Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 16, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
GST
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Classification of goods - the ‘Fly Ash Bricks’ manufactured by the applicant does not find mention in any of the Schedules of the said notification from 15.11.2017 onwards - Fly Ash Bricks would be liable to GST @18% - Fly Ash Block would be liable to GST @5%- - AAR
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Benefit of exemption from GST - professional service in respect of maintenance of Accounts and allied items of work to the SSNNL - SSNNL carries out activity of water supply for domestic, industrial and commercial purpose which is entrusted to Municipality - the Maintenance of Accounts service has no anywhere concern with functions prescribed under clause 243G and 243W of the Constitution of India - Benefit of exemption not available - AAR
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Valuation of supply - transaction of sale of residential/ commercial property with undivided rights of land - applicant is required to deduct one third value of land or undivided shares from the total value charged for the subject supply - AAR
Income Tax
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Introduction of concept of mediation and Advance Ruling System for Residents to reduce tax litigation and more clarity - Notes
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Disallowance u/s 40A - cash payment exceeding fixed limits - Payee was identifiable and not a fictitious person would go to show the bonafides of the transaction and this is what is required to be considered from the angle of a commercially expedient and prudent business house - No additions - HC
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Slump sale u/s 50B or not - Transfer of business in lieu of equity shares to its subsidiary by a scheme of arrangement as approved by HC - mere use of the expression ‘consideration for transfer’ cannot be said to be a transaction as a sale - The activity not liable to Capital Gain tax - HC
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Slump sale u/s 50B or not - Fresh Claim that transaction not liable to capital gain tax - investment in Tax Savings Bonds u/s 54EC - AO, CIT(A) and the Tribunal committed a fundamental error in shutting out the contention raised by the assessee solely on the ground that the assessee approached the Bond Issuing Authorities for availing the benefit u/s 54EC. A careful reading of the submissions made by the assessee before the AO would make things further clear. - There is no estoppel on the part of the assessee to pursue their claim and accordingly, we reject the argument of the Revenue in this regard. - HC
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Exercise of power of the Settlement Commission u/s 245D - Scope of enquiry - Procedure at the (2C) stage is undoubtedly summary in nature and the application filed by the 1st respondent/writ petitioner could not have been declared as invalid at the said stage, as the issue requires adjudication, which can be done only when the application is decided under Section 245D(4) of the Act. - HC
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Correct head of income - Rental income - where, in the terms of memorandum of association, the main object of the assessee given was to acquire properties and earn income by letting out the same, such income was brought to books as business income and not as income from house properties - HC
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Unexplained income - difference between the turnover declared by the assessee and the turnover declared in form 26AS - Once the assessment of the assessee was completed u/s. 44AD, there cannot be any application of sec. 68/69A. - AT
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The interest expenditure correlating to the interest paid by the assessee firm on the funds borrowed is to be disallowed u/s 36(1)(iii), to the extent, the same were advanced to the partner by way of overdrawing of his capital, and it is only the excess interest so received by the firm from him, if any, which would be assessed under the head “Other sources”. - AT
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Penalty u/s 271AAB - Defects in the notice issued u/s 274 - CIT(A) reduced the penalty to 10% applying provisions of Section 271AAB(a) of the Act as against penalty levied @30% by the Ld. A.O u/s 271AAB(c) of the Act but to our surprise Ld. CIT(A) has not taken pain to issue a fresh notice before reducing the penalty thus not giving reasonable opportunity of being heard as mandated under the proviso to Section 275 - Since the penalty notice issued u/s 274 r.w.s. 271AAB is vague and does not fulfill the requirement of law, entire penalty set aside - AT
Customs
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Valuation of imported goods - Commissioner (Appeals) allowed the appeal accepting the declared value - The assessing officer have been making enhancement in a routine manner and the respondent who are regular importers are left with no choice but to sign on the dotted line for taking delivery of their goods to carry on their business, and also save the demurrage charges if the consignment is delayed in the port for want of clearance. - Revenue appeal dismissed - AT
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Benefit of exemption - certificate of origin - The rejection of certificate of origin is bad as it was a case of minor discrepancy and was fit to be ignored in terms of Rule 18 of the said rules. Further, the appellant had produced the rectified certificate of origin, which have been wrongly treated as issue of certificate retrospectively - the certificates of origin submitted by the appellant are in order. - AT
IBC
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Initiation of disciplinary proceedings - complaint against the IP by the petitioner - Regulation 7(3) of IBC - Merely informing the petitioner as has been done in the present case that appropriate action is being initiated in the matter, would not, therefore, satisfy the requirements of Regulation 7. The complainant was never informed whether respondent no.1 has formed an opinion in favour of the complainant or against him, on such complaint. - HC
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Initiation of CIRP - Outstanding dues and Adjustment of retention money - The IBC is not a substitute for a recovery forum. - Since there was a dispute existing prior to the issuance of Section 8 notice, the insolvency provisions cannot be invoked. - AT
Central Excise
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Classification of goods - RBD Palm Stearin - Making a wrong claim of classification, per se, is neither fraud nor collusion nor wilful misstatement nor suppression of any facts. It is just a wrong claim. If the claim is wrong in the ER-1 returns, it was open for the revenue to have raised demand by issuing a show cause notice immediately. - there is no ground for invoking extended period of limitation - AT
TMI Short Notes
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (9) TMI 547
Classification of goods - HSN Code - Plastic Mechanical Liquid Dispenser - HELD THAT:- The applicant is engaged in importing various types of plastic devices intended to be screwed/fitted on the bottle/containers. These plastic devices are used for pumping/ dispensing liquid or lotion from a bottle and serves for the depletion of the contents, viz. liquid, gel, cream etc. During the period from 01.07.2017 to 14.11.2017 - Notification No.1/2017-Central Tax (Rate) dated 28th June 2017, as amended, is notified the CGST rates of intra-state supply of goods. During the period from 01.07.2017 to 13.11.2017, the Notification No.1/2017-Central Tax (Rate) dated 28th June 2017, provided rate of CGST @14% for Other articles of plastics and articles of other materials-HSN 3926), vide Entry/S. No. of 45 of Schedule IV of said Notification - Thus, till 14.11.2017, items in question were levied GST @ 28%. During the period from 15.11.2017 and onwards - W. e. f. 15.11.2017, the items in question were levied GST @ 18% Thus, the imported Plastic Items, (stated as Plastic Mechanical Liquid Dispenser ) shall be classified, under Chapter sub-heading 3926.90- Others, as articles, not elsewhere specified or included, of plastics (as defined in Note 1 to the Chapter) or other materials of heading 39.01 to 39.14 . Accordingly, the said product is liable to GST @ 28% (CGST@14% +SGST@14%) till 14.11.2017 and @ 18% (CGST@9% +SGST@9%) w. e. f. 15.11.2017.
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2020 (9) TMI 546
Classification of goods - Rate of GST - Fly Ash Bricks - Fly Ash Block - Whether supply of Fly Ash Bricks and Fly Ash Blocks are covered under Chapter heading 68159090 and liable to taxed @ 5% and @ 12% respectively under the GST Act? - HELD THAT:- It is observed that Fly Ash Bricks has been omitted from entry No.177 with effect from 15.11.2017. Further, it is also seen that Notification No.1/2017-Central Tax (Rate) has been amended vide Notification No.41/2017-Central Tax (Rate) dated 14.11.2017 vide which Entry No.225A has been inserted in Schedule-I of the said notification wherein Fly Ash Bricks with 90% or more content finds mention. However, since the Fly Ash Bricks manufactured by the applicant are containing Fly Ash content of only 40 to 60%, the same will not be covered under the said entry number. Therefore, since the Fly Ash Bricks manufactured by the applicant does not find mention in any of the Schedules of the said notification from 15.11.2017 onwards, we conclude that the same would be covered under Entry No.453 of Schedule-III of Notification No:01/2017-Central Tax(Rate) with effect from 15.11.2017 onwards. The GST rate on Fly Ash Bricks will be 18% (9% SGST + 9% CGST) with effect from 15.11.2017. It is further observed that the entry No.177 in Schedule-II of Notification No:01/2017-Central Tax(Rate) dated 28.06.2017 (under which only Fly Ash Blocks found mention with effect from 15.11.2017) has been omitted with effect from 01.01.2019. It is also seen that Fly Ash Blocks has been inserted in Entry No.225B of Schedule-I of Notification No:01/2017-Central Tax(Rate) dated 28.06.2017 with effect from 01.01.2019. We therefore conclude that the Fly Ash Blocks would be covered under Entry No.225B of Schedule-I of Notification No:01/2017-Central Tax(Rate) dated 28.06.2017 and the rate of GST on the same will be 5% with effect from 01.01.2019.
