Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 26, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
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Minutes of the Monetary Policy Committee Meeting, February 8 to 10, 2022 [Under Section 45ZL of the Reserve Bank of India Act, 1934]
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Grant of ₹ 1348.10 crore released to Six States for Urban Local Bodies
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Commission approves proposed combination involving acquisition of stake in ISMT Limited by Kirloskar Ferrous Industries Limited
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Crores of jobs can be created in labour-intensive sectors like the Textiles sector, Plastics, Footwear, Auto components, Sports Goods, Agri/Food Processing, says Shri Piyush Goyal
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Multiple interventions by the Government to enhance Local Value Addition have benefitted not only the large Industries but also the MSMEs, says Shri Piyush Goyal
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Principles of natural justice - petitioners have been summoned 20 times - The respondents shall issue norms as to how many times, such summons can be issued against the parties and for what purpose. Learned counsel for the respondents to inform this Court about compliance of this order on the next date - In view of the petitioners challenging the constitutional validity of Section 16(2)(c) of the Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017, office is directed to issue notice upon the Attorney General for India and Advocate General for State of Maharashtra, returnable on 28th March 2022. - HC
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Summon Order - not arresting petitioners in pre-inquiry proceeding in pursuance of the summon - On the submissions of the learned counsel for the petitioner regarding denial of proper and legal representation at the time of Inquiry or recording of statement under Section 70 of the CGST Act, it is hereby directed that if the petitioner so wants, he may take a qualified person to help him in explaining the details. He shall not be detained in the office of the Commissioner, who is the summoning authority beyond the reasonable working hours.- HC
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Liability of GST - GST on notional rent - property of the partner used by the Partnership Firm to carry out the business by the firm at free of rent - GST is liable to be paid in respect of properties of the applicant rented out to the partnership firm to carry out the business of the firm even if it is free of rent as the activity is in furtherance of business and amounts to supply as per Section 7(1)(a) read with Schedule I of the CGST/TNGST Act, 2017. - AAR
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Levy of GST - pure services or not - supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metropolitan Water Supply and Sewerage Board(CMWSSB) a Government Authority - Supply of desalinated water by the applicant to CMWSSB for distribution as safe drinking water to public falls under the entry at Sl.No.99 of Notification no.02/2017- Central Tax dated 28.06.2017 and attracts 'NIL' rate of GST. - Transaction of supply of safe drinking water by applicant to CMWSSB does not merit to be classified as 'services' and hence are not eligible for exemption under Sl.No.3 Of the Notification no.12/2017 dt. 28.06.2017. - AAR
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Classification of supply - supply or goods or supply of services - the activities rendered by the applicant to its members - amount collected by rotary is pooled together only for the sole purpose of charity and humanitarian activities for the most needed ones and requisite meeting and administration expenses without any profit motive - The applicant is liable to be registered under the GST Act, as they are providing taxable supplies. - AAR
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Exemption from GST - providing services of theme parks and intend to construct a building namely 'SUNDHA DARSHAN MUSEUM' near Sunda Mata Temple - The primary purpose of the said premises is making profit rather than to serve society or public at large. Being a partnership firm, the applicant has a motto to develop the nearby area of Sundha mata temple for earning profit by developing 'Sunha Darshan Museum'and amusement parks. Mere placing some new idols & sculptures in the said 'Sunha Darshan Museum' to exhibit story of sundha mata temple in the name of service to society, does not qualify as 'museum' due to its profit earning motto. - AAR
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Classification of supply - composite supply or not - naturally bundled with 'Construction Services' or not - recovery of the charges for 'the ancillary services' by builders, after completion certificate - 'the ancillary services' would not be considered as a 'composite supply' naturally bundled with 'Construction Services under Section 8 of CGST and RGST Act, 2017. The applicable rate of GST on 'the ancillary services' would be as per the SAC prescribed under Notification No. 11/2017 CT (R) dated 28.6.2017 and are liable to GST @ 18%. Further, the applicant has to pay GST on the entire consideration received as charges on account of 'the ancillary services', without any abatement. - AAR
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Levy of GST - providing educational related services - on gone through the section 13 of the agreement, we find that there is no establishment of term 'employment'. Hence, activity or transaction between service provider i.e. applicant and service receiver does not constitute employee-employer relation - thus the activity or transaction is not covered under entry no. 1 of the Schedule III of the act and resulted in a 'supply of service' as per Section 7 of the CGST Act, 2017 and tax will be leviable under section 9 of the CGST Act, 2017 and valuation thereof will be done as per section 15 of the CGST Act, 2017. - AAR
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Classification of services - Support services to exploration, mining or drilling of petroleum crude or natural gas or both - The activities of supply designing & engineering, installation, Commission of Project under EPC contract by the applicant shall attract GST @18% (9% CGST and 9% SGST) - AAR
Income Tax
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Business expenditure u/s 37(1) - pharmaceutical companies’ gifting freebies to doctors, etc. - The incentives (or “freebies”) given by Apex, to the doctors, had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their practice of medicine. Those sanctions are mandated by law, as they are embodied in the code of conduct and ethics, which are normative, and have legally binding effect. The conceded participation of the assessee- i.e., the provider or donor- was plainly prohibited, as far as their receipt by the medical practitioners was concerned. That medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of their giver, or donor, i.e., Apex. - Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. - SC
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Reopening of assessment u/s 147 - Fresh sanction under Section 151 - For a moment, even if accept Revenue’s contention that the present proceedings are continuation of the proceedings initiated by the Assessing Officer at New Delhi vide notice dated 22nd March 2013, the proceedings would be invalid since the notice issued by the Assessing Officer at New Delhi itself was invalid inasmuch as sanction of the appropriate authority as per Section 151 was not obtained before issuing the notice. - HC
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Reopening of assessment u/s 147 - Rejection of objection put by Assessee - Assessing Officer instead of providing these documents simply dismissed petitioner’s request by saying it is purely an administrative matter and all correspondence have been made through system. Assessing Officer was duty bound to provide all the documents called for by petitioner and his reluctance to provide these documents only would make the court draw adverse inference against respondent. - The order impugned in this petition is quashed and set aside. The matter is remanded for denovo consideration. - HC
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Penalty under Section 271(1)(c) - Undervaluation of closing stock - The case of furnishing of any inaccurate particulars of income is not apparent from the record itself neither the books of account has been rejected, nor any case of creating false evidence has been made by the Revenue. - we quash the impugned order of penalty - AT
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Unexplained cash credit u/s 68 - Bogus share capital and share premium - Since, the present assessment year is 2008-09, there is no onus on the assessee to prove the source of source in this case. Hence, the AO’s act of drawing adverse inference in this regard is not at all sustainable. Furthermore, the adverse inference on account of share premium is also not sustainable as necessary amendment by way of insertion of section 56(2)(viib) of the Act was also brought into statute books from AY 2013-14 and the same is not at all applicable for the current assessment year. - AT
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Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages u/s 44AE - It is clear that sec. 44AE, a non obstante clause, represents a code in itself and, further, provides for exceptions thereto as well as a built-in mechanism to effectuate the same. The right to adopt a lower than the presumptive rate stands taken away by Finance Act, 1997 (s. 44AE(6)). - AT
Customs
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Smuggling - Norephedrine - misdeclaration of goods exported - prohibited goods or not - Needless to say that the test report is the basis for holding that the goods exported are Norephedrine and prohibited goods. The entire case of the department is based upon the test report. Though the appellant has pointed out the discrepancies at the stage of replying to the Show Cause Notice itself, the department has not been able to explain the discrepancies. - AT
Indian Laws
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Dishonor of Cheque - cognizance of offences - when a company is the payee of the cheque based on which a complaint is filed under Section 138 of N.I. Act, the complainant necessarily should be the Company which would be represented by an employee who is authorized. Primafacie, in such a situation the indication in the complaint and the sworn statement (either orally or by affidavit) to the effect that the complainant (Company) is represented by an authorized person who has knowledge, would be sufficient. - SC
Service Tax
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Levy of service tax - market fee - mandi shulk - whether the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012? - The fact that, on and after 01.07.2012, such activity by the Market Committees is put in the Negative List, it can safely be said that under the 2006 circular, the Market Committees were not exempted from payment of service tax on such activities - it is required to be noted that it is not the case on behalf of the Market Committees that the activity of rent/lease on shop/land/platform as such cannot be said to be service. - SC
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Demand of Interest on 50% of the service tax - when the service provider (appellant) has paid entire 50% of the amount towards service tax and the service Recipient also paid the balance 50% of the service tax in time directly to the Service Tax Department on the assumption that the reverse charge mechanism is applicable, and when the Department also re-credited the said 50% of the service tax from the service recipient's account to the service provider's (appellant's account) with effect from 28.02.2014, instead of giving effect to the same from the date, on which, original payment was made by the service recipient, it is not open to the Department to turn down and say that reverse charge mechanism is not applicable, thus, the appellant is liable to pay interest on the belated payment. - HC
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Levy of penalty u/s 78 - entire Service Tax and interest paid before issuance of SCN - the appellant have not complied with the provision of section 73(3) and suppression of fact is clearly established against the appellant. Hence, they are not eligible to avail benefit under section 73(3). Accordingly, the Revenue has rightly issued the Show Cause Notice and the Adjudicating Authority has correctly imposed the penalty under section 78. - AT
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Refund of duty paid - applicability of principles of unjust enrichment - Commissioner (Appeals) has committed an error by holding the refund to hit by unjust enrichment merely on presumptive basis. No relevant evidence at all been discussed by him while coming to the said conclusion. Rather, the relevant evidence as was considered by Original adjudicating authority has miserably been ignored by the Appellate Authority - the question of adjudication as framed stands decided in favour of the appellant - AT
Central Excise
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Extended period of limitation - In fact in the present case the assessee has been proved to be incorrect in its belief. However to invoke larger period of limitation in terms of proviso to Section 11A of the Central Excise Act what is required is that the duty of excise is not levied or paid or has been short levied or short paid or erroneously refunded the reason of fraud, collusion or in willful misstatement or suppression of facts or contravention of any of the provisions of the act or the rules which intent to evade payment of duty. In absence of elements of fraud, collusion, willful misstatement, suppression of facts or intention to evade duty, larger period of limitation cannot be invoked. - HC
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Valuation - Job work - inclusion of value of the scrap retained and sold by the appellants in the assessable value of the goods manufactured and cleared by the appellants on job work basis, in the assessable value - the inclusion of additional consideration should be restricted to the actual scrap generated and sold by the appellants. For the computation of the same, the issue needs to go back to the Commissioner, who shall recalculate the demand including only the value of actual scrap generated and sold by the appellants.- AT
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Admissibility of credit on the TBA machine - The appellants claim that they had utilised the machine for manufacture of ‘Aqua Bailey’ though on trial basis and the same was not successful. - It is not the case of the department that the appellant used the capital goods exclusively in the manufacture of exempted products or in provision of exempted services. - credit cannot be denied - AT
VAT
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Interpretation of statute - When the Entry in question specifically provides for exemption to the goods described as “Hank Yarn” without any ambiguity or qualification, its import cannot be restricted by describing it as being available only for the hank form of one raw material like cotton nor could it be restricted with reference to its user industry. - SC
Case Laws:
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GST
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2022 (2) TMI 1110
Seeking to allow filing of declaration in form GST TRAN-1 - transitional credit of amount of Value Added Tax, Central Excise, Service Tax or Cess - Section 140(1) of the West Bengal Goods and Services Tax Act, 2017 - Central Goods and Services Tax Act, 2017 - HELD THAT:- In view of Section 140 and relevant rules of the GST law and in view of the judgment passed in NODAL OFFICER, JT. COMMISSIONER, IT GRIEVANCE, GST BHAWAN VERSUS M/S. DAS AUTO CENTRE AND OTHERS [ 2021 (12) TMI 835 - CALCUTTA HIGH COURT] , wherein liberty was given to the writ petitioner/assessee to claim individual tax credit in GSTR-3B Forms for the month of January, 2022 to be filed in the month of February, 2022 and the concerned authority/ Assessing Officer would be at liberty to verify the genuineness of such claim. As return in GST 3B for the month of January 2022, to be filed in the month of 20th February has already been filed, liberty is granted to the petitioner/assessee to file individual transitional tax credit in GSTR-3B Forms for the month of February, 2022 which is to be filed in the month of March, 2022 and the conerned authority/Assessing Officer would be at liberty to verify the genuineness of such claim. Petition disposed off.
