Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 27, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Personal hearing mandatory before heavy penalty order; natural justice violated.
Principles of natural justice violated as petitioner denied opportunity of hearing before passing adverse order. Coordinate bench ruling in BHARAT MINT case affirmed - assessing authority mandated to afford opportunity of personal hearing, irrespective of assessee's choice marked. In context of heavy civil liability assessment order, minimal opportunity of hearing essential to ensure reasoned order and better appreciation at appeal stage. Impugned order set aside, matter remitted to assessing officer to issue fresh notice to petitioner within two weeks for granting personal hearing.
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No invoice/e-way bill discrepancy, areca nut seller deemed owner as per circular - Court quashes penalty order, directs authorities for lesser penalty.
In the present case, the authorities levied penalty u/s 129(1)(b) of the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act. However, the court observed that the authorities neither challenged the invoice nor the e-way bill produced by the petitioner, nor questioned the purchase of areca nuts from a third party, which were being supplied by the petitioner to the consignee. The petitioner relied on Circular No. 76/50/2018-GST, which states that if an invoice or specified document accompanies the consignment, either the consignor or consignee should be deemed the owner. The court also relied on a Division Bench judgment, which held that the Department is bound by the aforesaid circular, and if the invoice mentions the consignor's name, the consignor shall be deemed the owner. Consequently, the court quashed the order dated November 6, 2024, as illegal and unjustified, and directed the authorities to pass an order u/s 129(1)(a) and release the goods and vehicle upon payment of the penalty in accordance with the law. The writ petition was disposed of.
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GST Circular allows filing rectification for input tax credit claims through returns.
Interpretation of Section 16(5) of CGST Act regarding input tax credit. Circular issued by Government of India No. 237/31/2024-GST dated 15th October 2024. Petitioner entitled to file rectification application for consideration of input tax credit claim made in return filed, as indicated from demand-cum-show cause notice. Petitioner can file rectification application within stipulated time in circular, to be considered under newly incorporated Section 16(5) of CGST Act and Government Circular. Writ petition disposed of by High Court.
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GST hike dispute: Petitioner gets relief, gov't entity to reimburse 6% GST paid from Jan-Sept 2022.
The petitioner sought reimbursement of the additional 6% GST paid from 01.01.2022 to 30.09.2022, as the respondents were paying bills with 12% GST while the petitioner was paying 18% GST. The court held that Respondent No. 4, the State GST Department, confirmed the GST rate was enhanced from 12% to 18%, which Respondent No. 2, a government entity, is liable to pay. Respondent No. 2 was directed to pay the petitioner the 6% GST difference from 01.01.2022 to 30.09.2022 within three months, failing which the petitioner shall be entitled to 6% interest per annum from the date of entitlement. The petition was disposed of.
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Fabric manufacturer wins tax case over CENVAT credit denial due to lack of proper hearing.
The petitioner challenged the order imposing tax liability and penalty for wrongful availment of CENVAT credit, alleging violation of principles of natural justice and non-consideration of explanations. The HC quashed the order, observing non-application of mind by authorities, non-production of relied-upon documents to petitioner, and failure to examine petitioner's explanations supported by expert opinions regarding use of raw materials in manufacturing process. The HC directed authorities to examine fabrics, provide report copy to petitioner, grant fair hearing opportunity, and pass reasoned order, upholding principles of audi alteram partem and concluding severe prejudice caused to petitioner due to lack of proper hearing.
Income Tax
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Fixed deposits in Krishi Bank treated as investments; loss on liquidation is capital, not business loss.
Deposits made by assessee in Krishi Bank were fixed deposit investments, not trading activity. Loss suffered when bank went into liquidation is capital loss, not business loss u/s 28 or bad debt u/s 36(1)(vii). Assessing Officer and appellate authorities rightly treated loss as capital loss based on evidence. No substantial question of law arises for adjudication u/s 260A as it involves findings of fact which cannot be re-adjudicated in appeal. Substantial question of law answered against assessee in favor of revenue.
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Amalgamated company's income assessment challenged due to jurisdictional error, lack of escaped income evidence, and violation of natural justice principles.
This case deals with the validity of assessment proceedings initiated against an amalgamated company for the assessment year 2018-19. The key points are: The Assessing Officer (AO) erroneously assumed jurisdiction u/ss 147/148/148A, alleging income had escaped assessment because the amalgamating company failed to file a return for AY 2018-19. However, the amalgamating company stood dissolved on March 30, 2018, and could not file a return. Only the amalgamated company was required to file, which it duly did. The consolidated accounts were assessed u/s 143(3). The AO failed to establish that items mentioned in the Section 148A(b) notice were not incorporated in the amalgamated company's accounts/return, resulting in escaped income. This vitiated the proceedings. The AO violated principles of natural justice by not granting an effective hearing despite requests. Section 148A(b) mandates granting an opportunity by issuing a show-cause notice with a minimum 7-day and maximum 30-day response period, extendable on application. Though the notice was issued on March 23, 2022, with a 7-day period, the AO improperly extended it to April 19, 2022, without an application. The Section 148 notice issued on April.
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Government Ayurveda Institute's Share Capital Interest Dispute: Treated as Capital Receipt, not Income.
Interest earned on share capital was treated as income, but the assessee argued that the interest was used for capital expenses as mandated by the Ministry of Ayush and was later converted into Share Capital Contribution of the Central Government. The assessee had made fixed deposits, and the interest earned belonged to the Central Government and was utilized as capital receipt with prior approval. The CIT(A) relied on the assessee showing interest as income from other sources, but the Supreme Court's judgment in Kedarnath Jute Mfg Co. Ltd vs CIT held that book entries are not relevant for computing total income. The CIT(A) also relied on CIT vs Pandian Chemicals Limited's case regarding interest earned on own free deposits, which was not applicable here. Considering the facts and legal principles, the ITAT allowed the assessee's appeal and set aside the impugned orders.
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Interest on enhanced compensation for land acquisition: Taxable or exempt? Court rulings diverge.
Characterization of interest received u/s 28 of the Land Acquisition Act, 1894, as part of enhanced compensation for compulsory acquisition of agricultural land. The key points are: whether the interest is a revenue receipt chargeable as income from other sources or an integral part of exempt compensation u/s 10(37). The Punjab & Haryana High Court held that such interest is taxable income from other sources. The Delhi High Court observed that enhanced compensation and interest thereon are income from other sources, considering the Finance (No. 2) Act, 2010 and the Ghanshyam Das (HUF) judgment. The ITAT dismissed the assessee's appeal, concluding that interest on compensation or enhanced compensation is taxable income from other sources u/s 56(2)(viii).
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Cash payment exceeding limit during sale deed registration wrongly penalized.
Penalty levied u/s 271D for contravention of Section 269SS, which restricts cash transactions above a specified sum for immovable property. The key points are: The Assessing Officer (AO) failed to reconcile the assessment order and penalty order regarding the violation of Section 269SS. The penalty order should have referenced the AO's communication proposing the penalty initiation. The AO is required to record the satisfaction of Section 269SS violation and reference for penalty initiation in the assessment order itself. The interpretation of "specified sum" as a residuary term encompassing all cash transactions beyond a specified amount is incorrect. The amended Section 269SS applies to cash received as an advance for immovable property transactions, not to the final payment made at the time of registration and execution of the sale deed. The assessee had received cash against the sale of multiple registered sale deeds, not as an advance. Since the payment was made before the sub-registrar during registration, it does not violate Section 269SS. Consequently, the penalty levied u/s 271D is against the provisions of law and is quashed by the Appellate Tribunal.
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Undisclosed income declared under IDS 2016 can't be treated as unexplained income despite non-payment of tax.
The key points are: Undisclosed income declared under the Income Declaration Scheme (IDS) 2016 does not change its character or nature merely due to non-payment of tax under the scheme. The assessing officer erroneously treated the declared income as income from unexplained sources u/s 68 read with Section 115BBE, instead of taxing it as capital gains. The Income Tax Appellate Tribunal (ITAT) held that failure to pay tax under IDS 2016 cannot alter the character of the income declared under the scheme. The ITAT upheld the Commissioner of Income Tax (Appeals) order directing the assessing officer to recompute the total income as capital gains in the hands of the assessee Hindu Undivided Family (HUF). The Revenue's appeal was dismissed, following the ITAT's own precedent case.
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Tax deduction denied for incomplete housing project & excess commercial area, but timelines & approved plans considered.
Section 80IB deduction denied due to non-completion of project within stipulated period u/s 80IB(10) by 31.03.2008 and commercial construction exceeding limit under clause (d). Amendment via Finance Act 2004 from 01.04.2005 imposed new conditions for deduction for projects approved and commenced prior to 01.04.2005. Condition restricting commercial space is impossible if project at advanced stage per approved plan, but completion timeline reasonable with over three years allowed post amendment. Projects approved after 01.04.2005 also have four-year completion period. Issue of completion certificate requirement sub-judice before Supreme Court, remanded for fresh adjudication as per provisions at project approval, subject to judgments. Commercial area exceeding prescribed limit allowed if approved by local authority, verified against sanction plan. Matter remanded to assess commercial area conformity with approved plan. Appeals allowed for statistical purposes.
Customs
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Retrospective amendment to import duty exemptions disallowed under DFIA Scheme before 19.02.2009.
The court upheld the Tribunal's order dismissing the appeals, as it aligned with the Division Bench's decision in Tarajyoth Polymers Ltd. case, where the retrospective amendment to Condition Nos. 3A and 3B of Notification No. 17/2009-Cus regarding imports cleared prior to 19.02.2009 under the DFIA Scheme was set aside. The Supreme Court dismissed the Special Leave Petitions against the High Court's judgment in Tarajyoth Polymers Ltd. case, establishing it as the prevailing law on the matter. Consequently, the appeals were dismissed, and the questions of law were answered in favor of the assessee.
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Stone article exporters win relief from classification dispute.
This case deals with the classification of handcrafted stone articles like 'Chakla Belan' (rolling board and pin), mortar, pestle, etc. for export under the Merchandise Exports from India Scheme (MEIS). The key points are: Self-assessment procedure under Customs Act empowers authorities to verify valuation, classification, exemptions, etc. The exporters classified the goods under ITC(HS) 68159990, entitling 5-7% MEIS rewards. Authorities later objected, alleging misclassification to claim higher rewards. The HC examined the scope of assessment, audit, and recovery powers under Customs Act and Foreign Trade (Development & Regulation) Act/Rules. It held customs cannot question MEIS certificates issued by DGFT without DGFT's adjudication on validity. Section 28AAA requires collusion/misstatement for recovery, not mere classification dispute. The HC quashed the objections, stating classification fell under DGFT's purview as per FTP provisions. It directed refund of amounts deposited by exporters but left it open for DGFT to initiate proceedings on MEIS certificate validity if permissible. The ruling balanced customs' assessment powers with DGFT's authority over export promotion schemes.
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Customs Duty Demand Quashed: Lack of Evidence for Invoking Extended Limitation Period.
The CESTAT held that the benefit of Notification No. 21/2016-CUS (ADD) dated 31.05.2016 is not to be provided to the appellant. The invocation of the extended period of limitation u/s 28(4) of the Customs Act, 1962, and the consequent imposition of penalty u/s 114A of the Act were examined. The CESTAT found that the dispute related to bills of entry filed on 24.10.2016, 27.10.2016, and 31.01.2017, but the show cause notice was issued on 20.10.2021. All the relevant information was available in the import invoice and bill of lading at the time of filing the bills of entry. There was no suppression of facts by the appellant. Therefore, the ingredients to invoke the extended period u/s 28(4) were not available. The demand for the bills of entry dated 24.10.2016, 27.10.2016, and 31.01.2017 was time-barred as the show cause notice was issued much after the normal period of limitation.
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Entrepreneur caught in legal tangle over financing gold smuggling operation.
Appellant financed an individual for smuggling gold from Dubai and selling it in India. Penalty was imposed u/s 112(b)(i) of the Customs Act, 1962. The Commissioner held that the appellant was concerned with selling, purchasing, and dealing with goods liable for confiscation, rendering them liable for penalty u/s 112(b)(i). Section 112(b) allows imposing a penalty when a person acquires possession of or is concerned in carrying, removing, depositing, harboring, keeping, concealing, selling, purchasing, or dealing with goods known or reasonably believed to be liable for confiscation u/s 111. However, the Revenue did not allege that the appellant was involved in such activities. The appellant did not acquire possession or concern themselves with importing gold, so the penalty u/s 112(b) should not have been imposed. The appellant did not fall within Section 112(b)'s ambit as they neither acquired possession nor dealt with goods known or reasonably believed to be liable for confiscation. The department failed to prove the appellant's knowledge of activities related to smuggled gold, lacking grounds for imposing a penalty. Mens rea is crucial for penalizing persons u/s 112(b), and the evidence did not suggest the appellant was aware the goods were smuggled into India. Therefore, the penalty imposed on the appellant cannot be sustained.
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Fraudulent export licenses: Agent exonerated from penalties for EOUs' misdeeds.
Certain Export Oriented Units (EOUs) fraudulently obtained Advance Licences/Advance Release Orders (AROs) without actual manufacture or removal of excisable goods. They falsified records to show clearance of goods against these licences/AROs to fulfill export obligations, despite no physical movement of goods. The appellant, acting as an agent for purchase and sale of these licences/AROs, was not a party to the fraud committed by EOUs. Without knowledge of such fraud, the appellant cannot be penalized. The Tribunal, following its earlier decisions, set aside the penalties imposed on the appellant under relevant rules and acts for lack of culpable involvement in the fraudulent activities of EOUs.
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Smuggling racket aided by appellant's transportation & storage facilities; co-appellant cleared of charges.
Evidences indicate appellant was aware of smuggling activities involving diversion of smuggled cigarettes concealed in transit container, providing transportation and storage facilities. Appellant abetted illegal smuggling activities, conniving with smuggling racket. Adjudicating authority rightly imposed penalty on appellant u/s 112(b) of Customs Act for abetment. However, co-appellant played no role in clearance or smuggling of cigarettes through containers. Evidence lacks co-appellant's involvement in alleged smuggling. Penalty imposed on co-appellant u/s 112(b) unsustainable, set aside. Tribunal upholds penalty on appellant, sets aside penalty on co-appellant.
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Directors penalized for company's failure to meet export commitment, despite no role proven.
Non-fulfilment of export obligation under Advance Authorization by importer company. Penalty imposed on directors solely based on their shareholding and directorship, without establishing their role in the alleged offence. Separate proceedings already initiated against the company for duty-free import and non-fulfilment. Penalty u/s 112(a) and (b) of Customs Act imposed together, legally unsustainable. Ingredients for imposing penalty u/s 112 not existing. Penalties on directors set aside by Appellate Tribunal as unsustainable.
