TMI Tax Updates - e-Newsletter
June 14, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax:
Garnishee notice issued for FDRs – Deposits yet to mature – non-compliance of the demand notice raised by the Department u/s 226 (3), revenue have rightly held that assessee is to be treated as an assessee in default - HC
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Income Tax:
The gross receipts having exceeded the stipulated monitory limit provided in the second proviso to section 2(15) of the Act, the assessee is not entitled to claim exemption in this year but that fact alone cannot make the Trust non-genuine for the purpose of invoking section 12AA(3) - AT
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Income Tax:
TDS u/s 194H - the nature of service provided by the assessee to the ultimate consumers/subscribers, whether it is prepaid or post-paid SIM card remains the same - TDS liable to be deducted - AT
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Income Tax:
When the assessee has violated the provisions of section 11 and 13 by giving concession to the persons, who are specified persons u/s 13(3), being so, assessee cannot be granted exemption u/s 11 - AT
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Income Tax:
Exemption u/s 11 - merely because the courses are not approved by the DG Shipping or merely because there is huge surplus in the non-approved courses than the approved courses cannot be a ground for denial of exemption u/s.11 - AT
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Customs:
Penalty u/s 114A and 114(iii) - only allegation against the appellants is that they have availed draw back claim wrongly - in the show-cause notice there is no proposal for confiscation of the goods - No penalty - AT
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Service Tax:
Service tax would not be chargeable on the amount charged for transportation, as even if this transportation within the mines is treated as GTA service provided by the appellant agency, the liability to pay service tax in respect of this activity would be of the service recipient - AT
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Service Tax:
Refund of unutilized cenvat credit - Export of services - lower Authorities mixed up the two issues - NTF 12/05-ST issued under Rule 5 of the Export of Service Rules, 2005, prescribing conditions to be fulfilled and the procedure to be followed for claiming rebate, has no application - AT
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Central Excise:
Valuation of goods - s.4(1)(b) of CEA, 1944 - Rule 6 of Valuation Rules, 2000 - value of remote control, smart card and software in the value of STB are includible - AT
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Central Excise:
CENVAT credit on capital goods - Appellant took the credit in September 2008 whereas the clearance of dutiable product started from March 2009. - at best, they can be asked to pay the interest which is applicable for the period from September 2008 to March 2009 - AT
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Central Excise:
CENVAT Credit - whether the service of procuring sales orders of cement through commission agents i.e. business auxiliary services being received by them is covered by definition of ‘input service’ - held yes - AT
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Central Excise:
Duty demand - Unaccounted receipts - Shortage in stock - Recovery of loose slips - there is no reason for discarding this evidence for the purpose of proving the allegation of duty evasion against the appellant - AT
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Central Excise:
Clandestine removal of goods - presumption - opinion of handwriting expert is a weak evidence which should be taken with caution and is not reliable unless supported by other independent evidence. - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2014 (6) TMI 378
Show cause notice for contempt of court – Notice against CA practicing in ITAT – Whether on the basis of reference made by only one member of the Division Bench of ITAT, proceedings for criminal contempt can be initiated under Section 15 (2) of the Contempt of Courts Act and whether any case for initiating criminal contempt proceedings against the opposite parties is made out - Held that:- Proceedings under the Contempt of Courts Act are quasi-criminal in nature - no action under the Act can be taken unless a clear case of criminal contempt is made out - at the cost of repetition we may state that the circumstances under which the contents of the representation dated 28.08.2012 were read by the opposite party are not difficult to understand - the language applied by the opposite party No.1 in his representation cannot be approved of - the grievance raised in the representation was in respect of a particular member of the ITAT not following the judicial precedence and thus not adhering to the accepted norms and principles of judicial discipline, the acts of opposite parties complained against in the reference would not constitute criminal contempt in its strict sense - notices issued against the opposite parties are liable to be discharged. The lawyers and other representatives of the litigants in the subordinate courts and Tribunals are expected to conduct themselves in a manner which protects the dignity and decorum of the judicial proceedings - the opposite party No.1 in his representation dated 28.08.2012 is not worthy of approval - It is the duty of lawyers to protect the dignity and decorum of the judiciary - If lawyers fail in their duty, the faith of the people in the judiciary will be undermined to a large extent - lawyers are the custodians of civilization - Lawyers have to discharge their duty with dignity, decorum and discipline.
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2014 (6) TMI 377
Grant of exemption u/s 10(23-C) (iiiad) of the Act – Held that:- CIT(A) as well as Tribunal rightly was of the view that the assessee had specifically raised the issue of Section 10(23C) (iiiad) and had placed on record the relevant and material facts including the objects of the trust, the allotment of land, the structure of a school building and the commencement of a school - assessee trust has taken various steps, including the construction of building and getting the necessary permission and sanction for running the school; so as to bring the school into "existence" during the year, although the school have separate running classes from next year onwards - total receipts of the assessee would remain below Rs. 1 Crore even if the donations of Rs. 49,99,000/- are added as receipt in the nature of income of the assessee society - the assessee trust is entitled for exemption u/s 10(23C)(iiiad) – thus, as such no substantial question of law arises for consideration – Decided against Revenue.
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2014 (6) TMI 376
Validity of notice u/s 148 of the Act - Mere change of opinion - Claim of exemption u/s 54B of the Act - Held that:- In the return filed by the assessee, the main claim was for exemption u/s 54B of the Act on sale of land – the proceeds of the sale of land was invested in purchase of another agricultural land - the details has been shown in the Statement of Total income attached with the Return of income filed - in the original assessment, the claim of the assessee for exemption u/s 54B of the Act was thoroughly scrutinized. Merely because during such scrutiny, the AO did not look at the angle of denying exemption on the ground that what the assessee sold was not an agricultural land, would not permit him to reopen the assessment for denying the claim on a new ground - any such exercise on his part would be a mere change of opinion as the claim which did not present any complex facts and which was virtually the sole claim made in the return filed and examined during the course of assessment proceedings, cannot now be revisited on a new ground which may have occurred to the AO - assessee had presented all facts before the AO and on the basis of the facts during the original assessment if he was of the opinion that the claim was not acceptable for any reasons, he would have expressed such opinion - to permit him to reopen the assessment to press in service a new ground for denying the claim would not be permissible – thus, the notice is set aside – Decided in favour of Assessee.
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2014 (6) TMI 375
Dividend income – Income from business or income from other sources – Interest on NPA to be brought to tax or not – Held that:- Following Commissioner of Income Tax & another vs. M/s.Canfin Homes Ltd. 2011 (8) TMI 178 - KARNATAKA HIGH COURT] - dividend income earned by the assessee during the current assessment year should be brought to tax under the head "income from business" and not under the specific provisions of Section 56(2) of the Act i.e., under the head "income from other sources" - the income from non-performing asset should be recognised only when it is actually received - Decided in favor of assessee. Allowability of expenses u/s 37 of the Act – Held that:- The AO shall take into consideration the judgments of the Supreme Court in Book Bond India vs. Commercial Tax Officer [1986 (9) TMI 2 - SUPREME Court] – the matter to be remitted back to the AO for fresh consideration – Decided partly in favour of Revenue.
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2014 (6) TMI 374
Stay application - Held that:- The assessee is directed to deposit a sum of Rs. 75 crores with the AO and shall also furnish a Bank Guarantee of any Nationalised Bank/Scheduled Bank for the difference of amount – revenue shall keep the Bank Guarantee alive till disposal of the appeals by the Tribunal, and for a period of 120 days as contemplated by Section 260A of the Act from the date of the decision of the appeals before the Tribunal – Decided partly in favour of Revenue.
