TMI Tax Updates - e-Newsletter
November 5, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. India’s E-commerce Export Revolution: Unlocking Global Opportunities

   By: Samanta Greene

2. INTEREST IS NOT PART OF THE OPEATIONAL DEBT

   By: DR.MARIAPPAN GOVINDARAJAN

3. Two different authorities cannot pass the two orders for confirming demand and dropping demand

   By: Bimal jain

4. GUIDELINES, PRECAUTIONS AND SAFEGUARDS FOR ARREST UNDER GST

   By: Dr. Sanjiv Agarwal

5. Date of online acknowledgement of appeal filed be considered as the date of filing appeal.

   By: Bimal jain

News

1. Gross and Net GST revenue collections for the month of Oct, 2024

2. Advisory for Biometric-Based Aadhaar Authentication and Document Verification for GST Registration Applicants of Ladakh

3. Government e Marketplace (GeM) launches 170 Seed Categories on the portal

4. Shri Piyush Goyal concludes successful visit to Kingdom of Saudi Arabia, strengthening India-Saudi Arabia economic ties at the 8th Edition of Future Investment Initiative

5. Monthly review of accounts of Government of India upto September, 2024 (FY 2024-25)

Notifications

Customs

1. 74/2024 - dated 30-10-2024 - Cus (NT)

Sea Cargo Manifest and Transshipment (Fourth Amendment) Regulations, 2024.

2. 73/2024 - dated 30-10-2024 - Cus (NT)

Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

GST - States

3. S.R.O. No. 997/2024 - dated 30-10-2024 - Kerala SGST

Supersession Notification G.O. (P) No. 68/2021/TAXES dated 7th September, 2021

4. CT-8-0008-2024-Sec-1-V-(CT) (20) - dated 20-9-2024 - Madhya Pradesh SGST

Seeks to bring in force provisions of various section of Madhya Pradesh (Second Amendment) Act, 2024

Income Tax

5. 05/2024 - dated 30-10-2024 - IT

Specifying Forms prescribed in Appendix-II of the Income Tax Rules 1962, to be furnished electronically under sub-rule (1) and sub-rule (2) of Rule 131 of the Income-tax Rules, 1962

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-PoD-1/P/CIR/149 - dated 4-11-2024

Investments in Overseas Mutual Funds/ Unit Trusts by Indian Mutual Funds

Income Tax

2. 14/2024 - dated 30-10-2024

Condonation of delay under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961 for returns of income claiming deduction u/s 80P of the Act for Assessment Year 2023-24

GST

3. Corrigendum to Circular No. 237/31/2024-GST - dated 25-10-2024

Corrigendum to Circular No. 237/31/2024-GST dated 15th October, 2024 issued vide F. No. CBIC-20001/6

DGFT

4. 29/2024-25 - dated 1-11-2024

Further abeyance of Public Notice No. 05/2024 dated 27.05.2024 until 31.12.2024.

5. 30/2024-25 - dated 1-11-2024

Amendment in 4.59 of Handbook of Procedures, 2023 and modification in Standard Input Output Norms (SION) M-1 to M-8 for export of jewellery

Customs

6. Instruction No. 27/2024 - dated 1-11-2024

Guidelines for Customs field formations in maintaining ease of doing business while engaging in investigation into tax evasion cases in import or export

7. Instruction No. 26/2024 - dated 30-10-2024

Disposal of gold - revised mapping of Customs jurisdictions to Focal Customs Commissionerate (FCC) and India Government (IG) Mints

8. 21/2024 - dated 30-10-2024

Mandatory additional qualifiers in import/export declarations in respect of Synthetic or Reconstructed Diamonds w.e.f 01.12.2024

Highlights / Catch Notes

GST

• Opportunity for personal hearing under GST Act: Mandatory if requested, not if ignored show-cause notice.

  Case-Laws - HC : The court held that u/s 75(4) of the GST Act, an opportunity for personal hearing must be granted if requested in writing by the person liable for tax or penalty, or if an adverse decision is contemplated against such person. However, if the person chooses not to appear before the authority after receiving the show-cause notice, neither filing a reply nor requesting a personal hearing, then after the final order is passed, they cannot claim that an opportunity for hearing was denied. The court dismissed the writ petition, upholding the principle that a personal hearing is an entitlement only when requested, and not providing it cannot be grounds for challenging the order if the person failed to make such a request.
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• Show Cause Notice Quashed for Violating Natural Justice; Case Remanded for Fresh Proceedings on Input Tax Credit Issue.

  Case-Laws - HC : Violation of principles of natural justice and the challenge to the show cause notice (SCN). The SCN was challenged on the ground that it was in the nature of a final order, and the order-in-original was passed without providing an opportunity for a hearing. The issue pertained to the availment of input tax credit (ITC) from a fictitious firm, resulting in a contravention of Section 16(2) of the GST Act. The High Court observed that the SCNs predetermined the demand and were worded identically, resembling an order-in-original, which cannot be sustained under the law. Consequently, the High Court quashed the impugned SCNs and the subsequent order dated 29.12.2023, remanding the matter back to the respondent authorities to initiate fresh proceedings in accordance with the law within twelve weeks from the receipt of the order's copy. The petition was allowed by way of remand.
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• High Court Upholds CGST Act's Restrictions on ITC Refunds for Inverted Duty Structure, Validates Exclusions for Exempt Services.

  Case-Laws - HC : The High Court held that Section 17(2) of the CGST Act is not ultra vires Article 14 of the Constitution to the extent it restricts refund under the inverted duty structure. The petitioner does not have a vested right to claim refund of accumulated Input Tax Credit on goods and services due to the inverted duty structure under the first proviso to Section 54(3) of the CGST Act. The restrictions imposed on the petitioner on availing credits used for exempted services u/s 17(2) and claiming refund of taxes on inputs and input services under the first proviso to Section 54(3) are valid. The right to avail Input Tax Credit and the benefit of taxes paid on inputs and input services does not extend to exempted supplies. The petitioner, providing education services, falls under the category of fully exempt supply and is not entitled to Input Tax Credit refund. The legislature has rightly excluded supplies with Nil or exempted rate from the refund provision for the inverted rate structure u/s 54(3). As there is no constitutional or statutory entitlement to refund, the petitioner's claim for refund of ITC on exempt output services cannot be accepted. Consequently, the High Court dismissed the petition.
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• Taxpayer seeks refund of double GST & interest for late filing.

  Case-Laws - HC : Refund of double tax paid by petitioner along with interest for November and December 2020 sought. Non-filing of GSTR-3B from July to December 2020. Petitioner to claim refund by appropriate application to authority as Insolvency Resolution Professional obtained GST registration in petitioner's name, now suspended. Impugned order confirming levy of interest and penalty quashed due to lack of show-cause notice u/s 126(3) of Act denying opportunity of hearing. Matter remanded to adjudicating authority to issue fresh show-cause notice enabling petitioner to avail hearing opportunity within 12 weeks. Petition disposed by way of remand.
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• Lack of reasoning in court order violates principles of natural justice.

  Case-Laws - HC : The main order rejecting condonation of delay lacks reasons, violating principles of natural justice. It is a well-settled legal position that an affidavit-in-reply cannot supplement the main order under challenge by assigning reasons when the main order itself does not contain any reasons. The Supreme Court has emphasized the need for courts, quasi-judicial, or administrative authorities to provide reasons for their orders to enable higher forums or courts to consider such reasons when the order is challenged. The impugned order dated 12.06.2023, devoid of any reasoning, is liable to be quashed and set aside. Consequently, the matter is remanded back to the respondent to pass a fresh order with detailed reasons in accordance with the law.
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• Utility companies' ancillary services under scrutiny for tax exemption eligibility.

  Case-Laws - HC : Dispute centered on whether exemption granted for transmission or distribution of electricity extends to ancillary services offered by utility companies. Court ordered stay on penalty proceedings until Supreme Court delivers judgment on exemption applicability to ancillary services. If ruled against assessee, penalty imposition to be independently evaluated based on governing principles. Petitions disposed, maintaining status quo on payments and penalty proceedings pending Supreme Court's final decision.
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Income Tax

• Mandatory e-filing of Forms 3CEDA & 3C-O for Advance Pricing Agreement rollback & Research & Development approval from Oct 31, 2024.

  Notifications : This notification specifies that Form 3CEDA (Application for rollback of an Advance Pricing Agreement) and Form 3C-O (Application form for approval under sub-section (1) of section 35CCC of the Income-tax Act, 1961) prescribed in Appendix-II of the Income Tax Rules 1962 shall be furnished electronically and verified as per sub-rule (1) of Rule 131 of the Income-tax Rules, 1962. The notification comes into effect from 31st October 2024.
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• Extension for co-op societies to claim 80P deduction for delays in account audits for AY 2023-24.

  Circulars : This circular relates to condonation of delay under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961 for returns of income claiming deduction u/s 80P for the Assessment Year 2023-24. The Central Board of Direct Taxes received applications from co-operative societies seeking condonation of delay in furnishing returns due to delay in getting accounts audited under respective State Laws. To mitigate genuine hardship, the Board exercised powers u/s 119 and extended the applicability of Circular No.13/2023 dated 26.07.2023 to AY 2023-24, subject to conditions stipulated therein. The circular aims to provide relief to assessees facing delays in filing returns claiming deduction u/s 80P.
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• Foreclosure Premium for Loan Restructuring Allowed as Business Expenditure Under Income Tax Act Section 37(1.

  Case-Laws - HC : Expenditure incurred for payment of foreclosure premium for restructuring loan and obtaining fresh loan at a lower rate of interest is allowable as business expenditure u/s 37(1). The pre-closure premium can be claimed as revenue expenditure u/s 37. The foreclosure of the loan to contain exorbitant charges stems from a business decision and commercial expediency governing the assessee's business dealings. An assessee can decide the best way to conduct business and maximize profits, subject to compliance with the law. The decision in Overseas Sanmar Financial Limited, where foreclosure premium was allowed as business expenditure on similar facts, has attained finality as it was not challenged by the Income-Tax Department. The High Court ruled in favor of the assessee.
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• Seized Materials Influence Tax Assessments Timing; Non-compliance Doesn't Invalidate; Separate Satisfaction Notes Required.

  Case-Laws - HC : The key points from the legal text are: Section 153A assessment - Limitation period applies based on when seized materials were handed over to the Assessing Officer (AO), not the search date. Despite 60-day limit in Section 132(9A) for handing over seized assets, non-adherence does not invalidate assessment if within extended limitation u/s 153B(1) proviso. Validity of satisfaction notes u/s 153C - Separate notes recorded for each year, concluding seized materials pertained to assessee and impacted income. Satisfied threshold u/s 153C(1) despite not explicitly mentioning all earlier years. Transfer order u/s 127 - Mixed questions of fact and law involved in determining if consent/consultation requirements were met. No findings recorded due to lack of pleadings. Addition u/s 69 read with 115BBE - Applicable for unexplained investments not recorded in books, even if no books maintained. Computation of income and tax liability upheld.
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• Cash incentives accrue on claim submission date, not actual receipt - rules High Court, siding with assessee over tax dept.

  Case-Laws - HC : The High Court held that cash incentives accrue to the assessee on the date when the application for claim is submitted to the Competent Authority, and not from the date of actual receipt or disbursement of the incentive. This view aligns with the court's earlier decision in a similar case. The reference was decided in favor of the assessee and against the Revenue authorities regarding the timing of accrual recognition for cash incentives.
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• Capital gains tax on property from family settlement calculated from original acquisition date; taxpayer wins appeal.

  Case-Laws - HC : Capital gains computation - cost of acquisition relates back to date of transfer through will/family settlement to beneficiary. Determination of indexed cost of acquisition for residential property acquired through family settlement. Additional evidence not admissible before ITAT without following rules. Family settlement is not a transfer, cost of acquisition relates back to previous owner's acquisition. Family settlement need not be registered if recording prior arrangement. For capital gains, cost inflation index calculated from year property acquired by previous owner through registered deed. Family arrangement does not involve transfer, hence no capital gains tax. Calculation based on indexed cost from previous owner's acquisition date, even if will disregarded. Order of CIT(A) upheld, decided in favor of assessee.
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• Court Rules AO Lacked Evidence for Reopening 2013-14 Assessment on Cubical Shares; No Proof of Undisclosed Income Found.

