TMI Tax Updates - e-Newsletter
July 9, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Period of limitation for declaring Assessee in default - time limit for proceedings u/s 201(1) and (1A) - tribunal fixed it to 4 years - order of tribunal sustained - HC
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Income Tax:
Obligation to pay advance tax - Revision of estimate - it can be reasonably inferred that the appellant acted bonafidely in not revising the estimate under Section 209A (4) of the Act. - HC
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Income Tax:
Deduction u/s 80IB – Business of assembling of computer and servers – manufacturing process -it was a new and distinct product which was coming out, entitling the assessee deduction u/s 80IB of the Act - HC
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Income Tax:
Establishment of PE in India – service PE - Article 5 of Indo-UK DTAA – It is thus rightly held that the service PE of the assessee is established in India - AT
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Income Tax:
Claim of deduction u/s 54 – new house purchased is in a foreign country - assessee is held entitled for claim of deduction u/s. 54 of the Act - AT
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Income Tax:
Payment to overseas institution as fees for awarding the degrees, supplying books and course material – There is no transfer of any technical know-how or technical services - No TDS required - AT
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Income Tax:
Computation u/s 153A - assessment order is silent as to whether the assessment for AY 2003-04 was pending as on the date of search and whether any incriminating material was found during the course of search - matter remanded back - AT
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Income Tax:
Deduction on profits and gains u/s 80IB - carrying on the same business in the new unit or stoppage of business in the old unit cannot be a criteria to hold that it is a case of reconstruction of a business already in existence - AT
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Income Tax:
TDS - activity of carriage of its school children by any mode of transport other than by railways - transport contracts would be covered by Sec. 194C and not Sec. 194I - AT
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Income Tax:
Double deduction of expenses towards excise duty – effect of increase of closing stock was neutralised by debiting to the P & L account - matter remanded back for verification - AT
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Service Tax:
Short-payment - Interest paid but paid under separate heading - Payment was made under a different Head should not result in denial of benefit of such payment and appropriation of the payment towards the liability - AT
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Service Tax:
Commercial or industrial construction service - construction of Bharat Ghar - letter issued by the Greater Noida Authority requires to be considered and appreciated, to adjudicate upon the claim of the appellant as to non-liability to service tax - AT
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Service Tax:
Refund - export of services - Notification 17/09 - exports that have taken place prior to its issuance - refund to be allowed since Notification 17/09-ST does not bar its applicability to the exports that have taken place prior to its issuance - AT
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Service Tax:
Whether the appellant having taken the services or operated under the authorization given to these persons would get covered under the category of Port services or not - stay granted partly. - AT
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Service Tax:
Valuation - repair and maintenance of transformers - value of spare parts sold by a service provider is not required to be taken into consideration if the same are subjected to levy of sales tax and VAT - AT
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Central Excise:
Assembly of CNG Kit - whether the very act of collecting various components and fitting them into a box for installation in the CNG would amount to manufacture - Held no - AT
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Central Excise:
Duty demand - simple failure of non-accounting of goods in the RG 1 register do not invite confiscation of the same or imposition of penalty unless there is evidence to show that goods were meant for clandestine removal - AT
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Central Excise:
Cenvat Credit - exempted by-product - Whether 8% of the amount is required to be discharged - liability to pay the said amount would not arise in respect of exempted by-product. - AT
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Central Excise:
100% EOU - demand of duty - grey fabrics manufactured cleared to DTA units - appellant obtained raw materials duty free i.e. without payment of duty removed clandestinely demand confirmed - AT
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Central Excise:
CENVAT Credit - whether the appellants are eligible to take Cenvat credit on MS plates, channels, beams, angles, etc. - prima facie, benefit of Cenvat credit cannot be denied to the appellant. - AT
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VAT:
Constitutional validity of certain provisions of the Tripura Value Added Tax Act, 2004 - writ petition rejected with heavy cost - HC
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VAT:
Liability to sale tax - Rate of tax - Inter-State sale of the goods or not - Bombay High does not form part of any State of Union of India - not liable for CST - HC
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VAT:
Attempt to evasion of tax -Since it is found that the buyer has become the owner of the goods, penalty can be imposed on him only if it is proved that he had colluded with the seller in his attempt to evade payment of tax - HC
Articles
News
Case Laws:
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Income Tax
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2014 (7) TMI 265
Period of limitation for declaring Assessee in default - time limit for proceedings u/s 201(1) and (1A) of the Act - Reassessment u/s 147 of the Act – tribunal held that the order passed under Section 195 r/w 201(1) or 201(1A) of the Income Tax Act, 1961 cannot be held as barred by limitation if it is not passed within four years from the end of the relevant financial year – Held that:- Tribunal was rightly of the view that Section 195(1) casts duty on the person responsible for paying or crediting to the account of a nonresident any sum chargeable to tax under this Act for deducting tax at source - on failure to deduct or pay to the Government after deducting, the person responsible is treated as Assessee in default u/s 201(1) - “Any such person” referred to in section 201(1) extends not only the person deducting and failing to deposit the tax but also the person failing to deduct the tax at source - Where no time limit is prescribed for taking an action under the statute, the action can be taken only within a reasonable time by harmoniously considering the scheme of the Act - Tax recovery proceedings are initiated only after the passing of order u/s 201(1) and that too if the person responsible fails to comply with notice of demand u/s 156. The decision in COMMISSIONER OF INCOME-TAX Versus NHK JAPAN BROADCASTING CORPORATION [2008 (4) TMI 182 - DELHI HIGH COURT] - though Section 201 does not prescribe any limitation period for the Assessee being declared as an Assessee in Default yet the Revenue will have to exercise the powers in that regard within a reasonable time - the Tribunal's order does not suffer from any error of law apparent on the face of record or perversity warranting our interference in appellate jurisdiction – thus, no substantial question of law arises for consideration – Decided against Revenue.
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2014 (7) TMI 264
Grant of registration u/s 12AA(3) of the Act – Object of society – Exemption u/s 10 (23C)(vi)of the Act - Held that:- The registration u/s 12A of the Act can be sought either by the trust or by the institution - for the purposes of claim of exemption u/s 11 and 12 of the Act, the registration u/s 12A of the Act is necessary as provided by Section 12A of the Act - for the cancellation of registration, the satisfaction of the Commissioner to the extent that the activities of the trust or the institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, whether the income of trust or institution is liable to be exempted on the fulfillment of the requirement provided u/s 11 of the Act, the matter is to be examined by the assessing authority. No finding has been recorded with regard to the satisfaction that the activities of the assessee are not genuine or are not being carried out in accordance with the objects of the trust or the institution - The criteria to grant exemption u/s 10 (23C)(vi) and grant of registration u/s 12A is different and merely because the exemption u/s 10 (23C)(vi) is declined, it does not amount the refusal of registration u/s 12AA or in case if the registration has been granted, it may be cancelled on that ground - For the cancellation of registration, the requirements, as provided under sub-section (3) of Section 12AA, are to be fulfilled - the refusal of the exemption u/s 10 (23C)(vi) may be relevant for the purposes of cancellation of registration, but to arrive to the conclusion that the activities of the trust or the institution are not genuine or are not being carried out in accordance with the objects of the trust or the institution, finding in this regard is necessary, based on the relevant material – thus, the matter is to be remitted back to the CIT for fresh adjudication – Decided in favour of Revenue.
