Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 2, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Violation of principles of natural justice - Opportunity of personal haring not provided - discretion to grant an adjournment - The petitioner sought an extension to respond to a show-cause notice under Section 73(1) of the GST Act. Despite the petitioner's request, the respondent passed the final order without considering the extension application. The court found the respondent's actions to be a colorable exercise of power, violating principles of natural justice. - Consequently, the court set aside the impugned order and directed the petitioner to file its response by 15th March, 2024.
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Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - The High court held that the proper officer failed to adequately consider the petitioner's reply on its merits and did not afford the petitioner an opportunity to clarify or provide further details. Consequently, the court set aside the impugned order and remitted the matter to the Proper Officer for re-adjudication, directing the officer to specify the required details/documents within one week.
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Cancellation of GST registration of the petitioner - mere system generated order - The court found that the cancellation order in question displayed a clear lack of application of mind by the concerned Superintendent. Notably, the order referenced a reply that was never filed and failed to provide any substantive reasons for the cancellation. - Consequently, the court set aside the order cancelling the petitioner's GST registration, restoring it with immediate effect. The petitioner was directed to fulfill necessary compliances and file requisite returns, while any delay charges were to be paid as per Rule 23 of the Central Goods and Services Tax Rules, 2017.
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Interpretation of statute - word ‘or’ is used in section 75(4) of the UPGST Act, 2017 - opportunity of personal hearing was not afforded - Relying on statutory interpretation and judicial precedents, the High court affirms that the mandatory nature of providing a personal hearing is clear under Section 75(4) of the UPGST Act, 2017, irrespective of whether a request for such a hearing is made by the affected party. - The court quashes the orders passed by the authorities and directs the respondent to grant the petitioner a proper opportunity for a personal hearing before passing any further orders.
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Classification of supply - survey, designing, installation and commissioning of project under EPC contract - The AAAR held that the services provided by the appellant under the EPC contract are appropriately classifiable under SAC Heading No. 9954, answering to the description of "Construction Services," which are in the nature of composite supply defined as a works contract. The AAAR concluded that the proposed supplies specifically fall under SAC Heading No. 9954, rejecting the appellant's argument for a more specific classification under SAC Heading No. 998621 or Heading 9983.
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Classification of supply - composite supply or not - job-work - Bonding of imported Carbon friction strips to Synchronizer core received from customers - The AAR ruled that the activity of bonding imported carbon friction strips to Synchronizer cores constitutes a supply of job work services under SAC 9988. - The applicant's activity primarily falls within the definition of "job work" as per Section 2(68) of the CGST Act, 2017. - The concept of composite supply does not apply to the applicant's activity, as it involves the provision of job work services rather than separate supplies of goods.
Income Tax
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TDS u/s 194H - Legibility of cellular mobile telephone service providers to deduct TDS on commission payable to franchisees/ distributors. - nature of relationship between a principal and an agent or principal to principal - The Supreme Court held that the assessees are not obligated to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from third parties/customers, or while selling/transferring the prepaid coupons or starter-kits to the distributors. The Court clarified that Section 194-H does not apply to the circumstances of this case because the discounts offered do not constitute a commission or brokerage. - The nature of transaction and relationship does not fit the principal-agent framework required for the application of Section 194-H.
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Re-opening of assessment u/s 147 - notice beyond period of four years - change in the opinion or a later decision on the legal aspects - The High court finds no evidence of failure on the part of the assessee to disclose relevant information during the original assessment. - The court declares the re-opening of assessments in all three cases as incompetent and sets aside the notices and assessment orders. It confirms the assessments made under Section 143 for the relevant assessment years. The writ petitions are thus allowed accordingly.
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Revision u/s 263 - admissibility of deduction u/s 54F - CIT has misinterpreted the provision of law to hold that the assessee was ineligible to claim exemption u/s. 54F of the Act on the investment made in the land beyond two years - The Tribunal agreed with the assessee's interpretation of the law, stating that Section 54F allows a time period of three years for the construction of a house property to claim exemption. As the purchase of land was intended for construction, the Pr.CIT's interpretation was deemed incorrect. Consequently, the order of the Pr.CIT was set aside, and the appeal of the assessee was allowed.
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TP Adjustment - Allowability of intergroup payment of management fees - principle of consistency - The Income Tax Appellate Tribunal (ITAT) found that the assessee failed to provide adequate evidence to substantiate the receipt and the economic benefits derived from the services allegedly provided by its AEs. - It was noted that, it is surprising that though the assessee has relied on OECD guidelines, but at the same time it is forgetting that the OECD guidelines clearly provides for Benefit Test for payment of intra group services and also the benefit test is duly recognized as several countries as mentioned by TPO/OECD in its commentary. - The Tribunal dismissed the assessee's appeals, affirming the Revenue's stance that there was insufficient evidence to justify the claimed payments towards management services.
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TP Adjustment - Eligible International Transaction - safe harbor rules - The court examined the eligibility of international transactions under Rule 10TC of the Income Tax Rules and concluded that certain transactions, including interest on outstanding receivables, did not fall under the scope of Safe Harbour Rules. Therefore, the court rejected the appellant's argument that the Safe Harbour mark-up of 25% precluded any further ALP adjustment. - Regarding the transfer pricing adjustment for interest on outstanding receivables, the ITAT in line with Tribunal decisions, revised the interest rate calculation from LIBOR + 400 basis points to LIBOR + 200 basis points. This adjustment was deemed equitable and balanced for both parties.
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Revision u/s 263 - CIT setting aside the second reassessment order - time limit to take action u/s 263 - the necessity for the Commissioner to have substantial grounds for considering an order as erroneous and prejudicial to the interests of the revenue - The tribunal found the section 263 order to be unjustifiable for multiple reasons, including the absence of a clear failure by the assessee to disclose fully and truly all material facts necessary for its assessment, and quashed the order. - Revision order quashed.
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Unexplained credits u/s. 68 - cash claimed to have been received by the assessee from recovery of farmers' advances earlier granted - onus to prove - The ITAT upheld the CIT(A)'s decision, finding that the assessee, a corporate entity engaged in sugar manufacturing, had regularly advanced money to sugarcane farmers to secure raw materials. These advances, reflected in the financial statements as 'receivables', were substantiated by the assessee through various documents and submissions during the assessment proceedings. - The ITAT found no basis to classify these deposits as unexplained under Section 68 or Section 69A of the Act. The tribunal emphasized that the AO's addition constituted a double addition for the same amount in two different assessment years, which was unjustified.
Customs
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Levy of customs duty - Aviation Turbine Fuel (ATF) - confiscation u/s 111 (f) (j) and (m) - penalty - ATF was held liable for confiscation, but since goods were not physically available, redemption fine was not imposed. - Tribunal upheld the decision, emphasizing that redemption fine couldn't be imposed on non-existent goods. - Regarding valuation, the Tribunal affirmed previous rulings that freight, insurance, and landing charges need not be included in ATF's assessable value.
Corporate Law
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Professional Misconduct - Chartered Accountant (CA) - Significant failures to adhere to Standards on Auditing (SAs), gross negligence, and lack of professional skepticism - Non-recognition of full interest cost on borrowings classified as Non-Performing Assets (NPAs) - material misstatement in the financial statements - The NFRA, after careful consideration of the submissions and evidence, found the CA guilty of professional misconduct as defined under the Companies Act, 2013, and the applicable standards. Consequently, the authority imposed a monetary penalty of Rs 3,00,000 and debarred CA Rathi for 2 years.
IBC
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CIRP - Liability to pay transfer fee of 10% of the prevailing market value of the Kharagpur land - The court determines the validity of notices issued by the respondents demanding a transfer fee, despite the absence of approval for Clause 15.15.5 of the Resolution Plan by the adjudicating authority or appellate forums. It holds that since the Resolution Plan was not fully approved, the claims therein are not frozen and binding, allowing the respondents to demand the transfer fee. - The Calcutta High Court dismisses the writ petition, ruling in favor of the respondents' right to demand a transfer fee, as Clause 15.15.5 of the Resolution Plan was not approved.
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While permitting withdrawal of Section 9 Application, Adjudicating Authority did not grant liberty to the Appellant to reapproach the Adjudicating Authority in the event of breach of Memorandum of Understanding - The NCLAT analyzed the terms of the MoU and concluded that it did not preclude the appellant from seeking redress in case of a breach by the corporate debtor. The MoU solely focused on the withdrawal of the Section 9 application, without relinquishing the appellant's rights arising from future contingencies. - The NCLAT partly allowed the appeal, setting aside the adjudicating authority's decision to deny further liberty to the appellant.
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Approval of the Resolution Plan - Appellant (Successful Resolution Applicant - SRA) submits that after approval of Resolution Plan of the Appellant by the CoC, there was no occasion for directing consideration of fresh settlement proposal submitted by Ex. Directors to be placed before the CoC - NCLAT noted that the Adjudicating Authority had passed the order without affording the appellant an opportunity to respond to the settlement proposal, which was deemed a violation of principles of natural justice. - The NCLAT set aside the Adjudicating Authority's order and granted the appellant two weeks to file objections to the settlement proposal. - NCLT directed to consider the objections along with the settlement proposal in accordance with the law.
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Rejection of section 9 application filed by the Appellant - pre-existing dispute - The NCLAT determined that the email communication constituted a clear dispute regarding the completion of the work and the refund of excess payments. - The tribunal rejected the Appellant's argument that the dispute was baseless or a "moonshine" defense, stating that the allegations made in the email were substantial and warranted consideration. - The NCLAT observed that while the issue of excess input tax taken by the Corporate Debtor could not be addressed under Section 9 of the Code, the Appellant could pursue remedies available under the contract for any dues.
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Withdrawal of CIRP - The NCLAT emphasized that withdrawal of CIRP necessitates an application by the applicant and approval by 90% of the Committee of Creditors (CoC), as mandated by Section 12A of the IBC. - However, it was found that Form 'FA' submitted for withdrawal was not signed by the applicant, indicating non-compliance with procedural requirements. Despite objections raised by the appellant (Joinup Corporation), the Form 'FA' was submitted by the Financial Creditor (Tamilnad Mercantile Bank Limited), leading to discrepancies in the submission process. - the NCLAT concluded that the withdrawal of CIRP was not conducted in accordance with the law. It set aside the impugned order and revived the CIRP proceedings.
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CIRP - Eviction of the Appellant from the property - handing over the possession of the property in question to the RP (now Liquidator) within 15 days from the passing of the order and the Statutory Authorities i.e. Local Police - The tribunal dismissed the Appellant's claim for protection under Section 53A of the Transfer of Property Act, 1882, as the Appellant did not fulfill his part of the contract, rendering him ineligible for possessory rights over the property. - The NCLAT, Principal Bench, New Delhi, dismissed the appeal, upholding the order of the Adjudicating Authority. The tribunal found no merit in the arguments presented by the Appellant and affirmed the possession of the property in question to be with the Corporate Debtor.
Central Excise
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Refund of excise duty paid under protest against demand created on alleged manufacture and clearance of Zarda Scented Tobacco - The High court concludes that the revenue failed to establish the manufacture of 'Zarda Scented Tobacco' or the passing on of the disputed duty liability. Therefore, the Tribunal's decision to allow the appellant's appeal and grant a refund of excise duty is upheld. The petition of the revenue lacks merits and is dismissed.
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Relevant date for allowing interest on delayed transfer of Cenvat credit - While the appellant argued for the date of formal communication of the merger to the department, the department contested this, leading to litigation. - The Tribunal set aside the Commissioner's order-in-appeal, affirming the appellant's entitlement to interest from the date of formal communication of the merger. The court upheld the appellant's right to seek redressal for unjustified delays by tax authorities and emphasized compliance with procedural requirements for tax-related transactions.
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Nature of Duty Paid by 100% Export Oriented Units (EOU) - The CESTAT held that while the measure adopted for computing duty paid by 100% EOUs may be based on customs duties, the nature of the duty itself is Excise duty. Therefore, the appellants were entitled to avail CENVAT credit on the duty paid by 100% EOUs under Sl. No. 4 of Notification No. 23/2003-CE. - The tribunal held in favor of the appellants, allowing their appeal and directing the admissibility of CENVAT credit on the duty paid by 100% EOUs as Excise duty.
Case Laws:
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GST
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2024 (3) TMI 60
Validity of the Notification No. 09/2023 dated 31.3.2023 and Notification No. 515/SI-2-23-9(47)/17-T.C215-U.P. Act- 1-2017-Order-(273/2023) dated 24.4.2023 - no valid reason to grant second extension of time to issue show cause notice under Section 73(10) of the U.P. GST Act, 2020 - HELD THAT:- In view of interim order granted in the lead case, proceedings in pursuance of the impugned notice dated 28.12.2023 may go on but no final order may be passed except with leave of the Court. All respondents are represented. They pray for and are granted six weeks' time to file counter affidavit. Petitioner shall have two weeks, thereafter, to file rejoinder affidavit - List thereafter showing the name of Sri Gopal Verma as counsel for Union of India.
