TMI Tax Updates - e-Newsletter
August 2, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (8) TMI 10
Interest expenses on borrowed funds u/s 36(1)(iii) – Held that:- Tribunal was of the view that the interest paid on the borrowals utilized for investments in a foreign company namely M/s Kemsol Ltd could not be allowed as deduction as it was not in the course of Assessee’s business - there was no evidence placed on record by the Assessee to support the argument of commercial expediency in acquiring 60% of the shares of M/s Kemsol Ltd. - the interest paid on borrowed funds was not for the purpose of the business of the Appellant/Assessee – tribunal was correct in its approach, both legally and factually in passing the order that it did. The investments made by the Assessee Company in its subsidiary were for furthering the business interests of the Assessee - there was no justification to disallow the deduction, which was otherwise eligible u/s 36(1)(iii) of the Act - the authorities below have come to a categorical finding that the investment made in M/s Kemsol Ltd from borrowed funds was not for the purpose of business of the Assessee. Foreign travel expenses – Held that:- The approach of the Tribunal in restricting the disallowance of the foreign travel expenses to 10% of the amount claimed by the assessee is more than a reasonable approach - It cannot be said to be vitiated either on the ground of perversity or error of law apparent on the face of the record – Decided against assessee.
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2014 (8) TMI 9
Lifting up of corporate veil - Whether the AAR was correct in holding that the corporate veil ought to be lifted and that the JV Company and Vatika were essentially the same entity – Held that:- The JV Company was to be managed as a joint venture between the petitioner and Vatika and the JV Company was not an alter ego of Vatika alone - the affairs of the JV Company were to be managed separately and distinctly from that of Vatika - The reading of the agreement as a whole clearly indicates that the petitioner was entitled to participate in the management and affairs of the JV Company, not only by appointing its nominee directors but also by ensuing independent auditors and an independent Asset Manager - the affairs of the JV Company were to be managed independent of Vatika - when the corporate veil of the JV Company is lifted, Vatika and the JV Company were essentially one and the same entity to be wholly erroneous and not warranted. Whether the amount paid/payable by Vatika in excess of the amount invested by the petitioner would be ‘interest’ within the meaning of Section 2(28A) of the Act and Article 11 of the Indo –Mauritius DTAA – Held that:- It cannot be read to mean that the petitioner was only entitled to a fixed return on the investments made by it in the equity and CCDs issued by the JV company - the CCDs held by the petitioner would mandatorily be convertible into equity shares and the petitioner would be entitled to the benefits that would accrue to an equity shareholder in respect of the equity shares issued by the JV Company on conversion of the CCDs - merely because an investment agreement provides for exit options to an investor, would not change the nature of the investment made - It also cannot be ignored that the options were granted to the investor as well as to Vatika - it is essentially a joint venture agreement and it is common in any joint venture agreement for the co-venturers to include covenants for buying each-others’ stakes - Although, the SHA enables the petitioner to exit the investment by receiving a reasonable return on it, and in that sense it is assured of a minimum return, it cannot be read to mean that the CCDs were fixed return instruments, since the petitioner also had the option to continue with its investment as an equity shareholder of the JV Company - The rights with regard to options as well as additional rights under Article 11 of the SHA were the mutual rights and obligations between Vatika and the petitioner and not the JV company - The JV Company would in any event, whether the options were exercised inter se Vatika and the petitioner or not, convert the CCDs into equity shares on completion of 72 months from the First Closing Date. Agreement structured for the purpose of avoiding tax or not – Held that:- If the gains are considered as payment of interest by Vatika, as is contended by the Revenue, it would also mean that the quantum of interest is a deductable expenditure in the hands of Vatika - it would be erroneous to conclude that the whole transaction had been structured to ensure avoidance of tax on income – Relying upon Vodafone International Holdings BV v. Union of India and Anr. [2012 (1) TMI 52 - SUPREME COURT OF INDIA] - Court must look at the entire transaction as a whole and not adopt a dissecting approach - the court cannot start with the question of whether the transaction is a tax saving device, but should instead apply the “look at test” to ascertain its true legal nature. There is sufficient commercial reason for the petitioner to have routed its investment in the real estate project through equity and CCDs - The pre-mature exit options as recorded in the SHA and the minimum return assumed by Vatika on its investment are clearly commercial agreements between the parties - These would not change the legal nature of the transaction entered into between the parties - The terms of the arrangements between Vatika and the petitioner reveal that the JV was a genuine commercial venture, in which both partners had management rights - The call and put options were defined commercial options capable of being elected by the parties –there is no reason to ignore the legal nature of the instrument of a Compulsorily Convertible Debenture or to lift the corporate veil to treat the JV Company and Vatika as a single entity – Decided in favour of Assessee.
