CIRCULARS
cuscir10_017
Export of carpet under duty drawback - examination of carpets for composition, price determination, etc.
Purchase of foreign exchange from foreign citizens and others
CASE LAWS
RELIANCE INDUSTRIES LTD Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: March 2, 2017)
Gujarat VAT Act - Capital Investment Incentive to Premier Units Scheme, 1995-2000 - Mines and Minerals (Development and Regulation) Act, 1957 – Section 3(b)
Keywords - incentive scheme - Exemption from Sales Tax incentive - natural gas / gas - local mineral resources
The Indian Petrochemicals Corporation Limited (IPCL) was a Government of India Undertaking at the time of its incorporation and, thereupon, IPCL continued as a Government of India Undertaking till in the month of June 2002 or thereabout, the Government of India decided to disinvest its shareholding as a major shareholder in IPCL and, thereupon, in furtherance thereof entered into a Share Purchase Agreement with the petitioner No.1 for the purpose of causing transfer of 46% of its shareholding in the setup of IPCL to a subsidiary of petitioner No.1, in the name and style of "Reliance Petro Investments Limited". Subsequent to the aforesaid, pursuant to the order passed by the Bombay High Court, a scheme of amalgamation of IPCL with the petitioner No.1 was sanctioned in consonance with the provisions embodied in sections 391 to 394 of the Companies Act, 1956 and as a result thereof, IPCL came to be merged with the petitioner No.1 herein – Reliance Industries Limited (RIL). The State of Gujarat through its Industries and Mines Department, promulgated a Resolution by virtue of whichIncentive Scheme, inter alia, providing incentive, in the form of Exemption from Sales Tax to industrial units for setting up industrial complex / project in the backward areas, defined therein, came to be published.
The IPCL thereafter, moved an application before the Industries Commissioner pointing out that grassroot Mega Industrial Complex, near Gandhar (Gandhar Complex) proposed to be set up by IPCL at an approximate cost of 3500 Crores would qualify for the purpose of Exemption from Sales Tax in the form of an incentive pursuant to the Incentive Scheme and hence, IPCL be accordingly registered as a Premier Industrial Unit. A provisional eligibility certificate under the nomenclature of "Eligibility Certificate for Sales Tax Incentive" was issued by the Office of the Industries Commissioner inter alia, declaring IPCL as eligible for Sales Tax Exemption under the said scheme for its Gandhar Complex. Thereafter the IPCL applied to the Commissioner, Sales Tax, for the necessary Exemption certificate in respect of Sales Tax for the said Gandhar Complex. The said request of IPCL was acceded to and, thereupon, a certificate, declaring IPCL as eligible for Exemption from Sales Tax to the tune of Rs.377 Crores for the said Gandhar Complex came to be issued by the office of Commissioner of Sales Tax in favour of IPCL. Thereafter, the eligibility certificate dated 01.01.2000, declaring IPCL for Phase-I of its Gandhar Complex as eligible for Sales Tax Exemption for a sum of Rs.377 Crores for the period commencing from 24.01.1997 to 16.04.2010, came to be amended by extending the validity period thereof upto 23.01.2013. Since Phase-II of the aforesaid Gandhar Complex of IPCL was also completed, a communication IPCL sought eligibility certificate for Exemption of Sales Tax in respect of Phase-II of Gandhar Complex under the Incentive Scheme. While the same was under process, an order was passed by Industries Commissioner by virtue of which the upper limit set out in the eligibility certificate for Sales Tax Exemption granted earlier in favour of IPCL, referable to Phase-I of the Gandhar Complex came to be increased from Rs.377 Crores to Rs.938.14 Crores. Thereafter an application was moved by IPCL to the office of the Commissioner of Sales Tax seeking amendment in the certificate of Exemption dated 13.01.2000, granted earlier by the office of the Commissioner of Sales Tax in favour of IPCL. Requisite amendment was made to the certificate of Exemption on 20.12.2002 declaring IPCL as eligible for Exemption from Sales Tax to the tune of Rs.938.14 Crores in place of original limit of Rs.377 Crores.
