TMI Tax Updates - e-Newsletter
August 16, 2014
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:
Interest Tax - the Act covers just the interest on loans and advances, it is difficult to bring under its fold, the transaction of purchase of Bills of Exchange - HC
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Income Tax:
TDS on hiring of Buses - the agreement between the assessee and the transporters was not akin to the taking of any 'plant' or 'machinery' on lease or any other similar arrangement - TDS to be deducted u/s 194C only - HC
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Income Tax:
Validity of Notice u/s 153C - Mere use or mention of the word “satisfaction” or the words “I am satisfied” in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the Act - HC
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Income Tax:
Claim of deduction against redemption fine paid to custom authorities - deduction of expenses u/s 37 allowed - HC
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Income Tax:
TDS credit - credit does not appear on ITD system - assessee is entitled to credit of the tax deducted at source with respect to amount of TDS for which Form No.16A issued by the employer deductor - HC
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Service Tax:
Service tax rate - chargeable @ 5% or @8% - Neither the CBEC letter nor Rule 5B of Service Tax Rules, 1994 authorise levy of service tax, at a rate not in force on the date of rendition of the taxable service, which is the taxable event - AT
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Service Tax:
BAS C&F service - Assessee not paying service tax on the gross amount received and were under reporting the valued of the taxable service in their ST-3 returns - demand confirmed invoking extended period of limitation - AT
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Central Excise:
Duty liability of Job worker - notwithstanding the fact that the process fabrics are not included in Notification 214/86, the job-worker is not liable to discharge excise duty liability and any liability thereon is required to be discharged by the supplier of the raw materials - AT
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Central Excise:
Number of appeal where 4 SCN were issued but only 1 order passed against all SCN - more than one show cause notices decided under a single OIO filing of one appeal is sufficient. - AT
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Central Excise:
Whether interest on delayed payment of refund sanctioned as per Rule 5 of the Cenvat Credit Rules, 2004 read with Section 11B of the Central Excise Act, 1944 is payable to the appellant or not - held as payable - AT
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Central Excise:
Cenvat Credit - Dereliction of duty by revenue - verification of transaction - There were ample opportunities for Revenue to enquire in this respect during de novo adjudication - credit allowed - AT
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VAT:
By using the word “including“ in entry 28, the Legislature did not wish to include an article which would normally be covered by the general terms “films of all kinds“ but to give an exhaustive meaning to the words “films of all kinds“ by clarifying and indicating the nature of film by referring to X-ray films. - HC
Articles
Notifications
News
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Calendar for Auction of Government of India Treasury Bills from August 20 – September 30, 2014 Revised
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RBI rationalises Number of Free Transactions on ATMs
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Online Filing of Applications for Various Purposes by SEZ Developers and Units to be Launched Next Month
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Index Numbers of Wholesale Price in India (Base: 2004-05=100), Review for the month of July, 2014
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RBI Reference Rate for US $ and Euro
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Time Limit Set for Disposal of Activities Related to SEZ Developers/Units by DC Offices
Case Laws:
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Income Tax
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2014 (8) TMI 458
Disallowance of franchise fee – Capital expenses – Held that:- CIT(A) has considered each and every aspect of the matter before arriving at the conclusion as drawn by him - He has elaborately discussed each and every issue in an appropriate manner specifying all the relevant details - the assessee had acquired only access to the technical information and there was no transfer of ownership with respect to the process and the know-how under the agreement in favour of the assessee - the payment could only be categorized as one made on revenue account – Decided against Revenue. 25% advertisement expenses capitalized – Held that:- Following the decision in Sassoon J. David And Co. Pvt. Limited Versus Commissioner of Income-Tax, Bombay [1979 (5) TMI 3 - SUPREME Court] - it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business - expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction even if there was no compelling necessity to incur such expenditure - CIT(A) while considering each and very aspect of the matter has come to a correct conclusion – Decided against Revenue. Sundry balance written off – Held that:- The AO has not examined whether the debt has been written off in accounts of the assessee - When bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors - Following the decision in TRF. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] - no contrary material or evidence has been furnished nor any infirmity or flaw has been pointed out – Decided against Revenue. Employees contribution to ESI u/s 36(1)(va) – Amount deposited after due date - Held that:- The deduction of payment needed to be allowed to the assessee in the relevant AY - Relying upon CIT vs. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] - CIT(A) while considering and accepting the plea of the assessee has concluded to delete the addition made in this regard - the entire amount of employees contribution to the ESI was deposited by the assessee before the due date of filing of the return under the Act - the employee contribution to ESI, if deposited before the due date of filing of return under the Act must be allowed u/s 36(1)(va) irrespective of whether it was paid before or after the due date in the respective statues - date of payments are part of audited accounts which clearly indicate that payments of ESI contribution have been made before the due date of filing of the return – Decided against Revenue. Donation made to CRY – Held that:- The assessee has requested the CRY and has got the receipt now - for reversal of the order or in alternative matter should be set aside on the file of the AO for re-consideration of the issue - the receipt stated to have been produced before CIT(A) has not been got verified by the AO nor he was associated with appeal proceedings – the matter is remitted back to the AO for re-consideration – Decided partly in favour of Revenue. Prior paid expenses – Held that:- The addition mainly on the ground that the assessee has not been able to substantiate its claim and CIT(A) is found to have not only accepted additional material, but also considered the same together part relief to the assessee without having allowed the AO to associate with the proceedings or without calling for the remand report - provisions of Rule 46A have not been complied with, certain document and material has been filed and accepted together relief to the assessee on first appeal stage - there is clear violation of Rule 46A – thus, the matter is to be remitted back to the AO for fresh adjudication. Debenture restructuring fees – Capital expenses or not – Held that:- Due to non-availability of finances, assessee was not in a position to negotiate the debentures issue which got matured during the year under consideration - he has arranged the finance by paying ₹ 15 lakhs to M/s Infrastructure Leasing & Financial Services Ltd. - in the absence of any contrary decision or evidence produced or any higher courts orders having been placed to support the plea raised by the department, there was no ground to interfere in the order passed by the CIT(A) – Decided against Revenue.
