Wednesday, September 16, 2015

[aaykarbhavan] Judgments and Information




IT : The proviso to Section 2(15) as substituted by the Finance Act,

  

IT : The proviso to Section 2(15) as substituted by the Finance Act, 2015 is applicable with prospective effect. Thus, even post insertion of such proviso but prior to April 1, 2016 activities of trade, commerce, business, etc, are not excluded from scope of charitable purpose which are in the course of actual carrying out of advancement of any other object of general public if aggregate receipts from such activity do not exceed 20% of total receipt of trust
Facts:
(a) Assessee-trust was registered under the Punjab Towns Improvement Trusts Act, 1922. It was providing services under the control and supervision of State Government for development of cities and towns. (b) It claimed relief under Section 11. However, the revenue denied such relief by equating assessee with a builder /colonizer. The revenue argued that the activity of trust would hit by exclusionary proviso to Section 2(15). The aggrieved-assessee filed the instant appeal before the Tribunal. The Tribunal held as under:
(1) The proviso to Section 2(15) as substituted by the Finance Act, 2015 would now excludes from scope of charitable purpose even activities of trade, commerce, business, etc, which are in the course of actual carrying out of advancement of any other object of general public if aggregate receipts from such activity do not exceed 20% of total receipt of trust. (2) The five judge bench of Hon'ble Supreme Court, in the case of CIT v. Vatika Township Pvt Ltd [2014] 49 taxmann.com 249 (SC), heldthat, following the maxim lex prospicit non respici, the law, particularly with respect to a requirement which is more onerous on the assessee, cannot be treated as retrospective in effect unless it is specifically legislated to be so. In our considered view, therefore, this amendment cannot be treated as clarificatory or retrospective in effect. (3) In view of these discussions, even post insertion of proviso to Section 2(15) but before 1st April 2016, when business activities are carried by the assessee trust "in the course of actual carrying out of such advancement of any other object of general public utility" , the benefit of Section 11 read with Section 2 (15) cannot be declined. Nothing, therefore, turns on the assessee carrying out, even if that be actually so, activities in the nature of trade, commerce or business, etc., as long as these activities are carried out in the course of actual carrying out of advancement of any other object of general public utility. (4) The planned development of cities and towns is an object of general public utility, and that is an object consistently followed by the assessee in all its activities. Thus, assessee-trust was eligible for Section 11 relief.

[2015] 61 taxmann.com 162 (Amritsar - Trib.)
IN THE ITAT AMRITSAR BENCH
Hoshiarpur Improvement Trust
v.
Income Tax Officer - Ward 1, Hoshiarpur


  

IT/ILT : Assessee, a resident of Sweden, can claim benefit of conditions imposed for bringing to tax managerial fees in treaty between India and Portugal at lower rate on basis of protocol to DTAA between India and Sweden on principle of most favoured nation (MFN)


[2015] 61 taxmann.com 31 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Sandvik AB
v.
Deputy Director of Income-tax (International Taxation)-II, Pune


  

Excise & Customs : In absence of any machinery provisions to assess and collect tax from a deceased person/dissolved firm, all proceedings against such deceased person/dissolved firm abate and therefore, proceedings cannot be continued against legal representatives

[2015] 61 taxmann.com 95 (SC)
SUPREME COURT OF INDIA
Shabina Abraham
v.
Collector of Central Excise & Customs


  

  





As every assessee would like, appellant is not interested in resolving conflict between rules and statute, but interested only in getting their money back - High Court allows refund of duty paid on goods returned





CHENNAI: THE dispute pertains to erstwhile Rule 173L of the Central Excise Rules, 1944. As per the said Rule, the assessee is eligible for refund of duty paid on goods returned for being re-made, refined, reconditioned or subjected to any other similar process in the factory. But, as per the proviso, such goods are returned to the factory within one year of the date of payment of duty or within such further period or periods not exceeding one year, in the aggregate, as the Commissioner may, on sufficient cause being shown, permit in any particular case.


In this case, the goods were received back after more than one year from the date of clearance from the factory and hence the refund was rejected. The rejection order was also upheld by the Tribunal. Hence, the assessee is before the Tribunal.


After hearing both sides, the High Court held:


There is no dispute on fact that at least within two years, which happens to be the extended period as per proviso (i) of sub-rule (1) of Rule 173L, the appellant has made a claim. As every assessee would like, the appellant is not interested in resolving the conflict between the rules and the statute, but interested only in getting their money back. Therefore, whatever way the department understands, they are liable to refund the money to the appellant.
We are not even going so far as to resolve any apparent conflict between Explanation (B) to Section 11B and proviso (i) to Rule 173L. Under the proviso (i) to Rule 173L, the Commissioner is given the discretion to extend the period of one year stipulated therein by a further period not exceeding one more year. In other words, the Commissioner has the power and discretion under proviso (i) to Rule 173L to entertain an application within a total period of two years. This is a case where the Commissioner should have at least exercised the said discretion in favour of the assessee.

The civil miscellaneous appeal is allowed answering the question of law in favour of the appellant/assessee. The respondents are directed to make a refund within a period of two months from the date of receipt of a copy of this order.
  

  

CX - Valuation - Post 01.07.2000 refinery has to discharge Excise Duty on transaction value which is collected from Oil Marketing Company by issuing commercial invoices: CESTAT Larger Bench


MUMBAI: FIVE years ago the matter came to be referred to the Larger Bench. Please see 2010-TIOL-1419- CESTAT-MUM.

The dispute relates to the valuation of LPG (domestic) cleared in bulk from the appellant' s factory (refinery) to Oil Marketing Companies (OMCs), namely, Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL) and Indian Oil Corporation Ltd. (IOCL) during the period from June 2002 to December 2004.

The appellant sold the goods to the OMCs at a price which was referred to as Import Parity Price and the OMCs sold the same, after bottling in cylinders, to their dealers at a price fixed, under a scheme called Administered Price Mechanism (APM), by the Oil Co-ordination Committee under the Ministry of Petroleum, Government of India, and the dealers, in turn, supplied the goods in cylinders at the same APM price to domestic consumers.

The clearance of LPG (domestic) in bulk from the refinery to the OMCs were effected under cover of Central Excise invoices and on payment of duty on the APM price which was shown as the assessable value in such invoices. In respect of these sales, however, the appellant collected the higher price (net of statutory levies and admissible deductions like freight and insurance), namely, import parity price (IPP) from the OMCs by issuing commercial invoices.

The department viewed that the price actually collected by the appellant from the buyer is the correct assessable value being the "transaction value" defined under Section 4(3)(d) of the CEA, 1944.

The demands for recovery of differential amounts of duty were raised for different periods, all post 1.7.2000 and the same came to be confirmed by the CCE, Raigad who also imposed equivalent penalties.

Before the CESTAT, the appellant explained the scheme of Administrative Price Mechanism (APM) for controlled petroleum products. Inasmuch as it was informed that the prices of LPG (domestic), both ex-refinery and ex-storage, were determined by the competent authority which was the 'Oil Co-ordination Committee' (OCC) prior to 1.4.2002 and the 'Petroleum Planning & Analysis Cell (PPAC) from 1.4.2002. It was also submitted that the quantum of excise duty payable on the goods was also determined by the said authority, whether it be for the period prior to 1.7.2000 or from 1.7.2000 to 31.3.2002 or from 1.4.2002; that it was not open to any petroleum refinery to determine the assessable value of LPG (domestic) differently. It was particularly pointed out that any subsidy given by the Government to compensate any loss due to APM was not includable in the assessable value.

