Direct Tax Basket
2014-TIOL-2435- HC-MUM-IT
CIT Vs Titan Time Products Ltd
Income Tax - Sections 32 & 143(3).
Keywords: Depreciation - Manufacturing activity - Semi conductor industry.
Whether the assessee engaged in the business of manufacturing of Electronic Circuit Boards (ECB) be entitled to higher rate of Depreciation - Whether the assessee Company be considered as semi-conductor industry. - Revenue' s Appeal Dismissed : BOMBAY HIGH COURT
2014-TIOL-2434- HC-MUM-IT
CIT Vs Symantee Software India (P) Ltd
Income Tax - Sections 10A, 80HH & 80HHC.
Keywords: expansion - export turnover - industrial undertaking - sale of assets - liabilities written back - 'derived from'
Whether merely because a new permission is obtained in relation to an upcoming Unit, containing reference to the original licence, it is a conclusive evidence to demonstrate that the new Unit is a separate or independent Unit - Whether incomes by way of sales tax refund, liabilities no longer required written back and profit on sale of assets are eligible incomes for computing deduction u/s 10A - Whether when once it is found that the view taken by the Tribunal is in consonance with the language of section 10A and also takes into consideration the relevant sub-section thereof, even then can it be said that Tribunal' s conclusion is vitiated by any error of law apparent on the face of the record. - Revenue' s appeal dismissed : BOMBAY HIGH COURT
2014-TIOL-2433- HC-AHM-IT
ITO Vs Tex Colour International
Income Tax - Sections 80HHC & 148
Keywords: Adjustment of freight - Computation for deduction - Excise duty -Export business
Whether the Tribunal is right in law and on facts in reversing the order of the CIT(A) and directing the AO to exclude the excise duty from the total turnover for computing deduction u/s 80 HHC of the Act without independent findings on the issue- Whether the Tribunal is right in directing the AO to allow deduction u/s 80HHC when the net result in the export business is a loss. - Revenue' s appeal partly allowed : GUJARAT HIGH COURT
Indirect Tax Basket
CENTRAL EXCISE SECTION
2014-TIOL-2648- CESTAT-KOL
Nilkamal Ltd Vs CCE
CENVAT – During the period April, 2003 to November, 2007 appellant availed CENVAT Credit on moulds as 'capital goods' equivalent to 50% of the duty paid on such moulds on its receipt and instead of availing the balance 50% in the next financial year, it was availed in the same financial year after putting the same to use and cleared subsequently to their other units in the same financial year by reversing the entire credit availed – Revenue denying the balance 50% credit availed on the ground that once moulds are put to use, the same lose the character "as such", hence the appellant could not be eligible to avail CENVAT Credit on the balance 50% of the CENVAT Credit at the time of its clearance in the same financial year. - Appeal allowed : KOLKATA CESTAT
CUSTOMS SECTION
NON TARIFF NOTIFICATION
117
CBEC reduces Tariff Value of Gold, Silver & Edible Oils
CIRCULAR
019
CBEC extends 24*7 Customs clearance to 13 more Airports + 14 more Sea Ports
CASE LAW
2014-TIOL-2436- HC-MUM-CUS + Story
Flemingo (Duty Free Shop) Pvt Ltd Vs CC
Cus - Appeal to Commissioner( A) - Extent to which section 5 of Limitation Act, 1963 can be applied having been enumerated and set out in section 128(1) of the Customs Act, 1963, which is a special law, then, for the further delay in filing or presenting the Appeal, applicability of section 5 of the Limitation Act, 1963 is expressly ruled out. The language of section 128(1), which is a special law, therefore cannot be ignored or brushed aside: High Court
Petitioner cannot get over the period of limitation under subsection (1) of section 128 of the Customs Act, 1962 with the aid of subsection (2) of section 14 of the Limitation Act, 1963: High Court
Petitioner is trying to take advantage of its own wrong committed earlier in approaching this Court, though knowing fully well that it had refused to exercise jurisdiction, because the alternate efficacious remedy of Appeal to the Commissioner of Customs was provided by law. The Petitioner did not take steps to file such an Appeal even during the pendency of the Writ Petition and allowed the time to run. In these circumstances, we cannot extend any benefit, as that would allow the Petitioner to take advantage of its own wrong: High Court
Petitioner filed the Appeal and knowing fully well that it has an alternate remedy. It was not only alternate but equally efficacious. The Petitioner has to blame itself for approaching the Appellate Authority belatedly. If the Appellate Authority refused to condone the delay by relying upon the statutory prescription, then, we do not find that the Petitioner can take assistance of this Court's jurisdiction under Article 226 of the Constitution of India to overcome the binding order passed by the Commissioner (Appeals) - More so, that order cannot be faulted in law - Writ petition fails: High Court - Petitions dismissed : BOMBAY HIGH COURT
Online Applications are invited from Chartered Accountant firms/LLPs who desire to be empanelled with the office of the Comptroller and Auditor General of India for appointment as auditors of Government Companies/Corporations for the year 2015-16. The online application will be available on our website www.saiindia.gov.in from 1st January 2015 to 15th February 2015; the firms/LLPs can apply/update the data showing the status of their firm as on 1st January 2015. After filling/updating the data, they are required to generate an online acknowledgement letter. They are also required to submit hard copies of the relevant documents in support of their online application along with a print out of the acknowledgement letter generated online. The application which does not have an online acknowledgement letter would not be entertained as a valid application.
