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TMI Tax Updates - e-Newsletter November 18, 2019 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles Is there any practical way out to the ITC restriction of 20% - Rule 36(4) DIGITAL LOCKERS News Central GST Delhi-West Commissionerate unearthed racket of issuance of fake invoices Indian Banking at Crossroads: Some Reflections (Shri Shaktikanta Das, Governor, Reserve Bank of India - Saturday, November 16, 2019 - Delivered at the First Annual Economics Conference, Amrut Mody School of Management, Ahmedabad University) Income Tax Department conducts search on prominent business groups in Mumbai India’s Foreign Trade: October 2019 Notifications Customs 84/2019 - dated 15-11-2019 - Cus (NT) Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver 83/2019 - dated 15-11-2019 - Cus (NT) Exercise of powers of Commissioner of Customs (Appeals), Delhi in certain cases by Commissioner of Customs (Audit), Delhi FEMA FEMA 5 (R)/ (3)/2019-RB - dated 13-11-2019 - FEMA Foreign Exchange Management (Deposit) (Third Amendment) Regulations, 2019 FEMA 14(R)/(1)/2019-RB - dated 13-11-2019 - FEMA Foreign Exchange Management (Manner of Receipt and Payment) (Amendment) Regulations, 2019 IBC G.S.R. 855 (E) - dated 15-11-2019 - IBC Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 G.S.R. 854(E). - dated 15-11-2019 - IBC Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 SEZ S.O. 4127 (E) - dated 7-11-2019 - SEZ The Government hereby rescinds the notification S.O. 2094(E), S.O. 808(E), S.O. 3610(E) Circulars / Instructions / Orders SEBI SEBI/HO/MIRSD/DOP/CIR/P/2019/136 - dated 15-11-2019 Mapping of Unique Client Code (UCC) with demat account of the clients SEBI/HO/CDMRD/DOP/CIR/P/2019/135 - dated 14-11-2019 Modifications in the contract specifications of commodity derivatives contracts Highlights / Catch Notes GST Classification of goods - fusible interlining cloth partially coated with plastic which is used for shirt collars, cuffs, pant belts etc. - The product, namely fusible interlining cloth, is classifiable under Heading 5903 in Chapter 59 Visit to Get Source Recovery of amount on account of tax, cess, interest and penalty - no proceedings whatsoever, was issued against the petitioner - Perusal of Section 83 would show that the such provisional attachment can be resorted to only when proceedings are pending under any of the provisions viz., Section 62, 63, 64, 67, 73 and 74. Visit to Get Source Income Tax Reopening of assessment u/s 147 - assessee is not being supplied with information/ documents by the AO - If such petitions are routinely entertained, not only would it lead to opening of flood-gates, but also it would be extremely difficult for the AO to complete the assessment proceedings within the period of limitation prescribed under the Act. Visit to Get Source Treatment to person as a Principal Officer of the company - Key Management Personnel - Whether the petitioner is the person connected with the management or administration of the company. Such finding has to be supported by substantial material - Merely on surmises and conjectures, no person shall be treated as a Principal Officer. Visit to Get Source Revision u/s 263 - CIT was clothed with ample supervisory powers to direct for redoing the assessment provided twin conditions as envisaged by Section 263 were fulfilled. Visit to Get Source Accrual of interest on deposits - Co-operative society had not come into existence till the end of relevant previous year - the assessee cannot hold the amount in fiduciary capacity of a non-existent entity. - If arguments forwarded by assessee are accepted, then the interest income on fixed deposits would escape tax net - Income could not be earned in vacuum and it should accrue to certain beneficiary. Visit to Get Source Customs Advance Authorization scheme - SION - allegation that the party had mis-declared that the exported product has been manufactured out of LSFO - This court finds no infirmity in the approach adopted by the Tribunal in accepting the explanation put forth by the respondent, which has a duly scientific basis Visit to Get Source Direction to issue a fresh certificate for unused value of the said Duty Free Credit Entitlement Certificate - Benefits under SFIS - Absolutely no discussion is made with regard to contentions raised by the petitioner that how they are not entitled for the benefits under “Served From India Scheme”. - Matter restored. Visit to Get Source Exemption under Rule 26 of the SEZ Rules, 2007 - import of New Garments in the name of "old and used clothing rags" - he project report clearly states that some of the reported garments that new and could be out of fashion in terms of time in these circumstances the conclusion of the Commissioner in the impugned order that the said T-shirts are not by letter of permission is mis-placed. - Benefit of exemption allowed. Visit to Get Source Scope of the SCN - It is completely impermissible for the Revenue to issue a Show Cause Notice and, thereafter, seek to support, or even supplement, the recitals in the Show Cause Notice by way of Office Memoranda, or executive instructions, such as the Office Memorandum dated 16th February, 2018, under challenge in these writ petitions. - Such an attempt would result in reducing the adjudicatory process to a mockery, and deserves to be deprecated. Visit to Get Source Status Holder Incentive Scheme - Import from the port which was not included in the list, later included - - listing of ports in Notification No.104/2009 is not an exhaustive list and on the other hand, it is only inclusive in view of the fact that the authorities included other ports by amending the said Notification periodically. - Benefit of the scheme allowed. Visit to Get Source Amendment in shipping bill - The conversion sought by the respondent was from free shipping bill to advance license shipping bill. The petitioner could not have entertained the application for such conversion without examination of the records. Visit to Get Source Levy of penalty on CHA - Prohibited goods - since they have failed in their duty and such act have rendered the subject consignment liable for confiscation as per provisions of Section 111 (d) of the Customs Act, 1962, a penalty under Section 112 (a) of Customs Act is required to be imposed. Visit to Get Source Levy of penalty - Improper importation - prohibited imports - The Adjudicating Authority has rightly taken the market value of such goods as prevailing in the local market for imposition of penalty, the amount of the penalty imposed on both the appellants is in accordance with the provisions of Section 112A (i) of Customs Act, 1962 and, therefore, no reason to interfere with the amount of penalty imposed on both the appellants. Visit to Get Source FEMA Foreign Exchange Management (Deposit) (Third Amendment) Regulations, 2019 Visit to Get Source Foreign Exchange Management (Manner of Receipt and Payment) (Amendment) Regulations, 2019 Visit to Get Source Corporate Law Handover of possession of the properties belonging to the Company (In Liquidation) - Tenants - The orders/decrees passed by the Courts in favour of tenants declaring them to be tenants, are a nullity in the eyes of law and are declared illegal and void, as being coram non judice and hence not binding on the Official Liquidator of the Company (in liquidation) - The tenants are directed to handover physical possession of the properties set out in paragraphs 7 and 8 above within a period of one (1) week from the date of uploading this Order. Visit to Get Source Indian Laws Appointment of members of Tribunal - Section 184 of the Finance Act, 2017 does not suffer from excessive delegation of legislative functions as there are adequate principles to guide framing of delegated legislation, which would include the binding dictums of this Court. Visit to Get Source Constitutional spirit of judicial independence - appointments to the Debt Recovery Tribunals - constitutionality of the Finance Act, 2017 - satisfaction of test of a ‘money bill’ under Article 110 of the Constitution. - Matter referred to a larger bench. Visit to Get Source IBC Corporate Insolvency resolution process (CIRP) - A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. Visit to Get Source Insolvency resolution process - Secured and unsecured creditors; the equality principle - the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. Visit to Get Source VAT The term "assessment" cannot be construed only as an order of assessment and on the other hand, the said term "assessment" consists several process commencing from the issuance of notice to passing of the order of assessment. Thus, the term "assessment" includes passing of an order of assessment as well and thus, it does not mean the order of assessment as such. Visit to Get Source Levy of entry tax - validity of insertion of new entry as “unmanufactured tobacco in sealed container” - In view of the product sold in sachet under a brand name after subjecting raw tobacco to physical process of cutting, shredding and sizing so as to make it fit for consumption including the process of being packed in a sealed container, the unmanufactured tobacco ceases to be an agricultural produce as defined under the KTEG Act and the dictionary meanings. Visit to Get Source Case Laws: GST 2019 (11) TMI 768 Classification of goods - fusible interlining cloth partially coated with plastic which is used for shirt collars, cuffs, pant belts etc. - whether classifiable in Chapters 50 to 55 or under Chapter Note 2(a) to Chapter 59 of the Tariff Act? - CBEC issued Circular No. 24/Coated Fabrics/88-CX.1 dated 02/09/1988 - N/N. 1/2017-CT (Rate) dated 28/06/2017 - HELD THAT:- Chapter Note 2(a)(4) to Chapter 59 says that fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments are excluded from Heading 5903 and are usually covered in Chapter 50 to 55, 58 or 60, depending on the materials used. At the same time, according to the Explanatory Notes to the HSN Code, textile fabrics which are spattered by spraying with visible particles of thermoplastic material and are capable of providing a bond to other fabrics or materials on the application of heat and pressure are classifiable under Heading 5903. According to Circular No. 433/66/98-CX-6 dated 27/11/1998 of CBEC, such classification should be treated as an exception to Chapter Note 2(a)(4) to Chapter 59. The Applicant s reference to rule 3(b) of the General Rules of Interpretation is of no use, as recourse to such rules is permitted under rule 1 of the said General Rules only if the terms of the headings and Section Notes or Chapter Notes do not otherwise require. It is evident from the above discussion that the Applicant s product is classifiable under Heading 5903 in terms of the Explanatory Notes to Chapter 59. Rule 3(b) of the General Rules of Interpretation is, therefore, not applicable. The Applicant s product, namely fusible interlining cloth, is classifiable under Heading 5903 in Chapter 59 of the First Schedule of the Customs Tariff Act, 1975. 2019 (11) TMI 767 Release of confiscated goods alongwith vehicle - the petitioners has submitted that the petitioners are ready and willing to pay the amount of tax and penalty as computed by the respondents - section 130 of the Gujarat GST Act, 2017 - HELD THAT:- Issue Rule returnable on 28th November, 2019. By way of interim relief, the respondents are directed to forthwith release truck together with the goods contained therein, subject to the petitioners depositing an amount of ₹ 1,06,352/- as computed by the respondents towards tax and penalty. 2019 (11) TMI 766 Recovery of amount on account of tax, cess, interest and penalty from the account maintained by the petitioner - invocation of section 79 of GST Act - It is the specific case of the petitioner that no proceedings whatsoever, was issued against the petitioner for determining either the tax, cess or interest or penalty - principles of natural justice - HELD THAT:- It is evident that the statement said to have been given on 19.06.2019 claims to be so called admission by the petitioner, is not available before the Revenue anymore and on the other hand, it is for them to determine the tax liability by resorting to the procedures in accordance with law, instead of issuing the impugned proceedings straightaway under Section 79 based on the so called admission which is subsequently retracted. The impugned proceedings issued under Section 79 is not sustainable. No doubt, the first respondent sought to rely upon Section 83 to contend that the first respondent is entitled to make the provisional attachment - Perusal of Section 83 would show that the such provisional attachment can be resorted to only when proceedings are pending under any of the provisions viz., Section 62, 63, 64, 67, 73 and 74. In this case, as admitted by the learned counsel appearing for the first respondent, no such proceedings are pending as on today under any of the above provisions. Therefore, Section 83 also would not come to the rescue of the respondent to sustain the impugned proceedings - impugned proceedings are not maintainable. Petition allowed. 2019 (11) TMI 765 Provisional attachment of Bank Accounts - period ending January 2019 - HELD THAT:- The learned counsel appearing for the first respondent does not dispute that the entire amount due and payable, for which the provisional attachment under Section 83 of the CGST Act was issued has been paid by the appellant. The impugned communication dated 03rd April 2019 (Annexure-A to the writ petition) is hereby quashed and set aside - Appeal allowed. Income Tax 2019 (11) TMI 764 Best judgment assessment - Admission of additional evidence - HELD THAT:- Application for oral hearing in Court is rejected. We have carefully gone through the review petitions and the connected papers. We find no merit in the review petitions and the same are accordingly dismissed. 2019 (11) TMI 763 Disallowance under section 40A(3) - whether fall within the ambit of undisclosed income within the meaning of Section 158B(b) - HELD THAT:- Leave granted. 2019 (11) TMI 762 Presumption u/s 132(4A) raised in the assessment proceeding - Whether apart from from section 132(4A) the burden to explain the documents seized from the possession of the assessee during search is upon him and if it so, then has he discharge the burden ? - HELD THAT:- Section 132(4A) of the Act provides that any books of account, documents, money, bullion, jewellary or other valuable articles or things found in possession or in control of any person in course of search may be presumed to be belonging to such person, and further, contents of such books of account and documents are true. But this presumption is not provided in absolute terms and the word used is may and not shall , as such the revenue has to corroborate the entries made in the seized documents before presuming that transactions so entered were made by the assessee. Presumption so provided is not in absolute terms but is subject to corroborative evidence. In the present case, Tribunal only on basis of presumption under Section 132 (4A) of the Act, reversed the finding of CIT (A), without recording any finding as to how the loose sheets which were recovered during search, were linked with the assessee. In the absence of corroborative evidence, the Tribunal was not justified in reversing the finding by the CIT (Appeals). In view of the above, we are of the considered view that order passed by Tribunal reversing the finding of CIT (A) in regard to deletion of addition made of ₹ 5,58,870/- and restoring the order of A.O. on mere presumption is unsustainable. The order dated 12th March, 2010 is set aside to that extent, and the matter is remitted back to Tribunal to decide afresh, as far as addition of ₹ 5,58,870/- is concerned, within a period of three months from today. 