Central Excise - MRP valuation - Abatement reduced but what about Rule 6 amendment? (See 'DDT')

Cabinet gives nod to Integrated Energy Policy + National Meat & Poultry Board;

Only Indian Citizens, not OCI and PIO, to represent India in international sports competition: Govt;

Repair and restoration of water bodies gets Rs 6000 Cr from Cabinet;

Inflation comes down to 6.61 %: Govt;

Slowdown in economy forces North Block to scale down internal targets for Direct and Indirect taxes;

Oil PSUs officers unhappy with pay-hike; proppse to go on strike from Jan 7, 2009;

Govt issues Rs 4000 Cr fertiliser bonds at 6.2% interest rate;

CCEA allows Central PUEs to invest surplus funds in Mutual Funds;

CCEA gives nod to Suzlon Energy for Right Issue of equity not exceeding Rs 1800 Crore;

ddt 26 dec.pdf

Reduction in duty rates across the board – Shouldn't abatement rates and rule 6 amount payment follow suit?

Legal Potpourri.pdf

Financial Meltdown: 'Those who sow the wind shall reap the whirlwind'

cobweb.pdf

Income Tax - Transfer Pricing: A tale of 'hearing' impairment!

ombudsman story.pdf

Banking Ombudsman Scheme: Complaints against foreign banks and new pvt banks flood RBI; Govt Departments also join swelling list of complainants;

rbi08cir043.pdf

Settlement system under ACU Mechanism;

mbuzz1306.pdf

Integrated Energy Policy gets Cabinet nod;

mbuzz1305.pdf

Only Indian Citizens, not OCI and PIO, to represent India in international sports competition: Govt;

mbuzz1304.pdf

Cabinet approves National Meat & Poultry Board with Rs 14.6 Cr budget;

mbuzz1303.pdf

Repair and restoration of water bodies gets Rs 6000 Cr from Cabinet;

mbuzz1302.pdf

Cabinet okays agri pact with Serbia; gives nod to revised air pact with S Africa;

2008-TIOL-24-ARA-IT.pdf + ara story.pdf

M/s Rural Electrification Corporation Ltd (Dated: December 19, 2008)

'Swapping Premium' – Rural Electrification Corporation Limited entitled for deduction under Section 36 - profits derived from the business of providing long-term finance for industrial or agricultural development or the development of infrastructural facility in India:- Section 36(1)(viii) of the Act lays down that the deduction is available upto 40% of the profits derived from the business of providing long-term finance for industrial or agricultural development or the development of infrastructural facility in India. The applicant is a public company incorporated under the Companies Act 1956 in which 100% share-capital was held by the Central Government during the year in question. However, pursuant to an initial public offer of Rs.15.61 crore in February 2008, the share holding of the Government of India has been reduced from 100% to 81.82%. Thus, even now more than 50% share is held by the Central Government. The paid up share capital of the applicant is to the tune of Rs.780.6 crores . As such, the applicant is a Government Company and a public company as well. That being so, the applicant is an eligible entity i.e. a financial corporation as laid down in the section 36(1)(viii) of the Act. The applicant is no doubt a financial corporation engaged in providing the long-term finance for the development of industry and agriculture in India as discussed above because electrification is the sheet anchor of such development. Approved by the Central Government of India as being eligible for the deduction under section 36(1)(viii) of the Act the applicant's eligibility status has not been doubted by the Revenue in course of the assessment proceedings.

Engaged in the business of generation, distribution or transmission of power, the applicant accordingly satisfies the requirements of being an eligible entity' as laid down in Section 36(1)(viii) of the Act.:ADVANCE RULING AUTHORITY;

2008-TIOL-655-HC-KOL-IT-LB.pdf + LB story.pdf

P G & Sawoo P Ltd & Another Vs ACIT, Calcutta I (Dated: September 26, 2008)

Income tax - rent - assessee rents out premises to a govt department - rent enhanced in 1994 with retrospective effect from 1987 - Reassessment u/s 147 - Sec 148 notice challenged on the ground that since the returns for the AYs 1989 to 94 were filed, and at the time filing them, such income had not accured to the assessee and it has also become time-barred for some of the AYs - Since the assessee itself had written a letter to the Revenue for a settlement of its tax liability and also offered to pay interest on the rent corresponding to some of the AYs and an intimation u/s 143(1)(a) was given which is as good as assessment orders and that being the case That being the case, Explanation 2 (c) to Section 147 is applicable and it cannot, therefore, be said that the impugned Notice under Section 148 is vitiated - Assessee's appeal dismissed

Conflict of judgements in the case of Hamilton and Hope India case - Matter goes to Larger Bench - Held, there is no conflict of decisions as

++ in Hamilton's case the Court laid down the ratio that the rent of the past year increased retrospectively shall be the annual rent of the said past year or years but cannot be said to be the annual rent of the year in which the said amount was received. It was also held that the said amount which was received by the landlord subsequently being the enhanced rent is nothing to yield of the house property and the character of such receipt, being the rent shall continue to be an income from the house property.