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2014 (8) TMI 457
Application of Rule 8D – Quantification of disallowance u/s 14A – Held that:- The Tribunal has rightly followed the decision in Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D of the Income Tax Rules, 1962 is applicable prospectively w.e.f. AY 2008-09, the appeal relates to AY 2005-06 - the Tribunal correctly held that Rule 8D of the Income Tax Rules, 1962 is inapplicable for the AY under consideration – Decided against Revenue. Restriction of disallowance @2% of exempted income - Held that:- The Tribunal while applying the decision in Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] has disallowed the expenditure only to the extent of 2% of the total exempt income earned by the assessee - the Tribunal rightly remanded the matter to the AO for verification of the disallowance claimed and restrictes the disallowance only to the extent to 2% of the total exempt income – Decided against Revenue.
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2014 (8) TMI 428
Interest Tax - Overdue interest on the demand bills - Whether the Tribunal is correct in holding that the overdue interest on the demand bills is not chargeable to tax under the Interest Tax Act, 1974 – Held that:- The transactions on which tax was ordered to be levied are in the nature of purchase of Bills of Exchange - It is not uncommon that banks purchase Bills of Exchange from their customers and make payments, on being satisfied that they are in order - the Act covers just the interest on loans and advances, it is difficult to bring under its fold, the transaction of purchase of Bills of Exchange - Had the Parliament been of the view that a transaction purchase of bills of exchange is on par with the transactions of loans and advances and wanted to levy tax on every amount that is recovered in the form of interest, penal or otherwise, it would have certainly included such transactions in the definition clause or in the other charging sections - That is not have been done, the assessing authority cannot be permitted to widen the scope of the Act – Decided against Revenue.
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2014 (8) TMI 427
TDS on hiring of Buses - pick-up and drop facilities for the employees - Liability to deduct TDS @ 2% u/s 194C or u/s 194I – Explanation to section 194I not considered – Held that:- The Tribunal has rightly held that the contract would indicate that the assessee has not taken possession of the buses - assessee had deducted the tax at source u/s 194C - Revenue contended that the deduction at source ought to have been made u/s 194 I of the Act - the agreement between the assessee and the transporters was not akin to the taking of any 'plant' or 'machinery' on lease or any other similar arrangement - on the contrary, Section 194C of the Act was attracted - the assessee had correctly deducted tax at source u/s 194C of the Act – Decided against Revenue.
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2014 (8) TMI 426
TDS on hiring of Buses - transportation of students - Liability to deduct TDS @ 2% u/s 194C or u/s 194I – Explanation to section 194I not considered – Held that:- The Tribunal has rightly held that the contract would indicate that the assessee has not taken possession of the buses - the Tribunal was correct in coming to the conclusion that the provisions of Section 194-C and not Section 194I of the Act were attracted - the agreement between the assessee and the transporters was not akin to the taking of any 'plant' or 'machinery' on lease or any other similar arrangement - the assessee had correctly deducted tax at source u/s 194C of the Act – Decided against Revenue.
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2014 (8) TMI 425
Validity of Notice u/s 153C - issuance of a notice by an AO of a person who has not been searched, on the basis of a satisfaction note prepared by the AO of a searched person - Basic ingredient - satisfaction – Held that:- Assessee rightly contended that whenever a document is found from a person who is being searched the normal presumption is that the document belongs to that person - It is for the AO to rebut that presumption and come to a conclusion or “satisfaction” that the document in fact belongs to somebody else - There must be some cogent material available with the AO before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else - apart from saying that the documents belonged to the assessee and that the AO is satisfied that it is a fit case for issuance of a notice u/s 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised have been rebutted by the AO - Mere use or mention of the word “satisfaction” or the words “I am satisfied” in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the Act - The satisfaction note itself must display the reasons or basis for the conclusion that the AO of the searched person is satisfied that the seized documents belong to a person other than the searched person – thus, the very first step prior to the issuance of a notice u/s 153C has not been fulfilled – the condition precedent has not been met, the notices u/s 153C are liable to be quashed – Decided in favour of Assessee.
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2014 (8) TMI 424
Claim of deduction against redemption fine paid to custom authorities - Whether the Tribunal was justified in holding that the sum paid to the Customs authorities on account of redemption fine, was an allowable expenditure – Held that:- Payment in form of expenditure should not be made for the purpose, which is prohibited by law - The fault or defect in the REP licence was not attributable to the assessee as the licenses were issued to India Craft - assessee was not to be blamed and had not indulged in any offence or incurred any expenditure for the purpose, which was prohibited by law - assessee had to pay redemption fine in order to save and protect themselves and they had received the balance consideration from the auction proceeds - the goods had been sold in auction pursuant to the direction of the Supreme Court - the conduct and action of the assessee was not blameworthy or commanding censure - assessee wanted to set-off the redemption fine from the consideration received by them - assessee had only received the net amount after adjustment of the redemption fine – Decided against Revenue.
