Summary of Recent Direct & Indirect Tax case Laws

Direct Tax

High Court decisions

High Court upholds genuineness of gift of shares

The taxpayer, a company incorporated in India was held by three shareholders. 

Two of the shareholders gifted 25,000 shares of Infosys Technologies Limited to the taxpayer vide a gift deed dated February 23, 2000, out of which 5000 shares were sold by the company on March 7, 2000, realizing a sum of INR 64,179,500. 

The taxpayer paid tax on proceeds received on sale of the 5,000 shares as capital gain adopting the cost basis as
applicable to original owner in accordance with section 49(1)(ii) of the Income tax Act, 1961 (“Act”).  The case was selected for scrutiny where the tax officer doubted the transaction of gift stating that the principal element of a gift, ie love and affection was imaginary since the donee was an artificial, juridical person.  The tax officer also held that the taxpayer had as one of its ‘main objects’ dealing with shares, stock, etc and hence the gain on sale of shares was assessable to tax as business income.  The appellate authorities set aside the order of the tax officer and provided relief to the taxpayer.

Aggrieved by the order of the appellate authorities, the Revenue filed an appeal before the Karnataka High Court.  The High Court after considering arguments of both the sides dismissed the appeal filed by the Revenue upholding the genuineness of the gift on the basis that there is no bar for gifting of shares to a company.  The High Court held that the definition of gift means transfer by one person to another of an existing property made voluntarily and without consideration and includes deemed transfer or conversion of any property.  Since the taxpayer was a separate legal entity, shareholders of the company can gift shares to the company.  Regarding characterization of income, the High Court held that the transaction of a solitary sale of shares cannot be held as a ‘trade or business’ in shares for the year under consideration following principles upheld by the Supreme Court in various cases.

CIT v M/s Nadatur Holdings and Investment Pvt Ltd (ITA No 1400/2006)(Karnataka High Court)

Application before authority for advance ruling (“AAR”) is inadmissible once return of income is filed

For financial year 2008-09, the taxpayer filed its income tax return on March 31, 2010.  Thereafter an application was made to the AAR on June 17, 2012 seeking a ruling on transactions entered into on April 26, 2008 and November 26, 2008 respectively.  However, the AAR did not admit the application on the basis that the case of the taxpayer was barred since the matter is already pending before the Income tax authority (proviso 1 to section 245R (2)) and hence AAR did not have the jurisdiction to entertain the application.

The taxpayer filed a writ petition before the Delhi High Court and the High Court after considering the arguments of the taxpayer and rulings of the AAR rejected the petition filed by the taxpayer.  The High Court relying on precedents observed that ‘pending’ has already been interpreted by Courts to include the time starting immediately upon commencement of a proceeding up until its conclusion. The High Court also observed that the proviso creates a jurisdictional bar on the AAR to rule on an issue in case the taxpayer proceeds to file a return instead of seeking clarification from the AAR.  In such a case, the statutory powers vested in the tax authorities to examine and rule cannot be taken away.

Netapp BV vs AAR and Ors (W P (C) 3959/2012)(Delhi High Court)

Tax officer cannot deny deduction under section 10A in later years if claim in the first year is accepted

The taxpayer was engaged in the business of software development for in flight entertainment of aircrafts and exported its software to a client in the US.  The taxpayer had two divisions - one in Mumbai which commenced operations in the year 1997-98 (Mumbai unit) and the other at Santacruz Export Processing Zone (“SEPZ unit”) which commenced operations in the year 2000-01.  The tax officer allowed section 10A deduction to the SEPZ unit for financial years 1999-2000 to 2001-02.  However, for financial years 2002-03 and 2003-04, the deduction was not allowed to the SEPZ on the basis that it was formed by splitting up of the Mumbai unit.  Basis this disallowance, the tax officer also reopened the audit for financial year 2001-02 and disallowed the claim granted for that year.  The CIT(A) set aside the order of the tax officer. 

The Income tax Appellate Tribunal (“Tribunal”) also dismissed the appeal filed by the Revenue on the finding that for financial years 1999- 2000 and 2000-01, the claim of SEPZ unit was allowed after completion of audit proceedings under section 143(3) by the tax officer.   On merits, the Tribunal held that the two units were functioning independently and nothing was brought on record to suggest that any plant or machinery was transferred from the Mumbai unit to the SEPZ unit, separate books of accounts were being maintained by the units and solely because the units manufactured the same product, it cannot lead to the conclusion that the two units were not separate.  The High Court after considering the submissions filed dismissed the appeal of the Revenue holding that section 10A deduction is available for a given number of years on satisfaction of prescribed conditions and unless relief for the first year is withdrawn or set aside, the tax officer cannot withdraw relief for subsequent years specifically if the Revenue has not suggested that there is any change in facts warranting a different view for subsequent years.

CIT v Western Outdoor Interactive Private Ltd (ITA No 1150 of 2010 with ITA No 1200 of 2010 with ITA No 1269 of 2010) (Bombay High Court)

No obligation to withhold taxes under section 195 if the technical services do not satisfy the make available test under the DTAA

The taxpayer, an Indian company was engaged in the business of manufacture of satellites and for the purposes of launching the satellites, it entered into a service agreement with Arianespace, a French company and Intelsat, a US company.  Under the agreement with Arianespace referred to as Launch Service Agreement (“LSA”), the services rendered by it involved assistance in launching of the satellites.  In addition, Arianespace was also required to provide other support services such as transportation, payload, etc to the taxpayer.  All the activities agreed in the LSA were highly sophisticated and involved complex technologies.  The agreement with the US Company was for provision of services rendered for the purpose of tracking, telemetry and command support for the satellites launched by the taxpayer. 

The tax officer during the audit proceedings treated the payments made by the taxpayer to both Arianespace and Intelsat, as Fee for Technical services (“FTS”) under section 9(1)(vii) of the Act and held that the taxpayer was liable for tax withholding under section 195 of the Act.  On Appeal, the CIT(A), upheld the order passed by the tax officer.  On further appeal, the Tribunal ruled in favour of the taxpayer and held that the services rendered by the foreign companies are not in the nature of technical services, and therefore the provisions of section 195 would not apply.  The Karnataka High Court on appeal rejected Revenue’s plea and ruled in favour of taxpayer.  The High Court by relying on the protocol to the Double Taxation Avoidance Agreement (“DTAA”) entered between India and France applied the narrower definition of Fee for Included Services (“FIS”) and held that for fee for such services to be taxed in India, it must satisfy the ‘make available’ test.  It held that in the present case although the services rendered by the foreign companies were technical in nature such services did not satisfy the make available test.  Accordingly, it held that the income arising on account of rendering technical services would not be taxable in India and hence, there was no obligation on the taxpayer for tax withholding under section 195 of the Act.

