 In this sixth episode on TARC Reports, the focus continues to be on tax dispute management. The four well-known domain  experts - Mr Vijay Mathur, Sr Advisor from PwC India; Mr R Sridhar, V-P (Taxation), Hindustan Coca Cola; Mr Sant Kumar Verma, Country Director, Tax & Customs, Schneider Electric and Mr M S Vasan, Director (Finance), G M Motors - have gone deeper into the various administrative aspects of litigation management and also made several recommendations which the Union Finance Minister, Mr Arun Jaitley, may find worthy of consideration.  |
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 | Cus - Import of medical instrument under NIL duty - conditions of Notification and undertaking to SC violated - CESTAT imposed penalty of Rs 20 lakhs - Penalty reduced to amount equal to duty subject to a max of Rs 20 lakhs: Supreme Court (See 'Breaking News') Welcome to Settlement Commission - CBEC Wants to create awareness (See 'DDT' Column) Income tax - Whether sum paid as lease premium has any nexus with rent of property leased to assessee and thus attracts provisions of Sec 194I - NO: ITAT (See 'Breaking News')Taxation of Alternative Investment Funds: Brand new Pass Through Provisions (See 'Guest' Column) Service Tax - Amway, for direct sales, no Service Tax - Second Level Distributors liable to Service Tax: CESTAT (See 'Breaking News') Why very few cases go to Settlement Commission? (See 'DDT') Draft Proposals for Facilitating Electronic Transactions - Tax Benefits! (See 'DDT') Export Certificate for Passengers - Why can't Board prescribe a uniform procedure? (See 'DDT') |  | |
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| TIOL COMMENTARY DDT (Daily Dose of Taxation) GUEST COLUMN CASE LAW CST Vs M/s Arrow Webtex Ltd Whether in case an issue is pending before the Revenue authority in remand, it is justified on the part of same authority to approach the High Court by way of a writ and contest against the same issue - NO: HC - Revenue's appeal dismissed : BOMBAY HIGH COURT | ||
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| | ITO Vs Earnest Towers (P) Ltd Whether the sum paid as lease premium has any nexus with the market rent of the property leased to the assessee and thus attracts provisions of Sec 194I - Whether payment of lease premium is capital in nature - Whether regulatory clauses in the lease agreement which are only regulatory in nature for the uniform development of the area of land leased out can convert the lease premium into tenancy as per section 194I. - Revenue's appeal dismissed : KOLKATA ITAT M/s Sujana Universal Industries Ltd Vs DCIT Whether the assessee having submitted the required details asked for and accordingly assessment order has been passed, CIT does not acquire jurisdiction by mere changing of opinion - Whether interest payable by the assessee is to be disallowed under sec. 43B if the same was not paid in cash but converted into equity - Whether the computation of book profit for the purpose of 115JB should start from the 'profit for the year' or from the 'final balance in the P&L A/c carried to balance sheet'. - Assessee's appeal partly allowed : HYDERABAD ITAT ACIT Vs M/s Atlanta Electricals (P) Ltd Whether the GP rate of 10% is to be applied or the GP rate of 30.87% is to be applied on the sale of stock presumed to have been made outside the books. - Revenue's appeal dismissed : AHMEDABAD ITAT M/s Kothari Products Ltd Vs DCIT Whether profits of eligible units, as per audit accounts , could not be said to be sacrosanct so as to prohibit the AO from making adjustment therein - Whether the deduction of expenses incurred by Head office for advertisement and publicity by the AO from the profits of unit in a backward area u/s 80-IB is to be considered legal - Assessee's appeal dismissed : LUCKNOW ITATDCIT Vs Ishar Infrastructure Developer (P) Ltd Whether when the AO has not pointed out any discrepancy in the books of account or purchase/sales or has not brought on record to prove that extra purchases have been made by the assessee at any point of time, any addition can be made by the AO on account of differences in stock - Whether, it is only the real income which can be taxed, and no additions is to be made on conjectures and surmises. - Revenue's appeal dismissed : AMRITSAR ITAT Ballal Chemicals And Metals Pvt Ltd Vs ITO Whether onus to establish its claims, as per the return of income is on the assessee. - Case Remanded : MUMBAI ITAT Asmitha Microfin Ltd Vs ADDL. CIT Whether the assessee can be said to be the owner of the Whether the amount received by assessee as discounted interest on the future receivables is taxable in the year in which it is received where assessee has received the discounted amount as a part of sale consideration and assessee was bill discounting system of accounting . - Case remanded : HYDERABAD ITAT ACIT Vs Smt Asha Ashok Boob Whether the assessee can be said to be the owner of the property and entitled to deduction under sec. 54F in respect of property of which he is a lessee and the lease is for a period of 999 years subject to renewal for further period of 