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Home e-Newsletters Index Year 2024 November Day 6 - Wednesday

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TMI Tax Updates - e-Newsletter
November 6, 2024

Case Laws in this Newsletter:

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



Highlights / Catch Notes

    GST

  • Improper notice under Sec 73(1) of SGST Act violates natural justice, rendering tax order unsustainable & warrants quashing.

    Non-issuance of a proper Show Cause Notice u/s 73(1) of the State Goods and Services Tax Act, 2017 (AGST Act) prior to passing the impugned order u/s 73(9) violates principles of natural justice. Mere issuance of a Summary of Show Cause Notice and Attachment to Determination of Tax does not comply with Section 73(1) and Rule 142(1) of AGST Rules, 2017. Section 73 mandates issuance of a Show Cause Notice by the proper officer, recording statements u/s 73(3), and passing orders u/s 73(9) by the proper officer. Compliance with Section 73(1) to (8) and (10) to (11), and Rule 142(1) is a prerequisite for a valid order u/s 73(9). Absence of a proper Show Cause Notice u/s 73(1) renders the impugned order unsustainable, necessitating its quashing by the High Court.

  • Refund of integrated tax under scrutiny - Petitioner's challenge to show-cause notice dismissed.

    The High Court dismissed the petition challenging the show-cause notice dated 20.08.2024 issued by the respondent authority in relation to the refund of integrated taxes for the period FY 2018-19 to 2020-21. The court held that Rule 86(4B) of the CGST Rules, introduced vide Notification No. 14/2022-Central Tax dated 05.07.2022, allows recredit of input tax credit pertaining to the amount paid back for contravention of Rule 96 of the CGST Rules. The respondent authority initiated an independent investigation against the petitioner regarding the refund of integrated tax for the period in question, issuing the first show-cause notice on 03.04.2024. The court observed that there is a separate period of limitation of three years from the date of erroneous refund, and the Special Intelligence and Investigation Branch had started an investigation against the petitioner for the FY 2017-18 to 2020-2021 before issuing the show-cause notice after scrutinizing all documents. Therefore, the court found no reason to interfere with the impugned show-cause notice.

  • Unfair order quashed for violating natural justice; fresh hearing ordered despite appeal filed earlier.

    Petition maintainable despite previously filed appeal. Order passed in violation of principles of natural justice by not allowing petitioner to file reply within stipulated time. Original order liable to be set aside. Fact of filing appeal against original order not a ground to refuse relief when order passed in violation of natural justice. Writ petition allowed, original order quashed, matter remanded for fresh adjudication after providing opportunity of hearing to petitioner.

  • Breach of natural justice in tax order, GST portal notices unaware, fresh hearing ordered after partial payment.

    The High Court set aside the impugned order dated 18.04.2024 passed by the 1st Respondent due to violation of principles of natural justice. The Petitioner was not aware of the show cause notice and reminder notices uploaded on the GST Portal, and no opportunity of personal hearing was provided before passing the order. The Court remanded the matter to the Respondents for fresh consideration, subject to the Petitioner paying 10% of the disputed tax within four weeks and filing their reply/objection along with required documents within two weeks thereafter. The petition was disposed of by way of remand.

  • GST Registration Cancellation Overturned: Non-Response to Notice Insufficient Ground.

    The High Court granted relief to the petitioner regarding the cancellation of GST registration due to non-submission of reply to the show cause notice (SCN). The court held that non-submission of reply to the SCN cannot be the sole ground for cancellation of registration. The impugned order cancelling the petitioner's registration did not provide any reason other than the failure to respond to the SCN. Consequently, the court allowed the petition, entitling the petitioner to the same relief granted in the case of Technosum India Pvt. Ltd. Lucknow Vs. Union of India, where the court ruled that the non-submission of reply to the SCN cannot justify cancellation of registration.

  • Assessee allowed to complete 2019-20 assessment; enforcement subject to court's final order.

    The court allowed the application seeking permission to complete the assessment for the year 2019-20 in respect of the assessee petitioner. However, the court imposed a condition that if the assessment is adverse to the petitioner, it shall not be enforced and shall be subject to further orders on the petition. All contentions of the parties regarding the assessment were expressly kept open. The court's decision was based on a previous order passed by a coordinate bench in a similar case, where the state was permitted to proceed with the assessment for the year 2018-19 to avoid it becoming time-barred.

  • Income Tax

  • Taxing Book Entries vs. Real Income: Distinguishing Accrual and Actual Earnings.

