TMI Tax Updates - e-Newsletter
September 27, 2014
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Scope of term total income u/s 5(2)(b) – question of fact or law - If, it was cash system of accounting and it was the consistent method followed and not objected to, then, the question referred cannot be termed as question of law - HC
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Income Tax:
Deletion of penalty u/s 271(1)(c) – penalty proceedings are separate from those of the assessment proceedings and confirmation of additions may not be the sole ground for confirming the penalty - HC
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Income Tax:
Deletion of penalty u/s 271A(2)(g) – late issuance of TDS Certificate - Once reasonable cause has been established by the assessee, no penalty u/s 271A(2)(g) of the Act could have been imposed on the assessee - HC
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Income Tax:
Section 80-P does not speak about any particular type of cottage industry. It is an inclusive definition - There is no sub-classification - what the statute provides u/s 80-P, cannot be taken away by means of an administrative circular - HC
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Income Tax:
Weighted deduction on agricultural demonstration park u/s 35C - The Tribunal was right in holding that dissemination of information or demonstration of modern techniques or methods of agriculture does not require any elaborate or detailed effort - HC
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Income Tax:
Penalty u/s 271(1)(c) – Whatever may have been the justification in adding the figures so arrived at, to the income of the appellant, there was no justification to initiate the proceedings u/s 271(1)(c) of the Act - the Tribunal proceeded on hyper- technicalities - HC
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Service Tax:
Exemption - generic principles of agency cannot be canvassed to expand the scope of exemption to the assessee, since the exemption Notification clearly limits the grant of immunity only to taxable services provided by or to the RBI and in enumerated circumstances - AT
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Service Tax:
Renting of immovable property - The fact that the area of the land appurtenant to the building being more than the area of the building would not make any difference. - AT
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Service Tax:
Import of services - if it is assumed that the branch has provided SSBC, service tax demand has to be made on their establishment in India which is nothing but the assessee himself. it is nothing but a self-service and therefore a service to self is not taxable also is valid - stay granted - AT
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Service Tax:
Imposition of penalty - the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act - HC
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Central Excise:
Finalization of provisional assessment – While finalizing a provisional assessment, the excess payment of duty can be adjusted against the short payment. - AT
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Central Excise:
Waiver of pre deposit - Manufacturing activity or not - The appellant cannot choose to discharge excise duty liability in some cases and not discharge duty liability in some other cases. - AT
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Central Excise:
Classification of goods - classification of Calcutta Meetha Pan - classifiable under CETH 20.01 prior to March, 2005 and under CETH 20.08 on or after March, 2005 - AT
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Central Excise:
CENVAT Credit - appellant would be liable to reverse the credit, if any, taken on such inputs/input services which have been used in the generation of electricity which have been sold to MSEB - AT
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Central Excise:
Clandestine removal - if the statements of the concerned persons are out of their volition and there is no allegation of threat, force, coercion, duress or pressure, such statements can be accepted as a valid piece of evidence. - AT
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Central Excise:
Claiming exemption on extracting gold from gold ore - there cannot be any dispute that appellants are converting gold ore into Dore bar and gold ore cannot be considered as any form of gold. - AT
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Central Excise:
Interest under Section 11AB - Differential duty - A principle laid down or a ratio laid down in the case of transaction between two parties by the Hon’ble Supreme Court cannot be applied to a situation where the law is amended with retrospective effect by the legislature - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (9) TMI 764
Notice for reopening of assessment u/s 148 – bar of limitation under Proviso to section 151(1) – Held that:- The original assessment was u/s 143(3) - The notice u/s 148 was sought to be issued more than four years after the end of the relevant AY 1998-99 - Notice u/s 148 was issued on 29 March 2005 - clearly the proviso to sub-section (1) of Section 151 was attracted - the entire exercise of re-opening of the assessment u/s 148 fails to meet the basic jurisdictional requirement under the proviso to sub-section (1) of Section 151 since under the proviso no notice can be issued except on the satisfaction of the Commissioner or, as the case may be, the Chief Commissioner – thus, the notice for re-assessment is set aside – Decided in favour of assessee.
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2014 (9) TMI 763
Computation of property income u/s 23 - annual letting value of the self-occupied flat - Whether the Tribunal was right in holding that the annual letting value of the self-occupied flat in Usha Kiran Building has to be the sum equivalent to the standard rent under the Bombay Rent Control Act and not the Municipal Annual Rateable value in computing the property income u/s. 23 of the Income Tax Act, 1961 – Held that:- Following the decision in Commissioner of Income Tax-12 V/s. Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT] - the AO in the cases of properties, which are subject to Rent Control Legislation cannot ignore the same - If the standard rent has not been fixed under the Rent Control Legislation by the competent authority, it is the duty of the AO to determine the same in terms of the Rent Control Legislation – there was no basis for an apprehension that the Tribunal would ignore the Rent Control Legislation and prefer some other mode in determining the fair rent or annual letting value of the property u/s 23(1)(a) - the principle cannot be any different for self-occupied properties and in relation to which the exercise must be carried out in terms of the relevant section 23(1) of the I.T. Act – Decided in favour of assessee.
