Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 19, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Exemption from GST - leasing of residential premises as hostel to students and working professionals - It evident that the expression 'residence' and 'dwelling' have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression 'residential dwelling' and it cannot be held that the same does not include hostel which used for residential purposes by students or working women. - The petitioner is held entitled to benefit of exemption notification. - HC
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Exemption from GST - Seeds - seeds received, processed, packed and returned by the Applicant, as job worker, as seeds for sowing are 'agricultural produce' - - Supply of seed does not fall under the definition of agricultural produce as the seed does not fulfill the utilities prescribed therein - Similarly the said definition restricts the ‘agricultural produce’ to unprocessed goods. Further even if ‘processing’ is done it should be ‘such processing’ as done by a ‘cultivator’ for ‘primary market’. Essentially processed agricultural products do not fall under this definition. - No Exemption from GST - AAR
Income Tax
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Income accrued India - applying the tax rate as per section 115A OR tax rate as per the DTAA between India and Spain - in all cases of concessional taxation on gross receipt or revenue basis, splitting of total receipt into reimbursement or revenue, remains neutral to its chargeability. Both such cases, invariably warrant inclusion of the receipt in the revenue base for taxation so long as the receipt is relatable to costs incurred contributing to the earning of the revenue. An assessee cannot be permitted to opt for concessional rate of taxation on gross receipt basis and then claim that some part of the receipts should be left out by describing it as reimbursement. It is patently an absurd proposition. - AT
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Commission income belonged to the HUF or assessee - Referring to TDS Certificate issued by Ajnara India Ltd. showing TDS on commission paid to HUF of the assessee and bank account of the HUF of the assessee with Oriental Bank of Commerce, wherein commission has been deposited after TDS. - Considering all we are of the considered opinion that the commission income belonged to the HUF and rightly returned by it. Therefore, correct hand for taxing such income is HUF and not the assessee. - AT
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Disallowance towards Employees contribution to EPF/ESIC which was deposited belatedly but before the time limit prescribed u/s. 139(1) - Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly apply in relation to assessment year 2021-2022 and subsequent assessment years. Since the assessment year under consideration, namely, 2018-19 is anterior to the amendment carried out with effect from A.Y. 2021-22, we hold that the position of law as set out by various Hon'ble High Courts squarely applies to the facts and circumstances of the instant case - AT
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Receipt from transfer of Carbon Emission Reduction ("CER") - carbon credits are not offshoot of business but offshoot of environmental concerns and hence not chargeable to tax. The receipts arising from transfer of carbon credits are in the nature of capital receipts not subjected to tax in terms of section 28(iv) read with section 2(24)(vd) of the Act. - AT
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Addition made on account of informer information expenses - Additions u/s 69C - In this case, details of informants have to kept secret and the assessee has supplied enough information to substantiate the actual payment but only kept the identity of the informants. After going through detailed finding of the Ld.CIT(A) we do not find any reason to interfere with the finding of the Ld.CIT(A) - CIT(A) rightly deleted the additions - AT
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Revenue recognition - Acceptability of correct method of accounting as per accounting standard and revised guidance note - As stated earlier the Accounting standards and guidance notes are applied to present the financial statement reliably and for consistency. Certainly not for filing return of income. In the given case assessee is an LLP and no doubt accounting standard and guidance note is applicable to the assessee, however, the revenue sharing method and revenue declared by the assessee as per JDA are not based upon the project completion rather it depends upon the gross sales effected by the TATA Housing Development Company Ltd. Therefore, as per the facts on record the GN–2012 has no application to the case of the assessee. - AT
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Addition of share premium received on issue of equity shares u/s.56(2)(viib) - shares were issued to its sister’s concern only and the transactions are between two closely held companies and it cannot be classified or equated to generations/circulations of unaccounted money. - No additions - AT
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Legality and validity of the order passed by the Income Tax Appellate Tribunal - Approval of resolution plan for insolvency - If the Revenue is dissatisfied in any manner with the sanctioning of the Resolution Plan by the NCLT, then liberty may be reserved in favur of the Revenue to prefer an appeal under Section 61 of the Code, 2016 before the NCLT. - HC
Customs
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Seeking direction to respondents to register duty credit scrips issued under Merchandise Exports from India Scheme (MEIS) and Rebate of State and Center Taxes and Levies (ROSCTL) - the respondents-authorities have chosen to withdraw the benefit which, at one stage, had been conceded to by them in the earlier writ petition. The said proceedings are binding on the petitioner as well as the respondents and thus, once the respondents-authorities had chosen to issue the scrips then the non-registering of the same cannot be justified. - HC
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Jurisdiction - scope of the subject offence was not limited to the one within SEZ but also an offence of smuggling dutiable goods from a territory outside India into the Indian Customs territory - whether the authorities under the Customs Act enjoy jurisdiction over SEZ units? - From the above well founded orders/decisions, we have to accept that the benefit of the interpretations, drawn consistently by various Benches, are in favour of the tax payer/ appellants herein, in these batch of cases - AT
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Rejection of conversion of free shipping bills to advance authorization shipping bills - Section 149 is a provision which permits the importer / exporter to request for amendment of documents for the mistakes that may have happened while filing the documents. When an application for amendment is received, if it is very much clear from the documents that the mistake was only an inadvertent mistake and there is no attempt of fraud or mis-statement to evade duty, the request for conversion ought to be allowed - AT
Indian Laws
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Exemption from payment of electricity duty, post 01.09.2016 or not - The exemption provision need to be interpreted literally and when the language used in exemption provision is simple, clear and unambiguous, the same has to be applied rigorously, strictly and literally. Under the 2016 Act, charitable education institutions running the schools or colleges are specifically excluded from the exemption clause/exemption provision, Section 3(2). - SC
IBC
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Maintainability of application - initiation of CIRP - The present is a case where we are satisfied that there is no dispute, in fact, prior to issuance of Section 8 notice. - We are fully satisfied that present is a case where Corporate Debtor is trying to raise illusory dispute and in fact no dispute existed. The Corporate Debtor cannot be allowed to raise bogy of disputes to save it from its liabilities and the debt under Section 9. - AT
Service Tax
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Classification of services - Business Auxiliary services or not - The agreement between the shop owners and the assessee provided that the shop owner would pay facilitation fees per season to the corporation on the condition that the tourist buses of the corporation would stop at the showroom of the shop owners for the purpose of shopping by the tourist travelling in palace on wheels. It was thus a clear case of promotion of sale of the goods of the shop owners or the showroom owners, as the case may be. - HC
Central Excise
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Delay in adjudication of SCN - show-cause notice has not been adjudicated upon for about 16 years - It is not expected from the assessee to preserve the evidence/record intact for such a long period to be produced at the time of hearing of the Show-Cause Notice. The Respondent having issued the Show-Cause notice, it is their duty to take the the said Show-Cause notice to its logical conclusion by adjudicating upon the said Show-Cause Notice within a reasonable period of time. In view of the the gross delay on the part of the Respondent, the Petitioner cannot be made to suffer - Hearing of Show-cause notice belatedly is in violation of natural justice. - SCN Quashed and set aside - HC
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Refund of amount of mandatory pre-deposit - adjustment/set off the amount of refund against the arrears towards assessee - There exist no other provision in the Act which enables the Revenue to adjust the amounts due to them as against the amounts due by them to the assessee - The Department can proceed against the assessee to recover the amounts due to them under the provisions of the Act but the refund to which assessee is entitled has to be sanctioned and disbursed in his favour - AT
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CENVAT Credit - manufacture of dutiable as well as exempted products - The SCNs in these appeals were issued proposing to recover under Rule 14 of CCR an amount to fulfill obligations under Rule 6(3). A plain reading of Rule 14 shows that it does not empower the Revenue to compel the manufacturer to maintain separate accounts or to pay an amount equal to 10% of the value of the exempted goods. - The demands in the show cause notices under Rule 14 of the Cenvat Credit Rules, 2004 of an amount equal to 10% of the value of exempted goods Rule 6 (3) are not sustainable in law at all and, therefore, none of the demands could have been confirmed as the lack any legal basis. - AT
VAT
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Levy of penalty - tax and interest imposed by the petitioner- Assistant Commissioner Commercial Tax has been upheld - Form-C found to be fake and forged - The penalty was rightly imposed upon the Assessee by the Authorities as he (Assessee) furnished inaccurate particulars and he also concealed the transactions of sale and purchase to avoid the payment of Tax. Therefore, the Assessee is liable to pay penalty u/s 61 of the RVAT Act, 2003. - HC
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Whether the tax which has been deposited by the applicant proof of the same were already on record the Tribunal was justified even in not giving the benefit of the same? - The State is not an unscrupulous tax collector. In face it accounts for every rupee that the tax payer deposits with it. Merely because the assessee-revisionist may not have claimed the deposit in the original returns would be of no consequence as to computation of outstanding demand - Against the Tribunal has erred in refusing to allow such verification exercise. Accordingly the question of law is answered in the negative and in favour of the assessee-revisionist and against the revenue. - HC
Case Laws:
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GST
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2022 (2) TMI 782
Rectification of mistake - petitioner seeks an order and direction against the respondent nos. 2 and 3 to allow the petitioner to rectify inadvertent mistake in mentioning incorrect place of supply - period from February, 2018 to June, 2018 and October 2018 - HELD THAT:- This Court in an identical matter passed an order in M/S. MAHLE ANAND TERMAL SYSTEMS PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2022 (2) TMI 609 - BOMBAY HIGH COURT] and has directed the authority to consider the representation made by the petitioner. In this case, the representations are made by the petitioner on 8th July, 2021 and 20th July, 2021. The said representations are still pending. The respondent no.4 are directed to decide those representations within eight weeks from today in accordance with law after considering the judgment of the Madras High Court in case of PENTACLE PLANT MACHINERIES PVT. LTD. VERSUS OFFICE OF THE GST COUNCIL, NEW DELHI, OFFICE OF THE ASSISTANT COMMISSIONER (ST) , PALLAVARAM ASSESSMENT CIRCLE, CHENNAI, OFFICE OF THE SUPERINTENDENT OF CENTRAL TAX, OFFICE OF THE SUPERINTENDENT, CENTRAL GOODS SERVICE TAX, RANGE V,U.P. [ 2021 (3) TMI 524 - MADRAS HIGH COURT] and applicability of the Circular bearing no. 26/26/2017 GST dated 29th December, 2017. The order that would be passed by the respondent no.4 shall be communicated to the petitioner within one week from the date of passing the order. If the representations made by the petitioner are allowed, the respondent no.4 shall permit the petitioner to carry out rectification in the GSTR-1 in question within one week from the date of the said order. Writ Petition is allowed.
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2022 (2) TMI 781
Grant of interest as ITC under Rule 86A of the Central Goods and Services Tax Rules, 2017 - time limit of blocking of such credit - petitioner s ITC account has been unblocked - HELD THAT:- Learned counsel for the respondents are directed to file reply affidavits confined to the relief of interest within eight weeks. Rejoinder affidavit, if any, be filed before the next date of hearing. List on 14th September, 2022.
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2022 (2) TMI 780
Exemption from GST - leasing of residential premises as hostel to students and working professionals - covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely 'Services by way of renting of residential dwelling for use as residence' issued under Integrated Goods and Services Tax Act, 2017 or not - HELD THAT:- It is well settled rule of Statutory Interpretation of fiscal statues that the words used therein if not defined in the statute have to be interpreted in their popular sense. As per Craies on statute law 6th edition, the popular sense means the sense in which people conversant with the subject matter with which the statute is dealing, would attribute it. Entry 13 contained in the exemption notification is unambiguous and is clear. It provides for exemption from payment of Integrated Goods and Service Tax in respect of 'services by way of renting of residential dwelling by way of use as residence'. The burden is of course on the petitioner to show that his case comes within the parameters of the exemption notification. The expression 'residential dwelling' has not been defined. It is pertinent to note that under the erstwhile service tax law, the expression 'residential dwelling' was defined in paragraph 4.13.1 of Taxation of Services: An Education Guide dated 20.06.2012 which was issued by Central Board of Indirect taxes and Customs - in the education guide issued by Central Board of Indirect Taxes and Customs which contains clarifications, it is provided that in normal trade parlance residential dwelling means any residential accommodation and is different from hotel, motel, inn, guest house etc. which is meant for temporary stay. The aforesaid clarification which is issued by the Board, in the absence of anything to the contrary in the Act, binds the Respondent. It evident that the expression 'residence' and 'dwelling' have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression 'residential dwelling' and it cannot be held that the same does not include hostel which used for residential purposes by students or working women. The service provided by the petitioner i.e., leasing out residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely 'Services by way of renting of residential dwelling for use as residence' issued under the Act. The petitioner is held entitled to benefit of exemption notification. Petition allowed - decided in favor of petitioner.
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2022 (2) TMI 779
Attachment of Bank accounts - section 83 of GST Act read with Rules 159 - HELD THAT:- It is seriously disputed by Mr. Trivedi that such order of provisional attachment was served on his client. It is only upon receipt of the intimation from the Bank that his client realized that the bank account has been provisionally attached - This writ application need not be adjudicated further because the statutory life of the order of provisional attachment of the bank account has come to an end. The intimation of the Bank is dated 20.01.2021. This would necessarily imply that the order of provisionally attachment must have been passed by the Office of the Deputy Commissioner any time before 20th. One year period has already elapsed. As on date, the order of provisional attachment cannot be said to be in-force. The IDBI Bank shall now permit the writ applicant to operate his bank account. This is without prejudice to the rights of the department to initiate any further action, if they intend to in accordance with law - Application disposed off.
