Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 22, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Determination of tax u/s 73(9) of the CGST/SGST Act - petitioner submits that the order is passed merely on the representation of the petitioner without giving any opportunity of oral hearing to the petitioner - violation of principles of natural justice - Citing legal precedents and principles of natural justice, the court emphasized the importance of personal hearing in tax matters. Despite objections raised by the respondent, the court ruled in favor of the petitioner, setting aside the impugned order and remanding the matter for fresh consideration with an opportunity for oral hearing.
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Seeking grant of bail - fraudulent availment and passing of input tax credit of G.S.T - The High court noted the significant amount of incriminating evidence collected against the accused, including documents, electronic devices, and statements that suggested a large-scale operation involving fake firms and fraudulent tax credit claims. - Considering the advanced stage of the investigation and the nature of the allegations, the court found no compelling reason for the continued detention of the accused. The court highlighted the importance of balancing the rights of the accused with the seriousness of the offense. - The court granted bail to the accused, subject to several conditions.
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Reversal of ITC - wrongful availment of Input Tax Credit (ITC) on Car - The petitioner contended that despite reversing the ITC in the GSTR 3B return, the impugned order was issued on the premise that the ITC was not reversed. However, upon examination of the documents provided by the petitioner, including the GSTR 3B return, the court found that the ITC was indeed reversed as claimed. Therefore, the court quashed the impugned order and remanded the matter for reconsideration, allowing the petitioner to file a reply and submit relevant documents.
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Validity of assessment order - fraudulent availment of Input Tax Credit (ITC) - The High court noted that documents provided by the petitioner were disregarded, and the assessing officer relied solely on the statements from the show cause notice, indicating a lack of application of mind. - It was observed that the petitioner had submitted documents such as invoices, transporter's invoice, and bank statements, which were not considered in the assessment order. - The court emphasized that the assessing officer failed to apply discretion and disregarded crucial evidence submitted by the petitioner. - Matter restored back.
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Validity of assessment order - alleged discrepancies in returns filed by the petitioner - The case involved a challenge to an assessment order by a petitioner in the cash logistics business, registered under GST, regarding alleged discrepancies in returns for the assessment year 2017-2018. Despite the petitioner's response and an earlier order dropping proceedings, an assessment order was issued, leading to legal contention. - the High court ruled in favor of the petitioner, emphasizing procedural fairness and consistency in tax assessment proceedings.
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Denial of Input Tax Credit - The case revolved around the disallowance of Input Tax Credit (ITC) claimed by the petitioner due to discrepancies in their return and the GSTR-2A return. The petitioner explained that the discrepancy arose from an invoice issued by their supplier, which contained an incorrect GSTIN. Despite the respondent's suggestion to pursue rectification proceedings, the court intervened, noting the potential injustice faced by the petitioner. Upon verification of records, the court found merit in the petitioner's claim and quashed the assessment order. The matter was remanded to the assessing officer for fresh consideration.
Income Tax
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Circular No. 05/2024, issued by the Central Board of Direct Taxes (CBDT) under section 268A of the Income-tax Act, 1961, introduces measures to reduce litigation in income tax matters. It specifies monetary limits and conditions for filing departmental appeals before Income Tax Appellate Tribunals (ITATs), High Courts (HCs), and Special Leave Petitions (SLPs) or appeals before the Supreme Court (SC). - The circular emphasizes filing appeals based on merits rather than solely on tax effect and outlines exceptions where appeals should be filed regardless of monetary limits.
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The Instruction issued by CBDT outlines significant changes in the allocation of work to Commissioners of Income-tax (Judicial) (CIT(J)) in light of the implementation of faceless assessment and appeals schemes. - CIT(J) will serve as the nodal office for all matters related to the jurisdictional High Court and coordinate with counterparts for other High Courts. Their primary responsibility is to ensure uniform enforcement of the Income-tax Act, 1961 within the jurisdiction of the respective Principal Chief Commissioners of Income-tax (Pr. CCIT).
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Validity of Revision u/s 263 - An order which is prejudicial to revenue even if no Tax Loss - The High Court found that the AO's assessment did not adequately address the genuineness and creditworthiness of the loan transactions from certain entities, identified in a DDIT investigation report as shell companies operated by an entry operator. This oversight was deemed a significant inquiry lapse, rendering the assessment order both erroneous and prejudicial to the Revenue's interests. - The Court underscored the principle that an order could be deemed erroneous if it was prejudicial to the Revenue, even if it did not result in immediate tax loss, reflecting a broader interpretation aimed at preserving the Revenue's interests.
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Validity of reopening of assessment - An order u/s 245D(4) already been passed by the Income Tax Settlement Commission (ITSC) - Scope of harmonious construction - The Delhi High Court, in this judgment, reinforced the binding and conclusive nature of orders passed by the Income Tax Settlement Commission, underscoring that once an assessment year's matters have been settled by ITSC, they cannot be reopened by the Income Tax Department under Section 147/148, except under specific circumstances of fraud or misrepresentation. This decision highlights the judiciary's commitment to uphold the finality and sanctity of ITSC's settlements, aiming to prevent administrative uncertainty and protect the interests of assessees who opt for settlement proceedings.
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Application u/s 119(2)(b) for condoning delay, if any, in filing Form 10-ID to avail the beneficial rate of tax of 15% u/s 115BAB - Validity of order of CBDT rejecting the application u/s 119(2)(b) - FDI investment approval from China - Beneficial rate of tax of 15% u/s 115BAB - The High court identified procedural irregularities, including the absence of the Member's signature and non-disclosure of field reports, which undermined the validity of the order. Consequently, the court quashed the order and directed the CBDT to provide all relevant documents to the petitioner for reconsideration.
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Validity of assessment u/s 153C - Period of limitation - Assessment of income of any other person in search proceedings - The proviso in Section 153C(1) includes not only the question of abatement but also determines the date from which the six-year limitation period should be calculated. - The High court analyzed the relevant legal provisions and case law, emphasizing the need to prevent prejudice to affected parties due to delayed proceedings. It concluded that the assessment orders were indeed barred by limitation, highlighting the unjustified delay in recording satisfaction. Considering the statutory limitation period and lapse of time for completing the assessment, the court quashed the assessment orders.
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Reopening of assessment u/s 147 - Reason to believe - The notice was based on alleged undisclosed cash deposits made by the trust during a specific financial year. The trust objected to the reopening, arguing that all income was duly recorded and offered for taxation. The High court found that the reasons provided for reopening were unsubstantiated and lacked a rational connection to establish income escapement. It emphasized the impermissibility of fishing expeditions without concrete evidence. Consequently, the court set aside the notice of reopening.
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Reopening of assessment u/s 147 - notice issued u/s 148A(b) - fictitious short-term capital loss - wrongdoing by the mutual fund - The High court noted discrepancies in the department's actions, including lack of clear information provided to the petitioner and reliance on incomplete data. - It observed that the petitioner, being a minor investor, was not a key player in the alleged fraudulent activities of the mutual fund. - The court emphasized the importance of a rational connection between reasons for reopening assessment and actual evidence, which was lacking in this case. - Decision: The court quashed the show cause notice, order for reopening assessment, and related notices issued by the department.
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TP Adjustment - Excessive managerial remuneration to a related party - The High Court noted that the remuneration paid to the director had not been disputed by the Revenue previously. It found that the comparison with remuneration paid by another company was improper. The ITAT's decision to disallow the addition on account of managerial remuneration was upheld.
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Disallowance of deduction u/s 80-IA(8) - computation of the market value or electricity - The High Court referred to a previous judgment and concluded that the market value of electricity supplied by the State Electricity Board to industrial consumers should be considered for computing the deduction under Section 80-IA of the Act. The ITAT's decision was upheld.
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Validity of order of ITAT allowing Applications filed u/s 254(2) - Rectification versus Review of order - TP Adjustment - The High court observed that the ITAT had rendered incompatible and inconsistent findings in its original order. - The court noted a contradiction between paragraphs 12 and 21 of the original order. - It was deemed necessary for the ITAT to recall its previous order and correct the error to avoid leaving the TPO and Assessing Officer in a quandary. - The court found that the issue of comparability regarding one company was left open for the ITAT's consideration, while another company's matter was remitted to the TPO. - Ultimately, the court determined that the appeal of Revenue did not raise any substantial question of law and dismissed it accordingly.
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Refund of the amount as deposited by the assesse towards part payment of demand raised - Time limit for completion of assessment, reassessment and recomputation - The High court referred to Section 153(5) and (7) of the Income Tax Act, 1961. It noted that since the remit ordered by the ITAT was prior to June 1, 2016, it was the AO's duty to frame final assessment orders by March 31, 2017. - Given the AO's failure to meet the statutory deadline for framing assessment orders, the court found no justification for the respondents to retain the deposited amounts. - The court allowed the petition and directed the respondents to refund the amounts along with applicable interest.
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TP Adjustment - Comparable selection - determination of arm’s length prices (ALP) - The High Court observed that the dissimilarity in products sold and their respective turnovers could significantly impact the profitability of an entity. Despite acknowledging significant differences and accepting the appellant's arguments, the ITAT failed to entirely exclude Modicare. The Court considered this a vital infirmity and directed the ITAT to re-examine the appropriateness of including Modicare and the functional difference in marketing strategy between the entities.
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Penalty u/s 271D - Sale of property in cash - meaning of the term “specified sum” - The ITAT examined the definition of "specified sum" under Explanation (iv) to Section 269SS, which pertains to any sum of money receivable, whether as advance or otherwise, in relation to the transfer of an immovable property. It relied on a previous decision by the Co-ordinate Bench of the Tribunal, which held that the provision applies only to advance payments and not to transactions where the final payment is made at the time of registration before the sub-registrar. - The Tribunal noted that the cash received by the assessee was not treated as an advance but as the final payment during the registration of the sale deed. Therefore, it concluded that there was no violation of Section 269SS in the given facts and circumstances.
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Capital gain computation - Allowability of transfer expenses [brokerage, air tickets, hotel accommodation receipts, postal charges receipts, conveyance charges, lawyer fees, photocopying expenses] u/s Section 48(i) - Considering the specific circumstances of the case, where the assessee was a non-resident individual, the Tribunal found that the expenses incurred for obtaining special power of attorney from the Indian Consulate in the USA, air tickets, hotel accommodation, postal charges, conveyance charges, lawyer fees, and photocopying expenses were essential for effecting the transfer of the property. - The ITAT concluded that the claimed expenses were indeed allowable u/s 48(i)
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Rejection of the books of account of the assessee company u/s. 145(3) - Estimation of income - The ITAT found the rejection of books of accounts by the AO unjustified as there was no evidence of incorrectness or incompleteness. - The AO's reliance on media clippings and reports without concrete proof was deemed insufficient to reject the books. - On the issue of cash deposits during demonetization, the Tribunal noted that the Assessing Officer's presumption of antedating sales and earning super profits lacked substantiation and relied heavily on speculation. - The Tribunal rejected the AO's presumption of a 25% profit margin on sales and found no basis for the addition.
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Revision u/s 263 - revision based on the audit objection - borrowed satisfaction - The ITAT noted that the AO had called for details and evidence from the appellant and had taken a plausible view based on the information provided. - Despite the PCIT's disagreement with the AO's assessment, the Tribunal held that the order passed by the AO after examination of the issues cannot be deemed erroneous or prejudicial to the revenue's interest. - Additionally, the ITAT found that the PCIT did not establish how the AO's view was incorrect or prejudicial to revenue. The PCIT's order lacked independent justification and was based on borrowed information without adequate satisfaction.
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Exemption u/s 11 - Charitable activity u/s 2(15) - Assessee has derived income by way of contributions from the head office, membership fee, income from publication of Indian Foundry journal , other grants and donations etc. besides receiving interest on fixed deposits. - Gross receipt was more than Rs. 10 lakhs - The tribunal set aside the order of the CIT(A) and directed the AO to allow exemptions u/s 11 for the year under consideration, recognizing the assessee's activities as being for general public utility without commercial intent. It allowed the appeal in favor of the assessee on all counts, including the issues of delay in appeal, depreciation claims, treatment of sale proceeds from the fixed asset, and the calculation method for deduction u/s 11(1)(a).
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TP Adjustment - assessee has issued the corporate guarantee on behalf of AE’s - interest saved approach - The ITAT decided in favor of the assessee, directing the AO to restrict the addition by splitting the interest benefit on a 50:50 basis between the guarantor and the borrower. It was noted that earlier years' tribunals had accepted a splitting of the interest savings as a reasonable approach. - With regard to Royalty, the ITAT allowed the assessee's grounds concerning TP adjustments related to the charge of brand royalty, following earlier tribunal decisions that set specific rates for such royalties.
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TP Adjustment - bilateral Advance Pricing Agreement (APA) between India and the USA - modified return of income - The ITAT found merit in the assessee's argument regarding the APA between India and the USA, agreeing that the methodology used for the transactions had been agreed upon. It directed the Assessing Officer to consider the modified return of income in light of the APA and decide the issue afresh after affording reasonable opportunity to the assessee. The court allowed this ground for statistical purposes.
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Approval u/s 80G(5)(iii) - time limit - The ITAT highlighted the distinction between applications for renewal and fresh registration, as well as the prescribed time limits for each. - The Tribunal concluded that the appellant's application for final approval was valid, despite having commenced activities before provisional registration. It clarified that the application could not be rejected solely on the grounds of the appellant's prior commencement of activities, as long as provisional registration had been granted. - It emphasized that the appellant's choice to apply for fresh provisional registration did not preclude them from subsequently applying for final approval.
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Levy of Penalty u/s. 271(1)(c) - The ITAT ruled that since there was no variation between the returned and assessed income, there was no concealment of income by the assessee. - Referring to legal precedents, the ITAT highlighted that the penalty under Section 271(1)(c) can only be levied if there is concealment or furnishing of inaccurate particulars, which must be determined with reference to the returned income. - As there was no discrepancy between the returned and assessed income, the tribunal instructed the A.O. to delete the penalty imposed under Section 271(1)(c).
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Levy of Penalty u/s. 271B for failure to get accounts audited u/s 44AB - The ITAT held that once a penalty has been levied under Section 271A for non-maintenance of books of accounts, no penalty under Section 271B can be levied. - Citing precedents and relevant case law, the Tribunal emphasized that Section 271B is not applicable when no accounts have been maintained, and recourse to Section 271A should be taken instead.
Customs
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Seeking rectification of an alleged mistake - question of jurisdiction of this tribunal - error apparent on the face of record or not - The Tribunal rejected the appellant's claim, stating that it had considered the jurisdiction issue in light of previous judgments and amendments. Since both parties chose not to argue the jurisdiction issue during the hearing, the Tribunal proceeded to decide the case on its merits. - The Tribunal emphasized that when a counsel makes submissions, it is presumed to be on the instructions of the appellant. Hiring a new counsel post-judgment to raise new grounds or find fault with the previous counsel's submissions is not a valid approach.
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Recovery of duty foregone - non-fulfillment of export obligation - non-installation of the capital goods and consequent non-fulfilment of post-importation condition - The Tribunal observed that the imported goods were not installed as they were stored pending land acquisition for setting up a manufacturing facility. The appellant claimed to have fulfilled the export obligation within the extended time frame but failed to provide evidence of exports after installation. It was noted that the extension of time for installation did not automatically extend the deadline for fulfilling the export obligation. - The Tribunal deemed the confirmation of duty liability reasonable due to non-fulfillment of the export obligation within the prescribed period. - However matter remanded back for a fresh decision considering all relevant factors, including evidence of exports and entitlement to depreciation based on export performance.
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Classification of goods - Import of Nutrition/Dietary Supplements - Levy of IGST @18% or 28% on Import - The tribunal noted that the Revenue argued for the classification of the goods under Serial No. 9 of Schedule IV, which attracted an IGST rate of 28%. - After a detailed analysis, the tribunal concluded that the goods in question did not fall under Serial No. 9 of Schedule IV. Instead, they determined that the correct classification was under Serial No. 453 and/or 23 of Schedule III, which attracted an IGST rate of 18%. - Therefore, the tribunal set aside the impugned order and allowed the appeal, granting consequential relief as per law.
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Classification of imported goods - defatted coconut - to be classified under CTH 08011990 or under CTH 23065020? - The Tribunal considered various test reports and ultimately criticized the adjudicating authority for disregarding the FSSAI standards and relying solely on Codex standards. Additionally, the CESTAT noted the importation of similar goods through another port, reinforcing the validity of the respondent's classification.
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Valuation of imported goods - Cement Carrier ship - The Tribunal accepted the value assessed by the Chartered Engineer at Rs. 27 Crores, overturning the adjudicating authority's re-determined value. The court found the inclusion of transportation, insurance, and handling charges unjustifiable, citing legal precedents and the absence of evidence to support such costs for vessel imports. - Consequently, the additional duty demanded based on these charges was set aside.
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Valuation of imported goods - Unwrought / Unrefined Zinc - enhancement of value - rejection of transaction value - The importer declared the goods as "Unwrought/Unrefined Zinc" but the test report revealed that the imported goods were actually "Zinc Dross." - The Commissioner (Appeals) ruled in favor of the importer, holding that the assessing officer lacked valid reasons to reject transaction values and had not followed proper procedures. - The Appellate Tribunal found no evidence to support the Department's claim that the zinc content exceeded 92%, necessary to classify the goods as "Zinc Dross."
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Smuggling - Betel Nuts - foreign origin goods - town seizure - notified item or not - onus to prove - The CESTAT recognized that betel nuts were not notified items under the Customs Act and therefore, the burden of proving smuggling rested with the Revenue. The appellants produced documents during interception to prove legal procurement of the betel nuts, shifting the burden of proof to the Revenue. - Since the Revenue failed to prove that the intercepted betel nuts were smuggled, the Tribunal set aside the confiscation of the goods and waived any penalties on the appellants.
DGFT
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The Directorate General of Foreign Trade (DGFT) issued Trade Notice, highlighting amendments to the Interest Equalization Scheme (IES) in line with the extension announced by the Reserve Bank of India (RBI). The notice introduces a cap of Rs. 2.50 Cr per Importer-Exporter Code (IEC) until June 30, 2024, impacting exporters and importers alike.
State GST
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Clarification on taxability of shares held in a subsidiary company by the holding company - Delhi SGST - The circular provides a clear-cut clarification, stating that securities, including shares, are neither considered goods nor services as per the definitions provided under the Delhi / Central Goods and Services Tax Act, 2017. This classification or rather, the lack thereof, directly implies that transactions involving the purchase or sale of shares are not deemed as a supply of goods or services. Therefore, such transactions fall outside the scope of GST.
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Clarification on issue pertaining to e-invoice - Delhi SGST - The Circular clarifies that government departments, agencies, local authorities, and PSUs, which are registered for the sole purpose of tax deduction at source, are considered registered persons under GST law as per clause (94) of Section 2 of the DGST Act / CGST Act. Therefore, suppliers whose turnover exceeds the prescribed e-invoicing threshold must issue e-invoices for supplies made to these entities.