2019 (11) TMI 761 Reopening of assessment u/s 147 - HELD THAT:- This Court is inclined to dispose the present writ petition without touching upon the merits of the claim made by the petitioner against reopening only with a direction to the Assessing Officer to pass appropriate orders on merits and in accordance with law on the request made by the petitioner dated 27.08.2019 within a period of three weeks from the date of receipt of a copy of this order. Based on the communication received from the AO, the petitioner shall work out their remedy in the manner known to law. With the above observation, this Writ Petition is disposed of, accordingly. Since this Court has directed the Assessing Officer to dispose of the representation dated 27.08.2019 within a period of three weeks from the date of receipt of a copy of this order, the Assessing Officer is directed not to precipitate the matter further by passing an order of assessment, since the outcome of the order to be passed on the request made by the petitioner dated 27.08.2019 will have a bearing on the Assessee, for filing their objections on the second reason. 2019 (11) TMI 760 Reopening of assessment u/s 147 - assessee is not being supplied with information/ documents by the AO - third party confidential information - HELD THAT:- So far as the petitioner s challenge to the reopening of the proceedings is concerned, this Court has already rejected the same by observing that it shall be open to the petitioner to raise all its pleas before the AO. AO is now carrying on further investigation, for which purpose notices u/s 142(1) have been issued to the petitioner. It is for the petitioner to comply with the said investigation. AO has already given an assurance to the petitioner that the petitioner would be confronted with whatever material is sought to be relied upon during the course of re-assessment, and that the petitioner would be granted ample opportunity in the matter. No reason to assume, at this stage, that the AO would not undertake the re-assessment proceedings in accordance with law. In any event, if there is any infraction of law by the AO in the matter of carrying out the re-assessment proceedings, and the petitioner is aggrieved by the re-assessment order that the AO may pass, it shall be open to the petitioner to raise all its pleas in appeal, firstly, before the CIT (Appeals), and thereafter, before the ITAT, if necessary. An assessee cannot approach the High Court under Article 226 of the Constitution of India when the assessment/ re-assessment proceedings are in progress with a plea that the assessee is not being supplied with information/ documents by the Assessing Officer that he has asked for. If such petitions are routinely entertained, not only would it lead to opening of flood-gates, but also it would be extremely difficult for the AO to complete the assessment proceedings within the period of limitation prescribed under the Act. We, therefore, do not find any merit in this petition and dismiss the same leaving it to the petitioner to raise its grievance before the Appellate Forum in case the petitioner feels that there has been infraction of the procedure, or the principles of natural justice in the matter of framing of the re-assessment order. 2019 (11) TMI 759 Withholding of TDS at the rate of 0.5% - Order u/s 197 - grievance of the Petitioner is that the impugned certificate dated 29.05.2019 has arbitrarily fixed the rate of deduction of tax at source at 0.5% even though under the DTAA, the Petitioner s income is not liable to be taxed in India - Indo- German DTAA - HELD THAT:- Court quashed the order under Section 197 of the Act allowing deduction of the tax at source @ of 5% from the payments made to the Petitioner by its Indian Customers. We may note that the situation in the present case is, in fact, even better for the Petitioner inasmuch as the total income of the Petitioner has been assessed in the return filed by the Petitioner Assessee as NIL. In this regard, the Petitioner has placed on record the assessment orders for the Assessment Years 2013-14 to 2015-16. A perusal of the file notings as extracted hereinabove, demonstrates the position beyond doubt that there has been complete non-application of mind to the germane and relevant considerations by the Respondents while dealing with the Petitioner s application u/s 197. It appears that the earlier years assessment statements were also called for, which shows the taxable income was accepted as NIL, yet there is no discussion found in the file notings, as to on what basis the decision was taken to withhold tax at source in respect of payments made to the petitioner in India at the rate of 0.5%. Following the decision in Bentley Nevada LLC [ 2019 (7) TMI 1503 - DELHI HIGH COURT ], we accordingly quash the certificate dated 29.05.2019 and direct the Respondents to apply mind afresh to all the relevant circumstances and issue a fresh certificate. Till the fresh certificate is issued, the Petitioner s receipts of payment shall be subject to Nil rate of deduction of tax at source in respect of payments made to it in India. 2019 (11) TMI 758 Treatment to person as a Principal Officer of the company - Key Management Personnel - HELD THAT:- No person can be treated as a 'Principal Officer' of the company recognising him as the Key Management Personnel of the company. The details of such information on the basis of which the Key Management Personnel tag is made, has to be explicitly expressed in the notice of the intention of treating any person as a Principal Officer by the Assessing Officer. Neither in the show cause notice nor in the order impugned, such connection of the petitioner with the management or administration of the company M/s Kingfisher Airlines Limited is established. The phrase 'Key Management Personnel' of the company has a wide connotation and the same has to be supported with certain material unless such connection is established, no notice served on the petitioner would empower the respondent Authority to treat the petitioner as a Principal Officer. In the present case, the question inasmuch as neither service of notice nor hearing of the petitioner before treating the petitioner as a Principal Officer is involved. The fulcrum of dispute revolves around the aspect whether the petitioner is the person connected with the management or administration of the company. Such finding has to be supported by substantial material and has to be reflected in the notice issued under Section 2(35) to treat a person as a Principal Officer of the company which will have wider consequences. The said aspect is lacking in the present order impugned. Merely on surmises and conjectures, no person shall be treated as a Principal Officer. 2019 (11) TMI 757 Exemption u/s 11 - building fund receipts received on capital account - tribunal restored the registration granted to the assessee under section 12AA - assessee contended that development fund is charged from the students for development of the infrastructure of the society/college/institution for construction of the building and purchase of capital asset and submitted that this fund is part of the corpus fund of the society and has been shown as part of the capital fund of the society - whether the contribution received for construction of building etc. from the student falls under the voluntary contribution for corpus of the trust as per section 11(1)(d) of the Act or not? - HELD THAT:- It is evident from section 11(1)(d) of the Act that there is no condition of prescribed amount of application of the income received in the form of voluntary contribution made with a specific direction that they shall form part of the corpus of the trust or institution, thus, the Learned CIT(A) is not justified in considering the development fund received under section 11(1)(a) or 11(1)(b) for the purpose of application of income upto 85% towards charitable purposes. But we find that Ld CIT(A) has not examined the building development fund in the light of the requirement of section 11(1)(d) of the Act that donors should specifically direct that said voluntary contribution shall form part of the corpus of the trust or institution. As this important requirement of the law has not been examined either by the ld. CIT(A) or by the Assessing Officer, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh with the direction to the assessee to produce necessary documentary evidence to substantiate that donors have specifically directed to treat the development fund given by them shall form part of the corpus of the trust of the institution. The Assessing Officer shall after verification of the documentary evidences produced by the assessee decide the issue in accordance with law. Appeal of the assessee is accordingly allowed for statistical purposes. 2019 (11) TMI 756 Unexplained cash credit u/s 68 - violation of the principle of the natural justice - notices u/s 133(6) were issued by the AO at the wrong address to various share subscribers, which had returned back undelivered - HELD THAT:- In the facts of the case, we are of the opinion that whatever may be the reasons, it is evident that those parties could not respond to the notices issued u/s 133(6) and the assessee also failed to produce them before the AO. Now, before us, the assessee has given undertaking that if matter is restored back to the AO, the assessee shall produce all the share applicant parties along with all the required documents to discharge its onus of proving the identity creditworthiness of the share applicant parties and genuineness of the transaction as required under section 68. In view of the facts and circumstances of the case and the undertaking given by the assessee, in the interest of the substantial justice, we feel it appropriate that the assessee must be provided an opportunity to produce all those share applicant parties, which the learned CIT(A) did not provide despite request on the part of the assessee. Accordingly, we restore the issue in dispute involved in the grounds of the appeal to the file of the AO for deciding afresh with the direction to the assessee to produce all the share applicant parties before the Assessing Officer along with all documentary evidences which it wants to rely upon. The assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for the statistical purposes. 2019 (11) TMI 755 Revision u/s 263 - applicability of provisions of section 115JB - appellant which is established under Banking (Companies Transfer Of Undertakings) Act, 1970 - the said issue was not in the show cause notice sent to appellant u/s 263 - whether CIT erred in invoking jurisdiction u/s 263 and directing AO to add back amounts in respect of bad and doubtful debts and investments which were written off and staff welfare expenses which were examined by AO and allowed in assessment? - HELD THAT:- If the assessment order was found to be erroneous as well as prejudicial to the interest of the revenue, the same would certainly become subject matter of revision u/s 263 as held by Hon ble Supreme Court in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] . The omissions on the part of AO, to carry out certain adjustments, as pointed out by Ld. Pr.CIT would certainly make the order erroneous as well as prejudicial to the interest of the revenue since Book Profits u/s 115JB has to be computed in accordance with the provisions of that Section. The failure to do so would render the order under consideration amenable to revisional jurisdiction u/s 263 read with Explanation-2 thereof. CIT, in our considered opinion, was clothed with ample supervisory powers to direct for redoing the assessment provided twin conditions as envisaged by Section 263 were fulfilled. Upon perusal of factual matrix as enumerated in preceding paragraphs, we find that the said conditions were duly fulfilled and the only recourse available to the revenue was revision u/s 263. Nothing on record would suggest that the stated issues were ever examined or verified by Ld. AO during assessment proceedings and a view was taken in the matter. Therefore, we decline to interfere in the directions given by Ld. Pr.CIT. Our adjudication as above, shall have no bearing on the issue of applicability of Section 115JB to the assessee, which is kept open since the same do not form subject matter of present appeal. Jurisdiction u/s 263 - assessee claimed deduction u/s 36(1)(viii) - HELD THAT:- Upon due consideration, we find that it was obligatory on the part of assessee to fulfil the conditions as envisaged by Sec. 36(1)(viii) before claiming deduction therein. Non-fulfillment of these conditions would certainly disentitle the assessee to claim the said deduction. The Ld. Pr.CIT has brought on record sufficient factual matrix to demonstrate that the assessee did not fulfil these conditions. Therefore, we are not impressed with the arguments of Ld.AR and find no infirmity in the directions issued by Ld. Pr. CIT. Accordingly, the appeal stands dismissed. 2019 (11) TMI 754 Addition emanating from the provisions of Sec.50C - difference in agreed sale consideration reflected by the assessee and stamp duty valuation - HELD THAT:- It is undisputed fact the sole project being carried out by the assessee was substantially completed which is evidenced by the inspection carried out by the department at the project site. In fact, the assessee has not even contested the same before us. There would be no quarrel on the point that the income from the project was rightly brought to tax by AO during the year under consideration and no interference, in this regard, would be required from our side. So far as the difference in agreed sale consideration reflected by the assessee and stamp duty valuation is concerned, we find that nothing has been brought on record by Ld. AO that the assessee was in receipt of higher sale consideration than reflected by the assessee in its books of accounts. Clearly, the provisions of Section 43CA as well as Sec 50C were not applicable to the year under consideration. However, the perusal of quantum assessment order would establish that either of these sections have not been invoked by Ld. AO. Onus was on assessee to establish that the agreement value received by the assessee as sale consideration was the fair market value of the inventory being sold by the assessee. The assessee remained unsuccessful in demonstrating the same. In fact, the assessee did not offer any income / loss from the project only on the pretext that certain issues were pending with relevant authorities. The obligation to offer the income from the project would not be dependent on the settlement of the litigation and the same could not be allowed to be postponed till indefinite period of time. The revenue could not be deprived-off its legitimate dues particularly when the project was substantially sold-off and the occupation was already granted as way back as FY 2006-07 2007-08. Therefore, the conduct of the assessee do not inspire us to confirm the stand of Ld. first appellate authority, in this regard. In our opinion, the assessee was duty bound to furnish proper explanation regarding sale of inventories at less than stamp duty valuation. Quantum of expenditure is concerned, since the correct income of the project was to be ascertained, the assessee would be entitled for actual expenditure incurred on the project and estimated expenditure which were likely to be incurred provided the expenditure had crystallized during the year and there was reasonable certainty of outflow of the same. Nothing concrete, in this regard, emanates from the quantum assessment order as well as appellate order. Restore the matter back to the file of Ld. AO to ascertain the correct income of the assessee earned from the said project and reframe the assessment after affording reasonable opportunity of being heard to the assessee. The assessee is directed to substantiate his claim, in this regard, including explanation for sale of flat at less than stamp duty valuation. 