  Case-Laws - HC : The High Court held that the Assessing Officer (AO) lacked sufficient material or evidence to reopen the assessment u/s 147 for the Assessment Year 2013-14 in respect of transactions involving shares of Cubical. The notice u/s 148A(b) and order u/s 148A(d) failed to demonstrate that the AO possessed books of account, documents, or evidence revealing that the assessee's income from Cubical transactions, treated as capital gains, had escaped assessment. The mere allegation of bogus profits from Cubical shares and the tabular statement reflecting figures did not substantiate that the income was undisclosed or a camouflage. Without concrete evidence suggesting the Cubical transactions were bogus, the amount of Rs. 30,71,263/- could not be included as income escaping assessment. Excluding this amount, the remaining income from Gemstone share transactions fell short of the Rs. 50,00,000/- threshold for reopening assessments beyond three years. Consequently, the court decided in favor of the assessee.
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• Transfer of salary arrears to pension fund: Can tax be deducted at source?

  Case-Laws - HC : Deduction of tax from salary arrears appropriated for transfer to pension corpus set up under pension regulations. Constitutionality of Explanation to Section 17(2)(ii)(c) of Income Tax Act 1961 and relevant circulars challenged. High Court held the issue identical to previous case, extended liberty to petitioners to make requests for determination of tax deduction rate. Interim injunction to continue till specified date or disposal of representations. For house rent allowance arising from bipartite settlement, same direction applied as the legal position is identical.
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• Penalty for Missing Vouchers Overturned; ITAT Rules Disclosure and Reported Gains Sufficient to Nullify Penalty.

  Case-Laws - AT : The assessee was penalized u/s 271(1)(c) for addition of sale consideration due to lack of vouchers. The CIT(A) partly confirmed the addition for want of vouchers. The assessee argued that no penalty is maintainable as the transaction was truly disclosed, and long-term capital gains were reported. The ITAT held that the CIT(A) restricted the addition after examining the evidence, indicating the assessee succeeded partially. The AO imposed the penalty solely for non-submission of supporting vouchers. Relying on the CAFCO SYNDICATE SHIPPING CO. case, the ITAT ruled that penalty cannot be imposed for non-furnishing evidence as it does not amount to concealment of income. Consequently, the penalty levied by the AO was deleted, and the assessee's grounds were allowed.
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• Tribunal Rules on Interest Income Taxation and Penalty Amid Ownership Dispute Over Fixed Deposit Funds.

  Case-Laws - AT : The Appellate Tribunal adjudicated on the issue of addition of interest income and penalty u/s 271(1)(c). The assessee contended that the interest income from a Fixed Deposit (FD) with the State Bank of India never crystallized due to a legal dispute over the ownership of the funds. The Tribunal held that where the ownership itself is in question, the decision to delete the addition becomes questionable. The assessee cannot be permanently excluded from taxation on interest earned from the FD. However, the assessee cannot be taxed on an asset over which it does not have conclusive ownership. The issue of final ownership is yet to be decided by the court. The Tribunal directed the Assessing Officer to re-adjudicate the taxation of interest income once the High Court decides the ownership. The penalty u/s 271(1)(c) was set aside, and the Assessing Officer was directed to decide on the imposition of penalty based on the decision regarding taxation of interest income.
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• Advance Money Investment: Tax Benefit Confirmed for NHAI Bonds.

  Case-Laws - AT : The Appellate Tribunal held that the assessee is eligible to claim deduction u/s 54EC of the Income Tax Act for investment in bonds of the National Highway Authority of India (NHAI). The assessee had invested the advance money received towards the sale of a property in the specified NHAI bonds before the date of transfer. This is in line with Circular No. 359 and the Bombay High Court's decision in CIT vs. Subhash Vinayak Supnekar, which ruled that when an advance received under an agreement to sell a capital asset is invested in specified bonds, the benefit of Section 54EC is available. The Tribunal observed a direct nexus between the advance received and the investment made, thereby allowing the assessee's appeal.
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• Salaried Employee Denied Foreign Tax Credit Due to Late Filing Technicality.

  Case-Laws - AT : The assessee, a salaried employee working for Tessolve Semiconductor Pvt. Ltd. and Tessolve Inc., earned income from salary, house property, capital gains, dividend, and interest. The assessee claimed foreign tax credit, which was denied by the CPC due to the late filing of Form 67 along with the return of income u/s 139. The Tribunal, relying on a previous Bangalore Bench decision, held that Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67. Filing Form 67 is a directory requirement, and the DTAA overrides the provisions of the Act. The Tribunal directed the Assessing Officer to allow Foreign Tax Credit after due verification of Form 67, allowing the assessee's appeal for statistical purposes.
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• Tax credit allowed despite delayed filing of Form 67; DTAA overrides domestic provisions.

  Case-Laws - AT : The Tribunal held that Rule 128(9) does not provide for disallowance of Foreign Tax Credit (FTC) in case of delay in filing Form No. 67. Filing of Form No. 67 is a directory requirement, and the Double Taxation Avoidance Agreement (DTAA) overrides the provisions of the Act and Rules. The issue was not debatable, and there was only one possible view. In such circumstances, proceedings u/s 154 of the Act can be resorted to, even if it involves a long-drawn process of reasoning. The Assessing Officer was directed to give credit for foreign tax as per Form 67 filed by the assessee prior to filing the appeal before the Commissioner of Income Tax (Appeals), after due verification.
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• Tax Deduction Valid if New Home Payment Completed Before Registration, Court Rules in Favor of Assessee.

  Case-Laws - AT : The case pertains to the determination of the date of "purchase" for claiming deduction u/s 54F of the Income Tax Act. The issue revolves around whether the assessee has purchased the new house property within the stipulated time limit of 24 months from the date of transfer of the capital asset. The assessee had paid the entire sale consideration and obtained possession of the property on the same day, albeit the registration was delayed beyond the prescribed time limit. The Delhi High Court in Balraj's case held that deduction u/s 54 should not be rejected merely due to pending registration if the consideration is paid. The Karnataka High Court in Sambandam Udaykumar's case also ruled in favor of the assessee, stating that the benefit u/s 54F cannot be denied if the entire payment is made, even if the registered sale deed is executed after the stipulated period. The ITAT decided in favor of the assessee, considering that the condition precedent for claiming deduction is the investment of capital gains in purchasing or constructing a residential house, and mere delay in registration should not lead to denial of the benefit.
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Customs

• India Updates Gold Handling: Customs Zones Realigned for Efficient Processing at IG Mints in Mumbai and Kolkata.

  Circulars : This instruction revises the mapping of Customs jurisdictions to Focal Customs Commissionerates (FCCs) and India Government (IG) Mints for disposal of seized/confiscated gold of 24 carat purity. Due to operational requirements of SPMCIL, seized/confiscated gold from Customs Zones in Telangana and Andhra Pradesh will now be lifted and processed by IG Mint, Mumbai instead of IG Mint, Hyderabad. The updated mapping table shows the IG Mints, corresponding FCCs, and mapped Commissionerates. Kolkata IG Mint covers Customs Zones of Kolkata, Patna, and CGST Zones of Bhubaneshwar, Guwahati. Mumbai IG Mint covers Customs Zones of Ahmedabad, Delhi, Mumbai, Bengaluru, Chennai, Tiruchirappalli, and CGST Zones of Thiruvananthapuram, Bhopal, Meerut, Nagpur, Pune, Hyderabad, Vishakhapatnam. Other aspects of previous instructions remain unchanged.
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• New import/export rules for synthetic diamonds from Dec 2024 - declare production method for faster clearance.

  Circulars : Circular mandates additional qualifiers for import/export declarations of synthetic or reconstructed diamonds effective 01.12.2024 to improve assessment and facilitate clearance. Importers/exporters must declare method used for producing these diamonds - Chemical Vapour Deposition (LGD001), High Pressure High Temperature (LGD002), or Other (LGD003) under CTHs 71042110, 71042120, 71049110, 71049120. Providing this information enhances assessment quality, avoids queries, and increases trade facilitation. Public notice to guide trade must be issued. Difficulties in implementation to be reported to the Board.
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• Extended deadlines for Sea Cargo Manifest filing: Nov 15 '24, Nov 30 '24 & Jan 15 '25 respectively.

  Notifications : The notification amends the Sea Cargo Manifest and Transshipment Regulations, 2018, extending the deadlines for compliance with certain provisions. The due dates for Sr. No. 4, 5 and 6 in the Table after FORM-XII have been revised to 15.11.2024, 30.11.2024 and 15.01.2025 respectively. The amendment regulations are called the Sea Cargo Manifest and Transshipment (Fourth Amendment) Regulations, 2024 and come into force on the date of publication in the Official Gazette.
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• New import tariff values for edible oils, gold, silver, brass scrap & areca nuts effective 31/10/24.

  Notifications : This notification from the Central Board of Indirect Taxes and Customs under the Ministry of Finance revises the tariff values for import of certain goods like edible oils, brass scrap, areca nuts, gold, and silver. Table 1 specifies the tariff values per metric ton for various forms of crude and refined palm oil, crude soya bean oil, and brass scrap. Table 2 prescribes tariff values for import of gold in different forms like bars, coins, and findings, as well as silver in the form of bars, coins, and semi-manufactured items. Table 3 maintains the existing tariff value for import of areca nuts. The revised tariff values are effective from 31st October 2024.
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• Exemption Continuity for EOUs in Aquaculture: Notification 196/1994 Invalidates Customs Bank Guarantees.

  Case-Laws - HC : Notification 188/93-Cus extended exemption to 100% EOUs for import of specified goods, including raw materials, for use in integrated aquaculture farms and export of farm products. Notification 183/93-Cus amended Notification 13/1981, appearing to restrict exemption for aquaculture units. However, Notification 188/93-Cus maintained exemption during the interim period till rescinded by Notification 196/1994. Clause 9 of Notification 196/1994 ensured seamless continuity of exemption granted under Notification 13/1981, including the interim period, rendering invocation of bank guarantees by Customs erroneous. Section 159A of Customs Act inapplicable due to contrary intention expressed in Notification 196/1994 regarding continuance of exemption benefits.
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• Importers Granted Concessional Duty on Scrap; Tribunal Rules No Evidence of Defective Classification.

  Case-Laws - AT : The appellants imported 251.300 MTs of re-rollable scrap on a high sea sales basis and classified it under CTH 7214 1090 as re-rollable scrap. However, the Department treated it as defectives and seconds, denying the benefit of Customs Notification No. 12/2012-Cus. The Tribunal held that seconds and defective steel products refer to non-standard dimensions or downgraded products with surface defects and internal faults. If the imported cargo is meant for sale as defective or second goods, the notification benefit can be denied. Since there was no allegation or finding that the appellants disposed of the cargo as such, and considering they are manufacturers regularly importing scrap for melting and re-rolling, the imported cargo cannot be treated as seconds and defectives. Therefore, the appellants are eligible for the concessional rate of duty under Notification No. 12/2012-Cus. at Sl.No. 330.
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• Dispute Over Valuation of Imported Aluminum Scrap Sent for Re-evaluation After Improper Rejection of Self-assessed Value.

  Case-Laws - AT : The case pertains to the rejection of self-assessed value of imported aluminium scrap and determination of the method for valuation. The key points are: rejection of the transaction value declared by importers in Bills of Entry is permissible u/s 14 of the Customs Act and Valuation Rules if the proper officer has reasonable doubts about its truth or accuracy, even without payment of additional consideration. The proper officer followed due procedure by recording reasons and communicating them to importers. The Commissioner (Appeals) erred in holding that transaction value could not be rejected. After rejecting the declared value, the Deputy Commissioner was required to re-determine the value as per the Valuation Rules. However, the reasoning for applying Rule 5 was cryptic and not examined by the Commissioner (Appeals). Hence, the matter is remitted to the Deputy Commissioner for re-determining the value in accordance with the Customs Act and Valuation Rules.
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• Dispute Over Customs Duty on Poppy Seeds: Tribunal Rules Against Revenue's Allegations of Undervaluation.

  Case-Laws - AT : The case pertains to the demand for differential duty of customs on the import of poppy seeds, alleging undervaluation. The respondent's declared price for poppy seeds imported from Turkey was significantly lower compared to other importers. The Tribunal relied on its previous decision in Commissioner of Customs (Port), Kolkata v. Sawetri Trading Company, where it observed that if the transaction values of contemporaneous imports were accepted by the revenue, the same values should have been used for comparison purposes in the present case. Additionally, the Tribunal cited the case of M/S CHIRAG INTERNATIONAL VERSUS C.C. KANDLA, which held that the enhancement of price and consequential demand, interest, etc., are not sustainable. Consequently, the Tribunal set aside the impugned order and allowed the appeal, deciding against the revenue.
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• Tribunal Rules E-rickshaw Parts Misclassified, Dismisses Revenue Appeal Due to Lack of Evidence and Unjust Value Enhancement.

