Customs, Excise and Service Tax Appellate Tribunal

Demosha Chemicals Pvt. Ltd. v. C.C.E. & S. Tax, Daman

MANU/CS/0101/2017

29.06.2017

Excise

Capital goods removed from factory should be received back within 180 days and if not received, Appellant is required to reverse the credit availed on such capital goods

In facts of present case are that, Appellants had availed CENVAT credit on capital goods and transferred same to their sister unit adjacent to their factory premises for job work premises. Both units were having separate Central Excise Registration. Alleging that, credit availed on said capital goods to tune of Rs. 3,77,798/- is recoverable a show cause notice was issued to Appellant. On adjudication, demand was confirmed with interest and equal amount of penalty. On appeal, Commissioner (Appeals) upheld order of adjudicating authority and rejected their appeal. Hence, present appeal. Question that needs to be answered is whether CENVAT credit availed on capital goods sent to their sister unit for job work and not received back within 180 days from date of removal is recoverable or otherwise.

Rule 4(5)(a) of CENVAT Credit Rules, 2004 provides that, CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker and from there subsequently sent to another job worker and likewise, for further processing, testing, repairing, re-conditioning or for manufacture of intermediate goods necessary for manufacture of final products or any other purpose, and it is established from records, challans or memos or any other document produced by manufacturer or the provider of output service taking CENVAT credit that, inputs or products produced therefrom are received back by manufacturer or provider of output service, as case may be, within one hundred and eighty days of their being sent from factory or premises of provider of output service, as case may be, provided that, credit shall also be allowed, even if any inputs are directly sent to a job worker without their being first brought to premises of manufacturer or provider of output service, as case may be, and in such a case, period of one hundred and eighty days shall be counted from date of receipt of the inputs by the job worker.

Rule 4(5)(a) makes it crystal clear that, capital goods removed from Appellant's factory should be received back within 180 days and if not received, Appellant is required to reverse credit availed on such capital goods. Said Rule also provides to take re-credit on capital goods, when received after 180 days from initial date of removal. In present case, even though capital goods were cleared earlier but no evidence has been adduced by Appellant that, same were received within 180 days or thereafter. In these circumstances, confirmation of demand is sustainable.

However, penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of CEA, 1944 cannot be sustained in view of judgment of Gujarat High Court in Patel Alloys Steel Pvt. Ltd.'s case. Impugned order is set aside to extent of imposition of penalty and appeal is partly allowed to said extent.

Relevant

Patel Alloys Steel Pvt. Ltd. vs. C.C.E., Ahmedabad 2013 (04 LCX 0053

Tags : Demand Penalty Validity

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High Court of Rajasthan

Bhilai Engineering Corporation Limited and Ors. V. Union of India and Ors.

MANU/RH/0500/2017

27.06.2017

Mines and Minerals

Central Government is empowered not only to frame rules to regulate grant of reconnaissance permits, prospecting licences or mining leases, but also for purpose connected therewith

Present batch of writ petitions is to examine constitutional validity of Rule 64-D of Mineral Concession Rules, 1960, as amended by Government of India under Notification dated 10th April, 2003. By Notification, an amendment is introduced in Rule 64-D of Rules under heading guidelines. Amendment introduced pertains to manner of payment of royalty of minerals on ad valorem basis.

Argument advanced on behalf of Petitioners, while questioning constitutional validity of provision aforesaid, is that Section 9 of Mines and Minerals (Development and Regulation) Act, 1957 provides that, holder of a mining lease granted on or after commencement of Act, shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from leased area at rate for time being specified in Second Schedule in respect of that mineral. Schedule Second appended with Act provides for payment of royalty to tune of 11% of sale price on ad valorem basis. Determination of sale price is an issue relating to conditions of contract between seller and purchaser, as such Central Government is having no authority to fix a notional sale price for determining value of royalty. Amendment introduced under Notification dated 10th April, 2003 permits notional determination of sale price by adding 20% of benchmark value, as such is beyond powers of Central Government. It is emphasised that, authority of Central Government under Section 13 of Mines And Minerals (development And Regulation) Act, 1957 is limited only to extent of fixing and collection of fees for reconnaissance permits, prospecting licences or mining leases surface rent, security deposit, fines, other fees or charges and the time within which and manner in which dead rent or royalty shall be payable. As per Petitioners, Act does not permit Central Government to frame Rules beyond prescription of manner in which dead rent or royalty shall be payable.

