Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 23, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Assessment appeal dismissed over technicality, courts intervene to uphold substance over form.
Dismissal of an appeal by the petitioner against an assessment order. The dismissal was primarily due to the petitioner filing an online appeal without submitting a certified physical copy of the assessment order, instead providing a downloaded copy. The High Courts unanimously held that the amendment to Rule 108, effective from 26.12.2022, is procedural and retrospective, relying on Indian Potash Ltd. v. Deputy Commissioner and Oaknorth (India) Pvt. Ltd. v. Union of India. The courts agreed that rejecting an appeal on hyper-technical grounds is untenable, especially when filed timely with a downloaded copy. Consequently, the impugned appellate order was set aside, the appeal restored to the appellate authority for a merit-based decision in accordance with the law.
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Hostel accommodation services taxed under GST, not exempt as residential dwelling.
Eligibility criteria for GST exemption on hostel accommodation services, the requirement for GST registration based on turnover, the applicable GST rate for hostel accommodation services, and the tax treatment of in-house food supply as part of hostel services. The key points are: hostel accommodation services do not qualify as a 'residential dwelling for use as residence' and are ineligible for GST exemption under the relevant notification. The applicant is required to obtain GST registration if their aggregate annual turnover exceeds the prescribed threshold. The supply of hostel accommodation services is taxable at 9% CGST + 9% SGST under the relevant tariff heading. When accommodation and food services are provided as a composite supply, the tax rate applicable to the principal supply (accommodation) will apply to the composite supply, which is 18% GST.
Income Tax
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Reopening of Assessment upheld; NRI Status & Source of Funds questioned.
Writ petition challenging reopening of assessment u/s 147 for income chargeable u/s 5(2) rejected. Petitioner failed to establish with documentary evidence husband's non-resident Indian status and genuineness of sources of funds transferred from NRE account to domestic account. Court reluctant to interfere in assessment orders under Article 226 when effective alternative remedy available, especially involving disputed questions of fact. Petitioner granted liberty to file appeal within three weeks from order copy receipt, without limitation objection, subject to compliance with appeal conditions including pre-deposit, if any. Merits not examined, observation limited to maintainability of writ petition.
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Liquor Tycoon's Undisclosed Income Unraveled Through Search Operation.
Undisclosed income computation u/s 158-BB for search assessment cases. Assessing officer can consider materials found during search and other available information relatable to such evidence. Assessment based on search results and post-search enquiries. Assessee's arguments on lack of opportunity and non-consideration of employee affidavits rejected. Recovery of documents like correspondence, maps, stock positions, and truck loads from assessee's premises indicated undisclosed income from liquor business run through employees and benami companies despite licenses not in assessee's name. Cross-examination of persons whose statements were relied upon afforded to assessee. Rent agreement signed by assessee as contractor further supported findings. Tribunal upheld reassessment of undisclosed income earned through ghost/benami companies. Decided against assessee.
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Petrol pump owner's cash deposits from sales accepted as genuine income.
The assessee, a sole proprietor running a petrol pump allotted by BPCL, deposited unexplained cash in the current bank account. The AO invoked Section 69A and made an addition, also invoking Section 115BBE. The Tribunal examined the monthly purchase and sales details, finding no major increase during demonetization. It concluded that the cash deposit was from the sale of petroleum products at the petrol pump. The assessee declared a net profit of Rs. 3,07,646 and a gross profit of Rs. 9,29,949 on gross sales of Rs. 3.23 crore. The books were audited, and quantitative records maintained. The gross profit margin at petrol pumps typically ranges from Rs. 1.5 to Rs. 3 per liter for petrol and Rs. 2 to Rs. 3 for diesel. The Tribunal found the net profit disclosed consonant with market practice and accepted it. It sustained the addition of Rs. 3,07,646 as net profit but deleted the remaining Rs. 2,59,70,084 addition. Since the cash deposits were from business activity, Section 115BBE was held inapplicable. The appeal was partly allowed.
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Reassessment notices quashed, approval withdrawal invalid - jurisdictional defect.
Reassessment notices issued u/s 148 for assessment years 2018-19, 2019-20, and 2020-21 were time-barred by limitation. Withdrawal of approval u/s 10(23C)(vi) by the Principal Commissioner of Income Tax (PCIT) was invalid as there were no valid pending proceedings before the Assessing Officer. The second proviso to section 143(3), allowing the Assessing Officer to make a reference, was applicable only from assessment year 2022-23 onwards. The PCIT lacked jurisdiction, as the Commissioner (Exemption) with territorial jurisdiction should have approved or withdrawn the approval. The Appellate Tribunal decided in favor of the assessee, quashing the PCIT's orders withdrawing approval u/s 10(23C)(vi) due to lack of jurisdiction and invalid reassessment proceedings.
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NRI's unexplained mutual fund investment & capital gains get relief after submitting evidence on foreign income source.
Non-resident assessee, a regular income tax filer, was subject to best judgment assessment u/s 144 for unexplained investment in mutual funds u/s 69. Assessee submitted additional evidence u/r 46A, which the Assessing Officer and CIT(A) failed to consider properly. ITAT observed assessee is an NRI with income sourced outside India, and the investment was traceable from bank statements. CIT(A) rightly deleted the addition on mutual fund investment and long-term capital gains on sale of equity-oriented mutual funds, being exempt u/s 10(38). ITAT upheld CIT(A)'s order, finding no reason to interfere given the evidence on record.
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Land sale profit: Business income or long-term capital gain? Intention key, not just dealer/trader status.
The case deals with the characterization of profit/receipts from the sale of land, whether it should be treated as business income or long-term capital gain. The Supreme Court in CIT vs. Madan Gopal Radhey Lal held that a trader may acquire an asset for personal purposes and hold it separate from their business stock. There is no presumption that every acquisition by a dealer is for business purposes; the intention must be determined based on the acquirer's conduct and dealings with the asset. In this case, since the assessee held the land for more than five years without developmental activity, and the Revenue accepted the treatment as long-term capital gain in preceding and succeeding years, the CIT(A)/NFAC correctly deleted the addition made by the AO, treating the profit as long-term capital gain. The Appellate Tribunal upheld this decision.
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Land business income surrendered during survey not unexplained, chargeable at normal rates.
The assessee offered additional income under the head 'Income from other sources' during the course of survey proceedings. The Assessing Officer treated it as income from unexplained sources u/s 68 read with Section 115BBE. However, the assessee explained that the amounts were income from land business received in cash, over and above the regular income. The source of income was clearly explained as arising from business activities. The Tribunal held that where the assessee surrenders undisclosed income during search/survey action, it is not necessary to charge tax at the higher rate u/s 115BBE. Since the Assessing Officer did not point out any unexplained credits in the books of account, Sections 68, 69, 69A-69D were not attracted on the surrendered amount. Consequently, Section 115BBE was also not applicable. Relying on precedents, the Tribunal allowed the assessee's appeal.
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Taxpayer wins against tax dept's addition of unproved sundry creditors as genuine evidence provided.
Assessee challenged addition on account of unproved sundry creditors u/s 41(1), contending evidence of liability cessation was provided. AO held assessee failed to prove identity, creditworthiness, and genuineness despite opportunities. However, assessee filed relevant details of sundry credits with opening balances and settlements in relevant year. Revenue's attempt to invoke section 68 lacked discussion on assessee's failure to discharge onus. ITAT concluded in these facts, whether u/s 41(1) or 68, AO could not make impugned addition on both counts. Addition rejected accordingly.
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Professional fees earned abroad taxable in India, but Japanese withholding upheld under tax treaty.
The assessee earned income from professional services rendered in foreign countries like Japan, Nepal, and Singapore. The Income Tax Appellate Tribunal (ITAT) examined the provisions of Article 12 and Article 14 of the India-Japan Double Taxation Avoidance Agreement (DTAA) pertaining to Assessment Year 2017-18. It held that Article 12 of the DTAA provides that income from professional services or other independent activities would be taxable in the resident country, i.e., India. However, clause 4 of Article 12 excludes payments made to individuals for carrying out independent professional services referred to in Article 14 from the definition of 'fees for technical services.' The ITAT concluded that the Japanese tax authorities' decision to withhold taxes from payments made to the assessee by its Japanese clients cannot be considered unreasonable or incorrect. Consequently, the ITAT allowed the assessee's claim for deduction, deciding against the revenue authorities.
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Lending business earned interest spread, no disallowance. Keyman insurance maturity proceeds fully exempt.
Assessee lent money from borrowed funds, charging higher interest rate than paid, later lending from own funds. Total interest paid eligible for deduction, though assessee suo moto disallowed part. No further disallowance warranted by authorities. Maturity proceeds from keyman insurance policy exempt u/s 10(10D), without bifurcation, following precedent. Authorities erred in denying exemption. Decisions favored assessee on both issues.
Customs
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Transaction Value Dispute: Insufficient Evidence for Duty Enhancement?
The department challenged the transaction value declared by the respondents, enhancing the declared value and demanding differential duty. However, the Commissioner (Appeals) failed to analyze or make specific observations on the respondents' submissions regarding the contemporaneous prices relied upon by the department. Additionally, the queries raised by the department and the respondents' replies were not on record, making it impossible to conclude the grounds for doubting the declared transaction value and the respondents' defense. The orders of the Commissioner (Appeals) were not speaking orders and did not consider certain factual matrices bearing on the case's outcome. Consequently, the orders were set aside, and the matter was remanded to the Original Assessing/Adjudicating Authority, who will provide opportunities to the importer to produce evidence justifying the correctness of the declared transaction value in light of the department's queries.
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Substandard Areca Nuts import case: Re-export allowed, fines reduced for unintentional violation.
The case pertains to the import of Areca Nuts found to be substandard and unfit for human consumption due to visible fungal growth and musty odor, violating food safety regulations. The Revenue alleged malpractice by importers in mixing consignments to evade customs duty. The Tribunal set aside the absolute confiscation order, allowing re-export of the goods as permitted under regulations. The High Court upheld the Tribunal's decision, finding it within its scope to examine the legality and propriety of the authority's discretion. The Court considered the Areca Nuts usable for ancillary and industrial purposes, justifying re-export. It also upheld the reduction of fines imposed on the importer, citing lack of importer's participation in receiving substandard goods. The Court found the Tribunal's reasoning of preventing wasteful outflow of foreign exchange to be sound public policy. Consequently, the Revenue's appeals were dismissed, and re-export of the goods was ordered if not already allowed.
Corporate Law
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Rejected resolution plan barred from halting asset auction due to principle of res judicata.
The application seeking direction to the liquidator to put on hold the auction of the immovable asset of the Corporate Debtor and consider the proposal to sell the Corporate Debtor as a going concern was dismissed. The appellant's resolution plan was previously rejected, and the orders affirming the rejection were not challenged, attaining finality. The relief sought was barred by the principle of res judicata as it had already been denied by the NCLAT. The appellant relinquished the right to question the appointment of the liquidator or seek the requested relief due to the failure to challenge the rejection of the resolution plan. Consequently, the appeal was dismissed.
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Arbitration Clause Deficiency Allows Oppression & Mismanagement Claims Under Company Law.
Applicability of Section 8 of the Arbitration and Conciliation Act, 1996, in a company law matter involving allegations of oppression and mismanagement u/ss 96, 173, 241, and 244 of the Companies Act, 2013. The appellant failed to produce the original or certified copy of the agreement containing the arbitration clause, instead relying on an "authenticated copy." The tribunal held that an authenticated copy cannot be treated as a certified copy u/s 47 of the Registration Act and Rule 2(9) of the NCLT Rules, which is required to invoke Section 8. Additionally, the court relied on the Supreme Court's decision in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., which stated that arbitration proceedings are a private forum and cannot preclude filing a company petition, as it is a judicial proceeding under the Companies Act and IBC. Consequently, the appellant's application u/s 8 was held inadmissible, and the company appeal was dismissed for failing to meet the statutory requirements.
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Tribunal alters merger deal terms, appeals arise over compliance burden.
The NCLT has jurisdiction to modify the scheme of amalgamation u/ss 230-232 read with Section 234 of the Companies Act, 2013. The amendment can be done at any stage. The NCLT Mumbai, while seized of a First Motion Petition, passed directions for changing the valuation and swap ratio. The proposed modification does not require further adherence to regulations for inbound merger or additional approval from the Reserve Bank of India as per FEMA Notification No. FEMA.389/2018-RB. If the impugned order is allowed, the scheme will have to be remodified, resulting in lengthy compliances undertaken for the third time. Therefore, the impugned order is liable to be set aside, and the appeal with the prayers stands allowed.
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Public sector firm not abusing dominant position in beach sand sillimanite market: watchdog.
The Competition Commission of India (CCI) examined whether Indian Rare Earths Limited (IREL), a public sector undertaking, contravened Section 4 of the Competition Act, 2002, by abusing its dominant position in the market for mining and supply of Beach Sand Sillimanite in India. CCI held that IREL is an 'enterprise' under the Act and the relevant geographic market is India. Despite IREL's high market share, CCI found no evidence of excessive or discriminatory pricing by IREL in violation of Sections 4(2)(a)(ii) and 4(2)(a)(i) respectively. CCI observed that differential pricing based on quantity, customer relationships, and assured offtake is a normal business practice. Consequently, CCI concluded that IREL did not contravene the provisions of Section 4 and directed the matter to be closed, while addressing confidentiality requests from parties.
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Sugar mills' parallel pricing insufficient for cartel; "plus factors" of collusion required. Independent business decisions prevail.
Price parallelism alone cannot establish a cartel u/s 3(3)(a) of the Competition Act, 2002. Evidence of parallel pricing must be supplemented with "plus factors" demonstrating conscious conduct rather than independent business decisions. In the present case, the limited evidence of exchange of calls between sugar mills and the industry association is insufficient to establish a contravention. No case of violation can be made out against any party, and the matters are directed to be closed forthwith. The order does not qualify for confidential treatment u/s 57 of the Act.
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Loan providers' interest rate hikes and penalties found not anti-competitive; adequate choices for consumers.
The Commission perused the material and public domain information. The Informant alleged unfair and discriminatory interest rate hikes, frequent increases, and pre-payment penalties by OP-1, creating barriers for new entrants as consumers would be disinclined to switch due to potential losses. Conduct allegedly violated Sections 3(1), 3(2), and 4 of the Competition Act, 2002. The relevant market was delineated as 'provision of loan against property in India'. OP-1's dominance was not established due to the competitive presence of numerous banks, NBFCs, and housing finance companies. Allegations of aftermarket abuse were rejected as misplaced. No prima facie case was made out u/ss 3 and 4. The matter was closed u/s 26(2) as no competition concerns arose.
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Alleged cartelization dismissed due to lack of evidence beyond price parallelism. Consumer terms not anti-competitive.
No prima facie case of contravention u/ss 3 or 4 of the Competition Act, 2002 was found against the parties. The Commission observed mere price parallelism without plus factors is insufficient to establish cartelization. OP-1's requirements/conditions as a consumer cannot be deemed anti-competitive. Lack of evidence to support allegations of bid-rigging or abuse of dominance led to the closure of the matter u/s 26(2).
IBC
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Corporate Debtor's Default Acknowledged, Insolvency Application Reinstated.
The appellant challenged the dismissal of its application filed u/s 7 of the Code by the Adjudicating Authority. The key issues were: existence of debt and default, applicability of Vidarbha Industries ratio, judicious application of mind by the Adjudicating Authority, acknowledgment of debt and default by the respondent, and the appellant's right to raise disputed issues through a rejoinder. The NCLAT held that there was outstanding debt and clear default by the respondent, entitling the appellant to file u/s 7. The Adjudicating Authority failed to apply the Vidarbha Industries ratio correctly and ignored the respondent's acknowledgments of debt and default. The appellant was permitted to raise issues through the rejoinder. The NCLAT ruled that the appellant was not duty-bound to assign its debts to EARC. The case was remanded to the Adjudicating Authority for fresh hearing, considering all relevant facts. The appeal was allowed by way of remand.
Indian Laws
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Micro small enterprise facilitation council's jurisdiction on disputes after registration.
The High Court examined the jurisdiction of the Micro and Small Enterprises Facilitation Council to refer disputes between the parties for arbitration under the 2006 Act. It held that although the agreement was entered into before the supplier registered as a small enterprise, the work continued after registration. Relying on the Supreme Court's judgment in Shanti Conductors' case, it ruled that the applicability of the Act is determined based on when goods/services were rendered, not the contract date. The Court noted that MRPL had initially raised the jurisdictional issue but later gave it up before the Single Judge. Hence, the Council had jurisdiction to refer disputes to arbitration u/s 18 of the 2006 Act. Regarding the impact of the "No Claim Certificate" issued by the supplier, the Court refrained from examining it as MRPL's petition u/s 34 of the Arbitration Act was pending adjudication. The appeal was disposed of accordingly.
PMLA
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Money laundering case: Balancing PMLA bail conditions vs. constitutional rights to speedy trial and personal liberty.
The court analyzed the application for regular bail in a money laundering case involving the fraudulent setup of Vivo group companies in India without disclosing Chinese ownership and making false declarations to government bodies. Considering Section 45 of the Prevention of Money Laundering Act (PMLA), which imposes additional conditions for granting bail, the court observed that it does not create an absolute prohibition. When trial completion is unlikely within a reasonable time, and the accused is incarcerated for a long period, the conditions u/s 45 must yield to the constitutional mandate of Article 21 (right to life and personal liberty). The court cited Supreme Court judgments emphasizing the right to speedy trial and the power of constitutional courts to grant bail on grounds of violation of Part III of the Constitution, notwithstanding statutory provisions like Section 45 PMLA.
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Lottery scam unraveled: Shielding nation's economic interests.