IBC
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Appellate tribunal rejects delay condonation, upholds strict adherence to filing timeline for appeals.
The tribunal held that it has no jurisdiction to condone a delay beyond 15 days in filing an appeal. The appellant's contention that the appeal was filed within time from the date of knowledge of the order was rejected, as the limitation period commences from the date of pronouncement of the order by the adjudicating authority. The Supreme Court's rulings in National Spot Exchange Limited vs. Anil Kohli and V Nagarajan vs. SKS Ispat & Power Limited were relied upon, wherein it was held that the appellate tribunal's power to condone delay is circumscribed and conditioned upon showing sufficient cause. The cited judgment in Aaryan Projects Private Limited vs. Klowin Infrastructure Private Limited was distinguished on facts. Consequently, the application for condonation of 26 days' delay and the memo of appeal were rejected.
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Locus Standi Questioned in Admission of Insolvency Application Against Real Estate Developer.
Locus standi of the appellant to file an appeal against the admission of a Section 7 application under the Insolvency and Bankruptcy Code (IBC) and the fulfillment of the threshold requirement for filing such an application. The key points are: The appellant, who is neither an allottee of the real estate project nor has any stake in it, lacks the locus standi to challenge the order admitting the Section 7 application. The application was filed by financial creditors in a class, alleging default by the corporate debtor in delivering possession of units within the agreed time. The application fulfilled the threshold requirement of being filed by at least 10% of the allottees, as it was filed by 29 out of 255 allottees. The Appellate Tribunal found no grounds to interfere with the impugned order and dismissed the appeal.
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Former workers' claims for wages rejected due to lack of proof of employment on liquidation date.
In the case at hand, the workmen's claims for wages and other dues were rejected by the liquidator due to lack of evidence substantiating their employment on the date of commencement of liquidation proceedings. The corporate debtor had ceased operations in June 2010, and the appellants themselves admitted to working only until April 2012. Despite the alleged violation of the Industrial Disputes Act, 1947, regarding the factory closure, the NCLT and NCLAT held that the appropriate remedy was to approach the Industrial Court or Labour Court, rather than raising the issue during the liquidation process. The tribunals relied on a precedent case involving Era Labourer Union, where similar claims were rejected for lack of verification from the date of closure. The NCLAT affirmed the Adjudicating Authority's decision, stating that the liquidator did not err in rejecting the claims due to insufficient evidence of employment until the commencement of liquidation.
Indian Laws
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Apex Court upholds 'socialist' and 'secular' in Constitution's Preamble after 44 years.
The Supreme Court dismissed the challenge to the insertion of the words 'socialist' and 'secular' in the Preamble to the Constitution of India by the Constitution (Forty-second Amendment) Act in 1976. The Court held that the terms have achieved widespread acceptance, and their meanings are understood without doubt. The additions have not restricted or impeded legislations or policies pursued by elected governments, provided they did not infringe upon fundamental rights or the basic structure of the Constitution. After nearly 44 years, there is no legitimate cause or justification for challenging this constitutional amendment, and the Court declined to undertake an exhaustive examination, as the constitutional position remains unambiguous.
Service Tax
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Benefit of legacy tax dispute resolution scheme allowed if duty liability admitted before deadline.
The High Court held that the petitioner is eligible to avail the benefit of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, as the duty liability was admitted and quantified before June 30, 2019, during the course of investigation. The definition of "quantified" under the scheme does not specify who is required to quantify the amount. The ministry's clarification also stated that duty liability admitted and quantified before June 30, 2019, would be eligible under the scheme. Despite mentioning a higher figure in the application, the petitioner cannot be deprived of the scheme's benefit, especially when the scheme aims to reduce litigation. The High Court directed the respondents to accept the petitioner's application and inform any amount due and payable under the scheme within four weeks.
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Residential flats by co-op housing society for members exempted from "construction service" tax under mutuality doctrine.
Co-operative housing society providing residential flats to members does not constitute taxable service under "construction of residential complex" due to doctrine of mutuality. Society and members not separate entities, hence no service provider-recipient relationship exists. Activity falls under "Club or Association Service". Demand unsustainable as per Supreme Court's decision in Calcutta Club case covering pre and post-negative list regime periods. Even if time-barred, no suppression of facts attributable to society given interpretational issues involved. Demand unsustainable on grounds of doctrine of mutuality and time bar.
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Construction firm undervalued services in returns; unwarranted penalties.
Service tax assessment case involving suppression of taxable value by appellant in ST-3 returns. Demand raised along with interest and penalty on appellant and directors. Appellant eligible for 33% abatement on taxable value for construction services with supply of materials under Notification 01/2006. Extended period of limitation invoked incorrectly as appellant filed returns regularly without objections from department earlier. After allowing abatement, tax payable for normal period less than already paid, hence no additional demand sustainable. Consequently, interest and penalties on appellant and directors set aside by CESTAT.
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Rent payment eligible for CENVAT credit: Tribunal overrules exclusion, aligns with NAVIN FLOURINE case.
Eligibility of claiming CENVAT credit for service tax paid on renting immovable property services. The lower authority denied the credit, considering it as a service related to setting up premises, which was removed from the definition of input service u/r 2(l) of CENVAT Credit Rules, 2004 with effect from 01.03.2011. However, the Tribunal held that renting immovable property service is directly used for providing the output service, and hence covered under the main clause of the input service definition. The exclusion of "setting up" from the inclusion clause does not impact this, as the inclusion clause is merely clarificatory. The Tribunal relied on the NAVIN FLOURINE case, which allowed CENVAT credit for such services, as they were used in relation to manufacturing the final product. Since renting immovable property service is not covered under the exclusion clause, even after 01.04.2011, it continued to be an admissible input service for availing CENVAT credit. Consequently, the demand for denying CENVAT credit was set aside, and the appeal was allowed.
Case Laws:
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GST
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2024 (11) TMI 1170
Levy of penalty u/s 129(1)(b) of the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act - HELD THAT:- From a perusal of the documents annexed with the writ petition, it appears that the authorities have not challenged the invoice and/or e-way bill produced by the petitioner nor have they questioned the fact of purchase of the areca nuts from a third party which was then being supplied by the petitioner to the consignee. The petitioner also relies on the Circular No.76/50/2018-GST, dated December 31, 2018 that states that if the invoice or any other specified document is accompanying the consignment of goods, then either the consignor or the consignee should be deemed to be the owner. Reliance placed on the Division Bench judgment of this Court in the case of H/S HALDER ENTERPRISES VERSUS STATE OF U.P. AND OTHERS [ 2023 (12) TMI 514 - ALLAHABAD HIGH COURT] wherein it has been held that the Department is bound by the aforesaid circular dated December 31, 2018 and if the invoice mentions the name of the consignor, the consignor shall be deemed to be the owner. The order dated November 6, 2024 is illegal and unjustified, and accordingly, the same is quashed and set-aside with a direction upon the authorities to pass an order under Section 129(1)(a) and thereafter release the goods and vehicle upon payment of the penalty in accordance with law. The writ petition is disposed of.
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2024 (11) TMI 1169
Denial of the input tax claim - Interpretation of Section 16(5) of the CGST Act regarding input tax credit - Circular issued by the Government of India bearing No. 237/31/2024-GST dated 15th October, 2024 - HELD THAT:- By virtue of the above provision and the directions issued by the Central Government, the petitioner would be entitled to file a rectification application for consideration of the claim of input tax credit made in the return filed; if it has been so made in the returns filed as indicated from the demand-cum-show cause notice. The petitioner would be entitled to file such rectification application within the time stipulated in the circular, which shall be considered in terms of the newly incorporated provisions under Section 16(5) of the CGST Act and the Circular of the Central Government. The writ petition stands disposed of.
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2024 (11) TMI 1168
Seeking reimbursement of extra GST paid at 6% from 01.01.2022 to 30.09.2022 - grievance of the petitioner is that despite the aforesaid enhancement from 01.01.2022, the respondents are paying the running bills with 12% GST and the petitioner is paying 18% GST - HELD THAT:- Respondent No.4 which is a State GST Department, according to which also the rate of GST has been enhanced from 12% to 18% and same is liable to be paid by respondent No.2 which is a Government Entity. The respondent No.2 is directed to pay the difference of GST amount to the petitioner @ 6% from 01.01.2022 to 30.09.2022 with a period of three months from the date of receipt of certified copy of this order, failing which the petitioner shall be entitled for interest @ 6% per annum from the date of entitlement. Petition disposed off.
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2024 (11) TMI 1167
Challenge to order of demand has been raised against the present petitioner - petitioner was denied opportunity of hearing - violation of principles of natural justice - HELD THAT:- The view taken by the coordinate bench in BHARAT MINT AND ALLIED CHEMICALS VERSUS COMMISSIONER COMMERCIAL TAX AND 2 OTHERS [ 2022 (3) TMI 492 - ALLAHABAD HIGH COURT] agreed upon. Once it has been laid down by way of a principle of law that a person/assessee is not required to request for opportunity of personal hearing and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order, the fact that the petitioner may have signified 'No' in the column meant to mark the assessee's choice to avail personal hearing, would bear no legal consequence. Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created. Not only such opportunity would ensure observance of rules of natural of justice but it would allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage, if required. The impugned order dated December 21, 2023 is set aside. The matter is remitted to the respondent no.2/Commercial/State Tax Officer, Sector-16, Lakhanpur, kanpur-II, Kanpur Nagar to issue a fresh notice to the petitioner within a period of two weeks from today - petition allowed by way of remand.
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2024 (11) TMI 1166
Wrongful availment of CENVAT Credit - Seeking refund the excess utilization of ITC along with penalty - petitioner submits that the impugned order is only a copy-paste of the reply given by the petitioner to the show cause notice and the explanation provided therein has not been considered in a reasonable manner - violation of principles of natural justice - principles of audi alteram partem - HELD THAT:- The Apex Court in Mrs. Maneka Gandhi v. Union of India and another [ 1978 (1) TMI 161 - SUPREME COURT ] laid down the ratio in relation to the principles of audi alteram partem in the doctrine of natural justice holding that ' The court must make every effort to salvage this cardinal rule to the maximum extent permissible in a given case. It must not be forgotten that natural justice is pragmatically flexible and is amenable to capsulation under the compulsive pressure of circumstances . The audi alteram partem rule is not cast in a rigid mould and judicial decisions establish that it may suffer situational modifications. The core of it must, however, remain, namely, that the person affected must have a reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise.' Coming to the present writ petition in hand, three factors may be highlighted by this Court. Firstly, the impugned order merely copies the reply provided by the petitioner which leads to a conclusion that there was non application of mind by the respondent authority - Secondly, in the reply to the show cause notice, certain documents and reports were sought for by the assessee, which had been relied upon by the authorities. However, without providing the same to the assessee, the authorities proceeded to impose the tax liability and penalty - Thirdly, the explanation provided by the petitioner with regard to the use of the raw materials in the process of the manufacture by the petitioner supported with opinions of the experts were simply brushed aside by the respondent authority, who did not even examine whether the said raw materials had been used in manufacture of the final products which were fabrics - Without having done so and without granting an opportunity of fair hearing to the petitioner, the liability that has been imposed upon the petitioner appears to be patently illegal and without any authority in law. Thus, non production of certain documents to the petitioner that were relied upon by the authorities, coupled with the manner in which no proper opportunity of hearing was granted to the petitioner leads us to the conclusion that severe prejudice has been caused to the petitioner. Ergo, the impugned order cannot be sustained and is liable to be quashed and set aside. The impugned order dated September 12, 2024 is quashed and set aside with a direction upon the respondent authorities to examine the fabrics, provide a copy of the report to the petitioner, grant an opportunity of hearing to the petitioner and thereafter pass a reasoned order in the same - Petition allowed.
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Income Tax
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2024 (11) TMI 1165
Validity of Reopening of assessment u/s 147 - no Valid approval u/s 151 - as argued notice issued u/s 148 was wholly without jurisdiction as it does not meet the pre-requisite conditions stipulated under the amended scheme of reassessment - also approval granted u/s 151 by the specified authority reflects non application of mind - delay filling SLP As decided by HC [ 2023 (8) TMI 519 - BOMBAY HIGH COURT] AS considered the approval u/s 151 we are satisfied that there is no valid sanction. There is no evidence that PCIT has even granted any valid sanction. HELD THAT:- There is a delay of 351 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 1164
Transfer pricing adjustment - international transaction between WOIL and its AE involving the AMP expenses within the meaning of Section 92B or not? - As decided by HC [ 2015 (12) TMI 1188 - DELHI HIGH COURT] Revenue has been unable to demonstrate by some tangible material that there is an international transaction involving AMP expenses between WOIL and Whirlpool USA. In the absence of that first step, the question of determining the ALP of such a transaction does not arise. HELD THAT:- We are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution of India. Special Leave Petitions are accordingly dismissed.
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2024 (11) TMI 1163
Nature of loss - Loss sustained by the appellant on account of moneys deposited in Krishi Bank being lost due to liquidation of the Bank - trading loss or business loss u/s 28 or in the alternative bad debt under Section 36(i)(vii) - HELD THAT:- None of cases/judgment relied upon are applicable to the present facts and circumstances of the case on the ground that the deposits made by the assessee were in the nature of fixed deposit investments - As the loss suffered by the assessee when the bank went to liquidation is only a capital loss. Hence, the claim of the assessee cannot be treated as bad debt or trading loss. It is pertinent to mention that the Assessing Officer after going through the evidence has specifically gave a finding that the loss suffered by the assessee is only capital loss and the same was confirmed by the appellate authority as well as tribunal. The said finding of the fact cannot be adjudicated in the appeal, while exercising the powers conferred under Section 260A of the Act, as the scope of the appeal is very limited. Substantial question of law is answered against the assessee in favour of revenue.