    The assessee had been following the mercantile system of accounting, wherein book profits are taken for tax assessment, though credit or debit amounts may not be realized or disbursed. The Income Tax Officer treated certain amounts as income, which the assessee claimed were not actually accrued. It is settled law that income tax cannot be levied on hypothetical income, and only real income can be taxed. Recording entries in books of accounts is not conclusive for determining income under tax laws. Whether an amount is income or not is determined based on Income Tax Law, not book entries. No tax can be charged on an amount not actually earned. The Tribunal rightly deleted the addition as hypothetical income not actually accrued, which was 64% of the excise duty recognized in the assessee's books. While subsidies, grants, and reimbursements are considered income u/s 2(24)(xviii), exemptions are not explicitly mentioned. Exemption means freedom from a general burden or tax, while subsidy means government aid for a public benefit enterprise. The assessee was exempted from paying 36% of the excise duty, not subsidized, making it a capital receipt not taxable under the Income Tax Act.

  • Monopoly on software, spares led to taxing advance AMC collections despite shown as liability.

    The assessee, following the mercantile system of accounting, had treated Annual Maintenance Charges (AMC) collected in advance from customers for lift maintenance as a "current liability" or "Income Received in Advance" in its books. The Tribunal had deleted the addition made by the Assessing Officer (AO) on account of AMC received in advance, shown as a liability in the balance sheet, especially when the AMC period was only one year. However, the High Court held that due to the assessee's monopoly over software, spares, and services, customers had no choice but to renew the AMC. Even if terminated, the assessee was not bound to refund the amount, and customers would be at the mercy of the assessee for maintenance. The assessee's business model left no uncertainties regarding income from AMC services. The amount received in advance was taxable in the year of collection, as there was no uncertainty in the consideration derived for rendering services, and the amount was non-refundable. The Court answered the substantial questions of law in favor of the Revenue and against the assessee.

  • Tax tribunal strayed from raised issues, adjudicated unraised matter on transfer timing.

    The High Court held that the Income Tax Appellate Tribunal erred in law by adjudicating an issue not raised by the Revenue regarding the relevant date of transfer of tenancy rights. The Tribunal deviated from the specific grounds raised by the Revenue, which pertained to whether the rights crystallized as per the consent terms dated 28 May 1999 or on 22 February 2007 when the Deed of Confirmation was registered. Instead, the Tribunal decided that the transfer took place on 04 November 2004 based on a tripartite agreement, an issue not raised by the Revenue. The Court observed that judicial adjudication should be confined to the grounds raised and cannot delve into issues not called upon to be answered. Consequently, the Tribunal's order was set aside, and the matter was remanded for de novo adjudication, keeping all contentions of the parties on facts and law open.

  • Non-profit misrepresented income application due to tech glitch, court orders reconsideration.

    The petitioner incurred expenditure towards application of income as required u/s 11(1)(d) for the year under consideration, which was evident from the computation of total income and Form No. 10B issued by the Chartered Accountant. However, the same was not reflected in Form ITR-7 uploaded by the petitioner, showing a nil amount in column no. 9 regarding the application of income for charitable or religious purposes. Since the petitioner applied the income/donation received for charitable purposes, they are entitled to the benefit of the same. The respondent should have considered this fact while deciding the revision application u/s 264. Following the Shree Rudra Technocast Private Limited case, the impugned order passed u/s 264 is quashed and set aside, and the matter is remanded back to the respondent to pass a fresh de novo order u/s 264 on merits, considering that due to a technical glitch, the income applied by the petitioner is not reflected in the return of income in Form ITR-7, which should be taken into consideration while computing the income and tax for the year under consideration.

  • Advance Amount not a Cessation of Liability when Reinvested in Group Cos, Sold at Loss.

    The High Court held that the provisions of Section 41(1) read with Section 28(iv) of the Income Tax Act would not be applicable in this case. The assessee had received advances against a project that was never implemented, and the amount was not returned due to financial constraints. The Assessing Officer treated it as a cessation of liability, but the CIT(Appeals) and Tribunal found that the assessee did not derive any benefit or enjoy the money received as an advance. The assessee had reinvested the amount in shares of group companies, which were later sold at a loss, and the capital loss was not claimed as a set-off. The concurrent findings of fact by the lower authorities were accepted, and it was held that no benefit was derived from the transactions, thus negating the applicability of the relevant provisions.

  • Contractor gets tax deduction for airport infrastructure development despite retrospective amendment.

