TMI Tax Updates - e-Newsletter
October 11, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise

Highlights / Catch Notes

GST

• Critical illness of managing partner, firm uploads returns, denied hearing violates natural justice.

  The High Court quashed the orders dismissing the appeal filed by the petitioner firm on grounds of limitation and the order passed u/s 73(9) of the Central Goods and Services Tax Act, 2017. The managing partner of the petitioner firm was critically ill with cancer from March to August 2022, and the firm had uploaded returns for March, April, and May 2022. However, the respondent department failed to grant an opportunity of hearing before passing the impugned order dated 04.04.2022, violating the principles of natural justice u/s 75(4) of the CGST Act. The Court held that despite the firm's inability to reply to the notice due to the managing partner's illness, one fair chance should have been given to comply with natural justice. Consequently, the matter was remanded back to the respondent to decide the show-cause notice after granting an opportunity of hearing to the petitioner.
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• Fly Ash Blocks attract 5% GST rate regardless of fly ash content percentage. Clarified by Circular 179/11/2022-GST.

  Fly Ash Blocks are classifiable under Entry No. 225B of Schedule-I, attracting a GST rate of 5%, as per the clarification issued by Circular No. 179/11/2022-GST dated 03.08.2022. The condition of 90% or more fly ash content applies only to Fly Ash Aggregate and not to Fly Ash Bricks or Fly Ash Blocks. Consequently, the orders passed by the Advance Ruling Authority and the Appellate Authority are set aside, and the petition is allowed.
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• Cancellation order quashed for lack of hearing & reasons; remanded for fresh decision after due process.

  Order of cancellation of registration passed by Assessing Officer upheld by dismissing appeal on limitation ground challenged for not providing opportunity of hearing and without assigning reasons for cancellation, violating principles of natural justice. Court quashed orders and remanded matter to Assessing Officer at show cause notice stage, directing registration to remain suspended till disposal, citing guidelines to avoid procedural lapses leading to writ petitions before High Court. Court emphasized authorities should follow procedure scrupulously to avoid unnecessary litigation.
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• Customs duty on ocean freight in FOB imports nullified due to flawed notification.

  Entry No. 10 of Notification No. 10/2017- Integrated Tax (Rate) dated 28.6.2017 was challenged as ultra-vires the IGST Act and Articles 14 and 265 of the Constitution, even for imports on FOB basis. The court held that IGST u/s 5(1) is leviable on the value determined u/s 3 of the Customs Tariff Act, 1975, at the point when customs duties are levied u/s 12 of the Customs Act, 1962. The value includes cost, freight, and insurance at the place of importation. Therefore, whether the transaction is CIF or FOB, IGST is payable on the value, including freight, cost, and insurance. However, following Supreme Court and Bombay High Court judgments, when the notification itself is struck down, IGST cannot be insisted upon for ocean freight in FOB transactions. Consequently, the impugned order was quashed, and the petition was allowed.
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• Authorities' arbitrary tax credit blockage without due process quashed by Court for violating natural justice.

  The High Court held that the revenue authorities committed grave illegality by not granting pre-decisional hearing to the appellants before blocking their Electronic Credit Ledger u/r 86A of CGST Rules, violating principles of natural justice. The Court observed that although Rule 86A doesn't expressly provide for pre-decisional hearing, it has to be read into the provision when serious civil consequences arise. The authorities passed orders solely based on communication from another officer without independently analyzing if Input Tax Credit was on account of fake invoices, which is impermissible. The orders lacked valid material constituting 'reasons to believe' and were passed on borrowed satisfaction, rendering them bald, vague, and unreasoned. Quashing the impugned orders, the Court allowed the appeals, holding that the mandatory requirements for invoking Rule 86A were not fulfilled by the revenue authorities.
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Income Tax

• Revision plea saved despite initial fee non-payment; court allows rectification, quashes rejection on technicalities.

  Revision application u/s 264 was initially rejected due to non-payment of mandatory fee of Rs. 500. However, the petitioner paid the fee immediately upon objection raised. The court held that the statutory requirement of Section 264(5) was sufficiently complied with by payment of fees, even if the filing date is considered as the date of fee payment. The decision relied upon by the respondent was inapplicable as no fees were paid in that case, whereas in the present case, fees were paid upon objection. The impugned order rejecting the revision application on technical grounds was quashed and the matter remanded to decide on merits after providing an opportunity of hearing within 12 weeks.
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• Reassessment notice quashed: AO failed to validly form belief of escaped income.

  The High Court quashed the reassessment notice u/s 147, holding that the Assessing Officer failed to form a valid reason to believe that income had escaped assessment. The AO merely brushed aside the assessee's objections without considering them in detail. The AO made vague observations about transactions not reflected in the Demat account but did not address the specific details provided by the assessee in the objections. The Court ruled that the AO cannot validly form a reason to believe without properly examining the assessee's objections, rendering the reassessment notice untenable. The decision was in favor of the assessee.
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• Assessee wins case over PCIT's incorrect invocation of Section 263 on immovable property valuation.

  The assessee's case was selected for limited scrutiny under CASS. The PCIT observed that the assessee, along with two co-owners, had purchased an immovable property (land), each having an equal one-third share. It was held that Section 142(1) cannot extend the scope of a defective notice u/s 143(2) without PCIT's approval, which was not obtained. The notice u/s 142(1) mentioned the transfer of property, not its purchase. The assessee provided details regarding large cash deposits and property transfer during the assessment proceedings. The PCIT cannot invoke Section 263 when the assessee has provided detailed replies to the issues raised by the AO u/ss 143(2) and 142(1). The AO passed the assessment order after considering all relevant details, which cannot be deemed erroneous or prejudicial to revenue. The PCIT's stance on the valuation of the immovable property based on stamp duty value cannot be the sole criterion for deeming the assessment order erroneous and prejudicial to revenue's interests. Consequently, the PCIT's order invoking Section 263 was held unjustified, and the decision was in favor of the assessee.
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• Money from UAE employment correctly documented, not unexplained income or gift. Foreign income not taxable.

  Section 69A applies to unexplained money, but the assessee provided valid documentation proving the remittance was earned outside India as part of employment in UAE and transferred from NRE to NRO account, negating addition under 69A. DRP's alternative view treating amount as gift u/s 56(2)(x) based on facilitation by company employee is unfounded as evidence clearly shows it was performance bonus, not gratuitous gift. Section 56(2)(x) requires gift/transfer without consideration, inapplicable here as remittance was salary earned for services rendered. Being non-residents, global income is taxable in India only if received/accrued in India u/s 5(2), which is not the case for this foreign-earned income remitted through proper channels. Therefore, additions under 69A and 56(2)(x) are unsustainable and deleted, allowing the assessee's appeal.
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• Securitization company not liable to deduct TDS on Excess Interest Spread paid to Originator.

  The assessee was in default u/s 201(1) for non-deduction of TDS u/s 194LBC on the Excess Interest Spread (EIS) paid to the Originator. The CIT(A) held that since the Originator did not subscribe to any Pass-Through Certificates (PTCs), it cannot be termed as an 'investor' u/s 194LBC read with Section 115TCA, and no investment was made by the Originator. Therefore, the provisions of Section 194LBC were not attracted. The ITAT, relying on previous decisions, observed that the issue had been extensively dealt with by the jurisdictional coordinate bench, which had taken a view in support of the assessee. Finding no infirmity in the CIT(A)'s order, the ITAT dismissed the grounds of appeal.
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• Trust taxed at highest individual income tax rate to curb tax avoidance.

  Discretionary trust liable to pay tax at maximum marginal rate, including highest slab rate of income tax and surcharge applicable to individuals. Section 2(29C) mandates computing maximum marginal rate by considering highest tax rate and surcharge rate for individuals. Surcharge cannot be based on trust's slab rate; it defeats the purpose of discouraging discretionary trusts. Central Processing Centre has power u/s 143(1) to compute correct tax and surcharge amount payable by assessee. Assessee's appeal dismissed, upholding CIT(A)'s order that maximum marginal rate is correctly computed using highest individual tax and surcharge rates.
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• Tribunal settles property valuation dispute, adopts reasonable rate for computing income addition.

  The assessment of income from other sources u/s 56(2)(x) of the Income Tax Act, specifically regarding the addition on account of excess fair market value over the purchase consideration. The key points are: The Departmental Valuation Officer (DVO) provided comparable instances for estimating the fair market value as on the date of sale of the asset. However, there were differences in the rates per square meter among the comparable instances cited by the DVO, ranging from Rs. 126.16 to Rs. 220.04 per square meter. While the DVO adopted Rs. 155 per square meter, the average of the four comparable instances was Rs. 163.36 per square meter. Considering the variations, the Income Tax Appellate Tribunal (ITAT) determined that Rs. 150 per square meter would be reasonable and directed the Assessing Officer to adopt this rate for computing the addition. The ground of appeal was partly allowed.
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• Tax calculation on gains from long-term capital assets sold at higher prices questioned.

  Capital gains u/s 50 arising from the sale of long-term capital assets, though deemed as short-term capital gains, should be taxed at the rates applicable to long-term capital gains u/s 112. The fiction of treating them as short-term gains is limited to Section 50 and cannot convert the nature of the asset for other purposes. Consequently, the concessional 20% tax rate u/s 112 applies. However, a dissenting view holds that Section 50 determines the chargeability, and Section 112(1) prescribes the rate, rendering the gains taxable as short-term. The conflicting interpretations aim to prevent double benefits from depreciation while adhering to legislative intent. The issue requires resolution by a regular bench for other aspects raised in cross-appeals.
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• Penalty for claim disallowance under tax deduction section cannot be automatic if made in good faith.

  Penalty u/s 271(1)(c) was levied for disallowance u/s 80IB(10). The assessee's claim was based on financial statements, adopting one of the possible interpretations, and similar claims were made in earlier years without penalty. The Tribunal held that penalty cannot be automatic for every addition/disallowance in assessment proceedings, relying on Manjunatha Cotton and Ginning Factory case. The assessee made a bona fide claim believing it was allowable under the law. Reliance Petroleum Products Ltd. case held that an incorrect claim in law cannot amount to furnishing inaccurate particulars. Thus, the penalty was set aside in favor of the assessee.
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• Improper reopening of assessment & addition without invoking relevant law provisions under Income Tax Act.

  The assessment reopening u/s 147 read with Section 148 was found to be unsustainable due to the lack of independent application of mind by the Commissioner of Income Tax (CIT) in granting approval. The CIT's approval was given in a slipshod manner without recording their own satisfaction, rendering the subsequent notice u/s 148 and assessment proceedings invalid. The addition made u/s 69 was also found to be improper as the Assessing Officer (AO) failed to invoke or apply any specific provision of law while making the addition. The AO did not specify the head under which the addition was made, whether business income, capital gains, or u/ss 48, 56, 68, or 69. Making an addition without invoking the relevant provision of the Act is against the law and liable to be deleted. The reasons for the addition cannot be supplemented by the assessment order or affidavit, and the assessee must be notified of the exact contravention or provision under which the assessment or additions are sought. Consequently, the addition sustained by the lower authorities deserves to be deleted, and the appeal allowed on merits.
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• Notice essential for valid assessment - Tribunal quashes tax order citing lack of 143(2) notice.

  The Appellate Tribunal held that the issuance of a valid notice u/s 143(2) is a prerequisite for framing a valid assessment, in line with the Supreme Court's judgments in Hotel Blue Moon and Laxman Das Khandelwal. The Tribunal found that the Assessing Officer had failed to issue a valid notice u/s 143(2) before framing the assessment u/s 147. The Tribunal was unable to accept the revenue's contention to cover the issue u/s 292BB. Consequently, the Tribunal quashed the assessment framed by the Assessing Officer u/s 147 due to the lack of a valid assumption of jurisdiction arising from the non-issuance of notice u/s 143(2), deciding in favor of the assessee.
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• Tax assessment involving TDS reconciliation, software license fees as revenue expense, interest on FDs as business income & disallowance u/s 14A.

  The case deals with various issues related to income tax assessment. The Tribunal directed the CIT(A) to verify the details and reconcile the tax deducted at source, allowing the assessee an opportunity to furnish documentary evidence. Regarding software license fees, following its previous order, the Tribunal treated it as revenue expenditure and not capital expenditure. Interest received on bank fixed deposits was held as business income and not income from other sources, relying on a High Court decision. The Tribunal upheld the CIT(A)'s order restricting the disallowance u/s 14A to 0.5% of the average investment and directed the AO to compute it after considering the suo moto disallowance made by the assessee.
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• Tax Addition Without Incriminating Evidence Quashed for Past Years.

  Assessment u/s 153C - Profit estimation on money received for new construction and redevelopment projects - extrapolation of income for the search period. The assessee contended that in the absence of any incriminating material seized from the premises, no addition could have been made u/s 153C for the assessment year under consideration. It was held that the Assessing Officer (AO) did not consider or hold the cash found as unexplained cash of the assessee, and it cannot be automatically subsumed in the addition related to 'on-money' without an express finding by the AO. The AO made an addition related to on-money based on material impounded during the survey and not under the search action. Therefore, no addition could have been made by the AO in assessments completed for the assessment years 2013-14 to 2016-17 invoking Section 153C/153A of the Act. Even if the cash found was considered undisclosed income for the assessment year 2017-18, no addition can be made for the assessment years 2013-14 to 2016-17. The additions made without any incriminating material found in the search were deleted, and the decision was in favor of the assessee. Regarding the validity of assessment proceedings u/s 153C/153A beyond the period of limitation and the selection of the initial assessment year.
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Customs

• Foreign national denied bail over commercial heroin haul; flight risk & addiction potential cited.

  Bail application dismissed in a case involving possession/recovery of commercial quantity of heroin, a highly addictive narcotic substance. Minor discrepancy in weight of contraband not material. Compliance with Section 50 NDPS Act regarding search of person/bag a matter of trial. Recovery of commercial quantity attracts Section 37 NDPS Act prohibiting grant of bail. Heroin's severe health impacts and addiction potential weigh against bail. Applicant being a foreign national poses flight risk. No grounds for regular bail made out.
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• Overseas transaction value valid unless proven otherwise, NIDB data alone insufficient for price adjustment.

  Transaction value must be accepted as assessable value unless proven incorrect through independent evidence, mere reference to NIDB data insufficient. Onus on Department to demonstrate how relationship between importer and overseas supplier influenced prices. No evidence that agreed values incorrect, original authority recorded relationship did not affect invoice price. NIDB data cannot be sole basis for value enhancement without establishing comparability in quality, quantity, origin, commercial factors affecting transaction value. Lack of communication to appellant regarding doubts on declared transaction value violates Customs Valuation Rules, 2007. Impugned order set aside, appeal allowed by Appellate Tribunal.
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IBC

• Majority CoC vote upholds resolution plan within IBC norms. Commercial wisdom prevails over judicial intervention.

  Resolution plan approved by Committee of Creditors (CoC) with 97.54% vote share. Commercial wisdom of CoC in approving resolution plan not to be lightly interfered with. Adjudicating Authority's jurisdiction limited to Section 30(2) of Insolvency and Bankruptcy Code (IBC). Resolution plan meets requirements of Section 30(2). No grounds to interfere with Adjudicating Authority's order approving resolution plan. Appeal dismissed by National Company Law Appellate Tribunal (NCLAT).
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• Application for CIRP withdrawal denied after commencement of liquidation; SCC not mandatory for prior cases.

  An application u/s 12A of the Insolvency and Bankruptcy Code (IBC) for withdrawal of the Corporate Insolvency Resolution Process (CIRP) cannot be filed after the commencement of liquidation proceedings. The statutory scheme delineated by Sections 12A and 33, and Regulation 2B of the Liquidation Regulations, prohibits an application u/s 12A during the liquidation period. The Adjudicating Authority correctly rejected the application filed by the appellant after more than three years from the commencement of liquidation, which was at the instance of the former director. Regarding the constitution of the Stakeholders' Consultation Committee (SCC) under Regulation 31A of the Liquidation Regulations, it is not mandatory for the Liquidator to constitute the SCC when the liquidation commenced before the insertion of Regulation 31A. The explanation to Regulation 31A, inserted in 2022, clarifies that the SCC need not be constituted for liquidations that commenced before the provision came into effect. The statute does not contemplate the performance of an impossible act, and the Adjudicating Authority rightly held that there was no requirement for constituting the SCC in the present case. The NCLAT (Appellate Tribunal) found no error in the order passed by the Adjudicating.
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• Banks justified in declaring company's loan account as NPA after failure to renew credit and provide financials.