NEW DELHI, JAN 01, 2015: THE issue before the Bench is - Whether payment in consideration of transfer of shares and handing over of management & control of company including termination & modification in terms of management, is liable to be treated as 'such payment' u/s 28(ii)(a). And the answer is YES.
Facts of the case
The assessee an individual, was the Chairman-cum-Managing Director of M/s Central Distillery and Breweries Ltd. (CDBL), which was engaged in the business of manufacturing and sale of Indian Made Foreign Liquor (IMFL) and beer. The assessee along with his family members, held 1,86,019 shares, constituting 57.29% of the paid-up equity share capital of CDBL. One M/s Shaw Wallace Company Group (SWC Group), a giant in liquor business in comparison to CDBL, offered and purchased through their subsidiaries, 1,86,019 shares out of the total shares held by assessee and his family members at the rate of Rs.30/- per share for Rs.55,83,270/-, by a MOU. The assessee who individually held 12% of the paid-up equity share capital of CDBL also entered into a deed of covenant in his individual capacity with the SWC Group. On the same date, another MOU was executed between the SWC Group and the assessee as an individual with the restrictive covenant to the effect that he would not either directly or indirectly carry on any manufacturing or marketing activities relating to IMFL for a period of 10 years. The assessee as per the MOU received a non-compete fee of Rs.6.60 crores out of which Rs.6 crores were paid upfront and balance was to be paid at later date. Upon verification of returns, the entire non-compete fee of Rs.6.60 crores was treated as a capital receipt and hence, not exigible to tax. The AO recorded statement of assessee on oath u/s 131 and invoking Section 28(ii), held that Rs.6.60 crores ostensibly paid as non-compete fee was nothing but a colourable device and the tax treatment should not be accepted. Accordingly,he brought Rs.6.60 crores to tax. On appeal, the CIT(A) upheld the said addition, relying upon section 28(iv). On further appeal, the Tribunal differed on the taxability of Rs.6.60 crores. In view of the divergence, the matter was referred to a third member of the Tribunal who decided the issue in favour of the assessee.
