TMI Tax Updates - e-Newsletter
March 16, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. ADVANCE RULING ON THE APPLICABILITY OF CONCESSIONAL RATE OFCUSTOMS DUTY IN RESPECT OF CAR KIT IMPORT IN CKD CONDITION

   By: DR.MARIAPPAN GOVINDARAJAN

2. APPEALS TO APPELLATE AUTHORITY UNDER GST

   By: Dr. Sanjiv Agarwal

News

1. More than 3.82 lakh companies struck off till financial year 2020-21 in Special Drives taken by Registrar of Companies

2. 2,01,863 proposals of ₹ 39,580 crore in BUSINESS LOAN category disbursed through psbloansin59minutes.com portal

3. Financial creditors realise 221% of liquidation value and 51% of admitted claims through corporate insolvency resolution process

4. CCI disposes off 1046 cases out of 1180 cases received under Sections 3 & 4 as on 28.02.2022

5. Total profit of profit-making CPSEs increased by 37.53% and total loss of loss-making CPSEs decreased by 29.86% during FY 2020-21 over FY 2019-20

6. 3.89 crore subscribers enrolled under Atal Pension Yojana (APY) as on 07.03.2022

7. 28,69,477 eligible beneficiaries benefited under PM SVANidhi Scheme

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 - dated 15-3-2022

Discontinuation of usage of pool accounts for transactions in the units of Mutual Funds: Clarifications with respect to Circulars dated October 4, 2021

GST - States

2. F.3(429)/GST/Policy/2022/1067-1072 - dated 8-3-2022

Unblocking of ITC on expiry of one year from the date of blocking

3. 193/GST-II - dated 15-2-2022

Instructions for enabling Internal Control Mechanism for Refunds in GST

DGFT

4. Trade Notice 38/2021-22 - dated 15-3-2022

Operationalisation of new online IT Module for Interest Equalisation Scheme w.e.f. 01.04.2022

Central Excise

5. F No. 275/06/2022-CX.8A - dated 14-3-2022

Reducing delays in Litigation Management

Highlights / Catch Notes

GST

• Court Denies Interim Protection in Summons Challenge u/s 70 of CGST Act; No Malicious Intent Found.

  Case-Laws - HC : Seeking interim protection against an apprehended action of arrest - It is not found that the issuance of summons to petitioners is without jurisdiction and authority of law. The action initiated by the respondents does not appear to be actuated by any mala fide intention and further taking into consideration the material disclosed during various searches and raids conducted by the respondent authorities involving M/s MPPL and M/s. MPSPL, any interim order cannot be passed in favour of the petitioners, keeping in view that an application for grant of anticipatory bail is not dealt with, but challenge to jurisdiction and authority of respondents in issuing summons under Section 70 of the CGST Act. - HC
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• Court Orders Tax Refund Under CGST Act; Collection Violated Constitutional Articles 265 and 300-A, Payment Not Voluntary.

  Case-Laws - HC : Collection of tax during the investigation - voluntarily payment of tax or not - In the instant case, the only provision which permits deposit of an amount during pendency of an investigation is section 74(5) of CGST Act, which is not attracted in the fact situation of the case - it is evident that amount has been collected from Company in violation of Article 265 and 300-A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation can not be accepted. The Department, therefore, is liable to refund the amount to the Company. - HC
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• GST Classification: Chips and Nuts Fall Under 12% Rate; Check Customs Tariff Headings 2008.19.10, 2008.19.20, 2008.19.40.

  Case-Laws - AAAR : Classification of goods - rate of tax - NAMKEENS or not - The Jackfruit Chips, Banana Chips, Potatoto Chips, Tapioca Chips, Chembu Chips and Pavakka Chips are classifiable under Customs Tariff Heading 2008.19.40 and is liable to GST at the rate of 12% - Roasted/ salted / roasted and salted Cashew nuts are classifiable under Customs Tariff Heading 2008.19.10 and roasted / salted/ roasted and salted Ground nuts and other nuts are classifiable under Customs Tariff Heading 2008.19.20 and is liable to GST at the rate of 12% - AAAR
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Income Tax

• High Court Rules: Remuneration and Interest from Partnership Not Part of Individual Turnover u/s 44AB Audit Requirement.

  Case-Laws - HC : Revision u/s 264 - requirement to get accounts audited u/s 44AB - determination of turnover - inclusion of remuneration from the partnership firm in the gross receipt from from the profession (in the hands of partner) - the assessee who was an individual in that case was not carrying on any business and the remuneration and interest received by the assessee from the partnership firm cannot be termed to be a turn over of the assessee (individual). - HC
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• Court Upholds Reassessment u/s 147: Audit Objection Validates Connection Between Borrowed Funds and Loans to Sister Concerns.

  Case-Laws - AT : Reopening of assessment u/s 147 - information received from audit party - there was no nexus between the borrowed funds and loans & advances to the sister concerns - in the present case there was tangible material in the form of audit objection. Thus, we do not find any merit in the contentions raised by the assessee challenging the validity of the reassessment proceedings. - AT
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• Dispute over Tax Deductions u/s 40(a)(i): Are CGTM France's Engine Tests Independent Activities?

  Case-Laws - AT : TDS u/s 195 - disallowance u/s 40(a)(i) - Conducting the test and subsequent improvement to the engines based on test results are independent activities and cannot be considered together. As contended by the assessee, the test conducted by CGTM France cannot be independently carried out by the assessee without the support of engineers from CGTM France and hence does not satisfy the conditions of ‘make available’ that the services rendered by CGTM France to the assessee. It is settled law that mere rendering of services would not be taxable unless the person receiving the services is enabled to utilize such services on its own in the future without having recourse to the person providing the service. - AT
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• Income Tax Commissioner can't revise AO's decision u/s 263 if multiple views exist or AO's choice is legal.

  Case-Laws - AT : Revision u/s 263 by CIT - Total power subsidy and TUF subsidy were wrongly declared by the assessee - When AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law - there is no escapement of income which is prejudicial to the interest of the revenue - AT
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• PCIT's Revision u/s 263 Deemed Unjustified Due to Lack of Specificity on Necessary Inquiries for Bank Deposits.

  Case-Laws - AT : Revision u/s 263 by CIT - Unexplained bank deposits - PCIT, without making further inquiry on his own account, has simply stated in the impugned order that the Assessing officer was required to make more inquiries. PCIT has not pointed out as to what further inquiry was the Assessing officer required to make and as to how without those inquires the order of the Assessing officer was erroneous in so far as prejudicial to the interest of the Revenue. Thus exercise of revisional jurisdiction by the Ld. PCIT is without any justification. - AT
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• Supreme Court Directive: 10% Deduction from Mineral Stock E-Auction Proceeds Allowed Under Income Tax Act Section 37(1.

  Case-Laws - AT : Addition of amount representing 10% of sale proceeds deducted by the Monitory committee from e-auction sale of mineral stock belonging to the assessee and which was contributed to Special Purpose Vehicle, as per the direction given by Hon'ble Supreme Court - there is merit in the submission of the Ld. A.R. that, without making these payments, the assessee could not have resumed the mining operations. Hence, these expenses are incidental to carrying on the business and hence allowable u/s. 37(1) of the Act. - AT
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Customs

• Appeal Challenged for Non-Compliance with Pre-Deposit Requirement u/s 129E of the Customs Act, 1962.

  Case-Laws - SC : Maintainability of appeal - non-compliance with the pre-deposit of the amount - Section 129E of the Customs Act, 1962 - When the appellant is not being called upon to pay the full amount but is only asked to pay the amount which is fixed under the substituted provision, there are no merit in the contention of the appellant - SC
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State GST

• Committee Formed to Enhance SGST Refund Process with New Internal Control Mechanism for Better Efficiency.

  Circulars : Instructions for enabling Internal Control Mechanism for Refunds in GST - SGST - A committee of officers was constituted - These instructions are issued based upon the recommendations of the committee.
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• Automatic Unblocking of Input Tax Credit Under SGST After One Year: Ensuring Efficient and Fair Taxpayer Management.

  Circulars : Unblocking of ITC on expiry of one year from the date of blocking - SGST - It is noticed that most of these taxpayers ITCs would have been blocked by the Proper Officers on account of some mismatches/investigation/non-existence or receipt of alert notices etc. from other state/central jurisdiction authorities, regarding the taxpayers. Hence, it is important that all such cases are taken to their logical conclusion in a time bound manner.
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Indian Laws

• Director Not Liable for Cheque Dishonor u/s 138 Due to Lack of Specific Involvement Allegations.

  Case-Laws - HC : Dishonor of Cheque - liability of a Director of a company - vicarious liability - It is clear from the perusal of the complaint that there is no specific averment that applicant is involved in day-to-day affairs of the company. There is only general allegation that applicant is a Director of the company. The documents filed by the applicant establishes that the applicant was a nominee Director and who has now resigned - thus, it is clear that in absence of specific allegations about the applicant he can not be prosecuted for any offence under section 138 N.I. Act. - HC
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IBC

• Court Corrects Error: Excluded Securities Remain Enforceable as Per Resolution Plan, Amending Impugned Order's Direction 1.

  Case-Laws - AT : Validity of approval of Resolution Plan - It is submitted that Adjudicating Authority while approving the Resolution Plan has erroneously directed that Excluded Securities are no longer enforceable as defined under Resolution Plan which direction is contrary to the Resolution Plan. - Appeal are allowed by deleting the relevant part in Direction 1 of the Impugned Order under the heading ‘Reliefs, Concessions and Dispensations to the extent ‘hence, the excluded securities are no longer enforceable as defined under the resolution plan’. - AT
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• NOIDA's Claim of Unawareness in Corporate Insolvency Resolution Process Rejected After Approving Plans, Accepting Payments for 7 Years.

  Case-Laws - AT : CIRP - Resolution Process - contention of appellant is that prior approval from the lessor has not been taken before sub-leasing portion of the land to the ‘Corporate Debtor’ for development of the Housing Project - It is beyond comprehension as to how the Appellant/NOIDA could have overlooked this factual scenario for 7 long years, having approved the Building Plans, having accepted the premium amounts and the lease rentals and now at this stage of CIRP, stating that they were completely unaware of any such Housing Project coming up, is completely untenable. - AT
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• Natural Justice Violation in Insolvency: Tribunal to Hear Personal Guarantor Post-Section 99 Report Filing for Fair Process.

  Case-Laws - Tri : Violation of principles of natural justice - no proper notice issued to the Personal Guarantor - once the Resolution Professional is appointed and the report is filed by the Resolution Professional under section 99 of IBC, 2016 the Personal Guarantor will be given an opportunity of hearing by the Tribunal and the above-mentioned preliminary objections can be raised before a final decision is made by the Tribunal. Raising any objections at this stage of adjudication of application is premature and will give rise to double hearings. - Tri
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Service Tax

• Determining if Fixed Gas Supply Installations are Services or Business Support Services Prior to July 1, 2012.

  Case-Laws - AT : Nature of activity - service or not - business support services or not - Installation of fixed facilities in the premise of customer/buyer - uninterrupted supply of gas - prior to 01.07.2012 - in the present case the Appellant assessee has not undertaken any service activity for the customer/buyer by installing fixed facilities. Therefore, no question of outsourcing of any activity by the customer/buyer to the Appellant assessee arises in this case. Thus, charges received by the Appellant-assessee in respect of fixed facility are outside the preview of the Business Support Services. - AT
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• Appeal Filed Timely: Department Failed to Prove Order Receipt Date; Commissioner Overlooked Key Evidence, Violating Justice Principles.