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2024 (3) TMI 59
Challenge to seizure order - seizure of 540 bags of Gambier - it is submitted that seizure of goods have been effected not on the strength of the original show cause notice dated 05.02.2024, but on the strength of reasoning and grounds with which petitioner was never confronted - HELD THAT:- Prima facie it does appear that the fact allegation on account of which, the show cause notice was originally issued had been duly explained by the petitioner. Adverse inference does not appear to have been drawn on those grounds. Rather fresh grounds have been culled out by the revenue authority. The revenue authority ought to have given a fresh notice to the petitioner to disclose the new grounds for the proposed seizure before the impugned order may have been passed. Failure to provide such opportunity has resulted in the impugned order being passed in denial of the rules of natural justice. To that extent, no useful purpose may be served in relegating the petitioner to the forum of alternative remedy. Petitioner may treat the impugned order to be the final show cause notice - Petitioner may file reply thereto within a period of one week - Petition disposed off.
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2024 (3) TMI 58
Violation of principles of natural justice - Opportunity of personal haring not provided - it is submitted that although, there is an appellate provision, an appeal is no substitute for the order to be passed on consideration of the petitioner s response, which in this case has been denied - HELD THAT:- Once, the petitioner had sought for an extension, the respondent no. 1 was obliged to consider the application for extension and ought not to have passed the final order without appropriately considering the petitioner s application for extension. The final order was also not passed immediately. The same was passed on 20th December, 2023, which is more than a month from the date the petitioner had sought for extension. Although, the discretion to grant an adjournment vests in the authority, in my view such discretion must be exercised judiciously. The manner in which the respondent no. 1 has proceeded to pass the final order without granting extension to the petitioner either to file its response or to be offered personal hearing, despite the petitioner showing sufficient cause, appears to be a colorable exercise of power by the said authority. Although it has been argued by the respondents that the petitioner has an alternative remedy in the form of an appeal, an appeal is no substitute to revisit of an ex-parte order, especially when the defense of the petitioner is not on record. Further since, the order stands vitiated on the ground of violation of the principles of natural justice, alternative remedy in the form of an appeal is no bar for exercise of extraordinary writ jurisdiction. Since the impugned order cannot be sustained, the same is set aside - Petition disposed off.
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2024 (3) TMI 57
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order which merely records that reply was found not satisfactory and devoid of merits - under declaration of output tax, excess claim Input Tax Credit [ITC], under declaration of ineligible ITC - ITC claim from cancelled dealers, return defaulters and tax non-payers - demand alongwith penalty - HELD THAT:- Proper officer had to at least consider the reply on merits and then form an opinion whether the explanation was sufficient or not. He merely held that no proper reply/explanation has been received which ex-facie shows that proper officer has not even looked at the reply submitted by the petitioner - Further, if the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been sought from the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details. The order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 29.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication - petition disposed off.
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2024 (3) TMI 56
Cancellation of GST Registration of the Petitioner with retrospective effect - petitioner had not filed the returns - vague SCN - violation of principles of natural justice - HELD THAT:- Show Cause Notice shows that there was no date, time or venue mentioned where the petitioner had to appear pursuant to the Show Cause Notice. The Show Cause Notice does not even bear the name and designation of the Officer issuing the Show Cause Notice and merely bears the digital signature signed by D.S. Goods Services Tax Network (4). In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. Clearly, the impugned notice and impugned order are bereft of any detail and are thus not sustainable. However, in the instant case, the case of the petitioner is that petitioner has himself shut the business since June 2022 and is no longer interested in the restoration of the GST registration - Both the petitioner as well as the respondent want cancellation of GST registration, however, for different reasons. Accordingly, the impugned order dated 12.10.2022 is modified to the effect that the cancellation of registration shall be effective from 18.07.2022 i.e. the date of the Show Cause Notice on which date the registration was also suspended. Petition is disposed of.
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2024 (3) TMI 55
Cancellation of GST registration of the petitioner - mere system generated order - non-application of mind by the proper officer - perusal of SCN shows that the same did not contain any date or time or venue where the petitioner had to appear in response to the show cause notice - principles of natural justice - HELD THAT:- There are no merit in the objection by learned counsel for respondents that there is delay in filing the subject petition and the statutory remedies of revocation has not been availed of by the petitioner. First and foremost, there is no limitation for filing a petition under Article 226 of the Constitution before this Court. Clearly, when this Court noticed a complete non-application of mind on the part of the proper officer, no purpose would be served in relegating an individual to filing the revocation petition. Repeatedly, this Court is flooded with petitions where there are similar system generated order which ex facie demonstrate non-application of mind. Further, the petitioner is stated to be an electrician doing petty jobs. Petition allowed.
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2024 (3) TMI 54
Cancellation of registration of the Petitioner with retrospective effect - notice does not specify any cogent reason - violation of principles of natural justice - HELD THAT:- The show cause notice and the impugned order are bereft of any details accordingly the same cannot be sustained. Further, neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 11.11.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 07.10.2022 i.e., the date when the Show Cause Notice was issued. Petitioner shall comply with the requirements of Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.
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2024 (3) TMI 53
Cancellation of GST registration of the Petitioner with retrospective effect - SCN does not put the petitioner to notice that the registration is liable to be cancelled retrospectively - no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- The show cause notice and the impugned order are bereft of any details accordingly. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period - Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 26.09.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 16.05.2018 i.e., the date when the application of cancellation of GST registration was submitted. Petitioner shall comply with the requirements of Section 29 of the Central Goods and Services Tax Act, 2017 - petition disposed off.
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2024 (3) TMI 52
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order which merely records that reply was found not satisfactory - HELD THAT:- The impugned order records that petitioner has not furnished the requisite details. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner within a period of one week from today. On such intimation being given, petitioner shall furnish the requisite explanation and documents within one week thereof. Thereafter, the Proper Officer shall re-adjudicate the show cause notice within a period of two weeks after giving an opportunity of personal hearing. Petition disposed off.
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2024 (3) TMI 51
Seeking direction to allow the application of the petitioner seeking cancellation of GST registration - petitioner was not found functioning at the registered address of the petitioner as given by the petitioner in GST registration - HELD THAT:- The petition is disposed of with the following directions:-a) Registration of the petitioner shall be deemed cancelled with effect from 12.01.2024 i.e. the date of the last application seeking cancellation; b) Petitioner shall furnish all requisite information in terms of Section 29 of the Act; c) Petitioner shall also furnish such further information and documents as may be required by the Department in terms of Section 29 of the Act and or change of address of petitioner.
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2024 (3) TMI 50
Levy of penalty - evasion of tax or not - non filling up of Part 'B' of the e-Way Bill - HELD THAT:- The undisputed facts are that firstly the bilty in fact had the details of the truck that was carrying the goods; secondly, the goods were not in variance with the invoice; and thirdly, the Department has not been able to indicate any kind of intention of the petitioner to evade tax. In the present case, the facts are quite similar to one in M/S CITYKART RETAIL PVT. LTD. THRU. AUTHORIZD REPRESENTATIVE VERSUS THE COMMISSIONER COMMERCIAL TAX U.P. GOMTI NAGAR LKO. AND ANR. [ 2022 (9) TMI 374 - ALLAHABAD HIGH COURT] and there are no reason why this Court should take a different view of the matter, as the invoice itself contained the details of the truck and the error committed by the petitioner was of a technical nature only and without any intention to evade tax. Once this fact has been substantiated, there was no requirement to levy penalty under Section 129(3) of the Act. The orders dated June 24, 2018 and June 22, 2019 are quashed and set aside - The petition is allowed.
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2024 (3) TMI 49
Interpretation of statute - word or is used in section 75(4) of the UPGST Act, 2017 - opportunity of personal hearing was not afforded to the petitioner which is a mandatory requirement under Section 75(4) of the UPGST Act, 2017 - violation of principles of natural justice - HELD THAT:- Courts have consistently upheld the disjunctive nature of or in statutory interpretation, adhering to the principle of giving effect to the plain and ordinary meaning of the language used in the statutes. This principle, known as the plain meaning rule or the literal rule of interpretation, emphasizes the importance of interpreting statutes based on their plain and ordinary meaning, as understood by the average person reading the text of the statute. Moreover, the disjunctive function of or in statutes is essential for upholding principles of fairness, equity, and access to justice. By offering alternative paths or options, statutes accommodate diverse individual needs and situations, promoting inclusivity and mitigating potential disparities or injustices. This is particularly significant in areas of law concerning rights, benefits, and entitlements, where the flexibility provided by or ensures that legal provisions can be applied in a manner that reflects the realities and complexities of human experiences. The significance of the word or'' in Section 75(4) of the UPGST Act, 2017 cannot be underestimated. The usage of the word or'' extends beyond its disjunctive function; it serves as a pivotal indicator of legislative intent regarding the necessity of providing an opportunity for personal hearing. By incorporating or'' into the statutory language, lawmakers explicitly delineate two distinct scenarios in which the opportunity of personal hearing must be afforded: either upon application by the individual subject to penalty or tax imposition, or in the event of contemplation of an adverse order. Personal hearing represents a fundamental aspect of procedural fairness and natural justice, ensuring that individuals have the opportunity to present their case, respond to allegations, and address any concerns or mitigating factors directly to the decision-maker. It is a vital safeguard against arbitrary or unjust decisions - Personal hearing provides a forum for nuanced discussion and exploration of these complexities, enabling decision-makers to make well-informed and equitable decisions based on a comprehensive understanding of the circumstances at hand. The Supreme Court in M/S. DHARAMPAL SATYAPAL LTD. VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE, GAUHATI OTHERS [ 2015 (5) TMI 500 - SUPREME COURT] , upheld the importance of personal hearing before making any decision. The Supreme Court stated that even in administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking decision is necessary. From a bare reading of the order passed by the Respondent No. 2 it is palpably clear that no opportunity of personal hearing was afforded by the Respondent No.2 to the petitioner, which is a statutory obligation under Section 75(4) of the UPGST Act, 2017. Furthermore, the Respondent No. 3, while dismissing the appeal failed to correct this glaring impropriety in its order dated December 16, 2022. These orders cannot be allowed to pass through the legislative barriers of natural justice, erected to safeguard individual rights and prevent abuse of power. Let there be a writ of certiorari issued against the order dated July 7, 2021 passed by the Respondent No.2 and order dated December 16, 2022, passed by the Respondent No.3. These orders are quashed and set aside - the Respondent No. 2 is directed to grant an opportunity of personal hearing to the petitioner and thereafter pass a reasoned order in accordance with the law within a period of two months from date. Petition allowed.
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2024 (3) TMI 48
Recovery Order - after hearing the learned counsel for the parties this Court directed the respondents to examine the additional information furnished by the petitioner - HELD THAT:- The Assistant Commissioner has submitted a report dated 06.10.2023 according to which on consideration of the documentation the recovery order needs a revision as the amount now stands at Rs.37,93,159/- only. The recovery order dated 06.06.2022 was for an amount of Rs.41,64,578/-. In view of the same, the learned Deputy Solicitor General of India agrees that the recovery order needs re-examination. Thus, this Court is of the view that the end of justice would be well met, if the respondents are permitted to revisit the recovery demand and take appropriate action as per law - Petition disposed off.
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2024 (3) TMI 47
Maintainability of petition - non-constitution of second appellate forum - liability to pay the tax and penalty - It is contended that the petitioner has already deposited 10% of the demanded tax amount before the first appellate authority and as there is no second appellate forum, this Court should entertain this writ petition - HELD THAT:- Since the petitioner wants to avail the remedy under the provisions of law by approaching 2nd Appellate Tribunal, which has not yet been constituted, as an interim measure subject to the petitioner depositing entire tax demand within a period of fifteen days from today, the rest of the demand shall remain stayed during the pendency of the writ petition. List this matter on 11th October, 2023.
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2024 (3) TMI 46
Maintainability of petition - non-constitution of second appellate forum - liability to pay the tax and penalty - It is contended that the petitioner has already deposited 10% of the demanded tax amount before the first appellate authority and as there is no second appellate forum, this Court should entertain this writ petition - HELD THAT:- Issue notice to the opposite parties. Since Mr. Diganta Dash, learned Addl. Standing counsel for the Department accepts notice for the Opposite parties, let required number of copies of the writ petition be served on him within three working days. Reply be filed within two weeks and rejoinder thereto, if any, be filed before the next date.
