Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 20, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of show cause notice (SCN) - Supply of Relied Upon Documents (RUD) - Supply of inter-departmental communications or records/file notings or data/information - The High court found a prima facie case for the petitioners to be provided with the investigation report, acknowledging that such disclosure must balance the need for transparency and the protection of sensitive information. The court directed the respondents to furnish the investigation report to the petitioners, with the possibility of redacting sensitive information. - The court dismissed the demands for additional documents as unfounded and a means to delay the proceedings. It affirmed the need for transparency and the right to a fair defense, within the bounds of reasonable requests and the avoidance of fishing expeditions.
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Attachment of Bank Account - Orders passed u/s 83(1) of the CGST Act - Period of limitation - The petitioner argued that as the orders had ceased to operate, there should be no impediment for them to operate the cash credit accounts. The respondents conceded to the statutory position but argued that a fresh attachment order had been passed, justifying the continued attachment. The petitioner contended that the repeated attachment was in breach of the CGST Act and they had not received copies of the latest attachment order. - The High Court noted that the order subject to these proceedings had ceased to operate, thus disposing of the petition while reserving the petitioner's right to challenge the fresh attachment order dated 13.12.2023.
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Cancellation of CGST registration - defective Show Cause Notice - The petitioner argued that the notice lacked essential details regarding alleged irregularities in invoices or bills, hindering their ability to respond adequately. The court, recognizing the deficiency in the notice, directed the respondent to furnish all necessary details to the petitioner within one week. Subsequently, the petitioner was granted time to respond, and the respondents were instructed to adjudicate the matter impartially within a stipulated timeframe.
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Manner of making Pre-deposit before filing an Appeal - Utilization of Input Tax credit (ITC) available in the Electronic Credit Ledger (ECL) - The petitioner approached the court seeking relief regarding the utilization of the Electronic Credit Ledger for payment of pre-deposit as required under the CGST Act. The petitioner argued that a circular issued by the GST Policy Wing allowed for such utilization, while the respondent did not dispute the legal precedent set by the Bombay High Court on the matter. After considering the arguments and the relevant legal provisions, the court ruled in favor of the petitioner, allowing the use of the Electronic Credit Ledger for the pre-deposit payment.
Income Tax
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Adjustment made u/s 115JB in Rectification order u/s 154 - Debatable issue - addition of surrendered income by the assessee was included in the book profit of the assessee as per Section 115JB - The Revenue argued that the disclosed income should be considered as part of the book profit for tax calculation purposes. However, the respondent contended that the inclusion of this income required extensive debate and was not supported by incriminating material found during the survey. The Tribunal agreed with the respondent, concluding that the Assessing Officer's action under Section 154 was unwarranted due to the debatable nature of the issue. Consequently, the Tribunal dismissed the appeal of the Revenue.
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Validity of reopening of assessment - Sanction for issue of notice u/s 151 - The High Court found that the AO had acted based on borrowed satisfaction and lacked independent application of mind. Additionally, the court ruled that the approval granted was merely mechanical and did not involve proper consideration. Consequently, the court upheld the decision of the ITAT to quash the reopening proceedings and notice issued under Section 148 of the Act, dismissing the appeal of the Revenue.
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Addition to the book profit u/s 115JB for the amount disallowed u/s 14A r.w. Rule 8D - the tribunal noted that the AO had made the disallowance under Section 14A, but the assessee hadn't adjusted this amount while computing the book profit. The tribunal upheld the addition to the book profit, affirming the decision of the CIT(A) and partly allowing the Revenue's appeal on this ground.
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Validity of reopening of assessment - doctrine of merger - The ITAT unequivocally quashed the reassessment proceedings initiated against the appellant for the Assessment Year 2006-07, ruling them as bad-in-law due to the procedural flaw of issuing a notice under section 147 beyond the four-year period without specifying the particulars of omitted income - The judgment also indirectly supports the appellant's contention regarding the classification of certain incomes as business incomes eligible for section 80IA deductions, though this specific issue became moot following the quashing of the reassessment order.
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Stay of recovery proceedings initiated under Section 226(3) - Political Party claiming exemption u/s 13A as appliable to Trusts, denied - The tribunal dismissed these allegations, highlighting that the Assessing Officer proceeded according to the due process of law. The claim of hardship was found to lack merit as the assessee had ample opportunities to address the demand, including a chance to pay 20% of the demand in October 2021, which was not taken. - While this issue's specific judicial reasoning is not provided in the Stay Application's context, the denial of exemption by the Assessing Officer underlines strict adherence to the statutory requirements of the Income-tax Act.
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Addition u/s 40A - purchases in cash in excess of ₹ 20,000/ - case of the assessee that all the cash purchase are fully covered under Rule 6DD(e)(ii) of the Income Tax Rules, as many venders do not have bank account and the purchases were done away from remote areas - whether assessee has fulfilled the condition laid down in Rule 6DD? - The Tribunal noted that the appellant had indeed made substantial cash purchases but found merit in the argument that these were covered under Rule 6DD, considering the nature of the business and the vendors' circumstances.
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Deduction u/s 80IA - The Revenue contended that the filing of Form 10CCB within the prescribed date is mandatory, while the assessee argued otherwise. The Tribunal, after analyzing the relevant legal provisions, concluded that while the filing of Form 10CCB is mandatory, adhering to the prescribed due date is not. The Tribunal also noted that the CIT(A) failed to properly consider legal precedents and independently assess the facts of the case. Consequently, the Tribunal set aside the CIT(A)'s decision and remanded the matter for fresh consideration.
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Registration u/s 80G(5) - The Tribunal found that the provision allowing expenditure of up to five percent for religious purposes did not apply to this case. - The Tribunal found that the rejection lacked proper confrontation of observations and opportunity for the applicant to rebut. It emphasized that if any object of the trust is wholly or substantially of a religious nature, it falls outside the scope of Section 80G. The Tribunal allowed the appeal for statistical purposes and directed reconsideration by the Commissioner of Income Tax (Exemption) with proper opportunity for the assessee to present their case.
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Registration u/s 80G(5)(vi) - The appellant, seeking registration under Section 80G(5) of the Income Tax Act, had their application rejected due to the mention of religious objects in the trust deed. The ITAT found that while Section 80G allows for charitable purposes, any object within the trust that is wholly or substantially religious renders it ineligible for benefits. It ordered a reevaluation of whether less than five percent of the total income was spent on religious activities, with the possibility of granting benefits if found compliant with the law. Thus, the appeal was allowed for statistical purposes.
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Dismissal of appeal of assessee ex-parte before the Ld.CIT(A) - there was no compliance from the assessee to the notices issued and served on the assessee - the Assessing Officer treated the receipt of land as income from other sources, which was contested by the appellant's husband, stating it should be exempt due to its origin from an institution with Section 12A registration. The court directed the matter back to the Commissioner of Income Tax (Appeals) for further consideration, emphasizing the principles of natural justice and affording the appellant another opportunity to present their case.
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Penalty u/s 271(1)(c) - Failure to file the Return of Income (ITR) - The appellate tribunal addressed two appeals filed by the assessee against penalties imposed under section 271(1)(c) of the Income Tax Act for the assessment years 2011-12 and 2015-16. In the case of the former, the penalty was upheld, despite the appellant's argument of being a non-resident with limited knowledge of Indian tax laws. However, for the latter assessment year, the tribunal ruled in favor of the assessee, citing a similar precedent and considering the appellant's circumstances. The decision emphasized the importance of timely compliance with tax obligations and the relevance of the appellant's awareness of their tax liabilities.
Customs
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Levy of Merchant Overtime Fee - the High Court ruled in favor of the appellant, overturning the Tribunal's decision to levy MOT charges for utilizing the services of Central Excise Officers during office hours. The court emphasized the importance of adhering to binding precedents, liberal interpretation of circulars, and adherence to procedural guidelines outlined in CBEC Manuals. They also highlighted the significance of considering the 24/7 mandate for Customs Officers and avoiding the imposition of unnecessary transaction costs and paperwork. Additionally, the court underscored the Principles of Natural Justice and the necessity of considering all relevant judicial pronouncements in such matters.
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Cancellation of grant of authorised operations of warehousing service activities - Section 16 of the SEZ Act, 2005 - The High Court found that the impugned letter, which suspended D.T.A. clearance, lacked legal basis. It observed that the respondents failed to cite any provision of the SEZ Act to justify their actions. - Consequently, the Court quashed and set aside the impugned order dated 01st November, 2023. It directed the respondents to proceed with the adjudication of the show-cause notice dated 08th January, 2024, in accordance with the law.
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Pre-Deposit - Adjustment of various deposits made by entities during the course of investigation - The appellant argued that since they were associated with these entities and deposits were made with No Objection Certificates, these amounts should be adjusted for the pre-deposit requirement. However, the High court upheld the decision of the CESTAT, emphasizing that Section 129E places the responsibility of pre-deposit solely on the appellant, and deposits made by other entities cannot be considered for this purpose. The court's decision was based on the clear language of the provision, and it found no reason to interfere with the CESTAT's order. Thus, the appeal was dismissed.
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Absolute Confiscation - penalty - town seizure - Smuggling - illicit transport of Gold - burden to prove - The CESTAT found the statements recorded from the employees at the time of interception and the third party's statement under Section 108 of the Customs Act to lack credibility and voluntary nature. It noted the failure to cross-examine Mr. BSB made his statement inadmissible. - The Tribunal concluded that the appellant presented cogent evidence of the gold's legitimate source through business records and testimonies, which were supported by the refinery's confirmation of melting and refining the gold. - The Tribunal allowed the appeals, setting aside the impugned orders.
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Classification of imported goods - Battery Fuse Units (BFU) - The tribunal examined whether the BFU should be classified under Chapter Heading 8529 as parts of Base Transmission Station (BTS) or Chapter Heading 8536 as 'Automatic Circuit Breakers.' After reviewing technical literature and customs tariff headings, they concluded that the BFU's functions align more with automatic circuit breakers, leading to classification under Chapter Heading 8536. Consequently, the tribunal ruled that the BFU does not qualify for exemption under Notification No.25/2005-Cus, as it does not meet the criteria as a part of the transmission apparatus specified in the notification.
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Refund of SAD - The appellant, a trader, imported goods and claimed a refund on the paid Special Additional Duty (SAD). However, the refund claims were rejected by the authorities, citing the absence of Chartered Accountant certificates and endorsements in sales invoices regarding CENVAT credit availability. The appellant contested these rejections, providing evidence of compliance with the conditions for refund. The CESTAT, after reviewing the submissions and evidence, concluded that the appellant fulfilled the requirements for the refund.
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Classification of goods intended to be imported - API Supari - Chikni Supari - Unflavoured Supari - Flavoured Supari - Boiled Supari - the Authority for Advance Ruling (AAR) ruled that the imported goods remained classified under Chapter 8, sub-heading 0802 80. It concluded that the processes applied did not transform the goods into preparations of betel nut under Chapter 21. Even the addition of flavoring agents did not alter the classification. Therefore, the AAR upheld the classification under Chapter 8 for all the imported goods.
Indian Laws
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Dishonour of Cheque - vicarious liability of the director - appellant was in-charge of day-to-day affairs of the Company or not - The appellant argued against her vicarious liability under Section 138 of the Negotiable Instruments Act, contending that she was not involved in the company's day-to-day affairs and was not a signatory to the cheques in question. The court found the allegations insufficient to establish the appellant's liability and quashed the proceedings against her. - Mere directorship does not automatically entail liability. - The court noted that the complaint lacked specific averments demonstrating how the appellant was in charge of the company's day-to-day affairs or responsible for its conduct.
IBC
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Maintainability of appeal - time limitation - Whether appeals filed without certified copies of the impugned orders, due to delays in obtaining them? - The Tribunal considered the mandatory requirement of annexing certified copies with appeals, as stipulated in its rules, against the backdrop of Supreme Court decisions emphasizing procedural law as a means to aid justice rather than hinder it. The NCLAT granted exemptions for filing certified copies in ten appeals where such applications were made, recognizing the Tribunal's power to exempt compliance with procedural requirements for substantial justice. However, it dismissed three appeals where no exemption applications were filed, reinforcing the necessity of following prescribed procedural norms.
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Initiation of CIRP - Guarantor - Extinguishment of debt - The NCLAT upheld the NCLT's decision, finding that ECL did not act as a guarantor for ESL's debts based on the contractual documents and the parties' actions. It also clarified that the approval of a resolution plan for a corporate debtor does not automatically discharge the liabilities of third parties or guarantors. However, the tribunal's analysis indicated that the extinguishment of debt post-resolution plan approval pertains only to the corporate debtor, not extending automatically to third parties or guarantors unless explicitly stated in the resolution plan.
Service Tax
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SVLDRS - The court acknowledged that the petitioner failed to make the balance payment within the extended period due to financial constraints post-COVID-19. However, it emphasized that the petitioner did not provide substantial evidence of severe financial crunch, as claimed. - Citing a precedent set by the Supreme Court, the court affirmed that the time limit cannot be extended by the court as it would amount to modifying the scheme, a prerogative of the government or the respondent authority. The extension granted during the COVID-19 pandemic was within the authority of the government, not the court.