  Case-Laws - AT : Period of limitation for filing an appeal before Commissioner (appeals) - The department has not produced any evidence about service of Order-in-Original on appellant on any date prior to the aforesaid date of receipt of said order. Order of Commissioner (Appeals) is miserably silent about the receipt of certified copy of Order under challenge before him on 25.9.2020. Had the said fact being considered by Commissioner (Appeals), he could have rightly appreciated the appeal to have been filed within the statutory period for the same. The absence thereof is sufficient violation of aforesaid principles of nature justice. - AT
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Central Excise

• Department Can't Recover 10% of Exempted Product Value u/r 6(3) via Rule 14, Per Show Cause Notice.

  Case-Laws - AT : CENVAT Credit - Whether the department can demand and recover under Rule 14 an amount under Rule 6(3) (i) equal to 10% of the value of the exempted products? - under no circumstances can the Department force a particular choice upon the appellant and demand an amount calculated as per Rule 6 (3) under Rule 14 as has been done in this show cause notice - An amount under Rule 6(3) cannot be demanded or recovered under Rule 14. - AT
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VAT

• Court Grants Regular Bail in Case of Alleged Illegal Gratification and Fraudulent VAT and Sales Tax Postings.

  Case-Laws - HC : Seeking grant of Regular bail - illegal gratification - fraudulent postings and assessment had been done in relation to the registered traders - since the charge-sheet is filed and considering the facts and circumstances of the case, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant - the applicant is ordered to be released on regular bail - HC
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Case Laws:

• GST

• 2022 (3) TMI 627
  Seeking interim protection against an apprehended action of arrest - alleged evasion of GST - HELD THAT:- While the petitioners claim to be completely unconnected with the affairs of various companies which are alleged to be involved in GST evasion, according to the respondents, this matter is still under investigation and the presence of these petitioners is necessary to record their statements. It is not found that the issuance of summons to petitioners is without jurisdiction and authority of law. The action initiated by the respondents does not appear to be actuated by any mala fide intention and further taking into consideration the material disclosed during various searches and raids conducted by the respondent authorities involving M/s MPPL and M/s. MPSPL, any interim order cannot be passed in favour of the petitioners, keeping in view that an application for grant of anticipatory bail is not dealt with, but challenge to jurisdiction and authority of respondents in issuing summons under Section 70 of the CGST Act. The stay applications for interim protection are rejected - these two writ petitions be listed for final disposal immediately after two weeks.

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• 2022 (3) TMI 626
  Appealable order or not - Violation of principles of natural justice - ex-parte order - despite issuance of SCN, the petitioner has not participated or approached before the Additional Commissioner, Central Excise and Service Tax - demand of tax with interest and penalties - effect of repealment of the amendment of Finance Act, 1994 being Act No. 32 of 1994 - whether the petitioner s right of Appeal is still protected as it was envisaged under the Finance Act, 1994? - HELD THAT:- Even if as an effect of Section 174 i.e. repealment of the Finance Act, 1994 is taken into consideration, if the argument of the learned counsel for the petitioner is considered, then too, the order of Joint Commissioner, impugned in the present writ petition, would be appellable under Section 107 of the CGST Act, 2017. Owing to this peculiar situation, where during the intervening period of subsistence of the order of imposition of tax on the petitioner by an order dated 31.12.2015, when the law has undergone a change with the enforcement of the CGST Act, 2017, this Court is of the view that in view of sub Clause (c) of sub Section (2) of Section 174 of the CGST Act, 2017, where it saves the rights and privileges including therewith the obligation and liability, which had accrued as a consequence of the amendment of Finance Act, 1994, in that eventuality, the assessee of the taxes under the Finance Act, 1994 could still avail the remedy of Appeal under Section 84 of the Finance Act, 1994, and the order of the Joint Commissioner, would be appellable under Section 84 of the Finance Act, 1994, which stand repealed to the extent it has been provided under sub Section (2) of Section 174 of the CGST Act, 2017. The writ petition is dismissed with liberty reserved for the petitioner to resort to the Appellate proceedings, which are available to him, in accordance with law.

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• 2022 (3) TMI 625
  Collection of tax during the investigation - amount was voluntarily paid during the investigation by the company under section 74(5) of CGST Act or not - amount was recovered from the company during investigation under the coercion and threat of arrest or not - matter conducted in a high handled and arbitrary manner during the course of investigation or not - petition filed by company suffers from delay or laches or not? Whether the amount paid during the investigation by the company was voluntarily paid, under section 74(5) of CGST Act? - HELD THAT:- Section 74 of the Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts - The payment is made as an extension of goodwill and bonafide. It is without prejudice to and with full reservation of our rights and contentions to seek necessary refund at the appropriate time and therefore should not be regarded as an admission of liability. Thus it is evident that payments have not been made admitting the liability. On the other hand, the company reserved its right to seek refund and made it expressly clear that payment of the amount should not be treated as admission of its liability. Besides the aforesaid, there is no material on record to establish that guidelines issued by division bench of High Court of Gujarat were followed - the issue is answered in the negative and it is held that the amount was not paid voluntarily under Section 74(5) of the CGST Act. Whether the amount was recovered from the company during investigation under the coercion and threat of arrest? - HELD THAT:- The officers of the Department have power of Inspection, search and seizure u/s 67(1) of CGST Act whereas Section 70 of the Act confers the power on the authority to summon person to give evidence as well as to adduce evidence. In the instant case, an investigation was initiated by DGGI officers and they entered the premises of the Company on 28.11.2019 at 10.30 a.m. in exercise of powers u/s 67(1) of CGST Act. On 30.11.2019 at about 4.00 a.m., a sum of Rs. 15 Crores was deposited by the Company under the GST cash ledger. Thereafter summons were issued to officers of company under section 70 of the Act. The officers of the company made a further deposit of Rs. 12,51,44,157/- at about 1.00 a.m. The aforesaid amounts were not deposited under section 74(5) of the Act - it can safely be inferred that payment of the amount was made involuntarily. There is also no material on record to hold that any threat of arrest was extended to officers of the company. The question whether any threat was extended to officers of the company is a question of fact which can t be adjudicated in a summary proceeding under Article 226 of the Constitution of India. Liberty is reserved to the parties to agitate the issue of threat and coercion in an appropriate proceeding - the issue is answered by stating that amounts were paid by the company involuntarily. Whether the DGGI officers conducted in a High handled and arbitrary manner during the course of investigation? - HELD THAT:- It is pertinent to note that company in the writ petition has neither attributed any specific role to officers of DGGI by name nor has impleaded them in the writ petition. Therefore, the same being a question of fact cannot be adjudicated in a summary proceeding under Article 226 of the constitution of India - A statutory power has to be exercised within a system of controls and has to be exercised by relevance and reason. It needs reiteration that a statutory power should not be exercised in a manner, so as to instill fear in the mind of a person. The issue is kept open to be agitated in an appropriate proceeding. Whether writ petition filed by company suffers from delay or laches? - HELD THAT:- The rule which says that this Court in exercise of its power under Article 226 of the Constitution may not enquire into belated and stale claims is not a rule of law but a rule of practice based on sound and proper exercise of discretion. The question of delay has to be decided in the facts of each case. The principle on which relief to a party on the grounds of delay and laches is denied is that rights may have accrued to others by reason of delay in filing the Writ Petition should not be allowed to be disturbed unless there is a reasonable explanation for the delay. The lapse of time is not attributable to any laches or negligence. In the instant case, the only provision which permits deposit of an amount during pendency of an investigation is section 74(5) of CGST Act, which is not attracted in the fact situation of the case - it is evident that amount has been collected from Company in violation of Article 265 and 300-A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation can not be accepted. The Department, therefore, is liable to refund the amount to the Company. Appeal dismissed.

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• 2022 (3) TMI 624
  Classification of goods - rate of tax - NAMKEENS or not - Jack Fruit Chips and Banana Chips (salted and masala varieties) made out of raw as well as ripe banana and sold without brand name - roasted and salted/ salted /roasted preparations such as of Ground-nuts, Cashew nut and other seeds, sold without a brand name - covered by HSN Code 2106.90.99 and taxable under Entry 101 A of Schedule of Central Tax (Rate) Notification 1 of 2017 or not - HELD THAT:- From plain reading of the contents of chapter 21, it reveals that it includes the food preparations which are not elsewhere specified in the customs tariff. Those food preparations not specified or included elsewhere in the tariff being preparations for use either directly or after processing for human consumption are to be classified under this heading 2106. Further the heading 2106 specifically excludes the preparations made from fruit, nuts or other edible parts of plants of heading20.08, provided that the essential character of the preparations is given by Such fruit, nuts or other edible parts of plants. Therefore, it is evident that the entry 2106.90 is a residuary entry in respect of edible preparations and hence the edible preparations shall be classified under this entry only if the same are not classifiable under any of the other specific entries for edible preparations. It is noticed that as per chapter note 1(a) to chapter 20, the chapter does not cover vegetables, fruits or nuts prepared or preserved by the processes specified in chapter 7, 8 or 11. It means that these items not being processed or preserved by the said processes shall be covered in chapter 20. The processes specified in chapter, 7, 8 or 11 are freeing, steaming, boiling, drying, provisionally preserving and milling. Chapter heading 2008 covers roasted, salted or roasted nuts and fruits such as ground nuts, cashew nuts, other seeds and nuts and these are specifically covered under said heading vide sl. No. 40 of schedule II to notification No. 1/2017-CT (rate). Hence there remains no doubt that the roasted/salted/roasted and salted ground nuts, cashew nuts and other seeds/nuts shall be appropriately classifiable under heading 2008 of customs tariff. Even otherwise also, heading 2106.90 being a residuary heading shall not stand against a specific heading 2008 as per Rules of interpretation of the tariff. Banana chips - tapioca chips - potato chips - jackfruit chips - sharkara varatty - HELD THAT:- By applying the rules for interpretation of the tariff, specially rule 1, 2 and 3 of the same, it is evident that the impugned goods are appropriately classifiable under heading 2008 and not under heading 2106. Rule 2(a) provides that any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance - Further, chapter 21 covers Miscellaneous edible preparations, whereas chapter 20 specifically covers Preparations of vegetables, fruits, nuts or other parts of plants. Hence, when there is a specific entry providing for the most specific description in the heading 2008 to the impugned products over the residuary heading description of heading 2106.90, the said impugned goods is held appropriately classifiable under heading 2008, by virtue of rule 3(a) of the rules for interpretation. In view of clear provisions in GST laws for interpretation of tariff, the contention of the appellant regarding common parlance understanding of a goods does not hold water, as is therefore rejected. Thus, all the other contentions of the appellant are rejected being not tenable and impugned goods viz. Jackfruit Chips, Banana Chips, Tapoica Chips, Potato Chips, Chembu Chips and Pavakka Chips (Bittergourd) (Whether salted/ masala or otherwise) are held classifiable under Tariff Heading 2008 19 40 of the Customs Tariff Act, 1975 - Regarding classification of roasted/salted/roasted and salted Cashew nuts, Ground nuts, and other nuts, there are specific headings under Chapter 20 that covers the products. Accordingly, roasted /salted / roasted and salted Cashew nuts are held classifiable under Tariff Heading 2008 19 10, and other roasted/ salted / roasted and salted nuts and seeds are classifiable under 2008 19 20 of the Customs Tariff Act, 1975.

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• Income Tax

• 2022 (3) TMI 623
  TDS u/s 194A - tds on payments of interest made to the Agra Development Authority. Agra Development Authority is a statutory body constituted under the provisions of the UP Urban Planning and Development Act 1973 - HELD THAT:- The issue which is raised in the present appeals is covered in Commissioner of Income Tax (TDS) Kanpur and Another vs Canara Bank [ 2018 (7) TMI 664 - SUPREME COURT] wherein the issue pertained to the applicability of the notification dated 22 October 1970 in relation to payments made by Canara Bank to the New Okhla Industrial Development Authority ( NOIDA ), an authority constituted under Section 3 of the Uttar Pradesh Industrial Area Development Act 1976. The Bank had not deducted tax at source under Section 194-A which led to notices being issued, resulting in consequential action. This Court, after considering the terms of the notification held that NOIDA which has been established under the Act of 1976 is covered by the notification dated 22 October 1970. Though the statute under which the Agra Development Authority has been constituted is the UP Urban Planning and Development Act 1973, the same principle which has been laid down in the judgment of this Court in Canara Bank (supra), would govern the present case. We accordingly allow the appeals and set aside the impugned judgment and order of the Division Bench of the High Court of Judicature at Allahabad in Income. The orders imposing penalty under Section 271C of the Income Tax Act 1961, shall in the circumstances be set aside.

