Direct
Tax
Supreme
Court
Payment
of advance tax does not amount to disclosure of income in case of non filing of
return of income
The
taxpayer, a firm, had not filed its the return of income (“ROI”) for the
assessment year (“AY”) 1995-96 but had paid advance tax for the year. The
assessing officer (“AO”) held that the taxpayer had not disclosed its income
pertaining to the AY 1995-96 in view of the non filing of the ROI. The taxpayer
objected on the ground that it had paid advance tax and therefore, the income
cannot be considered as undisclosed. The AO rejected the contention of the
taxpayer and proceeded to compute the undisclosed income of the taxpayer under
chapter XIV-B of the Income-tax Act, 1961 (“the Act”).
On
appeal before the Income Tax Appellate Tribunal (“ITAT”), the ITAT ruled in
favour of the taxpayer. The High Court (“HC”) affirmed the view of the ITAT.
The Revenue Authorities appealed before the Supreme Court (“SC”). The question
before the SC was whether payment of advance tax would tantamount to disclosure
of income for the purpose of application of chapter XIV-B of the
Act.
The SC
held that payment of advance tax is based on estimated income and is not the
final ‘total income’, and hence cannot indicate the intention of an assessee to
disclose its income. It was held that for income to be considered as disclosed
income, it should be disclosed by way of filling of ROI. Since no ROI was filed
by the taxpayer, the SC upheld the action of the AO.
ACIT v A
R Enterprises (Civil Appeal No 2688, 3127, 3848 of 2006, 2580 of 2010, 270 and
271 of 2013) (SC)
High
Court
Book
adjustment of a payable against receivables would tantamount to ‘actual payment’
for the purpose of section 43B of the Act
The
taxpayer, a company, availed a loan from Bihar State Financial Corporation
(“BSFC”) and was liable to pay interest thereon. The taxpayer was also entitled
to receive certain subsidy from BSFC. BSFC adjusted the amount of interest
payable by the taxpayer on the borrowings against the subsidy payable to the
taxpayer in its books.
The AO
contended that, under section 43B(d) of the Act, payment of interest on loan
obtained from a state financial corporation is allowable as a tax deduction only
on ‘actual payment’ of the interest. Since the taxpayer had not actually paid
the interest and the payment was settled by way of book adjustment, the AO
disallowed the interest expenditure under section 43B of the Act.
On
appeal, the ITAT held that the settlement of the interest liability by way of
book adjustment was an effective payment of interest to BSFC and accordingly is
allowable as a deduction to the taxpayer under section 43B. The Revenue
Authorities further appealed before the HC. The question before the HC was
whether the adjustment entry made for payment of interest shall tantamount to
actual ‘payment’ within the meaning of section 43B(d) of the Act.
The HC
held that ‘actual payment’ does not mean actual receipt and delivery of the
currency. Thus, in case interest is paid not by way of actual receipt but is
paid out of adjustment against any other receivable from such creditor, then it
shall constitute ‘actual payment’ within the meaning of section 43B(d) of the
Act. Accordingly, the HC ruled in favour of the taxpayer.
CIT v
Shakti Spring Industries Private Limited (TA No 06 of 2001)
(Jharkhand HC)
A
limited liability partnership in Germany is entitled for relief under the
India-Germany tax treaty
The
taxpayer, a non-resident in Germany, earned royalty income and fees for
technical services (“FTS”) in India during the financial year 2001-02. In the
ROI filed for the year, the taxpayer claimed a benefit of the lower rate of
taxation on such income under Article 12 of the India-Germany tax treaty. The
AO held that the taxpayer, being a limited liability partnership in Germany, was
not liable to tax in Germany and hence, denied the treaty benefit to the
taxpayer.
On
appeal, the Commissioner of Income-tax (Appeals) [“CIT(A)”] observed
that the taxpayer was liable to pay trade tax in Germany and such trade tax is
covered by Article 2 of the India-Germany tax treaty. Further, CIT(A) placed
reliance on the Tax Residency Certificate (“TRC”) issued by the German
authorities certifying that the taxpayer was liable to pay trade tax on profits
of the business in Germany. Accordingly, CIT(A) decided the matter in favour of
the taxpayer that the partnership is eligible for relief under the tax treaty.
The ITAT upheld the decision of the CIT(A).
On
further appeal, the HC observed that under Article 3(d), ‘person’ includes any
entity treated as taxable unit in Germany. Further, the term ‘resident’ under
Article 4 means any person who is liable to tax in Germany by reason of
domicile, residence, etc.
On the
basis of the fact that the taxpayer was filling ‘trade tax’ return in Germany
and placing reliance on the TRC issued by the German authorities to the
taxpayer, the HC held that the taxpayer qualifies as a taxable unit under the
German tax laws and thus, the treaty benefit cannot be denied to the taxpayer.
The HC also rejected the reliance placed by the Revenue Authorities on the OECD
commentary to contend that the taxpayer did not qualify as a taxable
entity.
DIT (International Tax) v Chiron Bearing Gmbh & Co (ITA No 2273
of 2010) (Bombay HC)
Overseas
allowance paid by the taxpayer to deputed personnel is not subject to tax
withholding by the taxpayer if such deputed employees are not on the payroll of
the taxpayer;
Foreign
tax credit is available even though the foreign taxes are not ‘actually paid’
during the relevant financial year
The
taxpayer, an association of persons comprising nine public oil sector companies,
deployed trained personnel to foreign companies for executing work abroad. The
personnel were drawn from the employees of the member companies and were not on
the payroll of the taxpayer. The overseas allowance paid by the taxpayer to
these personnel was claimed as a tax deduction by the taxpayer. Also, the
taxpayer paid certain taxes in Kuwait on the income earned during the relevant
previous year and claimed credit for these taxes in India under section 91(1) of
the Act.
The AO
disallowed the seconded personnel allowance claimed by the taxpayer contending
that the taxpayer had not deducted tax at source under section 192 of the Act on
the said payments. Also, the AO denied the credit of taxes paid in Kuwait
claimed under section 91(1) of the Act in India on the basis that such taxes
were not ‘actually paid’ by the taxpayer in the relevant financial
year.
On
appeal, the CIT(A) and ITAT, in relation to the overseas allowance payments,
decided in favour of the taxpayer observing that the employees continued to be
on the payroll of the member companies of the taxpayer and thus, remained
employees of the member companies. Further, CIT(A) and ITAT also allowed the
credit of the taxes paid in Kuwait by the taxpayer.
On
further appeal, the HC, relying upon the observation of the lower appellate
authorities, upheld that the deployed employees did not qualify as employees of
the taxpayer and thus, the taxpayer was not required to withhold taxes on the
overseas allowance paid to them. Further, in relation to the credit of taxes
paid in Kuwait by the taxpayer, the HC observed that the object of section 91(1)
of the Act is to give relief from taxation in India to the extent taxes have
been paid abroad for the relevant previous year. This relief is not dependent
upon the actual payment of foreign taxes in the same previous year.