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2022 (2) TMI 778
Exemption from GST - seeds produced/ procured and processed, packed and sold by the Applicant as seeds for sowing are agricultural produce - Applicability of N/N. 12/2017- Central Tax (Rate) dated 28-06-2017 and 11/2017- Central Tax (Rate) dated 28-06-2017 - storage of the seeds in the leased storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the job worker on job work basis - Applicability of Sl.No.54(e) of the Notification No. 12/2017- Central Tax (Rate)dated 28-06 2017 and Sl.No.24(1)(e) of the Notification No. 11/2017- Central Tax (Ret)dated 28-06-2017 - processes, namely, cleaning, drying, grading and treatment with chemicals (heading No.9986) carried out by the job worker on job work basis - Sl.No.54(c), (h) of the Notification No. 12/2017- Central Tax (Rate)dated 28-06-2017 read with the definition of agricultural produce there under and Sl.No.24(1)(c), (h) and (ill) of the Notification No. 11/2017- Central Tax (Rate)dated 28-06-2017 read with the definition of agricultural produce thereunder or any other entry/entries - transport of seeds from the farm lands to storage facility/godown of the applicant, transport of seeds from one storage facility/godown of the applicant to the other storage facility/godown of the applicant, transport of packed seeds from storage facility/godown of the applicant to the distributor and transport of sales-returns, if any, (heading No.9965 or 9967) - Sl.No. 21(a) of the Notification No. 12/2017- Central Tax (Rate)dated 20-06-2017 - processes undertaken by the applicant, namely, cleaning, drying, grading, treatment with chemicals and packing (heading No.9986), for himself - supply or not - HELD THAT:- The applicant is supplying goods which are produce of cultivation of plants. However they are of seed quality and not grain, therefore further they are not meant for food, fibre, fuel or raw material for further processing. In the definition of agricultural produce, the word raw material is used which is a general word and is in the company of specific words i.e., food, fibre and fuel. These specific words indicate direct consumption by human or in industry but not in cultivation. The Hon ble Supreme Court of India in the case of GODFREY PHILLIPS INDIA LTD. AND ANOTHER VERSUS STATE OF UP. AND OTHERS (AND OTHER WRIT PETITIONS AND APPEALS) [ 2005 (1) TMI 391 - SUPREME COURT] , held that when 2 or more words susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take, as it were, their colour from and are qualified by each other, the meaning of the general word being restricted to a sense analogous to that of the less general. In this case, it was held that even in case of inclusive definition, principle of noscitur a sociis can be applicable - Applying this rule to the present facts, supply of seed does not fall under the definition of agricultural produce as the seed does not fulfill the utilities prescribed therein. The facts presented by the applicant clearly indicate that the processing done by them to turn grain into seed quality goods is different from the processing done by a cultivator or producer of grain for primary market i.e., agricultural mandi or agricultural market yard. Therefore even on this count, the seed quality goods produced by them cannot be treated as agricultural produce. The seeds produced by them do not qualify as agricultural produce and hence: 1. Storage of seeds in the storage facility/godown, loading/unloading and packaging by job worker are not exempt under: a. Serial No. 54E of Notification No. 12/2017 as this entry pertains to Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. This entry relates to exemption of services engaged by a cultivator or an agriculturalist and not to services engaged by Seed Company; b. Serial No. 24(i)(e) of Notification No. 11/2017 as this entry pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company. 2. Cleaning, drying, grading and treatment with chemicals carried out by a job worker or on job work basis are not exempt under: a. Serial No. 54(c)(h) of Notification No. 12/2017 as this entry pertains to Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. This entry relates to exemption of services engaged by a cultivator or an agriculturalist and not to services engaged by Seed Company; b. Serial No. 24(i)(c) (h) of Notification No. 11/2017 as this entry pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company. 3. Transportation of seeds from farm to storage facility and then transportation of packed seed from storage facility to distributors is not exempt under: a. Serial No. 21(a) of Notification No.12/2017, as this entry provides exemption on transportation services to agricultural produce and from the foregoing discussion it is established that seed is not agricultural produce in terms of the definition used in the notification, the transportation services engaged by a seed company are not exempt. 4. If processing is undertaken by an applicant himself for in house seed production, there is no supply and hence exempt.
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2022 (2) TMI 777
Exemption from GST - seeds received, processed, packed and returned by the Applicant, as job worker, as seeds for sowing are 'agricultural produce' - exemption under N/N. 12/2017- Central Tax (Rate) dated 28-06-2017 and 11/2017- Central Tax (Rate) dated 28-06-2017 - storage of the seeds in the storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the applicant, job worker on job work basis - Applicability of Sl. No. 54(e) of the Notification No. 12/2017- Central Tax (Rate) dated 28-06-2017 and Sl.No.24(1)(e) of the Notification No. 11/2017- Central Tax (Rate)dated 28-06 2017 - rocesses, namely, cleaning, drying, grading and treatment with chemicals (heading No.9986), carried out by the applicant, job worker on job work basis - exemption under Sl.No.54(c) and (h) of the Notification No. 12/2017- Central Tax (Rate) dated 28-06-2017 read with the definition of agricultural produce thereunder and Sl.No.24(1)(c), (h) and (iii) of the Notification No. 11/2017- Central Tax (Rate)dated 28-06-2017. HELD THAT:- The applicant is supplying goods which are produce of cultivation of plants. However they are of seed quality and not grain, therefore further they are not meant for food, fibre, fuel or raw material for further processing. In the definition of agricultural produce, the word raw material is used which is a general word and is in the company of specific words i.e., food, fibre and fuel. These specific words indicate direct consumption by human or in industry but not in cultivation. Supply of seed does not fall under the definition of agricultural produce as the seed does not fulfill the utilities prescribed therein - Similarly the said definition restricts the agricultural produce to unprocessed goods. Further even if processing is done it should be such processing as done by a cultivator for primary market . Essentially processed agricultural products do not fall under this definition. If any processing is done it should be on an equal footing to that done by a cultivator for primary market i.e., processing made by a farmer for agricultural mandi. Even if the farmer does any different processing such produce will not fall under this definition. The seeds produced by them do not qualify as agricultural produce and hence: 1. Storage of seeds in the storage facility/godown, loading/unloading and packaging by job worker are not exempt under: a. Serial No. 54E of Notification No. 12/2017 as this entry pertains to Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. This entry relates to exemption of services engaged by a cultivator or an agriculturalist and not to services engaged by Seed Company; and b. Serial No. 24(i)(e) of Notification No. 11/2017 as this entry pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company. 2. Cleaning, drying, grading and treatment with chemicals carried out by a job worker or on job work basis are not exempt under: a. Serial No. 54(c)(h) of Notification No. 12/2017 as this entry pertains to Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce. This entry relates to exemption of services engaged by a cultivator or an agriculturalist and not to services engaged by Seed Company; b. Serial No. 24(i)(c) (h) of Notification No. 11/2017 as this entry pertains to support services to agriculture, forestry, fishing, animal husbandry engaged by a cultivator and not to services engaged by a seed company.
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Income Tax
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2022 (2) TMI 776
Addition u/s 14A r.w.r. 8D - disallowance of proportionate expenses and disallowance of depreciation on tax free securities applying section 14A - Whether no expenditure was incurred or claimed towards earning of those exempt incomes? - HELD THAT:- the issues involved herein deserve to be answered in favour of the assessee, as per the decision of the Supreme Court in South Indian Bank Ltd. v. Commissioner of Income-tax [ 2021 (9) TMI 566 - SUPREME COURT] as held that in a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest- bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. Disallowance would be legally impermissible for the investment made by the assessees in bonds/shares using interest free funds, under Section 14A - if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax-free securities then in such cases, disallowance under Section 14A cannot be made. Also the proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by the learned ITAT favouring the assessee. Thus we remand the matter to the Assessing Officer to decide the issues raised herein afresh, taking note of the observations made in the Supreme Court decision as referred to above and pass appropriate orders, within a period of three months from the date of receipt of a copy of this judgment
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2022 (2) TMI 775
Exemption u/s 11 - disallowing exemption and treating the gross receipts and corpus donation as taxable income, though the appellant trust is registered/s 12A and the appellant Trust had electronically furnished Form No.10B on the portal of the income Tax Department - HELD THAT:- There is no dispute that assessee is a registered under section 12A. We find that filing return of income assessee claimed exemption under section 11 of the Act and CPC/Assessing Officer disallowed the said exemption vide intimation dated 11.05.2020. On appeal before Ld. NFAC/CIT(A) the action of CPC/Assessing Officer was upheld by taking view that Form-10B as required by under Rule-17 of income-tax Rule, 1962 was not furnished. We find merit on the submission of assessee that the assessee has furnished its audit report under section 12A(1)(b) as required under Rule 17B of Income Tax Rule, 1962 prior to due date of filing its return of income on 26.08.2019. The objection of Ld. NFAC/CIT(A) that report is filed subsequently is misplaced, in fact, the date mentioned on the right side of screen shot is the date of printing the document on 10.02.2022, in fact it was uploaded on the portal of department on 26.08.2019. Considering that assessee has furnished its audit report under Form-10B well within time and the intimation u/s 143(1) is issued without verification of fact. Similarly, Ld. NFAC/CIT(A) has also not verified the fact that about the furnishing required audit report, the appeal of assessee is allowed. The CPC/Assessing Officer is directed to allow the necessary exemption under section 11 of the Act. We order accordingly.
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2022 (2) TMI 774
Delayed Employees contribution to PF and ESI - Amount paid on or before the due date of filing of return u/sec.139(1) - HELD THAT:- As decided in M/S ESSAE TERAOKA PVT LTD [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] there is no distinction between employees and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) then no disallowance can be made towards employees contribution to provident fund. CIT(A) after considering the relevant details rightly deleted the additions made by the AO - We do not see any reasons to interfere with the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and dismiss the appeal filed by the revenue.
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2022 (2) TMI 773
Disallowance u/s 40(a)(ia) - bank guarantee commission paid to a schedule Indian bank - HELD THAT:- Admittedly, the payment which is the subject matter of disallowance under Section 40(a)(ia) of the Act is bank guarantee commission paid to a schedule Indian bank. As rightly held by learned Commissioner (Appeals) by placing reliance on certain judicial precedents, there is no element of agency between the assessee and the bank, insofar as, it relates to payment of guarantee commission. We are also of the view that learned Commissioner (Appeals) has correctly applied the extant Circular of CBDT as it is clarificatory in nature. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) by dismissing the grounds raised.
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2022 (2) TMI 772
Addition of cash credits u/s 68 - HELD THAT:- In the present case on hand, the assessee has discharged his onus by providing details relating to the loan amount availed from the three creditors by producing their bank accounts, Income-Tax Returns, confirmation letters, etc. The AO has doubted source of the creditors thereby the AO is inquiring source of source which is not permitted as held in various judgments cited (supra). Wherever explanation has been provided by the assessee, CIT(A) has deleted such credits, and also confirmed the amount of loans which were not explained by the assessee. Therefore, this findings of the Ld.CIT(A) does not require any interference. Arguments of the ld.DR that as per the new proviso to section 68 of the Act introduced w.e.f. 1-4-2003 is related to the investment made on share application money, share capital, share premium or any such amount by whatever name called - Here in this case, the AO has doubted about the loans received by the assessee from three creditors who are not the investors . When the assessee has established with necessary documents, bank statements, IT return, confirmation letters, bank entries, etc. the AO ought not to have invoked proviso to section 68 which is not applicable to loan transactions. Thus, the grounds raised by the Revenue is rejected Nature of expenditure - disallowance of capital expenditure incurred for purchase of machinery, which is capital in nature, the same cannot be treated as revenue expenditure as per the Accounting Standard. Hence, addition made by the AO is unsustainable in law and liable to be deleted.
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2022 (2) TMI 771
Validity of reassessment proceeding u/s 147 - due to audit objection i.e., RAP objection, the assessment was reopened by issuing notice u/s.148 - assessee has claimed 10A deduction for a unit which is not located in a Export Processing Zone, free Trade Zone or Special Economic Zone, hence, the assessee failed to disclose fully truly this material fact and wrongfully claimed deduction u/s 10A which is not allowable - HELD THAT:- Original assessment was completed u/s.143(3) of the Act vide order dated 10.01.2013. The relevant assessment year involved is AY 2010-11. The notice u/s.148 of the Act was issued by the AO on 27.02.2017 after recording the reasons. The assessee before AO during the course of original assessment proceedings filed copy of Form No.56F for claim of deduction u/s.10A of the Act, filed copy of approval from STPI, computation sheet for claim of deduction u/s.10A of the Act and copies of Foreign Inward Remittance Certificate (FIRC) for all inward receipt of foreign currency for export of services to the AO AO after going through these documents and scrutinizing the same allowed the claim of deduction u/s.10A. We have gone through the reasons recorded for reopening of assessment and noted that there is no whisper about any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year 2010-11. Admittedly, the assessee s case falls under the first proviso to section 147 - Once, the reopening of assessment is beyond 4 years and falls under the first proviso to section 147 of the Act, we find no infirmity in the order of CIT(A) quashing the re-assessment. Hence, the appeal of the Revenue is dismissed.
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2022 (2) TMI 770
Capital gain computation - considering the guideline value of the land as mentioned in section 50C of the Act as fair market value on the date of conversion of said land into stock-in- trade u/s.45(2) - CIT-A noted that the provisions of section 45(2) of the Act is applicable in the case of capital asset and agricultural land is not a capital asset - assessee s own agricultural land admeasuring 7.54 acres converted as stock-in-trade and held as capital asset in the name of the assessee - HELD THAT:- As gone through the definition given in the Act in the provision for section 2(22B) of the Act, whereby it is defined that as to how the fair market value is to be substituted in place of cost of acquisition. According to Section 2(22B) of the Act, it is the price which the capital asset would ordinarily fetch if sold in the open market on the relevant date i.e., date of acquisition of asset in the stock-in-trade. This concept of fair market value is now well settled in the Income-Tax law and other cogent fiscal statutes bringing the question of hypothetical seller and the hypothetical buyer in the hypothetical market. For example and for the purpose of income-tax Act, this has been explained and elaborated in section 55 wherein specified date for cost of construction as also for substituting the fair market value for cost of construction is given, like in the present case before us, where the conversion took place as on 20.02.2012. The fair market value can be determined by taking the surrounding circumstances like sale instances of the area, urbanization of that area, future prospects, valuation of similar properties by the Revenue Department or scope of industrialization or growth of these can be considered by determining the fair market value. But for this purpose, the fair market value if could not be ascertained by the Income Tax Officer, the same can be referred to a technical person as conceded by both the sides. Hon ble Supreme Court in the case of Groz-Beckert Saboo Ltd [ 1978 (11) TMI 2 - SUPREME COURT ] we are of the view that this matter needs reconsideration just to ascertain the fair market value of assessee s agricultural land of 7.54 acres converted into stock-in-trade and held as capital asset. The AO has to refer this matter to the DVO to ascertain the fair market value based on the above factors enumerated. Hence, we set aside the orders of the lower authorities and restore the matter back to the file of the AO with the above direction. Appeal filed by the assessee is allowed for statistical purpose.
