TMI Tax Updates - e-Newsletter
July 6, 2013

Case Laws in this Newsletter:

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

Articles

1. PROVISIONS FOR CENVAT CREDIT ON CAPITAL GOODS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Credit Information Companies: Seeking New Frontiers (Inaugural address by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India at the Experian India Conclave 2013 organized in Mumbai on July 5, 2013)

2. Revenue Secretary Assures Trade and Industry Associations that their Concerns with Regard to Service Tax Voluntary Compliance Encouragement Scheme 2013 will be Duly Addressed

Notifications

Income Tax

1. 51/2013 - dated 4-7-2013 - IT

Income-tax (9th Amendment) Rules, 2013 - Insertion of Rule 6DDC AND FORM NO. 3BC

Circulars / Instructions / Orders

Income Tax

1. Instruction No. 03/2013 - dated 5-7-2013

Rectification of mistakes u/s 154 - Manner of disposal of application received for rectification of miskate

2. Instruction No. 04/2013 - dated 5-7-2013

Identification of Unserved Intimation under section 143 (1) for cases processed prior to 31-03-2010

Highlights / Catch Notes

Income Tax

• CIT's Section 263 Order Doesn't Prevent AO from Initiating Penalty Proceedings Based on Case Facts.

  Case-Laws - HC : Initiation of penalty proceedings - CIT u/s 263 ordered non initiation of penalty proceedings - it does not mean that the hands of the AO is tied on invoking the provisions under the Act, which, otherwise, would be applicable to the facts of the case - HC
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• High Court Denies Section 10B Tax Exemption for Training Fees in 100% Export Oriented Units and Software Technology Parks.

  Case-Laws - HC : Exemption u/s 10B - 100% EOU / STP unit - Receipt of training fees - not being one arising on account of manufacture or production of an article or thing, the benefit u/s 10B not allowed - HC
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• Court Rules Against Blind Application of CPWD Rates for Construction Costs; Factors Like Location and Materials Matter.

  Case-Laws - HC : Valuation - Considering the geographical location, the availability of work force and the cost of materials, CPWD rates can not be applied blindly for the purpose of arriving at the cost of construction - HC
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• High Court Rules No TDS u/s 194C for Postal Seals Contract, Deems It a Sale of Goods, Not Works Contract.

  Case-Laws - HC : TDS u/s 194C - nature of contract - sales of goods Vs. works contract - contract with the department of post and telegraph - manufactures postal seals and stamps - No TDS - HC
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• High Court Rules Filing Forms 15I and 15J with AO Valid Despite Procedural Error u/s 194C TDS Provisions.

  Case-Laws - HC : TDS u/s 194C - filing of form No.15I and 15J with the AO and not with the CIT - AO who had not doubted the payment of freight charges as non genuine - No addition - HC
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• Penalty u/s 271(1)(c) Dismissed: Agricultural Income Deemed Exempt, No Inaccurate or Concealed Income Details Found.

  Case-Laws - AT : Penalty u/s 271(1)(c) - when the income is exempt being agriculture income, allegation is that the assessee has either furnished inaccurate particulars or has concealed particulars of his income is wrong - AT
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• Court Rules TDS Not Required on Airline Ticket Amounts Remitted Post-Commission u/s 194C.

  Case-Laws - AT : TDS u/s 194C - Booking of airline tickets - agents of agent - deduction of TDS on amount remitted to main agent after deducting the amount of commission - decided in favor of assessee - AT
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• Donations to Kargil Fund, PM's Relief Fund, and Gujarat Relief Fund should be deductible under Chapter VI.

  Case-Laws - AT : Donation to Kargil fund, PM relief fund and Gujarat relief fund - AO should have allowed the said donations as deduction under Chapter VI for which the assessee is otherwise entitled to - AT
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• Section 271(1)(c) Penalty Not Applicable: Full Acceptance of Revised Income Declarations Post-Search Without Document Examination.

  Case-Laws - AT : Penalty u/s.271(1)(c) - If the additional income offered by the assessee in the revised return u/s.153A, after the search had been accepted in its entirety without detailed discussion of the seized documents, no penalty - AT
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Corporate Law

• Court Deems www.cokestudio.in Domain Name Adoption Dishonest, Violates COKE and COKE STUDIO Trademarks.

