Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 9, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI Short Notes
Highlights / Catch Notes
GST
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Bail cancelled for enabling firms to illegally avail input tax credit.
Case-Laws - HC : The High Court cancelled the bail granted to the respondent Gautam Garg, finding that the lower court had misconstrued the facts and legal position u/s 132 of the CGST Act. The Court held that the absence of material indicating the accused as the manager of the firms is not essential for prosecution u/s 132, which covers those who "cause to commit" offenses related to availing input tax credit without issuing invoices or supplying goods. The legislature amended Section 132 to catch hold of offenders enabling companies to avail input credit illegally. The Court found the respondent's arguments regarding accountability of only individuals engaged in management unsustainable and observed that while considering bail, courts should not delve into the legality of arrest unless there is a gross violation.
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Excess Credit Claim Quashed: Inadvertent IGST Omission Not Wrong Availment.
Case-Laws - HC : The High Court allowed the petition and quashed the order, declaring that the appellant shall not be seen as having availed excess credit for initiating proceedings u/s 73 of the GST Act. The case revealed no wrong availment of credit, and the appellant's mistake of omitting to mention IGST figures separately in Form GSTR 3A was inadvertent and technical, insignificant as there was no outward supply attracting IGST. Proceedings u/s 73 are attracted only when tax has not been paid, short paid, erroneously refunded, or input tax wrongly availed or utilised, which did not occur in this case.
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Promotional freebies denied input tax credit, CGST Act upheld.
Case-Laws - HC : The High Court dismissed the petition, upholding the denial of input tax credit availed on goods purchased by the petitioner for sales promotion of manufactured goods for the respective assessment years. Section 17(5)(h) of the GST enactments prohibits input tax credit on goods disposed of by way of gift or free samples. The court held that the petitioner was not entitled to avail input tax credit on T-shirts and gold coins purchased for sales promotional activities as they constituted goods disposed of by way of gift or free samples u/s 17(5)(h).
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Hydraulic Firm's Imported Machinery ITC Claim Rejected Due to Bill Entry Discrepancy.
Case-Laws - AAR : The Appellate Authority for Advance Ruling (AAR) ruled that R.V. Hydraulic Services is not eligible to claim Input Tax Credit (ITC) on the Integrated Goods and Services Tax (IGST) paid for the imported machinery (Davi Full Hydraulic Plate Roll). The Bill of Entry was in the name of M/s Promau SRL, C/o IMTEX, and not in the name of the applicant. As per Section 16(2)(a) read with Rule 36(1)(d) of the CGST Act, 2017 and Section 20 of the IGST Act, a valid Bill of Entry in the recipient's name is a prerequisite to claim ITC on imported goods. Since the essential documentary requirement was not fulfilled, the applicant's claim for ITC was denied.
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Leasing commercial property to government office - GST applicable at 18%.
Case-Laws - AAR : The Advance Ruling Authority held that the applicant, being the lessor and registered supplier of services for leasing a commercial property, is liable to remit Goods and Services Tax (GST) on the lease consideration u/s 9 read with Section 15 of the GST Act. The leasing of a commercial property to the Government of Andhra Pradesh for setting up the Institution of Lokayukta is a supply of service subject to GST at 18% (SAC code 997212). The applicant cannot rely on Notifications 4/2022 and 5/2022, which pertain to residential dwellings and are inapplicable to the leasing of commercial property. The essence of a lease involves the transfer of possession and user rights against consideration, and the lessor retains the right to possession after the lease term.
Income Tax
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Income Tax exemption: Court to examine if violation impacts entire income or just violating part.
Case-Laws - SC : The Supreme Court held that the High Court should formulate the second substantial question of law proposed by the Revenue regarding whether violation of conditions u/s 13(1)(c) would result in denial of exemption on the whole income or be restricted to the income in violation of Section 13(1)(c). The Court directed the High Court to answer this question along with the already admitted question of law, without expressing any final opinion on the merits. The case pertained to the non-admission of a substantial question by the High Court and the deletion of addition made on account of cash donation collected outside the books of accounts by the Income Tax Appellate Tribunal.
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Tax penalty upheld for unsubstantiated undisclosed income despite voluntary disclosure.
Case-Laws - SC : The Supreme Court dismissed the appeal and concurred with the Delhi High Court's interpretation of Section 271AAA(2) of the Income Tax Act, 1961. The assessee had declared a surrendered amount as "additional income," which was accepted by the Revenue. However, the assessee failed to substantiate the manner in which the undisclosed income was derived as required u/s 271AAA(2). Consequently, the lower appellate authorities erred in holding that the conditions in Section 271AAA(2) were satisfied by the assessee, and the penalty u/s 271AAA(1) was upheld.
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IT revisits: Notices for 2009-10 to 2014-15 upheld, income over Rs. 50L attracts 10-yr reassessment period.
Case-Laws - HC : The High Court held that the impugned notices issued for Assessment Years 2009-10 to 2014-15 u/s 153C of the Income Tax Act were valid and not time-barred. The court applied the extended period of 10 years for reassessment proceedings, as the amount of income escaping assessment exceeded Rs. 50 lakh. The 10-year period was computed from the Assessment Year 2018-19, considering the date when the Assessing Officer recorded satisfaction after receiving the seized material on 23.10.2019. The court harmoniously interpreted Sections 153A and 153C, relying on the Supreme Court's decision in Vikram Sujit Kumar Bhatia, which held the second proviso to Section 153A as clarificatory. Consequently, the notices were upheld as valid within the extended 10-year limitation period.
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Benchmarking analysis: Comparable selection key for arm's length pricing under transfer pricing rules.
Case-Laws - HC : The High Court upheld the decision of the ITAT regarding the selection of comparables for benchmarking analysis under the Transactional Net Margin Method (TNMM). The court concurred that companies like Kitco Ltd., TCE Consulting Engineers Ltd., Project and Development India Ltd., and Mahindra Consulting Engineers Ltd. were not appropriate comparables for the assessee, who was engaged in engineering and design services. Despite the TNMM's tolerance for functional dissimilarities, the comparables' broad functional profiles must be similar. Comparing entities with different functionalities solely based on the TNMM's tolerance would be erroneous. The ITAT's findings aligned with the arm's length principle provisions u/s 92C of the Income Tax Act.
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Tax dispute: Capital gains vs. business income on sale of securities.
Case-Laws - HC : The High Court remanded the proceedings to the Assessing Officer to consider the assessee's alternate claim for loss arising out of Held till Maturity securities under the head 'income from business and profession'. The Income Tax Appellate Tribunal's finding that no material was supplied by the assessee to substantiate the claim was held unsustainable. The assessee accepted the Income Tax Appellate Tribunal's decision treating profits from the sale of Held till Maturity securities as capital gains.
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Income Tax Assessment Order challenged; HC directs Taxpayer to exhaust statutory appeal remedy first.
Case-Laws - HC : The High Court dismissed the writ petition filed against the Assessment Order, as the petitioner had already availed the statutory remedy of filing an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which is presently pending. The Court held that the petitioner cannot approach the Court to evade payment of the statutory deposit required while preferring the appeal. The petitioner was granted liberty to file necessary applications before the CIT(A), raising all grounds to assail the Assessment Order. The CIT(A) was directed to hear and dispose of the pending appeal as per the provisions of law.
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Taxpayer's land purchase value disputed, District Valuation Officer's valuation upheld for stamp duty.
Case-Laws - AT : The assessee disputed the stamp duty value of land purchased, leading to the matter being referred to the District Valuation Officer (DVO). The DVO's valuation, based on comparable cases not objected by the assessee, was adopted as the assessee had not provided any other registered valuer's report. The CIT(A) upheld the addition u/s 56(2)(vii)(b)(ii) for the difference between purchase price and DVO's valuation, as the assessee failed to controvert the findings. The ITAT found no merit in the assessee's grounds and upheld the CIT(A)'s order, deciding against the assessee and confirming the addition u/s 56(2)(vii)(b)(ii).
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Tax notice validity hinges on issuance timeline from original return filing date.
Case-Laws - AT : The ITAT held that the limitation period for issuing a notice u/s 143(2) is relevant to the financial year and assessment year. When the Assessing Officer considered the return of income after rectification for initiating assessment proceedings, the relevant date for initiation dates back to the original date of filing the return of income. Therefore, the time limit for issuing the notice u/s 143(2) must be considered from the date of filing the original return of income. Following the decision in SMC COMTRADE LTD. VERSUS ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 24 (1), the Tribunal treated the notice issued u/s 143(2) as invalid. Consequently, further proceedings initiated based on the invalid notice were held to be bad in law, and the assessment order passed on the basis of the invalid notice was quashed. The assessee's appeal was allowed.
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Tax tribunal grants relief: bogus purchases rejected, additions annulled due to lack of incriminating evidence.
Case-Laws - AT : Regarding the additions made u/s 153A, the ITAT held that since no incriminating material was referred to by the Assessing Officer (AO) during the search, no additions could be made in a completed assessment as per the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd. Secondly, concerning the addition of bogus purchases, the ITAT observed that the purchases were accounted for in the regular books, and the source of payments was duly explained. Hence, the provisions of Section 69C were not applicable. Thirdly, regarding the addition u/s 69A, the ITAT upheld the Commissioner of Income Tax (Appeals) [CIT(A)]'s deletion of the addition, considering the assessee's retracted undisclosed income figure backed by credible evidence and the presumption u/ss 132(4A) and 292C.
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Tax dept's arbitrary order set aside for violating natural justice; assessee's submissions ignored.
Case-Laws - AT : The ITAT held that the order passed u/s 263 by the PCIT was in gross violation of the principles of natural justice. The Tribunal observed that the order disregarded the assessee's legal and factual submissions without any discussion or rebuttal, rendering the proceedings a mere formality. Furthermore, the Tribunal noted that the assessee had opted for the Vivad se Vishwas scheme, paid the due taxes, and provided judicial precedents supporting their claim for deduction u/s 10AA. The Assessing Officer, after considering the submissions, took a legally plausible view and did not disturb the deduction claim. The Tribunal also highlighted that several precedents have held that once an assessee opts for the Vivad se Vishwas scheme and pays taxes, the tax proceedings for that year cannot be re-agitated through Section 263 proceedings. Considering it was the ninth year of the deduction claim and the principle of consistency, the Tribunal ruled in favor of the assessee, setting aside the order passed u/s 263.
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Revival firm allowed set-off of losses against income as per CBDT circular based on BIFR order.
Case-Laws - AT : The ITAT held that the Central Board of Direct Taxes (CBDT) circulars are binding on the Income Tax Authorities. The Board for Industrial and Financial Reconstruction (BIFR) had recommended reliefs and concessions, including the set-off of carried forward business losses against business income, which were considered by the CBDT. Since the BIFR's recommendations were made after considering the views of the Income Tax Department, the assessee was entitled to the benefit of setting off brought forward business losses against business income as per the CBDT circular. The Tribunal relied on the Madras High Court's decision in CIT vs. Lakshmi Machine Works Ltd., which held that the provisions of the Sick Industrial Companies Act (SICA) would override the Income Tax Act's provisions. Regarding the disallowance u/s 14A, the interest expense disallowance was deleted as substantial interest-free funds were available, but the administrative expense disallowance was upheld due to lack of details.
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Tribunal upholds tax authority's order on booking advance, deletes overstatement of purchases & unexplained expenditure.
Case-Laws - AT : The ITAT upheld the CIT(A)'s order regarding three additions made by the Assessing Officer. Firstly, the receipt treated as consultancy income was rightly held to be a booking advance by the CIT(A) as no evidence of consultancy services was found and no TDS was deducted. Secondly, the addition for overstatement of purchases was correctly deleted by the CIT(A) after considering the assessee's explanation and finding no disparity between book data and sundry creditor details. Thirdly, the CIT(A)'s deletion of addition for unexplained expenditure was upheld as the chart for loan repayments through banking channels was based on bank statements filed during assessment, and the Revenue failed to controvert these factual findings.
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Cash deposits from genuine trade receipts exempted from tax during demonetization period.
Case-Laws - AT : The Tribunal held that the assessee's cash deposits during the demonetization period were from sale proceeds and collections from sundry debtors/trade debtors. The assessee maintained proper books of accounts subjected to tax audit, and the sales were reflected and offered to tax. Adding the same again would amount to impermissible double taxation. The assessee discharged the burden of proving the source of the cash deposited, and the authorities failed to rebut it. The Tribunal found no prohibition on dealing with Specified Bank Notes until December 31, 2016, under the Specified Bank Notes (Cessation of Liabilities) Act, 2017. Consequently, the assessee's appeal was allowed.
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Penalty waived on compensation for contract termination. No concealment, mere income head change.
Case-Laws - AT : The ITAT deleted the penalty imposed u/s 271(1)(c) for determination of the correct head of income. The assessee had treated compensation received on termination of agency rights as business income. The ITAT relied on the jurisdictional High Court's decisions in Bennett Coleman & Co Ltd and CIT vs Procter & Gamble Hygiene and Healthcare Ltd, which held that no penalty could be levied for a mere change of head of income by the Assessing Officer, unless concealment of income or furnishing of inaccurate particulars was established. Consequently, the penalty was deleted regarding the compensation received on termination of the agreement. Additionally, penalties on three other additions were also deleted as those issues were restored to the Assessing Officer's file.
Customs
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Court allows amendment to claim export incentive despite technical error.
Case-Laws - HC : The High Court directed the respondent authorities to allow the petitioner to amend the shipping bills u/s 149 of the Customs Act, 1962, and process the claim for the Merchandise Exports From India Scheme (MEIS) benefit. The court held that when the substantive conditions are satisfied, the benefit cannot be denied due to a technical error or lacunae in the electronic system. The petitioner's non-declaration of intent to avail the MEIS benefit on the shipping bills was a curable defect, and the authorities were unjustified in denying the MEIS benefit. The petition was disposed of in favor of the petitioner.
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Shipping Bills conversion rejected wrongly; Gujarat HC struck down circular clause as unconstitutional.
Case-Laws - AT : The Commissioner's rejection of the appellant's requests for conversion of DFIA Shipping Bills to Drawback Shipping Bills, relying on Para 3(a) of the CBIC Circular No. 36/2010-Customs, was held to be incorrect. The Gujarat High Court had previously ruled that Para 3(a) of the said Circular was ultra vires Articles 14 and 19(1)(g) of the Constitution of India and ultra vires Section 149 of the Customs Act, 1962. Since the Commissioner's rejection was solely based on the struck-down Para 3(a), the impugned order was held to be bad in law. Furthermore, under Para 4.28(e) of the Handbook of Procedures 2009-14, the appellant could apply for conversion after the DFIA licenses were cancelled, which they promptly did. No time limit was prescribed for seeking conversion. Consequently, the appellant was entitled to conversion of the Shipping Bills into drawback shipping bills. The CESTAT allowed the appeal.
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Customs Tribunal allows appeal against duty demand for manufacturing in bonded premises.
Case-Laws - AT : The CESTAT allowed the appeal filed by the Appellant against the demand of customs duty. The Tribunal held that the Appellant had obtained a bonded warehouse license u/s 58 of the Customs Act, 1962, and the manufacturing activity was carried out within the licensed premises in the knowledge of the Revenue authorities since 1986. Despite the impracticable conditions imposed under the license, the Revenue did not raise any objections for over 30 years. The Tribunal observed that there was no allegation of diversion or misuse of imported goods by the Appellant. The amendment to the license in 2017, enlarging the bonded area to the entire factory premises, was treated as a curative measure with retrospective effect from 2014. Consequently, the demands raised by invoking Sections 28 and 72 of the Customs Act were set aside by the Tribunal.
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Customs Broker's License Revocation Overturned Due to Procedural Lapses by Licensing Authority.
Case-Laws - AT : The Tribunal set aside the order of the licensing authority that revoked and forfeited the security deposit of a Customs Broker. The licensing authority alleged breach of regulations 10(d), 10(e), and 10(f) of the Customs Brokers Licensing Regulations, 2018. However, the Tribunal found that the substantial delay between the offence report in May 2022 and the final determination in January 2024 violated the timelines prescribed in Regulation 17 of the said Regulations. The licensing authority's attempt to justify the delay by citing transfer of officers was rejected, as the authority is responsible for efficient discharge of statutory and administrative roles. The Tribunal held that the mandatory stipulations in Regulation 17 were treated as directory without adhering to the Bombay High Court's decision in Unison Clearing Pvt. Ltd. case, rendering the proceedings invalid at the threshold.
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Insulin products from recombinant DNA tech classified as 'mono-component', exempted as lifesaving drugs.
Case-Laws - AT : The CESTAT held that insulin products manufactured using recombinant DNA technology would qualify as 'mono-component insulin' and are entitled to exemption under Notification No. 12/2012 Customs dated March 17, 2012, as they are lifesaving drugs. The classification of the imported insulin products is based on their content rather than source. The Tribunal accepted that 'mono-component' refers to the purity of insulin rather than its source, and there was no evidence that the disputed products had impurity levels higher than 1 PPM. The CESTAT upheld the classification of the imported insulin products under chapter heading 3004 31 10, making them eligible for the exemption as lifesaving drugs.
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Customs tribunal rules machinery for coating PET bottles classifiable under CTI 8422 3000 & parts under 8422 9090.
Case-Laws - AT : The Customs, Excise and Service Tax Appellate Tribunal held that the imported machinery "Innopet Plasmax System 20Q" used for coating PET bottles for aerating beverages/aerated waters is appropriately classifiable under Customs Tariff Item 8422 3000, and its parts under CTI 8422 9090 of the Customs Tariff Act, 1975. The Tribunal set aside the impugned order passed by the Commissioner of Customs classifying the goods under CTI 8479 8999, allowing the appeals in favor of the appellants.