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2024 (3) TMI 45
Classification of supply - survey, designing, installation and commissioning of project under EPC contract - to be classified under SAC Heading No. 9954 which relates to construction services or not - rate of tax applicable on the said supplies by the Appellant - SI. No. 3 (ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 - time limitation for filing appeal. Whether the appeal has been filed within stipulated period (i.e. thirty days from the date on which the Ruling sought to be appealed against is communicated to the Appellant) prescribed under Section 100 (2) of CGST Act, 2017 or not? - HELD THAT:- It is found that the date of communication of the Order of AAR, Rajasthan to the Appellant was 21.09.2021 and the appeal was filed on the portal on 19.10.2021. Thus, the Appellant have filed the appeal within statutory period of 30 days of date of communication of the Order of the AAR. Whether the supplies proposed by the Appellant in pursuance of the EPC contract with M/s Vedanta Limited are classifiable under SAC Heading No. 998621 of the Scheme of classification of services of under Heading 9983 or under Heading 9954? - HELD THAT:- The Appellant have not denied the fact that supply of service under the EPC Contract in question also involves transfer of property in goods. The only contention by the Appellant in this regard is that the scope of Heading 9986 does not exclude Works Contract Service. As can be seen from the appeal as also from the EPC Contract submitted by the Appellant, the Appellant have been assigned the work related to establishment of infrastructure for the proposed Sulphate removal plant as well as other facility - One of the important aspects of the EPC Contract is that Appellant are responsible for doing civil or structural work which includes jungle clearance, Gabion Wall mattress around the plot, foundation, structures, buildings like control building, sub-stations, switchyard, fire stations and sheds, roads, paving and drains etc. and the contract contains provisions which prescribe the quality of various types of material such as concrete for foundation and structural steel material. The Appellant shall also obtain all necessary approval. Coming to the proposed classification under Heading 998621 it is observed that the said heading covers support services to oil and gas extraction which is self explanatory in as much as the services proposed to be classified under this heading provide support to the main activity of oil and gas extraction and such activity of extraction eventually requires the infrastructure facilities established. These three parts of the entire gamut of oil and gas extraction are clearly distinguished from each other. Support service has to be essentially distinct from the main activity of oil and gas extraction. And establishment of infrastructure facilities in the form of SRP, pipelines, control buildings, sub-stations, switchyards, toilets and fire stations, to illustrate a few, is clearly a distinct feature of the activity of oil and gas extraction. Hence, support services to oil and gas extraction is clearly distinguishable from establishment of infrastructure facilities for oil and gas extraction and the former cannot be confused with the latter. Since, the Appellant have been tasked with establishment of Sulphate Removal Plant, the activities undertaken by the Appellant in pursuance of the EPC Contract cannot, by any stretch of imagination, be said to be support services to oil and gas extraction. The distinction between the activities undertaken by the Appellant in terms of the EPC contract and the activities included in the definition of SAC Heading No. 998621 is strikingly clear. Therefore, the activities undertaken by the Appellant in pursuance of the EPC Contract cannot be classified under SAC Heading No. 998621 as these are not in the nature of support services to oil and gas extraction. SAC Heading No. 998341 covers a wide range of activities which include provision of advice, guidance and operational assistance concerning the location of oil and gas fields including feasibility studies. But, it is observed that the Appellant have not proposed to undertake any such activity rather the Appellant have proposed to undertake establishment/ creation/ construction of infrastructure facilities for oil and gas extraction(execution of Sulphate Removal Plant) which are quite different and distinct from the advice concerning location of gas fields. SAC Heading No. 9954 of the Scheme of Classification covers the overall construction services with SAC Heading No. 995425 the general construction services of mines and industrial plants. The explanatory notes clarify that the said service code includes construction services for mining and related facilities associated with mining operations. Since, oil and gas exploration is also a form of mining; therefore, the construction services proposed to be supplied by the Appellant for execution of Sulphate Removal Plant are appropriately classifiable under the SAC Heading No. 9954. Since, the nature of supply justifies its classification as construction services of mining, it is observed that there is no conflict suggesting preference to specific description under SAC Heading No. 998621 to general description under SAC Heading No. 9954 because the nature of activities clearly indicates that the supply is classifiable under SAC Heading No. 9954. Entry Sl. No. 3(ii) of Notification No. 11/2017-CT(R), dated 28.06.2017 was omitted with effect from 01.04.2019 and, therefore, the supplies proposed to be undertaken by the Appellant could not have been eligible for the rate prescribed therein. However, it is observed that up to Notification No. 3/2019-CT (R), dated 29.03.2019, major changes have been made in the said entry under Sl. No. 3 of the basic Notification No. 11/2017-CT(R), dated 28.06.2017 to provide for different rates of tax for supplies under the categories of supply of construction services or supply of works contract services - the said item (xii) of entry at Sl. No. 3 of Notification No. 11/2017-CT(R), dated 28.06.2017, as amended up to Notification No. 3/2019-CT (R), dated 29.03.2019 prescribes Central Tax @ 9% on the supplies proposed to be undertaken in terms of the EPC Contract and therefore, the supplies proposed to be undertaken by the Appellant attract tax at the rate of 18%.
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2024 (3) TMI 44
Maintainability of Advance Ruling application - completed transaction - Supply or not - subsequent transfer of State Industries Promotion Corporation of Tamil Nadu Limited s (SIPCOT) allotted lease hold rights in the land from the Applicant to M/s. Kanta Flex (India) Private Limited - applicable HSN/SAC code and GST Rate - HELD THAT:- As the financial transactions relating to the instant issue, have been carried out in its entirety by 07.05.2022, i.e., the date of last payment, any liability arising out of the taxability or otherwise, on the instant transaction, ought to have been discharged at the relevant point of time by the applicant. Advance Ruling as the name suggests, are rulings pronounced upfront aimed at facilitating the trade on issues of ambiguous nature. The queries raised by the applicant relating to taxability and classification, if any, involved on the issue in question, need not be answered, inasmuch as the transaction stands completed already, before the filing of application by the applicant. The applicant cannot seek an advance ruling on a completed transaction as laid down in Section 95(a) of the CGST Act, 2017, and accordingly, this authority refrains from giving any ruling in this regard.
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2024 (3) TMI 43
Classification of supply - composite supply or not - job-work - Bonding of imported Carbon friction strips to Synchronizer core received from customers - activity undertaken by the Applicant amounts to supply of service (job-work service) under the accounting code 9988 or not - bonding of imported carbon friction strips to Synchronizer cores received from customers would amount to composite supply of goods under CTH 6815 or 8708? Supply or not - whether the activity undertaken by the Applicant amounts to supply of service (job-work service) under the accounting code 9988? - HELD THAT:- The activity of undertaken by the Applicant i.e. the process of bonding carbon friction strip with the metal component belonging to another person, will be supply of services in terms of Sl. No. 3 of the Schedule II to CGST Act, 2017 - the subject activity undertaken by the Applicant is a supply of service falling under SAC 9988. Whether the said activity would fall under the term job work? - HELD THAT:- The activity undertaken by the Applicant is a job work, as the Synchronizer core belongs to their customer, throughout the entire process, as stated by them - the job worker can use his own goods for providing the services of a job worker and therefore usage of imported carbon strips by the Applicant will not alter the nature of services provided as job work services. Whether the bonding of imported carbon friction strips to Synchronizer cores received from customers would amount to composite supply of goods under CTH 6815 or 8708? - HELD THAT:- The entire activity undertaken by the Applicant is a supply of service - job work service. The Applicant has mentioned in para 19 of their submission made along with the application that there are two supplies involved in their hands namely supply of specialized carbon friction strips and supply of services falling under heading SAC 9988 - there is a gross misunderstanding by the Applicant that there are two supplies involved. There is no supply of goods separately, as mentioned by the Applicant. The Applicant has bonded the carbon strips imported by them on the Synchronizer core belonging to their customer and the resultant product, after the job work being done, is sent back by the Applicant to their customers. The carbon strips are not sent separately under an invoice to treat that as a supply of goods. Further, as per provision contained in Section 7(1 A) of the CGST Act, 2017, it is expressly provided that certain activities or transactions shall be treated either as supply of goods or supply of services as referred to in Schedule II - when the law itself clearly states that the process undertaken on another person's goods is a supply of service, the question of composite supply does not come into picture. The concept of Composite Supply will be applied only when there is conscious supply of two or more taxable supply of goods or services or both. The Applicant is not supplying goods i.e. the carbon strips, separately, but they are binding these strips on to the component sent by their customers - the job worker can use his own goods for providing job work and the valuation of such services are as per Section 15 of the CGST Act. Thus, the entire job work activity is clearly stated as supply of service in Schedule II of the CGST Act, 2017, there remains no scope of doubt that along with supply of service there is also another the supply, i.e. supply of goods on the basis of component of materials used for providing the job work. The activity undertaken by the Applicant of Bonding of imported Carbon friction strips to Synchronizer core received from customers amounts to supply of job work services under SAC 9988.
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2024 (3) TMI 42
Seeking withdrawal of Advance Ruling Application - reversal of Input Tax Credit - HELD THAT:- After due consideration, taken on record, the letter dated 09.11.2023 of the Applicant, wherein they have stated that they have decided to withdraw the application ARA No. 47/2022 dated 26.08.2022 which was filed by them, as they have reversed the input tax credit. As the Applicant has stated their desire to withdraw of their Advance Ruling Application, their request is considered and the application is allowed to be treated as withdrawn without going into the merits or detailed facts of the case. The application filed by the Applicant seeking Advance Ruling is disposed as withdrawn as per the request of the Applicant.
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2024 (3) TMI 1
Violation of principles of natural justice or not - failure to afford opportunity of personal hearing - HELD THAT:- Upon service of notice the petitioner had been called to file its reply only. Non compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate in the oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped. On merits, learned counsel for the petitioner further states that detailed reply was not required. The discrepancies in the returns as noticed by the adjudicating authority would have been clarified if opportunity of personal hearing had been granted - the petitioner's business operations are lying closed since 2020. Therefore, for reasons of disruption of business operation, petitioner committed a mistake in not responding the notice, within time. Thus, no useful purpose may be served in keeping this petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy. The order impugned has been passed contrary to the mandatory procedure. The deficiency of procedure is self apparent and critical to the out come of the proceedings - matter is remitted to the respondent No. 3 to pass a fresh order. In that regard the petitioner may file its final reply to the show cause notice within two weeks from today - petition allowed by way of remand.
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Income Tax
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2024 (3) TMI 62
Assessment proceedings u/s 144C - period of limitation - faceless assessment regime - Reference to Dispute Resolution Panel - determine the ALP in relation to the international or specified domestic transaction - HELD THAT:- As is manifest from a reading of sub-section (13) of Section 144C of the Act, the AO is not accorded any discretion in the framing of an order of assessment once directions have come to be framed by the DRP. In fact, the provision requires the AO to frame an order of assessment in conformity with those directions and without providing any further opportunity of hearing to the assessee. This principle of law has been affirmed by the Bombay High Court in Vodafone Idea [ 2023 (11) TMI 449 - BOMBAY HIGH COURT] and in Shell India Markets Private Limited [ 2022 (2) TMI 1149 - BOMBAY HIGH COURT] which construe the time lines as provided in Section 144C to be mandatory in character. In our considered opinion, this interpretation is in accord with the intent behind insertion of that provision and the bare text and spirit of that section. Thus, we accord our approval to the interpretation as set out in the aforenoted decisions of the Bombay High Court. The procedure of assessment as provided u/s 144C does not envisage or contemplate the interdiction or involvement of the TPO once a directive has been framed by the DRP. The role of the TPO comes to an end once an order as contemplated under Section 92 CA(4) of the Act has come to be framed and remitted to the AO. There was thus no occasion for the TPO having resumed proceedings post the passing of the direction by the DRP on 20 June 2022. Undisputedly, the directive of the DRP came to be uploaded on the ITBA portal on 24 June 2022. It is additionally stated to have been dispatched through Speed Post to the third respondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27 June 2022. It is thereafter that the TPO appears to have passed the order dated 25 July 2022. Thus as per the provisions of E-as, 2019, all orders, notices and decisions have to be necessarily uploaded on the ITBA portal and as part of the larger faceless assessment regime which now holds the field. The uploading of the directive of the DRP on the ITBA portal would thus constitute valid and sufficient service and the period of limitation as prescribed in Section 144C(13) of the Act would be liable to be computed bearing that crucial date in mind. Once the aforesaid position becomes clear, it is evident that the order of assessment, if at all could have been framed lastly by 31 July 2022. There has thus been an abject failure on the part of the first respondent to comply with the mandatory timelines as incorporated in the aforenoted provisions. Accordingly, the writ petition is liable to be allowed and the impugned order of assessment and the consequential penalty proceedings are thus liable to be set aside on this short score alone. Decided in favour of assessee.
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2024 (3) TMI 61
Notice sent on wrong email addresses - Rejection of application filed for regular approval u/s 12AB citing the reason that the assessee has not furnished any explanations to the queries made by him - as argued since assessee did not receive any notice through post / email, the assessee was in the dark about the purported show cause notice, supposed to have been issued by the Ld. CIT(E) - HELD THAT:- Neither the show cause notice was never served upon the assessee by post nor on the correct email Id [email protected]. Instead it is noted that the notice from office of Ld. CIT(E) was issued on [email protected], which is not the email id of assessee. In such scenario, we find force in the submission of the Ld. AR that in the absence of the assessee being aware of the show cause notice [issued by the Ld. CIT(E)], the assessee cannot be faulted for not responding to the quires raised by the Ld. CIT(E) which in this case was never conveyed to the assessee. Therefore, the impugned action of the Ld. CIT(E) cannot be sustained and therefore we are inclined to set it aside and restore the application back to the file of the Ld. CIT(E) with a direction to sent notices to the correct registered email ID of assessee, and after giving proper opportunity to the assessee, the Ld CIT(E) to pass order in accordance to law. Appeal of the assessee is allowed for statistical purpose.