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2014 (6) TMI 373
Garnishee notice issued for FDRs – Deposits yet to mature – Liability to pay for the proceeds – Held that:- There is no lockin period insofar as fixed deposit of the assessee is concerned - the period of fixed deposit is stipulated in the fixed deposit receipts, it does not prevent the depositor namely assessee to seek for premature withdrawal of the fixed deposit - he or she as the case may be has to forego the interest for the remaining period and also in view of the fact that the guidelines issued by the Reserve Bank of India enabling the depositors to withdraw the fixed deposit prematurely they can withdraw the amounts deposited by them prematurely – Relying upon VYSYA BANK LTD., VS. JOINT COMMISSIONER OF INCOME TAX AND ANOTHER [1999 (8) TMI 26 - KARNATAKA High Court] - jurisdiction to attach the fixed deposit by the Department and obligation of the Bank to make payment of the amount even before maturity of the fixed deposit receipts cannot be found fault with. The assessee did not file objection to the Garnishee notice issued u/s 226 (3)(1) by raising an objection as required u/s 226 (3) (vi) and for this precise reason and also for the reason that the assessee-Bank did not dispute the relationship between it and the assessees including Shivaganga Multi-purpose Co-operative Society Limited it enabled the Department to arrive at a conclusion that petitioner is to be treated as an assessee in default and accordingly an order came to be passed u/s 226 (3) (x) - the assessee does not dispute about deposits held by it on behalf of the assessee and the same being payable by the assessee to the assessee and non-compliance of the demand notice raised by the Department u/s 226 (3), revenue have rightly held that assessee is to be treated as an assessee in default - There is no infirmity in the order passed by the revenue calling for exercise of extra-ordinary jurisdiction - whatever the amounts that are held by the assessee either on behalf of the assesee or on behalf of M/s Shivaganga Multi-purpose Co-operative Society Limited ultimately payable to assessees would be the amounts payable by the assessee to the Department – Decided against Assessee.
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2014 (6) TMI 372
Non-allowability of deduction u/s 80IA of the Act – Held that:- This is not the claim which is made for the first time before the Tribunal – the FAA has followed the decision rendered by the Tribunal in the assessee’s own case with the understanding that the Tribunal has confirmed the disallowance of claim made u/s 80IA of the Act - the disallowance made u/s 80IA only in respect of the projects undertaken in the earlier years - the matter of claim for deduction u/s 80IA was restored back to the file of the CIT(A) for fresh examination – thus, the matter is liable to be remitted back to the CIT(A) for fresh consideration - Decided in favour of Assessee. Deletion of disallowance u/s 14A of the Act – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee has got sufficient interest free funds and the investments were made out of interest free funds only - there is no reason to interfere with the order passed by CIT(A) - the investments have been made out of interest free funds and further the investments continue in the year also – there is no reason to take a contradictory stand – thus, the order of the CIT(A) is upheld. Expenses claimed on repair of New Sand bins – Held that:- The AO has disallowed the claim on the reasoning that it was capital expenditure - the Sand bins were already in existence and they were in dilapidated condition - the assessee incurred above said expenses in repairing the Sand bins and it is in the nature of Current repairs - CIT(A) has accepted the contentions of the assessee by considering the facts and circumstances – thus, there was no reason to interfere in the order – Decided against Revenue.
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2014 (6) TMI 371
Transfer pricing adjustment - International transactions for software development services provided to AE – Determination of operating cost – Held that:- The cost of development of new product seems to be not on the assessee but on the AE - However, these contentions were neither examined nor commented upon by either of the revenue authorities - in the absence of any clarity on the issue, no finding could be given either to exclude the amount or include the amount as part of operating cost – the Revenue itself has excluded the earlier R & D expenditure from the computation of operating cost, assessee’s contention seems to be genuine, if such expenditure was R & D for development of future products – thus, the matter is liable to be remitted back to the TPO for fresh adjudication about the nature of expenditure incurred and why the amount was not categorised as R & D expenditure and whether any product was developed to which this expenditure was capitalized or claimed ‘as relating to’ in later years – also the issue of operating cost is also remitted back to the TPO - Decided in favour of Assessee. Selection of comparables – Functionally dissimilar – Employee cost filter – Held that:- Following Trilogy E-Business Software India (P.) Ltd. Versus Deputy Commissioner of Income-tax. Circle 12(4). Bangalore [2013 (1) TMI 672 - ITAT BANGALORE] - The 14 comparables are required to be excluded by the TPO – these Companies are directed to be excluded from the list of comparables as assessee turnover is only 2.18 crores and employee cost is more - Many of the companies are also found to be not functionally similar. The various filters and reasons accepted in other cases do apply to the assessee as TPO selected same 26 comparables in all the cases relied on and decided earlier in various cases - the mean PLI of the rest of the comparables selected by the TPO would come to 18.66% and this is within the margin as arrived at by the assessee after excluding the R&D cost – Decided in favour of Assessee.
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2014 (6) TMI 370
Deletion of penalty u/s 271(1)(c) of the Act – 15% disallowance of commission payment – Held that:- Following M/s. Transport Corporation of India Ltd. Versus Asstt. Commissioner of Income-tax [2013 (10) TMI 870 - ITAT HYDERABAD] - imposition of penalty u/s 271(1)(c) on disallowance sustained by ITAT being 15% on commission payment, has deleted the penalty by holding that such disallowance having been made on estimation and on the basis of material furnished by the assessee itself, there cannot be any concealment of income or furnishing of inaccurate particulars of income in terms of section 271(1)(c) of the Act - Disallowance out of commission payments sustained by the Tribunal is merely by estimation of the excess amount of expenditure which the assessee might have been claimed by the assessee - disallowance has been made on the basis of the material furnished by the assessee itself – also in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - every disallowance of an expenditure/exemption claimed by the assessee in the return cannot automatically lead to the conclusion that assessee has concealed the income or furnished inaccurate particulars of income – thus, the order of the CIT(A) is upheld – Decided against Assessee.
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2014 (6) TMI 369
Revision u/s 263 of the Act – Claim of exemption u/s 54F of the Act – Capital gain towards investment in purchase of residential house – Held that:- Relinquishing or extinguishing one’s right over a capital asset also amounts to transfer - assessee has not only entered into an agreement of sale for purchase of plot but has also paid an amount of Rs. 25 lakhs to the vendor - the assessee acquired right, though may be to a limited extent, over the property - when the assessee, as per terms of the MoU, gave up his claim over the property against consideration received, certainly it can be interpreted that the assessee has relinquished or extinguished his right over the property. The vendor would have agreed to settle the dispute by paying a huge amount of Rs. 1.5 crores for a pittance unless the assessee had acquired some right over the property. Considered in the aforesaid perspective, a view can be taken that there is a ‘transfer’ of capital asset within the purview of section 2(47) attracting capital gain and which view has been taken by the AO - when the AO has enquired into the matter, applied his mind to the materials on record and the view taken by him on the assessability of the receipt is one of the possible views, the assessment order passed by him cannot be considered to be erroneous and prejudicial to the interests of revenue - Only because the CIT considers the receipts as windfall gain and in his opinion such receipt has to be assessed as income from other sources, the assessment order cannot be held to be erroneous and prejudicial to the interests of revenue so as to empower the CIT to revise it u/s 263 of the Act - the exercise of power u/s 263 of the Act is not justified – Decided in favour of Assessee.
