Service Tax - Closure of cases under Section 73(3) (See 'DDT')

Serial bomb blasts in Assam; 11 blasts reported in six minutes; 28 killed so far + 87 injured;

SC says inconsistent eye-witness accounts should be discarded;

Govt mulling proposal to cut interest rate to prop up economy;

Consumer Groups against Yahoo and Google tie-up;

New financial world order not possible without India: Lamy;

EC shifts poll date for MP to Nov 27 and for Mizoram to Dec 2;

ddt 30 0ct.pdf + standing_order.pdf

CESTAT Transfers – Ultimatum by President;

cobweb.pdf

Somalian pirates become serious Non-Tariff Barrier to global trade; India needs to save life of its citizens and cargo more proactively!

2008-TIOL-203-SC-CT.pdf + sc ct story.pdf

CC, Kolkata Vs M/s B Arun Kumar & Co (Dated: October 22, 2008)

UP Trade Tax Act - An order of assessment or re-assessment which was in existence at the point of time the notice was issued, continues to be effective unless it is varied: If it is not varied it goes without saying that it continues to be operative and effective. The period for making assessment or re-assessment is provided in sub-section (2) of Section 21. The period fixed for making assessment or re-assessment under any provision of the Act for any assessment year is two years from the end of the concerned assessment year. However, this period can be extended in terms of the proviso to sub-section (2) if the Commissioner on his own or on the basis of reasons recorded by the assessing officer is satisfied that it is just and expedient to do so to make the assessment or the re-assessment after the expiration of the period provided in sub-section (2) but in any event not after the expiration of 4 years from the end of such year notwithstanding that such assessment or re-assessment may involve a change of opinion.

In other words, the maximum period available for making assessment or re- assessment is 4 years from the end of the assessment year in question. That is no exception to this position because sub-section (2) of section 21 itself provides that such assessment or re-assessment may be made under any provision of the Act which includes Section 10-B. The power of revision by the Commissioner or such officer not below the rank of Deputy Commissioner as may be authorized in this behalf by the State Government by the notification, can be exercised by calling for and examining the records relating to any order other than an order mentioned in Section 10A passed by any officer subordinate to him for the purpose of satisfying himself as to the legality or propriety of such order. The Commissioner or the authorized officer is empowered to pass such order with respect thereof as he thinks fit.: SUPREME COURT;

mbuzz1111.pdf

Inflation further down to 10.67 per cent;

ORDER

cbdtorder141_2008.pdf

CBDT promotes 172 as ACITs; Also issues transfer order for many;

CASE LAWS

2008-TIOL-524-ITAT-BANG.pdf + cambodia story.pdf

M/s Shamanur Kallappa & Sons Vs ACIT, Davangere ( Dated : August 29, 2008 )

Income tax – Deduction claimed under s. 80HHC – Export of rice to Cambodia through STC with the appellant acting as a supporting manufacturer – Such transactions come under the category of ‘protocol exports' – Consideration received in Indian currency is also eligible for deduction – CBDT Circular No. 562 dated 23-05-1990 is a beneficial circular covering such transaction and should be interpreted liberally to extend the benefits – Realization of foreign currency or otherwise by the government not to be criteria for characterization of the transaction or for claiming the benefit of Circular : BANGALORE ITAT;

2008-TIOL-523-ITAT-MUM.pdf

M/s Bombay Oil Industries Ltd Vs ACIT, Mumbai ( Dated : September 16, 2008 )

Income tax - assessee is into manufacturing of chemicals, leasing, investments and financing - closes its chemicals divisions - files loss return but shows a receipt for assignment of certain brand names - capital gains - AO accepts the method of calculation of capital gains - CIT invokes powers u/s 263 - Held, since the twin conditions essential for invoking Sec 263 are not satisfied, the CIT order is not sustainable - assessee's appeal allowed :MUMBAI ITAT;

2008-TIOL-522-ITAT-DEL.pdf

ITO, New Delhi Vs M/s Virgin Securities & Credit Pvt Ltd ( Dated : August 22, 2008 )

Income Tax – Sale of shares – AO doubting the sale price and the purchase price of shares – CIT(A) admitted additional evidence crucial for deciding the issue under consideration and called for a remand report from AO – CIT(A) held, contract note as on date of sale and credit of sale proceeds in account of assessee certify the share sale price – As regards share purchase price it was held by CIT(A) that the notice of Extra-ordinary General Meeting for preferential allotment of shares and the letter of offer issued by the company whose shares were transferred certify the share purchase rate – Held, CIT(A) recorded correct finding after consideration of all material, hence revenue appeal dismissed. :DELHI ITAT;

2008-TIOL-521-ITAT-MAD.pdf

ACIT, Chennai Vs M/s Road Safety Club Private Ltd ( Dated : July 11, 2008 )

Matching principle – Income and expenditure should correspond to the same accounting period. Liability estimated on the basis of recognized principle of risk estimation is allowable as deduction.