++ in the Hope India's case it has been laid down that a claim made by a landlord for enhancement of rent cannot be said to be an amount within the meaning of Section 23(1) of the Act. Since a claim or a demand by itself does not come within the purview of the word “income received or receivable”. In this case the Division Bench duly considered the Hamilton's case and observed that the question raised in this case had not been raised in that Hamilton's case at all.: CALCUTTA HIGH COURT (Larger bench);

2008-TIOL-654-HC-P&H-IT.pdf

M/s Self Knitting Works Vs UoI (Dated: December 5, 2008)

Income tax - Search u/s 132 - assessees challenge the validity of search on the ground of lack of satisfaction recorded and hostility by one of the respondents who was complained against in CBI - held, since the satisfaction has been duly recorded by the Revenue, it is not advisable to go into the merit of the case at this stage. Stay on assessee order vacated and the case on plea of the assessee is to be transferred to Chandigarh for fair assessment.

As regards the allegation that some of the Income Tax officers have illegally been collecting money in the name of a Trust, CBDT Chairman is directed to look into the case himself or nominate an office of appropriate level to have the same investigated:PUNJAB AND HARYANA HIGH COURT;

2008-TIOL-653-HC-DEL-IT.pdf

CIT Vs M/s Siel Industrial Estate Ltd (Dated: December 9, 2008)

Income tax - penalty u/s 271(1)(c) - Tribunal disallows on the ground that the AO did not record satisfaction - Introduction of sub-section 1B in Sec 271 w.e.f 1.4.1989 - held, by virtue of the new provision where a direction for initiation of penalty proceedings under clause (c) of sub- section (1) is made in the assessment order, such assessment order is deemed to constitute the satisfaction of the Assessing Officer for initiation of penalty proceedings. For the deeming provision to apply, there must be a direction for initiation of penalty proceedings. But deeming fiction does get triggered in these appeals as there is no such direction for initiation of penalty proceedings - Revenue's appeal dismissed:DELHI HIGH COURT;

2008-TIOL-652-HC-P&H-IT.pdf

CIT, Ludhiana Vs M/s Hero Cycles Limited (Dated: December 9, 2008)

Income tax - assessee is a manufacturer - pays penalty to PSEB for overdrawing of electricity during peak hours - AO disallows but Tribunal deletes the addition made - Held, there is no doubt that payments made in the nature of penalty or fine for any wrongful act cannot be allowed as permissible deductions but mere label of the payment is not conclusive. Certain payments may be incidental to the business and have to be allowed on the test of ‘commercial expediency', if no violation of law or public policy is involved. Where penalty is not for deliberate violation of law, the amount may be allowed as deduction. There may be cases involving illegality or moral turpitude on the one hand and innocent violation on the other. Law is well settled. Revenue's appeal dismissed:PUNJAB AND HARYANA HIGH COURT;

2008-TIOL-651-HC-DEL-IT.pdf

Anil Kumar Saha Vs CCIT, New Delhi (Dated: December 5, 2008)

Income tax - Revenue issues order of transfer of cases u/s 127(2) - Assessees plead since their group companies are registered in Delhi and their operations are generally in Noida it would be too much inconvenience to attend day to day assessment proceedings in Meerut - held, since the Revenue has not applied its mind to the objections raised, the petitions are allowed with the direction to issue fresh order after recording its mind as to how the objections were met:DELHI HIGH COURT;

CENTRAL EXCISE SECTION

2008-TIOL-2124-CESTAT-MUM.pdf + gold story.pdf

CCE, Belapur Vs M/s Nandan Petrochem Ltd (Dated: December 2, 2008)

Valuation – Cost of gift articles viz. gold/silver coins put inside the containers of the lubricating oil or sunglasses and watches given as gifts with lubricating oil containers is required to be included in the Assessable value of Lubricating oil – Revenue also wins its claim of equivalent penalty before Tribunal.

