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Showing 181 to 200 of 420205 Records
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2024 (11) TMI 1298
Reopening of assessment u/s 147 - denying claim of exemption under section 10(38) of the Act in respect of Long Term Capital Gain (LTCG) on sale of shares of Sunstar Realty Development Ltd. (SRDL) - HELD THAT:- Assessee’s case does not fall under the modus operandi stated by the learned AO in the aforesaid reasons. As stated earlier, the assessee has bought the shares in IPO by making payments through cheque. The assessee held the shares for more than a year and sold it in open market through a registered share broker by suffering STT. Due reduction of shares have also been made from the Demat statement of the assessee to the extent of sales made by the assessee.
Hence, it could be safely concluded that the very basis of formation of belief of the learned AO that income has escaped assessment in the reasons recorded is fallacious. AO also refers to split of the shares of SRDL which had happened in the year 2015 so as to allege malafide motive on the part of the assessee. But it is pertinent to note that assessee herein had actually sold the shares in June, 2014 itself much before the act of splitting of shares. Hence, we have no hesitation to hold that the case of the assessee does not fall under modus operendi mentioned in the reasons recorded by the AO thereby making his entire formation of belief per se fallacious. Accordingly, the reasons recorded does not have live link to the formation of belief of the learned AO vis-à-vis the facts of the instant case. Hence, the reopening made under section 147 of the Act is based on incorrect assumption of facts. Decided against revenue.
Addition made on account of cash deposits made during the demonetization period - There is absolutely nothing unusual in the act or conduct of the assessee during the demonetization period. Further, the entire cash sales made by the assessee were duly reflected in the VAT returns of the assessee. The assessee had indeed sufficient cash balance in its kitty to make the cash deposits throughout the year and also during the demonetization period. The assessee also submitted the entire sale bills before the learned AO.
These facts were duly appreciated by the learned CIT(A) and accordingly the addition made by the learned AO under section 69A of the Act stood deleted by the learned CIT(A). We do not find any infirmity in the said action of the learned CIT(A). Accordingly, the grounds raised by the Revenue are dismissed.
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2024 (11) TMI 1297
Accrual of JDA revenue - Revenue from a JDA the terms of which admittedly were not fulfilled in AY 2014-15 - AO has resorted to Sections 53A read with Section 2(47) of the Act even when the piece of land was demonstrably held as stock-in-trade - As argued JDA could not be completed and hence, there was no ground for any revenue from the JD
HELD THAT:- The document indicating cancellation of JDA has been used to demonstrate that while the JDA was not implemented even in the AY 2014-15, it was eventually cancelled due to legal and operational difficulties. Thus, even if we are to confine ourselves to the facts available for the AY 2014-15, it is clear that in that year the JDA was not implemented at all and therefore, considering the authorities discussed (supra) and the position of law, there could not have been any revenue whatsoever merely on the basis of valuation by the Stamp Valuation Authority.
So far as the contention that the CIT(A) has relied upon the registered cancellation agreement without calling for the comments of the ld. AO on this fresh evidence is concerned, it is to be noted that the powers of ld. CIT(A) are co-terminus with that of the ld. AO. The cancellation agreement in question produced by the assessee was a registered cancellation agreement and the ld. CIT(A) rightly admitted and considered the same in deciding the case before him.
No useful purpose will be served in restoring the matter to the ld. AO only because of that the comments of the ld. AO were not sought on the said document whereas, the ld. CIT(A) being higher authority and being in possession of all the powers that are available to the ld. AO, has rightly considered the evidence before him which was in the shape of registered deed and there was no question of any manipulation or creation of this document afterwards. Decided against revenue.
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2024 (11) TMI 1296
Eligibility of exemption u/s 10(10) and 10(10AA) - Eligibility for full exemption - assessee being an employee of Maharashtra State Electricity Transmission Co. Ltd. which is a Public Sector Undertaking (PSU) - disallowance of excess exemption claimed by the assessee for retirement gratuity and leave encashment respectively - HELD THAT:- Perusal of the chart submitted by the Ld. AR reveals that the assessee joined Maharashtra State Electricity Board on 02.07.1981 and he retired on 30.11.2018 from Maharashtra State Electricity Transmission Co. Ltd. Out of his total service tenure of about 37 years, his tenure with Maharashtra State Electricity Board was about 24 years and with Maharashtra State Electricity Transmission Co. Ltd. was about 13 years.
Accordingly, the assessee is entitled to claim exemption for retirement gratuity and leave encashment received by him at the time of superannuation on the proportionate/prorata basis based on his employment tenure with the State Government i.e. Maharashtra State Electricity Board and his employment tenure with PSU i.e. Maharashtra State Electricity Transmission Co. Ltd. - assessee has contended before us that the balance amount of retirement gratuity of Rs. 11,49,579/- is also eligible for full exemption as it is fully covered within the limit laid down as per section 4(3) of the Payment of Gratuity Act, 1972 (as amended) - With respect to the claim of exemption for leave encashment amounting to Rs. 23,99,740/- full exemption shall be available in respect of the proportionate amount of Rs. 15,33,910/- and for the balance of Rs. 8,65,830/- the assessee shall be entitled to claim exemption to the extent of Rs. 3,00,000/- only and the remaining amount of Rs. 5,65,830/- shall be taxable.
This view finds support by the decision of Adinath Wandhekar [2024 (4) TMI 666 - ITAT PUNE]. However, the present facts need verification. Accordingly, we set aside this issue to the file of Ld. AO for verification of the details/calculation submitted by the assessee and allow the claim of exemption for retirement gratuity and leave encashment received by the assessee at the time of his superannuation on proportionate basis, as per law keeping in view his employment tenure with Maharashtra State Electricity Board and Maharashtra State Electricity Transmission Co. Ltd. The assessee shall co-operate fully before the Ld. AO and provide requisite details/explanation as may be required/called for in support of his claim.