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2020 (9) TMI 545
Benefit of exemption from GST - professional service in respect of maintenance of Accounts and allied items of work - applicant is of the view that service of maintenance of account provided to SSNNL, a Govt, of Gujarat undertaking is covered under Sr. No.3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT:- The Narmada Project implemented through a Company whose entire share capital is owned by Govt. of Gujarat viz. SSNNL is being implemented as part of the development and commercial activities of Govt. of Gujarat and to make available various benefits of development, irrigation, power generation and other attendant benefits to the people of Gujarat and other neighboring states - SSNNL, a company is engaged in the work of providing drinking water, generation of electricity and irrigation facility which is a function entrusted to a Panchayat under Article 243G and Municipalities under Article 243W of the Constitution. The words in relation to is defined in the Oxford Dictionary as to mean in the context of or in connection with . When two activities are directly linked to each other, then they are said to be in connection with or in the context of. The applicant has provided no evidence to establish that the activity of providing service of auditing, accounting, taxation to the SSNNL are provided in relation to the any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to the function entrusted to a Municipality under Article 243W of the Constitution - The applicant, himself, in his submission, has stated that they understand that pure service as prescribe in the said Notification is available in relation to an activity/ function entrusted to a Panchayat or a Municipality under Article 243 G and 243W of the Constitution respectively. They are not providing any technical services/any related services for constructing of Dam, Canal or any other irrigation network of the company; that Service of maintenance of Accounts provided by them is not related to main function of the Company like water providing activity and to prepare the structure of Dam, Canal and other irrigation network of the Company; they do not provide any services which are in relation to the functions prescribed in clause 243G and 243W of the Constitution of India; that Maintenance of Accounts service has no anywhere concern with functions prescribed under clause 243G and 243W of the Constitution of India. Thus, the service of auditing, accounting, taxation to the SSNNL is not covered under the Entry No. 3 of the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017.
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2020 (9) TMI 544
Valuation of supply - transaction of sale of residential/ commercial property with undivided rights of land - construction of residential/commercial complex - deduction of actual cost of land or not - amount of land to be deducted is not ascertainable - HELD THAT:- Applicant's contention to allow the deduction of actual value of land from the transaction value instead of deduction, as defined in the Notification No. 11/2017-CT (Rate) dated 28.06.2017, is not tenable and beyond the purview of legality. In para 2 of the Not. No. 11/2017-Ct (Rate) dated 2017, as amended by Not. No. 01/2018-CT (Rate), the value of land or undivided share of land required to be deducted from the total amount charged for the subject supply has been clearly provided. In para 2 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended vide Notification No. 1/2018-C.T. (Rate), dated 25-1-2018, there is deemed provisions that the value of transfer of land or undivided share of land, as the case may be, and the value of such transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. Accordingly, the applicant contention to allow the deduction of actual value of land from the sale value on the grounds that their land value is ascertainable and other grounds is not legal in terms of para 2 of Not. No. 11/2017-CT (Rate) dated 28.06.2017 as amended vide Notification No. 1/2018-C.T. (Rate), dated 25-1-2018. Further, the reliance of Rule 18(A) (A) of the erstwhile Gujarat Value Added Tax Rules, 2006 is not warranted in the instant case since the Value Added Tax Act is no more in existence. The Value Added Tax Act does not have any legal value in determination of GST liability since the value of supply is to be arrived in terms of the provisions of the GST Act. Thus, applicant is required to deduct one third value of land or undivided shares from the total value charged for the subject supply in terms of Para 2 of 11/2017-CT (Rate) dated 28.06.2017, as amended vide Not. No. 1/2018-C.T. (Rate), dated 25-1-2018.
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Income Tax
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2020 (9) TMI 543
Disallowance u/s 40A - cash payment exceeding fixed limits - as per assessee there was no banking facility and it was a business expediency - whether the assessee is entitled for exemption under Rule 6DD in respect of payments made in cash? - HELD THAT:- Banking facility was available but the bank account could not be operated by the very bank themselves because of an order of attachment passed by the ESI Department. M/s.SLM virtually came to the assessee with the begging bowl and requested to effect payment in cash. The assessee has entered into an agreement for conversion on job work basis. The assessee is required to act as a prudent businessman, so that the job work is completed to his satisfaction with optimum quality. This has led the assessee to effect payments in cash. Argument of the revenue that in order to avoid the attachment of the bank account the assessee has effected payment in cash - What is relevant to be seen insofar as Section 40A(3) is the conduct of the assessee and not the payee. The question would be did the assessee have a reasonable cause to effect payment in cash. If the assessee has a reasonable explanation, then the proviso under Section 3A would stand attracted and the assessee would be entitled to relief. It may be true that merely because the payee is identifiable, it will automatically exonerate the assessee. Payee was identifiable and not a fictitious person would go to show the bonafides of the transaction and this is what is required to be considered from the angle of a commercially expedient and prudent business house. - Decided in favour of assessee.
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2020 (9) TMI 542
Slump sale u/s 50B or not - Transfer of business in lieu of equity shares to its subsidiary by a scheme of arrangement as approved by HC - Presence of monetary consideration or not - investment in Tax Savings Bonds u/s 54EC - assessee stated that the transfer should not suffer any capital gains tax at all - whether the assessee was estopped from raising the contention by way of an alternate plea? . HELD THAT:- The fundamental legal principle is that there is no estoppel in Taxation Law. It is beneficial to refer to the decision of the Division Bench of the Delhi High Court in the case of CIT Vs. Bharath General Reinsurance Co. Ltd. [ 1970 (12) TMI 5 - DELHI HIGH COURT]. - AO, CIT(A) and the Tribunal committed a fundamental error in shutting out the contention raised by the assessee solely on the ground that the assessee approached the Bond Issuing Authorities for availing the benefit under Section 54EC. - There is no estoppel on the part of the assessee to pursue their claim and accordingly, we reject the argument of the Revenue in this regard. Slump Sale or not - Existence of monetary consideration - Held that:- to bring the transaction within the definition of Section 2(42C) of the Act as a slump sale, there should be a transfer of an undertaking as a result of the sale for lump sum consideration. - Therefore, necessarily the sale should be by way of transfer of ownership in exchange of a price paid or promised or part paid and part promised and the price should be a money consideration. If there is no monetary consideration involved in the transaction, then it would be not possible for the Revenue to bring the transaction done by the assessee within the definition of the term slump sale as defined under Section 2(42C) of the Act. - mere use of the expression consideration for transfer cannot be said to be a transaction as a sale. - Decision in the case of Motors and General Stores (P.) Ltd. [ 1967 (5) TMI 3 - SUPREME COURT] followed. Scope of the term purchase - Held that:- The Constitution Bench of the Hon ble Supreme Court in the case of Devi Das Gopal Krishnan Vs. State of Punjab [reported in [ 1967 (4) TMI 131 - SUPREME COURT] , while interpreting the provision of the Punjab General Sales Tax Act, 1948, considered the definition of the word purchase - The above judgment of the Constitution Bench will come to the aid and assistance of the assessee as the transfer, pursuant to approval of a scheme of arrangement, is not a contractual transfer, but a statutorily approved transfer and cannot be brought within the definition of the word sale Decided in favor of assessee.
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2020 (9) TMI 541
Eligibility of carry forward the unabsorbed additional depreciation as per the provisions of Section 32(1)(iia) - as assets was acquired in the 2nd half of the financial year 2007-08 and there being no provisions under the Act permitting the balance to be carry forwarded to be allowed in the succeeding year? - HELD THAT:- The effect of the insertion of the proviso in the year 2016, may not have a bearing on the present issue, as during the relevant assessment year 2009-2010, the law which has been settled by the Division Bench of this Court is the case of Brakes India [2017 (4) TMI 511 - MADRAS HIGH COURT ] , against the said decision, the revenue preferred an appeal before the Hon'ble Supreme Court which was dismissed by an order. Thus, the decision of the Division Bench in the case of Brakes India having been approved by the Hon'ble Supreme Court, we are bound by the said decision and accordingly, following the same. For the above reasons, the appeal filed by the Revenue is dismissed and the substantial question of law is answered against the Revenue.