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2022 (2) TMI 769
Income accrued India - applying the tax rate as per section 115A OR tax rate as per the DTAA between India and Spain read with the Protocol thereof - HELD THAT:- It is a settled legal position that a piece of legislation which imposes a new obligation or attaches a new disability is considered prospective unless the legislative intent is clearly to give it a retrospective effect. We are confronted with a circular, much less an amendment to the enactment, which attaches a new disability of a separate notification for importing the benefits of an Agreement with the second State into the treaty with first State. Obviously, such a Circular cannot operate retrospectively to the transactions taking place in any period anterior to its issuance. In view of the foregoing discussion, we are satisfied that the requirement of a separate notification for implementing the MFN clause, as per the recent CBDT circular dt. 03-02-2022, cannot be invoked for the year under consideration, which is much prior to the CBDT circular of the year 2022. DTAA between India and Spain, having the Protocol containing the MFN clause as its integral part, was duly notified on 21-04-1995, after having entered into force on 12-01- 1995. On such notification of the DTAA, the Protocol containing the MFN clause triggering the importing of any other DTAA fulfilling the requisite requirements, including the Portuguese DTAA, got automatically notified pro tanto , in terms of section 90(1) of the Act leaving no room for any separate notification for the importation. The sequitur is that that the authorities below were not justified in denying the benefit of the straight rate of tax at 10% as per the DTAA read with Portuguese DTAA and also additionally charging Surcharge and Education cess. Income from royalty or fees for technical services, which the assessee claimed to have received as reimbursement and hence not includible in its gross revenue for taxability - HELD THAT:- Primarily, we find that the basic details about the nature of expenses etc. are not forthcoming. It is not known as to whether such expenses claimed to be reimbursed were in furtherance of the rendering of fees for technical services or de hors the same. The assessee has not placed on record invoices raised to the Indian parties towards fees for technical services/royalties to demonstrate if such amounts claimed as reimbursement were part of royalties/fees for technical services . Even the claim of reimbursement without any mark-up has not been properly established before the Tribunal. In the absence of such relevant details, it is difficult to conclude as to whether the amount claimed as reimbursement should form part of total revenue base for applying concessional rate of tax. We accentuate that there is an inherent difference between the scheme of taxation of an item of income por una parte u/s 115A of the Act or under the concerned Article of the DTAA and por otra parte under the normal provisions of the Act or the Articles of the DTAA providing for taxation at normal rate. In all cases of taxation of revenue or gross basis, a fundamental question which needs to be asked is whether a particular cost has contributed to the earning of the revenue. If the answer is in affirmative, then its corresponding receipt needs to be included in the revenue for applying the concessional rate of tax irrespective of the nomenclature given to the parties as reimbursement or revenue. Thus in all cases of concessional taxation on gross receipt or revenue basis, splitting of total receipt into reimbursement or revenue, remains neutral to its chargeability. Both such cases, invariably warrant inclusion of the receipt in the revenue base for taxation so long as the receipt is relatable to costs incurred contributing to the earning of the revenue. An assessee cannot be permitted to opt for concessional rate of taxation on gross receipt basis and then claim that some part of the receipts should be left out by describing it as reimbursement. It is patently an absurd proposition. Thus we set aside the impugned order on this score and remit the matter to the file of the AO for deciding the point on the touchstone of the discussion made supra . Needless to say, the assessee will be allowed a reasonable opportunity of hearing. TDS credit - claim of the assessee is that the AO did not grant benefit of the TDS - HELD THAT:- AO is directed to verify the facts and allow necessary TDS credit as per law.
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2022 (2) TMI 768
Undisclosed sales - difference between the declared sales and the sales as per the VAT return - HELD THAT:- As decided in President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] that entire sales could not be added as income of assessee but addition could be made only to the extent of estimated profits embedded in sales. Further in the case of K Venkatesh [ 2016 (8) TMI 205 - ITAT BANGALORE] upheld the order of Tribunal by holding that it not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone can be subject to income tax. We are of the view that the entire sale consideration cannot be treated as income of the assessee but the addition could be made only to the extent of estimated profits embedded in sales, thus, in that eventuality, we deem it appropriate to restore the matter back to the file of the A.O. with a direction to make addition only to the extent of estimated profits embedded in sales while keeping in view the GP declared by the assessee on the total sales for the year under consideration. Reasonable and adequate opportunity of hearing shall be provided to the assessee before deciding the matter afresh. Disallowance of interest made by the A.O - HELD THAT:- CIT (A) completely overlooked the fact that the assessee is having capital balance of ₹ 29,19,242/-. The assessee is having building amounting to ₹ 12,28,000/- the other assets of the assessee are comprising the PNB Bonds, Mutual Funds and PPF. The assumption of the ld.CIT(A) that all these assets are financed through unsecured loans does not hold any strength as it is the matter of very common knowledge that Bonds, Mutual Funds and PPF carry very lower rate of interest and unsecured loans carry very high rate of interest hence, no prudent businessman will invest his higher interest rate borrowed funds in the lower fixed income investments hence these investment must have been made out of the capital balance of the assessee and investment in M/s Kanoria Enterprises must have been made out of the unsecured loans and interest incurred on these loans deserves a complete allowance. As regards the suspected excessive interest, we are of the view that this is the misconception of the ld.CIT(A) as he is comparing the closing balances of unsecured loans with total amount of interest paid. Out of the total amount of ₹ 2,63,659/-, ₹ 15,790/- were paid as brokerage for arranging the loans. ₹ 53,049/- were paid to the HDFC Bank Ltd and remaining interest of ₹ 1,94,820/- were paid to various parties who were not related to the assessee and all the payment have been made through banking channels only. Therefore, considering the totality of facts and circumstances of the case, we found merit in the contention of the ld. AR and therefore, we direct to delete the addition made qua this issue.
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2022 (2) TMI 767
Disallowance on delayed remittances of employees contribution towards PF/ESI - Scope of amended provisions of section 43B r.w.s. 36(1)(va) - HELD THAT:- As relying on Adyar Ananda Bhavan Sweets India P. Ltd. v. ACIT (supra), we hold that the amended provisions of section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2019-20, but will apply from the assessment year 2021-22 and subsequent assessment years. Accordingly, we direct the Assessing Officer to allow the claim of deduction as claimed by the assessee. Thus, the grounds raised by the assessee are allowed.
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2022 (2) TMI 766
Reopening of assessment u/s 147 - Addition u/s 68 - Non independent application of mind by AO - reasons contained in the report of enquiries made by DGIT (Inv.), Mumbai, about accommodation entries given by entry operators - HELD THAT:- AO has not stated in the reason that he has gone through the reports of the Investigation Wing. A.O. merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment, without arriving at his satisfaction. The reasons to believe contain no reason, but, conclusion of the A.O. without any basis - no independent application of mind by the A.O. to the report of the Investigation Wing which formed the basis for reasons to believe that income chargeable to tax has escaped assessment. The conclusion of the A.O. in the reasons is at the best reproduction of conclusion of the Investigation Report - A.O. has not brought anything on record on the basis of which any nexus could have been established between the material and the escapement of income. The reasons fail to demonstrate the link between the alleged tangible material and formation of the reason to believe that income has escaped assessment. There is a total non-application of mind on the part of the A.O. while recording the reasons for reopening of the assessment. The conclusion was merely based on observations and information received from DGIT (Inv.), Mumbai, which is not brought on record. Since, there is a total lack of mind while recording the reasons for reopening of the assessment; therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad in law. Addition u/s 68 - Assessee has taken unsecured loans from the various parties mentioned above through bank and the same was settled by the assessee within the same assessment year or subsequent assessment year again through the bank only. Assessee has filed before tax authorities, the confirmation of all the parties, ledger copy in the books of parties and bank statement of assessee as well as lender parties. These documents indicate that assessee has received loans from the lenders and settled the same before end of the year or subsequent year. AO has only considered the accounting entry in the books of accounts and considered the same as accommodation entry without considering the receipt of payment through bank and settlement of the loan by the assessee through bank. Just because these companies are controlled by Shri Praveen Kumar Jain, all the transactions cannot be termed as accommodation entry unless it is proved. By taking loan and repaying the same through bank, what is the benefit assessee would have got, the tax authorities failed to appreciate that the salient features of accommodation entries are, they remain in the books of account and will be carried forward to several years. In this case, that is not the case, the assessee had settled the unsecured loans within the same year or in subsequent year. Assessing Officer has made addition only relying on the report from DGIT(Inv), Mumbai. - Decided in favour of assessee.
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2022 (2) TMI 765
Commission income belonged to the HUF or assessee - HELD THAT:- Commission income in the case of the brother of the assessee was taxed in the hands of the HUF. A perusal of the computation of income of HUF of the assessee shows that the HUF has returned commission income and paid taxes thereon. Commission bill was submitted by the HUF to the Accounts Manager of Ajnara India Ltd. Referring to TDS Certificate issued by Ajnara India Ltd. showing TDS on commission paid to HUF of the assessee and bank account of the HUF of the assessee with Oriental Bank of Commerce, wherein commission has been deposited after TDS. Considering all we are of the considered opinion that the commission income belonged to the HUF and rightly returned by it. Therefore, correct hand for taxing such income is HUF and not the assessee. Accordingly, the Assessing Officer is directed to delete the addition from the hands of the assessee. In the result, the appeal of the assessee is partly allowed.
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2022 (2) TMI 764
Disallowance amount transferred to asset replacement account from the maintenance fees charges - assessee is not the owner of the property and plant/equipments installed in the complex and it adopted this method to avoid being taxed on the amount by way of a colourable device - Whether total maintenance charges received by the appellant irrespective of its nomenclature constitutes revenue receipts and appropriation out of the same for so called sinking funds cannot be allowed as deduction? - HELD THAT:- The assessee company is a part of the Unitech Group. It would be pertinent to refer to the judgment in the case of Bhupinder Singh Vs. Unitech Ltd.[ 2020 (1) TMI 1185 - SUPREME COURT] wherein the Hon'ble Supreme Court approved the proposal of the Ministry of Corporate Affairs, Government of India vide its order whereby the erstwhile management of Unitech was superseded and constitution of new management was approved. This appeal filed by the Revenue is dismissed.
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2022 (2) TMI 763
Late remittance of employees contribution to PF and ESI - As submitted assessee had paid the employees contribution prior to the due date of filing of the return u/s 139(1) - Scope of amendment to section 36(1)(va) and 43B - HELD THAT:- As following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2018 (2) TMI 115 - SUPREME 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.
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2022 (2) TMI 762
Disallowance towards Employees contribution to EPF/ESIC which was deposited belatedly but before the time limit prescribed u/s. 139(1) - HELD THAT:- It is an admitted position that the assessee did deduct employees' share of EPF and ESI but paid the same after the due date under the respective legislations but before the time for filing return u/s. 139(1) - In our opinion, this issue is no more res integra in view of several judgments allowing deduction u/s. 36(1)(va) of employees' share of contribution deposited after due date under the respective Acts but before the date prescribed u/s. 139. Finance Act, 2021 has inserted Explanation 2 below section 36(1)(va) providing that the provisions of section 43B shall not apply for the purpose of determining the due date under this clause w.e.f. 01.04.2021. The effect of this amendment is that if the amount of employees' contribution towards EPF, ESI, etc is delayed by an employer beyond the due date under the respective Acts, the disallowance will be called for notwithstanding the fact that it was deposited before the due date u/s. 139 of the Act. Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly apply in relation to assessment year 2021-2022 and subsequent assessment years. Since the assessment year under consideration, namely, 2018-19 is anterior to the amendment carried out with effect from A.Y. 2021-22, we hold that the position of law as set out by various Hon'ble High Courts including the one in CIT vs. Nipso Polyfabriks Ltd [ 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT] squarely applies to the facts and circumstances of the instant case, thereby not warranting any disallowance since the amount in question was admittedly deposited before due date u/s. 139(1) of the Act. The addition is therefore, directed to be deleted. - Decided in favour of assessee.
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2022 (2) TMI 761
Belated remittance of EPF Contributions - Amount paid before the due date for filing the return of income u/s 139(1) - HELD THAT:- Hon ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee s contribution under section 36(1)(va) of the Act would also be covered u/s 43B of the Act and therefore if the share of the employee s share of contribution is made on or before due date for furnishing the return of income u/s 139(1), then the assessee would be entitled to claim deduction. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1). Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted.
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2022 (2) TMI 760
Exemption u/s 11 - Charitable activity u/s 2(15) - assessee was running a hospital - appointment letters for appointing doctors which states that an incentive of ₹ 200/- only will be given in case of conversion of each OPD case into an IPD case - HELD THAT:- CIT(A) has relied on the judgement of the Hon'ble Bombay High Court in the case of Breach Candy Hospital Trust Vs. CCIT [ 2009 (8) TMI 315 - BOMBAY HIGH COURT ] to underline the fact that the fact of profit making was itself was not a conclusive proof of the trust having non-charitable activities. CIT(A) has relied upon the order in the case of Hamdard Laboratories India Vs. DGIT (Exemptions) [ 2013 (4) TMI 397 - DELHI HIGH COURT ] for holding that without recording any specific findings, the Assessing officer cannot invoke the proviso to section 2(15) of the Act for holding that the assessee fell under the category of advancement of general public utility. CIT(A) has also referred to CBDT Circular No. 11/2008 dated 18.12.2008, wherein, it has been clarified that proviso to section 2(15) will not be applicable in case of education, relief of the poor and medical relief etc. - in the course of arguments before us, the Ld. Sr. DR could not point out any perversity in the said observations of the Ld. CIT(A). Accordingly, on the facts of the case, being guided by the earlier assessment years as well as succeeding assessment years as well as the settled judicial precedent, we find no reason to interfere with the findings of the Ld. CIT(A) on the issue of allowing the benefit of exemption to the assessee Trust u/s. 11 and 12 - Decided in favour of assessee.
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2022 (2) TMI 759
Unexplained money u/s. 69A - search operation u/s. 132 - additional income surrendered - Search conducted in the locker which was co-owned by the assessee alongwith her husband - HELD THAT:- The facts of the case are not in dispute. In the case of Shri Niraj Kumar, it is very much apparent that the cash seized from the locker jointly owned by Shri Niraj Kumar and Shri Aditya Sharm has been taxed on substantive basis in the hands of the assessee's brother. As gone through the order of the CIT(A) in the case of Shri Aditya Sharma for assessment year 2014-15, wherein Ld. CIT(A) considered the discussion in the case of Sh. Moin Akhtar Qureshi and has, thereafter, reached the conclusion that the cash of ₹ 78,18,500/- is to be taxed in the hands of Shri Aditya Sharma on substantive basis instead of protective basis. Therefore, as per the settled law, the same amount cannot be taxed twice in the hands of two different assesses. Therefore, we have no option but to direct the Assessing officer to delete this addition. Similarly, in the case of Smt. Sujata Sharma CIT(A) has returned the finding that this amount of ₹ 1,15,00,000/- is to be taxed in the hand of Sh. Aditya Sharma on substantive basis instead of protective basis. Therefore, this addition has also been confirmed in the hands of Shri Aditya Sharma. Accordingly, there is no reason to bring the seized cash to tax for the second time in the hands of Smt. Sujata Sharma. Accordingly, we direct the Assessing officer to delete this addition also. Unexplained jewellery found in the locker of Shri Niraj Kumar - we have gone through the 'Panchnama' relating to the search of locker No. G-2123 which was co-owned by Shri Aditya Sharma and Shri Niraj Kumar and have also considered the impact of CBDT Circular No. 1916 dated 11.5.1994. We fully agree with the contention of the Ld. AR that since the jewellery found in the locker was only 339.20 gms and which is being claimed to be belonging to assessee's bhabi and mother, (both married ladies), the benefit of CBDT Circular No. 1916 dated 11.05.1994 should have been given to the assessee. Accordingly, we direct the Assessing officer to delete this addition also. Appeal of assessee allowed.