  Corporate debtor's account correctly declared as non-performing asset (NPA) due to failure to renew cash credit facilities and provide required financial documents for review within stipulated time. Banks require regular renewal to assess borrower's risk profile, credit worthiness, and viability to ensure account remains standard. Outstanding balance continuously exceeding sanction limit/drawing power renders account "out of order" as per RBI guidelines. Corporate debtor unable to rectify irregularities pointed out by bank, justifying declaration as NPA and initiation of insolvency proceedings u/s 7. Adjudicating authority's order upheld by appellate tribunal.
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PMLA

• Illicit liquor cartel busted, Rs 2161cr laundered via unaccounted sales, illegal commissions.

  The case pertains to allegations of money laundering, charging of illegal commissions, sale of unaccounted illicit country liquor using holograms, and payment of annual commissions by distilleries for operating a cartel in the state of Chhattisgarh. The key points are: the FIR registered by Chhattisgarh alleges proceeds of crime estimated at Rs. 2161 crores, involving illegal commissions, sale of unaccounted illicit liquor with the involvement of distillers, hologram manufacturers, bottle makers, transporters, and excise officials. The investigation revealed a criminal syndicate led by Anwar Dhebar and Anil Tuteja, who coordinated with various entities to ensure smooth operation of the illegal racket. The syndicate collected commissions on accounted liquor sales, unaccounted illegal liquor sales, and bribes from distillers to form a cartel. The High Court found prima facie offenses disclosed against the petitioners, causing huge financial loss to the state exchequer, estimated at Rs. 2161 crores in proceeds of crime. The case involves an organized crime requiring investigation by state police and the Enforcement Directorate (ED). The High Court dismissed the petition, finding no grounds for interference at this stage.
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• Property linked to crime proceeds seized despite Trust's lack of knowledge.

  Money laundering case involving scheduled offence and proceeds of crime. Trust property attached under PMLA despite Trust being bona fide receiver without knowledge of alleged offence. Key points: Government need not be made party as title remains with them despite lease. Attachment order valid as ingredients u/s 5(1) PMLA satisfied with reason to believe property involved in money laundering. Prosecution complaint filed within time limit. Trust not named in FIR/ECIR but property derived from proceeds of crime by accused infused into Trust. Sufficient nexus established between attached property and criminal activity. Adjudicating Authority followed statutory requirements u/ss 8(1) and 8(2) PMLA. No illegality in impugned order, appeal dismissed.
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• Prosecution complaint filed within amended 90-day limit, validating continued property attachment despite substantive law change.

  The notification GSR 383(E) dated 19.04.2018 amended the relevant clause, which came into effect on the date of publication. Consequently, the Directorate had 90 days from 19.04.2018 to file the prosecution complaint. The prosecution complaint was filed on 16.07.2018, within the limitation period of 90 days. The Supreme Court clarified that a subsequent amendment is considered clarificatory and applied retrospectively only when the pre-amended law was vague or ambiguous, making interpretation impossible without the amendment. However, no such difficulty existed in interpreting the PMLA, 2002, making the amendment substantive and prospective. Procedural amendments apply retrospectively to actions after the date they come into force, even if the claim is of an anterior date. Since the Directorate complied with the amended law by filing the prosecution complaint within 90 days of 19.04.2018, the continued attachment of properties during the pendency is valid.
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• Amended law timelines followed correctly for prosecution filing, attachment remains valid.

  The notification GSR 383(E) dated 19.04.2018 amended the clause, which came into effect on the same date. The respondent Directorate had 90 days from 19.04.2018 to file the prosecution complaint. The prosecution complaint was filed on 16.07.2018, within the limitation period of 90 days from 19.04.2018. The Supreme Court in Sree Sankaracharya University of Sanskrit case clarified that a subsequent amendment can be considered clarificatory or declaratory of the previous law only if the pre-amended law was vague or ambiguous, and it was impossible to reasonably interpret the provision without the amendment. In the present case, neither the amendment stated it was clarificatory nor any such implication arose, and no difficulty existed in interpreting the PMLA, 2002 provisions without the amendment. The appellant's contention that the provisionally attached properties were liable to be released due to the respondent's failure to file a prosecution complaint within 90 days of the AA's order dated 19.01.2015 is without merit. The 90-day period commenced from 19.04.2018, and the respondent complied by filing the prosecution complaint within this period. The continued attachment of properties during the pendency of proceedings arising from the prosecution complaint is not illegal. The appeal is.
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Service Tax

• HC dismisses plea for extension of payment deadline under Sabka Vishwas Scheme.

  The High Court dismissed the petition seeking direction to issue a discharge certificate under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The petitioner had availed the scheme's benefit but failed to make the payment within the prescribed time limit of June 30, 2020. The court held that extending the payment date would amount to modifying the scheme, which is impermissible under the law. The Supreme Court's decision in M/S. YASHI CONSTRUCTIONS VERSUS UNION OF INDIA & ORS. was cited, which stated that a person availing a scheme's benefits must strictly abide by its terms and conditions. Since the petitioner did not comply with the scheme's terms, the court found no reason to interfere and dismissed the petition.
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• Clinical Research & Data Management Services Wrongly Denied Export Status.

  The appellant availed CENVAT credit prior to registration. The department demanded interest on such credit, which was held impermissible as no demand for recovery of ineligible credit was raised. The appellant provided Clinical Research Management and Resourcing (CMR) services and Data Management services. The department alleged CMR services did not qualify as export, but confirmed demand for entire turnover including Data Management services, which was incorrect. Data Management services were accepted as exports by granting refunds, establishing they fulfilled export conditions. CMR services also qualified as export under Export of Service Rules as the services involved testing, analysis, and delivery of reports outside India. The extended period of limitation was invoked alleging suppression of facts, which was held unjustified as the appellant filed returns and obtained refunds for Data Management services. Penalties imposed under Finance Act and CENVAT Credit Rules were set aside. The Tribunal allowed the appeal, setting aside the impugned order as unsustainable.
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• Hazardous waste treatment by industry consortium exempt from service tax.

  The appellant company is a consortium engaged in treating hazardous waste of member industries as directed by GPCB. It was held that charges collected for treating hazardous waste of member industries are not liable to service tax, as affirmed in VAPI WASTE & EFFLUENT MANAGEMENT CO case. Services by operators of common effluent treatment plants for effluent treatment are exempt under Notification 08/2017-ST. Hence, for periods prior to and after 01.07.2012, services of effluent treatment of hazardous waste are not liable to service tax. The impugned order demanding service tax and penalty is set aside, and the appeal is allowed.
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Articles

• Intelligence Officer empowered to pass order under GST
• THE INTEREST ACT, 1978 – AN OVERVIEW
• Exemption is not available when the maintenance charges exceed Rs. 7,500/- per month per member

Notifications

• GST

• 20/2024 - dated 8-10-2024 - CGST
  Central Goods and Services Tax (Second Amendment) Rules, 2024.

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• 02/2024 - dated 7-10-2024 - UTGST
  Union Territory Goods and Services Tax (Ladakh) Rules, 2024.

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• GST - States

• 28/GST-2 - dated 9-10-2024 - Haryana SGST
  Amendment of Notification no. 35/ST-2, dated 30.06.2017 under the HGST Act, 2017

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• 27/GST-2 - dated 9-10-2024 - Haryana SGST
  Amendment of Notification no. 48/ST-2, dated 30.06.2017 under the HGST Act, 2017

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• 26/GST-2 - dated 9-10-2024 - Haryana SGST
  Amendment of Notification no. 47/ST-2, dated 30.06.2017 under the HGST Act, 2017

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• 25/GST-2 - dated 9-10-2024 - Haryana SGST
  Amendment of Notification no. 46/ST-2, dated 30.06.2017 under the HGST Act, 2017

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Circulars / Instructions / Orders

• SEBI - SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/136 - dated 10-10-2024
  Extension of timeline for implementation of SEBI Circular SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/75 dated June 05, 2024
• Income Tax - F. No. 173/118/2024-ITA-I - dated 7-10-2024
  Order under section 119 of the Income-tax Act, 1961
• IBC - IBBI/LIQ/76/2024 - dated 9-10-2024
  Extension of time for filing Forms to monitor liquidation processes under the Insolvency and Bankruptcy Code, 2016, and the regulations made thereunder
• IBC - IBBI/LIQ/77/2024 - dated 9-10-2024
  Extension of time for filing Forms to monitor voluntary liquidation processes under the Insolvency and Bankruptcy Code, 2016, and the regulations made thereunder.

News

• Empowering Rural India: NABARD Survey on Rural Financial Inclusion

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• Union Government releases tax devolution of ₹1,78,173 crore to State Governments, including one advance instalment of ₹89,086.50 crore in addition to regular instalment due in October, 2024

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Case Laws:

• GST

• 2024 (10) TMI 496
  Principles of natural justice - respondent No. 1 has passed a summary of the order dated 13th August, 2019, however no detailed order is made available to the petitioners - HELD THAT:- The impugned summary order dated 13th August, 2019 is based upon NO ORDER passed under Section 73 of 74 of the GST Act and therefore, such summary of the order is void-ab-initio and is accordingly hereby to be quashed and set aside and the petitioners are at liberty to take consequential action for the refund of the amount paid in Form GST DRC-03. Petition allowed.

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• 2024 (10) TMI 495
  Dismissal of appeal of the petitioner on the ground of limitation - prayer for for quashing and setting aside the order passed under section 73 (9) of the Central Goods and Service Tax Act, 2017 - requirement of one chance of hearing - violation of principles of natural justice - HELD THAT:- It is not in dispute that the managing partner of the petitioner-Firm whose Email ID was the only source of communication between the petitioner-Firm and the respondent- Department was critically ill and was suffering from cancer from the month of 2022 to August 2022. Revenue has not been able to controvert these facts. However, the fact remains that the petitioner-Firm uploaded the return in FORM GSTR 01 and GSTR 3B in the months of March, April and May, 2022 and therefore, the consultant of the petitioner-Firm ought to have been drawn attention of the petitioner about the notice dated 22.02.2022. However, taking into consideration the fact that the managing partner of the petitioner-Firm was not well, the respondent-Department ought to have granted an opportunity of hearing before passing the impugned order dated 04.04.2022 once more so as to comply with the provisions of section 75 (4) of the CGST Act. The respondent-authority is required to give an opportunity of hearing if any adverse order is passed. The fact remains that the notice in Form DRC 01 is issued by the respondent No. 1 before passing order and failure on the part of the petitioner-Firm to reply to such notice would be the sufficient ground for compliance of section 75 (4) of the Act - However, in the facts of the case, when Managing Director of the petitioner-Firm was not well and the petitioner has pleaded the inability to reply to the notice, one fair chance is required to be given to the petitioner to comply with the principle of natural justice. The impugned order dated 04.04.2022 and the appellate order dated 04.09.2022 are hereby quashed and set aside and matter is remanded back to the respondent No. 1 to decide show-cause notice dated 22.02.2022 after giving an opportunity of hearing to the petitioner - Petition allowed by way of remand.

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• 2024 (10) TMI 494
  Classification of goods - rate of GST - Fly Ash Blocks - classifiable under Entry No.225B of Schedule-I or under Entry No. 453 of Schedule-III? - HELD THAT:- Circular No. 179/11/2022-GST dated 03.08.2022 has clarified that as per recommendation of the GST Council in 23rd meeting the condition of 90% or more fly ash content was applicable only for Fly Ash Aggregate and accordingly it was clarified that 90% or more fly ash content applied only to Fly Ash Aggregate and not to Fly Ash Bricks and Fly Ash Blocks and w.e.f. 18.07.2022 the condition is omitted from the description. In view of above clarification, as per the Notification No. 04/2018-Central Tax (Rate) dated 31.12.2018 Entry No. 225B refers to applicability of levy of GST rate of 5% on Fly Ash Bricks and all Fly Ash Aggregate with 90% or more fly ash content or Fly Ash Blocks as per the clarification fly ash aggregate at 90% or more fly ash content would not be applicable Fly Ash Bricks or Fly Ash Blocks and accordingly the rate of GST applicable to the products manufactured by petitioner would be 5% as per the Entry No. 225B. The orders passed by the Advance Ruling Authority and the Appellate Authority is set aside - petition allowed.

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• 2024 (10) TMI 493
  Order of cancellation of registration passed by the Assessing Officer upheld - appeal was dismissed on the ground of limitation - petitioner challenged the order of cancellation of registration on the ground of not providing an opportunity of hearing as well as such order was passed without assigning any reason for cancellation of the registration of the petitioner - principles of natural justice - HELD THAT:- The Coordinate Bench of this Court in case of M/s. Aggrawal Dyeing Printing vs. State of Gujarat [ 2022 (4) TMI 864 - GUJARAT HIGH COURT ] has issued the guidelines to the respondent-authorities that ' Our concern is that on account of procedural lapses, the High Court should not be flooded with writ applications. The procedural aspects should be looked into by the authority concerned very scrupulously and deligently. Why unnecessarily give any dealer a chance to make a complaint before this Court when it could have been easily avoided by the department.' The aforesaid judgment was rendered in the year 2022. However, in spite of the above direction issued by this Court, the respondent-authorities without following such directions are issuing cryptic notice and order for cancellation of registration number of the petitioner. In the present matter, order of cancellation of registration is passed without giving any reason by the respondent authorities, and appeal filed by the petitioner under Section 107 of the GST Act is also dismissed. As the Appellate Authority has dismissed the appeal of the petitioner, the respondent authorities will not be able to exercise the revisional power under section 108 of the GST Act. Therefore, the impugned order passed by the Appellate Authority as well as the order of cancellation of registration are required to be quashed and set aside - the matter is remanded back to the Assessing Officer at the show cause notice stage - this petition is partly allowed and accordingly, stands disposed of by quashing and setting aside the impugned order passed by the Appellate Authority as well as order of cancellation of registration and the matter is remanded to the Assessing Officer at show-cause notice stage, however, the registration number of the petitioner shall remain suspended till such show cause notice is disposed of.

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• 2024 (10) TMI 492
  Rejection of Refund claim on multiple grounds - Constitutional validity of Entry No. 10 of Notification No. 10/2017- Integrated Tax (Rate) dated 28.6.2017 - ultra-vires the provisions of the IGST Act and Article 14 and 265 of the Constitution of India even qua imports made on FOB basis or not - levy of tax under the IGST Act on payment of ocean freight on reverse charge basis - HELD THAT:- It is not in dispute that IGST as per proviso to section 5(1) is leviable on the on the value as determined in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962)and value of goods includes the cost, freight and insurance at the place of importation and therefore, once the IGST is paid on value of goods including the freight, cost and insurance, it would not make any difference between the transactions is on CIF basis or FOB basis, as in both the cases IGST would be payable as per provision of section 5(1) of the IGST Act, 2017 on the value of goods as per the provisions of the Customs Act. As held by the Hon ble Apex Court in case of Union of India and another v. Mohit Minerals Private Limited through Director [ 2022 (5) TMI 968 - SUPREME COURT ] as well as by Bombay High Court in case of M/s. Agarwal Coal Corporation Pvt. Ltd. [ 2024 (3) TMI 1265 - BOMBAY HIGH COURT ], when the notification itself is struck down, the respondent authorities cannot insist for levy of IGST on the amount of ocean freight in case of transaction FOB basis also. The impugned order is hereby quashed and set aside - petition allowed.