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2024 (11) TMI 1162
Validity of assessment proceedings against company merged/amalgamating company/non existent company - Limitation period for issuing notice u/s 148 - denial of principles of natural justice due to lack of opportunity for hearing - HELD THAT:- AO could not have assumed jurisdiction under sections 147/148/148A of the Act on the ground that the amalgamating company was required to file a return of income for the assessment year 2018-19 and that income had escaped assessment because of the failure on the part of the amalgamating company to file such return. The amalgamating company stood dissolved on March 30, 2018 and was not required to and could not have filed any return for the assessment year 2018- 19. Accordingly, only the amalgamated company was required to file any return for the said assessment year which it duly filed upon amalgamation. In fact, the consolidated accounts of both the amalgamated company and the amalgamating company had been duly filed and was also assessed under section 143(3) of the Act. In such circumstances, the Assessing Officer had erroneously assumed jurisdiction under sections 147/148/148A on the allegation that income chargeable to tax had escaped assessment for the assessment year 2018-19 because the amalgamating company had not filed its return for the said assessment year. As a pre-condition to invoke jurisdiction u/s 147/148/148A of the Act, the Assessing Officer had to initiate a case that the items of income and expenses mentioned in the annexure to the notice u/s 148A(b) had not been incorporated in the consolidated accounts of the amalgamated company nor had the same been taken into consideration in preparing the income tax return of the amalgamated company for the assessment year 2018-19 resulting in income chargeable to tax in the hands of the amalgamated company escaping assessment. As such, the pre-conditions for invoking jurisdiction to initiate the impugned proceedings are significantly absent in the facts of this case and vitiate the entire proceedings and all the actions taken by the respondent authorities. Period of limitation - grant of opportunity of being heard by service of a notice to show cause - In any event, no opportunity of hearing was granted to the petitioners despite requests. It was incumbent upon the Assessing Officer to grant an effective hearing to the assessee before passing the order under section 148A(d) of the Act. Consequently, there has been a violation of the principles of natural justice in the manner in which the impugned proceedings have been conducted. Section 148A(b) provides for grant of opportunity of being heard by service of a notice to show cause provided a cause is cited within the time specified in the notice, which may vary from a minimum of seven days to a maximum thirty days from the date of issuance of the notice. Such time fixed by the notice can be extended on the basis of an application by the assessee. Although the impugned proceedings were initiated on March 23, 2022 by issuance of the notice under section 148A(b) whereby the petitioner was granted seven days to respond, i.e., by March 30, 2022. Nevertheless, the petitioner showed cause and requested for a personal hearing without filing a separate extension application. In view of the above, the contention of the Assessing Officer that he was not required by law to grant any personal hearing or any extension of time beyond the time fixed by the notice under section 148A(b) is without basis and untenable. 23. The Assessing Officer had seven days from 31 March 2022 i.e., upto 6 April 2022 to issue the notice under section 148. By the letter dated April 7, 2022, the Assessing Officer sought to make out as if the petitioner had asked for details even though the petitioner had not. The Assessing Officer suo moto sought to provide details and extend the time to respond by twelve days to April 19, 2022 even though there was no extension application by the petitioner. As such, it was not open to the Assessing Officer to extend the statutory period of limitation in such a circuitous manner. Accordingly, the extension was without the authority of law. In view of the above, the notice under section 148 issued on 19 April 2022, where the last date was 6 April 2022, is also ex facie barred by limitation. The impugned proceedings have been conducted in a grossly arbitrary and unreasonable manner and in excess of jurisdiction. AO passed the impugned order under section 148A(b) in undue haste and issued the impugned notice under section 148 on the same day without waiting for or going through the assessee's response. This is also in violation of the principles of natural justice. Decided in favour of assessee.
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2024 (11) TMI 1161
Disallowance of deduction u/s 80IC on interest - interest earned on this share capital was treated as income - HELD THAT:- Interest so earned was used for capital expenses as mandated by the Ministry of Ayush, New Delhi and whole of the interest earned was later on converted as Share Capital Contribution of the Central Government as per letter dated 18.01.2016 issued by the Ministry of Ayush, Government of India, New Delhi. The interest on time deposits was treated as share capital infusion and that permission to issue share against interest was accorded by the Ministry. Assessee had made fixed deposit and earned interest which belonged to Central Government of India and was utilized as capital receipt with the prior approval of the Central Government. So, it is a glaring fact that the Central Government of India had an overriding title over the interest on FDR made from capital. Therefore, the interest earned on FDR was not part of income of the appellant. CIT(A) has relied on interest having been shown by assessee as income from other sources. As per ratio of judgment in Kedarnath Jute Mfg Co. Ltd Vs Commissioner of Income Tax (Central), Calcutta s case [ 1971 (8) TMI 10 - SUPREME COURT] it is well settled that the entries made in books of accounts are not relevant for computing total income. CIT(A) relied on ratio of judgment CIT vs Pandian Chemicals Limited s case [ 1997 (4) TMI 38 - MADRAS HIGH COURT] relating to interest earned on own free deposits by the company which was not in the present case. Therefore reliance on judgment in Commissioner of Income Tax vs Pandian Chemicals Limited [ 1997 (4) TMI 38 - MADRAS HIGH COURT] was not proper. In view of above material facts and well settled principles of law the impugned orders are not sustainable and are set aside. Appeal filed by the assessee is allowed.
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2024 (11) TMI 1160
Jurisdiction of AO, Surat in issuing notice u/s 148A - assessee is a non-resident Indian and it admits of no doubt in the assessment order as well as in the return of income address of the assessee is of Bokaro (Jharkhand) - HELD THAT:- As relying on Cosmet Traders Pvt. Ltd [ 2022 (11) TMI 895 - CALCUTTA HIGH COURT] we are in this view that notice issued u/s 148A of the Act by ld. AO, Surat cannot be said to be a valid notice as ITO, Surat has no jurisdiction to issue any notice. accordingly, on this legal issue, the case of the assessee is hereby allowed and the order passed subsequent to the notice is also hereby set aside. Decided in favour of assessee.
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2024 (11) TMI 1159
Dismissal of the appeal by the CIT(Appeals) for non-prosecution - validity of assessment u/s 147 r.w.s.144B - HELD THAT:- CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issue which did arise from the impugned order and was assailed by the assessee before him. Unable to persuade to accept the manner in which the appeal of the assessee has been disposed off by the CIT(Appeals). Once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec.251(2) of the Act reveals that the CIT(Appeals) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per the mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution - See PREMKUMAR ARJUNDAS LUTHRA (HUF) [ 2016 (5) TMI 290 - BOMBAY HIGH COURT] Unable to persuade to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to dispose off the same on merits.
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2024 (11) TMI 1158
Disallowing of deduction for bad debts written off being net of sale consideration of the non-performing asset (NPA) u/s 36(i)(vii) - HELD THAT:- As the claim of the assessee as a bad debt is as per the provisions of the Act and also allowable as a business loss. Therefore, we do not find any merit in the impugned addition. The AO is directed to delete the addition. Denial of deduction for bad debts written off u/s 36(1)(vii) r.w.s. 36(2) of the Act and also u/s 37(1) - HELD THAT:- The assessee had assets of Rs. 7.84 Crores (being loan outstanding). The assessee was assigned assets, market value of which was Rs. 4.55 Crores (being price of shares on NSE on the date of credit in the D-Mat account). Thus, the assets of Rs. 7.84 Crores was exchanged for another asset for Rs. 4.55 Crores and hence the loss of Rs. 3.29 Crores, which is nothing but a business loss and deserves to be allowed. The reasons for denial of the claim have been considered while deciding Ground Nos. 1 to 5 (supra) and for our detailed reasoning therein, this claim of loss is also allowed. Ground Nos. 6 to 8 are accordingly allowed. Disallowance u/s 14A r.w.r. 8D - shares were held as stock-in-trade - assessee claimed exempt income on which suo moto disallowance u/s 14 of the Act was computed by applying Rule 8D - HELD THAT:- The assessee while computing the income at Clause 8 of the notes to the computation of total income has made it abundantly clear that though the assessee has disallowed u/s 14A r.w.r. 8D out of abundant caution, the bank reserves its right to claim that provision of Rule 8D should not be attracted in their case. This was in line with the judicial decisions prevailing at the time of filing of the return of income. However, now that the Hon ble Supreme Court in Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT ] has settled the dispute, the assessee was not required to disallow any expenditure for earning the exempt income as mentioned elsewhere. Therefore, the AO is directed to delete the suo moto disallowance. Ground No. 9 is accordingly allowed. Non-inclusion of the amount taxed as income of the head-office while working out adjusted total income for computing the deduction u/s 36(1)(viia) - AO has computed the adjusted total income without considering income of the head-office while working of deductions u/s 36(1)(viia) and Section 44C - HELD THAT:- . After giving a thoughtful consideration to the orders of the authorities below, we are of the considered view that this issue needs a fresh look qua the decision taken in AY 2013-14 by the appellate authorities. Therefore, this issue is restored to the file of the AO and the AO is directed to decide it afresh after considering the facts of AY 2013-14. Disallowance of payment of professional fees - expenses not related with day to day business of assessee and also expenses were related with expansion of the assessee s business - assessee explained that the fees were paid for services connected with developing India 2.0 plan for the Bank with focus on key areas like Macro and Regulatory Context, potential partnerships and inorganic play - HELD THAT:- As considering the business background of the assessee vis- -vis the fees paid to McKinsey Co. Inc., we are of the considered view that the expenditure was incurred primarily and essentially related to the operation and working of the business of the assessee. It was an expenditure which was not for acquiring any tangible or intangible asset but for conducting the business of banking better and more efficiently in the present. See Empire Jute Co. Ltd vs Commissioner of Income [ 1980 (5) TMI 1 - SUPREME COURT ]
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2024 (11) TMI 1157
Characterization of receipt - interest u/s 28 of the Land Acquisition Act 1894 received by the appellant during the year, which was part of enhanced compensation for compulsory acquisition of his agricultural land exempt u/s 10(37) - whether interest u/s. 28 of the Land Acquisition Act 1894 awarded by the Court is a revenue receipt chargeable to tax as Income from Other Sources or is an integral part of enhanced compensation, and thus, is a capital receipt, which is exempt u/s. 10 (37) - HELD THAT:- We find that Hon ble Punjab Haryana High Court in Mahender Pal Narang [ 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] held that interest issued on the compensation for enhanced compensation is to be treated as income from other sources and did not follow the principles laid down by Hon ble Gujrat High Court and Special Leave Petition against the aforesaid judgment has also been dismissed. In the case of PCIT vs Inderjit Singh Sodhi (HUF) [ 2024 (4) TMI 408 - DELHI HIGH COURT] observed that the enhanced compensation as income from other sources. The Hon ble Supreme Court has not dealt with Finance (No-2) act of 2010 in the case of Hari Singh while the Hon ble Delhi High Court has discussed the finance Act (No-2)/2010 and the judgement of Ghanshyam das (HUF) both. The interest on compensation or on enhanced compensation cannot be considered as compensation and shall be chargeable to tax under the head income from other sources. The Ld CIT(A) has rightly decided that interest received on compensation or enhanced compensation is to be treated as the income from other sources u/s 56(2)(viii) - Appeal of the assessee is dismissed.
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2024 (11) TMI 1156
Penalty levied u/s 271D - assessee had claimed the cash was received against sale of 32 sale deeds - Scope of phrase specified sums mentioned in section 269SS cover the amount received in cash - HELD THAT:- As we find that it is mentioned that AO had submitted a proposal for initiation of penalty u/s 271D for contravention of section 269SS of the Act. We fail to reconcile between the assessment order and the penalty order as to if the AO had in any way shown any indulgence during the assessment proceedings about the contravention of section 269SS of the Act. We are of the considered view that even if it is assumed that subsequent to the assessment order dated 26.11.2018 the AO had submitted a proposal for initiation of penalty u/s 271D, then, the particulars of that communication should have been part of the impugned penalty order. In any case, if after conclusion of the assessment order any proposal was forwarded by the AO that does not fulfill the mandate of law which requires that the satisfaction of violation of section 269SS and a reference for initiating penalty u/s 271D of the Act should be made and recorded by the AO in the body of the assessment order. The reliance in this regard is rightly placed by Ld. AR on the decision of Sri Raja Reddy Nalla, Warangal [ 2023 (5) TMI 1254 - ITAT HYDERABAD ]. Further, we are of the considered view that the interpretation given to words, specified sum by terming it as residuary term to encompass all other transactions done in cash beyond a specified sums is incorrect interpretation. See Shri R. Dhinagharan (HUF) [ 2024 (1) TMI 61 - ITAT CHENNAI ] wherein held sale consideration was received in cash at the time of execution of multiple sale deeds from different persons for the sale of plots and accepted as genuine in the assessment order completed on 23.05.2018 and admittedly there was no advance received by the seller. The amended provisions of Section 269SS of the Act was applied by the A.O to the facts of the present case only to the sale consideration received as 'specified sum' and on such presumption the JCIT levied penalty u/s 271D of the Act. The intention of the amendment is very clear right from the Budget speech of the Finance Minister that the said amendment is brought into the statute in Section 269SS of the Act would get attracted to sum received in cash as an advance in an immovable property transaction and not to the completed transaction namely cash received as a sale consideration at the time of execution of the registered sale deed. This provision will not apply to the transaction that happens at the time of final payment at the time of registration of sale deed and payment is made before sub-registrar at the time of registration of property. In admitted fact that all sale deeds were registered and cash payment was made at one go before the sub- registrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS - Assessee appeal allowed. Thus we consider the penalty levied to be against the provisions of law. The grounds are sustained. The impugned penalty is quashed. Assessee appeal allowed.
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2024 (11) TMI 1155
Liability of interest u/s 201(1A) - disallowance u/s 40(a)(ia) - assessee has suo moto disallowed 30% of the interest expenditure - HELD THAT:- The undisputed fact is that the assessee has suo moto disallowed the interest expenditure on which no tax was deducted at source. In our considered opinion, once an amount is disallowed u/s 40(a)(ia) of the Act for non-deduction of tax, it should not be subject to TDS provisions again so as to make an assessee liable to interest u/s 201(1A). The recipients of the interest have already included the said amounts in their returns of income and paid taxes thereon and the assessee has furnished evidence for the same including an Accountant Certificate as directed in the relevant provisions of the Act and since the tax has already been paid by the recipients, no further tax recovery is necessary. For this proposition, we draw support from the decision of Ansal Land Mark Township (P.) Ltd.[ 2015 (9) TMI 79 - DELHI HIGH COURT] wherein held what is common to both the provisos to Section 40(a)(ia) and Section 201(1) of the Act is that as long as the payee/resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. Appeal of the assessee is allowed.