2019 (11) TMI 753 Addition u/s 41(1) - utilization of working capital towards capital expenditure in respect of waiver of loans stated to be working capital loan/term loan - HELD THAT:- Upon perusal of impugned order, we find that learned first appellate authority failed to clinch the issue in the correct perspective since it was the observation in the impugned order that discretionary payment on compassionate grounds would be capital in nature and therefore, not taxable in the hands of the assessee, which was not the case of revenue. It was also observed that the purpose of utilization of the funds were not, at all, relevant for the determination of the taxability of the waiver. Rather it is the prime argument of assessee that since working capital loan was utilized for the purpose of capital expansion and therefore, the same would not constitute trading liability within the meaning of Sec.41(1). The terms of term loan granted by SICOM were referred to while providing the relief, ignoring the fact that one-time settlement was done by the assessee with Dena Bank and the matter was related with determination of taxability of principal amount of working capital loan waived by Dena Bank. Nothing was brought on record to justify the conclusion that the provisions of Section 41(1) were not applicable to the case of the assessee overlooking the fact that the assessee was claiming as well as allowed deduction of interest on working capital loans in earlier years. Rather onus was placed on Ld. AO to establish this fact. Therefore, we find ourselves unable to subscribe to the view of learned first appellate authority, in this regard. Proceeding further, it transpires that the assessee obtained certain loans in the shape of non-convertible debentures and working capital loans in earlier years from Dena Bank. The working capital loan was secured by hypothecation of inventories, book debts and documentary DA bills and third-party cheques drawn in assessee s favor. The assessee has claimed as well as allowed the deduction of interest on working capital loan, which is evident from its financial statements for various years, as placed on record. As submitted that total expenditure on capital expansion was ₹ 1880 Lacs which was financed out of NCD, term loan, working capital loan and internal accruals etc. as evidenced by addition to fixed assets, cash flow statements, statement of utilization of funds for capital expansion etc. This is contrary to the observation of Ld. AO that the assessee failed to prove such nexus despite being provided with adequate opportunity. Regarding differential interest amount of ₹ 148.33 Lacs, Ld. Sr. Counsel has submitted that such amount was never provided for in the books of accounts and therefore, the cessation of the same would not be covered u/s 41(1). We deem it fit to set-aside the order of Ld. CIT(A) on stated issues and direct Ld. AO to re-adjudicate the same de novo in the light of submissions made by Ld. Sr. Counsel, before us. The assessee, in turn, is directed to substantiate his stand, in this regard with documentary evidences including reconciliation of the interest differential. 2019 (11) TMI 752 Surplus on sale of property u/s 50 - HELD THAT:- Upon due consideration, we find that the fact that the immovable property,which was sold by the assessee during the year under consideration, was part of block of asset Building remain uncontroverted before us. The assessee during assessment proceedings as well as appellate proceedings could not establish that the said property was not part of block of asset and depreciation against the same was never claimed in earlier years. As rightly noted by learned first appellate authority, the assessee could not brought on record the factual position, in this regard, for the year ending 31/03/2011 as well as for the year ending 31/03/2012. Similar is the position before us since despite being specifically directed, the assessee could not demonstrate this fact and bring on record sufficient material to demonstrate that depreciation was never claimed against the said property since its acquisition. Therefore, we find no reason to differ with learned first appellate authority on this point and concur with the conclusion that resultant gains were rightly brought to tax as short-term capital gains u/s 50. Ground No.1 stand dismissed. Claim of direct expenditure - HELD THAT:- The property tax as well as Best deposit, as rightly held by first appellate authority, could not be held to be part of cost of acquisition of the property. The same could also not be termed as cost of improvement or expenditure incurred wholly and exclusively in connection with transfer of property. Therefore, the same has rightly been disallowed. So far as the other expenditure is concerned, we find that the assessee failed to adduce sufficient documentary evidences to substantiate the same. Keeping in view the principal of natural justice, we deem it fit to provide another opportunity to the assessee to substantiate his claim with documentary evidences before Ld. AO. Therefore, for the said limited purpose, the matter stand restored back to the file of Ld. AO with a direction to the assessee to substantiate that expenditure in the nature of Legal expenses, brokerage, Repairs Renovation qualified for deduction from sale of property. Ground No. 2 stand partly allowed for statistical purposes. Allowance of indirect expenditure which consist of employee s benefit expenses and administrative overheads as business expenditure u/s 37(1) - HELD THAT:- As rightly held by lower authorities, these expenditures could not be allowed from sale of property under the head capital gains since these costs could not be termed either as cost of acquisition / improvement or expenditure incurred wholly and exclusively in connection with transfer of property. However, it is noted that the assessee was a corporate entity and it has to incur bare minimum expenditure to maintain its corporate personality despite the fact that no business activity was being carried out by the assessee. Therefore, on factual matrix, we deem it fit to restore the matter back to Ld.AO to reconsider the allowability of these expenditures with a direction to the assessee to substantiate the fact that the same fulfilled the conditions of Section 37(1). Ground No.3 stand partly allowed for statistical purposes. 2019 (11) TMI 751 Levying the late fees u/s 234E - processing the statement of tax deducted at source u/s 200A before the amendment was brought in w.e.f. 01.06.2015 in the provisions of section 200A - HELD THAT:- We, therefore, in the given facts and circumstances of the case as well as following the decisions rendered by the Tribunal in the case of State Bank of India, Genda Chowk and others [ 2018 (11) TMI 1714 - ITAT INDORE] , M/s. Madhya Pradesh Power Transmission Ltd. and others Vs. DCIT (TDS) [ 2018 (12) TMI 1323 - ITAT INDORE] are of the view that Ld. CIT(A) erred in confirming the levy of late fees u/s 234E by the assessing officer. Accordingly findings of Ld. CIT(A) in all these 5 appeals are set aside and revenue is directed to delete the levy of fees u/s 234E - Decided in favour of the assessee. 2019 (11) TMI 750 Addition on account of repairs and maintenance - HELD THAT:- After considering the rival submissions, we do not find any infirmity to interfere with the Orders of the Ld. CIT(A) in deleting the addition. Since the existing unit of assessee have been repaired and no new asset has come into existence, therefore, the Ld. CIT(A) on verification of bills and vouchers, correctly held that same are revenue expenditure in nature. This Ground of appeal of Revenue is dismissed. Capital receipt - Subsidy in the form of excise duty refund - HELD THAT:- The assessee has referred to Notification issued for New Industrial Policy in which the Government of Jammu Kashmir has requested for special package for development of industries in the State. On the lines the industrial policy of the State Government was also notified by the Central Government. Thus, the assessee received the subsidy in the form of excise duty refund for development of industry and generation of employment for new units or making substantial expansion. Therefore, purpose test is satisfied in the case of the assessee for the purpose of grant of subsidy for setting-up industrial unit in the State of Jammu and Kashmir. The Ld. CIT(A) correctly followed the decision of Hon ble Supreme Court in the case of Pooni Sugars Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT] and in the case of Shree Balaji Alloys vs., Commissioner of Income Tax [ 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] in which similar Notification have been considered and held Excise refund and interest subsidy received by the assessees in pursuance of the incentives announced and sanctioned vide Government of India, Ministry of Commerce and Industry's Office Memorandum dt. 14th June, 2002 and Central Excise Notification Nos. 56 and 57 dt. 14th Nov., 2002 and other notifications issued on the subject, pertaining to the Industrial Policy for the State of Jammu Kashmir, is capital receipt. 2019 (11) TMI 749 Non service of notice under section 143(2) - scrutiny assessment - CIT(A) dismissed the appeal on the ground of delay in filing of appeal - HELD THAT:- We observe that the undisputed facts are that the notice under section 143(2) was not served on the assessee as is apparent from the reply of the AO in response to the RTI application dated 05.10.2018, we observe from the perusal of the said application that the notice has not been served on the assessee. In our opinion, the non service of notice is factual and serous defects in the framing of the assessment and renders the assessment proceedings as well as the consequent assessment order as null and void. CIT(A) instead of finding the truth chose to dismiss the appeal even without verifying the facts from assessment records. In the present case before us the AO admitted to have not served the notice u/s 143(2) on the assessee and in such a scenario we are left with no option except to quash the assessment order. The case of the assessee is supported by a series of decisions as stated hereinabove. In the case of CIT vs. Abacus Distribution Systems (India) (P.) Ltd. [ 2017 (2) TMI 582 - BOMBAY HIGH COURT] has held that where the notice u/s 143(2) has not been served at the correct address then the assessment proceedings concluded on the basis of invalid notice is void. Similarly, in the case of CIT vs. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] has held that no notice u/s 143(2) was ever issued by the Department, therefore, in the light of judgement referred to above the assessment proceedings sans service of notice u/s 143(2) of the Act are invalid and accordingly quashed. 2019 (11) TMI 748 Validity of reopening of assessment - non-genuine unsecured loans - HELD THAT:- The authorities below have simply brushed aside the documents furnished by the assessee, which inter-alia, includes confirmation from the lending parties, copy of bank statement of the assessee, copy of acknowledgement of return of income of lenders, etc. furnished by the assessee during the assessment proceedings. The authorities below have made addition merely on the basis of statement of Bhanwarilal Jain without there being any corroborative evidence. Even the said statement was retracted by Bhanwarlal Jain. In our considered view, the addition on account of unsecured loans from M/s. Navkar Diamond is unsustainable. As regards unsecured loans from M/s. Surya Diam is concerned, the assessee has filed confirmation from the lender, the same is at page-20 of the paper book. The assessee has also filed copy of audited accounts of the said firm at pages 22 to 26 of the paper book. The name of the assessee appears in the books of M/s. Surya Diam in Schedule-D of Balace Sheet as on 31/03/2012 under the head Loans and Advances . We observe that unsecured loans from M/s. Surya Diam is on the same footing as loan from M/s. Rose Impex, the Tribunal has deleted the addition vide order dated 20/04/2018 (supra). The relevant extract of the finding of Tribunal has already been reproduced above. On account of parity of transactions, the finding given by the Co-ordinate bench would mutandis mutatis apply in the present set of transactions as well. The ground No.1 of appeal stands allowed and the findings of CIT(A) on this issue are set-aside. 2019 (11) TMI 747 Undisclosed interest income - ownership of deposits in the hands of Developer of society - Co-operative society had not come into existence - Deduction u/s 80 IB(10) in respect of its residential project - AO disallowed assessee s entire claim of deduction u/s 80 IB(10) on account of certain violations and further made additions on account of undisclosed interest income - AO while disallowing assessee s claim of deduction u/s 80 IB (10) observed that the assessee is not eligible for claiming deduction in respect of sale of car parking and also on resale of flat - HELD THAT:- From the reading of meaning of fiduciary relationship as defined in legal dictionaries referred above, it can be safely construed that it is a relationship between the two parties . Thus, existence of two parties whether real or juristic is a pre-condition to have fiduciary relationship. In the absence of second party, there cannot be any fiduciary relationship. In the instant case it is an undisputed position that Co-operative society had not come into existence till the end of relevant previous year. Therefore, the assessee cannot hold the amount in fiduciary capacity of a non-existent entity. The argument of assessee, holding funds of society in fiduciary capacity, thus fails. If arguments forwarded by assessee are accepted, then the interest income on fixed deposits would escape taxnet. If it is held that the interest is not income of the assessee, the same would obviously not be taxable in the hands of the assessee. Since, residents Co-operative society has not come into existence during the previous year when the interest income had accrued, the interest income cannot be taxed in the hands of non-existent entity. Hence, interest income would neither be taxable in the hands of the assessee nor in the hands of Co-operative society. The proposition put-forth by the ld.Authorized Representative of the assessee is hence, unacceptable. Income could not be earned in vacuum and it should accrue to certain beneficiary. In the present case, it is not the collection of corpus fund but the interest on alleged corpus fund , which is subject matter of dispute. Corpus fund and interest on corpus fund are on different footing. Corpus fund is capital in nature, whereas, interest earned on corpus fund is revenue receipt. We concur with the findings of the CIT(A) in confirming the addition on account of undisclosed interest income in the hands of assessee. The grounds raised by the assessee in appeal are de-void of any merit and, hence, the same are dismissed. Deduction u/s 80 IB(10) in respect of sale of car parking - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by various decisions of the Tribunal. The Hon ble Jurisdictional High Court in the case of Puravankara Projects Ltd. ( 2011 (7) TMI 1352 - BOMBAY HIGH COURT ) has affirmed the findings of Tribunal in holding that car parking space forms part parcel of housing project and the assessee is entitled to deduction under section 80 IB(10) in respect of sale of parking area. The CIT(A) granted relief to the assessee by following the decisions of the Tribunal and the Hon ble High Court. We find no reason to interfere with the well reasoned finding of CIT(A). Thus, ground No.1 of the appeal of Revenue is dismissed. Deduction u/s 80 IB(10) in respect of flat which has been allegedly resol d - HELD THAT:- A perusal of records reveal that Flat No.K/1204 on which Revenue is disputing the claim of deduction under section 80 IB(10) was initially sold to Shri Jailesh Oebroi Smt. Vimla Oberoi. They had paid initial token amount of ₹ 2,50,000/- at the time of booking flat. Thereafter, they defaulted the terms of payment and the assessee had to cancel the booking. After cancellation of the initial sale agreement, the flat was resold to other party. The assessee claimed deduction under section 80 IB(10) of the Act in respect of profits arising from resale of said flat. It is not a case where the assessee has indulged in any trading/broking of the same flat twice. It was under peculiar facts that the first agreement was cancelled and the flat was resold. We do not find any error in the findings of CIT(A) in allowing deduction under section 80 IB(10) of the Act on the profits arising from sale of said flat. No infirmity in the findings of CIT(A) in allowing proportionate deduction on the eligible flats of the housing project. The concept of allowing proportionate deduction on eligible flats have been approved by Hon ble Jurisdictional High Court in the case of Vandana Properties ( 2012 (4) TMI 54 - BOMBAY HIGH COURT ) . The ground No.3 of the appeal is dismissed being devoid of any merit. Appeal of the Revenue is dismissed. 