  Case-Laws - AT : The case pertains to the classification of imported goods declared as "Spare Parts of E-rickshaw" by the respondent. The lower authority classified the goods under CTH 8703.80, covering vehicles propelled through a motor powered by a battery. However, the Tribunal held that the imported goods, if assembled, would not provide the basic function of propulsion required for classification under CTH 8703.80. Referring to the Twinkle Tradecom case, the Tribunal stated that for a machine or vehicle's essential characteristics, the parts involved in manufacturing should fulfill the basic principle of that vehicle or machine. Since the mis-declaration of description, classification, and value alleged by the Department was not established, the Tribunal ruled that the imported goods were not liable for confiscation. The Revenue's appeal was dismissed, and the enhancement of value without following due process, the Customs Valuation Rules, 2007, and principles of natural justice was deemed unsustainable.
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IBC

• EBKray Platform Mandated for Liquidation Asset Sales to Boost Transparency and Participation, Launching November 2024.

  Circulars : This circular mandates the use of a centralized electronic listing and auction platform, eBKray, for the sale of assets under the liquidation process. Key points are: Liquidators must list all unsold assets on eBKray, providing comprehensive details like photographs, videos, and coordinates. For ongoing cases, assets must be listed within 7 days of submitting the asset memorandum. Liquidators may use eBKray for auctions in all ongoing cases from the circular's effective date of November 1, 2024. The platform aims to enhance transparency, increase bidder participation, streamline operations, and maximize creditor returns through advanced technology. Initially deployed as a pilot, it will be improved based on usage experience before full-fledged rollout. The circular is issued u/s 196 of the Insolvency and Bankruptcy Code.
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Indian Laws

• Insurer's Claim Rejection Overturned Due to Lack of Evidence on Undisclosed Policies; Ordered to Pay with Interest.

  Case-Laws - SC : Insurance claim repudiation is governed by Section 45 of the Insurance Act, 1938, barring questioning of policies after a stipulated period unless proven by the insurer. The burden rests on the insurer to establish materiality of suppressed facts and insured's knowledge for justifying repudiation. Insurance contracts demand utmost good faith (uberrimae fidei), requiring disclosure of previous policies. Materiality depends on whether prudent insurers would be affected in risk assessment or premium fixation. The insurer failed to provide documentary evidence proving the deceased insured possessed multiple undisclosed policies from other companies. Consequently, the repudiation was held unjustified, and the insurer was directed to pay the claim amounts with interest.
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Service Tax

• Court Quashes Order for Lack of Reasoning, Remits Service Tax Dispute on Immovable Property Rentals for Reconsideration.

  Case-Laws - HC : Impugned order suffered from lack of reasoning regarding variation in service tax estimate between declarant/petitioner and designated authority. 50% of demand confirmed, with petitioner submitting lessee paid said amount eligible for set-off under Sabka Vishwas Scheme. Court held petitioner liable for service tax on immovable property rentals from 2007 under Finance Act, 1994, though lessees unsuccessfully challenged levy before various High Courts. Supreme Court ordered lessees to pay 50% property tax despite not being liable under Finance Act. Impugned order passed by two officers, one not hearing petitioner, violating natural justice. Circular on Sabka Vishwas Scheme unclear on appropriating lessee's deposited amount towards declarant's liability and refund mechanism. Court quashed impugned order, remitting case for fresh orders on merits due to element of doubt.
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• Service tax only on service part, not goods in works contracts - Larsen & Toubro ruling.

  Case-Laws - AT : Service tax on works contracts and the taxability of the value of goods used in such contracts. It clarifies that service tax can only be levied on the service component, not the goods component, of works contracts u/s 65(105)(zzzza) of the Finance Act, 1994. Other clauses of Section 65(105) cover only services simpliciter and cannot be invoked for works contracts, as held in Larsen & Toubro case. The demand of service tax u/s 65(105)(zzzh) for construction of residential complexes rendered as works contracts cannot be sustained. The Tribunal concludes that the demand, interest, and penalties on the appellant cannot be upheld and need to be set aside.
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• Service Tax Dispute: Short Payment and Evasion Claims Lead to Upheld Penalties and Dismissed Appeal by Tribunal.

  Case-Laws - AT : Dispute regarding non-payment/short payment of service tax, tax demand and interest u/ss 73(2) and 75, penalties u/ss 77 and 78 of the Finance Act, 1994, and extended period for demand invoked under the proviso to Section 73(1). Both authorities found no fault with non-payment/short payment of service tax. Appellant admitted short payment, differing only on deductions claimed for provident fund amounts, which the adjudicating authority excluded as not part of the present show cause notice. Service tax rightly demanded and confirmed after allowing deductions for services provided before 16.06.2005 and deducting service tax included in gross amount. Appellant aware of providing taxable services, short-paying service tax, issuing invoices indicating payable service tax, and collecting it from service recipients. Appellant did not file ST-3 returns during the entire period, suppressing information with intent to evade taxes. Extended period of limitation and penalties imposed cannot be disputed. Assessee's appeal dismissed by CESTAT (Appellate Tribunal).
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• Tribunal Rules Service Tax on Reimbursement Charges by Customs Agent Unjust, Citing Pure Agent Role and Direct Service Provision.

  Case-Laws - AT : The appellant, a customs house agent (CHA), collected reimbursement charges from clients for services availed from various service providers. The department demanded service tax on these reimbursed charges, contending they were part of business auxiliary services provided by the appellant. However, the Tribunal held that the appellant merely recovered actual expenses incurred on behalf of clients, with a small commission added. The nature of services remained unchanged, rendered by the service providers to the clients. The appellant acted as a pure agent, and the commission did not alter the character of services. Consequently, the Tribunal set aside the impugned order, ruling that service tax demand on reimbursed charges was legally unsustainable.
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Central Excise

• Appeal dismissed over misunderstanding of remarks as remanding matter.

  Case-Laws - AT : The appeal challenged the legality of remanding the matter to the original authority and the legal authority of the Commissioner (Appeals) to do so during the relevant period. The Tribunal examined the impugned order and the appeal filed by the appellant in Form-4. It held that the Commissioner (Appeals) had not remanded the matter but had merely remarked that if challans evidencing deposit of service tax were produced, the amount already deposited may be adjusted against the demand. The Commissioner (Appeals) had upheld the order-in-original and rejected the appeal. The appellant's counsel had misunderstood these remarks as remanding the matter. The Tribunal found the impugned order correct and proper, dismissing the appeal.
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Case Laws:

• GST

• 2024 (11) TMI 43
  Seeking release of amount resumed/seized by respondent no. 2 - power to seize cash under Section 67 of the CGST Act - it was held by High Court that The present petition is required to be allowed and the respondents are liable to refund the money seized - HELD THAT:- In view of the submission that there is a conflict between the interpretation adopted by the Delhi High Court and the Madhya Pradesh High Court, issue notice on the application seeking condonation of delay as well as on the Special Leave Petition.

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• 2024 (11) TMI 42
  Maintainability of petition - availability of alternative remedy of appeal - Reimbursement of extra GST amount paid @ 6% from 01.01.2022 to 30.09.2022 along with interest - grievance of the petitioner is that despite the aforesaid enhancement in the rate of GST bu N/N. 15/2021 CT(R) dated 18.11.2021, from 01.01.2022, the respondents are paying the running bills with 12% GST and the petitioner is paying 18% GST - HELD THAT:- Needless to say that no disputed question of facts are involved in this case, therefore, the petitioner cannot be relegated to the Dispute Resolution Form as provided under the agreement - Respondent No.4 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 41
  Principles of natural justice - Entitlement to personal hearing under Section 75 of GST Act - after receipt of the show-cause notice, petitioner chose not to appear before the authority to file a reply or to make a request for personal hearing - HELD THAT:- Sub-section (4) of Section 75 of GST Act says that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with the tax or penalty or any adverse decision is contemplated against such person. The Division Bench of this Court has held that the opportunity of hearing means persons opportunity of hearing and if such personal opportunity of hearing is not provided then the order is unsustainable and liable to be set aside. As per sub-Rule 4 an opportunity of personal hearing shall be granted where a request is received in writing from a person chargeable with the tax or penalty. Even if the request is not received in writing, the oral request is also liable to be accepted provided the person appears and makes a request for grant of an opportunity of hearing, then only he can plead or claim an opportunity of personal hearing. When the person after receipt of the show-cause notice choose not to appear before the authority to file a reply or to make a request for personal hearing, then after passing the final order, he cannot allege that an opportunity of hearing has been denied to him. This Writ Petition stands dismissed.

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• 2024 (11) TMI 40
  Violation of principes of natural justice - Challenge to SCN - SCN challenged on the ground that the impugned show cause notices are in nature of final order and the order-in-original is passed without giving an opportunity of hearing - Availment of ITC from fictitious firm i.e. M/s. Magnifico Minerals Private Limited - contravention of provisions of Section 16(2) of the GST Act - HELD THAT:- On perusal of the show cause notices dated 24.11.2023 and 28.12.2023, it is apparent that the respondent No. 2 has predetermined the demand while issuing the show cause notice on the basis of the reply filed by the petitioner and pursuant to the intimation, the tax ascertained is payable under Section 75 (4) of GST Act in FORM GST-DRC-01A. It is pertinent to note that in the grounds of show notice, there is no mention with regard to the word show cause notice except on the front page FORM DRC-01 is printed - the impugned show cause notices are issued by the respondent No. 2 in form of the order-in-original which cannot be sustained in the eye of law. Both the show cause notices are worded identical based on the same facts and therefore, it would be in the interest of justice to quash the same and remand the matter back to the respondents-authorities. Consequently the order dated 29.12.2023 passed by the respondents also would not survive as show cause notice are quashed, so as to enable the respondent No. 2 to issue the fresh show cause notice - impugned show cause notices and SCN set aside - matter is remanded back to the respondent No. 2 to initiate the fresh proceedings in accordance with law within a period of twelve weeks from the date of receipt of copy of this order. Petition allowed by way of remand.

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• 2024 (11) TMI 39
  Constitutional validity of section 17 (2) of the CGST Act - ultra vires Article 14 of the Constitution of India to the extent it restricts the refund under the inverted duty structure - vested right of the petitioner to claim refund of accumulated Input Tax Credit of goods and services on account of inverted duty structure under first proviso to section 54 (3) of the CGST Act - restrictions imposed on the petitioner on availment of credits used for exempted services under section 17 (2) of the CGST Act and claiming refund of taxes on inputs and input services under the first proviso to section 54 (3) of the CGST Act - right to avail Input Tax Credit - benefit of taxes paid on both inputs and input services - permission to apply for registration and file GST returns with effect from 1st July 2017 to avail Input Tax Credit - HELD THAT:- Sub-clause (ii) of sub-section (3) clearly stipulates that the refund of the input tax credit could not be payable even when the credit has accumulated on account of credit of tax or inputs being higher than the rate of tax on output supplies other than fully exempt supplies. Admittedly, the education service provided by the petitioner and other educational institution falls in category of fully exempt supply and therefore, the petitioner would not be entitled to the input tax credit. Sub-clause (ii) of section (3) applies to the inverted rate structure only whereas, in the zero rated supply, Nil Rated supply or exempted supply, the same would not be applicable as the very basis of inverted rate structure would not be applicable as the entire GST paid on the inputs would be liable to be refunded in such cases. The legislature has rightly provided that the tax credit which has accumulated on account of rate of tax on inputs being higher than the output tax would not cover the supplies having Nil rate or exempted supplies to entitle the service provider or the manufacturer to avail the refund of the input tax credit. When the provisions of Section 54 (3) of the GST Act provides for refund in terms of the first proviso to section 54 (3) categories which are governed by clauses (i) and (ii) and there is no constitutional entitlement to seek a refund as in clause (i) of the first proviso allowed a refund of the unutilized ITC in the case of zero-rated supplies made without payment of tax where as under clause (ii) of the first proviso, refund of unutilized ITC is available where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies other than inputs utilised for output having Nil rate or exempted. Therefore, when there is neither a constitutional guarantee nor a statutory entitlement to refund, the claim of the petitioner to grant refund of ITC on output service exempt from tax cannot be accepted. Thus, no interference is called for by granting any relief as prayed for and the petition is accordingly dismissed.

