Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 28, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Highlights / Catch Notes
GST
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Reopening of portal for filing of Form GST TRAN-1 - transitional credit. - applicability of time limitation provided under the retrospective amendment to Section 140(1) of the CGST Act and MGST Act read with Rule 117 of the CGST Rules and MGST Rules - directory in nature or mandatory? - Authorities directed to decide the application after providing an opportunity of hearing to the petitioner - HC
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Profiteering - purchase of flat - Since, no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.12.2018 when the Respondent had violated the provisions of Section 171 (1) of the CGST Act, 2017, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. - NAPA
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Profiteering - Till the State Consumer Welfare Funds become operational and necessary details of the State CWFs are made available to the petitioner, the petitioner is directed to deposit the entire amount with the Centre Consumer Welfare Funds. - HC
Income Tax
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Exemption u/s 10B - Renewal of100% EOU several times - Tribunal has held that though it was termed “a renewal”, the benefit was applied to a new unit. And the Ministry has been well aware of that. Within the given window of the extended period, the Assessee claimed the exemption for the first time in AY 2002-03. - HC
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Assessment against amalgamating company - Validity of reopening of assessment u/s 147 - Notice u/s.148 was issued in the name of HLCL (non-existent entity) and accordingly, reassessment order framed thereon deserves to be quashed as void ab initio. - AT
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Bogus sundry creditors - Assessee has provided details of the creditors, which should have been examined by both the authorities below but they did not do so for proving the genuineness of the creditors. As per our considered opinion, the assessee discharged his liability as cast upon him and now the duty shifted on the revenue authorities for the verification of the genuineness of the creditors, which are lack in this case. - AT
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Genuineness of Commission paid to relative against sale of land - Merely payment through banking channels is not sufficient to establish the genuineness of the particular transaction. There has to be some specific material on record, 3rd party confirmation and most important that the facts should convey the basic need for why the commission was paid. - AT
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TP Adjustment - Mark up on purchase of fixed assets - assessee has filed the reasons for charging 5% as markup that is for taking care of administration and fright cost. It is not submitted before us any document relating to prices i.e. whether it is FOB or C & IF prices. Since the AE has supplied the assets on cost to cost with a markup of 5% and the Customs has accepted the transaction as reasonable we do not see any reason to disturb the transaction. - addition made by the TPO deleted - AT
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Loss in F&O transaction investigation wing has carried on survey operation under section 133A in the premises of brokers and certain clients - Since the transaction was made through banking channel and settlement was already made for this transaction, that means the transaction must be completed subsequent to the completion of this transaction. So the broker cannot make modification after closure of the trading for the particular day. No factual submission coming from revenue and the addition was made by the assessing officer based on presumptions without any cogent material against the assessee - AT
Central Excise
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CENVAT Credit - additional duty of customs paid - In fact, Hindustan Zinc had paid additional duty of customs by availing the benefit under serial number 122A/123 of the Customs Notification dated March 17, 2012. It is because of this misreading of rule 3(1) of the CENVAT Credit Rules that led the Commissioner to commit an error - The Commissioner, therefore, committed an illegality in denying the benefit of CENVAT credit to Hindustan Zinc. - AT
Case Laws:
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GST
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2020 (10) TMI 1056
Reopening of portal for filing of Form GST TRAN-1 - transitional credit. - applicability of time limitation provided under the retrospective amendment to Section 140(1) of the CGST Act and MGST Act read with Rule 117 of the CGST Rules and MGST Rules - directory in nature or mandatory? HELD THAT:- On a conjoint reading of the provisions of Section 140(1) read with Rule 117(1), prima facie, it appears that a person is allowed to carry forward Cenvat credit from the erstwhile regime to the GST regime by fling of Form GST TRAN-1 - In the present case the petitioner has attempted to file Form GST TRAN-1, although belatedly, but alongwith the applicable late fees in compliance of the erstwhile service tax laws as also the provisions of the CGST Act and MGST Act. The petitioner s application dated 04.12.2019 is pending adjudication with the appropriate authority i.e. respondent No.6 - We may state that the present petition can be disposed of by issuing a direction to the respondent No.6/appropriate authority to consider the application dated 04.12.2019 fled by the petitioner for seeking to carry forward the accumulated Cenvat credit into the GST regime and acceptance of the petitioner s Form GST TRAN-1 in accordance with law. In doing so respondent No.6 / appropriate authority shall give a hearing to the petitioner and thereafter pass a speaking order on the aforesaid application. The respondent No.6 / appropriate authority i.e. Joint Commissioner of State Tax (EIU), Economic Intelligence Unit, C Wing, Old Building, GST Bhavan, Mazgaon, Mumbai- 400 010 is directed to decide the application dated 04.12.2019 fled by the petitioner for seeking to carry forward transition of accumulated Cenvat credit into GST regime in accordance with law - respondent No.6 / appropriate authority shall accord an opportunity of hearing to the petitioner before deciding and passing order on the petitioner s application dated 04.12.2019. Petition disposed off.
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2020 (10) TMI 1055
Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of additional Input tax Credit - violation of provisions of Section 171 (1) of the CGST Act, 2017 - penalty - HELD THAT:- It has been revealed that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicant No. 1 as well as other homebuyers who had purchased flats in his Project Orchard Avenue-93 during the period from 01.07.2017 to 31.12.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. It is also revealed that vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) of the CGST Act, 2017 which have come in to force w.e.f. 01.01.2020 vide Notification No. 01/2020-Central Tax dated 01.01.2020, by inserting Section 171 (3A) in the CGST Act, 2017. Since, no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.12.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively.