Having heard the parties, the High Court held that,
++ it is noted that Section 28(iv) would not be applicable and has not been pressed by the Revenue as the said Section applies when an assessee receives any benefit or perquisite arising from a business or in exercise of a profession. In such cases, value of the perquisite, whether convertible into money or not, is chargeable to tax as income under the head of "Profits and gains of business or profession". The present event would not be a case covered by section 28(iv) as the provision does not apply when the payment is monetary. What is taxable u/s 28(iv) is the value of benefit or perquisite, whether convertible in money or not, and not the monetary amount itself, which has been received. At the same moment, it is highly debateable whether the assessed was carrying on a profession or not. A reading of Section 28(i) would elucidate that profits and gains of business or profession, are to be taxed under the similarly worded head of income. However, clauses (ii) to (vii) have a different effect and expand the scope of income chargeable under the head "Profits and gains of business or profession". In a way, they create a deeming fiction and when income falls under any of the specified clauses, it would be treated as income chargeable under the head "Profits and gains of business or profession";
++ the issue of taxability remains unresolved as in the present case the Revenue has submitted and claimed that the nomenclature "non-compete fee" was a smokescreen and a façade, for Rs.6.60 crores represent a part consideration for transfer of shares to the SWC Group and termination of management or modification of the terms and conditions relating thereto. As against this, the case of the assessee was that this payment had nothing to do with handing over of management or transfer of shares, and the amount paid was on account of non-compete fee. Thus the core issue is whether the payment of Rs.6.60 crores, ostensibly stated to be non-compete fee under the MOU, can be treated and regarded as payment covered u/s 28(ii)(a), or consideration paid for transfer of shares. The question raised to be answered is, whether the description of the payment as non-compete fee in the MOU, is unquestionable or can be challenged by the Revenue. It is seen that the words used section 28(ii)(a) relate to "compensation", "other payment due" or "received". The phrase 'in connection with' gives the said sub-clause a wide and broad meaning. However, the payment must be for termination of management or modification of terms and conditions of management to a person who is managing whole or substantially the whole of the affairs of the Indian company. If the payment is on account of non-compete fee, it would not be covered under sub-clause (a) to clause (ii). It is noted by the MOU that the assessee has handed over the management and control of the CDBL to the SWC Group. The same MOU records that the assessee and his family members would co-operate with the SWC Group in arranging for effective registration of transfer of shares and the assessee had further agreed to resign as the Chairman cum Managing Director, and his son had agreed to resign as Joint Managing Director. Thus, the assessee forfeited and gave up the control, charge and management to the SWC Group;
++ the central issue in controversy was whether description of Rs.6.60 crores as non compete fee was binding and unalterable, even if the description was in fact an adroit attempt at artificiality or to transmogrify a taxable event. The thrust and impose of the majority decision of the Tribunal on why Rs.6.60 crores was payment towards non-compete fee is for the reason that the contention that Rs.6.60 crores was substantial and huge and could not be correlated to the salary or other remuneration which the assessee was receiving from CDBL should be rejected as the income tax authorities had no business to challenge the perception of the parties, unless it could be shown that the assessee and the SWC group were in collusion and wanted to defraud the Revenue, but there was no such finding on record. This reason, is inaccurate and fallacious for the reason that the AO and the CIT(A) had clearly recorded that non-compete fee payment was a sham and a façade to avoid payment of legitimate taxes. Thus, the Revenue had questioned and challenged reality of the taxable event as declared. Price per share quoted in the exchanges would not necessarily be the true price of a transaction for purchase of majority shares to acquire controlling interest in a company, which is its competitor. There is case law which holds that when the document is plain and clear, and when the legitimacy and genuineness of the document is not in question, there is no scope to ignore the legal character of the transaction. The right of the assessed to choose a legitimate taxable event must be respected. However, in the present case, there are two MOUs which were executed on the same day and deception and maladroit trickery is alleged. The facts mandated a more comprehensive and thorough examination. The first MOU was for transfer of 57.29% of paid-up equity share capital in CDBL which was considerably large company having about 350 employees and manufacturing IMFL and beer. No doubt, market price of each share was only Rs.3/- per share and the purchase price under the MOU was Rs.30/-, but the total consideration received was merely about Rs.56 lacs. What was allegedly paid as non-compete fee was ten times more, i.e. Rs.6.60 crores. The figure per se does not appear to be a realistic payment made on account of non-compete fee, dehors and without reference to sale of shares, loss of management and control of CDBL. The assessee had attributed an astronomical sum as payment toward non-compete fee, unconnected with the sale of shares and hence not taxable. Noticeably, the price received for sale of shares, it is accepted was taxable as capital gain. The argument of the assessee suffers from a basic and fundamental flaw which is conspicuous and evident. The primary emphasis in the assessee's contention as to character of payment of Rs.6.60 crores based upon euphonious documentation, ignores that the same logic and reasoning could ricochet and negate the justification to transfer controlling shares in CBDL for detritus amount of Rs.56 lacs. CBDL had requisite licenses, permissions and marketing network in place. By purchasing majority shares with controlling interests in CBDL, SWC Group was acquiring a company which was directly competing with them. The price paid for acquiring the majority shareholding, would include consideration paid to procure management rights as well as price paid for acquiring an effective competitor;
