TMI Tax Updates - e-Newsletter
July 25, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Additional cess and cess surcharge - u/s 43B - claim of expenditure on the basis of accrued liability to pay cess and cess surcharge under the Tamil Nadu Panchayats Act, 1958 could not be disallowed by the revenue authorities by invoking Section 43B - HC
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Income Tax:
Penalty u/s 271(1)(c) - The absence of books of accounts of the firm in the partners' residence, certainly would not lead to a further inference that there were no books of accounts of the firm maintained by the assessee - no penalty - HC
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Income Tax:
The mere fact that on account of the expenditure incurred by the assessee wholly and exclusively for its own business, incidentally some third party is also benefited is no ground to disallow any part of such expenditure - HC
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Income Tax:
Depreciation on securities - if the assessee has consistently treating the value of investment for more than two decades as investment as stock-in-trade and claim depreciation, it is not open to the authorities to disallow the said depreciation on the ground that in the balance-sheet it is shown as investment in terms of the RBI Regulations - HC
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Income Tax:
Nature of Incentive from government scheme - Capital receipt or revenue receipt - The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes - HC
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Income Tax:
Validity of Notice u/s 148 - it cannot be situation where two Assessing Officer would have simultaneous jurisdiction over the assessee, one being Additional CIT, Range-I, and other being ACIT, Range-IV - HC
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Income Tax:
Validity of Notice u/s 143(1)(a) - Prima facie Adjustment – The procedure was not followed and the adjustment were made without notice - No addition - HC
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Income Tax:
Notice for reassessment u/s 148 - Bar of limitation u/s 149 - the period of limitation for making assessment/reassessment had already expired long back - department cannot take shelter behind the provision of Section 150 (1) - HC
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Customs:
Classification - import of Non-alloy steel melting scrap consisting of skull - presence of “slag“ and “skull scrap“ in the consignment - no hesitation in accepting the plea of the assessee that the goods in question would fall under heading 72.04 and not under heading 26.19 - HC
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Corporate Law:
Enforceability of Foreign Awards - enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to fundamental policy of Indian law, the interests of India or justice or morality - SC
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Corporate Law:
Arbitration - The jurisdiction clause of an agreement, the absence of words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” is neither decisive nor does it make any material difference in deciding the jurisdiction of a court. The very existence of a jurisdiction clause in an agreement makes the intention of the parties to an agreement quite clear and it is not advisable to read such a clause in the agreement like a statute. - SC
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Service Tax:
Renting of immovable property - There was no evidence to show that the notional interest on the interest free security deposit has influenced the consideration received for renting - stay granted - AT
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Service Tax:
Differential income on stock broking – – recidivist and futile endeavours by Revenue for utopian perfection tends to undermine the stability of law and impose wholly avoidable litigation costs - AT
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Service Tax:
Date for applicability of rate service tax – The taxable event is the date of providing the service and not the date of receiving the payment - AT
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Central Excise:
Rufund in cash or by way of Cenvat Credit - area based exemption - There is no justification for allowing the refund by way of credit to the cenvat credit account, which is not even being maintained by the appellant - AT
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Central Excise:
First Stage / Second stage dealer - Once the goods are not recorded in the records maintained by the first stage dealer, he cannot be held liable for passing on unwanted cenvat credit to the buyers. A first stage dealer is required to enter only cenvatable items in his records and cannot be compelled to record the goods, in which he may be trading - AT
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Central Excise:
Cenvat Credit - Input services - Removal of coal fly ash is one of the necessity for running of the captive power plant. Without such removal of the coal fly ash from the captive power plant, the same cannot operate and run - credit allowed - AT
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Central Excise:
Reversal of Cenvat Credit on production of non-excisable goods namely Sludge - assessee cannot be called upon to suffer the reversal of Cenvat credit on the quantum of the input i.e. furnace oil equivalent to sludge on the ground that the same was not used in manufacture - AT
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Central Excise:
Rule 3(5) of Cenvat Credit Rules, 2004 – Registration as a manufacturer and not as a dealer - when supplier of inputs is already registered as a manufacturer separate registration as a dealer is not a ground for denying the Cenvat credit - AT
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VAT:
CST - power of state government - by retaining the words 'any person or class of persons' in the amended Section 8(5)(b) it is made clear that even after the 2002 amendment, the State Governments under Section 8(5) are also empowered to grant total / partial exemption in public interest in respect of inter State sales to any person or class of persons covered under Section 8(2) of the CST Act. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2013 (7) TMI 662
Additional cess and cess surcharge - Tax u/s 43B - CIT made disallowance u/s 43B holding that cess and cess surcharge is tax u/s 43B - Tribunal deleted disallowance - Held that:- Finance Bill, 1988 provides that cess or fee by whatever name called, which have been imposed by any statutory authority including a local authority, would also be allowed as a deduction only if they were actually paid - There was really no generic difference between a tax and a fee inasmuch as both are compulsory exactions of money by public authority - Tax recovered by a public authority invariably goes into the consolidated fund which is ultimately utilized for all public purposes whereas a cess levied by way of a fee is not intended to be and does not become a part of the consolidated fund - claim of expenditure on the basis of accrued liability to pay cess and cess surcharge under the Tamil Nadu Panchayats Act, 1958 could not be disallowed by the revenue authorities by invoking Section 43B as it was applicable to the assessment year 1985-86 - Decided in favour of assessee. Dialoowance u/s 43B - Deposits from non governmental buyers - CIT held deposit as trading receipts and made disallowance u/s 43B - Tribunal deleted disallowance - Held that:- Where an amount is received merely by way of deposit, on the express understanding or undertaking as in these cases, the company held the money as a mere custodian, and on the fulfilment of the condition became a trustee for the depositor. It is sufficient to state that when once the tax authorities determined that the proceeds of the sales in question were not within the taxable turnover of the company, the beneficial ownership became vested in the depositors and the company ceased to have any right to continue to hold the moneys - Following decision of The State of Mysore and Another Versus Mysore Spinning and Manufacturing Co., Ltd. and Another [1960 (9) TMI 59 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2013 (7) TMI 661