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2020 (10) TMI 1054
Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of additional Input tax Credit (ITC) - violation of provisions of Section 171 (1) of the CGST Act, 2017 - penalty - HELD THAT:- The Respondent had not passed on the benefit of additional Input tax Credit (ITC) to the Applicant No. 1 as well as other home buyers who had purchased flats and commercial units in his Project Synera during the period from 01.07.2017 to 31.12.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- It is also revealed that vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come in to force w.e.f. 01.01.2020 vide Notification No. 01/2020-Central tax dated 01.01.2020 by inserting Section 171 (3A) in the CGST Act, 2017. Since, no penalty provisions were in existence between the period w.e.f. 01.07.2017 to 31.12.2018 when the Respondent had violated the provisions of Section 171 (1) of the CGST Act, 2017, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 27.12.2019 issued to the Respondent for imposition of penalty under Section 177 (3A) of the CGST Act, 2017 is hereby withdrawn.
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2020 (10) TMI 1031
Profiteering - direction to respondent nos. 2 and 3 to make available all such details of the relevant State Consumer Welfare Funds (CWFs for short) in whose favour the Petitioner is required to make pre-deposit of the alleged profiteered amount, in compliance with the order dated 20thJuly, 2020 passed by this Court - HELD THAT:- It seems strange to the Court that while the petitioner wants to pay, the State Consumer Welfare Funds are neither operational nor functional. The Secretary, GST Council is directed to co-ordinate with the State Government and place the matter before the GST Council, if required, to ensure that the State Consumer Welfare Funds become operational and functional as expeditiously as possible - Till the State Consumer Welfare Funds become operational and necessary details of the State CWFs are made available to the petitioner, the petitioner is directed to deposit the entire amount with the Centre Consumer Welfare Funds. Application disposed off.
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Income Tax
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2020 (10) TMI 1053
Exemption u/s 10B - denial of exemption as Assessee Company has expanded its existing processing capacity with the new plant and machinery installed in the factory - HELD THAT:- ITAT has observed that, to be deprived of the benefit, the new undertaking must have been a simple reconstructed old unit, with at least 20% of the assets from the old unit transferred to the new unit. But the Assessee did not face any allegation of transferring the assets from the old unit to the new unit. It did construct a new unit adjacent to the old unit. And the Tribunal refused to accept the Revenue's contention that the adjacent unit should be termed an expanded old unit. We find no reason to disagree. We reckon the Tribunal's findings are in accord with the established industrial practice. In fact, the Revenue argued that the Assessee has installed new plant and machinery . Regrettably, plant and machinery are not synonymous; the plant is where machinery is installed. And the plant is erected, not installed - whether the new plant erected and the new machinery installed amounts to adding to an existing unit or amounts to a separate unit on its own is a matter of fact. On that, the Tribunal supplied cogent reasons and concluded in a particular way: The unit is separate, distinct, and new. The old unit has not been expanded; a new unit was established. We agree. Approval from an official amounted to approval from the Central-Government appointed Board under section 14 of the Industrial (Development and Regulation) Act 1951 and the Rules made thereunder - HELD THAT:- Assessee, to begin with, had the approval in December 1985 as 100% EOU to claim deduction under section 10B of the Act. That approval held the field from 1990-91 to 1994-95. After that, the Assessee had the approval renewed, and the period stood extended by five more years-up to March 2001. Finally, in October 2001, the Assessee had the approval renewed once again for another five years - Tribunal has held that though it was termed a renewal , the benefit was applied to a new unit. And the Ministry has been well aware of that. Within the given window of the extended period, the Assessee claimed the exemption for the first time in AY 2002-03. Tribunal has quoted with approval its own earlier ruling that it is not a statutory requirement that there has to be separate permission for each unit. Just because the Government granted permission by amending the original permission letter, it does not affect the eligibility for deduction under section 10B in any manner. In our considered opinion, the Tribunal's conclusions that (1) the unit is new, (2) the permission has been duly granted, and (3) the period of exemption has still been subsisting call for no interference. - Decided against revenue. Disallowance u/s 14A r.w.r. 8D - whether the Assessee incurred any expenditure while earning that exempted income and whether he included that expenditure in the common indirect expenditure of its own? - HELD THAT:- AO noted, rather guessed, that the Assessee borrowed funds to invest and that there ought to be an interest element. But the Assessee asserts that it utilized its surplus funds. We reckon there is no material for the AO to conclude that the Assessee borrowed the funds. Second, given the volume of investment, the Assessee is said to have received charge-free services from the managers of the banks and other financial institutions with whom they have invested. So the Assessee has insisted that it has not incurred any expenditure. On the contrary, the AO reasons that whenever those managers of the banks and other financial institutions came to the Assessee company, its personnel must have spent time with them, in assisting them. According to him, at least that amounts to an indirect expenditure in relation to exempted income. We are afraid the reasoning is far-fetched. Calcutta Knitwears [ 2014 (4) TMI 33 - SUPREME COURT] held that in a taxing statute, one has to look at what is clearly said. There is no room for any internment. There is no equity about a tax. There is no presumption as to a tax. So, in the face of the above facts we reckon the Tribunal has correctly held that the Assessee has been entitled to the exemption under section 14A of the IT Act, read with Rule 8D of the IT Rules, as well. - Decided against revenue.