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2014 (6) TMI 368
Reduction of estimation on the offshore contracts - Adoption of domestic tax rate as against higher rate – Held that:- The burden of proof of India operations in the case of a non-resident were generally lie on the Revenue as it was contended that no part of the offshore contract was executed in India - CIT(A) elaborately discussed the legal principles and arrived at a correct conclusions vide para 11 that India Project Office is liable under the Income Tax and the DTAA between India and Italy only to the extent of profit attributable to the business operations carried out by the permanent establishment in India - This position does not change even if all the three contracts signed by the parent company are treated to be single or composite contract - The cables are manufactured outside India and procurement of cables outside India fall beyond purview and jurisdiction of the provisions of Income Tax Act. The offshore contract is only for procurement of cables that too outside India and the training provided in India is incidental to the contract No.1 i.e., offshore contract and further as there is no profit earned on training, no part of the income can be attributable to the PE – Relying upon ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. Versus DIRECTOR OF INCOME-TAX [2007 (1) TMI 91 - SUPREME COURT] - when under an offshore contract, equipment was found transferred outside India, necessarily taxable income also accrued outside India - no portion of such income was taxable in India – thus, the order of the CIT(A) in restriction of the addition to 1% of the total contract is set aside – Decided in favour of Assessee. Onshore contracts - Rejection of books of account u/s 145(3) of the Act – Held that:- CIT(A) came to correct conclusion that provisions of section 44BBB are not applicable to the assessee as work of India Project Office does not relate to any turnkey power project - he confirmed the action of the AO in invoking the provisions of section 145(3) on the reason of incorrect method of accounting and partly debiting the expenses of offshore contracts - Even though there seems to be merit in contentions, it is very difficult to examine them at this point of time in view of afflux of time – thus, estimation of income at 10% on the contracts relating to onshore supply and services is reasonable - ITAT is generally estimating incomes from 10 % to 12.5% in main contractors cases - assessee undertook on contract basis the estimation at 10% is reasonable – Decided against Assessee. Levy of interest u/s 234B, 234D of the Act – Held that:- Levy of interest u/s 234B and 234D are to be re-examined by the AO - once the amounts are covered by the TDS, question of levy of interest u/s 234B on non-payment of advance tax should not arise –Relying upon DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] – AO is directed to verify whether the income that has been taxed is covered by the provisions of TDS and if so, not to charge interest u/s 234B of the Act - Decided in favour of Assessee.
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2014 (6) TMI 367
Withdrawal/cancellation of registration u/s 12A/12AA of the Act – Charitable purpose or not - assessee trust is constituted on 27.7.2000 by the President of India acting through the Ministry of SSI and ARI - DIT(E) come to the conclusion that activities of the assessee trust were in the nature of trade, commerce or business etc and since its receipts are in excess of monetary limit laid down in the aforementioned proviso there is contravention of provisions of section 2(15) r.w. proviso which has come into effect from 2009-10. - Held that:- The first proviso to the provision (s.2(15)), it would be noted, does not impinge directly on the objects per se, but the manner in which those are to be attained or achieved, and herein lies the controversy or the dichotomy attending the respective view points of the assessee and the Revenue. The review of registration subsequent thereto, as spoken of by the tribunal in Mumbai Cricket Association [2012 (8) TMI 369 - ITAT MUMBAI], is only in terms of and subject to the mandate of section 12AA(3), and which thus would be of no assistance to the Revenue. - Decision in the case of Maharashtra Housing and Area Development Authority V/s ADIT(E) [2013 (11) TMI 516 - ITAT MUMBAI] and Rajasthan Housing Board Versus Commissioner of Income-tax, Jaipur-II [2012 (5) TMI 100 - ITAT JAIPUR] followed. Exemption u/s. 11 r/w s. 12 is to be, notwithstanding grant of registration, only by the Assessing Officer, whose powers in the matter of assessment are plenary, on the satisfaction of the condition/s of those sections. Exemption u/s. 11(1) is only upon the application of income for charitable purpose/s, so that it is only where so applied, reading the term 'charitable purpose' as per the extant law, that it could be allowed. The insertion of section 13(8) by the Finance Act, 2012 (w.e.f. 1.4.2009, i.e., A.Y. 2009-10 onwards), from which period the changed section 2(15) becomes operative, removes the matter beyond the pale of any doubt. The matter/issue of exemption u/s. 11 would thus have to be reviewed by the Assessing Officer in assessment on a year to year basis. The gross receipts having exceeded the stipulated monitory limit provided in the second proviso to section 2(15) of the Act, the assessee is not entitled to claim exemption in this year but that fact alone cannot make the Trust non-genuine for the purpose of invoking section 12AA(3) of the Act. – Relying upon - the registration has wrongly been withdrawn and the order passed by DIT(E) - decision of the Mumbai Bench of the Tribunal in the case of M/s Vanita Samaj [2014 (3) TMI 320 - ITAT MUMBAI] followed – Decided in favour of Assessee.
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2014 (6) TMI 366
Deletion disallowance u/s 14A of the Act – Held that:- The AO had made disallowance u/s. 14A of the Act r. w. Rule 8D(2)(iii) - But, he did not consider the fact that out of the investments made by the assessee most of the investments were of the category that would result in earning income where assessee will have to pay taxes - FAA has given a categorical finding of fact that income arising from the investments was taxable or would be taxable - the provisions of section 14A can be invoked only if an assessee claims expenditure with regard to exempt income - If any assessee pays taxes on particular item of income and claims corresponding expenditure, it cannot be disallowed – the order of the FAA is upheld – Decided against Revenue. Deletion of disallowance of Group advertisement expenses – Held that:- In the AY 2006-07, FAA had deleted the addition made by the AO on identical facts and the department had not agitated the matter before the Tribunal - the issue has attained finality as the AO had accepted the decision of the FAA - Till new and distinguishing facts are brought on record, order of the FAA has to be treated as final and conclusive – Decided against Revenue. Deletion of disallowance of Mutual Fund expenses – Held that:- Following ING Investment Management (India) Private Limited Versus The ACIT, Ward 10(1), Mumbai[2014 (6) TMI 353 - ITAT MUMBAI] - there is also no dispute on the genuineness of expenditure before the lower authorities – the enabling provision for debiting the expenses above 6% limitation provided under SEBI Rules is being considered - the relief granted by CIT(A) does not call for any interference – Decided against Revenue. Deletion of disallowance of foreign travel expenses – Held that:- Following ING Investment Management (India) Private Limited Versus The ACIT, Ward 10(1), Mumbai[ 2014 (6) TMI 353 - ITAT MUMBAI] - the CIT(A) observed that the disallowance made by the AO on account of foreign traveling expenses and expenses incidental to foreign travel are deleted in the facts and circumstances where no specific adverse material is not in possession of the AO – Decided against Revenue. Deletion of disallowance of information technologies expenses – Held that:- Following ING Investment Management (India) Private Limited Versus The ACIT, Ward 10(1), Mumbai[2014 (6) TMI 353 - ITAT MUMBAI] - the addition deserves deletion of such expenses in the year also considering the homology of the facts - Regarding other expenses, both the parties agreed that these expenses have to be examined by the AO and after examining the nature of the expenses and the business connectivity - there is no specific discussion appearing in the orders of the lower authorities - the orders of the lower authorities cannot be described as speaking order on each of grounds – thus, the AO is directed to allow the claim of assessee after due verification of the genuineness and business nexus and also in accordance with the provisions of section 37 of the Act –Decided in favour of Revenue. Expenses incurred of payment of office license fee – TDS not deducted – Held that:- The AO was of the view that the assessee had not been able to prove with any documentary evidences of the working that it was merely reimbursement and that it had paid only the cost incurred by the holding company, that the payment made to OTPL was in the nature of expenses covered by sec. 194C/ 194J of the Act, that the assessee should have deducted tax on sum paid to OTPL towards the license fee - the additional evidence submitted by the assessee has been already admitted - TDS certificate produced by the assessee needs fresh adjudication – thus the matter is required to be remitted back to the AO for adjudication – Decided in favour of Assessee.
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2014 (6) TMI 365
Addition of gift u/s 68 of the Act - Proof of bank extract not considered – Admission of additional evidence -Held that:- FAA was of the view that in order to prove the creditworthiness the assessee had made an attempt to prove the source of the drafts purchased, that evidence was not produced before AO and an additional evidence which could not be admitted unless assessee showed some reasonable cause for not submitting the same before the AO, that no situation had been brought before him - assessee contended that daughter of the assessee had gifted a sum of Rs.5.87 lakhs, that all necessary evidences were produced before the AO/FAA, that additional evidences produced by the assessee would through light on the genuineness and creditworthiness of the donor, that FAA had refused to admit additional evidences that were vital and had direct bearing on the outcome of the appeal - additional evidences produced by the assessee would have bearing on the outcome of the appeal - as the AO/FAA did not have benefit of these documents at the time of hearing – thus, the matter is required to be remitted back to the FAA for fresh adjudication – Decided partly in favour of Assessee.