CIT vs ISRO Satellite Centre (ITA Nos: 532, 152 and 422 of 2008, 2009 and 2010) (Karnataka High Court)   

Retrospective amendments cannot be a reason to re-open assessment beyond the period of 4 years 

The taxpayer, a public limited company filed its return of income for the relevant financial year after claiming deduction under section 80HHC of the Act on the income earned by way of Duty Entitlement Pass Book Licenses (“DEPB licenses”).  During the audit proceedings, the tax officer denied deduction under section 80HHC of the Act to the taxpayer.  On appeal, the CIT(A) granted partial relief to the taxpayer.  While the Revenue’s appeal before the Tribunal was pending adjudication, the tax officer initiated the re-assessment proceedings in the case of the taxpayer by issuing a notice after the expiry of five years from the end of the relevant financial year.  As per the reasons recorded by the tax officer, the sole basis of reopening was a subsequent amendment in the provisions of the section 80HHC of Act with retrospective effect.  According to the tax officer, since the taxpayer had failed to fulfill the conditions laid down by the amended provisions of section 80HHC, there was clearly a failure on the part of the taxpayer to disclose fully and truly all material facts and thus re-assessment proceedings were valid and legal.  The taxpayer preferred a writ before the Gujarat High Court challenging the initiation of re-assessment proceedings under section 148 of the Act.  The High Court observed that the re-assessment proceedings would be valid after a period of four years only in cases of failure on part of the taxpayer to disclose fully and truly all material facts.  In the present case, the High Court observed that this condition is not satisfied and also no assertion or finding to this effect has been made by the tax officer at any stage.  Further, it observed that when the taxpayer filed its return of income, the amended provisions of sections 80HHC of the Act were not brought into the statue book and held that the non compliance with such provisions could not be treated as failure to disclose all material facts.  Accordingly, in the absence of satisfaction of the basic condition for re-opening assessments, the High Court held the very basis for reopening to be fallacious and thus, quashed the re-assessment proceedings initiated by the tax officer.

Dishman Pharmaceuticals & Chemicals Limited vs DCIT (ITA No 29122 of 2007) (Gujarat High Court)

Loan appraisal fee is not in the nature of interest or fee for technical services under the India-UK DTAA; it is business income and not taxable in India in the absence of a permanent establishment

The taxpayer, a UK company was engaged in the business of advancing loans to Indian companies.  Before granting the loan, it examined the credit worthiness of the applicant / borrower and the financial efficacy of advancing the credit facilities.  For this appraisal, an upfront appraisal fee was charged from the applicant.  The fee was charged regardless of whether the loan / credit facility was sanctioned to the applicant or not.  While passing the assessment order, the tax officer added the upfront appraisal fee amounting to Rs 7,714,828 to the income of the taxpayer under the head ‘income from other sources’.  The tax officer held the appraisal fee to be either in the nature of interest under Article 12(5) or FTS under Article 13(4)(c) of the India – UK DTAA.  On appeal, the CIT(A) deleted the addition by holding the appraisal fee to be in the nature of business income and in absence of a permanent establishment (“PE”) in India of the taxpayer, held that such income could not be brought to tax in India.  The CIT(A)’s order was affirmed by the Tribunal.  On appeal by the Revenue before the Delhi High Court, the Court by placing reliance on its earlier decision of Credit Suisse First Boston (Cyprus) Ltd rendered in the context of the India-Cyprus DTAA held that the appraisal fees was not in the nature of interest as it was not charged in connection with ‘any money borrowed or debt incurred’ rather it was the debt itself.  With regard to taxability as FTS, the High Court observed that the fee did not constitute payment for rendering any technical or consulting services to the applicant, but involved an appraisal by the taxpayer of the various aspects of the applicant before advancing the credit facilities to it.  Further, it did not ‘make available’ any technical services to the applicant as provided for under Article 13 of the India-UK DTAA.  In conclusion, the High Court dismissed the appeal by the Revenue and held the appraisal fee to be in nature of business income which could not be charged to tax under Article 7 of the India-UK DTAA in the absence of a PE in India. 

DIT v M/s Commonwealth Development (ITA No 1058 of 2011) (Delhi High Court)

Transaction for sale of pledged shares with an object to offset gains is not colourable

The taxpayer, a company incorporated in India, sold shares of an Indian company from which it derived capital gains.  For offsetting such gains, the taxpayer sold shares of another company, which were pledged with IDBI Bank, to a group company at a loss.  Since these shares were pledged with IDBI Bank, post transfer the share certificates continued to be with the Bank.  During the audit proceedings, the tax officer denied the capital loss to the taxpayer by treating the transaction of sale of shares to its group company at a loss as a colourable device for tax avoidance.  The tax officer was of the view that since the share certificates were lying with IDBI Bank who had lien over such shares, the shares could not have been validly transferred and thus, the loss was not allowable in absence of transfer of shares.  The CIT(A) on appeal concurred with the view of the tax officer.  On further appeal, the Tribunal held that the taxpayer had the right to transfer the shares as the legal title vested with it and a mere physical possession of the shares with IDBI would not automatically deprive the taxpayer of his rights to deal with such shares.  On further appeal by the Revenue, the Gujarat High Court rejected Revenue contention’s of treating the transaction as a “colourable device” and a “paper arrangement”.  It observed that although the shares were pledged with IDBI and the taxpayer did not have physical possession of the share certificates, the taxpayer transferred the entire gamut of rights it had in the shares to the purchaser company.  Further, it observed that there was a transfer of shares as per section 2(47) of the Act and such transfer was at a fair value.  On this basis, it held that the taxpayer would be entitled to set off the capital gains arising on sale of shares with the capital loss and accordingly upheld the Tribunal’s order.

ACIT vs Biraj Investment Pvt Ltd (ITA No: 260 of 2000) (Gujarat High Court)

  

Slot hire charges integral to shipping operations eligible for relief under the India-UK DTAA

The taxpayer is incorporated in the United Kingdom and is engaged inter-alia in the international transportation of goods by sea.  The taxpayer owned over 5000 containers and leased approximately 2700 of such containers.  It transported goods from India to the final destination ports by either availing slot hire facilities or by delivering the goods to international ports from where they were further shipped to the final destination.  The issue for consideration before the Bombay High Court was whether the freight earned from the portion of voyage utilizing slot hire facilities (under slot hire agreements) falls within the ambit of Article 9 of the India-UK DTAA and hence, eligible for exemption.

