Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 19, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
GST
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Dismissal of Review Petitions: Court Upholds Interest Refund Order, Cites Procedural Lapses.
Case-Laws - HC : In the matter under review, the High Court dismissed the review petitions filed by the parties. The Court held that no grounds were established for seeking a review of the order directing the refund of interest amount. The Court observed that the insufficient time to check calculations during the initial proceedings cannot be a ground for review. Regarding a letter from January 2014, which the Review Petitioner admitted was not brought to the Court's notice earlier, the Court stated that while it can be relied upon in the enquiry to fix responsibility for non-renewal of FD, it does not warrant a review of the Court's order. Consequently, both review petitions were dismissed by the High Court.
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GST refund claim restored despite procedural lapse on payment of costs.
Case-Laws - HC : The High Court, while acknowledging the procedural deficiency of not issuing GST RFD-03 to the petitioner, held that the petitioner failed to avail the opportunity to raise such contentions in response to the show cause notice. However, considering the peculiar circumstances and the non-issuance of GST RFD-03, the Court set aside the impugned order dated 30 April 2024, subject to the petitioner paying costs of Rs. 2,00,000/- within 4 weeks, and restored the petitioner's refund application made in form GST RFD-01.
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Upholding Tax Authority's Show Cause Notice, Court Allows Defences.
Case-Laws - HC : The High Court dismissed the petition challenging the show cause notice issued u/s 74 of the Central Goods and Services Tax Act, 2017. The court found no justification for alleging suppression or invoking the extended period of limitation. The show cause notice was based on findings from investigations after the audit report. The petitioner's statements accepting its status as a payment aggregator were considered relevant. The court held that at the show cause notice stage, judicial review is extremely narrow, and defences can be raised in response. Interference is warranted only in cases of violation of fundamental rights, natural justice, or lack of jurisdiction, which were not established here. The petitioner was directed to respond to the show cause notice and raise all defences.
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Respite for Petitioner: Court Quashes Orders on ITC Reversal, Directs Limited Tax Deposit.
Case-Laws - HC : The High Court set aside the impugned orders u/s 73 of the Tamil Nadu Goods and Service Tax Act, 2017/Central Goods and Service Tax Act, 2017 regarding non-reversal of Input Tax Credit (ITC) on account of Credit Notes issued by the Petitioner's suppliers. The Petitioner was directed to deposit 25% of the disputed tax within four weeks, subject to verification of any prior payments made. The impugned assessment order shall be treated as a show cause notice, and the Petitioner shall submit objections along with supporting documents within four weeks of receiving the order copy. The attachments, if any, would be lifted upon compliance with the deposit condition.
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Tax dispute: HC directs petitioner to deposit 20% of demanded tax & file appeal before appellate tribunal within 30 days.
Case-Laws - HC : The Hon'ble High Court disposed of the writ petition by directing the petitioner to file an appeal before the appellate tribunal after depositing 20 percent of the demanded tax amount as per the provisions of Section 112(8) of the GST Act, 2017 within 30 days. This was in line with the judgment passed by the Patna High Court in M/s Cohesive Infrastructure Developers Pvt. Ltd., which held that subject to deposit of 20 percent of the remaining tax amount in dispute, the petitioner must be extended the statutory benefit of stay u/s 112(9) of the GST Act.
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Excess ITC claim: Court orders reassessment, petitioner to submit objections & reconciliation.
Case-Laws - HC : The High Court set aside the impugned order relating to assessment year 2017-18 concerning excess availment of Input Tax Credit vis-a-vis Input Tax Credit reported in the annual GSTR-9 return. The petitioner shall treat the impugned assessment order as a Show Cause Notice and submit objections within two weeks, along with relevant reconciliation statements and supporting documents. Subsequently, fresh orders will be passed by the respondent authority after considering the petitioner's submissions.
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Denied input tax credit due to alleged fictitious supplier, HC allows appeal with pre-deposit condition.
Case-Laws - HC : The petitioner was denied input tax credit as the alleged supplier did not provide any goods, violating principles of natural justice. The assessment order omitted outward and inward e-way bills from the accounts. The HC held that the existence of the supplier is a disputed question of fact that cannot be adjudicated under Article 226. The adequacy of evidence also cannot be examined under this provision. The HC rejected the challenge to the assessment order but permitted the petitioner to file an appeal within two weeks, subject to compliance with conditions like pre-deposit, and directed disposal of such appeal after reasonable opportunity of hearing.
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Nuclear Fuel Complex unit's GST assessments quashed; reassessment ordered to examine Notification 9/2017 exemption.
Case-Laws - HC : The High Court set aside the impugned orders of tax assessments for the period 2017-18 to 2022-23 against the petitioner and directed the Assessing Authority to redo the assessments after examining the applicability of Notification No.9 of 2017 dated 28.06.2017. The Court found merit in the petitioner's contention that if the petitioner is a unit of the Nuclear Fuel Complex/Department of Atomic Energy under the Central Government, the services rendered would be covered under the said notification, exempting them from Goods and Services Tax under Article 265 of the Constitution.
Income Tax
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Car owned by spouse denied depreciation claim due to lack of proof of business use.
Case-Laws - AT : The assessee, an individual sole proprietor, claimed depreciation on a car registered in her husband's name but funded by her business. While the assessee may be treated as the owner satisfying the first condition u/s 32, she failed to provide evidence like logbooks or travel details to prove the car was used for business purposes as required by the second condition. Despite being allowed to claim motor car expenses u/s 37, depreciation u/s 32 was denied as the assessee could not substantiate the business usage of the car. The Income Tax Appellate Tribunal ruled against the assessee's claim for depreciation.
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Tax deduction allowed for house purchased in spouse's name using sale proceeds.
Case-Laws - AT : The ITAT held that the assessee's claim for deduction u/s 54F of the Act should have been granted, even though the residential property was purchased in the name of the assessee's wife who is assessed to tax separately. The Tribunal relied on judicial precedents which established that for Section 54F purposes, the new residential house need not be purchased by the assessee in their own name. Since the assessee purchased the property in their wife's name using sale proceeds without any contribution from her, and she is not an unconnected party, the deduction was allowed. The decision was rendered in favor of the assessee.
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Taxpayer wins deduction battle for provident & pension fund contributions; High Court upholds allowability of expenses.
Case-Laws - HC : The ITAT allowed the assessee's appeal, holding that contributions made to the unrecognized provident fund and unapproved pension fund were eligible for deduction under the relevant provisions of the Income Tax Act. The High Court upheld the ITAT's decision, ruling that the assessee had rightfully discharged its onus and the expenditure incurred was allowable. Regarding the allowability of expenditure u/s 36(1)(iv) as per Section 37(1), the High Court followed its earlier precedent in CIT vs. Punjab Financial Corporation, contrary to the Delhi High Court's view in Sony India P. Ltd. The court held that its earlier judgment would have binding precedential value over differing views of other High Courts. Furthermore, the court ruled that the liability payable by the assessee on account of electricity duty could be set off by the allotment of equity shares, amounting to discharging the liability u/s 43B. The shares allotted by the Government of Haryana were considered as part of the funds and not acquired from other sources, hence allowable u/s 43B of the Income Tax Act. Consequently, the assessee's appeal was dismissed.
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Court quashes tax reassessment against non-existent amalgamating company post NCLT-approved merger.
Case-Laws - HC : The High Court quashed the reassessment proceedings initiated against the non-existent amalgamating company. Relying on the Supreme Court's decision in Maruti Suzuki India Ltd. and the Bombay High Court's judgment in Teleperformance Global Services Private Limited, the court held that once the amalgamating company ceased to exist due to the amalgamation scheme approved by the NCLT, the assessing officer lacked jurisdiction to proceed against a non-existent entity. Consequently, the impugned action u/s 148 of the Income Tax Act and the resultant assessment order were declared wholly without jurisdiction, non-est, and a nullity.
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Transfer pricing adjustment deleted; cash payments to villagers disallowed; ad-hoc disallowance on expenses upheld.
Case-Laws - AT : The Income Tax Appellate Tribunal ruled as follows: Transfer pricing adjustment u/s 92CA(3) for determining arm's length price on interest paid to a related party was deleted. As the order was passed after April 1, 2017, it is covered by the ratio of M/s Texport case, and the addition treating the transaction as a specified domestic transaction is unsustainable. The disallowance u/s 40A(3) for cash payment of Rs. 8,00,000/- to villagers was upheld. The applicability of Section 40A(3) would exclude only cases covered u/r 6DD, and the genuineness of parties or payments was not doubted. The ad-hoc disallowance of 5% on various expenses like travel, promotion, lodging, and pooja expenses was upheld. Since the expenses were supported by self-made vouchers without proper bills, the element of personal claim could not be ruled out. The Tribunal found no infirmity in the CIT(A)'s order sustaining the 5% disallowance.
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Taxpayer wins on Transfer Pricing, Interest Disallowance & R&D Deduction.
Case-Laws - AT : The Appellate Tribunal ruled in favor of the assessee on the following issues: TP adjustment on international transactions for sale of goods, disallowance u/s 14A read with Rule 8D, and denial of deduction u/s 35(2)(ab). Regarding TP adjustment, the Tribunal held that since the assessee was bearing credit risk, market risk, and cost of bill discounting when selling directly to AAL, but these risks were shifted to the AE after selling through TCIPL, the TP adjustment was unjustified. On Section 14A disallowance, the Tribunal found no justification for the disallowance as the assessee had sufficient interest-free funds. Concerning Section 35(2)(ab) deduction, the Tribunal held that the assessee cannot be denied the deduction for failure to file Form 3CL, which is required to be submitted by DSIR, relying on judicial precedents. However, the AO can verify the actual expenditure incurred.
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Tribunal allows deduction for new owner after slump sale; upholds tax benefits for existing undertaking.
Case-Laws - AT : The Income Tax Appellate Tribunal allowed the assessee's claim for deduction u/s 80IA(4)(iv) of the Income Tax Act. The Tribunal held that the mere change of ownership of an existing undertaking through a slump sale would not disentitle the undertaking from the benefits u/s 80IA. The conditions prescribed u/s 80IA(3)(iii) regarding formation of an undertaking by splitting up or reconstruction of an existing business, or transfer of plant and machinery already used to a new business, were not applicable in this case. As the undertaking remained intact without any change in the plant and machinery or business, the mere change of ownership could not be a ground to deny the deduction u/s 80IA(4).
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Taxpayer's bonafide disclosure of foreign investments, sans malafide intent, exempts Black Money Act penalty.
Case-Laws - AT : The Income Tax Appellate Tribunal held that the assessee, although not disclosing foreign investments in the prescribed Schedule FA of the income tax return, had disclosed the investments in another schedule and offered the perquisite value for taxation. Considering the bonafide disclosure, absence of malafide intention, and the legislative intent behind the Black Money Act to deal with undisclosed foreign income and assets, the Tribunal deleted the penalty imposed u/s 43 of the Act for non-reporting of foreign assets. The decision was in favor of the assessee.
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Real estate firm wins tax deductions, escapes penalties for development projects.
Case-Laws - AT : The Tribunal held that based on the financial parameters and risk profile, the assessee qualifies as a developer rather than merely a contractor u/s 80IA of the Income Tax Act, entitling it to deductions. The CIT(A) rightly allowed the Section 80IA deduction based on the total income assessed by the AO, including additions or disallowances. The books of accounts were wrongly rejected by the AO, and the CIT(A) correctly deleted the additions made on estimated gross profit margins and disallowance of expenses for certain vendors lacking substantive evidence. The provision for defect liability was rightly allowed as a deductible expense. The disallowance of leave encashment provision was upheld due to Section 43B(f) requiring actual payment. The disallowance u/s 14A was deleted as no proximate cause linked the expenditure to exempt income. The partial disallowance of gift expenses was upheld. The addition u/s 40(a)(ia) was allowed on the ground of an invalid assessment u/s 153A. The penalty u/s 271(1)(c) was deleted as the assessee's claims did not amount to concealment or inaccuracy.
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Non-resident Korean Co's guarantee fees from Indian subs not taxable in India under DTAA.
Case-Laws - AT : The Income Tax Appellate Tribunal held that the guarantee fees received by the assessee, a foreign company incorporated in Korea and a non-resident without a permanent establishment in India, from its Indian subsidiaries for providing guarantees to foreign banks, cannot be taxed in India as per Article 22 of the Double Taxation Avoidance Agreement. The Tribunal noted that the guarantee fees were assessed as income from other sources and not business income, and that a similar issue for the assessment years 2014-15 and 2015-16 with the same facts and circumstances was held as not taxable in India. Consequently, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and allowed the assessee's appeal, ruling that the guarantee fees received during the assessment year 2016-17 are not taxable in India.
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Taxability of income earned abroad based on centre of vital interests.
Case-Laws - AT : The assessee's income earned in the USA is taxable in India. The tie-breaker test under Article 4 of the India-US DTAA is not applicable, as the assessee's centre of vital interest remained in India. While the income is includable in the total income u/s 5 of the Income Tax Act, the Appellate Tribunal directed the Assessing Officer to grant credit for taxes paid abroad by the assessee on the same income to avoid double taxation.
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Tax additions can't be solely based on statements during search; corroborative evidence needed.
Case-Laws - AT : The ITAT held that additions to the assessee's income cannot be made solely based on statements recorded during a search/survey operation u/s 131 of the Income Tax Act, in the absence of any other corroborative tangible evidence. The ITAT relied on the Supreme Court's decision in CIT, Salem, which stated that materials collected and statements obtained during a survey u/s 133A are not conclusive evidence and do not automatically bind the assessee. The ITAT further held that the application of the extrapolation technique depends on the facts and circumstances of each case, and in the present case, no adverse inference can be drawn against the assessee since no documents were found during the search. The ITAT also deleted additions made u/ss 69C and 69B, observing that additions cannot be made merely based on a valuation report without any supporting evidence brought on record by the Assessing Officer.
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Tribunal upholds assessee's stance on tax credits following CESTAT's ruling on genuine purchases.
Case-Laws - AT : The ITAT decided in favor of the assessee. The Central Excise Directorate had issued a show-cause notice alleging that the assessee had claimed CENVAT credit on bogus purchases. However, the CESTAT (Customs, Excise, and Service Tax Appellate Tribunal) had previously held that the purchases in question were not bogus. Consequently, the ITAT ruled that since the very basis for initiating proceedings u/s 263 of the Income Tax Act had been vacated/set aside by the CESTAT's findings, the order passed u/s 263 was liable to be set aside.
Customs
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Importer allowed SAFTA duty benefit on imported goods after producing valid country of origin certificate.
Case-Laws - AT : The CESTAT allowed the appeals filed by the appellant. The Tribunal held that the appellant is eligible for the benefit of the SAFTA Notification No. 99/2011-Customs dated 09.11.2011 as the appellant has fulfilled the conditions stipulated in the said notification by producing the country of origin certificate. Consequently, the impugned orders denying the benefit of the SAFTA notification to the imported goods were set aside, and the appeals were allowed.
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Fraudulent refund claim through forged documents; extended period recovery upheld.
Case-Laws - HC : The High Court dismissed the appeals filed by the assessee against the orders passed by the Tribunal. The assessee had fraudulently claimed and received refund of 4% Special Additional Duty by submitting forged documents to the Customs authorities, thereby contravening the provisions of Section 27 of the Customs Act, 1962 read with Notification No. 102/2007-Cus. The adjudicating authorities rightly invoked the extended period of recovery u/s 28 of the Customs Act, 1962, and ordered recovery of the erroneously sanctioned refund along with interest and penalty by denying the benefits under the said notification. The High Court upheld the Tribunal's order, finding no substantial question of law arising from the case.
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Customs gold smuggling case: Court upholds summoning order against accused based on co-accused's statement.
Case-Laws - HC : The High Court rejected the prayer to quash the summoning order against the accused applicant in a case related to illicit trade of foreign gold. The court held that the statements recorded u/s 108 of the Customs Act, 1962, from the co-accused and the applicant himself, provide sufficient evidence of their involvement in the smuggling and sale of foreign gold. The court relied on the Supreme Court's decision in Naresh J. Sukhawani Vs. Union of India, which allows the use of a co-accused's statement as evidence against others in cases under the Customs Act. Since the case was initiated based on a private criminal complaint, the Magistrate correctly applied judicial mind and found prima facie evidence to issue the summoning order. Consequently, the High Court confirmed the validity of the summoning order dated 24.8.2023 passed by the Special Chief Judicial Magistrate, Varanasi, and dismissed the application filed by the accused.
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Export duty on iron ore fines: Test report at load port prevails over CRCL for iron content determination.
Case-Laws - AT : The CESTAT dismissed the Revenue's appeal regarding the determination of export duty on exported iron ore fines. The Tribunal held that the iron content, prior to the amendment effective May 1, 2022, must be calculated on a wet basis following the principles established by the Bombay High Court and affirmed by the Supreme Court. The report from the Central Revenue Control Laboratory (CRCL), Kolkata, pertained to the dry form and was deemed irrelevant. The Tribunal ruled that the test report from the NABL-accredited agency at the load port should prevail over the CRCL report for determining the final iron content and transaction value as per the terms of the contract with the foreign buyer. The Customs officers cannot change the transaction value or the stipulated test report. The CRCL report cannot be used for levying export duty, and there were no allegations of fraud or misdeclaration. The Tribunal upheld the Commissioner (Appeals)'s order, finding no infirmity, and dismissed the Revenue's appeal.
Corporate Law
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Legatees Lack Standing in Estate Dispute, APL Holds Property Rights.