++ in view of the decision in of Vodafone's case and findings on the true and real nature of the transaction camouflaged as 'non-compete fee', there seems no hesitation and reservation in holding that assessee had indulged in abusive tax avoidance. The real and true nature of the transaction or event was the sale of shares and transfer of control and management of CDBL in favour of the SWC Group. The consideration of Rs.6.60 crores was not a fee paid towards non-compete and accordingly, it would not be exempt. However, question still remains whether section 28(ii)(a) should be invoked or it would be appropriate and proper to treat consideration of Rs.6.60 crores as a part of the sale consideration paid by the SWC Group for acquisition of majority shares in CBDL. The latter approach is preferable, but in the alternative. The reason is that transfer of majority shares holding would include consideration receivable towards the controlling interest. The price paid by the SWC Group and received by the assessee was for purchase of shares, including the controlling interest. The price paid would include the right to control and manage CBDL. Any division or bifurcation would result in the court or Revenue stepping into the arm chair of the assessee and the SWC Group for splitting the amounts between capital gains and Section 28(ii)(a). Thus, the SWC Group had acquired by entering into an agreement for purchase of shares, also the controlling interest. It would, therefore, include the price paid for the same. More importantly, it also included the price paid for acquiring control of a competitor, who henceforth would not be a competitor but a part of the SWC Group. The assessee, an individual did not even have a licence to manufacture alcohol. Thus, to hold the two agreements were independent, one related to sale of shares of CBDL and the other a 'non-compete' agreement, would be to ignore reality and treat sham and deceit as a true and real event. Therefore, it is appropriate to treat Rs.6.60 crores as consideration paid for sale of shares, rather than a payment u/s 28(ii);
++ the last issue would be whether Rs.6.60 crores should be taxed in the hands of the assessee as an individual or should be bifurcated as per the shareholding between the assessee and his family members. It is not the case of the assessee that his family members had received any share or part of this payment, but, the entire payment was paid to the assessee. The assessee, having chosen the taxable event, i.e. to receive the entire sale consideration in his name, must therefore bear and face the tax consequence. Thus, the entire amount would be taxed in the hands of the assessee, and would be treated as part of the sale consideration received on transfer of the shares in CDBL, held by him.
(See 2015-TIOL-08-HC-DEL-IT)
Whether brokerage can be paid to Directors of assessee-company in case of sale of its property and same is deductible as transfer expenses from capital gains arising out of such transfer - NO: ITAT
DURING assessment proceedings the AO noticed that assessee has sold a property on which capital gain was determined. However, it was noticed that Assessee Company has paid huge amount to the Directors on such sales, which were claimed as transfer expenses. The AO observed that director of the company cannot be acting as property brokers because they being directors and owners of the company and, therefore, payment of commission were not justified. Thus, he disallowed the payment of commission of Rs. 48 lakhs.
On appeal, it was mainly submitted that for selling property, commission / brokerage is required to be paid. Since the property dealers could not arrange for the sale of said property for a long time, therefore, Board of Directors of the company withdrew the offer from the property dealers and entrusted the job of finding of customers to the Directors. The Directors successfully found a customer and were able to get much better price because of this fact the company decided to award the Directors. In other words, directors were paid for their services.
THE issue before the Bench is - Whether brokerage can be paid to Directors of the assessee-company in case of sale of its property and the same is deductible as transfer expenses from the capital gains arising out of such transfer. NO is the verdic
AS every year pales into the annals of history, it shall always leave its footprints, on all fours of life, and tax laws are no exception. Some of them would fade into oblivion by the waves of time, some would stay ahead of the sands of time. Here is a rosary of the pearls of wisdom delivered in 2014, which had, has and shall have a lasting impression.
1. INCEN "TV":
The question before the Supreme Court was whether the Sales Tax collected and retained by the manufacturer under an incentive scheme should be added to the assessable value (AV) for payment of Central Excise (CE) duty or not?
In a very reasoned judgement in the case of CCE, JAIPUR-II vs M /s SUPER SYNOTEX (INDIA) LTD & ORS - 2014-TIOL-19-SC-CX, the Apex Court has held that, prior to 1.7.2000, when the assessable value under Section 4 of the Central Excise Act, 1944 (CEA) was the "normal price" and under which the term "value" as per Section 4(4)(d)(ii) did not include the sales tax paid or payable, such retention of sales tax collected and retained as an incentive given by the State Government need not be included in the AV for payment of CE duty. Further, the Apex Court had also held that, after 1.7.2000, wherein, the concept of "Transaction Value" (TV) had been introduced in the statute, any such retention would get included to the TV for payment of CE duty. While holding so, it also held that the exclusion from TV under Section 4(3)(d)of CEA is available only for the taxes which are "actually paid", under new Section 4(3)(d) of CEA.
