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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 11, 2020 Case Laws in this Newsletter: GST Income Tax Customs PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles VIVAD SE VISWAS ACT 2020 (VSV) – a half-hearted approach- all pending and likely disputes should be eligible for settlement. DENIAL OF CROSS EXAMINATION OF WITNESSES IS AN APPEALABLE ORDER LET THE CSR BE ON THE GOVERNMENT’S SHOULDERS News CGST Delhi detects Input Tax Credit fraud worth more than ₹ 12 crore from 30 fake firms, one arrested. NCLAT Chairperson exhorts NCLAT & NCLT members to stick to time limits for cutting delays in insolvency cases Notifications FEMA FEMA 14(R)/(2)/2020-RB - dated 4-3-2020 - FEMA Foreign Exchange Management (Manner of Receipt and Payment) (Second Amendment) Regulations, 2020 Highlights / Catch Notes GST Deduction of TDS u/s 51(1) of GST - supply conservancy/solid waste management service to the Municipal Corporation - Section 51(1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both - As the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply. - AAR Visit to Get Source Nature of transaction - whether the activities undertaken by procuring orders from a foreign buyer to print texts and thereafter deliver them to various places in India is a taxable transaction? - The Applicant supplies the composite printing service to the recipient located in India. Such supplies are not, therefore, export of services within the meaning of section 2(6) of the IGST Act, 2017 - AAR Visit to Get Source Profiteering - supply of ‘Sujata Mixer Grinder 900W’ - rate of GST was reduced from 28% to 18% - by increasing the base price of the product the benefit of reduction in the tax rate was not passed on to the recipients by the Respondent and hence he has contravened the provisions of Section 171 of the CGST Act, 2017 - NAPA Visit to Get Source Profiteering - purchase of a flat - the Respondent has not availed any benefit of CENVAT or ITC in the pre and post GST era and hence, there was no additional benefit available to the Respondent which was to be passed on to his buyers - it is established that the Respondent was not liable to pass on the benefit of ITC to the Applicant No. 1 and thus he has not contravened the provisions of Section 171 of the CGST Act, 2017. - NAPA Visit to Get Source Income Tax Depreciation loss - loss arising due to forward contracts - Section 43A - The assessee even under unamended provision is entitled to benefit of the loss claimed by the assessee to the tune on account of settlement of forward contracts in the previous year, which was shown as loss while computing the taxable income of the assessee. - HC Visit to Get Source Block assessment - as per panchanama drawn on 15th September, 1998, the search which was carried out in terms of authorization dated 14th September, 1998 was fully executed. After 15th September, 1998 there was no search or seizure. On 13th October, 1998 a prohibitary order was passed u/s 132(3) regarding the computer CPU of the respondent/ assessee which was revoked on 14th December, 1998. - passing of prohibitory order and revocation thereof were wholly irrelevant for the purpose of determining limitation u/s 158BE.- HC Visit to Get Source Power of CIT(A) to enhance the assessment - It is pertinent to note that requirement of issuing show cause notice is must prior to enhancement of the assessment as envisaged in Section 251(2) of the Act for each and every enhancement and it does not depend on overall outcome of the total income of the assessee in pursuant to the order of the ld. CIT(A) - Merely because some additions made by the AO are deleted by the CIT(A), the requirement of issuing notice for new additions cannot be escaped - AT Visit to Get Source TDS u/s 195 - Payment made to non residents - since the services in question provided by M/s. Korea Search to the assessee company do not fall in the category of fees for technical services as provided under Section 9(1)(vii) there was no liability of the assessee to deduct tax at source u/s 195 - AT Visit to Get Source MAT - Computation of Book profit u/s 115JB - doubtful debts - Since, we have held that provision of doubtful debts is not an allowable deduction while computing income under normal provisions, as a corollary to the aforesaid findings the Book Profits under section 115JB are not required to be reduced by that extent. - AT Visit to Get Source Even if expenditure may not have been incurred under any legal obligation, yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. The case of the assessee is that the assessee has made advances to its subsidiary for business expediency. - AT Visit to Get Source Customs Seeking a sum which represents the value of goods destroyed by the Customs authorities - The Customs authorities cannot be saddled with refunding of the value of the goods to the petitioner. The Customs authorities having acted bona fide, the department cannot be asked to compensate the petitioner for incidental loss suffered by him on account of the pendency of the proceedings. It is neither the case of the petitioner that wholly mala fide in order to harass the petitioner the proceedings were initiated or that the same protracted. - HC Visit to Get Source Recovery of Drawback - misdeclaration of the goods in the shipping bill - The subsequent change of declaration given by the Assessee to treat the same as 'Softy Upper Leather', all the more confirms the earlier misdeclaration in the relevant documents at the time of actual export. - HC Visit to Get Source Advance Licence scheme - Imposition of penalty - suspension of the IEC - The petitioner has not availed any benefit under the Advance Licence Scheme. Once the petitioner fulfills the export obligations of ₹ 30 crorers on the cost of ₹ 2.10 crores, he has incurred for importing fuel. Though the petitioner availed the benefit under the Advance Licence Scheme to import fuel as is clear in the aforesaid amended provision that has to be excluded from the said scheme. - HC Visit to Get Source 100% EOU - Job work - Reversal of Drawback granted - It could not have been the intention of Legislature or the authorities concerned, to deny drawback claim merely because some processes in the chain of manufacturing have been conducted in the premise of EOU/unit of EPZ, if the assessee is otherwise entitled to the benefit - Though the Notifications do specifically require that the export, after completion of job work, is to take place only from the EOU/EPZ, this can be given effect to only in a situation where the entire process of manufacture/finishing is occasioned in such EOU/EPZ. - HC Visit to Get Source Penalty u/s 116 of the Customs Act, 1962 - Since the person-in-charge of conveyance is liable for penalty in case of quantity unloaded is short of the quantity to be unloaded at the destination, the adjudicating authority has correctly imposed the penalty on the respondent under Section 116 of the Customs Act, 1962. - CGOVT Visit to Get Source FEMA Manner of payment in foreign exchange - Regulation 5 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 as amended Visit to Get Source Manner of Receipt in Foreign Exchange - Regulation 3 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 as amended Visit to Get Source Indian Laws Prohibition on dealing in Virtual Currencies - power of RBI - While we have recognized elsewhere in this order, the power of RBI to take a pre-emptive action, we are testing in this part of the order the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none. While we have recognized elsewhere in this order, the power of RBI to take a pre-emptive action, we are testing in this part of the order the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none. - there is nothing irrational about the acceptance of a technological advancement/ innovation, but the rejection of a by-product of such innovation. There is nothing like a “take it or leave it” option. - SC Visit to Get Source Service Tax Interest on refunds - The respondents have retained the money which belongs to the writ petitioners. Therefore, once the learned Single Judge has ordered for refund of the tax amount, necessarily, interest should follow. - claim of interest allowed - HC Visit to Get Source Valuation - air travel agent service - rule 6 (7) of the Service Tax Rules, 1994 - The appellant contends that out of the seventy three airlines only four airlines pay commission on fuel surcharge and, therefore, it cannot be said that commission is normally paid to the air travel agent by the airlines on fuel surcharge. It was, therefore, obligatory on the part of the Principal Commissioner to have considered this issue raised by the appellant in response to the show cause notice, but that has not been done. - AT Visit to Get Source Central Excise 100% EOU - allegation that they were doing job work in violation of Exim policy - quantum of sale made to DTA unit - debonding - Undisputedly, in the present case, the transaction between UFAC and TISCO satisfies all the three conditions. The goods are produced and manufactured by UFAC, an 100% export-oriented unit; they are manufactured wholly from the raw materials produced or manufactured in India and, thirdly, they have been allowed to be sold in India in accordance with the provisions of paragraph 9.9(b) of the EXIM Policy. - SC Visit to Get Source Rebate claim - Cenvat credit reversed on depreciated value of imported capital goods (machinery parts) at the time of their export - Since the imported goods are not liable for Central Excise duty under the Central Excise Act, 1944 no rebate claim can be filed in respect of such goods which are not excisable under Central Excise Act, 1944. - CGOVT Visit to Get Source Refund of Excise Duty - The Government is of view that the excess amount paid by the applicant on freight and insurance was not payable as Central Excise duty. It is observed that rebate can be granted only to the extent of duty paid on export goods. - CGOVT Visit to Get Source Rebate of duty - exporter missed out the self-sealing of the goods - The Government is of the view that this is a procedural lapse on the part of the respondent. The fact that the customs officer at Petrapole LCS has given a cross border certificate and remittance has also been received against the said export is undisputed - CGOVT Visit to Get Source Refund of Excise Duty - doctrine of merger - time limitation - since upon the Revenue preferring an appeal against the Order-in-Appeal (with the assessee also filing its cross-objection), the matter was sub judice before the Tribunal and naturally, when the matter was lis pendens, no such application for refund could be filed. - The appellant’s claim for refund is not hit by limitation - AT Visit to Get Source VAT Review of the assessment order - In absence of any such reason given by the Assessing Authority, showing the application of his own independent mind, we are of the considered view that only recording the audit objection cannot mean the independent reasoning given by the Assessing Authority. - HC Visit to Get Source Input Tax Credit (ITC) - Imposition of penalty u/s 70[2] of KVAT Act - bill trading “to evade the tax due to the State Government” - burden of proving that the claim of input tax credit is correct, is squarely upon the Assessee who never discharged the said burden in the present case. - HC Visit to Get Source Case Laws: GST 2020 (3) TMI 412 Exemption from GST or not - deduction of TDS while paying consideration for the supply conservancy/solid waste management service to the Howrah Municipal Corporation - whether the above supply is exempted in terms of SI No. 