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2025 (2) TMI 37
Revision u/s 263 - CIT directing the AO to tax the interest on enhanced compensation u/s 56(2)(viii) and 57(iv) - Addition being interest on enhanced compensation on acquisition of agriculture land u/s 28 of Land Acquisition Act, 1894 claimed as exempt in return filled - AO also held that a further amount received by the assessee as enhanced compensation for land acquired under LAA, was exempt from tax u/s 10(37)
HELD THAT:- The language in section 56(2)(viii) and 145B(1) are plain, simple and unambiguous and that the correct legal position is that the interest received during the year on enhanced compensation under section 28 of the Land Acquisition Act, 1894 is exigible to tax u/s 56(2)(viii) r.w.s 145B(1).
Assessee’s claim of the same as exempt u/s 10(37) of the Act is unsustainable as the provisions of section 10(37) deals with ‘compensation’ only and not “interest on compensation or enhanced compensation”.
Respectfully following the High Court’s decisions of Inderjit Sodhi [2024 (4) TMI 408 - DELHI HIGH COURT] and Mahender Pal Narang [2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] we hold that the ld. PCIT order to recompute the interest on enhanced compensation in accordance with section 56(2)(viii) r.w.s. 145B(1) and allowing deduction u/s 57(iv) needs no interference. Grounds 1 and 2 raised by the assessee are, accordingly, dismissed.
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2025 (2) TMI 36
Exemption u/s 11 - accumulation and application out of accumulations - addition and disallowance of unspent accumulation u/s 11(2) treated as deemed income u/s 11(3) - HELD THAT:- As in the facts of the present case the provisions contained in Section 11(3)(a) read with Section 11(3)(i) of the Act would get attracted since the accumulated amounts were ‘utilised’ for the mains objects [during the preceding previous years].
INR.23,62,687/- and INR.30,64,418/- were accumulated during the Assessment Year 2007-08 and 2008-09, respectively. On the other hand accumulation of INR.31,68,250/- and INR.21,60,433/- were applied during the Assessment Year 2009-10 and 2011-12, respectively and therefore, the aforesaid amounts could have been brought to tax in the hands of the Appellant during the Assessment Year 2009-10 and 2011-12, respectively, as per the provisions contained in Section 11(3)(a) read with Section 11(3)(i) of the Act as interpreted in Escorts Heart Institute & Research Centre[2012 (12) TMI 611 - DELHI HIGH COURT]
We set aside the order passed by the CIT(A) and direct the Assessing Officer to reduce the addition by the aggregate amount of accumulated income utilized in the Assessment Years 2009-2010 and 2011-2012 after carrying out necessary verification of the assessment records for the Assessment Years 2009-10 and 2011-12.
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2025 (2) TMI 35
Allegation of Bogus transactions through commodity trading - Addition on account of Client Code Modification relating to commodity trading - CIT(A) deleted addition - HELD THAT:- Report of the SFIO and DDIT (Inv.), which are the cornerstone of reopening of assessment u/s. 147 of the Act for all the three years, which viz, A.Ys 2012-13, 2013-14 and 2014-15 do not in any manner establish or refer to any wrong doing or illegal activity of the assessee either through client code modification or in any other mode or manner.
AO has further observed that through cogent evidence, the assessee was able to establish that its own funds were utilized to conduct transactions on NSEL platform and the profits from such transactions have already been offered to tax.
Thus, no valid reason to interfere with the decision of FAA qua the deletion of additions made on account of Client Code Modification. Grounds are dismissed.
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2025 (2) TMI 34
Revision u/s 263 - addition u/s 68 - HELD THAT:- Tribunal, thereafter, vide its order passed in [2022 (10) TMI 1131 - ITAT RAIPUR] allowed the appeal of the assessee company and set-aside the order passed by the Pr. CIT u/s. 263 and restored the order passed by the A.O u/s. 143(3) of the Act wherein as difficult to agree with the DR that there was no enquiry conducted by the AO by putting any specific question to the assessee as to the treatment given to the interest. As a matter of fact, the reason for the difference in the amount as per Form 26AS and ITR was due to the interest received from the banks that was duly accounted and considered in the financial statements of the company and was adjusted against the project expenditure.
The very fact that pursuant to the scrutiny when the AO proposed charging the interest amount received to tax, the very same explanation was offered by the assessee and was accepted by the AO. We are, therefore, of the considered opinion that it is not a case of no enquiry and as a matter of fact, it was specifically brought to the notice of the AO that the interest earned was adjusted against the project expenditure
We find substance in the claim of the AR that now when the very genesis of the impugned addition made by the A.O u/s. 143(3) r.w.s. 263 of the Act, dated 28.12.2018 i.e. the order passed by the Pr. CIT u/s. 263 of the Act, dated 30.03.2018 had been quashed and does no more survive, therefore, the impugned order passed by the A.O u/s. 143(3) r.w.s. 263 has to meet the same fate and is liable to be quashed. We, thus, in terms of the aforesaid observations, set-aside the order of the CIT(Appeals) and vacate the addition made by the A.O vide his order passed u/s. 143(3) r.w.s. 263.
