TMI Tax Updates - e-Newsletter
November 6, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise

Articles

1. TAXABILITY OF CORPORATE GUARANTEE POST INSERTION OF SUB RULE 2 OF RULE 28 OF CGST RULES,2017

   By: Brajesh Agrawal

2. What is Due Diligence for Startups in India?

   By: Ishita Ramani

3. ADVANCE RULING ON REVERSAL OF INPUT TAX CREDIT

   By: DR.MARIAPPAN GOVINDARAJAN

4. Kronos 4500 Touch ID Terminal Chips are Classifiable under the Category of Electrical Machines and Apparatus

   By: Bimal jain

News

1. Competition Commission of India launches Market Study on Cement Sector in India

2. DPIIT conducts PM GatiShakti Webinar with States/UTs and Line Ministries/Departments

Notifications

GST - States

1. G.O. Ms. No. 33 - dated 10-10-2023 - Puducherry SGST

Notify supply of online money gaming, supply of online gaming other than online money gaming and supply of actionable claims in casinos under section 15(5) of the Puducherry Goods and Services Tax Act, 2017

2. G.O. Ms. No. 32 - dated 10-10-2023 - Puducherry SGST

Amendment in Notification G.O. Ms. No. 25, dated the 29th August, 2023

3. G.O. Ms. No. 31 - dated 10-10-2023 - Puducherry SGST

Electronic commerce operator as required to collect tax at source under section 52 Puducherry Goods and Services Tax Act, 2017 notified.

4. G.O. Ms. No. 30 - dated 10-10-2023 - Puducherry SGST

Persons making supplies of goods through an electronic commerce operator who is required to collect tax at source under section 52 of the Puducherry Goods and Services Tax Act, 2017 specified

5. 1898-F.T. - dated 17-10-2023 - West Bengal SGST

Seeks to amend Notification No. 1487-F.T. dated 24.08.2023

6. 1876-F.T. - dated 16-10-2023 - West Bengal SGST

Seeks to notify different dates on which the provisions of section 2 of the WBGST(Amendment) Act, 2023 shall come into force

SEZ

7. S.O. 4795(E). - dated 2-11-2023 - SEZ

Sector specific SEZ for Multi-Sector SEZ (formerly FTWZ) in the State of Tamil Nadu - Additional area notified

Highlights / Catch Notes

GST

• Refund Denied Due to Misinterpretation of Tax Rates; Input Tax Credit Dispute Highlights Legal Misunderstanding.

  Case-Laws - HC : Refund of unutilised input tax credit - inverted duty structure - The impugned orders proceed on erroneous assumptions and presumptions. The premise on which the claim for refund has been outrightly rejected is that the output sales is to the extent of 80% of goods having 5% duty only and input too is majorly of 5% rate. On that basis, it has been concluded that the rate is more or less the same. This approach that “rate is more of less the same”, runs contrary to the statutory scheme. This patently violates not only the letter but also the spirit of the law. - HC
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• Seizure of Gold Limited to Specific Business Premises; Must Relate to SGST/CGST Act 2017 Proceedings.

  Case-Laws - HC : Authorization for seizure of Gold - There cannot be authorisation in respect of each and every person and each and every article, goods, books, and documents which may be discovered during the search operation. The authorisation has to be done in respect of the business premises of an assessee, and if things, items, books or documents are found that the authorised officer has reasons to believe that they would be relevant for the purpose of proceeding under the SGST/CGST Act 2017, they are liable to be seized - HC
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• Diesel Cost Must Be Included in GST Valuation for Goods Transport Agencies, Court Rules Against Exclusion.

  Case-Laws - HC : Valuation - consideration - inclusion of value of diesel provided by the service recipient Free of Cost (FOC) in the truck of the GTA - Without fuel the entire business of GTA cannot survive. Therefore, fuel being an integral part cannot be bifurcated to over come a tax liability - the Circular dated 8th June 2018 on which the petitioner tried to rely upon would not be of any help especially considering the nature of business and the provisions of Section 7(1)(a) and 15(2)(b) of CGST Act. - No relief - HC
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• Demand Notice Validity Challenged Without Using GST Appeal Process; Court Upholds Need for Exhausting Remedies First.

  Case-Laws - HC : Validity of demand notice issued under the Revenue Recovery Act - The appellant, not having availed the alternate remedy under the statute, cannot feign ignorance of the statutory scheme under the GST Act, which accords a finality to those orders that have not been appealed against. The said statutory scheme of finality is not one that the learned Single Judge could have ignored either while considering whether or not to entertain the Writ Petition. - HC
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Income Tax

• Revenue Authorities Cannot Recover Pre-Resolution Dues Post-Approval Under Insolvency and Bankruptcy Code.

  Case-Laws - HC : Revenue entitlement to recover dues for the period which precedes the date of approval of the RP by the NCLT under IBC - Extinguishment of liability as per the approved resolution plan - A successful applicant is, in law, provided with a “clean slate”; therefore, dues for the period prior to the date when the RP was approved cannot be recovered. The courts have recognized this principle in more than one case. - HC
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• Income tax claims against dissolved companies nullified post-CIRP under IBC if not lodged timely by revenue authorities.

  Case-Laws - HC : Recovery of Income tax demand with penalty against company dissolved - Conclusion of CIRP proceedings under IBC - Extinguishment of liability as per the approved resolution plan - Since the revenue failed to lodge its claims, the impugned demands raised by the revenue stand automatically extinguished. - HC
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• Assessment Reconsideration Ordered Due to Incomplete Income Comparison in Deceased Partner's Tax Case.

  Case-Laws - HC : Undisclosed income (from equity transactions) - unexplained investment (by way of cash deposit) u/s 69 r/w Section 115 BBE - huge amount of money was transacted using the Firm's PAN number - Assessment against deceased partner - AO ought to have compared the income that was proposed to be added pursuant to notice dated 31.03.2022 with the income declared by the petitioner's deceased husband (late) while finalizing the assessment. There is no comparison. - Matter restored back - HC
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• Transfer Pricing Adjustment on AE Loan Interest Deemed Unwarranted; Arm's Length Price Proven with Comparability Analysis.

  Case-Laws - AT : TP adjustment on interest on advances given to AEs - LIBOR + 260 basis points - the transactions of loans advanced to AEs by the assessee was adequately demonstrated by the assessee to be at Arm’s Length Price based on the comparability analysis done with its internal comparable. No transfer pricing adjustment to the same was warranted and the transfer pricing adjustment made by the authorities below is directed to be deleted. - AT
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• Income Estimation Error: Unaccounted Cash in Real Estate Ignored, Corrected on Appeal.

  Case-Laws - AT : Estimation of income - On Money - Unaccounted on money receipt from the real estate project - the assessing officer being investigator and adjudicator was under obligation to consider the entire seized material. The assessing officer has clearly recorded that the assessee receiving on money in cash and was incurring expenditure therefrom. No such fact was taken into consideration by assessing officer while estimating income from on money component. - CIT(A) rightly considered the on money for determination of income - AT
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• Interest on Unpaid Tax Refunds Must Reflect Accurate Calculations; Tribunal Orders Reassessment of Interest.

  Case-Laws - AT : Adjustment of refunds granted for computing of interest u/s 244A - the manner in which the assessing officer has adjusted the refund is not correct and that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Tribunal. AO is directed to compute interest under section 244A as per the claim of the assessee after giving a proper opportunity of being heard. - AT
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• Deferred Receivables Require Interest Imputation Despite Working Capital Adjustments, 6% Charged After 30 Days.

  Case-Laws - AT : TP Adjustment - interest on delayed receivables - Assessee pleaded that the deferred receivables do not constitute a separate international transaction requiring benchmarking and such a treatment is bad under law and working capital adjustment would take into account the impact of outstanding receivables and no need to impute any interest on receivables - the interest shall be charged only at 6% p.a. in respect of the receivables outstanding for more than 30 days. - AT
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• Appeal Dismissed: Commercial Entity's 324-Day Delay in Challenging Revision Order u/s 263 Not Justified.

  Case-Laws - AT : Delay filling appeal against Revision order u/s 263 - delay of 324 days - we are convinced that the assessee wanted to have the best of both the worlds and having tested its luck before the learned Assessing Officer in the consequential proceedings and having lost the same, it came back to agitate the legality of the impugned order. Assessee is not an individual, but it is a commercial entity with a battery of legally trained people available for assistance. Thus we do not find it proper to condone the delay - AT
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• Reimbursement of Seconded Employees' Salaries Exempt from Additional TDS Deduction Due to Section 192 Compliance.

  Case-Laws - AT : TDS u/s 195 on payment of secondment cost - The assessee has reimbursed the salary cost of seconded employees on cost-to-cost basis without any profit element. The assessee has duly deducted tax at source from these payments u/s 192 - The stated employees have worked under the supervision and control of the assessee. - No further requirement of deduction of TDS u/s 195 - AT
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• TPO Rejects Entity-Level Benchmarking, Favors Unit-Level PLI Comparison Against External Comparables.

  Case-Laws - AT : TP Adjustment - TPO rejected the ‘entity-level’ benchmarking done by assessee, instead made ‘unit-level’ comparison i.e. PLI of each unit was compared with the PLI of external comparables - 'principle of res judicata' OR ‘principle of consistency' - the uniform rate agreed by assessee with AEs is certainly a rate at entity-level which has no connection or linkage with individual units. - AT
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Customs

• Dispute Over Detained Lithium Ion Cells: Legality of Goods Detention for BIS Marking Compliance Under Scrutiny.

  Case-Laws - HC : Seeking grant of release of detained goods - import of Lithium Ion Cell - Compliance of BIS marking - There is no justification whatsoever on the part of the respondents, in not permitting to the petitioner, release of the consignments in question - there is no justification whatsoever as to how a different yardstick could be applied by the respondents to the goods in question, when similar goods under seven bills of entries were released and only two bills of entries were subjected to an illegal detention by the respondents. - HC
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• Misinterpretation of Judgment Leads to Error in Classifying Imported Gold Coins, Ignoring Binding Explanatory Notes.

  Case-Laws - HC : Classification of imported Gold Coins - The Principal Commissioner has clearly committed a manifest error while viewing the judgment rendered in Khandwala Enterprise and proceeding on the assumption that the contentions raised by the petitioner already stood conclusively answered by the Court. - The Principal Commissioner has also clearly erred in failing to appreciate the import of the explanatory notes which stand placed along with CTH 7118 9000 and ignoring the binding character of those notes. - HC
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• Employee Cleared of Penalty Due to Lack of Evidence in Import Overvaluation Case.

  Case-Laws - AT : Levy of penalty u/s 117 - connivance in overvaluation of goods imported - Employees of the Customs Broker - A perusal of the impugned order does not point out as to what was expected of the present appellant, being one of innumerable employees of the Customs Broker, as his duty to comply with, which the appellant had ‘failed’ to perform. Insofar as this appellant is concerned, the Commissioner himself has observed that there was no direct evidence of connivance. - No penalty - AT
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• Duty Exemption Denial Overturned Due to DGFT Delay in Processing Export Obligation Discharge Certificate.

  Case-Laws - AT : Denial of duty exemption availed by the assessee in terms of EPCG Authorisation - export obligation - Delay in getting EODC - The appellant should not be taken to task due to a delay caused in the DGFT office to act on their request for redemption of EPCG Licence. - Demand set aside - AT
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• Declared Value Upheld: NIDB Data Insufficient for Revaluation of Imported Goods, Revenue's Case Unsubstantiated.

  Case-Laws - AT : Re-valuation of the impugned goods imported - It is the settled position of law that NIDB data cannot be the only basis for rejection of the declared value - The Revenue has not made out a case firstly, for the rejection of the declared value and secondly, no case is either made out justifying re-determination of the same. - AT
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• Tariff Classification of Medical Accessories Used in Cancer Radiation Treatment.

  Case-Laws - AT : Classification of imported goods - import of accessories which are primarily used for positioning of the patient and his/her body parts on various machines including X-ray machines during the radiation treatment for cancer - Goods are classifiable under 9022 and 9608 - AT
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• Inkjet Printers Classified Under Entry 844332 Due to USB Port Data Reception, Excluding Entry 844339 Classification.

  Case-Laws - AT : Classification of imported goods - Ink Jet Printers - In the instant case, the appellant have confirmed that the machines are capable of receiving data through USB Port. In these circumstances, they qualify to fall under the double dash entry 844332 and therefore, the classification under double dash entry 844339 has to be ruled out. - AT
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IBC

• Minority Homebuyer Cannot Challenge Majority-Approved Resolution Plan Under Insolvency and Bankruptcy Code.

  Case-Laws - AT : Rejection of Resolution plan of another partly - Appellant, who is a dissatisfied minority, a single homebuyer has to sail alongwith the view of the majority in terms of the scheme of IBC - the Adjudicating Authority is agreed upon that Appellant as a class of homebuyers cannot be allowed to challenge the Resolution Plan which has received approval of class of homebuyers on the basis of majority of votes of homebuyers. - AT
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Service Tax

• Indian Institute's Post Graduate Courses in Clinical Research Deemed Taxable as Commercial Training Services.

  Case-Laws - AT : Commercial training or coaching’ services - The Commissioner has recorded a finding, after careful examination of the activities undertaken by the Indian Institute that it was providing training or coaching for a consideration. There is no error in this finding as indeed the Indian Institute was engaged in imparting education in the field of Post Graduate courses in ‘clinical research’ for a consideration - AT
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Central Excise

• Eligibility for Kraft Paper Excise Exemption Hinges on Verification of Pulping Machine Installation During Relevant Period.

  Case-Laws - AT : Benefit of exemption - Kraft Paper - non-compliance with the condition that Kraft Paper is manufactured from the pulp stage - The appellant did have the pulping machine at the relevant time. However, since the revenue has not carried out any verification, one opportunity is given to the Revenue to conduct the detail verification that the pulping machine was installed at the relevant point of time in the factory of the appellant or otherwise. - AT
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• CENVAT Credit Reversal Pre-Notice Renders Proceedings Unnecessary, Adjudicator's Decision Deemed Futile.

  Case-Laws - AT : Denial of CENVAT Credit - It is on record that the credit had been reversed well before issue of notice. There was, thus, no cause to initiate proceedings under rule 14 of CENVAT Credit Rules, 2004; it would appear that absurdity of ‘appropriating’ credit already reversed, and not restorable without prior approval from jurisdictional central excise authorities, does not seem have occurred to the adjudicating authority as an exercise in futility. - AT
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Case Laws:

• GST

• 2023 (11) TMI 210
  Taxable supply of service or not - employing certain expatriates and paying salary in the Indian currency - HELD THAT:- The decision in the case of C.C.,C.E. S.T. BANGALORE (ADJUDICATION) ETC. VERSUS M/S NORTHERN OPERATING SYSTEMS PVT LTD. [ 2022 (5) TMI 967 - SUPREME COURT] is in the peculiarities of that particular case and cannot be applied in the present case when it cannot be disputed that salary will not be a taxable supply of service. The interim order is granted as prayed for but with liberty to the respondents to seek vacation of this order - The office is directed to re-list this petition on 07.12.2023.

