Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 25, 2023
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Provisional attachment of the Bank account u/s 83 of the CGST Act, 2017 - in view of the legal provisions and taking into consideration materials found against the petitioners during investigation, CGST Guwahati authority’s action of attaching the bank account of the petitioner provisionally and the impugned order to this effect is very much legal, valid and within jurisdiction and is not liable to be interfered by this writ Court. - HC
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Belated claim of Input Tax Credit (ITC) - purchase of Petroleum product - GSTN had not provided the facility of GSTR-2 till now. - The respondents shall permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply / sales without paying taxes - HC
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Supply of outputs as sale of goods or not - effluent treatment - water sold as 'water including natural or artificial mineral waters and aerated waters - it is evident that the common effluent treatment plant has been set up in order to comply with the legislative and environment regulations thereby conserving water through recovery and reuse and not to manufacture water or chemicals - effluent treated water is eligible for exemption from GST - AAR
Income Tax
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Reopening of assessment u/s 147 - period of limitation - In fact, the impugned order dated July 28, 2022 of the Authorities had set out the entirety of the response of the appellant dated June 5, 2022 in its body and arrived at the finding that, the reply given was not tenable. The impugned order has also ascribed reasons why the reply of the appellant was not found to be tenable. - The impugned order of the authorities under Section 148A (d) of the Act of 1961 cannot be said to be vitiated by breach of principles of natural justice. - HC
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Payment of interest u/s 244A to the deductor on the refund of tax made u/s 240 - Since we have awarded simple interest at 6%, we are not granting any cost in this case. This order shall be given effect to and the interest shall be paid over on or before 15th February 2024 - If not paid, with effect from 16th February 2024, the rate of interest payable will be at 9% p.a. until the date of payment. - The difference of 3% (9% - 6%) will be recovered from the Officer who will be responsible to have the interest paid. - HC
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Delay in filing the revised return of income u/s 139(5) - delay of 37 days in filing the revised returns - No doubt, the petitioner is a Pilot, who has to travel throughout India and also he is a trainer of Pilots. As a Pilot, he cannot be excepted to reach home in time everyday. He may be compelled to stay away from his home town. Further, in this writ petition, the petitioner is asking for condonation of delay of 37 days. - Delay condoned - HC
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LTCG - eligibility or claim of exemption of u/s. 54F - As per AO new asset cannot be considered as acquired within 02 years of transfer of original asset - Since the assessee has invested the entire sale proceeds for the purchase of new house within three months of sale of the old house, the assessee is eligible for claim of exemption of u/s. 54F. - AT
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Penalty u/s 271(1)(c) - disallowance u/s. 36(1)(iii) - In fact, the assessee at the time of assessment proceedings has given a detailed calculation related to interest u/s. 36(1)(iii) on borrowed funds for acquiring capital assets and this very same amount was added by the AO and thus it cannot be said that the assessee furnished inaccurate particulars of income or concealed particulars of income though the assessee was under bonafide mistake did not state the same in its return of income. - No penalty - AT
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TP Adjustment - US Transactions non US Transactions - scope of MAP agreement - It would be better to refer to the settlement arrived between the competent authority of India and the competent authority of USA to resolve the cases relating to Hewitt India for A.Y. 2006-07 to 2010-11 by adopting the values relating to US related international transaction - No hesitation to direct the AO / TPO to adopt the same approach for the non US transactions as adopted in the MAP for US transactions and determine the TP adjustment, if any, after affording a reasonable and sufficient opportunity of being heard to the assessee. - AT
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Addition on account of business expenses - As in the present assessment year there is no interest income at all either under the heads, ‘Income from other sources’ or ‘business income.’ The claim of the assessee is that the lending business should be accepted on the basis of consistency. However, the same cannot be accepted as ld.CIT(A) has made a very specific observation on the basis of the financials. - Claim not allowed - AT
Customs
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Direction for issuance of a detention waiver certificate - In the instant case, the demurrage could have been avoided if after removing the goods for testing, same were directed to be shifted to warehouse under Section 49 of the Act. The petitioner on 13th January 2021 sought such permission and which was immediately granted but the same could have been done when the goods were detained for investigation. Therefore, respondent Nos. 1 & 2 were not justified in not responding to various letters of the petitioner seeking waiver certificate and now to justify the same in reply affidavit. - HC
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Provisional release of perishable goods - apples - Once the notification is stayed by the High Court, such order would be operational and binding on the department all over considering the well settled principles of law as laid down by the Supreme Court - HC
Corporate Law
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Power of the SFIO to Investigate Offences under the IPC - investigate offences under the Companies Act - If during course of investigation under the present Act, the concerned Investigating Officer comes across commission of offences punishable under the IPC or any other law relating to the transactions being investigated, then the same cannot give rise to distinct proceedings. Such investigation can be carried out under Section 4(1) of the CrPC. If the report which is subsequently filed is to be treated as a police report under Section 173(2) of the CrPC, then the officer is to be considered to be vested with powers of an ‘officer in charge of a police station’. - HC
IBC
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CIRP - Renewal of Bank Guarantee for customs duty exemption - When there is no guarantee with respect to the MPP status of the Non-Operational Units and since there are no goods being imported by the Corporate Debtor Company as it is undergoing CIRP, there is no exemption which the Company can claim for Customs Duty liability and we are of the earnest view that the Corporate Debtor Company need not be burdened with the Commission and renewal charges approximately amounting to Rs. 70 Crores which would only increase the financial burden of the Corporate Debtor Company with no positive benefits accruing. - AT
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Admissibility of Section 7 application - The date of default which is mentioned in the tabular form cannot be ignored it is clear that there was default of more than Rs.1 Crore i.e. threshold period in payment of default by the Corporate Debtor after Section 10A period. - The above default is very much there even if the default is ignored on the basis of Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 - even after Section 10A period there being default in payment of interest which was more than threshold amount, the Application under Section 7 deserves to be admitted - AT
Service Tax
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Levy of service tax - business auxiliary service or not - The Indian Bank has only collected such charges from the appellant as a reimbursement which was born by the Indian Bank while transacting with the Foreign Bank. Therefore, the appellant even though bearing the charges as a reimbursement the same cannot be said to be service charges - in the present case the demand of Service Tax was raised under the head of BAS which is absolutely incorrect. - AT
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Classification of services - technical inspection and certification service - activity of X-Ray of pipeline - the service in the present case is qualified as works contract service, for this reason also the demand under wrong head i.e inspection and certification service will not be sustainable. - AT
Case Laws:
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GST
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2023 (12) TMI 1054
Provisional attachment of the Bank account u/s 83 of the CGST Act, 2017 - challenge to attachment order on the ground that the condition precedent to initiate proceeding under Chapter XII, XIV and XV of the GST Act is absent in the present case - HELD THAT:- So far as objection of the respondents with regard to maintainability of the writ petition before this Court on the ground of lack of territorial jurisdiction is concerned, is not sustainable since cause of action is a bundle of fact and in the facts and circumstances of the present case, the part of cause of action arose within the territorial jurisdiction of this Court since petitioner s bank account in Kolkata was attached though may it be by an authority in Guwahati and in view of the fact that petitioner is a registered person in Kolkata and as such writ petition before this Court against the impugned order passed by the authority at Guwahati is maintainable. So far as challenge by the petitioner the legality and validity of the impugned order of provisional attachment under Section 83 of the Act on the ground of non pendency or initiation of any proceeding against the petitioner is concerned, on reading conjointly Section 1(2), Section 6(1), Section 83, Section 122(1) and Section 122 (1A), Clause (i), (ii), (vii) and (ix) thereunder and judgments, relevant circulars and notification and taking into consideration materials found against the petitioners during investigation, CGST Guwahati authority s action of attaching the bank account of the petitioner provisionally and the impugned order to this effect is very much legal, valid and within jurisdiction and is not liable to be interfered by this writ Court. This Writ Petition is dismissed.
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2023 (12) TMI 1053
Rejection of appeal on the ground of being delayed - appeal was beyond even the one month period provided under Section 107 of the BGST Act - HELD THAT:- Aan appeal against an order under Section 73 or 74 has to be filed on or before 31.01.2024, and any appeal filed which is pending before the authority could also be considered as properly filed, even if there is delay in such filing. In the present case, the appeal was filed and was dismissed by the first Appellate Authority. In such circumstances, it is only proper that the appeal be restored to the files of the Authority subject to the conditions under paragraph no. 3 being satisfied - Hence the petitioner would be entitled to satisfy paragraph no. 3 of the N/N. 53 of 2023- Central Tax, dated 02.11.2023 (S.O. 4767(E)) by paying up the deficient amounts as would be required to maintain the appeal under the notification - The Central Board of Indirect Taxes and Customs has by Notification No. 53 of 2023- Central Tax, dated 02.11.2023 (S.O. 4767(E)) extended the time for filing appeal against an order passed by the Proper Officer on or before 31.03.2023 under Sections 73 and 74 of the BGST Act. This in fact extends the period for filing a delayed appeal beyond the one month period as provided under Section 107(4) of the BGST Act, on following the special procedure prescribed under the said Notification. The impugned order set aside - petition allowed.
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2023 (12) TMI 1052
Validity of show cause cum demand notices issued under Section 74 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The Respondents are duty-bound to comply with the requirement of Section 67 (5). This Section provides that the person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts therefrom in the presence of an authorised officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation. The concerned Respondents are directed to dispose of the Petitioners' representations dated 03.05.2023, and and further representations as request in terms of Section 67 (5) of the said Act. This is because there is prima facie merit in Mr Agni's contention that they should have access to such documents for filing an effective reply/ response to the impugned notices which are now to be treated as show cause notices. Petition disposed off.
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2023 (12) TMI 1051
Belated claim of Input Tax Credit (ITC) - purchase of Petroleum product - contention of the petitioner is that as per Section 38 of the GST Act read with Rule 60 of the TNGST Rules, the ITC shall be claimed through GSTR-2, GSTN had not provided the facility of GSTR-2 till now. HELD THAT:- The respondents without giving any opportunity to file the returns by notifying the Form GSTR-2, cannot expect the taxable person to file returns. In fact, the petitioner has no intension to violate the provisions of the Act. In order to show his bonafide, he has filed physically. Moreover, all tax liability is paid and there is no loss to the department. Moreover, the petitioner has also claimed financial crisis. Even though the financial crisis cannot be a ground for not filing the returns in time, not notifying of Form GSTR-2 is clearly a ground to consider the petitioner's claim of belated returns. The next contention of the petitioner is that the ITC can be claimed through GSTR-3B, but GSTN has not permitted to file GSTR-3B in online if the dealers had not paid taxes on the outward supply / sales. In other words, if the dealer is not enabled to pay output tax, he is not permitted to file GSTR-3B return in online and it is indirectly obstructing the dealer to claim ITC. In the present case the petitioner was unable to pay output taxes and so the GSTN not permitted to file GSTR-3B in the departmental web portal it is constructed that the petitioner had not filed GSTR-3B online, that resulted the dealer unable to claim his ITC in that particular year in which he paid taxes in his purchases. Hence if the GSTN provided option for filing GSTN without payment of tax or incomplete GSTR-3B, the dealer would be eligible for claiming of input tax credit - The petitioner had expressed real practical difficulty. The GST Council may be the appropriate authority but the respondents ought to take steps to rectify the same. Until then the respondents ought to allow the dealers to file returns manually. This Court is inclined to quash the impugned orders and accordingly the impugned orders are quashed. The respondents shall permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the outward supply / sales without paying taxes - the matter is remitted back to the authorities for reconsideration - Petition allowed.
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2023 (12) TMI 1050
Failure on the part of the respondent to deposit an amount paid by the petitioner towards Goods and Service Tax to the respondent No. 1 - HELD THAT:- It is informed by the learned counsel for the Khopoli Municipal Council that the amount of Rs.38,94,868/- has been deposited in this Court on 6th July 2023 by demand draft. If that be so, what remains is the deposit of the said amount with the GST Authorities, in even proportion as per the requirement of the Central Goods and Services Tax (CGST) Act and also the Maharashtra State Goods and Services Tax (MGST) Act - Registry of this Court accordingly to receive intimation from the learned Advocate for the said Respondents authorities, to furnish bank account details of the concerned jurisdictional authorities so that the said amount can be transferred by this Court. The said compliance would be completed within two weeks from today and on receipt of such information, office to deposit the amount as directed within one week thereafter. The CGST Authorities and SGST Authorities to consider the Petitioner s case sympathetically with regard to interest and penalty - Petition disposed off.
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2023 (12) TMI 1049
Classification of supply - Supply of outputs as sale of goods - water sold as 'water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) - classified under heading 2201 or not. Supply of outputs as sale of goods or not - HELD THAT:- From the conjoined reading of section 4 of The Sale of Goods Act, 1930 and the Hon'ble Supreme Court judgement in the case of State of Madras vs Gannon Dunkerley Co.,(Madras) [ 1958 (4) TMI 42 - SUPREME COURT ], it is clear that the modus of operation as purchase of effluent and sale of output is applicable only if all the elements cited in the Section and judgement cited are present. If that is the case, then the classification of supply of treated water, salt and other products, as sale of goods is correct - However, it is emphasized that the mode of operation intended by the applicant i.e. purchase of raw effluent, treating the same and selling the resultant products, can be classified as sale of goods, if and only if, the applicant follows the procedures envisaged in the Sale of Goods Act and rationale of the observations of Hon'ble Supreme Court. If such is the case, the proposed mode of purchase of raw effluent, treat it on own account and supply of output, can be treated as sale of goods and consequently the first question is answered in the affirmative. Whether the classification of water sold as 'water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) under heading 2201 is correct? - HELD THAT:- Water grouped under the heading 22.01 is ordinary water whether or not clarified or purified. And this heading specifically excludes distilled or conductivity water and water of similar purity which are classified in heading 28.53. Therefore, it is amply clear that, water recovered out of the effluent treatment process nothing but an ordinary water which is suitable for reuse by the dyeing and bleaching units as a solvent and as a washing, rinsing medium. Thus, it aptly fits into Sl. No. 99 of Notification No. 02/2017, CT (Rate), dt.28.06.2017 under the heading 2201 rather than Sl.No.24 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 under the same heading 2201 - As per Circular No. 179/11/2022, dated 03.08.2022, issued by Ministry of Finance, regarding applicability of GST on various goods and services, it has been clarified that treated sewage water attracts Nil rate of tax. The ultimate intention behind the effluent treatment process is to treat the effluent water discharged by textile units to recover water, salt and other chemicals consumed during the course of dyeing and bleaching to the maximum extent possible so as to reuse the same without getting it discharged to pollute water bodies. Moreover, ZLD has been mandated by the TNPCB for all the highly polluting industries including Textile Dyeing and Bleaching industries in order to prevent pollution of River water and ground water. Therefore, it is evident that the common effluent treatment plant has been set up in order to comply with the legislative and environment regulations thereby conserving water through recovery and reuse and not to manufacture water or chemicals - effluent treated water is eligible for exemption as per Notification No. 2/2017- Central Tax Rate as amended vide notification No.7/2022-Central Tax (Rate), dated the 13th July, 2022.