Clause (I) of sub-section (2) of Section 13 of Act, empowers Central Government to make rules for a limited purpose, but sub-section (1) is wide and that empowers Central Government not only to frame rules to regulate grant of reconnaissance permits, prospecting licences or mining leases, but also for purpose connected therewith. Amendment introduced is for a purpose connected to issues referred in Section 13, as such allegation of incompetence is not well founded. Central Government, before making amendment in Rule 64-D of Rules, constituted a study group that, compared average sale price and average pit's mouth value during year 2001-02. Study disclosed that, sale price was higher than average pit's mouth value for about 20-22%. Study group was of view that, switching over to mode of computation of royalty on ad valorem basis from sale price will result in loss of revenue to State Government, therefore, recommended that, a factor of 20% be added to benchmark value of mineral production published by Indian Bureau of Mines in its monthly statistics of mineral production.

Accordingly, under Notification dated 10th April, 2003 Government of India changed basis for calculation of ad valorem royalty. In light of amendment introduced, royalty is to be charged on benchmark price as declared by Indian Bureau of Mines from time to time through its monthly publication by adding 20% to this benchmark, but rate of royalty in this event too shall remain the same as given in schedule second. Pertinent to notice here that Section 9(2) of Act, also refers rate for time being specified in schedule second in respect of specific mineral. Rate of royalty in no case is going to be altered by amendment impugned. Royalty for rock phosphate shall be 11% of its sale price even after amendment.

Amendment introduced is an outcome of thorough study made by a study group constituted by Government and it is well within statutory authority of Respondents. It is further relevant to notice that, as per conditions of contract, Petitioner is liable to pay royalty in accordance with law and necessary condition in this regard is that "any change in royalty or imposition of new levy by any lawful agency shall be to buyer's account".

Fact stated that, Government is not empowered to charge additional royalty with retrospective effect is not correct. Royalty has been charged by Respondents in accordance with provisions of Act and Rules framed thereunder and also in consonance to conditions of trade agreement. Respondents are not going to charge any royalty from Petitioners for period prior to amendment introduced in Rule 64-D of Rules. Charging of royalty is as a consequence of application of a statute and, therefore, principle of estoppel shall also not come in way of Respondents. There is no merit in instant petitions, hence same are dismissed.

Tags : Rule Validity Additional Royalty Charge

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Customs, Excise and Service Tax Appellate Tribunal

Mohammad Shaheed v. The Commissioner of Customs

MANU/CB/0099/2017

27.06.2017

Customs

Refund shall be effected on production of necessary documents of evidences

Present appeal is against impugned order dated 11.1.2016 passed by Commissioner of Customs (A) whereby Commissioner (A) set aside the Order-in-Original and allowed appeal of Appellant on condition that, refund is to be granted to Appellant only on production of necessary documents of evidences as demanded by original authority. Appellant submitted that, impugned order is not sustainable in law as same has been passed by ignoring specific direction of High Court of Kerala.

Original authority has rejected refund claim on ground which is not sustainable in law. Once High Court of Kerala in its order dated 12th November, 2014 had specifically given direction that, on producing identity and account details refund shall be effected to Petitioner within a period of four weeks and after judgment of Kerala High Court, Appellant has produced certificate obtained from Padi Village Office, Government of Kerala and also an affidavit clarifying that, Mohammad Shaheed, Sahid M and Sahid Mohammad are one and same person. Moreover, his identity was never in dispute from very beginning even during investigation. His statement was recorded and he is appearing before officers of custom and this reason has been coined by original authority only for purpose of denial of rightful claim of refund.