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2014 (7) TMI 263
Obligation to pay advance tax - Revision of estimate - Levy of penalty - Interpretation of section 273(2)(c) of the Act - Whether there was a reasonable cause in not revising the estimate in the months of September and December, 1981 - Held that:- The assessee had filed an estimate of income on 9.6.1981 showing the advance tax liability at nil - The estimate has not been further revised in the months of September and December, 1981- there was a reasonable cause in not revising the estimate under sub-section (4) of Section 209A of the Act – Decision in the case of Commissioner of Income Tax vs. Sulphur Refinery Pvt. Ltd. [1998 (6) TMI 73 - BOMBAY High Court] followed. on the day when the assessee was obliged to revise the return, the appellant had a bonafide belief of loss inasmuch as the details of the returns for the assessment years 1980-81 and 1981-82 were available. For both the assessment years, the returns of loss were filed, thus, it can be reasonably inferred that the appellant acted bonafidely in not revising the estimate under Section 209A (4) of the Act. - thus, the penalty imposed is set aside – Decided in favour of assessee.
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2014 (7) TMI 262
Restriction of addition on excess stock – Held that:- The Tribunal was of the view that there was an incongruity for which an addition is quite reasonable - owing to this calculation any leakage is covered up - An average rate of Finished, Semi Finished and raw material is 16.14/kg - This is to be applied on 24700 kg. In terms of amount the value comes to ₹ 4,07,303 - the issue is predominantly based on factual matrix - both the CIT(A) and the Tribunal have treated the issue elaborately and concluded in favour of the assessee - Tribunal had undertaken the entire exercise of computation - on examining the summary of stock valuation and other relevant materials, it reconciled the entire material and concluded that the AO was not right in making additions – Thus, the order of the Tribunal is upheld – Decided against Revenue.
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2014 (7) TMI 261
Disallowance u/s 80IB of the Act – Business of assembling of computer and servers – manufacturing process - Held that:- The decision in Arihant Tiles & Marbles(P.) Ltd. [2009 (12) TMI 1 - SUPREME COURT] followed - claim for deduction under the provision of 80IB was allowed in case of the very assessee in the year 2001-2002 and the assessee carried the manufacturing activity and there had been no change in the manufacturing process nor has any contrary material produced in the year under consideration - while assembling various components by carrying on quality control through testing equipments, the assessee manufactured computers and servers which is a new and distinct product other than the components of which it is made - it was a new and distinct product which was coming out, entitling the assessee deduction u/s 80IB of the Act – thus, there was no reason to interfere in the order of the Tribunal – Decided against Revenue.
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2014 (7) TMI 260
Establishment of PE in India – service PE - Article 5 of Indo-UK DTAA – Held that:- The AO has observed that the employees of JCBE, earlier seconded to JCBI, continued to render services to JCBI during the year in question in the same way as they were doing in the past – the details coupled with the fact that JCBE received 99.5% of royalty from the assessee left nothing to doubt that there was service PE of the assessee as per Article 5(2)(k) of the DTAA covered within the ambit of ‘other personnel’ - this position has been candidly accepted by the assessee - all the requisite conditions for attracting the mandate of Article 5(2)(k) are satisfied inasmuch as (i) there is furnishing of services including managerial services; (ii) such services are other than those taxable under Article 13 (royalties and fees for technical services); (iii) such services are rendered out of India; (iv) such services are rendered by ‘other personnel’; and (v) such activities continued for a period of more than 90 days within 12 months’ period - It is thus rightly held that the service PE of the assessee is established in India – Decided against Assessee. Royalty earned connected with service PE in India – Held that:- The Tribunal in the earlier year has held that the total amount consisting Lumpsum Licence/Know-how Fees and also royalty was consideration for the transfer of IP rights simplicitor and also the service rendered by the employees of the second category - in so far as the question of royalty representing consideration for the transfer of IP rights simplicitor was concerned, the service PE representing the deputationists had no role to play either in creating or making it available to JCB India - That is how the Tribunal came to hold that the same was not effectively connected with the service PE of the assessee in India - the consideration for rendering of services by the employees of first category was chargeable to tax under Article 7 of the DTAA – thus, the matter is remitted back to the AO for determination of the amount of income in terms of Article 7 – Decided in favour of Assessee. Applicability of Article 13(2) – Royalty subject to tax @ 20% plus surcharge and education cess u/s 115A(1)(b) of the Act – Held that:- The Department has no power to file appeal or object to the any direction issued by the DRP in pursuance of which the AO passed order u/s 144C, if the assessee filed objection before the DRP before this cut-off date of 1.7.2012 - the assessee filed objection against the draft assessment order before the DRP on 30.01.2012 - the objection in the case was filed by the assessee before the DRP prior to 01.07.12, the Revenue could have neither filed appeal nor cross objection against the order of the Assessing Officer – the cross objection is not maintainable. Neither the AO nor the DRP has held that the assessee is a beneficial owner of the royalty and hence the same should be charged to tax at the lower rate of 15% as provided under the DTAA – revenue goes without saying that right to appeal is a statutory right provided to the aggrieved party – it can be exercised strictly in accordance with and as per the terms of the relevant provision - If the law does not specifically or generally confer such a right against a particular action of the authorities, then the same cannot be inferred - section 253 of the Act does not give any right to the Revenue to appeal against a non-finding of the AO or the DRP, as the case may be - CO of the Revenue lacks the necessary mandate so as to become eligible for consideration and adjudication – Decided against Revenue. The effect of the section in unequivocal terms is that the provisions of the Act or the DTAA, which ever are more beneficial to the assessee, apply - the provisions of Art. 13(2) of the DTAA providing for lower rate of tax, being more beneficial to the assessee, shall apply if it is found to be covered within the mandate of the Article 13 of the DTAA - the assessee offered the entire amount as royalty income in its hands and admittedly JCBE did not - The assessment of royalty income has been made on substantive basis in the hands of the assessee and there is no assessment of such royalty income in the hands of the JCBE - It is not the case of the parties before us that the amount received by the assesee should have been charged to tax in the hands of JCBE as it was the real and the beneficial owner of the amount received by the assessee who merely acted as a mediator between JCBI and JCBE. For the applicability of Article 13(2) of the DTAA, the requirement is that the beneficial owner should be the resident of the UK - It is not that if the formal recipient, a resident of UK, is not the beneficial owner, then the benefit is lost, notwithstanding the fact that the beneficial owner is also the resident of UK - relief of lower rate of taxation can be denied if the beneficial owner of the royalty is a resident of some third state, neither being India nor UK - the assessee, a resident of UK, is not a beneficial owner as per the stand point of the Revenue, still the benefit of lower rate of tax cannot be denied because the beneficial owner of the royalty, being JCBE, is admittedly resident of UK - the royalty has arisen in India, and the beneficial owner of this royalty is resident of UK - the tax shall be charged @ 15% as provided in Article 13(2) of the DTAA. - Decoded partly in favor of assessee.