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2025 (2) TMI 33
Denial of Foreign Tax Credit (FTC) u/s 90/90A - required form no. 67 was not filed along with the ITR within the time allowed as per provision of section 139(1) - HELD THAT:- As relying on Rajesh Kumar Lakhran [2024 (2) TMI 1426 - ITAT JAIPUR] and Juan Miguel Guerrero Ferrer [2023 (9) TMI 1401 - ITAT JAIPUR] assessee is entitled for the credit of FTC under section 90 of the Act as claim of the assessee is duly supported by the ITR filed and the Form no. 67 though late. Appeal filed by the assessee is allowed.
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2025 (2) TMI 32
Capital gain computation - Consideration received for relinquishment of its right - Determination of sale consideration determined by AO - HELD THAT:- There was no mention in the resolutions that the payments as agreed upon will be made after adjusting the outstanding loan advanced by the members to the society. In the ansence of any stipulation in the resolutions that the outstanding loan of the members would be adjusted from the payments as agreed upon, the contention of the assessee that only the net amount (after adjusting the outstanding loan) should be considered as the sale consideration, can’t be accepted.
The resolutions made it explicitly clear that the total amount of Rs. 10,85,28,620/- was the consideration received by the assessee for relinquishment of its rights in the lands in favour of the societies. Accordingly, the AO is directed to take the amount of Rs. 10,85,28,620/- as the sale consideration for computation of capital gains on the relinquishment of its right in lands, in favour of the societies. The ground taken by the assessee is parly allowed.
Deduction u/s.54F - AO had disallowed the claim of the assessee for the reason that the purchase of the new asset was not completed within two years from the date of transfer to the original asset and neither the construction of the new asset was completed within 3 years from the date of transfer, which was upheld by the Ld. CIT(A) - HELD THAT:- Hon’ble Karnataka High Court in the case of Smt. B. S. Shanthakumari [2015 (8) TMI 274 - KARNATAKA HIGH COURT] held that once it was established that the assessee had invested entire net consideration in construction of residential house within the stipulated period, it would meet the requirement of Section 54F of the Act and the assessee would be entitled to get benefit of Section 54F
Revenue was not correct in disallowing the claim for deduction u/s.54F of the Actonly on the ground that the construction of the house was not completed within the stipulated period of 3 years from the date of transfer of the original asset.
Claim for deduction u/s.54F also included legal charges which was not eligible for deduction - We find that other payments were on account of stamp paper and registration fee, extra work, legal charges etc. For the extra work payment a separate agreement dated 26th October, 2018 was entered into by the assessee.
For the payment in respect of legal charges no agreement has been brought on record. The advance maintenance charges deposited by the assessee are recurring in nature for the period post occupation of the property and can’t be included in the cost of acquisition of the property.
Payment for stamp and registration charges is required to be made to the Govt. Authority at the time of registration of the property. No payment for stamp duty and registration charge could have been made when the flat had not yet been constructed and property not yet registered. AO is directed to verify the correctness of the deduction u/s.54F as claimed by the assessee. The ground taken by the assessee is partly allowed.
Disallowance of interest expenses u/s.57 - As explained by the assessee, this amount was advanced to the societies for purchase of land. Therefore, the interest in respect of these loans to the societies has to be treated as capital expenditure, which was not eligible for deduction u/s.57 - Revenue was correct in disallowing the proportionate interest expenditure. However, certain amount of loan taken from Kothari Finance was repaid during the year. Therefore, the AO was not correct in disallowing the interest on the basis of opening balance. The AO is directed to rework the disallowance by taking into account the closing balance of loan taken from Kothari Finance as well as the closing balance of the loans utilized for earning of interest income. Ground taken by the assessee is partly allowed for statistical purposes.
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2025 (2) TMI 31
Unexplained Credit taxable u/s 68 - Bogus LTCG -Characterization of the long-term capital gain from the sale of shares as unexplained cash credit - HELD THAT:- The transfer of shares has been recorded by the Company from Mr. Vijay Pamnani to assessee and assessee to Mr. Suresh Galani . This is evident from the photocopy of share certificates placed before us . Therefore, it cannot also be the case that Capital gain of Mr. Vijay Pamnani is transferred in the name of the assessee without transfer of assets by the son of the assessee.
It is the finding of the lower authorities that Gift deed is executed by the son of the assessee in favour of assessee a on a stamp paper of Rs 100/- purchased from same stamp vendor. This finding is in total ignorance of the fact that on Gift of shares assessee has paid stamp duty of Rs 75,000/- which is also claimed by the assessee as cost . In these facts , purchase of stamp paper from same stamp vendor does not have any relevance.
Thus, assessee has shown how shares are acquired by her i.e., by gift from his son, to whom she has sold those shares to Mr. Suresh Galani, details of transfers also shown endorsed on the share certificates, consideration has also passed through, the share price of the company at which those shares are sold is also fair.
No reason to sustain the appellate of the ld. CIT (A) that long term capital gain earned by the assessee is unexplained credit chargeable to tax u/s 68 - Assessee has correctly offered long term capital on the sale of shares to Mr. Suresh Galani. Accordingly Ground no 1 of appeal is allowed.