IBC
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IBC's Resolution Plan trumps creditor claims: Operational creditor's execution plea rejected after corporate revival.
Case-Laws - HC : The High Court held that the Execution Application filed by the Applicant against the Respondent does not survive due to the approved Resolution Plan under the Insolvency and Bankruptcy Code (IBC). As per the Supreme Court's ruling in Ghanshyam Mishra case, once a Resolution Plan is approved by the Adjudicating Authority u/s 31(1) of the IBC, all claims not part of the Resolution Plan stand extinguished. No proceedings can be initiated or continued for claims not included in the approved Resolution Plan. The Respondent's Resolution Plan was approved by NCLT on March 5, 2020, and upheld by NCLAT on July 6, 2023. The Applicant's claim, being an operational creditor's claim prior to the Resolution Plan approval date, is entitled to NIL payment under paragraph 27 of the approved Plan. Therefore, the claim stands rejected and extinguished, rendering the Execution Application infructuous. Consequently, the High Court dismissed the Execution Application and connected Notice.
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Corporate debtor's appeal dismissed, bank's IBC petition admitted based on post-COVID defaults exceeding threshold.
Case-Laws - AT : The NCLAT dismissed the appeal filed by the corporate debtor against the order admitting the application u/s 7 of the Insolvency and Bankruptcy Code (IBC) filed by the Union Bank of India. The NCLAT held that there was a clear acknowledgment of outstanding dues by the corporate debtor prior to the Section 10A period. During the 10A period, additional facilities were extended, and the statements of account indicated an overdue amount of more than Rs. 1 crore as of March 31, 2021. The NCLAT referred to the Supreme Court's judgment in Laxmi Pat Surana vs. Union Bank of India, which held that the date of declaration of a loan account as a Non-Performing Asset (NPA) can be reckoned as the date of default for initiating action u/s 7 of the IBC. The NCLAT observed that while defaults during the 10A period cannot be the basis for proceedings u/s 7, the corporate debtor had committed continuous defaults even after the 10A period, exceeding the threshold amount. Therefore, the NCLAT upheld the Adjudicating Authority's order admitting the Section 7 application.
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Resolution Plan approved by creditors upheld, no violation of IBC regulations.
Case-Laws - AT : The NCLAT dismissed the appeal, holding that the Resolution Plan submitted by the Resolution Applicant did not violate any provisions of law, including Regulation 37(ba) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Tribunal ruled that Regulation 37 requires the Resolution Plan to provide measures as necessary, including but not limited to those enumerated in clauses (a) to (m). Clause (ba) pertains to restructuring through merger, amalgamation, or demerger, which is required only when necessary for insolvency resolution. The NCLAT upheld the commercial wisdom of the Committee of Creditors in approving the Resolution Plan, stating that the Adjudicating Authority lacks jurisdiction to analyze or evaluate such commercial decisions unless the Plan violates Section 30(2) of the Insolvency and Bankruptcy Code.
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NCLAT upholds CoC's commercial wisdom over RP's procedural lapses in CIRP.
Case-Laws - AT : The NCLAT held that the erstwhile Resolution Professional (RP) acted in deference to the commercial wisdom of the Committee of Creditors (CoC), which is paramount. Although the Adjudicating Authority observed irregularities and non-compliance with the CIRP Regulations by the RP, the NCLAT modified the order to expunge those adverse remarks against the RP's performance and conduct. The RP had taken necessary steps envisaged under the IBC for conducting the CIRP, including preparing the Information Memorandum, inviting Expressions of Interest, appointing a Transaction Auditor, and filing applications u/ss 43 and 66. The CoC had approved the resolution plan with the requisite majority, exercising its commercial wisdom. Therefore, the RP cannot be blamed for breaching the IBC by acting on the CoC's decision. The rest of the Adjudicating Authority's order remained unchanged.
PMLA
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Liquor scam accused denied bail in Rs.1660 cr money laundering case.
Case-Laws - HC : The High Court rejected the application for grant of regular bail filed by the applicant accused of offences u/ss 420, 467, 468, 471, 120-B IPC and Sections 7 & 12 of the Prevention of Corruption Act, 1988 relating to a liquor scam and money laundering case. The Court observed that economic offences are grave, affecting the country's economy, involving huge loss of public funds posing a serious threat to financial health. The applicant played a pivotal role in facilitating payment of bribes to criminal syndicates involved in extorting illegal commissions and unauthorized sale of liquor causing an estimated Rs.1660 crore loss to the state exchequer. Considering the severity of offences, gravity of accusations, ongoing investigation and the Supreme Court's view on corruption being an enemy of the nation, the Court opined release on regular bail was not proper.
Service Tax
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Taxpayer wins relief from redemption fine under Sabka Vishwas Scheme.
Case-Laws - HC : The High Court disposed of the petition, holding that the rejection of the petitioner's declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) on the ground that redemption fine is not covered by the Scheme was contrary to the Court's previous decision. The Court ruled that once the petitioner's application under the SVLDR Scheme accepting payment of excise duty is accepted, the declarant is immune from imposition of any redemption fine, and the benefit of the Scheme extends to the redemption fine as well. Consequently, the ground for rejection was held to be bad in law.
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Contractor's services for Defense optical fiber project exempt from service tax.
Case-Laws - HC : The High Court allowed the writ petition and issued a writ of certiorari quashing the impugned advance ruling dated 23 March 2018 passed u/s 28E of the Customs Act, 1962. The court held that the services provided by the petitioner to BSNL for implementation of the Optical Fibre Cable Network Project for the Defence Services, Government of India, were exempt from service tax under Entry 12A of the Mega Exemption Notification dated 20 June 2012 read with Section 102 of the Finance Act, 1994. Further, the notional services provided by the petitioner to BSNL were also exempt by virtue of Entry 29(h) of the said Notification, which exempts sub-contractors providing works contract services to another contractor providing works contract services.
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Limitation Period for Tax Recovery Can't Be Extended Without Willful Suppression or Tax Evasion.
Case-Laws - HC : The court held that the extended period of limitation under the proviso to Section 73 of the Finance Act, 1994 could not be invoked against the appellant as there was no willful suppression of facts or deliberate attempt to evade payment of tax. The imposition of penalty u/s 78 of the Finance Act, 1994 and Rule 15(3) of the CENVAT Credit Rules, 2004 was not warranted in the absence of malafide intent on the part of the appellant. The case did not fall within the ambit of the proviso to Section 73 or sub-section 4 of Section 73 of the Finance Act, 1994.
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Demands quashed for lack of evidence on service recipients and consideration.
Case-Laws - AT : The CESTAT allowed the appeal filed by the appellant against the demands raised for service tax on franchise service, maintenance or repair service, commercial training or coaching service, management or business consultant service, reimbursable expenses, and manpower recruitment and supply service. The Tribunal held that the appellant cannot be treated as a franchisee or representative of Aircom International Company, U.K., based on the terms of the agreement between them. Regarding the other services, the Tribunal found that the show cause notice lacked proper identification of service recipients, consideration paid, and reasoned grounds for demand, rendering the allegations unsubstantiated. Consequently, the demands along with interest and penalties were set aside.
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Non-disclosure in tax return doesn't automatically mean intent to evade tax; Suppression must be willful.
Case-Laws - AT : Extended period of limitation of five years: Mere non-disclosure of receipts in the service tax return does not automatically mean there was an intent to evade payment of service tax. Suppression of facts has to be willful and with an intent to evade tax, as held by the Supreme Court. In this case, the department had already scrutinized the records earlier, and the show cause notice was based on entries available in the balance sheet. Therefore, the impugned order invoking the extended period was set aside, and the appeal was allowed.
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Export of Services Benefits Accrued Abroad, Eligible for Tax Abatement.
Case-Laws - AT : The CESTAT held that the marketing support services provided by the Appellants to Nokia Corporation Finland qualified as export of services, as the benefits accrued outside India. The taxable event is the rendition of service, not the payment date. Hence, service tax was rightly paid at 10.12%, the rate prevailing when services were rendered. The Appellants were eligible for abatement under Notification No. 1/2006-ST for turnkey projects involving supply of goods and services. The extended period of limitation was wrongly invoked by the Department, as it failed to substantiate allegations of willful suppression of facts by the Appellants. Consequently, the service tax demand was set aside, and the appeal was allowed in favor of the Appellants.
Central Excise
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Excess excise duty paid by manufacturer on goods cleared to institutional buyers remanded for redetermination.
Case-Laws - AT : Refund Claim: The appellant had inadvertently paid excess excise duty for the months of February and March 2013 while clearing goods from the factory to institutional buyers. Although new evidence is generally not permitted at the appellate stage, the Tribunal accepted the Chartered Accountant's statement and reconciliation sheet as these were department-prescribed documents for sanctioning refunds. The Tribunal observed that since the buyers had agreed to a pre-determined cum-duty price, the chances of passing on the excess excise duty were remote. Denying substantive benefits on technical grounds needs to be avoided. The Original Authority was directed to reconsider the refund claim after examining all documents submitted by the appellant.
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Railways raw material job worker not 'manufacturer', excise duty demand quashed.
Case-Laws - AT : Job Work: The Tribunal observed that there was no evidence to substantiate the allegation that the appellant carried out activities amounting to 'manufacture' such as quality testing or labelling at their premises. Without identification and quantification of the goods allegedly manufactured, the show cause notice was deemed ex-facie bad in law. Consequently, the demand for central excise duty, interest, and penalties imposed on the appellant company and its partner were set aside. The Tribunal further held that since no suppression of facts with the intention to evade tax was established, invoking the extended period of limitation to demand duty was legally unsustainable.
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Case Laws:
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GST
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2024 (12) TMI 400
Application for cancellation of bail under Section 439(2) of Cr.P.C. - evasion of GST - collection of fake bills from fake and non-existent firms based in Sirsa Haryana without supplying any goods - statement is admissible evidence or not - HELD THAT:- The Court analysed that no material is available on the record to suggest that the accused petitioner, the manager of the three companies, generated fake and goodless invoices for claiming input credit tax. The analysis of the Court below suffers from perversity as it is not the condition precedent for prosecuting a person under section 132 of the CGST Act. The provisions explicitly state that whoever commits or causes to commit and retain the benefits arising from any supplies, goods, or both without the issue of any invoice or without supplying the goods avails input tax credit is liable to prosecution. Thus, the absence of material indicating the accused petitioner as the manager of the three firms is not essential. The Court below did not assess the consequence and spirit of the provision under section 132 of the CGST Act. The legislature purportedly amended section 132 of the CGST Act in the Finance Act, 2020 after adding the phraseology causes to commit just after Whoever commits to take hold of the actual offender who enables the company or companies by generating fake invoices or aiding such companies in availing the input credit illegally. The earlier provisions lacked the provision regarding catching hold of the persons behind the curtains, enabling the companies to avail of the input credit by falsifying and manoeuvring the documents. Such unethical offenders were free from the clutches of the law-enforcing agencies. The arguments raised by the respondent's counsel are misconceived and against the express provisions of section 132 of the CGST Act. The arguments that only the individuals engaged in the company's management are accountable for the prosecution are unsustainable - The Court below while considering the bail application of respondent, did not consider the gravity of the offences and enlarged the respondent on bail misconstruing the facts and the legal position. It is also pertinent to mention here that while considering the bail application, it is not desirable for the Court to enter into the question of legality of the arrest, the legality of the arrest can be questioned only if there is a gross violation of any provision of the Act. In the present case, before arresting the respondent, the respondent was duly informed regarding grounds of arrest. This Court deems it appropriate to cancel the bail granted to respondent-Gautam Garg S/o Shri Rajesh Garg, the same stands cancelled. The application for cancellation of bail is allowed and the order granting bail dated 03.11.2023 passed by learned Additional Sessions Judge No. 2, Jaipur Metropolitan-II is cancelled accordingly. Application allowed.
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2024 (12) TMI 399
Wrongful availment of input tax credit as CGST and SGST instead of IGST - mismatch between Form GSTR-2A and Form GSTR-3B due to incorrect reporting of IGST credit - HELD THAT:- In the instant case, the notice issued to the appellant, and the demand confirmed against him, were in proceedings initiated under Section 73 of the GST Act. The said provisions are attracted only when it appears to a proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax has been wrongly availed or utilised for any reason. The case here clearly reveals that there has been no wrong availment of credit, and that the only mistake committed by the appellant was an inadvertent and technical one, where he had omitted to mention the IGST figures separately in Form GSTR 3A. The mistake was also insignificant because it is not in dispute that there was no outward supply attracting IGST that was effected by him. The impugned judgment of the learned Single Judge is set aside and the Writ Petition is allowed by quashing Ext.P14 order and declaring that the appellant shall not be seen as having availed excess credit for the purposes of initiating proceedings under Section 73 of the GST Act. Petition allowed.
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2024 (12) TMI 398
Denial of Input Tax Credit availed on goods purchased by the petitioner for sales promotion of the goods manufactured by the petitioner for the respective Assessment Years - stock variation - HELD THAT:- Section 16(1) of the respective GST enactments provides credit to an assessee, who is entitled to take credit of input tax charged on any supply of goods or services or both which are used or intended to be used in the course of furtherance of his/her business and that the said amount shall be credited to the Electronic Credit Ledger of such person - The credit that is available under Rule 16(1) of the respective GST enactments is subject to such conditions/restrictions as may be prescribed and in the manner specified in Section 49 of the respective GST enactments - Section 17(5) is an exception to not only Section 16(1) of the respective GST enactments but also Section 18(1) of the respective GST enactments. In this case, this Court is not concerned with the situations contemplated under Section 18(1) of the respective GST enactments. As per Section 17(5) of the respective GST enactments, notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the supplies as stipulated in sub-clause (a) to (i) of Section 17 (5) of the respective GST enactments. Sub-clause (h) to Section 17(5) of the respective GST enactments makes it clear that no input tax credit shall be available in respect of the goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples - The expression goods disposed by way of gift or free samples will specifically apply to the goods whether manufactured or traded by an assessee under the provisions of the respective GST enactments. Therefore, it cannot be said that the petitioner is entitled to input tax credit for the items meant for sales promotional activities - Be that as it may, since the provisions of the respective GST enactments are clear in terms of Section 17(5)(h) of the Act, the petitioner was not entitled to avail the input tax credit on T-Shirts and Gold Coins purchased for Sales Promotional Activity. Petition dismissed.
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2024 (12) TMI 397
Input Tax Credit - credit on the IGST paid for the purchase of the imported machinery - HELD THAT:- The machinery (a Davi Full Hydraulic Plate Roll) was imported by M/s Promau SRL, C/o IMTEX a foreign supplier and displayed at the International Machine Tool and Manufacturing Technology (IMTEX) exhibition held on January 19th to 23rd in Bangalore. The Bill of Entry No. 9280751, dated December 18, 2023, was in the name of M/s Promau SRL, C/o. IMTEX, not in the name of the applicant. The goods were cleared from customs by claiming exemption under Customs Notification 08/2016 from payment of applicable duties (Customs, SWS, IGST) by M/s Promau SRL, C/o. IMTEX. It is pertinent to mention here that the Customs Exemption Notification 08/2016, dated December 5, 2016, issued by the Government of India provides specific customs duty exemptions on goods imported for exhibitions or fairs in India. The goods imported in the present case were exempted from payment of duties relying on the above notification. The notification offers conditional exemptions from customs duties for certain goods imported temporarily for events such as exhibitions, fairs, conventions, and similar gatherings, including trade shows and demonstrations. This exemption helps companies avoid high customs duties on goods that are not intended for permanent sale or use in India but are displayed temporarily. The permissibility of claim for Input Tax Credit (ITC) by R.V. Hydraulic Services on the Integrated Goods and Services Tax (IGST) paid for imported machinery can be determined based on the statutory documentary requirements - The essential documentary requirements and the conditions to claim ITC are enumerated under section 16 of CGST act read with Rule 36 which apply mutadis mutandis under IGST. In the present scenario the claim for ITC by the applicant must have such essential documentation in their name to establish entitlement. Here, the Bill of Entry was in the name of M/s Promau SRL, C/o IMTEX and out of charge has been issued for the aforesaid goods. Section 16 (2)a read with Rule 36 (1) d of the provisions of APGST Act, 2017 and Sec 20 of IGST act. Rule 36 (1) (d) stipulates that a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made there under for the assessment of integrated tax on imports. The manual TR-6 challan used for IGST payment does not fulfill the documentation requirements outlined in rule 36 of the CGST Act for claiming ITC claim. Therefore, the Appellant is not eligible to claim ITC.
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2024 (12) TMI 396
Levy of GST on rent who has to pay owner or tenant - special provision in GST Act for Government Occupied Private Building - Who is liable for GST on rent owner or tenant? - GST on rent has to borne by owner for Government occupied private buildings or not. HELD THAT:- GST shall apply on lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, which is a supply of service. Lease is where possession is transferred along with the right to use immovable property with a duty to care, protect and return along with consideration in the form of non-recurring premium only or along with recurring rent. Essence of lease being delivery of possession along with user rights. Supplier of lease does not have possession, does not have the right to use but retains right to possession after term of lease. The applicant letting out his building which is a commercial property as per the occupancy certificate issued by the Town planning department, Kurnool Municipal Corporation dated 07-01-2022.The activity of the taxpayer fits under the scope of supply defined under section 7 (1A). Leasing of Commercial property is subjected to GST (Goods and Services Tax) at the rate of 18% (with SAC code 997212: Rental or leasing services involving own or leased non-residential property) and the service provider need to collect GST on such lease and he shall be liable to pay if he crosses the Threshold limit of taxable turnover under the provisions of GST. The applicant interprets the Notification No. 04/2022-Central Tax (Rate) dated 13th July 2022 and No. 05/2022-Central Tax (Rate), dated 13 th July 2022 which indicate that GST on rent is payable by the tenant (government) under the reverse charge mechanism. But, Notification 4/2022 is about exemption to residential dwellings and 5/2022 relates to reverse charge in respect of residential dwellings. Both are not applicable to renting of commercial property and also to the present case. Thus, it is clearly established that the applicant has leased out his commercial building premises for setting up the Institution of Lokayukta of Andhra Pradesh Government - the applicant, being a lessor and registered supplier of services of Leasing of Commercial property, is liable for remitting GST on lease consideration under Section 9 read with section 15 of the GST Act.
