Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 23, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Penalty u/s 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - goods detained on the ground that the goods were being transported on a vehicle different from that declared on e-way bill - onus to prove (shifting burden on petitioner) - The High Court held that, the intention to evade tax is sine qua non before imposition of penalty. I - Based on the lack of evidence demonstrating an intention to evade tax and the adherence to tax regulations by the petitioner, the High Court quashes the orders imposing penalties under Section 129(3) of the Act and allows the writ petition.
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Seeking grant of bail - availment of fake ITC - issuance of fake bills from seven firms managed by him and taking ITC through fake bills issued by fake firms created - The High Court held that, considering the gravity of the offence, so also, that petitioner has taken a fake Input Tax Credit (ITC) involving huge amount, the accused-petitioner is not enlarged on bail.
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Maintainability of appeal - appeal filed by the petitioner was dismissed on the ground of limitation - The High court concluded that the petitioner's appeal was filed beyond the prescribed limitation period under Section 107 of the GST Act. It held that the exclusion of Section 5 of the Limitation Act applies to appeals under the GST Act, as confirmed by previous rulings and the specific language of Section 107. - Section 107 of the GST Act, operates as a complete code in itself, explicitly delineating limitation periods for filing appeals and implicitly excluding the application of general limitation provisions such as Section 5 of the Limitation Act. - Writ petition dismissed.
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Classification of goods - Crackle - The AAAR held that, the product by name "Crackle" manufactured and supplied by the appellant containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours, should be classified under the Tariff Heading 1704 enumerated at Serial Number 32AA of Schedule -II (wrongly mentioned as Schedule-III) of Notification No. 01/2017-CT(Rate) as a Sugar Boiled Confectionery.
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Industrial consumer or institutional consumer? - Trading of Food grains, Sugars, Edible Oils etc. (unbranded) - Levy of GST on goods supplied by the applicant through the Nodal Agency - The AAR held that, the Department for Women, Children, Disabled & Senior Citizens qualifies as an institutional consumer if specific conditions are met, exempting the supplied goods from GST. - Goods supplied through the Nodal Agency, HACA, are also exempt from GST under the same conditions.
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Classification of supply - supply of hiring services of air conditioning system and fire extinguishing system - The AAR observed that, there can be no dispute in this regard that the intention of annexation of air conditioning system and fire extinguishing system involves significant degree of permanence. - Each of the supplies would attract tax @ 18% under serial number 17(viii) of the said notification as leasing or rental services and therefore, the supply received by the applicant from TCGUIH, being a mixed supply, would also be taxable @ 18% i.e., supply which attracts the highest rate of tax. - Input Tax Credit (ITC) is available to the assesseee.
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Levy of GST - export of pre-packaged and labelled rice Up to 25 Kgs, to foreign buyer - supply of pre-packaged and labelled Rice up to 25 Kgs, to exporter on “bill to ship to” basis - the AAR concludes that GST is leviable on the export and supply of pre-packaged and labelled rice up to 25 kilograms. This ruling applies to transactions involving foreign buyers, exporters, and domestic sales.
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Maintainability of Advance Ruling application - no question is found to have been raised by the applicant - The AAR states that since no questions were raised for advance ruling and the submitted document does not pertain to the matter, the application is rejected.
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Classification of supply - composite supply or not - Carbon credit trading - Support services to agriculture, forestry, fishing, animal husbandry - The AAR concluded that the services rendered by the applicant are commercial in nature, primarily aimed at carbon credit trading, and do not strictly fall within the ambit of agricultural support services as outlined in the GST notification.
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Requirement of GST registration - dealing in brokerage of agricultural produce which is exempt - The AAR determined that the applicant's activities qualify as commission and brokerage services under GST laws. They clarified that regardless of the turnover, GST registration is required for persons involved in such services. The applicable GST rate for these services was determined to be 9% each for CGST and SGST.
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Levy of GST - Supply or not - compensation amounts such as liquidated damages/trade settlement/damages collected from the customers for non-performing of contractual obligations or breach of the contract - The AAR held that, in the light of section 7 read with definition of consideration u/s 2(31)7 compensation amounts paid by defaulting party to the non-defaulting party for tolerating the act of non performance or breach of contract have to be treated as consideration for tolerating of an act or a situation under an agreement - Liable to GST @18%.
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Classification of goods - original car seat covers - The AAR ruled that, the original car seat covers which are manufactured and designed to permanently fit over the raw foam seat of the vehicles by the OEMs as well as the seat manufacturers who further sell to OEMs and are sold with the vehicle as an essential and integral part of seat is classifiable under HSN 8708 and is liable to pay @ 28%(CGST @ 14%+SGST @ 14%).
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Classification of goods (micronutrient Fertilisers) - Mangala Borosan - Mangala G1 - Classifiable under Chapter Heading 3105 as Fertilisers or not - The AAR ruled that, the product’s classification under 28332990 is substantiated by Its composition, as expounded in existing literature. The absence of micronutrient blends and the prevalence of inorganic chemicals, specifically sulphates, underscore its appropriateness for placement within this specific classification. - The product in question are not classifiable under Chapter Heading 3105 as Fertilisers.
Income Tax
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Rectification application - Validity of Garnishee Notices for recovery of tax - contention of the writ petitioners that the Garnishee Notices had come to be issued even though various applications for rectification were pending and the respondents having adopted coercive measures without disposing of those applications - The High Court observed that, since Garnishee Notices already operate, we take note of the additional prayer made by the writ petitioner of it being permitted to securitize 20% of the outstanding tax demand by submitting an undertaking that it would maintain a credit balance in the aforenoted accounts to the extent of INR 3,43,37,076/- being 20% of the total outstanding demand till such time as the rectification applications are disposed of.
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Validity of draft assessment order and final assessment order as barred by limitation u/s 153(2A) - Scope of the word “received” - Tribunal held the draft assessment order and final assessment order passed by the AO are barred by limitation u/s 153(2A) - The High Court observed that, ITAT has while passing the orders impugned before us proceeded on the basis of the principles enunciated in the aforenoted two decisions of the High Court. - The HC dismissed the revenue's appeal.
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Taxability of salary income in India while rendering service in abroad - assessee is NRI - income accrued inside or outside India - assessee is a non-resident employee in an Indian Company IBM India Pvt. Ltd. and was sent abroad to UK for rendering services there and service was rendered in UK though the appointment made in India - The ITAT held that the assessee, being a non-resident, qualified for tax treatment u/s 5(2)(b) of the Act.
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Addition made towards excess physical stock during the survey - unexplained investment u/s 69 taxable at rates prescribed u/s 115BBE - The ITAT concurred with the Commissioner's decision, stating that the Assessing Officer failed to rebut the assessee's valuation adjustments adequately. They agreed that the discrepancy in stock could be attributed to unrecorded sales, and upheld the Commissioner's decision to treat the addition as business income. - The ITAT dismissed the Revenue's appeal, affirming the Commissioner's order deleting the additions.
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LTCG - Denial of exemption u/s 54 - the ITAT observed that, for the purpose of claiming the benefit u/s 54 of the Act, within a period of one year before or two year after the date of transfer of old house, the tax payer should acquire another residential house or should construct a residential house within a specified period of three years from the date of transfer of old house. - The Tribunal held that t assessee has not fulfilled either of the conditions mentioned in Section 54, there is no error or infirmity in the orders of the Lower Authorities in denying the benefit of deduction to the assessee u/s 54.
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Denial of deduction claimed u/s 80P (2)(d) - AO disallowed the benefit by invoking the provision of section 154 for rectification of mistake change of opinion - interest derived by the Co-operative society from its investments with any other co-operative society - The ITAT held that considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative society the assessee is entitled for the exemption on the interest earned on the deposits. - The allowability of deduction of interest u/s. 80P(2)(d) decided in favour of assessee on merit itslef.
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MAT computation u/s 115JB - Adjustment for computation of book profits u/s. 115JB on the ground that expenses are unascertained liability. - The Tribunal addressed each provision made by the assessee (for HD commission, ex gratia and bonus, gratuity to HD canvassers, and gratuity), analyzing whether they constituted ascertained or contingent liabilities. It referenced judicial precedents to allow the assessee's claims, emphasizing the principle that provisions based on actuarial valuations are considered ascertained liabilities.
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Addition u/s 56(2)(viib) r.w.r 11UA - excess premium charged - issuance of preference shares to the director/ex-director of the assessee company - The ITAT held that there was no justification for the A.O to have triggered the deeming provisions of Section 56(2)(viib) i.e a counter tax evasion provision - The ITAT addressed the valuation dispute, emphasizing the distinction between preference shares and equity shares, particularly focusing on their characteristics and the applicable methods for determining their FMV. It was noted that preference shares, due to their nature, could not be valued using the same method as equity shares. - Matter restored back for redetermine the FMV of the subject preference shares subject to the tribunal's observations recorded as regards the mistakes/infirmities.
Customs
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Challenged the show cause notice issued - mergers and de-mergers - The petitioner argues that the show cause notice was issued in the name of a company, M/s.Fabritex Exports Pvt Ltd, which has ceased to exist due to mergers and de-mergers. - The High Court held that, the benefit of advance license was availed by the Noticee (transferor) and it had filed to discharge its obligation under the advance license, the liability has to be discharged by the transferee company as its successor. As a transferee company, the petitioner cannot state that the liability of the noticee company stood extinguished on account of its merger /amalgamation with it. - Consequently, the HC dismissed the writ petition.
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Amendment of bills of entry - The High court examined Section 149 of the Customs Act, which permits amendments of import documents under certain conditions. - HD found that the first proviso to Section 149 allows amendments even after goods are cleared for home consumption, subject to the condition of existence of documentary evidence at the time of clearance. - As regards the requirement that the importer should establish that the goods originated from Australia, as discussed earlier, this aspect should be determined by examining the certificate of origin and any other relevant documents. - Matter restored back.
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Classification of Betine Hydrochloride (Betine HCL) - The Tribunal noted that no samples were drawn for chemical testing to support the classification, and the product literature from the manufacturer indicated that "Betaine Hydrochloride" is an animal feed additive, produced according to International Quality Standard FAMI QS, and not suitable for human or medicinal use. - The Tribunal dismissed the Revenue's appeals and allowed the appeals filed by the appellant, confirming the classification of "Betaine Hydrochloride" under CETH 230990.
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Classification of "quicklime" imported goods - The CESTAT considered the chemical composition of the imported "quicklime" and previous judgments on similar matters. - On the percentage of chemical composition, the highest percentage of ‘available CaO2/calcium oxide is 92.8%’. - The Tribunal found that the "quicklime" imported by the appellants does not fall under the high purity category required for classification under CTI 2825 9090 and is instead correctly classified under CTI 2522 10 00, aligning with the appellants' declaration.
Indian Laws
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Condonation of delay by applying Section 5 of the Limitation Act - Section 378(5) of CrPC - In the present case, there is no such exclusionary provision under Section 378 of CrPC, or at any other place in the Code. The benefit of Section 5 read with Sections 2 and 3 of the Limitation Act, 1963 can therefore be availed in an appeal against acquittal. There is no force in the contentions raised by the appellants as regards the non-application of Section 5 of the Limitation Act in the present case and the appeal is therefore dismissed.
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Dishonour of Cheque - legally enforceable debt or not - The only defence, which has been taken by the petitioner-convict during trial was that the cheques were issued in good faith because of friendship of him with the complainant. - The High Court found that the oral evidence is not rebutted by the petitioner/ accused/ convict by adducing evidence even to rebut the presumption under Section 118 and 139 of the N.I. Act. Though the petitioner/ accused/ convict, in cross-examination of complainant C.W.-1, this question was put up that no income tax return was filed by the complainant; but the same fact is not rebutted by the accused/ convict/ petitioner by adducing evidence in rebuttal. - The revision petition against the order of trial court dismissed.
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Dishonour of Cheque - applicability of principles of discharge - allegations of taking the amount on the pretext of Chinese technology - Forged documents and cheating - The High Court held that while the case under Section 138 of the Negotiable Instruments Act was not made out, a prima facie case under Sections 406 and 420 of the Indian Penal Code existed. Consequently, the petition was allowed in part, with the petitioner discharged from liability under Section 138 of the Negotiable Instruments Act but facing further proceedings under Sections 406 and 420 of the Indian Penal Code.
IBC
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Initiation of CIRP u/s 7 - classification of Commission on sales - Financial Debt or not - threshold limit - The Adjudicating Authority analyzed the definition of 'financial debt' under Section 5(8) of the IBC and concluded that the commission on sale amount did not qualify as financial debt as it did not meet the criteria of disbursal against the consideration for the time value of money. - The NCLAT held that the Appellant having failed to meet the threshold limit in the earlier Section 7 application has now tried to overcome this impediment by inflating the claim amount by resorting to a calculation methodology which lacks rational basis.
SEBI
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Exit Policy of SEBI - letter issued by SEBI calling upon CSE [Calcutta Stock Exchange] to apply for voluntary exit - The High Court held that, Regulations such as those which have been framed by the SECC Regulations, insofar as they define the conditions for recognition, of minimum net worth, composition of the board of directors, dispersal of ownership and norms for governance, do not infringe any legal right of the stock exchange. The challenge is, therefore, lacking in substance.
Service Tax
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Classification of services - leaning Activity Services or not - rendering the services of “Evacuation of Ash from ash ponds and nuisance-free transportation and disposal of the ash” to Thermal Power Stations - The tribunal held that the activities of “Evacuation of Ash from ash ponds and nuisance-free transportation and disposal of the ash” in Thermal Power Stations is not liable to service tax under the category of 'Cleaning Services' - the demands of service tax along with interest and penalty confirmed in the impugned orders set aside
Central Excise
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Method of Valuation - section 4 of Central Excise Act, 1944 or section 4A of Central Excise Act, 1944 - packages of cake mixes manufactured having been affixed with retail sale price (RSP) - The tribunal held that, for the period before the Legal Metrology (Packaged Commodities) Rules, 2011, goods not intended for retail sale (as indicated by the appellant) did not qualify for section 4A assessment based on RSP. - The tribunal upheld the demand for differential duty for the period prior to 1st April 2011, siding with the respondent on the assessment method. For the period after 1st April 2011, it set aside the demand, recognizing the expanded scope of section 4A.
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Correctness of erasure of credit already availed by prospective invalidation of eligibility for retention of credit that would subject those services already procured and used in manufacture/rendering of services to the test of eligibility once again - deletion of rule 6(5) of CENVAT Credit Rules, 2004 with effect from 31st March 2011 - The Tribunal emphasizes that the deletion of rule 6(5) does not affect the validity of credit availed under rule 3 of the CENVAT Credit Rules, 2004, at the time of procurement of services. - It concludes that the appellant's entitlement to credit cannot be curtailed or impacted by the deletion of rule 6(5), and the impugned order is not sustainable.