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2020 (9) TMI 540
Exercise of power of the Settlement Commission u/s 245D - Scope of enquiry - HELD THAT:- Commission is required to give an opportunity to the applicant, the CIT, they are entitled to be represented by an Authorized Representative and after hearing them and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission, may, in accordance with the provisions of the Act, pass such order as it deems fit. Scope of enquiry is not confined to the statements made in the application, the response filed by the applicant to the report of the CIT, but also the submissions made during the personal hearing and any further evidence as may be placed before it by the applicant or obtained by the Settlement Commission in exercise of its power and then proceed to pass orders as it deems fit. Procedure at the (2C) stage is undoubtedly summary in nature and the application filed by the 1st respondent/writ petitioner could not have been declared as invalid at the said stage, as the issue requires adjudication, which can be done only when the application is decided under Section 245D(4) of the Act. Decision relied on by the Revenue in the case of Mr.Hassan Ali Khan [2008 (1) TMI 20 - HIGH COURT, BOMBAY] would, in fact, support the conclusion, which we have arrived at in the preceding paragraph. It has been held that the Settlement Commission can treat the application as invalid meaning thereby non est, if the applicant is not made a full and true disclosure and further must disclose how the income has been derived. The expression invalid will have to be given a meaning of non est , in other words, as if not made on and from the inception. If on the material, it arrives at a conclusion even prima facie that there was no true and full disclosure, it has then a right to declare the application as 'invalid'. As rightly pointed out by the Hon'ble Division Bench, there is a prima facie opinion formed by the Commission at the (2C) stage and this can never substitute an order under sub-Section (4) of Section 245D. The issues, which were requested to be settled by the 1st respondent before the Commission qua , the report of the CIT cannot obviously be an issue for a prima facie decision at the (2C) stage. Appeal filed by the appellant-Revenue is dismissed.
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2020 (9) TMI 539
Grant the credit of prepaid taxes on account of TDS and advance tax paid - grant the refund as finally determined after allowing the credit for prepaid taxes along with interest as per section 244A - HELD THAT:- Today as respondent states that the petitioner s rectification application has been allowed by the AO vide order dated 23rd July, 2020 and a refund has been determined. The issue is now pending before the Centralized Processing Center. Though petitioner states that the demand under Section 143(1) of the Act, 1961 is still showing as outstanding on the Income Tax portal, yet this Court accepts the undertaking/statement made by the learned counsel for the respondents and holds the respondents bound by it. Direct the AO i.e. respondent No.1 to pursue the matter with the Centralized Processing Center and ensure that the refund determined by him is credited to the petitioner s account within two weeks.
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2020 (9) TMI 538
Correct head of income - rental income of the appellant from software technology park developed - income from house property or under the head 'income from business' - HELD THAT:- CIT Vs. Tidel Park Ltd. [ 2020 (7) TMI 339 - MADRAS HIGH COURT] wherein the Court took note of various decisions and answered the substantial questions of law against the Revenue and in favour of the assessee. Decision in the case of Chennai Properties Investments Ltd. Vs. CIT [ 2015 (5) TMI 46 - SUPREME COURT] will come to the aid and assistance of the assessee wherein it was held that where, in the terms of memorandum of association, the main object of the assessee given was to acquire properties and earn income by letting out the same, such income was brought to books as business income and not as income from house properties.- Decided in favour of the assessee.
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2020 (9) TMI 537
Levy of penalty u/s 271(1)(c) - absence of satisfaction so recorded - HELD THAT:- Where the assessee has carried the matter in appeal before the Tribunal in the quantum proceedings and the quantum additions as so claimed by the assessee have been reduced and which forms the basis for levy of penalty, the consequent quantum of penalty will also undergo a change, however, we find that there is no finding recorded by the CIT(A) in this regard. Assessee has raised contentions regarding lack of satisfaction for initiating the penalty proceedings while completing the assessment proceedings, to our mind, there are relevant considerations which needs to be examined and disposed off before the levy of penalty is confirmed. We accordingly set-aside the matter to the file of the ld CIT(A) to examine the various contentions so raised by the assessee and decide the matter afresh after providing reasonable opportunity to the assessee. The assessee is also directed to appear before the ld. CIT(A) and file the necessary information and documentation in support of its contentions, as so advised and ensure in timely completion of the appellate proceedings. This will not prejudice the right of the assessee in availing of the aforesaid settlement scheme and where the assessee so decides finally to opt for the scheme and has taken necessary steps as so specified therein, it can bring the same to the notice of the ld CIT(A) who shall then decide and take appropriate action as per law.
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2020 (9) TMI 536
Undisclosed income u/s. 44AD - difference between the turnover declared by the assessee and the turnover declared in form 26AS - HELD THAT:- Admittedly, there is difference in the turnover declared by the assessee and the turnover declared in Form 26AS which is at ₹ 5,05,000/- and it is to be part of the business turnover of the assessee. Being so, it should be included in the total turnover of the assessee and income of 8% is to be estimated on it. Entire undisclosed turnover of ₹ 5,05,050/- cannot be considered as income of the assessee. The AO is directed to consider 8% of the income of ₹ 5,05,050/-. Thus, this ground of appeal of the assessee is partly allowed. Unexplained income - HELD THAT:- Once the assessment of the assessee was completed u/s. 44AD, there cannot be any application of sec. 68/69A. Being so, direct the AO to delete the addition made by the AO and confirmed by the CIT(A) at ₹ 3 lakhs. This ground of appeal of the assessee is partly allowed.
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2020 (9) TMI 535
Disallowance of R D Expenditure - HELD THAT:- Additional evidence has placed by the assessee for the first time before the CIT(A) and the ld. CIT(A) has decided the addition without calling for remand report from the AO and without making any verification of the expenditure independently. We are of the view that the issue is to be remitted back to the file of the AO and accordingly, we remit the issue back to the file of the AO with a direction to re-examine the issue and decide the same on merits in accordance with law after providing reasonable opportunity of being heard to the assessee. Thus, ground Nos. 1 to 4 are treated as allowed for statistical purposes. Addition on account of under reporting of consignment sales the assessee during the year made through M/s ABS Mercantile Pvt Ltd( in short consignee) - HELD THAT:- CIT(A) merely relied on the reconciliation statement without verifying the same with the books of account representing the cheques cancelled. The ld. DR contended that the opening balance claimed by the assessee was not reported by the ABS in it s reply and with regard to the cancellation of cheques and the stocks sold were required to be verified. With regard to the sales of M/s Adley Formulation the AO found that he same was not reflected separately in the statement of sales for the A.Y2013-14. CIT(A) deleted the addition without calling the remand report of the AO. Therefore, the issue needs to be verified with the books of account and if necessary cross verification to be made with ABS to reconcile the sales. Both the parties have agreed to remit the matter back to the file of the AO for further verification and reconciliation. Hence, in the interest of justice, we remit this matter back to the file of AO with a direction to reexamine the issue and decide the same afresh after providing reasonable opportunity of being heard to the assessee. Accordingly, ground is treated as allowed for statistical purposes. Disallowance of expenditure u/s 14A - HELD THAT:- There was no dispute that in the impugned AY, the assessee did not earn any exempt income. When the assessee has not earned any exempt income and there can be no disallowance under section 14A - In the case of Cheminvest Ltd., reported in [2015 (9) TMI 238 - DELHI HIGH COURT] has held that section 14A will not apply where no exempt income is received or receivable during the relevant assessment year - we hold that no disallowance is called for u/s 14A. Accordingly, we uphold the order of the ld. CIT(A) on this issue and dismiss the ground raised by the revenue on this issue. Disallowance of interest expenditure attributable interest free advances - HELD THAT:- No information was placed before us to substantiate, whether the assessee has advanced interest free funds or interest bearing borrowed funds to it s group concerns. Hence, this issue also needs verification at the end of the AO with regard to the availability of interest free funds and both the counsels have agreed to remit the matter back to the fie of the AO to verify the facts. Accordingly the issue is remitted back to the file of the AO with a direction to examine whether the assessee has made advances out of interest free funds or interest bearing funds and decide the issue afresh on merits after giving opportunity to the assessee. The grounds raised on this issue are treated as allowed for statistical purposes. Addition on account of difference of amount between the books of account of the assessee and the books of ABS Mercantile (P) Ltd. - HELD THAT:- In this case the assessee is maintaining the regular books of accounts which were produced before the AO. The assessee also duty bound to explain the discrepancies with the books of accounts and the supporting documents. The correctness of the entries made in the ABS and the reconciliation submitted by the assessee needs verification. It appears to us that there were some issues which need to be verified relating to the accounts of ABS. As AO made the addition of ₹ 19.80 crores due to under reporting of sales in respect of ABS. We are of the opinion that the account of ABS needs to be verified in detail to ascertain the factual position. Therefore we remit the matter back to the file of AO with a direction to cause necessary enquiries with M/s ABS Mercantile Pvt Ltd and decide the issue afresh on merits. Differences in purchases debited to the Profit and Loss account and the information received from the vendors - HELD THAT:- There is no dispute that the assessee filed reconciliation statement before the Ld. CIT(A) and the Ld. CIT(A) rejected the assessee s claim for want of cross verifications. CIT(A) ought have verified the information or should have called for the remand report from the AO. It is unjustified to reject the claim without making proper verification. Therefore we, remit the issue back to the file of the AO with a direction make necessary verifications and cross verifications and decide the issue afresh on merits after providing reasonable opportunity of being heard to the assessee. Thus, ground Nos. 2 3 are treated as allowed for statistical purposes. Disallowance of commission expenses - HELD THAT:- The evidences were placed by the assessee before the CIT(A) for the first time, we are inclined to remit this issue back to the file of the AO with a direction to examine the correctness and genuineness of the expenditure with the evidences produced by the assessee and decide the issue afresh on merits and after providing reasonable opportunity of being heard to the assessee. Accordingly, this ground is allowed for statistical purposes.