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• 2024 (11) TMI 38
  Refund of double tax paid by the petitioner along with interest for the month of November and December, 2020 - non-filing of GSTR-3B for the period of July 2020 to December, 2020 - HELD THAT:- It is for the petitioner to claim the refund by making appropriate application before the appropriate authority in respect of the amount of tax paid by IRP as the IRP had obtained the GST registration number as per the Notification No. 11/2020 in the name of the petitioner only which has now been suspended. So far as levy of interest and penalty is concerned, it is an admitted position that the petitioner was not served with any show-cause notice as required by section 126 (3) of the Act to provide an opportunity of hearing. Therefore, the impugned order so far as confirms levy of interest and penalty upon the petitioner is concerned, the same is hereby quashed and set aside and the matter is remanded back to the adjudicating authority i.e. respondent No. 2 to issue a fresh show-cause notice to the petitioner so as to enable the petitioner to avail opportunity of hearing as provided under sub-section (3) of section 126 of the GST Act. Such exercise shall be completed within a period of Twelve weeks from the date of receipt of copy of this order. Petition disposed off by way of remand.

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• 2024 (11) TMI 37
  Rejection of condonation of delay - main order does not contain any reasons - violation of principles of natural justice - HELD THAT:- It is well settled legal position that affidavit-in-reply cannot supplement the main order, which is under challenge by assigning the reasons when the main order does not contain any reasons. The Hon ble Apex Court in various decisions has emphasized the need for giving reasons by the Court or quasi-judicial or administrative authority so as to see that when such order is challenged before the higher Forum or before the Court, then the Court can consider such reasons and justification for passing such order - reliance can be placed in SANT LAL GUPTA VERSUS MODERN CO-OPERATIVE GROUP HOUSING SOCIETY LTD. [ 2010 (10) TMI 194 - SUPREME COURT] . The impugned order, dated 12.06.2023 which is bereft of any reason is liable to be quashed and set aside and is accordingly quashed and set aside. The matter is remanded back to the respondent to pass afresh order giving detailed reasons in support of the decision, which may be taken in accordance with law - petition disposed off by way of remand.

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• 2024 (11) TMI 36
  Exemption claim - composite service offered to the consumers - whether the exemption granted to transmission or distribution of electricity by an electricity transmission or distribution utility company would take in the ancillary services offered to its consumers? - stay on penalty proceedings - HELD THAT:- The writ petitions stand closed, leaving the parties to abide by the Hon ble Supreme Court judgment and status quo be maintained with respect to the payments and also the penalty proceedings till judgment is delivered by the Hon ble Supreme Court in C.A. No. C.A. No. 006278 of 2019. The penalty proceedings will stand stayed till the final decision of the Hon ble Supreme Court in the matter of exemption regarding ancillary services, and if the issue is held against the assessee, then necessarily penalty will have to be independently considered, on the basis of principles governing imposition of penalties. Petition disposed off.

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• Income Tax

• 2024 (11) TMI 35
  Revision u/s 263 - Expenditure incurred for payment of foreclosure premium for restructuring loan and obtaining fresh loan at a lower rate of interest is allowable as business expenditure u/s 37(1) - Whether pre-closure premium can be claimed as revenue expenditure under Section 37? - HELD THAT:- In the present case, it has never been the case of the Revenue that the borrowing was deployed towards purchase of capital asset or purchase / acquisition of a capital asset on that the transaction itself should be viewed as being capital in nature. Such an angle does not find place in either the show-cause notice, order under Section 263 or order of the ITAT. Hence, we would prefer to answer the substantial questions of law based on the factual matrix of the transaction as emanating from the records. Simply put, the Commissioner of Income-Tax expressess in the order under Section 263 the question of payment of interest would not arise in a case where the loan has been pre-closed. There is no other reason on the basis of which he felt compelled to reverse the grant of claim under Section 37. These decisions are thus of no avail to the revenue. Tribunal in the case of Overseas Sanmar Financial Limited [ 2001 (2) TMI 303 - ITAT MADRAS-C] has dealt with the identical issue on similar facts. In that case as well, the issue that arose was allowability of foreclosure premium on loans. That assessee had taken certain fixed term loans at high rates of interest. During the tenure of those loans, since fresh loans had been advertised by financial institutions with lower rate of loans it negotiated the closure of the earlier loans on charge. That charge was claimed as business expenditure on account of the restructuring exercise. The assessing authority was of the view that the claim should be rejected as there was an enduring benefit to the assessee. The foreclosure of the loan to contain the exorbitant charges to be paid, stem from a business decision of the assessee and the commercial expediency that governs its business dealings. In Sassoon J. David and Co.Pvt Limited. [ 1979 (5) TMI 3 - SUPREME COURT] SC states succinctly that ordinarily it is for the assessing authority to decide whether any expenditure should be incurred in the course of his or its business. Such an expenditure may be incurred voluntarily and without any interest and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under Section 10(2) (xv) of the Act even though there was no compelling necessity income such expenditure. Hence it is for an assessee to decide what would be the best way of going about its business and maximising its profit subject to such acts being within the four corners of the law. Incidentally, the decision of the Tribunal in Overseas Sanmar Financial Limited (supra) has not been challenged by the Income-Tax Department and has attained finality. Decided in favour of assessee.

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• 2024 (11) TMI 34
  Assessment u/s 153A - possession of the seized materials or not? - period of limitation - assessee pointed out that the seized materials purportedly relating to the petitioner were handed over to the AO only on 20.11.2021, whereas the notices u/s 153A were issued prior thereto on 04.08.2021. Whether the assessment orders are barred by limitation? - contention was advanced on the ground that the seized materials were handed over to the jurisdictional assessing officer of the petitioner about eight months after expiry of the 60 day period prescribed in section 132(9A) - HELD THAT:- The text of sub-section (9A) uses the mandatory word shall with reference to the obligation of the authorized officer to hand over the seized assets to the assessing officer having jurisdiction over the person. Sub-section (9A) further provides that the assessing officer shall exercise powers exercisable under sub-sections (8) and (9) upon receipt of the seized materials. Subsection (9A) does not, however, stipulate or prescribe any consequences for non-adherence to the time limit of 60 days. There is also nothing in the text such as not later than 60 days or 60 days but not thereafter - to indicate that this 60 day limit is a long-stop date that cannot be extended. In this context, it is necessary to turn to other relevant provisions pertaining to an assessment or reassessment u/s 153C to consider the implications of non- adherence to the time limit u/s 132(9A). Last authorisation for search was executed in this case on 02.01.2021, which falls within financial year 2021-22. Since financial year 2021-22 is after the financial year commencing on 01.04.2019, the limitation period prescribed in the third proviso to sub-section (1), which is emphasised above in bold font, becomes applicable. As regards the person referred to in section 153C, the period of limitation is 12 months from the end of the financial year in which the last of the authorizations for search under section 132 was executed or 12 months from the end of the financial year in which the seized assets were handed over to the assessing officer having jurisdiction over the person concerned, whichever is later. Conspicuous by its absence in section 153B is any reference to the time limit prescribed in section 132(9A). The admitted factual position is that the seized materials were handed over to the assessing officer on 20.11.2021. Consequently, the end of the financial year in which the seized materials were handed over would be 31.03.2022. As per the second limb of clause (ii) of the 3rd proviso to section 153B(1), the time limit of 12 months would run from 31.03.2022 to 31.03.2023. The assessment orders were admittedly issued on 30.03.2023 or 31.03.2023. Therefore, the said assessment orders were issued within the period of limitation. Validity of satisfaction notes u/s 153C - This is a clear indication that, except to the extent expressly modified in section 153C, all the provisions of section 153A, including the block assessment and abatement of pending assessments, apply to the assessment or reassessment of persons referred to in section 153C subject to the caveat that the three conditions set out above in paragraph 31 are fulfilled. Whether all three conditions and, in particular, the third was satisfied warrants examination next. In the cases at hand, separate satisfaction notes were recorded in respect of each assessment year.These satisfaction notes were recorded on 24.02.2023 after the seized materials were received by the assessing officer of the petitioner. The satisfaction notes disclose that the assessing officer concluded that the seized materials pertain to the assessee and that they would have a bearing on the determination of her total income for assessment years 2018-19 to 2021-22 and other earlier years. Reference is made in the satisfaction notes to seizure of books of account, electronic devices and incriminatory materials in the premises of GOPL, AMN Earth Movers and Mr. Ram Prasath Reddy. The satisfaction notes expressly record that the materials will have a bearing as regards assessment years 2018-19 to 2021-22 but use the expression and other earlier years with regard to earlier periods. The inventory provided with the panchnamas mention the seizure of electronic devices, including data storage devices. Credits in the petitioner s bank accounts formed the basis for additions made in three financial years. By taking into account the satisfaction threshold, context and the block assessment scheme, including the abatement of pending assessments, on balance, conclude that there is no basis to hold that the seized materials had no bearing on the determination of the total income of the assessee or on the assessments. The satisfaction notes satisfy the requirements of section 153C(1). In this connection, except where there is patent inadequacy, also concur with the contention of learned senior standing counsel, who relied on Chandran Somasundaram [ 2022 (11) TMI 547 - MADRAS HIGH COURT] , that the sufficiency of reasons recorded in the satisfaction notes would not ordinarily be a basis for interference under Article 226. Legality of the transfer order u/s 127 - As petitioner contended that the ACIT, Cuddalore falls within the jurisdiction of CCIT-VI, Chennai and Principal CIT, Pondicherry and contended that the transfer order could not have been issued without the consent of or without consulting the Principal CIT, Pondicherry or CCIT-IV, Chennai - Apart from contending that this issue was not raised in the affidavit or grounds, learned senior standing counsel countered the contention by asserting that the PCIT-III is duly authorised. Even from the above narration, it is evident that mixed questions of fact and law are involved in determining whether the order under section 127 was issued after obtaining the consent of or consulting the persons concerned. Although several judgments were cited by learned counsel for the petitioner, the said judgments do not detract from the principle that mixed questions of fact and law cannot be decided in the absence of pleadings. In the absence of any prior objection in this regard coupled with the absence of pleadings/grounds, we are inclined to examine this objection and record findings. Addition u/s 69 r.w.s. 115BBE - In both Baladin Ram [ 1968 (8) TMI 4 - SUPREME COURT] and Bhaichand Gandhi [ 1982 (2) TMI 28 - BOMBAY HIGH COURT] the courts were dealing with section 68, which only applies to cash credits in the books of an assessee. By contrast, in these cases, section 69 was invoked and this provision applies to unexplained investments that are not recorded in books of account, if any, maintained by an assessee. The use of the expression if any in section 69 indicates that that it would also apply to unexplained investments in cases wherein the assessee does not maintain books of account, as in this case. In view thereof, section 69 read with section 115BBE is applicable in this case and the computation of total income and tax liability on such basis, wherever applicable, is in order.

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• 2024 (11) TMI 33
  Accrual of income - cash incentive accrues to the assessee on the date when the application for claim is made to the Competent Authority as held by ITAT - HELD THAT:- As it would be for the concerned officer to examine as to what are the cash incentives allowed in each quarter, but so far as the question is concerned, we confirm and take the same view as already taken by this Court in the earlier case of the respondent [ 1997 (8) TMI 60 - PUNJAB AND HARYANA HIGH COURT] and hold that it is on the date of submission of claim that the accrual of cash incentive would be recognized and not from the date of submission or receipt of cash incentive. The reference is accordingly answered in favour of the assessee-respondent and against the Revenue.