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• 2024 (10) TMI 491
  Blocking of ITC in the Electronic Credit Ledger of the Appellants by invoking Rule 86A of the CGST Rules - justification in not providing/granting a pre-decisional hearing to the appellants before passing the impugned order blocking its Electronic Credit Ledger under Rule 86A of the CGST Rules - violation of principles of natural justice. Whether the respondents-revenue were justified in not providing/granting a pre-decisional hearing to the appellants before passing the impugned order blocking its Electronic Credit Ledger under Rule 86A of the CGST Rules? - HELD THAT:- A plain/bare reading of Rule 86A will indicate that there is absolutely no express provision for compliance with principles of natural justice; however, there could arise occasions/situations when principles of natural justice can be read into statutory provisions though they are not expressly present in the provisions - though Rule 86A does not expressly/specifically provide for adherence to principles of natural justice, the same would necessarily have to be read into Rule 86A and complied with while invoking the said provision. It would also be apposite to state that when the ECL of the appellants was sought to be blocked and such credit cannot be utilised for upto 1 year, the said blocking would entail and result in serious civil consequences for the appellants warranting compliance with the principles of natural justice and providing an opportunity of hearing to the appellants. The learned Single Judge clearly fell in error in coming to the conclusion that a pre-decisional hearing was not required to have been provided/granted to the appellants by the respondents-revenue prior to passing the impugned orders blocking the ECL of the appellants and consequently, the said findings recorded by the learned Single Judge deserve to be set aside - the issue is accordingly answered in favour of the Appellant and against the respondents-revenue by holding that respondents-revenue committed a grave and serious error/illegality/infirmity in not providing/granting a pre-decisional hearing to the Appellant before passing the impugned order blocking its Electronic Credit Ledger under Rule 86A of the CGST Rules and consequently, the impugned orders deserve to be set aside. Whether the respondents-revenue were justified in passing the impugned orders blocking the Electronic Credit Ledger of the Appellants by invoking Rule 86A of the CGST Rules? - HELD THAT:- In the instant case, the electronic credit ledgers have been blocked solely on the basis of communication from another officer [Field visit report by the Asst. State Tax Officer, Vasco-D-Gama, (Goa)]. There was no tangible material to form any belief that the ITC lying in the appellants ECL was on account of any fake invoice; it had proceeded to take action solely on the basis of a direction issued by another authority - On a perusal of the impugned orders, it is crystal clear that the order to block the ECL provisionally was out of the borrowed satisfaction of the respondent authorities rather than based on any independent analysis. In the light of existence of a legal mandatory pre-requirement and precondition of recording of formation of opinion which is in pari-materia with reasons to believe , it was incumbent upon the officer to arrive at his own satisfaction and not borrowed satisfaction by proper application of mind; the respondents have proceeded solely on the basis that the supplier has been found to be non-existent or not to be conducting any business from the place which it has obtained registration, has blocked the input tax which is impermissible in law without checking the genuineness or otherwise of the transaction and consequently, the impugned orders are bald, vague, cryptic, laconic, unreasoned and non-speaking and deserve to be set aside. In the absence of valid nor sufficient material which constituted reasons to believe which was available with respondents, the mandatory requirements/pre-requisites/ingredients/parameters contained in Rule 86A had not been fulfilled/satisfied by the respondents-revenue who were clearly not entitled to place reliance upon borrowed satisfaction of another officer and pass the impugned orders illegally and arbitrarily blocking the ECL of the appellant by invoking Rule 86A which is not only contrary to law but also the material on record and consequently, the impugned orders deserve to be quashed - the issue is answered in favour of the appellants by holding that the respondents-revenue committed a grave and serious error/illegality/infirmity in passing the impugned orders blocking the Electronic Credit Ledgers of the Appellants by invoking Rule 86A of the CGST Rules. Whether the impugned order passed by the learned Single Judge warrants interference in the present appeals? - HELD THAT:- It is already concluded that the learned Single Judge committed an error in holding that a pre-decisional hearing was not required prior to passing the impugned orders and that the respondents had satisfied the requirements/ingredients for invocation of Rule 86A and that the said findings recorded by the learned Single Judge deserve to be set aside. Under these circumstances, upon re-appreciation, re-evaluation and re-consideration of the entire material on record, the order of the learned Single Judge is not only contrary to law but also the material on record warranting interference in the present appeals which deserve to be allowed - the issue is answered in favour of the appellants by holding that the order of the learned Single Judge deserves to be set aside and the writ petitions preferred by the appellants-writ petitioners deserve to be allowed by quashing the impugned orders. The impugned order is set aside - Appeal allowed.

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• Income Tax

• 2024 (10) TMI 490
  Rejection of Revision u/s 264 - non-payment of mandatory fee of Rs. 500 at the time of filing - HELD THAT:- Sub-section (5) of Section 264 thus prescribes for payment of fees for preferring the Revision Application. When the petitioner has already paid the fees on 04.02.2023, when the notice dated 03.02.2023 was served upon the petitioner there is sufficient compliance of provisions of Section 264 (5) of the Act coupled with the fact that the Revision Application filed by the petitioner was within the time period even if the date of filing is to be considered as 04.02.2023. The decision relied upon by respondent No. 1 is not applicable in the facts of the case as in the said case, no fees were paid as stipulated by the statutory provision and whereas in the facts of the present case, the petitioner paid the fees immediately on raising the objections by the respondent No. 1 and by payment of such fees, the objections raised is removed regularizing the Revision Application filed by the petitioner. Respondent No. 1 ought to have considered the Revision Application on merits rather than dismissing the same on technical grounds. The impugned order passed by the respondent No. 1 u/s 264 of the Act for the A.Y. 2020-21 is hereby quashed and set aside. The matter is remanded back to the respondent No. 1 to decide the Revision Application on merits in accordance with law after giving an opportunity of hearing to the petitioner within 12 weeks from the date of receipt of copy of this order.

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• 2024 (10) TMI 489
  Reopening of assessment u/s 147 - Reason to believe - AO has formed the reason to believe only on the basis of the information available with him with regard to the transactions carried out by the assessee - HELD THAT:- It appears that the information available with AO has been denied by the petitioner and the same has only been brushed aside by AO while rejecting the objections filed by the petitioner without considering the same in detail. AO has only referred to such details by stating that the transactions disclosed by the petitioner are not reflected in the Demat account and the AO had material in his possession to form a reasonable belief that the income has escaped assessment. Except such vague observations, AO has not dealt with the details submitted by the petitioner in the objections. We are of the opinion that the impugned notice issued u/s 148 is not tenable as the AO has failed to form a reason to believe that income has escaped assessment without considering the objections raised by the petitioner. Decided in favour of assessee.

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• 2024 (10) TMI 488
  Validity of Revision u/s 263 - scope of Section 13(8) of the Income Tax Act, 1961 in relation to the applicability of Section 2(15) - ITAT holding that, CIT(E) has erred in passing order u/s 263 as the issue of applicability of Section 13 (8) read with provision of Section 2 (15) of Income Tax Act, 1961, was covered in favour of assessee - HELD THAT:- Considering such findings of facts recorded by the Tribunal to the effect that when the PCIT initiated the proceedings u/s 263 of the Act, this Court [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT] had already decided the issue in favour of the assessee holding that the assessee-Society constituted under the Gujarat Town Planning and Urban Development Act, 1976 would be providing general public utility services within the meaning of Section 2 (15) of the Act. The Hon ble Supreme Court has also upheld the view of this Court [ 2022 (10) TMI 948 - SUPREME COURT] . It was therefore, rightly held by the Tribunal that the PCIT could not have initiated the proceedings u/s 263 of the Act as the Assessment Order cannot be said to be erroneous or prejudicial to the interest of Revenue. No substantial question of law would arise from the impugned order of the Tribunal.

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• 2024 (10) TMI 487
  Revision u/s 263 - Assessee case selected for limited scrutiny under CASS - PCIT observed that the assessee alongwith two other co-owners (all three having equal share of one third each) had purchased an immovable property being land - HELD THAT:- It is pertinent to note that Section 142(1) of the Act cannot extend the scope of defective notice u/s 143(2) as stated by the Ld. AR. In fact, this can only be extended through approval of PCIT which was not done in the present case. It is further noted that as per the notice u/s 143(2) of the Act and that also the scrutiny was only to the extent of large cash deposits. Notice u/s 142(1) also mentions transfer of property and not that of purchase of property. The assessee at the time the assessment proceedings has given details related to large cash deposits as well as transfer of property in the present Assessment Year. PCIT cannot invoke Section 263 when the assessee has given the detailed reply to the issue which was called upon by the AO not only that of notice u/s 143(2) of the Act but also after the issuance of notice under Section 142(1) of the Act. Thus, the Assessing Officer has passed the Assessment Order after taking into account all the relevant details and this cannot be said as erroneous or prejudicial to the interest of Revenue. Besides this, the component of transfer of one or more properties during the year and the assessee s subsequent reply related to one third of the property and his investment in the said property conveys that the AO has taken into account the transfer of property including that of purchase of property. Thus, the PCIT is taking different stand/view related to the valuation of the immovable property which cannot be matter of revision once the same has been verified by the AO. The test of errors and prejudice to the interest of Revenue components in Assessment Order though has been mentioned by the PCIT being that the fair market value of the property in accordance with stamp duty value has not been taken by the Assessing Officer as held cannot be the sole criteria for making the Assessment Order erroneous and prejudicial to the interest of Revenue. Thus, the order passed by the PCIT is not justifiable u/s 263 of the Act. Decided in favour of assessee.

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• 2024 (10) TMI 486
  Unexplained income u/s 69 r.w.s 115BBE - addition on account of the earned commission - addition was made on the assumption basis because the assessee who was working in the bank as a bank employee finished their work beyond the working hours - HELD THAT:- If the assessee has done the work beyond the working hours this may be the violation of the banking rules but on that basis the addition cannot be made assuming that the assessee has received the commission from the Rajeev Singh Kushwaha. As undisputed fact that the statement recorded u/s 132(4) of the Act has better evidentiary value but it is also settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements. In this case addition was made merely on the statement basis and no other corroborating material was found during the search and seizure operation. According to AO 1 kg gold bar was seized by the Enforcement Directorate from the premise of the accomplice of the assessee Shri Shobhit Sinha sister s residence at Lucknow on 03-12-2016. We have observed that the AO has made the addition on the basis that the assessee had helped Shri Rajeev Singh Kushwaha in cash deposits by flouted the banking norms. AO has made the addition only on mere assumption and not on any material recovered during search and seizure. In the absence of the supporting evidence additions made by the AO is not sustainable. The appeal of the assessee is liable to be allowed.

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• 2024 (10) TMI 485
  Addition u/s 69A - unexplained credit - Treatment as a gift u/s 56(2)(x) - HELD THAT:- Section 69A applies to unexplained money for which no satisfactory explanation is provided. However, the assessee has provided all necessary documentation, including a valid remittance receipt, bank statements, and a certificate from the employer. These documents conclusively demonstrate that the amount was earned outside India as part of Mrs. Aashita P. Pancholi s employment in the UAE, and the same was transferred to the NRO account from the NRE account. As important to note that section 69A of the Act does not require the assessee to prove the source of the source of the funds, particularly when the immediate source-the remittance from the employer- is well-documented and legitimate. Therefore, we find that the AO s addition u/s 69A is unsustainable and should be deleted. DRP took an alternative view that the amount should be treated as a gift under Section 56(2)(x) - This conclusion is based on the involvement of Mr. Shreekanth Shenoi, an employee of the company who facilitated the remittance. The DRP suggested that the amount might have been a gift from Mr. Shenoi rather than a salary remittance. We find this contention to be without merit. The evidence on record clearly shows that Mr. Shenoi was merely facilitating the withdrawal and transfer of the performance incentive from the company s account to the NRE account of Mrs. Aashita P. Pancholi. The remittance receipt and the certificate from the employer both confirm that the amount was a part of Mrs. Aashita s performance bonus, and there is no evidence to suggest that it was a gratuitous gift from Mr. Shenoi. The employer s statement that this was part of the company s usual practice for handling such remittances further supports the assessee s explanation. Section 56(2)(x) applies to gifts or transfers without consideration, but in this case, the remittance was part of the salary earned by Mrs. Aashita P. Pancholi for services rendered in the UAE. There is no element of a gift or gratuitous receipt involved, and hence, the DRP s alternative finding u/s 56(2)(x) of the Act is incorrect and is accordingly rejected. Both the assessee and his wife were non-residents during the relevant assessment year. The couple had been residing and working in the UAE for over 10 years, and during the financial year 2017-18, they were in India for only 77 days, well below the threshold for being considered residents under the provisions of the Act. As per Section 5(2) of the Act, the global income of a non-resident is taxable in India only if it is received or deemed to be received in India, or if it accrues or arises in India. In this case, the performance incentive of AED 145,000 (Rs. 25,60,654/-) was earned and accrued outside India and remitted to India through legitimate banking channels. This income does not fall within the purview of Section 5 and is not taxable in India. Therefore, the addition made by the AO is contrary to the provisions of the law and cannot be upheld. It is clear that the addition made u/s 69A is unwarranted as the source of the funds has been satisfactorily explained by the assessee. The alternative finding by the DRP, treating the amount as a gift u/s 56(2)(x) of the Act, is legally unsustainable and not supported by any evidence. The income in question was legitimately earned outside India by a non-resident and is not taxable under Indian law. Accordingly, the addition made by the AO is deleted - Appeal of the assessee is allowed.

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• 2024 (10) TMI 484
  Validity of reopening of assessment u/s 147 - reasons to believe - as argued borrowed satisfaction without independent application of mind and therefore the same is invalid and may be quashed - HELD THAT:- The banking authorities are asked to provide the opening form and KYC details in which it was found that Shri Utpal Das was the introducer of the transacting party Smt. Mira Indra. It was also noted that the cash transaction were made in account and RTGS were made from her bank account. Thereafter it was mentioned by Income Tax Officer (Intelligence Investigation), Durgapur that the transaction has been found there that Shri Utpal Das withdraws huge amount and thereafter the investigation wing noted that the AO has to proceed to reopen the case of the assessee on protective basis. Thus, there has not been any application of mind by the AO and it is a patent case of borrowed satisfaction. We have perused the bank statement a copy wherein the deposit were made. There was withdrawals of only Rs. 9 lacks whereas the AO states that there have been huge withdrawals of cash of which the assessee was the beneficiary. Therefore, this is the case where the AO has failed to carry out any enquiry before issuing notice u/s 148 of the Act and re-opened the assessment on borrowed satisfaction which is not permissible under the Act. Moreover, we note that the case was reopened for making the protective addition in the hands of assessee whereas the addition was made on substantive basis. The case of the assessee finds support from the decision of Meenakshi Overseas Pvt. Ltd. [ 2017 (5) TMI 1428 - DELHI HIGH COURT ] wherein held that the case has reopened without any independent application of mind and the reasons recorded failed to demonstrate the live link between the tangible material and the formation of the reasons to believe that income has escaped assessment, then there is no error of tribunal concluding that initiation of proceedings u/s 147/148 to reopen the assessments for the AY in question does not satisfy the requirement of law and accordingly, the question framed is answered in the negative in favour of the assessee and against the revenue. Similar ratio has been laid down in the case of ACIT vs. Nupower Renewables Pvt. Ltd. [ 2019 (10) TMI 520 - SC ORDER ] wherein as held that where the AO reopens the assessment based on the information supplied by the Investigation wing to investigate the source of genuineness and creditworthiness of the investor company which is just a fishing enquiry and not permissible in law. We are inclined the quash the reassessment proceedings and also the consequent order passed by the AO for having failed to satisfy the condition for reopening of assessment u/s 147/148. Appeal of the assessee is allowed.

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• 2024 (10) TMI 483
  Penalty levied u/s 271(1)(c) - defective notice u/s 274 - non striking of the irrelevant limb - assessee argued that the ld. A.O. had issued notice u/s. 274 r.w.s. 271 without striking out the irrelevant limb as to whether the penalty was levied for concealment of particulars of income or for furnishing inaccurate particulars of income - HELD THAT:- We are of the considered view that the assessee s case would be squarely covered by the full bench decision of the Hon'ble Jurisdictional High Court in Mohammed Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] where the non striking of the irrelevant limb would vitiate the penalty proceeding. Thus, we hold that the impugned notice issued by the ld. A.O. is null and void and, hence, direct the ld. A.O. to delete the impugned penalty. Decided in favour of assessee.