    The assessee, a contractor or developer, was initially denied deduction u/s 80IA(4) by the Assessing Officer, citing the retrospective amendment introduced by the Finance Act, 2009, which required the assessee to be the owner of the property as a developer. However, the ITAT held that the assessee qualified as a developer within the meaning of Section 80-IA and was eligible for the deduction under Sub-section (4). The High Court upheld the concurrent findings of the CIT (Appeals) and the Tribunal, stating that the assessee was awarded a contract for full-fledged development of a new infrastructure facility at an airport, involving financial and entrepreneurial risk, thus qualifying as a developer eligible for the deduction.

  • Employer's failure to deposit TDS can't deny employee's TDS credit: High Court ruling on TDS credit adjustment.

    The High Court ruled that the provisions of section 205 regarding non-deposit of Tax Deducted at Source (TDS) by the employer are applicable. The petitioner's refund was adjusted against the outstanding demand, but the court held that the department cannot deny the benefit of TDS deducted by the employer during the relevant financial years. The credit of such TDS must be given to the petitioner for the respective years. If any recovery or adjustment has been made from the refunds of later years, the same shall be returned to the petitioner with statutory interest. The decision was based on previous rulings in similar cases involving employees of Kingfisher Airlines where TDS was deducted but not deposited by the employer.

  • Employers' failure to deposit TDS: Deductees not liable.

    Employer deducted tax at source from petitioners' salaries but failed to deposit it with the government. Court held that u/s 205 of the Income Tax Act and CBDT instructions, no demand can be raised against deductees for deductor's failure to deposit TDS. Impugned intimation u/s 143(1) raising demand against petitioners quashed. Authorities directed to ensure strict compliance with Section 205 and CBDT instructions, and rectify software to prevent such demands against deductees. Technology cannot cause inconvenience contrary to law and binding instructions, resulting in human helplessness and technological slavery. Case highlights technology's failure to consider statutory provisions and binding instructions.

  • Gift from uncle treated as from relative, not taxable as income.

    The case pertains to the reopening of assessment and addition u/s 56(2)(vii) of the Act regarding the receipt of immovable property as a gift by the petitioner from the brother of the petitioner's father. The assessing officer considered that a nephew is not a relative within the meaning of explanation (e) to the proviso to Section 56(2)(vii), rendering the gift taxable. The High Court held that the plain language of explanation (e) covers a brother or sister of either of the parents as a relative. Since the donor is the brother of the petitioner's father, he is covered under the said clause. The mere non-mention of the word 'nephew' cannot exclude uncles or nephews from the definition of relatives under explanation (e). Consequently, the impugned order and notice were set aside.

  • Amnesty for settling tax disputes, including interest - Writ petitions qualify as appeals under Direct Tax Vivad Se Vishwas Act.

    The Direct Tax Vivad Se Vishwas Act, 2020 aims to settle tax disputes. The term "appeal" under the Act includes writ petitions challenging tax orders, as per Supreme Court interpretations. The petitioner's writ petition challenging the tax order qualifies as an "appeal" under the Act, making them eligible to settle the dispute. The Act covers "tax arrears," including interest on disputed tax. The Court directed the authorities to process the petitioner's application under the Act expeditiously, emphasizing the legislative intent to provide amnesty for settling tax arrears disputes.

  • Wrong tax calculation rectified; AO's wide powers affirmed to amend orders for inadvertent mistakes.

    Section 154 allows the Income Tax Authorities to amend, correct, and pass orders notwithstanding anything in law, except matters already considered on appeal or revision. The Assessing Officer's powers are wide-ranging, allowing amendment of earlier orders suo motu or on rectification application. In this scrutiny case, the Assessing Officer could have examined the law and waived deductions from book profits for MAT liability calculation. The ITAT found the inadvertent mistake occurred due to misinterpretation and can be corrected u/s 154, as no new facts or accounts were introduced. The High Court held that the mistake arising from misinterpretation of law while filing the ITR can be rectified u/s 154, dismissing the Revenue's appeal.

  • Registration delay can't deny exemption for trust; spouse loans not hit by Section 13.