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2020 (10) TMI 1052
Rectification u/s 254 - HELD THAT:- All the submissions and explanations by the assessee and the department have been summarized and then a finding has been arrived at. The issue has been decided after considering the facts in entirety available on record. In fact full opportunity had been given to the assessee to make submissions. A perusal of the facts in the instant case clearly indicate that the applicant has not pointed out any mistake apparent from the record. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In the instant case, before the Tribunal, the hearing was concluded on 23.07.2019; the order was passed on 18.10.2019. There is no merit in the contentions of the Ld. counsel that since the appeal was pending till the date of pronouncement of the order, the Circular No. 17 of 2019 dated 18.08.2019 would apply. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Admittedly, during the course of hearing before the Bench on 23.07.2019, neither the Ld. counsel nor the Ld. DR made any mention of Circular No. 17 of 2019 dated 18.08.2019. As mentioned earlier, it is not a stand-alone Circular; it is to be read in conjunction with CBDT Circular No. 3 of 2018. Circular No. 3 of 2018 dated 11.07.2018 also mentions at para 10 that adverse judgments relating to six issues should be contested on merits notwithstanding that the tax entailed is less than the monetary limits specified in para 3 therein or there is no tax effect, which obviously requires long drawn process of reasoning. In the impugned order, there is no trace of patent, manifest and selfevident error which can be said to be an error apparent on the face of the record .What the applicant wants is a review of the order passed by the Tribunal, which is not permissible under the Act. Not a single error in the impugned order has been pointed out by the applicant. What the applicant wants is a review of the order passed by the Tribunal. The Tribunal is a creature of the statute. The Tribunal cannot review its own decision unless it is permitted to do so by the statute.
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2020 (10) TMI 1051
Revision u/s 263 - show cause notice issued by Ld. Pr.CIT relating to admissibility of agriculture income - HELD THAT:- Assessee as admitting the fact that this issue was not examined by Ld. A.O and Ld. CIT(A) has rightly directed to examine this issue to the Ld. A.O. However direction of Ld. Pr. CIT to the Ld. A.O for framing denovo assessment will not be justified since the additions made in the assessment proceedings u/s 143(3) of the Act has travelled up to the Tribunal, Indore Bench and the additions so made on account of lease rent and disallowance of corporate expenses have been deleted by the Tribunal. On going through the order of Tribunal, Indore Bench in assessee s own case, we find sufficient merit in the contention made the assessee and are of the considered view that impugned order u/s 263 of the Act dated 26.3.2019 needs to be modified and the direction of Ld. Pr.CIT to the Ld. A.O should be restricted only to the extent of examining the issue of admissibility of agriculture income and not to other issues already dealt by the Ld. A.O - Appeal of the assessee decided partly.
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2020 (10) TMI 1050
Assessment against amalgamating company - Validity of reopening of assessment u/s 147 - order of re-assessment being framed in the name of the amalgamating company - HELD THAT:- DR filed detailed written submissions by placing reliance on various decisions by also filing a detailed paper book comprising of various documents through e-mail, all the factual documents relied upon by the ld. DR and placed on record by him in the paper book does not advance the case of the revenue in as much as the notice u/s.148 of the Act was issued in the name of non-existent entity and re-assessment framed in the name of non-existent entity. Merely, because the assessee had participated in the said re-assessment proceedings after pointing out the actual fact of amalgamation before erstwhile Assessing Officer, the illegal assessment framed by a non-jurisdictional AO cannot be sustainable in the eyes of law. See case of Maruti Suzuki India Ltd. [2019 (7) TMI 1449 - SUPREME COURT] . Notice u/s.148 of the Act dated 29/03/2005 was issued in the name of HLCL (non-existent entity) and accordingly, reassessment order framed thereon deserves to be quashed as void ab initio. Accordingly, additional ground raised by the assessee on 17/07/2019 that re-assessment has been framed in the name of non-existent entity is hereby allowed.
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2020 (10) TMI 1049
Validity of reopening of assessment - Notice after expiry of 4 years from the end of the assessment year - assessee requested the A.O. to treat the return originally filed u/s 139 of the Act on 31.10.2007 as the return filed in response to the notice issued u/s 148 - HELD THAT:- It is imperative on the part of the A.O. to show that there was failure on the part of the assessee to disclose fully and truly all material facts relating to the assessment. Admittedly, no such allegation has been made by the A.O. in the reasons for reopening. As held in the case of Shri Shakti Textiles Ltd. [ 2010 (8) TMI 449 - MADRAS HIGH COURT] that the A.O. should have recorded in the reasons for reopening that there was failure on the part of the assessee to make true and full disclosure. The A.O. has not recorded that there was failure on the part of the assessee in the reasons for reopening. When there is no failure on the part of the assessee, the reopening after expiry of four years is bad in law as held by Hon ble jurisdictional Karnataka High Court in the case of Karnataka Bank [ 2015 (7) TMI 535 - KARNATAKA HIGH COURT] . We notice that the TPO/AO has taken a conscious decision on this issue on the basis of explanations furnished by the assessee. Having taken a conscious decision, it is not permissible for the AO to take a different view on the basis of subsequent decision of the Tribunal, after expiry of four years from the end of the relevant assessment year. The decision rendered in the case of Sesa Goa Ltd [ 2004 (5) TMI 54 - BOMBAY HIGH COURT] supports the case of the assessee. We find merit in the contentions of the assessee that the reopening is bad in law for more than one reason and hence the assessment order is liable to be quashed. Accordingly, we allow the legal ground urged by the assessee and accordingly the impugned assessment order is liable to be quashed TP adjustment made in respect of Advertisement and Market Promotion (AMP) expenses other than that paid to BCCI for advertisement - HELD THAT:- As decided in own case AY 2009-10 as per the definition of the