Deduction u/s 54F - In case of PCIT V Vembu Vaidyanathan [2019 (1) TMI 1361 - BOMBAY HIGH COURT] has held that even ‘letter of allotment’ also satisfies the requirement of section 54F is allowable
The assessee has acquired 60 % of the existing property. The decision of Honourable Supreme court in the case of Suraj Lamp Industries [2011 (10) TMI 8 - SUPREME COURT] also cannot apply to the fact of the case as assessee has not entered into any sale deed and has not registered it. Assessee deserves the benefit of section 54F of The Act.
Deduction of stamp duty on sale of shares while computing capital gains - We have not been explained why the Transferor assessee would pay stamp duty when the buyer is Mr. Suresh Galani . If it is so, under which section this deduction is allowable. If the stamp duty is paid by the assessee on the Gift of shares received, then obviously it become the cost of acquisition of those shares and assessee is eligible for deduction of the same.
On verification of the form of stamp duty paid of Rs 75,000/- , it is paid on 5/2/2015 where the shares are transferred by the assessee on 06/02/2015. As there is no clarity on which transaction assessee has paid stamp duty of Rs 75,000/-, we restore Ground no 3 back to the file of the ld. AO with direction to the assessee to substantiate this claim before ld. AO.
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2025 (2) TMI 30
Absolute Confiscation of gold jewelry carried by a petitioner, who was intercepted at the airport upon returning from Dubai - HELD THAT:- While dealing with an identical situation, this Court has passed a detailed order in N. KALIYAMOORTHY [2025 (1) TMI 1465 - MADRAS HIGH COURT] where it was held that 'Absolute confiscation of the imported quantity of gold in the hands of each of these petitioners cannot be ordered to be absolutely confiscated under Section 125 of the Customs Act, 1962.'
The Impugned Order passed by the fourth respondent affirming the Orders of the lower Authority is liable to be interfered with. The objection with the Order passed by the fourth respondent sitting at Mumbai also cannot be countenanced as the Order-in-Original No.356/2015-2016-AIRPORT made in F.No.O.S.No.793/2015-AIR dated 23.11.2015 passed by the second respondent was the subject matter of the Appeal before the third respondent, whereby, the third respondent vide Order-in-Appeal C.Cus-I Nos.263 to 265 of 2016 dated 27.06.2016 confirmed the view of the second respondent.
The cause of action has arisen within the jurisdiction of this Court. Therefore, the objection of the respondents before this Court has to be overruled.
Conclusion - i) The goods not declared at customs and not complying with import conditions can be treated as "prohibited" and subject to confiscation. ii) The impugned order of absolute confiscation set aside and case remitted back to the customs authority to allow for the redemption of the gold upon payment of a redemption fine.
Petition allowed.
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2025 (2) TMI 29
Revocation of the Customs Broker License - forefeiture of security deposit - levy of penalty - failure to comply with the obligations under Regulation 10(d) and Regulation 10(n) of the Customs Brokers Licensing Regulations (CBLR), 2018 - HELD THAT:- In the impugned order at page 525 it has been observed that it is expected of a man of prudence to know the exporter or importer and rely on undisputed Government documents available in public domain. However, it does not imply that in the stated facts of present case, a CB can take such documents from a third party and also aver that compliance under Regulation 10 (d) & (n) be taken as complete. If the action of CB in taking documents KYC from third party is justified then it will be contrary to the purpose of CBLR, 2018 and also Section 146 and 147 of Customs Act, 1962.
After taking into consideration the inquiry report, the officer concerned while passing the impugned order came to the conclusion that mere reference to documents handed over by Shri Lokesh Bansal and Mr. Tarun Jain without knowing the exporters does not constitute diligence which was required for verification of KYC documents.
The officer concerned in the impugned order came to the conclusion that it is evident that Customs Broker failed to act in accordance with their obligation as mentioned in Regulation 10(d) & 10 (n) of the Customs Broker Licensing Regulations, 2018 as they did not verify the address, or verified it and found it to be non-existing but did not report the same. It has been a serious lapse on part of the Customs brokers, which resulted in loss of revenue. Inquiry Officer has confirmed the contravention of said regulation by the CB. Thus, the CB has contravened the provisions of Regulations 10 (d) and 10 (n) of CBLR, 2018.
Therefore, it is clear that the Additional Commissioner of Customs Nhava Sheva of Order-In-Original dated 29.11.2023 was not having jurisdiction to pass any order regarding violation of relevant provisions of CBLR, 2018 by the appellant. Therefore, if any observation was made by the Additional Commissioner of Customs Nhava Sheva of Order-In-Original dated 29.11.2023 regarding violation or non-violation of relevant provisions of CBLR it has no effect what so ever being without jurisdiction.
Conclusion - It is evident that Customs Broker failed to act in accordance with their obligation as mentioned in Regulation 10(d) & 10(n) of the Customs Broker Licensing Regulations, 2018 as they did not verify the address, or verified it and found it to be non-existing but did not report the same. The impugned order has been passed by the officer concerned after proper analysis of the facts of the present case and after proper appreciation of the relevant provisions of CBLR and therefore, the impugned order is liable to be confirmed and the appeal appears to be without any merit and therefore, it is liable to be dismissed.
Appeal dismissed.