Accordingly, the HC decided the issue in favour of the taxpayer.
CIT v
Petroleum India International (ITA No 3653 of 2009) (Bombay
HC)
A
subsequent contrary AAR ruling on identical facts does not overrule a specific
ruling granted to the taxpayer
The
taxpayer, a foreign company, obtained a ruling from the Authority for Advance
Ruling (“AAR”) on the taxability of the profits arising from sale of portfolio
investments in India. The AAR held that such profits shall be treated as
business profits of the taxpayer. In accordance with the AAR ruling, the
taxpayer claimed a business loss on sale of shares which was accepted by the AO
during the course of the regular assessment proceedings.
Subsequently,
the AO reopened the proceedings under section 148 of the Act on the basis of a
subsequent ruling of the AAR in the case of another taxpayer wherein a contrary
decision was given. The AAR held that the income on purchase and sale of shares
shall be taxable as capital gains and not as business income. Basis this, the
AO held that income had escaped assessment in the taxpayer’s case and
accordingly, reassessed the income of the taxpayer holding it to be in the
nature of capital gains. On appeal, the ITAT set aside the order of the AO.
On
further appeal, the HC held that since the taxpayer had obtained a specific
ruling from the AAR, the decision in its own case will be binding. This would
not get over-ruled by a subsequent decision of the AAR. Accordingly, the HC
upheld the decision of the ITAT.
DIT v
Prudential Assurance Company Limited (ITA no 1193 of 2012) (Bombay
HC)
Relinquishment of rights in a plot of land is an actionable claim and
hence gains from such relinquishment is liable to tax as capital gains and not
as income from other sources;
Non acceptance of ‘head’ of income under which the taxpayer has
reported its income does not tantamount to wrong disclosure for invoking
reassessment proceedings
The
taxpayer entered into a Memorandum of Understanding (‘MoU’) with a real estate
developer to purchase a plot/ flat for a consideration of INR 4.28 crore. The
first installment was paid by the taxpayer at the time of entering into the
MoU. Later, a supplementary MoU was entered into whereby a specific plot was
allotted to the taxpayer. A no-objection certificate was also obtained from the
Revenue Authorities in relation to such allotment.
Subsequently,
the taxpayer relinquished its rights in the said plot for a sale consideration
of INR 5.05 crore and offered the gains to tax as capital gains income in the
ROI filed. The case was opened by the Revenue Authorities under section 148 of
the Act. It was contended by the Revenue Authorities that the transaction did
not involve transfer of any capital asset as no ownership rights were conferred
in favour of the taxpayer. Accordingly, the income was subject to tax as income
from other sources, as against capital gains.
The
taxpayer filed an application before the Commissioner of Income-tax (‘CIT’)
under section 264 of the Act seeking revision of the said order, which was
rejected by the CIT. Thereafter, the taxpayer filed a writ petition before the
HC.
Before
the HC, the taxpayer argued that since all the material facts had been
disclosed, the proceedings under section 148 of the Act were void. The Revenue
authorities contended that since the amount was reported under a wrong head by
the taxpayer, the same amounted to wrong disclosure, hence notice under section
148 of the Act was correctly issued.
The HC
observed that the taxpayer had acquired a right to a specific plot and such
interest was in the nature of an actionable claim, which could be asserted in a
legal proceeding. Accordingly, relinquishment of such rights by the taxpayer
was rightly offered to tax as capital gains. The HC also held that as long as
the taxpayer has made a full and true disclosure of income, the fact that the
‘head of income’ is ultimately not accepted by the Revenue Authorities would not
make it a wrong disclosure. Accordingly, the reassessment proceedings were
quashed by the HC.
Simka
Hotels and Resorts v DCIT and ANR [WP(C) 4350
of 2012] (Delhi HC)
ITAT Rulings
Payment to a UK firm for providing fabric designs is taxable as Fee
for Technical Service under Article 13 of the India-UK tax
treaty
The taxpayer, a company, entered into an agreement with a UK firm for
providing fabric designs. The firm was required to provide a detailed quantity
report to the taxpayer, along with specific/ new designs developed by it. The
firm was also required to show and/ or make available all related documents/
reports to the taxpayer under the Agreement. Further, on termination of the
agreement, the taxpayer was not required to return any designs/ documents to the
firm.
The taxpayer made an application to the AO under section 195(2) of
the Act for non deduction of taxes on these payments on the basis that it does
not qualify as Fee for Technical Service (“FTS”) under the Act. The AO held
that the payment qualifies as FTS and it being used by a resident for its
business purpose would be deemed to have accrued in India. Further, in relation
to Article 13 of the India-UK tax treaty dealing with FTS, the AO held that the
experience and skills of the employees of the consultancy firm were being made
available to the taxpayer and thus, payments were taxable as FTS
under the tax treaty. Accordingly, the AO held that the payments
were liable to tax withholding in India.
On appeal, the CIT(A) upheld the order of the AO. On further appeal,
the taxpayer contended that that no technical expertise was ‘made available’ to
the taxpayer under the agreement and thus, payments did not qualify as FTS under
Article 13 of the India-UK treaty. To substantiate the claim, the taxpayer
relied
upon the Memorandum of Understanding (“MOU”) between India and USA for
interpretation of the term ‘Fees for Included Services’ in the India-USA tax
treaty, which is pari material to the meaning assigned in the India-UK tax
treaty.
The ITAT observed that, under the terms of the agreement, the
taxpayer was not required to return the designs/ documents made available by the
UK firm on expiry of the agreement and thus the designs provided by the firm
became the property of the taxpayer. The ITAT held that the fabric designs are
made available to the taxpayer as these designs can be used by the taxpayer to
process and produce garments and can also be transferred by the taxpayer to any
other party. Accordingly, the ITAT rejected the contentions of the taxpayer and
held that the payments qualify as FTS under the India-UK tax treaty and thus,
are liable to tax withholding in India.
Sintex Industries Limited v ADIT (ITA no 2021 of 2009 and 639 of
2010) (Ahmedabad ITAT)
When the
tax is withheld by the payer pursuant to the order passed by the AO requiring
the payer to withhold taxes, refund arising subsequently in view of the
favourable order of the appellate authority will also be entitled to interest
under section 244A
The
taxpayer, a company, entered into a contract with a foreign entity to acquire
rights for live telecast of cricket matches. The taxpayer contended that the
payments to be made in this regard did not qualify as ‘royalty’ and were not
taxable in India in the hands of the foreign company. Accordingly, the taxpayer
made an application before the AO for lower/ nil withholding of taxes on these
payments under section 195(2) of the Act. The AO did not agree with the
contention of the taxpayer and directed to withhold tax at 11.72 percent on the
payments.