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2020 (9) TMI 534
Revision u/s 263 - assessing the interest received by the assessee firm on the capital overdrawn by one of its partner as its income under the head Other sources - HELD THAT:- As the interest bearing borrowed funds of the assessee firm were channelized for overdrawing of capital by the partner, viz. Shri. Shrenik Siroya, which admittedly as observed by the A.O was for non-business purposes, therefore, the correlating interest expenditure pertaining to the amount of capital overdrawn has to be disallowed u/s 36(1)(iii). As for the rate of interest received by the assessee firm from its partner, which is found to be in excess as in comparison to the rate on which the funds were raised/borrowed by the firm from third parties, the same only to the said extent is liable to be assessed as the income of the assessee firm from Other sources . In sum and substance, the interest expenditure correlating to the interest paid by the assessee firm on the funds borrowed is to be disallowed u/s 36(1)(iii), to the extent, the same were advanced to the partner, viz. Shrenik Siroya by way of overdrawing of his capital, and it is only the excess interest so received by the firm from him, if any, which would be assessed under the head Other sources . Accordingly, we modify the order of the CIT(A) in terms of our aforesaid observations. Valuation of closing stock - only contention of the ld. A.R before the lower authorities as well as before us was that the assessee had consistently been following this method for valuing its closing stock - HELD THAT:- Once the method that was consistently adopted by the assessee for valuation of stock is rejected and the same is substituted by another method by the A.O, therein, in order to deduce the true profits for the year under consideration such an exercise cannot be confined to the valuation of the closing stock alone and has to be extended to the valuation of the opening stock. Our aforesaid view is fortified by the order passed in the case of CIT Vs. Ahmedabad New Cotton Mills Co. Ltd. [ 1929 (11) TMI 1 - PRIVY COUNCIL] - restore the issue to the file of the A.O with a direction that the valuation of the opening stock may also be carried out as per the method substituted by the A.O for valuing the closing stock. Accordingly, the issue is set aside to the file of the A.O for giving effect to our aforesaid observations. Estimated profit on account of sale of certain flats - HELD THAT:- Assessee in the immediately succeeding year i.e A.Y 2010-11, had accounted for the sale on the basis of the date of the agreement to sell , Page 188 of APB. Even the claim of the assessee as regards consistency in the method of accounting for the sale transactions fails. Be that as it may, in the backdrop of our aforesaid observations, now when the agreements to sell were executed during the year under consideration, viz. A.Y 2009-10, and the construction of the said properties was also completed during the year in question, we therefore concur with the view taken by the lower authorities that the revenue from sale of the said properties was to be recognised in A.Y 2009-10 and could not have been accounted for in A.Y 2008-09. At the same time, we may herein observe that pursuant to the shifting of the aforesaid income from A.Y 2008-09 to A.Y 2009-10, the credit for the tax deposited by the assessee corresponding to the income pertaining to the aforesaid sale transactions that were accounted for by it in A.Y 2008-09 is required to be given to it during the year under consideration i.e A.Y 2009-10. Treating the amount recovered by the assessee as its income from Other Sources instead of reducing the same from the cost of construction of the project - HELD THAT:- Labour account for building was credited and the account of the developer, viz. M/s Omega Investment Properties Ltd. was debited by the aforesaid amount in the books of the assessee. As such, it is the claim of the assessee that the cost of goods sold for A.Y 2012- 13 was computed under identical facts by crediting an amount to its Labour A/c for building , and debiting the account of the developer, viz. M/s Omega Investment Properties Ltd., which was accepted by the department while framing the assessment for the said year. On the basis of our aforesaid observations, we are of the considered view that as the matter had neither been properly looked into by the loer authorities, nor the assessee had been able to substantiate its claim on the basis of irrefutable documentary evidence, therefore, the same in our considered view in all fairness requires to be revisited by the A.O for fresh adjudication. Before parting, we may herein observe that the A.O while readjudicating the aforesaid issue may inter alia seek necessary verifications from the developer., viz. M/s Omega Investment Properties Ltd. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate its aforesaid claim on the basis of fresh documentary evidence. Deduction u/s 80IB(10) on the total income assessed - HELD THAT:- It is the claim of the assessee that the additions made by the A.O qualified for deduction u/s 80IB(10) of the Act. We have given a thoughtful consideration and find no merit in the aforesaid claim of the assessee. Claim for deduction under Sec. 80IB is based on satisfaction of a set of conditions and legal requirements as specified in the Act. One of the important requirement is verification and authentication of the said claim for deduction by the auditor in the statutory Form 10CCB . As the said mandatory requirement would not be satisfied by the assessee insofar additions have been made in its hands in the course of the assessment proceedings, we therefore are of the considered view that the CIT(A) had rightly rejected the said claim of the assessee.
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2020 (9) TMI 533
Reopening of the assessment u/s 147/148 - validity of reason to believe - HELD THAT:- There was no justification for the authorities below to reopen the assessment in these four cases. Since no material was supplied to the assessee which is the basis for reopening of the assessment and no statements recorded during the course of search in the case of Shri Pramod Kumar Jindal were confronted to allow cross-examination on behalf of the assessee, therefore, such material could not be used in evidence against the assessee for making any addition. As noted here that assessee raised the objections against the reopening of the assessment on 27/28/29/30.11.2018, but, the objections of the assessee have not been disposed of by the A.O. prior to passing of the re-assessment orders. CIT(A) clearly show that objections of the assessee have been dealt by the A.O. in the assessment order by passing the composite order. Thus it is clear that objections of all the Assessees were not disposed of prior to passing of the re-assessment order. Thus, it is clearly in violation of Judgment of Hon ble Supreme Court in the case of M/s. GKN Drive Shafts [ 2002 (11) TMI 7 - SUPREME COURT] , Haryana Acleric [Delhi-HC], Fomento Resorts Hotels Ltd., [ 2008 (11) TMI 2 - DELHI HIGH COURT] relied upon by the Learned Counsel for the Assessee. Reopening of the assessment is clearly bad in Law and is liable to be quashed. The A.O. did not assume the jurisdiction under sections 147/148 in accordance with Law and as such, the re-assessment proceedings are liable to be quashed. The addition is also liable to be deleted. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment under sections 147/148 - Resultantly, all additions stand deleted. Appeals of the Assessee are allowed.
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2020 (9) TMI 532
Penalty u/s 271AAB - Defects in the notice issued u/s 274 - undisclosed income surrendered during the course of search conducted u/s 132 - penalty notice under the heading of Section 274 r.w.s. 271AAB of the Act pre printed format of issuing notice u/s 271(1)(c) - HELD THAT:- Tribunal in the case of Dr. Rajesh Jain [ 2020 (2) TMI 946 - ITAT INDORE] and after examining the fact find that the facts are verbatim similar wherein defective notice was issued u/s 274 r.w.s. 271AAB of the Act, without specifying the charges for which penalty proceedings were initiated. In other words in the notice issued u/s 274 r.w.s. 271AAB assessee has not been given an opportunity to offer explanation against the type of penalty to be levied i.e. whether the penalty is to be under Clause (a), (b) or (c) of Section 271AAB. In the instant case defect is much more grave because in the penalty notice under the heading of Section 274 r.w.s. 271AAB of the Act pre printed format of issuing notice u/s 271(1)(c) is appearing which relates to levy of penalty for concealment of particulars of income or furnishing inaccurate particulars of income. In the assessee s case Ld. A.O ought to have mentioned the specific charges provided u/s 271AAB of the Act rather than the charges of Section 271(1)(c) of the Act. CIT(A) reduced the penalty to 10% applying provisions of Section 271AAB(a) of the Act as against penalty levied @30% by the Ld. A.O u/s 271AAB(c) of the Act but to our surprise Ld. CIT(A) has not taken pain to issue a fresh notice before reducing the penalty thus not giving reasonable opportunity of being heard as mandated under the proviso to Section 275. We find that similar issue came up before us in the case of Shri Vivek Chug [ 2019 (4) TMI 1163 - ITAT INDORE] wherein the appeal was decided in favour of the assessee and penalty proceedings were quashed since Ld. CIT(A) partly deleted the penalty by confirming the penalty @10% as against 20% levied by Ld. A.O u/s 271AAB of the Act without affording reasonable opportunity to the assessee to make necessary submission of the explanation. Since the penalty notice issued u/s 274 r.w.s. 271AAB is vague and does not fulfill the requirement of law since no specific charges provided u/s 274 r.w.s. 271AAB of the Act are appearing in the body of penalty notice. Since the penalty proceedings has been quashed and legal ground allowed in favour of the assessee.
