TMI Tax Updates - e-Newsletter
April 12, 2024

Case Laws in this Newsletter:

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

Articles

1. GST: APPEALS BEFORE SUPREME COURT

   By: Dr. Sanjiv Agarwal

2. Construction of the Sulphate removal plant under the EPC Contract falls under SAC Heading No. 9954.

   By: Bimal jain

3. Liability under RCM on Ocean Freight under FOB Imports

   By: Kamal Aggarwal

4. Can valuation of shares be rejected, if done as per DCF method prescribed u/s 56(2)(viib)... and recalculated by AO

   By: Vivek Jalan

5. Superintendent cannot exceed jurisdictional prescribed limits and pass the Order.

   By: Bimal jain

News

1. Advisory: Auto-populate the HSN-wise summary from e-Invoices into Table 12 of GSTR-1

2. ‘International Symposium on Health Governance in a Political Landscape: Interplay of Health Law, Society and Political Economy’ held

Notifications

Customs

1. 28/2024 - dated 9-4-2024 - Cus (NT)

Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

Income Tax

2. 38/2024 - dated 9-4-2024 - IT

Central Government approves ‘Amul Research and Development Association, Anand, Gujarat' under the category of ‘Research Association’ for research in ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of section 35

Circulars / Instructions / Orders

DGFT

1. 02/2024 - dated 9-4-2024

Implementation of Melon Seeds Import Monitoring System (MS-IMS)

Highlights / Catch Notes

GST

• Challenge to Dual GST Probes: Court Highlights Coordination Requirement and Petitioner's Right to Respond.

  Case-Laws - HC : Simultaneous investigation by the Central and State GST authorities - The petitioner argued that the DGGI's actions violated a circular mandating coordination between Central and State tax authorities in investigations. They contended that since the State tax authority had already initiated proceedings for the same period, the DGGI should not have conducted parallel proceedings. The High Court declined to express a definite opinion on the matter, as it found that the petitioner had not raised the jurisdictional issue when responding to the summons. The Court emphasized the petitioner's right to respond to the show cause-cum-demand notice issued by the DGGI and take appropriate recourse under the CGST Act.
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• Court Adjusts Penalty for Seized Goods After Tax Registration Cancellation; Suggests Electronic Appeals for Better Access.

  Case-Laws - HC : Validity of Order passed u/s 129(1)(b) of the U.P.G.S.T. Act, 2017 - seized and penalty imposed, while they were in transit on truck - registration cancelled ten days after the Tax Invoice was issued - Despite subsequent registration cancellation, the court found no evidence to doubt the transaction's bona fides. Acknowledging the petitioner's willingness to accept a lesser penalty, the court reduced the penalty in line with statutory provisions. It also directed the implementation of electronic appeal mechanisms to ensure access to justice for affected parties.
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• GST Applies to RWA Corpus Fund Contributions and Bundled Electricity Charges, West Bengal Ruling Upheld.

  Case-Laws - AAAR : Applicability of GST - Benefit of exemption - Supply of Services by Residents’ Welfare Association (RWA) - The case involved an appeal by a Residents' Welfare Association (RWA) regarding the applicability of GST on contributions to a corpus fund and electricity charges. The RWA argued that GST should be levied only when funds are utilized and that electricity charges should be taxed at the time of actual consumption. However, the authority ruled that contributions to the corpus fund constitute advance payments for future services, hence subject to GST upon collection. Similarly, electricity charges bundled with maintenance services are treated as a composite supply, attracting GST on the entire maintenance charge. The appeal was rejected, affirming the initial ruling of the West Bengal Advance Ruling Authority.
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Income Tax

• Approval Granted for Amul Research and Development Association's Scientific Research with Retrospective Tax Benefits.

  Notifications : The Notification approves 'Amul Research and Development Association' for research in 'Scientific Research' under the provisions of section 35 of the Income-tax Act, 1961. It is mentioned that the approval is granted with retrospective effect from Assessment Years 2008-09 to 2021-22. This decision is in accordance with Rules 5C and 5D of the Income-tax Rules, 1962. The Notification also includes an explanatory memorandum, citing the Gujarat High Court orders in the case of M/s Amul Research and Development Association vs. CBDT, which necessitated the issuance of this Notification. It is further certified that no adverse effects are imposed on any individual by granting retrospective effect to this Notification.
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• Tax Tribunal Rules Penalties Invalid Due to Vague Notices; Clarifies Need for Specific Charges in Tax Notices.

  Case-Laws - AT : Penalty u/s 271(1)(c) - defective notice u/s 274 - The Tribunal emphasized the necessity for such notices to clearly delineate the charge against the assessee, allowing them to prepare an adequate defense. It found that the AO's notices were deficient in this respect, not specifying whether the penalties were for "concealment of income" or "furnishing of inaccurate particulars of income." This ambiguity, the Tribunal held, constituted a failure to meet legal standards, rendering the penalties unsustainable.
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• Interest on Compensation Under Land Acquisition Act is Taxable Income, Says Delhi Court.

  Case-Laws - HC : Characterization of receipt - interest received by the assessee u/s 28 and 34 of the Land Acquisition Act, 1894 - The Delhi High Court, in a case concerning the taxability of interest earned on compensation or enhanced compensation under the Land Acquisition Act, 1894, examined the provisions of the Income Tax Act, 1961, and relevant judicial precedents. - The court also examines the applicability of Section 145-B of the Income Tax Act, which deems interest on compensation or enhanced compensation as income of the year in which it is received, subject to tax. - Considering the legislative intent behind the 2009 amendment and the clear language of the statute, the court concludes that interest, whether on compensation or enhanced compensation, should be considered income from other sources and is subject to tax.
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• Court Upholds ITAT Decision: AO Must Clearly Justify Disallowance u/s 14A for Exempt Income Expenditure.

  Case-Laws - HC : Addition u/s 14A r.w.r.8D - AO mandation to record dis-satisfaction with the correctness of the Assessee's claim regarding expenditure related to exempt income - The Assessee contested the disallowance, arguing that the Assessing Officer did not provide valid reasons for rejecting its explanation. The High Court emphasized the necessity for the AO to record dissatisfaction with the Assessee's claim regarding expenditure related to exempt income and provide cogent reasons for such dissatisfaction. Upon analysis of the AO's assessment order, the Court found deficiencies in the recording of dissatisfaction, indicating a lack of proper application of mind. Consequently, the High Court validated the decision of the ITAT, affirming that the AO failed to adequately justify the disallowance made by the Assessee.
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• Court Allows Tax Appeal with Rs. 12 Crore Payment Plan; Initial Rs. 25 Lakh Due by March 2024, Balance in Monthly Installments.

  Case-Laws - HC : Exemption from paying advance tax - Seeking permission to prosecute appeal against order of assessment without having to pay the advance tax u/s 249(4) - The High Court acknowledged that the petitioner's case fell within the proviso of Section 249(4)(b) of the 1961 Act. - To maintain the appeal, the petitioner was instructed to remit a total sum of Rs. 12 crores against the demands in the order of assessment. This amount was to be paid in installments, with Rs. 25 lakhs due by March 31, 2024, and the rest in equal monthly installments starting from April 15, 2024. - Failure to comply with the payment conditions would empower the Department to proceed with the recovery of the assessed amounts as per the order.
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• Tribunal Rules on Additions, Deductions u/ss 153A/143(3) and 115JB; Stresses Incriminating Material's Role.

  Case-Laws - AT : Assessment u/s 153A - Additions made in original assessment u/s 143(3) of the Act again added back in the assessment completed u/s 153A/143(3) , Disallowance of loss incurred by SEZ added u/s 115JB, Disallowance of deduction claimed u/s 35(2AB) , Expenditure by way of tax paid on ESOP added u/s 115JB - The Tribunal's reinforces the necessity of basing additions and disallowances on incriminating material discovered during search operations, especially in unabated assessment years. Furthermore, it emphasizes the importance of evidentiary value and the principles of natural justice in the assessment process. The decision also delineates the boundaries of allowable deductions and the computation of taxable income in light of dubious transactions and flagged suppliers, adhering to established legal precedents.
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• Tribunal Upholds Reopening of Assessment; Grants Partial Relief with 10% Disallowance for Fairness.

  Case-Laws - AT : Reopening of assessment u/s 147/148 - reasons to believe - The Tribunal upheld the validity of the reopening, considering the reasons recorded by the Assessing Officer as based on tangible material. While the assessee failed to provide satisfactory evidence to explain the cash deposits, the Tribunal allowed partial relief by directing a 10% disallowance of the balance amount of the addition. The Tribunal's decision aimed at ensuring fairness and justice, taking into account the circumstances of the case.
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• Tribunal Upholds Royalty Payments as Arm's Length, Validates Agreement Addendum Clarifying "Third Parties" Definition.

  Case-Laws - AT : TP Adjustment - Adjustment in the transaction of payment of royalty - Royalty payments made by the subsidiary for using certain intangible properties and services. - The Tribunal acknowledged the addendum to the agreement as a legitimate clarification of the original intent, despite being executed retrospectively. It emphasized that the addendum did not introduce new terms but clarified the existing understanding regarding the scope of "Third Parties" and royalty payments. - The Tribunal rejected the Revenue's narrower interpretation of "Third Parties" that excluded transactions through Teleperformance USA. It affirmed that services rendered to Teleperformance USA's clients, facilitated by the subsidiary, qualified for royalty payments, aligning with the agreement's broader definition of Third Parties. - The Tribunal concluded that the royalty payments were in accordance with the arm's length principle.
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• Tribunal Rules Disallowance Unjustified: Timely Tax Deduction u/s 192 Meets Requirements, Section 195 Not Applicable.

  Case-Laws - AT : TDS u/s 195 - disallowance u/s 40(a)(i) - The Tribunal cited precedents and legal provisions to establish that disallowance under Section 40(a)(i) can only be made when tax is deductible at source under Chapter XVII-B and has not been deducted or paid within the specified time. Considering that TDS had been deducted under Section 192 and deposited within the prescribed time, the Tribunal found no justification for disallowing expenses under Section 40(a)(i). - The Tribunal also referred to the decision in M/s Serco India Pvt. Ltd., where it was held that once tax is deducted under Section 192 for salary payments, Section 195 has no application.
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• Tribunal Grants Tax Treaty Benefits to UK LLP for Indian Legal Services, Overturns Prior Taxability Rulings.

  Case-Laws - AT : Income deemed to accrue or arise in India - taxation of entire revenue received by the Appellant from provision of legal services on Indian engagements - Fees for Technical Services (FTS) - The tribunal critically analyzed the appellant's claim to the benefits under the India-UK DTAA. The Revenue argued that the appellant, being a fiscally transparent entity in the UK, did not qualify as a 'resident' under the DTAA, and hence, was not eligible for the treaty benefits. The tribunal, however, was persuaded by the appellant’s argument, supported by precedents and the tax treaty's provisions, that the income taxed in the UK in the hands of its UK tax resident partners should entitle the LLP to treaty benefits. - The tribunal allowed the appeal in favor of the appellant, setting aside the orders of the lower authorities regarding the taxability under FTS and the denial of DTAA benefits.
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• ITAT Mumbai: Tax Additions Need Solid Evidence, Not Just Suspicions, u/ss 68, 69C, and 14A of Income Tax Act.

  Case-Laws - AT : Assessment u/s 153A - The ITAT Mumbai's rulings reaffirm the principle that the additions under Sections 68, 69C, and disallowances under Section 14A require a concrete basis either in the form of incriminating materials found during the search or through clear evidence of unexplained cash credits or expenditures. Moreover, it highlighted the necessity for the Revenue to establish the lack of genuineness or creditworthiness beyond mere suspicions or procedural oversights
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Customs

• Tariff Values for Palm Oils and Brass Scrap Unchanged; Gold and Silver Revised Amid Global Price Fluctuations.

  Notifications : Notification No. 28/2024-Customs (N.T.) retains the tariff values for crude palm oil, RBD palm oil, others – palm oil, crude palmolein, RBD palmolein, others – palmolein, crude soyabean oil, and brass scrap (all grades) at their previous levels, indicating stability in these sectors. However, it introduces significant changes in the tariff values for gold and silver, setting them at 747 USD per 10 grams and 900 USD per kilogram, respectively. These adjustments may be indicative of fluctuations in the global prices of these precious metals, necessitating a recalibration of their tariff values to ensure equitable trade practices and prevent under-valuation or over-valuation at the time of import.
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• Late Fees Waived for Bills of Entry Due to Cyclone "MICHAUNG" Disruptions in Chennai from Dec 5-7, 2023.

  Circulars : The Trade Notice issued by the Office of the Principal Commissioner of Customs, Chennai, addresses the impact of Cyclonic Storm "MICHAUNG" on the filing of Bills of Entry in the region. Acknowledging the disruption caused by the natural disaster, the Customs authorities have decided to waive late fees for Bills of Entry filed for cargo arriving at Chennai Air Cargo/Airport from December 5th to 7th, 2023.
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• CBIC Clarifies Import Exemption for Used High-Value Medical Equipment, Excludes Critical Care Devices.

  Circulars : The Instruction No. 08/2024-Customs issued by the CBIC, discusses the exemption for importing high-end and high-value used medical equipment, excluding critical care medical equipment, under the Hazardous and Other Wastes (Management and Transboundary Movement) Second Amendment Rules, 2022. It outlines the permissions and restrictions imposed by the Ministry of Environment, Forest and Climate Change (MOEFCC) and provides a list of critical care medical equipment prohibited for re-use.
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• Tribunal Clears Appellants of Alleged Misconduct in Duty-Free Fuel Supply to Foreign Vessels Due to Lack of Evidence.

  Case-Laws - AT : Confiscation of goods - Clandestine removal of bunkers - import of duty free Furnace Oil & HSD Fuel Oil under warehouse procedure - The tribunal conducted a thorough analysis of the procedural aspects related to the duty-free import, warehousing, and subsequent supply of the bunker fuel to foreign going vessels. It noted the appellants' compliance with the requisite customs procedures, including the filing of warehousing bonds and undertaking as per Section 59 of the Customs Act, 1962 - Ultimately, the tribunal found that the department failed to establish the charge of diversion with cogent evidence. It underscored that serious allegations such as clandestine removal and diversion necessitate robust proof, which was conspicuously absent in this case.
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• Tribunal Confirms IGST Exemption for Export Manufacturer Amid Revenue's Oversight Under Advance Authorization Scheme.