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Clarification regarding taxability of services provided by an office of an organisation in one State to the office of that organisation in another State, both being distinct persons - Delhi SGST - It is clarified that the HO has the option to distribute ITC in respect of such common input services by following the Input Service Distributor (ISD) mechanism or issue tax invoices u/s 31 to the BOs for these services. The HO is required to get itself registered as an ISD if it opts for the ISD mechanism for distribution of ITC. - The value of supply of services made by a registered person to a distinct person needs to be determined as per rule 28 r.w.s 15(4).
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Clarification on availability of ITC in respect of warranty replacement of parts and repair services during warranty period - Assam SGST - The circular aims to clarify the GST implications on the warranty replacement of parts and repair services that are provided without any separate consideration (payment) from the customer. - For manufacturers and distributors, the circular offers guidance on handling ITC and GST for warranty services, reducing the risk of litigation and compliance issues.
Indian Laws
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Dishonour of Cheque - vicarious liability of directors - After considering the submissions of both parties, the court found that the impugned orders suffered from non-application of mind and lacked sufficient averments to justify the prosecution of the petitioners. It emphasized that liability under Section 141 is not based solely on designation but on the actual role played in the company's affairs. As the complaints failed to provide specific allegations against the petitioners regarding their involvement or negligence, the court held that prosecuting them would amount to an abuse of process.
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Appointment of Sole Arbitrator to adjudicate the dispute between the parties to the present lis - interpretation of the terms of the contract between the parties - The Supreme court examined various clauses of the contract, noting that while there was a general reference to terms of another document, there was no specific mention of the arbitration clause. - It was established that mere general references to another contract were insufficient to incorporate an arbitration clause. Specific mention or intention was required for such incorporation. - The court emphasized Clause 7.0 of the contract, which explicitly stated that disputes must be resolved through civil courts in Delhi.
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Framing of charges - Owning of assets disproportionate to known sources of income - Prevention of Corruption Act, 1988 - Case against the Additional Chief Architect in New Delhi Municipal Corporation - The Supreme Court held that findings in income tax proceedings, including those by the ITAT, do not have a direct bearing on criminal proceedings under the Prevention of Corruption Act. It stressed that the two processes serve different legal purposes and operate under distinct standards of proof. - The Court clarified that exoneration in a civil adjudication (like income tax proceedings) does not automatically negate the possibility of criminal liability under different statutes, emphasizing the independent nature of criminal proceedings concerning the alleged acquisition of disproportionate assets.
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Dishonour of Cheque - seeking leave of the Court to summon bank officials - The court found that the reason for dishonor of the cheques was 'payment stopped by the drawer' and not due to insufficient funds or exceeding arrangement. Both parties admitted to this fact. Therefore, the court concluded that there was no requirement to summon bank witnesses to prove this fact.
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Levy of stamp duty on schemes of amalgamation or restructuring - The High court found that orders of the court sanctioning amalgamation/restructuring, along with the schemes appended to them, are instruments of conveyance under the existing legal framework, thus liable for stamp duty. - The court upheld the circular clarifying the levy of stamp duty on amalgamation schemes but partially invalidated a government order that introduced a new mode of computation for stamp duty based on share value, stating it required legislative action. - The court affirmed the validity of the retrospective application of reduced stamp duty rates, provided by a government order, as beneficial and within the state's power.
IBC
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Liability to contribute towards Liquidation Process Costs - scope of Financial Institution - The Tribunal found that the appellant, having invested a significant sum by subscribing to redeemable secured non-convertible debentures, falls within the ambit of a "financial institution" as defined by the Reserve Bank of India Act. - The Tribunal upheld the adjudicating authority's order requiring the appellant and other respondents to contribute to the liquidation process costs. - The decision reaffirms the principle that secured financial creditors, even if opting out of the liquidation estate to realize their security interest, must contribute to the liquidation process costs.
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Rejection of transfer application - proceedings were initiated by the Financial Creditor under Section 7 which proceedings were initially admitted and the application to recall the said order was rejected - The Tribunal noted that the Adjudicating Authority had already heard both parties on merits as well as limitation. Despite the insistence of the Appellant for the restoration of IA No. 4676 of 2023, the Adjudicating Authority granted an adjournment for the Appellant to move an appropriate application for restoration. The Tribunal found no prejudice in the manner in which the issue was handled. - NCLAT upheld the rejection of the transfer application and found no fault in the actions of the Adjudicating Authority.
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Seeking impleadment of Successful Auction Purchaser/Appellant as one of the Respondents - The NCLAT found that non-impleadment of the successful auction purchaser was deemed crucial and prejudicial to the proceedings. Despite directions from the adjudicating authority, necessary applications for impleadment were not filed. - The failure to include the successful auction purchaser as a respondent deprived them of the opportunity to present objections or responses, violating principles of natural justice. - The direction for a fresh e-auction process was set aside due to the aforementioned procedural irregularities and lack of fairness.
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Validity of declaring of the respondent as a Secured Creditor - retention of shares held as security - The primary grievance of the petitioner was that the National Company Law Tribunal (NCLT) should have decided the Liquidator’s application under Section 25 of the Insolvency and Bankruptcy Code (IBC), 2016 prior to deciding the application under Regulation 21-A of the IBBI (Liquidation Process) Regulations, 2016. - The High court emphasized that the order under Regulation 21-A did not affect the petitioner's position adversely, as the shares became part of the liquidation estate, ensuring the interests of all secured creditors. - The High Court dismissed the writ petition filed by the petitioner challenging the order of the NCLT, which directed the sale of shares held by the respondent.
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Admission of section 7 application - financial debt owed by the Corporate Debtor or not - Home Buyers - The application was filed by respondents, who were allottees in a real estate project, claiming default on part of the Corporate Debtor. - NCLAT ruled that the allottees were indeed financial creditors, as their investments were made with the expectation of receiving residential units in return. - The NCLAT upheld the admission of the Section 7 application by the NCLT, affirming that the allottees had the right to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to the default in completing the construction project.
PMLA
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Money Laundering - scheduled offences - cognizance of offence - The High court concluded that the allegations did not meet the necessary elements to constitute an offence under Section 3 of the PMLA. There was no prima facie evidence to suggest the petitioner knowingly facilitated the transfer of proceeds of the crime. The court emphasized that intent is crucial for constituting an offence under the PMLA, and such intent was not established against the petitioner. - The court quashed the proceedings against the petitioner, accused No. 7, stating that continuing the criminal proceedings would be an abuse of the process of law.
RBI
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The Reserve Bank of India (RBI) issued Circular, addressing Scheduled Commercial Banks, Primary (Urban) Cooperative Banks, State Cooperative Banks, and Exim Bank regarding the Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit. The circular extends the Scheme until June 30, 2024, with revised interest rates. Notably, the Scheme now offers 2% interest equalization for Manufacturers and Merchant Exporters and 3% for MSME manufacturers. However, certain modifications have been advised, including restrictions on banks with an average interest rate higher than Repo Rate + 4% and a cap on the subvention amount.
SEBI
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The SEBI issued a circular, addressing amendments to the disclosure requirements for Foreign Portfolio Investors (FPIs). - In addition to the criteria outlined in the previous circular, an FPI with over 50% of its Indian equity Assets Under Management (AUM) within a corporate group is exempt from additional disclosure requirements subject to certain conditions. - Custodians and depositories are tasked with tracking the utilization of the 3% limit for apex companies without identified promoters on a daily basis. Public disclosure of breaches or meeting this limit is required before the start of trading the next day. - See the circular for further conditions and instructions.
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The Securities and Exchange Board of India (SEBI) recently issued a circular, addressing concerns regarding the transfer of securities in dematerialized mode. This circular, aimed at safeguarding investors' interests, introduces several measures to prevent fraud and misappropriation related to inoperative demat accounts. - Depositories are instructed to prioritize investor education, particularly regarding the careful preservation of Delivery Instruction Slips (DIS) by Beneficial Owners (BOs). BOs are advised against leaving blank or signed DIS with Depository Participants (DPs) or any other entity.
Service Tax
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SVLDRS - Recovery of arrears of tax in terms of Section 124(1)(c) of the Sabka Vishwas (Legacy Dispute Resolution Scheme Rules, 2019 in the Finance Act, 2019 - jurisdiction under Section 74 of the Finance Act, 1994 was invoked to rectify the mistake - The High court found that initiating a rectification proceeding under Section 74 cannot be equated with filing an appeal under Section 86 of the Finance Act, 1994. Therefore, the petitioner’s case could not be considered under the appeal category for SVLDRS relief, which necessitates a different calculation of the dues. - The court allowed the settlement under SVLDRS upon payment of the due amount and interest.
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Refund of CENVAT credit - The Tribunal observed that the refund claims were filed within the specified time frame after the introduction of the GST regime. It noted the appellant's efforts to claim the entire CENVAT credit lying in its books and transfer it to its Bangalore unit. The Tribunal found that the rejection of the refund claim solely based on not debiting the claim from the CENVAT credit account was unjustified, considering the transitional challenges from the Service Tax regime to the GST regime. - The Tribunal accepted the appellant's argument regarding the practical difficulties in debiting the refund amount at the time of filing due to the change in regimes. - Refund allowed.
Central Excise
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Refund claim - amount was paid in GST era under Reverse Charge Mechanism - The Tribunal relied on Section 142(8)(a) of the CGST Act, 2017, which states that if any amount becomes recoverable from a person as a result of assessment or adjudication proceedings under the existing law, and unless recovered under the existing law, it shall be recovered as an arrear of tax under the GST Act. - The CESTAT upheld the decision of the lower authorities that the payment made by the appellant was part of a recovery action under the enforcement done by the department. Therefore, the duty, interest, and penalty were paid for an extended period and the refund claim was not admissible.
Case Laws:
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GST
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2024 (3) TMI 969
Determination of tax u/s 73(9) of the CGST/SGST Act - petitioner submits that the order is passed merely on the representation of the petitioner without giving any opportunity of oral hearing to the petitioner - violation of principles of natural justice - HELD THAT:- The petitioner is entitled for an opportunity of hearing before determination of any tax even under Section 73(9) of the CGST/SGST Act. The impugned order dated 29.12.2023, is hereby set aside. The matter is remanded back to the appropriate authority to pass a fresh order after giving opportunity of personal hearing to the petitioner - Petition allowed by way of remand.
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2024 (3) TMI 968
Seeking grant of bail - fraudulent availment and passing of input tax credit of G.S.T, by preparing fake invoices without any actual supply of goods by several firms created, managed and run by the applicant - creation of a number of bogus firms for the purpose of issuing fake invoices - HELD THAT:- Perusal of the provisions contained under Section 73 and 74 of the CGST Act would reveal that a mechanism has been provided therein with regard to the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilfull mis-statement or suppression of facts. Section 74 of the CGST Act provides for assessment of tax by the proper officer by issuing a notice to the assesee, however, sub-section 11 of Section 74 of the CGST Act would suggest that if the tax, which has been calculated along with the interest payable or the penalty is deposited, all proceedings in respect of the said notice shall be deemed to be concluded - it may be inferred that even if all the tax liability including penalty, etc. has been deposited, it would be only the 'notice' which would be discharged and the proceedings with regard to Section 132 of the CGST Act shall remain alive. Thus, there seems force in the submissions made by learned counsel for the Department that the process of prosecution and assessment may go on simultaneously. The arrest of the applicant has not been done for his non cooperation in the investigation or for further investigation. Nowhere it is stated that the applicant while at liberty may hinder the smooth progress of investigation and in this order it has also not been mentioned as to why the applicant is being arrested, which was required to be stated. The requirement under sub-section (1) of section 69 of CGST Act is reasons to believe that not only a person has committed any offence as specified but also as to why such person needs to be arrested. From a perusal of the reasons recorded by the Principal Additional Director General, it is reflected that no incident has been mentioned therein recording any act of the applicant or his conduct of threatening any witness or even of not co-operating with the investigation or of fleeing from investigation. It is true that economic offences constitute a class apart and need to be visited with a different approach in the matter of bail, because such offences pose serious threat to the financial health of the country, but there has to be a sound reason or belief for curtailing the liberty of a person, specially in the offences punishable with up to seven years of imprisonment. Keeping in view the fact that applicant has appeared before the department on 30, 31 January 2024 and on 01st February and his statements have been recorded on these days and he was arrested on 2nd February, 2024 and produced before the magistrate and no custody remand was sought by the department and it was after many days i.e. on 26.02.2024 the department has taken the permission from the Court concerned for interrogation of the applicant in jail and also that applicant has retracted his confessional statements and in the orders of arrest no reason has been mentioned as to why after recording of the statements of the applicant for many days his arrest is required and also keeping view that applicant is in jail in this case since 02.02.2024 and investigation appears to have reached an advanced statge and nothing has been shown before this Court which may justify the further detention of the applicant in prison and also considering that the alleged offence is punishable with up to 5 years maximum punishment and still no formal accusation in the form of FIR or complaint has been filed by the department and also keeping in view that in such circumstances continuing the detention of the petitioner may not at all be justified and it appears justified for this court to strike a fine balance between the need for further detention of the applicant when even custodial interrogation has not been claimed at all by the Department and considering the right of an accused to personal liberty, applicant may be released on bail, however subject to certain conditions. Let the accused/applicant- Deepanshu Srivastava involved in above-mentioned case, be released on bail on his furnishing a personal bond with two sureties in the like amount to the satisfaction of the court concerned subject to fulfilment of conditions imposed - bail application allowed.
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2024 (3) TMI 967
Reversal of ITC - wrongful availment of Input Tax Credit (ITC) on purchase of Car - impugned order was issued in view of the respondent not being aware of the reversal in the GSTR 3B return - HELD THAT:- The petitioner has placed on record the GSTR 3B return for the month of April in the assessment year 2023-2024. Such return indicates the reversal of ITC to the extent of Rs. 73,690/- each towards CGST and SGST. On examining the impugned order, it is evident that such impugned order proceeds on the basis that ITC of Rs. 73,690/- each towards CGST and SGST was wrongly availed of. In other words, the said order proceeds on the basis that ITC was not reversed. In light of documents placed on record by the petitioner, the said order requires reconsideration. The impugned order dated 11.07.2023 is quashed and the matter is remanded for reconsideration. The petitioner is permitted to file a reply to the show cause notice dated 19.04.2023 and to submit all relevant documents along with such reply. Petition disposed off by way of remand.
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2024 (3) TMI 966
Validity of assessment order - fraudulent availment of Input Tax Credit (ITC) - documents produced by the petitioner were disregarded - issuance of fake invoices - HELD THAT:- The documents produced by the petitioner along with the reply to intimation and reply to show cause notice were disregarded and the assessing officer reproduced the statements from the show cause notice. Since there was no application of mind, the impugned assessment order is not sustainable. The impugned assessment order dated 23.08.2023 is quashed and the matter is remanded for re-consideration. After providing a reasonable opportunity to the petitioner, including a personal hearing, the assessing officer is directed to issue a fresh assessment order within two months. The petitioner is granted leave to submit additional documents to establish that the availment of ITC was in order. Petition disposed off.
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2024 (3) TMI 965
Violation of principles of natural justice - impugned order passed without taking into consideration the reply submitted by the petitioner and is a cryptic order - ex-parte demand - HELD THAT:- The observation in the impugned order is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply, however the impugned order records that neither filed any reply nor appeared in person . Proper Officer had to at least consider the reply submitted by the Petitioner on merits and then form an opinion. He merely held that the no reply has been filed which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner. The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 29.11.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. Petition disposed of by way of remand.
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2024 (3) TMI 964
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - demand alongwith penalty - HELD THAT:- Perusal of the Show Cause Notice shows that the Department has given separate headings under declaration of output tax, excess claim Input Tax Credit, ITC to be reversed on non-business transactions exempt supplies and under declaration of ineligible ITC. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving full disclosures under each of the heads - The observation in the impugned order dated 23.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was unsatisfactory, incomplete and not duly supported by adequate documents. He merely held that the reply is not clear and unsatisfactory which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner. Further, if the Proper Officer was of the view that the reply is unsatisfactory and if any further details were required, the same could have been specifically sought from the petitioner. However, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details. The matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 23.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication - Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner. Pursuant to the intimation being given, petitioner shall furnish the requisite explanation and documents. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the Act. Petition disposed off.
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2024 (3) TMI 963
Retrospective cancellation of GST registration of petitioner - SCN does not specify any cogent reason - violation of principles of natural justice - HELD THAT:- In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 07.07.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 26.07.2022 i.e., the date when the Petitioner closed down his business activities. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.
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2024 (3) TMI 962
Retrospective cancellation of GST registration of petitioner - petitioner could not respond to the SCN as the petitioner could not access the GST portal - HELD THAT:- The impugned order dated 11.12.2023 has been passed merely on the ground that no reply has been received from the taxpayer - It is not in dispute that once the registration is cancelled retrospectively, the taxpayer is not in a position to access the portal; become aware of any notice or respond thereto. In the instant case, since the GST portal shows that the registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017, petitioner would not have been able to receive the show cause notice or access the portal to become aware of any show cause notice or respond thereto. Since both the petitioner as well as respondent want the registration to be cancelled, though for different reasons, the interest of justice requires that the registration of the petitioner be deemed to be cancelled with effect from 01.01.2018 i.e., the date of the application filed by the Petitioner seeking cancellation of the GST registration - the impugned order dated 11.12.2023 is not sustainable - petition disposed off.
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2024 (3) TMI 961
Validity of assessment order - alleged discrepancies in returns filed by the petitioner - difference between the amounts indicated in the notice in Form ASMT-10 and the amounts specified in the show cause notice - HELD THAT:- On examining the notice in Form ASMT-10, the said notice pertains to financial year 2017-2018. The abstract of demand proposed therein is for an aggregate sum of Rs. 1,37,33,386.62 comprising a demand of Rs. 71,59,663.28 towards IGST, a sum of Rs. 32,86,861.67 towards SGST and a sum of Rs. 32,86,861.67 towards CGST. Upon receipt of the petitioner's reply dated 22.09.2023, by order in Form ASMT-12 dated 27.09.2023, the respondents concluded that the reply was satisfactory and no further action is required. In these circumstances, it is necessary to examine the impugned assessment order to verify whether the same demand was resurrected. On examining the impugned assessment order, it is found that the confirmation of demand relates to the same assessment period and the same amounts towards SGST, CGST and IGST. The only difference is that interest and penalty has been imposed thereon to arrive at the aggregate sum indicated therein. Upon issuance of an order in Form ASMT-12 recording that no further action is required, the continuation of proceedings culminating in the impugned assessment order is undoubtedly unsustainable. The impugned assessment order is quashed - Petition closed.