Unexplained investments made in mutual funds u/s 69 - CIT(A) restricted the said addition for the same reason in spite of the bank statement furnished by the assessee showing the deposits and investments made during the relevant period - AR therefore urged that given an opportunity the assessee is in a position to explain the source of investments in mutual funds by filing supporting documentary evidence before the Ld. AO - HELD THAT:- As we deem it fit to restore this issue back to the file of Ld. AO to verify the claim of the assessee and if found correct delete the addition sustained by the Ld. CIT(A) by suitable modifying the assessment order. We order accordingly.
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2024 (11) TMI 1295
Deduction u/s 10AA - assessee has derived the profit of SEZ unit before depreciation and depreciation of that assessee unit - claim of the assessee is that for the purpose of claim of deduction u/s 10AA the business losses of the earlier year should not be reduced from the eligible profit - HELD THAT:- We find that now the honourable Supreme Court has decided this issue in case of Yokogawa India Ltd [2016 (12) TMI 881 - SUPREME COURT] wherein it has been held that the deduction u/s 10 A of the act is provision for deduction and the sale of deduction would be while computing the gross total income of the eligible undertaking and chapter IV of the act and not at the stage of computation of total income under chapter VI of the act.
As in case of black & Veatch consulting private limited [2012 (4) TMI 450 - BOMBAY HIGH COURT] has also held that deduction u/s 10 A in respect of eligible unit has to be allowed before setting off of brought forward depreciation and losses of non eligible units.
Same is the view expressed in case of Techno Tarp and Polymers Private Limited [2015 (12) TMI 909 - BOMBAY HIGH COURT] Appeal of the assessee is allowed.
Disallowance on delayed payment of tax deducted at source u/s 37 - HELD THAT:- We find that this amount of expenditure is incurred by the assessee being interest on late payment of tax deduction at source. We find that interest on late payment of tax deduction at source by the assessee is not shown before the lower authorities that how it has been incurred wholly and exclusively for the purposes of the business of the assessee. In fact, such interest is in infraction of the law of the provisions of the income tax act when tax deducted at source required to be deposited after collecting from third parties to the credit of Central Government is deposited late. It is penal in nature.
In the case of CIT v. Chennai Properties & Investment Ltd. [1998 (4) TMI 89 - MADRAS HIGH COURT] declared that the assessee's payment of interest u/s 201(1A) does not qualify as a business expense and cannot be seen as a compensatory payment.
The payment of interest on late deposits of TDS assessed under Section 201(1A) is not an expense solely and exclusively expended for business purposes; hence it is not deductible u/s 37(1). Even if the deduction and remittance of TDS to the government are essential components of business operations, the assessee is nonetheless liable for this interest amount. This suggests that the assessee does not have the right to spend the money on the government's behalf. The character of the interest payment is determined by the sort of tax utilised to pay it. The several decisions of the coordinate benches cited before the learned CIT – A does not hold water in view of the decision of the honourable Madras High Court specifically saying that such interest does not qualify as deductible expenditure.
Computation of setting off of the business loss of the correct some - HELD THAT:- Claim of the assessee is that the business loss claimed by the assessee in its return of income should be allowed whereas the claim of the AO is that as per the past record only the claim of business loss is available. As the amount of claim of the business loss is dependent on the adjudication process of the appeal of the assessee for earlier years, we restore this issue back to the file of the learned assessing officer to determine the available set off of brought forward business losses and then grant it to the assessee in accordance with the law. Ground number 4 is allowed with above direction.
Expenditure incurred on leasehold improvements - nature of expenditure - HELD THAT:- This ground of appeal is in consequence to the assessment and appellate proceedings arising out of the assessment year 2013 – 14 and not this impugned assessment year. In that year the claim of the assessee is that assessee has incurred total leasehold improvements expenditure out of which assessee considered as revenue expenditure spent on fixtures and the balance sum is capital expenditure. The learned assessing officer for that assessment year has considered the whole of the sum is capital expenditure and allowed depreciation at the rate of 5%. As this issue pertained to that year, the appeal of which pending before the learned CIT – A. Therefore, the learned assessing officer is directed to consider the claim of the assessee if it is already decided in favour of the assessee by the appellate authority in accordance with the law. Accordingly ground number 5 of the appeal of the assessee is allowed with above direction.
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2024 (11) TMI 1294
Assessment u/s 153A - Additions u/s 69B - assumptions and presumptions based on the loose sheet found at the time of search - HELD THAT:- The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words "may be presumed" in section 132(4) given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same. The entire case depends upon the rule of evidence. There is no conclusive presumption with regard to unsubstantiated seized material to come to the conclusion that assessee has unaccounted transactions.
In the present case, the assessee categorically denied unaccounted transactions. The AO cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong, cannot take place the material in place of evidence brought on record. AO should act in a judicial manner, proceed in a judicial spirit and come to the judicial conclusions.
AO is required to act fairly as a reasonable person, not arbitrarily and capriciously. The assessment u/s 153C should have been supported by adequate material and it should stand on its own leg. This notebook or loose sheets found during the course of search is only circumstantial evidence and not full proof evidence to sustain the addition. No addition can be made in the absence of any corroborative material. If it is circumstantial evidence in the form of loose sheets and notebook, it is not sufficient to come to the conclusion that there is conclusive evidence to hold that assessee has any unaccounted transactions. The notes in the diary/loose sheets are required to be supported by corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of AO that assessee has unaccounted transactions.
There are various loose sheets, scribblings and jottings having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets.
The seized material relied by the assessing officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a non- speaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action.
Addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting's in the absence of any corroborative material and this material cannot be considered as transactions carried on by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee.
Admissibility of statements recorded u/s 132(4) as evidence - Admission made by the assessee will constitute a relevant piece of evidence but if the assessee contends that in making the admission, he had proceeded on a mistaken understanding or on misconception of facts or untrue facts, such admission cannot be relied upon without considering the aforesaid contention.