Case-Laws - HC : The plaintiffs/appellants, as universal legatees of the estate of Late Smt. Priyamvada Debi Birla, lack legal standing to initiate the suit seeking a declaration that the decision taken by the defendant/respondent-Company to obtain leasehold rights is illegal and void. Section 211 of the Indian Succession Act, 1925 vests the property of the deceased in the Administrator Pendente Lite (APL) appointed by the Testamentary Court, making the APL the legal representative. The plaintiffs, as legatees, cannot bypass the APL and assert rights over the estate directly. Their remedy, if aggrieved by the APL's functioning, lies in approaching the Testamentary Court. The plaintiffs are not "members" of the defendant-companies and cannot invoke the NCLT's jurisdiction u/ss 241 and 242 of the Companies Act, 2013. The High Court dismissed the application for interim injunction, finding the Single Judge's reasoned order justified and not warranting interference.
IBC
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Financial creditor's delayed application for investment refund rejected, corporate debtor's partial refund accepted.
Case-Laws - AT : The National Company Law Appellate Tribunal held that the Section 7 application filed by the Financial Creditor was hopelessly barred by limitation and dismissed it. The cause of action for refund of investment arose on 16.12.2010 as per the agreement, and the limitation period of three years expired on 15.12.2013. The Corporate Debtor had refunded the amount of Rs. 1.7 crores to the Financial Creditor through third parties, and the Financial Creditor's long silence indicated satisfaction of the refund of Rs. 3 crores. The Tribunal found no grounds to invoke Section 65 of the IBC for imposing penalty on the Financial Creditor as the Corporate Debtor did not plead that the proceedings were initiated maliciously or with fraudulent intent. The appeal was allowed.
Indian Laws
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High Court cancels bail in narco-terror case with 500kg heroin haul; NIA probe expanded to related offences upheld.
Case-Laws - SC : The Supreme Court dismissed the petition challenging the cancellation of bail granted to the accused in a criminal conspiracy case involving cross-border narco-terrorism and a huge recovery of 500 kgs of heroin. The Court upheld the legality of the Central Government's orders transferring the investigation to the National Investigation Agency (NIA). It held that once the NIA is directed to investigate a Scheduled Offence against an accused, it can also investigate any other offence committed by the same accused, provided it is connected to the Scheduled Offence. The Court interpreted the term "the accused" in Section 8 of the NIA Act to include any other accused whose name emerges during the investigation and who has committed an offence connected to the Scheduled Offence. The NIA's investigation into non-scheduled offences under the NDPS Act against the petitioner was justified due to their connection with the Scheduled Offences being probed in the Gujarat case.
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Appeal against execution of arbitral award dismissed: not maintainable under special Arbitration Act.
Case-Laws - HC : The High Court held that the appeals against orders in proceedings for execution or enforcement of arbitral awards are not maintainable. The doctrine of res judicata or principles analogous to it apply, as the issue of maintainability was previously decided. Even independent of res judicata, the appeals are not maintainable because the execution proceedings were under the Arbitration and Conciliation Act (ACA), not the Code of Civil Procedure (CPC). Section 37 of the ACA governs the appealability, being a special enactment prevailing over the CPC. The court affirmed the binding precedent that such proceedings arise u/s 36 of the ACA, not Order XXI CPC. The appeals cannot be maintained u/ss 13 or 13(1A) of the Commercial Courts Act read with Order XVIII CPC. Consequently, the appeals were dismissed as not maintainable, with costs imposed on the appellants.
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SC upholds statutory immunity for good faith actions under NDPS Act; quashes adverse remarks against police officer.
Case-Laws - SC : The Supreme Court quashed the High Court's order upholding the Special Judge's adverse observations against the appellant police officer for an offense u/s 58 of the Narcotic Drugs and Psychotropic Substances Act, 1985. The Court held that the Special Judge violated principles of natural justice by making findings without giving proper notice or following summary trial procedure prescribed u/s 36-A(5) of the NDPS Act read with the Cr.P.C. The Court reiterated that good faith actions under the NDPS Act are granted statutory immunity unless cogent material shows unreasonable motive, and mere allegations cannot dislodge presumption of good faith discharge of duties. The appeal was allowed, setting aside the impugned orders.
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Bank's auction upheld; borrower's challenge rejected on Res Judicata; transfer void on lis pendens.
Case-Laws - SC : The Supreme Court upheld the validity of the 9th auction conducted by the bank under the SARFAESI Act for sale of the secured asset to the petitioner. The court confirmed the sale and declared the title conferred through the sale certificate dated 27.09.2023 to be absolute. The borrower's attempts to challenge the auction proceedings at a belated stage were rejected by invoking the Henderson Principle of Constructive Res Judicata and the doctrine of lis pendens. The assignment agreement dated 28.08.2023 for transfer of the secured asset to a subsequent transferee was declared void, being hit by lis pendens. The borrower and bank were directed to cancel the release deed within one week.
Service Tax
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Potential double-dip: CENVAT credit scrutiny for public undertaking on 'cover notes' vs invoices.
Case-Laws - AT : The appellant, a public sector undertaking, had availed CENVAT credit on the basis of 'cover notes'. However, there were concerns about potential duplication of credit, as the appellant had also taken credit on the corresponding invoices. The matter was remanded back to the original authority to verify whether credit was taken twice against the same supply of goods/services. Regarding the extended period of limitation and penalties, while the extended period was invokable for inadmissible credit taken, the Tribunal held that the penalty should have been set aside by invoking Section 80 of the Finance Act, 1994, considering the appellant's status as a public sector undertaking. Consequently, the appeal was allowed in part.
Central Excise
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Propylene/Propene pure form classified under 29.01, not 27.11; Case remanded to determine purity level for proper classification.
Case-Laws - AT : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by the appellants against the order of the Commissioner classifying their product 'Propylene/Propene-PP feed stock' under CETI 2711 1400. The Tribunal held that if propylene/propene is in a pure or commercially pure state, being a separate chemically defined hydrocarbon, it is classifiable under heading 29.01 and not under Chapter 27. The matter was remanded back to the original authority to determine the purity level and whether it is a separate chemically defined compound for proper classification. The Tribunal also held that the extended period of limitation u/s 11A cannot be invoked as there was no willful suppression or misstatement by the appellants, whose periodic returns clearly showed details of production and clearance of the impugned product.
Articles
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Notifications
Case Laws:
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GST
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2024 (12) TMI 934
Maintainability of petition - availability of alternative remedy - 10% mandatory pre-deposit from the electronic cash ledger has been made - HELD THAT:- Since the pre-deposit has been made, the learned counsel for the petitioner is agreed that such a rigid stand should not have been adopted. This was a case of an inadvertent error and the dismissal of the petitioner s appeal even after the error was corrected, is excessively disproportionate. The impugned order is set aside - the petitioner s appeal restored before appellant authority - Now that the pre-deposit has already made, the appellate authority must consider and dispose of the petitioner s appeal on merits and in accordance with law.
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2024 (12) TMI 933
Jurisdiction to entertain petition against show cause notice - Exhaustion of alternate remedies - Challenge to SCN on the ground of alleged breach of Rule 142 (1A) of the Central Goods and Services Tax Rules 2017 (CGST Rules) in as much as no preshow cause notice was issued to the petitioner - HELD THAT:- In Oberoi Constructions Ltd. V/s. Union of India [ 2024 (11) TMI 588 - BOMBAY HIGH COURT] , the precedents on the exhaustion of alternate remedies surveyed - it was held in the said case that 'In the present petitions, the issue of whether the petitioners cases are covered by the exemption notification or the nil tax rate notification is debatable. The petitioners themselves accept that some of the services in the SCN may attract exemption and others may not. Ordinarily, SCNs cannot be split or quashed, especially where there are arguable issues on either side. In any case, the resolution would require examination into several factual aspects. In such situations, the contention of the SCN being wholly without jurisdiction cannot be accepted.' Following the reasoning therein, this petition is declined and the petitioner is relegated to respond to the impugned show cause notice. However, it is clarified that all contentions of all parties, are left open to be considered by the respondent that has issued show cause notice. Petition disposed off.
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2024 (12) TMI 932
Seeking review of an order directing them to refund interest amount - HELD THAT:- No ground can be said to have been made out for seeking a review of the order. Merely because the time was insufficient for them to check the calculations when the same was filed cannot be a ground on which our order can be reviewed. Concerning the letter of January 2014, the Review Petitioner (Respondent) fairly admits that this was not brought to the notice of the Court at the hearing. Therefore, this cannot be grounds for seeking a review. In any case, we have observed that an enquiry would be conducted as to why FD was not renewed and the responsibility fixed. In the enquiry, the Enquiry Officer can certainly rely upon this letter to come to the appropriate conclusion. However, insofar as our order is concerned, this letter would not bring about any change and, therefore, cannot be grounds for seeking the review of the order. Both the review petitions are dismissed.
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2024 (12) TMI 931
Dismissal of appeal on the ground that there is a delay in filing the appeal, without providing any opportunity of being heard - violation of principles of natural justice - HELD THAT:- Admittedly, the grounds relating to the delay in filing the appeal was not put to the petitioner by respondent No. 2. Respondent No. 2 ought to have brought to the notice of the petitioner to show cause as to why the appeal should not be dismissed on the ground of delay and ought to have sought explanation. Having not done so, there is a breach of natural justice. In so far as the grounds relating to the non-filing of board resolution authorising Mr. Udeshi are concerned, the petitioner submitted that they were under a bona fide belief that he, being Executive Director, would not require the resolution. Come what may be, without going into the legality of the same, since on the ground of delay in filing the appeal no opportunity was accorded to the petitioner, the impugned Order-in-Appeal dated 7 August 2024 is quashed and set aside and the respondent No. 2 is directed to issue defect memo to the petitioner of the defects in filing the appeal and give adequate opportunity to rectify the same. On rectification of the said defects, the respondent No. 2 to hear the appeal on merits and pass a speaking order. Petition disposed off.
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2024 (12) TMI 930
Challenge to Order-in-Appeal and the rectification order passed by respondent No. 2 i.e. the Commissioner (Appeals-II) - no notice was given before dismissing the appeal - violation of principles of natural justice - HELD THAT:- Admittedly, there is no dispute that the respondent No. 2 Commissioner (Appeals-II) did not give any opportunity of hearing to the petitioner for seeking their say on the three grounds on which the main appeal came to be dismissed, that is non-payment of pre-deposit, application for condonation of delay and board resolution of authorised person. Even the order rejecting the application came to be passed without hearing the petitioner. The appellate authority ought to have put to the petitioner the grounds on which he proposed to dismiss the appeal, namely pre-deposit, board resolution and condonation of delay and ought to have given opportunity to the petitioner to put their say and satisfy the appellate authority. There were procedural requirements which could not come in the way of seeking substantial justice. Respondent No. 2 will give the petitioner personal hearing stating grounds of deficiency and give adequate opportunity to the petitioner to rectify the same or to satisfy that no such grounds exists. Respondent No. 2, should thereafter hear the petitioner on merits and pass speaking order. Appeal disposed off.
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2024 (12) TMI 929
Rejection of petitioner s application for a refund - alleged procedural deficiencies - violation of principles of natural justice - HELD THAT:- M/s Knowledge Capital Services Private Limited [ 2023 (4) TMI 752 - BOMBAY HIGH COURT ], after referring to the relevant legal provisions, does hold that the deficiencies in the refund application have to be brought to the notice of the applicant in form GST RFD-03 so that the applicant can take steps as permissible under the law in that regard. In this case, there is no record of such deficiency memo or notice in terms of GST RFD-03 being issued to the petitioner. Though prima facie GST RFD-03 may not have been issued to the petitioner, even the petitioner failed to avail of the opportunity granted to the petitioner to raise such contentions in response to the show cause notice. Merely seeking adjournments and then contending that adjournment applications were not responded to or decided one way or the other is not grounds to complain about any failure of natural justice. In this case, the petitioner must accept the blame for not responding to the show cause notice within the time granted and raising the contentions which have now been raised after the impugned order was made. Since there was no response we cannot fault the respondents for making the impugned order. The interest of justice in such a situation would require the petitioner to pay costs of Rs. 2,00,000/- within 4 weeks from today to the 2nd respondent. Subject to depositing such costs within 4 weeks from today, given the peculiar circumstances and the fact that no GST RFD-03 was issued to the petitioner, the impugned order dated 30 April 2024 set aside and the petitioner s refund application made in form GST RFD-01 restored to the file.
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2024 (12) TMI 928
Reimbursement of extra GST amount paid @ 6% from 01.01.2022 to 30.09.2022 along with interest - grievance of the petitioner is that despite the aforesaid enhancement from 01.01.2022, the respondents are paying the running bills with 12% GST and the petitioner is paying 18% GST - HELD THAT:- Respondent No.4 which is a State GST Department, according to which also the rate of GST has been enhanced from 12% to 18% and same is liable to be paid by respondent No.2 which is a Government Entity. The respondent No.2 is directed to pay the difference of GST amount to the petitioner @ 6% from 01.01.2022 to 30.09.2022 with a period of three months from the date of receipt of certified copy of this order, failing which the petitioner shall be entitled for interest @ 6% per annum from the date of entitlement - petition disposed off.
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2024 (12) TMI 927
Challenge to SCN - no justification for either alleging any suppression or invoking the extended period of limitation under section 74 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The record shows that the Petitioner was audited, and an audit report was prepared on September 26, 2023. However, the impugned show-cause notice refers to the Petitioner s response at the pre-show-cause stage, after the audit report was prepared. Clause 3.5 of the show-cause notice refers to the statement of the petitioner's Finance Manager, which was recorded on July 1, 2024. These statements accept that the Petitioner is not registered as a Bank but a payment aggregator as per the RBI norms. At this stage, what is relevant is that the show cause notice is based upon findings of investigations that were ordered into the matter. No doubt, such findings are necessarily tentative. The scope of judicial review is extremely narrow at the stage of issuing a show cause notice. At this stage, it cannot be expected to decide whether the factual allegations are correct or not, but it is not thought that any case is made to halt further proceedings under the show-cause notice. Based on the premise that the audit had cleared the Petitioner or that allegedly complete disclosures were made during the audit, no case is made to interfere with the impugned show cause notice or the invocation of section 74 of the CGST Act. In any event, the contentions can always be raised in response to the show cause notice, and there is no reason to believe that such defences would not be considered and dealt with in accordance with the law. In the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others [ 1998 (10) TMI 510 - SUPREME COURT ], the Hon ble Supreme Court has explained that the writ petition may be entertained at the show cause notice stage, where the Petitioner seeks enforcement of any fundamental rights, where there is violation of the principles of natural justice or where the order or the proceedings are wholly without jurisdiction. It is satisfied that under all these circumstances are not made out in this case, and the Petitioner is only bent upon taking a chance to see if the proceedings are halted or hurdles are created in them. In the case of The Special Director and another Vs. Mohd. Ghulam Ghouse and Another [ 2004 (1) TMI 378 - SUPREME COURT ], the Hon ble Supreme Court has held that unless the High Court is satisfied that the show cause notice was totally non est in the eyes of law for absolute want of jurisdiction of the authority and to investigate the acts, the writ petition should not be entertained, for mere asking and as a matter of routine. The writ petitioner should merely be directed to respond to the show cause notice and raise all defences and contentions that may be highlighted in the petition. It is satisfying that no case is made out to interfere with the impugned show cause notice - petition dismissed.
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2024 (12) TMI 926
Challenge to impugned order under Section 73 of the Tamil Nadu Goods and Service Tax Act, 2017/Central Goods and Service Tax Act, 2017 including the Summary of the Order in Form GST DRC-07 - Non- Reversal Input Tax Credit [ITC] on account of Credit Notes issued by the Petitioner's suppliers, which is reflecting in Form GSTR-2A - HELD THAT:- Since, the order is made on the basis of the statement made by the learned counsel for the petitioner that 10% of the disputed tax has been remitted already, the respondents may verify the same. If the statement made by the learned counsel for the petitioner regarding the payment of 10% of disputed taxes is incorrect, the respondents authority shall intimate the same to the petitioner who shall deposit 25% of disputed taxes within 4 weeks from the date of such intimation. Subject to verification of payment of the entire disputed taxes or on payment of 25% of disputed taxes, attachments if any, would be lifted. The impugned orders are set aside and the petitioner shall deposit 25% of the disputed tax within a period of four weeks from the date of receipt of a copy of this order. The respondents authority shall take into account the amount remitted by the petitioner in excess of the admitted tax, while reckoning 25% of the disputed tax. On complying with the above condition, the impugned order of assessment shall be treated as show cause notice and the petitioner shall submit its objections within a period of four weeks from the date of receipt of a copy of this order along with supporting documents/material. Petition disposed off.
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2024 (12) TMI 925
Challenge to SCN and order creating a demand - discrepancies between the ITC claimed in GSTR-3B and ITC declared in GSTR-2A/2B - non-supply of documents - HELD THAT:- The submissions sought to be made by counsel for the petitioner regarding non-supply of documents, cannot be countenanced in the circumstances of the present case wherein neither in response to the notice pointing out the discrepancies nor in response to the notice under Section 73(1), the petitioner sought supply of the documents and based on the material available with it, filed the response. The adjudicating authority, after considering plea raised has taken a particular view of the matter and accepted a part of the plea raised by the petitioner, it is too late in the day for petitioner now to contend that along with the notices issued, the requisite documents should have been supplied - Once the plea raised by the petitioner, has been considered and a particular view has been taken and against the order statutory appeal is available, there are no reason to interfere in extraordinary jurisdiction of this Court, in the order impugned. The plea raised regarding difference in the date fixed and the date of order also has no substance inasmuch as no prejudice has been shown - petition dismissed.