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The case involved appeals regarding the denial of CENVAT credit, invocation of extended period of limitation, demand of interest on capital goods CENVAT credit, denial of credit on certain items, and imposition of penalties. The CESTAT found in favor of the appellant on all counts, ruling that the denial of credit, demand of interest, and imposition of penalties were unjustified. The appeals were disposed of accordingly.
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Classification of services under Business Support Services or not - The Tribunal observed that the appellant merely facilitates and assist the individuals who are travelling on which no service tax is leviable for the simple reason that service tax is charged on the service provided. The services in question does not fall within the scope of “Business Support Service” and therefore no service tax is leviable under the said category. - CESTAT rules in favor of the appellant, stating that services provided do not fall under "Business Support Services" but are connected with "Air Travel Agent" services.
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Imposition of personal penalty on the Partner of the Firm in terms of Section 78A of the Finance Act, 1994 - The case involved the imposition of a personal penalty on one of the partners of a partnership firm for alleged tax evasion. The tribunal ruled in favor of the appellant, stating that there was insufficient evidence to hold them personally liable and citing extenuating circumstances affecting tax payments. Additionally, the validity of a supplementary agreement absolving the appellant from liability was questioned, leading to a decision in favor of the appellant.
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Recovery of service tax alongwith interest and penalty - Extended period of Limitation- The tribunal found that the appellant had disclosed their CENVAT credit in their tax returns, negating claims of willful suppression of facts. Furthermore, it was determined that the extended period of limitation was incorrectly applied by the authorities, as the issue of taxing renting of immovable property was under judicial scrutiny during the relevant period. Consequently, the tribunal allowed the appeal, setting aside the demand for service tax and penalties as barred by limitation.
Central Excise
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Remission of Central Excise Duty - The tribunal found Rule 21 inapplicable, as it pertains to goods lost or destroyed before clearance from the factory, not to loss of production capacity. - It was held that the appellant could not claim abatement for non-production under Rule 8, as the factory's closure did not meet the minimum period stipulated for such abatement. - The tribunal dismissed the argument of unjust enrichment by referencing the Supreme Court's stance that refund claims based on taxes paid under an unconstitutional law are not unconditional and highlighted that the concept of unjust enrichment does not apply straightforwardly to the state in cases of tax collection and refund.
VAT
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Levy of penalty u/s 54(1)(2) of the U.P. VAT Act, 2008 - men-rea - The Court concluded that mens rea is indeed an essential prerequisite for imposing a penalty under this provision. - The Court held that penalties could not be imposed on the basis of a best judgement assessment. Such assessments are essentially grounded on reasonable guesses or estimates and do not inherently prove any willful attempt to evade taxes. Without explicit evidence of a deliberate action to avoid tax payments, the imposition of penalties is unjustified.
Case Laws:
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GST
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2024 (3) TMI 836
Validity of show cause notice (SCN) - Supply of Relied Upon Documents (RUD) - Supply of inter-departmental communications or records/file notings or data/information - Challenge to SCN on the grounds that such notice was issued under the provisions, which were unconstitutional according to the petitioners - HELD THAT:- The petitioners did file the application before the Adjudicating Authorities for information and documents and it is not as if such information and documents were not furnished to the petitioners. All the documents or information may not have been supplied, but that was mainly because the petitioners avoided the specifics and even refused to explain the relevancy. All this has to be considered in the light of a clear and categorical submission/statement that the impugned show cause notices are to be disposed of based upon the RUDs and the non-RUDs already furnished to the petitioners. In T. Takano [ 2022 (2) TMI 907 - SUPREME COURT] relied upon by the petitioners, the Hon'ble Supreme Court has held that it could not be oblivious to the wide range of sensitive information that the investigation report submitted under Regulation 9 of the SEBI Regulations may cover, ranging from information on financial transactions and on other entities in the securities market, which might affect third-party rights. The Court held that the report may contain market sensitive information which may impinge upon the interest of investors and the stability of the securities marker. Therefore, the Court held that the requirement of compliance with the principles of natural justice cannot therefore be read to encompass the right to a roving disclosure on matters unconnected or regards the dealings of third parties. The investigating authority may acquire information of a sensitive nature bearing upon the orderly functioning of the securities market. The right of the noticee to disclosure must be balanced with a need to preserve any other third-party rights that may be affected. In T. Takano, the Hon'ble Supreme Court relied upon Natwar Singh [ 2010 (10) TMI 156 - SUPREME COURT] , wherein it was observed that there are exceptions to the general rule of disclosing evidentiary material. The Court held that such exceptions can be invoked if the disclosure of material causes harm to others, is injurious to public health or breaches confidentiality. The Court held that while identifying the purpose of disclosure one of the crucial objectives of the right to disclosure is securing the transparency of instructions. The claims of third-party rights vis-a-vis the right to disclosure cannot be pitted as an issue of public interest and fair adjudication. T. Takano provides that a quasi-judicial authority has a duty to disclose the material that has been relied upon at the stage of adjudication. A mere ipse dixit of the authority that it has not relied on certain material would not exempt it from its liability to disclose such material if it is relevant to and has a nexus to the action taken by the authority. Thus, the actual test is whether the material that is required to be disclosed is relevant for the purpose of adjudication. If so, then the principles of natural justice require its due disclosure. On conclusion of investigation proceedings, the investigation team indeed prepared investigation report, and further it is on acceptance of the same by the competent authority that the show cause notices were issued, then subject to exceptions being made out by the respondents, copy of such investigation report should be furnished to the petitioners. If such an investigation report contains sensitive information regarding the identity of the sources or regarding third parties and unrelated transactions, respondents can always furnish such investigation reports to the petitioners by redacting such portions and such information. Thus, no directions are called for in the context of inter-departmental communications or records/file notings or data/information shared with ISI. Records show that respondents have furnished all the documents relied upon in the show cause notices and even allowed the petitioners' inspection based upon which they retrieved the Non-Relied Upon Documents. The show cause notice is detailed and refers to the material/documents based upon which it is issued. All this, coupled with the statement/submission that the show cause notices would be disposed of by reference to the documents furnished to the petitioners, suggests sufficient transparency and fairness. The petitioners must join the adjudication process and not delay the same. This clarification is necessary because Ms Desai, at the stage of admitting these petitions, has made a statement that final orders will not be made without the leave of this Court. All these civil applications are disposed of.
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2024 (3) TMI 835
Maintainability of petition - appealable order u/s 107 of the Goods and Service Tax, 2017 - petitions have been dismissed by this Court on the ground of availability of an efficacious alternative remedy - HELD THAT:- In Hameed Kunju vs. Nizam [ 2017 (7) TMI 1414 - SUPREME COURT ] the Apex Court held that any petition under Article 227 of Constitution of India should be dismissed in limine when there is statutory provision of appeal. In another case ANSAL HOUSING AND CONSTRUCTION LTD. VERSUS STATE OF U.P. AND ORS. [ 2016 (3) TMI 1435 - SUPREME COURT] it is held that when there statutory appeal is provided, then the said remedy has to be availed. Looking to the fact of availability of an efficacious alternative remedy, it is not found proper to entertain this petition. Petitioner would be at liberty to avail the alternative remedy in accordance with law, if so advised. Petition dismissed.
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2024 (3) TMI 834
Attachment of Bank Account - Orders passed u/s 83(1) of the CGST Act - Period of limitation - repeated issuance of provisionally attachment order - cash credit accounts - HELD THAT:- Learned counsel for the petitioners submits that repeated attachment of cash credit accounts in exercise of power u/s 83 of the CGST Act is in breach of the provisions of Section 83(2) and such exercise could not have been undertaken. He further submits that petitioners have not received copies of attachment order dated 13.12.2023. Admittedly, the order subject matter of these proceedings has ceased to operate, the petition is disposed of reserving the right of the petitioner to impugn the fresh attachment order dated 13.12.2023 in accordance with law. The question of validity of repeated issuance of attachment orders u/s 83 of the CGST Act is left open. All rights and contentions of parties are reserved.
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2024 (3) TMI 833
Cancellation of CGST registration - defective Show Cause Notice - HELD THAT:- Learned counsel for the petitioner inter-alia submits that since there were no details of the alleged invoices or bills which were made without supply of goods or services provided the petitioner was precluded from filing a reply to the Show Cause Notice. Thus, order dated 23.12.2021 is set aside. Respondents are directed to furnish all material that they possess in support of the Show Cause Notice dated 05.11.2021 to the petitioner within one week. Petitioner shall file a reply within a period of seven working days thereof. Respondents shall thereafter adjudicate the Show Cause Notice in accordance with law within a maximum period of two weeks of filing of the reply. It is clarified that this Court has neither considered nor committed on the merits of contentions of either party. Proper Officer shall adjudicate the Show Cause Notice uninfluenced by anything stated in this order on merits. He shall pass a detailed speaking order after giving an opportunity of personal hearing to the petitioner. Petition is disposed of in the aforesaid terms
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2024 (3) TMI 832
Manner of making Pre-deposit before filing an Appeal - Utilization of Input Tax Credit available in the Electronic Credit Ledger - whether the appellant, to comply with the requirement of sub-section (6) of Section 107 of the CGST Act of paying a sum equal to 10% of the amount of tax in dispute arising out of the impugned order, can pay the amount utilizing the credit available in the Electronic Credit Ledger? - HELD THAT:- The aforesaid question is no more res integra. The Hon ble Bombay High Court in the case of Oasis Realty [ 2022 (10) TMI 42 - BOMBAY HIGH COURT ], having considered the relevant provisions, held CBIT C has itself clarified that any amount towards output tax payable, as a consequence of any proceeding instituted under the provisions of GST Laws, can be paid by utilisation of the amount available in the Electronic Credit Ledger of a registered person. The CBIT C has also requested that suitable trade notices be issued to publicize the contents of the circular. Keeping in mind the ratio laid down by the Hon ble Bombay High Court in the case of Oasis Realty as well as the circular dated 6th July 2022 issued by the GST Policy Wing, Central Board of Indirect Taxes and Customs, Ministry of Finance, Government of India, it has been clarified that the payment of pre-deposit can be made by utilizing the Electronic Credit Ledger (ECL). The petitioner may utilize the amount available in the Electronic Credit Ledger to pay the 10% of Tax in dispute as prescribed under sub-section (6) of Section 107 of the CGST Act. Accordingly, the impugned order-inappeal No.CR/ADC/APL/147/2022 dated 25th July 2022 passed by the respondent No.2 is hereby quashed and set aside. The appeal is restored to file on the undertaking of the petitioner that it shall debit the Electronic Credit Ledger within two weeks of this order getting uploaded towards this 10% payable under Section 107(6) (b), if not already debited, is accepted. Petition disposed off.
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Income Tax
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2024 (3) TMI 831
Reopening of assessment u/s 147 - Eligibility of reasons to believe - AO jurisdiction to issue notice - as decided by HC 2021 (11) TMI 538 - BOMBAY HIGH COURT] allegation in the reasons recorded for reopening that petitioner has not disclosed all fully and truly material facts necessary for the assessment is incorrect, one of the condition for reopening the assessment before the AO could assume jurisdiction for issuing notice u/s 148 has not been satisfied HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed, however, question of law is kept open to be considered in an appropriate case.
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2024 (3) TMI 830
Review petition - validity of Revision u/s 263 by CIT - deduction claimed by the assessee as cost of improvement while computing long term capital gains - What can be said to be prejudicial to the interest of the Revenue? - As decided by SC [ 2023 (4) TMI 295 - SUPREME COURT] only in a case where two views are possible and the Assessing Officer has adopted one view, such a decision, which might be plausible and it has resulted in loss of Revenue, such an order is not revisable u/s 263. Applying the law laid down in the case of Malabar Industrial Co. Ltd [ 2000 (2) TMI 10 - SUPREME COURT] that the scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue - also observed that if due to an erroneous order of the ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. Assessment order was not only erroneous but prejudicial to the interest of the Revenue also - High Court has committed a very serious error in setting aside the order passed by the Commissioner passed in exercise of powers under Section 263 of the Income Tax Act. HELD THAT:- Application for stay is rejected. We have carefully gone through the review petition and the connected papers. We do not find any error, much less apparent, in the order impugned, warranting its reconsideration. The review petition is dismissed accordingly.
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2024 (3) TMI 829
Adjustment made u/s 115JB in Rectification order u/s 154 - Debatable issue - addition of surrendered income by the assessee was included in the book profit of the assessee as per Section 115JB - ITAT held non-inclusion of income surrendered u/s. 115 JB could not have been corrected in rectification proceedings u/s. 154 - HELD THAT:- The Hon ble Delhi High Court in the case of RTCL. LTD. [ 2012 (4) TMI 287 - DELHI HIGH COURT] has held that the book profits as declared by the assessee was in conformity and as per the provisions of parts II and III of the Schedule VI of the Companies Act, 1956 and there was nothing on record to suggest that the book profits were contrary to such provisions or not in consonance with such provisions. In view of the conclusion arrived at by the Tribunal that such inclusion of the disclosure made by the assessee company would require long drawn reasoning and debate and therefore, when the issues and contentions being debatable on uncertainty, the Assessing Officer could not have invoked the power under Section 154 of the Act for rectification of the mistake apparent on record. The Tribunal, therefore, was right in observing that the action of the Assessing Officer as well as the CIT(A) under Section 154 of the Act was not warranted. Decided against revenue.
