TMI Tax Updates - e-Newsletter
July 7, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
Income Tax
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The payments were made for the purpose of improvement of the software consequent upon merger of other companies, which was necessitated to generate some reports in oracle application. Any expenditure incurred for the purpose of improvement of software or purchase of software that expenditure should be treated as revenue expenditure
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Attachment orders - The transfer of immovable property can only be, by way of a sale deed. In the absence of a deed of conveyance, duly stamped and registered, no right, title or interest in an immovable property can be transferred. However, the contention of the writ petitioner/ first respondent that he is deemed to be the owner of the property cannot be accepted in the light of the Transfer of Property Act - HC
Service Tax
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CENVAT credit - input service distributor - recovery under Rule 14 can be only be from the manufacturer or service provider and there is no provision for issuing a show-cause notice to input service distributor
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Validity of show cause notice (SCN) - it is the duty of executive to examine the records and examine the objection raised with reference to the records and facts of the case and take a view whether there is a sustainable case for issue of Show Cause Notice. Such vital aspects of framing of charges have been missing in the present case.
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Refund claim - Port Service - Inspection Certification Services - Customs House Agent service - Storage Warehousing Service - these services have been received for export of goods and not contraverted by any positive evidence, therefore, the refund claim cannot be denied
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Self adjustment of service tax - Rule 6(4A) and 6(4B) - demand has been confirmed solely on the ground that the adjustment under Rule 6(4B)(ii) cannot be done after the month/ quarter immediately succeeding the month or quarter the mistake happened - demand set aside
Central Excise
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100% EOU - burning loss - difference between the permissible burning loss of 7.5% and actual burning loss of 15% - Therefore there is always difference between the input output norms given in SION and the actual input output ratio in the physical manufacture of the goods. Therefore the SION norms cannot be applied in the facts of the present case.
VAT
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Classification of goods - rate of tax - Insect killer products - They are household insecticides, considered as a separate class of goods even under the Insecticides Act, and are outside the scope of Entry 20 of the IV Schedule.- HC
TMI Short Notes
Articles
Notifications
Companies Law-
F. No. 1/30/2013-CL-V - dated
5-7-2017
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Co. Law
National Company Law Tribunal (Amendment) Rules, 2017
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F. No. 1/22/2013-CL-V-part - dated
5-7-2017
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Co. Law
Amendment in Sch.IV of the Companies Act 2013
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F. No. 1/22/2013-CL-V - dated
5-7-2017
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Co. Law
Companies (Appointment and Qualification of Directors) Amendment Rules, 2017
Customs-
64/2017 - dated
5-7-2017
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Cus
IGST exemption to SEZs on import of Goods by a unit/developer in an SEZ
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63/2017 - dated
5-7-2017
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Cus
Amendment in Notification No. 12/2012-Cus dated 17.03.2012
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70/2017 - dated
6-7-2017
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Cus (NT)
Rate of exchange of conversion of the foreign currency with effect from 7th July, 2017
DGFT-
15/2015-2020 - dated
5-7-2017
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FTP
Export Policy of Sandalwood
GST-
18/2017 - dated
5-7-2017
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IGST Rate
IGST exemption to SEZs on import of Services by a unit/developer in an SEZ
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17/2017 - dated
5-7-2017
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IGST Rate
Rescinding Notification No. 15/2017-Integrated Tax (Rate) dated 30.06.2017
GST - States-
F.3(770)/Policy/VAT/GST/2017/485-94 - dated
1-7-2017
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Delhi SGST
Rules of Delhi Goods and Services Tax Act, 2017 (Delhi Act 03 of 2017)
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F.No.3(11)/Fin(Rev-I)/2017-18/DS-VI/354 - dated
30-6-2017
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Delhi SGST
Lt. Governor of the National Capital Territory of Delhi appoints the 1st day of July, 2017 as the date on which the provisions of sections 6 to 9, 11 to 21, 31 to 41, 42 except the proviso to sub-section (9) of section 42, 43 except the proviso to sub-section (9) of section 43, 44 to 50, 53 to 138, 140 to 145, 147 to 163 and 165 to 174 of the said Act shall come into force
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12/2017-State Tax - dated
30-6-2017
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Delhi SGST
Department of Trade and Taxes, Government of NCT of Delhi, on the recommendations of the Council, notifies the registered person having annual turnover
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11/2017- State Tax - dated
30-6-2017
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Delhi SGST
Department of Trade and Taxes, Govt. of NCT of Delhi notifies the modes of verification
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09/2017-State Tax (Rate) - dated
30-6-2017
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Delhi SGST
Recommendations of the Council exempts, intra-State supplies of goods or services
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07/2017- State Tax (Rate) - dated
30-6-2017
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Delhi SGST
Recommendations of the Council exempts, the supply of goods Unit Run Canteens to the authorized customers
Income Tax-
59/2017 - dated
4-7-2017
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IT
Income-tax (19th Amendment) Rules, 2017
VAT - Delhi-
No. F.5(54)Policy/VAT/2013/PF/442-453 - dated
30-6-2017
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DVAT
Extension of VAT refund to South Asia Regional training and technical Assistance Center
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F. No. 5(54)/Policy/VAT/2013/PF/430-441 - dated
30-6-2017
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DVAT
VAT exemption/refund to New Development Bank
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (7) TMI 176
Attachment orders - whether the third respondent is not the owner of the said property as the entire sale consideration has been paid by the writ petitioner/ first respondent and therefore the first respondent firm is the owner of the property and therefore the order of the appellant department is not binding and should be lifted? - maintainability of petition - Held that:- As far as the instant case is concerned, the sale of property as defined under the Transfer of Property Act, 1882, was not completed at the time of order of Attachment was issued by the appellant department. At that time, only a sale agreement was entered into between the parties. The contention of the writ petitioner/ first respondent that the entire sale consideration was paid to the third respondent and the relevant documents have been handed over to the writ petitioner/ first respondent by the third respondent, would itself be sufficient to show that the writ petitioner/ first respondent is deemed to be the owner of the subject property. If there is any sale of the immovable property, the Transfer of Property Act, would apply. As per the provisions of the Act, unless the property is transferred in the name of the purchaser, the writ petitioner herein cannot claim that he is the owner of the property. Hence, the writ petitioner has no locus standi to question the order of attachment in the present appeal, as the writ petitioner is not the owner of the property and the vendor who is the assessee cannot question the order of attachment. The transfer of immovable property can only be, by way of a sale deed. In the absence of a deed of conveyance, duly stamped and registered, no right, title or interest in an immovable property can be transferred. However, the contention of the writ petitioner/ first respondent that he is deemed to be the owner of the property cannot be accepted in the light of the Transfer of Property Act
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2017 (7) TMI 175
Penalty u/s 271(1)(c) - addition u/s 36(1)(iii) - Held that:- As no part of the interest bearing funds available with the assessee could be related to the making of such investment, and in light of the availability of sufficient interest free funds and the profits/surplus generated during the year, which all could justifiably explain the investment made in the property at ‘BDB’, therefore no penalty u/s 271(1)(c) as regards the same was called for in the hands of the assessee. We however in all fairness and appreciation of the facts in totality, restore the matter to file of the A.O for fresh adjudication, and direct him to verify from the records of the assessee the factum of availability of sufficient interest free funds with the assessee, from where the aforesaid investment made towards purchase of property at ‘BDB’ could safely be explained, as had been so claimed and projected before us by the Ld. A.R. That needless to say, the A.O during the course of the set aside proceedings shall afford reasonable opportunity to the assessee to substantiate its contention.
