TMI Tax Updates e-Newsletter
Jul 23,2013

Jurisdiction of authority - Advance ruling - Offshore supplies - Authority held that applicant not entitled to relief u/s 90(2) - Held that:- While dealing with an application under Rule 19 it is not permissible to re-frame the questions or issues already framed and/or to add further questions - it is not legally permissible to decide new questions which were not originally formulated or adjudicated. That would virtually mean reopening of host of issues in the manner suggested which cannot be decided in view of the jurisdictional limitations inbuilt in section 245N. Even on merits, it needs no reiteration that the Authority has jurisdiction to make a determination only in relation to the transaction which has been undertaken or proposed to be undertaken by non-resident applicant. It is not permissible to deal with hypothetical questions - Authority cannot give a ruling that the applicant is not liable to be taxed and somebody else is liable to be taxed. The proposed question framed by the Authority for determination can only relate to the tax liability of the applicant and it would be impermissible to determine tax liability of a person other than the applicant.

Revision u/s 263 - Period of limitation - Whether period of limitation will commence from first order of assessment or second order of re-assessment - Held that:- Commissioner of Income-Tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalisation fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income Tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity - once reassessment order was passed, original underassessment was set aside, to the extent of underassessment but not in respect of matters covered by the original assessment and not subject matter of reassessment proceedings or order - Following decision of Commissioner of Income Tax versus Alagendran Finance Limited [2007 (7) TMI 304 Supreme Court] - Decided against Revenue.

Jurisdiction of BIFR - Scaling down of interest - Whether the income tax authorities are justified in stating that the order of BIFR, to the extent that it scaled down interest are beyond jurisdiction - Held that:- Prior special law will prevail over a later and general law - It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment - In the case of Section 32 SICA, the specific exclusion of two enactments, and the express reference to Section 72A of the Income Tax Act, to say that its provisions apply (by Section 32 (2)) manifest Parliamentary intention that provisions of SICA have to prevail over those of the Income Tax Act - Following decisions of Aswini Kumar Ghosh & Anr v. Arabinda Bose & Anr, [1952 (10) TMI 32 - SUPREME COURT] and Mewar Sugar Mills Ltd. v. Chairman, Central Board of Direct Taxes & Anr [1998 (10) TMI 512 - DELHI HIGH COURT] - Decided in favour of Assessee.

Superseding jurisdiction - Whether Board of Direct Taxes’ views have primacy over that of BIFR - Held that:- Income tax authorities were not given notice of remitting their matter back to BIFR and the order of BIFR reveals that it applied its mind, and granted limited concession only as regards reduction and waiver of interest - The larger pleas of the company towards income tax dues and concessions were denied by the BIFR - Having regard to these circumstances, and Section 32 of the Act as well as the Circular No. 683 of 1994 the failure of income tax authorities to inform the Director General would not result in the invalidity of BIFR’s scheme - Period for operation of the limited concessions in the scheme has also apparently ended - In view of the concurrence of the other secured creditors, and implementation of the approved scheme, it would be inequitable and unjust to put the clock back, at the behest of the Income Tax authorities - Decided in favour of Assessee.

Registration u/s 12A - Charitable purpose - CIT rejected to grant registration - Tribunal granted registration - Held that:- Registration was refused only on the basis of a report submitted by the Accountant General, where it was mentioned that the accounts were not properly maintained, But this defect is curable - For not utilization of the fund and keeping in the Bank, never attracts the cancellation of the registration of the society, however, it may amounts non functioning of the Society - It cannot be said that a purpose would cease to be charitable even if pubic welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be a charitable purpose - Following decision of CIT vs. Gujarat Maritime Board [2007 (12) TMI 7 - SUPREME COURT OF INDIA] and Ajai Hasia vs. Khalid Mujib [1980 (11) TMI 150 - SUPREME COURT] - Decided against Revenue.

Validity of amendments in Chapter XIX-A of Finance Act, 2007 - proceedings before settlement commission - applications for settlement filed prior to the amendment shall abate on 1.4.2008, provided under Section 245-D (4A) and 245-HA of the amending Act questioned - Whether, amendments in Chapter XIX-A of Finance Act, 2007 are ultra vires the constitution? - Held that:- Where the plain literal interpretation of a statutory provision produces a discriminatory or incongruous or manifestly absurd or unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction.