  Case-Laws - HC : Adoption and registration of the domain name www.cokestudio.in being identical to plaintiff No.1's registered trade marks COKE and COKE STUDIO is dishonest. - HC
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Service Tax

• High Court Condoned Filing Delay Due to Task Reshuffle and Advocate's Departure; Accepts Explanation as Sufficient.

  Case-Laws - HC : Condoning of delay - There was reshuffling of the tasks in the office. Learned advocate who was in-charge of this task had left the organisation - The delay was sufficiently described - delay condoned - HC
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• Merchant Banker's Activities Exempt from Service Tax under Business Auxiliary, Banking & Financial, and Support Services Categories.

  Case-Laws - AT : Merchant banker - taxability of various activities under the category of Business auxiliary services, Banking & Financial Services, Business support services - Held that not liable to service tax - AT
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• Court Rules Delivery Not Required to Transfer Right to Use Equipment; Stay Granted for Assessee in Tax Case.

  Case-Laws - AT : Supply of tangible goods for use - renting of earthmoving equipment - Delivery of goods is not condition precedent but the delivery may be one of the elements of the transaction for the transfer of the right to use goods - prima facie case in favor of assesse - stay granted. - AT
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• Hearing to be Reheld After Appellant Claims Lack of Notice, Costs Must Be Paid for Rehearing.

  Case-Laws - AT : Modification of stay order – the main contention of the appellant was that they had not received the notice hence they could not present at the hearing - matter to be reheard on payment of cost - AT
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Central Excise

• Commissioner (Appeals) erred by condoning petroleum product losses up to 1% without special circumstances.

  Case-Laws - CGOVT : Condonable limit for the petroleum products - losses upto 1% - Commissioner (A) erred in condoning losses upto 1% in the absence of any special circumstances for the same. - CGOVT
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• Remission Denied: Goods Lost Post-Removal Not Covered u/r 21 of Central Excise Rules 2002.

  Case-Laws - CGOVT : Remission under Rule 21 of the Central Excise Rules, 2002 – goods were removed from factory and loss had occurred after removal of goods. - No remission - CGOVT
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VAT

• High Court Overturns Tribunal's Decision on C Form Collusion; Penalty Against Petitioner Dismissed Due to Lack of Evidence.

  Case-Laws - HC : Penalty - Whether the Tribunal is correct in concluding that the petitioner has colluded with the buyers and obtained C forms to avail the concessional rate - held No - HC
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Case Laws:

• Income Tax

• 2013 (7) TMI 148
  Initiation of penalty proceedings - CIT u/s 263 ordered non initiation of penalty proceedings - Held that:- although in the revisional Order, he pointed out that a non initiation of penalty proceedings did not warrant any interference, but that does not mean that the hands of the Assessing Officer is tied on invoking the provisions under the Act, which, otherwise, would be applicable to the facts of the case - if the provisions of the Act on penalty are attracted, the Assessing Officer has to go by the dictates of the law rather than by the order of the Commissioner of Income Tax - Decided in favour of Revenue. Penalty u/s 271(1)(c) - Concealment of income - Held that:- claim for bill discounting for both assessment years was found to be totally untrue, as there was no physical movement of goods - claim for depreciation was also found as a bogus claim - in the garb of the bona fide claim, the assessee cannot escape levy of penalty Following decision of Commissioner of Income Tax Vs. Zoom Communication P. Ltd. [2010 (5) TMI 34 - DELHI HIGH COURT] and Union of India Vs. Rajasthan Spg. & Wvg. Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA].