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 - FT dated 28/06/2017)? HELD THAT:- The recipient is a municipal corporation, which is a local authority as defined under section 2(69) of the GST Act - Applicant performs compaction service and transport compacted garbage to the dumping station with the help of hook loaders mounted in compactor machine. There is, however, no reference to any supply of goods in the course of executing the work. The consideration to be paid measures the work only in terms of the quantity of the garbage lifted and removed. Based on the above documents, it may, therefore, be concluded that the Applicant's supply to HMC is a pure service. Furthermore, Article 243W of the Constitution that discusses the powers, authority and responsibilities of a Municipality, refers to the functions listed under the Twelfth Schedule as may be entrusted to the above authority. SI No. 6 of the Twelfth Schedule refers to public health, sanitation, conservancy and solid waste management. The Applicant's supply to HMC is a function mentioned under SI No. 6 of the Twelfth Schedule - The Applicant's service to HMC, therefore, is exempt under SI No. 3 of the Exemption Notification. The TDS Notifications bring into force section 51 of the GST Act, specifying the persons under section 51 (1)(d) of the Act and have mandated and laid down the mechanism for deduction of TDS. These notifications, therefore, are applicable only if TDS is deductible on the Applicant's supply under section 51 of the GST Act. Section 51(1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both - As the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply. 2020 (3) TMI 411 Nature of transaction - taxable transaction or not - Place of supply - whether the activities undertaken by procuring orders from a foreign buyer to print texts and thereafter deliver them to various places in India is a taxable transaction? HELD THAT:- Services by way of printing of the goods falling under Chapter 48 and 49 are classifiable under SAC 9989. The goods supplied, having no use other than displaying the printed matter, is ancillary to the principal supply of printing. At the same time, being a composite supply, the printing service is inseparable from supply of the goods, namely the printed booklets. The place of supply of the printed booklets will, therefore, be the place of supply of the printing service. In other words, the place at which the printed booklets are delivered is the place of supply of the composite printing service. The Applicant supplies the composite printing service to the recipient located in India. Such supplies are not, therefore, export of services within the meaning of section 2(6) of the IGST Act, 2017. It is taxable under SI No. 27(i) of Notification No. 11/2017 - CT (Rate) dated 28/06/2017 (corresponding State Notification No. 1135 - FT dated 28/06/2017) or SI No. 27 of Notification No. 8/2017 - IT (Rate) dated 28/06/2017, as the case may be. 2020 (3) TMI 410 Release of seized goods alongwith conveyance - return of amount which has been extorted under pressure - section 129 and 130 of CGST Act - HELD THAT:- While issuing notice, this Court directed that the vehicle as well as the goods be released, upon payment of the tax, in terms of the impugned notice - The writ applicant availed the benefit of the interimorder passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [ 2020 (2) TMI 1159 - GUJARAT HIGH COURT] . It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged - Writ application disposed off. 2020 (3) TMI 409 Release of seized goods alongwith the truck - section 129 and 130 of CGST Act - While issuing notice, this Court directed that the vehicle as well as the goods be released, upon payment of the tax, in terms of the impugned notice - HELD THAT:- The writ applicant availed the benefit of the interimorder passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [ 2020 (2) TMI 1159 - GUJARAT HIGH COURT] . It is now for the applicant to make good his case that the show cause notice, issued in Form GST-MOV-10, deserves to be discharged - Application disposed off. 2020 (3) TMI 408 Reopening of portal for filing of FORM GST TRAN-1 - Circular No.39/13/2018-GST, dated 03.04.2018 - HELD THAT:- The challenge in these appeals are against an interim order. The said order does not contain any specific directions. On the other hand, the learned counsel for the respondents in the writ petition was only directed to get instruction with respect to the alleged non-compliance of the directions contained in the earlier judgments. It is well within liberty of the appellants herein to point out the above mentioned aspects before the learned Single Judge and to seek appropriate modification of the interim order, if found necessary. There is nothing to presume that, the learned Single Judge will not consider such submissions, if made with supporting materials. Of course, contention of the appellants will be subject to what the respondents have to say on the issue, before the Single Judge. The writ appeals are hereby dismissed by reserving liberty to the appellants to raise all the contentions raised herein before the learned Single Judge, in seeking modification of the impugned interim order, if found necessary. 2020 (3) TMI 407 Seizure of goods alongwith the truck - It is the case of the petitioner that the e-way bill for inter-State transportation of the goods was introduced on 1.4.2018. The consignment was transported from Delhi on 6.4.2018 and it was intercepted in Jharkhand on 9.04.2018 - As at the relevant time, no Appellate Authority had been notified by the State Government, the petitioner approached this Court directly, by filing this writ application. It is the case of the respondent State that the Appellate Authority has since been notified by the State Government on 31st July 2018, who shall be the Joint Commissioner (Appeals), State Tax. HELD THAT:- The writ application is disposed with the direction to the petitioner to move before the Appellate Authority within a period of three weeks from today and in case, the petitioner moves before the Appellate Authority within the period of three weeks, the time spent before this Court shall be taken into consideration, treating the appeal filed before the Appellate Authority to be within time. 2020 (3) TMI 406 Profiteering - supply of Sujata Mixer Grinder 900W - Respondent had not passed on the benefit of reduction in the rate of GST on the impugned product supplied by him by way of commensurate reduction in price - contravention of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- The Respondent had increased the base prices of the goods when the rate of GST was reduced from 28% to 18% w.e.f. 27.07.2018, so that the commensurate benefit of GST rate reduction was not passed on to his recipients. Thus, by increasing the base price of the product the benefit of reduction in the tax rate was not passed on to the recipients by the Respondent and hence he has contravened the provisions of Section 171 of the CGST Act, 2017. The Respondent is therefore directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of ₹ 30,153/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited in terms of Rule 133 (3) (b) of the CGST Rules, 2017 - Since, rest of the recipients in this case are not identifiable, the above Respondent is directed to deposit the amount of profiteering of ₹ 30,153/- along with interest in the Consumer Welfare Fund of the Central and the concerned State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 in the ratio of 50:50 in the Central and State CWFs along with interest @ 18% till the same is deposited. Penalty - HELD THAT:- The Respondent has denied the benefit of rate reduction of the GST to the consumers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable to penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. 2020 (3) TMI 405 Profiteering - purchase of a flat - allegation that Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price, on introduction of the GST w.e.f. 01.07.2017 - contravention of section 171 of CGST Act - penalty - HELD THAT:- Prior to the implementation of the GST w.e.f. 01.07.2017, Service Tax on construction service was chargeable @ 4.50% (vide Notification No. 14/2015-ST dated 19.05.2015). however, after implementation of the GST w.e.f. 01.07.2017, GST on construction service was changeable @ 18% (effective rate was 12% in view of 1/3rd abatement on value) which was imposed vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was further reduced for low cost affordable housings to 12% GST (effective rate was 8% in view of 1/3rd abatement on value), vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 (in respect of affordable and low-cost house upto a carpet area of 60 square meters) and hence it is established that there was no rate reduction w.e.f. 01.07.2017 in the case of construction service for low cost affordable houses which the above Applicant has purchased. Hence, no benefit of tax reduction was required to be passed on to him. It is also revealed from the record that during the pre-GST era the Respondent was eligible to avail CENVAT Credit of Service Tax paid on the input services and post GST, the Respondent was eligible to avail the input tax credit of GST paid on all the inputs and input service including the sub-contracts. However, the Respondent has not availed any benefit of CENVAT or ITC in the pre and post GST era and hence, there was no additional benefit available to the Respondent which was to be passed on to his buyers - it is established that the Respondent was not liable to pass on the benefit of ITC to the Applicant No. 1 and thus he has not contravened the provisions of Section 171 of the CGST Act, 2017. There is no merit in the application filed by the Applicant No. 1 - application dismissed. Income Tax 2020 (3) TMI 404 Validity of assessment u/s 153A - Merely visiting the premises on the pretext of concluding the search but not actually finding anything new for being seized cannot give rise to a second panchnama - HELD THAT:- Two weeks further time is granted to the learned counsel for the appellant to file an affidavit of valuation and Ad valorem court fee, failing which, the Appeal shall stand dismissed for non-prosecution automatically without further reference to the Court. 2020 (3) TMI 403 Carry forward of unabsorbed depreciation beyond the period of eight assessment years - as per HC any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - HELD THAT:- SLP dismissed. 2020 (3) TMI 402 Deduction u/s 80P(2)(a)(i) - income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society - HELD THAT:- We find that revenue s case is covered by South Eastern Railways Employees Co-operative Credit Society Limited [ 2016 (9) TMI 814 - CALCUTTA HIGH COURT] The Act of 2006 and Rules thereunder mandate 10% of net profit in every cooperative year to be transferred to a reserve fund. Interest income on rest of the net profit of respondent appears to be similar income or to be similarly treated as interest income on investment of sale of agricultural produce of the assessee in Totgar s [ 2010 (2) TMI 3 - SUPREME COURT] that assessee being one coming within sub-clause (a)(iv) under sub-section (2) in section 80P. Assessee being a credit society similar to assessee South Eastern Railways Employees Co-operative Credit Society Limited, Totgar s (supra) would apply to its such income. It follows that the question in this appeal is to be answered in the affirmative, in favour of revenue and we so answer it. Having answered the question as we have, we direct the matter be remanded to the Assessing Officer, to work out interest earned on the reserve fund, if invested and allow deduction therefore in addition to the deduction already allowed in applying section 80P(2)(d), as in the assessment order. Said deduction was correctly allowed and allowing of only it cannot be taken to imply, reason to have disallowed the other income was by going on manner of such investments. 2020 (3) TMI 401 Stay of demand - stay of 80% of the disputed demand till disposal of the appeal, subject to payment of 20% of the demand - HELD THAT:- The petitioner to be present before the Principal Commissioner of Income Tax on 05.03.2020 at 11.30 a.m. and the request of petitioner as contained in the representation dated 07.02.2020 would be disposed of in light of the observations made above. In light of the submission that there has been attachment of bank account and in light of the direction being passed, the attachment already resorted to would be limited to ₹ 61,17,317/-. However, in light of the attachment being restricted to ₹ 61,17,317/-, the Principal Commissioner of Income Tax to dispose of the representation of the petitioner within a period not later than one week from the date of appearance of the petitioner as noticed above. All contentions of parties are kept open. It is made clear that if the Principal Commissioner of Income Tax does not decide the matter within a period of one week as stipulated, the attachment would automatically stand vacated. 2020 (3) TMI 400 Reopening of assessment u/s 147 - alternative remedy - HELD THAT:- In the light of the aforesaid judgment, the provisions of section 14A cannot be invoked as there is no exempt income in the hands of the assessee. Accordingly, we find no infirmity in the order of the CIT(Appeals) who has rightly deleted the addition. In view of the decision of the Hon ble Supreme Court rendered in the case of Commissioner of Income Tax Ors. Vrs. Chhabil Dass Agarwal [ 2013 (8) TMI 458 - SUPREME COURT] as above, we are of the opinion that the petitioners have approached this Court without availing the alternative remedy available under the Income Tax Act and have not been able to put-forth any cogent and satisfactory reason to persuade us to exercise our extraordinary jurisdiction under Article 226 of the Constitution of India. 2020 (3) TMI 399 Procedural violation of Rule 46A(2) and (3) - according to the tribunal the order of the Commissioner of Income Tax (Appeals) was flawed for not giving an opportunity to the assessing officer to deal with the additional evidence as provided in Rule 46A(3) - HELD THAT:- A proper order would have been to remand the matter to the Commissioner of Income Tax (Appeals) to rehear and re-determine the appeal complying with Rule 46A(2) and (3). This, in our opinion, gives rise to a substantial question of law. We think that it would be proper if the said impugned order of the tribunal is modified by directing that the entire matter be remanded to the CIT (Appeals) to decide the same complying with the procedural formalities under Rule 46A(2) and (3) within four months of communication of this order. 