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2024 (11) TMI 1154
Rejection of books of accounts - Addition u/s 68 - assessee had deposited cash during demonetization period - case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) - AO rejected the books of accounts of the assessee noting huge anomaly and differences in the financial figures of sales and cash in hand available with the assessee in the impugned year as compared to in the preceding year - HELD THAT:- In terms of the provisions of section 145(3) AO can reject the Books of accounts of the assessee and make a best judgement assessment u/s 144 of the Act, if he is not satisfied with the correctness or completeness of the Books of accounts of the assessee. This dissatisfaction of the AO has to be vis a vis the correctness and completeness of the Books of the assessee for rejecting the same. And this power cannot be exercised in a subjective manner. The reason being that serious consequences follow the rejection of the Books of accounts of the assessee since it gives power to the AO to make a best judgement assessment. The AO surely cannot reject the Books on his own whims and fancies. As pointed out by the in terms of provisions of Section 145(3) the Assessing Officer is duty bound to find patent, latent and glaring defects in the books of accounts while rejecting the Books of the assessee. The reliance placed on the decision of Vikram Plastics [ 1998 (8) TMI 43 - GUJARAT HIGH COURT ] clearly holds that for the purpose of rejecting the books of accounts of the assessee, discrepancies and defects in the same need to be pointed out. In the facts of the present case, admittedly no defects or discrepancies have been pointed out. The rejection of books of accounts is merely on the basis of surmises and conjectures of the AO which he has based on a mere financial analysis of the sales and cash data of the assessee for the impugned year and the immediately preceding year. Admittedly, no discrepancy in the books of accounts maintained by the assessee was pointed out before rejecting the books of accounts, and since it is settled law that the rejection of books of accounts can take place only when the books are found to be maintained in such a manner that true profits cannot be ascertained therefrom, for which it is necessary for the Revenue Authorities to pinpoint the defects in the maintenance of the same. Addition made to the income of the assessee of the cash found deposited in its bank after rejecting books of accounts of the assessee - Since we have held that the rejection of books of accounts was not correct, the additions made do not survive and therefore are directed to be deleted. Assessee appeal allowed.
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2024 (11) TMI 1153
Denial of setting off of carried forward Short Term Capital Loss against the Income under the head Capital Gains during the present AY - scope of section 115BAC - HELD THAT:- As we know that the return processing is computerized one and no manual interference is there and if any figure or claim is not entered in appropriate column the computer disallows the same. We find that in section 115BAC neither brought forward long term capital loss nor brought forward short term capital loss is required to be disallowed but due to the fact that the assessee has entered the figure of brought forward long term capital loss in correct column the same was allowed by CPC. But the brought forward short term capital loss was not filled in proper column, the same was disallowed by CPC. Considering the totality of the facts, we deem it proper to set-aside the order passed by the ld. Addl./JCIT(A)-1, Coimbatore and remand the matter back to his file with a direction to pass a fresh order in the light of our observations after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to comply with the notices issued by the ld. Addl./JCIT(A)-1, Coimbatore and bring this fact to the knowledge of the ld. Addl./JCIT(A)-1, Coimbatore that brought forward long term capital loss was allowed by CPC but brought forward short term capital loss was not allowed by CPC due to entry in wrong column in income tax return. Addl./JCIT(A)-1, Coimbatore shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Thus, the grounds of appeal raised by the assessee are partly allowed.
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2024 (11) TMI 1152
Undisclosed income declared in Income Declaration Scheme, 2016 (IDS) - Nature/Character of income declared under IDS for tax purposes - non-payment of tax under the IDS, 2016 against the income declared - AO has made an addition on account of income from unexplained sources u/s. 68 r.w.s 115BBE HELD THAT:- As per section 197(b) of IDS, 2016 where the assessee fails to pay the tax as per the income declared under IDS, 2016 the undisclosed income shall be chargeable to tax in the previous year in which such declaration is made. We find force in the argument made by the AR that non-payment of tax under the IDS, 2016 against the income declared cannot change the character of the income declared under IDS, 2016 with respect to character of income assessable in the previous year in which such declaration was made under the Income Tax Act, 1961. As before the Ld. Revenue Authorities the assessee has submitted that the amount disclosed in Form No.1 filed under IDS, 2016 was nothing but the capital gains arising out of the agricultural land sold through M/s. Satya Sai Housing by the assessee family and other members in various capacities. These facts were not disputed by the Ld. Revenue Authorities. AO while framing the assessment has stated the same as undisclosed income u/s. 68 r.w.s 115BBE of the Act instead of taxing the same under capital gains. Merely because the assessee failed to discharge the tax liability under IDS-2016 as declared cannot change the character of the income under which it was declared under the IDS-2016. IDS-2016 is also silent on the nature of income to be taxed in the event of failure by the declarant to pay the taxes. In these circumstances, we are of the considered view that the Ld. CIT(A)-NFAC has rightly directed the Ld. AO to re-compute the total income in the case of the assessee in the HUF status under the head capital gains and therefore the decision of the Ld. CIT(A)-NFAC does not suffer from any infirmity. As decided in own case [ 2023 (12) TMI 134 - ITAT VISAKHAPATNAM] income to be taxed as capital gains in the hands of the assessee with the status of individual stating that merely because the assessee failed to discharge the tax liability under IDS-2016 as declared cannot change the character of the income under which it was declared under the IDS-2016 . Appeal of the Revenue is dismissed.
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2024 (11) TMI 1151
Deduction u/s 80IB - Deduction denied as Non completion of project within the stipulated period provided u/s 80IB(10) i.e 31.03.2008 and commercial construction in the project exceeding the limit as provided in clause (d) of section 80IB (10) - thrust of the whole argument of the Ld. AR of the assessee is on the point that subsequent amendment vide Finance Act 2004 w.e.f 01.04.2005 in the provisions of section 80IB (10) cannot impose new condition for allowing deduction in respect of the project which was approved and commenced prior to 01.04.2005. HELD THAT:- The conditions for restrictions of commercial space in the residential project as inserted by clause (d) vide Finance Act 2004 w.e.f 01.04.2005 is in the nature of asking the assessee to comply with a conditions which is not possible if the project has already reached to advance stage as per the approved plan by the local authority but the condition of completion of project cannot be in the nature of impossible task because a reasonable period of more than three years is provided by the said amendment w.e.f 01.04.2005 as the project is required to be completed on or before 31.03.2008. In any case the time period of completion of the projects which are approved after 01.04.2005 is also only four years and therefore, the project which was approved in the year 2000 has already availed more than five years as on the date of amendment and further period of three years was allowed to complete such project for availing benefit of section 80IB(10) which is a proper and reasonable restriction placed by the legislature to protect the interest of the buyers who have booked their houses in ongoing project but would not get completed houses within a reasonable time. Even otherwise the assessment year under consideration are not prior to the amendment w.e.f. 01.04.2005 and therefore, the question of retrospective applicability of this amendment prescribing time limit for completion of the project does not arise. Since the issue of requirement of completion certificate issued by the local authority is sub-judice before the Hon ble Supreme Court therefore, in the facts and circumstances of the case we remand this issue to the record of the AO for fresh adjudication as per provisions as existed as on the date of approval of the project and subject to the decision in case of Global Reality [ 2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT] as well as Global Estate [ 2019 (7) TMI 1474 - SC ORDER] . Denial of claim of deduction on the ground of commercial area exceeding the prescribed limit in clause(d) of section 80IB(10) - This issue is covered by the judgment of Sarkar Builders [ 2015 (5) TMI 555 - SUPREME COURT] cited and reproduced in forgoing part of this order. Therefore, the claim of deduction cannot be disallowed on the ground that commercial space in the project is more than the prescribed limit as per clause (d) section 80IB(10) if the said commercial part of the project is duly approved by the local authority. The AO has to verify from the sanction plan about commercial area in the project approved by the local authority and the construction is in the conformity of the local approved plan. Accordingly the matter is remanded to the record of the AO for fresh adjudication in the light of above observations. Appeals of the assessee are allowed for statistical purposes.
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2024 (11) TMI 1122
Validity of assessment order passed - breach of principles of natural justice - delay filling SLP - Petitioner states that an assessment order has been passed even before the time granted for fling a reply expired and without considering the reply which was already fled - As decided by HC [ 2021 (9) TMI 1566 - BOMBAY HIGH COURT] Assessment order has been passed even before time to file reply had expired and without considering the records that reply has in fact been fled. This has resulted in petitioner having to rush praying to this Court to interfere in this wrongful action on the part of respondent. If the Assessing Officer had checked his/her records, he/she would not have passed assessment order hastily without waiting for time granted to file reply expired and without checking whether any reply has been fled - fit case to impose cost HELD THAT:- We have considered the submissions advanced at the Bar in light of the application filed seeking condonation of delay which we have also perused. The explanation offered by the petitioners is neither satisfactory nor sufficient in law so as to condone the delay of 444 days in filing the special leave petition. In the circumstances, the application seeking condonation of delay is dismissed. Consequently, the special leave petition stands dismissed.
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2024 (11) TMI 1121
Liability to pay interest on the income calculated under the MAT provisions [Section 115J] - eligibility of benefit of Direct Tax Vivad Se Vishwas Scheme 2024 - Scheme provides that for the purpose of seeking benefit under the said scheme the appeal should be pending as on 22nd July 2024. HELD THAT:- Clause 10 of Circular no. 12 of 2024 makes it clear that as per Section 91(3) of the scheme the tax payer is required to withdraw appeals and furnish proof thereof along with intimation of payment under Section 92(2) of the Scheme. In view of the aforesaid, both the appeals are disposed of as withdrawn with liberty to the appellants to approach the authority for the purpose of availing the benefits under the Scheme 2024. In the event of any further difficulty, we grant liberty to the parties to come back before us by way of an appropriate petition.
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2024 (11) TMI 1120
Assessment u/s 153C - addition on account of unexplained cash credit u/s 68 - HELD THAT:- Since seized documents in the instant case are not of incriminating nature, the AO is legally barred from framing assessment u/s 153C as confirmed by the Hon'ble Supreme Court judgment in the case of Abhishar Buildwell P. Ltd. [ 2023 (5) TMI 587 - SUPREME COURT ]. Similar issue came up for consideration before this Court in [ 2024 (8) TMI 1488 - MAHDYA PRADESH HIGH COURT] . This appeal also stands dismissed in the light of this order and the decision shall apply mutatis mutandis to the facts and circumstances of the present case.
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2024 (11) TMI 1119
Additional income relating to excess stock surrendered by the assessee - shall form part of its business income or not? - CIT(A) has also placed reliance on various case laws and accordingly rendered his decision in favour of the assessee that income surrendered by it was generated from its business activities only - HELD THAT:- The assessee herein is a Partnership Firm. There is no dispute with regard to the fact that the assessee does not have any other income other than the business income. Hence the assessee could have accumulated the stock out its business income only, which was not disclosed earlier. In the cases relied upon by CIT(A), the co-ordinate benches of Tribunal and the Hon ble High Courts as relied upon have held that the discrepancy in the stock found during the course of search/survey operations should be assessed as business income only. Since the CIT(A) has rendered his decision on the basis of various case laws and since the revenue did not contradict them, we affirm the order passed by Ld CIT(A) on this issue. Adhoc disallowance of expenses incurred shop expenses, office expenses and packing expenses - HELD THAT:- AO has not given any basis for making disallowance @ 20%. Before CIT(A), the assessee contended that making of adhoc disallowance is bad in law. Assessee did not disprove the observations of the AO that many expenses are supported by self made vouchers. However, we notice that the AO has examined the expenses on test check basis only and accordingly concluded that all the expenses are supported by self made vouchers only. The presumption so arrived at by the AO is debatable one. Under these set of facts, disallowance of part of expenditure so claimed is required in order to take care of leakage of revenue, if any, in making the claim. We are of the view that the disallowance made @ 20% is on the higher side. Accordingly, we modify the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance to 10% of shop, office and packing expenses. Decided partly in favour of assessee.
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2024 (11) TMI 1118
Revision u/s 263 - AO failed to conduct proper verification regarding the nature and source of the undisclosed income admitted during the survey u/s 133A - CIT observed that the undisclosed income was taxed at the normal rate of 30%, instead of the higher rate of 60% u/s 115BBE which applies to income covered under Sections 68 to 69D and by failing to tax the undisclosed income u/s 69A and at the higher rate prescribed by Section 115BBE AO's omission led to a potential revenue loss, which renders the assessment order prejudicial to the interests of the Revenue HELD THAT:- We find that the AO made sufficient inquiries during the original assessment proceedings. The undisclosed income admitted during the survey was included in the profit and loss accounts of the assessee firms, and the submission before PCIT clearly indicated that the receipts related to business activities (i.e., extra work, development charges, and maintenance charges). The cash receipts were in multiple transactions, each of which did not exceed Rs. 2 lakh per transaction, as required by Section 269ST - assessees had already provided this information to the PCIT during the revisionary proceedings, confirming that the receipts did not violate Section 269ST - PCIT did not present any evidence to contradict the assessee s explanation, and therefore, the invocation of Section 263 on the ground of potential Section 269ST violations was based on conjecture rather than facts. Reliance placed by the AR on judgement in the case of Dharti Estate [ 2024 (1) TMI 1197 - GUJARAT HIGH COURT] is valid. In that case, the court held that if the AO has made adequate inquiries and treated the undisclosed income as business income, the revisionary powers u/s 263 cannot be invoked simply because the PCIT holds a different view. This legal principle applies here, where the AO took a plausible view after considering the evidence and treating the undisclosed income as business income. Application of Section 115BBE - AO correctly assessed the undisclosed income at the normal rate since it was explained and connected to business receipts. There was no basis for taxing the income at the higher rate of 60% under Section 115BBE of the Act, as the income was neither unexplained under Section 69A nor considered unexplained investments. AO exercised a plausible and legally valid view in treating the undisclosed income as business income and taxing it at the normal rate. The revisionary jurisdiction under Section 263 of the Act cannot be invoked merely because the PCIT holds a different view. Decided in favour of assessee.
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2024 (11) TMI 1117
Unexplained investment u/s. 69 - Assessee has failed to explain the nature of source of the impugned amount - Onus to prove - HELD THAT:- The assessee has substantiated the nature of source of the investment over and above the sale consideration paid by him for the purchase of property along with the other incidental charges incurred by him at the time of the said purchase. We are of the considered view that the assessee has discharged the onus of proof casted upon him to explain the source of the investment made by him, as per the provisions of the I.T. Act. We, therefore, deem it fit to allow the grounds of appeal raised by the assessee and hereby direct the ld. A.O. to delete the addition made in the hands of the assessee.
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2024 (10) TMI 1616
Appeals pending before the appellate authority as on 26.09.2024 - issue of allotment of the appeals to each Commissioner of Appeals on average basis - HELD THAT:- As remedial measures suggested by Central Board of Direct Taxes for reduction of the backlog of the pending appeals, it is stated that the CBDT has issued the guidelines for the priority/out of turn disposal on 19.03.2024 and 100 JCIT (Appeals) are appointed in the year 2023 and as per Section 345MA of the Income-Tax Act, 1961, e-Dispute Resolution Scheme, 2022 is notified and under Finance Act, 2024, new measures have been introduced and Vivad se Vishwas Scheme, 2024 is also introduced by Finance Act, 2024 and Commissioner (Appeals) have been empowered to set aside the ex-parte assessment orders. Except the above remedial measure, no other measures are stated in the affidavit with regard to as to how the pending appeals with the CIT (Appeals) which is around 1400 cases per Faceless CIT (Appeals) shall be heard and within what time span such appeals shall be disposed of by the concerned CIT (Appeals). No measures are mentioned with regard to bunching of similar appeals or repeated issues for different succeeding years in appeals, covered matters etc. which would speedily dispose of such appeals by CIT (Appeals). In the facts of the case by order dated 26.03.2020, the petitioner is already protected by restraining the respondent from taking any coercive action. Let there be a fresh additional affidavit-in-reply be filed by respondent Nos.3 to 5 before the next date of hearing as placing on record the data with regard to the average life of the appeal as well as the remedial measures to dispose of the appeals pending before the CIT (Appeals) and time bound programme for disposal of backlog of 5,80,188 pending appeals as on 26.09.2024.