In our opinion, the voluntary admission are not conclusive proof of the facts admitted and may be explained or shown to be wrong but they do raise an estoppel and shift the burden of proof to the person making the admission. It is to be noted that, unless shown or explained to be wrong, they are an efficacious proof of the facts admitted. Thus, the burden to prove “admission” as incorrect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction or proved sufficiently, the earlier stated facts lose their effect and relevance as binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admission will not be enough after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded was involuntary and it was made under coercion, the statement has no legal validity.
Thus, the above additions cannot be made solely based on the statements recorded u/s 132(4). See Commissioner of Income-tax v. Harjeev Aggarwal [2016 (3) TMI 329 - DELHI HIGH COURT]
The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondent- assessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands.
A sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments.
Balance addition contention of the ld. D.R. is that this is based on the statement recorded u/s 132(4) and also evidence inventorized as A/MI/4 page no.1 to 24 which has been seized at the premises of the assessee - It is an agreement for Joint Development Agreement and sharing of shops/apartments entered into on 26.11.2012 between Mr. K.L. Chayabba and Mr. Mohammed Ali in one part as owner of the land and Mr. Mohammed Ibrahim, the present assessee in his individual capacity as a developer of the property for constructing the residential cum commercial project “Rose Garden” with a super built up area of 39,816 sq.ft. at Deralakatte, Mangalore. As per this agreement, the assessee paid a sum of Rs. 10 lakhs refundable security deposit, out of which sum of Rs. 4 lakhs was by cash. This was admitted by the assessee in section 132(4) statement recorded on 31.8.2017 and also on 30.10.2017. Further, it was admitted by assessee in sworn statement recorded u/s 131 of the Act on 5.9.2017 but however, the assessee was not adhered to his statement while filing return of income.
This addition is based on only unsubstantiated statement recorded u/s 132(4) of the Act and 131 of the Act without any supporting evidence as discussed in earlier paras. we are of the opinion that addition cannot be made on the basis of statement recorded u/s 132(4). Assessee appeal allowed.
Addition u/s 69 of the Act placing reliance on the seized material at the residence of assessee, which is in the agreement for purchase of non-agricultural property - As per agreement, total consideration was Rs. 20 lakhs and the assessee has paid Rs. 5 lakhs on the date of agreement. The assessee has confirmed the payment vide statement u/s 132(4) of the Act and also statement recorded u/s 131 - HELD THAT:- In this case, addition was based on the statement recorded u/s 132(4) & 131 of the Act on various dates from assessee. There is no corroborative material to suggest that this is unaccounted payment made by the assessee in the assessment year under consideration. The assessee has been assessed to tax and offered the income in the assessment year under consideration on the basis of presumptive income declared u/s 44AD of the Act. The seized material relied by the AO i.e. A/MI/06 is not self-sufficient to sustain the addition. More so, the revenue authorities have not examined the parties concerned who has received the payment to prove conclusively that there was an actual payment made by assessee, which was undisclosed by the assessee in his books of accounts. The evidence brought on record by the department is not enough to fasten additional tax liability on the assessee.
The department without examining Mrs. Gulzara Banu had came to a conclusion that there was unaccounted payment made by assesse by way of cash to her. In our opinion, this addition is based only on conjectures and surmises and not based on corroborative material. As such, we are not in a position to sustain the addition. Further, the ld. AO has failed to establish live link between the seized material and the statement of recipient who has received this payment. There is no conclusive presumption to say that actual payment has been passed to Mr. Gulzara Banu unless he has confirmed this payment and there after given a cross examination to the present assessee so as to make addition. Hence, we delete the additions.
Addition made on the basis of 26QB Challan, wherein it was showing the TDS made on the immovable property transaction u/s 194IA - This is the project by name Sita Plaza Developed Mr. Manohar B. Shetty, joint development agreement with Hindusthan Infrastructure Developers (HID) wherein the present assessee Mohammed Ibrahim is the Managing Partner of (HID). In our opinion, the transaction took place in the hands of firm in the name of Hindusthan Infrastructure Developers (HID) cannot be brought to tax in the hands of the present assessee who is only the managing partner of the said firm (HID) since the present assessee and that firm are two different taxable units and each one is distinguished and separate assessable unit for the purpose of Income Tax. Accordingly, this impugned amount cannot be taxed in the hands of present assessee in his individual capacity. Accordingly, the addition is deleted.
Addition under the head “income from other sources” - There is a sale agreement dated 17.9.2016 which shows the payment. However, the contention of the assessee is that the assessee has offered the profit arose from this transaction in subsequent assessment years as soon as the project is completed, which is required examination. Accordingly, the issue is remitted to the file of ld. AO for fresh consideration to verify whether this income is subject to tax in any subsequent assessment year.
Addition towards bogus loan based on the seized material marked - This addition has been made only on the basis of statement recorded u/s 132(4) of the Act which is unsubstantiated document without verifying the concerned persons involved therein i.e. Mr. Abdul Saleem GH. The addition based only on the basis of sworn statement recorded u/s 132(4) of the Act cannot be based for addition without any corroborative material as discussed in earlier para of this order. This addition is deleted.
Addition u/s 69 - assessee has deposited to various bank accounts during demonetization period - As it was submitted that assessee had sufficient withdrawals from various bank accounts and past savings which arise out of agricultural income. Hence, the addition cannot be made. The order of the ld. AO is ex-parte. Before ld. CIT(A), assessee has not placed necessary evidence to explain the source of deposits whether it is from agricultural activities or from earlier savings/past withdrawals. It is the duty of the assessee to explain the source for deposit of said amount of Rs. 63.27 lakhs during the course of demonetization. Accordingly, we remit this issue to the file of ld. AO to examine the same.