Subsequent to the aforesaid on account of introduction of coming into force the Gujarat Value Added Tax Act, 2003 (VAT Act) with effect from 01.04.2006, the Gujarat Sales Tax Act, 1969 came to be repealed. With a view to see that incentive in the form of Exemption from Sales Tax granted to the industrial units pursuant to the Incentive Scheme is continued in the shape of Exemption from Value Added Tax in lieu thereof, a notification dated 01.04.2006 came to be issued by the State Government under Section 5(2) of the VAT Act. That thereafter even another notification dated 01.04.2006 came to be issued by the Finance Department, State Government, by virtue of which the VAT Act came to be duly amended to provide for the procedure to be followed for claiming Exemption from the Value Added Tax in lieu of the Sales Tax and accordingly, an appropriate application in the prescribed format came to be moved by the IPCL before the concerned authority in respect of the Phase-I, which was duly accepted by the concerned authority. Since the application moved by the IPCL, seeking issuance of eligibility certificate for Sales Tax Exemption covering Phase-II of the Gandhar Complex of IPCL, was pending since long, a communication was addressed for and on behalf of the IPCL to the Principal Secretary, Industries and Mines Department, State of Gujarat requesting for early issuance of the eligibility certificate covering Phase-II of Gandhar Complex of IPCL. IPCL received a communication by virtue of which it came to be mentioned that Phase-I of the Gandhar Complex was related to imported raw material and not mine and, therefore, the same was construed as eligible for Exemption from Sales Tax under the scheme as an incentive as opposed to Phase-II of the Gandhar Complex, which is gas related, and hence, the said Phase-II of the Gandhar Complex would not be eligible for Exemption from Sales Tax under the Incentive Scheme. Thus, IPCL for Phase-II of Gandhar Complex would not qualify for the purpose of Exemption from the Sales Tax pursuant to the Incentive Scheme on the ground that the Phase-II is a gas related and not mines.IPCL requested to reconsider the decision of denying benefit of Exemption to IPCL for Phase-II of the Gandhar Complex.
On appeal, the HC held that,
Whether natural gas used by a petroleum company in its Phase-II Project can be treated as local mineral resources, which would require permit / license under any Rules or Mineral Act – NO: HC
++ it is seen that in the case of Association of Natural Gas & Others, the Supreme Court has observed and held that "natural gas" in raw and liquefied form is 'petroleum product' and part of mineral oil resources. It is further held that for mineral oils no license is required under Mineral Act or Rules. Even under the Oil Fields (Regulation and Development) Act, 1948 (hereinafter referred to as "Oil Fields Act"), "mineral oil" is not a mineral. Therefore, when the 'natural gas' cannot be said to be 'mineral resources' for which any permit is required under the Mineral Act or Rules, the petitioner could not have been denied the benefit of the Incentive Scheme for Phase-II Project, on the ground that 'natural gas' used by the petitioner in its Phase-II Project is a 'local mineral resource' for which any permit / license is required under the Mineral Act or Rules. As per section 3(b) of the Mines and Minerals (Development and Regulation) Act, 1957, "mineral oils" includes 'natural gas' and 'petroleum'. Therefore, the natural gas and petroleum which can be said to be mineral oils, but may not be included in the definition of the "minerals", for which license or permit is required under the Act, 1957. Even as per the Oil Fields Act, "mineral oils" include natural gas and petroleum. Therefore, "natural gas and petroleum" is a "mineral oil" and therefore, considering the provisions of Act, 1957, "natural gas and petroleum" being 'mineral oil' cannot be included within the definition of "minerals". Under the circumstances, the natural gas used by the petitioner Company in Phase-II Project cannot be said to be "local mineral resource" for which any license or permit is required under the Mineral Act or Rules. The petitioner has been wrongly denied the benefit of Sales Tax Incentive Scheme under the Government Resolution dated 11.09.1995;
++ natural gas cannot be said to be a local mineral resource for which permit / license is required under the provisions of Mineral Act or Rules. Clause 9(c) is required to be read as it is. In the word "local mineral resources", neither there is any coma nor the word "and" is mentioned. In Clause 9(c) what is stated is "local mineral resources". Natural gas cannot be said to be mineral / local mineral resource for which any permit / license is required under any of the provisions of the Mines and Mineral Act or Rules, the impugned decision to deny the benefit of the Sales Tax incentive under the Government Resolution dated 11.09.1995 to the petitioner for Phase-II Project cannot be sustained and the same deserves to be quashed and set aside and the matter is required to be remanded to the State Government for its fresh decision in light of the observations made hereinabove and to grant the benefit of the Incentive Scheme to the petitioner for Phase-II Project of Gandhar Complex if all other conditions of the Government Resolution dated 11.09.1995 are satisfied.