Constitutional validity of amendments in Chapter XIX-A made by Finance Act, 2007 - Abatement of settlement application prior to amendment - Held that:- The purported objective of the amendments introduced in Chapter XIX-A by the 2007 Act is to streamline the proceedings before the Settlement Commission and to ensure expeditious disposal of pending cases, the amendments cannot be construed so as to punish an applicant for the inability or failure of the Settlement Commission to dispose of its application within the period specified in section 245D (4A), where such delay in disposal is not attributable to the applicant - An interpretation leading to an unjust, inequitable, harsh and absurd result must be rejected - by reading down the provisions of Section 245D (4A) (i) and Section 245HA (1) (iv) the constitutional validity of the amendments providing abatement of proceedings may be saved and protected from the vice of discrimination, and issue same directions to find out, if the delay is attributable to the applicants before making final order - Following decision of Star Television News Ltd v. Union of India [2009 (8) TMI 86 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2013 (7) TMI 660
Penalty u/s 271(1)(c) - CIT deleted penalty that on date of search filing date for return not over - Tribunal confirmed penalty holding that even though the return was accepted, yet, the penalty proceedings and assessment proceedings being different, penalty was leviable - Held that:- admitted fact in this case is that the search party did not find any incriminating materials against the firm - Even in the course of search, if certain materials were seized relating to the assessee, yet, nothing was spoken to as regards the non-maintenance of the books of accounts or absence of books of accounts relating to the transactions of the firm - as on the date of search in the partner's premises, the books of accounts of the firm were not found. The absence of books of accounts of the firm in the partners' residence, certainly would not lead to a further inference that there were no books of accounts of the firm maintained by the assessee - Decided in favour of assessee.
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2013 (7) TMI 659
Undisclosed income - Bogus or genuine gifts - Tribunal held that Assessing Officer has failed to discharge the burden of proving that the gift is not genuine - Held that:- It would be appropriate to point out that the donee addressed a letter to the Department, not only denying the gift but also stating that he did not open the account from which the gift was made to the private respondent - Decided n favour of the revenue. Case relied on by assessee; Commissioner of Income Tax, Karnal v. Puneet Chugh [2011 (2) TMI 532 - PUNJAB AND HARYANA HIGH COURT] not to be relied upon.
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2013 (7) TMI 658
Unexplained investments - Name of parties to whom money advanced not disclosed at time of assessment - Tribunal deleted holding that assessee had produced materials regarding the income tax details of the parties and their addresses - Held that:- assessee had not explained the source for making the deposits as well as the loans and liabilities and some of the parties whose names were given as owing amounts to the assessee had denied having any transaction with the assessee but only with Raja music Universal wherein the assessee was the managing partner, the mere filing of details of creditors, per se, would not be a good ground to allow the appeal filed by the assessee. If the Appellate Authority felt that on the furnishing of any fresh material, the case demanded a fresh enquiry, the Appellate Authority should have remanded the matter by directing the Assessing Officer to make enquiry on the documents filed and pass orders - Assessment to A.O. Decided in favour of Revenue.
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2013 (7) TMI 657
Deduction u/s 37 - Expenditure done for advertising Rasna - Tribunal deleted disallowance u/s 37 - Held that:- While examining a claim for deduction under section 37 of the Act, what has to be seen is whether the expenditure had been incurred wholly and exclusively for the purpose of the assessees business and whether it falls under any of the exceptions carved out under sub-section (2B) - Once it is found that the expenditure had been incurred by the assessee for publicity or advertisement, it is not for the department to consider what commercial expediency justified such expenditure - The mere fact that on account of the expenditure incurred by the assessee wholly and exclusively for its own business, incidentally some third party is also benefited is no ground to disallow any part of such expenditure - No part of the said expenditure was expended for any purpose other than for the assessees business - Following decision of Commissioner of Income-tax, Bombay City I v. Maharashtra Sugar Mills Ltd. [1971 (8) TMI 14 - SUPREME Court] - Decided against Revenue.
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2013 (7) TMI 656
Depreciation on securities - Computation of income of Bank - Revenue held Assessee violated RBI guidelines - Tribunal declined to grant depreciation - Held that:- method of accounting adopted by the tax payer consistently and regularly cannot be discarded by the Departmental authorities on the view that he should have adopted a different method of keeping the accounts or on valuation - RBI Act or Companies Act do not deal with the permissible deductions or exclusion under the IT Act - if the assessee has consistently treating the value of investment for more than two decades as investment as stock-in-trade and claim depreciation, it is not open to the authorities to disallow the said depreciation on the ground that in the balance-sheet it is shown as investment in terms of the RBI Regulations - The question whether the assessee is entitled to particular deduction or not will depend upon the provision of law relating thereto and not the way, in which the entries are made in the books of accounts - Following decision of UNITED COMMERCIAL BANK v/s COMMISSIONER OF INCOME TAX [1999 (9) TMI 4 - SUPREME Court] and SOUTHERN TECHNOLOGIES LIMITED v/s THE JOINT COMMISSIONER OF INCOME TAX [2010 (1) TMI 5 - SUPREME COURT OF INDIA] - Decided in favour of assessee.
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2013 (7) TMI 655
Nature of Incentive from government scheme - Capital receipt or revenue receipt - Tribunal held incentive as capital receipt - Held that:- said Scheme, it can be immediately noticed that the scheme was framed as a part of Governments initiative to encourage modernization of existing industries in under-developed areas. The main purpose of the scheme was to accelerate the industrial development and to disperse industries to under-developed areas as well as to provide additional employment - It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry - The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes - Following decision of Sahney Steel and Press Works Limited & Ors. vs. Commissioner of Income Tax [1997 (9) TMI 3 - SUPREME Court] - Decided against Revenue.