  Case-Laws - AT : IGST exemption at the time of import of input materials by the appellant - Advance Authorization Scheme - The Tribunal acknowledged that while the Advance Authorization was initially issued under Notification No. 18/2005, it was subsequently revised to Notification No. 21/2015. However, considering the appellant's use of the imported goods for manufacturing final products that were exported, and the issuance of discharge certificates by the DGFT confirming export obligations, the Tribunal concluded that the appellant should be entitled to the benefit under Notification No. 18/2015–CUS. Additionally, it noted the contributory negligence on the part of Revenue for allowing IGST exemption under Notification No. 18/2015–CUS. Consequently, the Tribunal held that the demand for IGST exemption was not sustainable.
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• Tribunal Overturns Gold Confiscation Due to Insufficient Evidence; Orders Return or Compensation with Interest.

  Case-Laws - AT : Smuggling - Absolute confiscation of three gold bars and one small piece of remelted gold - Penalty u/s 112(a) and (b)(i) of Customs Act - The Tribunal noted that the confiscated gold did not bear any foreign markings and was not of standard size, shape, or weight typical of foreign-origin gold. This observation raised doubts about the assumption of its smuggled nature solely based on its physical characteristics. The Tribunal found that the Revenue had not provided substantial evidence to prove the smuggled nature of the gold, relying primarily on assumptions and the initial, subsequently retracted statements of the appellants' employees. - The Tribunal set aside the penalties imposed on the appellants and ordered the return of the confiscated gold to the managing partner. In instances where the gold had been disposed of by Revenue, the appellant was entitled to receive the sale proceeds along with interest.
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• Tribunal Finds No Unjust Enrichment; Assessee Meets Burden of Proof Under Customs Act, Dismisses Revenue's Appeal.

  Case-Laws - AT : Refund - Unjust Enrichment - amount deposited during investigation - The Tribunal observed that the doctrine of unjust enrichment is not attracted in this case as the Assessee had discharged the burden under Sec 28D of the Customs Act. It noted the absence of evidence showing that the Assessee received any additional amount from the foreign buyer beyond the final invoice, and that the deposits were made before any remittance was received. Thus, the Tribunal dismissed the appeal of Revenue on this ground.
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• Tribunal Rules 6% Interest Due on Refundable Deposits Held During Investigation, Recognizing Compensatory Nature.

  Case-Laws - AT : Refusal of grant of interest on the amount deposited during investigation, which was subsequently found to be refundable - The Tribunal found that the amount deposited during investigation took the character of revenue deposit. Considering similar precedents and the compensatory nature of interest, the Tribunal allowed interest at a rate of 6% per annum from the date of deposit till the date of refund.
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• Tribunal Upholds Penalties for Importer's Duty Evasion Due to Misdeclared Goods and False Exemption Claims.

  Case-Laws - AT : Recovery of differential duty (SAD) u/s 28(1) of CA for the imports made in all the Bills of Entry along with interest and penalties - The Tribunal confirmed the misdeclaration of goods and found the importer's actions led to the evasion of customs duties. - It was determined that claiming exemptions under false pretenses without fulfilling the necessary VAT payments constituted evasion of SAD. - The Tribunal upheld the penalties imposed on the appellants, stating their involvement and awareness of the transactions and misdeclarations were evident, directly implicating them in the customs duty evasion.
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• Tribunal Rules Intent to Export Currency a Minor Breach; Allows Redemption with Fine Instead of Absolute Confiscation.

  Case-Laws - AT : Smuggling - Absolute confiscation of foreign currency seized from the Appellant u/s 113(d),(e) & (h) of the Customs Act - The Tribunal found that there was only a venial breach of Section 113(d) of the Customs Act, implying that the Appellant had the intention to export but had not entered the customs area. - The Tribunal acknowledged that while the Appellant had intentions to travel outside India and possessed foreign currency, absolute confiscation was not justified. Instead, the Tribunal upheld confiscation under Section 113(d) of the Customs Act but allowed redemption upon payment of a fine.
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• Tribunal Rules Misclassification of Imported Fabric as Customs Evasion; Upholds Duty Payment Without Penalties.

  Case-Laws - AT : Classification of imported goods - Narrow Woven Fabric Webbing - The tribunal noted that the appellant's actions in misclassifying goods from a specific country indicated an attempt to evade duty payment, justifying the demand of customs duty. - The tribunal affirmed the decision to confirm the demand of customs duty, emphasizing that the appellant's concession regarding duty payment indicated acknowledgment of the duty liability, regardless of the absence of collusion or willful misstatement. - Regarding the non-confiscation of goods and absence of penalties under certain sections, the tribunal ruled in favor of the Commissioner's decision. It reasoned that while there was no explicit finding of collusion or willful misstatement to warrant penalties, the appellant's concession of duty payment justified the demand.
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• Tribunal Rules on Confiscated Mercedes Cars: Procedural Lapse Doesn't Justify Denying Duty Exemption Due to Substantial Compliance.

  Case-Laws - AT : Confiscation - imported four Mercedes Benz cars - restricted goods or not - While recognizing the mandatory nature of the type approval certificate under Rule 126 CMVR, the Tribunal distinguished the present case. It emphasized the certificates issued by the Delhi Transport Authority as fulfilling the intent of the import policy, even though there was a procedural lapse. The Tribunal concluded that denying duty exemption for a procedural lapse would be unjust, considering the substantial compliance demonstrated by the appellant.
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• Tribunal Rules Fuel Consumption by Foreign-Going Vessels Non-Dutiable During Cargo Transshipment.

  Case-Laws - AT : Levy of Customs Duty - transshipment of cargo - foreign-going vessel - bunker consumption for tug vessels - The tribunal examined relevant provisions of the Customs Act and concluded that the demand for duty on bunker consumption during transshipment was not valid. They determined that the vessels, arriving from a foreign port and not performing any coastal voyages, were considered foreign-going vessels, making the fuel consumed during transshipment non-dutiable.
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DGFT

• India Launches Melon Seeds Import Monitoring System: New Online Registration, Fees, and FSSAI Requirements for Importers.

  Circulars : The Public Notice issued by the DGFT introduces the Melon Seeds Import Monitoring System (MS-IMS) and outlines procedures for import registration. Importers are required to apply online, pay a fee of Rs. 500, and provide advance information to obtain an Automatic Registration Number. Registration must be completed within 10 days from the Bill of Lading date, with each number valid for a specific country of origin and port of import. Importers must declare Bill of Lading details and submit a valid FSSAI Manufacturer Licence for Melon Seeds during import clearance.
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• DGFT Updates SION E-124: New Input Specs for Importing 1 MT of Refined Sunflower Oil from Crude Oil and Chemicals.

  Circulars : The DGFT's amendment to SION E-124 involves a detailed specification of the quantities and types of inputs allowed to be imported for the production of 1 Metric Tonne (MT) of Refined Sunflower Oil for export. The amended norms specify the quantity of Crude Sunflower Oil (Edible Grade) with a Free Fatty Acid (FFA) range of 0.5 to 1.8% to be 1.033 MT for every 1 MT of the export product. This indicates a clear allowance for the loss in weight during the refining process and ensures that exporters can import a slightly higher quantity of crude oil than what is exported in its refined form. Additionally, the notice specifies the quantities of chemicals required in the refining process, including Caustic Lye (2.500 kg), Phosphoric acid (0.165 kg), Citric acid (0.020 kg), TONSIL Bleaching earth (2.000 kg), and Filter Aid (3600 Kg).
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IBC

• Application Rejected Under Insolvency Code Due to Pre-existing Dispute Over Service Claims, Upheld by Appellate Tribunal.

  Case-Laws - AT : CIRP - Rejection of Section 9 Application on the ground of pre-existing dispute - The dispute stemmed from services provided by the Operational Creditor to the Corporate Debtor, for which invoices were raised. However, the Corporate Debtor disputed the claims, citing demurrages imposed by the Principal Contractor. The Corporate Debtor consistently denied the claims made by the Operational Creditor, and this dispute was communicated to the Operational Creditor before the issuance of the Demand Notice under the Code. The Appellate Tribunal upheld the decision of the Adjudicating Authority, emphasizing that the materials on record clearly indicated the existence of a pre-existing dispute.
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PMLA

• Bail Granted in Money Laundering Case Amidst Trial Delays; Court Criticizes Systemic Inefficiencies and Urges Fair Trials.

  Case-Laws - HC : Seeking grant of bail - scheduled offence - The court acknowledged the gravity of the allegations but also highlighted the applicants' right to bail, given the substantial period already served in custody and the extensive delay in the trial's progression. - The court expressed concern over the systemic delays and the inefficiency in handling cases of such magnitude, emphasizing the collective responsibility of the judiciary, prosecution, and defense to ensure a fair and timely trial. It was explicitly mentioned that the delay in trial could not solely be attributed to the applicants, noting that both sides have legitimate exercises of their rights within the law.
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• Court Grants Bail in Money Laundering Case, Citing Legitimate Rights and Satisfaction of Legal Conditions.

  Case-Laws - HC : Maintainability of writ petition - Money Laundering - The Court evaluated the contention that the applicants had engaged in dilatory tactics. It concluded that the applications made by the accused, including bail applications, were legitimate exercises of their rights and not attempts to unduly delay proceedings. - While acknowledging the gravity of the alleged offenses, the Court determined that the seriousness of the allegations alone does not preclude the grant of bail, especially when statutory conditions for release under Section 436-A CrPC are met. - Ultimately, the Court granted bail to both applicants, subject to them furnishing personal and surety bonds with specific conditions.
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SEBI

• SEBI Updates Aadhaar-Based e-KYC Rules for Securities Market; Outlines KUA Responsibilities for Compliance.

  Circulars : The circular issued by SEBI on April 05, 2024, addresses the utilization of Aadhaar-based e-KYC authentication services in the securities market. It highlights the notification issued by the Department of Revenue, Ministry of Finance, which identifies 24 entities permitted to utilize Aadhaar authentication services for KYC purposes. SEBI emphasizes adherence to its previous circular on KYC norms and outlines the role of Know Your Authentication Service Providers (KUAs) in facilitating the onboarding of authorized entities as sub-KUAs.
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Service Tax

• Appeal Dismissed: Court Upholds Jurisdiction of Second Respondent in Summons Dispute, No Grounds for Interference Found.

  Case-Laws - HC : Rejection of appellants’ challenge to Summons, summoning the appellants to appear before the Second respondent - The Court found that the second respondent had jurisdiction as per relevant rules and notifications, and the show cause notice directed the appellants to respond to the competent authority. - Although the summons was issued by the second respondent, the show cause notice directed the appellants to respond to the Commissioner of Central Excise and Service Tax 1, Commissionerate, Bengaluru. - Therefore, the Court concluded that there was no reason to interfere with the learned Single Judge’s order regarding jurisdiction.
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• Tribunal Upholds Service Tax Exemption for Emergency Services Under Dial 108/102/104; Dismisses Penalties for Dial 100.

  Case-Laws - AT : Eligibility to exemption - Taxability of emergency response services provided to government entities - The tribunal upheld the exemption for Dial 108, Dial 102, and Dial 104 projects under Notification No. 25/2012–ST, affirming these services were provided to the government by way of public health and were thus exempt from service tax. - The tribunal recognized the tax liability for the Dial 100 Project, noting that the service tax for this project had been duly paid by the appellant, including the applicable interest, before the issuance of the show cause notice. - The tribunal also recognized the appellant's good faith belief in their exemption status, leading to the setting aside of penalties for the alleged non-compliance.
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• Tribunal Rules Post-Grad Program and Research Projects at Educational Institution Exempt from Service Tax.

  Case-Laws - AT : Taxability - research projects - educational programs - The case involved disputes regarding the taxability of fees for a post-graduate program and externally funded research projects conducted by an educational institution. The Tribunal determined that the post-graduate program qualified for exemption as an educational institution, thereby exempting it from service tax. Regarding externally funded research projects, the Tribunal found that the primary objective of the institution was academic, and the funds received were for furthering academic pursuits rather than providing taxable services. Therefore, the demands for service tax were dismissed.
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• Cargo Agent Building Integral to Airport, Exempt from Service Tax Due to Works Contract Exclusion.

  Case-Laws - AT : Classification of services - Cargo Handling Services or Works Contract Services - The Appellate Tribunal concludes that the cargo agent building constructed by the appellant is indeed an integral part of the airport. The Tribunal emphasizes that the building's role in facilitating cargo operations, its physical connectivity to the cargo terminal and runway, and its inclusion in the airport's master plan all support this conclusion. - Based on these findings, the Tribunal holds that the activity of constructing the cargo agent building falls within the exclusion clause of the definition of works contract service. Therefore, the appellant is not liable to pay service tax on the construction services provided in relation to the cargo agent building.
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• Antivirus Software Licenses Classified as Goods, Not Services; Tribunal Rules No Service Tax on License Key Sales.

  Case-Laws - AT : Classification of transactions involving the supply of antivirus software license codes/keys to end-users as either a provision of service or sale of goods. - The Tribunal concurred with the Supreme Court's view that the essence of a transaction involving canned software, which is physically transferred on media like CDs, constitutes a sale of goods rather than the provision of a service. This is because the transaction entails the transfer of right to use the software, satisfying the criteria of 'deemed sale' under the Constitution. - The Tribunal found that the adjudicating authority erred in imposing service tax on the transactions. It underscored that the appellant's distribution of software license codes/keys, which are integral to the use of antivirus software, falls within the ambit of 'deemed sale' and thus cannot be subjected to service tax.
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Central Excise

• CENVAT Credit Reversal Not Needed for Inputs Destroyed by Fire During Production, Tribunal Rules in Favor of Appellant.

