Service tax - outward transportation from place of removal is input service eligible for CENVAT Credit: CESTAT Larger Bench (Analysis + Order to be uploaded in a couple of hours on TIOL)

Palanimanickam back as Minister of State in Finance (See ddt.pdf in Common Basket)

Basic Structure of Constitution: A perspective from the Ramayana (See potpourri.pdf in Common Basket)

CBEC notifies Customs exchange rates for June, 2009;

India's per capital income grows only by 4.9% last fiscal: CSO;

Jairam Ramesh takes charge of Ministry of Environment and Forest;

IFC Study finds China and India may learn from each other's experience;

Anand Sharma gets Ministry of Commerce; Kamal Nath to be content with Road Transport & Highways; Kapil Sibal gets HRD and Law goes to Moily; Ambika Soni gets I & B Ministry;

Pre-Budget meeting: FM to begin consultations with Industry from next week;

TIOL COMMENTARY

ddt 29 May.pdf

Understanding laws – easier said than done?

potpourri.pdf

Supreme Court doesn't 'rule' - it does its constitutional duty!

MIXED BUZZ

mbuzz0520.pdf

India's per capital income grows only by 4.9% last fiscal: CSO;

mbuzz0519.pdf

IFC Study finds China and India may learn from each other's experience;

2009-TIOL-317-ITAT-MAD-SB.pdf + spl bench story.pdf

M/s Rajalakshmi Mills Ltd Vs ITO, Coimbatore (Dated: April 24, 2009)

An expenditure which is deductible for income-tax purposes is towards a liability actually existing at the time, but setting apart money which might become expenditure on the happening of an event is not expenditure allowable under the law. Nothing was placed before the Special Bench to demonstrate the nature of the liability. There is absolutely no material to say that the liability in question was an ascertained liability.

It is not necessary for the Commissioner of Income-tax to make further enquiries before cancelling the assessment orders of the Assessing Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Assessing Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral to give a decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke inquiry.:CHENNAI ITAT (SPECIAL BENCH);

2009-TIOL-316-ITAT-DEL.pdf

Sahara Airlines Limited Vs JCIT, Lucknow (Dated: February 22, 2009)

Income tax - Penalty u/s 271(1)(c) - Assessee is into airline business - issues bonds to raise funds - at the time of issue of bonds, the interest that accured against each folio issued against each bond was less than Rs 2500 - AO for deduction of tax at source and initiates penalty - CIT(A) confirms - held, since no interest had accured on each bond issued and as per terms and conditions it would have been less than Rs 2500 against each folio, no TDS was called for on such a sum - besides, the assessee deposited TDS to buy peace with the Revenue - no penalty is leviable in siuch a case - Assessee's appeal allowed:DELHI ITAT;

2009-TIOL-315-ITAT-MUM.pdf

DCIT, Mumbai Vs Smt Darshana M Jatania (Dated: January 20, 2009)

Income tax - Sec 145 - Assessee earns interest income on FDRs with banks - TDS benefit is claimed as per bank certificate - AO insists since TDS credit is availed, the interest income on accrual basis be added to the income - assessee argues it follows cash account method and interest income not to be added on accrual basis - CIT(A) deletes additions - held, as per Sec 145 the method of accounting is a choice with the assessee, and when the assessee has been following cash method since inception, the Revenue cannot force the assessee to switch over other method of accounting - as per cash method of accounting the interest income to be taxed only on maturity and TDS credit cannot be denied - Revenue's appeal dismissed:MUMBAI ITAT;

2009-TIOL-284-HC-ALL-IT.pdf

Sri Lakhsmi Narain Khetan Vs CIT, Ghaziabad (Dated: May 13, 2009)

Income tax - Sec 80HHC - Assessee is an exporter - has FDRs in bank for availing excess credit - earns interest income - claims deduction - AO disallows - Tribunal decides the issue ex parte on the basis of Delhi HC decision in the case of Shriram Honda Power Equipment - Assessee pleads Bombay HC conflicting decision on the issue - held, since service of notice for hearing is in dispute, it would serve interest of justice if the Tribunal order is put in abeyance for one month and the assessee is given a chance to make an application for deciding the issue on merit - Assessee's appeal allowed:ALLAHABAD HIGH COURT;

2009-TIOL-283-HC-DEL-IT.pdf

ATS Infrastructure Ltd Vs CIT (Dated: May 27, 2009)

Income tax - Sec 127 - Assessee's group companies searched - transfer of assessment from Delhi to Meerut - Assessee objects on various grounds like inconvenience - held, the four key tests which should be applied to transfer and consolidation of assessments of group companies are,

a) Under Section 124 the assessment must be carried out at the principal place of business but when powers under Section 127 are invoked, territorial nexus becomes irrelevant.

b) the determination of the venue of the assessment would be governed by the greatest effectivity for collection of taxes.

c) the decision to transfer cases cannot be capricious or malafide.

d) whilst the convenience of the assessee should be kept in mind, it would always be subservient to the interests of adjudication and collection of taxes.