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2014 (8) TMI 8
Notice for reopening of assessment u/s 148 – Income escapement – Change of opinion - Whether the income of the assessee had escaped assessment on account of failure on the part of the assessee to disclose, fully and truly, the material facts necessary for the assessment – Held that:- The depreciation on computer software is either to be charged at 60% or in certain cases, expenditure on computer software is treated as revenue expenditure - it is apparent that the dispute raised with regard to rate of depreciation by the AO merely indicates a change of opinion and there has been no failure on the part of the assessee to disclose any material fact in this regard - with respect to the sum received as non-refundable advance from Energy Ventures, the assessee had furnished clarifications with regard to the claim of deduction made by the assessee in respect of this sum received from Energy Ventures as nonrefundable advance - assessee had made full and complete disclosure with regard to the deduction claimed on account of the sum. The AO has sought to reopen the assessment not on account of failure on the part of the assessee to disclose any material particulars, but on account of the change of opinion with regard to certain deductions claimed and allowed by the assessee - assessment cannot be reopened on mere change of opinion – relying upon CIT v. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - a mere change of opinion cannot form the basis for reopening of assessment. Although the AO has recorded that he has reasons to believe that income chargeable to tax exceeding ₹ 1 lac. had escaped assessment, as the assessee had not disclosed, fully and truly, all material facts necessary for his assessment for the relevant assessment year, there is no allegation made in the reasons as furnished by the AO that there had been a failure on the part of the assessee to disclose, fully and truly, any particular fact that was necessary for the assessment - thus, the proceeding initiated by the AO for reopening the assessment for the AY 2006-2007 is without authority of law – Decided in favour of Assessee.
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2014 (8) TMI 7
Notice for reopening of assessment u/s 148 - Reasons to believe that the income chargeable to tax has escaped assessment – Held that:- The AO have reasons to believe that there had been some omission or failure to disclose fully or truly all material facts necessary for the assessment must be based on some material facts which according to the AO is based on some reasonable belief and which would have a material bearing on the question of under assessment - relying upon Calcutta Discount Co. Ltd. Vs. Income Tax Officer and another [1960 (11) TMI 8 - SUPREME Court] - the reasons recorded by the AO nowhere states that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year - the entire material had been placed by the petitioner before the AO at the time when the original assessment was made and that the AO had applied its mind to that material and accepted the contention canvassed by the assessee. Merely because the tax audit report opined that there was excess expenditure shown and that the excess payment should be treated as a deemed gift u/s 4(1)(c) of the Gift Tax Act on the basis of the same material is in our opinion a clear case of change of opinion - the AO has dealt with the audit report and justified his assessment order indicating in its order dated 4th July, 2000 that the issue pertaining to deemed gift and the purchase consideration was examined in detailed looking the business necessity for the petitioner company to acquire the copyright and held that the quantum of purchase consideration as disclosed by the petitioner was reasonable and was a true business transaction and that no gift appeared to be involved. Once the AO had made an assessment on the primary facts and documents placed before it, the AO could not at another point of time form another opinion on the same primary facts and arrive at a conclusion that he had committed an error or come to a conclusion that he has now reasons to believe that income had escaped assessment and reopen the assessment proceedings - on the basis of an audit report, notice u/s 148 of the Act could not be issued as such audit report cannot be regarded as "information" within the meaning of 147(b) of the Act for the purpose of reopening an assessment – the notice issued u/s 148 is to be set aside – Decided in favour of Assessee.
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2014 (8) TMI 6
Notice u/s 163(2) – Employee of the assessee to be treated as representative agent for the particular assessment year u/s 163(1)(c) or not - Mr Francis who is no longer in the employment of the petitioner became a non-resident subsequently. - Held that:- The relevant accounting year is the previous year ending on 31.03.2003 which pertains to the assessment year 2003-04. At that point of time Mr Francis Daly was not a non-resident. Therefore, in relation to that accounting period the petitioner cannot be appointed as a representative assessee. This is notwithstanding the fact that subsequently Mr Francis Daly attained the status of a non-resident and that when he was a non-resident the notice under Section 163(2) were issued. - the relevant period for consideration would be the relevant accounting period which in this case happened to be the year ending on 31.03.2003. Section 160(1)(i) of the said Act makes it clear that the expression “representative assessee” has to seen “in respect of the income of a non-resident”. It is obvious that when we construe the expression “income of a non-resident” it has reference to income in a particular previous year/accounting year. The income of that year must be of a non-resident. If that be so, the agent of the non-resident or the deemed agent under Section 163 of the said Act would be the representative assessee. The petitioner is not an agent of Mr Francis Daly. Section 163(1)(c) talks about the person from or through whom the non-resident “is in receipt of any income, whether directly or indirectly” – relying upon Abdullabhai Abdul Kader Versus Commissioner of Income-tax [1952 (3) TMI 33 - BOMBAY HIGH COURT] - the income bears reference to the accounting year for which the statutory agent is to be appointed – thus, the assessee cannot even be regarded as a deemed agent u/s 163(1)(c) of the Act - assessee cannot be considered to be the representative assessee of Mr Francis Daly in respect of the AY 2003-04 – Decided in favour of Assessee.