999 years and as per the agreement, the assessee enjoys all the rights, i.e. transfer, mortgage , sub-lease etc. - Whether the assessee is entitled to deduction under sec. 54F in respect of that amount only which was paid by him till the due date of filing of return under sec. 139(4). - Revenue's appeal partly allowed : PUNE ITAT Aquatic Remedies Pvt Ltd Vs DCIT Whether for the purpose of issuing a notice for reassessment u/s 148, satisfaction of one authority can be substituted by the satisfaction of the other authority. - Assessee's appeal allowed; Revenue's cross appeals dismissed : MUMBAI ITAT DCIT Vs Amarshiv Construction Pvt Ltd Whether when the revenue failed to show that the liabilities ceased to exist and the assessee has obtained the benefits in respect of such liabilities by way of Remission or cessation thereof, no addition can be made u/s 41(1) - Whether when accounts of the assessee are audited and the auditor has certified the correctness of the claim of the expenses, the expenses cannot be disallowed by AO without any material to disallow the claim - Whether the retention money was to be taxed in assessment year relevant to 'previous year' in which it became payable to assessee as per terms of contract i.e., after defect liability was over and after engineer-in-charge certified that no liability was attached to assessee. - Case remanded : AHMEDABAD ITAT | | |
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SERVICE TAX SECTION
M/s Emulex Communications Pvt Ltd Vs CST
Service Tax - 100% EOU - Claim of service tax paid on input services as rebate of exporting services - Rejected for delay in filing declaration - Held, Tribunal in Convergys India case held that filing of declaration is merely procedural in nature and non-compliance per se cannot be a ground to deny substantial benefit under the relevant Notification - Since the decision was not available for consideration before the original adjudicating authority, matter is remanded to original adjudicating authority to consider the rebate claim afresh in the light of precedent decision and submissions - Impugned order is set aside - Appeal is allowed by way of remand. (Para 2) - Case remanded : BANGALORE CESTAT
of precedent decision and submissions - Impugned order is set aside - Appeal is allowed by way of remand. (Para 2) - Case remanded : BANGALORE CESTAT Doosan Infracore (India) Pvt Ltd Vs CST
Service Tax - CENVAT credit - appellant is engaged in the management, maintenance & repair services of heavy engineering and availed credit of input service tax paid on 'network services' and 'GTA' - Revenue sought to disallow the same, agitated herein.
- appellant is engaged in the management, maintenance & repair services of heavy engineering and availed credit of input service tax paid on 'network services' and 'GTA' - Revenue sought to disallow the same, agitated herein. Held: The network services availed by the appellant to make its own mail/server functional having its integral connection to generate the output service is a tool for such output service - In view of the factual and legal position, Revenues appeals on this count are dismissed - Amounts related to GTA credit covered by SCN stood reversed by assessee as abundant caution, Revenue's contentions dismissed [Para 2, 3, 5]
covered by SCN stood reversed by assessee as abundant caution, Revenue's contentions dismissed [Para 2, 3, 5] With regard to Revenue's grievance that the appellant availed credit of GTA paid by transporters, Commissioner (Appeals) verified that transport service provider was registered and has discharged tax liability of the said amount verifiable from the invoices and held that there cannot be double taxation for which assessee should get the relief - In absence of any contrary evidence as to the deposit of that amount of service tax by the GTA service provider, Commissioner (Appeals) has reached to a proper conclusion for which the Revenue's appeal on this count is dismissed [Para 4.1, 4.2] - Appeals disposed of : CHENNAI CESTAT
Charanjeet Singh Khanuja Vs CST
Service Tax - Amway - for direct sales - no Service Tax - Second Level Distributors liable to Service Tax:
Direct Sale, no service : The Tribunal observed, The activity which is covered under Section 19(i) is in relation to the promotion or marketing or sale of the goods produced by the client or provided by the client or belonging to the client. This expression, would not cover the sale of the goods by a person, which belong to him, as the activity of the promotion or marketing or sale of the goods by a person belonging to him would not constitute service. The assessees in these cases are distributors, who purchase the goods from Amway at the Distributors Acquisition Price (DAP)) and sell the same in retail at price not exceeding MRP fixed by the Amway. This activity of the Distributors, cannot be treated as promotion, marketing or sale of the goods produced or provided by or belonging to the client (Amway), as the sale of the goods purchased by the Distributors from Amway is not the sale of the goods belonging to their client Amway.