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2024 (12) TMI 924
Maintainability of petition - availability of alternative remedy - Chellenge to order and consequent summary of demand - disallowance of ITC claimed under VAT Act - HELD THAT:- The Hon ble Patna High Court in M/s Cohesive Infrastructure Developers Pvt. Ltd. [ 2023 (11) TMI 247 - PATNA HIGH COURT ] disposed of the identical cases holding that ' 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.' In the light of the submissions made by the learned counsel for the respective parties as well as looking to the judgment passed by the Hon ble Patna High Court in the matter of M/s Cohesive Infrastructure the present writ petition is disposed of with a direction that the petitioner may file an appeal before the appellate tribunal after depositing 20 per cent of the demanded tax amount as required to be deposited as per the provisions of Section 112 (8) of the Act, 2017 within 30 days from receipt of copy of this order. Petition disposed off.
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2024 (12) TMI 923
Challenge to impugned order - respondent has proceeded to confirm the proposal on the premise that no documentary evidence has been filed in support of petitioner's contentions contrary to the material on record - non-application of mind - violation of principles of natural justice - HELD THAT:- Petitioner agreed to furnish the hard/physical copies of the documents relied upon by the petitioner. The petitioner shall treat the impugned assessment order as Show Cause Notice and submit their reply/objections along with supporting documents/material, if any, within a period of two weeks from the date of receipt of a copy of this order - the impugned order is set aside - petition disposed off.
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2024 (12) TMI 922
Time limitation - refund claim - Delay in processing refund applications - Inordinate delay in verification by Adjudicating Authority - HELD THAT:- Though no time limit was set for verification, it was expected that it would be completed within a reasonable period of two to three months. The Original Adjudicating Authority has not bothered to verify and comply with the Commissioner (Appeals) order dated 28 May 2018 for six years, which is entirely unacceptable. The concerned Original Adjudicating Authority is directed to comply with the directions in the order dated 28 May 2018 within four weeks from today. The Commissioner, GST, further directed to investigate the matter, determine the reasons for this inordinate delay, and fix responsibility on the concerned official/s. After assigning responsibility, the loss to the public exchequer must be recovered from the officer/s concerned. Petition disposed off.
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2024 (12) TMI 921
Challenge to impugned order passed by the respondent relating to the assessment year 2017-18 - excess availment of Input Tax Credit vis-a-vis Input Tax Credit reported in annual return in GSTR-9 - HELD THAT:- To a pointed question as to why was the impugned order passed without intimating the petitioner to produce documents for all the transactions, despite a specific request having been made by the petitioner vide letter dated 28.08.2023, the learned counsel for the respondent would submit that petitioner may submit their objections along with supporting documents and orders would be passed afresh. The impugned order is set aside. The petitioner shall treat the impugned order of assessment as a Show Cause Notice and shall submit its objections within a period of two (2) weeks from the date of receipt of a copy of this order along with relevant reconciliation statement and supporting documents/material - Petition disposed off.
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2024 (12) TMI 920
Challenge to impugned assessment order - impugned order traverses beyond the show cause notice - violation of principle of natural justice - contrary to the mandate under Section 75(7) of the GST Act - it was submitted by the respondent that inasmuch as the petitioner's status as intermediary was set out in the impugned order for the first time which resulted in the increase in the demand of taxes and the consequential interest and penalty in the impugned order being in excess of the amount specified in the notices - HELD THAT:- The impugned order dated 31.08.2024 is set aside. It is open to the petitioner to submit their reply within a period of 3 weeks from the date of receipt of a copy of this order. If for any reason the petitioner does not file their reply within the stipulated period i.e., 3 weeks from the date of receipt of a copy of this order, the impugned order of assessment shall stand restored. Petition disposed off.
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2024 (12) TMI 919
Denial of the Input Tax Credit - petitioner has not received any goods from the alleged supplier - violation of principles of natural justice - omission of outward and inward E-way bills from the accounts - challenge to assessment order. Denial of the Input Tax Credit - HELD THAT:- It is stated in the impugned order that there was no supply of goods or service or both by the supplier viz., Tvl.Thirumuruga Traders to the petitioner, the transactions cannot be genuine as they were based on tax invoices issued without actual receipt of goods or service or both and any claim of Input Tax Credit on the basis of the such transactions cannot be sustained. Omission of outward and inward E-way bills from the accounts - HELD THAT:- The question whether a supplier is existing or not, is a disputed question of fact which ought to be decided on the basis of evidence adduced by both assessee as well as the revenue. The examination of such disputed question of facts is foreign to jurisdiction under Article 226 of the Constitution. The impugned order proceeds to reject the petitioner's reply in respect of omissions to generate E-way bills of inward/ outward supply for want of evidence. It is well settled that adequacy or inadequacy or sufficiency of evidence cannot be gone into under Article 226 of the Constitution of India. The challenge to the order of assessment stands rejected. It is open to the petitioner to file an appeal within 2 weeks from the date of receipt of a copy of this order, subject to complying with all conditions relating to appeal, including pre-deposit, if any. If such appeal is filed within the stipulated period i.e., 2 weeks from the date of receipt of copy of this order. The same would be entertained and disposed of in accordance with law after affording the petitioner a reasonable opportunity of hearing. The writ petition stands disposed of.
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2024 (12) TMI 918
Levy of tax on the alleged services rendered to Nuclear Fuel Complex, Hyderabad - challenge is primarily on the premise that the activity of the petitioner would fall under Entry 3 of Schedule-II of the Central Goods and Services Act, 2017 Act or in any view would be covered by Serial No.8 of Notification No.9 of 2017, dated 28.06.2017 and thus any levy of tax on the petitioner would fall foul of Article 265 of the Constitution of India - HELD THAT:- This Court is of the view that there is merit in the submission of the learned Counsel for the petitioner that notification No.9 of 2017, dated 28.06.2017 would get attracted once an assessee or a taxable person is able to demonstrate that it is a service rendered by Central Government to another Central Government or a State Government. The material which has now been placed before this Court is relevant to determine if the petitioner is a unit of NFC complex / which in turn is a part of the Department of Atomic Energy coming under the Central Government. The above aspect would in turn have relevance in determining the applicability of Notification No.9 of 2017, dated 28.06.2017. The Assessing Authority ought to have examined the applicability of Notification No.9 of 2017, dated 28.06.2017 before making the assessments, which it failed to. When this was pointed out, the learned counsel for the respondent would submit that they would redo the assessments. This Court is inclined to set aside the impugned orders in GSTIN No.33AAALZ0205G1ZE for the assessment years 2017-18; 2018-19; 2019-2020; 2020-21; 2021-22 and 2022-23, dated 20.07.2023 and to direct the Assessing Authority to re-do the assessments - the writ petitions stand disposed of.
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Income Tax
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2024 (12) TMI 917
Validity of Reopening of assessment u/s 147 - claim under CSR (Corporate Social Responsibility) expenses made was otherwise not allowable and as such, the said claim deserves to be disallowed and to that extent, income of the petitioner has escaped assessment - reliance on audit party opinion As decided by HC [ 2023 (4) TMI 1305 - GUJARAT HIGH COURT] expenditure incurred is out of Commercial expenses and is fully allowable and further it is the stand of the petitioner that even it is not the case of revenue that expenditure if any for explanation 2 to Section 37 is not allowable expenditure and as such, the fundamental error appears to have been crept in and all details are consisting to computation of income, profit and loss figures and also tax audit report which are forming part of the assessment records, still in the absence of any tangible material, the respondent authority is trying to take a different view despite the original scrutiny of assessment is done. Under the circumstance, the action sought to be initiated is impermissible and we are of the considered opinion that a case is made out by the petitioner to call for interference. Petition allowed. HELD THAT:- The special leave petition is barred by 437 days delay. We have looked into the application for condonation of delay. Cause shown is absolutely insufficient. The application for condonation of delay stands rejected. Special leave petition stands dismissed as time barred.
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2024 (12) TMI 916
Addition on account of contributions to unrecognised provident fund and unapproved pension fund - HELD THAT:- ITAT vide its judgment noticed the view taken in cas Decom Marketing Pvt. Ltd. [ 2001 (6) TMI 54 - GUJARAT HIGH COURT] that the contributions made to the Provident Fund Act, 1925 would therefore, be eligible for registration and as the Trust of the assessee Corporation was duly recognized by CIT. Assessee had duly discharged its onus, the appeal therefore of the assessee is found to have been allowed rightfully and the question of law as framed by this Court (i) is answered in favour of assessee. Allowance of an expenditure of the nature described in Section 36 (1) (iv) as u/s 37 (1) - HELD THAT:- This Court framed the aforesaid question of law based on the judgment of Sony India P.Ltd [ 2006 (6) TMI 76 - DELHI HIGH COURT] which held that such expenditure while depositing amount in Provident Fund, is not allowable. We notice that the judgment passed by the Delhi High Court has failed to take notice of the judgment passed by this Court in case CIT Vs. Punjab Financial Corporation [ 2007 (3) TMI 162 - HIGH COURT, PUNJAB AND HARYANA] and therefore, a different view was taken by the Delhi High Court and the same could not be binding upon this Court as it is a settled law that earlier judgment passed by this Court would have a binding precedential value over and above any different view taken by any other High Court. The law has been settled by the Supreme Court in Official Liquidator Vs. Dayanand [ 2008 (11) TMI 679 - SUPREME COURT] wherein held the law laid down in a decision delivered by a Bench of larger strength is binding on any subsequent Bench of lesser or co-equal strength and it would be inappropriate if a Division Bench of two Judges starts overruling the decisions of Division Benches of three Judges. Thus, question No. (ii) is also answered in favour of the assessee Liability payable by the assessee on account of electricity duty payable can be set off by way of allotment of equity shares and that it amounts to discharging of liability u/s 43B - HELD THAT:- The word actually paid has been, therefore, used only in the proviso, while the explanation lays down circumstances where the deduction is not allowable. Thus, as per the revised return filed by the assessee, the liability discharged towards the Government relating to Electricity duty was payable from the allotment of equity of Rs. 52.41 crores by Government of Haryana to the said extent, the same was adjusted i.e. Rs. 44 Crores. The shares being part of the funds allotted by the Government of Haryana, the same cannot be said to have been acquired from other sources and was therefore, allowable in terms of Section 43 (d) of the IT Act, 1961, accordingly the present appeal is hereby dismissed.
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2024 (12) TMI 915
Validity of Reassessment order - as argued AO has failed to consider the replies filed by the petitione - HELD THAT:- The impugned order dated 21.03.2024 is required to be quashed and set aside, so as to enable the respondent-AO to pass a fresh de novo order taking into consideration, the replies dated 13.02.2024 and 21.02.2024 filed by the petitioner. The petition succeeds in part and is accordingly allowed by quashing and setting aside the impugned Assessment Order dated 21.03.2024 and matter is remitted to the respondent No. 1 to pass a fresh de novo order considering the replies filed by the petitioner dated 13.02.2024 and 21.02.2024. We make it clear that no further opportunity of hearing is required to be given to the petitioner as the petitioner did not file any reply to the show-cause notice dated 08.03.2024. Such exercise shall be completed within a period Twelve weeks from the date of receipt of copy of this order.
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2024 (12) TMI 914
Validity of assessment order and demand notice based on non-service of show cause notice u/s 144B (1) (xvi) - HELD THAT:- As is apparent that show cause notices dated 21.09.2022 and 27.09.2022 were never served upon the petitioner. We are therefore, left with no other option but to quash and set aside the impugned assessment order and remit the matter to the respondent-Assessing Officer for passing a fresh de novo order after giving an opportunity of hearing to the petitioner to file reply to the show cause notices dated 21.09.2022 and 27.09.2022 proposing to make additions as per the provisions of Section 144 (B) (1)(xvi) of the Act. Such exercise shall be completed within a period of Twelve weeks from the date of receipt of copy of this order.
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2024 (12) TMI 913
Reassessment proceedings against non-existing company being amalgamated with the petitioner - HELD THAT:- As decided in Maruti Suzuki India Ltd. [ 2019 (7) TMI 1449 - SUPREME COURT ] and Teleperformance Global Services Private Limited [ 2021 (4) TMI 550 - BOMBAY HIGH COURT ] once the amalgamating company had ceased to exist as a result of the scheme of amalgamation approved by the NCLT, there was no warrant in law for the Assessing Officer to proceed against a non-existent company. In the present case, there is no dispute in regard to the amalgamation order having taken effect from 01 April 2005 and which was in pursuance of the order passed by this Court in the proceedings of Company Petition. In this view of the matter, the impugned action u/s 148 of the IT Act leading to passing of the assessment order, as impugned, was wholly without jurisdiction, non-est and a nulity.
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2024 (12) TMI 912
Validity of reopening of assessment - unexplained accommodation entry receipts - HELD THAT:- Order u/s 148A(d) of the Act has been passed by the respondents. The order is based on the statement of Nikhil Soni given on oath during the search. Nikhil Soni admits that he had provided accommodation entry to the present petitioner through his business concerns which is reflected from the diary found and seized from the business premises of M/s Vivek Jewellers. Therefore, prima facie opinion was recorded that accommodation entry remained unexplained in the hand of assessee i.e. present petitioner which has escaped assessment from the Assessment Year - 2017 - 18. The petitioner is yet to explain the nature and source of the aforesaid income. The proceedings are within limitation as observed in para - 8 of the impugned order. The aforesaid entries are found in the material collected in search and seizure during the demonetisation period. The petitioner has not placed any material in respect of assessment proceedings conducted against M/s Vivek Jewelers Jindal Bullion Limited, therefore, detailed enquiry will be conducted u/s 148 of the Act by the authority, where the petitioner will get ample opportunity to prove his case. Hence, no case for interference is made out in the matter. Writ Petition dismissed.
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2024 (12) TMI 911
Validity of reopening of assessment - non deduction of TDS u/s 195 to foreign entities which do not have a permanent establishment ( PE ) in India - HELD THAT:- As decided in order passed u/s 201(1) all transactions are done at arm's length, so assessee should not be treated as an assessee-in-default in respect of payment made by it to HMJ and its affiliates u/s 201 of the Act. Viewed in the aforesaid light, it is manifest that there would exist no justification for the continuation of the reassessment proceedings which stand impugned in the instant writ petitions. Decided in favour of assessee.
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2024 (12) TMI 910
Denial of grant of registration of Trust u/s. 12AB and approval u/s. 80G - charitable activity u/s 2(15) - trust's objects were primarily for the benefit of its members and their families, not the public at large - HELD THAT:- We observe that the Objects which were selected/picked up by the CIT(E) were only incidental Objects, which were only aimed at providing administrative support to the main Objects of the trust, which in our view, are charitable in nature. We also observe that all details of expenses incurred by the assessee-trust were submitted before the CIT(E) and no specific finding has been given that the said expenses were not charitable in nature. We further observe that for the past three years, the Objects of the trust have not been challenged by the Tax Authorities and even on the principle of consistency, unless any new facts comes on record, registration cannot be denied to the assessee, on the basis of same set of facts. Accordingly, CIT(E) has erred in facts and law in denying granting of registration to the applicant-trust u/s.12AB of the Act. As decided in Bayath Kutchhi Dasha Oswal Jain Mahajan Trust 2016 (9) TMI 8 - GUJARAT HIGH COURT] has held that where apart from Objects which were for the benefit of religious community, the assessee-trust had large number of other objects which were for benefit of general public, the Tribunal was correct in allowing registration to the assessee. Denial of approval u/s 80G - This is not a fit case where registration u/s. 80G(5) of the Act should be denied to the assessee, since from the Objects of the applicant-trust it is evident that the Trust has not been formed for benefit of any particular religious community or for that matter for carrying out religious activities per se. As a result, appeal of the assessee is allowed.
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2024 (12) TMI 909
Unexplained credit u/s. 68 - difference in the cost of shares donated by the assessee s relative to assessee and that recorded at fair market value by the assessee - HELD THAT:- We notice that the assessee received the gift of shares from the brother of her spouse, who is a relative in terms of explanation (a) attached to the proviso to clause (xiii) r/w explanation to clause (vii) of section 56(2) of the Act. The gifted shares were recorded by the assessee in her account exhibiting the cost of gifted shares at fair market value @ Rs. 7,76,25,000/-. Such a gift is wholly exempt u/s. 56(2)(X) of the Act. The aforesaid issue is accordingly determined in negative against the revenue and in favour of the assessee. AO is directed to delete the said addition - Assessee s appeal is allowed.
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2024 (12) TMI 908
Claim of depreciation on car (tangible asset) - denial of claim as car was in the name of assessee s husband - HELD THAT:-Assessee may be treated to be the owner of the car, purchased in the name of her husband but funded by assessee s proprietorship concern. The first ingredient of section 32 of the Act, is therefore existing in favour of the assessee. Second ingredient of section 32 of the Act, assessee has to show that the car, purchased in the name of assessee s husband, was used for the purpose of assessee s business either wholly or partly. Learned assessing officer has mentioned in his order that the assessee could not lead any evidence such as log book, date of travel, distance travelled etc. of the car to show the travel undertaken. The same is the position before first appellate authority. Appellant assessee as an individual is at the command of her sole proprietor business. The decision-making rests in the assessee herself. The assessee, being the exclusive owner of the business, straight forward tax structure of direct and simple taxation has to be followed in respect of assessee s business income which is reported on the assessee s tax return. Since there is no legal requirement of discloser of financial information publicly, business activities and financial records can remain confidential giving certain level of discretion to the assessee as a sole proprietor of her business concern, the assessee should have been more careful in preserving the evidence by way of maintaining a log book or by documenting the terms and conditions with her husband with respect to the use of car for the purpose of assessee s business. The allowance of motor car expenses, insurance paid, etc. u/s. 37 of the Act, cannot automatically entitle assessee for the depreciation u/s. 32 of the Act as both the sections are mutually exclusive. The assessee has thus failed to prove that the car was used for the purpose of assessee s business wholly or in part. Assessee is thus not entitled for the claim of depreciation u/s. 32 of the Act - Decided against assessee.
