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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter February 17, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles Jurisprudence on Blocking of Electronic Credit Ledger Complaints made to the ICAI shall be enquired with an unbiased behaviour and by following the established principles of law News Continuation of Capacity Development Scheme, a Central Sector Scheme of Ministry of Statistics and Programme Implementation (MOSPI) Till 31.03.2026. More than 29.8 lakh major Tax Audit Reports (TARs) filed on the e-Filing portal of the Income Tax Department Notifications Customs 09/2022 - dated 15-2-2022 - Cus (NT) Fixation of Traiff Values - Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver etc, (including Crude Palm Oil, RBD Palm Oil, Others) GST - States G.O. (Ms) No. 184 - dated 31-12-2021 - Tamil Nadu SGST Tamil Nadu Goods and Services Tax (Tenth Amendment) Rules, 2021. 22/2021– State Tax (Rate) - dated 7-1-2022 - Tripura SGST Amendment in Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017 21/2021– State Tax (Rate) - dated 7-1-2022 - Tripura SGST Amendment in Notification No. 01/2017- State Tax (Rate), dated the 29th June, 2017 20/2021-State Tax (Rate) - dated 4-1-2022 - Tripura SGST Amendment in Notification No. 21/2018, State Tax (Rate), dated the 26th July, 20l8 Circulars / Instructions / Orders Companies Law 01/2022 - dated 14-2-2022 Relaxation on levy of additional fees in filing of e-forms AOC-4, AOC-4 (CES), AOC-4 XBRL AOC-4 Non-XBRL and MGT-7/MGT-7A for the financial year ended on 31.03.2021 under the Companies Act, 2013 Highlights / Catch Notes GST Period of limitation for refund claim - Constitutional Validity of Rule 90(3) - The period of limitation thus falling between 15th March, 2020 to 2nd October, 2021 is required to be excluded. If the said period between 15th March, 2020 and 2nd October, 2021 is excluded, the third refund application filed by the petitioner was within the period of limitation prescribed under the said circular dated 19th November, 2029 read with 54(1) of the Central Goods and Services Tax Rules, 2017. - HC Visit to Get Source Seeking grant of Bail - Supply of packaging material to the seven firms which are fake - Taking into account the facts and circumstances of the case and without expressing any opinion on the merits of the case, this court deems it just and proper to enlarge the petitioner on bail. - HC Visit to Get Source Time Limitation for claiming ITC - tax invoice dated 01.04.2020 issued by the supplier of service for the rental service supplied for the period 01.04.2018 to 31.03.2019 - Even the proviso to section 16 (4) reiterates that the registered person is entitled to take ITC in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18. This proviso absolutely necessitates or rather endorses the invoices relating to supplies made during the financial year 2017-18 only, for the registered dealer to claim entitlement of ITC in the succeeding financial year. - The appellant is not eligible to claim Input Tax Credit on the disputed invoice - AAAR Visit to Get Source Classification of goods - Submarine Fired Decoy System (SFDS) - following the spirit of the advance rulings pronounced by various Advance Ruling Authorities (on which the appellant placed reliance), we differ with the ruling of the lower Authority that, SFDS is not a part of 'Submarine', but an additional feature that falls under the category of 'arms and ammunition' - The SFDS is classifiable as 'parts of Submarine' falling under Chapter 8906 and consequently attract a GST rate of five (5) percent - AAAR Visit to Get Source Income Tax Addition u/s 68 - the tribunal was satisfied that the credit worthiness and the genuinity of the investments have been sufficiently established by the assessee not only before the CIT(A), but also before the assessing officer on the matter being sent back to the assessing officer pursuant to the order passed by the CIT(A) - No additions - HC Visit to Get Source Compounding of offence - Criminal case u/s 276C(1) read with Section 277 and 278B - The authority to issue instructions or directions by the Board stems from the second Explanation appended to Section 279 of the Act, 1961. It is well settled that the Explanation merely explains the main section and is not meant to carve out a particular exception to the contents of the main section. - Such instructions or directions that are prescribed by the Explanation cannot take away a statutory right with which an assessee has been clothed, or set at naught the working of the provision of compounding of offences. - HC Visit to Get Source Deduction of provisions made - Ascertained expenditure - the assessee is entitled to deduction being the provision created on account of fraud committed by one of its employees which caused loss to the leasing company. - AT Visit to Get Source Exemption u/s 11 - Donation receipt from foreign donors - belated filing of Form No.10AA - Assessee has filed Form No.FC-III-FCRA-2010 which has been duly assessed with the Ministry of Home Affairs, Government of India. Under these circumstances and considering the fact that since the assessee, during the course of assessment proceedings, has produced the relevant details and produced the books of account which have been gone through by the AO and no other defects were pointed out - Benefit of exemption allowed - AT Visit to Get Source Revision u/s 263 by CIT - it appropriate to quote that the legislative amendment made in section 263 by way of insertion of Explanation 2 in Finance Act, 2015 w.e.f. 01.06.2015 that an assessment order passed without making enquiry or verification is deemed to be an erroneous one in so far as it is prejudicial to the interest of Revenue. We thus uphold the learned PCIT's revision jurisdiction direction herein in principle. It shall however be open to the assessee to raise all factual as well as legal arguments before the Assessing Officer in support of her impugned exemption claim as per law; if so advised in consequential proceedings. - AT Visit to Get Source Customs Maintainability of petition before the High Court - availability of alternative remedy of statutory appeal - total lack of jurisdiction on the part of the Assessing Officer in passing the O-I-O or not - As such it cannot be said that there was total lack of jurisdiction on the part of the Assessing Officer in passing the O-I-O. Despite the above the High Court has entertained the writ petition under Article 226 of the Constitution of India and has entered into the merits of the case though the original writ petitioner did not avail the alternative statutory remedy of appeal against the order of O-I-O. - The impugned judgment and order passed by the High Court is hereby quashed and set aside - SC Visit to Get Source MEIS scheme - amendment in the shipping bills - whether to permit the necessary amendments in the shipping bills would be within the purview of the Commissioner of Customs himself and not the DGFT. It is only if the Commissioner of Customs permits such amendments in the shipping bills, then the DGFT would come into picture. It is also not clear from the impugned communications as to why such amendments have been declined. No reason has been assigned. - HC Visit to Get Source Valuation of imported goods - The authorities have nowhere given any acceptable reasons as to why they jumped to adopt Rule 4 ibid. and the valuation prescribed thereunder, instead of following the Rules sequentially. From the records, nowhere it is seen that the appellant was furnished with the NIDB data or whatsoever that was relied upon for enhancement of the value, for rebuttal, which is clearly in violation of the principles of natural justice. - AT Visit to Get Source Finalization of provisional assessment - The authorities below have erred in collecting the Duty at ₹ 300/- per M.T., which is clearly illegal and in violation of Notification No. 62/2007-Cus. ibid.; and secondly, the order of the Deputy Commissioner of Customs, which is treated as the Order-in-Original is clearly a non-speaking order and the same cannot be sustained. The collection of Duty, therefore, is clearly without the authority of law. Consequently, the impugned order, which has sustained the non-speaking order of the Deputy Commissioner, cannot also be sustained. - AT Visit to Get Source Classification of goods - goods namely, API supari, chikni supari, unflavoured supari, and flavoured supari - even flavoured supari merits classification under Heading 0802 of the Customs Tariff and not under Heading 2106 as argued by the applicant. Therefore, in respect of the products API supari, chikni supari, unflavoured supari, and flavoured supari, it is held that their correct classification is Heading 0802 of the First Schedule to the Customs Tariff Act, 1975 - AAR Visit to Get Source Classification of imported goods - preparation/product of betel nut commonly known as ‘Supari’ - API supari, Chikni supari, unflavoured supari, boiled supari and cutting supari - the goods covered by the application are clearly not “preparations of betel nuts”, the submission of the applicant for recourse to General Rules of Interpretation in the event of two sub-headings being equally applicable is not relevant. - AAR Visit to Get Source Indian Laws Disciplinary complaint / proceedings against the member of ICAI - it has to be construed that the complaint filed by the petitioner was not enquired into properly and by following the established principles of law. The nature of the allegations set out in the complaint by the petitioner, the evidence submitted as well as the statement made are not elaborately adjudicated or any findings are given by the Director Discipline in his enquiry report - reasons and the findings in respect of each issue or allegations made are necessary to form an opinion that the enquiry was conducted in a proper manner. - HC Visit to Get Source IBC Approval of resolution plan - The learned Counsel for the RP has submitted before us that Appellant itself has submitted twice the Resolution Plan, which could not be approved - There being debt of more that ₹ 50 crores, the Resolution Plan, which was submitted by the Appellant was only for ₹ 6.5 crores, which did not find favour with the Committee of Creditors. In the facts, which have been brought on record, there are no substance in the submission of learned Counsel for the Appellant that Application under Section 9 by the Operational Creditor was not maintainable. - AT Visit to Get Source Liquidation proceedings - Period of limitation - Auction of property of the corporate debtor - It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a time-bound manner. In exceptional circumstances, such a time limit can be extended. - AT Visit to Get Source Central Excise Area Based Exemption - manufacture taking place or not - A conjoint reading of the definition of manufacture in section 2(f) (iii) of the Excise Act and Chapter Note 5 of Chapter 33 of the First Schedule to the Excise Act and the aforesaid treatment adopted on the goods (colour solution) by the appellant would render the product marketable to the consumer as nail enamel and, therefore, the appellant would be covered by the exemption notification dated 10.06.2003 since the appellant has adopted such a treatment to the goods that rendered them marketable to the consumer. - AT Visit to Get Source CENVAT Credit - It is also difficult to accept the finding of the Commissioner (Appeals) that the respondent was not a party to the fake transactions. It is only the respondent who was to gain by adoption of such a mode and, therefore, the conclusion that even though only invoices were received by the respondent without the goods, the respondent had no role to play is perverse. - AT Visit to Get Source VAT Best judgement assessment - There appears to be divergents views insofar as the question as to whether the consumption of electricity can constitute the sole basis for making a best judgment assessment. However, in the present case, the best judgment assessment was not only necessitated by the survey report/case study on electricity consumption vis-a-vis production of jelly, but also the fact that the books of accounts maintained by the petitioner suffered from defects - Any best Judgment assessment is likely to be an over-estimate or an under-estimate, but that itself does not supply a reason or ground for interfering with the same. - HC Visit to Get Source Case Laws: GST 2022 (2) TMI 661 Refund of IGST - Export of goods - Zero Rated Supplies - calculation of interest from the date of shipping bill up till the date on which the amount of refund is paid to the petitioner herein - HELD THAT:- The issue raised in the present writ application is no longer res integra after the decision of this High Court in the case of M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [ 2019 (7) TMI 472 - GUJARAT HIGH COURT] where it was held that respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund. This writ application directing the respondents to immediately sanction the refund of the I.G.S.T. paid in regard to the goods exported i.e. the Zero Rated Supply with 9% simple interest from the date of the shipping bills till the date of actual refund - Application allowed. 