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2014 (6) TMI 364
Deletion made u/s 54 of the Act - Investment in purchase of Jay Pee Greens flat Application of capital gains towards purchase of flat Essential criteria of purchase of property not actually taken place - Held that:- Following CIT Vs. R.L. Sood [1999 (9) TMI 27 - DELHI High Court] - where an assessee paid substantial amount in terms of purchase agreement for new residential flat within specified period it amounts to assessee s compliance for requirement of sec. 54 - Merely because the builder failed to hand over possession within specified period, assessee could not be denied benefit of benevolent provision of sec. 54 - the applicability of CBDT Circular no. 471 dated 15-10-1986 is upheld - the circular finds further reinforcement by issue of CBDT Circular no. 672 dated 16-2-1993 - the assessee invested entire amount of capital gains towards purchase of new property remains unquestionable, thus, the exemption is clearly allowable the investment in flat irrespective of the delivery of possession by builder has been held to be investment in purchase or construction of new flat Decided against Revenue. Benefit of cost of improvement Held that:- Following BB. Sarkar Versus Commissioner Of Income-Tax, West Bengal IV [1981 (5) TMI 21 - CALCUTTA High Court] - the investment incurred towards improvement of the new house purchased by the assessee to make it habitable would go towards amount invested for purchase of new asset Decided against Revenue.
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2014 (6) TMI 363
Determination of Arm’s Length Price - Royalty payment to AEs – Held that:- Following ACIT Cir. 5(1), New Delhi Versus M/s. Kehin Panalfa Ltd. [2014 (6) TMI 317 - ITAT DELHI] - the royalty was being paid from 1997 and was continuously examined by the AO, then in the absence of any new facts to hold that there was no need to pay the royalty was uncalled for - Decided in favour of Assessee. Disallowance of contribution to Group Gratuity Fund – Held that:- Following Commissioner of Income Tax vs. Textool Co. Ltd. [2009 (9) TMI 66 - SUPREME COURT] - from a bare reading of section 36(1)(v), it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees - the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the assessee’s employees gratuity fund, approved by the Commissioner - the conditions stipulated in section 36(1)(v) stood satisfied - assessee had made the payment to the LIC and the payments were made before the filing of the Income Tax Return – thus, the claim of the assessee is allowable – Decided in favour of Assessee. Accordingly, we set aside the order of the AO and decide the issue in favor of the assessee. Difference in the balance of one of the parties – Held that:- The AO has not given any opportunity to the assessee to file the reconciliation and the reconciliation filed before the DRP was not examined – thus, the matter is required to be remitted back to the AO for adjudication – Decided in favour of Assessee. Disallowance u/s 43B of the Act - Unutilised Modvat Credit Outstanding at the end of the year – Held that:- Following Eicher Motors Ltd. vs. Union of India [1999 (1) TMI 34 - SUPREME COURT OF INDIA] - the set off of excise duty against Modvat credit available to the assessee is to be treated as payment of excise duty at the time of set off – the amount of excise duty adjusted against the Modvat available before the due date of filing of income tax return has to be treated as payment made u/s. 43B and the same is allowable – thus, the matter is remitted back to the AO for examination of adjustments – Decided in favour of Assessee. Addition u/s 40A(2)(a) of the Act – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that there was no excessiveness or unreasonableness regarding this expenditure - AO has not brought any cogent material on record to come to a conclusion that this expenditure is excessive or unreasonable – Decided in favour of Assessee.
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2014 (6) TMI 362
Order passed u/s 201(1) or 201(1A) of the Act – Bar of limitation - Held that:- Following The ACIT Circle-15(2) (TDS), Hyderabad Versus M/s. Ushodaya Enterprises Ltd. [2014 (6) TMI 315 - ITAT HYDERABAD] – The order passed u/s 201(1) or 201(1A) cannot be held as barred by limitation if it is passed within 4 years from the end of the relevant AYs or 6 years as the case may be - the order passed u/s 201(1) and 201(1A) is not barred by limitation and the same is valid, therefore, to that extent the CIT(A) is not correct in annulling the order passed u/s 201(1) and 201(1A) of the Act - order u/s 201(1) is to be treated as an order of assessment as per section 2(8) assessment includes reassessment, then it becomes manifest that the time-limit for initiating and completing the proceedings under section 201(1) has to be at par with the time-limit available for initiating and completing the reassessment, more so when the scope of section 147 also ropes in the cases of assessment apart from reassessment - even though the orders are passed beyond four years from FY 2003-04 and 2004-05, but within six years from the relevant financial year –Decided against Assessee. Treatment of discount offered to distributors as commission - TDS not deducted u/s 194H of the Act - Held that:- Following Commissioner of Income Tax-XVII Versus Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] - the nature of service provided by the assessee to the ultimate consumers/subscribers, whether it is prepaid or post-paid SIM card remains the same. In the instant case, the SIM cards are prepaid, which are sold by the assessee to the consumers through the medium of PMAs - even if advance payment is made by the PMA on receipt of the SIM cards, qua those SIM cards, it does not amount to "sale" of goods - The purpose is to ensure that the payment is received in respect of those SIM cards, which are ultimately sold to the subscribers in as much as unsold SIM cards are to be returned to the assessee and the assessee is required to make payment against them - This is an antithesis of "sale" - There cannot be any such obligation to receive back the unsold stocks - Decided against Assessee. Assessee in default u/s 201 of the Act – No payment or credit of any sum to the distributors - Held that:- Following Commissioner of Income Tax-XVII Versus Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] - the supplementary commission which is the amount retained by the travel agent is commission within the meaning of s. 194H r/w Expln. (i) to the section - The assessee airlines were thus obliged to deduct tax at source at the rate prescribed during the relevant period - The assessee airlines having not deducted the tax at source, they are liable to be held, within the terms of s. 201(1) as assessee(s) in default and also liable for payment of interest in terms of s. 201(1A) of the Act. The argument that assessee has not paid or credited the amount does not hold good as there is constructive payment in this regard in the books of accounts – Relying upon Surjit Singh Versus Commissioner Of Income-Tax/Wealth-Tax And Another [1986 (3) TMI 48 - PUNJAB AND HARYANA High Court] - entries in the books of accounts are not determinative factor and real nature of transaction has to be considered – Decided against Assessee. Levy of interest u/s 201(1A) of the Act – Held that:- Assessee is liable to deduct TDS u/s 194H of the Act, thus, where the recipients of such income has paid taxes on their income, then the interest should be calculated only from the date on which such tax was deductible to the date on which such tax is actually paid by the recipient as advance tax/self-assessment tax or up to filing of return of income –thus, the AO is directed to work out the interest on the amount which are determined after verification from the date of tax deductible to the date of payment by the recipient following This ground is consequential to the directions of the CIT(A) to examine the tax payments, respectfully following the decision of M/s. Hindustan Coca Cola Beverage Pvt. Ltd Versus Commissioner of Income Tax [2007 (8) TMI 12 - SUPREME COURT OF INDIA] – Decided partly in favour of Assessee.