    Assessee trust formed on 02.09.2014 but granted registration u/s 12AA from AY 2016-17 onwards. For AY 2015-16, exemption u/s 11 denied due to lack of registration. Relying on precedents, it was held that where registration is granted during pendency of appeal, benefit of Section 11 cannot be denied for the year under consideration. CIT(A)'s observations regarding applicability of Section 13 to loans/advances given to spouses of Principal/Administrator expunged, as provisions of Section 13(3)(cc) do not extend to manager/spouse of trust. CIT(A)'s enhancement of income by crediting Amalgamation Fund and Building Fund set aside, as assessee applied more than 85% of receipts for charitable objects, satisfying conditions for Section 11 exemption. CIT(A) exceeded enhancement powers by directing assessment on new source of income.

  • Income Tax Assessment: Limited Scrutiny Scope and Rectification Powers.

    The case pertains to rectification u/s 154 and the power of the Assessing Officer (AO) to travel beyond the reasons for which the case was selected for scrutiny. The key points are: 1) The case was selected for limited scrutiny under CASS for verification of interest expenses and unsecured loans. 2) The AO asked for details of preliminary expenses, which the assessee provided, and the AO accepted. 3) The CIT(A)/NFAC correctly held that a debatable issue cannot be subject matter of rectification u/s 154, as it is not an apparent mistake. 4) The AO did not make any addition regarding preliminary expenses, despite asking for details. 5) Since no addition was made other than the reasons for which the case was selected for scrutiny, the assessee cannot raise any ground on this issue. Consequently, the ITAT upheld the CIT(A)/NFAC's order and dismissed the Revenue's grounds, while also dismissing the assessee's grounds.

  • Indian expat's mental health issue delays tax appeal, tribunal shows empathy.

    The assessee sought condonation of delay in filing an appeal before the CIT(A)-NFAC, citing illness with Bipolar disorder and residence in USA as reasons for the delay. The CIT(A)-NFAC rejected the assessee's submissions and denied condonation. However, the ITAT, considering the assessee's health condition, condoned the 351-day delay and remitted the matter to the CIT(A)-NFAC for fresh consideration, granting the assessee an opportunity to be heard. The ITAT cautioned the assessee to cooperate promptly, failing which the CIT(A)-NFAC could pass an appropriate order based on available records. The assessee's appeal was allowed for statistical purposes.

  • Investments, cash deposits, unsecured loans & gift taxability - Burden on assessee to explain source.

    The assessee made investments in two firms by purchasing cold storage units funded by M/s. A.R. Constructions, where the assessee is a managing partner. The source for investment is explained as the amount was transferred from M/s. A.R. Constructions' books to the assessee's capital account in the respective firms through book entries. Therefore, the addition u/s 68 is directed to be deleted. Regarding cash deposits as capital investment in a firm, the assessee failed to explain the source and the period for which cash was held before investment. The burden to explain the source lies on the assessee, and the addition is sustained. Concerning unsecured loans received, the amounts were transferred from bank accounts of respective parties, and the sources were not disputed by the Revenue. Therefore, the addition is deleted. Regarding the addition u/s 56(2)(x) for the gift received from the assessee's father's HUF, the assessee does not fall within the definition of a relative u/s 56. Hence, the addition is sustained.

  • Scientific Research Funds wrongly treated as Royalty, disallowing Deduction - ITAT restores Weighted Deduction.

    The assessee received funds from DSIR, repayable as royalty equaling 1.3 times the amount, which the AO treated as royalty disallowing weighted deduction u/s 35(2AB). ITAT held the funds received were soft loans based on identical tripartite agreement terms in earlier years confirmed by Ministry of Science and Technology, unsecured loan treatment in financial statements, and interest disclosure and TDS on repayment. ITAT allowed weighted deduction u/s 35(2AB), directing AO to delete the disallowance.

  • Deduction under 80IA allowed for power unit supplying steam to paper unit after considering total fuel cost.

    The case pertains to the disallowance of deduction claimed u/s 80IA by an assessee operating two units, one for paper manufacturing and another for power generation. The Assessing Officer disallowed the deduction by considering the cost of steam supplied to the paper unit as income for the power plant, thereby enhancing its profits eligible for deduction. However, the Assessing Officer computed the steam cost based solely on the average cost of raw materials disclosed in the Director's Report, arriving at Rs. 1200 per ton of fuel consumption. The assessee contended that the Director's Report only disclosed material costs and not other overheads like stores, spares, and other expenses required for steam generation. The Tribunal found merit in the assessee's argument and observed that the Assessing Officer failed to consider these additional costs. While the Assessing Officer allocated 39% of the basic fuel cost, the assessee allocated 49% of the total fuel cost. Considering the other costs, the Tribunal deemed the assessee's rate of Rs. 1500 per ton of fuel as reasonable. Consequently, the Tribunal allowed the deduction claimed u/s 80IA by the assessee.

