Newsletter: Where Service Meets Reader Approval.
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
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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
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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.
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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.
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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.
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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
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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
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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
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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.
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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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Circulars / Instructions / Orders
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Case Laws:
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GST
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2024 (11) TMI 109
Violation of principles of natural justice - ex-parte adjudication proceedings against the petitioner - petitioner was not given any report of the SIB which the petitioner has specific plea requested by his letter - It was held by High Court that 'The petitioner having been denied opportunity of hearing the order impugned are vitiated and therefore liable to be set aside.' HELD THAT:- It is not required to entertain the Special Leave Petition under Article 136 of the Constitution of India - SLP dismissed.
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2024 (11) TMI 108
Issuance of SCN prior to passing the Impugned Order under Section 73 [9] of the State Act or not -Compliance with the provisions of Section 73 for issuance of Show Cause Notice or not - impugned orders under Section 73 [9] of the State Act is in conformity with Section 75 [4] of the State Act or not - violation of princiles of natural justice - HELD THAT:- Non-issuance of a proper and prior Show Cause Notice, as contemplated under sub-section [1] of Section 73 of AGST Act, 2017 and issuance of only Summary of Show Cause Notice and Attachment to Determination of Tax cannot be said to be in compliance with sub-section [1] of Section 73 and sub-rule [1] and Rule 142 of the AGST Rules, 2017, a Summary of Show Cause Notice is held to be not a substitute of a Show Cause Notice, contemplated by the provisions of sub-section [1] of Section 73 to set the proceeding in motion. From the provisions of Section 73, it emerges that the Show Cause Notice is required to be issued by the proper officer, the statement under Section 73[3] is to be issued by the proper officer as well as the Order under Section 73 [9] is required to be issued by the proper officer. Compliance of the provisions contained in sub-section [1] to sub-section [8] and sub-section [10] to sub-section [11] of Section 73 and sub-rule [1] of Rule 142 are conditions precedent to term an Order passed under sub-section [9] of Section 73 as a valid one. Having regard to the fact that a proper and prior Show Cause Notice under sub-section [1] of Section 73 of the AGST Act, 2017 was not issued along with the Summary of Show Cause Notice in Form GST DRC-01 [Annexure-I to the writ petition] and the Attachment to Determination of Tax [Annexure-II to the writ petition], and in terms of the observations made in the common Judgment and Order dated 26.09.2024 [supra], the impugned Order dated 30.12.2023 [Annexure-IV to the writ petition] is found not sustainable in law and the same deserves to be set aside and quashed. It is accordingly ordered. The petition is disposed off.
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2024 (11) TMI 107
Refund of integrated taxes sanctioned on export of goods for the period FY 2018-19 to 2020-21 - time limitation - challenge to notice on the ground of limitation prescribed under sub- section (10) of Section 73 of the CGST Act - HELD THAT:- Rule 86(4B) of the CGST Rules was introduced vide Notification No. 14/2022-Central Tax dated 05.07.2022 allowing recredit of input tax credit pertaining to the amount paid back for contravention of Rule 96 of the CGST Rules. The respondent No. 2 issued notice initiating independent investigation against the petitioner in relation to the refund of integrated tax for the period in question. The first show-cause notice was issued on 03.04.2024 in respect of the Maharashtra registration and thereafter the subsequent impugned notice dated 20.08.2024 in respect of Madhya Pradesh registration has been issued. Moreso, in the entire petition, petitioner has not disclosed the actual date of refund of integrated tax. There is a separate period of limitation of three years from the date of erroneous refund. Even otherwise, in this case the Special Intelligence and Investigation Branch started investigation against the petitioner in respect of import and export for the FY 2017-18 to 2020-2021 and after scrutinizing all the documents, the show-cause notice has been issued to the petitioner. Therefore, it cannot be said that it is a time barred notice. There are no reason for interference in the impugned show-cause notice dated 20.08.2024 and accordingly, the petition stands dismissed as not maintainable.
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2024 (11) TMI 106
Maintainability of petition - petitioner has already availed the remedy of filing an appeal - time limitation - HELD THAT:- The petitioner is entitled to succeed. Though the petitioner may have filed an appeal against Ext.P4 order (which was rejected by Ext.P7 order as being time barred), the fact remains that Ext.P7 order was passed in violation of principles of natural justice. It is clear from Ext.P2 that the petitioner was given time till 21.07.2023 to reply to the show cause notice. Ext.P4 order appears to have been passed on 11.07.2023, even before the time for filing a reply had expired. Ext.P4 order is liable to be set aside. The fact that the petitioner had filed an appeal against Ext.P4 is no ground to refuse relief to the petitioner as the original order was clearly issued in violation of principles of natural justice - the writ petition is allowed by setting aside Ext.P4 order and restoring the assessment of the petitioner for the year 2017-18, to the file of the 2nd respondent, who shall pass fresh orders, after affording an opportunity of hearing to the petitioner. Petition allowed.
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2024 (11) TMI 105
Seeking restraint on 1st and 2nd Respondents from proceedings with the recovery pursuant to the impugned order - Opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- In the present case, since the show cause notice as well as the reminder notices were uploaded in the GST Portal, the Petitioner was not aware of the same and therefore he is not in a position to file reply for the show cause notice. Further, it appears that no opportunity of personal hearing was provided to the Petitioner prior to the passing of impugned order. Hence, this Court is of the view that the impugned orders are passed in violation of principles of natural justice and it is just and necessary to provide an opportunity to the Petitioner to establish their case on merits. In such view of the matter, this Court is inclined to set aside the impugned order dated 18.04.2024 passed by the 1st Respondent. The impugned order dated 18.04.2024 is set aside and the matter is remanded to the Respondents for fresh consideration on condition that the Petitioner shall pay 10% of disputed tax to the Respondents within a period of four weeks from the date of receipt of a copy of this order and the setting aside of the impugned order will take effect from the date of payment of the said amount - The Petitioner shall file their reply/objection along with the required documents, if any, within a period of two weeks thereafter. Petition disposed off by way of remand.
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2024 (11) TMI 104
Maintainability of petition - order passed u/s 129 of the Uttar Pradesh Goods and Service Tax Act, 2017 has been passed by the Proper Officer and not by the Adjudicating Authority - HELD THAT:- It appears that the matter requires consideration and the affidavits are required to be exchanged in the present case. Accordingly, let counter affidavit be filed within four weeks; rejoinder affidavit, if any, within three weeks thereafter - the respondent authorities shall release the goods to the petitioner upon his furnishing bank guarantee as per Rule 140(1) of the Uttar Pradesh Goods and Service Tax Rules, 2017. List this matter on January 6, 2025.
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2024 (11) TMI 103
Cancellation of GST registration of the petitioner - non-submission of reply to SCN - petitioner could not respond to the SCN issued by the respondents within the stipulated period on account of sickness - HELD THAT:- The present petitioner is also entitled for the benefit of the order passed by this Court in Technosum India Pvt. Ltd. Lucknow Vs. Union of India and Others [ 2022 (9) TMI 1412 - ALLAHABAD HIGH COURT ]. In the said judgment, the Court has held that the impugned order does not assign any reason whatsoever for cancelling registration of the petitioner and is passed only on the ground that reply to the show cause notice is not given. The non-submission of reply to the show cause notice cannot be a ground for cancellation of the registration. In view thereof, the present petitioner is also entitled for the same relief. The benefit of the order in the above stated case, shall also be made available to the present petitioner - the present petition is allowed.
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2024 (11) TMI 102
Levy of GST under the reverse charge mechanism on the seigniorage paid by the petitioner to the Government - HELD THAT:- Reliance placed in the case of TVL. A. VENKATACHALAM VERSUS THE ASSISTANT COMMISSIONER (ST) [ 2024 (2) TMI 488 - MADRAS HIGH COURT] where it was held that ' It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision.' In view of the above judgment, this writ petition is liable to be disposed of on the same terms.
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2024 (11) TMI 101
Levy of GST under the reverse charge mechanism on the seigniorage paid by the petitioner to the Government - HELD THAT:- Reliance placed in the case of TVL. A. VENKATACHALAM VERSUS THE ASSISTANT COMMISSIONER (ST) [ 2024 (2) TMI 488 - MADRAS HIGH COURT] where it was held that ' It is made clear that there shall be no recovery of GST on royalty until the Nine Judge Constitution Bench takes a decision.' In view of the above judgment, this writ petition is liable to be disposed of on the same terms.
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2024 (11) TMI 100
Seeking modification of the order - permission to complete the assessment for the year 2019-20 in respect of the Assessee Petitioner - HELD THAT:- Attention is drawn to a previous Order passed by a Co-ordinate Bench of this Court on the present proceedings in THE STATE TAX OFFICER, SATARA VERSUS NEW PHALTAN SUGAR WORKS DISTILLERY DIVISION LTD. [ 2023 (3) TMI 1534 - BOMBAY HIGH COURT] , whereby, this Court allowed a similar Application filed by the State permitting assessment for the year 2018-19 to proceed as it was to become time barred post 31st March 2023. Having heard the learned Counsel for the parties and having perused the Application, this Interim Application is allowed. However, such prayer is granted with a condition that the assessment which would be undertaken, if adverse to the Petitioner, shall not be enforced and shall be subject to the further orders which would be passed on this Petition. All contentions of the parties on the assessment are expressly kept open. Interim Application stands disposed of.
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2024 (11) TMI 99
Challenge to Assessment order - petitioner seeks to withdraw the present writ petition in view of the order passed by a Division Bench of this High Court in DIPAK SARKAR VERSUS THE STATE OF WEST BENGAL ORS. [ 2024 (1) TMI 1342 - CALCUTTA HIGH COURT] - HELD THAT:- Liberty is granted to the appellant to raise its objection before the concerned contractee authority or to institute appropriate proceeding in a competent Court of law for realization of the amount due from the concerned contractee department. As prayed for the present petition is dismissed as withdrawn.
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Income Tax
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2024 (11) TMI 98
Review petition filled belatedly - Exemption u/s 10(23C)(iv)/11/12 - activities of the respondent/assessee qualify for charitable purpose in view of the Proviso to Sec 2(15) or not? - as decided by SC [ 2023 (6) TMI 1044 - SC ORDER] HC correctly granted approval to the petitioner u/s 10(23C)(iv) HELD THAT:- Application for listing Review Petition in Open Court is rejected. There is an inordinate delay of 247 days in filing this Review Petition which has not been satisfactorily explained. Even otherwise, having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record or any merit in the Review Petition, warranting reconsideration of the order impugned. Accordingly, the Review Petition is dismissed both on the ground of delay as well as on merits.
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2024 (11) TMI 97
Accrual of income - Nature of receipt - excise duty refund - capital receipt and claimed as exemption u/s 10 or revenue receipt and taxed accordingly - hypothetical income or real income - addition as hypothetical income which has not actually accrued - Assessee had been following the mercantile system of accounting - HELD THAT:- In the mercantile system of accountancy, the book profits are taken for the purpose of assessment of tax, though the credit amount is not realized or the debit amount is not actually disbursed; meaning thereby, in the present case, the impugned amounts as brought to tax by the Income Tax Officer did not represent the income which had really accrued to the assessee-respondent herein during the relevant assessment year. It is settled law that income tax cannot be levied on hypothetical income and only real income can be taxed. Therefore, recording of entries in the books of accounts is not conclusive to determine the income under the provisions of law. As such, we are in full agreement with the learned regional Income Tax Tribunal, that whether an amount is to be considered as income or not is to be determined on the basis of the Income Tax Law and not on the basis of the entries made in the books of accounts; that no tax can be charged on an amount which is not actually earned and that the learned Tribunal was right, in deleting the addition as hypothetical income which has not actually accrued, which was otherwise 64% of the excise duty recognized by the assessee in its books of accounts. In view of insertion of Clause (xviii) to Section 2 (24) introduced by the Finance Act, 2015, any subsidy, grant, cash incentive, duty drawback, waiver, concession and reimbursement referred to in the said clause is considered as income and only because the word exemption is not mentioned therein, it is not open for the tax payers to interpret the same as per their own convenience - Admittedly, as per Black s Law Dictionary (Sixth Edition) exemption means freedom from a general duty or service; immunity from a general burden, tax, or charge, immunity from service of process or from certain legal obligations, as jury duty, military service, or the payment of taxes. Whereas, subsidy means a grant of money made by government in aid of the promoters of any enterprise, work, or improvement in which the government desires to participate, or which is considered a proper subject for government aid, because such purpose is likely to be of benefit to the public. In the present case, the assessee is exempted from making payment of excise duty to the extent of 36% of the total excise duty collected, meaning thereby the same is not subsidy given to meet the cost of the project. Therefore, we are also in full agreement with the learned Tribunal that exemption from excise duty does not fall in the definition of income as envisaged u/s 2 (24) (xviii) of the Act and that the amount is not an income but a capital receipt not taxable under the provisions of the Income Tax Act.