international transactions as contemplated under Section 92B r.w.s. 92F(v) it does not necessarily require transfer or assigning of property or creating any right or interest in the property but even an arrangement, understanding or an action in concert having a bearing on the profit, income, losses or assets of the enterprises would fall in the term of international transaction. Since the TPO has considered the entire expenditure as international transactions which we have reversed to the extent of the expenditure incurred in normal course without any agreement, understanding or action in concert therefore, the determination of ALP of the international transactions to the extent of the sharing of cost between the assessee and AE paid to the BCCI is required to be reconsidered and readjudicated. Accordingly, we set aside this issue to the record of the TPO.A.O for determination of ALP afresh. The other AMP expenses should be considered as part of the operating cost. T.P adjustment in respect of reimbursement of expenses - HELD THAT:- TPO has been right in holding that the nature of these expenses are such that they cannot be attributed to have been solely and exclusively for the distribution business of the assessee; Claim of the assessee that it had derived tangible benefit from the expenditure has not been substantiated with evidence AND there is no evidence or likelihood of any independent entity dealing in similar circumstances bearing such expenditure. We, therefore, uphold the finding in the orders of the authorities below in making the T.P. adjustment on reimbursement of expenses. T.P adjustment made in respect of third party royalty - HELD THAT:- As observed by the co-ordinate bench in the case of the assessee in AY 2005-06, the onus to prove that the expenses incurred by the AE was towards sale of products and not for purpose of creating brand awareness lies upon the assessee. We notice that this onus has not been discharged by the assessee. The basic details like the agreement if any for reimbursing this expenses, RBI approval, business necessity/expediency in making the payment, the basis of calculation etc., have not been furnished. Hence, the TPO has taken the view that this expenditure is not related to the business of the assessee and accordingly he has determined the ALP at NIL. Before us also, no further details were furnished. In view of the above, we are of the view that there is no infirmity in the order so passed by the TPO/AO. TP adjustment made in respect of payment of trade mark Royalty - HELD THAT:- Having regard to the fact that the TPO has accepted service tax component as assessee s expenditure in assessment year 2012-13 and consequently did not make any Transfer pricing adjustment, we are of the view that this issue may be restored to the file of TPO for examining it afresh. Accordingly, we set aside the order passed by A.O. on this issue and restore the same to the file of AO/TPO. TP adjustment made in respect of interest paid on Compulsorily Convertible Debentures (CCD) - HELD THAT:- TPO has been taking different stand in different years. While he accepted the CCD as debentures in AY 2012-13 and reduced the rate of interest only, the TPO treated CCD as equity in AY 2014-15. However, in AY 2015-16, the TPO has accepted the rate of interest of 12% to be at arms length. We notice that the TPO has made certain enquiries in AY 2015-16 and accordingly came to the conclusion that the interest payment is at arms length. The benefit of those enquiries was not available with the TPO in the two years under consideration. Since the issue is the same in all the years and further, in view of the conflicting stands taken by TPO, we are of the view that this issue requires fresh examination at the end of TPO. Accordingly, we restore this issue in both the years under consideration to the file of AO/TPO for examining it afresh. TP Adjustment made in respect of Sourcing Commission payment - A.R submitted that the assessee has furnished various evidences to prove that the sourcing agent has provided services to the assessee. He submitted that the assessee has utilized services of one USA entity and one Singapore entity. However, the assessee has paid commission only to the Singapore entity - HELD THAT:- We are of the view that this issue requires fresh examination at the end of TPO. Accordingly we restore this issue to the file of AO/TPO for examining it afresh by duly considering the various evidences furnished by the assessee. After affording adequate opportunity of being heard, the AO/TPO may take appropriate decision in accordance with law. Disallowance of purchase of samples and incidental expenses - HELD THAT:- When the transaction is between related parties, the Act places more burden on the shoulders of the assessee to prove that the expenditure is related to the business of the assessee. Further, in trade circles also, it is known fact that the expenditure on samples are borne by the manufacturers only. Hence this claim of expenditure is against the trade practice and the assessee appears to have borne the expenses only on the reasoning that the same was charged upon it by its parent company - AO was justified in holding that the burden to incur this expenditure is that of parent company and is not related to the business activities of the assessee. Accordingly, we confirm the disallowance made by the AO. Disallowance of Provision for Sales return - assessee submitted that it creates a provision for anticipated sales returns based on a percentage of the sales made each month - HELD THAT:- In the instant case is Sales and not Sales return . When there is no past event, the question of present obligation out of such past event does not arise - provision for sales return does not represent present obligation arising as a result of past event. Rather, it is an expected obligation that may arise as a result of a future event. Accordingly, we are of the view that the Provision for Sales return would not fall under the category of Present obligation as a result of past events . Hence various case laws relied upon by the assessee and the Accounting Standard 29 would not support the case of the assessee - AO justified in holding the Provision for sales return as contingent liability. Accordingly we confirm the disallowance made by the assessing officer on this issue in both the years referred above. Disallowance made u/s 40(a) - Provision for expenses made by it in the earlier was disallowed in earlier years for non-deduction of tax at source - HELD THAT:- Having regard to the submissions made by Ld A.R and also the observations made by the AO in the assessment order, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order passed by the AO on this issue and restore the same to his file for examining it afresh in accordance with law.