The High Court after considering the facts of the case held that if an enterprise operating ships in international traffic does not avail slot hire facilities, it would lose much of its business and even if the commercial expediency test was not relevant, the slot hires factually had a close nexus, connection and relation to operation of ships and hence, it would fall within the term ‘operation of ships’ under Article 9 of the India-UK DTAA.  The High Court observed that the term ‘operation of ships’ is not defined in the India-UK DTAA.  It has been interpreted in the context of section 44B of the Act.  Accordingly, the term ‘operation of ship’ should be interpreted for the purposes of Article 9 of the India-UK DTAA in a similar way as interpreted under section 44B of the Act.  Since the case of the Revenue was to tax income from slot hire agreements under section 44B (as income from ‘operation of ships’), application of Article 9 of the India-UK DTAA to such income cannot be denied by the Revenue. 

DIT v Balaji Shipping UK Limited (ITA No. 3024/ 2009 with ITA No. 3215/2009) (Bombay High Court)

Expenditure incurred for sub-division of shares is revenue in nature

The taxpayer incurred an expenditure of INR 412,595 for the purposes of sub-division of its shares and claimed the expense as revenue.  The tax officer disallowed this expenditure and the Tribunal upheld the disallowance of the taxpayer on the basis that the expenditure was connected with the capital structure of the company and the sub division would benefit the shareholders of the company by enabling ease in trading.  Accordingly, the taxpayer obtained a benefit of an enduring nature and hence, the expense was capital in nature and not deductible. 

Upon appeal by the taxpayer, the High Court held that the sub-division of the shares did not in any manner result in increase of the share capital of the company and the only benefit that was derived out of the sub-division was easy trading of shares in the market.  While it did benefit the shareholder, the High Court did not agree with the contention of the Revenue that it resulted into any enduring benefit for the company.

G S F C Ltd v DCIT (Tax Appeal No. 202/ 2000) (Gujarat High Court)

Tribunal

Telecasting payments not taxable under section 9 despite retrospective amendments, section 40(a)(i) disallowance not warranted on account of amendments that have retrospective effect, payer to consider legal position prevalent at the time of making the payment

The taxpayer is engaged in the business of financing, leasing, hire purchase, production and distribution of internet media and manufacturing of towers.  The taxpayer entered into an agreement with M/s Shan Satellite Public Co Ltd (“SSPL”), a company incorporated in Thailand, in order to avail the facility of satellite up-linking and telecasting programmes.  During the year under consideration, the taxpayer paid an amount to SSPL, which was disallowed by the tax officer on the basis that no taxes were deducted at source. 

The order of the tax officer was upheld by the CIT(A).  However, the Tribunal placing reliance on the Delhi High Court judgment in the case of Asia-Satellite held that the use or right to use any industrial, commercial or scientific equipment as envisaged in clause (iva) of Explanation 2 to section 9(1)(vi) contemplates full control and possession of the user over the equipment.  Accordingly, since in the given case, the payment to SSPL was not made by the tax payer for the right to use due to the absence of control and possession of the equipment, the amount cannot be held to be in the nature of royalty and hence no tax was deductible and hence disallowance under section 40(a)(ia) of the Act cannot be made. 

The Tribunal also observed that the retrospective amendments made to section 9 of the Act vide Finance Act 2012 could not be a basis to disallow the deduction of expense since the taxpayer cannot be held liable to deduct tax at source relying on the subsequent amendments made to the Act with retrospective effect. 

ACIT v Channel Guide India Ltd (ITA No 1221/Mum/2006) (Mumbai Tribunal)

Special Bench upholds set off of pre-2002 long term capital loss against short term capital gain

For financial year 2002-03, the taxpayer earned short term capital gains of INR 22,191,307 and offered it to tax after setting off long term capital loss of INR 4,291,526 relating to financial year 2000-01.  The set off was disallowed by the tax officer in view of the amendment to section 74(1) (wef April 1, 2003) which provided that long term capital loss can only be set off against long term capital gain and not against short term capital gain.  The CIT(A) upheld the order of the tax officer.

Upon appeal, the Tribunal noted that contrary views of the co-ordinate Bench of the Tribunal were available on this issue and hence the matter was referred to the Special Bench.  The Special Bench, after considering the submissions upheld the contention of the taxpayer that the ‘present tense’ used to make the amendment in section 74(1) means that the amendment would apply to long term capital loss of the current year and following years.  The Special Bench also held that the manner in which the amendment was made clearly reflected the intention of the legislature to apply the amendment to the long term capital loss prospectively and if the intention was otherwise, nothing prevented the legislature from employing appropriate language. 

The Special Bench also observed, after considering ratios of the judgments referred to by the counsels, the right accrued to the taxpayer under section 74 prior to the amendment cannot be taken away either expressly by amending provisions of the section or even by implication.  The Bench held that as per the well settled rule of interpretation of statute, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or to impose a new liability otherwise than as regards matter of procedure. 

Kotak Mahindra Capital Co Ltd v ACIT (ITA No 521/Mum/2007) (Mumbai Special Bench)

Interest paid on OCDs allowed as a deduction up to the date of conversion

The taxpayer issued 6 percent optionally convertible debentures (“OCDs”) for a consideration of INR 10 crores and recognized an expense of INR 13,60,459 as interest on OCDs for the financial year 2007-08.  The tax officer disallowed the interest expense and held it to be a contingent liability, which is contingent upon the conversion of OCDs into equity.  The CIT(A) set aside the order of the tax officer.

The appeal filed by the Revenue was dismissed by the Tribunal and it was upheld that there was no contingency involved in the accrual of liability with reference to interest on debentures.  The Tribunal also agreed with CIT(A) that the only uncertainty in OCDs is whether the debenture holder will go for conversion into shares or not and such uncertainty did not in any way impact the taxpayer’s liability to pay interest till the date of conversion. 

