DG, Audit Staff may visit Head Offices of Multi Location Units -Do they have the power? (See 'DDT')

Strange things in the underpants of a 56 year old woman (See 'DDT')

Serious financial crisis in economy: FM holds meet with RBI Governor, SEBI Chief, Plan Panel Dy Chairman and former RBI Governor Dr Rangarajan;

Govt not considering any reduction in petro prices; prefers to watch volatile international crude oil market;

Step to prop up bourses: SEBI eases rules to allow promoters to up stakes;

ddt 29 oct.pdf + tradenotice_01.pdf

Export of Jewellery – Minimum value addition - reduced;

spl down.pdf

Light dues on deck cargo - current problem 'contained' but will Customs recover for past losses?

ADB story.pdf

Global financial crisis hits South Asia when it is already reeling under adverse trade shock: ADB;

rbi08cir027.pdf

Tax credits for imports into India - Review of all-in-cost ceiling;

mbuzz1110.pdf

Govt to set up Mega Food Park in Chittoor district in AP;

mbuzz1109.pdf

Duty Free Tariff Preference Scheme for Africa: 10 countries out of 49 LDCs avail so far;

mbuzz1108.pdf

68 institutions continue to have tie-ups with foreign univs without govt approval;

mbuzz1107.pdf

R & D intensity for China grows but for OECD countries declines: OECD Report;

mbuzz1106.pdf

WIPO to mark 50th anniversary of international geographical indications registration system';

2008-TIOL-519-HC-DEL-IT.pdf

CIT, Delhi Vs Usha Marketing Pvt Ltd ( Dated: October 17, 2008 )

Income tax - assessee deals in sale and transfer of shares - AO permits conversion of certain shares from investment into stock-in-trade - assessee books certain business loss - AO comes to the conclusion that it cannot be treated as business loss - CIT(A) and Tribunal uphold the order - Tribunal observes that since the transaction in shares which resulted in loss was not entailed by any business requirement rather it was a decision of the group companies decided by the group strategy and the assessee was merely used as a tool by the group and thus the loss was not genuine. However, the tribunal set aside the penalty proceedings u/s 271(1)(c) as the transaction were found to be at market value and genuine - Revenue appeals against decision to set aside penalty - Held, the tribunal has cogently dealt with both the issues and there is no contradiction in the decisions of the Tribunal as alleged by the Revenue - every addition need not result in penalty - Revenue's appeal rejected : DELHI HIGH COURT;

2008-TIOL-518-HC-P&H-IT.pdf

CIT, Chandigarh-II Vs M/s Excel Softech Ltd ( Dated : July 24, 2008 )

Income tax - Sec 10B benefits - Assessee is into export of computer software - AO disallows the benefits on the ground that it was not a new unit as it had earlier claimed deduction u/s 80HHE - CIT(A) and Tribunal the assessee's viewpoint - Held, the words “newly established undertaking” are only to identify the initial year of the period of 10 years for which the assessee is eligible for claim of exemption under Section 10B of the Act. Section 10B (1) of the Act does not use the words “newly established undertaking”. Only in the heading, the words “newly established hundred per cent export-oriented undertakings” have been mentioned. It is well settled law that headings or titles prefixed to sections or group of sections can be referred to in construing an Act of the legislation, only when the enacting words are ambiguous, but when the language of the section is clear, then the heading cannot be used to give a different effect to clear words in the section. There is no ambiguity in section 10B of the Act, which provides exemption to certain newly established hundred per cent export-oriented undertakings, on fulfilling certain conditions, for a period of ten consecutive assessment years. The initial year is the year in which the eligible undertaking begins to manufacture or produce articles or things or Computer Software. Section 10B of the Act does not provide any restriction that in each of the year of claim, the export-oriented undertaking should be newly established. Since in the present case, undisputedly, the initial year is the assessment year 1998-99, therefore, the assessee was rightly held to be fully eligible for exemption under section 10B of the Act for the assessment year under consideration i.e. 2001-02, as it was the fourth year, out of ten years beginning with the initial assessment year, in which it began to develop and export the computer software. There is no merit in this appeal, as no substantial question of law arises from the impugned order. : PUNJAB AND HARYANA HIGH COURT;

2008-TIOL-517-HC-AHM-IT.pdf + income story.pdf

DCIT Vs Amod Petrochem Pvt Ltd (Dated: June 27, 2008)