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2024 (11) TMI 96
Taxation of receipts - Accrual of Income Vs. Deferred Revenue - Annual Maintenance Charges (AMC) collected by assessee in advance from its customers for maintenance of Lifts installed and commissioned by the respondent-assessee - assessee is following mercantile system of accounting - Assessee had treated the same in their Books of Accounts as a current liability viz., Income Received in Advance - Tribunal deleting the addition made by the Assessing Officer (AO) on account of Annual Maintenance Charges (AMC) received in advance and shown by the assessee as liability in the balance sheet especially when the period of Annual Maintenance Charges (AMC) was only one year HELD THAT:- As from the nature of service provided and the monopoly exercised by reputed lift companies like respondent-assessee company, the customers have no choice. They have no choice to opt for services of other lift service providers for the lifts installed by companies like the respondent-assessee. The software which is used for operating the lifts is not freely available and never shared by the lift companies with the customers. If the contract for Annual Maintenance Service is not renewed, the cost of maintenance and running of the lifts will high and usurious as the respondent-assessee has the monopoly over not only the software but also the spares as they are not available in the open market. Even if the customer opts to terminate the contract, the respondent-assessee is not bound to refund the amount. If the customer opts to terminate the contract, the customer will still be at the mercy of the respondent-assessee should the lift malfunction. The business model which the respondent-assessee follows in so far as service under the Annual Maintenance Contract is concerned, it leaves no scope for uncertainties as far as income for provision service under its AMC model is concerned. Assessee would have been liable to pay tax under Section 65(64) r/w Section 65(105)(zzg) of the Finance Act, 1994 in the same quarter of it's receipt. Similarly, the same activity could also have been liable to tax under Section 5 of the TNVAT Act, 2006 and liable to tax under succeeding months. This is also confirmed in Schedule 11 to the Balance Sheet of the Respondent-Assessee. In fact with effect from 1st of April 2011 for the purpose of determination of tax liability, The Point of Taxation Rules, 2011 was also framed by the Central Government vide Notification No.18/2011 ST dated 01.03.2011. As per Rule 3 of the Point of taxation Rules, 2011, the point of taxation is at the time when invoice for service provided or agreed to be provided is issued. As per Rule 6 (b) of the Point of Taxation Rules, 2011 (as it stood then and since omitted), in a case where the persons providing service receives payment before the time of issuance of invoice, the time when he receives such payment to the extent of such payment shall be point of taxation. Thus the authorities, who are responsible for collecting indirect tax for the service provided would have treated the amount received towards that liability, the moment payment are received. There is also no dispute that the amount was collected by the appellant in advance towards Annual Maintenance Charges (AMC). The advance is a revenue in its hands at the time of its receipt. It is taxable in the year of its collection, as is contended by the Appellant/Income Tax Department. Further, there is no uncertainty in the amount of consideration derived for rendering of service and the amount is nonrefundable. Thus, we answer the substantial questions of law in favour of the Revenue and against the respondent-assessee.
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2024 (11) TMI 95
LTCG - relevant date, by virtue of which the transfer of rights in favour of the assessee had taken place - Date of Right to own the property was established/ accrued to the Appellant - Correct date of transfer of tenancy rights - ITAT held that the transfer of the property in question took place in favour of the assessee on 04 November 2004 and not on 22 February 2007 when the Deed of Confirmation was registered HELD THAT:- We find substance in the contention as urged on behalf of the assessee. It is clear from the appeal memo as filed by the assessee before the Tribunal that the ground, which was inter alia raised before the Tribunal, was whether the tenancy rights were converted into ownership rights, as per the consent decree dated 28 May 1999 and not in A.Y. 2007-08 when the agreement giving ownership right was registered through a transfer deed, which was in fact registered on 22 February 2007. It clearly appears from the observations which are made by the Tribunal that the Tribunal did not adjudicate on those specific grounds, which were raised, however, it delved to adjudicate on an issue which was not raised by the Revenue namely that necessarily the transfer ought to be recognized to have taken place on 04 November 2004 when tripartite agreement was entered between the parties. Keeping aside the core issue as raised in ground 1 as raised by the Revenue, which was either the rights having crystallized as per the consent terms dated 28 May 1999 or on 22 February 2007, when the Deed of Confirmation was registered and relevant to the A.Y. 2007-08 the Tribunal decided to adjudicate on an issue which was not specially put to the parties. It is thus the case that the Tribunal decided to keep aside the specific ground as raised by the Revenue and without adjudicating on such ground, has proceeded to decide an issue which in fact had not fell for consideration and/or not raised by the Revenue specifically. Thus there was an apparent error of law in the approach of the Tribunal in deviating itself from the course of adjudication of the appeal when the specific grounds which were raised by the Revenue were not adjudicated and in fact, what was adjudicated, was on a question which was not raised by the Revenue as any of the grounds even remotely in the memo of appeal. It is also not case that the revenue has raised any additional ground in the manner known to law so the Tribunal has jurisdiction to delve on such issue We may observe that it can never be the scope of judicial adjudication which would delve on an adjudication alien to or not call upon to be answered. Adjudication of the Tribunal would be confined to the ground which was raised and which were supposed to be contested by the assessee in the present case. We are, therefore, of the clear opinion that on such limited ground, the orders passed by the Tribunal would be required to be set aside and the proceedings be remanded before the Tribunal for a denovo adjudication, however keeping open all contentions of the parties on the facts and on law. We accordingly answer question (b) in favour of the assessee and against the revenue.
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2024 (11) TMI 94
Legality and validity of the order passed u/s 264 - Entitlement to claim benefit under Sections 11 and 12 - HELD THAT:- It is not in dispute that the petitioner has incurred expenditure for the year under consideration which was towards the application of income as required under section 11 (1) (d) - From the computation of total income as well as Form No. 10B issued by the Chartered Accountant, it is evident that the amount of income applied is clearly shown however, same is not reflected in Form ITR-7 uploaded by the petitioner copy of which is placed on record at page 17 of the petition wherein in column no.9 clearly shows Nil amount with regard to the application of income for charitable or religious purpose. In such circumstances, when the petitioner has incurred the expenditure and applied income/donation received by it for the charitable purpose, the petitioner is entitled to benefit of the same and the respondent ought to have taken into consideration this fact while deciding the revision application under section 264. As relying on Shree Rudra Technocast Private Limited [ 2024 (10) TMI 186 - GUJARAT HIGH COURT] Impugned order passed u/s 264 is hereby 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 while considering the fact which is not in dispute that due to technical glitch the income applied by the petitioner is not reflected in return of income in Form ITR-7 and the same is required to be taken into consideration while computing the income and the tax for the year under consideration.
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2024 (11) TMI 93
Reopening of assessment - reasons to believe - information received by the AO that the petitioner has obtained the accommodation entries - HELD THAT:- The objections raised by the petitioner alongwith the copy of the ledger accounts placed on record, it is evident that the petitioner had repaid the amount towards the opening balance as on 01.04.2014 during the year under consideration and there is no other transaction which is shown in the ledger account. It is therefore apparent that the information which was received by the respondent Assessing Officer with regard to the alleged accommodation entry received by the petitioner assessee seems to be not borne out from the reasons recorded. Thus, from the above reasons, it is clear that the same is contrary to the facts available on record and therefore, the Assessing Officer could not have assumed the jurisdiction for both the years as for the Assessment Year 2016-17 also the amount as already part of the ledger account for the Financial Year 2015-16 and admittedly, there is no transaction with the said entity by the petitioner during the relevant previous years to the Assessment Year 2016-17. Decided in favour of assessee.
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2024 (11) TMI 92
Addition u/s. 41 (1) r.w.s. 28 (iv) - as per AO there is no liability of the assessee to repay the amount and assessee has been benefited by the advances received by it in the financial year 2001-02 and there was cessation of liability as the same has ceased to exist - According to the assessee, the said amount was received against the project to be carried out but could not be implemented and the amount was not returned by the assessee due to financial constraints. HELD THAT:- There are concurrent findings of fact arrived at by the CIT (Appeals) as well as the Tribunal to the effect that though the assessee has received the advance against the project which had never been implemented and the amount was never returned by the assessee, the theory adopted by the Assessing Officer that it was a colourable devise was also not believed by the CIT (Appeals) as well as the by Tribunal. The CIT (Appeals) and Tribunal, on the contrary, found that the assessee never received any benefit or enjoyed the money that it has received as an advance and therefore, no benefit was derived out of the said transactions as admitted by the AO in the Assessment Order by observing that the assessee has reinvested the amount received as advance in the shares of the group companies of the said M/s. Marwar Hotels Private Limited which was later on sold at loss and such capital loss was never claimed as a set-off by the assessee. Thus, we are of the opinion that the provisions of Section 41 (1) read with Section 28 (iv) of the Act would not be applicable. Decided in favour of assessee.
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2024 (11) TMI 91
Deduction u/s. 80IA (4) - assessee worked as a contractor OR developer - AO disallowed claim as asessee was not eligible in view of the explanation inserted in the Act by Finance Act, 2009 with retrospective effect from 01.04.2000 and the assessee is not the owner of the property as a developer - ITAT held that the respondent-assessee is a developer withing the meaning of Section 80-IA and is eligible to claim the deduction under Sub-section (4) of the said provisions - HELD THAT:- In view of the above concurrent findings of fact arrived at by the CIT (Appeals) and the Tribunal, it cannot be said that the respondent-assessee is not a developer as it is found that the assessee was awarded a contract for full-fledged development of an Airport which is evidently not for any repairs or maintenance or upkeep or revamp of the existing Airport facilities but the assessee was entrusted with the work contract of developing a new infrastructure facility at Sardar Vallabhbhai Patel International Airport and the assesse was supposed to undertake necessary financial and entrepreneurial risk so as to qualify as a developer.
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2024 (11) TMI 90
Reassessment proceedings - validity and jurisdiction of the notice issued u/s 148 - Borrowed satisfaction v/s independent application of mind - validity of reasons to believe - HELD THAT:- It is not in dispute that during the course of the assessment proceedings, there is no failure on the part of the assessee to disclose fully and truly all material facts inasmuch as pursuant to the notice issued u/s 142 (1) of the Act, the petitioner has filed a detailed reply on 08.12.2015 providing details with regard to purchase of immovable property and payment of advance to the Om Land Reality Pvt. Ltd. AO after considering the details, has accepted the return income and passed the order u/s 143 (3) of the Act. On perusal of the reasons recorded it clearly reflects wrong figure in relation to the immovable property transaction carried out by the petitioner on 07.03.2013. This fact is further fortified by the Assessing Officer in the communication dated 22.09.2021 as well as show-cause notice issued on the same date for proposed addition in the re-assessment proceedings. It is therefore, apparent that the respondent-Assessing Officer has issued the impugned notice under section 148 of the Act only on the basis of the borrowed satisfaction without having any live nexus with the facts on record, more particularly, when the transactions in question are duly reflected in the books of accounts in form of audited balance-sheet as well as in reply to the notice 142 (1) of the Act during the course of the regular scrutiny assessment. We are therefore of the opinion that as there is no failure on the part of the petitioner to disclose truly and fully all material facts during the regular assessment and admittedly, the impugned notice is issued beyond the period of four years, as per proviso of 147 of the Act, the same would be without jurisdiction. The impugned notice is therefore quashed and set aside - Decided in favour of assessee.
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2024 (11) TMI 89
Applicability of provisions of section 205 - non-deposit of Tax Deducted at Source (TDS) by the employer - refund of the petitioner was adjusted against the outstanding demand - HELD THAT:- This Court in case of Kartik Vijaysinh Sonavane 2021 (11) TMI 682 - GUJARAT HIGH COURT] as held case is no longer res integra and is covered by the decision of this very Court rendered in case of Devarsh Pravinbhai Patel.[ 2018 (9) TMI 1635 - GUJARAT HIGH COURT] where too, the petitioner was an employee of the Kingfisher Airlines and worked as a pilot. In his case also the TDS on the salary made to the petitioner had not been deposited. It is only when the department raised the tax demand with interest and initiated the actions of the recovery that this Court was approached - Relying on the decision of the Bombay High Court rendered in case of Assistant Commissioner of Income Tax and Others vs. Om Prakash Gattani [ 2000 (1) TMI 43 - GAUHATI HIGH COURT] this Court allowed the same stating Department cannot deny the benefit of tax deducted at source by the employer of the petitioner during the relevant financial years. Credit of such tax would be given to the petitioner for the respective years. If there has been any recovery or adjustment out of the refunds of the later years, the same shall be returned to the petitioner with statutory interest. - Decided in favour of assessee.
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2024 (11) TMI 88
Demand raised in the intimation issued u/s 143 (1) - employer of the petitioners did not pay the Tax Deducted at Source from the salary of the petitioners - HELD THAT:- Employer of the petitioners deducted the Tax at Source from the salary income of the petitioners for two years but did not deposit the same with the Government. Thus, there is failure on the part of the employer to deposit tax deducted at source from the salary income income of the petitioners. Therefore, the respondent could not have raised any demand against the petitioners in view of the provisions of section 205 of the Act read with Instruction No. 275 dated 01.06.2015 and Office Memorandum dated 11.03.2016. The impugned intimation issued under section 143 (1) of the Act and consequential demand raised upon the petitioners are liable to be quashed and set aside. The respondents are hereby directed to see that strict compliance of the provision of section 205 of the Act as well as Instruction issued by the CBDT are followed and necessary corrections be made in the software so as to see that no demand is raised in case of the deductee on account of failure to deposit the amount of Tax Deducted at Source by the deductor. The Instruction issued by the CBDT under section 119 of the Act are binding upon all the officers of the department including the computer center which is now almost doing the job of the Assessing Officer. The technology used cannot be made to cause inconvenience to the tax payers contrary to the provisions of the Act and the Instruction issued by the CBDT resulting into helplessness on the human agency who has created the software resulting into the slavery of the technology. This is a classic case where the technology has failed to consider the provisions of the Act and the binding instructions of the CBDT.
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2024 (11) TMI 87
Reopening of assessment - Addition u/s 56(2)(vii) - receipt of immovable property as gifted to the petitioner who was the brother of the petitioner s father - According to the assessing officer, a nephew was not a relative within a meaning of explanation (e) to proviso to Section 56(2)(vii) of the Act, the said gift would be taxable - Scope of definition of expression relatives under explanation (e) to proviso to Section 56(2)(vii) HELD THAT:- It is clear from the plain language of explanation (e) to proviso to Section 56(2)(vii) of the Act that a relative would also include a brother or sister of either of the parents of the individual. In this case, the donor is the brother of the petitioner s father and therefore, is covered under the said clause. The fact that the word nephew has not been mentioned cannot be a reason for proceeding on the basis that uncle or nephew are not relatives within the meaning of explanation (e) to proviso to Section 56(2)(vii) of the Act. The impugned order as well as the notice is set aside.