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2014 (9) TMI 762
Scope of term total income u/s 5(2)(b) – Finding of fact only - Whether the Tribunal is right in not appreciating that as per the provisions of section 5(2)(b) of the Act the total income of a person who is a nonresident includes all income from whatever sources derived which accrues or arises or is deemed to accrue or arise to him in India during such year – Held that:- The finding of the FAA and the Tribunal is based on the system of accounting of the Assessee - If, it was cash system of accounting and it was the consistent method followed and not objected to, then, the question referred cannot be termed as question of law - It is a finding of fact and which cannot be termed as perverse or vitiated by any error of law apparent on the face of the record – decided against revenue.
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2014 (9) TMI 761
Deletion of penalty u/s 271(1)(c) – Technical knowhow expenses disallowed u/s 35AB – Expenses revenue or not u/s 37(1) – Held that:- The assessee in its books of account had considered technical knowhow expenditure as deferred revenue expenses as for the purpose of accounting, the expenditure in question was likely to benefit in future - But, in the return of income had claimed the technical knowhow license fees as revenue expenses - In the computation of income also, it had disclosed the accounting treatment given to the said item by way of a separate note - when the claim of expenses under the general provision was questioned, it changed such claim under the provision of Section 35AB and such change during the course of assessment proceedings is permissible under the law - so far as levy of penalty for concealment of the income u/s 271(1)(c) is concerned, the Tribunal has noted that in terms of provisions of Explanation 1 to Section 271(1)(c) of the Act, if an explanation comes forth from the assessee, or if any explanation given is found to be false, or is not able to sustain the explanation and is also not able to prove that the explanation is bona fide, the addition made tantamount to concealment of particular of income - the penalty proceedings are separate from those of the assessment proceedings and confirmation of additions may not be the sole ground for confirming the penalty, the Tribunal held that all the details were already before the AO and it would not be plausible to hold that the assessee had concealed any income – the order of the Tribunal is upheld – Decided against revenue.
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2014 (9) TMI 760
Appeal before CIT(A) - Non-compliance of Section 249(4)(a) or not - The pre-condition for filing the appeals is requirement of deposit of admitted tax due, which apparently the assessee had deposited with a delay of 534 days. - Levy of penalty u/s 271(1)(c) – Held that:- Taking note of the nature of business of the assessee and the financial hardship expressed by the assessee, tribunal allowed the assessee to pay the tax due on account of which delay occasioned later on - Revenue contended that the delay has not been properly explained and only on that reason the CIT(A) had dismissed the appeals of the assessee - there appears to be some explanation shown by the assessee showing sufficient cause for the delay in filing the appeals – relying upon RAM NATH SAO @ RAM NATH SAHU AND OTHERS Versus GOBARDHAN SAO AND OTHERS [2002 (2) TMI 1280 - SUPREME COURT] - there is no reason warranting interference with the order passed by the Tribunal – Decided against revenue.
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2014 (9) TMI 759
Deletion of penalty u/s 271A(2)(g) – late issuance of TDS Certificate - Reasonable cause for the failure - Held that:- Rule 31 of the Income Tax Rules, 1962 which prescribes that a certificate of deduction of tax at source by any person deducting the tax shall be in Form 16, came to be substituted on a number of occasions and under the old provision, the requisite certificate was required to be issued by the Revenue Department on an application by the deductor, but later on, that rule was substituted – the tribunal rightly found that in view of frequent amendments in rule 31 of the Income tax Rules, the assessee being a deductor was under a bona fide belief that the provisions have been followed - no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the provisions, if he proves that there was reasonable cause for the failure – here, the assessee has proved that there was a reasonable cause for the failure in complying with the provisions of section 272A (2)(g) of the Act - Once reasonable cause has been established by the assessee, no penalty u/s 271A(2)(g) of the Act could have been imposed on the assessee – the order of the Tribunal is upheld – Decided against revenue.
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2014 (9) TMI 758
Computation of capital gains - Adoption of fair market value as on 1.4.1981 – Documentary evidences considered or not – Held that:- The assessee apparently is stretching his claim further and has chosen to file these appeals, which cannot be held as justified - There is absolutely no basis for the claim made by the assessee for determining the fair market value - The documents produced before the AO clearly shows that the guideline value as on 01.04.1981 is ₹ 300/- per cent; before the CIT(A), the document of the year 1984 was submitted and based on that the CIT(A) fixed the fair market value at ₹ 1,200 per cent - The Tribunal has fixed the same at ₹ 5,000/- per cent, however, without any discussion - the document dated 14.2.1984 in respect of S.F.No.165/1 at Kurichi Village correctly shows the fair market value at ₹ 8,393/- and the Tribunal after allowing certain deductions for the three year period, i.e. the difference between the date of acquisition by the assessee, namely, 02.02.1981 and till the date of the noted document, to come to a conclusion that ₹ 5,000/- should be fair market price – the determination by the Tribunal does not warrant any further modification or interference – thus, no substantial question of law arises for consideration – Decided against assessee.
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2014 (9) TMI 757
Validity of block assessment – Limitation of passing of the order in case of search u/s 132 - Held that:- Following the decision in assessee’s own case for the earlier assessment year, it has been decided in The Deputy Commissioner of Income Tax, Central Circle II(1) Versus M/s. Rakesh Sarin And Others [2013 (11) TMI 577 - MADRAS HIGH COURT] - the block assessment was not barred by limitation – the matter is to be remitted back to the Tribunal to decide on issues other than the point of limitation – Decided in favour of revenue.