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2024 (12) TMI 907
Revision u/s 263 - Bogus LTCG - allowance of claim of exempt income by the assessee u/s 10(38) on long term capital gains earned on the sale of shares of LHSL which as per the information available with the Department, were allegedly penny stock - HELD THAT:- AO has, during the assessment proceedings raised every possible query on the information available in the insight portal and the assessee did respond to the same. DR before us was unable to point out, which query remained to be answered by the assessee or which inquiry was not conducted by the AO, with respect to the information in the insight portal with the AO. Considering the same, it is highly strange that the ld.Pr.CIT still goes on holding that the AO had not conducted proper inquiries. Considering the voluminous inquiries conducted by the AO, as noted above by us, the onus was on the ld.Pr.CIT to point out the specific inquiry which the AO had not conducted and which resulted therefor in the assessment order being erroneous, causing prejudice to the Revenue for a valid exercise of jurisdiction under section 263 of the Act. Thus, we hold that the impugned order passed by the ld.Pr.CIT u/s 263 of the Act is without any finding of error in the order of the AO and is therefore not sustainable in law. As in the present case brought out in the order of the PCIT do not demonstrate the concrete steps which the AO as per him failed to take considering the report of investigation before him. An order has to be a speaking and well-reasoned order bringing out clearly the basis for arriving at any findings. This is a basic rule/ principle of natural justice. There is no scope of any assumptions/ presumptions/reading between the lines, which can be left for the discretion of the appellate authorities. In the present case, as noted above by us, the Ld.PCIT except for stating that the AO has not conducted full inquiry on the issue, has not pointed out what remained to be considered and inquired into by him considering the information on the insight portal and considering the investigation and inquiry on the issue conducted during reassessment proceedings. PCIT seems to have left it for the appellate authorities to derive the same. Such orders are not sustainable. Appeal of the assessee is allowed.
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2024 (12) TMI 906
Revision u/s 263 - As per CIT AO omitted to consider the incriminating search material evidencing the assessee's money-lending business that had outstanding debtors balance on the date of search and failed to make necessary inquiries or verification to suitably assess the sources for investment made in the money-lending business HELD THAT:- The assessee furnished various replies against the same. In reply dated 02-03-2021, it was explained that out of total amount in circulation in money lending, almost 98% represent borrowed funds. The quantification of debits / credits as shown in the notices was not a true reflection of either the gross amount lent or borrowed. Therefore, these amounts could not be considered as income as proposed by Ld. AO. Assessee also explained that the amount outstanding as debtors on the date of search was Rs. 35 Crores and the source for this could only be out of the income generated from money-lending business over the period. The Ld. AO failed to take into consideration the corresponding amount outstanding on the same date in the loan creditors account. The source of investment in money lending business was duly enquired into by Ld. AO during the course of assessment proceeding. The assessee had furnished the replies to the satisfaction of Ld.AO. It was duly explained that out of total amount in circulation in money lending, almost 98% represent borrowed funds. It was also explained that the quantification of debits / credits as shown in the notices was not a true reflection of either the gross amount lent or borrowed and therefore, these amounts could not be considered as income of the assessee. The assessee also explained that the amount outstanding as debtors on the date of search was Rs. 35 Crores and the source for this could only be out of the income generated from money-lending business over the period. Thus, the issue of investment in money lending business was duly examined and verified by Ld. AO. The assessee furnished plausible explanation for the same. Having satisfied with assessee s replies, AO framed assessment for this year as well as for preceding years. AO accepted the claim of the assessee with due application of mind. The view of Ld. AO, in our considered opinion, was one of the plausible views and the same is not opposed to facts to record. This being the case, Ld. Pr. CIT, in our considered opinion, could not have substituted the opinion of Ld. AO with that of his own view unless the view of Ld. AO was shown to be perverse. We find that the view of Ld. AO was a plausible view. Where two views are possible and AO has preferred one view against another view, order could not be said to be erroneous or prejudicial to the interest of the revenue. See MALABAR INDUSTRIAL CO. LTD [ 2000 (2) TMI 10 - SUPREME COURT] and MAX INDIA LTD. [ 2007 (11) TMI 12 - SUPREME COURT] - Decided in favour of assessee.
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2024 (12) TMI 905
TP adjustment u/s 92CA(3) - determining arm s length price in relation to interest paid to related party - as argued provisions of sec. 92BA have been amended vide Finance Act, 2017 to exclude specified domestic transactions which are contained u/s 92BA(1) r.w.s. 40A(2)(b) of the Act from purview of transfer pricing regulations - HELD THAT:- As the order of TPO was passed on 31.10.2017 and the assessment order by the Ld. AO on 29.12.2017, being both the date falls after 01.04.2017, therefore, the issue in present case is expressly covered by the ratio of M/s Texport [ 2019 (12) TMI 1312 - KARNATAKA HIGH COURT] , hence the addition made on the basis of omitted provision of the law is unsustainable and have no standing in the eyes of law. Consequently, the addition made as an upward adjustment treating the transaction with related party as SDT is directed to be deleted. Addition u/s 40A(3) - cash payment of Rs. 8,00,000/- to two villagers/individuals - assesses explained that the payment is made to a villager, whose village has no bank - HELD THAT:- We are of the considered opinion that the applicability of section 40A(3) would only exclude the cases which are exclusively covered under Rule 6DD. Under such circumstances, we cannot concur with the contentions of the Ld. AR based on the contention that the genuineness of the parties or payments which though was not doubted by the Ld. AO, thus provisions of section 40A(3) cannot be invoked. Adhoc disallowance of 10% from various expenses such as travelling, business promotions lodging and boarding, pooja expenses, confirmed by Ld. CIT(A) at 5% - HELD THAT:- Since the nature of expenses incurred by the appellant and as the same were supported with self-made vouchers the element of personal claimed was not ruled out. As there was no further explanation by the assessee regarding the self-made vouchers which are not supported with proper bills, we do not find any infirmity in the order of Ld. CIT(A), therefore, the decision of LD. CIT(A) to sustain the addition to the extent of 5%, merits substance and acceptable, we, therefore, uphold the same. Consequently, Ground of the present appeal of assessee stands dismissed.
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2024 (12) TMI 904
TP Adjustment - international transactions relating to sale of goods - assessee adopted other method as the most appropriate method - goods are sold on Bill To Ship To Model basis i.e., the billing is done to TCIPL and the goods are sold directly to third party i.e., Adama Agan Ltd [AAL] - HELD THAT:- The undisputed fact is that the assessee was selling goods directly to AAL. The credit period was between 150-180 days and the assessee was bearing the cost of bill discounting, credit risk arising from non-payment of dues by customers and also market risk where the prices keep on fluctuating in the international market. Post 29th August, when the assessee started selling its goods through its AE, TCIPL, the actual days of credit were between 5-21 days with no credit risk and no market risk as both have been shifted to the AE, TCIPL. As per the chart exhibited the assessee has clearly demonstrated the benefit in saving of interest. From the chart, it can be seen that the actual difference of credit when the sales are made by AE to AAL, is much less than the credit period when sales were made by the assessee directly to AAL. Since all the apprehensions of the DRP has been explained in the chart exhibited the impugned TP adjustment was uncalled for on the facts mentioned hereinabove. Therefore, we direct the AO/TPO to delete the impugned TP adjustment. Ground Nos. 1 to 4 are allowed. Disallowance u/s 14A r.w.r. 8D - The undisputed fact is that the assessee has own interest free funds and has earned cash profits during the year under consideration. The interest free own funds are far more in excess of the investments and the cash flow statement already on record suggest that no borrowings have been invested in purchasing of investments. We further find that nowhere the AO has recorded his dis-satisfaction insofar as the suo moto disallowance of Rs. 18.61 Lakhs is concerned. AO has simply stated that some expenses need to be disallowed for earning exempt income without pointing out why the suo moto disallowance made by the assessee is not sufficient for earning the exempt income. Thus no merit in the impugned disallowance made u/s 14A. Decided in favour of assessee. Denial of deduction u/s 35(2)(ab) - AO noticed that the assessee has not filed certificate from DSIR in Form 3CL for claiming the above expenditure - As explained that under Rule 6 of the Income Tax Rules, 1962, the Department of Scientific Industrial Research (DSIR), is required to submit its report to the Income Tax Authorities in Form 3CL and there is no requirement of the assessee to file the said Form but From No. 3CL is required to be submitted by the DSIR, therefore, failure to file the same cannot be attributed to the assessee. As relying on decision of Astec Lifesciences Ltd. [ 2023 (8) TMI 1079 - BOMBAY HIGH COURT ] allegation of failure to file the said Form cannot be attributed to petitioner. Thus taking a leaf out of the decision of Sun Pharmaceuticals Industries Ltd. [ 2017 (8) TMI 933 - GUJARAT HIGH COURT ] in principle we accept the contention that, communication is between the prescribed authority and the Department and for the default in same, the assessee cannot be made to suffer. However, it would be open for the AO to verify the actual expenditure incurred by the assessee. With these directions, Ground Nos. 11 to 15 are allowed.
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2024 (12) TMI 903
Reopening of assessment u/s 147 - Addition of bogus purchases - reasons to believe or suspect - HELD THAT:- It is settled position of law that the reopening of an assessment can be made by the AO only after recording reasons for reopening of assessment. The reasons so recorded are sacrosanct and hence, it cannot be changed later. In the instant case, the AO has recorded reasons mentioning alleged bogus purchases, but the fact would remain that the assessee has not made any such purchases. AO has used the expressions source of investment and very basis of investment therein remained unexplained , which shows that he AO was under the impression that the assessee has given some money. On the contrary, AR submitted that the assessee has taken loans from the companies belonging to Shri Pravin Kumar Jain, which again proves that the AO has reopened the assessment without knowledge of exact nature of income alleged to have escaped the assessment at the time of recording reasons as well as at the time of completion of assessment. As noticed earlier, the provisions of sec. 147 of the Act makes it mandatory that the AO should be clear about the alleged escapement of income while recording reasons for reopening of assessment. Hence, the reopening has to be invalid on these reasons. AO shall be entitled to make addition on any other issues not mentioned in the reasons for reopening of assessment, only if he makes addition on any one of the issues mentioned in the reasons for reopening. We notice the above said contention of the assessee is supported by the decision rendered in the case of CIT vs. Jet Airways (I) Ltd [ 2010 (4) TMI 431 - BOMBAY HIGH COURT] AO had reopened the assessment on the reasoning that the assessee has availed accommodation entries in the form of bogus purchases. However, while completing the assessment, the AO assessed the income u/s. 68 r.w.s 56 - AO did not make any addition in respect of the issue for which the reopening was done. Decided in favour of assessee.
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2024 (12) TMI 902
Deduction u/s 80P - denial of deduction as treating the assessee as a cooperative bank - HELD THAT:- We find no merit in the Revenue s arguments supporting the same thereby treating the assessee as a cooperative bank. It appears that case law Mavilayi Service Cooperative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] as followed in Kerala State Co-Operative Agricultural Rural Development Bank decision [ 2023 (9) TMI 761 - SUPREME COURT] has already rejected the Revenue s very arguments thereby holding that in absence of banking license being issued under the provisions of Banking Regulation law and dealing with general public at large; the departmental authorities could not proceed on the basis of namesake only to decline the impugned section 80P deduction The lower authorities have erred in law and on facts in declining the assessee s section 80P deduction. So far as the Revenue s reliance on the very issue having got decided against the assessee in the earlier assessment year is concerned, we conclude that the same would not amount to adopting a correct approach in light of the aforesaid case law. The assessee s instant former substantive ground succeeds therefore. Disallowance of payment of gratuity to LIC etc. under the regular business heads which are found as covered under the CBDT s landmark Circular No. 37/2016 dated 02.11.2016 in assessee s favour and against the department that any such disallowance made under the regular business heads increases the business profits eligible for deduction(s) prescribed under Chapter-VIA of the Act. We reiterate that the assessee s section 80P deduction claimed stands accepted in the preceding paragraphs. We thus allow all it s instant remaining substantive ground against the department in very terms. Necessary computation shall follow.
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2024 (12) TMI 901
LTCG - Deduction u/s. 54F - since the residential property in question was purchased in the name of assessee s wife who is also assessed to tax separately - HELD THAT:- We are of the opinion that assessee s claim of deduction u/s. 54F of the Act ought to have been granted to assessee as held in the case of CIT v. Natarajan [ 2006 (2) TMI 136 - MADRAS HIGH COURT] though in the context of sec.54 of the Act, which section in pari materia with sec.54F of the Act. And it is noted that predominant judicial view in this regard is that for the purpose of sec.54F of the Act, new residential house need not be purchased by the assessee in his own name. Since the assessee has purchased the residential property in his wife s name, deduction need to be allowed and for such a proposition. As decided in the case of CIT v. Kamla Wahal [ 2017 (8) TMI 285 - PUNJAB AND HARYANA HIGH COURT] the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife. There is also no dispute that the entire investment has come out of the sale proceeds and that there was no contribution from the assessee's wife. AO is directed to give deduction claimed u/s. 54F of the Act. Decided in favour of assessee.
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2024 (12) TMI 900
Deduction of section 80IA(4)(iv) - change of ownership of an undertaking - Denial of claim as conditions prescribed under the section was not complied by the assessee - HELD THAT:- In the case in hand, it is not a transfer of a plant or machinery to new business, but it is a transfer of an existing ongoing business undertaking under slump sale and therefore, the undertaking remains intact and only the ownership got changed. There is no transfer of any plant or machinery already used for any purpose to a new business, rather the undertaking is not a new business in the hands of the assessee because it is already existed business undertaking acquired by the assessee because it is way of slump sale as an ongoing concern basis. Thus, if the undertaking is otherwise eligible for deduction u/s 80IA(4)(iv), then the mere change of ownership would not disentitle the undertaking from benefits u/s 80IA As observed that the formation of an undertaking should not be confused with ownership of the business if the undertaking is formed by splitting up or by reconstruction in that case the undertaking will not be qualified for exemption. However, if the undertaking was already in existence and was not formed by splitting up or reconstruction of the business, then mere change of ownership on conversion of proprietorship into partnership firm would not amount to transfer of plant and machinery to a new firm. A similar view has been taken in the case of CIT vs. Tata Communication Network Services Ltd. [ 2011 (8) TMI 633 - DELHI HIGH COURT ] Mere change of ownership cannot be a ground to deny the benefit of section 80IA(4) so long as the undertaking under consideration remains intact and same without any change in the Plant Machinery or business already in existence. The conditions, as stipulated u/s 80 IA(3)(iii) of the Act contemplate a situation of forming an undertaking by splitting up or reconstruction of existing business as well as transfer of Plant Machinery already used to a new business but, none of those transaction/incidents are part of the acquisition of the business undertaking by the assessee under consideration. Accordingly, we are of the considered opinion that, the disallowance of deduction u/s 80IA(4) to the assessee by the AO and confirmed by the learned CIT (A) is highly unjustified and not sustainable. Hence we allow the claim of the assessee.
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2024 (12) TMI 899
Penalty u/s. 43 of the Black Money Act - non-reporting of assets/bank account/investment in schedule FA of the income tax return filed for the respective assessment years by the assessee - assessee had made investments in offshore fund in MAURITIUS but not disclosed his foreign investment in schedule FA of ITR - HELD THAT:- Admittedly, assessee did not disclose his foreign asset in particular Schedule, i.e., Schedule FA though the same was duly disclosed in the Schedule AL in the item shares and securities in the Income tax return. Further, assessee had offered perquisite value of the foreign asset, i.e., ESOPs in his return of income which was subjected to tax by way of TDS. Further, in the course of impugned proceedings, assessee had offered all the details and explanations corroborated with documentary evidences in respect of foreign asset. As per provisions of section 43 of the Act as well as the preamble to the said Act to understand the discretionary power vested with the AO for imposition of penalty vis- -vis object sought to be achieved keeping in mind the legislative intent. The purpose of reporting requirement of foreign assets/income in Schedule FA of the Income tax return is for and monitoring the investments held abroad by the residents of India. Preamble to the Act describes its objective to deal with problem of black money, i.e., undisclosed foreign income and assets. The said Act must not be invoked for punishing a technical /venial /bonafide breach of any statutory obligation and therefore bonafide actions of the tax payers must be excluded from the application of provisions of this stringent legislation. In this regard, we draw our force from the decision of Hindustan Steel Ltd. [ 1969 (8) TMI 31 - SUPREME COURT] Thus, admittedly it is not a case where foreign asset remained undisclosed in entirety and that there is any malafide intention or ulterior motive on the part of the assessee for not disclosing the same - thus penalty deleted - Decided in favour of assessee.