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• 2024 (11) TMI 32
  Capital gain computation - cost of acquisition would relate back to date of transfer through will to the beneficiary (son) - Determination of indexation cost acquisition of the residential house - residential house sold, has been the ancestral property of the family, and was acquired by the Appellant-Assessee as a result of memorandum of family settlement arrived at between the parties Admissibility of Additional Evidence by ITAT - Whether the additional evidence as produced by the Appellant-Assessee before the ITAT should have been considered by it? - As noticed that no Will was produced before the Assessing Officer and CIT(A), however, at the stage of Appeal before the ITAT, the Appellant-Assessee produced the Will which was considered by it. The ITAT has found that there was no application moved under Section 46-A of the Rules of 1962 and the additional evidence as well as grounds regarding the Will having been executed in favour of the Appellant-Assessee, could not have been considered. We are in agreement with the view taken by the ITAT in this regard. The provisions of the Act of 1961 are to be read as it is. No addition or subtraction can be made in the Rules of 1962 nor any principles of natural justice, where not applicable, can be applied, nor can any other provisions regarding equity be made applicable while construing the provisions of the Rules. It is an admitted position that there was a violation of Rules 46-A of the Rules of 1962 and therefore, such documents could not be taken into consideration. No reason has come forward for not placing the so-called Will during the time of assessment. Accordingly, question No.(i) is answered in favour of the Revenue and against the Appellant-Assessee. Determination of Cost of Acquisition and Indexed Cost for Capital Gains Tax - selection of date when the property was initially acquired by the previous owner OR date of the family settlement - In the present case, since there was admittedly a family settlement whereafter, it has been held by the ITAT that the assessee became the owner/title holder of the capital asset, then his case has to be examined in terms of Section 49 (i) of the Act of 1961. Thus, the said family settlement cannot be treated as transfer of property. The question as to whether the family settlement is required to be compulsorily registered is no longer res integra. The law was already settled by the Supreme Court in Sahu Madho Das s case [ 1955 (3) TMI 39 - SUPREME COURT] Thus, if the family arrangements records a previous settlement already arrived at between the parties which they are adhering to, the same would not require registration. Thus we find that the family settlement arrived at between the parties, which was duly available on record, which recorded the earlier settlement already arrived at between the parties was, therefore, a valid family settlement to be noticed for the purpose of computation and computation of capital gains in terms of Section 49 (1) (i) of the 1961 Act. The cost inflation index is to be calculated with reference to the year 01.04.1981 by treating the acquisition of the property as purchased by the father of the petitioner Permanand Mehra on 01.04.1963 through registered-deed dated 06.06.1963. Thus, we find that a family settlement is not required to be compulsorily registered. In the case of C.A. Natrajan [ 1973 (5) TMI 3 - MADRAS HIGH COURT ] it was held that a primary condition must be satisfied before a tax is levied on a capital gain. A family arrangement, in the interest of settlement, may involve movement of property or payment of money from one person to another. Several judgments have held that there is no transfer involved in a family arrangement. Therefore, there is no question of capital gains tax index under a family arrangement. Thus, even though the documents relating to Will may not have been accepted by the ITAT, still the calculation has to be done treating the indexation as on 01.04.1981 and merely because the family settlement was arrived in the year 2003 would not make any difference, and the order passed by the CIT (A), is therefore, found to be correct although the CIT (A) has applied Section 49 (i) (ii) of the Act of 1961. We, therefore, agree with the submissions of the senior learned counsel for the Appellant-Assessee that even if the existence of the Will may be ignored, so far as the Appellant-Assessee is concerned, he has become the holder of the property on the basis of a family settlement and the cost of acquisition shall be with reference to 01.04.1981 alone. The calculation, therefore, has to be done accordingly and the order passed by the CIT (A) was not required to be interfered with. Decided in favour of assessee.

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• 2024 (11) TMI 31
  Reopening of assessment u/s 147 - Time limit for notice u/s 149 - transactions in Cubical were bogus transactions - threshold limit of Rs. 50,00,000/- for reopening of an assessment ending prior to three years preceding the notice. HELD THAT:- AO seeks to reopen the assessment in respect of the AY 2013-14 ending prior to a period of three years. Admittedly, a notice u/s 148 of the Act in such cases can be issued only where the AO had in his possession, the books of account or other documents or evidence, which reveal that the income chargeable to tax that had escaped assessment amounts to or likely to the amount of Rs. 50,00,000/- or more. Insofar as the transactions of the sale of shares of Gemstone is concerned, it is apparent that the AO had the material which suggested that the petitioner s income chargeable to tax for the AY 2013-14, had escaped assessment. However, neither the impugned notice dated 25.05.2022 issued under Section 148A (b) of the Act nor the impugned order passed under Section 148A (d) of the Act indicates that the AO had any books of account or documents or evidence, which would reveal that the petitioner s income chargeable to tax, reflected as capital gains from the transactions in Cubical, had escaped assessment in the relevant AY 2013-14. As noted above, the impugned notice merely alleges that the assessee had taken bogus profits through the scrips of Cubical to the tune of Rs. 30,71,263/- which is a penny stock during the financial year 2012-13 . However, there was no material to suggest that any profit from sale and purchase of the said shares was made or had escaped assessment. The report annexed with the impugned notice dated 25.05.2022 was only related to Gemstone and it did not mention about Cubical. AO had also furnished a tabular statement which reflected the transactions entered by the petitioner in the financial year 2012-13. The third row of the said tabular statement in the impugned order mentions the value of the opening quantity, the value at which the quantity was bought, the sale quantity, and the value which resulted in the profit of Rs. 30,71,263/-. The said tabular statement did not mention that the quantities or values were in respect of the shares of Cubical. The tabular statement is merely a statement reflecting the figures which represented the transactions. However, even if it is assumed that the said tabular statement related to the transactions in respect of the shares of Cubical, the same does not suggest that the income as generated from the shares was bogus or a camouflage to reflect the undisclosed income as long term capital gains. The impugned order also does not reflect any material that would suggest that the assessee s income in respect of the transactions in Cubical, had escaped assessment. AO has merely mentioned Cubical as a penny stock. However, the fact that a stock is a penny stock (a stock of low value), absent of any other material or information led to the conclusion that the transaction in the said stock is not genuine or a subterfuge to bring the undisclosed income as capital gains in the books of account. In absence of any material or evidence with the AO at the material time to suggest that the transactions in Cubical were bogus transactions, the amount of Rs. 30,71,263/- relating to the transactions in Cubical could not be included in the amount suggested having escaped assessment. If the said amount of Rs. 30,71,263/- is excluded, the value of the sale transaction of the shares of Gemstone (Rs. 29,75,000/-) falls short of the threshold limit of Rs. 50,00,000/- for reopening of an assessment ending prior to three years preceding the notice. Decided in favour of assessee.

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• 2024 (11) TMI 30
  Reopening of assessment u/s 147 - Reasons to believe - tax the transaction of sale of land as income from profit and gains - scope of change of opinion - notice is issued within a period of four years - HELD THAT:- It is not in dispute that the very same transaction which is the subject matter of the reasons recorded i.e sale of agricultural land for consideration being share of the petitioner is the subject matter of scrutiny during the regular assessment by the AO and the entire details have been placed on record by the assessee during the course of the regular assessment. Merely because the impugned notice is issued within a period of four years of the date of assessment order, it cannot be said that the respondent can assume jurisdiction on the same facts having different opinion and therefore, in facts of the case, it is apparent that there is a mere change of opinion on part of the respondent AO to reopen the assessment which is not tenable in law as held in case of Commissioner of Income tax v. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ] wherein held AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the AO. Decided in favour of assessee.

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• 2024 (11) TMI 29
  Deduction of tax from out of the salary arrears which is appropriated for transfer to pension corpus set up in terms of appropriate pension regulations - Constitutionality of Explanation to Section 17 (2) (ii)(c) of the Income Tax Act 1961 and para 2 of Circular bearing Ref.FD/HOAT/CIR dated 02.03.2011 read with Circular bearing reference FD/01/2010 dated 06.01.2010 issued by the 4th respondent - HELD THAT:- There is no dispute on the position that the issue raised in these writ petitions is identical to the one considered [ 2019 (9) TMI 1118 - MADRAS HIGH COURT] in W.P.No.8101 of 2011 by order dated 06.09.2019 and hence the contents of that order may be read as part and parcel of the present order as well. The liberty granted at paragraph 7 as in that matter is extended to the present petitioners herein as well. Petitioner states that the petitioner will make requests before the authorities for determination of the rate of tax deduction, if any, within four weeks from the date of receipt of this order and they are permitted to do so. Upon receipt of the requests, the petitioners shall be heard and their representations will be decided in accordance with law within a period of six weeks from the date of receipt of the representations. Since in the present matter as well, there is an interim injunction which is presently in force, the injunction shall continue till 15th April 2025 or disposal of the representations whichever is earlier. Writ petition disposed in terms of this order. The only distinction in W.P.No.8564 of 2011 is that the issue relates to house rent allowance (HRA) arising from a bipartite settlement between the employees and the Punjab National Bank. As the position in law is identical to the other writ petitions, the same direction above.

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• 2024 (11) TMI 28
  Unexplained money u/s 69A - cash deposits as found in the savings bank account of the assessee - AR submits that the assessee has two lorries and the source for cash deposits are only from transport charges. The assessee was engaged in small transport business having no knowledge of income tax proceedings, could not appear before the authorities below. HELD THAT:- On perusal of the assessment order as well as impugned order, there was no assistance from the assessee to the notices issued by the AO as well as CIT(A). The business of the assessee is not in dispute and the cash deposits as found in the savings bank account are constitutes transport charges as also not in dispute. There was no evidence before us to claim presumptive assessment u/s 44AE of the Act and moreover, in our opinion giving lorry numbers are not sufficient to charge income under the provisions of section 44AE of the Act. AO is not acceptable as the assessment year is 15 years old and no purpose will serve in accepting the request of AR. Since the assessment year is 15 years old and there is no material evidence to show to determine the income of the assessee under the provisions of section 44AE of the Act, we deem it proper to direct the Assessing Officer to adopt 15% of the total addition shall be treated as income from business and the balance is deleted. Thus, the ground raised by the assessee is partly allowed.

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• 2024 (11) TMI 27
  Penalty u/s 271(1)(c) - addition of sale consideration for want of vouchers - CIT(A) confirmed the addition partly for want of vouchers - AR argued that no penalty is maintainable for non-furnishing the details as the assessee truly disclosed the transaction of the sale consideration and disclosed long term capital gains - HELD THAT:- CIT(A) on examination of the same, restricted the addition to the extent above which clearly establishes that the assessee succeeded in part before the ld. CIT(A) by producing relevant evidence in support of claim of expenditure. On perusal of the penalty order, the AO proceeded to impose penalty only on the ground for non-submission of supporting vouchers for expenditure. As discussed above, CAFCO SYNDICATE SHIPPING CO. [ 2007 (7) TMI 35 - HIGH COURT, MADRAS] held that penalty is not liable for non-submission of the vouchers. Respectfully following the same, we hold that no penalty could be imposed for non-furnishing evidence as it does not amount to concealment of income. Thus, the penalty imposed by the AO and confirmed by the ld. CIT(A) is liable to be quashed. Therefore, the penalty levied by the AO is deleted. The grounds raised by the assessee allowed.

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• 2024 (11) TMI 26
  Addition of interest income - Penalty u/s 271(1) - No ROI was filed - CIT(A) deleted these additions based on the assessee s contention that the interest income never crystallized in its hands due to legal dispute over the ownership of the funds in a Fixed Deposit (FD) with the State Bank of India HELD THAT:- In a situation where the ownership per se of the FD is in question, the decision of the Ld. First Appellate Authority in deleting the addition made by the Ld. AO becomes questionable. It is not the case of the assessee that it is not exigible for taxation qua interest earned from the said FD. Its basic case is that because by way of a Court Order, the ownership of the impugned FD has been taken away from it, no tax is payable by it. We also find force in the argument of the assessee, supported by relied upon case laws that it cannot be taxed in respect of an asset over which it does not has any conclusive ownership. The fact of the matter however remains that the issue of final ownership is yet to be decided by the court. The assessee therefore cannot say that it is permanently excluded for taxation qua interest earned from the said FD. To allay the apprehension of revenue, the assessee has filed during present proceedings an affidavit, principally to the effect that in the event of ownership of the said FD vested back to him, it shall be liable for payment of due taxes on the interest income for the relevant period. Accordingly, we set aside the order of the Lower Authorities and direct the assessing officer to consider and re adjudicate afresh, the issue of taxation of interest income over the impugned FD, only once the Hon ble High Court decides upon its ownership. Accordingly, the grounds of appeal raised by the revenue are allowed for statistical purposes only. Penalty u/s 271(1)(c) - Where the quantum additions stand set aside there wouldn t be any tax on concealed income for levy of penalty. Therefore in the light of above directions to the Ld AO we also set aside the orders of lower authorities. The Ld AO may decide the issue of imposition of penalty if any as per law upon his decision on taxation of impugned interest income from FD s.

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• 2024 (11) TMI 25
  Disallowance of deduction u/s. 54EC - investment in bonds of the National Highway Authority of India (NHAI) - HELD THAT:- Circular No. 359 dated 10.05.1983 specifies that if the assessee invest the earnest money or advance money in specified assets before the date of transfer of asset, the amounts so invested will qualify of exemption u/s 54EC of the Act. We observe that in the case of CIT vs. Subhash Vinayak Supnekar [ 2017 (1) TMI 58 - BOMBAY HIGH COURT ] held that when amount received as advance by the assessee under an agreement to sell a capital asset is invested in specified Bonds, benefit of Section 54EC of the Act is available to the assessee. We are of the considered view that the assessee is eligible to claim deduction u/s 54EC of the Act since the assessee has been above to establish the direct nexus between the advance so received by the assessee towards sale of property and the investment made by the assessee in NHAI Bonds. Appeal of the assessee is allowed.