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2014 (6) TMI 361
Entitlement for exemption u/s 11 of the Act – No approval u/s 10(23C)(vi) of the Act – Requirement for registration u/s 12A of the Act – Held that:- To avail exemption u/s 11 of the Act, the only requirement is that the assessee should have obtained registration u/s 12A of the Act and there is no necessity to obtain approval u/s 10(23C) of the Act - the assessee duly granted registration u/s 12A of the IT Act and claimed exemption u/s 11 of the Act - AO cannot deny exemption on the reason that the assessee's case is not covered u/s 10(23C) of the IT Act and cannot thrust upon the assessee for particular deduction - assessee is having registration u/s 12A of the Act, it is entitled for exemption u/s 11, if the conditions required under this section is complied with – Relying upon CIT Vs. Bar Council of Maharastra, [1981 (4) TMI 8 - SUPREME Court] – thus, the order of the CIT(A) is upheld – Decided against Revenue. Denial of exemption u/s 11 of the Act - Benefit extended to specified persons as defined u/s 13(3) of the Act – Held that:- When the income of the assessee is applied for charitable purposes or religious purposes, the same is entitled for exemption u/s 11 of the Act provided that the money accumulated or set apart is invested or deposited in the forms or modes specified u/s 11(5) of the Act - Concession given the above persons falls foul of section 13(1)(c) of the Act - When the assessee has violated the provisions of section 11 and 13 of the Act by giving concession to the above persons, who are specified persons u/s 13(3) of the Act, being so, the assessee cannot be granted exemption u/s 11 of the Act - CIT(A) was not justified in bringing only the benefit given to the specified persons as income liable to tax - Relying upon T. Bapanaiah Vidyadharma Trust Vs. CIT, [1987 (1) TMI 52 - ANDHRA PRADESH High Court] - the only remedy is to disentitle the assessee in getting exemption u/s 11 of the Act – thus, the order of the CIT(A) is set aside and the AO is directed not to grant exemption u/s 11 of the Act to the assessee – Decided in favour of Revenue. Disallowance of depreciation – Held that:- Following Income-tax (Exemption) Versus M/s. Exhibition Society, Hyderabad [2014 (6) TMI 357 - ITAT HYDERABAD] – its claim under S.32(1) is eligible only in respect of business assets and where entire cost of the asset stands allowed by way of application of income under S.11(1), the depreciation claimed by the assessee under S.32(1) is not allowable as the trust is not undertaking any business activity. – thus, the AO is directed to verify in respect of each asset on which depreciation claimed, whether the value of such asset was in fact allowed u/s 11, and if it was so allowed, the depreciation would not be allowed in respect of such asset – thus, the matter is remitted back to the AO for adjudication – Decided in favour of Revenue.
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2014 (6) TMI 360
Addition of perquisites u/s 2(24)(iv) of the Act – Interest free loans – Held that:- M/s. Chennai Corporate Club Private Limited had not advanced the sum from borrowed funds - Following Asst. Commissioner of Income Tax Versus Shri M. Kangeyan [2014 (6) TMI 351 - ITAT CHENNAI] - CIT(A) rightly was of the view that the loan received by the assessee from the company in question was not interest-free loan, but it was interest bearing loan - no material could be brought on record by the Revenue to show that any interest expenditure was actually incurred by the company in question for or on behalf of the assessee - interest free money in the form of entrance fee and membership fee available with the company in question was more than the advance received by the assessee from the said company - the Revenue has admitted the fact, that the interest has actually been paid by the assessee in respect of amounts received from ‘CCCPL’ – thus, there was no reason to interfere with the order of the CIT(A) – Decided against Revenue.
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2014 (6) TMI 359
Entitlement for exemption u/s 11 of the Act – Imparting post-sea and pre-sea training – Scope of term Charitable purpose u/s 2(15) of the Act – Held that:- Following Dy. DIT(E) -I(2), Mumbai Versus M/s. Samudra Institute of Maritime Studies Trust[2014 (6) TMI 350 - ITAT MUMBAI] - the assessee is giving training in the area of Pre Sea and Post Sea to sea men - merely because the courses are not approved by the DG Shipping or merely because there is huge surplus in the non-approved courses than the approved courses cannot be a ground for denial of exemption u/s.11 as long as the Trust is imparting education as per the objects of the Trust – there was no error in the order of the CIT(A) in allowing the exemption u/s 11 of the Act – Decided against Revenue.
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2014 (6) TMI 358
Method of accounting of income in respect of DDBs/NCD - Use of Cash System instead of Mercantile system – hybrid method of accounting - Held that:- Following Smt Punitaben K. Patel, Shri Karsanbhai K. Patel, Shri Hiren K. Patel Versus ACIT, CC-1(1), Ahmedabad [2014 (6) TMI 352 - ITAT AHMEDABAD] - The method of accounting being followed by the assessee is cash and not mercantile - As per sub-section (1) of Section 145, the assessee can follow either cash or mercantile system of accounting regularly in respect of determination of income chargeable under the head 'profits & gains of the business and profession' or 'income from other sources' - the assessee can very much follow cash method of accounting for the purpose of declaring income in respect of DDBs/NCD if the assessee is regularly following cash method of accounting - No Board's circular can override the provisions of the Act and the Board's circular is not an accounting standard notified by the Central Government in the official gazette as required u/s 145(2) of the Income tax Act, 1961 to make out an exception in respect of Section 145(1) - the assessee is following cash method of accounting - the income of the assessee cannot be assessed on the basis of hybrid method of accounting by following mercantile method for assessing income in respect of DDBs/NCD and the remaining income on the basis of cash method of accounting – Decided against Revenue. Disallowance of LTCG – Held that:- No details are available on record with respect to the land like date of purchase its purchase price, its sale price and other relevant details required for the purpose of computation of capital gain - there is no finding on these aspects either by AO or CIT(A) – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Estimation of income from house property - Held that:- the CIT(A) held that in the absence of any substantive addition, the estimated addition on house property income cannot be accepted - during the course of assessment proceedings before A.O. the necessary details with respect to the house property was not furnished by the Assessee and therefore the AO proceeded to decide the matter on the basis of material available with him – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue.
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Customs
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2014 (6) TMI 381
Confiscation of gold - Ownership of gold seized - possessing 24 Gold Biscuits of foreign origin - Penalty - Held that:- gold seized upon examination by approved valuer proved to be of foreign origin with the purity written on the gold biscuits and all such biscuits valued in aggregate at Rs.12,03,724/-. Shri Dev Shankar Sharma categorically stated that no bills/invoices or documents in respect of the gold were given by Shri Dilip Ludwani to him. That also was not controverted by him at any point of time. This discards the plea of the bill number 1334 dated 21.04.2001 issued by M/s. M.P. Bullion owned by Shri Nachani. His evidence being consistently maintained and voluntary that cannot be discarded for no good reason shown. It may he stated that Sri Dev Shankar Sharma had not given statement before police. That was given before a customs officer under section 108 of customs Act 1962 which is good evidence as law is settled. In the course of hearing except creating doubts there was no substantive evidence adduced to prove that the gold seized was not of foreign origin nor it was proved that Shri Dilip Ludwani had imported those gold in accordance with Customs law. Shri Nachani failed to be owner of the gold since that was never been given by him to Shri Dev Shankar Sharma who was not required to deliver the same to M/s. Marudhar Jewellers. Revenue proved its case with cogent and credible evidence discharging its onus of proof bringing out that the gold biscuits seized were without any evidence of lawful import thereof. Shri Dilip Ludwani and Shri Nachani were not owner of the seized good as is held above. Similarly when Revenue tested the gold by approved valuer, the purity as well as the foreign origin of the gold was established. Customs authority seized the gold from Shri Dev Shankar Sharma only for the first time on 22.04.2001 under Customs Act 1961 without being a second seizure from the custody of police. There was no free import of gold allowed at the material time - Decided against assessee.
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2014 (6) TMI 380
Penalty u/s 114A and 114(iii) - Duty drawback claim - Held that:- On perusal of the show-cause notice, allegation against the appellants is that they have wrongly availed draw back claim. If an assessee is taken draw back claim wrongly, in that situation, it cannot be said that the assessee was having an intention to suppress the facts. Therefore, the facts of suppression are not proved as the show-cause notice itself alleges that draw back has been taken wrongly. as per the Section 114A of the Customs Act, 1962, penalty can be imposed on account of non-payment, short payment or erroneously refunded duty but in this case duty is not demanded. The only allegation against the appellants is that they have availed draw back claim wrongly. in the show-cause notice there is no proposal for confiscation of the impugned goods. Therefore, penalty under Section 114(iii) is not imposable - Decided in favour of assessee.