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2014 (9) TMI 756
Non-deduction of TDS u/s 194I – Petitioner contended that, respondent No.2/the Managing Director, Gujarat State Land Development Corporation Ltd. and under the aforesaid heading of ‘rent’, the respondent No.1 has made payment of ₹ 4,87,83,300/- during the years 1998 to 2013 to the Gujarat State Land Development Corporation Ltd. but did not care to deduct tax at source, as provided in Section 194-I of the Income Tax Act, 1961. The petitioner contends that for the above violation of mandatory provision of law, the respondent No.1 has become deemed assessee in default within the meaning of Section 201 of the Income Tax Act but the Income Tax Authority did not take any step in spite of continuous violation of the mandatory provision at the instance of the respondent No.1. Held that:- There has been violation of the provisions contained in Section 194-I of the Act and as a consequence for not deducting tax at source, the Corporation should not only be deemed to be an assessee in default in respect of such tax which has not been deducted but, at the same time, has also made itself liable to pay interest as provided in Section 201(1A) of the Act - the Income Tax Authority in spite of service of notice has not come forward to disclose why it has not taken any step against the Corporation – there was no substance in the contention that in this PIL, the Court should pass an order upon the Income Tax Authority to impose penalty – Income Tax Authority is directed to take immediate step against the Corporation for the non-compliances – Decided in favour of Petitioner.
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2014 (9) TMI 754
Benefit of deduction u/s 80P(2)(a)(ii) - assessee society is a cottage industry – satisfaction of criteria laid down in the Board circular No.722 dated 19.9.95 – Held that:- The Tribunal relying upon assessee’s own case for the earlier assessment year, came to the conclusion that the assessees have clearly made out a case that they are co-operative societies and, entitled to the benefit of Section 80 P (2) (a) (ii) of the Income Tax Act - the term cottage industry is not defined anywhere in the Income Tax Act and the classification is available only under the Industrial Development and Regulation Act and the assessee is getting all other favours and concessions both from the Central and State Governments and in view of their recognition under the Industrial Development Regulation Act, their status as cottage industry is relevant for the purpose of the Income Tax as well – the order of the Tribunal is upheld – Decided against revenue.
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2014 (9) TMI 753
Assessee society eligible for deduction u/s 80P(2)(a)(ii) or not - Assessee society is a cottage industry or not - criteria laid down in the Board circular No.722 dated 19.9.95 for availing benefits under Section 80 P (2) (a) (ii) or not by assessee – Overriding effect of Statue over circular - Held that:- The Tribunal has given a finding that all the assessees are producing handloom bed sheets and other handloom goods, which are sold through outlets of Co-optex, an apex marketing society formed by the Government of Tamil Nadu - recognition is available to the assessee under the Industrial Development and Regulation Act as cottage industry, which is also relevant for the purpose of Income Tax Act as well - the benefit of deduction u/s 80P(2)(a)(ii) is available to all the assessees - so long as recognition is available to the respondents/assessees as cottage industry under the provisions of the Industrial Development and Regulation Act, which is relevant for the purpose of Income Tax Act, in the absence of specific definition of 'cottage industry' in the Income Tax Act, the Tribunal was fully justified in accepting the recognition of the assessee as cottage industry by the Central as well as the State Governments - no further document is required to be submitted by the assessees to prove that they are cottage industries. Section 80-P does not speak about any particular type of cottage industry. It is an inclusive definition - There is no sub-classification - what the statute provides u/s 80-P, cannot be taken away by means of an administrative circular – relying upon Commissioner of Central Excise, Bolpur Vs - M/s. Ratan Melting & Wire Industries [2008 (10) TMI 5 - SUPREME COURT OF INDIA] - what is provided under the statute cannot be denied by means of a circular and, thereby, deny the benefit to the assessees. The mere reason that the size of the industry is big and there are large number of workers employed, is no reason to deny the assessees the benefit available to them u/s 80-P of the Act, when there is no specific embargo imposed under the Act - as long as the assessees are cottage industries, they would be entitled to the benefit of Section 80-P of the Act - No further fetters, as is done by the Department, can be imposed on such a claim, by means of circulars, to the detriment of the assessees – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (9) TMI 752
Weighted deduction on agricultural demonstration park u/s 35C - Whether the Tribunal was justified in law in allowing assessee's claim to grant weighted deduction u/s 35C in respect of expenditure incurred on agricultural demonstration park at Bilaspur – Held that:- The expenses that is incurred in relation to the development agricultural park at Bilaspur is for dissemination of information or demonstration of modern techniques or methods of agriculture that the company uses in manufacture of its product as raw material and which is a product of agriculture, it was entitled to the deduction that it claimed - the company was entitled to the weighted deduction as it satisfied the requirement both in clause (a) and (b) of subsection 1 of section 35C - The Tribunal was right in holding that dissemination of information or demonstration of modern techniques or methods of agriculture does not require any elaborate or detailed effort - The dissemination of information and by the method or modes utilized in this case fall within the clause - That is a way of dissemination of information and through the employed technicians - the expenses incurred so as to provide service of technicians and their salary and travelling expenses would definitely fall within the sub clause as they demonstrated modern techniques to the cultivators - the Tribunal did not commit any error of law apparent on the face of the record in upholding the order of the Commissioner – Decided against revenue.
