Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 5, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
PMLA
Service Tax
Central Excise
TMI Short Notes
Articles
News
-
Mitigating Climate Change Risks and Fostering a Robust Ecosystem for Sustainable Finance (Keynote address delivered by Shri M. Rajeshwar Rao, Deputy Governor, Reserve Bank of India - November 29, 2024 - at the International Conference, organised by the Institute of South Asian Studies (ISAS) at the National University of Singapore (NUS), in New Delhi)
-
Consultation paper on the proposed International Financial Services Centres Authority (Informal Guidance) Scheme, 2024
-
Ministry of Corporate Affairs has taken several steps to improve ease of doing business and enhance ease of compliance
-
Prime Minister’s Internship Scheme (PMIS) announced in the Budget 2024-25, aims to provide internship opportunities to one crore youth in top 500 companies in five years
-
43,30,121 accounts opened under Mahila Samman Savings Certificate Scheme (MSSC) till 31.10.2024
-
Repayment of ‘6.35% OIL MKTNCO GOI BOND 2024’
-
Auction for Sale (issue/re-issue) of (i) ‘New GS 2027’, (ii) ‘6.92% GS 2039’ and (iii) ‘7.09% GS 2054’
-
CCI approves the acquisition of certain shareholding of Shiprocket Private Limited by MUFG Bank, Ltd.
-
CCI approves the acquisition of certain shareholding in Shiprocket Private Limited by KDT Venture Holdings, LLC
-
CCI approves subscription to optionally convertible debentures of GMR Infra Enterprises Private Limited by Platinum Stone A 2014 Trust (acting through its trustee Platinum Rock B 2014 RSC Limited).
Notifications
Central Excise
-
31/2024 - dated
3-12-2024
-
CE
Seeks to rescind Notification No. 08/2022-Central Excise dated 30th June, 2022- Exemption relating to certain applicable duties on petrol, diesel and ATF cleared for exports
-
01/2024 - dated
3-12-2024
-
CE (NT)
Seeks to amend Rule 18 and Rule 19 of the Central Excise Rules, 2017 - Rule 18 is related to Rebate of duty and rule 19 is related to Export without payment of duty
Customs
-
48/2024 - dated
3-12-2024
-
Cus
Seeks to rescind Notification No. 32/2022-Customs dated 30th June, 2022.- It was exempting imports of Petroleum Crude and ATF from whole of the additional duty of Customs as is equivalent to the Special Additional Excise Duty leviable thereon under section 147 of the Finance Act, 2002
GST - States
-
S.R.O. No. 1124/2024 - dated
30-11-2024
-
Kerala SGST
Corrigendum - Notification G.O.(P) No.139/2024/TD. dated 9th October, 2024
Money Laundering
-
S.O. 5211(E) - dated
3-12-2024
-
PMLA
Central Government Authorization for Aditya Birla Sun Life Mutual Fund to perform Aadhaar Authentication for the purposes of section 11A of the Money-laundering Act
SEZ
-
S.O. 5185 (E) - dated
29-11-2024
-
SEZ
Central Government de-notifies an area of 0.7532 hectares, thereby making resultant area as 21.7468 hectares at Outer Ring Road, Devarabeesanhalli Village, VarthurHobli, Bengaluru East Taulk, Bengaluru in the State of Karnataka
-
S.O. 5183(E) - dated
29-11-2024
-
SEZ
Central Government notifies an additional area of 37.6980 hectares, thereby making the total area of the Special Economic Zone as 588.6514 hectares at Gopalpur, District Ganjam, in the State of Odisha
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
-
Empowering Additional/Joint Commissioners for adjudication of DGGI notices based on noticee's highest tax demand location.
Circulars : The circular amends the previous Circular No. 31/05/2018-GST to empower more Additional Commissioners/Joint Commissioners of specified Central Tax Commissionerates with All India jurisdiction for adjudication of show cause notices issued by DGGI officers. It provides criteria for allocating such notices to the concerned Additional/Joint Commissioners based on the location of the principal place of business of the noticee with the highest tax demand. It clarifies the procedure for adjudication of subsequent notices on the same issue involving different noticees. Notices issued before the amendment can be made answerable to the empowered officers by issuing corrigenda.
-
Authorities denied personal hearing despite request, order quashed.
Case-Laws - HC : The High Court quashed the assessment order dated 06.08.2024, holding that the Assessing Authority violated the principles of natural justice by denying an opportunity of personal hearing to the petitioner despite a specific request. Although the show-cause notice indicated 'NA' for personal hearing, the petitioner marked 'Yes' in the reply and sought an opportunity. The Court ruled that any previous opportunity before issuing the show-cause notice was inconsequential. The impending expiry of the limitation period did not justify denying a hearing. The authorities were directed to pass a fresh order after affording an opportunity of hearing to the petitioner.
-
Refund denied if export proceeds realized in INR via non-resident Vostro bank account outside ACU/Nepal/Bhutan.
Case-Laws - HC : The High Court quashed the impugned orders denying refund application, based on the respondents' clarification that refund would not be denied if export proceeds are realized in Indian Rupees routed through a non-resident bank's freely convertible Vostro account outside the Asian Clearing Union or Nepal and Bhutan. However, the respondents contended that the applicability of the clarificatory circular to all exports or specific commodities required examination, and this aspect was kept open for verification by the respondents.
-
Disputed tax case relief: 10% deposit required for stay on order pending appeal.
Case-Laws - HC : The High Court disposed of the writ petition, modifying the requirement to deposit only 10% of the remaining disputed tax amount for the impugned order to remain stayed. This decision was based on a Central revenue notification dated 16th August, 2024, reducing the deposit to 10%, and a corresponding State revenue notification dated 29th October, 2024. The petitioner's submission regarding the reduced deposit requirement of 10% for the first appellate order to remain stayed was accepted by the High Court.
-
Quashed penalty for transporting goods after e-way bill expiry; procedural lapses without tax evasion intent not penalized.
Case-Laws - HC : The High Court quashed the orders of the Appellate and Adjudicating Authorities imposing penalty on the petitioner for transporting goods after the expiry of the e-way bill. The Court held that while procedural compliance under the GST framework is crucial, penalties imposed purely for procedural lapses without evidence of tax evasion or malicious intent may not serve the legislative intent. Given the petitioner's compliance record and absence of any attempt to divert the goods or evade tax, the Court observed that imposing a penalty was unwarranted. The Court emphasized that rules, including those on e-way bill validity, should be applied contextually, taking into account the facts and intentions involved. The penalty imposed was found to be excessive and not aligned with the principles of natural justice.
-
High Court quashes penalty order for not generating e-invoices; directs refund.
Case-Laws - HC : The High Court quashed the order imposing penalty u/s 129(3) of the CGST/SGST Acts for not generating e-invoices. The court directed refund of any amount collected from the petitioner pursuant to the quashed order and ordered the competent authority to pass fresh orders after considering Sections 122 and 126 of the CGST/SGST Acts.
-
Freight forwarder wins case against govt, gets refund of unconstitutional IGST levied on ocean freight charges.
Case-Laws - HC : The High Court held that the levy of Integrated Goods and Services Tax (IGST) on ocean freight paid by the petitioner was unconstitutional. The Court relied on the Supreme Court's decision in Union of India & Anr. v. M/s Mohit Minerals Pvt. Ltd. and its own decision in Bla Coke Pvt. Ltd. v. Union of India & Ors., wherein it was categorically held that when the Notification itself is struck down, the authorities cannot insist on the levy of IGST on the amount of ocean freight. The High Court determined that this was not a case of unconstitutional levy or illegal levy but rather a voluntary payment made under a mistake of law. Applying the principles laid down by the Supreme Court in Mafatlal Industries Ltd. v. Union of India, the High Court held that the writ petition filed by the petitioner seeking refund of the IGST was maintainable and allowed the petition, directing the respondents to refund the IGST amount to the petitioner.
-
Popular flour mixes with spices & ingredients classified differently, attracting higher 18% GST.
Case-Laws - AAAR : The appellant M/s. Gajanand Foods P Ltd's various flour mixes containing spices and ingredients like sugar, semolina, salt, sesame seed, chili powder, garam masala, etc. in addition to flours of dried leguminous vegetables, rice and wheat, were held to be excluded from classification under Chapter Heading 1102 or 1106 of the Customs Tariff Act, 1975 attracting 18% GST. The products cannot be considered as mere flours improved by addition of very small quantities of specified substances. The appeal filed by the appellant against the Advance Ruling passed by the Gujarat Authority for Advance Ruling rejected by the Appellate Authority for Advance Ruling.
Income Tax
-
TDS Amount Deposited: Court Quashes Economic Offense Cases Over Tax Deduction.
Case-Laws - HC : The High Court quashed the criminal proceedings and cognizance orders against the petitioners for offenses u/ss 276B and 278B of the Income Tax Act. The TDS amount in question, which was the subject matter of the economic offense cases and C.O. Case, had already been deposited belatedly with interest to the Income Tax Department. The court held that continuing the proceedings would amount to an abuse of the process of law, given the deposit of the TDS amount and the amendment made to Section 276B in the Finance Act, 2024, allowing such delayed deposits. Consequently, the cognizance orders passed by the Special Judge, Economic Offenses, against the petitioners were quashed.
-
Tax reopening quashed, AO's reasons cryptic & lacking nexus for belief of escaped income despite explanations.
Case-Laws - HC : The High Court quashed the reopening of assessments u/s 148, holding that the reasons recorded by the Assessing Officer were cryptic, vague, lacking nexus, and demonstrating non-application of mind. The court observed that the Assessing Officer failed to establish a prima facie reason to believe that income had escaped assessment, particularly when the assessee had explained that the bank deposits represented cash sales duly recorded in the books of account. The court emphasized that for reopening assessments, the Assessing Officer must demonstrate a nexus between the information received and the satisfaction formed regarding income escaping assessment, which was lacking in this case. Consequently, the Assessing Officer could not assume jurisdiction to reopen the assessments due to the total lack of formation of a valid reason to believe escapement of substantial income.
-
Tax dispute settled under Vivad se Vishwas Act despite minor delay in payment.
Case-Laws - HC : The High Court quashed the order rejecting the issuance of Form 5 under the Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act) and directed the respondent to issue Form 5 to the petitioner within twelve weeks. The petitioner had paid the entire amount except Rs. 1,533/- within the specified time period on or before 30th September, 2021. The delay of twelve days in payment of Rs. 1,533/- was considered unintentional and supported by a justifiable reason. The petitioner had also paid the difference of the amount payable after 30th September, 2021. The Court held that permitting the petitioner the benefit of the Scheme would not amount to extending or modifying the Scheme, which is the prerogative of the Government.
-
Audit objection can't justify reassessment if contrary to facts & evidence already accepted by tax dept.
Case-Laws - HC : The High Court held that the reassessment proceedings initiated by the Assessing Officer based on an audit objection were invalid. The Court observed that the Assessing Officer could not have assumed jurisdiction by relying on the audit objection, which was contrary to the facts and evidence on record, especially when the department had previously accepted and granted depreciation on the goodwill claimed by the assessee for earlier years. The Court emphasized that even though an audit objection can be considered as "information" for reopening an assessment u/s 148 of the Act, the Assessing Officer cannot merely reiterate the audit objection while ignoring the facts of the case and the assessee's reply filed u/s 148A(b).
-
Allocation of common expenses, transfer pricing, prior period expenses, and treaty analysis in cross-border transactions.
Case-Laws - AT : The ITAT held that the common expenditure of the head office needs to be allocated on a reasonable and scientific basis to the eligible unit for correctly determining its profit. The ITAT upheld the allocation of expenses like commission to directors, audit fees, and bank charges to the MEPZ units. Regarding goods transferred to the MEPZ unit, the issue was remitted back to the Assessing Officer to ascertain the fair market value. The disallowance of prior period expenses was upheld due to lack of substantiation. The payment made to ESG International, USA for warehouse services was held not taxable in India as it did not constitute fees for technical services under the India-USA tax treaty. The "make available" condition was not fulfilled. The disallowances of foreign travel expenditure of directors and irrecoverable taxes were deleted. The additions for travel, gifts, and garden expenses were also directed to be deleted. The penalty imposed for the ESG International payment was cancelled as the primary addition was deleted.
-
Chartered accountant's resignation delayed audit report filing; no tax evasion, no penalty u/s 271B.
Case-Laws - AT : The Income Tax Appellate Tribunal allowed the assessee's appeal and held that there was a reasonable cause for the failure to furnish the audit report as required u/s 44AB of the Income Tax Act. The accountant responsible for maintaining the firm's accounts had abruptly resigned before finalizing the accounts for the relevant year. Upon rejoining after being offered a revised salary, the accountant completed the accounts, which were subsequently audited and filed. The Tribunal considered the explanations offered by the assessee and found that the conduct demonstrated a reasonable cause for the failure as per Section 273B. The assessee had committed only a technical breach without any loss to the government's exchequer, as no additions were made during the assessment proceedings.
-
IT Tribunal upholds 5% markup on intra-group services as arm's length based on TNMM analysis.
Case-Laws - AT : The ITAT held that the assessee's 5% markup charged for intra-group services was at arm's length based on benchmarking analysis using the Transactional Net Margin Method (TNMM). It ruled that tax authorities cannot question commercial decisions or quantum of fees, but can only examine if services were actually rendered and transactions were genuine. Relying on judicial precedents, the ITAT directed the TPO to delete the impugned transfer pricing adjustment.
-
Tribunal Rules on Income Tax Disallowances, TDS, FTC, ESOP: Upholds Exemption Exclusions, Directs TDS Relief.
Case-Laws - AT : Regarding additions u/s 14A for disallowance of expenditure related to exempt income, the ITAT upheld the CIT(A)'s order, which modified the Assessing Officer's (AO) disallowance by excluding investments not yielding exempt income, in accordance with the law. The ITAT rejected the assessee's claim for accepting its suo moto disallowance. On the issue of short credit of TDS, the ITAT directed the AO to grant relief expeditiously as per the CIT(A)'s directions. Concerning short credit of Dividend Distribution Tax (DDT), the ITAT dismissed the ground, stating that the matter requires administrative resolution between the assessee and the Revenue authorities. Regarding denial of foreign tax credit u/s 90/91, the ITAT directed the AO to consider the assessee's case and pass a suitable order. On the allowability of ESOP compensation as revenue expenditure, the ITAT upheld the CIT(A)'s order, following the coordinate bench's decision in the assessee's own case for earlier years.
-
Non-resident assessment u/s 147 quashed due to time limit breach.
Case-Laws - AT : The final assessment order passed by the Assessing Officer u/s 147 read with Section 144C(13) for the Assessment Year 2016-17 is quashed as barred by limitation. Except in cases of reference to the Transfer Pricing Officer, the extended time limit of 12 months for completion of assessment is not available in a case of Non-Resident assessment, even though covered u/s 144C of the Act. As per Section 153(4), the extended time limit of 12 months is not available for Non-Residents. The Assessing Officer ought to have completed the assessment within one year from the end of the financial year in which notice u/s 148 was served, as per Section 153(2). Considering the notice u/s 148 was served in April 2021, the time limit for completing the assessment u/s 147 was available up to 31.03.2023. Hence, the final assessment order dated 08.01.2024 is clearly barred by limitation and liable to be quashed.
-
Taxing Authority's Jurisdiction Challenged: Flawed 'Satisfaction Note' and Property Valuation Dispute.
Case-Laws - AT : The ITAT allowed the assessee's appeal, holding that the assumption of jurisdiction u/s 153C of the Income Tax Act by the Assessing Officer was vitiated due to a lack of proper 'satisfaction note'. The 'satisfaction note' lacked tangible and descriptive information, indicating a lack of application of mind. Consequently, the notice issued u/s 153C and the consequent assessment order were quashed. Additionally, regarding the valuation of a property, the ITAT accepted the assessee's contention and the District Valuation Officer's report, which was closer to the declared sale consideration. The significant difference between the sale consideration mentioned in the Agreement to Sale and the Sale Deed was deemed unconceivable and contrary to the estimated market value. The assessee's declared sale consideration was upheld in the absence of any contrary inquiry by the Revenue.
-
TDS amount reflected in Form 26AS treated as income in case of uncertainty/irrecoverability of principal amount.
Case-Laws - AT : The ITAT held that when the principal amount of income subjected to tax deducted at source (TDS) bears an element of uncertainty and irrecoverability, the TDS deposited by the deductor and reflected in Form 26AS of the deductee is deemed to be income received by the deductee u/s 198 of the Income Tax Act. The ITAT relied on the case of Y. Rathiesh [2014 (9) TMI 2 - ANDHRA PRADESH HIGH COURT] and directed the Assessing Officer to recompute the assessed total income by treating the TDS amount reflected in Form 26AS as income from other sources for the assessee. The Revenue's ground was partly allowed.
-
Corporate donations for social causes allowed tax deduction u/s 80G despite legal mandate.
Case-Laws - AT : The ITAT allowed the deduction claimed u/s 80G for Corporate Social Responsibility (CSR) expenditure. The solitary reason for denying the deduction by the lower authorities was that it was a statutory obligation under the Companies Law and not a voluntary contribution. However, the Tribunal held that the assessee had fulfilled all the conditions for claiming deduction u/s 80G, and the donations were verified by the tax auditor. The Tribunal directed the Assessing Officer to grant the deduction claimed u/s 80G.
Customs
-
Govt rescinds customs duty exemption on crude oil & ATF imports.
Notifications : The Central Government has rescinded Notification No. 32/2022-Customs dated 30th June 2022, which exempted imports of Petroleum Crude and Aviation Turbine Fuel (ATF) from the additional duty of Customs equivalent to the Special Additional Excise Duty leviable u/s 147 of the Finance Act, 2002. This rescission, through Notification No. 48/2024-Customs, has immediate effect, except for actions taken or omitted before the rescission. The powers exercised are u/s 25(1) of the Customs Act, 1962, read with Section 21 of the General Clauses Act, 1897, and Section 147 of the Finance Act, 2002.
-
Customs penalties overturned due to denial of cross-examination, inadmissible evidence, and lack of mala fide intent.
Case-Laws - AT : Imposition of penalties on the appellants u/ss 112(a) and 114AA of the Customs Act, 1962. The adjudicating authority failed to consider the appellants' request for cross-examination of witnesses, violating the principles of natural justice. The statements relied upon were inadmissible as evidence u/s 138B, requiring examination and cross-examination of witnesses. Furthermore, the electronic documents lacked the requisite certificate u/s 138C, rendering them inadmissible. Crucially, no mala fide act or omission was established to warrant penalties u/ss 112(a) and 114AA. Consequently, the Tribunal allowed the appeal, setting aside the impugned order upholding the penalties.
-
Counterfeit goods can't be absolutely confiscated if IPR Rules not followed. E-commerce pricing for originals can't value fakes. Penalties set aside.
Case-Laws - AT : The Tribunal held that since the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 were not followed, the goods cannot be considered prohibited, and consequently, cannot be absolutely confiscated. The valuation adopted by the Revenue by taking the price of original branded goods from an e-commerce site was incorrect as the goods were counterfeit. Since the goods were not liable for absolute confiscation and the enhancement of value by the department was unacceptable, the entire penalties imposed against all the appellants were set aside. The appeal was allowed.
-
Foreign national's gold chain & kara allowed as passenger baggage while arriving from abroad, overruling authorities.
Case-Laws - HC : The court held that the Original Authority and Revisional Authority misconstrued the scheme and objectives of the Baggage Rules. The petitioner, a foreign national, brought a gold chain and kara by wearing them while arriving from Bangkok, which was not in a concealed manner. The case was found to be squarely covered by the judgments in Pushpa Lekhumal Tulani and Vigneswaran Sethuraman vs. Union of India. Import of gold in India is highly regulated, and bulk importation can only be effected by nominated entities as per regulations. However, Rule 3(1)(h) of the Foreign Trade (Exemption from Application of Rules in Certain Cases) Rules, 1993 provides exemption for import of goods as passenger baggage to the extent permissible under the Baggage Rules.
-
Imported liquor case: No misdeclaration, confiscation & penalties set aside for appellant firm.