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Customs
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2024 (11) TMI 1150
Classification of handcrafted articles of stone popularly known as Chakla Belan (Rolling Board and Rolling Pin), mortar and pestle and other allied articles - petitioners were classifying the exported article specifically under ITC(HS) 68159990 and which constituted the residual clause and read as others . By virtue of the inclusion of articles falling within the ambit of ITC(HS) 68159990, those products became entitled to claim MEIS rewards @ 5%. The aforenoted Public Notice No. 02/2015 was thereafter amended from time to time including by way of Public Notice No. 44/2015-2020 dated 05 December 2017 in terms of which the MEIS reward was increased from 5% to 7%. Scope of the assessment power that stands conferred upon the competent authorities under the FTDR Act and the Customs Act - HELD THAT:- A process of self-assessment was ordained to form part of an assessment as contemplated under the Customs Act. This change had essentially come to be introduced in 2011 and pursuant to which self-assessment was acknowledged to be one of the modes of assessment as contemplated under the Customs Act. The procedure for assessment of duty is prescribed in Section 17 of that enactment. Prior to the amendments which came to be introduced in Section 17 by virtue of Finance Act, 2018, the Proviso to Section 17(2) while identifying the criteria relevant for selection of cases for purposes of verification, had recognised that power being guided by factors such as the valuation of goods, classification, exemption or concessional duties availed in terms of a notification issued under that Act. The Proviso had at the relevant time and prior to the passing of Finance Act, 2018 included the following phraseology regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification issued therefore under this Act . Section 17 also included a sub-section (6) in terms of which a proper officer was empowered to undertake an audit in respect of duty in case it had failed to undertake a reassessment or pass a speaking order in respect thereof. The aforesaid sub-section (6) as it existed in Section 17 came to be omitted by Finance Act, 2018. The observations appearing in ITC Limited 2019 (9) TMI 802 - SUPREME COURT (LB)] ] and BT India [ 2023 (11) TMI 478 - DELHI HIGH COURT ] assume significance when viewed in light of the various Bills of Entry as submitted by the writ petitioners on a self-assessment basis having been duly accepted and no questions in respect thereof having been raised. The Bills of Entry would thus be liable to be viewed as having been duly assessed and accepted. Undisputedly, it is decades after those exports had been affected and assessments completed that the respondents now seek to reopen those transactions and seek to question the benefits claimed by the writ petitioners. Undisputedly, consequent to the self-assessed Bills of Entry having been accepted and thus liable to be viewed as assessed, the stage of enquiry contemplated in terms of Section 17 of the Customs Act has clearly passed. That then leaves us to identify and determine the avenues which would otherwise be available to the customs authorities to reopen or review an assessment duly made. Recovery of duty u/s 28 and 28AA - The provisions of Section 28AAA are attracted where it is found that an instrument issued to a person under the FTDR Act was obtained by means of collusion, wilful misstatement or suppression of facts. While Section 28AAA does undoubtedly statutorily empower the respondents to recover duty benefits illegitimately claimed by virtue of an instrument, the larger question which merits consideration is of identifying the authority which could be recognized in law to undertake a determination with respect to whether an instrument could be said to have been obtained by way of collusion, wilful misstatement or suppression of facts. While we propose to return to this principal question a little later and in the subsequent parts of this decision, suffice it to note that Section 28AAA is a provision which stands at the crossroads of the Customs Act and the FTDR Act. It constitutes, in that sense, a junction or an intersection where the two statutes meet. Section 28AAA deals with situations of convergence and where a demand of duty is predicated upon a doubt being raised with respect to an instrument issued under the FTDR Act. Of critical significance, therefore, would be the issue of which authority should be recognised to have the jurisdiction to undertake the adjudication contemplated under that provision. An adjudication is warranted for the purposes of invoking Section 28AAA cannot possibly be doubted. The usage of the expression proper officer , and which is defined in Section 2(34) of the Customs Act to mean an officer of customs, also cannot be accorded undue significance when one bears in mind Section 28AAA (1) speaking of an instrument issued to a person for the purposes of this Act or the FTDR Act. The former undoubtedly is a reference to the Customs Act. Thus, Section 28AAA is clearly intended to encompass all contingencies arising out of or relating to an instrument issued for the purposes of the Customs Act or the FTDR Act as the case may be. Scope of the audit power which came to be independently incorporated in the Customs Act - As we read Audit Regulation 5, it becomes apparent that it is only after the disposal of any such objections that may have been invited that a final report containing the audit findings would come to be drawn. What however needs to be borne in mind is that the family of provisions pertaining to audit do not, at least in explicit terms, include a power to review, suspend or cancel an instrument issued either under the Customs or the FTDR Act. While hypothetically speaking an audit could contain findings or observations doubting a benefit or exemption claimed, we find ourselves unable to construe those provisions as enabling the customs authorities to suspend or cancel an instrument itself, be it under the Customs or the FTDR Act. Powers of DGFT - The Director-General or the licensing authority may by an order in writing suspend the operation of any 62[licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] granted under these rules, where proceedings for cancellation of such [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] has been initiated under rule 10. FDTR Rules thus confer a power on the DGFT or the licensing authority to regulate the grant, renewal, suspension and cancellation of licenses, certificates, scrips or any other instrument bestowing financial or fiscal benefits . The MEIS certificate would undoubtedly be an instrument which bestows a fiscal benefit. What we seek to emphasize and highlight is Rules 7, 9 and 10, embody in clear and unequivocal terms, a conferral of jurisdiction and power to commence an adjudicatory process that the DGFT could undertake while evaluating whether a license, certificate, scrip or instrument was liable to be suspended or cancelled. Validity of Audit objection letter - As the audit objection letter teems with definitive and predetermined conclusions and would not sustain when tested on the principles enunciated by the Supreme Court in Oryx Fisheries. We then find ourselves unable to sustain the audit objection letter even when tested on the anvil of the Audit Regulations which may be said to have been applied or invoked. As is evident from a reading of Regulation 5, the proper officer, after having apprised the exporter or the importer, as the case may be, of its intent to initiate an audit, is obliged to apprise the auditee of the objections before preparing the audit report. In case the auditee disagrees with the findings that appear in that report, a demand could be validly raised or created. Undisputedly, no such procedure appears to have been followed by the respondents in the facts of the present case. In fact, and contrary to the mandate of Regulation 5, the Assistant Commissioner has required the petitioners to pay sums representing amounts which according to that authority had been wrongly claimed under the MEIS and having clearly failed to abide by the statutory procedure prescribed. Purview of Sections 28(4) and 28AAA of the Act to sustain the direction for deposit as framed - Section 28(4) of the Act, as noted above, could have been invoked only if the Assistant Commissioner had come to the conclusion that the goods had escaped duty by reason of collusion, wilful misstatement or suppression of facts. It is only in those contingencies that Section 28(4) could have enabled the proper officer to reopen an assessment. However, all that is alleged in this respect is that the petitioners had failed to make a correct and truthful declaration and thereby mis-classified the goods with the avowed objective of claiming benefits under the MEIS. Unable to appreciate how the petitioners could have been charged of having failed to make a correct and truthful declaration when the imports were affected under the cover of MEIS certificates granted by the DGFT and which had never been questioned. In fact, the DGFT has not even and till date initiated any action against the writ petitioners alleging that the MEIS Certificate had been wrongly obtained. This too leads us to conclude that the impugned action is rendered wholly illegal, arbitrary and unsustainable. We then proceed to consider whether the action of the respondents would sustain under Section 28AAA - Section 28AAA is principally concerned with the right vested in the respondents to initiate action for recovery of duty and interest where an instrument issued to a person is found to have been obtained by means of collusion, wilful misstatement, or suppression of facts. The word instrument is defined by Explanation 1 to Section 28AAA to include any scrip, authorization, license, certificate, or any other document by whatever name called issued under the FTDR Act. We have already held that the MEIS certificate would clearly fall within the ambit of that expression in the preceding parts of this decision. Custom and DGFT Crossroad - It would be impermissible for the customs authorities to either doubt the validity of an instrument issued under the FTDR Act or go behind benefits availed pursuant thereto absent any adjudication having been undertaken by the DGFT. An action for recovery of benefits claimed and availed would have to necessarily be preceded by the competent authority under the FTDR Act having found that the certificate or scrip had been illegally obtained. We have already held that the reference to a proper officer in Section 28AAA is for the limited purpose of ensuring that a certificate wrongly obtained under the Customs Act could also be evaluated on parameters specified in that provision. However, the said stipulation cannot be construed as conferring authority on the proper officer to question the validity of a certificate or scrip referable to the FTDR Act. Invocation of Section 28AAA on a more fundamental ground - The controversy with respect to classification appears to have been raised for the first time in December of 2018 when the respondent no. 6 raised a doubt as to whether the stone and marble handicraft articles were liable to be placed under ITC(HS) 68159990. As was noted hereinabove, the sine qua non for Section 28AAA getting attracted is the triumvirate of collusion, suppression and wilful misstatement which are spoken of in sub-section (1) being attracted. Even if it were assumed for the sake of argument that the writ petitioners had wrongly classified or placed articles in question under ITC(HS) 68159990, the same would clearly not amount to it being ipso facto assumed that the same amounted to an act of suppression or wilful misstatement. Rendering of a finding in favour of the respondents on the issue of collusion would have far greater ramifications. A finding on that score, if returned against the writ petitioners, would essentially require us to hold that the MEIS certificates had been obtained by the writ petitioners in collusion with the officers working under the DGFT. That too is not the allegation which is levelled by the respondents against the writ petitioners. The controversy, therefore, as to whether the subject articles were liable to be classified under CTH 6802 or 6815, would clearly not qualify the tests constructed by Section 28AAA. Classification - handicraft articles being liable to be classified as falling under HSN 6815 or not? - The issue of classification was indelibly connected with the right of the writ petitioners to avail benefits under the MEIS. The MEIS scrip was issued by the office of the DGFT. The issuance of the MEIS scrip was dependent upon the exported article falling in the detailed list of products which came to be published by the DGFT on 01 April 2015. Table 2 set out the code wise list of products, as well as corresponding reward rates under the MEIS Scheme. There was undisputedly a reference to CTH 6815 as well as ITC(HS) 68159990 in that table. Once the DGFT had proceeded to issue the MEIS scrip to the writ petitioners, they would have been justified in assuming that the issue of classification was neither questioned nor doubted. It is on the aforesaid basis that exports were affected between the period 1991 to 2018. In the absence of the DGFT having ruled upon the issue of classification or having expressed any doubt with respect to the eligibility of the writ petitioners to claim benefits under the MEIS, it would be wholly impermissible for the respondents to take punitive action against the writ petitioners. The subject of classification stands explicitly reserved for the consideration of the DGFT in terms of Para 2.57 of the FTP. This too convinces us to conclude that the action as initiated by the respondents is rendered arbitrary. Determination - As we allow the present writ petitions hereby quash the audit objection letters and summons issued - direct the respondents to refund the amounts collected from the writ petitioners Since we have desisted from rendering any final opinion on the aspect of classification, the present decision shall be without prejudice to the right of the DGFT to initiate proceedings pertaining to the validity of the MEIS certificates issued to the writ petitioners if so chosen and advised and if otherwise permissible in law.
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2024 (11) TMI 1149
Bail application of the accused-applicant - gold recovered from the possession of the applicant from there car - Officers of D.R.I., NOIDA on information intercepted a Car at Kashi Toll Plaza on Delhi-Meerut Expressway and found package wrapped with brown colour tape and found a yellow metal bar in rectangular shape was found which was weighing 999 grams - as submitted that co-accused Naman Jain has a jewellery shop in the name of 'Namokar Jewellers' and the gold recovered from the applicant was from the stock of co-accused Naman Jain which he was carrying to melt and make jewellery. It is also submitted that the recovered gold from the applicant has not been found to have any kind of mark attached to the smuggled gold nor has it been proved by the Investigator that the said gold was brought into India by smuggling HELD THAT:- Having regard to the entire facts and circumstances and keeping in view the fact that in the matter trial has not started even yet and the complicity of the accused applicant is yet to be determined in trial, the gold seized is in the possession of the Department, the offence appears to be compoundable by virtue of Section 137(3) of the Customs Act and there is nothing on record to demonstrate that the applicant, if enlarged on bail, would in any way adversely affect the trial, no criminal antecedent to the credit of the applicant, his willingness and readiness to deposit the adequate customs duty over the said gold, the applicant is in jail since 17.6.2024, without further commenting upon the merits of the case, the applicant has made out a case for bail. Accordingly, the bail application of the accused-applicant is allowed. Let the applicant involved in Case No. 29 of 2024 under Sections 135(1)(a), (b), 135(1)(i)(a) of Customs Duty Act, 1962, Police Station D.R.I. NOIDA, District Gautam Budh Nagar be released on bail on furnishing a personal bond and two heavy sureties each in the like amount to the satisfaction of the court concerned subject to few conditions.
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2024 (11) TMI 1148
Demand of anti-dumping duty - benefit of Notification No.21/2016- CUS (ADD) dated 31.05.2016 is not to be provided to the appellant - invocation of extended period of limitation u/s 28 (4) of the Customs Act, 1962 and consequent imposition of penalty under Section 114 A of the Act Invoking extended period for raising demand of ADD - HELD THAT:- We find that though, the appellant have made out a very strong prima facie case on merit in their favour but in our considered view the appeal can be disposed of on the ground of limitation itself. We find that dispute relates bill of entry No.7216037 filed on 24.10.2016, bill of entry No.7250924 filed on 27.10.2016 whereas bill of entry No.8389062 was filed on 31.01.2017, however the show cause notice was issued on 20.10.2021. We find that the dispute which was raised by the department is on the basis of the information available on import invoice, bill of lading which are vital documents for the purpose of processing the bill of entry and assessment thereof. In the bill of entry itself the name of OCI is mentioned. In the bill of lading name of Lu Xi is clearly mentioned. Therefore, for purpose of making the present case all the information were gathered only from those documents which were very much available at the time of filing of bill of entry. Therefore, there is absolutely no suppression of the fact on the part of the appellant. Accordingly, the ingredients to invoke extended period in terms of Section 28 (4) are not available in the facts of the present case. For the bill of entry dated 24.10.2016, 27.10.2016 and 31.01.2017, the show cause notice was issued on 20.10.2021 that is much after the normal period of limitation. Therefore, in our considered view the demand is clearly time barred.