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2024 (11) TMI 86
Benefit of the Direct Tax Vivad Se Vishwas Act, 2020 - Interpretation of appeal under the DTVSV Act - claim of the petitioner for waiver of interest under Circular No.400/29/2002-IT(B) - HELD THAT:- One of the condition for availing the benefit of the Direct Tax Vivad Se Vishwas Act, 2020 is that an assessee should be in arrears of tax including interest. The expression tax arrears in Section 2(1)(o) of the Direct Tax Vivad Se Vishwas Act, 2020 also includes interest charged on such disputed tax under Section 2(l)(n) of the Direct Tax Vivad Se Vishwas Act, 2020. The expression appeal has not been defined under the Direct Tax Vivad Se Vishwas Act, 2020. The Hon'ble Supreme Court in State of Gujarat v. Salimbhai Abdulgaffar Shaikh [ 2003 (9) TMI 777 - SUPREME COURT] held that broadly speaking, an appeal is a proceeding taken to rectify an erroneous decision of a court by submitting the question to a higher court. Similarly, in James Joseph v. State of Kerala [ 2010 (8) TMI 959 - SUPREME COURT] the Hon'ble Supreme Court while giving its ruling in the context of Kerala Forest Act, 1961, observed that the word appeal is not defined either under the Kerala Forest Act, 1961 or under CPC. Hon ble Supreme Court further held that an appeal is a proceeding where an higher forum reconsiders the decision of a lower forum, on questions of fact and questions of law, with jurisdiction to confirm, reverse, modify the decision or remand the matter to the lower forum for fresh decision in terms of its directions. The expression appeal is defined in the Oxford Dictionary, Vol. 1, p. 398, as the transference of a case from an inferior to a higher court or tribunal in the hope of reversing or modifying the decision of the former. In the Law Dictionary by Sweet, the term appeal is defined as a proceeding taken to rectify an erroneous decision of a court by submitting the question to a higher court or Court of Appeal. Thus, under peculiar circumstances, a writ proceeding before a Writ Court may partake the character of an appeal in its revisional jurisdiction under Article 226 of the Indian Constitution. Therefore, though the expression appeal has not been defined in Direct Tax Vivad Se Vishwas Act, 2020, it has to be construed that [ 2020 (2) TMI 1182 - MADRAS HIGH COURT] W.P.No.12500 of 2010 was in the nature of an appeal as the writ petitioner had questioned the order dated 16.03.2010 of the Chief Commissioner of Income Tax in the said writ petition as the petitioner had taken a stand that the petitioner was eligible for waiver of interest under Circular No. 400/29/2002-IT(B) dated 26.06.2006. Therefore, the petitioner was eligible to settle the dispute under Vivad Se Vishwas Act, 2020. As stated elsewhere there is no embargo in Section 3 and Section 4 of the said Act for the petitioner to file a declaration. Even otherwise, the answer to the Question No.13 of the FAQ is not relevant to facts of the present case. In any event, such clarifications are not binding on the Court. The definition of appellant under clause (a)(i) of sub-section (1) of Section 2 expressly includes, inter alia , filing of a writ petition. Therefore, the Court is in agreement with the views of the Bombay High Court in Mrs. Premalatha Mohan Agarwal [ 2021 (9) TMI 1280 - BOMBAY HIGH COURT] and Kapri International (P.) Ltd [ 2022 (8) TMI 805 - DELHI HIGH COURT] on these aspects. Direct Tax Vivad Se Vishwas Act, 2020 was intended to allow person(s) like the petitioner also to settle the dispute under it. The speech of the Finance Minister during the presentation of the Budget also gives an indication that the intention of the Parliament was to provide an amnesty to the assessee(s) to settle the dispute in respect of tax arrears . The statement of the objects and reasons to the Act also seem to indicate the above position. These writ petitions deserve to be allowed. Consequently, the respondents are directed to process the application of the petitioner filed on 29.01.2021 in accordance with law as per Sections 3 and 5 of the Direct Tax Vivad Se Vishwas Act, 2020, as expeditiously as possible, preferably, within a period of six months from the date of receipt of a copy of this order and close the file against the petitioner.
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2024 (11) TMI 85
Rectification application u/s 154 - interpretation of the law as taken by the Karnataka High Court relating to Section 115J and 115JB - HELD THAT:- From the bare perusal of Section 154 it is apparent that the same allows the Income Tax Authorities to make amendments, corrections and even pass such orders notwithstanding anything in law for the time being in force and in relation to any matter other than the matter which might have been so considered by way of appeal or revision. Thus, the scope and powers of the AO are quite wider and he can even amend its earlier order suo-moto as well as on an application so moved for such rectification. Herein it is a case which was taken up for scrutiny by the AO and an order has been passed subsequently. At this stage, the AO could have examined the position of law and as per existing law, the deductions from the book profits for the purpose of calculation of MAT liability could have been waived and as noticed by the ITAT in its order, the inadvertent mistake occurred on account of misinterpretation, can always be corrected. It is not a case where any new facts or accounts have been introduced in the books of accounts. The ITAT has factually examined the balance sheets and discussed at length the facts in appeal. Thus, we are satisfied that there is no introduction of new facts to the books of accounts and the mistake which had occurred on account of misinterpretation of law in submission of ITR, can always be corrected and rectified in terms of Section 154 of the Act, 1961. Revenue's Appeal dismissed.
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2024 (11) TMI 84
Denial of benefit of exemption u/s 11 12 - excess of income over expenditure - CIT(A) endorsed the action of the AO and denied any relief towards taxability of surplus having regard to absence of registration available u/s 12AA - HELD THAT:- As emanating from records, the assessee-trust in the present case was formed on 02.09.2014 and thus was in existence from the date of formation. The assessee trust however, has been granted formal registration u/s 12AA of the Act vide order dated 27.12.2018 w.e.f. AY 2016-17. Thus, for the AY 2015-16, the assessee was admittedly not registered under the provisions of the Act resulting in denial of exemption u/s 11 of the Act. The issue is no longer res integra. The coordinate bench in the case of Prem Prakash Mandal Sewa Trust [ 2021 (8) TMI 744 - ITAT RAIPUR] and Sree Sree Ram Krishna Samity [ 2015 (11) TMI 119 - ITAT KOLKATA] have taken note of the position of law in the light of CBDT Circular and held that where during the pendency of appeal of the assessee, the registration was granted u/s 12A/12AA of the Act, the case of the assessee would be covered under deemed registration and thus assessee would be entitled to claim benefit under s. 11 of the Act on the strength of registration obtained in the subsequent year. In consonance with the view taken by the co-ordinate benches, the AO is not justified in denying the benefit of registration albeit obtained subsequently, to the year under consideration. Applicability of mischief of Section 13 to the loans/advances given to Pradeep Sood and Naveen Sood for purchase of Land - The plea of the assessee are three fold (i) the observations made towards applicability of Section 13 to transactions carried out in other years are wholly unnecessary and outside the scope of powers conferred under Section 251 of the Act (ii) The observations of the CIT(A) with reference to Section 13 are generic without specification of particular sub-clause of Section 13 (3). The recipients of the loans/ advances namely Naveen Sood and Pradeep Sood are spouses of the Principal or Administrator of school held in Trust. The assessee has taken support of the judgment rendered by Hon'ble Supreme Court in Thanthi Trust to submit that the expressions 'Trust' and 'Institutions' referred in Section 13(3)(cc) and elsewhere are differently constituted and are not the same. The assessee also refers to the decision of Inclen Trust International [ 2021 (7) TMI 1143 - ITAT DELHI] to submit that Manager of an Institution is not the manager of a Trust. We find force in such legal plea. In the light of decisions rendered, we hold that the provisions of Section 13(3)(cc) would not extend to manager( or her spouse) of the Trust.The observations so made with reference to Section 13 of the Act are thus expunged from the first appellate order and would not apply. Denial of exemption towards excess of income over expenditure and expunction of observations in the context of s. 13 of the Act are allowed. Enhancement of income by the CIT(A) credited in Amalgamation Fund and Building Fund - Having regard to the exposition of law by way of binding precedents governing the field, we are of the view that CIT(A) has traveled beyond the bandwidth provided in respect of enhancement powers in as much as it has the effect of directing the AO to make assessment on an entirely new footing resulting in assessment based on new source of income. The competence vested by way of enhancement being somewhat restrictive, do not permit the CIT(A) to do so. Notwithstanding, the enhancement of chargeable income towards receipts in building funds and amalgamation funds is not permissible on facts of the case. The assessee has demonstrated on facts that the assessee herein has applied more than 85% of its receipts for charitable objects. Receipts in aggregate including receipts in funds stands at Rs. 4.33 Cr. whereas corresponding application of income stands at Rs. 4.58 Cr. Hence, conditions for claiming exemption u/s 11 stands satisfied. The CIT(A) for the purposes of enhancement, has only looked at the receipt of funds and overlooked the corresponding application thereof and thus fell in error. The exercise of power of enhancement to make enhancement thus requires to be set aside and quashed.
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2024 (11) TMI 83
Validity of assessment u/s 153A - non-est approval being a mechanical and perfunctory granted by the superior authority u/s 153D - HELD THAT:- The non-application of mind is glaringly demonstrable having regard to the peculiar facts of the case. Admittedly, combined and consolidated approval has been granted to large number of cases involving different Assessment Years and that too before the end of the next day of the requisition from AO seeking approval. A bare glance at the approval so accorded makes it evident that such approval is generic, listless and accorded in a blanket manner without reference to any issue in respect of any of the Assessment years involved in the case of any of the assessee covered in the consolidated approval. Apparently, the approval has been granted on a dotted line without any availability of reasonable time which firms up the belief towards non-application of mind. Besides, the Addl. CIT has failed to note that the AO has not even cared to determine the assessed income. The whole sequence of action towards approval u/s 153D appears to be illusory to merely meet the requirement of law as empty formality. Identical dispute emanating from the same approval memo in question came up for adjudication in the case of Mysore Bhaskara Pankaja [ 2024 (7) TMI 1134 - ITAT DELHI ] wherein as discredited the validity of the approval granted u/s 153D of the Act in identical circumstances. It was held therein that the approval so granted suffers from vice of non-application of mind and consequently non-est in law. Thus, we hold that approval granted u/s 153D of the Act under challenge do not meet the requirement of law contemplated u/s 153D - Assessment Orders passed in consequence of mechanical approval thus, are rendered non-est and invalid. Decided in favour of assessee.
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2024 (11) TMI 82
Validity of reopening of assessment - Valid sanction for issuance of notice u/s 148 - Approval by competent authority under Section 151(1) or not? - HELD THAT:- Taking into consideration the entire aspect of the matter as it is evident from the records itself that sanction has not been given by the PCIT or CCIT on the reasons recorded by A.O. for initiating the proceedings u/s 147 for issuing of notice u/s 148 when the reopening is beyond the period of 4 years from the end of relevant assessment year but sanction has been given by the Additional CIT the assumption of jurisdiction by the Learned AO to reopen assessment was not in accordance with the provision under Section 151 of the Act, the notice issued under Section 148 of the Act is found to be, invalid, bad in law and is, therefore, set aside - Assessee appeal allowed.
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2024 (11) TMI 81
Addition made u/s 69A - substantial cash deposit in her bank accounts during demonetization period - HELD THAT:- There was no assistance from the assessee in furnishing any documents to prove the sources of cash deposits in her bank accounts. The ld. CIT(A) confirmed the order of the Assessing Officer only on the impression why the third party has to gfive cash to the assessee for transfer of money when all the citizens can open a bank account in their name and many rural branches are opened with a view to give banking access to all the citizens of this country. It is clear from the observations that the ld. CIT(A) did not believe the submissions of the assessee and doubted the business activities, which are narrated before us by the ld. AR herein above. Since the ld. AR able to show the required documents before us in support of the claim of the assessee, we deem it proper to remand the matter to the file of the Assessing Officer for fresh consideration. The assessee is at liberty to file evidences, if any, before the Assessing Officer. Thus, ground Nos. 2 3 raised by the assessee are allowed for statistical purposes. Addition towards business income of the assessee - For the assessment year under consideration, since the Assessing Officer is required to determine the income of the assessee on verification of Form 26AS, we deem it proper to remand the matter to the file of the Assessing Officer for fresh consideration. The assessee is at liberty to file evidences, if any, before the Assessing Officer. Thus, ground Nos. 4 5 raised by the assessee are allowed for statistical purposes.
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2024 (11) TMI 80
Rectification u/s 154 - case was selected for limited scrutiny under CASS for verification of interest expenses and unsecured loans - HELD THAT:- Once the AO has asked the details of preliminary expenses and the assessee has filed the details and the AO has accepted the same, it is not an apparent mistake and therefore the CIT(A) / NFAC in our opinion was fully justified in holding that a debatable issue cannot be subject matter of rectification u/s 154. We uphold the order of the CIT(A) / NFAC and the grounds raised by the Revenue are accordingly dismissed. Power of the AO to travel beyond the reasons for which the case was selected for scrutiny - It is an admitted fact that the case of the assessee was selected for limited scrutiny for two issues, the details of which are already reproduced in the preceding paragraphs. At the same time, it is also an admitted fact that although the Assessing Officer had asked the assessee the details of preliminary expenses, however, he has not made any addition on this issue. Therefore, in absence of any addition made other than the reasons for which the case was selected for scrutiny, the assessee cannot raise any ground on this issue. Accordingly, the grounds raised by the assessee are dismissed.