Case-Laws - AT : Confiscation of imported liquor cases, imposition of penalties, and demand of duty. The Tribunal held that there was no intentional misdeclaration or fraudulent intent on the part of the appellant, and the application for amendment of the Bill of Entry should have been allowed. The confiscation of 1329 cases and 11 wooden pallets was set aside. Regarding 2328 cases, the confiscation order and redemption fine were set aside as the provisions apply only when goods are concealed and not declared. The demand on 511 cases found short was also set aside due to lack of evidence of clandestine removal. The allegation of clearing 511+483 cases without bills was rejected as the loose documents were not proved with corroborative evidence. The demand of duty on 729 cases of expired beer was set aside as the validity period of the Letter of Approval had not expired. Consequently, the Tribunal allowed the appeals and set aside the duty demands, confiscation of goods, and penalties imposed on the appellant firm, its partner, and employee.
-
Customs tribunal rules against duty demand, penalties on confiscated areca nuts import.
Case-Laws - AT : The key holdings were: 1) Since the goods (areca nuts) were absolutely confiscated, the demand for duty on the appellants is unsustainable. 2) Penalty u/s 114A of the Customs Act, 1962 is not attracted as there was no case of paper transactions without actual import of goods. 3) Penalty imposed on the individual partners of the appellant firm is set aside, relying on a Gujarat High Court decision that separate penalty cannot be imposed on partners once the firm has been penalized. Consequently, all appeals filed by the appellants were allowed.
-
Battery scrap smuggled from Nepal confiscated, mastermind penalized for hazardous goods trade.
Case-Laws - AT : The CESTAT upheld the confiscation of 14200 kg of battery scrap of foreign origin which was smuggled through unauthorized routes from Nepal. The appellant was found to be the mastermind and penalized Rs.25,000/-, which was not considered excessive given that battery scrap falls under hazardous goods category. The appellant's claim of procuring the scrap locally could not be substantiated as used batteries cannot be freely traded per the Batteries (Management and Handling) Rules, 2001. The retraction of statements by co-noticees during adjudication was not given merit. The penalty on the appellant's accomplice, responsible for arranging invoices, was reduced to Rs.17,500/-. The appeal was partly allowed.
-
Customs broker's license suspension order quashed due to procedural lapses; inquiry to be completed within 6 months.
Case-Laws - AT : The CESTAT allowed the appeal filed by the appellant Customs Broker (CB) against the order of the Commissioner of Customs suspending the CB's license. The Tribunal held that the Commissioner failed to follow the prescribed procedure under Regulation 16 of the Customs Brokers Licensing Regulations (CBLR), 2018 for immediate suspension and its continuation. There was no justification provided for invoking immediate suspension nearly four years after the alleged act of overvaluation of export goods by the exporter. The Tribunal found no evidence implicating the CB in the overvaluation and held that the impugned order was contrary to Regulation 16. The Tribunal set aside the suspension order and directed the Commissioner to complete the inquiry proceedings under Regulation 17 expeditiously, preferably within six months.
-
Imported 'JOSS Powder' rightly classified under Heading 4405; no mis-declaration to invoke extended period limitation.
Case-Laws - AT : The CESTAT held that the imported 'JOSS Powder (Wood Powder for making incense sticks)' was correctly described by the appellant in the Bills of Entry under Chapter Heading 4405, though classified under the same. As there was no mis-declaration or suppression of facts, the extended period of limitation could not be invoked. Consequently, the appeal was allowed.
SEZ
-
IT zone area reduced for infra development by a company.
Notifications : The Central Government de-notified an area of 0.7532 hectares from the Special Economic Zone for Information Technology & Information Technology Enabled Services at Outer Ring Road, Devarabeesanhalli Village, VarthurHobli, Bengaluru East Taulk, Bengaluru in the State of Karnataka, thereby reducing the total area of the SEZ to 21.7468 hectares. The de-notified land will be utilized by M/s. Vikas Telecom Pvt. Ltd. towards creation of IT infrastructure (Non SEZ) which would sub-serve the objective of the SEZ.
Corporate Law
-
Auditor Penalized for Professional Lapses in Fraud Reporting, Valuation & Documentation.
Case-Laws - NFRA : The National Financial Reporting Authority (NFRA) held that the auditor committed professional misconduct u/s 132(4) of the Companies Act, 2013 and Section 22 of the Chartered Accountants Act, 1949. The auditor displayed gross negligence in relation to obligations to report fraud u/s 143(12) of the Companies Act, 2013 and SA 240. The auditor failed to exercise due diligence, challenge valuation assumptions, independently assess impairment requirements, maintain adequate audit documentation, and comply with Ind AS 16. Despite issuing a Disclaimer of Opinion, the auditor inadequately addressed risks related to fraud and disclosure requirements. Considering the nature of violations and principles of proportionality and deterrence, NFRA imposed a monetary penalty of Rs. 5,00,000/- on the auditor u/s 132(4)(c) of the Companies Act, 2013.
-
Auditors penalized for failing to report fraudulent transactions, diversion of funds in Coffee Day Enterprises.
Case-Laws - NFRA : The National Financial Reporting Authority (NFRA) held that the statutory auditors of Coffee Day Enterprises Limited (CDEL) committed professional misconduct u/s 132(4) of the Companies Act, 2013, due to diversion of funds and evergreening of loans/advances. The auditors failed to report fraudulent transactions, exercise due diligence, and comply with auditing standards and the Act, resulting in grossly misstated consolidated financial statements of CDEL. The NFRA imposed a monetary penalty of Rs 2 crore on the audit firm, Venkatesh & Co., Rs 10 lakh on the engagement partner (EP), CA D.V., and Rs 5 lakh on the engagement quality control review (EQCR) partner, CA D.G. Additionally, CA D.V. and CA D.G. were debarred for 10 years and 5 years, respectively, from being appointed as auditors or undertaking audits of companies.
Indian Laws
-
IFSCA unveils informal guidance scheme for clarity on IFSC business activities and regulations.
Circulars : The International Financial Services Centres Authority (IFSCA) issued the 'International Financial Services Centre Authority (Informal Guidance) Scheme, 2024' to provide a mechanism for seeking clarity and guidance on various issues pertaining to potential business activities, transactions, and legal matters under IFSCA's regulatory ambit. The scheme allows eligible persons, such as those licensed by IFSCA, intending to undertake regulated transactions, or planning to set up units in IFSC, to apply for informal guidance in the form of no-action letters or interpretive letters. The scheme outlines the application process, types of guidance, dissemination on IFSCA's website, confidentiality provisions, and the non-binding nature of the informal guidance.
PMLA
-
Customs duty evasion proceeds treated as money laundering, directors' ignorance no defense.
Case-Laws - HC : The High Court dismissed the petition challenging the complaint filed under the Prevention of Money Laundering Act (PMLA) for customs duty evasion. The court held that any person (Directors) directly or indirectly involved in projecting proceeds of crime as untainted property is guilty of money laundering u/s 3 of PMLA, punishable u/s 4. The person need not be an accused in the predicate offence. The petitioners' contention of not being involved in the company's day-to-day administration was rejected, as the PMLA complaint was for possession and use of proceeds of crime, not for offences committed as directors. The court reiterated that money laundering is a stand-alone offence distinct from the predicate offence, and the trial court should proceed uninfluenced by observations in this order.
-
Property attachment upheld due to unproven source; NRHM fund misuse suspected.
Case-Laws - AT : The appellant failed to prove the legitimate source for acquisition of the subject property, and the Appellate Tribunal upheld the Provisional Attachment Order treating the amount as proceeds of crime derived from NRHM funds. The prosecution complaint was filed within the prescribed time limit. At this interim stage, the attachment of properties continues till the final disposal of the prosecution case. The appeal regarding seizure of Rs. 9.50 lakh, treated as proceeds of crime, was also dismissed as the appellant could not provide authentic evidence for the cash transactions.
-
Retention of seized records in financial crime case upheld by tribunal.
Case-Laws - AT : The Appellate Tribunal dismissed the appeals, holding that the retention of records and digital devices seized by the respondents from M/s Moser Baer India Ltd. and Individuals was lawful. The offenses involved were punishable u/s 120-B read with Sections 420, 468, and 471 of the Indian Penal Code, and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The seized documents and gadgets were found relevant to the commission of the crime and were included in the prosecution complaint. The Tribunal ruled that Section 17 of the applicable law permits the recovery and retention of documents/records relating to money laundering, irrespective of whether they were in the possession of an accused person or not.
-
Property freezing order lifted after 2 years without prosecution under Anti-Money Laundering Act.
Case-Laws - AT : The appeals under PMLA were allowed. The freezing/attachment order would continue during the investigation period of 365 days or pendency of the case before the Court concerning offenses under the Act of 2002. However, after the expiry of over 2 years since the freezing order without a prosecution complaint filed against any accused, the impugned order lapsed due to the efflux of time. Consequently, the Appellate Tribunal set aside the impugned order declaring the freezing order and its confirmation to have lapsed in the absence of a prosecution complaint against any accused.
SEBI
-
Easing mobile/email sharing rules for market alerts among family/authorized persons by brokers.
Circulars : The circular amends the guidelines regarding uploading of mobile numbers and email addresses by stock brokers for sending SMS and email alerts to investors. Under exceptional circumstances, stock brokers can now upload the same mobile number/email for multiple clients belonging to the same family or authorized persons of non-individual clients like HUF, corporates, partnerships, or trusts upon their written request. The definition of family/authorized person is provided for individual and non-individual clients. Stock exchanges must notify members, update bye-laws, and implement the amended guidelines.
-
New Master Circular updates rules for stock brokers; supersedes previous circular.
Circulars : The Securities and Exchange Board of India (SEBI) issued a Master Circular consolidating and updating all relevant circulars/directions issued to Stock Brokers till August 09, 2024. This Master Circular supersedes the previous Master Circular dated May 22, 2024. The circulars listed at serial numbers 117-118 in the Appendix, to the extent relating to Stock Brokers, stand rescinded. However, any action taken, application made, right/obligation accrued, penalty incurred or legal proceeding initiated under the rescinded circulars remains unaffected. The Master Circular is issued u/s 11(1) of the SEBI Act, 1992.
-
Resolution plan allows delisting sans norms; upholds exemption to delisting regulations for cases.
Case-Laws - HC : The High Court upheld the validity of Regulation 3(2)(b)(i) of the SEBI (Delisting of Equity Shares) Regulations, 2021, which exempts the delisting of shares pursuant to an approved resolution plan under the Insolvency and Bankruptcy Code (IBC) from SEBI's delisting regulations. The court ruled that the IBC, being a later and overriding legislation, would prevail over the SEBI Act in case of conflict. The delisting under the IBC resolution plan cannot be considered ultra vires. The court rejected the challenge to the NCLT order approving the resolution plan for delisting the shares of Reliance Capital Limited, holding that the petitioner's lack of notice argument was misconceived given the IBC provisions and limited scope of judicial review.
Service Tax
-
Trust's service tax paid under mistake, refundable to appellant as final consumer.
Case-Laws - AT : The appellant, an individual who ultimately paid the service tax to a Trust, is eligible to claim refund of the tax paid under mistake of law. The incidence of tax has finally rested on the appellant as the final consumer, and there is no unjust enrichment involved. The refund claim is not time-barred as the department did not appeal against the finding that the claim was within the limitation period. The Appellate Tribunal cannot examine suo motu whether the Trust qualifies for service tax exemption, as it involves questions of fact and law which could not have been examined at the first appeal stage. The appellant is entitled to consequential refund relief as per law. Appeal allowed.
-
Coal handler's tax credit adjustment upheld for quality/quantity variances.
Case-Laws - AT : The appellant, a coal handling contractor, was allowed to adjust the excess service tax paid on account of credit notes issued to service receivers for quality and quantity variances of coal handled by them. The Tribunal held that the credit notes were rightly issued against the invoices for handling services, as the deviations in coal quality/quantity were attributable to the handling process under the appellant's responsibility after unloading at the destination port. The reduction of taxable value through credit notes aligned with Section 67 of the Finance Act, 1994, and the excess tax paid was eligible for adjustment against other liabilities u/r 6. The demand raised by the adjudicating authority was set aside as legally and factually incorrect.
Central Excise
-
New rules for rebate & duty-free exports under Central Excise. Simplified compliance for businesses.
Notifications : The Central Government amended Rule 18 and Rule 19 of the Central Excise Rules, 2017. Rule 18 relates to rebate of duty, wherein the first proviso before the explanation was omitted. Rule 19 concerns export without payment of duty, and the proviso was omitted from this rule. The amendment came into force with immediate effect.
-
Govt revokes duty exemption on exported petrol, diesel & ATF; past actions valid.
Notifications : The Central Government has rescinded Notification No. 08/2022-Central Excise dated 30th June 2022, which provided exemption from certain applicable duties on petrol, diesel and aviation turbine fuel (ATF) cleared for exports. However, actions taken or omissions made before such rescission remain valid. This rescission notification comes into force with immediate effect.
-
Pre-deposit of Rs 10cr mandatory for filing appeal before CESTAT upheld; no waiver discretion.
Case-Laws - HC : The High Court dismissed the petition challenging the requirement of pre-deposit of Rs. 10 crore for filing an appeal before the CESTAT u/s 35F of the Central Excise Act, 1944. The court held that it lacked discretion to grant a waiver or reduction in the pre-deposit amount, as it would be contrary to the legislative intent. The petitioner was directed to avail the alternative statutory remedy of filing an appeal before the CESTAT. The court observed that while considering a waiver, it must examine if the petitioner has a prima facie case likely to succeed, indicating no gross injustice, excessive demand contrary to facts, or perverse orders, coupled with blameless conduct. However, after examining the facts, the court found no merit to grant a waiver and dismissed the petition.
-
Transit loss up to 1% exempted from excise duty on petroleum products for export.
Case-Laws - HC : The High Court allowed the petition and held that the petitioner is entitled to exemption from payment of excise duty up to 1% on transit loss for petroleum products transferred from the refinery/factory to the place of storage for the purpose of export. The impugned orders passed by the revisional authority were set aside, and the order passed by the Commissioner (Appeals) was restored. The demand raised regarding duty, interest, and penalty was quashed.
Case Laws:
-
GST
-
2024 (12) TMI 216
Seeking a direction to the respondents to disburse the amount of refund sanctioned to the petitioner vide refund sanction order dated 12.02.2020 along with interest - HELD THAT:- Once the amount has been refunded in terms of the communication dated 05.04.2024, there are no good reason for not paying the interest in terms of Section 56 of the CGST Act, 2017 to the petitioner by the State authorities. Insofar as the order passed seeking to disown the liability, for whatever reason, the issue is between the State authorities and the CGST authorities which will have to be resolved among them. The petitioner cannot be deprived of the amount of interest on account of the inter se dispute between the authorities. Respondent no.3 is directed to make payment of the amount of interest in terms of Section 56 of the CGST Act, 2017 and in terms of Circular No. 17/17/2017 dated 15.11.2017 as indicated in the communication dated 05.04.2014, to the petitioner, within a period of one month from today - the petition is allowed.
-
2024 (12) TMI 215
Challenge to assessment order - opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- A bare look at the show-cause notice issued to the petitioner itself reveals that the Assessing Authority had no intention to afford any opportunity of hearing as in the column pertaining to personal hearing, as noticed hereinbefore, 'NA' has been indicated. However, as from DRC-06 provided for a column pertaining to the personal hearing, wherein the petitioner specifically marked 'Yes' and also made a prayer in reply to the show-cause notice for affording opportunity of personal hearing, it was incumbent upon the authorities to provide an opportunity of hearing. However, apparently on 06.08.2024 itself, the order has been passed, which ex facie, is against the principles of natural justice. The plea raised pertaining to the fact that the opportunity was granted to the petitioner, the indications made in the show-cause notice cannot and does not pertain to any opportunity after filing of the reply and demanding the opportunity of hearing. Any previous opportunity, i.e., prior to the issuance of show-cause notice, is of no consequence - So far as the fact that the limitation for passing the assessment was expiring, that also cannot be a reason for not affording opportunity of hearing to the party, may be that a short date could have been fixed by the authority for that purpose. The assessment made by order dated 06.08.2024 (Annexure-8) cannot be sustained. The same is, therefore, quashed and set aside leaving it open to the authorities to pass a fresh order after affording opportunity of hearing to the petitioner - Petition allowed.
-
2024 (12) TMI 214
Challenge to order whereby demand has been created against the petitioner - notices have not been uploaded on the 'Due Notices and Orders' and instead uploaded on 'Additional Notices and Orders' - entitlement of benefit of doubt - HELD THAT:- In the case of OLA FLEET TECHNOLOGIES PRIVATE LIMITED VERSUS STATE OF UP AND 2 OTHERS [ 2024 (7) TMI 1543 - ALLAHABAD HIGH COURT] , a co-oridiante Bench of this Court inter alia observed ' it does appear that the petitioner is entitled to a benefit of doubt. No material exist to reject the contention being advanced that the impugned order was not reflecting under the tab view notices and orders . On merits, as noted in the earlier orders an other dispute exists whether all replies and annexures to the replies as filed by the assessee were displayed to the assessing officer and whether those have been considered. We find, no useful purpose may be served for keeping this petition pending or calling for a counter affidavit or even relegating the petitioner to the available statutory remedy. The entire disputed amount is lying in deposit with the State Government. Therefore, there is no outstanding demand.' The order impugned dated 26.12.2023 passed by the Assistant Commissioner, State Tax, Sector-19, Varanasi (Annexure-1 to the writ petition) is quashed and set aside - Petition allowed.
-
2024 (12) TMI 213
Challenge to order passed by the Superintendent of CGST CX Singur Division, Howrah Commissionerate under Section 73(9) of the WBGST/CGST Act, 2017 - HELD THAT:- Taking note of the provisions contained in Section 16(5) of the CGST Act, 2017 which has been inserted vide notification dated 16th August, 2024, the present writ petition is required to be heard. Since, the petitioner has been able to make out a prima facie case, the order dated 17th August, 2024 for the tax period August, 2019 to March, 2020 forming subject matter of challenge in the instant writ petition, shall remain stayed till the next date of hearing - List this matter under the same heading in the Combined Monthly list of January, 2025.
-
2024 (12) TMI 212
Rejection of refund application based on realization of export proceeds in Indian Rupees instead of freely convertible currency - HELD THAT:- The respondents themselves have rendered a clarification that if export proceeds against specific exports have been realised in Indian Rupees albeit routed through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of the Asian Clearing Union or Nepal and Bhutan, the refund would not be liable to be denied - the respondents would contend that the Circular No. 88/07/2019-GST[F.NO. CBEC-20/16/04/2018-GST], dated 1 February 2019 alludes to specific exports and therefore, it is presently unclear as to whether the same would apply to all exports or to certain commodities and species of exports. It was thus submitted that since the Circular is being pressed in aid for the first time before this Court, at least this aspect should be kept open for verification and examination of the respondents. The impugned orders dated 23 November 2022 and 25 October 2023 is quashed - petition allowed.
-
2024 (12) TMI 211
Requirement to deposit 10% of the disputed amount of tax on filing the appeal and further 20% of remaining disputed tax - HELD THAT:- There was notification dated 16th August, 2024 made by Central revenue reducing latter deposit to 10%. Now, State revenue has correspondingly notified on 29th October, 2024. In the circumstances, the writ petition be disposed of as covered by order dated 16th February, 2024 with modification for deposit of 10% of remaining disputed tax for impugned order to remain stayed. The submission made on behalf of petitioner regarding corresponding notification reducing requirement of the deposit to 10% of disputed tax for impugned first appellate order to remain stayed, is accepted. The deposit be made accordingly. Petition disposed off.
-
2024 (12) TMI 210
Levy of penalty for transporting goods after the expiry of the e-way bill - HELD THAT:- Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court opines that while procedural compliance under the GST framework is crucial, penalties imposed purely for procedural lapses without evidence of tax evasion or malicious intent may not serve the legislative intent. Given the absence of any attempt to divert the goods or evade tax, and based on the petitioner s compliance record, this Court observes that imposing a penalty was unwarranted in this instance. This Court therefore, emphasizes that rules, including those on e-way bill validity, should be applied contextually, taking into account the facts and intentions involved. For the foregoing reasons and the judgment in Progressive Metals (P.) Ltd. v. Deputy Commissioner, State Tax [ 2022 (4) TMI 1542 - CALCUTTA HIGH COURT ], this Court finds that the penalty imposed by the respondents to be excessive and not aligned with the principles of natural justice. This Court, therefore, set aside the orders of the Appellate and Adjudicating Authorities, holding that the penalty imposed on the petitioner was unwarranted given the petitioner s established compliance and the absence of intent to evade tax. Applications are accordingly disposed of.
