CASE LAWS
2016-TIOL-1689-HC-DEL-CUS + Story
TINNA RUBBER AND INFRASTRUCTURE LTD Vs UoI: DELHI HIGH COURT (Dated: August 8, 2016)
Cus - Whether the process to which old tyres are subjected to to produce two or more pieces of cut tyre is 'manufacture' within the meaning of Section 2(f) of the CEA, 1944 for the purpose of leviability of CVD - Matter referred to Larger Bench: High Court [para 14, 15]
Matter referred to Larger Bench
Observations of High Court -
++ This Court is of the view that the entire aspect of recycling of used tyres to generate cut pieces of tyres, which are marketable as such, requires to be examined for determining if the process by which such cut tyres are generated amounts to manufacture. While it cannot be presumed that there was manufacture merely because cut pieces of rubber are classifiable under Tariff Heading 4004, nevertheless as pointed out by the Supreme Court in Commissioner of Central Excise, Chandigarh-I v. Markfed Vanaspati & Allied Industries (supra) it requires to be examined whether the twin test of manufacture and marketability are satisfied.
++ In particular, as pointed out in Commissioner of Central Excise, Bangalore-II v. Osnar Chemical Pvt. Ltd. (supra), it would be required to be examined if in producing cut pieces of tyres from old tyres there is transformation of a product into a new product "having a different identity, characteristics and use". The issues arising in the present case not having directly arisen before the Court in Modi Rubber Limited v. Union of India (supra), and the Tariff Heading 4004 not in vogue at the time, the observations in that decision touching on the aspect of recycling of waste tyres cannot be said to be conclusive.
++ Decision in Modi Rubber Limited requires to be reconsidered by a larger Bench - following issues are referred for consideration ( since answer to the above questions will in turn determine if CVD can be levied on the cut tyre pieces imported by the Petitioner ):
(a) Whether the process to which old tyres are subject to produce two or more pieces of cut tyre is 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944? and
(b) In the above context, whether the decision of this Court in Modi Rubber Limited v. Union of India 1987 (29) ELT 502 (Del) requires to be reconsidered?
2016-TIOL-1676-HC-DEL-VAT + Story
SHAILA ENTERPRISES Vs CVAT: DELHI HIGH COURT (Dated: August 5, 2016)
Delhi VAT - Careless action of the VATO, unmindful of the law, places an interest burden of Rs. 56 lakhs on the exchequer - disciplinary action initiated - urgent need for imparting orientation to officers of the DT & T - Refund to be granted along with interest by 5 th September 2016 - Costs imposed of Rs.10,000/-, to be paid by respondent to Sales Tax Bar Association: High Court [para 15, 18, 19, 20, 21, 23 to 26]
Petition allowed
Observations of the High Court -
+ There could be, therefore, no manner of doubt that the orders which were the subject matters of the proceedings before the OHA did not survive after the order of the OHA. The AO was required to pass an order afresh. It is for this reason that the Assessee was directed to appear before the AA on 15th July 2013.
+ The word 'may' (in the last line of the order of OHA) was not to give an option to the AO whether or not to pass an order but the option if at all about the time period within which the order was to be passed. However, here the AO appears to have forgotten about the proceedings altogether and not take any action whatsoever. If as contended by the Respondent, the Petitioner failed to appear before the AO on 15th July 2013, the AO was not absolved from passing a fresh order in respect of the refund claimed of the Petitioner. This was his bounden statutory duty.
+ With the notices of default assessment creating the demand by notices dated 5th, 6th and 7th January 2011 for the period 2007-2008 ceasing to exist by virtue of the order dated 25th June 2013 and with no fresh assessment order being passed, there was no legal impediment any longer in granting refund to the Petitioner in respect of the claim made along with its return filed for the month of January 2008. The AO, obviously did not realise the implications of his failure to pass fresh assessment order in terms of the order dated 25th June 2013 of the OHA.