The
taxpayer, while withholding and depositing the taxes in accordance with the
order passed by the AO, challenged the order before the CIT(A). The CIT(A) held
that the payments were not liable to any tax withholding under the Act.
Accordingly, the AO issued a refund of taxes deposited by the taxpayer.
However, no interest under section 244A of the Act was paid by the AO on the
refund amount contending that there is no provision in the Act for allowing
interest on taxes withheld at source (“TDS”).
The
taxpayer appealed before the CIT(A) for grant of interest under section 244A of
the Act. The CIT(A) placing reliance on the CBDT circular 7 of 2007 held that
TDS amount cannot be considered as a ‘tax’ and thus, is not entitled to interest
under section 244A of the Act. Accordingly, the claim of the taxpayer was
rejected.
On
further appeal, the ITAT observed that the circular applies to a situation where
the taxpayer withholds the taxes voluntarily and then claims a refund. In such
cases, interest under section 244A would not be allowable to the taxpayer.
However, in cases where the tax/ interest is demanded by the AO and refund
arises consequent to the order of CIT(A)/ ITAT, then interest under section 244A
shall be granted.
Since in
the present case, the taxpayer had paid taxes consequent to the order of the AO,
the ITAT held that the taxpayer is entitled to interest under section 244A of
the Act.
Neo
Sports Broadcast Private Limited v DDIT (ITA no 7649 of 2010) (Mumbai
ITAT)
Sale of shares of a company holding building does not tantamount to
sale of a business and hence does not attract provisions of section 50C of the
Act
The taxpayer, an individual, held shares in an Indian company which
in turn owned certain flats. During the relevant financial year, the taxpayer
sold shares of the company and offered to tax the long term capital gains
calculated on the basis of the actual sale price of the shares of the company.
The AO however held that by transferring the shares of the company, the taxpayer
had indirectly transferred the immovable property owned by the company for an
under-valued consideration. Accordingly, the AO assessed higher capital gains
tax liability in the hands of the taxpayer by piercing the corporate veil and
invoking the provisions of section 50C of the Act.
On appeal, the CIT(A) upheld the order of the AO holding that it was
a case of transfer of immovable property though the shares were the capital
assets transferred. On further appeal, the ITAT made the following relevant
observations:
· Capital assets that are covered under section 50C of the Act are land
or building or both as against the case of the taxpayer involving transfer of
shares in a company. The taxpayer did not have full ownership of the flats held
by the company;
· The expression ‘transfer’ referred to in the section should be a
direct transfer as defined under section 2(47) of the Act and does not include
the tax planning adopted by the taxpayer;
· Section 50C being a deeming provision should be interpreted
strictly;
· In relation to the words ‘assessed’ referred to in the section, the
transfer of shares was never a part of the ‘assessment’ of the Stamp duty
authorities of the State Government. Further, the word ‘assessable’, which was
subsequently introduced in the section, was not applicable for the relevant
financial year.
In view of the above observations, the ITAT ruled in favour of the
taxpayer that section 50C of the Act is not to be invoked in the present
case.
Shri Imran Yunus Fazlani & others v ACIT (ITA no 8831, 8832,
8835, 8836, 8850 and 8851 of 2011) (Mumbai ITAT)
Capital gains arising from 2 separate transactions will be exempt
under section 54 and section 54F of the Act if the entire gains are invested in
a single house
The taxpayer, an individual, sold a house property and a plot of land
during the same financial year and earned long term capital gains on both the
transactions. The taxpayer invested the total amount of capital gains from the
two sale transactions in a new house and claimed capital gains exemption for
both the transactions under section 54 and 54F of the Act respectively.
The AO held that for claiming exemption under sections 54 and section
54F of the Act, the taxpayer must invest in two different houses. Thus, the AO
disallowed the claim for exemption of the taxpayer.
On appeal, the CIT(A) ruled in favour of the revenue authorities
holding that sections 54 and 54F of the Act are independent and mutually
exclusive and cannot be clubbed together for getting a bigger advantage of
exemption on account of bigger investments.
On appeal before the ITAT, the taxpayer contended that though
sections 54 and 54F of the Act deal with different scenarios, both the sections
require investment in a residential house and thus, the interpretation of the
lower authorities that such investment should be made in two different houses
was incorrect. Further, the taxpayer also contended that the sections should be
interpreted liberally in accordance with the intention of the
Legislature.
The ITAT observed that both the sections 54 and 54F of the Act
provide for exemptions on purchase/ construction of a new residential house.
There is no bar either in section 54 or in section 54F or in any other provision
of the Act prohibiting allowance of exemption under both the sections in case
conditions of the provisions of the sections are fulfilled. Accordingly, since
the taxpayer had invested the entire amount of capital gains arising from the
two transactions in purchase of a new residential house within the stipulated
time period, the ITAT held that the taxpayer is entitled to claim exemption
under both the sections, ie 54 and 54F of the Act.
Venkata Ramana Umareddy v DCIT (ITA no 552 of 2012) (Hyderabad
ITAT)
Investments in the form of share application money should not be
considered in computing the disallowance under section 14A of the
Act
The taxpayer, a company engaged in the business of investment in
shares and securities, earned dividend income during the relevant financial
year. The taxpayer claimed exemption on the dividend income. Further, the
taxpayer also offered disallowance under section 14A of the Act read with rule
8D of the Income Tax Rules, 1962 (“Rules”). The taxpayer had made investments
in the form of share application money which was outstanding in its financial
statements for a long period.
The AO, during the assessment proceedings, adopted a view that the
share application money invested by the taxpayer qualifies as an investment
yielding tax-free income and should be taken into account for the purpose of
disallowance as per the method prescribed under rule 8D. Accordingly, the AO
increased the amount of disallowance under rule 8D. On appeal, the CIT(A)
confirmed the action of AO.
On appeal, the taxpayer contended that the calculation made by the AO
was not correct as the AO had
included the amount of share application money as part of the investments which
yields tax-free income, even though share application money did not yield any
tax-free income.
The ITAT
observed that the share application money is only in the nature of application
(offer) money to be adjusted against cost of the shares on allotment and it is
incapable of yielding any tax-free income. A company does not get any right
(not even inchoate) in relation to the share application money invested,
irrespective of the time period.
Further,
it was observed by the ITAT that the share application money can at best yield
interest income which shall be taxable under the Act. Accordingly, the ITAT
upheld the contentions of the taxpayer that the share application money should
be excluded in computing disallowance under section 14A of the Act read with
rule 8D of the Rules.