-
2024 (12) TMI 209
Levy of penalty u/s 129 (3) of the CGST / SGST Acts - E-invoice was not generated - HELD THAT:- The objection raised by the learned Government Pleader that the petitioner has an effective alternative remedy by way of appeal and quash Ext.P16 order permitting the competent officer to impose penalty in terms of provisions contained in Section 122 of the CGST / SGST Acts also keeping in mind the provisions of Section 126 of the CGST / SGST Act, is overruled. Any amount that has been collected from the petitioner towards the amount payable by the petitioner in terms of Ext.P16 shall be refunded to the petitioner after fresh orders are passed by the competent authority. Petition disposed off.
-
2024 (12) TMI 208
Levy of IGST on ocean freight paid by the petitioner - Constitutional validity of Sr. No. 9(i) of N/N. 8/2017-IT(Rate) dated 28.06.2017 read with Sr. No. 10 of N/N. 10/2017-IT(Rate) dated 28.06.2017. Whether the levy of IGST on transactions of CIF value can be imposed by the Department by way of Notification? - Whether this Court has power to direct the refund of the levy as prayed for by the petitioner? - HELD THAT:- The first issue is no longer res integra and has decided by the Hon ble Apex Court in case of UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2022 (5) TMI 968 - SUPREME COURT] and the decision of various High Courts including this Court in case of BLA COKE PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2024 (10) TMI 492 - GUJARAT HIGH COURT] wherein, it has been categorically held that when the Notification itself is struck down, the respondent-authorities cannot insist for levy of IGST on the amount of ocean freight. Such being the position, the main issue falls for determination of this Court is whether the prayers for refund of the amount of levy are maintainable and whether this Court must direct the respondents to refund the same to the petitioner. In case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] the Apex Court has contemplated three situations where the right to refund may arise. Firstly, where the statutory provision under which the tax is levied itself challenged by the assessee on the ground of being violative of some provisions of constitution (question of unconstitutional levy). In this class of cases, the claim for refund arises outside the provision of the Act inasmuch as, this is not situation contemplated by the Act - Secondly, where the tax is collected by the authorities under misconstruction of the statute (including rule or notification) or by erroneous determination (case of illegal levy). In this class of cases, the claim for refund arises under the provision of the Act itself, inasmuch as, these are the situations contemplated by the Act and Rules. Thirdly where, the assessee pays a tax under mistake of law. This is not a case either of unconstitutional levy or illegal levy but, voluntary payment upon mistake of law. The writ petition filed by the petitioner seeking refund of the IGST is maintainable and must be allowed as the levy has been held to be unconstitutional - The petition, therefore, succeeds and is accordingly allowed.
-
2024 (12) TMI 207
Classification and determination of rate of tax - to be classified under HSN 2106 90 (Others) attracting 18% GST or not - Gota Mix Flour - Dakor Gota Mix Flour - Methi Gota Mix Flour - Khaman Mix Flour - Dhokla Mix Flour - Idli Mix Flour - Rava Idli Mix Flour - Dosa Mix Flour - Upma Mix Flour - Dahiwada Mix Flour - Dalwada Mix Flour - Menduvada Mix Flour - Handvo Mix Flour - Khichu Mix Flour - to be classified under HSN 2106 90 (Others) attracting 18% GST or not? - HELD THAT:- The flours remain classified under chapter heading 1102 even if the flour has been improved by the addition of very small quantities of specified substances. However, if substances (other than specified substances) are added to the flours with a view to use as food preparations , then the same gets excluded from the Chapter Heading 11.02. A glance at paragraph 6, which mentions the percentage-wise break-up of the flours and other ingredients, depict that the various products supplied by the appellant, contain spices and other ingredients apart from flour of dried leguminous vegetables, rice and wheat, in different proportions. The spices and other ingredients contained in these products include sugar, semolina, iodised salt, sesame seed, red chili powder. garam masala, black pepper, coriander, sodium bicarbonate, garam masala, etc.. These spices and ingredients are other than those substances mentioned in the explanatory notes of HSN for Chapter Heading 1102 which could be added in very small quantities to improve or enrich the flours for the resultant product to still remain classified in those Chapter Headings - The HSN notes pertaining to chapter heading 1102 also clearly states that the heading covers flours (ie, the pulverised products obtained by milling the cereals of chapter 10) other than flours of wheat or meslin. It is found that Gota mix flour, Dakor Gota mix flour, Dos mix flour, Methi Gota mix flour, Handavo mix flour, Menduwada mix flour, contains wheat flour. Thus, in view of the explanatory notes of the HSN, all the fourteen products are excluded from the Chapter Heading 11.02. The next averment of the appellant is that under the VAT determination order, different varieties of flour have been held to be flours falling under entry 12 in Schedule I to GVAT Act that since there is no substantial change in schedule entries, classification and interpretation adopted needs to be followed. The applicant has also relied on the judgement in the case of West Coast Waterbase P Ltd and Samsung India Electronics P Ltd, ibid, to substantiate the averment. It is noted that the averment stands addressed in paragraph 12 of the impugned order dated 19.7.2021. Further the said findings of GAAR agreed upon. Even otherwise, there is nothing produced on record before us by the appellant, compelling us to interfere with the said findings. What Rule 3(b) ibid, encapsulates is that mixtures consisting of different material which cannot be classified by reference to 3(a) shall be classified as if they consisted of the material or component which gives them their essential character. The argument put forth is that as the essential character of the instant flour mixes is given by the Flour, so in terms of Rule 3(b) of the GRI, it would fall under chapter heading 1102 or 1106. The argument is not legally tenable owing to the fact that it is already held that on account of the composition, etc. the product gets excluded from falling under chapter headings 1102 and 1106. Therefore, the question of relying on Rule 3(b) of the GRI to classify the goods based on the essential character, does not arise. It is owing to this finding, that the averment of the appellant that entry most beneficial to the appellant needs to be preferred, also stands rejected. The CBIC has clarified in circular No. 80/54/2018-GST dated 31.12.2018 that the flour of ground pulses and cereals, improved by the addition of very small amounts of additives continues to be classified under HSN Code 1106. However, the said clarification is not applicable in the present case as the products being supplied by the appellant contain spices and other ingredients in proportions which cannot be held to be in very small amounts, which is not the case with the Chhatua or Sattu . Thus, none of the products of the appellant merit classification under Chapter 11 of the Customs Tariff Act, 1975 and specifically under Chapter Headings 1102 or 1106 of the Customs Tariff Act, 1975. The appeal filed by appellant M/s. Gajanand Foods P Ltd against Advance Ruling No. Guj/GAAR/R/28/2021 dated 19.7.2021, passed by the Gujarat Authority for Advance Ruling is rejected.
-
Income Tax
-
2024 (12) TMI 206
Entitlement to benefit u/s 10(20) - HELD THAT:- Issues which arise in these appeals are also identical with the controversy that was raised in the matters arising out of SLP(C) [ 2022 (10) TMI 499 - SC ORDER] these appeals could be, accordingly, disposed of. Although these appeals are being remanded to the High court for a fresh consideration, the fact remains that the respondent-assessee has never claimed the benefit u/s 10(20) of the Income Tax Act, 1961and therefore, the High Court was not justified in dismissing the appeals by considering the matter u/s 10(20) of the said act. Since the aforesaid matters have been remanded to the High Court, in the interest of consistency, we remand these matters also to the High Court for consideration afresh in accordance with law and on their own merits. The appeals shall be considered afresh as expeditiously as possible.
-
2024 (12) TMI 205
Cognizance for the offence u/s 276B r.w.s. 278B - delay deposoting TDS amount - HELD THAT:- TDS amount in question, which is the subject matter of difference economic offence cases as well as C.O. Case, has already been deposited with interest with the Income Tax Department belatedly and the same has not been denied and if such a situation is there, the case of the petitioners are fully covered in light of the judgment of this court in the case of M/s. Dev Multicom Pvt. Ltd [ 2022 (3) TMI 1038 - JHARKHAND HIGH COURT ] which has been affirmed by the Hon ble Supreme Court in [ 2023 (6) TMI 1174 - SC ORDER ] and pursuant to that in the Finance Act, 2024, the Parliament on his own wisdom has made amendment in Section 276 (B) and huge amount of TDS has already been deposited with the Income Tax Department, which has not been denied in the counter affidavit, filed by the Income Tax Department in respective cases, as such, to allow the proceeding to continue will amount to an abuse of the process of law. As such, the entire criminal proceedings and the cognizance orders in their respective cases, passed by the learned Special Judge, Economic Offices, Ranchi, in the respective Economic Offence Cases / C.O. Case, whereby cognizance has been taken against the petitioners for the offences under Sections 276 (B) and 278 (B) of the Income Tax Act, pending in the Court of learned Special Judge, Economic Offences, Ranchi / Dhanbad, are hereby, quashed.
-
2024 (12) TMI 204
Validity of the reopening of assessments u/s 148 - reasons to believe - HELD THAT:- Information made available by the Investigation Wing Ahmedabad is also common. Only the information of the Investigation Wing Indore so far as AY 2015-16 is different which is explained by the petitioner. However, the same is not considered by the AO in the order disposing of the objections. On perusal of the reasons recorded, it is apparent that the same are absolutely cryptic and vague. It does not disclose any nexus between the information received and the satisfaction recorded to form reason to believe that income has escaped assessment resulting into non-application of mind by the AO while recording reasons to assume jurisdiction to reopen the assessment. It is a trite law that when the reasons recorded are cryptic, vague having no nexus and no application of mind, the AO cannot assume the jurisdiction to reopen the assessment. Even the order disposing of the objection is a non-speaking order. We are unable to understand as to how the deposits made in the bank account would result in escapement of income, more particularly, when the assessee has categorically stated in the objections that the same represent the cash sales which is deposited in the bank account and duly recorded in the books of account. AO has failed to show even prima facie reason to believe as to how the information received from the Investigation Wing would amount to escapement of income as there is total lack of formation of reason to believe on part of the AO to prima facie arriving at a finding that it is a fit case to reopen the assessment for escaping income of more than Rs. 500 Crore for Assessment Year 2014-15, for Assessment Year 2015-16, and for A.Y. 2016-17.
-
2024 (12) TMI 203
Condone the delay to file the return of income - delay of 380 days - genuine hardship or reasonable cause of delay - HELD THAT:- Respondent ought to have taken into consideration the age of the petitioner as well as his medical condition, so as to condone the delay in filing the return of income so as to enable the petitioner to claim the refund of the tax deducted at source on the sole transactions of sale of the immovable property during the previous year to the relevant Assessment Year. It is also not in dispute that the petitioner was not required to file return of income as the petitioner was residing out of India for the sale transaction of the N.A. plot during the year under consideration. In such circumstances, when the petitioner has shown his difficulties bona-fidely, honestly for not filing the return of income within the due date, the respondent was required to exercise the jurisdiction vested in him by Section 119 (2) (b) of the Act in the facts of the case, liberally so as to enable the petitioner to get the refund as the said amount of refund belongs to the petitioner but for filing the return of income by the petitioner within the due date. Petitioner is not entitled to any interest in view of the Circular No. 9 of 2015 issued by the Central Board of Direct Taxes and the petitioner therefore, cannot be deprived of the amount of refund to which the petitioner is otherwise entitled to had the petitioner filed the return of income within the due date prescribed under the Act. Petition succeeds and is accordingly allowed. The impugned order passed by the respondent is hereby quashed and set aside. The matter is remanded back to the respondent to pass appropriate order to condone delay of 380 days in filing the return of income by the petitioner.
-
2024 (12) TMI 202
Entitlement to Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act) - Entitlement to the issuance of Form 5 under the DTVSV Act - respondent refused to issue Form No. 5 on the ground that the amount paid by the petitioner was beyond the last day of the Scheme i.e. 30th September, 2021 HELD THAT:- As in the facts of the case, the petitioner has paid the almost entire amount except Rs. 1,533/- within the specified time period on or before 30th September, 2021 and therefore, it cannot be said that permitting the petitioner to the benefit of the Scheme would amount to extending the Scheme or modifying the Scheme which is the prerogative of the Government. In the facts of the case, the petitioner is not permitted to pay the entire amount as per Form 3 beyond the specified date but only amount of Rs. 1,533/- which the petitioner paid late by twelve days is considered, is unintentional and the same was supported by the justifiable reason and therefore, in order to do the substantial justice to the petitioner, the delay of twelve days in payment of Rs. 1,533/- ought to have been condoned by the respondent No. 5 by issuing the Form 5. In the facts of the case, the petitioner has also paid Rs. 2,00,634/- being the difference of the amount payable after 30th September, 2021. The impugned order rejecting the issuance of Form 5 passed by the respondent on 16.03.2023 is hereby quashed and set aside. The respondent is further directed to issue the Form 5 to the petitioner as per the provisions of the DTVSV Act within twelve weeks from the date of receipt of the copy of this order. It is needless to say that the effect of issuance of such Form 5 shall be given by the respondent-Income Tax Department as per the provisions of the DTVSV Act.
-
2024 (12) TMI 201
Validity of reassessment proceedings - reopening based on audit objection - reply filed by the assessee ignored - HELD THAT:- We are of the opinion that the impugned notice as well as the order passed u/s 148 and Section 148A(d) of the Act respectively are not tenable as the AO could not have assumed jurisdiction in view of the audit objection which is contrary to the facts and evidence on record, more particularly when the department itself has accepted and granted depreciation on the goodwill claimed by the assessee for the earlier years. No reassessment proceedings could have been initiated by AO on the basis such audit objection. It is true that as per provision of Section 148 as amended from 1.4.2021 even the audit objection can be considered for reopening the assessment as part of information . However, it does not mean that merely because the audit objection is raised, the AO is bound to issue notice under Section 148 of the Act merely by reiterating what is stated in the audit objection ignoring the facts of the case and contents of the reply filed by the assessee pursuant to the notice issued under section 148A (b) of the Act. Therefore, the impugned order passed u/s 148A(d) of the Act cannot be sustained as it can not be said to be a fit case to reopen the assessment by any stretch of imagination. It is pertinent to note that merely producing of audit objection in the order under Section 148A(d) of the Act ignoring the reply filed by the assessee is nothing but non application of mind on the part of the AO. Assessee appeal allowed.
-
2024 (12) TMI 200
Addition u/s 68 - money received by the assessee as a Gift from her son, who is a NRI - HELD THAT:- AO primarily relied on information sourced from a Google search and local newspaper reports, without conducting any cross-verification or independent inquiry to substantiate the claims. The addition appears to have been made in a baseless manner, solely relying on unverified newspaper reports. Notably, the evidence provided by the assessee was not rebutted or discredited by the AO. The genuineness of the gift has not been questioned, and the donor's financial capacity to provide the gift was sufficiently demonstrated. The donor's bank account showed adequate funds at the time of executing the gift, thereby establishing creditworthiness. AO appears to have undertaken verification through online searches and local media reports about the donor, but even these steps did not provide conclusive evidence to challenge the donor's credibility. The actions of the assessee for investing the gifted amount in an Indian company and subsequently receiving and returning the funds to the donor are unrelated to the issue of addition u/s 68 of the Act. D.R was unable to provide any evidence or bring forth any material to contradict the submissions of the Ld. AR. Decided against revenue.
-
2024 (12) TMI 199
Addition by allocating the expenses of head office against the profits of the MEPZ unit - HELD THAT:- The common expenditure of the head Quarters needs to be allocated on a reasonable and scientific basis to the eligible unit for correctly determining its profit during the year. We also of the considered view that the commission and fees paid to the Directors, the audit and certification fees, claimed as HO expense, was in the nature of the expenses that relate to activities at the strategic, managerial, regulatory and overall oversight level and has a direct nexus with the activities at MPEZ availing deduction under Section 10AA. The Head Office (HO) does not exist for its own sake, but its existence is relevant for all activities undertaken by various undertakings /divisions/profit centers and ought to be reasonably allocated to the eligible undertakings. We also note that allocating the expenses on proportionate basis of turnover is reasonable. We are, therefore, of the considered opinion that the AO is justified in allocating such expenses in the nature of commission to the Directors, Audit fees and bank and loan processing charges to the MEPZ units. We are supported in our view of apportionment of expense by the decision of the hon ble Delhi High Court in the case of EHPT India P ltd [ 2011 (12) TMI 49 - DELHI HIGH COURT] which accepted, in principle, the concept of allocation of expense to the eligible units held that here alternative methods of apportionment of the expenses are recognized and there is no statutory or fixed formula, the endeavour can only be towards approximation without any great precision or exactness. If such is the endeavour, it can hardly be said that there is an attempt to distort the profits - decided against assessee. Income attributed to the MEPZ unit on account of Goods transferred to 'MPEZ' unit - HELD THAT:- As we find that the CIT(A) has not recorded a finding that such goods are transferred at the Fair Market Value. Respectfully following the decision of Wipro Ltd [ 2012 (12) TMI 592 - ITAT BANGALORE] relied upon by the assessee, we remit this issue back to the AO for ascertaining the fair market value of such goods transferred to and from the MEPZ unit to arrive at the profit of the eligible unit. The ground no 3 is decided accordingly. Disallowance on account of prior period expenses - AO observed that the assessee has not been able to substantiate with concrete documentary evidence that the prior period expenses are crystallized in the year under consideration - HELD THAT:- The assessee, before us, has argued that the prior period expenses quantified during the year is allowed in the year of booking. The assessee however, has not controverted the findings of the CIT(A) that assessee did not furnish any detail explanation with respect to misc. expense, repair and maintenance expense and legal and profession fees. As the assessee has not been able to substantiate its claim of such expense being crystalised in the current year, the findings of the CIT(A) is sustained. The ground no 4 is dismissed. Income deemed to accrue or arise in India - Fees for Technical Services [FTS] - TDS u/s 195 - AR argued that the payment made to ESG International, USA is not an income accrued or arise in India as per section 4,5 9(1)(vii)(b) r.w. Article 12 of the India - USA DTAA - HELD THAT:- From the readings of the provisions of section 9(1)(vii)(b), we find that it provides an exception to the taxability of Fees for technical service(FTS) paid by a resident, wherein FTS payable is in respect of services utilized for the purpose of making or earning any income from any source outside India . In the instant case, the assessee made payment made to ESG International USA for the space utilization of warehouse, outside India, for the international operation and for the delivery of material through the warehouse to the overseas customers of the assessee. The ESG International, USA has no business activity in India. We therefore are of the considered opinion that the payment made by the assessee to ESG International, USA is not an income within the ambit of section 9 of the Act. On the issue of application of Article 12 of the Indo-USA DTAA, we find that the condition of managerial services do not find any mention in the Article 12 of the said DTAA. There is a restrictive definition of FTS provided in DTAA and it will, on account of the provision of section 90(2) of the Act, have precedence over the wider definition provided in Explanation 2 of section 9(1)(vii) which includes managerial, technical or consultancy services . We are therefore with the assessee s contention that even if the warehouse charges paid by the assessee are treated as managerial services under the Income Tax Act, the payment received by the ESG International cannot be considered as deemed income that has accrued or arisen in India as DTAA incorporates only the technical or consultancy services and does not prescribes the managerial services as FTS. We also note that the definition of FTS in Article 13(4) of Indo- France is similarly worded as in Article 12 of the Indo-USA DTAA. We therefore are of the considered view that the payment made to ESGI is outside the ambit of fees for technical services as the USA-India DTAA do not provide for managerial services as FTS. We therefore hold that there did not deemed to accrue or arise in India any income for ESGI and hence there is no requirement of tax deduction u/s 195 of the Act on such payment. We also find force in the assessee argument that the Make Available conditions, as per USA-DTAA, are not fulfilled for treating the payment made for warehouse charges as fees for technical services. We find that the assessee is paying the warehousing charges on yearly basis to ESG International which indicates no technology has been transferred and hence the 'make available conditions are not complied with. Therefore, the decision of Bio-Rad Lab (Singapore) Pte Ltd [ 2023 (10) TMI 1039 - DELHI HIGH COURT] squarely applies that the continued provisioning and rendering of services over a substantial period of time would clearly detract from an assumption that technical or consultancy services had been made available . - Decided in favour of assessee. Disallowance of Foreign Travelling Expenditure - CIT(A) held that as the expense related to prior period, sustained the addition - HELD THAT:- Having heard the rival submissions, we find in the factual matrix of the instant case, there is no reason to interfere with the order of the CIT(A). Ground is therefore dismissed. Disallowance of Foreign Travelling Expenditure of director - HELD THAT:- CIT(A) has admitted that the said expense has been incurred for subsidiary company and the joint venture. We find that the ld DR has not controverted the claim that the directors of the assessee undertook foreign travel for the selling the products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.BuildeRs [ 2006 (12) TMI 82 - SUPREME COURT] we direct the AO to delete this addition of foreign travel of the directors. Disallowance towards irrecoverable taxes - HELD THAT:- We note that the assessee has paid the excise duty on the raw materials for the goods manufactured at the time of manufacturing. When the goods are returned, the assessee does not get back the excise duty paid on the raw materials. Such a payment on account of excise duty has to be allowed as a deduction u/s 37(1) as the same is incurred for the business purpose. This proposition was allowed in the case of Samtel India [ 2013 (10) TMI 18 - DELHI HIGH COURT] AO s method of adding back the non-reversed excise duty to WIP once the sales return takes place, is not correct as when the goods are received back on return, excise duties are not reversed by the Excise Department. Following the decision of Samtel India [ 2013 (10) TMI 18 - DELHI HIGH COURT] we therefore direct the AO to delete the addition on account of irrecoverable taxes. Addition of travelling expenses - HELD THAT:- We are of the considered view that where the expense incurred is not under doubt and the same is incurred for the business purposes, the same is required to be allowed. We accordingly direct the AO to delete the ad hoc addition on account of travelling expenditure. Disallowance on account of Gift and presents - as per AO gift and personal expenses have no relation to business activity - HELD THAT:- We find considerable force in the assessee argument. We are of the considered view that where the expense incurred is not under doubt and the same is incurred for the business purposes, the same is required to be allowed. We accordingly direct the AO to delete the addition on account of Gift and presents. Allowability of garden expenses - HELD THAT:- We are of the considered view that where the expense incurred is not under doubt and the same is incurred for the business purposes, the same is required to be allowed. We accordingly direct the AO to delete the addition on account of Garden expense. Penalty imposed u/s 271(1)(c) - addition on account of payment made to ESGI as FTS - HELD THAT:- As addition has been deleted by us in AY 2012-13 hereinabove. Considering the facts of the case, we take recourse in the legal dictum of sublatofundamento, cadit opus , meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation [assessment] has been removed, the super structure i.e. penalty must fall. Once the basis of a proceeding is gone, all consequential acts, actions, and orders would fall to the ground automatically. We, therefore hold that the decision of the CIT(A), confirming the penalty on account of payment made to ESGI as FTS is unsustainable and direct the Assessing Officer to delete the penalty u/s 271(1)(c).