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2022 (2) TMI 758
Receipt from transfer of Carbon Emission Reduction ( CER ) - Whether revenue receipt and taxable under section 28(iv) ? - Whether such money received by the assessee on sale of CERs/carbon credits is taxable under Income-tax Act or not? - HELD THAT:- We are of the view that carbon credits/CERs are in nature entitlement accrued to the assessee on account of its efforts to reduce the emission of harmful greenhouse gases. They have arisen due to environmental concerns and therefore cannot be said to be 'connected with' or 'incidental to' the business activities of assessee. The assessee is engaged in the business of refrigerants, engineering plastics and industrial yarns etc. and is not into the business of trading of carbon credits. All these findings of facts have been given by the coordinate bench in assessee's own case in subsequent years in AY 2007-08 and AY 2010-11 which have been placed before us. We, therefore, hold that carbon credits are not offshoot of business but offshoot of environmental concerns and hence not chargeable to tax. The receipts arising from transfer of carbon credits are in the nature of capital receipts not subjected to tax in terms of section 28(iv) read with section 2(24)(vd) of the Act. The claim of the assessee raised in grounds of appeal from 1 to 3 is hereby allowed. Exclusion of carbon credits from the book profits computed u/s 115JB - HELD THAT:- Carbon credits being the capital receipts cannot be brought to tax as book profits and are, thus, liable to be excluded from the computation of book profits u/s. 115JB - See Ankit Metal Power Ltd. [ 2019 (7) TMI 878 - CALCUTTA HIGH COURT] Allowability of education cess as deductible expenditure u/s. 37 (1) - HELD THAT:- As it stands today (as the proposed amendment by Finance Bill, 2022 is yet to take effect) hold that education cess is not a disallowable expenditure u/s. 40(a)(ii) of the Act having been expressly excluded from section 40(a)(ii) of the Act by following the judgment of the Hon'ble Rajasthan High Court in the case of Chambal Fertilisers And Chemicals Ltd. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] and the Hon'ble Bombay High Court in the case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] . We, therefore, allow the deduction of education cess u/s. 37 of the Act. Appeal of the assessee stands allowed.
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2022 (2) TMI 757
Disallowance u/s 14A r.w.r 8D - HELD THAT:- We observed that it is fact on record that assessee has not earned any exempt income during the year, therefore no disallowance can be made u/s. 14A of the Act when assessee has not earned any exempt income. Accordingly, ground raised by the revenue is dismissed. Disallowance of foreign travelling expenses to foreign countries from where assessee was not deriving any revenue - HELD THAT:- We observed that assessee has submitted capital account of the Directors and other relevant information before the Ld.CIT(A) as the additional evidences which clearly indicates that the expenses relating to two sons who were travelled with the Directors were not charged to Profit and Loss Account and were charged to personal account of the Directors. Further, he brought to notice that there is business connection in Singapore for the Directors to visit there. These are all details relating to the expenses and disallowed by the AO. CIT(A) having coterminous powers is empowered to verify the simple documents submitted before him. Therefore, it need not be remitted to Assessing Officer for further verification. Hence, the information placed before the Ld.CIT(A) and before us clearly indicate that assessee has not claimed personal expenditure relating to the family travelled in foreign trip and also there is business connection for the directors to visit Singapore. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A). Accordingly, grounds raised by the revenue are dismissed. Addition made on account of informer information expenses - HELD THAT:- From the record submitted before us this is a relevant expenditure incurred by the assessee during the year and also assessee is claiming this expenditure from the past several years. We also observed that Assessing Officer has not disputed the revenue or services offered by the assessee which is the services offered to rendering the services to multinational companies in the field of investigation of violation in the utilization of IPR. In our view once nature of business of the assessee is accepted, the unique aspect of informants expenses is also to be accepted, which is relevant for carry out the functions of the company. And when assessee takes services of informants certainly they will demand compensation without incurring such expenses assessee will not be able to provide effective services and continue similar services to other clients. In this case, details of informants have to kept secret and the assessee has supplied enough information to substantiate the actual payment but only kept the identity of the informants. After going through detailed finding of the Ld.CIT(A) we do not find any reason to interfere with the finding of the Ld.CIT(A). Accordingly, ground raised by the revenue is dismissed and also involvement of provisions of section 69C of the Act in the case of the assessee is farfetched and accordingly, this aspect also dismissed. Ground raised by the revenue is dismissed.
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2022 (2) TMI 756
Revenue recognition - Acceptability of correct method of accounting as per accounting standard and revised guidance note - change the accounting standard - Revised return of income rejected - assessee finalized the balance sheet by following the method of proportionate completion method as per AS-7, subsequent to finalization of the balance sheet assessee has filed original return of income by declaring the profit as per audited balance sheet - HELD THAT:- Even to change the accounting standard, the assessee has to declare the impact of change in such accounting standard/policy in the financial statements. Assessee decided to change the policy based on the status of the project it has to first modify the balance sheet and declare the impact. But in this case assessee preferred only to file revised return of income. Assessee and the TATA Housing Development Company Ltd. jointly developed the project and as per the joint development agreement assessee has brought proportionate land for the project and as per the joint development agreement assessee would receive the sale consideration based on the gross sales effected by the TATA Housing Development Company Ltd., and not based on the stage of project completion - gross revenue and the related cost for the project will depend upon the receipt of gross consideration from the TATA Housing Development Company Ltd., not depends upon stage of completion of the project - merely because assessee has received a certificate of statement from the TATA Housing Development Company Ltd. that the project completed is less than 25% it does not mean that assessee has to modify the method of accounting or the revenue from the project. The joint development agreement remains same and the compensation to the assessee remains same, the assessee has received 24% of the gross sales effected by TATA Housing Development Company Ltd. Therefore, the change of method proposed by the assessee in order to revise the return of income is not as per the fact brought on record. As stated earlier the Accounting standards and guidance notes are applied to present the financial statement reliably and for consistency. Certainly not for filing return of income. In the given case assessee is an LLP and no doubt accounting standard and guidance note is applicable to the assessee, however, the revenue sharing method and revenue declared by the assessee as per JDA are not based upon the project completion rather it depends upon the gross sales effected by the TATA Housing Development Company Ltd. Therefore, as per the facts on record the GN 2012 has no application to the case of the assessee. In the given case assessee has not revised the balance sheet and Profit and Loss Account based on the change of method of accounting adopted by the assessee but only filed the revised return of income. It is immaterial whether assessee followed the revised method of account in the subsequent assessment year, what is relevant is whether the assessee has followed the proper method of accounting to declare the revenue for this assessment year. In this assessment year assessee has revised return of income just because JV partner has certified that the project completed is less than 25% but it has to follow the revenue sharing method prescribed in the joint development agreement based upon which the financial statement was finalized/prepared. Consideration received by the assessee is not based on the stage of completion of the project. It is only depends upon the gross sales effected by the TATA Housing Development Company Ltd. Therefore, we are in agreement with the findings of the Assessing Officer and we sustain the addition proposed by the Assessing Officer. Accordingly, the appeal filed by the Revenue is allowed.
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2022 (2) TMI 755
Addition of share premium received on issue of equity shares u/s.56(2)(viib) - whether shares have been valued by taking the growth projections during the year rather than adopting the book value of the assets? - HELD THAT:- Assessee has submitted the detailed working of the fair market value of all the assets along with supporting documents including stamp duty ready reckoner in order to substantiate the value arrived by the valuer on the date of issue of shares. CIT(A) has accepted the method adopted by the assessee and he came to the conclusion that it is at the option of the assessee to adopt the value as per explanation (a)(i) or a(ii) of section 56(2)(viib). Assessee has an option to adopt explanation a(i) or a(ii) of the Act and assessee has chosen the option explanation a(ii) to value the shares. Before accepting, the Ld.CIT(A) has given an elaborate finding in his order. it is also a fact on record that AO has not brought on record that there is any involvement of cash transaction in these transactions which goes to the main purpose of the introduction of section 56(2)(viib) and further we also noticed that shares were issued to its sister s concern only and the transactions are between two closely held companies and it cannot be classified or equated to generations/circulations of unaccounted money. Therefore, we do not find any reason to interfere with the finding of the CIT(A) and accordingly we deem it fit and proper to dismiss the ground raised by the revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- The assessee has earned only ₹.3000/- as exempt income and Ld.CIT(A) has restricted the same to the extent of exempt income earned by the assessee. Therefore, the action of the Ld.CIT(A) is in line with the various judicial pronouncements which restricts the disallowance u/s. 14A of the Act to the extent of exempt income earned by the assessee. Therefore, we are inclined to dismiss the grounds raised by the revenue. Revenue appeal dismissed.
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2022 (2) TMI 754
Legality and validity of the order passed by the Income Tax Appellate Tribunal - Approval of resolution plan for insolvency - National Company Law Tribunal, Ahmedabad Bench ( NCLT ) approving the Resolution Plan (second revised Resolution Plan) including the addendum dated 19th September 2020 of the MCPI Private Limited (Successful Resolution Applicant) in exercise of its powers under Section 31(1) of the Insolvency and Bankruptcy Code, 2016 (for short, the Code ) for the Insolvency Resolution of the corporate debtor i.e. the applicant (Garden Silk Mills Limited) - whether the appeal of 2013 filed by the Revenue could be said to have stood abated with the passing of the order passed by the NCLT ? - HELD THAT:-The aforesaid question is now no longer res integra in view of the recent pronouncement of the Supreme Court in the case of Ghanshyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstructions Company Limited [ 2021 (4) TMI 613 - SUPREME COURT] wherein the Supreme Court took the view that the 2019 amendment to Section 31 of the I B Code is clarificatory and declaratory in nature and therefore will have a retrospective operation. If the Revenue is dissatisfied in any manner with the sanctioning of the Resolution Plan by the NCLT, then liberty may be reserved in favur of the Revenue to prefer an appeal under Section 61 of the Code, 2016 before the NCLT. We allow this Civil Application filed by the Revenue does not survive and the same is disposed of accordingly without expressing any opinion on the merits of the substantial questions of law framed therein with the aforesaid liberty to file an appeal under Section 61 of the Code, 2016. The Civil Application as well as the Tax Appeal both are disposed of accordingly. Rule is made absolute to the aforesaid extent.
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2022 (2) TMI 753
Denial of natural justice - AR submitted before us that the Ld. AO has passed ex-parte order without providing an opportunity to the assessee of being heard - HELD THAT:- AO had given sufficient opportunities to the assessee. However, none appeared on behalf of the assessee before the Ld. AO. Even before the Ld. CIT (A), there was no effective representation by the Ld. AR to support the assessee s case. CIT (A) was left with no other option except to adjudicate the appeal based on the material on record. In this situation, do not find much strength in the arguments advanced by the ld. AR. Before us the Ld. AR has pleaded that if an opportunity is given before the AO, the assessee may be able to substantiate it s case with documentary evidence. Therefore, considering the prayer of the Ld. AR as well as the issues involved in the appeal, in the interest of justice, We hereby remit the matter back to the file of Ld. AO in order to consider the appeal afresh by providing one more opportunity to the assessee of being heard. Appeal filed by the assessee is allowed for statistical purposes
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2022 (2) TMI 752
Rectification of mistake u/s 154 - allowability of Foreign Tax Credit - Assessee from Australia has a global income as taxable in India - Assessee offered to tax salary income earned for services rendered in Australia for the period from December 2017 to March 2018 to tax in India and claimed foreign tax credit ( FTC ) for taxes paid in Australia - India Australia DTAA - HELD THAT:- We agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. - the issue was not debatable and there was only one view possible on the issue which is the view set out above. The issue in the proceedings u/s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee s application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. therefore do not agree with the submission of the learned DR in this regard. Assessee appeal allowed.
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2022 (2) TMI 751
Revision u/s 263 by CIT - unrecorded advances found during the course of survey and taxability thereof - HELD THAT:- This matter was enquired by the AO and specific queries have been raised in respect of documents found during the course of survey as part of notice u/s 142(1) the reply submitted by the assessee has been duly examined by the AO including the statement of the assessee recorded during the course of survey where there is clear mention about rotation of funds and how the final figures has been arrived at, the findings of the survey team, the surrender made by the assessee and additional income offered in the return of income. It is therefore not a case where the AO has merely gone by the surrender made and additional income offered by the assessee in the return of income rather the AO has examined the whole gamut of documentation found during the course of survey and thereafter has accepted the additional income so offered by the assessee towards the discrepancies found during the course of survey. Thus, it cannot be said that there is failure on part of the AO to make proper enquiries and verifications which should have been made in respect of these transactions found during the course of survey. Agreement for purchase of property and payment therefore - AO has raised a specific query as part of initial notice u/s 142(1) dated 24.07.2018 and in response to the same, the assessee has submitted that he has made a payment of ₹ 36 lacs towards purchase of a residential house and a part of which has been funded through bank borrowing amounting to ₹ 27 lacs from the OBC Bank duly reflected in the financial statements. We therefore find that the matter has been duly examined by the AO and after taking into consideration the submission of the assessee including the source of payment towards the purchase of residential house, the same has been accepted and no adverse finding has been recorded. Thus, it cannot be said that there is failure on part of the Assessing officer to make proper enquiries and verifications which should have been made in respect of the said transaction. There is no basis to hold that the order passed by the Assessing officer is erroneous is so far as prejudicial to the interest of the Revenue - Decided in favour of assessee.
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Customs
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2022 (2) TMI 750
Inadvertent mistake in self-assessed Bills of Entry - Seeking Direction to the respondents to reassess the customs duty - It was held by High Court that petitioner has made out a case for issuance of a direction to the respondents for correction of the mistake or error in classification of the goods from CTH '85176990' to '85176930' and thereby for amendment of the Bills of Entry. Refusal of the respondents to look into the aforesaid grievance of the respondents is therefore not justified - HELD THAT:- There are no reason to entertain this petition under Article 136 of the Constitution of India - The petition seeking special leave to appeal is, accordingly, dismissed.