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2017 (7) TMI 174
Disallowance of additional depreciation - Held that:- When an allowance which is ordinarily not available under normal commercial principles of accounting, is made specifically allowable, through enactment of certain specific provisions of the Act, it is also a requirement that there should be similar specific provision which shows its applicability every year, unless the context strongly calls for such an interpretation. We are thus of the opinion that CIT(Appeals) was justified in confirming the disallowance of additional depreciation. Software expenses should be treated as revenue in nature Royalty payment - nature of expenditure - revenue or capital - Held that:- Royalty amount received by the CRI Industries India Ltd., which was holding the brand “CRI” is not the point at issue either before the Department or before the Tribunal. Since the royalty amount paid by the assessee [User] to M/s. C.R.I. Amalgamation Pvt. Ltd. (Proprietor] was high, the Assessing Officer has made the disallowance. The assessee paid the royalty for exclusively using the trade mark “CRI” based on monthly turnover at the rate of 0.50%, which was duly agreed and executed a User Agreement between the proprietor and user. Therefore, the expenses incurred towards payment of royalty has been treated as revenue expenditure by the ld. CIT(A) for the assessment 2008-09, which was duly confirmed by the Tribunal against the appeal of the Revenue after elaborately discussing the facts Addition made towards implementation of oracle additional report development - Disallowance of improvement of software or purchase of software - Held that:- The assessee has filed the copies of invoices raised by M/s. Astral Consulting Ltd. and the payments are made for the information systems services rendered. There was no dispute that the payments were made for the purpose of improvement of the software consequent upon merger of other companies, which was necessitated to generate some reports in oracle application. Any expenditure incurred for the purpose of improvement of software or purchase of software that expenditure should be treated as revenue expenditure Disallowance made on account of dividend income - addition u/s 14A r.w.r. 8D - Held that:- The provisions of section 14A of the Act are not applicable to assessee’s case since the investment made in foreign subsidiaries and the income earned from the aforesaid investments have been offered to tax. Thus, we confirm the order passed by the ld. CIT(A) on this issue and dismiss the ground raised by the Revenue Levy penalty under section 271(1)(c) - Held that:- It is not a fit case to levy penalty under section 271(1)(c) of the Act and accordingly, confirm the order passed by the ld. CIT(A) in directing the Assessing to delete the penalty.
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2017 (7) TMI 173
Addition u/s. 153C - addition made under the head income from other sources and allowing as agricultural income - Held that:- The agricultural income declared by the assessee as returned ought to be accepted. Accordingly since the entire income of the assessee is from agricultural activities and hence exempt under section 10(1), the above issue will no longer survive. Further, in the order under section 143(3) passed earlier the AO had treated the same as agriculture income. Addition made on account of loan account written off invoking provisions of Section 41 - Held that:- Even if interest portion is considered as taxable as per the provisions of section 41(1) of the Act, the same has been claimed as deduction in earlier years against the agricultural income and hence remission of the same in current year ought to be treated as agricultural income and therefore, exempt u/s 10(1) of the Act. No incriminating material was found during the course of search, accordingly, addition made under section 153C in respect of assessment year which has already been completed under section 143 (3) has no legs to stand. Appeal of the assessee is allowed
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2017 (7) TMI 172
Addition on account of rent - Held that:- When the lessor company admitted of leasing out and also simultaneously handing over the possession of the premises on 1.4.2005, the mere fact that the lease deed was recorded a little later on 1.8.2005, cannot per se lead to disallowance of rent for a period of four months as has been done by the authorities below. When the assessee placed a copy of the letter of the lessor company to the effect that the premises were, in fact, handed over to the assessee on 1.4.2005, it was incumbent upon the authorities either to accept this proposition or rebut the same with some cogent reasons. No such rebuttal has been done in the instant case. In our considered opinion, the user of the premises by the assessee for a full period of one year coupled with the fact of having made payment of rent for similar period, clearly entitle the assessee to deduction of the rent for the whole of the year. The impugned order is set aside to this extent. Disallowance u/s 14A - Held that:- AR has placed on record a copy of the consequential order passed by the AO pursuant to the restoration of the matter by the ld. CIT(A) for computing disallowance u/s 14A on some reasonable basis. As per this order dated 30.3.2013, the AO has computed the fresh disallowance at ₹ 2 lac. In our considered opinion, the sustenance of disallowance at this level is quite reasonable, which does not require any further interference. Disallowance of remaining expenses - Held that:- AO made disallowance of ₹ 16.12 crore simply by means of a mathematical exercise carried out by him. If he found the expenditure incurred by the assessee to be on higher side, it was incumbent upon him to specifically point out as to which expenses were not incurred for the purposes of business. No such exercise worth the name has been carried out. In our considered opinion, the ld. CIT(A) was fully justified in deleting this addition made by the AO on ad hoc basis. This ground is, therefore, not allowed. Disallowance of depreciation allowable on licence to use software @ 60% and not at 25% - Held that:- Once it is found that the software used by the assessee were of standard nature to be used in computer hardware and not meant for any independent usage, such software qualify for depreciation @ 60%. Appendix I to the Income-tax Rules under the broader head ‘III – Machinery and plant’ at Sl. no. (5) provides : ‘Computers including computer software’. Rate of depreciation at 60% has been prescribed against this item. When we consider Appendix I to the Income-tax Rules containing rates of depreciation available for the purposes of income-tax, it becomes manifest that the computer software which are necessary and integral for the working of hardware are eligible for depreciation @ 60%, as was claimed by the assessee. We, therefore, approve the view taken by the ld. CIT(A) in deleting this disallowance. This ground is not allowed. Expenditure on development of website is a revenue expenditure. Disallowance on account of expenses towards Telecom web support - Held tht:- There is some calculation mistake in the assessment order in respect of the amount paid by the assessee to these two parties. Since the very nature of the expenditure is that of revenue, there is no need to go deep into such a calculation mistake as the entire amount on this score is deductible as revenue expenditure. CIT(A) was justified in deleting this disallowance. Addition being Web page updation charges - Held that:- We find it as an undisputed fact that this expenditure was incurred by the assessee on web page updation. When the Hon’ble jurisdictional High Court in Indian Visit.com (P) Ltd. (2008 (9) TMI 8 - DELHI HIGH COURT) has held the expenditure incurred on development of website as revenue, it is, but natural that the expenditure incurred on website updation, cannot assume the character of a capital expenditure. We, therefore, uphold the impugned order on this issue. Annual maintenance cost is undoubtedly revenue expenditure and qualifies for deduction in entirety. Deduction on account of ‘Repairs to furniture and fixtures - Held that:- From the details of such repair and maintenance of furniture and fixtures, it can be seen that there are certain items of the capital nature, such as, payment towards purchase of LCD TV frame, etc. Such expenditure cannot be considered as a revenue expenditure. In view of the fact that the AO has not specifically dealt with the details of expenses for which he made disallowance, we consider it expedient to set aside the impugned order on this score and remit the matter to the file of AO for making an itemwise analysis of the nature of expenses claimed by the assessee under this head and, thereafter, make disallowance, to the extent permissible as per law. Disallowance of receipt of advances - Held that:- The assessee was following matching principle in recording income as well as expenses under the mercantile system of accounting. Paper book indicates that not only the income pertaining to the succeeding year, but, received in the year under consideration was taken as deferred revenue income, but, the expenditure incurred during the year not pertaining to the year under consideration, was also similarly accounted for. This unearned income of ₹ 1.55 crore was taken as income for the succeeding year and accepted by the Revenue as such in the assessment u/s 143(3) of the Act. In view of the fact that this income did not pertain to the year under consideration, we hold that the ld. CIT(A) was justified in deleting this disallowance.