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2013 (7) TMI 654
Validity of Notice u/s 148 - Whether the ITAT was right in law in holding that the notice issued under section 148 was without jurisdiction when the AO issuing the said notice had valid jurisdiction while passing the assessment order in the case of the assessee for the A.Y. 2001-02 and the ITAT was justified in entertaining the fact that the jurisdiction was challenged under section 124 especially when this was not done before the same AO during the assessment proceeding for the A.Y. 2001- Held that:- the Tribunal has rightly held that the issuance of notice under section 148(1) by the ACIT, Range-IV, was without jurisdiction - when the notice under section 148(1) Commissioner have no jurisdiction over the assessee on the date of issuance of such notice as the jurisdiction over the assessee was transferred to the Additional CIT passed under section 120 – it cannot be situation where two Assessing Officer would have simultaneous jurisdiction over the assessee, one being Additional CIT, Range-I, and other being ACIT, Range-IV appeal decided against revenue.
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2013 (7) TMI 653
Validity of Notice u/s 143(1)(a) - Prima facie Adjustment – Held that:- if the Assessing Officer wanted to reject any expenditure for want of proof/evidence he should have issued notice and called for the said evidence for deciding the question - the AO could not have made the said addition for want of documents - clause (iii) of the proviso was sought to be applied by the ITO. The procedure was not followed and the adjustment were made without notice The examples contained in the circular clearly show that, for want of proof, no disallowance or adjustment can be made - the adjustment made are not covered by the scope of section 143(1)(a) and as per the law expounded in S. R. F. Charitable Trust v. Union of India (1991 (10) TMI 38 - DELHI High Court) -It is only when a disallowance is evident from the facts on record that in adjustment can be made - the payments were made by the assessee before the due date of filing of the return and these aspects have not been denied and referred to by the AO – appeal decided against revenue.
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2013 (7) TMI 652
Reassessment - assesse contended that the very reopening of the assessment for the year 2006-07 is one without jurisdiction - Held that:- The proceedings would squarely fall under section 147 - having regard to the fact that it is not forthcoming in the reasons stated that he had a reason to believe that the income chargeable in A.Y. 2006-07 had escaped his attention within the meaning of section 147 – assessee had reflected the present transactions in the returns filed by them - but that had escaped the notice of the assessing authority – the term "reason to believe" has been described by the SC in the judgement of Johri Lal v. CIT (1973 (2) TMI 2 - SUPREME Court) – petition decided against assesse. As observed the petitioner is already before the Dispute Resolution Panel. Undoubtedly, if the proceedings go against him before the Dispute Resolution Panel, it is always open for him to file an appeal before the Income-tax Appellate Tribunal wherein all contentions available to him can be raised. - the reasons given by respondent No. 1 making him to believe to initiate or reopen the assessment for the year 2006-07 cannot be substituted by this court by giving its own reasons as to why the reasons given by him are incorrect.
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2013 (7) TMI 651
Notice for reassessment u/s 148 - Bar of limitation u/s 149 - The two notices have been challenged on the ground that they have been issued after the period prescribed under Section 149 of the Act for taking proceedings under Section 147 and 148 of the Act has expired and the notices are barred by limitation - the order dated 19.12.2003 was passed by the CIT (Appeals) and the order dated 11.1.2005 passed by the CIT - the period of limitation for making assessment/reassessment for the assessment year 1992-93 to 1996-97 had already expired long back on 31.3.2003 - in any event the department cannot take shelter behind the provision of Section 150 (1) - which conclusion therefore is irresistible and the notices issued for the A.Y.1992-93 to 96-97 are beyond the period of limitation – petition decided in favour of assessee
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2013 (7) TMI 650
Rate of tax on LTCG - Section 112 of the Income Tax Act,1961 read with Section 48 of the Act - Long-term capital gains be worked out each transaction wise and tax should be charged at 10 percent or 20 percent (without indexation/with indexation respectively) whichever is beneficial to the assessee/at the option of the assessee, ignoring that the law with respect to taxation of long-term capital gain on sale of shares had undergone a change with effect from 2000-01 wherein long-term capital gain on sale of shares could be offered to tax at 10 percent plus surcharge instead of 20 percent plus surcharge, if the cost is not modified by adopting the cost inflation index – Held that:- Legislature intended to tax the capital gains with indexation at 20 percent and to limit the tax on capital gains on transfer of listed securities or units or zero coupon bonds computed without indexation to 10 per cent thereof – Appeal dismissed – Decided against the Revenue. Decision in Mohanlal N. Shah (HUF) v. Asst. CIT [2008 (9) TMI 614 - ITAT MUMBAI] followed.