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2022 (2) TMI 749
Smuggling - import of plant khat - Narcotics drugs or not - only ground raised by the petitioner is that the alleged package was booked prior to the notification i.e., on 24.02.2018 - it was held by High Court that the commission of the offence had taken place on 27.04.2018 as such, on the date of commission of offence, the contraband called khat leaves were included as psychotropic substances and the same was notified by the Government of India, Ministry of Finance vide notification No.S.O.821(E), dated 27.02.2018 - HELD THAT:- There are no to entertain the Special Leave Petition under Article 136 of the Constitution of India. Appeal dismissed.
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2022 (2) TMI 748
Seeking direction to respondents to process the 47 applications filed and issue the duty credit scrips to the Applicant under the Focus Product Scheme (FPS) - HELD THAT:- The Respondent No.3 has not complied with the Order dated 29th July 2021 passed by the Division Bench of this Court in LARSEN TOUBRO LIMITED VERSUS THE UNION OF INDIA AND ORS. [ 2021 (7) TMI 1310 - BOMBAY HIGH COURT] . The Respondent No.3 ought to have considered and processed all those 47 applications and to take a final decision in accordance with law after giving an opportunity to the authorized officer of the Applicant. We do not propose to initiate any action under the provisions of Contempt of Courts Act, 1971 against the Respondent No.3 for non compliance of the Order passed by this Court at this stage, since this Court proposes to direct the Respondent No.3 to process the remaining 46 applications and to take a final decision on those applications in accordance with law after giving an opportunity of hearing to the authorized Officer of the Applicant, if not excluded by any express provision of law or by necessary implication. The Respondent No.3 shall consider and process the remaining 46 applications and to take a final decision thereon in accordance with law after granting an opportunity of hearing to the authorized Officer of the Applicant, if not excluded by any express provision of law or by necessary implication, within one month from the date of receipt of the copy of this Order without being influenced by the observations made in the communication dated 22nd October 2021 and the conclusions drawn therein - application allowed.
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2022 (2) TMI 747
Seeking direction to respondents to register duty credit scrips issued under Merchandise Exports from India Scheme (MEIS) and Rebate of State and Center Taxes and Levies (ROSCTL) by the Directorate General of Foreign Trade, Ludhiana - HELD THAT:- It is the admitted case of the parties that after the DRI had searched the factory premises of the petitioner on 17-6-2019 and had issued an alert and had also directed the DGFT and the other authorities not to grant/release the export benefits to the petitioner, the petitioner had approached this court by filing CWP No. 16214 of 2020. It is also admitted between the parties that during the said proceedings a letter was issued by the DRI to the Additional DGFT granting its no objection to the DGFT for releasing the export scrips. The DGFT in turn had submitted an affidavit in the said proceedings clearly stating that the petitioner s name was withdrawn from the Denied Entity List (DEL) and that the scrips have already been issued to the petitioner on 28-10-2020. They had further stated that the benefits already stand transferred to the petitioner. On the basis of the said affidavit, the earlier writ petition had been rendered infructuous. The respondents did not choose to file application for review/recalling of the said order by explaining the facts, which are now sought to be explained when the petitioner has filed the present writ petition - the said approach of the respondents-authorities is not in accordance with law, inasmuch as, in case on the basis of certain factors, the respondents had the understanding that they could have still denied the relief to the petitioner, then they should have moved an application in the first writ petition detailing all the facts. However, the respondents-authorities have chosen to withdraw the benefit which, at one stage, had been conceded to by them in the earlier writ petition. The said proceedings are binding on the petitioner as well as the respondents and thus, once the respondents-authorities had chosen to issue the scrips then the non-registering of the same cannot be justified. The duty credit scrips issued in the present case are for a value of ₹ 3,25,43,947/- and since the petitioner has already deposited ₹ 50 lakhs, thus, we find the offer of further deposit of ₹ 1 crore to be very just and fair, in the facts and circumstances of the present case. The orders relied upon by the Learned Counsel for the respondents were passed on the basis of consensus. However, in the present case no such consensus has been reached. The petitioner is directed to pay an amount of ₹ 1 crore within a period of 30 days from today. The said amount would be over and above the amount of ₹ 50 lakhs, which the petitioner has already paid - petitioner is also directed to provide security for the balance amount of the scrips i.e. ₹ 1,75,43,947/-, by furnishing personal surety duly supported by personal guarantees of two other persons within a period of 1 month from today - Petition disposed off.
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2022 (2) TMI 746
Jurisdiction - scope of the subject offence was not limited to the one within SEZ but also an offence of smuggling dutiable goods from a territory outside India into the Indian Customs territory - whether the authorities under the Customs Act enjoy jurisdiction over SEZ units? - HELD THAT:- In the cases of M/S MEENAKSHI INTERNATIONAL VERSUS CC (I G) , NEW DELHI [ 2016 (11) TMI 851 - CESTAT NEW DELHI] , either co-ordinate division benches or single members of this Tribunal have consistently held that the authorities under the Customs Act do not enjoy such jurisdiction. The only discordant note has been struck by a Division Bench in SHRI JATIN ARORA VERSUS C.C., NEW DELHI [ 2017 (11) TMI 1119 - CESTAT NEW DELHI] . We are not required to reconcile between these orders of this Tribunal as there is, already available to us, guidance from a High Court on this question. We are required, therefore, to reconcile between two decisions of the Hon ble Gujarat High Court in BHARTI J. GANDHI VERSUS UNION OF INDIA [ 2009 (12) TMI 439 - GUJARAT HIGH COURT] and UNION OF INDIA VERSUS OSWAL AGRICOMM PVT. LTD. [ 2010 (7) TMI 712 - GUJARAT HIGH COURT] . Whereas Bharti Gandhi holds that authorities under the Customs Act do not enjoy jurisdiction over SEZ units, Oswal Agricomm reaches the opposite conclusion, but without referring to its own earlier decision in Bharti s case. In any case and in our opinion, it is not for us to weigh the relative merits of the reasoning adopted by these two judgements, both being rendered by a High Court, to which we must defer. The benefit of the interpretations, drawn consistently by various Benches, are in favour of the tax payer/ appellants herein, in these batch of cases, including the decision of the Hon ble Gujarat High Court in Bharti Gandhi s case which, both parties before us agree, has attained finality. The impugned order and the demands and penalties raised therein, against all the appellants are set aside - Admittedly, there is a permission letter placed on record permitting the appellant in Customs Appeal No. 21358 of 2016 viz. M/s. Ashwin Gold Pvt. Ltd. for outsourcing 50 kgs. of gold to one of its units in DTA. The alleged difference is of about 49 kgs. Hence, if telescoping of the above 50 kgs. is given, then there may not be any shortage. But, the Adjudicating Authority has ignored this aspect completely, which appears to be incorrect - appeal allowed.
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2022 (2) TMI 745
Rejection of conversion of free shipping bills to advance authorization shipping bills - Section 149 of the Customs Act, 1962 - HELD THAT:- When the statute does not prescribe any time limit for filing an application for conversion of a shipping bill, the department cannot rely upon a circular to frustrate the provisions contained in the statute. When there is a conflict, the statute will definitely prevail over the Board circular. The issue whether the time limit prescribed as per the Board circular will apply was considered by this Tribunal in the case of Autotech Industries (India) Pvt. Ltd. [ 2021 (11) TMI 518 - CESTAT CHENNAI ] and held that time limit of three months prescribed in the above Board circular cannot be applied to reject the request of conversion / amendment of shipping bills. The Tribunal in the case of Contemporary Leather Pvt. Ltd. Vs. CC, Chennai [ 2021 (12) TMI 293 - CESTAT CHENNAI] followed the decision of the Hon'ble jurisdictional High Court to hold that the Board circular cannot be pressed into application to deny the request for conversion of shipping bills. The second ground for rejecting the request for conversion of free shipping bills is that the goods exported have not been subjected to physical examination. As can be seen from Section 149, which has been noticed above, there is no requirement in the said section that the amendment can be allowed only if the goods have been subjected to physical examination before export - On perusal of the impugned shipping bills, it is seen that the appellants have clearly stated in the shipping bills that the goods are exported under advance authorization scheme. On one shipping bill, there is a mistake in noting the license number of the advance authorization. In both the shipping bills, the scheme code was wrongly mentioned though they have stated that the goods are exported under advance authorization. The code has been noted as 00 instead of 01 . Section 149 is a provision which permits the importer / exporter to request for amendment of documents for the mistakes that may have happened while filing the documents. When an application for amendment is received, if it is very much clear from the documents that the mistake was only an inadvertent mistake and there is no attempt of fraud or mis-statement to evade duty, the request for conversion ought to be allowed - The Tribunal in the case of Autotech Industries (India) Pvt. Ltd. had observed that the amendment is only a procedural issue. In the present case, the documents itself establish that these were inadvertent mistakes. The rejection of request for conversion of free shipping bills to advance authorization scheme shipping bills are not justified. The impugned order is set aside - Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2022 (2) TMI 744
Rectification of mistake - error apparent on the face of record - requirement of sending different notices for different meetings - HELD THAT:- Regarding the convening the meeting of the shareholder, secured creditor and unsecured creditor of the appellant company, within 30 days from the date of order is concerned, the same is hereby modified - regarding the requirement of sending the prescribed form of proxy along with in addition to scheme related Ministry 01 Corporate Affairs, the appointment of proxy is not required, therefore, we hereby also modified that portion of the order. There is no confusion regarding the requirement of sending individual notice of convening the meeting of the secured creditors and unsecured creditors of the transferee company. The present application stands disposed of.
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Insolvency & Bankruptcy
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2022 (2) TMI 743
Rejection of application on the ground of time limitation - no application has been filed for condonation of delay - HELD THAT:- Payment due date of the last invoice is 10.04.2014 and admittedly no payment has been made after 10.04.2014. The right to sue accrued to the Appellant from the last payment made i.e. 31.03.2014. At best the limitation will be three years thereafter. The submission of the learned counsel for the Appellant that since response to the legal notice, which was issued by he Appellant, they have asked for 10% bank guarantee it shall auto extend the limitation does not commend us. The mere fact that the Corporate Debtor has asked to submit 10% Bank Guarantee shall not in any manner arrest running of limitation which began when amount became due and payable and not paid - In the present case, according to own documents filed by the Appellant, that amount became due on 10.04.2014, which is mentioned in the Column 1 Form IV of the Application which was filed by the Appellant itself. There are no materials on the record, as has been rightly observed by the Adjudicating Authority, for granting any extension of limitation. The submission of the learned counsel for the Appellant is that there being no application for condonation of delay under Section 5, the court has powers to condone delay in appropriate case there being sufficient cause. The Appellant has not brought on record any material or made a case to show sufficient cause for condonation of delay within Section 5. There are no relevant material to exercise our jurisdiction under Section 5 of the Limitation Act for condoning the delay - Application under Section 9 filed by the Appellant was rightly rejected by the Adjudicating Authority as barred by time - appeal dismissed.
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2022 (2) TMI 742
Seeking extension of CIRP period - appellant has stated that the exclusion of 90 days from the CIRP of the CD would save the company from Liquidation - HELD THAT:- This pandemic has, no doubt, interrupted the normalcy in various activities of Corporate Insolvency Resolution Process - The Resolution Professional has received a Resolution Plan from a Prospective Resolution Applicant which is under scrutiny of Resolution Professional/ Committee of Creditors. If granting of 90 days helps the Corporate Debtor to revive, then the basic objective of the I B Code, 2016 will be met. Liquidation is the last resort. Hence, this Tribunal is of the subjective opinion that no prejudice will be caused in allowing the instant appeal to prevent an aberration of justice and to promote substantial cause of justice. Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 741
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing dispute between the parties - HELD THAT:- From the correspondence which took place between the parties it is noticed that before 20.05.2019 there is no iota of evidence at any point that Corporate Debtor informed about deficiency in goods or lack of quality. It has been emphasised by learned counsel for the Respondent that Credit Notes dated 01.08.2019, 26.07.2018, 28.07.2018 and 14.05.2018 were issued to the Buyers which have been brought on record alongwith the reply at page 33 to 38. According to the Respondent Credit Notes were issued to the buyers due to bad quality of goods which were supplied by the Appellant. It is noted that there is no communication to support that Credit Notes were issued due to bad quality of goods supplied by the Appellants to the Corporate Debtor - If the Credit Notes were issued due to bad quality of materials supplied by Appellant, there was no reason for the Corporate Debtor not to raise quality concerns from 01.08.2018 till 20.05.2019. No correlation between the quality of goods and Credit Notes have been established that the Credit Notes have been issued due to bad quality of goods supplied by the Appellant. In proceeding under Section 9, the Court has to satisfied that dispute truly exists in fact and is not spurious, hypothetical or illusory. The present is a case where we are satisfied that there is no dispute, in fact, prior to issuance of Section 8 notice. Appellant sent various communications to the Corporate Debtor for payments and stated that it will be compelled to go to NCLT for his claim, after which the Respondent first time on 20.05.2019 informed that there is deficiency in the goods supplied. There has been no communication regarding quality of goods after delivery of goods by invoices dated 09.01.2018, 16.04.2018, 24.05.2018 and 22.10.2018 and after more than six months period the Respondent sent communication regarding deficiency in quality of goods - If there was any deficiency in the quality of goods, Respondent ought to have brought it to the notice of the Appellant immediately after receipt of the goods, the email dated 20.05.2019 was sent when Appellant informed about taking legal remedy. Thus, present is a case where Corporate Debtor is trying to raise illusory dispute and in fact no dispute existed. The Corporate Debtor cannot be allowed to raise bogy of disputes to save it from its liabilities and the debt under Section 9 - the Adjudicating Authority committed error in rejecting Section 9 application on the ground of dispute - appeal allowed.
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2022 (2) TMI 740
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- It is seen that Operational Creditor has issued notice under section 8 of the Code on 27.2.2019 and the said notice has been duly replied by Corporate Debtor on 7.3.2019, and the present Application has been filed on 14.8.2019. In its reply dated 7.3.2019 the Corporate Debtor has only raised issues with regard to certain payments not being accounted for by Operational Creditor and nothing is shown/claimed as being prior existing dispute between the parties. It is seen from copy of ledger account annexed with Section 8 notice that parties are having running account in respect of various invoices raised by Operational Creditor for the logistics/freight services provided by it to the Corporate Debtor during the period from 1.4.2014 to 18.2.2019. The last invoice as recorded in the said ledger account is no. SLPL/15-16/3317 dated 4.1.2016 for ₹ 1,18,315/- and the last payment received from Corporate Debtor is on 19.10.2016 of ₹ 94,064. Operational Creditor has made out case against Corporate Debtor for initiation of CIRP under the Code due to non-payment of Operational Debt of ₹ 6,66,667.40. The present application has been filed on 14.8.2019 with the last payment admittedly having been made by Corporate Debtor on 19.10.2016 on running account basis, the same is held to be within limitation u/s. 137 of the Limitation Act. Therefore, this Authority admits the present Application under section 9 (5) of the I B Code, 2016. Application admitted - moratorium declared.