-
2024 (12) TMI 198
Penalty levied u/s 271B - non furnish of audit report as required u/s 44AB - Consideration of reasonable cause - HELD THAT:- Reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow. Taking into cumulative effect of the explanations offered by the assessee and from a reading of the relevant provisions of Section 271B read with Section 44AB of the Act, we are of the considered opinion that assessee demonstrated that there was a reasonable cause for the said failure as per the provisions contained in section 273B of the Act. From the conduct, behavior and attitude of the assessee, it is clear that as soon as the accountant joined in September, 2018, after a higher remuneration was offered to him, the audit report and the return of income were immediately filed manually. Before us, the accountant submitted an affidavit by way of additional evidence stating that he was responsible for maintaining and finalizing accounts of the firm and during September, 2017, he decided to leave his job due to the dis-satisfaction with the salary being offered and consequently he chooses to resign from his position. Further he stated that at the time of resignation, the accounts of the firm had not been finalized during the year ending 31.3.2017. Further, he confirmed to have rejoined again in September, 2018 after the request of the Managing Partner offering a revised and reasonable salary. Upon rejoining the firm, he completed the finalization of accounts and these accounts were subsequently audited by the CA in compliance with the relevant statutory requirement. The Managing Partner has also filed an affidavit stating that firm was required to get its accounts audited u/s 44AB of the Act and to file the audit report within the extended due date as on 7th November, 2017. The accountant who was responsible for maintaining accounts of the firm abruptly left his employment without finalizing the accounts. This unexpected departure left the firm without a qualified person to manage the accounts and he being unfamiliar with the accounting software and procedure, faced significant difficulties in finding a replacement promptly. There is nothing contrary that has been brought on record by the Ld. DR at the time of the hearing. Further, the assessee has only committed a technical breach without any loss to the exchequer of the Government as there was no addition made by the Ld.AO during the assessment proceeding. CIT(A)/NFAC s non-consideration of the plea raised by the assessee about the existence of reasonable cause vitiate the order. Appeal filed by the assessee is allowed.
-
2024 (12) TMI 197
Validity of the reassessment proceedings initiated u/s 147 - notice issued by the AO based on an internal audit objection - HELD THAT:- We are of the considered view that whether the material satisfies the criteria of information as per the provisions of Explanation 1 to section 148 of the Act has to be analysed on the date of issuance of show cause notice under section 148A(b) of the Act, since such information remains constant till the culmination of the entire proceedings resulting in issuance of notice under section 148 of the Act and ultimately passing of the assessment order under section 147 of the Act. Therefore, if a material does not satisfy the criteria of information as provided in Explanation 1 to section 148 on the date of issuance of show cause notice under section 148A(b) of the Act, we are of the considered view that no notice under section 148 of the Act can be issued since the twin conditions, as noted in the foregoing paragraph, in the first proviso to section 148 of the Act are not satisfied. Therefore, in the instant case, since the only information available with the Revenue for initiating the re-assessment proceedings was the internal audit memo dated 06.02.2018, we are of the considered view that on the date of issuance of show cause notice under section 148A(b) of the Act, which in the present case is 29.06.2021, the same does not fall within the scope and ambit of the term information as provided in Explanation 1 to Section 148 of the Act. We find that the Hon ble Jurisdictional High Court while considering the similar objection against the initiation of re-assessment proceedings in Hashmukh Estates Pvt. Ltd. [ 2023 (11) TMI 508 - BOMBAY HIGH COURT] held that the re-assessment notice issued by the AO based on an internal audit objection would not be permissible in law. we find no merits in the submission of the Revenue that the amended provisions of Explanation 1 to section 148 of the Act, w.e.f. 01.04.2022 are applicable in the present case. Since the internal audit memo has been found to be outside the scope and ambit of the term information as provided in Explanation 1 to section 148 of the Act, prior to its amendment by the Finance Act, 2022, we are of the considered view that the learned CIT(A) has rightly quashed the re-assessment proceedings. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A) on this aspect of the invocation of jurisdiction under section 147 of the Act. Accordingly, we are of the considered view that the notice issued u/s 148 of the Act is void ab initio and bad in law - Assessee appeal allowed.
-
2024 (12) TMI 196
Disallowance u/s 14A r.w.r. 8D - investments made by the assessee in its subsidiaries, joint venture investments, investments in associates, other equity shares and mutual funds - HELD THAT:- Considering the observation of coordinate bench of this Tribunal for the proceedings years in assessee s own case, as well as the observations of Hon'ble High Court in assessee s own case [ 2019 (6) TMI 440 - BOMBAY HIGH COURT] , we do not find any reason to uphold the disallowance computed by the Ld.AO. We also note that in the present facts the total expenditure claimed by the assessee was Rs. 11,18,85,962/-, out of which the assessee suo-moto disallowed Rs. 10,70,71,997/- that includes Rs. 4,53,034/- as disallowance u/s. 14A r.w.r.8D of the Act. We note that the disallowance in any manner cannot exceed the total expenditure claimed by the assessee. There is nothing contrary brought on record by revenue regarding the total expenditure, to deviate with the observations and the view taken by coordinate bench of this Tribunal as well as Hon'ble High Court in assessee s own case.
-
2024 (12) TMI 195
TP Adjustment - intra-group services - To substantiate the markup of 5% charged by the AE, the assessee had undertaken the benchmarking analysis which validated the arm s length nature of the mark-up on the costs for intra-group services (IGS) - AEs (Foreign parties) were considered as tested parties for primary analysis to demonstrate that the margins earned by them compared as to independent companies were comparable - Further a secondary analysis is conducted using combined TNMM approach - HELD THAT:- We are of the considered view that it is for the assessee to determine as to whose services it desires to avail. Business decisions are at times good and profitable and at times bad and unprofitable. Business decisions, in fact do result in loss/es. Therefore, whether the decision was commercially sound or not is not relevant. The only question is whether the transaction which was entered into, was bonafide or not or whether it was a sham transaction only for the purpose of diverting profits. For this proposition, we draw support from the decision of Knorr- Bremse India Pvt. Ltd. [ 2016 (5) TMI 145 - PUNJAB AND HARYANA HIGH COURT ] Similarly, in the case of Cushman and Wakefield (India) (P.) Ltd. [ 2014 (5) TMI 897 - DELHI HIGH COURT ] has held that the AO/TPO cannot question the quantum of fee but can check if services were actually rendered and if they are genuine and real. Thus, we direct the AO/TPO to delete the impugned TP adjustment.
-
2024 (12) TMI 194
Additions u/s 14A in relation to exempt income - suo moto disallowancetowards expenditure incurred in relation to exempt income earned by way of dividend on investments made in subsidiary companies, associate companies and mutual funds - HELD THAT:- The indication of prima facie presence of satisfaction can be deemed to be substantial compliance of the provisions without there being any explicit assertion about the same. As noted, the affirmative steps by way of SCN on the issue in the first instance tantamount to subsistence of 'satisfaction' in the instant case. Be that as it may, the Assessing Officer in the instant case has also duly recorded the satisfaction in writing as contemplated under section 14A of the Act. The requirement of section thus stands addressed in the present case as the satisfaction is duly discernible in the action of the AO. We are of the opinion that requisite satisfaction was expressed in unequivocal terms and was otherwise also subsisting for invoking section 14A and Rule 8D. Consequently, we hold that the objection of the assessee on this score is unfounded. Thus, we are of the considered opinion that the CIT(A) has rightly upheld the action of the AO with some modification towards exclusion of investments not yielding exempt income which is in accord with law. Hence, we decline to interfere with the order of the CIT(A) restricting the disallowance either to the extent of the exempt income claimed or computation of disallowance under Rule 8D with reference to investments yielding exempt income. The relief sought by the assessee for accepting the suo moto disallowance made by the assessee is thus not sustainable in law. Short credit of TDS granted by the AO - AO is directed to look into the grievance of the assessee and implement the directions provided in first appellate order on the issue in letter spirit. The AO shall grant relief expeditiously towards TDS credits in accordance with law. Short credit of Dividend Distribution Tax (DDT) - In view of the fact that the credit as per the DDT Challan appears in A.Y. 2016- 17, the AO has declined to accept the credit in relation to A.Y. 2015-16. The matter requires to be looked into administratively by the Competent Authority of the Income tax Department. It is not within the domain of the ITAT to examine such aspects. We are thus not in a position to give any direction in this regard. The issue requires to be resolved between the assessee and the Revenue in accordance with law. We thus decline to interfere with the order of the CIT(A) in the matter. Ground pertaining to Short credit of DDT is thus dismissed. Denial of credit of tax relief claimed by the assessee u/s 90/91 - It is the case of the assessee that the claim was duly substantiated by TDS certificates relating to foreign tax credit. The CIT(A) has referred the issue back to the file of the AO. However, the Assessing Officer has not disposed of the application seeking relief despite the directions by the CIT(A). The assessee seeks suitable relief. We direct the AO to expediently consider the case made out by the assessee seeking tax credit and pass suitable order in accordance with law. Nature of expenses - allowability of ESOP of compensation as Revenue expenditure - It is observed that the CIT(A) has followed the decision of the Co-ordinate Bench wherein the additions on account of ESOP compensation was deleted in assessee s own case in A.Y. 2007-08 to 2013-14. We thus see no reason to take a different view in the matter. The grievance of the Revenue thus does not hold any water.
-
2024 (12) TMI 193
Legality of the final assessment order passed by AO u/s 147 r.w.s. 144C(13) as barred by limitation - HELD THAT:- Except in a cases of reference to the TPO, extended time limit of 12 months for completion of assessment is not available even in a case of Non-Resident assessment, even though the said assessment proceedings is covered u/s 144C of the Act. Since the extended time limit of 12 months is not available in the case of Non-Resident as per section 153(4) of the Act, in our considered view, the Assessing Officer ought to have completed the assessment as per the provisions of section 153(2) of the Act which is one year from the end of the financial year in which notice u/s 148 was served. In the present case, if we go by date of notice issued u/s 148 of the Act i.e. 29.03.2021 and probable service in the month of April, 2021, the time limit for completing the assessment u/s 147 was available up to 31.03.2023 and thus, the final assessment order passed by the Assessing Officer u/s 147 r.w.s. 144C(13) dated 08.01.2024 is clearly barred by limitation. In this view of the matter and considering the facts and circumstances of the case, and also by following the decision of Syed Gulam Mohiuddin [ 2024 (6) TMI 269 - ITAT HYDERABAD] we are of the considered view that the final assessment order passed by the AO under Section 147 read with Section 144C(13) dated 08.01.2024 is barred by limitation and is liable to be quashed and thus, we quash the re-assessment order passed by the Assessing Officer u/s 147 r.w.s. 144C(13) of the Act dt.08.01.2024 for the A.Y. 2016-17.
-
2024 (12) TMI 192
Penalty u/s 271(1)(c) - defect in the notice issued for imposition of penalty - HELD THAT:- In view of the decision of case of Thakur Prasad Sao Sons (P.) Ltd [ 2024 (5) TMI 787 - CALCUTTA HIGH COURT] the appeal was not allowable merely on the basis of the defect in the notice issued for imposition of penalty. The addition on account of share capital made was confirmed by the Tribunal. It is observed that the Ld. CIT(A) issued as many as 8 notices to the assessee and as there was no compliance, the penalty imposed was confirmed. The notices were sent by email but there was no representation before the Ld. CIT(A). Assessee requested that the matter may be set aside so that proper submission could be made before the CIT(A). Thus, in order to be fair to both the assessee as well as the Revenue, we consider it necessary in the interest of justice that the order of the CIT(A) is set aside to be done de novo after affording an opportunity of being heard to the assessee and the assessee shall be free to raise all contentions before the Ld. CIT(A) as neither the issue of defect in the notice was raised before the CIT(A) nor any finding has been given in this regard. Hence, grounds of appeal are allowed for statistical purposes.
-
2024 (12) TMI 191
LTCG - Disallowance u/s 54 - transaction of GPA - AO denied the deduction by observing that the assessee is not entitled to claim deduction for having more than one residential property - CIT(A) confirmed the said disallowance by observing that son of the assessee is a Co-Parcener. HELD THAT:- The Hon ble Supreme Court in the case of Suraj Lamp Industries Pvt. Ltd. [ 2011 (10) TMI 8 - SUPREME COURT] clearly held that the transaction of GPA does not convey any title nor create any interest in an immovable property and that the transfer under GPA as concluded transfer is not good in law. By taking same principle to the present case in hand, as discussed above, the son of the assessee as Co-Parcener got GPA to deal with the property as per the terms and conditions therein with 3 persons and clause 15 of the said GPA clearly shows that no consideration or possession of the property given to the said Co- Parcener, who is son of the assessee HUF. Therefore, when there is no payment of consideration nor possession was given, it is not a transfer under law. Therefore, the finding of the ld. CIT(A) in confirming the view of the Assessing Officer as concluded transfer is not justified. We note that the Co-Parcener is son of assessee HUF representing 3 owners sold the property to the assessee HUF, having authority only to represent, but, nothing else. In true sense, it can be safely concluded that the said 3 persons having received sale consideration and given possession of the property to the assessee HUF is a valid transaction to hold the assessee HUF acquired right on the property from the above said 3 persons, but not from Co-Parcener i.e., son of assessee HUF by a registered deed of conveyance as held by the Hon ble Supreme Court in the case of Suraj Lamp Industries Pvt. Ltd. (supra). As decided in Amit Chand Mitra Anr. [ 2023 (9) TMI 1601 - SUPREME COURT] that no title could be transferred with respect to an immovable property on the basis of even registered POA nor any title would confer on the GPA over the property even in respect of having valid GPA. Therefore, we are of the opinion that the findings of the ld. CIT(A) is not justified to hold that the assessee HUF is not entitled to the benefit of deduction u/s 54 of the Act as it was a transaction of selling of property between assessee HUF to assessee HUF. Thus assessee is entitled to allowance of deduction under section 54 - Decided in favour of assessee.
-
2024 (12) TMI 190
Condonation of delay - delay of 400 days in filing of these appeals - Levy of fees u/s 234E - as argued assessee has not received any order/intimation u/s 200A - HELD THAT:- As the appellant-assessee was already in receipt of intimation about levy of fees u/s 234E on/before 12.07.2017 when rectification letter was furnished by him. Hence we do not find any substance in the contention of the assessee that he was unaware with the demand and intimation u/s 200A was not received by him. In addition to above fact, we also find that an identical issue has been decided by the Tribunal in the case of sister concern of the assessee firm i.e. Kedar Infrastructure vs. ITO [ 2023 (4) TMI 1379 - ITAT PUNE] wherein, the Tribunal dismissed the appeal of the assessee and even the Miscellaneous Application against the above order filed by the assessee was also dismissed in March, 2024. Thus in the light of the fact that in the year 2017 itself the assessee was already in receipt of information that such an order imposing fees u/s 234E has been passed, we do not find any infirmity in the order passed by Ld. CIT(A)/NFAC dismissing the appeal of the assessee.
-
2024 (12) TMI 189
Weighted deduction u/s 35(1)(ii) - donation made to the School of Human Genetics and Population Health (SHGPH) - as per AO SHG PH was indulge in providing bogus donation entries u/s 35 of the Act through various brokers in lieu of the commission - CIT(A) in its order has dismissed the appeal of the assessee in view of the notification that Section 35(i)(iii) of the Act shall not come to rescue the appellant as it relates only to approvals which have been withdrawn subsequent to the payments made to the institutions to which Clause 'ii' or Clause 'iii' applies. HELD THAT:- By submitting all the documentary evidences during assessment, the assessee had shown that it had examined the credentials of M/s SHGPG. The assessee also explained about its objective for association with the Institute. The assessee had gone through the annual report provided by the Institute and relied on the information regarding the projects undertaken by the Institution. The assessee had examined the status of the board members of SHGPG. Assessee had taken information about the on-going projects of SHGPG. Thus, the assessee had all along acted as a man of ordinary prudence, examined the documents as are generally asked for, gathered facts from the Institution's website and thus completed its due-diligence about the Institution. The payment was not made by the assessee to an unknown person but to an organization approved by the Central Government which was valid till the date of payment. The payment was made through banking channels i.e. through RTGS so that the donee only gets the fund for carrying out its declared objectives. All the payments were duly covered by the money receipts of the donor. The claim was duly made in the return. Even during assessment, in respect of the AO's specific query about the investigation carried on by the DDIT(Inv), Kolkata and the statement of the Institute's director treasurers before the investigation agencies about receipt fund for commission through bogus donation, the assessee explained that the company was not aware of any incident and the donation was given under bona fide belief. In the same context, the assessee requested the AO to supply the adverse material which however was not provided.' As decided in case of Calcutta High Court [ 2023 (8) TMI 1576 - CALCUTTA HIGH COURT] if the donation to the approved society is genuine, in that case withdrawal with retrospective effect does not affect the right of the assessee for deduction of the amount which has accrued to the assessee on the basis of the payment to an approved society under Section 35CCA In the present case also the approval of the assessee was subsequently withdrawn. Donation to the approved society is genuine. The present case is entirely covered with the said decision of the Hon'ble Calcutta High Court. Accordingly, appeal of the assessee is hereby allowed and the Ld. AO is directed to delete the amount. Appeal filed by the assessee is allowed.