Rainy Investments Private Limited v ACIT (ITA no 5491 of 2011)
(Mumbai ITAT)
Liquidity
damages paid due to delay under the supply agreement is an allowable
expenditure
The
taxpayer, a company, engaged in the business of supply of electrical and optical
connectivity equipments, entered into an agreement with the railway department
and other government undertakings for supply of equipments. In accordance with
the contractual agreement, the taxpayer paid liquidated damages due to delay in
supply of equipments to the customers. These damages were claimed as a revenue
expenditure by the taxpayer. The AO disallowed the expenditure holding
inter-alia that the damages paid exceeded the prescribed rate under the
contract.
On
appeal, the CIT(A) upheld the disallowance holding that the damages paid on
account of late supply of capital assets qualify as a capital expenditure. On
appeal before the ITAT, the taxpayer contended that since the expenditure was on
account of a contractual obligation and not paid for any offence or was not
prohibited by law, it shall be allowed as a revenue
expenditure.
The ITAT
observed that the supply of equipments in connection with which the liquidated
damages were paid related to the day-to-day business activity of the tax payer
and hence is not a capital expenditure. The ITAT held that the delay in
completion of the supply contract is incidental to the business and thus,
compensation paid should be an allowable deduction. Further, the ITAT also
placed reliance on the terms of the contract where it was specifically mentioned
that the payment of liquidated damages would not be considered as a penalty and
hence is an allowable expenditure. Basis the same, the claim of the taxpayer
was allowed by the ITAT.
Huber+Suhner
Electronics Private Limited v DCIT (ITA no 4750 of 2011) (Delhi
ITAT)
Circulars/ Notifications
New India-Malaysia tax treaty notified
The new tax treaty between India and Malaysia was entered into force
on December 26, 2012 and will be effective from April 1, 2013. The key
amendments in the new treaty include introduction of a service PE clause with a
threshold of 90 days, provisions for corresponding transfer pricing adjustment,
introduction of an article for taxability of capital gains and reduction in
withholding tax rates for dividends.
Source: Notification no 7/ 2013 dated January 29, 2013, issued by
CBDT
New scheme for centralised processing of withholding tax
returns
CBDT has notified a scheme for centralised processing of withholding
tax returns. Under the scheme, certain Centralised Processing Cells would be
set up by CBDT. The salient features of the scheme include rectification of
apparent mistakes in order/ intimation by the concerned officer either on its
motion or on an application from the deductor, adjustment of refunds arising on
processing against outstanding tax demand, no requirement for personal
appearance and appellate provisions before CIT(A) presiding over the
jurisdictional AO.
Source: Notification no 3/ 2013 dated January 15, 2013, issued by
CBDT
Electoral trusts guidelines notified
CBDT has notified a scheme and rules for approval and exemption of
Electoral Trusts. The key features of the scheme include bar on receipt of cash
contributions/ voluntary contributions by the electoral trust from outside
India/ other electoral trusts, registration as a company under section 25 of the
Companies Act, 1956, distribution of contributions only to registered political
parties etc
Source: Notification no 8 and 9/2013 dated January 31, 2013, issued
by CBDT
Protocol amending the India Netherlands tax treaty
notified
CBDT has notified the Protocol for amending the India Netherlands tax
treaty signed on
May 10, 2012. The Protocol has amended Article 26 of the treaty dealing with exchange of information. The revised provisions allow sharing of banking information as well as information without any domestic interest of the supplying country. Further, the shared information is allowed to be used for non tax purposes, if allowed under the laws of both countries and approved by the supplying country. .
May 10, 2012. The Protocol has amended Article 26 of the treaty dealing with exchange of information. The revised provisions allow sharing of banking information as well as information without any domestic interest of the supplying country. Further, the shared information is allowed to be used for non tax purposes, if allowed under the laws of both countries and approved by the supplying country. .
Source: Notification no 2/2013 dated January 14, 2013, issued by
CBDT
Revision of conditions for issuance of shares against import of
capital goods
The RBI has revised the conditions for issuance of equity/ preference
shares under the FDI scheme allowed under the government route by conversion of
import of capital goods etc. Under the revised conditions, second-hand
machineries have been excluded from purview of the scheme and hence issuance of
equity shares against import of second-hand machinery shall not be allowed.
Source: Circular no 74 dated January 10, 2013, issued by
RBI
Link: http://www.rbi.org.in
India companies in hotel sector allowed to avail ECBs for repayment
of rupee loan/ fresh Rupee capital expenditure
RBI has extended the scheme, which allows Indian companies in
manufacturing and infrastructure sector to avail External Commercial Borrowings
for repayment of outstanding rupee loan availed from domestic banking systems
and/ or for fresh rupee capital expenditure, to Indian companies in hotel
sectors with a project cost of INR 250 crore or more.
Source: Circular no 78 dated January 21, 2013, issued by
RBI
Link: http://www.rbi.org.in
Revision of limits/ conditions of investment by SEBI registered FIIs/
long term investors in government securities and corporate
debts
RBI has enhanced the sub-limit of USD 10 billion for investment by
foreign institutional investors (“FII”) and the long-term investors in dated
Government securities to USD 15 million, with the condition that the investments
will not be allowed in short term paper like Treasury Bills. Further, the
residual maturity requirement has been dispensed away
with.
In relation to investment in corporate debt in other than
infrastructure sector, the same has been enhanced from USD 20 billion to USD 25
billion with the condition that the enhanced limit shall not be available for
investment in Certificate of Deposits and Commercial Papers. The revised limit
shall be applicable for SEBI registered FIIs and other long-term investors.
Further, in relation to investment in infrastructure sector, relaxations have
been introduced in lock-in period, maturity requirements.
Source: Circular no 80 dated January 24, 2013, issued by
RBI
Link: http://www.rbi.org.in
Date for filing Balance Sheet and Profit and Loss Account in XBRL
format for financial year commencing 1.04.2011
extended
The ministry of corporate affairs has extended the time limit for
filing the Balance Sheet and Profit and Loss Account in Extensible Business
Reporting Language for the financial year commencing April 1, 2011 without any
additional fee/ penalty. The extended time limit is February 28, 2013 or within
30 days from the due date of AGM of the company, whichever is
later.
Source: General Circular no 5/2013 dated February 12, 2012 issued by
MCA
Indirect
tax
Value
Added Tax (“VAT”) / Central Sales Tax (“CST”)
Gold
declared by a partner’s wife under the Voluntary Disclosure Scheme under Income
Tax does not amount to purchase in course of business and is not liable to
purchase tax
Section
7A of the Tamil Nadu General Sales Tax Act (“TNGST") levies a purchase tax inter
alia on purchase of goods meant for sale or disposal from any person on which
tax is leviable under the provisions of TNGST but has not so been paid. Section
3 of TNGST provides that every dealer in bullion, gold, silver and platinum
jewellery including articles thereof and worn-out or beaten jewellery including
casual trader whatever be his turnover for the year, shall be liable to pay tax
under TNGST at the specified rate.