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• 2023 (11) TMI 209
  Refund of unutilised input tax credit - rejection of petitioner s claim for refund on the ground that the petitioner s case does not fall in the category of inverted duty structure - HELD THAT:- The provision contained in proviso (ii) to Section 54(3) of the CGST Act, 2017, as it stands and on its plain reading, uses the expression, where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies . The language of the aforesaid provision is plain and simple signifying the plurality of both inputs and output supplies. The statute purposely uses the words, inputs and output supplies . t is well settled that a taxing statute is to be strictly construed. Conscious use of the plural words, inputs and output supplies by the legislature has to be given full effect to. Use of the word, inputs signifies a situation where there may be more than one input and it is not possible to read inputs as input alone, so as to restrict its meaning. In other words, one of the basic principles of interpretation of statute is to read the statute as it is. The Hon ble Supreme Court in the case of COMMISSIONER OF INCOME-TAX VERSUS KASTURI AND SONS LTD. [ 1999 (3) TMI 6 - SUPREME COURT] , while explaining the principle of strict construction of taxing statute and relying upon its various earlier decisions, propounded that in a taxing Act, one has to only look fairly at the language used therein. The Supreme Court in VKC Footsteps India Private Limited having analysed the report of the Joint Committee, Empowered Committee of State Finance Ministers on Business Process for GST and on Refund Process published in August, 2015, noted that under the proposed GST law, ITC will be allowed, so as to remove the cascading effect of taxes and it is the ultimate customer who should bear the burden of taxes. It was also noticed by the Hon ble Supreme Court that there can be cases where there is an accumulation of credit due to inverted duty structure. It was only those cases of ITC accumulation which are on account of inverted duty structure, i.e., GST on output supplies being less than the GST on inputs that the scheme of refund would be applicable. The impugned orders proceed on erroneous assumptions and presumptions. The premise on which the claim for refund has been outrightly rejected is that the output sales is to the extent of 80% of goods having 5% duty only and input too is majorly of 5% rate. On that basis, it has been concluded that the rate is more or less the same. This approach that rate is more of less the same , runs contrary to the statutory scheme. This patently violates not only the letter but also the spirit of the law. The statutory prescription being that where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies is sought to be substituted on the consideration that where the rate of tax is more or less the same - even if the overall rate of all inputs is marginally higher than rate of output supplies, the accumulation of unutilised input tax credit on such account will bring it within the net of inverted duty structure. The other ground of rejection of claim of refund is equally unsustainable in law as it proceeds on the ground that the claim of refund is mainly due to high input purchases and they were in stock during the claim period(tax period). The authorities, while examining the claim of refund of the petitioner, were not only obliged to apply the statutory scheme as contained in Section 54(3) of the CGST Act, 2017, in its true spirit, but also to keep in view the law providing for refund mechanism as contained in Rule 89(5) of the CGST Rules, 2017, which does not talk of the stock, but refers to output turnover (adjusted turnover) during the claim period. Rule 89(5) of the CGST Rules, 2017 envisages that total ITC claimed on inputs during the claim period gets consumed in respect of the turnover of the claim period. As to how the refund would be computed in case the conditions and limitations provided under Section 54(3) of the CGST Act, 2017 are fulfilled, is provided under Rule 89(5) of the CGST Rules, 2017 which provides for a formula for making such computation. In a case of accumulation of unutilised input tax credit on account of rate of tax on inputs being higher than the rate of tax on output supplies, the refund mechanism is governed by the said formula providing for maximum limit of refund and therefore, refund claim is to be determined on the basis of computation based on statutory formula prescribed in Rule 89(5) of the CGST Rules, 2017 and not on the basis of any other mode of computation and determination of actual amount of refund payment under the law. Impugned order set aside - petition allowed.

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• 2023 (11) TMI 208
  Authorization for seizure of Gold - the petitioner submits that in the absence of such satisfaction or authorisation, the seizure becomes illegal, null and void - HELD THAT:- From the perusal of sub-section (2) of Section 67 of SGST/CGST Act 2017, it is evident that when search and seizure operations are authorised, at that time, it would not be known which are the items or documents or books which might be recovered or which would have been kept at a secreted place - What is relevant is that while granting authorisation for search and seizure operations, the authority granting such permission, i.e., Joint Commissioner or Officer above the rank of Joint Commissioner, should have reasons to believe that the goods, documents or things hold relevance and are useful in any legal proceedings under the SGST/CGST Act 2017 and the same are secreted at a particular place. The contention of the petitioner that there was no authorisation for the seizure of 1647.970 grams of gold, the property of the petitioner, does not merit consideration as there was authorisation for the search of the premises of M/s Sobhana Jewellery and these gold items, which the petitioner had later on claimed ownership, was found in a bag in the premises of M/s Sobhana Jewellery. There cannot be authorisation in respect of each and every person and each and every article, goods, books, and documents which may be discovered during the search operation. The authorisation has to be done in respect of the business premises of an assessee, and if things, items, books or documents are found that the authorised officer has reasons to believe that they would be relevant for the purpose of proceeding under the SGST/CGST Act 2017, they are liable to be seized - there are no substance in the submission of the learned Counsel for the petitioner that there was no authorisation under Section 67(2) of the SGST/CGST Act 2017 for the seizure of the gold ornaments weighing 1647.970 grams. There are no substance in this writ petition - petition dismissed.

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• 2023 (11) TMI 207
  Seeking grant of anticipatory bail - right of police officer to investigate the offence under the GST Act - requirement of custodial interrogation - evasion of GST - HELD THAT:- Having heard the learned advocate for the parties and perusing the investigation papers, it is equally incumbent upon the Court to exercise its discretion judiciously, cautiously and strictly in compliance with the basic principles laid down in a plethora of decisions of the Hon ble Apex Court on the point. It appears that evasion of CGST / GST in connection with by preparing forged bill of petcoke is levelled against the accused persons and in this regard complaint has been filed. Going through the record and at the various stage, it appears that accused are pointing the figures towards each other and shift the blame to each other and the owner put the blame on the present accused, who is only a casual employee as he is concerned with only his wage at the end of the day. Considering the fact that actual beneficiary of said entire alleged offence is only may be considered only owner. However, stand taken on the part of the Investigating Officer appeared very selective. The present application is allowed by directing that in the event of applicant herein being arrested in connection with the FIR No. 11192050220242 of 2022 registered with Sanand Police Station, Dist. Ahmedabad, the applicant shall be released on bail on furnishing a personal bond of Rs. 10,000/- (Rupees Ten Thousand Only) with one surety of like amount and on the conditions imposed.

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• 2023 (11) TMI 206
  Valuation - Scope of the term Consideration - inclusion of value of diesel provided by the service recipient Free of Cost (FOC) in the truck of the GTA - HELD THAT:- The Supreme Court in the matter of UNION OF INDIA ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [ 2021 (9) TMI 626 - SUPREME COURT] has defined the constitutional scheme of GST. Mainly it demonstrates that the idea which permeates GST legislation globally is to impose a multi stage tax under which each point in a supply chain is potentially taxed. Suppliers are entitled to avail credit of tax paid at an anterior stage. As a result, GST fulfills the description of a tax which is based on value addition. The predominant object is for supply of goods and services, except those which are kept out of the purview of the goods and services tax - Indisputably, the petitioner is a Goods Transport Agency (GTA) in terms of GST. In so far as the service of GTA is concerned, if the services (of goods transportation) are provided by GTA to specified class of persons, the tax liability falls on such recipients under the reverse charge mechanism, In terms of Notification dated 28.06.2017. In the case in hand, as per the proposed agreement/contract, the fuel (diesel) is not in the scope of the service of the petitioner. The agreement purports that the fuel would be free of cost basis for transportation of the goods and fuel would be filled by the service recipient for transportation. In the instant case, the scope of supply as defined in section 7 of the GST Act purports all forms of supply of services made or agreed to be made for consideration in the course or furtherance of business . The words used in Section 7(1)(a), in course or furtherance of business would point out about service to be provided by the transporter as a GTA. The contention of petitioner that the consideration is required to be confined as per the terms of agreement cannot be given a literal interpretation - The recipient is not a GTA or engaged in business of transport. Consequently it is the petitioner GTA in course or furtherance of business has agreed to supply the goods or service for consideration. When it is the primary business of the GTA, in order to allow running the vehicles by fuel, it is a potential combination. If that part of responsibility is delegated by way of an agreement to the recipient, in such a case, the recipient would step into the shoes of GTA as its component and would be playing central role in setting narratives. In the instant case, the value of service agreed to be provided necessarily will depend on the nature of service and the nature of business. The petitioner who can survive to run the business of goods transport on fuel therefore cannot claim that the diesel is supplied by the service recipient free of cost, as such, it cannot be included as the fuel is an integral part used in providing the Transportation Service and is essential for GTA provider. Without fuel the entire business of GTA cannot survive. Therefore, fuel being an integral part cannot be bifurcated to over come a tax liability - the Circular dated 8th June 2018 on which the petitioner tried to rely upon would not be of any help especially considering the nature of business and the provisions of Section 7(1)(a) and 15(2)(b) of CGST Act. Thus, no relief can be granted in favour of the petitioner. Accordingly, the petition is dismissed.

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• 2023 (11) TMI 205
  Violation of principles of natural justice - ex-parte order - reply filed by the petitioner not taken into consideration and the respondent - HELD THAT:- In the present case, the respondent/Assessing Officer, admittedly, has failed to consider the reply/objections made by the petitioner pursuant to the show cause notice and passed a non-speaking order. The learned counsel also brought to the notice of this Court certain paragraphs mentioned in the show cause notice were re-produced in the impugned order. Therefore, failure on the part of the respondent/Assessing Officer to address the reply/objections of the petitioner/assessee by a speaking order, would vitiate the impugned proceedings. On this score, since the reply/objections made by the petitioner pursuant to the show cause notice remained undecided, this Court feels that the petitioner is entitled to have a considered opinion of the Assessing Officer after taking into consideration the reply filed by the petitioner. Thus, this Court is inclined to set-aside the impugned order and remit the matter back for re-consideration. Petition allowed by way of remand.

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• 2023 (11) TMI 204
  Validity of demand notice issued under the Revenue Recovery Act - SCN not served with any assessment order - HELD THAT:- The statutory period of limitation for preferring an appeal is three months from the date of communication of the order, with a further period of one month towards condonation of delay, if any. The appellant, not having availed the alternate remedy under the statute, cannot feign ignorance of the statutory scheme under the GST Act, which accords a finality to those orders that have not been appealed against. The said statutory scheme of finality is not one that the learned Single Judge could have ignored either while considering whether or not to entertain the Writ Petition. This settled position in law has been reiterated in Assistant Commissioner (CT) LTU, Kakinada and Others v. Glaxo Smith Kline Consumer Health Care Limited [ 2020 (5) TMI 149 - SUPREME COURT ] as also in Oil and Natural Gas Corporation Limited v. Gujarat Energy Transmission Corporation Limited and Others [ 2017 (3) TMI 1628 - SUPREME COURT ]. In the former decision, it was clearly held that even though the High Court can entertain a Writ petition against any order or direction passed or action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law. Taking note of the said settled position of law and finding that all that the learned Single Judge did was to follow the said dictum while dismissing the Writ Petition, there are no reason to interfere with the judgment of the learned Single Judge - appeal dismissed.

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• Income Tax

• 2023 (11) TMI 211
  Condonation of delay in filling appeal - delay of 328 days - appeal against Revision order u/s 263 - Claiming that assessee did not receive proper legal advice at that point of time, the assessee came forward with this appeal with a delay of 328 days - HELD THAT:- The affidavit does not specify when did the assessee approach the counsel and got the advice. There is no reason as to why the assessee sought such an advice at a belated stage. There is no denial of the fact that the consequential order was also passed. On a consideration of all these facts, we are convinced that the assessee wanted to have the best of both the worlds and having tested its luck before the AO in the consequential proceedings and having lost the same, it came back to agitate the legality of the impugned order. Assessee is not an individual, but it is a commercial entity with a battery of legally trained people available for assistance. The pleas available to the individual cannot be taken by the commercial entities with all the legal paraphernalia at their disposal. If a party like assessee is permitted to conduct litigation in this way, we are afraid there would be no end to litigation and it would be against the public policy. In the case of SRK Infracon (India) Pvt. Ltd [ 2023 (2) TMI 1208 - ITAT HYDERABAD] a Co-ordinate Bench of the Tribunal considered this aspect of assessee filing the appeal with considerable delay, having lost the case in consequential proceedings and held that in such an event, it would not be in the public interest to condone the delay - Appeal of the assessee dismissed.

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• 2023 (11) TMI 203
  TP Adjustment - comparable selection/Deselection - selection criteria - HELD THAT:- Tribunal not just followed the previous orders mentioned above to maintain consistency, but also examined the entire material on record to ascertain the comparability of each of the comparables with the case of the respondent/assessee pertaining to AY 2007-08. Appellant/revenue has not been able to demonstrate change, if any, in circumstances qua the respondent/assessee and/or any of the comparables in the financial year in question vis- -vis the earlier years. There is not even a whisper alleging any such change while calling upon fresh analysis of comparability. We have not been shown that the Tribunal committed any perversity in reaching the conclusion it reached in the matter. No substantial question of law.

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• 2023 (11) TMI 202
  Revenue entitlement to recover dues for the period which precedes the date of approval of the RP by the NCLT under IBC - Extinguishment of liability as per the approved resolution plan - revenue claims that Section 238 of the 2016 Code does not impede its powers to pursue assessment or reassessment proceedings - HELD THAT:- In cases where no provision is made for claims lodged on behalf of the creditors, or there is failure to lodge a claim with the Resolution Professional, all such claims stand extinguished. This position in law obtains because of the provisions of Section 31 of the 2016 Code, which, inter alia, stipulates that once the RP is approved, it shall be binding on the corporate debtor and its employees, members, and creditors which includes the Central Government, State Government, Local Authority arising under any law for the time being in force, and also on authorities to whom statutory dues are owed. Furthermore, the provision also stipulates that the approved plan will be binding on guarantors and other stakeholders involved in forging the same. Therefore, the submission advanced on behalf of the revenue that it could continue with the assessment/reassessment process concerning the AYs in issue is entirely untenable. A successful applicant whose RP has been approved should not be put in a position where it is called upon to liquidate dues of creditors, including statutory creditors, which were not embedded in the RP. A successful applicant is, in law, provided with a clean slate ; therefore, dues for the period prior to the date when the RP was approved cannot be recovered. The courts have recognized this principle in more than one case. Whether the provisions of the 2016 Code would override the provisions of the 1961 Act, where inconsistency is found between the two statutes? - When one examines the provisions of Section 238 of the 2016 Code, the underlying purpose of the provision comes through. Section 238 clearly states without any ambiguity that the provisions of the 2016 Code shall have effect, notwithstanding anything inconsistent contained in any other law for the time being in force, or any instrument having effect under any such law. Thus, where matters covered by the 2016 Code are concerned [including insolvency resolution of corporate persons] if provisions contained therein are inconsistent with other statutes, including the 1961 Act, it shall override such laws. If such an approach is not adopted, it will undermine the entire object and purpose with which the Legislature enacted the 2016 Code. As decided in Ghanshyam Mishra s case [ 2021 (4) TMI 613 - SUPREME COURT ] SC held since the subject matter of the proceedings related to claims made by the VAT authorities before the approval of the plan, no purpose would be served in relegating the writ petitioner/appellant to an alternative remedy. The Court made a specific observation which, applies to the instant cases as well: A party cannot be made to run from one forum to another forum in respect of the proceedings and the claims, which are not permissible in law. Thus the impugned notice and order are unsustainable in law and, hence, cannot be enforced.