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2024 (3) TMI 828
Validity of reopening of assessment - Sanction for issue of notice u/s 151 - manner of recording the approval granted by the prescribed authority u/s 151 for reopening of assessment proceedings a/s 148 - HELD THAT:- the satisfaction arrived at by the prescribed authority u/s 151 must be clearly discernible from the expression used at the time of affixing its signature while according approval for reassessment under Section 148 of the Act. The said approval cannot be granted in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase Yes does not appropriately align with the mandate of Section 151 of the Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. Therefore, it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression Yes could be considered to be a valid approval. In fact, the approval in the instant case is apparently akin to the rubber stamping of Yes in the case of Central India Electric Supply. ITAT correctly held that the prescribed authority has granted approval under Section 151 in a mechanical manner. Decided against revenue.
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2024 (3) TMI 827
Condonation of filling appeal before ITAT - delay of 37 days in filing of the appeal - HELD THAT:- The bench noted that the assessee has explained the reasons that in fact there is no delay and the date of intimation was inadvertently left blank. Even the date of intimation and service there was an email id of the consultant who was now not looking to the affairs of the trust and the details of the trustee have been updated on the portal and thus even on this reasons there are reasonable cause in filling the appeal though belated. Based on these observations we found merits in the reasons advanced and we concur with the submission of the assessee and see that there were reasonable cause for the delay and thus, the delay in filing the appeal by the assessee before the ld. CIT(A) is condoned in view of the decision of Hon ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others [ 1987 (2) TMI 61 - SUPREME COURT] as the assessee is prevented by sufficient cause and the appeal of the assessee taken up for deciding on the merits of the case. Exemption u/s 11 - assessee had belatedly e-filed the Audit Report in Form 10B along with the return of income filed under sub section (1) of section 139 - whether the assessee denied the benefit of exemption as a trust merely on the reason that the audit report in Form no. 10 B filed belated? - HELD THAT:- For delay in filling the audit report in form no. 10 B we note that the assessee has filed the said audit report on 13.03.2024. Assessee placed on record that even the CBDT vide F.No. 225/358/2018/ITA.II dated 08.10.2018 wherein the due date extended upto 31.10.2018 and the assessee in this case e-filed the form no. 10B on 13.03.2024. This issue is decided in the case of Sarvodaya Charitable Trust Vs. ITO(E) [ 2021 (1) TMI 214 - GUJARAT HIGH COURT] where assessee, a public charitable trust registered u/s 12A, had substantially satisfied condition for availing benefit of exemption as a trust, it could not be denied exemption merely on bar of limitation in furnishing audit report in Form No.10B especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. Also see Shri Laxmanarayan Dev Shrishan Seva Khendra [ 2023 (7) TMI 293 - ITAT AHMEDABAD] and Sh. Rajkot Vishashrimali Jain Samaj [ 2023 (3) TMI 765 - ITAT RAJKOT] - Thus we direct the Jurisdiction Assessing Officer (JAO) to consider the Form no. 10B through belated and allow the claim of exemption u/s. 11. Appeal of assessee allowed.
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2024 (3) TMI 826
Disallowance u/s 14A r.w.r. 8D - Addition of interest and administrative expenses - HELD THAT:- As decided in Gujarat Flurochemicals Ltd [ 2023 (12) TMI 713 - GUJARAT HIGH COURT] has held that the disallowance u/s 14A r.w. Rule 8D of Income Tax Rules cannot exceed the amount of exempted income. Also decided in Craft Builder Construction private limited [ 2020 (1) TMI 135 - SC ORDER] disallowance under section 14A cannot exceed exempt income of relevant year. Thus as coming to the facts of the case on hand, admittedly the exempted income is of Rs. 1,08,650/- only and therefore, respectfully following the judgments as discussed above, the disallowance cannot exceed the amount of exempted income. Hence, the ground of appeal of the assessee is partly allowed. Addition to the book profit u/s 115JB for the amount disallowed u/s 14A r.w. Rule 8D - HELD THAT:- We note that the in the case of ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] has held that the disallowance made u/s 14A r.w.r. 8D cannot be the subject matter of disallowance while determining the net profit u/s 115JB of the Act. Thus, it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expense as mentioned under clause (f) to explanation 1 to section 115JB of the Act. Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - We feel that an ad-hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus, we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore, our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus, we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus, the ground of appeal of the Revenue is partly allowed.
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2024 (3) TMI 825
Eligibility for deduction u/s 80IAB - assessee earned interest on the advances received from the developers and contractors to facilitate the execution of work entrusted to them - AO considered the interest received on advances to the developer/contractors under the head income from other sources and proceeded to hold that the said income does not have nexus with the business of the assessee, hence not eligible for deduction under section 80IAB - CIT(A) allowed the deduction - HELD THAT:- As relying on assessee s own case for A.Y. 2008-09 [ 2014 (8) TMI 959 - ITAT MUMBAI] CIT(A) has rightly considered interest earned by the assessee company from developers and contractors, being eligible for deduction under section 80IAB. Decided against revenue. Lease rent claimed for deduction u/s 80IAB - AO disallowed claim on the ground that the said income does not have any nexus with the business of the assessee - CIT(A) overturned the findings returned by the AO holding that lease rent income received by the assessee is an income from business and eligible for deduction under section 80IAB - HELD THAT:- Bare perusal of the findings returned by the Ld. CIT(A) goes to prove that this issue is no longer res-integra having already been decided by the Tribunal in assessee s own case in A.Y. 2010-11 2011-12 [ 2019 (6) TMI 1370 - ITAT MUMBAI] whereby income derived by the assessee from the lease rental has been held to be eligible as business income for the purpose of deduction under section 80IAB of the Act. So finding no illegality or perversity in the impugned findings ground No.3 raised by the Revenue is hereby dismissed. Nature of receipt - Grant received from Government of Maharashtra towards the repair and maintenance of airports - revenue or capital receipt - A.Y. 2012-13 - HELD THAT:- This issue is no longer res-integra having already been decided by the Tribunal in favour of the assessee in its own case for A.Y. 2010-11 [ 2019 (6) TMI 1370 - ITAT MUMBAI] as held Maharashtra Government release the grant in favour of assessee for the repairs and maintenance of airports . It is if any capital in nature and is not liable to be considered as revenue in nature. Thus we are of the view that the grant released by Government of Maharashtra on account of repairs and maintenance of airports is not liable to be treated as income of the assessee being in the nature of capital receipt. Decided in favour of assessee. Receipts on behalf of Government of Maharashtra for the purpose of Grant-in-aid for the rehabilitation of Project Affected Persons (PAP) and for infrastructure development of airports in notified area - AO treated the grant-in-aid as income of the assessee and made addition thereof to the total income of the assessee company - A.Y. 2013-14 and 2014-15 - HELD THAT:- Undisputedly the assessee company was incorporated as a company under the Companies Act, 1956 by the Government of Maharashtra as a special purpose company to develop multi model international hub airport at Nagpur and aviation infrastructure in the State of Maharashtra in order to provide regional air connectivity and operationalising certain government schemes. Also not in dispute that the assessee company is appointed by the State Government as a special planning authority under section 40(IB) of the Maharashtra Regional Town Planning (MRTP) Act, 1966; that it is also not in dispute that the assessee company being a special planning authority is required to carry out the work of development and disposing of land in the notified area as an agent of the state. CIT(A) has erred in treating the grant-in- aid received by the assessee company from State of Maharashtra as capital receipt rather utilization of the grant-in-aid by the assessee company for acquisition of land, development of airports, repair and maintenance of airports is the statutory functions of the assessee company as an agent of the State of Maharashtra, hence, not assessable to tax under Income Tax Act. Receipts of an amount on account of development charges levied by the assessee company u/s 124J of Maharashtra Regional Town Planning (MRTP) Act, 1966 - CIT(A) held the receipt on account of development charges as business receipt and liable to be taxed - HELD THAT:- As the assessee company is held to be a state only for the purpose of receiving grant-in-aid from the state government as a special planning authority and collecting the development charges from various lessees/unit holders in Multi- Model International Passenger and Cargo Hub Airport at Nagpur' (MIHAN) area are to be used for development of the land acquired by the assessee company with the grants-in-aid provided by the state government and as such is also a statutory function. Because without developing the land purchases with grant-in-aid received from the state government, which ultimately vests in the state government the purpose of providing public amenities as prescribed under the scheme of the Act cannot be fulfilled. CIT(A) has erred in treating these development charges which are inextricably linked to the development of the project under the scheme, akin to the lease rental/usage charges. So the findings returned by the Ld. CIT(A) are hereby set aside and the AO is directed to delete the addition made by the AO and confirmed by the Ld. CIT(A). Disallowance u/s 14A r.w.r. 8D - as argued there is no exempt income and own funds of the assessee are far more than the investment made by the assessee during the years under consideration - CIT(A) deleted the addition - HELD THAT:- No illegality or perversity in the impugned findings returned by the Ld. CIT(A) deleting the addition made by the AO under section 14A read with rule 8D as it is a settled principle of law that when there is no exempt income earned by the assessee during the year under consideration no disallowance can be made under section 14A read with rule 8D - See Era Infrastructure (India) Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] Characterization of receipts - interest on fixed deposits - business income or income from other sources - HELD THAT:- In view of the order passed by the co-ordinate Bench of the Tribunal [ 2014 (8) TMI 959 - ITAT MUMBAI] we remit this issue back to the AO to decide as per the directions given by the co-ordinate Bench of the Tribunal wherein A.O. is directed to verify whether the FDs have been made out of surplus funds or out of loans and borrowing of the assessee and whether the FDs were for short period of time. The assessee is directed to file necessary details before the A.O. Nature of receipt - Receipt of fire service fee - AO as well as the Ld. CIT(A) by declining the contentions raised by the assessee company held that the assessee company is to manage a property by taking various measures as per section 114 of the MRTP Act and section 11 of MFPLSM Act, 2006 empower MADC to levy fire service fees on various unit holders within the area of its jurisdiction and the said amount is credited separately to the MIHAN development fund account, and treated the same as revenue in nature - HELD THAT:- when the fire services fee is to be applied for the purpose of maintaining fire brigade which is also mandatory for the assessee company to maintain in compliance to section 25 of chapter VII of MFPLSM Act, 2006, section 11 of the MFPLSM Act, 2006 also empowers the assessee company to levy fire services fee on all owners of various buildings within the area of its jurisdiction, the same cannot be treated as receipt of revenue in nature. Since the entire project was being executed by the assessee as a stated owned company fire services fees which was not received in the ordinary course of business and was strictly applied for the purpose of maintaining fire brigade is like development charges collected by the assessee company and as such is inextricably linked with the success of airport project being executed by the assessee company on behalf of the state government and as such it cannot be treated as income. So the same is ordered to be treated as revenue in nature as claimed by the assessee. Disallowance of Loss in respect of power distribution and water supply activities - CIT(A) has considered the losses due to water evaporation - HELD THAT:- As not in dispute that no company will deliberately decrease its profit. Main cause as brought on record by the assessee has been duly perused by the Ld. CIT(A) for loss on account of distribution of water is underutilization of water supply which led to low sale and it has increased the losses. It is also not in dispute that sometimes a purchaser has no option except to purchase the electricity at the higher cost and there has to be energy loss due to transmission distribution and scheduling losses. Similarly so far as water losses are concerned it is a proved fact on record that the assessee has not fully utilized the installation capacity of water supply which has become the main cause of losses for which cost has to be incurred to procure the same. Moreover, when the AO has not disputed the books of account disallowance merely on the basis of surmises is not sustainable. Decided against the Revenue. Admission of additional grounds - assessee company by moving an application sought to raise the additional grounds on the ground that the same are purely legal grounds and can be raised at any stage of the proceedings - As contended by the Ld. A.R. for the assessee that qua assessment year 2008-09 in the first round of litigation the Tribunal has passed an order whereby issue as to earning interest being interest on fixed deposits was ordered to be decided afresh and AO has passed an order giving effect to the order passed by the Tribunal i.e. after a period of about three years - HELD THAT:- Bare perusal of the grounds goes to prove that these are purely legal grounds and as per the law laid down by the Hon ble Supreme Court in case of National Thermal Power Co. Ltd. [ 1996 (12) TMI 7 - SUPREME COURT and Jute Corporation of India Ltd. [ 1990 (9) TMI 6 - SUPREME COURT] the legal grounds can be raised at any stage of the appellate proceedings and hence the same are allowed. In all eventualities the AO is required to pass the order within a period of nine months/three months as the case may be which the AO has failed to pass. Even it is not the case of the Revenue that their case falls under proviso 1 2 to section 153(5) of the Act nor any explanation has been brought on record. When the AO was required to pass the order giving effect to the order passed by the Tribunal within a period of three months from the end of the month in which order under section 250, 254, 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner as the case may be the assessment order passed by the AO after a period of about three years is barred by limitation, void, ab-initio and bad in law. So the additional ground No.1 raised by the assessee is allowed. When the appeal filed by the assessee is allowed on technical ground the assessment order passed by the AO being barred by limitation, void, ab-initio and bad in law the cross appeal filed by the Revenue is also not maintainable in the eyes of law and as such is liable to be dismissed. When the additional ground No.1 raised by the assessee is allowed the Bench has decided not to go into the merits by deciding other grounds.