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2022 (2) TMI 1109
Principles of natural justice - no show cause notice is issued for conducting any investigation/enquiry against the petitioners - petitioners have been summoned 20 times - HELD THAT:- The respondents are directed to file affidavit and shall deal with the issues raised by the petitioners in the petition and shall also deal with the averments made in paragraph 4.6 of the writ petition. The respondents shall indicate as to how many time summons were issued by the respondents to the petitioners, for what purpose and the progress of the investigation during this period. Affidavit shall also indicate as to when the investigation would be completed by the respondents against the petitioners - A copy of this order shall be forwarded to the Additional Director General of DGGI, Pune to look into the matter personally. There are allegations made by several petitioners in various petitions about the repeated summons issued by the authority under the provisions of Central Goods and Service Tax Act, 2017 for the purpose of harassment, coercion and to compel them to deposit substantial amount not in accordance with law. The respondents shall issue norms as to how many times, such summons can be issued against the parties and for what purpose. Learned counsel for the respondents to inform this Court about compliance of this order on the next date - In view of the petitioners challenging the constitutional validity of Section 16(2)(c) of the Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017, office is directed to issue notice upon the Attorney General for India and Advocate General for State of Maharashtra, returnable on 28th March 2022. Application disposed off.
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2022 (2) TMI 1108
Maintainability of appeal - failure to comply with the requirement of mandatory pre-deposit - Validity of series of monthly assessment orders - failure to furnish returns in spite of notice under section 46 of CGST Act - HELD THAT:- After filing the appeal, which mandates a pre-deposit of 10%, a defect was pointed out that petitioner had not deposited the mandatory predeposit. Petitioner contended that since the order of cancellation of registration issued on 19.03.2021 enabled the petitioner to have his entire assessment orders set aside, the mandatory pre-deposit, if paid, would cause prejudice to the petitioner, especially since the petitioner will stand to lose the court fee payable on the appeal. Ext.P4 appeal was preferred by the petitioner as early as on 11.03.2020. Once the petitioner undertakes the remedy of a statutory appeal under section 107 of the Act, petitioner cannot thereafter turn around and approach this Court seeking reliance upon subsequent events, to avoid the mandatory pre-deposits. Such a practice, if permitted, would render the provisions of the statute redundant. The liability to make the pre-deposit befalls on the date of filing of the appeal, i.e., 11.03.2020 in the instant case. The said liability cannot be eschewed from reckoning on the basis of subsequent events, which as claimed by the petitioner to be beneficial to it. The subsequent events can, at the most, be utilised for availing the appropriate benefits while the appeal is considered on merits but not to overcome the mandate of pre-deposit under section 107 of the Act. This Court is of the view that since the petitioner had already invoked the appellate remedy, the said appeal ought to be pursued as contemplated by law - Petition dismissed.
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2022 (2) TMI 1107
Summon Order - not arresting petitioners in pre-inquiry proceeding in pursuance of the summon - seeking directions to respondent authority not to arrest to petitioner in pursuance of notice issued under section 70 of CGST Act - HELD THAT:- This Court is not inclined to follow the orders passed by the learned Single Judge sitting in the Coordinate Bench, which do not constitute a binding precedent. However, keeping in view the apprehension of the petitioner, the submissions made by Mr. Ashutosh Posti, learned counsel for the petitioner and the submissions made by Mr. Shobhit Saharia, learned counsel for the respondents, this Court observes that the petitioner shall appear before the Authority summoning him for recording his statement. However, this Court further directs that before taking any steps to arrest, the Commissioner of CGST, Dehradun shall comply the provisions of Sub-Section (1) of Section 69 in letter and spirit. In other words, he must come to a definite conclusion that the petitioner has committed the offence as enshrined thereon, on the basis of credible materials and before authorizing any person to arrest the petitioner and the commissioner must record the reasons and material that he took into consideration in authorizing the officer to arrest him. A violation of this order shall be considered contempt of this Court. On the submissions of the learned counsel for the petitioner regarding denial of proper and legal representation at the time of Inquiry or recording of statement under Section 70 of the CGST Act, it is hereby directed that if the petitioner so wants, he may take a qualified person to help him in explaining the details. He shall not be detained in the office of the Commissioner, who is the summoning authority beyond the reasonable working hours. Application disposed off.
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2022 (2) TMI 1106
Classification of goods - electronic toys or not - When physical force is the primary action of a Toy and if the light and the music are ancillary to it then whether it is to be classified under Electronic Toys or other than Electronic Toys? - HELD THAT:- Had the Parliament thought that the electronic toys are altogether different from that of toys, it would not add the same list of tricycles, scooters, pedal cars etc. (including parts and accessories thereof) and the difference between them is that any component of electronic added to the toys like tricycles, scooters, pedal cars etc. would disentitle them to fall under serial number 228 of schedule II to the Notification No.1/2017 Central Tax Rate dated 28-6-2017. In the case of appellants, it is apparently clear that all the four products contain electronic components irrespective of its usage, the said goods would fail to fall under serial number 228 of schedule II to the Notification No.1/2017 Central Tax Rate dated 28-6-2017 and therefore they have to be classified under serial number 440 of schedule III to the Notification No.1/2017 Central Tax Rate dated 28-6-2017. As far as these toys consists of electronic components irrespective of the usage, they would attract 18% GST as per Sl.No. 440 of Schedule-III of the Rate Notification - Appeal dismissed.
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2022 (2) TMI 1105
Liability of GST - property of the partner used by the Partnership Firm to carry out the business by the firm at free of rent - relevant section or rule or provision in GST law under which the partner of the firm is required to pay GST on notional rent - execution of rental deed between partner and Partnership firm, when there is no furtherance of business for that partner - applicable valuation rule, when consideration is not fixed and not received by the Partner - HELD THAT:- Any trade whether or not for pecuniary benefit and irrespective of the volume, frequency, continuity or regularity, is considered as Business. The Pecuniary benefit is nothing but the economic benefit accrued to the Service Provider in exchange for the said service provided, directly or indirectly and is corelatable with the service provided. In order to qualify, any service as in course of business, should be provided with the intention of deriving economic benefits. If it accrues directly or indirectly, then the same is treated as provision of service against consideration - the properties are found to have been rented to the partnership firm for carrying on its activities such as Showrooms, Godowns/Warehouses and Hostels for their staff and also it is observed that the EB charges and water tax/ charges are being borne by the partnership firm as evidenced by the ledger extracts of the partnership firm pertaining to such payments. For the years after introduction of GST, the applicant has stated to have collected rent from the firm in respect of the properties listed above which has been reflected as Income from Property in the Income Tax Returns of the applicant. The rent free accommodation if so provided by the applicant indirectly accrues as profit for the firm which is enjoyed by the applicant as partner. So the economic benefit accrues to him and hence this supply is in the course of and furtherance of business only. Thus it is evident that the applicant in the course of furtherance of business has rented out the properties for commercial use to the partnership firm which is a separate person - in the case at hand the applicant is the owner of the properties. He also holds 2/3rd of the shares in the partnership firm in which the Managing Partner and controls the firm. Therefore, the applicant and the firm who are separate persons are Related Persons for the purposes of this Act. Therefore, as per the above schedule, the supply of service between such related persons i.e., the applicant and the partnership firm, when made in the course or furtherance of business, the same is a taxable supply even when rendered without consideration. The rent free accommodation proposed to be provided by the applicant to the partnership firm in which he is major shareholding partner and Managing Partner is. a supply without consideration in the course of and furtherance of business and is found taxable under Section7(1)(a) read with Schedule I of the CGST Act,2017. Applicable valuation provisions when consideration is said to have not been fixed and received - HELD THAT:- Where the supply is between related persons, the value of such supply shall be the open market value of such supply. Where the open market value is not available, the value of supply of goods or services of like kind and quality will be the taxable value. In the instant case, the property being rented and the supplier and recipient being related Rule 28 of CGST/TNGST Rules 2017 applies and the value should be arrived at accordingly for the purposes of GST. The activity of renting out the Immovable Properties owned by the applicant as an individual person to the partnership firm, another individual person in which he is a major shareholding partner and Managing Partner even without consideration is a taxable supply under Section7(1)(a) read with Schedule I of the CGST Act, 2017. The value of taxable supply shall be as stipulated under Rule 28 of the CGST Rules, 2017.
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2022 (2) TMI 1104
Levy of GST - pure services or not - supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metropolitan Water Supply and Sewerage Board(CMWSSB) a Government Authority - applicability of SI.No.99 of Notification 02/2017 for supply of water or SI.No. 3 of Notification 12/2017?. Whether the transaction of supply of desalinated water for public purpose by the applicant to CMWSSB is Pure services as stipulated in the SI.No.3 of Notification no.12/2017? - HELD THAT:- The entry exempts pure services provided to a local authority in relation to functions entrusted to a Panchayat/Municipality under Article 243 G/ 243W of the Constitution - The applicant abstracts water from sea, treats the same in the facility owned, managed, operated, maintained by them and sells the 'treated water' to the Purchasers' and charge them for such supply. The applicant is not involved in the distribution of the water supply. to the common public and sale of water to CMWSSB is done at the 'Off-take points' at the underground storage tank of the applicant company as agreed in Schedule XVII of the BWPA therein. Invoices issued for sale of product water has been furnished. Thus in our opinion, this activity of treatment of water on own account and supply of water is sale simpliciter and therefore this notification which provides exemption to services do not have any application with regard to supply of water. Whether the applicant is eligible to avail exemption under Entry no.99 of Notification no.2/2017 dt. 28.06.2017 read with clarification in Circular No.52/26/2018-GST dt. 09.08.2018? - HELD THAT:- The clarification in para 6 of circular no 52/26/2018-GST, dated 09.08.2018 issued from F.No. 354/255/2018 TRU states that supply of drinking water for public purpose when not sold in sealed container is exempted. The notification is unambiguous in as much as it clearly states the type of waters which is not exempted. On a joint reading of the Notification and the Clarification, the waters mentioned at sl.no. 1 to 8 and drinking water for public purpose sold in sealed container are not exempted. In the case at hand the applicant sells the water to CMWSSB after the process of desalination - the product water sold in this case is potable water and is not sold in sealed container. Hence, it is found that the desalinated water eligible to be classified under HSN-2201 attracting NIL rate of GST. The desalinated water supplied by the applicant to CMWSSB for distribution as safe drinking water is not liable to tax under the entry at Sl.no.99of Notification no.02/2017- Central Tax dated 28t.06.2017 - the activity of the applicant is not services and is only sale simpliciter i.e., sale of potable water, obtained after the process of desalination of sea water. The product water to be falling under water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] falling under HS code 2201 attracts NIL rate of GST.