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Income Tax
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2023 (12) TMI 1048
Validity of revision u/s 263 - Allowability of Maintenance expenses and depreciation - Validity of order passed u/s 143(3) by AO confirmed by ITAT and setting aside revisional order of the Commissioner on the question of disallowability maintenance expenses and depreciation - HELD THAT:- Assessee is engaged in business of chartering flights and had derived chartering income which evidences the business nexus of use of aircrafts owned by the respondent/assessee. This being the finding of fact and not disputed by the revenue even before us, it can be safely concluded that the aircrafts were utilised for business purpose. Even if officers of the assessee i.e. directors have used the aircrafts for business meetings in different locations, it cannot be said to be a personal use. The assessee is a company and thus an artificial juristic person. Therefore, even if directors on some occasion have been allowed to use the aircrafts for their personal use, neither the expenses incurred in maintenance of the aircrafts nor the depreciation of the aircrafts can be disallowed, inasmuch as then, at the best, the value of use of the aircrafts on such occasion is perquisite in the hands of the user. On that account, neither depreciation nor maintenance can be disallowed, even partially. Tribunal has found that the aircrafts have been used for chartering business. Substantial receipts from chartering business has been shown by the assessee. Therefore, the view taken by the Tribunal in the impugned order, does not suffer from any error of law. Hence, the substantial question of law No.(i) is answered against the revenue and in favour of the assessee. Since the revenue/appellant themselves have conceded on the question of admissibility of the maintenance expenses and depreciation of the aircrafts, in full, in the matter of the present assessee in other assessment years, therefore, the revenue cannot be allowed to take a contrary stand in the present appeal. Therefore, for this reason also, the afore-quoted substantial question of law is answered in the manner as afore-stated i.e. against the revenue and in favour of the assessee. Deduction of lease rent for vehicle obtained on lease by the Assessee permitted - Relying upon the judgment of IM/S ICDS. LTD. VERSUS COMMISSIONER OF INCOME TAX. MYSORE ANR. [ 2013 (1) TMI 344 - SUPREME COURT] and Rajshree Roadways v. Union of India Ors. [ 2003 (3) TMI 50 - RAJASTHAN HIGH COURT] Tribunal held that the issue of lease rent is covered by the aforesaid judgment of the Hon ble Supreme Court and hence the order passed by the Assessing Officer by taking one possible view, cannot be termed as erroneous warranting initiation of revision proceedings under Section 263 of the Act, 1961. The Tribunal also found that in own case of the respondent/assessee for the assessment year 2011-12, the issue was accepted by the revenue, pursuant to the directions of the DRP. The impugned order of the Tribunal on the point of lease rent cannot be said to suffer from any illegality. Hence, the substantial question of law no. (ii), is answered against the revenue and in favour of the assessee.
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2023 (12) TMI 1047
Income from business u/s 28(iv) - Valuation of shares on scheme of amalgamation - actual market and/or valuation of the Shares of the transferee company being more than face value, the differential valuation of such shares issued representing the value of the net identifiable assets accruing to the transferee constitutes a profit and/or taxable benefit accruing to the transferee company within the meaning of Section 28(iv) - HELD THAT:- To invoke Section 28(iv) of the Act 1961, the necessary requirement is that firstly there should be a benefit and secondly the benefit should arise from business. In the present set of facts, there was neither any benefit nor any benefit arising from business to attract Section 28(iv) of the Act 1961. Under the circumstances, Section 28(iv) of the Act 1961 has no application at all, on the present set of facts. The findings recorded by the Tribunal are findings of fact based on consideration of relevant evidences on record. The findings recorded by the Tribunal do not suffer from any illegality or perversity. No merit in this appeal. The substantial question of law answered against the revenue and in favour of the assessee.
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2023 (12) TMI 1046
Reopening of assessment u/s 147 - period of limitation - Unexplained deposits - HELD THAT:- An order u/s 148A (d) of the Act of 1961 had been passed and a notice under Section 148 of the Act of 1961 was issued as against the appellant. The impugned order dated July 28, 2022 had been passed u/s 148A (d) of the Act of 1961 and relates to the Assessment Year 2015-2016. The issue of limitation has been dealt with in the impugned order. It has been held that the case of the appellant would fall under definition of asset as laid down under the provision of Clause b of Section 149 (1) of the Act of 1961. The impugned order has found that, for the relevant financial year a sum had been deposited with ICICI bank by the appellant in his account and that the appellant had failed to produce any supporting documentary evidence to explain such deposit. Such deposit has not been reflected in the relevant assessment year. Therefore, by the impugned order, the authorities had come to a finding that, there was an escapement of income tax chargeable to tax for the relevant assessment year. Consequently, the authorities, by the impugned order have decided that it was a fit case to issue a notice u/s 148 of the Act of 1961 for the relevant assessment year. Issue of limitation had been taken by the appellant before the authorities. Appellant had also taken the point of limitation and contended that the authorities wrongly assumed jurisdiction by deciding the issue of limitation erroneously before the learned Single Judge. Contention of the appellant with regard to lack of jurisdiction has revolved around the new regime of limitation that had been introduced with effect from April 1, 2021 by the substituted provisions of Sections 147 to 151 particularly Section 149 of the Act of 1961 by the Finance Act, 2021. In the facts of this case, the appellant had suffered a notice under Section 148 of the Act of 1961 on April 30, 2021. Such notice had been set aside by the High Court on February 22, 2022. The appellant and the department are governed by the directions of Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT ] which had issued directions relating to all notices issued under Section 148 after April 1, 2021. The department by a letter dated May 23, 2022 had provided the materials based on which the proceedings had been initiated. To that the appellant had submitted a response dated June 5, 2022. The impugned order dated July 28, 2022 passed under Section 148A (d) of the Act of 1961 had dealt with the response of the appellant dated June 5, 2022 in extensor. In fact, the impugned order dated July 28, 2022 of the Authorities had set out the entirety of the response of the appellant dated June 5, 2022 in its body and arrived at the finding that, the reply given was not tenable. The impugned order has also ascribed reasons why the reply of the appellant was not found to be tenable. The impugned order of the authorities under Section 148A (d) of the Act of 1961 cannot be said to be vitiated by breach of principles of natural justice. The appellant had been heard before passing of the order. Appellant had submitted a response to the show-cause notice and filed written submissions which were considered by the Authorities. The impugned order, as noted above, cannot be said to without reasons for arrival at the decision recorded. Learned Single Judge has exercised discretion not to entertain the writ petition. Learned Single Judge has proceeded to hold that there was no violation of the principles of natural justice or that there was any procedural defect in arriving at the impugned decision dated July 20, 2022 of the Authorities - No ground to interfere in the appeal
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2023 (12) TMI 1045
Payment of interest u/s 244A to the deductor on the refund of tax made u/s 240 - Failure to release the undisputed refund due and determined by respondents themselves in the intimation/order issued u/s 168(1) - stand of the Revenue is interest is not provided for refund of amounts deposited under the equalisation levy and, therefore, the question of payment of any interest does not arise - HELD THAT:- In Tata Chemicals Ltd. [ 2014 (3) TMI 610 - SUPREME COURT ] Apex Court also held that refund due and payable to the assessee is debt owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course In the present case, it is not in doubt that petitioner was entitled to refund of Rs. 4,23,60,940/- because the amount has been paid after the petition was filed. Since the excess amount has been paid over by petitioner on various dates during Financial Year 2017-2018, in our view, the refund ought to have been processed and paid latest by 31st July 2018. The interest, therefore, of course, will become payable from 1st April 2018 if we apply the principles prescribed in Section 244A of the Act. The amount, as noted earlier, has been paid only on 21st August 2023. Consequently, we are of the view that petitioner is entitled to interest on this amount of Rs. 4,23,60,940/- from 1st April 2018 upto 21st August 2023 at the rate of 6% p.a. which is the rate prescribed under Section 244A of the Act. Since we have awarded simple interest at 6%, we are not granting any cost in this case. This order shall be given effect to and the interest shall be paid over on or before 15th February 2024 - If not paid, with effect from 16th February 2024, the rate of interest payable will be at 9% p.a. until the date of payment. This will be in addition to other proceedings to hold the department and concerned officers to be in willful disobedience of the orders passed by this Court. The difference of 3% (9% - 6%) will be recovered from the Officer who will be responsible to have the interest paid.
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2023 (12) TMI 1044
Penalty u/s 271(1)(c) - undisclosed royalty receipts - assessee earned revenues from two streams i.e. web hosting and domain registration charges and offered revenue from web hosting services to tax in the return filed for the relevant AYs. However, the assessee did not offer to tax its income from domain registration services for the reason that it was under a bonafide belief that this income is not chargeable to tax under the provisions of the Act. HELD THAT:- Tribunal was of the view that the issue involved in the appeal was debatable. As would be evident, in this behalf, the Tribunal had also taken recourse to the fact that the quantum appeal was pending in this court. Concededly, the quantum appeals were filed by the respondent/assessee with this court for the AY in issue, i.e., AY 2013-14 and other AYs as well. The other AYs qua which the appeals were filed, as noticed above, were AY 2014-15 and AY 2015-16. Insofar as these appeals were concerned, the question of law, as framed, was answered in favour of the respondent/assessee and against the appellant/revenue, although, as noticed above, the respondent/assessee had preferred appeals before this court. The question of law which was framed and answered by this court in [ 2023 (12) TMI 718 - DELHI HIGH COURT] decided issue in favour of assessee. Thus the penalty imposed in the instant appeal cannot be sustained.
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2023 (12) TMI 1043
Penalty levied u/s 271(1)(c) - undisclosed income taxable as royalty - assessee earned revenues from two streams i.e. web hosting and domain registration charges and offered revenue from web hosting services to tax in the return filed for the relevant AYs but did not offer to tax its income from domain registration services for the reason that it was under a bonafide belief that this income is not chargeable to tax - HELD THAT:- Insofar as these appeals were concerned, the question of law, as framed, was answered in favour of the respondent/assessee and against the appellant/revenue by this Court in [ 2023 (12) TMI 718 - DELHI HIGH COURT ] reads as follows: Whether on the facts of the case and in law, the Income Tax Appellate Tribunal [in short, Tribunal ] erred in holding that the income received by the appellant as a consideration for providing domain name registration services amounted to royalty‟ under Section 9(1)(vi) of the Income Tax Act, 1961 ? Given the position that the respondent/assessee before us has succeeded in the aforementioned appeals, the penalty imposed in the instant appeal cannot be sustained. Therefore, the impugned order, in our opinion, requires no interference.
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2023 (12) TMI 1042
GP estimation - AO has determined the GP rate at 6% as against the disclosed GP rate of 4.6%, which was reduced by the CIT(A) to 5% - ITAT has further reduced it and made an ad hoc addition of Rs. 4,00,000/- to the Gross Profit - HELD THAT:- No reason whatsoever has been assigned by the Tribunal to sustain the addition of Rs. 4,00,000/- in the GP rate of the assessee. Under the circumstances, the finding of the ITAT that ad hoc addition of Rs. 4,00,000/- to the disclosed GP rate of the assessee would be reasonable and fair, is based on no material. Even the Tribunal has not recorded any finding based on any material so as to disbelieve the GP rate disclosed by the assessee. Under the circumstances, the ad hoc addition made by the Tribunal to the GP of the assessee is wholly arbitrary and based on no evidence, consequently, it cannot be sustained. Therefore, the substantial question of law no. (i) is answered in favour of the assessee and against the revenue. Addition u/s 68 - transaction of sale of jewellery out of receipt of gift of jewellery - HELD THAT:- The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is necessarily required to be based on proper appreciation of material and other attending circumstances available on record. The Assessing Officer has to form his opinion objectively with reference to the materials available on record and not merely on surmises and conjecture. Application of mind is a sine qua non for framing the opinion of the Assessing Officer. Since in the present set of facts the assessee has offered proper explanation based on documentary evidences and the evidences so filed by the assessee were not found to be in-genuine or fake, therefore, genuineness of the sale transaction of jewellery by the assessee could neither be disputed nor Section 68 could be invoked to make addition in the income of the assessee. The legal proposition with respect to applicability of Section 68 has also been settled by the Hon ble Supreme Court in Commissioner of Income Tax Vs. P. Mohanakala[ 2007 (5) TMI 192 - SUPREME COURT] which also helps the assessee in the present set of facts. Therefore, the addition of Rs. 9,00,000/- upheld by the Tribunal cannot be sustained. Decided against the revenue.
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2023 (12) TMI 1041
Addition u/s 68 - onus to prove - ITAT sustained addition - HELD THAT:- Tribunal correctly concluded that once unexplained credit was found in the books of accounts, the initial onus under Section 68 of the Act lay on the assessee. Tribunal held that there was no material except the assertion of the appellant/assessee that he was merely an entry provider and, therefore, only the amount received as commission ought to have been added to his income. Appellant made a valiant attempt to defend the position of the appellant/assessee by submitting that the appellant/assessee could not assist the AO in unravelling the truth, since Mr Dinesh Prasad had expired immediately after the assessment order was passed in the first round. Having regard to the record and the approach adopted by the Tribunal, we are unable to persuade ourselves that this is a fit case for interfering with the impugned order. No substantial question of law arises for our consideration.