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2025 (2) TMI 28
Classification of imported goods - Search Lights - to be classified under CTH 85131090 or under CTH 94054010? - mis-declaration of goods leading to short payment of duty - invocation of the extended period of limitation - Confiscation - penalty - HELD THAT:- The Searchlights are specifically mentioned under CTH 94054010, whereas CTH 85131090 covers portable lamps designed to function by their own source of energy such as dry batteries accumulator magnetos. As per the basic principle, the most specific description has to be preferred to a heading providing a mere general description. The classification as claimed by the appellant under CTH 85131090 is a residuary entry as compared to CTH 94054010, which is a specific entryand hence, the imported goods i.e. searchlights have been rightly classified under the latter heading.
It is a settled principle of law that classification has to be determined according to the terms of the Headings, Section Notes, Chapter Notes and General Rules of Interpretation and the HSN Explanatory Notes. Reference is invited to the provisions of Rule 3 of GRI providing that when the goods are prima facie classifiable under two or more headings, classification shall be affected by referring to the heading, which provides the most specific description than the heading providing mere general description. In that view of the matter, the Authorities below rightly classified the goods in terms of Rule 3(a) of GRI under CTH 94054010.
In the present case, show cause notice was issued on the ground that the goods were more appropriately classifiable under CTH 94054010. The issue, therefore, basically pertains to classification of the impugned goods, and it is a settled principle of law that mis-classification of a product is no ground to confiscate the goods or to impose penalty. The justification for penal action is maintainable only when element of fraud collusion, willfull statement or suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of duty is present, which in the present case is not so.
The imported Searchlights were mis-classified under CTH 85131090 and, therefore, the appellant is liable to pay short levy of duty amounting to Rs.15,89,326/- with interest. The order of confiscation and penalty is set aside.
Appeal allowed.
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2025 (2) TMI 27
Jurisdiction - exercise of proper discretion by Commissioner (Appeals) u/s 128A(3) of the Customs Act, 1962, in remanding the case to the Adjudicating Authority for fresh adjudication - violation of principles of natural justice - HELD THAT:- The impugned order has been passed in accordance with the provisions of Section 128A (3) of the Customs Act, 1962 and no illegality or irregularity has been committed by the Commissioner (Appeals) in passing the impugned order as the Order-In-Original was passed by the Adjudicating Authority without following the principles of natural justice. The Commissioner (Appeals) was duty bound under Section 128A (3) of the Customs Act to refer the matter back to the Adjudicating Authority, with direction for fresh adjudication.
The learned Counsel for the appellant has vehemently argued that the Order-In-Original passed by the Adjudicating Authority in which reliance was placed on the Standing Order No. 6/2022 dated 04.07.2022 but such action was manifestly arbitrary, illegal and baseless in as much as the Adjudicating Authority had ignored the fact that the standing order in para 4 had excluded certain category of Bills of Entry including Bills of Entry where the importer is invoking Section 149 or Section 154 of the Customs Act. In this context we are of the view that in this appeal the order dated 19.09.2023 is not under challenge. This appeal is directed against the order of Commissioner (Appeals) dated 16.07.2024 which seems to be proper and in accordance with law.
Conclusion - The Commissioner (Appeals) has exercised his discretion in accordance with the relevant provisions of Customs Act and no interference is required in the impugned order. There is no merit in the Appeal and same is liable to be dismissed and impugned order is liable to be confirmed.
Appeal dismissed.
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2025 (2) TMI 26
Demand of duty - appellants who imported/cleared goods without payment of duty by using DEPB scrips which were later found to be obtained by fraudulent means - time limitation - penalty u/s 114A of the Customs Act, 1962.
HELD THAT:- It is an admitted fact that the DEPB licenses used by the appellants were obtained fraudulently by M/s. Bilwa Labs by mis-declaring Potassium Chloride (Muriate of Potash) as Industrial Salt. In similar set of facts this Tribunal in M/S. ITC FILTRONA LIMITED (PRESENTLY KNOWN AS M/S. ITC ESSENTRA LIMITED) VERSUS THE COMMISSIONER OF CUSTOMS, BANGALORE [2024 (10) TMI 577 - CESTAT BANGALORE] has held that 'There are no reason to interfere with the impugned order as far as the demand of duty is concerned. However, since the appellants were not aware of the fact that the goods imported by them were based on the fraudulently obtained DEPB scrips, the question of imposing penalty on them does not arise.'
Penalty - HELD THAT:- The demand of duty along with interest is upheld and for the reasons that at the time of import, the appellant was not aware of the fraudulently obtained DEPB licenses, the question of imposing penalty does not arise, hence penalty set aside.
Appeal allowed in part.
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2025 (2) TMI 25
Re-classification of the goods - levy of differential customs duty along with confiscation, redemption fine and penalty - non-levy of mandatory penalty u/s 114A of the Customs Act, 1962 - misdeclaration of imported 100% Polyester Knitted Fabric - to be classified under CTH 60059000 or under CTI 60019200? - admissibility of statements - HELD THAT:- The law on the admissibility of the statements recorded under Section 108 of the Act has been well established over the years. Reference is invited to the decision of the Apex Court in Surjeet Singh Chhabra versus Union of India, [1996 (10) TMI 106 - SUPREME COURT], holding that the customs officers are not police officers and therefore the confession is an admission and binds the petitioner. Similar view was taken by the Apex Court in Assistant Collector of Central Excise, Rajamundri Versus Duncan Agro Industries Ltd. [2000 (8) TMI 87 - SUPREME COURT] observing that a statement made by a witness or a party under Section 14 of Central Excise Act, 1944 or section 108 of Customs Act, 1962 is ex-facie admissible in evidence to sustain penalty. The proprietor of the firm having categorically accepted the test report and paid the entire duty amount is a clear admission on his part - there is no iota of doubt that the appellant had mis-declared the classification of the goods in question as “ 100% Polyester Knitted Fabric” and classified the same under chapter heading 6005 9000, which actually covers “warp knit fabrics".