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2022 (2) TMI 739
Winding up of Company - Section 433(e) and (f) of the Companies Act, 1956 - HELD THAT:- While the proceedings were pending before the Hon'ble High Court of Madras, one of the Creditor of the Company in Liquidation viz. Harikrishna, Proprietor of M/s. Classic Marketing has moved a Company Application No. 98 of 2021 seeking transfer of proceedings in CP No. 201 of 1996 to National Company Law Tribunal (NCLT), Chennai to be treated as an Application for initiation of Corporate Insolvency Resolution Process under the provisions of the IBC, 2016 - it is seen that the affairs of the Corporate Debtor has not yet been completely wound up and hence under the said circumstances, we hereby initiate Corporate Insolvency Resolution Process as against the Corporate Debtor viz. M/s. Neptune Inflatables Limited. The Official Liquidator is discharged of his duty in relation to the Corporate Debtor company is concerned. Application admitted - moratorium declared.
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2022 (2) TMI 738
Seeking withdrawal of petition - settlement arrived at between the Operational Creditor and Corporate Debtor - HELD THAT:- It can be inferred that for withdrawing the application before the constitution of COC, the appropriate course is to apply as per Regulation 30A of CIRP Regulations 2016. Further, the Hon'ble Supreme Court in Arun Kumar Jagtramka case [ 2021 (3) TMI 611 - SUPREME COURT ] has observed the reasons of substitution/amendment in Regulation 30A. Therefore, no reliance can be placed on the order of NCLT Ahmedabad, as placed by the applicants, to demonstrate that there is an impediment in approaching the competent authority for withdrawal under Regulation 30A of CIRP Regulations 2016 - further, the applicants have not placed any decision of Hon'ble Supreme Court or Hon'ble High Court, which had repealed Regulation 30A of CIRP Regulations or any of its part, therefore, there is no ground for the Applicants for not adopting the procedure prescribed under Regulation 30A of CIRP Regulations 2016. Since there is a specific provision and procedure prescribed for withdrawal of an application admitted under section 7, 9 and 10 of IBC, before as well as after the constitution of CoC, in terms of Regulation 30A of CIRP Regulations 2016, which has been taken note of by the Hon'ble Supreme Court in the matter of Arun Kumar Jagtramka Vs Jindal Steel and Power Ltd. Anr. and the Hon'ble NCLAT has also held recently in the matter of Mr. Harish Raghavji Patel Vs. Shapoorji Pallonji Finance Pvt. Ltd. and Anr. [ 2021 (10) TMI 340 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ] that the inherent power cannot be invoked to by-pass the procedure prescribed under the law, we are of the considered view that Rule 11 of NCLT Rules, 2016 shall not be invoked to in the instant case for withdrawal of CP (IB)-3013 (ND) 2019. The Application is accordingly dismissed.
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Service Tax
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2022 (2) TMI 737
Classification of services - Business Auxiliary services or not - Government company formed with the object of developing tourism and infrastructure related to it and running Palace on Wheels - can be charged of rendering business auxiliary service on account of realizing felicitation fee from the empaneled showrooms/Emporia s, which was required for avoiding fraud, cheating, and to protect the foreign and domestic tourist? - HELD THAT:- The term business auxiliary service has been defined in Section 65 (19) of the Finance Act, 1994 as to mean, besides others, promotion for marketing or sale of goods produced or provided by or belonging to the client. The tribunal assessed the factual situation and came to the conclusion that the activity amounted to marketing of the goods for sale. The stand of Tribunal is agreed upon. The agreement between the shop owners and the assessee provided that the shop owner would pay facilitation fees per season to the corporation on the condition that the tourist buses of the corporation would stop at the showroom of the shop owners for the purpose of shopping by the tourist travelling in palace on wheels. It was thus a clear case of promotion of sale of the goods of the shop owners or the showroom owners, as the case may be. Appeal dismissed.
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2022 (2) TMI 736
Seeking direction to accept the demand drafts produced by the petitioner towards filing fees for the appeals filed under section 85(1) of the Finance Act, 1994 in lieu of online payment - seeking consideration of stay petition filed along with the appeal as well as the appeal itself, on merits - HELD THAT:- It is evident that petitioner had taken demand drafts as early as on 23.12.2020, as is evident from Ext.P5 produced in both writ petitions. The said date is within the period of limitation itself. Therefore the bona fides of the petitioner cannot be doubted. In such a view of the matter, since the petitioner has now expressed his willingness to pay the filing fee under the online method, an opportunity to make such payment ought to be made available to the petitioner. The petitioner is permitted to pay the filing fee for the appeal against the order through the online method within a period of 30 days from the date of receipt of a copy of the judgment. If such payment is made, the appellate authority shall accept the same into its files and consider the appeals on merits. Petition disposed off.
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2022 (2) TMI 735
Recovery of service tax - services provided by the petitioner under the category of clubs/associations - period between April 2016 to June 2017 - HELD THAT:- Though the petitioner is required to file a reply to the statement of demand and participate in the adjudication mechanism prescribed under the Finance Act, 1994, this Court is of the view that the issue is covered against the revenue in terms of the decision of the Hon'ble Supreme Court in State of West Bengal Vs. Calcutta Club Limited [ 2019 (10) TMI 160 - SUPREME COURT ] which has been followed by this Court in the petitioner's own case M/S. OOTACAMUND CLUB VERSUS THE ASSISTANT COMMISSIONER OF CENTRAL GST CENTRAL EXCISE, COONOOR [ 2020 (2) TMI 1615 - MADRAS HIGH COURT] . Since the issue is covered in favour of the petitioner, no useful purpose will be served in relegating the petitioner to file reply to the statement of demand - Petition allowed.
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2022 (2) TMI 734
Quantum of penalty - penalty of ₹ 2,56,000/- being confirmed against him against the duty liability of the appellant for an amount of ₹ 40,318/- - whether the said imposition is not permissible being disproportionate? - HELD THAT:- Reliance placed upon the decision of Hon ble Karnataka High Court in PHILIPS ELECTRONICS INDIA LTD. VERSUS STATE OF KARNATAKA [ 2009 (1) TMI 182 - KARNATAKA HIGH COURT] wherein it has been held that the penalty cannot be more than the tax amount to be recovered from the assessee. It was specifically held by the Hon ble High Court that penalty based on extent of delay which sometimes exceeds the liability is grossly disproportionate and arbitrary penalty which is also an irrational levy automatically looses nexus achieving the object of correcting mischief sought to be preventive by the Legislation and therefore, renders itself unconstitutional. Also keeping in view that per day penalty at the rate of ₹ 200/- can be levied in terms of sub-clause (3) of section 77 of Central Excise Act and the SCN is silent about specifically invoking the said sub-clause (3), it is held that the grievance of the present appeal stands already covered by the decisions as discussed above. The issue, therefore, is no more res-integra. Imposition of penalty of ₹ 2,56,000/-+ ₹ 5000 + 40318/- as against the duty demand of ₹ 40,318/- is therefore, held to be unreasonable being absolutely disproportionate. Question of adjusting the said amount except for ₹ 40,318/- from the refund sanctioned to the appellant, therefore, does not arise. The adjudication with reference to the impugned SCN s is still pending due to matter being remanded back for afresh adjudication of claim for abatement and reverse charge, the same shall take its own independent course. Hence, setting aside of the present order under challenge to the extent beyond deduction of ₹ 40,318/- shall not be prejudicial to the interest of either of the parties to the lis - Appeal allowed.
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Central Excise
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2022 (2) TMI 783
Delay in adjudication of SCN - show-cause notice has not been adjudicated upon for about 16 years - HELD THAT:- Perusal of the records indicates that the Show Cause Notice was issued on 16 September 2005. A reply was filed by the Respondent. It is not in dispute that no notice of hearing on the said Show Cause Notice was issued to the Petitioner at any point of time. The Petitioner was not informed that the said Show Cause Notice was kept in call book as alleged in the affidavit-in-reply. There is no delay attributable on the part of the Petitioner in the affidavit-in-reply filed by the Respondent. This Court in case of PARLE INTERNATIONAL LIMITED VERSUS UNION OF INDIA AND OTHERS [ 2020 (11) TMI 842 - BOMBAY HIGH COURT] has dealt with the identical situation, where the Show Cause Notice was adjudicated upon after 13 years after the date of issuance. This Court after considering the judgments in the cases of SANGHVI RECONDITIONERS PVT. LTD. VERSUS UNION OF INDIA, THE COMMISSIONER OF CUSTOMS, AIR CARGO COMPLEX (IMPORT) , THE ADDITIONAL DIRECTOR GENERAL, DRI [ 2017 (12) TMI 906 - BOMBAY HIGH COURT] where there was delay of 14 to 17 years in adjudicating the proceedings, this Court held that when the revenue keeps the show-cause notice in call book then it should inform the parties about the same - this Court in the said judgement held that when a show-cause notice is issued to a party, it is expected that the same would be taken to its logical consequences within a reasonable period so that a finality is reached. In this case, the show-cause notice has not been adjudicated upon for about 16 years. It is not expected from the assessee to preserve the evidence/record intact for such a long period to be produced at the time of hearing of the Show-Cause Notice. The Respondent having issued the Show-Cause notice, it is their duty to take the the said Show-Cause notice to its logical conclusion by adjudicating upon the said Show-Cause Notice within a reasonable period of time. In view of the the gross delay on the part of the Respondent, the Petitioner cannot be made to suffer - Hearing of Show-cause notice belatedly is in violation of natural justice. The Impugned Show-Cause Notice dated 16 September 2005 issued by the Respondent to the Petitioner, annexed as Exhibit A to the Petitioner is quashed and set aside - petition allowed.
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2022 (2) TMI 733
Maintainability of appeal - period of limitation to maintain appeal has expired - petitioner submits that even after the adjudication order, the respondents have issued second show cause notice not permissible under law and adjudication order has been passed thereupon also - HELD THAT:- The fact however admitted by Learned Counsel is that such orders are appealable and no appeal therefore has been filed. In absence of a challenge to the adjudication order by an appeal, the attachment order in consequence thereof cannot be challenged. The foundation of the attachment order is adjudication order thereby the writ petition to challenge the attachment order would not be maintainable in absence of challenge to the adjudication order by maintaining the appeal. Even the excuse taken by the petitioner that an appeal was not maintainable due to expiry of limitation cannot help him in any manner. Default of the party cannot be to his benefit and accordingly we do not find any reason to cause interference in the attachment order dated 22-3-2021. The show cause notice has already been adjudicated and in absence of an appeal thereof, the prayer made in this writ petition cannot be granted. Petition dismissed.
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2022 (2) TMI 732
Refund of amount of mandatory pre-deposit - amount of mandatory deposit at the time of filing appeal before CESTAT is 10% of duty and penalties or just 2.5% of duties and penalties added to the pre-deposit of 7.5% thereof already made before Commissioner (Appeals) - adjustment/set off the amount of refund against the arrears towards assessee - HELD THAT:- The amount at the rate of 10% of duty and penalties as has to be deposited by the assessee for the appeals before CESTAT shall include the amount of pre-deposit before Commissioner (Appeals). Thus, the aforesaid 10% shall include the 7.5% of the amount of duty and / or penalty involved as was already deposited at the time of first appeal being preferred before Commissioner (Appeals). Hence, at the time of second appeal before Tribunal it shall only be 2.5% of the amount of duty or penalty that is to be deposited as amount of pre-deposit. However, the fact of the present case is that since the Circular of 2018 was not applicable at the time when the appeal before CESTAT was filed by the appellant in the year 2016-17 and as per the then prevalent provisions the appellant was supposed to deposit 10% of duty and penalty amount without including the amount of pre-deposit made by him before Commissioner (Appeals), that the appellant made a pre-deposit of 17.5%, accordingly. The said deposit qualifies to be called as pre-deposit under Section 35 F of Central Excise Act. The Larger Bench of this Tribunal also, at the relevant time, IN RE: QUANTUM OF MANDATORY DEPOSIT [ 2017 (4) TMI 1222 - CESTAT NEW DELHI (LB)] had held that under Section 35F of Central Excise Act, 1944 and under Section 129E of Customs Act, 1962 the assessee is required to make separate pre-deposit of 10% of amount of duty confirmed / penalty imposed for preferring a second appeal to Tribunal against the order of Commissioner (Appeals) - Keeping in view the said prevalent situation at the time when the appellant herein made a pre-deposit of 17.5%, his refund claim pursuant to setting aside of the demand/ penalty has to be sanctioned with the interest at the said deposit @ 17.5 % of duty and penalty deposited instead of sanctioning the refund of mere 10% of duty and penalty. As far as, first point of adjudication is concerned, the Adjudicating Authority below is held to have committed an error while not sanctioning the refund claim of entire amount of pre-deposit i.e. @ 17.5% of duty and /or penalty involved, that too, along with the interest. Recovery of sums due to the Government is dealt with under section 11 of Central Excise Act, 1944 - HELD THAT:- The Order under challenge has been passed after the amendment in section 11. Hence, the post amendment provision is to be followed. Perusal of the said provision makes it clear that the adjudicating Authority has no power to order adjustment as there no more remains the specific provision authorizing him to adjust any sanctioned amount/ refund towards any other amount due to the Revenue. Section 11 existing as on date is rather in the nature of garnishee proceedings. The said provision does not contemplate adjustment of monies due to assessee towards the amount due to the Revenue. There exist no other provision in the Act which enables the Revenue to adjust the amounts due to them as against the amounts due by them to the assessee - The Department can proceed against the assessee to recover the amounts due to them under the provisions of the Act but the refund to which assessee is entitled has to be sanctioned and disbursed in his favour - the issue stands decided as against the Department and in favour of the assessee. The adjudicating authorities below have committed an error while ordering adjustment of the amount of ₹ 2,43,608/- from the sanctioned refund of ₹ 8,72,425/-. The amount disbursed of ₹ 6,64,357/- is therefore held to be a short disbursement - Appeal allowed.