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• 2022 (3) TMI 622
  Validity of Faceless assessment u/s 144B - whether or not the principles of natural justice have been followed as required under Section 144B? - HELD THAT:- AO passed the impugned assessment order, as indicated above, on 07.06.2021, without granting an opportunity to the petitioner of a personal hearing in the matter. This being the position, clearly, the provisions of Section 144B(7)(vii) of the Act would apply in this case. See RITNAND BALVED EDUCATION FOUNDATION (UMBRELLA ORGANIZATION OF AMITY GROUP OF INSTITUTIONS) VERSUS NATIONAL FACELESS ASSESSMENT CENTRE ORS. [ 2021 (6) TMI 17 - DELHI HIGH COURT] Thus the prayer made in the writ petition is allowed.The impugned assessment order dated 07.06.2021, as well as consequential notices i.e., the notice of demand issued under Section 156 of the Act, and the notice issued for initiation of penalty proceedings under Section 270A of the Act, of even date, are set aside.

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• 2022 (3) TMI 621
  Revision u/s 264 - requirement to get accounts audited u/s 44AB - determination of turnover - inclusion of remuneration from the partnership firm in the gross receipt from from the profession (in the hands of partner) - as submitted return of income was treated as invalid was because according to respondent, petitioner failed to get her accounts audited u/s 44AB though her gross receipts / turnover after including remuneration received from partnership firm was more than the threshold limit of Rs. 50,00,000/- - HELD THAT:- Profession is defined under Section 2(36) of the Act as under: Profession includes vocation . The income earned by petitioner as remuneration received as working partner or partners remuneration, cannot be held as carrying on profession as well as business simultaneously in different field. That is because the provisions of Section 44AB(a) which says every person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year and clause (b) of Section 44AB which says every person carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year , are mututally exclusive, i.e., the former dealing with the assessee carrying on business and later dealing with the profession. None of the clauses under Section 44AB envisages the situation where the assessee is carrying on both the profession as well as business. In a matter which is similar to this matter at hand, where the scope of Section 44AD of the Act came up for consideration, is the judgment of Madras High Court in Anandkumar [ 2020 (12) TMI 994 - MADRAS HIGH COURT ] while upholding the contentions of Revenue observed that the assessee should establish that he is an eligible assessee engaged in an eligible business and such business should have a total turn over or a gross receipt. Admittedly, the assessee who was an individual in that case was not carrying on any business and the remuneration and interest received by the assessee from the partnership firm cannot be termed to be a turn over of the assessee (individual). The court concluded that the Revenue was right in its contention that remuneration and interest from the partnership firm cannot be treated as gross receipt of the assessee. We respectfully agree with the view expressed by the Hon ble Madras High Court. In fact, in the case at hand, petitioner s case is the same that petitioner s remuneration from the partnership cannot be treated as gross receipt in profession.In the circumstances, in our view petitioner s stand that she was not required to get her accounts audited under Section 44AB, is correct. - Decided in favour of assessee.

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• 2022 (3) TMI 620
  Capital gain - Assets transferred under scheme of demerger - transfer of all the assets and liabilities under the telecom undertaking to ICL without any consideration - whether demerger under the said scheme should not be treated as a transfer for the purposes of Section 45 and be taxed as capital gain? - ITAT set aside the order of the CIT(A) and come to a conclusion that one of the ingredients for computation for capital gains is consideration and since no consideration has been paid or received by assessee no capital gains would be proposed to be of assessee - HELD THAT:- We cannot find error with the conclusion of the ITAT that since there is no consideration for transfer of a capital asset, the capital gains computation mechanism fails and thus no capital gains tax can be levied on such transfer. In the case of transfer of capital asset, what can be taxed in the hands of the seller under the Act is real or actual gain that accrues/arises from transfer of the assets and hence, in absence of any sale consideration (resultant profit from such transfer) no notional gain can be imputed in the hands of the seller to tax such transfer. 7. Even the Assessing Officer taking the revaluation of assets in Indus as valuation for transfer of undertaking is incorrect. The Assessing Officer has failed to understand that carrying out such revaluation and passing accounting entry by assessee in its books of account does not represent any consideration whatsoever received from ICL or any third person towards transfer taken by ICL. We have to also note that Section 50D of the Act which provides for fair market value deemed to be full value of consideration in certain cases has been inserted by the Finance Act, 2012. For the Assessment Year 2013-14 Section 50D provides for consideration where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined. Even that cannot be applied because in the subject case it relates to assessment year 2010-11. Tribunal has not committed any perversity or applied incorrect principles to the given facts - No substantial question of law.

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• 2022 (3) TMI 619
  Addition on protective basis u/s 69 - money paid for purchase of lands - Difference of amount as per sale agreement and registered deed - On receipt of information from Investigation Wing, Guntur, AO found that Shri G.Punna Rao has shown receipts from consideration on account of sale of agricultural land to the assessee for more than the amount mentioned in registered deeds, whereas the books of accounts of the assessee depicts only the registered value - assessee has contended that the agricultural lands were purchased from Shri G.Kalyan Babu for the purpose of construction of spinning mill, but not entered into any agreement with Shri G.Kalyan Babu before purchase of the property - HELD THAT:- Revenue made substantive and protective assessments in the hands of Shri Punna Rao and the assessee company. But there is no evidence to show that the said Shri Punna Rao is the owner of the property. As per the agreements of sale as well as the sale deeds, one Shri Kalyan babu, is the owner of the lands and he has entered into an unregistered agreement of sale in favour of Shi Masthan Rao, but he executed registered sale deeds in favour of the assessee company. Assessee company never entered into any agreements of sale with Shri Kalyan Babu. There are no recitals in the agreements of sale that the assessee company has purchased the land. Therefore, one thing is clear that there is no seller and buyer relationship between Shri Punna Rao and the assessee company. Thus, the contention of the revenue has no legs to stand. Some portion of payments were made through cheques which were issued by the assessee company and the said cheques photostat copy was affixed on the agreement of sale as acknowledgement - Unregistered agreement for purchase of the property cannot be material to rely on, when the registered sale deed has been produced and the same shows that the property was purchased at particular price. According to us, the agreement of sale loses it s character, the moment, the registered sale deed is executed. The property has been purchased at a higher price than that of amount mentioned in the purchase deed, the burden to prove is heavily placed on the AO to establish the said fact. After considering the above said facts, we are of the considered view that the AO as well as Ld.CIT(A) have done guess work while coming to conclusion that the price of the property is more than mentioned in the sale deed. In the present case on hand, as discussed above, there is no seller, buyer relationship between Shri G.Punna Rao and the assessee company. Therefore, the protective assessment which was made in the hands of the assessee company is not sustainable. In this case, except the oral statement of Shri G.Punna Rao, there is no other piece of evidence to establish that the amount of sale consideration was paid by way of cash to Shri Punna Rao by the assessee company. Therefore, we allow the ground No.2 raised by the assessee.

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• 2022 (3) TMI 618
  Reopening of assessment u/s 147 - information received from audit party - Eligibility of deduction u/s 80IB - taxing the interest earned on the loans and advances made to the sister concerns under the head Income from other sources - HELD THAT:- It is an admitted position that the reassessment proceedings were initiated by the Assessing Officer only after audit objection was raised. The Audit party who pointed out that the interest income earned on the loans advances made to the sister concerns should be assessed under the head Income from other sources without setting off any interest expenditure. This information in the form of audit objection had enabled the Assessing Officer to form an opinion that the income got escaped assessment to tax.The Hon ble Supreme Court in the case of P.V.S. Beedies (P.) Ltd. ( 1997 (10) TMI 5 - SUPREME COURT] had laid down that an audit objection constitutes information. Therefore, the contentions that there was no fresh tangible material brought on record by the Assessing Officer cannot be accepted. Second contention of the appellant that there was no failure on the part of the assessee to disclose truly and fully all material facts necessary for the purposes of making the assessment as laid down in the first proviso to section 147 of the Act cannot be accepted, as it is evident from the original return of income filed that the assessee made claim that interest expenditure incurred on the loans borrowed from HUDCO for the purpose of housing project against the interest earned on the loans advances made to the sister concerns, knowing fully well that the there was no nexus between the borrowed funds and loans advances to the sister concerns. It is settled position of law that for the purpose of allowing the expenditure against the interest income earned, the loans should be borrowed for the purpose of earning the interest income as laid down by the Hon ble Supreme Court in the case of Seth R. Dalmia [ 1977 (9) TMI 1 - SUPREME COURT] Thus in the present case there was tangible material in the form of audit objection. Thus, we do not find any merit in the contentions raised by the assessee challenging the validity of the reassessment proceedings. Therefore, we uphold the validity of the reassessment proceedings. Accordingly, the ground no.1 stands dismissed. Interest income earned on the loans and advances made to the sister concerns under the head Income from other sources - HELD THAT:- It is an admitted position that the interest expenditure was incurred on loans borrowed from HUDCO for the purpose of housing project. The contention of the appellant that the loans and advances were made to the sister concerns for the business purpose and out of business expediency cannot be accepted for the reason that the appellant had not led any evidence proving the business expediency, as it is question of fact which requires to be proved by leading necessary evidence. Even assuming for a moment, the loans and advances were made to the sister concerns for business purpose, there is necessity for charging interest and secondly, the loans were borrowed from HUDCO only for the purpose of business of housing project not for the purpose of advancing loans to the sister concerns. Therefore, there was no nexus between the borrowed funds and amounts advanced to the sister concerns. In these circumstances, in the absence of nexus between the borrowed funds and amounts advanced to the sister concerns, the question of allowing interest against the interest earned from the loans and advances to the sister concerns does not arise in terms of law laid down by the Hon ble Supreme Court in the case of Seth R. Dalmia (supra). Thus, we do not find any merit in the contention raised by the appellant - Decided against assessee.

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• 2022 (3) TMI 617
  Addition u/s 36(1)(va) - delayed payment of employees contribution towards PF ESI - whether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021? - HELD THAT:- As relying on M/S KOGTA FINANCIAL (INDIA) LTD. VERSUS CPC, BENGALURU. [ 2022 (1) TMI 250 - ITAT JAIPUR] this issue was decided in favour of the assessee by holding that amendment in Section 36(1)(va) as well as Section 43B of the Act by way of inserting the explanation vide Finance Bill, 2021 are applicable only from A.Y. 2021-22 and subsequent assessment years and therefore, the said amendment is not applicable to the assessment year under consideration. Appeal of the assessee is allowed. Also see CHATRU MAL GARG VERSUS ACIT, CIRCLE 1, FARIDABAD. [ 2021 (10) TMI 1282 - ITAT DELHI] - Decided against revenue.

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• 2022 (3) TMI 616
  Deduction u/s 80IC - As per AO assessee was not engaged in the business of manufacturing of any new product but was engaged in job work - CIT(A) by following the order of his predecessor for A.Y. 2012-13 held the assessee to be engaged in the business of manufacturing and held that assessee to be eligible for deduction u/s 80IC - HELD THAT:- As identical issue about the claim for deduction u/s 80IC of the Act arose in assessee s own case in A.Y. 2009-10 2010-11 wherein [ 2017 (8) TMI 1657 - ITAT DELHI ] held the assessee to be eligible for deduction u/s 80IC of the Act. Before us, Revenue has not placed any material on record to demonstrate that the facts in the case in the year under consideration and that of A.Y. 2009-10 2010-11 are different and distinguishable and further no material has been placed by the Revenue to demonstrate that the decision rendered by the Tribunal in assessee s own case for A.Y. 2009-10 2010-11 has been stayed/ set aside/ overruled by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A). Thus ground of the Revenue is dismissed.