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2022 (2) TMI 1103
Classification of supply - supply or goods or supply of services - Requirement of registration of petitioner - amount collected by rotary is pooled together only for the sole purpose of charity and humanitarian activities for the most needed ones and requisite meeting and administration expenses without any profit motive - no furtherance of business in this activity and neither any services are rendered nor are any goods being traded - determination of liability to pay tax on any goods or services or both - HELD THAT:- Sub-section (aa) has been inserted vide Notification no.39/2021-C.T dt.21.12.21 which is brought into force on 01.01.2022 with retrospective effect from 01.07.2017. Hence the activities performed by a person other than an individual to its members for a consideration is a supply as per the scope of this section. In the explanation provided it has been clarified that the members and the person i.e. the association shall be deemed to be two separate person and the supply of activities shall be deemed to take place from one such person or another and hence is a supply liable to be taxed - the activities rendered by the applicant to its members for which the membership fees collected forms the consideration is a supply and is liable to be taxed. Once it is held that the applicant and it's members are distinct and that the membership fee collected from its members is found taxable, they provide taxable service and are required to be registered under the CGST Act, 2017 subject to the exceptions available with regard to the monetary limit for such registration. Whether the activities rendered by the applicant, which they term as charitable etc., amount to supply? - manner of determination of tax liability - HELD THAT:- In the present case, the applicant had furnished details for the activities already done in the yester years. During the Personal hearing held on 21.12.21, the applicant was informed that the activities pertained to the years 2017-18 and 2018-19, which have been completed on which ruling cannot be extended by this authority under Section 95 of the GST Act. The authorized representatives accepted the fact. Hence this authority is constrained in considering this question on merits. Therefore no ruling is extended in respect of this question as the same is not related to the activities being undertaken or proposed to be undertaken. Whether the membership fees collected by the applicant from their Members is subject to tax? - HELD THAT:- As the activities rendered by the applicant to their Members is a supply to its constituents/members and they have to be registered. With respect to the question of whether specific activities listed by them and performed by the applicant are liable to tax, it has been found that the activities so rendered by the applicant are pertaining to the previous years and they have been rendered complete. Hence the question is found to be beyond the scope of Section 95(a) of the Act and is not answered. The GST liability on all the amounts collected other than Membership fees is not answered as the details relating to the said amounts was not furnished.
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2022 (2) TMI 1102
Exemption from GST - providing services of theme parks and intend to construct a building namely 'SUNDHA DARSHAN MUSEUM' near Sunda Mata Temple - applicability of Notification No. 12/2017- Central Tax (Rate)dated 28th June, 2017 in respect of said 'SUNDHA DARSHAN MUSEUM' - whether the said building to which the applicant claiming as 'Sundha Darshan Museum' is museum or otherwise so that applicability of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 can be determined? - HELD THAT:- The museum means a non-profit organisation that stores objects of both natural and cultural heritage, cares and provides necessary conservation supports required to objects in both display and storage and exhibits objects for the knowledge of common people. The premises claimed by the applicant as 'museum' is founded and developed by a Limited Liability Partnership (LLP) firm namely M/s Vakao Theme parks LLP which is a business entity. The Main Business Activity of Vakao Theme Park LLP is Recreational, cultural and sporting activities . Further, as per discussion held with its authorized representative during personal hearing dated 30.11.2021, it emerges that this firm intend to develop amusement parks near sunda mata temple. The creation of Sundha Darshan Museum is one of the way with a motto to increase people foot- fall in order to run these amusement/theme parks. This building is owned by its partners which shows that it is not a non-profit entity. The primary purpose of the said premises is making profit rather than to serve society or public at large. Being a partnership firm, the applicant has a motto to develop the nearby area of Sundha mata temple for earning profit by developing 'Sunha Darshan Museum'and amusement parks. Mere placing some new idols sculptures in the said 'Sunha Darshan Museum' to exhibit story of sundha mata temple in the name of service to society, does not qualify as 'museum' due to its profit earning motto. The applicant is not eligible to avail benefits of entry at S. No. 79 of the Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 in respect of 'Services by way of admission to a museum'. The services provided/to be provided by the applicant will be classified under item No. (vi) of column No. 3 of S. No. 34(heading 9996) of the Notification No. 11/2017-CT(R) dated 28.06.2017 under Recreational, Cultural and sporting services other than (i), (ii), (iia), (iii) (iiia), (iv) and (v) above , and the applicant is liable to pay GST @ 18%.
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2022 (2) TMI 1101
Classification of supply - composite supply or not - naturally bundled with 'Construction Services' or not - recovery of charges for the ancillary services by builders - rate of GST - charges for 'the ancillary services' would attract GST at the rate specified for 'Construction Services' (principal supply) at 1% or 5%? - recovery of the charges for 'the ancillary services' by builders, after completion certificate - composite supply naturally bundled with Construction Services - GST not attracted once completion certificate is issued - levy of GST for 'the ancillary services' as individual respective service (considering 18% GST rate) - Input Tax Credit can be claimed in respect of GST paid on expenses incurred to provide the said ancillary services? Whether the Charges for the 'Ancillary Services' recovered by the applicant will be treated as consideration for 'construction services' and classified under SAC 9954 along with the main residential construction services or whether the same will be treated as consideration for independent service(s) under the respective head. And consequently, what would be the applicable GST rate on such Charges collected for the 'Ancillary Services? - HELD THAT:- There are more than two supplies which are independent supplies and so taxable separately, the supply of construction services of residential unit and the other supply of 'ancillary services' (as mentioned in 'Agreement for Sale' provided), viz. JDA Lease Charges, Electrification Charges, Sewage Treatment Plant Charges, Non-refundable IFMS (Interest Free Maintenance Security) and Club Membership from the residents. Ancillary Services supplied in respect of the 'other charges' are different from the service of construction of residential flats. Therefore, it is observed that the 'ancillary services' provided cannot be said to be naturally bundled and supplied in conjunction with each other in the ordinary course of business with main supply of residential flat in the subject case - services to be provided by the applicant covered under entry No. (i) or (ia) as the case may be, is specifically related to Construction of affordable residential apartments other than affordable residential apartments by a promoter in a Residential Real Estate Project (RREP). The 'Construction services' and the 'ancillary services' provided by the applicant are not naturally bundled and are not supplied in conjunction with each other in the ordinary course of business with main supply. These are the facilities/amenities provided by the applicant to its customers for the limited period because, for these facilities created the customers have not been given perpetual rights. The amount or consideration is charged separately for different services. Therefore, the other charges for the ancillary services provided is not covered under the scope of 'Composite supply of services'. Therefore, the contention of the applicant is found not acceptable - the other charges to be charged for ancillary services' mentioned as above are held taxable as per their SAC under the GST Act, at 18% in terms of the respective and appropriate entries in Notification No. 11/2017 CT (R) dated 28.6.2017 as they are covered under services, other than construction services. The consideration for providing the construction services by way of construction of residential unit and the consideration for the ancillary services (i.e. other charges collected) are considerations against separate independent services being provided by the applicant - the services for each of the service head/description are covered under Notification No. 11/2017 CT (R) dated 28.6.2017 and therefore, the Other Charges would attract GST @18%. Thus, the l/3rd deduction from total value as per Sr. No. 2 of the Notification (as claimed by the applicant) cannot be allowed as deduction from the Other Charges. Input Tax Credit (ITC) on goods services received for supply of the ancillary services - HELD THAT:- As 'ancillary services' are subject to outward tax liability at the rate of 18% (without any abetment) therefore, as per Section 16 of the CGST and RGST Act, the applicant shall be eligible to take ITC of the GST paid on goods or services used or intended to be used in the course or furtherance of business subject to the conditions as prescribed and the provisions of sub section 5 of the Section 17 of the GST Act.
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2022 (2) TMI 1100
Levy of GST - providing educational related services - employee employer relationship - nature of services provided and that offered by the prospective service recipient are same - Whether the services under consideration will be covered under entry 1 of schedule III of RGST/ CGST Act or not? - HELD THAT:- The agreement has been entered into on a principal to principal basis and there is no scene in respect of any employment. Hence, it can be said that there no Service is provided by an employee to the employer in the course of or in relation to any employment in the instant case. Thus, the provisions of entry no. 1 of schedule III of the GST act are not applicable. In the instant case, the applicant intends to provide Educational and Training Services to its service recipient i.e. M/s Mentors Eduserv on the basis of section 13 of the agreement dated 10.02.2020. on gone through the section 13 of the agreement, we find that there is no establishment of term 'employment'. Hence, activity or transaction between service provider i.e. applicant and service receiver i.e. M/s Mentors Eduserv does not constitute employee-employer relation - thus the activity or transaction is not covered under entry no. 1 of the Schedule III of the act and resulted in a 'supply of service' as per Section 7 of the CGST Act, 2017 and tax will be leviable under section 9 of the CGST Act, 2017 and valuation thereof will be done as per section 15 of the CGST Act, 2017. The services under consideration will not be covered under entry 1 of schedule III of RGST/ CGST Act, 2017.
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2022 (2) TMI 1099
Classification of services - Support services to exploration, mining or drilling of petroleum crude or natural gas or both - classified under Sr. No. 24(H) of Heading 9986 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 or not - services provided by the Applicant are classified under 'Other professional, technical and business services relating to exploration, mining, or drilling of petroleum crude or natural gas or both' under Sr. No 21(ia) of Heading 9983 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 - appropriate classification - rate of GST - Whether the supply to be made by the applicant under the EPC contract awarded to them would be classified as Support services to mining or other Professional, Technical Business services relating to exploration, mining or drilling of Petroleum Crude or Natural Gas or Both or otherwise in any other service ? - HELD THAT:- From the explanatory note it reveals that Support Services shall include the services to be provided for exploration, once the infrastructure/facility for exploration is built complete in all respect and ready to start exploration. But it does not include the services to be provided before creating the infrastructure/facility. Under the EPC contract the applicant has to undertake activities from Designing, Engineering, Procurement, construction of customised facility, commissioning of permanent facility, Test run and hand over of complete facility so designed, constructed, tested commissioned. Thus it cannot be treated as support services to oil gas extraction - Similarly other professional, technical business services are classified under heading 9983. The heading covers other Professional, Technical and business services relating to exploration, mining or drilling of Petroleum crude of natural gas or both. This heading covers pure services of other Professional, technical business related and not the services provided under a EPC contract which include Engineering, Procurement Construction. The applicant has to undertake the Designing, Engineering, Procurement, construction of customised facility, commissioning of permanent facility, Test run and hand over of complete facility so designed, constructed, tested commissioned. Thus it cannot be classified as other professional, Technical and Business services relating to exploration, mining or drilling of petroleum crude or natural gas or Both - the services provided by the applicant neither fall under Support services to exploration mining or drilling of Petroleum crude or natural gas or other professional, Technical and business services relating to exploration, mining or drilling of Petroleum crude or natural gas or Both. The contract is for the engineering, procurement and commissioning of MLJPS2-EPC-2 project including various infrastructure facilities, all commissioned. What would be transferred is the project including the civil work and land involved in project. Various civil structure would be created and various equipment would be installed - the said project cannot be shifted anywhere; it is essentially of the nature of immovable property. The project after completion at the time of transfer will be an immobile property. It is thus, we are of the considered view that the work specified in the EPC contract qualifies as work contract and will be taxed accordingly. The services provided under EPC contract awarded to the applicant by M/S Vedanta for setting up of a project broadly ranging from designing, engineering, procurement, fabrication, manufacturing assembly, erection installation, facilities construction, insulation, dismantling, Pre commissioning Commissioning training etc. and satisfactory hand over of complete various infrastructure facilities all customised as per contract, it is a work contract'' of composite supply. The composite supply is a mixed of goods services and would be taxed accordingly under S. No. 3 Heading 9954 (ii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 and GST @ 18 % is payable.