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2014 (8) TMI 423
Restriction of land development expenses – Held that:- The Tribunal in assessee’s own case was of the view that there is a mistake apparent on record - the total disallowance including the offer made by the assessee should not exceed 10% of the land development expenses incurred in cash by the assessee - in any of the the assessment years in case the offer made by the assessee is more than 10% of land development expenses incurred in cash - assessee is also not aggrieved by the subsequent order passed by the Tribunal – Decided against Revenue. Interest free funds disallowed – No evidence for advances given – Held that:- The Tribunal in assessee’s own case was of the view that the Department has not produced before the Court any iota of material rebutting the finding arrived at by the Tribunal – revenue has also not pointed out any specific error of law committed by the Tribunal – monies have not been advanced during the year and they were advanced in earlier years out of interest free funds and, therefore, there is no diversion of borrowed funds by the assessee for non-business purposes - Decided against Revenue. Depreciation on roads and electrical fittings – Held that:- The roads connect the various amusement rides within the park with one another – CIT(A) as well as the Tribunal proceeded on the basis that the roads are not adjunct to any buildings and it cannot be classified under buildings for depreciation purposes - A reading of the provision makes it clear that building includes roads, bridges, culverts, wells and tubewells - The provision is not restricted to only roads adjacent to buildings – CIT(A) as well as the Tribunal have not considered the aspect fell into error in accepting the assessee's plea that 20% depreciation on roads and electrical fittings should be allowed - the AO was justified in restricting depreciation to 10% and 15% - Decided in favour of Revenue. Drawings by the Directors debited under the head sales promotion and travelling expenses – Held that:- There is a clear admission by the Director that the personal expenses are met out of the bank accounts of the assessee only - credit card expenses, foreign travel expenses of directors, household expenses, etc. are debited under the head Sales Promotion and Travelling Expenses in the VGP Housing (P) Ltd / VGP & Co Pvt Ltd books of account – the issue relating to deleting the addition on account of drawings of directors should be considered by the AO on merits based on materials to be produced by the assessee – thus, the matter is remitted back to the AO – Decided in favour of Revenue.
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2014 (8) TMI 422
Depreciation on assets disallowed – Outside the block period, a regular assessment order was passed in respect of the assessment year 1997-98 where the assessee had claimed depreciation - Tribunal allowed the claim of depreciation - Held that:- The Tribunal while following the decision as given in earlier assessment year of the same assessee have granted the benefit - assessee has substantiated his claim for depreciation - the assessee has established his claim for depreciation, there was no justification to interfere with the finding of fact – no substantial question of law arises for consideration – Decided against Revenue.
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2014 (8) TMI 421
Penalty u/s 271(1)(c) – Contravention of section 43B – Deduction only on actual payment – Held that:- The assessee-society was functioning under the control of Ministry of Human Resource Development - The amounts relating to leave encashment and gratuity being claimed as deduction was not paid before the closing of the financial year and it were disallowed u/s 43B of the Act - the assessee had not deliberately claimed wrong deduction and furnished inaccurate particulars of income - once full particulars had been given in the return which were not found to be incorrect, it could not be said that the assessee had filed inaccurate particulars - Decided against Revenue.
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2014 (8) TMI 420
Civil and labour construction - Whether the Tribunal was right in law in holding that the assessee engaged in the business of civil and labour construction was entitled to deduction u/s 32AB – Held that:- Following the decision in SA BUILDERS LTD. Versus COMMISSIONER OF INCOME-TAX (APPEALS) AND ANOTHER [2006 (12) TMI 76 - SUPREME COURT OF INDIA] - the deduction u/s 32AB was not automatic and was subject to various conditions laid down - whether the assessee fulfilled those conditions for claiming the deduction or not required examination into facts which were not on record - the assessee had not placed any material to show how the assessee is entitled to deduction - Decided in favour of Revenue.
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2014 (8) TMI 419
Grant of registration u/s 12A - Objects of the society not examined – Running of school - Purpose charitable or not - Held that:- The main objects of the society as per its MOA are to provide advancement research and dissemination of education-literary, scientific and scholastic, to start, establish, run, manage and maintain schools with an object to provide sound pre-primary, primary, middle, secondary and higher education - Following the decision in Suchinta Educational Society Versus Commissioner of Income Tax-I [2014 (5) TMI 155 - PUNJAB & HARYANA HIGH COURT] - running of a school falls within the scope of activities for which registration can be granted u/s 12AA of the Act - The Society has been established to manage one of such schools - There cannot be any attempt of the assessee to evade tax liability, as Shishu Niketan Model School has been granted registration and availing the benefit of tax – Decided in favour of Assessee.
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2014 (8) TMI 418
TDS not credited by Department - Whether in case the deductor had deducted the TDS and for the same Form no.16A has been issued by deductor, the credit of the same can be denied to the assessee and deductee solely on the ground that credit does not appear on ITD system of the department and/or same does not match with the ITD system of the department – Held that:- Assessee is not supposed to do anything in the whole transaction except that he is to accept the payment of the reduced amount which is deducted income tax at source - on the amount being deducted the assessee only gets a certificate to that effect by the person responsible to deduct the tax – Relying upon Yashpal Sahni vs. ACIT [2007 (7) TMI 7 - HIGH COURT , BOMBAY] – action of the revenue in not giving the credit of the tax deducted at source for which form no.16 A have been produced by the assessee – deductee and the demand notice issued u/s 221(1) of the Act cannot be sustained – assessee is entitled to credit of the tax deducted at source with respect to amount of TDS for which Form No.16A issued by the employer deductor – M/s. Amar Remedies Limited has been produced – revenue is directed to give credit of tax deducted at source to the assessee to the extent form no.16 A issued by the deductor have been issued – Decided in favour of Assessee.
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Customs
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2014 (8) TMI 431
Valuation of goods - First appellate authority has set aside the OIO enhancing the assessable value primarily on the grounds that goods imported at higher value were under a different contract when international prices of the imported goods were fluctuating - whether the value of imported ‘USA Origin US Green Petroleum Coke’ should enhanced on the basis of value of the consignments of the similar goods imported in the same vessel and also supplied by the same supplier - Held that:- there is no evidence on record to suggest that any amount over and above the transaction value has been repatriated by the Respondent with respect to imported goods of Bill of Entry No. F-188 dt 25/7/2008. The Act of the respondent J K Cements Ltd showing a higher C&F Value for the similar goods under Bills of Entry No F.187 gives an indication to the genuine nature of transaction based on the contracts as respondent has not hidden any facts from the department - Decision in the case of CC Vishakapatanam vs. Aggrawal Industries Ltd [2011 (10) TMI 4 - SUPREME COURT OF INDIA] and in the case of CC Chennai vs Pushpanjali Silks Pvt Ltd [2006 (3) TMI 515 - CESTAT, CHENNAI] followed - Decided against Revenue.