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2014 (7) TMI 259
Amount debited to P&L A/c as overdue interest reserve – Held that:- The assesee had rightly contended that the assessee followed the regular system of accounting - the assessee has made the provision following the RBI guidelines - the assessee referred to the Master Circular of RBI for Income Recognition, Asset classification, provisioning and other related matter of the RBI - similar provision for overdue interest reserve has been made by the assessee in the prior period on the basis of RBI guidelines issued in this regard and the same was allowed - provisions made as per RBI guidelines are allowable - similar provision made in the previous period has been allowed to the assessee - the assessee has a reasonable case and the orders of the authorities is to be set aside – Decided in favour of Assessee. Payment of internal tax auditor – Liability to pay TDS on salary or u/s 194J as professional fee – Held that:- CIT(A) rightly held that the payments to those persons did not attract liability of TDS u/s 194J of the Act - the payment is related to the salary payment there is no question of deduction of TDS u/s 194J of the Act – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue. Non-deduction of TDS – Form 15G not obtained - Held that:- CIT(A) noted that several Form-15G were received by the assessee and they were sent to the CIT’s office under Certificate of posting - CIT(A) noted that as per the sub-rule(3) of Rule 29C of IT Rules the form 15G is forwarded to the Chief Commissioner or the Commissioner of Income Tax - CIT(A) held that the assessee complied its obligation and therefore the AO was not correct to disallow and add back to the income u/s 40(a)(ia) of the IT Act - CIT(A) has deleted the addition in this regard by finding that Form15G were obtained and sent to the Chief Commissioner of Income Tax in this regard – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 258
Penalty u/s 271(1)(c) of the Act to be levied with prior approval – Held that:- The order passed u/s 271(1)(c) itself shows contradictory facts and no material was brought on record by Revenue to prove otherwise - the AO has not followed the mandatory procedure, prescribed u/s 274(2) of the Act – the penalty levied u/s 271(1)(c) of the Act is to be set aside - the case of the assessee is that after being diagnosed with cancer her father gave the money to the assessee, which has to be amicably distributed amongst the family members but upon the death of her father it became difficult for her to gather the material to prove the source of his money; to buy peace of mind and to avoid litigation the amount was offered to tax - the assessee always cooperated with the Department - thus, it cannot be treated as a deliberate act or omission on the part of the assessee so as to levy penalty – revenue could not controvert the contents brought out in the affidavit by the legal heirs - Taking an overall picture and particularly on the fact that neither Shri Francis Philip Gonsalves nor Smt. Violet Julius Pereira are alive today, a lenient view of the matter deserves to be taken - she has voluntarily offered to tax to buy peace of mind – thus, the explanation of the assessee is bonafide – Decided in favour of Assessee.
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2014 (7) TMI 257
Claim of deduction u/s 54 – new house purchased is in a foreign country - exemption from Capital gain - Held that:- CIT(A) has disallowed the assessee’s claim of deduction u/s. 54 for the reason that he had purchased his new house in Singapore; paid his consideration in foreign currency, the amount turned out to be more than sale consideration realized from sale of Chennai house and his accounts statement did not provide exact information about flow of money – Relying upon Vinay Mishra Vs. ACIT [2013 (9) TMI 80 - ITAT BANGALORE] - sec.54 claim cannot be rejected merely for the reason that the new house purchased is in a foreign country - the Revenue has failed to draw any distinguishing features - the CIT(A) first reason is not sustainable in the eyes of law. The purchase amount is more than sale proceeds and assessee’s bank statement did not provide exact information - sec. 54 is a beneficial provision wherein such a condition is nowhere provided for - the assessee had utilized his consideration money only to purchase the new Singaporean house - the CIT(A)’s other reasons are not liable to be affirmed - The assessee is held entitled for claim of deduction u/s. 54 of the Act – Decided in favour of Assessee.
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2014 (7) TMI 256
Disallowance u/s 14A r.w Rule 8D of the Rules – Interest on exempt income – Held that:- CIT(A) rightly held that the interest expenditure that could be considered for disallowance was to be the net amount of interest which the assessee had to incur - the source of income and the destination of expenditure were same and when both had a direct nexus with the earning of exempt income, the expenditure in that regard would be that which was actually incurred by the assessee - the assessee had himself disallowed all the expenditure claimed to be incurred by him - CIT(A) after proper appreciation of the facts has categorically held that there was a direct nexus between loan, interest paid on loan amount, the interest received on margin money as well the investments made – thus, CIT(A) rightly held that the assessee was right in his action in netting the interest received against the interest paid, while calculating the interest expenditure incurred for the purpose of investments as the source of money for investment and the destination of expenditure were the same – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 255
Addition u/s 40(a)(ia) – Payment to overseas institution as fees for awarding the degrees, supplying books and course material –TDS not deducted u/s 195 - technical know-how or technical services - Held that:- CIT(A) rightly of the view that the amount has been paid by the assessee to the overseas institutions as fees for awarding the degrees, supplying books and course material - fees is paid towards the study curriculum which includes teachers textbooks, teaching aids, associated marketing tools and materials etc. - There is no transfer of any technical know-how or technical services - The Revenue has not been able to substantiate its plea, as to how the amount paid falls in the category of technical fee – thus, there was no infirmity in the order – Decided against Revenue.
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2014 (7) TMI 254
Computation u/s 153A of the Act - Sale of flat – Computation of LTCG – Held that:- Chapter XIV-B of the Act deals with computation of undisclosed income, whereas section 153A, etc., provides for the computation of ‘total income’ - the language of section 153A has been structured in such a way so as not to permit the making of addition for the AY of which the assessment is not pending as on the date of search, without there being any incriminating material found during the course of search - where a search is initiated u/s 132 of the Act etc., the AO shall issue a notice requiring the person searched etc. to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made - a duty has been cast on the AO to determine the 'total income' of the assessee for such six assessment years. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income - if some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search - In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material - no addition can be made for any assessment year u/s 153A, the assessment for which is not pending on the date of search, unless any incriminating material is found in the course of search - The assessment order is silent on both the counts as to whether the assessment for AY 2003-04 was pending as on the date of search and whether any incriminating material was found during the course of search having bearing on the addition so made – the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (7) TMI 253
Outstanding sales tax liability – Held that:- If the amount of liability has not been not deducted in arriving at the quantum of taxable income which could be on the ground of deferral of sales-tax being considered as deemed payment, so that deduction in its respect stands claimed, the same could definitely be considered as income on cessation of liability - The onus on the assessee in-as-much as it is its’ claim that no deduction qua the said liability/s has in fact been claimed for the relevant year/s – thus, the matter is remitted back to the AO for verification of assessee’s claim by issuing definite findings of fact. Advance forfeited but outstanding in books of accounts - taxability u/s 51 – Agreement to sale not materialized – Held that:- It could not be ascertained as to how the primary facts being undisputed and un-rebutted - the assessee’s income when the relevant asset (property) continues to be owned by the assessee and, accordingly, reflected in its accounts - assessee has clarified that the asset sold by it during the FY 2006-07 was in fact its factory building at Vapi – the amount has nothing to do with the sale - The amount is a capital receipt in the assessee’s hands, and which character would not undergo any change due to lapse of time - it would stand to be reduced from the cost of the relevant asset (residential plot) on its sale, i.e., if and when it takes place, in terms of section 51 of the Act. Disallowance of claim of rent – Held that:- The assessee explaining its inability to improve matters as the recipient was not co-operating with it - No improvement in its case, besides stating that the godown had been rented at ₹ 2300/- per month w.e.f August 2006 onwards, stands made by the assessee - if the assessee could demonstrate the actual renting of the godown from Shri Lakdawalla and payment of the sum to him, i.e., as a fact, there is no particular reason for disbelieving the assessee’s claim - The amount stands paid as an advance, so that it having been forfeited by the landlord, it is quite possible that he may not co-operate with the assessee - The onus to establish the basic facts afore-stated would be though on the assessee – thus, the matter is remitted back to the AO for verification. Depreciation on a staff quarter – Held that:- There was no merit in the assessee’s claim, which thus is only a bald one – it could not be observed that even the name of the relevant employee or any evidence of his working for the assessee having being adduced at any stage. Notional income from house property – Held that:- The assessee wrongly agitates the addition on this ground at ₹ 1,68,000 - CIT(A) having allowed it specific and substantial relief in-as-much as the estimation by the AO was ad hoc, while the municipal valuation would, besides being conservative, make for an objective criterion - No improvement in its case stands made by the assessee - reference to the municipal tax bill during hearing reveals municipal tax to be unpaid not only for FY 2010-11 but also for the preceding years as well – Decided partly in favour of Assessee.