-
2024 (12) TMI 188
Denial of Exemption u/s. 11 - assessee had not filed his audit report in 10B along with the return - assessee contended that the disallowance made by the AO is not correct when the assessee is having a valid registration u/s. 12A of the Act, therefore eligible for exemption u/s. 11 - HELD THAT:- We have gone through the audit report filed by the assessee in the paper book in which it was mentioned that the said report was prepared on 15/06/2017 well before the filing of the return of income and passing of the assessment order. We have also seen that the assessing officer had not made any further additions to the books of accounts but only disallowed the claim of exemption. We have also noted that the assessee is also a registered trust u/s. 12AA of the Act and the said fact was not disputed by any of the authorities. The authorities also accepted that in respect of the other years, the assessee was allowed the exemption u/s. 11 of the Act treating the assessee as a charitable institution. In such circumstances, the denial of exemption for the non-filing of 10B will not entitle the assessee for denying the exemption. We have also perused the judgments as well as the orders of the Tribunal in which it was held that exemption cannot be denied merely because of the belated filing of audit report in form 10B. Similar issue was decided in many number of orders by this Tribunal in which the Tribunal had held that the technical ground will not be a reason for denying the exemption u/s. 11 of the Act when the assessee is a registered charitable trust under the provisions of the Act. When the registration is still in existence and also in view of the fact that the assessee was granted the exemptions for the earlier years that is for 2014-15, 2015-16 and 2016-17, the denial of exemption in respect of the A.Y. 2017-18 that too on technical grounds is not correct. Further, the assessee had also uploaded the audit report and also filed the acknowledgement received by the department. As relying on Rai Bahadur Bissesswarlal Motilal Malwasie Trust [ 1991 (4) TMI 56 - CALCUTTA HIGH COURT] assessee was all along treated as a charitable institution and granted exemption u/s. 11 of the Act and no violation has been pointed out by the authorities, in such circumstances, mere delay in filing the audit report would not be a reason for the denial of exemption claimed u/s. 11. Appeal filed by the assessee is allowed.
-
2024 (12) TMI 187
Addition on account of provision for doubtful debts claimed as deduction - HELD THAT:- Coordinate Bench of ITAT [ 2018 (7) TMI 2355 - ITAT MUMBAI] ,Hon ble jurisdictional High Court of Mumbai [ 2013 (4) TMI 211 - BOMBAY HIGH COURT] have granted relief by following the decision of Hon ble Supreme Court in the case of Vijaya Bank Vs. CIT [ 2010 (4) TMI 46 - SUPREME COURT] wherein it was held that once the provision of doubtful debt has been debited to the profit and loss account and corresponding provision has been credited or reduced from the debtors account in the balance sheet, then, this would amount to written off . In the present case it is an undisputed fact that the assessee has debited the provision of doubtful debt from the P L account, balance sheet and written off income, which amount to written off of the debt. Therefore, respectfully following the decisions mentioned above and also considering the facts of the case, we hold that the assessee is eligible for deduction on account of provision for doubtful debt in the given facts and circumstances. Therefore, while concurring with the stand of Ld. AR, we direct the Ld.AO to delete the impugned additions. Decided in favour of assessee.
-
2024 (12) TMI 186
Validity of the assessment order in absence of proper approval u/s 153D - as alleged approval granted u/s 153D by the Joint Commissioner of Income Tax (JCIT) being without proper application of mind - HELD THAT:- We find that in the case of PCIT vs. Shiv Kumar Nayyar [ 2024 (6) TMI 29 - DELHI HIGH COURT] has held that where approval under section 153D for relevant assessment year was granted by Addl. Commissioner for 43 cases on a single day without perusing draft assessment order at all and without an independent application of mind, impugned assessment order was rightly declared to be illegal by Tribunal. We find in the case of PCIT vs. Sapna Gupta [ 2022 (12) TMI 887 - ALLAHABAD HIGH COURT] has held that where Approving Authority approved draft assessment order in 85 cases including that of assessee in one day in a mechanical manner without applying independent mind to appraise material before it, Tribunal rightly concluded that approval so granted under section 153D vitiated entire proceedings. Since the JCIT in the instant case has given his approval in a mechanical manner without due application of mind and nowhere has mentioned that he has gone through the draft assessment orders while giving the approval, therefore, respectfully following the decisions cited above, we hold that the approval given by the JCIT u/s 153D is not in accordance with law. Accordingly, the order passed by the Assessing Officer is liable to be quashed. We accordingly quash the assessment order for want of due approval u/s 153D as per law. The additional grounds raised by the assessee are accordingly allowed. Since the assessee succeeds on the additional grounds, the grounds challenging the addition on merit become academic in nature and therefore, are not being adjudicated. The appeal filed by the assessee is accordingly allowed.
-
2024 (12) TMI 185
CIT(Appeals) declined to condone the delay of 30 days involved in filing of the appeal before him by the assessee firm - HELD THAT:- CIT(Appeals) ought to have condoned the delay of 30 days, which was not only backed by justifiable reasons, but also by no means can be dubbed as inordinate. Accordingly, in terms of my aforesaid observations, we restore the matter to the file of the ADDL/JCIT(A)-2, Jaipur with a direction to condone the delay of 30 days and dispose of the appeal qua the issues raised before him on merits. ADDL/JCIT(A) shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee firm which shall remain at a liberty to substantiate its claim on the basis of fresh documentary evidence, if any. As we have restored the matter to the file of the ADDL/JCIT(A) for fresh adjudication, therefore, refrain from adverting to the merits of the case which, thus, are left open. Appeal filed by the assessee firm is allowed for statistical purposes.
-
2024 (12) TMI 184
Lack of jurisdiction u/s 153C - as argued satisfaction note prepared apparently suffers from the vice of being vague, non-descript and unintelligible - HELD THAT:- Mere drawing of a perfunctory satisfaction without meeting basic ingredients of providing some tangible descript information and application of mind thereon has no standing in law and would not confer drastic jurisdiction of assessment u/s 153C of the Act on a person other than searched person. The jurisdiction assumed based on such lackadaisical satisfaction note beset with vital infirmities cannot be countenanced in law. The objection raised on behalf of the assessee towards lack of jurisdiction based on cryptic and non-descript satisfaction thus deserves to be sustained. While recording a consolidated satisfaction note is not a bar in law per se as rightly contended on behalf of the revenue, but however, in the same vain, the documents/assets searched need to be specified against each year covered in the satisfaction note to depict application of mind and initiation of action u/s 153C of the Act qua such assessment years. The AO has failed to do so. As a corollary, the notice issued under section 153C of the Act and consequent assessment order passed under section 153C of the Act is vitiated in law and requires to be quashed. Difference between the sale consideration mentioned in Agreement to Sale and Sale Deed is undisclosed part of the transaction - Noticeably, the Department referred said property to the DVO for determination of FMV under section 142A of the Act. The DVO issued a Valuation Report as per which the total value of the property is INR 1,68,59,788/- approximately wherein the cost of land was valued at INR 94,71,341/- and the cost of building was valued at INR 73,88,447/-. The assessee contends that the valuation report derived by the DVO after inquiry is quite close to the sale consideration declared by the assessee. The staggering difference as per the Agreement to Sale and Sale Deed is thus unconceivable and totally contrary to the estimated market value of the property. The Report of the DVO thus assumes significance for the cause of the assessee and cannot be brushed aside while weighing the factual position and giving over-riding importance to a photocopy of unsigned Agreement to Sale found from the premises of searched person. Besides, the assessee has also placed an affidavit from the purchase, Shri Pranjil Batra wherein it is affirmed that the sale consideration noted in the Sale Deed is sacrosanct. In the light of the Sale Deed, the DVO report and in the absence of any inquiry by the Revenue on facts to support the amount mentioned in the photocopy of the Agreement to sale, the sale consideration declared by the assessee cannot be discredited out rightly and substituted by whopping amount unconnected to the grounds realities. We thus, find force in the plea raised on merits also. Assessee appeal allowed.
-
2024 (12) TMI 183
Addition of interest accrued and receivable by the assessee and credit for TDS - Revenue is aggrieved by the deletion of addition which has been deleted by applying real income theory - HELD THAT:- Facts being undisputed in this respect and uncontroverted by the ld. Sr. DR, we do not find any reason to interfere with the said observations and findings arrived at by CIT(A). In respect of TDS of Rs.36 lakhs done by Dharti and deposited in the government exchequer which is duly reflected in Form 26AS of the assessee in the year under consideration, needs a consideration since it forms part and parcel of amount of interest receivable of Rs.3.60 Crores. In our understanding, in the given set of facts and circumstances, when the principal amount of income which has been subjected to deduction of tax at source bears an element of uncertainty and irrecoverability then in such a situation, the tax so deducted at sources and deposited by the deductor which appears in Form 26AS of the deductee, provisions of section 198 gets attracted. Accordingly, in the present set of facts, TDS done by Dharti and deposited duly reflected in Form 26AS of the assessee for the year under consideration, is deemed to be income received by the assessee under the said section. This section deals with treating the TDS as income whenever an amount deducted becomes incapable of being adjusted or counted towards tax payable. As relying on case of Y. Rathiesh [ 2014 (9) TMI 2 - ANDHRA PRADESH HIGH COURT ] in the present case, the amount of TDS reflected in Form 26AS of the assessee for the year under consideration in respect of TDS done by Dharti is to be treated as an item of income under the head income from other sources and provisions of section 198 be applied accordingly. It is important to note that once TDS is deducted, assessee cannot be permitted to use the certificate to cover other amounts while refusing to show the amount of interest in his return by resorting to difference in method of accounting system. The effect of the assessment made by the ld. AO is only that the assessee ought to desist from having the best of both the systems and discarding the one which is disadvantageous to him. If the assessee intends to take the TDS as component of tax paid by him, the corresponding income to the TDS must Form part of the return and the assessment. Thus we direct the AO to recompute the assessed total income in terms of our above observations and findings. Accordingly, grounds taken by the Revenue is partly allowed.
-
2024 (12) TMI 182
Deduction u/s 80G - CSR expenditure - solitary reason for denying the benefit of deduction u/s 80G was that it was not a voluntary contribution but CSR expenses are statutory obligation under the Companies Law - HELD THAT:- On perusal of the same which is placed on record, we find that the total donations made. The party wise details and the approval granted to each of the donees are also placed on record and same is evident from the certificate issued from the donees. The details of the donations given by the assessee to the various entities, their PAN, date of donation and the approval granted to the donees is annexed to this order as Annexure A. We find donation receipts were verified by the tax auditor and its eligibility has been certified in Form 3CD. Without any allegation of lower authorities on other conditions of section 80G not being satisfied, it can safely be concluded that lower authorities accepted that the other conditions have been fulfilled by the assessee. Therefore, on perusal of the material on record, we direct the AO to grant deduction claimed u/s 80G. Appeal filed by the assessee is allowed.
-
2024 (12) TMI 181
Addition in applying provision of Section 56(2)(viib) in retrospective manner - Addition on protective basis without framing any substantive assessment to this clinching effect in the alleged other person/husband s hands - AO invoked the impugned statutory provision thereby treating the said differential sum as assessee s income from other sources which has been confirmed in the lower appellate discussion - HELD THAT:- Both the learned lower authorities have made the impugned addition on protective basis without framing any substantive assessment to this clinching effect in the alleged other person/husband s hands. The question as to whether such a course of action making protective addition on ex ascendant cautela basis, in absence of a substantive addition, came up for consideration before this tribunal s learned co-ordinate bench in Suresh K. Jajoo vs. ACIT [ 2010 (3) TMI 874 - ITAT MUMBAI] . Thus, we conclude that the impugned protective addition made on standalone basis in absence of a substantive assessment, is not sustainable in law. The same is directed to be deleted in very terms.
-
Customs
-
2024 (12) TMI 180
Provisional release of goods - HELD THAT:- List these special leave petitions on 28.11.2024. In the meanwhile, pending disposal of the Special Leave Petitions, it is directed that the goods shall be provisionally released subject to the terms and conditions as imposed by the Single Judge.
-
2024 (12) TMI 179
Seeking direction for release/return/re-export the gold to the Petitioner - Baggage Rules - Petitioner did not provide any documents regarding the possession of the gold chain and kara - seizure u/s 110 of the Customs Act, 1962 on the reasonable belief that the same were imported to India illegally and were attempted to be cleared without payment of customs duty - HELD THAT:- Import of gold in India is highly regulated and bulk importation of gold can only be effected by the nominated banks, agencies or business houses in the manner laid down by various DGFT Regulations as well as by RBI Circulars or by the eligible passengers in the manner provided by the relevant regulations. As per Section 7 of Foreign Trade (Development and Regulation) Act, 1992, no person is allowed to import gold into the country except under an Import-Export Code Number. However, Rule 3 (1) (h) of the Foreign Trade (exemption from application of rules in certain cases) Rules, 1993 provides exemption to the import of any goods by the person as passenger baggage to the extent permissible under the Baggage Rules. In the present case also, petitioner is a foreign national, who brought a chain and a kara by wearing them on his body while arriving from Bangkok. The same was not brought in a concealed manner. It is found that the present case stands squarely covered by the judgments of Pushpa Lekhumal Tulani [ 2017 (8) TMI 684 - SUPREME COURT ] and Vigneswaran Sethuraman vs. Union of India [ 2014 (12) TMI 268 - KERALA HIGH COURT ]. Thus, it becomes apparent that the Original Authority and Revisional Authority has clearly misconstrued the scheme as well as objectives of the Baggage Rules. Since the case of the petitioner has not been evaluated on the basis of the principles, the order impugned cannot be sustained. The order dated 13.08.2018, passed in revision, is hereby quashed and set aside - Petition allowed.
-
2024 (12) TMI 178
Levy of penalties under Sections 112(a) and 114AA of the Customs Act, 1962 - Smuggling of memory cards by concealing them in the import cargo - adjudicating authority has not considered the request for cross-examination - violation of principles of natural justice - HELD THAT:- The Ld. Adjudicating authority not considered the request of appellants for cross-examination of witnesses. It is found that persons are not examined in the adjudication proceedings and as such their statements are not admissible, as evidence under the provisions of Section 138B of Customs Act, which provides that if an authority in any proceedings under the Act wants to rely upon the statement of any person (made during enquiry), such person is required to be examined as witness and if the adjudicating authority finds the evidence of the witness admissible , then such witness should be offered for cross-examination and only thereafter the evidence is admissible. In absence of compliance with the provision of Section 138B of the Act, the statements are not admissible as evidence and accordingly, the case of revenue against the appellants does not stand. Tribunal in case of M/S. S.N. AGROTECH, SHRI NIKHIL ASRANI, SHRI ASEEM ASRANI, M/S. SURESH KUMAR CO. (IMPEX) PVT. LTD. VERSUS C.C., NEW DELHI [ 2018 (4) TMI 856 - CESTAT NEW DELHI] , has held that Section 138C of the Act ibid is pari materia to Section 65B of Evidence Act, 1872 and therefore evidence in form of computer printouts etc. can be admitted only subject to satisfaction of conditions precedent under Section 138C of the Act ibid and in absence of certificate, these electronic documents cannot be relied upon by the Department to prove role of the appellants. In this case there is no such certificate. It is found that for imposition of penalty under Section 112(a), a positive act or omission is to be established. For imposition of penalty mala fide act/omission is one of the requirements. In the present matter it is found that no mala fide has been brought on record on the part of appellant so as to impose penalties on the appellants under Section 112(a) and Section 114AA of the Customs Act, 1962. The impugned order upholding imposition of penalties on the appellants are set aside - Appeal allowed.
-
2024 (12) TMI 177
Absolute Confiscation - levy of penalties under Section 112(a) and 114AA of CA, 1962 - misdeclaration and alleged infringement of Intellectual Property Rights (IPR) - Valuation of counterfeit goods. HELD THAT:- From the Intellectual Property Rights Rules, 2007, it is mandatory on the part of the right holder i.e. brand name owners to follow the procedure as prescribed in the above Rules and only thereafter the goods can be held as prohibited goods. However, as per Rule 7 (3) of the Rules, it is provided that if the right holder or his authorised representative does not join the proceedings within a period of ten working days from the date of suspension of clearance leading to a decision on the merits of the case, the goods shall be released provided that all the other conditions of import of such goods under the Customs Act, 1962 have been complied with. In the present case, admittedly none of the condition of above Rules was followed such as giving notice, execution of bond etc. Thus, the right holder has not participated in the proceeding as prescribed in the Rules. In absence of compliance of the above Rules, the goods cannot be held prohibited goods and consequently the same cannot be absolutely confiscated. Therefore, since the right holder have not effectively participated in the proceeding inasmuch as not followed any procedure laid down in the above Rules, the goods cannot be held liable for absolute confiscation being not prohibited goods. As regards the enhancement of valuation of the goods, it is found that Revenue has adopted the price of the similar brand available on E.Commerce site which means the price of the original branded goods and not the price of counterfeit goods were taken and the deducting method was adopted - In the present case, the department s case is that the goods are counterfeit which is not disputed by either side, therefore the price of the original branded goods cannot be comparable to value the counterfeit goods. Therefore, the entire basis of the Revenue to take the price of the original branded goods from the E.Commerce site is absolutely illegal and arbitrarily and not sustainable. Therefore, on this ground the valuation adopted by the Revenue is incorrect and the same cannot be accepted. Since it is not established that the goods are prohibited for the reason that Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 are admittedly not followed, the absolute confiscation of the goods was not warranted. However, the appellant are not interested to get the goods released. Since the goods are not liable for absolute confiscation and enhancement of value by the department was not acceptable, the entire penalties imposed against all the appellants are not sustainable and the penalties are set-aside. Appeal allowed.
-
2024 (12) TMI 176
Maintainability of appeal in terms of proviso to Section 129A of CA - HELD THAT:- As per Section 129A(1) proviso of Customs Act, 1962, the Tribunal has no jurisdiction to decide this appeal, therefore appeal is liable to be returned to appellant for filing before the appropriate authority. The appeal is disposed off accordingly.
-
2024 (12) TMI 175
Revision in classification of goods imported - appellant had not entered appearance in the personal hearing but had requested for disposal on the lines of argument preferred in the proceedings of appeal against the former bunch of bills of entry - principles of natural justice - HELD THAT:- It is on record that the proper officer has not elaborated upon the cause for re-assessment and, yet, the first appellate authority took it upon itself to stand in for the proper officer to offer reasons for adoption of the revised classification. This was undertaken without pre-requisite, in terms of second proviso to section 128A(3) of Customs Act of notice to importer and more especially warranted in circumstances of neither notice preceding the commencement of the dispute nor such proposal on record by way of appeal of Revenue. A notice issued in connection with some other imports, in the absence of any legal provision extending existing proceedings to future imports, is no substitute - The first appellate authority was as bereft of any material on record, to determine that the exercise of re-assessment conformed to enacted law in the form of General Rules for Interpretation of the Tariff appended to Customs Tariff Act and within the framework of judicially determined rules of engagement in disputes over classification. And just as it would be inappropriate for us to adjudge free floating attempt at classification on the part of the first appellate authority, it was no less so for the first appellate authority to venture upon a decision on merit of assessment by the original authority. Affirmation of re-assessment without any material to go by invalidates it ab initio. The lack thereof should have prompted the first appellate authority to enforce compliance with consequence of revision. Not having done so invalidates the impugned order. The impugned orders set aside - the bills of entry before the original authority for disposal in the manner set out in section 17 of Customs Act - appeal allowed by way of remand.