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2024 (3) TMI 824
Addition u/s 69A - unexplained money u/s 69A - assessee has failed to furnish explanation/supporting documents in respect of deposit of cash on various dates and credit of amount in bank account - assessee submitted that he has received cash money from father-in-law at the time of marriage and assessee also filed an affidavit submitted the fact that on account of loss incurred in the speculative transaction. He has also sold the jewellery received by him at the time of marriage and various other subsequent functions - he has also filed a detailed list of gift received at the time of marriage and therefore, considering that aspect of the matter and considering the financial crises/shortage of funds he has deposited the cash which is receipt of gold ornaments and the money lying on him supported by the list of gift received at the time of marriage. HELD THAT:- As agreed assessee recently been married and the cash deposit of Rs. 13,85,200/- and credit worth Rs. 14,72,754/- cannot be considered as income of the assessee. Considering all facts and arguments presented before us, we are of the considered view that the addition sustained by the lower authorities is not justified and the same is directed to be deleted. Appeal of the assessee is allowed.
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2024 (3) TMI 823
Validity of reopening of assessment - doctrine of merger - notice of reopening as issued beyond 4 years - deduction u/s 80IA - HELD THAT:- It emerges that in original assessment order AO denied impugned deduction as claimed by the assessee u/s 80IA - CIT(A) partly allowed the claim and the assessee was allowed deduction by AO. It is crystal clear that the order of Ld. CIT(A) was confirmed by Tribunal and revenue s appeal was not admitted by Hon ble High Court. This issue, thus, has attained finality. The first appellate order got merged with the orders of high authorities. By revisiting this issue in reassessment proceeding, in our opinion, would tantamount to disturbing the already concluded issue which could not be permitted. Therefore, the reassessment proceedings could not be upheld for this reason alone. Also perusal of recorded reasons would show that no new tangible material has come into the possession of Ld. AO which would indicated any escapement of income. There is no allegation in the reasons by Ld. AO that the assessee failed to disclose material facts which were necessary for assessment of income. This condition is mandatory condition since the reopening is beyond 4 years. It could also be seen that the reopening is merely at the behest of revenue audit objection. The prime requirement to reopen the case is that Ld. AO has reasons to believe that certain income had escaped assessment. The formation of belief should be based on tangible material. This condition, in the present case, has not been fulfilled. In the case of CIT vs. Shwing Stetter India P. Ltd. [ 2015 (6) TMI 497 - MADRAS HIGH COURT] held that for the purpose of assumption of jurisdiction u/s 147, the AO must have reason based on materials that there has been an income escaping assessment, which warranted assumption of jurisdiction under section 147. In the absence of any such material indicating escapement of income, the proceedings would be invalid. AO did not record any reason that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. When the AO had failed to record anywhere in his satisfaction or belief that the income chargeable to tax had escaped assessment on account of the failure of the assessee to disclose truly and fully all material facts necessary for assessment, the notice issued u/s 147 beyond the period of four years was wholly without jurisdiction and could not be sustained. This case law clearly supports the case of the assessee. Computation u/s 115JB - Mere omission on the part of Ld. AO to consider the same could not trigger reassessment proceedings unless there was any failure on the part of the assessee to make full disclosure thereof. The complete details, in this regard, was made available by the assessee in the computation of income. Therefore, no allegation of disclosure of true facts could be made against the assessee. We would hold that the reassessment proceedings were bad-in-law. The assessment order is accordingly quashed.
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2024 (3) TMI 822
Addition u/s 69 - Unexplained investment by sending monies abroad in illegal means - onus to prove - material that is relied upon by the revenue is the hard disk seized during search - whether the expression amounts sent of 19500000 USD mentioned in seized data represent amounts sent by assessee under hawala route or the amounts sent by LGF from Cyprus to assessee company? - HELD THAT:- We are in agreement with the argument advanced by the ld. AR that if the seized documents were already provided to the assessee on 04.12.2018 itself, then what is the need for the ld. AO to grant an opportunity to the assessee to be present for receiving the cloned copy of the hard disk on 05.02.2019. Hence the version of the assessee that the cloned copy of the hard disk-2 which allegedly contained the material for making the impugned addition was never handed over to the assessee requires to be accepted. In this background, the stand taken by the assessee that it had not sent any monies abroad through illegal means and hence there cannot be any addition u/s 69 towards unexplained investment in the hands of the assessee company requires to be accepted. We hold that when assessee states that it had not made any investment by sending monies abroad in illegal means, it cannot be asked to prove the negative. The onus shifts on the revenue to prove the fact with cogent materials that statement of assessee is incorrect. Without doing so, the revenue cannot directly proceed to make an addition u/s 69 of the Act by entertaining a huge suspicion. We find that from perusal of the records, there is no evidence to prove that the amounts sent shown in the hard disk is actually amounts sent by assessee company in hawala route which had ultimately found its way in the form of share capital and share premium under FDI route. The revenue had completely addressed this issue and made an addition purely on suspicion and surmise without any basis thereby making the addition totally unsustainable in the eyes of law. It is trite law that suspicion howsoever strong would not partake the character of legal evidence and hence a greater onus is casted on the revenue to bring on record cogent evidences to justify its suspicion, which is conspicuously absent in the instant case. The only material that is relied upon by the revenue is the hard disk seized during search which only contained the details of amounts sent and amounts received . Nowhere the said material even suggested that the amounts were sent by assessee company in illegal route which in turn had surfaced back in the form of share capital and premium under FDI route from Cyprus. This case was even subjected to examination by CBDT Foreign Tax Division wherein FT TR reference was also made to Cyprus tax authorities. FT TR had submitted its report duly confirming the fact that LGF had raised monies through issue of shares and those monies had been utilized by them for making investment in shares of Assessee Company under FDI route. No adverse comments were indeed given by FT TR of CBDT with regard to these transactions. Hence the source of source is also duly established and proved by the assessee company herein - Decided in favour of assessee.
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2024 (3) TMI 821
Stay of recovery proceedings initiated under Section 226(3) - Political Party claiming exemption u/s 13A as appliable to Trusts, denied - Special provision relating to incomes of political parties - Denial of the exemption claimed by the assessee u/s 13A - reasons for the denial are violation of the third Proviso to Section 13A and violation of clause (d) of the first Proviso to Section 13A - HELD THAT: - Section 13A of the Act is a special provision relating to incomes of Political Parties. It prescribes that any income of a Political Party under the head income from house property , income from other sources or capital gains or income by way of voluntary contributions received from any person shall not be included in the total income of such Political Party if it fulfils the conditions prescribed thereof. In the instant case, the pre-requisites for the assessee-Political Party to exclude its voluntary contributions received and other incomes from the total income is subject to the fulfillment of the conditions prescribed therein. The scope and nature of the conditions prescribed in Section 13A of the Act has been a subject-matter of consideration by the Hon'ble Delhi High Court in assessee s own case [ 2016 (3) TMI 879 - DELHI HIGH COURT] relevant discussion in the judgment of the Hon ble High Court compliance with the conditions prescribed in Section 13A of the Act is mandatory for a Political Party in order to be eligible for the claim of exemption under Section 13A of the Act.Assessee s case for exemption u/s 13A has to be examined in the aforesaid light. The first case by the Assessing Officer is qua the third Proviso to Section 13A - The compliance with the third Proviso can be understood as being two-fold. First, that a Political Party is required to furnish its return of income in accordance with the provisions of sub-section (4B) of Section 139; and, second that such return is to be furnished on or before the due date under that Section . So far as the first essential is concerned, the same has been complied with inasmuch as there is no dispute that assessee has filed its return of income; in order to examine the second essential of the Proviso, one has to decipher the meaning of due date for furnishing of return as envisaged in the third Proviso to Section 13A of the Act. For this purpose, we may go to sub-section (1) of Section 139, which requires an assessee to furnish its return of income on or before the due date . Explanation 2 thereof enumerates the due date applicable to the different category of assessees, and, insofar as the due date applicable in the instant case is concerned, there is no dispute between the parties that the same is 31st December, 2018 (since extended from 30th September, 2018). Ostensibly, the return of income has been filed on 2nd February, 2019, which is beyond the due date. Consequently, there is an apparent non-compliance with the requirements of the third Proviso to Section 13A of the Act. The third Proviso, as reproduced by us in the earlier part of this order, was inserted in Section 13A by the Finance Act, 2017 with effect from 1st April, 2018. As per the Memorandum explaining the provisions introduced in the Parliament, it was noted that Political Parties were required to file their return of income in terms of Section 139(4B) of the Act; So, however, the filing of the return was not a condition precedent for availing exemption under Section 13A of the Act. The Proviso was introduced to make it mandatory for a Political Party seeking exemption under Section 13A of the Act to furnish its return of income for the relevant year on or before the due date under section 139. As Senior Counsel submitted that since Section 139(4B) of the Act provides that all the provisions of this Act shall apply to a return filed by a political party as if it were a return furnished under subsection (1) of Section 139 , therefore, it would encompass sub-section (4) of Section 139 of the Act also. In our view, the said argument is quite misplaced as it would negate the purpose for which the third Proviso has been inserted by the Finance Act, 2017. Moreover, the third Proviso contains the expression the due date under section 139 and a plain reading of the provisions shows that the due date for the purpose of Section 139 is defined in terms of Explanation 2 below Section 139(1) of the Act and that such due date is not controlled by the provisions of sub-section (4) of Section 139, which merely permits filing of belated returns. As per the CBDT, the trusts who have filed return under Section 139(4) of the Act need not be refused the exemption for the reason that the return of income filed was not within the due date of filing of the return. It has been canvassed by the learned Senior Counsel that the two provisions being pari materia, similar reasoning should govern the understanding of the condition prescribed in the third Proviso to Section 13A of the Act with regard to the due date of furnishing of the return. In our view, the plea of the assessee to seek treatment on par with Trusts, is misplaced having regard to the pronouncement of Hon'ble Delhi High Court in assessee s own case. It is incongruent for a Political Party to canvass that inspite of accepting Donations in cash exceeding Rupees two thousand each, clause (d) is not violated merely because it has maintained the details as per clause (b) of the first Proviso. Each of the conditions laid down in clauses (a), (b), (c) and (d) of the first Proviso are to be mandatorily complied with in order to claim exemption under Section 13A of the Act, as per the ratio of the judgment of the Hon'ble Delhi High Court in the case of the assessee (supra). In the present case, the detail of Rs. 14,49,000/- clearly show that each contribution is in cash in excess of Rs. 2,000/-, thereby reflecting clear violation of clause (d) of the first Proviso. At this point, we are conscious of the statement made by the learned Senior Counsel at Bar that out of the sum of Rs. 14,49,000/-, a sum of Rs. 3,00,000/- has been received by transfer through RTGS. However, even after considering the same, violation of clause (d) to the first Proviso is palpable qua the balance of the amount. As component of Donations received in cash in excess of Rs. 2,000/- each was merely 0.1% of the total contribution received and, therefore, the same should not invite wholesale denial of exemption under Section 13A - In our view, the said plea is manifestly contrary to the understanding placed by the Hon ble High Court on the provisions of Section 13A of the Act. In fact, the following discussion by the Hon ble High Court does not leave us in any doubt that once the mandatory requirements contained in Section 13A of the Act is violated, there is no discretion with the income tax authorities to give any relaxation in allowing the exemption. Therefore, the Revenue is justified in relying on the findings of the Assessing Officer to the effect that the assessee has complied with the provisions of clause (b) but still violated the provisions of clause (d) of first proviso to section 13A of the Act which clearly prohibit receipt of donation in excess of Rs. 2,000/- in cash . On the basis of the aforesaid discussion, and having regard to the legal position and the material on record, it is reasonable to conclude that the income tax authorities have not made any error in denying the exemption claimed by the assessee under Section 13A of the Act due to violation of clause (d) of the first Proviso as well as third Proviso to Section 13A of the Act. Consequently, in our view, the Applicant has been unable to make out a strong prima facie case against the interpretation of Section 13A of the Act as adopted by the Revenue to deny the exemption, so far it is relevant for the purposes of examining the merits of the present Application. Expenditure of a political party - Once the income by way of voluntary contributions is not excludible from total income on account of denial of exemption under Section 13A of the Act, the same is liable to be treated as income from other sources . Thereafter, the question of allowability of expenditure incurred by a Political Party for attaining its aims and objects was declined by the Hon'ble Delhi High Court. Recovery proceedings - The chronology of events, which have been canvassed before us starting from the passing of the assessment order on 6th July, 2021 and ulminating with the issuance of notice under section 226(3) of the Act on 13th February, 2024, in our view, does not justify an inference that the recovery proceedings have been done in an undue haste. We do not find that the recovery notice under Section 226(3) of the Act issued by the Assessing Officer on 13th February, 2024 is lacking in bona fides, so as to require us to intervene. It was an accepted practice at the level of the Tribunal that taxpayer is entitled to a stay on the recovery proceedings on payment of 20% of the demand during the pendency of the Appeal before the Tribunal. The aforesaid argument, in our view, is too general and does not merit acceptance. Moreover, as we have already discussed in the earlier paragraphs, each Application for stay has to be decided on its own facts and circumstances, and there can be no generalized approach.