2019 (11) TMI 746 Computing deduction u/s 80HHD - AO concluded that the receipts transferred to other hoteliers should have been included in the total business receipt - HELD THAT:- The relevant observations of the Tribunal on the issue were also brought to the notice of the Bench. Having considered rival submissions, we have noted that deduction u/s 80HHD is calculated as a percentage of profit derived from services provided to foreign tourists. The mode and manner of computing such deduction has also been provided in the said provision. It is the specific case of the assessee that the receipts transferred to other hoteliers and tour operators by issuing certificate in Form no. 10CCAC should not form part of tourist receipts to compute deduction u/s 80HHD as per the formula prescribed under the said provision. While deciding identical issue in A.Y. 2002 03, [ 2019 (3) TMI 561 - ITAT MUMBAI] held that the receipts passed on to other hotels and travel agents cannot be included in the total business receipts for computing deduction u/s 80HHD. The same view was reiterated by the Tribunal while deciding the issue in A.Y. 2003 04. As could be seen from the aforesaid facts, this is a recurring dispute continuing from past assessment years. In fact, the AO as well as Commissioner (Appeals) have decided the issue simply following their respective decisions in the assessment year 2002 03. There being no difference in facts brought to our notice in the impugned assessment year, respectfully following the consistent view of the Tribunal in assessee s own case as referred to above, we uphold the decision of Commissioner (Appeals). Ground raised is dismissed. Excluding the unrealized tour receipts for the purpose of computing deduction under section 80HHD - HELD THAT:- As rightly observed by Learned Commissioner (Appeals), the Assessing Officer has included the unrealized tour receipts to the gross receipts for computing deduction under section 80HHD of the Act without making any discussion in the assessment order. Be that as it may, it has come to our notice that while deciding identical issue in assessee s own case in A.Y. 2002 03, the Tribunal in the order referred to above has held that unrealized tour receipts would not form part of total business receipts for computing deduction under section 80HHD of the Act. Facts being identical, following the decision of the Tribunal in A.Y. 2002 03, we uphold the decision of Learned Commissioner (Appeals) on the issue. Including the foreign exchange fluctuation gain for the purpose of computing the deduction under section 80HHD - HELD THAT:- Notably while deciding identical issue in assessee s own case in A.Y. 2002 03 (supra), the Tribunal following the decisions of the Hon ble jurisdictional High Court in case of CIT vs. Syntel Limited [ 2009 (12) TMI 689 - BOMBAY HIGH COURT] and in case of CIT vs. Rachana Udhyog [ 2010 (1) TMI 38 - BOMBAY HIGH COURT] has held that the foreign exchange fluctuation gain has to be considered as part of foreign exchange receipt for computing deduction under section 80HHD of the Act. The same view was expressed by the Tribunal while deciding the issue in assessee s own case in A.Y. 2003 04 (supra). There being no difference in facts involved in the impugned assessment year, respectfully following the consistent view of the Tribunal in assessee s own case as referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. Ground raised is dismissed. Disallowance of interest paid - HELD THAT:- In proceeding before learned Commissioner (Appeals), the Assessing officer again verified the loan transaction and in the remand report accepted it to be genuine. On the basis of such remand report, Commissioner (Appeals) not only deleted the addition made under section 68, but also allowed the interest expenditure. In the impugned assessment year, the Assessing Officer has disallowed the interest expenditure primarily for the reason that the loan transaction was treated as non genuine in assessment year 2003-04. However, as discussed earlier, the first Appellate Authority accepted the loan transaction as genuine and also allowed the interest expenditure thereon while deciding the appeal for A.Y. 2003-04. The aforesaid decision of learned Commissioner (Appeals) was also upheld by the Tribunal. That being the case, the reason on which the Assessing Officer disallowed the interest expenditure is unsustainable. As regards the observation of the learned Commissioner (Appeals) that the amount on which interest was paid being an advance the interest expenditure is not allowable, we must observe, the facts on record clearly reveal that since the assessee needed finance for his business activity it availed the loan/advance against proposed sale of property. The purpose of availing loan / advance is connected with the business of assessee. In any case of the matter, under identical facts and circumstances, interest expenditure was allowed in the preceding assessment year. That being the case, we delete the disallowance of interest expenditure. Ground raised is allowed. Disallowance of deduction claimed towards payment of non compete fees - HELD THAT:- From the observations of Commissioner (Appeals) it appears that the payment made by the assessee is not only for non compete but also for acquiring brand name, trademark, goodwill etc. While allowing assessee s claim in assessment year 2002-03 the aforesaid factual aspect appears to have not been brought to the notice of the Tribunal. Further, the fact that by making such payment the assessee has acquired assets of enduring benefit cannot be denied. Therefore, we concur with the view expressed by the Revenue Authorities that the expenditure incurred is capital in nature. However, it is established on record that the payment made by the assessee is for non compete, acquiring brand name, trademark, goodwill etc. Therefore, by incurring such expenditure the assessee certainly has acquired assets which have to be considered as intangible assets as per section 32(1) (ii). That being the case, assessee would be eligible to avail depreciation at the rate applicable to intangible assets. Therefore, we direct the Assessing Officer to allow depreciation on the expenditure claimed by the assessee. Disallowance of expenditure u/s 14A - HELD THAT:- Undisputedly, the assessee has earned exempt income during the year under consideration. Therefore, expenditure attributable to earning of exempt income has to be allowed in terms of section 14A. It is observed, while deciding identical issue in assessment year 2002-03, the Tribunal, in the order referred to above, has restricted the disallowance to 2% of the exempt income earned during the year. Facts being identical, respectfully following the decision of the Coordinate Bench in assessee s own case, we direct the Assessing Officer to restrict the disallowance to 2% of the exempt income. Ground raised is partly allowed. Disallowance being commission paid to PTC Holidays Private Limited - HELD THAT:- Assessing Officer must establish on record that the payment made by the assessee to a related party is unreasonable and excesseive having regard to the market rate. On a careful reading of the assessment order, we are of the view that the AO before disallowing the expenditure has not brought any material on record to demonstrate that the payment made by the assessee is unreasonable and excessive having regard to the market rate. Commissioner (Appeals) also sustained the disallowance on a factual misconception that similar disallowance was sustained by the first Appellate Authority in A.Y. 2003-04. Whereas, in Assessment Year 2003-04, Learned Commissioner (Appeals) has actually deleted the disallowance made by the Assessing Officer, as evident from his order dated 06.12.2012. In fact, in assessment year 2002-03 also the Assessing Officer himself allowed the payment made to the very same party in the scrutiny assessment. Therefore, considering the overall facts and circumstances relating to the issue, we are of the opinion that the disallowance made is unsustainable, accordingly, we delete it. Computing deduction u/s 80HHD - excluding the income received on interest on income tax refund and misc. Income from total business receipt - HELD THAT:- In so far as income from interest on income tax refund, the assessee has accepted the decision of Revenue authorities. Therefore, there is no need to deliberate any further on that issue. As regards misc. income, it is the claim of the assessee that this income is closely related to the business activity of the assessee. It is observed, the Revenue authorities have disallowed assessee s claim in absence of necessary details. It has been submitted before us by the learned AR that the assessee is in possession of all the details relating to the income earned and can establish its claim before the AO. Considering the above, we are inclined to restore the issue relating to assessee s claim of misc. income to be treated as business income for deduction under section 80HHD to the Assessing Officer for de novo adjudication after verifying the details to be filed by the assessee. Needless to mention, the Assessing Officer must afford a reasonable opportunity of being heard to the assessee before deciding the issue. Ground raised is partly allowed for statistical purposes. Disallowance under section 40A(2)(b) - HELD THAT:- While deciding the issue arising out of disallowance of commission paid to the very same party, we have deleted the disallowance on the basis of our detailed reasoning therein. The said decision of ours would apply mutatis mutandis to the issue raised in the present appeal also. Accordingly, the disallowance made by the Assessing Officer is deleted. Ground raised is allowed. Disallowance under section 14A to 02% of the exempt income earned during the year. This ground is partly allowed. Disallowance u/s 40A(2)(b) - HELD THAT:- While considering the disallowance of commission paid to the very same party, we have allowed assessee s claim and deleted the disallowance. Following our decision therein, we delete the disallowance made in the impugned assessment year as well. 2019 (11) TMI 745 Disallowance u/s. 14A r.w. Rule 8D - assessee has claimed before the ld. CIT(A) that he was engaged in the business of trading in shares and securities and the provisions of the section 14A were not applicable to it - HELD THAT:- After considering the decision of the Hon ble Supreme Court in the Maxopp case [ 2018 (3) TMI 805 - SUPREME COURT] , it is clear that the principle of apportionment of the expenditure was applicable and the expenditure apportioned to the exempt income or income not eligible to tax was not allowable as a deduction. Provision of section 14A is applicable even when the shares are held stock in trade though incidentally certain dividend income is earned, therefore, the contention of the ld. counsel about the applicability of ACIT Vs. Punjab National Bank [1764562] is not acceptable. We consider that the decision of the Hon ble Supreme Court in Maxopp Investment Ltd. vs. CIT has settled the law that relevant expenditure in case of exempt income has to be apportioned between taxable and non-taxable income. In the case of the assessee, the total exempt income earned during the year is ₹ 22,01,928/- as per note 10 attached to the profit and loss statement for the year ended 31st March, 2014 and share dividend account placed at page 42 of the paper book. We consider that Hon ble Delhi High Court in the case of Joint Investment Pvt. Ltd. Vs. CIT [ 2015 (3) TMI 155 - DELHI HIGH COURT] held that disallowance u/s. 14A cannot exceed the actual exempt income - we restrict the impugned disallowance to the extent of income of ₹ 2,21,928/- , therefore, appeal of the Revenue is partly allowed. 2019 (11) TMI 744 Loan fund amounts raised in assessee's name or in case of the private limited concerns - HELD THAT:- Additions of the so-called embezzled funds added by way of enhancement in the CIT(A) s order under challenge. He has himself made it clear that the assessee and his private limited companies (supra) had raised the ICICI Bank loans in question. That being the case, it can be very well inferred that the same are not unexplained cash credits. There is also no material on record in the CIT(A) s corresponding discussion that the said loan liability has been a subject-matter of remission or cessation u/s. 41(1). So is the case with the assessee s fixed deposits and interest finance charges which prima facie have a nexus with the loan amounts only. Faced with this factual position, we direct the AO to treat the assessee s loan fund amounts raised in his name or in case of the private limited concerns (supra) as duly explained and grant telescoping benefit to him regarding source of his fixed deposits as well as interest / finance charges. He shall then reexamine this entire inter connected issue as per law within three effective opportunities of hearing. This interconnected issue is taken as accepted for statistical purposes. Disallowance of expenditure only in the lower appellate proceedings - HELD THAT:- DR fails to rebut the clinching fact that the impugned addition is based on estimation only than any lack of nexus with the assessee s trading activity in various commodities. The fact also remains that the assessee has also not been able to prove the same by way of cogent supportive evidence. We therefore deem it appropriate to restore the impugned disallowance to a lump sum amount of ₹1 lac only with a rider that same shall not be treated as a precedent in any other assessment year. Claim brought forward losses sought to be set off involving sum(s) each carried forward from earlier years and disallowed in the course of assessment as well as in the lower appellate proceedings - HELD THAT:- Both the learned representatives are ad idem on the instant issue requires afresh factual verification / reconciliation of all necessary details qua the brought forward losses carried forward from earlier assessment years. We therefore restore the instant issues as well back to the Assessing Officer. Inflated purchase disallowance - Admission of additional ground - HELD THAT:- We find no merit in Revenue s foregoing technical plea going by hon'ble apex court s landmark decision in National Thermal Power Corporation. Ltd. vs. Commissioner of Income-tax [ 1996 (12) TMI 7 - SUPREME COURT] considered in tribunal s special bench order in All Cargo Global Logistics Ltd. vs. DCIT [ 2012 (7) TMI 222 - ITAT MUMBAI(SB)] that we can very well entertain such an additional ground in order to determine the correct tax liability of a taxpayer provided all the relevant facts are already on record. Going by the very analogy, we admit the assessee s instant additional ground. Coming to merits of the issue of correctness of estimated disallowance regarding assessee s potato purchases there is no issue that both the lower authorities have already accepted the correctness of assessee s corresponding sale figures. They have thereafter proceeded to disallow the sum in issue @ 3% on estimation basis. We find in these peculiar backdrop neither the AO nor the CIT(A) have taken into consideration the assessee s line of potato trading business wherein such a disallowance would result in very high profit ratio. We deem it appropriate in this backdrop that lump sum addition of ₹10 lac would meet the ends of justice with a rider that same shall not be treated as a precedent in any assessment year. The assessee s lead appeal for assessment year 2006-07 is partly allowed in above terms. Customs 2019 (11) TMI 778 Advance Authorization scheme - SION - allegation that the party had mis-declared that the exported product has been manufactured out of LSFO - exemption denied on the