  Case-Laws - AT : Reversal of CENVAT Credit - inputs consumed/utilized for production, at the work-in-progress stage, were destroyed in fire in the factory - The Tribunal examined the legal provisions and found that destroyed WIP or semi-finished goods should not be considered as inputs subject to duty reversal. Therefore, they allowed the appeal and ruled in favor of the appellant, clarifying that no duty reversal was required on the destroyed inputs forming part of WIP/semi-finished goods.
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• Processes on Steel Pipes Not Classified as Manufacturing Under Excise Law Despite Tariff Heading Change.

  Case-Laws - AT : Process amounting to manufacture - Change in Tariff Heading - buying tubes (stainless steel pipes) and then undertaking certain processes thereon, such as, upsetting, heat treatment, inspection, testing, threading and external coating, so that the pipes can be used for the purposes of oil drilling - The Tribunal finds that the processes undertaken by the appellant do not amount to 'manufacture,' citing precedents and the lack of substantial changes in the character or end-use of the products. - The Tribunal dismisses the Revenue's argument that a change in the tariff heading implies 'manufacture,' stating that such changes do not necessarily indicate manufacturing processes.
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• Tribunal Rules Against Appellants for Evading Central Excise Duty via Unregistered Manufacturing and False SSI Claims.

  Case-Laws - AT : SSI Exemption - value of clearances - clubbing of clearances - The tribunal found the appellants engaged in the manufacture and sale of excisable goods without Central Excise registration, crossing the exemption turnover limit but still claiming benefits under the SSI exemption notification. The appellants created a separate entity to continue availing of the SSI exemption, which was deemed a scheme for suppressing the value of clearances to evade duty. The tribunal upheld the demand for Central Excise duty for the period from April 2013 to November 2014, including the appropriation of a deposit made during the investigation towards this duty liability.
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VAT

• VAT Not Applicable on Old Machinery Sold Post-Business Closure; High Court Classifies as Exempt Capital Goods.

  Case-Laws - HC : Levy of VAT (tax) - Turnover of old machinery and equipment after the closure of business - The central contention is the interpretation of the amended definition of "business" and the classification of the assets sold. The revisionist argues for a broader interpretation, encompassing all transactions related to goods acquired during business operation, while the respondent maintains that the assets sold are capital goods and thus exempt from taxation. - The High Court, after careful consideration, rules in favor of the respondent (assessee). It emphasizes that the amended definition of "business" restricts taxation to the sale of goods acquired during business operation, excluding transactions post-business closure. Additionally, the Court agrees with the lower authorities' classification of the assets sold as capital goods, affirming that they fall outside the taxable scope of the Act.
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Case Laws:

• GST

• 2024 (4) TMI 422
  Principles of natural justice - vague SCN - notice did nor disclose to the petitioner, the date, time or venue of personal hearing - violation of Section 75(4) of UPGST Act - HELD THAT:- The issue has been considered by a coordinate bench of this Court in M/S MOHINI TRADERS VERSUS STATE OF U.P. AND ANOTHER [ 2023 (6) TMI 531 - ALLAHABAD HIGH COURT ] as also in MAHAVEER TRADING COMPANY VERSUS DEPUTY COMMISSIONER STATE TAX AND ANOTHER [ 2024 (3) TMI 334 - ALLAHABAD HIGH COURT ] where it was held that The impugned order cannot be sustained in the eyes of law. It has been passed in gross violation of fundamental principles of natural justice. The self imposed bar of alternative remedy cannot be applied in such facts. If applied, it would be of no real use. In fact, it would be counter productive to the interest of justice. Here, it may be noted, the appeal authority does not have the authority to remand the proceedings. In view of the facts noted above and the earlier decisions of the Court, no useful purpose may be served in keeping the present petition pending or calling for a counter affidavit at this stage. The impugned order dated 17.03.2023 is set aside. The matter is remitted to the respondent no.2/Assistant Commissioner, Sector - 8, Varanasi (A) : Varanasi I, Commercial Tax to issue a fresh notice to the petitioner within a period of two weeks from today - petition allowed by way of remand.

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• 2024 (4) TMI 421
  Time limitation - Section 14 of the Limitation Act, 1963 - Penalty order under Section 129(3) of UPGST Act - Seizure of goods - HELD THAT:- Upon perusal of the documents and upon hearing counsel for the parties, it is clear that coordinate Bench of this Court had given a specific direction by order dated September 13, 2021 giving liberty to the petitioner to approach the appellate authority. Furthermore, this Court in MURLI PACKERS THROUGH ITS PROPRIETOR RAKESH KUMAR JAIN VERSUS STATE OF UP THROUGH SECRETARY, INSTITUTIONAL FINANCE AND 2 OTHERS [ 2024 (2) TMI 63 - ALLAHABAD HIGH COURT ] has held that benefit of Section 14 of the Limitation Act would apply in relation to the appeal filed under Section 107 of the Act. The impugned order dated June 16, 2023 is quashed and set aside with a direction upon the appellate authority to hear and decide the appeal of the petitioner on merits expeditiously, preferably within a period of three months from the date of presentation of a certified copy of this order - Petition allowed.

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• 2024 (4) TMI 420
  Principles of natural justice - ex-parte order dated 30.09.2023 issued by Commercial Tax Officer, Sector-4, Ghaziabad, Uttar Pradesh - petitioner was never afforded any opportunity of personal hearing - HELD THAT:- Upon service of notice the petitioner had been called to file its reply only. Non compliance of that show cause notice may have only led to closure of opportunity to submit written reply. However by virtue of the express provision of Section 75 of the Act, even in that situation the petitioner did not lose its right to participate in the oral hearing and establish at that stage itself that the adverse conclusions proposed to be drawn against the petitioner, may be dropped - the rules of natural justice as are ingrained in the statute prescribe dual requirement. First with respect to submission of written reply and the second with respect to oral hearing. Failure to avail one opportunity may not lead to denial of the other. The two tests have to be satisfied independently. Thus, no useful purpose may be served in keeping this petition pending or calling counter affidavit at this stage or to relegate the present petitioner to the forum of alternative remedy. The order impugned has been passed contrary to the mandatory procedure. The deficiency of procedure is self apparent and critical to the out come of the proceedings - matter is remitted to the respondent No. 2 to pass a fresh order. Petition allowed by way of remand.

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• 2024 (4) TMI 419
  Simultaneous investigation by the Central and State GST authorities - Challenged summons issued, even after a lapse of 15 days - Violation of the circular issued by the Central Board of Excise - suppression of transaction concerning supply of goods/services or suppression of stock or goods - Overlapping of tax periods in the pending case - show cause-cum-demand notice - HELD THAT:- There is no ambiguity in the language of Section 6(2)(b) of the CGST/OGST Act, which bars initiation of proceeding by a proper officer under CGST Act where a proper officer under the State Goods and Services Act or the Union territory Goods and Services Tax Act has initiated proceeding on a subject matter. The relevant fact to be borne in mind is the subject matter of the proceeding. If the subject matter of the proceeding is entirely different, there is no bar to the maintainability of the proceeding. What is barred is the initiation of the proceeding on the same subject matter by the proper officer. The words subject matter can be equated with words cause of action . The reason behind barring the initiation of proceeding on the same subject matter by the proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Act seems to be that the possibility of the final decision in the two proceedings being different cannot be totally ruled out which would create confusion. In the case of Vallabh Das v. Madan Lal and Ors [ 1970 (4) TMI 168 - SUPREME COURT] , it is held that the expression subject matter is not defined in the Civil Procedure Code. That expression includes the cause of action and the relief claimed. Unless the cause of action and the relief claimed in the second suit are the same as in the first suit, it cannot be said that the subject matter of the second suit is the same as that in the previous suit. In the present case, the opposite parties have disputed that the proceedings initiated by the officer under the State GST Act and the show cause notice issued by the DGGI relate to the same subject matter . It is the specific ground on behalf of opposite party No.1 that the Central GST authority had initiated investigation of suppression of transaction by the petitioner. The DGGI was investigating clandestine supply by the petitioner during the month of March, 2022 only whereas investigation by CT and GST was with reference to receipt of materials from one supplier i.e. M/s. Anamika Enterprises. Be that as it may, in view the nature of the order which we intend to pass in the present matter, we refrain ourselves from recording any definite opinion at this stage that the impugned show cause notice issued by the DGGI is barred or not by virtue of operation of Section 6(2)(b) of the CGST/OGST, Act considering the dispute raised in this regard on behalf of opposite parties No.1 and 2. We see no reason why the petitioner did not respond to the summons issued by the DGGI taking a plea that it was barred by Section 6(2)(b) of the CGST/OGST Act. Further, in the present case, a show cause-cum-demand notice has already been issued on 29.12.2023. Such being the position, we decline to interfere in the present matter. The petitioner shall have the liberty to respond to the said show cause-cum-demand notice dated 29.12.2023 and take appropriate recourse to the provisions of the CGST Act. Since we have refrained ourselves from expressing any definite opinion as to whether the case of the petitioner is covered by Section 6(2)(b) of the CGST/OGST Act, it would be open for petitioner to take the said plea before the appropriate forum in appropriate proceeding. These writ petitions are, accordingly, disposed of with the liberty as aforesaid.

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• 2024 (4) TMI 418
  Petition challenging the Order passed u/s 74 of the Central Goods and Service Tax Act, 2017 ( the Act ) and rejected first appeal - certified copy of the order passed u/s 74 of the Act was not annexed to the appeal - HELD THAT:- Upon a perusal of the appellate order, I am of the view that the technical ground on which the appellate authority has rejected the first appeal of the petitioner should not be allowed to stand. Thus, the impugned order dated August 25, 2022 passed by the appellate authority is quashed and set aside with a direction upon the appellate authority to hear out the first appeal of the petitioner on merits and pass a reasoned order after granting an opportunity of hearing to the petitioner. The entire exercise should be completed within a period of ten weeks from date. With the above direction, the writ petition is disposed of.

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• 2024 (4) TMI 417
  Validity Of order in original - Order for cancellation of registration passed without any application of mind - HELD THAT:- In the present case, the facts are similar to one in Surendra Bahadur Singh s case [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT] wherein the appeal was barred by time u/s 107 of the Act. However, the Division Bench took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. Thus, the orders impugned herein are liable to be set aside. Accordingly, the order in original and the appellate order are quashed and set aside.

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• 2024 (4) TMI 416
  Cancellation of GST Registration retrospectively - Validity Of Show Cause Notice, does not bear the date and time whereby the Petitioner was required to appear for personal hearing - not considered by the Proper Officer - No longer continuing business - HELD THAT:- Pursuant to the said impugned order, Petitioner filed an application dated 24.06.2021 seeking revocation of cancellation of GST registration. On the said application, Petitioner was issued a Show Cause Notice dated 19.07.2021 for rejection of application for revocation of cancellation of registration. It merely stated The reasons entered for revocation of cancellation is not appropriate. We notice that Show Cause Notice and the impugned order are also bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed, and the taxpayer was compliant. 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, we do not consider it 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 above that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 16.06.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 31.12.2019. i.e., the date when the Petitioner discontinued his business. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017 Petition is accordingly disposed of in the above terms.

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• 2024 (4) TMI 415
  Violation of principles of natural justice - Order passed without granting any opportunity of Personal hearing to the petitioner - mandatory requirement of the UPGST Act, 2017 - HELD THAT:- This Court in M/s Shree Sai Palace v. State of U.P. and Another [ 2024 (3) TMI 49 - ALLAHABAD HIGH COURT] , relying on two judgments of coordinate Bench of this Court in Bharat Mint and Allied Chemicals v. Commissioner Commercial Tax and Others [ 2022 (3) TMI 492 - ALLAHABAD HIGH COURT] and M/s Primeone Work Force Pvt. Ltd. v. Union of India, [ 2024 (1) TMI 625 - ALLAHABAD HIGH COURT] in similar facts and circumstances has held that no orders can be allowed to pass through the legislative barriers of natural justice erected to safeguard individual rights and prevent abuse of power and that the opportunity of hearing is required to be afforded to the petitioner before passing orders. Thus, let there be a writ of certiorari issued against the order dated July 12, 2023 and the order dated August 18, 2022. These orders are quashed and set aside. Consequential relief to follow. The respondent No. 3 is directed to grant an opportunity of personal hearing to the petitioner and thereafter pass a reasoned order in accordance with the law within a period of six weeks from date. This writ petition is, accordingly, allowed.

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• 2024 (4) TMI 414
  Validity Of order in original - Order for cancellation of registration passed without any application of mind - appellate order u/s 107 - HELD THAT:- In the present case, the facts are similar to one in Surendra Bahadur Singh s case [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT] wherein the appeal was barred by time u/s 107 of the Act. However, the Division Bench, took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. Thus, the orders impugned herein are liable to be set aside. Accordingly, the order in original and the appellate order, are quashed and set aside. Thus, the writ petition is allowed.

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• 2024 (4) TMI 413
  Validity of Order passed u/s 129(1)(b) of the U.P.G.S.T. Act, 2017 - seized and penalty imposed, while they were in transit on truck - registration cancelled ten days after the Tax Invoice was issued - HELD THAT:- Since issuance of the Tax Invoice and its presence at the time of the detention of the goods is not doubted and further inasmuch as on the date of transaction being performed the petitioner was a registered dealer, we dispose of the writ petition with the observation, the penalty be reduced in terms of Section 129(1)(a) of the State Act. Subject to payment of due amount within a period of three weeks, the goods and vehicle be released forthwith.