Since the purported objective of the amendments introduced in Chapter XIX-A by the 2007 Act is to streamline the proceedings before the Settlement Commission and to ensure expeditious disposal of pending cases, the amendments cannot be construed so as to punish an applicant for the inability or failure of the Settlement Commission to dispose of its application within the period specified in section 245D (4A), where such delay in disposal is not attributable to the applicant.

By reading down the provisions of Section 245D (4A) (i) and Section 245HA (1) (iv) the constitutional validity of the amendments providing abatement of proceedings may be saved and protected from the vice of discrimination, and issue same directions to find out, if the delay is attributable to the applicants before making final order - Following decision of Star Television News Limited Versus Union of India and others [2009 (8) TMI 86 - BOMBAY HIGH COURT] - Decided in favour of assessee.

Undisclosed income - Income received from various people - Tribunal held that no sufficient evidence produced to prove that money belong to other people - Held that:- No evidence was produced by them to substantiate that the said sums were paid to them by the neighbourhood people for carrying out certain construction activity - No substantial question of law to admit the appeals - Decided against assessee.

Interest on minor's income - Tribunal clubbed interest income earned by minors with income of their mother - Held that:- In the previous case of appellant Anju Mehra vs Union of India and others [2013 (7) TMI 559 - PUNJAB & HARYANA HIGH COURT] it has already been decided that power conferred under Section 64(1A) to club the minors income with income of the parent whose income is greater is legal and does not suffer from any legal disability - Decided against the assessee.

Penalty u/s 271(1)(c) - Amount of goodwill debited to partners capital accounts - Tribunal deleted penalty holding that no capital gain tax is payable by writing off the goodwill in the books of accounts by debiting the partners account - Held that:- claim made by the respondent assessee that the amount attributable to the goodwill amount which was written off is not chargeable to tax was not accepted by the revenue. In such circumstances, merely making of a claim which is found to be not sustainable and would not warrant imposition of penalty under Section 271 (1)(c) - Following decision of CIT v/s. Reliance Petro Products Ltd [2010 (3) TMI 80 - SUPREME COURT] - Decided against Revenue.

Application of proviso to Section 44BB(1) - prospecting for, or extraction or production of, mineral oils - A.O. looked into those completed assessments for the accounting years, which stood closed prior to addition of Proviso - Held that:- No justification for A.O. doing since proviso to applicable only after 1st April 2011 and not before that.

Remuneration to partners - Deduction u/s 40(b) - Whether Tribunal was justified in taking view that whole income embedded in P & L account of assessee is to be taken into consideration for allowing deduction of remuneration paid to partners under section 40(b) without excluding interest income credited to P & L account even if it is not business income - Held that:- From Section 40, it can be seen that where an assessee is a partnership firm, any payment of salary, bonus, commission or remuneration to its partners under certain circumstances, if it exceeds the limits set out in Clause B, deduction to the extent of excess cannot be claimed - Assessee is in the business of purchasing raw cotton and ginning the same. It is a seasonal business. The interest income was generated out of spare funds invested in the fixed deposit. Such income was declared as part of the business income and that is how even the Assessing Officer had accepted the same - Decided against Revenue.

Whether the Tribunal was right in holding that the sum received from the Excise Commissioner during the current assessment year for the difference in supply of alcoholic products in earlier years cannot be treated as income of the assessee during the current assessment year – Held that:- When the Government Order is set aside, if the assessee repays the money, he is eligible for adjustment of tax paid for the income received or for refund of the said amount - the third party has filed the public interest litigation for the relevant assessment year, he cannot avoid payment of tax on the said revenue receipt - In the event of assessee losing the battle, he will be bound to refund the amount to the Government - If he were to pay tax under the Act, when once that amount is returned, he would be entitled for refund of the said tax or adjustment of tax in future, but that does not enable him to withhold payment of tax on the pretext of pending litigation - In that view of the matter, the approach of the Tribunal is not proper - order requires to be set aside – appeal decided in favour of revenue.