Assessee's Petition allowed
2017-TIOL-638-HC-MP-IT
NORTHERN COAL FIELDS LTD Vs ACIT: MADHYA PRADESH HIGH COURT (Dated: March 23, 2017)
Income tax - Sections 220(6) & 245
Keywords - intimation to assessee - recovery of demand - stay of order - adjustment of refund
The ITAT, Jabalpur during the subject year, had directed for refund of an amount of Rs.899,83,91,210/- to the assessee. It was thereafter on Jan 05, 2007, the AO served a notice on the assessee in terms of Section 245 proposing to set off the amount of refund against the tax demand of Rs.729.33 Crores due for the A.Y 2013-14 and Rs.791.25 Crores due to the A.Y 2014-15. Consequently, the assessment for the A.Y 2013-14 was finalized by the AO on Mar 18, 2016 and that of the A.Y 2014-15 was finalized on Dec 28, 2016. It is thereafter, a notice for adjustment was issued on Jan 05, 2017, which was received by the assessee on Jan 12, 2017 and response was submitted by the assessee on Jan 12, 2017. After considering the reply filed, an order of adjustment was passed on Jan 16, 2017 adjusting Rs.729,33,48,880/- as a demand raised for the A.Y 2013-14 and Rs.170,50,42,330/- from the demand of tax for the A.Y 2014-15. The amount of refund was thus adjusted against the tax payable amounting to Rs.899,33,91,210/-.
The counsel for the assessee has vehemently argued that in respect of the A.Y 2013-14, the AO has passed an order of stay of the demand for a period of six months whereas the order of refund has been passed within the period of stay, therefore, the refund amount could not be adjusted against demand for the A.Y 2013-14 as such demand was stayed. The order of stay of the AO.
On appeal, the HC held that,
Whether the order of AO not to recover a demand for an A.Y does not lead to setting aside of the demand itself, and it can be adjusted against the refund due for the previous year - YES: HC
++ in respect of an argument that demand for the A.Y 2013-14 was stayed by the AO in exercise of powers conferred u/s 220(6), there seems no merit. A perusal of the order of stay passed by AO in terms of Section 220(6) shows that even in the said order, an amount of Rs.144,08,49,460/- has been adjusted. After adjustment, the balance amount was stayed for a period of 6 months or upto the decision of the first appeal, whichever is earlier. After passing of such order, the assessment for the A.Y 2014-15 was finalized on 28.12.2016. The order u/s 220(6) as well as the intimation u/s 245 was issued by the same AO. Therefore, the argument of the counsel for assessee that the AO should have modified its order before the order of adjustment is not tenable as the order of stay was not passed by any other superior authority but by the AO himself. The Supreme Court in M/s. Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, Madras, has held that distinction has to be made between quashing of an order and stay of an order. Quashing of the order results in restoration of the position as stood on the date of passing of the order which has been quashed but the stay of operation of the order does not however lead to such a result. In view thereof, the order of AO not to recover the demand for the A.Y does not lead to setting aside of the demand itself. The said demand could very well be adjusted against the refund due for the previous year 2012-13. Similarly, the assessment was completed for the A.Y 2014-15 on 28.12.2016. The demand for recovery of the tax due was issued on 13.01.2017 giving time to the assessee to deposit the tax due within 30 days. Such demand notice is for the recovery of the amount which is payable within 30 days and after 30 days, the consequences as contemplated u/s 156 follows but assessment having been finalized on 28.12.2016, the AO could adjust the amount against the refund payable as it was amount due and payable by the assessee though it had 30 days time to deposit the same;
Whether the Revenue Dept. is permitted to set off any demand from the amount to be refunded, provided an intimation in writing was issued to such person against whom action is proposed to be taken - YES: HC
++ the order of the Delhi High Court referred to by the counsel for assessee infact draws a distinction between stay of coercive measures to recover the demand and stay of adjustment u/s 245. The Court has categorically held that it did not intend to lay down propositions or broad principles when and in what case there should be total stay of demand or stay of recovery but no stay u/s 245 can be made. Section 245 infact permits the Revenue to set off any demand from the amount to be refunded but the only condition is of intimation in writing to such person against whom action is proposed to be taken. We find that demand having been raised against the assessee for the A.Ys 2013-14 and 2014-15 and intimation having been sent to the assessee on 05.01.2017, the mandate of Section 245 was satisfied by the Revenue before making adjustment from the refund due to the assessee from the tax due to the assessee for the subsequent years.