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2014 (9) TMI 751
Penalty u/s 271(1)(c) – Held that:- The appellant is not a businessman nor has he been maintaining books of account - A small school was being run by him - The maintenance of accounts was so casual and imperfect, that hardly any details of exact amount received towards fees and amount paid towards salaries were available - The record discloses that the appellant himself was so anxious to pay the tax and that when in a particular year, the income was below the minimum levels, he added some amounts and filed returns - Whatever may have been the justification in adding the figures so arrived at, to the income of the appellant, there was no justification to initiate the proceedings u/s 271(1)(c) of the Act - the Tribunal proceeded on hyper- technicalities - It was not even alleged that the appellant had any intention to evade tax or to defraud the Revenue – there is no basis to levy penalty – Decided in favour of assessee.
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2014 (9) TMI 750
Appointment of special auditor by AO – Opportunity of being heard not provided – Held that:- The appointment of Special Auditor without granting personal hearing is contrary to and in defiance of the statutory provisions as provided u/s 142(2A) – thus, the order is set aside and the matter is remitted back to the AO for fresh adjudication after granting personal hearing to the assessee – Decided in favour of assessee.
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Service Tax
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2014 (9) TMI 783
Refund of service tax - Banking or Financial Service - primary authority rejected the claims for refund on the ground that provisions of Notification No. 22/2006-ST were inapplicable as also on the ground that the some claims were barred by limitation - claim of the assessee based on Notification 22/2006-ST was accepted by the appellate Commissioner - Held that:- The power of the appropriate legislature to levy tax is subject to limitations specified in the Constitution of India. There is nothing in the Constitution which engrafts a limitation on powers of an appropriate legislature to levy a tax on rendition of ‘sovereign’ service. Service provided by RBI or the assessee under authorisation of the RBI does not also fall within the ambit of Articles 285 and 289 of the Constitution. The power to grant exemption from the liability to tax is conferred on the Central Government under Section 93 of the Act in plenitudinous terms. Such exemption may be granted either in a specific case or in respect of a generality of cases, with or without conditions. In the exercise of such broadly conferred power, the Central Government issued Notification No. 22/2006-ST, clearly enumerating the transactions, the taxable services and the provider or recipient of services, in expressly specified circumstances, which alone are notified to be eligible to the immunity to tax. It is a settled principle and one that is too well established, that exemption Notifications are to be strictly and rigorously construed. We also prima facie discern no ambiguity in the taxable services and circumstances of such rendition/receipt which are spelt out in Notification No. 22/2006-ST. - the generic principles of agency cannot be canvassed to expand the scope of exemption to the assessee, since the exemption Notification clearly limits the grant of immunity only to taxable services provided by or to the RBI and in enumerated circumstances. - grant of refund stayed.
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2014 (9) TMI 782
Penalty u/s 77 & 78 - Construction of complex service - suppression of facts - Held that:- There is no discussion/analysis with regard to the allegation of suppression and the adjudicating authority merely jumps to the conclusion that there is suppression of facts. Obviously this is not sufficient to sustain the allegation of suppression of facts - When section 80 of the Finance Act, 1994 has been found to be invocable for waiving penalty under Section 76, it is not possible to argue that the same (i.e. Section 80) will not be invocable mutatis mutandis for waiving penalty under Section 78 ibid. Further as has been fairly conceded by the Ld. AR, there is absence of mala fide in the present case. In such a situation, even otherwise penalty under Section 78 ibid cannot be imposed in as much as penalty under that section requires means rea - Decided in favour of assessee.
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2014 (9) TMI 781
Commercial or industrial construction service - site formation service - Imposition of penalty - Held that:- As regards the commercial or industrial construction service and the site formation service, the applicant does not dispute the classification or the computation of demand and therefore, the appellant is liable to pay the entire service tax demand confirmed along with interest thereon and only the amounts actually paid by them and appropriated has to be excluded for the purposes of recovery. Therefore, we direct the appellant to make pre-deposit of entire service tax confirmed in respect of “Commercial or Industrial Construction Service” and “Site Formation and Clearance Service” along with interest thereon (excluding the amount already deposited). Renting of immovable property - Held that:- Only if vacant land exists as it is without any building, the exclusion clause would apply. The fact that the area of the land appurtenant to the building being more than the area of the building would not make any difference. The Ld. Adjudicating authority has dealt with this matter in detail in paras 88 to 90 of the impugned order and we do not find any fault in the reasoning adopted by the adjudicating authority. Therefore, the demand of service tax in respect of the land and building rented to M/s. Reliance Industries Ltd. is prima facie, sustainable in law. As regards the land and building rented out to M/s. Avinash Automobiles Pvt. Ltd., we note that the premises leased out consisted of a factory building and vacant land with a common compound wall and security gate. The appellant has also not been able to lead any evidence to the contrary nor did they furnish any evidence of the alleged construction on the vacant land subsequent to the lease agreement. Therefore, the Ld. adjudicating authority was correct in concluding that the consideration received for both the land and building would be leviable to service tax under the category of “Renting of Immovable Property Service”. The law was also respectively amended by the Finance Act, 2010 deeming renting of immovable property as a taxable service since 1-6-2007 which was also upheld by the Hon’ble High Court of Delhi in the above decision. In view of these judicial pronouncements, there is no doubt that the activity undertaken by the appellant is a taxable service and has always been so with effect from 1-6-2007. Further, in the Finance Act, 2012, a provision was made for waiver of penalty in case a service provider discharged the service tax liability along with interest in respect of renting of immovable property service within a stipulated time-limit. But, the appellant did not exercise their option for availing this facility. Having failed to avail of the opportunity, the contention for waiver of penalty is not acceptable. - Decided against assessee.