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Non-fulfillment of input output norms as per the allegation of the Department - defective PETs also should be considered as part of the output or not - Applicability of Note 2 of the SION - The tribunal held that, this Note 2 cannot be treated as a new norm prescribed for the future manufacture only. This simply prescribes the norms for normal production which are being carried out by the Appellant all along. Therefore, the Adjudicating Authority is in error in taking the stand that this Note 2 cannot be applied for the goods manufactured during the past period.
Case Laws:
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GST
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2024 (2) TMI 1073
Penalty u/s 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - goods detained on the ground that the goods were being transported on a vehicle different from that declared on e-way bill - onus to prove (shifting burden on petitioner) - HELD THAT:- The said goods were intercepted only two-three hours after the goods have left the SEZ Unit, and therefore, it cannot be said that this e-way bill was wrongly being used. It is a fact that the burden of proof lies on the petitioner in certain cases to show that there was no evasion of tax. However, when the the error in the documents is only that of a clerical or typographical error, the initial burden of proof lies on the department to show there was intention to evade tax. In the present case the department has failed to do so and infact has not even tried to do so. The documents produced by the petitioner at the time of the interception itself indicates that the goods have been transported from a SEZ Unit to the DTA after payment of custom duty and payment of IGST. The department has accordingly failed to shift the burden of proof on the petitioner as the only error found by the department was that the vehicle number was incorrect. Apart from this one error in the e-way bill, nothing has been shown by the department to justify the imposition of penalty under Section 129(3) of the Act. The impugned order also failed to take into account the document produced by the petitioner of the transporter wherein the explanation was given with regard to the reason for the mistake of the vehicle number in the e-way bill. The intention to evade tax is sine qua non before imposition of penalty. In present case the department has failed to establish any such intention whatsoever. Furthermore, the Appellate Authority has failed to look into all the documents that were produced by the petitioner to rebut the allegation of the department with regard to intention to evade tax. The impugned orders dated June 22, 2019 and June 22, 2018 are quashed and set aside - petition allowed.
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2024 (2) TMI 1072
Nature of the services which are provided by the Petitioner - service agreements entered into by the Petitioner with foreign clients or not - HELD THAT:- The respondents submits that Petitioner with these proceedings has annexed some sample agreements. Further, she submits that since the core issue involves the nature of the services which are provided by the Petitioner and in the absence of the documents being on record, the Appellate Authority was constrained in determining the exact nature of petitioner s services. She submits that the matter could be remitted to the Appellate Authority with liberty to the Petitioner to place all such agreements on record and for the Appellate Authority to reconsider the issue. The matter is remitted to the Appellate Authority - Petition disposed of by way of remand.
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2024 (2) TMI 1071
Seeking grant of bail - availment of fake ITC - issuance of fake bills from seven firms managed by him and taking ITC through fake bills issued by fake firms created - HELD THAT:- The allegation in the charge sheet itself speaks and states that accused-petitioner has generated the fake ITCs of Rs. 20,28,40,841/-. It is settled law that economic offences constitute a class apart and required to be scanned with a different approach in the matter of bail. In the matter of Ratnambar Kaushik [ 2022 (12) TMI 263 - SUPREME COURT] , the facts were entirely different and that was not a case of generating the fake ITC. In that case, goods were supplied without paying the CGST. In the present case, the facts are entirely different. The Hon ble Apex Court in the matter of Lalit Goyal [ 2022 (8) TMI 1319 - SC ORDER ] dismissed the bail application of the petitioner. In the matter of Lalit Goyal, it was alleged that petitioner Lalit Goyal and other persons had made various fake firms and claimed Input Tax Credit of Rs. 18.91 Crores without any transportation of goods. In that case, co-ordinate Bench of this Court in S.B. Criminal Misc. Bail Application No.13042/2021 dated 07.09.2021 [ 2021 (9) TMI 1347 - RAJASTHAN HIGH COURT] dismissed the bail application of the petitioner and in SLP vide order dated 26.08.2022 [ 2022 (8) TMI 1319 - SC ORDER] , the Hon ble Apex Court dismissed the Special Leave Petition, therefore, considering the gravity of the offence, so also, that petitioner has taken a fake Input Tax Credit (ITC) worth of Rs. 20,28,40,841/-, the accused-petitioner is not enlarged on bail. The bail application of accused-petitioner under Section 439 Cr.P.C. is dismissed.
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2024 (2) TMI 1070
Principles of natural justice - SCN was uploaded on the portal in the category of Additional Notices which were not easily accessible - Petitioner prays that one opportunity be granted to the petitioner to respond to the Show Cause Notice and an opportunity of a personal hearing be also given - HELD THAT:- Perusal of the impugned order shows that the impugned order categorically records that the tax payer has not replied or appeared in person. Consequently, the petitioner needs to be granted one opportunity to respond to the Show Cause Notice and thereafter, the Show Cause Notice to be re-adjudicated. Respondent shall open the portal to enable the petitioner to file a response to the said Show Cause Notice dated 24.09.2023 which shall be filed within a period of 30 days - the impugned order is set aside - petition disposed off.
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2024 (2) TMI 1069
Maintainability of appeal - appeal filed by the petitioner was dismissed on the ground of limitation, as the same was filed approximately 66 days beyond the date of limitation - HELD THAT:- Section 107 of the GST Act prescribes a specific limitation period within which appeals against certain decisions must be filed. This limitation period is integral to the functioning of the appellate mechanism under the GST Act and reflects the legislative intent to expedite the resolution of tax disputes. By imposing a time limit on the filling of appeals, Section 107 aims to prevent undue delayed in the adjudication process and promote the efficient administration of the GST regime. On the other hand, Section 5 of the Limitation Act provides for the extension of prescribed periods in certain exceptional circumstances, such as when sufficient cause is shown for the delay. In analyzing the conflicting interpretations concerning the exclusion of Section 5 of the Limitation Act as far as Section 107 of the GST Act is concerned, it is essential to consider the rationale behind the exclusion of the Limitation Act in certain special statues, particularly in the context of taxation. Tax laws are often characterized by strict procedural requirements and time-bound deadlines, reflecting the need for expeditious resolution of tax disputes to ensure revenue certainty and fiscal stability. Taxing statutes like the GST Act embody a comprehensive framework with specific limitation provisions tailored to expedite the resolution of tax-related matters. Section 107 of the GST Act, operates as a complete code in itself, explicitly delineating limitation periods for filing appeals and implicitly excluding the application of general limitation provisions such as Section 5 of the Limitation Act. The present writ petition is without any merit and is dismissed.
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2024 (2) TMI 1068
Appeal dismissed on the ground of limitation - cancellation of registration of the Petitioner with retrospective effect - HELD THAT:- In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The impugned show cause notice dated 09.01.2021, order of cancellation dated 27.01.2021 and the order in appeal dated 28.04.2023 are accordingly set aside. GST registration of the petitioner is restored, subject to petitioner filing requisite returns upto date - petition allowed.
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2024 (2) TMI 1067
Appeal dismissed on the ground of limitation - cancellation of registration of the Petitioner with retrospective effect - HELD THAT:- In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 24.11.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 14.08.2019 i.e., the date when the Show Cause Notice was issued. Petition disposed off.
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2024 (2) TMI 1066
Refund of IGST - Constitutional Validity of section 96(2) of the RGST Act and section 96 of the CGST Act, section 99 of the CGST Act and Section 99 of the RGST Act , Entry 10 of the Impugned Notification dated 28.06.2017, proviso to section 5(1) of the IGST Act, 2017 - HELD THAT:- In the case of Mohit Minerals [ 2022 (5) TMI 968 - SUPREME COURT] , Hon ble Supreme Court, inter alia observed and directed Since the Indian importer is liable to pay IGST on the composite supply , comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the supply of services by the shipping line would be in violation of Section 8 of the CGST Act. The writ petition filed by the petitioner is disposed of in the light of the judgment in the case Mohit Minerals - the petitioner would be entitled to refund of the IGST paid by it - petition disposed off.
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2024 (2) TMI 1065
Jurisdiction to issue SCN - issuance of multiple show-cause notices based on one single audit report - Section 65 (7) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Matter requires consideration - Issue notice. Issue notice of the stay application also - List the matter on 30.01.2024.
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2024 (2) TMI 1064
Maintainability of petition - Delay in preferring the appeal - It is contended that the petitioner has already deposited 10% of the demanded tax amount before the first appellate authority and as there is no second appellate forum, this Court should entertain this writ petition - HELD THAT:- Since the petitioner wants to avail the remedy under the provisions of law by approaching 2nd appellate tribunal, which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of fifteen days from today, the rest of the demand shall remain stayed during the pendency of the writ petition. List this matter along with M/S PRAVAT KUMAR CHOUDHURY AND OTHERS VERSUS ADDITIONAL STATE TAX OFFICER, CT GST, CUTTACK AND OTHERS [ 2023 (11) TMI 1014 - ORISSA HIGH COURT] on the date fixed therein.
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2024 (2) TMI 1063
Condonation of delay of 8 days in filing the application for revocation - delay caused due to the delay in Aadhar verification - HELD THAT:- This Court is satisfied with the submissions and the reasons stated in the affidavit filed in support of the petition and the delay of 8 days is condonable. Accordingly, the delay is condoned and hence, this Court is inclined to set aside the impugned order. This writ petition is allowed and the impugned order dated 07.09.2023 is hereby set aside.
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2024 (2) TMI 1062
Maintainability of petition - availability of alternative remedy - petitioner submits that the petitioner is unable to avail of the remedy before the Appellate Tribunal because of non-constitution thereof and he would make the payment as per the provisions as contained in Section 112 of subsection (8) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Accordingly, it is directed that till the next date of hearing, subject to deposit of the amount by the petitioner under Section 112 of sub-section (8), the recovery proceedings for the balance amount of the disputed amount shall be deemed to be stayed till the next date of hearing.
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2024 (2) TMI 1061
Classification of goods - Crackle manufactured and supplied by the appellant containing the ingredients sugar, cashew nuts, butter, liquid glucose and other permitted flavours - classified under SI. No. 32AA of Schedule -III (sic) of Notification No. 1/2017-Central Tax (Rate) as Sugar Boiled Confectionery, chargeable to tax at the rate of 12% or not - whether the product Crackle is a sugar boiled confectionery? - HELD THAT:- As per the Appellant, the main ingredients of the product is Sugar @ 68% to 72%, Cashew Nuts accounts for 28% to 30% followed in a small measure, butter and Glucose. The description of the product manufactured by the Appellant and that described in the FSSAI Regulations and Indian Standard 1008:2024 support the claim of the Appellant that the product Crackle manufactured by them is a Sugar Boiled Confectionery . It must be stated that this Authority is basing its findings on the submissions and literature regarding the manufacturing process of Crackle as provided by the Appellant. Any suppression, misrepresentation of facts would be dealt with in terms of Section 104 of the CGST / SGST Act 2017. In the case at hand, there is a specific entry for Sugar Boiled Confectionery under SI. No. 32AA of Schedule -II of Notification No. 01/2017-CT(Rate). Based on the literature and claim made by the Appellant in their submissions, it is seen that the product Crackle would fall under the category of Sugar Boiled Confectionery . As such, the product Crackel would rightly be classified under Schedule-II SI. No. 32AA chargeable to a tax rate of 12%. As regards the finding of the AAR in IN RE: M/S. SRI VENKATESWARA CASHEW CHIKKY MANUFACTURERS [ 2023 (9) TMI 162 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH] that only products generally meant for immediate consumption are to be classified under CH 1704, it is found that the same has an inherent flaw. If the said HS Explanatory provisions of immediate consumption is to be made applicable to Crackle , then the same is equally applicable to all the products falling under Chapter Heading 1704 which are covered under Schedule -I, Schedule -II and Schedule -III as all these products are grouped under CH 1704. It cannot be said that products falling CH 1704 of Schedule -II only are hit by the said clause of immediate consumption and those falling under CH 1704 of Schedules I and III are not affected. Further, No alternative HSN was suggested by the AAR - the Committee opines that the Advance Ruling dated 26.05.2023 passed by the Authority for Advance Ruling for the State of Andhra Pradesh Is not in order. Therefore, the Committee sets aside the ruling pronounced in SRI VENKATESWARA CASHEW CHIKKY MANUFACTURERS. Thus, the product by name Crackle manufactured and supplied by the appellant containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours, should be classified under the Tariff Heading 1704 enumerated at Serial Number 32AA of Schedule -II (wrongly mentioned as Schedule-III) of Notification No. 01/2017-CT(Rate) as a Sugar Boiled Confectionery.
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2024 (2) TMI 1060
Industrial consumer or institutional consumer? - Trading of Food grains, Sugars, Edible Oils etc. (unbranded) - Levy of GST on goods supplied by the applicant through the Nodal Agency - Hyderabad Agricultural Co-operative Association Limited (HACA) - HELD THAT:- The Department for Women, Children, Disabled Senior Citizens in September 2022 has floated a tender for supply of Red Gram Dal Procurement through HACA who are nominated as nodal agency vide G.O. RT No. 69 dated 07/04/2017. The supply of Red Gram is meant for all the ICDS projects in the state. The HACA will call for tenders on behalf of the Women Dev. Child Welfare Dept., for the supply of Red Gram Dall. HACA is an agency to provide service for the proper qualitative and timely supply of Red Gram Dall to above Department as per their norms/requirements. Thus HACA is an agent on behalf of The Department for Women, Children, Disabled Senior Citizens who is the principal who as nominated HACA as a nodal agency for the specific purpose of calling for tenders on behalf of the principal and ensure proper qualitative and timely supply of Red Gram Dall. The Department for Women, Children, Disabled Senior Citizens of the State of Telangana is buying packaged commodities, directly from the manufacturer or from wholesale dealers for use by that institution and not for commercial or trade purpose. Therefore the said department will qualify to be an institutional consumer as long as the following conditions are fulfilled: i. The packaged commodities are bearing a declaration not for retail sale , ii. The purchase is made directly from the manufacturer or from an importer or from wholesale dealer, iii. The purchase is made for use by that institution and not for commercial or trade purpose. The supplies made by the applicant will be exempt from CGST SGST if made to the institutional consumer who is satisfying the above conditions.