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• 2013 (7) TMI 147
  Exemption u/s 10B - 100% EOU / STP unit - Receipt of training fees - Held that:- exemption considered under Section 10B is related only to those undertakings which are engaged in the manufacture or production of any article or thing and has relevance to the receipts which are out of the activities relating to the profits and gains arising from the manufacture or production of an article or thing - benefit under Section 10B is referable not only with reference to the approved undertaking, but it must also be with reference to profits and gains derived from the export oriented unit fulfilling the conditions specified in the Section - receipt is related to a fee charged by it, on the training of professionals who are admittedly not its employees and that the profits and gains not being one arising on account of manufacture or production of an article or thing, the benefit under Section 10B can have no relevance at all - Decided in favour of Revenue. Benefit under STP scheme - Tribunal rejected - Held that:- Training is given to the graduates/professionals who are not employees, who are not, in any way, associated with the business of the assessee in the matter of production and manufacture of an article or thing, and the receipts not being profits and gains derived by the undertaking in the manufacture or production of article or thing, we do not find any justifiable ground to confer benefit of the provision based on the policy decision taken either under the customs enactment, or for that matter, under the Software Technology Park Scheme. - Decided against the assessee.

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• 2013 (7) TMI 146
  Valuation of Shopping cum residential complex - Addition in construction costs - Difference between CPWD rate and state PWD rate - Held that:- construction of the shopping and residential complex is in Coimbatore, which is not a small town, but a Corporation - Assessing Officer partially agreed with the assessee and allowed the valuation at 10% instead of 7.5%, towards supervision charges. The Assessing Officer also accepted the contention that water connection was already existing; apart from that, certain other concessions were given. However, the basis of valuation as regards the cost of construction, nevertheless, was that of the District Valuation Officer, adopting CPWD rates. It is not denied by the Revenue that there is a variation between the CPWD rates and the State PWD rates. Considering the geographical location, the availability of work force and the cost of materials, unless there are similarities in the rates under CPWD and the State PWD, we do not think, we can blindly go by CPWD rates for the purpose of arriving at the cost of construction - Assessing Officer directed to work out ost of construction, to be distributed in assessment years 1997-98 and 1998-99 by taking State PWD rates - Decided in favour of revenue.

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• 2013 (7) TMI 145
  Waiver of interest u/s 234A and 234B - CBDT rejected waiver - CBDT appraised that relief as the powers of the Board are now delegated to Chief Commissioner of Income Tax of the area - Held that:- Complaint of the assessee requesting for waiver of interest under Section 234-B of the Income Tax Act had not received due consideration - Court itself observed that assessee can approach the Central Board of Direct Taxes for the matter - Apprehension of the assessee is that even if the appellant/writ petitioner should approach the Chief Commissioner of Income Tax in the light of the earlier order passed by the Chief Commissioner of Income Tax, he may not yet again look into the matter - Chief Commissioner of Income Tax directed to reconsider the matter and to pass orders on merits giving reasons.

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• 2013 (7) TMI 144
  Provision of warranty and Rectification expenses - unascertained liabilities - assessee had made provision for liquidated damages under two heads viz., one towards delay in delivery and other towards non performance. - The rectification expenses is mainly for repairs and replacements - Deduction u/s 37 - Held that:- provision is recognised when an enterprise has a present obligation as a result of a past event; that it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made on the amount of the obligation. If these conditions are not met, no provision could be recognized. - when the company made reliable estimate based on the performance capacity and the quality therein and the materials relating thereto, we do not find any justifiable ground to reject the plea of the assesee on the provision made. - Decided in favor of assessee. Commissioner of Income Tax (Appeals) committed an error in his finding on the ground that the amount claimed in the nature of warranty was not stated so, but described as provision towards the liquidity damages. We do not find that the description of the claim would govern the claim on the provision for warranty when the terms of the agreement specifically provided that the liquidated damages was for non performance. Given the above fact, one can not reject the claim for provision made towards the warranty on the performance of the machineries supplied - Following the decision of ROTORK CONTROLS INDIA P. LTD v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - Decided in favour of assessee. Regarding rectification expenses - Held that:- it was stated that the said provision was based on the information that some of the equipments supplied by the company required repair and replacement and that technical team estimated such expenses for making provision in the account. The claim thus based on materials and the information of the technical team - Deduction allowed - Decided in favor of assessee.