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2024 (3) TMI 960
Denial of Input Tax Credit - Disallowance on the ground that the details submitted in the petitioner's return did not tally with that in the GSTR-2A return - HELD THAT:- The documents on record, such as invoice dated 20.09.2017 and the GSTR return of Kirthi Enterprises, prima facie indicate that the GSTIN of Premier Corporation was wrongly mentioned by Kirthi Enterprises in the return. If that is indeed the case, the petitioner would be unjustly deprived of ITC. In order to provide the petitioner with an opportunity to redress this grievance, interference with the impugned order is called for. The impugned order dated 25.08.2023 is quashed and the matter is remanded to the assessing officer. The assessing officer is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh assessment order within a period of two months thereafter. It is also open to the petitioner to file an appropriate petition, if necessary, to set right the error complained of by the petitioner. Petition disposed off.
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Income Tax
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2024 (3) TMI 959
Validity of Revision u/s 263 - Revision of orders prejudicial to revenue - loan transactions advanced to the assessee by entry operators - disallowance u/s 14A of the Act read with Rule 8D(2)(iii) - PCIT, while exercising the revisional powers, recorded that M/s. Sarvottam Securities Ltd. and M/s. Upaj Leasing Finance Pvt. Ltd. are the shell companies of Mr. Himanshu Verma, an entry operator and the assessee was the beneficiary of the unsecured loans received through the entry operator and AO ought to have done further inquiry to ascertain the genuineness and creditworthiness of the loan transactions - HELD THAT:- As in light of the findings which are unravelled from the DDIT investigation report and assessment proceedings of M/s. Upaj Leasing Finance Pvt. Ltd. that the entities M/s. Sarvottam Securities Ltd. and M/s. Upaj Leasing Finance Pvt. Ltd. are the shell companies of an entry operator, the relevance of ascertaining the genuineness and creditworthiness of the transactions cannot be undermined. Additionally, the genuineness and creditworthiness of the transactions may not be satisfactorily determined solely on the basis of the ledger accounts or the ITR of the entities, especially when the identities of such entities are not bona fide. As observed in N.R. Portfolio [ 2013 (11) TMI 1381 - DELHI HIGH COURT] the task of unveiling the mischief of the human minds working behind the corporate veil in such cases requires a deeper scrutiny, which goes beyond the periphery of documents ordinarily submitted for the purpose of assessment. An inquiry for ascertaining the creditworthiness and genuineness of financial transactions necessarily requires unknotting of the transactions, by going beyond what is conspicuously available. Unfortunately, the assessment order nowhere reflects any element of inquiry or verification. The discussion about the loan transactions in question is altogether missing. Furthermore, the assessment record would also reflect that the AO has not taken any concrete steps to ascertain the genuineness and creditworthiness of the transactions, which merits consideration in the light of the findings that emerged from the DDIT investigation report and assessment proceedings of M/s. Upaj Leasing Finance Pvt. Ltd. It emerges that the present is a case where the AO failed not only to spell out any finding about the DDIT investigation report and assessment proceedings of M/s. Upaj Leasing Finance Pvt. Ltd. but also to scrutinize the highlighted aspects in the said report qua the genuineness and creditworthiness of aforenoted loan transactions. Therefore, this is the minimum inquiry which atleast was expected to have been made by the AO. It is apposite to point out that clause (a) of Explanation 2 of Section 263 of the Act introduces a deeming fiction to the effect that the order passed by the AO shall be considered erroneous and prejudicial to the interests of the Revenue, if the order is passed without making inquiries or verification, which should have been made. Henceforth, since neither there is any facet of discussion about the aforenoted aspects in the assessment order nor the assessment record duly reflects that the AO has done inquiry in the light of the findings of the investigation report. We find that the present is a fit case to invoke the revisional powers under Section 263 of the Act. So far as question (a) is concerned, we hold that the ITAT was incorrect in holding that the AO had duly made the inquiry in the instant case and considered the material produced before it. Furthermore, the ITAT also erred in holding that the PCIT has wrongly assumed the jurisdiction under Section 263 of the Act as the assessment order is not only prejudicial to the interests of the Revenue but also erroneous in nature. So far as question (b) is concerned, it is crystal clear that Explanation 2 to Section 263 of the Act will be applicable in the instant case as the said explanation was inserted vide Finance Act, 2015 with effect from 01 June 2015 and the case of the assessee belongs to AY 2016-17. Thus, questions of law need to be answered in favour of the Revenue and against the assessee.
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2024 (3) TMI 958
Validity of reopening of assessment - An order u/s 245D(4) already been passed by the Income Tax Settlement Commission (ITSC) - Scope of harmonious construction - whether the order of the ITSC is final in all respects for the concerned AY? - HELD THAT:- As seen that the order of the ITSC is deemed to be conclusive for all the matters pertaining the concerned AY for which the settlement application has been accepted and processed by the ITSC. In case, the Income Tax Department is not satisfied with the computation of income by the ITSC for the relevant AY, the same could only be assailed in accordance with the provisions contemplated under Section 245D(6) read with Section 245D(7) of the Act. The legislative scheme envisaged for ITSC is self-contained in nature and the intent appears to be to facilitate a mutually satisfactory arrangement which could not be reopened, unless explicitly covered under the textual exceptions of fraud or misrepresentation. In the instant case, the application of the petitioner was accepted and the proceedings were initiated therein by the ITSC after the second search and seizure operation was conducted by the respondent on 05.03.2013. Thus, undoubtedly, since the ITSC was already held up with the concerned AY, including the aspects raised by the respondent in the present petition, the AO cannot be allowed to exercise jurisdiction to reopen the proceedings under the guise of Section 147/148 of the Act for the relevant AY in consideration. As already settled allowing the AO to proceed with the impugned notices and order for reopening assessment for the concerned AY would create a situation of downright chaos and vagueness. Put otherwise, it would tantamount to simultaneous existence of two concomitant and materially different assessment orders for the same AY, which is completely impermissible as per the provisions of the Act. The issue regarding the impermissibility of two assessment orders for a particular AY was also highlighted in the case of Abhisar Buildwell Pvt. [ 2023 (4) TMI 1056 - SUPREME COURT] Therefore, if the respondent was apprehensive of the fact that the petitioner had suppressed its income before the ITSC, it ought to have resorted to the remedy contained in Chapter XIX-A of the Act itself on the grounds of fraud or misrepresentation. The concept of fraud has been jurisprudentially recognized as a concept of wide import, and thus, availability of a challenge on the ground of fraud could have provided an effective remedy to the respondent, if so justified. Evidently, the respondent has failed to seek recourse to such a remedy and rather, preferred an appeal before this Court on altogether different aspects as compared to the ones raised in the present petition. In any case, the same was also dismissed vide order dated 05.09.2017 [ 2017 (9) TMI 1721 - DELHI HIGH COURT] So far as the decision relied upon by the respondent in the case of Abhisar Buildwell P. Ltd. [ 2023 (5) TMI 587 - SUPREME COURT] is concerned, in the given facts and circumstances, the same cannot be construed to be an authority to override the mandate of Section 245-I of the Act. Sections 150 and 245-I of the Act are provisions of equal standing and a conflict between the two must be resolved by resorting to the principle of harmonious construction. One of the foremost considerations of harmonious construction is to preserve the essence and meaning of both the provisions, and to not let either provision fall at the expense of the other. If the settlement arrived at by ITSC is allowed to be reopened on grounds, other than those expressly provided for, it would effectively render the entire mandate of the ITSC as vulnerable and the commitment of the finality of a settlement would stand compromised. It is this legislative sanctity of ITSC that provides it a special status under the Act. Since the decision of the ITSC qua the issues in the present petition has already attained finality, therefore, taking a cue from the decision of the Constitution Bench of the Hon ble Supreme Court in the case of Brij Lal [ 2010 (10) TMI 8 - SUPREME COURT] the reliance placed by the respondent on Abhisar Buildwell P. Ltd. [ 2023 (5) TMI 587 - SUPREME COURT] to proceed with the reassessment proceedings, is completely unjustifiable and unsustainable, in the given factual matrix of the petition. In view of the aforesaid, we quash the impugned notice alongwith corrigendum and the impugned order of even date.
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2024 (3) TMI 957
Application u/s 119(2)(b) for condoning delay, if any, in filing Form 10-ID to avail the beneficial rate of tax of 15% u/s 115BAB - Validity of order of CBDT rejecting the application u/s 119(2)(b) - FDI investment approval from China - as submitted Petitioner had not entered into any transaction for FY 2019-20 as need to take approvals and the COVID-19 pandemic which lasted in China for a longer period - For AY 2020-21 and 2021-22, Petitioner had not exercised the option to be governed by Section 115BAB of the Act, which Petitioner thought of exercising for AY 2022-23. - As argued order has not been passed or signed by the Member who gave a personal hearing and secondly, in the order reliance has been placed on the report of the Field Authorities, which Petitioner on instructions, states, has not been provided - principles of natural justice denied - HELD THAT:- As Petitioner stated that such a report was received by CBDT and considered itself came to light only when Petitioner received the impugned order. He also states that Petitioner s officers were called by the Field Authorities . Their explanations were sought after which nothing was received by the Assessee from the Field Authorities. In our view, principles of natural justice would require that Respondent No. 1 should have made a copy of the report received by them from the Field Authorities to Petitioner and given an opportunity to Petitioner to explain or show cause. We understand that even during the personal hearing, it was not informed to Petitioner that there was such a report. Moreover, the order says, This issues with the approval of Member (IT R), Central Board of Direct Taxes and is signed by one Virender Singh, Additional Commissioner of Income Tax (ITA Cell), CBDT, New Delhi. If a personal hearing has been granted by the Member (IT R), the order should have been passed by him. Mr. Sharma states there could be file notings. If that is so, that has not been made available to Petitioner. In the circumstances, on these two grounds alone, we quash and set aside the impugned order dated 5th December 2023 and remand the matter to CBDT. The Member/Members shall within three weeks from the date this order is uploaded make available to Petitioner all Field Reports/documents/instructions received by the CBDT from the Field Authorities and within two weeks of receiving the same, Petitioner shall file, if advised, further submissions in support of their application for condonation of delay. Thereafter, an order shall be written, passed and that order shall be authored and signed by the Member of CBDT, who has given a personal hearing and when we say this, it is not the Member holding the same designation.
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2024 (3) TMI 956
Reopening of assessment u/s 147 - reasons to believe - cash deposits in bank account as alleged unexplained - nformation received from the Investigation Officer, Kolhapur that Petitioner made some cash deposit by assessee-trust - HELD THAT:- The reasons recorded clearly indicate that notice has been issued and the reopening has been initiated on a mere change of opinion. In the earlier scrutiny assessment, Respondent No. 1 had the opportunity to specifically scrutinize the cash deposits made by Petitioner. A specific query was also raised by the IO, Kolhapur regarding the cash deposits under Section 133(6) of the Act, to which Petitioner had replied stating that the said issue was being examined in the scrutiny assessment. The reason recorded and the impugned order are based on issues which have already been examined and verified during the original scrutiny assessment and the same cannot, in law, be a valid ground to reopen Petitioner s assessment for AY 2016-17 as the same would amount to a review . The same facts and materials on record cannot be re-examined for change of opinion under the garb or reassessment proceedings. It has been held in a catena of judgments that reassessment proceedings cannot be initiated by the AO when he has accepted the matter in an original assessment and the same would amount to a mere change of opinion and would not give rise to reasons to believe . Also further noticed from the documents on record that there was no reason nor any justification given in the notice to even arrive at prima facie finding that the cash deposits led to escapement of income. There was no response to Petitioner s requests for information regarding alleged undisclosed income pertaining to cash deposits over and above the deposits in the bank account. The impugned order does not even controvert the objection raised by Petitioner that the cash collected was not only deposited in its bank account but was also duly offered to tax. It is settled law that a reason to suspect is not the same as reason to believe. There has to be a rational connection and the live link between the material coming to the notice of the AO and the formation of belief regarding escapement of income. See Sheo Nath Sing case [ 1971 (8) TMI 6 - SUPREME COURT ] The reasons to believe in the present matter merely adverts to information from the Investigation Officer, Kolhapur that Petitioner made some cash deposits. But it is an admitted fact that Petitioner, a charitable trust registered under Section 12A of the Act, eligible to avail exemption under Section 11 of the Act has deposited the donations received in cash in its bank account and thereby disclosed Nil total income for the relevant assessment year. Moreover, the accounts of Petitioner are recorded, accounted and audited and hence, undoubtedly, there is no undisclosed cash over and above the deposits in its regular bank accounts which were offered for taxation. Thus, there is no material or fact which has been stated in the reasons for reopening assessment in the present case on which any belief can be founded of the nature contemplated by law. Decided in favour of assessee.
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2024 (3) TMI 955
Validity of assessment u/s 153C - Period of limitation - Assessment of income of any other person - recording of satisfaction about seven years after search - HELD THAT:- The question as to whether these proceedings are barred by limitation should be addressed with reference to the judgment in Jasjit Singh [ 2023 (10) TMI 572 - SUPREME COURT ] Effectively, the Supreme Court held that the person, other than the searched person, would be gravely prejudiced if the papers were to be handed over to the jurisdictional assessing officer of such person after about four years. In the case at hand, the search in the premises of Mr. Thirumalaivasan was carried out on 11.10.2012, whereas the satisfaction note was recorded only on 27.03.2019. It is also significant to notice that the assessing officer of the searched person and the petitioner were the same and the recording of satisfaction about seven years after search is unjustified. If the limitation period of six years is reckoned from the date on which satisfaction was recorded, which falls within financial year 2018-2019 or assessment year 2019-2020, the respondent could only have reached back up to assessment year 2013-2014. Therefore, the proceedings in respect of both these assessment years are undoubtedly barred by limitation. It should also be noticed that the periods specified in Section 153B for completion of assessment had also lapsed. The impugned assessment orders are quashed as being barred by limitation. Decided in favour of assessee.
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2024 (3) TMI 954
Reopening of assessment u/s 147 - Reason to believe - information received from the Investigation Officer, Kolhapur that Petitioner made some cash deposit by assessee-trust - HELD THAT:- It is an admitted fact that Petitioner, a charitable trust registered under Section 12A of the Act, eligible to avail exemption u/s 11 of the Act has deposited the donations received in cash in its bank account and thereby disclosed Nil total income for the relevant AY. Moreover, the accounts of Petitioner are recorded, accounted and audited and hence, undoubtedly, there is no undisclosed cash over and above the deposits in its regular bank accounts which were offered for taxation. Thus, there is no material or fact which has been stated in the reasons for reopening assessment in the present case on which any belief can be founded of the nature contemplated by law. Thus upon perusal of the letter providing the reasons to believe escapement of assessment as well as the order rejecting Petitioner s objections impugned herein, we have no hesitation in holding that there is no live link, which is a sine qua non between the material before the AO in the present case and the belief which he has to form regarding escapement of income. The sanction under Section 151 of the Act granted by the prescribed authority as well as the notice is issued by the Department without any application of mind. Decided in favour of assessee.
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2024 (3) TMI 953
Reopening of assessment u/s 147 - notice issued u/s 148A(b) as alleged that petitioner was one of the persons who claimed fictitious short-term capital loss - HELD THAT:- There is nothing in the notice to indicate on what basis it is alleged that the short-term capital loss claimed was fictitious. Petitioner had, based on public announcement, invested in the mutual fund. The fact that petitioner received tax free dividend fund cannot be held against petitioner. The fact that petitioner had suffered a loss also cannot be held against petitioner. Even assuming that the transaction was pre-planned, there is nothing to impeach the genuineness of the transaction. Petitioner was free to carry on his business which he did within the four corners of law. Mere tax planning without any motive to evade taxes through colourable devices is not frowned upon even by the judgment of the Apex Court in McDowell Co. Ltd [ 1985 (4) TMI 64 - SUPREME COURT] It is settled law that the reasons for the formation of the belief that there has been escapement of income must have a rational connection with or relevant bearing on the information. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and his view that there has been escapement of income of the assessee from assessment in the particular year. It is settled law that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched which would suggest escapement of the income of the assessee from assessment. The powers of the Income Tax Officer to reopen assessment, though wide, are not plenary. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The live link or close nexus should be there between the information before the Income Tax Officer and the belief which he has to prima facie form an opinion regarding the escapement of the income of the assessee. In the notice issued under Section 148A(b) of the Act, the Assessing Officer alleges that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short-term capital loss. These are allegations against JM Financial and do not implicate petitioner in any manner. There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability or to earn dividend or book short-term capital loss. Therefore, the Assessing Officer is also not clear whether the assessee had booked loss or claimed dividend in the JM Balanced Fund Annual Dividend Option Regular scheme or JM Equity Hybrid Fund Quarterly Dividend. This also indicates non application of mind by the Assessing Officer. Assessee appeal allowed.
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2024 (3) TMI 952
Disallowance of deduction u/s 80-IA(8) - computation of the market value or electricity - Scope of expression market value in relation to any goods - ITAT justification in holding that the price at which State Electricity Board sells electricity to industrial consumer in representative of the price that electricity would ordinarily fetch in the open market in terms of section 80-IA(8) - HELD THAT:- We note that the issue would stand concluded in light of the judgment rendered [ 2024 (1) TMI 1252 - DELHI HIGH COURT] wherein as accepted the alternative plea of the assessee and remanded the matter with a direction to the Ld. AO to deduct the sale proceeds of those items from the cost of raw materials used in the manufacturing process and then accordingly determine the profit of the undertaking to allow the deduction under section 80 IB as per the revised profits so computed. TP Adjustment - Excessive remuneration to a related party - HELD THAT:- No disallowance in this regard have been made in the earlier years as held comparison done by the AO between the remuneration paid by the assessee company on account of managerial remuneration to Ms. Shallu Jindal with the remuneration paid by Essar Steel Ltd to Sh. Ashutosh Agarwala is not proper as well considering the facts that the assessee company is a profit making venture whereas Essar Steel Ltd. is incurring losses. It should also be noted that the assessee company has also complied with all the provisions of the Companies Act, 1956, relating to the payment of managerial remuneration to its managerial personnel appointed and the said payment of managerial remuneration has also been approved by the Board of Directors. The reference made to Circular No. 6P dated 08.07.1968 issued by the CBDT is apt in the present case. Thus, the Assessing Officer was not correct in making addition on account of managerial remuneration. Allocation of common expenses u/s 80-IA to eligible and non-eligible unit on the basis of ratio between eligible and non-eligible units - HELD THAT:- As decided in [ 2024 (1) TMI 1252 - DELHI HIGH COURT] from perusal of the Assessment Order/Order of the TPO/Directions of the DRP, in the present case none of the authorities have doubted that there was no expenses. In facts, the Assessing Officer/TPO/DRP re-allocated the expenditure in the ratio of turnover between eligible and non-eligible units without bringing into the light the flaw or inaccuracy or any suitable explanation involved in relation to the method of allocation adopted by the assessee company. Non deduction of TDS on bank guarantee commission u/s 40(a)(ia) - As decided by ITAT DRP has directed to delete the bank guarantee commission and without appreciating the same, the Assessing Officer made an addition which is unsustainable. Therefore, we direct the Assessing Officer to comply with the directions of the DRP and grant the relief to the Assessee. We find no justification to entertain the instant appeal on this solitary question.