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2024 (11) TMI 1147
Appellant has financed person for smuggling of gold from Dubai and Sold in India - penalty imposed u/s 112(b)(i) of the Customs Act 1962 - mens rea - Commissioner held that the appellant is concerned with selling, purchasing and dealing with the goods for which they knew that the same were liable for confiscation and rendered himself liable to penalty in terms of Section 112(b)(i) of Customs Act, 1962. HELD THAT:- Penalty u/s 112(b) can be imposed when a person acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111. In the present case it is not the case of the Revenue that the Appellant was indulged in any of the activities as mentioned under Section 112(b) of the Customs Act. As the Appellant did not acquire possession of or in any way concern with import of gold, penalty under Section 112(b) ought not to have been imposed. The appellant cannot come within the ambit of Section 112(b) because appellants had never acquired possession or in any way concerned in any of the activities mentioned in the Section or any measure dealing with any goods which the appellant knew or had reason to believe are liable to confiscation. In the absence of the department having not proved the knowledge of the appellant in the activities relating to the smuggled gold, there were no grounds for imposition of penalty on him. It is now well established that mens rea is an important ingredient for imposing a penalty on the persons enumerated in Section 112(b) of the Customs Act. The evidence brought out by the department nowhere suggests that the appellants were aware that the goods in question were smuggled into the India. The penalty imposed on Appellant, therefore, cannot be sustained.
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2024 (11) TMI 1146
Licence /AROs obtained fraudulently - EOU's only falsified their records without manufacture or removal of any excisable goods against the said Licences/ARO's, that clearances were made only on paper against certain Advance Licence Nos./ ARO's against which no goods were moved from their units - E.O.U's obtained Advance Licences/Advance Release Orders through their local agents and manipulated their record s to show clearance of excisable goods as if manufactured by them, against such Licences/A.R.O's, so that the said records could be used to show their deemed export by which their export obligation would be shown to have been fulfilled. HELD THAT:- As appellant has acted as agent for purchase and sale of advanced licence / Advance Release Order which were fraudulently obtained by 100 % EOU. In this fact even though the licence /AROs were obtained fraudulently, the appellant being not the party to said fraud, whereas he is only involved in the purchase and sale of advance licence /AROs. Without Knowledge of such fraud, it cannot be penalized. On the same set of fact, the appellant has been exonerated from penalty in the decision of this Tribunal reported as T.S Makkar Vs. Commissioner of Central Excise, Surat [ 2012 (10) TMI 981 - CESTAT AHMEDABAD] wherein on the issue of imposition of penalty on the appellant there were difference of opinion between the Hon ble Member (T) and the Hon ble Member (J), due to which the third Member was appointed which hold the penalty is not imposable on the appellant. The aforesaid order was also followed in the appellant s own case by this Tribunal vide final order No. A/11619-11620/2023 dated 28.07.2023, whereby the penalty imposed under Rule 209 A of Central Excise Rules, 1944 and under Section 112 (b) of Customs Act, 1962 were set aside.
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2024 (11) TMI 1145
Confiscation of the illegally imported cigarettes in the guise of stationery items - imposing penalties for the appellants herein for their role in the alleged offence - HELD THAT:- As evidences available on record indicate that Sri Man Singh was well aware of the smuggling activities of the smuggling syndicate involved in the subject case, who diverted smuggled cigarettes concealed in the Nepal bound container No. 3707024, in transit. Thus, we hold that the evidences available on record prove that Shri Man Singh has abetted the act of smuggling in the present case also. Knowing fully well that the container in transit contained smuggled cigarettes, he provided the transportation and helped in replacing the smuggled cigarettes with stationery items. He also helped in storage of the stationery goods to be replaced in the godown owned by Shri Akhilesh Singh. We hold that the Appellant No. 1 has abetted the act of illegal smuggling activities and thereby connived with the smuggling racket for smuggling of cigarettes in to the country. Accordingly, we hold that the ld. adjudicating authority has rightly imposed penalty on the Appellant No. 1 under Section 112(b) of the Customs Act, 1962 in the impugned order and hence, we uphold the same. Regarding the penalty imposed on the Shri Pravin Kumar Singh (Appellant No. 2), we observe that penalty has been imposed on him for abetting the alleged offence and for the role played by him in the past and present smuggling activities. The role played by him has been elaborated by the ld. adjudicating authority of the impugned order. From the statements of Shri Santosh Kumar Prasad and Shri Srimonta Rakshit, it is evident that Shri Pravin Kumar Singh has refused the clearance work of the said consignment brought to him and advised Shri Santosh Kumar Prasad to approach Shri Srimonta Rakshit as he has no experience of clearance of Nepal bound transit containers. In respect of clearance of the goods imported through the container GESU 5984886, we observe that Shri Santosh Kumar Prasad had come to his office again on 18/19.05.2015, when he was not available in the office. Shri Prasad had informed him over phone that he had left some documents in his office related to clearance of one more Nepal bound import consignment of the same party. In turn, he had given the said documents to Shri Srimonta Rakshit for clearance of the second consignment. From the statements mentioned above, therefore, we observe that Shri Pravin Kumar Singh has played no role in the clearance of the earlier import vide container no. VMLU 3707024 or in the smuggling of cigarettes through the container GESU 5984886 in the present case. Thus, we find that the evidence on record does not indicate that the Appellant No. 2 had played any role in the alleged smuggling of foreign origin cigarettes. Accordingly, we hold that the penalty imposed on him under Section 112(b) of the Customs Act, 1962 in the impugned order is not sustainable and hence, we set aside the same. We pass the following order: - (i) We uphold the penalty of Rs.10,00,000/- (Rupees Ten Lakhs only) imposed on the Appellant No. 1 (Shri Man Singh) under Section 112(b) of the Customs Act, 1962. (ii) We set aside the penalty of Rs.20,00,000/- (Rupees Twenty Lakhs only) imposed on the Appellant No. 2 (Shri Pravin Kumar Singh) under Section 112(b) of the Customs Act, 1962.
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2024 (11) TMI 1144
Non-fulfilment of export obligation in respect of import of Clinker made under Advance Authorization issued by DGFT - Imposition of penalty under Section 112 (a) (b) of the Customs Act, 1962 - HELD THAT:- We observe that duty free import of Clinker under Advance Authorization has been made by the Company M/s. SUPL and for non-fulfilment of export obligation separate action has already been initiated by enforcing the Bond. There is no finding in the impugned order about the role played by the appellants in the alleged offence. It is observed that penalty has been imposed on them only on the ground that their company had acquired 51% of shares in the company viz. M/s. SUPL and they were appointed as Directors in M/s. SUPL. Thus, the imposition of penalty on the appellants is not sustainable when separate proceedings have already been initiated against the company M/s. SUPL for the duty free import of Clinker under Advance Authorization and for the non fulfilment of export obligation. Thus, we hold that penalty imposed on the appellants are not sustainable. Penalty of Rs.20,00,000/- each has been imposed on both the appellants under Section 112 (a) (b) of the Customs Act, 1962. The impugned order has not specified categorically as to under which sub-section of Section 112 the penalty has been imposed. The penalty has been imposed under both sub-sections 112(a) and (b) together, which is legally not sustainable. Further we observe that the ingredients required for imposing penalty under Section 112 are not existing in this case. Accordingly, we hold that that penalties imposed on the appellants are not sustainable and the same are liable to be set aside. We set aside the penalties of Rs.20,00,000/- each imposed on the appellants and allow the appeals filed by them.
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2024 (11) TMI 1116
Import of plastic granules of various grades under Transferred Duty Free Import Authorisation Scheme/'DFIA Scheme' read with Notification No.40/2006-Customs dated 01.05.2006 regarding the imports which were cleared prior to 19.02.2009 - notification was issued in Notification No.17/2009-Cus dated 01.09.2009 amending Condition No.3 of the earlier notification and introducing Condition Nos.3A and 3B with retrospective effect HELD THAT:- A Division Bench of this Court, by order dated 01.11.2017 disposed of those writ petitions in the matter of Tarajyoth Polymers Ltd., [ 2017 (11) TMI 494 - MADRAS HIGH COURT] where, the amendment giving retrospective effect from 01.05.2006 has been set aside by allowing the said writ petitions. Also Special Leave Petitions filed against the judgment of this Court have been dismissed by order [ 2023 (4) TMI 1376 - SUPREME COURT] and as on date the prevailing law on this point would be Tarajyoth Polymers Ltd., -Vs- Union of India alone. Since that has been followed by the Tribunal in dismissing these cases through the impugned order, we do not find any error in the said order passed by the Tribunal. Hence, all these appeals are dismissed and the questions of law are answered in favour of the assessee.
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Insolvency & Bankruptcy
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2024 (11) TMI 1143
Cancellation of sale certificate issued by the Respondent - Appointment of a local commissioner to verify the machinery mentioned under the tender document and as per valuation report annexed to the application - Grant of Stay on auction going to be conducted on 08.02.2022 by the liquidator - HELD THAT:- In the present case, admittedly the Sale Certificate was issued to the Successful Bidder, after issuance of Sale Certificate on 08.11.2021, it is failed to see any relevance of LoI which was referred to in Clause 9. Under the Liquidation Regulation 2016, there is a statutory requirement of payment of bid amount within 90 days. The submission of the Appellant that he was never intimated that he has to make the payment of 90 days cannot be accepted. The bid document as well as Regulation clearly provided for payment. Appellant having failed to make the payment of the balance amount. Liquidator did not commit any error in forfeiting the EMD and cancelling the Sale Certificate. The amount of Rs.58.10 Lakhs which was paid after e-Auction has already been refunded to the Appellant. There is no ground to interfere with the Impugned Order - Appeal is dismissed.
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2024 (11) TMI 1142
Locus of the Appellant to file the Appeal - nonfulfillment of threshold for filing a Section 7 application under the Insolvency and Bankruptcy Code (IBC). Whether the appellant has locus to file this Appeal? - HELD THAT:- By admission of Section 7 Application, the Corporate Debtor or allottees of project may have any grievance, a person, who is neither allottee of the project, nor has any stake in real estate project, which is subject matter of the insolvency, cannot be allowed to challenge the order admitting Section 7 application. Section 7 application has been admitted on account of debt and default by the Corporate Debtor, who committed default in delivering the possession of the unit to the allottees. There are substance in the submission of learned Counsel for the Respondent that the Appellant has no locus to challenge the order admitting Section 7 application. Nonfulfillment of threshold for filing a Section 7 application under the Insolvency and Bankruptcy Code (IBC) - HELD THAT:- Section 7 application filed by the Financial Creditors in class is dated 25.09.2021, is much subsequent to the registration of the project Lotus Isle (Residential). The Applicants in the application under Section 7 have given relevant facts. The copy of the application is filed as Annexure A-44, which clearly mentions that the project was bifurcated by permission dated 31.01.2017. Section 7 application was filed by the Financial Creditor in a class alleging default committed by the Corporate Debtor in giving possession of the units, within the time given in the Builder Buyers Agreement. Several amounts have already been disbursed by the Financial Creditors in a class in residential units consisting three towers wherein total allotted units are 255, out of which 29 unit holders were Applicants in Section 7 application. The Adjudicating Authority has returned a finding in paragraph 17 that 10% allottee of the real estate can maintain a petition. It is not a dispute between the parties that total units for the residential project are 255 and the application was filed by 29 unit holders - the application filed by Financial Creditors in a class, fulfill the threshold as provided under Section 7, second proviso and the submission advanced by the learned Counsel for the Appellant that application did not fulfill the threshold limit, cannot be accepted. There are no ground to interfere with the impugned order - The Appeal is dismissed.
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2024 (11) TMI 1141
Rejection of liquidator's claim by the workmen - closure of factory - violation of the provisions of the Industrial Dispute Act, 1947 - HELD THAT:- From the facts brought on the record, it is clear that the corporate debtor ceased to work from June, 2010 and according to the case of the Appellants themselves, they worked in the factory till April 2012 only. The claim was filed by the Appellants who were asked by the liquidator to submit evidence to substantiate the claims. No satisfactory evidence having been produced by the Appellant that they were in the employment of the corporate debtor on the date of commencement of the liquidation, the Liquidator rejected the claims and sent communication dated 02.03.2019. In the present case, according to own case of the Appellants that they could not work after April, 2012. They had not taken any proceedings before the Industrial Court or Labour Court for their wages and other claims. For violation of provisions of the Industrial Disputes Act, 1947, the remedy available to the workmen was to approach the Industrial Court or Labour Court. Adjudicating Authority has rightly observed that the workmen/ employees have slept over their rights for years together and they filed the claim only when CIRP/ liquidation has commenced - The NCLT while exercising its jurisdiction on the liquidation process of the corporate debtor is not entitled to enter into issue as to whether the closure of the factory from June 2010 was in violation of the Industrial Dispute Act, 1947. The said issue ought to have been raised by the Appellants before the Industrial Court or Labour Court. Reference made to the judgment of this Tribunal in Era Labourer Union of Sidcul, Pant Nagar, through its Secretary vs. Apex Buildsys Ltd. [ 2024 (9) TMI 1323 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB ]. In the above case also, labourer union of Sidcul, Pant Nagar had filed a claim in the CIRP of the corporate debtor which commenced on 20.08.2018. Direction for liquidation was also passed by the Adjudicating Authority on 09.01.2020. Before the Adjudicating Authority, IA was filed by Era Labourer Union where declaration of the lockout on 31.07.2017 was under challenge and Appellant claimed for payment from date of the lockout till the commencement of the liquidation proceedings. The liquidator had not accepted the claim from date of lockout till the commencement of the CIRP. The claims of the Claimants were not verified from the date of closure. Adjudicating Authority rejected the application of the Labourer Union questioning the layoff. Challenging the said order, the appeal was filed. The above judgment fully supports the submission of the Liquidator that the issue of closure of the factory from June, 2010 cannot be questioned and the issue which ought to have been raised by the Appellants before the Industrial Court or Labour Court. Before the liquidator, no material having brought by the Appellants to prove their employment and working till 31.12.2018, the Liquidator did not commit any error in rejecting the claims. There are no infirmity in the order of the Adjudicating Authority warranting interference by this Tribunal in exercise of Appellate Jurisdiction - There is no merit in the Appeal - The Appeal is dismissed.