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Corporate Laws
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2014 (8) TMI 430
Jurisdiction of Courts for offence under Section 138 of N.I. Act - Transfer of Criminal Complaint No.14089 of 2009 from the Court of Judicial Magistrate, First Class, Gurgaon, Haryana to the Court of competent jurisdiction at Bangalore - Held that:- Only reason the complainant claims jurisdiction for the Courts at Gurgaon is the fact that the complainant-respondent had issued the statutory notices relating to the dishonour of the cheque from Gurgaon. We do not think that issue of a statutory notice can by itself confer jurisdiction upon the Court to take cognizance of an offence under Section 138 of The Negotiable Instruments Act. In Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd. [2008 (12) TMI 677 - SUPREME COURT OF INDIA] this Court examined a similar question and clearly ruled that a unilateral act on the part of the complainant of issuing a notice from any part of the country would not vest the Court from within whose territorial limits the notice has been issued with the power to entertain a complaint. That judgment has been affirmed by a three-judge bench of this Court in Dashrath Rupsingh Rathod v. State of Maharashtra & Anr. Criminal [2014 (8) TMI 417 - SUPREME COURT] - this Court has in that case held that presentation of the cheque at a place of the choice of the complainant or issue of a notice from any such place do not constitute ingredients of the offence under Section 138 and cannot, therefore, confer jurisdiction upon the Court from where such acts are performed. Although the complaint does not claim jurisdiction for the Court at Gurgaon on the ground that the cheque was presented for collection there yet in the Counter affidavit, the respondent has tried to justify the filing of the complaint on that ground - Case transferred - Decided in favour of Applicant.
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2014 (8) TMI 429
Jurisdiction of Courts for offence under Section 138 of N.I. Act - Transfer of case - whether the Courts in Delhi had the jurisdiction to entertain the complaint in the facts and circumstances of the case especially when issue of statutory notices was the only reason urged by the respondentcomplainant for filing a complaint in Delhi - Held that:- Issue of a statutory notice demanding payment of the cheque amount is, in our opinion, not sufficient to vest the Delhi Courts with the jurisdiction to entertain the complaint and try the case. We say so on the authority of the decision of this Court in Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd. (2008 (12) TMI 677 - SUPREME COURT OF INDIA) where this aspect was examined at length. This Court ruled that issue of a statutory notice cannot constitute a valid ground for conferring jurisdiction upon the Court concerned to take cognizance of an offence under Section 138. Cheque in question was dishonoured at Vellore where the bank on which it was drawn is located, we see no reason why the complaint filed by the respondents should not be transferred to Vellore for further proceedings - decided in favour of applicant.
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Service Tax
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2014 (8) TMI 456
Consulting engineer service - Service tax rate - chargeable @ 5% or @8% - services provided prior to 14.05.2003 in respect of which payments were received on or after 14.05.2003 - Held that:- The appellate Commissioner considered copies of the relevant invoices, payment advices and copies of cheques evidencing receipt of payments by the assessee and concluded that the assessee had provided month wise and return wise details of invoices disclosing that rendition of the taxable service was prior to 13.5.2003 i.e. prior to the date the rate of service tax was increased from 5% to 8%; and therefore liability to service tax was at 5% and not 8%. Neither the CBEC letter nor Rule 5B of Service Tax Rules, 1994 authorise levy of service tax, at a rate not in force on the date of rendition of the taxable service, which is the taxable event. However, the Review Commissioners appear to have fundamentally misguided themselves as to what is clearly a basic principle, that only the rate of tax prevailing at the time of rendition of the taxable service could be levied and collected - Following decision of CST Vs. Consulting Engineering Services (I) Pvt. Ltd. - [2013 (1) TMI 434 - DELHI HIGH COURT] - Decided against Revenue.
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2014 (8) TMI 455
Business Auxiliary Service and C&F service - Assessee not paying service tax on the gross amount received and were under reporting the valued of the taxable service in their ST-3 returns - whether certain expenses reimbursed to them by their principal are includible in their assessable value or not - Held that:- Appellant provide C&F agent's service. This issue stands decided against the appellant by the Larger Bench of the Tribunal vide its judgment in the case of Sri Bhagavathy Traders vs. CCE, Cochin (2011 (8) TMI 430 - CESTAT, BANGALORE). In view of this, the service tax was payable by the appellant on the gross amount of remuneration received by from their principals on the basis of the quantity of cement handled. Looking to the circumstances of the case, we find that extended limitation period has been correctly invoked and for the same reason, the penalty on them under Section 78 of the Finance Act, 1994 has been correctly imposed - Decided against assessee.
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2014 (8) TMI 454
Supply of Tangible Goods service - supply of 3 to 5 ton capacity tankers to ONGC for transportation of crude oil - Held that:- prima facie view, in an identical situation has been taken by us as to hold that services rendered by the appellant is interpretation of classification of services. Accordingly, we consider the amount deposited by M/s. ONGC towards the service tax liability, under the category of GTA services, as enough deposit to hear and dispose the appeal. Accordingly, the application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.