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2014 (7) TMI 252
Deduction u/s 80IB of the Act – Correct audit report as per Form 10CCB filed subsequent to original assessment – Held that:- The assessee’s claim for deduction u/s 80IB on the profits derived from its industrial undertaking has been allowed to the assessee since last several years - In all the subsequent proceedings, like revision proceedings u/s 263 and the appeal before the Tribunal against the order, this vital fact has either not been brought to the notice of any of the authorities or had not been considered – the contention is accepted that if the audit report for the purpose of claiming deduction u/s 80IB, has been filed subsequently before the AO or even at the appellate stage, it should be taken into cognizance for examining the allowability of claim for deduction - neither the AO nor the Commissioner (Appeals) in the proceedings, has taken cognizance of the audit report filed before the AO in the rectification proceedings, thus, the matter is liable to be remitted back to the AO for the examination that if the revised audit report has been filed before the AO in pursuance of notice u/s 154, then it should be taken into cognizance for examining the allowability of the claim u/s 80IB – Decided partly in favour of Assessee.
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2014 (7) TMI 251
Deduction on profits and gains u/s 80IB of the Act –Industrial undertaking formed by reconstruction of business – Held that:- The decision in assessee’s own case for the earlier assessment year followed, the unit has not been formed either by splitting up or by reconstruction of a business - There was a new independent location where new plant and machinery was stated to be installed - Whether the assessee carried the same business or different business was of no consideration as it was done by the revenue authorities - the AO has molded the facts and stated that the old unit was closed down consequently given birth to a new unit - The old unit may stop functioning immediately or after sometime - If old unit runs parallel for some time and thereafter it stop functioning then it is not going to make any difference - carrying on the same business in the new unit or stoppage of business in the old unit cannot be a criteria to hold that it is a case of reconstruction of a business already in existence – thus, the assessee is entitled for the claim of deduction u/s 80IB of the Act – Decided in favour of Assessee.
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2014 (7) TMI 250
Penalty u/s 271(1)(b) of the Act Opportunity of being heard Held that:- The notices u/s 142 (1) of the Act were issued on 19.11.2012, for 26.11.2012, giving a very short time of only six days - the notices were served, rather as to whether such notices were served at all, does not find mention in the penalty orders - the assessee was not provided sufficient time to respond to the notice - there is no mention of any non-cooperation by the assessee with the AO during the assessment proceedings - there was no case for the imposition of penalty u/s 271(1)(b) of the Act Decided in favour of Assessee.
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2014 (7) TMI 249
Addition u/s 68 of the Act – Double addition - Opportunity of being heard – Held that:- The Tribunal earlier held that some of the persons had introduced their money for share application through cheques and some of them had introduced the money in shares through DD – the Tribunal had given specific directions to AO to examine the bank account and DDs purchased by the persons - From the reply of three persons viz Shri Santosh Gupta, Mukesh Bhatia and Shri Basant Lal it is evident that they expressed their inability to produce the bank details as the same were more than 10 years old - they furnished the photo copies of the share certificates - As far as Anand Singh is concerned, he had also stated in response to letter dated 10th July, 2008 that the payment had been made through banking channel but the bank statement was not available with him - he could not be found out subsequently and he did not furnish his photo copy of share certificate - keeping in view the smallness of amount and the matter being quite old and considering their replies, the addition made in respect of Santosh Gupta, Mukesh Bhatia and Basant Lal is liable to be set aside - in respect of other persons since assessee was not able to comply with the directions of the Tribunal, no interference is called for with the order of CIT(A) – Decided partly in favour of Assessee.
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2014 (7) TMI 248
Penalty u/s 271(1)(c) of the Act – Claim of disallowance not accepted by AO – Held that:- The assessee earned dividend income which was claimed as exempt - the assessee furnished all the details relating to the earning of dividend income and the calculation for the disallowance to be made u/s 14A of the Act - it cannot be said that the assessee had concealed income or furnished inaccurate particulars of income - The only basis for levying the penalty u/s 271(1)(c) of the Act was that the claim of the assessee for the disallowance u/s 14A of the Act was not accepted by the AO, so it can at the most be a ground for making the addition but was not sufficient to levy the penalty u/s 271(1)(c) of the Act. Relying upon CIT Vs Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - there was a difference of opinion as regards to the working of disallowance u/s 14A of the Act - The assessee disallowed suo-moto a sum of ₹ 16,020/- while the AO worked out the disallowance at ₹ 41,10,546/- which was more the total claim of the expenses at ₹ 32,06,595 - merely on this basis that the claim of the assessee was not accepted by the AO it cannot be said that the assessee either concealed the income or furnished inaccurate particulars of income - CIT(A) was fully justified in deleting the penalty levied by the AO u/s 271(1)(c) of the Act – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue.
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2014 (7) TMI 247
Payment made for hiring of buses - Short deduction of TDS u/s 194C of the Act – Liability to deduct tax u/s 194I @ 10% - Held that:- CIT(A) rightly of the view that the contract entered by the assessee with the transport service provider is primarily in the nature of transport contract/service contract for providing travel facility of school children to and from the School of the assessee and not for hiring the vehicles – assessee itself has not utilized the vehicles but they were used by the transport contractors for fulfilling the obligations set out in the agreement - the running and maintenance expenditure is borne by the transport service providers who are also responsible for making all other arrangements, the nature of contract entered cannot be termed as contract for hiring of the vehicles - the provisions of Sec.194I of the Act are not applicable since the expression plant and machinery used in explanation to Sec. 194I refers to plant and machinery used by the assessee in its business by hiring them but not hiring of transport services. As per the transport contracts, the activity of transport contractor will be a simple activity of carriage of its school children by any mode of transport other than by railways - transport contracts would be covered by Sec. 194C and not Sec. 194I – Relying upon ACIT (TDS) Versus Delhi Public School [2014 (1) TMI 176 - ITAT DELHI] - the provisions of section 194C are applicable - The assessee has deducted TDS as per section 194C of the Act - there was no fault in the order of the CIT (A) – Decided against Revenue.
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2014 (7) TMI 246
Conodnation of delay - CIT(A) dismissed the appeal on account of delay - time gap between signing of appeal memo and actual filing of appeal - Held that:- CIT(A) noticed that the date of service of the notice of demand in both the cases was 4th November, 2011 and appeals were filed by the assessee on 19/3/2012 - the appeals were belatedly filed - the request of the assessee for condonation of delay has been rejected only for the reason that assessee could not explain the delay between the signing of the verification of appeal form and the actual date of filing the appeal - The concerned gap is only of 16-17 days - many other documents are required to be filed along with appeal, the time gap of 17 days is not much as the statute itself has given time of 30 days to the assessee to file appeal before CIT(A) - it is a deserving case where delay should have been condoned by CIT(A) - CIT(A) is directed to condone the delay and decide the appeals filed by the assessee on merits after giving the assessee a reasonable and sufficient opportunity of hearing – Decided in favour of Assessee.