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Income Tax
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2024 (12) TMI 395
Non admission of substantial question by High Court - Addition made on account of cash donation collected outside the books of accounts deleted by ITAT - whether ITAT was right holding that violation of conditions u/s 13(1)(c) would not result in denial of exemption on the whole income and denial be restricted to the income in violation of provisions of Section 13(1)(c) HELD THAT:- High Court seems to have declined to admit the appeal on the second substantial question of law as proposed by the Revenue, on the premise that the same is covered by Finance Act, 1984, Circular No.387 dated 6-7-1984 issued by the Income Tax Department. High Court relying on the said Circular observed that where such a trust contravenes the provisions of Section 13(1)(c) or (d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provisions. Revenue has manifold contentions to canvass to make good his submission that the High Court was not correct in saying that the second question of law as proposed is covered by Finance Act, 1984 Circular No.387/6.7.1984 As the Income Tax Appeal No. [ 2021 (11) TMI 1190 - BOMBAY HIGH COURT] has already been admitted on one substantial question of law, it will be in fitness of things if the High Court also looks into the second question of law as proposed by the Revenue, more particularly when it has been vociferously submitted that Circular No.387/6.7.1984 is not applicable. We are of the view that the High Court should be asked to formulate the second question of law as proposed by the Revenue as one of the substantial questions of law and answer the same in accordance with law along with the question of law on which the income tax appeal has already been admitted. We may only say that we have otherwise not expressed any final opinion as regards the substantial question of law No.2 as proposed by the Revenue before the High Court. It will be for the High Court to take the final call as regards the merits of the said substantial questions of law.
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2024 (12) TMI 394
Reopening of assessment u/s 147 - Validity of order passed u/s 148A (d) - High Court [ 2022 (8) TMI 1313 - PUNJAB HARYANA HIGH COURT] rejected the writ application filed by the appellant herein (assessee) and thereby affirmed the order passed by the Revenue u/s 148A (d) - HELD THAT:- Revenue with his usual fairness submitted that the impugned order be set aside for the reason that the Authority has quoted incorrect provisions therein. Ordinarily, if the final conclusion arrived at in any order is correct then irrespective of the fact whether the provisions are correctly relied upon or not may not affect the final result. However, in the case on hand, the revenue itself wants that the impugned order be set aside with liberty to issue a fresh notice under Section 148A (b) of the Income Tax Act. In view of the aforesaid, the impugned order passed by the High Court is set aside. It shall be open for the Revenue to issue a fresh notice to the appellant (assessee) under Section 148A (b) of the Act in accordance with law.
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2024 (12) TMI 393
Penalty u/s 271AAA(1) - assessee declared the surrendered amount under the head additional income which was accepted by the Revenue - purported failure on the part of the assessee to substantiate the manner in which the undisclosed income was derived - as decided by HC [ 2024 (7) TMI 1561 - DELHI HIGH COURT] it cannot be said that the assessee has fulfilled the requirement that she, in her statement (under section 132(4)) substantiates the manner in which the undisclosed income was derived . Such being the case, this court is of the opinion that the lower appellate authorities misdirected themselves in holding that the conditions in section 271AAA(2) were satisfied by the assessee. HELD THAT:- We concur with the view taken by the Delhi High Court about the interpretation of sub-section 2 of Section 271AAA of the Income Tax Act, 1961. Hence, no case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is accordingly dismissed.
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2024 (12) TMI 392
Reopening of assessment u/s 147 - defects in notices issued against a dead person - right of legal representatives - as decided by HC [ 2024 (10) TMI 1618 - RAJASTHAN HIGH COURT] notices are alleged to be defective on the ground that the same were issued against a dead person, but the contents of the notices issued from time to time show that the name of the petitioner was reflected in the notice along with the name of his deceased father. Physical assessment carried out by the respondents is subjected to challenge in the second round of petition, whereas the petitioner was satisfied with the direction issued by this Court in earlier round of litigation that he may be supplied with reasons. As ordered that if the petitioner deposits 20% of the demand in each case within a period of one month, recovery of balance amount under assessment orders and demand notices issued in aforesaid cases, shall remain in abeyance. HELD THAT:- We are not inclined to issue notice in the present special leave petitions, as the matter is still sub judice before the High Court and only an interim order has been passed. At this stage, it is submitted that the petitioner has not inherited the estate of his deceased father. Reference is also made to Section 159(6) and submitted that the direction to pay 20% of the demand was never an issue which was urged and argued before the High Court. If that be so, it will be open to the petitioner, Samir Andrea Kasliwal, to file a petition/application for review before the High Court pointing out the above facts. If any such petition/application is filed, the same will be considered and decided in accordance with law. We, however, clarify that we have not made any comments on how the review petition/application should be decided. The right of the petitioner, to challenge the present impugned order, after the decision of the review petition/application, is preserved.
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2024 (12) TMI 391
Validity of assessment u/s 153C - Period of limitation - period of six years to be computed - Scope of extended period of 10 years - HELD THAT:- In the facts of the case, the AO of the searched person has recorded the satisfaction note on 31.03.2018 which is on the last date of the assessment proceedings of the searched person to be completed u/s 153B of the Act and as such, it cannot be said that the satisfaction note recorded by the AO of the searched person is contrary to the decision of the CCIT vs. Calcutta Knitwears [ 2014 (4) TMI 33 - SUPREME COURT] or the Circular No. 24/2015 issued by the CBDT as it was on the same day on which, the assessment proceedings of the searched person ought to have been completed. There is no provision in the Act prescribing the time limit to record the satisfaction by the Jurisdictional Assessing Officer on receipt of the incriminating seized material from the Assessing Officer of the searched person. Hon ble Supreme Court in case of CIT vs. Jasjit Singh [ 2023 (10) TMI 572 - SUPREME COURT] has considered the aspect of recording the satisfaction by the Jurisdictional Assessing Officer by holding that the period of six years would be reckoned in respect of which the returns were to be filed would be from the date of receipt of material by the Jurisdictional Assessing Officer. In view of the above dictum of law, the period of six years to be computed would be from the date when the material was forwarded to the jurisdictional Assessing Officer which can be either 31.03.2018 or 02.04.2018 or 23.10.2019 and accordingly, the Assessment Years for which, the notices can be issued would be in first scenario from A.Y. 2012-13 to 2017-18, in the second scenario from 2013- 14 to 2018-19 and in third scenario from 2014-15 to 2019-20. The period of 10 years is to be considered on the basis of harmonious interpretation of section 153C and its proviso to the effect that the commencement of initiation of the assessment proceedings is required to be considered from the date when the satisfaction is formed by the AO of the petitioner. Therefore, applying the second proviso to section 153A which has come into effect by the Finance Act,2017 which is held to be clarificatory by the Hon ble Apex Court in case of Vikram Sujit Kumar Bhatia [ 2023 (4) TMI 296 - SUPREME COURT] when the escaped assessment is more than Rs. 50 Lakh, the extended period of 10 years would be applicable. As the satisfaction was recorded on 23.10.2019, 1st Assessment Year to be reopened would be Assessment Year 2018-2019 and the 10th Assessment year would be 2009- 10. Therefore, the impugned notice issued from the Assessment Year 2009-10 to 2014-15 would be valid notices applying the provision of section 153A of the Act by extended period of 10 years. We are therefore of the opinion that the impugned notices cannot be said to be time barred considering the extended period of 10 years from the Assessment Year 2018-19 upto Assessment Year 2009-10 considering the previous year in which, considering the date of receiving books of accounts or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction being 24.10.2019 from the end of the Assessment Year relevant to the previous A.Y. 2019-20. We answer the Issue No.1 in the negative that the notices are not time barred.
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2024 (12) TMI 390
TP Adjustment - Selection of comparables for benchmark analysis - HELD THAT:- Undisputedly, Kitco Ltd. was working in divisions like infrastructure, tourism, aviation, IT services, HRD and financial services, which were not similar to the functions performed by the Assessee. As noted above, the Assessee was engaged in engineering and design services. Whilst the TNMM method is broadly tolerant to certain functional dissimilarity as the method entails comparison is based on net margins. It is essential that the broad functional profile of the comparables are similar. It would be erroneous to compare companies with different functionalities as similar only on the ground that TNMM is a more tolerant method. TCE Consulting Engineers Ltd. is concerned, the Tribunal accepted that the said company was providing high end technical services, which were also not comparable with the functions performed by the Assessee. Similarly, the ITAT also examined the FAR comparability of Project and Development India Ltd. and Mahindra Consulting Engineers Ltd. on the basis of their respective FAR analysis. Project and Development India Ltd. is concerned, the learned ITAT concluded that it could not be compared with the limited functions as performed by the Assessee. A similar view was also expressed in respect of Mahindra Consulting Engineers Ltd. The relevant extract of the decision of the learned ITAT setting out the reasons for excluding the said two entities as comparables for the purposes of benchmarking the ALP. The findings of the learned ITAT are in consonance with the ALP provisions under Section 92C of the Act.
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2024 (12) TMI 389
Disallowance of loss on sale of HTM securities (Held till Maturity Securities, being securities which are held till maturity) - HELD THAT:- We consider it apposite to remand the proceedings to the AO to consider the Assessee s alternate claim for loss arising out of the HTM securities, as loss under the head income from business and profession . The finding of the ITAT to the effect that no material had been supplied by the Assessee to substantiate the claim is clearly unsustainable. Assessee fairly states that as far as the question of treating the profits from the sale of HTM securities as capital gains is concerned, the same stands concluded by the learned ITAT, and the Assessee accepts the same.
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2024 (12) TMI 388
Maintainability of writ petition against Assessment Order - appeal before CIT(A) is presently pending but no effective order has been passed thereon - Department submits that since there is already an appeal which is preferred against the Assessment Order and the same is presently pending, the writ petition ought not to have been filed by the petitioner as he had already taken recourse to the statutory alternative remedy prescribed - HELD THAT:- Petitioner having availed all the statutory remedy, this Court, without the said appeal being disposed of and more particularly when the said appeal was filed prior to filing of the present writ petition, this Court is disinclined to accept the contention of the writ petitioner. The petitioner has not raised this contention before the Court by referring to the relevant provisions and/or the orders passed by the departmental authorities that the appeal before the Appellate Authority is not efficacious and will not provide adequate relief as prayed for by that forum. It appears from the facts urged that the only reason for approaching this Court is to evade payment of the statutory deposit which is prescribed under the Act while preferring the appeal. Such attempt may be made by the petitioner cannot be permitted, more particularly in the manner sought to be done by taking recourse to filing a writ petition before this Court during the pendency of the statutory appeal already filed by the petitioner. Any application that may be filed by the petitioner will necessarily be required to be considered appropriately in terms of the proviso to Section 249 (4) of the Income Tax Act and pass appropriate orders. The contentions raised by the writ petitioner before this Court can also be raised before the Appellate Authority which is presently in seisin of the matter. The petitioner is granted liberty to file necessary applications before the Commissioner, Income Tax Appeal, raising all grounds to assail the Assessment Order dated 31.03.2022 before the Commissioner (Appeals). The Commissioner (Appeals) in its turn will proceed to hear and dispose of the appeal filed by the petitioner and pending before the said authority as per the provision of law.
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2024 (12) TMI 387
Estimation of income - unexplained cash deposits in bank account - assessee has not filed any return of income u/s 139 or in response to notice u/s 148 - CIT(A) estimating income of the Appellant at 8 percent on the total Turnover - HELD THAT:- CIT (A) has restricted the addition to 8% of the total deposits as against the addition made by the AO of total deposits in the bank account. Now the assessee is seeking further relief by claiming that, the income of the assessee is only 1.5% of the deposits as the commission income and relied upon the order of the CIT (A) for the A.Y 2017-18 dated 27/06/2024 whereby the CIT (A) has deleted the addition made by the AO on account of unexplained cash deposits in the bank account. Assessee has also relied upon the assessment order in case of Shri Anand Rao Mouglikar for the A.Y 20912-13 passed by the Income Tax Officer Ward-1 Nirmal dated 16/12/2019 wherein the AO has accepted the commission income @ 1.5%. It is pertinent to note that once the AO has accepted the business activity of the assessee as a commission agent as well as dealership in drip irrigation system on behalf of the farmers, then the income of the assessee was required to be assessed on some reasonable basis. Though the CIT (A) has estimated the income of the assessee @ 8%, however, in the subsequent A.Y, the CIT (A) has deleted the addition made by the Assessing Officer on account of unexplained cash deposits in the bank account. It is not clear from the order of the CIT (A) for the A.Y 2017-18 whether the assessee has offered any income on account of commission or not. Accordingly, we are of the considered opinion that this matter requires a proper verification and examination of the relevant facts in the light of order of the learned CIT (A) for the A.Y 2017-18 as well as the assessment order in case of Shri Anand Rao Moglikar as relied upon by the assessee. Since the deposits in the bank account of the assessee represents two kind of receipts (i) as a commission agent and another (ii) activity of the assessee in respect of drip irrigation system under the scheme of the State Govt. Therefore, there cannot be a single percentage of commission in both kind activities. Hence, the matter is remanded to the record of the Assessing Officer with a direction to the AO to reconsider the issue - Assessee is allowed for statistical purposes.
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2024 (12) TMI 386
Addition u/s. 56(2)(vii)(b)(ii) - difference in purchase price of the land and value of land as per valuation officer - assessee had disputed the stamp duty value and on the objection of the assessee the matter was referred to the DVO - HELD THAT:- Assessee had not submitted any other Registered Valuer s report before the DVO. The comparable cases considered by the DVO were also not objected by the assessee. CIT(A) has also dealt with the objection of the assessee in respect of difference in valuation being less than 15% of the sale price. FMV determined by the DVO was adopted only on the basis of objection of the assessee to the stamp duty value, with a request to refer the matter to the DVO. The Ld. CIT(A) has given a categorical finding that the value as per report of DVO was taken as per alternate plea of the assessee only. Under the circumstances, we don t find any merit in the ground as raised by the assessee. The assessee has been unable to bring any material on record to controvert the findings of the Ld. CIT(A). We, therefore, do not find any reason to interfere with the order of the Ld. CIT(A). The provision of section 56(2)(vii)(b)(ii) of the Act is found to be squarely applicable to the facts and circumstances of the case. Accordingly, the addition as confirmed by the Ld. CIT(A) u/s. 56(2)(vii)(b)(ii) of the Act, is upheld. Decided against assessee.
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2024 (12) TMI 385
Denial of deduction u/s. 80IC - unit of the assessee is not located in the eligible physical location as per the notification of CBDT - HELD THAT:- As gone through District wise details of Industrial Estates and Industries established therein by the Uttarakhand Government wherein the assessee s name is found at serial no.7 plot no.20 and area 1992 square meter. We find that that the entire confusion arose because of the mistake of the assessee mentioning as Rudrapur instead of Kalyanpur in the form 10CCB. Rudrapur being the Municipal limit, Kalyanpur is the village in the Tehsil Kichha being survey no.373 in village Kalyanpur has been duly notified as an eligible area for claim u/s. 80IC. Since the fact proves that the establishment of the assessee is in the eligible area, the appeal of the assessee is hereby allowed. This case signifies the lack of judgement among the official undermining the efficiency, equity and credibility of the taxation system. The weak standards and lack of accurate mechanism can lead to bias judgement. Inefficient and poor decision making can lead to prolonged disputes, backlog of cases and higher litigation cost for the assessee as well as for the Revenue Department. This ultimately leads to fostering of resentment and impedes discharge of voluntary compliances. Such overly aggressive action may drive the tax payer to deflate public trust and fairness of assessment. The tax official must primarily rely on the facts as per the record to ensure fairness. Focus should be on the material aspects that directly impact the correct collection of taxes. Striking this balance is essential to maintain the integrity of the tax system while upholding the tax payers rights and promoting compliance. In this case, the allowability of the deduction primarily beyond the jurisdiction of the provisions of Section 154. In spite of the robust evidences filed by the assessee before the AO, the AO chose to act in an unjustifiable manner. The action of the AO and the ld. CIT(A) calls for examination of the records administratively to fix the responsibilities of the officials concerned. Appeals of the assessee are allowed.