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2023 (12) TMI 1040
Sham collaboration agreement - addition made after adjustments towards technical expertise and brand value - addition made by the AO is the collaboration agreement as executed between the assessee and an entity named, MGF Development Ltd. - collaboration agreement entered into between the assessee and MGF cast several obligations upon the latter, which included providing and securing funds, bank guarantee and technical expertise for the integrated hotel project and assessee was required to pay 60% of the revenue earned from the transfer/sale of the integrated hotel project to MGF. Tribunal s view that the contention of revenue that the collaboration agreement represented a sham transaction was not established and consideration for sharing the revenue was provided by MGF in the form of funds, technical support/assistance for execution of the project and the benefit of its brand value that had been acquired perhaps over the year - HELD THAT:- Tribunal as concluded that the obligation cast on the respondent/assessee to share the revenue from the project represented commercial expediency. In a nutshell, the Tribunal applied the well-established principle that the AO could not have put itself in the armchair of the businessman and decide what amount would pass as a reasonable expenditure, vis- -vis the subject project. In our view, having regard to the findings of facts returned both by the CIT(A) and the Tribunal, no interference is called for. As was correctly concluded by the Tribunal, the amount received by MGF had been offered for tax and quite clearly, addition in that regard could not have been made in the hands of the respondent/assessee, once the remittance had been accepted in the hands of MGF. In a manner of speech, in our view, what is sauce for the goose is also sauce for the gander. No substantial question of law arises for our consideration.
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2023 (12) TMI 1039
Rectification u/s 154 - case of the Petitioner is that in the course of re-assessment proceedings, the Assessment Officer have wrongly added ICDS while computing taxable income u/s 115JB - also stated that in terms of provisions of law, ICDS will be added in the normal course in determining the income, but in the present case on hand, the assessee is liable to pay the tax in terms of provisions u/s115JB of the Act and hence the Petitioner filed a Rectification Petition u/s. 154 HELD THAT:- While passing the reassessment order, the Respondents have added ICDS while computing income in terms of Section 115JB of the Act. There is no provision in law to add ICDS and therefore when there was no provision, the question of adding the said ICDS while calculating deemed income under Section 115JB would not arise. In such view of the matter, the aforesaid error has to be rectified. As relying on MK VENKATACHALAM, INCOME-TAX OFFICER, AND ANOTHER [ 1958 (4) TMI 4 - SUPREME COURT] it is clear that in the event of any mistakes on the record both in law and on facts, it can be rectified. Following the same, this Court is inclined to set aside the impugned order.
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2023 (12) TMI 1038
Delay in filing the revised return of income u/s 139(5) - delay of 37 days in filing the revised returns - petitioner filed his return of income without claiming relief u/s 89 - petitioner is a Pilot - HELD THAT:- There was a delay of 37 days in filing the revised returns. Initially, the petitioner had filed his Income Tax Returns within the prescribed time limit. However, he has not availed the benefits available u/s 89 of the Income Tax Act. Petitioner is a Pilot, who has been travelling throughout India. That apart, he is also a Trainer for the Pilots. Therefore, by oversight, he had filed his returns without claiming the exemption, which is available u/s 89 of the Income Tax Act and there is no dispute on the aspect that the petitioner's entitlement to claim the said exemption. In the present case, the petitioner should have filed the revised returns within the time limit prescribed under the provisions of the Income Tax Act. However, due to the nature of work, the petitioner was unable to file his revised returns in time. No doubt, the petitioner is a Pilot, who has to travel throughout India and also he is a trainer of Pilots. As a Pilot, he cannot be excepted to reach home in time everyday. He may be compelled to stay away from his home town. Further, in this writ petition, the petitioner is asking for condonation of delay of 37 days. Therefore, this Court feels that for the interest of justice, the said delay of 37 days in filing the revised returns has to be condoned, since it is not a tax liability that the petitioner is not going to pay to the respondent, but it is an exemption, which he is entitled to claim under the provisions of Income Tax Act. The said entitlement cannot be deprived by citing the reasons of delay of 37 days in filing the revised returns. Regarding the argument that Respondents that there must be some discipline in filing the returns, otherwise it would set an example to demoralise the work done by the Officers, who are in-charge of filing returns is concerned, this Court is of the considered view that the question of demoralisation of work will not come into picture here, since it is the duty of the Officers to scrutinize the returns and in the course of scrutinizing the returns, if anything is found, it is the duty of the Officers concerned to intimate the same to the Assessees and hence, while performing their duty. In fact, this Court expects that the officials should assist the Assessees and inform the defects in time, if any, noticed in the returns then and there. This Court is inclined to set aside the impugned order passed by the respondent. Accordingly, the impugned order is set aside and the delay of 37 days in filing the revised returns is hereby condoned.
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2023 (12) TMI 1037
Unexplained investments - assessee alleged to have receipt it as gift - Non establish relation between the donor and the assessee with documentary evidence - addition made by the AO was non furnishing of requisite document during the assessment proceedings - DRP held that, since the basis of addition made by the AO was non furnishing of requisite document during the assessment proceedings, the panel, in the interest of natural justice and with the objective to arrive at true determination of taxable income of the assessee, considers it appropriate to take the additional evidence filed by the assessee on record - HELD THAT:- We have given credence to the following facts like Copy of UK passport of donor to prove his identity, date of birth and age of 72 years, Details of his personal residence and complete residential address, Copy of duly signed letter of confirmation from the donor stating that he had gifted a sum to his sister's son i.e. the assessee on 22.12.2015 to prove the genuineness of the transaction. A perusal of the bank statement of the assessee showing receipt of funds, also showing the details of remittance received by the assessee in his NRE account on account of said gift. Documentary evidence to prove that the assessee and donor are both UK citizens and non-residents and thus the documentary evidence to support and substantiate documents generally applicable in India such as gift deeds were neither relevant nor executed between them. A signed letter of confirmation was submitted before the AO. Details of PAN of donor in India to prove his identity and credit worthiness, Details of investments held by Donor in India in Bharti Airtel which were sold for approximately Rs. 2150 crores in 2005 to prove his credit worthiness. The relationship between the assessee's mother and the donor was established with a joint reading of the said affidavit along with the copy of Indian passport of the assessee's mother Smt. Sumi Malik. Copy of assessment order u/s 147/143(3) framed by colleague of the Ld. AO himself duly scrutinizing and accepting the sale of investments by the donor in AY 2007-08. In the instant case, the sale of investment being considered was to the tune of Rs. 19,80,37,899 as against gift of Rs. 6.87 crores, to establish the credit worthiness of the donor. Copy of ITRs of the donor for AY 2016-17 and 2017-18 declaring income of Rs. 4,12,79,631 and Rs. 20,11,631 respectively to establish the credit worthiness of the donor. Hence keeping in view in the facts narrated above, we hold that no addition is called for in this case.
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2023 (12) TMI 1036
LTCG - eligibility or claim of exemption of u/s. 54F - As per AO new asset cannot be considered as acquired within 02 years of transfer of original asset - HELD THAT:- The assessee sold residential property on 17.04.2014 for Rs. 70,00,000/- and the entire sale proceeds were invested from 01.05.2014 to 08.07.2014 in purchase of property named The Grands Arch from the builder Ireo . - New property acquired vide Possession letter dated 04.07.2016 and conveyance deed dated 29.04.2016. Since the assessee has invested the entire sale proceeds for the purchase of new house within three months of sale of the old house, the assessee is eligible for claim of exemption of u/s. 54F - Appeal of the allowed is allowed.
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2023 (12) TMI 1035
Shifting of income by client code modification - HELD THAT:- Addition cannot be made on the basis of DDIT report into the shifting of income through client code modification alone where the AO has not carried out any further independent verification into the matter. In the present case also the assessee has maintained all the books of account and also furnished all the documents qua the F O segment done through the said broker. We also note that the AO has not doubted the F O transactions loss incurred to the tune of Rs. 18,16,26,178.83/- and has doubted only the transactions through M/s Indianivesh Securities Pvt. Ltd. registered broker that too on DDIT Report. Under these facts, we are not in a position to sustain the order of Ld. CIT(A) which has also discussed DDIT report by SEBI without giving any independent finding on the issue. Accordingly we set aside the order of authorities below and direct the AO to delete the addition.Appeal of the assessee is allowed.
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2023 (12) TMI 1034
Estimation of income - bogus purchases - HELD THAT:- Estimation of profit of the assessee @4% is reasonable - Therefore, direct the AO to estimate the profit of the assessee @4% instead of 5%. Grounds raised by the assessee are partly allowed.
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2023 (12) TMI 1033
Penalty u/s 271(1)(c) - disallowance u/s. 36(1)(iii) - Penalty imposed for furnishing inaccurate particulars of income - HELD THAT:- It is pertinent to note that the Hon ble Supreme Court in case of Reliance Petro-Product Pvt. Ltd. [ 2010 (3) TMI 19 - SUPREME COURT] categorically stated that the word inaccurate particulars means that the details supplied in the return are not accurate not exact or correct and not according to truth or erroneous. In the absence of finding by the AO that any detail supplied by the assessee in its return were found inaccurate or false cannot attract section 271(1)(c) of the Act. In fact, the assessee at the time of assessment proceedings has given a detailed calculation related to interest u/s. 36(1)(iii) on borrowed funds for acquiring capital assets and this very same amount was added by the AO and thus it cannot be said that the assessee furnished inaccurate particulars of income or concealed particulars of income though the assessee was under bonafide mistake did not state the same in its return of income. The notice also lapses on the part of not specifying the particular of limb of section 271(1)(c) of the Act which was decided by the Hon ble Apex Court in case of CIT vs. SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] , hence the appeal of the assessee is allowed and the penalty does not survive. Decided in favour of assessee.
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2023 (12) TMI 1032
Revision u/s 263 - LTCG - admissibility of deduction u/s 54F - CIT broadly observed that the Assessing Officer has wrongly accepted the methodology of computation of capital gains and consequent deduction u/s 54F - HELD THAT:- As pointed out on behalf of the assessee, two pre-requisites must coexist before the designated authority could exercise the revisional jurisdiction conferred on him namely; the order should be (i) erroneous (ii) the error must be such that it is prejudicial to the interests of the Revenue. However, an erroneous order does not necessarily mean an order with which the Pr.CIT is unable to agree. The AO while passing an order of assessment, performs judicial functions. An order of assessment passed by the AO cannot be interfered only because some other view is also possible on the issue as held in CIT vs. Greenworld Corporation [ 2009 (5) TMI 14 - SUPREME COURT] If in given facts and circumstances of the case, two views are possible and one view as legally plausible has been adopted by the AO then existence of other possible view alone would not be sufficient to exercise powers under s.263 of the Act by the Pr.CIT /CIT concerned. Hence, there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when an order is erroneous and causing prejudice, that the Section will be attracted. An incorrect assumption of facts or incorrect application of law will satisfy the requirements of the order being erroneous. In the instant case, it is sought to be demonstrated on behalf of the assessee that necessary inquiries were made towards computation of Long Term Capital Gains and deduction claimed u/s 54F of the Act. It was further pointed out that although two separate agreements have been executed due to demarcation of share in single property to different persons due to gift or bequeath by will, the property remains only one and therefore eligible for deduction under Section 54F - assessee has advanced justification for cost of improvement of Rs. 25 lakhs claimed under Section 54F of the Act. Eligibility of deduction towards two units under two different agreements sought to be questioned by the Pr.CIT - Reasons are not far to seek. Both the agreements have been claimed to have been entered at the same time and in respect of same property. The kitchen continues to be only one and therefore, two different agreements will not give rise to different residential property. The electricity bill is also common as demonstrated. The background facts for division of property has also been narrated. These facts could have been easily appreciated by the Pr.CIT with some minimal inquiry. CIT has simply shifted the burden on the AO and eventually on the assessee without discharging his judicial duties expected in law. Besides, such allegation does not appear in the show cause notice issued at the first instance. While it is true that the directions are not necessarily required to be restricted to the show cause notice alone but however in the same vein, opportunity must be given to the assessee in some form to meet the point in issue in the course of revisional proceedings. In the absence of notice to the assessee that the purchase of residential property is being considered as two different residential units, the assessee had no occasion to rebut the ground raised directly in the revisional order. The directions at this point given to the Assessing Officer without opportunity to assessee in the course of revisional proceedings thus requires to be set aside on this score too. We hardly see any merit in the plea of the assessee that amount of Rs. 25 lakh set apart and kept in the Capital Gain Account Scheme towards cost of improvement of residential property acquired is eligible for deduction under Section 54F of the Act. Such cost of improvement can, at best, be treated as cost of improvement deductible at the time of sale of such property as and when happens. The direction of Pr.CIT on the point thus cannot be assailed. Appeal of the assessee is partly allowed.
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2023 (12) TMI 1031
Approval u/s. 10(23C)(vi)(via) - Claim denied on the ground that the institution is engaged in the multi-objects apart from education - HELD THAT:- It is pertinent to note that the distinguishing facts which have been pointed out by the ld. A.R. does not stand in toto in light of decision of Hon ble Apex Court in New Noble Education Society [ 2022 (10) TMI 855 - SUPREME COURT] and in fact after verifying the objects of the society which is placed before us clearly sets out that the assessee is not solely into the activity of education. A.R. pointed almost 19 decisions, but the same will not be applicable in Assessee s case as in Assessee s case, the assessee is doing other activities and not exclusively dealing with education as explained and decided by the latest decision of Hon ble Apex Court in case of New Noble Education Society (Supra). Therefore, there is no need to interfere with the findings of CIT (Exemption). Thus, both the appeals filed by the assessee are dismissed.