Later in another judgement, the Supreme Court in the case of CCE, DELHI-III vs M/S MARUTI SUZUKI INDIA LTD - 2014-TIOL-74-SC-CX, while asserting the above ratio also held that the exclusion would be available for the taxes "actually paid" or "actually payable" citing the Board's Circular dated 30.6.2000.
2. MOST WAN "TED":
This is a classic instance where the Policy Relaxation Committee (PRC) had become Policy Restriction Committee! In this case, the petitioner had made supplies to EOUs on payment of CE duty and had claimed refund of the Terminal Excise Duty (TED) under para 8.2(b) of the Foreign Trade Policy (FTP). As per the said para, supplies made to EOUs are treated as "deemed exports" and the benefits for such deemed exports would include interalia refund of TED. But the authorities proceeded to hold that the petitioner was disentitled to the benefit of refund in view of the clarification given by the Policy Interpretation Committee (PIC) to the effect that "Refund of CENVAT credit provisions are available under Excise Rules and CENVAT rules which should be availed of rather than claiming refund". The above clarification of PIC prevailed upon the PRC and thus became a PRIC!!!
By a detailed judgement the High Court of Delhi in the case of KANDOI METAL POWDERS MFG CO PVT LTD Vs UOI & Ors - 2014-TIOL-230-HC-DEL-EXIM quashed and granted relief to the petitioners by holding that they are entitled for the refund of TED. Similar ratio was held by the High Court of Madras in the case of and M/s RAJA CROWNS AND CANS PVT LTD Vs UNION OF INDIA & Ors - 2014-TIOL-2323-HC-MAD-CX.
3. P "AND" "OR" A BOX CLOSED:
After the pronouncement of the judgement in the case of UOI vs Ind-Swift Laboratories Limited - 2011-TIOL-21-SC-CX, the entire nation went haywire. Tons and tons of show cause notices were issued demanding interest and proposing penalty on the Cenvat credit wrongly taken though not utilised but was just kept in the books. Petrified by this jarring proposition, for once, the department reacted positively and amended the Rule 14 of Cenvat Credit Rules, 2004 (CCR) in 2011, by replacing the controversial "OR" by a sensible "AND" between the words "taken" and "utilised".
In a very compassionate and a logical judgement, the High Court of Madras in the case ofCCE, MADURAI vs M/s STRATEGIC ENGINEERING (P) LTD - 2014-TIOL-466-HC-MAD-CX had put an end to this controversy by holding that even prior to the amendment, mere taking of Cenvat credit without utilisation would not compel the assessee to pay any interest as well as penalty. While holding so, the High Court had referred to the judgement of the High Court of Karnataka in the case of CCE & ST BANGALORE vs BILL FORGE PRIVATE LIMITED - 2011-TIOL-799-HC-KAR-CX and also to the subsequent amendment to Rule 14 of CCR.
4. BAR & RESTAURANT:
While holding the levy of service tax on the advocates fees, the High Court of Bombay in the case of P C JOSHI Vs UOI & Ors - 2014-TIOL-2279-HC-MUM-ST was at its critical best. Pained by the falling standards of the legal education and profession, it went on to observe that the profession is NOBLE but the professional is not necessarily so. Apart from the merits, I feel these concerns of the Lordships from the Temple of Justice is a must read for all the law students and practioners.
While the BAR bore the brunt, on the other hand, the RESTAURANTS tasted the toast.
Firstly the High Court of Mumbai in the case of INDIAN HOTELS AND RESTAURANT ASSOCIATION & ANR vs UOI & ORS - 2014-TIOL-498-HC-MUM-ST upheld the Constitutional validity of the levy of service tax on Restaurants overruling the Single Judge's judgement of the Kerala High Court in the case of KERALA CLASSIFIED HOTELS AND RESORTS ASSOCIATION vs UOI - 2013-TIOL-533-HC-Kerala-ST.