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2024 (3) TMI 41
TDS u/s 194H - commission payable to an agent by the assessees under the franchise/ distributorship agreement between the assessees and the franchisees/distributors - assessee cellular mobile service providers - nature of relationship between a principal and an agent - As per the assessees, neither are they paying a commission or brokerage to the franchisees/distributors, nor are the franchisees/distributors their agents. HELD THAT:- In franchise agreements, the supplier or the manufacture, i.e. a franchisor, appoints an independent enterprise as a franchisee through whom the franchisor supplies certain goods or services. There is a close relationship between a franchisor and a franchisee because a franchisee s operations are closely regulated, and this possibly is a distinction between a franchise agreement and a distributorship agreement. Franchise agreements are extremely detailed and complex. They may relate to distribution franchises, service franchises and production franchises. Notwithstanding the strict restrictions placed on the franchisees which may require the franchisee to sell only the franchised goods, operate in a specific location, maintain premises which are required to comply with certain requirements, and even sell according to specified prices the relationship may in a given case be that of an independent contractor. Facts of each case and the authority given by principal to the franchisees matter and are determinative. An independent contractor is free from control on the part of his employer, and is only subject to the terms of his contract. But an agent is not completely free from control, and the relationship to the extent of tasks entrusted by the principal to the agent are fiduciary. As contract with an independent agent depends upon the terms of the contract, sometimes an independent contractor looks like an agent from the point of view of the control exercisable over him, but on an overview of the entire relationship the tests specified in clauses (a) to (d) in paragraph 8 may not be satisfied. The distinction is that independent contractors work for themselves, even when they are employed for the purpose of creating contractual relations with the third persons. An independent contractor is not required to render accounts of the business, as it belongs to him and not his employer. Thus, the term agent denotes a relationship that is very different from that existing between a master and his servant, or between a principal and principal, or between an employer and his independent contractor. Although servants and independent contractors are parties to relationships in which one person acts for another, and thereby possesses the capacity to involve them in liability, yet the nature of the relationship and the kind of acts in question are sufficiently different to justify the exclusion of servants and independent contractors from the law relating to agency. The term agent should be restricted to one who has the power of affecting the legal position of his principal by the making of contracts, or the disposition of the principal s property; viz. an independent contractor who may, incidentally, also affect the legal position of his principal in other ways. This can be ascertained by referring to and examining the indicia mentioned in clauses (a) to (d) in paragraph 8 of this judgment. It is in the restricted sense in which the term agent is used in Explanation (i) to Section 194-H of the Act. We hold that the assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H of the Act is not applicable to the facts and circumstances of this case. Accordingly, the appeals filed by the assessee cellular mobile service providers, challenging the judgments of the High Courts of Delhi and Calcutta are allowed and these judgments are set aside. The appeals filed by the Revenue challenging the judgments of High Courts of Rajasthan, Karnataka and Bombay are dismissed.
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2024 (3) TMI 40
Validity of reopening of assessment - notice issued after expiry of four years - change of opinion - applicability of section 73 - HELD THAT:- The reasons recorded to believe that there is escapement of income from assessment does not even make an allegation that there was failure to truly and fully disclose material fact. On this ground alone, in our view, the notice issued under Section 148 of the Act impugned in the petition has been quashed and set aside. Moreover, the fact that Section 73 of the Act was a subject matter of consideration during the assessment proceedings, also cannot be disputed. This is because in the order rejecting Petitioner s objections, there is an admission that Section 73 of the Act was discussed during the assessment proceedings. Moreover, in the letter dated 29th February 2016, Assessee has elaborately discussed as to why Section 73 of the Act is not applicable. In fact, in the said letter even the explanation of Section 73(4) of the Act has also been extracted. Therefore, it is clear that the applicability of Section 73 of the Act was a subject of consideration during the assessment proceedings and as held by Aroni Commercials Limited ( 2014 (2) TMI 659 - BOMBAY HIGH COURT ), once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment and it is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. It would, therefore, follow that the reopening of assessment is merely based on the basis of change of opinion which does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.
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2024 (3) TMI 39
Validity of Reopening of assessment - reasons to believe - reliance on audit objection - treatment to be given for the corpus fund and whether this income of the corpus fund received by the petitioner in the relevant assessment year is exempt under Section 11 or not - HELD THAT:- In the present case, the provisions have been drastically changed with effect from 01.04.2022, and the audit objection is one of the reasons for reopening the assessment. If the revenue audit raises an objection that the assessment was not completed in accordance with the provisions of the Act, it cannot be treated as a change of opinion because this is the statutory prescription and statutory ground/reason for re-opening the assessment. Assessing Authority has proceeded strictly in accordance with the provisions of Clause (ii) of Explanation 1 to Section 148 of the Act. Therefore, find no error of law or jurisdiction in the impugned order. Therefore, the writ petition is dismissed. If the petitioner has not filed the return of his income in pursuance of the notice dated 07.02.2023 in Ext. P8, the petitioner may file his return within a period of four weeks.
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2024 (3) TMI 38
Re-opening of assessment u/s 147 - notice beyond period of four years - change in the opinion or a later decision on the legal aspects - reason for the re-assessment is that the assessee was not entitled to the exemption u/s 10B of the IT Act by reason of it not having an approval from the relevant authority, as provided in the explanation to the section - HELD THAT:- There is no contention that the assessee had originally withheld any information from the assessing authority. It is not contended that the assessee had suppressed any material or had not made available the approvals during the assessment or had induced the assessing authority to come to a wrong conclusion by any failure on the part of the assessee to disclose the relevant details. Apparently, what has occurred was a mistake on the part of the assessing authority in accepting the approval produced by the assessee to be an approval as required under Explanation 2 to Section 10B. It appears that later, the High Court of Delhi [ 2012 (9) TMI 627 - DELHI HIGH COURT] had held that the approval for the purpose of Section 10B can only be an approval granted by the Board constituted by the Central Government under the provisions of Industries (Development and Regulation) Act. This judgment of the Delhi High Court is the reason cited in respect of all the re-assessments. In WP it is additionally stated in the reasons that there was a failure on the part on the assessee to disclose fully and truly all relevant materials required for the assessment. However, neither in the notices or the assessment orders, nor in the counter affidavit is it stated that the assessee had failed to disclose any relevant information or had produced any fraudulent material during the assessment proceedings. The Apex Court in Parashuram Pottery Works Co. L.t.d v. Income Tax Officer [ 1976 (11) TMI 1 - SUPREME COURT] has specifically considered the issue and has held that the responsibility of the assessee is only to place the materials before the assessing officer and the assessee would not be responsible for the inferences made by the assessing authority on the basis of the materials that he has placed before the concerned authority. As further held by the Apex Court that a change in the opinion or a later decision on the legal aspects cannot be a reason for re-opening an assessment which has been concluded on the basis of the material which is made available in cases where the re-opening is attempted after 4 years, unless the assessee failed to disclose relevant information. In the cases before us the respondents have no case that the income chargeable to tax during the relevant assessment years had escaped assessment because of the failure on the part of the assessee to disclose any relevant material. It apparently is a case where the assessing authority had gone wrong in granting exemptions which were not liable to be granted in terms of the provisions of the statutes. If that be so, the 1st proviso would prevent the authorities from reopening the assessment after 4 years from the close of the assessment year, unless the income had escaped assessment on account of the failure of the assessee. Thus it is clear that in a case where there is no failure on the part of the assessee to disclose the materials and the failure was on the part of the assessing authority in drawing inferences on the basis of the materials placed the re-opening of the assessment after 4 years would be incompetent. The re-opening of the assessment in all these 3 cases are therefore found to be incompetent. Decided in favour of assessee.
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2024 (3) TMI 37
Disallowance of claim u/s. 90 of Foreign tax credit - Form-67 was filed belatedly - non-filing of Form-67 before the due date of filing of the return of income u/s. 139(1) - AR argued that debatable disallowances cannot be made through intimation u/s. 143(1) - mandatory or directory provisions - CIT(A) allowed claim - HELD THAT:- In the instant case, admittedly the return of income for the AY 2019-20 was filed on 31/10/2019 being the extended due date for filing of the return of income for that assessment year. In the impugned Intimation U/s. 143(1) of the Act passed on 13/3/2021 and the written submissions filed by the Ld. AR, we find that Form-67 was submitted on 17/2/2021. There is no dispute on the fact that Form-67 has been filed before the generation of Intimation U/s. 143(1) of the Act. In the instant case, Form-67 was filed on 17/2/2021 while the intimation U/s. 143(1) was passed on 13/3/2021. The facts of the case decided in Duraiswamy Kumaraswamy [ 2023 (11) TMI 1000 - MADRAS HIGH COURT ] are squarely applicable to the facts of the instant case wherein held returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. We therefore find no infirmity in the order of the Ld. CIT(A)-NFAC and accordingly the grounds raised by the Revenue deserves to be dismissed.
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2024 (3) TMI 36
Revision u/s 263 - admissibility of deduction u/s 54F - As per CIT Assessment assessment order is erroneous on account of noting this fact of the claim u/s. 54F being incorrectly allowed to the assessee since the land was purchased by the assessee beyond the alleged prescribed period of two years from the date of transfer of the original asset - HELD THAT:- As gone through the provisions of section 54F we agree that as per section 54F of the Act, a time period of three years is provided to the assessee for construction of a house property for claiming exemption of capital gains under the said section. Even DR was unable to controvert this interpretation of the provision of law before us. In view of the same, it is abundantly clear that in the present case that the CIT has misinterpreted the provision of law to hold that the assessee was ineligible to claim exemption u/s. 54F of the Act on the investment made in the land beyond two years since it was beyond the time limit prescribed in law and, accordingly holding the assessment order to be in error causing prejudice to the Revenue for having allowed the assessee this claim. Thus no reason to confirm the order of the CIT, finding his exercise of revisionary power to be based on an incorrect interpretation of the provisions of law on the issue - Appeal of the assessee is allowed.
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2024 (3) TMI 35
Validity of proceedings initiated u/s 147 - tangible material for reason to believe that income has escaped assessment - primary reason to believe escapement of income is alleged non filing of return for AY 2010-11 by the assessee - HELD THAT:- As the purported reasons to believe are based on the allegation that the assessee did not file her return of income, whereas, as a matter of fact the return of income was filed by the assessee. Evidence of filing e-return by the assessee on 29.10.2010 for AY 2010-11 and processing thereof on 21.02.2011 under section 143(1) of the Act appears at page 1 and 1A of the Paper Book. In proforma for obtaining approval of Ld. PCIT against column 8(a) also the information given by the Ld. AO is in negative to the question whether any voluntary return had already been filed . It is, therefore, obvious that the primary reason to believe escapement of income is alleged non filing of return for AY 2010-11 by the assessee which is contrary to the facts on record. The factum of non-consideration of ITR filed by the assessee on the part of the Ld. AO has been accepted by the Ld. CIT(A). Co-ordinate Bench of Delhi Tribunal [ 2019 (11) TMI 1002 - ITAT DELHI] relied upon the decision Braham Prakash Lakra [ 2019 (11) TMI 1002 - ITAT DELHI] AND Indo Arab Air Services [ 2015 (10) TMI 2383 - DELHI HIGH COURT] wherein the Hon ble Court observed that while law does not require AO to form definite opinion by conducting any detailed investigation regarding escapement of income from assessment, it certainly did require to form prima facie opinion based on tangible material which provide nexus or link to having reason to believe that income escaped assessment. Following the decisions (supra) and applying their ratio to the facts of the assessee s case we sustain CO No. 2 of the assessee which is sufficient to hold that the notice u/s 148 issued to the assessee is bad in law and deserves to be quashed. Taxability of enhanced compensation u/s 45(5) - year of assessment - HELD THAT:- CIT(A) was perfectly justified in deleting the impugned addition. CIT(A) recorded the finding that as per the given facts the enhanced compensation by way of the 550 sq. Meter plot was received on 12.06.2007 which implies AY 2008-09 and not AY 2010-11. Thus, the capital gain to be taxed under section 45(5)(b) of the Act should have been brought to tax in AY 2008-09 as per law and also as held by the Hon ble Supreme Court in the case of CIT vs. Ghanshyam (HUF) [ 2009 (7) TMI 12 - SUPREME COURT] This finding of the Ld. CIT(A) is fully in consonance with the principle of law laid down by the Hon ble Supreme Court in the decision (supra) Thus no material with the Ld. AO on the basis of which it could be established that enhanced compensation was received during the FY 2009- 10 relevant to AY 2010-11 under consideration. Decided in favour of assessee.