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2014 (7) TMI 245
Proceedings u/s 263 of the Act - Condonation of delay for appeal before CIT(A) – Delay of 771 days – Assessee contended that the appeal could not be filed in time as the papers had been misplaced by one of the office staff and the same could be traced out with a delay of 771 days - Held that:- The order u/s 263 was passed on 19.04.2011 and subsequently, assessee also appeared before the AO who has passed assessment order on 26.12.2011 - it cannot be stated that assessee is not aware about the 263 proceedings and misplacement of papers by one of the office staff cannot be accepted as a genuine explanation and it could be one of the reason given seeking condonation of delay even though the actual reason may be that assessee did not want to challenge the order when it was passed, therefore, the condonation of delay cannot be granted – Decided against Assessee. Reassessment proceedings - reopening after 4 years - Held that:- there is no evidence on record that assessee has furnished the necessary information. In fact, change of accounting policy in A.Y. 2005-06 itself not on record. - even though assessment was reopened after 4 years, on the facts of the case, A.O. is well within the jurisdiction to reopen the assessment - Decided against the assessee. Double deduction of expenses towards excise duty – the amount added to the closing stock by the assessee as well as debited to profit & loss account as expense – Held that:- Under the provisions of section 43B, excise duty paid is allowable as deduction if it is paid on or before the relevant due dates out of the outstanding amounts at the end year - in the computation of income the assessee has to add the amount outstanding at the end of the year and then should claim the amount as deduction - As explained in A.Y. 2005-06, assessee has added amount of ₹ 1,43,47,164/- as amount of addition to the closing stock as the assessee was following the exclusive method earlier - Because of change in method of accounting, the closing stock value has gone up by that amount. In order to neutralise the same, the same amount was also claimed in P & L account as debit to the P & L account under the Head “Manufacturing & Direct Expenses” - the effect of increase of closing stock was neutralised by debiting to the P & L account - the problem came only in the computation of income. The amount of ₹ 1,43,47,164/- was not paid at the end of 31.03.2005, the amount should be added back in the computation and out of this amount, any amount actually paid should be claimed as deduction - whether the amount of ₹ 1,38,77,013/- was out of the amount of ₹ 1,43,47,164/- added in the P & L account to the closing stock or a further amount of which was not part of the above amount - The explanation was that the amount added to the closing stock is not the amount claimed in the computation of income - This aspect requires examination by the AO by verifying the relevant Registers and payment of excise duty by obtaining the necessary details from the assessee company in all the years under consideration from A.Y. 2005-06 to 2007- 08 - the amounts furnished in the tables and the amounts claimed as deduction u/s 43B require verification – thus, the matter is remitted back to the AO for fresh adjudication. Tax Effect - Relying upon CIT vs. Nagri Mills Co. Ltd. [1957 (9) TMI 30 - Bombay High Court] – assessee argued that it does not have any tax effect cannot be accepted as each year being a self-contained unit tax of the particular year is payable with reference to income of that year, as computed in terms of the Act - AO is directed to determine the income as per the provisions of the Act by examining the issue – Decided in favour of Assessee.
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Customs
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2014 (7) TMI 271
End use based exemption - Benefit of Notification No. 21/2002-Cus., dated 1-3-2002 - Violation of condition of notification - Held that:- End-Use Certificate is required to be produced within a period of six months or such extended period as the Asst. Commissioner may allow. We note that the condition of the Notification does not limit the period, which could be extended by the appropriate officer. As such, we are of the view as long as the substantive condition of production of End-Use Certificate, which has not been disputed by the Revenue, stands fulfilled by the assessee, the denial of the benefit of Notification on technical grounds that no formal extension was sought by the assessee cannot be appreciated - Decided against Revenue.
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Service Tax
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2014 (7) TMI 289
Short-payment of service tax - Interest paid but paid under separate heading - Held that:- Payment was made under a different Head should not result in denial of benefit of such payment and appropriation of the payment towards the liability, as similar view was taken in the case of Arcadia Share & Stock Brokers Pvt. Ltd. Vs CCE & C, Goa [2013 (7) TMI 330 - CESTAT MUMBAI]. Since the issue is covered by the precedent Tribunal decision, we consider that the issue is no longer res integra. In such a situation it would not be appropriate to consider the stay petition and keep the matter pending for a final decision on a subsequent date when there is nothing left to consider - Decided in favour of assessee.
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2014 (7) TMI 288
Commercial or industrial construction service - construction of Bharat Ghar - Assessee claimed that the services were provided to a non-profit making entity and therefore there was no liability to tax - Revenue contends that Bharat Ghar used to provide space for civil amenities and since the appellant had produced no proof of the construction being used only for charitable purposes and without monetary consideration, the service provided fell outside the exclusionary clause of Section 65(25b) of the Act - Held that:- appellant has filed a copy of a communication dated 6.6.2013 of the service recipient M/s Greater Noida Authority which is to the effect that Bharat Ghar is intended to be used by the villagers; no service charges are levied; and the construction is for facility of the public of the area - Neither the primary Authority nor the appellate Authority were sensitized to this material. If there is sufficient evidence in support of the appellant's claim that Bharat Ghar was not used for commerce or for industrial purposes, the service provided by the appellant would be outside the ambit of the taxable service alleged. The material now produced requires to be considered by the primary fact finding Authority. It is the appellant's conduct of presenting a vague and breezy not unresponsive of constructing defence that has led to expenditure of scarce and valuable adjudicative resources by the State, resulting in the primary and the appellate Orders. We are of the view that letter issued by the Greater Noida Authority requires to be considered and appreciated, to adjudicate upon the claim of the appellant as to non-liability to service tax. - Matter remanded back - Decided conditionally in favour of assessee.
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2014 (7) TMI 287
Valuation - Manpower supply services, outdoor catering and cleaning services - renting out machineries for providing services and consumables and those costs have not been included for the purpose of tax - Held that:- The original authority as well as the Commissioner(Appeals) have stated that the appellants have produced ledger extract, sales register but these did not reflect the expenses of consumables and materials supplied. However, both the authorities are silent as to on what basis these amounts have been found to have been received by the appellants. If they are not reflected in the sales register and ledger extractand on what basis the service tax has been arrived at has to be indicated. In the absence of any indication what is the basis for the demand and whether it has been found that the amount has been collected and the amount has been included in the. It is extremely difficult to come to any conclusion. We have also gone through the orders passed by the lower authorities to the observation recording that sales register and ledger extract which show that sales register and ledger extract were provided but there is no observation as to how the amount has been worked out. There has to be some basis for raising the demand. There is also a mention of audit in the records but we find that from the audit notes submitted along with documents by the appellant, there is no mention of escapement of revenue on these grounds in the audit note also service tax - Matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 286
Review of refund claim - Denial of refund claim previously sanctioned - refund claim of the services availed by them which was not utilized as per Notification 17/09 for the period April 2009 to June 2009 - non compliance with the condition of Notification 41/07 - Held that:- Tribunal has considered the Board circular no. 354/256/2009-TRU dated 1.1.2010, which provides that the Notification 17/09-ST does not bar its applicability to the exports that have taken place prior to its issuance, and therefore, the scheme prescribed under Notification 17/09 would be applicable even for such exports subject to the conditions that refund claims are filed within the stipulated period of one year and no previous refund claims have already been filed under the previous Notification. Admittedly, in the matter in hand, the appellant have filed the refund claim on 26.12.2009, after introduction of Notification 17/09. Therefore, the queries/discrepancies raised by the ld. Commissioner (Appeals) that condition of Notification 41/07 are to be complied are not required to be fulfilled by the appellant as per the decision of Havells India Ltd. (2013 (12) TMI 1332 - CESTAT NEW DELHI). Further, the appellant has produced the documentary evidence before the Adjudicating Authority towards the input service credit pertains to the refund claims have not availed by the appellant - review order set aside - refund allowed - Decided in favour of assessee.