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2024 (11) TMI 1293
Rejection of books of accounts - AO had pointed out defects in the books of accounts of the assessee, which are again thoroughly discussed by the Ld. CIT(A) - HELD THAT:- Issue regarding rejection of books of accounts has been dealt and deliberated by the CIT(A) at length and has noted that in light of various defects / deficiencies / irregularities a/w assessee’s evasive approach towards explanations sought by the Ld. AO, the allegation that the rejection of books was done in arbitrary manner does not hold any ground.
Such observations of Ld. CIT(A) are worth accepting, for the reason that in absence of requisite details or non-maintenance of certain prescribed records necessary to find out the true and fair picture of the books of accounts, it is not possible for the Ld. AO to work out the correct profit of the assessee. Accordingly, the rejection of books u/s 145(3) on account of dissatisfaction of the AO was justified, which has led the Ld. AO to estimate the profit of the assessee. In view of such observations, ground no. 1 of the present appeal of the assessee stands rejected.
Estimation of profit at 10% before interest and depreciation which was scaled down by the Ld. CIT(A) to 6% - we find force in the contention of the Ld. AR that the estimation should be on a logical basis, might be on the basis of comparable instances and in case no comparable instances available then the best ratio to be adopted should be the past performance of the assessee itself.
As relying on Action Electricals vs. DCIT [2002 (7) TMI 64 - DELHI HIGH COURT] in absence of any comparative instances of similar assessee’s in the same line of business, dehors any explanation, reasoning supported with evidence to show as to how the profit of the current year is low, any other factor brought to our knowledge by the either side in support of their contentions, we are of the considered opinion that the past history of the assessee herself would be best indicator / major / benchmark to estimate the profits, particularly in a situation, wherein the assessee is unable to produce proper books and evidence before the Ld. AO. Accordingly, in the present case, we find it appropriate to estimate the profit of the assessee at a percentage worked out on the basis of preceding 3 years profit of the assessee herself. For this limited purpose only, the issue raised in ground no. 2 & 3 by the assessee are restored back to the files of Ld. AO to recompute the taxable income of the assessee.
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2024 (11) TMI 1292
Taxability of income in India - Taxability of Management Service Fees - “royalty” receipts treatment under Article 12(4) of India-Netherland DTAA - ‘services fees’ are charged as a percentage of turnover carried out by VOIPL during the year without any mark up - Indian entity/VIOPL is totally dependent upon the foreign enterprise for its experience in industrial, commercial and scientific field - assessee’s main contention had been that, the services rendered in pursuance of the ‘service agreement’ are not in the nature of ‘FTS’ under the DTAA, because there is no “make available” of any technical knowledge, experience, skill, know how or process, etc
HELD THAT:- As in own case (A.Y. 2003-04) [2012 (6) TMI 483 - ITAT, CHENNAI], (A.Y. 2009-10) [2016 (11) TMI 1249 - ITAT MUMBAI] and (A.Y. 2017-18) [2023 (10) TMI 1181 - ITAT MUMBAI] we hold that none of the services provided by the assessee in the term of "service agreement" falls within the scope and ambit of "royalty" as defined in Article 12(4) of the DTAA. 16. Here again, Management services fees charged is an allocation of cost which is without mark-up, hence it has been stated that the same being in nature of reimbursements do not constitute Royalty as per India-Netherlands Double taxation avoidance agreement (DTAA').
Once this issue consistently have been allowed in favour of the assessee, holding that none of the services provided by the assessee in terms of service agreement falls within the scope of Royalty as defined in Article 12(4) of the India Netherlands DTAA and also that the payments received by the assessee are in the nature of reimbursement without any mark-up and therefore, the same cannot be held to be ‘Royalty’ and not taxable in India. Further, Management Services if represents the allocation of the actual cost incurred which has been certified by the auditors and the Tribunal has held that Management Services Fee are not taxed in India. Accordingly, this issue is decided in favour of the assessee.
Short grant of tax deducted at source - As it has been stated that in the return of income filed for A.Y.2017-18, assessee had claimed credit of TDS of Rs. 3, 89, 05,708/-, however, the ld. AO has not granted any credit, despite the fact that the same amount appearing in form no. 26AS. Accordingly, we direct the ld. AO to examine the issue and grant appropriate credit of tax after verification.
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2024 (11) TMI 1291
Non-payment of interest on refund u/s 18(4) of the Customs Act 1962 on account of finalization of provisional assessment - on completion of the specified quantity of import under the contract, the provisional assessments were finalized and an amount was ordered to be refunded - No interest was paid to the appellant on such delayed payment which is payable as per Section 18(4) read with Section 27A of the Customs Act 1962
HELD THAT:- From the Section 18(4) read with Section 27A of the Customs Act 1962, we observe that upon finalization of provisional assessment, if there is a refund liable to be paid, then it is to be paid within 3 months from the date of final assessment. If there is any delay in payment of the refund, then interest is liable to be paid for the delay in refund.
We observe that this section does not talk about filing of the refund application. As per section 18(4), if the refund is not paid within 3 months from the date of final assessment, then interest is payable. Accordingly, we hold that the department is liable to pay interest for the delay in payment of refund, beyond 3 months from the date of final assessment. Thus, allow the appeal filed by the appellant.
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2024 (11) TMI 1290
Rejection of Application filed by Petitioner for rectification/change in the name of the Respondent No. 4 Company - Section 16 (1) (b) of the Companies Act, 2013 - HELD THAT:- Section 16 of the Companies Act gives the power to the Central Government through the Office of the concerned Regional Director [hereinafter referred to as “RD”] to rectify the name of a company. Sub-Section (1) of Section 16 of the Companies Act contemplates two circumstances under which the name of a company can be rectified. If such name resembles the name of an existing company or is identical to the name of an existing company, the RD may suo moto under the provisions of Section 16 (1)(a) of the Companies Act issue directions to a company to change its name, which directions require compliance within three months.