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• 2023 (11) TMI 201
  Recovery of Income tax demand with penalty against company dissolved - Conclusion of CIRP proceedings under IBC - Extinguishment of liability as per the approved resolution plan - HELD THAT:- Some of the notices issued u/s 143(2)predated the order passed by the NCLT, whereby KCPL s RP was approved. These notices adverted to the fact that additions concerning share application money and depreciation claimed by RGPCL were proposed to be made for AY 2017-18 [Financial Year (FY) 2016- 17]. Thus, limited scrutiny was proposed. The notices were based on the ROI filed by RGPCL. Therefore, the additions to RGPCL s income were, quite clearly, on the anvil. Thus the submission advanced on behalf of the revenue insofar as the tax demand, which is the subject matter of the impugned order and notice dated 06.12.2019, is concerned, is untenable in law. An operational creditor can lodge a claim which needs to be adjudicated. As far as the impugned order and notice are concerned, it will have to suffer the same fate as the penalty which was imposed, and the consequential demand that was created had its genesis in the failure of the previous management of RGPCL in responding to the statutory notices. These notices concerned the aspects mentioned in the first notice issued under Section 143(2) of the 1961 Act. Thus, having regard to the fact that the revenue had not lodged its claim, despite the publication of the public announcement by the Resolution Professional inviting claims from creditors, including statutory/operational creditors such as the revenue, no provision could be made [even if it may otherwise have been possible] in the approved RP. The terms contained in the approved RP are binding on all stakeholders, including those who could have filed claims but chose not to lodge them. The revenue, having failed to lodge its claim, cannot enforce the impugned orders and notices, given the binding nature of the approved RP. Section 31 of the 2016 Code, among other things, stipulates that once the RP is approved, it shall be binding on the corporate debtor and its employees, members, and creditors, which includes the Central Government, State Government, Local Authority to whom a debt in respect of payment of dues arising under any law for the time being in force and also on authorities to whom statutory dues are owed. Furthermore, the provision also stipulates that the approved plan will bind the guarantors and other stakeholders involved in forging the same. [See Ghanashyam Mishra and Sons Private Limited through the Authorised Signatory Vs. Edelweiss Asset Reconstruction Company Limited through the Director, [ 2021 (4) TMI 613 - SUPREME COURT] . Since the revenue failed to lodge its claims, the impugned demands raised by the revenue stand automatically extinguished. [See Ruchi Soya Industries Limited and Others Vs Union of India and Others, [ 2022 (3) TMI 60 - SUPREME COURT] and Sreemetaliks Limited Vs. Additional Director General and Ors. [ 2023 (2) TMI 682 - DELHI HIGH COURT] Therefore, the submission made on behalf of the revenue that it should be allowed to enforce the impugned orders and notices is misconceived in law.

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• 2023 (11) TMI 200
  TDS u/s 194C or 194J - Short deduction of TDS - Addition u/s 40(a)(ia) - payments for conversion of raw milk into processed milk and milk products - HELD THAT:- Services rendered by the dairies are not technical services since the dairies are not expert on any technology which they could provide to the assessee, nor they provide any managerial services/consultancy services since there is no advice given by dairies to the assessee. The dairies are not assigned any exclusive work relating to quality check but are assigned work relating to conversion/processing of milk and milk products, wherein one of the requirements is to ensure quality parameters. The main and basic nature of transaction viz. conversion/processing of mild on job work basis does not lose its true characteristic. Tribunal relying on assessee s own precedent [ 2018 (3) TMI 1304 - ITAT RAJKOT] which was not challenged, held that processing of milk falls under Section 194C of the Act and there is no question of short deduction by the assessee. The Tribunal therefore rightly deleted the addition made by the AO u/s 40(a)(ia) of the Act.

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• 2023 (11) TMI 199
  Undisclosed income (from equity transactions) - unexplained investment (by way of cash deposit) u/s 69 r/w Section 115 BBE - huge amount of money was transacted using the Firm s PAN number - Assessment against deceased partner - despite providing ample opportunities, the petitioner choose to remain silent and failed to answer to the notice issued u/s 142(1) - HELD THAT:- The retirement and dissolution deed filed along with the typed set of papers indicates that the petitioner has resigned from the partnership firm and therefore, the partnership firm was no longer in existence. After the dissolution deed was signed, no steps were taken by the petitioner s husband (late) Sripal Kumar Jain to make changes in the Bank Accounts maintained by the partnership firm to state that the firm continued to exist and that the business of the firm was being carried on by him as the sole proprietor. Also petitioner s Late husband died on 07.09.2021. The proceedings came to be initiated only after the death of assessee with the issuance of notice u/s 148 of the Income Tax Act, 1961. A portion of the notice issued u/s142(1) thus remains unanswered although they were posted in their web portal in accordance with the provisions of the Income Tax Act, 1961 read with Income Tax Rules, 1962. While passing the order, the respondent ought to have compared the income that was proposed to be added pursuant to notice dated 31.03.2022 with the income declared by the petitioner s deceased husband (late) while finalizing the assessment. There is no comparison. Court is inclined to set aside the impugned order and remits the case back to the respondent to pass a fresh order on merits and in accordance with law within a period of eight (8) weeks from the date of receipt of a copy of this order. Petitioner is directed to file all the documents that were called for in pursuant to the notice issued under Section 142(1) and give a proper reply to the various show cause notices issued to the petitioner. Petitioner is directed to co-operate with the respondent.

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• 2023 (11) TMI 198
  Validity of assessment u/s 153A - due approval u/s 153 D - Addition invoking the provisions of section 56(2)(viia) - addition alleging anomalies in the method of valuation adopted by the AO - Admission of additional documentary evidence denied - HELD THAT:- As stated by the assessee, and rightly so there were justifiable reasons on its part for not filing the requisite details/documents, which have been filed before us as additional evidence, in the course of the proceedings before the CIT(Appeals). Also, it is a matter of fact borne from the record that the CIT(Appeals) had merely referred to the observations of the A.O. and disposed off the appeal by approving the same. We, thus, in the totality of the facts involved in the present case before us, read a/w. multi-facet contentions that have been raised by the assessee before us wherein adjudication of the majority of those would require a reference of the additional documentary evidence that the assessee has placed before us, restore the matter to the file of the CIT(Appeals) with a direction to him to re-adjudicate the same after taking cognizance of the additional documentary evidence and also addressing the additional grounds of appeal that have been raised by the assessee in the course of the proceedings before us - CIT(Appeals) shall, in the course of set-aside proceedings, afford a reasonable opportunity of being heard to the assessee company, which shall remain at liberty to substantiate its contentions on the basis of fresh documentary evidence. Assessee appeal allowed for statistical purposes

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• 2023 (11) TMI 197
  Unexplained jewellery - wealth tax returns filled to disclose jewellery - CIT(A) noted that out of jewellery found of 18,085.700 gms, most of it in weight was disclosed in wealth tax returns already filed by the assesses, being 15, 341.244 gms. The remaining he noted was either returned to tax as undisclosed in the hands of Rakesh Agarwal 2,026.810 gms, Madhavi Agarwal 1,925.60 gms and the balance to be explained in the hands of Ruchika Agarwal - HELD THAT:- Jewellery which matched with wealth tax returns in description weight - For 9,397.650 gms comprising of gold weight 8,016.330 gms and diamond 1,485.900 Ct.and no other jewellery of matching description being found during search, we are in complete agreement with him that that the only logical conclusion was that such jewelleries are to be taken as those disclosed in the Wealth Tax Returns only. We completely agree with ld. CIT(A) that it is preposterous to hold that such identical jewellery found during search as different from that disclosed in the Wealth Tax Returns when there is no jewellery found during search identical in all terms with that disclosed in the Wealth Tax Returns. The finding of the Ld.CIT(A) in this regard is very pertinent that having conducted search and covered multiple premises and numerous receptacles in the group cases, the convenience of balance has to be in favour of the person searched and the inference/ conclusion against the person searched is that nothing more has remained undiscovered by the Department. That any presumption of separate set of similar jewellery should be based on hard undisputed facts. We agree with the CIT(A), that any basis adopted by the AO for treating such matched jewellery as unexplained is unacceptable, be it higher valuation by DVO or non operation of locker in which it was kept. We agree with the reasoning of the CIT(A) for rejecting higher valuation of jewellery by DVO as basis for treating matched jewellery as unexplained. Valuation is not an exact science, and in case of precious gems and stones, being a matter of estimate of size, weight and quality; there may be difference in valuation as submitted by two valuers. Jewellery which did not match with wealth tax returns but was given credit by Ld.CIT(A) of weight of un matched jewellery of wealth tax return - The certificate of the bank submitting the last date of operation of these two lockers along with the daily register of operation of lockers as evidenced clearly demonstrates that locker No.907, which contained the substantial jewelleries, was last operated by Smt. Uma R. Agrawal on 08.02.2011. These facts find mention in the first paragraph of the bank s certificate also. The Assessing Officer, however, has noted the last date of operation of locker No. 907 as 14.11.2007, on which date also this locker was operated by Smt. Uma R. Agrawal. But, the daily attendance register also shows operation of this locker on 08.02.2011. Therefore, incorrectly noting the last date of operation of locker No.907 as in 2007, the Assessing Officer held that the Registered Valuer of the assessee could not have given a report in 2009 after physically examining the contents of the locker. Since, factually this locker was last operated in 2011; therefore, this basis of the Assessing Officer for rejecting the Registered Valuer s Report is rightly found by the CIT(A) to be not correct. On the contrary, the assessee s explanation of the contents in the locker being explained with that returned in the Wealth Tax Returns based on the Registered Valuer s Report prepared in 2009 is substantiated with the fact that the locker was operated during that period. Therefore, with respect to items of jewellery and ornaments which matched with the Wealth tax Returns both in weight and description to the extent of gross weight of 9397.65 gms as found by the Assessing Officer himself during the assessment proceedings, we endorse the finding of the CIT(A) that no addition on account of unexplained investment can be made either on account of huge difference in valuation of the items by the DVO as compared to the Registered Valuer or on account of his conclusion of last operation of two lockers in Bank of Baroda. Jewellery surrendered as unexplained by the assessee s themselves - Disclosure in wealth tax returns coupled with copies of bills of purchase and bank statements showing payment through banking channels furnished by the assessee sufficiently evidence the fact of jewellery purchased over the years from disclosed sources. With nothing found by the department during search of such jewellery being converted into any other asset we do not find any infirmity in the CIT(A) giving credit of the same to the unmatched jewellery found during search. As for the balance unexplained jewellery Ld. CIT(A) has, noted that the assessees themselves have admitted certain jewelleries as unexplained and included in their Income-tax Returns for the impugned year. He noted the same to be of gross weight of 2026.810 gms, comprising of gold weight 2201.528 gms and diamond 82.890 Ct., reducing the same from the balance jewelleries and ornaments required to be explained by the Group which came to gross weight 3,943.260 gms, comprising of gold weight 3,937.147 gms and diamond 2,026.810 Ct., he held that the unexplained jewellery remaining to be explained remained in the hands of Smt. Ruchika Agrawal entirely who is not an assessee before us. This finding of fact by the ld. CIT(A) has also remained uncontroverted before us. We uphold the order of the CIT(A) in the case of all the assessee before us deleting the addition of all the matched jewellery and the unmatched jewellery to the extent of jewellery remaining unmatched as disclosed in the wealth tax returns. Addition on account of unexplained Investments in artwork - 3240 items of artworks were found. The same were valued by the Expert Art Appraiser / Valuer at Rs. 87,29,68,900/-; out of same, seizure of artwork of value Rs. 33,37,30,000/- was made - HELD THAT:- As noted the fact the assessee had given all details with respect to the artworks which he claimed to have purchased from outside party, giving names of the parties, the amount paid to him and the cheques through which the payments were made, which details were found with the assessee during search itself, the substitution of the value of artworks with that as valued by the artwork valuer is not acceptable and, in this regard, we agree with CIT(A) that the work of art has no market or exchange for dealing in the same and every art piece has a different value in the eyes of the buyer and the seller. Therefore, there could be no basis in determining the fair market value of artwork. That there can be no parity in determining the fair market value of artwork piece of jewellery or ornaments whose value of capable of being reasonable estimated basis of the weight of precious items used therein, but in the case of artwork its value is not determined on the basis of the cost involved in it, but the basis more on the value placed to its creativity which is immeasurable and varies from person to person and from time to time. We agree with the ld. CIT(A) that the value of artwork is only a notional figure of estimation at a given point of time only and, therefore, cannot be relied upon for determining the cost of investment made in the artwork. No infirmity in the findings of the ld. CIT(A) deleting the addition made on account of unexplained investment in artwork. Unexplained credits in Foreign Bank account and disallowance of set off of business loss - HELD THAT:- In view of the same, the issue relating to the addition made on account of unexplained credit in foreign bank account and set off of brought forward business loss having been decided in favour of the assessee in the preceding years by the ITAT, and no distinguishing facts have been brought to our notice, there is no case with the Revenue challenging the same addition and disallowance in the case of the assessee for the impugned year before us i.e. AY 2015-16. Revenue appeal dismissed.