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2013 (7) TMI 649
Deduction under Section 80IB(10) - Provisions of section 80-IB(10) were applicable only when project is approved as "housing project" and in the assessee's case it was "residential as well as commercial project" approved by the Navi Mumbai Municipal Corporation - Deduction under section 80-IB(10) be allowed even if the commercial area is up to 10 percent of the total built up area of the plot – Held that:- There was no evidence about the commercial area not being on the ground floor. It, therefore, depicts that the commercial area being shops, etc. were situated on the ground floor of the building. If that be the case then the built up area for staircase and passage, lift or lift room are to be considered as part and parcel of residential area because these are only to facilitate residents for going up and coming down from the building. It does not assist shops, in any manner, to function with the help of staircase, lift area, lift room, etc. In such a situation the built up are covered under staircase, life passage, lift room etc. has to be considered as part and parcel of residential area and not as commercial area – Deduction is eligible to housing project approved by the local authority as such or as "residential plus commercial project" having residential as well as commercial units to the extent permitted under the Development Control Rules – Decided in favor of Assessee. Unbuilt-up area also be considered in proportion to the residential and commercial area – Held that:- It is obvious that there cannot be 100 percent construction on any plot. Some area has to be left open as per the plan and construction can be done only as per the specifications approved by the competent authority. By no stretch of imagination can an open area be considered as proportionately relatable to residential as well as commercial area. As the size of the plot in this case is more than one acre, condition under section 80IB(10)(b) also stands fully satisfied - Decided in favor of Assessee. Proceeding under section 147 read with section 143(3) – Held that:- Assessee can be allowed deduction under section 80-IB(10) only to the extent it was disallowed in the present proceedings which amounts to ₹ 2,23,85,571. In so far as the disallowance of deduction to the tune of ₹ 31,70,650 is concerned, the same cannot be conferred on the assessee for the reason that it was disallowed in the original assessment order passed under section 143(3) and no material has been brought to our notice to indicate that such order has been modified in any manner. As the reassessment proceedings are aimed at taxing the income which has escaped assessment, these cannot be taken as a tool for putting the assessee in a better position than in which it was before such proceedings - Decided against the Assessee.
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2013 (7) TMI 648
Exemption certificate under section 80G(5)(vi) of the Income Tax Act, 1961 - Charitable purpose - renewal of exemption certificate under section 80G(5)(vi) of the Income-tax Act, 1961 – Alleged that activities are beneficial to manufacturers only. It will not be covered under section 2(15) under public utility. It is governed by the principle of mutuality – Held that:- Assessee-association was registered under the Societies Registration Act since July 16, 1945 - Considering the objects for which the assessee-association the learned Director of Income-tax (Exemption) vide an order dated June 22, 2001 granted registration under section 12A of the Income-tax Act to the assessee-association with retrospective effect from April 1, 1997 and the same is still subsisting - Assessee-association was granted exemption certificate under section 80G(5)(vi) of the Act by an order dated July 27, 2001 of the learned Director of Income-tax (Exemption), which was further renewed for another term covering the period of the assessment year 2009-10, considering the same objects contained in the memorandum of association. Registration of an institution under section 12A by itself is a sufficient proof of the fact that the trust or the institution concerned is created or established for charitable/general public utility purposes and it enjoys approval under section 80G of the Act - When on the same set of facts and circumstances of the case, renewal of registration under section 80G(5)(vi) has been granted for the earlier years and there being no change in the facts and circumstances of the years for which renewal is sought for. No any justification to reject the assessee's application for renewal of exemption certificate under section 80G(5)(vi) for the assessment year 2009-10 onwards - Director of Income-tax (Exemption)'s order rejecting the assessee's application under section 80G(5)(vi) is quashed – Decided in favor of Assessee. Further, relying upon the decision in the case of Sonepat Hindu Educational & Charitable Society v. CIT [2005 (5) TMI 52 - PUNJAB AND HARYANA High Court], wherein their Lordships applying the ratio of decision of the hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1991 (11) TMI 2 - SUPREME Court] has held as - Res judicata can be applied in income-tax proceedings when a fundamental aspect has prevailed through different assessment years without being challenged one way or the other. In such cases it is not appropriate to change the position in a subsequent year – Being the same situation and circumstances as earlier years, there is no any justification to reject the assessee's application for renewal of exemption certificate under section 80G(5)(vi) for the assessment year 2010-11 onwards.
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2013 (7) TMI 647
Section 14A of the Income Tax Act, 1961 – Held that:- Dividend income received from IFFCO-Tokyo General Insurance Co. Ltd. The assessee has not incurred any expenditure and hence, section 14A is not at all attracted. Deduction, if not made any valid claim in the return of income – Held that:- Relying upon the apex court decision in the case of Goetze (India) Ltd. v. CIT [2006 (3) TMI 75 - SUPREME Court] , assessee can raise the issue during the course of assessment, if not claimed in the return of income - Decided in favor of Assessee. Capital Expenditure being disallowed - Disallowance of Rs. 6,17,364 being amount written off in the previous year relevant to the assessment year towards amortisation of lease amount paid towards land obtained from Noida authorities – Held that:- Tribunal in the assessee's own case for the assessment year 2004-05 has held that the said expenditure was capital in nature and not deductible in computing the income – In an analogical issue in the case Deputy CIT v. Sun Pharmaceuticals [2009 (3) TMI 587 - Gujarat High Court], decision has been rendered in favour of the assessee - However, since this Tribunal in the assessee's own case has taken a view, therefore adhering to the doctrine of precedence, relying upon the decision of the co-ordinate Bench of the Tribunal in the assessee's own case decided the issue against the assessee.
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2013 (7) TMI 646
Colourable transaction - Exemption u/s 10(38) - long term capital gain - the assessee-company sold the holding of manority shares to M/s. DLF Commercial Developers Ltd. (DLF-CDL), which is a subsidiary of M/s. DLF Universal Ltd - The assessee-company claimed exemption from taxation for the above sum of long-term capital gains on the ground that the sales were made through a stock exchange and securities transaction tax (STT) was paid as provided under section 10(38) of the Income-tax Act, 1961. - In the previous year relevant to the assessment year under appeal, BFSL acquired land for ₹ 3.75 crores from M/s. Bhoruka Steels Ltd., which is another company of Bhoruka group – Held that:- Though BEIL, BFSL and Bhoruka Steels Ltd. are different corporate entities for the purpose of the Companies Act, they are all controlled by the same interest group of Agarwal family as common shareholders which is very prominent in the entire course of transaction involved in the present appeal - The assessee and its group associates along with the concerned individuals of the same group held 98.73 per cent. of the shares in BFSL, it means without any contradiction that the assessee along with its group owned all the assets and properties of BFSL even though those assets and properties are technically held in the name of BFSL as an independent corporate entity. Once this corporate veil is pierced, which is within the powers of the Revenue authorities, we find that the properties and assets of BFSL were held and de facto owned by the assessee-company and its group – Landed property purchased for ₹ 3.75 crores has become substantially the property of DLF-CDL when 98.73 percent in BFSL were transferred to DLF-CDL on sale - If the formalities of the transactions and the legal nature of the corporate bodies are ignored for a moment, the stark fact coming to surface is that the assessee's group has sold the property belonging to one of its concerns to DLF-CDL for a consideration of more than ₹ 89 crores through the medium of sale and transfer of shares which property was purchased for ₹ 3.75 crores and thereby made attempt to avoid payment of short-term capital gains tax – Decided against the Assessee.