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2024 (11) TMI 79
Belated filing of the appeal before the CIT(A)-NFAC - assessee has explained before the Ld. CIT(A)-NFAC that the delay was due to his illness with Bipolar disorder for which treatment is being taken from 2017 onwards and as his residence in USA, he could not attend the notices and also could not file the appeal against the assessment order within the prescribed period HELD THAT:- CIT(A)-NFAC rejected the assessee s submissions and denied the explanation for condonation of delay. Considering the facts and circumstances of the case and also consider the health condition of the assessee, we are inclined to condone the delay of 351 days and hereby remit the matter back to the file of Ld. CIT (A)-NFAC in order to consider the appeal afresh and decide the case on merits by providing one more opportunity to the assessee of being heard in accordance with the principles of natural justice. At the same breath, we also hereby caution the assessee to promptly co-operate before the CIT (A)-NFAC in the proceedings failing which the CIT(A)-NFAC shall be at liberty to pass appropriate order in accordance with law and merits based on the materials available on the record. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (11) TMI 78
Addition u/s 68 - assessee has made investments in the two firms by purchasing two cold storage units which was funded by M/s. A.R. Constructions where the assessee is a Managing Partner - HELD THAT:- It cannot be disputed that the sources for the investment is not explained. In our considered view funding for the purchase of cold storage units has been made by M/s. A. R. Constructions on behalf of the Managing Partner being the assessee which was later on transferred to M/s.Lakshmi Cold Storage and M/s. Vigneswara Cold Storage as capital of the assessee in the respective firms amount. Since the amount has been considered as the investment by the assessee in the respective firms the observation of the Assessing Officer that it is neither reflected in the books of accounts of M/s. A.R. Constructions could not be accepted. These capital investments made by the assessee are through book entries which is reflected in the books of M/s. A.R. Constructions and consequently in the assessee s capital account in M/s.Lakshmi Cold Storage and M/s. Vigneswara Cold Storage. We therefore direct the AO to delete the addition made u/s 68 r.w.s. 115BBE of the Act as the source for the capital investment has been properly explained by the assessee. Cash deposits investments as a capital in the firm - AR failed to explain why the withdrawals of cash was held for a period more than one year for investment into the partnership firm. The burden lies on the assessee to properly explain the cash deposits investments as a capital in the firm. There is merit in the argument of Ld. DR that the assessee has not properly explained the source of investment in capital of the said firm and hence we are of the considered view that since the investment in the firm remains unexplained, we are inclined to sustain the order of the Assessing Officer on this ground. Accordingly Ground No. 4 raised by the assessee is dismissed. Unsecured loans to the assessee - Since the amount has been transferred from the bank accounts of the respective parties wherein the sources for the amounts available in the bank accounts of the parties granting unsecured loans to the assessee were not disputed by the Revenue, which was demonstrated by the Ld.AR, we are inclined to allow this ground raised by the assessee thereby deleting the addition made by the Assessing Officer. Accordingly, Ground raised by the assessee is allowed. Addition u/s 56(2)(x) - AR submitted that the amount has been received by the assessee as gift from his Father s HUF account - It is an admitted fact that the assessee has received gifts from Shri Devagiri Lakshmi Narsimha Reddy HUF, the father of the assessee being its Kartha. Assessing Officer has rightly considered that the amount has been received without any consideration and assessee also not covered within the definition of relative u/s 56 of the Act. We therefore find no reason to interfere with the orders of the Revenue Authorities, thereby dismissing this ground raised by the assessee. Accordingly Ground raised by the assessee is dismissed by sustaining the addition made by the Assessing Officer.
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2024 (11) TMI 77
Disallowance of excess deduction claimed u/s 35(2AB) - assessee has taken a grant-in-aid from DSIR which was repayable in the form of royalty aggregating to 1.3 times of the money actually received by the assessee, therefore AO considered the amount as royalty and observed that grant-in-aid received by the assessee cannot be considered for the purpose of weighted deduction - HELD THAT:- We find that there is merit in the argument of the AR that in the earlier assessment year assessee has received sum as soft loan on similar terms and conditions as entered into tripartite agreement during the impugned assessment year. Further the Ministry of Science and Technology has also confirmed that the funds provided by them is in the nature of soft loan and not a grant-in-aid for the earlier loan taken by the assessee. Since the terms and conditions of the tripartite agreement are identical for both the assessment years the argument of the AR deserves consideration. The assessee has categorized the amount received from DSIR as unsecured loans in their financial statements which was not disputed by the revenue. AR also submitted a copy of invoice wherein interest on the repayment of the loan has been disclosed and consequently tax has been deducted at source on the interest paid. We are of the considered opinion that the assessee has taken a soft loan which is repayable in five equal instalments cannot be considered as a grant-in-aid and therefore assessee is eligible for weighted deduction u/s 35(2AB). We therefore allow grounds raised by the assessee and direct the AO to delete the disallowance of weighted deduction u/s 35(2AB).
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2024 (11) TMI 76
Disallowances of the deduction claimed u/s 80IA - assessee has two units one for manufacturing of paper and another for generation of power - case of the Assessing Officer is that the assessee has claimed deduction u/s 80IA with respect to the steam cost supplied to the paper unit by considering it as income in the books of the account of the assessee, thereby enhancing the profit of the power plant which is eligible for deduction u/s 80IA and claiming the same as cost in the hands of the Paper unit HELD THAT:- AO has resorted to value the steam based on the Director s Report annexed to the financial statements, wherein the average cost of various raw materials i.e., husk, fire wood, saw dust, chipper dust was disclosed. AO proceeded to compute the average cost based on these disclosures and arrived at a cost of Rs. 1200/- per ton of fuel consumption for the purpose of generation of steam. The main contention of AR is that as per the Companies Act, 1956 only material cost for the power consumption is disclosed in the Directors Report annexed to the financial statements whereas the stores and spares and other overheads consumed in the process of generation of steam are not disclosed. There is merit in the argument of AR that apart from the main fuel cost certain other overheads in the form of stores and spares and other overheads are required for the purpose of generation of steam. Further we also find from the submissions of the Ld.AR that the Assessing Officer has allocated 39% of the basic fuel cost whereas assessee has allocated 49% of the total fuel cost. We also find that the AO has not considered the consumption of stores and spares and other overheads as claimed by the Ld.AR. In our considered view, if the other costs are considered for the computation of the average cost of fuel consumption used for the purpose of generation of steam the rate of Rs. 1500/- per ton of fuel adopted by the assessee-company is reasonable. Therefore, the disallowances u/s 80IA of the Act could not be justified. We are therefore inclined to allow the deduction u/s 80IA as claimed by the assessee, thereby allow the ground raised by the assessee.
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2024 (11) TMI 75
Disallowance of deduction u/s. 80P(2)(a)(i) - income from interest earned on bank deposits treated the income from banking activities as income from other source instead of its true nature of business income - whether or not the interest income on the surplus funds of a co-operative society, i.e. the funds for which there were no takers? - HELD THAT:- Whether or not the interest income on the surplus funds of a co-operative society, i.e. the funds for which there were no takers would be eligible for deduction u/s. 80P(2)(a)(i) of the Act, had been deliberated upon and is squarely covered by the order passed in the case of Gramin Sewa Sahakari Samiti Maryadit [ 2022 (3) TMI 75 - ITAT RAIPUR] follow the same and set-aside the disallowance made by the A.O of the assessee s claim for deduction u/s. 80P(2)(a)(i).
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2024 (11) TMI 74
Disallowance made on account of proportionate interest paid on loans which were advanced - interest incurred on loans borrowed for the purpose of advancing such loan to AAIPL was allowable as business expenditure u/s 36(1)(iii) HELD THAT:- From the facts on record, we observe that, the assessee is engaged in the business of real estate development and in furtherance of its business, it had set-up an Indian subsidiary in the name of AAIPL in which it held 87.5% along with one Mr. JH who held 12.5% for undertaking real estate projects abroad. It is further observed that AAIPL had accordingly set-up subsidiaries in Sri Lanka Dubai which were undertaking real estate projects in the respective countries. We further note that the monies advanced by the assessee to AAIPL to further fund the step-down subsidiaries abroad was in the course and for the purposes of its business. Having considered these facts and circumstances, we find merit in the Ld. CIT(A) s findings that, on the given facts, it was commercial prudence that, the AAIPL would not be able to realize interest from the foreign subsidiaries and thus the assessee will also not be able to realize interest due on the loans advanced to AAIPL. The assessee is in the real estate business and so was its subsidiary AAIPL and step down foreign subsidiaries. The loans were infused into the step down foreign subsidiaries through the aegis of AAIPL for the reason that the Banks required the promoter to infuse funds as their commitment to the real estate project, which sufficiently proved that the funds were advanced for the business purposes. These loans originally carried interest which were serviced as well. For the reasons discussed above viz., serious litigation between partners and financial distress in foreign subsidiary, the assessee decided not to charge interest from this year in order to protect its overall business interests as well as principal loan amount. As has been discussed above, it is not necessary to show that the said deployment of borrowing always results in income to the assessee. The assessee have sufficiently established that the loans were advanced to AAIPL for the business purposes and therefore, even if the loans did not yield interest income during the year, yet the interest paid on borrowings has to be considered to be admissible for the purpose of Section 36(1)(iii) - we do not find any infirmity in the order of CIT(A). Therefore, we are inclined to uphold the same by dismissing the appeal of the Revenue.
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2024 (11) TMI 73
TDS u/s 195 - commission paid to non-resident agents - assessee states to have hired agents in foreign countries where he does not have physical presence, to assist in procuring these contracts - HELD THAT:- As pointed out on behalf of the assessee, the commission payments have been made to non-resident agents for services rendered outside India and therefore, not chargeable to tax in India. In the absence of chargeability to tax, the provisions of Section 195 of the Act are not attracted as rightly held by the CIT(A) in the present case. The action of the CIT(A) granting relief to the assessee is in sync with the view expressed by the Tribunal in assessee s own case in the Assessment Year 2017-18. We thus see no perceptible reason to interfere with the view expressed in the impugned appellate order passed by CIT(A). Hence, the contentions on behalf of the Revenue are unfounded on facts and law. Decided against revenue.
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2024 (11) TMI 72
Deduction u/s. 80P - interest earned from deposits held with Cooperative Banks - HELD THAT:- Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s. 80P. Section 80P(2)(d) of the Act refers to the interest from Cooperative Society but it has been consistently held by this Tribunal (Pune Benches) that Cooperative banks are basically Cooperative Societies except that they get license for doing the banking business. Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. [ 2024 (6) TMI 791 - ITAT PUNE] held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s. 80P(2)(d) of the Act. Thus, where the assessee made investment with the Cooperative Banks in regard to the funds which it was required to maintain as per the guidelines provided in the Societies Act applicable to the assessee society and hold that the assessee is eligible for deduction u/s. 80P(2)(d) of the Act for the interest income earned from Cooperative Bank - Decided in favour of assessee.
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2024 (11) TMI 71
Addition made u/s 56(2)(x) - Conversion as a transfer u/s. 2(47) - scope of the terms 'transfer' and 'received' - conversion of one class of rights (tenancy rights) in the property to another class of rights (ownership rights) in the same property - correctness action of the AO in invoking the provision of 56(2)(x) CIT(A) held that the purchase transaction, i.e. conversion of tenancy rights into ownership rights, is duly covered under the definition of transfer as provided in section 2(47) accordingly, upheld the invocation of provisions of section 56(2)(x)(b)(B) - HELD THAT:- From a careful perusal of the aforesaid decisions, it is clearly evident that the transfer of ownership rights is distinguished by the Hon ble Courts from the transfer of ownership by the protected tenant. Dr. D.A. Irani [ 1998 (9) TMI 81 - BOMBAY HIGH COURT] and Mrs. Nila V. Shah [ 2012 (6) TMI 379 - ITAT MUMBAI] are the cases where the taxpayer purchased the tenant premises from the owner and thus there was a transfer of ownership by the erstwhile tenant. We agree with the submissions of the assessee that if the assessee had purchased an immovable property, then he would have entered into a Deed of Conveyance, however, in the instant case the parties entered into a Deed for Conversion. The fact that while computing the fair market value of the subject property, the DVO considered 30% of the gross value as the fair market value of the subject property also supports the case of the assessee as in the case of purchase of ownership entire 100% would have been considered as fair market value. Having considered the peculiar facts of the present case in light of the various judicial pronouncements as noted above and also in light of the detailed analysis of the provisions of section 56(2)(x)(b) of the Act, we are of the considered view that since the assessee, being a protected tenant since 1992, has merely acquired an ownership right of the Flat earlier occupied by him as a protected tenant and not any immovable property vide Deed for Conversion dated 05/12/2019, therefore section 56(2)(x)(b) of the Act is not applicable to the present case. Reliance on the definition of the term transfer as provided in section 2(47) of the Act is immaterial in the instant case as no addition on account of capital gains was made either in the hands of the assessee or the landlord. Accordingly, the impugned addition made by the AO and upheld by the learned CIT(A) under section 56(2)(x)(b) of the Act is directed to be deleted. As a result, the grounds raised by the assessee are allowed.