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2020 (10) TMI 1048
Bogus sundry creditors - search and seizure operation u/s. 132 - assessee was unable to submit any details or explanation of sundry creditors during the assessment proceeding to prove the identity and credit worthiness of the creditors and was also failed to prove the genuineness of the transactions - No supporting bills and vouchers were produced before A.O. regarding the sundry creditors - CIT-A deleted the addition - HELD THAT:- Assessee that the sundry creditors were authorized representative of the assessee and acting on behalf of the assessee for procuring paddy. Affidavit filed by the assessee in which they categorically undertakes that he is doing only custom-milling for M/s Orissa State Civil Supplies Corporation Ltd.(OSCSC Ltd.) besides working also as agent of MARKFED, NAFED, NCMSL, PACS and FCI. Assessee is not purchasing paddy directly. He is doing custom milling only. In these circumstances, there should be no creditors for purchase of paddy. Further on perusal of the paper book page No.57 58, which is a copy of letter of authorization in which the assessee has pointed out to offer persons for purchase of paddy as authorized representative Creditors are mentioned by the assessee in his reports, who have filed undertaking in which they have categorically stated that they are authorized representative but received paddy from the paddy purchase centre and for milling from joint custody and maintenance and to deliver the resultant CMR in the RRC/FCI on behalf of the assessee. On perusal of the ledger copy of the creditors shown by the assessee the narration is with regard to labour charges, loading, unloading, banking and netting expenses and freight inward and outward expenses. Assessee has provided details of the creditors, which should have been examined by both the authorities below but they did not do so for proving the genuineness of the creditors. As per our considered opinion, the assessee discharged his liability as cast upon him and now the duty shifted on the revenue authorities for the verification of the genuineness of the creditors, which are lack in this case. In the second round of proceedings before the Assessing Officer, he could have exercised his powers for presence of the creditors and verification of the genuineness of the transactions done with the creditors but did not do so. Decided in favour of the assessee. Addition regarding capital introduction from undisclosed sources - addition on account of income of the assessee form bus plying - HELD THAT:- CIT(A) which is remand report of the assessing officer in which he has categorically stated that the computation of income was produced before the Assessing Officer but the assessee has not shown any income from business of bus plying and trading and the source of capital introduced could not be explained whereas the assessee has stated that the books of accounts were produced before the Assessing Officer and the capital introduction has been shown properly - we send these issues to the file of AO for verification of copy of income tax return filed with the income tax department for the purpose of verification of the income shown from business of buses plying. Whether the income from bus plying has been shown in the return of income and has paid due taxes thereon? - The assessee is directed to produce the copy of income tax return for the verification of income offered under buses plying. Accordingly, we restore the grounds to the file of Assessing Officer for fresh adjudication. Sale suppression of rice bran - HELD THAT:- There are differences observed by the assessee in regard to the addition made by the Assessing Officer, therefore, it would be better to send this issue to the Assessing Officer for calculating the current year s transactions. AO is directed to calculate the actual current year s sale of bran in cash to the above two parties and which has not been recorded in the books of accounts of the assessee. The assessee is directed to cooperate with the department for early disposal of the appeal and avoid to take unnecessary adjournments. Accordingly, we restore these issues to the file of CIT(A) for fresh adjudication. Stock difference during the course of survey operation - inventory of stock was taken by the survey party in present of the Manager Sri Deepak Sharma with the help of the staff members of the assessee concern and no satisfactory and convincing reply was given by Shri Sharma - submitted by the ld. DR that the assessee was the owner of such bran/broken rice which was being sold to outside parties out of books of account - HELD THAT:- The revenue authorities have counted physically to bags as kept lying in the row. The assessee has also alleged that the stock/inventory has been counted by the search team only on the basis of eye estimation but not actual weighment of stock of paddy/rice/bran/husk etc. Therefore, considering the totality of facts and circumstances of the case, we allow 20%(twenty percent) relief to the assessee on the total addition made due to there may be difference between eye-estimation for stock taking and actual weighment of the stocks found and the rates applied by the revenue authorities and uphold 80%(eighty percent) of the addition made by the AO in this regard. Accordingly, we are not in agreement with the observations made by the CIT(A) deleting the additions made by the AO.
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2020 (10) TMI 1047
Exemption u/s 54F - No deposit was made by the assessee in the specified bank account as required by the provisions of subsection (4) of section 54F - whether investment as specified was made by the assessee in the construction of house within a period of 3 years from the date of sale of the immovable property - HELD THAT:- The Hon ble Karnataka High Court in the case of CIT vs. K. Ramachandra Rao [ 2015 (4) TMI 620 - KARNATAKA HIGH COURT] thus clearly held that if the investment in construction of new house was made by the assessee within the stipulated period of 3 years, then section 54F(4) was not at all attracted and the assessee could not be denied the benefit of exemption u/s 54F merely because he had not deposited the amount in specified bank account as stipulated. At the time of hearing before us, even the ld. DR has not been able to raise any material contention to doubt or dispute this legal position clearly propounded. As contended that the claim of the assessee of having invested the amount of net consideration in the construction of the new house within the stipulated period of 3 years from the date of the transfer of the original assets has not been verified either by the AO or by the ld. CIT(A).- We find merit in this contention raised by the ld. DR and since ld. Counsel for the assessee has also not raised objection for sending the matter back to the Assessing Officer for the limited purpose of such verification - Decided in favour of assessee for statistical purposes.