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2024 (3) TMI 951
Validity of order of ITAT allowing Applications filed u/s 254(2) - Rectification versus Review of order - TP Adjustment - Comparability analysis done by ITAT - HELD THAT:- ITAT had clearly rendered incompatible and inconsistent findings. In fact we are constrained to observe that paras 12 and 21 were clearly contradictory. It was thus not only imperative but also expedient in the interest of justice for the ITAT to recall its order of 29 September 2020 and correct a manifest error apparent on the record. If that route had not been adopted, it would have left the Transfer Pricing Officer [ TPO ] as well as the Assessing Officer with an unresolvable quandary. We further note from a reading of the order dated 18 October 2022 that the ITAT has presently kept the issue of comparability vis-a-vis PSL open for its own consideration, and insofar as Sasken is concerned the matter has been remitted to the file of the TPO. In that view of the matter no prejudice as such stands caused to the appellant.
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2024 (3) TMI 950
Refund of the amount as deposited by the assesse towards part payment of demand raised - Justification for retention of the amounts of which refund is sought - Time limit for completion of assessment, reassessment and recomputation - petitioner asserts AO has failed to frame a final order of assessment on or before 31 March 2017, there exists no justification for the respondents to retain the amounts which had been deposited by the petitioner pending finalization of the assessment proceedings HELD THAT:- As would be evident from a reading of Section 153(5) of the Act, the same deals with contingencies where the matter may have been remitted by the ITAT to other authorities, including the TPO wholly or in part, for the purposes of making a fresh assessment. Dealing with such a contingency, sub-section (5) of Section 153 of the Act provides that effect to such an order of the ITAT would have to be given within a period of three months from the end of the month in which that order is received. However, and insofar as the present case is concerned, it would clearly be governed by sub-section (7) of Section 153 of the Act since the matter itself relates to an order passed by the authority prior to 1 June 2016. Since the remit ordered by the ITAT, admittedly, was rendered prior to 1 June 2016, it was incumbent upon the AO to have framed a final order of assessment on or before 31 March 2017. Having failed to do so, there would exist no justification for the respondent to retain the amounts which had been deposited by the petitioner. We further take note of the submission of respondent, who draws our attention to the pendency of appeals preferred by the petitioner against the orders of the ITAT. In our considerate opinion, the mere pendency of those appeals would clearly not detract from the right of the writ petitioner to claim refunds since those appeals have in any case been rendered infructuous consequent to the period of limitation of framing an order of assessment itself having come to an end. We according allow the instant writ petition and direct the respondents to refund the amounts along with the interest as may be statutorily payable.
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2024 (3) TMI 949
TP Adjustment - Comparable selection - ITAT excluding Modicare Limited [ Modicare ] as a comparable under the Resale Price Method [ RPM ] - ITAT after considering various factors such as the non-availability of data of Modicare for various product segments and marketing strategies, difference between the entities in the treatment of discounts given to consultants/agents and the substantial difference between the entities in the advertising, marketing and promotion expenses incurred by them - ITAT also held that the Transactional Net Margin Method [ TNMM ] ought to be adopted as the most appropriate method for benchmarking the respondent s case. HELD THAT:- During the course of hearing today, it was brought to our attention that the matter has been resolved inter partes in terms of the assessment which came to be finalised for AY 2014-15 and that Modicare Limited has been excluded from the list of comparables to determine the ALP and the upward adjustments of income as proposed by the Department has not been undertaken as well. We are informed that the view taken therein has been duly accepted and followed in the subsequent years. Thus bearing in mind the principle of consistency, we find no justification to entertain the instant appeals.
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2024 (3) TMI 948
Penalty u/s 271D - violation of the provisions under section 269SS - Assessee sold the property for a consideration received in cash - meaning of the term specified sum - assessee pleaded that the cash of Rs. 9.38 lakhs was received from the purchaser on the day of registration and before the Jt. Sub Registrar only, since the purchaser did not have sufficient bank balance and hence had to pay such sum in cash, which was accepted by the assessee to avoid inconvenience to the purchase - HELD THAT:- The meaning of the specified sum has dealt in the case of ITO vs. Shri. R. Dhinagharan (HUF), [ 2024 (1) TMI 61 - ITAT CHENNAI] wherein as took the view that the sum specified as per Explanation to Section 269SS of the Act, only applicable for advance receivable, namely, as advance or otherwise means advance can be in any manner, and therefore, this provision will not apply to the transaction that happens when the final payment at the time of registration of sale deed and payment takes place before sub-registrar for registration of property. In the present case before us, it is an admitted fact that the assessee received the amount of cash not as advance, but as the final payment in front of the Sub-Registrar at the time of registration for sale of property - we hold that there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances and hence, penalty under section 271D of the Act is not leviable. Grounds raised by the assessee allowed,
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2024 (3) TMI 947
Capital gain computation - allowability of transfer expenses [brokerage, air tickets, hotel accommodation receipts, postal charges receipts, conveyance charges, lawyer fees, photocopying expenses] - as per DR expenditure was merely incidental to the sale transaction and cannot be allowed to be deduction since such an expenditure was not wholly and exclusively for the transfer of property - HELD THAT:- As decided in SHAKUNTALA KANTILAL [ 1991 (3) TMI 123 - BOMBAY HIGH COURT] what constitute the expenditure incurred wholly and exclusively in connection with transfer as contemplated under section 48(i) of the Act and reached a conclusion that the expression in connection with such transfer is certainly wider than the expression for transfer and held that any amount of payment of which is absolutely necessary to effect transfer will be an expenditure covered by section 48(i) of the Act. In the case on hand, the assessee is a non-resident individual and for the purpose of effecting transfer of the property, he had to travel to India and incurred the expenditure for obtaining special power of attorney from Indian Consulate in USA, air tickets, hotel accommodation receipts, postal charges receipts, conveyance charges, lawyer fees, photocopying expenses, without which the transfer could not have taken place. We, therefore, are of the opinion that in terms of the ratio in the case of Shakuntala Kantilal [supra], said expenditure is covered under section 48(i) of the Act is allowable. We, accordingly hold that the expenditure incurred by the assessee towards special power of attorney from Indian Consulate in USA, air tickets, hotel accommodation receipts, postal charges receipts, conveyance charges, lawyer fees, photocopying expenses are also allowable expenditure and the AO will consider the same and delete the addition so made. Assessee appeal allowed.
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2024 (3) TMI 946
Rejection of the books of account of the assessee company u/s. 145(3) - addition of Cash deposits in bank accounts in demonetized currency - adverse inferences drawn by the A.O regarding the authenticity of the sale transactions of the assessee company i.e. by dubbing the same as sales carried out against SBNs during the demonetization period - HELD THAT:- AO conclusion is not supported by any evidence, but is based on a general presumption, i.e reference to certain media clippings and the modusoperandi that was adopted by some jewellers who during the demonetization period had indulged in laundering the ill-gotten money of their customers, therefore, we are unable to persuade ourselves to concur with the same. As the rejection of the books of account of the assessee u/s. 145(3) of the Act pre-supposes satisfaction of either of the two conditions contemplated under the said statutory provision, viz. (i) dissatisfaction of the A.O as regards the correctness and completeness of the accounts of the assessee; or (ii) failure on the part of the assessee in computing its income as per system of accounting regularly employed by him, existence of neither of which, had been proved in the case of the assessee company before us, therefore, rejection of its books results by the A.O cannot be approved. Estimation of income - AO estimated profit element (Net Profit) of 25% on the subject sales - We find substance in the claim of the Ld. AR that no material had been placed on record by the department, which would reveal that the subject sales were not carried out by the assessee company during the pre-demonetization period, i.e, as disclosed in its books of accounts, but were made during the demonetization period. Also, as stated by the Ld. A.R., and rightly so, there is even otherwise no basis for the A.O. to have inferred that the assessee company had carried out the subject sales at an abnormally high profit of 25%. We are unable to comprehend that as to on what basis, the A.O. had presumed a profit element (Net Profit) of 25% on the subject sales. In our view, both the assumptions of the A.O, viz. (i) that the sales in question were antedated, i.e., though disclosed by the assessee as having been carried out during the pre-demonetization period, but were carried out by the assessee company in lieu of SBN's during the demonetization period; and (ii) earning of the super profit by the assessee company on the subject disclosed sales of Rs. 2.37 crores (approx.) in SBN's, are merely based on mere suspicion, assumptions, presumptions, surmises, and conjecture without any material proving the same. Although the A.O had drawn support from certain media clippings and status reports of the Income Tax Department on Operation Clean Money , and also the fact that certain jewellers had opted for IDS and PMGKY scheme and had offered 25% to 40% of their total cash deposits as undisclosed income, but the said observation, on a standalone basis, in our view, cannot justify the drawing of adverse inferences and the consequential impugned addition in the hands of the assessee company. Thus we are unable to fathom the very basis, on which, the duly disclosed sales of the assessee company had been related by the A.O to the demonetization period, i.e. 09.11.2016 to 31.12.2016; and also, the presumption drawn by him regarding earning of super profit of 25% on the subject sales, thus, are unable to persuade ourselves to subscribe to the view taken by the lower authorities. Accordingly, we set aside the order of the CIT(Appeals), and vacate the addition made by the A.O. Assessee appeal allowed.
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2024 (3) TMI 945
Revision u/s 263 - PCIT order of revision based on the audit objection - borrowed information or independent application of mind by CIT - HELD THAT:- The bench noted the ld. PCIT has raised four issues, on four issue the ld. AO has raised the issue, the assessee submitted the reply and the ld. AO has taken a plausible view on the matter. AO taken a view based on the submission made by the assessee which the ld. PCIT merely based on the audit objection and PCIT s observation that the view taken by the ld. AO on which the ld. PCIT is not in agreement cannot hold the order liable to be sustained PCIT based on the borrowed information and has not established as to how the view taken by the ld. AO is not correct when the issue raised has already been form part of the proceeding before the ld. AO. Based on the discussion so recorded we are of the considered view that the proceeding initiated u/s. 263 is merely based on the audit objection, PCIT is not agreement with the ld. AO and the observation on the stock, in the audit report already filed by the assessee. Thus, there is clear absence of his satisfaction and there is no independent view of the ld. PCIT even on merits thus, the assessee which has been completed there cannot be the second inning to the revenue without justifying the twin condition to the order passed by the ld. AO. We note that on all the four issue the AO has called for the details, examined the issue and the plausible view on the matter is taken. Merely there is an audit objection, adverse remark of the auditor and the ld. PCIT is not in agreement with the view of the AO the order cannot be sustained as liable to quash as the twin condition provided u/s. 263 that the order should be erroneous and prejudicial to the interest of the revenue fails and therefore, we do not agree with the finding of the ld. PCIT wherein he could not point out any mistake / error in order which is prejudicial to the interest of the revenue. The AO while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue - See MANNA TRUST, [ 2022 (1) TMI 693 - RAJASTHAN HIGH COURT] wherein as held Jurisdiction of the Commissioner under Section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal. As proceeding initiated u/s. 263 is merely based on the audit objection, PCIT is not agreement with the ld. AO and the observation on the stock, in the audit report already filed by the assessee. Thus, there is clear absence of his satisfaction and there is no independent view of the ld. PCIT even on merits - Decided in favour of assessee.
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2024 (3) TMI 944
Exemption u/s 11 - Charitable activity u/s 2(15) - AO has rejected the exemption on the ground that the activity of the assessee for advancing the object of general public utility cannot be accepted as the society is advancing the object of general public utility and gross receipt of assessee from such activity was more than Rs. 10 lakhs, in the previous year and therefore the activities of the assessee were held to be not for charitable purpose - assessee submitted that the assessee is registered u/s 12A - HELD THAT:- We find that the assessee is registered u/s 12A and has derived income by way of contributions from the head office, membership fee, income from publication of Indian Foundry journal , other grants and donations etc. besides receiving interest on fixed deposits . We find that undoubtedly the assessee s main object is general public utility which is clearly covered u/s 2(15) of the Act however the receipts from the said activity is more than 10 lakh and now the issue before us where surplus generated from the said activity is meager so that it does not fall within the ambit of proviso to Section 2(15) of the Act. We note that profit on the receipts is very meager and therefore the decision of Co-ordinate Bench in the case of Indian Chamber of Commerce ( 2014 (12) TMI 256 - ITAT KOLKATA ) is clearly applicable We are inclined set aside the order of ld. CIT(A) and further uphold that the assessee is entitled to exempt u/s 11 of the Act during the year on the ground that the profit derived from the services rendered as public utility service is very meager. The AO is directed to allow the exemption u/s 11 of the Act. Appeal of the assessee is allowed.
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2024 (3) TMI 943
TP Adjustment - assessee has issued the corporate guarantee on behalf of AE s - TPO has applied the interest saved approach i.e. interest saved by the AE s on account of corporate guarantee given by the assessee and based on this approach the TPO has computed the guarantee fees in the hands of the assessee @ 75% of interest saved - HELD THAT:- After giving a thoughtful consideration to the orders of the coordinate Bench for earlier AYs we are of the considered view that the basis of interest split benefit between guarantor and borrower is 50:50 basis, therefore, we direct the AO to restrict the addition by splitting the interest benefit for the year under consideration on 50:50 basis. In our considered view whatever mistake which has happened inadvertently in earlier years cannot be allowed to perpetuate indefinitely. Considering the fact that the coordinate Bench has principally decided the split on 50:50 basis. Ground 1-5 allowed. TP adjustment on account of royalty - TPO/ CIT(A) held charge of brand royalty of 0.75% in the case of Dabur International Limited and 2% composite royalty in case of Asian Consumer Care Ltd. - HELD THAT:- Following the aforesaid decision of the ITAT in assessee's own case 2022 (10) TMI 219 - ITAT DELHI ] A.Y. 2010-11 we direct that in case of Dabur Nepal (P) Ltd., royalty is quantified at nil, the case of Dabur International UAE, royalty is quantified at 0.75% of FOB sales. Disallowance on account of delay in deposit of ESI / EPF - HELD THAT:- This issue is now squarely covered in favour of the revenue and against the assessee by the decision of Check Mate Services Private Limited [ 2022 (10) TMI 617 - SUPREME COURT ] Addition u/s. 43B based on audit report - HELD THAT:- As seen from the chart the liability as on the first day of the previous year was Rs. 227754220/- out of which Rs. 160073926/- were paid during the year and Rs. 67156645/- was not paid during the year which means that this amount was never charged to the P L account, therefore, there is no question of any disallowance. We have verified from the computation of income and we are of the considered view that there is no need of addition which we direct the AO to delete. Addition for change of accounting policy - HELD THAT:- In the computation of income the assessee has made addition on account of instrumeny hedging adverse currency fluctuation against of balance sheet exposer in FG Rs. 52,93,552/- which means the assessee has already added the loss and that there was no need of any further addition by the AO. We accordingly direct the AO to delete the addition. Deduction as capital subsidy on statutory exemption from payment of excise duty - HELD THAT:- Respectfully following the decision of the Coordinate Bench in [ 2021 (2) TMI 1250 - ITAT DELHI ] for A.Y. 2008- 09 we hold accordingly and direct the AO to decide the issue fresh after affording a reasonable and adequate opportunity of being heard to the assessee. Notional interest imputed on trade receivables - assessee interalia raised invoices on account of sales made to its associates enterprises - TPO recharacterized the delay in receipt of receivables as deemed unsecured loans advanced to the AE and sought to impute notional interest on the delay in receipt of receivables @ 12.65% and made addition - CIT(A) accepted it to be an international transaction but since no interest was charged on receivables due from unrelated parties, the CIT(A) deleted the addition - HELD THAT:- We find that an identical quarrel was considered by this Tribunal in assessee s own case [ 2022 (10) TMI 219 - ITAT DELHI ] in A.Y. 2010-11 and 2011-12 wherein held as not in agreement with the submission of Ld. DR. It is no doubt that after the amendment, receivables are an international transaction which needs to be benchmarked separately but as rightly pointed out by the ld. CIT(A) above that margin of the assessee both in FMCG and non-FMCG segment is much higher than the comparables. Hence, since benchmarking under both the segments has been accepted in the transfer pricing, we do not find any infirmity in the order of ld. CIT(A) that there is no reason to separately benchmark receivables. Direction to re-compute the deduction 80IB and 80IC of the Act without further allocation of the head office expenses - HELD THAT:- CIT(A) following the principal of consistency followed the order of his predecessor for the assessment year 2007-08 2008-09 [ 2021 (2) TMI 1250 - ITAT DELHI ] 2009-10 [ 2017 (12) TMI 934 - DELHI HIGH COURT ].wherein as find no infirmity in the order of the CIT(A) reversing the action of the AO in allocating the head office expenses and depreciation to various eligible units for the purpose of recomputing the deducting u/s 80IB/80IC. The factual finding of the ld.CIT(A) that the assessee has added back the depreciation as per Companies Act, 1956 and claimed depreciation as per the Income-tax and, therefore, the AO was wrong in allocating the difference of depreciation available under the Companies Act and the Income-tax Act to the eligible units could not be controverted by the ld. DR. Similarly, the ld. DR also could not controverted the factual finding given by the CIT(A) that expenses aggregating to Rs. 1,563.02 lakhs being head office expenses were suo motu disallowed by the assessee and added back in the computation of income and once these expenses were claimed by the assessee the same cannot be allocated to the eligible units for computation of deduction u/s 80IB/80IC and, therefore, cannot be allocated to the eligible units. Addition made u/s. 14A r.w.r. 8D - Exempt income earned or not? - HELD THAT:- The facts on record show that the assessee has not earned any exempt income during the year under consideration, therefore, the ratio laid-down by the Hon ble High Court of Delhi in the case of Cheminvest [ 2015 (9) TMI 238 - DELHI HIGH COURT ] and Cortech Energy Limited.[ 2014 (3) TMI 856 - GUJARAT HIGH COURT ] squarely apply and respectfully following the same no interference is called for ground No.7 is also dismissed. TDS u/s 194H - Addition u/s. 40(a)(ia) - assessee has incurred an expenditure on account of bank guarantee commission/ fee for alleged failuer to deduct tax at source - HELD THAT:- We find that the issue is squarely covered by the decision of Hon ble Jurisdictional High Court of Delhi in the case of JDS Apparels [ 2014 (11) TMI 732 - DELHI HIGH COURT ] wherein the Hon ble Court has held that amount charged by bank as a fee for rendering banking services to its client could not be treated as commission or brokerage u/s. 194H of the Act. Deduction u/s. 80G - assessee has claimed deduction being 50% paid as donation to various trust/ organizations - AO denied the claim of exemption holding that the organizations did not have valid 80G certificates - When the certificates were produced before the CIT(A) he refused to admit the same as they were not produced before the AO - HELD THAT:- We are of the considered view that the CIT(A) ought to have admitted the evidences. In the interest of justice and fair play we restore this issue to the files of the AO. The assessee is directed to furnish the certificates of eligibility and the AO is directed to consider the same and decide the issue as per the provisions of the law.