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• 2024 (11) TMI 24
  Disallowance of foreign tax credit u/s 90 - assessee did not file return of income u/s. 139 within due date along with Form 67 - HELD THAT:- Assessee is a salaried employee and employed with Tessolve Semiconductor Pvt. Ltd. and Tessolve Inc. during the year and earned income from salary, house property, capital gains, dividend and interest income. The assessee claimed foreign tax credit which was denied by the CPC. The assessee filed return of income on 28.09.2017 and due date was 05.08.2017. Form 67 was also filed belatedly on 04.04.2019. We note from the submission of the assessee, he had sufficient reason for not filing Form 67 within time. As relying on Bench of the Tribunal [ 2024 (3) TMI 468 - ITAT BANGALORE] held that rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing of Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act - we direct the AO to allow Foreign Tax Credit after due verification of Form 67 - Appeal by the assessee is allowed for statistical purposes.

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• 2024 (11) TMI 23
  Denial of Foreign tax credit - Form 67 was filed beyond due date - HELD THAT:-Similar issue has been decided by coordinate Bench of the Tribunal [ 2024 (3) TMI 468 - ITAT BANGALORE] we agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing of Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. The issue was not debatable and there was only one view possible on the issue which is the view set out above. The issue in the proceedings u/s. 154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s. 154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee s application u/s. 154 of the Act was not on the ground that the issue was debatable but on merits - We direct the AO to give credit for foreign tax as per Form 67 dated 05.04.2021 filed by the assessee prior to the filing of the appeal before the CIT(A) after due verification.

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• 2024 (11) TMI 22
  Deduction u/s. 54 - Determination of the date of purchase - denial of deduction as time gap of more than 24 months between the date of transfer of capital asset and the date of purchase of the new house property - whether the assessee has purchased the house property within the stipulated time mentioned U/s. 54F of the Act or not? - HELD THAT:- The assessee had paid the entire sale consideration on 14/11/2016 and the possession of the property was also given to the assessee on the same day itself. It is also an admitted fact that the assessee has let out the said house property and offered the rental income earned therefrom and also shown it in her return of income for the assessment year 2016-17. Therefore, merely because the registration of the house property (new) was delayed or done beyond the prescribed time limit of 24 months from the date of disposal of the capital asset, it cannot be a ground to deny the exemption claimed U/s. 54F. Hon ble Delhi High Court in the case of Balraj [ 2001 (12) TMI 51 - DELHI HIGH COURT] held that since the assessee has paid the complete consideration to vendor of the land, which is duly acknowledged by the vendor, merely because of the registration is pending, we are of the view that deduction allowable U/s. 54 of the Act should not be rejected . The condition precedent for claiming benefit under the said provision is the capital gain realized from the sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated it cannot be denied the benefit of section 54F of the Act - See Sambandam Udaykumar [ 2012 (3) TMI 80 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• Customs

• 2024 (11) TMI 21
  Scope of Notification 188/93-Cus in relation to goods imported for use in an integrated aquaculture farm and export of farm products by 100% EOUs - effect of various amended customs notifications on the exemption status - Notification 183/93-Cus issued on 27.12.1993 amended - invoking bank guarantees by the Customs Department during the period of alleged exemption interruption - continuance of the exemption throughout the intervening period - Notification 183/93-Cus was issued amending various notifications extending general exemptions, including Notification 13 dated 09.02.1981 as provided for the insertion of a clause after (2) in Notification 13 of Cus /81 dated 09.02.1981, as clause (3) that stated that nothing contained in this notification shall apply to goods imported by an aquaculture unit. HELD THAT:- It is only at the stage of writ petition that the parties appear to have come alive to the existence of Notification 188/93-Cus dated 27.12.1993. That notification extends an exemption to 100% EOUs for the import of specified goods for use in an integrated aquaculture farm and export of farm products. Inter alia, the list of specified goods is set out in a Table. Though the description of the goods in the Table do not include raw materials, the body of the notification, in clause (3), identified raw materials specifically and extended exemption thereto. The counter filed by the Customs Department before the Writ Court defended the invocation of bank guarantees based upon their concurrent reading of notifications 13/1981, 189/1993 and 196/1994. It is thus clear that the authorities have blissfully lost sight of Notification 188/1993. After hearing the parties, the Writ Court has allowed the writ petitions by order dated 30.06.2008 noticing, and rightly, that Notification No. 188/1993 had maintained the grant of exemption during the entirety of the interregnum to prawn feed and raw materials. Notification No.196/1994 itself facilitates the continuance of the exemption throughout the intervening period between 27.12.1993 and 08.12.1994. Sub-clause (i) of clause (9) of the aforesaid notification not only rescinds Notification 188/93-Cus dated 27.12.1993 which withdrew the exemption, but sub-clause (ii) of clause (9) states that notwithstanding such rescission, anything done or action taken under the notification so rescinded shall be deemed to have been done or taken under the corresponding provisions of this notification. Thus, the impact of sub-clauses (i) and (ii) of Clause (9) is a seamless continuance of the exemption granted under Notification No.13/1981 dated 21.12.1993, all the way till 08.12.1994 including the 342 days when there was the impression created of an interruption to the grant of exemption. In reality, the simultaneous issuance of Notification 188/93-Cus dated 27.12.1993 ensured that there was no interruption. Thus, and in addition to the reasoning of the writ court, we also find support in sub-clauses (i) and (ii) of clause (9) of Notification No. 196/1994 to the availability/continuance of the exemption. Applicability of Section 159A of the Customs Act, 1962 regarding amendments to notifications - Section 159A states that amendments to rules, regulations, notifications or orders would come into effect, only in situations where there is no contra intention available. In the present case, clause (9) of Notification No. 196/1994 clearly reveals such different intention by stating expressly that the benefit of earlier notifications will continue for the interim period. Thus, Section 159A has no application to the facts of the present case.

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• 2024 (11) TMI 20
  Scrap imported - Eligibility for the concessional rate of duty under Customs Notification No. 12/2012-Cus. dated 17.03.2012 vide Sl.No. 330 - Appellants purchased 251.300 MTs of re-rollable scrap each on high sea sales basis - Assessee classifying the imported materials under the CTH 7214 1090 as re-rollable scrap but the Department treated it as Defectives and Seconds and denied notification benefit - HELD THAT:- Seconds and defective steel products can be of products of non-standard dimensions or downgraded products. Downgraded products mean that the steel products suffering from surface defects and internal faults. If the imported cargo is meant for sale as defective or second goods, then only the benefit of Notification No. 12/2012-Cus. dated 17.03.2012 can be denied to the Appellants. Neither there is an allegation nor any finding that the importer-Appellants are disposing these cargo as such. Taking into consideration of all the facts obtaining in all these appeals and Examination Reports as the Appellants being the manufacturers who regularly import scrap both for melting and re-rolling, we are of the view that the imported cargo cannot be treated as seconds and defectives and so are eligible for the benefit of concessional rate of duty in terms of Notification No. 12/2012-Cus. dated 17.03.2012 at Sl.No. 330.

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• 2024 (11) TMI 19
  Rejection of self-assessed value of imported aluminium scrap - Determination of the method of valuation - direction to re-determine the value under rule 9 of the Valuation Rules with a direction to the respondents to pay the differential duty on the enhanced value with interest - seeking clearance of goods declared as aluminium scrap namely Zorba , Twitch , Tense , Troma , Taint Tabor Tense/Taint Tabor . Rejection of value declared by the importers in the Bills of Entry - For rejection of the transaction value, the principles enshrined in section 14 of the Customs Act and the Valuation Rules have to be adhered to. In fact, Explanation (iii) to rule 12 of the Valuation Rules provides examples where the proper officer shall have the powers to raise doubts about the truth or accuracy of the declared value. Payment of additional consideration is not even a ground stated therein. The finding recorded by the Commissioner (Appeals), that in the absence of any additional consideration having been paid by the importers to the sellers, the transaction value could not have been rejected is not in conformity with the provisions of the Customs Act or the Valuation Rules. Even if no additional consideration is paid, still the proper officer can proceed to reject the vale under rule 12 of the Valuation Rules, if he has a reasonable doubt that the declared value does not represent the transaction value. Doubts can be raised on the truth or accuracy of the declared value based on certain reason which may include the six reasons mentioned in Explanation (iii) of rule 12 of the Valuation Rules. One such reason is where identical or similar goods imported at or about the same time in comparable quantities in comparable commercial transaction were assessed at a significantly higher value. Commissioner (Appeals) has also placed reliance upon the decision of the Supreme Court in Motor Industries [ 2008 (4) TMI 436 - SUPREME COURT ] which holds that formation of opinion regarding reasonable doubt as to the truth or accuracy of the valuation and communication of the said ground to the importer is mandatory. This procedure had been followed by the Deputy Commissioner in the present case. The doubt must be reasonable based on a degree of objectivity. The Supreme Court also observed that the reasons have to be recorded and if requested disclosed/communicated to the importer. The Supreme Court also clarified that a general direction is not being issued that the transaction value declared in the Bills of Entry should invariably be accepted in all cases where the imports of aluminium scrap are involved, and the matter has to be examined on a case to case basis on the basis of the evidence and the material placed on record. In the present case, as noticed, the reason assigned by the Deputy Commissioner for rejection of the transaction value was not based on mere suspicion but was based on proper and objective consideration of the facts. The reasons were also communicated to the importers. Commissioner (Appeals) was, therefore, not justified in holding that the transaction value declared by the importers in the Bills of Entry could not be rejected. The Deputy Commissioner has given good and cogent reasons for rejecting the transaction value declared by the importers in the Bills of Entry. Re-determination of value - . After having rejected the value mentioned by the importers in the Bills of Entry, the Deputy Commissioner was required to re-assess the duty leviable on the imported goods and pass a speaking order on the re-assessment. Deputy Commissioner, after nothing that rule 4 would not be applicable proceeded to re-determine the value under rule 5 holding that the data for similar goods, with near identical/similar description for grade/type/specification were found in NIDB for the contemporary times against various Bills of Entry was available. Commissioner (Appeals) has not examined this contention regarding rule 5 of the Valuation Rules raised by the importer and, in fact, has observed that the Deputy Commissioner had resorted to rule 9 of the Valuation Rules for re-determination of the value. Thus, a very cryptic finding has been given by the Deputy Commissioner for applying 5 of the Valuation Rules for re-determination of the value and the fact that the Commissioner (Appeals) has not examined this issue at all, it would be appropriate to remit the matter to the Deputy Commissioner for re-determining the value of the goods in accordance with the provisions of the Customs Act and the Valuation Rules.

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• 2024 (11) TMI 18
  Undervaluation in import of poppy seeds - Demand of differential duty of customs - demand differential duty of customs alleging that the supplier of Poppy Seeds is the same from Turkey whereas the declared price shown by the respondent is very less than the Poppy Seeds imported by the other importers - HELD THAT:- We find that the issue has been dealt with by this Tribunal in the case of Commissioner of Customs (Port), Kolkata v. Sawetri Trading Company [ 2023 (12) TMI 383 - CESTAT KOLKATA] observed that if the value of contemporaneous imports were accepted and the transaction value in those case are not doubted by the revenue in the assessment orders, it is not understandable why the said values could not have been used for the purposes of comparing the same with the value of the consignments in question in these appeals. As decided in M/S CHIRAG INTERNATIONAL VERSUS C.C. KANDLA [ 2019 (4) TMI 946 - CESTAT AHMEDABAD] the enhancement of the price and consequential demand, interest etc. are not sustainable. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief. Decided against revenue.

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• 2024 (11) TMI 17
  Classification of imported goods - Respondent had declared the goods as Spare Parts of E-rickshaw - lower authority has classified the goods under CTH 8703.80 which covers the vehicle propelled through motor powered by a battery - HELD THAT:- As decided in in the case of Twinkle Tradecom Pvt. Ltd. [ 2024 (5) TMI 472 - CESTAT KOLKATA] in order to have the essential characteristics of any machine or vehicle, the parts involved in the manufacturing should fulfil the basic principle of that vehicle or machine. The lower authority has classified the goods under CTH 8703.80 which covers the vehicle propelled through motor powered by a battery. The goods imported as such, by the respondent, if assembled together, will not provide the basic function of propulsion as required for the classification under CTH 8703. Accordingly, we uphold the findings of the Id. appellate authority in the impugned order and hold that the goods imported would not constitute a fully finished e-rickshaw as it did not have all essential components for a fully finished e-rickshaw. Enhancement of value without following the due process as laid down in the Act and CVR, 2007 and in violation of the principles of natural justice is not sustainable. Since the mis-declaration of the description, classification and value as alleged by the Department has not been established, we hold that the goods Imported are not liable confiscation. Appeal filed by the Revenue is dismissed.