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• 2024 (4) TMI 412
  Maintainability of order - respondents have not put their signatures nor there exists any digital signature - statutory mandate engrained in Rule 26(3) of the Central Board of Service Tax Rule 2017 not followed - HELD THAT:- By placing reliance on the judgments of various High Courts in SRK Enterprises v. Assistant Commissioner (ST) [ 2023 (12) TMI 156 - ANDHRA PRADESH HIGH COURT] , Ramani Suchit Malushte v. Union of India [ 2022 (9) TMI 1263 - BOMBAY HIGH COURT] , Railsys Engineers Pvt. Ltd. v. Additional Commissioner of CGST (Appeals-II) [ 2022 (7) TMI 1230 - DELHI HIGH COURT] and another judgment of this Court in M/S. SILVER OAK VILLAS LLP VERSUS THE ASSISTANT COMMISSIONER (ST) , THE ADDITIONAL COMMISSIONER OF CENTRAL TAX, STATE OF TELANGANA, UNION OF INDIA, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS [ 2024 (4) TMI 367 - TELANGANA HIGH COURT] , learned counsel for the petitioner submits that the singular point involved is no more res integra. Since the order is not pregnant with the signature of the competent authority, the order cannot sustain judicial scrutiny. Other side did not dispute the factum of non-availability of signature on the notice and order. In this view of the matter, notices dated 10.02.2022, 12.02.2021 and order dated 15.11.2023 are set aside. Liberty is reserved to the department to proceed against the petitioner in accordance with law. The writ petition is disposed off.

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• 2024 (4) TMI 411
  Disallowance of input tax credit received from the ISD - petitioner not file GSTR Form-6 - provisions of sub-section (7) of Section 140 of CGST Act - HELD THAT:- As per the Rule 36 of the CGST Rules, the petitioner has received the invoice of distribution of the input tax credit of its ISD and therefore the petitioner is entitled to such input tax credit. Considering the submissions, issue Notice returnable on 1st May, 2024. In the meanwhile, no coercive action shall be taken by the respondent authority during the pendency of this petition. Direct service is permitted through e-mail.

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• 2024 (4) TMI 410
  Disallowance of CENVAT Credit - Section 140 of CGST Act, 2017 - transitional credit - HELD THAT:- In the present case, petitioner s appeal has been dismissed. Since, no Tribunal is working at this stage, therefore, the High Court can examine the case. At this stage, Rishab Kapoor, Advocate, accepts notice on behalf of the respondents and seeks time to get instructions. Adjourned to for 11.09.023 - To be heard along with CWP-2687-2021. In the meantime, no coercive steps shall be taken.

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• 2024 (4) TMI 409
  Applicability of GST - Benefit of exemption - Supply of Services by Residents Welfare Association (RWA) - contributions towards the corpus fund made by the members of the RWA - whether this money is in the form of a deposit or an advance payment - CGST/ SGST on collection of common area electricity charges from the members - HELD THAT:- As per the ICAI Guidance Note on Terms Used in Financial Statements , a Sinking Fund is a fund created for the repayment of a liability or for the replacement of an asset. In the case of a RWA, such sinking/corpus fund is created in order to meet future contingencies e.g., to meet the expenses for structural repairing, reconstruction work etc. RWA creates a sinking/corpus fund which serves as a backup fund for supply of specific services. A member contributes to such funds with an agreed condition that the RWA will provide some specific services in future, as and when required out of the said funds. So, it is pertinent to refer that the contributions towards the sinking/corpus fund are made by the members of the RWA with a presumption that such funds will be used for bearing the burden of expenses of future supply of services like common area maintenance and other future contingencies as may arise. This contribution is thus an acceptance of the offer of guarding future burden of expenses as made by the RWA, i.e. the appellant in this case to its members. This money is never refunded back to the members but is always in the possession of the RWA for bearing such expenses. Hence, such contribution is not of the nature of a deposit in the truest sense of the term but an advance payment made by the members of the RWA for receiving a supply of common area maintenance services to be provided to them by the RWA in future. As a result, the same would be taxable and the appellant will be liable to pay tax at the time of receipt of such amount in accordance with the provisions of sub-section (2) to section 13 of the GST Act. Tax on electricity charges received by the RWA - It is observed that the appellant has collected the electricity charges consumed for common area from its members on pro-rata basis. Further, the tax invoice issued in this case for Common Area Maintenance shows a consolidated amount under SAC 999598 where a fixed rate is levied per square feet of the area of the flat. Tax @ 18% has also been charged on the entire amount. This Common Area Maintenance Charge not only includes common area electricity charges but also charges for other services like security, scavenging, water supply, maintenance of garden etc. Any amount collected on account of consumption of electricity has not been shown separately in the said invoice. Thus, services relating to electricity charges are bundled with supply of goods and services for the common use of its members and hence form a part of composite supply where the principal supply is the supply of common area maintenance services. Therefore, the rate of the principal supply i.e., GST rate on maintenance of the premise would be applicable. The WBAAR Ruling is thus confirmed and the Appeal stands rejected.

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• Income Tax

• 2024 (4) TMI 424
  Penalty u/s 271(1)(c) - defective notice u/s 274 - as argued AO had failed to strike-off the irrelevant default while calling upon the assessee to explain as to why he may not be subjected to penalty u/s 271(1)(c) - HELD THAT:- Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty u/s 271(1)(c) was sought to be imposed on him by clearly and explicitly pointing out the specific default in the SCN(s) for which he was called upon to explain that as to why penalty u/s. 271(1)(c) of the Act may not be imposed upon him had left the assessee guessing of the default for which he was being proceeded against, and further divested him of an opportunity to put forth an explanation before the A.O that no such penalty was called for in his case. We, thus, are of a strong conviction that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the defaults for which he was being proceeded against, therefore, the penalty u/s 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. Thus we are not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. The penalty imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. Assessee appeal allowed.

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• 2024 (4) TMI 423
  Bogus LTCG on shares - unexplained credit u/s 68 - HELD THAT:- Only finding of the Ld. AO that the investor s share capital and reserves were not changed from the preceding year also there is insufficient income cannot be the sole reason to characterize the said transaction as bogus and to disqualify the same under the provisions of Section 68 for making an addition. In the present case, the assessee had cooperated with the department have produced all the necessary information, including the production of the director of the investor company, before the ld. AO; therefore, the burden cast on the assessee has been duly discharged. Ld. CIT(A) has also observed, and rightly so, that there was no reasonable basis supported by any material on record with the Ld. AO to disprove, the identity and creditworthiness of the investor, i.e., M/s Axis Propbuild Private Limited, and the genuineness of the transaction. We hold that the addition made by the AO was merely on the basis of a preconceived notion, arbitrary, and unsustainable; therefore, the finding of CIT(A) that since the identity and creditworthiness of the investor as well as the genuineness of the transaction is duly established, therefore, in absence of any further explanation, evidence, material, or decision to dislodge such finding of the CIT(A) by the revenue, we do not find any infirmity in the said findings so as to interfere with the same. In result, Ground No. 1 of the appeal of the revenue dismissed.

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• 2024 (4) TMI 408
  Characterization of receipt - interest received by the assessee under Section 28 and 34 of the Land Acquisition Act, 1894 - as per AO receipt of interest must be treated as income chargeable to tax u/s 56(2)(viii) of the Act and therefore, it allowed the statutory deduction of 50% of the interest income u/s 57(iv) - whether the interest on enhanced compensation received by the respondent-assessee partakes the character of income from other sources under Section 56(2)(viii) of the Act, to be considered as separable from the enhanced compensation? HELD THAT:- A conjoint reading of the provisions i.e., Sections 56(2)(viii) and 145-B of the Act vividly stipulate that the income received by way of interest on compensation or on enhanced compensation shall be chargeable to tax under the head income from other sources . Therefore, since the position with respect to the imposition of tax on interest on compensation or enhanced compensation, as it exists today, came into being only in the year 2010, the conclusions drawn from the decision in Ghanshyam [ 2009 (7) TMI 12 - SUPREME COURT] which was passed in the year 2009, are unsustainable in the facts of the present case. Much reliance has been placed by the ITAT upon the decision of the Hon ble Supreme Court in the case of CIT v. Govindbhai Mamaiya [ 2014 (9) TMI 587 - SUPREME COURT] which relies upon the case of Ghanshyam (supra) to hold that the interest on enhanced compensation received under Section 28 of the Act of 1894 is exigible to tax on receipt basis. However, a deeper analysis of the decision in Govindbhai Mamaiya (supra) would show that it does not deal with any issue pertaining to the change in the taxability, put in place through the concerned amendment of 2010. Therefore, the said decision lacks any applicability in the facts and circumstances of the present case. Notably, a three-Judges Bench of the Hon ble Supreme Court in the case of Sham Lal Narula (Dr.) [ 1964 (4) TMI 10 - SUPREME COURT] while considering the interest under Section 28 of the Act of 1894 to be analogous to the interest under Section 34 of the Act, took the view that the same did not form part of compensation We affirm the concurrent findings of the AO and CIT(A) and find that the view taken by the ITAT is unsustainable, as the same is based on an incorrect appreciation of law. The 2010 amendment was a conscious departure by the Legislature from the earlier position and the said departure holds good law, as on date. There is no question with respect to the vires of the amendment before us or regarding any ambiguity in the language of the amendment. The only concern is regarding the enunciation of the applicable law and we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax. We, accordingly, answer the substantial question of law which has arisen in the instant appeal in affirmative and in favour of the Revenue.

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• 2024 (4) TMI 407
  Addition u/s 14A r.w.r.8D - AO mandation to record dis-satisfaction with the correctness of the Assessee s claim regarding expenditure related to exempt income - HELD THAT:- We agree with the finding of the CIT(A) and the ITAT that though the AO has stated that Assessee s explanation is not acceptable, he has not given reasons why it was not acceptable to him. Subsection (2) of Section 14A and Rule 8D provides that if the AO is not satisfied with the correctness of the claim in respect of expenditure made by Assessee in relation to income which does not form part of the total income under the Act, he shall determine the amount of expenditure in relation to such income in accordance with the provisions prescribed. The most fundamental requirement, therefore, is the Assessing Officer should record his dissatisfaction with the correctness of the claim of Assessee in respect of the expenditure and to arrive at such dissatisfaction, he should give cogent reasons. See JSW Energy Limited. [ 2023 (6) TMI 1223 - BOMBAY HIGH COURT] The order of the ITAT (Panaji Bench) in the case of Sesa Goa Limited [ 2013 (9) TMI 233 - ITAT PANAJI] has been upheld by the Goa Bench of this Court in CIT, Goa v. Sesa Goa Limited, Panaji, Goa [ 2021 (5) TMI 466 - BOMBAY HIGH COURT] where the Division Bench concurred with the view taken by the ITAT that the AO did not record his satisfaction why the disallowance made by Assessee was incorrect. Assessee appeal allowed.

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• 2024 (4) TMI 406
  Exemption from paying advance tax - Seeking permission to prosecute appeal against order of assessment without having to pay the advance tax u/s 249(4) - DR submitted that even in the year 2017-18, the petitioner has made substantial investments in immovable property while not filing a return of income or paying even the admitted tax in respect of the assessment year 2016-17, since the demand in order of assessment is in excess of Rs. 68 crores, a substantial amount will have to be remitted by the petitioner for maintaining the appeal. HELD THAT:- Since it is not seriously disputed that the case of the petitioner falls under the proviso Section 249(4)(b) of the 1961 Act, Ext. P17 appeal filed by the petitioner against Ext. P15 order of assessment for the assessment year 2016-17 can be directed to be disposed of on merits after affording an opportunity of hearing to the petitioner on the condition that the petitioner remits a total sum of Rs 12 crores against the demands in Ext. P15 order of assessment. An amount of Rs. 11.75 crores shall be remitted by the petitioner in 8 equal monthly installments commencing from 15.04.2024. Subsequent installments shall be paid on or before the 15th day of the succeeding months. The petitioner shall remit a sum of Rs. 25 lakhs towards the demand in Ext. P15 on or before 31.03.2024. If the petitioner fails to remit the amounts as directed above, it will be open to the Department to proceed for recovery of amounts assessed in terms of Ext.P15. Since the above condition is to be satisfied for maintaining the appeal, it is directed that the appeal filed by the petitioner shall be taken up and adjudicated only after the entire amounts (Rs 12 crores) payable by the petitioner in terms of this judgment are paid, as directed.