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2024 (3) TMI 820
Disallowance of personal expenses - assessee has made payment/remittance to USA towards medical treatment of one of its Directors - HELD THAT:- We find due to non-submission of the Board Resolution approving the treatment of the Chairman of the company in USA and in absence of production of any evidence that the Chairman has admitted such expenditure as perquisites in his hands to tax, the AO disallowed the expenditure incurred by the assessee towards the treatment of the Chairman of the company in USA. We find in absence of any further details filed before the learned CIT (A) NFAC, the learned CIT (A) NFAC upheld the action of the AO. Assessee referred to the certified copy of the Bozard Resolution and copy of Form 16 filed in the paper book and requested for admission of the same as additional evidence. He submitted that given an opportunity, the assessee is in a position to produce the copy of the resolution of the Board of Directors approving the treatment of the Chairman of the company in USA and also file the copy of the ITR of the Chairman wherein such amount has been admitted to tax as perquisites. Thus we deem it proper to restore the issue to the file of the AO with a direction to grant more opportunity to the assessee to file the requisite details to his satisfaction and decide the issue as per fact and law - Grounds No.1 to 3 raised by the assessee are accordingly allowed for statistical purposes. Belated deposit of employee s contribution to PF - HELD THAT:- Issue which has now been settled by the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd [ 2022 (10) TMI 617 - SUPREME COURT] wherein it has been held that the employee s contribution to PF ESI, if not remitted before the due dates mentioned in the respective Act, cannot be allowed as a deduction. Assessee also fairly conceded that the above issue stands decided against the assessee by the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P) Ltd vs. CIT (Supra). Accordingly, this ground raised by the assessee is dismissed. Addition towards interest paid on customs duty - Allowable revenue expenses or not? - as per AO assessee had defaulted in payment of customs duty which is an offence and only on the direction of the Hon'ble Supreme Court, the assessee has paid customs duty along with interest and if assessee paid the customs duty in time, the interest expenditure would not have arrived - HELD THAT:- We find the Hon'ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT ( 1980 (4) TMI 1 - SUPREME COURT ) has held that the interest paid u/s 3(3) of the U.P Sugarcane Cess Act, 1965 cannot be described as a penalty paid for an infringement of the law. The Coordinate Bench of the Tribunal ENKEI WHEELS INDIA LTD[ 2023 (2) TMI 687 - ITAT PUNE] following the decision of the Hon'ble Supreme Court in the case of Mahalakshmi Sugar Mills Co. vs. CIT (Supra) has held that the interest paid for delayed payment of such taxes is a deductible item of expenditure. In view of the above discussion, we do not find in any infirmity in the order of the learned CIT (A) NFAC holding that the interest paid on customs duty is allowable as revenue expenditure and is not in contravention to Explanation (1) of section 37(1) of the I.T. Act. Accordingly, the ground raised by the Revenue is dismissed.
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2024 (3) TMI 819
Addition u/s 40A - purchases in cash in excess of ₹ 20,000/ - case of the assessee that all the cash purchase are fully covered under Rule 6DD(e)(ii) of the Income Tax Rules, as many venders do not have bank account and the purchases were done away from remote areas - whether assessee has fulfilled the condition laid down in Rule 6DD? - HELD THAT:- Considering the fact that out of total purchase of 2,69,92,101/- the assessee had purchased in cash of Rs. 74,67,186/- and also by taking into consideration of the nature of the business of the assessee and by respectfully following the ratio laid down in the case of Gee Square Exports [ 2018 (11) TMI 658 - SC ORDER] , we find merit in the Grounds of appeal of the assessee, accordingly, the disallowances/additions made by the A.O. which has been upheld by the CIT(A) is hereby deleted. Appeal filed by the assessee is allowed.
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2024 (3) TMI 818
Deduction u/s 80IA - claim rejected on non-filing of Form 10CCB alongwith return of income - CIT(A) deleting the disallowance u/s 80IA holding that filing of Form 10CCB within the specified date as provided in section 80IA(7) of the act is not mandatory but directory in nature - HELD THAT:- On going through the contents of the order passed by the Ld. CIT(A) we observe that the order passed by Ld. CIT(A) is a non-speaking order in which the Ld. CIT(A) has not analyzed the relevant judicial precedents on the subject as applicable to the assessee s set of facts. Further, it is observed that Ld. CIT(A) has simply accepted the version of the assessee without independently applying his mind to the facts of the case. The Ld. CIT(A) has not even considered the impact of Supreme Court judgment in the case of Wipro Ltd. [ 2022 (7) TMI 560 - SUPREME COURT] which was passed prior to date as passing of order by Ld. CIT(A). Accordingly, looking into the instant facts, in the interest of justice, the matter is being restored to the file of Ld. CIT(A) for de-novo consideration - Appeal of the Department is allowed for statistical purpose.
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2024 (3) TMI 817
Registration u/s 80G(5) - application rejected as assessee has mentioned in Form No. 10AB that one of it s objects is religious in nature - Assessee submitted that on perusal of the trust deed submitted before Ld. CIT(E), it can be seen that the objects of the trust which have been mentioned are medical relief, educational objects, general public utility, preservation of environment etc. - HELD THAT:- CIT(E) while rejecting the application filed by the assessee has summarily rejected the application without analyzing the facts of the assessee s case. CIT(E) has not pointed out any specific object in the trust deed which could be termed as religious in nature. CIT(E) has also not analyzed whether any expenditure was incurred by the applicant towards religious purposes. We also observe that the applicant had filed written submissions on two occasions and there has been no non-compliance on part of the applicant trust in response to notices issued by CIT(E). CIT(E) did not confront the applicant trust with regard to it s observation that one of the objects of the assessee trust is religious in nature and simply proceeded to dismiss the application filed by the applicant without provided any opportunity of hearing to the applicant to rebut the findings made by CIT(E) which formed the basis of rejection of application by the applicant trust. Accordingly, looking into the instant facts, in the interest of justice, the matter is being restored to the file of the Ld. CIT(E) for de-novo consideration after giving due opportunity of hearing to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purposes
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2024 (3) TMI 816
Registration u/s 80G(5)(vi) - CIT(E) rejected the application filed on the ground that the assessee / applicant has mentioned in Form 10AB that two of the objects of the assessee are religious in nature - CIT(E) observed that the assessee / applicant in Form No. 10AB has mentioned that it has incurred expenditure of religious nature and was of the view that Section 80G of the Act specifies that there is no provision for application of fund for any purposes other than a charitable purpose - HELD THAT:- Explanation 3 to Section 80G(5) suggests that the termed charitable purpose does not include any purpose, the whole or substantially the whole of which is of a religious nature. This implies that some part of the activities of a trust are permitted to be of a religious nature Sub-Section (5B) provides that an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding 5% of it s total income in that previous year, shall be deemed to be a institution or fund to which the provisions of this section apply. Further, notably sub-Section 5B starts with the words Notwithstanding anything contained in Clause (ii) of sub-Section (5) and Explanation 3 . Therefore, on plain reading of sub-Section (5B) to Section 80G, it is evident that if any institution or fund incurs any expenditure which is of a religious nature for an amount not exceeding 5% of it s total income, in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. In the instant facts, we observe that Ld. CIT(E) has relied upon only two out of ten objects to show that the assessee is a religious trust. CIT(E) has not made any specific observations as to whether less than 5% of the total income has been spent by the assessee towards religious purposes. Accordingly, in the interest of justice, the matter is being restored to the file of CIT(E) for de-novo consideration after analyzing whether less than 5% of the total income has been incurred by the assessee trust towards religious activities. In case it is found that less than 5% of the total income has been incurred as expenditure by the applicant trust towards religious purposes, then benefit of Section 80G(5) of the Act may be granted to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purposes.
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2024 (3) TMI 815
Dismissal of appeal of assessee ex-parte before the Ld.CIT(A) - there was no compliance from the assessee to the notices issued and served on the assessee - AR contended that the assessee was not given sufficient opportunities to substantiate her case and therefore, pleaded for another opportunity of being heard before the CIT(A) - AO applied the section 56(2)(vii) - HELD THAT:- As in view of the foregoing facts and circumstances of the case and keeping in view the principles of natural justice, we are inclined to remit the matter back to the file of the Ld.CIT(A) and direct the Ld.CIT(A) to afford the assessee, another opportunity of being heard before the Ld.CIT(A) and to pass order on merits. The assessee is also directed to adhere to the notices issued by the Ld.CIT(A) and furnish relevant material evidences to substantiate her case. Accordingly, the grounds filed by the assessee are allowed for statistical purpose.
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2024 (3) TMI 814
Penalty u/s 271(1)(c) - assessee has not filed the original return of income though he had taxable income/Interest income - bonafide belief - AO had information in his possession that the assessee had made investment in FDR and had received interest income - assessee contended before the AO that he was a non-resident not well versed with the income tax law in India and return was not field due to bonafide ignorance of law - penalty order had mentioned that the notice was issued on 16-12-2021 requesting the assessee to furnish reply by 20-12-2021 but no reply was furnished by the assessee. HELD THAT:- Observation of the AO is totally erroneous as the assessee had submitted the reply on the income tax portal on 18-12-2021 (i.e. before the due date) which is evident from the screen shot of the income tax portal and thus penalty levied by the AO is without considering the reply filed by the assessee and it is unjustified and thus deserves to be deleted. It is noted that the assessee before leaving India, was employed in Indian Company and used to live at a rented premises. He had parked his Indian Savings fixed deposits and mutual funds which continued during the year under consideration. The assessee did not file his income tax returns due to bona fide ignorance that tax has already been deducted by the Bank on interest income and due to his stay outside India. Thus the penalty was levied by the AO on interest income on which TDS was deducted which is also reflected in Form No. 26AS. Keeping in view the above facts, circumstances of the case and also the decision of ITAT Ahemdabad in the case Vijaybhai Dashrathbhi Patel [ 2022 (2) TMI 1429 - ITAT AHMEDABAD] wherein held assessee had earned interest income (being the only source of income for the captioned year), on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the Income Tax Department is aware about his having income, but was of the mistaken view that once taxes have been deducted on this income, the assessee was not required to be filed return of income, thus not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause for not filing of return of income - we do not concur with the order of the ld. CIT(A) and thus the appeal of the assessee is allowed.
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Customs
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2024 (3) TMI 813
Levy of Merchant Overtime Fee - carrying out examination and supervision of loading of export goods at the factory of the manufacturer during office hours on working days the Central Excise Officers - HELD THAT:- It is not in dispute that the place of working/ supervision was at the factory of the appellant and it is also not in dispute that supervision was made by the Range Central Excise Officer in whose territory the factory of the appellant is located. Chapter 13 of the C.B.E. C. s Customs Manuals deals with Merchant Overtime Fee wherein it is provided that if services are rendered by the Custom Officer at a place which is not his normal place of work or place beyond the custom area, overtime is levied even during the normal working hours. In the facts of the case, none of the condition for levy of the MOT charges is satisfied and accordingly, the appeal is allowed by answering the questions in negative and in favour of the appellant to the effect that the appellant would not be liable to pay Merchant Overtime Charges for carrying out examination and supervision of loading of export goods at the factory premises of the manufacturer during the office hours on working day by the Central Excise Officers contrary to the instruction of the Central Board of Excise and Customs. Appeal allowed - decided in favour of appellant.
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2024 (3) TMI 812
Cancellation of grant of authorised operations of warehousing service activities - Section 16 of the SEZ Act, 2005 - imposition of penalty under Foreign Trade (Development and Regulations) Act, 1992 as made applicable by Rule 54(2) of the Foreign Trade (Regulation) Rules, 1993 for violation of the SEZ Rules - HELD THAT:- Respondent Nos. 1 to 3 and 5 could not controvert the submissions of learned advocate for the petitioner by referring to any provision of the SEZ Act. The espondent Nos. 1 to 3 and 5 could not controvert the above submissions of learned advocate for the petitioner by referring to any provision of the SEZ Act. Petition disposed off.
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2024 (3) TMI 811
Adjustment of various deposits made by entities during the course of investigation - Section 129E of Customs Act, 1962 - HELD THAT:- The CESTAT has in terms of the order impugned while taking note of the statutory position held that it is only in situations where the person or the entity seeking waiver/adjustment for the purposes of pre-deposit has itself tendered those amounts during the course of investigation, the issue of adjustment would not arise. It has further and in light of the express language of Section 129E of the 1962 Act found no justification to accede to the prayer made by the appellant. The CESTAT has found that while various deposits appear to have been made during the course of investigation, those amounts cannot be considered for the purposes of computing the pre-deposit amount since those deposits had been effected by different entities and individuals. Undisputedly, the depositors were not the appellants before the CESTAT. It was in view of the aforesaid that it came to conclude that amounts deposited by other entities cannot be reckoned towards pre-deposit. It has further observed that even if the entities which had made those deposits had chosen not to initiate any appeals, it would still be open for them to seek refund of those amounts. In light of the unambiguous wording of Section 129E, there are no justification to interfere with the view which the CESTAT ultimately took and stands reflected in the impugned order. Appeal dismissed.