Assessee is an Accident Management Solution Company and the product essentially strives to educate its members on various risks associated with daily life. It is rendering services for promoting safety amongst the members through insurance. The main purpose of the assessee's membership scheme is to instill road safety awareness among its members and also spread the culture of insurance. The assessee, though credited the whole amount of receipt on account of membership fee, requested AO to tax only 1/8th of the membership fee as the relevant year's income on matching concept. According to AO since the membership fee collected is one time non-refundable subscription, it represents income in the year of receipt. Assessee contended that since the membership fee collected by it is attached with corresponding liability of providing services through out the period of membership, the concept of matching of revenue with expenditure is necessary for determining the net income in an accounting year. This view was upheld by both CIT(A) and ITAT.

Assessee used to give incentive to exercise care to prevent accidents by giving a safety bonus to its members if it has not preferred any claim for insurance during the entire period of membership. In that event, the amount not exceeding the membership fee collected, is awarded as safety bonus at the time of closure of membership which is granted for a period upto 8 years. Assessee estimated the liability for this and claimed as deduction. According to AO the safety bonus liability is not a definite liability and depends upon the claim made by the members and hence it is contingent in nature which cannot be allowed. Assessee pleaded that the estimate was made on the basis of recognized principle of risk estimation as admitted internationally by the insurance companies. CIT(A) and ITAT allowed the claim of assessee.

Appeal by Revenue dismissed. :CHENNAI ITAT;

2008-TIOL-520-ITAT-MAD.pdf

DDIT, Chennai Vs Murugappa Chettiar Trust ( Dated : March 20, 2008 )

Violation under sec. 13(1)(d) – Only that part which violated provision will be subject to maximum marginal rate of tax and remaining income will not be taxable

Assessee trust claimed exemption under sec. 11. Since there was violation under sec. 13(1)(d), the claim of exemption was denied and the entire income was brought to tax at maximum marginal rate. On appeal to Tribunal, denial of exemption was upheld; however it was held that maximum marginal rate can be applied only to the part of the income for which violation was proved. While giving effect to the order of ITAT, AO levied maximum marginal rate on that part of the income which violated sec. 13(1)(d) and the balance income was taxed at normal rate.

On appeal it was held that forfeiture of exemption in respect of some part of the income due to violation of sec. 13(1)(d) would not affect the privilege available to the assessee in respect of the remaining part of the income and hence the remaining part of the income cannot be taxed at all.

Appeal by revenue dismissed. :CHENNAI ITAT;

CENTRAL EXCISE SECTION

2008-TIOL-1771-CESTAT-MUM-LB.pdf + LB story.pdf

Modernova Plastyles Pvt Ltd Vs CCE, Raigad (Dated: October 10, 2008)

Removal of capital goods, whether used or not , is to be done after reversal of Cenvat Credit availed – Larger Bench of Tribunal.

Conflicting views of the Division Benches Madura Coats Pvt. Ltd. [ 2005-TIOL-891-CESTAT-BANG ] and Bilt Industrial Packaging Co. Ltd. [ 2007-TIOL-1800-CESTAT-MUM ] on the issue – whether Cenvat credit has to be reversed on capital goods when they are removed from factory after use – Matter referred to Larger Bench [See Modernova Plastyles Pvt. Ltd. ( 2007-TIOL-1800-CESTAT-MUM ]

Larger Bench decision:-

The expression “as such” has to be interpreted as commonly understood, which is in the “original form” and “without any addition, alteration or modification”.  It does not have any connection with the goods (capital goods) being new/unused or used.  In Sarkar's “Words & Phrases of Excise, Customs & Service Tax” , the expression “as such” has been defined as “in or by itself alone”.  It does not distinguish between a new/unused and a used product.

In the case of BILT Industrial Packaging Co. Ltd. vs. CCE, Salem ( 2007-TIOL-1789-CESTAT-MAD ), the Tribunal has brought out how, in Rule 57S(2) as it earlier stood, the expressions “without being used” and “after being used” were mentioned, and subsequently these two clauses were merged into one by using the expression “as such” which clearly shows that the expression is intended to cover both capital goods, cleared without use and cleared after being put to use.

Ever since the inception of the Modvat/Cenvat Scheme, capital goods, whether used or unused, were allowed to be removed from a factory only on payment of duty or on reversal of cenvat credit taken.

Initially, used capital goods could be removed after reversing proportionate credit depending upon the period of use, as per Notification 23/94-CE (N.T) dated 20.5.1994.  This system was later changed to charging duty on used capital goods, cleared on the transaction value as per notification 6/2001-CE (N.T) dated 1.3.2001 and w.e.f 13.11.2007 vide notification no. 39/2007-CE (N.T), the concept of reversal of proportionate credit has been reintroduced.