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2014 (8) TMI 5
Deduction u/s 80IA - Central Excise Duty set off and Sales Tax set off – Whether the Tribunal was right in law in confirming that assessee was not entitled to deduction u/s 80IA of the Act, 1961 in respect of Central Excise Duty set off and sales tax set off - Held that:- In respect of DEPB and duty drawback the assessee is not entitled to deduction under Section 80IB of the Act - Following the decision in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] - the assessee must claim the Central Excise Duty set off to be in the nature of duty drawback linked with export profit while claiming deduction u/s 80HHC of the Act - for claiming deduction u/s 80HHC, the assessee itself claimed that Central Excise Duty set off is export incentive by way of duty drawback, the assessee cannot take different stand while claiming deduction u/s 80IA - the stand taken by the assessee while claiming deduction u/s 80HHC under the Act, the Tribunal has rightly held that the assessee shall not be entitled to deduction u/s 80IA of the Act on the Central Excise Duty set off as well as Sales Tax set off – Decided against Assessee.
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2014 (8) TMI 4
Benefit u/s 11 – Investments made in modes prescribed u/s 13(1)(d) or not - Whether the Tribunal is correct in allowing the benefit of Section 11 to the assessee and thereby allowing the relief to the assessee if at all there was violation of section 13(1)(d) of the Act – Held that:- The foreign shares have not been transferred in the name of the trust and were/are still in the name of late Raja Bahadur Sardar Singh – CIT(A) has noticed that as per the Will, the shares are to become the corpus of the trust, but this acquisition is dependent upon adjudication of the Probate - there cannot be violation of Section 11(5) - revenue has not been able to controvert and deny the factual position - he was asked whether the revenue has filed or taken similar objections in respect of other years and denied benefit of Section 11 – allegation of violation of Section 11(5) of the Act does not arises for consideration - Decided against revenue.
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2014 (8) TMI 3
Deduction u/s 10(10C) – VRS benefits not exceeds the limit prescribed - Employer deducted TDS - Rule 2-BA of the Income Tax Rules – Held that:- The manpower in its establishments has become economically unviable and accordingly evolved VRS, with the participation of the representatives of the workmen - to discourage introduction of indiscriminate schemes, which ultimately may serve the cross purposes, the Government introduced Rule 2BA in the Rules, prescribing certain Guidelines - The approach of the revenue is contrary to the relevant provisions of the Act and the Rules made thereunder - Rule 2BA of the Rules by itself does not provide for any formula for deductions - It only stipulates the conditions on satisfaction of which, the VRS would qualify for the benefit u/s 10(10C) - once the scheme is approved, the occasion to effect deduction of tax at source would arise, if only the benefit of a particular employee exceeds ₹ 5,00,000 - for none of the assessees herein, the benefit under VRS exceeded ₹ 5,00,000 – the deduction (TDS) was not proper - Decided in favour of Assessee.
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2014 (8) TMI 2
Grant of registration of trust u/s 12A – Assessee trust made donations to another trust – Held that:- The Tribunal has specifically held that the objective of the Trust is charitable - Relying upon COMMISSIONER OF INCOME TAX-I Versus KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TRUST [2012 (12) TMI 876 - GUJARAT HIGH COURT] - absence of any activity of a trust at the time of registration is not a ground to question genuineness of objectives and activities; registration for trust cannot be denied on the sole ground of non-commencement of activity and such absence of activity does not empower Commissioner to infer absence of genuineness - Tribunal has set aside the decision of the Commissioner denying the registration and directed the Commissioner to grant registration to the assessee trust u/s 12A of the Act - There was no error has been committed by the Tribunal in directing the Commissioner to grant registration to the assessee-trust u/s 12A of the Act – Decided against Revenue.