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2024 (3) TMI 34
TP Adjustment - Allowability of intergroup payment of management fees - principle of consistency - CIT(A) has partly allowed the claim of assessee - main contention of the A.R. is that the issue is already decided by this Tribunal in favour of the Assessee in earlier Assessment Years and the same to be followed - HELD THAT:- As various Courts/Tribunals have held that each year is distinct and different and it is to be governed by facts and circumstances of each year. Thus, the assessee contention that no adjustment in the current year is to be made on the issue of services because in earlier years no adjustment was made is of no consequence because in the case of intra Group Services, assessee has to establish receipt of services with convincing evidence/details for each year, which assessee has failed to prove and accordingly its case cannot be taken as precedent from earlier years decision. On going through the order of the TPO/AO which is speaking and detailed one, and based on the above discussion on evidences filed, it is absolutely clear that the assessee has failed to prove the rendition of services and the TPO/AO has rightly taken the ALP as nil on account of Assessee s failure to prove receipt of services along with the benefit received by assessee. Though the Need/ Benefit Test has been accepted as the valid ground for benchmarking of IGS by several authorities, but the disallowance has been made primarily on the rendition of services. Assessee has also stated that the TPO/AO cannot question the need or the benefit achieved by the assessee from services given by AE. As found that, though the TPO/has mentioned/asked about the benefit received, however the disallowance was mainly based on the assessee failure to prove the rendering receipt of services. It is surprising that though the assessee has relied on OECD guidelines, but at the same time it is forgetting that the OECD guidelines clearly provides for Benefit Test for payment of intra group services and also the benefit test is duly recognized as several countries as mentioned by TPO/OECD in its commentary. There is absolutely no rendering/receipt of services and the assessee has miserably failed to discharge the onus of providing the basic evidences with regard to so called services received from AE. Thus, the Assessee s appeal on this grounds deserves to be rejected and the grounds raised by the Revenue to be allowed on this issue. Interest on outstanding receivables from the AE - international transaction or not? - AO/TPO made addition by applying interest rate of 12.6% on account of interest on delayed receivables - HELD THAT:- The issue in hand has to be decided in favour of the assessee, following the ratio laid down by the Tribunal in earlier year for assessment year 2009-10 [ 2020 (2) TMI 1567 - ITAT DELHI] to delete the addition on account of interest outstanding receivables as held conclusion in the explanation to section 92B of the Act of the expiration receivables does not mean that de hors the context every item of receivables appearing in the accounts of an entity which may have dealings with the foreign AEs would be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of facts which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee will have to be studied. Therefore, the ground raised is to be decided in favour of the Assessee.
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2024 (3) TMI 33
TP Adjustment - Eligible International Transaction - interest on outstanding receivables from the AE in respect of invoices which had been realized beyond the agreed credit period of 60 days - determination of ALP on the fact that the Assessee has opted for the safe harbor regulations in accordance to Section 92CB of the Act read with Rule 10TA to Rule 10TG of the Rules - AO / TPO adopted interest rate calculated at LIBOR + 400 basis points and made an ALP adjustment - HELD THAT:- AR argument that since the assessee had offered the income by having a mark up of 25% which is the rate prescribed under the Safe Harbour Rules, no other ALP adjustment could be made by the revenue is not acceptable in view of the fact that if an item falls under the definition of Eligible International Transaction as defined in Rule 10TC of the Income Tax Rules (hereinafter referred to as the Rules). Definition of Eligible International Transaction in Rule 10TC is for the purpose of applicability of Safe Harbour Rules only. Hence the international transaction of interest on outstanding receivables does not figure in any of the clauses (i) to (x) in the aforesaid list. Hence the assessee would not be able to get the benefit of ALP adjustment getting subsumed in the mark up of 25% offered under Safe Harbour Rules. However, in consistent with various Tribunal decisions across the country, we hold that adoption of interest calculated on outstanding receivables at the rate of LIBOR + 200 basis points should be adopted as against LIBOR + 400 basis points. This in our considered opinion, would meet the ends of justice for both the sides. Accordingly, the grounds raised by the assessee are partly allowed.
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2024 (3) TMI 32
Validity of Revision u/s 263 - assessment order as already been settled under VSVS - HELD THAT:- As decided in Swatiben Biharilal Parekh [ 2023 (10) TMI 42 - GUJARAT HIGH COURT] as find that the Hon'ble Court has been pleased to observe opting the VSV Scheme and finalizing thereof is nothing but the closure of disputes in respect of tax arrears which cannot be subsequently reopened by issuing notice u/s 263 of the Act for revising the assessment order. Hence, we hold that the order passed u/s 263 on the assessment order which has already been settled under VSVS is invalid and the same is liable to be dismissed and quashed accordingly.
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2024 (3) TMI 31
Non-genuine Long term capital loss - attempt by assessee to somehow reduce tax liability by taking advantage of setting off of capital loss - no apparent commercial expediency in selling the shares incurring capital loss on these shares - HELD THAT:- We note that AO has not made proper enquiry in this regard. Similarly, the buyer has not been examined by the Revenue authorities. As submission of assessee that the value of shares of subsidiaries is not correct and that the value has been arrived at without giving assessee an opportunity to rebut. CIT (A) has passed an order in which he has tried to verify cursorily the claim of the assessee that the NAV of the shares of these companies has become negative. CIT (A) has embarked upon the valuation which the assessee contended that it is not based upon full details and assessee was not confronted also. In this view of the matter, in our considered view, there are shortcomings in the assessment order as well as in the order of ld. CIT (A) which need to be examined afresh. We refer to the decision of Kapurchand Shrimal [ 1981 (8) TMI 2 - SUPREME COURT ] wherein it is held that it is the duty of the appellate authority to correct the lacunae in the orders of the authority below and remit the matter with or without direction unless prohibited by law. In the present case, as already noted that there are shortcomings and lack of proper enquiry by the AO and the assessee has further contended that ld. CIT (A) has arrived at the valuation of the shares without giving the assessee an opportunity in this regard and the documents relied upon by the ld. CIT (A) are incomplete. In such circumstances, we deem it proper to remit the issue to the file of AO. AO shall consider the issue afresh. Disallowance of prior period expenses - CIT (A) elaborately considered the issue. He noted that on the issue of disallowance the same has already been found to be double addition and in the order passed u/s 154, the AO has deleted the addition. As regards, previous year expenditure we note that ld. CIT (A) has examined in detailed the nature of expenditure and his reasoning for classifying it as prior period expenditure is credible. Expenditure on Gifts and presents - We find that this addition has been made on ad hoc basis without bringing out necessary details. Hence, in our considered view, orders of authorities below on this issue are liable to be reversed. Accordingly, we hold that entire expenditure in this regard is allowable. Misc. expenses - CIT (A) on this issue examined the details and gave a finding that none of the expenditure could be said as not pertaining to the purpose of business of the assessee. He also noted that AO has not made out any case by brining any evidence whatsoever on record to show that some or any of the expenditure was not for the purpose of the business. Hence, in absence of any material brought on record by the AO, ld. CIT (A) directed to delete the addition in this regard. Disallowance of advisory fee paid - As per provisions of Section 48 of the Act, expenditure incurred wholly and exclusively in connection with transfer has to be deducted from the full value of consideration received or accruing as a result of such transfer of the capital asset. Thus, the action of A.O. in disallowing entire payment made by the appellant to JMMS cannot be justified by any standard even if he feels that the same is not incurred wholly and exclusively in connection with this transfer - As entire payment is wholly and exclusively in connection with the transfer under reference of shares of the appellant in EHIRCL and therefore AO was not justified in making even part disallowance. Disallowance of upfront fee paid - CIT (A) correctly held that the expenditure is allowable as revenue expenditure. Addition on account of royalty payment - CIT(A) correctly deleted addition as it is a clear cut case of revenue expenditure. Not only that, it has been allowed in earlier years also by the AO in full as revenue expenditure. Therefore, royalty payment is directed to be allowed in full.
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2024 (3) TMI 30
Revision u/s 263 - CIT setting aside the second reassessment order - time limit to take action u/s 263 - as submitted second reopening of the assessment is bad in the eyes of law because this notice was issued after expiry of four years - HELD THAT:- AO has not highlighted which information or details was not declared by the assessee fully and truly in its accounts. Therefore, we are of the view that this reopening is not sustainable and if this reopening is not sustainable, then notice of 263 could not be issued. It is observed that since no addition was made by the ld. AO, therefore, there was no occasion to challenge its reopening before the higher appellate forum but once Commissioner took cognizance u/s 263, then, the assessee has every right to defend itself, even before the Commissioner for dropping of the 263 proceeding on the ground that reopening is bad in the eyes of law. Assessee has received a sum from the Bank Account - There is no dispute that assessment was reopened for escapement of income of Rs. 15,00,000/-. No addition was made of this item. Commissioner has not categorically recorded in the show-cause notice that acceptance of Rs. 15,00,000/- is erroneous at the end of the ld. Assessing Officer. His show-cause notice just reflects all narrative of facts. Nowhere analytical examination for forming belief that AO has failed to conduct a particular enquiry qua loan of Rs. 15,00,000/- from M/s. Rupali Financial Consultants (P) Ltd. He simply observed that apart from this loan, there are other unsecured loan transaction, which remained to be examined and if no error is being found qua acceptance and genuineness of the loan from M/s. Rupali Financial Consultants (P) Ltd., no other issue could be examined. The ld. Commissioner has erred in travelling in that area. Unsecured loan received from various loan creditors - Observation of the ld. Commissioner would reflect that he was taking note of the fact only from the accounts of the assessee. Thus such aspect should have been examined at the first step when scrutiny assessment was made. It cannot be put off for waiting reopening of assessment in 2019 so that exercise under section 263 would be carried out in 2022. In the present case original assessment was passed u/s 143(3) on 13.11.2014. The process of computation of income commenced when assessee has filed the return of income on 29.09.2012 and it attained finality on 13.11.2014 when scrutiny assessment was passed. Thereafter all reopening would be taken up qua any escaped income. In none of the notices of reopening issued, all unsecured loans were ever taken up by the ld. AO. Therefore, if any error has crept in the computation of income, then, it should be construed when the original assessment order u/s 143(3) was passed. Commissioner should find fault in this order and should take corrective measure qua this order under section 263, but he did not and by now the time limit to take action u/s 263 has expired. In sub-section (2) of section 263, it has been contemplated that no order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which orders sought to be revised, was passed. The original error crept in the assessment order dated 31.11.2014. The two years from end of March, 2015 ought to be calculated. Therefore, 263 notice is not sustainable. Taking into consideration all these three fold of contentions raised by the assessee, we are of the view that the impugned order passed under section 263 is not sustainable. Decided in favour of assessee.
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2024 (3) TMI 29
Unexplained credits u/s. 68 - cash claimed to have been received by the assessee from recovery of farmers' advances earlier granted - onus to prove - addition made based on non-appearance of few farmers - CIT(A) deleted the addition - HELD THAT:- As no independent enquiries were made by Ld. AO to support the impugned addition made u/s 68 for AY 2016-17 - as further be seen that during assessment proceedings for AY 2017-18, certain enquiries, on sample basis were done AO. In this year, Ld. AO selected, on sample basis, the details of 48 farmers and forwarded them to DCIT, Kolhapur for verification of the same. Out of this list, 21 farmers filed details along with confirmation letters which completely matched with the details furnished by the assessee. The remaining 28 farmers did not appear. Merely because some farmers did not turn up, no adverse inference could be drawn since the assessee had discharged the primary onus of furnishing the requisite details to Ld. AO and it was onus of Ld. AO to controvert the same . However, there is nothing on record which would show that the details furnished by the assessee were not correct. There is not material on record to controvert the details furnished by the assessee. Once the debtors balance is accepted, the recovery of the same could not be doubted unless some positive material was brought on record to establish that the cash was not received by the assessee from such debtors. As noted that the assessee has made further recoveries during AY 2016-17 and 2017-18 which have duly been credited in the cash book. The cash balance available with the assessee has been deposited in the bank and the same has been used to settle the bank loan taken by the assessee. Thus, the source of cash deposit was cash balance as available with the assessee in the books of accounts. In such a case, the impugned additions as made u/s 68 for AY 2016-17 has no legs to stand. The addition made u/s 69A in AY 2017-18 has also no basis since the cash deposited by the assessee is duly supported by the cash balance as available with the assessee in the cash book. The cash so deposited could not be termed as unexplained money for the assessee. The stand of Ld. AO is also fallacious since the addition made for Rs. 19.22 Crores in AY 2016-17 is a double addition as evident from the fact that the assessee has received aggregate advances of Rs. 39.78 Crores from the farmers and deposited the same during demonetized period. Out of this, an amount of Rs. 19.22 Crores has been added in AY 2016-17 whereas the Ld. AO has considered the entire amount of Rs. 39.78 Crores in AY 2017-18 again for the purpose of making the proportionate addition. We are also concur with the observations of Ld. CIT(A) that Ld. AO made artificial distinction between the 21 farmers who have appeared in response to summons issued by DCIT, Circle-2, Kolhapur and gave their confirmations and the remaining 27 farmers who have not responded to the summons issued for examination. The AO considered the claim of recovery of advances from the 21 farmers as genuine whereas he considered the claim of recovery of advances from the 27 farmers as unsubstantiated and bogus one. Such a conclusion is unjustified since AO is accepting only a part of the explanation offered by the assessee while accepting the fact that the assessee made advances to farmers in earlier years. No adverse conclusion could be drawn against the assessee for non-appearance of remaining farmers since the assessee had discharged the primary onus by producing confirmation letters from the farmers - Decided in favour of assessee.