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• 2024 (10) TMI 482
  Assessee in default u/s 201(1) - non deduction of TDS u/s 194LBC on the EIS paid to the Originator - CIT(A) held that since the originator in this case has not subscribed to any PTCs, it cannot be termed as an investor as defined in section 194LBC r.w.s. 115TCA of the Act and further no investment has also been shown to have been made by the originator, thereby determining that the originator in this case is not an investor and provisions of section 194LBC of the Act could not be attracted. HELD THAT:- As relying on ITO vs. Syamantaka IFMR Capital [ 2024 (5) TMI 1233 - ITAT MUMBAI] , M/s. Vivriti Cibus [ 2023 (12) TMI 806 - ITAT MUMBAI] and SME Pool Series [ 2024 (2) TMI 1383 - ITAT MUMBAI] it is observed that this issue has already been dealt with by the jurisdictional co-ordinate bench extensively which has taken a view in support of the assessee. We also find no infirmity in the order of the ld. CIT(A) and we find no justification in taking any other view. Therefore, the grounds of appeal are dismissed.

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• 2024 (10) TMI 481
  Liability to pay tax at maximum marginal rate as per provisions of Section 167B - assessee is a private discretionary trust - CIT(A) rejected the contention of the assessee and held that the maximum marginal rate is required to be computed at the highest rate of taxation and surcharge also - CIT(A) held that the provisions of Section 2(29C) do not remotely suggest to include surcharge in MMR as per different slab rates of income. and it is clear that maximum marginal rate is required to be computed of the tax rate of highest slab @ 30% and surcharge for highest slab @ 37% alongwith education Cess @ 4% Applicable rate of surcharge - How to calculate the maximum marginal rate? - HELD THAT:- Language of law is clear that maximum marginal rate shall be maximum rate of tax and surcharge of the highest rate in case of an individual. If the surcharge was to be levied according to the slab rate of the assessee, it was not required to be mentioned in Section 2(29C) of the Act that rate of income tax (including surcharge of income tax, if any) applicable in relation to the highest slab of income in case of an individual. Thus, purpose of mentioning surcharge in that section is to compute maximum marginal rate as high rate of tax and also highest rate of surcharge. If one reads the provisions of the law as suggested by the learned A.R., mentionof the word surcharge in Section 2(29C) of the Act becomes redundant. The definition is not capable of any doubt and only meaning that it admits is that the rate on the maximum slab of income and maximum rate of surcharge is to be treated as the maximum marginal rate. The Finance Act for each year prescribes various slabs for each category of the assessee and the corresponding rates applicable. This view is also supported by the decision of C.V. Divakaran Family Trust [ 2001 (12) TMI 56 - KERALA HIGH COURT] It is also true that the Policy of Law as suggested in Section 2(29C) of the Act is to discourage discretionary trust by charging the income of such trust in the hands of the trustee at the maximum marginal rate except in certain specified situation. Thus, such a policy is defeated, if we hold that the beneficiary of a trust is chargeable to tax and also surcharge at the highest slab, but the assessee trust is charged to tax at the highest slab but lower rate of surcharge. See Gosar Family Trust, Jamnagar etc vs. CIT [ 1995 (4) TMI 2 - SUPREME COURT] The levy of maximum marginal rate on trust is thus specific anti Avoidance rule and therefore should be given a strict interpretation. Law prescribes that tax shall be charged on income in respect of which such person is so liable at the maximum marginal rate. There is no provision in the law to charge specific discretionary trust bit lower than the rates of tax and surcharge applicable to a beneficiary individual. We also draw strength from the decision of JK Holdings [ 2002 (12) TMI 15 - BOMBAY HIGH COURT] In the result, we confirm the order of CIT(A) holding that the maximum marginal rate is correctly computed by the Central Processing Centre by taking the maximum rate of income tax and maximum of rate of surcharge applicable in case of an individual for the assessment year and same is applicable on assessee, a private discretionary trust. CPC power to vary the rate of surcharge by processing the return of income u/s. 143(1) - For this proposition we find that CPC has power to compute the correct amount of tax and sum payable by the assessee in terms of provisions of Section 143(1)(b) and (c) of the Act. Therefore, on this ground also, we do not find any reason to interfere with the order of the learned CIT(A). Assessee appeal dismissed.

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• 2024 (10) TMI 480
  Exemption u/s 11 - denial of exemption on the ground that the details of registration u/s 12A were not provided - filing of return and audit report within the time limit prescribed u/s 139(1) was not established - HELD THAT:- We find that in the light of CBDT order dated 27.09.2019, the observation of the ld. Addl./JCIT(A)-5, Chennai is not correct since the last date for filing of the return and audit report for asstt. year 2019-20, which was 30.09.2019, was extended up to 30.10.2019 admittedly the same were filed on 23.10.2019, therefore, the return of income as well as audit report in Form 10B was filed within the prescribed time allowed by the CBDT and, therefore, the delay which was not there, cannot be the basis of denial of exemption u/s 11 as mentioned by the ld. Addl./JCIT(A)-5, Chennai. The acknowledgement of income tax return and Form 10B audit report dated 23.10.2019 was produced before us. We therefore find force in the argument of assessee that the ld. Addl./JCIT(A)-5, Chennai has erred in holding that the return of income and audit report was filed belatedly. Since the income tax return and audit report in Form 10B was filed within the prescribed time, ld. Addl./JCIT(A)-5, Chennai ought not to have disallowed this ground of appeal. - Thus direct the JAO to delete the adjustment - Decided in favour of assessee.

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• 2024 (10) TMI 479
  Addition u/s 14A r.w.r 8D - no dividend income received - HELD THAT:- It is an admitted fact that the assessee has not received any dividend income during the year and the statement made by assessee at the Bar could not be controverted by the DR. In assessee s own case, the CIT(A) has already taken a view in assessment years 2012-13 and 2014-15 that in absence of any exempt income, there cannot be any disallowance u/s 14A - Nothing contrary was brought to our notice against the order of the CIT(A) for the earlier assessment years where such disallowance made by the Assessing Officer was deleted by him. CIT(A) while deciding the issue has followed the decision of CIT vs. Chettinad Logistics Pvt. Ltd [ 2018 (7) TMI 567 - SC ORDER ] where it has been held that in absence of any exempt income, no disallowance can be made u/s 14A - As reasoning given by the CIT(A) on this issue and in absence of any contrary material brought to our notice by the Revenue, we do not find any infirmity in the order of the CIT(A) deleting the disallowance made by the AO. Accordingly, the same is upheld. The grounds raised by the Revenue are according dismissed.

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• 2024 (10) TMI 478
  Income from other sources u/s 56(2)(x) - Addition on account of excess fair market value as given in the Valuation Report over the purchase consideration - estimation of fair market value as on the date of sale of asset - HELD THAT:- The comparable instances narrated by DVO relates to the same village, however, there is a difference of about Rs. 94/- per square meter vis- -vis, the comparable of RS No.53 and RS No.3, which are shown at Rs. 126.16 per square meter and Rs. 220.04 per square meter respectively. No doubt, the DVO has adopted Rs. 155/- per square meter as on 15.09.2017. Though, average of four comparables instances is Rs. 163.36 per square meter. Considering the difference in various comparable instances relied by DVO, in my considered view, Rs. 150/- per square meter would be reasonable and sufficient to meet the end of justice. Thus, direct the AO to adopt Rs. 150/- per square meter and compute the addition accordingly. Ground No.1 of the appeal is partly allowed.

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• 2024 (10) TMI 477
  Capital gains u/s 50 arising out of sale of long term capital asset - rate applicable to short term capital gains or rates applicable to long term capital gains u/s 112 - diversified views on the issue by both members [JM and AM] As PER AMIT SHUKLA (J.M) - HELD THAT:- Capital gains arising out of the depreciable asset u/s 50 even though deem to be capital gain arising from transfer of a short term capital asset, that fiction has to be confined only to section 50 and it cannot convert short term capital asset into a long term capital asset and vice versa for the other purpose of the Act, either for set off against a long term capital loss or exemption provision were benefits is given from a long term capital gain on transfer of a long term capital asset or the rate of tax provided u/s 112 of the Act which clearly provides that income arising from transfer of a long term capital asset chargeable under the head capital gains, the amount of income tax calculated on such a long term capital gain shall be the rate of 20%. Thus, even section 50 treats that excess is to be taxed as capital gain arising from transfer of a short term capital asset but the rate of tax has to be applicable in terms of section 112 of the Act, because the treatment of a short term capital asset is only a purpose of section 50 and not otherwise can convert a long term capital asset into a short term capital asset for the purpose of rate of tax or any other provision of the Act. Accordingly, this question is answered in favour of the assessee holding that rate of tax applicable would be in terms of section 112 of the rate of 20% and applicable surcharge. Since, this is the only question referred to the Special Bench by the Hon ble President, therefore, for the deciding other issues as raised in cross appeals filed by the assessee as well as the revenue, same shall be fixed before the regular bench to decide. In the result, the question of law referred to the Special Bench is answered in favour of the assessee. As PER OM PRAKASH KANT, A.M - Section 50 of the Act has provided chargeability of income arising from transfer of depreciable assets. Since the sections related to exemptions/ deductions including section 54E of the Act under the head capital gains , are invoked only after computing of the capital gain and therefore those sections are independent from the sections which create chargeability of the capital gains. The exemptions provisions provided under the head capital gains from section 54 to 54GB of the Act , can be claimed once the chargeability of the gain arising on transfer of a capital asset is determined under the head of capital gains. Conversely, the section 112(1) of the Act is for invoking concessional rate of tax of 20 percentile on income arising from transfer of long-term capital asset, which is chargeable under the head capital gain and included in total income. The section 112(1) of the Act is intended solely for prescribing concessional rate of tax and not for determining chargeability of income under the head Capital gain , therefore, the section 112(1) cannot decide character of capital gain whether it would be short term capital gain or long term capital gain. If the opinion of learned JM is followed, then a anomalous situation may arise, where the income under the head capital gain determined as short-term capital gain u/s 50 and included under total income would be rendered only as ornamental item, undermining the purpose of exercise for computing short term capital gain. Such an interpretation would contradict the legislative intent. The provision of section 50 in the statute has been provided for achieving particular purpose of denying multiple benefit of depreciation and any interpretation which frustrate that purpose, should be discouraged. Thus held assessee is not entitled for concession rate of tax of 20% provided under section 112(1) of the Act on the short term capital gain computed u/s 50 of the Act and included by the assessee in its total income, which arose on transfer of three residential properties forming part of block of asset and on which deprecation was availed by the assessee in earlier years.question of law referred to the special bench is liable to be answered against the assessee and in favour of the revenue. Since the issue referred to the Special Bench has been adjudicated as above, for deciding other issues as raised in the cross appeals of the parties, the Registry may take up appropriate action for fixing the appeals before the regular Bench.

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• 2024 (10) TMI 476
  Levy of penalty u/sec 271(1)(c) - disallowance u/sec 80(IB)(10) - HELD THAT:- We find that the claim of the assessee is in consideration of the financial statements and the assessee adopted one of the possible views and has made similar claims in the earlier years and penalty was not levied. We are of the view that penalty cannot be automatic and every addition/disallowance in the assessment proceedings cannot be gate way for levy of penalty and relay on the decision of Manjunatha Cotton and Ginning factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT ] Further the assessee has made a claim under the bonafide belief that it is allowable under the law. Also see Reliance Petroleum Products Ltd. [ 2010 (3) TMI 80 - SUPREME COURT ] wherein held making in incorrect claim in law cannot be tantamount to furnishing in accurate particulars. Thus penalty cannot be sustained. Decided in favour of assessee.

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• 2024 (10) TMI 475
  Estimation of income - bogus purchases - addition on account of gross profit by applying GP Rate of 6% against 4.91% declared by the assessee - HELD THAT:- We do not have any hesitation in confirming the action of the CIT-A in stating that the 25 % of the purchases cannot be added in the hands of the assessee. As decided in Clarity Gold (P) Ltd [ 2017 (9) TMI 1640 - RAJASTHAN HIGH COURT ] while estimating the gross profit the industry gross profit which is running the business and that gross profit shown by the comparable cases should be considered. As is evident from the above comparable cases cited, the highest gross profit is 4.37 % as against the assessee has declared profit @ 4.91 % which is higher than the comparable cases. As against this information filed by the assessee revenue did not brought any cases having higher profit we direct the ld. AO to adopt 5 % as gross profit to end justice in the matter. While holding so we have respectfully followed the finding of our high court taking the industry comparable profit in the case of Clarity Gold [supra] and direct the ld. AO to adopt the Gross Profit @ 5%. As the assessee has already disclosed Gross Profit @ 4.91% balance gross profit to be add @ 0.09% and determine the Income accordingly. Appeal of the assessee is partly allowed.

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• 2024 (10) TMI 474
  Reopening of assessment u/s 147 - reasons to believe - borrowed satisfaction v/s independent application of mind - unexplained investment in purchase of property and assessee has also not filed her return of income - HELD THAT:- AO initiated proceedings u/s 147 r.w.s.148 on basis of borrowed information received from the Sub Registrar for valuation of the immovable property, without verifying the correctness of the information and CIT gave approval without applying his mind in slipshod manner. As approval/sanction given by CIT was without recording his own independent satisfaction as noted above, therefore, the reopening was not sustainable as per above judicial pronouncements and irregularities noted. Thus, in that eventuality, issuance of notice u/s 148 and all the consequent proceedings and assessment order passed was not in accordance with law. Thus find merit in the contention of the ld. A/R, therefore, quash the proceedings under section 147 of the Act. Addition u/s 69 - AO while making the addition has not invoked or applied any provisions of law. AO has not stated under what provision of law he has made the addition and under what head whether, under business or trading income, agriculture income, capital gain or under section 48, 56 or under section 68 or 69. Thus the addition so made without any provision of Act is also against the law and liable to be deleted on this ground alone. Without invoking the provision of Act/law, the AO cannot make the addition. As the recorded reason/impugned assessment order is silent under which provision of the Act the addition is sought to be made. It is well settled that the reasons cannot be supplemented by assessment order or affidavit. Unless the assessee is put to the notice as to the exact contravention or provisions of law under which assessment or additions are sought to be made, the assessee cannot defend his case. Thus, addition made and sustained by the lower authorities deserves to be deleted. Therefore, allow the present appeal on merits as well.

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• 2024 (10) TMI 473
  Validity of reassessment w/o issuance of a valid notice u/s. 143(2) - Whether curable defect? - non-deduction of TDS on payment of labour charges to sub-contractor namely, supervisor or Munshis - Addition u/s. 40(a)(ia) - HELD THAT:- We are of the view that the issuance of a valid notice u/s. 143(2) is a sine-qua-non for framing of a valid assessment is no more res-integra in light of the judgments of Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] and Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] We find that the Hon ble Apex Court in the case of Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] had quashed the assessment in absence of a notice u/s. 143(2) of the Act having been issued by the AO. We find in the case of Pr. CIT Vs. S.G Portfolio (P). Ltd. [ 2023 (4) TMI 635 - DELHI HIGH COURT] had recently held that where the assessee company had communicated to A.O that its original return be treated as a return filed in response to notice issued u/s. 148 of the Act, the A.O was required to issue notice u/s. 143(2) of the Act and further proceed in the matter. We are unable to persuade ourselves to subscribe to the conations of the revenue to cover the issue under the scope of section 292BB, thus, in present case the assessment framed by the A.O u/s. 147 dehors valid assumption of jurisdiction on account of non-issuance of notice u/s 143(2) cannot sustain, thus is liable to be quashed and we do so. Decided in favour of assessee.