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2014 (7) TMI 285
CENVAT Credit - Goods Transport Agency service - transport of empty containers from yard to factory for stuffing of export goods - Held that:- Following decision of assessee's own case in [2012 (5) TMI 445 - CESTAT, MUMBAI] - appellant is entitled to take CENVAT credit on the said activity - Decided in favour of assessee.
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2014 (7) TMI 284
Commercial or Industrial Construction Service and Erection, Commissioning and Installation Service - benefit of Notification No. 1/2006 which provides abatement of 67% during the period 1.4.2008 to 31.3.2009 - Held that:- Important submission of the appellant on the eligibility for benefit of the Notification No. 1/2006-S.T. which provides 67% abatement in respect of erection, commissioning or installation service has not been considered by the adjudicating authority is correct - Therefore, matter remanded back - Decided in favour of assessee.
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2014 (7) TMI 283
Waiver of pre-deposit of the service tax, interest and penalty - Renting of immovable property service - whether security deposit amount is taxable - Held that:- There is no evidence on record to show that the security deposit had influenced the rent received - pre-deposit of dues is waived and recovery thereof stayed for hearing the appeal - Stay granted.
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2014 (7) TMI 282
Modification of order - Order of pre deposit - Tax collected from customers but not deposited - Held that:- Appeal memorandum wherein it has been stated that the entire amount of service tax has not been collected as mentioned in the impugned order. Moreover it was also stated that the observation of the Commissioner that the appellant had collected the tax is not entirely correct in view of the fact that the provisions of Section 73A have not been invoked. Further it was also stated that appellant collected service tax excluding the salary portion and therefore the observations of the Commissioner could not have been correct. It was also submitted that in several cases the amount was not actually received - Tribunal while passing the order in the absence of the learned Chartered Accountant, probably missed certain important submissions. Moreover we also find that the financial difficulties explained by the appellants also have some validity. Most important part is the fact that the claim of the appellant they have not collected entire amount of service tax is required to be verified and the revised quantification based on the actual amounts received may have to be done. Since the appellant has paid nearly 1/3rd of the total amount payable, we consider that at this stage itself the matter should be remanded for fresh consideration by the original adjudicating authority so that the appellant’s claim of the quantification can be correctly done and appellants also get another opportunity to defend their case properly and also another opportunity to adjudicating authority to pass a well reasoned order. - Modification done.
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2014 (7) TMI 281
Waiver of pre-deposit - port service - authorized operations / activities or not - reimbursement of expenses - whether the appellant having taken the services or operated under the authorization given to these persons would get covered under the category of Port services or not - Held that:- appellant would definitely have a prima facie case on the plea that the amount which has been paid by them as per billing done by Kandla Dock Labour Board or Kandla Port Trust, are nothing but reimbursement of the expenses incurred by them - there is a mark-up of the billing done by the appellant to their service recipients on the services received by them from Kandla Dock Labour Board etc. Service Tax liability may get fastened upon the appellant for the differential amount billed and charged by them as mark-up. This is our prima facie view. In our view, the main appellant M/s Maheshwari Handling Agency Pvt.Ltd needs to be put to some condition for hearing and disposing the appeals - stay granted partly.
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2014 (7) TMI 280
Waiver of pre-deposit of Service Tax - Valuation - Repair and Maintenance services - inclusion of value of goods - Held that:- It is the contention of the Revenue that even if VAT is paid on the spare parts, service tax is applicable as the same were not related to the spare parts but services in view of the aspect theory laid down by the Hon’ble Supreme Court in the case of Federation of Hotel & Restaurant Association of India, etc. Vs. Union of India & Others - (1989 (5) TMI 50 - SUPREME Court) Tribunal in the case of Surya Transformers (2014 (7) TMI 279 - CESTAT NEW DELHI) observed that, in the event VAT/Sales Tax is paid on the spare parts/ materials used in providing services, its value cannot be included in the service portion of the contract, for discharging the service tax. - prima facie case is in favor of assessee - stay granted.
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2014 (7) TMI 279
Waiver of pre-deposit - Valuation - repair and maintenance of transformers - inclusion of cost of spare parts - Held that:- appellants have paid sales tax as also VAT on the material used in providing the said service by them. The ratio of the various decisions of the Tribunal is to the effect that where the sales tax and VAT stands paid on the material it has to be held that the goods were sold by the assessee. In such a scenario, the value of the same, cannot be added in the value of taxable service. Board’s Circular No. 96/7/2007-S.T., dated 23-8-2007 laying down that the value of spare parts sold by a service provider is not required to be taken into consideration if the same are subjected to levy of sales tax and VAT and there is clear evidence to show the sale of the same. - Circular further goes on to say that the fact of payment of VAT/sales tax on a transaction value indicates that the said transaction is treated as sale of goods. - stay granted.
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Central Excise
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2014 (7) TMI 275
Manufacture - assembly of CNG Kit - whether the very act of collecting various components and fitting them into a box for installation in the CNG would amount to manufacture - Held that:- The appellant prepare the kit consisting of the items required for converting a motor vehicle into CNG run vehicle. For this purpose, some items like Electric Central Units (ECUS), Regulators, injectors, filters, etc. are imported on payment of appropriate customs duty and the other items - CNG cylinder, high pressure pipes, gauge and hoses are procured from the domestic manufacturers on which central excise duty has been paid and all these items are packed as CNG kits along with a diagram and instruction manual explaining how the kit is to be installed in a particular vehicle. It is the various components and installation manual which are sold as CNG kit. The appellant do not manufacture any of the above items. There is also no dispute that on the sale of the CNG kit, sales tax is paid on the value of the CNG kit and wherever the appellant installed the kit in a customer's vehicle, service tax is paid on the installation charges - impugned order is not sustainable - Decided in favour of assessee.
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2014 (7) TMI 274
Duty demand - Non-account of goods in RG-1 - excess quantity found during physical verification - weighment was not done - Confiscation of goods - Penalty - Assessee contends that when their factory was visited by the officers on 19.7.09, there was already a break down in the factory due to fault in the transformers which fact is not being disputed by the Revenue - Held that:- In the absence of inventory, it is neither possible nor practical to weigh such huge quantum of final product. As such, there is every possibility of occurrence of an error in the physical verification of stock. Otherwise, there is virtually no evidence on record that such excess stock was not entered in the records with any malafide to clear the same without payment of duty. There is no inculpatory statement of any authorised representative of the appellant. - In the absence of any evidence to that effect, as per declaration of law by various decisions of the Tribunal, confiscation of excess found goods is neither justified nor warranted - Reference can be made to majority decisions in the case of Bhillai Conductors (P) Ltd. vs. CCE, Raipur [2000 (1) TMI 105 - CEGAT, NEW DELHI] as also to Tribunal's decision in the case of A Kumar industries vs. CCE Daman, Vapi [2009 (7) TMI 1126 - CESTAT AHMEDABAD] - simple failure of non-accounting of goods in the RG 1 register do not invite confiscation of the same or imposition of penalty unless there is evidence to show that goods were meant for clandestine removal - Decided in favour of assessee.