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2020 (9) TMI 531
Assessment on a non-existent company - scheme of amalgamation conceived - HELD THAT:- When both the amalgamating company, assessee in this case, have ceased to exist by virtue of the approved scheme of amalgamation w.e.f. 01.04.2013 by the order passed by Hon ble Delhi High Court, AO was not within his jurisdiction to frame the assessment in the name of non-existent entity and such assessment orders dated 28.12.2016 29.12.2016 are nullity and not sustainable in the eyes of law. Consequently, assessment framed in the name of M/s. Artsy Infrastructure and Projects Private Limited and M/s. ATJ Impex Pvt. Ltd. vide orders dated 28.12.2016 29.12.2016 respectively passed by the AO and confirmed by the ld. CIT (A) are ordered to be quashed.
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2020 (9) TMI 530
Disallowance u/s 14A r.w.r. 8D(2)(iii) - HELD THAT:- Special Bench of ITAT Delhi in the case of ACIT Vs. Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] authored by a Member of this Bench held that only those investments are to be considered for computing the average value of investment which have yielded exempt income during the year. Following the said judgment, we hereby hold that interests of justice would be well served by computing the disallowance @ 0.5% on the average investment of ₹ 18,00,000/- (opening balance Nil) made in M/s Lakshaya Investment only which has yielded the profits. In the result, the disallowance determined by the ld. PCIT stands modified to ₹ 45,000/-. Appeal of the assessee is treated as allowed.
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2020 (9) TMI 529
Fee levied u/s 234E - late filing of e-TDS statement - Intimation u/s 200A - Low tax effect - maintainability of revenue appeal - CIT- A deleted levy of fee - HELD THAT:- Whether a particular provision is within the four corners of the Constitution is a matter which falls in the exclusive domain and jurisdiction of the Courts and the ld CIT(A) doesn t have any authority and jurisdiction to hold any provisions as constitutionally not valid. In the present case, we are of the considered view that he has not breached his authority and jurisdiction in this regard while passing the impugned order. Revenue may have other grievances against his order passed by the ld CIT(A) deleting the fee u/s 234E on merits of the case, however, as far as Para 10(a) of the CBDT Circular no. 3 of 2018 as amended is concerned, the exception carved out therein is not applicable in the present case. Second exception 10(e) as contended that fee u/s 234E has been levied basis the information and processing of TDS statement by Central Processing Centre, which is an external agency and therefore, the said exception is applicable in the instant case - In the instant case, the assessee has filed his TDS statement on TRACES which is an IT platform managed and run by the Tax Department - As per the Revenue s own submission, DCIT, CPC-TDS Ghaziabad holds concurrent jurisdiction with the Assessing Officer(TDS)-3, Jaipur over the case, as per the provisions of Section 120 read with 124 of the Income Tax Act, 1961. Even though CPC has its separate and identifiable functions relating to TDS returns, the officers hold concurrent jurisdiction over such TDS matters with that of the AO, there cannot be any dispute that both administratively and functionally, the CPC of the Department is part of Income Tax Department and is therefore clearly not an external law enforcement agency qua Income Tax department and that too, as specified in the aforesaid exception. Therefore, in the instant case, where the TDS statement has been processed by the CPC and while processing the same, fee u/s 234E has been levied having tax effect less than the prescribed limit, it will continue to be governed by low tax effect circular issued by the CBDT which is binding on the Revenue. Present appeal filed by the Department is dismissed on account of low tax effect given that the matter is not covered by any of the exceptions so specified and the contentions advanced by the ld DR on merits of the case are left open and not adjudicated upon. - Decided in favour of assessee.
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Customs
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2020 (9) TMI 528
Duty Drawback - non-realisation of sale proceeds - Failure to approach the Reserve Bank of India for obtaining the necessary extension - Rule 16A of the Drawback Rules - HELD THAT:- The issue as to whether the extension is granted by the Reserve Bank of India or whether the petitioner is entitled for the relief otherwise, being factual issues, could be determined by the Revisional Authority himself, in line with the decision relied upon by the learned Standing Counsel for the respondents in ZAZ AND ZAZ PVT. LTD. VERSUS UNION OF INDIA AND 2 OTHERS [ 2014 (3) TMI 840 - ALLAHABAD HIGH COURT ], wherein the Hon'ble Division Bench of the Allahabad High Court was also of the view that factual aspects requires to be verified by the Authorities and accordingly remanded back the matter. The matter is remanded back to the third respondent herein. The petitioner is granted liberty to submit the remaining 6 Shipping Bills and all other certificates and materials in support of his claim - Petition allowed by way of remand.
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2020 (9) TMI 527
Valuation of imported goods - various kind of polyester knitted fabric of different weight and colour - rejection of declared value - enhancement of declared value - Commissioner (Appeals) allowed the appeal accepting the declared value - period 8 June, 2018 to 9 February, 2019 - HELD THAT:- The assessing officer have been making enhancement in a routine manner and the respondent who are regular importers are left with no choice but to sign on the dotted line for taking delivery of their goods to carry on their business, and also save the demurrage charges if the consignment is delayed in the port for want of clearance. Appeal dismissed - decided against Revenue.
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2020 (9) TMI 526
Condonation of delay of 27 days from the date of limitation before commissioner (Appeals) - Delay was within condonable period of thirty days - sufficient cause which prevented the appellant from filing the appeal within limitation period - Benefit of exemption - certificate of origin - HELD THAT:- Commissioner (Appeals) have erred in dismissing the appeal on limitation, vide the impugned order dated 28.07.2020, which is in violation of the direction of the Hon ble Supreme court in IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [ 2020 (5) TMI 418 - SC ORDER] . Accordingly, the present appeal is admitted for hearing on merits. The rejection of certificate of origin is bad as it was a case of minor discrepancy and was fit to be ignored in terms of Rule 18 of the said rules. Further, the appellant had produced the rectified certificate of origin, which have been wrongly treated as issue of certificate retrospectively - the certificates of origin submitted by the appellant are in order. The appellant is held entitled to the benefit of exemption/ concessional tariff under Notification No. 096/2008-Cus. - Appeal allowed - decided in favor of appellant.
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2020 (9) TMI 525
Smuggling - Provisional release of seized goods - Betel Nuts and Black Pepper - prohibited goods or not - evidence with revenue to establish that the same were smuggled into the country or not - HELD THAT:- There are no evidence to establish that the goods which were moved within the country, were smuggled in the country and therefore, it was high handedness on the part of revenue to have detained the said goods not released the same inspite of the order of learned Commissioner (Appeals). The appeal filed by Revenue is dismissed - Further, Revenue is directed to release Black Pepper and Betel Nuts to the respondents by 15 March, 2020.
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Corporate Laws
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2020 (9) TMI 524
Amalgamation of Scheme of Merger by Absorption - Sections 230 to 232 of Companies Act - HELD THAT:- The observations made by the Regional Director have been explained by the Petitioner Companies in Para 11 to 16 above. Moreover, the Petitioner Companies undertake to comply with all the statutory requirements, as may be required under the Companies Act, 2013 and the Rules made thereunder. The clarifications and undertakings given by the Petitioner Companies are accepted by the Tribunal - The Official Liquidator has filed his report dated 17th August, 2020 in the consolidated Company Scheme Petition bearing CP (CAA) NO. 966/MB.V/2020, inter alia, stating therein that the affairs of the Transferor Company has been conducted in a proper manner not prejudicial to the interest of the Shareholders of the Transferor Company and that the Transferor Company may be ordered to be dissolved without the process of winding up by this Tribunal. From the material on record, the Scheme appears to be fair and reasonable and is not violative of law and is not contrary to public policy. The Scheme is hereby sanctioned and the Appointed Date is fixed as 1st April, 2019. The Transferor Company be dissolved without winding up - The Petitioner Companies to file a copy of this Order, duly certified by the Deputy Director or Assistant Registrar of this Bench, along with Scheme with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable within 60 days from date of receipt of copy of the Order.