2022 (2) TMI 660 Period of limitation for refund claim - Constitutional Validity of Rule 90(3) of the Central Goods and Services Tax Rules, 2017 - Prayer for declaration that the Rule 90(3) of the Central Goods and Services Tax Rules, 2017 is ultra vires the Constitution of India and shall be struck down - seeking to withdraw the impugned circular dated 18th November, 2019 to the extent it requires a refund application under Rule 90(3) of the the Central Goods and Services Tax Rules, 2017 to be filed within the time limit prescribed therein - HELD THAT:- This Court after considering the identical facts in case of SAIHER SUPPLY CHAIN CONSULTING PVT. LTD. VERSUS THE UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF LAW AND JUSTICE, NEW DELHI, ASSISTANT COMMISSIONER OF CGST AND CENTRAL EXCISE DIVISION-X, MUMBAI [ 2022 (1) TMI 494 - BOMBAY HIGH COURT] has held that while computing the period of limitation time from 15th March, 2020 and 2nd October, 2021 shall stand excluded in view of the order passed by the Hon ble Supreme Court on 23rd September, 2021. The time to file the third application by the petitioner in this case fell within the said period considered by the Supreme Court in the said order dated 23rd September, 2021. The period of limitation thus falling between 15th March, 2020 to 2nd October, 2021 is required to be excluded. If the said period between 15th March, 2020 and 2nd October, 2021 is excluded, the third refund application filed by the petitioner was within the period of limitation prescribed under the said circular dated 19th November, 2029 read with 54(1) of the Central Goods and Services Tax Rules, 2017. There is thus no substance in the submission made by the Revenue - the view taken by the Hon ble Supreme Court in case of Saiher Supply Chain Consulting Pvt. Ltd. apply to the facts of this case and are binding on this Court. Learned counsel for the respondents could not distinguish those orders of the Supreme Court and the judgment of this Court. The order dated 30th April, 2021 is quashed and set aside. The third refund application filed by the petitioner on 14th October, 2020 which was filed within the period of limitation is restored to file before the respondent no.3 - petition allowed. 2022 (2) TMI 659 Seeking direction to respondent no.2 to issue GST registration certificate in accordance with Section-25 of CGST/GGST Act - seeking to transfer the eligible Input Tax Credit of petitioner to his New GST Number - writ-applicant failed to offer any explanation as regards the discrepancies in the documents submitted by the writ-applicant - HELD THAT:- The grievance voiced by the writ-applicant herein is that despite the fact that he succeeded before the authority, till this date the respondent no.2 has not given effect to the order passed by the Appellate Authority. This writ-application is disposed off with a direction to the respondent no.2 to give effect at the earliest to the order passed by the Appellate Authority dated 17.06.2020 and further, grant all consequential benefits available to the writ-applicant in accordance with law for the interregnum period - Let the needful be done within a period of four weeks from the date of receipt of the writ of this order. 2022 (2) TMI 658 Stay on further audit proceedings - HELD THAT:- Issue notice. Ms.Pankhuri Shrivastava, learned counsel for the petitioner accepts notice. She fairly states that the issue in the present writ petition is squarely covered against the petitioner by the judgment of this Court in AARGUS GLOBAL LOGISTICS PVT. LTD. VERSUS UNION OF INDIA ANR. [ 2020 (3) TMI 811 - DELHI HIGH COURT] and Vianaar Homes Private Limited VIANAAR HOMES PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER (CIRCLE-12) , CENTRAL GOODS SERVICES TAX, AUDIT-II, DELHI ORS. [ 2020 (11) TMI 150 - DELHI HIGH COURT] . The present writ petition is dismissed. 2022 (2) TMI 657 Detention of goods alongwith the vehicle - goods detained without giving any reasons and without mentioning any provision of law - HELD THAT:- The Court being conscious of the fact that the vehicle and the materials thereon i.e., iron and steel scrap not being perishable and still in the custody of the departmental authorities, ends of justice would be served if, in the presence of the authorized representative of the petitioner, a fresh weighing of the same is undertaken. Let the authorized representative of the petitioner appear before the respondent no.1 on 11.02.2022 i.e., day after tomorrow at 11:00 a.m. Upon him doing so, the vehicle and the materials thereon shall be got weighed in accordance with law. Copy of the same would also be handed over to the representative of the petitioner. Depending upon what comes out of the said exercise, consequences in law shall follow - Petition disposed off. 2022 (2) TMI 656 Validity of action of the respondent GST Department and its officials in conducting search and seizure of the petitioner s premises - coercion on petitioner to deposit a huge sum of ₹ 11.5 crores during the course of search operations - gross contravention of the mandatory requirement of Section 74 of the CGST Act - HELD THAT:- Prima facie, it appears that the impugned action has been resorted to without adhering to the procedure provided under Section 74 of the CGST Act. As the petitioner s representative claims to have retracted from the confession, the voluntary nature of deposit of GST pursuant to the search proceedings dated 05-06.01.2022 is seriously disputed, there is merit in the contention of Mr. Balia that the procedure provided under Section 74 of the CGST Act would have to be followed. Once this procedure is adopted, the respondent authorities would not be able to procure allegedly short paid GST amounts by branding it to be a voluntary deposit and that is why a dubitable procedure of issuing summons to petitioner under Section 70 of the CGST Act is being adopted even though the petitioner s/representative s statement had already been recorded on the date of inspection/search itself. The matter requires consideration - Issue notice of the writ petition as well as the stay petition to the respondents. Rule is made returnable on 10.03.2022. 2022 (2) TMI 655 Seeking grant of Bail - Supply of packaging material to the seven firms which are fake - input tax credit availed or not - offence(s) under Sections 132 (1) (B) (H) (I) of Central Goods and Services Tax Act, 2017 - HELD THAT:- Taking into account the facts and circumstances of the case and without expressing any opinion on the merits of the case, this court deems it just and proper to enlarge the petitioner on bail. The bail application under Section 439 Cr.P.C. is allowed and it is ordered that the accused-petitioner Dananjay Singh S/o Shri Hari Sharan Singh shall be enlarged on bail provided he furnishes a personal bond in the sum of ₹ 50,000/- with two sureties of ₹ 25,000/- each to the satisfaction of the learned trial Judge. 2022 (2) TMI 654 Input ax Credit - composition scheme opted out - HELD THAT:- Once a person ceases to pay tax under the composition scheme, as envisaged under Section 10 of the G.S.T. Act, he becomes entitled to claim an Input Tax Credit of the goods held in stock as on the date of transition by virtue of Section 18(1)(c) of the G.S.T. Act - It is not in dispute that for the purpose of claiming an Input Tax Credit under Section 18(1)(c) of the G.S.T. Act, a Form GST ITC 01 should have been filed within 30 days from the date of becoming eligible to avail the Input Tax Credit or within such time period, as may be extended by the Commissioner. It is the case of the writ applicant that since 24th September 2018, for not less than 15 times, he requested the concerned authority to look into the matter and permit him to upload the Form ITC 01. however, till this date, the concerned authority has not said anything in that regard - We have been able to understand the stance of the respondent No.5 as above. However, the question is whether all the doors are closed for the writ applicant for all times to come? Is there any scope still for the authority to permit the writ applicant to upload the Form ITC 01 for the purpose of claiming the refund towards the Input Tax Credit. The amount which could have been refunded at the relevant point of time is approximately ₹ 5 Lakh. The respondents, more particularly, the respondent No.5 are expected to find out some via media by which the writ applicant is able to upload the Form once again and seek refund - Post the matter on 16th February 2022 on top of the Board. 2022 (2) TMI 653 Seizure of lorry vehicle - procedure under statutes contemplated under law not followed - violation of principles of natural justice - HELD THAT:- The present writ petition stands disposed of in similar terms to order CHILLALE SANJIV VERSUS THE STATE OF ANDHRA PRADESH, DEPUTY ASSISTANT COMMISSIONER (ST) , AP STATE TAX, ADDANKI CIRCLE, [ 2022 (2) TMI 126 - ANDHRA PRADESH HIGH COURT] where it was held that The Court is not inclined to interfere in the matter. Keeping in mind the provisions of Section 129(2) of A.P.G.S.T. Act, as also that once such proceeding has been initiated, the same is now required to be taken to its logical conclusion. Petition disposed off. 2022 (2) TMI 652 Time Limitation for claiming ITC - tax invoice dated 01.04.2020 issued by the supplier of service for the rental service supplied for the period 01.04.2018 to 31.03.2019 - Section 16 (4) of the CGST/SGST Act, 2017 - If the applicant avails ITC on such invoice after 01.04.2020 and before filing GST return for September 2021/Annual Return for 2020-2021, whether it amounts to violation of condition stipulated under sub- section (4)? - HELD THAT:- The 'Supply of Service' here is 'Renting of immovable property'. The supplier of service issued a tax Invoice dated 01,04.2020 covering the period from 01.04.2018 to 31.03.2019. Therefore the supply of service pertains to the financial year 2018-19. The date on which the invoice issued was 01.04.2020 and hence appears that the invoice issued pertains to the financial year 2020-21. However, the date of invoice or the period to which an invoice pertains will be determined only by the period of supply covering which the said invoice was issued. Therefore, in the instant case, irrespective of the date of Invoice (which is leading to mis-interpretation of the period of Invoice), the same is pertaining to the period of supply covered by the said invoice i.e. 2018-19. In the instant case, as the invoice pertains to the financial year 2018-19, vide Section 16 (4), the recipient is entitled to take ITC on an the same before furnishing of Return under Section 39 for the month of September, 2019 following the end of financial year 2018-19 to which such invoice pertains or furnishing of the relevant annual return for the year 2018-19, whichever is earlier - Even the proviso to section 16 (4) reiterates that the registered person is entitled to take ITC in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18. This proviso absolutely necessitates or rather endorses the invoices relating to supplies made during the financial year 2017-18 only, for the registered dealer to claim entitlement of ITC in the succeeding financial year. The appellant is not eligible to claim Input Tax Credit on the disputed invoice dated 01.04.2020 that was issued covering the supply of services pertaining to the period from 01.04.2018 to 31.03.2019 - the ruling of the AAR upheld. 2022 (2) TMI 651 Classification of goods - Submarine Fired Decoy System (SFDS) - classifiable as 'parts of submarine' under Chapter Heading 8906 or not - taxable GST rate of 5% by virtue of entry no. 252 of Schedule I in Notification No. 1/2017-Integrated Tax (Rate) dated 28.07.2017 - HELD THAT:- The submarines under discussion pertain to the Indian Navy and are basically used for warfare. A submarine, when used as a warship, is equipped with a torpedo launching system as well as a decoy system. Therefore, it can rightly be concluded that the said Submarines are 'Warships' which are classifiable under CTH 8906 - the SFDS system in question is tailor made/customized for use in the submarines by the Indian Navy. Apart from their usage in a submarine for countering torpedoes, it does not have any independent use for it to be sold in the market. Thus it deserves to be classifiable as 'part' of a submarine. Even the defence market recognizes the SFDS as a system necessary for anti-torpedo attacks. The market identity of the SFDS as a system connected to a submarine for anti-torpedo measures qualifies the argument that it is 'part of submarine' in commercial parlance too - as per the detailed write up on the usage of SFDS in the Appeal, it appears that, SFDS is a defense Mechanism and without which the very existence of the submarine is at stake. This in itself is an irrevocable proof/evidence that this is an essential part of the said submarine. Similarly, in case of IN RE: M/S. BHARAT ELECTRONICS LIMITED [ 2019 (9) TMI 823 - AUTHORITY FOR ADVANCE RULING, KARNATAKA] , the systems like color tactical display system, Radar system, Electro Optical fire control system, optical director system , etc, are ruled as 'parts of submarine'. Now in the present case, SFDS system is a similar system, as is in the case of Bharat Electronics Ltd. Further, following the spirit of the advance rulings pronounced by various Advance Ruling Authorities (on which the appellant placed reliance), we differ with the ruling of the lower Authority that, SFDS is not a part of 'Submarine', but an additional feature that falls under the category of 'arms and ammunition'. The SFDS is classifiable as 'parts of Submarine' falling under Chapter 8906 and consequently attract a GST rate of five (5) percent, by virtue of entry No.252 of Schedule I in Notification No. 28.06.2017. 2022 (2) TMI 609 Seeking to delete the respondent nos.6 and 7 in the cause title - It is the case of the petitioner that there were three inadvertent errors in SAP wherein GSTN number remained to be corrected/updated from Andhra returns - HELD THAT:- The respondent no.2 are directed to decide the said representation made by the petitioner within a period of eight weeks from today without fail in accordance with law after considering the applicability of the Circulars dated 26/26/2017- GST dated 29th December, 2017 - The order that would be passed by the respondent no.2 shall be communicated to the petitioner within one week from the date of passing of the order. If the representation made by the petitioner is allowed, the respondent no.2 shall permit the petitioner to carry out rectification in the GST number in question within one week from the date of the said order. Writ Petition is allowed. Income Tax 2022 (2) TMI 650 Exemption u/s 11 - whether Tribunal erred treating the assessee as a charitable institution, even when the activities of the assessee fell under the last limb of Section 2(15)? - HELD THAT:- This Court in Commissioner of Income Tax (Exemptions) Delhi vs. Association of State Road Transport Undertakings [ 2021 (10) TMI 179 - DELHI HIGH COURT] has held that it is settled law that the first proviso to Section 2(15) of the Act does not exclude entities which are for charitable purpose but are conducting some activities for a consideration or a fee A perusal of the paper books reveals that the assessee-society is running a printing press and publishing a newspaper. The profit so generated is used for charitable purposes and apparently there is no profit motive in the activities of the assessee. As such it cannot be said that the assessee is involved in any trade, commerce or business. Consequently, the mischief of proviso to Section 2(15) of the Act is not attracted to the present batch of matters. In any event, the assessee-society is charitable in nature as the profit, if any, made by the assessee-society is ploughed back for charitable activities. It is pertinent to mention that the assessee-society was set up by the late freedom fighter Lala Lajpat Rai. The appellant itself has granted the assessee registration under Section 12A, recognition under Section 10(23C)(vi) and Exemption under Section 80G of the Act. Consequently, this Court is in agreement with the finding of the ITAT that the assessee-society does not carry on any business, trade or commerce with the intent of earning and distributing profit. - Decided in favour of assessee. 