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2014 (9) TMI 780
Commercial training or coaching service - vocational courses - fee/charges collected from students - Held that:- Since undisputedly the coaching or training imparted by the petitioner enables its students/trainees to seek employment or undertake self-employment, directly after training or coaching, the petitioner’s endeavours fall within ‘vocational training’ covered by the exemption Notifications - Notification No. 3/2010-S.T., dated 27-2-2010, the Central Government amended earlier exemption Notifications and redefined the expression ‘vocational training institute’. While continuing the exemption granted to vocational training institute, ‘vocational training institute’ is redefined to mean ‘an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training offering courses in designated trades as notified under the Apprentices Act, 1961 (Central Act 52 of 1961)’. Admittedly the petitioner is not an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training nor does it offer courses in designated trades defined under the Apprentices Act, 1961. On this dynamics of the exemption regime post 27-2-2010, the petitioner falls outside the purview of the exempted categories of taxable services falling within Sections 65(26) and 65(27) read with Section 65(105)(zzc). On this prima facie analysis, the petitioner is liable to remit the Service Tax for services provided on and from 27-2-2010, on the consideration received therefor - Service Tax liability on services provided and the consideration received therefor for the period subsequent to 27-2-2010 would be approximately ₹ 33.33 crore, of which ₹ 3.61 crore has already been remitted. The balance liability therefore for this period would therefore be ₹ 30 crores approximately - Partial stay granted.
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2014 (9) TMI 779
Waiver of pre deposit - Import of services - service to self - IT enabled services - Support Services for Business and Commerce - Business Auxiliary Service - Held that:- Where the service provider has no permanent establishment in India or he has no branch providing service in India but the service is received in India, tax would be paid by the receiver. Naturally what this means is that the service provider should not be having an establishment in India and then only this provision is attracted. In this case, the service provider is the branch and it cannot be said that overseas branch does not have an establishment in India assuming that it is providing the service classifiable under SSBC. This is because the branch has an establishment in India in the form of their Head Office and abroad as a permanent establishment in that country - When service is provided by a company which has a permanent establishment in India or when the service is provided by a person who has an establishment in India, provision of Section 66A do not get attracted. In this case, if it is assumed that the branch has provided SSBC, service tax demand has to be made on their establishment in India which is nothing but the assessee himself. it is nothing but a self-service and therefore a service to self is not taxable also is valid. Further, the amount received by the appellant as a result of services rendered by the branches abroad for the appellant would be more than what they have paid to the branches, in which case, it will be a negative consideration for the service rendered by the branch to the principal. This is another complexity that gets created because of the stand taken by the Revenue that payment of salaries and other expenses of branches by the appellant is in return for consideration received. In the absence of actual earnings that arise because of the branches and its analysis by either side, no conclusion can be clearly laid down and the fact remains that this is a complexity that should not arise in a case of tax transaction like service tax. If service has been rendered and there is no consideration is determined, how can we say entire amount incurred as expenses is consideration, in the absence any enquiry or a question about the income earned and the nature thereof. Prima facie conclusion goes in favour of the assessee on this issue at this juncture - Stay granted.
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2014 (9) TMI 778
Denial of CENVAT Credit - Works contract service - Held that:- As regards the demand of service tax for the period on or after 1.6.2007, the activity is liable to service tax under 'works contract service' and, therefore, if the appellant has discharged service tax liability under 'works contract service', the question of confirmation of the demand would not arise at all once again. The weak observation made in the impugned order is the appellant did not produce the requisite contracts so as to satisfy the adjudicating authority that they were entered into or on after 1.6.2007. This observation of the adjudicating authority is quite naive and cannot be accepted. If the adjudicating authority had any doubt about when the contract was entered into and the works executed, he could have asked the appellant to produce the copies of all the contracts which the appellant, in fact, claims that they have produced before the department. Therefore, this cannot be a ground for demanding service tax without any basis when the liability has in fact been discharged by the appellant. As regards the denial of cenvat credit of ₹ 168.82 crores, from the records it is seen that the appellant has availed only an amount of ₹ 134.26 crores during the impugned period. If that be so, we do not understand how a disallowance of a credit not availed can be made by the Revenue. It is also on record that the appellant has in fact reversed an amount of ₹ 47.62 crores towards the capital goods and GTA and foreign consultancy services which have been appropriated in the impugned order. Therefore, the denial of cenvat credit to the extent of ₹ 168.82 appears to be not based on any documentary evidences. Similarly, the demand of ₹ 90.78 crores being the credit actually utilized is also clearly not sustainable in law inasmuch as the said amount is already included in the cenvat credit disallowed. There cannot be any double demand towards cenvat credit, once by disallowing the entire amount of credit taken and second by a demand of credit utilized. Thus we find that there are a lot of inconsistencies/mistakes committed in the impugned order by the adjudicating authority. Therefore, the matter needs to go back to the adjudicating authority for fresh consideration. Accordingly we remand the matter back to the adjudicating authority. - Decided in favour of assessee.