-
2024 (12) TMI 174
Classification and reclassification of liquor under the Customs Tariff - wooden pallets - confiscation - penalty - HELD THAT:- This is not a case of intentional misdeclaration of goods but an unintentional on the part of the person filing the Bill of Entry. Further the Section 149 of the Customs Act, 1962 provides for the amendment in documents after their presentation. The amendment sought by the appellant in the facts of the present case is justified and if such amendment are not allowed, Section 149 would loose its relevance and would become infructous and if such bona fide errors are not allowed to be amended, it is failed to understand as to what would be covered by the provisions of Section 149 of the Customs Act. Act provides for correction of such errors as may be seen from Section 149 of the Customs Act. It is on record that Appellant already had filed application for amendment in documents - In the present matter Since there was no fraudulent intention whatsoever and the appellant had made application for amendment to the Bill of Entry mentioning about the facts in its entirety, the said application for amendment should have been allowed by the proper officer in terms of the powers conferred on him. There was no warrant to hold the goods liable to confiscation and impose any penalty. In these circumstances, the impugned orders are unsustainable in law. There is no evidence to establish that the appellant had prior knowledge of the excess import of goods and also when there is no evidence to establish any wrongful intent on the part of the appellant, further appellant had already filed application for amendment of Bill of Entry, then there is no justification for confiscation of the imported goods and imposition of penalty in this matter. In the result, the impugned order upholding confiscation of 1329 cases imported vide Bill of Entry dtd. 09.06.2022 and 11 wooden pallets is liable to be set aside. In respect of 2328 cases, the case of the department is that during the search of warehouse/ store room of Appellant, 2049 cases of foreign brand liquor, beer etc., were found which included 729 cases of Beer which expired in January 2022 - HELD THAT:- It is admitted by the Ld. Commissioner that on the basis of verification of stock summary provided by M/s BBLLP vis- -vis the stock found physically available in their warehouse/storeroom during the panchanma dtd. 28/29.06.2022, shortage of 511 cases of branded liquor, beer beverages was noticed and on the aforesaid shortage appellant also admittedly paid the duty amounting to Rs. 12,57,982/-. We find that provisions of confiscation of disputed goods applies only when goods have been concealed and have not been declared and not the entire quantity of goods. In such circumstances impugned order for confiscation of total 2328 cases of goods valued at Rs. 52,73,873/- and imposition of redemption fine of Rs. 8,00,000/- in lieu of confiscation is legally not correct and we hereby set aside the same. Demand on 511 cases found short - HELD THAT:- The clandestine removal charges based on shortages in stock cannot be upheld in the absence of any other evidence brought on record by the Revenue showing such illegal activities on the part of an assessee. The said decisions stand followed by the Tribunal in many numbers of cases. Inasmuch as in the present case the entire case of the Revenue is based upon the shortages detected at the time of visit of the officers, without there being any other evidence, there are no reasons to uphold the demand. Shortage of 511+483 cases as allegedly cleared without bill - HELD THAT:- It is evident that nowhere it is admitted by the partner of appellant that the said details related to removal of goods. Further, the said loose documents which were recovered were not put to test for ascertaining to the authorship of these documents. Moreover, these documents could not be proved with the corroborative evidences. The investigating authority failed to find out the author of said disputed documents. The details contained on the loose sheets are actually not comprehensible and, therefore, cannot be accepted as admissible piece of evidence. Moreover, none of the persons on whose statement reliance was placed by the department were admitted that the details mentioned in the said sheet are true - It is well settled that the allegation of clandestine removal is required to be discharged by the revenue by production of positive evidence. In the absence of the same such allegation cannot be upheld on the basis of assumptions and presumptions - there are no justifiable reasons to uphold the impugned order. 729 cases of Beer imported without payment of duty - HELD THAT:- According to Rule 37 (2) of the said Rules, on failure to utilize or dispose off goods as provided, such goods shall be liable for payment of duty as if the goods have been removed to Domestic Tariff Area on the date of expiry of the said validity period under sub-rule (1). In the present matter there is no case of the department that the validity period of the Letter of Approval issued to the appellant has expired. Hence, demand of duty on 729 cases of beer is also not legally sustainable. The duty demand, confiscation of goods penalties imposed on the appellant firm and its partner and employee set aside - Appeals are allowed.
-
2024 (12) TMI 173
Classification and origin of imported goods - import of Dry Dates by appellant - retraction of statements - case of the department is that Appellants had filed Bills of Entry declaring the country of origin of the said goods as UAE, classified the said goods under CTH 08041030 where the Customs Duty rate is 20% adv. and self-assessed the Bills of Entry whereas correct county of origin of the said goods is Pakistan and therefore, the said goods are classified under CTH 98060000 for which Customs duty rate is 200% adv - HELD THAT:- The officers of DRI and Customs carried out investigation in the matter which includes search at the premises of various person related to the above import transaction and collection of documentary evidences/ digital evidence. Statement of various persons were also recorded. The Ld. Commissioner while confirming the demand observed that during the course of examination of goods, the packing material in which dry dates were packed was showing the name of Sargodha Jute Mills Ltd. in Pakistan on it. This concrete and tangible evidence is further corroborated by the deposition of Shri Souvik Sarkar in his statement dtd. 19.11.2021 admitting inter alia, that in fact the goods have been brought from Pakistan via Dubai to evade the Customs Duty on it, and shri Rajeev Singh in his statement dtd. 19.11.2021 admitting, inter alia, that in fact the goods have been brought from Pakistan via Dubai to evade the Customs Duty on it. In the present Shri Souvik Sarkar retracted his statement via filing affidavit, however the same was not considered by the Ld. Adjudicating authority on the ground that the appellant has not requested for any cross-examination of any witness including the independent panchas. However, it is not disputed that appellant has raised objection on the statements of said witness and said persons were not examined in the adjudication proceedings even after the objection of appellants. The appeals filed by Appellants needs to be disposed of by way of remand to the adjudicating authority to reconsider the issue afresh by following the principles of natural justice and adherence to the provisions of Section 138B of the Customs Act, 1962 on this point - the matter remanded to the Ld. Adjudicating authority to decide the issue a fresh.
-
2024 (12) TMI 172
Absolute confiscation - areca nuts - abondonment of goods - denial of benefit u/s 23 of the Customs Act, 1962 only on the ground that it appears to be an afterthought - HELD THAT:- It is undisputed fact in the present case that the goods (areca nuts) are absolutely confiscated by the revenue authorities. In such circumstances, the demand of duty on the Appellants is not sustainable. Similar question arose before the Division Bench of this tribunal in case of Maiden Trading Co. Pvt. Ltd. [ 2015 (7) TMI 925 - CESTAT NEW DELHI] wherein it is observed ' as the appellant has not filed any Bill of Entry neither placed order for supply of the impugned goods to the supplier/exporter, the penalty under Section 112(a) of the Customs Act is not imposable on the appellant.' The demand of duty is not sustainable on the Appellants as goods are absolutely confiscated. Penalty u/s 114A of the Customs Act, 1962 - HELD THAT:- Section 114A deals with situations of intentionally making or using any declaration, statement or document which is false or incorrect in the transaction of any business for the purpose of Customs Act, 1962. The said Section is intended to penalize situation where there are paper transaction without any actual import or export of goods. In the present case, the revenue department has no case that the transaction was a paper transaction and that no goods were imported by the Appellant and therefore, we hold that penalty under Section 114A is not attracted. Penalty imposed on the partners of the Appellant firm - HELD THAT:- The same is not sustainable for the reason that the penalty was proposed to be imposed on the Appellant partnership firm. Reliance placed on the decision of Hon ble Gujarat High Court in case of CCE Vs. Jai Prakash Motwani [ 2009 (1) TMI 501 - GUJARAT HIGH COURT] wherein it is observed that ' Admittedly, a partner is not a separate legal entity and cannot be equated with the employees of a firm. Once the firm has already been penalized, separate penalty cannot be imposed upon the partner. The impugned order of the Tribunal does not suffer from any legal infirmity so as to warrant interference. In the absence of any substantial question of law, the appeal is dismissed.' - the penalty imposed on all the partners of the Appellant firm set aside. All the appeals filed by the Appellants are allowed.
-
2024 (12) TMI 171
Smuggling - Confiscation of the seized battery scrap 14200 kg of Foreign Origin Third Country Origin - Retraction of Statements - case is based on the interception of the truck containing the said goods and on examination the goods were found to be battery scrap of third country origin - HELD THAT:- On the basis of the objective evaluation of the evidences the authorities below have arrived at the conclusion that the impugned goods are smuggled goods smuggled through unauthorized routes from Nepal. Appellant is the master mind in the entire episode has been subjected to penalty of Rs.25,000/- as per the impugned order, which is not excessive and needs to be upheld, which also is not harsh, taking into account the fact that battery scrap , falls under the category of Hazardous Goods , to dangerous for the environment and eco system of our country. Appellant has claimed that the Old and Used Battery Scrap seized and confiscated was procured by him locally through local vendors and hence no violation of Customs Act, 1962 can be alleged. The story fabricated by the appellant about local procurement of scrap cannot be substantiated, simply for the reason that he has in his own statement admitted that he do not maintain any record of procurement of the Battery Scrap. Old and used battery scrap is being Hazardous Goods and the same are governed by BATTERIES (MANAGEMENT AND HANDLING) RULES, 2001. As per these rules used batteries don t get disposed off in the open market. Rule 4 related to responsibilities of the manufacturer, importer, assembler and re-conditioner. The used batteries are not freely traded in the market. They to be collected back by the manufacturer, dealer or importer at the time of sale of new batteries and thereafter transported to recyclers in the manner prescribed. The entire story made by the appellant to the effect that he has procured these batteries scrap from the local market, goes contrary to the specific provisions of these rules and hence cannot be relied upon. If that is so, the entire defense of the appellant fails. The statements of the of the co-noticee relied in the proceedings were retracted only in the defence reply filed by them to the show cause notice, and adjudicating authority has not found any merits in the retraction made during the course of adjudication proceedings as per the defence reply, filed by those co-noticees. The findings recorded by the lower authorities on the retraction made by co-noticees have not been challenged by the said co-noticee have thus acquired finality. The Additional Commissioner has in the impugned order imposed a penalty of Rs. 25,000/- on the appellant whereas penalty Shri Shakir who was to be the actual beneficiary of these goods penalty imposed is only Rs 10,000/- - penalty of Rs 10,000/- has been imposed on Shri Santosh Kumar Gupta, who was equal accomplice in the case with Appellant as he had gone along with the appellant for loading the scrap on truck at Nepal border with the appellant, and was responsible for arranging the invoice of the appellant as cover up during the transportation - penalty imposed reduced to Rs 17,500/-. Appeal partly allowed.
-
2024 (12) TMI 170
Immediate suspension of the appellant Customs Broker - it was alleged that the appellants CB did not exercise due diligence in discharging their obligation as required under sub-regulations 10(d), 10(e), 10(k) and 10(n) of CBLR, 2018 - distinct charges framed against the appellants enable the immediate suspension action and its continuation under Regulation 16 of the CBLR, 2018 - HELD THAT:- The Commissioner of Customs had come to the conclusion that the appellants CB had violated the stated sub-regulations (d), (e), (k) and (n) of Regulation 10 ibid, as they did not advice the exporter properly on the need to file declaration with correct details; they did not exercise due diligence and report of any non-compliance by the exporter, to the DC/AC for necessary action. Further, the learned Commissioner had found that the appellants CB could not produce the documents related to S/Bs, and that the exporter could not be located in the address furnished in the S/Bs during verification conducted by the department. Regulation 16 ibid, what is required to be done is to evidentially provide for the appropriateness for immediate suspension action of the CB license and its continuation, pending regular inquiry proceedings under Regulation 17 ibid. However, it is found there is no record to show such a procedure prescribed has been followed in this case. Therefore, it is found that the impugned order is not in conformity with the provisions of CBLR, 2018. There is no justification given by the learned Commissioner of Customs in the impugned order for invoking the provisions of immediate suspension and its continuation in the year April, 2023, nearly after more than four years, for an alleged act done by the exporter in overvaluation of export goods in the year January, 2019 to which the appellants CB have been made as a party/co-noticee - there are no specific grounds to evidentially prove that immediate suspension of the appellants CB license is required as an appropriate case, for initiating action under Regulation 16 of CBLR, 2018. Further, none of the parties are able to provide further information about the inquiry proceedings that is required to be initiated under Regulation 17 for bringing the case to a logical conclusion as per CBLR, 2018. There is no ground or evidence produced by the department to implicate the appellants CB in overvaluation of export goods. In fact, even in the proceedings initiated for the customs offences against the appellants CB, there is no such evidence forthcoming as seen from the adjudication order dated 12.06.2023, in order to claim that the learned Commissioner had gone by his preponderance of probability, in order to decide that the present case is an appropriate case for immediate suspension, on the basis of his subjective satisfaction of the facts and evidences - the impugned order is contrary to the requirement of the provisions of Regulation 16 of CBLR, 2018 and therefore it does not stand the scrutiny of law. There are no merits in the impugned order 04.05.2023 passed by the learned Commissioner of Customs, Nagpur in continued suspension of the CB license of the appellants, inasmuch as there is no finding given by the Commissioner of Customs for displaying the appropriateness of the case for invocation of such action, and justifying the continued suspension of CB license under Regulation 16 of CBLR, 2018. Further, the impugned order dated 04.05.2023 is also not sustainable as it has failed to establish the role of appellants CB in the alleged overvaluation of export goods to claim that regular inquiry proceedings are contemplated against such alleged violations of Regulations 10(d), 10(e), 10(k) and 10(n) ibid. The impugned order dated 04.05.2023 is set aside - it is also directed that the learned Commissioner of Customs to complete the inquiry proceedings under Regulations 17 of CBLR, 2018 expeditiously, preferably within a period of six months from receipt of a copy of this order - appeal allowed.
-
2024 (12) TMI 169
Classification of imported JOSS Powder - to be classified under Chapter Heading 4405 of the Customs Tariff Act, 1975 or not - benefit of the Notification No.46/2011-Cus. dated 01.06.2011 (Sl. No. 543) - whether extended period of limitation is application to the present set of facts and circumstances? - Suppression of facts or not - HELD THAT:- From the Bills of Entry enclosed by the appellant, the description of the product is clearly mentioned as JOSS Powder (Wood Powder for making incense sticks) , though the Chapter Heading is mentioned as 4405 in these Bills of Entry. Since the appellant has correctly described the products in the Bills of Entry, there is no mis-declaration or suppression of facts, hence, the extended period of limitation cannot be sustained. Appeal is allowed.
-
Corporate Laws
-
2024 (12) TMI 168
Professional misconduct - Section 132(4) of the Companies Act, 2013 - gross negligence in relation to his obligations to report fraud under Section 143(12) of the Companies Act, 2013 and SA 240 - reliance placed on the valuation report of the management's expert without challenging the assumptions and methods and without independently assessing the impairment requirements of these investments - deficiencies in the audit working papers - non-compliances with Ind AS 16 - Disclaimer of Opinion was based only on the NCLT, Mumbai Bench Order dated 14.05.2018. HELD THAT:- It is concluded that even though the EP has issued a Disclaimer of Opinion, he failed to exercise due diligence and displayed gross negligence in failure to adequately address the risks related to fraud, disclosures requirements and deficiencies in audit documentation and make appropriate reports under Section 143(12). The EP has committed professional misconduct as defined in Section 132 (4) of the Companies Act, read with Section 22 the Chartered Accountants Act 1949 (the CA Act), as amended from time to time, as detailed below: a. The EP committed professional misconduct by not exercising due diligence and being grossly negligent in the conduct of his professional duties. (refer to Clause 7 of Part I of the Second Schedule of the CA Act). b. The EP committed professional misconduct by failing to invite attention to any material departure from the generally accepted procedure of audit applicable to the audit engagement (refer to Clause 9 of Part I of the Second Schedule of the CA Act). Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law - Absent a robust system of auditing, investors, creditors and other users of Financial Statements would be handicapped and their interest compromised. The best of systems fails if the professionals implementing the system do not perform their job. This could lead to a serious failure of the financial system which could ultimately result in a breakdown in trust and confidence of investors and the public at large. Considering the professional misconducts have been proved and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered imposition of monetary penalty of Rs. 5,00,000/-.
-
2024 (12) TMI 167
Professional misconduct of the statutory auditors of Coffee Day Enterprises Limited under Section 132(4) of the Companies Act 2013 - diversion of funds and evergreening of loans/advances - HELD THAT:- After a detailed examination of facts and circumstances, it is observed that the failure in this audit engagement was due to violations of SAs, and the Act. Hence the role of the Audit Firm, whose responsibilities are mandated by the Act, is equally important as that of EP and EQCR Partners, whose responsibilities are delineated in the SAs and SQC -1. Given the fact that the Audit Firm is the legal body appointed as the auditor and EP mandatorily takes responsibility for the individual audits subject to firm-level supervision, both have joint and several responsibilities for the Audit. Section 132 (4) of the Act emanates from this basic premise. However, there is not adequate evidence of effective supervision and oversight by Mis Venkatesh Co. Providing the ET with a quality policy and tools are not good enough to establish effective supervision as envisaged in SQC-1. Had the Audit Firm discharged its supervisory responsibilities timely and effectively such major lapses in the audit could have been avoided. Therefore, Mis Venkatesh Co. is responsible for the misconducts committed by the EP and EQCR. Due to these fraudulent transactions the consolidated financial statements of CDEL were grossly misstated. The Auditors in audit reports issued by the Audit Firm had disclaimed the opinion. Their contention about disclaiming the audit opinion is not logical as an auditor is required to comply with Laws and auditing standards even if he disclaims his opinion. Further, the Auditors were required to comply with section 143(12) of the Act and CARO even in case of Disclaimer of Opinion - The lack of professional skepticism in challenging the management about clearly visible fraud is not expected from an auditor of a listed company. Such omissions and commissions by an experienced audit firm cannot be taken lightly, as these are detrimental to the public interest. The Firm and Engagement Performance Metrics published by PCAOB on October 12, 2022, provides a detailed study of engagement level and firm-level quality matrices. Engagement level metrics provide information about a particular engagement of the firm, and Firm-level metrics address an audit firm's overall strategy in complementing the engagement-level matrices. The study covers all major jurisdictions in the world, including India and top tier Audit Firms. The Auditors and EQCR have made a series of serious departures from the Standards and the Law, in conduct of the audit of CDEL for FY 2019-20. Based on the above discussion, it is proved that the Auditors and EQCR had failed to report fraudulent diversion of funds to related parties and failed to exercise due diligence in performance of audit. Based on the foregoing discussion and analysis, it is concluded that the Auditors and EQCR have committed Professional Misconduct as defined under Section 132 (4) of the Companies Act 2013 in terms of section 22 of the Chartered Accountants Act 1949 (CA Act). Penalty and sanctions - HELD THAT:- Section 132(4)(c) of the Companies Act 2013 provides that National Financial Reporting Authority shall, where professional or other misconduct is proved, have the power to make order for (A) imposing penalty of-- (I) not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and (II) not less than five lakh rupees, but which may extend to ten times of the fees received, in case of firms; (B) debarring the member or the firm from-(I) being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate; or (II) performing any valuation as provided under section 247, for a minimum period of six months or such higher period not exceeding ten years as may be determined by the National Financial Reporting Authority. Considering the seriousness of proved professional misconduct and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered imposition of a monetary penalty of Rs Two crores upon M/s Venkatesh Co.; Rs Ten lakhs upon CA Dasaraty V.; and Rs Five lakhs upon CA Desikan G. In addition, CA Dasaraty V. and CA Desikan G are debarred for a period of Ten years and Five years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
-
2024 (12) TMI 166
Professional misconduct - financial irregularities in the company and the failure of the auditor to qualify or emphasize in his independent audit report, any matter related to misstatement/ irregularities in the transactions - Section 132(4) of the Companies Act 2013 read with Rule 11(6) of National Financial Reporting Authority Rules 2018 - Penalty and sanctions. HELD THAT:- The EP committed professional misconduct in terms of by Section 132 (4) of the Companies Act, read with Section 22 and clause 5 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity - This charge is proved as the EP failed to obtain sufficient and appropriate audit evidence to draw conclusions about the existence and valuation of the inventory, failed to perform his duty of evaluation and reporting the non-compliance of Ind AS-110 and Ind AS-28 related to consolidation of financial statements of SCL, failed to fulfil his duty related to the audit of investments. The EP committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 6 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity - This charge is proved as the EP failed to obtain sufficient and appropriate audit evidence to draw conclusions about the existence and valuation of the inventory, failed to perform his duty of evaluation and reporting the non-compliance of Ind AS-110 and Ind AS-28 related to consolidation of financial statements of SCL, failed to fulfil his duty related to the audit of investments. The EP committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 7 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he does not exercise due diligence and is grossly negligent in the conduct of his professional duties - This charge is proved as the EP failed to conduct the audit in accordance with the SAS and applicable rules as well as due to his failure to report the material misstatements and non-compliances of the Company in its financial statements. The EP committed professional misconduct in terms of by Section 132 (4) of the Companies Act, read with Section 22 and clause 8 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion - This charge is proved as the EP failed to conduct the audit in accordance with the SAs and applicable rules as well as due to his failure to report the material misstatements and non-compliances of the Company in the financial statements. The EP committed professional misconduct as defined by Section 132 (4) of the Companies Act, read with Section 22 and clause 9 of Part I of the Second Schedule of the Chartered Accountants Act 1949 (as amended from time to time), which states that an auditor is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances - This charge is proved since the EP failed to conduct the audit in accordance with the SAs but reported in his audit report that the audit was conducted as per SAs. Penalty and sanctions - HELD THAT:- Independent Auditors of Publicly Listed Companies are expected to demonstrate sufficiency and appropriateness of audit work in every aspect of the critical building blocks of an audit of Financial Statements of a PIE. Failure of the auditor to meet the requirements envisaged under the Law and Professional Standards on Auditing are conspicuous in this audit engagement performed by the EP - the manner in which the audit was conducted, failed to meet the requirements of the SAs, the Act and the Code of Ethics in a number of significant aspects which demonstrated gross negligence on the part of the EP. This can be gauged from the failure of the EP to critically assess the existence and valuation of inventories, failure to comment in the audit report about the non-consolidation of financial statements, failure to verify the impairment testing of the investments of SCL and failing to apply the mandatory SAs in the audit - it is concluded that the EP's failure to comply with the provisions of SAs, exhibit professional skepticism, and fulfill the necessary audit procedures led to significant deficiencies in the audit. This non-compliance, combined with the consequent reporting failures, constitutes a breach of professional responsibilities and statutory requirements. The EP's actions (or inactions) constitute a serious violation of audit standards, leading to significant repercussions for the integrity and reliability of the financial statements. The professional misconduct of CA Santosh Deshmukh has been detailed in the foregoing paragraphs of this Order. Considering the proved professional misconducts and keeping in mind the nature of violations, principles of proportionality and deterrence against future professional misconduct, we, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, hereby order imposition of monetary penalty of 5,00,000/- (Rupees Five Lakhs) and also debars CA Santosh Deshmukh for 1 (One) year from being appointed as an auditor or internal auditor or from undertaking any audit in respect of Financial Statements or internal audit of the functions and activities of any company or body corporate.