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Customs
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2013 (7) TMI 645
Classification - import of Non-alloy steel melting scrap consisting of skull - presence of "slag" and "skull scrap" in the consignment - whether the conclusion arrived at in the Final Order passed by the Hon'ble Tribunal not having expertise in the subject goods and chemical analysis report submitted by NML would be legally enforceable and tenable - Held that:- The goods in question would fall under heading 72.04 and not under heading 26.19 - the reasoning of the Tribunal particularly based on the National Informatics Data Base of Directorate of Valuation under the Central Boards of Excise and Customs does not call for any interference by this Court -Court relied upon the judgement of Steel Authority of India Ltd v. Commissioner of Customs and Excise, Raipur (2005 (3) TMI 377 - CESTAT, NEW DELHI ) - skull scrap was obtained during the filling of the molten metal in the moulds through tundish as well as some spillage on the ground –the same was imported - skull scrap is suitable for melting and in the absence of any material to show that the imported item was only slag resulting from the manufacture of iron and steel classifiable under Heading 26.19 – no hesitation in accepting the plea of the assessee that the goods in question would fall under heading 72.04 and not under heading 26.19. The reasoning of the Tribunal particularly based on the National Informatics Data Base of Directorate of Valuation under the Central Boards of Excise and Customs does not call for any interference by this Court. - decided against the revenue.
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2013 (7) TMI 644
Fixation of duty drawback - Held that:- Commissioner (Appeals) has rightly denied the fixation of drawback - The exemption contained in the Notification being absolute/unconditional - manufacturer had no option to pay duty on said exempted goods in terms of the provisions of Section 5A(1A) of Central Excise Act - no condition was provided under column (5) of the Notification - the exemption is available to all goods captively consumed – the rules stipulates that rebate of duty chargeable on said materials was to be given a drawback - In case the duty was not chargeable, the question of drawback does not arise - assessee had no option to pay duty on aggregates/materials used in the manufacture of tractors exported - assessee's entitlement of duty drawback on the inputs used in the tractors exported under DEPB-cum-Drawback Shipping Bills - Government notes that such availment were governed by Board’s Circular No. 39/2001-Cus. – brand rate of drawback was available on excise duty paid on indigenous inputs only if such inputs are not specified in relevant SION. Brand rate in duty paid - assessee was claiming brand rate on duty paid on indigenous inputs which are specified in SION norms – Held that:- the claim was not admissible in view of provisions of Circular No. 39/2001-Cus. – assessee’s reliance upon relevant export-import Policy was not tenable on the ground that no provision in the said Policy categorically provides for exemption from conditions for eligibility of drawback in terms of circular No. 39/2001-Cus - brand rate of drawback is available for duty paid on indigenously procured inputs provided such inputs are not specified in SION - the inputs on which brand rate was being claimed are specified in SION, as such, rendered the assessee ineligible for brand rate of drawback in terms of Board’s Circular No. 27/2001-Cus. Brand rate of Duty paid under protest – the claim of duty paid under protest had been rejected - rejection of brand rate of duty paid under protest on inputs by input supplier - Government notes that the original authority had clearly held that in absence of non-mentioning of reason of payment of duty under protest in their Drawback claims and in absence of any certificate indicating that refund of duty had not been claimed by input supplier - assessee failed to give any categorical reasons contradicting findings of original authority their eligibility of the claim does not sustain - decided against the assessee.
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Corporate Laws
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2013 (7) TMI 643
Enforceability of Foreign Awards - Whether the two appeal awards in favour of the respondent are enforceable u/s 48 of the Arbitration and Conciliation Act - Held that:- The objections raised by the appellant do not fall in any of the categories - the foreign awards cannot be held to be contrary to public policy of India as contemplated under Section 48(2)(b) – it does not give an opportunity to have a ‘second look’ at the foreign award in the award - enforcement stage - the scope of inquiry u/s 48 does not permit review of the foreign award on merits - Procedural defects in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy - enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to fundamental policy of Indian law, the interests of India or justice or morality – appeal decided against appellant.
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2013 (7) TMI 642
Jurisdiction of courts - whether clause 18 of the consignment agency agreement the Calcutta High Court has exclusive jurisdiction in respect of the application made by the appellant under Section 11 of the Arbitration and Conciliation Act – Held that:- The appellant shall be at liberty to pursue its remedy under Section 11in the Calcutta High Court – the intention of the parties is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction - expression of one is the exclusion of another - By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata the parties have impliedly excluded the jurisdiction of other court - clause like this is not hit by Section 23 of the Contract Act at all - such clause is neither forbidden by law nor it is against the public policy. The jurisdiction clause of an agreement, the absence of words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” is neither decisive nor does it make any material difference in deciding the jurisdiction of a court. The very existence of a jurisdiction clause in an agreement makes the intention of the parties to an agreement quite clear and it is not advisable to read such a clause in the agreement like a statute.