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Customs
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2017 (7) TMI 154
Project import - denial of benefit of concessional rate of duty - Held that: - the contract is required to be registered, and the assessment of ‘project imports’ is required to be provisional and subject to final assessment within three months of the clearance of the last consignment in the contract. Reclassification of imported goods under heading 8462.99 - Held that: - The consequence of classification under 9801 of the First Schedule to the Customs Tariff Act, 1975 is the bundling of goods; and the conditions that are prescribed in the regulations are related to that bundling for increasing the production capacity of the economy. There is no condition other than import in that state for installation in that form. There is no allegation of disaggregation of the imported goods and, therefore, its possession by another entity does not detract from the principal objective of such bundled classification, i.e. capacity building - Eligibility for such classification at the time of import, compliance with project approval conditions and installation at the permitted site are not in dispute here. Classification as ‘project import’ and assessment thereof cannot be denied. Appeal allowed - decided in favor of appellant.
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2017 (7) TMI 153
Penalty u/s 112 (a) of Customs Act, 1962 - Duty Exemption Entitlement Certificate (DEEC) scheme - actual user condition - appellant allegedly diverted the duty-free imports into the local market without utilising it for manufacture of export products as stipulated in the conditions preescribed in the notification granting exemption - Held that: - A careful reading of the provision makes it clear that penalty can be visited upon those who directly or indirectly have aught to with the goods that were confiscated. It is clear from the impugned order that the confiscation is a consequence of the diversion of the imported goods in contravention of the conditions of the exemption notification. The diversion of imported goods was enabled by the obtaining of the licence under false pretence and the arrangements that led to procurement of the offending goods. The impugned order, establish the connection of the appellants with the goods that were held liable for confiscation - Section 112 of Customs Act, 1962 prescribes the imposition of penalty for any act that may, directly or indirectly, have contributed to the confiscation of the goods. Penalty upheld - appeal dismissed - decided against appellant.
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2017 (7) TMI 152
Legality and propriety of invoking the proviso section 28 of Customs Act, 1962 - finalization of provisional assessment in accordance with section 18 of Customs Act, 1962 - C&F service - canalising charges - extended period of limitation - penalty - Held that: - It is very clear that the tax authorities cannot claim lack of knowledge of the canalising fee that is now proposed to be incorporated in the assessable value. Consequently, invoking of the extended period fails. With that the imposition of penalty under section 114A also fails. Redemption fine - Held that: - It is that custodianship of the confiscated goods that enables the adjudicating authority to permit its redemption on payment of the prescribed fine. Without the wherewithal to return the goods on fulfilment of the condition of fine, the imposition of redemption fine is an exercise in futility. Imposition of redemption fine does not of itself create a debt to the government. The option to redeem his one that has to be exercised by the person to whom that offer has been extended. The imposition of fine in the impugned order is, therefore, set aside. Personal penalty on officers - Held that: - it must be borne in mind that these are employees of a public sector enterprise and who would not have derived any benefit personally from an act of ‘smuggling’ of ‘liquefied petroleum gas’ - penalties set aside. Appeal allowed - decided in favor of appellant.
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2017 (7) TMI 151
Power of Committee of Chief Commissioners to review orders of Commissioner of Customs - prevail of specific power over general power - Clearance of ‘unaccompanied baggage’ - two wooden crates of goods - baggage rules - regulation no.22(8) of Custom House Agents Licensing Regulations, 2004 - Held that: - Tribunal has, while disposing of the dispute in Commissioner of Customs (General), Mumbai v. Mukadam Freight Systems Pvt Ltd [2017 (5) TMI 798 - CESTAT MUMBAI], held that the licensing authority is not vested with the privilege of filing an appeal against its own order and that the Committee of Chief Commissioners is not vested with the power to review orders issued in exercise of powers under the Custom House Agents Licensing Regulations, 2004/Customs Brokers Licensing Regulations, 2007. The institution of ‘custom house agents’ is a characteristic of the customs regulatory mechanism; at the same time, it is not unique to this country but is universally recognised as a facilitation catalyst for clearance of cargo. The geographical distance between the entry/exit hubs and the location of the importer/exporter, as well the complexities of procedures, warrants professional representation that may not be available in-house. Consequently, in a statute that is essentially concerned with the power to levy tax, with procedure for recovery of tax and with enumeration of offences and penalties, special provision have been enacted to accord legal status, and thereby to exercise statutory control on certain institution. It is inconceivable that the licensing authority is so base as to forfeit the high reputation of the organisation that is presided over warranting intervention by another authority howsoever eminent. It, therefore, does not behove upon a collegial body/individual, not acknowledged in the Regulations, to take upon itself the mantle of supervision and thus insinuate itself into a process not contemplated either in section 146 of Customs Act, 1962 or by the Regulations framed thereunder. For us to permit recourse to the general provision in section 129D of Customs Act, 1962 merely because of the absence of such a remedy in the Regulations and for convenience of some executive authority would be tantamount to proclaiming that our perspicacity is superior to that of the sovereign legislative organ - an overreach that we will not even deign to consider. A licensing system, concerned with the functioning of a facilitation mechanism is, not to be equated with the power to collect tax - the provisions of section 129E is not intended to apply to the appellant-Commissioner. Appeal dismissed - decided against appellant.
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2017 (7) TMI 150
Natural justice - misdeclaration of goods - The importer has questioned the propriety of ordering confiscation of goods once these had been abandoned as abandonment implied relinquishing of ownership of the goods with no further right to those goods - penalty - Held that: - the impugned order has not recorded a disposal of the request of the importer for re-test of the samples. Unless the test report is able to confirm that the goods have been misdeclared, the entire proceedings, based as they are on the allegation of attempt to evade the stipulation of floor prices imposed as a condition of import, would fail. The credibility of the test report has to be established beyond doubt. The consequence of abandonment of goods has also not been examined in the impugned order - there is need for a re-consideration of the submissions made by the importer - appeal allowed by way of remand.