DCIT v M/s UAG Builders Pvt Limited (ITA No 2831/Del/2012) (Delhi Tribunal)

Gain from sale of shares of a Sri Lankan company not liable to tax in India under India-Sri Lanka DTAA

The taxpayer, an Indian company, held shares in a Sri Lankan company and did not offer to tax in India the capital gain arising on sale of such shares in accordance Article 13 of the India-Sri Lanka DTAA.  The tax officer dismissed the claim of the tax officer holding that under section 5 of the Act, resident company would be liable to tax on worldwide income and the use of term ‘may be taxed’ in Article 13 grants both the countries the right to tax capital gain.  Accordingly, the tax officer held that the taxpayer was not correct in applying the exclusion method but would need to claim credit of foreign taxes paid.  However, the CIT(A)  set aside the order of the tax officer stating that the resident state does not have the right to tax gains arising from sale of shares of a company incorporated in Sri Lanka as per para 4 of Article 13.

The Tribunal dismissed the appeal of the Revenue upholding that the use of term ‘may be taxed’ means an automatic exclusion of income from tax in the other State. 

Apollo Hospital Enterprises Ltd v DCIT (2012) (23 Taxmann 63) (Chennai Tribunal)

Provisions of section 40(a)(ia) applicable only in case of non-deduction of tax and not for short deduction of tax

The taxpayer, an Indian company was engaged in the business of solvent purification and distillation.  During the relevant financial years, it incurred certain expenditure namely ‘testing charges’ towards technical analysis of its samples.  The payment was made to another Indian company after withholding tax at the rate of 2 percent under the provisions of section 194C of the Act.  During the audit  proceedings, the tax officer held that these payments were in the nature of FTS and therefore tax should have been withheld at the rate of 10 percent (instead of 2 percent) applied by the taxpayer.  On this basis, the tax officer disallowed proportionate amount of expenditure corresponding to short deduction of the tax by invoking the provisions of section 40(a)(ia) of the Act.  On appeal, the CIT(A) by observing that there is no provision under the Act to make short deduction of tax  and the taxpayer has not withheld tax at correct rate of 10 percent held that the provisions of section 40(a)(ia) are applicable.  Accordingly, upheld the order passed by tax officer.  On further appeal, the Tribunal held that the provisions of section 40(a)(ia) cannot be invoked in case of short deduction of tax. The Tribunal observed that wherever there is a short deduction of tax, provisions of section 40(a)(ia) cannot be applied as it can only be invoked in the event of non-deduction of tax but not for lesser deduction of tax.  Accordingly, the orders of the tax officer and the CIT(A) were set aside and the tax officer was directed to allow the amount as claimed.

Sunbell Alloys Company of India Ltd vs ACIT (ITA No 8966 of 2010 and ITA No 6178 of 2011) (Mumbai Tribunal)

Penalty cannot be levied under section 271(1)(c) if revised return of income filed by taxpayer after initiation of investigation but before issue of notice under section 148 of the Act

The taxpayer had filed a return of Income (“ROI”) for the relevant financial year offering long term capital gain (“LTCG”) on sale of shares to tax.  Subsequently, an inquiry was conducted under section 133A during the course of which due to non-cooperation by the seller of shares, the taxpayer failed to submit requisite documents sought by the department.  The taxpayer then revised its ROI in which the LTCG was offered to tax as normal income and tax and interest thereon was duly deposited by the taxpayer.  The tax officer thereafter issued a notice under section 148 of the Act, and completed audit on the basis of the revised return without making any addition.  However, penalty under section 271(1)(c) of the Act was levied by the tax officer for furnishing inaccurate particulars of income by holding that revised ROI was filed only after the issue of notice under section 148.  The penalty was levied with respect to the amount offered to tax in the revised ROI and was partly confirmed by the CIT(A).  On appeal before the Tribunal, the taxpayer mentioned that the revised ROI was filed before the issue of notice under section 148 and the audit under section 148 was completed without making any addition.  Considering this, the taxpayer argued that the reasons for initiating the penalty proceedings were itself invalid and accordingly, the penalty cannot be levied in the present case.  Further, the taxpayer by relying on various judicial precedents contended that it is a well settled law that where a revised ROI is filed after investigation but before issue of a notice under section 148, no penalty is leviable.  Ruling in favour of the taxpayer, the Tribunal accepted the contentions of the taxpayer and held that it was on the Revenue to prove that the taxpayer had furnished inaccurate particulars of income which was not done in the present case.  Further, the Tribunal held that no penalty can be levied in cases where the taxpayer has surrendered additional income by way of a revised return to buy peace and such revised ROI has been regularized by the revenue. 

Shri Radheshyam Sarda and Shri Sumanrani Sarda v ACIT (ITA No 222 & 223 of 2012) (Indore Tribunal)

AAR

Sub-contracting payments to Australian subsidiary does not qualify as FTS

The applicant is an Indian company engaged in business of development and export of computer software and related services.  It has an Australian subsidiary (“Subsidiary”) which is engaged in the business of development of customer software and related services.  The applicant undertakes work in Australia and subcontracts part of the work to its Subsidiary for which it makes payment to the Subsidiary.  The applicant sought a ruling on whether payment it makes to the Subsidiary for the sub contracted work is chargeable to tax in India under the provisions of the Act or the DTAA between India and Australia. 

The AAR after considering the contentions of the applicant and the Revenue authorities held that the source of income earned by the Subsidiary has to be fixed as India.  However, since the work performed by the subsidiary does not result in the subsidiary making available any technical service to the applicant, it cannot be held liable to tax in India as FTS under para 3 of Article 12 of the DTAA between India and Australia.  Accordingly, the applicant was not required to withhold tax on the payments made to its Subsidiary.

Infosys Technologies Ltd (AAR No 1065 of 2011)

Right to terminate employment as against right to terminate secondment key to determine employment and taxability of consideration thereafter

The taxpayer was a wholly owned subsidiary of a company incorporated in the United States of America (“Parent Co”).  The Parent Co seconded certain employees to the taxpayer for a specified period under its global mobility policy.  While the Parent Co was to ensure that the seconded employees acted in accordance with the taxpayer’s instructions, all responsibilities and risks related to work undertaken by such employees vested with the taxpayer.  Further, while the right to reject a seconded employee at any time vested with the taxpayer, the right to terminate employment only vested with the Parent Co.  Salaries of the seconded employees were processed by the Parent Co and it subsequently received a reimbursement of the same from the taxpayer (referred as secondment charge) along with a payroll processing fee of USD 15 per employee.  The question preferred by the taxpayer before the AAR was whether the secondment charge and payroll processing fee paid / payable to the Parent Co by it was in the nature of income accruing to the Parent Co and therefore subject to tax withholding under the Act.  The AAR, in line with the Revenue’s contention observed that the right to terminate employment is distinct from the right to terminate secondment and to determine the existence of employee employer relationship between the taxpayer and the seconded personnel it was significant to see who possess the right to terminate employment of the personnel.  It observed that in the absence of a right with the taxpayer to terminate employment of the seconded personnel, the Parent Co remained the employer.  Further, the absence of an obligation on the taxpayer’s part to pay salaries directly was also indicative of the aforesaid fact.  The remittance by the taxpayer to the Parent Co was therefore held to be not a mere reimbursement but income in the hands of Parent Co and thus liable to tax withholding in India.  The AAR however, did not rule on the nature of such remittance deeming it to be inappropriate as the taxpayer had not sought a ruling on the specific question.  On the taxability of payroll processing fee, the AAR held that in the absence of requisite information on the duties/ roles of seconded employees, this question could not be answered.