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2022 (2) TMI 1065
Suspension order - whether suspension should be resorted to only if the enquiry which was conducted would result in a major punishment or not? - Rule 4 of the Uttar Pradesh Government Servants (Discipline Appeal) Rules, 1999? - HELD THAT:- Matter requires consideration. Sri Amit Kumar, learned Additional Chief Standing Counsel appears for the respondents. He may file counter affidavit within a period of four weeks. Rejoinder affidavit, if any, may be filed within two weeks thereafter. Till the next date of listing, the effect and operation of the order dated 7.1.2022 shall remain in abeyance. The enquiry which might have been initiated shall continue and shall be concluded as expeditiously as might be possible.
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Income Tax
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2022 (2) TMI 1114
Business expenditure under Section 37(1) - pharmaceutical companies gifting freebies to doctors, etc . - what is prohibited by law ? -agreement between the pharmaceutical companies and the medical practitioners in gifting freebies for boosting sales of prescription drugs - HELD THAT:- It is a settled principle of law that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self-defeating. Doctors and pharmacists being complementary and supplementary to each other in the medical profession, a comprehensive view must be adopted to regulate their conduct in view of the contemporary statutory regimes and regulations. Therefore, denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. The incentives (or freebies ) given by Apex, to the doctors, had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their practice of medicine. Those sanctions are mandated by law, as they are embodied in the code of conduct and ethics, which are normative, and have legally binding effect. The conceded participation of the assessee- i.e., the provider or donor- was plainly prohibited, as far as their receipt by the medical practitioners was concerned. That medical practitioners were forbidden from accepting such gifts, or freebies was no less a prohibition on the part of their giver, or donor, i.e., Apex. In view of the foregoing discussion, the impugned judgment cannot be faulted with. The appeal is dismissed without order on costs
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2022 (2) TMI 1098
Assessment u/s 153A - Whether No incriminating material was found in the search on the assessee conducted by the Officers under Section 132? - HELD THAT:- There is distinction between proceedings abated and the proceedings which are concluded , as evident from bare reading of Section 153 A of the Act, 1961. Since assessment proceedings of the respondent assessees fall under the category concluded , therefore, provisions of Section 153 A could not have been invoked unless some specific incriminating material was found in the search. Since no incriminating material was found in the search conducted on the assessee, therefore, reassessment proceedings under Section 153 A of the Act could not have been initiated by the Assessing Officer and such initiation of proceedings was wholly without jurisdiction.- Decided in favour of assessee.
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2022 (2) TMI 1097
Inflation of expenses on account of lorry hire charges paid - ITAT not accepting the contention of the AO as to the authenticity of the books of accounts produced by the assessee in the course of search and survey operations who rejected the contention of the assessee that the records were destroyed by fire and that the whole of the contents of the books of accounts were audited by the authorised representative cum auditor of the assessee - HELD THAT:- Tribunal on noting the facts found that in the course of search which commenced on November 5, 2009, the survey team had seized electronic data and other records. However, there was no finding that any entry therein was false or fabricated - CIT(A) had set aside the findings of the assessing officer which had disbelieved the fire accident which took place in the office premises of the assessee at Strand Bank Road, Kolkata. Noting the facts, the Tribunal found that the assessee was able to substantiate with official records to show that there was a fire accident in the said premises which had destroyed the records. DR who appeared before the Tribunal could not controvert the said fact. Apart from that the other factual findings rendered by the CIT(A) were also considered and approved by the Tribunal. Thus we find there is no question of law much less substantial question of law arising on these issues, which have been raised in question Nos. 1 to 3. Accordingly, the same stand rejected. Addition toward immovable property - loan paper or any supporting documents were not produced during the assessment which may relate the loan or advances to the payment toward immovable property - ITAT deleted the addition - HELD THAT:- Tribunal after considering the factual submissions made by the assessee has verified the correctness of the finding rendered by the CIT(A) and held that the department could not controvert any of the facts which were recorded by the CIT(A) while allowing the assessee s appeal. Thus, we find there is no question of law arising for consideration on this issue as well and the same stands rejected. Addition made on account of cash payment noted in seized document - ITAT deleted the addition - HELD THAT:- Tribunal found that the payments made during the financial year 2006-07 and in the subsequent years were all through banking channel and reflected in the balance sheet for the assessment year 2007-08 and subsequent years. Further the investment was financed to the extent of ₹ 1.15 crore by ICICI Bank which was explained at the assessment stage. Furthermore, the total investment made by the assessee was also found to be recorded in the books of accounts. These factual findings which were recorded by the CIT(A) could not be controverted by the department when the appeal was heard by the Tribunal. Thus, we find no substantial question of law arising for consideration
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2022 (2) TMI 1096
Reopening of assessment u/s 147 - reopening beyond period of four years - change of opinion - slump sale - deduction of interest paid on loan or borrowing from Public / State / Industrial financial institution as claimed by petitioner should not have been allowed because after slump sale, assets and liabilities belonged to the transferee and it was the transferee who paid the interest to these financial institutions in a subsequent Financial Year - HELD THAT:- The reasons expressly state that the Assessing Officer, who passed the original assessment order, had allowed this deduction and, therefore, reopening in our view, is only due to change of opinion, which, as held time and again by various courts, is not permissible. Moreover, in the notes to the Form 3CD submitted by petitioner alongwith its return of income expressly provided as pursuant to the slump sale in the previous year 13-14, the liability on account of interest payable and property tax payable was transferred to E-land Fashion India Private Limited. In case of E-land Apparel Limited, the said interest and property tax liability was disallowed u/s 43B of the Income Tax Act 1961 and was remaining unpaid as at the end of the previous year 13-14. As held by this court in 3i Infotech Ltd. vs. Assistant Commissioner of Income Tax [ 2010 (6) TMI 372 - BOMBAY HIGH COURT] petitioner had brought to the attention of the Assessing Officer this facet while submitting the tax audit report as a part of its return of income. This is not a case where petitioner can be regarded as having merely produced its books of account or other evidence during the course of the assessment proceedings on the basis of which material evidence could have been deduced by the Assessing Officer with the exercise of due diligence. Petitioner, u/s 139 of the Act had a mandatory obligation to furnish with its return of income the report of audit. Petitioner fulfilled its obligation. In the case at hand, the reopening is proposed after the expiry of 4 years after the end of relevant assessment year and assessment has been completed under Section 143(3) of the Act. Therefore, the proviso to Section 147 would apply and the onus is on respondents to show that there was a failure on the part of petitioner to fully and truly disclose all material facts necessary for assessment. This has not been discharged by respondents. In the affidavit in reply, as submitted by Mr. Suresh Kumar, what has been merely submitted is that there was incorrectness of the claim on the part of petitioner while filing its return of income, which has been discovered subsequent to the original assessment and, therefore, there is no change of opinion. We are afraid, we cannot agree with the view expressed by respondents.- Decided in favour of assessee.
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2022 (2) TMI 1095
Motor Accident Claims - tds on the interest component deducted by insurance companies - petitioners are claimants of motor accident compensation - petitioners contend that the interest is not taxable and insurance company ought not to have deducted tax at source thereon - divergent views amongst different High Courts on the point - HELD THAT:- In view of the position and also considering the importance of the issue as also the fact that the issue is a recurring one arising in large number of motor accident claim cases, it is desirable that there is an authoritative pronouncement on this question by Larger Bench. Under the circumstances reference may be made to the Larger Bench on following question:- Whether the interest payable on motor accident claim compensation is exigible to tax and resultantly is the insurance company required to deduct tax at source while making such payment to the claimants?
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2022 (2) TMI 1094
Reopening of assessment u/s 147 - Period of limitation - Provision for cases where assessment is in pursuance of an order on appeal, etc - HELD THAT:- We are satisfied that the notice dated 10th January 2014 impugned in this petition is barred by limitation since it is issued beyond a period of six years from the end of the relevant assessment year, the time limit prescribed under Section 149(1)(b). Fresh sanction under Section 151 - The stand of Revenue that no fresh sanction under Section 151 of the said Act was required is also misconceived. Admittedly, no sanction has been accorded before issuance of notice by the Assessing Officer at Mumbai. The Revenue cannot seek to sustain the validity of the notice by relying on the sanction accorded to the issuance of the notice dated 22nd March 2013 by the Assessing Officer at New Delhi. The notice issued by the Assessing Officer at New Delhi was after obtaining approval of Additional Commissioner of Income Tax, Range-14, New Delhi. Even that notice is invalid because the notice dated 22nd March 2013 was issued after a period of four years from the end of the relevant assessment year and, therefore, sanction ought to have been accorded by the Commissioner of Income Tax. The sanction accorded by the Additional Commissioner of Income Tax, therefore, would render the notice issued by the Assessing Officer at New Delhi itself bad in law and without jurisdiction. Respondent seeking to derive validity in view of Section 150 - The other ground taken by respondent to oppose the petition is that since the notice has been issued under Section 148 read with Section 150 of the said Act, the approval under Section 151 of the said Act is not required to be obtained is also misconceived. For a moment, even if accept Revenue s contention that the present proceedings are continuation of the proceedings initiated by the Assessing Officer at New Delhi vide notice dated 22nd March 2013, the proceedings would be invalid since the notice issued by the Assessing Officer at New Delhi itself was invalid inasmuch as sanction of the appropriate authority as per Section 151 was not obtained before issuing the notice. In the circumstances, the notice dated 10th January 2014 issued by respondent no.1 under Section 148 of the said Act to petitioner and notice dated 14th February 2014 issued by respondent no.1 to Rachna Morarka for Assessment Year 2006-2007 are quashed and set aside. - Decided in favour of assessee.
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2022 (2) TMI 1093
Reopening of assessment u/s 147 - Rejection of objection put by Assessee - HELD THAT:- In the order passed rejecting the objections the Assessing Officer has not dealt with all thes points. Assessing Officer was duty bound to deal with all the submissions made by petitioner in its objections and not just brush aside uncomfortable objections under the carpet. We have to note that petitioner had, with the objections, also requested the Assessing Officer to provide photocopies of documents evidencing request sent by the Assessing Officer to the Principal Chief Commissioner of Income Tax/Chief Commissioner/Principal Commissioner/ Commissioner in terms of Section 151(1) of the Act for obtaining an approval for re-opening of the assessment for the year under consideration and documents evidencing the approval received from the Principal Chief Commissioner of Income Tax/Chief Commissioner/Principal Commissioner/ Commissioner. Assessing Officer instead of providing these documents simply dismissed petitioner s request by saying it is purely an administrative matter and all correspondence have been made through system. Assessing Officer was duty bound to provide all the documents called for by petitioner and his reluctance to provide these documents only would make the court draw adverse inference against respondent. The order impugned in this petition is quashed and set aside. The matter is remanded for denovo consideration. The concerned officer shall keep in mind that the exercise of considering the assessee s objections to the re-opening of assessment is not a mechanical ritual but a quasi judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion.
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2022 (2) TMI 1092
Deduction u/s.80IA(4)(i) - assessee failed to satisfy the applicability clause u/s.80IA(4)(i) of the Act, for the reason that the assessee is only a partnership firm - Also assessee taken part in tender process floated for rate contract - HELD THAT:- As the assessee being a partnership firm in the relevant assessment years is legally not eligible to claim deduction u/s.80IA(4)(i) and also, even on merit, the assessee is found to have executed works contract attracting the explanation to sub-section 13 of 80IA. Therefore, the appeal of the Department may be allowed. As assessee could not controvert the above submissions. As the issue is squarely covered in assessee s own case [ 2013 (12) TMI 299 - ITAT CHENNAI] we consistently following the same allow these three appeals of the Revenue.