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2017 (7) TMI 149
Import of restricted item - LCD watch modules - these items were imported for sale in the market - natural justice - Held that: - It is seen from the impugned order that the contents of the statements have not been subjected to the test of validity - it would appear that the original authority had arrived at the findings based entirely upon the statements that had not been authenticated by appropriate challenge and without taking into consideration the pendency of assessments that were yet to be finalised. The circumstances would direct us to remit the matter back to the original authority for consideration of these issues - appeal allowed by way of remand.
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Corporate Laws
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2017 (7) TMI 147
Issue of duplicate shares on lost share certificates - Transfer and transmission of securities - Held that:- In the case on hand, the dispute is relating to the title of 20000 equity shares of ₹ 2/- each of 1st Respondent Company between the Petitioner and 5th Respondent. Such title disputes cannot be decided by the Company Law Tribunal and it can only be decided by a Civil Court. Section 430 of the Act only says that the Civil Court's jurisdiction is ousted only in respect of matters which the Tribunal is empowered to determine. In the case on hand, in view of the complicated question of title to the disputed shares to the disputed shares between the Petitioner and the 5th Respondent is involved, this Tribunal cannot agitate upon the said issue. More so, there is no specific provision in the Companies Act which envisage the Tribunal to give a direction to the 1st Respondent Company to issue duplicate shares. It is already said that the relief sought by the Petitioner does not come under the provisions of Sections 58 and 59 of the Act. In the Petition there are no allegation made against the 2nd Respondent. But in the Rejoinder filed by the Petitioner, allegations were made against the 2nd Respondent that he colluded with the 5th Respondent and brought into existence some forged and fabricated documents. No material is placed on record by the Petitioner to substantiate such wild allegations involving 2nd Respondent. More so, the Petitioner did not seek any relief against the 2nd Respondent. Moreover, there is no basis to grant any relief in this application against 2nd Respondent. More so, the Main Petition itself is misconceived, considering the prayer made by the Petitioner.
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Insolvency & Bankruptcy
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2017 (7) TMI 146
Enforcement of provisions of Insolvency and Bankruptcy Code, 2016 - Held that:- Operational Creditor has been able to show that the Operational Debtor owes the operational debt to it and there is a default committed by the operational debtor. The application satisfied all the requirements of the Code and the Rules framed there under. The application is admitted. As no insolvency professional has been proposed by the 'Operational Creditor' a reference is made to the Insolvency and Bankruptcy Board of India in term of Section 16 (4) of the Code for appointment of Interim Resolution Professional. Admission a declaration of moratorium is given in terms of Section 13(1) of the Code. The Interim Insolvency Professional shall comply with the provisions of Sections 13(2), 14, 15, 17 & 18 etc. of the Code. The directors of the Corporate Debtor, its promoters or any person associated with the Management of the Corporate Debtor is expected to extend all assistance and cooperation to the Interim Resolution Professional as stipulated by Sections 19 and 20 etc of the Code.
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Service Tax
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2017 (7) TMI 171
Wrong payment of duty - Self adjustment of service tax - Rule 6(4A) and 6(4B) of the Service Tax Rules - demand has been confirmed solely on the ground that the adjustment under Rule 6(4B)(ii) cannot be done after the month/ quarter immediately succeeding the month or quarter the mistake happened - Held that: - similar issue decided in the case of M/s. Jubilant Organosys Ltd. Versus CCE, Meerut-II [2014 (10) TMI 138 - CESTAT NEW DELHI], where it was held that adjustment of service tax paid in excess in certain months towards the service tax liability of the subsequent months cannot be denied on such technical grounds - there is no question regarding double payment of service tax. In these circumstances, the grounds on which demand has been raised become procedural grounds - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (7) TMI 170
Refund claim - Port Service - Inspection Certification Services - Customs House Agent service - Storage Warehousing Service - denial on the ground that these are not port services - N/N. 41/2007-ST dated 06.10.2007 - denial also on the ground that the invoices issued by the J.M. Baxi having ambiguous description of service and evidence of payment of service has not been provided - Held that: - Circular No. 112/6/2009-ST dated 12.03.2009 it has been clarified that the port services do not necessarily have to be port services but the same must be related to export of goods. Admittedly, there is no dispute regarding services availed by the appellant for export of goods at the port of export, therefore, the refund claim cannot be denied on that ground - the certificate produced by the appellant shows payment of service tax has been made under the category of CHA and the said certificate also clarifies that the services are used for CHA services. Therefore, the appellant is entitled for refund of the port service - refund allowed. Refund claim - Inspection and Certification Service - denial on the ground that the invoices are not issued in respect of export of goods and stuffing of containers not form part of Inspection and Certification Services - Held that: - the certificate issued by the Service provider clearly provides that the services were with respect to the export of goods - It is admitted that in the case in hand, the service tax has been borne by the appellant, therefore, the refund claim cannot be denied to the appellant on those grounds. Refund claim - Customs House and Agent Service - denial on the ground that all the required details were not provided in the invoices - Held that: - circular dated 12.03.2009, clarifies that procedural violations should be dealt with at the end of the service provider and not the end of the service recipient i.e. appellant, therefore, it is fact on record that the appellant has received services and paid service tax thereon, therefore, the appellant is entitled for refund claim. Refund claim - Storage and warehousing service - denial on the ground that invoices does not show that the services has been used for export of goods - Held that: - As it is fact on record that these services have been received for export of goods and not contraverted by any positive evidence, therefore, the refund claim cannot be denied on this ground. Refund allowed - appeal allowed - decided in favor of appellant.
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2017 (7) TMI 169
Penalty u/s 76 and 77 - invocation of section 80 - Held that: - we find that the order of Commissioner (Appeals) dated 27.12.2012 has already been set aside by the Tribunal on the issue of confirmation of demand of Service Tax and interest and imposition of penalty under Section 77 - we have no option but to allow the issue regarding setting aside of penalties under section 80 by the same order also to be remanded to the Commissioner (Appeals) for fresh adjudication - appeal allowed by way of remand.
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2017 (7) TMI 168
Validity of show cause notice (SCN) - Erection, Commissioning & Installation service - mis-declaration of value of goods - it was alleged that on the basis of TDS Certificate issue by the clients of M/s Sharma, the taxable amount that M/s Sharma received was ₹ 25,20,59,862/- but they have declared less value and short paid Service Tax - Held that: - there is no whisper of examination of books of account maintained by M/s Sharma to arrive at the value of consideration received by them - It may be worth mentioning here that the purpose of audit report is to point out any discrepancy to the notice for examination by the executive and it is the duty of executive to examine the records and examine the objection raised with reference to the records and facts of the case and take a view whether there is a sustainable case for issue of Show Cause Notice. Such vital aspects of framing of charges have been missing in the present case. The charges in the Show Cause Notice have to be on the basis of books of account and records maintained by the assessee and other admissible evidence. The books of account maintained by M/s Sharma were not looked into for issue of above stated two Show Cause Notices. Therefore, the transactions recorded in the books of account cannot be held to be contrary to the facts. Appeal allowed - decided in favor of appellant.