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2014 (8) TMI 1
Rectification of order u/s 154 – Withdrawal of unabsorbed investment allowance to be set off – Held that:- The successive ITOs from 1983 onwards did not express any reservation about the admissibility of the investment allowance claim - the ITO, who dealt with the assessment of a subsequent year, can independently deal with the claim - it was competent for the respondent to deal with the investment allowance for the AY 1991-92 independently, and was not bound by the view expressed by his predecessors, in the preceding assessment years - If it were to be a case where no deduction whatever was permitted of the investment allowance, though claimed in the preceding assessment years, and the respondent addressed the question, the contention of the Department can certainly be accepted - the determination as to the admissibility has already taken place and substantial part of it was enforced by permitting deduction, any permission accorded to the respondent to undo whatever has been done earlier, would run contrary to the very letter and spirit of Section 154 of the Act, or for that matter, the facility created under Section 32A of the Act - The process of undoing any matter can be only through the known and prescribed procedure and not otherwise – the order is set aside – Decided in favour of Assessee.
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Customs
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2014 (8) TMI 13
Rejection of bail application - Applicant booked for possession of contraband articles - Applicant contends that he was booked because he was a son a co-accused - Absence of mens rea - Held that:- Under section 437 or 439 of the Code of Criminal Procedure it is for the prosecution to show the existence of reasonable grounds to support the belief in the guilt of the accused to attract the restriction on the power to grant bail. However, as the definition of section 37 noted above indicate, it is the accused who must show the existence of grounds for the belief that he is not guilty, to satisfy the condition precedent and lift the embargo on the power to grant bail. This is the distinction between the two provisions which makes section 37 of NDPS Act, more stringent. The twin conditions under section 37(1)(b)(ii) of the Act required to be satisfied are cumulative and not alternative. It cannot be said that the mandatory provisions with regard to the detention, arrest, search and seizure etc. in respect of the applicant have not been followed, simply because it is premature to give any verdict on the argument of the learned counsel for the applicant and it would be decided after appreciation of the evidence led by the parties in the case - Further in view of the provisions of sections 35 and 54 of the Act, it is the burden of the applicant to prove that he was not in conscious possession of the contraband, if it is proved that he was in possession thereof and that he had no such mental state with respect to the act charged as an offence. The consistent case of the prosecution is that the applicant was found travelling in the car owned by the family along with his father and they were found in possession of 50.300 kgs of Charas hidden in the secret cavity (specially made for the purpose) of the Bolero vehicle. The defence taken by the applicant in para-17 of the affidavit appears to have been taken for the first time in the bail application as it does not find place in the bail rejection order of the applicant passed by the Court below on 3.10.2013. The statement of the applicant recorded by the department under section 67 of the Act falsifies the plea taken by the applicant to explain the recovery of the contraband in their vehicle. Further in view of the provisions of sections 35 and 54 of the Act, it is the burden of the applicant to prove that he was not in conscious possession of the contraband, if it is proved that he was in possession thereof and that he had no such mental state with respect to the act charged as an offence. The consistent case of the prosecution is that the applicant was found travelling in the car owned by the family along with his father and they were found in possession of 50.300 kgs of Charas hidden in the secret cavity (specially made for the purpose) of the Bolero vehicle. The defence taken by the applicant in para-17 of the affidavit appears to have been taken for the first time in the bail application as it does not find place in the bail rejection order of the applicant passed by the Court below on 3.10.2013. The statement of the applicant recorded by the department under section 67 of the Act falsifies the plea taken by the applicant to explain the recovery of the contraband in their vehicle. Indisputably complaint against the applicant had been filed by the department on 17.8.2013 and the trial has begun. The applicant has filed the copy of the statement of PW-1 recorded in the trial Court and his learned counsel has tried to show certain pieces of evidence to demonstrate non-compliance of mandatory provisions of the Act. However, in my opinion, it would not be expedient in the interest of justice to appreciate the evidence of PW-1in these misc. proceedings of summary nature, as any finding of this Court, may be for consideration of the bail application of the applicant, is likely to prejudice any of the parties. - the twin conditions as enumerated in section 37 (1)(b)(ii) of the Act, for grant of bail to the applicant for the offences under NDPS Act are not satisfied, therefore, he cannot be released on bail - Decided against applicant.