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2024 (3) TMI 942
TP Adjustment - bilateral Advance Pricing Agreement (APA) between India and the USA - international transaction pertaining to receipt of information technology enabled services and payment towards K-Net charges - whether international transactions between the Applicant and its AEs as Covered Transactions? - HELD THAT:- As the year under consideration is covered under the APA [bilateral Advance Pricing Agreement [APA] between India and USA, the assessee filed its modified return of income which we have been told has been processed. Since the modified return of income is now available with the AO, we deem it fit to restore the impugned quarrel to the file of the Assessing Officer. The Assessing Officer is directed to consider the modified return of income in light of APA and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. Accordingly, Ground No. 1 with all its sub-grounds is allowed for statistical purposes. Foreign Tax Credit - HELD THAT:- HCL Comnet Systems And Services Ltd [ 2023 (11) TMI 1238 - DELHI HIGH COURT] has decided the issue in favour of the assessee as relying on Wipro Ltd. case [ 2015 (10) TMI 826 - KARNATAKA HIGH COURT ] Short credit of TDS - HELD THAT:- We are of the considered view that this issue needs verification and we direct the Assessing Officer to verify the details of TDS and allow credit as per provisions of law. Ground No. 5 is allowed for statistical purposes.
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2024 (3) TMI 941
Application for final approval u/s 80G(5)(iii) - time limit prescribed for making an application for final approval u/s 80G - as per revenue assessee had already commenced its activities since long even prior to grant of provisional registration, and since the time period for making application mentioned in Clause (iii) to First Proviso to section 80G(5) of the Act had already expired, therefore, the assessee could not be granted final registration u/s 80G(5) - HELD THAT:- CBDT has extended the date upto 30.09.2023 for making application under Clause (i) to First Proviso to section 80G(5) of the Act, which means that the institutions, which were already registered prior to the amendment brought to section 80G(5) by Amendment Act of 2020 w.e.f. 01.04.2021, if an institution for some reasons could not make an application for renewal/continuance of registration under Clause (i) to First Proviso to section 80G(5) of the Act within the stipulated period of three months, it could still apply under Clause (i) upto 30.09.2023. Once an institution has applied under Clause (i) to First Proviso to section 80G(5) of the Act on or before 30.09.2023, it will be further governed by the statutory provisions of Clause (iii) of First proviso to section 80G(5) of the Act and not by the CBDT Circular for the purpose of limitation. CBDT Circular is for extension of date to help the institutions which could not apply under Clause (i) within stipulated period of three months, and not for curtailing limitation or barring institutions for final registration under Clause (iii) to First Proviso to section 80G(5) of the Act. For making application for final registration under Clause (iii) to First Proviso to section 80G(5) of the Act, the institution must have been provisionally registered either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act. If the view of the ld. CIT(Exemption) is accepted to be correct, then no institution which has already been into charitable activities before seeking provisional approval under Clause (iv) to First Proviso to section 80G(5) of the Act would ever be entitled to grant of final registration under Clause (iii) to First Proviso to section 80G(5) of the Act even after grant of provisional approval, which would make the relevant provisions of section 80G(5) otiose and defeat the object and purpose of these statutory provisions. As held that after grant of provisional approval, the application cannot be rejected on the ground that the institution had already commenced its activities even prior to grant of provisional registration. Thus the date of commencement of activity will be counted when an activity is undertaken after the grant of provisional registration either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act. In the case in hand, the assessee admittedly has applied for final registration after grant of provisional registration under Clause (iv) to First Proviso to section 80G(5) of the Act and therefore, the application filed by the assessee is within limitation period. The issue is otherwise squarely covered by the decision of Vivekananda Mission Asram [ 2023 (12) TMI 1298 - ITAT KOLKATA] and in the case of West Bengal Welfare Society [ 2023 (9) TMI 1422 - ITAT KOLKATA] and Sri Aurobindo Bhawan Trust, Krishnagar vs. CIT(Exemption) [ 2024 (3) TMI 839 - ITAT KOLKATA] - Therefore, the impugned order of the CIT(Exemption) is set aside and the ld. CIT(Exemption) is directed to grant provisional approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act, if the assessee is otherwise found eligible. The ld. CIT(A) will decide the application for final registration within three months of the receipt of copy of this order. Appeal of the assessee is treated as allowed for statistical purposes.
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2024 (3) TMI 940
Penalty u/s. 271B - penalty u/s. 271A has been levied as assessee has not audited his book of accounts as per the provisions of section 44AB - HELD THAT:- It is a settled proposition of law that once the penalty has been levied u/s. 271A of the Act for non maintenance of books of accounts, then penalty u/s. 271B of the Act cannot be levied. See Varadagovind Parthasarthy Iyer [ 2023 (8) TMI 1444 - ITAT MUMBAI] . Once the penalty u/s. 271A has been levied for non maintenance of books of accounts, no penalty u/s. 271B of the Act can be levied. This view has been supported by the decisions of various high courts. It is observed that in the present case in hand the ld. A.O. had levied a penalty u/s. 271A of the Act which according to the ld. AR has been accepted and paid by the assessee. As per the decisions cited herein above, we deem it fit to hold that penalty u/s. 271B of the Act cannot be levied in the present facts of the case for non auditing of the books of accounts where the assessee has failed to maintain the same. We hereby direct the ld. A.O. to delete the impugned penalty. Ground no. 1 raised by the assessee is hereby allowed. Penalty u/s. 271(1)(c) - Assessee has concealed the particulars of income during the year under consideration - CIT(A) upheld the penalty vide an ex parte order holding that the assessee has failed to substantiate his claim neither by documentary evidence nor by the submission of the assessee - assessee contended that there has been no variation in the returned and assessed income - HELD THAT:- It is observed that the assessee had filed his return of income in response to notice u/s. 148 of the Act, declaring total income which amounts to business income on the total turnover and commission income which aggregates to Rs. 6,57,615/- out of which the assessee had claimed deduction of Rs. 15,970/- under Chapter VIA of the Act. A.O. in the assessment proceeding had accepted the return of income filed by the assessee and determined the total income without any variation between the returned and the assessed income From the above observation, we deem it fit to hold that as there has been no variation in returned and the assessed income, there could not be any possibilities of the assessee concealing the particulars of income which could attract the provision of section 271(1)(c) of the Act. We hereby deem it fit to direct the ld. A.O. to delete the impugned penalty levied u/s. 271(1)(c) of the Act. Hence, the grounds raised by the assessee are hereby allowed.
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2024 (3) TMI 939
Deduction u/s 80IC - Claim denied on the ground that the audit report in Form No.10CCB was not filed within the due date - assessee pleaded that there are case laws for the proposition that if Form 10CCB is filed during the course of assessment before the final order the deduction is to be allowed - HELD THAT:- The due date of filing of return in this case was 07.11.2017. The return was filed on 29.08.2017 and the Tax audit report was also filed on 28.10.2017 and Form 10CCB on 28.05.2018. The return was processed under section 143(1) of the Act on 08.02.2019 We find that in this case, Form 10CCB was filed before the intimation u/s 143(1) dated 08.02.2019. In these circumstances, the case laws point out that deduction is to be allowed. See G.M. KNITTING INDUSTRIES (P.) LTD. AKS ALLOYS (P.) LTD. [ 2015 (11) TMI 397 - SC ORDER] wherein held that even if form 3AA was not filed along with return of income but the same was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance. Also see GREEN DOT HEALTH FOODS PVT. LTD. [ 2023 (2) TMI 516 - ITAT DELHI] - Appeal of the assessee stands allowed.
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Customs
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2024 (3) TMI 938
Seeking rectification of an alleged mistake - error apparent on the face of record or not - submission in the applications is that this Tribunal committed an error because this Tribunal was competent to decide but had not decided the question of jurisdiction - HELD THAT:- These applications seeking rectification of mistake are misconceived. The appellants were represented by a learned counsel who made submissions on their behalf. Needless to say, that when a learned counsel makes submissions, the court has to presume those to be on the instructions of the appellants. After arguing the appeal on merits and partly succeeding and partly failing in the appeal, the appellant then decided to hire a new counsel to find fault with the submissions made by the previous counsel and further alleging that this Tribunal committed a mistake in proceeding on the basis of the submissions made by the previous counsel. It is also incorrect to say that this Tribunal did not follow the directions of the High Court and had not applied its mind on the question of jurisdiction. It had not only applied its mind but also recorded in paragraphs 1 and 2 of the Final Order the question of jurisdiction not only with respect to the judgment in M/S MANGALI IMPEX LTD., M/S PACE INTERNATIONAL AND OTHERS VERSUS UNION OF INDIA AND OTHERS [ 2016 (5) TMI 225 - DELHI HIGH COURT] , the review petition filed by the Revenue and the further retrospective amendments made by Finance Act, 2022. Considering the judgments and the subsequent amendments, if it has to be decided if the officer issuing the SCN had jurisdiction or not in this case, it can only be done on the basis of the submissions made by both sides. Both sides did not want to press the question of jurisdiction and therefore the matter was decided on merits and it was decided so. The Tribunal can rectify if there is a mistake apparent on record. In this case, there are no mistake at all in Final Order, let alone, an error apparent on record. Therefore, the applications deserve to be dismissed and are dismissed.
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2024 (3) TMI 937
Recovery of duty foregone - non-installation of the capital goods and consequent non-fulfilment of post-importation condition - It is the contention that the capital goods had not been installed within the prescribed time period and that the export obligation could not, therefore, have been fulfilled - HELD THAT:- It is on record that the capital goods were found to have been installed at premises other than that indicated in the licensing documents. It was held in the impugned order that, though the rent agreement for the said premises had been produced, documents evidencing shift of the capital goods was neither available nor furnished by the appellant. The imports had been permitted, and duty had been foregone, subject to condition that export obligation would be completed within six years. It is also on record that the licensing authority had extended the time-period for effecting the installation which, in effect, re-scheduled the date by which the export obligation would have to be fulfilled. There is nothing available on record to indicate that, after such installation, as claimed by the appellant in application for relaxation of time for fulfillment had been preferred, exports had been undertaken. It would also appear to us that the deferment of time for installation does not, of itself, re-schedule the deadline for completion of export obligation. The imports had been effected in October 2012 and December 2012 with post-import fulfilment of the export obligation by 2018. In the facts and circumstances of fulfilment of export obligation not having been evinced and the stipulated deadline prescribed in the authorisations not adhered to, the confirmation of duty liability, equal to the duty foregone, would appear to be reasonable. However, there is no finding on the entitlement for depreciation in proportion to the export performance established from the records. This would have a bearing on the other consequences under Customs Act, 1962. The rectification of that want requires that the impugned order be set aside and matter remanded back to the original authority for fresh decision after consideration of the facts and circumstances including evidence of exports undertaken by deployment of the said capital goods that may be furnished by the appellant herein. The appeal is disposed off by way of remand.
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2024 (3) TMI 936
Classification of goods - Nutrition/Dietary Supplements classified under Tariff item 21069099 attracts IGST at the rate of 18 % under serial No. 453 and/or 23 of Schedule III of Notification No. 1/2017- Integrated Tax (Rate) dated 28-06-2017 as claimed by the appellant or the said goods is covered under serial No. 9 of Schedule IV of the said notification which provided for IGST at the rate of 28% as claimed by the Revenue? - HELD THAT:- The case of the department is that since goods are covered under Serial No. 9 the same will not fall under either Serial No. 453 or 23 of Schedule III, which is absolutely incorrect. Other than the specified goods covered under Serial No. 9 all other goods fall under Serial No. 453 and/or 23 of any chapter falls under the discerption given therein. We find that the Adjudicating Authority has not given any heed to a vital fact that discerption mentioned in serial No. 9 is only for some specific items which does not cover the goods of the present case. Therefore, the appellant s goods does not fall under Serial No. 9. Accordingly, the Serial No. 453 and/or 23 of Schedule III is the correct entry where the appellant s goods fall. Hence, the correct rate of IGST applied by the appellant i.e. 18% is correct and legal. The identical issue has been considered by this Tribunal in the case of NEUVERA WELLNESS VENTURES P. LTD. VERSUS C.C. MUNDRA [ 2023 (10) TMI 964 - CESTAT AHMEDABAD] wherein it was held that From tariff entry of 2106, it can be seen that the entry covers various food preparation not elsewhere specified or included. However, out of the many items provided under tariff item 2106, the serial No. 9 described only some of those goods. This also establish that Serial No. 9 is not a general entry which covers entire entry of 2106 but only some of the goods which are specified in the description of goods are provided under serial no. 9 of Schedule IV,. This fact also strengthens the claim of the appellant that their goods are not covered under serial no. 9 of the schedule IV of Notification 1/2017-IGST-Rate and correctly falls under Serial No. 453 according to which the rate of IGST is 18%. The appellants have correctly declared their goods under Serial No. 453 and/or 23 of Schedule III of Notification No. 1/2017- Integrated Tax (Rate) which attracts 18% of IGST. Therefore, the impugned order is not sustainable. The impugned order is set aside. Appeal is allowed.
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2024 (3) TMI 935
Classification of imported goods - defatted coconut - to be classified under CTH 08011990 or under CTH 23065020? - Benefit of Notification No.50/2017- Customs dated 30.06.2017 Sl. No. 114 - HELD THAT:- As per the first test report dated 11.11.2020, oil content is 46.8% and it confirm to the FSSAI (Food Products Standards and Food Additives) standard of defatted coconut. There is no reason given in the impugned order-in-original to discard the said finding. Thereafter another set of sample were drawn and sent to Coconut Development Board. Vide report dated 08.12.2020, they have also classified that sample submitted is defatted coconut and oil content was 45.51%. Alleging that the said report was not clear about the parameter for identifying the defatted and desiccated coconut, on further query was made and they have confirmed that as per Codex committee there is no difference between defatted and desiccated coconut. The adjudicating authority proceed with technical standards for desiccated coconut as per CODEX standard (CODEX STAN 177-1991) and concluded that goods which was defatted coconut is low fat desiccated coconut classifiable as under CTH 08011110. Such presumption is drawn on conclusion that to bring the goods under CTH 2306, oil should have removed from them and in the nature of residues material suitable for any subsequent use after there primary use in food industry. Such finding is arrived without considering the standard prescribed by the FSSAI and only based on the standard of Codex. Such method adopted by the adjudicating authority for classification of food articles is prima facie unsustainable. Moreover, Revenue is not disputing the fact that similar goods are being imported through Chennai port. There is no infirmity in the order issued by the Commissioner (Appeal) - Revenue is directed to classify the goods as per the declaration made by the respondent by extending the benefit of notification as applicable - Appeal dismissed.
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2024 (3) TMI 934
Valuation of imported goods - Cement Carrier ship - rejection of transaction value - redetermination of value - inclusion of handling charges, transportation, cost of insurance and landing charges in assessable value - failure to declare the value of Bunkers on board at the time of delivery at Colombo. Mis-declaring the value of ship by not adding value of transportation, cost of insurance and lending charges - failure to declare the value of Bunkers on board at the time of delivery at Colombo - HELD THAT:- In the present case, though the invoice value of Rs. 26,91,00,000/- was declared at the time of import, as per the prevailing practice, at the request of appellant, it was subject to valuation by Chartered Engineer and as per the valuation report, chartered engineer assessed the value of ship as Rs. 27,00,00,000/- and based on the above said value, it was allowed to clear on payment of proper Custom duty. Now in addition to that, adjudicating authority is adding 20% as cost of transportation, handling charges of 1.125% and 1% of assessable value for confirming demand of Rs. 30,31,174/- - The inclusion of freight and insurance in the assessable value in commercial parlance, is designated as CIF in transactions. The vessel, ever coursing the seas and oceans, does not take on additional insurance merely for the purposes of movement to a destination for registration and the cost of self-propulsion does not add to the value of the vessel. Moreover as per the estimated voyage cost produced by the appellant, they have added cost of Rs. 1,70,595/- towards cost of voyage and other expenses for the fuel from Colombo to Mangalore Port and paid customs duty. Consequently, the enhancement of assessable value beyond the value assessed by Chartered Engineer fails on every count. Adding the cost of Bunkers, based on the balance quantity of Bunkers at Mangalore port - HELD THAT:- The issue is squarely covered by the judgment of the Hon ble Supreme court in the matter Mangalore Refinery Petrochemicals Ltd. Vs. CC, Mangalore, [ 2015 (9) TMI 245 - SUPREME COURT] where it is held that the quantity actually received into the shore tank in port in India should be the basis for payment of Customs duty, being the goods imported into India. Considering the law laid down by the apex court, demand of duty for the balance quantity of Bunkers available in Colombo at the time of delivery of the ship cannot be added towards the cost of Bunkers. Regarding value, as per the request of the appellant, Chartered Engineer carried out survey and as per the report No. AR/016/2011-12 dated 09.05.2011, value assessed the as Rs 27 Crores. Hence this appeal is allowed by accepting the assessable value of the goods as Rs. 27 Crores and additional demand of customs duty against cost of transportation, insurance and handling charges as demanded in the impugned order is set aside - Since there is no suppression of fact, confiscation of the ship and fine and penalty imposed by the adjudicating authority is set aside. The impugned order modified to the extent of confirming assessable value as Rs. 27 Crores. Appeal allowed in part.
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2024 (3) TMI 933
Valuation of imported goods - Unwrought / Unrefined Zinc - enhancement of value - rejection of transaction value - demand of additional duty on the basis of NIDB data for primary Zinc ingots - contemporaneous imports or not - HELD THAT:- The Department has rejected the transaction value and redetermined the same on the basis of LME price considering the percentage of Zinc content in the consignments in terms of the Test Report of CRCL, Kolkata. As per the Test Report, the Zinc content in Bill-of-Entry No. 4533688 dated 10.03.2016 was 87.80% and the Zinc content in Bill-of-Entry No. 8650713 dated 19.03.2015 was 92.50%. The Ld. Authorized Representative appearing for the Revenue was asked to furnish a copy of both the Test Reports. However, the Ld. Authorized Representative could not submit a copy of the Test Report for the Bill-of-Entry No. 8650713 dated 19.03.2015. It is observed that the percentage of Zinc should be above 92% in Zinc dross . Only in the Bill-of-Entry No. 8650713 dated 19.03.2015, the Zinc percentage was found to be more than 92%. However, no such report has been produced by the Department to substantiate this claim. In the absence of a Test Report, it cannot be considered that the percentage of Zinc content in the goods imported by the respondent was above 92%. In respect of the other Bill-of-Entry No. 4533688 dated 10.03.2016, the percentage of Zinc content was found to be only 87.80%, which is less than 92%. Accordingly, these goods cannot be considered as Zinc dross which are restricted as per the Foreign Trade Policy. The Department has not brought any evidence on record to substantiate their claim that the percentage of Zinc content in both the Bills-of-Entry was more than 92% so as to classify the same as Zinc dross . Accordingly, there is no infirmity in the impugned order passed by the Ld. Commissioner (Appeals) and therefore, the impugned order passed by the Ld. Commissioner (Appeals) is upheld. The appeal filed by the Department is rejected.