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• 2023 (11) TMI 196
  TP adjustment on interest on advances given to AEs - assessee had charged interest on the outstanding amount of advances to the AE at the rate of 3.22% - derived on the basis of LIBOR + 260 basis points - rejection of internal Comparable of the assessee - HELD THAT:- we see no reason given by the authorities below, nor is there any finding by the Revenue Authorities below to the effect that quotation of the Bank of Nova Scotia, Singapore was, in any way, not authentic. There is no investigation or inquiry conducted by the Revenue Authorities with regard to the authenticity of the quotation, and the Bank of Nova Scotia, Singapore is a renowned bank having global operations. Therefore, there is no basis for doubting the authenticity of the quotation. Basis with the ld. CIT(A) for rejecting the internal CUP of the assessee was not correct. Having held so, there is no doubt that the internal CUP is the best comparable which can be taken for comparability analysis as compared to external comparable and no deficiency having been found in the internal CUP, the external CUPs taken by the AO/TPO are rejected as not applicable for comparability analysis in the present case. We hold that the transactions of loans advanced to AEs by the assessee was adequately demonstrated by the assessee to be at Arm s Length Price based on the comparability analysis done with its internal comparable. No transfer pricing adjustment to the same was warranted and the transfer pricing adjustment made by the authorities below is directed to be deleted. TP Adjustment - outstanding receivables of the assessee for the overdue period of outstanding by charging interest thereon treating them as in the nature of loans and advances made to the Associated Enterprises - HELD THAT:- As decided in KUSUM HEALTH CARE PVT. LTD. [ 2017 (4) TMI 1254 - DELHI HIGH COURT] where the international transactions of sales has been demonstrated to be at arm s length by adopting the TNMM method and after making working capital adjustment to the Profit Level Indicator (PLI), there remains no scope for making any further adjustment on account of overdue outstanding receivables on account of the very same sales transactions made to AEs. The reasoning being that the working capital adjustment made to the PLI take care of the overdue outstanding receivables. Having said so, we completely agree with the ld. Counsel for the assessee that the said decision squarely applies to the facts of the present case since the assessee in the present case had done the TP analysis of its international transactions using the TNMM method and after making working capital adjustment to its PLI. These facts were sufficiently demonstrated before us through relevant documents of the transfer pricing report as noted above by us and were not controverted by the ld. DR also before us. Thus we hold that no upward adjustment of interest on the outstanding trade receivables of the assessee relating to its AEs was warranted in the present case and the adjustment, therefore, made is directed to be deleted. TP Adjustment made on account of specified domestic transactions undertaken with the AEs - argument of the assessee that the impugned transaction was not covered u/s 92BA - HELD THAT:- We find that the assessee had reported this transaction qualifying as specified domestic transaction u/s 92BA(i) of the Act as transactions relating to section 40A(2)(b) - TPO has also accepted this fact which finds mention in his order. The proposition of law canvassed by the assessee has remained uncontroverted before us. Ld.DR was unable to distinguish the decisions relied upon by the assessee before us. Thus following the proposition of law laid down in the case of Texport [ 2017 (12) TMI 1719 - ITAT BANGALORE] followed by various coordinate benches of the Tribunal, we hold that the impugned transaction of purchase by the assessee from its associate enterprise did not qualify as a specified transaction in terms of section 92BA of the Act. The entire exercise of determining its ALP in terms of section 92BA of the Act therefore fails. The adjustment made to the income of the assessee accordingly does not survive and is therefore directed to be deleted. Thus addition on account of specified domestic transaction is deleted. Deduction u/s 35(2AB) - R D expenditure incurred in in-house facility of the assessee - Claim in excess of that allowed by the DSIR in Form 3CL - quantum to which the assessee is eligible? - claim of the department being that the assessee is eligible to claim deduction only on the expenditure approved by the prescribed authority in Form No.3CL and the assessee arguing otherwise - HELD THAT:- What is only to be reported by the prescribed authority is the cost of in-house research facility, mentioning specifically the expenditure incurred on land building, since the expenditure on land building is not eligible to weighted deduction as per section 35(2AB) of the Act. Therefore, we are convinced with the contentions made by assessee that the reporting by the prescribed authority in Form No.3CL of the revenue and capital expenditure incurred by the assessee can no way be relied upon and taken as that approved by the prescribed authority, restricting the assessee s claim to weighted deduction to the expenditure allegedly approval by the prescribed authority. As noted above by us from the provisions of section and rules and form prescribed thereto, there is no requirement for the approval of any expenditure by the prescribed authority for the relevant assessment year i.e.Asst.Year 2013-14 and 2014-15. Therefore, we agree with assessee that the AO could not have relied on the Form No.3CL for restricting the claim of the assessee to the extent allegedly approved by the DSIR .Revenue s contention of disallowing the assessee s claim of weighted deduction on clinical trial is dismissed, since solitary contention of the Revenue is that DSIR had not approved this expenditure in Form No.3CL. As for the expenditure incurred on Exhibit Batches and other expenses, the explanation regarding nature of the expenditure being in relation to samples/prototype obtained for pilot studies and in relation to labour cost, staff training etc in the R D units, they are all clearly incurred for the purpose of R D activity only, and therefore are also eligible to claim weighted deduction - We hold that the entire claim of expenses u/s 35(2AB) were in accordance with law and called for no disallowance at all. Deduction of expenditure u/s 35(1)(iv) - claim has been made by appellant company during the course of assessment proceedings and not in the Return of Income. - HELD THAT:- Both the authorities below have wrongly denied the assessee s claim of deduction, for the simple reasoning that it does not make any difference that before the AO the assessee had made claim under section 35(1)(i), while before the CIT(A) the assessee claimed u/s 35(1)(iv) - What is pertinent is, whether the assessee is eligible to claim deduction in whichever section it qualifies. As long as the assessee is entitled to deduction, mere wrong quoting of section will not disentitle the claim of deduction. Assessee has claimed the allowability ,as the expenses were incurred for product development and qualified as capital expenditure on research and development, eligible for reduction under section 35(1)(iv) of the Act. Since the facts relating to eligibility of the claim have not been properly verified by the authorities below, we admit the claim of the assessee and restore the issue back to the AO to verify eligibility of the assessee s claim and thereafter allow the same in accordance with law. Disallowance of u/s. 36(1)(iii) - borrowed funds had been used for investing in CWIP and computing the funds so allegedly deployed on CWIP on the average CWIP for the year he worked out the interest attributable to the same on proportionate basis which accordingly was disallowed in terms of section 36(1)(iii) - HELD THAT:- DR was unable to controvert the factual finding of the ld.CIT(A) that the assessee s own interest free funds were much more than its investment made in CWIP during the year, as also the fact that even the profits earned during the year sufficed for the purpose of making investment in CWIP during the year. Also judicial proposition in this regard also stands settled by the decision of Reliance Industries Ltd [ 2019 (1) TMI 757 - SUPREME COURT] holding that where mixed funds are available and where sufficient interest free funds are there the presumption is that the same were used for the purpose of making interest free investments, calling for no disallowance under section 36(1)(iii) - DR was unable to point out any subsequent decision of the Hon ble apex court unsettling the said proposition of law. Since the Ld.DR was unable to controvert the findings of the Ld.CIT(A) both on facts as well as law we see no reason to interfere in the order of the CIT(A) deleting the disallowance of interest made u/s 36(1)(iii) of the Act. Disallowance u/s 14A r.w.r. 8D - sufficiency of own funds - HELD THAT:- Where sufficient own interest free funds are available no disallowance of interest is called for u/s 14A - See Sintex Industries Ltd [ 2018 (3) TMI 1448 - SC ORDER] . Since the Ld.DR was unable to controvert the findings of the Ld.CIT(A) both on facts and on law, we see no reason to interfere in the order of the ld.CIT(A) deleting the disallowance made by the AO of interest made u/s 14A. CIT(A) deleted disallowance of administrative expenses u/s 14A of the Act noting that the assessee had suo moto disallowed expenses more than what was computed by the AO as disallowable -DR was unable to controvert the factual finding of the Ld.CIT(A) as above. In view of the same the order of the Ld.CIT(A) deleting the disallowance made by the AO of administrative expenses u/s. 14A of the Act calls for no interference. TDS u/s 195 - disallowance u/s. 40(a)(ia) of the IT. Act on export commission payments made to the Non-resident Agents - HELD THAT:- No reason to interfere in the order of the ld.CIT(A) deleting the disallowance of commission made under section 40(a)(ia) as AO was incorrect in holding that the commission income accrued in India and hence was liable to tax in India. Revenue appeal dismissed.

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• 2023 (11) TMI 195
  Estimation of income - On Money - Unaccounted on money receipt from the real estate project - Addition by making extrapolation of on money in respect of whole of the saleable area and worked out component of on money - incriminating documents found and seized during the course of search proceedings u/s 132 and admissions made by the partner of the firm - AO held that the contention of assessee regarding the cancellation of booking of flats in only an afterthought, when the evidence in respect of receipt of on money was found and seized during the search proceedings - CIT(A) estimated 25% of such on money as the income component - HELD THAT:- Being a search case, we have independently examined the facts of the present case and find that there was no incriminating material qua the entire saleable area. Though the assessee raised a plea before the Assessing Officer that 19 persons have cancelled their bookings after a search action due to fear of interrogation and investigation by the search team. No proof of refund of their deposits or bookings is either shown to the AO while filing reply to the show cause notice except assertion that liability of bookings were refunded. In such situation, we find that the ld. CIT(A) was justified in considering the on money component in respect of such 23 persons. For other remaining buyers, AO has not brought any evidence except assuming and presuming and making extrapolation that assessee has received on money from each and every buyer. Thus, we find that the ld. CIT(A) was quite right and justified in considering the on money in respect of the persons whose details were found during the search action. Neither the search party nor the Assessing Officer made any investigation from the purchasers or the other person whose names were found in the seized material about the payment of additional on money. AO estimated on money after rejecting books of account by considering whole saleable area by multiplying figure of rate found in the seized material. Such application of formula of on money with regard to entire saleable are is not justified, particularly when there is no independent or corroborate evidence to support such action. Further, the assessing officer being investigator and adjudicator was under obligation to consider the entire seized material. The assessing officer has clearly recorded that the assessee receiving on money in cash and was incurring expenditure therefrom. No such fact was taken into consideration by assessing officer while estimating income from on money component. We find that in CIT Vs Indeo Airway (P) ltd [ 2012 (9) TMI 97 - DELHI HIGH COURT] held that where receipt recorded in the searched documents are believed to be income, entries of expenditure recorded therein are also to be believed without asking for more evidence for such expenditure. Thus, with our aforesaid additional observation, we uphold the order of ld. CIT(A). In the result, grounds of appeal raised by the revenue are dismissed.

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• 2023 (11) TMI 194
  Statutory deduction u/s 24(a) denied to assessee trust - rent income earned from the properties of the trust - AO was of the view that Section 11, 12 and 13 are special provisions, though, deals with the benefit of tax exemption and these provisions override the general provisions of Income Tax Act and not required the assessee to follow normal accounting or commercial principle to determine income - HELD THAT:- As decided in Improvement Trust, Fatehabad [ 2020 (2) TMI 709 - ITAT DELHI ] deduction @ 30% being standard deduction u/s 24(a) cannot be allowed as the income of assessee is subject to application under Section 11 and 13 of the Act. Section 11, the income of trust is exempt. Thus, respectfully following the decision of Division Bench of Delhi Tribunal in the case of Improvement Trust Fatehabad Vs ITO(E) (supra) and Nandlal Tolani Charitable Vs ITO(E) [ 2019 (4) TMI 762 - ITAT MUMBAI ] no merit in this ground of appeal raised by the assessee. Disallowance of amount paid to FCRA - penalty was paid for violation of provision of Foreign Contribution (Regulation) Act, 2010 - addition made as expenses were incurred by way of penalty for breach of law which cannot be considered as incurred wholly and exclusively for the purpose of business - HELD THAT:- Assessee vehemently submitted that such expenses were incurred wholly and exclusively for the purpose of regularization of foreign remittance. To support his submission, assessee relied upon the decision of Master Capital Services Ltd. [ 2007 (2) TMI 241 - ITAT CHANDIGARH-A ] wherein it was held that wherein some violation of conditions prescribed by National Stock Exchange but such violation occurred in the regular course of business which cannot be considered as infringement of any statutory law, so the expenses incurred by the assessee in regular course of business were allowable.We do not find that the assessee has incurred expenses for regularization of foreign remittance, thus the same is allowed for the purpose of business. In the result, ground No. 2 of the appeal is allowed. Addition on account of foreign contribution - AO made addition by taking a view that the assessee has not shown the donation either in the income and expenditure account or in the computation of total income - CIT(A) confirmed the action of AO by holding that there is discrepancy in the statement of the assessee - HELD THAT:- The assessee is claiming to have received the donation for earlier years but as per letters were given to FCRA for registration of foreign contribution, the assessee admitted that they have received amount in FY 2013-14. Before us, assessee vehemently argued that no funds were received in impugned assessment year, so no addition can be made and has shown the details of such contributions received in this regards. Thus, if the contribution is not received in the assessment year under consideration no addition is warranted, therefore principles agreed that that no such addition be sustained against the assessee. As there is some discrepancy in explaining facts before ld CIT(A), direct the assessing officer to verify the fact and allow relief to the assessee. In the result, this ground of appeal is allowed for statistical purpose. Unexplained deposits in bank - assessee not furnished required details to him rather reply was sent through courier - CIT(A) confirmed the action of AO by relying of the Schedule-H of profit and loss account of the assessee-trust - HELD THAT:- We find that the assessee has furnished complete bifurcation of all the credit in the impugned bank account with Central bank of India. The assessee has filed complete statement of bank account as well as the ledger of fees of student. The books of the assessee are duly audited. The bank account is not undisclosed account. The said bank account is regularly used and maintained by the assessee for the purpose of its primary wing of school. In the bank account the assesse has mentioned the PAN of assessee- trust. Thus, the bank account is not the undisclosed bank account. The assessing officer made addition solely on the basis of AIR information without actual verification of facts. Hence, I do not find any justification of making addition on account of credit as unexplained credit. The assessing officer is directed to delete the entire addition. In the result, this ground of appeal is allowed.

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• 2023 (11) TMI 193
  Adjustment of refunds granted for computing of interest u/s 244A - manner of adjusting the refund - assessee submitted before the CIT(A) that AO had granted interest u/s 244A by artificially splitting the refund granted into interest and tax and adjusting the same from interest and tax refund resulting in reduced interest u/S 244A being granted - HELD THAT:- The amount of interest u/s. 244A is to be calculated by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Accordingly we hold that the manner in which the assessing officer has adjusted the refund is not correct and that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Tribunal. AO is directed to compute interest under section 244A as per the claim of the assessee after giving a proper opportunity of being heard.

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• 2023 (11) TMI 192
  Income accrued in India - taxability of receipts from offshore supplies - allegation of the revenue authorities that the assessee has a supervisory permanent establishment (PE) under the provisions of Article 5 of India-Thailand Tax Treaty - HELD THAT:- There being no difference in the factual position in the current assessment year, respectfully following the decision of coordinate Bench [ [ 2023 (8) TMI 1372 - ITAT DELHI] ] we hold that the addition made by the Assessing Officer on account of attribution of profit in relation to receipts from offshore supplies is not taxable in India. Accordingly, the Assessing Officer is directed to delete the addition. Taxability of receipts from engineering services as royalty - Addition has been made by the departmental authorities on a completely factual misconception that the receipts from BTIN towards engineering services is royalty income for use of process of equipment. We find, while deciding assessee s appeals for assessment year 2016-17, 2018-19 and 2019-20 [ 2023 (8) TMI 1372 - ITAT DELHI] the coordinate Bench has also addressed this issue and held that the receipts are not in the nature of royalty. Appeal of assessee allowed.

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• 2023 (11) TMI 191
  Validity of assessment u/s 144C - period of limitation - HELD THAT:- According to the provisions of section 144C (13) on receipt of the direction of DRP, AO shall, in conformity with the directions, complete the assessment within one month from the end of the month, in which such direction is received. Therefore, it clearly says that the AO gets one month time from the end of the month in which the directions are received. In the present case, the assessee has asked the secretariat of the Dispute Resolution Panel, as per letter dated 15/12/2022, about date of sending the directions to AO. To this, an email reply was received from the ITO Headquarter, DRP 1, Western Zone, Mumbai that the DRP has passed the direction and uploaded the same in ITBA system on 26/5/2022. Therefore, apparently as soon as the order is uploaded on the ITBA website, the time limit of one month will start from the end of the month in which such directions are received/ uploaded. DR could not produce before us any evidence that on 26/5/2022, the directions of the DRP were not received by AO. Therefore, the time limit ends for passing the final order on 30/6/2022. However, the assessment order was passed on 31/7/2022 and therefore, it is barred by limitation. Appeal of assessee allowed.