2020 (3) TMI 398 Depreciation loss - loss arising due to forward contracts as these contracts stood terminated during the current assessment year and the corresponding amount was deemed to be added to the value of the assets even when these assets had not been acquired or payments made - HELD THAT:- Section 43A as it is stood before the amendment required an assessee to revalue the foreign exchange liability at the end of every previous year and provide for the increase or decrease as a result of foreign exchange fluctuation. The aforesaid adjustment has to be made even in a case where the payment was not actually made and the adjustments have to be made on the basis of the liability as on the last day of the previous year. By way of an amendment in the year 2002, the requirement of making of payment was inserted. The assessee even under unamended provision is entitled to benefit of the loss claimed by the assessee to the tune on account of settlement of forward contracts in the previous year, which was shown as loss while computing the taxable income of the assessee. We agree with the view taken by the Tribunal on this issue. Accordingly, the first substantial question of law is answered against the revenue and in favour of the assessee. No interest u/s 234B levied on the amount of tax payable u/s 115JB as clause (h) to Explanation 1 to Section 115JB was inserted with retrospective effect by Finance Act, 2008 which could not haven anticipated during the current assessment year 2005-06 and consequently reading the provision which was not within its jurisdiction - HELD THAT:- The Supreme Court in the case of Star India P. Ltd. [ 2005 (3) TMI 10 - SUPREME COURT ] has held that liability to pay interest arising on default is in the nature of quasi punishment and even though it is permissible for the legislature to retrospectively legislate yet, such retrospectivity is normally not permissible to create an offence retrospectively. It is true that the assessee could not have paid advance tax in case of a deferred tax liability in respect of AY 2005-06, when the amendment was brought into force in 2008. However, it is pertinent to mention here that clause (h) to second proviso to Section 115JB(2) of the Act has been incorporated with effect from 01.04.2001. The retrospective operation of the aforesaid provision has not been challenged by the assessee and therefore, the aforesaid provision has to be given effect to. The Tribunal clearly acceded to its jurisdiction in holding that no interest could be levied u/s 234B. Second substantial question of law is answered in favour of the revenue and against the assessee. 2020 (3) TMI 397 Block assessment - Annulment of the assessment order for the block period under consideration passed u/s 158BC beyond the limitation period prescribed u/s 158BE(b) - HELD THAT:- Action u/s132(3) can be resorted to only if there is any practical difficulty in seizing the things which are likely to be seized. When there is no such practicable difficulty, the officer is left with no other alternative but to seize any item if he is of the view that it represented undisclosed income. This court categorically held that power u/s 132(3) cannot be exercised so as to circumvent the provisions of Section 132(3). Referring to the Explanation to Section 132(3), this court held that a restraint order does not amount to seizure. By passing a restraint order, the time limit available for framing of assessment order cannot be extended. Adverting to the facts of the present case, we find that the first appellate authority had recorded a clear finding of fact that as per panchanama drawn on 15th September, 1998, the search which was carried out in terms of authorization dated 14th September, 1998 was fully executed. After 15th September, 1998 there was no search or seizure. On 13th October, 1998 a prohibitary order was passed under Section 132(3) regarding the computer CPU of the respondent/ assessee which was revoked on 14th December, 1998. The first appellate authority had rightly held that passing of prohibitory order and revocation thereof were wholly irrelevant for the purpose of determining limitation under Section 158BE. Tribunal had considered the submission of the Revenue regarding Explanation 2 to Section 158BE but did not accept the same and rightly so. Finding returned by the first appellate authority as affirmed by the Tribunal is a finding of fact and we do not find any element of perversity in such finding of fact. In the absence thereof, no question of law, much less any substantial question of law, can be said to arise therefrom, there being concurrent findings of facts by the two lower appellate authorities. 2020 (3) TMI 396 Condonation of delay of 494 days in filing Tax Appeal - HELD THAT:- Having heard the learned counsel appearing for the Revenue and having considered the averments made in this application, we are convinced that sufficient cause has been made out for condonation of delay of 494 days in filing the Tax Appeal. The delay is hereby condoned. This application is allowed. Rule is made absolute. Tax Appeal shall now be notified for admission subject to removal of office objections, if any. 2020 (3) TMI 395 Reopening of assessment u/s 147 - alternative and efficacious remedy - HELD THAT:- In the existence of an alternative and efficacious remedy, it would be improper for a writ court to exercise its jurisdiction. The question of whether the notice issued under Section 147 of the Act is justified or not is once again a question of fact. As questions of fact cannot be gone into by a writ court, it would necessarily have to be done by the concerned authorities. Even assuming that the learned Single Judge exercised the writ jurisdiction, then a reference as to why the alternative remedy is not an efficacious remedy would have to spelt out. Even on considering the alternative and efficacious remedy, we do not find that the rights of the petitioner are infringed only because he has to file an appeal against the said order. We are of the view that there is no reason to interfere with the well considered order passed by the learned Single Judge. Hence, the writ appeal is dismissed. 2020 (3) TMI 394 Correct head of income - capital gain or business income - Sale of land as mentioned under the head property - HELD THAT:- Assessee has not conducted any other activity other than holding the land as investment. It is also pertinent to mention here that the revenue has not come up with any documentary evidence to suggest that assessee had earned income from the transaction to the land in question during the year 2003-04. The Tribunal thereafter on the basis of meticulous appreciation of evidence on record has recorded a finding that assessee has rightly disclosed the income from the property as long term capital gains instead of business income. The aforesaid finding by no stretch of imagination can be believed to either perverse and arbitrary. - Decided in favour of assessee. 2020 (3) TMI 393 Addition on account of sale out of books on presumption basis made by AO - CIT(A) enhancing the addition for credit allowed on account of expenditure @ 30% without serving notice u/s 251(2) - HELD THAT:- It is pertinent to note that once the assessee has produce the relevant documentary evidences in support of the fact that certain goods imported from Chinese supplier were found to be defective and this fact was accepted by the counterpart by giving the credit of said amount from the purchase bills then the assessee has discharged his onus by production of the documentary evidences. The AO has not doubted the fact that the assessee has not paid in respect of the goods found to be defective and therefore, to the extent of cost of the purchase of the goods found to be defective was reduced from the total cost of purchase as per import bill. Therefore, accepting the fact of non-payment of purchase price due to the reason as is manifest from the record being defective goods, the corresponding sale of the goods is not possible. AO has not disputed that the value of these goods as per the invoice is USD 219700 and the corresponding value is in ₹ 1,37,40,718/-. These facts were confirmed by the supplier which is also recorded in the books of account of the assessee, ledger account, supporting invoice, Debit Notes and Credit Notes etc. The goods imported by the assessee are perishable in nature having limited shelf life. Therefore, the goods received by the assessee were found to be out dated or expiry date then it would certainly become useless having no value as chemical properties and compounds gets changed after the said period of shelf life. Accordingly, we find that the claim of defective goods reduced from purchase is established by supporting evidence and therefore, the addition made by the AO purely on presumption and assumption is liable to be deleted. It is pertinent to note that requirement of issuing show cause notice is must prior to enhancement of the assessment as envisaged in Section 251(2) of the Act for each and every enhancement and it does not depend on overall outcome of the total income of the assessee in pursuant to the order of the ld. CIT(A). If the AO has made more than one addition to the total income of the assessee and some of the additions are found to be not sustainable by the ld. CIT(A) and accordingly deleted then the addition which is enhanced by the ld. CIT(A) shall satisfy the conditions of issuing show cause under sub-section 2 of Section 251 as the same is not obliterated due to reason that certain other additions made by the AO were deleted by the ld. CIT(A). Therefore, the enhancement of assessment has to be considered in the context of each issue raised in the appeal before the ld. CIT(A). Without going into the controversy of the validity of the order, once we find that the assessee has established the facts of defective goods received from the Chinese suppliers then the addition itself would not survive and the same is deleted. Thus the appeal of the assessee is allowed. 2020 (3) TMI 392 TDS u/s 195 - Payment made to non residents - as per AO payment to M/s Korea Search is the fees for technical services and thus liable for tax deduction at source - interest charged u/s 201(1A) - HELD THAT:- Detailed job description is provided by the assessee company to M/s. Korea Search which has a data base of profiles of various eligible candidates. After examining the profile and matching it with the clients job description candidates are referred to the assessee company with guarantee that if the candidates so recruited leaves the job for first 90 days from the date of employment, suitable replacement will be made at no additional cost. There is no specification for any technical expertise which the assessee company has sought from M/s. Korea Search. From all the angles the agreement shows that M/s Korea Search (which is a foreign company) have no permanent establishment in India is working only as a placement services having data base of various persons who want job. M/s. Korea Search has various clients based across the globe who need such experts who are well versed and expert in their fields. M/s. Korea Search after matching requirement of the client with the job profile of the candidate refers it to the client after charging fees as agreed. Whether the candidate who is referred by M/s Korea Search, is technical expert or not in the particular field is on the sole discretion of the assessee company who interview and test the candidate and appoints as an employee for the period and conditions to be decided or it requests for replacement. As far as Section 9(1)(vii) Explanation 2 provides that fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . After examining the agreement, nature of services provided by M/s. Korea Search to the assessee and the provisions of Section 9(1)(vii) we are of the considered view that the services taken by the assessee company from M/s Korea Search do not fall under the category of technical services and it is merely fee paid for placement services which by no canon require any technical expertise. Therefore since the services in question provided by M/s. Korea Search to the assessee company do not fall in the category of fees for technical services as provided under Section 9(1)(vii) there was no liability of the assessee to deduct tax at source u/s 195 - set aside the order of both the lower authorities and direct the Revenue authorities to delete the demand raised for default of deduction of tax at source. Interest levied u/s 201/201(1A) also deserves to be deleted being consequential in nature. Ground No.1 raised by the assessee is allowed. 2020 (3) TMI 391 TP Adjustment - comparable selection - HELD THAT:- We find that in assessee s own case in [ 2019 (5) TMI 290 - ITAT MUMBAI] the Tribunal excluded Apitco from the list of comparables for the reasons that the company is Government company and also being functionally non-comparable. TSR Darshaw Limited is engaged in providing Share Registrar and transfer services, depository services, pay roll and Provident fund Management Services, etc. The activities carried out by the said company are in the nature of BPO/KPO. We find that the Tribunal in the case of Star India Pvt. Ltd [ 2019 (8) TMI 1464 - ITAT MUMBAI] a group company of the assessee, having activities similar to that of assessee has held, TSRDL is not comparable to support service provider. TDS u/s 194H - disallowance made under section 40(a)(ia) - Agency commission paid to the agents for procuring business for the assessee - HELD THAT:- Revenue did not assail the findings of Tribunal on the issue of deleting the addition made in respect of agency commission under section 40(a)(ia) of the Act. Thus, the Revenue accepted the findings of Tribunal on this issue. See STAR ENTERTAINMENT MEDIA (P.) LTD. [ 2020 (1) TMI 867 - BOMBAY HIGH COURT] WAPCOS company is liable to be rejected as comparable on account of functional disparity as well as, being a Government Company. In view of our above observation, we direct TPO /Assessing Officer to exclude WAPCOS from the list of comparables. Company having related party transactions exceeding 25% of turnover - It is no denying fact that where an entity is having related party transaction in excess of 25% of the total turnover, the same is held to be bad comparables - We find that in the case of DCIT vs. Aruba Network Pvt. Ltd., [ 2016 (9) TMI 1447 - ITAT BANGALORE] has excluded Hindustan Housing Co. Ltd. from the list of comparables as it has failed to qualify RPT filter of 25%. Taking into consideration, well settled principle of rejecting comparable by applying RPT filter, we deem it appropriate to refer this comparables to the TPO for re-examination. In case the related party transactions of the said company exceeds 25% of the total turnover, the TPO is directed to exclude said company from the list of comparables. 