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TMI Tax Updates - e-Newsletter
November 7, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Coercive methods adopted for deposit of tax - since the petitioner has unequivocally made clear that he does not wish to voluntarily deposit any tax with the concerned authority and there is no dispute that the petitioner cannot be compelled to deposit the tax without following the procedure under Section 73, 74 and 79 of the CGST Act. - HC
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Withholding of Refund of accumulated Input Tax Credit - there is no order staying the operation of the order-in-appeal dated 19.06.2023 - It cannot be accepted that the respondents can withhold the refund due to the petitioner on the ground as stated. - Refund directed to be made - HC
Income Tax
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Guilty of contempt of the orders passed by the writ Court - Proceedings against the DCIT for disobeying the orders (directions) of HC - DCIT submitted that they have decided to challenge the order of HC before the SC, therefore there is no illegality in passing the impugned order - Charges framed - HC
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Invocation of 153A & 153C - cash seized during assembly election - entitlement to exception u/rule 112F(ii) of the Income Tax Rules, 1962 - Unless, the cash that was seized was in connection with the assembly election, question of excluding the petitioners from the purview of proceeding under Section 147, 153A/153C of the Income Tax Act, 1961 cannot be countenanced. - HC
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Disallowance u/s 80IA/80IB - There is no requirement u/s 80IA(5) of the Act to adjust profits derived from the eligible units against the losses that stand absorbed against profits of the 'other’ non-eligible businesses or losses that have already been adjusted against the profits of the eligible businesses in the years before the previous year in relation the first assessment year in which the deduction was claimed. Therefore, in this case, the respondent/assessee was not required to set off losses of other units against its profitable units. - HC
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Addition u/s 68 - undisclosed income - investment made in shares issued at premium - AO asked himself the wrong question and proceeded thereafter on the wrong path. - AO, instead of making further inquiries, seems to have been burdened by the fact that the premium charged was high, which, according to us, was not the correct test for making an addition u/s 68 - HC
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Validity of Revision u/s 263 - Even if it were to be accepted that the assessment has been completed by mere reference to the provisions of section 44AD by the AO, even then, in our view Principal CIT was correct in observing that reference could not have been drawn to the said provisions as the total quantum of transaction was exceeding Rs. 60 lacs in the year under consideration. - Revision order sustained - AT
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Reopening of assessment - bogus long-term capital gain has escaped assessment - Scope of the reasons recorded by the AO - The reasons are to be seen in its substance. If there is some error in mentioning some information which is not so fatal, then, on trivial matters, the reasons recorded cannot be held to be invalid or nonapplication of mind cannot be inferred. - AT
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Defective return - Rectification u/s 154 - the gross receipt of the assessee from the business carried out by the assessee was not more than to Rs. 1 Crore, therefore the assessee was not required to get his accounts audited u/s 44AB. - As defect notice issued by CPC u/s 139(9) of the Act is not in accordance with law and accordingly, we quash the said defect notice, meaning thereby, the return of income filed by the assessee should be considered as valid return - AT
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While issuing Draft order u/s 144C, AO issued demand notice with penalty notice - If particular income is taxable under the I.T. Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income. - AT
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Revision u/s 263 by CIT - lack of enquiry proved or not? - AO has accepted the genuineness of the cash deposited in the bank account after a conscious and independent application of mind. - Revision order held to be bad in law and the same is as such quashed. - AT
Customs
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Valuation of imported goods - related party transactions - addition of 5% royalty on carbon brushes under Rule 10(1)(c) - the pricing was at arm’s length and the relationship had not influenced the price, which has been accepted by the department hence there is no question of adding the royalty to the transaction value - AT
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Classification of imported goods - snap fasteners - Benefit of exemption - to be classified under Customs Tariff Heading 9606 1010 or not - benefit of notification cannot be declined to the assessee merely because import was button in parts and not in made up form. - AT
Service Tax
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Classification of services - business auxiliary services or not - The Subsidiary company is also undertaking the activity of clearing and forwarding agent. No clause of the agreement provides that subsidiary company also undertaking any marketing or promotion activity for the sale of the books exported by the appellant. In such a scenario, the subsidiary company who is the service provider had to be held as consignment agent rather than commission agent. - AT
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Classification of services - GTA or Supply of Tangible Goods for use service? - supplying Trucks to ONGC - Appellant strongly argued that the ONGC is paying service tax under the category of ‘Goods Transport Agency” and they are providing GTA services - the submission of the ld. Chartered Accountant agreed upon that no double taxation is permissible under the law - Matter restored back for fresh adjudication - AT
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Levy of Service tax - Supply of tangible goods service (STGS) on both voyage charter and time charter - when the contract itself is not for transfer of right to use the vessels, there cannot be any levy of Service Tax under the head “supply of tangible goods for use”. - AT
VAT
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Classification of goods - rate of tax - Wire Nails - to fall within the meaning of “Fastener” or not - The respondent (Revenue) has to show as to why wire nails are put in residuary entry and not in Entry 79 Part II of Schedule II of VAT Act. What are the distinguishable features of wire nails to put it in the residuary entry has not been placed. There is nothing cogent on record that the wire nails cannot be put to any other entry than to residuary entry. - HC
Case Laws:
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GST
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2023 (11) TMI 248
Cancellation of GST registration of petitioner - Registration has been obtained by means of fraud, wilful misstatement or suppression of facts - no reasons mentioned in impugned order for such cancellation - HELD THAT:- The impugned order does not provide any reason as to why the petitioner s registration was cancelled except to state that the tax payer has not given any response. The impugned SCN did not contain any specific details as to the alleged fraud, wilful misstatement or the facts purported to have been suppressed by the petitioner. Clearly, the said SCN is vague and was incapable of eliciting any meaningful response. It is settled law that a show cause notice must state the reason to enable the noticee to respond to the allegation on the basis of which the adverse action is proposed. The impugned SCN has failed to satisfy the said standard and therefore, is liable to be set aside. As stated above, the impugned order does not reflect any reason for cancelling the petitioner s GST registration. The impugned SCN and the impugned order cancelling the petitioner s GST registration are set aside - the petitioner s GST registration shall be restored forthwith - petition disposed off.
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2023 (11) TMI 247
Maintainability of petition - availability of statutory remedy of appeal - non-constitution of the Tribunal - HELD THAT:- The respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019 for removal of difficulties, in exercise of powers under Section 172 of the B.G.S.T Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal under Section 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution under Section 109 of the B.G.S.T Act, enters office. Subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves - Petition disposed off.
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2023 (11) TMI 243
Coercive methods adopted for deposit of tax - Seeking quashing of summons issued to petitioner - seeking to restrain Respondent No. 1 from adopting any coercive measures such as arrest/detention by Respondent No. 1, without issuing show cause notice in terms of the CGST Act - compliance with the principles of natural justice - seeking to allow the presence of a lawyer during the investigation/summoning of the Petitioner - HELD THAT:- The petitioner s apprehension that he would be coerced to deposit the further amount can be addressed by directing the respondents not to accept any amount of tax from the petitioner since the petitioner has unequivocally made clear that he does not wish to voluntarily deposit any tax with the concerned authority and there is no dispute that the petitioner cannot be compelled to deposit the tax without following the procedure under Section 73, 74 and 79 of the CGST Act. In the event, the petitioner wants to deposit the tax, he shall do so after seeking permission of this Court. Petition disposed off.
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2023 (11) TMI 242
Withholding of Refund of accumulated Input Tax Credit - Denial on the ground that petitioner s turnover for the relevant period (May, 2022 to June, 2022) was less than the refund claimed and that the petitioner had availed an excess ITC during the Financial Year 2021-22 - HELD THAT:- Concededly, there is no order staying the operation of the order-in-appeal dated 19.06.2023 - It cannot be accepted that the respondents can withhold the refund due to the petitioner on the ground as stated. Accordingly, the respondents are directed to forthwith process the petitioner s claim for refund in compliance with the order-in-appeal dated 19.06.2023 along with applicable interest, in accordance with law, within a period of three weeks from today.