Tribunal's observations –

We find that supply of free gifts have been held, both by the Tribunal and the Apex Court, in a series of decisions, Glaxo (I) Ltd. [upheld by the Supreme Court], Hindustan Coca Products Ltd. , Geoffrey Manners and Co. Ltd . [2002-TIOL-65-CESTAT-Mum] , Baljeevan Karyalaya, Union of India vs. J.G.Glass Industries Ltd. [2002-TIOL-112-SC-CX] and Siddhartha Tubes Ltd. [2005-TIOL-161-SC-CX] as an element of expenses which acts as incentive for sales promotion and is, therefore, an item of sale expenses, whose cost is required to be included in the cost of production as the Central Excise duty is chargeable on the price at which the goods are sold.

Once it is an element of expenses, its cost has to be included in the cost of production whether supplied by M/s Tata-BP or otherwise. The assessees were incurring extra labour charges for putting the coins in the container or packing the gifts along with the container which form part of the job charges, but they did not include the cost of free gifts.

The Apex Court has in its clarificatory order in Ujagar Prints [2002-TIOL-03-SC-CX] held that duty is required to be paid at the price at which the trader sells the goods provided that the same does not include trader's profits. The only exclusion allowed is that of profits and for determining the profits, the expenses have to be deducted first and once free gifts form part of an expense, it cannot form part of profit and accordingly its value was required to be included.

The assessees plea that this part of the clarificatory order refers to the traders and not to manufacturers is not convincing as once the goods are manufactured on behalf of some other person, it does not make any difference whether the person on whose behalf the goods are manufactured on job charges basis is a trader or a manufacturer.

As regards time bar, since this was an item of expense, and was required to be packed by the job worker, he should have disclosed this activity in his declaration being an element of expense and therefore non-declaration of such activity amounts to suppression and accordingly extended period was invocable.

The order of the Commissioner(Appeals) demanding duty with interest is upheld and as regards penalty under Sec.11AC being a mandatory penalty which is equivalent to the duty evaded the same cannot be reduced as per the Supreme Court's decision in the case of M/s Dharmendra Textile Processors . [2008-TIOL-192-SC-CX-LB] .

Order of the Commissioner(Appeals) was modified by enhancing the penalty from Rs.5 lakhs to Rs.19,81,691/-.

Appeal filed by the assessee was rejected and appeal filed by the Revenue was allowed.: MUMBAI CESTAT;

2008-TIOL-2122-CESTAT-BANG.pdf

M/s K K R Flour Mills, Ernakulam Vs CCE, Cochin (Dated: August 6, 2008)

Central Excise – Classification of Rice flakes – Rice flakes not obtained either as pre-cooked or otherwise prepared – Processes involved in manufacture does not go beyond Chapter 11 of CETA 1985 - Classifiable under Chapter 11.06 - Larger bench decision in Mahavir Food Products followed: BANGALORE CESTAT;

2008-TIOL-2121-CESTAT-MAD.pdf

CCE, Madurai Vs M/s Sagar Chlorate Pvt Ltd (Dated: September 26, 2008)

Central Excise – small scale exemption under Notification 1/93 CE – clubbing of clearances from more than one factory of the assessee – as per para 2(i) of the Notification, separate exemption is not available to each of the units – however, even after clubbing the respondents paid more duty – Revenue appeal has no merit.: CHENNAI CESTAT;

2008-TIOL-2117-CESTAT-BANG.pdf

CCE, Belgaum Vs M/s Ashok Iron Works (Dated: August 1, 2008)

Central Excise – Classification – Processing of Goods beyond proof machining stage and acquiring characteristics of parts of machinery – Classifiable under Chapter 84 and not Chapter 74: BANGALORE CESTAT;

SERVICE TAX SECTION

2008-TIOL-2123-CESTAT-BANG.pdf

CCE, Mysore Vs Crystal Colour Lab (Dated: October 9, 2008)

Service tax - Value of goods and materials consumed during photography service not includible in taxable value - Tribunal decisions to be followed by lower authority in terms of judicial discipline: BANGALORE CESTAT;

2008-TIOL-2120-CESTAT-DEL.pdf

M/s J J Foam Pvt Ltd Vs CCE, Ghaziabad (Dated: October 31, 2008)

ST - Market Research Agency Service Vs BAS - Revenue raises demand - assessee works on commission basis - Waiver from pre-deposit granted: DELHI CESTAT;