Now since, Appellant has clarified about his identity also, therefore there is no reason left for Respondent to deny refund claim. Therefore, in view discussions and examination of various orders passed by Revenue authorities as well as judgments of High Court of Kerala, Appellants are entitled for refund and therefore, Appeal of appellant allowed by setting aside impugned order. Appellants are entitled for interest as per law.

Tags : Refund Eligibility Document Production

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High Court of Delhi

Rites Limited v. Commissioner of Income Tax, Delhi-V

MANU/DE/1814/2017

03.07.2017

Direct Taxation

Commissioner is empowered to entertain even a new ground not urged before lower authorities while exercising revisional powers

Petitioner, Rites Limited, has filed present petition challenging order passed by Respondent. By order dated 10th December 2010, CIT(A) dismissed appeal filed by Petitioner holding that claim could not be allowed by way of rectification in a proceeding under Section 154 of Act. CIT(A) referred to decision of Supreme Court in Goetze India Limited v. Commissioner of Income Tax and held that, a claim not made in original return could not be made subsequently during assessment proceedings by way of letter. Further, by impugned order dated 24th March 2014, CIT(A) rejected application filed by Petitioner under Section 264 of Act, holding that, Petitioner had not claimed deduction in respect of provision for wage arrears by revising return for AY 1998-1999. Therefore, issue did not emanate from assessment order.

Regarding preliminary objection on maintainability of present petition under Article 226 of Constitution, when remedy of challenging decision of AO by way of an appeal has been exhausted, Court is of view that, Petitioner went before CIT with a petition under Section 264 of Act only pursuant to leave granted by this Court in its order dated 4th September 2012. It is not, therefore, open to Revenue to raise a preliminary objection as to maintainability.

Impugned order of CIT appears to have ignored history of litigation leading to filing of revision petition. Petitioner has already exhausted remedies that were available to it. In light of order of this Court disposing of Petitioner's appeal in first round, the CIT ought to have considered claim of the Petitioner on merits. Petitioner's revision petition under Section 264 of Act ought not to have been dismissed on a mere technicality.

In C. Parikh & Co. v. CIT, Gujarat High Court observed that, there is nothing in Section 264 which places any restriction on Commissioner's revisional power to give relief to the Assessee in a case where Assessee detracts mistakes on account of which he was over-assessed after assessment was completed. It is open to Commissioner to entertain even a new ground not urged before the lower authorities while exercising revisional powers. In Sneh Lata Jain v. CIT, it was observed that, in its revisionary jurisdiction, CIT has power to call for record of any proceedings under this Act and is also entitled to make any enquiry himself or cause any inquiry to be made and to pass such order as he thinks fit.

In present case, therefore, mere fact Petitioner did not make any claim in original return and also in its revised return before passing of assessment order by AO would not stand in way of CIT exercising revisionary jurisdiction to grant relief. Supreme Court in its decision in Goetze India Limited v. Commissioner of Income Tax held that, while AO could not permit a claim to be made after filing of return without Assessee revising it prior to assessment order, it did not impinge on scope of revisionary jurisdiction of CIT.

In CIT v. Mithlesh Impex, it was clarified that, decision of Supreme Court in Goetze India Limited is confined to powers of AO. However, "when it comes to power of Appellate Commissioner or Tribunal, Courts have recognized their jurisdiction to entertain a new ground or a legal contention."

Consequently, Court is satisfied that in present case, CIT erred in rejecting revision application of Petitioner on ground of maintainability. CIT ought to have entertained revision petition on merits. Court directs that, revision application filed before CIT should be treated as having been allowed on merits. Consequently, while setting aside impugned order of CIT dated 24th March 2014, Court allows revision petition filed by Petitioner before CIT and directs AO now to give effect to this order by computing the tax liability of Petitioner for the AY 1998-1999 after allowing claim for provision made for wages arrears as per 5th Pay Commission which became effective on 1st January 1996.