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Income Tax
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2023 (11) TMI 246
Addition u/s 69A - cash deposits in Bank out of earlier cash withdrawal from Bank - assessee had during the demonetization period, i.e., on 01.12.2016, deposited an amount of Rs. 23 lac in old notes of Rs. 500/- and Rs. 1000/- in her bank A/c. - CIT(A) disbelieving the availability of cash in hand merely because the same is kept as cash in hand for nearly 32 months, because the assessee was having bank account - HELD THAT:- It is not a case that the A.O had declined to accept the explanation of the assessee that the cash deposits of Rs. 23 lacs made on 01.12.2016 in her bank account were sourced out of the cash withdrawals that she had made way back in A.Y.2016-17 for the reason that a substantial period had lapsed, but the said explanation was rejected for the reason that now when the assessee had herself claimed that the cash withdrawals of Rs. 21.60 lacs (supra) was thereafter, utilized by her for giving short term interest bearing advances to third parties, then in the backdrop of the aforesaid factual position the availability of the said funds as cash in hand with her during the year for making cash deposit in her bank account did not merit acceptance. It is incomprehensible that the amount of Rs. 21.60 lacs (supra) withdrawn by the assessee in the period relevant to A.Y.2015-16 would have been exploited by giving the same as short-term interest-bearing advances to third parties and, at the same time, be available with her for sourcing the cash deposits in her bank account. Assessee had neither in the course of the assessment proceedings nor before the CIT(Appeals) or in the course of proceedings before me, placed on record the cash flow statement a/w. documentary evidence, which would establish that the short-term interest-bearing advances that she had given in the preceding year to third parties out of her cash withdrawals of Rs. 21.60 lac (supra) made from her bank account in the year 2014 were received back and lying available with her to, inter alia, source the cash deposit of Rs. 23 lac (supra) on 01.12.2016 in her bank account during the year under consideration. The legal heir of the assessee had failed to discharge the primary onus that was cast upon him to substantiate the nature and source of the cash deposit AND their explanation that the same was sourced out of the cash withdrawals made from her bank account on the year 2014 is nothing short of an unsubstantiated claim; thus, the same does not merit acceptance. However, in all fairness availability of cash in the hand with the assessee considering the fact that she had regularly been assessed to tax for the last many years can safely be taken at an amount of Rs. 2,50,000/- (on estimated basis). Accordingly, addition made by the A.O is sustained to the extent of Rs. 20,50,000/- [Rs. 23,00,000/- (-) Rs. 2,50,000/-]. Thus, the Grounds of appeal raised by the assessee are partly allowed
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2023 (11) TMI 245
Revision u/s 263 - exemption of interest income earned by the assessee co-operative society from other co-operative banks or other banks - debatable issue - diversified view on topic - HELD THAT:- There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i). As decided in M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit [ 2018 (12) TMI 1926 - ITAT PUNE] interest income earned on fixed deposits with bank partake of the business income which is eligible for deduction u/s 80P(2)(a)(i) Fact of existence of debate on the issue of taxability of the interest income earned on the deposits made with other co-operative banks or other banks proved. Therefore, in the light of the law settled in the case of Malabar Industrial Co. Ltd [ 2000 (2) TMI 10 - SUPREME COURT] the power of revision cannot be exercised by the ld. PCIT in exercising of power vested with him u/s 263 in respect of debatable issue. Even assuming for a moment, there is failure on the part of the Assessing Officer to examine the issue of taxability of interest earned on deposits made with co-operative banks or other banks, in our considered opinion, the power of revision cannot be exercised by ld. PCIT in view of the fact that even on remand to the Ao, AO is barred from taking a view against the assessee in view of the consistent view taken by this Tribunal that such interest income qualifies for deduction u/s 80P(2)(a)(i). Thus, the order of remand by this Tribunal would be futile exercise, nothing but a useless formality. We are of the considered opinion that PCIT was not justified in exercising the power of revision vested with him u/s 263 of the Act in the facts of the present case. Accordingly, the appeal filed by the assessee stands allowed.
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2023 (11) TMI 244
Deduction of interest in respect of the second loan u/s 24(b) - assessee purchased the property by utilising the unsecured loans from directors and shareholders - assessee had taken unsecured loans and the major portion of the same was utilised in repayment of the earlier loans - HELD THAT:- The unsecured loan taken from directors and shareholders was utilised for payment of consideration for the purchase of 2 shops along with 4 open car parking spaces together with equity shares and fully convertible debentures. We find that the lower authorities have not examined whether the term 'property u/s 24 also includes equity shares and fully convertible debentures, which were purchased by the assessee along with shops and open car parking spaces. Examination of the aforesaid aspect is necessary before determining whether the assessee is entitled to claim a deduction of interest paid on a loan taken for repayment of the earlier loan. Therefore, we deem it appropriate to remand the issue arising in ground No. 2, raised in assessee s appeal, to the file of AO for de novo adjudication after examining the aforesaid aspect and thereafter in light of CBDT Circular No. 28 dated 20/08/1969. Ground No. 2 raised in assessee s appeal is allowed for statistical purposes. Disallowing the interest expense - As argued property can be owned and enjoyed only by virtue of owning the shares and debentures as envisaged in the agreement as well as memorandum of association / article of association - whether cost of shares and debentures was part and parcel of the entire cost of property? - HELD THAT:- Shops no. 1 2 and 4 open car parking spaces along with B-class equity shares and fully convertible debentures of Ahura Chemical Products Pvt. Ltd. were sold to the assessee and consideration of Rs. 3,63,72,600 was paid by the assessee. However, before deciding on the validity of proportionate disallowance of the deduction of interest under section 24(b) of the Act, it is pertinent to analyse whether the term 'property u/s 24 also includes equity shares and fully convertible debentures, which were purchased by the assessee along with shops and open car parking spaces in the facts of the present case. Therefore, we deem it appropriate to remand the issue. Appeal by the assessee is partly allowed for statistical purposes.
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2023 (11) TMI 241
Validity of reopening of assessment u/s 147 - reasons as furnished to assess can be looked into for testing the validity of reassessment proceedings - long term capital loss disallowed as transaction was not regarded as transfer within the meaning of Section 47(iv) and (v) As submitted by Revenue that the impugned order is erroneous inasmuch as in regard to its appreciation of the expression transfer viz-a-viz Section 2(47) as just opposed to Section 47(IV) of the Income Tax Act. HELD THAT:- The context of the impugned judgment and the remit to the High Court was narrow; it is only concerning the validity of the re-assessment proceedings. In these circumstances, this Court holds that the observations of the High Court cannot be considered as determinative of other issues. The petition is dismissed. All pending applications are disposed.
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2023 (11) TMI 240
Guilty of contempt of the orders passed by the writ Court - Proceedings against the DCIT for disobeying the orders (directions) of HC - DCIT submitted that they have decided to challenge the order of HC before the SC, therefore there is no illegality in passing the impugned order - issue was related to jurisdiction to assess the applicant at Lucknow or New Delhi - outstanding demand on the web portal even after writ court orders - HELD THAT:- On perusal, it is found that the judgment and order [ 2015 (3) TMI 1229 - ALLAHABAD HIGH COURT] passed by the writ Court is unambiguous and clear and is not confined to any particular year but lays down the jurisdiction of the authority in accordance with the provisions contained in the Income Tax Act, 1961. Sections 124 and 127 of the Act and has clearly recorded that in case any objection being raised in respect of the jurisdiction of the assessing officer as has been done in the present case when the applicant had referred the pending writ petition after the issuance of the first notice dated 20.09.2014, the opposite party should have awaited the decision of the writ Court and in any case as the income tax authorities are expected to proceed in disciplined manner without creating any doubt in the minds of the assessee s, it was the duty of the assessing officer (opposite party) to have referred the question of jurisdiction to the Chief Commissioner or Commissioner as the case may be u/s 124(2) and not doing so renders the action of the opposite party illegal. Demand on the income tax portal pursuant to assessment made by the opposite party - As find that the assessment order for the assessment year 2012-13 was passed on 30.03.2015 during the pendency of the writ petition and on the very next day the writ Court had passed the order on 31.03.2015. The demand generated pursuant to the assessment order was only after 31.03.2015 and had been generated by the opposite party who had assessed the applicant. The opposite party, therefore, knowing that judgment and order dated 31.03.2015 had been passed generated the demand. He, thus, acted in contempt of the judgment and order dated 31.3.2015. The submission made by the learned counsel for the applicant that the writ Court vide the judgment and order dated 31.03.2015 had decided the question of jurisdiction and not of any particular assessment year and also that each year assessment being different has no application in cases where the jurisdiction prima facie appears to be correct as this Court finds that the judgment and order dated 31.03.2015 is not confined to any particular assessment year and has generally recorded that the income tax authority at Lucknow does not have jurisdiction over the applicant who is assessed at New Delhi. This Court, is therefore, of the prima facie view that the opposite party is guilty of contempt of the orders dated 31.03.2015 passed by the writ Court and the opposite party does not the jurisdiction or authority to interpret the orders passed by this Court by putting in words which are not contained in the judgment and order dated 31.03.2015 appears to be willful and deliberate Charges framed and the applicant is required to appear in person and answer the charge of contempt on the next date of listing - List this contempt application on 21.11.2023
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2023 (11) TMI 239
Revision u/s 263 - Unexplained jewellery found in assessee residence - petitioner has declared 101442.5 gms under the same VDI Scheme - HELD THAT:- It is noticed that prior to the consequential order the petitioner had made statement on to the effect that 1194.60 gms of gold out of 2034.1 gms of gold formed part of 101442.5 gms of gold declared under VDI Scheme, 1997. The consequential order that was passed pursuant to judgment [ 2019 (7) TMI 705 - MADRAS HIGH COURT] has not made any proper enquiry. There is no merger. The order of the Tribunal allows the Revenue's appeal. The High Court had merely remitted the case back to the respondent. Therefore, the decisions cited by petitioner are not relevant for allowing this Writ Petition. In the facts of the case, it cannot be said there is no merger as has been argued. Prima facie, the consequential order indicates that the said order is erroneous and is prejudicial to the interest with the Revenue warranting invocation of Section 263 of the Income Tax Act, 1961 as there is no proper reasoning and proper application of mind. Thus, there is no comparison between the case of the petitioner and petitioner's co-sister Shanmugapriya's case, who succeeded before the Tribunal [ 2016 (7) TMI 1529 - ITAT CHENNAI] for the same assessment year. There, the Tribunal vide its final order was of the view that when the assessee's mother-in-law late Smt.Prema had declared 3650 grams of gold jewellery under VDI Scheme, the Assessing Officer was expected to give credit to the extent of 3605 grams of gold in the hands of the petitioner's co-sister out of 6136.90 gms of unaccounted gold found in the hands of petitioner's co-sister. There, during the search operation 6136.90 gms of unaccounted gold was found in the hands of petitioner's co-sister. Out of 6136.90 gms of gold, 3650 gms was set off as that of the gold of her mother-in-law late Smt.Prema, who had declared the aforesaid grams of gold under VDI Scheme, 1997. In the present case, 2034.1 gms of gold was found at the residence of petitioner's son R.Sabapathy on 18.08.2011. Whereas, in the present case, the petitioner has declared 101442.5 gms under the same VDI Scheme, 1997. During the search operation in the petitioner's son's residence viz., R.Sabapathy's residence, where 2034.1 gms of gold was found is claimed to be 101442.5 gms declared by the petitioner in VDI Scheme, 1997. The High Court by its order [ 2019 (7) TMI 705 - MADRAS HIGH COURT] merely gave a fresh opportunity to the petitioner to explain the case afresh. AO has passed a consequential order on 29.10.2019 by stating that the case does not attract penalty since the additional income towards investment in jewellery was offered only to purchase peace with the Department. No case is made out for interfering with the Impugned Order,.