The High Court dealt with a case involving money laundering through the sale of illegally printed lottery tickets. The court held that the Prevention of Money Laundering Act (PMLA) aims to protect the economic interests of the nation, and its implementation should align with this legislative intent. The court found prima facie evidence of offenses under the Indian Penal Code, including cheating, forgery, and criminal conspiracy, constituting predicate offenses for money laundering under the PMLA. The state investigating agency had initially registered the predicate offense, but later filed a closure report, which the court deemed suspicious and an attempt to bury the case on extraneous considerations. The High Court set aside the closure report and directed the state agency and the Enforcement Directorate to proceed with the case in tandem, ensuring a fair trial uninfluenced by the court's observations.
VAT
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Dealer's burden to prove initial sale for second sale exemption; wilful suppression invites penalty.
Claim of second sale exemption and the imposition of penalty u/s 12(5)(iii). The High Court held that when the burden was on the dealer to prove the factum of second sale, the respondent had failed to discharge this burden by proving the actual first sale, which was a prerequisite for claiming the exemption. The Tribunal had erroneously shifted the burden from the dealer to the revenue. Relying on previous decisions, the High Court reiterated that the burden of proving an earlier taxable sale was on the assessee. Regarding the penalty u/s 12(5)(iii), the Court held that since the respondent had wilfully suppressed taxable turnover and failed to file returns, the Assessing Officer was justified in imposing the penalty, and the Tribunal's decision to delete the penalty was untenable. Consequently, the High Court set aside the Tribunal's order and restored the assessment order confirmed by the appellate authority.
Service Tax
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Service Tax Refund Claim's Jurisdiction Tussle - Recipient's Location Prevails Over Provider's.
Jurisdiction issue regarding the refund claim filed by the service receiver, whether the Mumbai Service Tax authority or the Kolkata Service Tax authority has the jurisdiction to deal with the refund application filed u/s 103 of the Finance Act, 1994. There was a difference of opinion between the CESTAT members on this issue. The key points are: Section 103 is a complete code and does not mandate filing the refund claim at any specified jurisdiction. Once the service recipient is eligible, insisting on filing with the service provider's jurisdictional officer is beyond the law's mandate. Section 103(3) only requires filing within six months, without specifying the officer. The appellants filed the claim before their own jurisdictional office where they filed returns. The Supreme Court's Canon India ruling supports the appellant's case, as the jurisdictional officer at the appellant's end would issue any show cause notice for erroneous refund, not the service provider's officer. The service provider's officer lacks geographical jurisdiction over the appellants. Section 103 overrides assessments through Parliament's retrospective exemption act, negating the need for reassessment. Filing in multiple jurisdictions is not the case here. The impugned order was set aside, allowing the appellants to get the refund at Mumbai based on the majority opinion.
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Export of service partly performed outside India via progress reports to foreign clients exempts from tax demand.
The appellant provided steamer agent and cargo handling agency services, which involved segregation, internal shifting of timber logs, and sending progress reports to foreign principals. The services were partly performed outside India as the progress reports were sent to foreign service recipients. According to Rule 3(ii) of the Export of Service Rules, 2005, if a service covered under sub-clauses (zn) and (zr) is partly performed outside India, it shall be considered as performed outside India. Since the progress reports were an essential part of the overall service and were delivered outside India, it amounted to part performance of the taxable service outside India. Based on the CESTAT rulings in SGS India Pvt Ltd and B A Research India Ltd, where delivery of reports to clients outside India was considered part performance outside India, the services provided by the appellant qualify as export of services u/r 3(ii) of the Export of Service Rules, 2005. As the appellant received payment in convertible foreign exchange, the demand was held unsustainable.
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Technical testing firm wins CENVAT credit case; Revenue can't deny credit for samples collected at unregistered branches.
Denial of CENVAT credit for expenses incurred at unregistered branches and the demand raised by revenue authorities. The key points are: The appellant undertakes technical testing and analysis services on blood samples obtained during human trials. The final analysis report is prepared at the Ahmedabad office, although samples are collected from unregistered branches. The Tribunal held that CENVAT credit cannot be denied merely because samples are collected from unregistered branches, as the entire activity is accounted for and carried out from the registered Ahmedabad office. Centralized registration is not a prerequisite for availing CENVAT credit; the criteria is that the input service should be used for providing output service and service tax should be paid. As all activities are ultimately attributed to the Ahmedabad office, availment of CENVAT credit there is valid. The demand based on the difference between taxable income in profit and loss account and taxable value declared in ST-3 returns is unsustainable unless revenue establishes the nature of service for the difference. The appellant provided reconciliation and paid service tax on excess amount. Demands based on alleged totaling mistakes and short payment of service tax are unsustainable as the appellant provided explanations and evidence of correct payment. The demand based on debit notes issued by Wockhardt Ltd. is unsustainable.
Central Excise
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Micronutrient Goods Classification Dispute: Awaiting Fresh Decision After PI Industries Verdict.
The case pertains to the classification of goods, specifically Biovita, under the appropriate Central Excise Tariff heading. The show cause notice relied on a CBEC Circular prescribing that micronutrients cannot be classified under Chapter 31 as 'fertilizer' and the appellants' previous classification of the goods under different headings. However, subsequent to the impugned order, the classification issue between Chapters 31 and 38 was referred to a Larger Bench in the case of PI Industries, the principal manufacturer. As the products in the instant case are similar in nature, the principles laid down by the Larger Bench in PI Industries' case would apply. Consequently, the impugned order is set aside, and the matter is remanded to the original adjudicating authority for a fresh decision in light of the Larger Bench's observations in PI Industries' case. The appeal is allowed by way of remand.
Case Laws:
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GST
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2024 (11) TMI 1038
Dismissal of appeal of the petitioner - dismissal mainly, on the ground that against the assessment order, the petitioner preferred online appeal without filing certified copy of assessment order in physical form, whereas, downloaded copy of assessment order was filed along with the appeal memo - HELD THAT:- The view taken by all the High Courts agreed upon, wherein it was held that amendment in Rule 108 with effect from 26.12.2022 is procedural in nature and being procedural, will have retrospective effect - reliance can be placed in Indian Potash Ltd. v. Deputy Commissioner [ 2024 (8) TMI 66 - MADRAS HIGH COURT] and Oaknorth (India) Pvt. Ltd. v. Union of India [ 2023 (9) TMI 781 - PUNJAB AND HARYANA HIGH COURT] . The view of the High Courts agreed upon that rejection of appeal on hyper technical ground cannot be countenanced, more so, when appeal was admittedly filed within time along with the downloaded copy from the portal. Thus, the impugned appellate order dated 19.07.2024 is set aside. The appeal is restored in the file of learned appellate authority. The appellate authority shall decide the appeal, in accordance with law, on merits - petition disposed off.
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2024 (11) TMI 1037
Eligibility for GST exemption on hostel accommodation services - whether the hostel accommodation being provided by the Applicant to students and working women qualify to be a residential dwelling for use as residence as described in the above entry and thus eligible for exemption or not? - HELD THAT:- The term 'residential dwelling' has not been defined either under CGST Act or under Notification No. 12/2017. However, under the erstwhile service tax law, in paragraph 4.13.1 of the Taxation of Services: An Education Guide dated 20.06.2012', issued by the CBIC, the expression residential dwelling' has been interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, campsite, lodge, house boat, or like places meant for temporary stay. It is clear that the purpose and objective of the notification is nothing but to avoid taxing residential properties taken on rent by family or individuals and the benefit of exemption is not extended to the premises which do not qualify as residential dwelling for use as residence. Further, unless the twin conditions of 'renting of residential dwelling' for 'use as residence,' being inter-twined and inseparable, are not met, the exemption is not available. As per settled position in taxation laws, especially when exemptions or concessions or benefits are to be availed, the interpretation is to be literally and strictly construed and not in liberal terms. In effect, the place rented out is neither a residential dwelling nor being rented out for use as residence. It is clear that hostel accommodation is not equivalent to residential accommodation and hence the services supplied by the Applicant would not be eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 and under the identical Notification under the TNGST Act, 2017, and also under Entry 13 of Exemption Notification No.09/2017-IT(Rate) dated 28.06.2017, as amended. Requirement for GST registration based on turnover - HELD THAT:- It is clear that the Applicant's service of providing hostel accommodation is not eligible for exemption under Entry 12 of Exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017 as amended, the Applicant is very much be required to take registration under the GST Enactments, as the arrangement between the Applicant and the hostel occupants is liable to be classified as transaction in the course of furtherance of business and hence, as per Section 7(1)(a) of CGST Act, 2017 read with Entry No. 2(b) of the Second Schedule to the CGST Act, the said transaction constitutes supply - the Applicant is required to get themselves registered in the state of Tamil Nadu, if their aggregate turnover in a financial year exceeds twenty lakh rupees. Taxability and applicable GST rate for hostel accommodation services - HELD THAT:- It is observed that hotels are meant for a temporary stay (2-5 days) and have lot of facilities and staff, but hostels are used for a longer period and have basic facilities with minimal staff required by the inmates to stay at a reasonable rate. Therefore, hostel services cannot be equated to a hotel accommodation and hotel GST rates cannot be applied to a hostel. Therefore, the supply of hostel accommodation services (Tariff heading 9963) is taxable @ 9% CGST + 9% SGST under Sl. No. 7(vi) of the above Notification (Sl.No. 7 (ix) as per original notification). Tax treatment of in-house food supply as part of hostel services - HELD THAT:- The natural bundle has the characteristic of where one service is the main service and the other services are ancillary services which help in better enjoyment of the main service. Further, there is a single price for the combined services. The principal activity of the Applicant is supply of accommodation Services. While providing such services, the charges are being realised in a consolidated manner for the value of food and other like services rendered. The Applicant has stated that they do not charge separately for the other services provided by them. Thus, the services provided by the Applicant are composite in nature - As per Section 8 of the CGST Act, 2017, for a Composite supply, the tax rate on the principal supply will be treated as the tax rate on the given composite supply. Since the Applicant provides a number of services in a composite manner, the hostel accommodation services provided by the Applicant, being the principal supply, which is taxable @18%, will be tax rate for the composite supply provided by them.
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Income Tax
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2024 (11) TMI 1036
Reopening of assessment u/s 147 - procedure prescribed for reassessment - intra Court appeal by the Revenue against the order of this Court - Non furnishing of reasons - Without passing the preliminary order, AO has passed the final assessment order - As decided by HC [ 2023 (1) TMI 1261 - KARNATAKA HIGH COURT] after receipt of the letter A.O. has called the assessee for final hearing keeping in view the paucity of time. No explanation is forthcoming as to why the reasons were not furnished, though it is an admitted position that reasons were sought as back as in April 2018. The order sheet and assessment order clearly indicate that entire proceeding has been hurriedly completed between 18.12.2018 and 28.12.2018 in order to complete the same within the time limit i.e. 31.12.2018. This is an intra-court appeal. There is no patent error to interfere with the view taken by the Hon ble Single Judge more so, when a Division Bench of this Court following an authority of the Hon ble Supreme Court of India has held that provision is mandatory in nature. Decided against revenue. HELD THAT:- There is a delay of 380 days in filing the Special Leave Petition which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same. Special Leave Petition is, therefore, dismissed on the ground of delay as well as on merits.
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2024 (11) TMI 1035
Assessment u/s 144C - TP adjustments were not received in time and the AO has confirmed the draft assessment order and the same is in violation of Section 144C - Delay filling SLP - As decided by HC assessee is right in his submission that under Section 144C of the IT Act, the Assessing Officer is bound by the directions issued by the DRP and required to pass the assessment order in conformity with the directions issued within one month from the end of month in which such directions are issued. ITAT has recorded that impugned order is not in conformity with the provisions of Section 144C of the IT Act and barred by time. Revenue appeal dismissed. HELD THAT:- There is a gross and unexplained delay of 294 days in filing the Special Leave Petition. We see no good reason to interfere with the impugned order passed by the High Court of Karnataka at Bengaluru. Special Leave Petition is, accordingly, dismissed on the ground of delay as well as on merits.
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2024 (11) TMI 1034
Computation of undisclosed income of the block period - Scope of section 158-BB of the Income Tax Act for assessment of undisclosed income in search cases - HELD THAT:- We find that the words which have been added are rightly interpreted by the Tribunal to include two types of material which may be considered by the assessing officer. First, the material found during search and relatable to such evidence and the second part is such other materials or information as are available with the AO. Thus, apart from the evidence which may be collected and noticed during search, if the assessing officer has any other information and such other material with him, which is relatable to such evidence, the same can also be looked into for the purpose. Therefore, an assessment u/s 158-BC of the Act is required to be made both on the basis of result of search as well as post search enquiry and other proceedings which are in the nature of consequences of the evidence found as a result of search. Affidavit of the employees have not been considered - It is argued that the assessee was not provided sufficient opportunity and fair hearing has not been provided to him - Large number of documents relating to correspondence with Excise Department, police cases, court cases relating to the firms carrying out liquor business, which were not in the name of the assessee, have also been found from his premises. Copies of number of maps of godowns and vends, which were operated by various companies were also recovered from his premises. There were 7+9+7 truck loads recovered from three different places. Stock position of various liquor vends was also found. During the courses of search, statements of number of persons were also recorded, who stated that they were salesmen working in those vends. The assessee was their employer and real owner of the vends. Merely because the license was issued by the Excise Department for various liquor vends, income from which the learned assessing officer has found to be undisclosed income of the assessee cannot absolve the concerned assessee. We agree with the Tribunal that the assessing officer is not flattered by the technical rule of evidence and if he reaches to the conclusion that the vends are all being owned and managed by the concerned person singularly through employees, merely because the licenses are not in the name of the concerned assessee, it would not make any difference to reach to the conclusion that there is undisclosed income. There is cross-examination of almost all persons, whose statements were relied upon, was afforded to the assessee and after the cross-examination was conducted when nothing contrary to the earlier statements was emerged and in some cases the assessee did not even come forward to cross-examine, the inference could be drawn. There was also a document of rent agreement for premises taken on record in the name of one M/s Chander Bhan Om Parkarsh and Company, which was signed by the assessee as a contractor. Thus, the Tribunal has found that there was undisclosed income of the assessee which he was earning through ghost and benami companies, which were running on the properties taken on rent by him. The assessment order was found to have been correctly re-assessed by the three Judges Bench of the Tribunal. Decided against assessee.
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2024 (11) TMI 1033
Deduction u/s. 80IA - initial assessment year for claiming deduction - Tribunal held that the unabsorbed depreciation and carried forward losses of the earlier years which had already been set off against the other income, could not be notionally carried forward and taken into consideration for the purpose of computation of deduction u/s. 80IA - HELD THAT:- The issue arising in the first two substantial questions of law are covered in favour of the assessee by a judgment of Supreme Court in the case of Velayudhaswamy Spinning Mills Ltd [ 2010 (3) TMI 860 - MADRAS HIGH COURT] . Disallowance of agency commission paid to non-resident without deducting tax at source, u/s. 40[a][i] - HELD THAT:- The facts are admitted to the effect that the commission agents are situated abroad. The factum of rendition of services abroad is also admitted. It is also not in question that no payments were made in India and that the commission was remitted through banking channels directly to the agents. In the facts of the present case, Circular No.786 issued by the Central Board of Direct Taxes, is clear to the effect that export commission would not be liable to tax. There has admittedly been no determination of tax made by any other authority holding the recipients of the commission to be taxable in India. Hence, the determination of taxability made by the assessee, and the decision to remit without deduction, is, in this case, unimpeachable. Hence, we see no infirmity in the order of the Income Tax Appellate Authority having accepted the case of the assessee. The third substantial question of law is also answered in favour of the assessee.
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2024 (11) TMI 1032
Reopening of assessment u/s 147 - Income chargeable u/s 5(2) - assessment funds transferred from the NRE account of the petitioner's husband to the petitioner's domestic bank account - HELD THAT:- The question as to whether the petitioner's husband was a non resident Indian was found as not having been established by the petitioner with documentary evidence. Similarly with regard to the amount it is found that the petitioner failed to prove the genuineness of the sources with material evidence. All these are essential questions of fact which are disputed. It is trite law that this Court under Article 226 of the Constitution, would be loathe in interfering with the orders of assessment when there is an effective alternative remedy available, more so, when there is a need to examine disputed questions of facts, for examination of disputed question of facts is normally alien to jurisdiction under Article 226 of the Constitution. This Writ Petition challenging the impugned order is rejected. The petitioner is at liberty to file an appeal, if any appeal is filed within a period of 3 weeks from the date of receipt of copy of this order, the same shall be entertained without reference to limitation, subject to complying with other conditions relating to appeal including pre-deposit if any. It is made clear that have not examined the merits and the observation is only for the limited purpose of examining whether the writ petition ought to be entertained or otherwise.
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2024 (11) TMI 1031
Validity of assessment proceedings u/s 153A/153C - satisfaction note for initiation of proceedings u/s 153C - satisfaction note as drawn u/s 153C by the AO of the searched person that seized documents/digital data/information found in the course of search indicates that the other person namely, the assessee herein has purchased a property in which some cash component is involved and such information/document etc. has bearing on the determination of total income of other person namely, the assessee - HELD THAT:- While search in the instant case was carried on 06.01.2021 i.e. previous year relevant to AY 2021-22, the documents were handed over in the previous year relevant to AY 2022-23. Based on such matrix, the assessment upto Assessment Year 2021-22 stood covered within ambit of section 153C. This being so, domain for assessment qua undisclosed income for Assessment Year 2021-22 falls within sweep of section 153C of the Act. AO has committed substantive error in proper appreciation of jurisdictional provisions of section 153C of the Act by excluding AY 2021-22 from the ambit of section 153C of the Act erroneously based on actual date of search rather than based on date of receipts of incriminating documents. In order to frame assessment based on the searched document, the notice ought to have been issued under section 153A r.w.s. 153C of the Act. The regular assessment passed by issuance of notice u/s 143(2) of the Act without aid of section 153C of the Act despite satisfaction note from AO of searched person thus, is not supportable in law. The impugned assessment framed under section 143(3) of the Act thus, is void ab-initio as rightly pleaded on behalf of the assessee. Hence, the assessment order passed is vitiated in law and requires to be quashed at the threshold. Assessee appeal allowed.