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2020 (9) TMI 523
Oppression and Mismanagement - Waiver of the qualification requirement - section 244(1) of the Companies Act 2013 - case of applicant is that there are exceptional circumstance for granting waiver because all the board of directors have acted in connivance against the applicant, the applicant have no recourse in law if the waiver is not granted and there are just and equitable ground for grant of waiver. HELD THAT:- The main issue raised in the petition is that the applicant has to get value for the brand created by his father s contribution to the company. It seems that another company is taking over the R1 company by purchase of shares from the shareholders at the rate of INR 532 per share. The respondents are selling their shares on their own volition, the shares of R1 are transferrable and if the applicant wants to sell the shares he can do so and if he is not willing to sell his shares at this rate, nobody is compelling to part with his shares. What he wants to get is, since respondents are selling the shares, he has to get some consideration for the so-called brand value created by his father for the company. This issue will not fall under the ambit of oppression and mismanagement. To create a scenario that there is oppression and mismanagement in R1, the applicant makes a general complaint that R1 company issued rights shares without issuing notice to him. The applicant has not even given the details of rights issue and bonus issue of shares. Hence, we hold that the petition is a frivolous one. This application for waiver is dismissed.
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2020 (9) TMI 522
Restoration of name of the Company in the register of companies maintained by the Respondent - Section 252(1) of the companies Act, 2013 - HELD THAT:- On perusal of the Reply of Registrar of Companies, Maharashtra in Pune and the documents submitted, it is clear that the Company is in operation. The Respondent struck off the name of the Company, as the Company failed to file statutory returns for a continuous period of more than two years. However, the Company is in business operation and therefore, unless the relief sought is granted to the Company, grave hardship and irreparable loss shall be caused to the said Company, its members and its creditors. It is satisfactory that the prayer sought by the Petitioner Company deserves to be allowed - Respondent is directed to restore the name of the Petitioner Company in the register of companies subject to payment of a sum of ₹ 50,000/- as cost payable in the account of Pay and Accounts Officer, Ministry of Corporate Affairs, Mumbai within 10 days from the date of receipt of copy of this order. Consequentially thereupon the Bank Accounts if freeze shall get defreeze and to be operated by the Company.
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2020 (9) TMI 521
Sale of shares - approval of the sale - HELD THAT:- The sale of education assets has been done within the Resolution Framework and the same is approved and recorded. Initiation of Bankruptcy Proceedings - HELD THAT:- The initiation of bankruptcy proceedings is the best option in the given scenario. The same is recorded as prayed for. In the circumstances, the proposal of the Applicant for initiation of insolvency proceedings of IIDL and IIDMCC is taken on record - the request of the Applicant for exempting them from affixing the stamp on the affidavit and notarising the Application is also granted. Striking off the name from Register of Companies - Section 241-242 of the Companies Act, 2013 - HELD THAT:- This Bench is of the view that the striking off of the company is the best option in the given scenario. Hence, we take on record the proposal as prayed for - The request of the Applicant for exempting them from affixing the stamp on the affidavit and notarising the Application is also granted.
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2020 (9) TMI 520
Restoration of name in the register of companies maintained by Registrar of Companies - Section 252 of the Companies Act, 2013 - HELD THAT:- The materials available on record indicate that the failure of the Company to furnish the statutory returns with the Respondent was not intentional. The promoters of the Company as well as the Appellant are keen to carry on and perform the objects of the Company in right earnest. There has been substantial investment in the project. The Company is carrying on its business. Unless the name of the Company is restored in the register of companies it would suffer financially and may go out of business. We are satisfied that the name of the Company should be restored in the Register of Companies. The Appeal be and the same is allowed in part without contest. The prayer for restoration is allowed. The prayer to direct the Ministry of Corporate Affairs (MCA), Government of India (GoI) to remove the name of the Directors from the list of disqualified Directors is refused.
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2020 (9) TMI 518
Sanction of Amalgamation Scheme - sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- The observations made by the Regional Director have been explained by the Petitioner Companiesas above. Moreover, the Petitioner Companies undertake to comply with all statutory requirements, as required under the Act and the Rules made thereunder. The clarifications and undertakingsgiven by the Petitioner Companies are accepted. From the material on record, the Scheme of Arrangement appears to be fair and reasonable and so far not in violation of any provisions of law, nor contrary to public interest - the scheme is sanctioned - It shall be binding on the Petitioners and the Companies involved in the Scheme and all concerned including their respective Shareholders, Secured Creditors, Unsecured Creditors/Trade Creditors and Employees.
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2020 (9) TMI 516
Sanction of Amalgamation Scheme - section 230(1)(b) of the Companies Act, 2013 - HELD THAT:- This Bench is of the view that the meeting of the equity shareholders and creditors of the Transferee Company can be dispensed with since all the Transferor Companies are wholly-owned subsidiary of the Transferee Company. The Counsel for the Applicant Companies further clarifies that the Transferee Company will file petition and comply with the provisions of service of notices upon all Regulatory Authorities. The Applicant Companies to serve notice of the present Application along with its enclosures upon:- (i) concerned Income Tax Authority within whose jurisdiction the Applicant Companies assessments are made clearly indicating the PAN of the concerned company (PAN of First Applicant Company: AAACM3648P, PAN of Second Applicant Company: AAACP9345A, PAN of Third Applicant Company: AAACR5880Q, PAN of Fourth Applicant Company: AADCS9305C and PAN of Fifth Applicant Company: AAACT8968M) (ii) the Central Government through the office of Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai (iii) Registrar of Companies, Maharashtra, Mumbai, and any other applicable regulatory authority pursuant to section 230(5) of the Companies Act, 2013 and rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, with a direction that they may submit their representations, if any, within a period of thirty days from the date of receipt of such notice to the Tribunal with copy of such representations shall simultaneously be served upon the Applicant Companies, failing which, it shall be presumed that the authorities have no representations to make on the proposed Scheme. The Transferor Companies are also directed to serve notice along with a copy of the Scheme upon the Official Liquidator, High Court, Bombay, pursuant to section 230(5) of the Companies Act, 2013 and as per rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
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2020 (9) TMI 515
Sanction of Amalgamation Scheme - sections 230-232 of the Companies Act, 2013 - HELD THAT:- The Official Liquidator (OL) has filed his report dated 23.10.2017 in Company Petition inter alia stating that the affairs of the Transferor Company have been conducted in a proper manner. It is clear from the report of M/s. P R Agarwal and Awasthi, Chartered Accountants appointed vide order dated 28.07.2017, which is annexed to the OL Report, that the affairs of the Transferor Company have not been conducted in a manner prejudicial to the interest of the members or to the public interest - There is, therefore, no reason to doubt the correctness of the transaction and the accounting entries made in this regard by the Transferor Company. Nevertheless, in so far as tax liability in respect of the transaction itself is concerned, the Income Tax Department is free to take an independent view and determine whether there is any tax due on this score. Sanction of the Scheme by this Tribunal shall not come in the way of any such determination, and the Income Tax Department is free to proceed in accordance with law - The rest of the clarifications and undertakings provided by the Petitioner Companies are found satisfactory and are, therefore, accepted. From the material on record, the scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, the Company Petition filed by the Transferee Company is made absolute in terms of prayer clauses (a) to (h). Petition filed by the Transferor Company is also made absolute in terms of prayer clauses (a) to (h) thereof. The Scheme is sanctioned - The Appointed date of the Scheme is fixed as 1st April 2017.
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Insolvency & Bankruptcy
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2020 (9) TMI 519
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC at the relevant time. The Corporate Debtor has unequivocally admitted, through the Board Resolution dated 09.03.2020, that any restructuring of the Corporate Debtor would be best achieved within the four corners of the Insolvency and Bankruptcy Code, 2016. Therefore, the default stands established and there is no reason to deny the admission of the petition. This Adjudicating Authority admits this petition and orders initiation of CIRP against the Corporate Debtor - Petition admitted - moratorium declared.
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2020 (9) TMI 517
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Debt - existence of debt and dispute or not - HELD THAT:- The petitioner has not been able to establish a contractual relationship with the corporate Debtor, as the very basis of claim namely the Invoice is in the name of Arogyam Hospital(third party) and as such the claim does not tantamount to a debt under Sec 5(21) of I B code. The claim of fee at best could be a referral fee which is untenable in law and opposed to principles and guidelines, as laid down by Medical Council of India. Petition dismissed without costs.