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2023 (11) TMI 238
Invocation of 153A 153C - cash seized during assembly election - entitlement to exception u/rule 112F(ii) of the Income Tax Rules, 1962 - after the Tamil Nadu State Assembly Election Model Code of Conduct was in force, the Tamil Nadu State Survelliance Team (SST) intercepted two persons, working at the Bank of Baroda as Joint Manager and as correspondent, who were found carrying cash in a vehicle As on the date when the cash was seized Tamil Nadu State Assembly Model Code was in operation and therefore AO cannot issue notice for assessing and reassessing the total income for six assessment years immediately preceding the assessment - HELD THAT:- A reading of the facts and statement given by the petitioner and the statements of Bank Officer, Joint Manager, Mr.Unnikrishnan, makes it clear that the practice of the petitioner as the president of the Trust running the college was to credit the salary of staffs/employees into their personal savings account and thereafter withdraw the same by collecting self drawn cheques duly signed by them. The statement that was given by the petitioner was retracted only at a later point of time. The seizure of cash on 10.03.2021 from the possession of Mr.Unnikrishnan and Mr.Swaminathan merely coincided with the implementation of the Tamil Nadu State Assembly Model Code for the ensuring Tamil Nadu Assembly Election. The exception under Rule 112 F (ii) of the Income Tax Rules, 1962 will apply only where the assets so seized or requisitioned are in any manner connected with the ongoing election in an assembly or Parliamentary constituency. This exception is not applicable to the facts of the case, as records indicate that it was the practice of the petitioner to withdraw the cash of staffs/employee atleast from January 2021, if not before as is evident from the statement of Mr.Unnikrishnan on 10.03.2021. Merely because, search was conducted or requisition was made when the Tamil Nadu State Assembly Model Code of Conduct from the State Assembly Election in Tamil Nadu was in force could not mean the issuance of notice u/s 153 A or Section 153C would be automatically excluded and exception under Rule 112F(ii) of the Income Tax Rules, 1962 would get triggered. Unless, the cash that was seized was in connection with the assembly election, question of excluding the petitioners from the purview of proceeding under Section 147, 153A/153C of the Income Tax Act, 1961 cannot be countenanced. Decided against assessee.
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2023 (11) TMI 237
Reopening of assessment u/s 147 - reason to believe - notice issued after four years - Deductions u/s 36(1)(vii), 36(1)(viia) and 36(1)(viii) of bad debts was allowed in excess - onus to prove - HELD THAT:- As considered the reasons and the entire basis for forming a reason to believe that there has been escapement of income is the effect that the assessing officer gave while giving effect to CIT(A) s order u/s 250 of the Act. These do not indicate that there was no failure on the part of Petitioner to truly and fully disclose material facts. During the assessment proceedings, AO had issued notices u/s 142(1) and also issued questionnaires from time to time with respect to Petitioner s claim u/s 36(1)(vii), Section 36(1)(viia) and Section 36(1)(viii) and Petitioner has answered all those queries. In the assessment order, Petitioner s claim u/s 36(1)(vii) r.w.s. 36(1) (viia) and Section 36(1)(viii) has been discussed in detail and certain amount of bad debts had been disallowed. Petitioner had carried that in appeal to CIT(A) and an order giving effect to the order passed by the CIT(A) came to be passed. Therefore, the reasons as recorded for reopening indicate only change of opinion which again is not permissible in law. Change of opinion does not constitute justification and/or reasons to believe that income chargable to tax has escaped assessment. Decided in favour of assessee.
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2023 (11) TMI 236
Disallowance u/s 80IA/80IB - profits of two (2) eligible units were not adjusted against unabsorbed losses of the other (3) eligible units and brought forward losses of earlier years - view taken by the CIT(A) that, while calculating deductions u/s 80IA/80IB, only profits of the eligible businesses had to be considered is the correct view - HELD THAT:- Section 80IA(5) provides that to quantify the deduction under Section 80IA(1) of an assessee for an AY [post the initial AY in which such deduction is claimed], the profits and gains of the eligible business should be computed as if it is the only source of income of the assessee. It does not mandate that losses that have been adjusted against the profits of other non-eligible businesses have to be, once again, adjusted against the profits of the eligible business, or that absorbed losses against the eligible businesses of the time before the second AY in which deduction is claimed must be notionally carried forward and adjusted. See M/S STERLING AGRO INDUSTRIES LTD [ 2023 (8) TMI 768 - DELHI HIGH COURT] There is no requirement u/s 80IA(5) of the Act to adjust profits derived from the eligible units against the losses that stand absorbed against profits of the 'other non-eligible businesses or losses that have already been adjusted against the profits of the eligible businesses in the years before the previous year in relation the first assessment year in which the deduction was claimed. Therefore, in this case, the respondent/assessee was not required to set off losses of other units against its profitable units. Disallowance u/s 80M - dividend received by assessee had not been distributed to its shareholders - HELD THAT:- As assessee can only claim a deduction to the extent of the dividend it distributed to its shareholders. Although revenue sought to place reliance on the assessment order to submit that the dividend was not distributed by the respondent/assessee, it appears to be based on an erroneous factual foundation. CIT(A) has returned the finding of fact, which was sustained by the Tribunal, that the respondent/assessee had placed the relevant material before the AO which showed that dividend to the extent of Rs. 3,97,34,475/- had been distributed by it to its shareholders -This is a finding of fact that remains undisturbed and, therefore, in our view, the deletion of disallowance ordered by the CIT(A) and the Tribunal under Section 80M was correct. Revenue appeal dismissed.
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2023 (11) TMI 235
Addition u/s 68 - undisclosed income - investment made in shares issued at premium - HELD THAT:- The triple test u/s 68 requires an assessee to prove identity, creditworthiness, and the genuineness of the subject transaction. In this case, concededly, there is no dispute with regard to the identity of the investor. As indicated above, Adhyay was the investor. The fact that Rs. 20 crores have been invested via banking channels is not in dispute. Also not disputed that the respondent/assessee justified the premium that it had charged qua the shares by producing a valuation certificate of the Chartered Accountant. The valuation was made based on the Net Asset Value Method (NAVM). The valuation revealed that the shares of the respondent/assessee were worth Rs.200.52 per share. We find from the assessment order that the AO has taken note of the fact that if other methods were used, the valuation would have been much higher. There was on record a justification concerning the premium that the respondent/assessee received for its shares. AO asked himself the wrong question and proceeded thereafter on the wrong path. It is important to highlight, something which the Tribunal has noted, that in a query put by the AO to the representative of Adhyay, what was revealed is that it had a net worth of more than Rs.100 crores. What has come through on perusal of the record is that the respondent/assessee has furnished the details of the cheque payments and therefore, there was enough and more material available with the AO to make further inquiry into the matter. AO, instead of making further inquiries, seems to have been burdened by the fact that the premium charged was high, which, according to us, was not the correct test for making an addition u/s 68 - Decided in favour of assessee. Deduction u/s 80IB - inclusion of CENVAT Credit in the profits of assessee for the purposes of arriving at the deduction - HELD THAT:- CIT(A) went into a detailed analysis of the issue at hand and correctly drew a distinction between the CENVAT credit, which is made available to a manufacturer against the duty drawback, and the Duty Entitlement Pass Book (DEPB) certificates issued to an exporter. DEPB are incentive profits which are made available to an exporter who may not necessarily be a manufacturer and therefore, possibly, being ineligible for deduction u/s 80IB of the Act. Both CIT(A) as well as the Tribunal have taken note of Dharam Pal Prem Chand Ltd. [ 2008 (11) TMI 231 - DELHI HIGH COURT ] - No substantial question of law.