If the expression “as such” is held to cover only unused or new capital goods, manufacturers who wish to remove used capital goods to job worker's premises for testing, repairing, reconditioning etc. would not be able to avail of the facility under Rule 4(5)(a).  Further, if the expression “as such” is interpreted to mean new or unused capital goods, then the question of testing, repairing or reconditioning them does not arise and the terms ‘testing', ‘repairing' and ‘reconditioning' would become redundant, and any interpretation which results in rendering any portion of rule or legislation redundant , should be avoided as held by the Apex Court in Amrit Paper vs. CCE, Ludhiana [ 2006-TIOL-85-SC-CX ] and Rajesh Kumar Sharma vs. UOI [ 2007-TIOL-16-SC-CUS ].

The decision of the Tribunal in Cummins India Ltd. vs. CCE, Pune-III = [ 2007-TIOL-1620-CESTAT-MUM ], which has been upheld by the Bombay High Court's order dated 23.7.2008 in Central Excise Appeal no. 232 of 2007, only deals with the provisions of Rule 3(4)(c) and does not consider the provisions of Rule 4(5)(a) and, therefore, cannot be said to cover the present issue.

In the case of Max India Ltd. vs. CCE, Chandigarh 2008 (228) ELT 328 = [ 2008-TIOL-1097-CESTAT-DEL ], the Tribunal held that even used capital goods were covered by the expression “as such” occurring in Rules 3(4)(c) and 4(5)(a). : MUMBAI CESTAT ( Larger Bench);

2008-TIOL-1770-CESTAT-MAD.pdf

CCE, Chennai Vs Numeric Power Systems Ltd (Dated: July 31, 2008)

Central Excise – classification – cabinets / boxes for UPS are classifiable under heading 85.04, but not under 85.43 – revenue appeal has no merit. : CHENNAI CESTAT;

2008-TIOL-1769-CESTAT-AHM.pdf

CCE, Rajkot Vs M/s Indian Steel Corporation Ltd (Dated: August 26, 2008)

Central Excise - exemption under Notification No 39/2001 CE - whether allowed for new products launched after the cut off date - even if a new product is added, the same stands manufactured by the respondents by using the plant & machinery which were already installed in their factory upto the cut off date and without addition of new plant & machinery - exemption is allowed in view of the clarification given by the Board.: AHMEDABAD CESTAT;

2008-TIOL-1768-CESTAT-MAD.pdf

CCE, Chennai Vs Rane Brake Linings Ltd (Dated: May 7, 2008)

Central Excise – Provisional assessments - Claim of abatement towards freight, insurance and turnover tax from deport sale price – Facts of assessee not claiming abatement of equalized freight from the depot sale price and finalization of provisional assessments under Rule 9B not in dispute – Reliance by Appellate Authority on Apex Court judgment in Baroda Electric Meters Ltd case not challenged by Revenue – Impugned order of Commissioner (Appeals) in accordance with law : CHENNAI CESTAT;

SERVICE TAX SECTION

2008-TIOL-1766-CESTAT-MUM.pdf

Indian Oil Corporation Ltd Vs CC & CE, Goa (Dated: July 24, 2008)

ST - Storage and warehousing service - Assessee collects licence fee from dealers for storage of petroleum products - Though the amount collected by the assessee seems to be fees charged as licence fee but in view of the Tribunal's decision in the case of Finolex Industries and not very clear facts, the waiver from pre-deposit is granted : MUMBAI CESTAT;

2008-TIOL-1765-CESTAT-DEL.pdf

Mahanagar Telephone Nigam Ltd Vs CST, New Delhi (Dated: September 23, 2008)

ST - telecom service - assessee is a public sector undertaking - Revenue demands Rs 11 Cr - Assessee alleges that the Board has issued guidelines to resolve the issue without issuing SCN - Since the SCN has been issued as per the statutre, the case is remanded to the Commissioner(A) and the assessee is directed to file reply with evidence : DELHI CESTAT;

CUSTOMS SECTION

NOTIFICATION

ctariff08_110.pdf

RNI-registered newspapers can now import newsprint at 2% basic customs duty;

CASE LAWS

2008-TIOL-204-SC-CUS.pdf + sc cus story.pdf

CC, Kolkata Vs M/s B Arun Kumar & Co (Dated: October 22, 2008)

Refund granted while reference application was pending and Tribunal's order was stayed – assessee asked to pay back the refunded amount with interest – matter remanded to Tribunal: SUPREME COURT;

2008-TIOL-1767-CESTAT-MAD.pdf

Shri Ejaz Ahmed Vs CC, Chennai (Dated: July 31, 2008)

Customs – confiscation of imported goods under Section 111 (d) and 111 (m) of the Customs Act – the appellants were not supplied with the relied upon documents and the test reports – matter remanded to pass fresh speaking order after supplying the copies of relied upon documents. : CHENNAI CESTAT;