-
2024 (12) TMI 165
Professional misconduct - failure to disclose complete information about revenue earned from related parties - determination of related party status under Section 2(76) of the Companies Act, 2013 - HELD THAT:- It is proved that CA Lavitha Shetty committed professional misconduct of failure to exercise due diligence in the conduct of her professional duties by not providing complete information about revenue earned by her from related parties of MACEL. This professional misconduct is defined in para 7 of part I of second schedule of the Chartered Accountants Act 1949. CA Lavitha Shetty vide our Orders dated 13.04.2023 and 25.04.2023 is sanctioned. However, the misrepresentation of facts during those proceedings cannot be overlooked. CA Lavitha Shetty has misrepresented the facts relating to revenue earned by her from MACEL and its related parties and this information was crutial in evaluation of her independence in this matter. It is also found that misleading the regulator leads to interference with the statutory functions of the regulator. Having already penalised her, it is found that in these proceedings a token penalty would be appropriate given the facts and circumstances of the current professional misconduct. Accordingly, in exercise of powers under section 132(4)(c) of the Act, imposition of monetary penalty of Rs One lakh only upon CA Lavitha Shetty imposed.
-
Securities / SEBI
-
2024 (12) TMI 164
Validity of Regulation 3(2) (b)(i) of the SEBI (Delisting of Equity Shares) Regulations, 2021 ( Delisting Regulations ) as being ultra-vires to SEBI Act, 1992 - Applicability of the Insolvency and Bankruptcy Code (IBC) over SEBI Regulations - Petitioner challenges the Order which approved the Resolution Plan providing for the delisting of shares of Reliance Capital Limited ( RCL ) and the further consequent circulars issued by the National Stock Exchange and the Bombay Stock Exchange announcing suspension of trading in the scrip of RCL. HELD THAT:- As considering that IBC is a complete code containing a non-obstante clause, a delisting of equity shares pursuant to the approval of a plan under IBC would be governed by the provisions of the IBC and the regulations made thereunder. Therefore, if the SEBI felt that governing such delisting under the Delisting Regulations might not be appropriate, there is no question of SEBI acting ultra vires. Accordingly, the Impugned Regulation, i.e. Regulation 3 (2) (b) (i), providing that the Delisting Regulations shall not apply in the case of delisting of equity shares pursuant to a resolution plan approved under Section 31 of the IBC cannot be regarded as ultra-vires the SEBI Act or the rules made thereunder. Respondent contention about harmonious construction of the SEBI Act, 1992 provisions, the Delisting Regulations, the IBC and CIRP Regulations has considerable merit. By striking down the Impugned Regulations, we would introduce a conflict between the SEBI Act/Regulations on the one hand and the IBC/CIRP Regulations on the other. Even in such a conflict, in all probability, the provisions of the IBC/CIRP Regulations would prevail, given that the IBC is later legislation that has been given an overriding effect. In contrast, the SEBI is an earlier legislation, and Section 32 of the SEBI Act, as noted earlier, provides that the provisions of the SEBI Act, 1992 shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force. The arguments based on the consultation paper or the review of 2009 are not grounds for declaring the Impugned Regulations as ultra-vires. Ultimately, these are suggestions for the formulation of policy. It is not as if such consultation papers or reviews bind the SEBI, particularly in exercising its quasi-legislative powers of framing regulations. The suggestions in the consultation paper or the review must be considered from the perspective that we are dealing with economic legislation based on experimentation where wide latitude must be given to the legislative bodies. The review of SEBI (Delisting of Equity Shares) Regulations, 2009 (Exhibit F ) refers to the Primary Markets Advisory Committee s ( PMAC ) suggestion to delete Regulation 3(2) of the Delisting Regulations as they then stood. Regulation 3(2), as it then stood, dealt with the non-applicability of Delisting Regulations made on the delisting made pursuant to the scheme sanctioned by the BIFR under Sick Industrial Companies (Special Provisions) Act, 1985 ( the SICA, 1985 ) or by the NCLT under Section 424D of the Companies Act, 1956. It is evident that the Impugned Regulations neither represent any marked shift in policy nor could we say that the Impugned Regulations conflict with the recommendations of the PMAC. Based on a consultation paper or a review that, in any event, does not bind the SEBI or statutorily curtail its quasi-legislative powers to frame regulations, the Impugned Regulations cannot be considered ultra-vires. The Court has held that economic legislation is essentially empiric. It is based on experimentation and, therefore, cannot anticipate all possible situations or abuses. Complicated experimental economic legislation may contain crudities and inequities, but they cannot be struck down solely on that ground. The system of checks and balances must be used with the primary objective of accelerating economic growth rather than suspending it by doubting its constitutional efficacy at the threshold itself. The Bankruptcy Law Reforms Committee report refers to a company representing a contract between equity and debt. As long as the shareholders can service the debt, they have complete control over the company and the freedom to run it as they see fit. The report contained a draft of the Insolvency and Bankruptcy Code, intended to replace the patchwork of laws with a single comprehensive code. The Government accepted this report, and the Parliament passed the draft code as the Insolvency and Bankruptcy Code, 2016. The aim of the IBC is to rehab a company rather than liquidate it. The legislature made a conscious decision to accord priority to the financial creditors. A moratorium is provided during which period the company's creditors cannot sue it. However, some provisions effectively exclude the erstwhile owners from management. The Committee of Creditors (CoC), which comprises the corporate debtor s financial creditors, can make significant decisions during the CIRP process. One of the most important decisions is considering and approving the resolution plan proposed by the prospective buyer. This resolution plan is expected to contain details about the company's revival, how various creditors would be paid off, the treatment of shares, and other financial decisions. Once approved, the resolution plan will bind all creditors and stakeholders. The challenge to the NCLT s impugned order dated 27 February 2024 was premised upon such an order being based on the Impugned Regulation, which, according to the Petitioner, was ultra vires. This premise was misplaced. Still, now that we have found no infirmity in the Impugned Regulations, the challenge to NCLT s impugned order dated 27 February 2024 fails and is liable to be rejected. The argument that the Petitioner was not given notice before the CoC voted to approve the resolution plan is misconceived, given the facts of the present case referred to in paragraph 39 above, the provisions of sections 30 and 31 of the IBC, and the provisions of regulation 37 of the CIRP regulations. This is possibly why the Petitioner avoided challenging the NCLT s impugned order dated 27 February 2024 by appealing to the NCLAT. As the Hon ble Supreme Court explained in Jaypee Kensington Boulevard Apartments Welfare Association and others (supra), the scope of judicial review in such matters is minimal.
-
PMLA
-
2024 (12) TMI 163
Money Laundering - Validity of arrest of petitioner under Section 19 of the PMLA - Seeking quashing of Arrest Memo and Arrest Order for arrest of petitioner - violation of Section 19 of Prevention of Money Laundering Act, 2002 - constitutional safeguards against arbitrary detention - petitioner was not provided with reasons to believe - HELD THAT:- The arrest of the petitioner did not fall foul of provision of Section 19 of the PMLA, and that judicial review (not merits review) of the grounds for arrest (which subsume the reasons to believe, as per the ED) does not invite an adverse inference from this Court. Needless to state that, as pointed out by the Supreme Court itself in Arvind Kejriwal [ 2024 (7) TMI 760 - SUPREME COURT] , all grounds can be agitated by the petitioner/accused at the stage of plea of bail, and the Court may have a larger canvas before itself to consider the petitioner s plea, if and when taken up. Needless to state, any observation by this Court in this judgement is only for the purposes of assessing the challenge to the legality of arrest of the petitioner, and may not be construed as a conclusive opinion on the merits of the case. The present petition is dismissed.
-
2024 (12) TMI 162
Seeking to assail the complaint filed under Section 45 read with Sections 3 and 4 of the Prevention of Money Laundering Act, 2002 - Customs duty evasion in the import of Carbide inserts imported vide 9 bills of entry during the period from 2009-2011 - HELD THAT:- In light of the language employed under Section 3 of the PMLA, any person whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering. Therefore, if a person other than a Company is also found to have committed the offence as contemplated under Section 3 of the PMLA punishable under Section 4 of the PMLA the person can be arraigned as an Accused. It has been repeatedly held by the Courts that the person Accused of committing an offence under Section 3 of the PMLA need not even be arrayed as an Accused in the prosecution of the predicate offence as long as the said person has satisfied the ingredients mentioned under Section 3 of the PMLA. The contention of the 2nd and the 3rd Petitioner herein are that they had nothing to do with the day-to-day administration of the Company, will not hold water, even if proved to be true by the Accuseds in trial, since the Complaint under PMLA was filed against them for the possession, acquisition, use of the proceeds of crime, while claiming the same to be untainted property and not for the offences committed by them in their capacity as the Directors of the Company. It has been repeatedly reiterated by the Hon'ble Apex Court that the offence of Money-Laundering is a stand-alone offence. The offence under the Customs Act is totally different and distinct from the offence of Money- Laundering. The Petitioners/Accuseds are attempting to paint two distinct offences, as if it is the very same transaction. Therefore, the submission of the Petitioner/Accused that the subject matter of investigation by the Department of Customs and ED emanates from the same transaction is incorrect. The Hon'ble Apex Court in Vijay Madanlal Choudhary and Ors -Vs- Union of India and Ors [ 2022 (7) TMI 1316 - SUPREME COURT] held that the investigation conducted by the Respondent Department is into the offence of money laundering and the same can be established through the prosecution of the offence of money laundering independent of the predicate offence. There are no hesitation in arriving at a conclusion that the present petition is devoid of merits and the petitioners have to face the trial. However, the Trial Court shall proceed with the trial uninfluenced by the observations made in the present order with reference to the facts, if any. Petition dismissed.
-
2024 (12) TMI 161
Money Laundering - proceeds of crime - challenge to Provisional Attachment Order - manipulating and forging the records and supplied sub-standard and mis-branded quality materials to DG, Family Welfare at exorbitant rates - HELD THAT:- The consideration (in cash) was not paid as a lumpsum at the time of execution of the sale deed, but on different dates . As such, there are no merit in the submission of the appellant that the consideration paid was out of the cash withdrawn from the separate account of the appellant maintained in respect of Sommya Prakashan. Notably, the time when property was purchased falls squarely within the time-period of the alleged scheduled offence. Consequently, on the pre-ponderance of probabilities, the appellant has failed to prove the source of acquisition of the subject property for which the burden was upon him under sections 8(1), 23 and 24 the Act. On the contrary, there is every reason to believe that the amount was sourced from the proceeds of crime derived from NRHM funds. In the present case, the impugned order was passed on 24.02.2016 when there was no time limit for filing the prosecution complaint. The prosecution complaint in this case was filed on 27.03.2018, prior to the date when the amendment made by the Finance Act, 2018 setting a 90- day time period for filing the prosecution complaint came into force. As such the attachment order shall continue till the final disposal of the prosecution case against the accused. Accordingly, there are no merit in the appellant s challenge to the impugned order on account of prosecution complaint not being pending when the same was passed. It is also to be borne in mind that at this stage of the proceedings, the subject property has only been attached. As per the definition of the term attachment provided u/s 2(1)(d), attachment means prohibition of transfer, conversion, disposition or movement of property. Attachment of property per se does not alter the ownership status of the property. It does not even alter the status of possession and user of the property, unless in a given case, owing to exceptional circumstances, the provisions of section 8(4) are invoked by the Directorate in order to take possession of the property - as and when the prosecution case is decided by the Special Court, it is required to either order the confiscation of the same under section 8(5) where it finds that the property was involved in money-laundering, or the release thereof in the event the Court finds that the property is not involved in money-laundering. Therefore, at this interim stage when the prosecution case against the accused is pending, both the legal position as well as the balance of interests lies favour of continuance of the attachment of the subject properties. The present appeal fails, and is hereby dismissed. Seizure of amount of Rs. 9.50 lakh and attachment by the Respondents, treating it to be proceeds of crime - HELD THAT:- The Ld. Adjudicating Authority has pointed out that the Appellant has submitted before it unsigned receipts and payment account, unsigned cash receipts, quotation forms etc. which could not constitute authentic evidence of transactions and were in all likelihood false and fabricated. The claim of having paid tax in respect of some of the transactions also cannot be considered to be authentic proof of the entries made in the books of account and availability of cash balance as per books. The findings of the Ld. Adjudicating Authority were justified given the facts and circumstances stated above, including the fact the cash was seized from the residence and not the premises of M/s Midtown Hotel and Banquets, and that no satisfactory explanation could be provided by the appellant at the time of seizure. Accordingly, there are no merit in the contentions of the Appellant in this regard. Appeal dismissed.
-
2024 (12) TMI 160
Retention of records and digital devices seized by the respondents - offences punishable under Section 120-B read with Section 420, 468,471 IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 - HELD THAT:- The offence has been committed by M/s Moser Baer India Ltd. with the active support of Rajiv Saxena and Shivani Saxena. Abhinav Saxena was supporting them and for that reason alone, the incriminating documents were found in his possession. It is a fact that during the pendency of the appeal, all the documents and the gadgets recovered during the course of search have been filed along with the PC. It is after showing relevance of the documents with the commission of crime. Hence, there are no reason to order for release of documents. The perusal of the provision reveals that if anyone is found in possession of the record relating to money laundering, then subject to the rules, the Director or an officer authorized by him can search and retain seized property and record, etc. initially for a period of 180 days but after it is sent for confirmation, then subject to the order of the Adjudicating Authority, the retention would continue. Section 17(1) does not provide lapse of the seizure and retention after a period of 180 days, rather sub-section (1) permits continuation subject to the rules. In the absence of the pleadings on factual issues, it cannot be proceeded further to analyze the grounds but it is found that the documents and gadgets seized by the respondents was referred in the Panchnama and is now part of the PC. In the light of the aforesaid, it is not found that any of the provisions have been violated by the respondents to retain the documents/devices relevant for the case and are part of the PC. Thus, even if the appellant is allowed to take the fresh ground without its pleading involving factual issues, a case is not made out to cause interference. This is not a case in favour of the appellant. Interference in the seizure and retention cannot be made only on the ground that the seized material now retained was recovered from a person not implicated as an accused. In fact, Section 17 permits recovery of the documents/record relating to money laundering without any condition that it should be in the possession of the accused - there are no reason to cause interference in the impugned order - Appeals accordingly fail and are dismissed.
-
2024 (12) TMI 159
Challenge to provisional attachment order - appellant submits that prosecution complaint has not been filed against anyone which includes the accused named in the ECIR despite expiry of 365 days from the date of the impugned order, thus, the attachment and so the order should lapse - HELD THAT:- The freezing/ attachment would continue during the period of investigation to be completed within 365 days or pendency of the case before the Court in reference to offences under the Act of 2002. At times, the respondent make argument that with sending a copy of ECIR is to be considered as pendency of the case in the competent court for the offence of Act of 2002. There are no reason now for the respondent to continue freezing rather it stands lapsed which are otherwise perishable goods and after freezing by the respondent, a period of more than 2 years as already gone by now. In the light of the aforesaid and the legal position in reference to Section 8(3) of the Act of 2002, there are reasons to cause interference in the impugned order rather the freezing order and its confirmation is declared to have lapsed by an afflux of time in absence of the prosecution compliant against any of the accused and accordingly the impugned order is said aside. The appeals are allowed.
-
Service Tax
-
2024 (12) TMI 158
CENVAT Credit - input services used in modernization and renovation of the plant - present dispute pertains to April 2009 to March 2011 - HELD THAT:- As per the definition available during the relevant period, all activities relating to business were eligible for credit. We also find that all input services used in respect of modernization, renovation and repair of factory had been specifically included as eligible for credit. Thus, it is observed that the input service credit availed by the Appellant squarely falls within the definition of input service in terms of Rule 2(l) of the CENVAT Credit Rules, 2004. Accordingly, the Appellant is eligible for the credit on the input services availed by them. This view has been taken by the Tribunal in the case of M/S MARUTI SUZUKI INDIA LTD. VERSUS CCE, DELHI-III (VICE-VERSA) [ 2016 (10) TMI 648 - CESTAT CHANDIGARH] wherein it has been observed ' denial of credit on construction service to the appellant is not legally sustainable as the period involved is prior to amendment in Rule 2(l) made on 1-4-2011.' The input services used by the Appellant are eligible for credit - the demand confirmed in the impugned order is set aside - Since the demand itself is set aside, the question of demanding interest or imposing penalties does not arise - appeal allowed.
-
2024 (12) TMI 157
Condonation of delay of 28 days on the ground that the Order in Original was received by the appellant only on 16/11/2022 - whether the mandatory pre-deposit has been paid by the appellant? - time limitation - HELD THAT:- The appellant claims to have paid Rs.9,82,313/- during the period April 2015 to August 2016, towards Video Tape Prod Ser-Tax Collection at Corporation Bank through internet banking. As per the OIO dated 12/08/2022, the appellant has not filed ST 3 returns for the half yearly periods April 2015 to September 2015 and October 2015 to March 2016 for the financial years 2015 16. Whereby they have not paid the Service Tax of Rs.12,68,750/- on the taxable value of services. The OIO has not accepted the payments made and shown in the challans towards duty as no documentary proof was shown that the amounts were paid as duty. The same was hence not adjusted towards the duty demanded. This being so the amounts paid are treated as pre-deposit and satisfy Section 83 of FA read with section 35F of the CEA. Time Limitation - HELD THAT:- There is a lack of clarity on the dates involved with proof of the same. When an issue is being determined on the basis of limitation it is necessary for the concerned Authority to set out the dates along with the basis for adopting the same and the specific provision of law involved, clearly. A similar clarity with proof was required to be submitted by the appellant in the Appeal Memorandum so that the matter could have been decided. The same is lacking by both the parties. The matter hence needs to be remanded for a decision afresh. In case the time limit is within the condonable period the Ld. Commissioner Appeal is required to take a judicious decision on the same. The issue relating to pre-deposit is found in favour of the appellant and the appeal to that extent is allowed. The issue of time bar needs to be re-determined by the Commissioner Appeals. If the facts are found in favour of the appellant the appeal may then be decided on merits. The appeal is hence partly allowed on the issue of pre-deposit and the matter is remanded for a decision on the question of time bar - The appeal is disposed of accordingly.