2020 (3) TMI 390 Cessation of liability in respect of his father s gold that was purchased during the year - gold introduced by the assessee into the business belonged to his father on whose death it was inherited by mother, brothers and sister of the assessee - HELD THAT:- As rightly contended by the ld. AR, inasmuch as the other legal heirs are available and the debt is acknowledged in the books of account of the assessee, it cannot be said that the liability ceased to exist. As a matter of fact, it cannot be said that such a liability ceased to exist on the death of assessee s father because the father of assessee died way back in the year 1993 and the introduction of gold of father into the business of assessee took place in the assessment years 2011-12 and 2012-13 only. In Mahindra Mahindra Ltd. [ 2018 (5) TMI 358 - SUPREME COURT] clearly held that unless the benefit accrued to the assessee is in nature of cash or money, section 28 has no application and in the absence of cessation of liability, section 41(1) has no application. What all that happened in this matter is that the assessee introduced the gold left behind by his father into his business and had shown the trade liability in his own name in the name of other family as a whole or individual legal heir. Such an act cannot be termed either as introduction of unaccounted or unexplained money into the capital or that the trade liability ceased to exist. For these reasons, we find it difficult to sustain the addition made by the Assessing Officer and confirmed by the ld. CIT(A). Ground of appeal is accordingly allowed. 2020 (3) TMI 389 Disallowance of share issue expenses u/s 35D(2) - assessee has not established the business - HELD THAT:- We observe that the Ld. CIT(A) has passed a very reasoned order by holding that there was expansion of the existing unit. During the course of hearing also we required the Ld. A.R. of the assessee to produce the necessary documents which were filed before us and after examination of the same we are of the view that assessee has expanded the existing unit in order to carry out its operation more economically and accordingly we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground No.1 2 of the issue raised by the Revenue. Claim of bad debts - sale of property as long term capital loss to be carried forward to the next year - no such claim was made either in the return of income or in the assessment proceedings and therefore not allowable - HELD THAT:- CIT(A) has rightly entertained the claim of the assessee and allowed the long term capital loss to be carried forward to the subsequent years. The Revenue has relied on the decision of Hon ble Supreme Court in the case of Goetz India Ltd. vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] however in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] has held that appellate authorities can entertain a claim of the assessee which is not made in the return of income after considering the decision of Hon ble Supreme Court in the case of Goetz India Ltd. vs. CIT (supra). Loss has genuinely arisen due to fall in prices of property during the period when preemptive right by member of Lalbaug Industrial Estate Ltd. was excercised. Needless to mention that assessee has already returned the gain on this property resulting from the transfer of the property through MOU and part handing over the possession to the prospective buyer and thus are recognised the the transaction of sale in the books of accounts. In our opinion, this is a genuine short fall in recovery of the sale consideration originally agreed to and recognized in the books of accounts by the assessee. Therefore, the action of Ld. CIT(A) in allowing the carried forward of the said loss is as per the provisions of Income Tax Act. Accordingly, we do not find any infirmity in the order of Ld. CIT(A) and same is upheld by dismissing the ground raised by the revenue. Addition u/s 14A read with rule 8D2(iii) - HELD THAT:- CIT(A) has given a correct finding on the issue that no disallowance is required to be made under rule 8D2(iii) where no satisfaction has been recorded having regard to the books of accounts of the assessee as to how the claim of the assessee that no expenses are to be disallowed is wrong. We note that in point No.17(1) of 3CD report the assessee has worked out the expenses at nil. Accordingly, we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue. Bogus purchases - HELD THAT:- We observe that in this case the assessee is engaged in the business of printing and publication of newspaper and other publications. The assessee has turnover of ₹ 500 crores during the year. We observe that the disallowance made by the AO on account of bogus purchases is only ₹ 38,563/- despite the fact that the assessee has produced all the necessary bills, vouchers, transport receipts, inward and outward stock entries along with the payment through banking channel. The AO has not carried out any enquiry despite assessee filing all these informations before the AO. Moreover this being a petty expense which having regard to the turnover of the assessee is not even worth consideration. In our view, the Ld. CIT(A) has taken a balanced and correct view of the matter. After considering all the facts and circumstances of the case, we are inclined to uphold the order of Ld. CIT(A) on this issue by dismissing the appeal of the Revenue. 2020 (3) TMI 388 TP Adjustment - comparable selection - HELD THAT:- The assessee is engaged in installation, assembling and maintenance of Lifts and Escalators, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Adherence to Turnover filter applied by the assessee company as companies having turnover less than one crore need to be rejected. Addition on account of unaccounted income reflected in Form 26AS - onus to prove - HELD THAT:- We are of considered view that merely on AIR information based on TDS statement addition cannot be made in the hands of the assessee. The assessee has successfully reconciled 602 entries from the total 616 entries in question. For the remaining entries the assessee has denied to have transactions with the parties during the impugned assessment year. Since, the assessee has denied the transactions, onus was on the Revenue to show that TDS reflected in Form 26AS is in respect of the amounts that have been received by the assessee during the relevant period. The Revenue has failed to discharge its onus. The Bangalore Bench of the Tribunal in the case of Arati Raman vs. DCIT [ 2012 (10) TMI 1045 - ITAT BANGLORE] has held that addition cannot be sustained on the basis of AIR information alone . The onus is on the Department to prove correctness of information by way of bringing cogent evidence - Since the Revenue has failed to lead positive evidence, the addition to be deleted. Non-granting of deduction in respect of provision for bad and doubtful debts while computing book profits under section 115JB - claim was not made by assessee in return of income - HELD THAT:- Since, we have held that provision of doubtful debts is not an allowable deduction while computing income under normal provisions, as a corollary to the aforesaid findings the Book Profits under section 115JB are not required to be reduced by that extent. We do not find any infirmity in the impugned order in rejecting assessee s claim. 2020 (3) TMI 387 Disallowance u/s 14A - suo moto disallowance by assessee - HELD THAT:- No exempt income is earned by the assessee during this year therefore, we direct the Assessing Officer to restrict the disallowance suo-moto offered by the assessee at ₹ 8,20,000/-. Addition on account of presumptive basis under section 5 on advances made by assessee to its subsidiaries - HELD THAT:- Assessee advanced the money to its subsidiary, which falls under the business expediency. Therefore, in the present case that the assessee advances to its subsidiary for business requirements, which may have impact on the objectives of the assessee for earning future revenue to the assessee. When it made in relation to advances. Though, it is another fact that the business of such nature did not materialized in positive outcome and the subsidiary had to close such business operation. The Hon ble Supreme Court in S.A. Builders [2006 (12) TMI 82 - SUPREME COURT ] held that whether expenditure may not have been incurred under any legal obligation, yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. The case of the assessee is that the assessee has made advances to its subsidiary for business expediency. - Decided against revenue 2020 (3) TMI 386 Assessment u/s 153A - Addition on account of cash deposit - as submitted that since no incriminating material was found during the course of search and addition is made on the basis of record produced by the assessee, therefore, the issue is covered by Judgment of the Hon ble Delhi High Court in the case of CIT vs., Kabul Chawl [ 2015 (9) TMI 80 - DELHI HIGH COURT ] - HELD THAT:- We set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. with a direction to pass assessment orders afresh in the light of original returns of income filed by the assessee, after duly verifying of the same from the records. The A.O. shall give reasonable, sufficient opportunity of being heard to the assessee. Appeals of the Assessee are allowed for statistical purposes. Customs 2020 (3) TMI 385 Seeking a sum which represents the value of goods destroyed by the Customs authorities - illegal trade - HELD THAT:- The petitioner has not been able to build a case of mala fide or vindictive action on part of the adjudicating authority in originally initiating proceedings and eventually ordering confiscation of goods and imposing personal penalties on the petitioner and other co-noticees. In fact, other co-noticees did not challenge the order. Qua them such order be achieved finality. Only petitioner carried the order in appeal. Commissioner of Appeal had confirmed the order. The Tribunal remanded the proceedings for fresh consideration by the adjudicating authority. The Customs authorities cannot be saddled with refunding of the value of the goods to the petitioner. The Customs authorities having acted bona fide, the department cannot be asked to compensate the petitioner for incidental loss suffered by him on account of the pendency of the proceedings. It is neither the case of the petitioner that wholly mala fide in order to harass the petitioner the proceedings were initiated or that the same protracted. In fact, a part of the blame for destruction of the drugs must be attached to the petitioner itself. Under the Customs Act, provisions are there where under certain circumstances even after confiscation of the goods in respect of which any of the legal breaches are detected, the authority can provide for redemption fine and on payment of which in lieu of absolute confiscation, the goods can be returned to its owner. The petitioner could have applied for such redemption fine - The petitioner could also have urged the Customs authorities to auction the goods well in time so that the market price could have been fetched and if the petitioner ultimately succeeded such sale price could have been paid over to the petitioner. In the present case, during the pendency of the proceedings before the order of confiscation of the goods were set aside by the CESTAT and issues were re-decided by the adjudicating authority, the drugs had expired and, therefore, destroyed - Petition dismissed. 2020 (3) TMI 384 Recovery of Drawback - misdeclaration of the goods in the shipping bill - HELD THAT:- Such ex-post facto obtaining of a fresh Report by the Assessee/Exporter, is of no relevance, because the fact remains that on the basis of the CLRI Report obtained in the contemporary period of actual export by the Assessee/Exporter, it was found that what was exported by the Assessee was not 'Nubuck Leather' as the process of snuffing to make 'Nubuck Leather' was not carried out. The subsequent change of declaration given by the Assessee to treat the same as 'Softy Upper Leather' vide letter dated 08 April, 2011, all the more confirms the earlier misdeclaration in the relevant documents at the time of actual export. The findings of facts by the learned Tribunal based on the aforesaid material are binding on us and cannot be said to be perverse in any manner and therefore, we do not find any error in the order passed by the learned Tribunal. Appeal dismissed. 2020 (3) TMI 383 Imposition of penalty - suspension of the IEC of the petitioner with immediate effect till the amounts of penalty is paid by the petitioner and cancellation of the petitioner s Advance Licence - duty free import of fuel for all Advance Licence applications either under SION or under self declaration as per para 4.7 - HELD THAT:- Clause (d) provides that even the fuel is included as an import under SION, it should not be taken into account while fixing the DEPB rate for such products against which fuel has been allowed as an input. The petitioner has imported fuel under the Advance Licence Scheme and even admittedly he has not imported any other raw material under that scheme. The petitioner has not availed any benefit under the Advance Licence Scheme. Once the petitioner fulfills the export obligations of ₹ 30 crorers on the cost of ₹ 2.10 crores, he has incurred for importing fuel. Though the petitioner availed the benefit under the Advance Licence Scheme to import fuel as is clear in the aforesaid amended provision that has to be excluded from the said scheme. Appeal dismissed. 