The Division Bench, after considering a plethora of case laws observed [para 8.5] that - although the facts of the present case are similar to those of MRPL's case [CESTAT Bangalore Final Order No. 1893/2006 dt. 10.11.2006 in Appeal No. E/647/06], the apex court's order in MRPL's case having been passed sub silentio in respect of the substantive valuation issue cannot, in our view, be followed as a binding precedent under Article 141 of the Constitution for the present case.

And, therefore, the Bench placed the matter before the President for constitution of a larger Bench to consider and decide on the following substantive issue, on which the view taken by the Bench happened to be contrary to the view taken by a co-ordinate bench in MRPL's case –

"Whether a manufacturer of LPG selling the product in bulk, post-1.7.2000, to an OMC for further sale in packed form to dealers/ domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price(APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f. 1-7-2000.

As mentioned, we reported this order as 2010-TIOL-1419- CESTAT-MUM. This order was passed in September 2010.

The Larger Bench heard the matter in May 2015 and the order has been issued the day before.

The Member (Judicial) observed that identical issue was considered by the Tribunal in respect of the very same assesse vide Final order dated 06.08.2008 [2008-TIOL-2849- CESTAT-AHM] and where it was held that –

"4. We have considered the arguments advanced by both sides in detail. We find that the issue already stands decided in the cases of Reliance Industries & MRPL cited above by the Tribunal in favour of the parties and facts and circumstances are the same. There is no dispute that additional consideration which is paid by the oil marketing companies has been paid out of the subsidy from oil pool account and not received from ultimate consumers. In view of the fact that the Larger Bench has already decided the issue and two Benches of this Tribunal have followed the same. We respectfully follow the same and allow the appeals filed by ONGC."

Inasmuch as in view of the Board Circular 796/29/2004- CX dated 4.9.04 adverted by the Bench it would mean that even after amendment of section 4, in the case of goods which are subjected to APM of the Govt. of India, assessment practice will have to continue as existed prior to amendment of section, the Member (Judicial) viewed. It was also observed that in view of the peculiar facts and circumstances of the case, the Referral Bench should have followed the view expressed by the Tribunal in the appellant's own case.

However, both the Technical Members constituting the Larger Bench, in a thirty-page order, came to the following conclusion –

"…it has to be held that the appellant was required to discharge its duty liability on the basis of 'transaction value' which it collected from the OMCs by issuing commercial invoices during the disputed period in terms of provisions of section 4 of the Central Excise Act as amended w.e.f 01/07/2000. In other words, post 01/07/2000, the provisions of new section 4 cannot be ignored for determination of assessable value of LPG sold in bulk to OMCs for further sale in packed form to dealers/domestic consumers. Therefore, the views expressed by the referral Bench are correct and the same are endorsed."

In view of the Majority order, it is held that the appellant has to discharge the excise duty on the transaction value which is collected from the Oil Marketing Company by issuing commercial invoices during the disputed period.

We would be uploading the Larger Bench order shortly.


I-T - Whether anonymous donations received by religious trust would fall within scope of Sec 115BBC and to be added to its income if activity of Trust is spiritual and not religious - NO: High Court

NEW DELHI: THE issue before the Bench is - Whether anonymous donations received by a religious trust would fall within the scope of Section 115BBC and will be added to its income, if the activity of the trust is 'spiritual&# 39; and not 'religious&# 39;. NO is the answer.

Facts of the case

The assessee is a registered trust. For the AY in question, the assessee had filed its return accompanied by an audit report, balance sheet, income and expenditure account etc. The case of assessee was picked up for scrutiny, wherein it was found that the assessee had received Rs.5,28,84,204/ - by way of donations. While the details of the names and addresses of the donors to the extent of Rs.5,01,588, 98 was furnished, the details of donors to the extent of Rs.27,25,306 were not explained. The assessee explained that it was mainly involved in imparting of spiritual education through lectures/samagam delivered by Brahmarishi Kumar Swami Ji and in distribution of medicines and clothes to the needy and destitute. The AO, therefore, proceeded to invoke Section 115BBC and add the aforementioned sum to the income of assessee. It was held by AO that although the legislature had exempted wholly public religious trusts from the provision of Section 115BBC, the case of assessee was not of public religious trust but a case of spiritual organization. Therefore, the case of the assessee was clearly hit by the provision of Section 115BBC. Accordingly, a sum of Rs.27,25,306/ - was, therefore, treated as anonymous donations and brought to tax as per Section 115BBC and seperately initiated penalty proceedings u/s 271(1)(c).

On appeal, the CIT(A) confirmed the action of AO. On further appeal, the Tribunal concluded that the AO and CIT had proceeded "on a very narrow and incorrect understanding in holding that the assessee trust was engaged in spreading spirituality and since Section 115BBC only exempts religious trust, a trust allegedly imparting spiritual knowledge was consequently not contemplated as an exception by the Legislature as much as it consequently was barred to claim exemption vis-a-vis the anonymous donation.

Having heard the parties, the High Court held that,

++ the question posed arises in the context of the anonymous donations received by the assessee trust and the view of the AO that such donations would not be exempt within the scope of Section 115BBC since the activity of the trust was 'spiritual&# 39; and not 'religious&# 39;. In Commissioner of Income-Tax v. Dawoodi Bohra Jamat, the Supreme Court after analysing the objects of the trust in that case held that they were "not indicative of a wholly religious purpose but were collective indicative of both charitable and religious purposes." It was held in the context of that case that "the establishment of Madarsas or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education under the provisions of Section 2(15). What can constitute religious activity in the context of the Hindu religion need not be confined the activities incidental to a place of worship like a temple. The Supreme Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar held that "a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters;

++ it might well be that a Hindu religious institution like the assessee is also engaged in charitable activities which are very much part of religious activity. In carrying on charitable activities along with organising of spiritual lectures, the assessee by no means ceases to be a religious institution. The activities described by the assessee as having been undertaken by it during the A.Y in question can be included in the broad conspectus of Hindu religious activity when viewed in the context of the objects of the trust and its activities in general. For the aforementioned reasons, the Court finds no legal infirmity in the conclusion of the ITAT that for the purpose of Section 115BBC(2)(a) , anonymous donations received by assessee would qualify for deduction and it cannot be included in its assessable income.
  

  

HC upholds ITAT's order, quashes reassessment for AY 2001-02 owing to non-service of Sec 148 notice, casts onus on Revenue to show that service of notice was duly effected on assessee; Merely because other notices sent to the 'Assessee group' were received at the same address where notice in instant case was served, does not mean that assessee' s place of business was also the same, moreover even after assessee pointing out non-receipt of notice, Revenue never attempted to serve notice on assessee' s known address; Rejects Revenue's reliance on co-ordinate bench rulings in Venad Properties (P) Ltd and Mayawati vs. CIT to contend that failure to comply with procedural requirement should not defeat substantive justice, clarifies that failure to serve notice u/s 148 is a jurisdictional defect and not procedural lapse; Rules that "AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC"; Further denies benefit of Sec 292BB (which provides for deemed validity of notice in certain circumstances) to Revenue, holds the same was not applicable to subject AY as it was inserted prospectively w.e.f. April 1, 2008, relies on SC ruling in Hotel Blue Moon : Delhi HC

Direct Tax Basket

2015-TIOL-2143- HC-AHM-IT- LB
CIT Vs Prabhukunj Co-op Housing Society Ltd

Whether if the trade or activity conducted by the assessee is mutual, certain activities are performed only for the benefit of specific members of that association, it would affect the mutuality of the enterprise - NO: HC

Whether the premium collected by the cooperative society from its outgoing member, out of the portion of his profits, would be taxable as income of the society disregarding the principle of mutuality - NO: HC

Whether in case a person transfers his interest in land, the transferor goes out after paying the contribution and the purchaser enters as member in his place to derive the benefit of expenses incurred by the society - YES: HC - Revenue' s appeal dismissed : GUJARAT HIGH COURT