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2024 (3) TMI 932
Smuggling - Betel Nuts - foreign origin goods - town seizure - notified item or not - onus to prove - HELD THAT:- It is a case of town seizure of betel nuts which is not a notified item under Section 123 of the Customs Act, 1962. Therefore, the onus to prove that the betel nuts are a smuggled one is on the Revenue. At the time of interception, the appellant has produced documents pertaining to procurement of the said betel nuts through proper channel. In that circumstances, we hold that the Revenue has failed to discharge their onus to prove that the goods impugned are a smuggled one or of foreign origin. As Revenue has failed to discharge their onus that the goods in question are a smuggled one, in these circumstances, the confiscation of the impugned goods is not sustainable in the eyes of law and therefore, confiscation of the impugned goods is set aside. As the goods are not liable for confiscation, consequently no penalty is imposable on the appellants. The impugned order set aside - appeal allowed.
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Insolvency & Bankruptcy
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2024 (3) TMI 931
Validity of declaring of the respondent as a Secured Creditor - retention of shares held as security - primary grievance of the petitioner is that the NCLT ought to have decided the Liquidator s application under Section 25 of the Insolvency and Bankruptcy Code (IBC), 2016 prior to deciding the application under Regulation 21-A of the IBBI (Liquidation Process) Regulations, 2016 - direction to hand over the share certificates - HELD THAT:- The provisions of Regulation 21-A of the 2016 Regulations are to be examined. Clause (1) of the same provides that a Secured Creditor shall inform the Liquidator of its decision to relinquish its security interest to the liquidation estate or realize its security interest as the case may be. Alliance has filed a Form-D application expressing its interest to realize its security interest. The Liquidator, upon expiry of 30 days from the liquidation commencement, Alliance having not intimated its decision, filed the application under Regulation 21-A for presuming the assets covered under the security interest to be part of the liquidation estate - irrespective of the claim of Alliance to the pledged shares being sub judice in a separate suit, the fact remains that the effect of the order under Regulation 21-A is that the assets covered under the security interest that is the said shares, are presumed to be part of the liquidation estate. By virtue of the order passed under Regulation 21-A treating the assets covered under the alleged security interest of Alliance (the shares-in-question) to be part of the liquidation estate, the interest of the secured creditors, be it the petitioner or others, cannot be adversely affected in any manner; rather, such order can only enure to the benefit of the secured creditors. The effect of the order is that, despite the claim of security interest of Alliance in the said shares, those are made a part of the liquidation assets, thereby subjecting the sale proceeds obtained after sale of such shares to the rigours of Section 53 of the IBC - Section 53 provides the order of priority for distribution of the proceeds from the sale of the liquidation assets. If the shares are treated to be liquidation assets and are sold as such, the proceeds from the said sale will be a part of the hotchpot of the liquidation assets and will be distributed in terms of Section 53 where the secured creditors will get their dues in accordance with the order of priority stipulated therein. The petitioner claims to be a secured creditor and, hence, could only be benefited, and not suffered, from the order under Regulation 21-A. There are no irregularity in the order impugned herein. Since the Liquidator s repeated efforts directing Alliance to hand over its shares failed, Section 25 of the IBC has been rendered academic. Section 25, it is to be noted, does not envisage any adjudication of the rights of a secured creditor to any of the assets. Only if a secured creditor in the liquidation proceedings realizes its security interest in the manner specified in section 52 of the IBC, under sub-section (1)(b) of the said Section, he shall inform the Liquidator of such security interest and identify the assets subject to such security interest to be realized, as per the provisions of sub-section (2) of Section 52 - the scope of an adjudication of the security interest during a liquidation process is provided only in Section 52(3). If Alliance had succeeded in having its way under Section 52(1)(a), it would not be the bounden duty of the Liquidator to adjudicate on the said rights under sub-section (3) of Section 52. However, since such bid of Alliance has failed by way of the impugned order under Regulation 21-A, presuming the shares-in-question to be a part of the liquidation asset and directing sale thereof, there cannot arise any question of such adjudication, since, in any event, the shares become a part of the liquidation estate, sufficiently subserving the interest of all secured creditors, including the petitioner (who claims to be a secured creditor), who would be getting their dues in order of priority under Section 53 of the IBC. The petitioner cannot claim to have been aggrieved in any manner, as the order passed under Regulation 21-A did not adjudicate on the rights of Alliance in respect of security interest to the disputed shares. Rather, the Liquidator has rightly submitted that the said shares would be shown in the auction sale to be subject to the pending suit. The argument of the petitioner that the order is devoid of reasons is entirely misplaced. In the absence of any adjudication on the issue of Alliance s rights to the pledged shares, there arises no question of any reason being provided for such non-existent adjudication - there is no scope of interference in the present writ petition. Petition dismissed.
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2024 (3) TMI 930
Rejection of transfer application - proceedings were initiated by the Financial Creditor under Section 7 which proceedings were initially admitted and the application to recall the said order was rejected - HELD THAT:- The facts indicate that the order of admission of the CIRP and the order rejecting the application of the Corporate Debtor for recall of the order was set aside by this Tribunal on 26.09.2023 and thereafter Section 7 proceedings revived before the Adjudicating Authority to be proceeded and decided in accordance with law. There can be no dispute to the preposition of law that mere apprehension of bias is sufficient for transfer of a proceeding. The question is as to whether the facts and sequence of the events in the present case reflect any apprehension of bias. Having adverted to the submission and facts and sequence are fully satisfied that neither there is bias reflected nor any apprehension of bias which can be imputed the Bench hearing the matter. In the impugned order, Hon ble President has looked into the submission and has rejected the application for transfer in which there are no error. Appeal dismissed.
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2024 (3) TMI 929
Liability to contribute towards Liquidation Process Costs - scope of Financial Institution - Appellant points out that neither the Appellant nor the Debenture Holders, it acts on behalf of the fall within the definition of Non-banking Institution, under Section 45-I(e) of the RBI Act and hence, not liable to contribute towards Liquidation Costs - HELD THAT:- As a matter of fact, in view of the rejection of the Resolution Plan, by the Members of the Committee of Creditors, and in view of the CIRP Period, expiring on 17.02.2020, the Resolution Professional, preferred an Application, as per Section 33(1) of the Code, seeking Liquidation of the Corporate Debtor. The Adjudicating Authority / Tribunal, by an Order dated 13.03.2020, passed an Order of Liquidation, for the Corporate Debtor. Also that, the Adjudicating Authority, had appointed the 1st Respondent / Liquidator as Liquidator, through an Order dated 13.03.2020. The 1st Respondent / Petitioner / Liquidator, had informed the 3rd Respondent / Phoenix ARC Private Limited, through letter dated 26.08.2020, their respective Share of Liquidation Costs of Rs.36,74,771/-, (which includes, the approved Liquidation Costs and Liquidator Fee) and requested to remit their respective Share as a whole or at least 30% within 5 days, from the issuance of the Letter. In fact, the 1st Respondent / Petitioner / Liquidator, had provided the Liquidator s Fee Estimate, as per Letter dated 26.08.2020, as per Regulation 4(2)(b) of the Liquidation Process Regulations, 2016 - It is represented on behalf of the 1st Respondent / Petitioner / Liquidator that any delay, in depositing the Liquidation Costs by the Respondents, is delaying the Liquidation Process and the Liquidator, is unable to perform his duties, as mandated under the I B Code, 2016. Petition is filed in a Bona fide manner, and in the interest of Justice, the said Application, may be allowed by issuing necessary directions to the Respondents, to forthwith defray the portion of Liquidation Process costs, as per Regulation 2A of the IBBI (Liquidation Process) Regulations. The filing of a Certified Copy (Paid Cost Copy), is not an empty ritualistic formality, in the considered opinion of this Tribunal. It cannot be gainsaid that only when the Petitioner / Appellant / Aggrieved Party, applies within the prescribed period of Limitation, as envisaged, under Section 61 (2) of the Code, the time taken to secure the Certified Copy, will be excluded from the Computation of Period of Limitation - In terms of Rule 22(2) of the NCLAT Rules, 2016, a Certified Copy of the Impugned Order, shall accompany every Appeal to be filed, before the Office of the Registry. Only in a Paid Certified Copy, by an Aggrieved Party, the details Viz. when the Application for Certified Copy of the Impugned Order was made by the Applicant, when it was made ready, when it was handed over / taken delivery, etc., will find a place, ofcourse, duly signed by the Deputy / Asst. Registrar of the Adjudicating Authority / Tribunal. Considering the entire conspectus of the attendant facts and circumstances of the instant case, in an encircling manner, comes to an irresistible conclusion that the Impugned Order, dated 25.05.2023 in IA No. 399 / BB / 2020 in CP (IB) No. 189 / BB / 2018, passed by the Adjudicating Authority / NCLT, Bengaluru Bench, in directing the Appellants, 1st Respondent and two other Respondents, to Defray their portion of Liquidation Process Costs, is free from any legal infirmities. Appeal dismissed.
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2024 (3) TMI 928
Admission of section 7 application - financial debt owed by the Corporate Debtor or not - default was committed by the Corporate Debtor in not carrying out the construction due to interim order or not. Whether Grandstar Reality Pvt. Ltd., auction purchaser under SARFAESI Act, 2002, on 17.06.2016/ 19.07.2016 can be held to be Financial Creditor of the Respondent allottees, who were issued allotment letters/ Builder Buyers Agreement by Akme Projects Ltd. (the predecessor of the Corporate Debtor)? - HELD THAT:- The definition of Financial Creditor means that any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. The crucial word in the definition is any person to whom a financial debt is owed becomes a Financial Creditor. Further, the expression includes a person to whom such debt is legally assigned or transferred to is only incidence of further elaboration of person to whom the financial debt is owed. In the facts of the present case, there can be no denying that financial debt, which was owed by Akme to the allottees is now the debt owed by Grandstar Reality Pvt. Ltd. The Grandstar Reality Pvt. Ltd. is fully covered by the definition of Section 5, sub-section (7), who owed the debt towards the allottees. The financial debt can be owed in more than one manner. Assignment or transfers are two modes, which has been expressly included in the definition. In cases of amalgamation and demerger under the Companies Act, 2013 of a Corporate Debtor with another entity is obviously considered as Corporate Debtor on account of transfer/ vesting of assets and liabilities to the amalgamated/ transferee Company. Transferee Company cannot be permitted to escape the rigours of the Code by claiming that disbursement was not done to it directly. In the present case, where Grandstar Reality Pvt. Ltd. has taken over the Project under the SARFAESI Act, cannot escape the rigours of the Code and defeat the rights of the homebuyers under the Code - there is a financial debt and the filing of the Application by the allottees under Section 7 cannot be faulted on this ground. Whether no default was committed by the Corporate Debtor in not carrying out the construction due to interim order passed by the Hon ble Supreme Court in Rameshwar and Ors. vs. State of Haryana and Ors. [ 2018 (3) TMI 1964 - SUPREME COURT] , M/s Akme Projects Ltd. vs. YES Bank Anr.Whether no default was committed by the Corporate Debtor in not carrying out the construction due to interim order passed by the Hon ble Supreme Court in Rameshwar and Ors. vs. State of Haryana and Ors.; in M/S. AKME PROJECTS LTD. VERSUS YES BANK LTD. ANR. [ 2016 (10) TMI 1397 - DELHI HIGH COURT] ? - HELD THAT:- The learned Counsel for the Respondent is right in her submission that even in additional affidavit filed on 19.01.2024 by the Appellant, no such facts have been stated, which may indicate that Grandstar Reality Pvt. Ltd. has been taking steps for completion of the Project. In the additional affidavit, the Appellant has placed reliance on letter dated 09.05.2023 issued by Tehsildar in terms of the order No.17/LAC dated 12.04.2023 passed by District Revenue Officer cum Land Acquisition Collector Gurugram. On looking into the said letters/ orders, it is clear that said orders were issued on a request made by one Om Prakash Yadav in the Rameshwar s case. Hence, order of the District Revenue Officer dated 12.04.2023 and letter dated 09.05.2023 by Tehsildar are not relevant for the present case - in the facts of the present case default was clearly proved on the part of the Grandstar Reality Pvt. Ltd. and the findings recorded by the Adjudicating Authority that Section 7 Application is complete and deserved to be admitted, does not warrant any interference. There are substance in the submission of learned Counsel for the Respondent that since the Project has been taken over by the Grandstar Reality Pvt. Ltd. in 2016 and it is now the obligation of Grandstar Reality Pvt. Ltd. to continue the Project, the filing of the claim by the allottees against the CIRP of Akme Project, cannot preclude the allottees from agitating their claim by filing Application under Section 7 against the Grandstar Reality Pvt. Ltd., who has taken over the Project. There is no error in the order of the Adjudicating Authority admitting Section 7 Application. The Appeal is dismissed.
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2024 (3) TMI 927
Seeking impleadment of Successful Auction Purchaser/Appellant as one of the Respondents - HELD THAT:- This Tribunal , makes a pertinent mention that all pleadings exchanged prior to and non-impleadment, to overcome direction issued by the Adjudicating Authority/Tribunal , in regard to impleadment shall not be anyway to be construed that the concerned party had an effective and adequate opportunity to putforth its views/grievances, in terms of the principles of natural justice . This Tribunal , is of the considered view that even though the Adjudicating Authority/Tribunal had observed among other things Liquidator is permitted to start e-auction process afresh allowing the Applicant/Successful Bidder and other persons to participate in the process. It was also submitted that the mistake was bona fide and he is willing to allow the Successful Bidder , to participate with the amount already furnished/deposited and ultimately, proceeded to pass an order, that there will be a fresh auction and the Applicant, Successful Bidder and other persons would be permitted to participate in the fresh e-auction is liable to be set aside, to secure the ends of justice because of the latent and patent fact that the Appellant/Proposed Impleading Party, who was directed earlier by the Adjudicating Authority/Tribunal through its order dated 30.01.2024 to be impleaded as the Appellant/Successful Bidder , as one of the Respondents , was not added as a party as one of the Respondents, this Tribunal is of the considered view that the said omission is a vital one and goes to the root of the matter and affects the impugned order on the file of the Adjudicating Authority/National Company Law Tribunal, Division Bench Court-I, Chennai. Appeal allowed.
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PMLA
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2024 (3) TMI 926
Money Laundering - scheduled offences - cognizance of offence - issuance of summons without conducting an enquiry as prescribed under Section 202 of Cr.PC - petitioner not charged with the predicate offence, still be prosecuted for the offence under the PMLA Act or not - sufficient evidence to establish that the petitioner - accused No. 7. Is it permissible to take cognizance and issue summons without conducting an enquiry as prescribed under Section 202 of Cr.PC? - HELD THAT:- Upon examination of Clause (b) to Sub-Section 1 of Section 44, it is evident that the Special Court, irrespective of the provisions in the Code of Criminal Procedure, possesses the authority to take cognizance of an offence under Section 3 without being committed to trial. In the present case, the complaint was lodged by the respondent, an authorized Officer, and the Special Court can take cognizance without resorting Section 202 of Cr.PC, thus, the argument presented by the learned Senior Counsel for the petitioner, asserting that the issuance of summons violated Section 202 of Cr.PC is untenable. Can the petitioner, who is not charged with the predicate offence, still be prosecuted for the offence under the PMLA Act? - HELD THAT:- In the present case, the scheduled offences are under investigation by the jurisdictional police. Therefore, the petitioner can be subjected to prosecution under the PMLA, if it can be established that the petitioner has prima facie committed an offence under Section 3 of the PMLA. Does the investigation under the PMLA Act provide sufficient evidence to establish that the petitioner - accused No. 7 has prima facie committed the offence alleged? - HELD THAT:- There is no evidence to suggest that the petitioner, who is a payment gateway, had knowledge that the funds transferred to the merchant IDs of accused No. 5 were derived from criminal activity related to a scheduled offence, nor did they knowingly assist accused No. 5 in concealing or transferring illicit proceeds as clean money. Even if we accept the statements from the Director of accused No. 5 and the employee of accused No. 7, at most, it indicates that accused No. 7 was negligent in setting up the merchant IDs in the name of accused No. 5. Intent is essential to constitute an offense under Section 3 of the PMLA. Therefore, the commission amount earned by accused No. 7 cannot be deemed a result of facilitating the illegal money-lending business of accused No. 5, as there is no evidence to establish that accused No. 7 had the intention to commit the crime under Section 3 of the PMLA - When there is no prima facie material to substantiate that the Accused No. 7 knowingly facilitated the transfer of proceeds of the crime, no presumption can be drawn that the Petitioner was involved in money laundering as stated under Section 24, and the burden is on Petitioner to prove otherwise. The complaint averments does not apparently satisfy the essential elements to constitute the offences alleged against the Petitioner, and, therefore the continuation of the criminal proceedings will be an abuse of the process of the law - Petition allowed.
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Service Tax
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2024 (3) TMI 925
Recovery of arrears of tax in terms of Section 124(1)(c) of the Sabka Vishwas (Legacy Dispute Resolution Scheme Rules, 2019 in the Finance Act, 2019 - jurisdiction under Section 74 of the Finance Act, 1994 was invoked to rectify the mistake - HELD THAT:- The power to rectify an order is confined only to remove the error apparent on the fact of record. Therefore, a rectification proceeding under Section 74 of the Finance Act, 1994 cannot be considered to be an appellate proceeding before the Appellate Authority under Section 86 of the Finance Act, 1994 although, proceeding initiated proceeding under Section 74 of the Finance Act, 1994 may also result in reversal of the decision sought to be rectified. There is no merits in the submissions of the petitioner that the case of the petitioner has to be settled in terms of Section 124(1)(a) of Chapter V of Finance Act, 2019 contrary under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. Considering the fact that the petitioner was given a temporary relief by this Court while passing order dated 17.03.2020, the petitioner cannot be denied the benefit of Sabka Vishwas - (Legacy Dispute Resolution) Scheme, 2019 if the petitioner has complied with the said order by depositing Rs. 1,66,83,286/- within a period of two weeks as was ordered. The petitioner shall pay an amount of Rs. 33,36,656/- within a period of 30 days from the date of receipt of a copy of this order, provided the petitioner has paid a sum of Rs. 1,66,83,286/- as was ordered on 17.03.2020 - petitioner shall also pay the interest at 12% p.a. on the delayed payment of (Rs. 1,66,83,286/- and Rs. 33,36,656/-) Rs. 2,00,19,942/- from the date of expiry of 30 days from the receipt of Form SVLDRS-3 - In case, the petitioner had failed to pay the amount of Rs. 1,66,83,286/- as ordered on 17.03.2020 and fails to pay the amounts as ordered now, the benefit of Sabka Vishwas - (Legacy Dispute Resolution) Scheme, 2019 shall not be extended to the petitioner. Petition disposed off.