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2014 (6) TMI 379
Violation of principle of natural justice - No opportunity for cross examination - Whether there is violation of principles of natural justice by not allowing cross-examination of the members of the Expert Panel - Held that:- only when the denial of cross-examination prejudicially affects the right of defence, can it be said that the principle of natural justice has been violated. In the present case, the copy of the expert panel’s report has been given to the appellant. In fact, the appellant’s representative Shri R.R. Dhar was part of the expert panel, which examined the goods and submitted the report. Shri R.R. Dhar had exressed his reservations on the observation and conclusions drawn by the expert panel and had submitted detailed comments vide letter dated 8-3-2004. Thus, sufficient opportunity has been given to the appellant to make submissions against the findings of the expert panel. Therefore, it cannot be said that denial of cross-examination of the members of the expert panel has caused prejudice to the appellant in making their defence. Whether the counter given by Shri Dhar is sustainable and whether there is any other corroborative evidence sustaining the expert panel’s observations - Held that:- goods were never been in use in Belgium and the goods were refurbished before it was sent to the appellant-importer. If the goods were refurbished, the question of excessive wear and tear would not arise nor there could not be any rust due to exposure to open atmospheric condition. Further the foreign supplier himself says he is not sure whether some of the parts used for refurbishing is older or younger than 10 years. When the goods were refurbished and he is unsure to the age of the machine, how can the importer-appellant be sure of its age. Similarly, when old parts are refurbished, it is reasonable to presume that the parts used in refurbishing would be contemporaneous to refurbishing. If the year of the manufacture of crane is 1995 as claimed by the appellant and refurbished before shipping in 2003, the parts used for refurbishing would be of the later years. Denial of duty exemption contained in Notification No. 55/2003-Cus., dated 1-4-2003 - Mis declaration of goods - Held that:- order of the adjudicating authority denying the benefit of exemption is correct in law. Since the year of make of the machine has been misdeclared and also the provisions of EXIM Policy has been violated, the goods become liable for confiscation under Sections 111(d) & (m) of the Customs Act, 1962. Consequently, the confiscation of the imported goods with an option to redeem the same is sustainable in law and we hold accordingly. Once the goods are liable for confiscation, penal consequences automatically follow and, therefore, the imposition of fine on the goods and penalty on the appellant-importer is clearly sustainable. Whether the quantum of fine imposed is excessive or not - Held that:- The machinery is valued at Rs. 2.06 crore approximately and the fine imposed is only Rs. 40 lakhs. As per the guidelines contained in the Appraising Manual of the department, the fine shall be to the extent of 25% if the import of article is not banned. In the present case, the fine imposed is about 20% of the value of the goods, therefore, it cannot be said that the fine imposed is excessive. Further the appellant had claimed a concessional rate of 5% adv. as against the merit rate of 50.8%, the difference being about 45% of the value of the goods Whether the CHA is liable to penalty under Section 112(a) of the Act - Held that:- The CHA knew that the age of the machine has been misdeclared and a bogus certificate was obtained. In fact, it was the CHA who arranged for the false certificate. Therefore, he was party to the misdeclaration made by the appellant-importer which rendered the goods liable to confiscation. Accordingly, we hold that penalty on the CHA is warranted. However, considering the facts and circumstances of the case and also noting that the CHA’s role is relatively minor, the penalty on Mr. Rakesh Handa, Proprietor of the CHA firm M/s. Shobha Prompt Services is reduced from Rs. 3 lakhs to Rs. Fifty thousand only - Decided partly in favour of appellants.
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Service Tax
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2014 (6) TMI 393
Demand of service tax - Cargo Handling Service - work orders mention separate rates for transportation, tipper loading and wagon loading and according to the appellant, the invoices had been issued on this basis only. - Held that:- Since, the work orders prescribe separate rates for tipper loading that is loading of the coal/mineral ore into the tipper trucks, its transportation up to the railway siding and unloading of the coal/mineral ore into the railway wagons, the appellant s contracts with their clients has to be treated as separate contracts for transportation, loading and unloading of coal/mineral ores, though under one instrument. The coal/mineral ore loaded by the appellant at the coal/mineral ore heaps and thereafter unloaded into the wagons was meant for transportation to its destination by railways and, therefore, the same would have to be treated as ‘cargo’ and its loading into the tipper trucks and thereafter unloading into the railway wagons would have to be treated as cargo handling service. Since, in this case in the appellant's contracts with their clients, the activity of the loading of the coal/mineral ore into the tipper trucks and its subsequent unloading into the railway wagons for its transportation is clearly identified and separate rates are prescribed for the same, we hold that the service tax would be chargeable on the amount charged by the appellant for these services under Section 65 (105) (Zr) readwith Section 65 (23) of the Finance Act, 1994. - Decided against the assessee. However, service tax would not be chargeable on the amount charged for transportation, as even if this transportation within the mines is treated as GTA service provided by the appellant agency, the liability to pay service tax in respect of this activity would be of the service recipient - Matter remanded back - Decided in favour of assessee. Extended period of limitation - Held that:- non-payment of service tax has to be treated on account of bonafide belief of the appellant that their activity was not taxable and accordingly the longer limitation period under proviso to Section 73 (1) of the Finance Act, 1994 would not be available to the Department. - demand beyond the normal period of limitation set aside - Decided in favor of assessee. Levy of penalty - Held that:- during the period of dispute there were conflicting decisions by the Tribunal with regards to taxability of the appellants activity, it has to be held as the non-payment of service tax by the appellant was due to bonafide belief on the part of the appellant that their activity is not taxable. Therefore in view the provisions of Section 80 of the Finance Act, 1994, the penalty under Section 77 and 78 would have to be waived. - Penalty waived - Decided in favor of assessee.
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2014 (6) TMI 392
Simultaneous penalty - Penalty u/s 76 & 78 - whether penalty under section 76 & 78 of the Finance Act, 1994 for the period prior to 10.05.2008 can be imposed simultaneously on the assessee or not - Held that:- Both sides produced certain decisions of the Hon'ble High Court. As in the case of United Communication Udupi 2011 (10) TMI 163 - KARNATAKA HIGH COURT, the Hon'ble High Court held that the liability of penalties cannot be imposed under section 76 and 78 of the Finance Act, 1994 simultaneously. But in the case of Krishna Poduval 2005 (10) TMI 279 - Kerala High Court wherein the Hon'ble High Court of Kerala has held that penalty under section 76 & 78 of the Finance Act, 1994 can be imposed simultaneously and same view has been taken by the Hon'ble Delhi High Court in the case of Bajaj Travels Ltd. 2011 (8) TMI 423 - DELHI HIGH COURT - Matter referred to larger bench.
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2014 (6) TMI 391
Denial of Refund claim - Export of services - CENAVAT Credit - Notification No.5/06-CE(NT) dt. 14.03.06 - Non compliance with procedure prescribed under Notification No. 12/05-ST - Held that:- Refund claim, in question, is for refund of accumulated Cenvat Credit terms of Rule 5 of the Cenvat Credit Rules, 2004 for which the Notification No. 5/06-CE(NT), issued under this rule, prescribes the condition to be fulfilled and the procedure to be followed. The Notification No. 12/05-ST issued under Rule 5 of the Export of service Rules 2005, prescribes the conditions to be fulfill and procedure to be followed for claiming rebate in respect of export of services. The two schemes are totally different and the procedure prescribed and the conditions to be fulfilled for claim of cash refund of accumulated Cenvat Credit under Rule 5 of the Cenvat Credit Rules, 2004 and for claiming rebate in respect of export of services in term of Rule 5 of the Export of Service Rules, are totally different. The lower Authorities mixed up the two issues. In this case it was required to be seen as to whether the procedure prescribed under Notification No. 5/06-CE(NT), issued under Rule 5 of Cenvat Credit Rules, 2004 has been followed and the conditions prescribed in this Notification have been fulfilled. Notification No. 12/05-ST issued under Rule 5 of the Export of Service Rules, 2005, which prescribes the conditions to be fulfilled and the procedure to be followed for claiming rebate in respect of export of services, has no application. The impugned order is, therefore, set aside and the matter is remanded to the Assistant Commissioner for examining the refund claim under Rule 5 of the Cenvat Credit Rules, 2004 on the basis of the conditions and the procedure prescribed, in this regard in the Notification No.5/06-CE(NT) dt. 14.03.06 which is the correct Notification applicable to this case - Decided in favour of assessee.