Target Corporation India Pvt Ltd (AAR No 851 of 2012)

Indirect_tax

VAT/CST

‘During the course of business’ postulates a continuous exercise of an activity.  The expression ‘carrying on business’ requires something more than selling or buying.  The object of the person who carries on the activity is important to attract the levy of sales tax.

The taxpayer-dealer was engaged in the manufacture and sale of biscuits, confectionery etc.  It entered into an agreement with Britannia for transfer of business wherein the entire assets and liabilities were transferred to Britannia including the movables, immovables, goodwill, IPR etc. The Deputy Commissioner proposed to levy sales tax under the Karnataka Sales Tax Act, 1957 on the sale of IPR owned by the taxpayer. The assessing authority confirmed the levy of sales tax on the transfer of IPR.  The taxpayer filed an appeal before the Joint Commissioner (Appeals) and subsequently, Karnataka Appellate Tribunal wherein the order of the assessing authority was confirmed.  Consequently, writ petition was filed before the Karnataka High Court wherein the Court set aside the order of the Tribunal.

The High Court held that the sale of IPR was not ‘in the course of business’ of the taxpayer.  It relied on various case laws including the case of State of Gujarat vs. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 (SC) wherein it was held that the turnover of sale of a commodity could not be added to the total turnover of the taxpayer if he is not engaged in the business of trading of those goods.

Kwality Biscuits (P) Ltd vs. State of Karnataka – [2012] 53 VST 66 (Karnataka High Court) 

‘Transfer of right to use’ must involve transfer of effective control and possession of the goods for it to qualify as a ‘deemed sale’ and be subject to the levy of sales tax / VAT

The taxpayer entered into an agreement with ONGC for conducting drilling operations in the oil blocks of ONGC.  The drilling rigs were operated in the designated area which belonged to ONGC. The assessing authority held that since the drilling area had to be specified by ONGC, the drilling rigs were under the control of ONGC and there was a transfer of right to use the goods which is subject to levy of sales tax. The first appellate authority allowed the appeal of the taxpayer on the basis that the effective control and possession of the drilling units was with the taxpayer at all times.  The revenue appealed before the Tribunal wherein the assessment order was upheld but dropped the penalty.  Against the said order, the taxpayer approached the High Court of Madras through a revision petition.

The High Court held that there was no transfer of right to use the drilling units and that the effective control and possession remained with the taxpayer.  The court relied on the decision of State of Andhra Pradesh vs Rashtriya Ispat Nogam Ltd, [2002] 126 STC 114 (SC) where the apex court held that passing of an effective control of the machinery was a sine qua non for the purpose of attracting the levy under the concept of deemed sale relating to transfer of right to use goods.

Aban Loyd Chiles Offshore Limited vs. State of Tamil Nadu – [2012] 53 VST 89 (Madras High Court)

Bill of Entry is not a document of title and therefore, an exemption from sales tax cannot be denied in case of sale in the course of import merely on the basis that the name of the seller is appearing in the bill of entry

The taxpayer-dealer claimed exemption under section 5(2) of the Central Sales Tax Act (“CST Act”) on the execution of high seas sales.  The goods were cleared from customs by the purchaser on payment of customs duty.  The sales tax officer rejected the claim of exemption on the basis that the name of the dealer was written on the bill of entry filed with the customs.  The Assistant Commissioner (appeals) allowed the exemption to the dealer on the basis that high seas sale was effected and the purchaser had paid the customs duty on clearance.  Against this order, the department filed an appeal with the Tribunal wherein the Department’s appeal was rejected. 

The revision petition filed by the department before the Madras High Court was also dismissed on the ground that there was no dispute with respect to the transfer of document of title (bill of lading) before crossing the customs station.  Merely, on the ground that the bill of entry (which is not a document of title) had the name of the dealer, the exemption under the CST Act cannot be denied.   

State of Tamil Nadu vs. Kawarlal & Co. – [2012] 52 VST 221 (Madras High Court)

In case of execution of a works contract through a sub-contractor, merely because a sub-contractor deduction is allowed, it cannot be said that the profit margin of the main contractor cannot be subjected to tax.  It matters little as to whether execution of the work is by the main contractor or through sub-contractor. 

The taxpayer-dealer was engaged in execution of certain works contracts, where certain contracts were entirely executed by the taxpayer and some were executed through its subcontractors. In some cases, the  claimed that it had undertaken certain exclusive labour contracts (referred to as ‘back to back basis contracts’) and in execution of such contracts, it had not either utilized or passed on any taxable goods and therefore the turnover relating to such labour contracts were not taxable.  However, the Revenue authorities did not recongise the distinction between the two kinds of contracts as claimed by the taxpayer and sought to tax the entire value as turnover. 

The High Court decided against the taxpayer. In respect of the Supreme Court’s decision in Larsen & Toubro's case reported in (2008) 17 VST 1 (SC), the High Court has held that making of a dichotomy as 'contractor' and ‘sub-contractor’ is not permissible since a sub-contractor acts as an agent of the main contractor and therefore, the primary responsibility and liability for payment of tax in respect of the execution of the works contract is only on the contractor.  The taxpayer’s turnover being the value of the contract it had entered into with the principal, the taxable turnover of the value of this contract is the value of the goods that are utilised for the over-all execution of the contract in favour of the principal. The High Court further held that when taxpayer claims deduction under the relevant valuation rules (under the VAT statute) in respect of such payments actually paid to the sub-contractor, he cannot turn around and put forth further claim that on the basis of the value of the sub-contractor, certain amount is to be taken as taxpayer’s profit margin and therefore not covered within the scope of VAT.  