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2024 (11) TMI 1140
Condonation of 26 days delay in filing the Appeal - sufficient cause for delay or not - admission of Section 95 Application filed by the State Bank of India (SBI) against the Appellant, Sanjay Jain - whether the Appellant has made out the case for condonation of 26 days delay as prayed in the Application? - HELD THAT:- Law is well settled that this Tribunal has no jurisdiction to condone delay beyond 15 days. The Hon ble Supreme Court in the matter of National Spot Exchange Limited. Vs. Anil Kohli, Resolution Professional for Dunar Foods Limited, [ 2021 (9) TMI 1156 - SUPREME COURT ], has held that Appellate Tribunal has no jurisdiction at all to condone the delay exceeding 15 days. The submission of the Appellant for explaining the delay is on the basis that Appellant came to know about the Order only on 30.03.2024, hence from 30.03.2024, the Appeal filed on 22.04.2024 is within time. Limitation for filing an Appeal begins from the date when the Order is pronounced by the Adjudicating Authority. In the present case, Order was delivered on 26.02.2024. The Hon ble Supreme Court in the matter of V Nagarajan Vs. SKS Ispat Power Limited Ors., [ 2021 (10) TMI 941 - SUPREME COURT (LB) ], had laid down about commencement of limitation for filing the Appeal had noted the difference between the Statutory Scheme under Section 421 of the Companies Act, 2013, and Section 61 of the Insolvency and Bankruptcy Code, 2016. It was held by the Hon ble Supreme Court that omission of the words from the date on which a copy of the Order of the Tribunal is made available to the person aggrieved from Section 421(3) to Section 61(2) are not mere omission and power to condone the delay is slightly circumscribed and conditioned upon showing sufficient cause. In the case of AARYAN PROJECTS PRIVATE LIMITED VERSUS KLOWIN INFRASTRUCTURE PRIVATE LIMITED [ 2022 (8) TMI 1551 - CALCUTTA HIGH COURT] , even after substituted service, Plaintiff obtained fresh summons of service which was returned unserved and when the summons were pending suit was transferred into the list of undefended case which were the reasons for allowing the Application by the Hon ble High Court. The said Judgment was also on its own fact. The above Judgment does not help the Appellant for condonation of delay as prayed in the present Appeal. The Application for condonation of delay of 26 days is rejected - Memo of Appeal is also rejected.
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Service Tax
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2024 (11) TMI 1139
Rejection of Application filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 ( SVLDR Scheme ) - quantification of demand is made after 30 June 2019, Petitioner is not eligible to avail the benefit of the said Scheme. HELD THAT:- Section 121 (r) of the Scheme defines quantified to mean a written communication of the amount of duty payable under the indirect tax enactment. The said definition does not state that who is required to quantify. Therefore, even if an assessee admits in the course of investigation prior to 30 June 2019 and arrived at the quantification same would fall within the meaning of the term quantified as defined. Section 125 of the said Scheme provides for the eligibility except the exclusion mentioned therein. One of the exclusion under Section 125(1)(e), which is relevant for our purpose, is where a person has been subjected to an enquiry or investigation or audit and the amount of duty involved has not been quantified on or before 30 June 2019. The Ministry of Finance by its clarification dated 27 August 2019 in paragraph 10(g) clarified that the duty liability admitted by the person during enquiry, investigation or audit quantified before 30 June 2019 would be eligible under the Scheme. In the instant case, admittedly in the course of the enquiry / investigation, the Petitioner has admitted its liability of Rs.1,39, 58,752/- and, therefore, the Petitioner is eligible for availing the benefit of the Scheme. Merely because a higher figure is mentioned in the application by way of abundant caution, the Petitioner cannot be deprived of the benefit of the Scheme moreso, when the object of the Scheme is to reduce the litigation. It is also important to note that the Petitioner is not seeking refund of any amount paid or payable on the basis of his declaration of Rs.1,50,37,871/-. Petitioner is justified in relying upon the decisions of the Co-ordinate Bench in the case of Sabareesh Pallikere, Proprietor of M/s. Finbros Marketing Vs. Jurisdictional Designated Committee, Thane Commissionerate, Division IV, Range-II ORs. [ 2021 (2) TMI 515 - BOMBAY HIGH COURT ] wherein on an identical fact situation the rejection of the declaration was found to be not justified. Thus rejection of the Petitioner's application is unjustified - Respondents are directed to accept the application of the Petitioner made in Form SVLDRS-1 and inform the Petitioner of any amount due and payable, if any, under the SVLDR Scheme within a period of four weeks from the date of uploading the present order.
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2024 (11) TMI 1138
Service tax under renting of immovable property - renting of residential quarters by a government corporation to employees of contractors for residential purposes - renting of the residential dwelling for use as residences listed in negative list - invoking extended period - HELD THAT:- We find that the appellant have given their residential quarters to the employee of contractor for residential purpose. It is admitted fact that the residential quarters are not used for any commercial purpose whereas, the same is used for only residential purpose. As per renting of residential quarter as listed in the negative list it is absolutely clear that any residential house given on rent for use as residence is not taxable service. In the facts of the present case, even though the residential quarter was given by appellant to the employee of the contractor but the fact remains the quarter is a residential dwelling and it is exclusively for use as residence. Therefore, in view of the clause ( m ) of Section 66 D this service is in negative list and the same is not taxable. As per Senior Accounts Officer, M.P.Power Generating Co. Pvt. Ltd. [ 2017 (4) TMI 952 - CESTAT NEW DELHI ] the renting of quarters to the employee of contractor is not liable to service tax. Moreover, the appellant is a government corporation and there cannot be any malafide intention to evade service tax. Therefore, the extended period is not invokable in the fact of the present case. Hence, the demand is also not sustainable on the ground of time bar. Appeal allowed.
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2024 (11) TMI 1137
Services provided by cooperative housing society to its members - Demanding service tax under the category of construction of residential complex service for the period 2011 (October, 2010 to March, 2011) to 2013-2014 along with proposal for interest and penalty - Scope of doctrine of mutuality between the association and its members - as argued since between the society and members no different person are involved, therefore, even though the construction of residential complex has been carried out but the same do not fall under the definition of taxable service of construction of complex. Therefore, the activity between the society and its members is correctly classified under Club or Association Service. HELD THAT:- We find that in the facts of the present case the period involved is 01.10.2010 to 31.03.2014, therefore, both the periods i.e. prior to negative list regime and post negative list regime is involved. We find that the appellant vehemently argued that the relationship between the appellant and its members to whom the residential flats have been allotted are of association and its members. Therefore, there is no service as the service provider and service recipient are not existing. As per the facts of the present case we find that there is no dispute that the appellant is a co-operative housing society constituted by its members for the objective of construction of residential complex exclusively for the members of the society. Therefore, it is not a case that of the independent builder has constructed the residential complex and sold to the unrelated buyers. Since, the concept of doctrine of mutuality is involved in the present case between the appellant and its members, it cannot be said that the society has provided any service to its members. Between the association and its members in such service no service provider and service recipient are involved. In this arrangement of society and its members, we are of the view that at most the activities are covered under club or association service. The principal of doctrine of mutuality has been considered in various judgments and finally the larger bench of State of West Bengal vs. Calcutta Club [ 2019 (10) TMI 160 - SUPREME COURT] it was decided that there is a doctrine of mutuality between the association and its members, therefore, no service exist. Accordingly, the same is not taxable. The Hon ble Apex Court has considered both the period i.e. prior to 01.07.2012 and thereafter and held that even in both the period , the amount received by the association from its members shall not be liable to service tax. Thus, we are of the view that in a case the appellant being a society consisting of members provided the residential complex to its members does not amount to service in the light of settled legal position in Calcutta Club (Supra). Therefore, the demand is not sustainable. Whether demand is time barred? - In this regard we find that the demand is for the period October, 2010 to March, 2014 and the show cause notice was issued on 21.04.2016 i.e. beyond the normal period. We find that this issue being very contentious and decided by various high courts and finally the issue came to be settled in the case of Calcutta Club Ltd by the Hon ble Apex Court. Therefore, the issue being involved interpretation of law, no malafide can be attributed to the appellant. Therefore, there is no suppression of fact or wilful mis-statement. Accordingly, the demand is not sustainable on the ground of time bar also.
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2024 (11) TMI 1136
Short paid the Service Tax - appellant had suppressed the taxable value in their ST-3 returns filed - Demand of service tax along with interest, and penalty - Separate penalty has been imposed on the Directors as well - gross taxable value declared is far less than the income receipt mentioned in 26AS as well as Profit Loss Account - Appellant are engaged in providing taxable services under the category of commercial or industrial construction service as defined under Section 65(25b) of the Finance Act, 1994. Eligibility for the abatement of 33% from the taxable value, as provided under Notification 01/2006 dated 01.03.2006 - services of construction and fabrication to their clients along with supply of materials - HELD THAT:- We observe that the Appellant has supplied consumables, gas, etc., for the purpose of fabrication and construction service rendered by them. As per Notification No. 01/2006 dated 01.03.2006, if the construction service is undertaken along with supply of materials, the Appellant would be eligible for the benefit of 33% abatement in the taxable value. We observe that this exemption is available in the notification itself. Since the evidence submitted by the appellant clearly indicate rendering of the construction service along with consumables and materials such as Gas, grinding wheels, Welding Electrodes etc., we hold that the Appellant is eligible for abatement of 33% as provided under Notification No. 01/2006-S.T. dated 01.03.2006. Confirmation of the demand of service tax by invoking the extended period of limitation - We observe that the Appellant had been filing their Returns and paying Service Tax regularly. They have registered with Service Tax Department since 2006, but till the date of audit conducted in 2011, the Department had not raised any objection regarding any short payment of Service Tax by the Appellant. We observe that the if the demand has been confirmed on the basis of the data submitted by the appellant, i.e., from their balance sheet, Profit Loss Account and Form 26AS, then extended period of limitation is not invokable. Thus, we hold that the demand cannot be raised in this case by invoking the extended period of limitation. Thus, we hold that the demand confirmed in the impugned order by invoking the extended period of limitation is not sustainable. As the total tax payable for the normal period (excluding the extended period of limitation), after allowing the 33% abatement as provided under notification 01/2006 dated 01.03.2016, comes to Rs. 22,82,336/-. From the ST-3 returns filed for the half yearly period October 2011 to March 2012, we observe that the Appellant has paid service tax amounting to Rs. 33,92,433/- , for this period. As the appellant has paid more service tax than the service tax payable by them for normal period of limitation, i.e., the half yearly period October 2011 to March 2012, after allowing the abatement, we hold that no additional service tax is payable by the appellant for the normal period of limitation, i.e., for the period October 2011 to March 2012. Accordingly, we hold that the demand confirmed in the impugned order for the normal period of limitation is also not sustainable and hence we set aside the same. Since the demand itself is not sustainable, the question of demanding interest and imposing penalties on the Appellant as well the Directors does not arise.
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2024 (11) TMI 1135
Denial of Cenvat credit of service tax paid on renting of immovable property service in view of amended definition of input services as provided under Rule 2(l) of Cenvat Credit Rules, 2004 w.e.f. 01.03.2011 - claim denied by the lower authority on the ground that renting of immovable property service falls under the category of setting up of the premises of the output service provider which has been removed from the inclusion clause of the definition of input service. Whether as per the amendment is the service related to setting up and activities relating to business were removed from the inclusion clause of the definition of input service - HELD THAT:- We find that only services which are covered under inclusion clause of the definition are not alone eligible for cenvat credit but these services are in addition to all such services which are used in or in relation to providing the output service. In the present case the service of renting of immovable property service is directly used for providing output service of the appellant, therefore, the same is clearly covered under the main clause of the definition of input service in terms of Rule 2(l) of Cenvat Credit Rules, 2004. We find that even subsequently w.e.f 01.04.2011, certain services were excluded from the purview of definition of input service however, the service namely, renting of immovable property service is not covered under the exclusion clause of the definition, therefore, even from 01.04.2011 also the renting of immovable property service continued to be admissible input service for the purpose of availing the cenvat credit. This issue is no longer res-integra as interpreting the removal of setting up in the inclusion clause, the cenvat credit was allowed in NAVIN FLOURINE INTERNATIONAL [ 2024 (10) TMI 1396 - CESTAT AHMEDABAD] as regard the use of service we are of the view that there is no dispute that those services were used in or in relation to the manufacture of the final product. As regard the contention of the revenue that setting up of factory has been removed from the inclusion clause, in our view the removal of from setting up of factory will not make any difference because the inclusive portion is not additional service but it is only clarificatory out of all the services covered in main clause - wherein held as on perusal of the exclusion clause of the definition we find that none of the services which are subject matter in the present appeal is falling in the exclusion clause. Therefore, we have no hesitation to hold that all the services are admissible input service and Cenvat credit is admissible. Thus, the demand of cenvat credit in the present case is not sustainable. Hence the impugned order is set aside and appeal is allowed.
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2024 (11) TMI 1134
Service Tax on the Commission received from services provided to foreign clients - Assessee engaged in providing taxable services, including services under the category of business auxiliary service to their clients located in the United Kingdom (U.K.) - Appellant rendered the service of collecting necessary information based on the questionnaire sent by M/s. J.S. Humidifiers PLC, U.K. and supplying back such information directly to the foreign party in the U.K. - HELD THAT:- In the Circular No. 111/05/2009-S.T. dated 24.02.2009, it has been clarified that for the services under category III [rule 3(i)(iii)], the deciding factor is the location of the service receiver and not the place of performance. We observe that the said Circular has interpreted the phrase used outside India to mean the benefit of the services accrues outside India. Business auxiliary services falls under Rule 3(i)(iii) of the Export Service Rules. Thus, in this case we observe that the phrase used outside India has to be interpreted to mean that the benefit of the services accrues outside India. In the present case, we observe that the appellant has collected the information and provided the same to the foreign principal, who, after analyzing the information, negotiated the price, delivery schedules, technical evaluation, etc., with the customers and delivered the goods directly to them. We observe that the Appellant had no role in the purchase of the goods by the Indian customer. The information gathered by the appellant and provided to the principal viz. M/s. J.S. Humidifiers PLC, U.K., has been utilized by the principal located in a foreign country and thus the benefit of the information gathered by the them accrues only to the foreign principal. Accordingly, we hold that in terms of Circular No. 111/05/2009-S.T. dated 24.02.2009, the services rendered by the appellant would be appropriately classifiable as export of service . Accordingly, we hold that the services rendered by the Appellant in the instant case are exempted from Service Tax, being export of services, and thus the demand of Service Tax confirmed vide the impugned order is not sustainable. The same is therefore set aside.