Case disposed of
2017-TIOL-637-HC-MAD-IT
HINDUSTAN PHOTO FILM WORKERS WELFARE CENTRE Vs GOVT OF INDIA MADRAS HIGH COURT (Dated: March 17, 2017)
Income Tax - Writ - Sections 10(10B) & (10C)(viii) - Voluntary Retirement Scheme - VRS - TDS - Rehabilitation.
The petitioner is a registered trade union of the Hindustan Photo Film Manufacturing Company Ltd. (HPF), a public sector undertaking. The petitioner represents 70 workmen out of the total 700 workmen and officers, who were regular employees of the HPF. It was submitted that more than 3800 of the total 4500 employees, had left employment under the Voluntary Retirement Scheme (VRS) announced by the Management periodically from 1991. The petitioner challenged the VRS circular as unfair and illegal and sought 72 months salary on the 2007 pay scales for each employee; arrears of pay and also no deduction of TDS on the severance package payable under the VRS.
After hearing the parties, the HC held that,
Whether it is the plain language of a VRS Scheme that determines the nature of benefit being passed on to employees - YES: HC
++ the case of the Revenue was that the package given to the workmen was a VRS package and it would fall within Section 10(10C)(viii) and accordingly, taxable if the receipt exceeds the exempted limit. The case of the petitioner was that the severance package received by them would fall within Section 10(10B) and shall not be included as income in computing total income of the employees. The contention of the Revenue that TDS proceeding is independent of the other provisions of the Act cannot be disputed, but however, what the Revenue seeks to state is that it is for the AO to examine as to whether the receipts in the hands of the employee is a compensation for a closure or a package received as a VRS. The instant case, is not a case of a single assessee, but a large section of employees of HPF Ltd., a Government of India company. If it is clear from the plain language adopted in the scheme as regards the nature of benefit which is extended to the employees, then the employees need not be driven to approach the AO to establish that the receipts are not taxable in their hands. The nature of the benefit which flows to the employees under the package has to be tested on its plain language without adding any interpretation;
Whether Scheme brought for rehabilitation of employees of a Govt Enterprise through non-plan budgetary support is to be construed as compensation u/s 10(10B) - YES : HC
++ the Government of India had recommended a scheme to give relief to the employees of HPF. This proposal was approved by the Cabinet Committee on Economic Affairs and such approval was a non-plan budgetary support. The Government of India did not authorise the HPF to bring out a VRS package, but what was approved was a non-plan budgetary support, which is in the nature of a grant given by the Central Government to the second respondent for a specific purpose and a specific reason. The purpose is to rehabilitate the employees of HPF and the reason being that the employees have been receiving the pay scales as of 1987, the increase in the cost of living has made it very difficult for them to survive and meet their financial obligations and the Government thought fit to offer this package to enable the employees to come out of the financial crises. If such was the sanction made by the Central Government, it undoubtedly would qualify the parameters laid down under sub-section (10B) of Section 10 of the Income Tax Act. This is so because the monetary benefit which will accrue to the employees is in the nature of a compensation, which is pursuant to a decision taken by the Government of India specifically for the employees of HPF. Therefore, the amount would be exempted from income tax in terms of the first proviso under Section 10(10B) of the IT Act. In terms of clause (2) of first proviso, the ceiling limit is Rs.5,00,000/-. The second proviso states that the first proviso shall not apply in respect of any compensation received by a workmen in accordance with any scheme, which the Government may, having regard to the need for extending the special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in its behalf. The compensation which is received by the workmen would fall within the definition of compensation found in explanation to Section 10(10B).