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2023 (11) TMI 234
Validity of Revision u/s 263 - assessee has filed appeal against the assessment order before CIT(Appeals), which is pending adjudication - whether the said assessment order cannot be subject matter of 263 proceedings? - HELD THAT:- In the case of Amritlal Bhogilal Co [ 1958 (4) TMI 3 - SUPREME COURT] the Hon'ble Supreme Court held that it would be open to the Commissioner to revise an assessment while an appeal against it is still pending before the CIT(A), because the AO's order must be regarded as subsisting and effective in law, despite the pendency of the appeal. In the case of EIMCO K.C.P. Ltd [ 2000 (2) TMI 7 - SUPREME COURT] the Hon'ble Supreme Court held that Commissioner could interfere, acting under section 263, with order of ITO on point which was directly in appeal before AAC. In view of the direct decisions on this issue by the Honourable Supreme Court of India, we are of the considered view that in respect of matters which are pending before Ld. CIT(Appeals) and on which no final order has been passed by Ld. CIT(Appeals), they can be revised by recourse to proceedings under 263 of the Act. Whether Principal CIT erred in not invoking Explanation 2 of section 263(1) of the Act in the notice issued to the assessee and such Explanation was invoked only in the body of the order? - In the instant case, it is not the contention of the assessee that there was evident lack of opportunity having been provided to the assessee in the 263 proceedings. The assessee was given due opportunity of hearing and the reasons for initiating revisionary proceedings under 263 of the Act were made available to the assessee. The objections of the assessee were taken on record and after due consideration of the same, the Principal CIT passed order in accordance with law. Accordingly, in our considered view an order passed by Principal CIT under 263 of the Act cannot be set aside merely by taking recourse to decisions without analysing whether the facts in such decision are applicable to the assessee s in set of facts. Whether the issues on the basis of which proceedings u/s 263 have been initiated against assessee had already been examined by the assessing officer during the course of assessment proceedings? - In the instant facts, even though the relevant facts were examined by the assessing officer during the course of assessment proceedings, however, on perusal of the order passed by Principal CIT, it is seen that the conclusion/analysis of the assessing officer and the basis of arriving at the taxable income did in fact cause prejudice to the interests of the Revenue. Accordingly, we are unable to agree with the contention put forth by the assessee on this issue. Assessment order is not on the basis of provisions of section 44AD of the Act and only a reference has been made to the aforesaid provision to determine the taxable profits @8% - From a perusal of order passed by Principal CIT, it is evident that the aforesaid transactions have been made by the assessee with M/s. National Shroff who is an Angadia therefore there was no scope to treat the said transactions as trading turnover but to treat as cash transactions only and therefore, there was no question of applying any GP or NP rate on above financial transactions. Even if it were to be accepted that the assessment has been completed by mere reference to the provisions of section 44AD by the AO, even then, in our view Principal CIT was correct in observing that reference could not have been drawn to the said provisions as the total quantum of transaction was exceeding Rs. 60 lacs in the year under consideration. Therefore, there was incorrect application of the provisions of law by the AO while completing the assessment. Decided against assessee.
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2023 (11) TMI 233
Reopening of assessment - bogus long-term capital gain has escaped assessment - Scope of the reasons recorded by the AO - claim of the AO is that it is evident from the order of the SEBI that assessee has been held guilty and imposed apparently in the matter of said script looks health services Ltd which is subject matter of the instant assessment proceedings - allegation on the assessee that she has violated the provisions of regulation 13 (3) read with 13 (5 of CB (Prohibition of insider trading) regulations, 1992 and regulation 29 (2) of SEBI (substantial acquisition of shares in takeover) regulations, 2011 HELD THAT:- There was an abnormal fluctuation in the price of the script in which the assessee has offered long-term capital gain that is exempt from tax. Further the report from investigation Wing, dated 13/12/2016 was also made available to the assessing officer wherein price rigging in looks health services Ltd was intimated. On verification of the details of sale of shares, the learned assessing officer on examination did not find any details of purchases of shares AO in the form of information from other sources had a tangible material to reopen the assessment. On the details available in the form of information, the learned assessing officer also made his own enquiry by verification of the return of income as well as the bank statement of the assessee. The assessee also made his own enquiry on the tangible material received by him for reopening of the assessment. At the time of recording the reason only the prima facie belief is to be formed that there is a escapement of income. On careful reading of the reasons recorded by the assessee placed before us we find that the learned assessing officer has complied with all the necessary requirements of the law. The reasons are to be seen in its substance. If there is some error in mentioning some information which is not so fatal, then, on trivial matters, the reasons recorded cannot be held to be invalid or nonapplication of mind cannot be inferred. CIT A did not adjudicate this issue holding it to be merely academic, on perusal of the reasons, we do not find that the reopening of the assessment is invalid for any reasons. Accordingly, we uphold that reopening of the assessment is invalid. The solitary ground raised in the cross objection of the assessee is dismissed. Addition u/s bogus LTCG - On careful reading of the order of the adjudicating authority, which is the main base for making the addition in the hence of assessee, is for violation of late disclosure of the particular percentage of the shares of the company and not for any other reason. Therefore, in the adjudication order, there is no allegation of any other nature which even remotely shows that the capital gain earned by the assessee is not genuine. Further regarding the acquisition of the shares, the assessee was allotted 4,50,000 shares of the company in March 2012 in private placement when the company was unlisted. Therefore naturally, during the trading period there is no purchase of shares by the assessee and hence there was no details available with the assessing officer. But that does not show, that, the transaction of the sale of the shares is not genuine. The purchase consideration was paid by the assessee by check number 212460 of Indian bank dated 2/2/2012 which was cleared in the bank statement of the assessee on 4/2/2012. Share certificate was issued to the assessee by certificate number 58. For the sale consideration assessee has given the contract note of Skyes rayes equities India private limited showing the date and time stamp of the securities traded. There is no allegation or enquiry of the learned assessing officer about the same. Original acquisition of the shares were made by the assessee when the name of the above company is monarch health services (private) Ltd. No doubt the name of this company appears in the investigation report of the investigation wing. However when the shares were sold, the name of this company was looks health services Ltd. Naturally, there was no reference of sale of the shares in looks health services Ltd in the above report. Regarding the claim of AO in the reasons were recorded that the consideration received by the assessee was not found credited in the bank account of assessee with HDFC bank, the assessee submitted that the above sum was credited in the account of the assessee in Indian bank account number 415206490 at Fort branch. The copy of the passbook submitted clearly shows that the above amount is credited in the bank account of the assessee. This bank account was jointly maintained by the assessee with her husband. Interestingly the price movement chart shown by the assessee of the above company from the Bombay stock exchange clearly shows that the high prices of the company quoted at that stock exchange was much higher than the price at which the assessee sold the shares. We do not find that there is any reconciliation made of the trade transaction number as well as the buy transaction of affluence commodities private limited with the sale transaction of the assessee along with time and date stamp. Even in the written submission also the learned departmental representative has stated that this is a suspicious trading activity of the script because of the price movement. However, according to the departmental submission it is merely a suspicious trading. But that does not prove that the long-term capital gain earned by the assessee is bogus. There is no allegation from the side of the revenue that the capital gain earned by the assessee is bogus except the adjudication order of Sebi. DR could only show us that the learned assessing officer on the basis of the price movement of that company was directed to reopen the case of the assessee by issuing notice under section 147 of the act. We do not find any infirmity in the reopening of assessment in case of assessee, we have upheld the same. But merely reopening of the case does not authorise the learned assessing officer to make an addition in the hands of the assessee without carrying out investigation as well as finding with reasonable evidence with preponderance of the probability that the income shown by the assessee is not genuine. No infirmity in the order of the learned CIT A in deleting the addition in the hands of the assessee. Decided in favour of assessee partly.
