NOTIFICATIONS

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Relaxation in export policy for export of Red Sanders wood under Sl. No. 188, Chapter 44 of Schedule 2 of ITC (HS) Classification of Export and Import 2012

ctariffadd16_048

Antidumping duty imposed on imports of 'Glass Fibre and Articles thereof ' from PR China

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Amendment in paragraph 4.61 of Hand Book of Procedures 2015-20.

CASE LAWS

2016-TIOL-153-SC-CX

PADMASHRI V V PATIL SSK LTD Vs CCE & C: SUPREME COURT OF INDIA (Dated: April 4, 2016)

CX - Civil Appeal 1826 of 2008 involving meager amount, hence not entertained - Appeal dismissed: Supreme Court.

CX - Civil Appeal 2993 of 2008 - Deliberate undervaluation in respect of goods cleared for home consumption which is discerned from the resolution dated 2 nd August 1996 passed by the appellant himself - on being pointed out, appellant paying the differential duty amount - penalty proceedings initiated and penalty imposed which was upheld by Tribunal - no reason to interfere with the impugned judgment - appeal dismissed: Supreme Court

Appeals dismissed

2016-TIOL-152-SC-CT

HARRISONS MALAYALAM LTD Vs STATE OF KERALA: SUPREME COURT OF INDIA (Dated: April 4, 2016)

CST Act - Rubber Act, 1947 - Rubber Cess - sales tax turnover - notional basis.

Whether when the assessee is into the sale of rubber products, it can be said that such an activity is much prior to the taxable event of rubber cess - YES: SC

Whether when the assessee neither pays rubber cess nor collects the same from traders whom goods were sold, even then it can be subjected to the levy of rubber cess - NO: SC

Whether it is settled law that rubber cess is a levy only on manufacture of rubber products - YES: SC

The appellants operating several rubber plantations, are engaged in the production of raw rubber which is sold by them to various trader. It is those traders who re-sell the same to the manufacturer of rubber products. The appellants are exigible to sales tax under the provisions of Central Sales Tax Act. The assessing officer while making assessments held that the rubber cess, which was payable under the Rubber Act, 1947 by the manufacturer, be treated as the part of sales tax turnover and assessed sales tax thereupon. The appellants challenged the said orders with the submission that as the appellants were not paying any rubber cess at all nor was it payable by them under the provisions of the Rubber Act, the notional amount of rubber cess cannot be included in the sales tax turnover. This contention of the appellant were rejected till the stage of High Court.

On appeal, the Apex Court held that,

++ it has been held in the case of M/s. Jullunder Rubber Goods Manufacturers' Association vs. Union of India & Anr. 1969 (2) SCC 644 that it is the manufacturer of the rubber products alone which is liable to pay cess under the Rubber Act. It is clear that the liability to pay the rubber cess is only that of a manufacturer and the event of liability is the manufacture of goods and not earlier. The stage of sale of goods by the appellant was much prior to the taxable event of rubber cess. The appellants were neither paying the rubber cess nor collecting the same from the traders with whom they have sold the goods. Therefore, the rubber cess could not be included, that to on notional basis, in the sales turnover of the appellant. The appeals are accordingly allowed and the impugned judgment of the High Court is set aside.

Assessee's appeal allowed

 

2016-TIOL-1971-HC-MAD-VAT

HINDUSTAN UNILEVER LTD Vs DCCT: MADRAS HIGH COURT (Dated: August 29, 2016)

Tamil Nadu VAT Act, 2006 - Sections 63A, 64, 65 & rule 6(2)(b).

Keywords: stock transfer - branch office - depots - third party manufacturers - inter state transactions - local sale - pre revision notice - taxable turnover - excess.