2015-TIOL-1456- ITAT-AHM

Madhav Corporation Vs ACIT

Whether assessee is entitled to deduction u/s 80IB(10) where assessee had worked as developer and all the conditions laid down u/s 80IB(10) had been complied by assesee - Whether assessee is entitled to deduction u/s 80IB(10) on additional income which was disclosed upon search where the amount had direct and proximate connection with the normal business/developmen t activities and there was no other sources of income and whatever income arising to the assessee firm was business income of assessee. - Assessee' s appeal partly allowed : AHMEDABAD ITAT

2015-TIOL-1455- ITAT-AHM
Desai Construction Pvt Ltd Vs ACIT

Whether Revenue is justified in making disallowance claimed u/s. 80IA in respect of unabated assessments because there was no incriminating document found during search which could suggest that claim u/s. 80IA is not permissible even though assessment u/s. 153A can be made - NO: ITAT - Assessee' s appeal allowed : AHMEDABAD ITAT


Indirect Tax Basket
CUSTOMS SECTION

NON-TARIFF NOTIFICATION


92


Govt reduces Tariff Value for many items including gold

PRESS NOTES

09

Review of the existing Foreign Direct Investment policy on Partly Paid Shares and Warrants

File No.12/15/2009- FC-1
Clarification on FDI Policy on Facility Sharing Arrangements between Group Companies

CASE LAW

2015-TIOL-2137- HC-MAD-CUS

M/s Karur K C P Packkagings Ltd Vs CC

Customs - Interest on Drawback - Writ Petition seeking interest on delayed payment of drawback - Held: A perusal of Section 75A of the Customs Act, 1962 goes to show that where any drawback payable to the claimant is not paid within a period of one month from the date of filing a claim for payment of such drawback, interest at the rate fixed under Section 27-A from the date after the expiry of the said period of one month is payable to the petitioner - Writ Petition is allowed and the 3rd respondent is directed to pay the interest at the rate of 18% on the sanctioned and paid duty drawback claim amount entitled by the petitioner. (paras 5 & 6) - Petition allowed : MADRAS HIGH COURT
  

  

Direct Tax Basket

2015-TIOL-2141- HC-DEL-IT + Story
CIT Vs Bhagwan Shree Laxmi Naraindham

Whether anonymous donations received by a religious trust would come within the scope of Section 115BBC and will be added to its income, if the activity of the trust is 'spiritual&# 39; and not 'religious&# 39; - NO: HC

Whether the said trust would cease to be a religious institution, in case it organises spiritual lectures alongwith other charitable activities - NO: HC - Revenue' s appeal dismissed : DELHI HIGH COURT

2015-TIOL-1464- ITAT-MAD

Federation of Motor Sports Club of India Vs ADIT

Whether the CIT(A) was justified in denying the benefit of Sections 11 & 12 to the assessee when the CIT(A) did not consider the notification No.S.O.1246( E) dated 29.11.2002 which specified motor racing including motor cycle racing to be granted the benefit of section 80G - Whether the claim of the assessee to carry forward the excess application of fund can be entertained? Whether if the assessee has incurred foreign travel expenses outside India in order to comply with the objects of the assessee which if entitled for the benefit of Section-11 & Section-12 the same can be treated as the application of income. - Case Remanded : CHENNAI ITAT
2015-TIOL-1463- ITAT-LKW

Tech Trusion Systems & Services (P) Ltd Vs ACIT

Whether when the assessee did not furnish the requisite evidence despite various opportunities, the entire arrangement is correctly considered as sham and fake - Whether in a case where AO has made detailed investigation and when the assessee was cornered, he come forward with the proposal of surrender, the contention of the assessee that it was conditional surrender and cannot be accepted in part, cannot be accepted. - Assessee' s appeal is dismissed : LUCKNOW ITAT

2015-TIOL-1462- ITAT-BANG
ACIT Vs Shri Prashant Prakash

Whether for the purpose of exemption u/s 54F, for construction of a house there should be registration under the Registration Act, 1908 – Whether for the purpose of exemption u/s 54F, the construction agreement should also be within the period set out in Sec.54F(4) - Whether assessee is eligible for exemption u/s 54F where the Assessee has utilized the consideration received on transfer on which exemption is claimed u/s.54F in construction of the property within 3 years from the date of transfer of the capital asset. - Revenue's appeal dismissed : BANGALORE ITAT
2015-TIOL-1461- ITAT-MAD

DCIT Vs Shasun Pharmaceuticals Ltd
Whether share issue expenses can be amortized under sec. 35D - Whether the assessee was eligible for deduction under sec. 80HHC on the issue of adjustment of negative profit and also on the issue of consideration of export incentives without application of eligibility conditions in the 3rd and 4th proviso to sec 80HHC (3) - Whether the CIT(A) erred in holding that the assessee is eligible for Rs.70,65,156/ - and not for weighted portion of the claim of Rs.35,32,578/ - under sec.35(2AB) when the assessee had incurred an expenditure of Rs.70,65,156/ - as revenue expenditure. - Revenue' s Appeal Partly Allowed : CHENNAI ITAT

2015-TIOL-1460- ITAT-MUM

Chrome Pictures Pvt Ltd Vs ACIT

Whether prior period expenses are not allowable, if the payability is not crystallized during the year under consideration - YES: ITAT

Whether when assessee has failed to discharge its onus in furnishing evidences in support of the cash expenses, then disallowance of 25% based ad-hocisam is not acceptable as it is without any basis - YES: ITAT - Assessee' s appeal partly allowed : MUMBAI ITAT

2015-TIOL-1459- ITAT-HYD
Manikanta Concerns Warangal Vs DCIT

Whether where the claim of the assessee for shortage at the time of sale was duly supported by the certificate issued by the concerned customer confirming the shortage, the disallowance made by AO on account of such shortage can be sustained - NO: ITAT

Whether where confirmation certificate issued by the concerned contractor is sufficient to show that the payments in cash were made by the assessee in the exceptional circumstances as specified in Rule 6DD, no disallowance u/s 40A(3) is called for such cash payments - YES: ITAT - Assessee' s appeal allowed : HYDERABAD ITAT

2015-TIOL-1458- ITAT-MAD

Shri Naveen Kumar Kochar Vs ACIT

Whether bank account maintained by the assessee' s wife in which all the savings were deposited has to be examined and the availability of funds on the date of payment made has to be examined, before ruling out option that the same savings were used for purchase of the property - YES: ITAT

Whether the fact that the assessee' s wife could claim 50% of the share in the property on the basis of the sale deed, also needs to be examined by the AO - YES: ITAT - Matter remanded : CHENNAI ITAT

2015-TIOL-1457- ITAT-MUM

ITO Vs Ajay Dilkhush Sarupria

Whether the amount received by the assessee could be assessed as deemed dividend u/s. 2(22)(e) where the lending company had deployed substantial part of its available funds in the shape of loans and advances and lending of money constituted substantial part of the business of the lending company. - Revenue' s appeal dismissed; Assessee's cross-objection dismissed : MUMBAI ITAT

Indirect Tax Basket
SERVICE TAX SECTION

2015-TIOL-1947- CESTAT-MUM + Story

Trans Engineers India Pvt Ltd Vs CCE

ST - Revenue cannot invoke the extended period of limitation when the records of the assessee were audited by the officers once but no short payment was noticed from records - Assessee audited in 2006 and again in 2008 for same/overlapping period and demand issued in 2009 invoking extended period of limitation - Entire demand set aside and appeal allowed: CESTAT [para 10, 11, 12] - Appeal allowed : MUMBAI CESTAT