The matter was listed on 7.01.2025, when the applicant had once again chosen not to appear. Considering that the appeal is of the year 2010, we heard the learned Authorized Representative and after perusing the record had reserved the order, granting two weeks time to file written submissions, if any.
Conclusion - Since there is apparent mis-declaration in the description of the goods as well as the value thereof, the goods are liable to be confiscated under section 111(m) of the Act along with redemption fine. On the same reasoning and analogy duty is recoverable under the proviso to subsection (1) of section 28 of the Act. Consequently, the differential customs duty calculated by the adjudicating authority in respect of the two bills of entry is affirmed. With regard to imposition of penalty under section 114A of the Act, the same needs to be upheld as the appellant had resorted to suppression of facts resulting in evasion of duty.
Appeal disposed off.
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2025 (2) TMI 24
Valuation of imported goods - enhancement of the declared value of the imported goods - old and used worn clothing articles classifiable under Tariff Item No.63090000 of the First Schedule of the Act - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [2018 (11) TMI 625 - CESTAT MUMBAI], wherein this Tribunal has observed 'the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. In the light of the admitted failure to comply with the licensing requirements, we uphold the confiscation of the goods under Section 111(d) of Customs Act, 1962. However, it is our opinion that the ends of justice would be served by reducing the redemption fine to 10% of the ascertained value and penalty to 5%.'
Conclusion - The redemption fine and penalty imposed on the respondent to the tune of 10% & 5% respectively on the assessed value is sufficient. Therefore, the redemption fine and penalty confirmed by the ld.Commissioner (Appeals) are sufficient to meet the end of justice.
There are no infirmity in the impugned order and the same is upheld - appeals filed by the Revenue are dismissed.
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2025 (2) TMI 23
Rejection of classification of the goods declared by the importer - Polyester bed sheet - classifiable under CTH 5407 or not - confiscation of the goods imported - levy of penalty - HELD THAT:- An identical issue had come up for consideration before this Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT) , KOLKATA VERSUS M/S. SILPHA FINVEST P. LIMITED [2024 (3) TMI 246 - CESTAT KOLKATA], wherein it has been observed that 'We admit that the articles which have been imported by the respondent are woven fabric of synthetic filament yarn, but they are Bed spreads / Bed sheets and quantity of the goods in numbers has been described by the respondent. In the circumstances, the merit classification of the impugned goods is under CTH 6304 of the Customs Tariff Act. Therefore, we classify the impugned goods as ‘Bed spreads’ (Bed sheets) classifiable under CTH 6304 of the Customs Tariff Act.'
Conclusion - The appellant had correctly classified the goods under CTH 6304, making the confiscation and duty demands unsustainable.
The demands confirmed against the appellant are not sustainable. Consequently, no penalty is imposable on the appellants - Appeal allowed.
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2025 (2) TMI 22
Revocation of Customs Broker License of the appellant - forfeiture of the whole amount of security deposit - levy of penalty - rent agreement submitted by the appellant was forged - violation of regulation 10 (k) of the Customs Brokers Licensing Regulations 2018 - HELD THAT:- A perusal of the impugned order shows that much emphasis has been placed by the Commissioner on the rent agreement submitted by the appellant and more importantly the fact that the appellant even requested the department not to provide copies of the documents to the landlord. This, according to the Commissioner, raises questions about the conduct of a customs broker. According to the Commissioner, a customs broker should not shift the blame on the landlord, when the customs broker himself is a party to the rent agreement. The Commissioner has presumed that the rent agreement is a forged document and on that basis has recorded this finding.
The appellant had been repeatedly informing the department that he has a serious dispute with the landlord, but the Commissioner has treated this rent agreement as a forged document only for the reason that the landlord denied having signed it. The Commissioner failed to appreciate that the premises from where the customs broker was operating were mentioned in the application submitted for grant of the license in the year 1991 and the Customs Broker License of the appellant had been renewed from time to time. The Commissioner could have caused a physical verification of the place of business of the appellant instead of merely relying upon the version of the landlord that he had not signed the rent agreement. The Customs Broker License of the appellant, therefore, could not have been revoked taking aid of the provisions of regulation 10(k)of the 2018 Regulations. The forfeiture of the security amount and imposition of penalty of Rs. 50,000/- also cannot be sustained.
Conclusion - Regulation 10(k) should not be used to address issues unrelated to record-keeping, such as the authenticity of a business address or rent agreement.
Appeal allowed.