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Service Tax
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2013 (7) TMI 669
Renting of immovable property - taxability of notional interest on interest free security deposit – Held that:- There was no evidence available on record led by the revenue to show that the notional interest on the interest free security deposit has influenced the consideration received for renting and it is only a presumption on the part of the revenue - the appellant had followed the practice of taking security deposit for the premises rented out on lease basis was common throughout the country and the amount of security deposit taken also varies from place to place and also depends on the property whether it was for commercial or residential purpose – court followed the judgement of CCE, Mumbai-III vs. ISPL Industries Ltd. (2003 (4) TMI 99 - SUPREME COURT OF INDIA 2003). - appellant had made out a case in their favour for grant of stay – stay granted.
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2013 (7) TMI 667
Demand of tax - Manpower recruitment and supply agency - Whether Demand of service tax and penalty on Manpower Recruitment and Supply Agency service upon the assessee by the department sustainable - Held that:- The entire service tax and interest liability was remitted prior to issuance of notice - the petitioner is entitled to immunity from initiation of further proceedings u/s 73 (3) - Court relied upon CCE & ST, LTU, Bangalore vs. Adecco Flexione Workforce Solution Limited (2011 (9) TMI 114 - KARNATAKA HIGH COURt) - the entire amount of service tax and interest on the taxable service of Manpower Recruitment and Supply Agency service including the quantum of Service tax and interest on the Provident Fund amounts remitted by the service recipient to the Provident Fund authorities on behalf of the assessee - were remitted by the assessee to Revenue even before issue of show cause notice – decided in favour of assessee
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2013 (7) TMI 666
Differential income on stock broking – revenue contended that there was differential income on account of assessee during the year - The adjudicating authority critically examined the defence of the assessee and made a detailed assessment of the material on record and came to the conclusion that the lapse of the assessee is not intimating payments made by his sub-brokers in ST-3 returns was mere technical flaw and no demand could be raised on the assessee on this count, since the resultant service tax was already remitted - Held that :- Present appeal had been filed without any justification - no infirmity in the order of the adjudicating authority as confirmed by the order of the Commissioner (Appeals) - once the Tribunal had pronounced on an aspect having a clear and direct application in a subsequent case - such judgment absent any overarching norm by any superior court must constitute the non-derogable norm in conformity with which subsequent assessment or adjudication should proceed – recidivist and futile endeavours by Revenue for utopian perfection tends to undermine the stability of law and impose wholly avoidable litigation costs - appeal decided against revenue.
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2013 (7) TMI 665
Date for applicability of rate service tax – assessee provided the Manpower Recruitment Services – service tax was demanded as short paid along with interest and penalty - whether rate is applicable on date of providing the taxable service or on the date of receipt the payment – what is relevant date for applicability of the rate of service tax - Held that:- The taxable event is the date of providing the service and not the date of receiving the payment - Court followed the judgment of Commissioner of Central Excise Cus., Vadodara Vs Schott Glass India Pvt. Ltd.(2009 (1) TMI 45 - HIGH COURT OF GUJARAT) – no infirmity in the order of Commissioner – appeal decided against revenue.
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2013 (7) TMI 664
Rejection of refund claim – assessee was engaged in the manufacture and export of PF Resin, FF Resin and Hardner - Held that:- In absence of any amount shown on the transportation charges against the GTA service – assessee would not eligible for refund - under Notification No. 17/2009 dated 07.07.2009 the assessee can claim the refund of service tax paid of transport of goods from place of removal to inland container depot or port or airport - the invoices bills submitted by the various service provider show the various amounts against the various entries mentioned in the invoice but nothing on transportation – appeal decided against assessee.
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2013 (7) TMI 663
Plea for leniency – assessee provided security services but did not paid service tax – after adjudication pleaded for leniency - Held that:- It is not a case where any leniency is merited or required to be shown - the same will send a wrong signal to the tax-paying community – court direct the assessee to remit the balance amount of service tax along with interest -the assessee had collected the service tax from their customers and have failed to remit the same - appellant is a repeated offender and the Tribunal had confirmed pre-deposit of huge amounts which the assessee had collected from their customers. Stay application – after submission of duty penalty to be waived and stay granted – decided against the assessee.
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Central Excise
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2013 (7) TMI 671
Stay Application – Pre-deposit - Appellant engaged in the manufacture of V.P. sugar and molasses - Cenvat credit on various inputs namely, M.S. sheets, plates, sections, lock washer, S.S. tubes, pipes, ropes, Roller EN-8, bagasse carrier, joint roller, ERW boiler tube, valve, etc. – Held that:- Items in question against which Cenvat credit has been disallowed have been used for fabrication/manufacture of “Boiler house” which is essential for manufacture of excisable final product - Prima facie there is no justification for denial of Cenvat credit on the impugned goods - Strong prima facie case for waiver of condition of pre-deposit of duty demand, interest and penalty - Stay application is allowed – Decided in favor of Assessee.
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2013 (7) TMI 670
Cenvat Credit - Job Work - Benefit under Rule 4(5)(a) of the CENVAT Credit Rules – Assessee could have followed the procedure prescribed under Rule 4(5)(a) of the CENVAT Credit Rules and could have returned the job-worked material without payment of duty – Held that:- This plea is not sustainable - Party did not opt for the facility provided under the said rule and neither the party followed the procedure prescribed therein. In the absence of exercising any such option or compliance to the procedure prescribed, the appellant cannot claim the benefit of the said provisions – Decided against the Assessee Limitation - There was no specific written agreement for the job-work undertaken by the appellant in respect Tata Motors Limited - The fact that the conversion / job-work charges were not depressed because of the retention of the scrap by the party came to light only after questioning the officials dealing with the matter – Held that:- It is on account of the efforts made by the department during investigation, a clear picture has emerged as to why the job-charges were depressed - Extended period of time could not have been invoked in the present case – Decided against the Assessee. Revenue neutral - Duty discharged by the appellant could have taken as credit by the raw material supplier – Held that:- Relying upon the decision in the case of Jay Yuhshin Ltd. vs. Commissioner of Central Excise, New Delhi [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI], wherein held that the revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods - In the instant case the raw material supplier and the job-worker are totally different and distinct entities and hence the plea of revenue neutrality is prima facie not attracted – Decided against the Assessee.