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2024 (12) TMI 384
Validity of proceedings initiated u/s 153C - search proceedings were initiated in the case of Sushen Mohan Gupta and others u/s 131 and subsequently a survey action u/s 133A was initiated in the case of the assessee - HELD THAT:- Based on various informations available on record, the case of the assessee was initiated u/s 153C of the Act relying on various documents found in the case of Sushen Mohan Gupta and others. Based on the date of search initiated in the case of Sushen Mohan Gupta and others, the proceedings were initiated in the case of the assessee. However, as per the record, we noticed that satisfaction note was recorded by the Assessing Officer of the assessee only on 30.09.2021. Based on the date of satisfaction, the relevant assessment year for the assessee is AY 2022-23. Therefore, the date of search relevant for the assessee is only AY 2022-23, the AYs 2014-15 and 2015-16 are outside the provisions of section 153C of the Act. Therefore, it is a settled position of law relevant for assessment year under consideration. Mandation of recording satisfaction - AYs 2016-17 to 2020-21 - We observed that the satisfaction recorded under section 153C is recorded without there being any reference to any specific assessment year and most of the informations were based on survey proceedings carried out in the case of the assessee. Further there is no reference to any seized material which may have bearing on the determination of total income of the assessee relevant assessment year-wise. The statutory requirement requires the AO to record the satisfaction based on the particular seized material considered as incriminating material and records satisfaction having bearing on the other person as well as relating to relevant assessment year for the purpose of revision of income of the relevant assessment years. AO has not recorded the satisfaction as per rule of law. See Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] as held Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to have a bearing on the determination of the total income for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs years immediately preceding the assessment correlatable to the search year or the relevant assessment year as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents. Assessee appeal allowed.
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2024 (12) TMI 383
Scrutiny through CASS - limitation period for issue of notice u/s 143(2) - HELD THAT:- It is held that the limitation period for issue of notice u/s 143(2) is relevant to the financial year and assessment year. When the AO considered the return of income after rectification for the purpose of initiation of assessment proceedings, the relevant date for initiation of proceedings, dates back to original date of return of income, therefore the time limit for issue of notice u/s 143(2) has to be considered for date of filing of original return of income. Respectfully following the decision of SMC COMTRADE LTD. VERSUS ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 24 (1) [ 2023 (11) TMI 44 - DELHI HIGH COURT] we are inclined to treat the notice issued u/s 143(2) as invalid notice. Accordingly, further proceedings initiated with invalid notice are bad in law. Therefore, assessment order passed on the basis of invalid notice is also bad in law and accordingly quashed. Assessee appeal allowed.
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2024 (12) TMI 382
Assessment u/s 153A - absence of any incriminating material during the course of search - HELD THAT:- We find not a single seized material has been referred to by the AO in respect of any of the addition made by him in the assessment. Hence, it could be safely concluded that there is absolutely no incriminating material found during the course of assessment for making the aforesaid 4 additions. Hence, in the absence of any incriminating material during the course of search, no addition could be made in a completed assessment as per the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ] Accordingly, ground No. 1 of Rule 27 petition is hereby allowed. Addition of bogus purchase - Admittedly, purchases made by the assessee from the aforesaid 3 parties have already been accounted by the assessee in its regular books of account. This books of account were not rejected by the ld AO or by the ld CIT(A). Payments for this purchase have already been made by the assessee out of the monies available in the disclosed bank account. Hence, the source of incurrence of such expenditure together with the payments made thereon are duly explained from the books of account of the assessee itself. It is not the case of the revenue that the purchase made from aforesaid 3 parties were made out of books and for which assessee is not able to explain the source of making payment. Hence, the provisions of section 69C of the Act per se cannot be applied to the facts of the instant case. When the provisions of section 69C are sought to be invoked, the revenue does not doubt the genuineness of incurrence of such expenditure. Only the source of such expenditure is being doubted by the revenue. Here the source is drawn from the regular books of accounts of the assessee which were not rejected by the lower authorities. Hence on this ground itself, the addition deserves to be deleted. Addition u/s 69A - HELD THAT:- As submitted that the admission of undisclosed income offered by the assessee in the return of income is backed by credible evidence. Reliance was placed on the presumption provided in section 132(4A) of the Act and section 292C of the Act wherein, the contents of the seized documents are to be considered as true. Since, the seized documents itself contains the actual undisclosed income figure, as against the estimated figure, the actual figure retracted thereon should be considered as true, when more so, this actual figure stood specifically deposited in the bank account by all the assessees. We find that the ld. CIT(A) had duly appreciated the aforesaid contentions and deleted the addition made in the sum of Rs 1.80 crores on which we do not find any infirmity. Accordingly, the grounds raised by the revenue are dismissed.
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2024 (12) TMI 381
Revision u/s 263 - non eligibility to claim of deduction u/s 10AA - assessee has opted for VSV scheme, and paid due taxes thereon - HELD THAT:- The entire 263 order has been passed on the basis of initial notice issued u/s 263 of the Act and has been passed in total disregard to any of the legal/factual submissions placed on record by the assessee challenging the 263 proceedings. As seen from the contents of the 263 order that Principal CIT has not even discussed/analysed/rebutted any of the arguments taken by the assessee during the course of 263 proceedings, thereby making such proceedings a mere formality, initiated only with a view to take a unilateral call to set aside the assessment order as being erroneous insofar as prejudicial to the interests of the Revenue, without even bothering to discuss the arguments taken by the assessee during the course of 263 proceedings. Accordingly, since the order passed u/s 263 is in gross violations to the principles of natural justice, in our considered view the same is liable to be set aside. Secondly, even otherwise, on merits we observe that the assessee has placed on record several judicial precedents in support of the contention that the case of Liberty [ 2009 (8) TMI 63 - SUPREME COURT] is not applicable for computation of claim of exemption under section 10AA. Further, even on the basis of facts placed on record is seen that the assessing officer had specifically enquired into the aspect of computation of claim of exemption u/s 10AA of the Act and after taking into consideration the written submissions/legal arguments placed by the assessee on record, took a legally plausible view and decided not to disturb the claim of deduction u/s 10AA of the Act. We also observe that several judicial precedents have held that once the assessee has opted for VSV scheme, and paid due taxes thereon, then the tax proceedings for this year would come to a close and thereafter, the same issues cannot be re-agitated by taking recourse to 263 proceedings. In the point to be noted is that this is the 9th year of claim of deduction by the assessee and therefore, even from point of view of principle of consistency, unless any new facts are brought on record, the claim of exemption cannot be disturbed by taking recourse to 263 proceedings. Decided in favour of assessee.
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2024 (12) TMI 380
Disallowing allowing set off of carried forward business loss of earlier years against business income of the current year - Board for Industrial and Financial Reconstruction (BIFR) had recommended reliefs and concessions, including the set-off of such losses, which were to be considered by the Central Board of Direct Taxes (CBDT) - HELD THAT:- Sanctioned scheme specifically deals with the reliefs and concessions From CBDT namely to consider the exemption/grant relief to the company from the provisions of various sections including Section 72(3). Further the CBDT was represented by its Counsel and after considering the same, BIFR passed the above order. Since the views of the Income Tax Department were considered by BIFR, the recommendations of BIFR was allowed to the assessee in view of CBDT Circular dated 16-02-2000 which specifically provides to recommendations contained in BIFR s order as to consider any particular must be allowed, if views of Income Tax Department have been considered by BIFR during the course of hearing. Thus the CBDT Circulars are binding on the Income Tax Authorities. Thus the Lower Authorities ought to have allowed the benefit of set off of brought forward business loss against business income of current year instead of denying the same on this count. In this connection, in the case of CIT Vs. Lakshmi Machine Works Ltd [ 2019 (2) TMI 1780 - MADRAS HIGH COURT ] was relied upon wherein it was held that the provisions of SICA would override the provisions of Income Tax Act. Denial of benefit of Section 72(3) - Since the provisions of SICA would override those of the provisions of the Income Tax Act, When BIFR has sanctioned the scheme which is sufficient and no further compliance need to be called for in regard to the conditions set out about u/s. 72(3) of the Act. Therefore the disallowance made by the Assessing Officer is hereby deleted and Ground No. 1 raised by the assessee is allowed. Disallowance made u/s. 14A on interest expenses - Since substantial interest free funds were available with the assessee, the disallowance on this count is directed to be deleted. Regarding Administrative expenses disallowed u/s. 14A wherein no details furnished therefore the same is confirmed. In the result, Ground No. 2 is partly allowed.
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2024 (12) TMI 379
Validity of assessment order against company insolvent - HELD THAT:- It is undisputed fact that during the course of assessment proceedings, the Insolvency Resolution Professional vide its letter dated 01-02-2021 informed the assessing officer about the order dated 29-05-2019 passed by NCLT for commencement of Corporate Insolvency Resolution Process. However the assessing officer has not made any claim on the part of the Income Tax Department before the NCLT. However, State Government VAT Department and GST Department made the respective claim before NCLT. Jurisdictional High Court in the case of Jyoti Power Corporation Private Limited (Now Known as Ausil Corporation Private Limited) [ 2024 (10) TMI 1156 - GUJARAT HIGH COURT] held that invocation of Revision proceedings after the Resolution Plan is against the Provisions of Law and quashed the Revision proceedings.
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2024 (12) TMI 378
Validity of reopening of assessment u/s 147 - disallowance of expenses u/s 69C being unexplained - HELD THAT:- We find that the AO undisputedly did not make any addition in respect of the items of income which were subject matter of the notice u/s 148A(b) and order u/s 148A(d) of the Act. The copy of the notice issued u/s 148A of the Act in clause (b) with annexure is available at paper book page no.1-2. We note that the case of the assessee was reopened on the ground that assessee has transactions relating to rent receipt and renewal of FDS, etc. Thereafter, the order passed under clause (d) of Section 148A of the Act dated 07/04/2022, stating there that the notice issued u/s 148A(b) was not complied with till 25.03.2022 and the income has escaped assessment for A.Y. 2018-19 on account of TDS (194I) Rent for BNB Paribas, Time Deposits and TDS (194A) Interest for IDBI Bank Ltd. AO did not make addition in the assessment order qua the subject information in order passed u/s 148A(d) of the Act. Once, no addition was made in respect of the items of income, which were stated by the ld. AO were escaped in the order passed under clause (d) of Section 148A of the Act, then no other addition can be made as the AO has no jurisdiction as well as on the ground that the very foundation of the proceedings are demolished. Appeal of the assessee is allowed.
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2024 (12) TMI 377
Unexplained investment - penny stock purchases - HELD THAT:- We find that both sale and purchase were made on the same day. The AO as well as the CIT(A) have not given any reason as to why explanation of the assessee is not acceptable. They have relied on information from Investigation Wing, but the same has not been discussed in either of the orders. Content of the report of the Investigation Wing pertaining to the appellant has neither been discussed in the orders of lower authorities nor it was given to assessee for his rebuttal and explanation. The appellant has claimed that he has not made any investment in the above penny stock and he had undertaken only daily trading of very nominal amount and the profit earned thereon has been offered for tax. The appellant also submitted that he has also not earned any LTCG and claimed exemption u/s 10(38) of the Act. After considering the facts of the case, as discussed above, we do not find any merit in the addition made by the AO because such conclusion is not based on any specific information and evidence in respect of the assessee. On the other hand, claim of the assessee has not been rebutted by the AO by bringing any positive evidence or information. Hence, the addition is not liable to be sustained. Assessee appeal allowed.
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2024 (12) TMI 376
Disallowance u/s. 80P(2)(a)(i) - interest income received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. - HELD THAT:- The assessee is entitled for deduction on the interest derived from its investments with any other co-operative society. The authorities below on the wrong notion had treated the said Kerala State Co-operative Agricultural and Rural Development Bank Ltd. as a bank and therefore held that the assessee is not entitled for deduction u/s. 80P(2)(d) of the Act. Insofar as status of the The Kerala State Cooperative Agricultural and Rural Development Bank Ltd. is concerned, the issue came up for hearing before the Hon ble Supreme Court and the Hon ble Supreme Court after elaborately discussing the provisions, had categorically held that The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is a co-operative society and not a bank registered under the Banking Regulations Act. The said finding is given in its judgment in the case of Kerala State Co-operative Agricultural Rural Development Bank Ltd. vs. AO [ 2023 (9) TMI 761 - SUPREME COURT ] Therefore the status of The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. was decided by the Hon ble Supreme Court and therefore we are applying the said judgment to the facts of the present case and held that the interest income received from the said The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is eligible for deduction u/s. 80P(2)(d) Thus, the assessee is entitled for deduction on the interest income received from the said The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. being a co-operative society u/s. 80P(2)(d) - The balance if received from the other banks, then the assessee is not entitled to claim deduction u/s. 80P(2)(d) of the Act as per the judgment of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT ] In order to ascertain the correct figures, we are remitting this issue to the AO to verify. Disallowance of 30% of interest expenses incurred by the appellant due to non-deduction of TDS u/s 40(a)(ia) - We have perused the provisions and the audit report submitted for the A/Y 2018-19 and we are in agreement with the argument advanced by the Ld.AR and hold that the assessee need not deduct the TDS while making the payment to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. which is a co-operative society as well as to its members. It seems that the assessee had not furnished any details about the payment of interest to the said bank as well as its members while the CIT(A) had decided the appeal and therefore we are of the opinion that this issue may also be remitted to the AO for verifying the said facts and if the AO find that the interest was paid to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and also to the members, then the deduction of 30% u/s. 40(a)(ia) need not be made. We also made it clear that the assessee will also submit the necessary records in support of their case before the AO before passing the order. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (12) TMI 375
Addition u/s 68 - creditworthiness of the lenders in the absence of the income tax return and bank statements - HELD THAT:- CIT(A) was of the opinion that the assessee has failed to provide complete and satisfactory documentation that could establish the of the transactions concerning all creditors. CIT(A) further held that assessee also failed to comply with the notices issued by the AO, as it indicated a lack of due diligence in substantiating the claimed transactions. The primary burden of proof lies with the assessee to establish that the source of the cash credits appearing in the books are from genuine sources and in this case, the assessee was unable to discharge this burden satisfactorily. Therefore, the addition as unexplained cash credit u/s 68 of the Act was upheld by dismissing the ground raised by the assessee. Disallowance on account of interest - assessee failed to provide adequate documentation to prove that the interest expenses were incurred solely for the purpose of business - linkage between the borrowed funds and their utilization in business activities was not substantiated satisfactorily - HELD THAT:- CIT(A) observed that the borrowed funds were used for non-business purposes, such as providing interest-free loans to related parties weakens the case for a business deduction as per income tax laws. CIT(A), based on the examination of the documents furnished and the legal framework, the AO's decision to disallow the interest expenses was upheld, as the assessee did not meet the burden of proof required to establish that these expenses were incurred wholly and exclusively for business purposes. Thus the ground raised by the assessee was dismissed and addition made by the AO was upheld. Disallowance u/s 57 - AO observed that the assessee claimed an expenditure as interest expenses, which were asserted to be incurred for earning income from other sources, but were not recorded in the Profit Loss Account of the business - HELD THAT:- Certain lenders have confirmed the transaction. AO out of total 43 lenders, issued notices u/s 133(6) of the Act only to 10 lenders out of which 4 lenders confirmed the transaction, while 6 lenders did not respond. There is no denial in any case. AO only on the basis of non receipt of response from 6 lenders, coloured the entire unsecured loan borrowed during the year as unexplained cash credit, conveniently ignoring the fact that majority of loans were repaid during the current year and subsequent year and the assessee has duly paid interest and complied with TDS provisions. AO erred in drawing negative inference based on non response from few parties. Moreover, the A.O. only enquired from 10 parties out of 43. It was least expected from the AO to at least verify the return of income of the lenders from their own database. Needless to say that in case of non response, the Assessing Officer has all the powers to issue summons under section 133 of the Act and enforce attendance of the lenders. However, the said exercise was also not conducted by the AO. No enquiry was made by the AO by issuing summons. Further, no incriminating evidences were brought on record to dislodge the materials relied upon by the assessee to prove the ingredients of section 68. Accordingly, we set aside the impugned order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for verification of the fact as to whether loans were duly repaid back by the assessee either in current year or subsequent years and if so, the same need not be added back. Needless to say that the assessee be provided reasonable opportunity of being heard. Thus, ground no.1, raised by the assessee is allowed for statistical purposes. Disallowance of interest considering the fact that the funds were not used for the purpose of business - AO disallowed the interest considering the fact that the funds were not used for the purpose of business - HELD THAT:- For claiming deduction under section 57(iii) of the Act, it would be sufficient to prove that there is nexus between the income which will be earned and amount expended. In the given case, it is undisputed fact that the funds have been advanced to related concern. At this juncture it is also apropos to refer to the landmark judgment of S.A. Builders Ltd. [ 2006 (12) TMI 82 - SUPREME COURT] wherein it has been held that the tax authorities must not look at the matter from their own view point but that of a prudent businessman. In case, it is found that transfer of borrowed funds to a sister concern was on account of commercial expediency even if the same is interest free, the deduction claimed by the assessee cannot be disallowed. Thus, ground raised by the assessee is allowed. It is reiterated that the allowance of any expenditure is within the judicial periphery laid in the Act and mere non recording in the books of account can hardly negate the claim. Disallowance of interest expenses claimed u/s 36(1)(iii) in the books of accounts - The matter has to be directed to be re examined since we do not ascribe to the views that loan is unexplained. AO could not make out a single case of diversion of funds for non business purpose apart from making a general and casual statement which has no basis to be sustained. Hence, we find force in the submissions of the learned Counsel for the assessee that the interest is used for the purpose of business. The order of CIT(A) cannot be sustained because he has failed to highlighted about how the submissions of the assessee is fallacious. He failed to advert about the financial affairs which clearly demonstrates that the assessee has own funds to the extent of ₹ 1.25 crore. Thus, it is beyond any logic as to how the entire interest can be disallowed straightway. Moreover, out of the total interest of ₹ 0.97 crore, the interest paid by the assessee on cash credit of ₹ 0.53 crore is availed from Bank, which is undisputedly loan taken for business, which fact is examined and is not in dispute. Even for the balance interest, not even single instance of diversion of funds have been brought by the AO In the absence of any instance of diversion of funds, the interest claimed under section 36(1)(iii), which are part of audited books of account, cannot be disallowed.