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• 2023 (11) TMI 190
  TP Adjustment - interest on delayed receivables - Assessee pleaded that the deferred receivables do not constitute a separate international transaction requiring benchmarking and such a treatment is bad under law and working capital adjustment would take into account the impact of outstanding receivables and no need to impute any interest on receivables - HELD THAT:- TPO in unequivocal terms noted that even in respect of such sample evidence, no ledgers of the parties, confirmation that no interest was charged, any agreement in that respect, or any other evidence to prove that what was mentioned as terms of payment on invoices was not followed was not submitted. Furnishing of mere invoices and calculations is not sufficient compliance with the directions of the learned DRP. If the assessee substantiates the invoices, the supporting evidence like ledgers confirmations etc., at least to the tune of Rs. 18.46 lakhs, such sample evidence would have been sufficient. But it is not so in this case. We, therefore, do not find any merits in the contention of the assessee. Suffice it to say that the interest shall be charged only at 6% p.a. in respect of the receivables outstanding for more than 30 days. Issues No. 3 to 8 area allowed in the above terms. Deduction u/s 10AA - Assessee filed rectification application and the CPC allowed the deduction u/s 10AA - Subsequently, in the draft assessment order AO did not make any disallowance on this account and, therefore, there is no occasion for the assessee to carry this to the learned DRP- HELD THAT:- AO missed this aspect while passing the final assessment order dated 18/01/2022 and added the sum by way of disallowance of deduction under section 10AA - These are all undisputed facts. It is not the case of the Revenue that for any reason, the order passed u/s 154 cannot be acted upon - we see no reason not to accept the action of AO while passing the draft assessment order and the order u/s 154 allowing the deduction u/s 10AA of the Act. We, therefore, direct the AO to delete the addition made on this account

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• 2023 (11) TMI 189
  Condonation of inordinate delay - delay ranges between 2175 days to 3300 days which roughly translates into 6 to 9 years - Levy of fees u/s 234E on late filing of quarterly TDS returns in Form No.24Q / 26Q - AR has submitted that the assessee is serving in the remote areas AND continuous changes in branch managers and concerned persons who were responsible for filing TDS returns. Due to amalgamation of various banks with assessee bank, it became difficult for head office of Bank to compile all previous data related to TDS returns - AR further submitted that no appeals were preferred against original intimation orders since there was lack of clarity on the issue of levy of late fees u/s 234E. The assessee was informed by its consultants that the levy of late fee u/s 234E was already being challenged in the judicial forums and Bank decided to wait for the outcome of the judicial proceedings HELD THAT:- Though there was inordinate delay in filing the appeal, the assessee could not adduce sufficient or reasonable cause to justify the inordinate delay. As noted by Ld. CIT(A), the assessee is a regional rural bank and assisted by qualified professionals who simply ignored the statutory notices / orders issued by assessing officer and also various limitations given in the Act for the purpose of filing appeal. The conduct of the assessee shows gross negligence which does not justify the condonation of delay. The various case laws as enumerated by CIT(A) supports this reasoning. It could thus be seen that Ld. CIT(A), in a very detailed manner, considered the condonation plea of the assessee and arrived at a conclusion that there was no reasonable or justifiable cause with the assessee in filing the appeals with such an inordinate delay. Reasons and arguments are very general in nature. Difficulty in compliance or change in concerned offices / professional or the fact that the TIN facilitation centre was far-off could not be a reasonable cause to justify such an inordinate delay. The plea that the assessee was waiting for the outcome of judicial decisions also does not impress us since the assessee s grievance could be redressed only by filing an appeal by the assessee only. Even today, there are divergent views of various High Courts on impugned issue and this issue is yet to be settled by Hon ble Apex Court. The assessee is a regional rural bank and surely assisted by qualified professionals and therefore, we are unable to accept all these arguments of Ld. AR. Thus we confirm the action of Ld. CIT(A) in dismissing the appeals of the assessee for want of condonation of inordinate delay.

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• 2023 (11) TMI 188
  Delay filling appeal against Revision order u/s 263 - delay of 324 days - Fresh order passed by the AO after remand back the case by CIT u/s 263 - assessee submitted that it did not receive proper legal advice - sufficient cause of delay - HELD THAT:- As stated that pursuant to the impugned order, the assessee thought that it would only after disposal of the consequential proceedings, the order u/s 263 has to be challenged, but subsequently, on proper advice, came to know that the impugned order has to be challenged separately. Claiming that it did not receive proper legal advice that that point time, the assessee came forward with this appeal on 19/04/2023 with a delay of 324 days. The affidavit does not specify when did the assessee approach the counsel and got the advice. There is no reason as to why the assessee sought such an advice at a belated stage. There is no denial of the fact that the consequential order was also passed. It is also not in dispute that the assessee was pursuing the consequential order with the aid and advice of professionals only given the volume of the returned income. we are convinced that the assessee wanted to have the best of both the worlds and having tested its luck before the learned Assessing Officer in the consequential proceedings and having lost the same, it came back to agitate the legality of the impugned order. Assessee is not an individual, but it is a commercial entity with a battery of legally trained people available for assistance. Thus we do not find it proper to condone the delay and the reason stated by the assessee does not constitute sufficient cause for such purpose - Decided against assessee.

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• 2023 (11) TMI 187
  TDS u/s 195 on payment of secondment cost - disallowance made u/s. 40(a)(i) for non deduction of tds - payment to the US and other entities were not in the nature of reimbursement, and the assessee is under obligation to deduct TDS - as per AO payment so made would be fees for included services under DTAA and fees for technical services u/s 9(1)(vii) - CIT(A) deleted the addition - assessee being resident corporate assessee is stated to be engaged in manufacturing and sale of moving machineries - HELD THAT:- The undisputed position that emerges is that the assessee has reimbursed the salary cost of seconded employees on cost-to-cost basis without any profit element. The assessee has duly deducted tax at source from these payments u/s 192 which is evidenced by the copies of Form 16 as placed on record. The same would show that the stated employees have worked under the supervision and control of the assessee. Once tax has been deducted u/s 192, there would be no requirement of TDS u/s 195 again while reimbursing the same to the foreign entity on cost-to-cost basis. Decided in favour of assessee. Depreciation on computer software @60% - AO, treating the same as intangible asset, restricted the same to the extent of 25% and made disallowance - HELD THAT:- The functioning of the computer and the software was interlinked and inseparable. Therefore, the software would be eligible for same rate of depreciation. We are of the considered opinion that software is an integral part of computer system and the same would be eligible for same rate of depreciation as applicable to computer system - See M/S. COMPUTER AGE MANAGEMENT SERVICES PVT. LTD. [ 2019 (7) TMI 1153 - MADRAS HIGH COURT] - Decided in favour of assessee.

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• 2023 (11) TMI 186
  TP order u/s 92CA without quoting the mandatory DIN - simultaneous DIN number was generated and communicated - assessee submitted that the TPO order doesn t bear DIN in the light of Circular No.19/2019 dated 14.08.2019 - HELD THAT:- As decided in ABHIMANYU CHATURVEDI, MALLIKA CHATURVEDI, ALKA CHATURVEDI VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-I, NOIDA [ 2023 (8) TMI 378 - ITAT DELHI] forwarding of the intimation of generation of the DIN in ITBA is only a subsequent action and that is not part of assessment order. The manner in which the word communication is defined shows every notice, order, summons, letter and any correspondence from Tax authorities should have a DIN quoted and it is for this reason that the Intimation issued about the DIN of assessment order itself has a DIN quoted on it. Thus simultaneous issue of the DIN number is insignificant and superfluous exercise, in the absence of mentioning the DIN number on the body of the communication. Hence, the grounds taken up for discussion are decided in favour of the assessee.

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• 2023 (11) TMI 185
  TP Adjustment - TPO rejected the entity-level benchmarking done by assessee, instead made unit-level comparison i.e. PLI of each unit was compared with the PLI of external comparables - principle of res judicata OR principle of consistency - HELD THAT:- Admittedly, the transactions done by assessee are not closely-related but they are identical. As decided in CIT Vs. Birlasoft India Limited [ 2011 (6) TMI 1035 - ITAT DELHI] rejected unit-level comparison done by department and accepted assessee s claim of entity-level comparison on the grounds that the assessee had provided identical services from all units; there were no significant functional difference in the services; the services were rendered by various units to the same AEs; and the terms and conditions for rendering such services by all units were governed by one single agreement entered into between assessee and AEs. Same view was again taken in the case of same assessee for AY 2005-06 Birla Soft India Ltd. [ 2014 (8) TMI 867 - ITAT DELHI] The management and finance functions of assessee were common and centralized; the individual units were only concerned with providing services. Therefore, in such a situation, the uniform rate agreed by assessee with AEs is certainly a rate at entity-level which has no connection or linkage with individual units. There is also merit in the submission of assessee that the assessee had to maintain separate books and computed separate profits of all 5 units just to claim exemption qua some of the eligible units but had there been no exemption, there would not have been any necessity to maintain separate books or even compute separate figures of each unit. Therefore, in the present case, when the authorities have accepted entity-level approach of assessee in other years, there is a gross fallacy in not accepting the same approach in current year in absence of any changed circumstance. Therefore, we are inclined to accept that the entity-level approach applied by assessee deserves to be accepted. We, therefore, reverse the decision of lower-authorities and direct the AO to apply entity-level approach as claimed by assessee. Internal benchmarking with Mumbai Unit denied - AR submitted that under TNMM, there can be internal benchmarking as well as external benchmarking and it is judicially settled that the former should be preferred over later - HELD THAT:- From analysis of Rule 10B as interpreted in the judicial rulings cited above, it is clear that internal comparison is allowed by law and the same is preferrable also. But, as contended by Ld. DR for revenue, the DRP has given a clear-cut basis for rejecting the claim of internal comparison . Needless to mention that the claim of internal comparison cannot be allowed merely because the law permits or merely on the basis of mathematical analysis; the assessee has to prove the functional and economic comparability. The DRP has clearly noted that the assessee has failed to do so. We do not find anything wrong in the findings of DRP which are re-produced in foregoing paragraph. Therefore, we are not inclined to make any interference with the order of DRP. The claim of internal benchmarking is therefore devoid of merit and dismissed. Certain external comparables have been wrongly used; they are liable to be excluded - HELD THAT:- Avani Cincom Technologies - As there is a substantial difference in the business of assessee and this company. While the assessee is engaged in providing software/outsourcing services, this company is a product company and catering to specific segments of customers like travel, insurance, etc. Therefore, the assessee is not comparable to this company. We, therefore, direct the TPO/AO to exclude this company from comparable list. Celestial Bio-Labs Ltd. is a product company and secondly, it is developing software for a specific segment, namely bio-technology, pharma, healthcare and clinical research. The name of company Celestial Labs Limited also gives some indication that the company is engaged in laboratory or bio-tech related activity. Therefore, its business is completely different from assessee s business, thus be excluded from list of comparables. Flextronics Software Systems Ltd. company is firstly a product-cum-service company whereas the assessee is a service company only. Secondly, the revenue model of this company is also unique in as much as the company also earns by way royalty from products. Therefore, the assessee s case cannot be compared with this company. We direct the TPO/AO to exclude this company from list of comparables. Infosys Technolgies Ltd. is a giant in software industry and it cannot be compared with small players like assessee. It is also noteworthy that this company has been excluded from list of comparable in assessee s own case by ITAT. Therefore, without mentioning anymore analysis, we are inclined to exclude this company from list of comparables and direct the TPO/AO to do so. Ishir Infotech Ltd. - payments made to outside professional cannot be included in employee cost for the reason that the test of employee cost filter is applied to judge the nature of business. If a company is paying lesser amount of salary to its own staff but paying higher amount to outside professionals, it goes out of service company and does not remain comparable with assessee. Kals Information company is also a product company. It has developed various software products as pointed out by Ld. AR and earning revenue therefrom. Further, it is also claimed by assessee that the company is earning from composite contracts. These business activities of assessee are not controverted by Ld. DR. Therefore, we feel appropriate to exclude this company from comparable and directly accordingly to TPO/AO. Lucid Software Ltd. be excluded as sufficient difference in this company and assessee noticed. Tata Elxi is functional dis-similar in the business with assessee. Even the TPO has also accepted this by mentioning in his report TNMM does not call for strict product comparability and it also allows some diversity in functional comparability. Being a functionally dis-similar, this company cannot be considered as comparable to assessee. Wipro Ltd. company is one of big market players in software sector. The turnover of company is manifold of assessee s turnover, thus we are inclined to exclude this company from comparable. Re-working of exemption u/s 10A/10B - exclusion in numerator (i.e. Export Turnover) but not in denominator - HELD THAT:- As relying on HCL Technologies case [ 2018 (5) TMI 357 - SUPREME COURT] if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. Also Circular No. 4/2018 dated 14.08.2018 stating freight, telecommunication charges and insurance expenses and expenses incurred in foreign exchange for providing the technical services outside India to be excluded from both export turnover- and total turnover-while computing deduction admissible under section 10A - Decided in favour of assessee. Nature of expenses - civil and tiling expenditure - revenue or capital expenditure - HELD THAT:- As noteworthy here that the assessee has himself capitalized expenses in books of account which itself shows that the expenditure cannot be in the nature of repair or maintenance. We find that the AO has carefully invoked the provision of Explanation 1 to section 32(1) by making a sufficient note in assessment-order. Consequently, we uphold AO s action. The assessee fails in this ground. Nature of expenses - licensed software - revenue or capital expenditure - HELD THAT:- As assessee agreed that this issue stands covered against assessee by the decision of [ 2014 (3) TMI 1186 - ITAT CHENNAI] for AY 2008-09 - As AR has not been able to bring on record any change in the nature of expenditure so as to not follow the decision of ITAT, Chennai in assessee s own case for AY 2008-09 re-produced earlier. Therefore, we have no reason to deviate from the view taken therein. Respectfully following the same, we uphold AO s action. Disallowance u/s 14A on account of expenditure incurred for earning exempt income - reasonable computation u/s 14A - assessee has earned exempted dividend from mutual funds - HELD THAT:- We agree with the proposition canvassed by Ld. AR that the Rule 8D was not applicable to AY 2007-08 involved in present appeal as held by Hon ble Supreme Court [ 2018 (2) TMI 115 - SUPREME COURT] Therefore, the disallowance computed by AO in terms of part (iii) of Rule 8D cannot stand. But, however, we find that a reasonable disallowance is attracted u/s 14A de hors Rule 8D. It is to be noted that the assessee has earned a very high amount of exempted income and the AO has mentioned, in his words, that the assessee has incurred expenses which are embodied in various indirect expenses debited to P L A/c. We also find that this issue has also cropped in other years in assessee s case. As mentioned earlier, in the consolidated order for AY 2011- 12 to 2013-14 [ 2023 (4) TMI 1263 - ITAT INDORE] the ITAT Indore has remanded this issue back to AO. We find that the assessee has filed a copy of order [ 2014 (3) TMI 1186 - ITAT CHENNAI] for AY 2008-09 in assessee s own case wherein the ITAT has upheld disallowance of Rs. 35 lakhs on reasonable computation u/s 14A de hors Rule 8D. We find it most appropriate to remit this issue back to the file of AO for a fresh consideration. Ground allowed for statistical purpose.