The
dealer (partnership firm) disclosed a turnover of INR 11,76,630/- for the
assessment year 1997-1998 in respect of old gold under the Voluntary Disclosure
Scheme (“VDS”) of the Income Tax Act which belonged to the wife of one of the
partners. The assessing authority assumed that such disclosed gold being the
capital introduced by partner in the firm is a purchase made by the firm, and
included the estimated value of such gold in the taxable
turnover.
An
appeal against the said order of the assessing authority was filed by the dealer
with the Tribunal. The Tribunal while relying on a clarification dated January
21, 1999 issued in this regard held that gold personally declared under the VDS
and sold in the same condition will not attract tax under Section 7A of TNGST.
In the
present revision filed with the Madras HC against the order of the Tribunal, the
HC dismissed the revision petition and held that when the jewellery, in respect
of which the voluntary disclosure of income was made by the wife of one of the
partners of the firm, was pooled into the capital of the firm by her husband
could not be treated as purchase made by firm during the course of business.
Hence, such gold shall not be liable to be taxed under Section 7A of
TNGST.
State of Tamil Nadu v Variety Jewellery [2013-57-VST-190
(MAD)]
Mere
supply of goods from another state does not change the nature of transaction and
liability to pay tax remains under the Act of the state where the transaction is
entered and executed
The
taxpayer being a registered dealer under the Karnataka Sales Tax Act, 1957
(“KST”) and the CST is a manufacturer of diesel generator sets (“DG sets”). The
taxpayer entered into a works contract in respect of electrical works with a
customer in Mangalore. For execution of the said works contract, the taxpayer
procured DG sets from its branch unit in Goa which supplied the goods directly
to customer in Mangalore and also raised an invoice directly in the name of
customer.
The
taxpayer being registered in Goa as well, deposited sales tax in Goa under the
Goa Sales Tax Act and did not include the value of such goods in its KST
returns. The assessing authority in Karnataka, not satisfied by the contentions
of taxpayer, included the value of such goods for assessment under KST.
In an
appeal filed by the taxpayer before the Karnataka HC, it was held that the
present contract was executed in Karnataka for which payment is also made in
Karnataka. Movement of goods from Goa to Karnataka was under an independent
contract and the present contract did not occasion movement of goods from
outside the state. Accordingly, such a transaction would not be deemed as an
inter-state sale and would be subject to levy of tax under KST.
Ghatge Karkera Power Industries v Additional Commissioner of
Commercial taxes, Zone I, Bangalore and Others [2013-57-VST-255
(KARN)]
VAT
registration cannot be denied on the basis of absence of sufficient area under
the Tamil Nadu Value Added Tax Act, 2006 as there is no provision under the Act
specifying the requisite area for conducting business
The
taxpayer made an application for registration under the Tamil Nadu Value Added
Tax Act, 2006 (“TVAT Act”) for doing business in stainless steel pipes, ferrous
and non- ferrous metals. The registration application was rejected by the
relevant authorities on the grounds that the place of business consisted of 80
sq. ft and it was not possible to do business in such a small area. Aggrieved by
the same, the writ petition was filed by the taxpayer before the Madras HC.
The HC
held that that taxpayer has satisfied all provisions relating to application for
registration as stipulated under the TVAT Act as there is no such condition
under the TVAT Act prescribing the area for conducting business.
The HC
also relied on Circular No 11/2011 dated March 25, 2011 which clarified that
prior inspection was not necessary for granting registration except in relation
to evasion prone commodities (including iron and steel). However, the HC
clarified that the guidelines or instructions issued to authorities were for the
purpose of inspection and it did not enable the authorities to determine the
extent of land for carrying the business. It was for the taxpayer to decide the
space required for the business.
Accordingly,
the order of the assessing authority rejecting the taxpayers application being
untenable under law was set aside by the Court.
Sri
Sundha Metals v CCE [2013-57-VST-73-HC-MAD]
Benefits
provided under an exemption notification issued prior to reorganization of a
state shall continue even after the reorganization
The
taxpayer, a trader of cement, cement colours etc was a registered dealer under
the provisions of the Madhya Pradesh Commercial Tax Act, 1944 under the
erstwhile state of Madhya Pradesh prior to November 1, 2000 before its
reorganization.
The
taxpayer made some purchases from M/s L & T Limited, Raipur (“L&T”)
located in the state of Madhya Pradesh claiming exemption granted under the
erstwhile State before its reorganization.
After
the reorganization, the taxpayer was located in the newly formed state of
Chhatisgarh and continued the supply from L&T for the financial year
2002-03. However, the Revenue Authorities denied the benefit of exemption
granted prior to reorganization.
The HC
in the writ preferred before it relied on the judgment of the SC in the case of
Commissioner
of Commercial Tax v Swaran Rekha Cokes and Coals Pvt Ltd [2004-6-SCC-689]
wherein in an identical case for the state of Bihar, the SC had held the benefit
which was available to an exempted unit prior to reorganization shall continue
to the unit even after reorganization.
Accordingly,
the HC while allowing the petitions in favour of the taxpayer directed the
Revenue Authority to re-decide the matter in accordance with the aforecited
judgment of the SC.
Fairdeal Traders v Assistant Commissioner, Commercial Tax [2012- 56-
VST- 503-HC-MP]
Consideration received by a works contractor opting for a composition
scheme towards independent pure labour contracts shall not be included in the
value of taxable turnover; however, labour charges for services included in the
works contract shall be includible
The taxpayer is engaged in the activity of fabrication and erection
of structural works qualifying as ‘works contracts’ and had opted for
composition of tax under Section 17(6) of the KST. While arriving at his taxable
turnover, the taxpayer claimed an exemption towards labour and other like
charges involved in the execution of works contract. The assessing authority
denied the exemption on the basis that the taxpayer had opted for composition
rate of tax under which the total consideration is the criteria for levy of tax.
The matter reached the Karnataka HC which held that the taxpayer
would not be entitled to any exemption in respect of the labour charges included
in the works contract once he opts for a composition scheme. However, if he
enters into independent pure labour contracts where no aspect of sale is
involved, consideration received towards such contracts shall not be included in
his taxable turnover for works contract.
Accordingly, the HC remanded the matter for fresh assessment giving
ample opportunity to taxpayer to produce necessary contracts to substantiate his
claim and directed the Revenue Authorities to pass an order keeping in mind the
observations made by the Court and in accordance with the
law.