2022 (2) TMI 649 Addition u/s 68 - No satisfactory genuineness of transaction, credit worthiness of the company, nature and source of such sum so credited to the assessee s account - CIT- A deleted the addition as confirmed by ITAT - HELD THAT:- We find from the order passed by the tribunal that the assessing officer has complied with the direction issued by the CIT(A) and has given effect to the order and no adverse finding has been recorded by the assessing officer and accordingly the addition was deleted. Therefore, the tribunal would have been well justified in rejecting the revenue s appeal which was filed against the order passed by the CIT(A). Nevertheless the tribunal took upon itself the exercise to examine the factual position probably realising that they are the last fact finding authority in the hierarchy of authorities provided under the Act. After making an elaborate factual exercise the tribunal examined the credit worthiness of the investors and found that three share applicants were income tax assessees; they were filing return of income; share application form and allotment letter were available on record; the share application money was paid by the account payee cheques; details of bank account belonging to the share applicants and their bank statements were available; the assessing officer did not find any amount to be deposited in cash; the share applicants have substantial credit worthiness; the share applicants have common directors; all the directors are income tax assessees and all the three share applicants are sister concern. Thus, the tribunal was satisfied that the credit worthiness and the genuinity of the investments have been sufficiently established by the assessee not only before the CIT(A), but also before the assessing officer on the matter being sent back to the assessing officer pursuant to the order passed by the CIT(A). - No substantial question of law. 2022 (2) TMI 648 Compounding of offence - Criminal case u/s 276C(1) read with Section 277 and 278B of the Income Tax Act, 1961 against the petitioner on 29.3.2000 praying that the accused opposite parties may be summoned, tried and punished in accordance with law - limitation for compounding guidelines - THAT:- From a bare perusal of sub-section (2) of Section 279, it is evident that any offence under Chapter XXII of the Act, 1961 may be compounded by the authorized officer either before or after the institution of the proceedings. No limitation for submission or consideration of compounding application has been provided under sub-section (2) of Section 279 of the Act, 1961. Therefore, the Central Board of Direct Taxes by a circular can neither provide limitation for the purposes of sub-section (2) nor can restrict the operation of sub-section (2) of Section 279 of the Act, 1961, in purported exercise of its power to issue circular under the second Explanation appended to Section 279 of the Act, 1961. It has not been disputed before us by the learned counsel for the respondent or in the impugned show cause notice that the criminal case in question is still pending. A circular is subordinate to the principle Act or Rules, it cannot override or restrict the application of specific provision enacted by legislature. A circular cannot travel beyond the scope of the powers conferred by the Act or the Rules. Circulars containing instructions or directions cannot curtail a statutory provision as aforesaid by prescribing a period of limitation where none has been provided by either the Act, 1961 or the Rules. The authority to issue instructions or directions by the Board stems from the second Explanation appended to Section 279 of the Act, 1961. It is well settled that the Explanation merely explains the main section and is not meant to carve out a particular exception to the contents of the main section. In the present case a specific limitation has been provided by para 7(ii) of the compounding guidelines contained in the circular dated 14.6.2019 in purported exercise of power under the second Explanation to Section 279(2) of the Act, 1961. The second Explanation merely enables the Board to issue instructions or directions to other Income Tax authorities for the proper composition of offences under that Section. That is to say the instructions or directions may prescribe the methodology and manner of composition of offences to clarify any obscurity or vagueness in the main provisions to make it consistent with the dominant object of bringing closure to such cases which may be pending interminably in our Court system. Such instructions or directions that are prescribed by the Explanation cannot take away a statutory right with which an assessee has been clothed, or set at naught the working of the provision of compounding of offences. Considering the facts and circumstances of the case and the provisions of sub-section (2) of Section 279 of the Act, 1961, the writ petition is allowed to the extent that compounding application of the petitioner cannot be rejected by the Income Tax Authority concerned on the ground of delay in filing the application 2022 (2) TMI 647 Validity of draft assessment order u/s 144-C - Unexplained Sundry Creditors - rejecting the explanation regarding identity of the creditors - petitioner submit that material was made available to the Assessing Authority but due to technical glitch in the portal which is an admitted fact there were some difficulty relating to uploading the documents and that even though the documents were uploaded, due to technical glitch, the same were not available for the Assessing Officer to take note of the same - HELD THAT:- It would be appropriate to set aside the draft assessment order at Annexure-G and also the assessment order at Annexure-J and the assessee may be afforded an opportunity to place before the Authorities necessary details and material and upon such production of material, the Assessing Officer could proceed with the matter. The draft assessment order at Annexure-G and the Assessment order at Annexure-J are set aside. The matter is remitted for completion of the assessment proceedings afresh after affording necessary opportunity to the petitioner as per law. 2022 (2) TMI 646 LTCG - Gain on sale of transferable development rights[TDR] - whether the sale consideration received on transfer of transferable development right was taxable as a long-term capital gain in the hands of the assessee or not? - HELD THAT:- We hold that the consideration received by the assessee on sale of transferable development rights not chargeable to tax under the head capital gain in view of the fact that there is no cost of acquisition. We are also conscious of the fact that the learned assessing officer when raised the issue of chargeability of the above sum Under the head capital gain, initially the assessee contended that there is no cost of acquisition in respect of the transfer of the asset and therefore that capital gain being the resultant transaction could not be chargeable however letter on the assessee submitted a valuation report during the assessment proceedings of Mr. K C Gandhi co dated 13/3/1989 valuing the asset as on 31/3/1986 at ₹ 666,000. This order has stated that as the ownership of the land was vested with the assessee in consequence to execution of a deed of assignment on 20/10/1973 by assignor Mrs. Lilavati R SHelat in favour of the assessee and other coowner for the value specified therein, therefore the above cost of acquisition was derived by the assessee. However, that does not change the stand of the assessee that there is no cost of acquisition incurred by the assessee in respect of the asset transferred. In view of the above facts, we do not find any infirmity in the order of the learned CIT A in holding that receipts against the sale of TDR are not chargeable to capital gain tax. 2022 (2) TMI 645 Deduction being the provision created on account of fraud committed by one of its employees which caused loss to the leasing company - Disallowance of provision made by the assessee on account of settlement with the leasing company on the ground that no deduction towards the provision for unascertained liability is allowable - HELD THAT:- As relying on BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX [ 2000 (8) TMI 4 - SUPREME COURT] and M/S VODAFONE ESSAR SOUTH LTD. [ 2014 (11) TMI 804 - DELHI HIGH COURT] we are of the considered opinion that the assessee is entitled to deduction being the provision created on account of fraud committed by one of its employees which caused loss to the leasing company. We, therefore, set aside the order of the CIT(A) and direct the AO to allow the deduction in full. - Decided in favour of assessee. 2022 (2) TMI 644 Addition u/s 68 - bogus LTCG - Addition on account of Long Term Capital Gain (LTCG) and expenditure in connection with the LTCG - HELD THAT:- As relying on ANJULA GOEL VERSUS THE D.C.I.T., CIRCLE-II, CHANDIGARH. [ 2021 (4) TMI 291 - ITAT CHANDIGARH] impugned income having been categorically taxed as undisclosed income of the assessee firm, we fail to understand why it should be taxed in the hands of the assessee also, which would only result in taxing the same income twice. The observation of the Hon ble Settlement Commission on which the Revenue has relied for dismissing assessee's claim, that they refrain from making any comment in respect of claim of utilization of additional income of M/s Rohit Traders in the hands of partners, in our view, only serves the limited purpose of the Commission refraining from commenting on assessee's which were not there before them. This observation, we find, does not negate the admitted and undisputed fact of surrender of the impugned capital gains of the assessee in the hands of M/s Rohit Traders. We direct the deletion of addition made on account of Long Term Capital Gains and expenditure incurred on account of the same in the hands of the assessee - Decided in favour of assessee. 2022 (2) TMI 643 Addition of interest paid on bogus unsecured loan borrowed by the assessee from bogus lenders - HELD THAT:- Tribunal in [ 2021 (10) TMI 215 - ITAT SURAT] once the addition of unsecured loan for which the disallowance of interest was made has been deleted, the order for disallowance of interest would not survive. Accordingly, we affirm the order of Ld. CIT(A). Considering the fact that as we have affirm the order of Ld. CIT(A) on merit, therefore adjudication of other various submission raised either by Ld. Sr.DR for the Revenue and Ld. AR of the assessee would be academic. In the result, appeal of Revenue is dismissed. 2022 (2) TMI 642 Disallowance u/s.36(1)(iii) - interest on various loans and advances - assessee company had also advanced loans and advances to groups/subsidiary companies, but not charged any interest on such loans - whether loans and advances given to groups/subsidiary companies is out of interest free funds or out of interest bearing funds, which warrants disallowance of proportionate interest u/s. 36(1)(iii) ? - AO has disallowed proportionate interest on the ground that the assessee had diverted interest bearing funds for non-business purpose -HELD THAT:- We do not subscribe to the reasons given by the AO to disallow proportionate interest expenses for the simple reason that once it is an established fact that there is a business connection between the assessee and its groups/subsidiary companies, then merely for the reason that the assessee has not charged any interest on loans and advances given to those groups/subsidiary companies, interest paid on borrowed money, cannot be disallowed u/s. 36(1)(iii). It is a well-established principles of law that when there is a business expediency, then the assessee is at liberty to deal with its finance in accordance with its business requirements. AO cannot sit in arms chair of the businessman to decide its business affairs and direct how to deploy its funds. As long as the assessee establishes the business connection or commercial expediency, then it is free to deal with its affairs in accordance with its requirements and thus, we are of the considered view that the AO cannot disallow proportionate interest expenses u/s. 36(1)(iii) of the Act merely for the reason that no interest has been charged on loans and advances given to groups/subsidiary companies. In this case, the assessee had filed necessary evidences to prove that there is a business connection between the assessee and the company to whom loans and advances were given. Once it is an established fact that there is a commercial expediency, no interest can be disallowed u/s. 36(1)(iii) of the Act. Assessee has placed all evidences to prove that interest free loans given to groups/subsidiary companies is out of interest free funds available with the assessee at the relevant point of time, which is evident from the fact that when the loans and advances given in the FYs ended 31.03.2011 31.03.2012, the assessee had raised fresh funds in form of share capital of ₹ 25 Crs. and out of which, it had given loans to its groups/subsidiary companies for business purpose. Therefore, we are of the considered view that on this count also, interest disallowance made by the AO u/s. 36(1)(iii) of the Act, is not correct. Decided in favour of assessee. 