A Coordinate Bench of this Court in a case CGMP Pharmaplan (P) Ltd. v. Regional Director, Ministry of Corporate Affairs [2010 (7) TMI 272 - HIGH COURT OF DELHI] has while explaining this provision, relied on a Judgment of the Division Bench in Montari Overseas Ltd. v. Montari Industries Ltd. [1995 (12) TMI 268 - HIGH COURT OF DELHI] to explain that the powers of a Civil Court while examining and determining in a passing off action, if one name is confusingly deceptive or similar to another name, is independent of the jurisdiction of the Regional Director in respect of registering of a company’s name. It was however held that the Regional Director cannot approach the case, as it would in a trademark dispute.
In the facts of the present case, both the parties have claimed ownership and rights over the mark ‘Panchhi’ and have disputed each other's submissions. Admittedly, both Petitioner and Respondent No. 4 form part of the same extended family. Both are also engaged in legal proceedings in various fora including against each other in relation to the impugned trademark and other intellectual property related rights. The Impugned Order refers to these disputes, however, it goes on to give a finding of ownership on the mark ‘Panchhi’, which cannot be sustained.
In the present case, the parties are two entities which are from the same lineage, which are embroiled in disputes over the intellectual property of a brand. The Regional Director while deciding an Application under Section 16 of the Companies Act cannot undertake an examination of the marks as the Intellectual Property Division of a Court would. It cannot also decide the ownership of a mark while deciding such an Application under Section 16 of Companies Act, where these are disputed contentions. The same is not the subject matter of jurisdiction of the Regional Director under the Companies Act.
The Impugned Order is set aside - Petition disposed off.
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2024 (11) TMI 1289
Entitlement to raise an objection to the Resolution Plan - Whether the appellant, GNOIDA, is to be treated as a financial creditor? - HELD THAT:- The appellant, GNOIDA, will be entitled to raise all claims in this regard in accordance with law and in terms of the provisions of the Insolvency and Bankruptcy Code, 2016.
Recording the aforesaid, the appeal is dismissed.
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2024 (11) TMI 1288
Maintainability of Section 9 application - rejection due to pre-existing disputes - operational debt - whether there is any infirmity in the impugned order passed by the Adjudicating Authority dismissing the Section 9 application on the ground that the operational debt claimed by the Appellant was embedded with pre-existing disputes?
HELD THAT:- It is clear from the agreement arrived at the meeting held on 26.01.2021 that the Operational Creditor had agreed to replace the defective pump sets and meet the standards as per the tender conditions which is a clear admission on their part for having been unable to discharge their obligations up to the expectations of the tender specifications. The Appellant has however contended that these minutes indicate that the dispute had come to an end and stood amicably settled - merely because a meeting was held between the two parties to overcome the shortcomings in the meeting the obligations of supply and installation of pump-sets cannot be taken to imply that all disputes between the parties had subsided without the parties being at ad idem on whether the obligations stood discharged on a mutually satisfactory basis.
The Adjudicating Authority has concluded at paragraph 7 of the impugned order that the dispute which existed between the Operational Creditor and the Corporate Debtor prior to the demand notice about the quality of the pump sets supplied requires detailed inquiry and investigation by the proper forum and that the Adjudicating Authority is not that forum - the Adjudicating Authority did not commit any error in returning this finding keeping in mind that IBC bestows only summary jurisdiction upon the Adjudicating Authority. Once plausibility of a pre-existing dispute is noticed, it is not required of the Adjudicating Authority to make further detailed investigation. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court.
It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. There was no requirement for the Adjudicating Authority in the present case to go under the skin of dispute and therefore the Adjudicating Authority rightly held that the Section 9 application was not maintainable in the present factual matrix.
The defence taken by the Appellant that the Corporate Debtor was trying to manufacture disputes fails to succeed. The defence raised by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. The Adjudicating Authority has therefore correctly noted that the conditions laid down in Section 9 having not been fulfilled, the application deserved to be rejected. There are no good reasons to disagree with the findings of the Adjudicating Authority.
The Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant - There is no merit in the Appeal - Appeal is dismissed.
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2024 (11) TMI 1287
Re-constitution of the Committee of Creditors (CoC) by excluding Appellants - misinterpretation of provisions of Section 140 of the Indian Contract Act - Application filed by the Central Bank of India, Appellants were not heard - violation of principles of natural justice - whether the Appellant are the Financial Creditor of the Corporate Debtor and they are entitled to be part of the CoC as has been allowed by the RP, which inclusion has been set aside by the Adjudicating Authority by the Impugned Order?
HELD THAT:- The plain language of Section 5(8)(i) clearly indicates that any of the Guarantee or indemnity for any of the items referred to in sub-Clauses (a) to (f) may also be Financial Debt. In event, there is any “amount of any liability in respect of”. Thus, by giving Guarantee to a transaction referred to in (a) to (i) will not be covered by Financial Debt unless there is any liability in respect of the Guarantee. Thus, Guarantee given by a Guarantor plain and simple cannot be basis for a Financial Debt, unless there is an amount of any liability in respect of such Guarantee. Thus, a Financial Debt will arise only when in respect to Guarantee as covered by Section 5(8)(i) any liability has arisen which is the Statutory Scheme of the IBC - Personal Guarantors claim which obviously will be ₹10 Crore each is accepted the Bank’s voting share shall be reduced to only 20% and 3 Guarantors shall be given 20% vote shares each and 1 Guarantor against whom ₹25 Lakhs have been realised, his claim shall be entitled to be accepted, and he shall also be entitled for voting shares of 2.5%. The above interpretation shall lead to reducing the Bank’s share to minority, which cannot be the scheme of IBC.
The Statutory Scheme is thus clear that for accepting transaction as a Financial Debt, in addition of establishing a Guarantee or indemnity liability in respect of Guarantee has also to be established - The Personal Guarantor while giving the Guarantee for Guarantee of repayment to the loan has guaranteed for repayment of the loan, in event, principal failed to make a payment to the Guarantor. Thus, Guarantor in the present case has to make payment and performance of all that is liable for is payment to the Bank none-else.