Unexplained income of the predecessor cannot be taxed in the hands of a company which came into existence after the income was shown in the accounts: Even if the credits in the books of account are deemed income, they cannot be deemed to be income in the hands of the Assessee-Company prior to its incorporation, as the Company simply does not exist. The Company could have entered into an agreement of obtaining loan only after its incorporation. Merely because the Company decides to accept the business carried on by the promoters as its own business, it cannot be presumed therefrom that the transaction on the appropriation of the income earned by the predecessor entity itself is subject to tax. What is taxable in law is the income earned and such taxability is at the point of time when it is first earned as income. For the sake of deeming a particular credit as income, the same legal position would obtain and there can be no different criterion for determining the same. : GUJARAT HIGH COURT;

2008-TIOL-519-ITAT-DEL.pdf + TP story.pdf

DCIT, New Delhi Vs M/s Carraro India Ltd ( Dated : September 30, 2008 )

Income tax - Assessee is a joint venture company - files loss return - AO finds the assessee had major exports deal with its non-resident promoter & partner and also purchased raw materials from the same company - fixes 10% profit of the total turnover and holds provisions for transfer pricing under sec 92 are applicable to the case - CIT(A) holds the loss was largely because of the huge depreciation claimed. For invoking Sec 92 the conditions of arranged business and profit less than ordinary profit need to be satisfied which cannot be seen in this case as assessee's gross profit is 28.75% of sales and is also higher than the profit of the non-resident promoter

Held, for invoking Sec 92, the three conditions need to be satisfied are a) The business is carried on between a resident and a non-resident; b)There is a close connection between the resident and non-resident party; and c) The resident earns either no profits or less than ordinary profits because of arrangement existing between parties. There is close connection between the assessee and the non-resident party. The resident had suffered net loss because of arrangement existing between the parties. And it is a case of earning of no profit by the resident and not a case of less than ordinary profit. Therefore, there is no error in the approach of the AO in application of Section 92. And since the conditions of Sec 92 are satisfied, the burden was prima facie on the assessee to show that no profit resulted because of arrangement with the non-resident. Since the assessee pleaded not reasonable opportunity was given to them, the case remanded to the AO :DELHI ITAT;

2008-TIOL-518-ITAT-DEL.pdf

AGM Protection Devices Ltd Vs DCIT, New Delhi ( Dated : July 25, 2008 )

Addition under sec. 68 towards unexplained share capital and sundry creditors – private placement of shares – duty of assessee to prove identity of creditor, genuiness of transaction and creditworthiness of the party.

In case of Private placement of shares, ITAT laid out parameters in the context of sec. 68 which are as follows :

Assessee to prima facie prove the identity of the creditor / subscriber

Genuineness of the transaction ie. whether it was transmitted through banking or any other undisputable channel

Creditworthiness / financial strength of the creditor / subscriber

If address and PAN furnished to the department alongwith copies of shareholders register, share application forms, share transfer register etc. it would constitute acceptable proof / explanation by assessee

The onus would not stand discharged if the creditor / subscriber denies or repudiate the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee

AO is duty bound to investigate the creditworthiness of the creditor/ subscriber, the genuineness of the transaction and the veracity of the repudiation.

Appeal by assessee dismissed and by revenue partly allowed. :DELHI ITAT;

2008-TIOL-517-ITAT-LKW.pdf

Guru Charan Singh Vs ACIT, Bareilly ( Dated : August 28, 2008 )

Income Tax Act – Section 132 – Validity of search warrant - Held, search warrant should be issued in the name of individual and not in the name of more than one individual and that issuance of notice commonly addressed is not sufficient to initiate proceedings in individual case – Search warrant thus bad in law - Also held, that that the material used against the assessee was not seized from the search and seizure action initiated against which assessee's name was appearing. The paper, according to the Revenue, was seized from the residence where the assessee was living with his son. The Panchnama was also prepared only in assessee's son's name. If that be so only proceedings u/s 158BD could be initiated against the assessee. : LUCKNOW ITAT;

CENTRAL EXCISE SECTION

2008-TIOL-1764-CESTAT-DEL-LB.pdf

M/s Bosch Chassis Systems India Ltd Vs CCE, Delhi III, Gurgaon (Dated: September 30, 2008)

Supplementary invoices – Cenvat Credit - Taking recourse to the Settlement Scheme and the payment of additional/differential duty on receipt of the show cause notice, per se may not necessarily treated as admission of guilt – Larger Bench of Tribunal.

Division Bench observed in the referral order that Section 11A contemplates payment of additional duty in cases of short-payment etc.; the notice having been issued invoking the extended period in terms of the proviso to sub-section (1) of Section 11A which relates to non/short payment of duty by reason of fraud, collusion etc., the payment of additional duty in terms of show cause notice may amount to admission of facts alleged, but as this tentative view was in conflict with the decision in Essar Steel Ltd. [ 2007-TIOL-2005-CESTAT-AHM ], appeal was referred to Larger Bench for decision on the following issues [See 2008-TIOL-1176-CESTAT-DEL ]

(1) Whether the assessee is entitled to take cenvat credit on the basis of supplementary invoice of the manufacturer in case additional duty of excise is paid suo motu on receipt of the show cause notice alleging wilful mis-statement or suppression of facts or contravention of the provisions of the Central Excise Act or the Rules with intent to evade duty invoking proviso to Sub-Section (1) of Section 11A of the Act?