ground that the said import had been made in violation of para 4.1.15 of the Foreign Trade Policy - It was alleged that the respondent had not used LSFO as an input in the export goods but has used VGO (Vacuum Gas Oil) generated during the refining of crude oil and had subsequently imported permissible input LSFO without payment of customs duty HELD THAT:- Insofar as the parameter of acidity is concerned, there is no inorganic acid present in the crude oil. There is no addition, use or generation of inorganic acids like HCl, H2SO4, HNO3, etc., during the refining process. Thus, there is no possibility of inorganic acid being present in the stream. Moreover, the FCC feed boils in the range of 300o C 570o C, whereas the boiling point of water is 100o C, thus, water would have evaporated earlier in the distillation process. Inorganic acids are water soluble and not oil soluble; hence, there is no possibility of presence of water soluble inorganic acids in the Feed. Ash percentage - HELD THAT:- Ash is composed of materials that cannot be burnt out during the distillation process. These solid materials (such as dust and other impurities) are likely to be found in the residue crucible of the distillation columns. As the FCC Feed is composed wholly of intermediate streams drawn as side cuts (excluding the residue) from distillation columns, this residue will not be present in the Feed. The principal elements contributing to high ash contents of petroleum stocks are metallic salts and organometallic compounds. The FCC feed contains metals like Nickel, Sodium etc. in the 5-50 ppmw range (0.005%). Hence, ash content is never likely to be more than 0.1% by mass. Parameter of flash point - HELD THAT:- It is expected to generate sufficient vapours which form combustible mixture at around temperature of 150o C or more. Hence, the specification of minimum 66o C will necessarily be met. Parameter of sediment percentage by mass - HELD THAT:- As the FCC feed is composed wholly of intermediate streams drawn as side cuts (excluding the residue) from distillation columns, the residue will not be present in the Feed. Water content - HELD THAT:- The water would have evaporated earlier in the distillation process. Also the products are drawn as side cuts of distillation columns at high temperatures (approximately 230-380o C). Water would have evaporated earlier at around 100oC mark. Hence, water content is not expected in LSFO (FCC Feed). The respondent had, thus, duly explained how the VGO met with all the parameters laid down in IS 1593:1982 as well as the low sulphur content required for LSFO. On behalf of the revenue, nothing was pointed out as to why the explanation submitted by the respondent should not be accepted. The adjudicating authority has relied upon the submission of the respondent that LSFO and VGO have distinct use, marketability and description and has held that it is settled law that the said product would be regarded separate and distinct manufacturing product from each other for the purpose of customs law. It, accordingly, has turned down the submission of the respondent that VGO and LSFO are the same and has held that it would establish that the export goods, that is, motor spirit was actually manufactured out of VGO only and not LSFO as declared - the adjudicating authority has failed to consider the relevant material namely, the explanation submitted by the respondent explaining that all the seven parameters required for LSFO are duly satisfied in the case of VGO. Sweet VGO used in the manufacture of motor spirit meets with the specification of LSFO as prescribed by BIS: 1593-1982 - HELD THAT:- The question of breach of DGFT notification No.31(RE-2013)/2009-14 dated 01.08.2013 whereby Para 4.1.15 came to be inserted in the Foreign Trade Policy providing that the inputs actually used in manufacture of the export product should only be imported under the Authorisation and similarly inputs actually imported must be used in the export product, does not arise. This court finds no infirmity in the approach adopted by the Tribunal in accepting the explanation put forth by the respondent, which has a duly scientific basis - In the absence of any substantial question of law arising out of the impugned order passed by the Tribunal, the appeal fails and is, accordingly, dismissed. 2019 (11) TMI 777 Direction to issue a fresh certificate for unused value of the said Duty Free Credit Entitlement Certificate - Benefits under SFIS - HELD THAT:- It is undisputed fact that the petitioner is an Indian Company, incorporated under the provisions of the Indian Companies Act, 1956, which is engaged in providing healthcare services at its hospital to patients to patients in India and also to patients who come to the petitioner s hospital for medical treatment in India from abroad. It is the specific case of the petitioner that in pursuance to Served from India Scheme to avail benefits enumerated in the Foreign Trade Policy, 2004- 2009 of the Government of India has filed an application on 22.03.2012 for issue of Duty Free Credit Entitlement Certificate in respect of eligible transactions of the petitioner during the period between 01/04/2008 and 31/03/2009 along with relevant documents. A careful perusal of Annexure-A clearly indicates that the fourth respondent before passing the order has not considered the details furnished by the petitioner as per Annexures F K, absolutely no discussion is made about the documents and information furnished by the petitioner and also the fourth respondent has not considered the details mentioned and documents produced along with the reply letter made by the petitioner as per Annexure-K, dated 08.04.2013 and as per Annexure-F, dated 12.06.2013. Absolutely no discussion is made with regard to contentions raised by the petitioner that how they are not entitled for the benefits under Served From India Scheme . If the fourth respondent has considered the reply made by the petitioner along with the documents, the fourth respondent ought to have given an opportunity of being heard instead of passing the order which is not a speaking order. Therefore, the impugned order passed by the fourth respondent cannot be sustained - matter remanded to fourth respondent with a direction to provide an opportunity of hearing - Petition allowed by way of remand. 2019 (11) TMI 776 Exemption under Rule 26 of the SEZ Rules, 2007 - import of New Garments in the name of old and used clothing rags - goods accompanied by Pre-shipment Certificate as per Public Notice no. 12 (RE-2001)/1997-2002 dated 03/05/2001 or not - it is alleged that the unused T-shirts were being sought to be cleared as old and used clothing rags - Confiscation - penalties - HELD THAT:- It is seen that the Bill of Entry describes the goods as old and used clothing rags. In the instant case, the new clothes cannot be called rags and, therefore, there is a mis-declaration to this extent. Nonetheless, the said goods are covered by the letter of permission granted by the Development Commissioner and the appellants are entitled to take the same to the SEZ without payment of duty. The impugned order comes to the conclusion that the T-shirts imported by them do not confirm to the letter of permission. We find that contrary to the facts, the letter of permission is specifically issued referring to the project report. Letter of permission also permits them to manufacture reconditioned clothing. The project report clearly states that some of the reported garments that new and could be out of fashion in terms of time in these circumstances the conclusion of the Commissioner in the impugned order that the said T-shirts are not by letter of permission is mis-placed. Thus, the appellants are entitled to clear the goods to SEZ in terms of letter of permission and Rue 27 of the SEZ Rules. Thus, the charge under section 111(m) of the Customs Act, 1962 cannot be sustained in the instant case as the payments. As the appellants were clearly entitles to clear the said goods at SEZ at nil rate of duty. Charge under section 111(d) - HELD THAT:- Revenue has relied on Public Notice no. 12 (RE-2001)/1997-2002 dated 03/05/2001. The appellants have pointed out that the said circular permits Revenue to test goods at the time of import for pre shipment certificate. In these circumstances, confiscation can only be ordered if the goods do not confirm. In this case no testing was done by Revenue and, therefore, confiscation under section 111(d) cannot be justified. There is nothing in support for the charges made for invoking section 111(m) and section 111(d). Consequently, all the charges in the Show Cause Notice including imposition of Redemption fine and penalties fail - appeal allowed - decided in favor of appellant. 2019 (11) TMI 775 Interrogation of petitioner - Pre-arrest bail - service of SCN - recording of statements - power to arrest the petitioner - HELD THAT:- The petitioners would be interrogated in presence of an advocate at a visible, but not audible distance in relation to the interrogation by the Officers of DRI in accordance with the direction given in the case of VIJAY SAJNANI ANR. VERSUS UNION OF INDIA ANR. [ 2012 (4) TMI 706 - SUPREME COURT] . Petition allowed. 2019 (11) TMI 743 Pre-deposit - demand of 50% of pre-deposit - Misdeclaration of imported goods - under-declaration - the case of the respondent-revenue is that the goods imported were under declared and custom duty was paid on declared value - HELD THAT:- There are no justifiable reason to entertain the review petitions. Review Petitions are dismissed. 2019 (11) TMI 742 DEPB fraud -Demand - Limitation - Suppression of facts - Whether extended period of five years is available for the notice dated 3-10-2006 issued under Section 28(1) of the Customs Act, 1962 when the ingredients of Fraud and with intent to evade payment of duty are absent in the said Section? - HELD THAT:- The order dated 20 February 2009 leaves no manner of doubt that the adjudicating proceedings have not been stayed and the result thereof shall be subject to the final result of this appeal. Application disposed off. 2019 (11) TMI 741 Interpretation of statute - N/N. 62/2007-Customs - Export of Iron Ore - demand of export duty - it was held in the case that benefit of doubts will go in favour of the revenue for the simple reason that the exemption notification has to be strictly construed - HELD THAT:- There is nothing to interfere with the impugned judgment and order passed by the Tribunal - appeal dismissed. 2019 (11) TMI 740 Scope of the Show cause notice (SCN) - Issuance of Circular contrary to Decision of CESTAT - Power of CBIC - Confiscation of imported Gold Coins - freely importable or not - the impugned SCN allege that the gold coins imported by the petitioner and Mink, having been imported in violation of the FTP, were not entitled to the benefit of exemption under S. No. 526 of Notification. 152/2019-Cus - demand of differential duty with interest - imposition of penalty - Circular No. 450/67/2019-Cus. IV, dated 9th September, 2019 - HELD THAT:- When the issue of classification, and entitlement to exemption, of the gold coins, imported by the petitioner, and other similarly situated importers, is at large before competent adjudicating authorities, who are in seisin thereof, the CBEC was completely unjustified in issuing the Office Memorandum dated 16th February, 2018. The powers of the CBEC, as conferred by Section 151A of the Customs Act, cannot extend to issuance of executive instructions, or Office Memoranda, pronouncing on the merits of issues which are pending before adjudicating authorities. Such an attempt would result in reducing the adjudicatory process to a mockery, and deserves to be deprecated. If the Revenue is of the opinion that an assessee has imported goods in violation of the law, or claimed the benefit of exemption to which it is not entitled, the grounds for such an opinion are required to be contained in the Show Cause Notice issued to the assessee. It is completely impermissible for the Revenue to issue a Show Cause Notice and, thereafter, seek to support, or even supplement, the recitals in the Show Cause Notice by way of Office Memoranda, or executive instructions, such as the Office Memorandum dated 16th February, 2018, under challenge in these writ petitions. Circular No 450/67/2019-Cus. IV, dated 31st May, 2019, stands modified by Circular No 450/67/2019-Cus. IV, dated 9th September, 2019, issued by the Central Board of Indirect Taxes and Customs. While no orders are, therefore, required to be passed in respect of Circular dated 31st May, 2019, Circular dated 9th September, 2019, is quashed and set aside, to the extent of the directions contained therein, especially in para 4 thereof - The authorities, adjudicating the Show Cause Notices impugned in these writ petitions would be required, independently, and uninfluenced by the Circular dated 9th September, 2019, to examine, for themselves, whether such appeals have, in fact, been filed and, if so, the effect of the orders passed therein. Para 8 of the impugned Show Cause Notices, dated 12th July, 2019/15th July, 2019, 28th June, 2019/19th July, 2019, 5th July, 2019/9th July, 2019 - HELD THAT:- The impugned SCN are quashed and set aside. The authorities, adjudicating the said Show Cause Notices, would do so, uninfluenced by para 8 thereof, and keeping in view the directions/observations contained in this judgment. Office Memorandum No. 01/89/180/36/AM-11/PC-II(A), dated 6th September, 2017, issued by the DGFT, is upheld, to the extent of the position in law stated therein. However, the authority, adjudicating the Show Cause Notices, impugned in these writ petitions, would have to assess the applicability, of this Office Memorandum, to the facts of the case of the petitioners, on merits. Office Memorandum No. 20000/5/2015-OSD (ICD), dated 16th February, 2018, issued by the Central Board of Excise and Customs, is quashed and set aside, to the extent it seeks to opine on the classification of the gold coins imported by the petitioners, and other importers similarly situated, and of the eligibility, of such gold coins, to exemption. The Show Cause Notices, impugned in these writ petitions, would be adjudicated on their own merits, uninfluenced by the opinion conveyed by the Office Memorandum dated 16th February, 2018. Petition disposed off. 2019 (11) TMI 739 Seizure of import of goods without licence - Refusal to to grant P5 license under Ammonium Nitrate Rules 2012 - special category explosive substance - Countervailing Duty in terms of N/N.12/2012-CE dated 17.03.2012 - whether this Court while exercising the discretionary jurisdiction under Article 226 of the Constitution of India, needs to interfere with the orders passed by the respondents 1 and 2 in refusing to grant P5 license to the petitioner under the Ammonium Nitrate Rules, 2012? HELD THAT:- Though the petitioner claims that the Ammonium Nitrate is also a fertilizer, it is seen that by virtue of the Notification dated 21.07.2011, issued by the Union of India through its Ministry of Commerce and Industry, Ammonium Nitrate is deemed to be an explosive within the meaning of the Explosives Act, 1884, when it has the chemical formula as stipulated in the said notification. The petitioner is not entitled to seek P5 license either as a matter of routine or right, when national security is projected by the respondents 1 and 2 for refusing to grant the P5 license to persons other than the user of the same -Perusal of the order of the Original Authority in refusing to grant license and the order of the Appellate Authority in rejecting the appeal would undoubtedly indicate that there is no scope for the writ petitioner to seek indulgence of this Court to interfere with those orders, more particularly, when the rejection was made in the interest of national security and based on a policy decision. It is seen from the order of the Original Authority, issuance of license in Form P5 for import of Ammonium Nitrate will be considered only in favour of Ammonium Nitrate user and not to a person, who is a trader of the same. It is not the case of the petitioner that it is the user of Ammonium Nitrate. On the other hand, admittedly, it is only a trader. Under Rule 16 of the Ammonium Nitrate Rules, 2012, it is stated that no license for import or export of Ammonium Nitrate by land shall be granted without the previous sanction of the Central Government in each case, wherein the Central Government may impose conditions and restrictions in consultation with the Chief Controller - Therefore, it is evident that even for issuing the license for import by the Licensing Authority, previous sanction from the Central Government in each case is necessary and that the Central Government may impose conditions and restrictions while granting such sanction. Now, it is stated that the Government has taken a policy decision not to permit import of Ammonium Nitrate to a person, who is not a user. Therefore, in view of the above Rule 16 position as well, the petitioner's claim was rightly rejected. The very act of the petitioner in disposing the earlier imported Ammonium Nitrate to various third parties, who are not possessing valid P3 license, would clearly indicate that the petitioner is undoubtedly not the user of Ammonium Nitrate and on the other hand, it is only interested in trading the same, that too, by selling it to several individuals, who are stated to be the persons without P3 license - Needless to say that accumulating small quantities of Ammonium Nitrate periodically would result in gathering larger quantity in the hands of unknown and unidentifiable persons and hence allowing such trade to go on will not be the interest of national security. Therefore, the Authorities have rightly rejected the claim of the petitioner for P5 license, with which, this Court finds no reasons or grounds to interfere, more particularly, while exercising its discretionary jurisdiction under Article 226 of the Constitution of India. Petition dismissed. 