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2024 (12) TMI 374
Addition on account of understatement of revenue - AO had mechanically and erroneously concluded that the receipt was in respect of consultancy services rendered by the assessee in respect of construction business - HELD THAT:- AO had no evidence of any consultancy services rendered by the assessee so as to treat the receipt as income of the assessee. As no TDS was deducted on this amount there was no reason to conclude that this amount was consultancy receipt. The Ld. CIT(A) has correctly held that this amount was in respect of booking advance and there was no understatement of revenue. As GST was applicable on booking amounts the assessee had reported this amount in the GST return. A mere reporting in the GST return doesn t make the amount taxable as per the provisions of the Income Tax Act. AO, rather than examining whether the income was correctly reported in accordance with percentage completion method, had erroneously held the entire booking advance receipt as income of the assessee, which can t be held as correct. The Revenue has not controverted the findings as given by the CIT(A) in this regard. Therefore, the order of the CIT(A) on this issue is upheld. The ground taken by the Revenue is dismissed. Addition on account of over-statement of purchase - AO had made the addition for the reason that the difference in the sundry creditor balance was not explained - HELD THAT:- CIT(A) has correctly allowed relief after considering the explanation of the assessee. He has also given a finding that there was no disparity between the data from the books of account and the details as presented regarding these sundry creditors. Since, CIT(A) has allowed the relief after correctly appreciating the facts of the case, the ground taken by the revenue is dismissed. Addition on account of unexplained expenditure - CIT(A) has given a categorical finding that Upon reviewing the information, it is evident that the appellant made payments to parties through the banking channel which is also evidenced from the chart submitted by the appellant - HELD THAT:- The chart for repayment of loans is also found reproduced in the order of the Ld. CIT(A). The Revenue has not controverted this finding of fact as given by the Ld. CIT(A). It is not that this finding was given on the basis of any additional evidence. The chart for repayment of loans was prepared only on the basis of bank statements which were also filed before the AO in the course of assessment proceeding. We don t appreciate the ground taken by the Revenue challenging the finding of fact recorded by the Ld. CIT(A), without controverting his findings. When the Ld. CIT(A) had given a categorical finding that all the repayments of loans were reflected in the bank statement, the Revenue shouldn t have challenged this finding without bringing any material to show that the finding of the Ld. CIT(A) was incorrect. Since the Revenue has not brought anything on record to controvert the findings of Ld. CIT(A), we don t find any reason to interfere with his order. The ground taken by the Revenue is dismissed.
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2024 (12) TMI 373
TP Adjustment - whether the royalty can be separately benchmarked when the margin was accepted by the TPO to be at arms length price? - HELD THAT:- CIT(A) had rightly allowed the appeal filed by the assessee challenging the order of the TPO in which the royalty was separately benchmarked even after the margin is accepted to be at arms length price by the TPO. This Tribunal in the assessee s own case, we are not inclined to accept the grounds raised by the revenue and in effect, we are dismissing the appeal filed by the revenue.
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2024 (12) TMI 372
Addition u/s. 69A r.w.s. 115BBE - unexplained income - cash deposits during demonetization period - HELD THAT:- Assessee deposited cash out of sale proceeds and collection from sundry debtors / trade debtors. In response to notice u/s. 142(1) of the Act, the assessee had furnished cash book, sales register, purchase register, bank statements. Assessee has maintained proper books of accounts which are subjected to tax audit u/s. 44AB. The books of accounts of the assessee have been accepted by the lower authorities while framing the assessment and not rejected by pointing out any defects. We are of the considered opinion that when the sales has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law. The cash sales / collections made from debtors by the assessee have been credited in the books of accounts and the same form part of the assessee s cash book. On these facts, it could be very well said that the assessee claim was backed up by relevant evidences. Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the AO failed to rebut the same. The allegations/statistics relied upon by AO to take an adverse view is not backed up by relevant evidence/material and therefore the impugned action of authorities below cannot be countenanced. Since cash generated out of sales / collection from debtors has been recorded in the books of accounts, the provisions of section 69A. Objection on legal tender of Specified Bank Notes on or after 08.11.2016 - We find that as per the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which came into effect from 31.12.2016 appointed date for this purpose means 31.12.2016. As per Sec.5 of said Ordinance, from the appointed date, no person shall, knowingly or voluntarily, hold or transfer or receive any Specified Bank Notes. From the above what is clear is that up to the appointed date i.e.31.12.2016, there is no prohibition for dealing with Specified Bank Notes. Therefore, in our considered view, the objection of the Ld.CIT(A) and that of AO on this issue in light of said Act is devoid of merits. Tribunal after considering relevant provision of Specified Bank Notes (Cessation of Liabilities) Act, 2017, held that there is no prohibition under the Act to deal with Specified Bank Notes up to 31.12.2016. Assessee appeal allowed.
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2024 (12) TMI 371
Penalty u/s 271(1)(c) - determination of correct head of income - Compensation received on termination of agency rights by treating it as business income - HELD THAT:- Hon ble jurisdictional High Court in the case of Bennett Coleman Co ltd in [ 2013 (3) TMI 373 - BOMBAY HIGH COURT] have deleted the penalty on account of change of head of income by the assessing officer particularly when he could not establish concealment of income or furnishing of inaccurate particulars of income by stating incorrect facts by the assessee. Hon ble Bombay High Court in the case of CIT Vs Procter Gamble Hygiene and Healthcare Ltd [ 2013 (3) TMI 883 - BOMBAY HIGH COURT] deleted the penalty for change of head of income from Income from House property to Business income . Therefore, respectfully relying on the decisions referred above, in our opinion no penalty could be sustained in respect of addition of compensation received on termination of the agreement. Thus, the penalty in respect of this issue is hereby deleted. Penalty in respect of three additions i.e. Addition on account of Insurance claim received during the year, Disallowance of deduction u/s 35(2AB) and u/s 35(1)(iv) in respect of Chennai unit and Disallowance of depreciation on capital expenses of R D unit is hereby deleted as above three issues, have already been restored back to the file of the Assessing Officer.
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Customs
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2024 (12) TMI 370
Advance Authorisation Scheme - Export Promotion Schemes - transfer of Authorisation from the old unit to the new IEC - automatic extension of the export obligation period after amalgamation of the company - existence of company to which the original Authorisation was issued - fulfillment of export obligation after amalgamation - It was held by High Court that ' This court is of the opinion that the impugned order dated 14.5.2018 passed by the Appellate Committee suffers from the vice of nonapplication of mind to the relevant issues and is contrary to the provisions of the Handbook of Procedures, 2009-14, the Circular dated 16.11.2011 as well as the Public Notices issued in this regard from time to time, which renders the impugned order unsustainable in law.' HELD THAT:- The Special Leave Petition is disposed of as having been rendered infructuous.
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2024 (12) TMI 369
Grant of benefit under MEIS scheme - amendment of Shipping Bills manually - direction to allow modification in the online system to enable the Petitioners to correct the technical error - non-declaration of the intention to avail the benefit under Chapter 3 on the shipping bills covering the export consignment - HELD THAT:- On perusal of the section 149, it appears that when amendment to shipping bill after export of goods is sought, the same is governed by the proviso to section 149 and if the requirements of the proviso of section 149 are satisfied, the amendment has to be allowed. This Court in the case of Gokul Overseas [ 2020 (3) TMI 167 - GUJARAT HIGH COURT ] in the facts before the court, where the petitioner omitted to file declaration of intent within three months from the date of the late export order as stipulated in the CBEC circular no. 36/10 dated 29.03.2010 for availing the benefits under the Merchandise Exports From India Scheme (MEIS) was permitted as all other relevant material available as the petitioner before the Court was eligible for the benefit of MEIS. It was observed by the Court that ' The respondents are, therefore, not justified in turning down the request to convert the shipping bills of the petitioner from free to MEIS and thereby depriving the petitioner of the benefits under the MEIS in respect of exports made under such shipping bills.' This Court in case of Bombardier Transportation India Pvt. Ltd. vs. Directorate General of Foreign Trade [ 2021 (3) TMI 9 - GUJARAT HIGH COURT ], has held that in similar facts that the EDI system, which is an electronic system developed and managed by the respondent authority with an objective to digitalize transmission of shipping bills between respondents, suffers from lacunae that it does not permit amendment, which is specifically permitted in terms of Section 149 of the Customs Act, 1961 to be carried electronically through EDI system and in view of settled law that the benefit which otherwise a person is entitled to once the substantive conditions are satisfied cannot be denied due to technical error or lacunae in the electronic system. This Court in the case of M/s. Deendayal Port Trust vs. Union of India [ 2020 (3) TMI 155 - GUJARAT HIGH COURT ] in the facts of the said case, it was held that the department was directed to consider the CENVAT credit claim made by the petitioner by allowing the petitioner to re-revise the service tax, return manually and thereafter, to revise GST Tran-1 online so as to grant the benefit of carried forward of the CENVAT credit manually. This Court in case of M/s. Siddharth Enterprises [ 2019 (9) TMI 319 - GUJARAT HIGH COURT ] has held that by not allowing the right to carry forward the CENVAT credit for not being able to file the form GST TRAN-1 within the due date may severely dent the working capital of the petitioner and may diminish an ability to continue the business, which would the mandate of Article 19(1)(g) of the Constitution of India. It was further held that Article 300A which provides that no person shall be deprived of property save by authority of law while right to the property is no longer a fundamental right, but it is still a constitutional right and CENVAT credit earned under the erstwhile Central Excise Law is the property of the writ-applicants and it cannot be appropriated for merely failing to file a declaration in the absence of Law in this respect. Accordingly, respondent authorities were directed to permit the petitioner to allow the filing of declaration in form GST TRAN-1 so as to enable them to claim transitional credit of the eligible duties in respect of the inputs held in stock on the appointed day in terms of Section 140 (3) of the CGST Act. The petitioner shall be entitled to MEIS scheme benefit in respect of the exports of the goods by the respondent authorities in view of the amendment of the shipping bills under Section 149 of the Customs Act, 1962 - The respondent authorities are directed to process the claim of the petitioner for MEIS scheme. Petition disposed off.
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2024 (12) TMI 368
Rejection of the request for conversion of Shipping Bills from DFIA to Drawback - request was made after the expiry of the three months from the date of let export order as prescribed under Para 3(a) of the CBIC Circular No. 36/2010-Customs dated 23-9-2010 - Para 3(a) of the said Circular has been held to be ultra vires Articles 14 and 19 (1) (g) of the Constitution of India as also ultra vires Section 149 of the Customs Act 1962, by the Hon ble Gujarat High Court by its decision in MESSRS MAHALAXMI RUBTECH LTD. VERSUS UNION OF INDIA [ 2021 (3) TMI 240 - GUJARAT HIGH COURT ]. HELD THAT:- It was not open to the Commissioner to reject the Appellant s requests for conversion of DFIA Shipping Bills to Drawback Shipping Bills by relying on Para 3 (a) of the Board Circular No.36/2010-Cus dated 23-9-2010 since the Hon ble Gujarat High Court in the case of MESSRS MAHALAXMI RUBTECH LTD. VERSUS UNION OF INDIA [ 2021 (3) TMI 240 - GUJARAT HIGH COURT ], has by its judgment and order dated 2-3-2021 held that the said Board Circular No. 36/2010-Cus dated 23-9-2010, to the extent of Para 3 (a), to be ultra vires Article 14 and 19(1)(g) of the Constitution of India and also as ultra vires Section 149 of the Customs Act, 1962. Since the only basis for rejecting the Appellant s request for conversion of the Shipping Bills in the impugned Order/ decision of the Commissioner, is Para 3(a) of the said Circular, which has been struck down by the Hon ble Gujarat High Court as ultra vires as aforesaid, the impugned Order/ decision of the Commissioner is clearly bad in law. It is further seen that under Para 4.28 (e) of the Handbook of Procedures 2009-14, the Appellant could have applied for conversion of the Shipping Bills only after the cancellation of the DFIA licenses by the licensing authority. The DFIA licenses were cancelled by two letters dated 11-7-2013 and 12-3-2014 and soon thereafter the Appellant applied for conversion by letters dated 20-7-2013 and 21-3-2014 which were followed by various reminders; there was therefore no delay on the part of the Appellant in applying for conversion of the Shipping Bills. Thus, no time limit was prescribed in Para 4.28 (e) of the Handbook of Procedures for seeking conversion of the Shipping Bills to Drawback Shipping Bills and the Appellant was entitled to conversion of the Shipping Bills into drawback shipping bills. The impugned order cannot be sustained. Appeal is allowed.
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2024 (12) TMI 367
Jurisdiction of customs authorities to demand duty - denial of benefit of Notification No. 12/2012-Cus dated 17.03.2012 to the Appellant on the ground that the Appellant failed to follow the conditions scrupulously - retrospective effect of license amendment - applicability of principle of revenue neutrality - HELD THAT:- The appellants have got a bonded warehouse notified by Customs way back in 1986. The area notified was not sufficient for the purpose of manufacturing activity of the appellant as the appellants are engaged in manufacturing large off-shore oils exploration related machinery. The appellants have been taking the material out of bonded space into the factory premises, within which the bonded space is located, for the purpose of actual physical manufacturing of goods. The entire process was happening in the knowledge of Revenue authority since 1986 - The goods were manufactured and cleared by the appellant availing benefit of Notification 12/2012-Cus dated 17.03.2012. 8 show cause notices were issued to the appellant during the period 18.12.2018 to 04.07.2019. All the show cause notices were issued Section 72 of the Customs Act 1962. In some show cause notices invoked Section 73A of the Customs Act, was also invoked and some demand was raised by invoking section 28 and sub-section 28(4) of the Customs Act. The appellant had obtained private bonded warehouse license under Section 58 of the Customs Act 1962 within the premises that were otherwise registered under Central Excise Act. The first license was granted on 31.03.1986 and thereafter license was renewed in the name of the appellant on 28.05.2014. The said license was amended on 29.11.2016 and again on 01.09.2017. The second amendment dated 01.09.2017 enlarged the bonded area under Section 58 to the full factory as per the request of the appellant. It transpires that the activity for which the appellants are being charged was happening in full knowledge of the Revenue. The Conditions imposed under Section 58 and 65 licenses were imposable to follow and that fact was acknowledged by Revenue - The Revenue did not, at any stage, crystallize the matter during more than 30 years it was followed. Further it is noticed that the Revenue has not made out any case to the effect that the imported goods were not used for stated purpose. No case of clandestine clearance was made out by Revenue and there is absolutely no allegation of diversion of any imported goods. The issue regarding covering entire premies within Section 58 of the Customs Act was raised by appellant themselves. The bonafides of the appellant cannot be doubted. When the permission to cover the entire premises was granted by Revenue, it was granted on the basis of a request made by the appellant on 06.11.2015 for amendment of their license issued on 28.05.2014. In the instant case, it is noticed that Revenue also recognizes that the conditions imposed during earlier period were impracticable and would have defeated the very purpose of grant of license. The appellant could not have possibly manufactured the goods within the bonded area. In these circumstances, when revenue after recognizing this difficulty extended the Bonded area to the entire factory registered under Central Excise Act then said amendment can only be treated as curative and therefore, will have the effect from the date of issue of original license on 28.05.2014 - The entire activity happened in the full knowledge of the Revenue. Furthermore, there is absolutely no loss of the Revenue as can be seen from the fact that Revenue has not raised any allegation about diversion of any goods or use of goods for the purpose other than that stated in Notification 12/2012 dated 17.03.2012. Section 28 of the Customs Act cannot be invoked to raise demand for the period beyond the period of limitation. In view of above, the amendment made in 01.09.2017 will have to be treated as curative amendment having effect from 28.05.2014. Consequently, the demands made would not survive. Appeal allowed.
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2024 (12) TMI 366
Revocation and forfeiture of Security Deposit - Allegation of breach of regulations on Customs Broker - Violation of principles of natural justice - failure to comply with time-lines prescribed in Customs Brokers Licensing Regulations, 2018 - violation of regulations 10(d), 10(e), and 10(f) of Customs Brokers Licensing Regulations, 2018 - HELD THAT:- The substantial delay that occurred between the offence report of May 2022 and the final determination of proceedings on 9th January 2024, which has outstripped prescriptions set out in regulation 17 of Customs Brokers Licensing Regulations, 2018, was, though brought before the licensing authority, discarded by drawing upon the decision of the Hon'ble High Court of Bombay in THE PRINCIPAL COMMISSIONER OF CUSTOMS (GENERAL) MUMBAI VERSUS UNISON CLEARING PVT. LTD., AND OTHERS. [ 2018 (4) TMI 1053 - BOMBAY HIGH COURT] . The licensing authority attempted to justify the delay on the ground of transfer of officers having impeded conclusion of enquiry within the prescribed period. The licensing authority is entrusted with responsibility, including of all aspects of statutory and administrative roles, by assumption of office and such official, found fit to hold the charge, as determined by the Central Board of Indirect Taxes and Customs (CBIC), is, doubtlessly, considered competent enough to discharge all aspects of the office efficiently. That the Principal Commissioner of Customs (General) now explains that only one aspect of such responsibility had been accorded more significance to the detriment of others does not set well with both administrative reach and the faith reposed by superior authorities. There is nothing on record to suggest that the licensing authority was not aware of the prescriptions of law or that he was not competent by any stretch. The Hon'ble High Court, in re Unison Clearing P Ltd, had held that the stipulations in regulation17 of Customs Brokers Licensing Regulations, 2018 would acquire the character of being directory upon demonstration that customs broker was responsible for the delay in completion of the proceedings. That is not the case here; on the contrary, it would appear that the administration had, for one reason or the other, failed to comply with the prescriptions. Considering the circumstances in which the licensing authority has attempted to transform mandatory stipulations as directory without being in consonance with the decision of the Hon'ble High Court of Bombay in re Unison Clearing Pvt Ltd, the proceedings failed at the threshold itself - It is not required to assess the merit of the submission on behalf of appellant. The impugned order is set aside to allow the appeal.