2020 (3) TMI 382 100% EOU - Reversal of Drawback granted - All Industry Rate (AIR) - N/N. 31 of 1999 dated 20.05.1999 - HELD THAT:- The petitioner is entitled to drawback at All India Rate in respect of the duty suffered on inputs utilised by 100% EOU/units in EPZ for manufacture. It could not have been the intention of Legislature or the authorities concerned, to deny drawback claim merely because some processes in the chain of manufacturing have been conducted in the premise of EOU/unit of EPZ, if the assessee is otherwise entitled to the benefit - Though the Notifications do specifically require that the export, after completion of job work, is to take place only from the EOU/EPZ, this can be given effect to only in a situation where the entire process of manufacture/finishing is occasioned in such EOU/EPZ. In a situation such as the present, where parts of the process are carried out in different locations, one can hardly conclude that this operational difference would result in denial of the benefit to the exporter. The original stipulation that no drawback was available for export was imposed to ensure that no double benefit was obtained. Subsequently, when an EOU was permitted to engage in job work, the original condition stood modified to the effect that a manufacturer/exporter would also be entitled to drawback, provided the finished commodity was exported from EOU/EPZ itself. A situation such as the present where the goods revert back to the assessee for further processing has not been envisaged and is thus not covered, though it is, in my view, also entitled to such benefit. Such a situation is clearly not intended to be kept out of the beneficial sweep of Notification 31 of 2000. The issue is remanded to the Assessing Authority to verify specifically whether duty has been remitted on the raw materials utilised in job work. If the result of the enquiry is positive, the petitioner is entitled to the drawback of the duty paid in accordance with law - petition disposed off. 2020 (3) TMI 381 Penalty u/s 116 of the Customs Act, 1962 - Commissioner (Appeals) has set aside the Order-in-Original on the basis of the fact that the OTR (Out Turn Report) alone cannot be the basis of imposition of penalty where the Surveyor s report has confirmed that there was no short landing - HELD THAT:- Government finds that the present case is regarding imposition of penalty under Section 116 of the Customs Act, 1962 on the ground of short-landing determined on the basis of quantity. C.B.I. C. s Circular No. 46/95-Cus., dated 4-5-1995, relied on by the Respondent - The circular relied upon by the respondent is regarding levy of duty and penalty. Therefore the respondent does not get any benefit of the above circular. No explanation has been offered by the respondent as to how the weight of 2473.628 MT in the survey report can match the weight of the imported shipment wherein 11 pieces of logs have short landed. Survey Report is silent both in respect of volume and quantity of the impugned cargo. Since there is no evidence to contrary, the fact regarding short-landing of eleven pieces of logs gets established. Since the person-in-charge of conveyance is liable for penalty in case of quantity unloaded is short of the quantity to be unloaded at the destination, the adjudicating authority has correctly imposed the penalty on the respondent under Section 116 of the Customs Act, 1962. Government sets aside the order of the Commissioner (Appeals) - Revision Application is allowed. 2020 (3) TMI 380 Refund of SAD - refund was claimed on the ground that the same was not payable in terms of Notification No. 21/2012-cus dated 17.03.2012 - refund rejected on the ground of time limitation. The appellants contention is that the refund cannot be said to time barred, for the reason that they have filed an application for rectification of the Bill of Entry under Section 149 read with Section 154 of Customs Act, 1962, and the same has not been disposed of which compelled the appellant to file the refund claim. HELD THAT:- Considering the application under Section 149 the refund cannot be held as time barred. The department has not given any response to their application under Section 149 which is directly related to the present refund matter - In this position, the department must first dispose of the application of the appellant filed under Section 149 read with Section 154 and thereafter, should reprocess the refund claim. Matter remanded to the adjudication authority to first decide the application under Section149, thereafter, reprocess the refund claim - appeal allowed by way of remand. PMLA 2020 (3) TMI 379 Restraint on Arbitral Tribunal from proceeding with the arbitral claim made by appellant - liabilities pertaining to prenationalisation period - recovery proceedings - sick company - HELD TAHT:- Since the present examination herein is limited to the aspect relating to forum and when it is seen that the claim initially made by the appellant is against the Shree Sitaram Mills Ltd. and the Respondent No.1 herein is disputing the liability for the same by bringing about a distinction since the takeover was only of Shree Sitaram Mills and not of Shree Sitaram Mills Ltd., an adjudication on that aspect to be made cannot be considered as a dispute as involving only the two public sector establishments as contemplated under the Official Memorandum. Upon consideration of evidence adduced by the parties it has to be determined in that light as to whether the Respondent No.1 Corporation has in fact inherited such liability making themselves liable for the decree in existence or on the other hand if such liability has remained and subsisted with Shree Sitaram Mills Ltd. It is a matter to be examined in such recovery proceedings by providing opportunity to the parties to adduce evidence. Further in respect of post take over period a Suit No.4489/96 was filed which was transferred to DRT and registered as O.A.No.1114/2000 which has remained pending as respondent No.2 had proceeded to BIFR. No doubt in that circumstance if the appellant herein had chosen to initiate the proceedings before the PMA, keeping in view that the COD which was subsequently constituted is a mechanism in the nature of prelitigation mediation, it cannot be said that the step adopted by the appellant is wholly without basis. In the instant case, the claim is by the lender Bank towards which a decree had already been granted in respect of one claim and the other claim is pending consideration. The fact as to whether in the matter of take over, the liabilities were also included is one aspect of the matter. Further, the aspect which may also require examination by the Court undertaking the recovery proceedings is as to whether in the process of takeover of Shree Sitaram Mills the secured assets for the loan transaction has been taken over by the Respondent No.1 or was it available with Shree Sitaram Mills Ltd. if it had retained its existence and identity after takeover of the Textile Mills and in that circumstance whether the recovery proceedings could still be resorted to against the Respondent No.1 in respect of the liability of Shree Sitaram Mills Ltd., and would the Union of India be liable as Guarantor. This is an aspect which is to be examined after providing opportunity to the parties, if need be, after tendering evidence in that regard. The question of liability could neither have been decided in the writ proceedings before the High Court nor in this appeal. If this aspect is kept in view, the conclusion reached by the Division Bench to hold that the respondent herein is not liable for the dues of Shree Sitaram Mills Ltd. and the proceedings is misconceived for such claim is an erroneous conclusion reached in a proceedings where such conclusion ought not to have been recorded. Hence the decision to that effect is liable to be set aside. The conclusion reached by the Division Bench that the respondents are not liable for the amount claimed by the appellant herein is set aside. The question of liability and the manner of recovery is left open to be considered by the appropriate forum - Appeal allowed in part. Service Tax 2020 (3) TMI 378 Principles of natural justice - opportunity for cross-examination denied - alleged evasion of tax - HELD THAT:- There are no merit in this appeal. The question of cross-examination of petitioner No.2 by himself and the adjudicating authority does not arise. Even otherwise, the rights of the petitioners are protected. The liberty is granted to the petitioners to adduce any evidence to substantiate their stand and the respondents - authority was also directed to consider the same and pass appropriate orders. Therefore, there is no denial of the rights of the petitioners. The order of the learned Single Judge is sufficient and well reasoned to protect the legal rights of the petitioners. They are entitled to make a statement or otherwise as held by the learned Single Judge - there are no good ground to consider the case of the petitioners - appeal dismissed. 2020 (3) TMI 377 Interest on refunds - Revenue rejected the claim with regard to the interest on the refund amount on the ground that no effective steps were taken by the petitioners subsequent to the order passed by the assessing authority - HELD THAT:- The assessing authorities orders are of the year 2006 and the respective writ petitions are filed in the year 2017. Even if the petitions are not entertained on the ground of delay, on equity, the petitions are to be considered as the matters pertain to demand of tax amount. Admittedly, the delay cannot come to the aid of the respondents. The respondents have retained the money which belongs to the writ petitioners. Therefore, once the learned Single Judge has ordered for refund of the tax amount, necessarily, interest should follow. The order of the learned Single Judge is not challenged by the respondents authorities. It is only on the question of interest that these appeals are filed. It is only just and appropriate that the interest be awarded on the refund amount as ordered by the learned Single Judge in both the appeals - respondents are directed to pay the interest at the rate as applicable for the respective periods - Appeal disposed off. 2020 (3) TMI 376 Valuation - air travel agent service - taxable value of services has been computed under rule 6 (7) of the Service Tax Rules, 1994 - invocation of extended period of limitation - Recovery of CENVAT Credit - HELD THAT:- Under rule 6 (7) of the Rules, a person is liable to pay service tax in relation to the services provided by an air travel agent, has an option to pay an amount calculated @0.6% of the basic fare in case of domestic bookings and @1.2% of the basic fare in case of international bookings. Basic fare has been defined in the Explanation to mean that part of the air fare on which commission is normally paid to the air travel agent by the airlines. According to the appellant, commission is normally not paid to the air travel agents by the airlines on fuel surcharge and, therefore, commission, if any, received from the four airlines out of the seventy three airlines for fuel surcharge could not have been subjected to service tax under rule 6 (7) of the Rules. It is a fact that though a defence was taken by the appellant in reply to the show cause notice that the commission received on fuel surcharge could not have been subjected to levy of service tax under rule 6 (7) of the Rules, but there is no discussion of this issue in the impugned order. The appellant contends that out of the seventy three airlines only four airlines pay commission on fuel surcharge and, therefore, it cannot be said that commission is normally paid to the air travel agent by the airlines on fuel surcharge. It was, therefore, obligatory on the part of the Principal Commissioner to have considered this issue raised by the appellant in response to the show cause notice, but that has not been done. The matter, therefore, has to be remitted to the Principal Commissioner to decide this issue - It is only when this issue is decided against the appellant, that would be necessary for the Principal Commissioner to take recourse to the provisions of section 72 of the Act for determination of the taxable value. This issue again would have to be decided by the Principal Commissioner afresh as it has been submitted by the learned Authorized Representative of the appellant that a new method was adopted by the Principal Commissioner without providing any opportunity to the appellant to make submission. The impugned order dated 29 February 2016 deserves to be set aside and is set aside - Appeal allowed - decided in favor of appellant. Central Excise 2020 (3) TMI 375 100% EOU - allegation that they were doing job work in violation of Exim policy - quantum of sale made to DTA unit - debonding - conversion of raw material supplied by M/s Tata Iron Steel Company Ltd. - transfer of Manganese Ore by TISCO to UFAC for the purposes of processing the same and converting it into Silicon Manganese - sale and purchase - case of Revenue is that since in the transaction between UFAC and TISCO there is no transfer of property in goods, the same cannot be termed as sale and therefore would not be covered under paragraph 9.9 (b) of the EXIM Policy - HELD THAT:- The perusal of the definition makes it clear that when there is a transfer of possession of goods in the ordinary course of trade or business either for cash or for deferred payment or any other valuable consideration, the same would be covered by the terms sale and purchase within the meaning of the Central Excise Act, 1944. Undisputedly, in