Whether at the time of passing an assessment order, an AO is enjoined with the statutory duty to complete the assessment after analysing the adequacy or inadequacy of information gathered by the enforcement wing - YES: HC

Whether the report of the Enforcement Officer could at best be treated, as a first information report gathered based on audit in the place of business of a dealer, it is not a conclusive proof of a wrong having been committed - YES: HC

Whether when the AO issues a show cause notice based on the information furnished by the enforcement, the dealer responds to the allegations and proposals in the notice, such AO has to objectively analyse the explanation given by the dealer - YES: HC

Whether in order to make an assessment, the Assessing Authority could visit the place of business of assessee or in the alternative, the entire data in the format maintained by the assessee can be made available in his office with the infrastructure being set up at the cost of assessee - YES: HC

The assessee is a registered dealer. It was engaged in the business of FMCG products such as detergents, soaps, cosmetics, toothpaste, coffee, tea, etc., having their factory at Hosur and at Chennai. Besides their factory, assessee had depots/branches located in Chennai, Dindugal and Coimbatore from which they effect sales both inside the State of Tamil Nadu as well as inter-state from the State of Tamil Nadu. They undertake periodical stock-transfers of their goods to their depots/branches within and outside the State of Tamil Nadu for further sales. The assessee was engaged in the purchase of products such as diapers, sanitary napkins, shampoos etc., from third party manufacturers to be sold through their depots either locally or outside the State or stock transfer to their depots and branches outside the State.

The assessee's place of business was audited by the Commercial Tax Officer (CTO), during which it was observed that assesee was stated to maintain their accounts through MFG-pro initially and later by System, Application and Products package (SAP). It was stated that SAP package was a German Multinational Software Corporation that makes software to manage business operations and customer relations. The SAP, Enterprise Resource Programme, [ERD], enables the user company to avail the benefits of customer package, which helps the company from sourcing stage to sales. The assessee stated that during the course of audit, the officials were given full access to the MFG-pro/SAP system of the assessee. The audit officials recorded the statement of the Manager-Sales Tax of assessee, further details were sought for from the assessee. The said letter was accompanied by an annexure and the assessee had stated that the details in the annexures were by and large incorrect and the alleged excess as per the account for the years 2006-07 as indicated in the annexure was also incorrect, as the assessment for the said year was completed on the basis of the books of accounts of assessee. After about 2 months, assessee received pre-revision notice from the Deputy Commissioner in which there were various proposals and one of them related to a proposal to treat a sum of Rs.136,93,17,498/- as taxable turnover was proposed to be tax at 12.5%.

Having heard the matter, the High Court held that,

++ on a perusal of the reasons recorded by the first respondent, it is seen that the explanation or reply given by the petitioner, dated 30.09.2014, has not been considered. Though, it has been referred to in the preamble portion of the order, this is sufficient to hold that there is violation of principles of natural justice. This reply is very crucial because after the explanation dated 02.05.2011, a show cause notice dated 06.12.2013, was issued purportedly, superseding the earlier notices, dated 14.12.2010 and 28.03.2013. However, it is not clear whether it is in supersession as the notice dated 06.12.2016 states that for the sake of clarity and convenience fresh notice comprising of the proposals already made is issued afresh. Therefore, for all practical purposes, the show cause, which would be relevant, is the notice dated 06.12.2013. Thus, the explanation given by the petitioner dated 30.09.2014, is a vital document and that could not have been brushed aside. The counter affidavit is full of inconsistencies that is to say inconsistency in what has been pleaded in various paragraphs in the counter affidavit and inconsistent with the findings recorded in the impugned order. The respondent in their counter affidavit has stated that the petitioner has produced the Chartered Accountant's certificate alone and that could not obviate, the need for production of accounts, in the preceding paragraph i.e., para 4(b), there is a statement made that the details furnished through SAP data, were inadequate. However, the first respondent appears to have lost sight of the fact that he is the Assessing Officer who is enjoined with the statutory duty to complete the assessment, inadequacy or adequacy of information gathered by the enforcement wing, is of no consequence, when the Assessing Officer takes up the case for assessment to tax;