2019 (11) TMI 738 Status Holder Incentive Scheme - Import from the port which was not included in the list, later included - capital goods imported against such scrips are exempted from payment of Custom duties subject to the conditions - HELD THAT:- There is no dispute to the fact that at the time of clearing the goods, the customs did not make any objection by contending that ICD - Arakkonam was not a notified port. However, subsequently, the petitioner was called upon to pay the above said duty in cash, only on the reason that ICD - Arakkonam was not a notified port for the purpose of importation of goods taking benefit under the Notification No.104/2009. In this case, it is not the contention of the Revenue that the petitioner is not entitled to get the benefit of Notification had the ICD Arakkonam been there in the list of ports originally. In other words, but for the exclusion of ICD Arakkonam in the original Notification, the petitioner is entitled for benefit of such exemption Notification - listing of ports in Notification No.104/2009 is not an exhaustive list and on the other hand, it is only inclusive in view of the fact that the authorities included other ports by amending the said Notification periodically. Even otherwise, as the Commissioner is empowered to grant such permission in respect of other ports as well, the submissions made by the Revenue in this aspect are not convincing. The respondent is directed to extend the benefit of Notification No.104/2009 dated 14.09.2009 to the petitioner in respect of the above said five Bills of Entry - Petition allowed. 2019 (11) TMI 737 Non-service of order - case of petitioner is that order has not been served to this petitioner so far and therefore they are unable to prefer an appeal against the aforesaid order - HELD THAT:- It appears that the respondent has already passed an order-in-original bearing no. 55/2019 dated 5th March, 2019, copy whereof has already been served to the authorized representative of this petitioner namely Sh. Raj Kumar, whose statement has also been recorded under Section 108 of the Customs Act, 1962 before the customs authority. There is no question of issuing any direction to the respondent to serve again order-in-original dated 5th March, 2019 to the petitioner - petition disposed off. 2019 (11) TMI 736 Amendment in shipping bill - time limitation - request for conversion of free shipping bill to advance license shipping bill being rejected on the basis of time limit as prescribed by Circular No. 36/2010-Cus dated 23.09.2010 by the Adjudicating Authority - HELD THAT:- Tribunal was not justified in adopting the approach that it did. Merely because no time limitation is prescribed under Section 149 for the purpose of seeking amendment/ conversion, it does not follow that a request in that regard could be made after passage of any length of time. The same could be made within a reasonable period. The conversion sought by the respondent was from free shipping bill to advance license shipping bill. The petitioner could not have entertained the application for such conversion without examination of the records. It was not fair to expect the Department to maintain, and be possessed of, the records after passage of five long years when the respondent made its application for such conversion. Appeal allowed. 2019 (11) TMI 735 Duty Drawback - No notice was given by the Revisional Authority to the petitioner that there was a defective filing - Revision Application was dismissed only on the ground that court fee of ₹1,000/- was not paid on time - HELD THAT:- The petitioner is claiming a drawback claim of ₹31,04,845/-. A Revision Application was dismissed against which an appeal was also preferred, but the same was also dismissed. A Revision Application was preferred on 14th June, 2016. It appears that Revisional Authority has no Registry, which could point out the defect in filing. No defect could be pointed out in the year 2016; whereas the defect was only pointed out in the year 2018. The court fee of ₹1,000/- was paid on 18th April, 2018. Nonetheless, defect was pointed out on 20th March, 2018 and immediately thereafter, on 18th April, 2018 the court fee of ₹1,000/- was paid by the petitioner. Thus, it cannot be said that the Revision Application, which was preferred by the petitioner, was barred by any limitation. This aspect of the matter has not been appreciated by the Revisional Authority while deciding the Revision Application. Revision Application is revived at its original number and the same will be decided by the Revisional Authority on its own merits in accordance with law - Petition allowed. 2019 (11) TMI 734 Levy of penalty on CHA - Prohibited goods - The case of the revenue is that, the CHA firm namely M/s R.U. Imports-Exports Pvt. Ltd. has played a crucial role in violation of the provision of the Foods Safety Standards Act, 2006 as well as violation of provisions of the Customs Act, 1962, however, the Adjudicating Authority has failed to impose penalty on the respondent CHA firm and, therefore, the Adjudicating Authority has erred in not imposing penalty under Section 112A on the CHA firm namely M/s R.U. Imports-Exports Pvt. Ltd. HELD THAT:- There is no doubt that the import consignment was of the prohibited goods as same was not found fit for human consumption. The statement of various persons including the Director of the CHA firm reveals that the Director of the CHA firm was aware that the present import consignment as well as the consignment, which have been cleared previously were not meeting with the legal requirement of the FSS Act, 2006 and thereby the same had been imported and cleared in violation of the provision of the Customs Act, 1962 - the Adjudicating Authority under para 28.3 of the order-in-original has categorically mentioned that the CHA firm is responsible for filing the documents for clearance of goods from the customs and the firm has failed to ensure compliance of the provisions of Food Safety Standards Act, 2006 as well as the provision of the Customs Act, 1962, still the Adjudicating Authority did not impose any penalty under Section 112A of the Customs Act, 1962. CHA firm being independent legal entity and responsible for ensuring compliance of the customs provisions. The CHA firm has been provided with a CHA license as per the provisions of the Customs Broker Regulations CBLR which mandate them to ensure compliance of provisions of the Customs Act and since they have failed in their duty and such act have rendered the subject consignment liable for confiscation as per provisions of Section 111 (d) of the Customs Act, 1962, a penalty under Section 112 (a) of Customs Act is required to be imposed. The Adjudicating Authority after providing an opportunity hearing to the respondent CHA firm will adjudicate the matter afresh only with regard to issue of the imposition of the penalty under Section 112A of the Customs Act, 1962 - Appeal allowed with the way of remand to the original Adjudicating Authority. 2019 (11) TMI 733 Improper importation - Mis-branded sample or not - prohibited imports - imposition of penalties u/s 112(a) of the Customs Act, 1962 - prohibition from import or not - Section 25 of FSS Act, 2006 - HELD THAT:- In the appeals filed by both the appellants, no evidence has been adduced which contradicts the facts that the import consignment were of the goods which did not confirm to the standards laid down under Food Safety Standards Act, 2006. The test report of the samples drawn from the import consignment has categorically mentioned that the samples are unsafe and mis-branded as per the provisions of Section 3 (1) of the FSS Act, 2006. The argument made by the appellant is not legally sustainable as the Customs Act under Section 112A provides that penalty under the Section should not exceed the value of the goods. Since, the import consignment falls under the category of the prohibited goods and it has also been found that the value declared by the importer is not correct. The seizure value of these goods have been taken as market value since as the goods are of prohibited nature, they are certainly to fetch high margin of profit in the domestic market - The Adjudicating Authority has accordingly taken the market value of such goods as prevailing in the local market for imposition of penalty, the amount of the penalty imposed on both the appellants is in accordance with the provisions of Section 112A (i) of Customs Act, 1962 and, therefore, no reason to interfere with the amount of penalty imposed on both the appellants. The deterrent penalty need to be imposed on such importers and their accomplices and thus we do not find any reason to interfere with the amount of penalty imposed by the Adjudicating Authority in the impugned order-in-original - appeal dismissed. Corporate Laws 2019 (11) TMI 732 Handover of possession of the properties belonging to the Company (In Liquidation) - Permission to Official Liquidator to break open the lock put by the ex-management of J.B. Diamonds Limited, the Company (In Liquidation) on the premises namely Bharat Diamond Bourse, Office Space No.8120, Bandra Kurla Complex, Bandra (E), Mumbai-400 051 - takeover of physical possession of the assets of the Company, of which symbolic possession has already been taken by the Official Liquidator, and if necessary, with the assistance of the Police Authorities, by directing the tenants (tenancy rights whereof are disputed by the Official Liquidator) to vacate the premises. HELD THAT:- The record reveals gross collusion between the ex-directors of the Company in liquidation and the directors/partners of the tenants. All the suits have been filed by the tenants in the year 2011, which is the same year in which the Company Petition was filed against the Company under Sections 433 and 434 of the Companies Act. It is during that time, the tenants, claiming a right in the assets of the Company (in liquidation), approached the Courts in Mumbai and in Surat, where the various assets of the Company are situated and obtained orders/decrees from the Courts, which forms the underlying basis on which the tenants are claiming protection and have obstructed the Official Liquidator from taking possession of the assets of the Company in liquidation. It is an admitted fact that the properties are the assets of the Company in liquidation. Hence, under the scheme and the provisions of the Companies Act, 1956, this Court is required to protect the assets of the Company in order to not defeat the rights of the workers and the creditors of the Company. The record reveals a shocking state of affairs, which supports the stand of the Official Liquidator of the collusion and fraud on part of the ex-directors of the Company and the tenants. The relationship between the ex-directors of the Company and the directors/partners of the tenants is not in dispute - it can be hardly contended by the tenants that the orders/decrees were not collusive and/or that no fraud was played by the tenants and the ex-directors of the Company on the Courts in Mumbai and Surat. The orders/decrees passed by the Courts in favour of tenants declaring them to be tenants, are a nullity in the eyes of law and are declared illegal and void, as being coram non judice and hence not binding on the Official Liquidator of the Company (in liquidation) - The tenants are directed to handover physical possession of the properties set out in paragraphs 7 and 8 above within a period of one (1) week from the date of uploading this Order. The Official Liquidator's Report is accordingly disposed of. Insolvency & Bankruptcy 2019 (11) TMI 774 Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in repayment in amount - HELD THAT:- The amount of default exceeds ₹ 1,00,000/- as per the requirement under section 4 of the Code, 2016. Hence, this application is within the purview of section 9 of the IBC, 2016. The present application is complete and the Applicant is entitled to claim its dues, establishing the default in payment of the operational debt beyond doubt, and fulfilment of requirements under section 9(5) of the Code - the present application is admitted. Application admitted - moratorium declared. 2019 (11) TMI 773 Admissibility for appeal - initiation of CIRP - Corporate Debtor failed to pay outstanding debt - Section 9 of the Insolvency and Bankruptcy Code, 2016 - principles of natural justice - HELD THAT:- The Respondent Corporate Debtor has also not disputed that no notice was issued or served by Operational Creditor or the Adjudicating Authority before admission of the application under Section 9. The impugned order also shows that the ex-parte order was passed by the Adjudicating Authority. As the impugned order dated 6th March, 2019 has been passed in violation of the rules of natural justice , we set-aside the order - However, the matter is not remitted to the Adjudicating Authority as in the meantime the Appellant has settled the matter with the Respondent. However, this will not come in the way of the other creditors to move before appropriate Forum, if any amount is due from the Corporate Debtor . Appeal allowed. 2019 (11) TMI 772 Maintainability of application - initiation of CIRP - Corporate Debtor has committed default for a total outstanding amount - Existence of dispute or not - HELD THAT:- The Petitioner failed to substantiate the alleged outstanding amount by producing relevant documents to prove that the materials in question were supplied in required standard - Therefore, we are of the considered opinion that the Petitioner failed to establish its claim with regard to Principal amount and interest as claimed in the Petition and it is filed only to recover the alleged outstanding amount. Therefore, it is not a fit case for admission and is liable to be dismissed. Application dismissed. 2019 (11) TMI 771 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - debt due and payable - existence of dispute or not - HELD THAT:- This adjudicating authority is of the considered view that operational debt is due to the Applicant. That, Applicant is an Operational Creditor within the meaning of sub-section (5) of Section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default and service is complete. Application filed by the Applicant is complete in all respects - Application admitted - moratorium declared. 