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• 2023 (11) TMI 184
  Reopening of assessment u/s 147 - Assessment u/s 147/144 was completed ex-parte - Addition of sale of property as capital asset - HELD THAT:- As the assessee was given the chance to represent the case before CIT(A) and even though there were three notices given after set aside of the proceedings by the Bench to the assessee. Three instances of the notices are given in span of 10 months and the assessee did file any submission in support of the grounds raised in the appeal before the CIT(A). As in support of the fact that the assessee remained noncompliant in the earlier round of litigation. One more chance was given by the Bench vide order dated 06.03.2020 on which the assessee in support of given three occasions did not appear and file the requisite submission before CIT(A). Therefore, it appears that the assessee is not interested in pursuing his case on merits. Before us also while filing the appeal, the assessee did not file any document in support of the claim that why the addition is not sustainable and it is sale of property and is capital assets and receipt thereof is not chargeable to tax in full. Appeal of the assessee stands dismissed.

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• 2023 (11) TMI 183
  On-Money received - undisclosed income on account of inflated purchase price of flat - WhatsApp chat relating to the rates of flat was treated as incriminating material found during the search - rate mentioned in the mobile communication were resulted in generation of unaccounted income by way of on-money - AO by calculating the difference of sale price and the price negotiated by partner with the customers, made a estimation of on money with respect of 31 flats booked for the impugned assessment year - CIT(A) deleted the addition - HELD THAT:- Though before us, the ld. AR of the assessee submits that the purchase party of flat No. C-603 was called, however, there is no such averment in the assessment order about calling of such purchaser either at the time of assessment or in post search investigation. We find that such fact was brought on record during first appellate stage by the assessee. Such fact is not controverted either by AO in raising various grounds of appeal or in the statement of fact filed in support of various grounds of appeal nor by the ld. CIT-DR at the time of making submission before us. We find that in CIT Vs Standard Tea Processing Co. Ltd. [ 2013 (7) TMI 539 - GUJARAT HIGH COURT] held that the addition for undisclosed income on account of inflated purchase price can be made only for the period to which document found during the search is related and not for the entire block period. We also concur with the finding of ld. CIT(A) that alleged incriminating material in the form of message was in respect of seven flats only. From the submission of assessee filed before the ld. CIT(A), we find that there was huge difference of time gap between the date of alleged communication and the date of booking as explained by assessee. AO has not counter such explanation of assessee by bringing corroborative evidence. AO worked out the addition in a strait jacket formula that the assessee has received on money in respect of each and every square feet or developed by assessee which is far from imagination in an ordinary manner. With this aforesaid observation, we affirm the order of ld. CIT(A). In the result, the grounds raised by revenue are dismissed. Unexplained money receipt from the project Crystal Heights - assessee made declaration at the time of survey/search action - HELD THAT:- Considering the fact that the ld. CIT(A) has not accepted the addition on the basis of interpolation of figure of booking for all three years. At the same time, the ld. CIT(A) has confirmed the addition with respect to booking of seven flats, in absence of any supporting of corroborative evidence. However, keeping in view the possibility of revenue leakage, in our view, 10% of figure of on money estimated by ld. CIT(A) would be sufficient to meet the end of justice. In the result, grounds of cross objection raised by assessee is partly allowed.

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• Customs

• 2023 (11) TMI 182
  Seeking grant of release of detained goods - import of Lithium Ion Cell - it is alleged that the consignment in question was not in compliance with the requirement of BIS marking - HELD THAT:- The requirement of labelling and marking under paragraph 6 under Schedule II of the Regulation is clear to the effect that each product or the package , as the case may be , shall be marked with the Standard Mark, as specified in Annexure-II i.e. the sample illustrative mark. Thus, under the said regulations, it is clearly permissible to have a mark on the package, which requirement is met by the petitioner, in respect of the consignment in question of the two bills of entries. The respondents despite the clear provisions of paragraph 6 of the Schedule II Scheme I of the 2018 Regulation have chosen not to apply the requirement as it stands, however, they are applying Public Notice No. 136 of 2018 dated 8 October 2018 issued by the Office of the Commissioner of Customs, NS-III, Mumbai Customs Zone-II. On a plain reading of Public Notice No. 136 of 2018 dated 8 October 2018, it appears that the Commissioner of Customs providing for such requirement under paragraph 6 has actually deviated from the requirements of the 2018 Regulations, and more particularly paragraph 6 of the labelling and marking requirements as contained in Schedule II of the Scheme I, under the said Regulations, as noted by us hereinabove. In taking the position as assailed, the respondents also could not have taken recourse to the applicability of RCR orders (Requirement For Compulsory Registration) inasmuch as the RCR order was wholly irrelevant, in so far as the present goods are concerned. This inasmuch as the RCR order was applicable only to the electronic and information and technology goods , subject matter of Electronics and Information Technology Goods (Requirement For Compulsory Registration) Order 2012, which provides that the standard mark shall be placed on the product and packaging both. There is no justification whatsoever on the part of the respondents, in not permitting to the petitioner, release of the consignments in question - there is no justification whatsoever as to how a different yardstick could be applied by the respondents to the goods in question, when similar goods under seven bills of entries were released and only two bills of entries were subjected to an illegal detention by the respondents. The goods are illegally detained and without any powers being exercised by the customs authorities under section 110 of the Act and that too for such a long period - Petition allowed in part.

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• 2023 (11) TMI 181
  Classification of imported Gold Coins - classifiable under CTH 7114 1910 as claimed by the petitioner or under CTH 7118 9000 of the Customs Tariff Act, 1975? - HELD THAT:- It becomes pertinent to note that in Paras 49 and 50 of KHANDWALA ENTERPRISE PRIVATE LIMITED AND CREDENCE COMMODITIES EXPORTS VERSUS UNION OF INDIA AND ORS. [ 2019 (11) TMI 740 - DELHI HIGH COURT] , the Court firstly noticed the distinction between Sub-Headings 7114 and 7118 with the former pertaining to articles of gold while the latter being in respect of coins . CTH 7118 1000 and 7118 9000 were correctly recognised to subserve the requirement of segregating coins made of gold and those made of other precious metals. It was while seeking to explain the distinction between CTH 7118 1000 and 7118 9000 that the Court observed that gold coins would fall within the ambit of the latter. Paras 49 and 50 of decision cannot be justifiably interpreted as purporting to hold that all articles that may be ordinarily or loosely referred to as gold coins are liable to be classified as falling under CTH 7118 9000. To put it differently, when the Division Bench in Khandwala Enterprise observed that gold coins are liable to be classified under CTH 7118 9000, it did not mean or intend to hold that all articles of gold are liable to be classified as falling in that entry of the CTH merely because they happen to be in the shape of a coin or are colloquially referred to as such. CTH 7114 deals with articles of goldsmiths, silversmiths, wares and parts thereof. The aforesaid entry, namely, CTH 7114 1910 specifically speaks of articles of gold. It also brings within its ambit articles of silver and other precious metals. Both CTH 7118 1000 and CTH 7118 9000, on the other hand, are placed under the generic heading of Coins . While CTH 7118 1000 deals with coins [excluding those made of gold] and not being legal tender, CTH 7118 9000 is the residuary entry and encompasses all other coins. CTH 7118 9000 being the remanent receptacle would thus include within its ambit, even gold coins. Accordingly, while 7118 1000 relates to coins (not made of gold) which have ceased to be legal tender, CTH 7118 9000 would extend to all coins whether they be of gold or any other precious material. While explaining CTH 7118 1000, the explanatory note provides that the aforesaid entry seeks to bring within its ambit coins which were legal tender but have since been withdrawn as well as coins which may be struck in one country to be placed in circulation in another as also those which are yet to obtain the character of legal tender. The phrase not being legal tender as appearing in CTH 7118 1000 is thus liable to be construed accordingly. In Khandwala Enterprise, the Court clearly appears to have referred to gold coins as falling in CTH 7118 9000 proceeding on the premise that they were articles which were or are proposed to be used as legal tender. This Court is thus of the firm opinion that the observations as appearing in Paras 49 and 50 have been clearly misinterpreted by the respondents as the Court having held or purporting to hold that all articles of gold which may be colloquially referred to as coins would be liable to be placed under CTH 7118 9000. The observation of gold coins not being classifiable under CTH 7114 1910 was clearly misunderstood and wrongly interpreted by the Principal Commissioner. That observation was liable to be appreciated in the context and backdrop in which the same came to be rendered. As explained above, the said recital was entered primarily to underscore the distinction between CTH 7114 1910 on one end of the spectrum and CTH 7118 1000 and 7118 9000 on the other. While the former is concerned with articles of gold and other precious metals generally, the latter set of entries extends to currency and legal tender. The Principal Commissioner has clearly committed a manifest error while viewing the judgment rendered in Khandwala Enterprise and proceeding on the assumption that the contentions raised by the petitioner already stood conclusively answered by the Court. The aforesaid premise is clearly based on an incorrect reading of that decision. The Principal Commissioner has also clearly erred in failing to appreciate the import of the explanatory notes which stand placed along with CTH 7118 9000 and ignoring the binding character of those notes. Impugned order set aside - petition allowed.

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• 2023 (11) TMI 180
  Levy of penalty u/s 117 of the Customs Act, 1962 - Employees of the Customs Broker - connivance in overvaluation of goods imported - HELD THAT:- This Bench in M/S. COCHIN AIR CARGO CLEARING HOUSE, M/S. E. KOCHURANI AND M/S. V.A. MARY DAS VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) , TIRUCHIRAPPALLI [ 2023 (9) TMI 1198 - CESTAT CHENNAI] after considering the facts as pleaded by both the sides, has inter alia held that there was no evidence to allege that the appellants therein had connived in any manner, in the overvaluation of the goods imported - it is found that most of the other appellants are the employees of the Customs Broker namely, M/s. Cochin Air Cargo Clearing House, Cochin, including the appellant. Section 117 of the Customs Act, 1962 invites penalty for contravention, etc., of any provision of the Act or abets any such contravention or who fails to comply with any of the provisions of the Act, which was his duty to comply with - A perusal of the impugned order does not point out as to what was expected of the present appellant, being one of innumerable employees of the Customs Broker, as his duty to comply with, which the appellant had failed to perform. Insofar as this appellant is concerned, the Commissioner himself has observed that there was no direct evidence of connivance. There are no justification in the imposition of penalty under Section 117 ibid. on the present appellant in the peculiar facts of this case - appeal allowed.

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• 2023 (11) TMI 179
  Denial of duty exemption availed by the assessee in terms of EPCG Authorisation under N/N. 102/2009 dated 11.09.2009 - import of capital goods - Non-fulfilment of export obligation - Delay in getting EODC - HELD THAT:- Admittedly, the ADGFT neither issued certificate nor has issued any communication highlighting the shortcomings, if any, to the appellant from the said application and hence, we do not have any doubts as regards the bona fides of the assessee/appellant before us. Just because the said authority who should have issued communication to the assessee-applicant chose to bias the mind of the adjudicating authority does not ipso facto become sacrosanct, much less, an admissible evidence. Had the assessee defaulted in not approaching the authority in time, then perhaps it was a different aspect altogether, which is not so here. When no primary evidence is available for various reasons, then there is no bar to consider other evidences like secondary evidences before concluding the proceedings, by the lower authority. The appellant should not be taken to task due to a delay caused in the DGFT office to act on their request for redemption of EPCG Licence. The impugned order calls for interference and is set aside - appeal disposed off.

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• 2023 (11) TMI 178
  Re-valuation of the impugned goods imported - rejection of the declared value by the Revenue on the ground of NIDB data - Import of 990 Pcs of Uber Brand Induction Cooker with 1 PCT Free Spare Parts Model No. UB001IC (2000W) and 1170 Pcs of Uber Brand Induction Cooker with 1 PCT Free Spare Parts Model No. UB002IC (2000W) and the country of origin was China - HELD THAT:- The reason for the Assistant Commissioner to reject the declared value is solely based on the NIDB data and other than this, there are no contemporaneous imports of similar goods declaring higher value having been referred to, by the said authority. Moreover, it is a fact borne on record that the appellant had tried to impress upon the Assistant Commissioner by furnishing imports of similar goods by various other importers, the value of which almost matched with that of the appellant before us, but however the same has not at all been considered by the said authority. It is the settled position of law that NIDB data cannot be the only basis for rejection of the declared value, which has been reiterated by various CESTAT Benches, including the Chennai Bench, in the case of M/S. ALMAA TRADERS VERSUS COMMISSIONER OF CUSTOMS (EXPORT) , CHENNAI [ 2023 (10) TMI 510 - CESTAT CHENNAI] wherein it was held that so-called contemporaneous imports were in fact in comparables, due to which the rejection of the value of import as declared by the appellant is without any basis. The Revenue has not made out a case firstly, for the rejection of the declared value and secondly, no case is either made out justifying re-determination of the same. The decisions/orders relied upon by the appellant support our above view, and hence, the adjudicating authority was clearly in error in rejecting the declared value and then re-determining the same; and hence, the impugned order is clearly unsustainable. Appeal allowed.

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• 2023 (11) TMI 177
  Maintainability of appeal - time limitation - Smuggling - yellow metal biscuit believed to be gold of foreign origin - Absolute Confiscation - levy of penalty - HELD THAT:- In the impugned order, the Ld. Commissioner(Appeals) has not decided the merits of the case, but held that appeals were filed beyond time limit prescribed under Section 128 of the Customs Act, 1962, that appeal is to be filed within 60(sixty) days from the date of receipt of the order and appellants have filed appeal after 70(seventy) days, but as no reasons have been explained by the appellants, satisfactory to the Ld. Commissioner(Appeals), the Ld. Commissioner(Appeals) dismissed the appeals. In the impugned order, the Ld. Commissioner(Appeals) himself has recorded that the appellants have been communicated the adjudication orders only on 05.08.2018. The said fact has not been verified by the Ld. Commissioner(Appeals), while passing the impugned order, therefore, it cannot be said that the appeals were filed beyond the time limit prescribed under section 128 of the Customs Act, 1962 - matter remanded back to the Ld. Commissioner(Appeals) to decide the issue on merits on the basis of various judicial pronouncements. Appeal allowed by way of remand.

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• 2023 (11) TMI 176
  Classification of imported goods - import of accessories which are primarily used for positioning of the patient and his/her body parts on various machines including X-ray machines during the radiation treatment for cancer - Revenue was of the opinion that the goods imported are not accessories falling under Chapter heading 9022.90 but surgical tools and therefore the same cannot be treated as accessories. HELD THAT:- There is no dispute between the parties that items at Serial No. 1 to 12 and 17 to 57 of bill of entry No. 4604051 dated 11.02.2004 and Serial No 1 to 21 and 26 to 66 of the bill of entry No 5062153 dated 01.04.2004 are used for the purpose of X-ray/ radio therapy for positioning the patient. It is seen that heading 9018 is a general heading and as prima facie no connection with the items mentioned in Serial No. 1 to 12 and 17 to 57 of bill of entry No. 4604051 dated 11.02.2004 Serial No 1 to 21 and 26 to 66 of the bill of entry No 5062153 dated 01.04.2004 whereas heading 9022 includes X-ray machines for which the items listed in Serial No. 1 to 12 and 17 to 57 of bill of entry No. 4604051 dated 11.02.2004 Serial No 1 to 21 and 26 to 66 of the bill of entry No 5062153 dated 01.04.2004 are specifically made for. The combine reading of Chapter note 2 (b) with HSN explanatory Note 4 clearly shows that the goods which are undisputedly used along with X-ray/ radio therapy machines for positioning patient would be classifiable under heading 9022 as accessories. In so far as items at Serial no. 13 to 16 of bill of entry no. 4604051 dated 11.02.2014 and Serial No. 22 to 25 of bill of entry no. 5062153 dated 01.04.2014, it is seen that no specific connection has been brought out by the appellant between the said markers and the apparatus of heading 9022. The appeal memorandum does not bring out any connection which makes the said markers exclusively usable along with machine of heading 9022only. In this circumstance there are no merit in the appeal in so far it relates to these items. Appeals in respect of these items is dismissed. The items at Serial No Serial No. 1 to 12 and 17 to 57 of bill of entry No. 4604051 dated 11.02.2004 and Serial No 1 to 21 and 26 to 66 of the bill of entry No 5062153 dated 01.04.2004 are classifiable under 9022 of Custom Tariff Act and items at 13 to 16 of bill of entry no. 4604051 dated 11.02.2014 and Serial No. 22 to 25 of bill of entry no. 5062153 are classifiable under 9608. Appeal allowed in part.