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2014 (8) TMI 12
Confiscation of goods - Imposition of redemption fine - Under valuation of goods - Assessee admitted under valuation - Held that:- when goods are liable for confiscation, and confiscated and released to the assessee on his executing a bond or bank guarantee, the proceedings are concluded holding that if there is a violation of the provisions of the Act, then the order of confiscation has to follow as a matter of course. As the goods are already released in favour of the assessee instead of again taking possession of the confiscated goods, the law provides for payment of fine in lieu of confiscation which is popularly known as redemption fine. Therefore, whether the bond executed by the assessee is in force; whether the bank guarantee executed for due compliance of the bond is in force or not; whether goods are in possession of the authority or not; whether the goods in existence or not on the day when order was passed is totally irrelevant - Once that finding is recorded in lieu of confiscation of the goods and option is given to the assessee to pay confiscation fine ie., redemption fine to retain the goods - decided in favour of Revenue.
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2014 (8) TMI 11
Power of tribunal - Reduction in penalty - Whether the Tribunal was justified in modifying the penalty imposed under Section 114A of the Customs Act in respect of misdeclaration, where duty demand has been confirmed - Held that:- there was no discretion vested with the Tribunal to reduce the quantum of penalty than what is provided in terms of the Statute - In view of the categorical statement of law and taking note of the specific provision of Section 114A where there is a specific mandate that the importer shall be liable to pay penalty equal to the duty or interest so determined by the authority concerned, when there is a mis-declaration the Tribunal is not justified in reducing the penalty imposed under Section 114A of the Customs Act. Such a mandate under the Statute cannot be given a go-by by the Tribunal - Following decision of Commissioner of Central Excise, Delhi -II V. Bisht Electronics reported in [2011 (9) TMI 128 - DELHI HIGH COURT] - Decided in favour of Revenue.
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Service Tax
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2014 (8) TMI 30
Waiver of pre-deposit of duty - input service distributor (ISD) - Goods manufactured on behalf of other Company - Tax paid by company for whom goods were manufactured - Assessee availed credit for tax paid by that company - Held that:- The applicants are independent manufacturers and are paying Central Excise duty being independent manufacturer. As per the provisions of Rule 7 of the Cenvat Credit Rules, 2004 the input service distributor may distribute the Cenvat Credit in respect of Service Tax paid on the input service to its manufacturing units. A reading of the above provision of Rule 7 of the Cenvat Credit Rules, 2004 it is clear that input service distributor can distribute Service Tax paid on the input service to its manufacturing units. In the facts and circumstances of the present case, it cannot be said the applicants are manufacturing unit of M/s. Merck. Further, we find that as per the definition of ‘input service distributor’ as provided under Cenvat Credit Rules, 2004, ‘input service distributor’ means an office of the manufacturer or producer of final products or provider of output service. In view of the facts and circumstances of the present case, office of M/s. Merck cannot be held to be the office of the present applicants who are independent manufacturers. Invocation of extended period of limitation - Held that:- applicants were filing monthly returns in respect of credit availed and utilised towards payment of duty, hence, prima facie the argument that the demands are beyond the normal period of limitation is not sustainable. Following decision of Benara Valves Ltd. v. Commissioner of Central Excise [2006 (11) TMI 6 - SUPREME COURT OF INDIA] - Conditional stay granted.
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2014 (8) TMI 29
Cenvat Credit -input services - Rent a cab service - said rent-a-car service was rendered at various other places other than the factory - tribunal allowed the credit - Held that:- Tribunal has not dealt with the questions extensively, therefore, would it be fair, just and proper at this stage itself if the present Appeal is allowed and the order of the Tribunal is quashed and set aside and the matter is remitted back to the Tribunal. - In view of the judgment of this Court in the case of Commissioner of Central Excise, Nagpur v/s Ultratech Cement Limited reported in [2010 (10) TMI 13 - BOMBAY HIGH COURT] matter remitted back to the tribunal after granting full stay / waiver of pre-deposit - Decided in favor of revenue.
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2014 (8) TMI 28
CENVAT Credit - GTA Service - Credit on freight charges - Whether credit taken on GTA services could be utilised for payment of service tax on the freight amount paid by them towards outward transportation of their final products as well as inward transportation of their inputs/capital goods at a specified time - Held that:- Service received by an assessee cannot be treated as output service and in respect of such service received by him, he cannot be treated as provider of service. Same view has been taken by the Board in its Circular No. 97/8/2007, dated 23.8.2007, wherein the Board has clarified that in terms of Cenvat Credit Rules, ‘output service’ means any taxable service provided by the provider of taxable service to be service receiver; that definition of ‘provider of taxable service’ includes a person liable to pay service tax; that reading the two definitions in conjunction, it is clear that, to form ‘output service’, taxable service has to be actually provided by the provider of taxable service and that even if due to a legal fiction, a consignor or a consignee qualifies to fall under the definition of a person liable to pay service tax (and consequently a provider of taxable service), it cannot be said that he has actually provided any taxable service. Just because in respect of the service provided by a Goods Transport Agent (GTA) the consignee has been made liable to pay service tax, that service received by the consignee does not become their ‘output service’. Therefore, the service tax payable by the consignor or consignee on transportation of goods by road cannot be paid through Cenvat credit by such consignor or consignee. The above clarification by the Board has to be treated as contemporaneous exposition of Rule 2(p). Moreover this clarification is in accordance with settled law that legal fiction can be applied only for the specific purpose for which it has been made not for other purpose - Decided against assessee.