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2025 (2) TMI 21
Execution and compliance with the exit formula devised by the Company Law Board (CLB) for foreign investors ORE Holdings and Nandakumar Athappan to exit from a joint venture with Indian company CEPL - HELD THAT:- It was very obvious from the strategy of KCP and his group of companies who have been litigating since CLB took cognizance of the controversy, that they were keen to knock off the money invested by ORE and Athappan, but when KCP strategies were halted by the CLB vide its Order dated 13.08.2008, he appeared to have entertained a belief that by reading the exit-formula the way he and his group of companies had since chosen to read, they could deflect the focus from their need to abide by the directions of the CLB and bypass the exit-route prescribed for the self- preservation of both. This perhaps might have been the reason why the team-petitioner have chosen not to challenge the Order prescribing the exit- route for the foreign investors of the CEPL to quit from the company.
The CLB contemplated on reduction in the share capital when it pronounced its set of directions. Does not KCP, the captain of team-petitioner know it? He does. He knew it. His team's think-tank knew it. But he came to the wicket not to play cricket, a game considered as synonymous with fairness associated with the gentlemen who played it. Did KCP shrewdly tried to manipulate an argument to equate the surrender of shares for achieving reduction of share capital as buy-back of shares? Indeed, the CLB in the operative portion of its Order dated 13.08.2008 has underscored that its direction to CEPL to pay ORE and Athappan in cash or in kind will be the consideration for reduction of share capital, and has not described it as consideration for the purchase of shares from its foreign investors.
If the present petition is keenly observed KCP finds himself on an unplayable and slippery wicket. He even struggles for a cause of action. Therefore, he has laid his hands on a clarificatory note of the RBI, dated 28.08.2020, which decides nothing but only affirms its earlier decision dated 08.06.2015, permitting sale of 17.15 acres of VML land to the nominee of ORE. And, when VML chose to withdraw petition which it had laid before the Delhi High Court, challenging the proceedings of the RBI dated 08.06.2015, this Order became final. And necessarily what has been done pursuant to it has also attained finality, thanks to the Order of the Supreme Court in the batch of SLP filed against the Order of this Court in C.A 5 to 10 of 2016. What remains to be done is the repatriation of sale proceeds from India, for which permission has been sought from the RBI.
When KCP valued the shares of ORE and Athappan, it was not even 1% of the value which CEPL was under an obligation to pay them. KCP and his team's game-plan is very evident, to unravel which not even the IQ required to solve a beginners' sudoku is necessary. If he had gone to the CLB or the Court to seek clarification on the point, he knew what to expect. It is hence he tried to circumnavigate the CLB and the Court and approached RBI and even the PMO, faking a grievance where there is none, and avoided seeking clarification whether share-pricing could be telescoped into the clause in the Order of the CLB directing payment of money invested by ORE and Athappan.
Conclusion - The CLB's exit formula did not constitute a buy-back of shares, as it aimed to return the invested sums and reduce share capital. The legality of the sale of VML property to ORE's nominee affirmed, as it complied with FEMA regulations and was executed with necessary permissions.
Petition dismissed.
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2025 (2) TMI 20
Levy of penalty u/s 162 of the Companies Act, 1956 - failure to file the Board's Report for the financial years 2010-11 and 2013-14 - continuing offence or not - Compounding of offences under Section 441 of the Companies Act, 2013 for the offences made under Section 217 read with Section 220 of the Companies Act, 1956 - HELD THAT:- It is an admitted fact that the Appellants 1, 2 & 3 have failed to file Board Report with the financial statement for the financial years 2010-11 and 2013-14 respectively within the stipulated time and hence the offences have been committed. They have to be taken as a continuing offence. Penalty for Non-filing of Board Report for financial year ending on 31.03.2011 will be determined as per the provisions of Section 220 r/w Section 162 of the Companies Act, 1956 which is not disputed by either party.
The Appellant has contended that the mistake is inadvertent, that he himself has found out the mistake and has sought to rectify it by seeking composition of the offence, that he has failed to file the Board Report with ROC only, and that it has been circulated to shareholders within the due date, that the omission is not prejudicial to the interest of members, creditors, regulators or other stakeholders and that the content of the Board Reports was such that there is nothing to hide - In view of absence of any assertion to the contrary by the Respondent, the above contention is acceptable.
Conclusion - The offences were committed for the financial year 2010-11 and financial year 2013-14 under Section 220 of the Companies Act, 1956 only and that penalty levied for compounding appears excessive in view of orders issued by the same Ld. Tribunal and other Tribunals in similar cases and therefore penalty should be levied at the rate of Rs.50 per day for every day during which the default continued, both for the company and for the directors.
Appeal allowed.
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2025 (2) TMI 19
Interpretation and application of the proviso to Section 31(4) of the Insolvency and Bankruptcy Code (IBC) - whether the requirement for obtaining the Competition Commission of India (CCI) approval prior to the approval of a resolution plan by the Committee of Creditors (CoC) is mandatory or directory? - Locus standi of the appellants - adequacy of data presented for regulatory approvals.
As per Hrishikesh Roy, J. and Sudhanshu Dhulia, J.
Locus standi - HELD THAT:- Once the CIRP is initiated, the nature of proceedings are no longer in personam but rather become in rem. In light of the same, the expression ‘any person aggrieved’ in the context of the IBC has been held to be indicative of there being no rigid locus requirements to institute an appeal challenging an order of the NCLT before the NCLAT or an order of the NCLAT before this Court - In the present case, the Appellant as an unsuccessful resolution applicant whose Resolution Plan could have otherwise been approved by the CoC, satisfies the requirement of being aggrieved. This preliminary locus standi objection vis-à-vis the Appellant, therefore, does not merit acceptance.