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2017 (7) TMI 167
CENVAT credit - input service distributor - The case of the department is that the total credit was distributed to all the registered units whereas the Haridwar unit is exempted from payment of excise duty. Therefore, the credit attributed to the Haridwar unit is not admissible - Held that: - the input service distributors have not taken any credit whereas they have already distributed the input service credit. The credit was taken by various manufacturing units. Therefore, rule 14 can be made applicable only on the person who avails the cenvat credit wrongly or utilised the same. Therefore the appellant being an input service distributor cannot be issued any SCN - Board vide F. No.137/68/2013-STd dated 10.03.2014 wherein it was clarified that recovery under Rule 14 can be only be from the manufacturer or service provider and there is no provision for issuing a show-cause notice to input service distributor - the demand raised on the appellant being an input service distributor is not sustainable in law - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (7) TMI 166
CENVAT credit - inputs - Sulphur Absorption Catalyst used for manufacture of non-dutiable goods - Rule 6 (1) of the CCR - separate account for the receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods not maintained - whether Sulphur which emerges as a result of the Desulphurisation of HSD is an exempted final product for which input namely Sulphur Absorption Catalyst has been used in its manufacture? - Held that: - Sulphur is a commercial product and sold in the market has not been rebutted by the appellant - Sulphur produced in the process of Desulphurisation is an excisable goods and is not only marketable but actually sold commercially by the appellant. Since it is chargeable to nil rate of duty in the Tariff, it is in the category of exempted goods - demand with interest upheld. Extended period of limitation - penalty - Held that: - there has been no intimation to the Department before the investigations began - there was clear suppression of material facts by appellant for which extended period has been rightly upheld and penalty has been correctly imposed. Appeal dismissed - decided against appellant.
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2017 (7) TMI 165
100% EOU - Redemption fine - goods exported are not available for confiscation - Held that: - reliance placed in the case of Commissioner of Central Excise Customs and Service Tax Versus M/s Sanjari Twisters [2017 (4) TMI 219 - CESTAT AHMEDABAD], where it was held that as the goods were not available for confiscation, as the goods were already diverted/permitted to be warehoused without payment of duty, on furnishing the bond and the undertaking and thereafter, the respondent-Unit clandestinely and illicitly diverted the goods to the open market, the goods which otherwise were liable to be confiscated, in lieu of confiscation, redemption fine was imposable - the matter needs to be remanded to the Adjudicating Authority to ascertain the quantum of fine - appeal allowed by way of remand.
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2017 (7) TMI 164
CENVAT credit - denial on the ground that the handling of pipes by the appellant being beyond the place of removal, hence, credit availed on such handling charge, is not admissible - Held that: - the appellant are required to deliver the manufactured pipes at the mega power project site of the customer M/s CGPL and the handing charges are included in the price of the said pipes. Besides, it is the appellant who is required to undertake transportation of the said huge pipes and unload it at the customer's premises - the place of delivery ought to be considered as premises of the Customer. The appellants are thus eligible to Cenvat Credit of the Service Tax paid on handling charges at the premises of the customer which was denied to them considering the place of removal as the factory gate - appeal allowed - decided in favor of appellant.
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2017 (7) TMI 163
Rebate of NCCD, AED and Education Cess - denial on the ground that the manufacturer located in the State of Jammu & Kashmir had taken Self Credit of the elements of NCCD, AED and Education Cess under the scheme of N/N. 56/2002-CE - jurisdiction - Held that: - Section 35B(1) Clause (b) excluded the appeals against orders relating to rebate of duty of excise. However, as regard interest on rebate there is no exclusion provided in the said Section, therefore this Tribunal has jurisdiction to decide the appeal on the issue of interest on delayed payment of rebate therefore the objection of the AR, in this regard is hereby rejected. As regard the issue raised by the Ld. AR that the single member bench cannot heard the present appeal as the issue of rate of duty is involved. On careful perusal of the entire case paper, I find that the issue involved in the present case is limited to the grant of interest on the refund which has already been sanctioned there is no issue of rate of duty or interpretation of N/N. 56/2002-CE is involved in the present case - the refund become payable only by virtue of Section 88 of the Finance Act, 2008 by which Rule 18 was amended before that there was no occasion to grant the rebate to the appellant, therefore there is no delay in sanction of the refund. If there is a delay in sanction of refund/rebate in terms of Section 11BB, the interest is payable to the claimant after expiry of three months from the date of filing the refund application - In the present case the refund application was filed during the period February and April 2006 whereas the refund was sanctioned in June 2009. Therefore there is a delay after expiry of three months from the date of filing application, accordingly the appellant is entitled for the interest in terms of Section 11BB. Appeal allowed - decided in favor of appellant.
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2017 (7) TMI 162
Price variation clause - refund of excess paid duty - rejection on the ground that whatever price was charged at the time of clearance the same cannot be varied for any reason - Held that: - in case of price variation clause on the basis of raw material cost the final price as per the raw material cost has to be taken as transaction value, therefore, the provisional price on which the goods are cleared from the factory and duty paid thereon is not the final price. Accordingly, if there is any excess payment between the value charged at the time of clearance and value finalised on the basis of price variation clause the excess paid duty, if any arise, is refundable. Since the excess paid duty is on the excess value, which is not the price paid or payable by the customer, the unjust enrichment is not applicable - refund allowed. Liquidated damages - scope of SCN - Held that: - if there is a deduction in the price due to liquidated damages, that is not permitted to be deducted from the transaction value for the reason that the liquidated damages is part of the cost to respondent that has to be considered as their expenditure which will not affect the transaction value. However, since this issue has not been considered by the Commissioner (Appeals), the matter needs to be remanded to the Commissioner (Appeals) only for a limited purpose to decide the issue - matter on remand. Appeal disposed off - part matter decided in favor of assessee and part matter on remand.
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2017 (7) TMI 161
CENVAT credit - non-return of Capital goods sent to job-worker under the cover of challan issued u/r 4 (5) (a) of the CCR, 2004, within 180 days - Held that: - Even though no evidence is available on record to show that the period of 180 days is expired from the date of sending the capital goods to the job-worker, as per the challan produced by the learned Counsel, it is clear that when the appellants have paid the duty within 180 days from the date of issue of challan was not expired. In these circumstances, this particular matter needs to be re-verified - matter on remand. Reversal of CENVAT credit - obsolete input - Held that: - since the input was subsequently removed from the factory as a scrap, the CENVAT Credit is required to be reversed. Penalty - Held that: - It is also observed that the appellants have paid the duty along with interest. In these circumstances, there is no reason to impose penalty commensurate to the CENVAT amount in respect of written off quantity of inputs - Penalty set aside. Appeal allowed - decided partly in favor of assessee, partly against assessee and part matter on remand.