2022 (2) TMI 641 Exemption u/s 11 - Donation receipt from foreign donors - belated filing of Form No.10AA - HELD THAT:- As assessee, during the course of assessment proceedings, has filed the requisite details as asked for by the AO and also produced the books of accounts which were gone through by him on test check basis. AO has not pointed out any other defect other than (a) the belated filing of Form No.10AA and (b) the sworn affidavit filed by Mr. Michael Masih, Head of Finance of the assessee Trust stating that foreign donors are not assessee instead of any of the trustees. Other than the above two objections, there is no other objection by the AO regarding any defect or any diversion of funds by the trust for the benefit of the trustees. As mentioned earlier, the trust is functioning in accordance with the aims and objectives as per its Memorandum of Association. There is no allegation of the AO that the assessee has violated in any manner regarding the non-fulfillment of the conditions prescribed u/s 12(3) of the Act after the application was accepted by the competent authority. The submission the assessee society is already registered under FCRA and is entitled to receive the foreign contribution for charitable activities and, therefore, it is out of the purview of section 2(7)/12(3) of the IT Act, 1961 could not be controverted by the ld. DR. Assessee has filed Form No.FC-III-FCRA-2010 which has been duly assessed with the Ministry of Home Affairs, Government of India. Under these circumstances and considering the fact that since the assessee, during the course of assessment proceedings, has produced the relevant details and produced the books of account which have been gone through by the AO and no other defects were pointed out, therefore, considering the totality of the facts of the case and this being a very old matter relating to AY 2004-05, the argument of the ld. DR that the matter should be remanded back to the AO for verification, in our opinion, is not justified. We, therefore, set aside the order of the CIT(A) and direct the AO to allow the exemption. - Decided in favour of assessee. 2022 (2) TMI 640 Disallowing employees' contribution to PF ESI as paid before the due date of filing of the return of income u/s. 139(1) - Scope of amendment by Finance Act, 2021, to section 36[1][va] and 43B - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee. 2022 (2) TMI 639 Direct Taxes Vivad Se Vishwas Act, 2020 - HELD THAT:- Though the process of settlement under the DTVSV Act has yet not been finalized, it is clear that the assessee does not intend to prosecute its' appeal, a statutory right granted under the Act, but to settle its' tax dispute under the said Act, having completed all the processes in this regard, viz. paying the tax; uploading Form 4 on the Revenue's E-portal, etc., as explained by Sh. Bardia. The said Act, which provides an alternate dispute resolution route for an assessee, whether as an appellant or respondent, rather itself provides for an automatic vacation of the relevant appeal on the tax dispute being settled thereunder. There was, therefore, and only understandably so, no objection to Sh. Bardia's request by Sh. Dayasagar, the Ld. CIT-DR. We accordingly have no hesitation in permitting withdrawal of the said appeal, which stands rendered not maintainable before the Tribunal, even as liberty for moving the Tribunal for restoration of the appeal is hereby granted where for any reason the assessee's application/s under the DTVs Act does not reach its logical end. 2022 (2) TMI 638 Revision u/s 263 by CIT - Denial eligibility for exemption under Explanation 3 to 2(1A) r.w.s. 10(1) - directions to treat the assessee's income arrived from banana saplings as a business activity than that derived from agricultural operations eligible for the foregoing exemption - HELD THAT:- PCIT has elucidated the detailed process in tissue culture activity which had neither been examined by the Assessing Officer nor the assessee had filed the corresponding details. We also deem it appropriate to quote that the legislative amendment made in section 263 by way of insertion of Explanation 2 in Finance Act, 2015 w.e.f. 01.06.2015 that an assessment order passed without making enquiry or verification is deemed to be an erroneous one in so far as it is prejudicial to the interest of Revenue. We thus uphold the learned PCIT's revision jurisdiction direction herein in principle. It shall however be open to the assessee to raise all factual as well as legal arguments before the Assessing Officer in support of her impugned exemption claim as per law; if so advised in consequential proceedings. The assessee fails in all of her substantive grounds. 2022 (2) TMI 637 Disallowing the EPF and ESI contribution received from the employees u/s. 2(24)(x) - Addition u/s. 36(1)(va) read with Section 2(24)(x) - delayed deposit of employees contribution to PF and ESI assessee contributing/depositing the same before the due date of filing of return of income u/s. 139(1) - HELD THAT:- As decided in Harendra Nath Biswas [ 2021 (7) TMI 942 - ITAT KOLKATA ] we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision in Vijayshree Ltd.[ 2011 (4) TMI 63 - ITAT KOLKATA] u/s.36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Appeal of the assessee. Customs 2022 (2) TMI 636 Jurisdiction - Additional Director General, Directorate of Revenue Intelligence can be treated as proper officer within the meaning of Section 2(34) of the Customs Act read with Section 28 of the said Act or not - HELD THAT:- Section 6 of the Customs Act which has been found to be the repository of power to appoint a person to exercise the power under Section 28, according to the petitioners, is not relevant insofar as the Additional Director General of DRI is concerned for the reason that he is actually an officer of Customs. What is more, according to the special leave petition, it is stated that he has been authorised by the Board within the meaning of Section 2(34). More importantly, however, when questioned in this regard, it is pointed out that Section 28(11) would come to the rescue of the petitioners for the reason that the Additional Director General will be treated as proper officer under the said provision irrespective of the requirement declared in Section 2(34) of the Customs Act. The case will stand listed on 08th March, 2022. 2022 (2) TMI 635 Maintainability of petition before the High Court - availability of alternative remedy of statutory appeal - total lack of jurisdiction on the part of the Assessing Officer in passing the O-I-O or not - HELD THAT:- It is not in dispute that the writ petition before the High Court was against the Order-in-Original (O-I-O) passed by the Assessing Officer without availing the alternative remedy of statutory appeal. Though a specific plea was taken on behalf of Union of India not to entertain the writ petition against the O-I-O without availing the alternative statutory remedy available to the Assessing Officer by way of appeal, the High Court has not at all dealt with the same in detail. It cannot be disputed that there are no specific findings given by the High Court that the Assessing Officer who passed the O-I-O lack total jurisdiction. As such it cannot be said that there was total lack of jurisdiction on the part of the Assessing Officer in passing the O-I-O. Despite the above the High Court has entertained the writ petition under Article 226 of the Constitution of India and has entered into the merits of the case though the original writ petitioner did not avail the alternative statutory remedy of appeal against the order of O-I-O. At this stage, Learned Counsel appearing on behalf of the respondents-original writ petitioners has also fairly conceded that in that view of the matter, the respondents herein - original writ petitioners may be permitted to file the statutory appeal before the Appellate Authority against the Order-in-Original to be filed within a period of four weeks subject to complying with the other requirements while preferring the statutory appeals. However, has requested to make observations that if appeal is preferred within a period of four weeks from today the same be entertained without raising the issue of limitation and it may be suitably observed that all the contentions which may be available to the respective parties are kept open. The impugned judgment and order passed by the High Court dated 9-1-2020 passed in R/Special Civil Appeal No. 12550 of 2017 is hereby quashed and set aside - Appeal allowed. 2022 (2) TMI 634 MEIS scheme - amendment in the shipping bills - rejection to grant the amendments of the shipping bills under Section 149 of the Customs Act, 1962 so as to enable the writ applicant to claim benefit under the Merchandise Exports from India Scheme - power of DGFT to carry out necessary amendments in the shipping bills - HELD THAT:- The Principal Commissioner wants the shipping bills to be looked into by the DGFT. The writ applicant has been informed to approach its jurisdictional RA, DGFT for further necessary guidance in the matter - whether to permit the necessary amendments in the shipping bills would be within the purview of the Commissioner of Customs himself and not the DGFT. It is only if the Commissioner of Customs permits such amendments in the shipping bills, then the DGFT would come into picture. It is also not clear from the impugned communications as to why such amendments have been declined. No reason has been assigned. Both the communications dated 4th November 2020 and 4th December 2020 are set aside - matter remanded to the Principal Commissioner of Customs, Mundra, Commissionerate (Kutch) to look into the issue a fresh and take an appropriate decision whether the writ applicants are entitled to claim the necessary amendments in the shipping bills - appeal allowed by way of remand. 2022 (2) TMI 633 Valuation of imported goods - Fresh Orchid Cut Flowers - enhancement of value - furnishing of NIDB data or not - speaking order in terms of Section 17(5) of the Customs Act, 1962 - Applicability of Rule 4 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - HELD THAT:- There is no such clear admission by the appellant and the so-called consent is also limited to the flower consignment imported by them with effect from the date of the letter; but however, the same was also subject to the final outcome of the decision in respect of the appeals filed by them, which means that their challenge to the adoption of the enhanced value was pending in appeal as on the date of the said letter. Vide Orders-in-Appeal, the First Appellate Authority had termed as unsustainable and set aside vide orders passed on 27.03.2013 and 29.05.2013. By this, it is evident that the so-called consent letter was not a blank cheque to be adopted universally and for all the imports the appellant could ever make. The authorities have nowhere given any acceptable reasons as to why they jumped to adopt Rule 4 ibid. and the valuation prescribed thereunder, instead of following the Rules sequentially. From the records, nowhere it is seen that the appellant was furnished with the NIDB data or whatsoever that was relied upon for enhancement of the value, for rebuttal, which is clearly in violation of the principles of natural justice. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 632 Finalization of provisional assessment - refund of the excess Duty paid - request for rectification under Section 154 of the Customs Act, 1962 - exemption Notification No. 62/2007-Cus. - HELD THAT:- It is clear that the statute mandates the passing of the final assessment since a provisional assessment will have to be taken to its logical conclusion, by passing a final assessment order after obtaining necessary information or any report or any other document that the Officer may require, as prescribed under Section 18(1) ibid. It is also for the reason that a provisional assessment is in the nature of an interim order, which is not enforceable. Otherwise, granting of time as in Section 18(4) becomes otiose. Other than this, law does not recognize any deeming fiction to treat a provisional assessment as the final one. Hence, a provisional assessment will always remain as a provisional one. The authorities below have erred in collecting the Duty at ₹ 300/- per M.T., which is clearly illegal and in violation of Notification No. 62/2007-Cus. ibid.; and secondly, the order of the Deputy Commissioner of Customs, which is treated as the Order-in-Original is clearly a non-speaking order and the same cannot be sustained. The collection of Duty, therefore, is clearly without the authority of law. Consequently, the impugned order, which has sustained the non-speaking order of the Deputy Commissioner, cannot also be sustained. The appeal is allowed by way of remand to the Original Authority with a direction to pass a speaking order, finalizing the assessments. It is also directed that relief as per Notification No. 62/2007-Cus. dated 03.05.2007 be given taking into account the test reports. 2022 (2) TMI 631 Levy of redemption fine and penalty - misdeclaration of imported goods - misuse of facilities extended to FTWZ so as to avoid customs examination of undeclared goods - contention raised by appellant in the appeal before the Commissioner (Appeals) was that when the adjudicating authority allowed re-export of the goods, there was no requirement to impose any redemption fine - mens rea against the importer existing or not - HELD THAT:- Even though there was no appeal filed by the department, after going into the merits of the case, the Commissioner (Appeals) has set aside the order passed by the adjudicating authority allowing the appellant to re-export the goods. This conclusion arrived at by the Commissioner (Appeals) to set aside the order of the adjudicating authority is highly erroneous in absence of an appeal filed by the department. The said order passed by the Commissioner (Appeals) to confiscate the goods without option to redeem the goods for re-export requires to be set aside. The Tribunal has held that when the goods are allowed to be re-exported, the imposition of redemption fine cannot sustain. In the present case, the adjudicating authority has also imposed penalty of ₹ 2 lakhs. The adjudicating authority after considering the submissions made by the appellant that the goods were intended to be supplied to another customer of another country has allowed the request for re-export. On such score, when the goods have not been intended to be imported by the appellant, no penalty can be imposed. The impugned order cannot sustain. The same is set aside - Appeal allowed - decided in favor of appellant. 