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• 2023 (11) TMI 175
  Classification of imported goods - Ink Jet Printers - to be classifiable under heading 84433250 or under heading 84433910? - HELD THAT:- The machines capable of being connected to automatic data processing machines or to a network would be classifiable under CTH 84433210 to 84433290 giving under the double dash entry. The machine not capable of being connected to automatic data processing machines or to network would fall under double dash entry 844339. In the instant case, the appellant have confirmed that the machines are capable of receiving data through USB Port. In these circumstances, they qualify to fall under the double dash entry 844332 and therefore, the classification under double dash entry 844339 has to be ruled out. In similar circumstances, in the case of M/S. MONOTECH SYSTEMS LIMITED VERSUS THE COMMISSIONER OF CUSTOMS (AIR) [ 2020 (3) TMI 323 - CESTAT CHENNAI] the co-ordinate Bench has observed after examining the HSN Explanatory Notes and the Board s circular, we hold that goods are correctly classifiable under CTH 8443 32 50. The impugned order cannot be sustained - Appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (11) TMI 174
  Sufficient time not provided for filing the reply - grievance of the Appellant is that the petition which runs into 2059 pages, a reasonable time was required for filing the reply and on 26.10.2023 time was allowed for reply and matter was adjourned to 30.10.2023 which was insufficient for filing a reply - HELD THAT:- In facts of the present case, there are no reason to entertain the Appeal and keep it pending. Learned Counsel for the Appellant submits that the NCLT, Mumbai is closed from 11.11.2023 to 19.11.2023 and shall be reopening only on 20.11.2023. In facts of the present case, in the ends of justice be served in disposing the Appeal by giving liberty to the Appellant to file their reply on re-opening day i.e. on 20.11.2023. The Adjudicating Authority is requested to fix 30.11.2023 as date in the Company Petition to hear the parties and decide in accordance with law - appeal disposed off.

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• 2023 (11) TMI 173
  Rejection of Resolution plan - no related party - Non-inclusion of the Appellant in the Committee of Creditors - entitlement to vote in the Committee of Creditors - categorization of the homebuyers in class as Affected and Unaffected homebuyers - violation of Section 30(2)(e) of IBC. Non-inclusion of the Appellant in the Committee of Creditors - Whether the Appellant is not a related party and was entitled to vote in the Committee of Creditors? - HELD THAT:- In the financial statement of the Corporate Debtor, Appellant has been reflected as shareholder on the date of commencement of the CIRP. The Registrar of Companies has not recorded transfer of shares as per the Share Purchase Agreement. Share Purchase Agreement dated 31.10.2018 after the Settlement Agreement between the parties could not be implemented, which is a fact on record. The Appellant itself has filed application for contempt against the Vira Group before the Hon ble Supreme Court alleging the violation of order of Hon ble Supreme Court which contempt was permitted to be withdrawn with liberty to the Appellant to take such proceedings as may be advised. Filing of contempt itself recognises that Memorandum of Settlement dated 31.10.2018 was breached - The Resolution Professional proceeded to classify the Appellant as related party on account of declaration of the Appellant itself in the claim form that it is a related party. The shareholding of the Appellant still continues in the Corporate Debtor which is not yet been transferred as per the Settlement Agreement - there are no error in the decision of the Resolution Professional classifying the Appellant as related party and not giving the Appellant a seat and voting share in the Committee of Creditors. Whether the Vira Group being related party consequently Respondent No.3 was also related party and as Director of Kalpataru Advisory Services Pvt. Ltd. could not be member of the Committee of Creditors or voted in the Committee of Creditors? - HELD THAT:- There is no material on record that resignation of Respondent No.3 was with intend to be member of the Committee of Creditors. There being no material or pleading to come to the conclusion that KASPL still continues to be related party by virtue of Section 5(24)(d) whereas after 19.02.2019, Mr. Pratik Jayesh Vira does not continue as Director of the Corporate Debtor and CIRP against the Corporate Debtor commenced on 11.08.2020, more than a year after such resignation. With regard to 16% shareholding of KASPL, learned counsel for the Respondent No.3 has submitted that to attract Section 5(24)(j), the KASPL had to control more than 20% of voting rights in the corporate debtor on account of ownership or a voting agreement. It has only 16% shareholding in the Corporate Debtor, hence, cannot be held as related party as per Section 5(24)(j) - The submission of the Appellant objecting participation of KASPL on the basis of its shareholding which in view of the definition clause 5(24)(j) does not fulfils it to be related party, hence, participation of KASPL in voting cannot be faulted. As noted above, transfer of shareholding in favour of the Vira Group could not materialise. Whether the Appellant is entitled to challenge the Resolution Plan which was approved by majority of creditors in class i.e. homebuyers? - HELD THAT:- From the facts which have been brought on the record, it is clear that homebuyer as a class have approved the Resolution Plan. Voting results on the plan have been brought on the record which clearly shows that the homebuyers as a class had approved the Resolution Plan. Appellant, who is a dissatisfied minority, a single homebuyer has to sail alongwith the view of the majority in terms of the scheme of IBC - the Adjudicating Authority is agreed upon that Appellant as a class of homebuyers cannot be allowed to challenge the Resolution Plan which has received approval of class of homebuyers on the basis of majority of votes of homebuyers. Whether the categorization of the homebuyers in class as Affected and Unaffected homebuyers is violative of Section 30(2)(e) and the Resolution Plan deserve to be set aside on this ground alone? - HELD THAT:- The different treatment of two sets of homebuyers in view of the allotment to the homebuyer with/without NOC of the Mortgagee has rational for separate treatment and the submission of the Appellant cannot be accepted that all homebuyers should be treated in the same manner in the Resolution Plan - This Tribunal noticing that there was discrimination in payment to the Operational Creditors inter se, has directed that Operational Creditors be paid the same amount. In the above case, the Adjudicating Authority has rejected the Resolution Plan on the ground that there is differentiation in payment of Operational Creditors inter se. The commercial wisdom of the Committee of Creditors, which has approved the Resolution Plan under which different treatment has been given to Affected Homebuyers and Unaffected Homebuyers , cannot be faulted - there are no grounds made out to challenge the approval of the Resolution Plan. Thus, no error has been committed by the Adjudicating Authority in rejecting the application - Register of the Corporate Debtor cannot be rectified on application filed by the Appellant and Appellant in fact by the application prayed for specific performance of Memorandum of Settlement which admittedly could not be implemented due to various reasons which are not necessary to be noted for the purposes of this case - appeal dismissed.

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• Service Tax

• 2023 (11) TMI 172
  Non-payment of service tax - Transport of Goods by Road Services - incurring expenditure on account of amounts, paid to Rice millers, which included payment towards transportation, from the premises of millers to the godowns of FCI - reverse charge mechanism - time limitation - HELD THAT:- The show-cause notice does not specify as to how the transportation charges have been arrived at for the purpose of showcause notice. It is seen from the Chart given under Para 2 of the show-cause notice that 33.33% of the payment, @ Rs.15 per quintal made to the millers, has been assumed to be charges towards transportation; no basis for the same has been given. Moreover, the difference between figures indicated in the Trial Balance was compared with the figures given in ST-3 Returns and service tax is sought to be levied on the differential figures. It is opined that such a vague and unsubstantiated show-cause notice cannot stand the scrutiny of law. Allegations in the show-cause notice should be based on concrete evidence of the services rendered or availed and the consideration paid or received for the same. In the absence of the same, the allegation will not survive. Moreover, the certificates given by the rice mills have been sought to be discarded during the course of hearing before us stating that the same do not bear date etc. However, no investigation appears to have been done to verify the authenticity or otherwise of such documents - Department has not established that the services have been rendered by a taxable service provider and that the appellants are under obligation to discharge duty on Reverse Charge Mechanism. Time limitation - HELD THAT:- The appellants, moreover, being a Government Corporation cannot be alleged to have suppressed material fact with intent to evade payment of tax. The Courts and Tribunal have been consistently holding that in respect of Government Corporations, Companies etc. intent to evade payment of service tax cannot be alleged. Moreover, it is found that during the relevant period, there was lot of confusion in the minds of the assessee regarding the taxability of goods transport operators; therefore, extended period cannot be invoked and to that extent, the appellants succeed on limitation. Appeal allowed.

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• 2023 (11) TMI 171
  Classification of services - Intellectual Property Service or Franchise Service? - separate agreements with M/s Liberty Shoes Ltd. for transfer of their business of the respective manufacturing units - time limitation. The case of the Department is that various clauses of the agreement leave no doubt that the services received by the appellant are not IPR Services because in addition to the use of intangible property, the transaction under the agreement involves right to sell or manufacture the goods are undertake a process identified with franchisor. HELD THAT:- The agreement itself is settled agreement for transfer of business on franchise basis. We find on going through the various clauses of the agreement are in the nature of Franchise Agreement. The agreement includes conditions for following the concept of business operation, manufacture or technical specifications, marketing etc. in addition to the restriction on selling, producing or providing similar goods or services identified with any other person. The appellants argue that the condition put forth under Clause 7(j) is not absolute as envisaged under condition No.(iv) and it is subject to the written consent of the franchisor. Be it so, the appellants did not submit any proof, whatsoever, to indicate that such permission was sought and given permitting the franchisee to engage him in the business of others or in other goods from the same premises. In the absence of example to the contrary, Clause No.7(j) is akin to the condition laid down under No.(iv). Therefore, there are no hesitation in concluding that the impugned agreement is in the nature of Franchise Agreement wherein the appellants have total control of the business, the process, the product and the premises. Time Limitation - HELD THAT:- It is on record that the appellants have submitted the copies of the agreements to the jurisdictional Central Excise authorities as early as in 2003. They have surrendered their Central Excise registrations and have obtained Service Tax registrations and have discharged the duty under Intellectual Property Rights ; they have regularly submitted the ST-3 Returns. Therefore, it cannot be alleged that the appellants have suppressed any material fact from the Department with intent to evade payment of duty - there are reasons to believe that the appellants, who have been paying service tax under the Head Intellectual Property Service , had a bona fide doubt on the classification of the service. Therefore, the appellants succeed on limitation. The appeals are allowed on limitation.

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• 2023 (11) TMI 170
  Levy of service tax - commercial training or coaching services - imparting education in the field of Postgraduate Courses in clinical research in India, entered into collaboration with Cranfield University, UK - Input credit of the expenses incurred as per CENVAT Credit Rules, 2004 - Deduction of the value of study material supplied - Cum-tax benefit under section 67 of the Finance Act - ex-parte order - violation of principles of natural justice - Penalty under section 76 and 77 of the Finance Act and interest - HELD THAT:- The commercial training or coaching means any training or coaching provided by a commercial training or coaching centre. A commercial training or coaching centre has been defined, prior to 30.04.2011, to mean any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field with or without issuance of a certificate and includes coaching or tutorial classes, but does not include any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force. The definition, as amended w.e.f. 01.05.2011, deletes only that latter portion not included in the definition of commercial training or coaching centre . The Commissioner has recorded a finding, after careful examination of the activities undertaken by the Indian Institute that it was providing training or coaching for a consideration. There is no error in this finding as indeed the Indian Institute was engaged in imparting education in the field of Post Graduate courses in clinical research for a consideration - The contention of the learned Chartered Accountant for the appellant that since the Indian Institute is a registered society and is working without profit, no taxable service can be said to have been provided cannot also be accepted. Thus, if the Indian Institute itself did not appear before the Commissioner despite ample opportunities having been provided, it cannot be permitted to raise any grievance about violation of the principles of natural justice. Penalty under section 76 and 77 of the Finance Act - HELD THAT:- The contention of the learned Chartered Accountant for the appellant that since there was no malafide intent to evade payment of service tax, penalty under section 76 of the Finance Act should be set aside, cannot also be accepted - The contention of the learned Chartered Accountant for the appellant that penalty under section 77 of the Finance Act should be set aside also does not deserve acceptance. In the end, learned Chartered Accountant submitted that the Indian Institute would be entitled to the following benefits out of the total demand that has been confirmed: (i) Input credit of the expenses incurred as per CENVAT credit; (ii) Deduction of the value of study material supplied; and (iii) Cum-tax benefit under section 67 of the Finance Act - This matter has not been examined by the Commissioner. In the facts and circumstances of the case, it would be appropriate to remit the matter to the Commissioner to decide this aspect only, namely as to whether the Indian Institute would be entitled to the aforesaid benefits out of the total demand that has been confirmed. While confirming the findings recorded by the Commissioner, the matter is remitted to the Commissioner to decide whether the Indian Institute would be entitled to the aforesaid benefit from out of the demand that has been confirmed - appeal allowed by way of remand.

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• 2023 (11) TMI 169
  Levy of service tax - Technology Transfer Analysis and Agreement entered with M/s Eugenex Biotechnologies GmbH, Switzerland - reverse charge mechanism - HELD THAT:- In the instant case, it is not in dispute that the entire technology was imported by the appellant from abroad and no evidence of registration of the said technology under any Indian law has been produced by the revenue - The term under any law for the time being in force appearing in Section 65(55a) implies that the Intellectual Property Right should be protected under any Indian law in force, and only then it become taxable service. The issue has been examined in the case of M/S. MUNJAL SHOWA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, DELHI (GURGAON) AND (VICE-VERSA) [ 2017 (6) TMI 819 - CESTAT CHANDIGARH] wherein it was held that to tax under service tax, under Intellectual Property Rights, such rights should be registered with Trademark/ Patent authorities - the said decision has been held in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX DELHI VERSUS MUNJAL SHOWA LTD [ 2023 (8) TMI 544 - SC ORDER ]. From the above decision of Tribunal, upheld by the Hon ble Apex Court, it is apparent that only in cases where the technology is protected by some law of India then it can be charged under the head of Intellectual Property Service - In the instant case, the technology has been imported from abroad and no evidence of any protection under any law for the time being in force in India has been produced by Revenue. In these circumstances, no demand can be made under the head of Intellectual Property Service . There are no merit in the order, the same is set aside - appeal allowed.

