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TMI Tax Updates - e-Newsletter
February 12, 2025
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
By: Tushar Malik
Summary: The Ministry of Finance issued Notification No. 25/2024-Central Tax, effective October 10, 2024, amending the applicability of Tax Deduction at Source (TDS) under the CGST Act, 2017, for metal scrap transactions. Registered buyers purchasing metal scrap must now deduct 2% TDS if the transaction value exceeds 2,50,000. Buyers need a separate GST registration (Form REG-07) for TDS deduction, and suppliers receive TDS credit monthly. Compliance includes timely TDS deduction, filing GSTR-7, and issuing TDS certificates (GSTR-7A). The amendment specifically targets metal scrap, even if other transactions are TDS-exempt.
By: Dr. Sanjiv Agarwal
Summary: The Central Board of Indirect Taxes and Customs (CBIC) has issued clarifications on the taxability of various services following the GST Council's recommendations. Key points include: no GST on penal charges by regulated entities as per RBI guidelines; GST exemption for payment aggregators on transactions up to two thousand rupees; regularization of GST on research services funded by government grants and on skilling services; GST applicability on facility management services to the Municipal Corporation of Delhi; clarification that the Delhi Development Authority is not a local authority under GST law; and regularization of GST on services by Goethe Institute/Max Mueller Bhawans.
By: pooja jajwni
Summary: The article discusses the challenges and legal complexities surrounding the entry tax in India, particularly in Haryana. After the Supreme Court upheld the tax's validity in a landmark 2016 case, the Haryana Government attempted to enforce the tax in 2024, despite the tax being subsumed under GST by the 101st Constitutional Amendment. The article argues that the state's actions are illegal, as they contravene both the repealed laws and the GST Act. It outlines the procedural aspects of the entry tax and advises businesses on strategies to address assessment notices, emphasizing the importance of legal remedies and factual clarifications.
By: YAGAY andSUN
Summary: The ban on cotton candy in India is not nationwide but is enforced in specific regions due to health and hygiene concerns. Local authorities and food safety bodies have issued guidelines addressing the unsanitary conditions of its preparation, high sugar content, and potential harmful additives. States like Andhra Pradesh, Karnataka, Himachal Pradesh, and Tamil Nadu have imposed restrictions or bans, focusing on ensuring safe preparation and compliance with food safety standards. Tamil Nadu's ban was particularly notable due to the discovery of Rhodamine-B, a toxic industrial dye, in cotton candy, prompting regulatory actions to protect public health.
By: Likitha srimeka
Summary: The Reserve Bank of India (RBI) has implemented stringent measures to curb the practice of loan evergreening, where new loans are issued to repay old ones, masking non-performing assets (NPAs). This article examines the implications of these regulations on the Indian financial sector, particularly focusing on the Corporate Insolvency Resolution Process (CIRP). The RBI's guidelines aim to enhance transparency and accountability in credit management, affecting the dynamics between guarantors and principal debtors. While these measures promote financial stability and reduce NPAs, they also increase the financial burden on guarantors, potentially leading to more insolvency proceedings and legal challenges. The article highlights the need for a balanced regulatory framework that protects guarantors while ensuring effective insolvency resolutions.
By: DEVKUMAR KOTHARI and CA UMA KOTHARI
Summary: The proposal for a unique identification marking (UIM) aims to digitize track and trace mechanisms to enhance transparency and curb tax evasion under the Central Goods and Services Tax (CGST) Act. The UIM, defined as a unique, secure, and non-removable digital mark, will be implemented following GST Council recommendations. Section 148A introduces a track and trace mechanism for specified goods, requiring affixation of UIMs and maintenance of related records. Section 122B imposes penalties for non-compliance. The UIM system is expected to function similarly to existing barcodes but with more advanced technology to ensure accuracy and reliability in tracking and reporting.
By: YAGAY andSUN
Summary: HACCP (Hazard Analysis and Critical Control Points) is a globally recognized food safety management system aimed at identifying and controlling hazards throughout the food supply chain. Certification is essential for maintaining public health, complying with regulations, meeting market demands, managing risks, and boosting consumer confidence. It applies to food manufacturers, distributors, retailers, service providers, and packaging suppliers. The certification process involves assessment, training, documentation, implementation, and audits. Benefits include improved food safety, market access, risk management, customer trust, regulatory compliance, and operational efficiency. Surveillance audits ensure ongoing compliance, and certified organizations can display their certification to demonstrate their commitment to food safety.
By: YAGAY andSUN
Summary: The use of calcium carbide for ripening fruits and vegetables in India poses significant health risks, including toxicity, cancer, and neurological damage due to impurities like arsenic and phosphorus. Despite being banned under laws such as the Food Safety and Standards Act and the Prevention of Food Adulteration Act, its use persists due to cost-effectiveness, lack of awareness, and inadequate enforcement. The government and FSSAI are addressing this through inspections, awareness campaigns, and penalties. Safer alternatives like ethylene gas and ripening chambers are promoted to ensure food safety and compliance with regulations.
By: YAGAY andSUN
Summary: India's capital account management involves regulatory policies by the Reserve Bank of India and the government to control capital inflows and outflows, crucial for economic stability. Governed by the Foreign Exchange Management Act (FEMA), it includes foreign direct investment, portfolio investment, and external borrowings. The rupee is partially convertible, with restrictions to protect against speculative flows. Regulatory measures balance foreign investment attraction with financial stability. Challenges include capital flight and debt management, while gradual liberalization and strengthening domestic markets are recommended for sustainable growth. India's cautious approach has maintained macroeconomic stability amid global integration pressures.
By: YAGAY andSUN
Summary: The article discusses the potential internationalization of the Indian Rupee (INR) to enhance its role in global trade and finance, traditionally dominated by currencies like the US Dollar. Key motivations include reflecting India's economic growth, reducing dependence on the Dollar, and boosting export competitiveness. Steps towards this goal involve bilateral trade agreements in Rupees, developing Rupee settlement systems, and issuing Rupee-denominated bonds. Challenges include exchange rate volatility, limited convertibility, and global confidence. The article suggests that while full internationalization may not be imminent, gradual steps could position the Rupee more prominently in the global economy.
News
Summary: The Finance Minister addressed concerns about potential increases in Goods and Services Tax (GST) rates, clarifying that no rates have risen since the GST regime's implementation. During the Rajya Sabha session, she highlighted that GST rates have decreased from an average of 15.8% to 11.3%. She emphasized the collaborative efforts within the GST Council, where state finance ministers work together to simplify GST and reduce rates. The Council, a constitutional body, makes recommendations on GST rates, and no obstruction from the Union government has occurred in reducing rates to ease consumer burden.
Summary: The Supreme Court ruled that lottery distributors are not required to pay service tax to the Union government, dismissing an appeal by the Centre against a Sikkim High Court decision. The bench, comprising Justices BV Nagarathna and NK Singh, stated that since there is no agency relationship, service tax is not applicable to transactions between lottery ticket purchasers and firms. The court upheld that only state governments can impose taxes on lotteries under Entry 62, List II of the Constitution. The Centre had argued for the right to impose service tax but was unsuccessful in its appeal.
Summary: CPI(ML) MPs walked out of the Lok Sabha during the Finance Minister's budget reply, criticizing the government for not addressing key issues affecting Bihar and the nation. They expressed dissatisfaction over the lack of special status for Bihar and the exclusion of increased reservations in the 9th schedule following a caste survey. The MPs highlighted the budget's failure to support sharecroppers, modernize irrigation canals, and tackle unemployment by filling vacant government positions. The CPI(ML) accused the BJP-led government of neglecting these pressing concerns despite repeated demands and movements.
Summary: Opposition MPs criticized the Union Budget as lacking substance, failing to address key issues like unemployment and farmer distress, while the ruling party praised it as a step towards a developed India. The ruling party highlighted economic growth and tax reforms, while the opposition accused the government of neglecting welfare schemes and criticized the GST regime. Concerns were raised about stagnant funding for rural employment and the impact of indirect taxes. The opposition also criticized the government's economic policies and lack of vision for the future. In contrast, ruling party members emphasized progress and development initiatives.
Summary: A Rajya Sabha MP has called on the government to allocate funds for storytelling initiatives in schools to instill values in students. She emphasized the importance of value-based education alongside traditional subjects like AI and mathematics, arguing that moral science classes alone are insufficient. Sharing her experience in a village school, she highlighted the success of using storytelling in an air-conditioned hall to engage children and foster good values. She urged the government to incorporate storytelling into teacher training and school infrastructure, suggesting that storytelling sessions become a compulsory part of education to nurture good citizenship.
Summary: Congress MP criticized the Finance Minister's response to the General Budget 2025-26, questioning her awareness of issues like inflation, unemployment, and price rises. The Finance Minister stated that inflation, especially in food, is moderating and that the government plans to allocate nearly all borrowing in 2025-26 to capital expenditure. The Congress MP expressed disbelief at the Finance Minister's claims, suggesting a disconnect from the realities faced by the public.
Summary: The Municipal Corporation of Delhi (MCD) is expected to present its 2025-26 budget without tax hikes, focusing on cleanliness, education, and healthcare. The budget, to be presented by the commissioner, is anticipated to increase the total outlay from the previous Rs 16,683 crore. Allocations for sanitation, education, and healthcare are set to rise, with sanitation receiving nearly Rs 4,900 crore, education around Rs 1,660 crore, and healthcare over Rs 1,830 crore. Despite delays due to election-related disruptions, the Lieutenant Governor has approved the budget presentation in the absence of a standing committee.
Summary: Opposition MPs in the Rajya Sabha criticized the Union Budget, arguing it contradicts the 'Sabka Saath, Sabka Vikas' slogan by reducing funding for minority schemes and neglecting farmers, Scheduled Castes, and Scheduled Tribes. They highlighted significant cuts in scholarships and minority programs, suggesting a bias against these groups. Calls were made for farmer loan waivers, a caste census, and increased coal royalties for Odisha. Concerns were raised about unemployment, inflation, and inadequate support for Kerala, with accusations that the government is financially penalizing the state for its political stance. Critics argue the budget fails to address the real needs of citizens.
Summary: An independent Rajya Sabha member criticized the Indian government's Union Budget 2025-26 for lacking a clear vision on artificial intelligence (AI) and addressing external challenges such as the US tariff war. He questioned the government's plans for AI, noting its potential impact on jobs and competitiveness. He also highlighted the absence of strategies to tackle potential US tariffs on Indian software exports. Furthermore, he criticized the government's slow and inconsistent delivery mechanisms, the lack of regulatory rollbacks, and inadequate focus on education and health. Other members echoed concerns about the budget's failure to address economic growth and tax burdens.
Summary: The Samyukt Kisan Morcha (SKM) is urging members of parliament to advocate for a legal guarantee on Minimum Support Price (MSP) and the repeal of the National Policy Framework on Agriculture Marketing (NPFAM), which they argue threatens farmers' independence by favoring corporate control over agriculture. SKM claims the Union Budget neglects farmers' needs, lacking provisions for MSP, loan waivers, and employment generation. They criticize the government for ignoring the 2021 agreement with SKM and demand improved employment under MNREGS. Memorandums have been distributed to MPs, and the campaign will continue throughout February.
Summary: A Janata Dal (United) MP highlighted that Bihar's demand for 'special status' has been resolved, allowing the state to benefit from a "double-engine government." The MP expressed gratitude for budget allocations, including a Makhana Board and a new international airport near Patna. Criticism came from other MPs, who accused the government of neglecting other states and prioritizing election-focused budgets. Concerns were raised about ignored demands for a legal guarantee on Minimum Support Price, loan waivers for farmers, and insufficient allocations for employment schemes. The budget's focus on infrastructure and income tax relief was also questioned.
Summary: The TMC government in West Bengal is set to emphasize social security, welfare schemes, and women empowerment in its upcoming budget, with a focus on initiatives like the 'Banglar Bari' housing scheme and 'Lakshmir Bhandar', a financial assistance program for women. This budget, the last full-fledged one before the 2026 assembly elections, is expected to include increased allocations for infrastructure, healthcare, education, and social welfare. The government may also announce enhancements in direct cash transfer schemes and consider a hike in the dearness allowance for state employees, aiming to secure voter support, especially among women and minorities.
Summary: The Bihar legislature's budget session is set to commence on February 28 and conclude on March 28, as announced by the state's Parliamentary Affairs Department. The session will start with the Governor's address and the presentation of the economic survey. On March 3, the current government will present its final budget ahead of the upcoming assembly elections. The session will include 20 days of legislative business, with half dedicated to budget debates. Additionally, two days are reserved for the Motion of Thanks to the Governor's address.
Summary: The Congress-led opposition UDF in Kerala criticized the state budget presented by Finance Minister K N Balagopal for lacking significant announcements, while the ruling Left Front defended it as a strategic response to financial constraints imposed by the Centre. Deputy Speaker Chittayam Gopakumar accused the Centre of neglecting federal principles and underfunding Kerala's requests, particularly for Wayanad landslide rehabilitation. Opposition members highlighted concerns over education funding, social welfare pensions, and land tax hikes. Meanwhile, ruling party members emphasized the budget's focus on tourism, agriculture, and health, asserting progress in infrastructure projects and future confidence. The budget debate will conclude with the Finance Minister's response.
Summary: The Union Budget 2025-26, discussed in the Rajya Sabha, is part of a strategic plan to transform India into a developed nation by 2047. A BJP leader highlighted the budget's role in fostering innovation and economic growth, aiming for India to become the fourth largest economy by 2026 and achieve a USD 5 trillion economy. The budget includes initiatives for railways, urban development, and education, benefiting marginalized groups. It also offers income tax relief and supports consumption through a repo rate cut. A Shiv Sena member praised the budget for reducing compliance burdens and enhancing export readiness for Indian companies.
Summary: A Congress leader criticized the Union Budget 2025-26, labeling it as politically motivated with a focus on upcoming Delhi elections, neglecting the needs of the poor. He questioned the Finance Minister's approach to improving fiscal deficit by reducing capital expenditure and grants to states, calling it poor economics. The leader highlighted the lack of support for the bottom 50% of the population, pointing out falling wages, rising household debt, and inadequate relief measures. He also criticized the income tax relief measures for disproportionately benefiting the wealthy and accused the government of failing to address unemployment and meet economic targets.
Summary: Opposition parties criticized the government for the Union Budget 2025-26, highlighting issues like rising inflation, joblessness, and income inequality. They argued that the budget neglected the poor and rural populations, with accusations of it being politically motivated due to upcoming elections. Concerns were raised about reduced allocations for the Ministry of External Affairs and inadequate funding for programs like MNREGA and PM Kisan. Critics claimed the budget favored the privileged, ignored low-income workers, and failed to address regional disparities, with demands for special status and increased allocations for states like Odisha, Tamil Nadu, Kerala, and Bihar.
Summary: A Trinamool Congress leader criticized the resignation of Manipur's Chief Minister as insufficient to resolve the ongoing crisis, suggesting an investigation into alleged state-sponsored chaos. During a Budget debate, she argued the government's policies have failed, with Manipur experiencing significant unrest and displacement. She also criticized the Budget for neglecting the region's needs. In contrast, an AGP member praised the Budget for its benefits to the North East. A Congress leader accused the government of neglecting Bihar, demanding special status and accusing it of prioritizing industrial interests over regional development.