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2014 (9) TMI 777
Imposition of penalty - Whether the penalty under sections 76 and 78 of the Act can be imposed simultaneously particularly in view of the fact that there was no evidence/proof to prove the allegations of suppression of fact - Held that:- Even if technically, scope of sections 76 and 78 of the Act may be different, as submitted on behalf of the Revenue, the fact that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time - Decided partly in favour of assessee.
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Central Excise
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2014 (9) TMI 774
Rectification of Mistake - Valuation of goods - mistakes apparent on record - Held that:- At the rectification of mistake stage, we cannot re-appreciate the evidence available on record. As held by the Hon'ble Apex Court in the case of ACSU Ltd. [2002 (12) TMI 87 - SUPREME COURT OF INDIA] and RDC Concrete (India) Pvt. Ltd. (2011 (8) TMI 25 - SUPREME COURT OF INDIA), the mistake apparent on record must be obvious and patent mistake and the mistake should not be such which can be established by a long drawn process of reasoning. Re-appreciation of evidence on a debatable point cannot be said to rectification of mistake apparent on record. If the mistake is sought to be rectified by a long drawn process of reasoning or where two opinions are possible, the same cannot be said to be a mistake apparent from the record attracting the provisions of Section 35C of the Central Excise Act, 1994. We have given clear and cogent reasons for coming to the conclusions drawn in the impugned order. If the appellant is aggrieved of the same, the remedy lies in filing an appeal as provided for in the law. - Rectification denied.
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2014 (9) TMI 773
100% EOU - clearance of goods to DTA - whether the respondents are eligible for the benefit of Notification No.8/97 - Held that:- Notification No. 8/97-CE excludes the exemption, in case the finished goods are wholly exempt or chargeable to NIL rate of duty, if manufactured and cleared by a unit other than a 100% EOU. In the present case, the goods manufactured by the respondent is wholly and unconditionally exempt by Notification No. 5/99-CE dated 28.2.1999 (1st SCN) and 6/2000 dated 1.3.2000 (2nd SCN). It is seen that Condition (a) of Notification No.13/98, extended the benefit to such finished goods, if manufactured and cleared by a 100% EOU to DTA, if the finished goods is wholly exempt from the duties or chargeable to NIL rate of duty. So, the respondents are liable to pay duty on the items in question in terms of Notification No. 13/98. It is noticed that the demand raised in respect of the period of dispute from December 1999 and January 2000 to November 2000 which are covered by both the Notifications. So, we find that the demand of duty as confirmed by the adjudicating authority is justified. However, penalty is set aside - Decided partly in favour of Revenue.
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2014 (9) TMI 772
Waiver of the pre-deposit of Central Excise duty - manufacture of chewing tobacco - removal of chewing tobacco clandestinely without obtaining Central Excise registration - Held that:- in dealing with such application twin requirement need to be examined, i.e. undue hardship relating to assessee and secondly safeguard the interest of Revenue. This principle has been echoed by the various High Courts including the Andhra Pradesh High Court in Sri Chaitanya Education Committee’s case (2011 (1) TMI 356 - HIGH COURT ANDHRA PRADESH). Also mere financial hardship cannot be the criteria for total waiver of pre-deposit of dues adjudged in view of the ratio of Division Bench of Hon’ble Punjab & Haryana High Court in the case Triveni Castings (P) Ltd. cited (2011 (2) TMI 170 - PUNJAB AND HARYANA HIGH COURT). Accordingly in view of the ratio laid down by the Apex Court and the various High Courts, and the interest of Revenue, and in the interest of justice, it would be appropriate to direct the pre-deposit of 50% by the Applicant pending disposal of the Appeal. - Partial stay granted.
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2014 (9) TMI 771
Finalization of provisional assessment – Finalization of assessment done without adjustment of excess payments against short payments on the ground that the former needed to be claimed as refund – Commissioner held that Adjudicating Authority has erred in not adjusting the amount of excess paid duty against the amount of duty short paid during finalization of the provisional assessment - held that:- Commissioner (Appeals) has been passed in respect of Department's review appeal against order-in-original dated 11/03/05 and by this order, the Commissioner (Appeals) has held that the finalization of the assessment-should have been done invoice wise and no adjustment of excess duty paid during a month against short payment during the same month should have been allowed. Against the same order dated 11/03/05 of the Deputy Commissioner by which he had disallowed the adjustment of excess payment of duty of ₹ 3,54,467/- during certain period of provisional assessment against the short payment during, the period of ₹ 14,60,053/-, the assessee had filed an appeal before the Commissioner (Appeals) and in respect of that appeal, the Commissioner (Appeals) vide order-in-appeal dated 05/08/05 had reversed the part of the Deputy Commissioner's order refusing the adjustment of excess payment against the short payment and, as such, had allowed the adjustment of excess payment against the duty demand during finalizing the provisional assessment. Once the Commissioner (Appeals) passed this order in respect of appeal against the order-in-original dated 11/03/05 of the Deputy Commissioner, in accordance with the law laid down by the Apex Court in the case of Kunhayamed vs. State of Kerala (2000 (7) TMI 67 - SUPREME Court), the Deputy Commissioner's order dated 11/03/05 cease to exist and merges with the Commissioner (Appeals)'s order dt 5/8/05 and what remains is the Commissioner (Appeals)'s order dated 05/08/05. While finalizing a provisional assessment, the excess payment of duty can be adjusted against the short payment. This judgment is with regard to the provisions of Rule 7 of the Central Excise Rules, 2002. - Decided against Revenue.