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• 2024 (10) TMI 472
  Addition on account of non-reconciliation of tax deducted at source ('TDS') data as reflected in Individual Transaction Statement ('ITS') - HELD THAT:- As observed that the assessee has entered into 39 transactions as per the AIR with 576 parties with respect to Form 26AS. Though the assessee tried its best to reconcile its ITS details with its accounting record, the same became futile for various reason such as the difference in the method of accounting followed by its customers, delayed deduction or payment of TDS, the date when the customer has deducted tax did not match with the books of accounts of the assessee company, variation in time of recognition of expenses by the deductor and the income by the assessee and the tax deducted on amount whether including/excluding service tax. It is further observed that as per the ITS, the income reflected is Rs. 75.06 crores, whereas the total income offered by the company is Rs. 127.10 crores which exceeds the total as per 26AS by Rs. 52.04 crores. On the above factual matrix of the case, we deem it fit to restore these issues back to the file of the ld. CIT(A) for verification of the details and for reconciliation of the tax deducted at source by giving sufficient opportunity to the assessee to furnish all documentary evidences, pertaining to its claim. Hence, ground nos. 1 2 are allowed for statistical purpose. Nature of expenses - Addition on account of software license fee which the Revenue claims it to be of enduring benefit - AO observed that the assessee is not the owner of the software but had merely procured only the license to use the software which are in the nature of intangible assets as per clause (ii) of section 32(1) which according to the ld. AO had enduring benefit to the assessee which are in the nature of capital expenditure - HELD THAT:- The Tribunal for A.Y. 2008-09 [ 2017 (1) TMI 1818 - ITAT MUMBAI ] had followed the order of the ld. CIT(A) for A.Y. 2009-10 where on identical issue, the same has been treated as revenue expenditure and not capital in nature having enduring benefit to the assessee. On no change in the facts and circumstances, we deem it fit to take a consistent view as that taken by the Tribunal in assessee s own case for A.Y. 2008-09. Hence, ground no. 1 raised by the Revenue is dismissed. Characterization of income - interest received by the assessee on bank FDs as per the P L account of the assessee - business income v/s income from other sources - HELD THAT:- As in the case of CIT vs. Chinna Nachimuthu Constructions [ 2007 (11) TMI 40 - HIGH COURT, KARNATAKA ] which held that the investment made in fixed deposits for bank guarantee and the interest arised out of it, is to betreated as business income and not income from other sources . Decided against revenue. Disallowance made u/s. 14A at 0.5% of the investment - assessee had earned dividend income which was claimed as exempt - FAA has restricted the disallowance to 0.5% of the average investment made by the assessee during the year under consideration and had directed the ld. A.O. to verify the suo moto disallowance made by the assessee - HELD THAT:- As observed that the ld. CIT(A) has rightly restricted the disallowance u/s. 14A r.w. Rule 8D to 0.5% of the average investment of the assessee and we find no infirmity in the order of the ld. CIT(A) in directing the ld. A.O. to compute the disallowance to 0.5% of the average investment after considering the suo moto disallowance made by the assessee. Hence, ground no. 3 raised by the Revenue is dismissed.

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• 2024 (10) TMI 471
  Validity of reopening of assessment u/s 147 - reason to believe - notice issued after the expiry of 4 years - addition of deemed dividend u/s 2(22)(e) - as per AO deemed dividend was not considered/discussed during the scrutiny assessment proceedings u/s 143(3) - HELD THAT:- It is settled law that reason to believe can never be the outcome of a change of opinion. It is essential that before any action is taken by the AO he should substantiate his satisfaction. Thus, where the reasons recorded by the AO disclose no more than a mere change of opinion, the reassessment proceedings and assessment order pursuant thereto are liable to be quashed. The existence of a valid reason to believe is a sine qua non to exercise the jurisdiction under Section 147 of the Act. The expression reason to believe imports the cumulative presence of the following four elements viz. some tangible material or materials to establish that income has escaped assessment; nexus between such material and the belief of escapement of income from assessment as envisaged under section 147; application of mind by the AO to such material; and an inference, based on reason drawn tentatively by the officer that income has escaped assessment. As is evident from the facts available on record, no new information was received by the AO at the time of initiation of reassessment proceedings, and it was merely a fresh application of mind to the same set of facts as were available at the time of original scrutiny assessment proceedings. Thus, reopening of assessment under section 147 in the present case, is bad in law and therefore is set aside. Decided in favour of assessee.

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• 2024 (10) TMI 470
  Estimation of income - Bogus purchases - HELD THAT:- The fact would remain that supplier M/s Globe Pharma has changed its stand before the AO. When the above said party changes its stand before different authorities, it may not be possible to ascertain which of his statement was right and hence, it would be difficult to rely upon his changed stand. We noticed that the assessing officer had placed reliance on certain investigation report and the tax authorities have also pointed out certain deficiencies in the documents. Since the assessee has submitted stock records to prove the receipt and consumption of materials, one possibility could be that the assessee might have purchased material from one source and could have obtained bill from other source. We are not meaning that the assessee has actually indulged in such kind of practices. This issue may be put an end by estimating profit, if any, that could have been made by the assessee in this alleged bogus purchases. Accordingly, we estimate the profit @ 8% of the value of alleged bogus purchases - Decided partly in favour of assessee. Disallowance of R D expenses claimed u/s 35(2AB) - AO has disallowed the claim on the reasoning that the assessee has failed to substantiate the nature of expenses, genuineness of expenses and purpose of expenses - HELD THAT:- The above said observations of the AO, in our view, are beyond the scope of order passed by ITAT. We notice that Cadila Healthcare Limited. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT ] has held in the above said case that the R D expenses incurred on clinical trials outside approved laboratory facility is eligible for weighted deduction. Accordingly, we hold that the expenses incurred on Clinical Trial expenses are eligible for weighted deduction. Expenses is Building repairs - In the case of USV Ltd [ 2012 (9) TMI 43 - ITAT MUMBAI ] the co-ordinate bench of Tribunal has held that the rent, repairs etc., incurred on the premises relating to R D activities is eligible for weighted deduction. Accordingly, we hold that the building repairs expenses incurred on the premises relating to R D activity is eligible for weighted deduction. Expenses is Foreign Consultancy expenses - As stated therein the payments have been made to A A Thornton Co in connection with international patent applications and also in Third party infringement cases. Thus, it is not clear as to whether the payments made to A A Thornton Co is related to R D activity or not? We also notice that the nature of payment made to Michael Best Friedrich LLP is not explained and further, it is not clear as to whether the said payment was related to R D activity. Hence, we restore this item of expenses to the file of AO for fresh examination. The assessee may furnish necessary details before the AO to prove that the foreign consultancy charges are related to R D activity. Expenses of R D Exhibit Batches - As submitted that the expenses incurred on materials alone have been included in the cost of Exhibit Batches. As stated that other overhead expenses, labour expenses have not been claimed. It is noticed this expenses are in the nature of clinical trial expenses incurred in its manufacturing facility for production of samples for trial purposes. Accordingly, as per the ratio laid in the case of Cadila Healthcare Limited [ 2013 (3) TMI 539 - GUJARAT HIGH COURT ] this expenses are also eligible for weighted deduction u/s 35(2AB). Salary of CMD Chairman allocated to R D activity - A.R did not advance his argument on this item of expenditure. Accordingly, we reject this claim of the assessee. Difference in the quantum of expenses disallowed by the AO and the details furnished by the assessee . It requires reconciliation. Further, the nature and relationship of foreign consultancy charges are also require examination. Disallowance made u/s 14A - AR submitted that the own funds available with the assessee are more than the value of investments and hence no disallowance out of interest expenses is called for u/r 8D(2)(ii) - HELD THAT:- As per the decision rendered in the case of HDFC Bank Ltd [ 2014 (8) TMI 119 - BOMBAY HIGH COURT ] the presumption is that the investments have been made out of own funds and accordingly, no disallowance out of interest expenses is called for. Accordingly, we direct the AO to delete the interest disallowance. Expenditure disallowance made u/r 8D(2)(iii) - A.R submitted that the assessee had worked out the expenditure attributable to exempt dividend income at Rs. 10,48,529/-. However, the AO did not examine the same having regard to the books of accounts and hence the AO could not have applied Rule 8D of I T Rules. The present assessment is set aside proceedings and the assessee had only requested before the Tribunal to set aside this issue to the file of the AO, meaning thereby, the assessee s case before the Tribunal was restricted to the computation of disallowance u/s 14A r.w Rule 8D. In the case of Vireet Investments P Ltd [ 2017 (6) TMI 1124 - ITAT DELHI ] has held that , for the purpose of computing average value of investments, only those investments which have yielded exempt income alone should be considered. We direct the AO to compute average value of investments by considering only those investments which have yielded exempt income and accordingly compute the disallowance u/r 8D(2)(iii) of I T Rules. Appeal of the assessee is treated as partly allowed.

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• 2024 (10) TMI 469
  Deduction u/s 80P - interest income on deposit nationalized bank - AO held that the only issue is that the income earned by way of interest on such deposits kept with banks does not qualify for claiming as deduction under Chapter VIA (80P) and deduction claimed under Chapter VIA (80P) was restricted by excluding the amount of interest earned on deposits with Bank - HELD THAT:- It is an admitted fact that the assessee is a Co operative Society and the assessee has deposited certain funds with Nationalised Bank and has received interest income which was claimed the as deduction under section Chapter VIA (80P) of the Act. The case of the AO is that the interest income received by the assessee is from income from other sources not eligible for deduction under Chapter VIA (80P) of the Act. We find that similar issue came up for adjudication before the Tribunal, Nagpur Bench, wherein the very same Bench was a party to that order rendered in The Ismailia Urban Co operative Society [ 2024 (6) TMI 1404 - ITAT NAGPUR] wherein the Tribunal has considered this issue in detail and held that interest income earned by the assessee trust is eligible for deduction under Chapter VIA (80P). In the above decision, the Co ordinate Bench has already considered the judgment of the Hon ble Supreme Court in The Totgars Co operative Sale Society Ltd [ 2010 (2) TMI 3 - SUPREME COURT] and held that the facts of this case are distinguishable and not applicable to the facts of the present case. Therefore, following the decision of The Ismailia Urban Co operative Society [ 2024 (6) TMI 1404 - ITAT NAGPUR] set aside the impugned order passed by the learned CIT(A) and hold that the assessee is eligible to claim deduction under Chapter VIA (80P) - Assessee appeal allowed.

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• 2024 (10) TMI 468
  Assessment u/s 153C - Profit estimation on-money received for new construction and redevelopment projects - extrapolation of the income for the search period - assessee contended that in absence of any incriminating material seized from the premises of Shri Ishwardev Shukla qua, the assessment year under consideration no addition could have been made in the hands of the assessee under u/s 153C - HELD THAT:- Without going into the controversy raising doubt on search action , we are of the view that AO in impugned order has no where considered or held the cash found as unexplained cash of the assessee and same can t be automatically considered as subsumed in the addition in relation to on-money , without express finding by the ld AO. AO has made addition in relation to on-money, on the basis of material impounded during the survey and not under search action, therefore no addition could have been made by the AO in assessments completed for AY 2013-14 to AY 2016-17 invoking section 153C/153A of the Act. Even for a moment, it is presumed that cash found was undisclosed income for AY 2017-18 i.e. the year in which cash was found, no addition can be made in AY 201314 to AY 2016-17. Therefore, additions made without there being any incriminating material found in search, are deleted. Decided in favour of assessee. Validity of assessment proceedings 153C/153A beyond period of limitation - selection of initial assessment year - determination of six assessment years - contention of the assessee is that six preceding assessment years for invoking section 153C have been taken by the AO from AYs 2016-17 to AY 2010-11, corresponding to six assessment years, preceding the assessment year in which search was conducted on searched person - HELD THAT:- Hon ble Supreme Court in the case of CIT vs Jasjit Singh [ 2023 (10) TMI 572 - SUPREME COURT ] has held that six assessment years in case of other person i.e. person other than searched person, are to be reckoned from the assessment year, preceding to assessment year in which seized material was handed over to the AO of other person We hold that in the case of assessee, the assessment year 2017-18 falls within the six assessment years, which should be assessed u/s 153C r/w sec 153A but the AO has wrongly assessed the same under section 143(3) which being an invalid action, same is not sustainable in law, hence quashed. The additional ground of appeal of the assessee is allowed.

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• Customs

• 2024 (10) TMI 467
  Seeking grant of Regular bail - possession/recovery of contraband - discrepancy in the weight of the contraband - Applicant has alleged that the alleged recovery of the contraband is tainted as there is considerable delay in sending the alleged recovered contraband for sampling in terms of section 52-A of the NDPS Act - HELD THAT:- A minor discrepancy in the weight of the contraband, as is the case at hand, does not shake the roots of the case of prosecution, as has been noted by the Allahabad High Court in CHHOTEY LAL KAVINDER KUMAR VERSUS U.O.I.N.C.B. [ 2022 (4) TMI 1639 - ALLAHABAD HIGH COURT] . The discrepancy of 9 grams, when the entire quantity of the contraband seized is 9950 grams may be attributable to environmental factors especially moisture. Moreover, the discrepancy in weight of the contraband seized is a matter of trial as has been held in a plethora of cases. The argument qua violation of Section 50 of the NDPS Act has also been made to essentially claim that the search was illegal. So far as the issue of applicability of Section 50 of the NDPS Act is concerned, there are two aspects of the same. Firstly, whether Section 50 of the NDPS Act was not complied with, and secondly, whether Section 50 could at all be made applicable to the case on hand - The law in regard to compliance of mandate of Section 50, about the phrase search any person has been traversing on either side of proposition as to whether it refers only to recovery from the person or includes the bag which he may be carrying. In Pawan Kumar [ 2005 (4) TMI 549 - SUPREME COURT ] the Apex Court was considering a situation where the contraband was seized from the bag of the Applicant and not his person. It was held that Section 50 is not applicable when the search is made of the bag being carried by the person. Further, it has been held that the phrase search any person as described in Section 50 would not include the bag which was being carried by the individual and therefore, recovery of narcotics from the bag of the accused would not attract the provisions of Section 50 of the NDPS Act. The Court held that the term person under Section 50 would mean a natural person or a living unit and not an artificial person i.e., a bag or a briefcase. In any case, admittedly the facts of this case disclose that the Applicant was served with a Notice Section 50 of the Act. The qualms were merely regarding the missing nearest from the Notice, but the same cannot be gone into at the stage of deciding Bail Application, for it is a matter of trial - It is pertinent to note that the total quantity of contraband recovered in this case is of commercial quantity and thus, embargo of Section 37 of the NDPS Act is applicable. Considering the overall facts and circumstances of the case, and that the recovery of commercial quantity of narcotic substance was affected from the Applicant, this Court cannot persuade itself to believe that there are reasonable grounds to believe that he is not prima facie guilty of the alleged offence under NPDS Act. Moreover, it is the nature of the contraband seized which further weighs against any benefit that were to accrue to the Applicant. Heroin (a hard drug), an opioid, directly impacts the central nervous system, leading to rapid addiction, severe withdrawal symptoms, and has a high propensity for overdose, often resulting in death - Heroin use on a regular basis has been noted to have major health and lifestyle problems such as collapsed veins and skin abscesses, and in the long term, the effects are seen in the deterioration of the brain s white matter and it also produces high intolerance and physical dependence, thus, proving to be highly addictive. The Applicant being a foreign national can prove to be a flight risk, especially when the alleged offence involves a large quantity of contraband. Thus, no ground for bail is made out and the Bail Application is dismissed.

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• 2024 (10) TMI 466
  Refund of 4% SAD levied u/s 3(5) of Customs Tariff Act, 1975 - rejection of refund claim on the ground of mis-match of the description of goods and non-replying to the deficiency memo - HELD THAT:- The issue relating to the discrepancies in the description of the product have been held by the First Appellate Authority as not fatal which according to him cannot be basis for rejection of refund. With the DM having been issued only with respect to the description in the invoice not having tallied with import documents, the appeal should then have been allowed by him. Although the appellant has stated that revenue had pointed to a discrepancy in the amount paid towards VAT / CST and SAD, it is not reflected in the orders of either the learned Original Authority or the learned Commissioner (Appeals). There is no allegation that the VAT / CST were not paid or that the CA s Certificate along with the reconciliation statement as prescribed in Boards Circular has not been submitted or is deficient in any manner etc. The impugned order rejecting the refund is not proper and is hence set aside - Appeal allowed.