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2020 (10) TMI 1046
Genuineness of Commission paid to relative against sale of land - HELD THAT:- In this case, absolutely, no material on record has been brought by the assessee to suggest as to how the commission agent i.e., the said relative has worked in order to facilitate the sale of the plot of the land. Merely payment through banking channels is not sufficient to establish the genuineness of the particular transaction. There has to be some specific material on record, 3rd party confirmation and most important that the facts should convey the basic need for why the commission was paid. In the present case of the assessee, these aspects are not at all proved. Disallowance on account of various expenses regarding the leveling of land, expenses towards compound wall, land development expenses and evacuation payment - HELD THAT:- Assessee could not produce the tenants namely, Maruti Narayan Patil to whom an amount of ₹ 13 lakh was paid and Shri Sudhakar Patil to whom ₹ 1 lakh was paid, totaling to ₹ 14 lakhs, for removing the encroachment. The assessee failed to substantiate the basis of such payments. The assessee also failed to prove through the return of income reflecting the above payments. Therefore, the disallowance of ₹ 14 lakhs i.e., payment to tenants is hereby upheld. Un-substantiated expenses AR prayed that this amount as the WIP - Since the CIT (Appeals) mentions that this amount assessee might have incurred the same for running his project. However, nothing was placed on record by the learned Authorised Representative before us, as regards any running project of the assessee during the relevant year. Considering the prayer of the assessee and the fact that CIT (Appeals) in his order mentions of WIP, this issue is restored to the file of AO for factual verification whether the said amount could qualify as WIP. AO shall decide this issue of balance expenditure whether WIP or not while complying with the principles of natural justice. Therefore these grounds partly allowed for statistical purposes.
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2020 (10) TMI 1045
Penalty u/s 271(a)(c) - Disallowance towards cost of raising of loan treated as Deferred Revenue expenditure - Disallowance of provision of Non-performing assets - HELD THAT:- On perusal of the impugned orders and the decision of the Tribunal in assessee s own case in the quantum proceedings, we find that in so far as the disallowance of expenditure in respect of raising loan is concerned, the Tribunal has deleted the said addition - penalty on such disallowance is directed to be deleted. Disallowance of provision of Non-performing assets - It is clear that the assessee made claim of provision for NPA on 31.1.2001 in the return of income filed for 2001-02 and at that point of time, the issue was debatable and the assessee placing reliance on the decision of the ITAT Chennai in the case of Overseas Sanmar Financial Ltd [ 2001 (2) TMI 303 - ITAT MADRAS-C] made the said claim in the return of income - We may point out that subsequently, after filing return the Hon'ble Madras High Court rendered decision on 23.1.2002 against the assessee in the case of Southern Technologies [ 2002 (1) TMI 61 - MADRAS HIGH COURT] but the assessee of that case filed SLP before the Hon'ble Supreme Court [ 2010 (1) TMI 5 - SUPREME COURT] . Thus, the issue could not attain finality at that point of time while the assessee filed first appeal making same claim before the Tribunal for A.Y 2002-03 and the issue was also debatable. - Decided in favour of assessee.
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2020 (10) TMI 1044
Condonation of delay - delay of 308 days and 127 days - Sufficient reason for delay - HELD THAT:- Assessee has explained the cause of delay as he was suffering from various diseases and had an attack of paralysis and under treatment for long time. Therefore, at the time of considering the sufficient cause of delay a lenient view ought to have been taken. We condone the delay of 308 days and 127 days respectively in filing these appeals before the ld. CIT(A).
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2020 (10) TMI 1043
LTCG - cost of construction of capital asset that was sold by the assessee - Deduction u/s 54 - HELD THAT:- Cost of construction of new asset and the period within which it was constructed also requires examination in the light of evidence filed as additional evidence by the CIT(Appeals). For proper adjudication of long term capital gain in accordance with the law, these documents are necessary. We therefore set aside the order of CIT(Appeals) on the above two issues and remand the case to the Assessing Officer for fresh consideration in accordance with the law on the computation of long term capital gain and the claim of assessee for deduction u/s. 54 of the Act in the light of additional evidence filed before Tribunal and such other evidence that the Assessee may seek to rely on or required by the AO to substantiate her claim. Correct head of income - Long term capital gain or income from other sources - Admission of additional evidence - HELD THAT:- We find that the assessee in the proceedings before the AO has filed copy of agreement for sale dated 22-7-2013 in which the price agreed between the parties was a sum of ₹ 94 lakhs. In the light of this evidence, the question whether the sum of ₹ 46 lakhs should form part of long term capital gain or income from other sources also needs to be examined by the AO. Accordingly, we set aside the order of CIT(Appeals) on this issue also and direct the AO to admit the additional evidence filed by the assessee and decide the issue in accordance with the law, after affording assessee opportunity of being heard.
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2020 (10) TMI 1042
TP Adjustment - assessee purchased fixed assets from its AE Tokheim UK Ltd - MAM Selection - rational for charging the markup by the AE - reconciliation between the invoices for raw materials being converted into fixed assets - HELD THAT:- Assessee has imported these assets. Since it is an international transaction, without documentation the assessee would not have cleared these assets from customs. It also declared this transaction as international transaction. In our considered view there is supporting documents available for the cost of fixed assets supplied by its AE. If there is missing document, it is only for the markup charged by AE. Even though assessee has declared that it has followed other method, in fact not followed any method to arrive at the ALP. In our considered view, TPO should adopted one of the method prescribed in the income tax rules before rejecting the method adopted by the assessee and treating the ALP as nil. Benchmarking has to be done only for the markup charged by Tokhiem UK, whether it is appropriate. We notice that assessee has filed the reasons for charging 5% as markup that is for taking care of administration and fright cost. It is not submitted before us any document relating to prices i.e. whether it is FOB or C IF prices. Since the AE has supplied the assets on cost to cost with a markup of 5% and the Customs has accepted the transaction as reasonable we do not see any reason to disturb the transaction. In the similar situation TPO has treated the ALP as nil without following any method or parameters set out in chapter X of the act, in the case of Lever India Exports Ltd [ 2017 (2) TMI 120 - BOMBAY HIGH COURT ] deleted the impugned addition made by TPO. We are inclined to delete the addition made by the TPO in the present case. Accordingly, the appeal filed by the assessee is accordingly allowed.