H S
Chandra Shekar Hande v State Of Karnataka [2013-57-VST-234-HC-KAR]
Excise
Exemption is available to manufacture of more than one solar lantern
as a part of solar panel under Notification No 6/ 2002 - CE dated March 2,
2002
The taxpayer is manufacturing and clearing solar lanterns under
single pack. The taxpayer clears two lanterns and a solar panel as “solar
lanterns” or “solar power generating system” in a common
package.
The Revenue Authorities contended that benefit of Notification No 6/
2002 - CE is available to one solar panel, one solar lantern and one battery and
the benefit of notification is not available on the second solar
lantern.
The Tribunal noted that Notification does not provide any condition
that the exemption is available in respect of one lantern only; therefore the
taxpayer has strong prima facie case in their favor. Accordingly, the
Tribunal waived the requirement of pre-deposit for hearing the appeal, and
stayed the recovery of demand imposed on the taxpayer.
Aura Solar Products Private Limited v CCE, 2012 [(286) ELT (703)
(CESTAT– MUM)]
CENVAT credit of duty paid on Diesel Locomotive used within factory
is admissible as accessory to capital goods if the same increases the
effectiveness of handling process
The taxpayer is engaged in the manufacture of iron and steel products
and is availing CENVAT credit of duty paid on inputs and capital goods including
diesel locomotive. This was challenged by the Revenue Authorities on the ground
that diesel locomotive is not capital goods since it is not covered under the
definition of ‘capital good’ under the Credit Rules.
The taxpayer contended that they have set up an integrated steel
plant having railway sliding within the factory premises and laid down railway
lines within the factory connecting one plant to another plant for movement of
raw material, semi finished and finished goods. The diesel locomotive acts as an
accessory to the torpedo ladle car which increases the convenience of carrying
molten metal from one place to another. The taxpayer also contended that there
is need to have some mechanical force ie diesel locomotive in the present case
for handling/ carrying the torpedo ladle car.
The Tribunal noted that although molten iron could have been handled
manually, but it is not easy to carry 300 to 350 mega tonne of molten metal
manually. Further, it noted that diesel locomotives not only increases the
effectiveness in carrying 300 to 350 mega tonne of molten metal, but without it
the handling, and in turn production of finished goods would not be
possible.
Accordingly, the diesel locomotive shall be treated as accessory of
capital goods and credit should be available.
CCE v Bhusan Steel Limited [2012 (286) ELT 745 (CESTAT-
KOL)]
Having obtained separate excise registration, the taxpayer was
entitled to take credit on eligible inputs utilized in generation of electricity
to the extent to which it is utilized in generation of electricity within its
factory but not to the extent it was supplied to another excise registered
factory albeit located in the same premises
The taxpayer was a manufacturer of cotton yarn, processed cotton
fabric, processed man made fabric etc and had two divisions namely textile
division and plastic division. Both these divisions had separate central excise
registration, common PAN number and were located on common ground surrounded by
common wall and adjoining to each other.
The taxpayer had installed DG sets / electricity generation plant to
be used in factory. It has used furnace oil as fuel in the generation of
electricity. The taxpayer had been availing CENVAT credit on the furnace oil,
used in generation of electricity. Whenever there was underutilization of
electricity in textile division and the plastic division required the
electricity, the taxpayer supplied a part of electricity so generated to the
plastic division.
The taxpayer contended that the credit of the duty paid on furnace
oil used in the generation of electricity which is supplied to plastic division
shall be available as it is used in factory of production and both the divisions
ie plastic and textile division are, in substance, common factory. Separate
central excise registrations do not make them separate factories as defined in
Central Excise Act, 1944 (“CE Act”).
The dispute reached the HC where it was held that basis the central
excise rules, in case the taxpayer has more than one place of business, he shall
obtain a separate licence in respect of each of such places of business. Further
HC held that in this case, the taxpayer has itself described the factory of the
plastic division as a separate place of business by applying and obtaining
separate central excise registration. Therefore, the taxpayer is estopped from
contending that the said plastic division factory is also within the factory of
the present unit of the taxpayer simply because both the separately registered
factories are situated within a common boundary wall. Further, the HC held that
basis the facts of the present case the taxpayer is entitled to credit on
eligible units utilized in generation of electricity to the extent to which it
is using the produced electricity within its factory which is registered for
that purpose but not to the extent supplied to a factory which is registered as
different unit.
Sintex Industries Limited v CCE [2013 (287) ELT 261
(GUJ)]
Once the allegations raised in the Show Cause Notices are admitted by
the taxpayers, it is not open for them to contend that the Settlement Commission
ought to have passed a detailed order before imposing a
penalty
Show Cause Notices were issued to the taxpayers consequent to a
search, wherein it was alleged by the Revenue Authority that the taxpayers had
cleared partially oriented yarn of higher grade by downgrading its quality in
the invoices. It was also alleged that the taxpayers had given special discounts
to certain select customers so as to reduce the value of goods, resulting in
payment of duty on lower value and subsequently such discounts were received
back by the taxpayers. The taxpayers decided to approach the Settlement
Commission to settle the dispute, where allegations so raised were admitted and
accepted by them. The Settlement Commission directed the Revenue Authorities to
rework the amounts in the light of cum duty benefit, however penalty of 15 lacs
was still imposed along with recovery of interest at 10 percent for the relevant
period. The taxpayers filed a writ petition before the Bombay HC against the
order of the Settlement Commission.
It was argued by the taxpayers that the breach of law on their part
was not deliberate and the allegations were admitted only to sought settlement
and thus avoid prolonged litigation. Further, the Settlement Commission is a
statutory body obliged to pass reasonable orders. The Revenue Authorities called
for no interference with the order passed as the taxpayers themselves opted to
forgo the normal process of adjudication and seek settlement. Moreover, the
penalty of 15 lacs imposed was less than the penalty proposed to be levied in
the Show Cause Notice.
The Court held that the Settlement Commission had been constituted as
an extra ordinary measure to enable a defaulting person to make a full and
complete disclosure/ confession to have the matter settled; it was not a place
where one can challenge the show cause notice on merits. After noting that the
Settlement Commission had imposed penalty lesser than that proposed to be
imposed in the Show Cause Notice, the Court dismissed the petition.
It was not examined by the Court whether it was open to challenge a
part and accept the other part of the order of the Settlement Commission even
when its order was in the nature of a package deal.
Indorama Synthetics India Ltd v UOI
[2013-TIOL-08-HC-MUM-CX]
Where certain processes are carried out on goods brought into the
factory and subsequently such processed goods are cleared on payment of excise
duty which is more than input credit taken, the admissibility of credit cannot
be questioned on the ground that processes undertaken do not amount to
manufacture
The taxpayers were engaged in the manufacture of ‘P D Pumps’ and
MODVAT credit was being availed by them on the purchase of such pumps. The
credit so availed was asked to be reversed by Revenue Authority on the ground
that no manufacturing activity was being carried out in respect of such goods.