+ In the present case, in respect of the assessment for the period 2007-2008, even if the DT&T wished to revisit them, the limitation under Section 34 of the DVAT Act would apply. There are two periods of limitation. One is the period of four years from the end of year comprising one or more time period for which a person furnishes his return and the other is in terms of proviso of Section 34(1) of the Act where there is an extended period of six years and where the Commissioner has reason to believe that the tax was not paid "by reason of concealment, omission or failure to disclose fully material particulars". In the present case, in respect of the month of January 2008 the time within which it could have been reopened has long been crossed. The DT&T cannot, therefore, possibly seek to reopen the assessment for 2007-08.
+ The net result is that the refund for the month of January 2008, which the Petitioner has claimed refund along with the return became due to the Petitioner from the expiry of one month thereafter in terms of Section 38(3)(a) (i) of the DVAT Act. The interest thereon till the date of payment also falls due in terms of Section 42 of the DVAT Act.
The High Court, therefore, directed the Respondent Department of Trade & Taxes to pay to the Petitioner the aforementioned refund amount with the interest thereon up to the date of payment on or before 5th September 2016.
Strictures by High Court:
++ This is yet another instance of orders being passed by the officers of the DT&T with total non-application of mind and in ignorance of the legal position. The Court would only like to reiterate that there is an urgent need for an orientation being imparted to the officers of the DT&T in the law and the decisions of the Court explaining the law.
++ Due to the careless action of the VATO in the present matter, who issued the issued the 'adjustment order' dated 30th December 2010 unmindful of the law, an interest burden of nearly Rs. 56 lakhs is now placed on the exchequer.
++ A question then arises as to who should be made responsible for this and whether any action on the disciplinary side is not called for? Consequently, the Commissioner, VAT is directed to seek an explanation from the VATO who issued the above 'adjustment order' and to pass appropriate orders on the disciplinary side as he deems fit not later than four weeks from today.
2016-TIOL-1690-HC-AHM-IT
CIT Vs ATUL LTD: GUJARAT HIGH COURT (Dated: August 1, 2016)
Income tax - Sections 80IA & 254(2).
Keywords - establishment of plant - generation of power - installation of turbine - mistake apparent on record - mere proposition - new industrial undertaking - order for further hearing - power of rectification & raw material.
Whether a proposition of High Court that 'mere dependence of new industry on an existing industry, would not disqualify itself from deduction u/s 80IA', can be inferred as "ratio" by the ITAT while recalling its earlier judgment on the issue of deduction u/s 80IA upon installantion of new turbine, when the High Court has made it clear that such deduction will depend on the nature of technology and should be judged case specific - NO: HC
The assessee had filed its return declaring 'nil' income, consequent to which, the case was selected for scrutiny. The claim of the assessee was that during the year under consideration, the assessee had established a new power plant by expending a sum of Rs.14.56 crores and had claimed deduction u/s 80IA in relation to the profit derived from such undertaking. The AO was of the opinion that generation of power would require boiler and turbine both, since boiler would manufacture steam which would be a raw material for production of power with the aid of turbine. The assessee had merely installed a new turbine, claiming it to be a new industrial undertaking capable of generating electricity. The AO therefore disallowed the assessee's claim of deduction u/s 80IA and made addition of Rs.15.68 crores, thereby determining assessee's total income at Rs.4.9 crores. On appeal, the CIT(A) held that no industrial undertaking came into existence within the meaning of the provisions contained u/s 80IA by transferring the boiler or by installing new machinery for the purpose of generation of power. The power plant was not capable of running independently and depended on the transfer of steam from the existing plant. He therefore rejected the assessee's claim. On further appeal, the ITAT confirmed the order of CIT(A) by holding that it was only in the existing unit the assessee had added new turbine, which could not be regarded to be establishing the new undertaking qualifying for deduction u/s 80IA. The assessee thereafter filed an application for rectification and contended that after the said judgment was delivered by the Tribunal, the High Court in case of Gujarat Alkalies and Chemicals Ltd. v. Commissioner of Income tax, had delivered a judgment which would have a bearing on the issues decided by the Tribunal. The Tribunal therefore, allowed the application for rectification, recalled its earlier judgment, revived the assessee's appeal and ordered it to be posted for further hearing.