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2024 (3) TMI 810
Absolute Confiscation - penalty - town seizure - Smuggling - illicit transport of Gold - burden to prove - HELD THAT:- Admittedly, the gold bars seized are of irregular shape and size and also of irregular weight other than standard gold bars. Admittedly, there is no marking of any foreign refinery on the gold bars seized. It is further found that the statements recorded by Revenue from both the appellants/staff Mr. VK Kumar and Mr. TP are pari materia and hence, it is apparent that such statements are not freely given but the person deposed have signed on the dotted line. Similarly, the statement of Mr. B. Suresh recorded under Sec 108 also does not inspire confidence - It is also beyond comprehension that a person engaged in gold business for a long time, not usually entertaining cash dealings, will get involved in facilitating the purchase of smuggled gold from unknown person for a paltry commission of Rs.2,000/- per kg. It is further found that the statement of Mr. B. Suresh is not admissible for denial of cross-examination and accordingly, the same is inadmissible in terms of Sec 138B of the Act. The appellant/claimant Mr. PVMJ Rao has lead cogent evidence with regard to availability of stock, evidence of conversion of old gold ornaments to gold bars and pieces through refinery at Narasaraopet and the said refiner has also confirmed melting of old gold jewellery and thereafter, refining the gold and delivering gold bars and pieces to the appellant - further, in view of the evidence led by the appellant, they have discharged the onus under Sec 123 of the Act as to the licit source of the gold in question. The appellant Mr. P.V.M. Jagannadha Rao is held entitled to receive back the gold, and if the same is already disposed of by the department, shall be entitled to receive the sale proceeds of the same with interest as per Rules. All penalties also stand set aside - the impugned order set aside - appeal allowed.
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2024 (3) TMI 809
Classification of imported goods - Battery Fuse Units (BFU) - classifiable under Chapter Heading 8529 or under Chapter Heading 8536? - exemption under Sl.No.16 of N/N. 25 /2005 Cus; dated 01.03.2005 - HELD THAT:- The technical literature placed by the appellant before the authorities is not under dispute. Before the Tribunal, they have produced the technical literature and based on the technical literature, it is seen that The Battery Fuse Unit (BFU) connects the radio equipment to the battery backup system. Three LEDs on the front panel indicate operational status. If the mains is out longer than the available backup time, the BFU automatically disconnects the Radio Base Station (RBS) cabinet from the batteries to avoid destructive excess discharging. When the mains returns, the BFU reconnects the batteries instantly. The BFU also measures battery voltage and current. Battery temperature sensors are also connected to the BFU. From the above, it is clear that the BFU is an independent functional unit. There is no dispute on the observations of the Commissioner (Appeals) by the appellant and their only argument is that it is a Part of the transmission equipment which the technical literature placed before us does not does not in any way provide any information to indicate that the same is an integral part of the communication system as claimed by the appellant. Therefore, the observations of the Commissioner (Appeals) agreed upon and the Chapter Headings - the impugned goods are rightly classifiable under CTH 8536 as Automatic Circuit Breakers and not as Part of the transmission system. Eligibility of the benefit of the Notification No.25/2005-Cus; dated 01.03.2005 - HELD THAT:- The appellant claimed exemption Notification for the goods classifying the same under CTH 8529 9090 as Parts of transmission apparatus incorporating reception apparatus. Since it is held that the goods are Automatic Circuit Breakers rightly classifiable under Chapter Heading 8536, the question of extending the benefit of the Notification as Parts of the transmission apparatus does not arise. Hence, the impugned goods rightly classifiable under chapter heading 8536 and they are not eligible for the benefit of the above Notification. The impugned order upheld - appeal dismissed.
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2024 (3) TMI 808
Refund of SAD - rejection of refund on the ground that the appellant failed to submit Chartered Accountant certificates and there had been no endorsements in the sales invoices indicating non-availibility of CENVAT credit on the imported goods sold - HELD THAT:- It is found that the conditions on which refund claims have been rejected are complied with by the appellant inasmuch as (i) Chartered Accountant certificate produced at pages 28 and 29 (in respect of appeal No. C/21068/2015) and pages 44-54 (in respect of appeal No. C/21484/2015) of the appeal paper-books (ii) Sample copy of invoice indicating endorsement is placed at page 25 and 41, respectively. Also, it is now settled law that endorsement in the sales invoice regarding non-availability of CENVAT credit cannot be a reason to deny the SAD refund. The impugned orders are set aside - Appeal allowed.
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2024 (3) TMI 807
Classification of goods intended to be imported - API Supari - Chikni Supari - Unflavoured Supari - Flavoured Supari - Boiled Supari - classifiable under Chapter/Heading 2106 90 30 as food preparation or under Chapter Heading 0802 80 90 or any other sub-heading of 0802 80 as areca nut? - HELD THAT:- In the instant case, betel nuts after being boiled are dried and this fact per se would not exclude the end-products from the scope of dried nuts . Further, boiling or mere addition of certain additives for the purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut - the processes to which raw betel nuts have been subjected to obtain API Supari: Chikni Supari, Unflavoured Supari, Flavoured Supari and Boiled Supari are squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN. Therefore, at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as preparations of betel nut, which is sine qua non for a goods to be classifiable under Chapter 21. Flavoured supari - HELD THAT:- The question to be answered is whether the addition of special flavouring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21. In this regard, the judgment of the Hon ble Supreme Court of India in the case of M/s. Crane Betel Nut Powder Works [ 2007 (3) TMI 6 - SUPREME COURT] and of the CESTAT, Chennai in the case of M/s. Azam Laminators Pvt. Ltd. [ 2019 (3) TMI 782 - CESTAT CHENNAI] [where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and marketed in small pouches as Nizam Pakku (in Tamil)/Betel Nut (in English), the Hon ble CESTAT held the resultant product classifiable under sub-heading 0802 90 19 of Central Excise Tariff and not under 2106 90 30 as supari for period after 7-7-2009] are relevant. Put simply, these decisions clearly imply that addition of flavouring agents do not change the character of the goods, meaning in the present case betel nut would continue to remain betel nut and not become preparation of betel nut. All the five goods placed before me for consideration, i.e., API Supari, Chikni Supari, Boiled Supari, Unflavoured supari, and Flavoured supari, merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the sub-heading 0802 80. This is so in view of the fact that the processes to which raw green fresh betel nuts have been subjected to obtain the said five goods are squarely in the nature of processes mentioned in Note 3 to Chapter 8, and have not materially changed the essential character of betel nuts. Further, the said five goods are not classifiable under sub-heading 2106 90 30, since they have not attained the character of preparations of betel nut, which is sine qua non for a goods to be so considered.
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Insolvency & Bankruptcy
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2024 (3) TMI 806
Approval of Resolution Plan - Dues of Income Tax liability - HELD THAT:- It is not required to issue notice in the present appeal as it is apparent that the corporate debtor did not have money/assets, and the appellant under the waterfall would not have received payment. The present appeal is dismissed.
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2024 (3) TMI 805
Maintainability of appeal - time limitation - impugned order was passed on 10.06.2022 and the period of 30 days prescribed for filing the appeal had expired on 10.07.2022 and a further period of 15 days had also expired on 25.07.2022 but these appeals have been filed without annexing the certified copy of the impugned order and the certified copies of the impugned order were applied much after the expiry of period of 45 days - HELD THAT:- It has been found from the resume of the facts that four appeals have been filed within a period of 30 days, six appeals have been filed within the extended period of 15 days alongwith the application for condonation of delay which are yet to be decided and all these ten appeals have been filed with applications for seeking exemption from filing certified copy of the impugned order whereas three appeals have been filed without seeking exemption from filing certified copy of the impugned order which can be granted under Rule 14 of the Rules. In all these appeals, the certified copies have been obtained after the expiry of 30 days/45 days but the fact remains that the application for seeking exemption is yet to be disposed of and this Tribunal has the jurisdiction to grant the exemption for the compliance of the Rules though on a sufficient cause shown in an appropriate application filed by the Appellant. Similarly, six appeals have been filed beyond the period of 30 days but within 45 days and the application for condonation of delay has not yet been decided. Supposing, the application for condonation of delay is allowed then the appeals shall be deemed to have been filed within the period of limitation and if the application is dismissed then the matter would be over. In so far as the remaining three appeals are concerned, these appeals have been filed without any application for seeking exemption from filing certified copy of the impugned order whereas Rule 14 clearly lays down that exemption can be granted if an application is moved in that behalf and by assigning a sufficient cause to render substantial justice. Appeal disposed off.
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2024 (3) TMI 804
Rejection of Section 7 Application filed by the Appellant - initiation of CIRP for default of payment of the Financial Debt owed to the Appellant - guarantor of the Financial Facilities or not - Approval of Resolution Plan lead to debt extinguishment or not. Whether the ECL is a guarantor to the SREI for the financial facilities availed by ESL from SREI? - HELD THAT:- The submission of the Appellant cannot be accepted that there was clear and categorical admission of Respondent No.1 in the pleadings before Madras High Court and the Hon ble Supreme Court that Respondent No.1 stood guarantor of the Financial Facilities extended by SREI to ESL - Admittedly, Respondent No.1 mortgaged its immovable property as per the Supplementary Agreement as noted above and pleadings have to be looked into the background that mortgage was made by Respondent No.1 of his immovable property to secure the Facilities. The issue directly arose in proceeding under Section 7, as to whether Respondent No.1 stood guarantor to SREI in reference to Financial Facilities extended to ESL, which has been answered by the Adjudicating Authority taking into consideration all relevant facts. Neither the issue was decided in proceedings before Madras High Court or by the Hon ble Supreme Court, nor any such admission can be pressed into service as claimed by the Appellant. The Adjudicating Authority in the impugned order after considering all facts and circumstances of the present case has rightly come to conclusion that Respondent No.1 cannot be held to be guarantor to the Financial Facilities extended by Financial Creditor to the ESL. In paragraph 11 of the judgment of the Adjudicating Authority, detailed consideration and reasons have been given for holding that Respondent No.1 is not guarantor of the Financial Facilities. Whether approval of ESL s Resolution Plan by the Adjudicating Authority led to extinguishment of entire debt of ESL and no claim would lie against Respondent as guarantor/ third party surety in respect of the financial facilities availed by the ESL? - HELD THAT:- Law on extinguishment of claim against personal guarantor and third party on approval of Resolution Plan has been settled by Hon ble Supreme Court in its judgment in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. [ 2021 (5) TMI 743 - SUPREME COURT] , where the Hon ble Supreme Court held that approval of resolution plan does not ipso facto discharge a personal guarantor (of a Corporate Debtor) of her or his liabilities under the contract of guarantee. There cannot be any dispute to the proposition that after the approval of the Resolution Plan, entire debt of the Corporate Debtor against the Financial Creditor stand discharged and after approval of Resolution Plan, Financial Creditor can have no further recourse against the Corporate Debtor. But the question as to whether debt of personal guarantor or third party which arises out of different contract shall also automatically extinguished after the approval of Resolution Plan is a question to be answered in the present case - The Minutes of the CoC throws light on the true interpretation of Clause 3.2 (ix) and cannot be said to be not relevant. When Clause 3.2 (ix) of the Resolution Plan expressly provides that all the debt shall be extinguished against the Company, but it shall not extinguish against personal guarantor and third party, nothing more is required to be looked into. The Respondent cannot be allowed to raise the submission contrary to above Clause of the Resolution Plan, which has received approval. In view of Clause 3.2 (ix) of the Resolution Plan, when read in the light of the CoC Meeting dated 29.03.2018, which throws considerable light on the meaning and content of Clause 3.2 (ix), the submission of the Respondent cannot be accepted that after approval of Resolution Plan, the entire debt stand extinguished and no recourse can be taken by the Financial Creditor against third party. Whether the approval of the Resolution Plan has led to extinguishment and effacement of the entire debt of ESL (including the liability owed by the CD)? - HELD THAT:- In view of Clause 3.2 of the Resolution Plan, which clearly contemplated that all rights/ remedies of the creditors shall stand permanently extinguished against the Company, except any rights against any third party (including the Existing Promoter) in relation to any portion of unsustainable debt secured or guaranteed by third parties. The finding of the Adjudicating Authority that approval of Resolution Plan has led to extinguishment and effacement of the entire debt of ESL has to be held to be finding qua the Corporate Debtor only. There is no finding recorded by the Adjudicating Authority in the impugned order that after approval of the Resolution Plan, it would lead to extinguishment and effacement of the entire debt of third party including the Corporate Debtor. The order of Adjudicating Authority rejecting Section 7 Application filed by the Financial Creditor upheld - appeal disposed off.
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Service Tax
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2024 (3) TMI 803
Accepting the balance payment as per the Sabka Vishwas (Legacy) Dispute Resolution Scheme, 2019 (SVLDRS) Form 3 - HELD THAT:- It is apparent that the petitioner has not made balance payment of Rs. 12,32,643/- within the extended period of time. The petitioner has also not pointed out any circumstances which suggests that the petitioner was under severe financial crunch as canvassed before the respondents authorities in the representation made by the petitioner pursuant to the order passed by this Court. As held by the Hon ble Supreme Court in the case of Yashi Constructions [ 2022 (3) TMI 110 - SC ORDER] that the time limit cannot be extended by the Court as the same would amount to modifying the scheme, it is only the respondent authority or the Government can extend the time, which is already extended during the COVID-19 pandemic upto 30th June 2020 and later on, upto 30th September 2020. This petition is not entertained and is, accordingly, dismissed.