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2013 (7) TMI 641
Unexplained shortage of finished goods - Shri Subhash Chand Garg who was authorised signatory of the appellant in his statement during enquiry accepted the shortage of goods – Held that:- Relying upon the judgment of Hon’ble High Court of Madras in the case of Alagappa Cement (P) Ltd. vs. CCE, Chennai [2010 (10) TMI 131 - MADRAS HIGH COURT], onus is on the appellant to furnish satisfactory explanation. If the stock shortage remains unexplained, that leads to the conclusion that such consequence was out of clandestine removal – Appeal dismissed – Decided against the Assessee.
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2013 (7) TMI 640
Rufund in cash or by way of Cenvat Credit - Appellant claimed area based exemption under Notification No. 50/2003-CE dated 10.06.2003, they were directed to reverse the cenvat credit in respect of stock of inputs, the inputs in process and inputs contained in the final product on the date of availment of the notification on 29.11.2003 - Assessee not having any credit balance in their RG-23A Part-II register, the total credit was deposited in cash on 29.11.2003 - Subsequently the appellant claimed the refund of the said cash deposited – Held that:- There is no dispute about the fact that the amount in question was paid back by the appellant in cash, as there was no credit available with them in RG-23A Part-II records - There is no dispute about the fact that the appellant is availing benefit of area based exemption notification and as such is not in a position to utilise the cenvat credit - There is no justification for allowing the refund by way of credit to the cenvat credit account, which is not even being maintained by the appellant - The same was paid by the appellant in cash and eligibility of refund having been finally decided in their favour, the same has to be refunded in cash – Decided in favor of Assessee.
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2013 (7) TMI 639
Cenvat Credit taken twice - CENVAT on yarn was allowed only from 1.4.2003 - The assessee had used POY for manufacture of the Text. Yarn which was cleared for captive use on payment of duty (CENVAT @ 2.5/- per kg + AED (TTA) @ 15% of CENVAT), therefore CENVAT credit was admissible for the duty paid Text. Yarn contained in the finish product - The assessee took double Cenvat credit, they took Cenvat Credit on duty paid Text. Yarn laying in the stock and also for the duty paid POY used in the manufacture of this duty paid Text. Yarn – Held that:- Notification No. 25/2003-CE dated 25.3.2003 intended to grant Cenvat credit in respect of inputs lying in stock as on 31.3.2003 but the goods claimed to be input by the appellant in the present appeal was not the input as on 31.3.2003 because that was already transformed into finished goods by ultimate consumption before 1.4.2003 - Consumption of input the appellant has already availed Cenvat credit on input. After notification No. 25/2003-CE dated 25.3.2003 the appellant again made attempt to avail Cenvat credit on yarn which was already transformed into finished goods. Therefore, there was no input existed as such to entitle the appellant to avail Cenvat credit further after 31.3.2003 – Decided against the Assessee.
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2013 (7) TMI 638
First Stage / Second stage dealer - Excess goods found than the recorded value – Seizure of excess goods - Respondent is a first stage dealer registered with the Central Excise Department - Confiscation of the seized goods have been ordered on the basis of statement of Sh. P.K. Aggarwal, Area Sales Manager – Held that:- There is no other evidence corroborative or otherwise to show that the appellants had indulged in clandestine removal of the impugned goods - The appellant is a 1st stage dealer and not a manufacturer - Respondent have taken a categorical stand that inasmuch as they have not received the papers, no entries were made in their records - There is no allegation that the respondent was in the process of passing on the modvat credit to buyers. Once the goods are not recorded in the records maintained by the first stage dealer, he cannot be held liable for passing on unwanted cenvat credit to the buyers. A first stage dealer is required to enter only cenvatable items in his records and cannot be compelled to record the goods, in which he may be trading – Appeal rejected – Decided against the Revenue. Clandestine Removal - Cenvatable goods involving modvat credit of Rs. 1,24,484/- were found short – Held that:- Hon’ble Tribunal upheld the denial of modvat credit of Rs. 1,24,484/- as the goods were removed clandestinely – Decided in favor of Assessee.
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2013 (7) TMI 637
Cenvat Credit - Input services - service tax paid on service used for removal of fly ash - Alleged that as it is not used in or in relation to manufacture of final product or for providing of output service as there is no nexus with manufacture of final product and clearance of final product from the place of removal and for providing of output service – Held that:- In the case of Sanghi Industries Ltd. vs. C.C.E., Rajkot [2008 (4) TMI 471 - CESTAT, AHMEDABAD] , Hon’ble Tribunal has observed as under: “As regards the service tax paid on overhauling of DG set, the Commissioner (Appeals) has taken a view that the final product is electricity which is exempt and therefore, credit is not admissible. Now the law is well settled that Cenvat credit used on inputs/capital goods used in power plant set up by the manufacturer is admissible if the final product is dutiable and therefore, in this case also the Cenvat credit of input services for overhauling of DG set is admissible.” Also in the case of Coca Cola India Pvt. Ltd. vs. C.C.E., Pune II – [2009 (8) TMI 50 - BOMBAY HIGH COURT] held that any such service used in relation to manufacturing activity and relating to business are required to be held as cenvatable service. Removal of coal fly ash is one of the necessity for running of the captive power plant. Without such removal of the coal fly ash from the captive power plant, the same cannot operate and run, in which case, the power won’t be generated and the appellant would not be in a position to manufacture their final product – Appeal allowed – Decided in favor of Assessee.