In this regard, it was argued by the taxpayers that excise duty was being paid
by them in respect of processes carried out on pumps and had the processes not
amounted to manufacture, the question of payment of excise duty would not have
arisen.
The matter reached before the Gujarat HC where the Revenue
Authorities contended that credit should not be allowed to the taxpayers since
the pumps were cleared for home consumption without any manufacturing activity
carried out on them.
The HC ruled in favour of the taxpayer – it took note of the relevant
rule (ie Rule 57F of Central Excise Rules, 1944), wherein it was said that
inputs in respect of which credit is allowed may be removed under intimation to
the specified authority for home consumption provided the duty payable on
clearance in case of home consumption is not less than the input credit availed.
The HC held that as the taxpayer paid output tax more than the credit availed,
the denial of credit is unjustified.
CCE v Delta Corporation [2013 (287) ELT 15
(GUJ)]
Benefits
provided under exemption Notification No 56/2002 – CE will be available even
though the Khasra number of the industrial area where the unit is located is
different from that given under the relevant
Notification
The
taxpayer, located in Jammu & Kashmir, was in the business of manufacture of
goods which were exempt from excise duty as provided under Exemption
Notification No 56/2002 – CE subject to the condition that the goods were being
manufactured and cleared by units located in industrial growth centres,
industrial estates, export promotion industrial parks, etc as given under
Annexure II to the said Notification.
The
Revenue Authorities objected to the availment of the above exemption on the
ground that the unit was located in Khasra number other than that specified
against the corresponding industrial area under the relevant Notification. At
the Tribunal level the Revenue Authorities agreed to the fact that the goods and
the industrial area where the unit was located were specified in the
Notification but argued that duty was still payable because the units were not
located in Khasra number specified against the corresponding industrial area in
the said Annexure. It was further argued that the provisions of the Notification
be construed strictly and interpreted only basis the language used.
The
Tribunal observed that the relevant Khasra number was included in the
Notification albeit it was wrongly specified against another industrial area,
which was separated by a road from the industrial area where taxpayer’s unit was
located. After noting that the Notification did not stipulate that the unit must
also be located in the Khasra number mentioned against each industrial area, the
Tribunal dismissed the Revenue Authority’s objection by stating that just
because a Khasra number is mentioned against a wrong industrial area, the
benefit of the Notification could not be denied to the taxpayer.
CCE v
Jaycon Engineers [2013 (287) ELT 97(CESTAT – DEL)]
Service
tax
Decision of the Gujarat HC on the availability of CENVAT credit for a
manufacturer vis a vis a variety of input services
The taxpayer was a manufacturer of medicines classifiable under
chapter 30 of First Schedule to Central Excise Tariff Act, 1985. The Revenue
Authorities challenged the taxpayer’s availment of CENVAT Credit in respect of
certain services which according to them were not eligible as ‘input services’
in accordance with the definition provided under the CENVAT Credit Rules, 2004
(“Credit Rules”). The matter reached the Gujarat HC which held as follows on
the various services in question:
· Technical Testing & Analysis
The taxpayer procured these services from outside agencies for
testing of the clinical samples before the commencement of production. The
Revenue Authorities were of the view that since the products in relation to
which these services were procured have not yet been manufactured and sold, such
services will not fall under the definition of ‘input services’. The HC
observed that the taxpayer was duly paying excise duty in respect of samples
manufactured by them. Further, it was mandatory for the taxpayer to avail
technical and testing services in respect of samples before commencing the
commercial production of such samples. Therefore, such services were essential
for the taxpayer to carry on its business and hence, the same would qualify as
‘input services’.
· Commission paid to the foreign agents
The taxpayer availed services of foreign agents who were procuring
sale orders for the taxpayer. The Revenue Authorities were of the view that the
foreign agents were acting as commission agents and not involved in sales
promotion of the product. Further, according to the definition of ‘input
services’, services of commission agent do not fall under the ambit of ‘input
services’. The HC held that since there was nothing on record to indicate that
the commission agents were involved in any sales promotion activities, credit of
service tax paid on commission paid to such agents will not be
available.
· Courier Services
The taxpayer received courier services for export of goods, the
credit of which was denied on the basis such services are not used in or in
relation to manufacture of final products or clearance of final product from the
place of removal. The HC held that courier services are covered in the
inclusive part of the definition of ‘input services’ and hence credit in respect
of such services would be allowable.
· Clearing and Forwarding Services
The taxpayer received services of Clearing and Forwarding agents
across the country in relation to sale of goods in domestic market, the credit
of which was denied on the basis that such services were preformed after the
final products are cleared from the factory. The HC after analyzing the
relevant provisions held that a clearing and forwarding agent is an agent of the
principal and hence the goods stored by him after clearance of goods from the
factory are stored on behalf of the taxpayer. Since such services are preformed
before the final clearance of goods from the ‘place of removal’ and such
services are performed in relation to manufactured goods, credit of such
services will be available.
· Technical Inspection and Certification
The taxpayer availed services of technical inspection and
certification of instruments against the known standards, the credit of which
was denied on the basis that such services have no nexus with manufacture of
final products. The HC observed that such services are availed by the taxpayer
to ensure that the instruments are of prescribed standard and accuracy which are
further used to manufacture final products. Further, the ‘means' portion of the
definition of ‘input services’ is an expansive one and covers all services used
in or in relation to the manufacture of final products and it is immaterial
whether such use is direct or indirect. Furthermore, such service is used only
in relation to business activity of taxpayer and not for any other purpose and
is therefore, covered by the ‘includes' portion of the definition of ‘input
services’.
· Miscellaneous Services
In addition to the above, the taxpayer availed miscellaneous services
such as repair and maintenance of copier machine, air conditioner, water cooler,
Management Consultancy, Interior Decorator, Commercial or Industrial
Construction Services. The HC after examining the nature of these services and
definition of ‘input services’ under the Credit Rules held that some of the
aforementioned services are covered in the inclusive part of the definition
while other are coved under the ‘means’ part of the definition and therefore,
taxpayer is entitled to claim credit of service tax paid in respect of these
services.
CCE v Cadila Healthcare Ltd
[2013-TIOL-12-HC-AHM-ST]
Runways at airports would also qualify for the service tax exemptions
available vis a vis ‘roads’
The taxpayer was engaged in the business of maintenance and repairs
of roads including runways at different airports and was availing the benefit of
exemption under Notification No 24/2009-ST dated July 27, 2009 providing for an
exemption from service tax levied on services of maintenance and repair of
road. The Revenue Authorities objected to the availment of the said exemption
and the matter reached before the Bombay HC.