Subsequently, the High Court of Kerala in the case of UOI vs KERALA BAR HOTELS ASSOCIATION & ORS - 2014-TIOL-1913-HC-KERALA-ST struck down the levy of service tax on the restaurants distinguishing the decision of the Mumbai High Court supra, holding that the supply of food and beverages in a restaurant is a deemed sale of goods as contemplated under Article 366(29A)(e) of the Constitution and even the service part involved in the supply of food and other articles of human consumption, is deemed as a sale to enable the States to impose tax on the same and it is not open to the Union to characterise the same transaction as a service for imposition and levy of service tax.
5. SUO MOTU:
After the Larger Bench (LB) decision in the case of BDH Industries Limited vs CCE (Appeals), Mumbai -I - 2008-TIOL-1211-CESTAT-MUM-LB, taking re-credit on one's own motion (suo motu) had been in a seriouscommotion.The LB in the BDH case supra, had held that there is no provision under the CEA and the Rules allowing suo motu taking of credit of refund without sanction by the proper officer and until the department is satisfied that the incidence of duty has not been passed on. From that day, life had been made very miserable, as the Revenue had started denying any and all types of re-credits, be it an accounting error or an arithmetical error, citing BDH supra.
In a major reprieve, the High Court of Madras in the case of ICMC Corporation Ltd vs CESTAT - 2014-TIOL-121-HC-MAD-CX had allowed the suo motu re-credit of the Cenvat credit reversed by the appellant by holding that it was only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application under Section11B of the CEA claiming refund of duty. After 5 years of eclipse, there is sunshine.
6. STAY PUT:
To me, the most tinkered provision in CEA had been the EXTENSION of STAY by CESTAT. The amount of time, money and energy spent, nay wasted, on this futile provision is worth a million whiplashes to the brain behind this worthless provision.
Actually the year didn't start well for the appellants seeking the extension of stay. In M/s SALASAR STEEL & POWER LTD vs CC, RAIPUR - 2014-TIOL-1217-CESTAT-DEL, it was held that no extension of stay could be granted by CESTAT in the light of the provisions of Section 35C (2A) of CEA, even if the cause of the delay is not attributable to the appellants. This created a major hue & cry across the nation and the matter was referred to Larger Bench. In the meanwhile, as usual, the High Court came to the rescue and in the case of COMMISSIONER vs SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA - 2014-TIOL-1102-HC-AHM-CX, the High Court of Gujarat held that the CESTAT can extend the stay beyond 365 days and thus averted a mass litigation, which was on cards. Subsequently, the Larger Bench of CESTAT in the case of M/s HALDIRAM INDIA PVT LTD & ORS vs CCE - 2014-TIOL-1965-CESTAT-DEL-LB also held so, based on the above High Court judgement cited supra.
In a very interesting development, the Ahmedabad Bench of CESTAT in the case of M/s VENKETESHWARA FILAMENTS PVT LTD vs CCE & ST, VAPI - 2014-2388-CESTAT-AHM had held that any stay order passed by the CESTAT, if it is in force beyond 07.08.2014 (the date when the 1 st, 2 nd & 3 rd provisos to Section 35C (2A) of CEA were omitted), such stay order would continue till the disposal of appeals and there is no need for filing any further applications for extension of stay, which is a peach of a decision. The above ratio has been followed by the Bangalore Bench in the case of M/s ASIA PACIFIC COMMODITIES LTD & ORS vs CC - 2014-TIOL-2628-CESTAT-BANG.
7. NAY ST ON NEST:
Much water has flown under the taxability of residential complex service. In a very significant decision, the Bangalore Bench of CESTAT in one of the path-breaking decisions in the case of JOSH P JOHN & ORS vs CST, BANGALORE - 2014-TIOL-1753-CESTAT-BANG, held prior to 01.07.2010, there is no service tax payable on the construction services provided by the builder/developer to the individuals, who had purchased flats/residential units in a residential complex. Backed by a sound reasoning, the definition prior to 01.07.2010 and the introduction of explanation in clause (zzzh) of the Finance Act, 1994, had been handsomely interpreted thus giving the much-sought relief to the individuals.