Personal Guarantors who have not made any payment in discharge of their Guarantee given to the Central Bank of India cannot be accepted as Financial Creditor of the Corporate Debtor, nor any voting share can be allocated to them in the CIRP of the Corporate Debtor.There are no error in the Order of the Adjudicating Authority holding that Appellants who have not made any payment to the Creditor cannot be treated to be a Financial Creditor. There is no infirmity in the Order passed by the Adjudicating Authority allowing I.A. No. 294/2020 filed by the Bank.
Appeal dismissed.
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2024 (11) TMI 1286
Service of demand notice - whether petition filed under Section 95 was premature? - appellant argued that period of service of demand notice has to be counted in terms of Section 95(4)(b) of the Code and the period mentioned in the guarantee agreement should not be taken into consideration - HELD THAT:- The facts are not in dispute that a personal guarantee deed was executed on 27.07.2011 amongst the Appellant as a lender, SPIL as the Borrower and Respondent No. 2 as the Guarantor. Clause 3 of the said agreement categorically lays down that the Guarantor would pay the amount of ICD of Rs. 1 Cr. 75 Lac to the lender within 60 days from the date of demand notice served by the Lender requiring the payment. Therefore, from the plain reading of this clause it is apparent that the liability to pay by the Guarantor to the lender shall arise only in two circumstance firstly, on the service of demand notice and secondly, within the period of 60 days from the receipt of demand notice. In fact the time was provided in the agreement to the guarantor to arrange payment of the lender to avoid legal complications. The right to file the petition under Section 95 thus would not arise after 14 days of service of the notice in view of the specific agreement between the parties that after the demand notice is served, 60 days time shall remain available with the guarantor for discharging his liability whereas in the present case the demand notice is dated 01.11.2021 and the application was filed on 01.12.2021, just after the expiry of one month, which is contrary to clause 3 of the agreement.
It is obvious from the dates because the petition under Section 9 of the Act was filed by Respondent No. 1 on 30.11.2021 and when the case was adjourned to 03.12.2021 for orders, the petition under Section 95 was filed on 01.12.2021 as a result of which the petition filed under Section 9 had to be adjourned by the Hon’ble Bombay High Court.
There are no error in the findings recorded by the Tribunal for not only allowing the application of the Respondent No. 1 but also dismissing the application filed under Section 95 of the Code by the Appellant and imposition of cost.
There are no merit in the present appeal and hence, the same is hereby dismissed.
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2024 (11) TMI 1285
Taxability of service tax on transporting goods by road itself - appellant has employed GTAs for the purpose, but in those cases the appellant has discharged the service tax liability under Reverse Charge Mechanism (RCM) and has taken credit of such service tax paid in their Cenvat account at appropriate percentage in terms of Rule 6 (3) of Cenvat Credit Rules, 2004 - HELD THAT:- Since admittedly the appellant is neither the GTA, nor the Courier agency hence, the activity of transportation of goods by road by them is well covered under the aforesaid provision. The amount in question is an amount towards facilitation of freight and insurance by the appellants themselves. The said perusal of section 66D (p) in itself is sufficient to hold that the service tax on the said amount has wrongly been demanded. The order to that extent is therefore liable to be set aside.
Demand of reversal of Cenvat credit on the services of hiring of water tankers, mechanized canteen cleaning, catering services - Section 44 of the Act requires every factory owner to make suitable arrangements for sitting of all workers obliged to work in standing position and even for all other workers engaged in a particular manufacturing process or working in a particular room. Section 46 of Factory Act requires the existence of canteen in the factory and the cleanliness thereof. In the light of the above discussed statutory mandate the services of hiring of water tankers having mechanized canteen cleaning and that of catering services, to our opinion are the eligible input services. Hence we hold that the Cenvat credit has wrongly been denied to the appellant.
In the present case the services like hotel accommodation etc. were for the personnel called for imparting training to the employees of the appellants. Hence it is clear that services were not meant for personal use of the employee. We hold that the credit of these services has been rightly availed.
Meaning of terms “Includes”, ‘in relation to’ and ‘such as’ referred in view of the following Decisions in Bakelite Hylam [1998 (7) TMI 92 - SUPREME COURT], Azad Coach Builders [2006 (2) TMI 171 - SUPREME COURT] and CCE v. JK Cement Works [2009 (1) TMI 146 - CESTAT NEW DELHI], TTK Pharma Ltd v. CCE [ 1992 (8) TMI 183 - CEGAT, NEW DELHI] respectively.
Credit on short term accommodation/hotel services was with respect to the visits in factory for inspection and witnesses of the test on the goods ordered by the customers for giving certificate of acceptance. Hence, the expenditure was directly related to the manufacture of goods and rendering of services by the appellant. Resultantly, the denial of availment of Cenvat Credit is not sustainable. The order to this extent is also liable to be set aside. In the light of entire above discussion the Order in Original/ Order under challenge is set aside. Consequent thereto the appeal is hereby allowed.
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2024 (11) TMI 1284
Service tax on amounts received by an employee from the employer on premature termination of contract of employment - HELD THAT:- We find that the issue is no longer res integra in view of the decision of GE T & D INDIA LIMITED (FORMERLY ALSTOM T & D INDIA LIMITED) VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE [2020 (1) TMI 1096 - MADRAS HIGH COURT] as followed in M/S HCL LEARNING LIMITED [2019 (12) TMI 558 - CESTAT ALLAHABAD] wherein held the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit. The definition in clause (e) of Section 66E is not attracted as the employer has not 'tolerated' any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard.
Though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of noncompete. Notice pay, in lieu of sudden termination however, does not give rise to the rendition of service either by the employer or the employee. No merit in the appeal of jurisdictional Commissioner of Service Tax which is dismissed.