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2014 (7) TMI 273
Duty demand - Clandestine removal of goods - whether the television sets found in the truck were removed by the manufacturers in a clandestine manner or not - Held that:- Admittedly, the transporters is not a manufacturer of various brand of television sets found loaded in the truck. No investigation stand conducted by the Revenue to find out as to who was the manufacturer of the said television sets even though the brand names were written on the same. Further, there is neither any investigation nor any evidence on record to show that said television sets stand cleared by the manufacturer without payment of duty. In the absence of same, no finding of the fact as regards their illicit character can be arrived at. Merely because the consignor and the consignee were allegedly found to be fake, as per the Revenue, tainted character of television set vis-`-vis payment of excise duty cannot be upheld. Further, in any case, the confirmation of demand of duty of excise, which is essentially required to be paid by the manufacturer, against the transporter has no legs to stand. As such, I hold that in the absence of any evidence to show that television sets in question were cleared by a manufacturer from his factory, without payment of duty, the finding of the lower authorities cannot be upheld. As rightly argued by the learned advocate, the same could have been booked for transportation by a distributor or a dealer. If there is no justification for confirmation of demand or for confiscation of television sets on the ground that there were no evidence of tainted goods on the consequent finding, there is no justification for confiscation of truck or for imposition of penalty upon the appellant - Decided in favour of Assessee.
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2014 (7) TMI 272
Valuation of goods - Valuation u/s 4A - MRP based valuation - Held that:- There is absolutely no evidence to show that the value adopted by the assessee in this case was not in accordance with the provisions of Section 4. There is absolutely no basis on a prima facie basis to come to the conclusion that it was a notional value. - Following decision of Allianz Bio Sciences Pvt. Ltd. Vs. CCE, Puducherry [2012 (7) TMI 32 - CESTAT, CHENNAI] and Cadila Pharmaceuticals Ltd. Vs. CCE, Ahmedabad-II [2008 (9) TMI 98 - CESTAT AHEMDABAD] - Decided in favour of assessee.
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2014 (7) TMI 270
Cenvat Credit - emergence of exempted by-product - Whether 8% of the amount is required to be discharged, before removal of by products/subsidiary products when such products are exempted from whole of duty - common inputs used in dutiable and exempted goods - Held that:- liability to pay the said amount would not arise in respect of exempted by-product. - Revenue in their memo of appeal has again contested the matter on legal provisions but has not referred to the fact as to why Bombay High Court decision would not be applicable. I find that the Bombay High Court decision [2008 (12) TMI 46 - HIGH COURT BOMBAY] clearly covered disputed issue and has been rightly followed by Commissioner (Appeals) - Decided against Revenue.
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2014 (7) TMI 269
100% EOU - demand of duty on the goods in question, namely, grey fabrics manufactured cleared to DTA units - benefit of Notification No. 8/97 - Held that:- it is evident that the appellant obtained raw materials duty free i.e. without payment of duty removed clandestinely from M/s. Jamshri, Gopal Jajoo and M/s. Pooja Textiles, without the cover of a CT-3 certificate and without the cover of a Central Excise invoice. This position has been clearly admitted. If that be so, the appellant cannot legitimately claim the benefit of Notification No. 8/97, even for the period prior to 2-6-1998 and, therefore, the claim of the appellant in this regard has to be rejected. - Decided against the assessee. Regarding benefit of Notification No. 2/95 - clearance with the permission of the Development Commissioner - held that:- Duty demand has been confirmed on the entire quantity without allowing the benefit of Notification No. 2/95, which is not correct. Therefore, the duty liability needs to be recomputed by extending the benefit of Notification No. 2/95 in respect of clearances made within the permissible limit and only in respect of the excess quantity, the benefit of the notification would not apply. - matter has to be considered afresh by the adjudicating authority and the duty liability needs to be recomputed. Therefore, we remand the matter back to the adjudicating authority for consideration afresh for redetermination of duty liability and the consequential penal liabilities - Decided in favour of assessee.
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2014 (7) TMI 268
Condonation of delay - demand of interest on refund - Held that:- application for condonation of delay which has been filed by the applicant before the Tribunal is not correct as the appeal has been filed before the Tribunal within time as provided in the provisions of Central Excise Act, 1944 - The said adjudication order is totally silent on the interest which was demanded by the appellant, presumably, vide his letter dated 26.6.2012 - Matter remanded back to be heard and disposed of by the first appellate authority on merits - Decided in favour of assessee.
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2014 (7) TMI 267
Denial of CENVAT Credit - whether the appellants are eligible to take Cenvat credit on MS plates, channels, beams, angles, etc., which are classifiable under Chapters 72 and 73 of CETA - Held that:- items like tundish, buffels, former sheets, gasification plant are actually utilized in the manufacturing process by the appellant and there is no specific rejection of the claim of the appellant that these are parts/components of the finished goods or in the absence of such, they get utilized in the manufacture of their finished goods and therefore considered as inputs. Contrary to the findings recorded by the lower authorities, it is seen from the Chartered Engineer’s certificate that it gives the size of the former sheets/tundish, number of such items required, the quantity of steel required for manufacture which on verification could have revealed whether the appellants have taken the credits correctly or not. No doubt there is a procedural omission in view of the fact that the appellant should have indicated these items to have been manufactured and shown in their returns and claimed Cenvat credit. To that extent, the appellant can be found fault with. However, in the absence of any evidence of diversion of items on which credit has been taken and in the absence of any contrary finding to find that Chartered Engineer’s certificate to be invalid, prima facie, benefit of Cenvat credit cannot be denied to the appellant. - Decided in favour of assessee.