++ in my view the report of the Enforcement Officer could at best be treated, as a first information report gathered based on audit in the place of business of the dealer. If such is the report, it can be only a prima facie material to initiate action in accordance with the provisions of the Act. The first information report is not a conclusive proof of a wrong having been committed. Thus, when the AO issues a show cause notice based on the information furnished to him by the enforcement, and the dealer responds to the allegations and proposals in the notice, the AO has to objectively analyse the explanation given by the dealer and the materials produced by him to dislodge the information passed on to the officer by the enforcement wing. The AO cannot be bowed down by the observations of the enforcement wing and in several cases that appears to be so and this malady is on account of the fact that the enforcement officers are superior officers to AO. This had led the first respondent to use the expression that the enforcement proposal has been received by him for implementation while issuing show cause notice dated 14.12.2010. If enforcement proposals are received for implementation by the AO, then the purpose of issuing a show cause notice itself is lost and the powers of the AO would stand reduced to that of the Executing Officer, when the statute prescribes a different duty to be done by him. While on this issue, it would be beneficial to refer to the role of the AO as observed by SC in the case of C.Velukutty, that he must not act dishonestly or vindictively or capriciously, because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary. If the impugned order is tested on the anvil of the role of AO as explained above, then the only conclusion that could be arrived at is, that the AO has abdicated his statutory duties;

++ the averments in the counter affidavit shows that the SAP data was examined by the enforcement and this Court is at a loss to understand as to why the AO should not exercise his powers in examining the accounts maintained by the petitioner in a particular format. It is true that the Rules stipulate the manner in which the accounts have to be maintained. However, it is not the case of the first respondent that the data available with the petitioner does not confirm to the Rules. The petitioner's justification is that the accounts are maintained in that particular format, which is a specially designed software and this helps them in monitoring the business through out the country. AO is a statutory authority who plays a very vital role in assessing dealers to tax. Therefore, the endeavour of the officer should be to ensure that not a rupee of revenue payable to the Government is missed out in collection, that is why financial experts have said that an assessment proceedings is an outcome of dialogue and deliberations. In certain cases to understand the nature of activity, done by a dealer/assessee, AO must equip himself to the nuances of the particular trade, so as to ensure that the disclosure made by the Assessee in their return is full and true. Therefore, I see no reason as to why the first respondent should fight shy of visiting the place of business of the petitioner or in the alternative, the entire data in the format maintained by the petitioner can be made available in the office of the first respondent with the infrastructure being set up at the cost of the petitioner. In fact, during the course of argument, the counsel for the petitioner was fair enough to state that they are ready and willing to provide print outs of the entire data, but it would be voluminous running to several lahks of pages and it would be a very difficult task for the first respondent to verify the details, apart from wastage of stationary. He has extended one more option that they are ready and willing to establish a required computer installation in the office of the first respondent and provide all the data in the system and Senior Executives wellversed with the data will be present in the office of the first respondent to assist the first respondent in clarifying any doubts that may be arise in the process of verification;

++ undoubtedly the impugned assessment is a very complicated issue and this is all the more established from the fact that the enforcement officials namely, the second respondent had spent 15 days in the place of business of the petitioner gathering details and information. Therefore, there is absolutely no reason for the first respondent to complete the assessment in the manner done in the impugned order. He is required to take into consideration relevant factors and should not proceed to decide the matter based on irrelevant considerations, which are not germane for determining the disputed issues. Above all failure to consider the petitioner's explanation dated 30.09.2014, amounts to serious violation of principles of natural justice. Thus, for all the above reasons, this Court has no hesitation to hold that the impugned assessment orders require interference. In the result, the Writ Petitions are allowed and the impugned orders are set aside and the first respondent is directed to redo the assessment in accordance with law, after affording an opportunity of personal hearing and adopt any one of the modes for verification of the data/records in terms of the observations contained in this order.

Assessee's appeal allowed

 

2016-TIOL-1972-HC-P&H-CUS

BE OFFICE AUTOMATION PRODUCTS PVT LTD Vs CC & CE: PUNJAB AND HARYANA HIGH COURT (Dated: August 30, 2016)

Cus - Whether redemption fine and penalty, as determined by first appellate authority, can be increased further by Tribunal in appeal filed by assessee, especially when appeal filed by department against same order passed by first appellate authority had been dismissed - In the appeal filed by assessee, order passed by first appellate authority was set aside and the quantum of redemption fine and penalty was increased - That course was not possible in the appeal filed by assessee, especially when the appeal filed by the department had been dismissed - Impugned order set aside and appeal allowed: CESTAT

Appeal allowed

 

2016-TIOL-1970-HC-P&H-VAT

STATE OF PUNJAB Vs INDO ARYA CENTRAL TRANSPORT LTD: PUNJAB AND HARYANA (Dated: August 16, 2016)

Punjab VAT Act - Sections 51(6)(a).