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2024 (11) TMI 1030
Addition u/s 69A - unexplained cash deposited in the current bank account of the assessee s sole proprietorship concern - validity of invoking of Section 115BBE by AO - assessee is running a petrol pump allotted by BPCL - HELD THAT:-Monthly details of purchase sales have also been placed before us and there is no major increase in sales during the demonetization period and they have normally been consistent throughout the year. Therefore, we are of the considered view that the alleged cash deposit is from sale of petroleum products at the petrol pump allotted by BPCL (a public sector undertaking) which is run by the assessee in the name of M/s. Pappu Fuel Station. Determination of Net profit earned during the year - Assessee has declared a net profit of Rs. 3,07,646/- and gross profit of Rs. 9,29,949/- on the gross sales of 3.23 Crore. Books of accounts have been audited by the Chartered Accountant Farm namely Sujit Mishra and Associates dated 30.09.2017. Quantitative records are duly maintained. Gross profit margine at the petrol pumps are normally ranging between Rs. 1.5 to Rs. 3 per litre for petrol and around Rs. 2 to Rs. 3 for diesel. Considering this aspect, we find that the assessee has disclosed the net profit in consonance with the generally accepted market practice and the same should be accepted as the net profit for the year. We, accordingly sustain the addition of Rs. 3,07,646/- being the net profit from petrol pump and delete the remaining amount of addition of Rs. 2,59,70,084/- and partly allow the grounds of appeal raised on merits of the case. Invocation of Section 115BBE - Since the alleged cash deposits are on account of business activity carried out by the assessee and has been duly explained and no addition has been sustained u/s 69A provisions of Section 115BBE of the Act will have no application. Appeal filed by the assessee is partly allowed.
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2024 (11) TMI 1029
Validity of reassessment proceedings - as alleged notices were time barred by limitation - Withdrawal of approval u/s 10(23C) - lapses found during the course of survey conducted on the assessee as well as during search and seizure operation u/s 132 and survey u/s 133A on the founder of the society, wherein the assessee-Society Founder was found to have been indulging in syphoning off the money of the society - HELD THAT:- As relying on Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] . Assessing Officer was required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. In this context, the assessee s contentions is worth merit that the notices issued under section 148 of the Act under the new regime dated 21.07.2022 for A.Y. 2018-19, on 22.07.2022 for A.Y. 2019-20 and dated 26.07.2022 for A.Y. 2020-21 were clearly barred by limitation. As on the date of reference, there was no valid proceeding pending before the ld. Assessing Officer, whereas for making any reference to the ld. PCIT by the ld. Assessing Officer during a pending proceeding is sine quo non, which were not there in the instant cases as these notices were clearly time barred by limitation. Therefore, on this count, we are inclined to quash the orders passed by the ld. PCIT withdrawing the approval under section 10(23C)(vi) of the Act. Second proviso to section 143(3) of the Act was brought on the Statute Book w.e.f. 1st April, 2022 and is accordingly applicable for A.Y. 2022-23 onwards - We observe that the AO is vested with the power to make reference during the course of pending proceedings before him but in the instant case a reference was made by the ld. AO under 2nd proviso to section 143(3) of the Act, which was not applicable to the assessments under consideration and thus the reference is also invalid and, therefore, the consequent orders passed by the ld. PCIT under section 10(23C)(vi) of the Act withdrawing the approval for all these assessment years are invalid and accordingly quashed. The ld. Case of the assessee finds support from the decision of Lakhmi Chand Charitable Society [ 2024 (8) TMI 1297 - ITAT DELHI] wherein similar issue has been decided by the Coordinate Bench. Reference was made in terms of 2nd proviso to section 143(3) to ld. PCIT (Central), Patna to whom the ld. Assessing Officer was subordinate - We are of the opinion that it is not permissible under the Act and is invalid. Rather it was the ld. Commissioner (Exemption) having territorial jurisdiction as specified in Column 4 of the Notifications Nos. 52/2014 and 53/2014 both dated 22nd October, 2014, who was the appropriate authority to approve or withdraw the approval. Even on this account, the ld. PCIT s jurisdiction is invalid and not sustainable in the eyes of law. Decided in favour of assessee.
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2024 (11) TMI 1028
Denial of benefit of extension to interest u/s 234A - assessee had opportunity to remit the self-assessment tax before 31st October 2021 but did not do so - interest u/s 234A is compensatory OR penal - HELD THAT:- We note that assessee deposited interest u/s 234A for one month i.e., (from the original due date i.e., 31st October 2021 till the deposition of taxes i.e., 29th November 2021). However, the CPC / Ld. AO computed interest till the date of filing return i.e. 7th March 2022 and Ld. CIT(A) upheld that action of CPC / Ld. AO on the contention that the assessee had opportunity to remit the self-assessment tax before 31st October 2021 but did not do so and CBDT Circulars do not grant the benefit of extension to interest u/s 234A. We find considerable cogency in the contention of the Ld. AR that the decision of Dr. Prannoy Roy [ 2001 (12) TMI 68 - DELHI HIGH COURT] which was upheld by Hon ble Supreme Court in the case of CIT vs Prannoy Roy [ 2008 (9) TMI 150 - SUPREME COURT] , fully supports the case of the assessee, wherein, it has been held that the interest u/s 234A is compensatory and not penal in nature and interest is payable where tax has not been deposited prior to due date of filing the Income tax return. Thus, irrespective of date of filing of ITR, interest u/s 234A of the Act, shall accrue on the balance of taxes outstanding from the first date immediately following the due date and shall cease to accrue on the date of payment by installment /when paid in parts) or on the date of full discharge of entire tax liability computed on the total income. See Milind Madhav Padhye [ 2023 (4) TMI 726 - ITAT PUNE] Decided in favour of assessee.
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2024 (11) TMI 1027
Best judgment assessment u/s 144 - Unexplained Investment u/s 69 (in Mutual Funds) - additional evidences were submitted by the assessee under rule 46A of the IT Rules - HELD THAT:- We observed that assessee is a non-resident and maintaining non-residential status for more than 15 years. The assessee is a regular filer of return of income declaring income sourced from India. We observed that AO has made the addition with the observation that no response was received from the assessee. Based on that, he proceeded to complete the assessment u/s 144 of the Act based on the information available on his record. We observed that there is no proper opportunity was extended to the assessee during the current assessment proceedings because of that assessee has submitted various information after draft assessment order. However, the AO has not considered those informations. Even before ld. CIT (A), assessee has submitted additional informations under Rule 46A of the Rules. Ld. CIT (A) as per information available on record remanded the matter back to Assessing Officer. However, the Assessing Officer did not accept or verify the additional evidences forwarded by the ld. CIT(A). CIT(A) deleted the additions made by the AO on investment in mutual fund during the current assessment year - We observed that the findings given by ld. CIT (A) are based on the information very much available on record and it is also fact on record that assessee is an NRI and all the source of income are from his salary income earned by the assessee outside India - No reason to disturb the findings of the ld. CIT (A) considering the fact that all the informations are traced from the bank statements submitted by the assessee. Therefore no reason to disturb the findings of the ld. CIT (A). Accordingly, ground raised by the Revenue is dismissed. LTCG on sale of equity oriented mutual funds - Since the transaction falls u/s 10(38) accordingly ld. CIT (A) deleted the addition - CIT (A) has considered various informations submitted before Assessing Officer as well as in remand proceedings. Therefore, we are inclined to accept the findings of ld. CIT (A) that these transactions are covered by section 10(38) of the Act. Hence, we do not see any reason to disturb the findings of ld. CIT (A). Accordingly, ground no.(ii) raised by the Revenue is dismissed.
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2024 (11) TMI 1026
Scope of assessment framed u/s 153C - HELD THAT:- We noticed that the satisfaction recorded by the Assessing Officer of the assessee was only on 18.01.2021, therefore, the assessment proceedings initiated u/s 153C in AYs 2011-12, 2012-13 2013-14 are outside the jurisdiction. Accordingly, the assessment of these assessment years are set aside as void ab initio. Addition of rental income based on valuation report for AYs 2014-15 to 2016-17 - We observed that a document was found during the search conducted in the case of Harvansh Chawla and valuation report was dated 08.04.2010 seized from the premises of Harvansh Chawla. Since the valuation report was 09.04.2010, the material found in the search pertains to AY 2011-12. Since the valuation report was dated 08.04.2010, we are in agreement with the submission of the ld. AR that it was only a valuation per se and there is no record which shows that the above said property was rented out as per the valuation report found during the search. It is another matter whether the valuation report can be termed as incriminating material without corroborating with the assessee s books of account or return of income. It is settled law that incriminating material found during the course of search is year specific was that addition could be made in the case of unabated assessment. Since the material found/valuation report is dated 08.04.2010 it cannot be considered as an incriminating material. Even the Assessing Officer has not verified and recorded a satisfaction that this valuation report was actual or the same was acted upon by the assessee. Merely because certain documents were found in the premises of third party, the same cannot be utilised to make the addition as incriminating material without there being corroboratory evidence to show that such income was not offered to tax . In this case, we observed that merely based on the availability of valuation report, the Assessing Officer proceeded to make addition without properly giving explanation how it can be treated as incriminating material in the case of the assessee, as held in the case of CIT vs. Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] . Thus, we are inclined to delete the addition made by the AO and sustained by the ld. CIT (A) and the appeal for AY 2014-15.
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2024 (11) TMI 1025
Validity of reopening of assessment - Addition of alleged bogus purchases - reasons to believe - HELD THAT:- In assessment order there is no allegation that the assessee has taken any bogus accommodation entries from the bogus concerns of Deepak Sharma named in the reasons for reopening the assessment. It is a well settled law that if no addition is made on the basis of reasons recorded for reopening, no other addition can be made. The reasons for reopening should coincide with the addition made in the reassessment proceedings. Further, third party statement recorded subsequent to the reasons recorded, cannot form basis of Assessing Officer s reasons to believe to reopen the assessment. In the instant case, there is no coherence in the reasons recorded for reopening and the addition made in the assessment order. There is utter nonapplication of mind by the Assessing Officer while recording reasons for reopening. In facts of the case, we have no hesitation in holding that reopening of assessment lacks Assessing Officer s, reasons to believe for reopening of assessment. Reassessment proceedings are held invalid, hence, quashed. The assessee succeeds on ground no.1 of appeal.
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2024 (11) TMI 1024
Characterization of profit/receipts - profit on sale of land - business income or long-term capital gain - holding period of asset - HELD THAT:- Hon'ble Supreme Court in the case of CIT vs. Madan Gopal Radhey Lal [ 1968 (9) TMI 14 - SUPREME COURT] has held that a trader may acquire a commodity in which he is dealing for his own purposes and hold it apart from the stock in trade of his business. There is no presumption that every acquisition by a dealer in a particular commodity is acquisition for the purpose of his business; in each case the question is one of intention to be gathered from the evidence of conduct by the acquirer and his dealings with the commodity. Since the assessee in the instant case has held the land for more than five years without carrying out any developmental activity on the same, the Revenue in the preceding and succeeding assessment years has accepted the treatment of the assessee in claiming the long term capital gain on account of sale of land even though she was also a director in various concerns at that time, therefore, in view of the above discussion and in view of the detailed reasoning given by the Ld. CIT(A) / NFAC on this issue, no infirmity in his order deleting the addition made by the AO. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.
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2024 (11) TMI 1023
Denial of deduction u/s 54B - land sold was barren land on which no agricultural activity is carried out - According to the AO as per the provisions of section 54B only agricultural land purchased after the date of transfer is allowed as deduction - HELD THAT:- The assessee has purchased the new agricultural land before the land in question was sold, the investment in the land was also made jointly i.e. in the name of the assessee as well as Mr. Santosh Vitthal Mhsurkar and the assessee did not offer any clarification to indicate his share in the said investment, if any. It is the submission of assessee that he was running a dairy firm and the land sold was used for growing grass and therefore, it was an agricultural activity. It is also his submission that in the case of one of the co-owners i.e. Mr. Santosh Vitthal Mhsurkar, the AO in the order passed u/s 144/147, dated 13.03.2024 for assessment year 2016-17 has accepted the land as agricultural land, therefore, the assessee being a party to the same sale deed for the same land, the AO cannot take a different view. It is also his submission that the various documents filed before the Assessing Officer as well as the Ld. CIT(A) / NFAC evidencing the sale of milk to dairy, cattle food, farm pesticides and medicines, details of crop revenue, etc. were completely ignored by the lower authorities. We find some force in the above arguments of assessee. A perusal of the assessment order of Mr. Santosh Vitthal Mhsurkar/coowner shows that the AO has accepted the land sold as ancestral agricultural land and is not a capital asset as per section 2(14) of the Income Tax Act, 1961. This order was passed by the Assessing Officer after the order passed by the Ld. CIT(A) / NFAC and this was accepted as an additional evidence. In the instant case, the assessee is the consenting party No.2 to the sale of the said land and the same sale deed. We further find that the various documents filed by the assessee in the paper book were not considered by the Ld. CIT(A) / NFAC. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (11) TMI 1022
Treatment to income surrendered - Additional income declared during course of survey proceedings - additional income which was offered in the return of income under the head Income from other sources - AO treated it as income from unexplained sources and to be added u/s 68 r.w.s. 115BBE - assessee explained that the amounts in question are nothing but income from land business which are received in cash and are over and above the regular income. Thus, the source of income has clearly been explained as out of business and not from any other activities - HELD THAT:- A perusal of the assessment order clearly shows that the assessee has categorically given the details of the land with survey number etc from which he has received excess cash which was not recorded in the books of account and which was surrendered during the course of survey and offered in the tax return. Thus, the assessee has categorically stated the nature and source of income during the course of survey itself which was offered to tax in the return filed. Under these circumstances, we have to see as to whether the provisions of sections 68, 69, 69A, 69B, 69C or 69D r.w.s. 115BBE of the Act are to be attracted or not. As decided in the case of Hari Narain Gattani [ 2020 (10) TMI 559 - ITAT JAIPUR ] that where the assessee surrenders undisclosed income during search action for relevant year, it is not necessary that tax rate has to be charged as per provision of section 115BBE. We find in the case of Bajaj Sons Ltd. [ 2021 (5) TMI 956 - ITAT CHANDIGARH ] has held that where director of assessee-company surrendered a certain sum during search and the Assessing Officer treated said sum as income from unexplained sources and invoked provisions of section 115BBE and charged tax at a higher rate, since the Assessing Officer had not pointed out any unexplained credit in the books of account, provisions of sections 68, 69, 69A, 69B, 69C and 69D were not attracted on surrendered amount and aforesaid surrender not being covered under the provisions of sections 68, 69, 69A, 69B, 69C and 69D, provisions of section 115BBE were not attracted. Assessee appeal allowed.
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2024 (11) TMI 1021
Penalty u/s 271(1)(c) - defective notice u/s 274 - no specific limb of the penalty indicated - HELD THAT:- We find considerable cogency in the contention of the Ld. AR that notice dated 24.11.2016 u/s 274 r.w.s. 271 (1)(c) of the Act was issued to the Assessee wherein, no specific limb of the penalty indicated i.e., whether it is for concealment of particulars of income or for furnishing of inaccurate particulars of income, which is not sustainable in the eyes of law and illegal, as per the settled law. Assessee appeal allowed.
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2024 (11) TMI 1020
Addition u/s 68 - Bogus share transaction - assessee had carried out the transactions have been alleged to have been indulged in price manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the said broker - HELD THAT:- Since the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee. We noticed earlier that the AO has assessed the sale consideration of shares as unexplained cash credit u/s 68 of the Act. It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the Revenue. The sale of shares has taken place in the online platform of the Stock Exchange and the sale consideration has been received through the stock broker in banking channels. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of sec. 68 of the Act. Accordingly, we set aside the order passed by the Ld.CIT(A) on this issue and direct the AO to delete the addition made u/s. 68 of the Act relating to sale consideration of shares. Decided in favour of assessee. Assessment of the deposits made into the bank account and disallowance of claim of interest expenditure u/s 24 - In the interest of natural justice, we set aside the order passed by the Ld.CIT(A) on both these issues and restore them to the file of the AO for examining them afresh. We also direct the assessee to fully co-operate with the AO for expeditious completion of assessment.
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2024 (11) TMI 1019
Addition u/s. 41(1) - addition on account of unproved Sundry Creditors holding that existence of liabilities is not proved - evidence that the liability has ceased to exist and that too in the year under appeal or not? - Revenue s endeavour to invoke section 68 - HELD THAT:- AO had held the assessee not to have proved identity, creditworthiness and genuineness despite availing various opportunities. He therefore concluded in para 5 of the impugned credits lacked genuineness which inturn, represented the assessee s sundry credits only, in the regular course of business. Learned departmental representative could hardly dispute the clinching fact emerging from the assessee s paper book that it had duly filed all the relevant details of the said sundry credits which also had been having opening balances as well as settlement(s) finalized in the relevant previous year and afterwards. Sofaras the Revenue s endeavour to invoke section 68 herein is concerned, we do not find any discussion in the assessment order as to how the assessee s relevant details had failed to discharge its onus even if it is presumed that this not an instance of cessation of liability u/s. 41(1) of the Act. We conclude in these peculiar facts and circumstances that be it section 41(1) cessation of liability addition or that section 68 unexplained cash credits, the learned Assessing Officer could not have made the impugned addition in assessee s hands on both counts. Rejected accordingly.