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2023 (11) TMI 232
Defective return - Rectification u/s 154 for invalidating the return filed by the Assessee - non audit of books of accounts u/s 44AB - order u/s 139(9) as passed treating the return as invalid return stating that Tax Payer has shown gross receipt or income under the head profit and gains of Business or Profession more than Rs. 1 Crore, however Part A of the Profit and Loss Account and/or Balance Sheet have not been filed and/or the books of accounts have not been audited. HELD THAT:- If the order passed by the AO u/s 139(9) of the Act contains apparent mistake then it is curable u/s 154 of the Act. Since there is no defect in the ITR filed by the assessee, therefore it is a valid Income Tax Return. It is imperative to mention that the gross receipt of the assessee from the business carried out by the assessee was not more than to Rs. 1 Crore, therefore the assessee was not required to get his accounts audited u/s 44AB. In this regard reference is drawn towards the Guidance Note on Tax Audits under section 44AB of the Act issued by ICAI and on perusal of Para 5.13 of the Guidance note it is apparent that the Sales proceeds of Fixed Assets would not form part of gross receipts in business for the purposes of section 44AB of the Act. As decided in Y.K. Patel Securities (P) Ltd. [ 2023 (6) TMI 1327 - ITAT MUMBAI] there is merit in the submission of the assessee that it is not required to get its accounts audited u/s 44AB - Accordingly, we are of the view that the defect notice issued by CPC u/s 139(9) of the Act is not in accordance with law and accordingly, we quash the said defect notice, meaning thereby, the return of income filed by the assessee should be considered as valid return. As defect notice issued by CPC u/s 139(9) of the Act is not in accordance with law and accordingly, we quash the said defect notice, meaning thereby, the return of income filed by the assessee should be considered as valid return. Accordingly, we direct the AO/CPC to treat the return of income filed by the assessee as valid return and process the same in accordance with law. Thus the appeal of the assessee is allowed.
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2023 (11) TMI 231
Income taxable in India - capital gain derived by the assessee from sale of shares of two Indian companies in view of Article 13(4) of India Mauritius Tax Treaty - GAAR applicability - Allegations of the departmental authorities that the assessee is a conduit company and has been set up under a scheme of impermissible tax avoidance arrangement - assessee is a tax resident of Mauritius and is an investment holding company - only reason on which the AO has declined the treaty benefits to the assessee is because assessee is a stepping stone conduit entity set up in Mauritius only for the purpose of availing treaty benefits, hence, it is an impermissible tax avoidance arrangement - HELD THAT:- If the provisions of the DTAA are more beneficial to that particular assessee, the provisions of DTAA would override the domestic law. With the introduction of sub-section (2A), of section 90 w.e.f. 01.04.2016 earlier overriding effect of the treaty provisions to some extent has been curtailed as the provisions of GAAR as provided under Chapter XA of the Act shall apply irrespective of the fact that such provisions are not beneficial to the concerned assessee. Thus, the department has been empowered under the statue w.e.f. 01.04.2016 to deny treaty benefits to the assessee in a case where GAAR is applicable. Undisputedly, the provisions of section 90(2A) read with Chapter XA of the Act are applicable to the impugned assessment year. Though, the Assessing Officer has alleged that the assessee is a conduit company and has been set up as a part of impermissible tax avoidance arrangement, surprisingly, he has not invoked the provisions of GAAR as provided under Chapter XA of the Act. Departmental authorities were accepting the fact that the shares in the Indian companies having been acquired prior to 01.04.2017, hence, the capital gain derived from sale of such shares would be exempt from taxation in India in terms of Article 13(4) of the Indian Mauritius DTAA. Only for the purpose of defeating assessee s claim of exemption under Article 13(4) of the treaty, AO has introduced the theory of impermissible tax avoidance arrangement and Conduit Company. Since, the allegations of the departmental authorities that the assessee is a conduit company and has been set up under a scheme of impermissible tax avoidance arrangement remains unsubstantiated, we are inclined to accept assessee s claim of exemption under Article 13(4) of India Mauritius DTAA, qua the capital gain derived from sale of subject shares held in two Indian entities. AO directed to delete the addition. Decided in favour of assessee.
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2023 (11) TMI 230
Validity of Assessment order u/s 144C - While issuing Draft order, AO issued demand notice with penalty notice - assessee vehemently stated that the assessment order so framed by AO by any stretch of imagination, cannot be called as draft assessment order and, is therefore, in violation of provisions of section 144C - HELD THAT:- A perusal of Section 144C of the Act shows that the Assessing Officer shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the Assessing Officer shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the AO shall complete the assessment. However, we find that while framing the said draft assessment order, the AO not only issued and served demand notice, but has also initiated the penalty proceedings. Though the ld. DR time and again has stated that the conclusion of the AO speaks for the order as a draft assessment order and there should not be any confusion on that point. In our considered view, the impugned order by the AO has bypassed the relevant sub-section i.e. sub-section (3) and (13) to section 144C of the Act. Whether by by-passing mandatory provisions of the Act can assessment survive? - As decided in Dipak Babaria [ 2015 (8) TMI 775 - SUPREME COURT] if the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute. We are of the considered opinion that by issuing the demand notice on 28.06.2022 itself the Assessing Officer has bypassed all the mandatory sub-sections of section 144C. DR stated that by participating in the subsequent proceedings, the assessee was well aware that the order passes is merely a draft assessment order and not final assessment order and the assessee cannot blow hot and cold in the same breath - As decided in MR. P. FIRM, MAUR. [ 1964 (10) TMI 13 - SUPREME COURT] Approbate and Reprobate is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. If particular income is taxable under the I.T. Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income. Argument of the ld. DR that merely issue of notice of demand and penalty notice will not convert draft assessment order into final assessment order , does not hold any water, in as much as the mandatory provisions of the Act have to be followed and the Assessing Officer does not get any leverage for bypassing the mandatory provisions of the Act. Whether a curable defect u/s 292B ? - As decided in M/S NOKIA INDIA PVT LTD [ 2018 (5) TMI 1913 - SC ORDER] there is a clear order of setting aside of an assessment order with the requirement of the AO/TPO to undertake fresh exercise of determining the arm s length price, failure to pass draft assessment order would violate the provisions of section 144(1) - This is not a curable defect in terms of section 292B Thus we have no hesitation to hold that the proceedings culminated on 28.06.20228 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 and, therefore, all the subsequent proceedings and orders become non est. Decided in favour of assessee/
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2023 (11) TMI 229
TP Adjustment - comparable selection - Adjustment of Marketing Support Services - HELD THAT:- Power Systems Operations Corp. Ltd. entity is a government company and responsible for ensuring the integration of power grid whereas the assessee is providing only limited marketing support services. The sale magnitude of this entity is quite high and not comparable to the assessee. In the case of Mentor Graphics (Sales and Service) Pvt. Ltd.[ 2019 (10) TMI 1552 - ITAT DELHI] which is an entity having similar functional profile as that of the assessee, DRP has excluded this entity from comparable matrix. Therefore, this entity has rightly been excluded by Ld. CIT(A). Apitco Ltd. is engaged in providing specialized consultancy and therefore, rightly been excluded by Ld. CIT(A). Assessee s marketing functions could not be compared with an entity providing high end technical consultancy. As in Philip Morris Services India S.A. ( 2018 (6) TMI 1226 - ITAT DELHI ) wherein this entity was excluded on the similar reasoning that it was engaged in provided highend consultancy services. Global Procurement Consultants Ltd e assessee s marketing functions could not be compared with an entity providing high end technical consultancy to entities like World Bank and other significant financial institutions where the magnitude would be very high and the objective would be different. Therefore, this entity has rightly been excluded by Ld. CIT(A). SEL and ARMS segments of India Tourism Development Corporation Ltd. (ITDC) - As CIT(A), considering the decision of Eli Lilly Co. India P. Ltd. ( 2015 (12) TMI 1172 - ITAT DELHI ) directed Ld. TPO to include SEL and ARMS misc. operations segment of ITDC Ltd. CIT(A) has directed lower authorities to adopt particular segment of this entity which is quite comparable to assessee s functions. Therefore, we find no reason to interfere in the same. EDCIL Ltd. entity has been accepted to be comparable entity in earlier years and therefore, there is no reason for rejection of the same in the current year. No change in functional profile of that entity has been demonstrated before us. In House Production Ltd.entity has been accepted to be comparable entity in earlier years and therefore, there is no reason for rejection of the same in the current year. No change in functional profile of that entity has been demonstrated before us. Directions of CIT(A) with respect to certain comparable entities wherein Ld. CIT(A) has directed Ld. AO / TPO to reconsider the Annual Report of these entities - We find that Ld. CIT(A) has merely directed lower authorities to reconsider the annual report and re-compute the margins of these entities. Therefore, the argument raised by the revenue is not to be accepted. Nature of expenses - disallowance u/s 37(1) on Advertisement, Marketing and Promotion expenses - AO disallowed 50% of such expenditure on the ground that it was capital in nature - HELD THAT:- We find that this issue is covered in assessee s favor by the decision of Delhi Tribunal in assessee s own case for AY 2008-09, [ 2020 (6) TMI 568 - ITAT DELHI] wherein Tribunal dismissed revenue s ground of appeal assailing similar adjudication. Therefore, the adjudication of Ld. CIT(A) do not require any interference on our part. Management fees paid to is AE which was disallowed u/s 37(1) - HELD THAT:- We concur with the adjudication of Ld. CIT(A) that once ALP has been determined by appropriate authority, no separate adjustment / disallowance is called for on the part of Ld. AO. The corresponding grounds stand dismissed.
