Cofeposa case: 'For a self respecting man death is preferable to dishonour' (See 'DDT')

Cabinet Secretary reiterates instructions to strictly adhere to timelines (See 'DDT')

CBDT asks CCITs to send list of 10 officers from each jurisdiction for election duties;

Kamal Nath says exports target of USD 200 bn to be revised downward; New package being discussed;

Ransom paid; Somalian pirates release Japanese vessel with 18 Indian crew but seize another cargo ship of South Korean origin with 23 crew ;

ddt 17 nov.pdf + cabinet_circular_do_letter.pdf

For a self respecting man death is preferable to dishonour;

tiol special guest.pdf

The Decline and Fall of Government Audit!

guest column.pdf

Physician samples - The Larger Bench twist!

mbuzz1173.pdf

India, Malaysis agree to upgrade air services agreement ;

mbuzz1172.pdf

India emerges second largest cement producer; cement also remains second largest emitter of CO2;

mbuzz1171.pdf

Kamal Nath says exports target of USD 200 bn to be revised downward; New package being discussed;

cbdtorder147_2008.pdf

CBDT transfers 7 ACIT/DCITs at All India level;

CASE LAWS

2008-TIOL-214-SC-IT.pdf

M/s India Cine Agencies Vs CIT, Madras ( Dated : November 12, 2008 )

Income tax - Sec 32AB benefits - assessee converts jumbo rolls of photographic films into small rolls of various sizes - claims Sec 32AB, Sec 80HH and Sec 80I benefits - AO says it is neither manufacture nor production - issue travels to Apex Court with conflicting rulings coming from various High Courts - Held, the word production has much wider connotation than the word 'manufacture' which refers to raw materials processing leading to emergence of a new product with its own commercial name, use and character and capable of being marketable. A manufacture can entail multiple processes and each processing stage can involve production but not manufactured good until a new product with distinct commercial name and use emerges and the same cannot be reversed to the first stage of the raw materials. Assessee's appeal allowed

Alternate argument: If there was no manufacturing activity, then the question of referring to Item 10 of the Eleventh Schedule for the purpose of exclusion does not arise. The Eleventh Schedule, which was inserted by Finance (No.2) Act, 1977 w.e.f. 1.4.1978 has reference to Sections 32A, 32AB, 80CC (3)(a)(i), 80-I(2), 80J(4) and 88A (3)(a)(i) of the Act. Assessee cannot be denied benefits : SUPREME COURT;

2008-TIOL-558-ITAT-MUM.pdf + bhatt story.pdf

Ms Pooja Bhatt Vs CIT, Mumbai ( Dated : October 20, 2008 )

Income tax - DTAA between India-Canada - assessee performs in an entertainment show - TDS deducted from payments made to her - Assessment of global income as per domestic laws - Assessee claims exemption under Article 18 of DTAA - AO disallows but allows relief u/s 80RR - CIT(A) confirms the order - held, the income derived in Canada is not taxable in India as the expression ''may be taxed in other state'' used in the tax treaty clearly percludes the state of residence to tax the income which has the source in the other state.

The Scheme of taxation enshrined in the tax treaty is divided into three categories. One of the categories clearly talks about certain heads of income which both the contracting parties can tax. However, the income of the assessee does not figure in that chapter and if the Revenue's contention is accepted that the expression ''may be taxed in other state'' entitles both the parties then it would render the scheme of taxation given in the treaty meaningless : MUMBAI ITAT;

2008-TIOL-557-ITAT-DEL.pdf

Xerox India Ltd Vs DCIT ( Dated : June 27, 2008 )

Income tax - AO on ad hoc basis disallows certain percentage of a sum claimed as business promotion and general expenses - held, AO cannot make additions based on surmises and conjectures. Without corroborative evidences such additions are bald and legally unsusstainable