2022 (2) TMI 630 Classification of goods - goods namely, API supari, chikni supari, unflavoured supari, and flavoured supari - to be classified under Chapter 21, more specifically under sub-heading 2106 90 30 or not - whether the arguments of applicants that the products intended for import by them do not merit classification under Chapter 8 of the Customs Tariff need to be rejected when the notes to Chapter 8 are read together with the relevant HSN Explanatory Notes? - HELD THAT:- Reliance placed in the Hon ble Supreme Court in COMMISSIONER OF SALES TAX, LUCKNOW VERSUS DS. BIST AND OTHERS [ 1979 (9) TMI 168 - SUPREME COURT] wherein it was held that all agricultural produce undergoes some processing on or outside the farm in order to make it non-perishable, transportable, and marketable and just because processing is a bit longer or complicated wouldn t rob the produce of its agricultural character. The observations of the Hon ble Supreme Court in the case of CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. C. EX., TIRUPATHI [ 2007 (3) TMI 6 - SUPREME COURT] that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and use is also an extension of the same line of reasoning. This decision of the Hon ble Supreme Court has been subsequently followed by the Chennai Bench of the Hon ble Tribunal in the case of AZAM LAMINATORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY (VICE-VERSA) [ 2019 (3) TMI 782 - CESTAT CHENNAI] where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and this product classifiable under sub-heading 0802 90 19 of Central Excise Tariff which is aligned with Customs Tariff. Thus, even flavoured supari merits classification under Heading 0802 of the Customs Tariff and not under Heading 2106 as argued by the applicant. Therefore, in respect of the products API supari, chikni supari, unflavoured supari, and flavoured supari, it is held that their correct classification is Heading 0802 of the First Schedule to the Customs Tariff Act, 1975 - application allowed. 2022 (2) TMI 629 Classification of imported goods - preparation/product of betel nut commonly known as Supari - API supari, Chikni supari, unflavoured supari, boiled supari and cutting supari - goods does not contain lime or katha (catechu) or tobacco but may or may not contain any other ingredients such as food starch, cardamom, copra, mulethi, menthol (flavours), perfume etc. - classifiable under the CTH 2106 90 30 as food preparation or not - HELD THAT:- The basic raw material for each of the six goods is raw betel nut, which is classifiable under Chapter 8, more specifically sub-heading 0802 80. I also note that Chapter 8 covers only edible nuts; inedible nuts and fruits being excluded by virtue of Chapter Note 1; and that betel nut/supari are masticatory. However, these items have been subjected to certain processes and added with certain materials, resulting in the question being posed whether the said processes and mixing/addition of certain materials are substantive enough to lead to the said six goods be considered as preparation of betel nut that would make them classifiable under Chapter 21 by virtue of Supplementary Note 2 of Chapter 21. Five goods, namely API supari, Chikni supari, unflavoured supari, boiled supari and cutting supari are considered together. In these cases, one set of processes are found to be intended for cleaning; the second set for enhancing preservation; and third set for enhancing appearance or presentation, which are clearly covered by the Chapter Note 3 to Chapter 8. Addition of starch would be included under such process. It is also noted that during the personal hearing, the Learned Advocate raised the contention that with the process of boiling, betel nut loses the character of being fresh dried nut, therefore, the item will not be covered under Chapter 8. In the instant case betel nuts have been boiled and then dried, the eventual state of betel nuts being indeed dried - the processes to which raw betel nuts have been subjected to obtain API supari, Chikni supari, unflavoured supari, boiled supari and cutting supari are squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Note. Therefore, at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as preparations of betel nut, which is sine qua non for a good to be classifiable under Chapter 21. Boiled supari - HELD THAT:- In a recent judgment of the CESTAT, Chennai, in the case of S.T. Enterprises [ 2021 (3) TMI 27 - CESTAT CHENNAI ], the Hon ble Tribunal has concluded that whole betel nut would not merit classification under 2106 90 30 merely on the ground that they have been subjected to boiling and drying. The Hon ble Tribunal has also observed that since the imported goods are betel nuts whole, these would merit classification under Chapter 8. In terms of terms of the provisions of the Customs Act, the decision of the Hon ble Tribunal would apply. Flavoured supari - whether the addition of special flavouring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21? - HELD THAT:- The judgment of the Hon ble Supreme Court of India in the case of CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. C. EX., TIRUPATHI [ 2007 (3) TMI 6 - SUPREME COURT ] and of the CESTAT, Chennai in the case of AZAM LAMINATORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY (VICE-VERSA) [ 2019 (3) TMI 782 - CESTAT CHENNAI ] [where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and marketed in small pouches as Nizam Pakku (in Tamil)/Betel Nut (in English), the Hon ble CESTAT held the resultant product classifiable under sub-heading 0802 90 19 of Central Excise Tariff and not under 2106 90 30 as supari for period after 7-7-2009] are relevant. Put simply, these decisions clearly imply that addition of flavouring agents do no, change the character of the goods, meaning in the present case betel nut would continue to remain betel nut and not become preparation of betel nut. Thus, the goods covered by the application are clearly not preparations of betel nuts , the submission of the applicant for recourse to General Rules of Interpretation in the event of two sub-headings being equally applicable is not relevant. Corporate Laws 2022 (2) TMI 628 Application for emergency relief with the registrar of the SIAC court of arbitration seeking interim prohibitory injunction to prevent FRL and FCPL from taking further steps in the aforesaid transaction with the Reliance group - tortious interference in the scheme for the sale of assets - HELD THAT:- If an order is passed, by the Arbitral Tribunal, in favour of FRL, then it will be difficult to initiate fresh proceedings before NCLT at that stage. It is his submission that FRL is incurring expenditure everyday and there is an imminent threat of insolvency. Any delay in the proceedings before the NCLT will have serious ramifications and virtually render the agreement between FRLReliance group redundant. Furthermore, the livelihood of 22,000 employees of FRL are also at stake. In the same breath, he has submitted that continuation of the NCLT proceedings will not adversely affect Amazon in any manner. Liberty granted to FRL to approach the High Court by filing an application seeking continuation of the NCLT proceedings beyond the 8th Stage (Meeting of Shareholders and creditors) - appeal disposed off. Insolvency & Bankruptcy 2022 (2) TMI 627 Sale of assets of Corporate Debtor during moratorium period - prohibition on Corporate Debtor only or the prohibition also operate on the RP and CoC in exercise of their duties and jurisdiction under the Code - Whether the Appellant has right to challenge the decision of the NCLT dated 11th June, 2020? - HELD THAT:- The Respondents have challenged the locus of the Appellant to file this Appeal questioning the order dated 11th June, 2020 passed by the Adjudicating Authority. The Appellant is a registered Trade Union representing 95% of the aircraft maintenance engineers of the Corporate Debtor. The Appellant s Union had submitted a claim and Respondent No.1 has admitted claim worth INR 1,525,859,239/-. The Appellant is a stakeholder in the CIRP, its claim having been admitted. The Appellant has come up in this Appeal questioning the order of the NCLT dated 11th June, 2020 by which it has granted approval to the proposal of CoC and RP to sell the subject assets of the Corporate Debtor. The Appellant being stakeholder in the CIRP has interest in the assets of the Corporate Debtor, since it is the value of assets, which will be relevant for determination of its claim either in the Resolution Plan or in the liquidation proceedings - Whether the sale is in accordance with the provisions of the Code or not is a question on merit, which we shall proceed to consider while considering the other issues as noted above. However, insofar as the submission of the Respondent that Appellant is not an aggrieved person, we do not find ourselves in agreement with the submission of learned Counsel for the Respondents. The Appellant has sufficient locus to file this Appeal. The Appellant is a person aggrieved within the meaning of Section 61 of the Code and the Appeal on behalf of the Appellant is fully maintainable. Whether the prohibition contained under Section 14, sub-section (1), sub-clause (b) is only on the Corporate Debtor or the prohibition also operate on the RP and CoC in exercise of their duties and jurisdiction under the Code? - Whether RP in exercise of power under Regulation 29 of CIRP Regulation, 2016 can sell the assets of Corporate Debtor during the currency of Moratorium declared under Section 14 of the Code? - HELD THAT:- The Moratorium which comes into operation by order of the Adjudicating Authority on the insolvency commencement date is limited to the date when Adjudicating Authority approves the Resolution Plan under sub-section (1) of Section 31 or passes an order of liquidation under Section 33. The Moratorium is to cease to have an effect from either of the above dates. Thus, the life of Moratorium is not indefinite and is limited. Normally, period of completion of CIRP is 180 days and an ultimate time limit taking into consideration including all extension is 330 days as required by Section 12, sub-section (3). The object of the Code is clearly that there should be no depletion of Corporate Debtor s assets during the CIRP - submission of learned Counsel for the Appellant relying on the above judgment of Hon ble Supreme Court is correct that there is statutory freeze when Moratorium is done under Section 14. The question to be answered is as to whether the statutory freeze, which comes into operation has any exception to it, or the prohibition contained in Section 14 is absolute - The prohibition under Section 14(1)(b) is also regarding encumbering the assets of Corporate Debtor. When Section 28(1) expressly provides for approval of Committee of Creditors for creating any security interest over the assets of the Corporate Debtor, this is a clear exception engrafted under the Code itself to Section 14(1)(b). The above scheme of the Code leads us to come to the conclusion that injunction under Section 14(1)(b) is against the Corporate Debtor, which provision does not restrain any other entity authorised under the Code to transfer, encumber or alienate the assets of the Corporate Debtor. Thus, prohibition under Section 14(1)(b) has to be read along with exceptions created in the Code itself. RP was of the opinion that sale of asset shall result in better realization of the value. In the same meeting dated 24th April, 2020, the CoC has passed Resolution, approving minimum sale consideration for the sale of two floors being 3rd and 4th floors of BKC property as INR 490 crores. The CoC although in its Resolution has contemplated for approval of NCLT for carrying out sale transaction. Thus, the condition as contained in Regulations 29, sub-regulation (2) by approval of the CoC and Section 28, sub-section (3) by minimum 66% of vote is satisfied, since the Resolution was passed by CoC with 74.45% of votes. We further notice that under Regulation 29, the jurisdiction has been given to the RP to sell unencumbered assets. Thus, the sale is permissible of only unencumbered assets. In the present case, subject property was under encumbrance, since the Corporate Debtor had taken a loan from HDFC on the security of 2nd, 3rd and 4th floors of the subject property - The prohibition under Section 14(1)(b) thus in transferring the assets of the CD is throughout the currency of CIRP except where statute specifically empowers RP to carry the sale on fulfillment of conditions as laid down in the statute. Whether decision of RP to proceed with the sale of BKC property and approval of CoC of the said proposal by its Resolution in the meeting dated 24th April, 2020 is impermissible by virtue of declaration and Moratorium under Section 14(1)? - HELD THAT:- The decision of RP to proceed with the sale of BKC property after approval of the CoC in the meeting dated 24th April, 2020 was permissible and was not interjected by virtue of declaration of Moratorium under Section 14(1)(b). Whether in view of Section 14, sub-section (1), sub-clause (c) of the Code, no Financial Creditor can foreclose, recover any debt or enforce any security interest created by the Corporate Debtor in respect of its property? - HELD THAT:- In CIRP no Secured Creditor can realize its claim or its debt due to prohibition imposed under Section 14(1)(c). The provisions of the Code and the CIRP Regulations, do not contain any exception to the effect that a Secured Creditor can be paid during CIRP process. If it is permitted, then Secured Creditors can realize their security or recover their security interest during CIRP. The Financial Creditors who are mostly the Secured Creditors shall always lean in favour of realizing their dues, adversely affecting the rights of other stakeholders, which is not permissible in CIRP. The Appellant, a stakeholder in the CIRP must have received due consideration in the final Resolution Plan approved on 22nd June, 2021, which Resolution Plan is also under challenge in separate Appeal, there are no reason to set-aside the impugned order dated 11th June, 2021 at this stage. Appeal dismissed. 