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2024 (2) TMI 1059
Classification of supply - supply of hiring services of air conditioning system and fire extinguishing system - Rate of CGST and SGST - to be charged under SAC Code 997314 or not - composite supply or mixed supply - eligibility of avail ITC - HELD THAT:- The hiring of air conditioning machine and fire extinguisher would attract tax @ 28% and @ 18% respectively being the same rate applicable for supply of such items and when such are supplied in conjunction with each other for a single price, the supply being a mixed supply would attract tax @ 28%. However, in the instant case, air conditioning system and the fire extinguishing systems which have been installed in the building have lost its character of a movable property and thereby cannot be regarded as goods. In COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD VERSUS SOLID CORRECT ENGINEERING WORKS ORS. [ 2010 (4) TMI 15 - SUPREME COURT] the Hon ble Supreme Court of India observed that attachment of the plant in question with the help of nuts and bolts to a foundation intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth. The court further held that manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property. However, in the case at hand, there can be no dispute in this regard that the intention of annexation of air conditioning system and fire extinguishing system involves significant degree of permanence. Further, contrary to the observation made by the Hon ble Apex court that the plant can be moved and is indeed moved after the road construction or repair project , air conditioning system and fire extinguishing system are not intended to be moved and indeed not moved after they are installed in the building. In the instant case, rate of tax on supply of hiring services of air conditioning system and fire extinguishing system would not be determined vide serial number 17(iii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. According to our view, each of the supplies would attract tax @ 18% under serial number 17(viii) of the said notification as leasing or rental services and therefore, the supply received by the applicant from TCGUIH, being a mixed supply, would also be taxable @ 18% i.e., supply which attracts the highest rate of tax. Whether the applicant is eligible to avail the credit of tax being paid by him to the supplier? - HELD THAT:- A registered person is eligible to avail credit of input tax if all the conditions laid down in section 16 of the GST Act get fulfilled and such credit is not restricted under sub-section (5) of section 17 of the Act ibid. - In the instant case, tax paid by the applicant on hiring charges is not restricted under sub-section (5) of section 17 of the Act. As a result, the applicant is entitled to take credit of input tax charged by his supplier namely TCGUIH subject to fulfillment of all the conditions under section 16 of the GST Act.
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2024 (2) TMI 1058
Levy of GST - export of pre-packaged and labelled rice Up to 25 Kgs, to foreign buyer - supply of pre-packaged and labelled Rice up to 25 Kgs, to exporter on bill to ship to basis i.e., bill to exporter and ship to customs port, Exporter ultimately exports the rice to foreign buyer - supply of pre-packaged and labelled rice up to 25 Kgs, to the factory of exporter, Exporter will export the rice - HELD THAT:- Reference invited to the Notification no 06/2022 (CT Rate), dated 18th July 2022 wherein, GST has been made applicable on supply of pre-packaged and labelled commodities attracting provisions of Legal Metrology Act, 2009. The expression pre-packaged and labelled means a pre-packaged commodity as defined in clause (I) of Section 2 of the Legal Metrology Act, 2009 (1 of 2010) where, the package in which the commodity is pre packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act 2009 (1 of 2010) and the rules made there under. In the instant case, the ultimate buyer is not present and the commodity is being prepacked for an unknown ultimate buyer. The buyer from the applicant is re-selling the same to another buyer be it export or indigenous. This advance ruling authority agrees with the observation regarding the applicability of GST on pre-packaged and labelled irrespective of the fact that whether it is for domestic sale or exported outside the country. Thus, GST will be applicable on all three issues.
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2024 (2) TMI 1057
Maintainability of Advance Ruling application - no question is found to have been raised by the applicant - document is found to be a statement on Auditors‟ comments on Emphasis of Matter in Independent Auditors‟ Report for Financial Year 2021-2022 and Management Reply against the comment thereto - Scope of Advance Ruling - HELD THAT:- In terms of clause (a) of section 95 of the GST Act, an advance ruling means a decision provided by this authority or the appellate authority, as the case may be, on matters or any questions specified in sub-section (2) of section 97 or sub-section (1) of section 100 of the GST Act in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. An application for obtaining an advance ruling is to be made on the common portal in FORM GST ARA-01. However, in the instant case, no question is found to have been raised by the applicant against the specified column of the application in FORM GST ARA-01. The applicant has enclosed an annexure with the application. The applicant, even in the said document so annexed, has not stated any questions on which the advance ruling is sought. The said document is found to be a statement on Auditors‟ comments on Emphasis of Matter in Independent Auditors‟ Report for Financial Year 2021-2022 and Management Reply against the comment thereto. There cannot be any reason to admit the application. The application, therefore, is rejected.
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2024 (2) TMI 1056
Classification of supply - composite supply or not - Carbon credit trading - Support services to agriculture, forestry, fishing, animal husbandry as provided in the Sl. No. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017 (as amended time to time) having SAC code 9986 - whether taxable rate applicable would be NIL in term no. 24 of Notification 11/2017-Central Tax (Rate) dated June 28, 2017? - HELD THAT:- The appellant's role in carbon credit trading is a complicated legal situation. Resolving this matter requires careful use of legal principles, taking into account all the details of what the appellant is doing within the broader legal and regulatory context resulting in outcome of them not getting the exemption under support services. This legislative interpretation underscores the importance of ascertaining the specific characteristics and nature of carbon credits to determine their GST status accurately. It is pertinent to note that the services said to have been undertaken by the appellant are nowhere in tune with the agricultural support services and are mostly independent activities. The worker or activities undertaken by the appellant as per agreement viz., project during doesn t fall under the support services to agriculture under SI. No.2 4 of Heading 9986 of Notification No. 11/2017-Central Tax(Rate), dated 28th June, 2017.
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2024 (2) TMI 1055
Requirement of GST registration - dealing in brokerage of agricultural produce which is exempt - requirement to discharge GST - Rate of GST - HELD THAT:- In the instant case the applicant is involved in processing of the agricultural produce such as de-husking or splitting of the pulses to make the product marketable. Pulses commonly known as dal are obtained after dehusking or splitting or both. The process of de-husking or splitting is usually not carried out by farmers or at farm level but by the pulse millers. Therefore pulses (dehusked or split) are also not agricultural produce. However whole pulse grains such as whole gram, rajma etc. are covered in the definition of agricultural produce - It is clarified that processed pulses fall outside the definition of agricultural produce given in notification No. 11/2017-CT (Rate) and 12/2017-CT(Rate) and corresponding notifications issued under IGST and SGST Acts and therefore the exemption from GST is not available to them. Commission and brokerage - HELD THAT:- Commission typically refers to income earned by a person for arranging a transaction between two parties and earning a percentage of the sales proceeds. The commission earned in such a scenario is taxable under GST as a service at 18%, GST registration applies to all commission and brokerage income irrespective of the turnover limits of the taxpayer Persons who make taxable supplies of goods or services or both on behalf of other taxable persons whether as an agent or not are required to take registration regardless of turnover - In the instant case the applicant is involved in the processing of the products and also facilitates the transactions between buyer and seller and collects brokerage charges. Therefore the applicant is required to obtain registration as well has to pay CGST @ 9% and SGST @ 9% as per notification 11/2017-central Tax (Rate) dated 28.06.2017 given below, irrespective of whether the goods involved in the transaction are exempted or taxable under GST.
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2024 (2) TMI 1054
Levy of GST - Supply or not - compensation amounts such as liquidated damages/trade settlement/damages collected from the customers for non-performing of contractual obligations or breach of the contract - HSN Code applicable and the rate of GST applicable - restriction of input tax Credit of common services under 42 43 of CGST/APGST Rules, 2017 - HELD THAT:- In the present case the customers are paying certain amount to the applicant. The amount so paid is neither ad-hoc, unconditional nor at the whims of any customer nor the appellant. There is a clear mathematical formula as to calculation of such amount and the conditions/scenarios contingent upon which the amounts are payable are clearly narrated in the agreement itself. The circular issued by CBIC vide circular No. 178/10/2022-GST Dtd. 03/08/2022 is only meant to clarify the position of law and shall be applied reasonably having regard to the facts of the case. The circular had clearly mentioned, Inter alia, vide para 7.1.6 that Therefore, such payments, even though they may be referred to as fine or penalty, are actually payments that amount to consideration for supply, and are subject to GST, in cases where such supply is taxable. Since these supplies are ancillary to the principal supply for which the contract is signed, they shall be eligible to be assessed as the principal supply, as discussed in detail in the later paragraphs. Naturally, such payments will not be taxable if the principal supply is exempt. In the light of section 7 read with definition of consideration u/s 2(31)7 compensation amounts paid by defaulting party to the non-defaulting party for tolerating the act of non performance or breach of contract have to be treated as consideration for tolerating of an act or a situation under an agreement and hence such an activity constitutes supply of service and the compensation amounts such as liquidity damages are exigible to tax under CGST @ 9% and SGST @9% each under the chapter head 9997 at serial no. 35 of Notification No. 11/2017- Central/State tax rate.
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2024 (2) TMI 1053
Classification of goods - original car seat covers which are manufactured and designed to permanently fit over the raw foam seat of the vehicle by the OEMs as well as the seat manufactures who further sell to OEMs and are sold with me vehicle as an essential and integral of part of seat is classifiable under HSN 9401 as Seats (other than those of heading 9402) whether or not convertible into beds, and parts thereof other than seats of kind used for aircraft or not - HELD THAT:- Permanent Seats, herein referred to as such, are explicitly designated for exclusive utilization within a specified motor vehicle, thereby serving a specialized function meticulously aligned with the precise design and manufacturing specifications of said particular vehicle. The nomenclature permanent seat cover is employed to underscore the highly specialized nature of these seating arrangements, exemplifying a bespoke creation characterized by an assiduous focus on detail, ensuring seamless integration with the intended motor vehicle. It is paramount to recognize that Permanent Seats transcend mere functional contributions to the overall operation of the motor vehicle; they assume a pivotal role in guaranteeing that each seat is purposefully tailored for the precise vehicle with which it is affiliated. This meticulous alignment serves as a safeguard, preserving the structural Integrity and performance parameters of the motor vehicle In Its entirety. The original car seat covers which are manufactured and designed to permanently fit over the raw foam seat of the vehicles by the OEMs as well as the seat manufacturers who further sell to OEMs and are sold with the vehicle as an essential and integral part of seat is classifiable under HSN 8708 and is liable to pay @ 28%(CGST @ 14%+SGST @ 14%).
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2024 (2) TMI 1052
Classification of goods (micronutrient Fertilisers) - Mangala Borosan - Mangala G1 - Classifiable under Chapter Heading 3105 as Fertilisers or not - HELD THAT:- The determination to classify the product under 28332990 is fortified by a meticulous examination of relevant scholarly works. In contrast to its characterization as a blend of micronutrients, the product unequivocally comprises inorganic chemicals. This classification aligns seamlessly with the delineated characteristics in the relevant code, accentuating the importance of its predominantly sulphate-centric constitution. This classification not only mirrors the inherent qualities of the product but also ensures precise alignment within the regulatory framework. The product s classification under 28332990 is substantiated by Its composition, as expounded in existing literature. The absence of micronutrient blends and the prevalence of inorganic chemicals, specifically sulphates, underscore its appropriateness for placement within this specific classification. This thorough assessment facilitates a nuanced understanding of the produces nature and contributes to Its compliance with regulatory standards.
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Income Tax
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2024 (2) TMI 1051
Revision petition u/s 264 - validity of Assessment u/s 153A/153C - whether assumption of jurisdiction by the AO u/s 153C was illegal and therefore the entire proceedings were void ab initio - As decided by HC [ 2017 (5) TMI 1425 - DELHI HIGH COURT] no ground to invalidate the assumption of jurisdiction under Section 153C and CIT's impugned orders are not unfair, unjust or irrational and are consistent with the basic procedural requirements. On none of these counts do the impugned orders of the CIT in the present case warrant interference HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petitions are dismissed.
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2024 (2) TMI 1050
Income deemed to accrue or arise in India - licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) read with Article 12 of the Indo US DTAA - HELD THAT:- The issue raised by the Revenue in the present special leave petition is covered against them in the case of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] wherein held that the payment received for providing access to computer software to its member firms located in India, does not amount to royalty liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA. As Ld' Additional Solicitor General states that a Review Petition has been filed against this judgment, which is currently pending and the right of the Revenue to revive the present special leave petitions may be reserved, in case the Review Petition is allowed. Recording the aforesaid, the special leave petition is dismissed, as the same is covered by the said decision of this Court. In case the review petition on the issue raised in the present special leave petition is allowed, it will be open to the petitioner(s) to get the present special leave petitions revived.
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2024 (2) TMI 1049
Rectification application - Validity of Garnishee Notices for recovery of tax - contention of the writ petitioners that the Garnishee Notices had come to be issued even though various applications for rectification were pending and the respondents having adopted coercive measures without disposing of those applications - writ petitioners had contended that while dealing with the pending rectification applications, when the petitioner had approached the Centralized Processing Center [CPC] it was apprised that it would have to move the jurisdictional AO. HELD THAT:- We find ourselves unable to appreciate the manner in which the two rectification applications have come to be disposed of and that too after we had taken cognizance of the grievance of the writ petitioners. If the AO were of the opinion that the powers of rectification did not stand conferred, it would have been well advised to desist from making observations pertaining to the merits of the application. Similarly, the fact that an appeal has not been filed would not constitute a valid ground for refusing to consider a rectification application provided the issues that are raised fall within the ambit of Section 154 of the Act. Respondents appearing on instructions submitted that against the various demands which remain outstanding, the petitioner has chosen not to invoke the appellate remedies available and has merely moved rectification applications. He has also alluded to the petitioner having not made any deposit against the outstanding demand. We may note that the total demand as per the Garnishee Notices is stated to be INR 17,16,85,384/-.However, and notwithstanding the above, Respondents submitted that the jurisdictional AO would have no objection to considering the rectification applications afresh in case such liberty were to be accorded by the Court. As we view the order pertaining to AY 2016-17, we find that the rectification application has come to be rejected solely on the ground that no appeal had been filed by the writ petitioner against the original order of assessment. In terms of that order, the rectification applications which had been pending right from 30 April 2021, 05 October 2021 and 09 January 2024 have come to be summarily rejected. Similarly, while passing the orderpertaining to AY 2022-23, while the jurisdictional AO has on the one hand held that it has not been transferred rectification rights by the CPC, it has proceeded further to observe that the adjustments would not fall within the ambit of Section 154 of the Act. Therefore, both these orders are liable to be quashed and the matter remitted to the jurisdictional AO for considering the pending rectification applications afresh and in accordance with law. Permission to securitize 20% of the outstanding tax demand - Since Garnishee Notices already operate, we take note of the additional prayer made by the writ petitioner of it being permitted to securitize 20% of the outstanding tax demand by submitting an undertaking that it would maintain a credit balance in the aforenoted accounts to the extent of INR 3,43,37,076/- being 20% of the total outstanding demand till such time as the rectification applications are disposed of. In our considered opinion the prayer for lifting of the Garnishee Notices and for provisioning of adequate security is an issue which would merit examination and consideration by the jurisdictional AO in the first instance. We thus leave it open to the writ petitioner to move the jurisdictional AO in this regard also. The prayer for modification and lifting of the Garnishee Notices as well as for disposal of the pending rectification applications may be considered with due expedition and disposed of within a period of one week. Assessee in default and levying interest u/s 220(1) - Case of the writ petitioner was that as per the rectification order passed by the CPC a demand of INR 1,22,310/- came to be created which was duly paid by the petitioner on 13 April 2022 and thus within 30 days of the passing of the aforesaid order. It is in the aforesaid context that they question the respondent treating it as an assessee in default and levying interest u/s 220(1). In this respect, the assessee is stated to have filed a rectification application on 08 January 2024. That rectification application has come to be rejected by an order dated 12 February 2024.