2015-TIOL-1946- CESTAT-MUM
National Insurance Academy Vs CCE

ST - Applicant seeking extension of stay on the ground that their appeal has not come up for disposal for no fault of theirs. Held: In the case of Venketeshwara Filaments Pvt. Ltd. - 2014-TIOL-2388- CESTAT-AHM it is held that consequent upon omission of 1 st , 2 nd and 3 rd proviso to section 35C(2A) of the CEA, 1944 by the FA, 2014 it is to be held that there is no provision for making further application for extension of stay and that the stay order passed by the Tribunal, if it is in force beyond 07.08.2014, it would continue till the disposal of the appeals and there is no need for filing any further applications for extension of orders granting stay either fully or partially - since the stay in the present case was in force beyond 07.08.2014, same would continue till the disposal of the appeal - Application disposed of: CESTAT [para 2, 3] - Application disposed of : MUMBAI CESTAT

2015-TIOL-1945- CESTAT-DEL

M/s Hindustan Petroleum Corporation Ltd Vs CCE

ST - BAS - Agreement between HPCL & IGL for distribution of CNG through HPCL owned/leased retail outlets - Revenue views that HPCL was providing BAS to IGL with regard to the sale of CNG through retail outlet of HPCL - There is no sale of natural gas or CNG to assessee and sale of CNG the retail customers is by IGL itself without an intermediary transfer of property in CNG in favour of assessee - Inasmuch as the activity of HPCL in marketing or sale of CNG belonging to IGL would fall within the ambit of Section 65 (105) (zzb) r/w Section 65 (19) of the FA, 1994 and, therefore, exigible to ST - Pre-deposit of 50% of tax demand and proportionate interest is ordered: CESTAT - Pre deposit ordered : DELHI CESTAT

CENTRAL EXCISE SECTION

2015-TIOL-2145- HC-ALL-CX
CCE Vs M/s Okay Glass Industries

Central Excise - appeals - finding of facts by Tribunal not appealed against - Tribunal' s order attains finality: neither there is any allegation in the memorandum of appeal nor it has been argued on behalf of the appellant that the findings of fact recorded by the Tribunal as afore-quoted, are perverse. The Tribunal being the last fact finding authority, its findings of fact cannot be interfered unless it is alleged and established that the findings are perverse. Thus, no substantial questions of law as framed by the appellant arise for consideration.

Cost imposed by CESTAT on Commissioner for judicial indiscipline upheld: it was not open for the Commissioner of Central Excise, to pass the order ignoring the remand direction and confirming the demand on the same grounds as taken in the first order in original which was set aside by the Tribunal. No error in the observations made by the Tribunal with regard to "judicial discipline"

No substantial Question of Law - Revenue appeal dismissed : ALLAHABAD HIGH COURT

2015-TIOL-2144- HC-MAD-CX + Story
M/s Delphi-Tvs Diesel Systems Ltd Vs CESTAT

Central Excise - Refund of duty under Rule 173L on goods returned to the factory for being remade, reconditioning etc after more than one year from the date of clearance - Appeal against the order of Tribunal rejecting the claim - Held: Irrespective of whether there is a conflict between Section 11B and Rule 173L, there is no dispute on fact that at least within two years, which happens to be the extended period as per proviso (i) of sub-rule (1) of Rule 173L, the appellant has made a claim - As every assessee would like, the appellant is not interested in resolving the conflict between the rules and the statute, but interested only in getting their money back. Therefore, whatever way the department understands, they are liable to refund the money to the appellant. (para 10)

Under the proviso (i) to Rule 173L, the Commissioner is given the discretion to extend the period of one year stipulated therein by a further period not exceeding one more year. In other words, the Commissioner has the power and discretion under proviso (i) to Rule 173L to entertain an application within a total period of two years. This is a case where the Commissioner should have at least exercised the said discretion in favour of the assessee - Respondents are directed to refund the amount. (para 12) - Appeal allowed : MADRAS HIGH COURT

2015-TIOL-1948- CESTAT-MUM + Story

CCE Vs M/s Candico India Ltd

CX - s.4 of CEA, 1944 - Valuation - Respondent selling confectionery items to bottlers of Coca Cola in the range of 35 to 55% of the normal wholesale price - agreement with Coca Cola mandated that they advertise and promote the respondent&# 39;s products - this requirement is to be treated as additional consideration - AV of the goods will be the normal wholesale price - Revenue appeal allowed: CESTAT - Appeal allowed : MUMBAI CESTAT

2015-TIOL-1944- CESTAT-MUM

CCE Vs M/s Uniworth Textiles Ltd

CX- During scrutiny of records it was noticed that the assessee had paid sales commission during the period 09.07.2004 to 31.07.2004 to their foreign agents, who did not have any office in India - on pointing out by Audit about non-payment of service tax under BAS on reverse charge basis, the assessee paid ST of Rs.15,87,659/ - and availed credit thereof during the month of May to December 2007 - Revenue seeking to deny CENVAT credit so availed by invoking rule 9(1)(b) of CCR, 2004 - order set aside by Commisisoner( A) and, therefore, Revenue in appeal. Held: Issue involved in the case is fully covered by the decision of the Tribunal in the case of JSW Steel Ltd. - 2008-TIOL-2351- CESTAT-MAD - As credit was taken by the assessee on the basis of TR-6 challan, Explanation to Rule 9(1)(b) of CCR, 2004 is not applicable in the present case - there is no infirmity in the order of Commissioner( A) and the same is upheld - Revenue appeal is dismissed: CESTAT [para 5] - Appeal dismissed : MUMBAI CESTAT

2015-TIOL-1943- CESTAT-AHM
Ultra Tech Cement Ltd Vs CCE & ST

CX - Assessee availed Cenvat Credit on Nitrogen Cylinders as capital goods under category of storage tank and on Welding Electrodes - Cylinders are used for filling Nitrogen gas which is used in analytical laboratory as well as process plant and these cylinders are used for storage of Nitrogen gas which is utilized for in or in relation to manufacture of finished excisable goods - It is observed that capital goods are defined to mean inter alia, "storage tank used in factory of the manufacturer of the final products" - Nitrogen Cylinder are used for storing Nitrogen gas, therefore serves the purpose of storage tank - Welding Electrodes are eligible for Cenvat Credit either as capital goods, or as inputs under Rule 2(g) of CCR, 2002 - Assessee is eligible for Cenvat Credit: CESTAT - Appeal allowed : AHMEDABAD CESTAT

2015-TIOL-1942- CESTAT-AHM
M/s Synpol Products Ltd Vs CCE & ST

CX - Whether extended period of five years as per proviso to Section 11A of CEA, 1944 is applicable or not - Assessee was clearing certain inputs from their DTA unit to their 100% EOU under CT-3 certificate under Form ARE-3, with due approval of jurisdictional Superintendent of Central Excise - It has already been held that extended period is not invocable because of favourable views expressed by CESTAT cases on issue relied upon by assessee - Demand within period of limitation is not sustainable on revenue neutrality as held by Supreme Court in case of Narmada Chematur Pharmaceuticals Ltd 2004-TIOL-113- SC-CX-LB - Interest and penalty imposed on assessee is set aside: CESTAT - Appeal allowed : AHMEDABAD CESTAT

2015-TIOL-1941- CESTAT-DEL

M/s Fem Care Pharma Ltd Vs CCE

CX - Exemption under Notfn 50/2003-CE - Assessee has filed a declaration on 28/07/2006 declaring goods which they are manufacturing and details of their unit - Also filing regularly the details of their clearances periodically - Revenue disputed that assessee has not filed declaration regarding nature of inputs - Department&# 39;s view for not invoking extended period of limitation is that the non-supply of details of nature of inputs is not fatal - As it is the understanding of Department itself that non-supplying the details of nature of inputs to be used by assessee prior to January 2008 was not a suppression in that case the denial of benefit of exemption notfn shall become fatal to assessee - When allegation of suppression has been dropped against assessee, he is entitled for benefit of exemption of said notfn: CESTAT - Appeal allowed : DELHI CESTAT