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2024 (12) TMI 898
Eligibility u/s 80IA(4) - assessee operates as a developer or contractor? - HELD THAT:- Based on the financial parameters and business risk elements, it is apparent that the assessee operates as a developer rather than merely a contractor. The risk profile characterized by substantial leverage, operational responsibility, liquidity constraints, and market dependency-supports the classification of the assessee as a developer u/s 80IA. By assuming extensive financial, operational, and market risks, the assessee aligns with the statutory definition of a developer, undertaking comprehensive responsibilities in infrastructure creation. The financial statements serve as indicators of the business's nature, scope, and the substantive responsibilities borne by the assessee, which collectively affirm that the assessee s activities qualify under the broader framework of infrastructure development as envisaged u/s 80IA. This analysis will provide the foundation for determining eligibility and distinguishing the assessee's role in alignment with legislative intent, statutory provisions, and relevant judicial precedents, ultimately supporting the assessee's position for developer status. The assessee s case here mirrors Montecarlo Ltd [ 2024 (1) TMI 383 - GUJARAT HIGH COURT] wherein upheld deductions for infrastructure developers who mobilized resources, bore risks, and undertook comprehensive development duties. Given the binding nature of this jurisdictional precedent, concurring with the CIT(A) that the assessee qualifies as a developer entitled to deductions under Section 80IA(4) of the Act. We find that the CIT(A) rightly allowed the assessee s claim under Section 80IA(4) based on its function as a developer in infrastructure projects. CIT(A) s reliance on statutory interpretation, judicial precedents, and CBDT guidance provides a sound basis for affirming the assessee s eligibility for the deduction. CIT(A) erred in not directing the AO to allow the deduction u/s 80IA of the Act based on the total income of the eligible business as finally computed and assessed by the AO, which includes adjustments arising from additions or disallowances made during assessment - We agree with the assessee s interpretation that Section 80IA of the Act deductions should apply to the total income of the eligible unit as assessed by the AO, including any additions or disallowances made during the assessment process. The legislative intent of Section 80IA of the Act is to incentivize infrastructure development and industrial growth by providing deductions on income attributable to eligible undertakings. This objective is best achieved by allowing deductions on the income computed as per the final assessment, which captures the true profits of the eligible business. CIT(A) should have directed the AO to allow the deduction u/s 80IA based on the final assessed income of the eligible undertaking, after considering all additions or disallowances. Accordingly, the AO is directed to recompute the Section 80IA deduction on the final assessed income of the eligible industrial undertaking. Addition on the basis of Gross Profit Margin due to rejection of books of accounts - AO rejected the books of account under Section 145(3) on the grounds of unverifiable vendor/subcontractor transactions and applied an estimated GP margin of 22.89%, resulting in significant GP additions - HELD THAT:- We find that the AO s rejection was based primarily on suspicion rather than identified defects in the accounting records. There are many Judicial precedents which clearly mandate that books of accounts cannot be rejected solely on suspicion; specific and concrete accounting defects must be demonstrated. CIT(A) appropriately deleted the additions, noting that the AO s approach lacked consistency, as he accepted similar evidence for some vendors while rejecting identical evidence for others without clear justification. For Assessment Years 2008-09, 2009-10 and 2010-11, which were unabated at the time of the search, additions u/s 153A of the Act are permitted only if they are based on incriminating material found during the search operation. Judicial precedents establish that completed assessments cannot be reopened or disturbed under Section 153A in the absence of new, substantive evidence discovered during the search. In this case, the remand report from the AO confirmed that the additions were based on post-search analysis rather than on any incriminating material found during the search. We hold that the AO s additions in these unabated assessment years are legally unsustainable. We uphold the CIT(A) s deletion of these additions, as they lack a legal basis. We note that selective acceptance and rejection of evidence for vendors without valid justification is arbitrary and lacks a consistent approach, especially when the nature of evidence provided was identical across vendors. In this case, the AO did not present any such incriminating material to substantiate the disallowance of expenses for these 7 vendors. The AO s findings were instead based on a general suspicion that the vendors were non-genuine. The rejection of the expenses related to these 7 vendors was based on assumptions rather than concrete evidence of inflated or fictitious expenses. Judicial precedents emphasize that additions based on GP estimation or disallowance of expenses require clear defects or discrepancies in the books, which were absent in this case. We find that the assessee s submissions, including payment proofs, TDS records, and confirmations, sufficiently established the genuineness of the transactions with the 7 vendors. We conclude that the CIT(A) erred in confirming the AO s addition, as the evidence provided by the assessee met the threshold for substantiating these expenses. We, thereby, delete the additions confirmed by the CIT(A) for these 7 vendors and fully allows the assessee s grounds on this issue, dismissing the Revenue s contentions. Disallowance of Purchases / Expenses considering non-genuine - HELD THAT:- CIT(A) rightly referred to judicial precedents that establish that payments made via account payee cheques and substantiated by proper documentation cannot be disallowed merely based on suspicion or absence of confirmations from third parties. In the case of CIT v. M.K. Brothers [ 1985 (10) TMI 15 - GUJARAT HIGH COURT] it was held that such payments, without specific evidence to the contrary, should be accepted as genuine. AO s reliance on presumptive grounds, without any independent corroborative evidence, is contrary to these principles. It is also noted that the AO, despite having the opportunity, did not conduct any further inquiry or verification with the banks or other independent agencies. AO s reliance solely on unserved notices without further efforts undermines the principle of natural justice, as the assessee was not given a fair opportunity to substantiate its case in the face of doubts raised by the AO. We find that the AO s disallowance was based on assumptions and lacks any substantive evidence to prove that the payments to the four vendors were non-genuine. CIT(A) has rightly observed that the documentation provided by the assessee is adequate to substantiate the genuineness of these transactions. Therefore, we find no infirmity in the order of the CIT(A) in allowing the appeal of the assessee. Provision for Defect Liability (Warranty Expenses) - Revenue contends that the provision does not meet the criteria of an allowable expense since it is uncertain and could or could not arise, thus treating it as contingent and disallowable - HELD THAT:- Co-ordinate Bench s reliance on Rotork Controls India Pvt. Ltd.[ 2009 (5) TMI 16 - SUPREME COURT] is well-founded, as it establishes that warranty-related provisions, when estimated based on past experience and the nature of the business, qualify as deductible liabilities u/s 37 and confirmed that such provisions, being tied to contractual obligations and industry practices, cannot be classified as merely contingent, given the contractual retention requirements and the historical necessity of rectifying defects post-project completion. The High Court dismissed the Revenue s contention, underscoring that the absence of tax motivation further justified the assessee s approach. Thus on the scientific basis and established practice adopted by the assessee, and the accepted commercial principles underpinning the defect liability provision, we hold that the Revenue s appeal lacks substantive grounds. Therefore, the appeals on this ground are dismissed, affirming the position that the provision for defect liability is a legitimate deduction under the Act. Disallowance of Leave Encashment - Assessee argued that it is a legitimate and ascertained liability associated with employee benefits, accrued based on employee service and thus should be allowable as an expense - HELD THAT:- As in Exide Industries Ltd.[ 2020 (4) TMI 792 - SUPREME COURT] upheld the constitutional validity of Section 43B(f) of the Act, explicitly stating that this provision does not infringe upon the assessee s autonomy in choosing a particular accounting method or in claiming legitimate deductions. Rather, Section 43B(f) of the Act imposes an additional statutory condition that deductions for leave encashment liabilities are allowable solely upon actual payment, irrespective of the assessee s chosen accounting method or the timing of liability accrual. This interpretation reinforces the legislative intent to mandate payment-based deductions for specified expenses. Thus, we uphold the disallowances in respect of the unpaid provision for leave encashment. The appeal filed by the assessee is, therefore, dismissed, as the legislative requirement of Section 43B(f) of the Act mandates actual payment for allowance, which the assessee has not met. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Disallowance u/s 14A requires a proximate cause between the expenditure and exempt income. In A.Y. 2011- 12, the CIT(A) correctly found that the investments in subsidiaries were made to fulfil business obligations with NHAI, without an intent to earn exempt income. Applying the same principle to A.Y. 2008-09, we find no proximate cause connecting any interest expense or administrative cost to the exempt income. Both the purpose and the availability of own funds indicate that the AO s blanket application of Rule 8D was unjustified in A.Y. 2008-09 as well. As in Shreno Ltd. [ 2018 (12) TMI 1145 - GUJARAT HIGH COURT] and Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT] have emphasized that Rule 8D should not be applied automatically and without examining the actual nature and purpose of investments. Since the assessee demonstrated substantial own funds and justified the business necessity behind the investments, we hold that the CIT(A) s reliance on blanket application of Rule 8D in A.Y. 2008-09 was misplaced. Disallowance Gift/Boni/Chandla Expenses - HELD THAT:- As we observe that the CIT(A) has taken a consistent and judicious approach by referencing the past assessment years while also taking into account the increase in the amount claimed in the current year. The CIT(A) s disallowance of Rs. 3,00,000 out of Rs. 16,32,609 for A.Y. 2007-08 appears to strike a reasonable balance, granting the assessee partial relief while also recognizing the AO s concerns regarding insufficient documentation. Given the substantial increase in the claimed expenses compared to previous years and the assessee s inability to furnish complete evidence, we find no reason to interfere with the CIT(A) s decision. Addition u/s 40(a)(ia) for Import of Materials - HELD THAT:- As it is observed that the assessee raised an additional ground challenging the validity of the assessment u/s 153A of the Act, contending that no incriminating material was found during the search to justify such an assessment. We have already adjudicated upon this additional ground in favour of the assessee, holding that in the absence of incriminating material, the assessment u/s 153A of the Act was invalid. Consequently, without delving into the merits of the disallowance under section 40(a)(i) the appeal on this ground is allowed on the legal ground of invalid assessment. Penalty u/s 271(1)(c) - disallowance of claims for leave encashment, disallowance u/s 14A and disallowance due to TDS default - HELD THAT:- AO s basis for the penalty under Section 271(1)(c) of the Act rests on the assumption of inaccurate particulars or concealment. However, the records reflect that the assessee consistently disclosed its claims in the financial statements and made provisions in a transparent manner. CIT(A) has not demonstrated that the assessee s claims were without merit or intended to mislead. The claims for deductions, though disallowed, do not amount to concealment or inaccuracy under the standards set by the Hon ble Supreme Court in the case of Reliance Petro Products Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] Thus, in light of the above findings and the judicial precedents supporting the assessee s case, it is concluded that the penalty u/s 271(1)(c) of the Act is unjustified in both AY 2007-08 and AY 2008-09.
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2024 (12) TMI 897
TP Adjustment - Guarantee fees received from subsidiaries for providing guarantee to foreign banks - assessee is a foreign company incorporated in Korea, a non resident and do not have PE in India, which is engaged in the business of manufacture of automobile and auto parts - HELD THAT:- Since, the guarantee fees has been assessed as income from other sources but not a business Income, the same cannot be taxed in the hands of the assessee in India as per Article 22 of the DTAA and hence the we do not countenance the action of the ld.CIT(A). Further, we note that, the similar issue for the A.Y. 2014-15 2015-16 with the same facts and circumstances in assessee s own case has been held as not taxable in India in [ 2023 (7) TMI 343 - ITAT CHENNAI ] Thus Guarantee fees received by the assessee during the impugned A.Y. 2016-17 from Indian Subsidiaries is not taxable in India and hence we set aside the order of the Ld.CIT(A) by allowing the grounds of appeal of the assessee.
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2024 (12) TMI 896
Applicability of tie-breaker test - income earned by the assessee in USA is taxable in India or not? - applicability of Article 4 of India US DTAA to the case of the assessee - if the income is assessable in India then whether having regard to the provisions of section 90 of the Act, credit of taxes paid by the assessee abroad is to be given - HELD THAT:- While examining the test of tie-breaker test one has to see the centre of vital interest, when we see the facts of the present case, it is abundantly clear that centre of vital interest in the present case has remained in India. The case laws relied upon by the AR of the assessee are on different facts and in fact the counsel for the assessee has also fairly accepted that the cases relied upon are distinguishable on facts. Hence no infirmity in the orders of authorities below. We hold that benefit of tie-breaker test is not available to the present assessee and hence the income earned by him in US is includable in total income within the meaning of section 5 of the Income Tax Act. We find force in the contention of the assessee raised in additional grounds of appeal that is credit of taxes already paid abroad. Therefore, we direct the AO to grant the benefits of taxes paid abroad by the assessee vis-a-vis the income earned to avoid double taxation of same income.
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2024 (12) TMI 895
Assessment u/s 153A - documents has been impounded from the premises of third party - additions based on statements recorded during search - HELD THAT:- In the instant case there was not a shread of material apart from the statement recorded during search. Proceedings are not justifiable wholly on the basis of sworn statement recorded in the course of search/survey in the absence of any other tangible evidence available with the Assessing Officer as the material collected and the statement obtained u/s 131 would not automatically bind upon the assessee. This issue had been considered in the case of CIT, Salem [ 2013 (6) TMI 305 - SC ORDER] wherein the Bench stated that the word may used in Section 133A(3)(iii) of the Act, viz., record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, made it clear that the materials collected and the statement recorded during the survey u/s 133A were not conclusive piece of evidence by itself. Following the circular F.No.286/2/2003 of the Central Board of Direct Taxes dated 10.3.2003, it was concluded that the materials collected and the statement obtained under Section 133A would not automatically bind the assessee. The application of the extrapolation technique shall depend on facts and circumstances of each case and there can be no universal law on this issue. In the present case, no documents have been found and seized during the search and Ld. AO is merely relying on the statement of employees only, and as such application of extrapolation technique is not warranted for the entire assessment period. Thus, no adverse inference may kindly be drawn against the assessee and addition made in the hands of assessee may kindly be deleted. Addition made u/s 69C on account of unexplained expenditure should be deleted as there is no supporting document to proof the contention that assessee has actually spend amount of Rs 10,00,000/- as marriage expenditure neither any documents were found at the time of search which could proof the same. So, the addition made in the hands of assessee on account of marriage expenses should kindly be deleted. Addition on estimate basis in the hands of assessee on account of foreign tour expenses not confirmed without proving or bringing on record any evidence that the assessee has incurred said expenditure on foreign tour. Additions u/s 69B - Addition is made merely on the basis of DVO valuation report only, without bringing on record any material, to show or establish that unaccounted investment has been made by the assessee. The law has been settled by various courts that addition cannot be made only on the basis of valuation report, which is just a tool for guidance of the AO and is just an opinion of a technical expert, and without any evidence or material brought on record by the AO, an addition u/s 69B cannot be sustained simply on the basis of an opinion.
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2024 (12) TMI 894
Revision u/s 263 - additions made in the hands of the assessee on the basis of show-cause notice from Central Excise Directorate indicating that the assessee had claimed Cenvat Credit on bogus purchases - HELD THAT:- Once CESTAT has given a findings that the purchases in question were not bogus, then, in our view additions proposed to be made u/s 147 and 263 of the Act have no basis which the same can be sustained. Thus when CESTAT has decided the issue in favour of the assessee by holding that the purchases in question were not bogus, we hold that since the very basis on which proceedings were initiated u/s 263 of the Act have been vacated / set-aside, then, order passed u/s 263 of the Act is also liable to be set-aside. Decided in favour of assessee.
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Customs
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2024 (12) TMI 893
Wilful and deliberate disobedience of order - respondents were directed to process the application of the petitioner as per the specified timeline - HELD THAT:- The respondents submits that it will be ensured that these are returned to him within three working days. It will be open to petitioner to visit the office of the respondents on coming Monday so that the Demand Drafts are returned to him directly. In case, nobody reports to the office of the respondents by Monday, the respondents would be at liberty to return the Demand Drafts through registered post/courier. Petition disposed off.
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2024 (12) TMI 892
Legality of recovery of refund without appealing the original refund order - ignoring the strict compliance with the various conditions of N/N. 102/2007-Cus. - correctnes of relying on the certificates issued by the statutory auditor without examining various evidences emerged during investigation indicating that the refund had been fraudulently claimed on the basis of forged documents - HELD THAT:- It appears that based on the information gathered that the assessee had claim refund of 4% SAD that had been paid at the time of import of timber incorrectly by submitting sale invoice of timber imported under some other Bill of Entry, a search was carried out at the business premises of the assessee by the DGCEI. On the basis of such investigation report, show cause notices were issued by the revenue and the adjudicating authorities took the view that the assessee had submitted forged documents with the customs authority with a view to get the refund fraudulently by not declaring the factual position and suppressing the material facts i.e. clearance of different timber which did not pertain to the Bill of Entry for which they claimed refunds on the basis of preparation of forged invoices etc. Such facts came to the notice of the department only after initiation of investigation against the assessee by adopting such modus operandi, the assessee received the refund which otherwise would not have been sanctioned and thereby contravened the provisions of Section 27 of the Customs Act, 1962 read with provisions of Notification No. 102/2007-Cus dated 14.09.2007. The extended period of recovery of refunds so sanctioned erroneously to the assessee was invoked in all the cases and the adjudicating authority passed the orders to recover the refund sanctioned earlier by denying the benefits under N/N. 102/2007-CUS dated 14.9.2007 under the provision of Section 28 of the Customs Act, 1962 along with interest and penalty. Considering the facts of the case and on perusal of the impugned order passed by the Tribunal, it is opined that these appeals are being devoid of any merit that no questions of law much less any substantial questions of law arises from the impugned order passed by the Tribunal - appeal dismissed.