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2024 (2) TMI 1048
Time limit to decide appeal - scheme for disposal of appeals through faceless system - petitioner seeks a direction to the Respondent No. 2 to decide the pending application filed by the petitioner in a time bound manner - HELD THAT:- Looking to the fact that the appeal is pending since 2018 and has been heard and reserved for judgment. In such a situation, the Respondent No.2 is directed to decide the appeal forthwith as expeditiously as possible preferably within a period of 4 weeks from the date of receipt of certified copy of the order and pass a reasoned and speaking order. The order be communicated to the petitioner forthwith.
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2024 (2) TMI 1047
Aggregation of additional income - Validity of assessment order - three additions were made to the total income of the assessee - difference in opening and closing balances, loan availed of by the petitioner and interest income earned from Axis Bank. HELD THAT:- As aggregate additional income was arrived at by examining the difference between the opening and closing balance. While undertaking this exercise, the respondent has failed to take into account the fact that the sale consideration from the proceeds of sale of agricultural land was duly disclosed in the statement of income read with the schedule thereto. As regards the interest income from Axis Bank, the same is also duly disclosed in the entry relating to TDS under the head 'Total income' read with Schedule 18. Thus, it appears that the AO did not take into account the material placed on record and, consequently, the order impugned herein is vitiated by non-application of mind. Addition of loan availed of by the petitioner it appears that the petitioner has not placed all necessary documents on record. Therefore, it is just and necessary to direct the petitioner to place all relevant documents for consideration. For reasons set out above, the writ petition is disposed of by remanding the matter for re-consideration. The assessee is permitted to respond to the assessment order by treating the same as a show cause notice within a maximum period of four weeks from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, take into consideration all documents produced by the assessee and issue a fresh assessment order in respect of the three additions dealt with in the impugned assessment order.
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2024 (2) TMI 1046
Validity of draft assessment order and final assessment order as barred by limitation u/s 153(2A) - Scope of the word received - Tribunal held the draft assessment order and final assessment order passed by the AO are barred by limitation u/s 153(2A) HELD THAT:- We note that although the Full Bench of the Court in Odeon Builders [ 2017 (3) TMI 1266 - DELHI HIGH COURT] was concerned with Section 260A of the Act, there are certain significant observations appearing in that decision of the Court which would have a material bearing on the question which is proposed for our consideration - Full Bench also considered the contention of the Revenue that unless the jurisdictional Commissioner receives a copy of the order of the ITAT, the limitation prescribed in the aforenoted provision for filing an appeal would not commence. It becomes pertinent to note that Section 260A also employs the expression is received and thus stands at par with Section 153(2A). Full Bench proceeded to reject the contention of the Department that the receipt of the order of the ITAT must be considered as being service upon the jurisdictional Commissioner holding that the acceptance of such a view would amount to rewriting 153(2A) and construing that provision contemplating receipt of the order by the concerned Commissioner or Principal Commissioner of Income Tax. Full Bench had unequivocally found that while examining the issue of limitation, one would have to pose the question of when the Department became aware of the order and not when the concerned Commissioner or Principal Commissioner may have been served or had derived knowledge. It proceeded further to observe that once a responsible officer of the Department becomes aware of the order, the period of limitation would commence form that point in time. In GE Energy Parts [ 2019 (8) TMI 1068 - DELHI HIGH COURT] what is relevant is when the Commissioner of Income-tax (Judicial) representing the Department before the Income-tax Appellate Tribunal received the order, which in any event is generally made available in the public domain soon after the order is pronounced. This is the purport of the decision of the Full Bench of this court in CIT v. Odeon Builders P. Ltd. (supra), the ratio decidendi of which will apply to the case on hand as well since the language of section 260A(1) and section 275(1)(a) of the Act is identical. ITAT has while passing the orders impugned before us proceeded on the basis of the principles enunciated in the aforenoted two decisions. We thus find no justification to interfere with the view as expressed. The appeal raises no substantial question of law
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2024 (2) TMI 1045
Taxability of salary income in India while rendering service in abroad - assessee is NRI - income accrued inside or outside India - assessee is a non-resident employee in an Indian Company IBM India Pvt. Ltd. and was sent abroad to UK for rendering services there and service was rendered in UK though the appointment made in India - relief as per DTAA between India and United kingdom denied for the want of tax residency certificate by the AO HELD THAT:- The assessee has received total salary and the same has been returned and offered to tax in UK. The income tax return and certificate of residence has been placed on record. Once the assessee qualifies to be treated as non-resident u/s 6 of the Act then the scope of the taxable income is in the hands of assessee would be as per Section 5(2)(b) of the Act. In the present case also the assessee undisputedly is a non-resident and therefore the salary received by the assessee while rendering service in abroad is not taxable in India. The case of the assessee finds support from the decision of Arvind Singh Chauhan [ 2014 (3) TMI 18 - ITAT AGRA] wherein held once it is not in dispute that the assessee qualifies to be treated as a 'non-resident' under Section 6 of the Act, as is the undisputed position in this case, the scope of taxable income in the hands of the assessee, under Section 5(2), is restricted to (a) income received or is deemed to be received in India, by or on behalf of such person; and (b) income which accrues or arises, or is deemed to accrue or arise to him, in India. Therefore, it is only when at least one of these two conditions is fulfilled that the income of a non-resident can be brought to tax in India. In the present case, the services are rendered outside India as crew on merchant vessels and tankers plying on international routes. A salary is compensation for the services rendered by an employee and, therefore, situs of its accrual is the situs of services, for which salary paid, being rendered. Appeal of the assessee is allowed.
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2024 (2) TMI 1044
Addition made towards excess physical stock during the survey - unexplained investment u/s 69 taxable at rates prescribed u/s 115BBE - CIT(A) deleted addition and directing to assess only Gross profit on stock difference as per the working given by the assessee during the assessment proceedings - assessee submitted that physical inventory was valued at selling price which would require adjustment of GST component as well as adjustment of Gross Profit component to bring the stock at cost price which was the basis of valuation of closing stock in the books maintained in the software - as argued AO should not have merely relied upon sworn statement but should have made additional efforts in proving that the findings of survey were right. HELD THAT:- From the facts, it emerges that physical stock was taken at selling price whereas the stock in the books of accounts was being reflected at cost price. Therefore, the physical stock was required to be adjusted for GST component as well as for Gross Profit component to make the two items comparable. The assessee furnished necessary workings in this regard during the course of assessment proceedings which could not be controverted by Ld. AO. No defect has been pointed out by Ld. AO in assessee s workings. No quantitative differences have been noted. The Ld. AO has merely raised an objection that the assessee did not object to the valuation at the time of survey. As in the statement recorded during survey, the assessee demanded more time to reconcile the two components. The same was done at the time of assessment proceedings. Obviously, the onus was on Ld. AO to controvert the working of the assessee which was not done. CIT(A), in our considered opinion, clinched the issue in correct perspective. The deficit in stock could be termed as sales effected but not recorded in the books of account. CIT(A) has already estimated gross profit against the same and sustained the addition to that extent which is quite appropriate on the facts and circumstances of the case. The same has rightly been held to be business income - Decided against revenue.
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2024 (2) TMI 1043
Disallowance u/s 14A r.w.r. 8D - dividend income - AO rejecting the suo-motto disallowance made by asseessee - contention of the assessee is that had the AO excluded the non-dividend bearing investments and investment made out of non-interest bearing fund, no disallowance would have been called for - CIT(A) has sustained the additions to the extent of exempt income without adverting to the contentions of the assessee regarding exclusion of investments that did not earn dividend income, investments that earned taxable income and investments that were made out of interest free own funds. HELD THAT:- There is no ambiguity under the law that Section 14A of the Act casts statutory obligation on the Assessing Authority to verify and satisfy itself about the correctness of claim of the assessee regarding suo-motto disallowance or no disallowance at all in relation to expenditure incurred for earning of exempt income. If the AO fails to give clear finding, he would be failing into statutory obligation. In the present case, the AO had not adverted to the objections of the assessee and did not accept the suomotto disallowance made by the assessee. AO failed to take into account that the assessee was having interest free fund. Certain investment did not earn exempt income and some investment in foreign entities were amendable to tax in India. AO did not give any cogent reason for rejecting the suo-motto disallowance. Thus disallowance made by AO and restricted by CIT(A) to the extent of exempt income, is not justified. We therefore, direct the AO to delete the impugned addition. Appeal of assessee allowed.
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2024 (2) TMI 1042
LTCG - Denial of exemption u/s 54 - assessee has not purchased any new property within the time specified in the provision of Section 54 - HELD THAT:- In the present case, as per the Agreement dated 18/02/2014, the Assessee has been given full right to use, to hold, enjoy, sell, mortgage the Property to be purchased by the Assessee. On the other hand, the first party will not have any right, title or interest over the said property. It is also obverted that as per the Assessee, the new Flat was purchased by sale endorsement dated 18/02/2014, but later on contended that the Assessee has purchased Bare-Shell flat on 13/08/2016, which is not supported by any of the documents. On the contrary, the Assessee has entered into Agreement to Sell on 18/02/2014 which itself given with certain absolute rights to the assessee as mentioned above. For the purpose of claiming the benefit u/s 54 of the Act, within a period of one year before or two year after the date of transfer of old house, the tax payer should acquire another residential house or should construct a residential house within a specified period of three years from the date of transfer of old house. Considering the fact that assessee has not fulfilled either of the conditions mentioned in Section 54 of the Act, we find no error or infirmity in the orders of the Lower Authorities in denying the benefit of deduction to the assessee u/s 54 - Decided against assessee.
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2024 (2) TMI 1041
Nature of expenses - treatment of repair maintenance and store and space expenses - whether such expenditure is capital or revenue? - Test of enduring benefit - assessee is required to demonstrate that the expenses have been claimed for a routine up keep of building and plant machinery - contention of the assessee is that the expenditure was incurred to maintain the upkeep of the existing assets and no new asset came into existence by such repairs HELD THAT:- Looking to the nature of expenditure made by the assessee it is seen that there are replacement of the entire components and laying of roads etc. Therefore, in our considered view the AO ought to have verified the correctness of the claim that it is purely for the routine upkeep of building and plant machinery and not for major repairs which brought enduring benefit to the assessee. Thus, in the absence of clear finding about the nature and extent of repairs treating the expenditure as capital is not justified. However, it is clarified that in respect of repairs made on road, such expenditure would be allowable since the assessee is not the owner of roads, outside its premises. We, therefore, set aside the impugned order and restore the issue to the file of AO for verification of the correctness of the claim of the assessee. Ground is allowed for statistical purpose.
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2024 (2) TMI 1040
Denial of deduction claimed u/s 80P (2)(d) - AO disallowed the benefit by invoking the provision of section 154 for rectification of mistake change of opinion - interest derived by the Co-operative society from its investments with any other co-operative society - HELD THAT:- The issue of allowability of deduction of interest received from other co-operative society (though the said co-operative society is doing banking activities) is allowable u/s 80P(2)(d) of the Act is already decided by the Jodhpur bench in the case of in the case ITO Vs. Bhilwara Zila Dugdh Utpadak Sahkari Sang Ltd., [ 2023 (9) TMI 1410 - ITAT JODHPUR] wherein as held Section 22 of the Regional Rural Bank Act provides that Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961, thus considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative society the assessee is entitled for the exemption on the interest earned on the deposits. Thus allowability of deduction of interest u/s. 80P(2)(d) decided in favour of assessee.
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2024 (2) TMI 1039
Penalty u/s 271(1)(c) - allegation of defective notice u/s 274 - charge has not been specified in the notice - Non-striking off of the irrelevant part - HELD THAT:- The charge has not been specified and it is an omnibus notice. In such circumstances, in the case of Sahara India Life Insurance Co. Ltd [ 2019 (8) TMI 409 - DELHI HIGH COURT] has held that the penalty order passed is liable to be quashed on account of this defect which is fatal. We further note that in the case of Mr. Mohd. Farhan A. Shaikh[ 2021 (3) TMI 608 - BOMBAY HIGH COURT] has held that no specification of charge in the penalty notice leads to same becoming void and penalty on that count is to be deleted - Decided in favour of assessee.
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2024 (2) TMI 1038
Estimation of income - bogus purchases - HELD THAT:- As AO has not doubted the sales and hence considering the ratio of decision of Hon'ble Jurisdictional High Court in the case of CIT v. Nikunj Eximp [ 2013 (1) TMI 88 - BOMBAY HIGH COURT] and CIT Vs. Simit P Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] and to meet the ends of justice, set-aside the order of the CIT(A) on this disputed issue and direct the assessing officer to estimate the income @12.5% on unapproved/ bogus purchases and partly allow this ground of appeal of the assessee. Deduction u/sec 80IC - disallowing the claim u/s 80-IC(2)(a) in the assessment order passed u/s 143(3) r.w.s 147 as against the same was allowed by his predecessors while passing the Assessment Order u/s 143(3) - HELD THAT:- When a query was raised to Ld.AR to substantiate with the submissions on claim of deduction u/sec 80IC of the Act in lieu of notice U/sec 142(1) of the Act discussed above, made in the original assessment proceedings u/sec 143(3) of the Act , the explanations are not convincing and are not supported with the evidences and similarly the DR also could not express the view on this query. Therefore, considering the principles of natural justice shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) on this disputed issue and remit the entire disputed issue of claim of deduction U/sec 80IC of the Act for limited purpose to the file of the Assessing Officer to examine and adjudicate afresh on merits. Appeal filed by the assessee is partly allowed for statistical purposes.