Whether such compensation is tax exempt u/s 10(10B) - NO : HC
++ the package had been received by the workmen as compensation pursuant to the decision taken by the Central Government to offer special protection to the employees of HPF, the same stands exempted from tax deduction.
Assessee's Writ Partly Allowed
2017-TIOL-636-HC-DEL-IT
TELENOR INDIA COMMUNICATIONS PVT LTD Vs ACIT: DELHI HIGH COURT (Dated: March 29, 2017)
Income Tax - Writ - Section 220(6).
Keywords - CBDT Office Memo dated 29.02.2016 - Stay of demand beyond 15%.
The assessee Company was a mobile network operator. The Revenue raised demand on several grounds but the assessee filed petition for stay of recovery of demand. The AO granted the stay up to 15%. The assessee sought the benefit of CBDT office memo dated 29/02/2016 for stay of higher percentage of demand. In its writ the assessee argued that the AO had not taken into account the pending refund due to the assessee. The High Court remanded the case to the AO who in turn observed that since the financial position of the assessee was uncertain, to safeguard the interest of the Revenue, the assessee was asked to pay the entire demand of Rs 203 Crore after adjusting the refund. The Assessee again went back to the High Court pleading that the earlier relief granted was denied and the AO went beyond the scope of the remand order.
After hearing the parties, the HC held that,
Whether when a case is remanded to the AO, the liberty lies with the AO to go beyond the scope of the remand order - NO: HC
++ after the case was remanded, the AO had to confine the focus of his inquiry only and only to whether to grant relief in excess of 85% exemption from compliance with the demand to pay tax. It cannot go to the merits of the matter, since the appeal was pending before the Appellate Commissioner. When the AO made his first order, he was of the opinion that the assessee was entitled to the facility of paying 15% of the amount demanded, to secure a stay of demand during pendency of its appeal. He granted that relief. The petitioner wanted more, and contended that the AO had overlooked three points and could well have invoked the power to grant relief in excess of 85%, i.e could have even completely absolved it of the liability to pay anything towards the tax demand, since its case fell within the provision in the Office Memo concerned. If the AO felt constrained by the terms of the Memo, he could have sought a clarification; at worst, he could have referred the matter to the Commissioner, if he thought that he did not have the power to grant such relief. What he could not have done was to revisit the entire issue as to whether the relief to the extent of 85% waiver of demand deposit could be given;
++ the AO could not have revisited the matter, as if there were a fresh or open remand. The AO after rejecting the assessee’s claim for benefit (i.e beyond 85% waiver) directed payment of Rs. 203 crores after adjusting Rs. 27,93,09,100/- refund. This relief (of adjustment of Rs. 27,93,09,100/- refund) had not been considered in the earlier order. In these circumstances, the impugned order, to the extent it reviewed the previous order could not be sustained. The relief of adjustment of refund amount however was upheld. Therefore, the assessee was directed to deposit the balance amount, i.e. Rs.34,78,86,820/- (Rs. 62,71,95,920/- minus Rs.27,93,09,100/-) within two weeks, which would be sufficient compliance of the orders.
Assessee's writ petition partially allowed
2017-TIOL-617-HC-P&H-CX + Story
SUNSHINE STEEL CORPORATION Vs CCE: PUNJAB AND HARYANA HIGH COURT (Dated: March 22, 2017)
CX - Penalty - here is nothing in section 11AC that entitles the assessee to the benefit of the reduced quantum of penalty, if only a part of the duty, as determined, and the interest payable thereon is paid - first Proviso to section 11AC of CEA, 1944 not having been complied with, the appellant is not entitled to the benefit of the second Proviso - appeal dismissed: High Court [para 8, 14, 19, 22, 23]
Appeal dismissed