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2023 (11) TMI 228
Revision u/s 263 by CIT - lack of enquiry proved or not? - As per CIT AO didn't enquire about the source of cash deposit as emanated from undisclosed sources - HELD THAT:- We find that apart from the cash receipts on account of professional income, the Appellant is also having enough cash withdrawals during the year under consideration. Meaning thereby that the view of the Pr. CIT that the cash deposited by the Appellant in his bank account is out of the undisclosed sources is vague and without any basis. AO has accepted the genuineness of the cash deposited in the bank account after a conscious and independent application of mind. We hold that the Ld. PCIT s action of invoking the provision of section 263 of the Act has been on account of difference in opinion of Pr. CIT which is held to be as invalid under law. If there was an enquiry, even inadequate, that would not, by itself, give occasion to the PCIT to pass order under section 263, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. See NARAIN SINGLA case [ 2015 (10) TMI 2371 - ITAT CHANDIGARH] Thus merely difference of opinion by itself would not give occasion to the Commissioner to pass orders under Section 263 of the said Act. Therefore, the impugned order held to be bad in law and the same is as such quashed - See ANIL KUMAR SHARMA [ 2010 (2) TMI 75 - DELHI HIGH COURT] - Decided in favour of assessee.
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Customs
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2023 (11) TMI 227
Conversion from EOU to EPCG - Quantification of duty - department has not provided the details of computation of the demand of duty, therefore, the appellant is unable to make their defense submission - HELD THAT:- It is found that the individual duty demand from serial No. 1 to 16 is not supported by the documents it is necessary to arrive at the conclusion that whether the quantification of demand is correct and whether such duty is payable by the appellant. The matter needs to be reconsidered by the adjudicating authority by providing the necessary documents whereby the correct quantification of duty, if any can be ascertained. Accordingly, the impugned order set aside and the appeal allowed by way of remand to the adjudicating authority for passing a fresh order.
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2023 (11) TMI 226
EPCG Scheme - Failure to fulfil the Export Obligation - non-production of discharge/redemption certificate (EODC) from the ADGFT authorities within the prescribed time - HELD THAT:- The matter has to be verified by the adjudicating authority, for which reason the impugned order set aside and the issue remitted to the adjudicating authority for the limited purpose of verification and thereafter grant such benefits to the appellant, as the appellant may be entitled to, in law, consequent to the production of EODC. Appeal disposed off.
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2023 (11) TMI 225
Valuation of imported goods - related party transactions - addition of 5% royalty on carbon brushes under Rule 10(1)(c) of the Customs Valuation Rules, 2007 - whether royalty paid by the appellant needs to be added to the transaction value of the imported goods? - HELD THAT:- Once the fact that the pricing pattern has been examined from various angles as discussed supra and the fact that it was factually found that the prices declared by the importer was as per the price list of the supplier, the question of adding royalty of 5% does not arise. The Commissioner (A) in the impugned order has held that the appellants have not shown any imports from unrelated suppliers and therefore, it can be inferred that the import is made only from the related suppliers without substantiating the fact that when the transaction value was accepted as to how the royalty paid on the technical know-how influenced the price of the imported goods. The appellant s submission that once the transaction value of the goods imported from the associated companies are at arm s length price under Rule 3(3)(a) of the Customs Valuation Rules, 2007 is accepted, the Department cannot load 5% royalty to the transaction value under Rule 10(1)(c) of the Customs Valuation Rules, 2007 is absolutely valid and sustainable in law as has been held by the Hon ble Supreme Court in the case of COMMISSIONER OF CUSTOMS VERSUS M/S FERODO INDIA PVT. LTD [ 2008 (2) TMI 12 - SUPREME COURT ] wherein it had held that in a given case, if the Consideration Clause indicates that the importer/buyer had adjusted the price of the imported goods in guise of enhanced royalty or if the Department finds that the buyer had misled the Department by such pricing adjustments then the adjudicating authority would be justified in adding the royalty/licence fees payment to the price of the imported goods. In the present appeal, the facts have clearly proved that the pricing was at arm s length and the relationship had not influenced the price, which has been accepted by the department hence there is no question of adding the royalty to the transaction value as held by the apex court in the judgement referred above. The impugned order is set aside - appeal is allowed.
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2023 (11) TMI 224
Classification of imported goods - snap fasteners - to be classified under Customs Tariff Heading 9606 1010 or not - can be considered as buttons for the benefit of the Notification No.21/2002 dated 01.03.2002 or not - HELD THAT:- This issue is no longer res integra as the Hon ble High Court of Kerala and the Tribunal have clearly held that the benefit of the Notification for snap fasteners is to be allowed. It is also on record that the department had accepted these orders and allowed the benefit of the Notification. Benefit of notification cannot be declined to the assessee merely because import was button in parts and not in made up form. The Commissioner (Appeals) has rightly allowed the appeal filed by the respondent extending the benefit of the notification - appeals filed by the Revenue are dismissed.
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Insolvency & Bankruptcy
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2023 (11) TMI 223
CIRP - Liquidation proceedings initiated - Right of the Operational Creditor (Petitioner) - Petitioner alleged Misconduct in the performance as an Insolvency Resolution Professional - seeking appropriate direction restraining Respondent No. 3 (now Respondent No. 2) from functioning as a Liquidator of the Corporate Debtor - HELD THAT:- Respondent No. 1/Board is the authority to regulate the functioning of the Insolvency Professionals and the Board comprises of experts in the field who have been appointed by the Central Government to carry out the functions specified under Part IV of the IBC. It is well settled that Courts do not sit as an Appellate Authority over the decisions taken by the experts. The Apex Court in MANSUKHLAL VITHALDAS CHAUHAN VERSUS STATE OF GUJARAT [ 1997 (9) TMI 618 - SUPREME COURT] has observed that The Court cannot substitute its judgment for the judgment of administrative authorities in such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene. This Court does not find that the decision making process adopted by the Board or the decision based on the final report is perverse or is contrary to law or against public interest, which would warrant interference from this Court under Article 226 of the Constitution of India. Court while exercising its jurisdiction under Article 226 of the Constitution of India while examining any enquiry report does not go into excruciating detailed facts nor does it substitute its conclusion to the one arrived at by the fact finding body. If the process adopted in the enquiry is fair, reasonable and transparent then the Writ Court does not interfere with the findings to substitute its own conclusion to the one arrived at by the authority simply because another view is possible. Petition dismissed.
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Service Tax
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2023 (11) TMI 222
Classification of services - business auxiliary services or not - whether the subsidiary company of appellant located in USA is acting as C F Agent or as a Commission Agent and if it is a commission agent whether the service tax is payable on the commission received by them in view of the provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994? HELD THAT:- The books are exported by the appellant to the subsidiary company located in USA. The purchase orders are received from the customer directly by the appellant. Further, after the arrival of the said books at USA destination port, the subsidiary company will undertake the clearing activity of the said books from the customs authorities. The invoices to the customers are issued by the subsidiary company. Payment is also received by subsidiary company from the customers located in USA. As per the terms of the agreement,, the subsidiary company retains a 15% commission of the ultimate sale price to the third parties for each shipment or part thereof and bank transfer the reaming 85% proceeds to the appellant. The appellant are booking the said expenses under the head selling expenses as commission on sales (export). There is difference between commission agent and consignment agent. Consignment agent actually deals with the goods, when he receives the same from the principal and dispatches them on the direction of the principal, to the ultimate customer. Consignment agent may not be even associated with the procurement of orders or does not directly deal with the sale purchase. He is acting on behalf of the principal and deals with the movement of the goods as per the direction of the principal. On the other hand commission agent is only concerned with the procurement of orders for which he may receive the fixed amount along with some percentage amount. The Subsidiary company is also undertaking the activity of clearing and forwarding agent. No clause of the agreement provides that subsidiary company also undertaking any marketing or promotion activity for the sale of the books exported by the appellant. In such a scenario, the subsidiary company who is the service provider had to be held as consignment agent rather than commission agent. The conclusion of the Learned Adjudicating authority that the appellant are liable to pay service tax under the taxable service Business Auxiliary Services cannot be sustained - Appeal allowed.