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2024 (3) TMI 802
Levy of service tax - services of laying Pipes were provided to Government of Gujarat under Sujalam Sufalam Yojana and the same was not provided for commercial purpose or otherwise - HELD THAT:- From the decision in LARSEN TOUBRO LTD. VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD [ 2011 (1) TMI 188 - CESTAT, AHMEDABAD] , it can be seen that in the above case also the similar activity of laying of pipe line was carried out for the state of Gujarat Board i.e. Gujarat Water Supply and Sewerage Board wherein the demand of service tax was set aside. The facts and issue in the present is the identical to above case. Therefore, the ratio of above decision is directly applicable in the present case. The demand in the present case is also not sustainable. Hence the impugned order is upheld - appeal of Revenue dismissed.
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2024 (3) TMI 801
Extended period of limitation - suppression of facts or not - Denial of CENVAT Credit - inputs and capital goods - HELD THAT:- It is a settled principle that the demand can be invoked only during the normal period of limitation unless one of the elements required to invoke the extended period of limitation were present in this case. The Commissioner held that there was suppression of facts for the reason that the assessee had not declared that it had availed CENVAT credit on certain capital goods and had also not sought any clarification from the department. It is found that the responsibility of the assessee is only to file ST-3 returns. Unless the ST-3 return requires declaration of details of the goods on which the credit was taken, CENVAT credit can be availed without declaring the details and no fault lies at the doorstep of the assessee. In fact, since the ST-3 returns are to be filed online, there is no scope for assessee to add any extra information - there is no requirement or provision under the Act to seek clarification from the Department. As far as self-assessment is concerned, it is followed by every assessee in service tax and operating under self-assessment is not a ground on which the extended period of limitation can be invoked. For these reasons, the demand of CENVAT credit for the period up to 30.06.2012 needs to be set aside on this ground of limitation alone. CENVAT Credit - capital goods - 38 tippers - 4 excavators - HELD THAT:- Undisputedly the excavators, tippers and the graders were not exclusively used but were used partly for providing exempted service, namely, road construction and partly used for providing taxable services. For this reason Revenue s appeal needs to be dismissed - Appeal dismissed. Interest on capital goods CENVAT Credit - HELD THAT:- There are force in the contention of the assessee insofar as the order for recovery of interest on this amount of CENVAT credit is concerned. Learned counsel for the assessee is correct in his assertion that CENVAT credit can be availed once the capital goods are received and there is no prescription under the rules as to when they should be put to use in providing taxable services nor is there any provision under which any interest can be recovered for the period between the date of taking credit and date on which they are put to such use. Therefore, the demand of interest needs to be set aside. CENVAT Credit on tyres, tubes and flaps - HELD THAT:- The issue on the question of limitation has been decided in favour of the assessee. It has been found that no case has been made out by the Commissioner in the impugned order for invoking the extended period. The demand of CENVAT credit tyres tubes and flaps cannot be sustained and, therefore, needs to be set aside. CENVAT Credit on Soil Compactor and roller - HELD THAT:- The Commissioner was correct in stating that as per rule 6(c) of CCR no CENVAT credit can be availed on capital goods which are used exclusively for providing exempted services. However, it is the assertion of the assessee that after the show cause notice was issued, the capital goods were indeed, used for providing some taxable service also this submission was not accepted by the learned Commissioner. Notwithstanding this fact, we find that the demand is time barred. It, therefore, could not have been sustained in any case. It is set aside on the ground of limitation. Penalties - HELD THAT:- The necessary ingredient for imposing penalty under 15 of CCR or invoking section 78 is an element of fraud or collusion or willful misstatement or suppression of facts or violation of Act and Rule with intent to evade payment of service tax. We have already held that no case has been made out in the impugned order for invoking the extended period of limitation. Therefore, penalty invoking section 78 also cannot be sustained. Accordingly, the penalties of Rs. 7,46,081/- and Rs. 12,29,271/- set aside - penalty of Rs. 5000/- imposed under rule 15A cannot be sustained and, accordingly, the same also needs to be set aside. Appeal disposed off.
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2024 (3) TMI 800
Invocation of Extended period of limitation - classification of services under Business Support Services or not - HELD THAT:- From the fact that several show cause notices have been issued by the Department, it cannot be said that the Department is not aware of the allegations now being made in the instant show cause notice. The facts were in the knowledge of the Department. In fact, the learned Counsel for the appellant has referred to Order-in-Appeal No.278/2013 dated 19.07.2013, where the show cause notice dated 5.4.2010 was under challenge wherein the demand pertained to the period May, 2006 to September, 2008 for rendering the services towards arranging travel of clients covered under the Business Support Services . The show cause notice was confirmed by the order-in-original dated 13.06.2011 by the Addl. Commissioner of Service Tax, Bangalore and on the same being challenged by the appellant, the Commissioner (Appeals) held the demand under the Business Support Services as unsustainable, observing that it is not the case of the Department that the assistance provided by them is used for the purpose of business or commerce referring to the Circular No.109/03/09 dated 23.03.2009 issued by the Board. In view of these facts, the issue of limitation is squarely covered by the decision of the Supreme Court in Nizam Sugar Factory [ 2006 (4) TMI 127 - SUPREME COURT ] where the Court held that the allegation of suppression of facts against the appellant cannot be sustained, when the first show cause notice was issued all the relevant facts were in the knowledge of the authorities. The assessee was under statutory obligation of self-assessment to disclose the requisite details and pay the correct service tax amount and non-disclosure thereof amounts to suppression of material facts from the Department and therefore, the extended period of limitation of 5 years from the relevant date can be invoked under Section 73(1) of the Act - The allegation of suppression of facts have been buttressed on the ground that by virtue of the audit of the accounts by the Central Excise Revenue Audit (CERA) of the Chennai location of the assesse it came to knowledge that they were charging the management fee which is in addition to the price of the ticket. As the issue on limitation has already been answered by the decision of the Apex Court in Nizam Sugar Factory [ 2006 (4) TMI 127 - SUPREME COURT ] and also by the Tribunal in M/s G. D. Goenka [ 2023 (8) TMI 995 - CESTAT NEW DELHI] , there is no reason for us to differ from that view and following the same, we are of the considered opinion that the department cannot invoke the extended period of limitation and therefore the demand in so far as it falls beyond the normal period of limitation is unsustainable and is accordingly set aside. The appellant merely facilitates and assist the individuals who are travelling on which no service tax is leviable for the simple reason that service tax is charged on the service provided. The services in question does not fall within the scope of Business Support Service and therefore no service tax is leviable under the said category. The Larger Bench in Kafila Hospitality and Travels Pvt Ltd. [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] had observed that the definition of air travel agent includes all services connected with or in relation to the booking of passage for travel by air. The miscellaneous services rendered by the appellant are also in furtherance of the travel agent service to its customers and hence cannot be classified under the Business Support Service . The learned Counsel has further argued that no reliance can be placed on the Board s Circular No.137/6/2011- ST dated 20.04.2011 as relied on by the Commissioner in the impugned order. There are force in the submissions of the learned Counsel that services have to be classified in terms of section 65A/66F of the Act - the Larger Bench in the case of Kafila Hospitality [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] also dealt with the similar contention where the two competing entries were ATA service and BAS and relying on the provisions of section 65A(2)(a) of the Act concluded that the classification of the service would fall under air travel agent services and not business auxiliary service. Applying the same principle, we are of the view that the services rendered by the appellant being in connection with the air travel agent service has to be classified therein and not under the business support service as claimed by the Revenue. Since the issue decided on merits in favour of the appellant and also on the issue of extended period of limitation there is no need to go into the question of interest or penalty. The appeal filed by the Revenue on the plea that the demand for the period 2010-2011 is within the period of five years also does not survive in view of the issue decided on extended period of limitation and on merits. The impugned order needs to be set aside - the appeal filed by the assessee is accordingly allowed.
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2024 (3) TMI 799
Imposition of personal penalty on the appellant in terms of Section 78A of the Finance Act, 1994 - appellant was one of the partner of the main notice - HELD THAT:- From Section 78A it is evident that penalty under this section can be imposed only on a person who at the time of such contravention was in charge of, and was responsible to, the company for the conduct of business of such company and was knowingly concerned with such contravention. Original authority has instead brushed aside the submissions made by the appellant on the basis of supplementary agreement, as afterthought, without examining the same. In absence of any finding to the effect that appellant was responsible for the conduct of business of the firm at the time of contravention, there are no merits in the orders of lower authorities imposing penalty on the appellant under Section 78A. There are no merits in the impugned order which is set aside - appeal allowed.
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2024 (3) TMI 798
Short payment of service tax - Business Auxiliary Services - appellant submitted that the rate of service tax has changed from 10.2% to 12.24% w.e.f. 18.04.2006 and therefore the appellant was liable to pay the service tax @ 12.24 % only on the amount realized in respect of taxable services provided on or after 18.04.2006 - HELD THAT:- It is found that the basis of the show cause notice is only that a sum of Rs.1,12,960/- is short paid by the appellant and no allegations have been made that these services were provided after the cut off date, i.e. 18.04.2006. The High Court of Delhi in VISTAR CONSTRUCTION (P) LTD/PIYARE LAL HARI SINGH BUILDERS PVT LTD VERSUS UNION OF INDIA AND ORS [ 2013 (2) TMI 52 - DELHI HIGH COURT] , relying on the decision of the Apex Court in ASSOCIATION OF LEASING FINANCIAL SERVICE COMPANIES VERSUS UNION OF INDIA AND OTHERS [ 2010 (10) TMI 4 - SUPREME COURT] , declared the Instruction invalid as it made the service tax chargeable on receipt of payment for the service. The Court held that the rate of tax applicable on the date on which the services were provided would be the one that would be relevant and not the rate of tax on the date on which payments were received as the taxable event under the Finance Act was providing or rendition of the taxable services. The Commissioner, while passing the impugned order has gone beyond the scope of the show cause notice in observing that the appellant have not produced or enclosed the copies of the relevant bills/invoices, the copies of the ledger of the parties to whom the invoices for the period on which rate of service tax at the rate of 10.2% was applicable so as to prove the services in respect of said realisation were rendered during the earlier period, when rate of service tax was 10.2% and in the absence thereof, it cannot be confirmed that services were rendered during the earlier period. As noticed above, the show cause notice is absolutely silent as to the reasons for raising the demand and hence the show cause notice is unsustainable. The impugned order deserves to be set aside and accordingly, the appeal is allowed.
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2024 (3) TMI 797
Recovery of service tax alongwith interest and penalty - admissibility of the exemption under Notification no 6/2005-ST - benefit denied on the ground that appellant have in their ST-3 return shown certain amounts as CENVAT credit - Renting of Immovable Property service - suppression of facts or not - invocation of Extended period of Limitation - HELD THAT:- The ST-3 return which has been relied upon by making the demand, against the appellant is for the period April 2008 to September 2008. As per this return the appellant have indicated the Opening Balance for the month of April 2008 as Rs 61,711/- and the credit taken during the month as Rs 1,66,326/-. The breakup of this credit taken during the month of April 2008 was also indicated in the chart enclosed with ST-3 return. On going through the said chart it is quite evident that the appellant had availed the CENVAT Credit in respect of certain documents, which were dated much before the 1st April 2008. The fact of taking the credit against these documents was reflected in ST-3 return and enclosed chart, filed with the range officer 20.10.2008. While acknowledging the said return, superintendent has observed on 23.10.2008 stating Defective ST-3 on account of CENVAT Credit in ST-3 of Transport of Goods . Thus it is evident that the fact that appellant had availed the CENVAT Credit while claiming the benefit of exemption under Notification No 6/2005-ST as amended during the Financial Year 2007-2008 was well in knowledge of the department. No ST-3 return for the period 2007-08 has been produced during the entire proceedings. The fact that appellant was availing the CENVAT Credit against the documents which are for the Financial Year 2007-08 was disclosed to the concerned jurisdictional officers while filing the ST-3 return for the period April 2008-September 2008 - No ground for alleging suppression has been brought forth in the show cause notice or in the orders of lower authorities. The show cause notice alleging the suppression and invoking extended period of limitation for making demand for the period 2006-07 is bad in law. The bonafide belief of the appellant that this tax was not due from them is well founded in these correspondences. Further it is noted that the issue of renting of immovable property was in dispute and matter challenging constitutional validity of levy was taken before various high courts. Without going into the merits of admissibility of Exemption Notification 6/2005-ST, this appeal cannot be disposed of on this ground itself - As the demand is held barred by limitation, the penalty imposed on the appellant under Section 77 78 are also set aside. Appeal allowed.