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• 2024 (10) TMI 465
  100% EOU - re-valuing the imported goods by adopting contemporary value of imports as per NIDB data after rejecting the declared values - relationship between the Appellant and supplier abroad - related party or not - HELD THAT:- It is incumbent on the Department to show as to how the relation between the appellants and their overseas sellers has influenced and affected the prices. There is no evidence on the record to show that the values agreed upon between the importer and the exporter are not correct transaction values. This fact shows that there is no independent evidence with the Revenue to first reject the transaction values. Further, it is found that the original authority has clearly recorded the examination of the circumstances indicating that the relationship has not influenced the invoice price of the goods imported by the Appellant. It is a well-settled law that the transaction value has to be admitted as the assessable value unless proved to be incorrect. For such purpose, proving the value to be wrong, independent evidence is required and mere reference to NIDB data is not sufficient. It is held by various Courts that NIDB data cannot be made the sole basis for enhancement of the value. Tribunal has also considered similar issues in a number of earlier decisions and has held that adoption of NIDB Data, without any other evidence on record to establish the transaction value as incorrect, is not proper and justified. Thus, there is no justification for enhancement of the transaction value basing solely on the NIDB Data, that too without determining how the imported goods are comparable and contemporaneous in terms of quality, quantity and country of origin and other commercial factors which affect the transaction value. Neither there was any communication of the reasons to the Appellant as to how the declared transaction value is doubted in terms of the Customs Valuation Rules, 2007. The impugned order dated 24.12.2014 is set aside - Appeal allowed.

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• Insolvency & Bankruptcy

• 2024 (10) TMI 464
  Approval of Resolution Plan - the plan stood approved by the CoC - Section 30(2) of IBC - HELD THAT:- The Appellant cannot be allowed to challenge the approval of the Resolution Plan by the Adjudicating Authority, which stood approved by the CoC by vote share of 97.54%. It is well settled that commercial wisdom of the CoC in approving Resolution Plan is not to be lightly interfered with. The jurisdiction of the Adjudicating Authority to interfere with approval of the Resolution Plan is limited within the four corners of Section 30(2) of the Code.Adjudicating Authority in the Impugned Order has held that Resolution Plan meets the requirement of Section 30(2). There are no ground to interfere with the Impugned Order of the Adjudicating Authority approving the Resolution Plan at the instance of the Appellant - appeal dismissed.

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• 2024 (10) TMI 463
  Withdrawal of application under Section 12A of IBC - application can be filed after commencement of the Liquidation Proceedings or not? - Liquidation commenced on 12.09.2017 - requirement of constitution of SCC as per the Regulation 31A inserted in Liquidation Regulation with effect from 25.07.2019. Whether an Application under Section 12A for withdrawal of the CIRP can be filed after commencement of the Liquidation Proceedings? - HELD THAT:- In view of the clear Statutory Scheme as delineated by 12A, Section 33 and Regulation 2B of the Liquidation Regulation, during Liquidation period, an Application under Section 12A is not permissible - In the facts of the present case, it is clear that former Director of the Corporate Debtor, Ashish Mohan Gupta, himself has challenged the Liquidation Order and also sought to submit a Scheme which were all rejected up to this Tribunal. The Application which has been filed by the Appellant No. 1 under Section 12A was filed after more than three years from Liquidation commencement, which was at the instance of the former Director Aashish Mohan Gupta, which has been clearly noticed by the Adjudicating Authority in the Impugned Order - the Adjudicating Authority did not commit any error in rejecting application filed by the Appellant. Whether in the facts of the present case, when the Liquidation commenced on 12.09.2017, it was obligatory for the Liquidator to constitute the SCC as per the Regulation 31A inserted in Liquidation Regulation with effect from 25.07.2019? - HELD THAT:- The Liquidation commencement date in the present case is 12.09.2017. The provision for constitution of SCC was inserted in IBBI (Liquidation Process) Regulations, 2016, by Notification dated 25.07.2019 with effect from 25.07.2019, which required the Liquidator shall constitute the SCC. An explanation to Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016, has been inserted by Notification dated 08.04.2022 with effect from 20.04.2022, which explanation is clarificatory explanation, clarifying the ambit and scope of Regulation 31A - On looking into the Scheme of IBC, SCC, which is required to be constituted within 60 days from the Liquidation commencement date is not a possibility in the facts of the present case. Statute never contemplate performance of impossible act, in the present case when Liquidation has commenced on 12.09.2017, there is no question of constitution of the SCC within 60 days from Liquidation commencement date. From bare look into the statutory provision, it is clear that Regulation 31A did not require constitution of SCC with regard to the Liquidation which has commenced years ago from the provision for SCC came into the Regulation. Explanation to Regulation 31A is a complete answer to the submission of the Appellant that there is no requirement of constitution of SCC in the facts of the present case. There are no error in the Order passed by the Adjudicating Authority, rejecting the Applications filed by the Appellant - there are no substance in any of the submission advanced by the Counsel for the Appellant - appeal dismissed.

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• 2024 (10) TMI 462
  Account of the Corporate Debtor was correctly declared as a Non-Performing Asset (NPA) or not - whether there was any default, since the debt is undisputed fact and has not been agitated by either of the parties? - HELD THAT:- The sanction limit was Rs.20 Crores for cash credit facilities and it is significant to note that review was to be done within a year . Similarly, letter of bank/ bank guarantee also sanctioned of Rs. 7.5 Crores within overall total CC limit of Rs. 20 Crore for procurement of raw material and the same was also required to be renewed within a year. Drawing power under CC including sub limit proposed for LC/BG sub limit was not to exceed Rs. 20 Crore at any time including outstanding payment under LC/BG - the sanction letter of Respondent No. 2 specifically contained clauses for review/ renewal before expiry of one year. This review/ renewal was to be done by Bank based on Annual Audited Financial Statements and other documentary evidence to be submitted by the Corporate Debtor along with request letter which the Corporate Debtor did not furnish. It will be worthwhile to understand as to what is the need for such review/ renewal of cash credit facilities by banks at the request of the Corporate Debtor. It is noted that banks require such renewal regularly to ensure that the credit facilities and terms on which these facilities were granted, remains in sync with risk profile and credit worthiness of the Corporate Debtor so that such financial facilities remain healthy. By regular reviews, banks monitor financial performances of the borrowers, assessing that the business of the Corporate Debtor remains viable so as to meet the repayment schedule of the banks. Similarly, banks also would like to ascertain and reassess the risk profile of the Corporate Debtor which may change from time to time on several micro and macro factors including business performance by the Corporate Debtor due to technological and economical changes - the regular review/ renew of cash credit facilities is considered to be critical and vital for risk management, compliance and maintaining the account of the Corporate Debtor as standard account and failing of which such accounts are liable to be declared as an NPA with drawing power as zero . The account becomes out of order in terms of Para 2.2 of RBI Circular dated 01.07.2013 for cash credit facilities if the outstanding balance remains continuously in excess of sanction limit/ drawing power. It is a fact that the Corporate Debtor could not get its accounts reviewed/ renewed in time and also could not take action to rectify regularities pointed out that banks, as such the Respondent No. 2 was within its right in declaring the account of Corporate Debtor as NPA and initiate Section 7 application. The Adjudicating Authority has correctly passed the Impugned Order - Appeal dismissed.

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• PMLA

• 2024 (10) TMI 461
  Money Laundering - validty of FIR - prosecution complaint quashed - Whether when the prosecution complaint filed by the Enforcement Directorate had been quashed by the Supreme Court, would the statements made under Section 50 of the PML Act, 2002 of various witnesses continue to form the basis of F.I.R. which was to be lodged on the basis of the communication passed on to the State under Section 66(2) of the PML Act? - HELD THAT:- When on the date when the ED had communicated to the State of Uttar Pradesh on 28.7.2023 (purportedly under section 66(2) of the PML Act, 2002) then on that date the prosecution complaint was very much surviving and, therefore, there was nothing wrong in the communication being sent on 28.7.2023 and in the lodging of the FIR on 30.7.2023. Also if the prosecution complaint had been set aside, there was information available with the ED which had compulsorily to be disclosed to the relevant authority for taking necessary action. In the instant case, if the FIR is perused, then it becomes clear that the Directorate of Enforcement while investigating in a money laundering case under the provisions of PML Act, 2002 had discovered that a company known by the name of M/s. Prizm Holography and Security Films Pvt. Ltd. which was based in Noida was illegally granted a tender to supply holograms to the Excise Department of Chhattisgarh. FIR therefore was registered under sections 420, 468, 471 473, 484 and 120-B IPC. The accused government officials and the owner of the firm M/s. Prizm Holography and Security Films Pvt. Ltd. along with Anwar Dhebar were prima facie involved in the case in question. A bare perusal of the FIR does not evidently disclose the complicity in the case of Anwar Dhebar with the crime in question but the counter affidavits of the State definitely reveal such incriminating evidence which confirms the involvement of Anwar Dhebar. The whatsapp chat between Anwar Dhebar and company officials of the firm definitely go to indicate that there were dubious activities going on in between the accused persons. It is a clear law as has been held by the Supreme Court in Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra and Others, [ 2021 (4) TMI 1244 - SUPREME COURT] ; State of Telangana Vs. Habib Abdullah Jellani [ 2017 (1) TMI 1683 - SUPREME COURT] and Lalita Kumar vs. State of U.P. [ 2013 (11) TMI 1520 - SUPREME COURT] that if there is a cognizable offence disclosed in the FIR, then no interference is to be made by the Court. In the instant case, so far as the petitioners Anil Tuteja, Arun Pati Tripathi and Niranjan Das are concerned we do find that against them a definite allegation is there in the FIR and they disclose cognizable offences under sections 420, 468, 471 473, 484 and 120-B IPC. As per the judgment of the Supreme Court in State of Haryana Ors. vs. Bhajan Lal Ors. [ 1990 (11) TMI 386 - SUPREME COURT] , an FIR could be quashed if there was nothing established from the reading of the FIR and from the evidence collected thereafter. In the instant case the evidence gathered after the lodging of the FIR definitely showed complicity of the petitioner Anwar Dhebar with the crime in question. The law with regard to criminal cases stands on a different footing from the law with regard to service law etc. wherein an order cannot be substituted with reasons etc. in the form of subsequent affidavits - In the case at hand, it is found that Anwar Dhebar was named in the FIR and during the investigation his complicity in the crime which was a cognizable one cannot be prima facie ruled out, the evidence in regard to which was clearly to be found in the counter affidavit of the State and of the E.D. The answer to the question that whether when the prosecution complaint itself had been done away with, could the FIR stand on the basis of the statements etc. which were recorded under section 50 of the PML Act, 2002, would be that definitely the information which was gathered under section 50 of the PML Act, 2002 was a material in the possession of the Director of ED which had to be transmitted to the concerned agency for necessary action. In the instant case, the State of Uttar Pradesh was the concerned agency which had to look into the fact as to whether the work of manufacturing holograms was given to M/s. Prizm Holography and Security Films Pvt. Ltd. illegally by the accused persons and whether the accused persons for their illegal acts had charged commission. It will be very unsafe to accept the arguments of the learned counsel for the petitioners that for all initiation of criminal cases, statements made before the authorities under Section 50 of the PML Act, 2002 could never be used. Such statements which are in the knowledge of an investigating agency can always be used for initiating or for furthering of any pending investigation. It of course need not be used for the purposes of a trial and definitely they could not be categorized as confessions or admissions - Also when the ED had by its communication dated 28.07.2023 informed the State of Uttar Pradesh and which information had resulted in the F.I.R. dated 30.07.2023 then that information was an information under Section 66(2) of the PML Act, 2002 and that information could be always used by the State of Uttar Pradesh. Still further even if the crimes had allegedly been discovered in the State of Chhatisgarh, when it was discovered by ED that duplicate holograms were being made in NOIDA a district of the State of Uttar Pradesh then it was in the fitness of things that the State of Uttar Pradesh was informed about the wrongs which were being done on its territory. Also there was nothing malicious in the fact that when the State of Chhatisgarh did not react to the communication dated 11.07.2023, then the ED had written to the State of Uttar Pradesh on 28.07.2023 about the activities which were being done in the State of Uttar Pradesh. It is not required to interfere in the writ petitions - petition dismissed.

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• 2024 (10) TMI 460
  Seeking grant of Regular Bail - cattle smuggling was happening from India to Bangladesh by paying illegal gratification to BSF personnel deputed on the Border - section 439 of Criminal Procedure Code 1973 (Cr.P.C.) read with section 45 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- The guarantee of Personal liberty of every individual envisioned by Article 21 of the Constitution of India, which cannot be curtailed except by due process of law. The fundamental principle of bail is the rule and jail is exception , has been time and again emphasized by the Apex Court and other Courts and has been recently reiterated in the case of Vijay Nair vs. Directorate of Enforcement, [ 2024 (9) TMI 321 - SC ORDER ], as the foundational presumption of criminal law is that of innocence until proven guilty . In Masroor v. State of Uttar Pradesh and Another, [ 2009 (4) TMI 1031 - SUPREME COURT ], the Hon ble Supreme Court observed that the courts must strike a balance between the valuable right of liberty of individual and the larger interest of society. The Hon ble Supreme Court has time and again reiterated that the economic offences constitute a class apart and must be approached differently in regards to the bail, as has also been observed by the Hon ble Supreme Court in the judgments State of Gujarat v. Mohanlal Jitamalji Porwal and Another, [ 1987 (3) TMI 111 - SUPREME COURT ]. The allegations against the Applicant are essentially are in the nature of facilitating the offence of illegal cattle smuggling by providing authoritative support and consequent clout that he exercised on account of his being in the Police and being connected with an influential Political leader, the co-accused Mr. Anubrata Mondal. He helped in procuring stray cattle from various markets, collecting cash on behalf of co-accused, Mr. Anubrata Mondal, and laundering the PoC. The Applicant is an accused in the predicate offence as well, though admitted to bail in the said offence by this Court - Though the investigations qua the Petitioner are complete and the Supplementary Complaint has been filed in the Court, but the trial has not been proceeding since last 2 years. Looking at his antecedents, he is not a flight risk, and he has deep roots in the Society, having been in the employment of the Govt. The evidence being essentially documentary, is not likely to be tampered or the witnesses influenced - Applicant has been in judicial custody from 09.06.2022, in the scheduled offence, and from 07.10.2022, in the present case, i.e. for over two years. The Applicant is admitted to bail subject to fulfilment of conditions imposed - bail application allowed.