Having heard the parties, the High Court held that,
++ from the facts on record, it emerges that the Tribunal in its original judgment had held that the assessee had not established a new power plant so as to qualify for deduction u/s 80IA. The Tribunal recalled this order in exercise of powers of rectification on the ground that this view is not in consonance with in case of Gujarat Alkalies and Chemicals Ltd. It is undisputed that u/s 254(2), the Tribunal enjoys the power to rectify any mistake apparent on the face of the record at any time within four years from the date of the order. In view of the judgment of this Court in case of Assistant Commissioner of IncomeTax v. Saurashtra Kutch Stock Exchange Limited, the decision of the jurisdictional High Court even if rendered subsequently, would constitute a mistake apparent on record, investing the Tribunal with jurisdiction to rectify the mistake. It was therefore not even the argument of the Revenue that merely because the judgment of the Gujarat High Court in case of Gujarat Alkalies and Chemicals Ltd. was delivered subsequent to the judgment of the Tribunal, the same would not form a ground to hold that the Tribunal's judgment suffered from an apparent mistake. However, the Revenue argued that the said judgment did not clinch the issue and at any rate, it was debatable whether by virtue of the judgment of Gujarat High Court, the Tribunal's view would be rendered incorrect and in that view of the matter, power of rectification could have been exercised;
++ as noted, the Supreme Court in case of T.S. Balram, held that a mistake apparent on record must be obvious and patent mistake and not something which can be established on a long drawn process of reasoning where two opinions are possible. In case of Honda SIEL Power Products Ltd., the Supreme Court highlighted that the purpose behind enactment of section 254(2) is based on the fundamental principle and no party appearing before the Tribunal should suffered on account of the mistake committed by the Tribunal and that power of rectification of the Tribunal is granted to see that no prejudice is caused to either of the parties by the decision of the Tribunal based on the mistake apparent from the record. Section 254(2) itself refers to a mistake apparent on record, which can be rectified. The concept of mistake apparent on record was not diluted by the Supreme Court in case of Honda SIEL Power Products Ltd. also. In view of such settled legal position, we may examine the facts on hand. As noted, the assessee had installed a turbine for power generation, which relied on the excess steam production capacity of the plant. The assessee claimed that it had thus, set up a new power plant which qualify for deduction u/s 80IA. The Tribunal by its original judgment, upheld the view of the Revenue authorities holding that turbine itself would not be sufficient to generate power and the plant therefore would not qualify as a new industry. On the basis of judgment of Supreme Court in case of Gujarat Alkalies and Chemicals Ltd., however, the Tribunal was persuaded to recall this judgment and post the appeal for further hearing. While discarding the theory of the test of separate and distinct identity failing merely because the new undertaking was dependent on the existing one, the Court opined that it all depends on the nature of technicality and the mechanism of production. In the later portion of the judgment, the Court observed that "The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is a new identifiable endevour where substantial investment of fresh capital is made to enable earning of profit attributable to that new capital.";
++ it can thus, be seen that the High Court in case of Gujarat Alkalies and Chemicals Ltd. while laying down certain broad propositions for ascertaining whether a new industrial undertaking in the given set of facts was established, did not lay down ratio which can be straightway applied to the facts of the present case. In the present case, the view adopted by the Revenue authorities which was upheld by the Tribunal was that by mere installation of turbines, the assessee did not install a new industry, since turbines themselves would not be sufficient for power generation, without generation of steam. When the High Court in case of Gujarat Alkalies and Chemicals Ltd. referred to the issue depending on the nature of technology and mechanism of production, it left this question open to be judged case specific. This was therefore not a case where by virtue of the judgment of the case of High Court, it can be stated that the Tribunal had committed an error apparent on record which needed rectification. At best, the High Court propounded that mere dependence of a new industry on an existing industry, would not disqualify itself from claiming deduction.