8. SWEET 16:
To the department, the good word is "Demand" and the bad word is "Refund". Often the refund claims are seen with a prejudicial microscope and stalled with the most trivial objections possible. In a novel and noble initiative, the Bangalore bench of CESTAT has passed an interim order, on various common / legal issues on the refund of Cenvat Credit under Rule 5 of CCR vide its order M/s APOTEX RESEARCH PVT LTD & ORS vs CC, BANGALORE - 2014-TIOL-1836-CESTAT-BANG, wherein it had addressed 16 vital issues. To me, these are nothing but 16 Commandments.
9. THE ASHES AND PHOENIX:
The issue relating to the classification of imported coal as Bituminous Coal or Steam Coal is the recent block buster in the indirect tax litigation, both in terms of notices as well as the amount involved. In a very detailed decision in the case of M/s COASTAL ENERGY PVT LTD & ORS vs CCE, CUS & ST, GUNTUR - 2014-TIOL-1157-CESTAT-BANG, the Bangalore Bench of CESTAT had upheld the classification in favour of the revenue.
Subsequently, the Chennai bench of CESTAT in the case of M/s TANGEDCO & ORS vs CC, TUTICORIN - 2014-TIOL-2503-CESTAT-MAD, had questioned the ratio of the Coastal case supra, against the decision in the case of TNPL vs CC, TUTICORIN - 2009-TIOL-1851-CESTAT-MAD and had referred the matter to the Larger Bench to enunciate the correct position of law, thus giving a reprieve.
10. ONE MAN ARMY:
In the most audacious yet reasonable decision, in the case of CCE vs M/s AKRUTI PROJECTS - 2014-TIOL-1925-CESTAT-MUM, a Single Member Bench of CESTAT, Mumbai, had held that the services provided by a sub - contractor is not liable to service tax, when the main contractor pays service tax. While holding so, the Learned Single Member, rightly aided by the ratio of the landmark decision of the Supreme Court in the case of STATE OF AP vs LARSEN & TOUBRO LTD - 2008-TIOL-158-SC-VAT had overturned the opinion of the Third Member in the case of SUNIL HI-TECH ENGINEERS LTD vs CCE, NAGPUR - 2014-TIOL-541-CESTAT-MUM as PER INCURIAM.
11. SMALL AND BEAUTIFUL:
Admissibility of Cenvat Credit on GTA services had been the most debated issue under the Central Excise. Vide para 8.1.c of the Master Circular No. 97/8/2007 dated 23.08.2007, the Board had clarified that Cenvat Credit of the service tax paid on Outward Transport of Goods would be admissible upto the place of removal and not beyond that. In para 8.2 of the said Circular, the phrase "Place of Removal" has been explained, wherein three conditions were set out, under which the Cenvat Credit would be admissible, of which, the seller shall borne the risk of loss or damage to the goods during transit, is one. Keeping in line with its usual tradition, the Board had taken a complete U-turn and issued a recent Circular No. 988/12/2014-CX dated 20.10.2014, wherein it had departed from the earlier Circular by stating that the payment of transport, inclusion of transport charges in value, payment of insurance, who bears the risk are not the relevant considerations to ascertain the "place of removal".
Not influenced by these contradicting clarifications, but towing logical reasoning backed with sound fundamental principles of the Cenvat Credit Scheme, the Cenvat credit of input services under GTA was allowed in the case of CCE, RAIPUR vs SURYA WIRES PVT LTD -2014-TIOL-2566-CESTAT-DEL.
12. THE BEST JUDGEMENT:
In one of the landmark decisions on tax laws, the Constitutional Bench of the Supreme Court in the case of M/s KONE ELEVATOR INDIA PVT LTD vs STATE OF TAMIL NADU & ORS -2014-TIOL-57-SC-CT-CB, had decided a very crucial and a complicated issue as to whether the manufacture, erection, installation and commissioning of lift at the customer's premises would constitute a sale or a works contract. While holding that the above activity would constitute "Works Contract" and not a "Sale", the Apex Court had chronicled the entire legislative history of the taxability of works contract, the 46th amendment to Article 366 (29A) of the Constitution as well as the landmark decisions rendered in the past. While allowing the appeal by a majority view, the Apex Court had delivered path breaking ratio on the legal fiction of deemed sale, the application of Article 366 (29A) to divisible contracts and the inapplicability of the dominant nature test / overwhelming component test / the degree of labour and service test on composite contracts under Clause (29A) (b) of Article 366 of the Constitution.
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