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2022 (2) TMI 731
Levy of central excise duty - waste and scrap products cleared by the appellant, without payment of duty - period from February 2013 to June 2017 - HELD THAT:- The issue was involved in M/S VARUN BEVERAGES LIMITED VERSUS C.C.E. AND ST, JAIPUR-I [ 2018 (4) TMI 823 - CESTAT NEW DELHI] where it was held that the various goods on which the Revenue seeks to collect Excise duty are all, admittedly, products incidentally arising during the manufacture of finished goods on which in any case, the appellant is discharging duty. These scrap material are not emerging due to a process of manufacture. Hence, they do not qualify to be taxed for excise levy. It will also be appropriate to refer to the decision of the Supreme Court in UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. [ 1991 (9) TMI 72 - SUPREME COURT] . The order passed by the Assistant Collector not only ignored the order of the Collector (Appeals) remanding the matter, but also distinguished the decision of the Tribunal by observing that the decision of the Tribunal had not been agreed to by the Department as an appeal had been filed in the Supreme Court. The assessee filed a writ petition in the Bombay High Court to challenge the said order of the Assistant Collector. The High Court not only quashed the order passed by the Assistant Collector but also directed the Department to allocate the matter to a competent officer for passing a proper order - The Supreme Court also observed that the order of the Tribunal is binding upon the Assistant Collectors who functions under the jurisdiction of the Tribunal and that the principles of judicial discipline require that the orders of higher appellate authorities are unreservedly followed by the subordinate authorities. The aforesaid decisions of the Supreme Court have been referred to by the Supreme Court in COMMISSIONER OF INCOME-TAX VERSUS RALSONS INDUSTRIES LIMITED [ 2007 (1) TMI 184 - SUPREME COURT] and it has been observed that when an order is passed by a higher authority, the lower authority is bound keeping in view the principles of judicial discipline. The appeal before the Commissioner (Appeals), therefore, should have been allowed solely on the ground that on the same issue the Tribunal had earlier decided that no excise duty could be levied but the Commissioner (Appeals) refused to accept this decision as a binding precedent and dismissed the appeal - Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 730
Levy of penalty under Rule 15(1) of Cenvat Credit Rules, 2004 read with Rule 26 of Central Excise Rules, 2002 - availment of wrong credit - forged bills of entry - HELD THAT:- Since the main company has settled their case under SVLDRs, 2019 no discussion is required to be made for company s case. However, the bill of entry is not an invalid document, the only lapse on the part of the company is that they have taken the credit on the Bill of Entry whereas the custom duty was paid but the same was not in the name of the M/s Nitco Ltd , Village- Silli, Silvassa, Gujarat. In this fact it cannot be said that the present appellant who is an employee of the company has intentionally done any fraud. The issue involved is of interpretation of Cenvat Credit Rules, 2004 for which the company M/s Nitco Ltd, Silli has been demanded the wrongly availed credit and penalty was also imposed. In this nature of case personal penalty cannot be imposed on the employee as the credit was not taken on a forged or invalid document but the only lapse was that the bill of entry was not in the name of the company but in the name of the different location. However, both the company belongs to one entity only even the availment of credit does not amount to double benefit. In these facts of the case, the personal penalty cannot be imposed on the employee. Penalty set aside - appeal allowed - decided in favor of appellant.
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2022 (2) TMI 729
CENVAT Credit - manufacture of dutiable as well as exempted products - exempted products include LPG (Domestic), SKO (Domestic), etc. - common inputs and input services which go into manufacture of dutiable as well as exempted products - non-maintenance of separate records - Scope of Rule 6 of CCR - HELD THAT:- Rule 6 of CCR, 2004 lists out obligations of the assessee to avail CENVAT credit. This Rule also provides various alternatives through which the obligations can be met. Rule 6(1) mandates that the assessee shall not take credit on the inputs/input services used in manufacture of exempted products. Rule 6(2) deals with cases where the manufacturer manufactures both dutiable and exempted products and requires the assessee to maintain separate accounts. Rule 6(3) provides another alternative to reverse an amount equal to 10% of the value of the exempted goods if the assessee chooses not to maintain separate accounts. If the manufacturer takes CENVAT credit and does not follow any of the obligations under Rule 6 can it be compelled to follow any of the options? - HELD THAT:- A plain reading of the Rule does not show so. An illustration will make the position clear. Colleges select students and grant them admission to various courses. The selection will be subject to conditions such as, produce all the original certificates for verification, pay the fee by a certain date, etc. If the fee is not paid by that date, the college may give the student the option to pay the fee by a further date with late fee. In such a case, the student has an option of not producing his certificates and not paying the fee and not taking the admission at all. He also has the option of producing his certificates and paying the fee in time and taking the admission - Taking admission or fulfilling the pre-requisites for admission are not his legal duties. By contrast, one who manufactures excisable goods or provides taxable services has legal obligations such as taking registration, paying duty/tax and filing returns and failure to discharge any of these legal duties entails penalties. There is no Rule under which a manufacturer can be compelled to follow any of the options of Rule 6.The SCNs in these appeals were issued proposing to recover under Rule 14 of CCR an amount to fulfill obligations under Rule 6(3). A plain reading of Rule 14 shows that it does not empower the Revenue to compel the manufacturer to maintain separate accounts or to pay an amount equal to 10% of the value of the exempted goods. Therefore, any demand of an amount under Rule 6(3) is per se, without any authority of law and there is no Rule under which such an amount can be demanded. There are no force in the argument of the Revenue that the Commissioner could not have decided the matters as per Rule 6(2) which was in existence prior to 2010. Therefore there was no restriction in the remand orders on the learned Commissioner deciding the matter in terms of Rule 6(2) of Cenvat Credit Rules, 2004. Maintenance of separate accounts of receipt, consumption and disposal of the inputs/input services under Rule 6(2) - HELD THAT:- This rule does not require the assessee to either procure the goods or input services separately for use in dutiable and exempted final products nor does it require the assessee to stock the inputs used in manufacture of dutiable and exempted products separately. All that it requires that separate accounts have to be maintained. Accounts can be maintained in many ways and the rules do not prescribe any particular form of accounts. The respondent has produced certificate from the Chartered Accountant who has audited their accounts showing that the percentage of exempted goods cleared by them never touched; late alone exceeded 15% and they have taken credit on common inputs and input services only to the extent of 85%.We find that as per the evidence produced by the respondent they have more than fully met the requirements of Rule 6(2). On the other hand, there are no evidence produced by the Revenue to show that the proportionate amount of Cenvat credit reversed/not taken by the respondent was calculated wrongly. Revenue also has not produced any alternative calculations to show how much should have been reversed/not taken . In the absence of any other evidence, the Chartered Accountant certificate produced by the respondent is accepted and it is held that the respondent had sufficiently met with the requirements of maintaining separate accounts under Rule 6(2) and the Commissioner has correctly dropped all the demands. This issue decided in favour of the Respondent assessee and against the appellant Revenue. The demands in the show cause notices under Rule 14 of the Cenvat Credit Rules, 2004 of an amount equal to 10% of the value of exempted goods Rule 6 (3) are not sustainable in law at all and, therefore, none of the demands could have been confirmed as the lack any legal basis. It is also found that the Commissioner has not exceeded the scope of the remand order of this Tribunal in the first round in examining if the respondent assessee has fulfilled the requirements of Rule 6(2) of the CCR, 2004 as the remand order left the issue open and has not given any finding on it. It is also found that in these matters, the respondent had maintained separate accounts in the most practical way possible by taking only proportionate amount of Cenvat credit to the extent of 85% which accounts for the proportion of dutiable goods manufactured by them and, therefore, the respondent assessee has met with the requirements of Rule 6(2). Appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2022 (2) TMI 728
Levy of penalty - tax and interest imposed by the petitioner- Assistant Commissioner Commercial Tax has been upheld - Form-C found to be fake and forged - HELD THAT:- After recording the concurrent findings, the Assessing Officer and both the Appellate Courts have found that Forms-C submitted by the Assessee were not genuine. Even then the Tax Board has exonerated the assessee from payment of penalty - the Assessee has miserably failed to prove before all the Authorities that he acted bonafideliy upon the Forms-C submitted by the Dealers of the other States. From the bare perusal of the provision contained under section 61 of the RVAT Act, 2003, it is clear that the penalty can be levied for avoidance or evasion of tax where (i) any Dealer has concealed any particulars from any returns furnished by him; or (ii) has deliberately furnished inaccurate particulars therein; and (iii) has concealed any transaction of sale or purchase from its accounts, registers or documents required to be maintained by him under the RVAT Act of 2003 - the three situations provide for levy of penalty in cases of active concealment and deliberate fraud or misinformation by the Assessee. The Tax Board has neither recorded any cogent finding on merits of the case before setting aside the penalty nor it has considered the provisions of section 61 of the RVAT Act, 2003, more particularly, when the fact was proved before all the Authorities that Forms-C submitted by the Assessee were forged and fake to avoid payment of Tax. The penalty was rightly imposed upon the Assessee by the Authorities as he (Assessee) furnished inaccurate particulars and he also concealed the transactions of sale and purchase to avoid the payment of Tax. Therefore, the Assessee is liable to pay penalty u/s 61 of the RVAT Act, 2003. Revision petition allowed.
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2022 (2) TMI 727
Non acceptance of requisite forms - rejection of claim of goods return of applicant - goods have been returned within six months by the purchaser of the applicant - absence of any equipment/machinery with the applicant for finishing, surfacing, drilling the CI Casting the Tribunal - sale of CI Casting as machinery parts - Whether the tax which has been deposited by the applicant proof of the same were already on record the Tribunal was justified even in not giving the benefit of the same? Whether in view of judgment of this Hon'ble Court in the case of Dhan Prakash Cane Crusher Vs. Commissioner of Trade Tax [ 2002 (4) TMI 898 - ALLAHABAD HIGH COURT ] the Tribunal was justified in not accepting the requisite forms submitted by the applicant? - HELD TH AT:- The Tribunal has fallen in error in rejecting the application filed by the assessee-revisionist under Section 12B of the U.P. Trade Tax Act, 1948. The Assessment Year in question was 1996-97 (U.P.). The assessment order was passed on 07.12.1999 whereas the first appeal order was passed on 12.9.2001. In the meanwhile i.e. after the conclusion of the original assessment proceedings but before the first appeal order came to be passed, the assessee-revisionist had obtained the disputed two forms III-B issued under the U.P. Trade Tax Rules, 1948 (hereinafter referred to as 'the Rules') from the purchasing dealer. Briefly the purchasing dealer had been enabled by law to purchase raw materials from the assessee-revisionist on a concessional rate of tax against forms III-B. In that regard the assessee-revisionist claims delay in issuance of forms III-B by the purchasing dealer. In the present case, though the assessee-revisionist claims to have always had knowledge of its entitlement to concessional rate of tax upon furnishing forms III-B, at the same time it has been submitted that such forms could not be adduced by the assessee-revisionist because the purchasing dealer did not issue the same to it. These two number of forms III-B came to be first issued to the assessee-revisionist on 08.4.2000 and 24.2.2001 respectively. The Assessment Year being 1996-97 and the forms having been issued prior to 16.12.2002 (the date when Rule 25- B(3) was amended) it clearly indicates that forms thus obtained by the assessee-revisionist were valid - the assessee-revisionist had adduced sufficient material and evidence to establish that it was prevented from bringing on record the evidence in the shape of two forms III-B before conclusion of the assessment proceedings. The Tribunal has rejected the application made by the assessee-revisionist to lead such additional evidence without considering the third situation when such evidence may be allowed to be admitted being where the evidence could not be brought on record despite due diligence. Clearly the Tribunal has fallen in error in acting in ignorance of the third situation where Section 12B of the Act would allow the appeal authorities to entertain additional evidence - In absence of any dispute as to the explanation furnished by the assessee-revisionist of it having pursued the matter with the purchasing dealers and of such dealer having issued the two number of forms III-B with delay, the question of law is answered in the negative i.e. in favour of the assessee-revisionist and against the revenue. Whether admittedly the goods have been returned within six months by the purchaser of the applicant which is duly supported by debit note, invoices, gate pass of the purchaser and the applicant has made correspondence entries in its books of account and has produced the same while filing the return in the subsequent months. The said documents are on record of the Tribunal, still the Tribunal was justified in rejecting the claim of goods return of the applicant? - HELD THAT:- The appeal authority and the Tribunal erred in not taking care of the error committed by the Assessing Authority. Clearly in face of the findings recorded by the Assessing Authority accepting the claim of the goods-return and in face of the unrebutted debit note as has been shown to be reconciled with the excise gate passes, it could never be denied that the goods had been returned within a period of two months from the date of sale - In absence of any other dispute between the parties the assessee-revisionist was clearly entitled to the deduction in its turn over upon simple application of Rule 44A(b) of the Rules - the questions of law is again answered in the negative i.e. in favour of the assessee-revisionist and against the revenue. Whether in absence of any equipment/machinery with the applicant for finishing, surfacing, drilling the CI Casting the Tribunal was justified in treating the sale of CI Casting as machinery parts? - HELD THAT:- The Tribunal, appeal authority and the Assessing Authority have clearly erred in applying a wrong principle in law. No party or assessee could have been saddled with a negative burden to establish that it did not have machining tools available or that it had not machined the castings. Merely because the word 'unmachined' or such other description was not found mentioned on certain bills whereas such mention was found on certain bills it may at the most have invited a suspicion on the part of the Assessing Authority. Such suspension may have driven the Assessing Authority to make a full fledged enquiry from the purchasing dealers of the assessee or he could have also made a survey of the assessee-revisionist's manufacturing facilities to determine if any machined castings were prepared and sold by the assessee-revisionist. In absence of such enquiry being made by the Assessing Authority either from the purchasing dealers of the assessee or by carrying out a survey of the revisionist's factory premises, the findings recorded by the Assessing Authority as upheld by the Tribunal are presumptuous based on nothing but conjectures. They are perverse and contrary to law - the question of law is answered in the negative and in favour of the assessee-revisionist and against the revenue. Whether the tax which has been deposited by the applicant proof of the same were already on record the Tribunal was justified even in not giving the benefit of the same? - HELD THAT:- Once the assessee-revisionist claimed to have deposited any amount towards tax over and above that disclosed in its returns, the Assessing Authority became obligated to verify the same. The State is not an unscrupulous tax collector. In face it accounts for every rupee that the tax payer deposits with it. Merely because the assessee-revisionist may not have claimed the deposit in the original returns would be of no consequence as to computation of outstanding demand - Against the Tribunal has erred in refusing to allow such verification exercise. Accordingly the question of law is answered in the negative and in favour of the assessee-revisionist and against the revenue. The revenue authority shall now carry out a verification of the two forms III-B submitted by the assessee-revisionist by way of additional evidence and also of the amounts claimed to have been deposited by the assessee-revisionist after the assessment order. As to the claim of goods returned and liability of CI Castings, the demand created by the Assessing Authority as sustained by the Tribunal be deleted. The revision is allowed .