the present case, there is a transfer of Manganese Ore by TISCO to UFAC for the purposes of processing the same and converting it into Silicon Manganese. Undisputedly, the same is also for a valuable consideration. This Court has held, that it is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. It has further been held, that the conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute - It is also equally well settled that the first principle of interpretation of plain and literal interpretation has to be adhered to. We are therefore of the considered view, that the narrower scope of the term sale as found in the Sale of Goods Act, 1930 cannot be applied in the present case. The term sale and purchase under the Central Excise Act, 1944, if construed literally, it would give a wider scope and also include transfer of possession for valuable consideration under the definition of the term sale . Whether under the EXIM Policy, UFAC was entitled to carry out the job-work for TISCO and whether it was entitled to exemption from payment of duty under the Exemption Notification? - HELD THAT:- Under para 9.9(a) of the EXIM Policy, EOU is entitled to sell the rejects in the DTA on prior intimation to the Customs authorities. Such sales are to be counted against DTA sale entitlement under paragraph 9.9(b) of the EXIM Policy. The sale of rejects shall be subject to payment of duties as applicable to sale under paragraph 9.9(b) of the EXIM Policy - Under paragraph 9.9(b) of the EXIM Policy, DTA sale upto 50% of the FOB value of exports is also permitted subject to payment of applicable duties and fulfilment of minimum Net Foreign Exchange earning as a Percentage of exports (NFEP) as prescribed in Appendix1 of the Policy. It can thus clearly be seen, that paragraph 9.9(b) and paragraph 9.17(b) of the EXIM Policy operate in totally different fields. Under paragraph 9.9 (b), an EOU is entitled to sell upto 50% of the FOB value of exports to DTA subject to payment of applicable duties and fulfilment of minimum NFEP as prescribed in Appendix-I of the Policy, whereas under paragraph 9.17(b), an EOU is entitled to undertake job-work for export, on behalf of DTA units, with the permission of Assistant Commissioner of Customs, provided the goods are exported direct from the EOU/EPZ units. In such type of exports, the DTA units would be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. In view of paragraph 10 of the Circular dated 22.5.2000, the facility of undertaking job-work by EOU/EPZ units which was restricted to specific sectors has been amended and the said facility has been extended to all sectors. It has also been provided, that DTA units shall be entitled to brand rate of duty draw back. Similarly, paragraph 11 of the Circular dated 22.5.2000 also provides, that the facility which was given to EOU/EPZ to undertake job-work on behalf of DTA units in textiles, readymade garments and granite sectors which was subsequently extended to the EOU/EPZ units in aquaculture, animal husbandry, hardware and software sectors vide Circular dated 5.11.1999, was extended to EOU/EPZ units in all sectors. It has further been provided, that DTA units shall be entitled to avail of the brand rate of duty drawback for such job-work undertaken by EOUs/EPZ units concerned. It also provides, that earlier circulars issued by the Board stood modified to the said extent - failure on the part of the Commissioner, who passed the order-in-original, to notice the Circular dated 22.5.2000 has resulted in passing an erroneous order. It also appears, that after the show cause notice was issued to UFAC, the Commissioner had sought a clarification from the Sponsoring Authority i.e. the Development Commissioner, SEEPZ vide communication dated 6.11.2001. The combined reading of paragraph 9.9(b) of the EXIM Policy, the Circulars issued by the Board, particularly, the Circular dated 22.5.2000 and reply to the query of the Customs Authorities by the Development Commissioner, SEEPZ would clearly show, that the UFAC was entitled to carry out the job-work on behalf of TISCO on payment of duty as provided under Exemption Notification of 1997. If such an interpretation is accepted, the words unless specifically provided in such notification in subsection (1) of Section 5A will have to be ignored and the said words would be rendered otiose. It is a settled principle of law that while interpreting a provision due weightage will have to be given to each and every word used in the statute - the interpretation as sought to be placed by Shri Radhakrishnan would render the term unless specifically provided in such notification in subsection (1) of Section 5A otiose or useless. Such an interpretation would not be permissible. The harmonious construction of sub-Section (1) of Section 5A of the Act and the proviso thereto would be, that an EOU which brings the excisable goods to any other place in India would not be entitled for a general exemption notification unless it is so specifically provided in such a notification - since the said Exemption Notification specifically mentions, that the goods produced or manufactured by an 100% EOU, which are allowed to be sold in India in accordance with para 9.9(b) of the EXIM Policy, the proviso would be inapplicable thereby, requiring the duties to be paid, as are required to be paid under subSection (1) of Section 3 of the said Act. Undisputedly, in the present case, the transaction between UFAC and TISCO satisfies all the three conditions. The goods are produced and manufactured by UFAC, an 100% export-oriented unit; they are manufactured wholly from the raw materials produced or manufactured in India and, thirdly, they have been allowed to be sold in India in accordance with the provisions of paragraph 9.9(b) of the EXIM Policy. There would not be any conflict in the amended provisions of clause (ii) of the proviso to subsection (1) of Section 5A of the Act and the said Exemption Notification. In any case, by the 2001 Amendment, the legislature has not laid down any exhaustive code in respect of the subject matter in replacing the earlier law. It appears, that the said Amendment has been incorporated to bring the said clause (ii) of sub-Section (1) of Section 5A in sync with the words used in clause (i) of the proviso to subsection (1) of Section 5A of the Act and the words used in the proviso to subsection (1) of Section 3 of the Act. In that view of the matter, we find, that the said contention is without substance. What this Court has held is, that no permission is required to sell goods manufactured by 100% EOU lying with it, at the time approval is granted to debond. It has been held, that the expression allowed to be sold in India in the proviso to Section 3(1) of the Act was applicable only to sales made upto 25% of production by 100% EOU in DTA and with the permission of the Development Commissioner - Admittedly, in the present case, the sales made by UFAC to TISCO are within the permissible limits and with the permission of the Development Commissioner. The CESTAT has not committed any error in reversing the orders-in-original passed by the Commissioner - appeal dismissed. 2020 (3) TMI 374 Rejection of Rebate claim - rejection on the ground of time limitation - rejection on the omission of petitioners to submit original documents amounting to an irregularity of procedure provided in Central Excise Rules, 2002 - sections 35C and 35EE of CEA - HELD THAT:- Dictionary meaning of word annul is given as, to declare invalid. Court has perused impugned order. It is clear Central Government sat in appeal to confirm order in original, on setting aside appellate order. Inserted by amendment sub-section (1A) in section 35EE clearly requires the Commissioner to apply for revision. Revision is not appeal. Petition allowed. 2020 (3) TMI 373 Rebate claim - Cenvat credit reversed on depreciated value of imported capital goods (machinery parts) at the time of their export - whether the rebate of duty can be granted in case of reversal of Cenvat credit of CVD paid on imported capital goods at time of their export subsequently? HELD THAT:- Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 allows rebate claim only in those cases where the goods are manufactured in India and are liable to Central Excise duty and the same has been paid at the time of export. Since the imported goods are not liable for Central Excise duty under the Central Excise Act, 1944 no rebate claim can be filed in respect of such goods which are not excisable under Central Excise Act, 1944. In the present case the applicant could have availed duty drawback under Section 74 of the Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995. Section 74 states that any goods which were earlier imported and then re-exported (whether used or unused), the importer can claim the duty paid at the time of import as Drawback on the fulfilment of certain condition as specified under Section 74 of Customs Act 1962. Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 have been formulated in exercise of the powers conferred by Section 74 of the Customs Act, 1962. The revision application cannot be considered in terms of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 - the Government does not find any deficiency in the Commissioner (Appeals)'s order and the revision application filed by the applicant is rejected. 2020 (3) TMI 372 Refund of Excise Duty - time limitation - rebate on the enhanced value which includes the expenses incurred on account of freight and insurance etc. - HELD THAT:- Government finds that it is not in dispute that the goods were exported and Central Excise duty has been paid on the export goods. The applicant has paid duty as per value mentioned in ARE-1 which is higher than the transaction value determined under Section 4 of Central Excise Act, 1962 and has claimed rebate on the enhanced value which includes the expenses incurred on account of freight and insurance etc. It is observed that the original adjudicating authority has credited the excess amount paid as duty on export goods in the Cenvat credit account as per the applicant s request. The Government is of view that the excess amount paid by the applicant on freight and insurance was not payable as Central Excise duty. It is observed that rebate can be granted only to the extent of duty paid on export goods. The amount paid in excess of duty payable does not assume the character of duty as defined under Rule 2(e) of Central Excise Rules, 2002 in which duty means the duty payable under Section 4 of the Central Excise Act. The Government is of the view that the applicant should have followed the provisions of Cenvat Credit Rules, 2017 [Notification No. 20/2017-C.E. (N.T.), dated 30-6-2017] for claiming the Cenvat credit allowed to him by the Adjudicating Authority during the transitional period or the procedure prescribed under sub-sections (3), (4) (5) of Section 142 of CGST Act, 2017 which prescribes that refunds of tax/duty paid under the existing law, viz. Central Excise Act, 1944, shall be disposed of in accordance with the provisions of the existing law - Since the applicant has not followed the aforesaid procedure prescribed by law, Revision Application is non-maintainable and is rejected. 2020 (3) TMI 371 Rebate of duty - failure to self seal the consignment of export - Present Revision Application has been filed by applicant mainly on the ground that the applicant missed out the self-sealing of the goods as prescribed under Notification No. 19/2004, dated 6-9-2004 and the goods were exported to Bangladesh on 5-8-2012 wherein the officer concerned has given the cross border certificate in the prescribed format of the said notification and they had received the payment remittance against the said export - HELD THAT:- It is evident that the Commissioner (Appeals) order is sought to be revised. Under Rule 18, the essential condition for granting the rebate is that the goods are exported and duty has been paid on such export goods. It is not in dispute that the respondent has exported the goods on payment of duty and filed claim for rebate of duty with jurisdictional CE authorities. The Commissioner (Appeals) has contended that the respondent had not followed the procedure as prescribed under Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 as the vehicle used in procuring the goods and the vehicle that carried the goods to Bangladesh border were different and the goods were neither sealed by the Central Excise Officer nor was it self-sealed by the applicant which makes the export of the same goods doubtful. The Government is of the view that this is a procedural lapse on the part of the respondent. The fact that the customs officer at Petrapole LCS has given a cross border certificate and remittance has also been received against the said export is undisputed. Hence Government allows the rebate of ₹ 63,036/- to the applicant. 