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• 2013 (7) TMI 143
  Deduction u/s 80HH, 80-I and 80-IA - interest on the fixed deposit - Profits and gains derived from any business of an industrial undertaking - Held that:- there is hardly any doubt about the sweep of expression “profits and gains derived from any business of an industrial undertaking” referred to in sub-section (4) - if the profit is linked or having nexus with the business, as in the present case, because of the pre-condition of the business activity to keep margin money in fixed deposit, which, in turn, derives interest is also covered by Section 80IA, cannot be countenanced. For, it cannot be treated as first source income, which is the quintessence for attracting the benefit and incentive provided under Section 80IA of the Act - Following decision of Liberty India vs. Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] and CIT vs. Shahi Export House [2010 (8) TMI 785 - DELHI HIGH COURT] - Decided in favour of revenue.

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• 2013 (7) TMI 142
  TDS u/s 194C - nature of contract - sales of goods versus works contract - contract with the department of post and telegraph - manufactures postal seals and stamps - Held that:- A bare perusal of the order passed by Income Tax Commissioner (TDS), Aligarh shows that there is no application of mind in this regard - Said question is not germane to the controversy in issue. Para 7(vi) (b) of the circular merely clarifies that in case of simple contract relating to "sale of goods", section 194 C will not apply - agreement between the petitioner and the postal department is a simple contract for sale of goods then the provision of section 194-C will have no application - Following decision of Associated Cement Co. Ltd Vs. CIT [1993 (3) TMI 1 - SUPREME Court] - Decided in favour of assessee.

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• 2013 (7) TMI 141
  TDS u/s 194C - filing of form No.15I and 15J with the AO and not with the CIT - freight charges paid to small truck onwers - disallowance u/s 40(a)(ia) - Held that:- assessee is a transporter who had taken services of various small truck owners and freight charges were paid to them without deduction the TDS u/s.194C - The form no. 15-J has been submitted by the appellant in CIT-II Baroda office - during the course of assessment proceeding the appellant filed a copy of 15-J certificate to the Assessing Officer who had not doubted in payments of freight charges as non-genuine - Tribunal has recorded that during the course of the assessment proceedings, appellant had filed copy of 15-J form with the Assessing Officer who had not doubted the payment of freight charges as non genuine - Tribunal committed no error in holding that disallowance under section 40(a)(ia) was not justified - Decided in favour of Assessee.

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• 2013 (7) TMI 140
  Income escaping assessment u/s 147 - Validity of notice of re-opening - Held that:- Any notice of the reopening issued under Section 148 would be required to be tested at the touchstone of the reasons recorded by the Assessing Officer, as could be noticed from the record itself, the very basis on which the revenue has sought to reopen the assessment is not found cannot be sustainable - Correct to say from the reasons recorded by the Assessing Officer alone that these proceedings under Section 147 and the notice issued under Section 148 cannot be permitted to be sustained - Tribunal having annulled the proceedings of the reassessment had rightly chosen not to enter into any further questions proposed before it - Decided in favour of assessee.

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• 2013 (7) TMI 139
  Penalty u/s 271(1)(c) - assessee alleged for furnishing of inaccurate particulars of Income - whether a mere fact of not going in appeal to buy peace against addition made by AO in his order u/s 153A can lead to inference that there has been a concealment of income - Held that:- Assessee filed details pertaining to the proceed received on sale of agricultural land situation at village Raja Sansi, District Amritsar and appended the detail to the return of income in the assessment year under consideration. Notes no. 2 and 3 mentioned in the statement of taxable income clearly shows that the assessee has furnished particulars of receipts from sale of agricultural land and also claimed exemption thereon u/s 2(14)(iii). Coming to the issue of late deposit of the amount to the bank, AO has not controverted the statement of the assessee that this amount was deposited to the bank account of the assessee Shri Gurpal Singh after a lapse of time during the year under consideration and this fact came to the knowledge of the assessee when he checked the bank pass book and accounts submitted by his power of attorney S. Gurpal Singh. It is not in dispute that the amount so received from proceed of sale of agricultural land was exempted and AO also accepted the claim of the assessee for exemption u/s 2(14)(iii). In this situation unable to accept this contention of the authorities that the assessee has either furnished inaccurate particulars of his income or has concealed particulars of his income. See Harsh Talwar (2011 (5) TMI 593 - Delhi High Court), Commissioner of Income Tax vs S.L.N. Traders (2011 (7) TMI 525 - Karnataka High Court) and Careers Education & Infotech Pvt. Ltd.(2011 (3) TMI 602 - PUNJAB AND HARYANA HIGH COURT) - In favour of assessee.