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2014 (8) TMI 27
Availment of wrong CENVAT Credit - amount was reversed before before issue of SCN but interest was paid later - Invocation of extended period of limitation - Penalty - Held that:- The Commissioner (A) has taken the view that the appellant is working under self-assessment scheme and he is bound to be honest in taking credit and discharging liability - If the appellant had intentionally taken the credit, they need not have paid the amount before the issue of show-cause notice but waited for show-cause notice to be issued and challenged the same on the ground of limitation thereafter. The very fact that the appellant paid the amount before issue of show-cause notice and when it was found that interest liability was not fully discharged, they paid the balance, would go in favour of the appellants - this was not a case for invoking extended period for imposition of penalty - penalty imposed on the appellant is set aside and demand for wrongly availed Cenvat credit with interest is upheld as not challenged - Decided partly in favour of assessee.
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2014 (8) TMI 26
C&F agent service - Assessee appointed as market organisers by PPL - Held that:- assessee are performing the function of only placing the order for commissioning is also evidenced by the documents - C&F agreement with Heera Drug House is entirely different from the agreement entered into between the agreement and PPL here which again supports the case of the appellant. Further records show that while placing purchase orders, appellant indicates the name of C&F agent through whom goods have to be supplied which would also show that appellant cannot be a C&F agent - role of the appellant is more appropriately covered by business auxiliary service and not C&F agent service has considerable force. Accordingly, we find that the impugned order cannot be sustained - Decided in favour of assessee.
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2014 (8) TMI 25
Business auxiliary service - assessee is commercial concern or not - Penalty 76, 77 & 78 - Held that:- Appellant cannot get out of the tax net on the pleading that they are not a commercial concern. Services provided by the appellant is covered by the expressions “any customer care service provided on behalf of the client” and also under the clause “provision of service on behalf of client” and hence taxable. However in view of the decisions in the Tribunal in favour of the appellant which were in force for some time, extended period cannot be invoked in this case. So the demands falling within the normal period of one year is confirmed along with appropriate interest. In the facts and circumstances of the case, imposition of penalties is not justified - Decided partly in favour of assessee.
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2014 (8) TMI 24
Rent-a-Cab services - proof that cab is hired by another rent-a-cab operator from him and another operator has paid service tax - Non mention of registration number of the vehicle which was rented out - Whether the appellant is liable to pay service tax on vehicles which had the capacity to carry more than 12 persons under rent-a-cab service - Held that:- the liability to service tax would arise when a cab is rented out to another operator and bill is raised. However, if the other rent-a-cab operator is also registered and pays the tax, then it would result in a situation where two operators would be paying tax on the same service. To prevent such a situation, this clarification has been issued. There is no dispute and there cannot be any dispute that liability would be on the operator who has rented out the cab to the other operator also, but he need not pay tax if other operator who hired the cab paid the tax. Therefore, lower authorities were right in asking the appellant to submit proof that the other operator who had hired the cab from the appellant has paid service tax. - matter remanded for verification on this issue. Liability of tax when capacity to carry more than 12 persons - the appellant produced the registration numbers of the vehicles which had been rented out, but it was found that the vehicles belonged to other persons and not of the appellant except one vehicle which was in the name of the appellant and not in the name of the firm. The question that arises is whether the registration number of the vehicle was required to be given in this case and because of such failure, the liability can be fastened on the appellant. - Held that:- A.R. could not show any circular or statutory provisions making it obligatory for an assessee to indicate the registration number of the vehicle rented out, when he provided rent-a-cab services. In the absence of such provision, in my opinion, indicating capacity of the vehicle rented out on the invoice would be sufficient evidence to show whether the services was liable to tax under the Rent-a-Cab category or not. In such a situation, it was for the department to show that the vehicle actually rented was covered by rent-a-cab service. Therefore, demand of tax cannot be sustained and accordingly the impugned order confirming demand of service tax and penalty relating on such transactions is set aside - Decided in favour of assessee.