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2024 (11) TMI 1283
Demand of service tax by invoking extended period of limitation - technical knowhow falls under the category of "Consulting Engineer Service" and is liable to service tax under reverse charge mechanism, invoking section 66A of the Finance Act, 1994 - HELD THAT:- We find that the impugned order has not examined the aspect relating to payment of duty and availment of credit thereon. The impugned order takes note of service tax paid by the appellant and also the fact that the credit of same has been availed as can be seen from impugned order. Therefore, it is apparent that there is no dispute that whatever service tax was to be paid by the respondent would have been available as cenvat credit to them instantly. In these circumstances, invocation of extended period of limitation cannot be sustained. See Nayara Energy Ltd. [2023 (12) TMI 252 - CESTAT AHMEDABAD] and Chiripal Polyfilms Ltd. [2021 (3) TMI 1345 - CESTAT AHMEDABAD]
Thus it can be held that there was no malafide or intention to evade on the part of the respondent and therefore, extended period of limitation could not have been invoked. Consequently no penalty u/s 11AC could be imposed. The appellant has already discharged the duty liability.
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2024 (11) TMI 1282
Classification of services received from overseas service providers - Determination of place of provision of such services - services received by the respondent from the overseas service providers is "Online Information and Database access or retrieval services" OR "Market Research Services"
HELD THAT:- The activities done by the Foreign Service provider are merely in the nature of the data collection activities with no research or interpretation of the data. The raw data collected in terms of questionnaire designed by the respondent is supplied back to the respondent in the raw form. Research on the said data is done by the respondent.
It is like an architect outsourcing services of a surveyor to map a piece of land as input for the architectural services that he may provide. Merely because survey is necessary input for providing architectural services the outsourced activity of survey cannot be classified as architectural service.
Similar is the case of a tour operator hiring buses. While the service provided by tour operator is that of tour operator, the service availed by hiring buses does not become tour operator service although it is a necessary component of tour operator service.
No merit in holding that foreign service provider is providing market research service. The issue if the said service was classified as ‘Online Information and Data Basis Access or Retrieval Service’ or not is not relevant in this background. The charge made in the show cause notice seeking to classify the service of data collection as market research cannot survive.
Invoking larger period of limitation for issue of show cause notice - As on merits, the demand has not survive before Commissioner (Appeals) as well as Tribunal and therefore, it cannot be said that the interpretation of respondent was malafide or with intent to evade payment of duty. In these circumstances, extended period could not have been invoked to raise this demand show cause notice.
As claimed by the respondent that the entire service tax if any payable on the services received from Foreign Service Provider would have been available as cenvat credit to the respondent. In that scenario, the entire exercise would have been Revenue neutral. This would be another reason to say that there would have been no intention to evade payment of duty. Revenue appeal dismissed.
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2024 (11) TMI 1281
Service tax on amounts received by the Local Cable Operators (LCOs) - invocation of extended period of limitation - proof of suppression of material on the part of the appellant
HELD THAT:- Department has not been able to establish the suppression of material on the part of the appellant who is only a small service provider. Further, the appellant has filed all the relevant documents and has not concealed any information from the department so as to invoke the extended period of limitation.
It has been consistently held by the Courts in various decisions that in order to invoke extended period, there must be some positive act on the part of the party to establish either wilful mis-declaration or wilful suppression - mis-statement or suppression of facts must be wilful and deliberate.
As decided in Chemphar Drugs & Liniments [1989 (2) TMI 116 - SUPREME COURT] that “Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability”.
Thus, the invocation of extended period of limitation is not justified in the present case and therefore hold that the entire demand is barred by limitation. We are not going into the merits of the controversy as held in the case of Commissioner of Customs vs. B.V. Jewels[2004 (9) TMI 104 - SUPREME COURT]
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2024 (11) TMI 1280
Classification of services - works contract services or Construction of Residential Complex service - valuation of services - values of sale of land and construction of framework were clubbed and abatement of 70% was deducted in order to arrive at the value of taxable services - clause (b) of section 66E of the Finance Act, 1994 - liability of service tax on the amount retained by the appellant upon cancellation of the booking by the buyer on which tax was paid earlier as part of works contract services.
HELD THAT:- The revenue has not disputed that the appellant has used own goods while carrying out the construction activities. It is also found that another aspect of the construction of villa, which relates to construction of balance works, was classified as works contract services and accepted by the revenue in impugned order. The appellant has vehemently pressed that the construction of balance works in indispensable part for construction of villa and which submission has not been controverted by the revenue with plausible explanations or contemporary evidences. It is also found that the revenue has not disputed that the activity of constructing framework was indivisible in nature with respect to goods and services and value of goods was not separately measured by the appellant.
The adjudicating authority has deemed the transaction as that of sale of villa instead of construction whereas the adjudicating authority has classified the transaction under clause (b) which deemed “construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority”. Needless to elaborate that the very applicability of clause (b) would also require services by way of construction of a complex or building and sale thereof before completion of construction, which apparently and unequivocally transpires from the plain language of clause (b). If the transaction, according to the adjudicating authority, is limited to that of sale of villa and not involving agreement to construct the same, the same cannot fall within the scope of clause (b) whereas the adjudicating authority has classified the transaction under clause (b) - the arguments and averments made by adjudicating authority in the impugned order to declassify the transactions under works contract and to classify them under the construction services are self-contradictory as well as preposterous.
In view of decision of Supreme Court in case of Larsen & Toubro v. State of Karnataka [1992 (11) TMI 254 - SUPREME COURT], it is abundantly clear that the sale of a building prior to completion of construction constitutes a works contract and the issue is no more res integra and thus contention made by adjudicating authority in impugned order to draw distinction between sale of villa prior to completion of construction and agreeing to construction activity is unacceptable and contrary to settled position of law - there are force / merit in the argument placed by Shri Rahul Patel that amendment in rule 2A retrospectively by way of section 129 of Finance Act, 2017 shows the clear intention of the government to align the valuation machinery with the law settled by the Supreme Court.