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• 2013 (7) TMI 138
  TDS u/s 194C - Booking of airline tickets - agents of agent - deduction of TDS on amount remitted to main agent after deducting the amount of commission - disallowance u/s 40(a)(i) CIT(A) allowed the claim - assessee company was carrying on the business of General Sales Agents (GSA) for international airlines and domestic airlines in India for passenger and cargo warehouse management - Held that:- The mode of functioning of assessee as explained is that he has appointed various agents all over the country and the agents deal with the assessee and not with the airlines. The accounting treatment followed by the assessee and the agent vis-à-vis the claim of TDS is that on a booking hypothetically of Rs.100/- by the agent deduction of its commission of Rs.5/- is made and TDS at 2.24% u/s 194C on the balance amount of Rs.95/- is made and the agent remits Rs.92.87 to the assessee. In view of the fact that the entire amount is remitted to the airlines, it is not reflected in assessee's P&L account and only the GSA commission earned and received from the airlines on the cargo sales is reflected in P&L account it has also been stated on behalf of the assessee that this method of accounting is being followed by the GSA and their agents in India without any exception. On a consideration of the same, since the findings arrived at has neither been rebutted on facts and no evidence has been led to show that either the modus operandi followed by the assessee was not followed by GSA and their agents in India or that on account of following this system some amounts not included in the total income stood adjusted with the TDS considered no good reason to interfere with the finding arrived at in the impugned order - Decided against the revenue.

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• 2013 (7) TMI 137
  Penalty u/s 271(1)(c) - concealment of the particulars of income under ESOP - CIT(A) deleted the levy - assessee was picked up for scrutiny u/s 147 by the AO after conducting the inquiry u/s 133(6) - Held that:- AO had completed assessment proceedings ex parte in the absence of assessee and his representative. CIT(A) held that the notices were not properly served on the assessee and the AO should have traced him through ex-employer of the assessee. Accordingly, the assessee could have got reasonable opportunity of hearing before the AO and the findings of the CIT(A) are also based on the details submitted by the assessee during the first appellate proceedings but the same was not confronted to the AO. Thus the order is cryptic and does not contain necessary discussion, observation and findings for ordering the AO to delete the penalty imposed on the assessee u/s 271(1)(c) - the issue to be restored to the file of AO to decide the issue on merits after giving due opportunity of hearing to the assessee.

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• 2013 (7) TMI 136
  Re opening of assessment - CIT(A) rejected the status of the assessee as a mutual concern by confirming the addition in respect of the amount transferred to common good fund and disallowing certain expenses - assessee is a society registered under the Societies Registration Act, 1860 - Held that:- The assessee by donating its amounts to Kargil fund, P.M. relief fund, Gujarat relief fund etc. has vitiated the concept of mutuality. Therefore, the assessee cannot be held to be a mutual concern at least for these two assessment years. However, the assessee is entitled for deductions under Chapter VI as the assessee made donation to Kargil fund, PM relief fund and Gujarat relief fund. The Assessing Officer having held that the assessee is not a mutual concern and considered the assessee as an AOP he should have allowed the said donations as deduction under Chapter VI for which the assessee is otherwise entitled to. Since this aspect of the matter was not considered by AO he should be directed to look into this aspect and allow the deduction to the assessee in accordance with law. With regard to the addition made towards common good fund - Held that:- As it is found from the assessment order that the assessee introduced in the liability side of the balance sheet an amount of Rs. 21,21,488/- and Rs. 18,22,720/- as a common good fund and during the assessment years 2000-01 and 2003-04 respectively assessee has not produced any details for the said amounts said to have been received from its members and the assessee has not filed any details correlating the amounts with the names of the members etc., from whom the said fund was received by the assessee, except furnishing xerox copy of a ledger account. Since the assessee association is a District Bus Operators Association is formed for the benefit of the members of the association, in the interest of justice, the assessee be given one more opportunity to furnish the details of common good fund before AO. Disllowance of diesel expenses - Held that:- As assessee did not furnish complete details thus AO's order in estimating the disallowance of these expenses at 10% which is quite reasonable in the absence of complete details - appeals of the assessee partly allowed for statistical purposes.