Second Level Distributors liable to Service Tax : The activity of a Distributor of identifying other persons, who can be roped in for sale of the Amway products/marketing of the Amway products and who on being sponsored by that Distributor are appointed by Amway as second level of distributors is the activity of marketing or sale of the goods belonging to Amway and the commission received by the Distributor from Amway, which is linked to the performance of his sales group (group of the second level of distributors appointed on being sponsored by the Distributor) would have to be treated as consideration for Business Auxiliary Service of sales promotion provided to Amway. Therefore, service tax would be chargeable on the commission received by a Distributor from Amway on the products purchased by his sales group.
Small Scale Exemption - marketing or sales promotion of a branded product does not come under the exclusion category : Department s plea is that this exemption is not applicable when the taxable service is provided by a person under a brand name/trade name, whether registered or not, of another person and in this group of cases, the Distributors have promoted the sale/marketing of branded products. This plea of the Department is not correct, as in these cases the distributors are engaged in promoting sales/marketing of the products of Amway and they are not marketing or promoting any taxable service which is branded and the brand name belongs to another person. Marketing or sale promotion of branded products by a person/ commission agent does not amount to providing branded service by him and hence, marketing or sales promotion of a branded product does not come under the exclusion category as mentioned in the proviso to notification no.6/05-ST.
Limitation: merely because the assesses did not apply for Service Tax Registration or did not file ST-3 Returns or did not declare their activities to the jurisdictional central excise authorities, it cannot be inferred that this was a wilful act with intent to evade payment of service tax. The Commissioner (Appeals) after analyzing the activities of the assesses had taken the view that the same is not covered by the definition of Business Auxiliary Service under Section 65(105) (zzb) read with Section 65(19) of the Finance Act, 1994. When on the issue involved in this group of cases, there were two views in the Department itself, it cannot be said that on the question as to whether the activity of the assessees was taxable under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994, there was no scope for doubt. As held by the Apex Court in the case of Continental Foundation Joint Venture Vs. CCE, Chandigarh reported in 2007-TIOL-152-SC-CX when there is scope for doubt in the mind of an assessee on a particular issue, the longer limitation period, under proviso to Section 11 A(1)cannot be invoked and the ratio of this judgement of the Apex Court is applicable to the facts of these cases. Therefore, the longer limitation period of 5 years under proviso to Section 73(1) of the Finance Act, 1994 would not be invokable and duty can be demanded only for normal limitation period of one year from the relevant date.
The impugned orders passed by the Commissioner (Appeals) are set aside and the matters are remanded to the Original Adjudicating Authority for de novo adjudication. - Appeal disposed of : DELHI CESTAT
CCE Vs M/s Mahavishnu Cylinders
Central Excise - Section 11D - Assessee supplying LPG cylinders to Indian Oil Corporation - Price is fixed at Rs 300/- including excise duty irrespective of the status of the supplier whether SSI or not - While availing SSI exemption, the assessee had issued invoices showing Central Excise duty separately - Demand under Section 11D set aside by Commissioner (Appeals) - Revenue appeal dismissed by the Tribunal - Appeal filed against the order of the Tribunal.