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• 2024 (4) TMI 405
  Assessment u/s 153A - Additions made in original assessment u/s 143(3) of the Act again added back in the assessment completed u/s 153A/143(3) , Disallowance of loss incurred by SEZ added u/s 115JB, Disallowance of deduction claimed u/s 35(2AB) , Expenditure by way of tax paid on ESOP added u/s 115JB - HELD THAT:- We find merit in the preliminary plea of the Ld. AR for the assessee that the impugned disallowance was not based on any incriminating material found in the course of search and therefore the AO was legally unjustified in making this addition in the unabated AY 2010-11. It is noted that, this addition was also made on re-appraisal of the claim made by the assessee in the return of income, which had not been disputed in the original assessment u/s 143(3) of the Act. This addition was not made with reference to any impounded material seized in search. Hence, in absence of any incriminating material to justify this addition, and following the decision of Abhisar Buildwell Pvt Ltd [ 2023 (4) TMI 1056 - SUPREME COURT] we hold that the impugned disallowance was legally untenable in the unabated AY 2010-11. Disallowance of purchases in relation to over-invoicing of raw materials - addition made it was made on the basis of statements given by the three employees in the course of search u/s 132(4) of the Act, which is an important piece of evidence in itself and that their subsequent retraction, being an afterthought, was of no relevance - HELD THAT:- We direct the AO to delete the addition made on account of over invoicing in purchases across all AYs. Hence, the grounds raised by the assessee are allowed and the grounds of Revenue are dismissed. Estimation of income - bogus purchases - whether the entire value of payments made to the suppliers was to be disallowed or only the profit element embedded therein was to be taxed in hands of the assessee? - HELD THAT:- Only the profit element embedded in these purchases ought to be assessed to tax and that on the given facts, the disallowance of entire value of purchases was unwarranted. Coming to the issue of estimation of the profits, on the given facts and having regard to the gross profit already declared by the assessee, according to us, in the fitness of matters and fair play, profit rate of 8% would be fair reasonable. The AO is accordingly directed to restrict the addition on account of bogus purchases to 8% of the value of supplies across all AYs 2009-10, 2010-11, 2011-12 2012-13. With these directions, the grounds of the assessee are partly allowed Disallowance of professional fees - AO thus held that ACIAL had provided accommodation entries to the assessee as well, in the guise of professional fees - case of the Revenue is found to be hinge solely on the statement of one Mr. Shirish Shah who was purportedly found to have been involved in providing accommodation entries in the form of bogus long-term capital gains and share capital etc. - HELD THAT:- As relying on Odeon Builders Pvt. ltd [ 2019 (8) TMI 1072 - SUPREME COURT] addition/disallowance made solely on third party information without subjecting it to further scrutiny and denying the opportunity of cross examination of the third party renders the addition/disallowance bad in law. , thus the order of the Ld. CIT(A) deleting the disallowance of professional fees made by the AO, does not warrant any interference. These grounds of the Revenue are therefore dismissed. Disallowance of sales promotion expenses u/s 37(1) - sales promotion expenses which according to the AO fell within the ambit of freebies given to doctors, in violation of the guidelines issued by Medical Council of India in December 2009 and the CBDT Circular issued in August 2012 - HELD THAT:- It is not disputed by the Revenue that the items of expenses incurred under these heads were of nominal value less than Rs. 1000/- on flowers, sweets, cup, aprons etc. The sales promotion articles which had their name logo were given to customers, retailers, stockiest and distributors as a part of their brand awareness strategy. Likewise, flowers and sweets of nominal value would also be given by field staff on special occasions to their customer / stockiest / distributors. Also, some of these items were used by field staff to be given to doctors in the course of their visits. As noted MCI Notification dated 01.02.2016 has excluded nominal gifts valuing Rs. 1000/- and less from the mischief of MCI Regulations, 2009. This was also clarified by a public notice issued by Government of India dated 16.03.2022. In light of the foregoing and following the decision of this Tribunal at Bangalore in the case of Himalaya Drug Company [ 2020 (12) TMI 1060 - ITAT BANGALORE] the disallowance made by the AO out of these sub-heads of sales promotion expenses is held to be unsustainable and is thus directed to be deleted. Expenditure u/Sub-head Journals Periodicals , it is noted that these expenses were incurred for researching printing literature or purchasing journals regarding the products and its related uses/effects. As noted earlier, these expenses do not result in any benefit or gifts given to the doctors. We thus agree with the following findings of Ld. CIT(A) recorded in AY 2011-12 deleting the disallowance made by the AO on account of expenses incurred under this sub-head. Sub-head Taxi Hire Charges we note that these expenses were incurred by sales personnel of the assessee and not paid to any doctors or medical practitioners. Accordingly, the disallowance of taxi hire charges is held to be unwarranted in the facts of this case, and we direct to delete the same in all AYs. Sub-head Field Printing Expenses we note that these expenses related to printing of files, folders, pads and pens which were understandably to be used by the field staff and also the doctors who were attending camps. Going by the nature of these expenses, it cannot be termed as freebies given to doctors and hence we uphold the order of Ld. CIT(A) deleting the same. Sub-head Trade Relation Expenses Gifts for Sales Promotion , AO had disallowed these expenses under erroneous understanding that these were given to doctors. We accordingly uphold the order of Ld. CIT(A) deleting the same. Sub-head Air Ticket Expenses, according to us, the air ticket expenses paid for doctors directly fell under the mischief of MCI Regulations 2009 and was thus not allowable as deduction under Explanation (1) to Section 37(1) of the Act. We thus reverse the order of Ld. CIT(A) in this regard and uphold the action of AO disallowing the same in full. Enhancement of deduction u/s 80-IC of the Act to the extent of such disallowance of sales promotion expenses - A s brought to our notice that the AO had already, in principle, accepted the above plea of the assessee qua the amount disallowed in the assessment and accorded the benefit of the Circular No. 37/2016 dated 02.11.2016 - The AO is noted to have attributed the disallowance relatable to the eligible units and enhanced the eligible profits of the units available for deduction u/s 80-IC of the Act accordingly. In such a scenario therefore, this particular plea of the assessee is found to be acceptable. Hence, having regard to the disallowance quantified by us above, the AO is accordingly directed to appropriately attribute the disallowance of freebies to the eligible unit s u/s 80-IC of the Act and consequentially re-compute the enhanced eligible profits and allow the deduction u/s 80-IC of the Act. Needless to say, the AO shall allow an opportunity of hearing to the assessee to provide necessary computation, before undertaking this exercise. Disallowance of ESOP expenses - HELD THAT:- Tribunal in their order [ 2022 (9) TMI 526 - ITAT MUMBAI] dated 29.08.2022 is noted to have upheld the Ld. CIT(A) s order deleting the disallowance of ESOP expenses by following the decision of Biocon Ltd. [ 2013 (8) TMI 629 - ITAT BANGALORE] The Tribunal also took note of the fact that the Hon ble Karnataka High Court in their judgment reported [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] has since affirmed the decision of the Special Bench. Thus, in light of aforesaid decisions, we have no hesitation in upholding the order of Ld. CIT(A) deleting this impugned addition. We thus dismiss these grounds of the Revenue. D isallowance of deduction u/s 80IC in relation to sale of scrap - HELD THAT:- Heard both the parties. It is noted that the impugned issue stands squarely covered in favour of the assessee by the decision rendered by this Tribunal in their common order passed in assessee s own case for AYs 2008-09 2009-10, [ 2022 (9) TMI 526 - ITAT MUMBAI] wherein as held Provision of Section 80IC of the Act allows deduction of profit and gains derived by undertaking from eligible business. It cannot said that sale of empty containers is altogether different business of the assessee. We further held that this issue is squarely covered in favour of the assessee by the decision of honourable Delhi High Court in case of CIT versus Sadhu forging Ltd [ 2011 (6) TMI 9 - DELHI HIGH COURT] Exclusion of excise subsidy by way of capital receipt not liable to tax - CIT(A) s action of admitting and allowing the fresh claim raised by the assessee - seeking exclusion of capital subsidy from computation of income under normal provisions as well as book profit u/s 115JB of the Act, which was not made in the return of income - HELD THAT:- From the facts as discussed in the foregoing, it can be safely inferred that the subsidy was granted to the assessee for setting up new unit in the State of Sikkim. The Hon ble Supreme Court in the case of Chaphalkar Brothers [ 2017 (12) TMI 816 - SUPREME COURT] has held that the subsidies granted under Government Industrial Scheme to accelerate industrial development and generate employment is capital in nature. Thus we see no reason to interfere with the Ld. CIT(A) s findings hold that the excise subsidy received by the assessee was in the nature of capital receipt not liable to tax, as the object of granting subsidy was to encourage setting up new industries for industrial growth of industrially non-developed area. Treatment of these subsidies while computing book profit u/s 115JB - As decided in Ankit Metal and Power Ltd [ 2019 (7) TMI 878 - CALCUTTA HIGH COURT] subsidy received by the assessee in form of excise duty exemption for setting up new industry in the North Eastern State viz., Sikkim was in the capital field and therefore not liable to tax under the provisions of section 115JB - Thus we uphold the order of Ld. CIT(A) excluding the subsidy received by the assessee for setting up new industry, by way of refund of excise duty from the computation of book profit u/s 115JB of the Act. Admission of fresh claim - Hon ble Bombay High Court in the decisions rendered in the cases of Pr. CIT v. JSW Steel Limited [ 2020 (2) TMI 307 - BOMBAY HIGH COURT] and CIT v. B. G. Shirke Construction Technology (P.) Ltd [ 2017 (3) TMI 879 - BOMBAY HIGH COURT] has held that, it is open for an assessee to lodge a new claim in a proceeding under section 153A which was not claimed in his regular return of income, provided the assessment stood abated as a consequence of the search. We do not find any merit in the legal plea raised by the Ld. CIT, DR contesting validity of admission of additional claim by the Ld. CIT(A). Overall thus, we see no reason to interfere with the order of Ld. CIT(A) on this issue and uphold his action of directing the AO to delete / reduce the excise duty subsidy both while computing income under normal provisions as well as book profit u/s 115JB of the Act. These grounds of the Revenue are therefore dismissed. MAT computation - Non-inclusion of foreign fluctuation translation reserve while computing book profit u/s 115JB - HELD THAT:- As rightly pointed out by the Ld. AR, there is no specific adjustment prescribed in this regard in Explanation (1) to Section 115JB of the Act. We further observe that, similar gains were credited to foreign fluctuation translation reserve on restatement of foreign currency loans in earlier AYs 2012-13 2013-14 and the same was not added to computation of book profit u/s 115JB of the Act by the assessee. The earlier AYs 2012-13 2013-14 are noted to be abated assessments. We note that, in the income-tax assessments u/s 153A/143(3) for these AYs 2012-13 2013-14 was completed by the same AO. The AO is noted to have accepted the computation of book profit made by the assessee in AYs 2012-13 2013-14 and the gains directly credited to foreign fluctuation translation reserve were not added while assessing book profit u/s 115JB of the Act. Hence, when on same set of facts and circumstances, the Revenue, in the earlier AYs 2012-13 2013-14, did draw any adverse inference on this issue, then in absence of any change in position of law, we uphold the claim of the assessee, seeking reduction of foreign fluctuation translation reserve, inadvertently added while computing book profit u/s 115JB of the Act in the return of income. Useful reference in this regard may be made to the following observations made by the Hon ble Supreme Court in the case of Radhasoami Satsang v. CIT [ 1991 (11) TMI 2 - SUPREME COURT] Decided in favour of assessee.

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• 2024 (4) TMI 404
  Dismissal of the appeal by the CIT(Appeals) for non-prosecution - HELD THAT:- CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. Once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec.251(2) of the Act reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. As persuade myself to subscribe to the dismissal of the appeal by the CIT(Appeals) for non-prosecution, therefore, set-aside his order with a direction to dispose off the same on merits. CIT(Appeals) in the course of the de novo appellate proceedings shall afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to raise the additional grounds of appeal which have been raised before us. Thus, appeal filed by the assessee company is allowed for statistical purposes.

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• 2024 (4) TMI 403
  Reopening of assessment u/s 147/148 - reasons to believe - unexplained deposits in the bank account - HELD THAT:- AO having gone through the information and the bank statement concluded that the income has escaped assessment and therefore the reasons were recorded by the Assessing Officer based on tangible material, which are valid reasons for reopening the assessment. We note that the case laws relied by the Ld. Counsel for the assessee, are not squarely applicable to the facts of the assessee s case. The Ld. Counsel also stated that notice under section 148 of the Act, was not issued to the assessee. However, we do not agree with assessee because the Assessing Officer has clearly mentioned in his assessment order that the notice under section 148 of the Act was issued to the assessee on dated 29.03.2019, hence, we reject this technical plea raised by the assessee. Moreover, we note that the assessee has not contested the issue of reopening of assessment, under section 147/148 of the Act during the assessment stage, therefore, in our view, the reopening of assessment under section 147/ 148 of the Act is valid, thus, ground No.1 raised by the assessee is dismissed. Unexplained cash deposited in the bank account - Counsel stated that the assessee has redeposited the cash withdrawn from the bank and partly amount deposited from the agricultural income - We note that there is a little merit in the arguments advanced by assessee, hence considering the above facts we are of the view that end of the justice would be meet if some percentage of the total addition may be added in the hands of the assessee. We note that the entire cash deposit in the bank account is not income of the assessee. Therefore we direct the assessing officer to disallow 10% of the balance amount - Decided partly in favour of assessee.

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• 2024 (4) TMI 390
  TP Adjustment - adjustment in the transaction of payment of royalty - Royalty payments made by the subsidiary for using certain intangible properties and services. - TPO Rejecting the Addendum as a piece of evidence - whether the royalty paid by the appellant to the associated enterprise for services rendered to unrelated third parties are covered in the Addendum to Royalty Agreement entered by the appellant? - HELD THAT:- Appellant does not dispute the fact post facto agreement the addendum was entered. We find that more than the Intangible and Proprietary Licence Agreement dated 2nd January, 2002, the Foreign Collaboration Agreement dated 2nd January, 2002 between the TP USA and the assessee is of more significance. There is no material before us on record nor there is any case of the AO that apart from the work solicited by TP USA the assessee company had procured any work outside India on its own. When these clauses are read along with the licensing agreement dated 2nd January, 2002, the only conclusion that can be drawn is that there was consensus ad idem between parties that royalty is to be paid with respect to the entire sales revenue of the assessee in regard to overseas clients of TP USA, including sales to third party customers for TP USA for which Revenue is received from TP USA. We are of the firm view that the addendum was entered upon to just bring more clarity to this understanding and it cannot be said that this post facto addendum was made with intention to undo the findings of DRP. We fail to appreciate the observations and findings of DRP that a subsequent agreement executed in 2014 can not go back and influence the transactions already effected much earlier on the strength of an earlier agreement, so as to determine whether the earlier transaction was carried out at Arm s Length Price or not. If such a position is allowed, then an assessee can modify an agreement at any time after the date of international transaction as per an earlier agreement and by changing the clauses and terms, seek to modify the Arm s Length price already determined for earlier years. If at all, such post facto agreements should only have prospective effect as far as determination of Arm s length price of international transactions is concerned. The addendum does not set forth any new terms or conditions, but, as we discussed earlier, the addendum only crystalises the conduct of parties and when it is related back to the date of original agreement dated 02.01.2002, it does not post facto recognize anything, which is proved to be, not, originally agreed. TPO has observed that services rendered through TP USA fall under the category services rendered through an affiliate. As submitted on behalf of the assessee that sales through TP USA differs from the sales made through an affiliate. - As we take into consideration the definition reproduced earlier of Affiliate and the definition of Third Party in the original agreement or the Addendum, it becomes clear that the Affiliates refers to an entity other than Party to this Agreement. TP USA being the holding company cannot be considered to be an affiliate so as to accept the conclusion of the DRP and TPO that no royalty is payable in respect of sales to AEs (including affiliates.) TPO has held that the services rendered by the Appellant to a third party customer on behalf of its AE are to be considered as sales made to AE - Also, because the bill(s) raised by the assessee to its AE was for the services rendered to the client of the AE, the Appellant was not required to pay the royalty on it. On behalf of assessee it is reiterated that in the case of the appellant, the parties to the agreement, viz, TP USA and the appellant are ad idem that royalty needs to be paid on sale of services rendered by the appellant to third party customers of TP USA. As already concluded that in the understanding of the two contracting parties, it was always the intention that royalty has to be paid for use of intangible property, know-how, customer relationship management (CRM) services, etc. with respect to entire sale revenues of the appellant, including sales to third party customers of TP USA for which revenue is received from TP USA. As we consider the Foreign Collaboration Agreement clause 5 with subclauses, it becomes clear that TP USA had agreed to pay for the services provided by the assessee to the overseas clients of TP USA. Sub-clause 5.7 specifically mentions that the bills can be raised by the assessee on TP USA. This clause 5 of the Collaboration Agreement leaves no doubt that merely due to the fact of raising bills or invoices on the TP USA for services actually rendered to third party customers solicited by TP USA, the sales have to be considered to be one made to TP USA itself. Thus DRP and TPO both have fallen in error in first rejecting the Addendum as a piece of evidence showing the consistency of the conduct and the actual intentions of the parties to the agreement and then has made erroneous interpretation to the clauses of the Collaboration Agreement and the Licence Agreement to conclude that the assessee was providing services to the TP USA only and not to third parties for whom TP USA had, in fact, acted as intermediary. We are inclined to sustain the grounds. Consequently, the appeals of the assessee are allowed with consequential effect.