2015-TIOL-1940- CESTAT-AHM
M/s Bajaj Healthcare Ltd Vs CCE & ST

CX - Admissibility of CENVAT credit on Angles, channels, joints, HR Sheets, Plates, CRSS sheets in coils, CTD and Round bars loose - Period involved in this appeal is 2007-08 & 2008-09 whereas SCN was issued on 16.07.2011 which is clearly time barred as extended period of five years, cannot be invoked - Appeal allowed on this ground alone that SCN is time barred: CESTAT - Appeal allowed : AHMEDABAD CESTAT

2015-TIOL-1939- CESTAT-AHM
M/s Alembic Ltd Vs CCE & ST

CX - Adjudicating authority sanctioned rebate claims under Rule 18 of CER, 2002 and by exercising powers vested under Section 11 of CEA, 1944, appropriated the amount towards interest outstanding arising out of other demand - In view of decision in assessee' s own case in 2014-TIOL-1282- CESTAT-AHM, assessee is entitled to get refund of interest appropriated by adjudicating authority - Impugned order set aside and appeal allowed: CESTAT - Appeal allowed : AHMEDABAD CESTAT

CUSTOMS SECTION

2015-TIOL-1949- CESTAT-MUM + Story

Schlumberger Asia Services Ltd Vs CC
Cus - Tax cannot be levied by acquiescence or agreement - Appellant not being the importer, as also the goods having been transshipped/ re-exported, the duty liability could not be fastened upon the Appellant: CESTAT by Majority - Appeals allowed : MUMBAI CESTAT

2015-TIOL-1938- CESTAT-AHM

M/s Indian Oil Corporation Ltd Vs CC


Cus - Assessee engaged in import of Motor Spirit and High Speed Diesel - Whether Customs duty under Section 12 of Customs Act, 1962 is to be charged on invoice value or on basis of quantity of goods received in shore tank in cases of import of bulk liquid cargo - As per Hindustan Petroleum Corporation Ltd 2012-TIOL-1017- CESTAT-AHM, even if assessee would have received lesser quantity of goods in shore tanks, invoice value charged and paid by assessee would be correct value unless there is a clear evidence that they have paid less amount or they have paid value/price for quantity received in shore tanks - Contention of assessee that duty levied under Finance Act is not to be added in assessable value for purpose of computing Additional Duty of Customs under Section 3 of CTA, 1975 is not sustainable: CESTAT - Appeal rejected : AHMEDABAD CESTAT

  

  

Cus - Tax cannot be levied by acquiescence or agreement- Appellant not being importer, as also goods having been transshipped/ re-exported, duty liability could not be fastened upon Appellant: CESTAT by Majority

MUMBAI. M/s Schlumberger Asia Services Ltd. is having its registered office in Hong Kong with a project office established in India. The appellant is a service provider to ONGC and was engaged by ONGC for rendering services such as wire line testing, measurements while drilling etc. in their offshore oil well drilling operations, beyond the territorial waters of India. The appellant used to assist ONGC in contracting with overseas vendors for procurement of second hand logging tools and spares required on hire basis for oil well drilling operations. There was no outright sale of such goods either to the appellant or to ONGC and the title of the imported tools and spares remained with the overseas vendor. As per contract, the CIF value of any tools which were lost in the sea during operations was recovered from ONGC and in most cases the said tools and spares were re-exported after being used for the ONGC work.

IN the year 1998, the DRI initiated investigations and asked certain information from the appellant regarding the import of logging tools and spares for ONGC contract. After scrutiny of the documents, it was revealed that in a few instances, there was a difference between the values declared to the Customs in the invoices submitted to the Customs at the time of import vis-à-vis the values stated in the documents available in the appellant' s file.

Thereafter a show-cause notice was issued demanding customs duty on imports made through courier/hand baggage and in three cases by sea along with proposal for recovery of interest and imposition of penalties. The appellant also deposited a sum of Rs. 2 crores during the course of investigation. The show-cause notice was adjudicated and the demand against the appellant along with interest and penalties were confirmed.

In appeal, the Tribunal remanded the matter vide its order dated 17.04.2003.

In remand proceedings, again the demand of duty, interest and penalties on both the appellants have been confirmed by the Commissioner of Customs (Adj.), Mumbai on 29.09.2005.

The appellant is before the CESTAT against this order.

The Member (J) held as below –

+ It is not in dispute the imports in the instant case were effected either by ONGC or by courier or by hand baggage. Therefore, in these circumstances, the appellants cannot be held as importer as the appellants neither filed bill of entry nor they claimed owner of the goods or the goods were imported for the benefit of the appellants. In fact, by all means, the goods were imported for an on behalf of the ONGC by courier agency or by hand baggage. In case the imports were made by courier agency, the courier agency is required to file bill of entry therefore the courier is the importer. In case of hand baggage, the passenger who brought the baggage is the importer. In case of the imports were made through sea, ONGC has to file bill of entry as importer. This position has not been disputed by the Revenue. Therefore, the liability of payment of duty cannot be fastened on the appellants as the appellants are neither the importer of the goods nor the owner of the imported goods as per the agreement between the ONGC and the foreign supplier.

+ the impugned goods were used on board rigs which were rendering services to ONGC beyond the territorial waters of India as these were called as ship stores and consumption on board foreign going vessels. Section 85 of the Customs Act gives exemption from payment of duty for such ship stores. This fact has not been disputed by the adjudicating authority that the rigs have been used beyond the territorial waters of India which qualify as 'foreign going vessel by virtue of the definition of the expression foreign going vessel in Section 2(21) of the Customs Act, 1962. The adjudicating authority has denied the benefit on the ground that the appellants have not claimed the benefit under Section 85 of the Act at the time of import.

+ Since Section 85 of the Customs Act, 1962 does not require any prior permission to be taken, the learned Commissioner ought to have taken note of the undisputed position emerging from the detailed investigation of the case that the goods in question had indeed been used as ship stores and granted post facto permission under Section 85 of the Act.

+ when the factum of export has not been disputed therefore, the benefit of exemption should not be denied for procedural violation as held by the Hon'ble Bombay High Court in the case of Repro India Ltd. vs. UOI – 2007-TIOL-795- HC-MUM-CX. In this case it is not in dispute that immediately after importation of the goods, the goods were re-exported after use by ONGC therefore, the goods are not liable to pay any duty.

+ we hold that as the appellants are neither importers nor they claim to be owner of the goods, therefore, the appellants are not liable to pay duty. Further, as per Section 85 of the Customs Act, 1962 the goods are entitled for exemption of duty.

+ Appellants are not liable to pay duty but as they are not contesting the confirmation of duty against themwe drop the penalty imposed on both the appellants. Appeals are disposed of.

The Member (T) had a differing view –

He held as below -

+ I find that my learned brother has set aside the demand mainly on two grounds. First ground being that the appellants are neither importer nor claimed themselves to the owner of the goods therefore duty liability cannot be confirmed against the appellants. The second ground is that Section 85 of the Customs Act gives exemption from payment of duty for ship stores and in view of this position no duty is chargeable on the goods.

+ At the outset in my view, both the issues are beyond the direction of remand and, therefore, cannot be taken in the second round of litigation. No appeal was filed by either party and hence Tribunal' s order has attained finality. This Tribunal therefore need not go into these questions and should limit to the directions as per remand order. In the first round of litigation including the CESTAT stage, duty and other liabilities and the fact that they are owner of the goods/person chargeable to duty on import were not disputed. Even while passing the impugned order emphasis was on the quantification of the duty amount. Similarly, even in the appeal filed before this Tribunal, the main issue was not about their duty liability.