2020 (3) TMI 370 Refund of CENVAT Credit - doctrine of unjust enrichment - rejection of refund on the ground that the appellant herein did not produce any evidence to show that the incidence of service tax has not been passed on to any other person - HELD THAT:- Insofar as establishing the issue of doctrine of unjust enrichment is concerned, posting of the refund figure in the balance sheet under the head Claims Receivable is recognised as an acceptable principle in the accounting policy. Thus, on reflection of the refund amount in the balance sheet under such heads of account, without making any specific treatment/entry of the same in the profit and loss account should prove the fact that the incidence of duty of the tax amount has not been passed on to any other person. Thus, we are of the considered view that the balance sheet should be considered as the primary evidence and not secondary evidence, as held in the impugned order. Inasmuch as the appellant herein has specifically produced the profit loss account as well as the balance sheet for the relevant period, both before the original as well as first appellate authority, to demonstrate that the incidence of duty has not been passed on to any other person and the same has in fact, been borne by it. Since entry in the accounting head of Loans and Advances under the column of Claims Receivable is sacrosanct for consideration of the issue of applicability of the doctrine of unjust enrichment, the case in hand merits consideration in favour of appellant and thus, the amount in question should appropriately be paid to the claimant-appellant instead of it being credit to the Consumer Welfare Fund. There are no merits in the impugned order passed by the Ld. Commissioner (Appeals) - appeal allowed - decided in favor of appellant. 2020 (3) TMI 369 Refund of Excise Duty - doctrine of merger - time limitation - section 11B of CEA - HELD THAT:- Delhi Bench of the Tribunal in the case of M/s. Mahanagar Telephone Nigam Ltd. [2016 (12) TMI 1276 - CESTAT NEW DELHI] was seized of a more or less similar issue and was dealing with refund under Section 11B of the Central Excise Act, 1944, as in the case on hand. From the discussions of the Delhi Bench, which has found that the claim for refund, which was made after the dismissal of SLP, was correct and the same applies to the case on hand also, since upon the Revenue preferring an appeal against the Order-in-Appeal (with the assessee also filing its cross-objection), the matter was sub judice before the Tribunal and naturally, when the matter was lis pendens, no such application for refund could be filed. The appellant s claim for refund is not hit by limitation - Appeal allowed - decided in favor of appellant. 2020 (3) TMI 368 Refund claim - unjust enrichment - whether the appellant has passed the test of unjust enrichment in order to claim the refund amount? - HELD THAT:- It is not in dispute that the appellant has paid excess duty. The amount sanctioned has been directed to be paid to the Consumer Welfare Fund. The main ground on which the authorities below have directed the amount to be credited to the Consumer Welfare Fund is for the reason that the appellant has failed to furnish documents to show that the burden of duty has not been passed on to another. In para 6 of the Order-in-Original, the original authority has noted that the appellant has furnished all details with regard to invoices on which discounts have been claimed etc. It is also noted that they have produced the Chartered Accountant s certificate in support of their contention that the duty liability has not been passed on. The said Chartered Accountant s certificate has been rejected by the original authority holding that there is no certification of the correctness of the statements and also that the full signature of the Chartered Accountant s certificate is not endorsed in the worksheets. There are no substance in the grounds raised with regard to the Chartered Accountant s certificate. Wherever the excise duty has not been passed on to the buyer the same is noted in the work sheet. it is shown as discounts passed on which credit notes are allowed. One has to read the certificate issued by the Chartered Accountant along with worksheet. In such as case, it can be seen that only for the incidence where the duty has not been passed on to another, the appellant has claimed refund. Thus, on a perusal of the Chartered Accountant s certificate, no discrepancy found, so as to reject the same. The credit note/debit note itself would reflect the amount paid and the payments cannot be seen from the bank transactions or such other payment receipts. Therefore, the allegation that the appellant has not produced payment receipts and bank statements cannot sustain. Since both the authorities have stated that the appellants have not produced the credit note/debit note before them and only produce a detailed worksheet, the matter can be remanded to the adjudicating authority for reconsideration of documents by call of the report from range superintendent based on the detailed worksheets attached to the Chartered Accountant s certificate in order to satisfy whether the burden of duty has not been passed on - appeal allowed by way of remand. CST, VAT & Sales Tax 2020 (3) TMI 367 Classification of goods - Polyurethane Footwear - It is the case of the writ applicant that Polyurethane is a plastic - Gujarat Value Added Tax Act, 2003 - pre-condition for stay of demand of dispute - issue raised is to the effect that as the footwear manufactured by the writ applicant contains certain accessories not made of plastic, the footwear, as a whole, will fall within the ambit of residuary entry. HELD THAT:- The issue of granting stay pending appeal is governed principally by the two circulars issued by the CBDT. The first circular was issued way back on 2nd February 1993 being instructions no.1914. The circular contained guidelines for staying the demand pending appeal. It was stated that the demand would be stayed if there are valid reasons for doing so and mere filing of appeal against the order of assessment would not be sufficient reason to stay the recovery of demand. The instructions issued under the office memorandum dated 29th February 2016 are not in super-session of the instructions no.1914 dated 2nd February 1993 but are in partial modification thereof. This circular thus lays down 15% of the disputed demand to be deposited for stay, by way of a general condition. The circular does not prohibit or envisage that there can be no deviation from this standard formula. In other words, it is inbuilt in the circular itself to either decrease or even increase the percentage of the disputed tax demand to be deposited for an assessee to enjoy stay pending appeal. The circular provides the guidelines to enable the Assessing Officers and Commissioners to exercise such discretionary powers more uniformly - Ordinarily, the writ Court would be slow in interfering with such discretionary exercise of powers by the authority concerned. However, in the present case, the total tax demand is quite on higher side. The issues are at the first appeal stage. Even 15% of the disputed tax dues comes to around ₹ 60 Lakh. It is deemed fit to reduce the requirement of depositing the disputed tax dues to enable the writ applicant to avail the benefit of the stay pending the appeal before the Appellate Authority to 5% - application disposed off. 2020 (3) TMI 366 Review of the assessment of the sales tax - inter-State sales to unregistered dealers - exemption from the State tax under Section 7 (1-a) of the Bihar Finance Act, 1981 - Section 8 of the Central Sales Tax Act - HELD THAT:- Since Rule 32 of the Bihar Sales Tax Rules clearly says that before passing the review order under the Act, the reasons are required to be recorded, which is a mandatory provision, the review order needs to be looked into, to see whether it passes the test of Rule 32 of the Rules. It is submitted by the learned counsel for the State that when the assessee admits that he has paid the tax at the maximum rate prescribed under the State Act, sufficient reason has been given by the Assessing Authority to impose the surcharge on the transactions made by the petitioner, particularly when the original assessment order is not challenged - We cannot subscribe to the view of the learned counsel for the State on this count. We find that what has been stated by the Assessing Authority in his review order, is only that in view of the objection raised by the Audit Team, the review order is passed imposing the surcharge. No reason whatsoever has been given by the Assessing Authority, applying his own independent mind, whether in the inter-State transactions made with the unauthorized dealers, the surcharge is also payable by the assessee, and whether in failing to levy such surcharge, there was any mistake apparent on the record. In absence of any such reason given by the Assessing Authority, showing the application of his own independent mind, we are of the considered view that only recording the audit objection cannot mean the independent reasoning given by the Assessing Authority. When the Rule requires the Assessing Authority to record his reasons in writing, that means the Assessing Authority has to make out his own subjective satisfaction about the objection raised by the audit team, and if the Assessing Authority finds that the objection raised by the Audit Team is sustainable, he shall proceed to review order. He cannot proceed to review the order only on the basis of the objection raised by the Assessing Authority, without application of his own independent mind. Rule 32 of the aforesaid Rules is absolutely clear in these terms. Since, no reason has been assigned by the Assessing Authority in the review order dated 01.10.2009, the same cannot be sustained in the eyes of law - Accordingly, both the review orders dated 01.10.2009, with respect to the assessment years 2004-05 and 2005-06, as challenged in both these writ applications are hereby, quashed. Application allowed. 2020 (3) TMI 365 Imposition of penalty under Section 70[2] of KVAT Act - Whether the proceedings initiated under Section 39(1) of KVAT Act is after obtaining the necessary approval from the prescribed authority, namely, the authority prescribed under Section 2(24) of KVAT Act? - HELD THAT:- The authority who undertakes re-assessment provisions under Section 39(1) of KVAT Act could only be the prescribed authority and said authority is empowered to do so, which would be on the ground that it has reasons to believe that return furnished which is deemed as assessed is incorrect tax liability of the dealer. Whether the Revisional Authority was justified in initiating the proceedings under Section 64(1) of KVAT Act and setting aside the Appellate Authority order dated 24.07.2017 Annexure C passed under Section 62(6) of KVAT Act? - HELD THAT:- It has been found by the Revisional Authority that seller of the appellant namely M/s. Tradex Metal Corporation had engaged in bill trading to evade the tax due to the State Government . In fact, a criminal case has also been registered against said dealer by the jurisdictional police namely, Kalasipalayam Police Station which fact is available on record and completely ignored by the 1st Appellate Authority and said issue having not been addressed to by the 1st Appellate Authority. Revisional Authority having taken note of all these aspects has arrived at a conclusion that input tax credit claimed by the assessee is not sustainable. The penalty imposable under Section 70[2] of the Act using the words knowingly issues or produces a false tax invoice does not shift the burden on the Revenue, merely because the dealer claiming such input tax credit claims that he is a bonafide purchaser and knowingly he has not produced a false and fake invoice in question. The burden of proving the correctness of input tax credit remains upon the dealer claiming such input tax credit. Such a burden of proof does not get shifted on to the Revenue - mere his production before the Assessing Authority and his cross examination recorded by the Assessing Authority does not dispel the fact that the tax invoices produced by the Assessee for claiming input tax credit emanates from the genuinely existing selling dealers. Thus, burden of proving that the claim of input tax credit is correct, is squarely upon the Assessee who never discharged the said burden in the present case. The first Appellate Authority was absolutely wrong in setting aside the penalty assuming such burden of proof to be on the Revenue. The Revisional Authority, was therefore, perfectly justified and within his jurisdiction to restore the order of penalty in these circumstances - substantial question of law No.2 in favour of revenue and against appellant/assessee. Appeal is hereby dismissed by answering the substantial question of law against appellant/assessee. Indian Laws 2020 (3) TMI 364 Prohibition on dealing in Virtual Currencies - power of RBI to deal with, regulate or even ban VCs and VCEs - entire foundation of this contention rests on the stand taken by the petitioners that VCs are not money or other legal tender, but only goods/commodities, falling outside the purview of the RBI Act, 1934, Banking Regulation Act, 1949 and the Payment and Settlement Systems Act, 2007 - HELD THAT:- The impugned Circular of RBI dated 0604-2018 was issued in exercise of the powers conferred upon RBI by all these three enactments. Therefore, if virtual currencies do not fall within subject matter covered by any or all of these three enactments and over which RBI has a statutory control, then the petitioners will be right in contending that the Circular is ultra vires. Hence it is necessary (i) first to see the role historically assigned to a central bank such as RBI, the powers and functions conferred upon and entrusted to RBI and the statutory scheme of all the above three enactments and (ii) then to investigate what these virtual currencies really are. Therefore, we shall divide our discussion in this regard into two parts, the first concerning the role, powers and functions of RBI and the second concerning the identity of virtual currencies. Role assigned to, functions entrusted to and the powers conferred upon RBI as a Central Bank - HELD THAT:- The RBI Act, 1934, the Banking Regulation Act, 1949 and the Payment and Settlement Systems Act, 2007 cumulatively recognize and also confer very wide powers upon