2019 (11) TMI 770 Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making payment - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is evident that the issues in respect to break downs cropped up subsequent to the letter dated 05.01.2018 and the same was brought to the notice of the Operational Creditor long before issual of Section 8 notice i.e., on 26.02.2018 itself. Thereafter, since there is no material from the side of the operational creditor disclosing that the Operational Creditor already resolved those issues, except filing this case basing on the section 8 notice sent by the Operational Creditor, it is to be construed that dispute in respect to the break downs has remained in existence as on the date the Creditor issued Section 8 notice. When there is material disclosing existence of dispute even before section 8 notice is issued, it does not make any difference as to whether reply to section 8 notice has been given within 10 days or after 10 days. This Bench having come to a conclusion that dispute has been in existence as on the date section 8 notice was issued by the Operational Creditor, we hereby dismissed this Company Petition holding that dispute is in existence in between the parties as on 26.02.2018. Petition dismissed. 2019 (11) TMI 769 Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in repaying the outstanding amount of due and payable - HELD THAT:- As the Financial Creditor has proved existence of debt and default against the Corporate Debtor by showing various documents and the certificate issued by the DRT-II, Chennai, this Bench hereby holds that this Financial Creditor has proved existence of debt as well as default against the Corporate Debtor. Since the Corporate Debtor counsel has not come out with an argument stating that debt is not in existence or default is not in existence, we are of the considered view that this case is fit for admission. Petition admitted - moratorium declared. 2019 (11) TMI 731 Corporate Insolvency resolution process (CIRP) - Role of resolution applicants, resolution professionals, the Committee of Creditors that are constituted under the Insolvency and Bankruptcy Code, 2016 - constitutional validity of Sections 4 and 6 of the Insolvency and Bankruptcy Code (Amendment) Act, 2019. Role of the resolution professional in the revival of Corporate Debtor - HELD THAT:- The resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7, 9 or 10 of the Code till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional - Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors. Role of the prospective resolution applicant - HELD THAT:- Under the Code, the prospective resolution applicant has a right to receive complete information as to the corporate debtor, debts owed by it, and its activities as a going concern, prior to the admission of an application under section 7, 9 or 10 of the Code. For this purpose, it has a right to receive information contained in the information memorandum as well as the evaluation matrix mentioned in Regulation 36-B. Regulation 38 then deals with the mandatory contents of a resolution plan, making it clear that such plan must contain a provision that the amount due to operational creditors shall be given priority in payment over financial creditors - Such plan must also include provisions as to how to deal with the interests of all stakeholders including financial creditors and operational creditors of the corporate debtor, Regulation 38 (1A). It must then provide for the term of the plan, management and control of the business of the corporate debtor during such term, and its implementation. It must also demonstrate that it is feasible and viable, and that the resolution applicant has the capability to implement the said plan. Role of the committee of creditors in the corporate resolution process - HELD THAT:- Since corporate resolution is ultimately in the hands of the majority vote of the Committee of Creditors, nothing can be done qua the management of the corporate debtor by the resolution professional which impacts major decisions to be made in the interregnum between the taking over of management of the corporate debtor and corporate resolution by the acceptance of a resolution plan by the requisite majority of the Committee of Creditors. Most importantly, under Section 30(4), the Committee of Creditors may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulations - Regulation 39(3) fleshes out Section 30(4) of the Code, making it clear that ultimately it is the commercial wisdom of the Committee of Creditors which operates to approve what is deemed by a majority of such creditors to be the best resolution plan, which is finally accepted after negotiation of its terms by such Committee with prospective resolution applicants. Jurisdiction of the Adjudicating Authority and the Appellate Tribunal - HELD THAT:- After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority s jurisdiction is circumscribed by Section 30(2) of the Code - it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned. A harmonious reading, therefore, of Section 31(1) and Section 60(5) of the Code would lead to the result that the residual jurisdiction of the NCLT under Section 60(5)(c) cannot, in any manner, whittle down Section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority. This argument also must needs be rejected. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. Secured and unsecured creditors; the equality principle - HELD THAT:- The Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court s judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. The constitution of a sub-committee by the Committee of Creditors - HELD THAT:- Standard Chartered Bank did not agree to put the reconstitution of the sub-committee to vote by the Committee of Creditors. Given these facts, we find, therefore, that it is only when Standard Chartered Bank found that things were going against it that it started raising objections on the technical plea that sub-committees cannot be constituted under the Code. This is not a bonafide plea. For all these reasons, this objection of Standard Chartered Bank is also rejected. Extinguishment of Personal Guarantees and Undecided Claims - HELD THAT:- it is difficult to accept Shri Rohatgi s argument that that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile directors of the corporate debtor. So far as the present case is concerned, we hasten to add that we are saying nothing which may affect the pending litigation on account of invocation of these guarantees. However, the NCLAT judgment being contrary to Section 31(1) of the Code and this Court s judgment in State Bank of India (supra), is set aside. Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were - A successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate - For these reasons, the NCLAT judgment must also be set aside on this count. Utilisation of profits of the corporate debtor during CIRP to pay off creditors - HELD THAT:- The RFP issued in terms of Section 25 of the Code and consented to by ArcelorMittal and the Committee of Creditors had provided that distribution of profits made during the corporate insolvency process will not go towards payment of debts of any creditor - On this short ground, this part of the judgment of the NCLAT is also incorrect. Constitutional Validity of Section 4 and 6 of the Amending Act, 2019 - HELD THAT:- Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before the NCLT and NCLAT based upon a Latin maxim which sub-serves the cause of justice namely, actus curiae neminem gravabit. - even under the newly added proviso to Section 12, if by reason of all the aforesaid factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation. The challenge to sub-clause (b) of Section 6 of the Amending Act of 2019, again goes to the flexibility that the Code gives to the Committee of Creditors to approve or not to approve a resolution plan and which may take into account different classes of creditors as is mentioned in Section 53, and different priorities and values of security interests of a secured creditor. This flexibility is referred to in the BLRC report, 2015 (see paragraph 33 of this judgment). Also, the discretion given to the Committee of Creditors by the word may again makes it clear that this is only a guideline which is set out by this sub-section which may be applied by the Committee of Creditors in arriving at a business decision as to acceptance or rejection of a resolution plan. For all these reasons, therefore, it is difficult to hold that any of these provisions is constitutionally infirm. The resolution plan of ArcelorMittal as amended and objections thereto - HELD THAT:- The payment of INR 17.4 crore was to be made to unsecured financial creditors with a claim amount of more than INR 10 lakhs, and INR 30.55 lakhs to such creditors with a claim amount of less than INR 10 lakhs, with the fresh capital infusion for improving operations and enhancing revival prospects of the corporate debtor remaining at INR 8,000 crores. So far as operational creditors were concerned, there was no change made. The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside. The appeals filed by the Committee of Creditors of Essar Steel Limited and other Civil Appeals are allowed - The impugned NCLAT judgment is set aside, except insofar as Civil Appeal No. 6409 of 2019, Civil Appeal No. 7266 of 2019, Civil Appeal No. 7260 of 2019 are concerned, which are dismissed - appeal allowed in part. 2019 (11) TMI 730 Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in repayment of amount - reliefs sought under Section 7(5)(a) and Section 13(l)(a)(b)(c) of the Code - existence of dispute or not - HELD THAT:- The unsecured loan sanctioned by the applicant has been acknowledged by the respondent company from time to time. Record available is the acknowledgement of loan, interest accrued thereon and balance of the loan account, issued by the respondent company from 17.07.2011 to 05.04.2019. In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the Corporate Debtor committed default in paying the financial debt to the Applicant and the respondent company has acknowledged the debt - In the instant case, the documents produced by the Financial Creditor clearly establish the debt and there is default on the part of the Corporate Debtor in payment of the financial debt . There is existence of default and that the application under Section 7 (2) of the Code is also complete in all respect - the petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted - petition admitted - moratorium declared. Service Tax 2019 (11) TMI 729 Nature of activity - trading or service? - distribution of electricity - whether the electricity can be considered as goods or not - HELD THAT:- Appeal admitted. 2019 (11) TMI 728 Permission to withdraw appeal - appellant intends to pursue Sabka Vishwas (Legacy Dispute Resolution) Scheme - HELD THAT:- Permission granted. 2019 (11) TMI 727 Application for withdrawal of appeal - HELD THAT:- The application for withdrawal of civil appeals is allowed - appeals are dismissed as withdrawn. Central Excise 2019 (11) TMI 726 Permission to withdrawal of appeal - monetary amount involved in the appeal - HELD THAT:- The civil appeals are dismissed as withdrawn, along with pending application(s), if any. 2019 (11) TMI 725 Application for early hearing - HELD THAT:- The prayer for early hearing is allowed and it is directed that the appeal be listed before the appropriate Bench in the month of January, 2020. The interlocutory application stands disposed of. 2019 (11) TMI 724 Clandestine removal - TMT Bars - major shortage of finished goods revealed in stock taking - shortage of raw material - statements recorded were not taken ito consideration and was ignored by the Tribunal - principles of natural justice - it was held in the case that Since it is a case of acceptance and failure to explain the huge variation in the stock and the variations were not having been disputed, the demand so made and calculated by the assessing authority was in conformity with the law - HELD THAT:- There is no merit in the petition - The special leave petition is dismissed. 2019 (11) TMI 723 Benefit of N/N. 108/1995-C.E., dated 28-8-1995 - compliance with the requirements of notification or not - it was held in the case that no substantial question of law arises and even otherwise the certificate ought to have been in MOP or no substantive argument for ANS has purchased the material from the present appellant. He might have been in a position to make out the case. Nothing is shown to us to establish that - HELD THAT:- There is nothing to interfere with the impugned judgment - SLP dismissed. 2019 (11) TMI 722 Condonation of delay in filing appeal - present appeal is preferred against the order of the Tribunal refusing to exercise discretion to condone the delay - it was held in the case that As we are satisfied that such exercise of discretion does not suffer from any error, much less an error which gives rise to a substantial question of law, we see no reason to exercise discretion to interfere - HELD THAT:- SLP is dismissed. 2019 (11) TMI 721 SSI Exemption - Clubbing of clearances of six units - benefit of N/N. 08/03-CE dt.1.3.2003 - Dummy units - whether M/s. Premier Castings (M/s.PC), M/s. Castech Industries (M/s.CTI) and M/s.Dynocast Industries (M/s.DCI) are non existing and are dummy units of M/s. MWF? - HELD THAT:- The claim of the appellants is that the Revenue has relied upon the inculpatory statements which were retracted. The claim of the revenue is that retraction have not reached to the office of Commissioner, therefore the retraction cannot be acceptable. But we find that some of the witnesses were called for cross examination, during the course of investigation and while drawing panchnama at the time of visit, these firms were found non existing as they were closed earlier and no sale were effected in the name of firms which itself shows that the firms were already closed by their respective proprietors/owners. Moreover, the documents placed before us show that these units having their independent existence and registered with various government departments that these units were separate units. There is no denial by the revenue in respect of the documentary evidences found during the course of investigation and placed on record - the documentary evidence will prevail over the oral statements recorded during the course of investigation. The clearances of the firms, namely, M/s. Premier Castings (M/s.PC), M/s. Castech Industries (M/s.CTI) and M/s.Dynocast Industries (M/s.DCI) cannot be clubbed with clearances of M/s. MWF - Consequently, no penalty can be imposed on the said allegation Whether M/s. Industrial Casting (M/s. IC), M/s. Gautam Industries (M/s. GI) and M/s. S.G. Ferro Engineering Pvt. Ltd. (M/s. SGFEPL) can be held dummy unit of M/s. MWF and consequently the benefit of exemption N/N. 08/03-CE dt.1.3.2003 can be denied and duty be demanded from them? - HELD THAT:- All these units were found working during the course of investigation itself and machinery were installed. Moreover, the documents which have been found during the course of investigation, show that these units were separate manufacturing units and their clearance were the below the threshold limit in terms of Notification No.08/03-CE dt.1.3.2003 as amended - Moreover, the Revenue is confused, as one side, it has been alleged that these are dummy units of M/s. MWF and on the other hand, they are demanding duty separately from them. If, the Revenue alleged that these are dummy units of M/s.MWF then the duty is required to be demanded from M/s.MWF whereas the duty has been demanded from these unit which itself show that these units are independent units. Therefore, the department is confused and has concluded that these units are independent units from M/s.MWF and demanded duty from them by denying the benefit of Notification No.08/03-CE dt.1.3.2003. Whether the units are entitled to SSI Exemption or not? - HELD THAT:- The clearances of these three units are below the threshold limit of SSI exemption Notification No.08/03-CE dt.1.3.2003 and the same has not been disputed by the Revenue while quantifying the duty and there is no allegation of suppression of clearance by these units - these units are separate and independent units and are entitled for the benefit of SSI exemption under Notification No.08/03-CE dt.1.3.2003 as amended during the impugned period. Therefore, no duty demand is sustainable against these three units. The sole allegation of the Revenue is based on the understanding that these units are of M/s. Mech-well Group and the same are controlled and managed by Shri Gaurav Gupta in the name of dummy units. Such allegation is not sustainable - The Revenue‟s case is based on the oral evidence by discarding the documentary evidence available on records during investigation. Oral statements have no evidentiary value against the documentary evidence available on record. The allegations made by the Revenue in the SCN are not sustainable - there are no merits in the impugned order - no demand is sustainable against the appellants. Consequently, no penalty is imposable on the appellants. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2019 (11) TMI 720 Refund claim - Delhi VAT Act - principles of unjust enrichment - HELD THAT: The respondents are directed to decide the representation or claim of this petitioner for refund of the aforesaid amount under the Delhi Value Added Tax Act, 2004 as early as possible and practicable in accordance with law, rules, regulations, Government policy including principles of unjust enrichment and on the basis of evidences available on record. Petition disposed off. 2019 (11) TMI 719 Time limitation - scope of the term assessment - whether the impugned notices are liable to be interfered with on the ground that they are barred by limitation as provided under Section 24(5) of the PVAT Act, 2007? - HELD THAT:- A careful perusal of provision under Section 24(5) would show that the term assessment alone is used and not an order of assessment . The term assessment is defined under Section 2(e) as extracted supra. It means determination of business turnover of a dealer in prescribed manner to ascertain the tax liability under the said Act by self assessment, re-assessment and assessment by scrutiny and best judgment assessment. Therefore, the term assessment cannot be construed only as an order of assessment and on the other hand, the said term assessment consists several process commencing from the issuance of notice to passing of the order of assessment. Thus, the term assessment includes passing of an order of assessment as well and thus, it does not mean the order of assessment as such. Needless to say that for determination of business turnover of a dealer in the prescribed manner and to ascertain the tax liability, the Assessing Officer has to undertake a series of exercise commencing from the issuance of notice, conducting enquiry and thereafter to pass order of assessment. The phrase used under Section 24(5), viz., no assessment under the Section for any year shall be made after a period of three years cannot be considered as the one of passing the assessment order itself within three years and on the other hand, if the process of making the assessment begins by issuing a notice within the period of three years, the assessment order passed later, even after the expiry of three years, cannot be hit by the period of limitation, as provided under Section 24(5). In this case, it is seen that summons in Form-PP for the years 2011-12 to 2013-14 were issued on 07.11.2014 and again on 04.01.2016, wherein and whereby the assessee was called upon to produce certain documents with reference to an enquiry under the PVAT Act, 2007, in respect of assessment years 2011-12 to 2014-15. Therefore, the above summons, which is otherwise called as notice calling upon the petitioner to produce the documents for the purpose of assessment in respect of those assessment years, are to be construed as the commencement of assessment proceedings - When the above said notices were issued before the expiry of three years, this Court is of the view that the consequent Pre-assessment notices impugned in these writ petitions are not barred by limitation and therefore, Section 24(5) is not attracted in these cases in any manner. Petition dismissed granting liberty to the petitioner to give reply/objection to the notice of proposal within a period of two weeks from the date of receipt of a copy of this order. 2019 (11) TMI 718 Levy of entry tax - validity of insertion of new entry as unmanufactured tobacco in sealed container - agriculture product or not - power to levy - whether it was covered in the residual entry earlier - Karnataka Value Added Tax Act, 2003 - Central Sales Tax Act, 1956 - and Karnataka Tax on Entry of Goods Act, 1979. HELD THAT:- Section 3[1] of the KTEG Act provides that the tax on entry of goods specified in the First schedule into a local area for consumption, use or sale therein shall be levied at such rates not exceeding 5% of the value of the goods as may be specified retrospectively or prospectively by the State Government by Notification, with different dates and different rates specified in respect of different goods or different classes of goods or different local areas. Thus, the charging Section shall be effective only on the notification issued by the State Government under Section 3(1) of the KTEG Act in respect of any of the goods enumerated under the first schedule to the Act. In view of the product sold in sachet under a brand name after subjecting raw tobacco to physical process of cutting, shredding and sizing so as to make it fit for consumption including the process of being packed in a sealed container, the unmanufactured tobacco ceases to be an agricultural produce as defined under the KTEG Act and the dictionary meanings. The arguments advanced on behalf of the petitioner that Entry 96 of the First Schedule does not include unmanufactured tobacco assuming to be accepted, even then, certainly it would fall under the Residuary Entry 103. Entry 103 of First Schedule encompasses all such goods which are not covered under any of the Entries enumerated in Entry No.1 to 102 except the goods mentioned in the Second Schedule. For better clarity, understanding or specification, if the Entries are expressly made, it cannot be held to be beyond the power contemplated under Section 3[1] of the Act otherwise, the Entry 103 would render redundant or innocuous - the challenge to the notification impugned fails. The Notification impugned dated 1.10.2013 issued by the Government of Karnataka insofar it relates to the amendment made to the Notification dated 30.3.2002 for insertion of sub-item [ii] in Serial No.[5], specifying unmanufactured tobacco in sealed container for levy of Entry Tax at 5% with effect from 02.10.2013 cannot be held to be unjustifiable and is accordingly upheld - petition dismissed. Indian Laws 2019 (11) TMI 717 Arbitration Petition - appointment as a sole arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - whether on the date of presentation of Arbitration Petition, purportedly by SDJV through SSPPL on 15.12.2016, the arbitration agreement posited in Contract Agreement dated 09.03.2006 was in existence or subsisting and in force? - HELD THAT:- In the present case, however, in due course, because of fortuitous situation, the parties had to agree to amend certain terms and conditions of the Contract Agreement and to provide for revised contract rates. That was done after due negotiations, as is evinced from the correspondence exchanged between SDJV and WAPCOSL vide letters dated 15.09.2011 and 17.09.2012 and the recitals of the AoA itself. Finally, the parties (SDJV and WAPCOSL in particular) executed a formal Amendment of Agreement (AoA) on 09.06.2015. It is pertinent to note that the execution of stated AoA has not been disputed by SDJV or for that matter by SSPPL. More so, these entities have not even challenged the implementation of AoA. On the other hand, it has come on record that all concerned gave effect to the terms set out in AoA by offering revised rates to SDJV in conformity with the agreed rates referred to in AoA and which payment was received and availed of by SDJV/SSPPL without any demur. Whether the AoA has the effect of undoing and abrogating the arbitration clause predicated in the Contract Agreement? - HELD THAT:- It is not unknown in commercial world that the parties amend original contract and even give up their claims under the subsisting agreement. The case on hand is one such case where the parties consciously and with full understanding executed AoA whereby the contractor gave up all his claims and consented to the new arrangement specified in AoA including that there will be no arbitration for the settlement of any claims by the contractor in future. Having chosen to adopt that path, it is not open to the contractor to now take recourse to arbitration process or to resurrect the claim which has been resolved in terms of the amended agreement, after availing of steep revision of rates being condition precedent. The impugned judgment of the High Court is set aside - Appeal allowed. 2019 (11) TMI 716 Constitutional spirit of judicial independence - appointments to the Debt Recovery Tribunals - constitutionality of the Finance Act, 2017 - satisfaction of test of a money bill under Article 110 of the Constitution. - Competence of selection committee - validity of section 184 of the Finance Act, 2017 Held That:- RANJAN GOGOI, CJI (i) The issue and question of Money Bill, as defined under Article 110(1) of the Constitution, and certification accorded by the Speaker of the Lok Sabha in respect of Part-XIV of the Finance Act, 2017 is referred to a larger Bench. (ii) Section 184 of the Finance Act, 2017 does not suffer from excessive delegation of legislative functions as there are adequate principles to guide framing of delegated legislation, which would include the binding dictums of this Court. (iii) The Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 suffer from various infirmities as observed earlier. These Rules formulated by the Central Government under Section 184 of the Finance Act, 2017 being contrary to the parent enactment and the principles envisaged in the Constitution as interpreted by this Court, are hereby struck down in entirety. (iv) The Central Government is accordingly directed to re-formulate the Rules strictly in conformity and in accordance with the principles delineated by this Court in R.K. Jain (supra), L. Chandra Kumar (supra), Madras Bar Association (supra) and Gujarat Urja Vikas Ltd. (supra) conjointly read with the observations made in the earlier part of this decision. (v) The new set of Rules to be formulated by the Central Government shall ensure non-discriminatory and uniform conditions of service, including assured tenure, keeping in mind the fact that the Chairperson and Members appointed after retirement and those who are appointed from the Bar or from other specialised professions/services, constitute two separate and distinct homogeneous classes. (vi) It would be open to the Central Government to provide in the new set of Rules that the Presiding Officers or Members of the Statutory Tribunals shall not hold rank and status equivalent to that of the Judges of the Supreme Court or High Courts, as the case may be, only on the basis of drawing equal salary or other perquisites. (vii) There is a need-based requirement to conduct Judicial Impact Assessment of all the Tribunals referable to the Finance Act, 2017 so as to analyse the ramifications of the changes in the framework of Tribunals as provided under the Finance Act, 2017. Thus, we find it appropriate to issue a writ of mandamus to the Ministry of Law and Justice to carry out such Judicial Impact Assessment and submit the result of the findings before the competent legislative authority. (viii) The Central Government in consultation with the Law Commission of India or any other expert body shall re-visit the provisions of the statutes referable to the Finance Act, 2017 or other Acts as listed in para 174 of this order and place appropriate proposals before the Parliament for consideration of the need to remove direct appeals to the Supreme Court from orders of Tribunals. A decision in this regard by the Union of India shall be taken within six months. (ix) The Union Government shall carry out an appropriate exercise for amalgamation of existing Tribunals adopting the test of homogeneity of the subject matters to be dealt with and thereafter constitute adequate number of Benches commensurate with the existing and anticipated volume of work. Dr Dhananjaya Y Chandrachud, J Part XIV of the Finance Act 2017 could not have been enacted in the form of a Money Bill. The rules which have been framed pursuant of the rule making power under Section 184 are held to be unconstitutional. However, since during the pendency of these proceedings, certain steps were taken in pursuance of the interim orders and appointments have been made, we direct that those appointments shall not be affected by the declaration of unconstitutionality. The terms and conditions governing the personnel so appointed shall however abide by the parent enactments. Upon the declaration of unconstitutionality, the conditions specified in all corresponding aspects in the parent enactments shall continue to operate. Though the present judgment analyses the ambit of the word ―only in Article 110(1) and the interpretation of sub-clauses (a) to (g) of clause (1) of Article 110 and concludes that Part XIV of the Finance Act 2017 could not have been validly enacted as a Money Bill, I am in agreement with the reasons which have been set out by the learned Chief Justice of India to refer the aspect of money bill to a larger Bench and direct accordingly. I am in agreement with the observations of brother Justice Deepak Gupta that the qualifications of members to tribunals constitute an essential legislative function and cannot be delegated. Tribunals have been conceptualized as specialized bodies with domain-specific knowledge expertise. Indispensable to this specialized adjudicatory function is the selection of members trained in their discipline. Keeping this in mind, the prescription of qualifications for members of tribunals is a legislative function in its most essential character. Deepak Gupta, J. I am in total agreement with the Chief Justice in as much as he has held that the decision of the Hon ble Speaker of the House of People under Article 110 (3) of the Constitution is not beyond judicial review. I also agree with his views that keeping in view of the high office of the Speaker, the scope of judicial review in such matters is extremely restricted. If two views are possible then there can be no manner of doubt that the view of the Speaker must prevail. Keeping in view the lack of clarity as to what constitutes a Money Bill, I agree with the Hon ble Chief Justice that the issue as to whether Part XIV of the Finance Act, 2017, is a Money Bill or not may be referred to a larger bench. As far as Issue No.2 is concerned, I am unable to agree with the conclusion of Chief Justice. There can be no doubt that Parliament is not expected to deal with all matters and it can delegate certain non-essential matters to the executive. Every condition need not be laid down by the Legislature. There being no guidelines, unfettered and unguided powers have been vested in the delegatee and, therefore, in my opinion, there is excessive delegation. As such, I would hold that Section 184 of the Finance Act, 2017 insofar as it delegates the powers to lay down the qualifications of Chairperson, Vice-Chairperson, Chairman, Vice-Chairman, President, Vice-President, Presiding Officer or Member of the Tribunal, Appellate Tribunal or, as the case may be, other Authorities as specified in column (2) of the Eighth Schedule, suffers from the vice of excessive delegation and is accordingly struck down. Regarding Issue Nos. 3 6 I agree with the Chief Justice and I do not want to add anything. Regarding Issue Nos. 4, 5, 7 8 I agree with the Chief Justice both on the reasoning and conclusions on these issues
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