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Central Excise
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2014 (8) TMI 20
Power to tribunal to grant stay beyond period of 365 days - 3rd proviso to Section 35C(2A) of Central Excise Act, 1944 - Held that:- as such on expiry of maximum period of 180 days, the assessee - orig. appellant is required to submit application for extension of stay each time after completion of 180 days and the learned Tribunal is required to consider the individual case and pass a speaking order whether the delay in not disposing the appeal is attributable to original appellant - assessee or not and if it is found that the original appellant - assessee in whose favour the stay has been granted is not cooperating in early disposal of appeal and/or the delay in disposing respective appeals is attributable to the original appellant - assessee, the learned Tribunal is not required to extend the stay more particularly considering the provisions of section 35C( 2A) of the Central Excise Act. - Decided partly in favor of revenue.
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2014 (8) TMI 19
Rebate / Refund claim on export of goods - it was found by the Department that the entire transactions were fake and as such they were only billing transactions only with a view to get the CENVAT credit as well as the rebate - Held that:- there are concurrent findings of fact given by all the authorities below with respect to the fake transactions between the petitioner and M/s. Raju Synthetics Pvt. Ltd., we are of the opinion that all the authorities have examined the case in detail and as such no interference is called for. The conclusions arrived at by the authorities below are on the basis of evidence on record and such conclusions are not pointed out to be perverse. Under the circumstances, as such no interference in exercise of powers under Articles 226 & 227 of the Constitution of India, therefore, can be made. Merely because M/s. Raju Synthetics Pvt. Ltd. was not declared as fake company / supplier, it makes no difference. As such there is a distinction between the fake transaction and the fake company. When the transactions between the petitioner and the supplier were found to be fake transactions and it was found that the petitioner has failed to establish and prove that the petitioner used the inputs / goods in manufacturing of even the goods which came to be exported on which the actual excise duty or paid, the petitioner shall not be entitled to the rebate of the duty, which is not proved to be paid. Decision in the case of D.P. Singh (2011 (3) TMI 1370 - GUJARAT HIGH COURT) distinguished - Decided against the assessee.
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2014 (8) TMI 18
Clandestine manufacture and removal of goods - principle of natural justice - opportunity to cross examine the persons - Held that:- despite request from the assessee, no cross examinations of such witnesses were provided by the adjudicating authority and no investigations were carried with respect to the buyers of the traded goods from JBMC. - It is also observed from the sale invoices / bills of JBMC that even truck numbers are also mentioned but no statements of such transporters were recorded to establish the truth as to from where the goods originated and whether these goods were prime or out of retrieved materials. Under the present facts and the extent of clandestine manufacture and clearance activities there ought to have been some indicators in the form of excess / shortages of raw materials and finished goods or seizure the finished goods outside the factory premises after clandestine removals. Recovery of certain challans of JBMC in the factory premises of JBMI and the opinion / statements of third parties can create a strong presumption that appellants were indulging in the clandestine manufacture and clearance of excisable goods. However, creation of a strong suspicion does not establish the charge of clandestine manufacture and clearance of excisable goods. In the present appeals also there is no such evidence on record that appellant JBMI procured extra raw materials or used extra power etc. because on the date of visit of the officers of DGCEI the stocks of raw materials and the finished goods were found tallying. The theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal. - Decided in favor of assessee.
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2014 (8) TMI 17
Waiver of pre-deposit - Cenvat credit - input services - selling commission for issue of IPO, Under Writing Commission of IPO, and Brokerage Incentive for IPO - commissioenr (appeals) dismissed the appeals for non-compliance of order of 50% deposit - prima facie case - Held that:- In view of the order passed by this Bench in the case of Aditya Birla Nuvo Ltd (2009 (1) TMI 117 - CESTAT AHMEDABAD) relied upon by the appellant, CENVAT Credit with respect to IPO related services has been held to be admissible. So far as not following of procedure of ISD registration, appellant has relied upon the case laws that substantial benefit cannot be denied on the basis of procedural deficiencies which can be rectified. In view of the case records and the arguments taken by the appellant, there is an arguable case for the appellant regarding admissibility of CENVAT Credit on the services involved. It is, therefore, felt that the pre-deposit amount asked for by the first appellate authority was on the higher side. - Appellant directed to deposit an amount of ₹ 50,000 /- - appeals restored before first appellate authority.