+ In my view, it is not correct to entertain such plea at this stage more so, when they have accepted the duty and penalty liability due to importation of the goods through courier, through their own employees and through sea/air at the beginning of investigation itself and investigating officer did not note details on these aspects. Remand direction was only relating to quantification of duty and penalty. I also find that in the appeal the re-quantified amount has not been questioned by them and, therefore, appellant seems to be satisfied with the re-quantification.

+ In the present case, even the goods brought as baggage were by appellant' s employees as per appellant' s direction. Goods were collected by them abroad from appellant' s office and were handed over to appellant in India. Such employees have only acted as carrier and smuggled the goods on behalf of the appellant.

+ Ownership of the goods was with the appellant alone. Even the goods were in physical possession of the appellant. All the spare parts received by the courier were in the name of the appellant. Spare parts received through baggage were again sent by the appellant' s office abroad and were delivered to the appellant' s project office in India. The carriers of such goods were the appellant' s employees. Even the goods which had come through sea/air were sent by the appellant' s offices abroad and received by the appellant' s project office in India. Under the circumstances, in my considered view the main appellant is the importer and is also the person chargeable to duty as provided under Section 28 of the Customs Act.

+ The second ground on which my learned brother has taken a view that duty liability cannot be confirmed as the goods were used on board rigs which were rendering services to ONGC beyond the territorial waters of India as these were called as ship stores and consumed on board foreign going vessels. It is also stated that Section 85 of the Custom Act gives exemption from payment of duty for such ship stores.

+ It is nowhere the case of the appellants that the spare parts imported are that of oil rigs so as to claim the same as ship stores.

+ The Section 85 provides that the ship stores can be kept in a warehouse without assessment of duty. In the present case no goods were kept in warehouse. In fact, all the goods were cleared clandestinely through baggage and also misdeclaring the value and description by courier/air/ sea. No catalogue literature were produced at any stage so as to even examine whether the goods can be considered as stores to vessel or aircraft and, therefore, benefit of Section 85 cannot be extended at this stage.

+ Section 85 itself stipulates (i) goods to be ship stores, (ii) goods are entered for warehousing, (iii) makes and subscribes to a declaration that goods are to be supplied as stores thereafter proper officer may permit. In this case none of the three conditions were satisfied at the time of import. On the contrary, parts were smuggled or misdeclared in value/description. There is therefore no question of granting permission after being caught.

+ I find that the said goods were (i) smuggled through employees of appellant and were sent from appellant' s office abroad and finally collected and used by appellant (ii) were imported through courier by misdeclaring the value as also in some cases the description, were again sent from appellant' s office abroad and collected in India and used by the appellant. Ownership as also effective control remained with the appellant. The fact that they were used for providing services to ONGC does not make any difference. Smuggling and misdeclaration were at the instance of appellant. Appellant is therefore liable to penalty under Section 112 of the Customs Act and the penalty has been correctly imposed in the impugned order.

+ A penalty of Rs. 1 lakh is imposed on Shri Sudhir Pai, second appellant. Correspondence recovered clearly establishes his role in the whole episode of misdeclaration/ smuggling.

Both the appeals were dismissed.

In view of the difference in opinion the matter came to be referred to the third Member (Judicial).

This was on 19.08.2014.

Thereafter, the appellant filed a ROM application against this order and which came to be rejected on 23.03.2015. We reported it as 2015-TIOL-1084- CESTAT-MUM .

Recently, the third Member (J), on reference, has passed an order.

And he held thus –

+ the order passed by CESTAT, remanding the matter back to the adjudicating authority cannot be so read so as to limit its scope only to the determination of the effective rate of duty. It is nobody's case that the appellant had before the CESTAT given up on all its other contentions and had confined its case to a dispute only on the quantum of duty demanded and the consequent penalty. In my view unless there is an express conceding of the issue and the legal contentions, which the Tribunal records in its order, it cannot be construed that when the matter has been remanded by finding merit in one of the contentions urged, that, the other contentions stand given up or foregone. It has always been the practice of this Tribunal, that whenever an assessee gives up on any of its contention or makes a concession, the same is specifically recorded in the order. In the instant case neither from the order nor from the records I could find either any written or oral concession on the part of the appellant with respect to any of legal contentions and the issue. It is also significant to note that even the Respondent Commissioner who adjudicated the matter on remand did not construe the scope of the remand as being limited only to determination of the effective rate of duty after applying the applicable exemption notification. The Respondent Commissioner has in his remand order dealt with all contentions urged by the Appellant. The said order has also not been reviewed nor an appeal filed against the same on the ground that the same was beyond the scope of the remand directions. I am, therefore, of the view that the scope of the remand order was not confined to determination only of the effective rate of duty.

+ it is not in dispute that goods were used or consumed in the offshore locations to which the jurisdiction of the Customs Act was not extended. It is only w.e.f. 7.2.2002 that the provisions of the Customs Act, 1962 were extended to the whole of the Continental Shelf and the whole of Exclusive Economic Zone of India. Prior thereto, the jurisdiction of the Customs Act has been extended only to some specific designated areas in the CS & EEZ by Notifications dated 11/1987-Cus dated 14.1.1987 and 64/1997-Cus( NT) dated 1.12.1997. It is not the Revenue' s case that the vessels were operating in the said designated areas. In this view of the matter, the present case can be termed as one of transshipment, where the goods are meant to be taken outside India and in terms of Section 54(2) of the Act, no duty is payable on such goods.

+ in terms of Section 46 the importer of any goods other than goods intended for transit or transshipment is required to file a bill of entry, with the proper officer for home consumption or for warehousing the goods. In the instant case since the goods were not imported for home consumption, i.e. for use within India but were to be transshipped to the Continental Shelf and Exclusive Economic Zone of India to which the Customs jurisdiction did not apply at the relevant time, as such no demand for customs duty can be sustained on such goods which have been brought into India for being transshipped. It also clearly comes out from the record that the goods after being used were brought back to the main land for re-export outside the country. In my view for this movement also, there can be no liability to customs duty as the goods were exported outside the country.

+ the reason assigned by the Respondent for confirming the demand for duty against it i.e., on the premise that it was the owner of the goods is manifestly incorrect and contrary to the accepted position in the notice to the effect that the ownership always vested with the holding/associated companies overseas.

+ prior to the goods being cleared for home consumption the law provides with an option either to the person causing the import, owner of the goods or any other holding himself out to be the owner to come forward and file the Bill of Entry as an importer. One of the three having elected to become the importer, such a person cannot subsequently resile from the consequences which flow from such an election. It appears that insofar as courier imports are concerned it is the courier which held itself out to be the importer and filed a bill of entry seeking clearance of the goods. If there was any mis-declaration of value, the only course of option available to the revenue was to raise a demand, if any, against the courier.

+ There is absolutely no evidence which would even suggest let later alone establish that either the Appellant or the CHA on its behalf, had with the concurrence of the courier, filed a bill of entry seeking clearance of the goods imported through courier.

+ Whether Customs duty could have been demanded from the Appellant in respect of goods brought in as hand baggage by its employees without declaring the same or by mis-declaring the value? - the Appellant are not the owners of the goods and consequently the sole premise on which the demand has been confirmed against them by the Respondent cannot be sustained. Insofar as the finding of the Member (T) which has been reiterated by the Ld AR that the Appellant having undertaking to pay tax the investigating authorities did not investigate to find out who had actually brought in the goods, cannot by any stretch of imagination countenanced. It is settled law that tax cannot be levied by acquiescence or agreement. It was for the investigating authorities to have raised the demand against the person from whom it was legally due. They could have however legally sought appropriation of the amount deposited as duty by the appellant based on their authorization. However, having failed to raise the demand against the person from whom it is due revenue authorities cannot fasten the same on the person who in the course of investigation deposited the said amount.