Determining Tax Arrears – order u/s 90 - whether Revenue could prosecute an appeal in respect of an assessment year, covered under the Kar Vivad Samadhan Scheme - Held that:- The designated authority having determined the tax arrears as defined under the Act, would be deemed to include the amount of tax determined in respect of that assessment year as modified by any appellate order, but remaining unpaid on the date of declaration and further it would include such arrears, which after determination have been set aside - Court relied upon Killick Nixon Ltd., V/s. Dy. CIT (2002 (11) TMI 5 - SUPREME Court)- Sec. 90 required the designated authority to determine the amount payable by the declarant in accordance with the provisions of the Scheme and grant a certificate setting forth the particulars of the tax arrears and the sum payable after such determination towards full and final settlement of tax arrears - upon payment of such amount, determined and on an order having been passed u/s 90(1) - it is conclusive and shall not be reopened - In the instant case, the designated authority having issued such a certificate, the same attains finality – appeal decided against revenue.

Exemption u/s 11 - whether the assessee is entitled to the exemption under section 11 of the Act - assessee sought exemption u/s 11- the AO denied it on the ground that the pre-condition for an educational institution is to impart education on non-profit motive - the profit arising from its activity is not to be distributed among the members and should be utilized for building up the infrastructure to impart education with non-profit motive – Held that:- Section 13 is an adjunct to section 11 and exemption of income from property held for charitable purposes under section 11 cannot be granted where the activity of a charitable institution comes within the purview of section 13 - It is a settled principle of interpretation of statutes that the court should avoid a construction which would render a part of the statute devoid of any meaning or application - it is not possible to ignore the provisions of sub-section (2) of section 13 while deciding the issue - It is true that the words "Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1)" occurring in sub-section (2) of section 13 suggest that the provisions of sub-section (2) should not be understood as cutting down the provisions of clause (c) and clause (d) of sub-section (1) of section 13 but this does not mean that in a situation like the present where sub-section (2) can apply, it should be ignored.

Royalty u/s 13(2) - whether the act of the assessee in paying royalty amounts to diversion of the funds of the assessee attracting section 13(2) (g) - Held that:- merely because such facility was provided by SSSPL and royalty was being paid to it by the assessee in that behalf, the Revenue cannot contend that it is impermissible – Held that:-The observations of the Tribunal that income of the assessee is given to SSSPL, a company whose activity is commercial and not charitable - that payment of royalty by the assessee is not incurred for purpose of the assessee's business - that the students or staff of SSSPL were not bound to join the assessee once it was formed by SSSPL - and the payment was intended to benefit the members of assessee society - that it is a collusive transaction to transfer the profit of the assessee society to interested persons are wholly irrelevant and perverse- The Tribunal appears to have misdirected itself and considered totally irrelevant issues - In Polisetty Somasundaram Charities (1986 (11) TMI 4 - ANDHRA PRADESH High Court) - the court held that the income of a trust held wholly for charitable or religious purposes is exempt from tax subject to the conditions regarding application of income in section 13 - any other interpretation would set at naught the proviso and would defeat the very purpose for which the proviso was added in section 13 - merely because the assessee was registered by SSSPL to run the school after SSSPL's application for approval was rejected by the CBSE, it cannot be said that the assessee's payment by way of royalty to SSSPL is prohibited and consequently the assessee deprived of exemption under section 11 – appeal decided in the favour of assesse.

Addition u/s 40A(3) - Cash payment in excess of prescribed limit - Whether the Tribunal was right in deleting the additions under section 40A(3) by applying the exemption rule 6DD(i), when the assessee has not proved that the payee had acted as agents of the assessee and cash payment were to be paid to the growers by the payee on behalf of the assessee in the capacity of agent - When that being the factual finding in respect of the status of those persons, concurrently, by the first appellate authority as well as by the Tribunal by holding that those persons have acted as agents of the assesse - In the absence of an element of sale in the transaction between the society and the assessee the contention of the assessee that the said co-operative society was acting as the agent of the assessee has to be necessarily accepted - assessee is entitled to protection under rule 6DD(i) of the Rules as the disputed payments were made only to its agents - Apart from that aspect, by going through the nature of business and transaction between the parties an element of commercial expediency was also involved in this case which we can take judicial notice – there are no other materials placed by the Revenue to take a different view – appeal decided against revenue.