Assessee floats two investment companies - AO assesses income of these companies in the hand of the assessee by treating them as paper companies - It is a settled law that all large corporates create independent investment company having the same set of Directors and often do not undertake agressive business except for investment in the Group companies - Held, as long as their transactions are at arm's length, they cannot be treated as paper companies and their income is to be assessed separately from the assessee : DELHI ITAT;

2008-TIOL-556-ITAT-DEL.pdf

Satish Kumar Kapoor Vs ACIT, New Delhi ( Dated : July 8, 2008 )

Income tax - search - cash found - assessee deposed that he had received cash without furnishing any guarantee from D who was known to the assessee for the past two months through VS whose address was not known to the assessee - during the course of the assessment proceedings assessee stated that he had received cash against advance for sale of his property which he co-owned with his brother - block assessment was framed by adding the cash found as undisclosed income on the basis of alleged discrepancy in assesse's statement.

Held, that though there were some inconsistencies in the statements of the assessee but that did not materiality alter the transaction between the parties - D had deposed in its statement that it had advanced money to the assessee for a property transaction and that an agreement was entered into for the purpose and its books of accounts were also examined by the DDIT and the AO were in no discrepancies were pointed out – Agreement to sell was filed by assessee evidencing the transaction between the parties – Held, that there was no discussion about these evidences in the assessment order or in the appellate order of the CIT (A), and no fact or evidence to controvert and rebut these documentary evidence were bought on record by revenue. Addition made deleted. : DELHI ITAT;

2008-TIOL-555-ITAT-MAD.pdf

DCIT, Chennai Vs M/s Parry And Company Limited ( Dated : June 03, 2008 )

Transactions at arms length – held not to be sham

During the year assessee sold shares of PCL ( a group company ) to a group concern and claimed Long Tern capital Loss of Rs. 522 lakhs. According to AO, assessee was due to receive huge Long Term capital gains on sale of shares of Bush Boake Allen India Ltd. and only to offset tax on such gains assessee artificially booked this loss. Since the transaction resulting in huge loss was with sister concern, AO wanted to lift the corporate veil so as to block the device adopted by assessee to avoid tax on capital gains.

On appeal, assessee contended that PCL shares were sold by assessee to sister concern @ Rs. 50 per share when the prevailing market rate was Rs. 42 per share and hence the transaction was at arms length. Further the sale price was fixed on the basis of valuation made by a Chartered Accountant. Tribunal held that the transactions was as per the provisions of law and hence the I.T. authorities cannot enter into the shoes of the assessee to decide the prudence of commercial expediency.

Appeal by Revenue dismissed. : CHENNAI ITAT;

CENTRAL EXCISE SECTION

CIRCULAR

excircular877.pdf

Clarification regarding reversal of Cenvat Credit in case of trade discount;

CASE LAWS

2008-TIOL-1877-CESTAT-MUM-LB.pdf + LB story.pdf

M/s Nicholas Piramel (I) Ltd Vs CCE, Thane-I (Dated: October 23, 2008)

“Whether the provisions of Rule 6(3)(b) of the Cenvat Credit Rules, 2002 are applicable or not, when the amount equivalent to the Cenvat credit attributable to the inputs used in, or in relation to, the manufacture of the exempted final product has been paid prior to the removal of the exempted final product from the factory?”

Majority View of Vice President and Member(Judicial)

“7. It can be noticed from the above reproduced rule 57CC of the Central Excise Rules, 1944, and more specifically sub-rule(1), that the obligation cast upon the manufacturer in the current Rule 6 (3) (b) is pari materia unless the provisions of Sub-rule (9) are complied with. Combined reading of Rule 57CC (1) and 57CC (9) would indicate, that Rule 6(3) (b) has been carved out of a combination of the said sub-rule of Rule 57CC of Central Excise Rules, 1944.

8. We find that the provisions of Rule 57AD of Central Excise Rules, 1944, are pari materia with erstwhile rule 57CC of Central Excise Rules, 1944 and are also pari materia with rule 6 of Cenvat Credit Rules 2002.