Relevant

Goetze India Limited v. Commissioner of Income Tax MANU/SC/8814/2006
: (2006) 284 ITR 323, CIT v. Mithlesh Impex, C. Parikh & Co. v. CIT, Sneh Lata Jain v. CIT

Tags : Application Maintainability New ground

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High Court of Delhi

Kiri Associates (P) Ltd. Vs. Pramod Kumar Mittal and Ors.

MANU/DE/1819/2017

03.07.2017

Arbitration

Concealment of material fact, and active representation that, title to suit lands were good and free from encumbrance, is fraud that results in avoidance of contract

Instant appeal questions judgment of a single judge dismissing objections to an arbitration award, preferred by a petition under Section 34 of the Arbitration and Conciliation Act, 1996. Present Appellant ("Kiri") had filed petition, challenging award of an arbitral tribunal. Appellant, urged that, award is patently erroneous as it is plainly contrary to Section 21 (5) of Specific Relief Act, 1963. That provision, it is emphasized, clearly contemplates that no compensation "shall be awarded" as an alternative to a claim for specific performance "unless Plaintiff has claimed such compensation in his plaint." It is urged that, in view of unambiguous phraseology of provision, Tribunal fundamentally erred in granting a relief that was barred.

In present case, facts clearly shows that, Appellant does not anywhere dispute that, claimant was kept in dark about a material and relevant fact, when the agreement to sell was entered into, i.e. acquisition proceedings. Agreement and representations held out by Appellant were that, property in question was free from encumbrances and had good marketable title. On faith of these representations, Claimant paid substantial amounts as advance to Kiri. Later discovered, that acquisition proceedings were initiated in 1997 and that seller Kiri had even initiated writ proceedings to challenge them in 1998. That these were not disclosed was established in arbitration proceedings. Furthermore, during proceedings another fact came to light, i.e. that, Appellant had "sold" same property to some third party, and litigation in that regard was pending before present Court.

High Court opined that, single judge concluded correctly that, prohibition in Section 21 (5) of Act, did not apply to this case, because of Kiri's lack of bona fides. Concealment of a material fact, and active representation that, title to suit lands were good and it was free from encumbrance, was a fraud or certainly a misrepresentation that ultimately resulted in avoidance of contract. In such circumstances, claimant was entitled to say that, it should not be disadvantaged, and should be restituted. Furthermore, there is no principle - either in law or in equity, which can sustain Appellant's claim to retain amount. Single judge correctly held that, arbitrator's conclusion with respect to entitlement to amount and preclusion of plea of forfeiture was justified. Therefore, Claimant was entitled to amount of advance, i.e. Rs. 1.5 crores with some interest.

Regarding justification of award of Rs. 25 lakhs, amendment, under proviso to Section 21 (5) of Act, was not sought by Claimant to seek damages. As long as basic ingredients, which make up cause of action are same (i.e. an agreement to sell, inability of seller, due to his fault or omission to honour it and injury to purchaser) party at receiving end of bargain is not remediless. Fact that, relief is admissible in law, but may not be granted sans a specific amendment by a Court, due to a procedural hurdle, in arbitration proceedings, a tribunal would be liberated from such an impediment. It has been observed by Supreme Court in case of Pasupuleti Venkateswarlu v. The Motor & General Traders that, "procedure is handmaid and not mistress of judicial process. If a fact, arising after lis has come to Court and has a fundamental impact on right to relief for manner of moulding it, is brought diligently to notice of Tribunal, it cannot blink at it or be blind to events which stultify or render inept decretal remedy". In these circumstances, it cannot be held that, grant of that relief, i.e. Rs. 25 lakhs is a "patent illegality" or that such damages are contrary, or unknown to law, or contrary to public policy. Court holds that, there is no merit in the appeal.

Relevant

Pasupuleti Venkateswarlu v. The Motor & General Traders MANU/SC/0415/1975
: AIR 1975 SC 1409

Tags : Award Validity Facts Concealment

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High Court of Bombay

The Commissioner of Income Tax-8 v. Oryx Finance and Investment Pvt. Ltd.