The High Court was of the view that the argument that taxpayer’s profit margin shouldn’t be taxable is another way of submitting that that it is not any part of value of the goods supplied to the principal. As per the High Court, an argument of this nature, might have succeeded if the taxpayer was able to demonstrate that the actual value of the goods that passed from the contractor or through his sub-contractor to the principal on the execution of the work, is precisely the particular amount and that amount has been subjected to tax, which has already been paid and therefore no further liability in terms of the VAT statute exists – but taxpayer hasn’t been able to demonstrate that.

In light of the above observations, the High Court has allowed the revision petition and directed the assessing authority to re-do the exercise of ascertaining the tax liability of the  relating to execution of the works contract to arrive at the tax liability.

Larsen & Tourbo v. State of Karnataka 2012-VIL-55-BANG (Karnataka High Court)

A dealer in the business of building, owning, operating, maintaining passive telecom infrastructure for provision of services to several telecom service providers is entitled to purchase goods at concessional CST rates vide issuance of Form C

The taxpayer-dealer was engaged in the business of providing access to passive telecom infrastructure (ie. Towers and allied assets like shelter, air-conditioning equipments, DG sets etc) to telecom service providers like Airtel, Vodafone, Reliance, BSNL etc) who would put up their antennas on such towers, and share the usage of the other assets against a monthly payment described as the infrastructure payment fee. The key ground of objection by the VAT authorities against usage of Form C by the taxpayer-dealer was that the taxpayer-dealer was merely in the business of constructing passive infrastructure for providing to the actual telecom service providers and has thus wrongly represented themselves as being eligible to issue Form C (Under the CST Act, a “registered dealer purchasing the goods as being intended for use by him in the telecommunication network” is inter alia eligible for issuance of Form C and consequent concessional CST rate).

The Andhra Pradesh High Court dealt at length with the evolution of telecom regulatory aspects in India specific to passive telecom infrastructure and concluded that the phrase “telecommunication network” in the CST Act is a generic phrase and the fact that passive telecom infrastructure providers have to obtain registration with the Department of Telecommunications is enough to uphold the claim towards Form C of the -dealer in the given factual context. In this regard, the court relied upon earlier decisions on Form C like CTO v. Rajasthan State Electricity Board [(1997) 104 STC 89 (SC)]. While not directly relevant to the issue at hand, the court also took note of the decision of the Andhra Pradesh High Court in the BSNL case [(2012) 49 VST 98 (AP)] wherein the nexus between passive infrastructure and the telecom service was taken note of (to conclude that telecom towers are immoveable property and no ‘transfer of right to use’ in the passive infrastructure occurs between a passive infrastructure provider and telecom service provider).

Indus Towers Limited v. CTO, Begumpet, Hyderabad [2012] 052 VST 0447 (Andhra Pradesh High Court)

Excise

If details of Cenvat credit availed were mentioned in the periodic returns and same has been filed by the taxpayer promptly, no objections were raised about the same by the revenue officers during  the first audit but during the second audit, objections were raised upon availment of credit during the prior period, and thereafter proceedings were initiated against the taxpayer, then extended period under Section 11A of the Central Excise Act, 1944 cannot be invoked  

The taxpayer was a manufacturer of Ice Cream and were availing the benefit of Cenvat credit of duty paid on capital goods.  They availed Cenvat credit of duty paid on prefabricated (construction) building, (cold room) consisting of wall, roof, door, flashing window, on the assumption that they are required to manufacture final products.  The cold room was to be used for freezing the Ice Cream under below -20 to -40 degree celsius in order to make the Ice Cream marketable. It was not in dispute that the taxpayer had filed the return as required under Rule 7 of the Cenvat Credit Rules, 2002.  The Revenue Authorities after receipt of the returns did not raise any queries when the first audit was carried out during the period between May 2003 to August 2004.  The audit officers did not find anything wrong in availment of Cenvat credit.  It was only when the second audit took place during September & October, 2004 that they noticed this availment of credit and issued a show cause notice on September 25, 2007. Thereafter duty penalty and interest was levied. 

Aggrieved by the same, the taxpayer preferred an appeal to the Tribunal.

Revenue submitted that the defect was noticed in September 2004, and the proceedings initiated on September 25, 2007 was well within the period of 5 years by invoking extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944.  It was held that returns were filed by the taxpayer promptly, and the returns clearly mentioned that they availed credit under the aforesaid rules and the audit party also accepted the same, therefore extended period of limitation cannot be invoked in this case

Commissioner of Central Excise, Bangalore-I v. MTR Foods Limited 2012 (282) ELT 196 (Karnataka High Court.)

Cars sold to customers at ‘loss making price’ as a business strategy in order to penetrate the market cannot be considered as transaction value or as a normal price of goods ordinarily sold to a buyer for the purpose of Section 4(1)(a) of the Central Excise Act, 1944 for levy of excise duty

The respondent, taxpayers were manufacturer of motor cars, which was excisable under Central Excise Tariff Act, 1985.  The assesses have filed several price declarations in terms of Rule 173C of the Central Excise Rules, 1944 declaring the wholesale price of the cars for sale through wholesale depots for five years, during the period commencing from May 27, 1996 to March 04, 2001.  The authorities under Central Excise Act, 1944 had made enquiries and found that the wholesale price declared by the assesses is much less than the cost of production plus normal profit and, therefore the price so declared by them could not be treated as a normal price for the purpose of quantification of assessable value under Section 4(1)(a) of the Act.  It was further alleged that the taxpayer had not taken into account the cost of raw materials, direct wages, overheads, and profits for declarations for the purpose of Rule 4 of the Act.  The taxpayer defended their case on the premise that the taxpayer had to sell their cards at a price lower than the manufacturing cost and profit just to penetrate the market. The revenue on the other hand argued that this will constitute an extra commercial consideration for the purpose of valuation under Excise Act and not a sole consideration.  

The taxpayer lost the case before the adjudicating authority, and went on appeal before the Tribunal.  The Tribunal allowed taxpayer’s appeal against which the revenue went to Supreme Court.

The matter finally came up before the division bench of Supreme Court. The principal issues in this case was whether the price declared by taxpayer for their cars which is admittedly below the cost of manufacture can be regarded as "normal price" for the purpose of excise duty in terms of Section 4(1) (a) of the Central Excise Act, 1944 (as it existed during the relevant period).  Secondly, Whether the sale of cars by taxpayer at a price, lower than the cost of manufacture in order to compete and penetrate the market, can be regarded as the "extra commercial consideration" for the sale to their buyers as same could be considered as one of the vitiating factors to doubt the normal price of the wholesale trade of the taxpayers.