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2024 (2) TMI 1037
Condonation of delay filing appeal before ITAT - present appeal involves a delay of 161 days - bonafide reasons for delay or not? - AR submitted that though the Ld. CIT(Appeals)/NFAC had dismissed the appeal vide his order dated 21.03.2022, but the assessee appellant remained unaware about the same, and the same had come its knowledge only in the course of its audit for A.Y. 2022-23 - HELD THAT:- As the assessee appellant was in receipt of order of the CIT(Appeals) on 21.03.2022 (as mentioned in the memorandum of appeal filed before us), therefore, we are unable to comprehend that what stopped the assessee in preferring the present appeal upto 17th June, 2022. We are afraid that as the reasons given by the assessee for explaining the delay are not bonafide, therefore, the same cannot be summarily accepted. Considering the callous and lackadaisical conduct of the assessee company wherein it had delayed the filing of the present appeal without any justifiable reason, we do not find any substance in the claim of the Ld. AR that the delay in filing of the appeal had occasioned for bona fide reasons. As observed in the case of Ramlal, Motilal and Chotelal Vs. Rewa Coalfields Ltd [ 1961 (5) TMI 54 - SUPREME COURT] that seeker of justice must come with clean hands, therefore, now when in the present appeal the assessee appellant had failed to come forth with any good and sufficient reason that would justify condonation of the delay involved in preferring of the captioned appeal - Decided against assessee.
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2024 (2) TMI 1036
Disallowance u/s. 14A r.w.r.8D - expenditure incurred in earning exempt income or not? - HELD THAT:- We note that this issue was considered by this Tribunal in the case of Canara Bank [ 2021 (2) TMI 1366 - KARNATAKA HIGH COURT] held from perusal of Section 14A of the Act, it is evident that for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation of the income which does not form part of his total income under the Act. The expenditure, the return of investment and cost of requisition are distinct concepts. Therefore the word 'incurred' in Section 14A of the Act have to be read in the context of the scheme of the Act and if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other incomes which is includable in the total income for the purposes of chargeability to the tax It is equally well settled that expenditure is a pay out. In order to attract applicability of section 14A of the Act, there has to be a pay out and return of investment or a pay back is not such a debit item. [See: WALFORT SHARE AND STOCK BROKERS (P) LTD [ 2010 (7) TMI 15 - SUPREME COURT] as well as MAXOPP INVESTMENTS LTD [ 2018 (3) TMI 805 - SUPREME COURT] . In the instant case, the assessee has admittedly not incurred any expenditure. Decided in favour of assessee. Deduction u/s 36(1)(vii) - deduction claimed of bad debts of non-rural branches - claim denied as amount was not actually written off in the loan account of the debtors and entire write off (both rural and non rural debts) should be adjusted against the credit balance in the provision a/c u/s 36(1)(viia) and only the excess can be claimed. Since there is no excess amount, the write off is not allowable - HELD THAT:- As decided in own case [ 2022 (1) TMI 583 - ITAT BANGALORE] for AY 2014-15 in favour of the assessee after considering Explanation 2 inserted in section 36(1)(vii) by Finance Act, 2013 (after the decision of the Supreme Court in the case of Catholic Syrian Bank [ 2012 (2) TMI 262 - SUPREME COURT] wherein set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the bad debts relating to nonrural branches u/s 36(1)(vii) of the Act without adjusting the same against the PBDD a/c, since the said PBDD a/c relates to rural advances only. MAT computation u/s 115JB - CIT(A) upheld the addition for provision for HD commission, provision for ex gratia and bonus, provision for gratuity to HD canvassers and provision for gratuity - HELD THAT:- We note that in respect of provision for HD commission there is provision of Rs. 1,75,00,000 and in the current year, the assessee paid Rs. 1,02,78,643 which relates to previous assessment year. We remit this issue to the AO for verification and if the provision is allowed in the previous assessment year, then principle of consistency should be followed. However, if the AO finds that this is the first year for the provision of HD commission, then the actual payment made by the assessee should be allowed. In respect of provision for ex gratia and bonus, gratuity to HD canvassers and provision for gratuity, the assessee has made provision on the basis of actuarial valuation. However both the authorities below have disallowed by holding that it is a contingent liability which is not correct. Since the assessee has made provision on the basis of certificate from the actuarial valuer therefore the provisions made are to be treated as ascertained liability. This view is fortified by the decision of the coordinate Bench of the Tribunal in the case of Jeans Knit (P) Ltd. [ 2022 (3) TMI 244 - ITAT BANGALORE] wherein held AO is not right in adding back the provisions made by the assessee towards gratuity, leave encashment and bonus for computation of book profits u/s. 115JB on the ground that they are unascertained liability. Hence, we allow the appeal in favour of the assessee and direct the AO to give effect to the same in the computation of book profits u/s 115JB. Non consideration of revised Book Profit u/s 115JB - CIT(A) held that the appellant failed to furnish the copy of the revised Audit Report in form 29B and hence the revised computation of Book Profit could not be accepted - HELD THAT:- We noted that during the course of assessment proceeding vide assessee s letter dated 5.11.2018 the assessee submitted revised calculation of book profit. In the said calculation the appellant bank had not added the provision for NPA of Rs. 267,17,51,684 and provision for investment depreciation of Rs. 13,16,10,956. The AO did not accept the same. The CIT(A) observed that the appellant failed to furnish any copy of audit report in Form 29B to comply the provision of section 115JB(4) of the Act. Considering the argument of the ld. AR of the assessee, we remit this issue to the AO fresh consideration. Deduction claimed u/s. 36(1)(viia) - assessee has computed deduction u/s 36(1)(viia) being a scheduled bank to the extent of 7.5% of the total income and 10% of the AAA of rural branches - AO noted that the assessee has claimed excessive deduction on two counts, firstly the assessee has not updated its information about categorization of rural branches which has either converted to semi urban branches or where the population has exceeded 10,000 and secondly the assessee has claimed 10% of the entire advances of rural branches including the opening balances - HELD THAT:- As relying on Canara Bank [ 2023 (1) TMI 291 - KARNATAKA HIGH COURT] while calculating AAA of rural branches under section 36(1)(viia), not only fresh advances made during year, but also amount of advance outstanding are to be considered. Accordingly, the ground taken by the revenue on this issue is dismissed. Computation of deduction u/s. 36(1)(viia) in respect of classification of rural branches - HELD THAT:- This issue has been decided in the case of State Bank of Mysore v. ACIT [ 2015 (1) TMI 1328 - KARNATAKA HIGH COURT] to hold that for claiming deduction u/s. 36(1)(viia) in respect of rural branches, the latest/provisional census available should be considered. Accordingly this issue is remitted back to the AO. The assessee is directed to provide the latest/provisional census which was available for the respective assessment year. This ground is allowed for statistical purposes.
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2024 (2) TMI 1035
Addition u/s 56(2)(viib) r.w.r 11UA - excess premium charged - issuance of preference shares to the director/ex-director of the assessee company - Addition sustained by the CIT-A - whether or not the preference shares issued by the assessee company @ Rs.110/- per share was at Fair Market value (FMV)? - determining the FMV of the subject preference shares as per the dividend discounting method , i.e., at Rs.5/- per share as against that issued by the assessee at Rs.110/- per share Whether or not the A.O is right in rejecting the valuation of the preference shares that were issued by the assessee company to director and ex-director by adopting the Net Asset Value method, and substituting the same by dividend discounting method ? Anti-tax abuse provision - HELD THAT:- Admittedly, it is a matter of fact borne from the record that the legislature in all its wisdom had inserted the provisions of Section 56(2)(viib) as a part of its counter-tax evasion mechanism to deter the generation and use of unaccounted money. Although the contention of the AR that now when the genuineness of the transactions of issuance of preference shares by the assessee company to its director/ex-director had been proved to the hilt, therefore, there was no justification for the A.O to have triggered the deeming provisions of Section 56(2)(viib) i.e a counter tax evasion provision, at first blush appeared to be convincing, but going by the rule of strict literal interpretation that has to be adopted while construing the scope and gamut of a statutory provision the same does not merit acceptance. As Section 56(2)(viib) does not carve out any exception as regards the applicability of the same in a case where the shares are issued to the directors of the company, therefore, the aforesaid contention of the Ld. AR that the same would not apply to the preference shares issued by the assessee company to its director/ex-director cannot be accepted. It is only in cases of ambiguity that the court can use other aids to discern the true meaning but where the statute is clear and the words plain, the legislation has to be given effect in its own terms. We are unable to concur with the Ld. AR, who had tried to circumscribe the applicability of Section 56(2)(viib) of the Act by reading in it an exception as regards the applicability of the same to a specific class of persons, which, in the absence of anything to the said effect having been made available on the statute by the legislature cannot be accepted on our part. The Ground of appeal No. 2 is dismissed. Observations of the A.O while determining FMV of preference shares as per dividend discounting model - Redemption of preference shares at the end of 20 years at the same value i.e. Rs.110/- - As stated by the Ld. AR, and rightly so, a perusal of the Special Resolution passed in the extraordinary general meeting of the assessee company reveals that the subject 7,78,000 nos. of non-cumulative redeemable preference shares were redeemable not later than 20 years from the date of allotment - We find that the A.O while referring to the allotment and conditions based on which, the preference shares were issued by the assessee company, had categorically acknowledged the fact that the subject preference shares were redeemable within 20 years of allotment at a premium of not less than Rs.100/- each; or shall be converted into similar nature of equity shares. In fact, the period of 20 years is the maximum statutory period for redemption and as per the terms of allotment of preference shares, the entire premium is redeemable. Accordingly, we concur with the claim of the Ld. AR that the observation of the A.O. that the subject preference shares under consideration were redeemable at the end of 20 years at the same value, i.e, Rs.110/- per share is factually incorrect and contrary to the facts discernible from the records. Convertibility of preference shares into equity shares not considered by the A.O - As per the Special Resolution passed in the Extraordinary General Meeting of the assessee company it was specifically provided that the said preference shares shall be redeemed on not less than Rs.110/- each; or it shall be converted into a similar number of fully paid up equity shares by obtaining permission from all preference shareholders. As in a case where the preference shares are convertible into equity shares, the fair market value of such shares would be more than the non-convertible preference shares or debt instruments, therefore, we find substance in the claim of the Ld. AR that the A.O. had grossly erred in losing sight of the material fact that the subject shares were optionally convertible non-cumulative redeemable preference shares, which, thus, had a strong bearing on the determination of the FMV vis- -vis. nonconvertible preference shares or debt instruments. Observation of the A.O that the assessee company will pay a 10% dividend - As the terms of issuance of the preference shares itself provide for a 100% dividend, i.e. the coupon rate is 100%, therefore, there could have been no justification for the A.O. in assuming payment of 10% dividend every alternate year by the assessee company. Because the terms of preference shares itself provide for a 100% dividend, thus, the aforesaid assumption of the AO that the assessee company would pay a 10% dividend being devoid and bereft of any basis cannot be accepted. Also, we are unable to comprehend on what basis the AO had assumed that the dividend would be paid by the assessee company every alternate year. Once again, as the aforesaid assumption of the A.O. is not backed by any concrete basis, therefore, the same cannot be subscribed on our part. Discounted rate of 12% taken by the A.O - A.O. had not referred to any comparable instance and had arrived at his aforesaid view based on a general observation. Apart from that, we concur with the Ld. AR that the assumption of the A.O. wherein he had compared the discount rate for secured debt and equity is not only without any basis but also unrealistic. Although, some of the terms of the preference shares match with the debt instruments, but the same on the said standalone basis could not be treated as a simpliciter debt instrument. Accordingly, we find substance in the contention of the Ld. AR that there is no justification for the A.O. in treating preference shares as a debt or a quasi-debt instrument, and thus, consider the discounting rate on that basis for estimating the FMV of the subject preference shares. Also, we find substance in the Ld. AR s contention that the bank FDR rate as was prevailing during the year in question should have been taken as the appropriate rate of return. Subscription of the preference shares by the promoters of the assessee company - A.O., without placing on record any material could not have merely on the ground that the subject preference shares were issued to related parties, drawn adverse inferences as regards the price at which they were subscribed by the aforementioned persons Because the factual observations and assumptions of the A.O., as observed by us hereinabove, suffer from certain serious lapses/infirmities that had crept in while determining the FMV of the subject preference shares based on the dividend discounting method by the A.O., therefore, we are of the view that the matter in all fairness requires to be revisited by the A.O who is directed to redetermine the FMV of the subject preference shares in the backdrop of our aforesaid observations as regards the respective issues. Needless to say, the A.O., in the course of set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee company which will remain at liberty to substantiate its claim based on fresh documentary evidence, if any. A.O rejecting the Net Asset Value method adopted by the assessee company for determining FMV of the subject preference shares - As the subject shares are optionally convertible non-cumulative redeemable preference shares, which, as observed by the A.O in the body of the assessment order, as per the terms and conditions on which they have been issued by the assessee company, inter alia, in the event of winding up shall not be entitled to its assets, therefore, their FMV in our view cannot be safely determined based on the Net Asset Value (NAV) method. At the same time, we are of the view that the fact that the subject shares are optionally convertible preference shares would in itself be a primary factor to be considered in the backdrop of the unlisted equity shares, and thus, will have a strong bearing while determining of their FMV by an analyst. We, thus, in terms of our aforesaid deliberations direct the A.O to redetermine the FMV of the subject preference shares subject to our observations recorded as regards the mistakes/infirmities that had crept in the determination of the same. The Ground of Appeal No. 1 is partly allowed for statistical purposes in terms of our aforesaid observations.
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Customs
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2024 (2) TMI 1034
Valuation - seeks to include the demurrage charges in the value of the imported goods for the purpose of assessment of custom duty - entire case based on explanation added to Rule 10 of Custom Valuation Rules, 2002 - Tribunal held that the demurrage charges cannot be included in the transaction value of imported goods - explanation to Rule 10 to Customs Valuation Rules was held ultra virus - HELD THAT:- Delay condoned. Owing to the low tax effect involved in this appeal, we are not inclined to interfere in the matter. The appeal is, hence, dismissed.