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2024 (11) TMI 1018
Addition on account of cash deposited in bank account - Addition u/s.69A on account of unexplained cash deposit - AO s allegation that assessee has shown inflated cash sales - HELD THAT:- Assessee is a Wholesaler for Sapat Brand Tea. During the assessment proceedings, assessee had explained that the amount deposited was out of the Opening Cash Balance and Sales made. However, AO rejected assessee s submission and made the addition. As observed from the above table that during the month of October November, there has been substantial increase in the Cash Sales of the assessee in all the three Financial Years. Assessee claimed that these were the months of Festivals. Therefore, AO s allegation that assessee has shown inflated cash sales during October, 2016 to deposit his unaccounted cash is unsubstantiated. Because, consistently there is increased cash sales as compared to other months. It is also a fact that assessee s Books of Accounts are audited. The Audit Report along with Profit and Loss Account, Balance Sheet and its Annexures were filed before the Assessing Officer. AO has not pointed any defect in these Books of Accounts or Audit Reports. CIT(A) has also not pointed out any defect in the Audit Report. Assessee had also filed copy of all the bank statements before the Assessing Officer. There were regular cash deposits even before the Demonetization. Assessee had submitted before the AO details of monthly cash sales, details of monthly purchases. Assessing Officer has not doubted Assessee s purchases or sales. The entire sales and purchases are reflected in the Profit and Loss Account and AO has not brought out on record any evidence to rebut the assessee s claim. AO has merely made addition based on surmises and conjectures. Thus, AO s allegation that cash deposited on 11.11.2016 and 15.11.2016 are out of unaccounted sales is baseless. We have already reproduced the details of cash sales shown by the assessee much before the Demonetization. Therefore, in these factual background, there is no reason to doubt the cash deposits made on 11.11.2016 and 15.11.2016. Assessee appeal allowed.
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2024 (11) TMI 1017
Upward TP adjustment on account of AMP expenses - HELD THAT:- We find an identical issue raised in assessee's own case for assessment year 2012- 2013 [ 2023 (3) TMI 656 - ITAT BANGALORE ] which subsequently followed in A.Y. 2017-18 [ 2022 (12) TMI 1542 - ITAT BANGALORE] - The Tribunal in assessee's own case followed the dictum laid down in the case of Maruti Suzuki India Ltd. [ 2015 (12) TMI 634 - DELHI HIGH COURT ], case of Sony Ericsson Mobile Communications India (P.) Ltd. [ 2015 (3) TMI 580 - DELHI HIGH COURT ] directed the A.O. to delete the AMP TP adjustment and the mark up thereon wherein held that if an Indian entity has satisfied the TNMM i.e. the operating margins of the Indian enterprise are much higher than the operating margins of the comparable companies, no further separate adjustment for AMP expenditure was warranted. This is also in consonance with Rule 10B which mandates only arriving at the net profit by comparing the profit and loss account of the tested party with the comparable. As far as MSIL is concerned. its operating profit margin is 11.19% which is higher than that of the comparable companies whose profit margin is 4.04%. Therefore, applying the TNMM method it must be stated that there is no question of TP adjustment on account of AMP expenditure - Appeal of the revenue is hereby dismissed.
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2024 (11) TMI 1016
Tax relief in regard to income earned in Japan, Nepal and Singapore - Income earned by the assessee from professional services in forieng countries - HELD THAT:- As perused the decision of Amarchand Mangaldas Suresh A. Shroff Co. [ 2023 (6) TMI 1445 - ITAT MUMBAI] pertaining to AY 2017-18 wherein the provisions of Article 12 and Article 14 of the India- Japan Double Taxation Avoidance Agreement are discussed and it is held that Article 12 of the DTAA provides that income from professional services or other activities of independent characters would be taxable in the resident country, i.e., India. However, clause 4 of the Article 12 provides that such payments would not constitute fee for technical services only if such payment is made to an individual for carrying out independent professional services referred to in Article 14. Thus conclusions arrived at by the Japanese tax authorities, directing tax withholdings from the payments made to the assessee by its Japanese clients, cannot be said to unreasonable or incorrect, and hold that the assessee was wrongly declined tax credit on the facts of this case Thus, we find merit in the submission of the assessee and allow the claim of deduction. Decided against revenue.
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2024 (11) TMI 1015
Disallowance of interest on his own funds - AO found that the assessee has paid interest @ 12% to the people from whom he had borrowed the money and received interest @ 12.5% from the company whom he had lent the money - HELD THAT:- The undisputed fact is that the assessee had lent money out of the borrowed funds. Assessee was charging interest @ 12.5% and was paying interest @12%. It is also not in dispute that the assessee has lent out funds out of borrowed capital till October, 2017 on which gross interest received - Thereafter, since November, 2017, the assessee has lent money out of his own funds. The total interest paid by the assessee was Rs. 2,42,26,347/-. Thus, the assessee was eligible for claim of deduction of interest payments totaling to Rs. 2,42,26,347/-. However, a perusal of the computation of income shows that the assessee has claimed deduction of interest only to the extent of Rs. 2,02,76,955/- which means that the assessee has suo moto disallowed Rs. 39,49,392/-, which can cover all the apprehensions of the AO. Therefore, no reason for a further disallowance of Rs. 63,48,487/-. The AO is directed to delete the disallowance.Decided in favour of assessee. Maturity profits from Keyman Insurance Policies which was taxed as profit in lieu of salary - We are of the considered opinion that on identical set of facts, the Co-ordinate Bench in the case of Mihir Parikh [ 2024 (2) TMI 1194 - ITAT DELHI] wherein held benefit inured owing to the combined effect of a prudent investment and statutory exemption provided under Section 10(10D) of the Act, the section does not envisage of any bifurcation in the amount received on maturity on any basis whatsoever. Nothing can be read in Section 10(10D) of the Act, which is not specifically provided because any attempt in that behalf as contended by Revenue would be tantamount to legislation and not interpretation.Therefore, in the light of above-mentioned binding precedents, we are of the considered view that the authorities below were not justified in denying the benefit of exemption to the assessee. Decided in favour of assessee.
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2024 (11) TMI 1014
Revision u/s 263 - Section 50C applicable to a charitable trust - AO has not considered the value of the property as per provisions of Section 50C and therefore, difference between the stamp duty value and transaction value was not examined by the AO and no explanation was submitted by the assessee - HELD THAT:- It is apparent that the assessee has offered capital gain in assessment year 2017 18, the property was transferred in that year, property got registered in current assessment year. The capital gain offered by the assessee have been assessed to income tax in assessment year 2017 18 under section 143 (3) of the act. Therefore, even if, the action u/s 263 is required to be taken, it should have been taken in assessment year 2017 18 and not in assessment year 2018 19. Even otherwise in the case of the assessee, a trust, according to provisions of section 11 (1 A) where a capital asset is sold, transferred, the net consideration is required to be utilized for acquisition of another capital asset in those circumstances, the net consideration is deemed to have been applied for charitable purposes to the extent consideration is utilized. Net consideration is defined in explanation (iii) meaning the full value of the consideration received or accruing as a result of the transfer of the capital asset. Therefore, there is no provision under section 11 (1A) to substitute the net consideration with full value of the deemed consideration. Section 50 C of the act applies only for the purposes of computation of capital gain under section 48 of the act. Provisions of section 48 of the act does not apply to a charitable trust in view of provisions of section 11 (1A) of the act, so far as the facts of this assessee are concerned. Though assessee has relied upon several judicial precedents to support its case that in case of a charitable trust provisions of section 50 C does not apply, but even on the facts of the present case also we do not find that there should have been any addition on account of stamp duty value of the property in assessment year 2018-19, when the property is transferred in assessment year 2016 17 and revenue has accepted the same by framing an assessment order u/s 143 (3) of the act. Therefore, even otherwise, the stamp duty value of the property would not have any impact on the income of the assessee for assessment year 2018 19. Thus, the order itself is not prejudicial to the interest of revenue. Therefore, we do not find that the assessment order passed by the learned assessing officer for assessment year 2018 19 is erroneous insofar as prejudicial to the interest of the revenue - Assessee appeal allowed.
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Customs
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2024 (11) TMI 1013
Absolute confiscation of Areca Nuts imported - report received from National Food Laboratory, Ghaziabad reflected that the Areca Nuts were found with presence of visible fungal growth and musty, which did not confirm to the standards laid down under Regulation 2.3.55. of the Food Safety and Standards, Regulations, 2011 - case of the Revenue that as per the prior intelligence received by DRI, certain importers were engaged in malpractice of mixing consignments of Areca Nuts of Sri Lanka origin with that of shipments originating outside the SAARC territory and paying nil basic customs duty on the basis of notification dated 01.03.2000 - Goods found to be substandard in terms of Section 3(1)(zx) and unsafe food as per Section 3(1)(zz)(x)(xi)(xii) of the Food Safety and Standards Act, 2006 Whether the Tribunal has erred in setting aside the order in original and order in appeal whereby the absolute confiscation of the Areca Nuts imported by the respondents was ordered? - HELD THAT:- CESTAT hears an appeal, and therefore, all the arguments including the submissions relating to decision on Regulation 10 (11) of the Regulations 2017 can be examined by the Tribunal. Scope of Tribunal is wide enough to examine whether the discretion exercised by the authority was legal and proper. It can also take a different view after examining the reasons taken into consideration by the concerned authority. In the present case, the CESTAT found that the Areca Nuts may not be fit for human consumption, but the same are of such a nature which can be used for ancillary and industrial purposes by its original consignee or seller. Having reached to such a conclusion, it decided to direct the authority to allow the re-export of the food items which is provided as one of the option available under Regulation 10 (11) of the Regulations 2017. It, therefore, has interfered with the discretion exercised by the concerned authority and directed for re-export. We also do not find force in the arguments raised by learned counsel for the appellant with regard to reducing of fine of Rs. 2 crores to Rs. 25 lacs and personal fine of Rs. 10 lacs, as no reason has come forward for imposing such a harsh fine. More so, when we find that the goods were sent by the seller to the importer without there being any participation of the importer in receiving substandard Areca Nuts. We, accordingly, reject the aforesaid submission of learned counsel for the appellant also. We also find that the CESTAT has also examined the wasteful outflow of foreign exchange from Indian Importers for Foreign Buyers as one of the reasons for allowing the re-export. We find such reason to be sound and in accordance with public policy. We, therefore, do not find any ground to warrant interference. The appeals filed by the Revenue are found to be without merit and are accordingly dismissed. If the goods have not been allowed to be re-exported, the authority shall now allow them to be re-exported forthwith.
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2024 (11) TMI 1012
Maintainability of the appeals before this Tribunal - appeals before the wrong Forum - Appellate Tribunal Jurisdiction to deal with appeals related to drawback claims - HELD THAT:- A perusal of proviso (c) to Section 129A reproduced above clearly indicate that this Tribunal has no jurisdiction to deal with appeals related to drawback matters. We observe that this issue has been dealt in the case of Commissioner of Customs, Air Cargo Export v. Sans Frontiers [ 2023 (12) TMI 695 - DELHI HIGH COURT] wherein the Hon'ble Delhi High Court has held that Appeal to CESTAT against order of Commissioner (Appeals) with respect to recovery of duty Drawback on exported goods is not maintainable as per Section 129A of Customs Act, 1962. Also affirmed by the Hon ble Apex Court [ 2024 (5) TMI 1488 - SC ORDER] . We also find that the same view has also been held in Arihant Overseas [ 2024 (5) TMI 212 - DELHI HIGH COURT] wherein as held that in terms of Section 129DD of the Customs Act, 1962, the remedy against such orders is by way of a Revision to Central Government. We observe that the appellant has filed these appeals before the wrong Forum and hence these appeals are not maintainable before this Tribunal. As it is a genuine mistake, we observe that the appellant should not be penalised for filing appeal before the wrong forum. Accordingly, we grant leave to the appellant to file the Revision Applications against the impugned Orders passed by the Commissioner (Appeals) before the Government of India as per Section 129 DD of the Customs Act, 1962, along with condonation of delay.
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2024 (11) TMI 1011
Determination of transaction value - department said that the transaction value declared by respondents is not correct and therefore, they have enhanced the declared value and demanded the differential duty - HELD THAT:- Even though the respondents had pointed out certain reservations about contemporaneous prices relied upon by the department, the Commissioner (Appeals) has not analyzed or made any specific observation on the submissions made by the respondent before the Commissioner (Appeals). It is noted that the queries raised by the department in relation to the impugned bills of entry as well as replies made thereto by the respondents are also not on record. Therefore, it is not possible to conclude as to what are the nature of replies and the grounds on which the department doubted the veracity of the declared transaction value and the defence taken by the respondents to justify the correctness of the transaction value. We find that the orders of the Commissioner (Appeals) are not speaking orders and it has not considered certain factual matrix which has got bearing on the outcome of this case. Therefore, the orders of the Commissioner (Appeals) are set aside and the matter is remanded back to the Original Assessing/Adjudicating Authority, who will give opportunities to the importer to produce all the evidence to justify the correctness of the declared transaction value in view of the queries raised by the Department.
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Corporate Laws
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2024 (11) TMI 1010
Liquidation of Corporate Debtor - seeking for issue of an appropriate direction to the liquidator to put on hold the auction of the immovable asset of the Corporate Debtor, to consider his proposal to sell the Corporate Debtor as a going concern - It is the contention of the Appellant that his Resolution Plan was rejected without due diligence - principles of res-judicata - HELD THAT:- This Application came up for consideration before the Learned Adjudicating Authority and the Learned Adjudicating Authority after considering the text of the relief sought in IA No.140/2022, had dismissed by observing that it was on the same grounds / prayers the Appellant had already approached before the NCLAT by filing IA No.436/2021 in CA (AT) (CH) (Ins) No.314/2020 which has been rejected, that the relief as sought for in IA No.140/2022 has already been denied by the NCLAT while deciding IA No.436/2021, that, the Appellant has suppressed the material fact regarding the orders passed on IA No.436/2021 in CA (AT) (CH) (Ins) No.314/2020, and therefore, the relief as it was sought for in IA No.140/2022 would not be tenable owing to the bar created by the decision taken on IA No.436/2021 preferred in CA (AT) (CH) (Ins) No.314/2020. Apart from the aforesaid reason, the Learned Adjudicating Authority has concluded that the relief sought for by the applicant by invoking the provisions contained under section 60(5) of the Insolvency and Bankruptcy Code, 2016 to be read with Rule 11 of the NCLT Rules cannot be granted to the Appellant for the following reasons. (1) The Resolution Plan which was submitted by the Appellant was already rejected. (2) The Application filed for modification of the Resolution Plan also stood rejected vide Order dated 30.12.2019. (3) More importantly, the two orders affirming the rejection of the Resolution Plan was not challenged by the Appellant by invoking the provisions contained under Section 61 of the Insolvency and Bankruptcy Code, 2016 and the same would attain finality, against the Appellant. (4) Once the rejection of the Resolution Plan submitted by the Appellant had attained finality no cause of action would survive qua the Appellant for filing this instant Appeal as against the order passed in IA No.140/2022. Besides this, the relief itself as prayed for would be barred by the principle of Res judicata because the same already stood denied by the NCLAT vide its order dated 20.09.2021 passed in IA No.436/2021. In view of the above and primarily on the ground that in the absence of the challenge given to the order of rejection of the Resolution Plan submitted by him, the Appellant relinquishes his right to put a question to an order of appointment of liquidator, as well as, to seek for the relief he has sought in IA No.140/2022, which is the subject matter of Comp App (AT) (CH) (Ins) No.329/2022. For the aforesaid reasons, this Appeal too would stand dismissed.
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2024 (11) TMI 1009
Oppression and Mismanagement - invocation of provisions contained under Section 96, 173, 241, 244 of the Companies Act of 2013 - Applicability of Section 8 of the Arbitration and Conciliation Act, 1996 - Appellant/ Respondent, had not produced the Original Copy of the Agreement, nor the Appellant has supplied the certified copy of the said agreement - whether the Authenticated copy of the agreement as filed by the appellant in support of IA No.65/2019, could at all be read in parlance to the certified copy of the Arbitration Agreement or the Original of the Arbitration Agreement? - HELD THAT:- Obviously, under law the certification of a document has to be in accordance with the provisions of Registration Act to be read with Section 76 of Evidence Act, and particularly in the context of the provisions contained under Section 17 of the Registration Act, where certain documents will be inclusive of the present agreement as it dealt with the Subscription of the Shareholders, which itself is a property under law, which had to be mandatory required to be registered and if that be so, in that eventuality when the application under Section 8 of the Act of 1996, was preferred by the Appellant, it ought to have been accompanied with the certified copy of the agreement at the stage, when the initial objection of 10th October 2018 was filed by the Appellant/Respondent, in opposition to the Company Petition. In that view of the matter and for the said reasons, the authenticated copy cannot be treated as to be a certified copy , which could have been read in evidence under Section 47 of the Registration Act for the purposes to satisfy the restrictions imposed by Sub-Section (2) of Section 8 of the Arbitration and Conciliation Act, 1996. No such application under Section 8 of the Act of 1996, was filed before National Company Law Tribunal, Amravati Bench, to derive an objection with regards to the maintainability of the proceedings of the Company Petition, under Sections 96, 173, 241 to 244 of the Companies Act. The aforesaid principle literally and in its legal terms, as to what derivation could be made with regards to the certified copy in fact, has been prescribed under the National Company Law Tribunal Rules, where a certified copy would be a copy which has been obtained after compliance of the provisions contained under Section 76 of the Evidence Act . Since the same has not been complied with, the application under Section 8 was held to be not maintainable because it will not be falling to be, a certified copy under Sub Rule (9) of Rule 2 of the National Company Law Tribunal Rules, which deals as to what would be the certified copy. There is another logic and which has been rightly attracted by the Learned Adjudicating Authority, at the stage of considering the application under Section 8, by drawing an inference from the Judgment reported in Booz Allen Hamilton Inc. v. SBI Home Finance Ltd., Ors. [ 2012 (10) TMI 459 - SUPREME COURT ], where it has been observed that since the Arbitration Proceedings, being a consented chosen forum between the consenting parties for the redressal of the dispute, it will not be taken as to be Judicial Proceedings so as to create an embargo for filing of a Company Petition, as it would be relatively a Private Forum , which cannot deceive the objective of the Procedural Law under the Companies Act, to be read with Insolvency and Bankruptcy Code. The Application thus preferred being IA No.65/2019, by the Appellant in the Company Petition, didn t satisfy the parameters prescribed under Section 8 of the Act of 1996, and the legislative bar was created in even entertaining the Application in the absence of satisfying the parameters to sustain the proceedings because the certified copy or the original copy of the Agreement was not filed. Therefore no such proceedings could have been even entertained by the National Company Law Tribunal, Amravati Bench by way of IA No.65/2019 and in these circumstances, when the Law creates a bar in even entertaining of any such Application under Section 8 of Act of 1996, the same would not be maintainable. The Company Appeal lacks merit and the same is dismissed.