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2024 (12) TMI 365
Classification of imported insulin products - mono-component insulin or not - classified under chapter heading 3004 31 10 or not - eligibility for exemption under Notification No. 12/2012 Customs dated March 17, 2012, as they are lifesaving drugs or not - invocation of extended period of limitation under the provisions of Section 28 of the Customs Act, 1962 - HELD THAT:- From the definition of the phrase mano-component from various sources, it is clear that the same is used with reference to purity of insulin rather than the source. It is also found that it is not the case of the department that the product under dispute have impurity level higher than 1PPM or that any test report has been relied upon by them, which is on record, to establish the same. It is a fact borne on record that the Commissioner independently requested the Indian Institute of Technology, Chennai vide letter dated 29.11.2019 to examine whether human insulins and insulin analogue of biosynthetic origin could be referred to as mono-component insulin , in response to which the IIT through Shri N Manoj, Department of Biotechnology, per mail dated 05.12.2019 opined that Biphasic Isophane Insulin sold by the respondent was a two-component mixture of biosynthetic human insulin and protamine treated biosynthetic insulin. Protamine, a small protein/peptide is present as a second component and the two components together could not therefore be called as mono-component mixture. Insofar as the interpretation of notification is concerned, mono component insulin would undoubtedly cover the insulin developed using r-DNA technology, which position has been accepted by the authority, namely DCGI, who is the Statutory authority approving the license for sale of insulin. The classification of the impugned goods as mono-component insulin is a content based classification and certainly not a source based classification, as in the case of porcine and bovine insulin and hence, insulin manufactured using r-DNA technology would qualify as a mono component insulin, and hence, was entitled to the benefit of exemption under the Notification/s in question. The impugned order does not call for any interference - Appeal dismissed.
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2024 (12) TMI 364
Classification of goods Innopet Plasmax System20Q machinery - demand of differential duty of customs in respect of the subject B/E u/s 28 (4) the Customs Act, 1962 along with interest - confiscation of impugned goods - imposition of penalties on the appellants under provisions the Customs Act, 1962. Whether, it merits classification under Customs Tariff Item (CTI) 8422 3000as claimed by the appellants; or, is it classifiable under CTI 8479 8999as contended by the Department, for deciding on the appropriate levy of customs duty, and whether the adjudged demands including penalty imposed in the impugned order is sustainable or not? HELD THAT:- At the Chapter level i.e., Chapter 84, there is no difference of opinion in classification of goods among the appellants and the department. The dispute in classification lies in the narrow compass of the two Sub-headings i.e., 842230 or 8479 89 and the respective Tariff Items i.e., 842230 00or 8479 89 99 falling there under, in which the impugned goods are correctly classifiable. Now, we may closely examine the scope of the contending Sub-headings and Tariff Items thereof for determining correct classification of the imported goods. In the present case, the appellants had filed the five Bills of Entry (B/Es), by describing the imported goods in terms of specific description based on their function such as blow moulding machine, coating machine, filling machine, labelling machine, bottle dryer machine, shrink packing machine, which form a part of filling up of aerated water. Further, on perusal of the goods covered under each of the sub-heading - single dash, it would follow that dish washing machines of house hold type and other types are specifically covered under sub-heading 842210, in terms of specific tariff entry at 8422 1100 and 8422 1900, respectively. Further, machinery for cleaning or drying bottles/containers are covered under sub-heading 8422 20/tariff entry 8422 2000, with no further sub-classification. Machines having specific function mentioned therein and machinery used for aerating the beverages or aerated water are covered under sub-heading8422 30/tariff entry 8422 3000, with no further sub-classification. Machinery used for packing or wrapping are covered under sub-heading 8422 40/tariff entry 8422 4000, with no further sub-classification. The parts of these machinery are grouped under residual entry at sub-heading 8422 90, with specific tariff entry for the machines of category corresponding with the above-mentioned sub-heading. Revenue s contention is that the imported goods are rightly classifiable under tariff item 8479 89 99, under the category of machines having individual function on the basis of its functionality. Though there is no specific mention of coating function in these group of machines at the six-digit sub-heading level or eight-digit tariff item level in the Customs Tariff, learned Commissioner had come to the conclusion that coating machine, function independently of the blow moulding machine and the filling machine, as detailed in paragraphs 30.1 to 30.2 of the impugned order, for justifying the classification adopted by the department. As the sub-heading 8422 30 specifically cover machines for aerating beverages , and the entry in heading 8479 makes it clear that it covers only those machines which are not specifically included or covered elsewhere in Chapter 84, the aforesaid conclusion arrived at the impugned order is contrary to the legal position contained in the Customs Tariff Act, 1975. On the basis of above analysis about the scope of coverage of goods under contending sub-headings 842230 or 8479 89, in terms of GIR-1, it can be concluded that appropriate classification of the impugned goods as per the terms of headings , is sub-heading 8422 30 inasmuch as it specifically refers the impugned machines by their functions and the industry of aerated beverages; and not sub-heading 8479 89, which is a residuary category, with no specific mention of the function or industry where the impugned goods are used. Thus, upon detailed analysis of the scope of coverage of goods under contending sub-headings in paragraphs 9.1 to 9.5 as above, and on the basis of the Section Notes 3, 4 of Section XVI covering goods of chapter 84, it is opined that the imported machinery Innopet Plasmax System 20Q used for coating of PET bottles for aerating of beverages/ aerated waters are appropriately classifiable under CTI 8422 3000 and its parts thereof under CTI 8422 9090 of the First Schedule to the Customs Tariff Act, 1975. The classification under tariff item 8422 30 00 is appropriate as per GIR 3. Hence, the appropriate classification of the imported goods would be under Customs Tariff Item 8422 30 00. The Co-ordinate Bench of the Tribunal have examined the issue of classification of similar machinery used in aerated water manufacturing industry in the case of HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (IMPORT) ACC, MUMBAI [ 2017 (4) TMI 418 - CESTAT MUMBAI] and have held that the machines are classifiable under sub-heading 842230. The goods under consideration i.e., Coating machine - Innopet Plasmax System 20Q would be appropriately classifiable under Customs Tariff Item (CTI) 8422 30 00 and not under CTI 8479 89 99, as claimed by Revenue. Further, parts of such coating machine, therefore is appropriately classifiable under CTI 8422 90 90. The impugned order passed by the learned Commissioner of Customs cannot stand the legal scrutiny - the impugned order is set aside and the appeals are allowed in favour of the appellants.
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Insolvency & Bankruptcy
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2024 (12) TMI 363
Validity of the Execution Application in light of the approved Resolution Plan - Respondent has submitted that in view of the finality attained by the order approving the Resolution Plan in respect of the Respondent, the Execution Application does not survive - HELD THAT:- The law as settled by the Hon'ble Supreme Court in the case of Ghanshyam Mishra and Sons Private Limited, Through the Authorised Signatory vs. Edelweiss Asset Reconstruction Company Limited, Through the Director and Others [ 2021 (4) TMI 613 - SUPREME COURT ] enunciates that once the Resolution Plan has been approved by the Adjudicating Authority under Section 31 (1) of the IBC, all such claims which are not a part of the Resolution Plan shall stand extinguished and no person will be entitled either to initiate or to continue any proceedings in respect of a claim which is not part of the Resolution Plan and if the dues owed are not part of the Resolution Plan, they shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 can be continued. The resolution process is over as the Resolution Plan has been approved by the NCLT on 5th March 2020. The order of the NCLAT dated 6th July 2023 referred to by the learned Counsel for the Respondent also records that the Resolution Plan was finally approved on 5th March 2020 and while rejecting the application filed by the Applicant herein under Section 60 (5) and Section 9 of the IBC on the ground that the same was filed after expiry of several months from the date of the Resolution Plan approved by the Adjudicating Authority observed that the same was also approved by the Appellate Tribunal, of course with a liberty to either of the parties to pursue legal remedy in accordance with law. The order of the NCLAT has not been challenged any further by the Applicant. It would also not be necessary for an operational creditor of the nature of an Applicant, to be shown separately as a Decree holder or dealt with any differently although a Decree holder undisputedly is a separate class of creditor. This Execution Application, which has been filed on 28th October 2015 with respect to a claim prior to the date of approval of the Resolution Plan and had admittedly been lodged with the Resolution Professional by the Applicant as an operational creditor, is to receive NIL payment as per paragraph 27 of the order approving the Resolution Plan. Therefore, the claim stands rejected and extinguished and the execution proceeding cannot be continued - thus, no useful purpose would be served in perusing the Resolution Plan or directing the Respondent to furnish the Resolution Plan except to satisfy academic curiosity, in as much as, the Resolution Plan has been approved even by the NCLAT and admittedly there is no challenge to the order of the NCLAT approving the Resolution Plan and even the request for the Resolution Plan by application under Section 60 (5) and Section 9 of the IBC has not been entertained by the NCLT as well as the NCLAT. The Execution Application and the connected Notice are dismissed as infructuous.
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2024 (12) TMI 362
Admission of application under Section 7 of IBC filed by the Union Bank of India - application under Section 7 was barred by Section 10A or not - declaration of the account as Non-Performing Asset (NPA) - HELD THAT:- Prior to Section 10A period, there is clear acknowledgment by the corporate debtor that there is outstanding amount. During 10A period, two facilities were extended first on 16.09.2020 funded interest term loan (FITL) of Rs.3,21,63,265/- which was repayable by 6th monthly instalment commencing from September 2020. No moratorium was provided and interest to be serviced as and when debited. In the additional affidavit which was filed by the bank before the Adjudicating Authority, statements of account of the Corporate Debtor have been brought on record which indicate that amount of more than Rs.1 Crore was due as on 31.03.2021. Even according to the statement, EMI repayment chart submitted by the Appellant during the course of hearing indicate that there is overdue amount of 5th and 6th EMI and according to own statement of the Appellant, amount due on 31.03.2021 was Rs.1,09,28,247/-. It is clear that the amount has been calculated w.e.f. 31.03.2021. The amount was claimed due on the date of filing of the application. The calculation chart further clearly state that there was default committed by the corporate debtor even after 10A period. There was continuous default after 10A period which was much more than the threshold amount. Counsel for the Appellant has contended that the bank has treated the date of NPA as date of default which is not in accordance with the RBI guidelines. Reference made to the judgment of the Hon ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India Anr. [ 2021 (3) TMI 1179 - SUPREME COURT ] where Hon ble Supreme Court has held that ordinarily, upon declaration of the loan account/ debt as NPA that date can be reckoned as the date of default to enable the Financial Creditor to initiate action under Section 7 of the Code. The facts of the present case, clearly indicate that the borrower is liable to undergo insolvency resolution process and the application under Section 7 filed by the Bank cannot be thrown out on the bar of Section 10A. There being default prior to Section 10A period and subsequent to 10A period, order of the Adjudicating Authority admitting Section 7 application need no interference - It is well settled that at the time of admission of Section 7 application, Adjudicating Authority is not called upon to determine the amount of claim of the Financial Creditor who initiated Section 7 application, and those issues are to be left for Resolution Professional to be determined at the time of collation and admission of the claim. However, in view of the legal position that default during 10A period cannot be basis for any proceeding under Section 7 only observe that any amount defaulted during 10A period need not be included in the claim admitted of the Appellant. Appeal dismissed.
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2024 (12) TMI 361
Approval of Resolution Plan - violation of Regulation 37(ba) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- Regulation 37 has to be read to mean that Resolution Plan shall provide for the measures as may be necessary, including but not limited to as has been enumerated in Clause a to m. Clause (ba) on which reliance has been placed by the Appellant is regarding the restructuring of the Corporate Debtor, by way of merger, amalgamation and demerger. The above Clause in the Plan is required to be put if it is necessary, thus it cannot be said that Resolution Plan which does not contain any Plan pertaining to Regulation 37(ba) violates any provisions of law. The use of expression as may be necessary clearly indicates the intent of the statutory requirement. The Clause pertaining to restructuring of the Corporate Debtor is required to be put when it is necessary for insolvency resolution of the Corporate Debtor, hence a Plan which does not contain such Clause regarding restructuring of the Corporate Debtor cannot be said to violate any provisions of law. The Appellant in the Appeal has not made out any ground to the effect that Resolution Plan submitted by Respondent No. 3 violates any of the provisions of Section 30(2) of the IBC. It is well settled that commercial wisdom of the CoC in approving the Resolution Plan needs no interference by the Adjudicating Authority/Appellate Tribunal unless the Plan is violative of Section 30(2). The Hon ble Supreme Court in the matter of K. Sashidhar Vs. Indian Overseas Bank Ors. [ 2019 (2) TMI 1043 - SUPREME COURT ], has held that legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC. Insofar as submission that proceeding by SRA itself has filed an Application for recall of the approval of the Resolution Plan is not the issue which need to be considered in this Appeal. There are no ground to interfere with the decision of the Adjudicating Authority approving the Resolution Plan submitted by the Respondent No. 3 - there is no merit in the Appeal - The Appeal is dismissed.
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2024 (12) TMI 360
Irregularities and non-compliance of CIRP Regulations identified by the Adjudicating Authority purportedly committed by erstwhile Resolution Professional in the CIRP of the Corporate Debtor - discharge of professional duties by the erstwhile RP - HELD THAT:- In the impugned order, it has been observed by the Adjudicating Authority that the RP did not act in accordance with the provisions of the IBC and the CIRP Regulations framed thereunder in the conduct of CIRP of the Corporate Debtor and the issue before us is to decide on the tenability of these adverse remarks. It is an admitted fact that the RP had taken the following steps as envisaged in the IBC for conduct of CIRP including the preparation of Information Memorandum; publication of Form-G inviting Expressions of Interest; preparation of provisional list of eligible PRAs; appointment of Transaction Auditor; filing of Section 43 and 66 IBC applications; approval of CoC to the bidding documents and bid process etc. The irregularities in the conduct of the RP have been observed in the impugned order by the Adjudicating Authority only after the stage of receipt of resolution plans from the three eligible PRAs. One allegation which has been taken note of by the Adjudicating Authority is that RP had allowed multiple revisions in the plan - The RP has also been held responsible by the Adjudicating Authority for having committed the irregularity in that the marking of resolution plans was done by the CoC on the basis of evaluation matrix on 02.04.2024 while the plan of Sanklecha was received on 03.04.2024. The Adjudicating Authority held that marks could not have been allocated by the CoC prior to the date allowed for submission of modifications to the resolution plan. It was held that CoC had never deliberated on the revised resolution plan of Sanklecha which was received on 03.04.2024 which was the last date granted by CoC to the PRAs for submitting resolution plan. The RP cannot be blamed for having breached the IBC for the CoC to have approved the resolution plan of Parth with requisite majority share which action was taken by the CoC in the exercise of its commercial wisdom - the erstwhile RP has acted in deference to the wisdom of the CoC which is in line with the well settled legal precept of attaching paramount importance to the commercial wisdom of the CoC. The impugned order is modified to the extent that the observations made by the Adjudicating Authority on the performance and conduct of the RP is expunged. Rest of the operative portion of the impugned order remain unchanged - Appeal disposed off.
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PMLA
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2024 (12) TMI 359
Seeking grant of Regular Bail - Money Laundering - economic offences - liquor scam - fundamental right to liberty - offences punishable under Sections 420, 468, 471,120-B IPC read with Sections 7 12 of the Prevention of Corruption Act, 1988 - HELD THAT:- In the present case, charges have been brought against the applicant for offences punishable under Sections 420, 467, 468, 471, and 120-B IPC and Sections 7 12 of the Prevention of Corruption Act. It is the case of the prosecution that from the charge sheet, it is alleged that the present applicant along with co-accused Anwar Dhebar was the head of the criminal syndicate comprising of high level State government officials, private persons and political executives in extorting illegal commission in the sale of liquor and was also involved in unauthorized sale of unaccounted liquor through government liquor shops in the State of Chhattisgarh. In the matter of Nimmagadda Prasad v. Central Bureau of Investigation [ 2013 (5) TMI 920 - SUPREME COURT] their Lordships of the Supreme Court have held that economic offence is a grave offence affecting the economy of the country as a whole and observed ' Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep-rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as a grave offence affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country.' It is the case of the prosecution that the EOW had received a communication from the Enforcement Directorate and after due verification and on being satisfied, case was registered as FIR No. 04/2024 under Sections 7 12 of the Prevention of Corruption Act and Sections 420, 467, 468, 471, and 120-B IPC. It has been revealed that a criminal syndicate has been operating in the State of Chhattisgarh which was extorting illegal commission in the sale of liquor and was also involved in unauthorized sale of unaccounted liquor through government liquor shops - The investigation revealed that the applicant played a pivotal role in facilitating the payment of bribes to the syndicates in collusion with other co-accused. Considering the facts and circumstances of the case, noticed hereinabove and taking into account the nature and gravity of the offences, the role of the applicants herein, the manner in which the present applicant is alleged to have involved in the commission of the offence and that the investigation is going on and further taking note of the fact that the applicant along with the co-accused persons has caused huge financial loss to the State exchequer and the estimated proceeds of crime is around Rs. 1660,41,00,056/-. It is prima facie clear that on the one hand, the prosecution agency is claiming that the matter is of a huge economic loss to the State Exchequer and the offence is of highly serious nature and on the other hand, the distillers who are allegedly supplying illegal liquor causing huge financial loss to the State exchequer and the estimated proceeds of crime is around Rs. 1660,41,00,056/-, have not been made accused despite the fact that their name has been mentioned in the complaint made by the ED as member of the syndicate - In the present case, he was involved in the criminal acts of the syndicate and is in possession of the proceeds of crime and that he received commission from the liquor suppliers. However, no recovery of unaccounted money has been made in this regard. The details of the whatsap chats annexed with the charge sheet prima facie shows the involvement of the applicant in the present case. Taking into account the severity of the punishment prescribed for the aforesaid offences and keeping in mind, the binding observations of their Lordships of the Supreme Court in aforesaid cases [ 2017 (4) TMI 1410 - SUPREME COURT ] that corruption is a enemy of the nation and tracking down corrupt public servants and punishing such persons is a necessary mandate of the Prevention of Corruption Act, 1988 and further taking in view that corruption is really a human rights violation specially right to life, liberty, equality and non-discrimination and it is an economic obstacles to the realization of all human rights and further taking into consideration that charge-sheet has been filed against the applicant and considering the nature of accusation and gravity of offence, the applicant has been charged, which are extremely serious and such offences are alleged to have been committed in the State of Chhattisgarh, in the considered opinion of this Court, it is not proper to order release of present applicant on regular bail. The prayer for grant of bail to the applicant is liable to be rejected and it is hereby rejected.