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2014 (6) TMI 390
Refund, under Rule 5 of the Cenvat Credit Rules, 2004 - Rejection of the claim of refund to the extent of Rs. 1,24,27,580/- on the ground that no nexus was established between the input services and the output service - absence of registration - Held that:- Insofar as requirement of registration with the department as a condition precedent for claiming Cenvat credit is concerned, learned counsels appearing for both parties were unable to point out any provision in the Cenvat Credit Rules which impose such restriction. In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. Therefore, said finding recorded by the lower authorities cannot be sustained - Decided against Revenue. Demand of service tax - air ticket booking and professional charges - Held that:- air tickets were used by employees of the company in connection with the business of the company. Similarly, it is submitted that the professional charges were paid to Chartered Accountants in connection with the business of the company. Neither of the submissions is supported by any documentary evidence. The learned counsel for the assessee submits that, given an opportunity, the requisite evidence can be adduced before the original authority - Accordingly, the decision taken by the lower appellate authority in relation to these services is set aside and the question of nexus is directed to be re-examined by the original authority after giving the assessee a reasonable opportunity of adducing evidence and of being personally heard - Decided in favour of assessee.
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2014 (6) TMI 389
Penalty - Commissioner set aside penalty u/s 80 - Held that:- lower appellate authority has taken note of the fact that the appellants have paid the tax along with interest before issue of show cause notice and he has invoked the provisions of Section 73(3) of the Act which permits no further action to be taken once the assessees paid the tax with interest before issue of show cause notice - no infirmity in the impugned order passed by the lower appellate authority - Decided against Revenue.
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Central Excise
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2014 (6) TMI 388
Confiscation of goods - Mens rea - Clandestine removal of goods - Penalty - Whether ‘mens-rea’ is a pre-condition for confiscation of unaccounted exciseable goods under Rule 173Q (a), (b), (c) of erstwhile Central Excise Rules, 1944 and present Rule 25 (a), (b), (c) of Central Excise Rules, 2002 - Held that:- element of mens rea is normally required to be shown for imposition of penalty. - Department has failed to prove the element of mens rea for imposition of penalty. It has been so held by the Commissioner as well as the Tribunal that no case was made out to impose penalty. The finding recorded that no case was made out for imposition of penalty is not shown in any manner to be perverse - if there is no intention or suggestive of intention to remove the goods clandestinely, the same cannot be confiscated - decided in favour of assessee.
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2014 (6) TMI 387
Valuation of goods - s.4(1)(b) of CEA, 1944 - Rule 6 of Valuation Rules, 2000 - royalty/licence fee paid by Tata Sky to NDs for the download of the software by the appellant - Ehancement in valuation of goods - Revenue contends that STB manufactured and supplied by the appellant is sought to be enhanced in terms of the provisions of Rule 6 of the Central Excise Valuation Rules, 2000 - whether the cost of remote control supplied free of charge by the buyer can be added in the value of STBs supplied by the appellant to the buyer - Held that:- both the smart card (viewing card) and the software are an integral part of the STB manufactured and supplied by the appellant. From the statement of Sri. A.K. Mehrotra, Group Financial Controller, it is evident that the STB contains PCB boards and various electronic components which include integrated chips (IC). These ICs are first put on to the AP 600 programming machine from where the software is copied on to the IC and ICs are then fixed on the PCB board through surface mounting technology process. As per system integration agreement, the STB integration costs refer to the cost of development of the software, which is required to be supplied by the manufacturer. NDS assists the manufacturer to develop this software to be loaded on to the STB - subscriber access card is the key component of the conditional access system and it is an active security device of the STB and hence an integral part of the STB. Therefore, the cost of the same has to be included in the assessable value of the STB in terms of Rule 6 of the Central Excise Valuation Rules. Pre-loaded operating systems software in the Hard Disk Drive of the laptop forms an integral part of the laptop and therefore, the cost of such pre-loaded software forms part of the value of the laptop - cost of software which has been loaded on to the flash memory which in turn has been soldered onto the PCB of the STB forms an integral part of the STB and therefore, the value of the STB shall include the value of such software also. In these circumstances, we uphold the confirmation of duty demand against the appellant by including the value of remote control, smart card and software in the value of STB. Consequently, the appellant shall also be liable to interest on the said duty demand confirmed. - Decided against the assessee. Penalty under Rule 25 of the Central Excise Rules - whether the penalty should be imposed equal to the duty sought to be evaded or not - Held that:- No doubt, the assessee did not declare or reveal to the department the cost of items supplied free by the buyer and the non-inclusion of cost of such free supply in the assessable value of the STB manufactured and cleared by them. The appellant also did not inform or declare to the department the existence of various agreements relating to the design, manufacture and supply of the STB which could have supported its contention that it did not have any intention to evade payment of duty. Since the issue entailed interpretation of the provisions relating to valuation, in our considered view, imposition of penalty equal to the duty is not warranted. A penalty of (say) 5% of the differential duty demanded would suffice for contravention of the statutory provisions - Decided partly in favour of assessee.
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2014 (6) TMI 386
CENVAT credit on Capital goods - credit of additional customs duty - composite block making plant - shot blasting machine - Since CENVAT Credit was not admissible Assessee revered the credit - Refund claim filed for take back the credit - Revenue entertained a view that appellant was not eligible for CENVAT credit in respect of shot blasting machine which was part of the block making plant but was exclusively used for finishing the pavers manufactured by the appellants. The pavers manufactured by the appellants were exempt from payment of duty if more than 25% of furnace slag was used and the appellant was availing this benefit from March 2008 - Held that:- even though the machine is part and parcel of block making plant, its utility is basically for finishing pavers only. Therefore, it cannot be said that Department was wrong in entertaining a view that CENVAT credit in respect of shot blasting machine and the eligibility for the same can be considered separately. - Decided against the assessee. Regarding subsequent use in dutiable goods - Held that:- Appellant took the credit in September 2008 whereas the clearance of dutiable product started from March 2009. - at best, they can be asked to pay the interest which is applicable for the period from September 2008 to March 2009 when they started to manufacture goods which suffered duty. - Otherwise, the issue is covered by the decision of Hon’ble High Court of Gujarat in the case of CCE&C, Vadodara-II Vs. Gujarat Propack [2008 (9) TMI 170 - GUJARAT HIGH COURT] - assessee allowed to take back the credit - Decided partly in favor of assessee.