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2024 (12) TMI 891
Prayer to quash the summoning order with an alternative prayer to stay the effect and operation of the summoning order - illicit trade of foreign Gold - lack of evidences - initiation of case on the basis of a private criminal complaint - HELD THAT:- A perusal of the record reveals that the statement made by co-accused Vikas Rastogi under Section 108 of the Customs Act, 1962 was not the only ground on the basis whereof the summoning order was passed against the present applicant. He in his statement recorded under Section 108 of the Customs Act, 1962 before the customs officials has admitted that he has been indulged in the crime of sale, purchase and carrying illegal smuggled gold for long and further he stated that he was on way to Mirzapur with the smuggled foreign gold where he would have sold the same to Ritesh Soni, Raj Soni and Pradip Soni - Not only the co-accused Vikas Rastogi but also the present applicant Ritesh Kumar Soni states in his statement under Section 108 of the Customs Act, 1962 made before the customs officials that he is known to Vikas Rastogi for the last two years, who owes a shop namely M/S Maa Bhagwati Jewelers and he is also engaged in the gole business having his own shop named as Ritesh Silver Point and he uses to purchase gold bullion from said Vikas Rastogi and sells it to the customers and since they trade in cash only so no record thereof is maintained by them. The statements recorded under Section 108 Customs Act are the statements of a distinguish class and there stand on a different footing in companion of the applicants recorded under section 161 of CrPC and moreover, such statements are always admissible in evidence. It is also settled that a statement recorded under Section 108 of The Customs Act is a material piece of evidence collected by custom officers under The Customs Act. In Naresh J. Sukhawani Vs. Union of India [ 1995 (11) TMI 106 - SUPREME COURT ], it has been expressly held that while illegally exporting foreign currency a statement made by the co-accused can be used as evidence against the others and this theory is applicable to a case under The Customs Act,1962. Since the instant case initiates on the basis of a private criminal complaint, the Magistrate has to record his satisfaction about the prima facie case after applying his judicial mind to the facts and evidence of the case and the law applicable thereto and the specific allegations made in the complaint supported by satisfactory evidence and other materials on record is the primary and relevant element on the basis of which the Magistrate has to record his satisfaction while summoning an accused in a criminal trial - The summoning order dated 24.8.2023 passed by Special Chief Judicial Magistrate, Varanasi is a valid and legal order. There are no force in the present application moved by the accused applicant and accordingly impugned summoning order dated 24.8.2023 and cognizance order passed by the learned Special Chief Judicial Magistrate, Varanasi is hereby confirmed and this application is rejected.
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2024 (12) TMI 890
Seeking a mandamus to the Respondent DGFT to process Petitioner s application for renewal of their PSIA status - HELD THAT:- In light of the development and the stand of the Respondent, they are directed to process the application of the Petitioner as per the timelines specified. It is further directed that since the Petitioner has duly made the payment of the application fees of INR 21,000/- along with online submission, the earlier DDs deposited by the Petitioner with DGFT shall be returned/ refunded to them. The present writ petition is disposed of, along with pending application.
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2024 (12) TMI 889
Denial of SAFTA Notification benefits due to doubts about the origin of imported goods - rejection of appeals filed by the appellant on the ground that at the time of clearance of the goods, the importer has forgone the exemption benefit under SAFTA since they had cleared the goods on payment of applicable duty under protest - failure to provide the origin related information as indicated in FORM 1 in terms of para 4 of Rule 5 of N/N. 81/2020 dated 21.08.2020. HELD THAT:- Under similar facts and circumstances, the benefit of the SAFTA notification which had not been claimed initially, has been allowed to the appellant at a later stage on submission of the country of origin certificate. Further, in the present case we observe that the appellant has produced the country of origin certificate as desired under the Notification 99/2011-Customs dated 09.11.2011, as is evident from the details incorporated by the Ld. Commissioner (Appeals) in the table provided at paragraph 1 of the impugned order dated 23.01.2023. Thus, there are no reason to deny the benefit of the SAFTA Notification to the appellant. Since the appellant has fulfilled the conditions stipulated in the N/N. 99/2011-Customs dated 09.11.2011, it is held that the appellant are eligible for the benefit of the said notification. The impugned orders denying the benefit of the SAFTA N/N. 99/2011-Customs dated 09.11.2011 to the impugned goods imported by the appellant vide the six bills of entry are not sustainable - the impugned order set aside - appeal allowed.
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2024 (12) TMI 888
Requirement to consider CRCL Report for the purpose of Final Assessment of the Exported Iron Ore Fines - levy of Export Duty based on the test report of the Chemical Examiner of CRCL - Final Invoice / realised price is arrived at on the basis of the test report of a NABL Accredited Agency at Load Port or CIQ Report at Discharge Port or any other formula - HELD THAT:- This Tribunal has already decided in various cases that the Fe content, till the amendment made w.e.f. 1st May 2022 vide the Finance Act 2022, is required to be calculated in WET basis by following the principles of law as laid down by the Hon'ble High Court at Bombay in the case of Union of India v. Gangadhar Narsingdas Agrawal Anr. [ 1986 (4) TMI 71 - HIGH COURT OF BOMBAY ], which has been affirmed by the Hon ble Apex Court [ 1995 (8) TMI 73 - SUPREME COURT ]. The C.B.I.C., vide Circular No. 04/2012-Cus. dated 17.02.2012, accepted the same and directed all the officers to follow such procedure. In the present case, we observe that the goods were exported in moist form whereas the report of the CRCL, Kolkata is apparently for the dry form. Thus, it is observed that the report of CRCL is not relevant to this case. This Bench, in many of the matters including the matter of M/s. Vedanta Ltd. [ 2023 (8) TMI 947 - CESTAT KOLKATA ], have concluded that for carrying out the Final Fe contents, the sample should be drawn and tested as early as possible. In the present case, if the number of days taken by CRCL and the number of days taken by the NABL accredited Private Labs are considered, then the Test Report issued by the NABL accredited agency will prevail over the CRCL report as they have taken less number of days than CRCL. The C.B.I.C. has also directed vide Circular No. 12/2014 dated 17.11.2014, the Transaction value is to be decided based on the load port test report or discharge port test report, as per terms of contract, where the proper officer shall compare the two reports as per the terms set out in the contract and finalize the provisionally assessed shipping bills, under the provisions of Section 14 of the Act and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 duly, supported by Bank Realisation Certificates for the purposes of comparison with the final invoices. The valuation of Exported Iron Ore Fines has to be derived based on terms of contract with Foreign Buyer and as per the Contractual agreement. Accordingly, it is found that Load Port Test Report / Test Certificate in the present case would be the decisive factor for the determination of the iron content in the export product - the Customs officers cannot change the transaction value or the stipulation of the test report of Mitra S.K. Pvt. Ltd., being the determinant of the transaction value. The report of Chemical examiner, CRCL, Kolkata cannot be used for deciding and levy of Export Duty. Thus, there are no infirmity in the impugned order of the Ld. Commissioner Appeals, rejecting the Order in Original for determining the Export Duty on the basis of the CRCL test report - there is no allegation of fraud or mis-declaration made out in the facts of the present case. As per Section 14 of the Customs Act, the value of export goods shall be the transaction value i.e., the price actually paid or payable for the goods when sold from India for delivery at the time and place of exportation (FOB Value). There are no legal substance in the Order in Original of the Assistant Commissioner, and hold that there is no infirmity in the impugned order passed by the Ld. Commissioner (Appeals). Accordingly, the appeal filed by the Revenue is devoid of any merits and liable to be dismissed - appeal of Revenue dismissed.
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Corporate Laws
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2024 (12) TMI 887
Refusal of prayer of the plaintiffs/appellants for interim injunction - locus standi of the plaintiffs/appellants to initiate the suit - seeking declaration that the decision taken by the defendants/respondent-Company to obtain leasehold rights in their favour is illegal, null and void - limited scope of interference in a Letters Patent appeal, which is a unique power vested in the High Courts, more particularly, Chartered High Courts. Locus standi of the plaintiffs/appellants to initiate the suit - Whether the plaintiffs, as universal legatees of the estate of Late Smt. Priyamvada Debi Birla, have the legal standing to initiate the suit? - HELD THAT:- Section 104 of the 1925 Act provides that the legatee has a vested interest in the estate of the deceased testator from the date of death of the testator. However, the said Section is circumscribed by Section 211 of the said Act which operates to vest all the property of the deceased person in the Executor or Administrator, as the case may be. Since the APL Committee has been appointed by order of the Testamentary Court in respect of the estate of late PDB, Section 211 vests the property of the estate in the said APL. Also, as per Section 211(1) of the 1925 Act, it is the APL which is the legal representative of the estate for all purposes. Thus, the plaintiffs, in the capacity of universal legatees of the estate, cannot jump the queue bypassing the APL and directly assert their rights in respect of the estate. Section 332 of the 1925 Act provides that the assent of the executor or administrator is necessary to complete a legatee‟s title to his legacy. Thus, although the rights of legatees relate back to the date of death of the testator, such right/title is conferred only upon probate/Letters of Administration being granted and assent to the legacybeing completed by distribution of the property by the Executor or Administrator as the case may be - Hence, it is premature for the universal legatees to assert their rights by bypassing the total control of the APL over the estate through the testamentary court. Jurisdiction of the Civil Court in relation to the Companies Act, 2013 - HELD THAT:- Section 247 of the 1925 Act, under which the APL has been appointed, stipulates that the APL shall have all the rights and powers of a general administrator other than distribution of the estate and shall be subject to the immediate control of the (testamentary) court and act under its direction. Hence, the appropriate remedy for the universal legatees, if at all aggrieved by the functioning of the APL, would be to approach the testamentary court. The mere fact that as per the Division Bench order passed in connection with the testamentary matter no injunction can be passed or intermeddling can be undertaken by the testamentary court or the APL in respect of third-party properties is not sufficient justification for approaching the Civil Court. The dissenting/minority APL member could not seek to achieve indirectly through the plaintiffs/universal legatees what he could not obtain directly by contravening the majority decision of the APL. Admittedly, one of the major components of the cause of action pleaded in the plaint by the plaintiffs/appellants is the instigation caused by the letter of the dissenting member of the APL with regard to difference of opinion with the decision of the majority members. The Civil Court cannot grant its blessings to such attempt on the part of the dissenting member to frustrate the majority decision of the APL. At best, if aggrieved and otherwise entitled in law, the legatees could approach the testamentary court in that regard - From the Company Law perspective, the plaintiffs are not members of the defendant-companies and, as such, cannot invoke the jurisdiction of the NCLT under Sections 241 and 242 of the 2013 Act. A careful perusal of the impugned order refusing interim relief shows that all the above aspects were duly considered by the learned Single Judge. Hence, let alone meet the strict yardsticks and parameters of interference in an Intra-Court Appeal, the order impugned does not call for interference even by way of a regular first appeal. The learned Single Judge having taken a plausible and justified view backed by cogent reasons, there arises no occasion to interfere with the same. Application dismissed.
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Insolvency & Bankruptcy
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2024 (12) TMI 886
Dismissal of SLP - Legality of the suspension of the petitioner's registration as a Resolution Professional (RP) - contravention of the provisions of Section 30 (2) (b) and (e), 208 (2) (a) and (e) of IBC - It was held by High Court that ' The Disciplinary Committee had failed to indicate the reasons for suspending the petitioner s registration for a period of one year. The material on the basis of which the Disciplinary Committee proceeded to suspend the petitioner being unquestionable, the period for which such suspension should operate is a matter within the realm of the Disciplinary Committee. The Disciplinary Committee in the light of the jurisdiction conferred upon it by Section 220 of the Code is empowered to take into consideration all relevant aspects including the conduct of RP.' HELD THAT:- It is not required to interfere with the impugned judgment and, hence, the special leave petition is dismissed.
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2024 (12) TMI 885
Entitlement of Interim Resolution Professional (IRP) to fees - whether he is only entitled to the amount, that was to be paid for the performance of his duties is Rs.4,00,000/- as a whole or Rs.4,00,000/- thereafter too for each subsequent 30 days till the new RP was appointed? - HELD THAT:- By venturing into the observations which has been made by Learned NCLT in IA No.447/2020, wherein it had directed Respondent No.2 to pay a proportional share of Rs.4,00,000/-, the agreed fee which would be payable to the Appellant would be till the new RP has replaced him. Because from records till his date of replacement had worked as IRP, which is fact apparent from records. The fact to be noted is that, the new RP was appointed on 27.11.2020 as per order passed in IA No.562/2019. From the date of expiry of the first slab of 30 days of his appointment as IRP (i.e., on 05.10.2019) till the date of appointment of new RP (i..e, 27.10.2020) wherein it happens to be 53 days, the Appellant is shown to have worked as IRP and would entitled to receive the payment of Rs.4,00,000/- for each 30 days, and for the additional 53 days which amounts to Rs.6,49,290/-. The actual amount to be received by IRP is at the rate of Rs.4,00,000/- for each 30 days, which would be as determined above that is till 27.10.2020. The amount of Rs.6,49,290/- is directed to be paid to the Appellant within 30 days from the date of this Judgment - Appeal allowed in part.
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2024 (12) TMI 884
Admission of section 7 application - time limitation - Corporate Debtor has able to prove discharge of liability or not - sufficient grounds made out to invoke Section 65 of the IBC for imposing any penalty on the Financial Creditor. Whether Section 7 Application filed by Respondents No. 1 to 3, the Financial Creditor herein was barred by time? - HELD THAT:- The project having not commenced within seven months from execution of Agreement, the Plan having not been sanctioned within a period of 6 months and grace period of one month from 16.05.2010, the Project never commenced and under Clause 8, the cause of action arose to Financial Creditor to claim refund of the said investment and the said cause of action cannot remain arrested or suspended till the Financial Creditor exercise its option under Clause 6. Limitation for filing the proceeding for claiming refund of investment long expired after three years from 16.12.2010 i.e., in 15.12.2013 itself. Long silence of the Financial Creditor after 16.12.2010 till filing of Police Complaint by Corporate Debtor itself speaks volumes of the ground realities and State of Affairs between the Parties. We, thus are satisfied that Application filed by the Financial Creditor was hopelessly barred by time and deserves to be rejected. Adjudicating Authority had only adverted to the one part of the submission of the Appellant that on commencement of limitation from 30.07.2019, the Application was barred by time, without adverting to and finding out as to when the cause of action arose for filing the Section 7 Application to the Financial Creditor. As and above the cause of action for filing the Application arose on 16.12.2010 and Section 7 Application which was filed by the Financial Creditor was hopelessly barred by time. In the present case, the Project did not commence within 6 months and 1 month grace period, which was provided in the MoU when Project did not commence, cause of action arose to the Financial Creditor as per Clause 8 of AoA noted above. Hence the submission of the Respondent that there being continuous obligation, limitation will not commence cannot be accepted. In view of admission of Financial Creditor, that out of ₹3 Crores paid by the Financial Creditor to the Corporate Debtor, whether Corporate Debtor has able to prove discharge of liability of balance amount of ₹1.7 Crores? - HELD THAT:- The fact that right after execution of the Agreement on 16.05.2010 till sending of the Police Complaint by Corporate Debtor on 04.07.2019, there is not even the letter of demand of any amount from Financial Creditor to the Corporate Debtor towards refund of ₹3 Crores speaks for itself. The letter dated 15.10.2011 was sent by the Financial Creditor, acknowledging the receipt of the payment of ₹1.3 Crores. A Submission was advanced by the Counsel for the Financial Creditor that after receipt of the letter dated 15.10.2011, Corporate Debtor never wrote back to the Financial Creditor that there was other amounts paid by to the Thakkars - The letter dated 15.10.2011 which was sent by the Financial Creditor was only towards acknowledgement of ₹1.3 Crores. When we read the said letter, the said letter does not indicate that Financial Creditor had complaint of non-receipt of any balance amount apart from ₹1.3 Crores. Thus, the said letter 15.10.2011 cannot read to mean that no amount was paid by the Corporate data towards refund of ₹3 Crores received by them. The Financial Creditor initiated the proceedings by filing Section 7 Application only after Police Complaint was filed by the Corporate Debtor on 04.07.2019, making allegations against Thakkars. Financial Creditor found an opportunity to launch a proceeding after the receipt of the Police Complaint dated 04.07.2019. It is satisfied that Corporate Debtor had refunded the amount of ₹1.7 Crore to Thakkars and their Company, which was meant for refund to the Investors towards their amount of ₹3 Crores - Silence of Financial Creditor for long 8 years of not writing even letter to Corporate Debtor or Vendors/Thakkars clearly indicates that refund of ₹3 Crores was satisfied. Thus, the Developers have refunded the amount of ₹1.7 Crores through Thakkars and its Companies for payment to Investors. Whether sufficient grounds have been made out to invoke Section 65 of the IBC for imposing any penalty on the Financial Creditor? - HELD THAT:- On looking into the Reply which was filed by the Corporate Debtor to Section 7 Application, although it was pleaded that there is a collusion between Financial Creditor and Thakkars and they have colluded with each other with mala fide intention to cheat the Corporate Debtor, but there are no averment that Section 7 Application has been filed fraudulently or with malicious intent. In the facts of the present case, especially when Corporate Debtor has not pleaded that proceedings have been initiated maliciously with fraudulent intent, the ingredients of Section 65 are not fulfilled, hence Notice under Section 65 is discharged. The detail facts and opinion given by the IRP were wholly uncalled for IRP who is giving a certificate on 15.07.2022 is not supposed to know the events and facts which transpired between the Parties from 16.05.2010. Learned Counsel for the IRP submits that in view of the `Form 2 requiring Optional Certificate, the IRP has given the Option Certificate and there was no mala fide intention of the IRP or an intent to help the Financial Creditor. The Optional Certificate was not necessary, and the use of the word Optional itself indicates that unless IRP is aware of the facts and events, he is not required to give facts or opinion - Section 7 Application filed by the Financial Creditor was hopelessly barred by time and was nothing but abuse of process of the Court by the Financial Creditor. Section 7 Application filed by the Financial Creditor dismissed - appeal allowed.