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2024 (2) TMI 1033
Challenged the show cause notice issued - mergers and de-mergers - non-existing company - seeking to recover Customs duty on the imports - beyond prescribed time/ extended period of limitation - advance license issued in respect of the four bills of entry - Advance Authorization - HELD THAT:- There is no merits in these writ petitions challenging the impugned show cause notice. Merely because, the noticee company has been merged with the petitioner company ipso-facto would not mean the liability of the noticee company would stand extinguished on account of its merger with the petitioner company. Merger or amalgamation of companies is not a tool under law to either facilitate avoidance and evasion of tax liability already incurred by a transferor company like the Noticee. If the liabilities of the Noticee Company stood undischarged, the petitioner, as the successor of the business of the Noticee company and as the transferee company not only acquires the liabilities of the transferor company but also its assets, unless, the liability was retained by the promoters of the transferor company. The petitioner has not filed Scheme of Amalgamation before this Court. Therefore, Show Cause Notice proceeding cannot be scuttled. Since, the benefit of advance license was availed by the Noticee (transferor) and it had filed to discharge its obligation under the advance license, the liability has to be discharged by the transferee company as its successor. As a transferee company, the petitioner cannot state that the liability of the noticee company stood extinguished on account of its merger /amalgamation with it. This writ petition is therefore liable to be dismissed. The petitioner is therefore directed to file a reply with the impugned Show Cause Notice within a period of 30 days from the date of receipt of a copy of this order. For the sake of clarity, a corrigendum may be issued to the impugned Show Cause Notice to the petitioner as a transferee company/successor of Noticee company namely M/s.Fabritex Exports Pvt.Ltd. It is made clear that if the petitioner as the successor of the Notice company fails to co-operate with the respondents, the respondents are at liberty to confirm the demand proposed in the impugned show cause notice and recover the amount from the petitioner company based on the available material. This writ petition is dismissed. No costs. Consequently, connected miscellaneous petitions are closed.
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2024 (2) TMI 1032
Applications for amendment of bills of entry rejected - exemption from basic customs duty under the Australia India Economic Co-operation and Trade Agreement - manufacturer of basic iron and steel and had imported 'steam coal' in bulk - Customs duty paid on imports - Scope of Section 149 of the Customs Act, 196 2 - HELD THAT:- As regards the implications of the judgment of the Hon'ble Supreme Court in ITC [ 2019 (9) TMI 802 - SUPREME COURT] this Court examined the same in earlier orders and concluded that the Hon'ble Supreme Court did not intend to restrict the remedies of the assessee to the filing of an appeal. On examining the impugned order, I find that the Assistant Commissioner of Customs has rejected the claim on the basis that the importer should establish that the goods originated from Australia and by placing reliance on public notice. The said public notice was quashed by the earlier order of this Court. As regards the requirement that the importer should establish that the goods originated from Australia, as discussed earlier, this aspect should be determined by examining the certificate of origin and any other relevant documents. Since the impugned orders were issued without examining such documents, they call for interference. Therefore, the impugned orders are quashed and the matters are remanded for reconsideration. The 1st respondent is directed to reconsider the matter in accordance with Section 149 and other applicable provisions of the Customs Act and issue fresh orders after providing a reasonable opportunity to the petitioner. This exercise shall be concluded within a maximum period of two months from the date of receipt of a copy of this order. These writ petitions are disposed of. Consequently, connected miscellaneous petitions are closed.
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2024 (2) TMI 1031
Classification of the imported goods - unfinished rough cold forge as raw material - manufacture of Bicycle parts - Whether the subject goods shall be classified as Bicycle Parts under chapter heading 8714 Or under chapter heading 73269099? - HELD THAT:- We observe that for the purposes of classifying subject goods under chapter heading 8714 it needs to fulfill the criteria of having essential characteristics of the finished product. We observe that in order to aid classification it needs to be first decided whether the said product appeared to have represented any bicycle part for which, no evidence has been put forth by the department. Therefore, prima facie it appears that the said products will fall under chapter heading 73 unless any such characteristic of the product suggests to the contrary. Therefore, it is important to establish the features of the product before classifying it under the appropriate chapter. Basically the issue needs to be verified from the factual matrix before dwelling into appropriate classification. Thus, we remand the matter back to the adjudicating authority to reconsider the issue afresh by taking into consideration the claims made by the appellant as regards the nature of the subject goods. The impugned order is set aside and appeal is allowed by way of remand to the Adjudicating Authority.
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2024 (2) TMI 1030
Classification of Betine Hydrochloride (Betine HCL) - CBIC Instruction vide F. No. 401/92/2022-Cus-III - Commissioner (Appeals) held that the product rightly falls under CETH 230990 and has set aside the confirmed demands under the Order-in-Original - HELD THAT:- It is seen that Betine HCL 93-98% are classifiable under Animal Feed Grade only. As observed by the Commissioner (Appeals), the product literature provided by the Appellant very clearly shows that these all are part of Animal Feed and not fit for Human consumption for preparation of medicines. Again as observed by the Commissioner (Appeals) no tests have taken up before the classification is changed arbitrarily. Therefore, we dismiss the Appeals filed by the Revenue and allow the Appeals filed by the Appellant with consequential relief, if any, as per law.
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2024 (2) TMI 1029
Classification of quicklime imported goods - mis-classifying the same under Customs Tariff Item (CTI) 2522 1000 instead of rightly classifying it under CTI 2825 9090 - levy of customs duty - Claim for exemption entry for the purpose of levy of CVD/IGST - Notification No. 50/2017-Customs (Serial No. 120) for BCD; and Notification No. 01/2017-Integrated Tax - two Chapter Headings 2522 or 2825, whether the imported goods fall under the first category as quicklime or under the second category calcium oxide - manufacturing process of iron steel industry - application of Rule 3 of GIR - HELD THAT:- In the present case, the facts reveal that the imported goods are quicklime. There is no case of mixture of different material or substance to merit application of GIR 2 or 3. Thus, the Revenue s argument for classification of quick lime under heading 2825 as it is a separate chemically defined compound and that it occurs last among other classification under heading 2522 is not legally sustainable. Thus, we find that there is no case for application of Rule 3 of GIR in this case. Hence, we are of the prima facie view that the imported goods are appropriately classifiable under CTH 2522 10 00. We also find that our above views is duly supported by the Order of the Tribunal in the case of Collector of Central Excise, Chandigarh Vs. Nuchem Ind. (P) Ltd [ 1998 (9) TMI 186 - CEGAT, NEW DELHI] which has also duly followed the judgement of the Hon ble Supreme Court in the case same assessee. We find that the chemical test report of the samples of imported goods indicate that the available CaO% of range 91.70% to 92.80% in the 28 consignments which correspond to total CaO% of 93.84% to 94.77%; Unburnt CaCO3 of range 3.00 to 3.72%; Co2 of range 1.34 to 1.58% along with few other impurities viz., SiO2 of range 0.93 to 1.24%; Al2O3 of range 0.28 to 0.34%; SO3 of range 0.17 to 0.80%; Iron Oxide of range 0.19 to 0.21% and MgO of range 1.17 to 1.44%. Thus, from the above chemical composition of the test results of imported goods, it can be concluded that it is mainly composed of calcium oxide (quick lime) along with traces of Iron, Aluminum Silicious matter. On the percentage of chemical composition, the highest percentage of available CaO2/calcium oxide is 92.8% . Further, the HSN explanatory notes also specify that calcium oxide of high degree of purity i.e., app. 98% or more would alone gets covered under the scope of sub-heading 2825. As seen from the test reports, the content of calcium oxide or lime is much less than the requisite 98%. Thus, we are of the considered view that in terms of the HSN explanatory notes, both on account of presence of specified material making it not in pure state and the composition of calcium oxide not upto the requisite percentage making it not a product of high degree, would not enable the imported goods to be classified under sub-heading 2825. Claim for exemption entry for the purpose of levy of CVD/IGST - We find that the above notification has prescribed the effective rate of Integrated Goods and Service Tax (IGST) that is payable on the imported goods as countervailing duty (CVD). Inasmuch as the imported goods are covered under the description quicklime and by the chapter heading 2522 there is irregularity in the claim of such exemption. Thus, we do not find any infirmity in the claim for exemption benefit made by the appellants. In fact the CBEC circular No. 9/96-Customs dated 13.02.1996, clarifies this aspect by specifically stating that the imported goods when covered specifically by the exemption entry by its description, then notwithstanding the fact that the goods are not covered by the Chapter/Heading No./Sub-heading Nos. mentioned in the notifications, on the basis of the law laid down by the Hon ble Supreme Court in the case of Jain Engineering Vs. Collector of Customs [ 1987 (9) TMI 46 - SUPREME COURT] Further, it is not the case of Revenue that the impugned goods do not find fitment in heading 2522 of the First Schedule to Customs Tariff Act, 1975 or that the integrated tax rate at serial no. 131 of Schedule-I is, by the corresponding description, unquestionably excluded from every tariff item comprising heading 2522 of the First Schedule to Customs Tariff Act, 1975. Nor is it the case of Revenue that the quicklime at serial no. 131 of Schedule-I of the integrated tax rate notification do not find placement in Chapter 25 of First Schedule to the Customs Tariff Act, 1975. We further find from the standards prescribed by the Bureau of Indian Standards (BIS) in respect of IS:1540 (Part-I):1980 providing the specification for Quick lime and Hydrated lime for chemical industries state in its scope of coverage of the BIS that this standard does not cover lime for the metallurgical industry, besides excluding its scope for other uses such as building, agricultural, glass and ceramic industries. Thus, we find that the IS:1540 is not applicable for the quicklime used in the manufacturing process of iron steel industry as in the present case. Thus, we conclude that the imported goods quicklime would be appropriately classifiable under Customs Tariff Item 2522 10 00 and not as other under the Customs Tariff Item 2825 90 90, as claimed by Revenue. Therefore, we are of the considered view that the impugned order passed by the learned Commissioner (NS-I), JNCH cannot stand for judicial scrutiny by confirming the classification under the Customs Tariff Item 2825 90 90 in respect of the impugned goods and thus, the same is set aside. We are also of the considered view that the impugned goods are correctly classifiable under Customs Tariff Item 2522 10 00 as discussed above and thus in setting aside the order to the extent of dropping of the adjudged demands of duty on the appellants. In the result, the confirmation of demands as per the impugned order on the appellants is set aside and the appeal is allowed in favour of the appellants.
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Securities / SEBI
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2024 (2) TMI 1028
Exit Policy of SEBI - letter issued by SEBI calling upon CSE [Calcutta Stock Exchange] to apply for voluntary exit - Exit policy of SEBI in consonance with the provisions of the SCR Act [Securities Contracts (Regulation) Act] or not? - Was the CSE obliged to apply for continuance of its clearing house business in terms of the SECC Regulations, 2012 ? - Whether steps towards compulsory withdrawal of recognition of CSE suffer from a jurisdictional error and violation of the principles of natural justice HELD THAT:- In the circular issued by the SEBI, it has been stated that the same has been issued in exercise of powers conferred under Section 11(1) and 11(2) (j) of the SEBI Act, 1992 read with Section 5 of the SCR Act to protect the interest of investors in securities and to promote the development of and to regulate the securities market. Thus, it is clear that the circular has been issued with a particular object and in exercise of the statutory power conferred on the SEBI as a statutory authority. It has a force of law and is binding to all the stock exchanges in the country. In the said conspectus, we are unable to accede to Appellants s argument that Exit policy of SEBI is not in consonance with the provisions of the SCR Act. Regulations such as those which have been framed by the SECC Regulations, insofar as they define the conditions for recognition, of minimum net worth, composition of the board of directors, dispersal of ownership and norms for governance, do not infringe any legal right of the stock exchange. The challenge is, therefore, lacking in substance. Nothing has been indicated before the Court to establish that the determination of the threshold or the manner of its computation is untenable and is so disproportionately high so as to constitute the very negation of the right to carry on business. CSE cannot be accused of any offence or wrongdoing. It is a question of existence of an institution which had operated for more than a century and thereafter it was not being able to conduct its business due to mandatory imposition of a condition towards having a turnover of Rs. 1000/- crore on continuous basis and to set up a separate clearing corporation or tie with an existing recognized clearing corporation. Such circumstances may not warrant a zero-tolerance approach moreso when the terms and conditions for compulsory derecognition are yet to be specified by SEBI. Judiciary has a strong sense of justice and it works to maintain social justice and fairness as distinguished from misplaced sympathy. In the peculiar facts and circumstances of the case and though we are not inclined to interfere with the order impugned, we are left with an avenue to issue necessary direction on the basis of the findings of the learned Single Judge as regards the fourth issue which has been answered in the affirmative, in favour of SEBI and against CSE. Disengaging ourselves from the logjam, we direct that CSE would be at liberty to establish a clearing corporation in compliance with the provisions of SECC Regulations, 2012 or to tie up with another clearing corporation eligible to clear trades as per SECC Regulations, 2012 to achieve the prescribed net worth within a period of six months from date. In the event CSE fails to do so, SEBI would be free to take necessary steps thereafter, in accordance with law. With the above observations and directions, the appeals and all connected applications are disposed of.
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Insolvency & Bankruptcy
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2024 (2) TMI 1027
Rejection of Resolution Plan by the Committee of Creditors with 95.97% voting against the said Resolution Plan - prime grievance of the Homebuyers who filed the Applications , was that the interest was not adequately protected and Liquidation would worsen their position - addition of parties - necessary/proper party as third respondent or not - HELD THAT:- The addition of parties, is one of discretion to be exercised by the concerned Tribunal / Court of Law based on the facts and circumstances of the case - The power of the Court to add parties is succinctly pointed out by the Hon ble Supreme Court in the decision in Razia Begum v. Anwar Begum [ 1958 (5) TMI 50 - SUPREME COURT ] wherein it is observed that the question of addition of parties under Rule 10 of Order 1 of CPC is generally not one of initial jurisdiction , of the Court but of a judicial discretion , which has to be exercised in view of all facts and circumstances of a particular case; but in some cases it may raise controversies as to the power of the Court in contra distinction to its inherent jurisdiction or in other words of jurisdiction in the limited sense in which it is used in Section 115 of the Civil Procedure Code. This Tribunal bearing in mind of a crystalline fact that the Petitioner in IA 57/2024 in Comp. App. (AT)(CH)(Ins.) No. 446 of 2023 is a creditor to the Corporate Debtor is not to be impleaded in the instant Appeal as a third Respondent because of the fact that it is neither a necessary party nor a proper party to the instant Appeal to be decided by this Tribunal on merits, at the time of Final Hearing . In view of well settled principle in law that to add a person as a prospective proposed Respondent is not a substantive right but undoubtedly, it is one of procedure. As such, this Tribunal unhesitatingly holds that a mere interest of a party in the Fruits of Litigation cannot be an acid test for it being, impleaded as a party - Indeed, an Appellant/Plaintiff in an Appeal / suit proceedings cannot be coerced to join a person as party against whom, he/it does not desire to contest, unless it is a compulsion of Law, in the considered opinion of this Tribunal. This Tribunal bearing in mind of the entire facts and circumstances of the instant case, in an encircling manner , comes to a resultant conclusion that the Petitioner/Appellant is not a necessary / proper party, to be arrayed as third Respondent - Appeal dismissed.