Whether in case of imports made by sea could duty have been demanded from the Appellant? - the onus was on the revenue to establish as to who had actually filed the Bill of entry and had taken upon it the mantle of an importer. The Revenue having failed to discharge this burden, it was not open for the Revenue to draw an adverse inference against the Appellant and call upon it to prove the negative. Appellant has right from the stage of investigation itself clearly stated in no uncertain terms that ONGC was the importer, which fact has not been rebutted by the investigating authority.

Whether in the facts and circumstances no duty was chargeable from the Appellant? - Appellant not being the importer, as also the goods having been transshipped/ re-exported, the duty liability could not be fastened upon the Appellant. Appellant having time and again, before different authorities, accepting that it did not wish to claim refund of the duty paid and that it was contesting the matter only in view of the penalty imposed on it. Given the undertaking made by the Appellant they would not be eligible for refund of the duty deposited by the Appellant even though the same was not recoverable from them, confirmation of duty is erroneous.

The penalties were also held to be not imposable.

In view of the majority decision, the appeals were allowed.


  

  


The Bombay High Court in the recent case of Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd., has considered the issue as to whether two Indian parties choosing a foreign seat of arbitration and a foreign law governing the arbitration agreement may be construed to be contracting out of Indian law.
The parties had entered into an agreement whereby disputes between them were to be referred to arbitration and the arbitration clause included the following language: "Arbitration in India or Singapore and English law to be apply."
When dispute arose between the parties, Addhar filed an application under Section 11(6) of the Arbitration and Conciliation Act,1996 (the Arbitration Act) for appointment of an arbitrator as well as a petition under Section 9 of the Arbitration Act seeking interim reliefs. Shree Jagadamba opposed both the applications. Application under Section 11(6) of the Arbitration Act was opposed on the ground that the parties are governed by English Law and the seat of arbitration shall be at Singapore.
The Bombay High Court held that the intention of both parties was clear that the arbitration shall be either in India or in Singapore. It relied on the decision of the apex court in TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd., where it was held that the intention of the legislature is clear that Indian parties should not be permitted to wriggle out of Indian law and this is a matter of Indian public policy. Hence, the Bombay High Court held that the arbitration has to be conducted in India and the arbitral tribunal will have to decide the disputes in accordance with the substantive law for the time being in force in India and since both the parties are Indian, they cannot derogate the Indian law.


In our view, it is advisable that in an arbitration between two Indian parties, the seat of arbitration should be in India and the substantive law should be Indian law. Should Indian parties decide to choose a foreign seat of arbitration, issues may arise during the arbitration proceedings, which may pose practical challenges to the parties involved in the arbitration. We would welcome the final word on this issue from the apex court.
  

Wed Sep 16, 2015 2:01 am (PDT) . Posted by:

ca.bhupendrashah

SSI EXEMPTION – MULTIPLE UNITS OF SAME MANUFACTURER

Notification 1/93-CE, dated 28.02.1993 was published for exemption to first clearance of specified goods. This notification has been issued in order to encourage small scale industries. According to this notification exemption is provided to first clearance of specified goods up to the value of ₹ 30 lakhs and concessional duty thereafter in case of SSI units having a total clearances not exceeding ₹ 2 crores in the preceding year. The said notification granted exemption on excisable goods which had an aggregate value up to a certain limit with other riders attached it as well. This notification was amended on 01.03.1994 by Notification No. 59/94-CE, dated 01.03.1994. According to this notification a manufacturer shall have an option for not availing of the benefits of the exemption contained in said paragraph and to pay duty of excise at the rate applicable to the specified goods but for the exemption contained in the said para 1, subject to the condition that such manufacturer shall pay duty at the rate applicable but for the above said exemption on all subsequent clearances of specified goods made after availing such option, in a financial year in which such date of option falls.


The issue to be discussed in this article whether SSI exemption is available to the multiple units of same manufacturer with reference to decided case law.


In 'Commissioner of Customs & Central Excise, Meerut – I V. Janardan Plywood Industries Limited' – 2015 (9) TMI 690 - UTTARAKHAND HIGH COURT a demand of excise duty of ₹ 6.25 lakhs under rule 9(2) of Central Excise Rules, 1944 was confirmed by the Adjudicating Authority on 28.03.2004. This order was set aside by the Commissioner (Appeals) and later upheld by the Tribunal.


In the meantime the High Court passed an amalgamation order amalgamating M/s Dinex Plywood Private Limited, Sitapur and Janardan Plywood Industries Limited, Dehradun and continue the manufacturing activities. The respondent primarily manufactures articles of wood. A declaration was filed by the respondent on 01.04.1996 opting to pay full rate of excise duty for the unit in Sitapur and opted to avail exemption benefit under Notification 1/93-CE, dated 28.02.1993 for the unit at Dehradun.


The Revenue issued a show cause notice to the respondent for recovery of excise duty. The ground of demand is that the respondent had opted to pya full rate of excise duty in relation the Unit I, so it cannot avail the benefits under Notification No.3/92-Ce. Therefore the Revenue demanded the duty of ₹ 6.25 as adjudicated and set aside by Commissioner (Appeals) and the Tribunal.


The contentions of the Revenue before the High Court are as follows:


The respondent did not exercise the exemption benefit under Notification 1/93-CE, dated 28.02.1993 but exercised its option for exemption as regard unit at Dehradun in terms of the provision in the amended notification;
It is the manufacturer who has chosen to keep out of the exemption, therefore both the units would be kept out of the exemption;
It is not permissible that a manufacturer exercises his exemption for one unit and chooses to keep out of it as regards another unit;
The plain language of the amendment which talks about a 'manufacturer' exercising an option and not a unit or a factory exercising this option;
While forgoing exemption in respect of unit at Sitapur the manufacturer was under a statutory obligation to pay duty at normal rate for the unit at Dehradun as it cannot claim exemption for unit at Dehradun as its other unit has kept itself out of the exemption.
The respondent assessee contended the following:


The fiscal laws though to be strictly interpreted, yet where two meanings are possible, the meaning which is beneficial for the assessee has to be adopted;
There is nothing in the Notification as amended, which debars one unit of a company to exercise option and another to keep out of it;
These exemptions are for the benefit of small scale industries and, therefore, an interpretation should not come which should be detrimental to the small scale industries;
The High Court analyzed the notification. The High Court found that the purpose of the notification is obviously for the benefit of small scale industries. The limits to those exemptions, the checks and balances in the notification are for the purposes that only the deserving small scale industries get the benefit out of the notification. It is for the reason that if an aggregate value of the total clearance of a manufacturer exceeds ₹ 2 crore in the preceding financial year, it cannot claim exemption under the notification. Para 2 of the said notification speaks of 'the aggregate value of clearances of the specified goods for home consumption in a financial year' which are 'by a manufacturer from one or more factories' and should not exceed a particular amount.


In the notification two crucial words 'manufacturer' and 'aggregate value' are there. In the present case both the units is one legal entity and has to be into account for the purposes of exemption is the 'aggregate value' which would be the combined aggregate value of unit at Sitapur and unit at Dehradun. This is the possible interpretation. The High Court held that once the respondent had exercised to keep out of the exemption for its Sitapur unit it cannot claim benefit of the notification for its Dehradun unit. Therefore the demand of the Revenue is justified.