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2022 (2) TMI 1091
Addition u/s 68 - unexplained deposit - HELD THAT:- Not only the assessee had failed to substantiate the nature of the deposit in his bank account, but even the explanation offered by him is clearly devoid and bereft of any force and cannot be accepted. Although the aforementioned amount had been received by the assessee vide a transfer entry in his bank account from Shri Jail Singh however, in the absence of any explanation as regards the nature of the aforesaid receipt, we find no infirmity in the view taken by the lower authorities who had rightly stamped the same as an unexplained deposit in the hands of the assessee. We, thus, not being able to persuade ourselves to subscribe to the contentions advanced by the ld AR in his attempt to impress upon us that the lower authorities had erred in making the addition as an unexplained deposit in the hands of the assessee, uphold the same.- Decided in favour of assessee.
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2022 (2) TMI 1090
Penalty u/s 271(1)(c) - Non mentioning of specific default - defective notice u/s 274 - HELD THAT:- Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty u/s 271(1)(c) was sought to be imposed on it, i.e, neither by making a specific mention of the same at the time of initiating the penalty proceedings in the body of the assessment order, nor by striking off the irrelevant default in the SCN , dated 19.02.2014, had undoubtedly left the assessee guessing of the default for which it was being proceeded against. Accordingly, in the backdrop of our aforesaid observations, we are of a strong conviction that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default for which it was being proceeded against, therefore, the penalty under Sec. 271(1)(c) imposed by him in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. Resultantly, the penalty imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. - Decided in favour of assessee.
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2022 (2) TMI 1089
Addition made in respect of undervaluation of the closing stock - difference in valuation of closing stock of mill scale was added to the total income of the assessee which was further been confirmed by the First Appellate Authority - HELD THAT:- Closing stock of the loose mill scale was taken at rate lower than the cost price whereas as per the auditor s report the closing stock should have been valued at cost price and, therefore, the closing stock of Mumbai was valued at cost price. The value of the stock of both Bhavnagar and Mumbai totaling ₹ 3,28,47,859/- as per the cost price whereas the appellant has shown the closing stock at ₹ 1,91,52,750/- and thus the difference amount was added. It further appears that the appellant has not controverted the specific findings given by the Ld. AO as regards the closing stock at Bhavnagar and Mumbai and, therefore, the addition was further upheld by the Ld. CIT(A) which in our considered opinion is without any ambiguity so as to warrant interference. Thus this ground of appeal filed by the assessee found to be devoid of any merit and hence dismissed. Alternative plea taken by the assessee to this effect that in the event the addition is confirmed and the closing stock is valued on higher side then addition so confirmed may be added to opening stock of succeeding year i.e. A.Y. 2011-12 as per the settled amounting principle being closing stock of A.Y. 2010-11 would be the opening stock of A.Y. 2011-12. DR has not been able to controvert such submissions made by the Ld. Senior Counsel appearing before us for the assessee. We also do not find such prayer as unjustified and hence we direct the Ld. AO to pass orders of addition to the opening stock of the succeeding year i.e. for A.Y. 2011-12. Penalty under Section 271(1)(c) - Undervaluation of closing stock - HELD THAT:- We do not find any case of conscious concealment of any income by the assessee nor furnishing any inaccurate particulars of income by the assessee. It is also apparent from the records that the appellant had valued the closing at lower of the cost price on account of deterioration of old stock. AO has not accepted such valuation made by the assessee mainly on the ground that since the assessee valuing the closing at cost method the same should have been adopted. The case of furnishing of any inaccurate particulars of income is not apparent from the record itself neither the books of account has been rejected, nor any case of creating false evidence has been made by the Revenue. On this aspect we have considered the judgment passed in the case of Durga Traders vs. Income Tax Officer [ 2004 (6) TMI 256 - ITAT CHANDIGARH-B] where it has been held that notwithstanding addition of assessee s income on account of undervaluation of closing stock in the absence of any circumstances justifying the interference that assessee has consciously concealed its income, penalty under Section 271(1)(c) was not warranted. We do not find the order passed by the Ld. AO confirmed by the Ld. CIT(A) in imposing penalty for furnishing inaccurate particulars of income and thereby concealment of particulars of income of the assessee is justified. Hence, we quash the impugned order of penalty. - Decided in favour of assessee
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2022 (2) TMI 1088
Unexplained cash credit u/s 68 - Bogus share capital and share premium - AO observed that assessee has not discharged primary onus satisfactorily and observed that the bank statement of the investor, justification and share premium etc, was not provided with, hence the assessee has also failed to prove capacity and creditworthiness of creditors - AO was also was not satisfied with the working of share premium amount - HELD THAT:- We note that the assessment year was involved is 2008-09. The extant provisions of section 68 did not provide for the assessee to satisfy the AO regarding the source of source. The amendment was brought into the statute by Finance Act, 2012 w.e.f. 1.04.2013, which provided that in case of share capital and share premium receipt, it will be necessary for the assessee to satisfy the AO about the nature and source of credit of the person from whom, such sum is received. Since, the present assessment year is 2008-09, there is no onus on the assessee to prove the source of source in this case. Hence, the AO s act of drawing adverse inference in this regard is not at all sustainable. Furthermore, the adverse inference on account of share premium is also not sustainable as necessary amendment by way of insertion of section 56(2)(viib) of the Act was also brought into statute books from AY 2013-14 and the same is not at all applicable for the current assessment year. The assessee has discharged its onus. There was no requirement of proving the source of source in the impugned assessment year. Also the necessary mandate of the Act for addition of share premium was also not there in the said assessment year. In this view of the matter on the touchstone of decisions VEEDHATA TOWER PVT. LTD. [ 2018 (4) TMI 1004 - BOMBAY HIGH COURT] AND M/S. ORCHID INDUSTRIES PVT. LTD. [ 2017 (7) TMI 613 - BOMBAY HIGH COURT] , we do not find any infirmity in the well reasoned order of ld.CIT(A) on the merits of the case. Hence, we uphold his order in this regard and revenue s appeal stands dismissed.
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2022 (2) TMI 1087
Delayed employees contribution to PF and ESI - Whether the assessee would be entitled to claim deduction for the employees' contribution made to PF/ESI after the due date prescribed under the respective Act, but before the due date prescribed for filing of income tax return? - HELD THAT:- We find force in the arguments of the assessee for the reason that there is no difference between employees and employer contribution under the respective Act. If the legislature intends to differentiate employees and employer contribution, then there would have been two due dates like in the case of Income Tax Act. On merits also, this Tribunal has consistently viewed that the employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income - See M/S ESSAE TERAOKA PVT LTD [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] . We are of the view that there is no distinction between employees' and employer contribution to PF and if the total contribution is deposited on or before the due date of furnishing return of income u/sec. 139(1) of the Act, then no disallowance can be made towards employees' contribution to PF/ESI. - Decided in favour of assessee.
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2022 (2) TMI 1086
Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages u/s 44AE - whether the taxable income of the assessee is to be taken at the presumptive rate of 8 (eight) per cent (of turnover), as prescribed u/s. 44AE of the Act, or at the higher income disclosed per the assessee's regular accounts, which stand duly audited? - HELD THAT:- It is clear that sec. 44AE, a non obstante clause, represents a code in itself and, further, provides for exceptions thereto as well as a built-in mechanism to effectuate the same. The right to adopt a lower than the presumptive rate stands taken away by Finance Act, 1997 (s. 44AE(6)). As explained by the Apex Court in CBI vs. Keshub Mahindra Others [ 2011 (5) TMI 913 - SUPREME COURT] that no decision by any court, including itself, can be read in the manner as to nullify the express provisions of an Act. For the second aspect (b), it is again well-settled that the assessment of income under the Act is to be, subject to the provisions of the Act, of the real income, for which reference may be made to section 5 defining the scope of 'total income' under the Act (also see Poona Electric Supply Co. Ltd. [ 1965 (4) TMI 20 - SUPREME COURT] The argument of giving cognizance to the returned income de hors the audited accounts, which is admittedly higher than the presumptive rate u/s. 44AE, can hardly have the sanction of law. Therefore, have no hesitation in, notwithstanding that the appeals have been preferred by the assessee against the order by the Hon'ble jurisdictional High Court which, as explained, are yet to be decided, uphold the orders of the Revenue authority, finding the subject matter to be squarely covered by the Tribunal's decision in the assessee's own case. Sh. Shrivastava could not explain as to how the same was not in conformity with the extant law. His plea of keeping the matter in abeyance also cannot be accepted. The matter having been already decided by the Tribunal, the decision by the Hon'ble High Court would equally apply to this order as well.
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2022 (2) TMI 1085
TDS u/s 194C - expenditure for any work or service - Disallowance u/s 40(a)(ia) - whether Payment not for doing any 'work' or for provision of any 'Professional/Technical Service' ? - as per assessee payments were mere reimbursement of actual costs incurred by Equinox Global Services Ltd./I-Flex Solution Ltd. (India) on behalf of the assessee, and thus, do not represent expenditure for any work or service in respect of which tax is deductible as per the provisions of the Act - HELD THAT:- As the facts and circumstances of the present case are similar to the assessment year 2010-11, respectfully following the decision we hold that the nature of payments made by the assessee to I-Flex Solution Ltd. (India) and Equinox Global Services Ltd. are not in the nature as covered under section 194C of the Act and thus there was no liability on the assessee to deduct tax at source on such payments. Accordingly, the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act is affirmed. - Decided in favour of assessee.
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2022 (2) TMI 1084
Disallowance of business expenditures as the business had not yet commenced - whether the assessee has commenced its business or not during the assessment year 2012-13? - HELD THAT:- The commencement of real estate business would normally start with acquisition of land or immovable property. In the case of the assessee who is in the business of development of real estate construction and infrastructure development, the acquisition of land would clearly show that the assessee is ready to commence business and as a corollary, that it has already been set up. The actual acquisition of the land may be the first step in the commencement of the business. Section 3 of the Act does not speak of commencement of business but only of setting up of the business. We find from the records that the assessee has purchased lands vide documents no. 5158 5159 of 2012 dated 11.07.2012. Further, the assessee has produced the application of planning permit before the CMDA on 15.11.2011. The approval was accorded by the respective authorities on 01.07.2013. Based on the above, we find that the business of the assessee has been duly set up during the assessment year 2012-13. Disallowance of professional charges and legal charges - HELD THAT:- It is an admitted fact that the assessee has incurred legal and professional charges directly attributable to the acquisition of land as the assessee has entered into joint development agreement, we are of the opinion that the authorities below has rightly capitalized above expenditure along with cost of acquisition of the property and thus, we find no infirmity in the order of the ld. CIT(A) on this issue. Accordingly, the ground raised by the assessee is dismissed. Treatment of interest from bank deposits as income from other sources - Without any basis, the ld. CIT(A) has simply opined that the temporary deployment of funds and earning interest there upon cannot be considered as inextricably linked to business activity of the assessee. Admittedly, other than business purpose, the interest income or any other funds sourced were utilized. Thus, we are of the opinion that the assessee has invested amounts received which are inextricably linked with the process of setting up of its business as laid down by Hon ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd [ 1998 (12) TMI 4 - SUPREME COURT] which was followed in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd. [ 1999 (4) TMI 7 - SC ORDER] . Therefore we are of the considered opinion that the interest allowed on fixed deposits before the commencement of the project shall be reduced from the cost of the project and thereby, the decision of the ld. CIT(A) is set aside on this issue.