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Customs
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2024 (11) TMI 70
Validity of Detention Order under COFEPOSA Act, 1974 - as argued that no allegation has been made against the Detenu for absconding and violating the order dated 16th April, 2024. Also, it is important to note the fact that the Detenu does not have a passport for the past 20 years and, therefore, cannot be a flight risk. HELD THAT:- Detaining Authority has clearly noted that the Detenu was released on bail on 16th April, 2024 on certain conditions. Detaining Authority was satisfied that on being released on bail there is every likelihood that the Detenu would engage himself in the alleged prejudicial activities in view of his propensity to do so and therefore the need to immobilize him by way of the present Detention Order. A perusal of the impugned Detention Order further reflects the fact that the said satisfaction was based on the Detenu running a well-organized smuggling network with aid of his associates and having well-established mechanism in dealing with foreign origin gold. Detenu was arrested on 06th March, 2024 and as per the record he moved a bail application on 1st April, 2024 and the proposal for detention was moved on 12th April, 2024 which is proximate in time. By way of additional affidavit filed by Respondent No. 3 it has come on record that after the proposal for the Detenu s detention was moved by the Sponsoring Authority on 12th April, 2024, the Detenu was granted bail vide order dated 16th April, 2024 passed by the ld. ACMM, the Sponsoring Authority/Respondent No. 3 sent an updated proposal on 30th April, 2024 to the Detaining Authority placing the said bail order on record as well as its intention to move for cancellation of bail. The aforesaid sequence of dates and events clearly show that the Sponsoring Authority/Respondent No. 3 sent a proposal for detention soon after the Detenu having preferred an application for bail. Looking at the facts of the present case and the voluminous record relied by the Detaining Authority, the nexus between the date of the incident and the passing of the impugned Detention Order cannot said to be delayed or having no live-link. Application seeking cancellation of bail was not placed before the Detaining Authority - As noted in the additional affidavit on behalf of Sponsoring Authority/Respondent No. 3, that in the updated proposal sent to the Detaining Authority on 30th April, 2024, the intention to challenge the order granting bail was mentioned; however, the actual application for cancellation of bail was filed only on 06th May, 2024 and since the impugned Detention Order was passed on 09th May, 2024, in the considered opinion of this Court, the same would not amount to non-supply of a vital document inasmuch as the same was not before the Detaining Authority. Further, filing for cancellation of bail would not vitiate the impugned Detention Order as same cannot be considered as an alternate to a Detention Order. The fact that the Sponsoring Authority can move for cancellation of bail cannot be a ground to quash the order of preventive detention as held in Abdul Sathar Ibrahim Manik v. Union of India [ 1991 (10) TMI 303 - SUPREME COURT ] In Jaseela Shaji [ 2024 (9) TMI 707 - SUPREME COURT ] relied upon by Petitioner, Hon ble Supreme Court noted that a document which was extensively relied upon by the Detaining Authority was not supplied to the Detenu which is not the case here. The impugned Detention Order was also challenged on the ground that the same is vague as there is no clarity as to under which sub-clause of Section 3 (1) of the COFEPOSA Act the said order was passed. It was contended that in the impugned Detention Order all the possibilities mentioned in the said provision have been referred to without exactly referring as to which particular sub-clause was the case of the Detenu covered under. In view of the aforesaid discussion and after going through the material on record reflecting the activity of the Detenu and also the fact that the procedure and statutory safeguards have been fully complied by the Detaining Authority, in the considered view of this Court the impugned order of detention dated 09th May, 2024 calls for no interference.
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2024 (11) TMI 69
Non-fulfillment of the export obligation - appellant had imported raw materials duty-free under the scheme but mistakenly filed shipping bills under the Duty Drawback Scheme instead of the Advance Authorisation Scheme - seeking conversion the shipping bills under the Drawback Scheme to shipping bills under the Advance Authorisation Scheme - HELD THAT:- The appellant was exempted from payment of duty at the time of import only because the inputs had been imported under the Advance Authorisation Scheme, and there was a customs notification in force granting the exemption from import duty. It is also not in dispute that the appellant had exported finished products during the period between 10.05.2019 and 25.09.2019 under cover of six shipping bills which had passed through the Customs Authorities, who had issued the 'let export' order permitting the export of the said products. The sole mistake committed by the appellant was that, in the shipping bills aforesaid he had mentioned the Duty Drawback Scheme, instead of the Advance Authorisation Scheme, as the Scheme under which the exports were effected. While it may be a fact that there is a different level of examination envisaged at the time of export for each of the Schemes, we are of the view that, at this distance of time, the examination already done on the appellant's exported products needs to be revisited only if it is established that the earlier examination did not look into aspects that were crucially relevant for exports under the Advance Authorisation Scheme. Respondents have not been able to tell us whether there were any such aspects, that were missed out in the earlier examination. At any rate, on the facts of the instant case, we are unable to see why an examination of the exported products, which led to the appellant being sanctioned a drawback, cannot be relied upon for the purposes of the Advance Authorisation Scheme. Since the appellant has agreed to refund the drawback amount received by him together with up-to-date interest till the date of payment, we are of the view that on receipt of such payment from the appellant, the Customs Authorities shall issue a receipt to him evidencing such payment by the appellant. If the DGFT is satisfied that the appellant has discharged his export obligation through the exports that took place between 10.05.2019 and 25.09.2019, then he shall, without further delay, issue the export obligation discharge certificate to the appellant. The figure showing the drawback amount, together with up-to-date interest, that has to be refunded by the appellant, shall be communicated to the appellant by the Customs authorities, within a week from the date of receipt of a copy of this judgment. The appellant shall thereupon make the payment and obtain a receipt from the Customs Authorities, within a further period of one week. He shall then approach the DGFT who shall consider the request of the appellant for the Export Obligation Discharge Certificate within an outer time limit of three weeks from the date on which the appellant produces the receipt before him.
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2024 (11) TMI 68
Demand for recovery of erroneous refund amount - violation of principles of natural justice - HELD THAT:- The Hon ble Bombay High Court in the case of Patel Engineering Limited Vs Union of India [ 2013 (4) TMI 97 - BOMBAY HIGH COURT] held that recovery proceedings cannot be initiated when the stay application has remained pending for reasons beyond the control of the assessee. In the revised scheme of appeals based on a mandatory pre-deposit, a stay on the order appealed is deemed operative once the appeal is accepted on the file of the Tribunal after paying the requisite pre-deposit. The impugned order is very cryptic without there being a adjudication of the rights and liabilities of parties by the application of mind to the merits of the matter. While the First Appellate Authority, could have decided the matter ex-parte for non-prosecution, however it should not have been done at the first instance when the intimation letter was returned with the remarks left and moved . The appellant should not have been denied the opportunity for a personal hearing as required by the principles of natural justice without making a serious attempt to reach out to him, through his representative or through the department, lest the appellant be aggrieved with closure of the appeal, for unintended lapses. This is not to condone the laxity on the part of the appellant in not updating his new contact address, which is not appreciated. However substantive justice should not be denied on technical grounds without making visible efforts to reach out to the appellant. The impugned order hence merits to be set aside. The Demand Notice which flows from the impugned order comes into jeopardy and cannot be implemented as being infructuous once the appellate order on which it is based is set aside. Set aside the impugned order and remand the matter to the file of the First Appellate Authority to be decided afresh after giving the appellant an opportunity of being heard, as per law
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2024 (11) TMI 67
Rejection of Transaction Value - imported goods did not correspond in thickness with the description made in the Bill of Entry - appellant had filed the Bill of Entry and produced invoices with goods of 0.3 mm thickness and on examination they were found to be of much higher thickness - HELD THAT:- The transaction value can be rejected under Rule 12. If the proper officer has some reason to doubt the truth and accuracy of the transaction value he can call for information and on receiving such information or if the information is not provided, the proper officer still has a reasonable doubt about the truth and accuracy of the transaction value, it shall be deemed that the valuation cannot be done as per the transaction value. Discrepancy between the goods declared and goods actually imported gave the officer reason to doubt the transaction value and the owner of the appellant firm was summoned who, in his statement, admitted the mistake. It is not the case that the appellant had provided any invoice for the goods which were actually imported, .i.e., those whose thickness was 0.38 mm to 0.45 mm. We, therefore, find that the officer had reasonable doubt regarding the truth and accuracy of the transaction value and has correctly rejected it. Having rejected the transaction value under Rule 12, he found that there were no imports of identical goods and hence the value could not be determined under Rule 4 and therefore, proceeded to determine it under Rule 5. These proposals were incorporated in the SCN and the appellant was given adequate opportunity to submit its defence. We, therefore, find no force in the submission of appellant that the adjudicating authority should have determined the value under Rule 4. When it is specifically recorded that there were no imports of identical goods and the appellant also did not produce any evidence to the contrary till now, Rule 4 could not have been and has correctly not been applied. Consequently, the value was determined under Rule 5. We find that the Commissioner (Appeals) was correct in upholding the OIO insofar as the rejection of the transaction value under Rule 12 and its re- determination under Rule 5 are concerned. Confiscation of the goods u/s 111(m) of the Act and imposition of redemption fine u/s 125 of the Act in lieu of confiscation - The appellant had clearly made a declaration in the Bill of Entry which is false. Appellant s contention is that it had no intention and it had actually ordered for goods of 0.3 mm thickness but its supplier had supplied goods of much higher thickness (and therefore of higher quality) but sent an invoice for goods of only 0.3 mm. This submission cannot be accepted. If anyone orders some goods and the seller delivers wrong goods, one will naturally return them. Instead, in this case, the appellant accepted the mistake and sought provisional release of the goods which were actually imported. This shows that wrong goods were not sent by the supplier and it is the appellant who made the wrong statement in the Bill of Entry and produced an invoice for the wrong goods to evade duty. The intention of any person can only be inferred from the facts of the case and the behaviour of the person. We have no hesitation in concluding that the appellant had intentionally mis-declared the nature of the goods in the Bill of Entry. Penalty of Rs. 3,00,000/- each was correctly imposed on the appellant u/s 114AA and 112 of the Act. We find no error in the impugned order of the Commissioner (Appeals) upholding the OIO. The appeal is dismissed and the impugned order is upheld.
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2024 (11) TMI 66
Entitlement to refund of the CVD - exemption granted under exemption Notification dated 13.10.2017 - adjudicating authority rejected the refund on the ground that Notification in question is not applicable retrospectively in the appellant s case and the judgments relied upon by the appellant is not applicable as the appellant was not the party in the said cases before the Hon ble High court, HELD THAT:- Appellant is engaged in manufacturing of Stainless Steel coils against Advance Authorisation Scheme for the purpose of manufacturing and therefore export of the same as per the Advance Authorization Scheme and also the Foreign Trade policy all kinds of duties leviable under Custom Tariff Act are exempted. Government of India vide Notification No. 1/2017-Customs dated 07.09.2017 imposed CVD @ 18.95% under Section 9 of Customs Tariff Act, but thereafter, trade associations made various representations and thereafter, the government vide Notification No. 79/2017-Cus dated 13.10.2017 exempted the CVD. DGFT also issued Notification No. 33/2015-2020 dated 13.10.2017 to exempt CVD under Advance Authorization Scheme. Government rectified its mistake vide Notification No. 79/2017-Cus dated 13.10.2017 exempted the CVD. The question arose before the various High Courts regarding the retrospective applicability of Notification No. 79/2017 and the various High Courts in various decisions cited granted the benefit of Notification in similar circumstances. The refund has been rejected on the ground that the applicant was not the party in the said case before the High Court as held that Notification No. 79/2017 dated 13.10.2017 has retrospective applicability. Thus, allow the appeal of the appellant and hold that the appellant is entitled to refund claim of CVD along with interest as prescribed by law. Appeal is accordingly allowed on the above terms.
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2024 (11) TMI 65
Custom duty for the raw material consumed in excess of SION norms - Appellant being a 100% EOU - improper accounting of imported raw material consumption - period of dispute is from August, 2004 to March 2006 - Appellant had imported Milled Glass Powder for manufacture and export of multi form Bead glass which is used in the manufacture of Electron Guns HELD THAT:- We find that it is an admitted fact that the appellant had imported the raw-material for manufacture and as per the information available on record, they have fulfilled the export obligations. When the actual waste generated during the production was more than 4.76% as per norms related to subject goods, Appellant had take-up the issue with Development Commissioner, Cochin Special Economic Zone (CSEZ) vide letter dated 07.12.2004 for amending the wastage norms. Considering the same, Assistant Development Commissioner vide letter No. 1/72(2) EOU CEPZ 10517 dated 15.12.2004, conveyed the approval of the Development Commissioner fixing the percentage of waste and scrap generated as 20.34% on adhoc basis for the period of 6(six) months. Thereafter, as evident from letter dated 05.07.2005, Board of Approvals for 100% EOU in its 4th meeting held on 14.06.2005 decided that Adhoc norms fixed by the Development Commissioner, Special Economic Zone to continue till regular norms are approved by the Board of Approval. From the above facts and considering the judgment of M/s Goodluck Garments Pvt Ltd [ 2019 (1) TMI 1514 - GUJARAT HIGH COURT] merely if wastage is in excess of the input-output norms, without anything more, would not be sufficient for the Adjudicating authority to arrive at the conclusion that the imported goods have not been used for the manufacture of the articles for export. Further, it cannot be read in this manner, despite the fact that the Appellant is in a position to show that the entire material has been used for the purpose of manufacture of goods and there is no allegation with regard to the diversion of goods. We find that, if the Appellant has fulfilled the export obligation and when waste generated over and above SION norms is available in EOU, merely because the wastage norms are not satisfied, no presumption can be made to the effect that the goods have not been used for the manufacture of articles for export. Further it cannot be treated as improper accounting of raw material consumption to demand duty under 65(2)(b) and 72 (1)(d) of the Customs Act, 1962 as held by adjudication authority. Recovery of duty and interest confirmed in the impugned orders are also set aside.