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2014 (8) TMI 453
Eligibility for the CENVAT credit - outward transportation - Held that:- CENVAT Credit Rules, 2004, was amended so as to replace the words “from the place of removal” with the words “up to the place of removal” and this amendment came into effect from 1-4-2008 onwards. As a result of this amendment, the CENVAT credit in respect of outward transportation beyond the place of removal was excluded from the scope of ‘input service’. Therefore, for the period on or after 1-4-2008 CENVAT credit on outward transportation is not available. Therefore, the department is right in denying the benefit of CENVAT credit on the outward transportation incurred beyond the place of removal. Accordingly, the appellant-assessee is liable to reverse the credit of CENVAT credit taken, if any, along with interest thereon during the impugned period During the material period, as per the decision of the Larger Bench in the case of ABB Ltd. case [2009 (5) TMI 48 - CESTAT, BANGALORE], the appellant was held to be eligible for the credit which decision was reversed by the Hon’ble Karnataka High Court for the period after 1-4-2008 vide the judgment cited (2011 (1) TMI 748 - KARNATAKA HIGH COURT). Therefore, the assessee cannot be alleged to have committed either suppression or fraud in the matter and therefore, imposition of equivalent of penalty on the assessee is totally unwarranted - Assessee directed to reverse credit taken - Decided partly in favour of assessee.
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2014 (8) TMI 452
Rent a cab service - revenue treated the entire amount lying in the bank as consideration for providing the said services - Held that:- If the Revenue is holding the said receipt of money as consideration for the services, it is for them to produce evidence to show that the same are relatable to the services being provided by the appellant. The entire money found in the bank’s statement, cannot be held to be consideration for ‘rent a cab services’. The Revenue has presumed documents from premises of the appellant indicating providing of such services to Escotel, Glaxo, Picric, RCL and Nokia on which he has paid service. As there is no evidence of appellant having provided said services to any other organisations, his bank’s statement cannot be considered as value of the services and tax to Service Tax - Decided in favour of assessee.
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2014 (8) TMI 451
Denial of CENVAT Credit - business auxiliary services - Whether the services of M/s. Kapsons used for arranging the loan amount, on which the said M/s. Kapsons have paid the Service Tax under the category of “business auxiliary services”, can be held to be eligible cenvatable service or not - Held that:- definition of input service, as contained in Rule 2(l) of Cenvat Credit Rules, allows credit in respect of services which are used in relation to activities relating to business, such as accounting, auditing, financing etc. The expression “such as” has been subject matter of various decisions and it stand held that the same is inclusive and not exclusive definition - Admittedly finance is required for running of business and the services of loan broken, which stand utilized for procurement of such finance has to be held to be in relation to business activities - definition itself, while giving example of input services include the services of Financing in the input service definition. Though M/s. Kapsons have not financed the business themselves but they have admittedly, by arranging a loan, have provided service relating to financing - appellant is entitled to the benefit of Cenvat credit - Decided in favour of assessee.
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2014 (8) TMI 450
CENVAT Credit - Registration input service distributor (ISD) from 4-10-2008 - distribution of the credit of Service Tax paid on common input service such as Consultancy services, advocate services, house keeping, security etc., to their various units in proportion to the turnover of the unit during February, 2008 to October, 2008 - Held that:- Input service distribution is a facility granted to a manufacturer/service provider who operates from a number of premises. There is no restriction under the Cenvat Credit Rules, 2004, with regard to the period for availing Cenvat credit of Service Tax paid. In other words, a manufacturer/input service provider can avail Cenvat credit of the Service Tax paid irrespective of any time limitation. The only condition to be satisfied is that they should have paid the Service Tax prior to availing the credit. So long as this condition is satisfied, there is no time-limit prescribed in the Rule within which the Cenvat credit has to be taken. If that be so, there is no reason why in the case of input service distributor alone, a restriction should be placed with respect to availment of Cenvat credit i.e. input service distributor is permitted to distribute only taxes paid on or after registration. Such a restriction is totally unwarranted and is not provided for in the law - Decided in favour of assessee.
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2014 (8) TMI 449
Manpower recruitment or supply service - The plant and machinery owned by PTL, the present appellant, was taken on lease by ATL but PTL with their employees were undertaking the actual manufacturing operations of the tyres and tubes meant for ATL - Revenue contends that employees of appellant were utilized for manufacture of tyres for ATL, the payments received towards salary and other dues of the employees should be treated as payments towards ‘manpower recruitment or supply service’ - Held that:- The agreement for joint operation enabled ATL to manufacture of tyres of ‘Apollo’ brand in the plant and machinery owned by the appellant and the same was in pursuance of the scheme approved by the BIFR. The ATL is clearly manufacturer of excisable goods and, undisputedly, duty is being paid by them. On a close perusal of the agreement, we do not agree with the submission that the same should be treated only as an agreement for supply of manpower. Even otherwise, we, prima facie, agree with the views expressed by the learned senior advocate that whatever service tax to be paid on the alleged “manpower recruitment or supply service” was available as credit to ATL in respect of the goods manufactured in the same premises and, therefore, it is a clear case of revenue neutrality - Stay granted.
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2014 (8) TMI 448
Levy of interest and penalty - delay in payment of tax - Delay due to change in constitution of the entity from a Government department to a Public Limited Company - Held that:- As per the section, interest is payable for delay in payment of tax payable under Section 68 and Rules made thereunder. So the delay is to be calculated from the date on which tax was due to the date on which tax was paid - appellant had not put in place system by which tax is due for each month and no reasonable cause is adduced for such failure for prolonged period. So the appellants are liable to penalty under Section 76 - Decided against assessee.
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2014 (8) TMI 447
Payment of tax by C&F Agents on outward transportation services - Revenue contends that respondents are the exporter and they are paying service tax on inward goods transportation services but are not paying service tax on outward transportation service - Held that:- It is a clear finding in the impugned order by the Commissioner (Appeals) that service tax has been paid by the C&F Agents. In the Show Cause Notice nothing is contrary to that whether C&F Agents has paid service tax or not. It is settled law that service tax to be paid once not twice. If the department has any doubt regarding non-payment of service tax by the C&F Agents, they are free to go and verify the records. The challenge of the Revenue is that service tax is not paid by the respondents and not by the C&F Agents. As in this case, Service tax has been paid by the C&F Agents, the demand of service tax on the respondent is not sustainable - Decided against Revenue.