2008-TIOL-2119-CESTAT-AHM.pdf

CST, Ahmedabad Vs M/s Intas Pharmaceuticals Ltd (Dated: November 12, 2008)

ST - Consulting engineer service - assessee pays for technical knowhow fee to foreign collaborator - In view of Larger Bench decision, no tax is leviable for the impugned period. The demand is also time-barred.: AHMEDABAD CESTAT;

2008-TIOL-2118-CESTAT-KOL.pdf

M/s N D Mazumdar & Co Vs CCE, Bolpur (Dated: September 17, 2008)

ST - Cargo Handling Service - assessee does not dispute the tax liability but seeks deduction for payments made to contract labour - assessee gets reimbursed for the cost of contract labour used for cargo handling - as per provisions of law, the tax is leviable on gross amount but no penalty imposable as it was because of bona fide misunderstanding - Sec 80 invoked: KOLKATA CESTAT;

2008-TIOL-2115-CESTAT-AHM.pdf

M/s Vijay Security Services Vs CST, Ahmedabad (Dated: September 30, 2008)

ST - Security service - assessee provides such services to ONGC which admitted paying the assessee for availing its service - no registration with Department - Assessee has prima facie no good case for waiver of pre-deposit: AHMEDABAD CESTAT;

2008-TIOL-2114-CESTAT-DEL.pdf

M/s Vodafone Essar Digilink Ltd Vs CCE, Jaipur-I (Dated: September 3, 2008)

ST - Cenvat credit - assessee avails credit of tax paid on port and space charges to BSNL - Revenue alleges no credit is admissible as per Board's Circular and also the fact that the tax was not deposited by the BSNL - Held, although the Commissioner(A) has given the finding that the assessee was not aware of whether the BSNL paid tax on which credit was availed and the lower authorities have not given any finding on this issue, the matter remanded: DELHI CESTAT;

CUSTOMS SECTION

NOTIFICATIONS

dgft08pn121.pdf

Market-Linked Focus Products: bicycle wheels, taps, cocks and valves aded to list; Algeria added to list of linked markets;

dgft08pn120.pdf

Focus Product Scheme: Staples of Strips added to Appendix 37D;

ctariff08_135.pdf

Anti-dumping Notification No 30/2008 amended to substitute Korea RP;

ctariff08_134.pdf

New Shipper Review - Provisional duty to be collected on import from China;

corrigendum.pdf

Notification No. 131/2008-Customs (N.T.);

CASE LAWS

2008-TIOL-237-SC-CUS.pdf + customs story.pdf

Kothari Filaments Vs CC(Port), Kolkata (Dated: December 16, 2008)

Customs – misdeclaration – Copies of ‘relied upon documents' not given to the party - A person charged with mis -declaration is entitled to know the ground on which he would be penalized – principles of natural justice violated: The statutory authorities under the Act exercise quasi-judicial function. By reason of the impugned order, the properties could be confiscated, redemption fine and personal fine could be imposed. In the event, a finding as regards violation of the provisions of the Act is arrived at, several steps resulting in civil or evil consequences may be taken. The principles of natural justice, therefore, were required to be complied with. Justice, as is well known, is not only be done but manifestly seem to be done.

The Commissioner of Customs either could not have passed the order on the basis of the materials which were known only to them, copies whereof were not supplied or inspection thereto had not been given. He, thus, could not have adverted to the report of the overseas enquiries. A person charged with mis -declaration is entitled to know the ground on the basis whereof he would be penalized. He may have an answer to the charges or may not have. But there cannot be any doubt whatsoever that in law he is entitled to a proper hearing which would include supply of the documents. Only on knowing the contents of the documents, he could furnish an effective reply.: SUPREME COURT;

2008-TIOL-2116-CESTAT-DEL.pdf

M/s Choithram Hospital & Research Centre Vs CC, New Delhi (Dated: October 22, 2008)

Customs - exemption under Notification No 64/88 Cus - non-fulfilment of post import conditions - 64/98 cast continuing obligation which is co-terminus with the life of the equipments imported - The obligation relating to past imports under the Notification No.64/88 can not be wiped out by the rescinding notification - demand of duty upheld.

Limitation - demand of duty for violation of the end use conditions of the notification is not subject to the period of limitation under Section 28 of the Customs Act. Confiscation is upheld. Penalty is also warranted.: DELHI CESTAT;