2022 (2) TMI 626 Levy of penalty u/s 128 (6) of the Companies Act, 2013 - the Adjudicating Authority inferred that the suspended board of directors of corporate debtor did not maintain the records of the Corporate Debtor as mandated under the provisions of Section 128(5) of the Companies Act, 2013 - HELD THAT:- It is evident from the Impugned Order that the ex-Directors of the Corporate Debtor viz. Mr. Ashish Chaturvedi and Mr. Sanjay Kapoor were provided multiple opportunities to submit their reply when the matter was listed before the Adjudicating Authority on 25.2.2020, 30.9.2020, 19.10.2020 and 2.11.2020. But they neither filed any reply nor provided any record of the Corporate Debtor. In such a situation, the Adjudicating Authority inferred that the suspended board of directors of corporate debtor did not maintain the records of the Corporate Debtor as mandated under the provisions of Section 128(5) of the Companies Act, 2013, and after invoking the provision under Section 128 (6) of the Companies Act, 2013, a penalty of ₹ 5 lakhs each was imposed on both the Appellants. The resolution professional could not carry out his duties as required under the IBC for insolvency resolution of the corporate debtor and when the corporate debtor was sent into liquidation, the liquidator was unable to carry out the liquidation process in accordance with the provisions of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Moreover, when the Adjudicating Authority provided multiple opportunities to the Appellants to clarify their position by filing their replies in IA 1253/2020 the Appellants were totally remiss in doing so. With regard to the argument of the Learned Counsel of the Appellants that the Adjudicating Authority has imposed the penalty on the two ex-directors by invoking provisions of the Companies Act, 2013, and thus passed the Impugned Order by travelling beyond their jurisdiction, we are of the view that since the IA No. 1253/2020 was filed under the provisions of IBC, it would have served the requirement of law if any order regarding the penalty was imposed under the provisions of IBC - it would have served the cause of natural justice if the Appellants were given an opportunity to be heard before imposition of any penalty. Chapter VII of the IBC which lays down Offences and Penalties under which officers of the Corporate Debtor can be penalized and/or punished with imprisonment is relevant in this regard. It is directed that the case be remanded to the Adjudicating Authority for taking a decision under the provisions of IBC after giving an opportunity to the Appellants to present their case - petition allowed by way of remand. 2022 (2) TMI 625 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing dispute between the parties or not - arbitration settlement of disputes - Whether in view of Clause 8 of the Agreement between the parties dated 25th March, 2012 for settlement of dispute by the Court of Arbitration of Switzerland, Application under Section 9 could not have been entertained by Adjudicating Authority - in view of Section 45 of the Arbitration and Conciliation Act, 1996, whether Adjudicating Authority was obliged to refer the dispute between the parties to the Arbitration as per Agreement? - HELD THAT:- The present is a case where Operational Creditor is a company registered under the companies incorporated under the laws of Denmark and is a foreign entity, whereas the Corporate Debtor is a company registered under the Companies Act, 1956, which was within the territorial jurisdiction of National Company Law Tribunal, Mumbai. The Insolvency and Bankruptcy Code, 2016 was enacted to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons. Section 9 of the Code entitles an Operational Creditor to file Application after 10 days of the delivery of notice or invoices demanding payment. The argument, which has been raised is that in view of the arbitration clause contained in Clause 8 of the Agreement, Section 9 Application ought not to have been entertained and the matter ought to have been referred to arbitration. During the course of submission, learned the Counsel for the Appellant has also sought to raise a submission that Operational Creditor being a foreign entity, Section 9 of the Code could not have invoked. The said submission has no locus to stand and admittedly, the Corporate Debtor is a company registered under the Companies Act, 1956 and is fully covered with the definition of Section 3, sub-section (7) of the Code, which defines corporate persons , which clarifies that Application under Section 9 is fully maintainable. The question that a foreign supplier can invoke Section 9 of the code has no more res-integra in view of the judgment of the Hon ble Supreme Court in Macquarie Bank Limited vs. Shilpi Cable Technologies Limited. [ 2017 (12) TMI 850 - SUPREME COURT] where the Corporate Debtor was the corporate person within the meaning of Code and the Operational Creditor was assignee from foreign entity. The submission of Shri Kaushik that Section 9 Application was not maintainable in view of Clause 8 of the Agreement also has no merit. The Code has been given an overriding effect on other laws including any instrument having effect by virtue of such law. Admittedly, the Corporate Debtor is a company registered under the Companies Act, 1956, which is having its office in the State of Maharashtra. The Corporate Debtor cannot be heard in contending that since it entered into an Agreement with a foreign entity where clause was for settlement of dispute by arbitration under the Swiss law, Section 9 of the Code, shall be overridden by virtue of Section 45 of the Arbitration Act read with Agreement - if an Application under Section 9 of the Arbitration and Conciliation Act is filed before the Adjudicating Authority, the Adjudicating Authority shall first proceed to find out whether any default is there and in the event there is default, it will proceed to admit the Application, rejecting the prayer for arbitration. In the present case, the debt and default is fully admitted. The Adjudicating Authority has also observed that even the date of defaults has not been disputed by the Corporate Debtor by filing any reply to Section 9 Application. It is thus concluded that Application under Section 9 of the Code was fully maintainable and could not have been thrown out on the ground that there was a clause in Agreement dated 25th March, 2012. Despite there being clause of arbitration in Agreement, Application under Section 9 was fully maintainable and could be proceeded with by Adjudicating Authority - The proceedings under Code having been given overriding effect, the right to initiate Application under Section 9 shall not be taken away by the Operational Creditor by any Agreement of arbitration in the contract, when Operational Creditor elect to initiate proceedings under Section 9, it cannot be rejected. Whether there was any pre-existing dispute between the parties on account of which, the Application under Section 9 was liable to be rejected? - HELD THAT:- The dispute which has been contemplated under Section 9, which may be basis for rejecting an Application under Section 9 has to be genuine dispute. A dispute, which is invented for the purpose of case to get away from liabilities to pay debt, cannot be a dispute, on the basis of which the Application has not to be rejected. It is satisfying that there was no dispute at all prior to issuance of Section 8 notice by the Operational Creditor and there is overwhelming evidence that Corporate Debtor always acknowledged outstanding dispute and never disputed the debt or its liability to pay and now to only get away from its liability to pay its debt is making submission before us that there was pre-existing dispute between the parties - there are no substance in the contention of the learned Counsel for the Appellant that there was dispute regarding the default, hence, the Application under Section 9 ought not to have been admitted. Whether in the facts of present case, the Application under Section 9 was not maintainable, since the Corporate Debtor was a solvent Company? - HELD THAT:- The details of correspondence exchanged between the parties, which we have noticed while considering Question No.2, clearly indicate that Corporate Debtor was unable to pay its debt, which was admitted throughout and for more than three years, Corporate Debtor only requested for more time to pay the same. On the perusal of all the evidence and facts, which has emerged, we have no doubt that invocation of Section 9 IBC proceedings by Operational Creditor was in accordance with law. A Status Report has been filed by Interim Resolution Professional. The learned Counsel for the RP has submitted before us that Appellant itself has submitted twice the Resolution Plan, which could not be approved - There being debt of more that ₹ 50 crores, the Resolution Plan, which was submitted by the Appellant was only for ₹ 6.5 crores, which did not find favour with the Committee of Creditors. In the facts, which have been brought on record, there are no substance in the submission of learned Counsel for the Appellant that Application under Section 9 by the Operational Creditor was not maintainable. There are no error in the judgment of the Adjudicating Authority admitting Section 9 Application filed by Operational Creditor Respondent No.1 - appeal dismissed. 2022 (2) TMI 624 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - Appellant submits that the Claim of the 1st Respondent/Financial Creditor is not Debt in any manner, as the transaction is not a Loan Transaction - Appellant takes a plea that at the time of issuing the letter terminating the alleged understanding, the Debt was barred by Limitation - HELD THAT:- An Adjudicating Authority is subjectively satisfied as to the existence of Default and in the event of the Section 7 application being complete in all respects, then no other criteria can be looked into by the Adjudicating Authority for admitting an application under the I B Code. To put it precisely, the function of the Adjudicating Authority is to decide whether the application is complete, whether there is any Debt or Default . An Adjudicating Authority as a first step is to take necessary steps for resolution of the Corporate Debtor . An Adjudicating Authority is not a Court of Law. The proceedings under I B Code are summary in nature. A Financial Creditor is to establish the existence of the Debt and the Corporate Debtor s Default . A cumulative reading of Section 7 of the Code alongwith Rule 4(1) of the Insolvency Bankruptcy (Adjudicating Authority) Rule, 2016 exhibits that the form and manner of the application has to be the one specified - In the instant case on hand, the Corporate Debtor in its reply to CP No.1347/2019 had admitted that the Financial Creditor had paid a sum of ₹ 5,35,00,000/- on 27.10.2009 to it but the Corporate Debtor had taken a stand that no payment was ever made towards interest by it. Further, the claim of the 1st Respondent/Financial Creditor is repudiated by the Corporate Debtor by stating that the total consideration agreed to be paid for by the 1st Respondent/Financial Creditor towards the purchase of FSI and its entitlement to consume the same on the said portion was ₹ 10 crores only of which only a sum of ₹ 5,35,00,000/- was paid by the Financial Creditor to it. Even though pleas are advanced on behalf of the Appellant that for the alleged Default which occurred from the time the interest was not paid viz 2010 or 2011 and from 2009 till date the interest accrued every quarter was not paid by the Corporate Debtor and further that no action was taken, no claim was made from the company or no steps for recovery of interest was made by the 1st Respondent/Financial Creditor till 2018 when the 1st letter was issued to the Corporate Debtor demanding the amount with interest. In the instant case, the Debt of the Corporate Debtor is supported from the confirmation of accounts dated 01.04.2011, 01.04.2017 and 01.04.2018. Further, on 13.04.2018 the 1st Respondent/Financial Creditor had called upon the Corporate Debtor to repay the facility availed and that the Corporate Debtor had through a Reply dated 07.06.2018 had mentioned that the sum of ₹ 5,35,00,000/- was only provided as an advance for acquiring from the Corporate Debtor Floor Space Index of 15,500 sq mtrs etc. and not as loan. The 1st Respondent/Financial Creditor through its letter dated 28.03.2019 had reiterated that the sum in question was an advance as and by way of loan and that the same was repayable on demand alongwith interest @ 18% on quarterly rests. As such, the Section 7 application filed before the Adjudicating Authority in CP No. 1347/MB/CII/2019 (NCLT Mumbai Bench II) is well within the period of limitation. Keeping in mind the attendant facts and circumstances of the instant case in a conspectus fashion and also this Tribunal on going through the impugned order passed by the Adjudicating Authority comes to a resultant conclusion that the admission of Section 7 application by the Adjudicating Authority is free from any flaws - Appeal dismissed. 2022 (2) TMI 623 Liquidation proceedings - Period of limitation - Auction of property of the corporate debtor - seeking time extension in complying with auction proceedings' completion, under Rule 11 of the NCLT Rules, 2016 - HELD THAT:- Undisputedly the Appellant had emerged as the successful bidder in the auction proceedings for the Pondicherry unit with a bid of ₹ 3.3 crores. The Liquidator had issued a letter of intent on 5 March 2021, stipulating 90 days timeline for making the full payment to complete the auction proceedings. The said 90 days was to expire on 3 June 2021. However, the Appellant had preferred IA 3377 of 2021 on 25 May 2021, i.e. before the expiry of the timeline provided for depositing the bid amount. In the instant case, the Appellant, i.e. successful auction purchaser by filing IA 3377 of 2021 dated 25 May 2021, sought an extension of 90 days for making the full payment to complete the auction proceedings. However, before the expiry of the 90 days timeline, the appellant/applicant filed the said Application on the ground of Regulation 47 A of Liquidation Process Regulation, 2016. 