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2024 (11) TMI 1008
Amendment of scheme of amalgamation - section 230-232 read with section 234 of the Companies Act, 2013 - Jurisdiction of NCLT to modify the scheme - HELD THAT:- The amendment can therefore be done at any stage. In IN THE MATTER OF :. HAMBURG SUD INDIA PRIVATE LIMITED, MAERSK LINE INDIA PRIVATE LIMITED [ 2023 (3) TMI 1541 - NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV] , the Ld NCLT Mumbai while seized of a First Motion Petition passed directions for changing the valuation and the swap ratio. Admittedly the present modification to scheme will not require any further / revised adherence in so far as the regulations for inbound merger are concerned. Further, as per FEMA Notification No. FEMA.389/2018-RB dated March 20, 2018 Foreign Exchange Management (Cross Border Merger) Regulations, 2018 , point 9(1) states any transaction on account of a cross- border merger undertaken in accordance with these Regulations shall be deemed to have prior approval of the Reserve Bank of India as required under Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016. Hence, the proposed modification would also need no additional approval from Reserve Bank of India. If the impugned order is allowed to sustain then the scheme will have to be remodified to reflect such justification which will result into another round of lengthy compliances all of which would have to be undertaken for the third time. The Impugned Order is liable to be set aside and the Appeal with the prayers stands allowed.
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2024 (11) TMI 1007
Contravention of the provisions of Section 4 of the Competition Act, 2002 - abuse of dominant position - IREL is an enterprise in terms of provisions of the Act or not - relevant market in the present case - IREL holds a dominant position in the relevant market. Whether OP is an enterprise as defined in Section 2(h) of the Act? - HELD THAT:- The Commission observes that IREL, the erstwhile Indian Rare Earths Limited is a Public Sector Undertaking and an unlisted Public Company, was incorporated on August 18,1950. It became a full-fledged Government of India Undertaking under the administrative control of Department of Atomic Energy in year 1963. It has its own Board of Directors for managing its overall affairs. Accordingly, the Commission is of the considered view that IREL is not a department of the Government. The Commission notes that Sillimanite is sold by the OP in the open market for monetary consideration. Thus, IREL does not qualify for an exemption from the provisions of Section 2(h) of the Act with respect to the activity of mining and sale of Sillimanite in India. Based on the above and nature of activities carried on by OP, the Commission finds no reason to deviate from its prima facie order dated 03.01.2022 where it held OP to be an enterprise under the Act. Accordingly, the Commission finds OP to be an enterprise under extant provision of Section 2(h) of the Act. What is the relevant market in the present case as defined in Section 2 (r) of the Act? - HELD THAT:- With regard to delineation of relevant geographic market, the Commission notes the submission of DG that there are no geographical barriers for production as well as sale of Sillimanite in India. OP has stated that the relevant geographic market in the matter is India including import. The Commission, while agreeing with this contention of the OP, notes that the import of Sillimanite, if any, in Indian market may be appropriately considered under the relevant product market. However, there would be no change in geographic market as competition concerns (even accounting for imported relevant product) would still be evaluated within the boundary of India. Accordingly, the Commission finds no reason to disagree with the finding of DG and accepts the relevant geographic market in the instant case as India - the Commission holds that the relevant market in the present case as mining and supply of Beach Sand Sillimanite in India . Whether OP holds a dominant position within the scope of Section 4 of the Act? - HELD THAT:- The contention of the OP that the market share of an entity cannot be a definitive and exclusive indicator of its dominance and therefore, the findings of DG with respect to dominance of the OP cannot be relied upon. However, the Commission observes that the DG has analysed dominance based on various factors, as provided under Section 19(4) of the Act, and not alone on the basis of market share. Further, market share of an entity can be a strong indicator of its presence in the market and simply cannot be brushed aside in toto in absence of other negating factors - the Commission is in agreement with the conclusion drawn by the DG that the OP enjoyed a dominant position in the defined relevant market. Whether OP has violated the provisions of section 4(2)(a)(ii) by charging unfair/ excessive prices from the consumers? - HELD THAT:- The price charged by KMML was much higher than IREL despite KMML being a much small player. The Commission also notes that allegation have been levelled in respect of higher quantities being offloaded to a particular company and its associates and also that the price charged is substantially lower vis- -vis what is being charged from other customers. There seems to be no economic incentives for the OP, being in a dominant position, to indulge in such activities where it sold higher quantities at lower prices. Further, the Commission is of the view that market price is best left to the dynamic interaction between forces of the market and intervention would normally be required only in appropriate cases based on facts and circumstances of such a case - there is no reason for the Commission to hold that OP has indulged in excessive pricing. Resultantly, no case of contravention of Section 4(2)(a)(ii) of the Act is made out against the OP. Whether the OP violated the provisions of section 4(2)(a)(ii) by charging discriminatory prices? - Whether the OP violated the provisions of section 4 (2)(a)(i) by imposing discriminatory supply conditions? - HELD THAT:- The Commission is of the view that quantity supplied by OP to different categories of consumers of Sillimanite may be different for the reasons such as long-standing business relations, assured off-take quantity, past off-take etc. and therefore, may not be discriminatory. Here, it is trite to say that every commercial enterprise enjoys freedom to carry out trade and take appropriate business decisions. As a normal business prudence, the Commission has reasons to believe that, a party buying in bulk would get better terms (including purchase price) than a small buyer. Unless and until there are manifest contravention of the provisions of the Act, the freedom of enterprise remains sacrosanct and the Commission would not like to dictate the terms of the trade. Based on the facts of the case and analysis, the Commission is of the view that no case of contravention of Section 4(2)(a)(i) of the Act for adopting discriminatory practices in supply of Sillimanite favouring MNCs/foreign customers as against domestic customers is made out against the OP. Considering the facts and circumstances of the case, material on records, Investigation Report of the DG, submission made by the parties and analysis carried out in preceding paragraphs, the Commission is of the view that the OP is covered under the ambit of enterprise prescribed under extant provision of Section 2(h) of the Act and is dominant in mining and sale of Beach Sand Sillimanite in India. However, no case of contravention of provisions of section 4(2)(a)(i) and 4(2)(a)(ii) of the Act is made out against the OP. Accordingly, the matter is directed to be closed. The Commission deems it appropriate to deal with the request of the parties seeking confidentiality over certain documents/information filed by them under Regulation 35 of the Competition Commission of India (General) Regulations, 2009. The Commission notes that during the course of the proceedings, parties had filed their respective submissions in confidential as well as non-confidential version. Certain excerpts from such submissions, over which confidentiality has been sought, have been relied upon by the Commission.
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2024 (11) TMI 1006
Contravention of the provisions of Section 4(2)(c) of the Competition Act, 2002 - abuse of dominant position - HELD THAT:- In the absence of dominant position of the OPs in the delineated relevant market, the allegations of abuse made against the OPs need not be examined by the Commission. Be that as it may, based on the information available on record, the Commission is of the view that the alleged conduct cannot be considered as an abuse of dominant position by the OPs. The Informant has not provided any evidence indicating that the OPs used the Informant s information to develop and launch their products. Additionally, there is no evidence suggesting that the OPs prevented the Informant from introducing a similar product into the market. Furthermore, there is no record of the Informant having a similar product in development that was close to being launched and accordingly the Informant lost the first-mover advantage due to OPs product launch. Moreover, it is not demonstrated that having a first-mover advantage is crucial in this market. There does not seem to be any abuse of dominant position by the OPs in the delineated relevant market - the Commission is of the considered opinion that no prima facie case of contravention of the provisions of Section 4 of the Act is made out against the OPs in the present matter. Hence, the matter is directed to be closed in terms of the provisions contained in Section 26(2) of the Act. All pending applications stand disposed of accordingly.
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2024 (11) TMI 1005
Price fixation and bid-rigging by sugar mills and associations - price parallelism - contravention of the provisions of Section 3(3)(a) and 3(3)(d) read with Section 3(1) of the Competition Act, 2002 - HELD THAT:- It is seen that for the allegations of price cartel amongst ISMA and the sugar mills of the State of Uttar Pradesh in contravention of the provisions of Section 3(3)(a) of the Act, the only credible evidence brought out in the investigation report is a few instances of quotation of identical prices by OP-11 and OP-19 in the Impugned Tender, and exchange of calls by them as well as by key officials of certain other OPs with Shri GK Thakur, Director of ISMA, during the tender period - It is no longer res integra that price parallelism cannot be the sole criteria to establish a cartel. Evidence of parallel pricing must be supplemented with plus factors showing that alleged conduct is conscious and not the result of independent business decisions. In the present matters, the plus factors on record to supplement price parallelism by 2 OPs, is exchange of a few calls between the OPs with the representative of the industry association ISMA, which may have been to understand the nuances of the Impugned Tender as it ushered a novel way of tendering process. The investigation has not brought out sufficient evidence on record for the Commission to arrive at a finding of contravention of the provisions of the Act against any OP in the present matters - It is made clear that all information used in the present order is for the purposes of the Act and as such, in terms of Section 57 of the Act, does not qualify for grant of confidential treatment. Thus, no case of contravention of the provisions of the Act can be made out in the present matters against any OP and the matters are directed to be closed forthwith - The Secretary is directed to forward certified copy of the present order to the Informants and the OPs, accordingly.
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2024 (11) TMI 1004
Alleged anti-competitive practices under Sections 3(4) and 4 of the Competition Act, 2002 - exclusive supply obligation - forced co-branding - refusal to deal - resale price maintenance - HELD THAT:- The Commission notes that the Informant has primarily relied upon an undated and unsigned document titled Propel Agreement to allege exclusive supply obligation and forced co-branding . The Commission also notes that other two allegations i.e., refusal to deal and resale price maintenance are stated to be imposed through oral directions. Accordingly, the Commission directed the Informant to furnish a copy of an actual agreement signed between the OP-1 and a processor. The Informant, in its response dated 07.02.2024, stated that it does not have access/ possession of a signed agreement. Despite being given the opportunity, the Commission observes that the Informant has not been able to produce a valid and subsisting copy of the said Propel Agreement on the edifice of which the entire allegations rest - A bare perusal of the said Propel Agreement reveals that it is only an agreement to meet the requirements of the end consumers through the assistance imparted by the manufacturers to the processors by way of supply of raw materials, imparting technical and marketing training, rendering services to the customers as per the requirements, among others. With regard to the allegation of exclusive supply obligation, the Commission observes that exclusive purchase obligation is said to be imposed on processors only in respect of High Performance Glass Allied Products and Clear Tempered Glass . However, no such imposition of exclusivity is observed from the submitted Propel Agreement, in respect of clear float glass/other glass, thereby implying that the processor has a choice to procure clear float glass from other glass manufacturers. With regard to allegation of forced co-branding, the Commission has perused clause 3.3 of the said Propel Agreement which reveals that the OP-1 would facilitate the processor to use its own trademark/brand name alongside trademark/brand name of OP- 1 under certain terms and conditions. Thus, the Commission is of the view that co- branding, in itself, does not raise competition issue. As regards allegations of refusal to deal, it has been submitted by the Informant that processors/ distributors are being offered significant discounts on products of OP-1, if they purchase exclusively from OP-1. Additionally, the processors who are dealing with competitors of OP-1 will not be sold products of OP-1. The Commission is of the view that the Informant has merely alleged the conduct to be carried out through oral directions and has not substantiated the same with any evidence. It may be noted that offering discounts on the basis of volume of purchase may not be anti-competitive, per se. In relation to allegation of resale price maintenance ( RPM ) being practiced through oral direction, the Informant has claimed that in certain cases, OP-1 is stated to have directly approached the large bulk customers and negotiated prices directly with them. The processors and distributors are then forced to issue invoices at such prices - the Commission notes that OP-1 would have no control over the price charged by the processors from the end consumers for the services provided by it. It is clear that the processors are free to charge the price from the end users for the value addition/ enhancement they carry out in the glass received from OP-1 and OP-1 does not control it. This nowhere shows that the price of end product is being controlled by the OP-1 as OP-1 only charges for the products it sells to the processor. The Commission is of the view that no prima facie case is made out against OP-1 in respect of either Section 3(4) or 4 of the Act. Accordingly, the Information filed is directed to be closed forthwith under Section 26(2) of the Act. Considering the grounds put forth by the Informant for the grant of confidential treatment, the Commission grants confidentiality to such documents/ information in terms of Regulation 35 of the General Regulations read with section 57 of the Act for a period of three years from the passing of this order. The Commission also grants confidentiality on the identity of the Informant as prayed. It is, however, made clear that nothing used in this order shall be deemed to be confidential or deemed to have been granted confidentiality as the same has been used for the purposes of the Act in terms of the provisions contained in Section 57 thereof.
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2024 (11) TMI 1003
Anti-competitive agreements under Section 3 of the Competition Act, 2002 - contravention of the provisions of Section 3(1), 3(2), 4(2)(a)(ii) and 4(2)(c) of Competition Act, 2002 - abuse of dominant position under Section 4 of the Competition Act, 2002 - unfair trade practices and imposition of excessive interest rates - HELD THAT:- The Commission perused the material available on record and information available in public domain. The Commission notes that the Informant is mainly aggrieved with the alleged unfair and discriminatory increase in the rate of interest charged by OP-1. The Informant has alleged that due to imposition of high rate of interest, frequent increase of rate of interest and not allowing pre-payment of Loans (imposition of pre-payment penalty) resulted in the creation of barriers for new entrants in the market, as consumers would be disinclined to switch to a new entrant due to the apprehension of incurring losses. It is also alleged that the competition gets adversely affected as consumers face hindrance in the form of penalties when they switch to another bank. Therefore, the conduct of OP-1 allegedly amounts to be in violation of Sections 3(1) and 3(2) of the Act. It is also alleged that imposing unjust and excessively high rates of interest contravene provisions of Section 4 of the Act. For the purpose of analysis of conduct of OP-1 under the ambit of Section 4 of the Act, the Commission deems appropriate in the present matter to delineate relevant market as provision of loan against property in India . The Commission notes that the Informant has suggested that OP-1 has the biggest share in the area of Delhi and NCR and therefore is dominant. The Commission also notes from the information available in public domain that OP-1 is a housing finance company which is India s third largest non-bank mortgage lender in the country and is regulated by the Reserve Bank of India (RBI) - it is observed from the information in public domain that the relevant market appears to be competitive with the presence of large number of banks and Non-Bank Financial Companies (NBFCs) and housing finance companies and thus, dominance of OP-1 is not established in the aforesaid relevant market. Further, the allegation of aftermarket abuse is misplaced since the loan services of the nature impugned herein do not involve any aftermarket as alleged by the Informant and is, thus, rejected. The Commission is of the view that there is no prima facie case made out under the provisions of Section 4 of the Act. As far as the provisions of Section 3 of the Act is concerned, the agreement with an end-consumer like in the present case is not envisaged as an anti-competitive agreement under Section 3 of the Act and therefore, no case is made out under the provisions of Section 3 of the Act. The Commission is of the view that prima facie there is no competition concern arising in the present matter under the provisions of Section 3 and Section 4 of the Act and therefore, the matter is directed to be closed forthwith under Section 26(2) of the Act - the Secretary is directed to communicate the decision of the Commission to the Informant, accordingly.