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• 2023 (11) TMI 168
  Non-payment of service tax - bank charges paid to the foreign banks - Expenditure in Foreign Currency - HELD THAT:- It has been clarified as per Trade Notice No 20/2013-14 dated 10.02.2014 of Commissioner Service Tax I Mumbai that the Indian Exporters are not the recipient of services from the Foreign Bank/ intermediary bank. As Indian Exporter s as per the above clarification are not receiving any ser5vices from the foreign bank/ intermediary bank, the entire foundation on which this demand has been made and upheld is demolished and the impugned orders need to be set aside only on this ground. In case of M/S. THEME EXPORTS PVT. LTD. VERSUS C.S.T., DELHI [ 2018 (5) TMI 825 - CESTAT NEW DELHI] following the earlier decision in case of M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR [ 2017 (10) TMI 1231 - CESTAT NEW DELHI] where it was held that no documents have been produced showing that foreign bank has charged any amount from the appellant directly. The facts as narrated in the impugned order clearly indicate that it is the ING Vyasa Bank who had paid the charges to the foreign bank. In view of this, the appellant cannot be treated as service recipient and no service tax can be charged under Section 66A read with Rule 2(1)(2)(iv) of the Service Tax Rules, 1994. Thus, the issue involved in this case is no longer res-integra. The issue involved in the case is squarely covered by the above referred decisions and other decisions cited by the counsel for the appellant - there are no merits in the impugned orders - appeal allowed.

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• 2023 (11) TMI 167
  Levy of Service Tax - Intellectual Property Service - import of the Technical know how, lump sum fees and Royalty paid to the foreign service provider - reverse charge mechanism in terms of Section 66A of the Finance Act, 1944 - HELD THAT:- There is no dispute on the facts that the amount of Rs 3,55,96,434/- paid by the appellant to M/s Benasedo Spa, Italy for Transfer of Technical know how and Royalty as per their Agreement dated 31-03-2010 has been treated as Taxable Value under Intellectual Property Service by Revenue, attracting total Service Tax of Rs. 21,96,432/- which is in dispute in this case - From the provisions regarding levy of service tax on IPR it is mandatory that the Intellectual Property Right is registered or governed by law in India. In the fact of the present case the service provider being not located in India, it s Intellectual Property Right is not registered under any law in India, therefore for this reason itself the service received by the appellant is clearly not taxable under the reverse charge mechanism in the hands of the appellant. The Fees and Royalty paid by the appellant is towards Intellectual Property Right which is owned by company of Italy and the same is not registered under any law in India in terms of the definition of Intellectual Property Right is given in Section 65(55a) of Finance Act 1994. As per the facts of the present case, since the Intellectual Property Right which is used by the appellant belongs to the overseas supplier and that Intellectual Property Right is not governed by any law in India, therefore levy is not covered under the definition of Intellectual Property Right. Accordingly, the same is not taxable. The amounts debited from Cenvat Credit Account can not be retained by the Government without any authority of law and the same deserves to be returned to the Appellant in accordance with the law. Since the matter decided on its merits, the other issues raised by the counsel regarding the revenue neutrality and time limitations for SCN etc against such demand of Service Tax, are not dealt in this case. The impugned order confirming demand of Service Tax with interest and Penalty is not sustainable against the Appellant. As a result the impugned order is set aside - Appeal allowed.

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• 2023 (11) TMI 166
  Short payment of service tax - Management Consultancy Service - non-payment of service tax on Renting of Immovable Property - Point of Taxation Rules, 2011 by Notification No. 18/2011-S.T., dated 1-3-11 which was further amended by Notification 25/2011-S.T., dated 31-3-11 - Time limitation - HELD THAT:- During the disputed period there is no clear provision in Finance Act, 1994 as to the date with reference to which rate of tax is applicable for calculating service tax. However, this lacuna was removed by Point of Taxation Rules, 2011 by Notification No. 18/2011-S.T., dated 1-3-11 which was further amended by Notification 25/2011-S.T., dated 31-3-11 - In the present disputed matter the appellant raised the invoice on 30.04.2009 and payment towards the services of Management Consultancy Services was also received in July 2009 when rate of service tax was @10%, therefore in our view appellant had rightly paid the service tax under the category of Management Consultancy Services at 10%. The rate of tax is applicable on the date when the appellant was liable for pay Service tax to the department. It is clear that the rule of POT is not applicable in a case where service was provided and invoice was issued prior to introduction of Point of Taxation Rules, 2011 - the impugned order confirming the differential service tax demand in respect of Management Consultancy Service is not sustainable. Time Limitation - HELD THAT:- Admittedly the tax liability on this particular tax entry has been a subject matter of substantial litigation. At the relevant time the chargeability of service tax on renting of immovable property was sub-judice before various judicial forum - In fact, the Hon ble Delhi High Court in the case of HOME SOLUTIONS RETAILS (INDIA) LTD. VERSUS UNION OF INDIA ORS [ 2011 (9) TMI 46 - DELHI HIGH COURT] held that the activity of the rent per se cannot be subjected to Service Tax levy, whereas the activities in relation to renting are liable to Service Tax. The decision of the Delhi High Court led to legislative changes including retrospective amendment of the concerned legal provisions in the Finance Act, 1994. The ingredients for invoking demand for extended period are not present in the present case. Accordingly, the demand raised on Renting of Immovable Property shall be restricted to normal period only - the impugned order is set aside. Appeal allowed.

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• Central Excise

• 2023 (11) TMI 165
  Benefit of N/N. 5/2006 (Sl. No. 5) dated 01/03/2006 - Footwear - denial of benefit of notification on the ground that the appellant had manufactured and cleared footwear without embossing the MRP on such footwear - it was held by CESTAT that The exemption in the present case is required to be extended to the appellant, in as much as the substantial condition of MRP of the footwear has been satisfied even though the condition regarding the indelibly embossing the MRP has not been satisfied. HELD THAT:- There are no reason to interfere in the matter - appeal dismissed.

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• 2023 (11) TMI 164
  Demand of excise duty on the casting manufactured - principal manufacturer has not accounted for the job work goods manufactured and supplied by them - HELD THAT:- As per the documents referred by learned counsel, it is observed that the principal manufacturer M/s. Dyna Tex Enterprise has submitted necessary declaration / undertaking required under Notification No 214/86- CE and/ or Notification No 83/94 and 84/94- CE. Under the said notification the duty liability, if any arises, the same is recoverable from the principal manufacturer who has supplied the raw material to the job worker - It is also observed that the appellant have been receiving the goods under the job work challan and also clearing the processed goods under the subsidiary challan meant for job work goods. On this basis also no duty can be demanded from the appellant. However all the relevant documents needs to be verified to extend any benefit to the appellant. Goods which is other than job work and cleared by the appellant on their own without issuing invoices - HELD THAT:- There is a force in the argument of the appellant that after deducting the value of job work goods if the value remains within the threshold limit of the SSI exemption under Notification No 08/2003 dated 01.03.2003 then the same will not liable to duty. However, this aspect also needs to be verified on the basis of the facts. The entire matter needs to be re-considered - Appeal allowed by way of remand.

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• 2023 (11) TMI 163
  Benefit of exemption Notification No. 04/2006-CE dated 01.03.2006 (Sr. No. 90) denied - Kraft Paper - non-compliance with the condition that Kraft Paper is manufactured from the pulp stage - whole case of the department is that the appellant did not have the pulping machine - HELD THAT:- The Adjudicating Authority has stated that on the visit of the Central Excise officer, it appeared that the noticee has not installed pulping machine in their premises during the relevant period. However, there is absolutely no evidence of visit of the Central Excise Officer as neither any documentary evidence nor panchnama was recorded about visit of the factory. Therefore, such observation of the Commissioner appears without any basis. Since the entire case is based on the assumption that the pulping machine was not installed but the department could not adduce any evidence to this allegation. The sole basis of the department to hold that the appellant did not have pulping machine is the correspondence made with the supplier of pulping machine but no reply was received from the pulping machine supplier - Merely because the department could not get the response that itself will not conclude that the appellant have not purchased the pulping machine. In this position, it was incumbent on the department to physically verify, whether the pulping machinery installed in the appellant s factory is of the relevant period which department failed to do such exercise. The appellant did have the pulping machine at the relevant time. However, since the revenue has not carried out any verification, one opportunity is given to the Revenue to conduct the detail verification that the pulping machine was installed at the relevant point of time in the factory of the appellant or otherwise. Thereafter, to pass a denovo speaking order in the present matter. Appeal is allowed by way of remand to the Adjudicating Authority for passing a fresh order within a period of two months from the date of this order, after following the principle of natural justice.

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• 2023 (11) TMI 162
  Denial of CENVAT Credit - unfinished mild steel (MS) pipes - failure to deploy any equipment for production - reversal of CENVAT Credit - credit reversed before issuance of SCN - HELD THAT:- It is found that mild steel (MS) pipes procured by them had been cleared on payment of duty after undertaking some processing. It is now settled law that with duty having been paid, it was not open to central excise authorities to dispute credit availed on the goods procured for the purpose. It was not alleged in the notice that the appellant was at any time deficient in credit availability at any point in time during the period of dispute; to allow the plea of remand would be nothing but authorizing contemplation of proceedings beyond the period of limitation by bringing new charges against the assessee. There is, thus, no ground for sustaining the disallowance of credit of Rs. 39,73,256. For the claim of the appellant that angles , beams and channels were covered within definition of capital goods in rule 2(a) of CENVAT Credit Rules, 2004, reliance was placed on the decision of the Tribunal in M/S. MANGLAM CEMENT LTD. VERSUS C.C.E., JAIPUR-I [ 2018 (3) TMI 1547 - CESTAT NEW DELHI] and in CC CE, VISAKHAPATNAM VERSUS M/S. A.P.P. MILLS LIMITED [ 2013 (7) TMI 494 - CESTAT BANGALORE ]. It is, however, on record that the appellant had not yet procured the cranes for whose support the said goods had been purportedly deployed. The facts being, thus, at variance with the cited decisions and, the capital goods , not having been installed the claim of eligibility of goods used for installing structural support is not tenable. CENVAT Credit Rules, 2004 offers the framework and the mechanics for neutralization of duty discharged at preceding stage of value addition chain ; it is, therefore, procedural enunciation in which availment , as is reversal , is in the hands of assessee while restoration , as is recovery, of credit is left to the jurisdictional authorities. While rule 14 of CENVAT Credit Rules, 2004 enables recourse to section 11A of Central Excise Act, 1944 as does rule 15 of CENVAT Credit Rules, 2004 enabling recourse to section 11AC of Central Excise Act, 1944, the latter cannot be drawn upon in the absence of the former - It is on record that the credit of Rs. 14,55,597 had been reversed well before issue of notice. There was, thus, no cause to initiate proceedings under rule 14 of CENVAT Credit Rules, 2004; it would appear that absurdity of appropriating credit already reversed, and not restorable without prior approval from jurisdictional central excise authorities, does not seem have occurred to the adjudicating authority as an exercise in futility. The appeal is allowed to the extent of setting aside recovery of Rs. 39,73,256 and of the penalty in full.

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• 2023 (11) TMI 161
  Disallowance of CENVAT credit - procurement of outward transportation service from their factory to depots of the principals - HELD THAT:- The Tribunal in MP BISCUITS (P.) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD [ 2012 (10) TMI 623 - CESTAT, NEW DELHI] and in identical circumstances of another job-worker of M/s Parle Products Pvt Ltd, set aside the recovery thus holding that it is apparent that the appellant has paid Service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such, in view of Rule 3 of Cenvat Credit Rules the appellant has rightly availed Cenvat credit. The impugned order is set aside and appeal allowed.

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• 2023 (11) TMI 160
  Recovery of Central Excise Duty alongwith interest and penalty - including value of scrap arising from job-work in the assessable value as additional consideration from the principal for undertaking such work - HELD THAT:- Though the value adopted for discharge of duties in clearances effected by the assessee in GENERAL ENGINEERING WORKS VERSUS COMMR. OF C. EX., JAIPUR [ 2005 (3) TMI 16 - SUPREME COURT] is not incorporated therein, it would appear from the illustrative computation of the decision that cost of raw materials was in dispute therein and not of conversion charges not reflecting the true consideration; hence the corollary of establishing that it was depressed. There is no finding of such nature in the impugned order, in the appeal of jurisdictional Commissioner of Central Excise before the first appellate authority or in the show cause notice. Therefore, reliance placed in the impugned order on the said decision is not appropriate; the outcome therein is, thus, jeopardized. Here too, it is not in dispute that the landed cost of raw materials is not doubted and that the impugned scrap has been generated from such raw material. That value, having been included once, is not required to added once again for assessment to duty. The impugned order set aside - appeal allowed.

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• 2023 (11) TMI 159
  Refund claim - rejection of claim of the appellant for non-production of challans showing nil payment of duty on those goods in the warehouse - principles of unjust enrichment - HELD THAT:- It is well-settled that show cause notice is the foundation of all proceedings and in appellate disposal, only the issue in appeal may be argued or abetted. Failure to challenge assessment as an impediment to sanction of refund was not an issue thus far in the present dispute and in the absence of appeal/memorandum of cross-objections on behalf of Revenue, a fresh ground entered by Learned Authorized Representative does not merit consideration. The original authority has premised ineligibility with the finding that the date of sale of goods being undisputedly after the levy came into force, there is no alternative but for duty to be discharged. This is an improper appreciation of the nature of this levy and, more so, on induction of impugned goods into the list of taxable goods. Being a tax on manufacture, goods produced prior to the levy having come into force are not to be subjected to duties of central excise - stock transfer , as an internal nomenclature, has nothing to do with clearance of goods which would be subjected to dutiability from 1st March 2011. It is clear from the communication of the Central Board of Excise Customs (CBEC) supra that the specific aspect referred to in the order of the original authority is restricted to goods lying in the registered factory premises as on date of imposition of levy which, uncontestedly, is not the issue here. As the impugned goods were not dutiable, eligibility for refund should follow. The claim of the appellant being that duty had, nonetheless, been discharged, it was incumbent upon them to demonstrate such payment. The appellant had submitted details of goods lying elsewhere and to the extent that these can be correlated, that onus will stand discharged. It is on record that the appellant had, in proceedings before the original authority, submitted that challans could be produced and it is on record that these had not been. Therefore, it is only appropriate that this be complied with and, upon such, there need be no further controversy over duty having been discharged on non-dutiable goods. Section 11B mandates that all refunds undergo the test of bar of unjust enrichment and it falls upon the appellant to successfully navigate that. The refund application restored before the original authority for fresh processing - impugned order set aside - appeal allowed.

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• 2023 (11) TMI 158
  Levy of Excise Duty - insurance amount recovered by the appellant from their customers by enhancing the assessable value of the cleared goods by the amount collected as insurance over and above the amount actually paid towards insurance - HELD THAT:- The issue is no longer res-integra and stands settled by the decision of this Tribunal in series of decisions in appellant s own case and further the issue is also squarely covered by the decision of Hon ble Supreme Court in the case of BARODA ELECTRIC METERS LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1997 (7) TMI 126 - SC ORDER ], wherein following has been held that The Tribunal accepted the position that equalised freight was charged by the appellant from everyone, but proceeded to say that even though freight cannot be a part of the assessable value that wherever freight actually paid was less than the amount collected by way of freight and transportation charges the difference was appropriated by the appellant and, therefore, the same would be a part of the assessable value. There are no reason to differ - appeal allowed.

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