Disallowance on commission paid – whether assesse would be entitled for the exemption on the commission paid to the sub-brokers – Held that:- all the three lower authorities came to the conclusion that no services were rendered by the sub-brokers, there was no necessity to engage services of brokers/sub-brokers in the light of the agreement with the principal company, and further not a single penny was paid to the subbrokers for years together. One is required to arrive at the conclusion on the basis of human probability. Human probability cannot be ignored for persons like sub-brokers or men of no means who render services to some but do not receive any amount for years together. None would leave hard earned money, for their day-to-day needs if actual services have been rendered by the said persons. It was upon the appellant to discharge the onus which heavily lay on him and he miserably failed for the reasons stated herein before.

The said issue being essentially a finding of fact - the appeal is liable to be dismissed as no substantial question of law arise - Court relied upon the judgement of Sumati Dayal v. CIT (1995 (3) TMI 3 - SUPREME Court) – It is essentially a finding of fact not only recorded by the Tribunal but by the learned Assessing Officer as well as by the first appellate authority that no services were rendered by the sub-brokers and no amount was paid to them either during the year or even later – appeal decided against assesse.

Duty Drawback demanded – validity of notice – penalty - department contended that the goods procured from the traders did not accommodate the proforma prescribed under Boards Circular No. 54/2001 – Held that:- Drawback by providing wrong and incorrect information in Annexure I/II required to be furnished as per Drawback Circular No. 54/2001 – assessee mentioned the word supplier rather clearly stating the trader. As such they concealed this vital information from the department with motive to avail duty drawback of Central Excise portion - there was a suppression of facts the show cause notice was rightly issued invoking extended period clause and penalty is also rightly imposed on the applicant.

Limitation of time barred – assessee’s contention of notice being time barred was also not sustained – revision application decided against assessee.

Refund of duty with interest – order of refund of duty was passed but not paid even after one and half years later - the short question is whether the respondents should pay interest for the said delay in refund - Held that:- Department were liable to pay interest to the assessee - Board's circular dated 3 June 1998 clarifies that the refund not to be withheld on the ground that an appeal is filed against the order giving relief to an assessed unless a stay order has been obtained – court relied upon Tata Infotec Limited versus Collector of Customs (2004 (2) TMI 80 - HIGH COURT OF DELHI ) – decided in favour of assessee.

Whether nondisclosure of the letter/notice dated 18th January, 2005 issued by the RBI to the appellant is violative of the provisions of Section 391(2) and/or Section 393 – Held that:- The Company Court was not expected to substitute its own wisdom for that of the stakeholders - all the procedural requirements for sanctioning a scheme under Sections 391-394 have been complied with - an overwhelming majority of the deposit holders have approved this scheme yet the relief was not been granted to the appellant on the grounds that the scheme does not comply with the provisions contained in Chapter IIIB of the RBI Act - Held that:- The scheme proposed by the appellant is not bonafide and is in fact contrary to public policy - the scheme of arrangement presented before the Company Law Board was not bonafide - it failed to disclose various directions issued by the RBI restricting the functioning of the appellant as a NBFC - The High Court had correctly held that Whilst examining the scope of Sections 391 to 393 – court relied upon Miheer H. Mafatlal Vs. Mafatlal Industries Ltd. (1996 (9) TMI 488 - SUPREME COURT OF INDIA).