Revenue's appeal allowed
2016-TIOL-1691-HC-P&H-VAT
AVDESH TRACKS PVT LTD Vs STATE OF PUNJAB: PUNJAB & HARYANA HIGH COURT (Dated: August 2, 2016)
Punjab VAT Act, 2005 - Section 13.
Keywords - claim of input tax credit - MODVAT - non genuine transaction - substantive right - manufacturing unit - selling dealer.
Whether when the assessee has already proved genuineness of the transaction entered into, a minor discrepancy in the contents of an invoice is not fatal for making a claim for input tax credit - YES: HC
Whether if the input tax credit available to a person and the genuineness of the transaction otherwise has not been examined by the authorities, is it possible for them to straight away reject the claim made by the assessee - NO: HC
The assessee purchased various consignments of non-alloy ingots of different quality. The seller of the goods was a unit covered under the Central Excise Act, 1944. The invoice-cum excise gate pass admittedly depicted the description and price of the goods, excise duty and the sale tax charged. At the time of filing of return, the assessee claimed credit of the input tax paid at the time of purchase of the aforesaid material. As the refund was admissible to the assessee, the AO issued notice for determination thereof. Though all the invoices and other documents were produced by the assessee before the Designated Authority, but still the claim of input tax credit on the material purchased from Sada Shiv Casting Pvt. Ltd. was rejected. Aggrieved against the order so passed, the assessee preferred appeal, which was rejected by the Deputy Excise and Taxation Commissioner (Appeals). On further appeal before the Tribunal the assessee failed.
Held that,
++ even in the absence of a statutory form provided for claiming any benefit, such as modvat credit or input tax credit, a dealer can still claim the same in case he is able to prove that the transaction was genuine and the tax had been paid to the selling dealer. Even production of the prescribed form was not final for claiming such a benefit as the competent authority could still opine, in case there is sufficient material available with him, that the transaction was not genuine and the claimant/dealer was not entitled to the benefit. The prescribed form is merely a prima facie proof. The only discrepancy, on the basis of which input tax credit is sought to be denied to the appellant is that the invoice did not contain the words “Input Tax Credit is available to a person against this copy”. The opinion expressed by the authorities is that it is a mandatory condition, which cannot be ignored. Mere non-mentioning thereof is fatal. In our view, the opinion expressed is contrary to the law laid down by this court as these type of technical defects in the invoices cannot be fatal for grant of input tax credit to the claimant. The claim of the appellant had been rejected only on the ground that the invoice did not contain the words “Input Tax Credit is available to a person against this copy”. The input tax credit available to a person and the genuineness of the transaction otherwise had not been examined by the authorities to record a finding that the tax, credit of which was being sought by the appellant, had in fact been paid by him to the selling dealer at the time of purchase of goods. Accordingly, question No. (i) is answered in negative while holding that the Tribunal was not justified in rejecting the claim of input tax credit merely on technicalities, when the dealer was able to show that the tax had been paid to the selling dealer and duly deposited with the State. Question No. (ii) is also answered in negative while holding that the provisions of Rule 54 of the Rules are not mandatory, in case the claimant/dealer is able to prove from other evidence that the transaction and the claim is genuine.For the reasons mentioned above, the appeal is allowed. The matter is remitted back to the AO to examine the genuineness of the transaction and the claim made by the assessee.
Assessee's appeal allowed
MSME Development Act
Govt amends Rules for SMEs to furnish information
CBDT - Media Policy
Revision of the Media Policy of the Income Tax Department - reg
OFFICE ORDER
Order No 142
CBDT allocates S K Sahai zonal charge of North West Region, Delhi & UP
MIXED BUZZ
First ever National Conference of Investigation Agencies