Summary: In a heated debate over the Union Budget in the Lok Sabha, opposition members criticized it as a short-term "sugar rush" that fails to address long-term economic issues, while the ruling party defended it as a necessary "booster shot" for the economy. Concerns were raised about the depreciating rupee, rising government debt, and the plight of farmers. Critics argued the budget favors corporates over the common man and is election-focused. The ruling party countered by highlighting initiatives for start-ups and tax rebates. Despite some welcoming the tax relief, many opposition members felt the budget neglects broader economic challenges.
Summary: India's economic transformation from the 'Fragile Five' to the 'First Five' reflects significant governance reforms, according to Union Minister Jitendra Singh. Speaking at an international conference, Singh highlighted India's rise in the Global Innovation Index and the expansion of broadband connectivity. He noted the surge in digital transactions, with India processing over 16.8 billion in October 2024 alone. Singh also emphasized technological advancements, including the National Quantum Mission, space achievements, and breakthroughs in healthcare. The conference, focused on administrative reforms, saw participation from 55 countries and was co-organized by the International Institute of Administrative Sciences and India's Department of Administrative Reforms.
Summary: Net direct tax collections in India increased by 14.69% to over Rs 17.78 lakh crore by February 10, 2025. The Central Board of Direct Taxes reported a 21% rise in net non-corporate taxes, primarily personal income tax, reaching approximately Rs 9.48 lakh crore. Net corporate tax collections grew by over 6% to more than Rs 7.78 lakh crore. Securities transaction tax collections surged 65% to Rs 49,201 crore. Refunds issued rose by 42.63% to over Rs 4.10 lakh crore. The revised estimates for the fiscal year project total direct tax collections at Rs 22.37 lakh crore.
Summary: Iran has eased import restrictions on foreign cars and iPhones to address economic challenges and public demand, despite ongoing sanctions. The move, aimed at generating tax revenue, has led to increased prices for imported goods and benefited wealthier citizens. Iran's economy remains strained under sanctions related to its nuclear program, with the rial at record lows against the dollar. The government hopes these measures will provide a sense of progress, though they do not resolve deeper economic issues. The situation is exacerbated by uncertainty over U.S. policies, particularly regarding oil exports and nuclear sanctions.
Summary: India is working to separate economic growth from emissions, focusing on sustainable transportation, as stated by the Union Environment Minister at the World Government Summit 2025 in Dubai. India achieved a 12% growth in the mobility industry last year. The government is implementing policies to meet its 2070 net-zero target, including a production-linked incentive scheme worth Rs 25,000 crore for the automobile industry and a new electric vehicle policy. Initiatives like the PM e-Drive and PM e-Bus Seva aim to promote electric vehicles. Additionally, the SemiCon India programme aims to boost domestic semiconductor manufacturing with a Rs 76,000 crore investment.
Summary: The Economic Times is hosting the ET GCC Growth Summit 2025 in Hyderabad on February 13, where leaders from Global Capability Centers (GCC) will gather to discuss India's role as a global innovation hub. Inaugurated by Telangana's IT Minister and Special Chief Secretary, the event will feature over 500 delegates and 45 speakers from top global organizations. Key topics include innovation strategies, agri-tech, education, aerospace, diversity initiatives, generative AI, and talent development. The summit aims to foster collaboration and address challenges in India's expanding GCC landscape, which spans various sectors like hospitality and media.
Summary: India has established a transparent and predictable Foreign Direct Investment (FDI) policy framework, aiming to boost economic growth and attract foreign capital. The Union Budget 2025 increased the insurance sector's FDI cap to 100%. A new Investment Friendliness Index for states will be introduced, and the Jan Vishwas 2.0 initiative will further improve the business environment. Reforms have been made in sectors like Defence, Telecom, and Insurance, with most sectors open for 100% FDI under the automatic route. The government is also enhancing the Ease of Doing Business by decriminalizing various provisions and streamlining regulatory processes.
Summary: India and Israel are committed to combating terrorism and strengthening bilateral ties, as highlighted by India's Commerce Minister during the India Israel Business Forum in New Delhi. The Minister invited Israeli investments, emphasizing India's stable and expanding market, supported by strong macroeconomic fundamentals and infrastructure improvements. He outlined India's strategic advantages, including democracy, demographic dividend, digitalization, and a strong judiciary. The Minister stressed India's reliability and demand potential, positioning it as a natural ally for Israel. He encouraged Israeli investment in various sectors, citing India's rapid growth and increasing demand as key opportunities.
Summary: The Enforcement Directorate arrested a former Madhya Pradesh transport department constable and two associates in a money laundering case involving disproportionate assets. The ex-official, along with the associates, allegedly laundered money through firms and bank accounts linked to family and friends. The Lokayukta had previously arrested them, and the ED took custody for further investigation. The case involves assets worth crores, including 52 kg of gold and Rs 11 crore in cash found in an associate's vehicle. The ED has frozen assets worth Rs 10 crore as part of the ongoing probe.
Summary: Iran has eased import restrictions on foreign cars and iPhones, aiming to address its economic challenges and generate tax revenue amid international sanctions. This move allows citizens to purchase high-end products like the iPhone 16 Pro Max, despite substantial costs due to import fees. The policy shift is seen as a way to create a perception of economic progress without addressing underlying issues. Iran's economy continues to struggle with a devalued currency and limited foreign reserves, exacerbated by US sanctions. The government hopes these changes will placate public dissatisfaction and prevent potential protests.
Summary: The government has launched special campaigns to boost financial inclusion under schemes like the Pradhan Mantri Jan Dhan Yojana (PMJDY), initiated in 2014. As of January 2025, 54.58 crore Jan Dhan accounts have been opened, with 55.7% held by women. Efforts include the involvement of 13 lakh Banking Correspondents and 107 Digital Banking Units to enhance credit access. The focus has shifted to enrolling every unbanked adult, with various initiatives targeting women, rural populations, and marginalized groups. Online platforms and state-level efforts aim to address challenges like low enrolment and lack of awareness.
Summary: The government has implemented several initiatives to ensure a safe and non-discriminatory environment for women employees and entrepreneurs. The Companies Act mandates listed and large public companies to appoint at least one woman director and comply with sexual harassment prevention provisions. Support for women entrepreneurs includes additional benefits under the Credit Guarantee Scheme and subsidies via the Prime Minister Employment Generation Programme. The Stand-Up India scheme facilitates loans for women entrepreneurs. Initiatives like "Yashasvini" and the SHe-Box platform empower women and address workplace harassment. Maternity benefits and childcare facilities are enhanced under various legislative acts.
Summary: India and Israel are enhancing their economic and trade relations through the India-Israel Business Forum and CEO Forum in New Delhi on February 11, 2025. These events, organized by the Department for Promotion of Industry and Internal Trade and the Embassy of Israel, aim to foster collaborations in technology, manufacturing, healthcare, and more. A high-level Israeli business delegation, led by the Minister of Economy, will participate. The forums will facilitate discussions on investment opportunities, technological collaboration, and sectoral growth, focusing on areas such as AI, cybersecurity, renewable energy, and agriculture. These initiatives align with both countries' long-term economic growth visions.
Notifications
FEMA
1.
FEMA 14(R)(1)/2025-RB - dated
4-2-2025
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FEMA
Foreign Exchange Management (Manner of Receipt and Payment) (Amendment) Regulations, 2025
Summary: The Reserve Bank of India has issued an amendment to the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, under the Foreign Exchange Management Act, 1999. Effective from its publication date in the Official Gazette, the amendment modifies Regulation 3, specifically sub-regulation (2), clause (I), sub-clause (a). It now stipulates that payments between residents of participant countries in the Asian Clearing Union (excluding Nepal and Bhutan) can be made through the ACU mechanism or as directed by the Reserve Bank. For other transactions, payments should follow the specified manner outlined in the regulations.
SEBI
2.
SEBI/LAD-NRO/GN/2025/228 - dated
10-2-2025
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SEBI
Securities and Exchange Board of India (Investor Charter) (Amendment) Regulations, 2025.
Summary: The Securities and Exchange Board of India (SEBI) has issued the Investor Charter (Amendment) Regulations, 2025, effective upon publication in the Official Gazette. This amendment mandates compliance with the Investor Charter across various SEBI regulations, including those governing stock brokers, merchant bankers, registrars, debenture trustees, bankers to an issue, mutual funds, custodians, KYC registration agencies, alternative investment funds, investment advisers, research analysts, real estate and infrastructure investment trusts, depositories, foreign portfolio investors, portfolio managers, and vault managers. Each entity must ensure adherence to the Investor Charter as specified by SEBI periodically.
3.
SEBI/LAD-NRO/GN/2025/227 - dated
6-2-2025
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SEBI
Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2025
Summary: The Securities and Exchange Board of India (SEBI) has amended the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, effective upon publication in the Official Gazette. The amendment introduces Regulation 39B, which mandates that recognized stock exchanges and clearing corporations using artificial intelligence (AI) and machine learning tools are solely responsible for ensuring data privacy, security, and integrity. They must also ensure compliance with applicable laws and are accountable for outcomes from these technologies. This regulation applies regardless of whether the AI tools are developed internally or sourced from third parties.
4.
SEBI/LAD-NRO/GN/2025/226 - dated
6-2-2025
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SEBI
Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2025
Summary: The Securities and Exchange Board of India (SEBI) has issued the Intermediaries (Amendment) Regulations, 2025, effective upon publication in the Official Gazette. The amendment introduces Chapter IIIB on the usage of artificial intelligence (AI) and machine learning by regulated entities. These entities are responsible for ensuring the privacy, security, and integrity of investor data, the accuracy of AI outputs, and compliance with applicable laws. SEBI reserves the right to take action for any violations. The amendment specifies the scope of AI tools and defines "person regulated by the Board" as per existing regulations.
5.
SEBI/LAD-NRO/GN/2025/225 - dated
6-2-2025
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SEBI
Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulations, 2025
Summary: The Securities and Exchange Board of India (SEBI) has issued amendments to the Depositories and Participants Regulations, 2018, effective April 1, 2025. Key changes include a requirement for depositories to remit annual fees within fifteen days from the start of the financial year and provide certified statements of annual charges. A new regulation mandates a 15% annual interest on unpaid or delayed fees. Additionally, depositories using artificial intelligence must ensure data privacy, security, and compliance with applicable laws. These amendments aim to enhance regulatory compliance and accountability in the use of advanced technologies.
Circulars / Instructions / Orders
SEBI
1.
SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/14 - dated
11-2-2025
Facilitation to SEBI registered Stock Brokers to access Negotiated Dealing System-Order Matching (NDS-OM) for trading in Government Securities- Separate Business Units (SBU)
Summary: SEBI has issued a circular permitting SEBI-registered stock brokers to access the Negotiated Dealing System-Order Matching (NDS-OM) for trading in Government Securities via Separate Business Units (SBUs). This follows the Reserve Bank of India's notification allowing such access. The circular outlines that these SBUs must be distinct from the brokers' securities market activities, maintaining separate accounts and net worth. Investor grievances related to these SBUs will not be handled by existing stock exchange mechanisms. This directive is under SEBI's regulatory powers to safeguard investor interests and market integrity.
DGFT
2.
Trade Notice No. 28/2024-25 - dated
11-2-2025
Seeking details of manually issued Certificates of Origin in contravention of DGFT guidelines
Summary: The Directorate General of Foreign Trade (DGFT) has issued a notice seeking details of manually issued Certificates of Origin, which contravene guidelines requiring electronic issuance via the eCoO 2.0 platform. Despite previous notices, some agencies are still issuing manual certificates, which will be deemed invalid. Exporters are advised against accepting such certificates, and customs authorities in partner countries are being informed to reject them. Violating agencies risk removal from the list of authorized issuers. Instances of non-compliance should be reported to the DGFT. This notice is approved by the competent authority.
Highlights / Catch Notes
GST
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Tax Assessment Order Quashed as Notice Lacked Document Identification Number Required Under CBIC Circular 128/47/2019-GST
Case-Laws - HC : HC set aside GST assessment proceedings due to absence of Document Identification Number (DIN). Following established precedents and CBIC Circular No.128/47/2019-GST mandating DIN, the court held that non-inclusion of DIN invalidates tax proceedings. While quashing the impugned order dated 17-10-2024, HC granted liberty to tax authorities to initiate fresh assessment after proper notice and DIN assignment. The ruling reinforces procedural compliance requirement of DIN in GST proceedings as a mandatory safeguard, consistent with prior Division Bench decisions in similar matters involving procedural irregularities in tax assessments.
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Tax Authorities Must Initiate Recovery Within One Year of ITC Block Under Rule 86A to Prevent Automatic Unblocking
Case-Laws - HC : HC affirmed that blocking under Rule 86A of Orissa GST Rules serves as revenue security by preventing utilization of future ITC through negative balance insertion in electronic credit ledger. The court emphasized the necessity for tax authorities to initiate recovery proceedings within the one-year blocking period, as automatic unblocking would otherwise allow dealers to access and debit ITC from their electronic ledger. The temporary restriction mechanism ensures tax authorities can secure potential recoveries while maintaining procedural safeguards. The ruling clarifies that such preventive measures are valid when aligned with proper recovery actions within the prescribed timeframe.
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Tax Authority Must Allow Taxpayer Final Hearing Before Assessment After 25% Payment Commitment Under GST Law
Case-Laws - HC : Petitioner contested order regarding deficient monthly returns and lack of supporting documentation. Following precedent in K. Balakrishnan case, HC set aside the impugned order. Petitioner demonstrated willingness to pay 25% of disputed tax amount and requested final opportunity for presenting objections before adjudicating authority. Government Pleader raised no substantial opposition. HC disposed of writ petition by setting aside original order, allowing petitioner to present case before adjudicating authority with commitment to partial tax payment, aligning with established GST procedural jurisprudence on opportunities for taxpayer representation.
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GST Officers' Cash Seizure Ruled Illegal; Income Tax Transfer Under Section 132A Cannot Validate Unauthorized Action
Case-Laws - HC : HC determined the initial cash seizure by state GST officers was unlawful, lacking statutory authority under CGST/SGST Act. The subsequent transfer of seized funds to Income Tax Department under Section 132A of IT Act could not legitimize the original illegal seizure. The court emphasized constitutional principles under Articles 265 and 300A protecting against unauthorized property expropriation and taxation. Neither GST Department nor Income Tax Department could retain the seized cash prior to completing their respective proceedings. The ruling reinforces fundamental constitutional safeguards against arbitrary state action in tax enforcement matters. Appeal resolved with direction to release seized funds pending completion of formal proceedings.
Income Tax
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Foreign Entities with Liaison Offices Must File Annual Statement Form 49C Under Income Tax Rules 1962 Amendment
Notifications : CBDT amended Income Tax Rules 1962 requiring non-resident entities with liaison offices in India to file annual statement Form 49C within 8 months from end of financial year. The amended rules introduce comprehensive reporting requirements including details of head office, principal office, employees, group entities, and financial transactions. Form 49C mandates disclosure of liaison activities, employee compensation, agent details, and India-specific financial information. The notification, effective from publication date, aims to enhance transparency in operations of foreign entities' liaison offices by requiring detailed disclosures of their activities, transactions and organizational structure in India.