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• 2024 (10) TMI 459
  Money Laundering - scheduled offence - proceeds of crime - whether appeal is bad for non-joinder of Government of Odisha as a necessary party as the land belongs to Government of Odisha which is given on lease to the Appellant Trust? - essential ingredients of attachment of property u/s 5(1) of PMLA satisfied or not - no reason to believe that the said properties are involved in money laundering - Appellant Trust is a bona fide receiver and had no knowledge of the alleged offence - no prosecution complaint has been filed against the Appellant Trust within 365 days as stipulated u/s 8(3)(a) of PMLA - Appellant Trust was neither named in FIR or in ECIR and not an accused in the scheduled offence or in the prosecution complaint - no nexus or link between the attached property and the criminal activity relating to the alleged scheduled offence. HELD THAT:- It is an admitted fact that the land has been transferred to the Appellant Trust by the Government of Odisha under a lease deed with certain rights and liabilities but the title of the land has not been passed over to the Appellant Trust. The lease is for 99 years with effect from 11-1-2007 for a premium of Rs. 20 Lakhs at the rate of Rs. 1 lakh per acre with yearly rent of Rs. 20 thousand and cess of Rs. 15 thousand at the rate of 75 percent of the annual rent or as admissible from time to time besides the cost of trees standing on the demised land. The Appellant Trust has taken a plea that the Government of Odisha was neither made a party to the proceedings initiated before the Ld. Adjudicating Authority nor a show cause notice was served upon it by the Ld. Adjudicating Authority u/s 8(1) of the PMLA, 2002. There is no necessity of making Government of Odisha as a party by the Respondent ED as the title of the government land cannot be transferred in favor of the Central Government as absolute owner in the event of confiscation of the land, if the Respondent ED succeeds in the criminal trial of prosecution complaint under the PMLA. Whatever rights and liabilities are transferred to the Appellant Trust under the lease deed can only be passed on to the Respondent ED, as the Central Government and the subsequent lessee will step into the shoes of the Appellant Trust for the remaining lease period. The right, title and interest of Government of Odisha over the land in question is not any way effected - the confirmation of the PAO by the Ld. Adjudicating Authority sans Government of Odisha is not bad in law. This issue is accordingly answered against the Appellant Trust. Whether essential ingredients of attachment of property as provided in section 5(1) PMLA, 2002 read with the second proviso to section 5(1)(b) PMLA, 2002, has not been satisfied? - HELD THAT:- As it appears from the PAO that there is a subjective satisfaction of the Respondent ED that the property in question is liable to be attached, the essential ingredients of section 5(1) read with second proviso to section 5(1)(b) of PMLA, 2002 are satisfied on the plain reading of the PAO. There is reason to believe which is recorded in writing in the PAO, so there is due compliance of the aforesaid section and proviso thereto in issuing the PAO. The very intention of issuing the attachment order and confirmation of the same are only to protect the property in question, till the conclusion of trial. It also appears that the Respondent ED has not taken possession of the property, nor ousted the Appellant Trust from the property - the answer to this issue is decided against the Appellant Trust. Whether there is no reason to believe that the questioned properties are involved in money laundering? - HELD THAT:-There is no dispute that the Appellant Trust is a registered trust and covered by the definition of Person u/s 2(1)(s) of PMLA, 2002. Secondly, the prosecution complaint was filed on 31-3-2016 with the prayer to pass orders confiscating the attached property. In other words, the property attached in the present proceedings are already part of the prosecution complaint. In the present appeal, the property has already been a part of the prosecution complaint in the year 2016, when there was no limitation provided u/s 8(3)(a) for continuation of the conformation of attached property either during the investigation or the pendency of the proceedings in related to any offence under this Act before a court. For the first time the limitation of 90 days was inserted in the PMLA, 2002 on dated 19-4-2018 and subsequently 90 days was substituted by 365 days on dated 20-3-2019. In other words, when the prosecution complaint was filed on 31-3-2016 there was no such limitation. The aforesaid provision of law does not speak about continuation of any investigation or criminal proceedings in any court of law against any person, but it states about the property. The Trust is neither named in the FIR nor in the ECIR and not an accused in the scheduled offence or in the prosecution complaint - HELD THAT:- The proceeding before this tribunal is with regards to attachment of the tainted property derived/obtained directly or indirectly by any person as a result of criminal activity. In the present case, it is Shri Prashant Kumar Dash who is allegedly indulged in criminal activity and generated proceeds of crime and thereafter the said proceeds of crime was utilized for the development of the building of the Appellant Trust, payment of salary to the staff etc. while he was the Managing Trustee of Appellant Trust. In the aforesaid fact and circumstances, we do not find any merit in the contention of the Appellant Trust that the attachment is bad in law on the ground that the Appellant Trust has not been proceeded against either in scheduled offence or in the prosecution complaint. Therefore, this issue is answered against the Appellant Trust. Whether the Ld. Adjudicating Authority has followed the statutory requirements as required u/s 8(1) 8(2) of PMLA, 2002? - HELD THAT:- The impugned order passed by the Ld. Adjudicating Authority is examined. The Ld. Adjudicating Authority has clearly examined factual as well as legal issues in the present case. The facts have been discussed in the impugned order. In the said order, the submissions made by the Appellant Trust admitting the receipt of the aforesaid amount. It is also observed in the impugned order that no bank has approached the authority claiming the property and also held that there is no requirement of supplying the recorded reasons to the defendants and that the PAO/OC sufficiently conveys what they have to meet as observed by the Hon'ble High Court, Bombay in the case of Brizo Reality Co. (P.) Ltd. [ 2014 (6) TMI 993 - BOMBAY HIGH COURT ] - the Appellant Trust has no merit so far as this issue is concerned. No nexus or link between the attached property and the criminal activity relating to the alleged scheduled offence - HELD THAT:- It has been admitted that a sum of Rs. 9,01,66,000/- which was generated allegedly from the criminal activity by Shri Dash has been infused into the Trust and that the same amount was utilized by the Appellant Trust in various construction work as well as payment of salary to staff, return of amount to the existing trustees invested by them etc. this was done when the Appellant Trust was managed by Shri Dash during the period 2009-2012 and that the said amount was not returned to him after his vacation from the Trust. These facts go to the root of the case that there is a nexus between the alleged proceeds of crime with the property in question attached herein - this issue is also answered against the Appellant Trust. The appeal has no merit. There is no illegality or irregularity in the impugned order - Hence, the appeal is dismissed.

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• 2024 (10) TMI 458
  Money Laundering - limitation period for filing of prosecution complaint - provisional attachment of assets - scheduled offence - proceeds of crime - money was siphoned off by diverting the funds to several group companies to hide its true source and to use the funds for other purposes - HELD THAT:- The relevant notification in this regard is GSR 383(E) dated 19.04.2018 and the amended clause came into effect on the date of publication of the notification, i.e., 19.04.2018. Accordingly, the respondent Directorate had 90 days from 19.04.2018 to file the prosecution complaint. As per appellant's own admission, the prosecution complaint in this case was filed on 16.07.2018. The said date was within the limitation period of 90 days. In Sree Sankaracharya University of Sanskrit [ 2023 (5) TMI 1246 - SUPREME COURT ], while upholding the position that if a statute is curative or merely clarificatory of the previous law, retrospective operation thereof may be permitted, the Hon'ble Supreme Court also pointed out that in order for a subsequent order/provision/amendment to be considered as clarificatory of the previous law, the pre-amended law ought to have been vague or ambiguous. It is only when it would be impossible to reasonably interpret a provision unless an amendment is read into it, that the amendment is considered to be a clarification or a declaration of the previous law and therefore applied retrospectively. It was also held that merely because a provision is described as a clarification/explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyze the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively. No such difficulty in interpretation or implementation existed vis- -vis the PMLA, 2002 which made the provisions of Section 8(3)(a) impossible to interpret without the amendment made vide Finance Act, 2018. In Memon Abdul Karim Haji Tayab's case [ 1964 (2) TMI 95 - SUPREME COURT ] the Apex Court noted that it is well-settled that procedural amendments to a law, in the absence of anything to the contrary, apply retrospectively in the sense that they apply to all actions after the date they come into force even though the actions may have begun earlier or the claim on which the action may be based may be of an anterior date. In the present case, the Directorate has complied with the requirement of the amended law after it came into force by filing the prosecution complaint within 90 days of that date. There are no merit in the appellant's contention that the subject properties which were provisionally attached were liable to be released on account of the respondent Directorate's failure to file a prosecution complaint within 90 days of the order of the Ld. AA dated 19.01.2015. The period of 90 days would commence on the date the amendment came into force, i.e., 19.04.2018. The respondent's having complied with the requirement of filing the prosecution complaint within 90 days of 19.04.2018, there is no illegality in the continued attachment of the properties during the pendency of the same. Appeal dismissed.

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• 2024 (10) TMI 457
  Money Laundering - Provisional attachment of assets - scheduled offence - limitation period for filing of prosecution complaint - HELD THAT:- The relevant notification in this regard is GSR 383(E) dated 19.04.2018 and the amended clause came into effect on the date of publication of the notification, i.e., 19.04.2018. Accordingly, the respondent Directorate had 90 days from 19.04.2018 to file the prosecution complaint. As per appellants' own admission, the prosecution complaint in this case was filed on 16.07.2018. It is found that counted from 19.04.2018, the said date was within the limitation period of 90 days. In Sree Sankaracharya University of Sanskrit [ 2023 (5) TMI 1246 - SUPREME COURT ], while upholding the position that if a statute is curative or merely clarificatory of the previous law, retrospective operation thereof may be permitted, the Hon'ble Supreme Court also pointed out that in order for a subsequent order/provision/amendment to be considered as clarificatory of the previous law, the pre-amended law ought to have been vague or ambiguous. It is only when it would be impossible to reasonably interpret a provision unless an amendment is read into it, that the amendment is considered to be a clarification or a declaration of the previous law and therefore applied retrospectively. It was also held that merely because a provision is described as a clarification/explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyze the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively - In the present case neither the amendment states that it was meant to be clarificatory or declaratory nor any such necessary implication arises considering the text of the amendment. Also, no such difficulty in interpretation or implementation existed vis- -vis the PMLA, 2002 which made the provisions of Section 8(3)(a) impossible to interpret without the amendment made vide Finance Act, 2018. There are no merit in the appellant's contention that the subject properties which were provisionally attached were liable to be released on account of the respondent Directorate's failure to file a prosecution complaint within 90 days of the order of the Ld. AA dated 19.01.2015. The period of 90 days would commence from the date the amendment came into force, i.e., 19.04.2018. The respondent's having complied with the requirement of filing the prosecution complaint within 90 days of 19.04.2018, there is no illegality in the continued attachment of the properties during the pendency of proceedings arising from the prosecution complaint which has been filed by the respondents. Appeal dismissed.

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• 2024 (10) TMI 446
  Money Laundering - scheduled offences - charging of illegal commission - Sale of unaccounted illicit country liquor wherein usage of hologram along with other methods was modus operandi - payment of annual commission by distilleries for operation of cartel, which make out a cognizable offence under Sections 7 and 112 of the PC Act and section 420, 467, 471 and 120B of the IPC - HELD THAT:- It is apparent that the allegations and scope of investigation in both the FIRs are different from each other. The State is conducting investigation regarding allegation of charging of illegal commission, sale of unaccounted illicit country liquor wherein usage of hologram alongwith other methods was a modus operandi and payment of annual commission by distillers for operation of cartel, which are not within the scope of investigation of the FIR registered by the State of Uttar Pradesh. The FIR registered by the State of Chhattisgarh, being No. 4/2024 on 17.01.2024 on the basis of the letter dated 11.07.2023 of the ED, is much more detailed one running in about 11 pages. It states that proceeds of crime is estimated to be Rs. 2161 Crores. Illegal commission has been charged from the liquor supplies for accounted sale of liquor in Chhattisgarh. Sale of off the record unaccounted illicit country liquor from the State run shops was done with the active involvement of Distillers, Hologram manufacturer, Bottle Maker, transporter, manpower management and District Excise Officials. Annual Commission paid by Distillers for allowing them to operate a cartel and divide the market share among themselves in the State of Chhattisgarh. The role of Anil Tuteja, Anwar Dhebar, Arunpati Tripath and other unnamed senior officers of Excise Department and local District Level Excise Officers have also been mentioned. The said offence has different facets including multiple sections of the PC Act, IPC and PMLA. The main responsibilities of Excise Departments are to regulate the supply of liquor, ensure quality liquor to users to prevent hooch tragedies and to earn revenue for the State. But the criminal syndicate led by Anwar Dhebar and Anil Tuteja has turned these objectives upside down - The CSMCL was established with the vision to provide genuine liquor, to stop sale of illegal Liquor, to provide liquor on MRP. It established its own stores to retail the liquor/ beer/wine/country liquor after procuring liquor from manufacturers directly. The investigation conducted has revealed that the transportation of liquor from distillers to shops and supply of duplicate holograms to distillers was looked after by Arvind Singh. Monthly targets were set by Anwar Dhebar who used to communicate to MD CSMCL either directly or through Arvind Singh. Then senior Excise officials used to coordinate with Distillers, Hologram Makers, Bottle Makers, Transporters and local Excise Officials to ensure that the entire system ran flawlessly and no one interferes in this illegal State-run racket. The target of kachcha liquor sale was flexible and, on an average, around 200 trucks carrying 800 cases of country liquor per month were supplied by the distillers to the syndicate during the financial year 2019- 20. The syndicate apart from collecting commission on sale of accounted liquor (Part-A) and sale of unaccounted kachcha illegal liquor (Part-B) also charged quid pro quo bribes from main distillers so that they can form a cartel and divide the entire market share among themselves - The ED investigation has established that in the Excise Department of State of Chhattisgarh massive unprecedented corruption was done between 2019 to 2023 in multiple ways. The total extent of extortion is coming to around Rs. 2161 Crore. The entire amount is nothing but the rightful amount which should have gone to the State Exchequer and should have been taxed and yielded revenue for Central and State governments. Thus, this is the proceeds of crime which ED is investigating and trying to establish money trail and trace the assets created out of these proceeds of crime. From perusal of the FIR and the ECIR in question, it cannot be said that no prima facie offence whatsoever is disclosed against the petitioners. Moreover, the material collected during the investigation goes to show that the nature of offences committed by the accused/ petitioners has caused huge financial loss to the State exchequer and the estimated proceeds of crime is of around Rs. 2161 Crores. In the FIR, there are 70 named persons including bureaucrats, politicians, businessman and other individuals and the present is a case of an organized crime which needs to be taken to the logical conclusion by the investigating agencies i.e. the State Police and the ED. None of the action of the respondent State/ACB EOW or the ED is found to be in contravention of any of the provisions of the PMLA or in violation of any order passed by the Supreme Court. Thus, no strong case is made out for interference by this Court at this stage - petition dismissed.

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• Service Tax

• 2024 (10) TMI 456
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Seeking direction to Petitioner to make the payment as per Form SVLDRS-3 and to issue discharge certificate in Form SVLDRS -4 under sub-section (8) of Section 127 of the scheme - recovery of CENVAT Credit on the ground of wrongful availment of Input Cenvat Credit and wrong utilization for the payment of duties - HELD THAT:- It is noticed that though benefit of the scheme was availed by the petitioner, he could not make the payment within the time prescribed which was up to 30.06.2020. It is true that it was benevolent statutory scheme, but having cut-of date and not an on-going scheme. Thus, once the scheme was introduced as one time measure for specified period, any extension for payment would amount to modification of the Scheme, which is not permissible under the law. In the case of M/S. YASHI CONSTRUCTIONS VERSUS UNION OF INDIA ORS. [ 2022 (3) TMI 110 - SC ORDER] the Hon ble Supreme Court has held ' It is a settled proposition of law that a person, who wants to avail the benefit of a particular Scheme has to abide by the terms and conditions of the Scheme scrupulously. If the time is extended not provided under the Scheme, it will tantamount to modifying the Scheme, which is the prerogative of the Government.' In view of aforesaid decision of the Hon ble Supreme Court, this court cannot defer date of payment and modify the Scheme. The Scheme being prerogative of the Government and since the petitioner had not abided by the terms and conditions of the Scheme -2019, there are no reason to interfere - petition dismissed.

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• 2024 (10) TMI 455
  Levy of penalty u/r 15 of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 apart from appropriating the service tax and interest paid - irregularly availing and utilizing the CENVAT credit - suppression of facts or not - invocation of Extended period of Limitation. HELD THAT:- The Appellants have taken and utilized the CENVAT credit to the tune of Rs.63,58,370/- in the months of April 2007 and November 2007 respectively prior to the payment of the service tax on the import of services availed by them on reverse charge basis. There was a delay of 3 days in respect of payment of service tax after taking credit in the month of April and 7 days in the month of November 2007. The dates of availing the CENVAT credit were 30.04.2007 and 30.11.2007 whereas the dates of actual payment of service tax on reverse charge basis were 03.05.2007 and 06.12.2007 respectively. It is noticed that on being pointed out, the Appellant have paid the applicable interest. So, we do not find any justification for imposing mandatory penalty for such a clerical mistake committed in availing the CENVAT credit before the payment of the service tax. It is not that the Appellant has taken the credit without payment of the service tax. Extended period of Limitation - HELD THAT:- The grounds indicated in the impugned order would not indicate any mala fide intention on the part of the appellant to evade tax. Ingredients of suppression are not found and as such, we are of the opinion that invoking extended period is not justified. The facts in the case of M B ENGINEERING LIMITED VERSUS C.C.E. -AHMEDABAD-II [ 2024 (7) TMI 313 - CESTAT AHMEDABAD] are similar to the facts obtaining in the present appeal. In the above case, the Tribunal Ahmedabad has held that when the duty and interest are paid by the party during the course of the Audit, the assessee could not be further faulted with for its conduct to penalise them. Payment of duty with interest remove the stains of delay from the conduct of the party and bring back sparkles of bona fide conduct. In this appeal, even there is no allegation that the Appellant has taken the CENVAT credit without payment of the service tax on reverse charge basis. There was only few days delay and the assessee has availed the service tax paid on reverse charge basis even before its payment. There is no allegation of fraud or suppression and the Appellant have paid the interest for prior utilisation of the CENVAT credit and interest was paid before the issuance of the Show Cause Notice on being pointed by the Audit. The mandatory penalty imposed invoking the extended period under Rule 15(4) of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 is not justified and so ordered to be set aside. However, the appropriation of the tax and interest paid not disturbed. Appeal allowed.