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2024 (3) TMI 924
Bifurcation of composite service - whether the appellant have arbitrarily bifurcated the receipt of payments from M/s. JK Paper Limited under two separate service category i.e. Manpower Recruitment or Supply Agency Service and GTA service? - Extended period of limitation - HELD THAT:- It is matter of record that appellant has entered into two separate agreements with M/s. JK Paper Limited on two different dates. This fact has been admitted by the department also. In such a situation, it cannot be alleged by the department that the appellant have arbitrarily bifurcated the value of services rendered by him under two types of invoices/ bills. The invoices which have been raised by the appellant are as per the legally valid work contracts/ agreements and it is accepted legal principle that for the purpose of levy of service tax, the individual contract need to be taken into account. Therefore, merely on the assumption that the appellant have entered into separate contracts intentionally to evade service tax is prima-facie, not acceptable. Extended period of limitation - HELD THAT:- The appellant has regularly been filing their ST-3 returns wherein all the details of services provided by them have been mentioned. The service recipient has also been filing ST-3 returns and therefore, it cannot be alleged that there is any element of fraud, collusion, mis-declaration or suppression of facts with intent to evade service tax - there is no suppression of facts, fraud or misstatement with intent to evade payment of service tax and therefore, it was wrong on the part of the department to confirm demand of service tax under extended time period of Section 73(1) of the Finance Act, 1994. The impugned order-in-appeal is without any merits - appeal allowed.
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2024 (3) TMI 923
Refund of CENVAT credit - Form-A does not match with the amount of CENVAT credit availed in the ST-3 returns for the relevant period - failure to debit the refund claim from its CENVAT credit account at the time of filing of refund claims as required under condition 2(h) of the Notification dated 18.06.2012 - reversal of credit in GSTR-3B filed for the month of December 2017 and March 2018 - HELD THAT:- The period in dispute in this appeal is from July 2016 to June 2017. The appointed date under the 2017 Act is 01.07.2017. Immediately after filing of the last ST-3 return, the appellant claimed CENVAT credit lying in its books of account on 30.06.2017 through Trans-1 filed on 11.08.2017 in the Delhi GST registration and, thereafter, transferred the CENVAT credit to its Bangalore Unit in terms of the proviso to section 140(8) of the 2017 Act for the reason that Bangalore Unit had the same PAN and was included in the centralized registration of the appellant in the Service Tax Regime. The contention of the department is that the CENVAT credit has been wrongly reversed by the Bangalore Unit as it is a distinct person in the GST regime and the same was required to be reversed by the Delhi unit - This view taken by the department ignores the factual position that CENVAT credit pertains to pre-GST regime when the Bangalore Unit was included in the centralized registration of the Delhi unit. Thus, as the Bangalore Unit was part of centralized registration in the service tax regime, the appellant correctly transferred the CENVAT credit as CGST input to its Bangalore Unit in terms of section 140(8) of the 2017 Act. The refund claim has also been rejected for the reason that the total CENVAT credit claimed as refund in Form-A does not match with the CENVAT credit availed in the ST-3 return filed for all the four quarters covering the period in dispute from July 2016 to June 2017 - This mismatch has occurred on account of the fact that Swachh Bharat Cess paid by the appellant at the time of filing of return was not reported in the ST-3 returns, since there was no column for mentioning it in the ST-3 returns. The appellant has correctly also filed a refund claim for Swachh Bharat Cess amounting to Rs. 56,42,239/- in terms of Notification No. 3/2016 dated 03.02.2016. The appellant is, therefore, also entitled to claim refund of Rs. 56,42,239/-. It is not possible to sustain the order dated 16.03.2020 passed by the Commissioner (Appeals). It is, accordingly, set aside. The appellant would be entitled to refund of the amount of CENVAT credit with interest at the prescribed rate - Appeal allowed.
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2024 (3) TMI 922
Levy of service tax - Business Auxiliary service - services rendered by the foreign based agents to the appellant - commission towards sales promotion commission on export sales to their foreign agents situated located outside India - N/N. 9/2009-ST dated 03.03.2009 and N/N. 15/2009-Service Tax dated 20.05.2009 - invocation of Extended period of Limitation - HELD THAT:- Since the services have been availed by the appellant from outside India within Special Economic Zone and therefore, barring brief period of two months for the majority of period the services availed by them from foreign based agent for the promotion of the sales was falling under the exempted category as the services received by them were in the Special Economic Zone unit. There are force in the argument of the learned Advocate that the substantive benefit of the service tax exemption provided under Section 26 of the Special Economic Zone Act and Rule 31 of the Special Economic Zone Rules cannot be denied only on procedure requirement under Notification No. 9/2009 dated 03.03.2009 as amended by Notification No. 15/2009 dated 20.05.2009. The services received by the appellant from their foreign based agents who were engaged in promotion of sales abroad though chargeable to Service Tax under category of Business Auxiliary Service under reverse charge mechanism basis by virtue of exemption Notification No. 9/2009-ST dated 03.03.2009 as amended by Notification No. 15 of 2009-ST dated 20.05.2009 and by general exemption for Special Economic Zone units provided under Section 26 of the Special Economic Zone Act, 2005, the services received from abroad shall remain exempted and therefore, the demand raised against the appellant is without any merit. Extended period of limitation - SCN issued by the department invoking extended time proviso under Section 73(1) of Finance Act, 1994 as the show cause notice was issued on 19.09.2014 for the period April 2009 to March 2011 - HELD THAT:- All the transactions of foreign exchange payment were reflected in their books of account and the by taking necessary permission from the Reserve Bank of India. In view of this the elements for invoking extended time period such as fraud, collusion, misstatement and suppression of facts with an intent to evade duty are absent in this case and therefore the demand is time barred and same also deserved to be dropped on the grounds of limitation. The impugned order in appeal is without any merit and therefore, the same is set aside - appeal allowed.
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2024 (3) TMI 921
Calculation of interest - it is alleged that calculation of interest was not done, when it was due and when it was paid - also alleged that interest calculated in a clubbed manner - HELD THAT:- It is not disputed by the Revenue that in 2006, the appellant took registration themselves and started paying Service Tax on their activity. Moreover, the appellant was entitled for abatement of 50% of the Service Tax payable by them in terms of Notification No. 20/2004-S.T. dated 10.09.2004 and the appellant has not claimed abatement in terms of the said Notification, which shows that the appellant was bona fide in not discharging Service Tax initially and thus started paying Service Tax later on. Whatever amount was collected by the appellant from M/s. Tata Motors Ltd. has already been deposited with the Department. In the circumstances, no penalty is imposable on the appellant. Further, the appellant has disputed certain calculation of interest, which the appellant is ready to pay. For the purpose of calculation of interest, the matter is required to be remanded to the adjudicating authority. Therefore, the matter is remanded back to the adjudicating authority only for the purpose of calculation of interest. The appeal is disposed of by way of remand.
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2024 (3) TMI 920
Levy of service tax - commercial or industrial construction service - construction of laying solid, construction of trenches and construction connecting such trenches at road crossings - period from 2004-05 to 2007-08 or not - HELD THAT:- It is not disputed by the Revenue that these services have been provided by the appellant along with materials. Therefore, the merit classification of the above services is works contract service , as held by the Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] wherein the Hon ble Apex Court observed Works contract were not chargeable to service tax prior to 1.6.2007. Therefore as no demand has been raised against the appellant under the category of works contract service during the said period, no Service Tax is payable by the appellant under commercial or industrial construction service - Moreover, the Show Cause Notice in this case has also been issued by invoking the extended period of limitation, which came to be issued on 20.04.2010 for the period 2004-05 to 2007-08. The impugned order set aside - appeal allowed.
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2024 (3) TMI 919
Levy of Service Tax - Consulting Engineer Service - execution of work of construction of Residential Complexes in the state of Bihar - denial of CENVAT Credit on architectural Service - input service or not - HELD THAT:- The Executing Agency has not been assigned the work of actual construction, which has been done by the contractors. The role of the Appellant as an Executing Agency is to ensure that the works are executed as per drawings and specifications. They have to provide their expertise and experience for smooth completion of the projects. Accordingly, the Appellant has not rendered 'Construction of Complex Service'. The service rendered by the Appellant is rightly classifiable as 'Consulting Engineer Service' and the Appellant has rightly paid service tax on the 8.5% agency fees received, under this category. Accordingly, the demand of service tax along with interest and penalty confirmed in the impugned order under the category of 'Construction of Complex service' is not sustainable and hence we set aside the same. The impugned order has confirmed the Service Tax of Rs.3,63,321/- on the differential value of Rs.29,31,401/- during the period 2005-06 to 2008-09 - the calculation has been done unilaterally by the adjudicating authority without giving an opportunity to the appellant to explain the actual difference. Accordingly, it is found that it is required to remand it back to the adjudicating authority to arrive at the differential value after giving an opportunity to the appellant to explain the difference. Hence, the matter is remanded back to the adjudicating authority only for the limited purpose of arriving at the differential value of taxable service of Rs.29,31,401/- worked out by the Department as above. CENVAT Credit availed and utilized by the Appellant on Architectural Consultancy services - HELD THAT:- This is an essential input service required for rendering of the 'Consulting Engineer service rendered by the Appellant. As per the MOU signed on 18.01.2008, it is the responsibility of the Appellant to ensure that the works are executed as per drawings and specifications. The Appellant cannot fulfill this responsibility without the input service of architecture received from the Architects. Thus, there is no merit in the findings in the impugned order that architectural Service is not covered within the definition of input service . Accordingly, the 'Architecture ' service received by the Appellant is an 'input service' in terms of Rule 2 of CENVAT Credit Rules,2004 and the Appellant has rightly availed and utilized the credit on such input service. Hence, the denial of CENVAT Credit availed and utilized by the Appellant on 'Architecture service' is not sustainable. Accordingly, the impugned order demanding reversal of this credit along with interest and penalty set aside. The appeal is partly allowed and partly remanded.
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2024 (3) TMI 918
CENVAT Credit - common cenvat credit account for manufacture of dutiable goods as well as a provider of output services - non-maintenance of separate records - penalty - HELD THAT:- The assessee is a manufacturer of dutiable goods as well as a provider of output services and in the Cenvat Credit Rules, there is no provision to maintain a separate account for input/input services used for manufacturing activity and the separate account to be made for input or input services used for providing output services. There is a common cenvat credit account, which was used for payment of other duty or service tax. In that circumstances, the show-cause notice was not required to be issued as held by this Tribunal in the case of M/S. LARSEN TOUBRO LIMITED VERSUS COMMISSIONER OF CGST CX, BHUBANESWAR COMMISSIONERATE [ 2022 (10) TMI 1077 - CESTAT KOLKATA] wherein this Tribunal has held It has been held in numbers of cases that as far as the inputs or input services are availed on payment of duty and as long as they are capable of being used in the provision of Service Tax and manufacture of excisable goods, credit cannot be denied and that there is no requirement of oneto- one correlation. Penalty u/r 15 of the Cenvat Credit Rules, 2004 - HELD THAT:- As the demand is not sustainable, therefore, the question of imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004, does not arise. Thus, no demand is sustainable against the assessee. Accordingly, assessee s appeal is allowed.
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2024 (3) TMI 917
Levy of Service tax - activity of construction of railway infrastructure i.e., tracks - benefit of exemption under Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012 - HELD THAT:- The said issue has been examined by this Tribunal in the case of M/S HARI CONSTRUCTION ASSOCIATES PRIVATE LIMITED VERSUS COMMISSIONER OF CGST EXCISE, PATNA II [ 2023 (9) TMI 454 - CESTAT KOLKATA] wherein it has been observed The taxable service in Finance Act, 1994 excluding railways from the ambit of the service did not place any restriction on benefit going to private railways. The statute, 10 ST/86191/2021 too, did not consider it necessary to fall back on the definition of railways in another statute for determination of taxability and it is not open to the adjudicating authority to arrogate that privilege in an executive capacity. The intent of exclusion prior to 1st July 2012, and exemption for the period, thereafter, is abundantly clear. The issue has already been settled by this Tribunal and it has been categorically held that there is no distinction between public railways and private railways. In these circumstances, following the decision of this Tribunal in the case of M/s. Hari Construction Associates Pvt. Ltd., it is held that the appellant is entitled to the benefit of exemption vide Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012, as claimed. Accordingly, no demand of Service Tax is sustainable against the appellant. The impugned order set aside - appeal allowed.
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Central Excise
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2024 (3) TMI 916
Process amounting to manufacture - process undertaken on stators received from job workers i.e. the process of shaping, varnishing and baking - HELD THAT:- Perusal of the pleadings and the records would reveal that the order of assessment and the other materials available with the appellant do not indicate that the nature of the process undertaken at the assessee s Service Centre in respect of the so-called retrieving old stators from old compressors received by the assessee and mere using of old stators and subjecting the old stators to some process and renewing the same would not be sufficient. Moreover, all these allegations and contentions raised by the learned Senior Standing Counsel for CBIC would amount to be factual in nature. Therefore, in the course of exercising the powers under Section 35G of the Act, this Court cannot interfere with the finding of facts unless there is any strong substantial question of law or perversity made out. On this very ground, there are no merits in the appeals preferred by the appellant. In the teeth of the aforesaid finding by the Tribunal and that no sufficient material available with the Department to negate the said finding given by the Tribunal, it is difficult to interfere with the said finding of the Tribunal. All these appeals filed by the Department therefore being devoid of merits, deserves to and are accordingly rejected. Appeal dismissed.
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2024 (3) TMI 915
Refund claim - amount was paid in GST era under Reverse Charge Mechanism towards banking and financial service received for expenses made in foreign currency for facilitation of external commercial borrowings (ECB) - time limitation - HELD THAT:- The party has not only paid duty of extended period in 3 installments i.e. in April 2018, October, 2018 and November 2018 but has also paid interest and penalty there upon seggregating the three. On this issue, it is found at Commissioner (Appeals) has correctly held that payments made were part of the recovery action under the enforcement done by DGCI and therefore duty, interest and penalty were paid for extended period. It is also found that adjudicating authority whose findings have been endorsed in the impugned order, has correctly held that the amount is paid as part of the recovery action. The input credit or refund of the same cannot be allowed. It is held that in recovery action and when penalties imposed and are discharged and duty paid under extended period, the credit to person who has evaded tax and then paid duty, interest and penalty cannot be allowed - appeal dismissed.
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2024 (3) TMI 914
Inclusion of certain elements of cost in assessable value and revision of the method of determining assessable value applicable to transactions between related persons - inclusion of advertisement and sales promotion costs - HELD THAT:- The finality, insofar as the first notice was concerned, was equally applicable to subsequent ones. The claim of higher precedent from decision of the Tribunal was also settled by the first appellate authority in later order despite which the obduracy on the part of the original authority continued to be manifested in remand proceedings. Even so, the finality accorded to that precedent by the Hon ble Supreme Court in re P B Pharmaceuticals P Ltd [ 2003 (2) TMI 68 - SUPREME COURT] should have sufficed for the original and first appellate authority in the latest round. The orders passed in de novo proceedings by the original authority were not correct in law. That last which was upheld in the impugned order was also incorrect in law. The concurrence accorded to that impropriety by the first appellate authority piles gross impropriety on impropriety. We find no cause to allow this travesty of justice and judicial decorum to continue. The impugned order set aside - appeal allowed.
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2024 (3) TMI 913
CENVAT Credit - retention of credit that enabled obtaining of refund under rule 5 of CENVAT Credit Rules, 2004 - HELD THAT:- The appellant was exporting almost 98% of turnover for the period upto March 2010 and about 87% thereafter is a finding in the impugned order that has not been controverted in appeal of Revenue. That such exports should not have to bear the burden of duties inhering in the goods is undeniable and, therefore, if not refund under rule 5 of CENVAT Credit Rules, 2004, rebate was allowable under Central Excise Rules, 2002 with option left to assessee. The denial of credit was not enforced immediately upon grant of exemption; instead resort was had to section 11A of Central Excise Act, 1944 and, consequently, rebate was not an available option. This militates against the contention of Learned Authorized Representative that the cited Explanation has retrospective effect. The denial of credit was not enforced immediately upon grant of exemption; instead resort was had to section 11A of Central Excise Act, 1944 and, consequently, rebate was not an available option. This militates against the contention of Learned Authorized Representative that the cited Explanation has retrospective effect. We, therefore, examine the entitlement in terms of operation under the CENVAT credit scheme. As we have premised, this is a dispute about eligibility for retention of credit availed validly under rule 3 of CENVAT Credit Rules, 2004. It is only upon deployment of such goods in the production of exempted goods , which menthol crystal was since 1st March 2008, that rule 6(1) of CENVAT Credit Rules, 2004 is brought to bear - to the extent that inputs were deployed in goods that have been exported, availment of credit is not faulted. Even if exempted goods were removed on bond for export after March 2010, that procedural lapse, with its own attendant consequence, has no bearing on eligibility for retention of credit. Therefore, only the availment of credit in relation to inputs used in production of domestically cleared goods remain. There can be no dispute on availment of credit of duty paid on attributable goods till March 2010 as these were cleared on payment of duty. For the period thereafter, it is on record that the default provision in rule 6(3) of CENVAT Credit Rules, 2004 for payment of 10% of value of exempted goods cleared domestically would entitle retention of credit. The impugned order, and appeal of Revenue, appear to have, in their respective contentions which do not relate to the same input , misconstrued the meaning of common and the bar on retention which are applicable to both categories of inputs raw materials and consumables that are used in production - None of the goods in the dispute are consumables and, owing to export as well discharge of duty liability or liability of 10% on value of domestically cleared goods, there is no scope for recovery under rule 14 of CENVAT Credit Rules, 2004 or section 11A of Central Excise Act, 1944. Other consequences too fail. The demand fastened on assessee in the impugned order does not sustain. Appeal of assesse is allowed.
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2024 (3) TMI 912
Non-reversal of credits availed in respect of exempted services - waste and scrap of packing materials viz. corrugated boxes, cartoons, MS scrap, plastic, industrial refuse etc. - Rule 6(3) of CENVAT Credit Rules, 2004 - HELD THAT:- No demand is raised on the Appellant in the Show-cause notices on the ground that it was engaged in trading which was treated as an exempted service against which it cannot avail credits on inputs but the demand was solely based on the ground that out of two varieties of manufacturing waste, one is exempted from payment of Excise Duty for which demand is raised against non-reversal of the allegedly inadmissible credit availed on those exempted products and it is a settled principle of Law, which has been affirmed by the Hon'ble Supreme Court through various decisions including that of MARUTI SUZUKI INDIA LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III [ 2015 (12) TMI 1598 - CESTAT CHANDIGARH] , that duty is not payable on waste and scrap of packing material of inputs and demand is not sustainable if it had travelled beyond the Show-cause notice or made contrary to it, as has been held in the COMMISSIONER OF CENTRAL EXCISE VERSUS GAS AUTHORITY OF INDIA LTD. [ 2007 (11) TMI 276 - SUPREME COURT] . The order passed by the Commissioner of Central Excise, Customs Service Tax, Aurangabad are thereby conformed - Appeal dismissed.