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Railway Guard Wins Partial Relief in TDS Credit Dispute as ITAT Directs Fresh Assessment Under Section 192
Case-Laws - AT : ITAT allowed partial relief to appellant, a railway guard, regarding TDS credit denial. While non-response to notices due to frequent travel was deemed an inadequate excuse for tax non-compliance, the AO's failure to consider documented TDS credits in Form 26AS was found perverse. Matter remanded to AO for reassessment with directions to verify facts, allow legitimate TDS credits shown in Form 26AS under section 192, and consider eligible deductions under law. Tribunal emphasized that employment nature cannot justify evasive approach to tax obligations but ensured protection of substantive rights regarding documented tax deductions.
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Tax Officials Cannot Make Addition Based on Loose Papers Without Specific Evidence of Unaccounted Money in Property Sales
Case-Laws - AT : ITAT overturned addition of unaccounted money allegedly received by assessee representing 20% of total consideration. Addition was based on extrapolation from loose papers discovered during search operations. Tribunal held that extrapolation for on-money receipts from shop sales cannot be sustained where no specific evidence was found during search, no proper investigation was conducted, and key witness was not questioned about incriminating documents. Additionally, many flats were sold to parties different from those listed in loose sheets, and buyers were unrelated parties. Given CIT(A) had already deleted similar additions for another partner in joint venture project Ganga Acropolis, ITAT deleted the disputed addition for AY 2017-18, ruling in assessee's favor.
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Assessment Order Quashed: Failure to Issue Mandatory Notice Under Section 143(2) Makes Reopening Invalid and Unsustainable
Case-Laws - AT : ITAT ruled the assessment order invalid due to procedural deficiencies and lack of proper jurisdiction. The AO failed to issue mandatory notice under Section 143(2) before assessment, which the SC has established as sine qua non for jurisdictional validity. The assessment order was deemed cryptic, lacking detailed analysis of transactions, correlation with books of accounts, and source identification for alleged unexplained cash credits. The AO also failed to address the assessee's objections regarding reopening of assessment. Despite similar grounds for reopening assessment in AY 2012-13, no additions were made for that year. The tribunal quashed the reopening as legally defective and found the additions unsustainable on merits. Appeal allowed in favor of assessee.
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Commissioner Cannot Apply Section 40A(3) When Profits Already Estimated on Unaccounted Cash Purchases Worth 5.83 Crore
Case-Laws - AT : ITAT ruled against PCIT's revision order under s.263 regarding unaccounted cash purchases of Rs.5,83,99,000/-. The Tribunal held that where AO had already estimated profits on unaccounted cash purchases, additional disallowance under s.40A(3) was not warranted. Following established HC precedents, ITAT found AO's approach of applying gross profit estimation was a plausible view, precluding PCIT's revisionary powers. The assessment considering seized materials and ledger accounts demonstrated these were trading receipts during business operations. Since profits were already estimated and taxed on cash transactions, further disallowance under s.40A(3) was legally untenable. Assessee's appeals allowed, setting aside revision proceedings.
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Revenue's Extrapolation of Shop Sales On-Money Invalid Without Buyer Verification or Corroborating Evidence Under Section 133A
Case-Laws - AT : ITAT ruled against revenue's extrapolation of alleged on-money receipts from shop sales based on loose papers found during search. The tribunal noted that sales manager A's statement denying receipt of on-money was not properly confronted with discrepancies, and no buyers were examined during search or assessment proceedings. Following precedents from Madras HC and Kerala HC, statements recorded under Section 133A lack evidentiary value. Without corroborating evidence, cash recovery, or buyer verification, the extrapolation for three assessment years was deemed unjustified. The tribunal emphasized that while search evidence can be used per Supreme Court's Pooran Mal ruling, it requires corroboration. Appeal partly allowed for all three years.
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CIT(A) Cannot Direct Section 194C Reassessment After High Court Quashed Original Section 194I Order
Case-Laws - AT : CIT(A) erred in directing reassessment under Section 194C after High Court quashed original assessment order under Section 194I. While CIT(A) holds powers coextensive with AO under Section 251 including enhancement and reduction of assessment, these powers can only be exercised when there exists a valid, enforceable order under appeal. Once HC quashed the underlying AO order regarding TDS on External Development Charges, CIT(A) lacked jurisdiction to direct recomputation under different provisions. The attempted change from Section 194I to Section 194C assessment was invalid absent an existing enforceable order. ITAT allowed assessee's appeal, holding CIT(A)'s direction for demand recomputation legally untenable.
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Share Capital and Loan Additions Deleted as Assessee Proves Creditworthiness Under Section 68 Through Documentary Evidence
Case-Laws - AT : ITAT dismissed Revenue's appeal against CIT(A)'s order deleting additions under s.68 for alleged bogus share capital and unsecured loans. The assessee successfully demonstrated identity, creditworthiness, and transaction genuineness by providing shareholder confirmations, bank statements, and ITRs. AO's additions were rejected as based merely on doubt without contradictory evidence. CIT(A)'s partial allowance of s.14A disallowance was upheld, limiting it to investments yielding exempt income. ITAT affirmed CIT(A)'s authority to admit additional evidence without mandatory AO remand under s.250(4) and Rule 46A(4). The related interest expenses on unsecured loans were consequently allowed, and corresponding adjustments to WIP were permitted.
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Undisclosed Income Over Rs. 50 Lakhs Found in Search Evidence Leads to Extended Assessment Under Section 153A
Case-Laws - AT : ITAT upheld assessment beyond limitation period under s.153A as search evidence revealed undisclosed income exceeding Rs. 50 lakhs covering 7th to 10th assessment years. Documents found during search containing cheque transactions were not considered "dumb documents." Addition under s.69A sustained for unexplained Farm Account transactions in AY 2011-12. Cash found during search treated as business income rather than income from other sources, making s.115BBE inapplicable. Peak credit method accepted for s.68 additions regarding running account transactions. Blank uncashed cheques found during search not considered as income without evidence of completed transactions. Cash seized during search allowed to be adjusted against tax demand from assessment completion date, with s.234B interest recalculation directed.
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Tax Tribunal Allows 60% Expenditure Claims on Undisclosed Income, Upholds Section 153A Notice for Land Purchase Assessment
Case-Laws - AT : ITAT ruled on multiple issues in a tax assessment case. The Tribunal allowed 60% expenditure deduction against unaccounted cash receipts from spent solvents/scrap sales, following precedent from MSN Pharmachem Private Limited case. The court upheld AO's jurisdiction for notice under Section 153A, finding sufficient evidence of undisclosed income exceeding fifty lakh rupees. The Tribunal validated the assessment of 'on-money' payments for land purchase at Bibinagar, confirming that evidence from related party searches was admissible. However, the addition of deemed dividend under Section 2(22)(e) was set aside, directing AO to delete the addition following MSN Pharmachem precedent. The notice under Section 153A and subsequent assessment order were deemed valid under Section 153A(1).
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Interest earned on Smart City project grants must be returned to government as per GFR Rule 230(8), no addition should be made
Case-Laws - AT : Interest income earned on government grants parked in bank accounts for Smart City project implementation was contested. Assessee, established for Smart City Scheme execution, maintained separate accounts for Central and State Government funds. Interest earned on Central Government funds was returned to Consolidated Fund of India per GFR Rule 230(8), while State Government fund interest was adjusted against subsequent grants. ITAT remanded matter to AO for verification of interest remittance to respective governments. If confirmed that assessee retained no revenue benefit and interest was fully remitted, no addition should be made for interest income earned on deposits (fixed deposits and savings accounts). Matter requires factual verification of fund utilization and interest disposition as per governmental guidelines.
Customs
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Customs Officials' False Claims Lead to Return of Legally Worn Gold Jewelry Under Section 101 Customs Act Rules2016
Case-Laws - HC : HC invalidated confiscation orders regarding seized gold ornaments worn by petitioners at arrival. Court found multiple procedural violations: no show cause notice issued, denial of proper hearing, and falsification of Mahazar (seizure document) by customs officials. Officials falsely claimed jewelry was concealed under sleeves when petitioners were wearing it openly. Significantly, HC ruled that Baggage Rules 2016 provision regarding items "carried on the person" was ultra vires the Customs Act 1962. The rule-making authority exceeded statutory scope by regulating worn jewelry. Court directed release of seized items within 7 days, finding officials orchestrated false case potentially to benefit unknown parties. Ruling establishes that jewelry worn by passengers falls outside Baggage Rules 2016 purview unless deliberately concealed under Section 101 of Customs Act.
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Service From India Scheme Benefits: DGFT Show Cause Notice Quashed for Duplicating Previously Settled FTDR Act Claims
Case-Laws - HC : HC quashed show cause notice (SCN) issued by DGFT under FTDR Act regarding alleged misuse of Foreign Trade Policy benefits. Court found SCN merely restated previous allegations about Service From India Scheme (SFIS) compliance without new substantive claims, violating principles established in earlier Division Bench judgment. Applying res judicata, court determined SCN was an improper attempt to circumvent previous quashing of recovery notices. SCN deemed arbitrary and unreasonable for attempting to reopen settled matters. Petition disposed of in favor of petitioner, preventing DGFT from pursuing duplicate enforcement action.
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Customs detention order quashed as printed Show Cause Notice waiver violates Section 124 rights and natural justice principles
Case-Laws - HC : HC ruled detention of goods invalid due to procedural violations under Customs Act. Department's reliance on printed waiver of Show Cause Notice (SCN) was rejected as non-compliant with Section 124. Court held that oral SCN waiver requires proper conscious declaration, and opportunity of hearing is mandatory under natural justice principles. Printed waivers fundamentally violate affected persons' rights. Order-in-Original dated November 29, 2024 set aside as unsustainable without proper SCN issuance and hearing. Court directed release of detained goods to Petitioner, who must bear storage charges at Central Warehousing Cooperation, IGI Airport.
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Copper Scrap Import Value Rejection Upheld: Similar Goods Valuation Under Rule 5 Valid for Standardized Materials
Case-Laws - AT : CESTAT upheld rejection of declared transaction value for imported copper scrap (Birch/Cliff) under Customs Valuation Rules. Transaction value can be rejected based on reasonable doubt without proving fake invoices or buyer-seller relationships. Deputy Commissioner correctly applied sequential valuation rules after rejection, using values of similar goods under Rule 5. Court dismissed appellant's argument that scrap cannot have similar goods, noting copper scrap is globally traded per ISRI standards with specific classifications. Assessment based on contemporaneous imports of similar Birch/Cliff scrap was deemed appropriate. Appeal dismissed, affirming both Deputy Commissioner's reassessment and Commissioner (Appeals) order.
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Aircraft Engine Transport Stands Classified as Specialized Containers Under CTI 8609 Due to Essential Character and Design
Case-Laws - AT : CESTAT ruled on classification dispute for imported aircraft engine stands. The tribunal determined these specialized stands, designed for safe multi-modal transport of aircraft engines with shock attenuation systems, should be classified under CTI 8609 00 00 rather than CTI 8716 39 00. While featuring caster wheels for limited workshop mobility, the essential character derives from the cradle component functioning as a container. CESTAT rejected the narrow interpretation of "container" previously applied, noting CTH 8609's scope includes specially designed transport equipment, including open containers. The tribunal set aside the Principal Commissioner's order, allowing classification under CTI 8609 00 00 based on Rule 3(b) of the GI Rules.
DGFT
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Export Policy: Raw Human Hair Export Prohibited Unless FOB Value Exceeds USD 65/kg Under Section 3 & 5
Notifications : Pursuant to Foreign Trade (Development & Regulation) Act 1992 and FTP 2023, DGFT has amended the export policy for raw human hair (ITC HS codes 05010010 and 05010020). The policy revises the status from 'Restricted' to 'Prohibited' for both unworked human hair and human hair waste. However, exports remain unrestricted if the FOB value meets or exceeds USD 65 per kilogram. The amendment, effective immediately per Notification No. 59/2024-25, aims to regulate the export of raw human hair while maintaining quality standards through price control mechanisms. The notification exercises authority under Section 3 read with Section 5 of the Act.
Corporate Law
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Section 132 Companies Act and NFRA Rules Valid, But Disciplinary Process Needs Separate Investigation and Decision-Making Bodies
Case-Laws - HC : HC upheld validity of Section 132 of Companies Act 2013 and NFRA Rules while addressing disciplinary proceedings against audit firms and partners. Court rejected challenges based on vicarious liability, finding that firms and partners share unified responsibility under Companies Act framework. Retroactive application challenge was dismissed as Section 132 merely modified enforcement mechanism without creating new liabilities. However, proceedings were invalidated due to procedural defects in NFRA's structure where same Executive Body both issued findings and initiated disciplinary action, violating principles of natural justice and creating reasonable likelihood of bias. Court emphasized need for separate divisions within NFRA to maintain procedural fairness and avoid predetermination in disciplinary matters.
IBC
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Corporate Guarantee Invoked After CIRP Initiation Invalid Under Section 14 IBC Moratorium, Claim Not Admissible
Case-Laws - AT : NCLAT determined that invocation of corporate guarantee after CIRP commencement is impermissible under Section 14 IBC moratorium provisions. The corporate guarantee was invoked on 18.09.2020, subsequent to CIRP initiation date of 27.01.2020. Following precedents from SC in Ghanshyam Mishra and NCLAT in Edelweiss Asset Reconstruction, the tribunal held that claims based on guarantees invoked post-CIRP cannot be admitted as they had not matured when CIRP commenced. The guarantee should have been invoked prior to CIRP initiation for any valid claim. The appeal was allowed, invalidating the respondent's claim filed based on post-CIRP guarantee invocation, as it violated moratorium restrictions under IBC.
Indian Laws
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Acquittal in Section 138 NI Act Case Does Not Automatically Prove Malicious Prosecution or Entitle Damages
Case-Laws - HC : HC dismissed second appeal concerning damages claimed for alleged malicious prosecution following dishonored cheque case. Plaintiff failed to establish essential elements of malicious prosecution - damage to reputation, property, or person. Court found no evidence of defamation or mental agony, and determined original Section 138 NI Act proceedings were not maliciously instituted. Mere acquittal in criminal case insufficient to prove malicious prosecution. Lower appellate court correctly noted absence of published negative publicity or demonstrable harm to plaintiff's image. Without proof of actual damages or malicious intent, plaintiff's claim for compensation failed legal threshold for tort of malicious prosecution. Appeal dismissed with no interference in first appellate court's judgment.
Service Tax
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CENVAT Credit Allowed for Telecom Infrastructure Components Under Rule 2(a)(A) and Service Tax Input Credit Under Rule 2(l)
Case-Laws - AT : CESTAT allowed appeal regarding CENVAT credit admissibility for telecommunication infrastructure components. Following SC's ruling in a related matter, credit was deemed admissible for towers, shelters, electric setup, and electronic items as they qualify as capital goods under Rule 2(a)(A) of CENVAT Rules. Credit for input services used in tower erection was also held permissible under Rule 2(l) of CENVAT Credit Rules, 2004, as these services directly or indirectly contributed to output services. Revenue's challenge regarding SCN issuance was rejected, as per Section 73(3) of Finance Act, 1994, SCN cannot be issued for amounts already paid prior to notice. The tribunal affirmed taxpayer's position on all contested points.
Central Excise
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Taxpayer Cannot Claim Interest on CENVAT Credit Refund When Reversed Without Written Protest Under Section 11BB
Case-Laws - AT : CESTAT dismissed appeals concerning interest claims on refunded CENVAT credit. The appellant reversed credit following show cause notices but without written protest. Though partial credit was later allowed per Tribunal's order dated 04.07.2011, the reversed amount was deemed appropriated as duty payment, not a revenue deposit. The reversal constituted appropriation since it matched the amount proposed in show cause notices. As refunds were processed within the statutory three-month period, no interest liability arose under Section 11BB. The Tribunal distinguished from Pricol Ltd precedent, noting absence of protest during reversal. The amounts were treated as appropriated duty payments rather than deposits under protest, making interest claims untenable.