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2020 (9) TMI 514
Initiation of disciplinary proceedings against Insolvency professional (IP) - Status of complaint made by the petitioner - Regulation 7(3) of the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 - HELD THAT:- The complainant is being informed about the status of the complaint by way of a cryptic order like in the present case reproduced herein above. In my opinion, this is not in compliance with the Regulations. A reading of Regulation 7 of the Regulations clearly show that the complainant has to be informed as to whether the respondent no.1 has formed a prima facie opinion in favour of the complainant or against it. In case the opinion is against the complainant, the complainant has a right under the Sub- Regulation 5 of Regulation 7 to seek a review on the said decision. Merely informing the petitioner as has been done in the present case that appropriate action is being initiated in the matter, would not, therefore, satisfy the requirements of Regulation 7. The complainant was never informed whether respondent no.1 has formed an opinion in favour of the complainant or against him, on such complaint. As far as the present case is concerned, the respondent no.1 has already formed a prima facie opinion in favour of the complainant and further action thereon in terms of Regulation 7 (7) is under its consideration. The respondent no. 1is directed to expedite the decision under Regulation 7(7) of the Regulations and communicate such decision to the petitioner as well. List for hearing on the issue on 01st December, 2020.
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2020 (9) TMI 513
Revision/Rectification of the Resolution Plan- reflection of amount apportioned towards the dues of the Operational Creditors against the total liability of the Operational Creditors - revision/modification/relaxation in the Resolution Plan with respect to the timeline/timeframe for payment to financial creditors/operational creditors and/or other stakeholders - HELD THAT:- This Bench has noticed that the Applicant has already brought in substantial amount for implementing the Resolution Plan as approved by this Bench. Even though the lenders of the Resolution Applicant have already given in-principle sanction for the loan to be availed by the Applicant, there is some delay in disbursement due to the situation arising out of Covid-19 Pandemic prevailing worldwide. The prevailing situation is an unprecedented and extraordinary situation - We are thus inclined to grant time to the Resolution Applicant for arranging funds - the time is extended till 26 November 2020 for making payment as provided in the Resolution Plan approved by this Bench on 2nd July 2020.
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2020 (9) TMI 512
Approval of Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- There being no other resolution Applicant and also considering the fact that the CIRP has already ended, this Bench, left with Hobson s choice, orders liquidation of the Corporate Debtor as provided under Section 33 (1) (b) (i) of the Code. In view of the rejection of the resolution plan, the Corporate Debtor i.e. Guruashish Constructions Private Limited, shall be liquidated in the manner as laid down in Chapter-III of the Code with directions specified.
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2020 (9) TMI 511
Maintainability of application - initiation of CIRP - Outstanding dues and Adjustment of retention money - Corporate Debtor failed to make repayment of its dues - existence of default and dues or not - HELD THAT:- The IBC is not a substitute for a recovery forum. - Since there was a dispute existing prior to the issuance of Section 8 notice, the insolvency provisions cannot be invoked. The email communication of the Operational creditor dated 23.01.2016 states about operational creditor having knowledge of retention money being adjusted. Whether the corporate debtor was entitled to adjust the retention amount are disputed question of law and fact and shall be decided by the appropriate forum. It is clarified that no one can take recourse that they have not been communicated the Judgment. It should be the duty of the counsel to keep a track after the matter is reserved for pronouncement. This is not a valid ground for requesting the condonation of delay. There should be a sufficient cause for the delay and no one can claim condonation as a matter of right. Appeal dismissed.
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2020 (9) TMI 510
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Bench is of the view that as far as the subject relating to the return of stocks to the Bhiwandi warehouse of Corporate Debtor is concerned, there is no dispute and the same has been admitted by the Corporate Debtor. There is no written agreement between the Petitioner and the Corporate Debtor. Hence the Corporate Debtor's contention that it was categorically agreed between the parties that in case of return of stocks by the Petitioner to the Corporate Debtor, the Corporate Debtor would receive its payments only upon the acceptance of the stocks by the principal supplier, is not borne out by facts. The Bench is of the view that there may be disputes between the Corporate Debtor and the principal supplier to whom the Corporate debtor has ultimately returned the product. However, the legitimate claims of the Corporate Debtor can certainly not depend and held hostage to the settlement of dispute, if any, between the corporate debtor and a third party. The Application under sub-section (2) of Section 9 of I B Code, 2016 filed by the Operational Creditor for initiation of CIRP in prescribed Form 5, as per the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is complete. The existing operational debt is beyond the threshold limit against the Corporate Debtor and its default is also proved. Accordingly, the application filed under section 9 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the Corporate Debtor deserves to be admitted. Petition admitted - Moratorium declared.
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2020 (9) TMI 509
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The contentions of the Corporate Debtor that in view of the settlement entered into between the Vira Group and sunshine Group, the Corporate Debtor herein is not liable for the amount claimed in this petition based on the Clause 9.5 of the settlement memo dated 31/10/2018. We are unable to accept the contention of the Corporate Debtor that the Corporate debtor is not liable to the petitioner. The petitioner was not a party to the settlement entered into between the Vira Group and Sunshine Group. The corporate debtor has not raised any dispute with regard to the debt or quality of goods supplied. The debt and default on the part of the Corporate debtor is writ large in the petition and in fact the Corporate debtor himself is ready to returned back some of the unutilised goods remaining with them to the petitioner. This Bench having been satisfied with the Petition filed by the Petitioner which is in compliance of provisions of section 9 of the Insolvency and Bankruptcy Code admits this Petition declaring moratorium - Petition admitted.
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2020 (9) TMI 508
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - HELD THAT:- Before issuance of the demand notice, the Corporate Debtor vide email dated 26.02.2019, informed the Petitioner to remove all site establishments and equipment along with the material from the site immediately. The Petitioner was requested to coordinate with the team for signing the documents relating to joint records of the survey carried out by the Petitioner and terminated the contract - There has been an exchange of series of emails wherein the Corporate Debtor has alleged breach of contractual obligations to complete the project, provides safety to workers at site, absence of appropriate work permits, failure on the part of Petitioner to improve work conditions at site, failure of the Petitioner to appoint representative to have the quality check, constant labor strike, breach of general terms and conditions of contract more particularly clause 14.2(1) and (3) which categorically states that all RA bills shall have an attach duly certified material reconciliation statement. It is clearly established that the claim of the Petitioner is not a debt and does not demonstrate as the debt under Section 5(21) of the Code. The Corporate Debtor has raised disputes regarding quality of the Petitioner s work, the bills raised by the Petitioner were not duly certified on the basis of joint measurement, non-following due process of certificate of payment and RA Bill no. 4 was issued after issuance of final bill. Therefore, by no stretch of imagination, the Petitioner is entitled to any relief under IBC Code when there are serious disputes raised about the admission of the claim by the Corporate Debtor. Thus, this tantamount to a pre - existing dispute between parties - petition dismissed.
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2020 (9) TMI 507
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Corporate Debtor has neither stopped placing orders to the Operational Creditor, nor has initiated any civil or criminal proceeding against them. Thus, we are of the firm belief that this is only an afterthought and concocted contentions of the Corporate Debtor which cannot be relied upon - Moreover, the ledger accounts of the Corporate Debtor for the Financial Year 2016-2017 maintained by the Operational Creditor bears the amount of debt of ₹ 1,75,56,450.65/- which was due and payable on the date of closing of the account i.e. 31.03.2018. This Bench having been satisfied with the Application filed by the Operational Creditor which is in compliance of provisions of section 8 9 of the Insolvency and Bankruptcy Code admits this Application declaring moratorium - Petition admitted - moratorium declared.
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2020 (9) TMI 506
Maintainability of application - initiation of CIRP - Preference Share holding claiming as financial creditor - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Relying upon the rights and obligations between the parties had been recorded under a subscription agreement dated 28th February, 2013 the only question that requires to be considered is whether the applicant who is the holder of preference shares in the CD company would be a financial creditor within the meaning of section 5(7) of the Code. To satisfy that the applicant is a financial creditor, burden is heavy on the side of the applicant to prove that the debt allegedly due and payable by the CD would falls under the purview of Financial Debt as defined under section 5(8) of the Code. At the outset, we would say that the applicant has miserably failed to convince us that the debt allegedly due and payable is a financial debt as claimed by the applicant. The Corporate Debtor had issued a cheque to the Financial Creditor bearing No. 234327 for an amount of ₹ 2,00,00,000/- (Rupees Two Crore Only) and requested the Financial Creditor not to deposit the cheque for a few days, to which the Financial Creditor agreed but eventually the said cheque was deposited on 13th April, 2016 but was returned as dishonored . This is an application alleging default in performing the part of obligation on the side of the CD as per the terms of subscription agreement and according to the applicant the CD has defaulted the terms as on March 31,2013 and has been continuously defaulting since the said date. What is defaulted is not repayment of debt, but not redeeming the preferential shares at the option exercised on the side of the applicant. Admittedly, the applicant is a holder of preference shares in the CD Company. The applicant's claim in no way falls under any of the Clauses of Sub Section (8) of Section 5 of the Code and therefore, what is claimed is not a financial debt under section 5(8) of the Code. It is also true that as per the existing provisions of the Company law and the judgments on the issue, a holder of Redeemable Preference shares cannot sue the Company for redeeming its shares except out of the profit of the Company or out of the proceeds of a fresh issue of shares made for the purposes of such redemption. On a combined reading of section 55 of the Companies Act, 2013 read with Rule 9 of the Companies (Share Capital) Rules, 2014 and Section 5(7) (8) of the Code, a preference share holder cannot be classified as a financial creditor falling under section 5(7) of the Code and the applicant's claim is not a financial debt under section 5(8) of the Code. The application is not maintainable under section 7 of the Code and is liable to be dismissed - Application dismissed.