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• 2022 (3) TMI 615
  TDS u/s 195 - disallowance u/s 40(a)(i) - non deduction of tax on payments made to CGTM France towards flight testing services - assessee submitted that the services provided by CGTM France did not satisfy the condition of make available on technical knowledge and skill to the assessee in view of India-France treaty r.w India-Portugal treaty thus tax was not required to be deducted at source - HELD THAT:- The fees paid towards the services in question here is purely towards the testing of Shakti Engines in order to identify the issues of Air inlet distortion and installation losses. The subsequent action of the assessee to carry out the improvement based on the test results given by CGTM France cannot be considered as a basis for make available services rendered by CGTM France to the assessee. Conducting the test and subsequent improvement to the engines based on test results are independent activities and cannot be considered together. As contended by the assessee, the test conducted by CGTM France cannot be independently carried out by the assessee without the support of engineers from CGTM France and hence does not satisfy the conditions of make available that the services rendered by CGTM France to the assessee. It is settled law that mere rendering of services would not be taxable unless the person receiving the services is enabled to utilize such services on its own in the future without having recourse to the person providing the service. See DE BEERS INDIA MINERALS (P.) LTD. [ 2012 (5) TMI 191 - KARNATAKA HIGH COURT] . We are of the considered opinion that fees paid by the assessee to CGTM France is not in the nature of fees for technical services and hence does not attract the provisions of sec. 195 with regard to requirement for deduction of tax at source on payment of fees for technical services of an resident outside India. As a result, no disallowance is warranted u/s 40(a)(ia) of the expenses claimed by the assessee towards payment of service charges to CGTM France. Accordingly, we allow the appeal in favour of the assessee.

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• 2022 (3) TMI 614
  Addition u/s 36 (a) (va) - contribution received from Employees in respect of PF ESI which is deposited after the due date - Scope of amendment - HELD THAT:- As decided in M/S. RAMESH ELECTRIC WORKS, M/S. XO FOOTWEAR P LTD. VERSUS THE DCIT, CPC, BANGALORE [ 2022 (2) TMI 75 - ITAT DELHI] delayed deposits of PF ESIC before the date of filing of return of income is an allowable expenditure and for which reliance was placed on the decision of Hon ble Delhi High Court in the case of AIMIL Ltd [ 2009 (12) TMI 38 - DELHI HIGH COURT ] Also amendment brought out by Finance Act 2021 is concerned, notes on clauses to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that since the assessment year under consideration is A.Y. 2018-19, the amendment does not apply to the assessment year under consideration - no disallowance was warranted in the present case. We, therefore direct the AO to delete the addition. Thus the assessee s ground is allowed.

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• 2022 (3) TMI 613
  Unexplained purchases - statement recorded u/s 133A relied upon - Assessee argued purchases were made before the date of survey i.e. on 14/03/2017 and has stated in the statement recorded u/sec. 131 of the Act, the books were not updated and hence, there was an excess stock as on the date of survey - CIT-A deleted the addition - HELD THAT:- CIT(A) has observed that the AO did not find any defect and has also not disproved the genuineness of the bills. CIT(A) also observed that the suppliers are registered VAT dealers and has raised Tax Invoice. We, therefore concur with the findings of the ld.CIT(A), and find no infirmity in the order passed by the ld.CIT(A) and no interference is required on these issues. Statement recorded u/sec. 131A has no evidentiary value and cannot be taken as basis for addition - See case of Khader Khan Son [ 2013 (6) TMI 305 - SC ORDER ] Purchases and sales were not matching with VAT returns - CIT(A) noted that the assessee has submitted VAT returns where the 6A purchases were reported by the assessee. We therefore find that the assessee has satisfactorily explained the purchases and concur with the findings of the ld.CIT(A). We find no infirmity in the order passed by the ld.CIT(A) and no interference is required. Thus, the grounds raised by the Revenue is dismissed.

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• 2022 (3) TMI 612
  Revision u/s 263 by CIT - Total power subsidy and TUF subsidy were wrongly declared by the assessee - As per CIT nowhere it was mentioned in the assessment order by the AO that he has conducted necessary enquiry with regard to the above issues, such as, power subsidy and TUF subsidy and the AO failed to discuss the above two issues in the assessment order - AR contended that assessee is following mercantile system of accounting and has accounted the income received during the year in the profit loss account and amount receivable in the balance sheet and the power subsidy and TUF subsidy is granted by the Ministry of Textiles based on the interest payment made by the assessee-company to the banks - HELD THAT:- We find force in the argument of the ld.AR who has demonstrated that the income accruing each year is accounted in the profit loss account under the head other income . Similarly,where the receivable of the subsidy is shown under short term loans and advances. Since the assessee is maintaining the books under mercantile basis, interest subsidy receivable under TUF scheme and the power subsidy receivable for the A.Y. 2014-15 represent the balance receivable from the Ministry of Textiles as on the date of balance sheet. Based on the merits and facts of the case, there is no escapement of any income and the amount of claim of subsidy made in the profit loss account is income accrued to the assessee for that particular accounting year. The ld.AR also explained that the following entries were passed in the books of accounts. Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue - in the case of Malabar Industries [ 2000 (2) TMI 10 - SUPREME COURT] held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law - there is no escapement of income which is prejudicial to the interest of the revenue as contemplated under section 263 of the Act and the impugned order of ld.PCIT under section 263 of the Act is quashed. The appeal of the assessee is allowed.

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• 2022 (3) TMI 611
  Revision u/s 263 by CIT - Unexplained bank deposits - As per CIT complete lack of inquiry at the end of the Assessing officer as he had failed to inquire into the source of deposits in bank account - HELD THAT:- As gone through the bank statement of the assessee which have been filed in support of the contention that most of the deposits had been made on the same day of withdrawals from the bank account. We find that the contention of the Ld. AR that except for the months of June to August 2010, where there was a gap, most of the deposits found in the bank account were after making the withdrawals on the same day. This leads credence to the contention of the Ld. AR that deposits in the bank were made from the withdrawals from the Post office account and the account with State Bank of India. Of course, there is no bar in depositing or withdrawing the amount unless and until some foul pay has brought on record, which is not the case here. Although the Assessing officer might not have written it in as many sentences and phases about the documents he had verified during the course of assessment proceedings for the purpose of reaching the conclusion that the bank deposits were indeed out of withdrawals from the bank, there is no prescribed format for writing an assessment order and a perusal of the assessment order would show that the Assessing officer has duly mentioned that the required documents were examined and that the daughter of the assessee M/s. Renu Sahni has explained that the Time Deposits made by her father were from renewal of FDRs already made from the retirement benefits. So, in our considered opinion, the Assessing officer did conduct proper inquires, as warranted on the facts of this case, and we do not agree with the contention of the Ld. CIT DR that there was any lack of inquiry by the Assessing officer. PCIT, without making further inquiry on his own account, has simply stated in the impugned order that the Assessing officer was required to make more inquiries. PCIT has not pointed out as to what further inquiry was the Assessing officer required to make and as to how without those inquires the order of the Assessing officer was erroneous in so far as prejudicial to the interest of the Revenue. Thus exercise of revisional jurisdiction by the Ld. PCIT is without any justification. - Decided in favour of assessee.

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• 2022 (3) TMI 610
  Late payments towards ESI and EPF u/s 36(1)(va) - Payment before furnishing the return of income under section 139(1) - HELD THAT:- In the present case, it is not in dispute that the assessee deposited the contribution of PF ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM [ 2021 (11) TMI 370 - ITAT CHANDIGARH] wherein addition on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.

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• 2022 (3) TMI 609
  Employees share of contribution to ESI to the extent not paid on or before the due date as mentioned in Sec 36(1)(va) - payments made beyond the due date prescribed under respective statutes, but before the due date prescribed u/s 139(1) - Scope of amendment by Finance Act, 2021, to section 36[1][va] and 43B - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.

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• 2022 (3) TMI 608
  Addition of amount representing 10% of sale proceeds deducted by the Monitory committee from e-auction sale of mineral stock belonging to the assessee and which was contributed to Special Purpose Vehicle, as per the direction given by Hon ble Supreme Court - AO was of the view that the amount retained by MC as per the proposal approved by Hon ble Supreme Court is in the nature of appropriation of profit for adjusting it against the penalty and other liabilities - HELD THAT: All the amounts collected from the lessees under different categories are directed to be given to the SPV, which will in turn take various types of ameliorative and mitigative steps in the interest not only of the environment and ecology but the mining industry as a whole so as to enable the industry to run in a more organized, planned and disciplined manner. Under these set of facts, it cannot be said that these amounts are penal in nature. We notice that the Hyderabad bench of Tribunal in the case of NMDC Ltd [ 2018 (10) TMI 1120 - ITAT AHMEDABAD] came to the same conclusion by following the decision rendered by Hon ble Kolkatta High Court in the case of Shyam Sel Ltd [ 2016 (8) TMI 511 - CALCUTTA HIGH COURT] and State Pollution Control Board vs. Swastik Ispat (P) Ltd .[ 2014 (1) TMI 1913 - NATIONAL GREEN TRIBUNAL PRINCIPAL BENCH NEW DELHI] wherein identical types of payments made to remedy the river pollution caused by the parties were held to be compensatory in nature. Hence the provisions of Explanation 1 to sec. 37 will not apply to these payments. Hence, as held by Hyderabad bench of Tribunal in the case of NMDC Ltd (supra), these expenses are allowable as deduction u/s. 37(1) of the Act. The recommendations made by CEC for making these payments have been made for the purpose of resuming the mining operations. The Hon ble Supreme Court discusses these points at page 171 from paragraph 10 onwards. Hence there is merit in the submission of the Ld. A.R. that, without making these payments, the assessee could not have resumed the mining operations. Hence, these expenses are incidental to carrying on the business and hence allowable u/s. 37(1) of the Act. Thus we hold that the above said amounts deducted from the sale proceeds is allowable as deduction u/s. 37(1) of the Act. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in both the years under consideration and direct the AO to delete the impugned addition made in both the years. Rejection of claim for deduction being the difference in valuation of stock made by the AO in assessment year 2009-10 - A.O. has disallowed the claim by observing that the assessee should have made the claim only in assessment year 2010-11, i.e., in the year succeeding to AY 2009-10 - HELD THAT:- AO was right in observing that the difference in closing stock determined as on 31.3.2009 cannot straightaway have impact to the opening stock shown as on 1.4.2011, without modifying the closing stock as on 31.3.2010 and 31.3.2011. Further, the assessee has not furnished any material to show that the closing stock added by the A.O. in assessment year 2009-10 was still available with the assessee as on 31.3.2011. The closing stock as at the year end is determined on the basis of physical quantity available. Hence, without showing that the physical quantity which was added as on 31.3.2009 was available with the assessee as on 31.3.2011 over and above the quantity originally shown, it is not possible to increase the opening stock as on 1.4.2011. Accordingly, we confirm the disallowance made by the A.O. on this issue. Addition of difference in closing stock - main contention of Ld. A.R. is that the dump stock does not have market value and hence it is not valued both in the opening stock and closing stock - HELD THAT:- The opening stock quantity is shown at 193559 MT. There is no production during the year and sales during the year is 152360 MT. Accordingly the closing stock quantity is shown at 41,199 MT. The value of opening stock shown by the assessee is Rs. 4,24,98,060/- for the quantity of 193559, which translates to average price of Rs. 219.56 per MT. We notice that the AO has adopted the very same rate for valuing the dump stock, meaning thereby, the assessee has not considered dump stock for opening stock purpose also, though the same was reported to the Department of Mines. Hence it is seen that the assessee is adopting consistent practice of considering the realizable value of dump stock as Nil. In these set of facts, we are of the view that the AO was not justified in valuing the closing stock of dump stock by adopting the price applicable to good stock, when the assessee is consistently considering the realizable value of dump stock at NIL. Further, the very same stock has been brought forward from the prior year, wherein the value of dump stock was taken as NIL. Hence the AO was not justified in changing his stand and valuing the dump stock as on 31.3.2012 alone. Accordingly, we are of the view that the Ld. CIT(A) was not justified in confirming this addition. Accordingly, we set aside the order passed by Ld. CIT(A) and direct the AO to delete this addition made by valuing dump stock.