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Service Tax
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2024 (12) TMI 358
Rejection of Declaration in Form SVLDRS-1 ARN LD3012190004307 dated 30 December 2019 filed by the petitioner under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDR Scheme) - rejection on the ground that the redemption fine is not covered by the Scheme - HELD THAT:- With respect to the above issue, the Co-ordinate Bench of this Court in the case of MESSRS. ESBEE ELECTROTECH LLP (FORMERLY KNOWN AS ESBEE INDUSTRIAL COMBINES) , MS. SAVITA CHORDIYA, MS. ABHA CHORDIYA, SOHAN CHORDIYA, SURESH CHORDIYA, VIJAY CHORDIYA, AJAY CHORDIYA, SHANTILAL CHORDIYA AND OJAS CHORDIYA VERSUS THE UNION OF INDIA, THE COMMISSIONER, CENTRAL GST CUSTOMS, PUNE-I, THE ADDITIONAL COMMISSIONER, CGST PUNE-I COMMISSIONERATE, THE ASSISTANT COMMISSIONER, CGST PUNE-I COMMISSIONERATE. [ 2024 (7) TMI 1516 - BOMBAY HIGH COURT] has passed a detailed judgment holding that the redemption fine is akin to penalty and once the petitioner s application under SVLDR Scheme accepting the payment of excise duty is accepted, the declarant is immune from imposition of any redemption fine and, therefore the benefit of the scheme gets extended to the redemption fine also. The only ground on which the application was rejected was that the Scheme does not cover the redemption fine which as observed by us is contrary to the decision of this Court in the case of M/s. Esbee Electrotech LLP. It is settled position that the rejection order has to be tested on the touchstone of what is recorded in the said order and nothing can be added or subtracted therefrom or improvised either by way of reply (which in any case is not so in the present case) or by way of arguments. Therefore, this ground of rejection is bad in law. Petition disposed off.
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2024 (12) TMI 357
Exemption of service tax under the Mega Exemption Notification for services provided by the petitioner - BSNL is recipient of service - HELD THAT:- The Defence Services, Government of India is the beneficiary of the services provided by the petitioner through its subcontractors. It is but also apparent that the services provided by BSNL to the DoT by way of implementation of the Project are also exempted from the applicable service tax in terms of Entry 12A of the Mega Exemption Notification dated 20 June 2012 read with Section 102 of the Finance Act, 1994, and by the same logic the notional services provided by the petitioner to BSNL would also be exempt from the applicability of service tax, by virtue of Entry 29 (h) provided under the said Mega Exemption Notification dated 20 June 2012. State of Andhra Pradesh v. Larsen Toubro Limited [ 2008 (8) TMI 21 - SUPREME COURT] was a case where the respondent was engaged for execution of civil, mechanical and other building works throughout India, including the State of Andhra Pradesh. The respondent, in order to execute the said work, entered into contracts with its clients (contractees) and under the contract, the respondent with the consent of the contractee, was permitted to assign parts of the construction work to the sub-contractors. Accordingly, the respondent placed orders with the sub-contractors for the agreed price inclusive of applicable taxes. The overall work was done under the supervision of the consultants nominated by the contractee. The sub-contractors purchased goods and chattels in the nature of bricks, cement, steel etc. and brought the same to the site which remained the property of the sub-contractors. The respondent was served with a notice to the effect that the company had failed to disclose the turnover of the sub-contractors for a certain period. Undoubtedly, the work in the nature of laying down of Optical Fibre Cable Network is in the nature of setting up a civil infrastructure so as to benefit the defence forces of this country in having a better communication network. The said services are clearly exempted from imposition of services tax for the ultimate beneficiary being the Government of India. Further, Entry 29 (h) of the aforesaid notification also provides that the sub-contractor providing services by way of works contract to another contractor providing works contract services are also exempt from imposition of service tax. The present writ petition is allowed and a writ in the nature of certiorari is issued thereby holding the impugned advance ruling dated 23 March 2018 passed under Section 28E of the Customs Act, 1962 to be not sustainable in law, and is therefore, hereby quashed. The petitioner shall be entitled to claim consequential reliefs.
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2024 (12) TMI 356
Failure of the appellant to pay tax in respect of certain taxable events in the returns filed by the appellant - Invocation of extended period of limitation in terms of proviso to Section 73 of the Finance Act, 1994 when none of the ingredients stipulated therein have been satisfied - short-payment or short-expungement in statutory returns - malafide intent to evade payment of tax - malafide intent of appellant - penalty u/s 78 of the Finance Act, 1994 and Rule 15 (3) of the Credit Rules - benefit of Section 80 of the Finance Act, 1994 denied. HELD THAT:- The decision of the Hon'ble Supreme Court in Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay [ 1995 (3) TMI 100 - SUPREME COURT ], while dealing with Section 11 A of the Central Excise Act, 1944, the Court held ' A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.' It is found that, barring a bald reference in the show cause notice bearing No.LTUC/279/2014-ADC dated 05.08.2014 that the appellant's conduct attracted the proviso to Section 73 of the Finance Act, 1994, there was no other material to come to conclusion that there was willful suppression of the fact by the appellant. The question of imposition of penalty under Section 78 of the Finance Act, 1994 and under Rule 15 (3) of the CENVAT Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 will arise only when there is deliberate attempt on the part of the person to mislead the department to evade payment of tax. In this case, the show cause notice not to have issued to the appellant in view of sub Section 3 of Section 73 of the Finance Act, 1994. The case of the petitioner was not governed by proviso to Section 73 or sub- Section 4 of Section 73 of the Finance Act, 1994. Under these circumstances, the substantial questions of law are answered in favour of the appellant and against the Respondent Department. The reference in the impugned order passed by the Appellate Tribunal is liable to be set aside. Appeal allowed.
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2024 (12) TMI 355
Non-payment of service tax by the appellant for the period from April 2015 to March 2016 - Department has initiated action after obtaining the ITR of the appellant and comparing it with the STR - suppression of facts or not - Extended period of limitation - HELD THAT:- No investigation into the information received from the ITR is shown to have been attempted. No service rendered by the appellant has been identified in the SCN nor has any document been relied upon in the SCN apart from the figures purportedly taken from ITR. Just because the appellant was registered under the Courier Agency Services , is not conclusive that services have been rendered by him under the said category, without any documentary proof. The basis of calculating the tax demand in the absence of identifying the actual service provided and the tax rate applicable, is a serious lacuna in the SCN and the subsequent order. While the ITR could have triggered an enquiry into the non-payment of Service Tax, if any, by the appellant, it cannot be the basis of determining the value of service rendered during any period of time. Much less under the extended period of time, invoking fraud, suppression etc. without an iota of investigation or proof of evasion of duty. Mere entertaining of suspicion cannot be the basis to put a citizen s right to do business in difficulty and oblige him to pay tax which is improperly demanded. The burden of proof is on revenue to establish the blame worthy conduct of the appellant. It is also a well-accepted norm of judicial discipline that a Bench of lesser quorum / strength should follow the view taken by Bench of larger quorum / strength, in a case whose ratio covers the legal issue involved in the impugned matter. The impugned order merits to be set aside - Appeal disposed off.
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2024 (12) TMI 354
Confirmation of Service Tax demand under 'Construction Services' - Demand of service tax under Rent-a-cab service - Benefit of abatement of 67% under Notification No. 1/2006-ST dated 01.03.2006 - time limitation. Construction service - HELD THAT:- The period involved in the present appeal is 2003-04 and 2005-06 and the service tax liability has been confirmed under Construction Services whereas both the authorities have admitted that it was Works Contract service which involves construction activity and supply of material, thus, making the contracts as composite contract. This issue has been settled by the Hon ble Apex Court in the case of CCE vs. Larsen Toubro Ltd [ 2015 (8) TMI 749 - SUPREME COURT] , wherein it has been categorically held by the Hon ble Apex Court that composite contracts were not taxable under Service Tax prior to 01.06.2007. Demand of service tax under Rent-a-cab service - HELD THAT:- The decision of Mumbai Bench of the Tribunal in the case of Rahul Travels vs. CCE, Nagpur [ 2016 (11) TMI 1294 - CESTAT MUMBAI] is squarely applicable in the present case and the appellant is not liable to pay service tax under Rent-a-cab Service or under Tour Operator Service because the same was not taxable prior to 01.06.2007. Time Limitation - HELD THAT:- It is found that the entire demand in the present case is barred by limitation because the period of dispute is 2003-04 and 2005-06 whereas the show cause notice was issued on 03.04.2008, which is wholly time barred and the department has not brought any evidence on record to establish suppression on the part of the appellant with intent to evade payment of tax. The impugned order is not sustainable in law and is liable to be set aside - Appeal allowed.
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2024 (12) TMI 353
Availment of inadmissible credit on invoices received at the premises which is not registered - Franchise Service - Maintenance or Repair Service - Commercial Training or Coaching Service - Management of Business Consultant Service - Reimbursable Expenses - Manpower Recruitment and Supply Service - extended period of limitation - levy of penalties. Franchise Service - HELD THAT:- On going through the Contract dated 23rd October 2008 between the parties, it is found that, it is mentioned that the parties acknowledge that they are entering into this agreement as independent parties. Unless expressly stated otherwise, neither party shall be construed as legal representative of the other for any purpose. From this, it is apparent that the appellant cannot be treated as a representative of the Aircom International Company, U.K. - On going through the various clauses of the agreement, it is understood that the appellant is not seen as a representative of Aircom International Company, U.K; no representative rights have been given to the appellant; the independent existence of the appellant is manifest by various agreement they have entered into with Indian customers. Mere granting of right to distribute sub- license, copy right products of Aircom International Company, U.K; it does not make the appellant a Franchisee of Aircom International Company U.K. - Department has not made out any case regarding the levy of service tax on the appellants on the Franchise Service alleged to have been availed by them. Maintenance or Repair Service - HELD THAT:- It has been held in a number of cases that levy of service tax critically hinges on the identification of service provider, the service provided, the recipient of the service and the consideration paid or payable for the same thereof. It is found that Show Cause Notice dated 22.04.2010 simply takes out the figures from the balance sheet on account of license fee; support and maintenance; training fee; reimbursement and management fee etc. and quotes the relevant provisions of law pertaining to the definition of the said services and proceeds to say that the appellant is liable to pay service tax on the same. No identification of the service recipient and consideration is shown and no analysis whatsoever has been done. The Show Cause Notice being vague, unsubstantiated and not considering the various premises to levy service tax cannot be sustained. Learned Authorized Representative for the Department tries to argue that the appellant failed to produce documentary evidence or certified entries regarding transactions in the balance sheet and therefore, the assessment by the authorities is hampered and therefore, the appellant is liable to pay the duty demanded along with interest. It is opined that such an argument is not tenable. Particularly with reference to the Show Cause Notice dated 22.04.2010, whether or not extended period is invoked, it was open to the Revenue to conduct necessary investigation, to give adequate opportunity to the appellants and issue Show Cause Notice on rational and reasoned grounds. In the absence of the same, the allegations are to be held as unsubstantiated. It is not expedient and necessary to go into the other submissions of the appellants on the issue of invocation of extended period, computation mistakes etc. Appeal allowed.
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2024 (12) TMI 352
Invocation of Extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act - suppression of facts or not - HELD THAT:- The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word one year , the word five years has been substituted. It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be wilful‟ since wilful‟ precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression wilful before suppression of facts under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be wilful‟ and there should also be an intent to evade payment of service tax. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The said proviso to pari materials the proviso to section 73(1) of the finance Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It would transpire from the aforesaid decision that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax. In THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS AND ANOTHER VERSUS M/S RELIANCE INDUSTRIES LTD. AND COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S RELIANCE INDUSTRIES LTD. [ 2023 (7) TMI 196 - SUPREME COURT] , the Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona-fide manner. In the present case, all that has been stated in the show cause notice is that the appellant received an amount for the three taxable services and since the appellant did not provide the required documents it suppressed facts from the department with intent to evade payment of service tax - The Commissioner (Appeals) held that there was no infirmity with the issue of demand as the period of demand was within five years. The appellant had filed a reply to the show cause notice clearly stating that though the show cause notice referred to the search of the premises of M/s. Hans Travel on 04.04.2008, but even earlier on 16.09.2003 the office of M/s. Hans Travel was searched by the officers of the Service Tax Section of Central Excise Division and all the records were ceased for further investigation about the taxable service. The reply also mentions that not only the day to day record of M/s. Hans Travel were scrutinized by the officers of the department but even the financial records were scrutinized. The reply also mentions that no reasons had been stated as to why the facts were suppressed with intention to evade payment of service tax. The reply also mentions that the show cause notice was issued on the basis of entries made in the balance sheet which were available to the department when the search was carried out. The extended period of limitation, therefore, could not have been invoked. The impugned order dated 16.11.2016 passed by the Commissioner (Appeals), therefore, deserves to be set aside on the sole ground that the extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act could not have been invoked in the facts and circumstances of the case. The order dated 16.11.2016 passed by the Commissioner (Appeals) is, therefore, set aside - Appeal allowed.
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2024 (12) TMI 351
CENVAT Credit - services rendered to other cellular operators with reference to sharing of the network - dispute on availment of credit on the point that the cellular operators are not providing input services to each other and such service does not have any nexus with the output service rendered by the telecom operators - HELD THAT:- This Bench in the case of appellants themselves relying on the judgment passed by Chennai Bench of the Tribunal in the appellant s own case M/S BSNL, SALEM VERSUS CCE, SALEM [ 2013 (1) TMI 142 - CESTAT CHENNAI ] in which the issue was decided in favour of the appellants where it was held that ' The argument of the appellants that the premises where the equipment are used belong to BSNL and not to any other party and it is also used for completion of services originating from Salem also are strong arguments in favour of the appellants. Since Modvat credit is a substantial benefit, we are of the view that the impugned credit should not be denied on account of procedural defects of minor nature as pointed out by the Revenue.' The above decision has been accepted by the Revenue. It can be seen that various Benches of the Tribunal i.e Chandigarh, Allahabad and Chennai were unanimous on the issue in favour of the appellants. Appeal allowed.
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2024 (12) TMI 350
Recovery of Service tax with interest and penalty - classification of services - Work Contract Service - denial of benefit of exemption claimed by the appellant under N/N. 25/2012-ST - HELD THAT:- The impugned order has proceeded to confirm the demand made on the basis of amounts reflected in the TDS return after denying the benefit of the exemption claimed by the appellant. Appellant has in submissions made before me not agitated the issue of exemption denied but have agitated the matter on re-computation of demand. There are merits in the submissions made that demand needs to be recomputed. The demand made needs to be recomputed by treating the services provided to PVVNL as work contract service either on the basis determination of labour charges as per the work order or by allowing the benefit of composition scheme and partial recharge as per notification No 30/2012-ST. For limited purpose of re-computation of demand matter is remanded back to the original authority. The penalty imposed under section 78 is also set aside, to be recomputed after re-computation of the demand. Appeal partially allowed and the matter remanded to original authority for re-computation of demand and penalty under Section 78.