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• 2013 (7) TMI 135
  Penalty u/s.271(1)(c) - search u/s 132 - assessee introduced unaccounted cash which was detected during the course of search in response to a notice u/s.153A - Held that:- As in identical facts in other group cases, the Tribunal has consistently taken a view that assessment made by the AO on the basis of admission of assessee and not on basis of any material found during the course of search is not the case that the assessee has furnished inaccurate particulars or concealed any particulars of income in the return of income filed u/s.153A. If the additional income offered by the assessee in the revised return u/s.153A, after the search had been accepted in its entirety without detailed discussion of the seized documents and without making any attempt to obtain explanation of the assessee, penalty u/s.271(1)(c) is not leviable. In favour of assessee.

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• Customs

• 2013 (7) TMI 134
  Export obligation - import of duty free goods against advance licenses - waiver of pre deposit - stay - held that:- Although the appellants had failed to produce documents to establish that exports under the 37 advance licenses have been effected, before the Tribunal passing the pre-deposit order, in view of the fact that the appellants have subsequently produced documents to show that the exports have been effected and it is claimed that the exports effected are more than the export obligation required to be fulfilled as against the imports under the said 37 advance licenses, in our opinion it would be just and proper to set aside the pre-deposit order and direct the Tribunal to pass fresh order in that behalf.

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• Corporate Laws

• 2013 (7) TMI 133
  Injunction and damages for infringement of trade mark, passing off and unfair competition - Held that:- Plaintiffs have proved the facts stated in the plaint and have also exhibited the relevant documents in support of their case. Since the plaintiffs' evidence has gone unrebutted, said evidence is accepted as true and correct. Thus defendant’s adoption and registration of the domain name www.cokestudio.in being identical to plaintiff No.1's registered trade marks COKE and COKE STUDIO is dishonest. As decided in M/s. Satyam Infoway Ltd. vs. M/s. Sifynet Solutions Pvt. Ltd.[2004 (5) TMI 529 - SUPREME COURT OF INDIA] use of the same or similar domain name may lead to a diversion of users which could result from such users mistakenly accessing one domain name instead of another - thus direction issued to the National Internet Exchange of India c/o ISPAI (Internet Service Providers Association of India) to the Registrar of domain name M/s A to Z Domains Solutions Pvt. Ltd. to transfer the domain name cokestudio.in to plaintiff No.1.

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• Service Tax

• 2013 (7) TMI 153
  Demand of service tax - petition against the Stay order - Foreign Service Provider - prima facie case – Held that:- The Commissioner erred in insisting on the petitioners depositing the entire amount by way of pre-deposit - the petitioners had already deposited a sizable sum of total duty - even on the remaining amount the question whether the service tax was payable or not requires further consideration - it the petitioners' appeal has prima facie case – instead of full amount, the petitioners shall deposit a sum of Rs. 20 lakhs before the appropriate authority.

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• 2013 (7) TMI 152
  Condoning of delay - Period of limitation in filing appeal - There was reshuffling of the tasks in the office. Learned advocate who was in-charge of this task had left the organisation and that therefore, it was not noticed that appeal was not filed promptly. - Held that: – the court observed that that there has been some delay in the petitioners' approaching the Appellate Commissioner and the Commissioner could not have ignored the statutory limit beyond which he could have condoned the delay – a decided in D.R. Industries v. Union of India (2008 (3) TMI 213 - HIGH COURT GUJARAT) - The delay was sufficiently described - The Proceedings revert back to the adjudicating authority for fresh consideration and disposal – in extra-ordinary cases where an assessee can show extra ordinary circumstances explaining the delay - the assessee may invoke the writ jurisdiction of this Court but not as a matter of right – the assessee would have suffered gross injustice if he could not file appeals before the Commissioner (Appeals) within a period of 90 days on account of circumstances beyond their control – the court did not express any final opinion on Cenvat credit involved – petition allowed in the favour of the assessee.