Held: It is seen from the order of the Adjudicating Authority that he has not recorded any finding to sustain the demand. The Commissioner (Appeals), after verifying the facts and records and after perusing the statements given before the Central Excise Officers, held that the first respondent/assessee had not collected in excess of over and above what was paid. - Because of the error committed by the clerk in generating the invoice, the first respondent/assessee could not be faulted with - In the absence of any intention to collect excess duty, it is held that the first respondent/assessee had not violated the provisions of Section 11D for the Department to invoke the said provision and demand duty - Appeal has no merit. (para 6) - Appeal dismissed : MADRAS HIGH COURT
CCE Vs Indian Oil Blending Ltd
Central Excise - Lubricating preparations - Appeal by revenue against the order of Tribunal allowing the benefit of exemption under notification 12/94-CE for lubricating preparation falling under Chapter 3403.00.
Held: The correctness of the treatise taken into account by the Tribunal was not assailed by the appellant - If the treatise taken into account by the Tribunal is correct then it cannot be said that the view taken by the Tribunal is perverse. In that case one has to say that the view is a plausible view - Appeal has no merit. (para 5&6) - Appeal dismissed : CALCUTTA HIGH COURT
by the Tribunal was not assailed by the appellant - If the treatise taken into account by the Tribunal is correct then it cannot be said that the view taken by the Tribunal is perverse. In that case one has to say that the view is a plausible view - Appeal has no merit. (para 5&6) - Appeal dismissed : CALCUTTA HIGH COURT Sarvottam Rolling Mills Pvt Ltd Vs CCE
CX - Appellant is engaged in manufacturing of MS Bar - Factory was visited on 29.07.2009 at 11.05 hrs and panchnama was drawn - proceedings were concluded at 11.30 hrs on 29.07.2009 - whole of the proceedings were completed within a span of 25 minutes i.e. drawing of the panchnama and physical verification of stock of almost 2000 Metric tonnes which is not possible by all the means - Stock taking is not proper and shortage found are only on estimate basis which is not acceptable - Shortage found at the time of physical verification on 29.07.2009 is not sustainable - Accordingly, demand is set aside, so, interest and penalty is not imposable: CESTAT [Para 6]
of almost 2000 Metric tonnes which is not possible by all the means - Stock taking is not proper and shortage found are only on estimate basis which is not acceptable - Shortage found at the time of physical verification on 29.07.2009 is not sustainable - Accordingly, demand is set aside, so, interest and penalty is not imposable: CESTAT [Para 6] CENVAT - For the inadmissible Cenvat Credit on Joist Angle, appellant has already reversed Cenvat Credit and not disputed the same - Demand on that account has been confirmed along with interest - penalty is not imposable: CESTAT [Para 7] - Appeal partly allowed : DELHI CESTAT
on Joist Angle, appellant has already reversed Cenvat Credit and not disputed the same - Demand on that account has been confirmed along with interest - penalty is not imposable: CESTAT [Para 7] - Appeal partly allowed : DELHI CESTATPerfetti Van Melle India Pvt Ltd Vs CCE
CX - Assessee are manufacturers of sugar confectionaries and having two units, one unit in Chennai and second Unit in Gurgaon - According to assessee, goods manufactured by them i.e. mentos mint are "other sugar confectionary" classifiable under sub-heading 1704.90 of Tariff, while according to Department, goods are classifiable as "Chewing Gums" under sub-heading 1704.10 - Tribunal in respect of appeal filed against order of commissioner, has set aside Commissioner's order on grounds of limitation - Since proceedings against Gurgaon Unit are based on proceedings against Chennai Unit, and since in this case also SCN for demand of duty for period from April 2003 to February, 2005 has been issued by 30th April 2008, prima facie same would also be time barred - Merit found in assessee's plea that goods covered under sub-heading 1704.10 would be those where it is gum which gives them essential character and in-fact in terms of Provisions of Food Adulteration Rules 1955 (para A/25.02.01), bubblegums and chewing gums must contain not less than 12.5% to 14% of gums - Product, in question, contains about 1% or less of gum arabic - Even on merit, assessee have strong prima facie case in their favour - Staygranted: CESTAT - Stay granted : DELHI CESTAT