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• 2022 (3) TMI 607
  Revision u/s 263 by CIT - Reopening of assessment twice - AO issued notice u/s 148 based on the reason that he received information from Investigation Wing that the ass essee has received accommodation entry - Second re-assessment order has been interdicted by the impugned order of the Ld. Pr. CIT u/s. 263 - HELD THAT:- Second reopening was made by the AO based on the same reasons recorded for reopening the assessment of assessee for the first time (i.e. Rs. 50 lacs has escaped assessment); and since the AO in the first round has reopened the assessment of assessee and enquired about escapement of Rs. 50 lacs which was supposed to have escaped assessment and finally has made addition of only Rs. 25 lacs, the necessary corollary is that AO has accepted/satisfied with the balance of Rs. 25 lakhs out of Rs. 50 Lakhs which was supposed to have escaped assessment for which the AO reopened the assessment in the first round. Thereafter when the second AO reopened on the same issue (i.e. again on the issue of escapement of Rs. 50 Lakhs) which was the precise reason for reopening the assessment in the first round, and the AO in the second round rightly have not made any addition because it is trite law that the second AO in the second round cannot sit in review in respect of the action of AO in the first round on the same issue i.e. AO order dated 29.01.2016 passed u/s. 147/143(3) of the Act on the same set of facts - action of the AO dated 22.06.2018 not to make any addition is valid in law and, therefore, the Ld. Pr. CIT by the impugned order could not have held the AO s order dated 22.06.2018 (second reassessment order) to be erroneous as well as prejudicial to the interest of the revenue because the order of AO (dated 22.06.2018) is in line with well settled principle of law that AO does not enjoy the power of review. Decided in favour of assessee.

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• 2022 (3) TMI 581
  Delayed employees contribution of PF/ESI within the prescribed due dates - HELD THAT:- As decided in MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY [ 2021 (8) TMI 563 - ITAT JODHPUR] where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income u/s 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act. Thus addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the delayed deposit of the employees s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) - Decided in favour of assessee.

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• Customs

• 2022 (3) TMI 606
  Maintainability of appeal - non-compliance with the pre-deposit of the amount - Section 129E of the Customs Act, 1962 - HELD THAT:- The first proviso of Section 129E of the present Section enacts a limitation on the total amount which can be demanded by way of pre-deposit. The first proviso provides that the amount required to be deposited should not exceed Rs. 10 Crores. In this regard, the law giver has purported to grant relief to an appellant. The second proviso contemplates that Section 129(e) as substituted would not apply to stay applications and appeals which are pending before the Appellate Authority prior to the commencement of the Finance Act (2) of 2014 - Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision. The substitution has effected a repeal and it has re-enacted the provision as it is contained in Section 129E. In fact, the acceptance of the argument would involve a dichotomy in law. On the one hand, what the appellant is called upon to pay is not the full amount as is contemplated in Section 129(E) before the substitution. The order passed by the Commissioner is dated 23.11.2015 which is after the substitution of Section 129E. The appellant filed the appeal in 2017. What the appellant is called upon to pay is the amount in terms of Section 129E after the substitution, namely, the far lesser amount in terms of the fixed percentage as provided in section 129E. The appellant, however, would wish to have the benefit of the proviso which, in fact, appropriately would apply only to a case where the appellant is maintaining the appeal and he is called upon to pay the full amount under Section 129E under the earlier avtar. When the appellant is not being called upon to pay the full amount but is only asked to pay the amount which is fixed under the substituted provision, there are no merit in the contention of the appellant - appeal dismissed.

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• 2022 (3) TMI 605
  Refund of SAD - rejection of refund on the ground that the appellant has not submitted Chartered Accountant certificate to establish that the burden of 4% Additional Duty has not been passed on to another - N/N. 102/2007-Cus. dated 14.09.2007 as amended by Notification No.93/2008 dated 01.08.2008 read with Board s Circular No.6/2008-Cus. dated 28.04.2008 and 16/2008-Cus. dated 13.10.2008 - HELD THAT:- On perusal of the order passed by both the authorities, it is found that they have not cared to peruse the documents submitted by the appellant. The refund claim has been rejected in a cryptic manner. It is to be borne by the authorities below that interest on such delayed refund is paid out of public money and therefore the refund claims have to be processed in proper manner after perusing the documents produced by the claimants. In the present case, though the refund claim is received on 16.06.2009, the adjudicating authority has passed the order only on 21.06.2012. The adjudicating authority ought to have conducted one more personal hearing so as to make sure whether the appellants have furnished necessary documents before rejecting the appeal on such technical grounds. The matter is remanded to the adjudicating authority who is directed to process the refund claim on the basis of documents produced by the appellant. The appellant shall be given an opportunity of personal hearing and also for furnishing any documents, if necessary - The appeal is allowed by way of remand.

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• Insolvency & Bankruptcy

• 2022 (3) TMI 604
  Restoration of power connection to the Corporate Debtor for getting a better resolution plan - seeking reconnection of power supply of the Durgapur factory of Corporate Debtor within 15 days on deposit of current electricity dues from the date of initiation of CIRP without payment of past dues and any security deposit from the Corporate Debtor - HELD THAT:- From the provision in Section 14(2) of IBC, it is found that supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period. The essential goods and supplies have been defined and explained through an illustration in Regulation 32 of the CIRP Regulations wherein it is clarified that essential goods and services referred to in Section 14(2) shall be considered essential supplies only to the extent they are not a direct input to the output produced or supplied by the Corporate Debtor. Moreover, under Section 14(2-A) the IRP/RP can ask for continuation of the supply of such goods and services which are critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern. Admittedly the disconnection of the electricity supply to the Durgapur unit took place on 14.9.2019. According to clause 4.6.1 of the Power Supply Agreement, deemed termination of the agreement could happen only after 180 days from the date of disconnection. Thus deemed termination could have taken place on or after 12.3.2020 i.e. 180 days after the date of disconnection. The order for initiation of CIRP was passed on 17.12.2019 and moratorium was imposed under section 14 from the same date. Thus the deemed termination of the Power Supply Agreement to the Durgapur unit of the corporate debtor which could not take place by 17.12.2019, could not happen during the moratorium period, by virtue of protection provided under Section 14(2) - It is also noted that the IRP has asked for reconnection of the electricity supply so that a better resolution plan can be obtained in the resolution of the CD which is the intent of the IBC. In passing the Impugned order by which directions have been given to DVC for reconnection of the electricity supply to the corporate debtor during the moratorium period and also allowing waiver of security deposit, the Adjudicating Authority has not exceed its jurisdiction under the IBC - impugned order upheld. Appeal dismissed.

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• 2022 (3) TMI 603
  Demand of CIRP cost - demand to pay monthly rent to the Respondents during the CIRP Period till such time the Corporate Debtor is in occupation of the premise - HELD THAT:- It is an admitted fact that in pursuance of the lease agreement entered between the Corporate Debtor and the Respondents herein who are the owners of the premises, the Corporate Debtor carrying on its business from the leased premises as per the terms agreed in the agreement/lease deed dated 28.02.2011 and the Corporate Debtor is liable to pay the rents to the Respondents herein. While so the Corporate Debtor is into the CIRP and the Resolution Professional managing the affairs of the Corporate Debtor as per the directions of the Adjudicating Authority in the matter. Therefore, the Resolution Professional who is in the helm of affairs of the Corporate Debtor is liable to pay the rents payable to the Respondents herein. In view of the fact that the Appellant is in obligation to pay the dues to the Respondents. This Tribunal is of the view that the issue that arises for consideration is mixed question of fact and law. The fact remains that the premises in which the Corporate Debtor is carrying on its business is belongs to the Respondents herein and the Appellant is duty bound to pay the dues to the Respondents - the Adjudicating Authority has not committed any error in passing the above direction/order. The status quo is to be maintained with respect to the premises which the business of the Corporate Debtor is carrying on, when the Corporate Debtor is into CIRP i.e. after admission of Application under Section 7 or Section 9 or Section 10. After admitting the Application, the Adjudicating Authority would declare moratorium as per Section 14 of the I B Code, 2016. Admittedly the Corporate Debtor is into CIR Process and declared moratorium by the Adjudicating Authority on admission of the Application against the Corporate Debtor - the Corporate Debtor continuing its business in the premises leased to it. For the stated reason the Learned Adjudicating Authority rejected the prayer of the Respondents seeking handing over of vacant possession of the premises. Hence, no interference is called for. The law in this regard clearly specifies the IRP Costs which includes any cost incurred by the Resolution Professional in running the business of the Corporate Debtor as a going concern. In the present case as stated supra the Corporate Debtor is into CIRP and due to imposition of moratorium the Respondents should not suffer. Therefore, the IRP Costs makes provision for payment in such cases as defined in Sub Section 13 of Section 5 of the I B Code,2016 and as detailed out in Regulation 31 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. It is apt to state that no one can seek to deviate from the provisions of the Code and the Regulations framed there under. The Appellant has not made out any case calling interference of the order passed by the Adjudicating Authority dated 07.01.2022 which is impugned in this Appeal - appeal dismissed.

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• 2022 (3) TMI 602
  Validity of approval of Resolution Plan - It is submitted that Adjudicating Authority while approving the Resolution Plan has erroneously directed that Excluded Securities are no longer enforceable as defined under Resolution Plan which direction is contrary to the Resolution Plan. - HELD THAT:- The view which was taken by the Adjudicating Authority both in the Order dated 03.02.2022 approving the Resolution Plan and Clarification Order was that in view of the fact that unpaid debt shall stand converted into non-convertible redeemable preference share hence the excluded securities are no longer enforceable. The Adjudicating Authority held that excluded securities are subsumed under Clause 3.3.(iii). The Adjudicating Authority obviously referred to Paragraph 3.3. (e) (H) which provided that balance Financial Debt forming part of the Admitted Debt shall stand converted into non-convertible redeemable preference shares of the company which shall be issued to the Financial Creditors upon conversion of the unpaid debt. The above provision in the Plan for conversion into non-convertible redeemable preference shares of the balance financial debt has no bearing on specific provisions in the plan by 3.3.(iii)(g) which clearly provided that excluded securities shall not be extinguished or waived under this Resolution Plan. In the clarification Order dated 03.02.2022, the Adjudicating Authority in Paragraph 29 has again observed that excluded securities are subsumed under Clause 3.3(iii)(c )(h) wherein the plan proposed that any balance financial debt forming part of admitted debt shall be converted into non-convertible redeemable preference share, for the reasons which are noticed, the observations in Paragraph 29 of the Clarification Order also cannot be sustained and deserves to be deleted. The observations of the Adjudicating Authority in Paragraph 29 that the approval of the resolution plan ipso facto discharge the enforcement of excluded securities is not in accordance with the Resolution Plan and is hereby deleted. Appeal are allowed by deleting the relevant part in Direction 1 of the Impugned Order under the heading Reliefs, Concessions and Dispensations to the extent hence, the excluded securities are no longer enforceable as defined under the resolution plan .