  • Indian real estate co's loan interest for funding foreign projects allowed as biz expense.

    Real estate development company advanced loans to its Indian subsidiary for funding step-down foreign subsidiaries undertaking real estate projects. Interest paid on loans borrowed for advancing such loans was allowed as business expenditure u/s 36(1)(iii). Subsidiary unable to realize interest from foreign subsidiaries due to financial distress and litigation between partners. Assessee decided not to charge interest to protect business interests and principal loan amount. Loans advanced for business purposes, hence interest paid on borrowings admissible u/s 36(1)(iii) despite no interest income during the year. Appellate Tribunal upheld order allowing deduction.

  • No TDS obligation on commissions paid to foreign agents for services outside India.

    TDS u/s 195 was not applicable on commission paid to non-resident agents for services rendered outside India. The assessee hired agents in foreign countries where it did not have a physical presence to assist in procuring contracts. The commission payments were made for services rendered outside India and were not chargeable to tax in India. In the absence of chargeability to tax, the provisions of Section 195 of the Act were not attracted, as rightly held by the CIT(A). The CIT(A)'s action granting relief to the assessee was in sync with the Tribunal's view in the assessee's own case for the Assessment Year 2017-18. The Revenue's contentions were unfounded on facts and law. The decision was against the Revenue.

  • Tenant's ownership rights conversion not a 'transfer' under Income Tax Act.

    The case pertains to the applicability of Section 56(2)(x) of the Income Tax Act on the conversion of tenancy rights into ownership rights by a protected tenant. The key points are: The Assessing Officer invoked Section 56(2)(x) on the conversion, treating it as a 'transfer' u/s 2(47). The CIT(A) upheld this action, considering the conversion as a 'transfer' covered u/s 56(2)(x)(b)(B). However, the ITAT distinguished between transfer of ownership rights and transfer of ownership by a protected tenant. It held that the assessee, being a protected tenant since 1992, merely acquired ownership rights of the flat earlier occupied as a tenant, and did not acquire any immovable property. The ITAT ruled that Section 56(2)(x)(b) is not applicable in this case, as no immovable property was purchased. Reliance on the definition of 'transfer' u/s 2(47) was considered immaterial, as no addition on account of capital gains was made. Consequently, the ITAT deleted the addition made u/s 56(2)(x)(b).

  • Customs

  • Duty on Thai & Vietnamese welded stainless steel pipes & tubes imports to India; rates NIL-$307.79/MT.

    Anti-dumping duty imposed on imports of welded stainless steel pipes and tubes originating in or exported from Thailand and Vietnam to India. Duty rates ranging from NIL to USD 307.79/MT based on country of origin, exporting country, and producer. Applicable for 5 years from notification date. Duty equivalent to difference between anti-dumping duty and countervailing duty payable, if any, for certain Vietnamese producers. Exchange rate as per Customs Act notifications for duty calculation.

  • Smuggler's detention valid due to likely prejudicial acts post-bail; authorities satisfied with propensity for organized gold smuggling network.

    Detention order under COFEPOSA Act valid. Detaining authority satisfied detenu likely to engage in prejudicial activities upon release on bail due to propensity for organized smuggling network with foreign gold. Detention order proximate in time to bail grant and updated proposal by sponsoring authority. Non-supply of bail cancellation application inconsequential as not before detaining authority. Detention order not vague despite referring to multiple sub-clauses of Section 3(1). Procedure and statutory safeguards complied with by detaining authority. No interference warranted with detention order based on material reflecting detenu's activities.

  • Imports under Advance Authorisation wrongly exported via Duty Drawback allowed upon refund of drawback & DGFT certification.

    The appellant had imported raw materials duty-free under the Advance Authorisation Scheme but erroneously filed shipping bills under the Duty Drawback Scheme. The court held that since the appellant had exported finished products during the specified period and the Customs Authorities had permitted the export, the examination already done on the exported products need not be revisited unless it is established that the earlier examination missed aspects crucial for exports under the Advance Authorisation Scheme. The respondents failed to demonstrate any such aspects. As the appellant agreed to refund the drawback amount with interest, the court directed the Customs Authorities to issue a receipt upon payment. If the DGFT is satisfied that the appellant has discharged the export obligation, it shall issue the Export Obligation Discharge Certificate without delay. Timelines were prescribed for communication of drawback amount, payment by appellant, and DGFT's consideration for issuance of the certificate.