Keywords - detention - goods vehicle - goods in transit - information collection & penalty.

Whether an Excise tax officer is competent enough to check the goods in transit - NO: HC

Whether when goods are transported by rail, VAT authorities have the statutory powers to detain the same in transit for document verification as per Sec 51 of Punjab VAT Act - NO: HC

During the subject year, a goods train rake carrying pig iron was checked at Railway Station, Batala, by the ETO (MW) Jalandhar, which was found to have been transported from Kalem (Goa) to Batala Railway Station. On demand, owner of the goods produced 12RRs showing consignor to be M/s Indo Arya Central Transport Ltd. Kalem and consignee M/s Indo Arya Central Transport Ltd. Batala. Opining that the goods were not accompanied by proper and genuine documents and there was an attempt to evade tax, the Asst Excise & Taxation Commissioner, Jalandhar, imposed penalty of Rs.90,63,406/- u/s 51(6)(a) of Punjab VAT Act. On appeal, the penalty order was set aside.

Having heard the parties, the High Court held that,

++ a perusal of Section 51 shows that the owner or person incharge of goods vehicle shall carry with him specified documents with respect to the goods being carried in the goods vehicle which are meant for the purpose of business. Copies of the documents as enumerated in Section 51 (2) are to be produced at the Information Collection Center or before any Officer not below the rank of an Excise and Taxation Officer checking the vehicle at any place. The term "goods vehicle" has been defined u/s 2(l) to mean any mechanically propelled vehicle adapted for use upon roads but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or any other enclosed premises. It is not disputed that the goods were checked when these were in wagons on fixed rails. In terms of the provision of Section 51, the authority was not competent to check such goods in transit. It is seen that a Division Bench judgment of this Court in International Switch Gears's case, has set aside the notice and initiation of proceedings u/s 14-B of Punjab GST Act, where the goods were being transported in animal driven cart. The same being not covered in the definition of motor vehicle at the relevant time. This Court opined that the action of the authorities was without jurisdiction;

++ the contention raised by the counsel for Revenue that the exception as carved out in the definition of 'goods vehicle' is to be read in one part namely that the vehicle running upon fixed rails has to have a relation with a vehicle of special type adapted for use only in a factory or any other enclosed premises, is merely to be noticed and rejected. A plain reading of the exception clause shows that it is in two parts having no relation with each other. These being, (i) the vehicle running upon fixed rail; and (ii) the vehicle of a special type adapted for use only in a factory or any other enclosed premises. The language of Section is clear to the effect that these are types of vehicles, which are excluded from the definition of 'goods vehicle.' The facts were that the goods were booked at the northern railway city booking agency located in the city and were being carried therefrom to the railway station in tempos. The plea sought to be raised by the assessee therein was that the goods belonged to railways, hence, could not be detained. The argument was rejected. For the reasons mentioned herein, the question is answered in negative opining that the goods being transported in a vehicle running upon fixed rails could not be detained u/s 51, at the relevant time.

Revenue's appeal dismissed

2016-TIOL-1969-HC-ALL-IT

CIT Vs SYNDICATE BANK: ALLAHABAD HIGH COURT (Dated: August 23, 2016)

Income tax - Section 194A(3)(iii).

Keywords - corporation - interest paid by bank - res judicata & TDS obligation.

Whether a former decision of the High Court having observed the status of 'NOIDA' as 'local authority', would operate as res-judicata for the ITAT in deciding the impugned status, whereas a latter decision of the High Court has already made observations in respect of status of 'NOIDA' as 'Corporation established by State' - NO: HC

Whether 'NOIDA' being a 'Corporation' established by U.P. Industrial Area Development Act, is entitled for benefit of exemption, and any payment of interest by Bank to such Corporation does not require tax deduction at source as per Section 194A(3)(iii)(f) - YES: HC

The Revenue had preferred the present appeal challenging the order, whereby the ITAT had held that New Okhla Industrial Development Authority (NOIDA) being a 'Corporation' established by U.P. Industrial Area Development Act, was entitled for benefit of exemption, and payment of interest by Bank to such authority did not require any deduction of TDS in terms of Section 194A(3)(iii)(f).