Proviso to Section 31(4) IBC - HELD THAT:- The introduction of a proviso, specifically addressing those Resolution Plans with provisions for combination, and the use of the term ‘prior’ therein, makes it starkly clear that the intent of the legislature was to create an exception. This ensures that in cases containing combination proposals, the approval of the CCI i.e., the regulatory body designated to ensure fair competition in markets and preventing anti-competitive practices, should first be obtained before the same is approved by the CoC. No other provision of the IBC has been pointed out that might suggest otherwise or cause disharmony between the scheme and intent of the IBC or the said proviso to Section 31(4) of the IBC - The above provision makes it abundantly clear that the proviso herein creates an exception for those Resolution Plans that contain provisions for combination. The language used therein appears to be clear, precise & straightforward. As such, to understand the legislative intent, the Rule of Plain Reading or literal interpretation should find favour rather than the rule of purposive interpretation as is suggested by the other side.
Undertaking Interpretation: Why Literal and not Purposive? - HELD THAT:- The so-called ‘spirit of the law’ is an indeterminate construct, whose nature renders it subjective and susceptible to varied interpretations depending on the personal predilections of those tasked with interpreting it. Therefore, it is almost unattainable as a definitive guide, especially in the face of or when put in opposition to the unambiguous, clear and plain language used in a particular provision, as is presently the case - Therefore, it is almost necessary for the courts to interpret the provision in its natural sense, as it is through the words used in a provision that legislature expresses its intention. When the language is unambiguous, as in the present matter, the courts must respect its ordinary and natural meaning instead of wandering into the realm of speculation and unintended overreach invoking the so-called ‘spirit of the law’.
Principle of Plain Meaning - HELD THAT:- In the present case, the use of the word ‘prior’ at the appropriate place in the proviso besides being direct, clear and unambiguous also does not lead to any absurd consequences. The proviso to Section 31(4) of IBC mentions that the approval to the Resolution Plan from CCI shall be obtained ‘prior’ to its approval by the CoC - to interpret the specific word to mean that such an approval can be obtained even ‘after’ and not necessarily ‘prior’ to the approval by the CoC would amount to reconstructing a statutory provision, which is not permissible.
Different Threshold for Combinations - HELD THAT:- The statute provided a different threshold for the CCI’s approval as compared to approvals to be received from other statutory and regulatory bodies. Such arrangement appears to be deliberate as the Competition Act contains both specific restrictions with respect to combinations that may lead to an Appreciable Adverse Effect on Competition (AAEC) in the relevant market as well as a detailed procedure of enquiry and scrutiny of such combinations, to prevent such AAEC. Based on the same, the CCI is empowered to either approve, reject or modify such a combination or to mould it in a manner that is in consonance with the scheme of the Competition Act.
Harmony between Stipulated Timelines - HELD THAT:- In the present case, even though dilatory tactics are said to have been adopted in the submission of notice under the Combination Regulations, with Form II submitted on 03.11.2022, the combination was approved on 15.03.2023 i.e., within 132 days. The recent Competition (Amendment) Act, 2023 which reduced the timeline for approving combination proposal from 210 days to 150 days and requiring the CCI to give a prima facie opinion on the likelihood of a combination causing an Appreciable Adverse Effect on Competition (AAEC) from 30 days to 15 days, is indicative of the more realistic and shorter timelines that the CCI ordinarily requires for its analysis and decision-making, pertaining to such combination proposals - it is difficult to interpret the provisions disjunctively, as has been done by the NCLAT, in the impugned order dated 18.09.2023.
Procedural Lapses under the Competition Act - HELD THAT:- The failure to issue a SCN under Section 29(1) to the Target Company/Corporate Debtor, constitutes a major procedural lapse with significant consequence. The statutory scheme of the Competition Act, as well as the synergistic framework of the IBC, demands that all parties to the combination are afforded a fair opportunity to participate in the decision - making process, particularly when the proposed measures bear a direct and material impact on their interests. The absence of such notice undermines the procedural sanctity of the modification process and renders the resultant approval susceptible to bona fide challenge - The issuance of SCN to both the acquirer and the target under Section 29(1) of the Competition Act in our opinion, is a non negotiable procedural imperative. The interplay between the provisions of the Competition Act and the IBC necessitates a careful balancing of competing interests, underscoring the indispensability of procedural compliance. The lack of participation by the Target in the voluntary modification process, especially where the modification entails the divestment of their assets, vitiates the approval granted by the CCI and warrants remedial intervention by this Court.
Discrepancies in Data - HELD THAT:- Transparent and accurate data disclosures are fundamental to the regulatory mechanism. The identified discrepancies compromise the very basis of the CCI’s decision-making process. It is imperative to therefore underscore that discrepancies in operational capacity data would strike at the very root of the regulatory mechanism. While we do not intend to embark on a fact-finding expedition afresh, the prima facie inconsistencies in the submitted data ought to have been examined with greater care by the NCLAT. But this was not done. Consequently, the conditional approval should have been revoked, especially in light of the CCI’s express mention in its order (dated 15.03.2023) that the order may be revoked if the information provided by the acquirer is found to be incorrect at any particular time.