  • Denial of personal hearing, recovery during stay application's pendency improper. Pre-deposit deems stay operative.

    Principles of natural justice were violated by denying opportunity for personal hearing without making serious attempts to reach out to appellant. Recovery proceedings cannot be initiated when stay application is pending for reasons beyond assessee's control. In revised appeals scheme with mandatory pre-deposit, stay on appealed order is deemed operative once appeal is accepted by Tribunal after paying requisite pre-deposit. Impugned order was cryptic without adjudicating rights and liabilities by applying mind to merits. First Appellate Authority could have decided matter ex-parte for non-prosecution, but not at first instance when intimation letter was returned with remarks 'left and moved'. Appellant's laxity in not updating contact address is not condoned, but substantive justice should not be denied on technical grounds without visible efforts to reach out. Impugned order and consequent Demand Notice set aside, matter remanded to First Appellate Authority for fresh decision after giving appellant opportunity of being heard.

  • Misdeclared goods lead to confiscation, redemption fine, and penalties for duty evasion.

    Imported goods did not correspond to the description in the Bill of Entry, with a discrepancy in thickness. The transaction value was correctly rejected u/r 12 due to reasonable doubt about its truth and accuracy. With no imports of identical goods, the value was rightly determined u/r 5. Confiscation of goods u/s 111(m) and redemption fine u/s 125 were justified as the appellant intentionally misdeclared the nature of goods to evade duty. Penalties u/ss 114AA and 112 were correctly imposed. The Appellate Tribunal upheld the adjudicating authority's order, dismissing the appeal.

  • Stainless Steel Manufacturer Wins CVD Refund Battle for Exports Under Advance Authorisation Scheme.

    The appellant, engaged in manufacturing stainless steel coils under the Advance Authorisation Scheme, challenged the adjudicating authority's rejection of their refund claim for Countervailing Duty (CVD). The Government initially imposed CVD but later exempted it through Notification No. 79/2017-Cus dated 13.10.2017 and DGFT Notification No. 33/2015-2020. Various High Courts upheld the retrospective applicability of Notification No. 79/2017 in similar cases. However, the refund was denied on the grounds that the appellant was not a party in those High Court cases. The CESTAT allowed the appeal, holding that the appellant is entitled to a refund of CVD along with applicable interest, as Notification No. 79/2017 has retrospective effect, granting exemption from CVD under the Advance Authorisation Scheme.

  • Export firm exceeds allowable wastage norms but fulfills export obligations; Tribunal quashes duty demand.

    The appellant, a 100% Export Oriented Unit (EOU), imported 'Milled Glass Powder' for manufacturing and exporting 'Bead glass' used in 'Electron Guns'. During August 2004 to March 2006, the actual waste generated exceeded the Standard Input-Output Norms (SION) of 4.76%. The Development Commissioner granted ad-hoc approval for 20.34% waste for six months, further extended by the Board of Approvals. Despite excess wastage over SION, the appellant fulfilled export obligations without diverting imported goods. Merely exceeding wastage norms without evidence of diversion cannot lead to a presumption of improper accounting or demand of duty under Customs Act Sections 65(2)(b) and 72(1)(d). The Tribunal set aside the demand of duty and interest, holding that excess wastage alone cannot treat imported goods as not used for manufacturing exports when obligations are met.

  • Connector Assembly for Networks Reclassified from Electrical to Telecom Equipment.

    The impugned goods, a '6 Port Connector Assembly' used in manufacturing Patch Panels for connecting computer and telecommunication networks, were initially classified under Customs Tariff Item Entry 85389000 by the Department, treating them as parts suitable for use with apparatus under headings 8535, 8536 or 8537. However, the Tribunal found that these headings primarily relate to equipment for transmission and distribution of electricity, whereas the impugned goods are used for transmission of voice, video and data, not electricity. Moreover, they are not relays or switching equipment to be excluded from heading 8517. Heading 8536 specifically covers connectors for optical fibres, which the impugned goods are not. Therefore, the Tribunal held that the correct classification is under Customs Tariff Item Entry 85177090 as declared by the appellant, being an interface between telecommunication and computer network cabling, not covered under headings 8535 to 8537.

  • Reflective glass not exempt from Anti-Dumping Duty for certain period due to notification changes.