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• 2022 (3) TMI 601
  Validity of approved Resolution Plan - it is alleged that the Resolution Plan fails to consider the payment of provident fund dues as computed by the Assistant Provident Fund Commissioner - further allegation is that Resolution Plan approved by the Adjudicating Authority is on 02nd April, 2019. The amount so computed is Rs. 1,35,06,391/- whereas the provisions has been made for Rs. 78 lacs only - Financial Creditors are being paid 21.6% whereas Operational creditors are being paid 12.67% - HELD THAT:- Since no provisions of Section 31 (1), Section 30(2), Section 36(4)(a) (iii) Section 238 of the I B Code, 2016, is in conflict with any of the provisions of the I B Code, the applicability of even Section 238 of the I B Code does not arise. PF dues are not the assets of the CD as amply made clear by the provisions of Section 36(4)(a)(iii) of the I B Code, 2016. The Respondent No.2/Successful Resolution Applicant are directed to release full provident fund dues in terms of the provisions of the Employees Provident Funds and Miscellaneous Provident Fund Act, 1952 immediately by releasing the balance amount of (Rs. 1,35,06,391 full dues (minus) considered in the Resolution Plan Rs. 78,00,000). The impugned order dated 02nd April, 2019 approving the Resolution Plan stands modified - appeal disposed off.

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• 2022 (3) TMI 600
  CIRP - Resolution process - Right of Noida Authority over leased assets - contention of appellant is that prior approval from the lessor has not been taken before sub-leasing portion of the land to the Corporate Debtor for development of the Housing Project - appellant were ignorant of existence of the said JDA, GPA and Agreement to sell - HELD THAT:- The CONSTRUCTION Clause under the Lease Deed provides that the construction shall be as per the Building Plans approved by the Appellant/NOIDA. It is based on the Lease Deed, of M/s. Logix. The Corporate Debtor has entered into the said JDA, whereby the development rights and other privileges over the said Project premises has been transferred by M/s. Logix in favour of the Corporate Debtor . As regarding the contention of the Appellant that NOIDA is completely unaware of the said Project and any sort of construction activity going on, is untenable specially in the light of Annexure R-3 which refers to the Project namely i.e., Victory Ace , the Registration Date being 18/03/2019 and the signing Competent Authority being NOIDA Authority . It is seen that the Appellant/NOIDA had extended permissions for the Building Plans; that the Project Victory Ace is registered under UPRERA which establishes that all copies of approvals and Commencement Certificate from the Competent Authority were submitted in compliance of Section 4(2) of RERA Act, 2016. Keeping in view these reasons, the stand taken by the Appellant that they were not in knowledge of the Group Housing Scheme at Plot H-02, Sector 143 NOIDA, is unsustainable. JDA is a valid contract in the eyes of law or not? - HELD THAT:- The material on record establishes that all details of the Project were in public domain and therefore the stand of the Appellant that they had absolutely no knowledge about the Project, holds no water. It is also seen from the record that the Project commencement date was 2012 and the completion date was 2019. There is no documentary evidence filed by the Appellant showing any sort of objection raised by them for this 7 year period - A perusal of the JDA shows that the Agreement only creates development rights in favour of the Corporate Debtor which is authorised by a GPA to carry out construction and sale of the flats. There is no leasehold interest created in favour of the Corporate Debtor . There is no Clause in the Lease Deed which prevents M/s. Logix from transferring development rights or creating a sub-lease right to a third party. It is the case of the Appellant that the aforenoted JDA describes M/s. Logix as the Owner which is illegal. A careful reading of the JDA shows that the Appellant/NOIDA is shown as the sole owner of Plot No. GH-02. A comprehensive reading of all the terms and conditions show that pursuant to the registered Lease Deed dated 08/06/2011 leasehold rights were granted to M/s. Logix and it is clearly stated in the JDA that it considers itself the sole lessee of the plot. The JDA read with the Allotment Letter and the Builder Buyer Agreement further strengthens the case of M/s. Logix that both M/s. Logix and the Corporate Debtor have clearly repeated that the NOIDA is the Owner of the Project land and M/s. Logix is only a lessee of the plot - this Tribunal is of the earnest view that the issue raised by the Appellant regarding the usage of the word Owner with reference to M/s. Logix in the JDA, is misconceived. Having accepted the lease premium amounts towards lease premium and lease rentals under the Lease Deed and benefited therefrom, the Appellant cannot now turn around and say that they are completely unaware of the Project or that the JDA is non-est in the eyes of the law. There are no substantial reasons given by the Appellant to have not exercised their rights to cancel the Lease Deed in view of their stand that M/s. Logix had sub-leased the property without their approval and in contravention of Clause 5 of the Lease Deed. Clause No. 12 clearly mentions that the lessee/sub-lessee shall not be allowed to change his role otherwise the lease/sub-lease can be cancelled and the entire amount deposited shall be forfeited - It is beyond comprehension as to how the Appellant/NOIDA could have overlooked this factual scenario for 7 long years, having approved the Building Plans, having accepted the premium amounts and the lease rentals and now at this stage of CIRP, stating that they were completely unaware of any such Housing Project coming up, is completely untenable. The development rights construe Property of the Corporate Debtor and hence the Resolution Professional has duly performed his duties as per Section 18(1)(a)(iii) and has taken control and custody of the assets of the Corporate Debtor mentioned in the Balance Sheet in compliance of the provisions of Section 18(1)(f) and resultantly there are no deficiency of service on behalf of the RP. The appeal is dismissed.

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• 2022 (3) TMI 599
  Violation of principles of natural justice - no proper notice issued to the Personal Guarantor by the Hon ble Tribunal in terms of Rule 37 of the NCLT Rules, 2016 - HELD THAT:- In the present case, the applicant filed its application under section 95 of IBC, 2016 in Form C and served a copy of the application to the Respondent vide email dated 28.07.2021. This therefore acts as a notice to the Personal Guarantor for securing his presence in reference to the Interim Moratorium which has commenced. The applicant in the present application has submitted that the Tribunal heard the matter in the absence of appropriate representation on behalf of Personal Guarantor and reserved the same for orders. The present application, therefore has been filed by the personal guarantor to defeat the objects of IBC by raising disputes even after the service of Limited Notice before the receipt of report from Resolution Professional under section 99 of IBC. Once the Resolution Professional is appointed and the report is filed by the Resolution Professional under section 99 of IBC, 2016 the Personal Guarantor will be given an opportunity of hearing by the Tribunal and the above-mentioned preliminary objections can be raised before a final decision is made by the Tribunal. Raising any objections at this stage of adjudication of application is premature and will give rise to double hearings. Application disposed off.

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• 2022 (3) TMI 598
  Seeking direction to ex-management to provide tally data with respect to working of the Corporate Debtor - HELD THAT:- Upon looking at the balance-sheet for the year ending 2018-19, it is seen that the same has been signed by the Ex-Director on 15.05.2019. From this, it is very clear that the statement made by the Ex-Directors vide the present affidavit to the effect that tally data of the Corporate Debtor was stolen on 04.01.2019 is patently false and misleading as this Tribunal cannot believe that a balance-sheet for the year ending 2019 could have been made out without having access to the tally data of the Corporate Debtor for the entire financial year. Therefore, the submission made by the Respondents through the present affidavit is completely contradictory and not reliable at all. The 1 conduct of ex-management is very much within the purview of Section 34(3) of the Code read with Regulation 9 of the IBBI (Liquidation Process) Regulations 2016 - the present conduct of the ex-Management calls for appropriate action in terms of Section 70 of the IBC, 2016 - A fine of Rs. 5 lakhs is imposed on the Respondents (No. 1 2) in the present application - Let the matter be fixed on 12.04.2022.

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• 2022 (3) TMI 597
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- This Adjudicating Authority is satisfied that the Operational Creditor has proved its case by placing evidence that there exists an operational debt for an amount exceeding the pecuniary threshold as provided in Section 4 of the IB Code, 2016 and default has occurred for which the Corporate Debtor was liable to pay. There has neither been any reply to Statutory Notice u/s. 8 of the IBC, 2016 on behalf of the Corporate Debtor nor the contentions raised by the Applicant in the instant application have been denied by way of an affidavit by the Corporate Debtor. Further, the Operational Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. The instant application is hereby admitted and this Adjudicating Authority orders commencement of the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor herein, which shall ordinarily be completed within the timelines stipulated in the IB Code, 2016 - application admitted - moratorium declared.

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• 2022 (3) TMI 596
  Liquidation of Corporate Debtor - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The primary object of IBC is resolution and liquidation is the last resort. At the same time keeping the timelines prescribed under the IBC is paramount, lest asset value gets deteriorated. Therefore, taking into consideration the provisions of law as well as the documents on record, this Adjudicating Authority is of the view that since the efforts to obtain resolution of the Corporate Debtor have failed and the only option left, under the circumstances being early liquidation process, we allow this petition, directing the liquidation of the Corporate Debtor. The Liquidator appointed would sincerely endeavour to sell the Corporate Debtor as a going concern without delay however, by observing the relevant provisions contained in IBC as well as in IBBI (Liquidation Process) Regulations and thus ensure that one of the objects of the IBC viz. maximization of the assets of the Corporate Debtor is not diluted. The Corporate Debtor i.e. M/s. MBS Impex Private Limited shall be liquidated in the manner laid down in Chapter-III of the Code - Application allowed.

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• 2022 (3) TMI 595
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - validity of demand notice - HELD THAT:- The ratification in this case is done in respect of all the acts/deeds inclusive of filing the CP which means that the giving of section 8 notice by the Authorised Signatory is also validated by the said resolution. Apart from that, the earlier authorization is very widely worded which gives authorization to make applications, communications etc. - the notice given under Section 8 of the IBC and the Application filed under Section 9 of the IBC are under proper authorization. Non-filing of invoices along with the notice - HELD THAT:- A letter was issued by the Operational Creditor on 04.07.2017 rejecting the proposal of the instalments without Post-Dated Cheques (PDCs) and also rejecting the plea of waiver of interest at 12% p.a. on the delayed payment. A letter dated 27.07.2017 was issued by the Corporate Debtor, categorically admitting that as per the books of the accounts the balance as on 31.03.2017 stands at Rs. 3,79,47,945/- and they are liable to pay the company the said amount as claimed by the letter of the Operational Creditor dated 18.07.2017. This letter seems to be in response to the letter dated 18.07.2017 by the Operational Creditor calling upon the Corporate Debtor to confirm the balance due to them as on 31.03.2017. Hence, when there is a clear admission on the part of Corporate Debtor with regard to the debt due as on 31.03.2017 which is the same amount which is claimed in the CP, rejecting the application for not filing invoices would be a travesty of justice. There seems to be no pre-existing dispute as contended - the Corporate Debtor is due an amount of Rs. 4,63,19,366/- to the Operational Creditor and has defaulted in discharging the said due and hence, CIRP can be initiated against the Corporate Debtor. It is a fit case to admit and order initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - application admitted - moratorium declared.