The CoC shall reconsider the Appellant’s Resolution Plan and any other Resolution Plans which possessed the requisite CCI approval as on 28.10.2022 i.e., the date on which the CoC voted upon the submitted Resolution Plans.
As per S.V.N. Bhatti J.
Since it is the commercial wisdom of the CoC that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting-up of such Committee and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, section 21(2) of the IBC mandates that the CoC shall comprise of financial creditors of the corporate debtor - The CoC consists of financial creditors who are in the business of money lending, and the commercial angle of CIRP is within the domain of the CoC. Thus, when the CoC exercises its commercial wisdom, the adjudicating authority cannot interfere on merits with the commercial decisions taken by the CoC.
This Court also held that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and the feasibility of the proposed resolution plan. They act on the basis of a thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority and is made nonjusticiable.
The jurisdiction bestowed upon NCLAT is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in section 61(3) of the IBC, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (the Adjudicating Authority/NCLAT) have been endowed with clearly demarcated jurisdiction as specified in the IBC and are not to act as a court of equity or exercise plenary powers.
The proviso to sub-section (4) of section 31 is directory and would be compliant with IBC and the Competition Act. Hence, the combination approval of CCI at the stage of consideration of the resolution plan by the Adjudicating Authority under section 31(1) would be proper and legal. Such interpretation keeps the operations of the successful resolution applicant as a going concern, without deviating from the rigour of the Competition Act, and simultaneously, a one-year window is granted to obtain licenses, permissions, consents and other regulatory approvals envisaged by a host of laws. Therefore, the proviso is interpreted purposively and held that the approval of a combination of CCI at the stage of consideration by CoC is directory and not mandatory. By operation of section 31(2) of the IBC, to avoid rejection of a fully compliant and voted resolution plan, the Adjudicating Authority confirms that the approval of the combination is available before implementing the resolution plan. At best, the use of the words “prior to” is a temporal expression whose mandatory or directory nature is to be determined from the context surrounding section 31.
The view taken by the NCLAT on the question of whether the requirement of proviso to sub-section (4) of section 31 of IBC is mandatory or directory is correct. Thus, the appeals fail.
Conclusion:- As per HRISHIKESH ROY, SUDHANSHU DHULIA i) The AGI Greenpac’s Resolution Plan is unsustainable as it failed to secure prior approval from the CCI, as mandated under the proviso to Section 31(4) of the IBC. Consequently, the approval granted by the CoC to the Resolution Plan dated 28.10.2022 without the requisite CCI approval, cannot be sustained and is hereby set aside and quashed. ii) the CoC shall reconsider the Appellant’s Resolution Plan and any other Resolution Plans which possessed the requisite CCI approval as on 28.10.2022 i.e., the date on which the CoC voted upon the submitted Resolution Plans. As per S.V.N. BHATTI i) The object of IBC is to provide the institutional framework for theoretical resolution without considering liquidation as the first option. The buoyant economy needs absorption mechanisms to prevent collateral and cascading impact on the investors, depositors and financial creditors. Therefore, the idea of the IBC is to let the financial markets work. ii) The view taken by the NCLAT on the question of whether the requirement of proviso to sub-section (4) of section 31 of IBC is mandatory or directory is correct. Thus, the appeals fail.
A common conclusion cound not be reached. Such differences must be understood as useful steps towards the evolution of jurisprudence in the field of Insolvency and Bankruptcy Code, 2016 and the Competition Act, 2002.
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2025 (2) TMI 18
Dissolution of the Corporate Debtor - whether the Appellant herein, being determined as to be a successful bidder in the liquidation proceedings and having apparently defaulted in the remittance of the amount which was the settled due to be paid under the terms and conditions of the tender document, could be granted any leverage by way of an extension of time period to pay the amount, beyond the time period stipulated under the tender document? - HELD THAT:- Because the entire auctioning process was being conducted during the COVID-19 situation, the Appellant, despite his best efforts to mobilize the required amount and to deposit the same as stipulated under the award by attracting foreign investors, was unable to do so because of the inordinate time taken by the Financial Investment Unit (FIU) of RBI to process the case as per their regulations in relation to investment in India by foreign investors.
The Appellant had made all genuine efforts to deposit the amount, but he could not do so despite of extensions granted, because of the factors outside his control. Hence, he should not be saddled with the forfeiture of the entire EMD amount, which has been deposited by him as part of contract. As such taking a pragmatic view, and particularly in the light of the Judgment, of Alisha Khan, of [2021 (12) TMI 1483 - SUPREME COURT] it is apt and fair that, in order to balance the equities without adversely affecting the interest of any of the parties to the appeal, 25% of the Rs. 5 Crores of EMD deposited by the Appellant, i.e. Rs. 1,25,00,000/- is to be retained and the balance 75% of the EMD amount i.e. Rs. 3,75,00,000/- is to be refunded back to the Appellant, within one month from the date of service of the certified copy of this Judgment.
Conclusion - The Appellant's request for an extension of time to pay the balance amount denied but a partial refund of the EMD granted, acknowledging the unique challenges posed by the pandemic.
Appeal allowed in part.
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