Piercing of corporate veil - Held that:- The Court was not bound to superficially add its seal of approval to the scheme merely because it received the approval of the requisite majority at the meeting held for that purpose - Court has to ensure that the scheme of arrangement was not a camouflage for a purpose other than the ostensible reasons U/s 391 whilst approving the scheme the Company Court does not act as a rubber stamp - the Companies Act had to be satisfied that the concerned meetings of the creditors have been duly held - in the concerned meetings the creditors or members of any class had been provided with relevant material to enable them to take an informed decision as to whether the scheme is just and fair – Court had to be satisfied that the scheme was fair and reasonable from the point of view of a prudent man of business taking commercial decisions which were beneficial to the class represented by them - If any of the aforesaid requirements appear to be found wanting in the scheme, the Court can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same.

whether a scheme which does not comply with the provisions of Section 45QA of the RBI Act can be sanctioned – the High Court on a careful consideration of the entire matter has concluded that the scheme must fail as it does not comply with the provisions contained in Section 45QA(1) of the RBI Act -a later enactment will override the earlier enactment - Chapter IIIB of the RBI Act is a complete code in itself - The Companies Act is a prior enactment whereas Chapter IIIB was inserted in the RBI Act later on - provisions of the RBI Act would prevail over the Companies Act, it being a later enactment – section 45Q was incorporated with a clear intention to ensure that in a case of NBFC a scheme u/s 391 cannot be entertained unless it was in conformity with the provisions of Section 45QA - the scheme was in the teeth of Section 45Q and it had rightly not been approved by the High Court - the scheme has been rightly held to be lacking bona fide as well being contrary to public policy - It has been proposed with the oblique purpose of avoiding the mandate of Section 45QA(1) – appeal decided against petitioner.

Recovery of service tax – as per Notification No.35/2004-ST assessee should have discharged the service tax as a recipient - proceedings were initiated for recovering service tax on GTA service received by the assessee - Held that:- Extended period could not have been invoked since it cannot be said that there was intention to evade payment of duty when the transporter had paid the service tax and in any case as a recipient assessee was eligible for the benefit of CENVAT Credit also – court relied upon decisions of the Tribunal in Navyug Alloys Pvt. Ltd. vs. CCE, Vadodara-II: (2008 (8) TMI 100 - CESTAT AHEMDABAD) - Stay application – as there was no point in postponing the final issue court granted the stay – appeal decided in favour of assessee.

Stay application - Appellant was absent on the day of hearing to satisfy the Tribunal as to whether the order of the learned Commissioner (Appeals) is anyway erroneous - Held that:- It is not a fit case to interfere to the order of the Commissioner (A) – appellant has pressed the Tribunal to keep the matter pending without causing presence to explain its case - Tribunal cannot be burdened with spurious litigation abusing process of the court – appeal decided against assessee.

Issue of taxability - enhancement of penalty - Held that:- It would be proper for the Commissioner (A) to dispense with pre-deposit and hear the appeal without insisting the same - so that the appellant shall not be deprived of the process of justice - It is not warranted to examine merit of the appeal since the appellant has already lost his appeal on the maintainability - considering the decisions of the Tribunal Nagarjuna Construction Co. Ltd. vs. CCE(2010 (5) TMI 232 - CESTAT, BANGALORE) – remanded back to Commissioner (Appeals) – decided in favour of assessee.

Refund claim – assessee claimed that as per Section 26(e) of SEZ Act r.w. Rule 31 of SEZ Rule, no service tax is leviable in relation to authorized operations in SEZ - under Notification 4/2004 services provided by service provider consumed in SEZ by a Developer or units are exempt from Service Tax - Notification 9/2009 prescribes certain conditions to be fulfilled for claiming the refund - there was no evidence on record about fulfillment of these conditions – court did not accept the contention of the assessee - appellant did not claim refund under Notification 9/2009 as evident from refund application.

Limitaition of time barred - no refund procedure is prescribed in Notification 4/2004 - assessee can file a refund claim u/s 11B of Central Excise Act - refund is filed after one year thus the claim is clearly time barred - which is made applicable to Service Tax by virtue of Section 83 – claim of the appellants is required to be examined under provision of Section 11B of the Act – appeal decided against assessee.