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2014 (7) TMI 266
Interest - Delayed refund of pre-deposit amount - Held that:- deposited amount is required to be refunded within three months from the date of the order - Final order of the Tribunal in favour of the Appellant was passed on 09.09.2008. Thus, the amount deposited by the Appellant earlier in 2002, is required to be refunded within three months from the date of the said order. Consequenlty, the Appellant is entitled to interest after expiry of three months from the date of the order, which apparently is the date of communication of the order to the department being pronounced in the presence of the departmental representative. Following decision of Commissioner of Central Excise, Indore vs. Kamdeep Marketing Pvt. Ltd. [2010 (12) TMI 278 - CESTAT, DELHI] Matter is remanded to the adjudicating authority only for the limited purpose of calculating the interest amount on the number of days delay after expiry of the period of three months from the date of order of the Tribunal, till the sanction of refund to the Appellant. The adjudicating authority is directed to determine the interest at the appropriate rate following the provisions of section 35FF read with section 11BB of Central Excise Act, 1944 - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (7) TMI 278
Constitutional validity of certain provisions of the Tripura Value Added Tax Act, 2004 - provisions which are applicable in respect of works contract are beyond the legislative competence of the State of Tripura - provisions of the TVAT Act and the rules are contrary to the constitutional provisions inasmuch as they impose tax on inter-State transfer of goods and also impose tax on goods which are imported from outside India - Whether imposition of tax under the TVAT Act is in violation of sections 14 and 15 of the CST Act - Held that:- Section 14 of the CST Act declares certain goods to be of special importance in inter-State trade or commerce. Section 15 of the CST Act provides that every sales tax law of a State insofar as it authorizes or imposes tax on the sale and purchase of declared goods should comply with certain conditions. The first condition is that the tax leviable under the State law should not be more than five per cent (earlier four per cent). Section 15(b) provides that where a tax has been levied under the State law on any declared goods and later such goods are sold in the purchase of inter-State trade or commerce and tax is paid under the CST Act for the inter-State transaction, then the dealer shall be entitled to get the amount of tax paid under the State law reimbursed. A bare reading of the provisions of the CST Act clearly shows that sections 14 and 15 of the CST Act do not prohibit the State from imposing tax on goods declared to be of special importance in inter-State trade or commerce. Therefore, the State can levy the tax, but the tax shall not be above five per cent (earlier four per cent). In the TVAT Act, Schedule II of the Act deals with goods taxable at five per cent. Prior to May 4, 2011, the rate was four per cent. Entry 35 provides that declared goods as specified in section 14 of the CST Act, 1956 will be taxed at five per cent. Therefore, this is in consonance with the provisions of the CST Act and we see no conflict whatsoever. Whether the definitions of "sale", "sale price" and "turnover" under sections 2(25), 2(26) and 2(35) under the TVAT Act do not exclude sales which have taken place outside Tripura and is, therefore, illegal. - Held that:- it is apparent that section 41 has to be read into each and every definition. Section 41(2)(i) of the TVAT Act specifically excludes sales which have taken place outside Tripura and, therefore, on this ground the definition of "sale" cannot be held to be invalid. Not only section 41, but section 5(2) also excludes sales which have taken place outside Tripura and, therefore, there is no merit in this contention. The similar contention with regard to the constitutional validity of sale price (section 2(26)) and turnover (section 2(35)) are without any merit because the State legislation has taken care to ensure that it has not levied tax on those sales which it was not competent to do so. Whether the definitions of "sale", "sale price" and "turnover" are ultra vires inasmuch as they do not exclude labour and services and other charges - Held that:- As far as sale price is concerned, the definition of "sale" itself provides that in respect of transfer of property in goods involved in execution of a works contract, the value of the sale price shall be calculated by deducting from the amount of valuable consideration paid or payable, the amount representing labour and other charges incurred and profit occurred not in connection with transfer of property in goods for execution of such works contract. Thus, the definition itself excludes labour and other charges. Section 5(2)(c) which is specifically applicable to works contract specially provides that charges towards labour, services and other like charges shall be deducted from the gross turnover while calculating the taxable turnover. Tax is to be imposed on the taxable turnover. No tax is leviable on the sale price, but only on the taxable turnover and the same is in consonance with the judgment in Gannon Dunkerley's case [1992 (11) TMI 254 - SUPREME COURT OF INDIA]. Whenever tax is deducted at source, some sort of calculation has to be done by the person liable to deduct the tax. In case, the dealer places material before the person making the payment claiming deductions, then the person making the payment should give the dealer benefit of such deductions and would not be liable to any penalty, criminal or otherwise, if later the deduction claimed by the dealer is found to be false. The dealer would, however, in such a case be liable to both civil and criminal liability under law. The petitioner in the present case is obviously a big contractor. The petitioner has been approaching the court time and again filing one petition after another. That is his legal right and he is entitled to file a writ petition every time he is aggrieved by any action of the State. At the same time, the writ petitioner must at every stage disclose the pendency of each and every petition which has even the remotest bearing of the case. He cannot himself choose what facts to state and what not to state. If the petitioner does so, he takes the risk of falling foul of the court. In the other connected matters, the stay orders were vacated because a Division Bench of this court found that there was non-disclosure of material facts. In the present case, we are not non-suiting the petitioner since we are dealing with the constitutional validity of the legislation, but we are definitely of the view that the petitioner should have been more careful and the facts which he now seeks to bring in by way of amendment should have been stated in the writ petition itself. This would have avoided any unnecessary controversy. Therefore, we propose to burden him with exemplary costs - Decided against assessee.
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2014 (7) TMI 277
Liability to sale tax - Rate of tax - Inter-State sale of the goods or not - supply of goods for execution of such turnkey projects at Bombay High - whether Bombay High, which is situated in the exclusive economic zone is part of the territory of India - violation of principles of natural justice - Held that:- though Union of India has certain rights over the exclusive economic zone, the Indian Union does not have sovereignty over such a region. Clause (a) to sub-section (7) of section 7, for example provides that the Union has, over the exclusive economic zone, sovereign rights for the purpose of exploration, exploitation, conservation and management of the natural resources. Sovereign rights are thus for the limited purposes provided therein. By virtue of clause (b) of subsection (7) of section 7 of the Maritime Zones Act it becomes further clear that as and when Union of India issues notification extending any enactment over the exclusive economic zone or part thereof such enactment extended is applicable as if the exclusive economic zone or part thereof to which it has been extended is a part of the territory of India. When the sale of goods took place at Bombay High, for which the goods moved from Hazira to Bombay High, such movement does not get covered within the expression "movement of goods from one State to another" contained in clause (a) of section 3 of the CST Act. It is clear that the goods had not been moved from one State to another since, in our opinion, Bombay High does not form part of any State of Union of India. - Decided in favour of assessee.
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2014 (7) TMI 276
Attempt to evasion of tax - Penalty on seller or buyer - tribunal waived the penalty - who is the owner at the time of detention - Detention of goods being hydraulic excavator while being transported on a lorry - KGST / KVAT - Intention to evade - Held that:- question as to ownership of the goods, must be decided with reference to a point of time not later than the date of detention. That is a point of time when the officer entertains suspicion that there is intention to evade the tax under section 47(2) of the Act. Therefore, the question would be as to who is the owner of the goods at least as on the date of detention of the goods under section 47(2) of the Act. Under section 47(6) of the Act, when there is an intention of the seller of the goods to evade the tax which is established, it may be accompanied by the buyer being party to such guilty intention entertained by the seller. In such a case, even if the title to the goods had passed to the buyer, there can be no doubt that the penalty under section 47(6) of the Act can be imposed on the owner of the goods to be realized by the sale of the goods as provided under section 47 of the Act. Undoubtedly, if the seller continues to be the owner of the goods, nothing more remains to be enquired and his guilty mind would clothe the officer with authority to visit him with penalty by sale of the goods. Not only did the seller had the intention to evade the payment of tax, but the consignee was also party to it or was colluding with the seller. - In the circumstances of this case, this court is inclined to find that the consignee is the owner. This court already alluded to the relevant provisions in the Sale of Goods Act. Quantum of penalty - Held that:- relief must be given to the party. Twice the amount of tax (Rs. 5,25,000) is ₹ 10,50,000. There is complaint that the penalty levied exceeds even twice the amount of tax. This is a case where there was a bank transaction. The tax has been paid. - penalty to be imposed equal to ₹ 3.00 lacks. View of other Judge while concurrence with first Judge - Held that:- From the evidences on records, it is clear that buyer has got the ownership of goods - Further, the authorities below also have no case that the seller had retained the title in the goods and it never passed to the buyer and that was the reason why they had sent notice to the buyer and an opportunity was given to him before ordering penalty as well. So, under such circumstances, it can be safely concluded that the title in the goods passed to the buyer in this case and he has become the owner of the goods for the purpose of this section. Since it is found that the buyer has become the owner of the goods, penalty can be imposed on him only if it is proved that he had colluded with the seller in his attempt to evade payment of tax. - The fact that the original invoice alone accompanied the goods along with the transport of goods is also an indication that if the article was not intercepted by the authorities, he would not have paid the tax. So, even assuming that he becomes the owner of the goods, as proceeded by the authorities in this case and as found by this court as well, he is also liable to be proceeded against for the act of the seller as he had colluded with him for this purpose, and as such he will be liable to pay the penalty and the exoneration made by the Tribunal of the buyer is also unsustainable in law and hence the same is also liable to be set aside on this ground. - Decided against assessee.
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