Case Laws:
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GST
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2025 (2) TMI 411
Challenge to assessment order in Form GST DRC-07 - challenge on various grounds, including the ground that the said proceedings did not contain a DIN number - HELD THAT:- A Division Bench of this Court in the case of M/s. Cluster Enterprises Vs. The Deputy Assistant Commissioner (ST)-2, Kadapa [ 2024 (7) TMI 1512 - ANDHRA PRADESH HIGH COURT ], on the basis of the circular, dated 23.12.2019, bearing No.128/47/2019-GST, issued by the C.B.I.C., had held that non-mention of a DIN number would mitigate against the validity of such proceedings. Another Division Bench of this Court in the case of Sai Manikanta Electrical Contractors Vs. The Deputy Commissioner, Special Circle, Visakhapatnam [ 2024 (6) TMI 1158 - ANDHRA PRADESH HIGH COURT ], had also held that non-mention of a DIN number would require the order to be set aside. In view of the aforesaid judgments and the circular issued by the C.B.I.C., the non-mention of a DIN number in the order, which was uploaded in the portal, requires the impugned order to be set aside. This Writ Petition is disposed of setting aside the impugned proceedings, dated 17-10-2024 issued by the 1st respondent, with liberty to the 1st respondent to conduct fresh assessment, after giving notice and by assigning a DIN number to the said order.
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2025 (2) TMI 410
Permissibility under Rule 86A of the Orissa Goods and Services Tax Rules, 2017 - appropriating future input tax credit (ITC) by inserting a negative balance in the electronic credit ledger - HELD THAT:- Reference made to Laxmi Fine Chem [ 2024 (5) TMI 509 - TELANGANA HIGH COURT] regarding view taken on initiation of appropriate recovery proceedings, as otherwise the blocking will automatically come to an end after a period of one year, thereby making available to the dealer to debit in the electronic ledger on availing available therein, input tax credit. Thus, the blocking serves purpose of being security for revenue on recovery. Petition disposed off.
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2025 (2) TMI 409
Challenged the Order passed that the petitioner had filed only reply, Not supported by materials or invoices - Defects found in monthly return - Issued show notice - Petitioner ready and willing to pay the disputed tax - HELD THAT:- Following the recent judgment delivered by this Court in the case of M/s. K. Balakrishnan, Balu Cables vs. O/o. the Assistant Commissioner of GST Central Excise [ 2024 (6) TMI 713 - MADRAS HIGH COURT] . Additionally, petitioner is ready and willing to pay 25% of the disputed tax and that he may be granted one final opportunity before the adjudicating authority to put forth their objections to the proposal, to which, the learned Government Pleader appearing for the respondent does not have any serious objection. Thus, the writ petition stands disposed of on the following terms. The impugned order is set aside.
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2025 (2) TMI 408
Seizure of cash from the premises by the officers attached to the GST Department of the State in the course of proceedings initiated under Section 74 of the CGST/SGST Act - HELD THAT:- There are force in the submissions of the learned Senior counsel for the appellants that the initial seizure of cash from the premises of the appellant being illegal, the continued retention of it by the GST Department of the State, and the handing over of the cash to the Income Tax Department, cannot be seen as legal acts merely because the money was now handed over to the Income Tax Department pursuant to a requisition sent by them under Section 132A of the IT Act. The initial seizure of the cash by the GST Department was blatantly illegal since it was without the authority of law. This salutary principle that prevents the expropriation of property or tax from a citizen without the authority of law finds expression in Articles 265 and Article 300A of the Constitution of India. Conclusion - There are no hesitation to hold that the cash amount seized from the premises of the appellants cannot be retained either by the GST Department of the State or the Income Tax Department prior to a finalisation of respective proceedings initiated by them. Appeal disposed off.
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2025 (2) TMI 407
Challenge to assessment orders - mismatches between various GST returns - late filings - and non-generation of E-way bills - the petitioner is ready and willing to pay 25% of the disputed tax - seeking grant of one final opportunity before the adjudicating authority to put forth their objections to the proposal - HELD THAT:- The petitioner shall deposit 25% of the disputed taxes as admitted by the learned counsel for the petitioner and the respondent, within a period of four weeks from the date of receipt of a copy of this order. The impugned order dated 22.08.2024 is set aside - Petition disposed off.
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Income Tax
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2025 (2) TMI 406
Denial of credit of TDS deduction u/s 80C - Appellant is working as a Guard, and is staff of Indian Railways viz. South Eastern Central Railway, Bilaspur due to his nature of employment, he is used to stay outside of his usual residence. TDS is being made by the employer because of his unstable place of residence, his Return of Income could not be filed, notices were not received. HELD THAT:- Addition in the case of assessee was made by the Ld. AO in absence of any response by the assessee based on income of the assessee reflected in Form 26AS, but the TDS credited available in Form 26AS was not allowed to the assessee, which obviously would have reflected in Form 26AS against the entries of Salary (Amount paid / credited) and recorded as transactions u/s 192 of Act. The contention of AR that, the assessee is a Goods Train Guard, which is regularly placed on duties outside of his usual residence, and therefore, notices issued by the department could not have found his attention and he was unable to respond on time, cannot be the sole reason to allow the assessee to adopt non-responsive and evasive approach towards the tax compliances, however, as the legitimate credit of TDS was not allowed by the AO, in spite of having such facts on records, we find perversity in the order of Ld. AO, therefore, the same needs to be set aside and in the interest of substantial justice, we deem it fit to restore this matter back to the file of Ld. AO, for verification of the facts of the present case and to re-assess the income of the assessee after allowing the legitimate TDS credited and the eligible deductions available under the mandate of law.
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2025 (2) TMI 405
Addition on-money received by the assessee being 20% of the total consideration - extrapolation on the basis of loose papers found during the course of search - HELD THAT:- We are of the considered opinion that extrapolation cannot be made on account of receipt of on-money for sale of shops in respect of which no evidence was found during the course of search and no enquiry or investigation was conducted either by the search party during the course of search or post-search enquiries or by the AO during the course of assessment proceedings. Since in the instant case, admittedly, not a single question was put to Mr. Subhash Goel about the statements of the employees and the incriminating documents which relate to the sale of pent house has actually not been sold, most of the flats were sold to the persons other than the persons whose names were appearing in the loose sheets towards sale of the said very flats and the buyers are unrelated parties and since the Ld. CIT(A) in the case of other partner of the joint venture has already deleted the addition on account of such on-money received on sale of flats in the project Ganga Acropolis, we are of the considered opinion that no addition is called for in the hands of the assessee. Accordingly, the addition made by the AO for assessment year 2017-18 being share of the assessee on account of extrapolation is deleted. Decided in favour of assessee.
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2025 (2) TMI 404
Reopening of assessment u/s 147 - independent application of mind v/s borrowed satisfaction - Addition u/s 68 - AO merely reproduced the report of ADIT (Inv.) and came to the conclusion that income had escaped assessment - HELD THAT:- In the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd.[ 2017 (5) TMI 1428 - DELHI HIGH COURT] held that mere reproduction of Investigation report in reasons recorded initiation of reassessment proceedings u/s 148 is illegal in the absence of link between tangible material and formation of belief that income has escaped assessment. The crucial link between information made available to the AO and the formation of belief was absent. The reasons to believe recorded were not reasons but only conclusions and a reproduction of the conclusion in the Investigation Report received from the ADIT (Inv.) and held it to be a borrowed satisfaction. In the case on hand also AO merely reproduced the report of ADIT (Inv.) and came to the conclusion that income had escaped assessment. To justify this action he also noted that in the return filed by the assessee for the AY 2012-13 the assessee has reported income from other sources only to the extent of Rs. 6,10,072/-. However, the return filed by the assessee clearly show that apart from income from other sources of Rs. 6,10,072/- the assessee had exempt income of Rs. 15,26,571/- which was completely ignored by the Assessing Officer. Reopening of assessment in this case merely based on report of the ADIT (Inv.) without making any independent enquiry by the AO is nothing but borrowed satisfaction. Even on merits also the creditor s bank statements and the confirmation, PAN details, etc. show that all these transactions were made through banking channels and the assessee had repaid the credits through banking channels. Therefore, the credits in the bank cannot be assessed as unexplained credits. Appeal of the assessee is allowed.
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2025 (2) TMI 403
Reopening of assessment - Assessment carried out without issuing any notice u/s 143(2) - Treating credits in the account of the assessee as income of the assessee from unexplained sources - HELD THAT:- The assessment order in this case is totally cryptic. Even though the assessment order has been passed u/s 144 of the Act still, AO was supposed to discuss as to the relevant transactions and should have also correlate the same with the books of account of the assessee as well as bank account of the assessee and should have mentioned at least as to from whom the assessee has received the unexplained cash credits etc. Even the most peculiar point is that on identical reasons, the assessment for assessment year 2012-13 was reopened, however, in the assessment order, no additions were made on this issue. Even the assessee had duly filed objections in this respect but the Assessing Officer failed to decide the objections and passed the impugned cryptic assessment order - reopening of the assessment in this case was bad in law and the same is liable to be quashed on this score alone. Even on merits, the impugned additions are not sustainable. No notice u/s 143(2) has been issued before passing the impugned assessment order - DR could not bring out any evidence on the file to show that any notice u/s 143(2) of the Act was ever issued to the assessee. The assessee having duly taken the aforesaid plea that no notice u/s 143(2) of the Act was issued to the assessee and there is a complete silence about it in the assessment order, which duly proves that no notice u/s 143(2) of the Act has ever been issued to the assessee in this case. The Hon ble Supreme Court in the case of ACIT vs. Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT ] held that the issue of notice u/s 143(2) is sine qua non to assume jurisdiction to proceed with the assessment in a case. The assessment carried out without issuing any notice u/s 143(2) of the Act in such cases will be bad in law. Assessee appeal allowed.
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2025 (2) TMI 402
Revision u/s 263 - lack of enquiry and consequently non-disallowance of unaccounted purchases made in cash of Rs. 5,83,99,000/- by not invoking the provision of section 40A(3) - HELD THAT:- AO has framed assessment after considering the seized material which depicts that cash sales made by assessee AO estimated the profit rate after considering the facts of the case that the ledger account named MT 01 Chintu Capital found during the search on JBL Group of cases mixed the transaction relating to various parties which include assessee. It means that the cash payment of different transactions mentioned in seized ledger are trading receipts which was carried during the course of business and as such only the gross profit on unaccounted sales/purchases can be added as taxable income of the assessee. The AO has rightly added the same and there is no further scope of disallowance by invoking the provisions of section 40A(3) of the Act. Even, Amman Steel Allied Industries [ 2015 (11) TMI 395 - MADRAS HIGH COURT] has considered the same issue and ratio laid down that the addition made u/s 40A(3) of the act is faulted for the reason that the AO himself has estimated the income by estimating the gross profit. AO, while completing assessment has taken one of the view which is plausible one, as taken by various High Courts, as noted above, that once profit is estimated on purchases, no disallowance can be resorted to by invoking the provisions of Section 40A(3) of the Act. In our view, this is the only possible view. But, if we consider that there are two views possible, even then, the revision proceedings u/s 263 of the Act cannot be initiated. If two views were possible and when the AO has accepted one of the view which is a plausible one, it is not appropriate on the part of the PCIT to exercise his power u/s 263 of the Act solely on the ground that apart from estimating profit, the AO has to invoke provisions of Section 40A(3) of the Act. As held in the case of Malabar Industrial Co. Ltd.[ 2000 (2) TMI 10 - SUPREME COURT] and Vimgi Investment P. Ltd. [ 2007 (2) TMI 176 - DELHI HIGH COURT] once a plausible view is taken, it is not open to the PCIT to exercise the power u/s 263 of the Act. As in the present case the AO, after considering the facts of unaccounted purchases made by the assessee in cash has estimated the profit rate, the PCIT wants revision of the same under Section 263. Whether the PCIT is right in directing the AO to invoke the provisions of Section 40A(3) for making disallowances of cash purchases. Provisions of section 40A(3) of the Act cannot be invoked in the given facts and circumstances of the present case for the reason that the AO himself has estimated the profit rate on the cash purchases made by assessee. Once cash purchases are estimated by applying gross profit rate and income is taxed, no further disallowance u/s 40A(3) of the Act is possible. The reason for the same is that when income of the assessee is computed applying flat gross profit rate and when no deduction is allowed in regard to the purchases of the assessee, there is no need to invoke the provisions of section 40A(3). We also noted above that it is clear from the facts of the case that on the date when PCIT passed revision order u/s 263 of the Act, the view taken by the AO while framing assessment was in consonance with the view taken by various High Courts as noted above - Appeals of the Assessee are allowed.
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2025 (2) TMI 401
Validity of assessment u/s 153A on mechanical and consolidated approval of 153D - HELD THAT:- Considering the fact that the Ld. ACIT accorded the approval u/s 153D of the Act on the very same day wherein consolidated single approval has been granted for different Assessment Years and on the very same day of according the sanction, the assessment orders were passed, thus by following the ratio laid down in the case of SEH Realtors Pvt. Ltd.[ 2024 (7) TMI 1562 - ITAT DELHI] we allow the Additional Grounds of Appeal of the respective Appeal challenging the assessment order which was framed based on the invalid approval accorded u/s 153D of the Act. Assessee appeal allowed.
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2025 (2) TMI 400
Receipt of on-money for sale of shops - loose papers found during the course of search and statements recorded of sales manager relied upon - case the extrapolation on the basis of loose papers found during the course of search - HELD THAT:- A perusal of the statement so recorded shows that after denial of Shri Anuj Goel regarding the receipt of any on-money from any of the customers, no effort has been made by the Revenue to confront Shri Anuj Goel regarding the discrepancies found between two forms. We further find none of the persons to whom the shops/flats were sold have ever been examined by the search party during the course of search or post-search enquiry or by the Assessing Officer during the course of assessment proceedings. It is also an admitted fact that nothing is brought on record to show that any of the buyer to whom the flats have been sold are related to the assessee. We find the Hon ble Madras High Court in the case of CIT vs. S. Khader Khan Son [ 2007 (7) TMI 182 - MADRAS HIGH COURT] has held that section 133A of the Act does not empower any ITO to examine any person on oath. Therefore, the statement recorded u/s 133A of the Act has no evidentiary value and any admission made in such statement cannot be made the basis for addition. Hon ble Kerala High Court in the case of Paul Mathews Son vs. CIT [ 2003 (2) TMI 25 - KERALA HIGH COURT] has held that the provisions of section 133A of the Act does not empower any ITO to examine any person on oath and the statement recorded u/s 133A of the Act has no evidentiary value. So far as the question of extrapolation for three assessment years is concerned, as stated earlier, neither the key person Shri Anuj Goel was confronted in his statement u/s 132(4) of the Act regarding the receipt of on-money nor any of the customers to whom the shops have been sold were either examined by the search party at the time of search or post-search enquiries nor any effort was made by the Assessing Officer to ascertain the sale of shops at higher price to the concerned buyers. It is also an admitted fact that no cash or valuables or any entry relating to any other expenditure out of such on-money was found during the course of search. Under these circumstances, we are of the considered opinion that addition for all the 3 years by extrapolating is not justified. In the instant case the director/partner of the assessee firm has completely denied to have received any such on-money. Neither he was confronted subsequently nor any of the buyers/customers who are identifiable were examined/confronted either by the Investigation Wing during the course of search or post-search enquiries or by the AO at the time of assessment proceedings. So far as the decision of Hon ble Supreme Court in the case of Pooran Mal vs. Director of Inspection [ 1973 (12) TMI 2 - SUPREME COURT] there is absolutely no dispute to the fact that evidences can be used but the same has to be corroborated. We are of the considered opinion that extrapolation cannot be made on account of receipt of on-money for sale of shops in respect of which no evidence was found during the course of search and no enquiry or investigation was conducted either by the search party during the course of search or post-search enquiries or by the AO during the course of assessment proceedings. Thus, the grounds raised by the assessee are partly allowed for all the three years.