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2024 (12) TMI 349
Levy of service tax - export of service or not - marketing support provided to Nokia Corporation Finland - Service Tax is payable at the rate prevailing at the time of rendering service or at the time of raising bills or not - applicability of benefit of N/N. 1/2006-ST - invocation of Extended period of limitation. Whether marketing support provided to Nokia Corporation Finland is export of service? - HELD THAT:- The services rendered by the Appellants i.e. 'Business Auxiliary services' qualify as export of services as even though the services were rendered in India as the benefits of such services accrued outside India, being utilized by Nokia Corporation, Finland situated in Finland. The Circular dated 24.02.2009 issued by CBEC extensively deals with the issues relating to rule 3(1)(iii) and rule 3(2)(a) of the 2005 Export Rules. It notices that in cases where Indian agents undertake marketing in India of goods of a foreign seller, the Indian agent undertakes all the activities within India and receives commission for his services from the foreign seller in convertible foreign exchange - in this category 'export of service' may take place even when all the relevant activities take place in India so long as the benefit of these services accrues outside India. The Hon ble Supreme Court in the case of Association of Leasing and Financial Service Companies vs. Union of India [ 2010 (10) TMI 4 - SUPREME COURT ] has held that the taxable event is the rendition of service and not the date of payment - the services provided to Nokia Corporation, Finland are wrongly denied to be export of service. The issue stands decided in favour of the appellants and against the Department. Whether Service Tax is payable at the rate prevailing at the time of rendering service or at the time of raising bills? - HELD THAT:- The rate of payment of service tax was enhanced to 12.24% after the services were rendered but prior the date of payment. Since rendition of service is the point of taxation, except for TRU clarification dated 28.04.2008 which has been set aside, it is held that the service tax at the rate of 10.12% has rightly been paid. The short-paid Service tax demand confirmed is therefore, held liable to be set aside. The issue stands decided in favour of the appellant and against the department. Whether benefit of notification No. 1/2006-ST accrues to the Appellant? - HELD THAT:- It is clear that the appellant has charged for the equipments required for respective civil and electrical work for turn-key project. The perusal of these documents is sufficient to falsify the allegation that the value of goods has not been included by the appellant, to the gross value of the turn-key projects, though there are few invoices, wherein only installation and commissioning services have been charged. But it is clear that on such invoices no abatement has been availed by the appellant. The abatement has been availed only on the contracts of Civil Construction Services and not on the Services of Management Maintenance and Repair. Otherwise also there is no denial of the Department that the services provided by the appellants were in the nature of works contract being turn-key projects - the abatement has wrongly been denied to the appellants. This issue also decides in favour of the appellant. Whether the extended period is wrongly invoked while issuing Show Cause Notice? - HELD THAT:- Vide the present Show Cause Notice dated 31.03.2009, the allegedly short-paid service tax for the period October, 2003 to September, 2006 is proposed to be recovered. Clearly the department has invoked the extended period of limitation while issuing the said Show Cause Notice, alleging that the appellant has not assessed/disclosed the correct service tax which came to the notice of the department only through the audit. The mere ipse dixit that the noticee willfully suppressed the material facts with intent to evade payment of service tax is not sufficient. The notice must contain particulars of facts and circumstances in support of such allegation, even if, such particulars are not included in the notice the department should be in a position to justify and /or substantiate its allegations of suppression of material facts on the part of the noticee. But in the present case, it is clear that department has raised demand based on presumptions and without appreciating the contract entered into by the appellant with its service recipient and the invoices raised for rendering the impugned services. The appellant had diligently provided all the documents. The department has failed to substantiate the allegations of suppression. The demand is set aside - appeal allowed.
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Central Excise
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2024 (12) TMI 348
Refund of excess duty paid inadvertently for the months of February and March 2013 at the time of clearance from their factory gate to five institutional buyers - appellant has not produced evidence to prove that the tax element has not been passed on to the buyers - HELD THAT:- While it is true that new evidence is normally not allowed at the appeal stage, the C.A. s statement is only a summation of the details in the appellants record already submitted to the department. Its use will only help answer the query s raised. In fact it is a department prescribed document for the sanction of refunds. Further what the appellant is claiming is only a double payment of excise duty which could easily have been verified from the invoices and the price agreed for sale, to the institution buyers. The appellants claim that since the excise duty alone was paid for the second time at the factory gate there was no mention about the exact quantum of other taxes viz., VAT, Additional. Tax, Octroi since no such deduction was being claimed from the cum-duty price and these taxes were being paid only on clearance by their C F agents to the consumers, is also plausible and easily verifiable - The buyers having agreed to a pre-determined cum-duty price the chance of passing on the excise duty to them is remote. Denying substantive benefits on technical grounds needs to be avoided. This being so the impugned order is set aside and the matter is remanded to the Original Authority for a decision afresh on the refund claim after taking into consideration all the documents submitted by the appellant including the CA s statement and reconciliation sheet / statement - appeal disposed off by way of remand.
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2024 (12) TMI 347
Disallowance of CENVAT credit - input services - service received at premises other than the registered premises - recovery with interest and penalty - HELD THAT:- This issue is no longer res-integra. In the case of M/S. ORIENTAL INSURANCE COMPANY LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, LTU, NEW DELHI [ 2023 (6) TMI 646 - CESTAT NEW DELHI] held that registration of premises with service tax department is not a condition precedent for claiming CENVAT credit of input services. Once the requirement of rule 4A of the 1994 Rules and rule 9 of the 2004 Rules are satisfied, the benefit of CENVAT credit could not have been denied. Thus, the impugned holding to contrary cannot be justified. Appeal is allowed.
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2024 (12) TMI 346
Process amounting to manufacture or not - process of slitting and cutting jumbo paper rolls into smaller rolls - admissibility of CENVAT Credit availed by the appellants in both Unit-I and Unit-II - Applicability of Section 11D of the Central Excise Act, 1944 regarding the collection of excise duty. Whether the appellant s activity of slitting/cutting jumbo paper rolls into small paper rolls amounts to manufacture or not? - HELD THAT:- In this case, two units under the same management are involved and there is no dispute regarding the use of paper within Unit-I for slitting, lamination, printing and heat-sealing coating. Similarly, there is no dispute regarding process undertaken at Unit-II with regard to slitted paper and payment of duty thereon. Further, there is no dispute regarding process of heat-sealing coating at Unit-I after receipt from Unit-II, payment of duty from Unit-I and CENVAT Credit thereon. The process of slitting of papers in the present case amounts to manufacture since the paper in Unit-II cannot be used in the form it is received from Unit-I because it is required to be slit to the required size to fit into the machines of Unit-II. Further, there is a substantial value addition of raw material and huge investments were made in plant and machinery for slitting and after the process of slitting and cutting is completed, a new and distinct product emerges to which the starting material is not capable of being put or used. It is also found that the Department has never raised any concerns regarding the duty paid on final slit paper. Thus, it is a settled law that once duty on the final products has been accepted by the Department, CENVAT Credit is not deniable even if the activity does not amount to manufacture. CENVAT Credit availed by the appellants in both Unit-I and Unit-II - HELD THAT:- Once the Department has accepted the duty of the final products and has not raised the objection, then in that case, the CENVAT Credit is not deniable even if the activity does not amount to manufacture in view of the various decisions relied upon the appellants. Applicability of Section 11D of the Central Excise Act, 1944 regarding the collection of excise duty - HELD THAT:- The first condition to invoke Section 11D of the Central Excise Act, 1944 by the Department to demand is not applicable in present case because Section 11D is applicable on the person who is liable to pay duty under Central Excise Act, 1944, whereas in the present case, in the impugned order itself, it has been held that the appellants were not liable to pay duty on slitted paper, therefore, this condition is not satisfied. Second condition that Section 11D is applicable when a person has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under Central Excise Act, 1944; whereas, in the present matter, it is not a case that the appellants have collected any amount in excess of duty assessed or determined. Hence this condition is also not met. The third condition that Section 11D is applicable when the said person has collected amounts from the buyer' of such goods; whereas, in the present case, there is no distinct seller and/or buyer. It is a case of stock transfer to Unit-II within the same entity and there is no sale and consequently there is no buyer from whom amount has been collected representing excise duty. Therefore, this condition is also not satisfied. Accordingly, demand made under Section 11D of Central Excise Act, 1944 is liable to be dropped. The impugned orders are not sustainable in law, therefore, set aside - appeal allowed.
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2024 (12) TMI 345
Determination of the Retail Price - Central Excise duty on the Retail Price declared on the goods less such abatement - goods were sold at prices higher than the Retail Price declared on the goods - HELD THAT:- It is seen that Rule 4 nowhere provides for adopting a MRP indicated in a Price List but requires ascertainment of the RSP which is either declared on identical goods removed within a period of one month or the RSP in the retail market at which the goods are actually sold at or about the time of removal of such goods from the place of manufacture. The said Price List relied upon in the notice, itself under Terms and Conditions, at Sr. No.7 mentions that Prices therein are subject to revision without prior notice and ruling prices will be charged at the time of dispatch. The same therefore does not represent the actual retail price at which the goods are sold. Moreover, the requirement is to ascertain the actual RSP at or about the time of removal of the goods to be valued. Therefore, a Price list of Feb 2005 cannot in any event be uniformly applied through out the period from 2005 to 2009. It is settled law as laid down in CCE v Bell Granito Ceramics Ltd [ 2008 (11) TMI 99 - CESTAT, AHMEDABAD] , that there is no requirement under Section 4A that the MRP on each package of goods has to be identical. Accordingly, a manufacturer can affix different MRPs on different packages of the same kind of goods. If the MRP on a given package has to be rejected under Section 4A (4) and redetermined under Rule 4 of the said Rules of 2008, then with regard to every package, it would be necessary to ascertain the actual RSP in the retail market at or about the time of removal of the package in question. An MRP indicated in a Price list of Feb 2005, which itself mentions that Prices therein are subject to revision without prior notice and ruling prices will be charged at the time of dispatch cannot be applied across the board for clearances made from 2005 to 2009. It is further noticed that the Larger Bench of this tribunal in the case of Ocean Ceramics Ltd v CCE [ 2024 (1) TMI 1280 - CESTAT AHMEDABAD - LB] , has held that in absence of the manner of ascertainment of RSP having being prescribed by Rules under Section 4A (4) for the period prior to 1-3-2008, it is not open to the adjudicating authority to ascertain the RSP for the period prior to 1-3-2008 and that the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008 notified with effect from 1-3-2008 cannot apply retrospectively for the period prior to 1-3-2008, in that view, we find that the demand for the period prior to 1-3-2008 based on the ascertainment done in the impugned Order-in-Original is in any way not tenable. The impugned Order-In-Original cannot be sustained and is set aside - appeal allowed.
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2024 (12) TMI 344
Trading of the goods or manufacturing activity - Revenue contended that the Appellant had actually undertaken the manufacturing activity by themselves and created a network of job workers to create an impression that the goods were manufactured by job workers - entire case has been built upon by the department on the basis of the statements recorded from the job workers - invocation of extended period of limitation. Whether the appellant-company is the manufacturer or the job worker, who has undertaken the activities as per the designs supplied by the Railways, on the raw materials supplied by the appellant, is the actual manufacturer? HELD THAT:- It is observed that the activities such as quality testing, labelling/branding etc may or may not amounts to 'manufacture'. It depends upon the facts and circumstances of each case. However, before going into the question whether quality testing, labelling/branding etc amounts to manufacture or not it must be established that the appellant has actually undertaken such activities in their factory premises. In the present case, it is observed that the appellant did not have any manufacturing facility in their premises; there was no machinery found during the course of search; no raw material or manufactured goods were found in the process of manufacturing at the time of search; there was no manpower employed by them for undertaking the manufacturing process; the monthly electricity charges of the factory was within Rs.4,000/- to Rs.5,000/- which evidences that no manufacturing activity was undertaken in the factory. Thus, we observe that the evidences available on record does not support the conclusion arrived at by the adjudicating authority that the appellant has undertaken some activity amounting to 'manufacture' in their premises. The adjudicating authority has not produced any other evidence to substantiate the allegation that the appellant has actually carried out testing, branding etc in their premises. In the absence of any such evidence, it cannot be presumed that the appellant has undertaken these activities after receiving the goods from the job workers. Further, it is observed that the levy of Central Excise Duty is on the activity of manufacture , but in the Show Cause Notice it is nowhere mentioned as to what item had been manufactured and as to what quantity of the goods had been manufactured by them. It is observed that without identification and quantification of the goods, the Show Cause Notice issued is ex-facie bad in law. The evidence available on record does not indicate that the appellant has undertaken any of the activities amounting to 'manufacture' in their factory premises. Accordingly, the demand of central excise duty confirmed in the impugned order set aside. Since, the demand of duty is not sustainable, the question of demanding interest or imposing penalty on the appellant-company does not arise. Invocation of extended period of limitation to demand central excise duty - HELD THAT:- Since, there is no suppression of facts with intention to evade the tax established in this case, raising the demand by invoking extended period of limitation again is legally not sustainable. It is found that this view has been held by the Hon ble Supreme Court in the NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] wherein it has been categorically held that once a demand has been raised for any issue by invoking the extended period of limitation, then another demand cannot be raised again by invoking the extended period on the same issue for a subsequent period - the demands confirmed in the impugned order by invoking the extended period of limitation is not sustainable. Since there is no corroborative evidence brought on record by the respondent to substantiate the allegation that the Appellant are the actual manufacturers of the goods in question, it is held that the job workers are the actual manufacturers of the goods in this case, as has been claimed by the Appellant. The demand of Central Excise duty from the Appellant-company is not sustainable in law. Since the demand itself is not sustainable, the question of demanding interest or imposing penalty on the Appellant-company under Section 11AC of the Central Excise Act, 1944 or under Rule 25(1)(c) of the Central Excise Rules, 2002 does not arise - the demand of interest and penalties imposed on the Appellant-company are set aside. Penalty imposed on the Partner of the Appellant-company - HELD THAT:- Penalty has been imposed on the ground that the Partner played a role in the commission of the alleged offence. Since it is already held that the demand of duty on the activity undertaken by the Appellant is not sustainable, the role of the appellant in commission of the alleged offence is not established. Accordingly, the penalty imposed on the Partner viz. Shri Sudipta Dey under Rule 26(1) of the Central Excise Rules, 2002 is also set aside. The demands confirmed in the impugned order are set aside and the appeals filed by both the Appellants are allowed
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2024 (12) TMI 343
Clandestine removal - improper accountal of excess stock - Recovery of CENVAT Credit with interest and penalty - HELD THAT:- Appellant 1 has through well devised mechanism by way of issuance documents in name of non existent firms namely,- M/s Vishwakarma Trading Company, Noida, M/s Rishabh Trading Company Noida, M/s Pooja Traders, Noida and M's Aamir Enterprises, was clandestinely clearing their finished goods to their customers located across the country in Maharastra, Karnataka etc. Against the goods cleared against invoices made in name of the fictitious companies they were receiving the payment in cash. Where they were clearing the goods on the invoices issued in their name they were receiving the payment by cheque. Undisputedly the searches were conducted at various location including the factory premises of the Appellant 1, and various residential premises owned by them and their Directors i.e. Appellant 2 and Appellant 3. Searches were also conducted at the premises of the agent of transporter booking the consignments of appellant 1 and also at the premises of the transporter namely Ghatg Patil Transport Company. The document issued in the name of fake entity were accompanied with the transport documents prepared by the Ghatge Patil Transport Company, and there were no transport documents in respect of the invoices issued in name of Appellant 1. Investigations revealed that the invoices were issued in the name of appellant were to cover up the transport of the goods to the godown of transporter and were taken back by the booking agent, Appellant 4 and from the transporter godown goods were transported on the documents issued in the name of fake company along with the transport documents prepared by the transporter M/s Ghatge Patil Transport Company. It is evident that the all the threads necessary to establish the case of clandestine clearance have been investigated and interwoven to unearth the scheme of clandestine clearance adopted by the Appellant 1, Appellant 2, Appellant 3, Appellant 4, Appellant 5 and Appellant 6. Each of the appellant was fully aware of the scheme and was playing the role assigned to him. It is also interesting to note that appellant during the period even after search conducted in his premises on 11/12.04.2012, continued with his activity of clandestine clearance. The truck cleared from his premises on 17.04.2013 and intercepted by the officers clearly establishes that Appellants are habitual offenders - Transporter has admitted the factum of transport of the clandestinely cleared goods on the basis invoices of fictitious entities and the Customers of the appellant have admitted to the receipt of the clandestinely cleared goods and fact of making payment in cash against these goods. All these aspects on the basis of the evidences have been appropriately discussed in the impugned order. It is settled position in law that once the facts have been admitted the same need not be proved/ established again. Appellant had asked for the cross examination of the transporter. It is found that no statement of the transporter has been relied upon. Transporter was made co-noticee in the matter and he has specifically asserted in the reply to show cause notice dated 24.03.2015 that even no statement of any of representative is recorded to find out whether involved in the transaction knowingly. The charges of clandestine clearance of the goods resulting into evasion of Central Excise Duty, upheld - Demands in respect of shortages detected at the time of search in the premises of the appellant and admitted by them. Demands in respect of clandestinely cleared goods to various customers and also admitted by the Appellant. Imposition of penalty on the customers of the Appellant 1, transporter and others who have not filed any appeal - HELD THAT:- For imposing the penalty Commissioner has in the impugned order discussed the role of each individual separately and have concluded that each was part of conspiracy to evade payment of Central Excise Duty and defraud the exchequer. Appellants being habitual offenders the penalties imposed also do not appear to be on higher side and are upheld. There are no merits in the submissions made by the appellants - appeal dismissed.
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CST, VAT & Sales Tax
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2024 (12) TMI 342
Challenge to assessment order - taxation on digital photography - works contract with photography is a service contract or not - HELD THAT:- On perusal of the impugned order of assessment, this Court finds that no reply was even submitted by the petitioner pursuant to the order passed by the Appellate authority, nor has any appeal been filed against the order of the Appellate Authority before the Tribunal, insofar as it found that the petitioner is liable to tax in respect of photography. Since the question of liability to tax on photography is decided in the affirmative, the question that remains is the quantum of tax, which would depend on the value of materials involved in the execution of works contract. The same is essentially a question of fact, which is appropriate for the Appellate Authority to decide. Liberty is granted to the petitioner to file an appeal before the Appellate Authority, if so advised, on the limited ground, of determining the extent of the value of the materials involved in the execution of works contract, within a period of three (3) weeks from the date of receipt of a copy of this order. The Writ Petition stands disposed of.
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