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2023 (12) TMI 1030
LTCG - Deduction u/s 54EC on account of investment in REC Bonds - whether exemption under Section 54EC can be denied on account of the fact that deeming fiction of short term capital gain was created u/s 50 ? - HELD THAT:- As decided in the case of Aditya Medisales Ltd. [ 2013 (11) TMI 576 - GUJARAT HIGH COURT] has held that exemption u/s 54EC of the Act could not be denied on account of the fact that deeming fiction of short term capital gain was created under Section 50 of the Act. In this case the assessee company sold automatic electric monitoring system. The company invested gain amount in Rural Electrification Bonds and claimed exemption under Section 54EC of the Act. AO found that short term capital gain was offered by assessee under Section 50 of the Act and disallowed exemption under Section 54EC claimed by the assessee on the ground that same was not available on a short term capital gains. The High Court held that since capital gains arose out of long term capital asset and same was invested in specified assets, exemption under Section 54EC could not be denied on account of the fact that deeming fiction of short term capital gain was created - The aforesaid decision has also been followed by Ahmedabad Tribunal in the case of DCIT M/s. Liva Healthcare Ltd. [ 2019 (1) TMI 210 - ITAT AHMEDABAD] Whether benefit u/s 54EC of the Act is available in case the assessee invested a sum of Rs. 50 lakhs in two Financial Years? - As decided in C. Jaichander [ 2014 (11) TMI 54 - MADRAS HIGH COURT] held that where assessee invested a sum of Rs. 50 lakhs each in two different Financial Years, within a period of six months from date of transfer of capital asset, he was eligible for deduction u/s 54EC - The facts in this cases were that the assessee sold a property vide sale agreement dated 18.02.2008 and invested a sum of Rs. 1 crores out of sale proceeds in certain bonds in two Financial Years 2007-08 and 2008-09. AO held that assessee could take benefit of investment in said Bonds to a maximum of Rs. 50 lakhs only under Section 54EC(1) and accordingly, held that the other sum of Rs. 50 lakhs invested over and above ceiling prescribed did not qualify for exemption. However, the Madras High Court held that from a reading of Section 54EC(1) and first proviso, it was clear that time limit for investment was six months from the date of transfer and even if such investment felt under two Financial Years, benefit claimed by the assessee could not be denied and there was no cap on investment in Bonds. Accordingly, the Madras High Court held that the assessee was eligible for deduction under Section 54EC of the Act in respect of said investments. The position becomes clear that for the impugned A.Y. 2014-15, as it stood at the relevant time, if the assessee made investment in REC Bonds for Rs. 50 lakhs each, the assessee would be eligible for deduction under Section 54EC of the Act, provided both the investments were made within a period of six months as prescribed under 54EC of the Act. In the present case, the assessee had sold the asset under consideration on 16.12.2013, whereas the second investment in REC Bond was made on 30.06.2014. In the case of Alkaben B. Patel vs. ITO [ 2014 (3) TMI 842 - ITAT AHMEDABAD] held that in terms of General Clauses Act, 1897 the period of six months mentioned in Section 54EC has to be recorded as six British Calendar months. The issue for consideration before ITAT Special Bench was that whether for the purpose of Section 54EC, the period of investments should be calculated as six months after the date of transfer or to be reckoned as 180 days from date of transfer . The ITAT held that the term month is not defined in the Act and therefore, as per the definition of the term month as per General Clauses Act, 1897 shall mean of month recognized according to the British Calendar. Again, in the case of Niamat Mahroof Virji [ 2016 (12) TMI 1081 - ITAT MUMBAI] held that in terms of General Clauses Act 1897, period of six months mentioned in Section 54EC has to be recorded as six British Calendar months. Accordingly, it was held that where assessee sold his ancestral property on 13.10.2010, investment of capital gain made in REC Bonds on 30.04.2009 was eligible for deduction under Section 54EC of the Act. Thus we are of the considered view that investment of Rs. 50 lakhs in REC Bonds on 30.06.2014 falls within the period of six months as stipulated under Section 54EC of the Act and is hence eligible for deduction under Section 54EC of the Act. Appeal of assessee allowed .
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2023 (12) TMI 1029
TP Adjustment - US Transactions non US Transactions - scope of MAP agreement - associated enterprise of the assessee in the USA filed an application under mutual agreement procedure (MAP) with the competent authority of the US under article 27 of the India USDTAA and the settlement has been arrived at between the competent authority of India with respect to the adjustment on account of Transfer Pricing issues relating to the US transactions - DR vehemently stated that the same treatment should be given to the non US transactions as there is no difference in FAR of US transactions and non US transactions. HELD THAT:- It is true that this is an appeal by the assessee but it is equally true that the other party i.e. the revenue can raise issue under rule 27 orally as settled in the case of Sanjay Sahney [ 2020 (5) TMI 441 - DELHI HIGH COURT] and respectfully following the same the oral request of the DR is accepted. It would be better to refer to the settlement arrived between the competent authority of India and the competent authority of USA to resolve the cases relating to Hewitt India for A.Y. 2006-07 to 2010-11 by adopting the values relating to US related international transaction - No hesitation to direct the AO / TPO to adopt the same approach for the non US transactions as adopted in the MAP for US transactions and determine the TP adjustment, if any, after affording a reasonable and sufficient opportunity of being heard to the assessee. See J.P. Morgan Services India Private Limited [ 2019 (4) TMI 219 - BOMBAY HIGH COURT] Appeal of the assessee is allowed for statistical purpose.
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2023 (12) TMI 1028
Revision u/s 263 by CIT - excess claim of deduction u/s 80P - assessee stated to have earned income by way of interest from deposits made in Nationalized Banks - PCIT reveals that on scrutiny of the records of the assessee he noted that the assessee being a Co-operative Society engaged in providing credit facility to its members for agriculture it had been allowed excess claim of deduction u/s 80P of the Act in the assessment framed u/s 143(3) - PCIT noted that while the assessee had earned both exempt income and taxable income, the expenses had not been properly apportioned between two sets of income - HELD THAT:- We find merit in the contention of assessee that the basic premise of PCIT for arriving at finding of excessive claim of deduction u/s 80P(2)(a)(i) by the assessee, rested on assumption of incorrect and unverifiable facts. It is not clear to us as to how the Ld. PCIT arrived at the finding that the income of the assessee eligible to deduction u/s 80P(2)(a)(i) was only Rs. 36 Crore and not Rs. 41 Crore as claimed and allowed to the assessee. While the assessee claim of deduction of Rs. 41 Crores of profit u/s 80P(2)(a)(i) emanated from the records including the financial statement, the tax audit report and computation of income filed by the assessee, all documents filed before us in Paper book, and was also examined during assessment proceedings by issuance of notice u/s 142(1) of the Act and replies filed by the assessee placed before us,the basis of the Ld. PCIT for holding that the assessee was eligible to only Rs. 36 Crores deduction under Section 80P(2)(a)(i) of the Act is not clear nor does it seen to arise from the records before us. Therefore, we hold that the very basis for assumption of jurisdiction to revise assessment order fails on account of the error in the assessment order having been found by the Ld. PCIT on the basis of incorrect facts. Records do not support the finding of the PCIT that the assessee had claimed excessive deduction u/s 80P(2)(a)(i) - And as long as the finding of error of PCIT is based on facts which palpably do not emanate from records, it is immaterial whether this fact is pointed out for the first time before us. In view of the same there is no error in the assessment border vis a vis quantum of allowance of deduction to the assessee u/s 80P - The revisionary order passed by the Ld. PCIT, therefore, needs to be set aside for having failed to fulfill one of the twin conditions , of the assessment order being both erroneous and prejudicial to the interest of the Revenue, necessary for invoking revisionary jurisdiction , as laid down in the case of Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT ] this ground alone. Subsequently, after noting that as per records the assessee was eligible to lesser claim of deduction under Section 80P(2)(a)(i) of the Act, the Ld.PCIT has gone on a different tangent after receiving the assessee s reply to the show cause notice. We find from the reply filed by the assessee during revisionary proceedings that the assessee stated to have earned income by way of interest from deposits made in Nationalized Banks. Picking this information he held that the assessee was not eligible to claim deduction on this interest income as per the provisions of law and having been allowed deduction on the same, the assessment order was in error causing prejudice to the Revenue. We are not in agreement with the Ld. DR. Even if the Ld. PCIT had noted the fact of assessee having claimed deduction on an ineligible income from the assesses statement of facts before him, it was his bounden duty to confront the assessee that it was ineligible in law for deduction u/s 80P of the Act, before holding the assessment order being erroneous on having allowed the assessee s claim of deduction under Section 80P(2)(a)(i) of the Act on the same. In the absence of any show cause notice being given to the assessee, the finding of error by the Ld. PCIT on account of the same is not sustainable in law and the revisionary order passed, therefore, is liable to be set aside for the same reason also. PCIT is unclear and is not sure as what exactly is the error in the assessment order. He begins by noting error on account of excess claim of deduction under Section 80P(2)(a)(i) due to incorrect apportionment of expenditure to exempt income while assuming jurisdiction u/s 263 but goes on to hold the error to pertain to allowance of claim of deduction u/s 80 P to income which was otherwise not eligible in law to such claim , and then concludes by reverting back to his original finding of error on account of excessive claim of deduction on account of incorrect appropriation of expenses. The powers of revision being exercisable on a categorically finding of error in assessment order causing prejudice to the Revenue, this uncertainty in the finding of the error by Ld. PCIT renders the revisional order completely unsustainable in law. Decided in favour of assessee.
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2023 (12) TMI 1027
Addition towards limited return on share capital - limited return on share capital needs to be given out of reserves and cannot be debited to P L Account as expenditure - DR submitted that the limited return on share capital at 1% on the share capital amount paid to the farmers is identical to the dividends and cannot be a charge to the P L Account and it cannot be construed as a Finance Cost as claimed by the assessee - CIT(A) deleted the addition stating that it is legitimate business expenditure - assessee-company is a special category company under the Companies Act and is covered by the Part-IXA of the Companies Act, 1956 - HELD THAT:- The limited return is nothing but a maximum dividend payable / paid to the Members of the Producer Company as authorized by the Articles of Association and hence it cannot be considered as an expenditure and claimed as expenditure. It is not a charge to the P L Account but only an appropriation of the profit and hence the Ld. AO has rightly disallowed the same. We therefore allow the Grounds No. 1 2 raised by the Revenue. Disallowance towards withheld price / additional price - as per DR same is only application of income as the company makes payment towards additional price / withheld price of milk procured out of profit and therefore, the same cannot be debited to P L Account as an expense and not an allowable deduction - CIT(A) deleted addition - HELD THAT:- We find that the assessee-company has paid withheld price to the milk suppliers even in the earlier assessment years and the same was allowed by the Ld. AO. The Coordinate Bench of the Tribunal in the assessee s own case for the AY 2010-11 [ 2017 (11) TMI 1363 - ITAT VISAKHAPATNAM ] has allowed the appeal of the assessee thereby directed the Ld. AO to delete the addition of payment of withheld price made to the milk producers. However, as pointed out by the Ld. DR, the Revenue is in appeal before the Hon ble High Court of Andhra Pradesh contesting the order of the ITAT. In this connection, we hereby direct the Ld. AO to decide this issue based on the outcome of the decision of the Hon ble High Court of Andhra Pradesh, in order to avoid multiplicity of litigation. Accordingly, this ground raised by the Revenue is disposed off for statistical purposes. Allowability of expenditure incurred during the General Body meeting by way of payment of gifts to the Members of the Producer Company - CIT(A) deleted the disallowance made - as per DR distribution of gifts are not encouraged in AGM to curb cooperate misdoing and is against established practice of corporate governance - HELD THAT:- Admittedly these amounts of gifts were distributed at the time of AGM which is being gifted to the milk producers who were also Members of the assessee-company. We also find that these gifts are made to the Members who were also suppliers of milk and are also shareholders of the assessee-company. Hence we are of the considered view that these expenditures are in the nature of business promotion expenditure which shall be allowed as deduction U/s. 37 of the Act. We therefore find no infirmity in the order of the Ld. CIT(A) on this ground - Decided against revenue.
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2023 (12) TMI 1026
Disallowance of the standard deduction u/s 24(a) against the income declared by the assessee under the head Income from House Property - HELD THAT:- We are of considered opinion that judgement of the Hon ble Supreme Court in the case of Suraj Lamps Industries (supra) is in regard to transfer and conveyance of a title for civil consequences between private parties. However, with regard to the fiscal purposes, between assessee and Revenue, where on the basis of existence of an interest in an immovable property, certain rights or interest including those right to executed further convey the title are involved, the documents like GPA, sale agreement or Will have to be considered valid and effective for all purposes for creating a liability on assessee or to give benefit to the assessee. Although in the judgement relied by the ld. AR in the case of Rita Kuchal [ 2015 (5) TMI 1254 - ITAT DELHI] there is no specific discussion on this aspect, however, cognizance of the judgement of the Hon ble Supreme Court in the case of Suraj Lamps Industries [ 2011 (10) TMI 8 - SUPREME COURT] was taken, but, for the purpose of section 24(a), the right of an assessee to be entitled to receive the rental income was given precedence. Thus, the judgement which the ld. AR has relied in CIT vs. Smt. Wiran Bai Jaggi [ 2002 (8) TMI 889 - DELHI HIGH COURT] wherein the judgement of the Hon ble Supreme Court in case of CIT vs. Podar Cement [ 1997 (5) TMI 2 - SUPREME COURT] has been relied is still applicable to the case of the assessee. The observations of the Hon ble Supreme Court in the case of Podar Cement Pvt. Ltd. (supra) are worth to be reproduced to understand how the law propounded in regard to section 22 of the Act is different from the one propounded for the purpose of section 17 of the Registration Act in Suraj Lamps Industries [ 2011 (10) TMI 8 - SUPREME COURT] . Thus, furthermore, the ld. DR could not defend the argument that in the subsequent years the CIT(A) has deleted the addition made by the AO holding that the rent received by the assessee is to be assessed as income from house property. Thus, we are inclined to allow this ground no 2. Addition on account of business expenses - disallowance on the ground that appellant has no money lending business whereas assessee claims that the money lending business was dormant and the assessee was in litigation with the debtors to recover the principal and interest - HELD THAT:- As coming to the present assessment year, at the outset, we would like to reiterate the settled proposition of law that every assessment year is independent and there is no applicability of principle of res judicata, if the facts are distinguishable and there is evidence in that regard. In the present year 2015-16, the assessee is no more into subletting business, but, has earned income from property and has also claimed deduction u/s 24(a) of the Act which we have allowed in ground No.2. During the year, the assessee has changed the receipts from LIC India from one received in the capacity as a lessee who has created the sublease to an owner who has rented the premises. Thus, certainly the expenses of the description mentioned in the assessment order could not be attributed to the income from property as standard deduction u/s 24(a) of the Act stands allowed. It appears that during assessment proceedings the assessee claimed that apart from leasing of property business the assessee is also engaged in money lending business. This was considered by the AO to be an afterthought, but, the CIT(A) has gone into the issue in a more detailed manner. As in the present assessment year there is no interest income at all either under the heads, Income from other sources or business income. The claim of the assessee is that the lending business should be accepted on the basis of consistency. However, the same cannot be accepted as ld.CIT(A) has made a very specific observation on the basis of the financials. There are only two entries which the assessee claims to be money lending business. Now, in regard to one of those the assessee has filed a copy of complaint u/s 138 of the Negotiable Instruments Act filed against Sunil Mantri Realty Ltd. and the averments of this complaint shows that the assessee had entered into an agreement on 01.01.2010 to purchase certain flats from Sunil Mantri Realty Ltd., for which payments were made, but, as that vendor could not supply the flats, the vendor had given a cheque of Rs. 4,10,00,000/- to the assessee to return the sale consideration and that cheque was dishonoured. Thus, the averments in the complaint do not at all indicate that the money claimed to have been standing as a loan was ever given as a loan for the purpose of money lending business. In fact, in AY 2012-13, there was an issue of undisclosed income of Rs. 12 lakhs wherein the AO had made an addition of Rs. 12 lakhs on the ground that the assessee has been showing interest income from M/s Sunil Mantri Realty Ltd. on accrual basis. M/s Sunil Mantri Realty Ltd., had paid interest and deducted tax which was reflected in 26AS, but, there was lack of reconciliation. The order of ld.CIT(A) for AY 2012-13 show that there is a mention of cheque of Rs. 4,10,00,000/- given by the debtor on 01.09.2013 which could not be encashed and for which the assessee has filed the case and the ld.CIT(A) had confirmed the addition of Rs. 12 lakhs. Thus, we are of the considered view that what ld. AR has relied in regard to the previous or subsequent years about the money lending business of the assessee is not sustainable in the facts discussed above from the perspective of ld.CIT(A) and we do not consider that there is any error in the sustenance by ld.CIT(A). Accordingly, this ground is decided against the assessee.