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Customs
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2024 (3) TMI 28
Levy of customs duty - Aviation Turbine Fuel (ATF) - confiscation u/s 111 (f) (j) and (m) - penalty - Whether fine is required to be imposed on the non-prohibited goods once held confiscated and whether fine in lieu of confiscation of ATF is required to be imposed by the Commissioner - inclusion of freight insurance and landing charges as to the FOB value to determine the duty on the ATF - HELD THAT:- As per section 125 when goods are confiscated an option may be given in case of prohibited goods and shall be given in the case of other goods to the importer to pay a redemption fine in lieu of confiscation. If the importer opts to pay the redemption fine and pays it, the goods will be returned to the importer. If the importer does not opt to pay the redemption fine, the goods will stand confiscated. In this case, although the goods were confiscated it was only a notional confiscation because the goods were not available at all. The case of the Revenue is the redemption fine must have been imposed in lieu of confiscation. We do not find any force in this submission of the Revenue. If the redemption fine is imposed, it cannot be extracted from the respondents because redemption fine is only an option and the respondent may not opt for it. If the respondents opts for it and pays the redemption fine then Revenue will have to return the confiscated goods which the Revenue cannot do in this case because the goods no longer exist. Valuation - The cost of the freight, transit insurance and the landing charges being ascertainable as NIL, they cannot be included in the value of the ATF. In the appellant s own case in Customs Appeal, this Tribunal by its final order [ 2018 (4) TMI 785 - CESTAT NEW DELHI] held that the cost of freight, insurance and landing charges need not be included while arising the duty on the ATF consumed in the fuel tank of the aircraft. This Tribunal has also held so in final order in the appellant s own case [ 2019 (4) TMI 2132 - CESTAT NEW DELHI] . Thus, we find no force in the appeal of the Revenue. Accordingly, the appeal is dismissed and the impugned order is upheld with consequential relief, if any, to the respondent - The miscellaneous application also stands disposed of.
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Corporate Laws
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2024 (3) TMI 27
Professional Misconduct - Chartered Accountant (CA) - Significant failures to adhere to Standards on Auditing (SAs), gross negligence, and lack of professional skepticism - Non-recognition of interest cost on Bank Borrowings classified as NPAs - False reporting under CARO - Failure in performing of required audit procedures - Inappropriate Opinion on the Financial Statement for the FYs 2014-15 to 2016-17 - Non-implementation of Quality Control Measures at the Engagement Level - Non-submission of Audit File for the FY 2014-15 - penalty and sanctions. HELD THAT:- The EP has made departures from the Standards and the Law, in his conduct of the audit of Bilcare Limited for the FYs 2014-15, 2015-16 and 2016-17. In light of the foregoing discussion, findings on each article of charge listed out in the SCN, are stated below: (a) The EP committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the CA Act, which states that a CA is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity . This charge is proved as the EP failed to disclose in his report the material non-compliances by the company as explained in Para 16-22 above. (b) The EP committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the CA Act, which states that a CA is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity . This charge is proved as the EP failed to disclose in his report the material non-compliances by the company as explained in Para 16-22 above. (c) The EP committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the CA Act, which states that a CA is guilty of professional misconduct when he does not exercise due diligence or is grossly negligent in the conduct of his professional duties . This charge is proved as the EP failed to exercise due diligence in the audit of the company in accordance with the SAs and applicable regulations, as explained in Para 16-44 above. (d) The EP committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the CA Act, which states that an EP is guilty of professional misconduct when he fails to obtain sufficient information which is necessary for expression of an opinion, or its exceptions are sufficiently material to negate the expression of an opinion . This charge is proved as the EP failed to conduct the audit in accordance with the SAs and applicable regulations and failed to analyse and report the appropriateness of accounting policy for recognition of interest cost on NPA loans in the financial statements as explained in Para 16-44 above. (e) The EP committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the CA Act, which states that an EP is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances . This charge is proved since the EP failed to conduct the audit in accordance with the SAs as explained in Para 16-44 above. Therefore, it is concluded that the charges of professional misconduct enumerated in the SCN dated 14.07.2023 stand proved based on the evidence in the Audit File, the Audit Report issued by EP, the submissions made by EP, the annual report of Bilcare for the FYs and other materials available on record. Penalty and sanctions - HELD THAT:- It is the duty of an auditor to conduct the audit with professional skepticism and due diligence and report his opinion in an unbiased manner. Statutory audits provide useful information to the stakeholders and public, based on which they make their decisions on their investments or do transactions with the public interest entity - Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proven cases of professional misconduct are to be viewed, is evident from the fact that a minimum punishment is laid down by the law. Considering the proven professional misconduct, the nature of violations, principles of proportionality and deterrence against future professional misconduct, we in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, hereby order: I. Imposition of a monetary penalty of Rs 3,00,000/- upon CA Ratan Laxminarayan Rathi; II. In addition, CA Ratan Laxminarayan Rathi is debarred for 2 years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
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Insolvency & Bankruptcy
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2024 (3) TMI 26
Order of replacement of the appellant by another Resolution Professional - HELD THAT:- The impugned orders are in conformity with the principles laid down in Section 27 of the Insolvency and Bankruptcy Code, 2016. In view of this position, no case for interference with the impugned orders is made out. Appeal dismissed.
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2024 (3) TMI 25
Maintainability of petition - Declaration sought that the petitioners are not liable to pay any transfer fee as demanded in the notices - seeking to issue mandamus upon the respondents and/or its officers and/or its men and/or its agents and/or its servants to cancel, rescind and revoke the notices - prohibition on respondent and/or its officers and/or its men and/or its agents and/or its servants and/or its assignees from giving any effect or further effect - prohibiting the respondents, their men, agents, servants, subordinates and each one of them from in any manner disturbing or interfering with fullest enjoyment of the rights of the sub-lessee under the sublease. Maintainability of petition - appeal preferred before the learned NCLAT in view of apprehension of a belated and illegal demand for purported transfer fees from the first respondent in respect of the Kharagpur land - HELD THAT:- The appellants have incessantly tried to convince this Court that waiver of transfer fee was approved by the NCLT, NCLAT and the Hon ble Supreme Court whereas the fact is otherwise. The waiver as recorded in clause 15.15.5 of the Resolution Plan was not approved by any of the forums and it was unanimously held that such waiver was left open for determination of appropriate authorities, if applied for. Therefore it is crystal clear that the petitioners have made an attempt to obtain an order in their favour by misleading the Court and misconstruing the contents of the orders passed by the NCLT, NCLAT and the Hon ble Supreme Court deliberately. Challenge to notices issued by the WBIDC on April 26, 2022 and July 6, 2022 - challenge on the ground that demand raised therein is in violation of the orders passed by the NCLT, NCLAT as well as the Hon ble Supreme Court - HELD THAT:- The authorities relied upon by the petitioners demonstrate that once a Resolution Plan is duly approved by the adjudicating authority under section 31(1), the claims as provided in the Resolution Plan shall stand frozen and will be binding on the corporate debtor and its employees and also, all such claims which are not part of the Resolution Plan shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the Resolution Plan. The Hon ble Supreme Court as well as this Court has held in various judgments that change in shareholding of a company does not amount to transfer of its lease-hold interest on the plot in question which will call for payment of permission fees. Unless there is express transfer or assignment of a lease in favour of some other party, it cannot be ordinarily said that there is assignment or transfer of the lease merely because there is transfer of shareholding. It is trite law that no demand which is not part of the approved Resolution Plan can be raised subsequently. Clause 15.15.5 of the Resolution Plan is reproduced herein below for proper appreciation of the matter in issue - In the case in hand, clause 15.15.5 of the Resolution Plan was not approved at all, thereby authorizing the WBIDC to raise the demand impugned. There is nothing on record to suggest that the petitioners approached the respective authorities for exemption of transfer fee prior to issuance of the notice impugned by the authority. This Court is inclined to hold that the notices impugned issued by the WBIDC are in conformity with the terms of the Resolution Plan and there is no illegality or irregularity in the notices which calls for interference by this Court - Petition dismissed.
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2024 (3) TMI 24
While permitting withdrawal of Section 9 Application, Adjudicating Authority did not grant liberty to the Appellant to reapproach the Adjudicating Authority in the event of breach of Memorandum of Understanding - HELD THAT:- There was no undertaking by the Operational Creditor that Operational Creditor shall not pursue this matter on the basis of settlement reached between the parties. What was undertaken that in view of the settlement between the parties an application shall be filed for withdrawal/ closure of CIRP - very basis of denial to grant further liberty to the Appellant to reapproach the Adjudicating Authority was fallacious, as the MoU only states that in view of the agreement between the parties, both the parties shall file an application for withdrawal of Section 9 Application, for which no exception can be taken and the Adjudicating Authority rightly allowed the application for withdrawal. However, the MoU cannot be read to mean that the Operational Creditor has relinquished its right to make any further application before the Adjudicating Authority in event any default is committed by the Corporate Debtor. There was no occasion for declining any further liberty to the Operational Creditor to reapproach to the Adjudicating Authority at the stage when Section 9 Application was withdrawn on the basis of Section 12A Application. In the MoU, between the parties, neither there was any specific prayer made for revival of the CIRP, nor there was any statement that Operational Creditor has relinquished its right to revive the CIRP. The learned Counsel for the Respondent has relied on judgment of this Tribunal in Amrit Kumar Agrawal vs. Tempo Appliances Pvt. Ltd. [ 2020 (11) TMI 993 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ]. In the said case, Section 7 Application was dismissed on the ground of default in payment of Settlement Agreement holding that the debt does not come under the definition of financial debt. In the above case, MoU was entered on 22.09.2017 between the Appellant and the Principal Borrower, where Respondent stood as Guarantor. Since, cheques issued by Principal Borrower, were dis-honoured on presentation, the Respondent as guarantor came forward to pay the outstanding amount of Rs.86 lakhs with interest and issued two cheques in consideration of such liability. This Tribunal held that mere obligation to pay does not bring the liability within the ambit of financial debt . The above case is clearly distinguishable from the facts of the present case. In the present case, MoU was entered between the parties in proceedings under Section 9, with regard to which default was committed by the Corporate Debtor. The said judgment has no application in the present case. The order of the Adjudicating Authority insofar as it declines liberty to the Applicant to reapproach the Adjudicating Authority is set aside. The Appeal is partly allowed
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2024 (3) TMI 23
CIRP - Jurisdiction of the Adjudicating Authority to direct consideration of a settlement proposal after approval of a Resolution Plan. - Appellant (Successful Resolution Applicant - SRA) submits that after approval of Resolution Plan of the Appellant by the CoC, there was no occasion for directing consideration of fresh settlement proposal submitted by Ex. Directors to be placed before the CoC - HELD THAT:- The Adjudicating Authority, ought to have allowed opportunity to SRA to respond to the Application (IA No.188 of 2024 filed by Respondent Nos.1 and 2), whose Resolution Plan has been approved by the CoC and which is pending consideration before the Adjudicating Authority. Without giving an opportunity to the Appellant, direction to the CoC to consider the Plan, cannot be sustained. The Application for approval of Resolution Plan being pending consideration, it shall be open for the Adjudicating Authority to consider IA No.188 of 2024 along with its objection. The impugned order set aside - appeal disposed off.
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2024 (3) TMI 22
Rejection of section 9 application filed by the Appellant - pre-existing dispute - Allegations have been made in the email that excess amount has been paid to the Appellant and email also says that excess amount should be refunded - HELD THAT:- The submissions of the Learned Counsel for the Appellant that work was completed in March, 2021 and email sent was only moonshine defence cannot be accepted. Averments made in the email raises clear dispute which cannot be said to be moonshine. As per the submission of the Appellant that Corporate Debtor has taken input on the tax invoice sent by the Appellant. It is on record that advance payments were made by the Corporate Debtor and issues whether input tax taken is in excess is the issue which could not be gone into in proceeding under Section 9 of the Code. It is observed that it shall be open for the Appellant to take such remedy as available under the contract if there are any dues. Appeal dismissed.
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2024 (3) TMI 21
Withdrawal of CIRP - main contention of the appellant is that as per the provisions of Section 12A of IBC, 2016, CIRP can be withdrawn only on the application of the applicant who had filed the application under Section 7, Section 9 or Section 10 of the Code - HELD THAT:- The Adjudicating Authority has over looked and ignored the fact that Form FA has not been signed by the applicant of application under Section 9 of IBC, 2016. No finding in this regard has been given in the impugned order. The submissions of IRP requesting that the case may be remitted back to NCLT, Chennai as the corporate debtor has failed to honour the settlement agreement is considered - It is held that the Form FA was not proper, and was not as prescribed under the provisions of Regulation 30A of IBBI (CIRP) Regulations, 2016 and Section 12A of IBC, 2016 and hold that withdrawal of CIRP was not correct as per Law. The impugned order dated 09.11.2022 is set aside. Appeal allowed.
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2024 (3) TMI 20
Eviction of the Appellant from the property - handing over the possession of the property in question to the RP (now Liquidator) within 15 days from the passing of the order and the Statutory Authorities i.e. Local Police - HELD THAT:- Section 60(5) of the Code provides the power to the Adjudicating Authority which can be invoked to entertain or dispose of any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and also any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. Section 238 of the Code creates an overriding effect which provides that the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. It was held by the Hon ble Supreme Court in Gujarat Urja [ 2021 (3) TMI 340 - SUPREME COURT ] that the NCLT has the jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor but it has also been held that while doing so, the Tribunal may not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the corporate debtor and nexus with the insolvency of the corporate debtor must exist - The termination is not on a ground independent of the insolvency, therefore, the dispute in that case solely arising out of and relates to the insolvency of the corporate debtor and it was thus held that the RP can approach the NCLT for adjudication of the dispute that were related to the insolvency resolution. Similarly, in the present case also, the issue is in regard to the title of the property of the Corporate Debtor which is in CIRP and as per Section 60(5)(c) of the Code the question of fact as to whether the asset of the Corporate Debtor is the property of the Appellant on account of the agreement or is the property of the Corporate Debtor in CIRP is a question relating to the insolvency resolution. It is also pertinent to mention that the argument raised by the Appellant that the Appellant is entitled to double of the earnest money paid towards the part performance, in view of clause 7 of the agreement is concerned, it would not apply to this case because there was no denial on the part of the Corporate Debtor for the execution of the sale deed rather it was agreed by both the parties that the Appellant shall complete his part of the contract by 30.11.2018 which he had failed to perform, therefore, there are no substance in this argument as well. There is hardly any merit in this appeal which requires interference by this Court - Appeal dismissed.