25. Regulation 47 A was brought by the amendment in liquidation process regulation by Government Notification dated 20 April 2020 with retrospective effect from 17 April 2020. This Regulation provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of the timeline for any task that could not be completed due to such Lockdown in relation to any liquidation process - It is pertinent to mention that the Government of India vide notification dated 20 April 2020 brought similar notification 40 C, as a special provision relating to the timeline under the Insolvency Resolution Process Regulation 2016. Accordingly, this Regulation was effective with effect from 29 March 2020. In the instant case, the applicant had sought an extension of 3 months on the ground of the 2nd wave of the Covid 19 outbreak. The applicant stated that Lockdown had been imposed in Tamil Nadu since 10 May 2021 because of the 2nd wave of Covid 19. Regulation 47 A provided that the period of Lockdown imposed by the central government in the wake of the Covid 19 outbreak shall not be counted for computation of timeline for any task that could not be completed due to Lockdown in relation to any liquidation process. Although, the applicability of Regulation was dependent on the Lockdown declared by the Central Government - the relevance of Regulation 47 A in the instant case because Lockdown was declared by Tamil Nadu State and not the Central Government is under doubt. It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a time-bound manner. In exceptional circumstances, such a time limit can be extended. The Adjudication Authority did not consider that satisfaction of creditor claims while ensuring asset maximisation is the underlying principle of the IBC, which cannot be overridden on account of meagre delays induced by a force majeure event - It is further necessary to point out that the respondent liquidator has in its reply affidavit admitted that it has received two remittances of ₹ 3,39,02,732 on 8 September 2021 and 9 September 2021 respectively towards the bid consideration along with up-to-date interest at the rate of 12% till the payment was received in respect of any auction held on 2 March 2021 for Pondicherry unit of the corporate debtor. The appeal is allowed. 2022 (2) TMI 622 Approval of Resolution Plan - HELD THAT:- Since the Resolution Plan, which is under challenge in the present Appeal, is still under consideration before the COC, this Appeal has become infructuous in the circumstances. In the present Appeal, the Appellant had challenged the approved Resolution Plan on the ground that COC ought to have considered the 2nd settlement proposal of the Appellant during the pendency of IA No. 449 of 2021. Based on the application of the promoter, the Adjudicating Authority had directed the COC to consider the 2nd settlement plan. The said Order was challenged in Company Appeal (AT) (insolvency) No. 370, 376-377 and 393 of 2021. These Appeal has been allowed by this Appellate Tribunal and impugned Order dated 19 May 2021 directing the Administrator of the DHFL to place the 2nd settlement proposal of Kapil Wadhawan before the COC for consideration decision, and voting has been set aside - Therefore, this issue does not remain pending for our consideration in the present Appeal. Appeal disposed off. PMLA 2022 (2) TMI 621 Money Laundering - Seeking vacation of property - Attachment of property - notice for vacating the property was issued to the petitioner without providing any opportunity - violation of principles of natural justice - HELD THAT:- The subject property was attached after confirmation by the Adjudicating Authorities under Section 8 (3) of the Act. Once the Adjudicating Authorities confirmed the attachment under Section 8(3) of the Act, then the authorities are empowered to take possession of the property. In this context, the impugned order has been issued. Thus, there is no infirmity in respect of the order passed by the 3rd respondent - Opportunity of hearing is contemplated both under Section 8 as well as Section 9 of the Act. Under Section 8(2) proviso clause, it is stated that, if the property is claimed by a person, other than a person to whom the notice had been issued, such person shall also be given an opportunity of being heard to prove that the property is not involved in money-laundering . When the proviso clause contemplates an opportunity to a person interested, in the present case, undoubtedly, the petitioner is a person interested as he claims that he had purchased the property from the owner and the Civil Suit instituted by him was also ended in his favour. However, the appeal suit is pending - the authorities ought to have provided an opportunity to the petitioner to submit all the documents enabling him to establish his case and thereafter take a decision for the purpose of proceeding with the matter. Contrarily, the respondents admitted the possession of the petitioner in the subject property. The respondents in the present case directly issued a notice of eviction asking the petitioner to vacate the premises and hand over possession within seven days from the date of receipt of a copy of the notice. Thus, valuable opportunity of defence has been denied to the petitioner and even under the principles of law such an opportunity cannot be denied - the order impugned has been passed in violation of principles of natural Justice. The 3rd respondent is directed to issue a fresh notice to the petitioner setting out the facts and circumstances, as well as the allegations within a period of four weeks from the date receipt of a copy of this order - Petition allowed by way of remand. 2022 (2) TMI 620 Money Laundering - Maintainability of petition - invocation of inherent jurisdiction of this Court - abuse of official position by not taking proper care and precaution in verifying the entries and bills - offences or not - HELD THAT:- The Orissa High Court in SMT. JANATA JHA AND ANOTHER VERSUS ASSISTANT DIRECTOR, DIRECTORATE OF ENFORCEMENT, GOVERNMENT OF INDIA AND ANOTHER. [ 2013 (12) TMI 1588 - ORISSA HIGH COURT] has not held that the petitioner under Section 482 Cr.P.C. is not maintainable as the petitioners of that petition have not availed the remedy of revision, rather it has been observed that for quashing the proceeding initiated under the Act, 2002 the High Court may examine as to whether the inherent powers are to be invoked or not - the inherent jurisdiction of this Court enshrined under Section 482 Cr.P.C. may be invoked and, therefore, the present petition is maintainable. As per provision of Section 44 (1) of PMLA Act, further investigation is permissible but that may be conducted to bring any 'further evidence', oral or documentary, against any accused person involved in respect of offence, for which, the complaint has already been filed, whether he is named in the original complaint or not - So as to examine the authenticity or legality of the impugned Supplementary Prosecution Complaint in the instant case, this Court has to examine as to whether the Supplementary Prosecution Complaint has been filed on the basis of any 'further evidence' . On the basis of material available on record, the prosecution has not considered any 'further evidence' , rather the statements of various persons, which have been recorded under Section 50 of the Act, 2002 prior to the date when the first complaint was filed on 30.06.2018, have been considered. The question as to whether the allegation of abuse of official position by not taking proper care and precaution in verifying the entries and bills would be treated as an offence under the Act, 2002, may be considered after exchange of affidavits - the impugned Supplementary Prosecution Complaint against the petitioner alleges the same allegation as has been levelled by the C.B.I. At running page 133 of the petition, the conclusion of investigation by the ED has been indicated verbatim the same allegation with the same language has been levelled which has been levelled by the C.B.I. Since the impugned Supplementary Prosecution Complaint was filed before the learned trial court of ED, therefore, before taking cognizance on the aforesaid Supplementary Prosecution Complaint the provisions of Section 44 (1) (ii) of the Act, 2002 should have been considered. The learned trial court must ask from the prosecution as to what 'further evidence', oral or documentary has been collected after filing the first prosecution complaint to prosecute the petitioner in the present case inasmuch as the further investigation may only be conducted to bring any 'further evidence', oral or documentary, against the accused person - In the present case, the learned trial court of ED vide the impugned order dated 11.08.2021 (Annexure No.6) has taken cognizance against of the second Supplementary Prosecution Complaint and issued summon against the petitioner without adverting to the relevant factual and legal aspects. List this petition in the week commencing 29.11.2021 as fresh. Service Tax 2022 (2) TMI 619 Jurisdiction - legality of powers bestowed upon the DGGSTI, vide serial No.4 of the Notification No. 14/2017 - seeking declaration that Section 66E(e) of the Finance Act, 1994 as violative of Articles 14, 19(1)(g) and 265 of the Constitution of India - HELD THAT:- Issue notice. Mr.Dhawal Uniyal, Advocate accepts notice on behalf of Respondent No.1 and Mr.Satish Kumar, Senior GSC accepts notice on behalf of Respondents No.2 to 6. They pray for and are permitted to file their counter affidavits within four weeks. Rejoinder affidavits, if any, be filed before the next date of hearing. List on 11th April, 2022 along with connected matters. Central Excise 2022 (2) TMI 618 Maintainability of application - availability of statutory remedy of appeal - appealable order or not - waiver of condition of pre-deposit - section 107 of CGST Act - grievance redressed by the writ-applicants is that instead of rewarding him, the Department has gone to the extent of holding the writ-applicants liable for such evasion by virtue of the impugned order passed by the Commissioner, CGST CEX, Gandhinagar - HELD THAT:- The impugned order passed by the Commissioner, CGST CEX, Gandhinagar is an appeal-able order under Section-107 of the C.G.S.T. Act. As a statutory remedy of appeal is available to the writ-applicants, this writ-application need not be entertained - It appears that the present writ-application has been filed only with a view to overcome the 10% of the pre-deposit. According to Mr. Dave, his client is an ordinary man and would not be in a position to even deposit ₹ 4,00,000/- towards 10% of the total demand. It is always open for the writ-applicant to prefer an appropriate application before the appellate authority with a prayer that the condition precedent of 10% of pre-deposit may be waived. If any such application is filed, the appellate authority shall look into all the relevant aspects of the matter including the entire background of the writ-applicant and take an appropriate decision on such application. It is kept open for the writ-applicant to challenge the same once there is a final adjudication as regards his liability to pay the amount of penalty - application disposed off. 2022 (2) TMI 617 CENVAT Credit - Bagasse - exempt goods or not - use of both dutiable and exempted final products - non-maintenance of separate accounts for the receipt, consumption and inventory of inputs meant for use in the manufacture of both dutiable and exempted final products - Rule 6 (3) and Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A (1) of Central Excise Act, 1944 - whether the appellants are liable to pay 6% / 7% of the value of Bagasse sold by them for consideration? - HELD THAT:- The Hon ble Supreme Court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] had an occasion to consider the very same issue wherein it has been held that Since it is not a manufacture, obviously Rule 6 of the Cenvat Rules, 2004, shall have no application as rightly held by the High Court. - Since Bagasse is held not to be result of any manufacture. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 616 SSI Exemption - use of brand name of others - allegation is that use of brand name Le Royal Meridien and were clearing cakes, cookies and pastries without payment of duty by claiming the exemption under Notification No.8/2003-CE dated 01.03.2003 - appellant has entered into an agreement with M/s.Le Royal Meridien and Meridien SA and by such agreement, the appellant has been licensed to use the brand name of Le Royal Meridien - HELD THAT:- The very same issue was considered, analyzed and discussed in the appellant s own case for a different period in M/S. APPU HOTELS LTD. SHRI A. SENNIMALAI VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI I [ 2018 (7) TMI 241 - CESTAT CHENNAI] wherein the Tribunal held The appellants have entered into an agreement with Meridien SA dated 12.4.2000 by which they have acquired the brand name Le Royal Meridien . They have been given the exclusive right to use the brand name till the expiry of the agreement. Therefore, it cannot be said that they are using the trademark of another person. The demand cannot sustain - Appeal allowed - decided in favor of appellant. 2022 (2) TMI 615 Area Based Exemption - manufacture taking place or not - goods cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate - whether the appellant had undertaken any other process or processes amounting to manufacture in the State of Uttarakhand or Himachal Pradesh, which is a condition contemplated in paragraph 4 of the exemption notification? - HELD THAT:- It clearly transpire from the aforesaid General Explanatory Notes that the preparations (e.g. varnish), which are suitable for other uses in addition to use as varnish (that is applied on wood) are classified as cosmetics under Chapter 33 only when they are - (a) in packings of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as cosmetics; or put up in a form clearly specialized to such use (e.g. nail varnish put up in small bottles furnished with the brush required for applying the varnish). Thus, it is more than apparent that the colour solution supplied in 20/50 Kg drums from Fiabila cannot be regarded as nail enamel - The packing of nail enamel as contemplated in HSN General Explanatory Notes and the Cosmetics Act has special significance, as without the goods being packed in the specified packing they will not be classifiable or commercially known as nail enamel. The nail enamel takes its name, character and use as such only after being packed in the manner provided. A conjoint reading of the definition of manufacture in section 2(f) (iii) of the Excise Act and Chapter Note 5 of Chapter 33 of the First Schedule to the Excise Act and the aforesaid treatment adopted on the goods (colour solution) by the appellant would render the product marketable to the consumer as nail enamel and, therefore, the appellant would be covered by the exemption notification dated 10.06.2003 since the appellant has adopted such a treatment to the goods that rendered them marketable to the consumer. It is, therefore, not possible to accept the contention advanced by learned authorised representative appearing for the Department that the only change brought about by the appellant when the colouring matter is mixed to a solvent is to reduce the viscosity and this would not amount to manufacture - It cannot also be accepted that when the resultant product achieves superior quality, a new product marketable to the consumers as nail enamel does not come into existence as in the present case it has been found as a fact that a new marketable product comes into existence. The appellant would, therefore, clearly be entitled to the benefit of the area based exemption notification dated 10.06.2003 - Appeal allowed - decided in favor of appellant. 