The High Court accepted the legal proposition that fiscal laws have to be strictly interpreted. The High Court relied on the judgment of the Supreme Court in 'Union of India and others V. Wood Papers Limited and another' – 1990 (4) TMI 55 - SUPREME COURT OF INDIA which held that liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting. In fact an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provision intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly.


The High Court allowed the appeal filed by the Revenue and set aside of the Tribunal. The manufacturer could not have availed the benefit of exemption since it had opted to full rate of duty in a financial year in relation to its other unit.




By: Mr. M. GOVINDARAJAN

  



ACCESS TO PREMISES OF SERVICE TAX ASSESSEES

Central excise officers are empowered to pay visits to the premises of the assessees. Such visits shall be subject to the following rules:


All visit to the premises of service tax assessees will be made by central excise officers only after giving a notice in writing explaining therein the purpose of such visit.
The officers will clearly indicate the documents which may be required by them during their visits.
No such visits will be made without giving a clear notice of 15 days to the assessee.
uch visits will be made only with the prior approval of the commissioner.
The above guidelines would not apply to cases where the department has in its possession or has received any specific information/ intelligence regarding evasion of service tax or contravention of law by an assessee. In such cases, the process of law will be followed and action will be taken accordingly.


Rule 5A of Service Tax Rules, 1994 provides that Commissioner or audit team of Comptroller and Auditor General of India can also visit the assessee for audit purposes.


To curb unrestricted access to the premises of the tax payers by officers, instructions have been issued by CBEC whereby inspectors and above officers will be allowed access to taxpayers premises only after duly authorized written permission.


Amendment w.e.f. 5.12.2014


Vide Notification No. 23/2014-ST dated 5.12.2014, sub-rule (2) of Rule 5A has been substituted as under –


"(2) Every assessee, shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, or a cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994,-


(i) the records maintained or prepared by him in terms of sub-rule (2) of rule 5;


(ii) the cost audit reports, if any, under section 148 of the, and


(iii) the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961,


for the scrutiny of the officer or the audit party, or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the cost accountant or chartered accountant, as the case may be."


This substituted rule shall enable and empower the officers or person specified in sub-rule (1) or sub-rule (2) to demand records, in terms of rule 5, cost audit report and tax audit report for the purpose of their scrutiny. This rule enabling audit and verification of records of assessee has been notified by the Central Government under the powers contained in section 94 of the Finance Act, 1994.


Finance Act, 2014 had inserted the following clause (k) in section 94(2) –


"(k) imposition, on persons liable to pay service tax, for the proper levy and collection of tax, of duty of furnishing information, keeping records and the manner in which such records shall be verified."


Accordingly, Notification No. 23/2014-ST dated 5.12.2014 has been issued. This rule, inter alia, provides for scrutiny of records by the audit party deputed by the Commissioner. Such scrutiny essentially constitutes audit by the audit party consisting of departmental officers. Verification of records mandated by the statute is necessary to check the correctness of assessment and payment of tax by the assessee in the present era of self-assessment. It may be noted that the expression "verified" used in section 94(2)(k) of the said Act is of wide import and would include within its scope, audit by the departmental officers, as the procedure prescribed for audit is essentially a procedure for verification mandated in the statute.


The analysis of new Rule 5A (2) would reveal as under –


(1) Rule 5A(2) binds all assessees to provide records/reports as specified.


(2) Assessee is obliged to provide or make available such records/reports only on demand.


(3) Who can demand – Following officers or persons can demand –


(a) Officers empowered under sub-rule (1) i.e., an officer authorised by the Commissioner in this behalf


(b) Audit party deputed by Commissioner


(c) Comptroller and Auditor General of India


(d) Cost accountant or chartered accountant nominated by Commissioner u/s 72A of Finance Act, 1994.


(4) Such demand shall ordinarily have to be a written demand


(5) What can be demanded – Following records or reports can be demanded from the assessee:-


(a) Records as maintained or prepared and declared to the department by the assessee in terms of rule 5(2)


(b) Cost audit report, if any, u/s 148 of the Companies Act, 2013


(c) Income Tax audit report, if any u/s 44AB of the Income Tax Act, 1961


(6) Records as per Rule 5(2) shall include the following –


(i) all the records prepared or maintained by the assessee for accounting of transactions in regard to,-


(a) providing of any service;


(b) receipt or procurement of input services and payment for such input services;


(c) receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and capital goods;


(d) other activities, such as manufacture and sale of goods, if any.


(ii) all other financial records maintained by him in the normal course of business.


(7) Such records shall have to be made available within the time specified while making such demand.


(8) The purpose of such demand shall be for the scrutiny by such officer or person, of such records/reports.


It may be noted that if the assessee finds that the time available is not enough to comply, he can seek extension by way of a written request citing reasons for the same. Non-compliance may attract penalty under section 77 of the Finance Act, 1994.

 
By: Dr. Sanjiv Agarwal  

  

ST - Revenue cannot invoke extended period of limitation when records of assessee were audited by officers once but no short payment was noticed: CESTAT

MUMBAI. THE appellants are engaged in providing 'Installation and Commissioning of Plant and Equipment' services to various clients and obtained registration in February 2005. During the course of audit it was observed that during the period from November 2004 to February 2005,appellant had charged service tax on invoices raised only to those clients who agreed to pay service tax.

A SCN dated 08.06.2009 was, therefore, issued to the appellants seeking recovery of ST of Rs.46,62,677/ - on the taxable services provided by them during the period 01.07.2003 to September 2005 and imposition of penalties and interest.

The Adjudicating authority dropped the demand for the period 1.7.2003 to 31.3.2004 on ground of limitation and confirmed the rest with interest and penalty.

The appellant was not successful before the Commissioner( A) and is, therefore, before the CESTAT.

It is submitted that the entire demand is hit by limitation inasmuch as the records of the appellant were audited by the audit section in 2006 and no objections were raised and it was pursuant to the subsequent audit which took place in 2008 for the period in question that the demand was raised by invoking extended period of limitation. Reliance is placed on the decision in MTR Foods Ltd. - 2011-TIOL-696- HC-KAR-CX.

The AR supported the order of the lower authoirty.

The Bench observed -

++ It is noticed by us that the records of appellants were audited by the audit party of the Revenue in 2006 and vide audit report no 288/2006-07, for a period on 01/04/2003 to 31/12/2006, the authorities raised various queries but not in respect of the short payment of service tax as is alleged in the show cause notice in question in this appeal. We find that the audit party of the revenue in the 2 nd audit conducted by them in 2008, vide audit report no 46/2008-09 came to conclusion that there was short payment of duty with intention to evade Service Tax. The show cause notice in the case on hand was issued based upon the 2 nd audit report.

++ In our view the entire demand is to be set aside on the ground on limitation only. Revenue authority cannot invoke the extended period of limitation when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has misstated or suppressed the facts from the department.

Noting that in view of the authoritative judicial pronouncements in Rajkumar Forge Ltd. - 2010-TIOL-622- HC-MUM-CX and MTR Foods Ltd. - 2011-TIOL-696- HC-KAR-CX extended period cannot be invoked for demanding service tax from the appellant, the entire demand was set aside.

The appeal was allowed.
Cenvat Credit : Electricity generation is integral part of process o

  

Cenvat Credit : Electricity generation is integral part of process of manufacture; hence, inputs/pet-coke sent to sister unit for generation of electricity would be eligible for input credit, if resultant electricity is used for manufacture of final product


[2015] 61 taxmann.com 62 (New Delhi - CESTAT)
CESTAT, NEW DELHI BENCH
Commissioner of Central Excise and Service Tax, Jaipur-II
v.
J.K. Cement Works


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Posted by: Dipak Shah <djshah1944@yahoo.com>


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