RBI (i) to operate the currency and credit system of the country to its advantage (ii) to take over the management of the currency from central government (iii) to have the sole right to make and issue bank notes that would constitute legal tender at any place in India (iv) regulate the financial system of the country to its advantage (v) to have a say in the determination of inflation target in terms of the consumer price index (vi) to have complete control over banking companies (vii) to regulate and supervise the payment systems (viii) to prescribe standards and guidelines for the proper and efficient management of the payment systems (ix) to issue directions to a payment system or a system participant which in RBI s opinion is engaging in any act that is likely to result in systemic risk being inadequately controlled or is likely to affect the payment system, the monetary policy or the credit policy of the country and (x) to issue directions to system providers or the system participants or any other person generally, to regulate the payment systems or in the interest of management or operation of any of the payment systems or in public interest. Having taken note of the role of RBI as a central bank in the economy of the country, the functions entrusted to them and the powers conferred upon them under various statutes, let us undertake the exercise of fixing the identity of virtual currencies. Fixing the identity of VCs - HELD THAT:- It is ironical that virtual currencies which took avatar (according to its creator Satoshi) to kill the demon of a central authority (such as RBI), seek from the very same central authority, access to banking services so that the purpose of the avatar is accomplished. As we have pointed out elsewhere, the very creation of digital currency/ Bitcoin was to liberate the monetary system from being a slave to the central authority and from being operated in a manner prejudicial to private interests. Therefore, the ultra vires argument cannot be accepted when the provision of access to banking services without any interference from the central authority over a long period of time is perceived as a threat to the very existence of the central authority - RBI has the requisite power to regulate or prohibit an activity of this nature. If at all, the power is only to regulate, not prohibit - HELD THAT:- In the overall scheme of the Payment and Settlement Systems Act, 2007, it is impossible to say that RBI does not have the power to frame policies and issue directions to banks who are system participants, with respect to transactions that will fall under the category of payment obligation or payment instruction, if not a payment system. Hence, the argument revolving around Section 18 should fail. Mode of exercise of power - Satisfaction/Application of mind/relevant and irrelevant considerations - HELD THAT:- All the sequence of events from June 2013 up to 02-04-2018 would show that RBI had been brooding over the issue for almost five years, without taking the extreme step. Therefore, RBI can hardly be held guilty of non-application of mind. If an issue had come up again and again before a statutory authority and such an authority had also issued warnings to those who are likely to be impacted, it can hardly be said that there was no application of mind. For arriving at a satisfaction as required by Section 35A(1) of Banking Regulation Act, 1949 and Section 45JA and 45L of RBI Act, 1934, it was not required of RBI either to write a thesis or to write a judgement - In fact, RBI cannot even be accused of not taking note of relevant considerations or taking into account irrelevant considerations. RBI has taken into account only those considerations which multinational bodies and regulators of various countries such as FATF, BIS, etc., have taken into account. This can be seen even from the earliest press release dated 24-12-2013, which is more elaborate than the impugned Circular dated 06-04-2018. When a series of steps taken by a statutory authority over a period of about five years disclose in detail what triggered their action, it is not possible to see the last of the orders in the series in isolation and conclude that the satisfaction arrived at by the authority is not reflected appropriately. In any case, pursuant to an order passed by this court on 21-08-2019, RBI has given a detailed point-wise reply to the representations of the petitioners. In these representations, the petitioners have highlighted all considerations that they thought as relevant. RBI has given its detailed responses on 04-09-2019 and 18-09-2019. Therefore, the contention that there was no application of mind and that relevant considerations were omitted to be taken note of, loses its vigour in view of the subsequent developments. Malice in law/colorable exercise - HELD THAT:- The power under Section 35A to issue directions is to be exercised under four contingencies namely (i) public interest (ii) interest of banking policy (iii) interest of the depositors and (iv) interest of the banking company. The expression banking policy is defined in Section 5(ca) to mean any policy specified by RBI (i) in the interest of the banking system (ii) in the interest of monetary stability and (iii) sound economic growth. Public interest permeates all these three areas. This is why Section 35A(1)(a) is invoked in the impugned Circular. Therefore, the argument that the impugned decision is a colorable exercise of power and it is vitiated by malice in law, is rejected. Wait and watch approach of the other stakeholders - HELD THAT:- Enforcement Directorate can step in only when actual money laundering takes place, since the statutory scheme of Prevention of Money Laundering Act deals with a procedure which is quasi-criminal. SEBI can step in only when the transactions involve securities within the meaning of Section 2(h) of the Securities Contracts (Regulation) Act, 1956. CBDT will come into the picture only when the transaction related to the sale and purchase of taxable goods/commodities. Every one of these stakeholders has a different function to perform and are entitled to have an approach depending upon the prism through which they are obliged to look at the issue. Therefore, RBI cannot be faulted for not adopting the very same approach as that of others. Light-touch approach of the other countries - HELD THAT:- The list of countries where a ban similar to the one on hand and much more has been imposed discloses a commonality. Almost all countries in the neighborhood of India have adopted the same or similar approach (in essence India is ring fenced). In any case, our judicial decision cannot be colored by what other countries have done or not done. Comparative perspective helps only in relation to principles of judicial decision making and not for testing the validity of an action taken based on the existing statutory scheme - There can also be no comparison with the approach adopted by countries such as UK, US, Japan, Singapore, Australia, New Zealand, Canada etc., as they have developed economies capable of absorbing greater shocks. Indian economic conditions cannot be placed on par. Therefore, we will not test the correctness of the measure taken by RBI on the basis of the approach adopted by other countries, though we have, for better understanding of the complexities of the issues involved, undertaken a survey of how the regulators and courts of other countries have treated VCs. Precautionary steps taken by petitioners - HELD THAT :- I t is contended that all the issues flagged by RBI have already been addressed and that therefore, there was no necessity to disconnect the trade from the regular banking channels - But the fact of the matter is that enhanced KYC norms may remove anonymity of the customer, but not that of the VC. Even the European Parliament, in the portion of its report relied upon by Shri Ashim Sood accepts that the adequacy of mandatory registration of users (as a less invasive measure), whether or not of fully anonymous or pseudo anonymous crypto currencies depends on the users compliance with the registration requirement. After pointing out that compliance will partly depend on an adequate sanctioning toolbox in the event of breach, the report wonders whether it is at all possible outside of the context of randomly bumping into it, at least when fully anonymous VCs are concerned. In any case, we are not experts to say whether the safety valves put in place could have addressed all issues raised by RBI. Different types of VCs require different treatments - HELD THAT:- It is clear that the very same virtual currency can have a unidirectional or bidirectional flow depending upon the scheme with which the entities come up. Moreover, the question whether anonymous VCs alone could have been banned leaving the pseudo-anonymous, is for experts and not for this Court to decide. In any case, the stand taken by RBI is that they have not banned VCs. Hence, the question whether RBI should have adopted different approaches towards different VCs does not arise. Acceptance of DLT and rejection of VCs is a paradox - HELD THAT:- It was argued that the acceptance of the Distributed Ledger Technology and the rejection of VCs is actually a contradiction in terms. This argument is based upon the various reports, both of RBI and of the Inter-Ministerial Group, to the effect that DLT is part of FinTech - The above contention, in legal terms, is about the irrationality of the impugned decision. But there is nothing irrational about the acceptance of a technological advancement/innovation, but the rejection of a by-product of such innovation. There is nothing like a take it or leave it option. RBI s decisions do not qualify for Judicial deference - HELD THAT:- RBI is not just any other statutory authority. It is not like a stream which cannot be greater than the source. The RBI Act, 1934 is a pre-constitutional legislation, which survived the Constitution by virtue of Article 372(1) of the Constitution. The difference between other statutory creatures and RBI is that what the statutory creatures can do, could as well be done by the executive. The power conferred upon the delegate in other statutes can be tinkered with, amended or even withdrawn. But the power conferred upon RBI under Section 3(1) of the RBI Act, 1934 to take over the management of the currency from the central government, cannot be taken away. The sole right to issue bank notes in India, conferred by Section 22(1) cannot also be taken away and conferred upon any other bank or authority. RBI by virtue of its authority, is a member of the Bank of International Settlements, which position cannot be taken over by the central government and conferred upon any other authority. Though the shorter tenure and the choice given to the central government to fix the tenure, to some extent, undermines the ability of the incumbents of office to be absolutely independent, the statutory scheme nevertheless provides for independence to the institution as such. Therefore, we do not accept the argument that a policy decision taken by RBI does not warrant any deference. Article 19(1)(g) challenge Proportionality - HELD THAT:- In all cases where legislative/executive action infringing the right guaranteed under Article 19(1)(g) were set at naught by this court, this court was concerned with a ban/prohibition of an activity. The question of the prohibited/banned activities having the potential to destabilize an existing system, did not arise in those cases - if a central authority like RBI, on a conspectus of various factors perceive the trend as the growth of a parallel economy and severs the umbilical cord that virtual currency has with fiat currency, the same cannot be very lightly nullified as offending Article 19(1)(g). It is no doubt true that RBI has very wide powers not only in view of the statutory scheme of the 3 enactments indicated earlier, but also in view of the special place and role that it has in the economy of the country. These powers can be exercised both in the form of preventive as well as curative measures. But the availability of power is different from the manner and extent to which it can be exercised. While we have recognized elsewhere in this order, the power of RBI to take a pre-emptive action, we are testing in this part of the order the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none. When the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate. The petitioners are entitled to succeed and the impugned Circular dated 06-04-2018 is liable to be set aside on the ground of proportionality - the writ petitions are allowed and the Circular dated 0604-2018 is set aside. 2020 (3) TMI 363 Dishonor of Cheque - section 138 of NI Act - time limitation - Stay on the effect and operation of the order of attachment of salary of the applicant - non-bailable warrant - HELD THAT:- In exercise of inherent power under Section 482 Cr.P.C., this Court is not expected to analyse the factual evidence which is to be placed before the trial court. The power conferred under Section 482 Cr.P.C. is very specific and wide to secure the ends of justice or to prevent the abuse of the process of any Court or to make such orders as may be necessary to give effect to any order under this Code. No provision of this Code is deemed to limit or effect such inherent power of the High Court. In the facts and circumstances as noticed above, no sufficient ground, for quashing the proceedings is made out. No interference by this Court, in exercise of inherent jurisdiction under Section 482 Cr.P.C., is warranted in the present case. Application dismissed.
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