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2023 (12) TMI 1025
Disallowance of claim u/s. 80P(2)(a)(i)/80P(2)(d) - assessee received interest from co-operative banks and other cooperative societies - AR submitted that the cooperative societies /cooperative banks with which assessee had made investments, are registered with the Karnataka Cooperative Societies Act and, therefore, the interest/dividend earned by the assessee from such investments, made with such cooperative banks are eligible for deduction u/s 80P(2)(d) - HELD THAT:- When we look at the decision of Hon ble Supreme Court in case of Totgars Co-operative Sale Society's case [ 2010 (2) TMI 3 - SUPREME COURT ] relied by the DR, SC was dealing with a case where the assessee therein, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such amount retained by the assessee therein was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. On these facts Hon ble Supreme Court held the assessing officer was right in taxing the interest income indicated above under Section 56 as income from other sources of the Act. Further the adjudication by the Hon ble Supreme Court in case of Totgars Co-operative Sale Society Ltd. vs. ITO(supra) was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a cooperative bank. Therefore, reliance was placed by the Ld. DR on the decision of Hon ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (supra) is distinguishable on facts. In the instant case, the amount which was invested with other co-operative societies and SCDCC bank to earn interest was not any amount due to its members. This is very clear from the submissions reproduced in the assessment order wherein the assessee has submitted that it is due to the statutory obligation to keep the reserve fund of the society in SCDCC Bank that such deposits are made, and therefore, such fixed deposit has to be maintained. Claim of the assessee in u/s 80P(2)(d) was not any liability due to its members. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to its members, as there were no takers. Therefore they had deposited the money in a co-operative bank/other co-operative societies against which interest/dividend was earned. At this juncture, we refer to subsequent decision PCIT Vs. Totagars cooperative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT ] wherein held that, a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we find, that in the case of PCIT Anr. vs. Totagars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT ] and State Bank Of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT ], held, that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Hon ble Supreme Court in case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd., KSCARDB [ 2023 (9) TMI 761 - SUPREME COURT ] relied by the Ld.DR has elaborately analysed the requirement of a cooperative bank that could fall within the exception of section 80 P(4) of the Act. Based on such principle analysed by Hon ble Supreme Court and respectfully following the view taken in the case of PCIT Anr. Vs. Totagars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT ] and State Bank Of India [ 2016 (7) TMI 516 - GUJARAT HIGH COURT ] we hold that, the interest income earned by a cooperative society on its investments held with a cooperative bank that do not have licence under section 22 of the Banking Regulation Act 1949, falls outside the definition the term, Banking Company as per section 2(c ) of the Banking Regulations Act, 1949, would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. AO is thus directed to carry out necessary verification in respect of the that same to consider the claim of deduction u/s. 80 P(2)(d) of the Act. As directed that in the event it is found that the interest is earned by the assessee from such commercial/cooperative banks that fall within the definition of banking company as per section 2(c ), Section 5(b) and holds license under section 22 of the Banking regulation Act 1949, such interest are to be considered under the head income from other sources however, relief may be granted as available to the assessee u/s 57 of the Act in accordance with law. With the above directions, we remit this issue to the Ld.AO.
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2023 (12) TMI 1024
Nature of receipt - interest earned by the assessee from short term investments in unutilized funds - revenue or capital receipt - HELD THAT:- We notice that the co-ordinate bench in assessee s own case for A.Y. 2013-14 to 2015-16 [ 2019 (3) TMI 1457 - ITAT MUMBAI] considered same issue thus we hold that the interest income received by the assessee is capital in nature and accordingly, not taxable under both the normal provisions of the Act as well as under section 115JB. Decided against revenue.
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Benami Property
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2023 (12) TMI 1023
Benami Property Transaction - Scope of provisions of Section 5 of the Amended Act, 2016 - HELD THAT:- Today, when the matters were taken up for hearing, the learned counsel appearing for both sides in unison, submitted that a batch of appeals [ 2023 (12) TMI 620 - MADRAS HIGH COURT] cases, challenging the very same impugned order of the Appellate Tribunal, was disposed of, by this court, by passing a detailed judgment as on date, the decision of the Hon'ble supreme court in Union of India v. Ganapati Dealcom Pvt Ltd. [ 2022 (8) TMI 1047 - SUPREME COURT] holds the field and hence, the arguments advanced on the side of the appellants that the provisions of Section 5 of the Amended Act, 2016 have to be applied retrospectively, cannot be countenanced. Further, it is to be noted that in the Review Petition (Civil)[ 2023 (1) TMI 1327 - SC ORDER] f iled by the Department to review the order passed by the Honourable Supreme Court in Union of India vs. Ganapati Dealcom Pvt Ltd. delay was condoned and the application for oral hearing of the review petition was allowed, however, no stay order was granted. In such circumstances, pendency of the review of the decision in Union of India vs. Ganapati Dealcom Pvt. Ltd, cannot be a ground to interfere with the order passed by the Tribunal. It is also well settled that mere pendency of the Review Petition will not be a ground to assail the orders impugned in the appeals.
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Customs
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2023 (12) TMI 1022
Direction for issuance of a detention waiver certificate - It is submitted that the delay in releasing the goods is on account of detention of the goods by respondent Nos. 1 2 for the purpose of investigation which lasted for almost 2 months and, therefore, the delay in releasing the goods cannot be attributed to the petitioner - HELD THAT:- The procedure for issue of Detention Certificate is notified in Public Notice No. 111 of 1985 dated 29.07.1985 of the Bombay Custom House issued much prior to the Handling of Cargo in Customs Area Regulations, 2009. Paragraph 2 of the Public Notice No. 111 of 1985 sets out the circumstances under which a regular detention certificate could be issued by the Customs House for facilitating the importers to get remission of demurrage charges. Section 46 (4A) provides that the importer shall ensure the accuracy and completeness of the information given therein and the authenticity and validity of any document supporting it and compliance with the restriction or prohibition, if any, relating to the goods. It appears that on account of price difference between the supplier invoice and manufacturer invoice, the respondents are contending that the petitioner has not ensured the accuracy and completeness of the information given therein - one cannot say that the petitioner has not given accurate and complete information with respect to the price difference. The petitioner has filed the documents in support of its explanation which has not been rebutted by the respondents, and therefore reliance placed by the respondent Nos. 1 2 on Section 46(4A) of the Customs Act is not appropriate to deny the issuance of detention waiver certificate. In the instant case, the demurrage could have been avoided if after removing the goods for testing, same were directed to be shifted to warehouse under Section 49 of the Act. The petitioner on 13th January 2021 sought such permission and which was immediately granted but the same could have been done when the goods were detained for investigation. Therefore, respondent Nos. 1 2 were not justified in not responding to various letters of the petitioner seeking waiver certificate and now to justify the same in reply affidavit. In our view, the petitioner is therefore entitled to detention waiver certificate upto the period 13th January 2021. The respondent no. 1 has relied upon the decision of the Supreme Court in case of JINDAL DRUGS LTD. ANR. VERSUS THE UNION OF INDIA ORS. [ 2018 (8) TMI 49 - SUPREME COURT ]. The Supreme Court in this case held that the revenue cannot be made liable to pay demurrage charges unless the action of the detention is palpably wrong or wholly unacceptable. Respondent Nos. 1 2 to issue detention waiver certificate within a period of four weeks from today - Petition disposed off.
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2023 (12) TMI 1021
Provisional release of perishable goods - apples - petitioner has submitted that N/N. 5/2023 was stayed by the Kerala High Court referring to some interim orders passed in other writ petitions, wherein although as fairly stated, the challenge in such petitions was not to the Notification No. 5/2023 concerning the import of apples, but to a notification on spices. HELD THAT:- No case is made out by the review petitioner for this Court to exercise its review jurisdiction for more than one reason. The grounds as raised in the review petition, are quite alien to the orders passed by us on the proceedings of which a review is sought. Even otherwise such was not the case of the petitioner when we decided the writ petition. Further, the order passed by the Kerala High Court dated 11th July 2023 which is in the respondent s (original petitioner s) own case staying Notification No. 5/2023 continues to operate even today and the same has not been disputed by the review petitioner. The legal position as brought about by virtue of the stay to the notification is to the effect that the department can foist the said notification and refuse clearance of the goods (apples) by applying such notification. Once the notification is stayed by the High Court, such order would be operational and binding on the department all over considering the well settled principles of law as laid down by the Supreme Court in KUSUM INGOTS ALLOYS LTD. VERSUS UNION OF INDIA [ 2004 (4) TMI 342 - SUPREME COURT ]. Thus the department could not be heard to say that the said order passed by the Kerala High Court is not binding on the department. Perusal of order under review makes it clear that the department refused to clear the import of apples relying on the Notification No. 5/2023 which itself was stayed by the Kerala High Court in the petitioner s own case. Once such position had continued to operate, the review petitioner cannot argue that such stay on the said notification ought to be considered to have been impliedly vacated in the Kerala High Court adjudicating on a similar notification in relation to spices. This would be a misconceived approach on the part of the Department. There are no merit to review orders applying the well settled principles of law in the exercise of review jurisdiction under Order 47, Rule 1 of the Code of Civil Procedure, 1908 - The Review Petition is accordingly dismissed.
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2023 (12) TMI 1020
Non-imposition of penalty under section 114A of CA - not demanding interest from the respondent - HELD THAT:- The adjudicating authority has held that the goods are liable for confiscation and imposed redemption fine and penalty under section 112(a) of the Customs Act, 1962. Further, the adjudicating authority has relied on the judicial pronouncement of this Tribunal in the case of S.S.Impex where redemption fine was imposed @ 19.5% and penalty @ 7.8% on the value re-fixed. There are no infirmity in the impugned order and the same is upheld - appeal dismissed.
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Corporate Laws
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2023 (12) TMI 1019
Power of the SFIO to Investigate Offences under the IPC - Powers of SFIO restricted to investigate offences under the Companies Act only - Further Investigation by the SFIO. Power of the SFIO to Investigate Offences under the IPC - HELD THAT:- The heading of Section 219 of the Act reflects that the said provision relates to role of certain related companies, which has surfaced during the course of investigation being conducted under Section 212 or other provisions of the Act and therefore, approval would be required in terms of Sections 219(a), (b) and (c) of the Act. The provision of Section 219(d) of the Act has to be construed by applying the rule of ejusdem generis - In the present case, it is reasonable to construe the aforesaid clauses (a), (b) and (c) of Section 219 of the Act as constituting a distinct category or class, i.e., related companies . The language and the object behind the aforesaid clauses is with respect to investigation of affairs of a company other than the company for which investigation has been ordered under Section 212 of the Act. In that context, clause (d) of Section 219 of the Act will apply to a Managing Director or Manager or Employee of the company referred to in clauses (a), (b) and (c) of the said Section. Section 219(a), (b) or (c), comes across role of Managing Director, Manager or employee of the said related companies, then no prior approval for investigation would be required. In other words, protection has been given only to the Managing Director or Manager or employee of the company being investigated under Section 212 of the Act and not for the Managing Director or Manager or Employee of the companies being investigated under Section 219 (a), (b) or (c) of the Act. The aforesaid position is not acceptable - In the considered opinion of this Court, once an approval has been given under Section 212 of Act to investigate into the affairs of a company, the same would also relate to a Managing Director or Manager or Employee of the said company. The pre-condition of a prior approval under Section 219 of the Act applies to related companies and their Managing Director, Manager or employees as provided for in the said Section. It is an admitted case that petitioner no. 3 was mentioned in the original order dated 03.05.2016 issued by the MCA under Section 212 of the Act. So far as petitioner no. 2 is concerned, it is the case of the SFIO that since the affairs of the company were not being investigated, therefore, no approval was required in terms of Section 219(a) of the Act - It is a matter of record that subsequent sanction has been obtained from the Central Government before filing the complaint by the SFIO in terms of Section 212(14) of the Act. Petitioner no. 2 is being prosecuted for a single transaction, as explained above. It is always open for petitioner no. 2, during the course of trial, to demonstrate that prejudice leading to a miscarriage of justice has been caused on account of not obtaining approval under Section 219(c) of the Act. Powers of SFIO restricted to investigate offences under the Companies Act only - HELD THAT:- It is pertinent to note that Section 4(2) of the CrPC provides that investigation into offences under other statutes, like the present Act, shall be done in accordance with the CrPC unless the statute provides for otherwise. Section 212(15) of the Act provides that an investigation report filed before the learned Special Court shall be treated as a report filed by a police officer under Section 173 of the CrPC - the investigation report within the scheme of the Act will be treated as a police report, therefore, the officer filing the said report shall also be considered an officer in charge of a police station, although not specifically provided for in the said Act. The said position is further fortified by the fact that if power has been given to the learned Special Court under Section 436(2) of the Act to try offences other than those under the Act, then the power of the SFIO to investigate into such offences cannot be restricted. If during course of investigation under the present Act, the concerned Investigating Officer comes across commission of offences punishable under the IPC or any other law relating to the transactions being investigated, then the same cannot give rise to distinct proceedings. Such investigation can be carried out under Section 4(1) of the CrPC. If the report which is subsequently filed is to be treated as a police report under Section 173(2) of the CrPC, then the officer is to be considered to be vested with powers of an officer in charge of a police station . From a conjoint and harmonious reading of the aforesaid provisions of the CrPC and the present Act, it cannot be said that the SFIO is barred from investigating an offence under the IPC. Further Investigation by the SFIO - HELD THAT:- It is further pertinent to note that this Court has perused the record and does not find any document to show that after the learned Special Court has taken cognizance on 20.09.2022, the petitioners herein have been asked to join any further investigation by the SFIO. The present petition is dismissed.