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2024 (11) TMI 1002
Seeking confidentiality over its identity under provisions of Section 57 of the Act read with Regulation 35 of the Competition Commission of India (General) Regulations, 2009 - bid-rigging and cartelisation - abuse of dominant position - contravention of Section 3 of the Competition Act, 2002 - HELD THAT:- There was a significant difference of more than INR 2000/- between bids quoted by OP-2 and OP-3; in the remaining two tenders viz. Tender Nos. 03221028 and 03211577, there seems to be a minor difference of around INR 10 in the bid amounts of OP-2 and OP-3. However, there is no evidence on record that any part of the remaining two tenders were awarded to OP-2 and/ or OP-3. Further, it is noted that the bids quoted by several remaining bidders (approved or un-approved sources) were in the same range or higher than the bids quoted by OP-2 and OP-3. Specifically, it is noted that in all three tenders, the approved source Nanda Engineering Works, quoted rates higher than the OPs. The Commission observes that apart from the bid quotations made by OP-2 and OP-3 in two tenders with minor difference in their prices, there is no other evidence on record, which may support the allegations of the Informant regarding cartelisation between them - it is no longer res integra that mere price parallelism is not sufficient to arrive at a finding of cartelisation without there being evidence of any plus factors in support of parallel pricing. In the present matter, there are no plus factors averred by the Informant indicating meeting of minds or collusion between OP-2 and OP-3 or among OPs. Accordingly, in view of the Commission, neither case of cartelisation in contravention of the provisions of Section 3 of the Act is made out in the present matter against OP-2 and OP-3 nor there arises any question of violation of the provisions of Section 3 of the Act by OP-1. The Commission is of the view that OP-1 being a consumer/ procurer of the impugned item has freedom to specify its requirements/ conditions/ EC and the said requirements/ conditions/ EC themselves cannot be deemed to be anti- competitive. Thus, the Commission does not find OP-1 to be in violation of the provisions of Section 4 of the Act also. The Commission finds that no prima facie case of contravention of provisions of the Act is made out against any of the OPs in the present matter and decides to close the matter forthwith in terms of the provisions of Section 26(2) of the Act - The Secretary is directed to communicate certified copy of the present order to the Informant, accordingly.
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2024 (11) TMI 1001
Abuse of dominant position by DAE and IREL under Section 4 of the Competition Act, 2002 - contravention of the provisions of Section 4 of the Competition Act, 2002 - HELD THAT:- From a conjoint reading of Section 2(h) of the Act and the relevant Allocation of Business Rules, it is amply clear that DAE is exempted from the purview of enterprise in terms of the provisions of the Act. Accordingly, conduct of DAE does not invite scrutiny under the provisions of the Act. Furthermore, based on the above, the Commission notes that the IREL has no role to play in renewal of the off-take agreement, rejection of import licenses, and non-approval of an alternate disposal plan. Based on the facts and circumstance of the instant case and analysis carried out in preceding paragraphs, since no prima facie case is made out either against DAE or IREL, the matter may be closed under Section 26(2) of the Act forthwith. Consequently, no case for grant of relief(s) as sought under Section 33 of the Act arises.
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2024 (11) TMI 1000
Alleged contravention of Section 4 of the Competition Act, 2002 by Maruti Suzuki India Limited regarding pricing strategy for the 'Jimny' SUV - abuse of dominant position - HELD THAT:- In the opinion of the Commission, the OP does not hold a market share large enough to enable it to operate independently of competitive forces prevailing in the market or to affect its competitors or consumers or the market in its favour, especially in the SUV segment of passenger vehicles. As such, the OP does not appear to be a dominant player in the market. Therefore, in the opinion of the Commission, a case of violation of the provisions of Section 4 of the Act cannot be made out against the OP. Further, the Commission also notes that the grievance raised by the Informant is an inter-se dispute between the Informant and the OP regarding price of the product sold by the OP to the Informant. In the opinion of the Commission, on the basis of the grievances alleged by the Informant, no competition issue or concern seems to arise from the facts and allegations stated by the Informant. Once a buyer purchases a product from a seller at a given price, it cannot insist to avail benefit of any future discount which may be offered on such product by the seller. The discounted price alleged also does not seem to be predatory in nature. The Commission is of the considered opinion that no prima facie case of contravention of the provisions of Section 4 of the Act is made out against the OP in the present matter. Hence, the matter is directed to be closed in terms of the provisions contained in Section 26(2) of the Act.
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2024 (11) TMI 999
Contravention of provisions of Section 3 and 4 of the Competition Act, 2002 - abuse of dominant position/dominant enterprise - cartel formation - HELD THAT:- From the facts, the Commission notes that the Informants are the retail shop owners in the Mall and are aggrieved by the way Mall has been managed. The gravamen of grievance is that the management of the Mall has not been handed over to the association of the owners of the Mall (buyers of the retail space in the Mall) and it continues to be in the hands of OP-1 acting through OP-2 (maintenance agency); charging of high maintenance and electricity charges; selling joint common areas without consent of the shop owners. The Commission also notes that the Informants have claimed the Mall to be a relevant market and the conduct of OPs causing AAEC in such market - The Informants have already filed a civil suit against OPs claiming permanent injunction against OPs. The Commission notes from the information available in public domain that Metropolitan Mall is not the only mall situated in Gurugram and there are other malls situated in Gurugram and nearby areas. Thus, the Commission is of the view that the case does not merit any narrow delineation of relevant market for the purposes of Section 4 of the Act. As far as the alleged abuse is concerned, the Commission is of the view that the grievances of the Informants like payment of maintenance and electricity charges, rights and entitlement to joint common areas etc. are in the nature of contractual/civil issues/disputes - The Commission also does not find any merit in the case for its examination under Section 3(4) of the Act. Thus, the Commission is of the view that no competition concerns seem to arise in the present matter given the nature of allegations and the alleged conduct of the parties so arrayed by the Informant. The Commission is, thus, of the opinion that there exists no prima facie case of contravention of the provisions of Section 3 and Section 4 of the Act against the OPs in the present case and therefore, the matter be closed forthwith under Section 26(2) of the Act. Consequently, no case for grant for relief as sought under Section 33 of the Act arises and the same is disposed of accordingly.
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Insolvency & Bankruptcy
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2024 (11) TMI 998
Dismissal of application filed by the appellant under Section 7 of the Code - Respondent miserably failed to meet its obligation - existence of debt and default - judicious application of mind by the Adjudicating Authority - Appellant assailed the conduct of the Respondent for taking several frivolous grounds including that the application of the Appellant under section 7 of the Code has been rejected earlier and by doctrine of res-judicata the same could not have been filed. Whether there was a debt and default which could trigger Section 7 application filed by the Appellant? - HELD THAT:- There was outstanding debt and there was a clear default on the part of the Respondent in meeting its obligation which entitles the Appellant to take suitable remedy as per the Code and therefore, he correctly filed the Application under Section 7 of the Code - there are no meaningful and detailed discussion on this issue in the Adjudicating Authority decision in the Impugned Order, especially on issue of default which is against the spirit of the Code. In view of these discussions, the debt and default is established in favour of the Appellant. Whether, ratio of Vidarbha Industries [ 2022 (7) TMI 581 - SUPREME COURT] was applicable in the present case based on which the Adjudicating Authority rejected the application of the Appellant filed under Section 7 of the Code? - Whether, there was judicious application of mind by the Adjudicating Authority as evident in the Impugned Order while rejecting the application of the Appellant under Section 7 of the Code? - HELD THAT:- In the present case, the total outstanding of all lenders was thousands of crores and debt claims of Appellant was itself Rs. 646.38 Crores, whereas the Respondent is now hopeful of Rs. 1271 Crores to be recovered from other telecom companies based on Arbitration etc., which are at present at different stages of being finalised, thus, perception of the Respondent looks far from finality. It is anybody s guess as to when this money, if at all, will come to the Respondent s account after all sort of claims, counter claims and litigations at various legal fora. The Adjudicating Authority has not even discussed the nature of this repayment of Rs. 16915 Crores i.e., whether it was paid in cash component as per loan agreements or major chunk as deemed payable due to conversion of debt into equity as per CDR/ SDR in terms of RBI Guidelines, which Lenders/ Bank had to follow without any option. We note that both the CDR/SDR failed due to default of the Respondent. This could have been relevant factor to determine viability of the Corporate Debtor in terms of Vidarbha Industries - It would have been desirable for the Adjudicating Authority to go into details as what was the total outstanding claims all the lenders pre CDR/SDR as well as post CDR/SDR and what was the total payment made thereon. This would have given a clear picture in terms of total payment made by the Respondent on account of principals, interest and other ancillary charges like penal interest, if any, happened due to non payment on part of the Respondent to the Lenders. The Adjudicating Authority has not gone into any of these details, as such we are not in position to support the Impugned Order rejecting Section 7 application of the Appellant only on the ground of Vidarbha Industries. The Adjudicating Authority has not applied the ratio of Vidarbha Industries correctly in the present case while rejecting the application of the Appellant, filed under Section 7 of the Code. Whether the Adjudicating Authority ignored the acknowledgements of debt and default by the Respondent in its various statements, books of accounts, affidavit in reply and Written Submissions filed before the Adjudicating Authority? - HELD THAT:- There are several acknowledgements of debt and default on the part of the Corporate Debtor - there is a clear debt and default backed several acknowledgements by the Respondent which entitled the Appellant to file application under Section 7 of the Code before the Adjudicating Authority. Whether the Appellant is permitted to raise any disputed issues of facts before this Appellate Tribunal through Rejoinder dated 11.04.2023 to the Affidavit in Reply and Additional Affidavit in reply and whether it is an impediment in the present appeal? - HELD THAT:- The Appellant pleaded that in the present case, the question as to the applicability of Vidarbha Industries is not a new plea set out by the Appellant. It has its basis in the pleadings of the Respondent as well as the Appellant before the Adjudicating Authority - it is already noted the relevant para of Vidarbha Industries [ 2022 (7) TMI 581 - SUPREME COURT] , Innoventive Industries Ltd. [ 2017 (9) TMI 58 - SUPREME COURT] , Vidarbha Review Order and it is already noted the various financial facts and figures regarding viability of the Corporate Debtor, as such the contentions raised by the Respondent does not hold good. Even without considering the Rejoinder filed by the Appellant, the ratio and applicably of Vidarbha Industries is in the present appeal is required to be taken into consideration along with various financial facts which are found in the pleadings made as well as written submissions and which are based on the financial statements of the Corporate Debtor which are in public domain. Whether, the Appellant was duty bound to agree with majority of the lenders to assign its debts to EARC? - HELD THAT:- The Appellant is not duty bound to agree with majority of the lenders to assign its debts to EARC - It is clear that it is the commercial wisdom of the lenders is paramount in deciding to assign its debts or to pursue other remedies including filing under Section 7 of the Code or otherwise and these can t be any judicial intervention on this aspect by the Adjudicating Authority or this Appellate Tribunal. The case is remanded back to the Adjudicating Authority to hear the original petition of the Appellant a fresh, taking into consideration all the relevant facts - Appeal allowed by way of remand.
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PMLA
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2024 (11) TMI 997
Seeking grant of regular bail - Money Laundering - conspiracy to fraudulently set up Vivo group of companies in India without revealing their true beneficial ownership and carried out mis-declarations before government bodies - concealment of Chinese ownership - Section 45 of the PMLA - HELD THAT:- Since the offence pertains to money laundering, apart from the usual considerations, it would have to be seen whether the twin conditions stipulated in Section 45 of the PMLA are met. A plain reading of Section 45 of the PMLA shows that the public prosecutor must be given an opportunity to oppose the application and the Court should have reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. The twin conditions though restricts the right of accused to be released on bail but do not impose absolute restraint and the discretion vests in the Court. Section 45 of the PMLA while imposing additional conditions to be met for granting bail, does not create an absolute prohibition on the grant of bail. When there is no possibility of trial being concluded in a reasonable time and the accused is incarcerated for a long time, depending on the nature of allegations, the conditions under Section 45 of the PMLA would have to give way to the constitutional mandate of Article 21. What is a reasonable period for completion of trial would have to be seen in light of the minimum and maximum sentences provided for the offence, whether there are any stringent conditions which have been provided, etc. It would also have to be seen whether the delay in trial is attributable to the accused. In Senthil [ 2024 (9) TMI 1497 - SUPREME COURT] , the Supreme Court while reiterating the ratio enunciated in Union of India v. K.A. Najeeb (Three Judge bench) [ 2021 (2) TMI 1212 - SUPREME COURT] , also held that if the Constitutional Court comes to the conclusion that the trial would not be able to be completed in a reasonable time, the power of granting bail could be exercised on the grounds of violation of Part III of the Constitution of India notwithstanding the statutory provisions. The issue of long incarceration and right of speedy trial also cropped up in Manish Sisodia v Directorate of Enforcement, Manish Sisodia v Directorate of Enforcement, [ 2024 (8) TMI 614 - SUPREME COURT] wherein it has been held by the Supreme Court that the right to bail in cases of delay in trial, coupled with long period of incarceration would have to be read into the Section 439 CrPC as well as Section 45 of PMLA while interpreting the said provisions. Prem Prakash v. Union of India through the Directorate of Enforcement, Prem Prakash v. Union of India through the Directorate of Enforcement, [ 2024 (8) TMI 1412 - SUPREME COURT] is another recent decision where it has been reiterated that the fundamental right enshrined under Article 21 cannot be arbitrarily subjugated to the statutory bar in Section 45 of the Act and the constitutional mandate being the higher law, the right to speedy trial must be ensured and if the trial is being delayed for reasons not attributable to the accused, his incarceration should not be prolonged on that account. The right to speedy trial was also upheld and other special legislations where provisions akin to Section 45 PMLA exist. It is noted that the investigation was initiated in the year 2022 and the Prosecution Complaint has named 48 accused persons and cited 527 witnesses. There are 80,000 pages of documents which need to be analysed. A supplementary Prosecution Complaint dated 19 - In a situation such as the present case, where there are multiple accused persons, thousands of pages of evidence to assess, scores of witnesses to be examined and the trial is not expected to end anytime in the near future and the delay is not attributable to the accused, keeping the accused in custody by using Section 45 PMLA a tool for incarceration or as a shackle is not permissible - The accused in a money laundering case cannot be equated with those punishable with death, imprisonment for life, ten years or more like offences under the Narcotic Drugs and Psychotropic Substances Act, 1985, murder, cases of rape, dacoity, etc. As held in the catena of judgements discussed herein above, Constitutional Courts have the power to grant bails on the grounds of violation of Part III of the Constitution and Section 45 does not act as a hindrance to the same. The sacrosanct right to liberty and fair trial is to be protected even in cases of stringent provisions present in special legislations - The applicant has been in custody since 10.10.2023 and the trial is at the stage supply of documents under Section 207 Cr.P.C. and charges are yet to be framed. Out of the 7 accused persons who were arrested, arrest of 3 persons was declared illegal by the Trial Court vide order dated 30.12.2023 and the other three, as noted above, have already been released on bail. The fact that the twin conditions under Section 45 of PMLA stand satisfied, the fact that the all the other accused persons who were arrested are out on bail, the period of custody undergone, the trial is at nascent stage of supply of documents under Section 207 Cr.P.C., keeping in mind the import of the catena of decisions of Supreme Court discussed herein above, it is directed that the applicant be released on regular bail subject to him furnishing personal bond in the sum of Rs.1,00,000/- with one surety of the like amount each to the satisfaction of the concerned Jail Superintendent/Trial Court/Duty J.M./link J.M. and subject to fulfilment of further conditions imposed - The bail application is disposed of.
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2024 (11) TMI 996
Money Laundering - scheduled offence - proceeds of crime - whether the properties purchased prior to the alleged commission of offence would not fall under the definition of proceeds of crime ? - HELD THAT:- In view of the fact that 'proceeds of crime' has been set out in the complaint impugned in the present petition and the identification of proceeds of crime also has been set out, the grounds raised by the petitioner deserves no merit consideration and all other grounds raised on merits or regarding appreciation of materials would be considered only by the Trial Court. However, the Trial Court while proceeding with the trial, has to consider the materials available on record independently and uninfluenced by the findings recorded by this Court in this petition relating to facts. This Criminal Original Petition stands dismissed.
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2024 (11) TMI 995
Money Laundering - sale proceeds of lottery tickets - challenge to closure report - offences punishable under Sections 294N, Section 420 and 120B of Indian Penal Code - HELD THAT:- A legislation when brought into force with a legislative intent does not stay in the same shape, as it was intended to be. Evolution of the legislation is inevitable in a growing country. The operation and implementation of the law decides that the legislation is taken forward in its intended spirit and force. Once the legislation is applied and tested, the consequences of such application determine the character and fate of the legislation. The objects of the PMLA as intended is crystal clear from the day of its inception. Economic interest of our great nation is the soul object. The consequent implementation of the law should be in tandem with the legislative intent. Any misuse or abuse of the law will fracture the bones of PMLA, thereby rendering it wholly ineffective. Legislation of such nature must be handled with caution and must not injure any vital organs of Part III of the Constitution of India. To remind that facts of the present case at this juncture, the seizure of huge amount of cash of Rs. 7.20/- crores was on 12.03.2012. The sale agreement is said to have been entered into on 02.03.2012. The stamp paper has been released by the State Government only on 09.03.2012 and it was sold by the stamp vendor to one Smt.Vimala on 13.02.2012. It is a clear case of cheating by amassing money by sale of illegally printed lottery tickets attracting Section 420 of IPC, creation of a false document in the form of a sale agreement attracting the provisions of Sections 467, 468 and 471 of IPC and hence prima facie materials are available for both the predicate offence and the offence under PMLA. But the PMLA proceedings are sought to be scuttled by closing the proceedings in the predicate offence. In the present case, the State Investigating Agency registered the predicate offence, conducted investigation and against the dismissal of quash petition filed SLP before the Hon'ble Supreme Court and the criminal case was restored by the order of the Apex Court. When the prima facie case regarding a predicate offence has been upheld by the Hon'ble Supreme Court by restoring the criminal case in the predicate offence, filing closure report thereafter by the very same State Agency is undoubtedly suspicious and doubtful. The State Agency has made an attempt to bury the predicate offence against the accused persons in a suspicious manner and on extraneous considerations, which are visible through their actions including the closure report filed by the State police - The State Investigating Agency and the Enforcement Directorate are directed to proceed with the case in tandem, so as to ensure that the criminal case instituted is proceeded in accordance with law. However, the trial must go on uninfluenced by the observations, if any made relating to facts in the present case. The facts established and the legal position considered made us to arrive at an irresistible conclusion that the Closure Report filed by the 1st respondent dated 14.11.2022 accepted by the learned Judicial Magistrate-I, Alandur by order dated 17.11.2022 made in Crime No.304 of 2012 stands set aside - Accordingly, the Criminal Original Petition stands allowed.