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2023 (11) TMI 221
Non-payment of service tax - Mining Service - hiring equipment with operators, maintenance staff and facilities for excavation work - The department entertained a view that appellant are engaged in site formation and clearance of the mining area and the amount received by them after 01.04.2005 should have been subjected to service tax for which neither the appellant have taken registration nor have they paid the service tax. HELD THAT:- The excavation and removal of overburden/ earth all sorts of soil at all depths and disposing the excavated material within the mines premises is major item of work which has been assigned by M/s. GIPCL to the appellant. In the work schedule it can clearly be seen that excavation and removal of overburden material is an integrated work which primarily pertains to the mining of lignite - primary nature of service provided by the appellant to the service recipient is of mining service which was included in the service tax net vide Finance Act, 2004 with effect from 01.06.2007 under the service category of Mining Service. The appellant have duly discharged their service tax liability after 01.06.2007 under the service category of Mining Service. Thus the impugned order-in-original is without any merit. Reliance can be placed in the case of ASSOCIATED SOAP STONE DISTRIBUTING COMPANY PVT LTD VERSUS C.S.T. -SERVICE TAX AHMEDABAD [ 2022 (3) TMI 511 - CESTAT AHMEDABAD] where it was held that The appellant have provided the Mining Service which was not liable to service tax during the relevant period in this case. Appeal allowed.
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2023 (11) TMI 220
Classification of services - Goods Transport Agency or Supply of Tangible Goods for use service? - supplying Trucks to ONGC under contract for inter-locational movement of ONGC material - HELD THAT:- In the said service, the main ingredients are that for hiring of trucks the right to possession and effective control should not be transferred. However, the learned Commissioner has not given clear findings whether right to possession and effective control has been transferred or otherwise. These are the main factors which decide whether the service falls under the supply of tangible goods for use or otherwise. Therefore, this aspect needs to be reconsidered. The appellant have claimed that service in question is classifiable under GTA service. In this regard we find that under an agreement with ONGC, the appellant is supplying trucks which are used for inter-location movement, i.e. transportation of ONGC s materials including Oil field equipment, machinery, mud-chemical etc. in the Oil field on the condition prevailing at the work sites of ONGC. As regard the said transaction appellant strongly argued that the ONGC is paying service tax under the category of Goods Transport Agency and they are providing GTA services - the submission of the ld. Chartered Accountant agreed upon that no double taxation is permissible under the law, subject to the decision that under which category the service in question legally falls. Although the show cause notices refer to the charge of intention to evade payment of tax on the part of the appellant, no concrete evidence is forthcoming to substantiate this charge against the appellant. This aspect has not been fully examined and discussed in any of the orders passed by the authorities below. It is, therefore, necessary that in the interest of justice, the matter needs to be remanded to the Commissioner (Appeals) keeping all the issues open. Appeal allowed by way of remand.
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2023 (11) TMI 219
Non-payment of Service Tax - man power recruitment and supply agency service - Security Services under RCM - Goods Transport Agency Service (GTA) under RCM - invocation of extended period in terms of proviso to Section 73(1) of the Finance Act, 1994 - HELD THAT:- The appellant is required to produce necessary evidence to the Departmental authorities regarding payment of Service Tax collected from the appellant by the service providers to Government account. So, it becomes necessary to remand the issue of demand of Service Tax on Manpower Recruitment and Supply Agency Service and Security Service to the original adjudicating authority for carrying out verification of copies of ST-3 returns filed by the service providers / documents or any certificate or declaration to pass a speaking order in strict observance of principles of natural justice. The appellant is also directed to produce any of these evidences after collecting from the service providers to ensure that the Service Tax collected was in fact paid to the Government account. Invocation of extended period - HELD THAT:- The appellant has produced many copies of the invoices raised by the service providers of Manpower Recruitment and Supply Agency Services and also Security Services. It is no more res integra that extended period can be invoked only when there are ingredients necessary to justify the demand for the extended period in a case leading to short payment or non-payment of tax. The onus of establishing that such ingredients are present in a given case is on the Revenue. The active element of intent to evade duty by action or inaction needs to be present for invoking extended period - invoking extended period is not justified in this case. The demand of Service Tax for extended period is not maintainable. Even for normal period, the issue of demand of Service Tax on Manpower Recruitment and Supply Agency Service, Security Service and Goods and Transport Agency Service is remanded to the original adjudicating authority to carry out verification of evidences the appellant provides whether the Service Tax paid by the service providers have been deposited to the Government account or not and pass orders in compliance to the strict principles of natural justice. Appeal disposed off.
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2023 (11) TMI 218
Levy of Service tax - Supply of tangible goods service (STGS) on both voyage charter and time charter and the security deposit - Invocation of extended period of limitation under Section 73(1) of the Finance Act, 1994 - HELD THAT:- The following ingredients are required to be satisfied for fastening any liability to Service Tax under the head STGS:- i. there should be transfer of right to use; and ii. such transfer of right should be without transfer of right of possession and control. Voyage Charter - HELD THAT:- There is nothing to suggest from the above agreements / Fixture Notes that transfer of right to use the vessel was granted by the appellant to M/s. Archean Granites Pvt. Ltd. and hence, we notice that it is an arrangement for carriage of goods for freight simpliciter though it is mentioned as voyage charter - In the case of M/s. Great Eastern Shipping Company Ltd. [ 2019 (12) TMI 225 - SUPREME COURT ], the Hon ble Supreme Court had an occasion to deal with various modes of charterparty of vessels and had observed that the time charterparty involved in the said case was absolute transfer of right to use along with transfer of possession and control, and levy of sales tax was applicable in terms of Article 366(29A)(d) of the Constitution of India. It is clear that the charterparty may operate as a demise of the ship herself or it may confer on the charterer nothing more than the right to have his goods conveyed. In the case on hand, what is conveyed under the above Fixture Notes is only the right to convey the goods in a particular ship on a particular voyage and nothing more - From the contracts / Fixture Notes, intention of the parties is clear, to transport cobblestone from one place to another and incidentally using voyage charter and hence, there is nothing mentioned in the Fixture Notes about the otherwise usage of the charter. It is held that what is provided for in the Fixture Notes is only a contract for carriage of cobblestone from Chennai to Newark for a freight and though the contract is said to be on a voyage charter basis, we do not find any clauses to the effect that it involves transfer of right to use of the vessel. Therefore, when the contract itself is not for transfer of right to use the vessels, there cannot be any levy of Service Tax under the head supply of tangible goods for use . Accordingly, the demand of Service Tax with interest, confirmed in this regard, deserves to be set aside and consequently, the impugned order to this extent stands set aside. Time Charter - HELD THAT:- Regarding time charterparty, that there is no dispute that the appellant had paid Service Tax for the period from May 2008 to September 2008, in October 2008 which is much before the investigation, which happened only in June 2009. That being so, the finding of the learned adjudicating authority that the services had not been brought to the notice of the Department, lacks merit insofar as time charterparty is concerned. What the officers appear to have pointed out was that the appellant was required to pay Service Tax for the subsequent period as well, which apparently was honoured by the appellant immediately, by remitting the Service Tax of Rs.2,11,85,231/- for the subsequent period from October 2008 to June 2009 - there are no other allegation in the Show Cause Notice to propose the demand of Service Tax in this regard and hence, under these circumstances, the allegation that the appellant did not disclose or that but for the investigation, the non- payment would not have come to light, lacks merit - also there are no justifiable reasons to sustain penalty under Section 78 ibid. Security deposit - appellant did not produce any evidence in support of its claim that the amount represented the refundable security deposit and the same was not towards advance rent - HELD THAT:- The lease deed clearly identifies the lessor and the lessee and hence, the lessor-lessee relationship between the appellant and M/s. Good Earth Maritime Ltd. is undisputed. The above document requires payment of monthly rental apart from a one-time security deposit which is refundable. If it is to be treated as advance rent, that becomes non-refundable, which is not the intention of the parties as carried out in the said document. The duty of the authority is only to go by the language of the document which reflects the true intention between the parties and hence, nothing can be added by the authority since what is relevant is to only check if the contents of such document yields to the taxing statute. It is, therefore, not possible to interpret the intention of the parties reduced into writing to suit the requirements of the statute - the demand of Service Tax with interest cannot sustain on the security deposit and consequently, the same is set aside. To this extent, therefore, even the penalty imposed under Section 78 is set aside. Invocation of extended period of limitation under Section 73(1) of the Finance Act, 1994 - HELD THAT:- It is clear that the entire activity of the appellant was available with the Revenue in black and white; it is the appellant who, in good faith, requested as to the taxability as early as in 2009 from the Department - Though the allegation in the Show Cause Notice is only as to suppression of facts, but the intent to evade tax is conspicuously missing, which by itself makes it clear that even the Revenue did not have any justifiable reason to allege suppression of facts with an intent to evade tax. There cannot be any demand other than for the normal period, but there can never be any penalty under Section 78 ibid - Appeal allowed in part.