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2025 (2) TMI 399
Validity order u/s 250 - TDS u/s 194C or 194I - payment of External Development Charges ( EDC ) - demand u/s 201(1)/201(1A) - change the provision of law on which the assessment was made - order on Section 194C instead of Section 194I thereby changing the provision of law of the transaction basis which assessment/verification was concluded while passing the impugned order. HELD THAT:- As per the provision of Section 251 of the Act, the powers of CIT(A) in the Appeal filed under section 250 of the Act are co-terminus with that of the AO, due to which CIT(A) has power of enhancement of assessment and penalty and can also reduce the amount of refund which AO also can do. The said power can be exercised by the CIT(A) only when there is an existence of enforceable order of the AO and which should have been impugned before the CIT(A). When there is no existence of the Order of the AO, which has been quashed by the Hon ble High Court, the question of exercising the power confirmed under section 251 of the Act doesn t arise. In the present case the Ld. CIT(A) directed the AO to re-compute the demand raised considering the applicability of TDS rate of 2% as per Provisions of Section 194C of the Act by sitting on the Judgment of the Hon ble Jurisdiction High Court wherein the Hon ble High Court has quashed the very order of the AO dated 25/03/2022.Thus, Ld. CIT(A) committed grave error in directing the A.O. to re-compute the demand. Appeal of the Assessee is allowed.
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2025 (2) TMI 398
Validity of assumption of jurisdiction u/s 147 - reasons to believe or reason to suspect - cash deposits unexplained - HELD THAT:- AO did not have any material with him much less tangible material to form a belief that income of the assessee had escaped assessment in respect of cash deposits made in Nainital Bank Account. Hence, reopening of assessment deserved to be quashed on this count itself. Even though no return of income has been filed by the assessee still the fact of cash deposits made in the bank account could merely reflect reason to suspect and cannot be by any stretch of imagination directly become reason to believe for the AO. The assessee having not filed his return of income regularly and having made cash deposit in the bank account which is beyond the maximum amount not chargeable to tax, may be subjected to fall within ambit of reason to suspect . But such suspicion of the AO should have to be converted into reason to believe pursuant to AO making preliminary enquiries by way of issuance of notice u/s 142(1) to the assessee calling for return of income or calling for explanation for cash deposit prior to issuance of notice u/s 148 of the Act. This procedure was admittedly not followed by the AO in the instant case. Hence, the fact of cash deposits made by the assessee, in our considered opinion, would only result in reason to suspect and not reason to believe . It is trite law that no assessment could be reopened merely on the basis of reason to suspect . Assessee appeal allowed.
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2025 (2) TMI 397
Addition u/s 68 - advances received from its holding company - onus to prove the identity, creditworthiness and genuineness of the transaction - admission additional evidences - HELD THAT:- Since the relevant information is already submitted by the assessee in the form of additional evidences before the CIT (A) which CIT(A) has failed to acknowledge the same. In the result, we are inclined to allow the above claim made by the assessee. Inventory list , which is listed at Item No.3 the assessee has submitted that these are additional costs incurred by the assessee which assessee has inadvertently listed as separate item of inventory which is otherwise should have been apportioned. Since this requires certain verification we deem it fit and proper to remit this issue back to the file of AO with limited direction to verify the correctness of the claim of the assessee. Addition made u/s 68 observed that the assessee has received advances from its holding company for purchase of the abovesaid lands and invested the funds received from its holding company in the inventories and the inventories were actually acquired by the assessee in FY 2005-06, 2006-07 2007-08 and assessee has carried on the above inventories until the current assessment year without there being any movement. Since the funds were invested in earlier assessment year and also assessee has shown the source of the above funds, there is no requirement for initiation of section 68 under the present circumstances. We observed that the transaction under consideration is made by the assessee section 68 cannot be invoked - Decided in favour of assessee.
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2025 (2) TMI 396
Validity of Assessment order u/s 153A - absence of incriminating material found during the search - HELD THAT:- By respectfully following the ratio laid in the case of Abhisar Buildwel [ 2023 (4) TMI 1056 - SUPREME COURT] considering the fact that no incriminating materials/documents or any other evidence was found or seized during the course of search proceedings which resulted in additions against the Assessee, we find merit in appeal of the Assessee. Accordingly, we quash the assessment order and the order of the Ld. CIT(A).
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2025 (2) TMI 395
Validity of assessment u/s 153A - Mechanical approval granted u/s 153D - HELD THAT:- The department could hardly dispute in this factual backdrop that the foregoing learned prescribed authority had approved the AO s section 153D proposal vide common note on 27.03.2014 in a mechanical manner without giving due consideration to the entire search/scrutiny records enclosed therewith. We accordingly quote cases Shiv Kumar Nayyar [ 2024 (6) TMI 29 - DELHI HIGH COURT] , Anuj Bansal [ 2024 (7) TMI 852 - SC ORDER] and MDLR Hotels (P.) Ltd. . [ 2024 (8) TMI 1138 - DELHI HIGH COURT] to quash the impugned assessment framed by AO in assessee s case u/s 153A of the Act for this precise reason. Assessee appeal allowed.
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2025 (2) TMI 394
Characterization of receipt - rental income earned - taxable under the head house property or profit and gains from business and professions - HELD THAT:- We find that the main business of the assessee is manufacturing and trading of carpets, and rental income is only a side activity. The contention of the ld. counsel for the assessee that since the assessee has been offering the rent received to tax under the head house property since 2007, the rule of consistency has to be followed in the income tax proceedings unless there are compelling/convincing reasons for deviating from the view consistently being held, has substance. Nothing has been brought on record by the A.O. or the ld DR before us to prove that there is any variation in the facts of the case as compared to the earlier or subsequent years wherein the rental income has been assessed to tax under the head House Property. We are therefore, of the considered view that since there is no change in the facts of the case, the rule of consistency applies in accordance with case of Radhaswami Satsang [ 1991 (11) TMI 2 - SUPREME COURT ] Thus, no infirmity in the well-reasoned order of the ld. CIT(A) holding that the rental income is to be taxed under Income from House Property . Decided against revenue.
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2025 (2) TMI 393
Addition u/s 68 - bogus share capital and share premium - Identity, genuineness and creditworthiness of the shareholders not proved - CIT(A) deleted addition - HELD THAT:- Assessing Officer made the addition u/s 68 of the Act even though the assessee has submitted the relevant details and claims in respect of identity of the shareholder, confirmation from the shareholder, bank statement and statement of affairs as well as ITR from the shareholder. CIT(A) correctly deleted the addition by observing that the AO has failed in his duty since neither it had done any further enquiry nor he had asked the assessee to substantiate its claim by submitting documents such as bank statement of Saroj Devi and Tilak Raj and other relevant details of these persons. He deleted the addition by observing that as far as assessee is concerned, assessee has submitted all the relevant documents and also proved the source of source of the amount invested in the assessee s company as share capital as required by the amended provisions of section 68 of the Act. After considering the facts on record, we do not see any reason to disturb the abovesaid findings. Accordingly, ground no.i raised by the Revenue is dismissed. Assessee has taken unsecured loan from 9 parties - CIT (A) came to the conclusion that assessee has proved the conditions imposed u/s 68 that assessee has found identity, creditworthiness and genuineness of the transactions. Further, he observed that the Assessing Officer has merely rejected the submissions of the assessee on the basis of doubt without bringing any material to discredit the document or information on record. Further he observed that the provisions of section 68 of the Act as existed at that point out time there is no requirement of proving the source of source in the case of loan transactions. Accordingly, he deleted the addition made by the Assessing Officer. We are not inclined to disturb the findings of the ld. CIT (A). Accordingly, ground no.ii(a) is dismissed. Addition of interest expenses on unsecured loan u/s 68 - Since we have already deleted the addition made by the Assessing Officer on unsecured loan, we are not inclined to allow the same. Accordingly, ground no.ii(b) raised by the Revenue is dismissed. Disallowance of interest made by way of reduction in WIP, it is also relating to disallowance of interest expenditure - Since we have already deleted the addition on unsecured loan, this interest expenditure also allowed. Addition u/s 14A read with Rule 8D based on the investment which has yielded the exempt income during the year - CIT (A) partly allowed the ground raised by the assessee on the basis of exempt income i.e. dividend received by the assessee from the investment which has actually yielded exempt income. He came to the conclusion on the basis of decision of JSW Energy Limited [ 2015 (5) TMI 823 - BOMBAY HIGH COURT] and Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] After considering the factual matrix in this case, we observed that ld. CIT (A) has rightly applied the provisions of section 14A read with Rule 8D by relying on the settled position of law. Accordingly, ground no.iii is dismissed. Admission of additional evidences by the CIT (A) without seeking remand report from the AO - we observed that u/s 250(4) of the Act, the Commissioner (Appeals) has power to dispose off any appeal after making such an enquiry as he thinks fit or he was given reference option in case he thinks proper to remand the issue back to the Assessing Officer. Therefore, Commissioner (Appeals) has power to make such call. Further we observed that Rule 46A(4) gives right to the Commissioner (Appeals) to direct the production of any document or examination any witness to enable him to dispose off the appeal and also having power to enhancement of the assessment or penalty. Therefore, the above provisions and rule gives ample power to CIT (A) to make the call and it is not necessary that he has to remand the matter back to the Assessing Officer, it is only an additional power of reference given to him. Therefore, we are inclined to dismiss ground no.iv raised by the Revenue.
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2025 (2) TMI 392
Assessment u/s 153A beyond the limitation period - HELD THAT:- In the given case, the search was conducted on 1.12.2018. The relevant searched assessment year is AY 2019-20. Therefore, the relevant AYs for the purpose of 4th Proviso would be, 7th year AY 2013-14, 8th year AY 2012-13 and 9th year - AY 2011-12. The argument of the Ld AR that the year under consideration is the only year falls within the ambit of 4th proviso of section 153A is not correct, also the escapement of income exceeding 50 lakhs covers the period of 7th year to 10th year, it has to be seen covering all the years from 7th to 10th year. The arguments of the Ld AR are not acceptable considering the facts on record. Document found during the search - We observe that the document found in the search contains the details of cheque transactions and even the assessee has submitted that this relates to Farm related details for which it was submitted that this is out of agriculture income. This shows that the cheque payments were not disputed and transactions described in the loose sheets were explained by the assessee, therefore, the loose sheets cannot be termed as dumb documents as submitted by the Ld AR relying on case of V.C.Shukla [ 1998 (3) TMI 675 - SUPREME COURT] and reliance of on the case of Sunil Kumar Sharma [ 2024 (2) TMI 116 - KARNATAKA HIGH COURT] Hence, the submissions of the Ld AR on the aspect of quality of the loose papers found during the search as dumb documents cannot be accepted. Addition u/s 69A - The onus is on the assessee to explain the nature of income as reflected in the loose sheets captioned as Farm Account which was seized. This was not properly explained by the assessee. The details found in sheets shows that the funds pertaining to Farm account without specifically mentioning the nature of transactions thereon. Hence the cash transactions reflected thereon become undisclosed income in the hands of the assessee for AY 2011-12. But it is pertinent to note that these amounts which are treated as undisclosed income of the assessee would be available as a cash source for explaining the future investments or outgoings. In view of the above discussion, the findings of the AO that the funds invested in the Farm House is not justified and the funds spent and involved in the Farm Account shows that the assessee has generated funds which can be considered as undisclosed money u/s 69A.Therefore, we hold that only the addition of undisclosed money earned by the assessee could be taxed in the facts and circumstances of the case as unexplained money u/s 69A. Treatment of cash found during the search - cash found during the search was the main item found in the locker along with the details of loan given to various parties - HELD THAT:- We observe that the assessee has declared the cash found during the search as additional income in his return of income and also submitted the information and source of the same. AO also acknowledged the same and it was submitted that the assessee was handling the cash for commission from various persons, however, the AO himself rejected the same and treated the cash found and transactions carried on by the assessee as business. Since the assessee himself declared the above cash as additional income and explained the nature of transactions, the fact is that the assessee whether maintained the cash for a fees or as treated by the AO as assessee s own cash and meant for financial transactions, it clearly indicate that the cash found during the search is relating to the business carried by the assessee. Therefore, the addition can be made as income under the head income from business or profession and not under the head income from other sources. Hence it cannot be treated as income falling within the nature of section 68, 69 to 69D of the Act so as to apply the tax rate prescribed in section 115BBE. Addition based on the loose papers found during search operation - CIT(A) sustained the actual transaction of Rs. 86,00,000/- instead of Rs. 1,75,00,000/- As assessee has maintained transactions meticulously and mentioned the transaction amounts in lakhs. However, some entries found wherein it was mentioned in numbers as 20, 10 25 without there being clear information and also there is no details of the persons to whom such amounts were given. If it is in lakhs definitely, it would have formed part of the transactions. Therefore, we are inclined to accept the findings of the ld. CIT (A) and accordingly ground raised by the Revenue is dismissed. Coming to the ground raised by the assessee, after considering the nature of transactions and information available on record, we observe that these are financial transactions made by the assessee which corroborates with various information available on the material found during search, therefore, we are inclined to sustain the above addition. Accordingly, ground no.1(b) raised by the assessee is dismissed. Addition u/s 68 - addition of peak credit - HELD THAT:- Material available on record is a running account sheet maintained by the assessee for the purpose of deposit and removal of cash in the locker. Since it is a running account, the AO has taken only the total receipts which are mentioned on the left hand side and treated the same as undisclosed income u/s 68 - The approach of the AO cannot be accepted. The information found during the search has to be appreciated the way it is maintained, the transactions contained are receipts as well as payment and it carried the closing balance of the respective dates. Therefore, we are inclined to accept the findings of the ld. CIT (A) that it is a running account and only peak credit has to be considered for addition. Accordingly, we are inclined to accept the findings of the CIT (A). Issue of cheques which was found in the possession of the assessee which are not encashed - Unless the cheques are encashed or acted upon, the transaction is not complete. The cheques are issued meant for transaction and if it is not acted upon then the relevant paper may be live but it has no transaction value until it is transacted. Mere guarantee for giving loan also has to be established by making proper investigation. As observed by the Ld CIT(A), the AO has not made any investigation further, therefore, the mere presence of blank cheque without there being any evidence to show that the assessee has earned any income or made capital transaction with the presence of above cheques, the same cannot be treated income of the assessee. Adjustment of cash found during the search with the tax demand raised after completion of the assessment - No doubt the cash was found during search and the assessee also declared the same as additional income in his return of income and it is a fact on record that the tax liability was determined only after completion of assessment on 25.09.2021. Ld. CIT (A) rejected the submissions of the assessee. However, in our considered view, the cash was lying with the Revenue from the date of search and the tax liability no doubt determined only after completion of the assessment, therefore, from that date of determination of the tax liability, the tax credit may be given to the assessee. Accordingly, we direct the Assessing Officer to determine the charging of interest u/s 234B after making the above adjustment on the date of determining the tax liability on completion of the assessment on 25.09.2021
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2025 (2) TMI 391
Disallowance of claim of deduction of expenditure against the unaccounted cash receipts from sale of spent solvents / scrap - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the ITAT Hyderabad Benches, in assessee s own case for A.Y. 2015-16 [ 2024 (11) TMI 1424 - ITAT HYDERABAD] wherein the Tribunal has followed the decision in the case of MSN Pharmachem Private Limited for the A.Y 2019-20 [ 2024 (11) TMI 499 - ITAT HYDERABAD ] where the Tribunal has directed the Assessing Officer to allow 60% of expenditure against unaccounted cash receipts from sale of spent solvents / scrap for the year under consideration. Validity of assumption of jurisdiction by the AO for issuance of notice u/s 153A - legality of satisfaction note recorded - HELD THAT:- AO is having in possession books of accounts or other documents or evidence which reveal that the income represented in the form of asset , which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years. Therefore, we are of the considered view that the arguments of the assessee based on the satisfaction note , that the AO did not bring out the fulfillment of the conditions laid down for issuance of notice u/s 153A of the Act are devoid of merit and cannot be accepted. Unaccounted receipts from sale of spent solvents and scrap - If we consider the profits estimated from unaccounted cash receipts from sale of spent solvents and scrap which becomes the income of the appellant. Therefore, in our considered view, the profits estimated from sale of unaccounted spent solvents and scrap becomes income represented in the form of an asset being the advances given to the directors and other parties and therefore, the satisfaction note recorded by the Assessing Officer, in light of said incriminating material constitutes fulfillment of the conditions laid down for issuance of notice u/s 153A of the Act for the assessment years in question. Thus, we consider that the arguments advanced by the learned counsel for the assessee on this issue is devoid of merit and are hereby rejected. Notice issued u/s 153A for the assessment years in question and consequent assessment order passed by the AO is valid and in accordance with the provisions of Section 153A(1) of the Act and 4th proviso provided therein. Thus, the grounds taken by the assessee challenging the legal validity of the assumption of jurisdiction by the AOis hereby rejected. Thus, ground no.5 is dismissed. On Money payment made for purchase of land at Bibinagar - satisfaction note recorded by the AO u/s 153A did not refer to the issue of on-money payments, which renders the addition jurisdictionally invalid - HELD THAT:- Undisputedly clear that the Assessing Officer is having incriminating material which suggests payment of On money for purchase of land at Bibi Nagar and this fact has been confirmed by the CMD of the company. Further, the arguments of the assessee that the material seized from the premises of CMD cannot be used for the assessment of the appellant is devoid of merit and against the law, because where simultaneous search is conducted in the group of cases and its directors, on any material found during the course of search, whether it is in the premises of assessee or from the group companies or from the director s residential premises, the same can be used for making the assessment. Therefore, the arguments of the assessee that in the assessment framed u/s 153A of the Act material found in the third party premises cannot be used, is contrary to the law. Thus, we reject the arguments of the assessee. Therefore, we are of the considered view that the Ld.CIT(A) has rightly held that the addition is supported by seized material and corroborative evidence, which is sufficient to sustain the addition under Section 153A. Addition of deemed dividend (dividend distribution tax in the hands of the appellant) - HELD THAT:- Respectfully, following the decision of MSN Pharmachem Private Limited [ 2024 (11) TMI 499 - ITAT HYDERABAD ] we set aside the order of the LD.CIT(A) on this issue and direct the Assessing Officer to delete the addition made u/s 2(22)(e) of the Act in the hands of the assessee.