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2024 (11) TMI 1133
Service Tax demand - Demand confirmed on the basis of the figures which are taken from the financial statement - assessee has claimed that they have paid before issue of the Notice - HELD THAT:- Assessee has claimed that they have paid before issue of the Notice and to this effect, they have submitted evidence in respect of the payment made. As perused the said documents and found that this amount has been paid by the assessee before issuance of the Show Cause Notice. Annexures to the Show Cause Notice confirm this payment by the assessee before issue of the Show Cause Notice. We find that the ld. adjudicating authority has not taken cognizance of the same and not appropriated the same in the impugned order. Since the amount has already been paid along with interest before issue of the Notice, the same may be appropriated against the demand confirmed. Also, no penalty imposable on this amount confirmed, as this amount has been paid by the assessee before issuance of the Show Cause Notice. Assessee has imported services on which Service Tax has been demanded and confirmed on reverse charge basis - We observe that this issue has been raised by the audit during the course of audit conducted on the assessee by the Audit Branch of the Service Tax Commissionerate. A perusal of the Audit Report raised by the audit, reveals that the audit team has perused the foreign remittances made by the appellant during the Financial Years 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13 and after perusal, has arrived at a conclusion that the Service Tax liability in respect of the Financial Years 2008-09, 2009-10, 2010-11 and 2011-12 are not liable to be taxed at the hands of the assessee. Audit team has raised the Service Tax demand on these foreign remittances only in respect of the Financial Year 2012-13 - We observe that the Show Cause Notice was issued to the assessee for the Financial Years 2008-09 to 2012-13, ignoring the findings of the audit team. In view of the findings of the audit team as well as the submission made by the assessee before us, we find that the demand of Service Tax for the period from 2008-09 to 2011-12 is not sustainable on merits. We also observe that the demand has been confirmed on the basis of the figures which are taken from the financial statement of Asian Hotels Ltd and not from the assessee. Also, we observe that the assessee has not suppressed any information from the department. Accordingly, we hold that the demand for the Financial Years 2008-09, 2009-10, 2010-11 and 2011-12 are barred by limitation. Demand of Service Tax for the Financial Years 2009-10, 2010-11 and 2011 -12 - As we find that the assessee has contended that all the figures were taken from the financial statement which were related to the taxable services on which tax is not payable on the basis of mercantile system of taxation; the RCM is applicable on the payment basis. We observe that this claim of the assessee needs to be verified by the adjudicating authority as there is no finding on this aspect by the adjudicating authority in the impugned order. Accordingly, we remand this issue back to the adjudicating authority for the purpose of ascertaining the correctness of the claim made by the assessee in this regard and for passing an appropriate order in respect of the demand. Reversal of irregularly availed credit - As we observe that the assessee has already reversed the Service Tax credit amounting to Rs.17,00,404/- even before issuance of the Show Cause Notice, along with interest. The assessee submitted evidence with respect to this payment. we find that the ld. adjudicating authority has not taken cognizance of the same and not appropriated the same in the impugned order. Since the amount of Rs.17,00,404/- has already been paid along with interest before issue of the Notice, which is evident from the Annexure to the Show Cause Notice. Accordingly, we observe that the said payment may be appropriated against the demand confirmed. Also, no penalty imposable on this amount confirmed, as this amount has been paid by the assessee before issuance of the Show Cause Notice. Balance irregular credit availed amount - The assessee have submitted that this is related to Service Tax credit availed in respect of transportation of their employees after office hours and hence it falls within the ambit of 'input service', which they are entitled to avail. The assessee submitted the invoices raised by the transporter and submitted that it is categorically mentioned in the invoices that the service is related to transportation of some of their employees after office hours, which is related to their business activity of running the hotel. On a perusal of the documents submitted by the assessee, we find that the assessee have provided vehicles to the employees for dropping them after office work. Thus, the transportation service was used in connection with the rendering of the taxable services by the assessee. Accordingly, we hold that this service is eligible as an input service to the assessee and the assessee are eligible to avail CENVAT Credit in respect of these transportation services availed by them. Accordingly, the demand of irregular credit is not sustainable and hence we set aside the same. We pass the following order in respect of the appeal filed by the assessee: (i) In respect of the demand of Rs.50,19,379/-, the demands pertaining to the Financial Years 2008-09, 2009-10, 2010-11 and 2011-12 are set aside, on the ground of limitation. Regarding the demand of Rs.11,57,196/- out of the above demand pertaining to the Financial Year 2012-13, the issue is remanded back to the adjudicating authority for verification of the claim made by the assessee as discussed. (ii) Regarding the irregularly availed credit of Rs.18,17,206/-, we hold that the assessee is eligible for the credit of Rs.1,16,802/- pertaining to the transportation of their employees. As the remaining amount of Rs.17,00,404/-, along with interest amounting to Rs.6,16,725/-, was paid before issue of the Show Cause Notice, we appropriate this amount. No penalty is imposable on the appellant on this amount as this was paid before issue of the Show Cause Notice. Appeal filed by the Revenue, since the amount involved in the said appeal is Rs.59,94,305/- which is below the threshold limit prescribed for filing appeal before the CESTAT as per the revised National Litigation Policy Circular for monetary limits dated 06.08.2024, the same is dismissed as withdrawn as per the National Litigation Policy.
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2024 (11) TMI 1132
Classification under the category of 'Works Contract Service' or commercial or industrial construction service - appellant has rendered the service of construction of a commercial complex at Dibrugarh, Assam under the 10% pool fund provided by the Ministry of Urban Development, Govt. of India, out of the allocated budgetary support provided for North East region including Sikkim HELD THAT:- Appellant had rendered the said services along with material. The service of construction of complex along with material is appropriately classifiable under the category of works contract service as held by the Hon'ble Apex Court in the case of Commissioner of Central Excise and Customs, Kerala v. Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT ] As relying on case of M/s.National Building Construction Corporation Ltd. [ 2022 (8) TMI 471 - CESTAT KOLKATA ] we hold that the services rendered by the Appellant in the instant case are appropriately classifiable as works contract service . However, we observe that there is no demand raised against the appellant in the notice under the category of works contract service and therefore, we hold that the demand confirmed against the appellant under the category of commercial or industrial construction service is not sustainable. Accordingly, we set aside the same. Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise.
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2024 (11) TMI 1131
Demand under the category of port service and under the category of GTA Service under proviso to Section 73(2) - Interest has been demanded on the amount of service tax and CENVAT Credit confirmed - HELD THAT:- As we observe that this demand pertains to services rendered to four clients. We observe that out of the demand of Rs.28,24,469/- the appellant agreed to pay service tax on the value of Rs.4,33,000/- received from M/s. Essel Mining Industries Ltd., under the category of 'Port Services'. Accordingly, we confirm this demand along with interest, under the category of 'Port Services. Services rendered To Guru Shipping Clearing and M/s. Lee Muirhead Pvt. Ltd. We observe that the amended definition of 'Port Service' which came into effect from 01.07.2010 is not applicable in this case. Accordingly, we hold that the services rendered by the appellant to the above said clients for handling export cargo in the docks area is appropriately classifiable as 'cargo handling service' and the same are excluded from payment of service tax as per the definition of 'cargo handling service', as defined under Section 65(23) of the Finance Act, 1994. Thus, we hold that the demand confirmed in the impugned order under the category of 'Port Services' is not sustainable. Service rendered by the appellant to M/s. Tata Chemicals Ltd. We observe that the actual service rendered by the appellant is transportation of goods. M/s. Tata Chemicals Ltd., being a registered company, paid the freight and therefore, in terms of Sub-clause (V) of Rule-2(1)(d) of Service Tax Rules, 1994, we observe that the service recipient is liable to pay service tax on the GTA service under reverse charge basis. Accordingly, we hold that the demand of service tax confirmed in the impugned order under the category of 'port services' is not sustainable and hence the same is set aside. Denial of CENVAT Credit - appellant is having other units but no centralized registration has been obtained and accordingly CENVAT Credit availed on the basis of such invoices was disallowed - We observe that when the receipt and utilisation is not in dispute, CENVAT Credit cannot be denied merely on procedural grounds. We hold that the CENVAT Credit availed by the appellant cannot be denied. Levy of interest and penalties - Since the demand of service tax and denial of CENVAT Credit confirmed in the impugned order is held as not sustainable, the question of demanding interest and imposing penalty on the appellant does not arise.
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Central Excise
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2024 (11) TMI 1130
Condonation of delay of 268 days in filing the Civil Appeals - liability to pay NCCD on Dumper chassis as an intermediate product - It was held by CESTAT that 'the issue as to whether the exemption under notification 67/95 is available to NCCD is to be answered in the affirmative and in favour of the assessee.' - HELD THAT:- There are no good reason to interfere with the common impugned orders in M/S. KOMATSU INDIA PVT. LTD. VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE [ 2023 (11) TMI 305 - CESTAT CHENNAI] - The Civil Appeals are, accordingly, dismissed on the ground of delay as well as on merits.
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2024 (11) TMI 1129
Availment of inadmissible credit - mala fide intention on the part of the assessee or not - invocation of extended period of limitation under proviso to Section 11A of the Central Excise Act, 1944 - HELD THAT:- Circular dated 2-11-2023 issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes Customs states that in exercise of the powers conferred under Section 131BA of the Customs Act, 1962 and in partial modification of earlier instructions issued in F.No.390/Misc./163/2010-JC dated 17.08.2011, the Central Board of Indirect Taxes and Customs has fixed the monetary limit below which appeal shall not be filed in the CESTAT, High Court and the Supreme Court. So far as this Court is concerned, the monetary limit fixed is Rs.2 Crore. Appeal disposed off.
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2024 (11) TMI 1128
100% EOU - Refund/rebate of service tax paid - place of removal - export of goods as per N/N. 41/2012-ST dated 29.6.2012 - refund claims were rejected on the common ground that the gamma sterilization service was undertaken much before the time of export and hence does not fall under the category of services that have been used beyond the place of removal for the export of the said goods mentioned under Explanation (A) (i) of Notification No.42/2012-ST dated 29.06.2012 - HELD THAT:- The amendment has widened the ambit of the term 'specified service'. The appellant has drawn attention to the Tribunal judgment in the case of M/S BHARAT MINES MINERALS VERSUS COMMISSIONER CENTRAL GOODS SERVICE TAX, DEHRADUN. [ 2020 (2) TMI 1007 - CESTAT NEW DELHI] which held that rebate of service tax paid on Chartered Accountant Service is to be allowed since the said service was admittedly used beyond the place of factory and further held that the wordings of the notification make it very clear that the question of the service being rendered pre or post export has no significance. Swatch Bharat Cess and Krishi Kalyan Cess - HELD THAT:- This issue stands settled by the Hon'ble CESTAT, Kolkata in the case of M/S. MMTC LIMITED VERSUS COMMISSIONER OF CGST CX, BHUBANESWAR COMMISSIONERATE [ 2023 (10) TMI 815 - CESTAT KOLKATA] wherein it has been held that the assessee is entitled for refund of Swatch Bharat Cess and Krishi Kalyan Cess in terms of notification No. 41/2012-ST dated 29.06.2012. Refund paid on courier services - HELD THAT:- The Commissioner (Appeals) had allowed this very issue in the appellant s own case M/S. KANAM LATEX INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, TIRUNELVELI [ 2024 (1) TMI 1055 - CESTAT CHENNAI] . The Department has accepted the said order-in-appeal and no further appeal has been filed before the Tribunal against the grant of refund of service tax paid on courier services. It is submitted that the appropriation of an amount of Rs. 1,24,593/- is clearly without authority of law and therefore they are entitled to the refund of the said amount wrongly appropriated. In the facts and circumstances stated, the appropriation of amounts made and covered by the above-mentioned appeals, are set aside. The impugned order set aside - appeal allowed.
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2024 (11) TMI 1127
Appeal dismissed for non compliance with Section 35F of Central Excise Act - HELD THAT:- There are no justification for adjourning the matter. The Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.
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2024 (11) TMI 1126
Dismissal of appeal for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982 - HELD THAT:- There are no justification for adjourning the matter beyond three times which is the maximum number statutorily provided. The Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.
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2024 (11) TMI 1125
Recovery of CENVAT Credit with Interest and penalty - duty paying documents - endorsed Bill of entry - valid document for availing cenvat credit as per Rule 9(1) of Cenvat Credit Rules, 2004 or not - HELD THAT:- In appellant s own case REMIDEX PHARMA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS, BANGALORE-II [ 2018 (4) TMI 471 - CESTAT BANGALORE] , this tribunal for earlier period observed that ' the impugned order denying the CENVAT credit only on the ground of endorsed Bill of Entry is not sustainable in law.' The impugned orders are set aside and the appeals are allowed.
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2024 (11) TMI 1124
Time Limitation - Recovery of differential duty with interest and penalty - whether the demand is barred by limitation? - whether the demand is barred by limitation or not - HELD THAT:- It is found that initially the view of the department was that the clearance of samples free from the factory leviable to duty and the value should be determined adopting Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Later, the same was reconsidered and it was clarified that the proper rule for determination of value of free samples cleared from the factory would be Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The Hon ble High Court of Bombay in the case of INDIAN DRUGS MANUFACTURER'S ASSOCN. VERSUS UNION OF INDIA [ 2006 (9) TMI 94 - BOMBAY HIGH COURT] case held that the value of physician samples cleared free be determined by adopting Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. There was no suppression or misdeclaration on the part of the appellant with intent to evade payment of duty. Consequently, the demand with interest be limited to the normal period of limitation. Under these circumstances, penalty is also not imposable. The impugned order is modified to the extent of setting aside the demand for the extended period of limitation and the demand for normal period is upheld with interest. As issue pertains to interpretation of law, no penalty is imposable. Appeal is partly allowed.
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Indian Laws
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2024 (11) TMI 1123
Challenge to insertion of the words socialist and secular in the Preamble to the Constitution of India by the Constitution (Forty-second Amendment) Act in 1976 - retrospectivity of the insertion in 1976, resulting in falsity as the Constitution was adopted on the 26th day of November 1949 - whether word secular was deliberately eschewed by the Constituent Assembly, and the word socialist fetters and restricts the economic policy choice vesting in the elected government? HELD THAT:- The fact that the writ petitions were filed in 2020, forty-four years after the words socialist and secular became integral to the Preamble, makes the prayers particularly questionable. This stems from the fact that these terms have achieved widespread acceptance, with their meanings understood by We, the people of India without any semblance of doubt. The additions to the Preamble have not restricted or impeded legislations or policies pursued by elected governments, provided such actions did not infringe upon fundamental and constitutional rights or the basic structure of the Constitution. Therefore, there are no legitimate cause or justification for challenging this constitutional amendment after nearly 44 years. The circumstances do not warrant this Court s exercise of discretion to undertake an exhaustive examination, as the constitutional position remains unambiguous, negating the need for a detailed academic pronouncement. There are no justification or need to issue notice in the present writ petitions, and the same are accordingly dismissed.
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