Leviability of service tax – whether buffer stock subsidy would be leviable to service tax – Commissioner (Appeals) decided in the favour of assessee - Held that:- Buffer-stock subsidy cannot be considered as a consideration received for the services rendered thus not liable to service tax - The same has been settled in Commissioner of Central Excise, Chandigarh vs. Nahar Industrial Enterprises Ltd. (2010 (1) TMI 400 - PUNJAB & HARYANA HIGH COURT) - the sugar factories are storing the sugar for themselves thus there cannot be any service to self – also, subsidies are negative taxation and there cannot be a positive tax on the same under service tax – appeal decided against the revenue.

Condonation of Delay of 825 days under Section 35 G of Central Excise Act, 1944 - Delay has occurred due to the fact that the appellant was prosecuting bonafide its application for rectification of mistake and thereafter the Writ Petition in this Court – Held that:- The only explanation offered for delay in the affidavit in support – As per the decision of the Apex court in the case of Office of the Chief Post Master General v. Living Media India Ltd. & Anr.,[ 2012 (4) TMI 341 - SUPREME COURT OF INDIA] has while refusing to condone the delay, inter alia, observed: Unless Government Instrumentalities have reasonable and acceptable explanation for the delay and there was a bonafide effort, there is no need to accept the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural redtape in the process. Condonation of delay is an exception and should not be used as an anticipated benefit for the government departments – In the instant case, the affidavit in support of the Motion does not give any explanation for the delay but merely states that the process takes reasonable time – Decided in favor of Revenue.

Credit of Additional Excise Duty (AED) utilised for payment of Basic duty of Excise - AED credit utilised was paid into the revenue through PLA and the original AED credit for payment of Basic Excise Duty was suo motu taken by the respondent – Held that:- Considered appropriate not to put any cap on the use of the AED (GSI) credit accruing prior to 1.3.2003 - In terms of the provisions enacted in Finance Act, 2004, the debits were held not amounting to payment of duty and the assessee was required to meet the same obligation by payment from PLA. In the instant case, the debits were held to be of no consequence when the assessee was required to pay duty initially discharged using AED (GSI) credit – Decided against the Revenue.

Hon’ble Court in this matter is not inclined to condone the gross delay in filing the appeal – Notice of motion is accordingly dismissed.

Interest under Section 11AB and Penalty under Section 11AC of the Central Excise Act, 1944 on wrong availment of Cenvat Credit – There was wrong availment of Cenvat Credit on certain Capital Goods - Held that:- Supreme Court decision in the case of Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court] was considered and it was held, that the interest would be payable from the date Cenvat credit is taken or utilized wrongly - The said decision was considered by Hon’ble Karnataka High Court in the case of Commissioner of Central Excise & Service Tax Bangalore vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] as also in the subsequent decision in the case of CCE, Bangalore vs. Pearl Insulation Ltd. [2012 (11) TMI 912 - KARNATAKA HIGH COURT] and it was held that said Supreme Court decision relate to taking of credit or utilizing the same wrongly and cannot apply to availment of Cenvat credit in the account books - Hon'ble Karnataka High Court, in ST Bangalore V/s Bill Forge Pvt. Ltd. held that the assessee had not taken or utilized the Credit but only availed wrong credit in their account books and on pointing out the mistake, immediately reversed the entry. As no benefit of wrong entry in account books was taken, interest is not payable – Decided against the Revenue.

Held that:-The show cause notice does not attribute any malafide intention to the appellant so as to invoke the penal provisions of Section 11AC – Also, there has to be element supported by evidence to invoke the provisions of Section 11 AC- Decided against the Revenue.

Availment of input service credit – Held that:- Cenvat credit denied on the ground that repair and maintenance services obtained by the appellant for the cooler and refrigerator which are installed at the dealers premises cannot be held to be input services inasmuch as the same have no nexus with the manufacturing activities – Decided against the assessee.

Limitation - Appellant was making entries of the credit availed by them in their statutory records and filing proper returns also – Held that:- Appellants cannot be charged with any malafide for entertaining a view that he was entitled to input services credit, which was duly reflected in the statutory records – Decided in favor of Assessee.