(2) Whether filing of application before the Settlement Commission under Section 32E of the Act for waiver of interest & penalty and immunity from prosecution- after suo motu paying the entire duty demand as per the show cause notice, does not amount to admission of the facts alleged in the show cause notice as regards mis-statement or suppression of facts or contravention of the relevant statutory provisions with intent to evade payment of duty?

(3) Whether the Settlement Commission is required to record a specific finding regarding suppression of facts etc., and in the absence of any such finding, a conclusion cannot be drawn from admission of the facts alleged, so as to disentitle the applicant to take cenvat credit under the Cenvat Credit Rules?

Larger Bench decision:

++ There was/is no express provision to the effect that the manufacturer or importer will not be entitled to take Cenvat credit of the duty so paid. However, as cenvat credit can be taken only on the basis of specified documents, and in terms of clause (b) of Rule 7(1), supplementary invoice in respect of payment of additional duty is an admissible document but subject to the exception mentioned therein, it would follow that in view of the embargo or exception, where additional duty had been paid on account of non-levy or short-levy etc. by reason of fraud, collusion etc. , cenvat credit cannot be claimed on the basis of supplementary invoice in respect of such additional duty.

++ From a reading of the Settlement provisions (as existing prior to amendment by Finance Act, 2007), it would appear, that the applicant is required to make a full and true disclosure of duty liability which has not been disclosed before the jurisdictional Central Excise officer and also "the manner in which such liability has been derived", apart from the other things. The clause, "the manner in which such liability has been derived" suggests that while admitting the duty liability - in full or part - the applicant can explain the circumstances in which he could not discharge the full duty liability giving rise to impugned show cause notice. He may not admit the entire alleged duty liability but he is required to make a full and true disclosure of the liability. This is evident from the next clause "additional amount of duty accepted to be payable by him", which suggests that he may admit only part of the alleged duty liability , but in any case, he is required to disclose, fully and truly, what he believes to be his outstanding duty liability. As a matter of fact, he is required to deposit the admitted duty after his application is entertained within a time frame.

++ If the law permits the applicant to explain the non-discharge of his full duty liability, it may be difficult to hold that the payment of additional/differential duty suo motu on receipt of the show cause notice would per se amount to acceptance of the allegations that non-payment or short-payment etc. was the result of any fraud, collusion or suppression of facts etc.

++ We simply wish to emphasise that the non/short payment of duty could be bona fide and there may be good reasons for the assessee to opt for 'settlement' and not contest the show cause notice.

++ Taking recourse to the Settlement Scheme and the payment of additional/differential duty on receipt of the show cause notice, therefore, per se may not necessarily be treated as admission of guilt.

++ The admission, if any, may be found in pleadings of the applicant, that is to say "the manner" in which he seeks to explain the occurrence of the liability. In Sir Shadi Lal Sugar and General Mills Ltd. vs. C.I.T., a similar argument as one made on behalf of the Revenue in the present case was rejected in these words:

"16.... We find that the assessee admitted that these were the income of the assessee but that was not an admission that there was deliberate concealment. From agreeing to additions, it does not follow that the amount agreed to be added was concealed. There may be hundred and one reasons for such admissions, i.e. when the assessee realizes the true position it does not dispute certain disallowances but that does not absolve the revenue to prove the mens rea of quasi criminal offence..."

++ If the plea of the Revenue is accepted, it will render the entire exercise before the Settlement Commission nugatory and the provisions of Section 32E (1) ["manner in which such liability has been derived"] redundant.

++ In a nutshell, the benefit of Cenvat credit can be denied only in cases of fraud, collusion, etc., but the assessee can establish that no case of fraud, collusion etc. was made out against him. Thus, whether in the particular case, the benefit of cenvat credit has rightly been disallowed should be left to the appellate forum to consider.

++ In the above view of the matter, Issue Nos 2 and 3 are answered in the negative, that is, in favour of the assessee and against the Revenue, and it is held that the mere filing of application before Settlement Commission under Section 32E of the Act for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty as per show cause notice may not necessarily per se construed as admission of the allegations in the show cause notice as regards the fraud, collusion etc. Inference in this regard may be drawn from the contents of the application, that is, pleadings of the applicant and finding of the Settlement Commission, if any.

++ Issue No.1 pertains to the merits of the case and parties agreed that the same may be decided by the Division Bench at the stage of final disposal of the appeal.