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FEMA
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2024 (3) TMI 19
Adjudication made under FEMA Act - Non issuance of show cause notice as well as non giving of an opportunity of being heard within the meaning of Section 16 of the Act r/w Rule 4(1) and 4(3) of the Rules certainly would amount to violation of principles of natural justice - as decided by HC [ 2023 (12) TMI 914 - MADRAS HIGH COURT] notice as contemplated under the Act as well as the Rules as discussed herein above have been served on these noticees and Merely because at the time of serving the notice, these noticees were not available at the address at Bengaluru would not ipso facto entile them to claim immunity that the notices served on them at the Bengaluru address cannot be construed as a notice within the meaning of Section 16 r/w Rule 4(1) and Rule 14(b) or (c) of the Rules. HELD THAT:- We are not inclined to interfere with the impugned judgment, but observe that the petitioners have a right to file an appeal under Section 19 of the Foreign Exchange Management Act, 1999. However, we clarify that the observations and findings recorded in the impugned judgment are tentative and prima facie.The appellate tribunal will be entitled to go into all issues and contentions in accordance with law. Recording the aforesaid, the special leave petitions are dismissed.Pending application(s), if any, shall stand disposed of.
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Service Tax
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2024 (3) TMI 18
Invocation of Extended period of Limitation - SCN is ex facie beyond the prescribed limitation as provided for under proviso to Section 37C(2) of the Central Excise Act, 1944, as the same has been issued beyond the period of five years or not - HELD THAT:- Considering the fact that the show cause notice was issued on 25 April 2022, the basis for which even assuming is the date of the petitioner s filing of the Service Tax return on 25 April 2017, as per the provisions of Section 37C(2) of the Central Excise Act, what would be relevant is the delivery of the show cause notice which was admittedly on 28 April 2022. Prima facie, the show cause notice appears to have been received by the petitioner on 28 April 2022, which is certainly not within five years as per the proviso below Section 73 of the Finance Act, 1994 would mandate, so as to fall within such extended period of limitation. On this it is not found that there would be any serious disputed question of fact, on which a finding on evidence would be required to be recorded - If the law provides that the show cause notice is rendered bad, if either not issued or received by assessee as provided under the said provision (Section 73), then certainly the issue would become a jurisdictional issue and any adjudication of the same would be unwarranted. This apart, there are other issues as to whether, in the facts of the present case, the respondent could have invoked the reverse charge mechanism, so as to tax the petitioner retrospectively on the transaction which had taken place between TTL and Aqua, both of which were Mauritius based companies and beyond the territorial jurisdiction of the respondent Nos. 2 3 - For aforesaid reasons, the petition would require a final hearing. Pending the hearing and final disposal of this petition, the impugned show cause notice shall remain stayed.
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2024 (3) TMI 17
Levy of service tax - assignment of certain rights in the cinematograph films as representing temporary transfer or permitting use or enjoyment of intellectual property i.e., copyright - HELD THAT:- The question as to whether a particular transaction would attract the levy of Service Tax as constituting a taxable service within the meaning of 65(105)(zzzzt) prior to 01.07.2012 or Section 66B read with Section 65B(44) and Section 66E(c) w.e.f. 01.07.2012 ought to be determined on the basis of the contracts entered into between the service provider and the recipient. One cannot generalize the transactions nor determine the liability without examining the contracts individually for the rights/ obligations flowing therefrom may vary from contract to contract. This would be evident by the very fact that some of the contracts have been treated by the respondents in the writ appeals as representing temporary transfers thereby attracting the levy of Service Tax, while other contracts are understood by the respondents as resulting in perpetual transfers i.e., permanent and not temporary, thus outside the purview of levy of Service Tax. The matters may be remitted back to the assessing authority for fresh adjudication - Petition disposed off.
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2024 (3) TMI 16
Levy of service tax - Renting of Immovable Property service - fee charges recovered by the appellant - period from June 2011 to March 3012 - HELD THAT:- The matter is no longer res-integra as this Tribunal in the case of NAGAR NIGAM VERSUS C.C.E. S.T. -MEERUT-I [ 2018 (12) TMI 1039 - CESTAT NEW DELHI] where it was held that we are of the opinion that the authority below has wrongly considered it as a service being rendered by the appellant to the said traders. In such scenario, emphasis on the definition of renting of immovable property under the Finance Act has no more significance. Further we observe that the Government of India, Ministry of Finance has given the clarification on the issue regarding the levy of tax on the services provided by Government or the local authorities to be business entity vide circular dated 13th April, 2016. Perusal thereof makes it clear that tax on taxes/cesses or duties are not leviable. Following the above decision and because of the fact that the appellant have only collected fee and not rent, the impugned order-in-appeal is without any merit and the same is set-aside - appeal allowed.
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2024 (3) TMI 15
Levy of service tax - Stock Broker s Services - Banking Other Financial Services - transaction charges - delayed payment charges - Extended period of limitation - interest - penalty. Transaction charges - HELD THAT:- The transaction charges collected by the appellant are not in relation to the provision of taxable service but the same are collected from the clients and are remitted to the stock exchange. Therefore, applying the principle that any receipt other than brokerage or commission is not exigible to service tax under the category of stock broker service, the appellant cannot be saddled with the liability of service tax on the transaction charges. Delayed payment charges (DPC) - HELD THAT:- The appellant had made payments to Stock Exchanges on behalf of their clients who delayed the payments against their transactions of securities and the appellant charged the DPC from the said clients by making debit entries in their ledgers which cannot be termed as consideration for the service rendered - The learned Counsel for the appellant has also referred to a recent decision of the Mumbai Bench in M/S IIFL HOLDING LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, MUMBAI CENTRAL (VICE-VERSA) [ 2024 (2) TMI 967 - CESTAT MUMBAI ] wherein after quoting the observations in M/S RELIGARE SECURITIES LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2014 (4) TMI 588 - CESTAT NEW DELHI] , the demand on the assessee in respect of delayed payment of charges paid by the clients for the actual delay, if any, in payment for the purchase of shares or other stocks was set aside as it in no way, can be considered as service of tolerating or refraining from an act, or to tolerate an act or a situation, or to do an act - demand set aside. Extended period of limitation - interest - penalty - HELD THAT:- As the issue decided on merits in favour of the appellant, the other consequential issues of extended period of limitation, interest and penalty does not require any consideration although the same is covered by the observations made by the Tribunal in LSE SECURITIES LTD. VERSUS CCE [ 2012 (6) TMI 364 - CESTAT, NEW DELHI] that there persisted several confusion between the revenue and the appellants in respect to determination of accessible value of taxable service provided by the stock brokers and therefore there was a bona fide belief that there was no levy on receipts other than commission or brokerage received by the stock broker and consequently, no suppression of material facts can be attributed on the appellant with intent to evade payment of duty. Thus, no demand of service tax both can be raised on the appellant on account of transaction charges and delayed payment charges - the impugned order set aside - appeal allowed.
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2024 (3) TMI 14
Short payment of service tax - difference in the figures found in the Trial Balance as compared to the figures declared in the ST-3 returns - suppression of facts or not - invocation of extended period of limitation - imposition of penalties - HELD THAT:- It is a settled principle of law that service tax can be levied only when there is clear identification of a service provider service recipient and consideration paid for the same. In the absence of any such evidence of the service recipient and the service provided, service tax cannot be demanded and confirmed. For this reason, it is not open for the Department to raise demands on the basis of other statutory returns or balance sheets without proving that such service has been rendered by the appellant and consideration thereof has been received. The Tribunal in a catena of decisions has held that it is well settled law that no demand can be confirmed by comparing the ST -3 returns with balance sheet figures, in the absence of any evidence to the contrary that income in the balance sheet, if excess, reflects the provision of taxable service. As it is the Revenue authorities who have made the allegations of on payment of tax, and as such, the onus to prove the said allegation lies with them to substantiate the allegations. In the case of PRINCIPAL COMMISSIONER CGST CENTRAL EXCISE, MUMBAI EAST VERSUS M/S. SBI LIFE INSURANCE COMPANY LTD. [ 2024 (1) TMI 1161 - CESTAT MUMBAI] , the Tribunal held that demand/penalty on the basis of difference between ST-3 Returns and Income tax returns of any period, without further examination to establish that the difference is on account consideration received towards discharge of services, cannot be sustained. Thus, mere difference in figures appearing in the trial balance as compared to the ST 3 returns without any corroborative evidence that taxable services had indeed been provided by the appellant cannot be upheld - Further, it is a fact on record that the appellant was filing his ST-3 returns regularly. The Department did not raise any query or seek any clarification from the appellant. Thereafter, merely on the basis of audit observation as per the figures of Trial Balance, the Revenue, cannot, at this stage allege suppression. The impugned order cannot be sustained and is set aside - Appeal allowed.
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2024 (3) TMI 13
Adjustment of Cenvat credit against the total tax liability of the same period - While demanding the service tax, the availability of the Cenvat credit was ignored - HELD THAT:- If it is found that during the relevant period of liability of the service tax, on the basis of documents if the Cenvat credit is available the same needs to be adjusted against the total service tax liability. This aspect can be verified from the input/input service invoice and books of account of the appellant. Accordingly, in case of availability of Cenvat credit the same needs to be extended for adjustment against the total service tax liability. However, this issue on factual matrix needs to be verified. Matter remanded to the adjudicating authority for passing a fresh order - Appeal is allowed by way of remand to the adjudicating authority.
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2024 (3) TMI 12
Liability on sub -contractor to pay service tax - security service - service of manpower assistance given to M/s. Reliance Group Security Services (RGSS), who was the actual security provider - directions of the Tribunal not followed - violation of principles of natural justice - HELD THAT:- The Tribunal while remanding the matter to the Adjudicating Authority made the certain observations. From the above remand order it can be seen that this Tribunal categorically observed that in de-novo adjudication, matter on the issue of limitation and also on the liability of service tax on sub contractor to be decided considering the judgments cited therein. On perusal of the order, it is found that the Adjudicating Authority has not touched upon any of the judgments cited by the appellant and recorded by the Tribunal in the order dated 22.09.2010, therefore, the adjudicating authority gravely erred in not following the directions of the Tribunal and thus seriously violated the principle of natural justice. Entire matter needs to re-considered following the directions given by this Tribunal in the order dated 22.09.2010 - impugned order set aside - appeal allowed by way of remand.
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2024 (3) TMI 11
Demand of service tax with interest and penalty - demand sought on the basis of the income from sale of service shown in the Balance Sheet and the ITR Returns - HELD THAT:- Revenue takes the stand that in the Negative List regime, Department is not obliged to prove the provision of a particular service to demand service tax and further, the Appellants could not explain that the difference satisfactorily. I find that this is not the correct approach; exigibility to service tax depends on the service provider, service rendered, service recipient and the consideration thereof. Unless these four elements have been connected logically, demand of service tax cannot be confirmed merely on the basis of figures reflected in other statutory records. Be it pre or post-Negative List regime, the Department is under obligation to prove that the Appellants have rendered such and such service and to such and such persons and that the consideration was received towards the rendering of such service. Without doing the same, demand merely on the basis of figures does not survive. Tribunal has been continuously holding that such demands are not sustainable. Chandigarh Bench of this Tribunal in the case of M/S INDIAN MACHINE TOOLS MANUFACTURERS ASSOCIATION VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PANCHKULA [ 2023 (9) TMI 815 - CESTAT CHANDIGARH] held it is a settled principle of law that service tax can be levied only when there is a clear identification of service provider, service recipient and consideration paid for the same. In the absence of any such evidence of the service recipient and the service provided, service tax cannot be demanded and confirmed. The Impugned Orders cannot be legally sustained - Appeal allowed.
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2024 (3) TMI 10
Levy of service tax - remuneration paid by the Appellant to its directors - reverse charge mechanism - HELD THAT:- In the light of the records submitted by the Appellants, in terms of Board Resolution and Income tax returns submitted under Form 16, it is opined that the Directors have been appointed as employees of the Appellant s Company - the matter is no longer res- integra as the same has already been deliberated upon and decided by this Tribunal. The issue has been squarely covered by this Tribunal under similar facts and circumstances. In the case of M/S BENGAL BEVERAGES PVT. LTD. VERSUS CGST EXCISE, HOWRAH [ 2020 (11) TMI 622 - CESTAT KOLKATA] , it was held that the whole-time Director is essentially an employee of the Company and accordingly, whatever remuneration is being paid in conformity with the provisions of the Companies Act, is pursuant to employer-employee relationship and the mere fact that the whole-time Director is compensated by way of variable pay will not in any manner alter or dilute the position of employer-employee status between the company assessee and the whole-time Director. We are thoroughly convinced that when the very provisions of the Companies Act make whole-time director (as also in capacity of key managerial personnel) responsible for any default/offences, it leads to the conclusion that those directors are employees of the assessee company. The directors of the Appellant are employees of the Appellant Company and following the judicial discipline on the similar issue, it is held that the impugned order is not sustainable, hence the same is set aside as it is without any merit - appeal allowed.