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2014 (8) TMI 16
Levy of separate penalty on partner of the firm - clandestine removal of goods - Held that:- it is observed that respondent partner was a party to the whole fraud committed by the partnership concern and is liable to penalty - a penalty of ₹ 1,00,000/- imposed on the respondent under Rule 209A of the erstwhile Central Excise Rules, 1944 read with Rule 26 of the Central Excise Rules, 2002 - Decided in favor of revenue.
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2014 (8) TMI 15
Cenvat Credit - Input services - commission agent services for promoting the sale of finished goods - Held that:- The entire grounds of the appeal of the Revenue is basically trying to interpret the provisions of the Rule 2(l) of the Cenvat Credit Rules 2004, to drive home a point; that the sales promotion and such other activities are related sales commission service and do not qualify for as an Input Service. Revenue has placed reliance on the judgment of the Hon'ble High Court of Gujarat in the case of Cadila Health Care Ltd - [2013 (1) TMI 304 - GUJARAT HIGH COURT] of the judgement leadership , I find that the lordship have categorically held that the Cenvat Credit on the service tax paid on the sales commission is per-se is not allowed but if the said commission is paid for promotion, that would be a different. The factual matrix is recorded by the first appellate authority indicates that the amount paid by the appellant is a commission for sales promotion expenses. - Credit allowed - Decided in favor of assessee.
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2014 (8) TMI 14
Cenvat Credit on inputs services and capital goods received before registration - capital goods and input services which were consumed for setting up of the factory - Held that:- It is a common sense that unless a factory is setup, trial runs are taken, an assessee will be unable to manufacture excisable products. The entire exercise of the assessee for setting up of factory is for manufacturing excisable goods which can be done so only when he erects, installs and commissions the capital goods with the help of various agencies. In the case in hand, we find that there is no dispute that appellant has received the capital goods and the input services, utilized them for setting up the manufacturing facilities. To deny credit of the central excise duty paid and service tax paid, would be travesty of justice, more so when the assessee herein is discharging appropriate excisable duty on the finished goods cleared after taking the registration certificate. Decision in the case of mPortal India Wireless Solutions Pvt. Ltd. Vs. CCE, Bangalore (2011 (9) TMI 450 - KARNATAKA HIGH COURT) followed - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2014 (8) TMI 23
Stay application - Penalty - Assessee contends that orders of assessment were passed on a mistaken impression with regard to certain slips - Held that:- Under normal circumstances, the appellant should have gone only before the appellate authority. As against the order impugned in the Writ Petition, the appellant has a statutory remedy of appeal to the Appellate Assistant Commissioner. But, he had come out with a Writ Petition and the Writ Petition has been entertained. Therefore, under normal circumstances, we would not interfere with the exercise of a discretion by the learned Judge in imposing a condition upon the appellant for the deposit of the amount - explanation of the appellant needed to be taken care of. The products in question sold by the appellant were only two wheelers. These products cannot escape unnoticed as they require registration. Therefore, in cases of this nature, the condition, that would normally apply in similar cases, need not be insisted upon - Decided in favour of assessee.
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2014 (8) TMI 22
Input tax credit denied - registration certificates of the selling dealers have been cancelled with retrospective effect - TNVAT Act, 2006 - Held that:- Following decision of JINSASAN DISTRIBUTORS V. COMMERCIAL TAX OFFICER (CT), CHINTADRIPET ASSESSMENT CIRCLE, CHENNAI, reported in [2013 (4) TMI 615 - MADRAS HIGH COURT] - registration certificates of the selling dealers have been cancelled with retrospective effect and, therefore, to reverse the input-tax credit on the plea that registration certificates have been cancelled with retrospective effect cannot be countenanced. Whatever benefits that has accrued to the petitioners based on valid documents in the course of sale and purchase of goods, for which tax has been paid cannot be declined. The transaction that took place when the registration certificates of the selling dealer were in force cannot be denied to the petitioners/assessees on the above plea. This is contrary to the law laid down by the Supreme Court in the State of Maharashtra Versus Suresh Trading Company [1996 (2) TMI 451 - SUPREME COURT OF INDIA]. Notices, revised assessment orders and the provisional assessment order, insofar as it seeks to deny the benefit of input-tax credit to the petitioners/ assessees only on the ground that the registration certificates of the selling dealers have been cancelled with retrospective effect are set aside.
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2014 (8) TMI 21
Exemption of tax on stock transfer - petitioner has generated e-transit pass and not surrendered in the exit check post - Held that:- petitioner is now having supporting documents and also the fact that the petitioner was not given an opportunity, I am inclined to set aside the impugned orders and the matters are remitted back to the respondent - Decided in favour of assessee.
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