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• 2024 (4) TMI 389
  TDS u/s 195 - disallowance u/s 40(a)(i) - failure to withhold tax on salary cost reimbursement to Head Office by the Branch Office treating such receipt of Head Office as FTS - impugned payments made by Branch Office to Head Office are the reimbursement of salary cost of the expats working in the Branch Office in India on cost to cost basis without any mark-up. The entire salary payments made to the expats in India as well as outside India have been subject to TDS under section 192 of the Act which fact has been corroborated by Form 16 issued to the expats Whether provisions of section 40(a)(i) of the Act can be invoked to disallow an expense in respect of which due taxes have been withheld and deposited into the Govt. Account within the prescribed time period? - HELD THAT:- We have perused the decision of the Co-ordinate Bench of Delhi Tribunal in the case of Serco India Pvt. Ltd.[ 2023 (11) TMI 275 - ITAT DELHI] wherein the ITAT on similar set of facts held that where the assessee has deducted the tax at source under section 192 of the Act and deposited the same into the Govt. Account within specified time as prescribed under the Act, provisions of section 40(a)(i) of the Act are not applicable. Thus disallowance of salary cost reimbursement by Branch Office to the assessee by the Ld. AO under section 40(a)(i) is not justified as TDS has been duly deducted on entire salary payments to the expats and deposited into the Govt. Account within the prescribed time limit. Appeal of the assessee is allowed.

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• 2024 (4) TMI 388
  Income deemed to accrue or arise in India - taxation of entire revenue received by the Appellant from provision of legal services on Indian engagements - Fees for Technical Services under the provisions of section 9(1)(vii) of the Act for the subject assessment year - entitlment to benefit of Article 4(1) of India-UK DTAA - assessee, a Non-Resident LLP, is a firm of Solicitors registered in UK and is engaged in providing legal services to its clients worldwide - HELD THAT:- The order of the ITAT has been reported as ( 2022 (10) TMI 903 - ITAT DELHI] wherein it is held that the assessee LLP, tax resident of UK provided legal services to its clients worldwide. It was entitled to benefit of Article 4(1) of India-UK DTAA on portion of its income from Indian engagements which had been taxed in UK in hands of its UK tax resident partner. Eligibility of a fiscally transparent partnership firm to avail of the tax treaty benefits is affirmed on the basis that the income of the partnership firm has been taxed in the foreign state in the hands of its partners. Thus benefit of Article 4.1 is to be granted to the assessee in identical facts and circumstances of the case. Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee.

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• 2024 (4) TMI 387
  Addition made on account of non-genuine commission payment - commission/incentives paid to staff members - AO observed that despite the assessee was repeatedly asked to furnish the genuineness of the commission expenses incurred by the assessee, the assessee has chosen not to reply and not provided complete details at the fag end of the completion of the assessment proceedings - investigation over the genuineness of the commission could not be carried out in the case of the assessee by the undersigned - HELD THAT:- We observe that the assessee has filed the information before the CIT(A) and based on that CIT(A) has given part relief to the assesse and even revenue has filed grievances that the facts were not properly verified and this needs to be verified whether the agents have actually performed the duties of an agent and their credentials were not verified. After considering all this issue needs to verified afresh, we deem it fit to remit this issue back to the file of AO for fresh verification of the documents submitted by the assessee before the CIT(A). Accordingly, we remit this issue back to the file of AO with the direction to verify the evidences/documents as per law after giving proper opportunity of being heard to the assessee. Grounds raised by the revenue and assessee are allowed for statistical purpose. Disallowance u/s 14A r.w.r. 8D - Whether assessee has not received any exempt income during this year? - HELD THAT:- We observed that the assessee has not received any exempt income from the investments made and as held in the case of Cheminvest Limited [ 2015 (9) TMI 238 - DELHI HIGH COURT] that if disallowance exceeds the exempt income the same should be restricted to the exempt income only. The Hon ble Bombay High Court in the case of Pr.CIT v. M/s. Ballarpur Industries Limited [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] rejected the appeal filed by the Revenue holding that there is no substantial question of law, in upholding the view of the Tribunal that provisions of section 14A would not apply when there is no exempt income received or receivable during the relevant previous year. This bench is consistently holding that, the disallowance u/s. 14A of the Act shall not exceed exempt income and shall be restricted to the exempt income earned by the assessee. Therefore, we direct the Assessing Officer to delete the 14A disallowances. Estimation of income - Bogus purchases - CIT(A) restricted addition @ 5.87% - HELD THAT:- No infirmity in the order passed by the Ld.CIT(A) in restricting the addition to gross profit ratio of 5.87% of purchases as against 100% of the purchases disallowed by the Assessing Officer in the assessment year under consideration. Accordingly, ground raised by the revenue is dismissed.

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• 2024 (4) TMI 386
  Assessment u/s 153A - addition u/s. 68 - whether there was any incriminating material for the purpose of making the assessment ? - HELD THAT:- It is a well settled law that where the assessments had attained finality before the date of search and are not abated assessments in terms of proviso to Section 153A, the ld. AO can acquire jurisdiction to make the assessment or addition if there is any incriminating material found during the course of search. It is axiomatic that the ld. AO can assume jurisdiction to assess or re-asses total income only when any incriminating material is found / unearthed during search and then he can take into account those incriminating material unearthed during the course of search and other material available with the ld. AO including the income declared in the return of income. Thus, existence of incriminating material which is found in the course of search is a very foundation of acquiring jurisdiction u/s 153A in the case of unabated / completed assessment. This principle laid down by the Hon ble Bombay High Court and Hon ble Delhi High Court and various other High Courts have been reaffirmed by the Hon ble Supreme Court in the case of Abhisar Buildwell Pvt.ltd [ 2023 (4) TMI 1056 - SUPREME COURT] as held no addition can be made in respect of the completed assessments in absence of any incriminating material. Here, in this case if there was any such information or material which was found much prior to the date of search, then the ld. AO should have reopened the assessment after exercising the powers u/s. 147 / 148 subject to the fulfillment of the conditions and limitations provided u/s. 147/ 148 and these powers are specifically saved u/s. 153. Instead of resorting to action u/s. 147 / 148, ld. AO has proceeded to use pre-search enquiry and information within the scope of Section 153A which cannot be referred as incriminating material found in the course of search. As stated above in the course of search, in so far as statement of the promoter also there is nothing incriminating and the only material which has been found with the ledger account of certain share application money which cannot be held to be incriminating and this has been held so in the case of Param Dairy Ltd. [ 2021 (2) TMI 764 - DELHI HIGH COURT] wherein it has been held that audit report, cash book, ledger book, bank book and the books of accounts maintained regularly by the assessee if it has been seized and found during the course of search cannot be treated as incriminating material because regular books of accounts by no stretch of imagination could be treated as incriminating material form basis of framing assessment u/s. 153A. Here in this case same very books of account and ledger have been subject matter of scrutiny in assessment proceedings u/s 143(3) much prior to the date of search as noted above. Thus, on the facts and circumstances of the case and the principle of law as laid down by the Hon ble Apex Court which has been followed by the ld. CIT (A) as incorporated above is upheld - Decided against revenue. Addition made u/s 68 - assessee could not prove the genuineness of the transaction and creditworthiness of lender company - CIT(A) deleted addition - HELD THAT:- In so far as allegation of the ld. AO that lender and shareholders were not found at the address of the Kolkata becomes irrelevant when assessment has been done from the same address and also brought on record that address of the lender company had already shifted to Mumbai which is also evident from the order of the present AO in the case of the lender company wherein he has passed assessment order on 31/12/2019 i.e. the same date of order which has been passed in the case of the assessee. Thus, ld. AO was very well aware that this company s address has been changed and therefore, stating that this company was not found in Kolkata at the time of enquiry has no relevance. Then how did he pass the assessment in case of this company without drawing any adverse inference in that case. Apart from that, even in the earlier years, notices u/s. 143(2) and other statutory invoices for the purpose of assessment u/s. 143(3) was issued and served u/s. 143(3) was issued and served on the same address earlier then how can it be inferred that this company was non-existing. CIT (A) has also examined the immediate source of funds in the hands of the lender company which was received from sale of unquoted shares of various companies and in support of which, ITR, financial statements and bank statements and confirmation of the parties were submitted, including consideration paid by the lender company for the purchase of unquoted shares and sale were also filed before the ld. AO during the remand proceedings which has been duly examined by the ld. CIT(A). Nowhere, AO has inquired about the source and veracity of the source of the funds of the lender company, albeit it has been accepted in the order passed u/s 143(3). Thus, it cannot be held that source of the source has not been proved by the assessee. Accordingly, the aforesaid finding of the ld. CIT (A) is affirmed. Appeal of the Revenue is dismissed. Disallowance u/s 14A - assessee has not earned any exempt income during the year under consideration - HELD THAT:- Once it is an admitted fact that there is no exempt income earned by the assessee, then no disallowance u/s. 14A can be made. This issue stands covered by the decision of M/s. Nirved Traders Pvt. Ltd. [ 2019 (4) TMI 1738 - BOMBAY HIGH COURT] and catena of other judgments of Hon ble High Courts including Hon ble Madras High Court in the case of Chettinad [ 2017 (4) TMI 298 - MADRAS HIGH COURT] Hon ble Delhi High Court in the case of Era Infrastructure (India) Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] held that amendment brought in Section 14A w.e.f. 01/04/2022 is not retrospective. Accordingly, the order of the ld. CIT(A) is confirmed. Disallowance u/s. 14A while computing book profit u/s. 115JB also is covered by the various decisions and including the Special Bench in the case of Vireet Investments P Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] and in the case of Bhushan Steel Ltd [ 2015 (9) TMI 1424 - DELHI HIGH COURT] , accordingly, no disallowance can be made u/s. 14A while computing book profit u/s. 115JB. Accordingly, appeal of the Revenue is dismissed.

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• Customs

• 2024 (4) TMI 385
  Confiscation of goods - recovery of Customs duty - imposition of penalties - Clandestine removal of bunkers - import of duty free Furnace Oil HSD Fuel Oil under warehouse procedure and same was illegally supplied under the guise of Export to Stores on Foreign Going Vessel - case of the revenue is that although the goods were taken out of charge Ex-Bond successfully yet the same was not supplied to any Foreign Going Vessel and diverted elsewhere - HELD THAT:- It is found that revenue during the investigation Bunker Supply documents consisting of the photocopies of Shipping Bills, Short Shipment Notices, Sale contract and Warehousing Bonds/ undertaking etc. were called and recovered from the Appellants. Besides the documents like Shipping Bills, related to bunker supplies and EGM of the recipient vessels were also called for from the Customs Houses of the Ports of Supply where the supplies were shown having been made to the vessels by the Appellants. The documents like Log Book (LB) and the Oil Records Books of Bunker Barges shown having used in the transportation were also called for from the Barge owners/ Operators and details of all bunkers supplies made through barge Zee-II were called for from M/s Zee Shipping Services and others. It is found that the Shipping Bills filed at the Ports, wherein the Consignee is shown as the Master of the Foreign Going Vessels to whom the supply is to be made, were duly assessed by the proper officers of Customs at Kandla, Mundra and others ports where the Bonded tanks is located. This is evident from the fact that on Shipping Bills, bear the signatures of the Customs Officers, who assessed the Shipping Bills. Documentary evidences like acknowledgment by the Master of the vessel, acknowledgment by the Customs officers who escorted bunkers and supervised delivery to the Ships etc. produced by the Appellants clearly established that Bunkers covered under each of the Shipping Bills were supplied to the Foreign going vessels - Customs officers whose statements were recorded by the investigating officers have also confirmed the fact of the concerned bunkers having been supplied to foreign going vessels under their supervision and they have singed/counter singed/endorsed the documents. It is found that if bunkers were diverted i.e they were not supplied to the forging going vessels then it was a case of clandestine removal of bunkers which had to be proved by the department by adducing cogent and reliable evidences for establishing actual clandestine removal and delivery of such disputed bunkers to other persons. But there is no such case nor any evidence by the department for actual diversion of the bunkers were produced on records. We agree with the arguments of the appellant that diversion of duty free goods in clandestine manner being a serious charge which has to be proved by the department by adducing cogent and reliable evidence of independent nature. The case made out by Revenue cannot be sustained in the absence of evidence showing diversion of the duty free imported goods to other persons or in the local markets. In the present matter the demand is confirmed by the Ld. Adjudicating authorities in respect of the Shipping Bills on the ground that the EGM s filed by the vessels do not reflect the receipts of the Bunkers as supplied by the Appellants by virtue of the said Shipping Bills. In this regard we find that EGM is a document that is prepared by the Master of the Vessel or the Shipping agent and filed with the proper officers at the time of departure or within 7 days from the date of departure. However on this basis only duty liability cannot be confirmed against the Appellant. In the present disputed matter we find that in respect of the all the shipping bills appellants have duly recovered the consideration for the bunker supplied to recipient vessels. Despite the EGM not mentioning the receipt of bunkers, the owner of the recipient vessels has duly made payment for the said bunkers - the goods involved in all cases were examined and cleared for Foreign Going Vessel in terms of the Section 88 read with Section 69 of the Customs Act 1962. Goods were loaded on the vessel and the concerned officers who examined the goods and issued let export order confirmed in cross examination that they had made the report/order on the dates appearing in the Shipping Bill(s). In such circumstance, a finding contrary to the official records of the Custom Department cannot be supporetd. It is not established that the officers had predated their signatures on the Shipping Bills. Moreover, it is on record that sale proceeds against the supply of goods were received. Penalties imposed upon other co-appellants - HELD THAT:- It is found that the evidences on record clearly point out that M/s AEL and M/s World Link supplied the goods to foreign going vessels and there is no diversion of the disputed goods elsewhere as alleged by the department. In such circumstances we do not find any merit in the impugned orders imposing the penalties on the co-appellants. The impugned orders are liable to be set aside and accordingly the impugned orders are set aside - Appeal allowed.