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2022 (2) TMI 1083
Exemption u/s 11 - denying registration u/s 12AA - CIT(E) concluded that the sole objective of the Trust was the construction of a Temple and so he rejected the prayer for registration - HELD THAT:- CIT(E) could not realize that the Trust was in dire needs of funds for pursuing its activities. The funds could be generated by the Trust after it was registered for tax exemption.Accounts of the assessee along-with the details submitted to the Ld. CIT(E) during the course of its registration proceedings indicate the activities. The Ld. CIT(E)'s concept of the manner of expending the corpus donations is neither in consonance with facts is misplaced. Section 12 of the Act does not prescribe any mode or manner in which any corpus donation has to be retained or expended. As to the transfer of the corpus of this Trust, in the event of its dissolution or discontinuation the sole condition is that the balance funds at the time of closure should be transferred to a like charity. In resolving to transfer the corpus in such an eventuality to M/s Thakur Shree Hari Das Ji Maharaj Trust no aberration of any sort can be conceived as having been committed by the Trust. Use of corpus donations and funds for charity was definitely in terms of the provisions of law and societal practice. The purchase of land and the construction of a building thereon were integral to the establishment and existence of the Trust and thus were entirely in consonance with the pursuit of charitable objectives. They were not in any way derogatory for any part of Section 2(15) of the Act as the Ld. CIT (E) erroneously seems to think. Focus should be on charity was in pursuit of charitable objects alone. Thus the trust is eligible for registration u/s 12AA of the Act. In case, the activities of the trust are found to be not in the nature of charitable activities in the wider public interest, subsequently the department would be at liberty to invoke the relevant provisions of the Act to tax the surplus amount and also to revoke the registration granted. - Decided in favour of assessee.
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Customs
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2022 (2) TMI 1082
Principles of natural justice - It is the case of the petitioner that the Inquiry Officer neither furnished any documents nor granted any personal hearing - HELD THAT:- In this case, the record indicates that since 2009 when the regular inquiry was ordered by the Commissioner, hardly any steps are taken by the respondents to proceed with the regular inquiry ordered by the Commissioner. The petitioner had repeatedly called upon the respondents to produce the documents. Neither any documents were produced till 1st July, 2021 nor any regular date of hearing was conveyed to the petitioner except once. In these circumstances, the petitioner was not expected to preserve the evidence/record intact for such a long period of more than 11 years. We are not inclined to accept the submission made by the learned counsel for the respondents that there was no violation of principles of natural justice. In our view, the inaction on the part of the respondents in not adjudicating upon the show cause notice for a period of 11 years and proposing to pass an order would cause serious prejudice to the petitioner - there is no substance in the submission of the learned counsel for the respondents that no prejudice would be caused to the petitioner, if the inquiry is allowed to be proceeded with at this stage. In view of the gross delay on the part of the respondents, if at this stage the respondents are allowed to proceed with the inquiry, there would be gross injustice to the petitioner. Petition disposed off.
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2022 (2) TMI 1081
Enhancement of penalty under Section 112(a) of the Customs Act - Smuggling - Gold Biscuits - prohibited or restricted goods - show-cause notice was not issued to the petitioner - HELD THAT:- Having perused the documents on record what clearly emerges is that all the three authorities have concurrently come to the conclusion that petitioner had made a clear attempt of smuggling gold biscuits to evade payment of duty. As noted, as per the punchnama the petitioner had made a declaration to the customs officer however in which there was no indication of him carrying sizable quantity of gold. It was only when customs officer carried out a thorough search of his handbag that several gold biscuits were found concealed in spectacle case and camera case. These findings are thus supported by material on record. In writ jurisdiction the High Court would not interfere with findings of facts unless it is shown that the findings are perverse. Section 2(33) of the Customs Act defines the term 'prohibited goods' as to mean any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but would not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with - Import of an item which is not prohibited or restricted but is subjected to import duty and in which case duty may not have been paid is vastly different from categorising the item as prohibited or restricted so as to fall within the ambit of Section 2(33) of the Customs Act. Section 112 of the Act pertains to penalty for improper importation of goods. Section 125 on the other hand pertains to option to pay fine in lieu of confiscation. As noted sub-section (1) of Section 125 comes in two parts. Whenever confiscation of goods is authorized under the Act, as per sub-section (1) of Section 125 the adjudicating officer has a discretion to offer redemption fine in lieu of confiscation in case of goods importation or exportation whereof is prohibited. In all other cases there is a statutory mandate on the adjudicating officer to offer such redemption fine. If the interpretation of Section 112 and 125(1) is not reconciled, this latter portion of sub-section (1) of Section 125 which covers all cases except where the importation or exportation of the goods is prohibited, would become otiose. The petitions is disposed of with following directions:- (i) The fine of ₹ 40 lacs under Section 112 of the Customs Act imposed by revisional authority is reduced to ₹ 30 lacs. (ii) The issue of fixing the redemption fine in lieu of confiscation requires to be decided. To avoid further delay let this issue be decided by the revisional authority. The proceedings are placed back before the said authority for the limited purpose of deciding the redemption fine that the petitioner may pay if he wishes to avoid absolute confiscation of the seized gold. Fresh order shall be passed preferably within four months from today.
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2022 (2) TMI 1080
Smuggling - Norephedrine - misdeclaration of goods exported - prohibited goods or not - Confiscation - penalty - HELD THAT:- It has to be stated that though in the Show Cause Notice, the value of the the alleged goods in the nature of Norephedrine was estimated and arrived at ₹ 12 crores, the adjudicating authority in his findings recorded in para 32 has worked the price of 337 kilograms of Norephedrine to be ₹ 3,13,511/- only. The department has not filed any appeal against this finding of valuation arrived by the adjudicating authority. The main ground raised by the appellant is that the test report cannot be accepted as conclusive evidence to establish that the goods exported are Norephedrine. Tropical Biomarine Systems Pvt. Ltd. have exported the goods vide shipping bill dated 31.1.2007 declaring the consignment to be shrimp feed premix, MPEX shrimp feed and golden spawn. The goods were initially shipped to Enbiosys Services Pte. Ltd. Singapore. Later switch bill of lading obtained for deviating the goods to PT Gita Mandiri Abadi, Jakarta, Indonesia. The exporter Tropical Biomarine Systems Pvt. Ltd. has not informed the customs authorities as to the diversion of the goods. They have obtained the switch bill of lading issued by their freight forwarder - When the goods reached Jakarta, the same were detained on specific intelligence received by DRI. They were opened for examination by Indonesian Police and sent for test to laboratory. It is noted in para 4 of the adjudication order that the substance in the 15 bags was in the nature of white powder and not of the same consistency as the remainder of the shipment which granular and brown. The bags which contained the white powder substance were all imported with a small x on the bottom of the bag differentiating these bags from the rest of the consignment. After conducting test, the substance was found to be Norephedrine. There is no mention of the name of Tropical Biomarine Systems Pvt. Ltd. who is the exporter of the goods or the name of Shri Rajesh Khanna. Even the name of the consignee Enbiosys Services Pte. Ltd. or PT Gita Mandiri Abadi, Jakarta, Indonesia is not seen stated in the test reports. Instead the name of suspect is shown as Suriman Buyung Als Lukas who is not in any way connected with the present case - the learned AR was not able to explain as to why the name of suspect is shown as Suriman Buyung Alas Lulkas. From the difference in the date of test report (8.1.2007) and the difference in the name of suspect, the probability that can be arrived is that the test report of some other investigation has been furnished by the department in the present case - Needless to say that the test report is the basis for holding that the goods exported are Norephedrine and prohibited goods. The entire case of the department is based upon the test report. Though the appellant has pointed out the discrepancies at the stage of replying to the Show Cause Notice itself, the department has not been able to explain the discrepancies. The impugned order is passed on erroneous facts and documents and therefore cannot sustain - Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2022 (2) TMI 1079
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - landowner intending to share profits emanating from the agreed venture, by way of an MoU - Financial Creditors or Operational Creditors? - sole Member of the CoC does not fall within the ambit of definition of Financial Creditor or not - HELD THAT:- In the instant case, on mutual Agreement, the Corporate Debtor and other parties decided to transfer 25% of the land to the Appellant herein on a price decided jointly. As per Clause 4 of the MoU, the Appellant shall fund the cost of construction to the Corporate Debtor /developer, till the sample flat is ready. It was correlatively decided that both parties have rights to book flats with mutual consent . Clause 6 stipulates that whatever income is earned from the sale of flats, the Appellant is entitled to 25% of the Net Profit . The MoU entered into is an Agreement of reciprocal rights and obligations. Both parties being Joint Development Partners who entered into a consortium of sorts for developing the subject land and for any breach of terms of the contract, Section 7 Application filed under the Code would not be maintainable as the amount cannot be construed as Financial Debt as there is no sum(s) i.e., owed, assigned or transferred to in compliance of the provisions of Section 5(8) of the Code - Keeping in view the peculiar facts of the attendant case on hand, wherein an Application under Section 12-A, the Corporate Debtor has settled the claims of the Operational Creditor and the sole Member of the CoC is the Appellant herein, whom we, for all the aforenoted reasons, are of the considered view is not a Financial Creditor , we do not find any illegality or infirmity in the Impugned Order, whereby the Adjudicating Authority has sought to close the CIRP proceedings against the Corporate Debtor . This Tribunal also took into consideration the observation by the Adjudicating Authority, that subsequent to the Public Announcement, not a single claimant had come forward to file their claims. This Tribunal is not inclined to interfere with the well-reasoned Order of the Adjudicating Authority and hence the Appeal fails and is dismissed.
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Service Tax
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2022 (2) TMI 1113
Levy of service tax - market fee - mandi shulk - whether the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012? - HELD THAT:- It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard - the exemption notification should be strictly construed and given a meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions. As per the law laid down by this Court in a catena of decisions, in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining a defined meaning. Strict interpretation of the provision is to be accorded to each case on hand. Purposive interpretation can be given only when there is an ambiguity in the statutory provision or it results in absurdity, which is so not found in the present case. It is to be noted that on and after 01.07.2012, such activities carried out by the Agricultural Produce Market Committees is placed in the Negative List. If the intention of the Revenue was to exempt such activities of the Market Committees from levy of service tax, in that case, there was no necessity for the Revenue subsequently to place such activity of the Market Committees in the Negative List. The fact that, on and after 01.07.2012, such activity by the Market Committees is put in the Negative List, it can safely be said that under the 2006 circular, the Market Committees were not exempted from payment of service tax on such activities - it is required to be noted that it is not the case on behalf of the Market Committees that the activity of rent/lease on shop/land/platform as such cannot be said to be service. Appeal dismissed.
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2022 (2) TMI 1078
Benefit of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - very meagre mismatch of the amount paid which is 0.40 paisa more - whether it can be said that the petitioner had not paid the tax amount to the department on or before the last date of such payment under the scheme? - whether it is construed to be payment of lower amount than required? - HELD THAT:- Although technically the department may have rejected the payment of taxes by the petitioner on 30.06.2020 but such rejection itself would also have to be considered to be arbitrary from the point of view that the department could either have accepted the excess payment amounting to ₹ 1,25,629.60 or the excess amount of 40 paisa could have been returned to the petitioner instead of rejecting the entire amount - the subsequent offer of the petitioner to tender the exact amount and rejection of the same by the department on the ground that the payment was made on the last date of payment also cannot be accepted. The subsequent payment of the petitioner cannot be said to be a late offer of payment and it has to be construed to be an act of repayment of the amount which was already paid earlier but was rejected. The interest of justice will be made if the amount required to be paid by the petitioner is paid and the department accepts it to be the payment that was made on or before 30.06.2020. The payment be made within two weeks from today. In the event, it is not paid, the department will be at liberty to pass any order - petition allowed.