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2017 (7) TMI 160
Clandestine removal - Impregnated, Coated and Laminated fabrics falling under Chapter 59 of the CETA - job-work - the demand in the present case has been made upon the note book seized from the security person Shri Shukla and chits seized from M/s SRS Synthetics - Held that: - The facts of clearance of goods from M/s G.P Textiles to M/s SRS Synthetics are absolutely apparent. Even during the visit of the officers to the premises of M/s SRS Synthetics the consignment of laminated fabrics cleared clandestinely by M/s G. P Textiles was received by M/s SRS Synthetic. Also the same is corroborated by the transport memos and records as well as statements of transporters. The identity of SRS Synthetics as dummy concern floated by Shri Arun Poddar, Proprietor of M/s G.P textiles has been accepted by Shri Arun Poddar and their employee Shri Hemant Shah who was shown as proprietor of M/s SRS Synthetics - the Appellant has disputed the demand on ground of duplication of values or on the ground that the value of goods further cleared by M/s SRS Synthetics has also been included for the purpose of making demand. Thus though I hold that the charges against M/s G.P. Textiles stands proved but the adjudicating authority shall re-quantify the demands in as much as it relates to duplication of demand, inclusion of value of goods from M/s SRS Synthetics since the demand on same already stands confirmed from M/s G.P Textiles - demand upheld. Demand upon assumption that M/s Gaurishankar Textiles during the period January’ 2001 to July’ 2001 has supplied grey fabrics to them which was not accounted by them - Held that: - possibility of clandestine clearance of laminated fabric processed out of such jobwork goods cannot be ruled out. It is especially in case when the evidence of clandestine clearances has been found from the factory and M/s SRS Synthetic. Thus looking to the overall modus operandi adopted by the Appellant for getting the fabric manufactured on jobwork without any document and clearances made through dummy concern M/s SRS Synthetics, it is clear that the Appellant has used such jobwork fabric in manufacture of laminated/ impregnated fabric and the same was removed without payment of duty. I therefore do not find any lacuna in the order of the adjudicating authority and hold that the demand is sustainable - demand upheld. Demand made on the basis of cash received by M/s Weave Tex which was not accounted by M/s G.P Textiles in their records - Held that: - the Appellant has nowhere stated about disposal of fabrics received after jobwork from M/s Weave Tex. Since their account nowhere shows the process adopted by them in respect of such goods coupled with the fact that the fabric was used by them in manufacture of coated/ impregnated fabric, it is absolutely clear that the fabric was used in manufacture of their final product i.e coated/ impregnated fabric which was clandestinely removed. I therefore do not find any reason to interfere with the impugned order and hold that the demand is sustainable - Also the goods found short in the factory of M/s G.P. Textiles were due to the reason of clandestine removal and hence the demand is sustainable. For the same reason the goods seized from premises of M/s S.R.S Synthetics having been cleared from M/s G.P. Textiles are also liable to be confiscated - demand upheld - confiscation upheld. Penalty - Held that: - since the duty demand is sustainable and the instant case is of clandestine removal against M/s G.P. Textiles, hence the penalty under Section 11AC is also applicable against them - As regard penalty under Rule 27 and Rule 25 I find that the same are also justified for the above reason. Further the goods seized from the premises of M/s SRS Synthetics being removed clandestinely and non duty paid are liable for confiscation and therefore I uphold the confiscation - penalty and confiscation upheld. As regard penalty upon M/s Weave Tex and its partner Shri Yogesh Kabaria, I find that they have contested the penalty mainly on the ground that the grey fabrics is exempted from duty whether the same is manufactured on own account or on jobwork - Held that: - I find that the transactions between M/s Weave Tex and M/s G.P Textiles stands recorded in books and bank passbook of M/s Weave Tex. Further there is no ground to hold that the processed goods shall be used for manufacture of goods which shall be cleared without payment of duty. Also they have in no way handled the dutiable goods. They were not even involved in clandestine transaction in any way. In such case the ingredient of Section 26 does not get attracted to them. I therefore hold that they are not liable for penalty under Rule 209A of erstwhile Central Excise Rules.1944 or Rule 26 of Central Excise Rules,2002. I therefore set aside the penalty imposed upon M/s Weave Tex and its partner Shri Yogesh Kabaria. Appeal allowed - decided partly in favor of appellant.
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2017 (7) TMI 159
Penalty - credit was reversed before issuance of SCN - shortages of goods - Held that: - Failure to reverse the credit gave direct monetary benefit to the appellant and ambiguous provision, no other conclusion can be reached except that the same was done with intention to give undue benefits. In these circumstances, penalty imposed on account of non-reversal of credit is upheld. Imposition of penalty on Directors - Held that: - while investigations were on, statement of Shri Sukumar N Shah, Managing Director was recorded wherein he personally explained the entire process. It was obvious that he was aware that all the activities at the material time. In these circumstances, his involvement in the evasion of duty cannot be ignored - penalty on director is upheld. Appeal dismissed - decided against appellant.
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2017 (7) TMI 158
CENVAT credit - outward transportation of Service Tax paid on their finished goods for sale on FOR destination basis - Held that: - The admitted facts on record are that the appellant was supplying goods, on FOR destination basis, had taken out insurance for transit and that the sales price included the freight element - the ruling of the larger Bench of this Tribunal in the case of ABB LTD. Versus COMMISSIONER OF C. EX. & ST., BANGALORE [2009 (5) TMI 48 - CESTAT, BANGALORE], squarely covers the issue in favor of the appellant, where it was held that services availed by a manufacturer for outward transportation of final products from the place of removal be treated as an input service in terms of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax paid on the value of such services - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (7) TMI 157
100% EOU - burning loss - difference between the permissible burning loss of 7.5% and actual burning loss of 15% - demand - Held that: - It is not the case of revenue that due to burning loss, any quantity of either brass scrap or processed rods has been diverted somewhere else instead of bringing to the factory by the appellant. For such situation, whether there is burning loss of 7.5% or even 15% that alone cannot be reason to demand the duty. The entire demand worked out by taking the difference of SION norms provided in the Foreign Trade Policy is not correct - As far as SION is concerned it provides with the theoretical input output norms that too for the purpose of import and export of the goods. Even when the imports are allowed as per the SION norms the actual consumption of the input in the export goods is always variable as compared to the ratio provided under the SION norms. Therefore there is always difference between the input output norms given in SION and the actual input output ratio in the physical manufacture of the goods. Therefore the SION norms cannot be applied in the facts of the present case. Appeal allowed - decided in favor of appellant.
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2017 (7) TMI 156
SSI exemption - clubbing of clearances - dummy units - long delay in completion of adjudication - Held that: - Whatever the reason may be from either side for the delay caused to complete the readjudication which arose out of the show cause notice issued on 17.2.1999, it is high time for the appellants not to resort to further dilatory tactics but to submit for hearing on 20th June 2017 before learned adjudicating authority. From the date of initiation of the proceedings in the show cause notice, 18 years have been expired. The demand sustained in adjudication would certainly cause injury to both sides. Therefore to reduce the litigation, endeavour should be made by the appellant without seeking adjournment on 20th June 2017 - appeal allowed by way of remand.