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2024 (2) TMI 1026
Maintainability of section 7 application - Seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - threshold limit involved in in application - exclusion of amount of commission on sale in computation of debt amount. Principal stand of the Appellant is that though their claim of outstanding dues amounting Rs. 1,11,63,151/- qua the Respondent is duly reflected on the NeSL data, the Adjudicating Authority erroneously held the default amount to be less than the prescribed threshold limit - HELD THAT:- At a time when the principal outstanding amount; the applicable rate of interest and date of default in both the Section 7 applications remained constant and the duration of Agreement was only one year, the interest calculations should have remained confined to one year only. The reason for calculating the interest amount for a different time-period in the present Section 7 application, prima-facie, appears unjustified and irrational - the findings of the Adjudicating Authority that the interest calculation in the present Section 7 application has been unduly inflated and enhanced by the Appellant with the ulterior motive of crossing the threshold limit, agreed upon. Whether commission on sale amount which has been excluded by the Adjudicating Authority should have been included in the computation of debt amount? - HELD THAT:- It is a well settled proposition of law that any debt to be treated as financial debt , there must take place disbursal of money and the disbursal must be against consideration for time value of money and also includes anything which is equivalent to the money that has been loaned as long as commercial effect of borrowing or profit is discernible. There are no good reason to disagree with the findings referred in the impugned order that commission on sale amount neither falls in the menu of transactions delineated at sub clauses (a) to (i) of Section 5(8) of the IBC nor does it fall in the category of being a disbursal having time value of money. The commission on sale does not carry the implications of commercial effect of borrowing either. Thus, the Adjudicating Authority did not commit any error in coming to the conclusion that the amount of outstanding financial debt is only Rs. 78,40,000/- and that this amount does not meet the threshold limit of Rs. 1 crore as stipulated under Section 4 of the IBC - the Appellant having failed to meet the threshold limit in the earlier Section 7 application has now tried to overcome this impediment by inflating the claim amount by resorting to a calculation methodology which lacks rational basis. This is a clear case where the Appellant has reagitated the same issue which had been already dismissed by the Adjudicating Authority on an earlier occasion simply to cross the threshold bar. This amounts to misuse of the provisions of IBC to resolve a contractual dispute. There are no merit in the appeal - appeal dismissed.
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PMLA
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2024 (2) TMI 1025
Application for bail - offence under PMLA act - it was held by High Court that Rigors of Section 21(4) of MCOC Act as under consideration which is pari materia with Section 45(1) of PML Act, and considering the facts of the present case and the observations made hereinabove grounds for grant of bail are made out - HELD THAT:- There are no ground to interfere with the impugned order passed by the High Court. However, the question of law is left open. SLP dismissed.
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2024 (2) TMI 1024
Grant of bail - Money Laundering - summons was issued and served upon the appellant, pursuant to which he surrendered himself before the Court - HELD THAT:- In the instant case though there was no order passed by the Special Court for issuance of summons or warrant against the appellant, a summons under Section 61 came to be issued on 22.12.2022 requiring the appellant to appear before the Special Court on 07.01.2023. The appellant appeared before the Special Court and applied for his release on bail. Since there was no order passed by the Special Court for issuance of the summons or warrant, in our opinion, the application of the appellant seeking bail could not have been entertained. There was a basic flaw in the proceedings conducted before the Special Court. As such Section 437 would come into play when the accused is arrested or detained or when the summons or warrant is issued against the accused for causing him to be brought or to appear before the Court. In absence of any order for issuance of summons or warrant under Section 204 or under any other provision of Cr.P.C., the summons could not have been issued or served upon the appellant nor he could have been arrested or taken into custody. The appellant-accused also appears to have filed the bail application before the Special Court under the misconception of fact and misconception of law, which application came to be dismissed by the Special Court. The appellant accused No.10 is directed to be released on bail on the terms and conditions that may be imposed by the Special Court - Appeal allowed.
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2024 (2) TMI 1023
Money Laundering - fraud in sale and purchase of land belonging to two Housing Co-operative Societies - presumption that proceeds of crime used in money transaction - shame and bogus sale deed - it was held by High Court that Under Section 22 of the PML Act, there is a presumption as to the record or property in certain cases, according to which where any record or property is found in the possession or control of any person in the course of a survey or a search, such record or property shall be presumed to be belonging to such person. There is a presumption in inter-connected transaction also Section 24 castes a burden on a person charges with the offence of money laundering under Section 3, unless the contrary is proved, the presumption that such proceeds of crime are involved in the money transaction. HELD THAT:- There are no reason to interfere with the impugned order - SLP dismissed.
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Service Tax
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2024 (2) TMI 1022
Condonation of delay in filing appeal - appeal was filed beyond the normal period of limitation, but within the period within which the delay - delay can be condoned by the Appellate Commissioner under Section 85(3A) of the Finance Act, 1994 or not - HELD THAT:- It is evident that the petitioner cannot be denied the opportunity of the delay being condoned. The Office of the Commissioner of GST and Central Excise (Appeal) has numbered the appeal without issuing defect Memo to the petitioner stating that the appeal was beyond the statutory time limit of two months from the date of receipt of Order-in-Original No. 81/2022-CHN (ADC) dated 06.05.2022. The petitioner should have been called upon to explain how the appeal was maintainable without an application for condoning the delay. If such an opportunity was given, perhaps, the petitioner could have filed appropriate application to condone the delay. Instead of, the Appellate Commissioner has straight away proceeded to pass the impugned order. The impugned order is liable to be set aside and the case is liable remitted back to the respondent. The petitioner shall therefore file an application for condoning the delay explaining the reasons for delay in filing the appeal on 02.08.2022 within a period of 15 days from the date of receipt of a copy of this order - Petition disposed off.
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2024 (2) TMI 1021
Non-payment of service tax regularly - service tax returns not filed regularly - Manpower Recruitment or Supply Agency Service - Supply of Tangible Goods Service - Works Contract Services - Commercial or Industrial Construction Services - Business Auxiliary Service - suppression of facts or not - invocation of Extended Period of Limitation - HELD THAT:- At least prior to 01.07.2012, the correct classification of services are must to demand the service tax. Therefore, the adjudication order is lacking with regard to the service wise bifurcation of the demand which needs to be done. The appellant have made a submission that appellant s request for cross-examination has not been acceded by the Adjudicating Authority. For a fair play in adjudication, the opportunity of cross-examination ought to have been extended to the appellant so the truth can be brought on record and justice can be delivered. The appellant also submitted that as regard the manpower recruitment agency service the appellant was only required to pay 25% of service tax and in respect of the service provided in execution of works contract they were require to pay 50% of the Service Tax. However, department in violation of the statutory provisions demanded service tax at full rate of 100% from the appellant, for the period of 01.07.2012 to 31.03.2013. This issue also need deliberation. Since, the issue that whether demand can be time barred or not is a matter of fact based on record. It is found that the aspect of limitation also was not properly addressed by the adjudicating authority. Therefore, in view of the above deficiency in the adjudication order, the entire matter needs to be reconsidered considering the detailed submission of the appellant. The matter needs to be remitted back to the Adjudicating Authority - Appeal allowed by way of remand.
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2024 (2) TMI 1020
Classification of services - leaning Activity Services or not - rendering the services of Evacuation of Ash from ash ponds and nuisance-free transportation and disposal of the ash to Thermal Power Stations - HELD THAT:- The issue is no longer res integra as CESTAT Kolkata has decided the issue in the case of Purba Medinipur Jilla Parishad vs. Commissioner of Central Excise, Haldia [ 2018 (12) TMI 1780 - CESTAT KOLKATA] wherein it has been held that the activity of 'Evacuation of Ash from ash ponds and nuisance-free transportation and disposal in defined area provided by the plant' is not liable for service tax under the category of 'Cleaning Services'. Thus, the activities of Evacuation of Ash from ash ponds and nuisance-free transportation and disposal of the ash in Thermal Power Stations is not liable to service tax under the category of 'Cleaning Services' - the demands of service tax along with interest and penalty confirmed in the impugned orders set aside - appeal allowed.
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2024 (2) TMI 1019
Recovery of dues extinguished by resolution plan approved by NCLT - setting aside the demand on the basis of the NCLT proceedings - HELD THAT:- This issue is no longer res-integra as it has been decided by this Tribunal in the Appellant s own case based on identical issue vide in ALOK INDUSTRIES LIMITED AND AJAY KURALKAR VERSUS C.C.E. S.T. -VAPI AND C.C.E. S.T. -SURAT-I [ 2022 (11) TMI 39 - CESTAT AHMEDABAD] where it was held that the Central Board of Indirect Taxes Customs may consider issuing guideline/procedure for dealing with the case before this tribunal wherein, against the assesse s company IBC proceeding has been initiated. In view of the above Tribunal s decision, the present appeal also deserves to be disposed of on the same line. Accordingly, the appeal is disposed of as infructuous.
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Central Excise
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2024 (2) TMI 1018
Denial of CENVAT Credit - process amounting to manufacture or not - goods received from Unit-I (and cleared to Unit-II) required manufacturing activity or not - whether the demand raised alleging that the credit availed by the appellant is ineligible for the reason that there is no manufacturing process undertaken by the appellant on goods received from Unit I and cleared by them is sustainable or not? - HELD THAT:- It is an undisputed fact that the appellant has cleared all goods from unit 2 by payment of duty. When the department has collected duty on the finished products, the credit availed on the inputs cannot be denied alleging that the activity does not amount to manufacture. This issue is settled by the decisions in the case of Ajinkya Enterprises [ 2012 (7) TMI 141 - BOMBAY HIGH COURT ] wherein the Hon ble High Court of Bombay held CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. In the case of M/s. R K Packaging Vs. CCE, Mumbai [ 2019 (3) TMI 1500 - CESTAT MUMBAI ], the issue considered was whether the credit availed has to be reversed when the activity is alleged to be not manufacture. The demand was set aside by the Tribunal following the decision of the Hon ble High Court of Bombay in Ajinkya Enterprises. The demand cannot sustain and requires to be set aside. The impugned order is set aside - Appeal allowed.
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2024 (2) TMI 1017
Method of Valuation - section 4 of Central Excise Act, 1944 or section 4A of Central Excise Act, 1944 - packages of cake mixes manufactured having been affixed with retail sale price (RSP) - recovery of differential duty by resort to transaction value specified by section 4 of Central Excise Act, 1944 alongwith interest and penalty - HELD THAT:- The demand for the disputed period straddles two governing enactments by reference to which levy of duties of central excise on retail sale price , less permitted abatement, was enabled. Till the notification of Legal Metrology (Packaged Commodities) Rules, 2011 with effect from 1st April 2011, Standards of Weights and Measures (Packaged Commodities) Rules, 1977 , issued under the authority of The Standards of Weights and Measures Act, 1976, was in force even after the parent statute was substituted by the Legal Metrology Act, 2009. Both the laws have undergone streamlining and consolidation through amendments as did the respective Rules framed thereunder. The specific bar on retail sale on packages cleared by appellant is adequate discharge as evidence of overriding intent with fact prevailing over presumption of intent. Consequently, for the period preceding commencement of Legal Metrology (Packaged Commodities) Rules, 2011, the impugned notification does not apply to goods cleared by the appellant. - For the period thereafter, such intent does not circumscribe packages deployed anywhere in chapter II of Legal Metrology (Packaged Commodities) Rules, 2011 and, therefore, does not restrict the empowerment of notifying of goods for the purpose of section 4A(1) of Central Excise Act, 1944. The substantive distinction between deemed circumscribing of packages for the enforcement of rule 5 of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and absence of such curtailed meaning of package for requirement to comply with rule 6 of Legal Metrology (Packaged Commodities) Rules, 2011 makes for the difference in interpreting the extent and reach of power conferred on the Central Government to resort to retail sale price assessment. Consequently, all commodities in pre-packaged form, to the extent incorporated in the impugned notification, are subject to assessment on retail sale price less abatement as prescribed therein after March 2011. The distinguishment of ultimate consumer as the criteria for applicability of section 4A of Central Excise Act, 1944 to the impugned transactions has no basis in law. It is worth noting that even in relationship to industrial usage or institutional deployment, the buyer yet remains consumer. There is no reason to suppose, as the adjudicating authority has, from the tax statute or the consumer protection laws that bakeries are not intended recipients of such protection. The adjudicating authority has stretched logic to conclude that the transformation on a product, by change of form and attributes, does not alter the product for ascertainment of actual consumer. These unsubstantiated conclusions on the intent of consumer protection law and the extent of taxing statute are inappropriate justification for alteration of assessment methodology. The adjudicating authority has placed reliance on the decision of the Hon ble High Court of Karnataka in re Ewac Alloys Ltd. [ 2011 (9) TMI 688 - KARNATAKA HIGH COURT] - Reference was also made to the decision of the Hon ble Supreme Court in re Jayanthi Food Processing (P) Ltd. [ 2007 (8) TMI 3 - SUPREME COURT] . On behalf of respondents, the decision of the Hon ble Supreme Court in Commissioner of Central Excise Service Tax, Kanpur v. AR Polymers Pvt Ltd [ 2023 (3) TMI 951 - SUPREME COURT] was cited. The two judgements of the Hon ble Supreme Court found that institutional consumers, which were the recipients of goods impugned therein, are not final consumers because the goods are subject to further sale in that very form. The facts of the present case are totally at variance as the goods impugned here lose the form in which they have been cleared by the appellant in the hands of those erroneously held as not being final consumers even on the admitted reality that customers of bakeries are in the market for cakes and bakes which would render the bakeries to be the final consumer. The demand of differential duty for the period prior to 1st April 2011 is upheld while setting aside the demand for the period thereafter. The intention of the appellant not to clear for retail sale during the former period is evident despite which they resorted to abatement from retail sale price even though not entitled thereto. Nothing has been brought on record to evince that such intent, espoused in the markings, was not prompted by clear appreciation of the legal limitation on the jurisdiction of the Central Government to notify goods for alternative assessment - there are no reason to interfere with the penalty mandated under section 11AC of Central Excise Act, 1944. Appeal allowed in part.