The HC prima facie observed that runways at the airports are a
species of the genus ‘road’ and therefore, runways should receive the same
treatment as that of roads. The HC set aside the order passed by the CESTAT,
remanded the matter to CESTAT to hear the appeal afresh and decide the matter on
merits.
D P Jain & Co Infrastructure Pvt Ltd v CCE, Nagpur
[2012-TIOL-1030-HC-MUM-ST]
Availment
of credit on Consulting Engineering Services used for R&D activities for
developing prototypes exempted from excise duty, upheld on the basis of Rule
6(5) of the Credit Rules
Taxpayers were engaged in the manufacture of motor vehicles and motor
vehicle parts under Chapter 87 of the Central Excise Tariff Act, 1985 and also
had an Engineering Research Centre (“ERC”) situated in their premises where
R&D activities were being undertaken. CENVAT credit was availed by them on
input services utilized and consumed in the R&D activities in the ERC.
Prototypes manufactured in ERC were exempted from payment of duty under
Notification No 167/71-CE dated September 11, 1971 basis which the Revenue
Authorities denied availment of credit by the taxpayers of input services ie
Consulting Engineering Services (on the ground that the same is used in or in
relation to manufacture prototypes).
Taxpayers contended that since they are manufacturing prototype motor
vehicles and also clearing them on payment of duty at the time of export, the
CENVAT credit cannot be denied in view of the provisions of Rule 6(5) of Credit
Rules. Further the prototypes were used in manufacture of motor vehicles and so
are entitled for credit.
The Tribunal prima facie held that the taxpayers are not
eligible for CENVAT credit when input services are exclusively used for
manufacture of exempted goods [Rule 6(1)]. However, given that duty was paid on
prototypes which were cleared for export, Consulting Engineering Services were
used in or in relation of the manufacture of dutiable as well as exempted goods
and would be eligible for Cenvat credit vide Rule 6(5) of the Credit Rules (as
it existed during the period of the dispute).
Tata Motors Limited v CCE [2013-TIOL-40-CESTAT-MUM]
Though decision of the AAR is binding only to the parties involved in
that ruling, but when the facts involved are similar and the question for
decision is identical, due consideration needs to be given by
Tribunal
The taxpayer conducted training courses in Aircraft Maintenance
Engineering (“AME”) and operated a flying school and sought to avail service tax
exemption under Notification No 9/2003-ST dated June 20, 2003 and 24/2004-ST
dated September 10, 2004 up to February 26, 2010 which was objected to by the
Revenue Authorities.
Reliance was sought to be placed on the advance ruling in the case of
CAE Flight Training (India) Ltd (“CFTI”) [2010 (18) STR 785 (AAR)] where in
identical circumstances it was held that to qualify as a "commercial training or
coaching centre" the certificate should be recognized by law but the certificate
of course completion issued by CFTI was not recognized by law for the time being
in force. Reliance placed on this advance ruling was objected to on the ground
that decision of the AAR is binding only to the parties involved in that ruling.
The Tribunal held that though the decision of the AAR is binding only
to the parties involved in that ruling, since the facts involved are similar and
the question for decision is identical, the decision of the AAR can be relied
upon especially because AAR is presided by a Retired Judge of the SC and the
other members of the authority are erstwhile members of the Central Board of
Excise & Customs and Central Board of Direct Taxes. Thus the status of AAR
is higher than that of this Tribunal and therefore, the Tribunal cannot ignore
the ruling by the AAR.
Bombay Flying Club v CST [2013 (29) STR 156
(CESTAT-MUM)]
Customs
Sending
of imported raw material purchased on high sea sales basis to job worker for
conversion does not amount to transfer
The
taxpayer purchased billets by executing a sale on the high seas. Subsequently,
the said goods were cleared without payment of customs duty by availing the
benefit under Notification No 51/2000 – Customs dated April 27, 2000 and
Notification No 43/ 2002 – Customs dated April 19, 2002.
The
Revenue Authorities objected on the ground that the taxpayer had transferred the
imported billets to a job-worker thereby violating the condition (vii) of both
the notifications which provides that materials imported shall not be
transferred or sold. The question whether sending the imported goods to a job
worker for conversion into angles is to be construed as ‘transfer’ reached the
Bombay HC.
The
Bombay HC held that sending of imported raw material purchased on high sea sales
basis to job worker for conversion prima facie, does not constitute
transfer of the imported raw materials, because, firstly there is no bar to get
the imported raw materials converted through a job-worker and thereafter sell
the converted goods and secondly, the taxpayer has sold the goods after its
conversion and not before its conversion.
Sanvijay Rolling & Engineering Ltd v CC (Export), Mumbai, 2013
(287) ELT 33 (BOM)
Benefit of exemption from ACD to goods intended for retail sale under
Notification No 29/2010 – Customs cannot be denied on the ground that taxpayer
has already availed exemption under Notification No 6/2006 –
CE
The taxpayer had imported microprocessors meant for fitment inside a
CPU / Laptop after availing the benefit of exemption under Notification No
6/2006 – CE dated March 1, 2006 (“CVD Exemption”) and Notification No 29/2010-
Customs dated February 27, 2010 (“ACD Exemption”).
The Revenue Authorities rejected the claim of the taxpayer on the
ground that the benefit under the ACD Exemption is available in respect of
pre-packaged goods which are intended for retail sale - considering that the
taxpayer had availed the benefit under the CVD Exemption notification, the
intention of the taxpayer is not to sell the goods in retail form thereby
disentitling them to the benefit under the ACD Exemption notification.
The Tribunal granted an unconditional stay basis the prima
facie view that since the goods in question are pre-packaged goods and since
as per Notification No 44(RE-2000)/1997-2002 dated November 24, 2000 all
pre-packaged commodities are required to be affixed with an MRP, the benefit of
the ACD Exemption notification cannot be denied on the ground that they are not
intended for retail sale.
Esys Information Technologies Pvt Ltd v Commissioner of Customs, (Acc
& Import), Mumbai
[2012-TIOL-1864-CESTAT-MUM]
Circulars
/ Notifications
Excise/
Service tax/ Customs
CBEC issued a circular providing for recovery of confirmed demands
from the tax payers. This inter alia provided that if a stay application
is not disposed of within a period of 30 days of filling of appeal, recovery
proceedings shall be initiated after 30 days from the filing of appeal – a
hugely controversial circular, interim stays have been granted against it by
various HCs and a final order too has been passed by the Hon’ble Bombay HC (in
the case of L&T, 2013-TIOL-99-HC-MUM-CX).
Source:
Circular
No 967/01/2013-CX, dated January 01, 2013
Customs
Vide a customs circular, Fixed Deposit Receipts submitted as
security for obtaining provisional Mega Power Project and consequent exemptions
status may now be replaced with Bank Guarantees
Source:
Circular No 02/2013 dated January 1, 2013
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