The reference was disposed of accordingly. : DELHI CESTAT ( Larger Bench);

2008-TIOL-1763-CESTAT-MUM.pdf

M/s Deepak Fertilizers Vs CCE, Belapur (Dated: June 5, 2008)

Central Excise - Stay/Dispensation of pre-deposit - naphtha used in generation of steam which is further used in the manufacture of fertilisers - reversal of credit on the ground of non-maintenance of separate accounts under rule 6(3) of the CENVAT Credit Rule 2004 - no prima facie case for waiver of pre-deposit. : MUMBAI CESTAT;

2008-TIOL-1762-CESTAT-MAD.pdf

Srinivasa Chemical Enterprises Vs CCE, Pondicherry (Dated: July 16, 2008)

Central Excise – denial of CENVAT Credit based on the year-end discounts given by the supplier of the raw materials – unless the assessments under the relevant invoices is not revised, denial of credit is not correct and impugned orders set aside. : CHENNAI CESTAT;

2008-TIOL-1756-CESTAT-BANG.pdf

M/s Oswal Hi-Tech Pvt Ltd Vs CCE, Bangalore (Dated: June 23, 2008)

Central Excise – Reversal of CENVAT Credit on WIP after opting out of SSI Exemption – Balance sheets furnished to financial institutions showing WIP is a questionable device – No other evidence to show WIP and no evidence to show that the appellant utilized the balance CENVAT credit after opting out of SSI exemption – Credit lapses in such instances and no question of demand of duty – Imposition of penalty also set aside : BANGALORE CESTAT;

SERVICE TAX SECTION

2008-TIOL-1760-CESTAT-DEL.pdf

CC & CCE, Indore Vs M/s Nicholas Piramal India Ltd (Dated: September 25, 2008)

ST - Management Consultancy Service - Assessee receives services from eight foreign consultants - two of them had office in India - Commissioner dropped the demand related to three firms which had not authorised the assessee to pay service tax and confirms the demand for the rest two - In view of the Larger bench decision in the case of Hindustan Zinc (2008-TIOL-1149-CESTAT-DEL-LB ) the demand is set aside as it pertains to period prior to 1.1.05 :DELHI CESTAT;

2008-TIOL-1759-CESTAT-AHM.pdf

M/s Market Systems Vs CCE, Vadodara (Dated: September 25, 2008)

ST - GTA Service - Assessee avails cenvat credit for service tax paid on outward transporation of finished excisable goods beyond place of removal - Revenue declines to accept it as input service in terms of Rule 2(1) of the CCR, 2004 - Since the issue has been referred to the Larger Bench in India Cements case, the pre-deposit is dispensed with :AHMEDABAD CESTAT;

2008-TIOL-1758-CESTAT-DEL.pdf + st tds story.pdf

CCE, Jaipur-I Vs M/s Louis Berger International Inc (Dated: September 25, 2008)

ST - Management Consultancy service - Service recipient is a State Government agency and deducts TDS on the payments made to the assessee - Revenue for service tax on the gross amount - Assessee raises the issue with the service recipient which directly deposits service tax with the department - Revenue levies penalty - Commissioner (A) for cum-duty-tax and accordingly reduces demand and interest amount - Held, income tax is a liability on the assessee and TDS is payable only on behalf of the assessee by the service recipient. There is no justification for excluding the said amount from the gross amount chargeable to service tax - however, penalty is not imposable as it is a matter of interpretation of law : DELHI CESTAT;

CUSTOMS SECTION

2008-TIOL-1761-CESTAT-MUM.pdf + Shimnit Kiwalite story.pdf

Shimnit Kiwalite Industries Ltd Vs CC, Mumbai (Dated: August 8, 2008)

Customs – Valuation of goods imported – Declared value rejected and ordered for revaluation based on substantial evidence – Evidence of special relationship between the supplier and importer influencing gross undervaluation of imports available – Pre-deposit of Rs . 2 Crores ordered – Balance amount of duty with interest and penalty waived and stay application allowed subject to pre-deposit within eight weeks : MUMBAI CESTAT;

2008-TIOL-1757-CESTAT-MAD.pdf

A P Koya Vs CCE, Calicut (Dated: May 7, 2008)

Customs – Confiscation of Indian currency – No nexus between confiscated currency alleged as sale proceeds for foreign origin gold biscuits – Retraction statement cannot be rejected as an instrument of afterthought without assigning valid reasons

Customs – Confiscation of vehicle - Once the alleged complicity of the appellant with smuggling of gold biscuits was found to have been not established and benefit of doubt given to the appellant, it was not open to the Commissioner to order confiscation of the vehicle : CHENNAI CESTAT;