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2020 (10) TMI 1041
Reopening of assessment u/s 147 - loss in F O transaction investigation wing has carried on survey operation under section 133A in the premises of brokers and certain clients - brokers have indulged in misusing the client code modification procedure - HELD THAT:- Addition was made by AO merely on the basis of suspicion, presumptions, surmises and conjectures. The modification in the client code is in the hands of the broker and the assessee cannot be made responsible for the act of others and he also observed that the payments for the losses were made by the assessee to the broker through banking channel and the assessing officer has not disputed the above fact and has also not brought out any evidence of cash coming back to the assessee - all the modifications were made on the same day of the transaction which further substantiates that the same cannot be made with malafied intention. The client code modification can be made on the request of the client or suo moto by the broker before the close of the day. When the broker makes the modification on the behest of the client, as per the BSE procedure, he has to take the request in writing. With regard to suo moto modification it need not. Since the transaction was made through banking channel and settlement was already made for this transaction, that means the transaction must be completed subsequent to the completion of this transaction. So the broker cannot make modification after closure of the trading for the particular day. No factual submission coming from revenue and the addition was made by the assessing officer based on presumptions without any cogent material against the assessee - Decided in favour of assessee.
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Customs
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2020 (10) TMI 1040
Direction to consider several representations stated to have been filed by the petitioner - HELD THAT:- Since proceedings are on-going for assessment, it would not be appropriate to consider or grant the mandamus as sought. This writ petition is accordingly dismissed.
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Corporate Laws
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2020 (10) TMI 1039
Restoration of name of company in the Register of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- The Appellant have submitted sufficient evidence that it has been in operation during the period of striking off and therefore could not be termed as defunct company. Thus, taking into consideration the provisions of Section 252(3) of the Companies Act, 2013 which vests this Tribunal with a discretion where the Company, whose name has been struck off and such Company is able to demonstrate that there is a running business as on the date when the name was struck off and also keeping in consideration that it is just to do so, can restore the name of the Company in the Register and in the interest of all stakeholders, including the Appellant itself, who seeks restoration of the name of the Company in the register maintained by Registrar of Companies, the company deserved to be restored. The restoration of the company s name to the Register of Registrar of Companies is ordered subject to its filing of all outstanding documents with proper filing fees along with additional fees required under law and completion of all formalities - Appeal allowed.
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2020 (10) TMI 1038
Reduction of Share Capital - section 66 of the Companies Act, 2013 - Board of Directors are of the view that the Applicant Company does not require such excess capital for its business operations and such excess capital impacts the return on equity and earnings per share - HELD THAT:- The Board of Directors has passed the resolution on 21.11.2019 in the Board meeting which they have accorded approval for reducing the Paid-up share capital of the company. Pursuant to the above notices dated 22.11.2019 along with the Explanatory Statement for convening the Extraordinary General Meeting of all the members of the Applicant Company were sent - That as on 20.11.2019, there are two Secured Creditors and twenty eight unsecured creditors in the Applicant Company. The Applicant Company in this regard has obtained a Certificate from MKPS Associates Charted Accountants (FRN 302014E) dated 22.11.2019 that the list of Creditors is correct as per the records of the Company. The Applicant has obtained the written consent from unsecured creditors and are annexed as Annexure -12 of the Petition along with written consent of the Secured Creditors filed as additional documents on 13.01.2020 (Pg. 41-44). The total amount of debt of 28 Unsecured Creditors is ₹ 1,11,68,14,744/- and 2 Secured Creditors is ₹ 2,719,084,099/-. The Articles of Association of the applicant company, in Article 9 provides for reduction of the share capital by way of special resolution be passed. Hence, the reduction of share capital is as per the Articles of Association of the Applicant Company - We have gone through the report of the Income Tax Department filed on 06.08.2020 raising certain observations/objections along with the reply dated 17.08.2020 filed by the Applicant in response to the observations/objections. We are of the view that the averments made by the Applicant in response to the observations/objections raised by the Income Tax Department are satisfactory. There is no objection from any quarter in respect of prayer made for reduction of capital as contemplated by the Applicant Company, this Tribunal directs that the reduction of the share capital of the above company as resolved by the special resolution passed at the Extra Ordinary General meeting held on the 26.11.2019. Application allowed.
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Insolvency & Bankruptcy
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2020 (10) TMI 1037
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Operational Debt or not - time limitation - HELD THAT:- It is quite settled that the acknowledgement has to be a conscious acknowledgement of the debt. There could be refusal to pay but it should show that there has been an acknowledgement of the debt outstanding. In the present matter, the endorsement concerned is seriously disputed and even if we are to accept the case of the appellant - even the Appellant is not claiming that Mr. Faruk Qureshi signed it. Who signed, nothing is clear. In the facts of the matter, the contention of the Corporate Debtor that the signature is not of Authorized Representative, cannot be simply brushed aside. From side of Operational Creditor, there is no Affidavit regarding how such endorsement was made. Annexure A/4 does not inspire confidence. We do not find that the Adjudicating Authority erred when it concluded that the debt claimed was time barred. On this count, we did not find any substance in the Appeal. We set aside the Order passed by the Adjudicating Authority in Paragraphs 13 and 14 of the Impugned Order imposing penalty of ₹ 1 Lakh on the Operational Creditor/Appellant. Rest of the Impugned Order of the Adjudicating Authority we maintain - Appeal allowed in part.