2022 (2) TMI 614 CENVAT Credit - credit availed by the respondent denied for the reason that the declared registered factory premises of the so called manufactures were non-existent and these manufacturers were either not working or working on papers only - burden to prove - HELD THAT:- The Commissioner (Appeals), as can be seen from the order, even after accepting that the invoices had been issued fraudulently still proceeded to grant relief to the respondent by holding that they were not bogus or fake and, therefore, CENVAT credit taken on the basis of such invoices are admissible. This finding is contrary to the factual position emerging from the records. M/s Aditya Enterprises was not in existence; M/s Shree Ram Engineering Casting was not a manufacturing unit and in fact was engaged in construction of residential apartments; and M/s Ganesh Udyog and M/s L.S. Construction were not found on the mentioned address. It is clearly established that neither these firms were engaged in the manufacture of goods nor they had sold or cleared the goods but had generated invoices only for the purpose of passing CENVAT credit - It is also difficult to accept the finding of the Commissioner (Appeals) that the respondent was not a party to the fake transactions. It is only the respondent who was to gain by adoption of such a mode and, therefore, the conclusion that even though only invoices were received by the respondent without the goods, the respondent had no role to play is perverse. The two decisions in GIAN CASTINGS PVT. LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH [ 2015 (11) TMI 1096 - CESTAT NEW DELHI] and DUTT MULTIMETALS PVT. LTD. VERSUS C.C.E., CHANDIGARH-I [ 2016 (11) TMI 1329 - CESTAT CHANDIGARH] rendered by learned single members do not help the respondent. In these cases there was no evidence, whereas in the present case there is enough evidence on the record to establish that fake invoices were issued only to benefit the respondent. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2022 (2) TMI 613 Best judgement assessment - defects found on verification of accounts - whether the the best judgment assessment made on the basis of the electricity consumption vis-a-vis determining the input-output ratio, was relevant or not? - levy of penalty under Section 12(3)(b) of the TNGST Act, 1959 at 150% of the difference between the tax assessed and tax paid, which was nil - HELD THAT:- On going through the orders of the lower authorities, viz., Assessing officer, First Appellate Authority and Tribunal, we find a consistent view that the books of accounts of the petitioner suffers from defects and not reliable and therefore, warrant a best judgment. While the First Appellate Authority has proceeded to reject the estimation on the basis of electricity consumption, but found that the books of accounts suffer from defects warranting best judgment assessment. The Tribunal has however restored the best judgment assessment made on the basis of the electricity consumption and its bearing on the input-output norms, besides rendering a finding that the books of accounts of the petitioner was not reliable for the various defects. There appears to be divergents views insofar as the question as to whether the consumption of electricity can constitute the sole basis for making a best judgment assessment. However, in the present case, the best judgment assessment was not only necessitated by the survey report/case study on electricity consumption vis-a-vis production of jelly, but also the fact that the books of accounts maintained by the petitioner suffered from defects as set out above, which even according to the First Appellate Authority, required the best judgment assessment - A best judgment assessment necessarily involves an element of guesswork and is a matter of discretion to be exercised by the Assessing Officer and exercise of such power ought not be interfered with lightly unless and until the Court is of the view that the discretion/power of best judgment is exercised in a arbitrary and capricious manner. Any best Judgment assessment is likely to be an over-estimate or an under-estimate, but that itself does not supply a reason or ground for interfering with the same. Levy of penalty - HELD THAT:- The assessing officer had levied penalty on the entire turnover arrived at on the best judgment assessment and the same was restored by the Tribunal, by the order impugned herein. Whereas, Explanation to Section 12(3)(b) of the TNGST Act, 1959 provides for certain deductions, while assessing tax at the time of final assessment, for the purpose of determining the quantum of penalty, as can be seen from the extract of the Explanation to Section 12(3)(b) of the TNGST Act, 1959 - the Explanation has been completely overlooked by the lower authorities including the Tribunal and hence, the matter has to be remanded to the Assessing Authority to re-work the quantum of penalty alone, taking into account the Explanation to Section 12(3)(b) of the TNGST Act, 1959 with respect to the eligible deductions and after providing reasonable opportunity of being heard to the petitioner. The order impugned herein stands set aside and the matter is remanded to the third respondent / Assessing Authority, who shall complete the said exercise within a period of three (3) months from the date of receipt of a copy of this order - Petition allowed by way of remand. Indian Laws 2022 (2) TMI 612 Dishonor of Cheque - existence of legally enforceable debt or not - rebuttal of statutory presumption - cheque being lost by the accused - Section 138 and 139 of the NI Act - HELD THAT:- To take the cognizance under Section 138 of the NI Act the amount should be legally enforceable debt and the complainant except the oral statement of CWs 1, 2, 3, cheque and bank return slip on the ground of Drawer s Sign Mismatch has not produced any other evidence which would strengthen the case of the complainant in view of the defence taken by the accused. The defence runs around the cheque being lost by the accused and the GD entry. While initiating the said criminal proceeding before the trial court nothing prevented the complainant to place on record documentary evidence with regard to the transaction to say legally enforceable debt - This court has no hesitation to draw an inference that the complainant failed before the court for not placing any document to establish the transaction between the complainant and the accused herein. CW3 at one point of time says that he does not know Pintu Saha and later he says Pintu Saha was also present along with him in the shop of the complainant when transaction has taken place. The evidence of CW3 is inconsistent and the evidence appears to be fishy. Mr. Pintu saha who was shown as witness by complainant was not examined before the trial court. There are several laches on the part of the complainant and the order of the trial court and lower appellate court not considering the fact of cheque being lost and GD entry made before the police station Exhibit B cannot be appreciated and this court has no hesitation to set aside the Judgment order passed by the trial court and further order of the lower appellate court confirming the order of the trial court is also set aside - Petition dismissed. 2022 (2) TMI 611 Disciplinary complaint / proceedings against the member of ICAI - Validity of proceedings of the 38th meeting of the Board of Discipline of the respondent, wherein, the said committee accepted the report of the prima facie opinion of the Director Discipline in the matter of complaint made by the petitioner against the respondent 4 under Section 21 of the Chartered Accountants Act, recommending / passing the order for closure of the case - HELD THAT:- The petitioner on account of certain personnel vengeance started accusing the authorities of the Chartered Accountants of India and filed a complaint with incorrect facts. Even then the complaint was enquired into by the competent authority, namely, the Director Discipline and an opportunity was provided to the petitioner to establish his case. Thereafter, an enquiry report was filed. Based on the enquiry report, the Board of Discipline has taken a decision. Thus, there is no infirmity as such and the Writ Petition itself is motivated and therefore liable to be rejected. A perusal of the enquiry report as well as the order reveals that several allegations have been made against the 4 th respondent and the authorities of Chartered Accountants of India. No doubt, the Director Discipline has relied on the apology letter given by the petitioner. In respect of the apology letter, the petitioner in his affidavit has stated that the compromise discussion were going on between the parties and during the discussion the petitioner was made to believe that the criminal case as well as the defamation case will be withdrawn and he will be be taken back as a faculty - The rejoinder filed by the complainant were also recorded in the report. But, there is no findings or reasons for the purpose of forming an opinion to close the complaint. Merely recording that the complainant has not submitted the evidence is insufficient and the documents filed by the petitioner as well as the statement are to be scrutinized, considered and appropriate findings are just and necessary, which alone will satisfy the requirements of the fair enquiry to be conducted in accordance with law. The seriousness involved must be properly considered with reference to documents and evidences made available before the Director Discipline. Contrarily, by recording complaint and the written statement, the Director Discipline ought not to have formed an opinion that the complainant made a report without any evidence. The petitioner produced the evidence, contents in the documents with regard to the grounds raised - In the absence of any such findings, the Court has to form an opinion that based on an improper enquiry the complaint was closed. Though there is an allegation of bias, malafide, etc,. This Court is not inclined to go into those issues at this point of time as the same would not be necessary as this Court has not inclined to adjudicate the factual merits of the allegations and the counter allegations set out in the Writ Petition. Thus, it has to be construed that the complaint filed by the petitioner was not enquired into properly and by following the established principles of law. The nature of the allegations set out in the complaint by the petitioner, the evidence submitted as well as the statement made are not elaborately adjudicated or any findings are given by the Director Discipline in his enquiry report - reasons and the findings in respect of each issue or allegations made are necessary to form an opinion that the enquiry was conducted in a proper manner. This Court has no hesitation in forming an opinion that the case deserves to be remanded back to the Disciplinary Authority for conducting a fresh enquiry - Petition allowed. 2022 (2) TMI 610 Dishonor of Cheque - insufficiency of funds - discharge of legally enforceable debt and lawful liability or not - existence of vicarious liability or not - Section 138 of NI Act and Section 141 of the NI Act - HELD THAT:- The complaint was filed by the 2nd respondent showing the accused as proprietors/partners of M/s.Ayyappa Traders under Section 138 read with 142 of NI Act. With regard to the 2nd petitioner, he was shown as partner of M/s.Ayyappa Traders. It was not mentioned whether the 3rd petitioner was a firm or proprietary concern and what was the status of the 1st petitioner A1, whether he was a proprietor or partner. The cheques were alleged to be issued by A1 on behalf of the firm as per the complaint. But the copy of the cheques filed would disclose that they were signed by A1 as the proprietor for Ayyappa Traders. The petitioners filed the income tax returns of the 1st petitioner for the assessment year 2011-12 wherein he was shown as the Proprietor of Ayyappa Traders - The 2nd respondent - complainant failed to file any documentary evidence to show that the 3rd petitioner was a partnership firm. As the person who issued the cheque was the Sole Proprietor of M/s.Ayyappa Traders, he alone was liable for dishonour of cheque under Section 138 of NI Act. As the provisions of Section 141 of the NI Act would not apply in the case of a sole proprietorship concern and that it would be restricted to a duly incorporated company or a Partnership firm or an association of persons, the 3rd petitioner M/s.Ayyappa Traders also need not be shown as an accused. In the case of a sole proprietary concern, there are no two persons in existence. Therefore, no vicarious liability would arise on any other person. As such, the complaint filed by the 2nd respondent was not maintainable against the petitioners No.2 and 3. However, as the 1st petitioner is liable for dishonour of the cheques issued by him, the petition is partly allowed quashing the proceedings against the petitioners 2 and 3 and permitted to be allowed to continue against the petitioner No.1 in the capacity of the Proprietor of M/s.Ayyappa Traders. The Criminal Petition is partly allowed.
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