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2014 (8) TMI 446
Imposition of penalty - Invocation of extended period of limitation - Malafide intention - Commissioner invoked Section 80 and deleted penalty - Held that:- Tribunal has taken note of the fact that different interpretations was being given by judicial forums to the classification of the said services. In such a case, the extended period of time cannot be invoked - demand beyond the period of normal limitation period is not sustainable. The lower authority would quantify the demand falling within the limitation period. As regards the Revenue’s appeal, the same is against that part of the impugned order vide which benefit under Section 80 of Finance Act, 1994 stands extended to the assessee. As we have also held that there was no mens rea on the part of the assessee, thus limiting the demand within the period of limitation, benefit of Section 80 stands rightly extended by Commissioner (Appeals) - Following decision of Brij Motors v. CCE [2011 (11) TMI 410 - CESTAT, NEW DELHI] - Decided in favour of assessee.
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Central Excise
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2014 (8) TMI 441
Duty liability of Job worker - Manufacture - Job Work - process of stentering - the processed fabrics - Held that:- Liability to pay duty in respect of goods moved under Rule 4(5)(a) is on the supplier of the goods and not on the job-worker. Therefore, notwithstanding the fact that the process fabrics are not included in Notification 214/86, the job-worker is not liable to discharge excise duty liability and any liability thereon is required to be discharged by the supplier of the raw materials. Rule 4(6) of the CENVAT Credit Rules makes it abundantly clear that, if the goods are required to be cleared from the job-worker's premises instead of being returned to the supplier, then the Commissioner can direct clearance of the goods on payment of duty from job-worker's premises. This would also indicate that the liability to discharge duty under the provisions of Rule 4(5)(a) is on the supplier of the goods and not on the processor of the goods. In this view of the matter, we find that the impugned order is not sustainable in law and merits to be set aside - Decided in favour of assessee.
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2014 (8) TMI 440
Waiver of pre deposit - Clandestine manufacture and removal of goods - Violation of principle of natural justice - Denial of request of cross examination - Held that:- As regards the non-receipt of data stored in the computer seized during the investigation, the print outs of the data contained therein were taken during the Panchanama Proceedings dated 24/6/2010 and 25/6/2010. Sri Muralidharan Nair, authorized signatory was present during the said proceedings and have acknowledged - image file of the data from the CPU seized at the factory of appellant was taken and handed over to the appellant vide Panchanama proceedings dated 10-08-2010. Sri. Manoj Mittal, Managing Director of the appellant firm was present during the said proceedings and has acknowledged the receipt of the copy of the image file - From this factual position evidenced from the records, the contention of the appellant that they were not given copies of the relied upon documents is clearly not sustainable and accordingly we reject this contention. As regards the non-handing over of the non-relied upon documents, it is on record that the same had already been returned to the concerned parties as evidenced from the letter dated 21-10-2013 of the investigating agency to the adjudicating authority. The evasion of excise duty in the present case is based on documentary evidence which clearly shows clearance of goods without payment of duty form the transactions recorded in the computer seized from the factory of the appellant. This is further corroborated by the unaccounted purchase of raw materials from M/s Sigma Minerals and M/s Hitech Plast. From the invoices issued by M/s Hitech Plast for sale of plastic containers to M/s Simco, it is seen that plastic containers sold to Simco to the extent of ₹ 40.10 lacs, ₹ 21.96 lacs and ₹ 25.45 lacs during 2009-10, 2008-09 and 2007-08 respectively have not been accounted for in the books of accounts of M/s. Simco. Similarly in respect of hydrated lime sold by M/s Sigma to M/s Simco, the transactions were not recorded in the books of account of both the parties and the transactions were carried out in cash without bringing them in the books of accounts - Further Sri. Manoj Mittal, Managing Director of the appellant firm in his confessional statements recorded vide statements dated 21-11-2011 and 17-2-2012 have admitted to these facts. Thus sufficient documentary evidences are available in the records to confirm the manufacture and clearance of paints without payment of duty by the appellant. In any case it is a settled position in law that admitted facts need not be proved - Therefore, the denial of cross examination can not said to have crossed any prejudice to the appellants - Partial stay granted.
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2014 (8) TMI 439
Authority of the Additional Commission to issue modus operandi circular - Power of Board - Rule 19 (3) of the Central Excise Rules, 2002 - denial of Availment of All industry rate of drawback on clearance of packing material to the manufacturer exporters - whether to be treated as export or not - held that:- Petitioners have asked for clarification from the Board to remove the doubts in the matter and to stop the effect of the modus operandi circular No.1 of 2013 as well as to protect the interest on footwear export industries - The counter affidavit reveals that the petitioners' representation are pending consideration. - board directed to clarify the matter within 4 months - Matter remanded back.
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2014 (8) TMI 438
Number of appeal where 4 SCN were issued but only 1 order passed against all SCN - four appeals were filed by the appellant but the Commissioner (Appeals) has decided only one appeal - Held that:- Only one OIO has been issued by the adjudicating authority against four show cause notices and the OIO has mentioned four numbers i.e. OIO No. 41 to 44 - more than one show cause notices decided under a single OIO filing of one appeal is sufficient. Accordingly, the impugned order dated 09.01.2013, passed by the first appellate authority is set-aside and the matter is remanded back to the first appellate authority to decide the issue involved in these proceedings on merits - Following decision of Sun Pharmaceutical Industries Limited vs. CCE, Vapi [2013 (6) TMI-632-CESTAT-AHM] - decided in favour of assessee.