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• Insolvency & Bankruptcy

• 2024 (11) TMI 16
  Challenge to approval of the Resolution Plan - HELD THAT:- The entire admitted claim in question for provident fund and gratuity having been paid in the Resolution Plan, there are no ground to interfere with the order of the Adjudicating Authority of approving the Resolution Plan. The jurisdiction of the NCLT and NCLAT while considering the Plan approved by the Committee of Creditors ( CoC ) has a limited jurisdiction. The remit of the jurisdiction is to examine as to whether the Plan is in compliance of Section 30, sub-section (2) of the Insolvency and Bankruptcy Code, 2016 (IBC). Judgment of the Hon ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT] is referred in this context, where the Hon ble Supreme Court held The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the commercial wisdom of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable. The gratuity and provident fund having been admitted in full and paid in full in the Resolution Plan, compliance of provisions of IBC are fully met. There are no error has been committed by the Adjudicating Authority in approving the Resolution Plan. There are no grounds to interfere with the impugned order. The Appeal is dismissed.

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• PMLA

• 2024 (11) TMI 15
  Money Laundering - denial of bail - hawala operator - assisting the other accused persons in transferring the proceeds of crime - HELD THAT:- Prima facie, the case against the appellant seems to be that he being a hawala operator, assisted the other accused persons in transferring the proceeds of crime. It is also noticed that prosecution intends to examine almost ninety-eight witnesses. The investigation so far as the appellant herein is concerned, is complete and complaint has also been lodged. The appellant can be released on bail subject to certain terms and conditions as may be imposed by the court concerned - bail application allowed.

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• 2024 (11) TMI 14
  Seeking grant of Bail - Money Laundering - existence of proof of identification of proceeds of crime or not - absence of transcripts to alleged transfer of Rs. 30 crores - Section 45 of PMLA - HELD THAT:- It is not in dispute that all other accused have been granted bail and the complaint has already been filed. The impugned orders are set aside and the appellant is granted bail on terms and conditions to the satisfaction of the trial Court - appeal allowed.

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• Service Tax

• 2024 (11) TMI 13
  Validity of service tax demand Order - service tax demands on immovable property rentals - Order order of rejection suffers from a lack of reasoning as it ought to have set out the reasons cogently for the variation in estimate arrived at between the Declarant/Petitioner and the Designated Authority - 50% of the demand confirmed - Petitioner submitted that 50% of the demand confirmed has now been paid by the lessee and therefore the Petitioner was entitled to set off the aforesaid amount paid by the lessee under the declarations filed by the Petitioner under Chapter 6 of Finance Act No.2 of 2019 incorporating the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. HELD THAT:- The liability to pay service tax under the provisions of Finance Act, 1994 from 2007 for renting of immovable property was on the Petitioner. However, the lessee who have leased out properties from various persons like the petitioner have challenged the levy of service tax on renting of immovable property unsuccessfully before various High Courts and have approached the Hon ble Supreme Court. The Hon ble Supreme Court by its Order [ 2011 (10) TMI 12 - SUPREME COURT] has ordered payment of 50% of the property tax by the lessees although they are themselves not liable to pay service tax under the provisions of the Finance Act, 1994 read with Service Tax Rules, 1994. They have to bear the incidence of tax as service tax is an indirect tax. It is also noticed that the Impugned Order has been passed by two officer and one of the officers was not the person who heard the Petitioner. Hence, there is a violation of Principles of Natural Justice. Circular issued by the Board in Circular No.1073/06/2019.CX dated 29.10.2019 in F.No.267/78/2019/CX-8-Pt.III has been issued in the context of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The said Circular is not free from doubt and is fraught with confusion although it states that it is clarified that such persons are liable to file declaration under the Scheme to avail the benefit. It has given an impression as if the amount deposited by the lessee can be appropriated towards the tax liability of the declarant under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. If the challenge to levy is answered in favour of the lessee, the amounts deposited by them pursuant to the directions of the Hon ble Supreme Court referred to supra will have to be refunded back. If on the other hand the amount deposited is allowed to be appropriated even if the petitioner is able to give a break up and due certificate from the respective lessees, mechanism for refund of the amount to be appropriated under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 has been left unanswered. There is some element of doubt. Under these circumstances, we quash the Impugned Order and remit the case back to the Respondent to pass a fresh orders on merits.

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• 2024 (11) TMI 12
  Levy service tax and cess under the category of BAS for the commission paid to overseas commission agents along with interest and penalty u/s 76, 77 and 78 of the Finance Act, 1994 - service tax was demanded from the appellant under reverse charge mechanism as the overseas commission agents were located abroad who procured export orders for the appellants. HELD THAT:- The issue of chargeability of service tax on the commission paid to overseas agents is no more res-integra and the Tribunal, Chennai has held in the case of Texyard International [ 2015 (8) TMI 794 - CESTAT CHENNAI] that demand of service tax is not sustainable. As decided in case supra appellants are manufacturer-exporters. Service tax if any payable under reverse charge is permissible to be availed as Cenvat credit and that may be refundable under Notification No. 41/2007 unless otherwise deniable by law. The provision made in Central Excise Rules and Cenvat Credit Rules ensures that tax is not added to the cost of export so that Indian exporter can compete with overseas market. The Hon ble Supreme Court in CCE v. Coca Cola India (Pvt.) Ltd [ 2007 (4) TMI 17 - SUPREME COURT] dismissed Revenue s appeal holding that when an assessee is eligible to Modvat credit, the situation becomes revenue-neutral. In the present case, service tax demanded entitles the appellants to the credit thereof and claim refund thereof under 41/2007 since it is stated by appellants that they have no other liability for which the exercise may become revenue-neutral. Thus we cannot sustain the impugned Order-in-Appeal.

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• 2024 (11) TMI 11
  Service Tax on Works Contracts - Demand of service tax invoking extended period of limitation - appellant had rendered taxable service of construction of residential complexes chargeable to service tax under section 65(105) (zzzh) of the Finance Act, 1994 Whether the services of construction of the residential complexes for the government hospitals and the police department rendered by the appellant as works contracts chargeable to service tax under the head construction of residential complex service without abatement towards the value of the goods used? - The nature of works contracts came up before the Supreme Court in State of Madras vs. Gannon Dunkerley Company (Madras) Ltd. [ 1958 (4) TMI 42 - SUPREME COURT] held that the power of the State Government to levy Sales Tax did not extend to levying tax on the goods used in works contracts. The finding of the Commissioner (Appeals) in the impugned order that since the appellant had not opted for the composition as provided in the Rules, the entire amount received for the works contracts should be treated as consideration and service tax should be collected on the total value of works contracts including the value of goods is not correct. This is because the power of taxation of the Union does not, after the twenty sixth amendment to the Constitution, extend to tax the value of the goods used in works contracts. The Act and the Rules cannot be interpreted so as to tax the value of the goods used in works contracts. Whether service tax could be charged under the head construction of residential complexes when such services were rendered as part of works contracts ? - In Larsen Toubro [ 2015 (8) TMI 749 - SUPREME COURT ] held that works contracts are a separate species of contracts recognized by the world of commerce different from the contracts for services simpliciter. The term works contracts in article 366 (29A) (b) of the Constitution was amply wide and cannot be confined to a particular understanding of the term or to a particular form. Contracts where the services are rendered along with transfer of materials are works contracts which have been made taxable after the introduction of clause 65(105)(zzzza) of the Act with effect from 1.6.2007. Other clauses of section 65(105) of the Act covered only services simpliciter and service tax could not be levied under those headings if the services were rendered as works contracts. To sum up: a) Service tax can be levied and it has only been levied on the service component (and not on the goods component) of works contracts by introducing clause 65(105) (zzzza) of the Act. Therefore, the sections of the Act or the Rules made thereunder cannot be read so as to levy service tax also on the value of the goods transferred in the works contracts as has been erroneously done by the Commissioner (Appeals). b) Tax under various clauses of section 65(105) of the Act other than clause (zzzza) including clause (zzzh) under which the demand is confirmed in this case, cover only services simpliciter and not services rendered as a part of the works contract as held in Larsen Toubro. Since the appellant had rendered the service of construction of residential complexes as works contracts , the demand of service tax under section 65(105)(zzzh) of the Act towards construction of residential complexes cannot be sustained. c) The other submissions regarding the personal use or use of employees of the buildings constructed need not be considered because the services rendered by the appellant do not fall under section 65(105) (zzzh) of the Act at all. d) Consequently, the demand, interest and penalties on the appellant cannot be sustained and need to be set aside.

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• 2024 (11) TMI 10
  Validity of Order-in-Original rejecting the refund claim - HELD THAT:- As admitted fact that case of M/s SAL Steel Ltd. [ 2019 (9) TMI 1315 - GUJARAT HIGH COURT] has held that the levy is ultra-vires on 06.09.2019 once the duty was held to be ultra-vires. Thereafter, the appellant filed the refund claim on 27.11.2020. It is a fact that the Preventive Officers of the Department asked the appellant to deposit the amount after the decision of the Hon ble Gujarat High Court. Once the levy has been held to be ultra-vires then the Department is not justified to demand the tax after 06.09.2019 whereas in this case, the appellant is directed to deposit the amount after the decision of the Hon ble Gujarat High Court. Both the authorities have rejected the refund on the ground that the said decision of the Hon ble Gujarat High Court has not been accepted by the Revenue and they have filed the appeal before the Hon ble Apex Court against the said decision. It is also a fact that no stay has been granted by the Hon ble Apex Court in the judgment of Hon ble Gujarat High Court cited supra. In view of this, the decision of the Hon ble Gujarat High Court is binding on the Department. We find that amount which was deposited by the appellant on regular basis during the month of June 2017 and July 2017 as service tax under the relevant accounting head and duly reflected in their service tax returns. Appellant has not applied for refund within a period of one year from the date of the High Court s order dated 06.09.2019. Therefore to the extent of refund claim it is hit by limitation and is liable to be rejected. As regards the refund which was deposited by the appellant vide challan dated 30.11.2019 was not liable to be paid by him because by that time, judgment of the Hon ble High Court has come holding the levy as ultra-vires. Revenue has no right to retain the same and is liable to be refunded back to the appellant and order that the appellant is entitled to the refund along with applicable interest as prescribed by law.

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• 2024 (11) TMI 9
  Service tax demand after allowing the deductions - non-payment/ short payment of service tax - tax demand and interest under Section 73(2) and Section 75 of the Finance Act, 1994 - penalties u/s 77 and 78 of the Finance Act, 1994 and extended period for demand invoked under the proviso to Section 73(1). HELD THAT:- Both the authority no nonpayment/ short payment of service tax cannot be faulted with. Even as per the calculation cahrt submitted by the appellant they have admitted that short payment of service tax. The difference in two is on account deduction claimed by the appellant treating certain amounts received as amount towards provident fund. However adjudicating authority has specifically arrived at finding that the issue of provident fund is not even the part of present show cause notice and separate proceeding have been initiated against the appellant by another show cause notice. This finding is not in dispute. That being so, service tax has been rightly demanded and confirmed after allowing the deductions towards the amounts received for the services provided prior to 16.06.2005 and after deducting the amount of service tax included in the gross amount. The above findings cannot be disputed, as the appellant was well aware that he was providing taxable services and short paid the service tax, even after issuing invoices indicating the services tax payable and collecting the same from the service recipient. As evident appellant has during the entire period not filed any ST-3 return. Appellant do not dispute the factum of not filing the ST-3 return during the entire period of dispute. They have suppressed the information with intend to evade payment of taxes. Accordingly, the demand by invoking the extended period of limitation and penalty imposed cannot be disputed with. Assessee appeal dismissed.

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• 2024 (11) TMI 8
  Demanding service tax on the reimbursed charges collected from their clients - department has noticed that the appellant have discharged the service tax liability on the CHA agency charges collected by the appellant from their clients however, on the value of the second type of the invoices where they have collected reimbursement from their clients, no service tax has been paid - HELD THAT:- We find that the demand of the service tax has been made on charges which have been recovered by the appellant from their clients on reimbursement basis which was slightly more than what has actually been paid by the appellant for availing these services from various service providers for their importer / exporter clients. The demand has been made under Business Auxiliary Service. We find that the appellant has recovered the payment which have been made by him to the service provider on behalf of the recipient of the service and same has been indicated in the invoices issued by the service provider to the recipient of the service the addition of small amount of the commission on and above the actual expenditure incurred for availing various kind of the services. The small variation in the billed amount cannot change the nature of the service which have been rendered in the entire transaction. The fact of the matter remains that the service provider has provided various kind of the services to the appellant s importer / exporter clients and for this effect, necessary invoices have been issued on which service tax has been charged by the service provider. These facts clearly indicate that appellant is not service provider of these services and the small amount of the Commissioner which have been added to the taxable value does not change the nature of the service which have been rendered by the service provider to the service recipient and the appellant have recovered the charges as on pure agent basis from their importer / exporter clients. See Tiger Logistics India Ltd [ 2023 (7) TMI 546 - CESTAT NEW DELHI] We follow the same and hold that the impugned order-in-appeal is legally not sustainable and we set aside the same.