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Central Excise
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2023 (11) TMI 217
Time Limitation - suppression of facts or not - CENVAT Credit - capital goods used in the captive power plant installed outside the factory - period June 2012 to December 2012 - HELD THAT:- From the correspondence and certificate issued by the Deputy Commissioner of Central Excise-Division-IV, Ahmedabad, it is absolutely clear that the fact about installation of capital goods in the factory premises of Nandan Exim Limited and availment of cenvat credit there on by the Respondent was very much disclosed by the Respondent and was in the knowledge of the department. The appellant also filed their ER-1 return during the relevant period wherein the availment of Cenvat Credit on such capital goods was categorically declared. Therefore, there are no suppression of fact on the part of the Respondent. The adjudicating authority has correctly considered the fact on demand being time barred. Even though there is some discrepancy in the Plot No./ Survey No. in the address, it was categorically declared to the department that the capital goods were installed in the factory of Nandan Exim Limited. On the basis of this Certificate issued by the department, entire facts of availment of credit on capital goods by the respondent, installation of capital goods at the factory premises of Nandan Exim Limited were in the knowledge of the department. On the basis of such information, the department could have conveniently issued the show cause notice if at all they feel any discrepancy to the appellant will within the normal period of one year. However, in respect of credit taken during June 2012 to December 2012, the show cause notice was issued on 31.03.2015 i.e. more than two years after the date of taking credit. There are no hesitation to hold that the demand was wrongly made under the extended period in the show cause notice - the adjudicating authority has rightly dropped the proceedings on limitation. Appeal of Revenue dismissed.
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2023 (11) TMI 216
CENVAT Credit - denial on the ground that the input service invoice the Mumbai address is mentioned whereas the credit was taken by the appellant in their factory address which is different from the Mumbai address - nexus between the input services in question and manufacturing of the final product. Denial on the ground that the input service invoices bear the name of appellant s Mumbai office - HELD THAT:- In this regard on going through the ISD invoices and the submission made by the learned counsel we find that the entire allegation in the Show cause notice is incorrect in as much as the appellant claimed that the cenvat credit was taken on ISD invoice. It appears that the Adjudicating Authority has not considered the ISD invoices, if it is found that the appellant has taken the credit not on the basis of invoices issued to their Mumbai office but on the ISD invoice which are obviously bearing the name and address of the appellant factory, the appellant is premia facie eligible for credit. Nexus of input service in question with the manufacturing activity of the appellant - HELD THAT:- This issue is no longer res- integra as in respect of all the input services in question, the Tribunal in one or more judgments allowed the cenvat credit holding that there is a nexus between the input services and manufacturing of the final product - Reliance can be placed in the case of M/S. AHLCON PARENTERALS (INDIA) LTD. VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE CENTRAL GST, JAIPUR [ 2022 (7) TMI 1180 - CESTAT NEW DELHI] where it was held that credit allowed in similar circumstances - the entire matter needs to be reconsidered by the Adjudicating Authority keeping in mind. Appeal allowed by way of remand.
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2023 (11) TMI 215
Re-credit of cenvat credit already reversed - capital goods - applicability of provision of Section 11B of CEA - re-credit even as per cenvat credit rules is within the reasonable time or not - N/N. 30/2004-CE dated 09.07.2004 - HELD THAT:- The appellant admittedly had reversed the cenvat credit in the year 2006 and thereafter they claimed the re-credit after almost 7 years i.e. in 2013. Apart from the applicability of Section 11B, we find that even in case of initial credit, whether the appellant is entitled to re-credit after substantial period of 7 years was not examined by the adjudicating authority. The adjudicating authority has only decided the matter that Section 11B is not applicable in the case of re-credit. Even if it is assumed that provision of Section 11B for the purpose of re-credit of Cenvat credit is not applicable but whether the appellant can take the re-credit after 7 years of its reversal. The matter as a whole needs to be reconsidered by the adjudicating authority - Appeal allowed by way of remand.
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2023 (11) TMI 214
Valuation - Recovery of the differential duty alongwith interest and penalty - determination of assessable value of insulated copper conductors manufactured by the appellants on job work basis during the period 01.04.2007 to 08.09.2008 - goods captively consumed - applicability of Rule 8 of the Central Excise Valuation Rules, 2000 - HELD THAT:- This issue is no more res-integra and has been considered by this Tribunal in the case of ROLASTAR PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DAMAN [ 2011 (9) TMI 776 - CESTAT, AHMEDABAD ] taking note of the amended provisions, namely, Rule 10A of Central Excise Valuation Rules, 2000 and Circulars issued on the subject by the Board from time to time and following the earlier order, held that Rule 8 is applicable to the assessee who manufactures the goods and uses the same captively either by himself or on his behalf. The said Rule would have been applicable if M/s. Sai Flipped Coil Pvt. Limited would have manufactured the goods themselves and then used the same captively. The Hon ble Supreme Court in the case of CCE, Pune vs Mahindra Ugine Steel Co Ltd [ 2015 (4) TMI 351 - SUPREME COURT ] interpreting Rule 8 and Rule 11 of Central Excise Valuation Rules, 2000 for determination of the assessable value of the goods manufactured on job work basis held that Rule 11 would be applicable in arriving at the assessable value of the excisable goods. In the said case, the respondent was engaged in the manufacture of motor vehicle parts from the raw material supplied by the manufacturers of the motor vehicles on labour charge basis - The question before the Hon ble Supreme Court was whether Rule 8 of the Central Excise Valuation Rules, 2000 or Rule 11 would apply in arriving at the valuation of the goods at the end of the assessee and it was held that Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule. Even though the aforesaid judgement was delivered prior to insertion of Rule 10A, however, there is no change in the wordings of Rule 8 after 01.03.2007, and the facts of the present case do not fall either under sub-rule (i) or sub-rule (ii) of Rule 10A of Central Excise Valuation Rules, 2000. Thus, following the principle laid down in aforesaid judgments, it is opined that Rule 8 of Central Excise Valuation Rules, 2000 is not applicable to the facts of the present case. There are no merit in the impugned order passed by the ld. Commissioner (Appeals) - appeal allowed.
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CST, VAT & Sales Tax
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2023 (11) TMI 213
Validity of recovery notice - notice issued seeking recovery without even serving a copy of the assessment order - violation of principles of natural justice - availing of ineligible Input Tax credit - Evasion of tax - HELD THAT:- Almost an identical issue came up before this Court in W.P.Nos.37044 37045 of 2016 in the case filed by M/s.Hansa Enterprises, Park Town Chennai, from a same location in Parrys Corner, in Chennai [ [ 2020 (6) TMI 357 - MADRAS HIGH COURT] . There also, the petitioner therein had similarly alleged that the petitioner's login ID was misused by a third party, who filed returns and had passed on huge Input Tax credit to third party. The Court after considering the submission of the petitioner therein and the learned Government counsel, directed the Commercial Tax Officer to pass a proper order after thorough investigation with the help of Economic Offence and Cyber Crime Wing of the State as to whether indeed there was a misuse of login ID or whether the petitioner therein was masquerading as an unknown person to make it seem as if the said login ID was misused by an unknown person facilitating availing of ineligible Input Tax credit and to evade tax - In the present case, the petitioner has also filed a complaint before the Cyber Crime in FIR.No.100 dated 06.04.2017 for the alleged misuse of the login ID of the petitioner from 01.01.2014 to 31.08.2015. The status of the investigation pursuant to the above FIR registered based on the complaint of the petitioner is not known. Considering the above fact and to balance the interest of the parties, Court is inclined to suo motu implead The Inspector of Police, Cyber Crime Cell, Central Crime Branch, Vepery, Chennai 600 007 is impleaded as the 4th respondent in this Writ Petition to carryout thorough investigation on the complaint filed by the petitioner as to whether the complaint filed by the petitioner was genuine or not or whether the petitioner was facilitating a third party to use his login ID to evade tax and to pass an ineligible Input Tax credit to unknown persons or whether the petitioner was himself masquerading as an unknown person to evade tax. Writ petition disposed off.
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2023 (11) TMI 212
Classification of goods - rate of tax - Wire Nails - to fall within the meaning of Fastener as per entry 79 Part-II of Schedule II of VAT Act or under residuary entry in part IV of Schedule? - tax chargeable in entry 79 Part II of Schedule II is 5% and 14% in residuary entry Part IV of Schedule II? HELD THAT:- In case of Bharat Forge and Press Industries (P) Ltd. [ 1990 (1) TMI 70 - SUPREME COURT] the Supreme Court held that only such goods which cannot be brought under the various specific entries in the tariff schedule should be attempted to be brought under the residuary entry. In other words, unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort can be had to the residuary item. Fasteners means is a device that mechanically joins or affixes two or more objects together. It is a device to attach especially by pinning, tying or nailing. Nuts, bolts, screws and fasteners are included in Entry 79 Part II of Schedule II of VAT Act. The function of Screw and Wire Nails is more or less similar and are normally used to attach two or more items. The respondent has to show as to why wire nails are put in residuary entry and not in Entry 79 Part II of Schedule II of VAT Act. What are the distinguishable features of wire nails to put it in the residuary entry has not been placed. There is nothing cogent on record that the wire nails cannot be put to any other entry than to residuary entry. With due respect the case law cited by the state is not applicable in the facts of the present case. The impugned order Annexure P/1 and P/6 are set aside holding that wire nails would fall within the meaning of fasteners under entry 79 of PART II of Schedule II of VAT Act - Petition allowed.
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