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2025 (2) TMI 390
Addition u/s 69C - unexplained expenditure - no cognizance can be taken of the retraction statement - HELD THAT:- The amount was received during the year under consideration and which was found to be recorded in the books of account for which the CIT(A) gave part relief to the assessee. No cogent reason given by the lower authorities for confirming the balance amount. As there is no basis for making the addition/partially confirming addition of the same, the AO is directed to delete the entire addition. This ground is also allowed and the related grounds in the revenue s appeal are dismissed. No error or infirmity in the findings of the CIT(A) in deleting the protective addition as the same has been considered in the case of M/s. Vardha Enterprises Pvt. Ltd [ 2024 (11) TMI 1422 - ITAT MUMBAI] when the substantive additions have been identified in the hands of M/s. Vardha Enterprises Pvt. Ltd..
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2025 (2) TMI 389
Accrual of income - Interest income earned on funds parked in bank accounts, pending their utilization for the Smart City project for which grants were given by the Central as well as State Government of Karnataka - HELD THAT:- Assessee has been formed for implementation of the Smart City Scheme by the Central Govt. as well as State Govt of Karnataka. Grants are parked in the bank account until the same is used for the designated purpose of Smart City project and interest on such deposits in the case of Central Govt. funds is immediately returned to the Central Govt. as per Rule 230(8) of GFR, 2017 and interest is remitted to the State Govt. based on the extent of grant received to which the interest relates immediately after finalization of the accounts. On going through the documents, we note that there is no category of income to the assessee because the interest receive on Central fund is adjusted to the Consolidated Fund of India and interest received on State Govt. fund is adjusted in the subsequent grant. We are sending back this issue to the AO for carrying out verification in the light of the above judgment and the AO has to ascertain whether the interest income has been remitted back either to the Central Govt. and/or State Govt according to the interest received on the fund following the necessary guidelines. He has also to ascertain that the assessee has not received any benefit as revenue in nature on such interest income. After verifying if it is found that the entire interest income has been remitted back to the Central Govt. / State Govt., then there should be no addition on both the interest income earned on its deposits (FD and SB A/c).
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Customs
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2025 (2) TMI 388
Classification of imported goods - Joss Powder for usage in their finished goods known as Jigged Powder - to be under Chapter sub-heading 1211 9029 as against the Appellant s claim that the product was classifiable under 4401 30 00 or not - it was held by CESTAT that There are no proper evidence being brought in by the Customs Department to adopt new classification under CET 12119029, particularly when even the Test Reports obtained from CRL do not support the view of the Department. HELD THAT:- No case is made out for interference with the impugned order. The Appeals are, accordingly, dismissed.
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2025 (2) TMI 387
Condonation of delay in filing appeal - Denial of Drawback claims, based on testing samples - cross-examination of testing personnel sought, was not granted - no samples drawn in respect of 17 Shipping Bills - The Tribunal remanded the matter for verification of Bank Realization Certificates (BRC) for all consignments - HELD THAT:- There is a gross delay of 220 days in filing the appeals which has not been satisfactorily explained. There are no good reason to interfere with the impugned order - The appeals are, therefore, dismissed on the ground of delay as well as on merits.
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2025 (2) TMI 386
Issuance of SCN issued by the Director General of Foreign Trade (DGFT) u/s 14 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) and subordinate law thereunder - Essar availed of the benefits under the Foreign Trade Policy 2004-2009 (FTP) by furnishing information, making declarations and relying on certificates, that were allegedly wrong - HELD THAT:- A careful scrutiny of the Impugned SCN shows that it does not allege any mis-statement other than the assertion by Essar that the SFIS File was in conformity with the SFIS. Such an approach in the Impugned SCN is directly in the teeth of the DB Judgement, and is completely untenable. There are no hesitation in holding that the Impugned SCN is covered by res judicata, and is unreasonable and arbitrarily attempts to re-open an issue already closed. The Recovery Notices having been quashed, the Impugned SCN is a circumvention of the effect of such quashing. Petition disposed off.
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2025 (2) TMI 385
Seeking release of the detained goods under Section 110 (2) of the Customs Act, 1962 - no SCN was issued - no opportunity was accorded for even a hearing - liability to pay storage charges to Central Warehousing Cooperation, IGI Airport - violation of principles of natural justice - HELD THAT:- A perusal of Section 124 of the Act would show that even after an oral show cause notice is given, the authority has the discretion to issue supplementary notice under circumstances which may be prescribed. A perusal of Section 124 of the Act along with the alleged waiver which is relied upon would show that the oral SCN cannot be deemed to have been served in this manner as is being alleged by the Department. If an oral SCN waiver has to be agreed to by the person concerned, the same ought to be in the form of a proper declaration, consciously signed by the person concerned. Even then, an opportunity of hearing ought to be afforded, inasmuch as, the person concerned cannot be condemned unheard in these matters. Printed waivers of this nature would fundamentally violate rights of persons who are affected. Natural justice is not merely lip-service. It has to be given effect and complied with in letter and spirit. This Court is of the opinion that the printed waiver of SCN and the printed statement made in the request for release of goods cannot be considered or deemed to be an oral SCN, in compliance with Section 124. The SCN in the present case is accordingly deemed to have not been issued and thus the detention itself would be contrary to law. The order passed in original without issuance of SCN and without hearing the Petitioner, is not sustainable in law. The Order-in-Original dated 29th November, 2024 is accordingly set-aside. Conclusion - i) The detained goods are directed to be released to the Petitioner. ii) The storage charges of the detained goods shall however be borne by the Petitioner. Petition allowed.
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2025 (2) TMI 384
Smuggling - Direction to respondent to release the Gold ornaments inappropriately seized by the respondent officials - Whether the Baggage Rules, 2016, are ultra vires the Customs Act, 1962, particularly concerning the inclusion of articles carried on the person ? - violation of principles of natural justice - HELD THAT:- The real fact is that all the jewels were worn by the petitioners at the time of arrival. But the same not been stated in the confiscation notice, which was issued based on the falsely created Mahazar, wherein it was stated as if it was concealed under the sleeves and brought illegally by the petitioner. Therefore, the falsification of the records, such as preparation of the Mahazar, stands confirmed by virtue of reflecting the false informations in the confiscation orders. Based on their own statement, they had clearly proved that the Mahazar was prepared with false information, in order to, fix the petitioners into the case for ulterior notice for the reasons better known to them. This Court suspects that the officials have orchestrated this entire episode in order to divert the attention of the others for the benefit of somebody else. When the provision of the Rule is beyond the scope of the provisions of the Act, only the provision of the Act will prevail over the Rules. Thus, the word carried on the person up to Rs. 50,000/- is clearly beyond the scope of the Act and it cannot be given any effect since it is contrary to the provisions of the Statute. Thus, it has to be construed only for the articles, which have not been mentioned in Annexure-1 and carried in the accompanied baggage of a passenger. In such case, the application of Baggage Rules, 2016, would not arise. Thus, the jewelery worn by the passenger will not fall within the provisions of the Baggage Rules, 2016. The Doctrine of ultra vires states that the Rule making body must function within the purview of the Rule making authority conferred on it by the parent Act. As the body of making rules or regulations, there is no inherent power of its own to make rules, but such power arise only from the Statute and hence, it must necessarily function within the purview of the Statute - In the present case, the Rule making body had made the Baggage Rules as if they are having inherent power of its own to make rules beyond the scope of the Statutes, and they have incorporated the word carried on the person . Since this Court has held that the provision as carried on the person of the Baggage Rules, 2016 is ultra vires, the detention of gold under the Baggage Rules, 2016, in the present case would not apply, unless and otherwise if it is secreted in person, for which, the proceedings shall be initiated under Section 101 of the Customs Act, 1962, however, that is not the present case, except to the extent of false charges framed by the officials against the petitioner. Conclusion - i) The confiscation orders were passed without issuing the show cause notice; ii) No proper opportunity of personal hearing was provided to the petitioner prior to the passing of confiscation orders; iii) Since the Mahazar was prepared with false information to foist a false case against the petitioners, the confiscation orders were also passed, as an ex parte order, with the false information available in the said Mahazar. iv) The manner, in which the jewellery was brought by the petitioners, as stated in the Mahazar is that it was brought under the sleeve, however, in the affidavit, it was clearly stated that the petitioners worn the jewellery at the time of arrival. Due to the said contradiction of the respondent, it is clear that there was a change in the stand of the respondents with regard to the manner, in which the gold was carried by the petitioners, from proceedings to proceedings. This writ petition is allowed and the confiscation orders dated 24.04.2024 is quashed. The respondents are directed to release the goods of the petitioners within a period of 7 days from the date of receipt of copy of this order.
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2025 (2) TMI 383
Maintainability of petition - availability of alternative remedy of appeal before the Appellate Authority before approaching the Court under Article 226 of the Constitution of India - principles of natural justice - HELD THAT:- Even litigant has a statutory remedy of appeal before the Appellate Authority, in that event in the ordinary course writ is not maintainable with certain exceptions, one of the exceptions is violation of principles of natural justice. Insofar as providing principle of natural justice is concerned, it is available in the statute namely sub-section (4) of Section 75 of Central Goods and Services Tax Act, 2017. Reading of the aforementioned statutory provision, it is crystal clear that before passing any adverse order an opportunity shall be provided to such person against whom adverse orders are likely to be passed. The respondents submitted that before passing impugned order show cause notice has been issued insofar as proposed adverse order passed. Assuming that show cause notice was issued in respect of adverse order, insofar as paragraph no. 5.0 of the impugned order, in that event there is no reference in the impugned order insofar as issuance of show cause notice and so also seeking petitioner s explanation. Assuming that show cause notice was issued in that event there should have been a statement by the author of the impugned order dated 19.03.2024 to the extent that show cause notice was issued on a particular date, however, petitioner has failed to furnish his reply. In the absence of such material one has to draw inference that impugned order dated 19.03.2024 is in violation of sub-section (4) of Section 75 of Central Goods and Services Tax Act, 2017. Conclusion - The impugned order was in violation of the principles of natural justice as outlined in Section 75(4) of the Act. Matter is remanded to the concerned authority to proceed in accordance with law, such exercise shall be completed within a period of six months from the date of receipt of this order, after adherence to the respective provisions - Petition allowed by way of remand.
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2025 (2) TMI 382
Seeking grant of bail - smuggling of currency notes of U.S. Dollars - violation of provisions of section 77 of the Customs Act, 1962 and Foreign Exchange Management Regulations, 2000 and Foreign Exchange Management Act, 1999 - HELD THAT:- The applicant was intercepted by the D.R.I. officials at CCS International Airport, Lucknow and from the other co-accused persons, the gold bullion was recovered, whereas the applicant is connected with the present matter as the D.R.I. is said to be collected the evidence of conversations in between Ratnesh Pandey, one of the co-accused person and the present applicant, but, the fact remains that there is no strong evidence that in consonance with the conversations, any transaction has ever been done or the D.R.I. has failed to place any evidence that those conversations were specifically with respect to the offence, which is said to be committed. Though, it has been held by the Hon ble Apex Court in the case of Romesh Chandra Mehta Vs State of West Bengal [ 1968 (10) TMI 50 - SUPREME COURT] that the custom officers are not the police officers and the statement recorded under section 108 of the Act,1962, is admissible in evidence, though there seems to be no quarrel regarding the same, whereas the further issue is that can the statement of an accused recorded under section 108 of the Act,1962, blindly be accepted without any corroboration of other evidences? Infact, the admissibility of an evidence is one aspect of the matter and the conviction can lead only on the basis of the confessional statement recorded under section 108 of the Act,1962 is the other aspect of the matter and the answer would be no. This court is of the opinion that the confessional statement of an accused recorded under section 108 of the Act, 1962, cannot blindly be accepted unless it is corroborated by any independent evidence/material as the same would not lead to conviction. The examination of confessional statement of the accused is essentially required so as to find out that the same is not taken under coercion or under extraneous influences. The trial court has also to be conscious enough while examining the correctness and voluntariness of the nature of the statement of the accused. Conclusion - Considering the submissions of learned counsel of both sides, nature of accusation and severity of punishment in case of conviction, nature of supporting evidence, prima facie satisfaction of the Court in support of the charge, reformative theory of punishment and considering larger mandate of the Article 21 of the Constitution of India and, without expressing any view on the merits of the case, this is found to be a fit case of bail. Bail granted subject to fulfilment of conditions imposed - Bail application allowed.