MANU/MH/1311/2017

01.07.2017

Direct Taxation

Assessing Officer can impose penalty for default in making payment of tax, but same shall not exceed amount of tax in arrears

In the present case, Income Tax Return of Respondent-Assessee was processed under Section 143(1) of Income Tax Act, 1961, demand was raised and penalty was imposed by Assessing Officer under Section 221(1) of Income Tax Act for default by Assessee in payment of demand. Aggrieved thereby, Assessee filed Appeal before Commissioner of Income-Tax (Appeals) (CIT(A)). CIT(A) by its order deleted penalty imposed by Assessing Officer holding that, interest component has to be excluded while levying penalty under Section 221(1) of Act and since, penalty levied exceeded tax component, CIT(A) had set-aside order levying penalty. Aggrieved thereby Department filed an appeal before Income Tax Appellate Tribunal (ITAT). ITAT held that, while levying penalty under Section 221(1) of Act, interest component is not to be considered and remitted matter to Assessing Officer with direction to quantify amount of penalty in accordance with provisions of Section 221(1) of Act. Department has assailed said order in present appeal. Prime question for consideration in present matter is whether phraseology "amount of tax in arrears" as envisaged in Section 221 of Act, would in addition to tax include within its fold interest component also.

Definition of "Tax" under Section 2(43) of Act read in its entirety suggests that, "tax" means income-tax, super-tax and/or fringe benefit tax, as case may be chargeable under provisions of Act. Definition of tax does not take within its fold interest component. Definition of "interest" as envisaged under Section 2(28-A) of Act would not be relevant in present matter. Definition is restricted to interest payable in respect of any moneys borrowed or debt incurred. It is elementary rule of interpretation that, when language of a statute is clear and unambiguous, Courts are to interpret same in its literal sense and not to give a meaning that would cause violence to provisions of statute. Each word in statute should be assign meaning as per context. Provision imposing penalty will have to be strictly construed. Strict construction is a construction in which application of a provision used is limited by words used, so that anything which is not clearly included within scope of language is treated as excluded.

It is clear from Section 221 of Act, that aspect of default in payment of tax and amount of interest payable are treated as distinct and separate components. Section categorically states that, when an Assessee is in default or is deemed to be in default in making payment of tax, he shall in addition to amount of arrears and amount of interest payable under Sub-Section 2 of Section 220, be liable, to pay penalty, however amount of penalty does not exceed amount of tax in arrears. Terminology "default in making a payment of tax and amount of interest payable" are considered to be separate for imposition of penalty and penalty is to be levied on account of default in making a payment of tax. However, total amount of penalty shall not exceed amount of tax in arrears. Said penalty for non-payment of the tax is in addition to levy of interest under Sub-Section 2 of Section 220 of Act. Under no principle of interpretation, arrears of tax as laid down in said Section would include amount of interest payable under Sub-Section 2 of Section 220. Amount of penalty will have to be restricted on arrears of tax, which would not include interest component charged under Section 220(2) of Act.

Second proviso to Section 221(1) of Act, states that, if Assessee proves to satisfaction of Assessing Officer that if default was for good and sufficient reason, no penalty shall be levied. Sub-Section 2 further says that, whereas result of final order, amount of tax with respect to default in payment of which penalty was levied has been wholly reduced, penalty levied shall be cancelled and amount of penalty paid shall be refunded. Payment of penalty is directly commensurate with default in payment of tax and not of interest.

In view of aforesaid discussion and on reading provisions of Section 221 of Act, conjointly with definition of "tax" as detailed under Section 2(43) of Act, irresistible conclusion that can be drawn is that phraseology "tax in arrears" as envisaged in Section 221 of Act, would not take within its realm interest component. Assessing Officer can impose penalty for default in making payment of tax, but same shall not exceed amount of tax in arrears. Tax in arrears would not include interest payable under Section 220(2) of Act. Substantial question of law are answered against Appellant and Appeal stands dismissed.

Tags : Arrears Tax Interest Inclusion

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