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• 2024 (10) TMI 454
  Levy of service tax - IPR Services or not - transfer of technical know-how - time limitation - HELD THAT:- The impugned order records the fact that during the course of audit, it was observed that M/s MGBPL had paid royalty fee and noncompetition fee to the appellants for the use of technical know-how developed by the noticee. On going through the MOU dated 30.06.1997 between the appellants and M/s MGBPL, it is clear that the transaction that has taken place is of sale and the consideration is mentioned under two Heads one being Purchase Consideration on a slump price basis and the second being royalty for use of technical know-how for the period 01.07.1997 to 30.06.2000. There is no mention of any Consultancy Service to be rendered by the appellants. That being the case, it will be incorrect to levy service tax on the same. Tribunal in the case of Supreme Industries Ltd. [ 2013 (3) TMI 739 - CESTAT MUMBAI] held that consideration received towards the transfer of technical knowhow cannot be held to be consideration for the services rendered as Consulting Engineer. The impugned order passed in revision is not sustainable and is liable to be set aside - Appeal allowed.

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• 2024 (10) TMI 453
  Liability of Interest on cenvat credit availed by the appellant prior to registration - Clinical Research Management and Resourcing Services (CMR services) provided by the appellant qualify as export of service or not - suppression of facts or not - extended period of limitation - penalty. Whether, cenvat credit availed by the appellant prior to registration requires payment of interest? - HELD THAT:- In the present case, the department has not challenged the eligibility of credit availed by the appellant on merits and there is no demand issued to the appellant alleging that the credit is ineligible or recoverable. In the absence of valid demand and confirmation thereof in an adjudication, demanding interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 is not permissible in law. Therefore, the demand of interest is not sustainable. Whether, Clinical Research Management and Resourcing Services (CMR services) provided by the appellant qualify as export of service? - HELD THAT:- It is found that in the show cause notice as well as in the impugned order, the allegation is with regard to CRM services whereas the demand has been confirmed against the appellant for entire turnover comprising of Data Management services as well as CRM services, which is bad in law because the turnover for Data Management services was 58% of the total taxable value and the turnover for CRM services was to the tune of 42% of the total taxable value and therefore confirming the entire demand under CRM services is not tenable. Further it is found that with regard to Data Management services, the department has accepted it as an export and has been granting regularly the refunds to the appellant, which is clear from the various refund orders placed on record. These refund orders have not been challenged and have attained finality which clearly establishes that Data Management services fulfill all the conditions of export as required in law. The services performed by the appellant are in the nature of testing and analysis service, even then, it will amount to export of service because the said service partly performed outside India, to the extent of delivery of reports outside India and thus, qualifies as export of service under Export of Service Rules, 2005 as held in the cases COMMISSIONER OF SERVICE TAX VERSUS BA RESEARCH INDIA LTD. [ 2009 (11) TMI 213 - CESTAT, AHMEDABAD] , M/S. APOTEX RESEARCH PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX BANGALORE-III [ 2022 (1) TMI 256 - CESTAT BANGALORE] and C3I CONSULTANTS INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX - HYDERABAD-II [ 2014 (3) TMI 736 - CESTAT BANGALORE] . Extended period of limitation - suppression of facts or not - penalty - HELD THAT:- The appellant has not suppressed any material facts because the appellant has been filing returns regularly for Data Management services and was getting the refunds, which clearly establishes that the appellant has not suppressed any material facts; therefore, invocation of extended period is bad and thus, penalty imposed under Section 78 of the Act is not sustainable. Similarly, penalty of Rs.2,42,20,838/- imposed under Rule 15(4) of the Cenvat Credit Rules read with Section 78 of the Finance Act, 1994 is not sustainable because once the availment of cenvat credit without registration is valid in view of the various case-laws, then in the absence of any demand for recovery of alleged cenvat credit, imposition of penalty equal to credit amount is not sustainable in law. The impugned order is not sustainable in law and therefore, set aside - appeal allowed.

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• 2024 (10) TMI 452
  Levy of service tax on membership fees as well as treatment charges of hazardous waste from the member industries - Business Support Service - appellant is established for disposal of effluents and solid hazardous waste and they accept only those effluents and wastes as directed by GPCB and dispose them off scientifically after providing treatment - HELD THAT:- As per the facts of the present case the appellant company is a consortium of various industrial units and engaged in the treatment of hazardous waste of all the member industries - This issue is no more res-integra as the same has been decided in favour of the assessee in VAPI WASTE EFFLUENT MANAGEMENT CO VERSUS CCE, DAMAN [ 2012 (8) TMI 816 - CESTAT, AHMEDABAD] where it was held that ' the appellant is an association for the purpose of liability of service tax and eligible for exemption. Since appellant is eligible for exemption on merits, the appeal and the impugned order confirming the demand of duty and imposition of penalty is set aside.' Thus, it is settled that any charges collected by a company towards the treatment of hazardous waste of the industries who are the members of the company who operates effluent treatment is not liable to service tax. From N/N. 08/2017 ST dated 20.02.2017 issued under Section 11C of Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 , the services by operator of common effluent treatment plant by way of treatment of effluent is exempted. Therefore, for period prior 01.07.2012 as well as post 01.07.2012, the service of effluent treatment of hazardous waste did not liable to service tax. The impugned order is set aside - appeal allowed.

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• 2024 (10) TMI 451
  Recovery of Refund of service tax allowed in respect of Work Contract Services provided to PWD, the Government Organization - unjust enrichment - exemption under mega exemption N/N. 25/2012 dated 20.06.2012 - HELD THAT:- It has now been brought to notice that the previous Order in Appeal dated 30.08.2017 was earlier challenged by the appellant before this Tribunal and the said order stands set aside vide Tribunal final order no. 51682/2023 dated 22.12.2023. Consequent thereof the O-I-O dated 07.10.2016 which sanctioned the refund gets revived. The present show cause notice was issued consequent to the order in appeal dt. 30.08.2017 which is not in existence in view of the said final order of this Tribunal dated 22.12.2023. Thus very basis for impugned SCN has been set aside this Tribunal has already held appellant eligible for refund of amount in question - Nothing is brought to notice by the department about appeal, if any, as would have been filed by the department against the said final order dated 22.12.2023. The order arising out of present show cause notice i.e the order under the challenge (O-I-A dated 21.06.2018 ) Is hereby, is also not sustainable - Appeal allowed.

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• Central Excise

• 2024 (10) TMI 450
  Interpretation of N/N. 115/86-CE dated 1.3.1986 - mandatory requirement or otherwise, for the assessee to maintain charge-wise register - eligibility for exemption - HELD THAT:- On perusal of the Notification, it refers to the granting of exemption from the excise duty on the vegetable products made from the indigenous cotton seed oil or any one or more of the other indigenous minor oil specified in the table annexed to the Notification or mixture of any one or more of such oil with any other oil, as stipulated therein on condition that such vegetable products for additional percentage point of increase in the use of the cotton seed oil in excess of 15% and in case of specified minor oil being 3% of the total oil used. It emerges from the record that the appellant has used the cotton seed oil more than 15% per month. The Notification No. 115/86 came into effect from 1st March 1986 and the appellant has filed the refund claims for the months of March, April and May 1986 immediately after the Notification which are subject matter of these appeals and accordingly, filed the refund claims without understanding the process of calculation of percentage of usage of the cotton seed oil. However, the Assistant Commissioner of Central Excise, while sanctioning the refund, has applied the provisions of Explanation (3) and (4) of the Notification for the purpose of calculation of the use of cotton seed oil, which is found to be more than 15%, which entitles the appellant for the benefit of the Exemption Notification. It is a trite law that exemption in a Notification cannot restrict the benefit of exemption. Explanation (3) and (4) which are invoked by the respondents authorities and confirmed by the appellate authority and the CESTAT only provide methodology of calculation of percentage as well as the percentage of usage of the cotton seed oil so as to see that such usage of cotton seed oil is more than in excess of 15% of the cotton seed oil used so as to grant the benefit of exemption of Rs.30 per ton of such vegetable products for additional percentage point of increase. On bare perusal of the Notification, it is clear that there is no mandatory requirement to maintain the chargewise register as the Explanation (4) gives an option to the assessee for calculation either on the basis of the individual charge or on monthly basis. As the appellant has filed the refund claim per month, it goes without saying that the appellant has exercised the option on monthly basis and in absence of any specific requirement to file such option to claim the exemption under the said Notification. In such circumstances, the allegation that the appellant has failed to maintain individual charge for the usage of the cotton seed oil is without any basis. The Tribunal has clearly erred in law in interpreting Notification No. 115/86-CE dated 1st March 1986 to read therein a mandatory requirement for the assessee to maintain charge-wise register, failure whereof would render the assessee not eligible to exemption - merely because the assessee has filed the refund claim on monthly basis without there being any individual charge basis, it is not mandatory for the appellant to maintain the charge-wise register to claim the benefit of the Exemption Notification No. 115/86 dated 1st March 1986. Issue answered in favour of the assessee - Appeal allowed.

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• 2024 (10) TMI 449
  Clandestine manufacture and clearance of goods - demand based on conjectures and surmises - lack of cogent evidence - violation of principles of natural justice - HELD THAT:- It is found that to build up its case, the Revenue has largely dwelt upon conjectures and surmises for instance the presumption that in a medium scale industry like that of the appellant not a leaf moves without the nod from the higher authority . However, such blanket statements lead nowhere to uphold clandestine manufacture and clearance of finished goods. It is also noted that the sale invoices clearly indicate that the sale of the goods was made ex-factory. The department has not repudiated the assssee s contention that the delivery of the goods was taken by the broker of M/s. Industrial Associates (buyer) at the factory gate itself. The reliance placed by the learned adjudicating authority to build up this case for mention by way of indication of wrong vehicle registration numbers on the invoices, was in the context of the recipient of the finished goods (page 56) and to make out by way of analogy a case of clandestine clearance and saddling the manufacturer with consequences thereof is completely uncalled for. This is more so when receipt of raw material, capability to manufacture and clearance of goods have not been doubted upon. As the department has not been able to establish the alleged clandestine movement of the finished goods and dispute the duty paid on the impugned goods, that are a subject matter of the present appeal, there can be no case for re-demanding the same along with interest. To hold such serious charges of clandestine clearance, no case can be made out merely on circumstantial evidence. The appellants have sufficiently been able to establish that they received duty-paid material from their factory at Kodarma, which fact again is not disputed and manufactured finished goods therefrom which were sold from the factory gate. Goods procured from their sister unit were at times sold as such from their Durgapur unit but were largely used to produce finished goods by way of their own production at their Durgapur unit and finished goods so cleared upon payment of applicable rate of Central Excise duty and Cess. This sale is duly reflected in the returns filed for the relevant period with the department. The fact that in as much as 28 cases out of 61 no discrepancy in recording of vehicle numbers have been noticed by the department, the fact of sale of goods being ex works and payments made through banking transactions, the receipt of raw material duly explained, the department not being able to substantiate the charge by way of any corroborative evidence, the department s case stands on a weak footing having been built upon on presumptions and surmises. The impugned order is set aside - appeal allowed.

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• 2024 (10) TMI 448
  Levy of penalty - credit wrongly availed by the appellant but reversed along with interest when pointed out by Audit - intent to evade present or not - HELD THAT:- It is true that a legal procedure imposed by a statute requires the assessee to be not complacent and avail credit or discharge duty diligently. But to err is human. The presumption of innocence is a background assumption of our legal system. It is also true that deterrence is the main object behind the imposition of penalty which may be due to a breach of statutory duty like the wrong availing of credit or non-payment of tax under the Act. However, it is seen that the SCN and OIO have chosen to penalise the appellant not on the ground of a technical breach but that of duty evasion, when no such case is made out. It is seen that Section 11A(6) states that in a case where duty is paid with interest before the issue of SCN penalty equivalent to 1% of such duty per month is to be calculated and paid from the month following the month in which duty was payable. The appellant has also in their prayer agreed to pay the same as was required to be done when they opted to reverse the credit and pay interest, before the issue of SCN. While there has been a breach of statutory provisions in this case, there is nothing to show that there was an intention to evade payment of duty. This being so the wrong penal provisions have been invoked leading to a disproportionate penalty. The impugned order hence merits to be modified to that extend and the penalty limited to that payable as per section 11A(6) of the Central Excise Act, 1944. The impugned order imposing equivalent statutory penalty is not proper. The impugned order is hence partly modified and the penalty is hence imposed in terms of sec. 11A(6) of the Central Excise Act, 1944 - Appeal allowed.

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• 2024 (10) TMI 447
  Clandestine manufacture and removal - Gutka under the brand name GOA 1000 - incorrect mention of names of buyer in the invoices - contravention of Rule 11(2) of CER - denial of cross-examination of witnesses by the Commissioner - violation of principles of natural justice - penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002. The case of Revenue is significantly based on the statements of various persons involved in one way or other with Yogesh, and Commissioner has given cross-examination of only 9 persons out of about 25 persons whose cross-examination was sought by Yogesh and out of 9 persons, cross-examination of only 2 deponents was conducted. HELD THAT:- It is noticed that the goods by all these appellants are admittedly cleared on payment of duty. Non-mentioning name of buyers in the invoice is at best a procedural lapse in respect of the duty paid goods. In our view the goods which are alleged to have been removed by Yogesh without payment of duty can only be held liable for confiscation if it is established so, and not the goods in respect of which applicable duties are paid by these units as duty paid goods cannot be held liable to confiscation under Rule 25 of the Rules. It can be seen that Rule 25 is subject to non-payment of duty which is recoverable and subject to the provisions of section 11AC which is neither invoked or applicable in respect of goods cleared by the these units. It has been held in the following judgements that Rule 25 is subject to section 11AC and ingredients of Section 11AC have to be established first. In the case of COMMISSIONER OF C. EX. CUSTOMS VERSUS SAURASHTRA CEMENT LTD. [ 2010 (9) TMI 422 - GUJARAT HIGH COURT] the Hon ble Gujarat High Court has interpreted provisions of Rule 25 and held that ' For the purpose of invoking Section 11AC of the Act, the condition precedent is that the duty has not been levied, or paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement or suppression of facts. If these ingredients are not present, penalty under Section 11AC cannot be levied. Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules.' Since goods were cleared on payment of duty, the first condition of section 11AC which is non-payment of duty itself is not fulfilled and hence section 11AC is not invocable, consequently, goods are not liable to confiscation under Rule 25. In that view penalty under Rule 25(1) cannot be sustained on these appellants namely Balaji, Montage, Arihant and Sachin. Further, since the goods cleared by these units are not liable for confiscation under Rule 25, penalty under Rule 26 upon the partner/director/authorized person of these units namely Arun Joshi and Sushil kumar Upadhyay in the capacity of erstwhile partners of Balaji, Sunil Trivedi, partner of Balaji, Ramnivas Pareek authorized signatory of Balaji, Sunit Jain, partner of Arihant and Arvind Gupta, promoter/director of Montage of the above units are also liable to be set aside. The impugned order is modified, as a result appeals of Montage, Balaji, Arihant and Sachin and their directors/partners/authorised persons namely Arun Joshi, Sushil Kumar Upadhyay, Sunil Trivedi, Ramnivas Pareek, and Sunit Jain are allowed and appeals of Yogesh and rest of the appellants are remanded.

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