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2022 (2) TMI 1077
Demand of Interest on 50% of the service tax, which was not paid - Applicability of reverse charge mechanism - Works Contract Service - appellant raised invoices for 100%, however, remitted tax only for 50% - period December 2013 to 05.07.2014 - HELD THAT:- In the present case, as admitted by both the parties, the reverse charge mechanism is not applicable to the appellant company. The reverse charge mechanism is applicable only to the individuals, Hindu Undivided Family, etc., where, the Department would normally adjust the amount paid by the service Recipient and re-credit the same to the service provider's account. Though it is strongly contended that the 50% amount paid by the service recipient cannot be re-credited to the appellant, the fact remains that the Department has re-credited the said amount from the service recipient's account to the appellant's account with effect from 28.02.2014. Thus, when the service provider (appellant) has paid entire 50% of the amount towards service tax and the service Recipient also paid the balance 50% of the service tax in time directly to the Service Tax Department on the assumption that the reverse charge mechanism is applicable, and when the Department also re-credited the said 50% of the service tax from the service recipient's account to the service provider's (appellant's account) with effect from 28.02.2014, instead of giving effect to the same from the date, on which, original payment was made by the service recipient, it is not open to the Department to turn down and say that reverse charge mechanism is not applicable, thus, the appellant is liable to pay interest on the belated payment. The procedure adopted by the service recipient cannot be found fault with as long as there is no specific bar under the Act to make tax remittance directly to the account of the service provider. Further, service recipient admitted that, they misunderstood that reverse charge mechanism is applicable to the appellant's Company and this mistake happened only in the first transaction and subsequently, 100% of the service tax has been collected by the service provider from the service recipient and remitted the same to the Department without any default/delay - the contention of the respondent- Department that 100% service tax has to be collected from the service recipient by the service provider and the same has to be remitted to the Department does not hold water. Appeal allowed.
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2022 (2) TMI 1076
Seeking deletion of penalty imposed under section 78 - entire Service Tax and interest paid before issuance of Show Cause Notice - conclusion of section 73(3) of Finance Act, 1994 - invocation of extended period of limitation - suppression of facts or not - HELD THAT:- From section 73(3) of FA, it is clear that assessee is required to inform the department about their intention to avail the benefit of section 73(3) in writing - In the present case, the appellant has not informed the department that they wish to avail the benefit of section 73(3). Moreover, the demand was raised for the period 2011-12 to 2014-15 by invoking the extended period. This itself shows that the appellant has suppressed the fact. It is also observed that the appellant have discharged the Service Tax only when the issue was raised by the audit party at the end of service recipient M/s Balas Industry. The audit report was issued on 16/09/2014 and on this basis only the appellant has paid the amount on 14/10/2016 and 15/10/2016. The appellant has neither taken any registration nor paid the Service Tax for the last 5 years. Therefore, there is a clear suppression of fact on the part of the appellant. Sub-section (4) of the section 73 clearly provides that where nonpayment of Service Tax is due to suppression of fact, misstatement, fraud, collision, etc the case cannot be concluded under section 73(3) - Therefore, in the present case, the appellant have not complied with the provision of section 73(3) and suppression of fact is clearly established against the appellant. Hence, they are not eligible to avail benefit under section 73(3). Accordingly, the Revenue has rightly issued the Show Cause Notice and the Adjudicating Authority has correctly imposed the penalty under section 78. Appeal is dismissed.
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2022 (2) TMI 1075
Refund of service tax - rejection on the ground of time limitation - first refund claim was withdrawn - second refund claim should be treated fresh or not? second appeal was filed after stipulated time period, i.e. one year as prescribed section 11B of Central Excise Act, 1944 - HELD THAT:- There is no dispute that the appellant had filed the refund claim on 01/06/2017 for an amount of ₹ 12,25,023/-. Thereafter, on the audit query, the appellant had decided to reduce the refund claim and, therefore, withdrew the earlier claimed and thereafter claim for ₹ 7,92,262/- which is out of the total amount of ₹ 12,25,023/- for which earlier refund filed on 01/06/2017. With this fact, since the appellant had filed the refund claim for amount of ₹ 12,25,023/- which was well within the stipulated time period of 01 year as prescribed under section 11B of Central Excise Act, 1944, the subsequent refund claim of ₹ 3 ST/12166/2019-SM 7,92,262/-must be treated as in continuation of the earlier refund as this amount is out of the total refund of ₹ 12,25,023/-. Therefore, the date of filing of refund claim should be reckoned as the claim of first filing of refund claim and not as per the date of filing the revised refund claim. The appellant s refund claim cannot be rejected on the basis of time bar. The impugned order is set aside and appeal is allowed by way of remand to the Adjudicating Authority for passing a fresh order after considering the others facts and issues such as unjust enrichment, etc but without going into the limitation - appeal allowed by way of remand.
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2022 (2) TMI 1074
Refund of duty paid - applicability of principles of unjust enrichment - reverse charge mechanism - HELD THAT:- The impugned service tax liability got leviable upon the appellant in the year 2017, that too, under reverse charge mechanism. The said liability is against the amount of license fee being deposited by the appellant with the State Government of Rajasthan for getting a liquor license in favour of the appellant. The impugned refund would not have ever been applied had there not been an amendment in Finance Act, 2019, that too with the retrospective effect. The said amendment since came two years later, also the duty was not paid at the appropriate time but payments was made later after it was pointed by the audit team, that too, under reverse charge mechanism. Hence, from no stretch of imagination, it can be presumed that the burden of said payment would have been passed on to the customers. Department has not produced any positive evidence to prove the same. Otherwise also the only reason for such presumption is that the aforesaid amount has been shown as an expense in profit and loss account by the appellant - since the payment was made under RCM there appears no error on part of appellant when the said payment is shown as expense in the profit and loss account. Commissioner (A) has failed to appreciate the Chartered Accountants Certificate dated 17.11.2019 as was issued by the statutory auditors of the appellant alongwith the relevant pages of the balance-sheet for the year 2016-17 and 2017-18. The said documents were appreciated by original adjudicating authority to have been shown the pre-paid expenses of ₹ 1,29,17,302/- under the note No.20 of the audited balance sheet 2016.17 . The document were also observed to have provided the bifurcation for an amount of ₹ 15,65,000/- as bar license fees pre-payment and ₹ 39,74,331/- as rates and taxes for the year 2017-18 including therein ₹ 1565000/-as liquor license fee in the balance sheet of 2017-18. These documents were held sufficient by the original adjudicating authority to prove that the appellant had not passed the burden of refund claim amount to the others. Hence, the claim was denied to be hit by clause of unjust enrichment. Commissioner (Appeals) has committed an error by holding the refund to hit by unjust enrichment merely on presumptive basis. No relevant evidence at all been discussed by him while coming to the said conclusion. Rather, the relevant evidence as was considered by Original adjudicating authority has miserably been ignored by the Appellate Authority - the question of adjudication as framed stands decided in favour of the appellant - appeal allowed.
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Central Excise
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2022 (2) TMI 1073
Principles of natural justice - It is the grievance of the petitioner that though the said order was passed in the year 2011, the respondents have not furnished any documents or the relevant record till date - HELD THAT:- Without going into the issue as to whether the respondents have already furnished the relevant records to the petitioner till date or not, we direct the respondents to furnish copies of the relevant records to the petitioner within two weeks from today. The petitioner is directed to file reply to the show cause notice within four weeks from the date of receipt of such relevant records. It is made clear that no further extension of time would be granted either to the petitioner or to the respondents. The respondents shall give a reasonable opportunity to cross-examine the available witnesses. A list of available witnesses shall be furnished to the petitioner within two weeks from the date of the petitioner filing reply to the show cause notice. Respondents shall keep the available witnesses present for the purpose of cross-examination before the learned Commissioner - Learned Commissioner shall make an endeavour to dispose of the proceedings remanded by the said order passed by the Tribunal within eight weeks from the date of the petitioner filing reply to the show cause notice. The petitioner shall not seek any unnecessary adjournment before the learned Commissioner and shall cooperate for disposing of the proceedings expeditiously. Writ Petition is allowed.
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2022 (2) TMI 1072
Maintainability of appeal before High Court - Section 35L of the Central Excise Act - invocation of larger period of limitation - HELD THAT:- The appeals concerned only the question of invocation of larger period of limitation and such question is not hit by the provisions contained in Section 35L of the Central Excise Act. This contention is therefore turned down. The Tribunal has curtailed the period of limitation for collecting duty on the ground that the issue was not free from doubt prior to the issuance of exemption notification dated 05.12.2008. With these observations, we are in agreement. The discussion of the Tribunal on the point is rather brief. We have therefore referred to the stand of the department in the show-cause notice and that of the assessee in the reply filed. This would demonstrate that the question is whether the process undertaken by the assessee amounted to manufacturing process. We may recall, the assessee had contended that in all cases the sugar is subjected to heating process and though it may undergo physical changes, the chemical character remains the same and mere physical change does not bring into existence a new commodity. Extended period of limitation - HELD THAT:- In fact in the present case the assessee has been proved to be incorrect in its belief. However to invoke larger period of limitation in terms of proviso to Section 11A of the Central Excise Act what is required is that the duty of excise is not levied or paid or has been short levied or short paid or erroneously refunded the reason of fraud, collusion or in willful misstatement or suppression of facts or contravention of any of the provisions of the act or the rules which intent to evade payment of duty. In absence of elements of fraud, collusion, willful misstatement, suppression of facts or intention to evade duty, larger period of limitation cannot be invoked. The appeal is dismissed.
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2022 (2) TMI 1071
Maintainability of appeal - quantum of penalty involved in the appeal - Validity of Rule 8(3)A of the Central Excise Rules - HELD THAT:- Admittedly, the quantum of penalty which was imposed by the original authority is far below the threshold limit fixed by the CBEC in their circular instruction. Therefore, the appellant cannot pursue this appeal. Learned standing counsel for the appellant submitted that the Commissioner of Appeals has rendered certain findings touching upon the validity of Rule 8(3)A of the Central Excise Rules and referred to certain decisions of other Courts which struck down the rule as being ultra vires and also referred to one of the decisions of the High Court of Gujarat in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] - such a course need not be adopted for more than one reasons: firstly, as pointed out that there is no dispute to the fact that the circular instruction issued by the CBEC would prevent the department from pursuing the appeal as the penalty imposed was ₹ 6,33,022/-. If the legal issue with regard to the validity of Rule 8(3)A is left open, then the interest of the revenue will stand protected and at the same time if we hold that the appeal cannot be pursued by the revenue on account of the low tax effect, the interest of the assessee would also be safeguarded - the appeal filed by the revenue is dismissed on the ground that the amount of penalty imposed is lesser than the threshold limit fixed in the circular instruction by CBEC as part of the national litigation policy. Application dismissed.
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2022 (2) TMI 1070
Rejection of refund claim - duty demand having been set aside by the Tribunal, the assessee then filed an application for refund on 28.12.2018 - HELD THAT:- Perusal of the questions of law framed by the revenue in the present appeal do not, in any way, indicate any error on part of the Tribunal in passing the impugned order dated 19.02.2020. The question being raised appear to involve the merits of the earlier order of the Tribunal dated 26.07.2018. Those questions do not arise in this appeal. There are no merit in the appeal - appeal dismissed.