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2025 (2) TMI 381
Valuation of imported goods - Copper Scrap Birch/Cliff - rejection of declared value - appellant s contention is that the transaction value in the invoice should have been accepted and assessment should have been finalized accordingly - HELD THAT:- It is found that transaction value is not the only basis for assessment of the duty. The Valuation Rules as well as Section 14 of the Act provide for rejection of transaction value. When rejecting the transactionvalue, the customs officer does not modify the transaction value but only rejects it as the assessable value for determination of the duty. As per Valuation Rule 3, assessment must be done as per the transaction value subject to Valuation Rule 12. In other words, if the transaction value is rejected under Valuation Rule 12, then assessment cannot be done as per transaction value. If it is not rejected under Valuation Rule 12, then assessment must be done as per the transaction value. If the transaction value is rejected under Valuation Rule 12, valuation must be done as per Valuation Rules 4 to 9 sequentially - Rule 4 provides for valuation as per the value of identical goods. If value cannot be determined as per Rule 4 because there are no contemporaneous imports of identical goods then the valuation must be done as per contemporaneous goods of similar case under rule 5. The appellant s contention is that there cannot be similar goods in scrap. This contention cannot be accepted. In fact, scrap is classified as per ISRI standards and different types of copper scrap have been given different names. In this case the imported copper scrap is birch/cliff. Copper scrap is globally traded and it was also imported by the appellant as per ISRI classification. Therefore, copper scrap birch/ cliff as is known in the market is similar to other imported birch/cliff. The Deputy Commissioner has correctly considered only the value of birch/cliff imported during the relevant period. It is also the contention that there was no evidence that the transaction value was fake or fabricated. We find that as per the Valuation Rules,it is not necessary to establish the invoice was fake or fabricated in order to reject the transaction value. It is also not necessary to establish that the buyer and seller were related. It is sufficient if the proper officer has reasonable doubt for the transaction value to be rejected under Valuation Rule 12. Conclusion - i) The rejection of transaction value under Rule 12 of the Customs Valuation Rules can be based on reasonable doubt about the accuracy of the declared value, without the need to prove fake invoices or relationships between parties. ii) The Deputy Commissioner was correct in rejecting the transaction value and re-assessing the duty as per the values of similar goods and the Commissioner (Appeals) was correct in upholding order of the Deputy Commissioner. The impugned order is upheld and the appeal is dismissed.
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2025 (2) TMI 380
Classification of imported aircraft engine - to be classified under Customs Tariff Item 8716 39 00 of the First Schedule to the Customs Tariff Act, 1975 or under CTI 8609 00 00? - period from April, 2018 to March, 2019 - HELD THAT:- The aircraft engine stands, and its units are primed and paint-protected with a resistant enamel. They are specifically designed to support an engine with or without the Engine Build Unit. The aircraft engine stands majorly comprise of a base, a cradle set and caster wheels for ease of movement of the stand with engine on it. The cradle supports the engine and is mounted to the base through a shock attenuation system which is critical to the safe transporting of engines. The cradle is of unique shape and holds the engine in a manner that the engine is safely secured while it is being transported and that it is not damaged due to shock. The shock attenuation system dampens shock loads introduced to the engine during transport. With the help of caster wheels, the aircraft engine stand along with engine is able to move within the shop only on smooth surfaces and for very small distances. An engine stand is specially designed for safely transporting the aircraft engine by different modes of transport i.e., by land, air and sea. The engine stand comprises of a cradle (holder), a base and four caster wheels. The cradle holds the engine safely and prevents impact of any shock or jerk to the aircraft engine during transportation. An engine is kept on engine stand even while it is getting repaired in the repair shop or during installation/removal from the aircraft. An engine stand allows limited mobility within the repair workshop for adjustment of direction for easy access to all sides of the engine. It is, therefore, moved along with the engine right from its loading on to a truck, vessel or aircraft till the time it is unloaded and even during repairs. If an engine is to be transported from one airport to another by road, engine stand cannot be used as a trailer for transportation. Engine stand, in such a case, is placed on another truck and tied properly and then transported on a road worthy truck. Engine stand cannot even enable movement of the engine from the bay area of the airport to the repair workshop. This is because the weight of engine stand is approximately 2.5T and with the engine it is approximately 5T or more. It is, therefore, difficult for manpower to move the engine safely even till the repair workshop. The caster wheels on the engine stand only enable smooth movement of the engine within the repair workshop - an engine stand, being a composite machine, has to be classified basis the component that gives the essential character to it, i.e., cradle (container). It would be seen from judgment of the Supreme Court in G. CLARIDGE COMPANY LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1991 (2) TMI 112 - SUPREME COURT] that the term container was given a narrow interpretation to mean a receptacle in which articles are covered or enclosed because the term container was preceded by the type of containers like boxes, cartons and cases, which are all closed containers. In the present case, CTH 8609 does not use the term boxes or cartons . In fact, in terms of HSN Explanatory Notes to CTH 8609, all packing receptacles specially designed and equipped for carriage by one or more modes of transport are covered under this Heading. HSN Explanatory Notes to CTH 8609 also give various examples of containers that can get covered within the Heading. One example at paragraph (4) is also of an open container. Thus, so far as CTH 8609 is concerned, there is no good reason to apply the narrow meaning of the term container as against the broad meaning as discussed by the Supreme Court in G. Claridge Company Ltd. In view of the provisions of rule 3(b) of the GI Rules, aircraft engine stand would merit classification under CTI 8609 00 00. Conclusion - The air craft engine stand imported by the appellant would deserve classification under CTI 8609 00 00 and not under CTI 8716 39 00, as claimed by the department. The impugned order dated 30.01.2020 passed by the Principal Commissioner, therefore, deserves to be set aside and is set aside - appeal allowed.
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Corporate Laws
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2025 (2) TMI 379
Professional Misconduct - Constitutional validity of Section 132 (4) of the Companies Act, 2013 - power of NFRA to initiate disciplinary proceedings not just against individual partners and CAs but also auditing firms in respect of any audit - validity of Rules 3, 8, 10 and 11 of the National Financial Reporting Authority Rules, 2018 - seeking an appropriate declaration to the effect that Section 132 (4) of the Companies Act as well as Rules 3, 8 10 and 11 of the NFRA Rules be held not to apply to any audit completed before 01 October 2018 - applicability of provisions to audits that may have been completed prior to the introduction of Section 132 in the Companies Act and thus avoid a declaration of invalidity being rendered. Appointment and engagement of an auditor - Vicarious liability of pertners of the firm - HELD THAT:- An individual, a partnership firm or an LLP can be appointed as an auditor of a company. The appointment, prescriptions and the nature of services which could be rendered by it are further prescribed and regulated by Section 144 of the Companies Act. The Explanation to Section 144 proceeds to explain and provide a definition to the expression directly or indirectly as appearing therein - It will be wholly incorrect to hold that Section 132 creates a liability which is foreign to or uncontemplated by the various other provisions forming part of that statute. The Companies Act clearly contemplates a firm suffering a liability as a consequence of the action of its Engagement Partners and constituents who may be involved in the conduct of the audit. Thus, both the audit firm as well as its individual partners would be exposed to a statutory liability if Sections 139 to 146 were found to have been violated. The appointment of the firm as an auditor naturally encompasses the actions of its members. The engagement of members in the conduct of an audit is not an independent or isolated act but is inherently derivative of the firm s appointment as the auditor. The firm acts as the central organ, and its members function as its limbs, carrying out its obligations and responsibilities. The firm s designation as the auditor inherently extends to its members, who act on its behalf. The relationship between a firm and its members while delivering auditing services is one of complete integration, where roles and responsibilities overlap to ensure the highest levels of professional service. The nature of such services does not permit a firm to distance itself from the actions of its partners, especially when those actions are performed in furtherance of the firm s obligations. Therefore, liability, whether incurred by the firm or its members, cannot operate in silos but is instead a shared and unified responsibility that reflects the cohesive nature of their engagement. Such an arrangement is neither supported by the provisions contemplated within the LLP Act as well as the Companies Act. There are no merit in the contention that Section 132 of the Companies Act is liable to be held as unconstitutional basis the audit firm or its individual partners and members becoming vicariously liable. In light of the above, the challenge to the constitutionality of Section 132 on the grounds of vicarious liability is without merit - Section 132 is neither an overreach nor can it be said to be arbitrary; it is a necessary mechanism to enforce professional accountability. The expression engagement team is defined by the SQC to mean all persons contracted and engaged by the firm in connection with that engagement. The argument of Section 132 thus creating a vicarious liability which is otherwise not contemplated or envisaged is thoroughly misconceived. Section 132 and its Retroactive Operation - HELD THAT:- The challenge to Section 132 (4) and its retrospective application too would thus have to be appreciated on the assertion of certain rights, procedural or substantive, which could be said to have become absolute and fixed. The petitioners had essentially contended that the creation of penalties as well as the shifting of the adjudicatory function from the Council to the NFRA in respect of audits conducted prior to October 2018 would lead one to necessarily come to the irresistible conclusion that the statute impacts rights retrospectively. Vested rights were explained to mean those which would remain unimpacted by any future change in the legal position. Regard must be had to the fact that if the right hinges on an unsecured or contingent foundation, susceptible to modification by a change in the legislative scheme, then such a right was never truly vested, as it lacked the essential characteristics of being absolute, fixed, or immune to future alteration. While delving on the subject of retrospectivity of a legislation the Supreme Court had pertinently observed that while it is true that an enactment would not be construed as having retrospective operation unless such be the position which could be countenanced either on account of an express provision or by implication, merely because the statute takes into consideration a past act or event, that would not necessarily lead one to conclude that it be said to operates retrospectively. The argument of retrospectivity is unmerited is the facet of professional misconduct having remained unaltered and only the manner and ambit of the inquiry having been amended for a particular class of audits. The argument of retrospectivity is liable to be rejected also because it does not introduce new categories of misconduct or liabilities. Instead, it relies on the pre-existing definition of professional or other misconduct under Section 22 of the CA Act. Since the legal characterization of misconduct remains unchanged, the only discernible difference is the manner and scope of the inquiry under Section 132. On a consideration of the legislative history preceding the introduction of Section 132 clearly suggests a pre-existing regulatory deficiency or gap was sought to be addressed through the introduction of Section 132 aligning with the broader objective of strengthening oversight mechanisms and enhancing the quality of professional services rendered by audit firms. This measure was implemented not to create new liabilities but to bridge an existing gap in enforcement, ensuring that standards of professional conduct and accountability evolve in tandem with global best practices. The present case does not fall within the ambit of Article 20 (1) as it neither involves the creation of a new offence nor the imposition of a criminal penalty with retrospective effect. The disciplinary consequences for professional misconduct had always existed under the CA Act and Section 132 merely reinforces and formalizes the enforcement framework without altering the substantive nature of misconduct. Since Article 20 (1) applies exclusively to criminal offences and punishments, and the present case pertains to civil and regulatory disciplinary proceedings, its invocation is clearly misconceived. Moreover, professional misconduct was always subject to scrutiny and Section 132 does not introduce an unprecedented liability but only refines the mechanism for inquiry and enforcement. Thus, the challenge based on Article 20 (1) is without merit. While it is true that the monetary penalties that are imposed by Section 132 (4) could exceed those which were prescribed under the CA Act, the challenge so raised in any case remains of little significance that no monetary penalties exceeding INR 5 Lakhs would be imposed in respect of any audit conducted prior to 2018. Lack of procedural safeguards - HELD THAT:- The validity of Section 132 (4) as well as the procedure adopted by the NFRA was then assailed on the ground of the latter having deprived the petitioners of various significant rights and procedural safeguards which were otherwise provisioned for under the CA Act and the subordinate rules governing the conduct of disciplinary proceedings. It was submitted that the Act as well as the NFRA Rules merely provide for that authority evolving such procedure as may be considered expedient in the facts of a particular case. The statute, the petitioners argued, neither lays in place a codified procedure for the conduct of disciplinary proceedings nor do its provisions provide any guidance to the NFRA to adhere to a procedure which would be commensurate with the constitutional imperatives of fairness and natural justice. Rule 11 of the NFRA Rules, it becomes apparent that the statute clearly commands that authority to ensure that the disciplinary proceedings are undertaken in accordance with the principles of natural justice including where deemed necessary and appropriate by providing an opportunity of hearing to the charged entity in person. By virtue of Rule 11(5), the division of the NFRA is obliged to pass an order after considering all submissions made and taking into account the material on record as well as all other relevant facts and circumstances. The NFRA Rules, however, do not speak of or appear to envisage oral testimony being recorded in the course of proceedings that may ensue. Separation of functions - HELD THAT:- From section 132 of the Companies Act, there appears to be no doubt in mind that the provision did and always contemplated the NFRA performing and discharging its functions through such divisions as may be constituted. While it is true that Rule 2(g), while defining the word division includes one headed by a Chairperson or a full time Member, the Executive Body cannot possibly be construed to be a division in itself. A conjoint reading of sub-sections (3)(a) and (3)(b) appearing in Section 132 alongside the NFRA Rules, leads us to the irresistible conclusion that the statute clearly contemplated the discharge of functions enumerated in Rules 7 and 8 being undertaken by independent units or divisions of the NFRA. A body must not only be fair and impartial, but it should also not be burdened by a predisposition or a predetermined state of mind. This aspect assumes significance insofar as we are concerned in light of a common complement of persons having rendered findings of alleged professional misconduct and thereafter sitting upon that very opinion to consider commencement of disciplinary action. A person charged by such an authority could be reasonably said to apprehend a reasonable likelihood of the opinion so formed being tainted by the proscription of a reasonable likelihood of bias. It is not intended to suggest that the NFRA was obliged to punctiliously follow or adopt an identical structure, what we seek to highlight is that regulatory bodies appear to have universally formulated and attempted to adhere to a procedure which would meet the test of due process, of a fair opportunity being afforded to the person charged and above all justice appearing to have been truly served. These are surely not principles foreign to our jurisprudence. They are above all the command of Article 14 itself. The proceedings impugned, however, clearly falter and fall when tested on the aforenoted basic postulates. The scar of predetermination - HELD THAT:- It was the Executive Body which in the first instance came to record findings of guilt and violation of the SAs . Those reports had come to conclude in no uncertain terms that the petitioners had violated the ethics standards required to be maintained and having acted in violation of the SAs which applied. That very body proceeded to take a decision to commence disciplinary action based not an independent review of the facts that obtained but solely on the strength of what had been found in the AQRR. The composition of the body which penned the AQRR and that which issued the SCN remained unaltered. The proceedings have thus come to be stigmatized beyond repair and cannot in law be salvaged or saved. The Executive Body could not have discharged the dual role of rendering findings of guilt and violation of the SAs while authoring the SQARR/AQRR and thereafter don the mantle of the division which is contemplated under Rule 11. The assessment of whether circumstances warranted a disciplinary enquiry being initiated was statutorily liable to be undertaken by a unit of the NFRA separated from the one which drew up those reports - The doctrine of necessity has also been found to be inapplicable since it was open for the NFRA to have constituted separate units which could have discharged the functions statutorily envisaged. Since the body of persons which penned the reports and took a decision to initiate proceedings under Rule 11 was one and the same, the procedure is found to be in clear violation of the reasonable likelihood of bias test. An informed observer would be justified in alleging predisposition, predetermination and an inclination to affirm against that body. Conclusion - The validity of Section 132 and the NFRA Rules upheld. There are no merit in the challenge based on the arguments of vicarious liability, retroactive operation and a violation of Article 20(1) of the Constitution. Petition allowed.