    Notification No. 165/2003-Cus. dated 12.11.2003 excluded reflective glass from Anti-Dumping Duty (ADD), but Notification No. 6/2009 did not. Notification No. 51/2009 dated 22.05.2009 allowed exclusion of reflective glass from ADD. Between 06.01.2009 to 22.05.2009, there was no exemption for reflective glass from ADD. The imported goods being green and blue reflective glass, exemption was not available during this period. The contention that exemption continued from Notification 165/2003 till 51/2009 is untenable as 'reflective glass' was not covered by any Notification from 06.01.2009 to 22.05.2009. The Tribunal's decision is based on Supreme Court judgments in Dilip Kumar and State of Gujarat Vs. Arcelor Mittal Nippon Steel India Ltd. The appeal is not sustainable.

  • IBC

  • Corporate Debtor's Nominee's PoA Cancelled After Resolution Plan Approval.

    The adjudicating authority has jurisdiction to cancel a registered General Power of Attorney (PoA) executed in favor of the appellant, who was a nominee of the corporate debtor, when a resolution plan is approved by the committee of creditors (CoC). The PoA was given to facilitate development of property by the corporate debtor, and upon approval of the resolution plan, the successful resolution applicant takes over the corporate debtor and its functions. The appellant, being a suspended director, cannot assert rights over the property or create obstacles in the corporate debtor's revival. The Supreme Court has upheld the residuary jurisdiction of adjudicating authorities and the enforceability of approved resolution plans, even if they contain clauses contemplating withdrawal. The NCLT/NCLAT's jurisdiction is limited to examining compliance with Section 30(2) of the Insolvency and Bankruptcy Code. The appellant failed to demonstrate any grounds for faulting the resolution plan's approval.

  • Successful Resolution Applicant's objections to the conditional Letter of Intent rejected by the court.

    Conditionality of the Letter of Intent (LoI) issued by the Resolution Professional (RP) with the approval of the Committee of Creditors (CoC), and whether it was in conformity with the resolution plan and addendum submitted by the Successful Resolution Applicant (SRA). The court held that the SRA was aware of the conditions mentioned in the LoI, which were discussed and deliberated in the CoC meetings, and were integral to the resolution plan. The SRA's objections to the conditional LoI were deemed an afterthought, as the SRA had requested the CoC to issue the LoI without raising any objections earlier. The court emphasized the paramount importance of the commercial wisdom of the CoC, which is not subject to judicial review, except for ensuring compliance with the IBC and related regulations. The court found no infirmity in the Adjudicating Authority's decision to approve the liquidation of the Corporate Debtor, given the expiry of the CIRP timeline and the SRA's deliberate procrastination in accepting the resolution plan. The appeals were dismissed as devoid of merit.

  • Indian Laws

  • Challenge to arbitral award and conditional stay by statutory body: Court upholds equal treatment principle.

    The Supreme Court examined a challenge u/s 34 of the Arbitration and Conciliation Act, 1996 against an arbitral award and the grant of conditional stay on its execution. The High Court had directed the respondent, a statutory undertaking, to furnish a bank guarantee only for the principal amount awarded, excluding interest and costs, reasoning that the respondent was not a "fly-by operator." The Supreme Court held that the Arbitration Act does not distinguish between governmental and private entities, and the High Court erred in basing its decision on the respondent's status as a statutory authority. The Court modified the High Court's order, directing the respondent to deposit 75% of the decretal amount, inclusive of interest, by a specified date, conditional upon which the enforcement of the arbitral award would be stayed. The Court emphasized that the principles governing arbitration proceedings cannot vary based on the parties' status.

  • Presumption of Consideration in Promissory Note Case Upheld.

    Plaintiff filed suit for recovery of money. Defendant failed to rebut presumption u/s 118 of Negotiable Instruments Act by not proving lack of consideration through account books, bank statements, or tax returns. Courts analyzed evidence, found promissory note sufficient to prove consideration, and burden shifted to defendant to probabilize case. Supreme Court held Section 118 enables presumption of consideration, onus on maker to prove failure. Defendant's witnesses claimed misuse by plaintiff's agent, but no proof of collusion or loan repayment. Plaintiff's evidence supported by promissory note and legal notice. Courts rightly presumed consideration u/s 118(a). Judgments and decrees of lower courts confirmed, second appeal dismissed.

  • Cheque dishonor case: High Court upholds summoning order, framing notice u/s 138.