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2024 (11) TMI 64
Classification of import of the 6 Port Connector Assembly - Customs Tariff Item Entry 85177090 v/s Customs Tariff Item Entry 85389000 - as submitted from the pictorial details furnished by the appellant the imported goods are used in the manufacture of Patch Panel, which will be fitted in between/switch and the socket connecting the computer and the telecommunication network, therefore, they cannot be treated as parts of networking equipment, and they appear to be rightly classifiable under Chapter Heading 8538 as confirmed by the supplier in their invoices HELD THAT:- We find that the impugned goods as per the Department are held to be classifiable under Customs Tariff Item Entry 85389000 under heading Others of chapter heading 8538, which reads as parts suitable for use solely or principally with apparatus of headings 8535, 8536 or 8537 . We find that the item was classified by the Department under chapter heading 8538 inter alia based on the classification adopted by the supplier in USA. We further find that the United States International Trade Commission adopts the classification under Harmonized Tariff Schedule (HTS), We find that the chapter headings of HSN code adopted by the Indian Customs and a HTS code of the US are not completely aligned. Hence, determination of classification based on HTS code of US for the purpose of Indian Customs Tariff Act does not appear to be tenable. The impugned item is an interface between the telecommunication network cabling and the computer network cabling, and it is not any Relay or Switching equipment to be excluded from the chapter heading 8517, in view of the exclusion provided in the HSN to chapter heading 8517. We find that the impugned goods are used in connecting a telephone or telecommunication network to a computer network for the purpose of transmission of voice, video and data and not for transmission of electricity and is not a relay or a switching equipment. The headings 8535, 8536 and 8537 are primarily for equipment and apparatus related to transmission and distribution of electricity. Hence, the classification of the impugned goods does not merit classification under any of the headings 8535, 8536 and 8537. Chapter Heading 8536 provides for specific classification for connectors of optical fibre, optical bundles or cables . We find that the impugned imported item is not meant for any connections of optical fibre or optical fibre bundles. Thus, we find that the classification of the impugned goods under Customs Tariff Item Entry 85389000 is not correct, and the classification should be under Customs Tariff Item Entry 85177090 as declared by the appellant.
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2024 (11) TMI 63
Benefit of Anti-Dumping Duty (ADD) - scope of benefit of Notification No. 165/2003-Cus. dated 12.11.2003 and also the exemption from Anti-dumping duty under Notification No. 04/2009 dated 16.09.2009 - Revenue has not extended the benefit of Anti-Dumping Duty (ADD), since the imported goods are not eligible for the Anti-Dumping Duty exemption. The goods were cleared provisionally with bond and a bank guarantee. The Department finalized the provisional assessment and confirmed the demand HELD THAT:- We find that Notification 165/2003-Cus. dated 12.11.2003 excluded reflective glass, however, Notification 6/2009 did not exclude reflective glass from imposition of ADD. However, the exclusion of reflective glass from the imposition of ADD was allowed by Notification 51/2009 dated 22.05.2009, therefore during the period 06.01.2009 to 22.05.2009, there is no exemption from ADD for reflective glass. We find that the exemption for green glass was given in Notification 165/2003 as well as in 06/2009. The impugned imported goods are green and blue reflective glass, therefore, the exemption for these goods imported between 06.01.2009 and 22.05.2009 is not available in view of the fact that 06/2009 did not exclude specifically reflective glass which was subsequently done through Notification 51/2009. The contention of the appellant that the exemption from AAD for reflective glass continued from the original Notification 165/2003 till the issue of Notification 51/2009 is not tenable, in view of the fact that the word reflective glass was not covered by any Notification from 06.01.2009 to 22.05.2009. This Tribunal in the case of Glass House [ 2023 (11) TMI 915 - CESTAT BANGALORE] has analyzed this issue and in the light of decision in Dilip Kumar [ 2018 (7) TMI 1826 - SUPREME COURT] and the case of State of Gujarat Vs. Arcelor Mittal Nippon Steel India Ltd. [ 2022 (1) TMI 1013 - SUPREME COURT] We find that the appeal filed by the appellant is not sustainable.
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Insolvency & Bankruptcy
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2024 (11) TMI 62
Jurisdiction of Adjudicating Authority in cancelling a General Power of Attorney (PoA), a registered instrument - scope of residuary jurisdiction - approval of Resolution plan - HELD THAT:- On noticing the relevant clauses of the Development Agreement and the Power of Attorney executed in favour of the Appellant, it is amply clear that the Appellant in the PoA was nothing but nominee of the corporate debtor and Appellant being suspended director of the corporate debtor was treated as nominee of the corporate debtor for the purpose of facilitating the developers. The developers being corporate debtor, PoA was not executed in an individual capacity of the appellant nor gave any right to the subject land. When the Resolution Plan submitted by the SRA is approved and the corporate debtor is being taken over by the SRA, the development of property and all other steps as per the Resolution Plan has to be taken by the SRA - Appellant who was contemplated to extend its co-operation as nominee of the corporate debtor in developing the property is now taken a stand to create obstacles in revival of the corporate debtor to carry out function by the SRA who now takes over the corporate debtor after approval of the Resolution Plan. Hon ble Supreme Court in GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. [ 2021 (3) TMI 340 - SUPREME COURT ] has held that the residuary jurisdiction conferred by statute may extend to matters which are not specifically enumerated under a legislation. When PoA which was given for a particular purpose to the Appellant as nominee of the corporate debtor and Resolution Plan is approved by the CoC of the corporate debtor, the approval of the Resolution Plan is in commercial wisdom of the CoC and in event, the Resolution Plan declare the PoA which was given in favour of the Appellant as nominee of the corporate debtor as cancelled, the said clause of the Resolution Plan cannot be allowed to be challenged by the Appellant nor Appellant was given any rights in the subject property so as to assert any right. The endeavour of the Appellant is nothing but creating obstacles in revival of the corporate debtor in which he was suspended director - the imposition of cost of Rs.1 lakh that application was filed by the Appellant is nothing but a vexatious and dishonest attempt. Approval of Resolution Plan - Appellant referring to Clause 8.4 of the Resolution Plan sought to contend that the Resolution Plan was conditional and contingent which could not have been approved - HELD THAT:- The law is well settled that the Resolution Plan which is approved by the CoC cannot be allowed to be withdrawn and any clause which contemplate withdrawal of the plan is unenforceable. Law in this case is settled by the Hon ble Supreme Court in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED ORS. [ 2021 (9) TMI 672 - SUPREME COURT] . In view of the clarification issued by the Hon ble Supreme Court, the submission advanced on the basis of clause 8.4 by the Appellant terming the Resolution Plan as un-implementable and conditional cannot be accepted. Present is not a case where any violation of Section 30(2) has been even alleged by the Appellant. The Hon ble Supreme Court has laid down time and again that the jurisdiction of the NCLT and NCLAT is limited jurisdiction to see as to whether the Resolution Plan is in compliance of Section 30(2). Judgment of the Hon ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT] is referred. Appellant has not been able to point out any other ground on the basis of which approval of the Resolution Plan can be faulted. There are no ground to interfere with the order dated 09.08.2024 passed by the Adjudicating Authority approving the Resolution Plan submitted by the Respondent No.2 - there are no merit in the appeals. Appeal dismissed.
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2024 (11) TMI 61
Conditionality of LoIs issued by the RP with the approval of the CoC - not in conformity with the resolution plan and addendum submitted by the SRA - infirmity in the impugned order ordering liquidation of the Corporate Debtor or not - HELD THAT:- The SRA never objected at any stage upto the 28th CoC meeting to making the resolution plan subject to the prospective orders to be passed by the Adjudicating Authority. Instead the SRA requested the CoC to issue him a LoI. However, after the LoI was circulated to the SRA for his perusal and acceptance on 24.05.2021 by email, it is at this stage that the SRA through his Advocate on 29.05.2021 raised preliminary objections to the LoI being conditional for being subjected to the prospective orders of the Adjudicating Authority. This shows that the SRA was well aware before seeking the LoI from the CoC that the LoI was to be subject to the outcome of hearing dated 21.01.2021. Hence it becomes clear that it was an after-thought on the part of the SRA to raise the bogey of conditional LoI. It is already noticed that the SRA was informed by the RP on 10.05.2021 of the result of the e-voting and asked to provide three sets of hard copies of the finally approved resolution plan including the Addendum - The RP again sent a communication on 12.05.2021 to the SRA to include conditions at Clause 7.10.6 and Clause 12.6.1 which SRA had missed out through they were a part of the resolution plan with the Addendum. Clearly these conditionalities cannot be held to be a surprise for the SRA as these alleged conditionalities were discussed and deliberated in the CoC meetings and it was clear to all the participants including SRA that these conditionalities were integral to the resolution plan of the SRA - it is also noticed that the RP had addressed the reply to the SRA on 31.05.2021 reiterating that the condition under LoI had been subsisting since the 23rd CoC meeting which letter encapsulated all decisions taken in previous meetings of CoC wherein the Appellant was present. In these meetings dated 01.03.2021, 10.03.2021, 29.04.2021 and 21.05.2021, CoC had raised both the issues of the prospective order of the Adjudicating Authority as well as the requirement to correct the resolution plan. In the present case once CoC had approved the resolution plan, the SRA stood precluded from raising any observations to the conditions stated in the LoI as these were not alien to the resolution plan as submitted by the SRA which was approved by the CoC. Present was not a case of conditional and addendum LoI but a case where the SRA was vacillating in accepting the LoI and not wanting to put his skin in the game by baselessly alleging that the LoI was conditional. The Adjudicating Authority rightly refused to entertain the objections of the SRA to the conditions in the LoI since withdrawal or modification of resolution plan after approval by the CoC is not permissible in law. The timely and quick resolution of stressed assets is key to the successful working of IBC. The outer limit of CIRP of 330 days had also expired and yet formal acceptance of the resolution plan by SRA was nowhere in sight because of deliberate procrastination on the part of the SRA. Further, delay was diluting the value of the assets. In such circumstances, opting for liquidation was the best option available before CoC. Thus, there are no infirmity in the decision of the Adjudicating Authority to approve the liquidation of the Corporate Debtor. Since the CoC is statutorily empowered to decide on the liquidation of the Corporate Debtor at any time before the confirmation of the resolution plan. This decision is a collegiate, commercial wisdom of the CoC which is not subject to judicial review except for ensuring that the resolution plan meets the requirements of the IBC and related Regulations. The paramount supremacy of the commercial wisdom of CoC has been upheld in a catena of judgments by the Hon ble Supreme Court. The Explanation to Section 33(2) of IBC makes it amply clear that the CoC is entitled to take a final call, to liquidate the Corporate Debtor prior to affirmation of the resolution plan by the CoC. There are no good grounds to allow the three appeals. The Appeals being devoid of merit stand dismissed.
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PMLA
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2024 (11) TMI 60
Seeking grant of bail - Money Laundering - complaint under Section 44 of the Prevention of Money Laundering Act, 2002 - offences punishable under Sections 186, 204, 353, 120-B of the Indian Penal Code, 1860 - HELD THAT:- While filing the charge-sheet on 8th June, 2023 in FIR No.129 of 2022, it was mentioned that an offence under Section 384 of the IPC appears to have been committed in the State of Chhattisgarh. It is recorded that therefore, a report be submitted to the concerned Police Station in the State of Chhattisgarh through proper channel. While filing the charge-sheet, Section 120-B of the IPC was dropped. Thus, on the date of filing of the charge-sheet on 8th June, 2023, there was no scheduled offence. As late as on 17th January, 2024, another FIR was registered in Chhattisgarh in which allegation is made about the commission of offence punishable under Section 384 of the IPC. Thus, when the complaint under Section 44 of the PMLA Act was filed, the scheduled offence was not in existence. Even in the charge-sheet filed in the FIR which is stated to be a scheduled offence in the complaint, there was no allegation of commission of any scheduled offence. As late as on 19th July, 2024, now the charge-sheet has been filed in the State of Chhattisgah for the offence punishable under Section 384 of the IPC. Considering the long period of incarceration and considering the peculiar fact of these appeals, continuation of custody of the appellants will be violation of their right under Article 21 of the Constitution of India. Hence, the appellants are entitled to be enlarged on bail for the offence punishable under Section 4 of the PMLA Act. Appeal allowed.
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Service Tax
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2024 (11) TMI 59
Entitlement of full reward to the Informer - Petitioner s entitlement to a reward based on the recovery of unpaid duty arising from his disclosure was acknowledged however, the Respondents disbursed only 2 percent of the claimed reward amount - Settlement of dispute under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) - Petitioner asserts that, since the duty evasion by the Company was uncovered solely based on the information he provided, he has a legitimate expectation of receiving the full reward of 20 percent as specified. HELD THAT:- As per the guidelines, the competent authority has to consider the informer s degree of involvement and assistance, including whether they remained actively engaged or provided logistical support that contributed meaningfully to the operation. A critical factor in this determination is whether the information helped identify principal offenders such as organizers, financiers, or key associates involved in the scheme. The informer s contribution is viewed in higher regard if it exposes individuals central to the evasion network, thus enhancing the impact of the enforcement action. Together, these factors illustrate that the reward is not a fixed proportion of the recovery but instead a careful determination based on the informer s input, the level of risk, and the practical outcomes of their information in recovering government dues and capturing the key players involved. Thus on a holistic reading of the Guidelines, it emerges that the Petitioner s claim of reward for 20 percent is not a matter of right which can be sought by invoking this Court s writ jurisdiction under Article 226 of the Constitution. Petitioner has already been awarded INR 25 lakhs by the Respondents. The appropriateness of this quantum of reward cannot be adjudicated by this Court in proceedings under Article 226 of the Constitution, since it involves substantial determinations as to how and to what extent was the information useful in apprehending the duty evasion and the key players in this regard. While the information provided by the Petitioner was useful in determining that there was an evasion of duty by the company, the matter was eventually settled between the Respondents and the defaulting company under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Thus, there is nothing on record to show that the discretion exercised by the Respondents has been manifestly arbitrary. Petitioner s contention that he was entitled to a personal hearing before the authorities, before the determination of his reward, is misconceived. The guidelines do not impose any such procedural requirement. As the reward scheme is discretionary and ex-gratia, the competent authority is not bound to give personal hearing. Ex-gratia payments do not necessitate the procedural formalities associated with legally binding rights, as they are governed by principles of administrative discretion. Court does not find any reason to interfere with the decision of the Respondents.