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• 2013 (7) TMI 151
  Merchant banker - taxability of various activities i.e Brokerage/Commission, IPO, Brokerage/Commission-Fixed income product, IPO Finance Fee, Processing Fee, Recovery of commission expenses under the category of Business auxiliary services, Banking & Financial Services, Business support services - Held that:- there is no element of promoting or marketing of any services of the bank nor any service has been provided to the bank by the appellant on behalf of any client. - the tax liability on the incentive or processing fees received from the Bank is held to be not taxable to Service Tax under the heading ‘Business Auxiliary Services'. No service has been rendered by the appellant to the finance company and the activity has been done on the principal-to-principal basis - thus no Service Tax is leviable on the amount received by the appellant by way of share of income from NBFC in the activity of financing. Reimbursement of common expenses in the nature of electricity and other expenses incurred commonly by the appellant - no service can be stated to have been rendered thus the appellant is not liable to Service Tax. The levy of Service Tax on the share income as the result of IOP financing received from the NBFC Company is not liable to be taxed - Service Tax in respect of Processing Fee received from the Bank also to be set aside - penalties imposed on the appellant also set aside by the court. The appeal is allowed in the favour of the assessee.

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• 2013 (7) TMI 150
  Nature of service – ‘supply of tangible goods for use’ Section 65(105) (zzzzj) - the appellant is engaged in renting of earthmoving equipment to various customers - the appellant did not discharge any service tax liability - Held that:- The transaction involved herein is "transfer of right to use" which is deemed sale and not "supply of tangible goods for use service" - the transaction involved was a transfer of right to use Transit Mixers and not transport service and the petitioners had transferred the ‘right to use goods' – the said transaction is not the transfer of the property in goods - but it is right to use property in goods. Article 366 (29A)(d) r.w. clause (29A) uses the words, "and such transfer, delivery or supply" shows that the tax is not on the delivery of the goods used, but on the transfer of the right to use goods regardless of when or whether the goods are delivered - subject to the condition that the goods should be in existence for use - Delivery of goods is not condition precedent but the delivery may be one of the elements of the transaction for the transfer of the right to use goods. Control over the Goods – Held that:- the effective or general control does not mean always physical control but it would be under the effective or general control over the goods - the approvals, concessions, licence and permits would also be available to user of the goods - during the period of contract exclusive right to use goods along with permits, licence, etc., vests with the lessee. Stay application - Held that:- Prima facie the appellant has made out a strong case in his favour for grant of waiver of pre-deposit of the dues and stay recovery - The petition is allowed in the favour of the assessee.

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• 2013 (7) TMI 149
  Modification of stay order – the main contention of the appellant was that they had not received the notice hence they could not present at the hearing – Held that:- The appellant has never been present whenever the case was listed for hearing - the appellant seems to be misusing the opportunities of hearings and simply delaying the matter – cost on the appellant had been ordered - on payment of cost, the appellant's application for modification would be considered – a later date were mentioned for the hearing.

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• Central Excise

• 2013 (7) TMI 132
  Condonable limit for the petroleum products - losses upto 1% - due to natural causes and not due to any allegation of theft, pilferage, clandestine removal etc. Held that:- As per the Petroleum Manual the Board has specifically prescribed cumulative loss allowance of 0.5% for motor spirit, kerosene, refined diesel oil and 0.25% of furnace oil and 0.05% for LSHS which is the maximum condonable limit - Circular No. 663/54/2002-CX wherein at para 2 thereof it is clearly laid down that the limit stipulated for condonation of the losses in respect of petroleum product is the maximum limit to which the losses can be condoned - Wrongly allowed losses upto 1%. Government observed that M/s. HPCL was not maintaining proper accounts of such losses properly, which shows that there was a negligence on the part of the respondents. Further they also failed to make any justifiable case based on specific reasons for condonation of losses in excess to the specifically prescribed limit. Hence, the losses exceeding prescribed limits cannot be condoned in normal course. The same view has already been taken by the Government in the revision order No. 976/06, dated 24-11-2006 and 496/2011-CX., dated 19-5-2011 in the applicants’ own case- Commissioner (A) erred in condoning losses upto 1% in the absence of any special circumstances for the same. - Decided In favor of the Revenue. Penalty under Rule 25 of Central Excise Rules,2002 . Held that:- No charge of clandestine removal of goods or any suppression of facts. Therefore, the imposition of penalty under Rule 25 of Central Excise Rules, 2002 is not warranted. Decided against the Revenue.