Having applied these four tests, there is no mala fide in the Revenue's decision and Meerut is one of the most convenient places for the assessee - Assessee's petition rejected:DELHI HIGH COURT;

SERVICE TAX SECTION

2009-TIOL-830-CESTAT-BANG-LB.pdf + LB story.pdf

ABB LTD Vs CCE & ST, Bangalore (Dated: May 18, 2009)

Service tax – Services received for outward transportation of goods from the place of removal is input service as defined in Rule 2(l) of CENVAT Credit Rules, 2004

Valuation of goods and availability of CENVAT credit are independent of each other and exclusion of freight cost from transaction value would not come in the way of allowing CENVAT credit on outward transportation – There is an additional reason for holding that CENVAT credit is admissible on services even if the value thereof is not part of the value subjected to duty. This is because the interpretation of the expression “input services” cannot fluctuate with the change in the definition of “value” in Section 4 of the Central Excise Act and cannot vary depending on whether the goods are levied to duty under Section 4A of the Central Excise Act or tariff value under Section 3 (2) of the Central Excise Act or the product attract specific rate of duty.

Expression ‘activities relating to business’ has a wide import and includes both essential and auxiliary activities of business including outward transportation – The expression “activities relating to business” admittedly covers transportation upto the customers place and, therefore, credit cannot be denied by relying on specific coverage of outward transportation upto the place of removal in the inclusive clause.

Definition of ‘input service’ has to be interpreted in the light of the requirements of business and it cannot be read restrictively so as to confine only upto the factory or upto the depot of manufacturers. Transportation of goods to customer’s premises is an activity relating to business. It is an integral part of the business of a manufacturer to transport and deliver goods manufactured. If services like advertising, market and research which are undertaken to attract a customer to buy goods of a manufacturer are eligible to credit, services which ensure physical availability of goods to the customer, i.e. services for transportation should also be eligible to credit.: BANGALORE CESTAT;

2009-TIOL-829-CESTAT-MUM.pdf + gymkhana story.pdf

Mulund Gymkhana Vs CST, Mumbai (Dated: March 30, 2009)

Section 80 of Finance Act, 1994 - Ignorance of law cannot be accepted as a reasonable cause for failure to pay service tax. Any tax is a compulsory levy and, therefore, a new levy is raised by the Government only with prior notice to the public - Tribunal.

Penalty imposed u/s 76 upheld and appeal dismissed by Tribunal.:MUMBAI CESTAT;

2009-TIOL-828-CESTAT-DEL.pdf

M/s Engineers India Ltd Vs CST, New Delhi (Dated: March 26, 2009)

ST - tax rate - Revenue applies higher rate for calculation of demand - Assessee pleads lower rate for certain transactions and higher rate for others in the same month - held, since the assessee has given clear break-up of transactions which attract 5% rate and also those which are liable to 8% rate, there is mistake apparent in the Commissioner's order - matter remanded: DELHI CESTAT;

CENTRAL EXCISE SECTION

2009-TIOL-827-CESTAT-MUM.pdf + hpcl story.pdf

M/s Hindustan Petroleum Corporation Ltd Vs CCE, Mumbai-II (Dated: April 21, 2009)

Oil giant pleads financial hardship – Tribunal directs M/s HPCL to pay Rs.3.5 Crores as pre-deposit in Naphtha case.

Goods supplied to M/s RCF in terms exemption notification 6/2006-CE as amended by notification 48/2004-CE and not being put by M/s RCF for the intended purpose viz. manufacture of fertilizers – Onus is upon M/s HPCL to ensure that goods are exclusively used for manufacture of fertilizers - Duty liability cannot be resisted by M/s HPCL – condition of following CT-2 procedure done away with when notification 6/2002-Ce was amended by notification 48/2004-CE and this position continues in Notification 6/2006-CE.

Earlier stay order dated 19.02.2009 cannot be applied blindly as in the present case the Commissioner has not traveled beyond the show cause notice, the demand is restricted to naphtha used in producing electricity and the goods have not been cleared under CT-2 certificate unlike earlier.

Financial hardship pleaded – Pre-deposit ordered of Rs.3.75 crores against duty demand of Rs.7.52 crores and equivalent penalty – compliance to be reported by 29.06.2009:MUMBAI CESTAT;

2009-TIOL-826-CESTAT-MAD.pdf

CCE, Chennai Vs M/s Best & Crompton Engineering Limited (Dated: March 23, 2009)

Central Excise – Duty paid before issue of Show Cause Notice – Penalty - Payment of duty prior to issue of show cause notice is not a ground for setting aside the penalty. However as Section 11AC was introduced only on 28.9.96, re-computation of the penalty amount past 28.9.96 to be done. The penalty under Rule 173Q upto 28.9.96 is also required to be computed afresh. ( Para 2) :CHENNAI CESTAT;

2009-TIOL-825-CESTAT-MUM.pdf

CCE, Pune-II Vs Brown Paper Technologies Ltd (Dated: March 30, 2009)

Furnace oil used for generation of steam, which, in turn, was utilized for manufacture of both dutiable and exempted final products – Credit admissible – SC decision in CCE, Vadodara vs. Gujarat State Fertilizers & Chemicals Ltd.

followed – Revenue appeal dismissed.:MUMBAI CESTAT;

CUSTOMS SECTION

NOTIFICATION

cnt09_054.pdf

CBEC notifies Customs exchange rates for June, 2009;

CASE LAWS

2009-TIOL-824-CESTAT-MAD.pdf

Nanya Imports & Exports Enterprises Vs CC, Chennai (Dated: March 23, 2009)

Customs – Import - Concessional rate of duty – Exemption Notification – Burden of proof - Notification No.45/94 extended concessional rate of duty for “insole or midsole and sheet thereof” imported for use in the leather industry. The importers cannot wriggle out of the burden to establish that the goods imported were sold to trader in the leather industry. Such burden has not been discharged by the appellants. Demand and confiscation upheld. ( Para 2) :CHENNAI CESTAT;