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2023 (12) TMI 1013
Oppression and mismanagement - Application for continuation of interim stay dismissed - appointment of a Chief Operating Officer - Article 69 of the Articles of Association of the Respondent No. 1 Company requiring unanimous consent of all directors - appointment of more than 1 (one) director on the board of Respondent No. 1 Company - Appointing an independent director on the board - Removing Respondent Nos. 4 to 6 from the Board of Directors of the Respondent No.1 Company and directing Respondent No. 2 Company to nominate 1 (one) person after providing and obtaining approvals of the credentials of such person - restraint from interfering with the day-to-day functioning and management of the affairs of the Respondent No. 1 Company - ensuring clear separation between the persons nominated on the board of the Respondent No. 1 Company or any other person having access to Respondent No. 1 Company and its information - Restraining Respondent Nos. 2 to 9, their principals/directors, their promoters, managers, assigns, successors-in-interest, licensees, franchisees, sister concerns, representatives, servants, distributors, agents, etc. and/or any person or entity acting for them from entering into any contract of supply/ services or otherwise with the Respondent No.1 Company - Section 241 242 of the Companies Act, 2013. HELD THAT:- It is needless to mention that the main petition filed under Section 241 and 242 of the Act is pending for hearing on 01.02.2024. It is also borne out from the record that initially when stay was granted on 04.09.2023 it was observed that if the board of directors takes a decision to appoint Shri MSM Mujeebur Rahuman as COO, the said decision shall be kept in abeyance till 12.09.2023 and then the Appellant chose to file the application bearing I.A. No. 263 of 2023 in which the only prayer made is for extension of the order dated 04.09.2023. It is pertinent to mention that this order was extended by the Tribunal up to 28.11.2023 but by that time the appeal was filed not only the order became inoperative but also the Respondents appointed Dr. MSM Mujeebur Rahuman as COO who is working as such and no application has been filed until now about his act and conduct. It is also a matter of fact that the Tribunal fixed the case for hearing on 05.12.2023 i.e one after the order dated 28.11.2023 was passed for the purposes of hearing the main petition in terms of the observation made in para 49 which is mentioned hereinabove, however, instead of arguing the case on merit itself on 05.12.2023 the Appellant got the main petition adjourned for 01.02.2024 on the pretext that the appeal has been filed which was only against an interim order. In such a situation, where the court has to thoroughly scan voluminous record and also interpret various articles of the AoA, it would be just and expedient if the main petition itself is heard and decided, as proposed by the Tribunal who has rightly not made any observation about the interpretation of Article 69 which is the main plank of the argument of the Appellant in the interim application and the main petition, therefore, this appeal is disposed off with liberty to the Appellant to file an appropriate application before the Tribunal for preponement of the hearing from 01.02.2024 to an early date by making reference to Para 49 of the impugned order and in case any such application is filed, the Tribunal shall consider the said request and prepone the date of hearing and decide the main petition filed by the Appellant as early as possible.
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Insolvency & Bankruptcy
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2023 (12) TMI 1018
Maintainability of section 7 application - application filed by the Appellant was clearly beyond three years and time barred or not - HELD THAT:- There is no doubt that date of default has been mentioned as 31.03.2015 on which date the account of Corporate Debtor was declared as NPA, however, the Letter of Acceptance dated 24.04.2019 has also been pleaded in Part IV - Adjudicating Authority in the impugned order has noticed the DRT Consent Terms dated 26.09.2022 and observed that fresh period of limitation shall start, hence the objection on the ground of limitation have no merit. In so far as Consent Terms dated 26.09.2022 and fresh period of limitation thereafter, they have no relevance in the present application which was filed in the year 2021. However, the later part of the order where Letter of Acceptance dated 24.04.2019 has been noted is relevant for the purpose of limitation - The Letter of Acceptance is in the nature of agreement which is signed by all parties and amounts to fresh agreement between the parties. This fresh agreement acknowledges the debt of Rs.106,97,76,398.83/- along with interest. The Letter of Acceptance further provides that the Obligors shall jointly and/or severally to pay Rs.43,89,46,000/- along with interest towards the settlement of assigned debt due. The Letter of Acceptance which is an agreement between the parties shall give a fresh period of limitation after 24.04.2019, which is within three years of 01.11.2021, date on which Section 7 application was filed. There shall be fresh period of limitation from 24.04.2019 and the application filed by the Appellant within three years from the said date was well within time. The Adjudicating Authority in Para 13 has also noticed the Letter of Acceptance dated 24.04.2019 for holding that objection on ground of limitation does not have any merit. The application filed by the Financial Creditor was not barred by time and the debt and default being proved, the Adjudicating Authority did not commit any error in admitting Section 7 application. There is no merit in the Appeal - appeal dismissed.
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2023 (12) TMI 1017
Maintainability of Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 - delivery of the goods not proved - no reply given to notice issued u/s 8 of IBC - HELD THAT:- The Tribunal appears to have been swayed only by a submission made by the Respondent that the Appellant has failed to give the proof of the delivery of goods. There is no discussion in the entire Judgement as to whether the goods were actually taken by the Respondent in its own trucks as stated by the Appellant because it is alleged by the Appellant that the Respondent lifted the goods from the Port to its Plant. Furthermore, various other evidence which may prove the transactions having been taken place between the Parties have not been discussed at all by the Learned Tribunal much less the fact that if no contest is made till the filing of the Petition, whether it can be raised for the first time in the Reply filed to the Application under Section 9 is also a question which requires to be answered. This is one such case in which interference is required for the purpose of looking into the entire evidence by the Tribunal and recording a finding thereafter as to whether the Application has to succeed or to fail. The Impugned Order is set aside. The matter is remanded back to the Learned Tribunal to decide the Application again after taking into consideration the entire evidence on record.
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2023 (12) TMI 1016
Possession of goods - lien of the Appellant on the goods as a bailee - waterfall mechanism - main plank of argument of the Appellant is Section 171 of the Act on the basis of which it is claimed that the Appellant should have been declared as a secured creditor and should have been included in the list of stakeholders for the purpose of distribution in terms of Section 53 of the Code - HELD THAT:- Section 3(30) of the Code defines secured creditor which means a creditor in favour of whom security interest is created. Section 3(31) deals with security interest which means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person. Provided that security interest shall not include a performance guarantee. Section 3(4) deals with charge means an interest or lien created on the property or asset of any person or any of its undertakings or both as the case may be as security and includes a mortgage. The wharfingers as the Appellant claiming itself to be a security for a general balance of account any goods bailed to them whereas in the present case, the goods are not in possession of the Appellant which is also admitted by the Appellant during the course of hearing and thus there was no actual lien to invoke Section 171 of the Act. There are no error committed by the Adjudicating Authority in passing the impugned order and as such the present appeal is found without merit and the same is hereby dismissed.
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2023 (12) TMI 1015
CIRP - Renewal of Bank Guarantee for customs duty exemption - Whether the Adjudicating Authority was justified in concluding that the Customs Bank Guarantees are not essential for the Going Concern nature of the Corporate Debtor Company? - HELD THAT:- It is an admitted fact that the MPP status is important since it provides an exemption of Customs Duty - there are force in the contention of the Learned Counsel for the Respondent that since there are no goods being imported by KMPCL or its contractor, being SEPCO, from China during the CIRP of KMPCL, for the operationalisation of the units of KMPCL, there is no exemption which KMPCL can claim for customs duty liability and therefore, the Respondent has intimated the CoC that these renewals are not necessary for the Going Concern nature of KMPCL. A perusal of the Minutes of the Meetings dated 14.10.2020, 22.10.2020 and 19.09.2022 of the CoC evidence that the Respondent had informed the Appellants that the renewal of the Customs Bank Guarantees would only increase the financial burden of KMPCL which would have to bear the commission charges and renewal charges which are exorbitant amounts. It is also significant to mention that the Deputy Commissioner, Paradip Customs Division filed a claim dated 04.11.2019 with the IRP / RP of KMPCL stating that an amount of Rs. 7,19,98,48,660.49/- was payable by KMPCL as per the assessment Order. When there is no guarantee with respect to the MPP status of the Non-Operational Units and since there are no goods being imported by the Corporate Debtor Company as it is undergoing CIRP, there is no exemption which the Company can claim for Customs Duty liability and we are of the earnest view that the Corporate Debtor Company need not be burdened with the Commission and renewal charges approximately amounting to Rs. 70 Crores which would only increase the financial burden of the Corporate Debtor Company with no positive benefits accruing. Under Section 25(1), the RP is empowered to reject the CoC proposal for renewal of the Bank Guarantees provided by the Corporate Debtor Company, prior to the initiation of the CIRP as renewing those would not consequently lead to any advantage or any valuable gains. There are no substantial grounds to interfere with the well-considered order of the Adjudicating Authority - appeal dismissed.
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2023 (12) TMI 1014
Dismissal of application under Section 7 of IBC, for the resolution on the ground of limitation - the order was upheld by this Tribunal but the Hon ble Supreme Court set aside the order of this Tribunal and remanded the appeal back to this Tribunal and restored the same, permitting the financial creditors (Bank) to file an application to amend Section 7 application - HELD THAT:- The fact remains that while allowing the appeal, the Hon ble Supreme Court has remanded the appeal and restored the same to this Tribunal and permitted the present Respondent (FC) to make amendment in the application filed under Section 7 of the Code. It is no where mentioned by the Hon ble Supreme Court that the application had to be filed before the Adjudicating Authority. Since, the matter was pending before the Adjudicating Authority at that time, after restoration of the appeal by the Hon ble Supreme Court, the application has rightly been filed before this Tribunal for seeking amendment in Section 7 application. In so far as, the allegation of the Applicant that some application was also filed before the Adjudicating Authority for amendment, firstly, it was only a memo and secondly, no proceedings were pending at that time before the Adjudicating Authority, therefore, the application has rightly been filed before this Tribunal where the proceedings were pending and there is no error in the statement made by Counsel which has been recorded in the order dated 11.01.2022 which is sought to be labelled as fraudulent. As a matter of fact, the application under Section 7 was admitted on 05.06.2023 which was further challenged by the present applicant by way of an appeal i.e. CA (AT) (Ins) No. 184 of 2023 and dismissed with a detailed order on 16.10.2023, therefore, the only recourse available to the Appellant is to challenge the order dated 16.10.2023 by way of further appeal but in so far as the recalling application is concerned, it is totally misconceived and the same is thus hereby dismissed.
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2023 (12) TMI 1012
Admissibility of Section 7 application - date of default in the Section 7 Application - bar u/s Section 10A of IBC - right of Debenture Holders to initiate proceedings under Section 7 of the Code - competency of Facility Acceleration Notice. Whether the Application filed by the Financial Creditors under Section 7 of the Code was hit by Section 10A of the Code? - HELD THAT:- The Law is well settled that no application for initiating proceedings under Section 7 can be initiated for default which is committed during Section 10A period - It is well settled that when default is committed during Section 10A period and subsequent to Section 10A period, application is fully maintainable for any default subsequent to Section 10A period - The Application under Section 7 being filed for default which was on basis of default occurred subsequent to Section 10A period, it is opined that application was not hit by Section 10A. Whether the Debenture Holders have right to initiate proceedings under Section 7 of the Code? - HELD THAT:- It is already noticed that Altico i.e. majority Debenture Holder has already initiated Section 7 proceeding hence all Debenture Holders were unanimous in their view to proceed against the Corporate Debtor and this Tribunal upheld the initiation of proceeding against the Corporate Debtor by the Financial Creditors. Whether the Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 was incompetent and not in accordance with Debenture Trust Deed dated 19th March, 2018? - In event, Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 is held to be not in accordance with Debenture Trust Deed, whether the Application under Section 7 deserves to be dismissed? - Whether the Order passed by the Adjudicating Authority admitting Section 7 Application needs interference in this Appeal? - HELD THAT:- From the facts and sequence of events as noticed, it is clear that the facility acceleration notice issued by the Debenture Holders cannot be said to be in accordance with the Debenture Trust Deed. The notice was not issued by Debenture Trustee and issued by Debenture Holders - having held that Facility Acceleration Notice was not issued in accordance with the terms and conditions of Debenture Trust Deed, the next question to be considered is as to whether after the aforesaid holding whether the Section 7 Application deserves dismissal. While noticing the clauses of Debenture Trust Deed, it is noticed that Debenture Trustee has to initiate proceeding after occurrence of event of default in pursuance of the approved instructions by the Debenture Holders has to be obtained in meeting with fifty percent vote share as per the clauses of Debenture Trust Deed as noticed above. The Financial Creditors who have filed Section 7 Application were minority debenture holders having only 29.8 percent. Majority Debenture Holder is the Altico Capital. In the Reply which has been filed by the Financial Creditors it has been pleaded that Altico the majority NCDs holder had already initiated proceeding under Section 7 of the Code against the Corporate Debtor - The fact remains that majority Debenture Holder having already initiated Section 7 Proceeding, all debenture holders are unanimous in their actions to proceed against the corporate debtor for the defaults committed. It is already held while considering Question no. i that application under Section 7 was not hit by section 10A since the application under Section 7 was not confined to the default committed during Section 10A period rather the Application was filed on the basis of date of default dated 01st June, 2021 consequent to Facility Acceleration Notice dated 30th May, 2021 and 31st May, 2021 as well as other defaults as explained in Section 7 Application. If 1st June, 2021 is not taken as date of default, the default on the payment of interest after end of the 10A period i.e. after 24th March, 2021 there is clear default on the payment of interest and payment of default in the interest of both the Financial Creditors is more than Rs. 1 Crore which is threshold amount for filing of the Application under Section 7 - The tabular chart given in Exhibit K contains the details of interest accrued interest paid and interest outstanding even if we take period after 10A period i.e. period from 31st March, 2021 as mentioned in the tabular chart total overdue interest after 10A period is much more than threshold amount of Rs.1 Crore. Details of overdue interest has been captured in the tabular form in exhibit K - The date of default in payment of interest after there are several date of default in payment of interest after Section 10A period which is captured in the tabular form filed as Exhibit K in Part-IV of the Application, Financial Creditors have also filed the working for computation of the amount and days of default in tabular form thus the date of default cannot be confined only to date 1st June, 2021 as mentioned in Part-IV. The date of default which is mentioned in the tabular form cannot be ignored it is clear that there was default of more than Rs.1 Crore i.e. threshold period in payment of default by the Corporate Debtor after Section 10A period. The above default is very much there even if the default is ignored on the basis of Facility Acceleration Notice dated 30th May, 2021/31st May, 2021 - even after Section 10A period there being default in payment of interest which was more than threshold amount, the Application under Section 7 deserves to be admitted - the order of the Adjudicating Authority admitting Section 7 Application need no interference in this Appeal. Appeal dismissed.