Clandestine removal – Statement recorded under Section 14 of the Central Excise act, 1944 – Held that:- Authorised representative whose statement was recorded, himself assumed the weight of sponge iron lying in the stock. I find that authorized representative in his statement, has accepted only shortages detected by the officers and has nowhere accepted that such short found goods stand cleared by them without payment of duty - Shortages cannot be held to be a sole ground for upholding the charges of clandestine removal, without their being any other independent evidence corroborating such allegation - Such shortages detected on assumption basis cannot be held to be having been removed clandestinely – Decided in favor of Assesse.

Valuation - inclusion of Transportation charges in the assessable value for charging excise duty - Separate invoices were raised for transportation charges – Held that:- No ground is made out that the transportation charges are far in excess of the actual transportation charges thus shifting the value of goods to transportation charges. Transportation charges not to be included in the assessable value for the purpose of charging excise duty- Decided against the Revenue.

Inclusion of Value of Acoustic Enclosures - There is no finding to the effect that these goods were bought out by the respondent and not manufactured by them – Held that:- If the goods like acoustic enclosure is manufactured in the factory of respondent and cleared, excise duty is payable on it whether it is cleared along with DG sets or separately. Since the respondents are not in a position to demonstrate that the items in question were not manufactured by them the appeal filed by Revenue in this respect is allowed – Decided in favor of Revenue.

Erection and Commissioning Charges – Held that:- Excise duty is on manufacture. Erection and Commissioning is in the nature of a service and the apex court had held in the case of Thermax Ltd [1998 (4) TMI 134 - SUPREME COURT OF INDIA] that payments made towards erection and commissioning cannot form part of assessable value of excisable goods – Decided against the Revenue.

Cenvat Credit - removal of inputs from DTA to SEZ without reversing credit - Rule 3(5) of Cenvat Credit Rules, 2004 - Respondents are manufacturers of excisable goods namely, brake linings, clutch facings and disc braking pads. They take benefit of Cenvat credit on inputs used in the manufacture of these excisable products – Respondents removed certain inputs on which Cenvat credit was taken to another unit of theirs situated in Mahindra Special Economic Zone without reversing the credit taken at the time of receipt of the inputs in the factory – Held that:- For the purpose of accounting the goods on which Cenvat credit is taken, CCR has to be considered as a complete code in itself and since the said rules do not envisage export of inputs after taking credit, Rule 3 (5) has to be necessarily complied with. Such an approach only is consistent with the decision of the Larger Bench of Tribunal in Lakhmi Automatic Loom Works (Ltd)[2008 (10) TMI 57 - CESTAT CHENNAI].In the said decision it was held that inputs cannot be removed from one EOU to another without payment of duty considering it as deemed export – Moreover, Rule 18 and 19 would apply only when goods manufactured in a factory are exported and not when inputs on which credit is taken are exported – Decided in favor of Revenue.

Penalty – Held that:- No intention on the part of the respondent to evade payment of duty is established – No penalty levied – Decided against the Revenue.

Area Based exemption - Notification No. 56/2002 CE dated 14.11.02 - The Notification requires the manufacturing unit situated in that area to first pay the Central Excise duty on the goods cleared from the factory from their Cenvat credit account. On exhausting of Cenvat credit account, duty is required to be paid from the PLA and said duty paid from PLA is refunded to the manufacture – Appellant was having Cenvat credit balance of Rs.10,10,421/- - the same was erroneously shown as Rs.11,58,395/- - While discharging duty liability, the appellant showed the duty payment from the Cenvat credit account by treating as if the total balance was Rs.11,58,395/- and paid the balance amount from their PLA. – Held that:- When the entries were corrected in the Cenvat credit account and the differential amount was paid through PLA, the same would be refundable to the assessee – Decided in favor of Assessee.

Cenvat Credit - input received from First Stage dealer - burden on the manufacturer to check the particulars as mentioned in the invoice - Rule 9(5) of CCR - M/s. M K Steels raised dealers invoice, giving all the particulars required to be given under law in the invoice supplied to the respondents - Held that:- The inputs were used by them in the manufacture of their final product, which were cleared by them on payment of duty. It is also a part of the record that the goods traveled from the dealer premises to the respondents premises under the cover of form 31 of UP Trade Tax department. This fact is sufficient to prove the physical entries of the inputs in the assessee’s premises. Further, the ledger account and RG 23 A records maintained by the assessee also proves the receipt of the goods – It is sufficient if the assessee buys the goods from first stage dealer whose status he has checked and verified - Denial of credit to the respondent manufacturing unit on the ground that first stage dealer has fraudulently received the goods is neither proper nor justified – Decided against the Revenue.