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• PMLA

• 2022 (3) TMI 594
  Seeking grant of Regular Bail - payment of bribes through middlemen Guido Ralph Haschke - HELD THAT:- It is noted that the applicant is stated to be the key accused. He is accused of having played a pivotal role in the entire case, being a middleman engaged by M/s AgustaWestland for obtaining confidential information regarding the procurement process of VVIP helicopters by the Government of India. As per the allegations, one J.B. Subramanian was engaged by the applicant for typing and sending dispatches/reports in relation to developments in the procurement process to co-accused persons. He is further accused of having facilitated payment of kickbacks/bribes to IAF personnel, bureaucrats and politicians in India in order to influence the outcome of the procurement process with the end goal to benefit AWIL. From a perusal of the material placed on record, it is apparent that the applicant, through his companies M/s Global Trade Commerce Ltd., London and M/s Global Services FZE, Dubai, UAE, entered into various contracts with M/s Finmeccanica, M/s AgustaWestland, M/s Westland Helicopters, UK etc. to camouflage the receipt of kickbacks/bribe amounts. In furtherance, his companies were paid an amount of Euro 30 million, even though no work was carried out. One of these contracts is reported to have been for Euro 6,050,000 between M/s AgustaWestland Holdings Ltd. and M/s Global Services FZE, Dubai, and the second, for Euro 18.2 million between M/s Westland Helicopters and M/s Global Trade and Commerce Ltd., UK. Be that as it may, in 2017, the constitutional validity of Section 45 PMLA came to be challenged before the Supreme Court in NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. [ 2017 (11) TMI 1336 - SUPREME COURT] , wherefore, by a judgment rendered in 2018, explicating the defects inherent in the provision and the challenges posed thereby, the Supreme Court held that the twin conditions imposed by Section 45(1) PMLA were manifestly arbitrary, discriminatory and violative of Articles 14 and 21 of the Constitution of India. Post the decision in Nikesh Tarachand Shah, an amendment was made to Section 45 PMLA vide the Finance Act, 2018 and brought into effect from 19.04.2018. Insofar as learned ASG has raised an apprehension that the applicant may influence witnesses and/or tamper with evidence, suffice it to note, the respondent has failed to bring out any credible circumstance to show that the applicant has directly or indirectly influenced any witness till date. Further, statements of witnesses/accused under Section 50 PMLA are stated to have been recorded and all the material relevant to the case, being documentary in nature, is stated to have already been seized and filed alongwith the prosecution complaint/supplementary complaints. In this backdrop, this Court is of the opinion that the apprehensions of the applicant influencing witnesses/tampering with evidence are not supported by any material placed on record, and on this aspect, mere pendency of further investigation is of no consequence. Even though the applicant has spent considerable time in custody, on a consideration of the peculiar facts and circumstances of the case, including the factum of the applicant evading process/investigation in India/Italy and eventually having been extradited to India, this Court is of the opinion that the applicant, having no roots in the Indian society, is a flight risk. Further, keeping in view the parameters set out in Section 45(1) PMLA and the discussion undertaken hereinbefore, this Court finds no reasonable ground to believe that the applicant is not guilty of the alleged offence or that he is not likely to commit any such offence while on bail. The present bail application is dismissed.

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• 2022 (3) TMI 582
  Seeking an extension of interim/temporary bail for a period of six months - serious ill-health of the applicant - applicant admitted himself without any reference to the hospital with an intention to avoid surrendering in Court after being discharged from the Hospital on 10.01.2022 - HELD THAT:- The application for extension of interim /temporary bail granted by the order dated 28.09.2021, is not allowed. Bail application dismissed.

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• Service Tax

• 2022 (3) TMI 593
  Nature of activity - service or not - business support services or not - Instalation of fixed facilities in the premise of customer/buyer - uninterrupted supply of gas - prior to 01.07.2012 - cum-duty benefit is available to the assessee or not - invocation of extended period of limitation - penalty - HELD THAT:- In the present case, it is an admitted fact that the appellant assessee is engaged in the manufacture and sale of oxygen gases. They have entered into agreement with customer/buyer for sale of such industrial gases and as per the agreement the Appellant assessee have to ensure uninterrupted supply of gas in the factory of the customer/buyer for which they have installed fixed facilities in the premise of customer/buyer. Thus in the present case the Appellant assessee has not undertaken any service activity for the customer/buyer by installing fixed facilities. Therefore, no question of outsourcing of any activity by the customer/buyer to the Appellant assessee arises in this case. Thus, charges received by the Appellant-assessee in respect of fixed facility are outside the preview of the Business Support Services. To fall within the ambit of Business Support Services it is essential that activity should be supportive to the main activity undertaken by the client. Where as in the present case, the activity of installing and maintaining fixed facility undertaken by the Appellantassessee for supplying oxygen gas manufactured by it to the buyer/client. Thus, in this case the fixed facility installed by the Appellant-assessee is used by the Appellant-assessee itself and it is in no way construed as supporting activity for the buyer/client of the Appellant-assessee. Given this, fixed charges received by the Appellant-assessee from the buyer/client cease to fall within the ambit of business support services. Therefore, demand of service tax confirmed by the Ld. Adjudicating Authority is not sustainable and is liable to be set aside. In the present case it is admitted by the Department that the Appellant assessee has not charged service tax separately from the client. Given this, the service tax should have been computed backward by treating the total receipts as inclusive of service tax. Extended period of limitation - HELD THAT:- The Appellant has not discharged service tax on the fixed facility charges being of bonafide belief that the said fixed facility is installed for the Appellant s use and benefit and they are not providing any service to the client and the activity of installing and maintaining fixed facilities for supplying of oxygen to the client do not fall under any category of service defined during the period prior to 01.07.2012 i.e. before introduction of negative list. Further, after introduction of the Negative list as the scope of service was much widened, the Appellant started paying service tax after 01.04.2012 - the demand of service tax confirmed by the Ld. Adjudicating Authority by invoking extended period is not sustainable and liable to be set aside. It is held in plethora of judgments that where the facts were in the knowledge of the Department, in such situation, extended period cannot be invoked. In case of MAHESHWARI MILLS LTD. VERSUS COMMISSIONER OF C. EX., AHMEDABAD [ 2003 (12) TMI 390 - CESTAT, NEW DELHI] the Tribunal has held that suppression of fact cannot be alleged when facts were within the knowledge of the department. Penalty - HELD THAT:- The ingredients for invocation of extended period of limitation under Section 73(1) of the Act and imposition of penalty under Section 78 of the Act are identical. Once the extended period of limitation cannot be invoked in the facts of the present case, there is no question of imposition of any penalty under Section 78 of the Act. Appeal dismissed - decided against Revenue.

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• 2022 (3) TMI 592
  Refund of service tax - applicability of retrospective amendment under Rule 2A of Service Tax Valuation Rules - works contract service - composite contract for construction of complex and sale of units - HELD THAT:- There is no denial to the fact that while purchasing the different floors of a immovable property the appellants have been paying the Service Tax along with the demands which were raised by the construction company at the completion of each milestone. There is also no denial to the fact that the Hon ble High Court of Delhi in Suresh Kumar Bansal case [ 2016 (6) TMI 192 - DELHI HIGH COURT ] has held that Service Tax could not be levied on value of undivided share of land acquired by buyer of dwelling unit or value of goods which are incorporated in project by Developer. Perusal of Rule 2A of Service Tax Valuation Rules makes it clear that the said rule provides the mechanism to separately determine value of land and value of goods under a Works Contract Service. The gross consideration charged for construction of complex service by builder promoter of a project of a buyer would not only include the element of cost of Service Tax but also the value of undivided share of land which would be acquired by the buyer. In the present case admittedly the service provided is of not work contract service but is a simplicitor contract of construction of residential building. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside. It was held that if the concerned officer of respondent No. 1 shall examine whether the builder has collected any amount as service tax from the petitioners for taxable service as defined in Section 65(105)(zzzh) of the Act and has deposited the same with the respondent authorities, any such amount deposited shall be refunded to the petitioners with interest at the rate of 6% from the date of deposit till the date of refund. It is observed that Chartered Accountant certificate of the auditor of Emaar, the builder as annexed on record is sufficient to show that Emaar has duly paid the Service Tax for the period 2011-12 to 2017-18, which includes the period in question. Further it is also acknowledged that element of Service Tax has been borne by the appellant and the letter of Emaar dated 29.8.2019 as is available on record, shows that acknowledgement of Emaar to the said fact and it also conveys their no objection in favour of the appellant to claim the said refund. Appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 591
  Period of limitation for filing an appeal before Commissioner (appeals) - SCN was never received by the appellant nor even the Order-in-Original was received - Violation of principles of natural justice - Recovery of short duty alongwith interest and penalty - applicability of time limitation - HELD THAT:- Perusal of section 84 (sub section 2) of Finance Act makes it clear that the time period available with the assessee to file the appeal before Commissioner (Appeals) against the Order-in-Original is the period of three months from the date when he received the decision which was challenged before Commissioner (Appeals), instead of date of Order-in- Original itself. No doubt the Order-in-Original as was challenged before the Commissioner (Appeals) is dated 16.10.2019 but as already observed above, admittedly it was passed in the absence of appellants. From the documents on record it is apparent that copy of the said order was received by the appellant only on 25.9.2020. There is no denial apparent on record to falsify this date of receipt and that the Show cause notice was not received by the appellant. The department has not produced any proof of service of said Show cause notice - the Order-in-Original was not received by the appellant immediately after it was pronounced, it being served on the wrong address not pertaining to the appellant. The certified copy of order thereof was received by the appellant only on 25.9.2020. The appeal before Commissioner (Appeals) was apparently filed on 9.11.2020. i.e very much within the time limit prescribed by section 84 of the Finance Act (as reproduced above). Resultantly, the first point of adjudication is answered in affirmative in favour of the appellant. Principles of natural justice - opportunity of hearing not provided - HELD THAT:- It becomes clear that no opportunity of hearing was provided to the appellant to put forth his defence. First principle of natural justice i.e. Audi Alteram Partem, is not followed by Adjudicating Authority. The appellant had no opportunity to make himself available before the concerned authorities to put forth his stand. The authorities have wrongly issued a show cause notice at the wrong address. It was the recovery notice which was served on wrong address as well as registered address, accordingly was received by the appellant. Immediately thereof the appellant made representation before the Department on 04.09.2020 i.e. much prior to the order passed by the Commissioner (Appeals). Still his representation was not at all considered by the adjudicating authorities below. The department has not produced any evidence about service of Order-in-Original on appellant on any date prior to the aforesaid date of receipt of said order. Order of Commissioner (Appeals) is miserably silent about the receipt of certified copy of Order under challenge before him on 25.9.2020. Had the said fact being considered by Commissioner (Appeals), he could have rightly appreciated the appeal to have been filed within the statutory period for the same. The absence thereof is sufficient violation of aforesaid principles of nature justice. The appeal filed before the Commissioner (Appeals) was filed within two months of date receipt of Order-in-Original by the appellant. Commissioner (Appeals) has wrongly held the same to be barred by time - appeal allowed by way of remand.