With respect to valuation of excisable goods, the apex court held that for the purpose of Section 4(1) (a) all that has to be seen is, does the sale price at the factory gate represent the wholesale cash price. If the price charged to the purchaser at the factory gate is fair and reasonable and has been arrived at only on purely commercial basis, then that should represent the wholesale cash price (This is the price which has been charged by the manufacturer from the wholesale purchaser or sole distributor) under Section 4(1)(a) of the Central Excise Act, 1944.  What has to be seen is that the sale made at arms length and in the usual course of business, if it is not made at arms length or in the usual course of business, then that will not be real value of the goods.  The value to be adopted for the purpose of assessment to duty is not the price at which the manufacturer actually sells the goods at his sale depots or the price at which goods are sold by the dealers to the customers, but a fictional price contemplated by the section.

With respect to interpretation of the term “sole consideration” the court held that consideration means something which is of value in the eyes of law, moving from the plaintiff, either of benefit to the plaintiff or of detriment to the defendant.  It may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other; when the price is not the sole consideration and there are some additional considerations either in the form of cash, kind, services or in any other way, then the equivalent value of that additional consideration should be added to the price shown by the taxpayer. The important requirement under Section 4(1)(a) is that the price must be the sole and only consideration for the sale.  If the sale is influenced by considerations other than the price, then, Section 4(1)(a) will not apply.  In the instant case, the main reason for the taxpayers to sell their cars at a lower price than the manufacturing cost and profit is to penetrate the market and this will constitute extra commercial consideration and not the sole consideration.  As per the Supreme Court, in this case, a ‘loss making price’ continuously for a period of more than five years, and while selling more than 29000 cars cannot be the normal price for sale of cars. 

Basis the above reasons the court held that the appeal by the Commissioner  deserves to be allowed. The Court held that aforesaid reasoning will also apply to the present transaction value regime since the condition of price being sole consideration for sale is not satisfied in the instant case.

Commissioner of Central Excise Mumbai, v. M/s Fiat India Pvt Ltd & Anr 2012-TIOL-58-SC-CX

Service tax

The electricity supplied free of cost by the customers to the taxpayer does not in any way amount to additional consideration received by the taxpayer in kind

In the present case, the appellant - taxpayer is inter alia engaged in setting up air-separation plants (equipments for short) at the customer premises. The said equipments are used for manufacturing the oxygen which is ultimately used by the customers in manufacturing their final products.  Further, the appellant-taxpayer had entered into a lease agreement with their customers wherein the said equipments were leased to the customers and the appellant-taxpayer provided services of operation and maintenance of equipments to the customers for which they charge service fee.

The taxpayer was called upon to show-cause as to why the value of taxable service should not be enhanced by including the cost of electricity supplied free of cost to the appellant-taxpayer by the customers in the course of rendering the services. The appellant-taxpayer contended that the electricity supplied free of cost was not a consideration received by the taxpayer for rendering the services and, hence, the same was not includible in the taxable service. The Adjudicating Authority rejected the contention of the appellant-taxpayer and confirmed the tax demand with interest and penalty. Challenging the aforesaid order, the appellant-taxpayer filed an appeal and the CESTAT directed the taxpayer to pre-deposit Rs.1 crore for entertaining the appeal. The appellant-taxpayer approached the High Court challenging the above pre deposit. 

The Hon’ble High Court was of a prima facie view that the argument of the Revenue that the electricity supplied free of cost is a consideration in kind received by the taxpayer from its customers was difficult to accept. Further, the High Court stated that the electricity supplied free of cost is meant to be consumed in the manufacture of oxygen and admittedly the oxygen so manufactured is used by the customers in the manufacture of their final product. It is the customers of the taxpayer who clear the final product on payment of duty and no benefit accrues to the taxpayer on such clearances. Thus, the electricity supplied free of cost by the customers to the taxpayer does not in any way amount to additional consideration received by the taxpayer in kind.  The High Court directed the CESTAT to hear the appeal on merits without insisting on pre deposit.

M/s INOX AIR PRODUCTS LTD vs. CCE, Nagupur [2012-TIOL-510-HC-MUM-ST]

Delivery of ready-mix-concrete under a sale transaction through pumping the same at requisite spots would not lead to a separate taxable service transaction

In the present case, the taxpayer was engaged in the business of manufacturing ready mix concrete (RMC) and supplied the said goods at the recipients premises by pumping the RMC to spot where it was required.  The revenue was of the view that the aforesaid activity would qualify under the taxable category of ‘Commercial and Industrial Construction Services’.  After going through the facts of the case and relying on the judgment delivered by Hon’ble Karnataka High Court in case of ACC Ltd. vs. State of Karnataka, the CESTAT allowed the appeal by the taxpayer and held that aforesaid activity is part of the sales transaction entered by the appellant-taxpayer (pumping RMC at the requisite spots merely being the agreed mode of delivery of goods under the sale transaction) and thus do not qualify as taxable service.

Ultratech Concrete vs. Commissioner of Service Tax, Delhi [2012 36 STT 366]

Records such as discharged cheques, vouchers, deeds, agreements, books of accounts of banks and corporate houses wouldn’t qualify as ‘goods’ as per the provision of Section 2(7) of the Sale of Goods Act, 1930 and hence services in relation to storage and retrieval of these records  are not taxable under the category of ‘Storage and Warehousing’ Services

The taxpayer was registered with the service tax department for service tax purposes under the category of Business Auxiliary Service (“BAS”). During the financial year 2004, the Anti Evasion Wing at Bangalore initiated an investigation against the branch office of the appellant-taxpayer at Bangalore for evasion of service tax.  During the course of investigation it was noticed that the appellant-taxpayer was raising bills on their clients for (a) segregation and packing charges, (b) storage charges and (c) retrieval charges, on which they were not discharging any service tax liability.  It was submitted by them that the said activity was undertaken by them for storage and retrieval of records of banks and corporate houses and the records consisted of discharged cheques, vouchers, agreements, books of accounts, etc., which were not intended for sale and were not having any commercial value.  For rendering these services appellant-taxpayer raised bills on their clients towards (1) segregation, labelling and marking of records ; (2) transportation of records ; (3) storage of records at the premises ; and (4) retrieval/recall services.