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2024 (3) TMI 796
Maintainability of appeal - Time limitation - appeal dismissed for the reason that though the appeal was filed after the expiry of two months from the date of receipt of the order, the appellant did not file any delay condonation application to explain the delay in filing the appeal - HELD THAT:- Section 85 (3A) of the Finance Act provides that an appeal shall be presented before the Commissioner (Appeals) within two months from the date of receipt of the decision or order of the adjudicating authority, but the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of two months, allow it to be presented within a further period of one month. In the present case, it is not in dispute that the appeal was filed before the Commissioner (Appeals) after the expiry of two months but before the expiry of the further period of one month. It is correct that the appeal has to be filed within two months from the date of receipt of the order, but the Commissioner (Appeals) does have the power to condone the delay of a period of further month provided he is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the stipulated time - In the facts and circumstances of the case, when the covering letter that was sent to the appellant enclosing the order passed by the Assistant Commissioner mentions that the appeal could be filed within three months, it is clearly a case where the delay, even if an application had not been filed, should have been condoned. In such circumstances, it is not possible to sustain the view taken by the Commissioner (Appeals) that in the absence of a delay condonation application, the appeal was liable to be dismissed - the matter is remitted to the Commissioner (Appeals) to decide the appeal on merits. Appeal allowed.
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Central Excise
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2024 (3) TMI 795
Maintainability of appeal - monetary amount involved in the appeal - Motor Vehicle - exemption under exemption Notification No. 462/86-CE., dated 9th December 1986 as amended - CESTAT allowed the appeal and exemption as claimed - HELD THAT:- This appeal is dismissed on the ground of low tax effect.
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2024 (3) TMI 794
Interest on refund received belatedly - Section 11BB of Central Excise Act, 1944 - HELD THAT:- A perusal of the material on record, comprising of the details of the refund orders and refund payments made in favour of the petitioner as enumerated in Annexure-C clearly indicate that, the petitioner would be entitled for interest for delayed refund in terms of Section 11BB of the Act. The reasons assigned by the respondents in refusing grant of interest in Annexure-B dated 25.04.2022 is clearly erroneous in as much as adjudication proceedings have not been initiated against the petitioner as borne out from the material on record even till today. Under these circumstances, there is absolutely no impediment to direct the respondents to grant applicable interest on delayed refund in terms of Section 11BB of the Act in favour of the petitioner. However, in order to grant an opportunity to the concerned respondent for the limited purpose to verify the calculation of quantum of interest on the delayed refund as claimed by the petitioner, it is deemed just and appropriate to set aside Annexure-B dated 25.04.2022 and direct the concerned respondent to grant interest on the refund as sought for in Annexure-C dated 15.06.2022 in favour of the petitioner after making due verification and in accordance with law within a stipulated time frame. Petition allowed.
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2024 (3) TMI 793
Process amounting to manufacture - unauthorised manufacture and removal of pressure tanks meant for the storage and transportation of carbon dioxide - time limitation - HELD THAT:- It can be seen that the Tribunal in SOUTH INDIA CARBONIC GAS INDUSTRIES VERSUS COLLR. OF C. EXCISE, MADURAI [ 1993 (6) TMI 177 - CEGAT, , MADRAS] had set aside the demand in respect of pressured vessels for the disputed period on the ground of limitation - the Tribunal had held that there is no suppression of facts with intent to evade payment of duty on the part of the appellant and set aside the demand on the ground of limitation. The matter was remanded to the Adjudicating Authority only for reconsidering the issue as to whether the activity carried out by the appellant in the nature of providing insulation to the pressured vessels would amount to manufacture or not. The Department had not filed any appeal against such order. The same has attained finality. The demand having been set aside by the Tribunal on the ground of limitation, as per SOUTH INDIA CARBONIC GAS INDUSTRIES, the demand confirmed by impugned order requires to be set aside. The impugned order is set aside to the extent of confirming the demand and the penalties imposed without interfering with the findings or discussions in the impugned order as to issue of manufacture - appeal allowed.
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2024 (3) TMI 792
Remission of Central Excise Duty - Rule 21 of Central Excise Rules, 2002 - interpretation placed by the Commissioner on second proviso to rule 8 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, tenable or not - unjust enrichment. Whether the claim made by appellant for remission of duty as per Rule 21 of Central Excise Rules, 2002 maintainable? - HELD THAT:- From perusal of Rule 21 of the Central Excise Rules, 2002 reproduced earlier (in the impugned order), it is quite evident that the said rule provides for remission of duty in respect of the finished goods lost or destroyed prior to clearance of the same from the factory of production. The wording of the rule is very clear and unambiguous. It is not the case of the appellant that any goods which were to be cleared on payment of duty subsequently have been destroyed in fire. But it is the case of appellant that on account of this fire accident that occurred in their factory they were unable to produce the goods during this period and hence there was loss of production capacity. Rule 21 do not provide for such a situation. Admittedly appellant has was operating under the Compounded Levy Scheme as provided by the section 3A of the Central Excise Act, 1944 read with Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. It has been held by Hon ble Supreme court in the case of M/S HANS STEEL ROLLING MILL VERSUS COMMNR. OF CENTRAL EXCISE, CHANDIGARH [ 2011 (3) TMI 2 - SUPREME COURT] that the scheme of Compounded levy scheme is totally a different and self contained scheme. Importing the provisions of any other scheme of taxation would only lead to catastrophic results. Whether the interpretation placed by the Commissioner on second proviso to rule 8 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, tenable? - HELD THAT:- Rule 10 provides for the abatement of duty for the period of closure for whatsoever reason. In fact as per the submission of the appellant the unit was non operational for five days. Hence the benefit of abatement could not have been allowed. Section 3A (3) itself provides for the closure of the unit for fifteen days or more for allowing the abatement on proportionate basis. Any closure which is less than fifteen days is not recognized as closure by the statue, for the reason as stated in Sub Section (1) of Section 3A of the Central Excise Act, 1944 these goods are evasion prone. The submissions made by the appellant relying on various case laws with regards to the legal fiction etc., cannot carry forward the case of the appellant in view of the statutory provisions as per the Central Excise Act, 1944 and the Rules - It is not found that Rule 21 of the Central Excise Rules, 2002 to be not applicable to the present case we are not pronouncing on various decision relied upon by the Appellant with regards to natural cause or unavoidable accident. Whether by rejecting the claim for remission the department is unjustly enriched? - HELD THAT:- Reliance has been placed by the Appellant on the decision of Hon ble Supreme Court in the case of Kanhaiya Lal Mukund Lal Saraf, to argue that the revenue cannot be unjustly enriched at the expense of assessee. Howver we note that the said decision has been held to be not a good law by a nine judges bench of Hon ble Supreme Court in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] - Thus argument of unjust enrichment of the state has been considered and rejected by the Hon ble Supreme Court as per the above stated decision. The case of THE SALES TAX OFFICER, BANARAS AND OTHERS VERSUS KANHAIYA LAL MAKUND LAL SARAF AND OTHERS [ 1958 (9) TMI 57 - SUPREME COURT] has been held to be not stating the correct position in law hence reliance placed by the counsel of appellant on this decision, is totally misplaced. The decision of Hon ble Orissa High Court placing reliance on the said decision of Hon ble Apex Court cannot also be pressed, because the said decision has been rendered before the decision of the decision in case of Mafatlal Industries, and has been held to be wrongly decided. There are no merits in this appeal - appeal dismissed.
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CST, VAT & Sales Tax
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2024 (3) TMI 791
Levy of penalty u/s 54(1)(2) of the U.P. VAT Act, 2008 - men-rea on the part of the assessee is an essential pre-requisite condition for imposition of penalty or not - penalty can be imposed upon assessment is made on the basis of Best Judgement Assessment or not - imposition of penalty of 7 times the total tax imposed towards alleged concealed turnover was justified when the express provision of Section 54(1)(2) of the Act provides for imposition of a maximum penalty of 3 times of concealed turnover. HELD THAT:- A perusal of Section 28(2) of the Act 2008 would indicate that where after examination of books, accounts and other records referred to in Section 28(1) of the Act, 2008 the assessing authority is satisfied about correctness of sale or purchase or both, it may the assess the amount of tax payable by the dealer - A further perusal of Section 28(2) of the Act 2008 indicates that the power of assessment of the amount of tax payable by the dealer on such turnover and for determining the amount of input tax credit admissible to the dealer has been given to the assessing authority and further where the assessing authority is of the opinion that turnover of sale or purchase or both disclosed by the dealer is not worthy of credence it may determine to the best of its judgement the turnover of sale or purchase or both and assess the tax payable on such turnover. The assessment order dated 30.10.2010 would indicate that the same has been passed considering the provisions of Section 28(2) of the Act, 2008 on the basis of best of its judgement meaning thereby that it is an assessment which has been made by the assessing authority. The jurisdiction of the assessing authority while taking recourse to the best judgement assessment is well settled. Hon'ble Supreme Court in the cases of State of Kerala vs C. Velukutty [ 1965 (12) TMI 32 - SUPREME COURT] , The Commissioner of Income Tax, Calcutta v. Padamchand Ramgopal [ 1970 (4) TMI 2 - SUPREME COURT] , M/s Joharmal Murlidhar and co. v. Agricultural Income Tax Officer, Assam and others [ 1970 (8) TMI 5 - SUPREME COURT] and Shri S. M. Hasan, S.T.O. Jhansi and another v. M/s New Gramophone House, Jhansi [ 1975 (9) TMI 177 - SUPREME COURT] , has categorically held that while assessing on the basis of best judgement the assessing authority has to make the assessment honestly and on the basis of intelligent well grounded estimate rather than pure surmises i.e. the assessment so made while taking recourse to the best judgement assessment should be on reasonable guess based upon the material available before the assessing authority. The order of penalty passed under Section 54(1)(2) of the Act, 2008 is based on the order of the assessing authority as passed under Section 28(2) of the Act, 2008. The assessment order under Section 28(2) of the Act, 2008 is on the basis of well grounded estimate or reasonable guess as held by Hon'ble Supreme Court meaning thereby that the said order does not indicate the willful attempt to defeat or circumvent the tax law to reduce the tax liability. Once the sine qua non to imposition of penalty is evasion of payment of tax and for evasion there has to be a willful act consequently the Court will have to examine as to whether there has been willful act on the part of the revisionist in evasion of tax. The revisionist has already paid the tax as assessed after modification by the learned Tribunal vide the order dated 22.06.2016. At no stage is there any finding of any willful evasion of tax by the revisionist or a finding of there being any deliberate attempt on the part of the revisionist in avoiding the payment of tax. It is for the authorities to specifically prove the evasion of payment of tax on the part of the revisionist where the evasion has been defined as a willful attempt i.e. the authorities would have to prove a willful attempt on the part of the revisionist to evade tax. In absence thereto the order imposing penalty on the revisionist based on the assessment order passed under Section 28(2) of 2008 cannot be said to fall within the ambit of any of the eventualities as provided under Section 54(1)(2) of the Act 2008 more particularly it cannot be considered to be an evasion of payment of tax by the dealer / revisionist so as to attract the penalty as has been imposed on the revisionist. The judgement and order dated 06.04.2021 passed by learned Commercial Tax Tribunal, Lucknow in Second Appeal No. 50 of 2017 is set aside - revision allowed.
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2024 (3) TMI 790
Violation of principles of natural justice or not - petitioner failed to respond to the show cause notice or avail of an opportunity of personal hearing - Validity of assessment order - HELD THAT:- The documents on record include the show cause notice dated 23.02.2023. The said notice offered a personal hearing to the petitioner. Therefore, the respondents cannot be faulted for the petitioner failing to avail of such opportunity. At the same time, it is noticeable that the impugned order does not make reference to the earlier reply issued by the petitioner in February 2020. It is also noticeable that a sum of Rs. 4,55,013.70 was appropriated from the petitioner's bank account in the Punjab National Bank as against the total amount due of Rs. 4,52,341/- under the impugned assessment order. Therefore, at this juncture, revenue interest is fully secured. In these circumstances, the impugned order calls for interference solely with a view to provide an opportunity to the petitioner. The impugned assessment order is quashed and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice dated 23.02.2023 within a period of two weeks from the date of receipt of a copy of this order - Petition disposed off by way of remand.
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Indian Laws
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2024 (3) TMI 789
Dishonour of Cheque - vicarious liability of the director - appellant was in-charge of day-to-day affairs of the Company or not - HELD THAT:- In the case of SMS PHARMACEUTICALS LTD. VERSUS NEETA BHALLA [ 2005 (9) TMI 304 - SUPREME COURT] , this Court was considering the question as to whether it was sufficient to make the person liable for being a director of a company under Section 141 of the Negotiable Instruments Act, 1881. This Court considered the definition of the word director as defined in Section 2(13) of the Companies Act, 1956 - It was held that merely because a person is a director of a company, it is not necessary that he is aware about the day-today functioning of the company. This Court held that there is no universal rule that a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of day-to-day affairs of the company or responsible to the affairs of the company. This Court, however, clarified that the position of a managing director or a joint managing director in a company may be different. It could thus clearly be seen that this Court has held that merely reproducing the words of the section without a clear statement of fact as to how and in what manner a director of the company was responsible for the conduct of the business of the company, would not ipso facto make the director vicariously liable. It can thus be clearly seen that there is no averment to the effect that the present appellant is in-charge of and responsible for the day-to-day affairs of the Company. It is also not the case of the respondent that the appellant is either the Managing Director or the Joint Managing Director of the Company - It can thus clearly be seen that the averments made are not sufficient to invoke the provisions of Section 141 of the N.I. Act qua the appellant. The judgment and order passed by the High Court dated 26th April, 2022 is quashed and set aside - Appeal allowed.
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