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Service Tax
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2023 (12) TMI 1011
Maintainability of appeal - appeal dismissed on the ground of being filed beyond the period of limitation - cessation of right of petitioner to get legitimate relief which involves a wide range of legal interpretations as well as involves the same question of law for the previous and subsequent assessment years, for which the same elucidation is involved - compliance with the principles of natural justice or not - HELD THAT:- Under normal circumstances this Court would not exercise any discretion in the matter on account of clear statutory mandate for fixing time limit for preferring an appeal before the Commissioner of Appeals. However, considering the fact that the appellant is a local authority and the issues which have been the subject matter of adjudication before the authority culminating in an order dated 24th August, 2017 are all recurring issues, the appellant, in our opinion, should be granted one opportunity to agitate their contentions so that a decision on merits is arrived at rather non-suiting the appellant municipality on a technical ground. This discretion cannot be exercised in all cases and this Court is of the view that the case on hand is a rare case where the municipality is contesting demand raised by the Service Tax Commissionerate. That apart, in all probabilities the appellant would have complied with the pre-deposit condition while preferring the appeal before the learned Tribunal. The order passed by the learned Tribunal as well as the order passed by the Commissioner of Appeals is set aside and the appeal stands restored to the file of the Commissioner of Appeals, Siliguri - Appeal allowed.
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2023 (12) TMI 1010
CENVAT Credit - erection of transmission line towers - case of the appellant is the transmission towers which it had erected were for transmission of electricity and hence they are fully exempted - levy of penalty - HELD THAT:- The question is no longer res integra and it has been the consistent view in several precedent decisions that the expression services relating to transmission of electricity in the two notifications has a wide ambit and includes the services of installation of transmission towers for electricity and no service tax is payable - reliance placed in the case of M/S. KEC INTERNATIONAL LTD. VERSUS COMMISSIONER OF CGST, GURGAON AND COMMISSIONER OF S.T., DELHI [ 2022 (8) TMI 992 - CESTAT CHANDIGARH ]. As the entire service tax is exempted as no service tax has to be paid by the appellant. Consequently, the penalties imposed under sections 76, 77 and 78 of the Finance Act also cannot be sustained. The impugned order is set aside - Appeal allowed.
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2023 (12) TMI 1009
Levy of service tax - Business Auxiliary service or not - commission paid by the appellants to the commission agents - reverse charge mechanism - Revenue neutrality - extended period of limitation - HELD THAT:- The appellants are manufacturers of tyres; they are clearing the tyres in the domestic market and are also exporting to other countries; they have appointed agents, overseas, to procure orders for such tyres; as per the orders confirmed by the agents, the appellants export the tyres and pay the agents a certain commission. The services rendered by agents abroad results in the export of the goods manufactured by the appellant. Thus, the services rendered by the agents are in the direction of promoting the business of the appellants. Undoubtedly, the business of the appellant is in India - It is found that the effect of the services rendered by the overseas agents, results in export of tyres by the appellant, which is their business; to this extent, it is found that the categorization of the services under Business Auxiliary Service is correct. Moreover, it cannot be said that the services are received abroad though, they are certainly performed outside India; as long as the recipient and his business are in India, it cannot be said that the said service is not received in India. Receipt of the service takes the colour of recipient of the service that is to say receipt of service is decided by the recipient. The services rendered by the agents are not a personalized service availed by the appellants on their visit to abroad; moreover, by no stretch of imagination, the appellant being a body corporate, services cannot be held to have been received and enjoyed overseas, as they have no place of business abroad. Understandably, the benefit of the service accrued to the business of the appellant in India and therefore, to that extent, receipt of the services is certainly in India and not abroad. To this extent, the contention of the Revenue is correct - there are no infirmity in the findings of the OIO and OIA to the extent that the appellants have received services from foreign agents who have procured order outside India against which they had supplied the goods and thus have rendered themselves liable to pay service tax on Reverse Charge Mechanism in terms of Section 66A of Finance Act, 1944 and the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006. Revenue neutrality - HELD THAT:- It is found that the Scheme of Service Tax and Excise Duty work on the principle of a chain of paying the duty and availing the credit. It is not correct to argue that the service tax paid could have been availed as credit and therefore, non-payment of service tax has not made any material difference to the Revenue. The principle of netting of duty is not in operation. For a smooth flow of goods and seamless procedures, a system of payment of duty and availing credit has been put in place. Breaking of this chain for whatever logic would entail in chaos which is neither a principle envisaged nor an intended result under the Scheme of taxation. Extended period of limitation - HELD THAT:- It is apparent from the records that the appellant and the Department were in constant correspondence and litigation in this regard. Thus Revenue has not made out any case for invocation of the extended period. Therefore, we are of the considered opinion that extended period cannot be invoked to this extent. Both the appeals are partially allowed to the extent of limitation - it is held that the demands be restricted to the normal period; however, penalties imposed on the appellants are set aside - appeal allowed in part.
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2023 (12) TMI 1008
Levy of service tax - business auxiliary service or not - overseas Banks has deducted certain Bank charges from the export realization of the appellant s export of goods while remitting the export proceeds to the Indian Bank of the appellant - applicability of reverse charge mechanism - HELD THAT:- In the present case undisputed fact is that the bank charges deducted by the Foreign Bank while remitting the export proceed received from the Foreign Country to the exporters Indian Bank was demanded Service Tax - it is found that there is no contract or understanding between appellant and the Foreign Bank. The appellant being exporter of goods is exclusively dealing with Indian Bank i.e HDFC Bank of the appellant. In such case if any charge is collected by the Indian Bank from the appellant the said activity would be liable to Service Tax that too in the hands of the Bank. In the present case the dealing is clearly between the Foreign Bank and Indian Bank, therefore in such case the appellant is not a service recipient of the Bank charges collected by the Foreign Bank from the payment remitted to the Indian Bank. The Indian Bank has only collected such charges from the appellant as a reimbursement which was born by the Indian Bank while transacting with the Foreign Bank. Therefore, the appellant even though bearing the charges as a reimbursement the same cannot be said to be service charges - in the present case the demand of Service Tax was raised under the head of BAS which is absolutely incorrect. Therefore, on this count also the demand of Service Tax will not sustain. The impugned order set aside - appeal allowed.
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2023 (12) TMI 1007
Classification of services - technical inspection and certification service - activity of X-Ray of pipeline - HELD THAT:- As per the definition of inspection and certification service, apart from inspection, certification is also required whereas in the present case there is no certification found on record therefore on that basis the activity of X-Ray on the material cannot be classified as inspection and certification charges - the submission of the learned Counsel is also convincing that since the service was provided along with material it is classifiable as works contract service. The service is similar to the photography service and in M/S. JAIN BROTHERS M/S. PUNJAB COLOUR LAB. VERSUS CCE, BHOPAL [ 2008 (11) TMI 58 - CESTAT, NEW DELHI] and COMMISSIONER OF CENTRAL EXCISE, RAIPUR VERSUS AJANTA COLOR LABS [ 2008 (12) TMI 135 - CESTAT NEW DELHI] in case of photography, since it is provided along with material. It was held that the service is qualified as works contract service - Applying the ratio of the said judgment, we are of the view that the service in the present case is qualified as works contract service, for this reason also the demand under wrong head i.e inspection and certification service will not be sustainable. The demand in the present case is not sustainable on multiple counts - the impugned order is set aside - Appeal allowed.
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2023 (12) TMI 1006
Recovery of Service Tax - collection of service charge from the customers besides the price of the food - no show charges (amount forfeited advance as was received for providing accommodation service) - extended period of limitation. Whether the service charges collected besides the price of the food while rendering the restaurant service, the appellant was liable to pay tax on the said amount? - HELD THAT:- It is an admitted fact that the amount in question is received by the appellant while providing the restaurant service from their customers/recipients of the said service. In the light of section 67 as recorded above, it shall be the amount as part of consideration received for rendering the taxable service. Though the defence taken by the appellant is that they were not retaining this amount and were distributing the same among the hotel staff, hence, they were not liable to pay service tax of this amount - service tax in case of supply of food etc. in restaurant is being charged on abatement basis on the amount collected by the provider of restaurant service from the recipients thereof the TRU Circular No.334/3/2011 dated 28.02.2011 has also been referred, wherein it has been held that separation of certain portion of the bill as service charge will not represent the full value of all services rendered by the restaurants - there are no infirmity in those findings in the order under challenge when the demand of Rs.1,73,211/- on service charges has been confirmed by the Commissioner (Appeals). This issue is decided confirming appellant liability to pay service tax on service charges collected besides the price of food. Whether the amount of no show charges‟ i.e. the amount forfeited advance as was received for providing accommodation service, is the consideration for providing the declared service by the appellants? - HELD THAT:- In the present case admittedly there is no separate fee or charges recovered by the appellant from the customers/ recipients of hotel accommodation service, for not being appearing to attend the said service. There was no express nor implied contract for non-appearance for availment of accommodation service between the parties. The consideration was paid by the recipient only for accommodation service on which the service tax liability was duly discharged. This issue about forfeiture of the amount received by a hotel from a customer on cancellation of the booking whether to be liable to pay service tax under section 66 E (e) has already been dealt with by this Tribunal in the case of Lemon Tree Hotel [ 2019 (7) TMI 767 - CESTAT NEW DELHI] , South Eastern Coalfields Ltd. [ 2020 (12) TMI 912 - CESTAT NEW DELHI] the Tribunal has held that the retention of amount on cancellation would not attract service tax under 66E (e) - the adjudicating authority below has wrongly held the no show charges‟ as a consideration for providing declared service. Whether demand is barred by limitation and the penalty need to be waived in the given facts and circumstances? - HELD THAT:- The demand in question pertains to the period from July, 2012 to September, 2015 and the Show Cause Notice is of April 2016. Resultantly the major demand i.e. from July, 2012 to March, 2015 is the demand for the extended period. And that extended period should not have been invoked by the Department - Since the issue is observed to be an interpretational, imposition of penalty is also not warranted in the given circumstances. As a result of findings on three of the issues, except for the miniscule demand for the period w.e.f. April 2015 to September 2015 i.e. for the normal period, that too, on the amount of service charges collected, the entire demand is hereby set aside - Appeal stands, accordingly, partly allowed.
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2023 (12) TMI 1005
Classification of services - Erection Installation of Scaffolding - manpower supply/recruitment agency service or Erection Installation and Commissioning Service? - abatement claim - taxability of service provided to Reliance Industries Ltd. (SEZ) Jamnagar - levy of service tax on differential value arising between the figure shown as credit of service charge in the books of accounts and ST-3 return on account of credit shown twice once against receipt of service charge and second the value taken from 26-AS - Time Limitation. HELD THAT:- From the contract order of Leo Coats (I) Private Limited, it is clear that the appellant has provided the service of Scaffolding, Erection and Dismantling. From the nature of the service, there is no doubt that the service does not fall under the Man-power recruitment or supply agency service. Moreover, the job is not on the basis of man hour or number of man power but it is on the quantum of work and the rate is also as per cubic meter of Scaffolding, Erection Dismantling, therefore, the service is undisputedly does not fall under Manpower Agency Service but falls under Erection Installation Commissioning Service. The Appellant considering the service as Manpower Recruitment Supply Agency Service, availed the abatement of 75% and paid the service tax only on 25%. However it is not in dispute that on 75% of the Service provided by the appellant, the service recipient has discharged the service tax, which is clear from the work contract as well as the confirmation given by M/s Leo Coats (I) Private Limited. The appellant s service is classifiable under Erection Installation Commissioning Service but the fact remains that on the entire service the service tax was paid i.e. 25% by the appellant and on 75% by the service recipient. Since the entire service has suffered the service tax only for technical reason the department has no right to demand the service tax twice, therefore, on this ground, the service tax demand on the basis of is not sustainable. This issue has been considered time and again and in the following judgments, it has been held that service tax cannot be demanded twice even though the person who is liable to pay the service tax has not discharged the service tax but some other person has discharged the service tax on the same service. It is settled that once the service has suffered the service tax irrespective of anyone paid the service tax, the service tax cannot be demanded twice. Therefore, we hold that in respect of Erection Installation Commissioning Service, the service tax demand is not sustainable. Hence the same is set aside. Service provided to Reliance Industries Limited (SEZ) Jamnagar Unit - HELD THAT:- It is a settled law and even as per the SEZ Act, that any service provided to SEZ is exempted from payment of service tax. In this regard in the case of CCE Patna vs Advantage Media Consultant, [ 2008 (3) TMI 59 - CESTAT KOLKATA ], it was held When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. When no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable - the service tax demand on the service provided to SEZ is not sustainable. Time Limitation - HELD THAT:- It is found that in the submission of the appellant that the show cause notice has not expressly alleged any ingredient such as suppression of fact, misdeclaration, fraud, collusion etc with intent to evade payment of duty, the extended period cannot be invoked. Moreover, the appellant is a registered unit, was paying service tax on 25% of the service charges and were filing regular ST-3 Returns, therefore, it is not found any suppression of fact on the part of the appellant. Accordingly, the remaining payment being covered under extended period, will not sustain. Hence, the same is set aside on the ground of time bar. The service tax demand is not sustainable. Hence, the same is set aside. Appeals are allowed.