Having heard the parties, the High Court held that,

++ it has been accepted by the counsel for parties that in Writ (Tax) No.1338 of 2005, issue was decided that NOIDA is not a "local authority" within the meaning of Section 10(20) and this issue was answered against NOIDA. However, in present case, issue is whether NOIDA is a "Corporation" established by State Act and this question has been answered in favour of NOIDA and against Revenue in a subsequent matter i.e. CIT & Anr Vs. Canara Bank. The Division Bench in judgment has also considered earlier Division Bench judgment and distinguished the same by observing that there was a dispute whether NOIDA would be a "local authority" or not while in a subsequent judgment the issue was whether NOIDA is 'Corporation' established by State Act or not. Therefore, earlier judgment confined to the question of status of NOIDA being "local authority" would not have any application to the issue raised subsequently. In view thereof, it cannot be said that judgment in Writ (Tax) No.1338 of 2005 could have operated as res-judicata and Tribunal has erred in deciding the case otherwise in holding that NOIDA has been established by State Act. Considering the fact that this issue is now covered by judgement of this Court in Income Tax Appeal No.64 of 2016 and has been answered against Revenue and in favour of NOIDA, in our view, all substantial questions of law are answered in favour of NOIDA.

Revenue's appeal dismissed

Income tax - Sections 113, 132 & 158BC.

Keywords - block assessment - excess stock of jewellery - purchase of immovable property - undisclosed income & validity of statement u/s 132.

Whether a statement given by the son of the assessee in respect of purchase of immovable property which is not corroborated with any documentary evidence, can be relied upon for making any addition in the hands of the assessee - NO: HC

Whether the value of difference in the stock of jewellery found during search proceedings, can be treated as undisclosed income, when the assessee has duly submitted the reconciliation statement - NO: HC

Whether the statement recorded u/s 132(4) alone, in the absence of any corroboration, should form the basis, for arriving at any adverse decision against the assessee - NO: HC

The assessee is a proprietor of Sri Bhuavneswari Jewellers. During the subject year, a search u/s 132 was conducted in the residential and business premises of the assessee, wherein a notice u/s 158-BC was issued. The assessee thereafter filed the return for the block assessment, in Form No.2B on 24.04.2000, disclosing 'Nil' income. The same was taken up for scrutiny, by issuing a notice u/s 158-BC(b). After considering the books of accounts and other materials, the AO arrived at the undisclosed income for the block period, as Rs. 38,59,700/- and assessed the same at 60% u/s 113, with an addition of 10%, on the tax, towards surcharge. Finally, an assessment was passed by making an assessment in the hands of the assessee, the value of immovable properties at Rs. 31,00,000/- purchased in the name of daughter-in-laws at Nelmandi Street, Pudukottai. The AO in the assessment order also made addition of i) Rs. 80,000/- towards excess stock of 215 gms. of gold jewellery found in the business premises; ii) Rs. 2,90,000/- towards excess stock of 39 Kgs. of Silver articles; iii) Addition towards difference in cost of construction of Rs. 83,700/-; iv) Rs. 3,00,000/- towards inadequate drawings; and v) Levy of surcharge of Rs. 2,10,360/-. On appeal, the CIT(A) sustained the addition of 50,000/- in respect of immovable properties. As regards the addition of Rs. 86,000/- towards the excess stock of 215 grams of gold jewellery, the same was deleted by the CIT(A). As regards excess stock of 39 Kgs of Silver articles, the CIT(A) treated the same as undisclosed income. As regards difference in the cost of construction, the CIT(A) accepted the contention of assessee that the Valuation Officer had not given any allowance to self-supervision. As regards inadequate drawings, the CIT(A) directed the AO to substitute the figure of Rs. 2,00,000/- towards insufficiency in drawing for domestic expenses. As regards levy of surcharge of Rs. 2,10,360/-, the CIT(A) confirmed the order of AO.

