeals to their original numbers and pass an order on merits of the case after following the principles of natural justice.

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• 2013 (6) TMI 484
  SSI Exemption - manufacturing of printed/branded goods having the name of other brand owner - PP caps - Held that:- After examining the products and going through the notification, we find that the goods manufactured by the appellants are covered under Notification No. 47/2008 and the appellants are entitled for exemption under Notification No. 8/2003-C.E., dated 1-3-2003. - Decided in favor of assessee.

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• 2013 (6) TMI 483
  Valuation - Job Work - inclusion of product development charges and consultancy charges - assessee had taken into consideration the cost of raw materials + packing charges + conversion charges for valuation of the goods. - Held that:- The view taken by the learned Commissioner(Appeals) is that, as far as a job worker is concerned, any expense which is not attributable to the job work cannot be included in the cost of conversion and hence cannot be added to the assessable value. We are in full agreement with this view of the learned Commissioner (Appeals). - No demand on account of differential duty - decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2013 (6) TMI 482
  Works contract - dyes and chemicals which are used for washing of cloth - liability of tax on the goods which are consumed or used and the goods which are used and consumed - transfer of property in goods - textile processing - colouring, printing, bleaching, washing and dyeing of the gray cloth. In the case of Arviva Industries (I) Ltd.(2007 (1) TMI 6 - SUPREME COURT OF INDIA) Hon'ble the Supreme Court has held that circulars issued by the Central Board of Excise & Customs are binding upon the department and similar view has been taken in the case of Kurian Abraham (P) Ltd. (2008 (2) TMI 289 - SUPREME COURT) wherein the Hon'ble Supreme Court had held that the circular issued by the Board of Revenue under the Kerala General Sales Tax Act is binding on the department. It is amply clear that the State Government had decided the representation made by the Northern India Textile Processors Association and had come to the conclusion that dyes and chemical used in the bleaching, colouring and dyeing etc. on gray cloth are consumed in the process and not transferred. In our considered opinion, the said finding is binding upon the assessing authorities as the representation made by the Northern India Textile Processors Association was also decided by the said order. - Decided in favor of assessee.

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