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2014 (6) TMI 385
Duty demand - CENVAT Credit - whether the service of procuring sales orders of cement through commission agents i.e. business auxiliary services being received by them is covered by definition of ‘input service’ or not - Held that:- while there is a direct judgement of Hon’ble Punjab & Harayana High Court in the case of Ambika Overseas (2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT), which is in favour of the appellant, there is another judgement of the Hon’ble Gujarat High Court in the case of Cadila Health Care Ltd. (2013 (1) TMI 304 - GUJARAT HIGH COURT), wherein in para 5.2, a contrary view has been taken and in that judgement, Hon’ble Gujarat High Court after discussing in detail, has held that the service of commission agent for procuring sales orders is neither covered by the expression ‘sales promotion’ nor by the expression ‘activities relating to business’. Hon’ble High Court in this judgement has observed that the term, ‘activities relating to business’ in the definition of ‘input service’ has to be interpreted on the basis of the activities mentioned after the words ‘such as’ following this expression and that the activities covered by this expression must be similar to the activities which are mentioned as illustrative activities and on this basis, Hon’ble High Court has given a finding that procuring sales orders through commission agents is not an activity, which is similar to the activities mentioned as illustration of the ‘activities relating to business’. Rule 2 (l) of Cenvat Credit Rules, 2004 was amended w.e.f. 1.4.2011 and by this amendment, the expression ‘activities related to business’ in the inclusive portion of the definition of ‘input service’ was excluded. However, the expression ‘advertisement or sales promotion’ was retained. The Board vide Circular No.943/4/2011-CX dated 29.4.2011 (S.No.5 of the Table) in respect of the question ‘Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression ‘activities related to business’ clarified as under The definition of ‘input service’ allows all credit on services used for clearance of final products upto the place of removal. Moreover, activity of sale promotion is specifically allowed and on many occasions, the remuneration for the same is linked to actual sale. Reading the provision harmoniously, it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis - service of commission agents (Business Auxiliary Service) is covered by the term ‘advertisement or sales promotion’. In my view, there is nothing in this circular which is contrary to the provisions of law and hence the same would be binding on the Departmental officers. Thus, in view of this circular also, though it is in respect of definition of ‘input service’ during period w.e.f. 1.4.2011, commission agents service would be cenvatable as the term ‘advertisement and sale promotion’ was there in the definition of input service even during period prior to 1.4.2011 - Decided in favour of assessee.
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2014 (6) TMI 384
Duty demand - Unaccounted receipts - Shortage in stock - Recovery of loose slips - Held that:- The duty demand of Rs. 2,83,703/- based on allegation of unaccounted receipt of 77.755 MTs of MS angles from S.S.Steel and their use in unaccounted manufacture and clearance of MS angles, the unaccounted receipt of this quantity of MS ingots mentioned in the paper slip had been accepted by Sh. Ranka in his statement. His subsequently plea that out of 77.755 MT of MS angles, 47.715 MT of ingots had actually received from M/s. Aggarwal Steel and is duly accounted for in Form-IV Register has been examined by the Commissioner (Appeals) and he has held that this plea is not acceptable on the ground that the value of the two consignments are different. - Thus the 77.755 MT of MS ingots mentioned in the paper slip as received from S.S.Steel had not been accounted for and hence duty demand of Rs, 2,82,703/- on the finished goods made out of these unaccounted ingots has been correctly upheld. The loose paper slips, in question, containing details of clearance of finished goods on 30.06.08 and details of receipt of MS ingots from S.S. Steel have been recovered from the factory premises of the appellant. Therefore in term of the provision of Sec 36A of the Central Excise Act, 1944, there shall be presumption about the truth of the contents of these paper slips and the burden is on the appellant to prove that their contents are false. In this case, Sh. Ranka, in his statement by explaining the entries in the paper slips has accepted the correctness of their contents. Therefore, there is no reason for discarding this evidence for the purpose of proving the allegation of duty evasion against the appellant - Once on the basis of the documents recovered from a manufacturer’s premises, unaccounted purchase of any of the principal raw-material or unaccounted sale of finished goods is clear, a presumption can be made of unaccounted manufacture and clearance of the finished goods without payment of duty and unless the manufacturer produces cogent and concrete evidence in his defense, the allegation of clandestine clearances of finished goods would be treated as proved and duty demand on this basis can be confirmed - duty demand and the penalty has been correctly upheld. - Decided against assessee.
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2014 (6) TMI 383
Demand of differential duty - Classification of goods - manufacture of Rolls, Pusher, Ejector, Speed Increaser, Roller Table, Cold Shear, Pinch Roll etc. and also parts of Rolling Mills. - Chapter Sub-heading 8455.10 or under Chapter Sub-heading 8455.90 of CETA, 1985 - Bar of limitation - It is alleged that the Appellant did not declare the manufactured goods as ‘parts’, but cleared the same declaring as ‘for use’ in the Rolling mills - Held that:- Appellants has not seriously disputed the classification of the aforesaid items under Chapter Sub-heading 8455.90 as ‘parts’, before us. Thus, following the decision of this Tribunal in Simplex Engg.& Foundry’s case (2004 (8) TMI 296 - CESTAT, NEW DELHI), we hold that the items in dispute merit classification under Chapter sub-heading 8455.90. - Decided against the assessee. Extended period of limitation - Held that:- There is no dispute that the declaration had been filed under Rule 173B of the erstwhile Central Excise Rules, 1944, and duly acknowledged by the Department. But, no action had been initiated against the Appellants for recovery of the differential duty due to wrong classification of the items mentioned in the said declaration within normal period as prescribed under Section 11A of Central Excise Act, 1944. There is no merit in the allegation of the Department that lesser duty had been paid by the Appellant resorting to suppression or mis-declaration of facts. - Following decision of Tata Iron & Steel Co. Ltd. Vs. Union of India & Others reported in [1988 (5) TMI 39 - SUPREME COURT OF INDIA] - demand beyond the normal period of limitation is not sustainable - Decided in favour of assessee.
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2014 (6) TMI 382
Clandestine removal of goods - presumption - proof by identification of handwriting or signature - evidential value of opinion of the Govt. handwriting expert - manufacture of ‘Shimla’ & ‘Vansh’ brand Gutkha, Pan Masala & Mouth Freshner which is sold in retail pouches - majority order - Held that:- opinion of handwriting expert is a weak evidence which should be taken with caution and is not reliable unless supported by other independent evidence. The allegation against the Respondent Company is sought to be proved by the opinion of the handwriting expert Sh. C.T. Sarwate, as Sh. Arvind Gupta of M/s. Hans Travels has not named Sh. Subhash Joshi and Sh. A.C. Upadhyay, the employees of the Respondent, as the persons who had taken delivery of the consignments of outer pouches in his presence and had signed the delivery sheets and neither anyone familiar with their signatures has identified the signature on the luggage delivery sheets nor they have accepted the signature on the luggage delivery sheets as their signatures. For testing the correctness of the opinion of Sh. Sarwate, his cross examination was necessary, as other handwriting expert Sh. A.N.Ganorkar has given a contrary opinion and both Sh. Subhash Joshi and Sh. A.C.Upadhyay have stated that signatures on the documents of M/s. Hans Travels are not their signatures. But cross examination of Sh. Sarwate was not possible on account of his death. Therefore, the opinion of Sh. C.T.Sarwate, by itself, has no evidentiary value and in view of the judgments of Apex Court, and various high courts, mentioned above it not even admissible as evidence. The allegation of un-accounted receipt of outer pouches for packing of retail pouches of Gutkha, Pan Masala and Mouth Freshner cannot be upheld, the presumption of un-accounted manufacture of retail pouches of Gutkha, Pan Masala and Mouth Freshner and their clearance without payment of duty, cannot be made and as such, the duty demand against the Respondent cannot be upheld. The Commissioner has dropped the duty demand only on the ground that merely on the basis of alleged receipt of outer pouches for packing retail pouches of Gutkha, Pan Masala & Mouth Freshner without any other evidence regarding procurement of other raw-materials like plastic lamination for retail pouches, Supari, Kattha, Tobacco etc. the duty demand is not sustainable. - for making such a presumption of fact under Section 114 of the Indian Evidence Act, which would shift the burden of proof to the assessee, there must be cogent and concrete evidence of the fact of un-accounted receipt of any one or more of the principal raw-materials or evidence of un-accounted consumption of the principal raw-materials which admittedly had been received. Merely on the basis of the fact that there was no production of Shimla 2-in-1 Pan Masala during Sept.01 to Dec.01 and during this period only 21,800 outer pouches for Shimla Gutkha had been used, it cannot be presumed that 52,800 outer pouches for Shimla Gutkha and 16000 outer pouches for 2-in-1 Shimla Pan Masala had been used in the manufacture of un-accounted Shimla Gutkha and Shimla 2-in-1 Pan Masala, which had been cleared clandestinely without payment of duty, as their consumption for accounted production during August 2001 has not been ruled out. - Decided against Revenue.
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