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2020 (9) TMI 505
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Operational Debt - Service of demand notice - HELD THAT:- The demand notice dated 01.10.2018 was sent at the address as per the master data at Page No.14 of the petition in which the registered office is shown as Bhawanigarh Road Samana, Distt. Patiala, Punjab - 147101. The postal receipt is found to be attached with Annexure A-9 at page 55 of the petition. It could also be seen that the Corporate Debtor has replied vide letter dated 26.10.2018 (Annexure A-10) to the demand notice dated 01.10.2018. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The respondent corporate debtor has neither filed any reply to the petition nor has disputed the liability towards the operational creditor. Thus, there is no dispute as to the liability between the corporate debtor and the operational creditor. It is also observed that on the last date of hearing, learned counsel for the respondent has admitted its liability and submitted that this CP may be admitted. The corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. It is also observed that the conditions under Section 9 of the Code stand satisfied. The applicant-operational creditor states that from the abovementioned fact it is clear that the liability of the respondent-corporate debtor is undisputed. Accordingly, the petitioner proved the debt and the default, which is more than '1 lac by the respondent-corporate debtor. The petition is admitted - moratorium declared.
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2020 (9) TMI 504
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Non-Performing Asset - HELD THAT:- Section 7(5) of the Code provides for admission of the application where the Adjudicating Authority is satisfied that (a) a default has occurred; (b) the application under sub-section (2) of Section 7 is complete; (c) there is no disciplinary proceedings pending against the proposed Resolution Professional. The first condition is that a default has occurred. The default in repayment of debt is supported by account statements filed by the bank at Annexure P6 and certificate under Section 2(A)(a) and 2(A)(b) of Bankers Book Evidence Act, 1891 in support of the account statements appended with the petition. It is the case of the respondent-corporate debtor that the account of the respondent-corporate debtor was wrongly declared as NPA while OTS proposal was kept pending by petitioner-bank. It is stated by the petitioner-bank that no payment has been made towards the settled amount and the bank has revocated such proposal accordingly - there are no merit in the contention of the respondent-corporate debtor and pendency of any OTS cannot be an embargo in triggering the provisions under the Code. The second condition is that the application under Section 7(2) is complete. We have discussed the contents of the application above and we conclude that the application is complete. The third condition is that there are no disciplinary proceedings pending against the proposed Resolution Professional. In the present case, Shri Neeraj Bhatia, has been proposed as interim Resolution Professional. Form 2 filed by the proposed Interim Resolution Professional is at Page 92 to 92A of the petition. Shri Neeraj Bhatia has certified that there are no disciplinary proceedings pending against him with the board or Indian Institute of Insolvency Professional of ICAI. He has also affirmed that he is eligible to be appointed as a Resolution Professional in respect of the corporate debtor in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporation Persons) Regulations, 2016. In view of the satisfaction of the conditions provided for in Sections 7(5) of the Code, the petition for initiation of CIRP in the case of M/s Mir Kings Industries Private. Ltd. is admitted - petition admitted - moratorium declared.
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Central Excise
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2020 (9) TMI 503
CENVAT Credit - inability to maintain separate accounts for consumption of common inputs and inputs services - scope of rule 6(3) of CENVAT Credit Rules, 2004 - two options under the Rules, mutually exclusive or not? - HELD THAT:- It is clear from a reading of CENVAT Credit Rules 2004 that rule 6(1) and rule 6(2) complement each other and are in contradistinction with rule 6(3) which, qualified by the non obstante clause, operates on its own. The latter is unambiguously clear in conferring the privilege of exercising of option to the assessee. It was, therefore, not appropriate for the adjudicating authority to resort to computation that yielded higher revenue. It would be appropriate for the adjudicating authority to consider the matters afresh after giving an opportunity to the appellant to furnish the computation preferred by them but strictly in accordance with the provisions of rule 6(3) of CENVAT Credit Rules, 2004. The claim of Learned Senior Counsel that the plants should be deemed as separate registrations is not acceptable in law. The appellant is at liberty to raise the submissions pertaining to retrospective application of the revised computation methodology, as well as the claim of certain clearances being excluded from the definition of exempted goods , before the adjudicating authority. Matters remanded back to the adjudicating authority - appeal allowed by way of remand.
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2020 (9) TMI 502
Classification of goods - RBD Palm Stearin which they manufacture from refined palm oil - classified under Central Excise Tariff heading 1511 9090 or not? - benefit of N/N. 03/2006- CE dt.01.03.2006 (S.No.9) (as amended) - CBEC Circular No.81/2002-CUS dt.03.12.2002 - period September, 2008 to September, 2010 - extended period of limitation - HELD THAT:- The issue has been settled by the Hon ble Apex Court in October, 2010 in the case of CCE, C AND SERVICE TAX VERSUS JOCIL LTD. [ 2010 (12) TMI 24 - SUPREME COURT ] and it has been held that Palm Stearin is classifiable under Central Excise Tariff Heading 3823 and not under CTH 1511. Thus, it has been decided against assessee and in favour of the revenue - Respectfully following the judgment of the Hon ble Apex Court in the case of JOCIL Ltd, it is held that the appellant s product is classifiable under CTH 3823 and not under CTH 1511 as claimed by the appellant. Consequently, the exemption notification claimed by the appellant is also not applicable as the relevant entry pertains to only goods falling under Chapter Heading 1507 to 1515. Clearly the appellant s product falling under CTH 3823 is not covered. Extended period of Limitation - HELD THAT:- The appellant has been filing ER-1 returns claiming the product s classification under CTH 1511 and there has been correspondence between the department and the appellant in this regard. On 03.12.2008 the department advised the appellant that the classification of Palm Stearin in ER-1 returns is not correct to which the appellant responded on 06.01.2009 justifying their classification. Thus, the department was fully aware of the appellant s classification. There is no delay in the appellant responding to the revenue s letter. It was open for the revenue to issue a show cause notice if they did not find the appellant s reply acceptable. However, this was not done. No action was taken until the expiry of normal period of limitation and thereafter, demand has been raised invoking extended period of limitation - The entire demand is based on the information provided by the assessee in their ER-1 returns. Making a wrong claim of classification, per se, is neither fraud nor collusion nor wilful misstatement nor suppression of any facts. It is just a wrong claim. If the claim is wrong in the ER-1 returns, it was open for the revenue to have raised demand by issuing a show cause notice immediately. Therefore, we find that there is no ground for invoking extended period of limitation in this appeal. The appeal is allowed on the ground of demands being time barred - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (9) TMI 501
Validity of proceedings - petitioner raised a ground that the Assessing Officer, who is a Quasi Judicial Authority, has not independently applied his mind while dealing with the impugned proceedings, but had adopted the reports and proposals of the Enforcement Wing/ISIC Authorities, who are their higher authorities - HELD THAT:- Circular No.3 dated 18.01.2019 has empowered the Assessing Officers to henceforth independently deal with the assessment without being influenced by the proposals of the higher officials. Pursuant to the inspection conducted by the Enforcement Wing Officers, the petitioner company was assessed to the Best of Judgment for the Assessment Year 1994-95, as against which the petitioner had filed an appeal before the Tamil Nadu Sales Tax Appellate Tribunal and by an order dated 25.07.2011, the Tribunal had remitted back the entire assessment to the Assessing Officer for pre-determination. While doing so, one of the direction to the Assessing Officer was to examine each and every transactions of the Form-F Declaration filed by the Assessee as provided under Section 6 A(2) of the Central Sales Tax Act, 1956. However, in disregard of the Tribunal's order, the Assessing Officer had not gone into each and every transactions of the Form-F Declaration and on this ground also the impugned proceedings are liable to be set aside. The matter is remanded back to the first respondent herein for fresh consideration - Petition allowed by way of remand.
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