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2013 (7) TMI 636
Reversal of Cenvat Credit on production of non-excisable goods namely Sludge - sludge is a residue constituting of suspended articles and was refuse – Held that:- It is quite natural that there may be deposit of the sludge when the oil is stored which is beyond control of the assessee. Such a natural phenomena cannot be ignored and respondent cannot be called upon to suffer the reversal of Cenvat credit on the quantum of the input i.e. furnace oil equivalent to sludge on the ground that the same was not used in manufacture – Appeal rejected – Decided in favor of Assessee.
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2013 (7) TMI 635
Assessable Value to be reduced by the amount of discount given to the buyers – Held that:- appellant had never disclosed the pattern of discount to the Department which has proved evasion of the duty - appellant has neither given the discount to all buyers nor the discount was known to buyers. When the discount is not known to the buyers, the appellant shall not get any deduction of the same from the assessable value – Appeal dismissed – Decided against the Assessee.
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2013 (7) TMI 634
Rule 3(5) of Cenvat Credit Rules, 2004 – Registration as a manufacturer and not as a dealer - Appellant imported sodium antimonite and availed the credit of duty paid thereon - Said sodium antimonite was sold by the appellant as such by reversing the entire credit so availed by them - Revenue entertained a view that inasmuch as the assessee had traded in the said sodium antimonite and inasmuch as they were not registered as dealer, they were not entitled to avail Cenvat credit – Held that:- Rule 3(5) of Cenvat Credit Rules, 2004 provides that when inputs, on which credit has been taken are removed; as such, from the factory, the manufacturer shall pay an amount equal to the credit availed in respect of such inputs - The Tribunal in the case of CCE, New Delhi vs. Topaze Overseas (P) Ltd. [1998 (8) TMI 384 - CEGAT, NEW DELHI] has observed that the assessee’s registration as manufacturer of same items and not as a dealer is sufficient for the purpose of Notification No. 32/94-CE(NT). Similarly in the case of R S Julliram Shamlal vs. CCE Calcutta [2002 (1) TMI 1070 - CEGAT, KOLKATA], it was held that when supplier of inputs is already registered as a manufacturer separate registration as a dealer is not a ground for denying the Cenvat credit - Credit availed by the assessee stand reversed by them at the time of clearance of goods from their factory and as such, the entire situation is revenue neutral – Decided in favor of Assessee. Shortage found in two Raw-Materials - Shortages detected in the lead ingots and zinc ingots - The appellants immediately reversed the said credit – Held that:- No evidence adduced by the Revenue that the differential quantity of inputs was cleared by the appellant clandestinely - Appellants contention that such shortage may be on account of short quantity received than the invoice quantity is to be accepted - Appellants not agitated the said confirmation of demand and has deposited the same - Imposition of penalty on the appellant is not justified – Decided in favor of Assessee.
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2013 (7) TMI 633
Involvement of meager amount - None appeared on behalf of the appellant - A letter has been filed on behalf of the appellant company, requesting for disposing the matter on merit – Held that:- As the issue involved in this case is in narrow compass, Application for disposal was taken up in the absence of any representation on behalf of the assessee - Directed the appellant to deposit entire amount of CENVAT Credit that has been confirmed as in-eligible.
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CST, VAT & Sales Tax
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2013 (7) TMI 668
Section 8(5) of the CST Act as amended by Finance Act 2002 - whether the power of the State Governments to grant exemption under Section 8(5) is restricted only in respect of the transactions covered under Section 8(1) and not in respect of the transactions covered under Section 8(2) of the CST Act? - Held that:- As in State of Tamil Nadu V/s. Sitolaxmi Mills(1973 (12) TMI 75 - SUPREME COURT OF INDIA) uphelding the constitutional validity of Section 8 of the CST Act and further held that the high rate of tax imposed under Section 8(2) does not directly or indirectly impede or hamper the free flow of trade, commerce and intercourse and that in appropriate cases, the State Governments under Section 8(5) are empowered to grant total or partial exemption from the higher rate of tax payable under Section 8(2) the argument of the Revenue that the legislative policy of the Government is to discourage inter State sales to unregistered dealers cannot be sustained as the said argument is contrary to the report of the Taxation Enquiry Commission and also the decisions of the Apex court referred above. The argument of the Revenue that since it is mandatory to fulfill the requirements of Section 8(4) while exercising power under Section 8(5), it must be held that the power of the State Governments to grant total / partial exemption in public interest is restricted only to the transactions which fulfil the requirements of Section 8(4) namely the transactions covered under Section 8(1) cannot be accepted because, Section 8(5) as amended by Finance Act, 2002 not only refers to the transactions covered under Section 8(1) but also refers to the transactions covered under Section 8(2). Therefore, when Section 8(5) as amended by Finance Act 2002 specifically refers to the power of the State Governments to grant total / partial exemption from the tax payable under Section 8(1) or 8(2), it is not possible to accept the contention of the Revenue that after the 2002 amendment, the power of the State Government under Section 8(5) to grant total / partial exemption is restricted only in respect of the transactions covered under Section 8(1). Thus by retaining the words 'any person or class of persons' in the amended Section 8(5)(b) it is made clear that even after the 2002 amendment, the State Governments under Section 8(5) are also empowered to grant total / partial exemption in public interest in respect of inter State sales to any person or class of persons covered under Section 8(2) of the CST Act. Thus once it is held that the powers vested in the State Governments under Section 8(5) are not divested by the 2002 amendment and that even after the 2002 amendment, the State Governments subject to compliance of Section 8(4) have power to grant exemption in respect of transactions covered under Section 8(1) as also under Section 8(2), no reason to consider the second and the alternative argument of the petitioners that Section 8(5) as amended by Finance Act 2002 does not affect the rights vested in the petitioners under PSI 1993 to avail the exemption upto the quantum specified / period specified in the Entitlement Certificate granted to the petitioners.
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