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• 2024 (4) TMI 384
  Levy of Customs Duty - bunkers lying inside the tanks of the vessel including the consumption between Bedi Port to Alang or not - transshipment of cargo - foreign going vessel - Scope of SCN - HELD THAT:- Section 86(2) inter alia provides that any stores imported in a vessel or aircraft may with proper permission of the proper officer be transferred to any vessel as stores for consumption therein as provided in Section 87, which inter alia provides that imported stores may, without payment of duty be consumed on the vessel as stores during the period such vessel is a foreign going vessel. In order to appreciate the contention raised in the disputed matter, it is necessary to notice a basic premise that under Customs Act goods entering into India becomes imported goods and chargeable to duty under Section 12, unless they are exempt from payment of duty by virtue of specific provisions. It is significant to note that ship stores or spares thereof are not exempted from the operation of Section 12, but by virtue of Section 53 of the Act are allowed to be transited without payment of duty - Similar provision is found in Section 54 in respect of the goods imported into a customs port or customs airport but is intended for transhipment of goods. In the present matter, it is found that the tug had originally arrived at Bedi ports from overseas port laden on mother vessel. Mother vessel was unable to complete the delivery of the said tug at Alang owing to requirement of deeper draught which was not available at the ship breaking yard at Alang. The said tug had arrived from foreign port, it was treated as a foreign going vessel. There is no dispute over the fact that the said tug had not performed any costal voyage or undertaken any coastal operation. Therefore the fuel consumed during their transshipment from Bedi port to Alang cannot be considered as dutiable. The impugned orders are not sustainable, hence the same are set aside - Appeal allowed.

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• 2024 (4) TMI 383
  IGST exemption at the time of import of input materials by the appellant - Advance Authorization Scheme - HELD THAT:- It is not disputed that, had the appellant paid the IGST at the time of import they would have been eligible for input tax credit. Further, admittedly the goods have been used as inputs for manufacture of other goods which have undisputedly been exported to Hindalco. Admittedly, DGFT have issue Export Obligation Discharge Certificate to the appellant. It is further noticed that it is not the policy of the Government to export taxes. It is further found that it is a case of contributory negligence on the part of Revenue also, as inspite of having registrated the Advance Authorisation and the entitlement of the appellant to exemption under Notification No. 21/2015 CUS, have allowed the exemption of IGST also as applicable under Notification No. 18/2015 CUS. The situation being revenue neutral undisputedly, no case of malafide is made out against the appellant. In this view of the matter, following the ruling of the Apex Court in the NIRLON LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [ 2015 (5) TMI 101 - SUPREME COURT] , the demand is not invokable by invokation to extended period of limitation. The impugned order set aside - appeal allowed.

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• 2024 (4) TMI 382
  Smuggling - Absolute confiscation of three gold bars and one small piece of remelted gold - Penalty u/s 112(a) and (b)(i) of Customs Act - failure to examine witnesses during adjudication proceedings - retraction of statements - HELD THAT:- Admittedly, there were no foreign markings on the gold seized and subsequently confiscated, being 1129 gms of gold. Further, admittedly the gold is comprised of bar/rods and bits and is not of standard shape, size and weight, as in the case of gold of foreign origin. It is further found that Revenue has not laid any evidence as to the smuggled nature of gold save and except assumption and presumption based on the statements of Mr. NPK Mr. VVRK recorded at the time of seizure. As such statements have been subsequently retracted, the initial statements have lost their evidentiary value. It is further found that Revenue has failed to examine their witnesses during adjudication proceedings, as required under section 138B of the Act. Further, the appellant Mr. R. Rajasekhar who has claimed the ownership of the gold has led cogent evidence in the form of his business records and account statements in support of the gold in question. It is further found that such cogent explanation has not been found to be untrue but have been arbitrarily rejected by Revenue. It is also found that the explanation given by these appellants has been corroborated by the statement of smelters/melters both at Jaggayyapet and at Chennai. Accordingly, it is found that appellants have discharged the onus under section 123 of the Act. The impugned orders set aside - appeal allowed.

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• 2024 (4) TMI 381
  Refusal of grant of interest on the amount deposited during investigation, which was subsequently found to be refundable - applicability of principles of unjust enrichment on the principle amount of refund granted, which was deposited during the course of investigation - HELD THAT:- The issue in this appeal is squarely covered by the precedent order of this Tribunal (Allahabad Bench) in the case of M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] , wherein also, the amount paid during investigation, subsequently found to be refundable pursuant to adjudication/ appellate order, was held to be amount deposited by way of Revenue deposit. It was further held relying on the ruling of Hon ble Supreme Court in SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] , wherein the Hon ble Court examined the scope of Sec 243 of the Income Tax Act, which provides for interest on delayed refund and also examined Sec 35FF of Central Excise Act, which also provides for interest on delayed refund of amount deposited under Sec 35F (Pre-deposit) and observed that the provisions for grant of interest on delayed refund are pari materia under both the Acts. The Apex Court, taking notice that the assessee/Sandvik Asia Ltd have suffered as their money was lying locked in litigation, withheld by the department for about 17 years without rhyme or reason, and further taking notice that the Revenue charges much higher rate of interest on the amount payable by the assessee, and whereas, pays interest at much lower rate on the amount refundable to the assessee, further observing that interest is compensatory in nature, was pleased to grant simple interest @9% per annum and failing which, to pay further interest @15% per annum. Following the said ruling of Hon ble Supreme Court, the Division Bench of this Tribunal in Parle Agro Ltd have allowed the interest @12% per annum from the date of deposit (amount paid during investigation) till the date of refund - Similarly, interest @12% was also granted by the Chandigarh Bench of this Tribunal in RIBA TEXTILES LTD VERSUS COMMISSIONER OF CE ST, PANCHKULA [ 2020 (2) TMI 602 - CESTAT CHANDIGARH] . On appeal by Revenue, the said order was confirmed by Hon ble Punjab Haryana High Court, dismissing the appeal of Revenue following the ruling of the Apex Court in Sandvik Asia Ltd. The amounts paid during investigation are to be treated as deposits as held by the Hon ble Delhi High Court in TEAM HR SERVICES PRIVATE LTD. VERSUS UNION OF INDIA ANR. [ 2020 (6) TMI 342 - DELHI HIGH COURT] , wherein it has been categorically held that the amount deposited in the course of investigation is not in pursuance of any assessment and therefore, cannot be unjustly retained by the department. It was also held that the amounts deposited under protest at the time of investigation are not collected by the authorities with the sanction of law and therefore, the Government does not acquire any right to retain the said deposit, till the Government is held entitled in law by an authority or Court of law. Further, it was held that the assessee is entitled to interest @6% from the date of deposit till the date of interim order and further @7.5% till such amount is actually refunded to the assessee - Accordingly, learned Counsel for assessee has prayed for grant of interest @12% per annum from the date of deposit till the date of refund, in the interest of justice. Principles of unjust enrichment - HELD THAT:- Hon ble Madras High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL [ 2015 (3) TMI 735 - MADRAS HIGH COURT] , wherein, under similar circumstances, amount was deposited under protest at the time of investigation, it was held that any amount that is deposited during pendency of adjudication proceedings or investigation is in the nature of deposit under protest and therefore, the principle of unjust enrichment does not apply - In the present case also, there is absence of fact on record that the appellant/assessee has received any amount from the foreign buyer, in addition to the amount of final invoice, pursuant to export of iron ore. Further, admittedly, the final invoice for export is dated 25.08.2008 and remittance was received before 13.03.2009 as per BERC. The deposit(s) were made in December 2009 - the doctrine of unjust enrichment is not attracted in the facts and circumstances of the instant case, as the appellant- exporter have discharged the onus under Sec 28D of the Act. The impugned order modified directing to grant interest @6% per annum from the date of deposit till the date of refund - appeal of assessee allowed in part.

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• 2024 (4) TMI 380
  Recovery of differential duty u/s 28(1) of CA for the imports made in all the Bills of Entry along with interest and penalties on Umesh Kumar and Rajat Arora - Goods in excess of the declaration in the Bill of Entry - goods not declared at all in the Bill of Entry - rejection of declared assessable value - main contention of Umesh Kumar is that he had only lent his IEC to Rajat Arora and was in no way concerned with the imports at all and therefore, the impugned order needs to be set aside. Penalty on Umesh Kumar - HELD THAT:- There are no evidence to support the submission of Umesh Kumar that he is telling the truth and nobody else is telling the truth from the Oath Commissioner who certified his affidavit, the lawyers who filed the Writ Petition in the High Court on behalf of his firm and made submissions before the High Court, the CHA who filed the Bills of Entry and the bank which opened an account in the name of his firm and remitted large sums abroad on account of his firm. No evidence has been put forth to support such wild claims by Umesh Kumar. These arguments which form the grounds of Customs Appeal no. 51578 of 2018 filed by Umesh Kumar cannot be sustained and accordingly, the appeal deserves to be dismissed. Penalty on Rajat Arora - Appeal was dismissed for non-prosecution - HELD THAT:- This appeal which was initially dismissed for non-prosecution was restored on an application by the appellant. Thereafter, it was listed on 36 occasions over a period of five years and five months. While some adjournments were on account of other exigencies, the main reason for the adjournments were the requests of the appellant either in writing or in person or through proxy counsel. On 24 August 2023, on the request of the counsel, the matter was adjourned to 12 October 2023 as a last opportunity. Even on this 36th listing of the appeal, none appeared for the appellant. Needless to say that 36 adjournments is more than a reasonable opportunity of being heard given to the appellant. It is found from the records, when the goods were examined by the Customs and discrepancies were found, they were seized under a panchnama under section 110 in the presence of Deepak, G card holder of CHA M/s. Venstar Shipping Services and two independent witnesses. Quite logically, summons were issued to the proprietor of M/s. Aromatech and to the CHA for appearance on 29.9.2014 - the submission in this appeal that Rajat Arora has nothing to do with the import of goods or sales by M/s. Aromatech and that he was merely a freight forwarder holds no water. Having obtained an authorization from the proprietor of M/s. Aromatech and having appeared on his behalf in view of the summons issued to M/s. Aromatech, Rajat Arora cannot now turn around and say that he had nothing to with Aromatech. It is not the officers, but it is Rajat Arora who introduced himself into this case. Otherwise, a pure freight forwarder would have neither anything to do with the goods which are imported nor anything to do with the Customs clearance (which is the responsibility of the CHA). The conclusion in impugned OIO is that M/s. Aromatech had mis-declared the imported goods which were liable to confiscation under section 111(m) and (o) of the Act. Consequently, penalty was imposed on Rajat Arora under section 112(a) - Rajat Arora introduced himself as the sales incharge of M/s. Aromatech in his statement made representing Umesh Kumar, proprietor of M/s. Aromatech with an authorization from him. He provided to the department such details of the business as the IEC, VAT registration with different states and the bank account details of M/s. Aromatech which are most unlikely to be available with anyone not intricately connected with the business of the importer. Therefore, there are no reason whatsoever to interfere with the penalty. Appeal dismissed.

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• 2024 (4) TMI 379
  Smuggling - Absolute confiscation of foreign currency seized from the Appellant u/s 113(d),(e) (h) of the Customs Act - levy of penalty u/s 114 and equal amount under Section 13(1) of the Foreign Exchange Management Act (FEMA) 1999 - HELD THAT:- Admittedly Appellant was intercepted by the CISF officials outside the customs area. The Appellant had admittedly not approached the Airlines counter. This fact is supported by the no-show status of the ticket of the Appellant on the website of the airline. In the circumstances, the Appellant had not entered the customs area, nor there is any failure on the part of the Appellant to make appropriate declaration as required under Section 77 of the Customs Act. Under these circumstances, it is found that the provisions of Section 113(e) and (h) are not attracted. At best, there is only a case of intention or attempt to export, as the Appellant was approaching the airport with intention to travel outside India, he was also having a valid ticket. The conclusion of the Adjudicating Authority agreed upon, that foreign exchange or currency is prohibited goods and therefore liable for confiscation. However, it is not agreed that it is correct to deny redemption of the same under Section 125 of Customs Act as the discretion is to be exercised having regards to all relevant facts and cannot be arbitrary. Considering the whole factual nature of seizure and mitigatory facts, this confiscation should not have been absolute. An intention to smuggle prohibited goods cannot be equated with attempt to export prohibited goods. There is only venial breach of the provisions of Section 113(d) of the Act. In this view of the matter, the Order of absolute confiscation under Section 113(e) and (h) of the Act is set aside. However, it is held that the foreign currency in question is liable for confiscation under Section 113(d) of the Act, though the Order of absolute confiscation is set aside - it was further held that the seized foreign currency can be redeemed by the Appellant from whose possession it was recovered, on payment of redemption fine of Rs. 10 lakhs. Further, the penalty imposed under Section 114 of the Act is also reduced to Rs. 1 lakh, and penalty under Section 13(1) of FEM Act is set aside. The appeal is allowed in part.