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2014 (8) TMI 437
CENVAT Credit - Credit on parts of capital goods - parts of the capital goods on which credit is availed are not specified in the definition of capital - Held that:- for eligibility of cenvat credit on components, spares and accessories of the capital goods need not fall under any of the Chapter specified in Clause (i) of the capital goods definition given under Rule 2(a) (A) of Cenvat Credit Rules. A view can be possible that components, spares and accessories would fall under chapters of Central Excise Tariff Act but are used for capital goods specified under Clause (i) of capital goods definition. Prima facie, this is an arguable case and therefore, OIA dated 09.12.2013 passed by the first appellate authority is set-aside and matter is remanded back to him for deciding the issue in de-novo proceedings, without insisting on any pre-deposit from the appellant. - Decided in favour of assessee.
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2014 (8) TMI 436
Interest on delayed refund claim - Whether interest on delayed payment of refund sanctioned as per Rule 5 of the Cenvat Credit Rules, 2004 read with Section 11B of the Central Excise Act, 1944 is payable to the appellant or not - Held that:- admittedly the refund has been ordered under Rule 5 of the Rules and there was a delay in sanctioning the refund, in the circumstances, the provisions of Section 11BB of the Act would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB of the Act are clearly applicable to the facts of the present case and as such the respondent is entitled to interest on delayed refund of Cenvat Credit as claimed by it - Following decision of CCE, Vapi vs. Reliance Industries Limited reported at [2010 (10) TMI 190 - GUJARAT HIGH COURT] - Decided in favour of assessee.
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2014 (8) TMI 435
CENVAT Credit - CHA services and Clearing & Forwarding Agent Services - Held that:- In view of CCE Ahmedabad-II Vs Cadila Healthcare Ltd (2013 (1) TMI 304 - GUJARAT HIGH COURT) appellant seems to have a good case on merits. Under the circumstances, it is not justified on the part of first appellate authority to order nearly 100% of pre-deposit when the appellant has an arguable case in view of a favourable decision from the jurisdictional High Court. As the issue lies in a narrow compass, therefore, after allowing the stay application, appeal itself is taken up for disposal. Accordingly, order dt.07.01.2014 passed by first appellate authority, rejecting the appellants appeal for non-compliance, is set aside and matter is remanded back to him for deciding the issue on merits without insisting for any pre-deposit from the appellant in these proceedings - Decided in favour of assessee.
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2014 (8) TMI 434
Waiver of pre deposit of duty - default in payment of Central Excise duty under Rule 8 of Central Excise Rules 2002 - Interest for defaulted period - Held that:- As a result of occurrence of default appellant was required to pay duty from PLA consignment-wise which was not done. Subsequently out of the total amounts involved appellant has deposited an amount of ₹ 42 ,02,524 /- towards payment required to be made in cash. First appellate authority should have taken these aspects into account while ordering pre-deposit. A deposit of ₹ 58 lakhs ordered by the first appellate authority is, therefore, excessive. In the interest of justice, appellant is directed to deposit an amount of ₹ 2 lakhs (Rupees Two Lakhs only) with respect to these two appeals within four weeks from the date of this order and report compliance to Commissioner (Appeals) - Matter remanded back conditionally.
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2014 (8) TMI 433
Cenvat Credit - Dereliction of duty by revenue - verification of transaction - Held that:- Show Cause Notice neither questions genuineness of the transaction nor use of the goods in manufacture. The invoice disclosed the name and address of manufacturer consignor instead of second stage dealer - It is not desirable again to remand the matter when the Department was not conscious to enquire genuineness of the transaction nor questioned use of the goods in manufacture. There were ample opportunities for Revenue to enquire in this respect during de novo adjudication. It is a flimsy plea today that the particulars were not given on invoice. There was dereliction of duty by Revenue under law, for which the appellant should not suffer - Decided in favour of assessee.
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2014 (8) TMI 432
Waiver of pre deposit - supply to SEZ unit - eligibility for Exemption Notification No.67/95-CE, dated 16.03.1995 - demand was raised on Clinker captively used in the manufacture of cement cleared to SEZ - Held that:- It is the case of the appellants that the final product (cement) which was cleared to SEZ should be deemed to have been exported from the country and, therefore, the proviso to the above Notification cannot be pressed into service for demanding duty on clinker (input) contained in the final product. In this connection, the counsel has referred to the relevant provisions of the SEZ Act, 2005. It appears that the statute deems SEZs to be territories lying outside domestic tariff area. If that be the case, the clearance of cement by the appellants to SEZ was to be reckoned as ‘export' in which event this product cannot fall in the category of goods "exempt from the whole of duty of excise leviable thereon or are chargeable to ‘Nil' rate of duty". Only those inputs which are used in or in relation to the manufacture of the final products coming within the scope of this expression would be covered by the above proviso. In other words, prima facie, the proviso to the above Notification is not attracted and consequently the appellants can legitimately claim the benefit of exemption from payment of duty on clinker in terms of the Notification - Following decision of assessee's own previous case - Stay granted.
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CST, VAT & Sales Tax
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2014 (8) TMI 445
Validity of Circular No. 47 of 2005-06 - Inclusion of evaporation loss component in the claim of input tax credit - Jurisdiction of Commissioner - encroachment on the power and functioning of quasi-judicial bodies - Held that:- Section 67 empowers the Commissioner to decide or determine specific questions. It places in position an elaborate procedure for determination of such questions; it is not as if all questions can be taken on board and decided as specific questions by the Commissioner. It would be apparent from section 84 that determinable questions which might call for decisions in a particular assessment proceeding (as long as it is not pending before the court of law and is not covered by situations spelt-out in section 84(3)), can be answered by the Commissioner. Such decisions of the Commissioner have binding effect on the party in terms of section 84(9). These proceedings are akin to advance ruling proceedings enacted in various fiscal statutes such as Income-tax Act, Central Excise Act, etc. Existence of section 67(3) is of no assistance. Facially section 67(3) supports the submission of the petitioner that no direction of the kind made by the impugned circular could have been issued by the Commissioner. If understood in its proper perspective, the impugned circular dated January 23, 2006 (No. 47/2005-06) in this case cannot be said to fall within the power of the Commissioner at all. In other words, if the circular purports to direct the assessing or quasi-judicial authorities to take a particular view and not grant credit in respect of evaporation loss, that is not to be interpreted as binding; the assessing authorities, of course, are entitled to take into consideration Revenue's concerns, as are permitted by law, while examining the claims for credit at the point of sale to their customers - impugned circular dated January 23, 2006 (Circular 47 of 2005-06) shall not bind the authorities into taking a particular view to disallow the claims for the evaporation losses claimed as credit by the petitioners at the point of sale to their customers. Such claims shall be examined and taken into account by the assessing authorities on a factual basis - Decided in favour of applicant.