Having heard the parties, the High Court held that,

++ as regards the first issue of addition of Rs. 5,00,000/- in respect of immovable property, this court concurs with the view of the Tribunal that there was no material found, during the course of search operation and that the statement recorded from the assessee u/s 132(4) has been relied on, by the AO. However, upon perusal of the statement, the Tribunal has found that the preamble portion of the statement, it is recorded that the said statement has been given u/s 132(4), and on the materials, the Tribunal has observed that, it is not known as to whether search was initiated on 29th Dec, 1999 or 3rd Jan, 2000. A doubt has been raised by the Tribunal, regarding the statement said to have been recorded on the latter date. Taking note of Section 158-BB(1), which provides for the method of computation of the undisclosed income, for the block period, and that the AO is obligated to compute the undisclosed income for the block period, in accordance with the provisions of the Income Tax Act, on the basis of the evidence found, as a result of search, or other documents, materials or other information, available with the AO, and relatable to such evidence found, during the course of the search operation and by observing that the statement of the Assessee recorded u/s 132(4) does not throw any light on the aspect of payment of the money, for the purchase of property and in the light of the provision, that such statement recorded, cannot be relied on, by making it referable, at the hands of the Assessee, the Tribunal has held that the CIT(A) has rightly deleted addition of Rs. 31,00,000/-. Going through the material record, it could be seen that assessee's son S.Natarajan has been examined u/s 132, as per statement of whom, there was payment of Rs. 31,00,000/- towards purchase of property, and that such payment was made in the presence of his father, namely, the assessee. According to him, a sum of Rs. 31,00,000/- was paid to Shri.Babu, whereas, going through the statement of the assessee said to have been recorded on 3rd Jan, 2000, the Tribunal has observed that, if there was any payment of Rs. 31,00,000/- towards the purchase of property, the same ought to have been clarified from the assessee during examination, and that the Revenue authorities have not taken any pain to clarify the same, from the assessee. The Tribunal, by observing that, in the absence of any clarification from the assessee, statement said to have been recorded from Mr.Natarajan son of the assessee is of no assistance to the revenue. Thus, the Tribunal, in the absence of any material found during the course of search operation, was also of the considered view that statement of Mr.Natarajan, son of the assessee, not corroborated with any documentary evidence, cannot be relied upon, for making any addition, in the hands of the assessee;

++ reconciliation made by the assessee has been accepted by the AO, but, then, he has proceeded to assess the value of difference of 215 gms treating the same, as undisclosed income. Before the CIT(A), the assessee's counsel submitted that the alleged excess of jewellery of 215 gms., being negligible, explanation given at the time of search that the jewellery belonged to the customers, who had given for repairs, ought to have been accepted by the AO. Having regard to the nature of the business and keeping in view the quantum of stock of gold jewellery traded by the assessee, excess of 215 gms. has been considered, as negligible and, therefore, addition of Rs. 86,000/- on this account, has been held, as not warranted. The same, therefore, was deleted. Going through the material on record, we are of the considered view that CIT(A) held that the reasoning of the appellate authority, deleting Rs. 86,000/- towards the excess stock of 215 gms gold jewellery cannot be said to be perverse. Further, the Tribunal has found that, in spite of the reconciliation made by the assessee, the AO has proceeded to assess the value of the difference of 215 gms gold jewellery, treating the same, as undisclosed income. The Tribunal has categorically held that when the assessee has filed reconciliation statement, there was no need for making any further addition or deletion, only to the extent of Rs. 86,000/-. So saying, the Tribunal held that there was no infirmity, in the order of the appellate authority, as regards deletion of Rs. 86,000/-. A Perusal of the Memorandum of Grounds in the instant appeals, shows that there is no specific ground, relating to deletion of Rs. 1,00,000/- towards, inadequate drawings. This Court is of the considered view that, for deciding any issue, against the assessee, the Authorities under the Income Tax Act have to consider, as to whether there is any corroborative material evidence. If there is no corroborating documentary evidence, then statement recorded u/s 132(4) alone should not be the basis, for arriving at any adverse decision against the assessee. Admittedly, Revenue has also not confronted the assessee, with the said statement of his son. Considering the nature of the order of assessment, in the instant case characterised as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the statement.

Revenue's appeal dismissed