The Department was of the view that the activities undertaken by the appellant-taxpayer comes under the category of taxable service of "storage and warehousing" as defined in section 65(102) of the Finance Act, 1994 as such services covers any service provided to any person by a storage or warehouse keeper in relation to storage and warehousing of goods.  Therefore, taxpayer was liable to pay service tax on the said activity under section 65(105)(zza) of the said Finance Act.   Accordingly, various show cause notices (“SCN”) were issued to the taxpayer demanding service tax on above activities.  

The above SCN’s were adjudicated by the Commissioner of Central Excise (Adjudication), Mumbai wherein the Commissioner came to the conclusion that the storage and warehousing services rendered under section 65(105)(zza) relates to storage and warehousing of "goods" .  In the instant case, the storage and warehousing has been rendered in respect of old files and records which are not goods and therefore he dropped the proceedings initiated against the appellant-taxpayer.  Aggrieved by the said order, the Revenue preferred an appeal.

The short question for consideration before Tribunal was whether the records such as discharged cheques, vouchers, deeds, agreements, books of accounts of banks and corporate houses would come under the category of "goods" as per the provisions of section 2(7) of the Sale of Goods Act, 1930 and hence liable to service tax under the taxable category of "storage and warehousing"

Section 2(7) of the Sale of Goods Act, 1930 defines "goods" as every kind of movable property other than actionable claims and money ; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale."

Tribunal observed that to constitute goods, salability is an essential criterion. If salability was not a relevant criterion, there was no necessity to refer to the definition of goods, under the Sale of Goods Act,1930. Therefore the very reference to the definition of ‘goods’ under the Sale of Goods Act implies that salability is a necessary condition to consider something as ‘goods’.  Tribunal relied upon the decision of honourable apex court in R. D. Saxena v. Balram Prasad Sharma [AIR (2000) SC 912]  wherein it was held that case files maintained by a bank pertaining to their clients cannot be equated with goods as they are not saleable goods and they do not have any marketability.

In view of above, Tribunal held that the taxpayers’ are not liable to pay any service tax in respect of the activity undertaken by them relating to the storage and warehousing of old records of their clients.

Commissioner of Service Tax, Mumbai v. P.N. Writer & Co. Ltd [2012 (52) VST 479]

Where the parties are neither taking risk jointly or doing any common activity, it cannot be contended that their relationship was a relationship of a joint venture for profit and hence not of a service provider-recipient

The taxpayer was engaged in the construction of the residential complexes. For this purpose, it used to enter into Joint Development Agreements (“JDA”) with landowners, in terms of which it should undertake construction of residential flats/ houses in the lands owned by such landowners. As per the JDA, a portion of the constructed area, in the form of flats/ houses, would be assigned in favour of the landowners and the remaining constructed area, in the forms of flats/ houses, would be sold by the taxpayer to various buyers. After conducting a verification of the taxpayer’s liability to service tax, show cause notice was issued demanding short levy of service tax.

The taxpayer argued before the Tribunal that there is no service provider and service recipient relationship as it was a relationship of a joint venture for profit. The Tribunal held that the Joint Development agreement did not indicate any terms on the above lines as the parties were neither taking risk jointly or doing any common activity. In fact, the undivided share of land (“UDS”) was sold first and an agreement for construction was entered into with individual buyers. Hence, in these cases there was a service provided to the UDS holders including the original landowners.

The taxpayer further argued that the contracts were in nature of works contracts involving supply of material and service, since such service became taxable only from 1-6-2007, there would not be any tax on such works carried out prior to that date. The Tribunal held that the entry of works contract services cannot be taken as an altogether a new entry. Further, construction of flat is in nature of a composite contract specified in Article 366 (29a). So the value of the material supplied and the service provided can be separated and subjected to service tax. Hence, the argument of the taxpayer was rejected.

The taxpayer also argued that the definition of ‘residential complex’ excludes the construction of such flats intended for personal use. It was submitted that the fact that landowners were given more than one residential unit, should not be a reason to disregard their claim that the flats given to the landowners were for their personal use.  On this point, the Tribunal noted that the residential complexes in question were not constructed for personal use of the owners of the land. It was predominantly for sale to individual buyers. The exclusion in the definition of the service is for a residential complex intended for personal use. The clause cannot be applied to individual flats in a complex.

LCS City Makers (P.) Ltd. versus Commissioner of Service Tax, Chennai [2012] 36 STT 228

Key Circulars and Notifications

Service tax

(i)     Notification No.45/ 2012- ST and 46/2012- ST, dated August 07, 2012 seeks to amend Service Tax Rules, 1994 and Notification 30/2012- ST (reverse charge notification)  to add services provided by directors (non-whole time) of the company and security services in the list of services taxed under reverse charge mechanism. Further the liability to pay service tax in the said services is 100 percent on the service provider.  The notification provides for the definition of security services to mean services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity

(ii)    Circular No. 164/15/2012, dated August 28, 2012 provides for the clarification on vocational education and training course.  The circular has clarified that any vocational education courses offered by government institutions will not be liable to service tax.  Further it has been clarified that ‘qualification recognized as per law’ implies a Certificate, Diploma, Degree or any other similar Certificate as are approved or recognized by any entity established under a central or state law including delegated legislation, for the purpose of granting recognition to any education course including a vocation education course

Customs and Foreign Trade Policy

(i)     Vide Notification No. 46/2012 – Customs dated August 17, 2012, the government has amended Notification No. 12/2012 – Customs (the mega exemption notification under customs) thereby extending the benefit of concessional rate of CVD of 1 percent to all the goods falling under chapter 31 when imported into India

(ii)    Vide Circular No. 23/2012 dated August 30, 2012, the government has clarified the background and ambit of the aforesaid exemption.

(iii)   Vide Circular No.21/2012-Customs dated August 1, 2012,  clarification has been provided on the scope of exemption Notification No.146/94-Customs dated July 13, 1994 dealing with import of specified sports goods, equipments and requisites

(iv)    DGFT Notification No.15 (RE-2012)/2009-2014 dated August 29, 2012 amends the ITC(HS) Classifications of Export and Import Items, 2009-14, Chapter-90 and thus amends the import policy vis a vis night vision binoculars and similar devices.

(v)     Vide DGFT Policy Circular No.3(RE-2012)/2009-14 dated August 23 2012 pertaining to conditions and modalities for registration of contracts of sugar with DGFT it has been clarified that a variation of (-) 5% in weight against Registration Certificates issued for export of sugar shall be allowed. Thus, a variation of (-)5% in weight in exports of sugar against registered contracts shall not be treated as default for the purpose of imposition of penalty or debarment from future registrations.