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2020 (10) TMI 1036
Lliquidation of the corporate debtor - applicant appraised the COC, that since the COC had not approved extension of CIRP time, therefore no fresh invitation for EOI or extension can be given to Prospective Resolution Applicants. Further appraised that the CIRP period is ending on 23.06.25020, therefore the applicant is left with no option but to file application for liquidation of Corporate Debtor in terms of Section 33(1)(a) of IBC, 2016. HELD THAT:- Since the COC in its commercial wisdom has decided not to seek extension of CIRP period but to take the corporate debtor in liquidation and explore the possibility of it being sold as going concern, we are of opinion that the decision of COC should not be interfered. The present application seeking liquidation of the corporate debtor, UTM Engineering Private Limited, in the manner laid down in the Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016 is allowed. Application admitted.
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Service Tax
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2020 (10) TMI 1035
Recovery of interest on the delayed payment of the Service Tax - HELD THAT:- The applicants with a view to save the period of limitation may file the appeal before the CESTAT at the earliest but with a distinct understanding that the CESTAT shall not proceed to hear the appeal on merits as this Court is seized of the matter. Having regard to the issues raised in this litigation, we direct that till the next date of hearing, no coercive steps shall be taken towards the recovery of the demand. Due to paucity of time, it is not possible to hear this matter before Diwali break - let this matter be notified on 08.12.2020.
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2020 (10) TMI 1034
Rejection of application under SVLDRS 1 - rejection on the ground that amount of penalty imposed had not been shown in Form SVLDRS 1, thus making it an incorrect declaration. - HELD THAT:- On similar issue a Co-ordinate Bench has already disposed of a similar writ petition being PROLOY SEAL AND ANR., M/S. D.J. INFOSYSTEMS VERSUS THE UNION OF INDIA AND 3 ORS., THE CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS AND OTHERS [ 2020 (7) TMI 184 - GAUHATI HIGH COURT] - Mr. Keyal also submits that by this order this Hon ble Court has remanded the matter back to the authorities concerned. The impugned order is set aside - the matter is remanded back to the authorities to reconsider the application/declaration furnished by the petitioner and passed appropriate orders thereon in terms of the scheme and the rules framed there under. If the authorities require a fresh declaration then they shall permit the petitioner to file such declaration afresh.
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2020 (10) TMI 1033
Rejection of SVLDRS-1 Form submitted by the petitioner - HELD THAT:- This writ petition stands disposed of by requiring the petitioner to submit an application before the respondent authorities for the correction to be made in the information provided in the Form SVLDRS-1 as regards the disclosure of the dues from them and upon such application being made, the respondent authorities would pass a reasoned speaking order thereon. The requirement of submitting application be made within a period of 15 days from obtaining the certified copy of the order and upon receipt of the application, the respondent authorities shall pass an order on the same within a period of 2 months from the date of receipt of the application. Petition disposed off.
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Central Excise
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2020 (10) TMI 1032
CENVAT Credit - additional duty of customs paid - rule 3 (1)(vii) of the CENVAT Credit Rules - Customs duty of excise duty - concessional rate of tax under Customs Notification dated March 17, 2012 - extended period of limitation - levy of interest and penalty. HELD THAT:- It is not in dispute that both Hindustan Zinc and Ultratech Cement paid additional duty of Customs under section 3 (1) of the Customs Tariff Act, after availing the benefit of the Customs Notification dated March 17, 2012 and that they also availed CENVAT credit of the additional duty of customs so paid under rule 3(1)(vii) of the CENVAT Credit Rules. This availment of CENVAT credit has been denied to them for the reason that the additional duty of customs paid @ 2% was not the duty of excise as specified in the Excise Tariff Act and so CENVAT credit of the additional duty of customs paid under the Customs Notification dated March 17, 2012 have been wrongly availed. A bare perusal of rule 3(1)(i) indicates that a provider of output service shall be allowed to take CENVAT credit of the duty of excise specified in the First Schedule to the Excise Tariff Act specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act subject to the two conditions mentioned in proviso (a) (b). However, rule 3(1)(vii) provides that a provider of output service shall be allowed to take credit of the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via) - The Commissioner has mixed up rule 3(1)(i) and rule 3(1)(vii) of rule 3 of the CENVAT Credit Rules. It is for this reason that the conditions specified in rule 3(1)(i) have also been imported into rule 3 (1)(vii) of the CENVAT Credit Rules. In the first instance, Hindustan Zinc had not paid duty of excise specified in the First Schedule of the Excise Tariff Act, nor it had availed the benefit of the Central Excise Notification dated March 1, 2011 or that specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Central Excise Notification dated March 17, 2012 had been availed. In fact, Hindustan Zinc had paid additional duty of customs by availing the benefit under serial number 122A/123 of the Customs Notification dated March 17, 2012. It is because of this misreading of rule 3(1) of the CENVAT Credit Rules that led the Commissioner to commit an error - The Commissioner, therefore, committed an illegality in denying the benefit of CENVAT credit to Hindustan Zinc. On the other hand, the Commissioner (Appeals), in the matter of Ultratech Cement, after considering the provisions of rule 3 of the CENVAT Credit Rules and the decision of the Tribunal in M/S HINDALCO INDUSTRIES LTD. APPELLANT VERSUS GST, BHOPAL RESPONDENT [ 2018 (3) TMI 1124 - CESTAT, NEW DELHI] and the Minutes of the Meeting of the Regional Advisory Committee of Hyderabad Zone held on February 9, 2015, held that Ultratech Cement was justified in taking the CENVAT credit. The Commissioner (Appeals) also found that the judgment of the Gujarat High Court inLONSENKIRI CHEMICALS INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS AND SERVICE TAX, VADODARA-I [ 2018 (9) TMI 1439 - GUJARAT HIGH COURT] would not be applicable to the facts of the case. Thus, there is no error in the order passed the Commissioner (Appeals) in the matter of Ultratech Cement - appeal allowed.
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