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2014 (9) TMI 770
Waiver of pre deposit - Manufacturing activity or not - assessee took different stand for different units - Material Handling Equipment and its parts - assessee pleaded that the goods which the appellant procured were already marketable and the appellant did not undertake any activity to make them marketable except for inspecting the goods and putting in the plastic bags along with tags. - Confiscation of goods - Imposition of redemption fine - Held that:- In respect of the activity undertaken in the factory at Thane on the same goods, the appellant is treating the activity as 'manufacture' and discharging excise duty liability thereon. Therefore, there is no reason why in respect of the same activity on the same product undertaken at their Bhiwandi godown, a different stand should be taken holding that the activity does not amount to 'manufacture'. The appellant cannot choose to discharge excise duty liability in some cases and not discharge duty liability in some other cases. Therefore, the claim of the appellant that the activity undertaken by them does not amount to 'manufacture' does not appear to convincing at this stage. During the course of argument, a question was also put to the appellant as to why they are procuring these parts and distributing it to their customers. In reply thereof, it was stated that these parts are difficult to obtain and once these are procured by the appellant and delivered to the customer, the customers believe the parts to be genuine and the same are supplied with the warranty cards. If that be so, the activity undertaken by the appellant improves the marketability of the product. Thus any activity, which improves the marketability of the product by undertaking labeling and packing etc. would definitely amount to 'manufacture'. Prima facie case not in favour of assessee - stay granted partly.
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2014 (9) TMI 769
Classification of goods - classification of Calcutta Meetha Pan - Classification under CETH 2108 or under CETH 2106.099 - Held that:- product consists of dry dates shredded, cardamom, dry pan powder, spices, sauf, perfume, etc., and the dry dates account for 70% of the weight of the product. The other ingredients like cardamom, spices, sauf and menthol account for about 20% and the green powder consisting of dry pan leaf about 2% of the weight. Thus, the product is a mixture. As per the General Interpretative Rules, Rule 2(b) provides that “any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance.” As per Rule 3(b), “Mixtures, composite goods consisting of different materials or made up of different components, and goods put up for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character.” If this rule is applied, then the material which gives the essential character is the Pan Leaf Powder. Pan Leaf is part of a plant and preparation of pan leaves with other ingredients would merit classification under Heading 20.01 as preparation of fruits, nuts and vegetables and other parts of a plant prior to March, 2005 and under CETH 2008.9200 on or after March, 2005. Following decision of Maharshi Ayurveda Corpn. [2005 (12) TMI 93 - SUPREME COURT OF INDIA] - Accordingly, it is held that the classification of the impugned product under CETH 20.01 prior to March, 2005 and under CETH 20.08 on or after March, 2005. - Decided in favour of assessee.
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2014 (9) TMI 768
CENVAT Credit - Generation of electricity from bagasee - Non maintenance of separate records - Reversal of credit - Held that:- electrical energy which is mentioned in Chapter 27 of the Central Excise Tariff Act covers only such electrical energy which is generated from mineral fuels, mineral oil and products obtained therefrom and electrical energy produced from bagasse is not covered under Chapter 27 and hence, such electrical energy is not excisable goods nor is it exempted goods as defined in Section 2(d) of the Act. It was further held that Rule 6 of the CENVAT Credit Rules, 2004 refers to both dutiable/excisable goods and exempted goods. Only then, it is necessary for the manufacturer to maintain separate accounts. Rule 6(3) of the said Rules provides that when CENVAT credit is taken on the inputs/input service which are used for manufacture of dutiable as well as exempted final products, then the assessee is required to reverse proportionate credit or pay 5% amount of the value of the exempted final products. As regards electricity which is not excisable goods, the provisions of Rule 6 would not ab initio apply. Appellant has generated electricity from bagasse. Bagasse on burning generates heat and with the help of heat, steam is generated which is used to rotate turbines as a result of which electricity is generated. In view of the above, the impugned demands confirmed against the appellant @ 5% of the value of the electricity supplied to MSEB is clearly unsustainable in law. However, since electricity is not “excisable goods”, the appellant is not eligible to take any CENVAT credit on the inputs/input services used in the generation of such non-excisable electricity sold to MSEB. CENVAT credit is available only when input/input services are used in or in relation to the manufacture of excisable goods or for providing taxable services. Inasmuch as the appellant has utilized part of the inputs/input services in or in relation to the generation of electricity which has been sold, to that extent the appellant would not be eligible for taking of CENVAT credit on such inputs/input services used in the generation of electricity which has been sold to MSEB. Therefore the appellant would be liable to reverse the credit, if any, taken on such inputs/input services which have been used in the generation of electricity which have been sold to MSEB. - decided partly in favour of assessee.