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2017 (7) TMI 155
Waste and scrap - rejected pieces of insulated wire - It appeared to Revenue that the waste and scrap of Electrical Wires was classifiable under Tariff Item No. 85489000 - classification - Held that: - original authority rightly held that waste and scrap of insulated electrical wires does not fall under Tariff Item No. 85489000 - for subsequent period waste and scrap cannot be classified under Tariff Item No. 85489000 - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (7) TMI 148
Classification of goods - rate of tax - Insect killer products - HIT Anti-Roach Gel - the assessing authority held that these goods are not pesticides/insecticides falling within the ambit of Entry 20 of the IV Schedule to the VAT Act, and they were liable to be taxed at 12.5%/14.5% under Schedule V of the VAT Act as residuary goods - whether the products sold by the petitioners are insecticides and pesticides falling under Entry 20 of Schedule IV of the VAT Act or are unclassified goods chargeable to tax at the rate fixed in Schedule V? Factors to be taken into consideration in determining the classification of a product in tax statutes - Held that: - If a provision, which falls to be applied, is found to be ambiguous, a subordinate presumption comes into play, namely that it is presumed that there was no intention to change the meaning of the provision which has been taken and repeated in the same or similar language in the subsequent Act. In such circumstances, it may be relevant to try to determine the meaning of the relevant provision by looking at what it meant in a previous statute, including by reference to authority on the provision as it appeared in that statute. Evolution of entry 20 of the IV schedule to the AP VAT ACT - Held that: - From 1.01.2000 onwards, the APGST Act, in its first schedule, incorporated a distinct entry i.e. Entry 203 which specifically provided for a higher rate of tax at 8% in respect of “Mosquito repellants and devices of all kinds including electronic repellant devices, refills, mats, coils and accessories thereof”. Are the subject goods insecticides falling under entry 20 of the IV schedule? - Held that: - Under the 1968 Act, insecticides intended for ‘household use’, which are formulations consisting of a small portion of ‘active ingredients’, are considered a different class/category of insecticides. When the rigor of the Insecticides Act is relaxed for “household insecticides”, which the subject products admittedly are, can the extremely wide definition of an “insecticide” therein be applied to the said word used in Entry 20 of the IV Schedule, and the said Entry be understood to bring within its ambit all forms of insecticides including “household insecticides”? The answer to this question can only be in the negative. Whether one or more kinds of products containing its ingredients should be included under the Entry relating to pesticides is the exclusive prerogative of the State, and during the period when one category is excluded from the purview of the entry, it is not open to import the provisions of the Insecticides Act so as to enlarge the scope of the Entry under the Sales Tax Act. Where the words used in the entry are clear and unambiguous, there is no need to refer to the meaning of the words used under other enactments. Do the subject products lose their identity as an “INSECTICIDE” on its mixture with other substances? - Held that: - pesticides/insecticides, as they are commonly known, are mixed with LPG/Kerosene which is used as a propellant and, after such a process, a new product emerges which, even under the Insecticides Act, 1968, are separately classified as ‘household insecticides”. It is difficult, therefore, to hold that the subject goods are “pesticides/insecticides” as referred to in Entry 20 of the IV Schedule of the VAT Act. Is the scope of entry 20 restricted only to insecticides/pesticides used for agricultural purposes or does it include such goods when used for non agricultural purposes also? - Held that: - Insecticides and pesticides which kill insects and pests which cause damage to plants are chemicals used for plant protection. As shall be elaborated hereinafter, if the legislative intent was to include all forms of insecticides and pesticides within the ambit of Entry 20, it was wholly unnecessary to provide for a separate entry in Entry 100(140) for technical grade insecticides, fungicides, weedicides, herbicides and pesticides, that too at the same rate of tax at 4%/5%. It is evident, therefore, that the legislature intended to tax insecticides, pesticides etc at a concessional rate only when they were used either as industrial inputs or for plant protection, and not otherwise. The subject products, dealt with by petitioners, are used for purposes other than for plant protection or as industrial inputs. They are household insecticides, considered as a separate class of goods even under the Insecticides Act, and are outside the scope of Entry 20 of the IV Schedule. The products manufactured and sold by the petitioners, though they contain a small percentage of ‘Insecticide’, are used as a formulation not exceeding the percentage prescribed by the Government in terms of Section 36 (z-b) of the Insecticides Act, and are registered and packed as specified for being sold as “household insecticides”. They are not ‘insecticides’ as commonly understood, and considered by people dealing with it or by those who put it to use. These products are largely urban household products, and are not connected with plant protection which alone fall under Entry 20 of Schedule IV of the VAT Act. Can the statements of objects and reasons of an earlier statute and the white paper on VAY be relied upon? - Held that: - While Entry 17 of Annexure I to the White Paper does not include plant protection equipment, it includes, among others, insecticides and pesticides under the head “goods with 4% floor rate”. Under the caption “VAT rates and classification of commodities” the 4% VAT rate category was to comprise of items of basic necessities such as all agricultural and industrial inputs. It is evident therefore that only pesticides and insecticides, used as agricultural and industrial inputs, were extended the concessional rate of 4% tax. This understanding of the Empowered Committee, in the White Paper, has weighed with the State Legislature in providing for “pesticides and insecticides”, when used as agricultural inputs/plant protection, under Entry 20, and when used as industrial inputs under Entry 100(140) of the IV Schedule to the VAT Act. Can the dictionary meaning and trade parlance meaning of words, not defined in the Act, be relied upon? - Held that: - the composition of the subject goods contains a very small portion of “insecticide” as its active ingredient. The product literature and the label classify the subject goods as “household insecticide”. When a consumer purchases these products he does not ask for a pesticide or an insecticide but asks for the product by its brand name as it is a household insecticide used to kill household insects and pests. People in the trade, i.e the persons who sell the goods in the market and those who purchase it, would ask for pesticides and insecticides when they require them as agricultural inputs or for plant protection. Even, on application of the “common parlance test”, the subject goods, which are all “household insecticides”, would not fall within the ambit of “pesticides and insecticides” under Entry 20 of the IV Schedule to the VAT Act. Effect of certification of Government Agencies - Held that: - The certificate issued to the petitioners is by the Central Insecticides Board, a body constituted under the Insecticides Act to regulate the manufacture, sale, distribution and use of insecticides. As noted hereinabove, the Insecticides Act brings all kinds of insecticides within its ambit with a view to ensure the safety of human beings and animals from the use of such insecticides. As a person who manufactures products, using any of the insecticides enumerated in the Schedule to the Insecticides Act, is required to be registered under the 1968 Act, the subject products were certified by the Board as “household insecticides”. The Insecticides Act has itself made an exception of household insecticides, and has exempted it from the rigors of the Insecticides Act. The mere fact that it contains a very small portion of insecticides, would not make the subject products “pesticides and insecticides” falling within the ambit of Entry 20. Would the interpretation placed on Entry 78 of Schedule I of the A.P.G.S.T. ACT, be applicable to Entry 20 of schedule IV of the A.P. VAT ACT? - Held that: - A pesticide formulation is a combination of active and inert ingredients that form an end-use pesticide product. Active ingredients in pure (technical grade) form are not suitable for application, and pesticides are formulated to make them safer or easier to use. Entry 78-A of the I Schedule to the APGST Act brought within its scope technical grade pesticides or pesticides concentrate. Pesticide formulations (including household pesticides) do not fall within its ambit. If Entry 78 were to be read widely, and construed as bringing within its fold all kinds of pesticides, then pesticides concentrate and technical grade pesticides would also fall within the ambit of Entry 78, and it was wholly unnecessary for the legislature to have prescribed a separate entry i.e., Entry 78-A for pesticides concentrate and technical grade pesticides. Such a construction would also have rendered Entry 78-A redundant. Scope of Entry 100(140) OF THE IV Schedule - Held that: - Entry 100 of the IV Schedule relates to goods when sold as industrial inputs, and contains 235 sub-entries. It is only if all of them are sold as industrial inputs would they qualify to be taxed under this Entry. Entry 100(140) relates to technical grade insecticides, fungicides, herbicides, weedicides and pesticides, that too those used as industrial inputs to manufacture pesticides, insecticides etc. If all forms of insecticides are understood to fall within the ambit of Entry 20, it was unnecessary for the legislature to separately provide for these goods in Entry 100(140). As pesticides and insecticides, when used as industrial inputs, fall under Entry 100(140), the pesticides and insecticides referred to in Entry 20 can only be those used for plant protection, and not others. Specific entry prevails over the General Entry - Held that: - It is no doubt true that in case of competing entries, one falling under the specified items mentioned in the Schedules and the other a residuary entry, the burden is on the revenue to show that the goods can, by no conceivable process of reasoning, be brought within the specific Entry. As noted hereinabove, it is only if all kinds of pesticides and insecticides are held to fall within the ambit of Entry 20, can the subject goods, which are household insecticides, be said to fall within the said Entry. Such a construction would then render Entry 100 (140) redundant, as technical grade pesticides which are classified under Entry 100(140) would also fall within Entry 20 - “household insecticides”, which are neither used for plant protection nor do they constitute technical grade pesticides and insecticides used as industrial inputs for manufacture of pesticides and insecticides, would not fall either under Entry 20 or 100(140) of the IV Schedule to the VAT Act. They would, therefore, be taxable at the revenue neutral rate of 12.5%/14.5% treating them as falling within the residuary items in Schedule V of the VAT Act. Applicability and effect of Competing entries in the same/different schedules of a tax statute - Held that: - Agricultural implements which fell within Entry 226 of the I Schedule to the APGST Act have now been divided between Entry I of Schedule I and Entry I of Schedule IV of the VAT Act. While hand operated or animal drawn agricultural implements in Entry 226 are now classified under Entry I of Schedule I of the VAT Act, power operated agriculture implements, which hitherto formed part of Entry 226 of the I Schedule, are now classified under Entry 1 of Schedule IV. “Plant protection equipment”, which was classified within Entry 78 of the I Schedule to the APGST Act earlier, are now brought under Entry 20 of the IV Schedule to the VAT Act. Even under the APGST regime, “other plant protection equipment” were brought within a separate Entry (i.e., Entry 78) other than the entry relating to agricultural implements (i.e., Entry 226). The mere fact that both of them are in Schedule IV and are liable to tax at the same rate is of no consequence as “pesticides and insecticides used for plant protection” and “technical grade pesticides and insecticides” also fall within Schedule IV albeit in two separate entries (Entry 20 and Entry 100 (140)). Doctrine of NOSCITUR A SOCIIS and EJUSDEM GENERIS - Held that: - The rule of “nositur a sociis” cannot, however, prevail where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear, that this rule of construction can be usefully applied; it can also be applied where the meaning of the words of wider import is doubtful; but where the object of the legislature in using wider words is clear and free from ambiguity, this rule of construction cannot be pressed into service - Although the doctrine of ejusdem generis is to be applied with caution, where in a legislative enactment there are strong reasons (a) from the history and circumstances connected with its passing, (b) from the structure of the Act itself, to indicate the real meaning of the Legislature, the doctrine of ejusdem generis is one which not only can, but ought to, be applied. Is entry 20 a combined entry? - Held that: - The mere fact that certain articles are mentioned under the same heading in a statute does not automatically mean that they all constitute one commodity. The inclusion of several articles under the same heading may also be for reasons other than that the articles constitute one and the same thing - In the present case, however, all the items in the first limb of Entry 20, are analogous to each other, and their purpose is to provide plant protection. Entry 20 is a combined Entry which covers items viz., ‘pesticides’, ‘insecticides’, ‘fungicides’, ‘weedicides’ and ‘plant protection equipment’ used for agricultural purposes. While the second part of Entry 20 deals with ‘Plant Protection Equipment and Accessories thereof’, the first part of the Entry basically deals with products which gets consumed in the process of their application, and are joined together with products of a physical nature which are used for plant protection ie they are not consumed in the process, and are physically available for multiple uses. The goods mentioned in the first part of the Entry are applied by the use of the goods referred to in the second part. Should the meaning of words used in an entry in a schedule to a tax statute be ascertained in the light of development of science and technology? - Held that: - The subject products, manufactured by the petitioners, would not be considered as ‘insecticide’ in common parlance. These products are, admittedly, not used for agriculture/ plant protection. They are not essential requisites for agricultural production. These products are therefore liable to be taxed at a higher rate, and not at the concessional rate @ 4 % / @ 5 %. While passage of time has no doubt resulted in new found uses of pesticides, insecticides, weedicides, fungicides and herbicides, what we are called upon to examine is whether the subject products fall within the ambit of an Entry in a Schedule to a Sales Tax enactment. As a Sales Tax enactment relates to levy of tax on commercial goods, the words used in an Entry in a Schedule to a Sales Tax Act must be given the meaning attributed to it in the market by persons dealing with them daily, and not in their technical or scientific sense. When construed in its popular sense, it is evident that the words “pesticides” and “insecticides” used in Entry 20 relate to chemicals used as inputs for agriculture or plant protection, and not to “household insecticides” used to kill household insects and pests. Reasons for exclusion of 'mosquito repellents' from the ambit of entry 20? - Held that: - exclusion of “mosquito repellants” from Entry 20 can be traced to the fact that the Sales Tax Appellate Tribunal had treated mosquito repellants as “Insecticides”. The legislature, in its wisdom, has excluded mosquito repellants in any form from its ambit. Thereby the Entry has been confined to agriculture/plant protection products only. It is not applicable to the assessee’s products. Effect of an exclusion clause in an entry - Held that: - mosquito repellents in any form were not pesticides/insecticides falling within the ambit of Entry 20. That does not, however, mean that the subject goods are “insecticides”/”pesticides” falling within the ambit of Entry 20. Are two views of entry 20 possible necessitating the one which favors the assessee to be adopted? - Held that: - No entry similar to Entry 78A of the Schedule-I of the APGST Act, or Entry 100(140) of Schedule-IV to the VAT Act - The subject goods therein were, therefore, held to be insecticide killers falling within the word “insecticide”. Petition dismissed - decided against petitioner.
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