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• Central Excise

• 2022 (3) TMI 590
  CENVAT Credit - common inputs used for manufacture of dutiable and exempted goods - non-maintenance of separate records - Rule 6(3) (i) of CCR - if some credit has been taken and thereafter reversed, with respect to part of the credit, does it amount to not taking a credit at all or is the Appellant still liable for wrong availment of credit? - HELD THAT:- Hon ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. versus Collector of Central Excise, Nagpur [ 1995 (12) TMI 72 - SUPREME COURT ] held that once credit is debited, it is as good as not taking credit at all. The findings of learned Commissioner cannot be agreed upon that even if bulk of the disputed CENVAT credit is allowable as per Rule 6(5) and even though the remaining CENVAT credit amounting to Rs. 42,760/- has already been reversed by the appellant along with interest, it cannot be considered as not taking ineligible CENVAT credit. The learned Commissioner felt that such an interpretation would render Rule 6 redundant and therefore, demanded an amount of Rs. 11,95,39,489/- - the Appellant has completely complied with the requirement under Rule 6(1). Thus, there is no need to go into Rules 6(2) and 6(3). However, since these Rules have been discussed in the impugned order, we examine their scope in this case. Learned Commissioner has also held that the Appellant can choose Rule 6(2) or 6(3) and he cannot choose both and since the Appellant has chosen Rule 6(2), the Appellant cannot take any credit on common input services. With respect, we cannot agree with the Commissioner. Nothing in Rule 6 prevents an assessee from choosing to maintain separate accounts under Rule 6(2) and still avail proportionate amount of CENVAT credit on common inputs or input services. The Commissioner has erred gravely in holding that any assessee who maintains separate accounts under Rule 6(2) is not entitled to any credit on common inputs or input services as there is no legal provision to back this assumption of the Commissioner. Such an interpretation will lead to absurd and impractical conclusions. Thus, it is wrong to say that an assessee opting to maintain separate accounts under Rule 6(2) cannot avail the benefit of CENVAT credit on common inputs or input services. Whether Rule 6(2) requires separate procurement of common inputs or input services as those to be used for manufacture of dutiable goods and those to be used for manufacture of exempted goods? - HELD THAT:- The rule only requires the Appellant to maintain separate accounts for receipt, consumption and inventory of inputs and input services used in manufacture of dutiable final products and manufacture of exempted goods. Accounts can be maintained in many ways. One may procure goods separately for dutiable and exempted goods. One may procure some goods commonly and apportion them and take credit to the extent they are to be used for manufacture of dutiable goods. One may take the entire credit on the inputs and reverse the input credit if and to the extent they get used in the manufacture of exempted goods. All these amount to maintaining separate accounts - In this case, the Appellant reversed not just credit proportionate to the value of the exempted goods cleared, but has reversed the entire credit on common input services used during the period when it was manufacturing both dutiable and exempted goods. Whether Rules 6(1), 6(2) and 6(3) apply to all input services? - HELD THAT:- A plain reading of Rule 6(5) shows that it s non- obstante clause overrides the provisions of Rules 6(1), 6(2) and 6(3). Therefore, insofar as the services covered by Rule 6(5) are concerned, credit will be available regardless of whether dutiable or exempted products are manufactured. Whether the department can demand and recover under Rule 14 an amount under Rule 6(3) (i) equal to 10% of the value of the exempted products? - HELD THAT:- Any wrongly availed CENVAT credit can be recovered under Rule 14. Also various alternatives are given under Rule 6 are options available to the assessee who wishes to avail Cenvat credit on inputs which are used in manufacture of dutiable and exempted products. The rule nowhere empowers the Departmental officers to choose one of the options for the assessee and enforce it. If the assessee does not fulfill its obligations under any of the options under Rule 6 and still avails the cenvat credit on common inputs/input services it would be taking credit in violation of Cenvat Credit Rules, 2004 and such wrongly availed Cenvat credit can be recovered under Rule 14. But under no circumstances can the Department force a particular choice upon the appellant and demand an amount calculated as per Rule 6 (3) under Rule 14 as has been done in this show cause notice - Similarly, Rule 15 provides for imposition of a penalty equal to the wrongly availed cenvat credit but not a penalty equal to an amount calculated as per Rule 6(3) (i) because Rule 6(3)(i) is only one of the options through which the assessee can fulfill its obligations to be entitled to CENVAT credit. Therefore, both the demand of an amount calculated as per Rule 6(3) under Rule 14 and imposition of an equivalent amount of penalty under Rule 15 are without the authority of law and need to be set aside. Thus, Revenue cannot choose and force an option under Rule 6(3) upon the appellant - An amount under Rule 6(3) cannot be demanded or recovered under Rule 14. Appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 589
  Levy of penalty u/r 26 (2) of Central Excise Rules, 2002 - disallowance of CENVAT Credit - receipt of inputs along with the invoices in dispute - HELD THAT:- The issue is no longer res integra as against the same impugned order, the appeal of input receiver M/S ANGEL PIPES AND TUBES PVT. LTD. VERSUS COMMISSIONER, CENTRAL EXCISE AND CENTRAL GOODS AND SERVICE TAX, JODHPUR (RAJASTHAN) [ 2022 (2) TMI 5 - CESTAT NEW DELHI ], whereby this Tribunal (presided by me) have allowed the appeal of Angel Pipes and Tubes holding that The appellant have clearly established the genuineness of the transaction as regards purchase and receipt of inputs from the first stage dealer. Thus, the appellant has discharged their onus for credit of the goods as required under the scheme of the Act read with Cenvat Credit Rules. Appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 588
  Refund of excess duty paid - rejection on the ground of time limitation and principles of natural justice - Calculation of duty payable as per the provisions of Rule 7 8 of the said Rules or not - HELD THAT:- As apparent on the facts of the record and has not been denied by the Department that the refund application of 30th August, 2017 was filed pursuant to the orders of this Tribunal passed on 11.10.2017 and also the another order of this Tribunal dated 03.11.2017, but proposal of rejecting the said refund claim on the ground of being filed beyond the stipulated period in terms of Provisions of section 11B (1) of Central Excise Act, 1944 has been accepted by Order-in-Original dated 30.04.2020. It was held that the period of April, 2012 was not the subject matter of SCN of 2012 rather the claim is barred by period of limitation as the amount prayed to be refunded was deposited as payment of excise duty on 03.04.2012 but the refund thereof has been filed on 18.04.2019. However, in view of the earlier orders of this Tribunal i.e. 11.10.2017 03.11.2017, the said findings are factually incorrect. Time Limitation - HELD THAT:- The relevant date as per Explanation B thereof in the given facts and circumstances is sub-clause (ec) thereof (as quoted above). Apparently and admittedly, the refund claim was initially filed on 30.08.2018 pursuant to the CESTAT Order dated 11.10.2017 and 03.11.2017. Relevant date for the refund claim is therefore, the date of aforesaid orders. Hence, it is held that claim of 30.08.2017 is well within the one year of the said relevant date. It is accordingly held that the refund claim has wrongly been held to be barred by time. Rejection thereof is liable to be set aside. The Department is again directed to calculate and compute the duty only on the basis of the days during which each of the machines were working and thus to strictly comply with the directions already given by the earlier orders of this Tribunal. Since admittedly an amount of Rs. 19,00,000/- has already been deposited. The Department has only to verify whether the amount of impugned refund claim of Rs. 9,50,000/- is correctly calculated by the appellant for the period of closure of one of the machines of the appellant during the impugned period of four months i.e. form March, 2012 to July 2012. Appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 587
  CENVAT Credit - duty paying invoices - supplementary invoices issued by the Public Sector Undertaking - South Eastern Coalfield Limited, wherein the excise duty was charged on items - HELD THAT:- In view of the facts and circumstances that it was the practice in the coal company that excise duty is not chargeable on royalty etc. these items being in the nature of levy of tax or fee, they were not charging excise duty. The SECL (a PSU) charged duty on royalty, cess etc. vide supplementary invoice only on substantial dispute raised by the Central Excise Department. The coal company started charging excise duty on these items which is sub-judice before the higher Courts. In this view of the matter, it is held that there is no element of fraud, suppression etc. disabling taking cenvat credit in terms of Rule 9 of Cenvat Credit Rule. The appellant is entitled to take cenvat credit on the basis of supplementary invoice raised - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2022 (3) TMI 586
  Seeking grant of Regular bail - fraudulent postings and assessment had been done in relation to the registered traders - HELD THAT:- With regard to the allegations of the applicant s connivance with the co-accused, incase of manual challans of four dealers in respect of 2015-2016, is stated to have been produced but the allegations against the present applicant is that those were approved without due verification. The Departmental Circular dated 05.09.2011 referred to, gives direction to the Dealers to adopt the E-payment mode for the tax payment above Rs. 10,00,000/- while option has been given to the tax payment below the level of Rs. 10,00,000/-. Here in the case of assessment of four dealers, the tax so assessed is below Rs. 10,00,000/-. This requires the production of Form No.207 which shows that the duplicate of the Challan is required to sent to the CTU - the triplicate copy is for the treasury and the duplicate is to be sent to the CTU. The information with regard to the payment of the challan would be in the VATis system. Whether there has been a criminal conspiracy or any negligence of the applicant would be a question which is to be examined during the course of trial by adducing evidence. How the challans were manipulated and false postings were made in the VATis system with an intention to defraud by causing losses to the Government exchequer would be a question of fact. Whether any illegal gratification has been received by the present applicant for any manipulated, fraudulent entries with an intention to cause loss to the Government treasury would be a question of evidence which would be required to be examined during the course of trial. Further, since the charge-sheet is filed and considering the facts and circumstances of the case, this Court finds this to be a fit case where discretion could be exercised in favour of the applicant - the applicant is ordered to be released on regular bail - the present application is allowed.

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• 2022 (3) TMI 585
  Detention of goods alongwith penalty - Levy of tax and penalty - goods were attempted to be offloaded in the State of West Bengal, though the goods were consigned to the State of Assam - HELD THAT:- As long as the respondent nos.1 and 2 do not admit any of the tax liability or interest or fine or penalty, the question of invoking Clause (a) of Section 112 (8) would not arise. If that is the fact situation, then it has to be seen as to whether Clause (b) of Section 112(8) has been complied with. In fact, the learned writ Court bearing the same in mind had directed payment of additional 20% of the disputed tax, which the first respondent has already deposited. The exercise of discretion is neither improper or irrational for us to interfere. The interest of revenue stands sufficiently safeguarded as 30% of the disputed tax has been collected by the department. This Court expressed a concern that the product being pan masala and vehicle along with the goods having been detained for almost a year, the same would be unfit for consumption. This factual position is admitted by the first respondent - Court also expressed a concern that the first respondent, the consignee / owner of the goods, if is allowed to take the goods to the State of Assam, there may be a likelihood that the goods may be sold in the open market, which would be harmful. The appeal is disposed of by directing the respondent nos.1 and 2 to execute a bond in the form as approved by the appellant authorities securing the interest of the revenue and also a letter of undertaking to produce the vehicle-in-question as and when required.

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• 2022 (3) TMI 584
  Seeking waiver of amount payable towards non submission of C forms - HELD THAT:- In the instant case, the first appellant is yet to concur with the concessions sought for by the respondent. Further, the recommendation made by the 2nd appellant to the 1st appellant does not include the concession for non-payment of the applicable tax with regard to the non filing of Form C . It is further contended that the claim of the Department is not regarding any concession granted under clause 10 (B) 8 of the BIFR Scheme, but regarding full tax applicable towards non-filing of C Form. The provision under clause 10 (B) 10 of the BIFR Scheme grants concession only with regard to condoning the delay in payment of tax for non-filing of C Form and not dispensing with the tax liability itself and that the exemption as contemplated in clause 10 (B) 10 is related to interest for delayed payment of difference tax rate and not the tax component itself - The respondent ought to have filed the declaration in Form C, to avail the concessional rate, unless that was done, the benefit of the concessional rate, as claimed by the dealer, cannot be given. The amount of Rs. 80.42 lakhs is due based on the assessment made for non-production of C forms and the respondent is under an obligation to pay such amount but without considering the same, the learned Judge has issued positive direction in line with the claim of the respondent. Hence, the learned Government Advocate prayed to set aside the order of the learned Judge and to direct the respondent to pay the sum of Rs. 80.42 lakhs along with interest at 2% due thereon till the date of payment. There is no reason for entertaining this writ appeal, since there is no positive direction issued by the learned Judge in the order, which is impugned herein - the learned Judge only directed the appellants to consider the waiver application with regard to levy of penalty and interest etc., and such a direction issued needs no interference by this Court - petition disposed off.

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• Indian Laws

• 2022 (3) TMI 583
  Dishonor of Cheque - liability of a Director of a company - vicarious liability - contentions of the applicant are that the impugned order of summoning is a non speaking order - principles of natural justice - HELD THAT:- In case of K. SRIKANTH SINGH VERSUS NORTH EAST SECURITIES LTD. [ 2007 (7) TMI 405 - SUPREME COURT ] the Hon ble Apex Court has held that for vicarious liability of Director of a company it must be pleaded and shown that the Director was responsible for the conduct of the business of the company at the time of commission of offence. Only being a Director is not enough to cast a criminal liability. Vicarious liability must be pleaded and proved and can not be merely inferred. It is clear from the perusal of the complaint that there is no specific averment that applicant is involved in day-to-day affairs of the company. There is only general allegation that applicant is a Director of the company. The documents filed by the applicant establishes that the applicant was a nominee Director and who has now resigned - thus, it is clear that in absence of specific allegations about the applicant he can not be prosecuted for any offence under section 138 N.I. Act. The learned Magistrate has failed to consider the matter properly. The order of summoning regarding applicant is unjust and illegal and can not be sustained. Application allowed.

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