-
2024 (12) TMI 156
Refund of service tax paid to a Trust - payment of the amount under mistake of law - rejection of refund claim on the ground of limitation and unjust enrichment. Whether only the Trust was eligible to claim the refund and not an individual who has ultimately paid the tax? - HELD THAT:- Section 11B(1) of the CEA 1944, which pertains to the claim for refund of duty and interest, states that any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed. The expression any person is of wide amplitude. The Act thus does not confine a claim of refund only to the person who has collected and deposited the tax in the government coffers. However, section 12B of CEA 1944, contains an important presumption that needs to be overcome before sanction of refund to an applicant. As per section 12B of CEA 1944, the presumption is that the incidence of duty has been passed on to the final buyer. Every person who has paid duty, unless the contrary is proved by him, is deemed to have passed on the full incidence of such duty to the buyer of such goods [or consumer of such service] - In the impugned case the appellant states that the tax, though illegal, has finally come to be collected from him and the incidence of the tax has come to finally rest with him as being the final consumer. Hence he is eligible for the refund and there is no unjust enrichment involved. It is clear that it is the appellant who has borne the ultimate incidence of the tax, and not the Trust, who is the eligible claimant of the refund and is not barred from claiming the same. Further the question of unjust enrichment also does not arise as the amount has been paid from the appellants own resources and has not been shown to have been passed on. The appeal on this issue hence succeeds. Whether the refund claim is time barred? - HELD THAT:- It is found that though this legal issue has been raised by the Ld. AR during the hearing, the impugned order at para 10 states that the letter dated 30/01/2017 of the appellant seeking refund is not barred by limitation of time in terms of section 11B of the Central Excise Act 1944. As the department has not filed any appeal against this finding it has become final. Whether at all the impugned Trust is a body which qualifies for exemption from Service Tax? - HELD THAT:- The general principle is that an Appellate Authority should not travel outside the record of the lower authority. The issue involving fact and law could not hence have been examined suo moto at the First Appeal stage. The appellant is eligible for consequential relief as per law - Appeal allowed.
-
2024 (12) TMI 155
Levy of service tax - Event Management Services - Club or Association Services - Sponsorship Services - time limitation. Club or Association Services - HELD THAT:- With respect to demand of service tax of Rs. 14,40,514/- that the issue is squarely covered by the our own decision in case of THE SUMEL BUSINESS PARK 3 CO OPERATIVE SERVICE SOCIETY LTD VERSUS C.S.T. -SERVICE TAX - AHMEDABAD [ 2023 (10) TMI 740 - CESTAT AHMEDABAD] following the decision of Hon ble Supreme Court in case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT] . It is found from the facts appearing from the show cause notice and impugned order that the demand is in respect of the membership contributions received from the members of the appellant - the service tax demanded under the category of Club or Association Services is not tenable and liable to be set aside. Event Management Services - HELD THAT:- It is found from the facts of the case records in light of the submissions made by the appellant and findings and contentions of adjudicating authority contained in the impugned order that the issue is limited to the scope of the applicability of definition of event management services given in section 65 of the Act whereas it is unequivocal that the appellant is a host and not the service provider to the event host - Since the appellant is the host and not the event manager, the issue of the appellant is squarely covered by the above referred circular and accordingly the demand made by the revenue under the category of Event Management is not tenable - the demand under the category of Event Management is unsustainable and liable to be dropped. Demand confirmed u/s 73A in relation to sponsorship services - HELD THAT:- The same is not examined since the appellant has not pressed the ground effectively. Time limitation - HELD THAT:- There are great force in the challenge made by the appellant on limitation. Since the demands confirmed in impugned order under the category of Club or Association Services and Event Management Services are found unsustainable it is not required to enter further into this aspect. Impugned order is modified accordingly and the appeal filed by the appellant is partly allowed.
-
2024 (12) TMI 154
Eligibility of the appellant in adjusting the excess service tax paid on account of credit notes issued by them to service receiver from the facts of the contracts and other records - Section 67 of the Finance Act, 1994 - HELD THAT:- It is very clear from the facts that the major part of the credit notes attributed to the reasons of quality and quantity variances of coal for which services were provided by the appellant. However, before dealing with the issue, it is imperative to find the facts conducive to the decision and the veracity and correctness of which is not disputed by either side. The appellant entered into tripartite agreement with AGPTE and the buyer i.e. State Trading Corporation, MMTC Limited etc i.e. Buyers. AGPTE and the appellant, though part of the same group, but distinct persons having incorporation in different countries. Roles and responsibilities between the appellant and AGPTE were clearly defined in the respective contracts, however they were jointly and severally responsible for delivery of coal at the TPS of the Consumers which means the appellant carried equal responsibility towards the quality and quantity of the coal being delivered at the TPS. Services provided by the appellant were subjected to service tax in respective invoices for which credit notes were issued - Credit Notes issued by the appellant were adjusted against the invoices raised by them to the Buyers for handling services and not recovered or adjusted against the coal invoices which were issued by the AGPTE. Revenue has not brought on record any evidence to plausibly demonstrate that the amounts of credit notes, in full or part, were recovered by the appellant from the AGPTE. It is very much transpiring from the working statements provided in support of the credit notes that the substantial part of the amount involved in credit notes was attributable to the quality and quantity parameters of coal. However, we find that the appellant has strongly pressed before us and which appears to be free from obvious doubts that the deterioration in terms of quality or quantity of coal which led to issuance of credit notes, were significantly and dominantly attributable to the process which started at unloading of coal from the vessel at the destination port at which point in time the role of the appellant as handling contractor began - there are force in the arguments placed by the appellant that the revenue has not brought any contrary evidences on record to demonstrate and show, without any iota of doubt, that the deviations were on account of movement of coal from load port to destination port and not after the coal came to the responsibility and custody of the appellant. Since it is established that the amounts of credit notes went into the invoices of service on which service tax was determined by the appellant, it has become immaterial and irrelevant as to whether the quality and quantity parameters were involving the goods . Shri Rahul Patel vehemently pressed the distinction between reasons attributable to sale of coal and reasons attributable to handling of coal while explaining that the reasons of credit notes, though germinating from what is known and classified as goods , is of no relevance. He explained that the reasons attributable to sale of coal must be distinguished from the reasons attributable to handling of coal - there are force in the arguments and theory explained by him that the facts of the case are clearly suggesting the reasons attributable to handling of coal and thus they shall be accepted as eligible reasons for credit notes against value of services, though they relate to the commodities. Section 67(1) laid down the machinery for determination of value of taxable service and according to which the amount which is charged for provision of service shall be the value of taxable services - the gross amount charged for determination of value of taxable services provided by the appellant to the Buyers shall be the amount of respective invoices further reduced by the credit notes and consequently the value of taxable services shall be such gross amount charged. Accordingly the amount of tax paid in respect of the amount of credit note which did not form part of the value of taxable services as per section 67(1) was liable to be adjusted against other liabilities in terms of rule 6 - the adjustment made by way of credit note to the Buyers by the appellant against the value of taxable service is factually as well legally correct and well within the framework of section 67 of the Act. It is a settled position of law that what could have been done or carried out is not the subject of taxation but the actual deeds of the parties are. There are always different options and alternatives available for doing business in commercial world, however the tax laws are designed to follow the acts and deeds actually made by the taxpayers and not what they could have alternatively carried out. There is no denial that under joint and several liability framework, the AGPTE can be held liable by the Buyers, but AGPTE has not been held liable by the Buyers in the fact of this case. Regarding another issue taken up by the adjudicating authority in impugned order that there was a single tender in response to which tripartite agreement was entered into by AGPTE and the appellant to supply coal under joint and several responsibility and thus it was a composite transaction. If the argument placed by the adjudicating authority is presumed to be correct, then the consequences, which the adjudicating authority failed to look at, will be necessarily to refund the entire amount of service tax charged and collected in respect of handling invoices - If the view of adjudicating authority is accepted, the entire levy of tax, which is otherwise discharged by the appellant, would fail and the appellant would entitle for refund of service tax and as consequence the demand for service tax on amount of credit notes would fail to survive. Since it is already decided that the reduction made by the appellant in the value of taxable service was within the framework of section 67 and consequently the tax paid on the entire invoice value being in excess of the value ought to have taxed, is eligible for adjustment under rule 6(3) against other liabilities, we are not inclined to decide the issue of composite transaction taken up by the adjudicating authority. The impugned order and the demands arising from the show cause notice are legally as well as factually incorrect and unsustainable and hence set aside - Appeal allowed.
-
Central Excise
-
2024 (12) TMI 153
Refund of Cenvat Credit - whether, for the purpose of refund of Cenvat Credit under the Cenvat Credit Rules, 2004 supply of goods treated as export under the, The Special Economic Zones Act of 2005 (SEZ Act) can also be treated as export for the purposes of the Cenvat Credit Rules and Central Excise Rules, 2002? - HELD THAT:- Since the orders under challenge were passed prior to 2015, the original adjudicating and the appellate authorities did not have the benefit of the circular dated 28 April 2015, wherein it is clarified that, rebate of duty on goods cleared from Domestic Tariff Area to SEZ would be treated as export for the purposes of Cenvat Credit Rules and Central Excise Rules. Therefore, in the interest of justice and by consent of both the parties the matter remanded back to the Appellate Authority to decide the issue afresh after considering the Circular dated 28 April 2015 and all the decisions which the parties wishes to rely upon. Appeal disposed off.
-
2024 (12) TMI 152
Recovery of Central Excise Duty with interest and penalty - Waiver of the amount of pre-deposit of Rs. 10 Crore for preferring an appeal before the CESTAT as provided under Section 35F of the Central Excise Act, 1944 - HELD THAT:- A bare perusal of Section 35F makes it clear that the petitioner is liable to make pre-deposit of Rs.10 Crores, being the minimum amount for filing an appeal before the CESTAT. This Court is, therefore, not required to examine whether there is any prima facie case in favour of the petitioner in view of the fact that after the insertion of Section 35F, no discretion whatsoever has been left for granting any waiver / reduction in the amount of pre-deposit for preferring an appeal. Therefore, this Court would not be in a position to grant waiver or to reduce the amount of pre-deposit for preferring an appeal on the ground of financial hardship as it would be contrary to the legislative intention. Moreover, this Court vide order dated 16.12.2021 has observed that the petitioner is precluded to make submissions on merits, hence, the submissions made qua prima facie case is required to be considered accordingly. In the opinion of this Court, the petitioner has the alternative efficacious remedy of filing an appeal before the CESTAT and only on the ground that the petitioner is unable to make payment of the amount of pre-deposit, the impugned orders cannot be challenged before this Court in writ jurisdiction. In the case of ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT] while considering the maintainability of a writ petition where an alternative remedy is available, the Hon ble Apex Court held that writ jurisdiction can certainly not be exercised when invoked to undermine or defeat the applicable statutory regime. Whether a prima facie case, as canvassed by learned advocate for the petitioner, can be considered at this stage to grant waiver of the amount of pre-deposit, which is a pre-condition for preferring an appeal before the CESTAT? - HELD THAT:- The petitioner has relied upon the decision of the Hon ble Jharkhand High Court in SRI SATYA NAND JHA, R/O STAFF QUARTERS, KENDRIYA VIDYALAY, VERSUS UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF FINANCE, NEW DELHI, CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, EASTERN ZONAL BENCH KOLKATA [ 2016 (7) TMI 1307 - JHARKHAND HIGH COURT] , which has upheld the vires of Section 35F of the Central Excise Act, 1944 by referring to the concession made by the respondent authority that, in extreme cases, the assessee is not remedy-less and that it can prefer a writ petition. The Hon ble Delhi High Court, while considering the aspect of wrong valuation has directed waiver of the amount of penalty in the case of MOHAMMED AKMAM UDDIN AHMED ORS. VERSUS COMMISSIONER APPEALS CUSTOMS AND CENTRAL EXCISE ORS. [ 2023 (5) TMI 23 - DELHI HIGH COURT] to grant an opportunity to the assessee to prefer an appeal. Whereas, the Hon ble Allahabad High Court, in the case of M/S. SHUKLA BROTHERS VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL OTHERS [ 2014 (12) TMI 1098 - ALLAHABAD HIGH COURT] has observed that the phrase undue hardship would also cover a case where the appellant has a strong prima facie case. It appears that the petitioner, therefore, must satisfy this Court that he has a good prima facie case to the effect that he is likely to succeed in the appeal. In order to come to the conclusion that the petitioner would succeed in the appeal, having a good prima facie case, so as to grant waiver of the pre-condition of pre-deposit for filing the appeal, the petitioner is required to disclose a situation where he may be either subjected to gross injustice and / or misfortune or he is liable to excessive demand, contrary to the facts and evidence on record or the impugned orders are perverse, coupled with the fact that the conduct of the petitioner is blotless - Considering the facts of the case and the three tests which may be considered to arrive at a prima facie conclusion as to whether the petitioner has a prima facie case for waiver of the pre-deposit or not, it is required to examine the facts, which are recorded in the order-in-original. Petition dismissed.
-
2024 (12) TMI 151
Levy of excise duty on the transit loss up to 1% in Naphtha and ATF cleared during the relevant period meant for export - whether in view of the Notification No. 46/2001 dated 26.06.2001 read with Notification No. 17/2001 dated 04.09.2004 and Circular No. 581/2001 dated 29.6.2001 and Circular No. 804/2005 dated 04.01.2005 whether the petitioner is liable to pay excise duty on transit loss up to 1% in view of the Circular No. 261 dated 30.10.1985 issued by the CBEC? - HELD THAT:- From the findings arrived at by the revisional authority, it is clear that the revisional authority has ignored the existence of the Circular No. 46/2001 dated 26.06.2001 which is still in operation for the purpose of facility of removal of petroleum products without payment of duty for export warehousing, meaning thereby that as per Circular No. 46/2001, till the goods reached to the warehouse for the export purpose, the same would be treated as removal of petroleum products at the factory gate and the petitioner would be governed by the Circular No. 261 dated 30.10.1985 by which the petitioner is entitled to exemption from duty upto 1% of transit loss. Reliance placed by the revisional authority on the clarification of the Circular No. 804/2005 is misplaced in the facts of the case as it pertains only to the storage loss in export warehouse/tanks whereas the petitioner has claimed the exemption from payment of excise duty on the transit loss till the products of the petitioner are stored in warehouse/tanks whether intermediate or at AFS including those with such mix-storage as per the Notification No. 261 dated 30.10.1985 which is taken into cognizance by the revisional authority in the order dated 14.02.1991 passed in the case of the petitioner. Thus in view of the Notification No. 46/2001 not being disturbed by the CBEC read with Circular No. 261 dated 30.10.1985, the petitioner would be entitled to transit loss upto 1% for non payment of duty on the products transferred from the refinery/factory to the place of storage for the purpose of export only. The impugned orders passed by the revisional authority cannot be sustained. The order passed by the Commissioner (Appeals) is restored to file and the demand raised in order-in-appeal regarding duty, interest and penalty is hereby quashed and set aside and all consequential orders are quashed and set aside - Petition allowed.
-
2024 (12) TMI 150
Liability for duty payment on returned goods and subsequent re-manufacturing - suppression and mis-declaration of goods - recovery of entire amount of credit availed on the inputs - shortage of goods - HELD THAT:- It is noticed that the appellant at the time of first clearance of the impugned goods duly reversed the Cenvat credit that was availed by them and had issued proper tax invoices after debiting the duty on the said products. However, for whatever reasons when the goods were returned it is noticed that the appellant did inform the department in writing and subsequently has entered the said goods in their RG-23A Part-I and availed the credit in RG-23A Part-II register. These factual inputs are also part of the excise returns for the relevant periods and have been reflected in the monthly ER-1 Returns. There is not a penny of merit in the department s case on this pretext. Prima facie this is a case of frivolous litigation initiated at the behest of the department, which, ought to have been strictly eschewed in the first place as no case is apparently made out against the appellant having rendered the requisite information in ER-1 returns. So far as the shortage of stock of LDPE re-processed granules (3,000 kgs.) and calcium carbonate (7,950 kgs.) is concerned, the appellant in defence have submitted that the duty thereon for an amount of Rs.37,343/- has already been paid by them and they undertake to pay interest thereon. Pursuant to the return of the goods the appellants successfully negotiated new customers for supplying the said material on which credit was availed is borne out from records. This aspect is provided in law in terms of Rule 16(2) of the Central Excise Rules and therefore cannot be faulted upon. The department having chosen to remain silent when the intimation dated 30.06.2008 upon return of the impugned goods was conveyed, it is not open for them to rake up the matter after almost 16-17 months - the said amount of Rs.11,24,760/- paid by the appellant on a charge of clandestine clearance made by the department is bereft of any valid reason thereto and cannot be sustained. Thus, no case of imposition of penalty equal to the said amount under section 11AC of the Central Excise Act, 1944 is also made, in respect of the said amount. Shortage of certain goods - HELD THAT:- In so far as shortage of certain goods noticed by the department during their visit on 11.06.2011 involving a duty amount of Rs.37,343/- is rightly payable by the assessee and has been reportedly paid. Nonetheless the appellant is also required to pay interest thereon and equivalent amount of penalty under section 11AC on the said amount of Rs.37,343/- - The appellant is directed to make good the amount of penalty and the amount of interest on the amount so upheld, within one month from the date of receipt of this order. Appeal disposed off.
-
2024 (12) TMI 149
CENVAT Credit - outward GTA service used in connection with clearance of excisable goods namely cement from their factory premises to buyer premises, in the fact that the cost of transportation was included in the assessable value on which central excise duty was discharged - HELD THAT:- The fact is not under dispute that the appellant have undertaken to deliver the goods at the customer s premises. The freight charges of GTA on which cenvat credit was taken is included in the assessable value of the excisable goods. This is evident from the excise invoice raised by the appellant. It is observed that the freight charges was not separately collected by the appellant, therefore, the same is deemed to be included in the assessable value on which the excise duty was paid. In this identical fact the issue in hand is covered by this Tribunal s judgment in the case of Ultratech Cement Ltd [ 2019 (2) TMI 1487 - CESTAT AHMEDABAD] which was upheld by the Hon ble Gujarat High Court in [ 2020 (3) TMI 1206 - GUJARAT HIGH COURT] . This issue was further considered by the Hon ble High Court of Kerala in Central Excise Appeal No.17 of 2019 in the case of Transformers and Electricals Kerala Ltd vs. Commissioner of Central Tax and Central Excise Kochi/ Bangalore [ 2024 (10) TMI 623 - KERALA HIGH COURT] , it was held that ' permitting the appellant to avail input tax credit in such circumstances would militate against the very Scheme of CENVAT credit, which is designed to avoid the cascading effect of tax and an ultimate burden on a consumer.' The issue involved in the present case is no longer res-integra and accordingly the appellant are entitled for cenvat credit on outward GTA in the facts of the present case. Hence, the impugned orders are set aside - Appeal allowed.
-
2024 (12) TMI 148
Dismissal of appeal for the reason that instead of filing the appeal within 60 days from the date of receipt of the order that was impugned in the appeal, the appeal was filed 3 days after the expiry of 60 days without even moving an application for condonation of delay - liability to pay central excise duty on the additional consideration collected a sales tax but not deposited with Government. HELD THAT:- The scheme that is involved is the Rajasthan Investment Promotion Scheme, 2010 which deals with grant of subsidy, its quantum and the procedure for claiming it. This issue, has been decided by this Tribunal in M/S HARIT POLYTECH PVT. LTD. VERSUS COMMISSIONER, CENTRAL EXCISE CGST- JAIPUR I, GANPATI PLASTFAB LTD., M/S APEX ALUMINIUM EXTRUSION PVT. LTD., M/S MAHA MAYAY STEELS, M/S. TIRUPATI BALAJI FURNACES PVT. LTD., M/S. TRANS ACNR SOLUTIONS PVT. LTD., M/S. FRYSTAL PET PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS CGST- ALWAR [ 2023 (3) TMI 1120 - CESTAT NEW DELHI] where it was held that 'The subsidy amount under the promotion policy does not affect the selling price of the goods.' The matter was not examined on merits by the Commissioner (Appeals) as the appeal was dismissed only on the ground of being barred by time. As the issue on merits has been decided by the Tribunal, it is appropriate not to remand the matter to the Commissioner (Appeals) for passing a fresh order and have proceeded to decide the appeal on merits. The impugned order dated 17.01.2020 passed by the Commissioner (Appeals) and the order dated 22.03.2019 passed by the Superintendent are, therefore, set aside - appeal is allowed.
|
9911796707