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2024 (11) TMI 58
Service tax on charging of liquidated damages/penal interest over and above the applicable interest in the event of any default in the payment - HELD THAT:- It is imputably clear that the liquidated damages/penal interest charged by the appellant @2% 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. The nature of delayed payment charges as well as of the liquidated damage/ penalty interest is the same as both are being charged in the event of delay being made by the clients of the appellants and are, therefore, penal in nature. We, accordingly, hold that the liquidated damages/penal interest charged by the appellant are not exigible to service tax as per the provisions of the Act for the simple reason that such charges are not relatable to taxable service being rendered by the appellant. It has also been settled that such liquidated damages/penal interest do not form part of the declared service as given under section 66(E) of the Act, as the activity contemplated under section 66E(e), i.e. when one party obligates to refrain from an act or to tolerate such an act or situation or to do an act or the activities when an agreement refers to such an agreement and there is flow of consideration for this activity, which in the present case, we do not find so. In the present case, there is no separate agreement between the respondent and the borrower for any such liability. Since the issue has been decided on merit in favor of the appellant, the other consequential issue of extended period of limitation, interest and penalty does not require any consideration.
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2024 (11) TMI 57
Service tax leviable on the CRS incentive - dispute pertains to outbound tours and BAS - HELD THAT:- Issue whether service tax is leviable on the CRS incentive has been decided by Tribunal in the case of Kafila Hospitality Travels Pvt. Ltd [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] in favour of the assessee holding that mere selection of software or exercising of a choice would not result in any promotional activity and the department has not pointed out any activity undertaken by an air travel agent that promotes the business of the CRS company and therefore, the incentives received by service recipient from a service provider cannot be subjected to service tax. The principle of law settled by the Larger Bench squarely applies to the facts of the present case and hence no service tax can be levied on the appellant on account of incentives received from the CRS companies. Activity of providing services in relation to outbound tour in locations outside the territory of India - whether the appellant was involved in rendering the other services as scheduled in the definition of the tour operator service , which will result in the liability to discharge the service tax under the Act? - The nature of services provided by the appellant are not restricted to the tour itself but are extended to include other activities which in terms of the amended definition of Tour Operator Service are taxable. Moreover, the claim made by the appellant that the services rendered by them being executed outside the country would amount to export of services under the Export of Service Rules, 2005 is not sustainable as the same has not been found favoured with the Larger Bench in M/s. Cox King [ 2023 (10) TMI 1388 - CESTAT MUMBAI - LB] In the present case, more importantly one of the prerequisites for determining a service to be export service is that payment for rendering such service is received in convertible foreign exchange is not satisfied. Adjudicating authority has categorically recorded a finding that the appellant is not receiving the payment against the provision of outbound tours in foreign exchange and therefore the provisions of Export of Service Rules, 2005 are not applicable. Thus, we conclude as under: (i) that no service tax is leviable on the CRS incentives received by the appellant. (ii) the services of planning, scheduling, organising, or arranging tours, arrangements for accommodation, sightseeing, or other similar services as to operator service rendered by the appellant are chargeable to service tax under the Act. Having held that, the appellant is liable to pay service tax on outbound tours service which they have not paid/short paid during the period, 2010-12, they are liable to pay interest in terms of section 75 of the Act. Extended period of limitation - The facts of the present case shows that that Adjudicating Authority has recorded a finding that the appellant had contravened the provisions of the Service Tax Act and the Rules. Referring to the various provisions of the Act, it was noticed that the obligation cast on the appellant by the statutory provisions required them to file proper periodical returns and discharge the service tax liability accordingly, which the appellant had failed to do so. The present case had initiated because of the enquiry conducted by the officers of the department and in the absence thereof, the evasion of tax would not have come to light. The extended period as provided under the proviso to Section 73(1) of the Act has been rightly invoked and no interference is called for therein. In view of these facts, the penalties imposed under section 76, 77 78 respectively in the two appeals is also affirmed. The impugned order is, therefore, modified to the extent indicated above. We remand the matter back to the adjudicating authority to compute the service tax liability of the appellant in view of our decision above
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2024 (11) TMI 56
Service Tax demand and penalties thereon - Invoking extended period of limitation for issuing the show cause notice - HELD THAT:- It is settled law that subsequent show cause notice could not have been issued by invoking extended period of limitation. Even for the previous period where the show cause notice has been issued invoking extended period of limitation and the demands were confirmed holding that extended period of limitation would be applicable. As decided in A.N. Kapoor (Janitors) Pvt. Ltd. [ 2021 (2) TMI 942 - CESTAT ALLAHABAD] under similar conditions Department was aware of the facts when the first show cause notice was issued and, therefore, the extended period of limitation could not have been invoked in the third show cause notice. Thus we find that demand is barred by limitation. We have also find that admittedly three returns were filed, the delay for which late fee has been imposed as per the impugned order. The late fee for such delay in filing cannot be disputed. In view of the above levy of late filing fees in case where there is delay in filing the returns cannot be faulted with.
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2024 (11) TMI 55
Entitlement to cash refund of accumulated CENVAT credit - Nature of services provided by the appellant - appellant is a 100% EOU unit and provided export services which includes typesetting, composition, artwork, proof reading, project management, XML conversions, multimedia services and page designing, proof reading etc., to overseas clients HELD THAT:- Department had allowed the refund claims for the earlier period from January 2008 to March 2008 and also for the subsequent period from October 2010 to September 2013 i.e., much after the rejection of the present refund claims i.e., in the year 2019. The department has not raised any issue of the services provided by them while sanctioning the refund claims for the period October 2010 to September 2013. We find that the principle laid down in the case of mPortal India Wireless Solutions [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT] is subsequently applicable to the facts of the present case, the Appellant being an 100% EOU. Similar observations of the CESTAT Chennai Bench in the case of Suthernland Global Services Pvt. Ltd [ 2018 (3) TMI 771 - CESTAT CHENNAI] has upheld by the Hon ble Madras High Court [ 2021 (3) TMI 238 - MADRAS HIGH COURT] Documentary evidence to support their claim - Chartered Accountant submits that necessary Foreign Inward Remittance Certificate (FIRC) has been submitted before the adjudicating authority and it was not considered solely on the ground that the relevant export invoices have not been reflected in the said FIRC. Responding to the said observation, the learned Chartered Accountant submitted that in the FIRC, the amount is not shown against a particular invoices, therefore, the export invoice numbers are not reflected in the said certificate. Further to correlate, they have submitted one certificate dated 16.04.2009 indicating the number of invoices involved for each FIRC and the said foreign currency that has been received. Therefore, the export of goods against foreign remittances has been established by the appellant.
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Central Excise
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2024 (11) TMI 54
Exemption to new Industrial Undertakings / Units - Obtaining fresh license by the respondent after ban was lifted - Establishment of new industry or not - entitlement for benefit of Notification dated 25.04.2007 - old wood-based plywood industry, functioning at Jeypore prior to the ban imposed by the Apex Court. Whether Hon ble CESTAT has erred in law in holding that obtaining fresh license by the respondent after ban was lifted by the Hon ble Supreme Court on the basis of the report of the High Power Committee amounts to establishment of new industry and entitled to benefit of Notification dated 25.04.2007? - HELD THAT:- From a bare perusal of the order of the CESTAT it is more than clear that the CESTAT has not held that the respondent has obtained a fresh licence after the ban had been lifted by the Hon ble Supreme Court on the basis of the report of the High Power Committee and, therefore, is entitled to benefit of the Notification dated 25.04.2007. In such circumstances, the substantial question of Law as framed by this Court is factually incorrect. Whether the findings of the LD Tribunal is perverse in holding the newly established industry, whereas admittedly M/s Sarda Plywood Industries Ltd, Jeypore is an old wood-based plywood industry, functioning at Jeypore prior to the ban imposed by the Apex Court? - HELD THAT:- It cannot be held that the finding recorded by the CESTAT to the effect that the respondent has established a new industrial unit is perverse. The Assistant Commissioner and the Commissioner (Appeals) as well as the CESTAT have recorded their findings after taking into consideration the materials, which suggest that the respondent has established a new industrial unit, although on the same site. The Revenue has failed to produce any evidence contrary to the findings arrived at by the Assistant Commissioner and the Commissioner (Appeals) as well as the CESTAT, or in support of its stand that the respondent has not set up a new factory but has only renovated its old factory. The materials available on record reveal that the Assistant Commissioner, after visiting the respondent factory and after inspecting the documents, recorded a specific finding that the respondent unit is a new industrial unit which commenced commercial production after 01.04.2007. Apparently, the said finding of fact is based on the material and has rightly not been interfered with by the Commissioner (Appeals) as well as by the CESTAT. Thus, no substantial question of law arises in the present appeal. Hence, the appeal is dismissed.
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2024 (11) TMI 53
Eligibility for waiver of penalty imposed under Rule 26 of CER on co-noticees - in the case of the main party i.e. Komal Atomizer P Ltd the case has been settled under SVLDRS-2019 - contrary judgements on the issue - HELD THAT:- It is found that though there are contrary judgment on the issue that whether the co-noticee is eligible for waiver of penalty in case where the main party s case has been settled under SVLDRS-2019. However, there are some judgments given by Single Member Bench and as regard the judgment on the same issue given by the Division Bench which are in favour of the assessee. Hence, the division bench judgment in the case of M/s. Siemens Ltd [ 2023 (5) TMI 377 - CESTAT MUMBAI] will prevail over single member bench judgment, following the same the penalty is liable to be set aside. Hence, the same is set aside. Appeal is allowed.
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2024 (11) TMI 52
Recovery of duty of central excise under section 11A of Central Excise Act, 1944, along with applicable interest and penalty - additional consideration for sale of manufactured goods - remission of the net present value (NPV) of the accumulated amount as full and satisfactory compliance with the dues - inclusion of difference between the amount collected and the net present value (NAV) , computed with the date of schedule payments as benchmark, in the assessable value - HELD THAT:- The issue stood covered by the decision of the Tribunal in COMMISSIONER OF CENTRAL EXCISE, RAIGAD, BALKRISHNA INDUSTRIES LTD., ESSEL PROPACK LTD. VERSUS UTTAM GALVA STEELS LTD., BHUSHAN STEEL LTD., JSW ISPAT STEEL LTD., COMMISSIONER OF CENTRAL EXCISE, AURANGABAD [ 2015 (10) TMI 1727 - CESTAT MUMBAI ] which, in identical circumstances of dispute of another similarly situated automotive parts manufacturer, RATIONAL ENGINEERS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE I [ 2023 (11) TMI 363 - CESTAT MUMBAI ] was considered. It is found that the issue did come up in the above referred dispute and it was held therein that 'Among the terms actually paid or actually payable used in transaction value, actually paid is not relevant in the present set of appeals. What is relevant is actually payable . Actually payable at the time of clearance is the deferral sales tax. Thus, in our view, the amount of deferral sales tax will require to be excluded.' It was further held that 'the actual amount paid is equal to NPV (which is less than originally payable), cannot make the amount actually payable at the time and place of removal different, particularly when under Sales Tax Law such a payment is considered as deemed payment of the sales tax payable. Quantum of sales tax payable does not change in the above scheme of pre-payment.' In view of the decisions of the Tribunal, deciding on the dispute arising from the peculiar features of the said scheme of the Government of Maharashtra, the impugned order set aside - appeal allowed.
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2024 (11) TMI 51
Levy of education cess and secondary and higher education cess on automobile cess - HELD THAT:- It is an admitted position that the automobile cess is not levied under the Finance Act and the same is levied under Section 9(1) of the Industries (Development Regulation) Act, 1951 read with Rule 2 (c) of the Automobile Cess Rules, 1984 whereas the education cess and secondary and higher education cess are levied by the Ministry of Finance. Further, we find that this has been clarified vide Circular No. 978/2/2014-CX dated 07.01.2014 wherein, it has been clarified that education cess shall be levied only on such duties of excise/customs which are both levied as well as collected by the Department of Revenue. This issue has been considered by the Tribunal in the case of TAFE LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MADURAI [ 2007 (11) TMI 35 - CESTAT, CHENNAI] , wherein it has been held ' Education cess under Section 93 of the Finance Act, 2004 is one levied as a duty of excise at the prescribed rate, on the aggregate of all duties of excise which are levied and collected by the Central Govt in the Ministry of Finance (Department of Revenue) under the provisions of the Central Excise Act or under any other law for the time being in force. Automobile cess was not levied by the Central Govt. in the Ministry of Finance (Department of Revenue), though collected by officers of that department. Hence no Education cess is liable to be demanded as a percentage of automobile cess.' Thus, the impugned order is not sustainable in law and therefore the same is set aside.
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CST, VAT & Sales Tax
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2024 (11) TMI 50
Application for condonation of delay dismissed - provisions of Section 12-B of the J K GST Act, 1962 ignored, which provide that the provisions of Sections 5 12 of the Limitation Act, Samvat 1995 shall apply to the appeals, revisions, filed under this Act before Appellate, Reviewing Authorities or the Tribunals - it was held by High Court that 'the order passed by the appellate authority has attained finality because in view of the provisions of Section 12(d) of the J K GST Act, which is a special Act, has excluded the applicability of Section 5 of the Limitation Act.' HELD THAT:- This Special Leave Petition is disposed off by reserving liberty to the petitioners herein to agitate this issue in any other appropriate case. The question of law, which sought to advance, is kept open - Application disposed off.