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Service Tax
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2024 (11) TMI 994
Service Tax demand under the category of rent a cab service, interest and imposition of penalty - invocation of extended period - HELD THAT:- We find that the issue involved in the instant case relates to the appellant s understanding with respect of hiring of vehicles. The appellant was under the impression that hiring of vehicles does not fall under the category of renting of cab service, and therefore, the appellant was not discharging service tax in respect of vehicles hired by them. We hold that while service provided by the appellant is taxable, the Notification of extended period of limitation cannot be sustained. The impugned order is therefore, set aside and matter remanded to the original adjudicating authority for decision in light of above findings.
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2024 (11) TMI 993
Service tax on handling charges collected by the appellant from their customers of motor vehicle - appellant being a car dealer of Maruti Suzuki Ltd. involved in the selling car on principle to principle basis - appellant submits that the handling charges was collected by the appellant which was subsequently considered as part of the sale price of the car and the appellant have discharged the VAT on such handling charges treating the same as part and parcel of sale price of the car, any amount which is part of the sale of the goods will not attract any service tax. HELD THAT:- We find that this issue is no longer res-integra in as much as in various judgments, it was held that if the handling charges is included in the sale value of the car and VAT was paid then such handling charges being a part and parcel of the sale value will not be exigible to service tax. See Ganga Automobiles [ 2023 (10) TMI 355 - CESTAT AHMEDABAD ] It is not in dispute that once the handling charges is part and parcel of the sale price of car and sales tax/VAT thereon has been paid, the same became a part and parcel of the sale value hence will not attract any service tax. Thus the service tax demand on the handling charges collected during the sale of the car as sale price of the car cannot be levied with service tax. Whether the handling charges is a part and parcel of the sale value of the goods and VAT was paid? - From the VAT assessment order, it is clear that the handling charges and warranty amount which was not earlier included in the sale value was included for the purpose of VAT assessment and VAT has been paid and thereafter, no VAT amount tax remains to be paid. With the above it is clear that the appellant have paid the VAT amount on the handling charges. Therefore, the above judgments which are on the facts that the handling charges is a part and parcel of the sale value and the same was suffered the VAT tax, directly applies in the facts of the present case as discussed above. AR raised point that this VAT assessment order were not presented before the lower authority. Therefore, the same cannot be considered at this stage. In this regard, we are of the view that as per the settled legal position this Tribunal is a final fact finding authority, therefore, considering the VAT assessment order, the demand of service tax is not incorrect. Therefore, the objection of Ld. AR cannot be sustained.
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2024 (11) TMI 992
Classification of Services Provided - services as a steamer agent and a cargo handling agency - whether the services qualify as export of service? - since the service provided by the appellant is partly outside India, the same is covered by the definition of export of service - appellant is engaged in providing service of steamer agent in respect of vessels arriving at Kandla and other ports for discharging imported cargo and loading export cargo - appellant has got themselves registered under the category of steamer agent service covered u/s 65 (105) (i) of Finance Act, 1994, as also taken registration under the category of Cargo Handling Agency Service covered u/s 65(105) (zr) of Finance Act, 1994 HELD THAT:- We find that the appellant have carried out the job of segregation and internal shifting of timber logs on behalf of foreign based principals as part of their obligation but also the appellant have sent progress reports of segregation and internal shifting to the service recipient i.e. foreign based principals. Therefore, the progress report is also indeed a part of over all part of important service activity without which the service provided by the appellant would not complete. From the above sub rule (ii) of Rule 3 of export of service rules, 2005 it is clear that the service falling under sub clause (zn) and (zr) which are subject matter of the present case, if partly performed outside India it shall be considered as performed outside India. In the present case as discussed above, the progress report was sent to the foreign principals which is the part of the overall service. Hence, the service is partly performed outside India, therefore, it qualifies as export of service in terms of Rule 3 (ii) of Export of Service Rules, 2005. In the identical facts where the service was performed in India but the reports of the sad service was sent to the foreign service recipient wherein it was held that performance of service not completed until progressive/analysis report delivered to the client. Delivery of report being essential part of service made outside India and used outside India. Such delivery of report to client outside India amounting to part of performance of taxable service outside India. As relying on SGS India Pvt Ltd [ 2011 (2) TMI 54 - CESTAT MUMBAI ] and B A Research India Ltd. [ 2009 (11) TMI 213 - CESTAT, AHMEDABAD] we find that since in the present case the service is complete only when the progress report is sent to the foreign service recipient. The service is partly performed outside India. Therefore, it clearly falls under the definition of export of service in terms of Rule 3 (ii) of Export of Service Rules, 2005. It is also not in dispute that against the service provided by the appellant to their foreign principals they have received the payment remittance in convertible foreign exchange. Therefore, there is no doubt that the appellant have provided the export of service. Accordingly, the demand is not sustainable.
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2024 (11) TMI 991
Denial of CENVAT credit - expenses incurred at unregistered branches - Appellant undertakes the services of the Technical Testing Analysis Service from the branches that are performed on the blood samples of the Volunteers obtained during the human trials - IP molecule which is administered to the Volunteers is sometimes mixed with ancillary products. Study of the samples are sent to the Ahmedabad office from where final report is prepared - appellant did not obtain centralised registration for three branches namely Mumbai, Nadiad and Mehsana, they fail to prove that the appellant was paying the Service Tax for the services at Ahmedabad for these branches HELD THAT:- We find that though the appellant at Ahmedabad did not obtain the centralised registration but the overall business is accounted for at Ahmedabad and depending on the nature of the activity i.e. Technical Testing Analysis Service, which were performed on the sample of the volunteers obtained during human trials. Since, this nature of activity has to be carried out at different places, but the same is carried out by the appellant at Ahmedabad only. Therefore, merely because of obtaining the blood samples of volunteers at different places such as Mumbai, Nadiad and Mehsana but the final study of the samples are carried out at Ahmedabad office, where the final analysis report is prepared. For all the activities, as regards the expenses, the Ahmedabad office only making the payment for those expenses. Therefore, all the activities carried out irrespective at different places such as Mumbai, Nadiad and Mehsana, but same are accounted for and carried out from Ahmedabad only. Therefore, there is no reason to deny the credit in the peculiar facts of the present case. Centralized registration - Revenue's contention that the appellant have not obtained the centralised registration, for this reason Cenvat credit cannot be denied as held in catena of the judgments that for the purpose of availment of Cenvat credit registration is not prerequisite. The only criteria to allow the Cenvat credit on any input service is that the service should be used in or in relation to output service. The service should be tax paid. These criteria is not under dispute. The appellant have centralised accounting at Ahmedabad only. Therefore, even though the part of the activity are carried at different places but for all the activities of different places, the accounting is done at Ahmedabad office only. Therefore, in our considered view there seems to be no reason to deny the Cenvat credit. This issue has been considered by this Tribunal in the case of Manipal Advertising Services Pvt Ltd [ 2009 (10) TMI 434 - CESTAT, BANGALORE] wherein the Tribunal held that if a person is discharging service tax liabilities from his registered premises, the benefits of Cenvat Credit on the service tax paid by the service providers cannot be denied to the assesse only on the ground that the said services are in the name of branch offices. There is no dispute that the branch offices are not registered with the Service Tax Authorities and they are not discharging service tax liabilities. Since, the entire service tax liabilities is of Ahmedabad office, all the activities irrespective carried out at different places, are ultimately attributed to the Ahmedabad office only. Therefore, availment of Cenvat credit at Ahmedabad is absolutely in order and as per the law. Even though there is no centralised registration at Ahmedabad office but on the fact that all the services even if received at branch offices for same is attributed to the final output service of Ahmedabad. Therefore, in our considered view the Cenvat credit is admissible to the appellant. Demand on account of difference of taxable income as appearing in the profit and loss account, vis-a-vis taxable value declared in the half yearly ST-3 return - As we find that firstly, merely on the basis of difference between the ST-3 return and books of accounts, the confirmation of demand is not sustainable unless until the Revenue establish that the difference is on account of any service and the nature of service if any performed. Therefore, on this ground itself, the demand of Rs. 1,50,829/- is not sustainable. Further we find that the appellant have provided the reconciliation statement, according to which the appellant paid service tax on the excess amount coming after the reconciliation. Therefore, there is no short payment of service tax. We have perused the reconciliation statement as Annexed-2 of the appeal memo. Accordingly, on this count also demand is not sustainable. We place reliance on the decision in the case of Chartered Logistics Ltd [ 2023 (7) TMI 770 - CESTAT AHMEDABAD] dealing with the situation where there is a demand on difference of value shown in books of accounts and ST-3 return. Merely on the difference between the value mentioned in books of accounts and ST-3 returns, demand of service tax cannot be confirmed. Demand on the premise of totaling mistake and short payment of service tax to that extent - We find that the appellant have provided the explanation before the first Appellate Authority and as per the statement in Annexed at page No. 19 of the appeal it clearly shows that the appellant have correctly paid service tax on the taxable service and there is no calculation mistake as alleged by the revenue. Therefore, on this ground also the demand is not sustainable. Demand on the basis of debit notes issued by Wockhardt Ltd the allegation of the department is that the appellant could not provide the proof of payment of service tax to the Government Exchequer. We find that the appellant have submitted that they have paid the service tax during the year 2019 and produced the documents evidence in that respect. We fail to understand that despite giving this documentary evidence which clearly show the payment of service tax, the Learned Commissioner (Appeals) for no reason discarded such documentary evidence, only on the basis that the same unsigned. It is the submission of the appellant that though they did not pay the service tax immediately upon issuance of debit notes in the month of July,2008. Since, the appellant have received money subsequently from Wockhardt Ltd., thereafter they paid the service tax with the department at the time of receipt of amount. I am convinced with the submission of the appellant which is supported by the documentary evidence. Therefore there was no reason for Learned Commissioner (Appeals) to uphold the demand. Hence, the same is not sustainable. Invoking extented period of Limitation - We find that the period involved for the present matter is 2008-09 and the show cause notice has been issued on 22.10.2013. Hence, the entire demand is under extended period. In this regard we find that the appellant obtained service tax registration and the department had conducted various audits from the date of registration. The entire data on the basis of which the service tax demand was raised in the present case were retrieved from the existing books of accounts of the appellant. Therefore, there is no suppression of fact or any mala fide intention with intend to evade payment of duty on the part of the appellant. Therefore, in the facts of the present case also hold that the demand is not sustainable on the ground of limitation also. The demands are not sustainable on merit as well as on limitation.
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2024 (11) TMI 990
Refund claim filled by service receiver - jurisdiction of Mumbai Service Tax authority or Kolkata Service Tax authority to deal with the refund application of the appellant - action of the Deputy Commissioner in returning the refund claimed filed by the Appellants, in terms of Section 103 of Finance Act 1994, as inserted by the Section 159 of the Finance Act, 2016 - Difference of opinion among members of bench - difference of opinion between learned Member (Technical) and learned Member (Judicial) on the findings pertaining to jurisdiction of Mumbai Service Tax authority or Kolkata Service Tax authority to deal with the refund application of the appellant, filed in terms of Section 103 of the Finance Act, 1994. Appellants have challenged this action, arguing that since the appellant was registered in the jurisdiction of Deputy Commissioner, Division 9, Service Tax VII, thus they had rightly filed the refund claim in the jurisdiction where they were registered for payment of service tax - Whether the Deputy Commissioner, Division-9, Service Tax-VII, action in returning the refund claim that has been upheld by the Commissioner (Appeals) is to be upheld by the CESTAT as opined by Member (Technical) or is to be set aside as opined by Member (Judicial)? HELD THAT:- In the present case, due to non-obstante clause in Section 103 (1) of the Act of 1994, the charge of service tax itself and the assessment, if any, stands nullified by the legislated Act of the Parliament and thus, there is no need of ascertaining the fact, as to who would be considered as the jurisdictional proper officer for grant the refund of the service tax amount. In fact, Section 103(2) of the Act of 1994 mandates that refund shall be made of all such service tax, which has been collected, but which would have not been so collected, had sub-section (1) been in full force at all times. Section 103 of the Act of 1994 is a complete code in itself and it does not mandate for filing of the refund claim at any specified jurisdiction. Once it is admitted that the recipient of the service is eligible to file refund claim, it is beyond the mandate of the law to insist that such claim should be filed with the proper officer, having jurisdiction over the service provider. Section 103(3) of the Act of 1994 also starts with a non-obstante clause and puts only condition that the refund application should be filed within six months. Thus, there is no other condition imposed, as to the specific officer, before whom the refund claim should be filed with. The appellants in the present case have filed their refund claim before their own jurisdictional Service Tax divisional office, where they used to file the service tax returns. Even Section 11B of the Act of 1944, which has been strongly relied upon in the Interim Order, also does not mandate that the claim should be filed before the service provider's jurisdictional officer alone. In fact, the principle laid down in Canon India [ 2021 (3) TMI 384 - SUPREME COURT] would support the appellant's case inasmuch as in the event of any erroneous grant of refund, the proper officer to issue the show cause notice for recovery of such erroneously granted refund would be the jurisdictional officer at the appellant s end, and not the jurisdictional officer at the service provider s end. Thus, as per the reasoning given by the Hon'ble Member (Technical), the jurisdictional officer of the service provider will not have even geographical jurisdiction to issue any show cause notice to the appellants herein. Therefore, the expression the assessing officer , in the present case, would mean the jurisdictional officer of the appellants, and not that of the service provider. In any case, the appellants would not have any locus standi to file their refund claim before the jurisdictional officer of the service provider, as they are not registered in that jurisdiction. In the present case, interpretation of the provisions of Section 27 (supra) is not in question and there is no dispute that the appellants have filed the refund claim within 6 months of the Presidential assent to Section 103 of the Act of 1994 and as such, is within the schedule time frame. Thus, recourse cannot be had to the provisions of 1872 Act or the 1963 Act. The appellant's right to seek refund arose out of an act of the Parliament, by way of granting retrospective exemption, which overrides all assessments and hence, there is no question or need for seeking any re-assessment. In paragraph 4.32 of the Interim Order, learned Member (Technical) has observed that Section 103 of the Act of 1994 or Section 11B of the Act of 1944, did not permit for filing of the refund claim in multiple jurisdictions. In the present case, it is not the case of the appellants that they wanted to file the claim in multiple jurisdictions. The appellants have in fact, filed the refund claim application only with their jurisdictional officer. Therefore, this finding is of no relevance in the present context. In fact at the end of this paragraph, it is stated that we have no hesitation in agreeing to the observations made by the Tribunal to the effect that both the jurisdictions cannot refuse to entertain the refund claim filed by the recipient of service. If this be so, then the appellants are correct in filing the claim with their own jurisdiction. It is also stated in the said paragraph that filing of claim in multiple jurisdictions, will amount to double benefit in respect of the same transaction. In the present case, the appellants have filed the claim only in one jurisdiction and in any case, it is not the case of Revenue or of the Adjudicating or First Appellate Authority that the appellants is taking double benefit. Such a remark is unwarranted in the present case. Thus, in agreement with the learned Member (Judicial) that the impugned order is required to be set aside and the appellants should be entitled to get the refund at Mumbai. In view of the majority opinion, the impugned order is set aside and the appeal is allowed in favour of the appellants.
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Central Excise
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2024 (11) TMI 989
CENVAT Credit on the invoices issued by M/s. Rashmi Metaliks Ltd. and M/s. Neo Metaliks Ltd. - Evasion of Central Excise duty by way of willful suppression of material facts and intentional misuse of CENVAT Credit facility by adopting the modus operandi of non-receipt of their primary raw materials, namely Pig Iron in their factory and non- use of the same in the manufacture of final products - Levy of penalty - HELD THAT:- The whole of the case has been made out on the basis of the statement of appellant No.1 who stated that he is dealing with excise and VAT paid goods and not registered with the central excise department and clearing goods on their challans and no cenvat credit has been availed by the receiver of the goods as no excise paid challan or invoice has been issued by appellant No.1. During the course of investigation, statement of the Authorized Representative of the appellant No.3 was recorded and nowhere he has admitted that they are having any relation or have ever transacted with appellant No.1 and the goods which have been received by them have been used in manufacturing of their final product, which ultimately suffered duty. These facts are not in dispute. In the absence of all the evidences it cannot be said that appellant No.3 has not received the goods. Moreover, the case against the appellant No.2 and 3 has been made on the basis of statement of appellant No.1. Demand cannot be raised on the basis of third party statement without any corroborative evidence thereon. The cenvat credit in this case cannot be denied to the appellant No.3, therefore, no penalty can be imposed on the appellant No.2. Consequent to that, penalty on the appellant No.1 also cannot be imposed. The impugned order is set aside - appeal allowed.