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Central Excise
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2024 (3) TMI 9
Refund of excise duty paid under protest against demand created on alleged manufacture and clearance of Zarda Scented Tobacco - applicability of principles of Unjust Enrichment if the Central Excise Duty has been paid under Compounded Levy Scheme, made applicable in terms of Section 3-A of the Central Excise Act, 1944 - rebuttal of presumption created under Section 12-B of the Central Excise Act, 1944 - HELD THAT:- In the present proceedings for refund, the revenue had failed to establish that any part of the excess duty paid by the assessee under protest had been passed - on. First, there is absence of finding of manufacture of goods (Zarda Scented Tobacco) on which duty demand may have been levied, paid and passed on. Second, there was no evidence to allege that the assessee charged higher value/M.R.P. on the goods cleared by it (Branded Chewing Tobacco) as may have accounted for the allegation of passing - on the disputed duty liability. Once the entire goods cleared by the assessee were only Branded Chewing Tobacco cleared at the M.R.P. rate, the presumption of passing - on the disputed duty liability (on the Zarda Scented Tobacco) never arose. In absence of any material in support of the allegation made by the revenue authorities, the Tribunal rightly allowed the assessee's appeal, on facts. Petition dismissed.
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2024 (3) TMI 8
Relevant date for allowing interest on delayed transfer of Cenvat credit - What is the period of delay and which date is to be taken as a relevant date merger of M/s. Britco with M/s. Hindustan Coca Cola Beverages Limited? - HELD THAT:- It is found that the scheme of arrangement of merger between M/s. Britco Foods Company Limited (M/s. Britco) with M/s. Hindustan Coca Cola Beverages Limited was approved by Hon ble Delhi High Court vide its order dated 10.09.1999 and this merger order of Hon ble High Court was conveyed by the appellant to the department vide its order dated 20.10.1999. The Modvat/Cenvat credit which was lying in the balance of M/s. Britco stand transferred to M/s. Hindustan Coca Cola Beverages Limited from the date of merger of two entities which was effected vide order dated 10.09.1999. This order was conveyed to the department on 20.10.1999 as per the record of the appellant. Department should have allowed the transfer of Modvat / Cenvat credit lying in RG23A and RG23C accounts of M/s. Britco Foods Company Limited to M/s. Hindustan Coca Cola Beverages Limited on receipt of letter of merger of two companies it is opined that 20.10.1999 is the date when department was informed of the formal merger of two entities and therefore the relevant date of transfer of Cenvat credit should be 20.10.1999. Thus, relevant date for allowing interest on delayed transfer of Cenvat credit as ordered by Hon ble Gujarat High Court in the above mentioned order dated 04.04.2013, will be 20.10.1999 - appeal allowed.
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2024 (3) TMI 7
Seeking to change the classification of the items manufactured and cleared by the appellants - reliance placed on the statement of Director of the Appellant company Incharge of production related matters - HELD THAT:- It is found that other than the statement of Shri Purandar Reddy, Department has not taken any steps to obtain technical opinion of experts in respect of the impugned goods. The fact that the goods are manufactured by the appellants are but for the rice mill industry, as submitted by the appellants. Revenue could not show even a single example of such independent function of the items manufactured and cleared. The Tribunal had an occasion to go into the classification of the impugned goods in the case of Alpsco Gaintech Pvt Ltd [ 2018 (12) TMI 478 - CESTAT CHANDIGARH] , which was affirmed by the Hon ble Apex Court. Tribunal held that Admittedly, in this case, these conveyors and elevators are specifically used for rice milling industry as the part of the composite machinery of rice milling, therefore, having merit classification under chapter heading No. 8437. The Tribunal in the case of Moped Assembly [ 2000 (12) TMI 408 - CEGAT, CHENNAI] , held that sheet metal components for use exclusively in rice milling industry are classifiable under heading 8437 of CETA. The demands confirmed in the impugned order are not sustainable. When the demands are not sustainable, interest and penalty also do not survive - The impugned order set aside - appeal allowed.
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2024 (3) TMI 6
Recovery of excess CENVAT Credit alongwith interest and penalty - Nature of Duty Paid by 100% Export Oriented Units (EOU) - ineligible credit availed on the duty component of Basic Customs Duty, Education Cess and Secondary Higher Education Cess paid on the iron ore by the 100% EOU as per Sl. No.4 of Notification No.23/2003 CE dt. 31.3.2003 - Time Limitation - Suppression of facts or not - penalty - HELD THAT:- A plain reading of the said Sl. No.4, it is clear that the circumstances and corresponding method of computation of duty and quantum required to be paid by an 100% EOU in DTA is different from the duty payable against Sl. No. 2 of the said Notification. Therefore, no doubt the duty paid by an 100% EOU be considered as Excise duty in view of the principle of law settled by the Larger Bench in VIKRAM ISPAT VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III [ 2000 (8) TMI 111 - CEGAT, NEW DELHI] . In the instant case, the department has adopted a wrong basis in denying a portion of the CENVAT credit to the appellant of the duty paid by 100% EOUs, on the ground that component of BCD and applicable EC SHEC on the BCD adopted in computing aggregate duties of Customs, which is nothing but Excise duty being not mentioned in Rule 3(1) of CCR, 2004, hence, not admissible. The said reasoning adopted by the Learned Commissioner in denying a portion of the duty as CENVAT credit cannot be sustained being contrary to the principle of law laid down in Vikram Ispat s case. Time Limitation - Suppression of facts or not - penalty - HELD THAT:- From the records of the case, it is clear that the appellants have been availing CENVAT credit on the duty paid by 100% EOU after duly reflecting the same in the relevant monthly ER-1 returns filed with the department periodically and the present demand relates to a portion of CENVAT credit held to be inadmissible. Thus, there are no merit in the allegation of the department that the appellant had suppressed availing of excess amount of CENVAT credit against the duty paid by 100% EOUs reflected in the invoices with an intend to evade payment of duty. Accordingly, the demand confirmed invoking extended period of limitation cannot be sustained. Consequently, the penalty imposed also cannot be sustained. The impugned order is set aside - Appeal allowed.
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2024 (3) TMI 5
Entitlement to interest on account of delay in sanctioning the eligible refund in cash - Refund of unutilized cenvat credit claimed by the Appellant on export under LUT/ Bond - accumulation of credit on account of exports - amalgamation and merger of company - Cenvat credit utilized by the appellant during the quarter April, 2011 to June, 2011 was higher than the cenvat credit availed by it during the said quarter - possibility of adjusting the accumulated credit if the appellant had exported the goods on payment of duty - HELD THAT:- Though the appellant has filed the refund claim under Rule 5 for accumulated cenvat credit against export of goods but subsequently they have utilized the credit, hence, now they are not claiming the refund, however, they are claiming the interest for the period from the date of filing of application till the date of utilization of cenvat credit for which the refund claim was lodged - to decide the claim of interest first the eligibility of refund has to be decided. From the records it is observed that both the lower authorities have rejected the refund claim on the ground that the appellant s refund claim is in respect of the amount of cenvat which was transferred from M/s. Hazira Pipe Mill Ltd and Hazira Plate Ltd on account of amalgamation and merger of those companies in the present appellant s company. However, from the chart presented by the appellant it prima facie shows that the credit of 205 Crores included in the credit availed shown in August, 2010 and October and November, 2010 was on account of transfer of credit due to amalgamation and merger and thereafter, it can be seen that the entire credit of 205 Crores has been utilized between December, 2010 to March-2011. This prima facie shows that the refund claim for the period April 2011 to June, 2011 appears to be the amount out of the fresh credit availed after the utilization of transferred credit. However, the details given in the chart along with documents were not verified by both the lower authorities which is necessary to come to the conclusion that whether the refund amount is related to the transferred credit or from the credit in respect of input and input service used in the manufacture of export goods. As regard the claim of interest firstly the same is consequential to the eligibility of refund in the facts of the present case. Secondly, the claim of interest also needs to be considered independently, therefore, the entire matter needs to be remitted back to the original adjudicating authority. Appeal is allowed by way of remand to the Adjudicating Authority.
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2024 (3) TMI 4
Redetermination of annual production capacity w.e.f. 01.11.2012 in terms of Rule 6 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination And Collection of Duty) Rules, 2010 - seeking to declare the packing machines as uninstalled and sealed - HELD THAT:- Rule 4 of CER says that number of operating packing machines during any month shall be equal to the number of packing machines installed in the factory and if the manufacture doesn t intent to operate any of those machines, Rule, 5 prescribes that uninstallation and sealing as well as removal from the factory premises was to be done by and under the supervision of Superintendent of the Central Excise but it s proviso permits nonremoval from the factory premises only when it is not feasible to remove and in such an event it has been to be un-installed and sealed by the Superintendent in a manner that it can t be operated. It is not understood as to why Appellant was fastened with the liability to pay duty on the basis of number of packing machines available with him, when its uninstallation and sealing were duly made and Rule 8 is not violated, since calculation of the number of operating packing machines for a month is restricted to the maximum number of packing machine installed , apart from the fact that Circular No. 81/17/2007/CX-3 dated 20.04.2010, relied upon by the Appellant, issued by the Respondent-Department dictates not to take machines sealed by the Departmental Officer for the purpose of calculation of payment of duty. The order passed by the Commissioner of Central Excise (Appeals), Pune-III is hereby set aside - Appeal allowed.
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2024 (3) TMI 3
CENVAT Credit - freight charges incurred from their factory premises to the factory premises of the buyer - place of removal - extended period of limitation - suppression of facts or not - HELD THAT:- In this particular case, without doubt the place of removal is the factory premises of the Appellant only. Therefore, if the party has failed to claim any abatement on account of the freight charges incurred by them from their factory premises to premises of the receiver of the goods, the same cannot be come to the rescue in respect of the Cenvat Credit to be taken. Rule 2 (l) of the Cenvat Credit Rules, 2004, is very clear that the Cenvat Credit can be taken for the services utilized upto the place of removal only. Therefore, there are no merits in the Appeal filed by the Appellant. Suppression of facts - HELD THAT:- Admittedly, they have been paying the Service Tax on the freight charge and reflecting the same in the ST-3 Returns. For the Cenvat Credit taken on such Service Tax paid on GTA, they were filing their ER-1 Returns. Therefore, there cannot be any allegation of suppression on the part of the Appellant. Apart from this, it can also be taken as a case of interpretation. The Appellant has carried a bonafide belief that since they are paying the Excise Duty of the value which is inclusive of the freight charges, they would be eligible for the Cenvat Credit for the Service Tax paid on GTA Services for the outward transport - the allegation of suppression does not legally sustain. The Appeal is allowed on account of limitation.
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CST, VAT & Sales Tax
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2024 (3) TMI 2
Refund of tax - contention of the appellant is that, by way of deduction of 2% tax at the time of payment and on his declaration of the turnover for every assessment years, he is entitled for refund of tax - whether the judgment rendered in Mahindra and Mahindra Ltd. [ 2020 (11) TMI 970 - MADRAS HIGH COURT] has any bearing to the case in hand? - HELD THAT:- The judgment in Mahindra and Mahindra Ltd. relied upon by the learned counsel for the appellant is in respect of entertaining a Writ Petition without exhausting alternate remedy. In the above referred case, without affording opportunity, order levying penalty was issued and therefore, without preferring statutory appeal, the assessee approached this Court. In the said circumstances, the Division Bench of this Court held that existence of alternate remedy will not disentitle the writ petitioner to invoke Article 226 of the Constitution when the action of the statutory authority is unfair and against the principles of natural justice. The facts involved in the case cited is different from the facts of the case in hand. It is not the case of the appellant that he was not given an opportunity. In fact, the impugned notice of the fourth respondent clearly indicates that the notice is to afford an opportunity for being heard and for participating in the proceedings. Therefore, by no stretch of imagination, the dictum laid in Mahindra and Mahindra Ltd. will apply to the case in hand. Section 22(2) and amendment to Section 28 of the TNVAT Act to be read together to understand the intention of the legislature. The returns filed prior to 19.06.2012 under the self assessment scheme, but no explicit assessment orders are passed in these cases. By introducing the deeming clause, the assessee gets the privilege of assessment. At the same time, to prevent escaped assessment, the authority is vested with the power to revise any return, which has been deemed to have been assessed by virtue of Section 22(2) of the TNVAT Act and such power to revise, is restricted to the period of six years. In this case, the assessing authority while causing the show cause notice has given opportunity to the assessee to participate in the proceedings. The order of the assessing authority is not final. The statute provides for appeal remedy. Hence, this Court finds that the Writ Petitions are frivolous litigations initiated by the assessee to circumvent the procedure established. Hence, this Court finds no merit in the Writ Appeals. Appeal dismissed.
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