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2014 (8) TMI 444
Entry tax - Taxability of X-ray films - whether polyester film, metallised pet, metallised BOPP, aluminium foil film and poly film are covered by entry No. 28 of the Assam Entry Tax Act, 2008, i.e., "films of all kinds including X-ray films" making these liable to be taxed - Held that:- taxing statutes must receive strict interpretation and there cannot be taxation by implication and there must be clear and express language imposing tax. Further, the intent of the Legislature is to be gathered from the words used in the statute and once it is shown that the assessee falls within the letter of law, he must be taxed howsoever great the hardship it may appear to be. - On a cursory glance of the entry, it would appear that films of any kind or nature would be covered by the aforesaid entry. Thus the aforesaid items, polyester film, metallised pet, metallised BOPP, aluminium foil film and poly film, if they are to be understood as films would be apparently covered by the said entry. However, the problem has arisen because of the use of the words "including X-ray films" in the said entry. Words "X-ray films" would normally be covered by the words "films of all kinds" and as such, there was no need to specifically mention "X-ray films" again in the said entry. The expression "films of all kinds" in its sweep would normally take into account any kind of film including "X-ray film". Therefore, it is clear that the word "including" has not been used as an enlarging or extensive word, for it could not have been the intention of the Legislature to include something which in normal course would already stand included. The contention of the respondent authorities that the said word "including" has been used as an abundant caution to emphasis the fact that "X-ray films" have been included to clarify that nothing should be left out from the all inclusive and comprehensive character of the expression "films of all kinds", stands repelled in view of the decision of the Supreme Court in South Gujarat Roofing Tiles Manufacturers Association [1976 (10) TMI 147 - SUPREME COURT OF INDIA]. By using the word "including" in entry 28, the Legislature did not wish to include an article which would normally be covered by the general terms "films of all kinds" but to give an exhaustive meaning to the words "films of all kinds" by clarifying and indicating the nature of film by referring to X-ray films. In doing so, the substances covered by the expression, "films of all kinds" would possess such characteristics which are also discernible in "X-ray films". Thus, the words "films of all kinds" would envisage only those films which also possess certain characteristics as discernible in an X-ray film. The expression "X-ray films", therefore, would act as the indicator of the nature of the kinds of films contemplated under the expression "films of all kinds". Therefore, the words "films of all kinds" would be such films which possess any of the characteristics or attributes of "X-ray film", i.e., photosensitive materials and not any other film which does not possess such character. The kinds of films which would be covered by entry 28 would be only those films which have certain photosensitive materials. It will cover all those films possessing certain characteristics which may be also found in "X-ray film" but going under different names. This corresponds to the second definition of "film" as discussed above. In view of the above, "films of all kinds" referred to in entry 28 would be the films which possess photosensitive elements in them - articles, polyester film, metallised pet, metallised BOPP, aluminium foil film and poly film do not possess any such photosensitive chemical or substances which would qualify them to be treated as films under entry 28 and accordingly, these substances cannot be covered under entry 28 and not liable to be taxed under the said entry - Decided in favour of assessee.
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2014 (8) TMI 443
Release of gold seized - Combined proceedings under Income Tax and KVAT - Seizure of 6280 grams of gold from the business premises during seizure – Order for penalty proceedings passed u/s 67(1) of Kerala Value Added Tax Act, 2003 – Limitation - Held that:- The Income Tax Department having no subsisting claim, what would arise for consideration is the sustainability of the final order, passed by the Commercial Taxes Department - Commissioner of Income Tax, the 4th respondent to release the gold immediately to the petitioner, without fail and within two weeks from the date of production of the certified copy of this judgment. Penalty proceedings under KVAT but no proceeding for non registration - Held that:- The penalty proceedings was commenced on 19.01.2010, immediately after the seizure was effected - the limitation period was one year for the disposal of the penalty proceedings and it should be made within the time stipulated, from the date of detection of the offence and that the order passed beyond the period of limitation would be illegal – revenue being aware of the seizure of gold in the year 2010, and having initiated proceedings for penalty, chose not to take any proceedings against the petitioner for assessment or for failure to take out registration - The penalty proceedings too have been set at naught for reason of the same being barred by limitation - Even otherwise, the income tax authorities having found no sale of gold, being effected by the petitioner, it is a moot question as to whether the commercial tax authorities could ferret out a sale from the facts disclosed - there is absolutely no reason to take any proceedings at this point of time, under the Kerala Value Added Tax Act, 2003 – Decided in favour of Assessee.
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2014 (8) TMI 442
Seizure of records - Non production of documents - Held that:- Court is of the view that the position requires to be considered in the light of the relevant provisions of law, by the competent authority. This is not a fit case to call for interference invoking the discretionary jurisdiction of this Court. Without prejudice to the rights and liberties of the petitioner to challenge Ext.P5, interference is declined - It is open for the petitioner to approach the departmental authorities to get back the documents and in case any such petition is filed, the same shall be considered and necessary orders shall be passed, effecting return of the documents at the earliest. The petitioner shall produce the books of accounts as sought by the second respondent on the relevant date to be informed by the second respondent forthwith and after verification, the seized records shall be returned to the petitioner within two weeks thereafter. - Decided conditionally in favour of assessee.
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