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Insolvency & Bankruptcy
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2025 (2) TMI 378
Authority or jurisdiction to invoke the corporate guarantee after the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - admission of claim filed by the Respondent based on the invoked guarantee - applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) regarding the moratorium on invocation of guarantees. HELD THAT:- This Tribunal while considering the aforesaid issue referred to and relied on judgment of the Hon ble Supreme Court in Ghanshyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited [ 2021 (4) TMI 613 - SUPREME COURT ] as well as judgment of this Tribunal in Edelweiss Asset Reconstruction Company Ltd. vs. Orissa Manganese and Minerals Ltd. [ 2019 (6) TMI 639 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ]. This Tribunal ultimately held that the corporate guarantee could have been invoked prior to commencement of the CIRP. In paragraphs 27, 28, 29 and 30 of the judgment, following has been held that In the instant case, the CIRP commencement date of the Corporate Debtor is 27/01/2020 and the Appellant had recalled the entire redemption amount with respect to debentures on 25/03/2020 subsequent to the initiation of CIRP. The Adjudicating Authority recorded that the Corporate Guarantee was invoked on 07/04/2020. The claims were filed by the Appellants on 10/02/2020. This Tribunal is of the earnest view that the Appellants cannot Claim the amounts in the CIRP of the Corporate Debtor who is a Corporate Guarantor on the basis of the Deed of Guarantee which was never invoked as on the date of filing of the Claims. When the Respondent having invoked the guarantee on 18.09.2020 i.e. subsequent to initiation of the CIRP, on the basis of said invocation no claim could have been accepted in the CIRP. The Respondent could not have been invoked the guarantee given by the corporate debtor on 18.09.2020. The said invocation cannot be base for any claim to be admitted in the CIRP it having not matured. It is not necessary to examine the contention that the claim of the Respondent has to be treated to have been filed on 23.10.2020 and not on 13.10.2021. Conclusion - i) The invocation of a corporate guarantee after the initiation of the CIRP is prohibited under the moratorium imposed by Section 14 of the IBC. ii) Claims based on such impermissible invocation cannot be admitted in the CIRP. Appeal allowed.
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Service Tax
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2025 (2) TMI 377
Entitlement to abatement granted by the learned Commissioner - assessee has not satisfied the necessary conditions of the N/N. 1/2006-ST dated 01.03.2006 - HELD THAT:- The learned Commissioner vide impugned order finds that the demands in both SCNs were raised without considering the applicable abatement under N/N. 1/2006-ST dated 01.03.2006 which was admissible to the noticee and that the noticee was eligible for the said abatement. The learned Commissioner has not only held that the assessee is eligible for abatement but has also quantified the abatement available to the assessee. Having acknowledged the presence of material and labour components in the services provided by the assessee to the oil companies, it was not open to the learned Commissioner to disregard the classification claimed by the assessee under Works Contract Service . Conclusion - The impugned order is not sustainable as for as the categorization of works under various other heads than Works Contract Service is concerned; therefore, the same is liable to be set aside. Appeal allowed.
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2025 (2) TMI 376
Refund claim - requirement to reverse the Cenvat credit to claim refund, in terms of N/N. 27/2012-CE(NT) dated 18.06.2012 - non-fulfilment of condition of para 2(h) of the N/N. 27/2012-CE(NT) dated 18.06.2012 - HELD THAT:- Admittedly, in this case the appellant has debited Cenvat credit in their books of accounts which shows reversal of Cenvat credit. Although they have transferred Cenvat credit to Tran-1 for the period January 2017 to June 2017 but same was also reversed in June 2018. Therefore, it will be treated as that they have reversed the Cenvat credit. If there any delay on the part of the appellant that is only a technical lapse and the substantial benefit of the notification should not be denied for such technical lapse. The refund claim filed by appellant cannot be rejected on these technical grounds as held by the Tribunal in the case of LIGHTSPEED INDIA PARTNERS ADVISORS LLP VERSUS COMMISSIONER CENTRAL TAX (APPEALS) NEW DELHI ADVISORS LLP [ 2021 (12) TMI 621 - CESTAT NEW DELHI] wherein this Tribunal observed that the Commissioner (Appeals) has miserably failed to observe that with the introduction of the GST Act filing of ST-3 return was absolutely done away due to which there was no other possible way with the appellant to debit and to reflect the existing credit in its ST-3 return. The Notification No. 27/2012 dated 18.6.2012 with its condition No 2(h), to my opinion, was applicable only during the period prior to GST regime. Since the GST regime has done away with the ST 3 return, there remain no provision in GST system to reflect the refund claim in the CENVAT credit balance. The only option was to show its reversal in the Books of accounts. Such reversal still amounts to non availment of Credit and refund whereof remains eligible. Conclusion - The appellant is rightly claimed the refund in terms of Notification No. 27/2012-CE(NT) dated 18.06.2012 and entitled for the refund as the appellant has satisfied the conditions of the Notification No. 27/2012-CE(NT) dated 18.06.2012. The impugned order set aside - appeal allowed.
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2025 (2) TMI 375
Admissibility of Cenvat credit in respect of the Tower , Shelter , Electric Setup , other electronic items and prefabricated shelters for provision of output/telecommunication services - Admissibility of Cenvat credit of input service used for erection of such tower - Issuance of SCN. Admissibility of Cenvat credit in respect of the Tower , Shelter , Electric Setup , other electronic items and prefabricated shelters for provision of output/telecommunication services - HELD THAT:- The dispute between both the decisions has been finally settled by the Hon ble Supreme Court in the case of Bharti Airtel [ 2024 (11) TMI 1042 - SUPREME COURT] that credit is admissible and the decision of Hon ble Bombay High Court has been set aside. Hon ble Supreme Court held We, therefore, agree with the conclusion arrived at by the Delhi High Court that towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are admittedly capital goods falling under Chapter 85 within sub-clause (i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are covered by the definition of capital goods within the meaning of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT Rules. - there are no reason for the denial of the said credit. Admissibility of Cenvat credit of input service used for erection of such tower - HELD THAT:- As the Hon ble Supreme Court has considered these goods as capital goods/inputs in the provision of output service the credit in respect of erection of these goods could not have been denied. As the services have been used for provision of output services either directly or indirectly the CENVAT credit could not have been denied - these services are squarely covered by Rule 2 (l) of the CENVAT Credit Rules, 2004 and hence the credit of service tax paid in respect of these services would be admissible to the appellant. Issuance of SCN - HELD THAT:- There are no merits in the said appeal for the reason that the Show Cause Notice would not have been issued in respects of the amount already paid by the party prior to the issuance of Show Cause Notice in terms of Section 73(3) of the Finance Act, 1994. There are no merits in the appeal filed by the Revenue. Appeal allowed.
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Central Excise
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2025 (2) TMI 374
Condonation of delay in filing SLP - Refund of excise duty paid under protest against demand created on alleged manufacture and clearance of Zarda Scented Tobacco - applicability of principles of Unjust Enrichment if the Central Excise Duty has been paid under Compounded Levy Scheme, made applicable in terms of Section 3-A of the Central Excise Act, 1944 - it was held by High Court that Once the entire goods cleared by the assessee were only Branded Chewing Tobacco cleared at the M.R.P. rate, the presumption of passing on the disputed duty liability (on the Zarda Scented Tobacco) never arose. HELD THAT:- There is a delay of 129 days in filing the Special Leave Petition which has not been satisfactorily explained. The Special Leave Petition is accordingly dismissed on the ground of limitation.
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2025 (2) TMI 373
Interest on the refund of the Cenvat credit that was reversed following the issuance of SCN - refund amount should be treated as a revenue deposit or not - HELD THAT:- Apparently and admittedly, there is no written protest ever raised by the appellant for reversing the said amount of credit. It is also an apparent fact that initially the entire amount was held to have been wrongly availed credit. However, this Tribunal vide final order dated 04.07.2011 has partly allowed the availment of Cenvat credit and ordered reversal of the remaining directing the Commissioner (Appeals) to re-quantifying the amount of reversal of Cenvat credit. In view of those directions, the amount of the eligible Cenvat credit to the appellant was quantified. However, the Cenvat credit of such amount, for which the refund claim was filed was held to be ineligible Cenvat credit and thus was ordered to be reversed by the appellant and got reversed also. The said amounts stand appropriated by the adjudication order - Also for the reason that the amount of credit reversed was the same amount as was proposed to be reversed vide the six show cause notices. This reversal to my opinion amounts to appropriation. Appropriation is the act of setting aside money for a specific purpose. The reversal of this amount by the appellant on his own post issuance of show cause notice proposing the said reversal is therefore nothing but the appropriation of the amount towards duty. The bare perusal of the provision reveals that the liability of interest on delayed refunds vis- -vis amount of duty arises only when the amount is not refunded within three months from the date of receipt of the application/claim. Since admittedly the refund claim was sanctioned within three months from the date of respective application, the appellant is held not entitled to claim interest on the amount of refund. Though the Hon ble Madras High Court in the case M/s Pricol Ltd [ 2015 (3) TMI 735 - MADRAS HIGH COURT] has held that a consistent view is being taken by the courts that any amount which is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest but as already observed above, there is no evidence of the reversal of Cenval credit to have been made under protest rather the same is held to be an act appropriation on part of the appellant i.e. reversing the utilized amount of Cenvat credit for the reason that the appellant was alleged to not to be entitled for the said credit. In the given circumstances, the entire case laws as relied upon by the appellant is held not applicable to the present case. Conclusion - In the absence of evidence, the amount is treated as appropriated duty, not eligible for interest under Section 11BB if refunded within the statutory period. All the four appeals are hereby dismissed.
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2025 (2) TMI 372
Penalty on co-noticees when the main party s case is settled under the SVLDR Scheme, 2019 - HELD THAT:- This Court finds that in the matter of Prakash Steelage Ltd [ 2024 (11) TMI 468 - CESTAT AHMEDABAD] , the matter went in favor of the appellants after various decisions were considered. It was held in the case that the penalties imposed on the co-noticees in a case where the main noticee against whom the demand is confirmed, the case is settled under SVLDRS then in respect of other co-noticees penalty will not sustain even if they have not filed a declaration under SVLDRS-2019 . Conclusion - The penalties imposed on co-noticees should be set aside if the main party s case is settled under the SVLDR Scheme, 2019. The appeal is liable to be accepted. Accordingly, appeal is allowed.
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2025 (2) TMI 371
Denial of CENVAT Credit - appellant did not provide the required documents at the time of investigation itself - suppression of facts or not - time limitation - HELD THAT:- In this case, it is not disputed by the learned Authorized Representative that for the period April 2015 to March 2017 appellant is filing their ER-1 returns which is evident from the show cause notice itself. If there is minor discrepancy in the documents for availment of Cenvat credit it cannot be alleged that appellant has willfully suppressed the fact with intent to evade payment of duty. For the period April 2017 to June 2017 appellant did not file their ER-1 returns, therefore, for the said period extended period of limitation is rightly invoked by the adjudicating authority. Conclusion - i) If there is minor discrepancy in the documents for availment of Cenvat credit it cannot be alleged that appellant has willfully suppressed the fact with intent to evade payment of duty. ii) The demand pertaining to extended period of limitation except for the period April 2017 to June 2017 is not sustainable. Therefore, the appellant is liable to reverse the ineligible Cenvat credit for the period April 2015 to June 2017 along with interest. Appeal disposed off.
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2025 (2) TMI 370
Process amounting to manufacture or not - process undertaken by the appellant on the received gas - recovery with interest and penalty - HELD THAT:- The issue involved in the present case is identical as was involved in the earlier appeal of the appellant decided by this Tribunal in M/S. SURYA AIR PRODUCTS PVT. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, CHANDIGARH [ 2018 (5) TMI 1450 - CESTAT CHANDIGARH] . The decision of this Tribunal for the earlier period has been upheld by the Hon ble Apex Court in COMMISSIONER OF CENTRAL EXCISE AND S.T. CHANDIGARH VERSUS M/S. SURYA AIR PRODUCTS PVT. LTD. [ 2024 (7) TMI 1312 - SC ORDER] where it was held that In the instant case, the process involved is that the gas received by the appellant through the pipeline has some accumulation of moisture and in order to remove the same from the gas, the compressor has an inbuilt system of drying the moisture. The treatment employed by the respondent-herein is oil filtration for the removal of moisture from gas by drying the inbuilt system of compressing gas into the cylinders. The said process, in our view, does not amount to a manufacturing process. Conclusion - The appellant s process of preparing the gas cylinders for sale did not amount to manufacturing under the Central Excise Tariff Act. The impugned order is not sustainable in law and is set aside - appeal allowed.
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Indian Laws
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2025 (2) TMI 369
Dishonour of Cheque - Suit for recovery of damages/compensation on account of defamation, mental pain, agony, harassment, tension and financial loss caused to the appellant/plaintiff due to the filing of false litigation - HELD THAT:- In the present case, there is no evidence to show that any damage or harassment was caused to the plaintiff. The learned Trial Court has observed that the amount has been granted on account of defamation and mental pain and agony; whereas there is nothing on record to show that the plaintiff was defamed. In fact, there was no evidence to show that any damage or harassment had been caused to the plaintiff. It must be remembered that the institution of a legal proceeding by the defendant against the plaintiff maliciously and without reasonable and probable cause is actionable in tort on proof of damage either to his reputation or to his property. In the present case, the petitioner/plaintiff has failed to prove any damage either to his reputation or to his property or to his person. The learned first Appellate Court upon detailed appraisal of the evidence and pleadings on record held that the proceedings instituted by the defendant against the plaintiff upon dishonouring of the cheque were not instituted on the basis of some malice. As such, the learned first Appellate Court correctly held that there was no malicious prosecution/false and frivolous litigation instituted on the part of the defendant against the plaintiff. Mere acquittal of the plaintiff in criminal case would not imply that there was malicious prosecution by the defendant against the plaintiff. As such, no ground was made out for granting the damages. Learned lower appellate Court found that image of the plaintiff was not lowered nor any news regarding filing of complaint under Section 138 of the Negotiable Instrument Act was ever got published by the defendant. It was in this background that the suit of the plaintiff was dismissed - no ground is made out to interfere in the judgment and decree dated 30.09.2024 passed by the learned First Appellate Court. Conclusion - The court found no merit in the plaintiff s claims of defamation, mental pain, and financial loss due to false litigation. The lack of evidence supporting these claims led to the dismissal of the suit in the second appeal. The present regular second appeal is hereby dismissed.
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