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Service Tax
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2024 (12) TMI 883
Recovery of wrongly availed CENVAT Credit with interest and penalties - Credit taken on the basis of Cover note - Extended period of limitation. Credit taken on the cover notes - HELD THAT:- Appellant have taken the credit on the basis of cover note again of the entire amount claiming the same to be in respect of the same invoices. The said fact whether there was no duplication of the credit, once on the basis of the invoice and second time on the basis of cover note needs to be factually verified. As appellant had taken credit of entire amount against these cover notices subsequently, he reversed the excess credit as claimed by them vide GAR challan dated 05.12.2011. No findings has been recorded either in the impugned order with regards to the availment of credit against the invoice in question. The fact in respect of credit taken against the corresponding invoices and cover notes was subject to verification- whether the credit has been taken twice against the same supply of goods/services. The matter needs to go back to the Original Authority for verification. Extended period of limitation - penalties - HELD THAT:- The appellant is public sector undertaking. Even if the extended period is invokable for the reason of inadmissible credit taken by the appellant, and penalty imposable on them under section 78. Penalty should have been set aside by invoking the provisions of Section 80 of the Finance Act, 1994. Appeal allowed in part and the matter remanded back to original authority.
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Central Excise
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2024 (12) TMI 882
CENVAT Credit - input services - transportation by road service - technical testing and analysis service - denial on the ground that no supporting documents were submitted. Disallowance of the input credit on the disputed services - no supporting documents were produced - HELD THAT:- On perusal of the documents filed by the appellants as part of the appeal papers in respect of business auxiliary service, C F agent service, management consultancy service, consultancy/professional charges, storage/warehousing charges. The aforesaid services have been used in or in relation to the manufacture of final products inasmuch as these services are in the nature of bank guarantee commission paid to the bank for raising funds for working capital, services used for obtaining advance licenses for the final product, surveillance audit service, C F agents service upto the place of removal i.e., Zirakpur and Guwahati depots, management of certain operations, services of environment clearance certification and training, ISO audit etc., godown/warehousing services at the depots. Further, it is also found that the learned Commissioner (Appeals) had not given any finding in rejection of the input credit on these above input services, except that he found that there is no supporting documents. In view of the above, and on the basis of supporting duty/service tax paying documents produced by the appellants, CENVAT credit in respect of the above input services are allowed. Transportation service - HELD THAT:- The representative copy of the invoices evidencing the service tax paid thereon and the excise invoices issued by the appellants for stock transfer from their factory to their sales depots. In view of the above factual position, CENVAT credit on the above service of transportation by road allowed being the eligible credit in respect of input service having been covered under the inclusive category of specific services viz., outward transportation upto the place of removal . Technical testing and analysis service - HELD THAT:- The appellants have produced three invoices issued by the Mumbai Waste Management Ltd., for comprehensive analysis and technical testing of waste sample. As testing of waste arising in the course of manufacture is a legal requirement for any manufacturer for compliance with environmental laws and regulations of the State, it is found that such credit of service tax in respect of testing and analysis service is eligible as input service. Further, the certificate issued by the Mumbai Waste Management Ltd., for the appellants-manufacturer factory at Tarapur, being a registered member for safe and secure disposal of hazardous waste in terms of hazardous waste management rules and regulations of the State, in the nature of input service used is directly in relation to manufacture in compliance with statutory regulations dealing with hazardous waste management. Such certification is not in any way connected with the membership of a club, which, when used primarily for personal use or consumption of any employee alone, is excluded under the category of specified exclusions given under clause (C) of Rule 2(l) of the Rules of 2004. Hence, the input credit of service tax paid on technical testing and analysis, obtaining registered membership for safe disposal of hazardous waste by the factory of the appellants, is eligible as input service in terms of Rule 2(l) of the Rules of 2004. The impugned order is set aside to the extent it had disallowed the CENVAT Credit, imposed penalty on the appellants and the appeal filed by the appellants is allowed in their favour with consequential relief, if any, as per law.
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2024 (12) TMI 881
Classification of Propylene/Propene-PP feed stock manufactured by the appellants - whether, the same merits classification under CETI 2902 9090 as claimed by the appellants; or, is it classifiable under CETI 2711 1400 as determined by the learned Commissioner in the impugned order? - invocation of extended period under Section 11A of the Central Excise Act, 1944 - imposition of penalty under Section 11AC ibid. HELD THAT:- It could be seen that by applying the GIR 1, the position is made clear that Chapter Heading 27.11 covers within its scope and ambit, mainly of Petroleum gases and other gaseous hydrocarbons. However, separate chemically defined organic compounds, other than pure methane and propane, are not covered under chapter 27 and are to be classified under chapter 29. Further, separate chemically defined organic compounds, whether or not containing impurities remain classified under Chapter 29. Moreover, it is only pure methane and propane of chapter 27 which are excluded from the scope of coverage of chapter 29 and not propene (propylene). Thus, the distinguishing factor for classification of the impugned product i.e., propylene/propene is to determine whether these are separate chemically defined compounds and further its purity, as per standards such as BIS or other laid down norms by Indian Institute of Petroleum, which is one of the constituent laboratories under the umbrella of Council of Scientific Industrial Research (CSIR), which has facilities for testing ASTM/IP/UOP/BIS standards for analyzing and evaluating of petroleum products. The impugned order has not examined all the aforesaid aspects for arriving at a proper classification of the impugned goods. It is not the case of the Revenue, that Propene/propylene is a new product that was manufactured by the appellants and as such its classification as per self-assessment made by the appellants are mis-classified. It is a fact on record that right from the beginning of the petroleum refinery operations of the appellants at the Mahul refinery, Propene/propylene was being manufactured and were cleared for home consumption. Heading 2711 covers under its scope liquified petroleum gases and other gaseous hydrocarbons as well as such products in gaseous state. Liquified propylene is specifically covered under sub-heading 2711.14 and in gaseous state is covered under 2711.29. However, if such propylene is in a pure state or commercially pure state, being separate chemically defined hydrocarbons, then the same is classifiable under heading 29.01. The records of the case also show that the customers of the appellants have placed orders for the product as Poly Propylene Feed Stock , Propylene as these are known commercially in the trade for use in their further manufacture of chemicals. Therefore, as observed by us, the determining factor for classification of the propylene/ propene manufactured by the appellants would be determination of the purity level and whether it is a separate chemically defined compound or not. The test reports stated to have been examined by the learned Commissioner does not throw light on the above factual aspects for determining proper classification of the impugned goods. Therefore, the findings of the learned Commissioner is faulty and does not help in determining proper classification of the impugned goods. Invocation of extended period of limitation - suppression of facts or not - HELD THAT:- The classification of the impugned product was initially approved by the Department under the classification adopted by the appellants, and the issue of misclassification of the impugned product was raised during the audit scrutiny by the department authorities. The periodical returns filed by the appellants before the department authorities, clearly show that all information relating to the production and clearance of the impugned products, were in the knowledge of the Department, including the classification of the product, and there was no suppression of fact or mis- statement in the declaration filed by the appellants. Further, CBIEC s instructions issued vide Circular No. 808/5/2005-CX dated 25.08.2005, clearly state that 8-digit classification code is a technical change adopted in the numbering scheme for Central Excise classification, and all possible assistance to trade industry may be provided by the Department for switching over to such new 8-digit tariff. Hence, the invocation of extended period for confirmation of demand on the ground of willful suppression or mis-statement is not legally sustainable. The impugned order dated 30.06.2014 classifying imported goods under heading 2711 1400 does not stand the scrutiny of law and therefore it is not legally sustainable. In order to determine the proper classification of the impugned goods as per law, it is considered necessary that the matter should be remanded back to the original authority - the impugned order set aside - appeal allowed by way of remand.
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Indian Laws
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2024 (12) TMI 880
Cancellation of bail granted - criminal conspiracy - crossborder narco-terrorism involving a huge recovery of 500 kgs of heroin, which was stated to have been smuggled into India through Gujarat and then into Punjab in a meticulously planned manner - scheduled offences - Legality of the Central Government's orders transferring investigation to the National Investigation Agency (NIA) - can the NIA investigate any other accused person who, although not being investigated for any Scheduled Offences could be investigated by NIA because there exists a link between the two namely, Scheduled and non-scheduled offences, thereby connecting every co-accused? HELD THAT:- On a plain reading of Section 8, it is clear that the said Section has to be read in continuation of what has been stated in subsection (5) of Section 6 of the NIA Act. Once the Central Government directs the NIA to investigate a Scheduled Offence and during the course of such investigation of a Scheduled Offence against an accused, it becomes necessary for the NIA to also investigate any other offence which the said accused is alleged to have committed, then such offence could also be investigated provided that other offence to be investigated is connected with the Scheduled Offence. The expression the accused in Section 8 of the NIA Act needs to be interpreted contextually. Learned senior counsel for the petitioner submitted that the said expression has to be read narrowly and as per its plain meaning as referring to only the accused in respect of whom a Scheduled Offence is being investigated by the NIA and if such an accused has committed any other offence which is connected to the Scheduled Offence then such other offence could also be investigated by the NIA provided there is a connection with the Scheduled Offence - The expression Agency may also investigate any other offence which the accused is alleged to have committed has no doubt to be read with the rigour of if the offence is connected with the Scheduled Offence . In other words, if any other offence is connected with the Scheduled Offence, then the NIA may investigate such other offence which the accused is alleged to have committed provided there is a connection of such other offence with the Scheduled Offence. Whether, the expression the accused in Section 8 of the NIA Act has to refer to only the accused in respect of whom a Scheduled Offence is being investigated or it could include any other accused whose name would emerge during the course of investigation of a Scheduled Offence and who has committed an offence which has a connection with the Scheduled Offence? - HELD THAT:- The nexus or connection between any other offence and the Scheduled Offence is of critical importance and must be present in order to enable the NIA to investigate any other offence committed by an accused in connection with the Scheduled Offence. The connection between a Scheduled Offence and any other offence being established would enable the NIA to investigate the accused of committing any other offence which is connected with the Scheduled Offence. Once there is such a connection between a Scheduled Offence and a non-scheduled offence then, for all practical purposes the non-scheduled offence would come within the connection of a Scheduled Offence. Therefore, it is held that the accused who may have committed a non-scheduled offence having a connection with a Scheduled Offence can be investigated by the NIA in respect of a non-scheduled offence. It is reiterated that, while investigating the accused regarding Scheduled Offences, if the NIA submits a report about some other accused who may have also committed certain offences connected with the Scheduled Offences under investigation then, the Central Government on a consideration of such a report may exercise suo motu powers and direct the NIA to also investigate the other accused also provided the offences alleged against the other accused are offences, having a connection with the Scheduled Offence already under investigation - on the aforesaid basis NIA would be enabled to also carry out an investigation of any other accused who has committed an offence connected with the Scheduled Offence already being investigated. This would be in the realm of a joint investigation into Scheduled Offences which may have occurred in different parts of the country but having a connection with other offences also. The offences registered in FIR No.1/2018 dated 12.08.2018 at PS ATS, Ahmedabad, Gujarat (Gujarat case) and the offences registered against the petitioner herein under FIR No.20/2020 dated 29.01.2020 and under FIR No.23/2020 dated 31.01.2020 all being under the NDPS Act and in view of the connectedness of the offence under NDPS Act with the Scheduled Offence in Gujarat FIR No.01/2018 in respect of which the Central Government was of the opinion that the provisions of Sections 17 and 18 of the UAPA (Scheduled Offences under the NIA Act) were also attracted as a result, the Central Government directed the NIA to investigate into the Scheduled Offences (Sections 17 and 18 of the UAPA) on the basis of the initial order passed under sub-section (5) of Section 6 of the NIA Act on 29.06.2021. When the NIA was investigating into the Scheduled Offences in the Gujarat case, it forwarded reports to the Central Government in respect of FIR No.23/2020 registered at Police Station STF, District STF Wing, Amritsar, Punjab dated 31.01.2020 and FIR No.20/2020 dated 29.01.2020 registered at PS STF, SAS Nagar, Mohali, Punjab under the provisions of the NDPS Act. On a consideration of the said reports and on the strength of Section 8 of the NIA Act, the Central Government passed orders to investigate into the offences alleged against the petitioner herein on the premise that those offences have a connection with the Scheduled Offences. The NIA was justified in seeking cancellation of bail granted to the petitioner herein by the High Court in respect of the offences alleged against him under the provisions of the NIA Act in the State of Punjab. This is because the said offences are now being investigated by the NIA and there is also transfer of the trial from the concerned Special Court in the State of Punjab to the Special Court in the State of Gujarat, to be tried along with Scheduled Offences under Sections 17 and 18 of the UAPA as per Section 14 of the NIA Act. Therefore, the special leave petition is also liable to be dismissed and is dismissed. The interim relief granted to the petitioner vide order dated 07.03.2024 and extended from time to time stands vacated.