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2014 (9) TMI 767
Clandestine removal - confession statements - corroborative evidences - Confiscation of excisable goods and currency - Redemption fine - imposition of fine and penalties - Held that:- In one type of sale he used to prepare sales invoices and delivery challans for sale of goods at the factory gate to the genuine customers and the said sales was duly accounted for in the records. In the second type of sales, they were selling the goods at factory gate to various customers on payment of cash without any sales invoice and bills. In the third type of sales wherever they received orders for supply of goods over phone, the goods were lifted from the factory for delivery under delivery challans made in the name of genuine customers but the goods were sold to needy customers without any sales bills or delivery challans and against payment of hard cash. Thus the modus operandi adopted by the appellant firm stood clearly admitted in the aforesaid statement of Shri Balkrishna Agarwal, who was the Managing Partner of the appellant firm during the relevant period. There is no retraction of the confessional statement by Shri Balkrishna Agarwal. As regards the lack of corroborative evidence, it is a settled position of law that “admitted facts need not be proved” as held by the Hon’ble High Court of Madras in the case of Govindasamy Ragupathy - [1997 (6) TMI 356 - MADRAS HIGH COURT]. In a recent decision in the case of Telestar Travels Pvt. Ltd. - [2013 (2) TMI 396 - SUPREME COURT], the Hon’ble Apex Court held that reliance can be placed on statement if they are based on consideration of relevant facts and circumstances and found to be voluntary. Similarly in the case of CCE, Mumbai v. Kalvert Foods India Pvt. Ltd. - [2011 (8) TMI 24 - SUPREME COURT OF INDIA] the Hon’ble Apex Court held that if the statements of the concerned persons are out of their volition and there is no allegation of threat, force, coercion, duress or pressure, such statements can be accepted as a valid piece of evidence. As regards the confiscation of the currency, the same is permissible, in view of the provisions of Section 121 of the Customs Act read with Section 12 of the Central Excise Act, 1944, as the currency was the sale proceeds of the goods clandestinely removed without payment of excise duty - Inasmuch as Shri Balkrishna Agarwal has passed away, the proceedings against him abates and therefore, the penalties imposed on Shri Balkrishna Agarwal is set aside - Decided partly in favour of assessee.
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2014 (9) TMI 766
Claiming exemption on extracting gold from gold ore - Exemption under Notification No. 5/2006-C.E., dated 1-3-2006 - Held that:- The explanatory notes to Chapter 71.08 also clearly provide that the heading excludes gold ores. Therefore it is difficult to conclude that gold includes gold ore. In our opinion because of subsequent amendments made to the notifications and on that basis interpretation of notification has to be different is not correct. The notifications have to be read as they are worded. Only in case of ambiguity or doubt and when the terms are not clear, there may be a requirement to go to some other definitions/notifications, history of taxation, etc. In our opinion the notification here is quite clear and there cannot be any dispute that appellants are converting gold ore into Dore bar and gold ore cannot be considered as any form of gold. Therefore the appellant in our opinion has not been able to make a prima facie case on merits about applicability of exemption notification. - stay granted partly.
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2014 (9) TMI 765
Interest under Section 11AB - Differential duty - the differential duty became payable only after Note 5 to the Chapter 15 of the First Schedule to CETA, 1985 was given retrospective effect and introduced as part of the Act - Application of decision of Apex Court in the case of M/s SKF India Ltd [2009 (7) TMI 6 - SUPREME COURT] - Held that:- even though a supplementary invoice is issued subsequently by the supplier of the goods to the buyer, in reality the price determined is the one which should have been the price at the time of removal. - This is the logic that is behind the decision of the Hon’ble Supreme Court. - A principle laid down or a ratio laid down in the case of transaction between two parties by the Hon’ble Supreme Court cannot be applied to a situation where the law is amended with retrospective effect by the legislature. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2014 (9) TMI 776
Recovery proceedings initiated as per assessment order - stay was granted on condition of payment of 30% of the outstanding dues - Held that:- though a remand was made, the first appellate authority has specifically found that only if verification of books and accounts and invoice copies issued to various persons and institutions, revealed that the turnover is not relating to testing fees, service charges, service tax, education cess etc.; the authority could deem it to be turnover includable in the works contract of the petitioner. It is submitted by the learned Government Pleader that in Exhibit P4 the said finding was taken note of. However, that is a matter which has to be decided in appeal and going by the facts and circumstances noticed above, this Court is of the opinion that the appeal is to be disposed of and till such time, recovery proceedings shall be kept in abeyance. In such circumstance, Exhibit P6 is set aside - Decided in favour of assessee.
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2014 (9) TMI 775
Recovery of the outstanding tax dues - Issuance of endorsement - Dismissal of appeal being defective - Held that:- petitioner has not taken care to ensure that the memorandum of appeals filed by it was in accordance with the prescribed format and rules. However, the appeals were rejected only on the ground of defective filing and not on merits. In the interest of justice, I am of the view that an opportunity must be given to the petitioner to rectify the defects in the memorandum of appeals, so that the appeals could be heard on merits. Hence, Annexure-J is quashed. Matter remnaded back - Decided in favour of assessee.
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