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2024 (3) TMI 911
CENVAT Credit - denial of credit on the ground that the appellant has incorrectly considered the electrodes as inputs and availed full credit whereas they are capital goods, in respect of which only 50% of CENVAT Credit is available in the year of receipt as per the CENVAT Credit Rules, 2004 - HELD THAT:- Circular No. B22/51/86-TRU dated 21.10.1986 clarified the position that It is only for the purposes of Notes 1 to 4, Section XVI that the word 'machine' (used in Notes) refers to any machine, machinery, plant, equipment, apparatus or appliance mentioned in the heading of Chapter 84 or 85. Otherwise, the whole phrase machine, machinery, plant, equipment, apparatus, etc. would have to be used wherever the word machine is used in the Notes. As carbon electrode is essential for manufacture of aluminum, it should be eligible for Modvat credit, as it would satisfy the criterion of input. Also, the issue whether electrodes can be treated as input for availment of CENVAT Credit or capital goods came before the Tribunal in the case of THE COMMISSIONER OF GST CENTRAL EXCISE VERSUS M/S. CHEMFAB ALKALIES LTD. [ 2023 (7) TMI 947 - CESTAT CHENNAI] wherein the Tribunal observed The Tribunal in the case of COLLECTOR OF C. EX. VERSUS METTUR CHEMICALS INDUSTRIALS [ 1990 (12) TMI 243 - CEGAT, MADRAS] held that cathodes used in the electrolytic process being incidentally consumed in the manufacture of caustic soda is an input as defined under erstwhile Rule 57A of Central Excise Rules, 1944 and eligible for modvat credit. As the issue is no longer res integra in view of the clarifications issued by the C.B.E.C. by way of Circulars from time to time and the decision in the case of M/s. Chemfab Alkalies Limited, it is held that on all the items which have been used by the appellant in the process of manufacture of their final product, the appellant is entitled to avail CENVAT Credit, as inputs. There are no merit in the impugned orders and accordingly, the same are set aside - appeals filed by the appellant are allowed.
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2024 (3) TMI 910
Method of valuation - calcined alumina - to be valued in accordance with Rule 4 or 11 of Central Excise Rules, 2000 by considering normal transaction value of sale of calcined alumina (Smelter) of normal transaction value? - invocation of extended period of limitation - HELD THAT:- On going through the technical specifications, it is clear that technical specification of both the products is different as having variation in the composition. Moreover, the calcined alumina (sale) is sold by the assessee in in PP bags of 50 kgs each whereas the calcined alumina (Smelter) is sold in bulk or loose form. Both the products are two different products and there is no allegations in the impugned showcause notice that the assessee is clearing calcined alumina (smelter) to independent buyers. Therefore, the valuation adopted by the assessee under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules,2000, is correct and they have paid duty correctly - Otherwise also, the assessee is clearing the said goods to their sister unit, therefore, it is the situation of revenue neutrality. In that circumstances also, the differential duty cannot be demanded. There are no merit in the impugned order demanding duty from the assessee for the normal period of limitation - also there are no merit in the appeal filed by the Revenue to demand duty from the assessee by invoking extended period of limitation - the appeal filed by the assessee is allowed.
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CST, VAT & Sales Tax
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2024 (3) TMI 909
Violation of principles of natural justice - Validity of assessment order - bills to indicate that no form 'C' was ever issued not considered - erroneous observation that sale took place - no opportunity of hearing has been accorded to the revisionist at any stage by the authorities. Revisionist was having three copies of the bills in his bill book which has not been appreciated by the competent authority - HELD THAT:- Perusal of the assessment order dated 24.03.2011 would indicate that the version of the revisionist has been considered by the assessing authority and he has observed that he himself has examined the bill book upon being produced by the revisionist but the bill book is not having the original bill contained in the bill book. Thus, the said ground is rejected. Incidentally, this finding of the bill book having been examined by the Authority has not been denied anywhere by the revisionist upon filing of either the first appeal or the second appeal. The learned Tribunal has erroneously observed in the judgment dated 14.12.2012 that sale took place with respect to bill no. 107 dated 01.01.2008 and bill no.121 dated 30.01.2008 of which all three copies are available in the bill book as per the list of sales produced before the Tax Assessing Authority - HELD THAT:- No denial to the said finding has been given by the revisionist while filing the instant revision of the said sales being indicated in the list of sales produced before the Assessing Authority. As such, the said ground is rejected. No opportunity of hearing has been accorded to the revisionist - HELD THAT:- The said ground is also misconceived considering that the assessment order dated 24.03.2011 has been passed after issuing notice to the revisionist and thereafter the revisionist had ample opportunity while filing the first and second appeal of rebutting the specific finding that had been given by the assessing authority which he himself failed to do - while considering the revision filed by the revisionist and even considering the grounds as raised by the learned counsel for the revisionist, no perversity or illegality emerges and consequently no case for interference is made out. The instant revision as well as the connected revision is dismissed at the admission stage.
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Indian Laws
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2024 (3) TMI 908
Application allowed under Section 11(6) of the Arbitration Conciliation Act 1996 - appointment of Sole Arbitrator to adjudicate the dispute between the parties to the present lis - HELD THAT:- A perusal of sub-section (5) of Section 7 of the Arbitration Act itself would reveal that it provides for a conscious acceptance of the arbitration clause from another document, by the parties, as a part of their contract, before such arbitration clause could be read as a part of the contract between the parties - It is thus clear that a reference to the document in the contract should be such that shows the intention to incorporate the arbitration clause contained in the document into the contract. The present case is a two-contract case and not a singlecontract case. In view of Clause 1.0, the documents stated therein shall also form part of the agreement. In view of Clause 2.0, all terms and conditions as contained in the tender issued by the DVC to the NBCC shall apply mutatis mutandis except where these have been expressly modified by the NBCC. Clause 7.0 specifically provides that the redressal of dispute between the NBCC and the respondent shall only be through civil courts having jurisdiction of Delhi alone. Clause 10.0 further provides that the L.O.I. shall also form a part of the agreement - the intention between the parties is very clear. Clause 7.0 of the L.O.I. which also forms part of the agreement specifically provides that the redressal of the dispute between the NBCC and the respondent shall only be through civil courts having jurisdiction of Delhi alone. It is pertinent to note that Clause 7.0 of the L.O.I. specifically uses the word only before the words be through civil courts having jurisdiction of Delhi alone . When there is a reference in the second contract to the terms and conditions of the first contract, the arbitration clause would not ipso facto be applicable to the second contract unless there is a specific mention/reference thereto - the present case is not a case of incorporation but a case of reference . As such, a general reference would not have the effect of incorporating the arbitration clause. In any case, Clause 7.0 of the L.O.I., which is also a part of the agreement, makes it amply clear that the redressal of the dispute between the NBCC and the respondent has to be only through civil courts having jurisdiction of Delhi alone. The learned single judge of the Delhi High Court has erred in allowing the application of the respondent. The impugned orders are quashed and set aside - Appeal allowed.
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2024 (3) TMI 907
Framing of charges - Owning of assets disproportionate to known sources of income - Whether the courts below were justified in refusing to quash and set aside the order on charge dated 21.02.2006 and the charges as framed on 28.02.2006? - Case against the Additional Chief Architect in New Delhi Municipal Corporation - HELD THAT:- In the present case, the probative value of the Orders of the Income Tax Authorities, including the Order of the Income Tax Appellate Tribunal and the subsequent Assessment Orders, are not conclusive proof which can be relied upon for discharge of the accused persons. These orders, their findings, and their probative value, are a matter for a full-fledged trial. In view of the same, the High Court, in the present case, has rightly not discharged the appellants based on the Orders of the Income Tax Authorities. In RADHESHYAM KEJRIWAL VERSUS STATE OF WEST BENGAL [ 2011 (2) TMI 154 - SUPREME COURT] , this Court was concerned with a fact situation where the Petitioner therein was being prosecuted under the Foreign Exchange Regulation Act, 1973 for payments made by him in Indian currency in exchange for foreign currency without any general or specific exemption from the Reserve Bank of India. The Enforcement Directorate had commenced both an adjudication proceeding and a prosecution under the provisions of the Foreign Exchange Regulation Act, 1973. It so transpired that the Adjudicating Officer found that no documentary evidence was available to prove the foundational factum of the Petitioner therein entering into the alleged transactions which fell foul of the Act and thereafter directed that the proceedings be dropped. There are no merit in these appeals and the appeals are dismissed.
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2024 (3) TMI 906
Dishonour of Cheque - vicarious liability of directors - sufficient averments to issue process against the directors, including the Petitioners or not - HELD THAT:- The liability under Section 141 of the Act, 1881 for commission of the offence punishable under Section 138 of the Act, is in the nature of a vicarious liability. It is trite that vicarious liability for an offence is required to be strictly construed. From the text of Section 141 of the Act, it becomes evident that the liability is incurred not on account of the position a person holds, but by reason of the role such person plays in the management of the affairs of the company. Liability does not depend upon the designation or status of the person sought to be roped in. Conversely, it could be shown that though a person does not hold a particular designation, yet he was in-charge of and responsible to the affairs of the company, and, therefore, liable to be prosecuted by invoking the constructive criminality under Section 141 of the Act. In the case of POOJA RAVINDER DEVIDASANI VERSUS STATE OF MAHARASHTRA ANOTHER [ 2014 (12) TMI 1070 - SUPREME COURT] , the Supreme Court enunciated that the law laid down by the Supreme Court is that for making a director of a company liable for the offence committed by the company under Section 141 of the Act, there must be specific averments against the director showing as to how and in what manner, such director was responsible for the conduct of the business of the company. The facts in the case of SUNITA PALITA OTHERS VERSUS M/S PANCHAMI STONE QUARRY [ 2022 (8) TMI 55 - SUPREME COURT] , appear to be on all four with the case at hand, as the Appellants therein were also shown to be independent and non-executive directors of the company. Non-executive directors are not involved in the day to day affairs of the company or in running of its business. The endeavour of Mr. Kumar to bank upon the information disclosed in the annual statement of account does not advance the cause of the Respondent No. 1 complainant. The very fact that the Petitioners were made members of the audit and corporate social responsibility committee appears to be in consonance with the role of the Petitioners as independent non-executive directors of Isinox Ltd. The complaints singularly lack any averment that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, the Petitioners. In the absence of such averments, the prosecution of the Petitioners by invoking the provisions contained in Section 141(2) of the Act also, would be legally impermissible. The conspectus of aforesaid discussion is that the prosecution of the Petitioners who are the independent non-executive directors of Isinox Ltd. for an offence punishable under Section 138 read with Section 141 of the Act, 1881 would amount to abuse of the process of the court and wholly unjustifiable - Petition allowed.
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2024 (3) TMI 905
Dishonour of Cheque - legally enforceable debt or not - insufficiency of funds - seeking leave of the Court to summon bank officials along with record pertaining to the concerned bank account for the financial years 2019-2020 and 2020-2021 - Section 311 Cr.P.C. read with Section 91 Cr.P.C. - HELD THAT:- The singular reason for filing an application under Section 311 Cr.P.C. by the Petitioner was to prove through the bank officials and the financial statements that there were sufficient funds in the bank account pertaining to which the dishonoured cheques were issued, so as to set up a defence against the alleged offence under Section 138 of the NI Act. As rightly pointed out by counsel for Respondent No. 2, learned MM has noted in the impugned order itself that the dishonour of cheques was not on account of insufficiency of funds or exceeding arrangement. In fact, the learned Court has categorically noted, after referring to bank return memos Exs. CW-1/8, CW-1/9, CW-1/10 and CW1/11 and the evidence of Respondent No. 2 s witness CW-1 that reason for dishonour of the cheques in question was payment stopped by drawer . The apprehension of the Petitioner is misplaced and no infirmity is found with the impugned order, warranting interference by this Court. Moreover, Respondent No. 2 has reiterated its stand that the funds maintained by the Company/accused were neither insufficient nor the amounts under the impugned cheques exceeded arrangement. Petition disposed off.
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2024 (3) TMI 904
Levy of stamp duty on schemes of amalgamation or restructuring - Validity of the Circular dated 20.11.2018, issued by the Inspector General of Registration in No. 49282/P1/2018 and / or G.O.(Ms.) No. 29, Commercial Taxes and Registration (J1) dated 01.03.2019 and G.O.(Ms.) No. 47, Commercial Taxes and Registration (J1) dated 19.02.2020. Whether or not the order of the Court sanctioning the scheme of amalgamation / restructuring or merger can be deemed to be an instrument? - HELD THAT:- The Hon'ble Supreme Court in the HINDUSTAN LEVER VERSUS STATE OF MAHARASHTRA [ 2003 (11) TMI 335 - SUPREME COURT] dealt with the similar definition of the term 'instrument' under the Bombay Stamp Act and held that on a consideration of Section 394 of the Companies Act, it is clear that upon such Orders of the Court, the undertaking of the transferor company stood transferred to the transferee company with all its movable, immovable and tangible assets and on presentation of certified copy of the said Order of the Court to the Registrar of Companies, the transferor of company stands amalgamated in the transferee company along with all its assets and liabilities and as such the Court Order along with the amalgamation scheme appended to it, is an instrument - In the present context, whereunder the Registrar being a public officer, under Section 35 is mandated not to act upon in the scheme of amalgamation, unless it is duly stamped, the said argument of certified copy will not hold good. Therefore, the submissions made on behalf of the petitioners in this regard is rejected and the question is answered that the Orders of Court/Tribunal sanctioning schemes of amalgamation/restructuring/de-merger etc., along with such schemes appended thereto, shall be instruments within the meaning for the purposes of the Act. Whether or not amalgamation / restructuring can be termed as a transfer inter vivos amounting to conveyance? - HELD THAT:- The scheme of amalgamation results in transfer of the rights, assets and liabilities of the transferor company vesting in the transferee company in praesenti and therefore there is a transfer inter vivos - it can be seen that amalgamation, merger or other such arrangements shall be within the meaning of conveyance in more than one sense. As a matter of fact, such schemes, originally being dealt with under Sections 391-394 of the Companies Act, 1953 and now under Chapter XV (Sections 230-240) of the Companies Act, 2013. Except doing away with the definition of transferor company and transferee company in respect of amalgamation and imposing certain additional requirements of disclosure etc., the essential features of the transactions remains the same - the order sanctioning amalgamation / restructuring appended by the scheme as such is an instrument of conveyance liable to duty under Article -23 of the Act and no further legislative action is necessary to bring the same within the ambit of duty. As far as the impugned circular dated 20.11.2018 is concerned, it only attempts to clarify the existing position by quoting the relevant Judgments and addressing the registering officers that they should be aware that the scheme of amalgamation submitted by the Companies and sanctioned by the High Court are classifiable as Conveyance and will be subject to duty under Article -23 of Schedule -I of the Act - there are no illegality in the said Circular dated 20.11.2018. If the Orders are instruments amounting to conveyance, then whether the levy in the present manner, that is, prescription through an executive order is valid? - HELD THAT:- As far as the notification in G.O.Ms.No.29 dated 01.03.2019, it states that it is to reduce the duty chargeable under the Act. Therefore, the State of Tamil Nadu is well within its powers to reduce or remit the duty chargeable under the Act. So long as the power is exercised to reduce the duty chargeable under the Act, the same would be perfectly in order. When it is only a question of reduction or remitting, it can be by an Order passed in exercise of power under Section 9(1)(a) of the Act. If so, the mode of computation, that is, 2 % of the value of the immovable property or 0.6 % of the net value of the shares transferred whichever is higher is in order? - HELD THAT:- While exercising the powers under Section 9(1)(a), reducing the duty from 5 % to 2 % of the market value of the property is a clear and fair exercise of power and it merely reduces the duty chargeable as per Article- 23. As far as the second limb of the notification, to compute the Stamp Duty on 0.6 % of the aggregate of the market value of the shares and then adopt the value whichever is higher is concerned, firstly it introduces a new mode of computation, which is not found in Article -23. Therefore, the same tantamounts to amending Article -23, which would require legislative action. Secondly, it was pointed out across the bar that there are several instances where the aggregate market value of the shares in respect of the transferee company which is amalgamated may run to several crores, whereas it may have an immovable property of a meagre value within the State of Tamil Nadu in which case, as per the notification if 0.6% of the aggregate market value of the shares which is higher would only be taken, then the same would result in increase in duty which would be more than 5 % of the duty chargeable under Article- 23 - to the last sentence of the notification contained in the impugned Government Order, in G.O.(Ms.) No. 29 dated 01.03.2019, i.e., or 0.6 percent of the aggregate of the market value of the shares, whichever is higher alone is struck down and rest of the notification shall stand. Whether the retrospective application of the impugned Government Order with effect from 01.04.1956, by way of G.O.Ms.No.47 dated 19.02.2020 is valid? - HELD THAT:- Conveyance it was chargeable at various rates periodically prescribed and is presently at the rate of 5 % . It can be seen that from 01.04.1956 at no point of time, it was less than 2% and the G.O.(Ms.) No. 29 dated 01.03.2019 only reduces the duty to 2 %. Therefore the petitioners have no ground to complain of G.O.(Ms.) No. 47 dated 19.02.2020, which only makes the application of the beneficial provision of G.O.(Ms.) No. 29 dated 01.03.2019 as retrospective. As a matter of fact, Section 9(1) (a) of the Act itself expressly authorises the State to exercise such a power retrospectively. Thus, the retrospective applicability per se cannot be termed as illegal - the G.O.(Ms.) No. 47 dated 19.02.2020 is upheld. Whether the stamp duty paid in other States, while registering the amalgamation orders are liable to be taken into account and set off as against the duty payable, while presenting the document for registration in the State of Tamil Nadu? - HELD THAT:- Once the instrument is already presented for registration in other States and again presented for registration within the State of Tamil Nadu, then, Section 19 -A of the Act, which is a Tamil Nadu amendment of the Indian Stamp Act, 1899, which will come into play - The very question was dealt with in detail by the Constitution Bench of the Hon'ble Supreme Court in New Central Jute Mills Co. Ltd. And Ors Vs. State of West Bengal and Ors., [ 1963 (1) TMI 65 - SUPREME COURT] while considering the identical provision 19 -A of the Uttar Pradesh amendment. The Hon'ble Supreme Court has held that though the execution of instrument may be in other States, when the instrument relates to any property situate within the State, then the liability also arises with reference to the State, where the property is situate also. Thus, it is clear that upon presentation in the State of Tamil Nadu, the duty has to be calculated as per the rate payable in Tamil Nadu and thereafter, upon comparison, if the duty paid in any other State is higher than the State of Tamil Nadu, then the same has to be taken into consideration and no duty shall be payable. If the duty paid is lesser than what is payable in the State of Tamil Nadu, then whatever amount paid is to be set off and the balance duty is to be paid on the instrument of amalgamation. Appeal disposed off.
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