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2024 (11) TMI 49
Taxability of panel boards purchased by a manufacturer of submersible pumps - 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? - HELD THAT:- In the present case, there is a finding of fact by the assessing authority that reveals that the goods supplied are integrated sets, comprising both submersible pump and panel board. In such circumstances, where the department has accepted the nature of final product supplied, it is found difficult to accept the stand that the two items must be treated as separate products liable to tax under different rates as stipulated in the schedules. In the case of Northwest Switchgear Ltd [ 2006 (2) TMI 169 - SUPREME COURT] , the assessee was engaged in the manufacture of switches, fan regulators and distribution boards that fell under Chapter Sub-Headings No. 8536.90, 8414.20 and 8537.00 of the Central Excise Tariff Act, 1985. The appellants had classified fan regulators under Sub-Heading 8414.20 of the Tariff Act which covers electric fans, on the strength that there is no other use of these items and these are used principally and solely with the electric fans - The issue framed to be determined was whether fan regulators would be classified along with electric fans at the same rate of duty or as parts and accessories attracting higher rate of duty - On facts, the position in that case was that regulators had been sold without the electric fan and as independent, stand-alone products. On that admitted factual basis, the Supreme Court accepted the contention of the Department that fan regulators manufactured by that assessee without any electric fans were only classifiable as a part or accessory of a fan and not as a fan itself. In the present case, undoubtedly, submersible pumps and panel boards are governed by separate entries. Under the Schedules, submersible pumps are taxable @ 10% under entry 26 of part 'C' of the First Schedule and panel boards are taxable under entry 14 (iii) of part 'D' of the First Schedule taxable @ 12%. The Assessing Authority appears to have invoked the proviso to Section 3(3) of the Act although there is no reference to the proviso in the order of assessment. The officer proceeds on the basis that the petitioner, after purchasing the panel boards on the strength of Form XVII declarations, has failed to make use of the panel boards for the purpose stated in the declarations, but has sold them as independent commodities - his conclusion cannot be accpeted in the light of categoric admission in the assessment order to the effect that the submersible pumps have been sold with the panel boards as integrated kits. Reference made to three assessment orders all dated 27.01.2005 for the periods 2002-2003, 2004-2005 2005-2006 where the claim of concessional rate of tax under Section 3(3) has been accepted by the Assessing Officer. Needless to say, it is necessary that the Department adopts a sustained and uniform view in assessment and cannot waver, taking conflicting stands, especially in the absence of any variation in facts or legal position - the decision that Form XVII declarations are legitimate and liable to be accepted for the earlier and later years, there are no justification in the officer having deviated from that view for the intervening year alone. The impugned order of the Tribunal dated 03.12.2007 is set aside and this writ petition stands allowed.
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Indian Laws
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2024 (11) TMI 48
Challenge to arbitral award under Section 34 of the Arbitration and Conciliation Act 1996 - grant of stay on the execution of the award conditional on the respondent furnishing a bank guarantee - treatment of governmental versus private entities in arbitration proceedings - HELD THAT:- In the present case, there is an arbitral award to the tune of approximately Rs 21 crores in favour of the appellant. The High Court, while issuing a direction for furnishing of a bank guarantee, dealt with only one of the claims which was awarded by the arbitral tribunal, namely, that which pertained to the refund of the cess under the Building and Other Construction Workers Welfare Cess Act 1996. In this regard, the High Court observed that the Deputy Chief Labour Commissioner, by its order dated 6 November 2019, held that the Cess Act was not applicable to the appellant which was therefore not required to pay cess under that statute. It noted that the arbitral tribunal had, however, rendered an award in which it directed the respondent to pay the appellant this amount, which had already been paid by the respondent to the appellant. The High Court granted a stay on the operation of the award subject to the respondent furnishing a bank guarantee for the principal amount awarded to the appellant, i.e. Rs 21,07,66,621. It held that it was not inclined to issue orders in relation to the interest and the costs awarded to the appellant because the petitioner is not a fly-by operator and is a statutory undertaking. The law qua arbitration proceedings cannot be any different merely because of the status of the respondent as a statutory undertaking. The High Court was in error in not even prima facie considering the fact that apart from the issue of cess, there was an arbitral award in favour of the appellant in regard to other claims as well. Further, the High Court ought not to have based its decision on the condition for the grant of stay on the status of the respondent as a statutory authority. The Arbitration Act is a self-contained code it does not distinguish between governmental and private entities. Hence, the decision of the Court cannot be influenced by the position of the party before it and whether it is a fly-by-night operator - the argument that the High Court was correct in directing the respondent to furnish bank guarantees in relation to the amount awarded because it is a statutory body is rejected. Under Order XLI Rule 5 of the CPC, the Court has the power to direct full or part deposit and/or the furnishing of security in respect of the decretal amount. Bearing in mind the principles which must guide the Court, we are of the view that the order of the High Court requires modification - The respondent shall deposit an amount quantified at 75% of the decretal amount, inclusive of interest, on or before 30 November 2024 before the High Court - Conditional on the deposit of the aforesaid amount within the period stipulated above, there shall be a stay on the enforcement of the arbitral award. The impugned judgment of the High Court shall stand modified - Appeal allowed.
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2024 (11) TMI 47
Suit for recovery of money filed by the plaintiff - Rebuttal of presumption under Section 118 of the Negotiable Instruments Act - failure to prove the consideration by producing the account books, bank statement, income tax returns, etc. - failure to consider and appreciate the oral and documentary evidence on record in their proper perspective and based their conclusions on mere surmises and conjectures - burden to prove - HELD THAT:- In this case, both the Courts below have analyzed the evidence of P.W.1 to P.W.3 and they have recorded their finding that the promissory note itself is sufficient to prove the passing of consideration since there is a clear acknowledgement of the receipt of the same. Further, the defendant has not denied the thumb impression or signatures. After the plaintiff has proved the consideration and the execution of the promissory note, then, the burden shifts on the defendant to probabilize his case that the promissory note was not executed in favour of the plaintiff. The Apex Court in Kundan Lal Rallaaram vs. Custodian Evacuee Property, Bombay [ 1961 (3) TMI 100 - SUPREME COURT] declared that the Section 118 of the Negotiable Instruments Act lays down a special rule of evidence. It enables the Court to presume that the negotiable instruments or the endorsement was made or endorsed for consideration and the burden of proof of failure of consideration is thrown on the maker of the note or the endorser as the case may be. A Combined reading of the defendant side witnesses only shows that they have come up with the case that D.W.4-Raj acted like an agent for the plaintiff and through him, D.W.1 to D.W.3 have borrowed loans and promissory note executed by them and later it was misused by the plaintiff - In the absence of any proof establishing the collusion between the plaintiff and the said Raj, and in the absence of any repayment of loan as stated by the defendant in his evidence and pleadings, the evidence adduced on the side of the plaintiff's side, shall be placed on higher pedestal since their evidence is supported by the promissory note-Ex.A1 and consequent legal notice issued which was not replied by the defendant. The defendant had come forward to lodge a complaint only the year 2011 that too, after decree being passed against him. Both the Courts have not erred in drawing a presumption under Section 118(a) of the Negotiable Instruments Act against the defendant. Both the Courts have rightly held that the execution of promissory note itself is sufficient to prove the passing of consideration, hence rightly decreed the suit. The Judgment and Decree dated 31.10.2012 passed in A.S. No. 62 of 2011 on the file of the III Additional District and Sessions Court, Cuddalore at Virudhachalam confirming the Judgment and Decree dated 29.08.2011 passed in O.S. No. 110 of 2010 on the file of the Sub Court, Neyveli are hereby confirmed - the Second Appeal is dismissed.
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2024 (11) TMI 46
Dishonor of Cheque - Validity of the summoning order and framing of notice under Section 138 of the Negotiable Instruments Act, 1881 - Exercise of inherent powers under Section 482 of the CrPC by the High Court - HELD THAT:- The instant petition has been filed under Article 227 of the Constitution of India read with Section 482 of the CrPC (now Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023). It has been already settled in a catena of judgments that although the High Court has inherent powers under Section 482 of the CrPC (now Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023) while adjudicating a petition, however, the said power has to be exercised sparingly and with caution wherein the High Court must bear in mind that it does not interfere unnecessarily, unless there is some material irregularity or illegality. Section 138 of the NI Act is a quasi criminal remedy available to a party aggrieved by the dishonor of a cheque, who may initiate such proceedings against the issuer of a cheque - This Court is of the view that summons issued in a complaint case under Section 138 of the NI Act may be quashed if it is prima facie apparent from the complaint that the complainant has not presented even an iota of evidence for filing the said complaint which shows occurrence of an offence. In the case of HMT Watches Limited v. M.A. Abida, [ 2015 (5) TMI 280 - SUPREME COURT] , the Hon'ble Supreme Court held ' The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties. The High Court further erred in observing that Section 138(b) of the NI Act stood uncompiled with, even though Respondent 1 (accused) had admitted that he replied to the notice issued by the complainant. Also, the fact, as to whether the signatory of demand notice was authorised by the complainant company or not, could not have been examined by the High Court in its jurisdiction under Section 482 of the Code of Criminal Procedure when such plea was controverted by the complainant before it.' Upon perusal of the aforesaid judgment, it is made out that it has been emphasized time and again by the Hon be Supreme Court that the High Court while exercising powers under Section 482 CrPC must bear in mind that whenever a proceeding under the NI Act has been challenged under the said provision, it should not express its view on the disputed question of facts to arrive at a conclusion that the offence is not made out as the same would amount to error of law. As per the settled principle of law, summons can be issued only, when, prima facie, a case is made out on the basis of documents alongwith the complaint, its contents and the evidences filed alongwith the affidavit - This Court is of the view that the Court concerned has taken into consideration the submissions made as well as the contents of the petition, and thereafter, rejected the revision petition by way of passing a detailed and reasoned order, by upholding the summoning order passed by the learned Trial Court. This Court does not find any material on record which can be stated to be of sterling quality warranting invocation of the jurisdiction of this Court under Section 482 CrPC at this stage when the learned Trial Court has issued summons and framed notice of charge against the petitioners - this Court deems it imperative to state that in contemporary practice, a complainant in proceedings under Section 138 of the NI Act often endures greater procedural hardship than the accused. This stems primarily from the trend wherein every summoning order issued by the Magistrate is challenged on various grounds. Such challenges compel the complainant to defend the validity of the Magistrate s orders at the preliminary stages of the case. There is no illegality in the order dated 14th March, 2023 passed by the learned ASJ in CR No. 627/22 and the same is hereby upheld - Petition dismissed.
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2024 (11) TMI 45
Dishonour of Cheque - sustainability of criminal prosecution against adjudicated insolvency - HELD THAT:- The Hon'ble Supreme Court in various judgments, had discussed the issue in detail and had protected only the corporate debtors namely, the company and not the Directors. The individual liability of the Directors of the company which faced bankruptcy proceedings are not immune from prosecution and not protected under Section 32A(1) of IBC Code. As regarding the individual debtors, the Hon'ble Supreme Court has clarified that the insolvency proceedings against the individuals will not protect them from proceedings under Section 138 N.I.Act. Even prior to the enactment of IBC. This Court through Justice M.Karpagavinayagam (as he was then) in Bharath N.Mehtha and another case [ 1999 (2) TMI 733 - MADRAS HIGH COURT ] had considered the consequence of issuing cheques after adjudication as insolvent and had explained the expressions that suit or other legal proceedings found in Section 72 of the Presidency Town Insolvency Act that ' The wordings any suit or other legal proceedings would mean the suit or other legal proceedings relating to the property of the insolvent and not with reference to the personal act committed by the accused constituting the offence liable to be proceeded in Criminal Court.' Thus, finally the Court has held that there is no bar in any of the provisions of insolvency Act or in the Negotiable Instruments Act, restricting the complainant to resort Section 138 of N.I.Act, after adjudication proceedings under Insolvency Act and it is open to the petitioner/accused to establish the fact regarding the alleged enforceable liability and the factum of impossibility to pay in the light of the insolvency before the trial Court. This Court is not inclined to record any opinion on the facts and leave it open for the petitioner/accused to canvas those points before the trial Court - this Criminal Original Petition is disposed of.
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2024 (11) TMI 44
Dishonour of Cheque - account from which the cheque drawn was frozen and for that reason the subject cheque returned unpaid - offence under Section 138 of NI Act attracted or not - complainant is the Bank which freezed the account due to the default of loan by the account holder - presentation of the cheque for collection and consequential complaint amounts to malicious prosecution or not. HELD THAT:- The clarification of the Hon ble Supreme Court in M/S LAXMI DYECHEM VERSUS STATE OF GUJARAT ORS. [ 2012 (12) TMI 106 - SUPREME COURT ] makes clear that, account block or freezed are a species. Insufficient fund is one of the two contingencies mentioned in section 138 of the NI Act. If the issuance of cheque without sufficient fund which is the genus, same will give cause of action to prosecute. The test is whether the fund in the account not sufficient or exceed the limit arranged. Account blocked or freezed is species. It is not so material whether the drawer of the cheque aware or not aware of the fact about his account freeze at the time of issuing cheque. If with knowledge that the account is freezed nevertheless he issue the cheque from the account freezed, the intention to cheat is manifestly seen. From the facts and circumstances of the instant case, obviously on the date of cheque (08/11/2019) fund in the account was not sufficient to honour. Thus, the first contingency to attract section 138 of NI Act gets satisfied. The account being freezed, the petitioner company had a opportunity to pay the cheque amount within 15 days from the date of receipt of the statutory notice. In this case, the petitioner company had disputed the liability and not paid the cheque amount. Hence, the question whether the Bank which has freezed the account can initiate the complaint for dishonor of the cheque due to account freeze and the dispute regarding liability to discharge enforceable debt, it is necessary to consider the plea of the petitioners regarding the circumstances the subject cheque purportedly given to the complainant Bank. This Criminal Original Petition stands dismissed.
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