Penalty u/s 9(2) - Tribunal confirmed penalty - Held that:- assessee had not objected to the finding of fact by the Tribunal that there were interpolations in the photocopy of the triplicate copy of the bills of entry and there were differences in the names found in the original bills of entry filed before the Customs Department and the photocopy of the the bill of entry filed before the Sales Tax Department. Thus with the finding of fact remaining intact, the question of law raised is a superfluous one - assessee had imported goods in bulk. When the assessee claims that high sea sales were effected in favour of three parties, with no appropriation definitely made on the bulk quantity imported, we do not find any justifiable ground to accept the plea of the assessee - Following decision of State of Tamil Nadu V. Kawarlal and co. [2011 (9) TMI 519 - Madras High Court] - Decided against assessee.

Inherent power of High Court - Whether the High Court while entertaining the petition under Section 482 of the Code has exceeded its jurisdiction. The powers under Section 482 are inherent which are to be exercised in exceptional and extraordinary circumstances - jurisdiction u/s 482 of the Cr.PC has to be exercised sparingly and with circumspection - It has been held that at an initial stage a court should not embark upon an inquiry as to whether the allegations in the complaint are likely to be established by evidence or not – extraordinary or inherent powers did not confer an arbitrary jurisdiction on the court to act according to its whim or caprice - the power being extraordinary has to be exercised sparingly, cautiously and in exceptional circumstances – court relied upon the judgement of State of Bihar v. Murad Ali Khan (1988 (10) TMI 260 - SUPREME COURT).

What amounts to conspiracy – difference between conspiracy and negligence - Professional misconduct - Whether the respondent was liable for abusing their official position as public servants and for having conspired with private individuals u/s 120-B, 419, 420, 467, 468 471 r.w. Section 109 of the IPC and Section 13(2) r.w. Section 13(1)(d) of the Prevention of Corruption Act, 1988 - Held that:- He cannot be charged for the offence under Sections 420 and 109 of IPC along with other conspirators without proper and acceptable link between them Lawyer owes an “unremitting loyalty” to the interests of the client and it is the lawyer’s responsibility to act in a manner that would best advance the interest of the client - merely because his opinion may not be acceptable - he cannot be mulcted with the criminal prosecution – particularly - in the absence of tangible evidence that he associated with other conspirators – court followed the judgement of Pandurang Dattatraya Khandekar vs. Bar Council of Maharashtra & Ors. (1983 (10) TMI 225 - SUPREME COURT) - At the most he may be liable for gross negligence or professional misconduct if it is established by acceptable evidence - the liability against an opining advocate arises only when the lawyer was an active participant in a plan to defraud - there was no evidence to prove that respondent was abetting or aiding the original conspirators – decided against the CBI.

Sealed cover process – eligibility for promotion - Whether the respondent was eligible for promotion – gross misconduct in the matter of checking and passing the bills of various firms involved in manufacturing and supplying of cast iron sleeper plates was alleged - tribunal dismissed the application – High court decided in favour of respondent - On the relevant date the respondent’s batch mates were promoted - on that date the respondent was not under suspension - no charge sheet was served upon him nor he was facing any criminal prosecution – Held that:- Disciplinary proceedings commence only when a charge-sheet is issued to the delinquent employee – the recommendation of the DPC has to be honored and there is no question of applying ‘sealed cover process’ as decided in Union of India and Others vs. K.V. Jankiraman and Others(1991 (8) TMI 292 - SUPREME COURT) - the findings of his entitlement to the benefit are kept in a sealed cover to be opened after the proceedings in question are over - disciplinary proceedings commence only when a charge sheet is issued - Departmental proceeding is normally said to be initiated only when a charge sheet is issued – court agreed with the decision of the High Court – decided against the appellant.