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• 2013 (7) TMI 131
  Remission of duty under Rule 21 of the Central Excise Rules, 2002 – Loss after removal of goods from the factory. - Held that:- As per Rule 21 of the said rules, remission of duty is allowed if the loss of goods occurs due to natural or unavoidable accident, at any time before removal of goods from factory of manufacture. In the instant case, the goods were removed from factory and loss had occurred after removal of goods. As such, remission of duty sought in this case is not covered in the provision of said Rule 21. Case law of Tribunal in case of Sree Narasimha Textiles Ltd. [2008 (9) TMI 328 - CESTAT, CHENNAI], is not applicable to this case as much as the said case law deals with Rule 49 of the erstwhile Central Excise Rules, 1944; while this remission claim is in terms of Rule 21 of the Central Excise Rules, 2002. - Decided against the Assessee.

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• 2013 (7) TMI 130
  Stay Application - Pre-deposit for hearing - CESTAT directed the assessee to deposit the aggregate amount of Rs.34.00 lacs, as pre-deposit amount, and rejecting the request of the petitioner for total waiver thereof. - the grievance of the appellant was that no notice was served on it and no opportunity was given before passing the impugned assessment order by the Assessing Officer. Secondly, the appellant was declared as a sick industry by the BIFR. - Held that:- Interim order passed by the tribunal set aside - matter restored before tribunal for reconsideration.

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• 2013 (7) TMI 129
  Stay Application- Application for extension of Stay for Pre-deposit - Assesee filed Miscellaneous Application for extension of stay in the matter of waiver of pre-deposit of duty - When the interim stay granted by this Court was vacated, the order of the Tribunal originally passed directing the assessee to make pre-deposit of Rs.5.00 lakhs stood thereon for compliance - Held that:- Perplexing to note the course of conduct adopted by the assessee - whatever be the reasons, which compelled the assessee to withdraw the Writ Petition, conscious of the provisions under Section 35C(2A) of the Central Excise Act, the assessee once again moved the Tribunal for an order of extension of stay on the pre-deposit of the duty imposed for, by that time, the order on adjudication had come into force. Tribunal directed to make the pre-deposit. As per this Hon’ble High Court - Assessee to deposit the said sum of Rs.5.00 lakhs within a period of four weeks. Against the Assessee.

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• 2013 (7) TMI 128
  Principle of natural justice – order of adjudicating authority rejecting the application for cross examination - right to cross examine - Held that:- the petitioners had atleast a right to be told whether such application is being granted or refused before final order was passed. When the petitioners prayed for cross examination and reasonably expected that the same would be granted, they cannot be expected to participate in the adjudicating proceedings upto the final stage. - Principles of natural justice breached - order would be set aside - Petitioner had a right to know the outcome of their application - commissioner should issue a notice for further hearing – petition allowed in the favour of the assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 154
  Penalty u/s 10(3) of Act I of 1959 - Whether the Tribunal is correct in concluding that the petitioner has colluded with the buyers and obtained C forms to avail the concessional rate in the absence of specific finding of the assessing officer? - Held that:- As it is no doubt true that immediately on receipt of notice, the assessee paid the differential tax for the reasons best known to the assessee, but one cannot infer any knowledge on the part of the assessee that the forms used by them to gain concessional levy are only bogus forms and while confronted with the fact situation, they had reversed the claim. As pointed out by this Court, if at all there had been any notification indicating the bogus nature of the 'C' forms used by certain assessees, motive can be attributed to the assessee for misusing his declaration to gain concessional tax rate - there is no ground for attracting the provisions under Section 10(3) of the Tamil Nadu General Sales Tax Act, quite apart from the relevance of this provision to the assessment under the Central Sales Tax Act and that the assessment herein is made only under Section 16(1)(b) of the Tamil Nadu General Sales Tax Act, for which no penalty could be levied. - Decided in favor of assessee.

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