Inclusion of value of land in the value of construction services by the revenue - HELD THAT:- Since there is no contention in the impugned order or allegation in the show cause notice to re-determine the value of works contract services under rule 2A to include the value of land, value determined by the appellant under rule 2A shall be accepted as final. However, it is found that the appellant has raised various grounds and substantiated with the help of logical interpretation that the value of land cannot be included in the value of works contract under rule 2A - there are force in the clarity brought on record by him that the service tax cannot be extended to the value of land which is not a necessary an integral element of works contract like goods. Since the land is subject matter of State levy, same cannot be deemed as part of the service so defined in section 65B(44) of the Act. Thus, it is necessarily transpiring that the works contract is comprised of only two elements i.e. ‘goods’ and ‘service’ and does not include ‘land’ as integral part of it. However, this may not have any restriction to combine the works contract along with land under commercial arrangement and if that has been done the arrangement needs to be vivisected so as to separate the works contract from the land. It is a settled position of law that where the tax is imposed on the subject matter the measure for levying such a tax can only be the value of such subject matter.
Though the works contract is a different and distinct specie of contracts and distinct from a contract for service simplicitor, measure of tax is considered divisible so as to ensure that the tax is imposed only on that value which attributes to the powers available with respective tax authority. The Supreme Court has categorically held that the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be stuck down. This necessitates a complete segregation of the elements involved in the works contract to ensure compliance with constitutional mandates.
Any reference to the measure of taxable event shall be on the basis of measure of works contract by excluding the actual value of goods involved or be on the basis of measured as per fictional machinery provided in rule 2A(ii), however measure of levy cannot solely depend upon the measure of a bundle comprising works contract and land - it is not a case of revenue leading to overvaluation of land by the appellant. Accordingly, the value agreed upon with the buyer with respect to land and indicated in the agreement shall be the value of land required to be separated from the works contract. Accordingly, there are force in the argument that the land value is not includable in the value of works contract irrespective of and regardless of the option exercised by the appellant for valuation of works contract services under rule 2A.
Re-determination of the value by the Revenue concerning the construction of balance works by treating them as finishing services under Rule 2A(ii)(B) instead of Rule 2A(ii)(A), as adopted by the appellant - HELD THAT:- The transaction of constructing balance of works are in relation to construction of villa and which is classified as works contract. Construction of framework and construction of balance works collectively resulted into construction of villa which is a residential dwelling for the buyer. Thus, it is found that the treatment available to the construction of framework shall be the treatment for construction of balance work. Since it is already decided that the construction of framework is works contract and the appellant has classified them as original works under rule 2A(ii)(A), construction of balance works deserves classification under same machinery and not under the rule 2A(ii)(B).
The construction of balance works merits classification under rule 2A(ii)(A) as per its plain language - it is observed that clause (B) of Rule 2A(ii) expressly begins with the words, "in the case of works contract, not covered under sub-clause (A)," which implies that clause (B) applies exclusively to works that do not qualify under clause (A). Given that the construction of balance works, even if involving finishing services, qualifies as "original works," their valuation must be determined under clause (A) and not clause (B) - the contention of the Revenue in the show cause notice and the impugned order, which seeks to determine the value under Rule 2A(ii)(B), is incorrect. Accordingly, the demand for service tax amounting to Rs. 1,53,07,940/- based on the higher rate of valuation under clause (B) is unsustainable and is liable to be set aside.
Demand of service tax amounting to Rs. 3,29,637/- confirmed in relation to cancellation charges - HELD THAT:- The Revenue has treated the retained amounts as consideration for agreeing to an obligation, classifiable under clause (e) of Section 66E, and quantified the tax liability on the portion exceeding the value determined under works contract services at the rate of 40%. Since the Revenue itself, as evident from the facts stated in the show cause notice, has deducted the amounts on which service tax was paid under works contract services by the appellant, it follows logically that the amounts now subject to the impugned demand represent retentions from the payments originally received towards works contract services. Consequently, these amounts cannot simultaneously be treated as consideration for a new and distinct service provided by the appellant under clause (e) of Section 66E of the Act - the cancellation charges, even if considered distinct from their prior taxation under works contract services, do not fall within the ambit of clause (e) of Section 66E of the Act. Accordingly, the demand for service tax on cancellation charges is unsustainable and is liable to be set aside.
Limitation for issuance of the show cause notice - HELD THAT:- The period covered by the notice is 2015-16 to June 2017, while the show cause notice was issued on 22-12- 2020. Additionally, we find that the ST-3 return for the period ending June 2017 was filed on 27-09-2017. Thus, the entire demand is raised under the extended period of limitation. The Revenue has invoked the extended period on the grounds of alleged suppression of facts by the appellant - the appellant has clearly disclosed the amounts in Form ST-3 under the category of works contract services. These facts unequivocally demonstrate that the Revenue was aware of the appellant’s business activities and the classification adopted - it would be inappropriate to attribute serious allegations of suppression of facts or an intent to evade payment of tax to the appellant - the invocation of the extended period of limitation is unsustainable.
The impugned order and the demands arising from the impugned order are legally as well as factually incorrect and unsustainable and hence set aside - Appeal allowed.
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2024 (11) TMI 1279
Maintainability of appeal - monetary limit invloved in the appeal - Activity amounting to manufacture or not - HELD THAT:- In terms of National Litigation Policy, this appeal is required to be dismissed on this count alone.
The issue involved in this case is as to whether activity undertaken by the appellant amounts to manufacture or not. In case it amounts to manufacture, the appellant would be required to pay Excise Duty of Rs.8,57,549/- as confirmed by the Adjudicating Authority.
It is found that the Commissioner (Appeals) has given a very detailed findings and has made a considered decision to allow the appeal filed by the respondent. There are no reason to interfere with the same.
The appeal filed by the Revenue is dismissed.
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