9. It can be noticed from the above reproduced judgments of the Hon'ble Supreme Court and the Hon'ble High Court, that it is the settled law that reversal of the credit taken on the inputs is as good as non-availment of the credit on the inputs.

10. To our mind, the decisions of the Hon'ble Supreme Court in the case of Life Long Appliances [ 2006-TIOL-25-SC-CX ] (Supra), following the decision of Chandrapur Magnet Wires Ltd. [ 2002-TIOL-41-SC-CX ] (Supra) and the judgment of Hon'ble Apex Court in the case of Bombay Dyeing Manufacturing, [ 2007-TIOL-141-SC-CX ] (Supra) and the judgment of the Hon'ble High Court of Bombay in the case of Concept Pharmaceuticals Ltd. (Supra) squarely cover the issue in favour of the assessee.

11. We find that the contrary decision in the case of Maa Kamakhya Marbles (P) Ltd. and National Information Technologies Ltd. taking the view that reversal of input credit is not enough but 8% or 10% of the value of the exempted goods needs to be paid by the assessee, were delivered without noticing the decision of the Hon'ble Apex Court in the case of Chandrapur Magnet Wires Pvt. Ltd. (Supra). We find that other submissions made and case laws referred by both the sides need not be gone into, as the issue before us, is squarely settled by ratio of the decisions of Apex Court and Hon'ble High Court of Bombay.

12. In view of the above reasoning we answer reference as under:-

"The provisions of Rule 6(3) (b) of the Cenvat Credit Rules 2002 are not applicable when the amount equivalent to the Cenvat Credit attributable to the common inputs used in, or in relation to, the manufacture of exempted final products has been paid prior to the removal of exempted final products from the factory".

Minority view of Member(Technical)

“14. I regret the reliance placed upon the decision of the Supreme Court is misplaced. What binds is the ratio of a decision and not the logical extensions there from.

16. If the interpretation put by the majority order is held to be correct, it will render the provisions of Rule 6 (3)(b) ibid providing for payment of an amount equal to 8% or 10% rather otiose. This militates against an interpretation, which renders it superfluous and of no significance. It cannot be presumed that the Central Government introduced the said rule without any meaning, significance or purpose.

21. None of the aforesaid decisions can be considered as a ratio for the proposition that the proportional reversal of cenvat credit taken on inputs used in manufacture of exempted goods will ipso facto satisfy the requirements of Rule 6(3)(b) of the CENVAT Credit Rules, 2002.

23. It is pertinent to note that the Government has amended Rule 6 of the CENVAT Credit Rules, 2004 with effect from April, 2008. Now a manufacturer, using common inputs or input services for manufacturer of dutiable as well as exempted goods and opting not to maintain separate accounts has the following options:

(i) reverse the credit attributable (to be worked out in a manner prescribed in the rule) to the inputs and input services used in the manufacture of exempted goods; or
(ii) pay 10% amount of the value (to be determined in accordance with the provisions of section 4/4A of the Central Excise Act. 1944) of the exempted goods.

There is no provision for giving retrospective effect to this amendment. It cannot be given, as the amount of reversal of credit has to be worked out in a manner prescribed in the Rules. There was no such prescription prior to the amendment. The decision of the majority in this case will make the amendment superfluous. Such interpretation has to be avoided.”

Majority order

"The provisions of Rule 6(3)(b) of the Cenvat Credit Rules 2002 are not applicable when the amount equivalent to the Cenvat Credit attributable to the common inputs used in, or in relation to, the manufacture of exempted final products has been paid prior to the removal of exempted final products from the factory".