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2023 (12) TMI 1004
Non-payment of service tax - providing non-scheduled operation of aircraft for the period upto 30.11.2009 by making the services of aircraft available to various entities for travelling to places in India pre-fixed and pre-intimated on payment of charges, based on duration and destination - suppression of facts or not - invocation of extended period of limitation - HELD THAT:- In Pushpam Pharmaceuticals Company [ 1995 (3) TMI 100 - SUPREME COURT ], the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since suppression of facts has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. Mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax. This issue was also examined at length by this Bench in M/s G.D. Goenka Private Limited vs. The Commissioner of Central Goods and Service Tax, Delhi South [ 2023 (8) TMI 995 - CESTAT NEW DELHI ] and after referring to the provisions of section 73 of the Finance Act, the Bench observed Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked. The impugned order dated 31.01.2018 passed by the Commissioner (Appeals) is, accordingly, set aside - Appeal allowed.
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2023 (12) TMI 1003
Levy of service tax - Construction of Residential Complex services (CRC) - Commercial or Industrial construction (CIC) - demand prior to 1.6.2007 - HELD THAT:- The contracts are entirely composite in nature involving both element of service as well as supply of goods. The Hon. ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ] has held that the demand of service tax on composite contracts cannot be made prior to the introduction of WCS (1.6.2007). Following the said decision, it is opined that the demand prior to 1.6.2007 requires to be set aside. After the period 1.6.2007 the department has raised the demand under the category of Construction of Residential Complex services and Construction of Commercial or Industrial Construction services - HELD THAT:- The said demand cannot sustain for the reason that the contracts involved are again, composite in nature, involving both rendering of services as well as supply of goods. The Tribunal in the case of Real Value Promoters Pvt. Ltd. and Others Vs. CGST and Central Excise, Chennai [ 2018 (9) TMI 1149 - CESTAT CHENNAI] had observed that even after 1.6.2007 the demand of service tax on composite contracts has to be under works contract services and the demand under Construction of Residential Complex services or Commercial and Industrial Construction services cannot sustain. The decision rendered by the Tribunal in the case of Real Value Promoters was followed by the Tribunal in the case of Jain Housing and Construction Ltd. Vs. CST [ 2018 (9) TMI 1149 - CESTAT CHENNAI] In the said decision, the Tribunal set aside the demands raised under Residential Complex Services observing that the demand raised under such services after 1.6.2007 on composite contracts cannot be sustained. The demands raised under construction of Residential Complex Services and Commercial or Industrial Construction Services for the disputed period cannot be sustained and requires to be set aside - the impugned order is set aside - appeal allowed.
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Central Excise
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2023 (12) TMI 1002
Recovery of Central Excise Duty alongwith interest and penalty - Onus to prove - conditions imposed in N/Ns. 4/97-CE, 5/98-CE, 5/99-CE, 6/00-CE were satisfied or not - failure to discharge the onus of proving that the two conditions mentioned in the said Notifications, namely, that the goods in question had to be sold to the apex bodies by the respondent and that a certificate should be issued from the said apex bodies to the respondent at the time of the clearance of goods that the said goods were going to be used only on handloom had been satisfied - whether or not the role of the apex bodies was in the nature of selling or commission agents and not that of direct purchasers of the said goods from the Respondent. HELD THAT:- It is undisputed that the respondent/assessee is a co-operative spinning mill which manufactured the yarn in question. The two co-noticees namely Tantuja and Tantusree are also apex handloom co-operative societies of the State Government who purchased yarn and also gave certificate that the yarn is going to be used only on handlooms. The respondent/assessee received payments from the aforesaid two purchasers namely Tantuja and Tantusree, by account payee cheques. The inference drawn by the adjudicating authority to deny exemption under the relevant exemption notification, that delivery of yarn was given by the respondent/assessee to persons other than Tantuja and Tantusree, is neither based on any material or evidence nor the inference so drawn can be said to be a valid exercise of power by the adjudicating authority - on admitted facts of the case, it is found that the respondent/assessee has fully complied with the conditions of the relevant exemption notification. Therefore, the Tribunal has correctly and lawfully set aside the adjudication order and allowed the appeal of the respondent/assessee. Undisputedly, the yarn in question has been purchased by the co-noticees namely Tantuja and Tantusree, which both are registered apex handloom co-operative societies, who made payment to the respondent/assessee (yarn manufacturing co-operative society) through cheque drawn by them on their own bank accounts. They have also issued a certificate to the effect that the yarn is going to be used only on handlooms. Thus, all the conditions of the exemption notification in question were satisfied by the respondent/assessee. Therefore, the respondent/assessee was entitled for exemption and the Tribunal has lawfully and correctly allowed the appeal of the respondent/assessee holding the transactions in question to be exempt from Central Excise Duty. The adjudicating authority had proceeded to deny exemption to the respondent/assessee merely on the basis of surmises and presumptions and alleged intendment. In our view and as per well-settled principles in a taxation statute, there is no room for any intendment and that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification - Nothing is required to be read into nor should anything be implied other than essential inference while considering a taxation statute or exemption notification. What the adjudicating authority attempted to do is that it attempted to read something which was either factually not existing or which was not provided by the exemption notification. It attempted to add words by drawing its own inference on the basis of presumption that the yarn in question could have been sold by the respondent/assessee not to the aforesaid apex handloom co-operative societies but to some other persons - Since the respondent/assessee has fulfilled all the conditions, therefore, it became entitled for exemption and the exemption could not have been denied. There are no manifest error of law in the impugned order of the tribunal. The appellant has completely failed to make out any case for interference with the impugned order - substantial questions of law framed are answered in favour of the assessee and against the respondent. There are no merit in this appeal - appeal dismissed.
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2023 (12) TMI 1001
Application seeking restoration of appeal - non-prosecution of the case - seeking change in the cause title - non-inclusion of value of the said moulds, dies charged to respective buyers of the forgings separately in the assessable value - Availment of CENVAT Credit. Application seeking restoration of appeal - non-prosecution of the case - seeking change in the cause title - HELD THAT:- For the mistake of the counsel in not intimating the Tribunal about the change of name and address on merger with M/s. Kems Forgings Limited, the appellant cannot be penalised - Considering the submissions of the appellant supported by affidavit filed by the Managing Director of the company, in the interest of justice, the miscellaneous application seeking restoration of the appeal dismissed earlier for non-prosecution vide order dt. 20.08.2019 is allowed and the said order is recalled and appeal is restored to its original number. Also, the miscellaneous application seeking change of cause title from M/s. Sree Lakshmi Forge Engineers Ltd., to M/s. Kems Forgings Ltd. on the basis of the certificate issued by the Registrar of Companies dated 14.07.2011 is allowed and the appellant s cause title is changed from M/s. Sree Lakshmi Forge Engineers Ltd., to M/s. Kems Forgings Ltd. Registry is directed to make necessary changes regarding cause title and address in the records as well as database. Short payment of duty - non-inclusion of value of the said moulds, dies charged to respective buyers of the forgings separately in the assessable value - Section 4 of the Central Excise Act, 1944 - HELD THAT:- Initially, in the demand notice, the entire cost of the dies / jig fixtures proposed to be included assuming that the same have been used in the manufacture of forgings and its cost has been recovered from the customers. However, no evidence has been placed in this regard in spite of two rounds of litigation before the adjudicating authority. The learned Commissioner (Appeals) has now erred in remanding the matter to examine the issue of inclusion of the amortised cost of dies in the value of the forgings without analysing the evidence on the allegation of receipt of additional cost of the dies / blocks or inserts by showing separately in the invoice without payment of duty - the cost/value of the inserts, which are fixed with the blocks of the appellant and exhausted during the course of manufacture of forgings cannot be included as no evidence has been placed on record indicating that the same are recovered separately along with the value of the forgings. Thus, the finding of the learned Commissioner (Appeals) remanding the matter to add the amortised cost of the dies / blocks to the transaction value of forgings is erroneous; hence cannot be sustained. Availment of CENVAT Credit - HELD THAT:- The invoices were raised on their account and the materials were shipped to the appellant and have been received as indicated in their material receipt register (pages 52 to 59 of the appeal paper book), the relevant transport receipts from the supplier M/s. Mahindra Intertrade Ltd. A/c of Sree Lakshmi Industrial Forge Engineers Limited have been placed. The said goods are duly accounted for in their stock register. They have cleared the said goods later and necessary invoices are raised for clearance the goods as such in favour of M/s. Southern Steel Forgings Ltd. The receipt and corresponding clearance invoices in respect of M/s. Southern Steel Forgings Ltd. are enclosed with the appeal (pages 32 to 51); hence it is sufficient to accept that the materials were received and utilized in the premises of the appellant - there are no reason to deny the cenvat credit on the basis of the aforesaid documents and to remand the matter to the original authority to examine the evidences enclosed, when the same had not been examined in the two rounds of adjudication before the original authority. Consequently, another remand to verify the cenvat credit documents would not yield any fruitful result - the impugned order is set aside - appeal allowed.
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2023 (12) TMI 1000
CENVAT Credit - inputs - capital goods - structural steel items (plates falling under Chapters 69, 72, 73, 84 and 85) as part of modernization of the plant as well as their existing unit - Ld. Commissioner has denied the credit on the 'plates' mainly on the ground that they fall under Chapter 72 of the Central Excise Tariff, which are excluded from the definition of 'Capital goods' - HELD THAT:- In the impugned order credit has been denied on many items which are classifiable under Chapter 84 and 85 also. They fall under the definition of capital goods under Rule 2(a) of the CCR, 2004 and hence they are entitled for the credit as 'Capital goods'. Remaining credit availed on goods falling under Chapters 72, 73 and 74 - HELD THAT:- The impugned order has erroneously held that the plates are used in factory shed, construction of building foundation etc. and dismissed the CE certificate furnished by the Appellant. The CE certificate certifies the end use of such plates by the Appellant viz. plates were used as components, parts or accessories of Kiln, Milling Machine, Coke Oven Gas, Pollution Control Equipment, Storage Tank, Kiln, etc. - the adjudicating authority has not given any valid reason for rejecting the CE certificate. Further, in this case the plates were not used as building materials for constructing factory shed, etc. They are used in construction of machinery, which are capital goods. Therefore, the credit on such plates cannot be denied. The impugned order has relied upon Notification No. 16/2009-CE (NT) dated 7.7.2009 which amended explanation 2 to Rule 2(k) of the CCR, 2004 to specifically exclude angles, channels, TMT bards used for construction of factory and laying of foundation or making of structures for support of capital goods - the 'plates' are inputs for the capital goods and hence they are eligible for the credit availed on the 'plates' as 'inputs' - the demand confirmed in the impugned order is not sustainable. Since the demand itself is not sustainable, the question of demanding interest or imposing penalty does not arise. The impugned order set aside - appeal allowed.
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2023 (12) TMI 999
Area based exemption - exemption Notification No. 01/10-CE dated 06.02.2010 - substantial expansion - expansion of capacity or modernization and diversification or not - HELD THAT:- The purpose stipulated in para 8(b)(i) of expansion of capacity means expansion of capacity of the existing product or diversification from the existing product. Further, it is found that the Commissioner (Appeals) in para 7(i) has observed that exemption notification has to be interpreted by taking into consideration, the language of the notification which has to be given its due effect. If the tax payer falls within the plain terms of the exemption, it cannot be denied its benefit by calling any aid a supposed intention of the exempting authority. There are catena of judgments that the reading of the Notification cannot be done in the manner, so as to give a narrow and restricted meaning. It is well settled that the interpretation of the Notification should not be done in such a way as to make the notification otiose or nugatory. There are no infirmity in the impugned order - appeal of Revenue dismissed.
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2023 (12) TMI 998
Exemption from payment of duty under N/N. 22/2003 dated 31.03.2003 - goods cleared to 100% EOU - inputs cleared as such - period June 2010 to September 2010 - HELD THAT:- For a different period, the Tribunal in M/s. Ajinomoto India Pvt. Ltd. Versus CCE, Chennai-IV [ 2018 (7) TMI 85 - CESTAT CHENNAI ] had remanded the matter to verify whether any consignment was cleared as such by the appellant. On perusal of the records, there are no sufficient clarity as to whether the procured goods entirely have been re-packed and re-labelled. Needless to say in the said activities are carried out then it amounts to manufacture. The Ld. Counsel has submitted that they would be able to furnish documents to establish their contention with regard to re-packing and re-labelling of the goods. As the issue in the appellant s own case has been considered favourably by the authorities below for several consignments, the matter requires to be remanded to the adjudicating authority who is directed to consider the contention of the appellant that their activity amounts to manufacture and verify the same. The impugned order is set aside - the appeal is allowed by way of remand.
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CST, VAT & Sales Tax
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2023 (12) TMI 997
Constitutional validity of Section 26(6A) of the Maharashtra Value Added Tax Act, 2002 - validity of the provisions of requirement of pre-deposit as introduced by sub-section (6A), (6B) and (6C) to Section 26 of the 2002 Act, as incorporated by Maharashtra Act 31 of 2017 w.e.f. 15th April 2017 - HELD THAT:- In the case of THE STATE OF TELANGANA ORS. VERSUS M/S TIRUMALA CONSTRUCTIONS [ 2023 (10) TMI 1208 - SUPREME COURT] it was held that The amendments in question, made to the Telangana VAT Act, and the Gujarat VAT Act, after 01.07.2017 were correctly held void, for want of legislative competence, by the two High Courts (Telangana and Gujarat High Court). The judgment of the Bombay High Court Court is, for the above reasons, held to be in error; it is set aside; the amendment to the Maharashtra Act, to the extent it required pre-deposit is held void. Considering the finality now having reached in regard to the issue of pre-deposit being put to rest by the decision of the Supreme Court in The State of Telangana Ors. Vs. Tirumala Constructions, it is opined that the request of the Petitioners to approach the Appellate Authority/Tribunal needs to be accepted. The Petitioners shall approach the Appellate Authority/Tribunal by filing their respective appeals along with applications praying for condonation of delay and also waiver of pre-deposit within a period of four weeks from today. If such appeal alongwith application are filed as permitted such proceedings be considered by the Appellate Authority/Tribunal in accordance with law and appropriate orders be passed on the application as also on the appeals - petition disposed off.
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