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2024 (2) TMI 1016
Correctness of erasure of credit already availed by prospective invalidation of eligibility for retention of credit that would subject those services already procured and used in manufacture/rendering of services to the test of eligibility once again - deletion of rule 6(5) of CENVAT Credit Rules, 2004 with effect from 31st March 2011 - whether credit availed legally and validly up to 31st March 2011 is entitled to be carried forward in the books for subsequent utilization even if the enabling provision was erased from the Rules on that day? HELD THAT:- The operation of law by erasure of rule 6(5) of CENVAT Credit Rules, 2004 could not impact the credit taken under rule 3 of CENVAT Credit Rules, 2004, at the time of procurement of the impugned services; nor is that entitlement thereof under challenge in the proceedings initiated by the notice issued to the appellant. Proceeding onward, the operation of erasure of rule 6(5) of CENVAT Credit Rules, 2004 would not impact credit relating to inputs or input services , already consumed and not determined as attributable exclusively to production of exempted goods or exempted services as on date of erasure. The amendment was effected only for withdrawal of the privilege of exclusion from the general provisions of the rule 6 of CENVAT Credit Rules, 2004 that permitted retention of credit even after the factum of utilization in or deployment in exempted goods and exempted services become apparent. Consequently, the operation of rule 6(5) of CENVAT Credit Rules, 2004 did not, or does not, impact taking of credit but is only pertinent to the retention of credit and, being exclusion by special provision, would have to operate only with effect from the date on which such exclusion came into effect. It is in this context that the decision of the Hon ble Supreme Court in EICHER MOTORS LTD. VERSUS UNION OF INDIA [ 1999 (1) TMI 34 - SUPREME COURT] in SAMTEL INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [ 2003 (3) TMI 121 - SUPREME COURT] and in COLLECTOR OF CENTRAL EXCISE, PUNE VERSUS DAI ICHI KARKARIA LTD. [ 1999 (8) TMI 920 - SUPREME COURT] must be seen i.e., non-operation of rule 3 of CENVAT Credit Rules, 2004 both at the threshold and at the time of utilization of the impugned goods/services. It is clear that the vested right affirmed by the Hon ble Supreme Court in re Eicher Motors Ltd clearly applies to the case of the appellant as there is no evidence that the impugned services had been utilized only after 31st March 2011. The continued eligibility for credit cannot be curtailed or impacted - the impugned order does not sustain - appeal is allowed.
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2024 (2) TMI 1015
Levy of Automobile Cess - manufacture of Electrically Operated Vehicles named Yo Bikes by assembling various Parts, components and Assemblies - exempt under N/N. 25/2008-CE - time limitation - suppression of facts or not - HELD THAT:- The appellant is assembling various parts and components in order to produce Yo-Bikes falling under the chapter heading 87 which qualifies for exemption vide Notification No. 25/2008-CE. Further it is observed that the Appellant has paid automobile cess upon being pointed out by auditors for the period February, 2010 to February, 2011 under protest only because the Appellant was under bona fide belief that their product does not qualify under the category of automobiles and thus they were not liable to pay cess for which they received no clarity from the department with respect to their liability. It is pertinent to note here that the department has taken no effort to establish any tests/ingredients as to why the product of the appellant will be classifiable as automobile for the levy of automobile cess and has simply taken the support of Notification 67/88 dated 09/01/1989 to levy automobile cess on the Appellant. The entire demand for automobile cess has been raised from the Audit Objection and records maintained by the Appellant which goes on to show that the department never raised any objection regarding non deposit of automobile cess even when the cess was paid by the Appellant under protest. Therefore it cannot be denied that the Department had enough time to investigate for the purpose of levy of cess. Time limitation - HELD THAT:- The entire demand in this case is time barred as for the period 2008 09 to 2011 - 12 show cause was issued on 03.04.2013 which is not only beyond the period of normal limitation but also that the Department has incorrectly invoked extended period of limitation without sufficiently establishing ingredients to give effect to the same. The demand is barred by limitation. The issue on merit is left open. Thus the impugned order is set aside - Appeal allowed.
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2024 (2) TMI 1014
Levy of penalty u/r 26 of the Central Excise Rules, 2002 - clandestine manufacture of Pan Masala - recovery of duty alongwith interest and penalty - HELD THAT:- The penalty under Rule 26 can be imposed if one is concerned in a manner indicated in the Rule with goods which were liable for confiscation or was in any way concerned such goods or any person who is connected with issue of invoices without delivering goods so as to enable the person to enable the other person to avail CENVAT credit incorrectly. In this appeal, no penalty has been imposed with respect to the confiscation of the goods (first SCN). The second SCN was only concerned with recovery of duty. It is in this SCN, penalty of Rs. 10,00,000/- was imposed on the appellant under Rule 26. This Rule does not provide for imposing penalty on the ground that no excise duty was not paid or short paid. In the first SCN, where there was confiscation of goods, no penalty was imposed on the appellant by the adjudicating authority and in the proceedings related to the second SCN, where duty is to be demanded, penalty was imposed under Rule 26 which is clearly beyond the scope of this Rule - Since there is no basis for imposing penalty on the appellant under Rule 26 in the second SCN (which neither involved confiscation of goods nor issue of invoices without supplying goods), the penalty cannot be sustained. Appeal allowed.
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2024 (2) TMI 1013
Non-fulfillment of input output norms as per the allegation of the Department - defective PETs also should be considered as part of the output or not - Applicability of Note 2 of the SION - submission of the Appellant is that in the course of manufacture of PET even hypothetically speaking, no manufacture can produce 100% correct quality quantity of PET - time limitation - HELD THAT:- There are force in the Appellant s contention that the Adjudicating Authority should have considered the defect PETs emanating in the course of their final manufactured product towards the SION fulfillment. It is also seen from the records that Note 2 was issued by the Committee after proper verification of the technical details furnished by the Appellant. This Note 2 cannot be treated as a new norm prescribed for the future manufacture only. This simply prescribes the norms for normal production which are being carried out by the Appellant all along. Therefore, the Adjudicating Authority is in error in taking the stand that this Note 2 cannot be applied for the goods manufactured during the past period. Time Limitation - HELD THAT:- So far as the Appellant s submissions on limitation are concerned, there are force in the same. The Appellant was registered EOU and was filing the ER-2 and ER-5 Returns regularly and data contained in these Returns have been considered by the Department for issue of the Show Cause Notice. Therefore, allegation of suppression does not sustain. The Department has committed a grave error by issuing the second Show Cause Notice once again invoking the extended period. It is surprising that the Adjudicating Authority has relied on the Nizam Sugar Factory Larger Bench decision, after this LB [ 1999 (10) TMI 123 - CEGAT, NEW DELHI ] was overturned by the Hon ble Supreme Court long ago in NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] . In view of these facts, we hold that the confirmed demands cannot sustain for the extended period in respect of the both Show Cause Notices. For the confirmed demand in respect of the normal period, (March 2009 to October 2009), the matter is remanded to the Adjudicating Authority to consider the following facts. (i) Get the details of defective PET manufactured during this period and give the benefit of such quantities holding that they are part of the total manufactured quantity. (ii) Consider the amendment brought in under Note 2 of the SION and give the benefit to the Appellant. After considering these two issues, the net quantification is required to be done. If any demand is confirmed by the Adjudicating Authority after such re-quantification, the Appellant is required to pay the interest - Appeal disposed off.
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Indian Laws
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2024 (2) TMI 1012
Condonation of delay by applying Section 5 of the Limitation Act - case of an appeal against acquittal - whether the period of filing an appeal against acquittal, has been prescribed under Section 378(5) of CrPC itself, where there is no provision for condonation of delay? - HELD THAT:- In the present case, there is no such exclusionary provision under Section 378 of CrPC, or at any other place in the Code. The benefit of Section 5 read with Sections 2 and 3 of the Limitation Act, 1963 can therefore be availed in an appeal against acquittal. There is no force in the contentions raised by the appellants as regards the non-application of Section 5 of the Limitation Act in the present case and the appeal is therefore dismissed. Neither Hukumdev Narain Yadav [ 1973 (12) TMI 92 - SUPREME COURT ] or Gopal Sardar [ 2004 (3) TMI 743 - SUPREME COURT ] would help the case of the appellant as both these cases deal with special laws which prescribed a period of limitation and the expression of the language contained in the law is very clear that under no circumstances can such a limitation be condoned. The relevant provisions have already been discussed earlier. Appeal dismissed.
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2024 (2) TMI 1011
Dishonour of Cheque - legally enforceable debt or not - no evidence to that effect has been adduced on behalf of the petitioner-convict to rebut the presumption under Sections 118 and 139 of the N.I. Act - HELD THAT:- In the case in hand the petitioner/ convict/ accused has admitted his signature on the cheque and stated that the same were taken from him by the complainant in good faith being on friendly relation. The complainant has stated that both these cheques were issued by the accused to discharge the liability of the payment of Rs. 20 lakhs, which was paid by him to purchase the land; but the same land was sold by the accused to any other person though there is no written document to this effect only the oral evidence has been adduced by the complainant examining himself as C.W.-1. This oral evidence is not rebutted by the petitioner/ accused/ convict by adducing evidence even to rebut the presumption under Section 118 and 139 of the N.I. Act. Though the petitioner/ accused/ convict, in cross-examination of complainant C.W.-1, this question was put up that no income tax return was filed by the complainant; but the same fact is not rebutted by the accused/ convict/ petitioner by adducing evidence in rebuttal. The Hon ble Apex Court in the case of Oriental Bank of Commerce Vs. Prabodh Kumar Tewari [ 2022 (9) TMI 264 - SUPREME COURT ] held that drawer of a cheque is liable even if details of the cheque was filled by some other person in writing; the experts opinion cannot rebut the presumption under Section 139 of the N.I. Act. The Hon ble Apex Court in the case of Yogesh Jain Vs. Sumesh Chandra [ 2022 (10) TMI 1198 - SUPREME COURT ] held that once the cheque is issued and upon getting dishonored statutory notice is issued, it is accused to dislodge the legal presumption available under Section 118 and 139 of the N.I. Act. In order to rebut both these presumptions on behalf of the convict petitioner, no oral or documentary evidence was adduced. The only defence, which has been taken by the petitioner-convict during trial was that the cheques were issued in good faith because of friendship of him with the complainant. This suggestion was also given that in regard to sale of the land, no document was executed and there was no alleged liability for issuance of cheques. To this effect, on behalf of the petitioner-convict, no evidence has been adduced to rebut both the presumption sunder Sections 118 and 139 of the N.I. Act and also the evidence adduced by the complainant oral and documentary even on the touchstone of preponderance of probabilities - In view of the complaint case, the same is found to be proved beyond reasonable doubt. Accordingly, this point of determination is decided in favour of the opposite party No. 2 and against the petitioner/ convict. The impugned order passed by the learned trial Court, which was affirmed by the learned Appellate Court needs no interference and this Criminal Revision deserves to be dismissed - revision dismissed.
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2024 (2) TMI 1010
Dishonour of Cheque - applicability of principles of discharge - amount paid for transaction for installing a plant on Chinese technology - cheque was bounced for insufficient fund and stop payment - such technology from China existing (for which cheque was issued) on the date of encashment of cheque or not - it is submitted that the entire case of prosecution is devoid of criminal mens rea and the instant prosecution is merely a misuse of the process of law - HELD THAT:- It is an admitted position that the petitioner and the informant have entered into transaction for installing a plant on Chinese technology. It appears that after taking cheque of Rs. 51 Lakhs, the petitioner was traceless for about 3 months and thereafter he was traced and he has issued a cheque of Rs. 51 Lakhs in favour of opposite party no. 2, which was instructed as stop payment by the petitioner. In spite of issuance of cheque, it was not encashed, opposite party no. 2 was required to take remedy under the Negotiable Instruments Act. It appears that statutory notice etc. was not issued and the present FIR was registered, which clearly suggests that Section 138 of the Negotiable Instruments Act is not made out. There is no doubt that the document of unimpeachable character can be considered, however, if such dispute is there, that cannot be appreciated under Section 482 Cr.P.C. A reference may be made to the judgment passed by the Hon'ble Supreme Court in the case of SURYALAKSHMI COTTON MILLS LTD. VERSUS RAJVIR INDUSTRIES LTD. ORS. [ 2008 (1) TMI 865 - SUPREME COURT] , where it was held that The courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is otherwise genuine. The courts cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable. There is no doubt that mere breach of contract and cheating would depend upon the intention of the accused at the time of alleged inducement, as has been held by the Hon'ble Supreme Court in the case of INTERNATIONAL ADVANCED RESEARCH CENTRE FOR POWDER METALLURGY AND NEW MATERIALS (ARCI) ORS. VERSUS NIMRA CERGLASS TECHNICS (P) LTD. ANR. [ 2016 (3) TMI 32 - SUPREME COURT] as relied by the learned counsel for the petitioner, however, in the case in hand, it has been alleged that the said technology was never introduced by China and on the said ground, the amount was taken. Thus, that dispute is distinguishable in the facts and circumstances of the present case. Further it is well settled that if injustice is not done, in the garb of Section 482 Cr.P.C., second revision is not maintainable after dismissal of the revision petition. The learned Court will proceed under Sections 406 and 420 of the Indian Penal Code, in accordance with law - Petition allowed in part.
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2024 (2) TMI 1009
Appointment of Arbitral Tribunal to adjudicate upon the disputes between the parties - whether a petition under Section 11 (6) of the Act would be maintainable? - HELD THAT:- Under Section 21 of the Act, the expression used is commencement of the proceeding . The argument advanced on behalf of the petitioner with regard to the aforesaid provision of the Act is that on receipt of the claim by the respondent, the arbitral proceeding is deemed to be commenced. However, such submission is not acceptable in the facts and circumstances of the instant case. Admittedly, it is the provision of the Contract that in case the claim exceeds Rs. 5 crores, the Tribunal would be constituted by three members and unless and until the Arbitral Tribunal is constituted, the question of commencement will not arise at all. With regard to application of Section 11 (6) of the Act in making a challenge of the present nature, the learned counsel has relied upon a decision of the Hon ble Supreme Court in the case of HUAWEI TECHNOLOGIES CO. LTD. VERSUS STERLITE TECHNOLOGIES LTD. [ 2015 (9) TMI 866 - SUPREME COURT] . However, on a reading of the said decision, this Court is of the opinion that the same would not have any application in the present case. Rather, on reading of the contents of paragraph 8, a different interpretation would be available which will not come to the aid of the petitioner. This Court is of the firm opinion that a challenge of this nature would not be maintainable under the provision of Section 11 (6) of the Act and unless a petition is presented before the appropriate forum under the appropriate provisions of law, such challenge cannot be maintained - Petition dismissed.
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