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2022 (2) TMI 1069
CENVAT Credit - denial of credit for want of registration as ISD during the relevant period - HELD THAT:- The issue has already been settled by the Hon ble Gujarat High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [ 2016 (2) TMI 183 - GUJARAT HIGH COURT] wherein affirming the view taken by the Tribunal s Ahmedabad Bench, it has been held that merely for want of registration as ISD, the assessee should not be denied substantial benefit of Cenvat Credit. The Department in Circular no. 1063/2/2018-CX dated 16.02.2018 (Para 2.3) has accepted the above decision of the Hon ble Gujarat High Court by stating that Further nonregistration of ISD is only a procedural irregularity for which substantial benefit of CENVAT credit cannot be denied when all the necessary records have been maintained by the respondent. There are no reason to sustain the impugned demand order and hence, the same is set aside, except to the extent of ₹ 4,65,724/- which is not being contested by the Appellant assessee - penalty set aside - appeal dismissed - decided against Revenue.
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2022 (2) TMI 1068
Valuation - inclusion of value of the scrap retained and sold by the appellants in the assessable value of the goods manufactured and cleared by the appellants on job work basis, in the assessable value - revenue neutrality - time limitation - HELD THAT:- Any procedure under any statute requires to be followed and only then the benefits that accrue consequentially would be available. When the principal manufacturers of the appellant-job worker have not followed the procedure, any plea on the same would be only hypothetical. Moreover, as held by the Tribunal in the case of THERMAX BABCOCK AND WILCOX LTD., THERMAX LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [ 2017 (12) TMI 266 - CESTAT MUMBAI] has clarified that the applicability or otherwise of the said Rule has no bearing on the valuation of the goods cleared by the job worker.The issue before this Bench is to see whether the appellants were required to include the value of the scrap in the assessable value of the goods cleared by them after manufacture on job work basis on behalf of their principal manufacturers. The impugned orders have arrived at the assessable value correctly and that the sale proceedings of the scrap are required to be included in the assessable of the goods cleared by the appellant-job worker. The appellants have also taken the plea that whatever duty they would have paid, the principal manufacturers or the other buyers would have availed CENVAT credit and therefore to that extent the issue is revenue neutral. We find that this submission is far fetched and cannot be considered in a case where the payment of duty is by someone and availment of credit would be by somebody else. Such an averment would defeat the very scheme of CENVAT Credit and therefore, cannot be accepted. The impugned orders fail to take into account burning losses during the process of rolling and in their case the actual scrap available is only 4.25% as against the assumption of the department that the entire 10% of the allowance given by the principal manufacturer is available for sale in the hands of the appellant-job workers. The appellant submits that the actual details were available in the Form-IV register maintained by them; demand confirmed, if any, cannot related to the quantity representing the burning loss - Neither the Rules nor the judicial pronouncements mention about a notional value of any scrap retained by the appellants and about the includability of burning losses. Essential element that requires to be considered as additional consideration and thus, includable in the assessable value is the value / sale proceeds of scrap. Burning losses, if any, cannot be considered by any stretch of imagination as additional consideration in the hands of appellants, though it may constitute an amount of wastage or loss for the principal manufacturer - the inclusion of additional consideration should be restricted to the actual scrap generated and sold by the appellants. For the computation of the same, the issue needs to go back to the Commissioner, who shall recalculate the demand including only the value of actual scrap generated and sold by the appellants. Extended period of limitation - HELD THAT:- When regular audit is conducted and the department fails to go through the accounts of the appellants with due diligence, the appellants cannot be faulted for the same. It cannot also be alleged that the appellants have suppressed any information with intent to evade payment of duty. Understandably, there were different opinions expressed in the judgments delivered during the relevant time, therefore, we find the contention of the appellant about existence of a bona fide belief that they are not required to include the value of the scrap in the assessable value is acceptable.It is not the case of the department that the appellants have not been filing returns periodically. Moreover, we find that show-cause notice dated 2.12.2008 and show-cause notice dated 11.2.2010, both invoke extended period - Revenue has not made any case for invocation of extended period - the demands need to be restricted to normal periods only. As intent to evade payment of duty is not established, imposition of penalties is also not justified, they are liable to be set aside. Revenue s contention that the value of scrap, retained by the appellants in respect of products manufactured and cleared by them on job work basis, as alleged in the various impugned show-cause notices, requires to be included in the assessable value in terms of Central Excise Valuation Rules, 2000. Quantification of scrap shall be on actual basis taking into account the burning losses, if any, as claimed by the appellants - demands shall be restricted to the normal period only as may be applicable during the relevant period of respective appeal - penalties imposed are set aside. Appeal allowed in part.
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2022 (2) TMI 1067
Clandestine removal - alleged shortages found by officers on 12.02.1998 in the various premises of the factory - capital goods available to the appellants on the TBA machine purchased and installed by them - CENVAT credit on the TBA machine - Department alleges that there were excesses and shortages in different products in the company on the day of verification - time limitation - HELD THAT:- The department has not made a case against the appellants for demand of duty on goods found in short/excess. Moreover, it is neither alleged by the revenue that appellants have removed the goods clandestinely nor any proof of the same is placed on record. Therefore, duty cannot be demanded on the simple fact that shortages are found in different units. The appellants contention that the shortage found in one unit is found in the other unit cannot be brushed aside. It is evident from the annexures to show cause notices. Hence, duty cannot be demanded on such excesses and shortages. Admissibility of credit on the TBA machine - HELD THAT:- In the instant case, it is not disputed that a declaration, under Rule 57(T)(i), was filed on 14.03.1997, declaring the intent to use the machine for manufacturing Bailey Acqua Water; declaration for intent to use the machine for both Bailey Acqua Water and YoFrooti was filed on 19.03.1997; Machine started for packing YoFrooti from 02.04.1997;YoFrooti Became dutiable on 14.05.1997 and Cenvat Credit was Taken 02.09.1997. The intention is clear about the usage of the machine and the declarations were not denied by the department - in the instant case, the appellants have made clear their intention to use the machine for manufacture of dutiable as well as exempted goods. They have filed two declarations to this effect. The declarations were not contested by the department at the material time. The appellants claim that they had utilised the machine for manufacture of Aqua Bailey though on trial basis and the same was not successful. The appellants cleared the scrap of such goods on payment of duty. Learned Commissioner rejects the claim of the appellants saying that the affidavits are filed in a belated manner. It is not the case of the department that the appellant used the capital goods exclusively in the manufacture of exempted products or in provision of exempted services. The appellants have filed declarations under Rule 57(T) (i) and availed credit on 02.09.1997 after YoFrooti Became dutiable on 14.05.1997. We are in agreement with the learned Counsels argument that there is no time limit prescribed for taking credit. They have availed credit within 6 months of receipt of capital goods, for which there is no express bar. Express Bar if any is in relation to the usage exclusively in the manufacture of exempted products or in provision of exempted services - the provisions of Rules need to be understood as they are and it is not for the authorities or Tribunal to supplement the same with arguments however cogent. Time Limitation - HELD THAT:- The appellant is registered with the department, paying central excise duty and are filing periodical ER-1 returns and other declarations as well; the issue involved herein is one of interpretation and is purely legal in nature; moreover, there being no positive act on part of the appellants to suppress any fact from the department and there being no evidence for such allegation, the proposal to invoke extended period is not correct. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (2) TMI 1111
Interpretation of statute - Entry 44 of Part B of the Fourth Schedule to the Tamil Nadu Value Added Tax Act, 2006 - Cotton Hank Yarn - Division Bench was of the view that no external aid for interpretation was called for when the language of the Entry in question was clear in itself - HELD THAT:- When the Entry in question specifically provides for exemption to the goods described as Hank Yarn without any ambiguity or qualification, its import cannot be restricted by describing it as being available only for the hank form of one raw material like cotton nor could it be restricted with reference to its user industry. That being the position, reference to the decision in K.P. Varghese (supraKP VARGHESE VERSUS INCOME-TAX OFFICER, ERNAKULAM, AND ANOTHER [ 1981 (9) TMI 1 - SUPREME COURT] remains entirely inapposite to the facts of the present case. Therein, this Court was dealing with the interpretation of the language of sub-section (2) of Section 52 of the Income Tax Act, 1961 and it was found that a literal interpretation might not cover several eventualities concerning the value of consideration declared by the assessee in respect of the transfer of a capital asset vis-a-vis its fair market value as on the date of its transfer - the observations in the said decision, based on the rules of interpretation to cull out meaning of a sentence (vide paragraph 5 thereof), do not apply to the question at hand because the Entry in question is clear, direct and unambiguous; and simply reads: Hank Yarn . There are no question of law worth consideration so as to entertain this petition - SLP dismissed.
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2022 (2) TMI 1066
Classification of goods - rate of Tax - steel tubes, steel strips etc. - taxable only at 4% falling under item No.4 of the second schedule of the Act or otherwise? - whether the bent steel supplied by the petitioner to Ashok Leyland Limited is a declared goods or not? - HELD THAT:- This was answered by the Division Bench of this Court in the case of the petitioner in Tube Investments of India Limited vs. Deputy Commercial Tax Officer, Group III, Enforcement-I, Greams Road, Chennai and others [ 2002 (8) TMI 822 - MADRAS HIGH COURT ] wherein it was held that the fact that the specification of the tube or pipe supplied was given by the buyer would also make no difference, as what is supplied in fact, is the steel tube conforming to the specification given by the buyer and nothing more. The sales tax levied on steel tubes supplied by the petitioner, though put to use by the buyer as exhaust pipes, cannot exceed four per cent. Thus, it is evident that the issue involved in these writ petitions is no longer res integra as it was already answered by the Division Bench of this Court - petition allowed.
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Indian Laws
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2022 (2) TMI 1112
Dishonor of Cheque - cognizance of offences - requirement under Section 142 of the N.I. Act complied with or not - HELD THAT:- What can be treated as an explicit averment, cannot be put in a straitjacket but will have to be gathered from the circumstance and the manner in which it has been averred and conveyed, based on the facts of each case. The manner in which a complaint is drafted may vary from case to case and would also depend on the skills of the person drafting the same which by itself, cannot defeat a substantive right. However, what is necessary to be taken note of is as to whether the contents as available in the pleading would convey the meaning to the effect that the person who has filed the complaint, is stated to be authorized and claims to have knowledge of the same. In addition, the supporting documents which were available on the record by themselves demonstrate the fact that an authorized person, being a witness to the transaction and having knowledge of the case had instituted the complaint on behalf of the payee company and therefore, the requirement of Section 142 of N.I. Act was satisfied. Despite the conclusion that the documents available on record would on facts satisfy the requirement relating to delegation of power and also knowledge of the transaction by the person representing the Company in the instant case, it is also necessary for us to keep in perspective that though the case in AC NARAYANAN AND ANOTHER VERSUS STATE OF MAHARASHTRA ANOTHER [ 2013 (9) TMI 948 - SUPREME COURT] has taken the center stage of consideration, the facts involved therein were in the background of the complainant being an individual and the complaint filed was based on the power of attorney issued by the payee who was also an individual. In such an event, the manner in which the power was being exercised was to be explicitly stated so as to establish the right of the person prosecuting the complaint, to represent the payee i.e., the complainant. The position that would emerge when the complainant is a company or a corporate entity will have to be viewed from a different standpoint. The position that would emerge is that when a company is the payee of the cheque based on which a complaint is filed under Section 138 of N.I. Act, the complainant necessarily should be the Company which would be represented by an employee who is authorized. Primafacie, in such a situation the indication in the complaint and the sworn statement (either orally or by affidavit) to the effect that the complainant (Company) is represented by an authorized person who has knowledge, would be sufficient. The employment of the terms specific assertion as to the knowledge of the power of attorney holder and such assertion about knowledge should be said explicitly as stated in A.C. Narayanan cannot be understood to mean that the assertion should be in any particular manner, much less only in the manner understood by the accused in the case. The High Court was not justified in entertaining the petition filed under Section 482 of Cr.PC and quashing the order dated 05.11.2015, taking cognizance of the complaint filed by the appellant - Appeal allowed - decided in favor of appellant.
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