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• Central Excise

• 2024 (11) TMI 7
  Violation of principles of natural justice - High court has not applied its mind to the contentions raised by the appellant - HELD THAT:- It is found from the perusal of the impugned judgment that the High court has not applied its mind to the contentions raised by the appellant. Only two paragraphs of the impugned order of the Customs Excise Service Tax Appellate Tribunal (CESTAT) have been reproduced and it is recorded in one sentence that the conclusions of CESTAT are correct. The impugned judgment is set aside and Appeal No.37 of 2018 is restored to the file of the Delhi High Court. The appeal shall be listed before the Roaster Bench on 25th November, 2024 in the morning when parties to this appeal shall remain present. On that day, the High Court shall fix a date for hearing of the appeal. Appeal allowed in part.

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• 2024 (11) TMI 6
  Reversal of CENVAT Credit - denial of benefit of notification no. 30/2004-CE - non-reporting and non-disclosure of discontinuation of duty liability on finished products - HELD THAT:- It is not in dispute that the appellant had cleared all final product by availing exemption in the impugned notification and that such exemption is not available in the event that CENVAT credit had been taken on the inputs used in the manufacture of the finished products. As duty liability had been discharged on the intermediate product, the entitlement to avail credit thereof could not be denied and, to the extent that such credit was utilized for clearance of the intermediate product, there is no provision in law which enables recovery of duty thereof. The denial of exemption notification, and consequent recovery of duty, is premised on credit having been taken even though the goods involved were allegedly used in the manufacture of finished products that were exempted. It is the claim of the appellant that these were actually used in the manufacture of intermediate product that was duty paid and hence eligible to be availed as credit. Without going into the technicalities and on the averment that the disputed credit had been reversed, in conjunction with the decision of the Hon ble High Court of Allahabad in HELLO MINERAL WATER P. LTD. VERSUS COMMISSIONER OF C. EX., NOIDA [ 2003 (10) TMI 416 - CESTAT, NEW DELHI] holding that the order of the Tribunal dated 1-10-2003 in so far as it relates to denial of the benefit of Notification No. 15/1994-CE is liable to be, and is hereby, set aside. The petitioner is thus entitled to the benefit of the said Notification No. 15/1994-CE, dated 1-3-2004 and reversal of Modvat credit on the inputs namely PVC granules used in the manufacture of PVC/PP bottles, which have been admittedly reversed by the petitioner, even though after clearance of the final product. - thus, the continuation of the detriment to the appellants does not sustain. The impugned order is set aside and the appeals are allowed.

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• 2024 (11) TMI 5
  Legality of remanding the matter to the original authority - legal authority of Commissioner (Appeals) to remand the matter during the relevant period - HELD THAT:- A perusal of the impugned order and the appeal filed before the Commissioner (Appeals) by the appellant in Form-4 shows that the learned authorised representative for the Revenue is correct in her averment. The Commissioner (Appeals), however, also examined this question of deposit of service tax interest. He remarked in paragraph 7 that no mention of the amount claimed and deposited by the appellant was in the order-in-original and, therefore, if the amount had already been deposited and such challans were produced, the service tax already deposited may be adjusted against the demand. Learned counsel for the appellant misunderstood this remark in the impugned order by the Commissioner (Appeals) to mean that the Commissioner (Appeals) has remanded the matter to the original authority. All that the Commissioner (appeals) said in the impugned order is that the order-in-original is upheld and the appeal is rejected - Learned counsel for the appellant misunderstood these remarks which were in favour of the appellant s claim that it had already deposited service tax through some challans and argued that the Commissioner (Appeals) had wrongly remanded the matter to the original authority. The impugned order is correct and proper and calls for no interference - appeal dismissed.

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• 2024 (11) TMI 4
  Utilization of CENVAT credit for payment of duty, in respect of inputs procured duty free, when the same are cleared as such, by a 100% EOU into DTA or utilization of CENVAT credit - invoking extended period of limitation - Whether the demand of duty by invoking the extended period, confiscation of goods, imposition of redemption fine and penalty imposed on the appellants are legally sustainable or not? - HELD THAT:- On perusal of the various permission letters granted by the Department to the appellants, we find that these cover the entire period of dispute, from June, 2008 to April, 2009. In view of the above evidences, where the jurisdictional central excise authorities are not only aware of the clearances of inputs as such being made by the appellants, but have given specific permission for such removal, then it cannot be stated that the Department is unaware of such clearances and therefore any SCN issued for demand of duty by invoking extended period is not legally sustainable. We find that in the case of Commissioner of Central Excise, Mumbai Vs. Blue Star Ltd. [ 2015 (3) TMI 628 - SUPREME COURT ] have held that extended period is not invokable in the case of goods cleared through CT-3 procedure by 100% EOU unit. As demand confirmed under the extended period is not sustainable. Further, we find it is not even be possible for sustaining the demand of duty for the normal period, as in the present case, the SCN have not been issued within the permitted period one year from the relevant date for covering the normal period of demand. Since the inputs have been cleared as such from the 100% EOU unit to DTA, in terms of Section 3 ibid, applicable duties of central excise are required to be paid on such goods. As the appellants had discharged such duty payable on these goods, by debiting from their CENVAT credit account, which is also available for taking further CENVAT credit by the buyer, no further duty payment is required to be made through PLA/cash. Since the adjudged demands are liable to be set aside on the ground of non- sustainability of extended period of limitation, and that normal period of demand is not covered in the SCN, there is no fresh duty payment involved for such goods. No merits in the impugned order passed by Commissioner (Appeals) as it does not stand the scrutiny of law. Therefore, by setting aside the impugned order the appeal is allowed in favour of the appellants.

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• 2024 (11) TMI 3
  CENVAT Credit - capital goods - copper bars / rods, MS rods /sheets/bars, channels, flats, joists etc. used in the factory for fabrication and erection of plant and machinery - HELD THAT:- The issue is no longer res integra, as far as the period prior to 07.07.2009 is concerned. It is covered by the judgment of this Tribunal rendered in the case of M/S. BMM ISPAT LIMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, BELGAUM [ 2024 (4) TMI 671 - CESTAT BANGALORE] wherein this Tribunal had elaborately discussed the ratios rendered in the case of M/S. THIRU AROORAN SUGARS, M/S. DALMIA CEMENTS (BHARAT) LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2017 (7) TMI 524 - MADRAS HIGH COURT] and also decision of Larger Bench of this Tribunal in the case of M/S. MANGLAM CEMENT LTD. VERSUS C.C.E., JAIPUR-I [ 2018 (3) TMI 1547 - CESTAT NEW DELHI] , wherein it is held that CENVAT credit on various inputs such as MS Angles, MS Channels, MS beams, MS joists, MS plates, etc., used in the fabrication of various machineries, support structure, platforms for machineries and equipment, etc., used in the factory, is admissible. For the period from 07.07.2009 to April 2011, the definition of input under Rule 2(k). The Explanation 2 has been inserted to the said definition vide Notification No.16/2009CE(NT) dated 07.07.2009. Consequently, the items viz., HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates, etc., has been specifically excluded from the scope of the definition of inputs . For the period prior to 07.07.2009, the appellants are eligible to avail CENVAT credit on the inputs viz., HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates, etc., and accordingly, demand confirmed is not sustainable; for the period 07.07.2009 to April 2011, in principle CENVAT credit on the inputs viz., HR coils, HR Sheets, M.S. Angles, M.S. Channels and MS plates, etc., are not admissible. Consequently, the impugned order is modified and the appeal is remanded to the original adjudicating authority to recalculate the demand for the period after 7.7.2009, if any, payable. - invocation of extended period of limitation cannot be upheld. Thus, the demand is to be ascertained for the normal period of limitation. No penalty is imposable on the appellants. The impugned order is set aside and the matter of the appellant company is remanded to the adjudicating authority - Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2024 (11) TMI 2
  Levy of Additional Sales Tax (AST) - turnover had not exceeded the threshold of Rs. 100 Crores during the year in question - challenge to amendment to the provisions of Section 2(1)(a) of the TNAST Act - HELD THAT:- The amendment to the TNAST is effective from 01.08.1996. As a result of this amendment, the threshold for the levy of AST stood enhanced from Rs. 10.00 lakhs to Rs. 100 Crores. It is true that if the turnover of the writ petitioner is taken for the year in entirety, it would be less than a sum of Rs. 100 Crores. However for the purpose of assessment, the assessing authority is bound to apply the provisions of the Act strictly from their dates of insertion into the Act. Hence for the period 01.04.1996 to 31.07.1996, as the turnover of the petitioner is in the region of Rs. 15.66 Crores, which is far in excess of Rs. 10.00 lakhs, the petitioner cannot avoid liability under the TNAST Act. Writ Petition is dismissed.

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• Indian Laws

• 2024 (11) TMI 1
  Repudiation of insurance claim on the grounds of suppression of material information regarding existing policies with other insurers - burden of proof and the method of discharging that burden of proof to prove an alleged fact - Section 45 of the Insurance Act, 1938 - uberrimae fidei - plea of utmost good faith - HELD THAT:- The repudiation of an insurance claim is largely governed by Section 45 of the Insurance Act, 1938. Section 45 is a special provision of law, which bars the calling in question of an insurance policy beyond expiry of the stipulated period, except in a few circumstances that have to be proved by the insurer. Since the present case deals with a policy and its repudiation before the 2014 amendment to Section 45 of the Insurance Act, the pre-amendment time period of two years would be applicable to the case. As per the aforesaid language and interpretation of Section 45, the insurer cannot question the policy after the expiry of the time period and if it does, then the burden rests on the insurer to establish materiality of the fact suppressed and the knowledge of the insured about such suppression, so that the repudiation of the claim could be justified by the insurer. Law demands a higher standard of good faith in matters of insurance contracts which is expressed in the legal maxim uberrimae fidei. The plea of utmost good faith has also been taken by the respondent, for contending that the insured-deceased had a duty to disclose the details of the previous policies, as the same was sought in the application form. However, the insured failed in his duty to correctly answer the question about his previous policies. The basic test hinges on whether the mind of a prudent insurer would be affected, either in deciding whether to take the risk at all or in fixing the premium, by knowledge of a particular fact if it had been disclosed. Therefore, the fact must be one affecting the risk. If it has no bearing on the risk it need not be disclosed and if it would do no more than cause insurers to make inquiries delaying issue of the insurance, it is not material if the result of the inquiries would have no effect on a prudent insurer - Whether a fact is material will depend on the circumstances, as proved by evidence, of the particular case. It is for the court to rule as a matter of law, whether, a particular fact is capable of being material and to give directions as to the test to be applied. In the present case, the date of birth declared are different and the date of issuance has not been stated except in respect of one policy. It is also not known from the table to whom the said policies were issued. However, the NCDRC has observed that the appellant-complainant had not alleged in her complaint that no other insurance policy had been taken by the deceased. In the affidavit of the complainant, the fact that insurance policies were taken from other insurers was not denied. The respondent insurance company had given details of the aforesaid policies by way of an affidavit. Therefore, NCDRC concluded that deceased insured had withheld information in respect of several insurance policies which he had taken from other insurers. There is an essential distinction between burden of proof and onus of proof; burden of proof lies upon a person who has to prove the fact and which never shifts but onus of proof shifts. Such a shifting of onus is a continuous process in the evaluation of evidence. For instance, in a suit for possession based on the title, once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant, it is for the defendant to discharge his onus and in the absence thereof, the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff s title. The respondent insurance company has produced no documentary evidence whatsoever before the District Forum to prove its allegation that the insured had taken multiple insurance policies from different companies and had suppressed the same. The District Forum had therefore concluded that there was no documentary evidence to show that the deceased-life insured had taken various insurance policies except an averment and on that basis the repudiation was held to be wrong - in the absence of any evidence to prove that the insured-deceased possessed some insurance policies from other insurance companies, the State Commission upheld the decision of the District Forum in setting aside the repudiation of the claim by the respondent. The impugned order dated 22.07.2019 passed by the NCDRC in Revision Petition No.1268 of 2019 is set aside. The respondent company is directed to make the payment of the insurance claim under both the policies to the appellant, amounting to Rs. 7,50,000/- and Rs. 9,60,000/-, with interest at the rate of 7% per annum from the date of filing the complaint, till the actual realisation. Appeal allowed.

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