    The High Court examined the validity of the summoning order and framing of notice u/s 138 of the Negotiable Instruments Act, 1881, in a dishonor of cheque case. It reiterated that the High Court's inherent powers u/s 482 of the CrPC (now Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023) should be exercised sparingly and with caution, without unnecessary interference unless there is material irregularity or illegality. Section 138 provides a quasi-criminal remedy for dishonor of cheques, and summons may be quashed if the complaint lacks evidence of an offence. The High Court cannot examine disputed facts u/s 482 when the complainant contests the plea. Summons can be issued only when a prima facie case is made out based on documents and evidence with the complaint. The Court upheld the Trial Court's reasoned order rejecting the revision petition and framing the notice of charge, finding no grounds to invoke Section 482 jurisdiction at this stage. It highlighted the procedural hardship often faced by complainants in Section 138 cases due to frequent challenges to summoning orders.

  • Account freeze leading to cheque dishonor constitutes offense u/s 138.

    Dishonor of cheque due to account freeze falls within the purview of Section 138 of the Negotiable Instruments Act. The test is whether the account had insufficient funds or exceeded the arranged limit, regardless of the drawer's knowledge about the account freeze. If a cheque is issued from a frozen account with the intention to cheat, it attracts Section 138. In this case, on the cheque date, the account lacked sufficient funds, satisfying the first contingency u/s 138. Despite the statutory notice, the petitioner company disputed the liability and did not pay the cheque amount. The court dismissed the petition, ruling that a bank freezing the account can initiate a complaint for cheque dishonor due to account freeze, subject to considering the circumstances surrounding the issuance of the cheque to the complainant bank.

  • VAT

  • Taxability of panel boards integrated with submersible pumps sold as kits resolved.

    The case pertains to the taxability of panel boards purchased by a manufacturer of submersible pumps. The issue was whether panel boards purchased against Form XVII declarations should be taxed separately at a higher rate or as part of an integrated unit with submersible pumps. The court held that since the assessing authority accepted the nature of the final product supplied as an integrated set comprising both the submersible pump and panel board, it is difficult to treat the two items as separate products liable to different tax rates. The court distinguished the present case from the Northwest Switchgear Ltd case, where fan regulators were sold as independent products, and hence classified as parts/accessories attracting higher duty. In the present case, the submersible pumps and panel boards were sold as integrated kits. The court noted that the assessing officer had accepted the concessional rate claim u/s 3(3) for earlier and later years, and there was no justification for deviating from that view for the intervening year alone. The court set aside the impugned Tribunal order and allowed the writ petition.

  • Service Tax

  • Bank's penalty on delayed loan repayment not subject to service tax.

    The Appellate Tribunal held that liquidated damages/penal interest charged at 2% by the appellant cannot be construed as additional consideration but is a penal interest on account of delayed payment of loans, on which no service tax can be levied. Such charges are penal in nature and not relatable to taxable services rendered by the appellant. Liquidated damages/penal interest do not form part of the "declared service" u/s 66E of the Act, as there is no separate agreement between the parties for such liability, and no consideration flows for refraining from or tolerating an act or situation. Consequently, the Tribunal ruled that liquidated damages/penal interest are not exigible to service tax under the provisions of the Act.

  • Central Excise

  • Exemption Eligibility for Restarted Industry After Ban Lifted.

    This case pertains to an exemption granted to new industrial undertakings/units under a notification dated 25.04.2007. The respondent, an old wood-based plywood industry operating in Jeypore prior to a ban imposed by the Supreme Court, obtained a fresh license after the ban was lifted. The issue was whether obtaining a fresh license after the ban amounted to establishing a new industry, thereby entitling the respondent to the exemption under the 2007 notification. The CESTAT held that the respondent had established a new industrial unit, although on the same site, and was thus eligible for the exemption. The High Court upheld the CESTAT's finding, stating it was based on material evidence and not perverse. The court dismissed the appeal, ruling that no substantial question of law arose.

  • Automobile Cess Not Subject to Education Cess: Court Rules Against Govt's Demand.

    The summary is as follows: The automobile cess is levied under the Industries (Development Regulation) Act, 1951, and the Automobile Cess Rules, 1984, while the education cess and secondary and higher education cess are levied by the Ministry of Finance. The Circular No. 978/2/2014-CX dated 07.01.2014 clarified that education cess shall be levied only on such duties of excise/customs which are both levied and collected by the Department of Revenue. The Tribunal, in the case of TAFE LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MADURAI, held that no education cess is liable to be demanded as a percentage of automobile cess since the automobile cess was not levied by the Central Government in the Ministry of Finance (Department of Revenue), though collected by officers of that department. Consequently, the impugned order is set aside.


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