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2024 (11) TMI 988
CENVAT Credit on removal of waste and scrap as such - after use of plant and machinery removal of the same as used plant and machinery attract duty by deducting the depreciation as provided in Rule 3(5) of Cenvat Credit Rules or will be treated as removal of waste and scrap of capital goods attracting duty on transaction value in terms of Rule 3(5A) of Cenvat Credit Rules - denial of credit on the ground that M.S. Window Section cleared as such without any manufacturing process carried on such M.S. Window Section - shortage of 30.123 MT of Billets which was used in the furnace and subsequently dismantled and cleared in June, 2008. Whether after use of plant and machinery removal of the same as used plant and machinery attract duty by deducting the depreciation as provided in Rule 3(5) of Cenvat Credit Rules or will be treated as removal of waste and scrap of capital goods attracting duty on transaction value in terms of Rule 3(5A) of Cenvat Credit Rules? - HELD THAT:- It is found that merely because the plant machinery was sold in the Metric Ton and the buyer is the scrap dealer that alone cannot establish that the plant and machinery sold by the appellant is in the form of waste and scrap. As per the invoices raised by the appellant it is observed that in some of the invoices, the description clearly shown as old and used iron scrap. However, in some of the case it is declared as old and used machinery. From the two sample invoices, it is observed that some of the goods were cleared as waste and scrap and some of the capital goods were cleared as old and used machinery without mentioning steel scrap. Therefore, the entire matter needs to be reconsidered after verification of facts on the basis of each invoice and wherever, the description of the capital goods is mentioned as waste and scrap, the same is liable to excise duty on the transaction value and in case of description mentioned as old and used capital goods the same shall be liable to duty after allowing the depreciation as prescribed in the Rules. The adjudicating authority shall also consider the submission of the appellant that at the relevant time there was no recovery proceeding which was brought in this statute only by Notification No.03/2013- C.E. (N.T.) dated 01.03.2013. Whether this Cenvat Credit is liable to be denied on the ground that M.S. Window Section cleared as such without any manufacturing process carried on such M.S. Window Section? - HELD THAT:- It is the admitted fact that the appellant have cleared the M. S. Window Section involving Cenvat Credit of Rs.19,86,317/-on payment of duty amounting toRs.27,93,234/-, therefore, the amount of Cenvat Credit of Rs.19,86,317/-stands reversed/ paid by the appellant. On this ground the demand of Rs.19,86,317/- and consequent penalty and interest if any shall not sustain. Whether demand of Cenvat Credit is correct on the ground of shortage of 30.123 MT of Billets which was used in the furnace and subsequently dismantled and cleared in June, 2008? - HELD THAT:- It is found that the stand of the appellant is that at the time of use of billets in the foundation of the furnace, they have reversed the Cenvat Credit. However, no evidence in respect of such reversal was brought here. Therefore, this factual aspect also needs to be verified by the adjudicating authority while passing denovo order. The matter relates to the demand of Rs.54,38,305/- and Rs.Rs.1,04,249/-,it is remanded to the adjudicating authority and the demand of Rs.19,86,317/- on M.S. Window Section is set aside. The appeal is disposed of.
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2024 (11) TMI 987
Time Limitation - suppression of facts or not - concessional rate of duty - Interpretation of Notification No. 12/2012-CE and subsequent amendments regarding concessional rates of duty for goods falling under Chapter 85 - short payment of Central Excise duty due to misinterpretation of notification - HELD THAT:- The appellant had bonafide belief that goods attract 10% as per the rate prescribed under the Notification No.12/2012-CE dated 17.03.2012 even the notification was time bound wherein, the closure date was prescribed of31.12.2014. By amendment in the said notification, the appellant s goods i.e. falling under85441190was excluded by Notification dated 11.07.2014. Since, the notification otherwise prescribed the time limit upto31.12.2014,the appellant had bonafide belief that 10% rate is effective till 31.12.2014. It is only because of the appellant was not aware of the notification, they continued to pay the duty at the rate of 10%. Appellant s bonafide further get reinforced on the ground that the appellant have been declaring the goods with Chapter heading and the rate of duty, at the rate of 10% in their all ER-1 monthly return for the period July, 14 to December,14. The changes were brought by statutory amendment which is otherwise known to the department also. The department was also aware that the appellant prior to 11.07.2014 had been paying the duty at the rate of 10%. The officers have verified those documents while processing the rebate claim and/ or the clearance is under bond. Therefore, all the facts were available on record before the department and nothing was prevented from the department to initiate the action for demanding the differential duty within the normal period. However, the show cause notice for the period July,14 to December, 2014 was issued only on 18.10.2017 by way of show cause notice. Therefore, the entire demand is within the extended period. Since there is no suppression of fact on the part of the appellant, the demand for extended period shall not sustain. Accordingly, the demand of duty confirmed by the lower authorities is set aside on the ground of the time bar itself. The appeal is allowed.
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2024 (11) TMI 986
Exemption from Excise Duty under N/N. 6/2006-CE dated 1.3.2006 - goods supplied against international competitive bidding - appellant contended that they were entitled to the benefit of Notification No. 6/2006-CE dated 1.3.2006, in view of the fact that there was no dispute with respect to the goods which were supplied against international competitive bidding - HELD THAT:- Considered the fact that the Tribunal in the appellant s own case M/S WPIL LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-III [ 2023 (7) TMI 298 - CESTAT KOLKATA] has observed that ' the Appellant is eligible for the benefit of Notification No. 6/2006-CE dated 1.3.2006, as they have fulfilled all the conditions required to avail the said exemption. Accordingly, we hold that the demands made in the impugned order are not sustainable and the same is liable to be set aside.' The appellant is entitled for the benefit of Notification No.6/2006-CE dated 01.03.2006, as they have fulfilled all the conditions required to avail Cenvat credit, therefore, no demand is sustainable against the appellant. Appeal allowed.
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2024 (11) TMI 985
Clandestine removal - Gutkha pouches and related materials - retraction of statements - Confiscation of goods - 90 bundles containing 1872720 Gutkha pouches and related materials, three packaging machines - demand of duty with interest and penalty - HELD THAT:- Undisputed facts of the case are that Gutkha pouches brand-named Raj Kolhapuri along with other related materials, three packaging machines and one lorry were seized by the Banavasi Police on 03.11.2009 which was later, with the intervention of the Central Excise Department, on direction by the Hon ble Principal JMFC was handed over to the Central Excise Department for further investigation. The said materials were again seized on 09.12.2009 and statements of persons were recorded again to ascertain the quantum of offence. From analysis of the statements, it revealed that the Gutkha and three packing machines were seized from the premises viz. House No.6, Plot No.21, Golikatta Village, Gudnapura 581 318, Banavasi, Sirsi Taluk Uttara Kannada which was given on rent by the owner of the said premises Shri Dhananjaya Krishna Hegde for a period of one month to the appellant by an understanding recorded on 28.10.2009 was manufactured in the said premises and cleared without payment of duty. The appellant from the very beginning expressed his ignorance about the said labourers and undertaking the manufacture of Gutkha in the said premises. However, no request for cross-examination of the witnesses was requested by the appellant before the adjudicating authority. Neither the appellant nor Mr. Dhananjaya Krishna Hegde, the owner of the said premises has claimed before the authorities that the Gutkha packed in the plastic pouches having mark of Raj Kolhapuri Gutkha belongs to them or the seized machineries have been claimed to belong to them and requested for its release to them. On the other hand, both of them denied being involved in the manufacturing of Gutkha in the said premises. Since duty paid character of the Gutkha has not been established and on the basis of the statements given by the labourers and lorry driver and retrieving the three machineries from the manufacturing premises, it is clear that the said Gutkha bearing name Raj Kolhapuri manufactured in the said premises and cleared without following procedure and discharging duty payable on the same. Consequently, the Gutkha as well as the three packaging machines and other related materials seized by Police on 03.11.2009 and later by Central Excise Department on 09.12.2009 are liable for confiscation and hence the order of the Commissioner directing the confiscation of the same does not require any interference. More or less, similar views expressed by the Tribunal in a series of cases, including the cases COMMR. OF C. EX., HYDERABAD VERSUS DHARIWAL INDUSTRIES LTD. [ 2010 (4) TMI 890 - CESTAT, BANGALORE] ; GOYAL TOBACCO CO. PVT. LTD. SHRI RAJESH GOYAL, DIRECTOR VERSUS CCE ST, JAIPUR-I [ 2017 (3) TMI 57 - CESTAT NEW DELHI] , COMMISSIONER OF CENTRAL EXCISE, DELHI-I, M/S KUBER TOBACCO INDIA LTD, SHRI DHANPAT SINGHEE, DIRECTOR, SHRI CHATAR SINGH BAID, SHRI VIKAS MALU VERSUS M/S KUBER TOBACCO INDIA LTD, COMMISSIONER OF CENTRAL EXCISE, DELHI-I [ 2016 (4) TMI 622 - CESTAT NEW DELHI] Hence, the demand in absence of evidence of the nature narrated above being not adduced by the Department, hence cannot be sustained, only on the basis of the date of installation of electricity meter at the said premises. In these circumstances, the demand confirmed by the learned Commissioner is liable to be set aside. Accordingly, the same is set aside and consequently penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944 also set aside. The impugned order is modified to the extent of upholding confiscation of the seized goods, three machines and related materials; however, confirmation of demand, interest and imposition of penalty on the appellant is set aside. Appeal is disposed of.
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2024 (11) TMI 984
Rejection of refund claim over and above the value addition - appropriation of pre-deposit made - HELD THAT:- The appellant has filed the refund claim of the pre-deposit along with interest on the basis of CESTAT Final Orders dated 23.03.2018 and 28.08.2018 but the Assistant Commissioner vide two Order-in-Original 512 and 514 sanctioned the refund along with interest but appropriated the said refund of Rs. 15,00,000/- and Rs. 32,77,590/- against the total demand of Rs.2,17,35,588/- on account of value addition confirmed for the period February 2012 to April 2012. It is found that when the appeal against the Order-in-Original was pending before the Commissioner (Appeals), the appellant Voluntarily deposited the demand against all three OIOs relating to February 2012 to April 2012 and intimated the jurisdictional Deputy commissioner Jammu vide letters dated 14.08.21 duly acknowledged on 26.08.2021 and the copies of challans have also been produced showing the payment of the entire demand of Rs. 2,17,35,588/-. Further, it is found that the appellant has voluntarily deposited the entire demand amount and informed the Department but the Department did not acknowledge the same in spite of challans showing payments being attached. Since, the appellant has voluntarily made the complete payment thereafter appropriation of the pre-deposit amount of refund sanctioned against the said demand is not legally sustainable - further it is found that the appellant specifically intimated to the department regarding the payment of the entire amount of Rs. 2,17,35,588/- and also produced the challans but in spite of that the Ld. Commissioner has upheld the Order-in-Original, appropriating the refund claim against the demand which has already been paid, when the department has collected the entire demand confirmed by the various orders thereafter, the Department is not justified to retain the sanctioned refund and appropriated the same. The both impugned order dated 08.12.2022 are not sustainable in law and is set aside - appeal allowed.
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2024 (11) TMI 983
Refund claim under Rule 5 of Cenvat credit rules - input services - Rule 5 of Cenvat credit rules 2004 - it is alleged that input service involved in the refund claim has no nexus with the manufacture of export goods - HELD THAT:- It is found that it is undisputed that at any stage the revenue has not issued any show cause notice or adjudicated thereupon the issue of admissibility of input service in terms of rule 14 of Cenvat Credit Rules, 2004 therefore the allowance of the credit on the input service in question attained finality and when this be so then by filing the appeal against the sanctioned order of the refund dispute about admissibility of the service for purpose of allowing the Cenvat credit cannot be raised. The learned Commissioner (Appeals) on this very ground rejected the appeal of the revenue. From the findings of the Commissioner (Appeals) it can be seen that the Commissioner (Appeals) rejected the appeal of the revenue on the threshold point that the department has not taken any action under rule 14 for disputing the admissibility of input service in question. The findings of the learned commissioner (Appeals) based on various judgments. Therefore, this issue is no longer res-integra. Without prejudice, it is also found that all the service which were questioned by revenue are admissible input service as held in various judgment as cited by the appellant in their synopsis. It is further found that though the revenue in the appeal before the Commissioner (Appeals) as well as before this tribunal reiterated that the input services involved in present case have no nexus with the manufacture of the export goods, however, no reasoning is given that why these services are not essential in or relation to the manufacture of exports goods. For this reason also the revenue s appeal is hollow and without any basis. As per the above discussion, there are no infirmity in both the orders passed by authorities below. The impugned order is upheld - Revenue s appeal is dismissed.
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2024 (11) TMI 982
Classification of goods - Biovita - to be classified under heading 3101 0099 or under Central Excise heading as 3105 of Central Excise Tariff? - HELD THAT:- A perusal of show cause notice shows that it relies on the CBEC Circular 1022/10/2016-CX dated 06.04.2016. The said circular prescribed that micronutrient could not be classified under Chapter 31 as fertilizer . It also relies on the fact that the appellants had in the month of July 2015 themselves classified the goods under Central Excise Tariff Heading 3808 and in the months of June, August, September-2015 classified the product under Central Excise Tariff Heading 3105 as per directions of M/S. P.I. INDUSTRIES LIMITED (FORMERLY M/S. ISAGRO (ASIA) AGROCHEMICALS PVT. LTD.) ; M/S. AGRO PACK; SHRI PARTH H. PATEL VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS, SURAT-II, SURAT [ 2024 (9) TMI 1655 - CESTAT AHMEDABAD (LB)] the principal manufacturer. It is noticed that subsequent to the impugned order, the issue regarding classification of goods between Chapter 31 and Chapter 38 was referred to the Larger Bench in the case of PI Industries (the Principal Manufacturer itself). It is seen that while the products in the instant case are not identical but similar in nature, therefore, the principles laid down by Larger Bench of Tribunal in the case of PI Industries would equally apply to the product in the instant case. In view of above, the impugned order is set aside and matter remanded to the original adjudicating authority for fresh decision in the light of observations made by Larger Bench in the case of PI Industries. Appeal is allowed by way of remand.
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CST, VAT & Sales Tax
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2024 (11) TMI 981
Allowing the claim of second sale exemption contrary to established facts that the so-called sellers were either non-existent or had not handled the goods - Deletion of consequential penalty under Section 12(5)(iii). Whether the Tribunal was legally right in allowing the claim of second sale exemption despite the sellers being non-existent or not having handled the goods? - HELD THAT:- When the burden was on the dealer to prove the factum of second sale, the respondent had not discharged the burden of proving the actual first sale, for him to successfully claim the exemption on the ground of second sale. The Tribunal had erroneously shifted the burden from the dealer to the revenue, which is against Section 10 of the Act and had come to the conclusion that the revenue had not established by proving that the purchase of the respondent was a first sale. Similar issue in M/S. MKR CASHEW EXPORTS VERSUS THE SECRETARY, TAMILNADU SALES TAX APPELLATE TRIBUNAL (MB) , CHENNAI, THE DEPUTY COMMERCIAL TAX OFFICER, PANRUTI (RURAL). [ 2024 (8) TMI 1485 - MADRAS HIGH COURT] where the dealer was not able to prove the factum of first sale to claim the exemption on the ground of second sale, as the burden of proof was on the assessee to prove the transaction. Further, in A.S.Ganapathy Chettiar Vs. The State of Tamil Nadu [ 1976 (3) TMI 209 - MADRAS HIGH COURT] , relied on by the learned Government Advocate for the appellant, the Division Bench of this Court has held that the burden of proving that there was an earlier taxable sale was on the assessee. In view of the above decisions and the fact that the respondent dealer had failed to prove the transaction of the factum of first sale, the first question of law is answered in favour of the revenue and against the assessee. Whether the deletion of the consequential penalty under Section 12(5)(iii) by the Tribunal is legally tenable? - HELD THAT:- In the instant case, the respondent had put forth a claim of second sales and further they submitted the documents, which on enquiry were found to be bogus and fictitious and the respondent had made no attempts to produce the documents through dealers before the authorities for confirmation of the alleged first sale. In view of our findings arrived at question No.1, the respondent, who is liable to pay tax had not filed any return for the assessment year 1982-83 and have wilfully suppressed taxable turnover and therefore, the Assessing Officer had rightly imposed the penalty under Section 12(5)(iii) of the Act - the decision of the Tribunal in deleting the penalty imposed by the Assessing Officer under Section 12(5)(iii) of the Act cannot be sustained. Under such circumstances, the second question of law is also answered in favour of the revenue and against the assessee. The impugned order of the Tribunal is set aside and the assessment order as confirmed by the appellate authority stands restored - this Tax Case stands allowed.
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Indian Laws
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2024 (11) TMI 980
Jurisdiction of Micro and Small Enterprises Facilitation Council to refer the purported disputes obtaining between MRPL and Driplex for adjudication via arbitration - Validity of the No Claim Certificate issued by the supplier and its impact on the claims - Jurisdiction of Micro and Small Enterprises Facilitation Council to refer the purported disputes obtaining between MRPL and Driplex for adjudication via arbitration - HELD THAT:- In the instant matter, MRPL and Driplex entered into an agreement on 01.12.2009. Driplex submitted a memorandum to register itself as a small enterprise under the 2006 Act on 09.12.2011. Concededly, Driplex completed its work and obtained a certificate from MRPL after registration under Section 8 of the 2006 Act i.e., only on 11.03.2013. Since Driplex had been awarded a turnkey contract, the work, quite naturally, would have continued even after it filed a memorandum i.e., obtained registration under the 2006 Act. The judgment in Shanti conductors case [ 2019 (1) TMI 1906 - SUPREME COURT ], which was rendered by a three-judge bench of the Supreme Court and concerned pari materia provisions contained in the 1993 Act tilts the balance in favour of Driplex as it, inter alia, holds that the applicability of the Act i.e., the 1993 Act would be determined on the date when the goods were supplied, and services were rendered and not the date when contract was entered into between the disputants. It is noted that MRPL had filed a reply dated 20.02.2016 in which the jurisdictional issue appears to have been raised before the Council. This was clearly given up at the later stage as, concededly, this issue was not raised before the learned Single Judge - thus, the Council had the jurisdiction to refer the disputes under Section 18 of the 2006 Act to the arbitral tribunal. Whether the present claims are tenable in the light of the No-Claim Certificate dated 25.09.2013 issued by the Claimant? - HELD THAT:- This area need not be delved upon since a petition preferred by MRPL under Section 34 of the Arbitration Act is pending adjudication. Appeal disposed off.
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