In view of majority order, reference answered in favour of assessee: MUMBAI CESTAT (Larger Bench);

2008-TIOL-1876-CESTAT-MAD.pdf

Sudhan Spinning Mills Ltd Vs CCE, Madurai (Dated: July 10, 2008)

Central Excise – Modvat Credit on capital goods used in manufacture of carded / combed cotton which is not specified as a final product under Rule 57 Q – credit cannot be disallowed in view of Supreme Court ruling in Ballarpur Industries case. : CHENNAI CESTAT;

2008-TIOL-1875-CESTAT-BANG.pdf

CCE, Guntur Vs M/s The Andhra Farm Chemicals Corporation Ltd, Andhra Pradesh (Dated: July 25, 2008)

Central Excise – CENVAT Credit – Duty paid on materials used for maintenance of plant & machinery eligible as CENVAT Credit – Issue no longer res integra: BANGALORE CESTAT;

2008-TIOL-1874-CESTAT-MAD.pdf

CCE, Chennai Vs M/s Entex Private Ltd (Dated: July 28, 2008)

Central Excise – Section 3A – Independent textile processors – the appellant availed abatement for closure of the unit for less than one month without following the procedure under Rule 96ZQ(7)(e) - Board, in circular dated 15.9.1999, took the view that an independent textile processor claiming abatement of duty for any period of non-operation of stenter should not be compelled to pay duty first and then claim abatement – the liberal approach suggested by the Board should not be resisted by the department. : CHENNAI CESTAT;

SERVICE TAX SECTION

2008-TIOL-565-HC-MAD-ST.pdf + GTA Story.pdf

Inox Air Products Ltd Vs CESTAT (Dated: August 8, 2008)

Service Tax – GTA – outward transport not input service? – Stay granted - It is brought to the notice of this court that in number of similar cases, the Tribunal granted waiver. Considering consistent stand taken by the Tribunal wherein full waiver of pre-deposit was granted, there is no reason for the Tribunal to deny the said benefit to the petitioner, but directing the petitioner to deposit a sum of Rs. 57,488/-. In view of the above said fact, the impugned order of the first respondent dated 14.2.2008, is set aside with direction to the first respondent to grant full waiver of predeposit and also to grant stay of recovery of penalty amount and take up the appeal and decide the same on merits and in accordance with law : MADRAS HIGH COURT ;

2008-TIOL-1872-CESTAT-BANG.pdf

Toyota Kirloskar Motor Pvt Ltd Vs CCE (LTU), Bangalore (Dated: August 5, 2008)

Service Tax – Expenses related to Rajyotsava day and Colour photography expenses incurred for inauguration police station cannot be brought within the ambit of activities related to business – Credit not available on such services – Assessee under bonafide belief with regard to definition of input service - Allegation of intention to evade duty ‘or' willful suppression of facts not explicitly brought out in SCN - Demands are hit by limitation: BANGALORE CESTAT;

2008-TIOL-1871-CESTAT-AHM.pdf

CCE, Rajkot Vs Rajhans Metals Pvt Ltd (Dated: August 21, 2008)

ST - Cenvat credit on GTA Service - assessee avails credit for transporation of goods from factory to the consignment agent's premises - Since the premises of the consignment agent are also defined as a place of removal and the property in the goods does not pass to a the agent, credit is available to the assessee : AHMEDABAD CESTAT;

CUSTOMS SECTION

2008-TIOL-1873-CESTAT-DEL.pdf

M/s Radnik Exports Vs CCE, Delhi-IV, Faridabad (Dated: June 27, 2008)

Customs - Conversion of shipping bill from Drawback scheme to DEEC scheme - As per the condition of the advance licence the imported raw material is to be used in the imported goods with 50% value addition and the export should be made through the same port, from where the goods were imported - In the instant case goods were not examined at the time of export to ascertain as to whether the same fulfilled the condition under DEEC scheme - Evidence to show that the duty free imported material is 100% rayon fabric whereas it is declared as 100% viscose by appellant in export documents - No infirmity in impugned order - Claim for conversion of shipping bill has no merits : DELHICESTAT;