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2022 (2) TMI 726
Refund of tax collected from the petitioner and deposited by the seller along with appropriate interest on such refund amount - principal argument of Mr. Sheth is that the respondents have wrongly declined to refund the amount of excess tax collected and deposited with them despite the fact that the High Court of Bombay in the case of the writ applicant itself in ASAHI INDIA GLASS LTD. VERSUS STATE OF MAHARASHTRA OTHERS [ 2020 (12) TMI 694 - BOMBAY HIGH COURT ] has directed the respondents to issue necessary C Forms to the writ applicant. HELD THAT:- When the C Forms issued by the Maharashtra Sales Tax Department came to be produced before the respondents herein for the purpose of seeking refund of tax amount of ₹ 1,87,69,739/- under the C.S.T. Act, two fold objections were raised by the respondent: first, the writ applicant is not registered within the State of Gujarat and secondly, the order passed by the Bombay High Court is an interim order - both the objections raised on behalf of the respondents are not tenable in law. The respondents are directed to forthwith refund the tax amount of ₹ 1,87,69,739/- under the C.S.T. Act collected from the writ applicant. Let this entire exercise be undertaken and completed within a period of four weeks from the date of receipt of the writ of this order - Application allowed.
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Indian Laws
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2022 (2) TMI 725
Dishonor of Cheque - challenge to order of acquittal - preponderance of probabilities - impact of presumption as contemplated under Sections 118(a) and 139 of Negotiable Instruments Act - HELD THAT:- On going through the materials available, it can be seen that, the specific case of the appellant is that, an amount of ₹ 3 lakhs was borrowed by the 1st respondent from him, on 02.01.2005. It is also his case that when the aforesaid amount was demanded back the 1 st respondent issued a cheque on 28.01.2005. Thus the specific case of the appellant is that the cheque in question which is bearing No.06361 was issued to the appellant by the 1 st respondent on 28.01.2005, in discharge of a liability created by 1 st respondent on 02.01.2005. Apart from the aforesaid cheque, there are no other materials to substantiate the transaction. Even though it is stated that the amounts were handed over by the appellant when the 1st respondent came to his residence at Kasargod, there are no witnesses to substantiate the same. The main contention raised of the learned counsel of the appellant is by placing reliance upon the presumption contemplated under Section 118(a) and 139 of Negotiable Instruments Act. It is true that the aforesaid Section 118(a) provides that unless contrary is proved it is to be presumed that a negotiable instrument has been made or drawn for consideration. Similarly, Section 139 provides that unless contrary is proved, the holder of the cheque received the cheque for discharge in whole or in part of debt or liability. However, the fact is that the presumptions contemplated under the aforesaid provisions are rebuttable. In order to rebut the presumption, the accused has to put forward a probable case and it is not at all necessary that it should be a case beyond reasonable doubt. It is a well settled position of law that the presumption can be treated as rebutted when the accused advances a probable case with evidence and the consideration for the same is not strict proof but only 'preponderance of probabilities' - there is overwhelming evidence in support of the case put forward by the 1st respondent. Right from the inception, he raised such a contention consistently and there are materials produced in support of the same. Therefore, it is evident that the presumption in favour of the appellant by virtue of Section 118(a) and Section 139 stands rebutted. The natural consequence of such rebuttal is that the burden to establish the offence allegedly committed by the 1st respondent is upon the shoulders of the appellant herein. When we consider the evidence on record in that perspective, it can be seen that, apart from the cheque there are no materials to substantiate the claim of the appellant. Even though he stated that, the amount was borrowed by the 1st respondent herein on 02.01.2005 and the cheque was issued in discharge of the said liability on 28.01.2005 no documents are there, to substantiate the same. It is evident from the documents produced by the 1st respondent that the said cheque was already entrusted with Joy Orathel and there are no evidence available on record as to how it reached in the possession of the appellant - no attempt has been made by the appellant to prove the transaction by adducing any evidence. In such circumstances, the conclusion arrived at by the learned Magistrate to the effect that the appellant failed to prove execution of the cheque is a sustainable view. The learned counsel for the appellant contended that, since the 1st respondent has admitted the signature, the presumption has to be drawn in his favour. It is true that the 1 st respondent has admitted the signature, but he never admitted that the said cheque was issued and handed over to the appellant herein. On the other hand, he has raised specific case that this cheque was handed over to one Joy Orathel in the year 1997 and the same was misused by the appellant, in connivance with the said Joy. In the light of the specific and consistent case amply proved by the 1st respondent through his deposition as DW1 and also with the help of Exts.D1 to D8, there are no scope for any interference. There are no material to rebut the presumptions which stand in favour of the 1st respondent herein - appeal dismissed.
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2022 (2) TMI 724
Dishonor of Cheque - offence punishable u/s 138 of Negotiable Instruments Act - dispute is amicably settled between the parties - HELD THAT:- It has emerged that the applicant has been convicted by the concerned Court for the offence punishable under Section 138 of the N.I. Act. However, now, the parties have amicably settled the dispute and, therefore, the respondent No. 2 has filed an affidavit stating that if the order of conviction passed against the applicant is quashed and set aside, the respondent No. 2 has no objection. When the parties have settled the dispute amicably, compounding of the offence is required to be permitted. Accordingly, the application is allowed.
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2022 (2) TMI 723
Dishonor of Cheque - has the plaintiff succeeded in establishing the execution of Ext. A1 cheque and if so, has the defendant rebutted the presumption under s. 118 of the Negotiable Instruments Act, 1881(the Act) by setting up a probable defense? - HELD THAT:- It is true that no complaint alleging the commission of the offence under s. 138 of the Act has been filed by the plaintiff. The learned Senior Counsel was pointedly asked as to why such a course of action had not been adopted, to which it was submitted that since the plaintiff is working abroad, it was not practical or possible for him to appear on all posting dates before the Magistrate Court concerned. That of course is not a satisfactory answer. But at the same time, it has to be noted that the plaintiff herein has paid a sum of ₹ 20 odd lakhs, certainly a hefty sum, as court fees before the trial court and this Court. Therefore, had there been no case at all as contended by the defendant, it is improbable for the plaintiff to have paid such a big sum and proceed with the litigation. In the case on hand, the court below has found that in spite of the existence of better evidence or best evidence in the possession of the plaintiff, he has failed to produce the same before the court. In reply to the applications filed by the plaintiff for production of additional documents, the learned counsel for the defendant drew our attention to the testimony of PW1 wherein he deposed that he is not in possession of any other document(s) to evidence the plaint transaction - According to the court below, there is only a general pleading in the plaint that payments were made to the defendant in several installments through cash as well as through Bank account. Ext. A17 was also produced only at the fag end of the trial. The plaintiff had also not referred to this payment when he was examined as PW1. In the absence of specific pleadings in the plaint regarding this payment and also the omission on the part of PW1 to refer to the same in his testimony, persuaded the court below not to rely on Ext. A17 on the ground that mere entries in the books of account are not sufficient to charge a person with liability, relying on Section 34 of the Evidence Act. However, it needs to be noticed that an amount of ₹ 35 Lakhs appear to have been paid to the defendant. This has to be viewed in the background of the contention taken up by the defendant denying the entire transaction. The case put-forward by the defendant that Exts. B1, B2 and A1 were actually given as security for the business transaction that took place between the parties in Dubai, is also not probable because even according to the defendant, the business transaction relating to the supply of building materials/hardware took place in Dubai. Therefore, for a transaction that took place in Dubai, it is improbable for the parties or the defendant to give Exts. B1, B2 and A1 cheques, which are admittedly cheques issued by the Banks in Kerala. It is further true that the plaintiff cannot succeed due to the inconsistent stand of the defendant or based on the loopholes or the weakness in the case put-forward by the defendant - even though there are some laches on the part of the plaintiff in properly conducting the case and omission or laches on his part in producing all the documentary evidence in his possession to prove his case when the matter had been posted for his evidence, in the facts and circumstances of the case, the interest of justice requires an opportunity to be given to the plaintiff to establish his case. The matter is remanded to the trial court for a fresh disposal. The plaintiff is given the liberty to adduce further evidence to substantiate his case - appeal allowed by way of remand.
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2022 (2) TMI 722
Seeking grant of bail - supply of narcotic drugs and psychotropic substances - prohibited goods - retraction of statements - recovery not made from petitioner - inadmissible evidences - HELD THAT:- Admittedly, no recovery has been affected from the petitioner. Though in the statement of the petitioner recorded under Section 67 of the NDPS Act it is noted that that the petitioner in his Honda City Car No.3003 gave the parcels to Satpal for being sent to Delhi, the same being not admissible in evidence in view of the decision of the Hon'ble Supreme Court in Tofan Singh [ 2020 (11) TMI 55 - SUPREME COURT ], the statement of Satpal only indicates that the car number of the petitioner was given and that the parcels will be sent in the said car. As per Satpal, the parcels were given to Danish and on Dr.Bansal asking about the parcels being received and sent, he inquired from Danish who said that the same were taken by Dr. Bansal's man from Apex Courier. No statement of Danish has been recorded to show that the petitioner has handed over the two parcels to him in his Honda City Car No.3003. Thus the allegations at best against the petitioner is that number of his Honda City Car was used for sending the parcels to the courier agency at Agra. In the absence of the statement of Danish, as per the complaint filed by the respondent who is not a witness and there is no evidence against the petitioner except the inadmissible statement of the petitioner himself that he delivered the parcels to Danish. Before the Court grants bail to an accused allegedly involved in an offence under the NDPS Act, the Court required to be satisfied that the accused is not guilty of the offence and that he will not involve himself in an offence under the NDPS Act while on bail. The petitioner has been in custody since January, 2019 and considering the evidence against him, this Court deems it fit to grant regular bail to the petitioner pending decision of the trial. Consequently, the petitioner is directed to be released on bail on his furnishing a personal bond in sum of ₹ 50,000/- with two surety bonds of the like amount subject to the satisfaction of the learned Trial Court. Further, subject to the condition that the petitioner will not leave the country without prior permission of the court concerned and in case change of address and/or mobile number, the same will be intimated to the Court concerned by way of an affidavit by the petitioner - Petition disposed off.
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2022 (2) TMI 721
Dishonor of Cheque - insufficiency of funds - interpolation/manipulation in the cheque - Service of notice - HELD THAT:- Firstly with regard to interpolation in the cheque Ex. P.2, it is to be stated that if the judgment of the trial Court is perused, it is found that the learned Magistrate has considered this aspect of the matter. What is held is that while cross-examining P.W.1, a suggestion was given that figure '11' was inserted behind number '5' and that P.W.1 denied that suggestion. Except this suggestion, there is nothing on record to show that the cheque was issued for ₹ 5,000/-. It is further observed that if according to the petitioner, the respondent manipulated the cheque, he could have given an intimation to bank to stop payment - Now if Ex. P.2 is perused, a sum of ₹ 1,15,000/- is written both in words and figures. The petitioner admits the signature on the cheque and does not dispute the sum written in words. But the argument of the learned counsel for the petitioner is that the cheque was filled up by somebody else. This argument is difficult to be accepted, because once the petitioner admits his signature on the cheque, it does not matter if the cheque is filled up by somebody else. Service of notice - HELD THAT:- The petitioner does not dispute the address written on the postal cover. Postal acknowledgment contains signature in Hindi. If the petitioner does not dispute the address and if the postal acknowledgment was returned after due service, it is deemed that the petitioner received the notice. Moreover as has been argued by Sri Bryen Stienberg, it is held by the Supreme Court in the case of CC. ALAVI HAJI VERSUS PALAPETTY MUHAMMED [ 2007 (5) TMI 335 - SUPREME COURT] that once notice is sent by registered post by correctly addressing the drawer of the cheque, the service of notice is deemed to have been effected. It is held that within 15 days of the receipt of summons from the Court, the accused can make payment and insist on rejection of complaint in case he disputes the service of demand notice. In this revision petition there is no scope for re-appreciation of evidence. The trial Court as also the appellate Court have properly appreciated the evidence - there are no infirmity in the findings given by both the Courts below - this revision petition fails and it is dismissed.
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2022 (2) TMI 720
Exemption from payment of electricity duty, post 01.09.2016 or not - writ petitioners being charitable education institutions registered under the provisions of the Public Trusts Act (the Maharashtra Public Trusts Act, 1950) - Maharashtra Electricity Duty Act, 2016 - HELD THAT:- As per Section 16 of the 2016 Act, on coming into force the 2016 Act, the Maharashtra Electricity Duty Act, 1958 stood repealed subject to the eventualities mentioned in Section 16 of the 2016 Act. None of the eventuality mentioned in proviso to Section 16 shall be attracted and/or applicable to the facts of the case on hand in view of the specific provisions providing for exemption from payment of the electricity duty as per subsection (2) of Section 3 of the 2016 Act. Therefore, for the purpose of exemption from payment of electricity duty on and after 01.09.2016, subsection (2) of Section 3 of the 2016 Act shall have to be applied and shall be applicable. Under the 1958 Act, the electricity duty was not leviable on the consumption charges or the units of energy consumed by or in respect of charitable institutions for the purpose; in respect of school or college imparting education or training in academic or technical subjects. Even as per Section 3(2)(ia), electricity duty shall not be leviable on the consumption charges or the units of energy consumed by or in a respect of any municipal corporation, municipality, municipal committee, town committee, notified area committee, Cantonment Board, Zilla Parishad or village panchyat constituted under any law for the time being in force in the State, for the purpose of, or in respect of a school or college imparting education or training in academic or technical subjects, a hospital, nursing home, dispensary, clinic, public street lighting, public water works and system of public sewers or drains (save in respect of premises used for residential purposes - there are material changes under the 2016 Act. As per Section 3(2) of the 2016 Act, even the public undertakings are liable to pay the electricity duty. As per Section 3(2)(iii), electricity duty is not leviable on the consumption charges or energy consumed, for the purposes of, or in respect of a school or college or institution imparting education or training, student s, hostels, hospitals, nursing homes, dispensaries, clinics, public streets lighting, public water works, sewerage systems, public gardens including zoos, public museums, administrative offices forming whole or, as the case may be, a part of system run by any local bodies constituted under any law for the time being in force in the State of Maharashtra. Therefore, Section 3(2)(iiia), which was there in 1958 Act, is now conspicuously and deliberately absent in Section 3(2) of the 2016 Act. The exemption provision need to be interpreted literally and when the language used in exemption provision is simple, clear and unambiguous, the same has to be applied rigorously, strictly and literally. Under the 2016 Act, charitable education institutions running the schools or colleges are specifically excluded from the exemption clause/exemption provision, Section 3(2). The original writ petitioners charitable education institutions registered under the provisions of the Societies Registration Act and/or under the Maharashtra Public Trusts Act, are not entitled to any exemption from levy/payment of the electricity duty on or after 08.08.2016 i.e. from the date on which the Maharashtra Electricity Duty Act, 2016 came into effect. Therefore, the High Court has committed a grave error in setting aside the levy of electricity duty levied on the original writ petitioners respondents No.1 to 10 herein - Appeal allowed.
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