to assessee, goods manufactured by them i.e. mentos mint are "other sugar confectionary" classifiable under sub-heading 1704.90 of Tariff, while according to Department, goods are classifiable as "Chewing Gums" under sub-heading 1704.10 - Tribunal in respect of appeal filed against order of commissioner, has set aside Commissioner's order on grounds of limitation - Since proceedings against Gurgaon Unit are based on proceedings against Chennai Unit, and since in this case also SCN for demand of duty for period from April 2003 to February, 2005 has been issued by 30th April 2008, prima facie same would also be time barred - Merit found in assessee's plea that goods covered under sub-heading 1704.10 would be those where it is gum which gives them essential character and in-fact in terms of Provisions of Food Adulteration Rules 1955 (para A/25.02.01), bubblegums and chewing gums must contain not less than 12.5% to 14% of gums - Product, in question, contains about 1% or less of gum arabic - Even on merit, assessee have strong prima facie case in their favour - Staygranted: CESTAT - Stay granted : DELHI CESTAT Sports And Leisure Apparels Ltd Vs CCE & ST
CX - Place of removal - Assessee cleared goods from their factory on stock transfer basis to warehouses from where certain quantity of goods was sold to customers and remaining quantity was transported to retail outlets for sale - Input services were availed for transportation of goods from factory to warehouse/retails outlets and various services availed at retail outlets - It is the warehouse /retail outlet which has to be treated as place of removal and, therefore, assessee would be eligible for cenvat credit in respect of services availed upto the place of removal - Stay granted: CESTAT [Para 3, 5] - Stay granted : DELHI CESTAT
in respect of services availed upto the place of removal - Stay granted: CESTAT [Para 3, 5] - Stay granted : DELHI CESTAT CUSTOMS SECTION
CC Vs M/s Diascans (India) Ltd
Customs - Import of medical instrument under nil duty - conditions of notification and undertaking to Supreme Court violated - CESTAT imposed penalty of Rs. 20 lakhs - Penalty reduced to amount equal to duty subject to a maximum of Rs. 20 lakhs : Supreme Court found from the impugned order of the CEGAT that no reason whatsoever is given for reducing the penalty from Rs. 20 lakhs to Rs.1 lakh except observing that it "appears to be excessive". The Court has taken note of the circumstances under which the breach has been committed by the respondent . More serious breach is the violation of undertaking given to the Court.
In these circumstances, held that it was not a fit case where penalty should have been reduced. Since the respondent is now to pay the duty at the depreciated value of the machinery, the order of the CEGAT in so far as reduction of penalty from Rs. 20 lakhs to Rs.1 lakh is concerned, is set aside and the penalty payable shall be same as the duty which is now to be paid by the respondent on the depreciated value of the machinery, subject to maximum of Rs.20 lakhs. - Revenue Appeal allowed partly : SUPREME COURT OF INDIA
case where penalty should have been reduced. Since the respondent is now to pay the duty at the depreciated value of the machinery, the order of the CEGAT in so far as reduction of penalty from Rs. 20 lakhs to Rs.1 lakh is concerned, is set aside and the penalty payable shall be same as the duty which is now to be paid by the respondent on the depreciated value of the machinery, subject to maximum of Rs.20 lakhs. - Revenue Appeal allowed partly : SUPREME COURT OF INDIA Government Of India Vs Dyestuffs Manufacturers Association Of India
Of India Vs Dyestuffs Manufacturers Association Of India Anti Dumping Duty - Best Judgement - Designated Authority applied the provisions of Rule 6(8) of the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 and determined the anti-dumping duty on the basis of "best judgment assessment". There is no dispute that in those cases where the noticee does not cooperate in the inquiry or furnishes the requisite material, it is open to the Designated Authority to invoke Rule 6(8) and determine the normal value of the product on the basis of "best judgment assessment". This is so held in the case of Designated Authority v. Haldor Topsoe - 2002-TIOL-681-SC-AD. However, while carrying out the "best judgment assessment", it is necessary for the Designated Authority to base its decision on the relevant considerations/ material.
In the present case, the Customs, Excise and Gold (Control) Appellate Tribunal ('CEGAT') has found many loopholes in the exercise carried out by the Designated Authority which prompted the CEGAT not to accept the valuation of goods arrived at by the orders of the Designated Authority. CEGAT Order upheld. - Revenue Appeal Dismissed : SUPREME COURT OF INDIA
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