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2024 (12) TMI 879
Principles of Constructive res judictata - Seeking to initiate contempt proceedings against the respondents / alleged contemnors for wilful disobedience - Section 2(B) of the Contempt of Court Act, 1971 read with Article(s) 129 and 142(2) of the Constitution - default in repayment of loan - handing over physical possession along with the original title deeds of the Secured Asset to the petitioner herein - clear title to the said property - absence of any registration in accordance with Section 52 of the TPA as amended by the State of Maharashtra renders the lis pendens inapplicable. Concept of Abuse of Process of Court and Collateral challenge to judgments that have attained finality - HELD THAT:- When the impugned order of the High Court was challenged before this Court in the Main Appeals, the scope of proceedings before us also entailed the issue of validity of the Bank s actions under the SARFAESI Act. As discussed by us in the foregoing paragraphs of this judgment, that the Borrower for reasons best known to it, never agitated the validity of the proceedings under the SARFAESI Act including the legality of the 9th auction notice. Not once did the Borrower submit either in the course of its arguments or in its written submissions that the very auction process is allegedly illegal and in contravention of the SARFAESI Act. Since, no challenge had been raised to the measures taken by the Bank under the SARFAESI Act and the 9th auction notice by the Borrower, this Court proceeded to determine only the issue of right of redemption under Section 13 sub-section (8) of the SARFAESI Act. Accordingly, this Court held that under the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. However, under the amended provisions of Section 13(8) of the SARFAESI Act the right of the borrower to redeem the secured asset would be available only till the date of publication of the notice under Rule 9(1) of the SARFAESI Rules and not till the completion of the sale or transfer of the secured asset in favour of the auction purchaser. It is material to note that even in the review petition preferred by the Borrower including the application for additional grounds of review therein, the contention of the Borrower in the present contempt petition as to the illegality of the SARFAESI proceedings including the 9th auction or the contravention of the 30 / 15 days statutory period, does not figure. In fact, the Borrower in the review petition did not even lay any challenge to the direction of this Court to issue the sale certificate in the Main Appeals - the Borrower having admittedly failed to even remotely indicate the aforesaid issues to this Court let alone contend it in both the Main Appeals and the review thereof, the only question that now remains to be answered is whether it is permissible for the Borrower to raise it and again litigate the same subsequently either in the present contempt petition or in the S.A. No. 46 of 2022 which is still pending before the DRT. The Henderson Principle as a corollary of Constructive Res - Judicata - HELD THAT:- The Henderson Principle is a foundational doctrine in common law that addresses the issue of multiplicity in litigation. It embodies the broader concept of procedural fairness, abuse of process and judicial efficiency by mandating that all claims and issues that could and ought to have been raised in a previous litigation should not be relitigated in subsequent proceedings. The extended form of res-judicata more popularly known as Constructive Res Judicata contained in Section 11, Explanation VII of the CPC originates from this principle. The fundamental policy of the law is that there must be finality to litigation. Multiplicity of litigation benefits not the litigants whose rights have been determined, but those who seek to delay the enforcement of those rights and prevent them from reaching the rightful beneficiaries of the adjudication. The Henderson Principle, in the same manner as the principles underlying res judicata, is intended to ensure that grounds of attack or defence in litigation must be taken in one of the same proceeding. A party which avoids doing so does it at its own peril. In deciding as to whether a matter might have been urged in the earlier proceedings, the court must ask itself as to whether it could have been urged - In holding that a matter ought to have been taken as a ground of attack or defence in the earlier proceedings, the court is indicating that the matter is of such a nature and character and bears such a connection with the controversy in the earlier case that the failure to raise it in that proceeding would debar the party from agitating it in the future. The doctrine itself is based on public policy flowing from the age-old legal maxim interest reipublicae ut sit finis litium which means that in the interest of the State there should be an end to litigation and no party ought to be vexed twice in a litigation for one and the same cause. The Henderson Principle is a core component of the broader doctrine of abuse of process, aimed at enthusing in the parties a sense of sanctity towards judicial adjudications and determinations. It ensures that litigants are not subjected to repetitive and vexatious legal challenges. At its core, the principle stipulates that all claims and issues that could and should have been raised in an earlier proceeding are barred from being raised in subsequent litigation, except in exceptional circumstances. This rule not only supports the finality of judgments but also underscores the ideals of judicial propriety and fairness. Both logic and principle support the approach that the judicial determination of an entire cause of action is in fact the determination of every issue which is fundamental to establishing the entire cause of action. Thus, the assertion that the determination is only on one of the issues is flawed as it is nothing but an indirect way of asserting that the whole judgment is flawed and thereby relitigating the entire cause of action once more. The effect of a judicial determination on an entire cause of action is as if the court had made declarations on each issue fundamental to the ultimate decision. Applicability of Lis Pendens in the absence of any registration as required under the State Amendment to Section 52 of the TPA - HELD THAT:- As per the Doctrine of lis pendens, nothing new can be introduced during the pendency of a petition and if at all anything new is introduced, the same would also be subject to the final outcome of the petition, which would decide the rights and obligations of the parties - The doctrine of lis pendens is duly recognized in Section 52 of the TPA which states that during the pendency in any court of any suit in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceedings. The explanation to the provision states that for the purposes of the Section, the pendency of a suit or proceedings shall be deemed to commence from the date of the presentation of the plaint or institution of the proceeding in a Court, and shall continue until the suit or proceeding is disposed by a final decree or order and complete satisfaction of the order is obtained, unless it has become unobtainable by reason of the expiry of any period of limitation. The doctrine of lis pendens, which Section 52 of the TPA encapsulates, bars the transfer of a suit property during the pendency of litigation. The only exception to the principle is when it is transferred under the authority of the court and on terms imposed by it. Where one of the parties to the suit transfers the suit property (or a part of it) to a third-party, the latter is bound by the result of the proceedings even if he did not have notice of the suit or proceeding. In the present case, it has been canvassed on behalf of the Subsequent Transferee that it is a bona-fide third party purchaser of the Secured Asset since it was neither arrayed as a party to proceedings in the Main Appeals nor issued a notice of the said proceedings either by the petitioner or by the Bank - In Sanjay Verma v. Manik Roy [ 2006 (12) TMI 559 - SUPREME COURT] this Court held that the principle of lis pendens enshrined in Section 52 of the TPA is not only based on equity, good conscience and justice but is also a principle of public policy and as such no party can claim exemption from the application of this doctrine on the ground of bona fide or good faith. Since, in the present case the Special Leave Petitions were already instituted and pending before this Court as on 28.08.2023 i.e., the date of execution of the Assignment Agreement for the transfer of the Secured Asset in favour of the Subsequent Transferee, the said Assignment Agreement dated 28.08.2023 and the transfer thereto is beyond a shadow of doubt hit by lis pendens. The execution of the Assignment Agreement dated 28.08.2023 and the transfer of the Secured Asset in pursuance thereto in favour of the Subsequent Transferee is hit by lis pendens despite the fact that no notice of pendency was registered in terms of the amended Section 52 of the TPA - Section 52 of the TPA does not render transfers affected during the pendency of the suit void but only render such transfers subservient to the rights as may be eventually determined by the court. Since in the present case, the Assignment Agreement dated 28.08.2023 whereby the Secured Asset was transferred in favour of Greenscape / the Subsequent Transferee herein was effected by the Borrower on the strength of its right of redemption pursuant to the High Court s impugned order which was ultimately set-aside by this Court in its judgment and order dated 21.09.2023 in the Main Appeals, the same rendered Borrower s right to transfer the Secured Asset non-est and by extension the Assignment Agreement void. Whether any contempt is said to have been committed by the respondents herein? - HELD THAT:- The expression or word wilful means act or omission which is done voluntarily or intentionally and with the specific intent to do something which the law forbids or with the specific intent to fail to do something the law requires to be done, that is to say with bad purpose either to disobey or to disregard the law. It signifies a deliberate action done with evil intent or with a bad motive or purpose - Article 129 of the Constitution declares this Court as a a court of record and states that it shall have all the powers of such a court including the power to punish for contempt of itself. The provisions of the Act, 1971 and the Rules framed thereunder form a part of a special statutory jurisdiction that is vested in courts to punish an offending party for its contemptuous conduct. In Ram Kishan v. Tarun Bajaj Ors. [ 2014 (1) TMI 1897 - SUPREME COURT] it was held that the contempt jurisdiction conferred on to the law courts power to punish an offender not only for his wilful disobedience but also for contumacious conduct or obstruction to the majesty of law. It further observed that such power has been conferred for the simple reason that the respect and authority commanded by the courts of law are the greatest guarantee to an ordinary citizen that his rights shall be protected and the entire democratic fabric of the society will crumble down if the respect of the judiciary is undermined. Any contumacious conduct of the parties to bypass or nullify the decision of the court or render it ineffective, or to frustrate the proceedings of the court, or to enure any undue advantage therefrom would amount to contempt. Attempts to sidestep the court s jurisdiction or manipulate the course of litigation through dishonest or obstructive conduct or malign or distort the decision of the courts would inevitably tantamount to contempt sans any prohibitory order or direction to such effect - the mere conduct of parties aimed at frustrating the court proceedings or circumventing its decisions, even without an explicit prohibitory order, constitutes contempt. Such actions interfere with the administration of justice, undermine the respect and authority of the judiciary, and threaten the rule of law. While the initial acts of the Borrower and the Subsequent Transferee are in violation of this Court s judgment and order dated 21.09.2023, yet the efforts on their part to take steps and make amends by withdrawing the Special Civil Suit No. 5 of 2024 along with their belated unconditional undertaking to comply with any further order that this Court may deem fit and proper to pass, demonstrates their effort and willingness to purge themselves of their contemptuous conducts. Circumstances when a sale of property by auction or other means under the SARFAESI Act may be set-aside after its confirmation - HELD THAT:- In LICA (P) Ltd. v. Official Liquidator [ 1993 (1) TMI 242 - SUPREME COURT] this Court held that the purpose of an open auction is to get the most remunerative price with the highest possible public participation, and as such the courts shall exercise their discretion to interfere where the auction suffers from any fraud or inadequate pricing or underbidding that too with circumspection, keeping in view the facts of each case - This Court in Valji Khimji [ 2008 (8) TMI 562 - SUPREME COURT] held that once an auction is confirmed the objections to the same should not ordinarily be allowed, except on very limited grounds like fraud as otherwise no auction would ever be complete. In the present lis, it is not the case of the Borrower herein that the 9th auction conducted by the Bank was a result of any collusion or fraud either at the behest of the Bank or the Successful Auction Purchaser herein. Aside from the lack of any 15-days gap between the notice of sale and the notice of auction, no other illegality has been imputed to the aforesaid auction proceedings. It is also not the case of the Borrower that due to the absence of the aforesaid statutory period, any prejudice was caused or that it was prevented from effectively exercising its rights due to such procedural infirmity. Despite a total of eight auctions being conducted by the Bank from April, 2022 to June, 2023, not once did the Borrower express its desire to redeem the mortgage - given the fact that although the S.A. No. 46 of 2022 was still pending, yet since there was nothing before this Court to doubt the validity of the 9th auction, this Court in the Main Appeals confirmed the sale in favour of the petitioner and brought the auction proceedings to its logical conclusion by directing the issuance of the sale certificate. The Borrower never raised the issue of the validity of the 9th auction notice despite having sufficient opportunities to do so even after the pronouncement of the decision in the Main Appeals, and that such pleas are being raised only after the auction was confirmed in favour of the petitioner, we find no good reason to interfere with the 9th auction conducted by the Bank. In the present lis, apart from the want of statutory notice period, no other challenge has been laid to the 9th auction proceedings on the ground of it being either collusive, fraudulent or vitiated by inadequate pricing or underbidding, thus, the auction cannot be said to suffer from any fundamental procedural error, and as such does not warrant the interference of this Court, particularly when the plea sought to be raised to challenge the same could have been raised earlier. The legality and validity of the 9th auction proceedings conducted pursuant to the notice of sale dated 12.06.2022 is upheld. The sale of the Secured Asset to the petitioner is hereby confirmed and the title conferred through the Sale Certificate dated 27.09.2023 is declared to be absolute - The Borrower and the Bank shall immediately take steps for the cancellation of the Release Deed dated 28.08.2023 within a period of one week from the date of pronouncement - Let this matter be notified once again before this Bench after a period of two weeks to report compliance of the aforesaid directions.
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2024 (12) TMI 878
Proceedings initiated against the appellant for the offence punishable under Section 58 of the Narcotic Drugs and Psychotropic Substances Act, 1985 - Interpretation of the provisions of the NDPS Act and Cr.P.C. - Good Faith - Violation of Principles of Natural Justice - recovery of opium. Interpretation of the provisions of the NDPS Act and Cr.P.C. - HELD THAT:- A perusal of sub-section (1) of Section 58 of the NDPS Act would reveal that if any person empowered under Section 42 or Section 43 or Section 44, who, without reasonable ground of suspicion enters or searches, or causes to be entered or searched, any building, conveyance or place, or vexatiously and unnecessarily seizes the property of any person on the pretence of seizing or searching for any narcotic drug or psychotropic substance or other article liable to be confiscated under the Act, or of seizing any document or other article liable to be seized under Section 42, Section 43 or Section 44; or vexatiously and unnecessarily detains, searches or arrests any person shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to one thousand rupees, or with both. The notice which was given by the learned Special Judge to the appellant and other police officers was for the offence punishable under Sections 58(1) and (2) of the NDPS Act. As such, it could be seen that the proceedings which were initiated by the learned Special Judge against the appellant were for the offence punishable for which the maximum sentence provided in the NDPS Act was up to two years. Section 36-A (5) of the NDPS Act which begins with the nonobstante clause provides that notwithstanding anything contained in the Cr.P.C., the offences punishable under this Act with imprisonment for a term of not more than three years may be tried summarily. A bench of learned three Judges of this Court in the case of TOFAN SINGH VERSUS STATE OF TAMIL NADU [ 2020 (11) TMI 55 - SUPREME COURT] was considering a question as to whether officers of departments other than the police, on whom the powers of an officer in charge of a police station under Chapter XIV of the Cr.P.C., have been conferred, are police officers or not within the meaning of Section 25 of the Evidence Act. This Court answered the question that the officers who are invested with powers under Section 53 of the NDPS Act are police officers within the meaning of Section 25 of the Evidence Act, as a result of which any confessional statement made to them would be barred under the provisions of Section 25 of the Evidence Act, and cannot be taken into account in order to convict an accused under the NDPS Act. It is clear that the statutory scheme, according to the provisions of Section 36-A(5) of the NDPS Act, prescribes that, for convicting a person under Section 58 of the NDPS Act, he/she must be tried summarily - It is clear that the learned Special Judge could not have conducted the proceedings against the present appellant for the offence punishable under Section 58 of the NDPS Act inasmuch as such proceedings could have been conducted only by a Magistrate. Undisputedly, the procedure as required under Chapter XX i.e. Sections 251 to 256 of the Cr.P.C. has also not been followed. Good faith - HELD THAT:- Section 69 of the NDPS Act provides immunity to the Central Government, State Government or any officer of the Central or State Government or any other person exercising any powers or discharging any functions or performing any duties under this Act or any rule or order made thereunder from civil or criminal proceedings. This Court observed that anything done with due care and attention, which is not mala fide, is presumed to have been done in good faith. It has been observed that there should not be personal ill will or malice, no intention to malign and scandalise. It has been observed that good faith and public good are though a question of fact, they are required to be proved by adducing evidence. This Court held that as to whether the performance of duty acting in good faith either done or purported to be done in the exercise of the powers conferred under the relevant provisions can be protected under the immunity clause or not, would depend upon the facts of each case and cannot be a subject matter of any hypothesis. It has been held that for availing such immunity, the act has to be official and not private - It has been held that the presumption of good faith therefore could be dislodged only by cogent and clinching material and so long as such a conclusion was not drawn, a duty in good faith should be presumed to have been done or purported to have been done in exercise of the powers conferred under the statute. It has been held that there has to be material to attribute or impute an unreasonable motive behind an act to take away the immunity clause. Violation of Principles of Natural Justice - HELD THAT:- The facts in the present case are somewhat similar to the facts which fell for consideration before this Court in the case of State of West Bengal and Others v. Babu Chakraborthy [ 2004 (9) TMI 606 - SUPREME COURT ]. In the said case, the accused persons were convicted for an offence punishable under the NDPS Act. In the appeal preferred by them, while allowing the appeal, the High Court made several strictures and observations against two officers of the West Bengal Police in an IPS Cadre. In the said case also, the allegations against the said officers were with regard to violation of provisions of Section 42 of the NDPS Act. The learned Special Judge, without even giving notice to her, only on the basis of the arguments advanced at the stage of final hearing of the matter, made adverse observations against her by almost finding her guilty of the offence punishable under Section 58 of the NDPS Act - the learned Special Judge had given a complete go-bye to all the principles of natural justice. It is a well-settled principle of law that justice should not only be done but should be seen to be done. The matter went to the High Court in revision. The High Court, by the impugned judgment and order refused to interfere with the same and upheld the order dated 30th May 2008. The said impugned judgment and order was stayed by this Court vide order dated 26th October 2010 - The judgment and order dated 14th October 2010 passed by the High Court in Criminal Revision No. 2194 of 2008 is quashed and set aside - Appeal allowed.
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2024 (12) TMI 877
Maintainability of appeals u/s 13, including Section 13 (1A) of the Commercial Courts Act, 2015 - Commercial Court within the meaning of Section 13 read with Section 2(b) of the CCA - Application of the doctrine of res judicata. Res judicata or principles analogous to res judicata - HELD THAT:- This doctrine finds expression in Section 11 of CPC, but it is well settled that Section 11 of CPC is not the foundation of this doctrine but is merely the statutory recognition thereof. Accordingly, Section 11 of CPC is not exhaustive of the general doctrine of res judicata. This doctrine is founded on equity, justice and good conscience - the provision in Section 11 of CPC or the doctrine of res judicata says that once a matter is finally heard and decided between two parties, such a matter will not be allowed to be re-agitated amongst the same parties or the parties claiming under them. The Hon'ble Supreme Court in Vijayabai and others vs. Shriram Tukaram and others [ 1998 (11) TMI 703 - SUPREME COURT ] has held that the principle of res judicata would apply not only to two suits or proceedings but also to two different stages in the same suit or proceedings. The Court held that even if the strict parameters of Section 11 of CPC are not attracted, still, principles analogous to res judicata or estoppel would still apply. The matter of maintainability of appeals against judgments and orders made in proceedings for execution or enforcement of arbitral awards was directly and substantially in issue in the former proceedings, which came to be disposed of by judgment and order dated 9 August 2019. It is precisely the very same issue that is directly and substantially in issue in the present proceedings. Therefore, all the parameters necessary to attract the doctrine of res judicata, or in any event, the principles analogous to res judicata, are fully satisfied in these matters - the judgment and order dated 9 August 2019 in the former proceedings is sufficient to uphold the first objection to the maintainability of these appeals raised by and on behalf of the respondents. Law of the case doctrine - HELD THAT:- To put this doctrine in perspective, the interpretative intricacies in understanding a precedent differ from those involved in understanding the law of the case. A precedent binds to the extent the holding accords with the facts on hand. On the other hand, the law of the case fetters a later Bench in the same case from taking a contrary stand to that taken earlier by the previous Bench. Of course, this constraint flows down to the lower judicial echelons or applies to coordinate Benches, but not appellate or higher fora - these appeals are not maintainable given the judgment and order dated 9 August 2019 in Commercial Appeal (L) No. 109 of 2019 and connected appeals. Independent of Res Judicata, whether these appeals are maintainable? - HELD THAT:- Even independent of the principle of res judicata, we are satisfied that these appeals are not maintainable simply because the proceedings for execution or enforcement of the arbitral award were not proceedings under the CPC or the CCA, but they were proceedings under the ACA. Accordingly, the issue of appealability of orders, whether interim or final, made in such proceedings for execution or enforcement of arbitral awards would have to be determined by the provisions of the ACA in general and Section 37 of the ACA in these particular cases. Section 35 of the Arbitration and Conciliation Act imparts finality to arbitral awards. This section provides that subject to this Part, i.e. Part I, an arbitral award shall be final and binding on the parties and persons claiming under them, respectively. Section 36 of the Arbitration and Conciliation Act provides that where the time for making an application to set aside the arbitral award under Section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the Court. Adopting the mechanism under the CPC does not convert the execution or enforcement proceedings under Section 36 of the Arbitration Act into proceedings under Order XXI of the CPC. Therefore, even if Respondents 1 and 2 may have referred to the provisions of Order XXI of the CPC or Rule 313 of the Bombay High Court (Original Side) Rules, that can make no difference to the character of the enforcement proceedings under Section 36 of the Arbitration Act. Jet airways [ 2011 (10) TMI 783 - BOMBAY HIGH COURT ] precedent - HELD THAT:- The Coordinate Bench in Jet Airways (supra), by adverting to several binding precedents emanating from the Hon ble Supreme Court, held that the execution/enforcement proceedings were proceedings under Section 36 of the Arbitration Act and not proceedings for execution under Section 47 or Order XXI of the CPC. The Coordinate Bench also held that the appealability issue would be governed by Section 37 of the ACA, a special enactment that would prevail over the CPC, which was only a general enactment. Similarly, the Coordinate Bench also held that clause 15 of the Letters Patent was also impliedly excluded by the special provisions of the ACA. Finally, the Coordinate Bench held that the Supreme Court s decision in Fuerst Day Lawson Limited [ 2011 (7) TMI 1275 - SUPREME COURT ] conclusively determined the question of maintainability and the observations in paragraphs 70 to 73 constitute a binding precedent even in respect of maintainability of an appeal against an order passed in proceedings arising out of a domestic award under Part I of the ACA. These appeals cannot be held to be maintainable by reference to sections 13 or 13 (1A) of the CCA read with the provisions in Order XVIII of the CPC. The appellants are determined not to pay the first and second Respondents under the consent award dated 14 July 2014 and the consent order dated 22 February 2018. Considerable judicial time has been spent dealing with almost identical arguments on the issue of maintainability in Commercial Appeal (L) No. 109 of 2019 and connected matters and the present appeals. This is at the cost of several non-commercial matters, which cry for scarce judicial time and commercial matters, which must be expedited given the legislative intent of both the Commercial Courts Act and the Arbitration Act. The appellants are directed to pay consolidated costs of Rs. 20,00,000/-, out of which Rs 10,00,000/- to be shared by the first and second Respondents, and the balance Rs. 10,00,000/- by the Maharashtra State Legal Services Authority. These costs must be paid within four weeks from today, and proof of payment must be filed in the Registry - Appeal dismissed as not maintainable.
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