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• 2024 (4) TMI 378
  Classification of imported goods - Narrow Woven Fabric Webbing - to be classified under Customs Tariff Item (CTI) or under CTI 58063200? - suppression of facts or not - extended period of limitation - Levy of penalty u/s 112 (a)(i) and u/s 114AA of CA. Extended period of Limitation - first grievance of the Revenue is that the Commissioner had confirmed the demand invoking the extended period of limitation along with interest but had not imposed the mandatory penalty under section 114A - HELD THAT:- It needs to be pointed out at this stage that section 28 of the Customs Act is not the charging section. The charge of customs duty comes from section 12 according to which duties of customs shall be paid on the goods imported into or exported from India. However, if the duty which should have been paid was either not paid or was short paid, the remedy to recover such duties is available to the Revenue under section 28. This section also has an inbuilt limitation. Beyond the period of limitation although the charge would continue, Revenue will no longer have the remedy to recover the duties short paid. In the normal course, the limitation is of one year - In this case, although the Commissioner found that there was no collusion or willful mis-statement or suppression of facts, the respondent had fairly conceded the charge of duty and agreed to pay the same along with interest. It is for this reason, that the demand was confirmed for the extended period and not because any evidence that these factors were present. Insofar as section114A is concerned, it pertains to penalty and not a charge. Therefore, penalty cannot be imposed when it has been explicitly recorded that there was no collusion or willful mis-statement or suppression of facts which are essential to impose penalty under section 114A. Confiscation of the goods under section 111(m) - HELD THAT:- The respondent did not contest the imposition of penalty and has already been paid the same. There are no ground to order confiscation of the goods which were not available. Holding that the goods were liable for confiscation under section 111(m) at this stage will be nothing more than a academic exercise as the penalty which would flow from such statement has already been imposed and has not been contested by the respondent. Penalty under section 114AA - HELD THAT:- The background in which section 114AA was introduced. Nothing in the section indicates that it does not apply to import. It will apply to both imports and exports and the recommendation of the Committee was that it should be applied with due diligence and care so as to avoid any undue harassment to trade. The Commissioner did not impose any penalty under section 114AA because it can be imposed only if there is evidence that the person has not knowingly or intentionally made, signed or used or causes to be used, any declaration, statement or document which is false or incorrect. The Commissioner has also recorded that the goods which were imported by the respondent were examined and assessed by the department before allowing clearance - there are no reason to disagree with this finding of the Commissioner. Therefore, there is no case to impose penalty under section 114AA. The impugned order is upheld and the appeal filed by the Revenue is dismissed.

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• 2024 (4) TMI 377
  Confiscation - imported four Mercedes Benz cars - Failure to comply with provisions of Para 2 of Import Licensing Note of Chapter 87 - restricted goods or not - HELD THAT:- It is an admitted fact that the imported vehicles have been registered and have got certified by the Transport Department of Government of NCT of Delhi as complying with all the provisions of CMVR. Not only this, All India Tourist Permit Certificates of Fitness have been issued by Delhi Government stating that the vehicle complies with all provision of CMV Act and Rules including Rule 126A of CMVR. These certificates by Government authorities of importer s country amounts to substantive compliance of the impugned Import Licensing Note 2. The Note is therefore held to have been wrongly invoked and so is wrongly invoked the provisions of Foreign Trade Policy for ordering confiscation of imported cars. It is also observed that it has been acknowledged in the Order-in- Original itself that there is no mis-declaration neither of description nor of classification nor even of quantity and value except the violation of procedural condition of policy. Confiscation of imported vehicle is ordered only because said violation is admitted. But it is opined that substantial benefit of duty exemption shall not be denied on account of mere procedural lapse. As already discussed, the intent of the policy condition as is held to have been violated stands fulfilled in view of the certificate issued by Transport Authority. The order under challenge is not sustainable - Appeal allowed.

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• Insolvency & Bankruptcy

• 2024 (4) TMI 402
  Implementation of the Resolution Plan as Approved - Prayer for exclusion of the lease land from the assets of the Corporate Debtor rejected - The respondent alleged that the appellant, as the landowner, obstructed the implementation of the Resolution Plan by preventing access to common facilities and services essential for the functioning of the corporate debtor. HELD THAT:- Having upheld the Resolution Plan and granted liberty, both the parties are to act in pursuance of the liberty as granted and the order being only an interim direction and the application being still pending, there are no reason to entertain this Appeal. While disposing of the application, Adjudicating Authority shall take into consideration the judgment of this Tribunal of the date in SHRISTI INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED VERSUS MR. AVISHEK GUPTA, RESOLUTION PROFESSIONAL [SARGA HOTEL PRIVATE LIMITED UNDER CIRP] , JC FLOWERS ASSET RECONSTRUCTION PRIVATE LIMITED, SHRIRAM MULTICOM PRIVATE LIMITED [ 2024 (4) TMI 321 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] as contained in paragraph 13 of the judgment. Appeal disposed off.

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• 2024 (4) TMI 376
  CIRP - Maintainability of Section 9 Application - rejection on the ground of pre-existing dispute - Appellant relying on the provisions of Section 194 (C) of the Income Tax Act, submits that deduction was made by Corporate Debtor under Section 194(C), after receipt of invoices by the Appellant - HELD THAT:- The above submission of learned Counsel for the Appellant cannot be accepted for two reasons. Firstly, in a reply dated 13.06.2021, the Corporate Debtor has clearly indicated about the deduction under Section 194(C) as well as the credit of GST amount. In the reply it was stated that the Corporate Debtor was to issue debit/ credit note and the Operational Creditor has not settled the accounts for last five years for under-loading and overloading and demurrage charges debited by principal borrower, as Operational Creditor was required to adjust the amount. Thus, deduction under Section 194(C) cannot lead to conclusion that Corporate Debtor acknowledged the liability to pay the entire bills of the Operational Creditor. The dispute was raised by the Corporate Debtor, which is reflected in the letter dated 11.02.2021 referred by Appellant himself in his letter dated 22.04.2021 as well as the reply dated 13.06.2021. On examining of averments made in the reply dated 13.06.2021, which clearly indicate pre-existing dispute raised by the Corporate Debtor much before the Demand Notice dated 09.08.2021 was issued. The Adjudicating Authority did not commit any error in rejecting Section 9 Application on the ground of pre-existing dispute. There is no merit in the Appeal - appeal dismissed.

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• PMLA

• 2024 (4) TMI 375
  Seeking grant of bail - Money Laundering - scheduled offence - proceeds of crime - delay in proceedings or not - HELD THAT:- The benefit of Section 436-A of the Code cannot be denied merely on the basis that allegations are serious. If the conditions are fulfilled, the Court is bound to give the benefit. Only the factors like the allegations, time required to be taken for conduct of the trial need to be considered. It is but natural for the Prosecution to take sometime for conduct of trial. At the same time, it is but natural that the Accused still remain in jail for a longer period. Ultimately, the Court has to balance in between the rights of both the contesting parties. The word joint trial is not defined anywhere in the Code of Criminal Procedure. In ordinary parlance, it is construed as a joint trial of several Accused. It may be for the purpose of framing of charge. Such issue may also arise when there are counter cases against each other. Both these cases also need to be tried separately even though it may be by the same Judge. By inserting this provision, the Legislatures want to suggest that the trial of scheduled offences and trial of PMLA offences will have to be conducted independently though by the same Judge. As per Section 3 of the PML Act, anyone involved in the process of proceeds of crime, it is an offence. The scheduled offences are the offences laid down as per the schedules. The scheme of the Act does not suggest that there can be an investigation for PMLA offences only when there is a conviction in a trial involving the scheduled offences . A person accused of PMLA offence may contend that unless it is proved that the proceeds alleged by the Enforcement Directorate were derived from the criminal activity is proved, they cannot be convicted. When the trial of PMLA offences in this case will be started? - HELD THAT:- A draft charge is already filed on behalf of the E.D. It is true that yet the Special Court has not proceeded further after framing of charge, that is to say, hearing the Prosecution and hearing the respective Accused persons. If there are discharge Applications, the Special Court is required to decide them. There are in all 38 Accused persons. One does not know when this pre-charge formalities will be completed. It is true that all these complaints consist of thousands of pages and there will be number of witnesses. So, the trial will be going to take its own time. The issue is, whether the Applicants can be detained in jail just because the allegations are serious in nature ? The answer is No . Because it is not certain when the trial will start and it will be over. Furthermore, even if trial of both the cases will start simultaneously, still the judgement in PMLA case will not be pronounced till the time, the judgement in trial involving scheduled offence will be pronounced. It is true that in entire administration of Criminal Law various stake holders are involved. The responsibility on investigating agency and on the Courts is onerous. Firstly, it is the duty of investigating agency to investigate properly and to collect materials and to submit it in the Court. The responsibility of the Court starts later on. It is true that there is time limit fixed for completion of investigation. Even if the charge-sheet/complaint is filed, still depending upon the magnitude of the offence, the trial continues. There are two sides. One is prosecution and another is defence. Court has to hear both of them. And it is bound to take time - It is but natural that it will take long time for completion of the cases considering the procedure required to be followed. One cannot deny the fact that considering the statistics received by me, it is uncertain when the trial will start. Hence in such a situation a person cannot be deprived of his personal liberty. It is no doubt true that E.D., has filed draft charge . Same time, it is also true that framing a charge is not an empty formality. The Special Judge has to satisfy himself that ingredients of an offence are prima facie satisfied. Both the parties need to be heard - In this exercise, there is also onerous responsibility on the prosecuting Agency by remaining vigilant. If their case is not progressed (due to pendency), they are not remedy-less. They can request the head of that establishment (i.e. Principal Judge) to assign the case to another Court. Ultimately, running of a system is collective responsibility. The defense Counsels have also a role to play. On one hand, they have got every right to protect the interest of their clients and at the same time, they have to come forward for early disposal of the case. Because, they are also part and parcel of the system. And the system must work. Defence Counsels are also part of the same Society for betterment of which system is created. Bail application allowed.

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• 2024 (4) TMI 374
  Maintainability of writ petition - Money Laundering - proceeds of crime - Provisional Attachment Order - reasons to believe - impugned order is issued in consonance with the provisions of Section 5(1) of the Act of 2002 and more particularly the second proviso to Section 5(1) of the Act of 2002 or not - property acquired by the Petitioner No.1 vide the Deed of Sale dated 06.03.1997 could have been provisionally attached by the impugned order taking into account that the said property was acquired when the Act of 2002 had not come into force and more particularly when the provisions of the Act of 1988 was brought within the fold of the Act of 2002 only on 01.06.2009 or not. Whether the instant writ petition is maintainable and if so whether this Court should entertain the writ petition in the present facts? - HELD THAT:- The Act of 2002 was enacted to address the urgent need to have a comprehensive legislation inter alia for preventing money-laundering, attachment of proceeds of crime, adjudication and confiscation thereof including vesting of it in the Central Government, setting up of agencies and mechanisms for coordinating measures for combating money-laundering and also to prosecute the persons indulging in the process or activity connected with the proceeds of crime. This need was felt throughout the world, owing to the serious threat to the financial systems of the countries, including their integrity and sovereignty because of money-laundering. Notably, before coming into force of the Act of 2002, various other legislations including the Act of 1988 were already invoked to deal with attachment and confiscation/forfeiture of the proceeds of crime linked to concerned offences. The inclusion of various offences in Part-A, Part-B, Part-C of the Schedule to the Act of 2002 brings any criminal activity in relation to the Scheduled Offence or relatable to the Scheduled Offence within the fold of the Act of 2002. At the cost of repetition, it reiterated that the process or activity as clarified in the Explanation to Section 3 of the Act of 2002 includes concealment or possession or acquisition or use or projecting as untainted property or claiming as untainted property. Further to that, this process or activity would be a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by any of the activities aforementioned. Therefore, the involvement in any one of such process or activity connected with the proceeds of crime would constitute the offence of money-laundering. The offence of money-laundering in the opinion of this Court has nothing to do with the criminal activity relating to the Schedule Offence except the proceeds of crime derived or obtained as result of that crime. The properties mentioned in the Schedule to the impugned order including the property acquired vide the Deed of Sale dated 06.03.1997 would come within the fold of proceeds of crime provided the property/properties are derived or obtained directly or indirectly by the Petitioners as a result of a criminal activity relating to or relatable to a Scheduled Offence. It is also observed that in the circumstances, the Authorized Officer treats the property/properties as proceeds of crime, the Petitioners would be at liberty before the Authorities under the Act of 2002 to establish that the crime property have been rightly owned and possessed by them and such property by no stage of imagination can be termed as crime property and ex-consequential proceeds of crime within the meaning of Section 2(1)(u) of the Act of 2002. Whether the impugned order is issued in consonance with the provisions of Section 5(1) of the Act of 2002 and more particularly the second proviso to Section 5(1) of the Act of 2002? - HELD THAT:- This Court finds it very pertinent to observe that Section 5(1) of the Act of 2002 envisages an action of provisional attachment can be initiated only on the basis of materials in possession of the Authorized Officer indicative of any person being in possession of proceeds of crime. The precondition of being proceeds of crime is that the property has been derived or obtained, directly or indirectly by any person as a result of criminal activity relating to a Scheduled Offence. The sweep of Section 5(1) of the Act of 2002 is not limited to the accused named in the criminal activity relating to a Scheduled Offence but would also apply to any person if he is involved in any process or activity connected with proceeds of crime - the reasons to believe in the instant case having referred to the provisional attachment order makes it clear that the said reasons to believe which were recorded in writing was done subsequent to the impugned provisional attachment order. Under such circumstances, it was a clear infraction to the provision of Section 5(1) of the Act of 2002 as well as the second proviso to Section 5(1) of the Act of 2002. The reasons to believe so recorded by the Respondent No.2 mentioned that if the properties were left unattached, they are likely to be transferred, disposed of, parted with or otherwise dealt with in any manner prejudicial to the purpose of investigation carried out under the provisions of the Act of 2002. As already stated, there was no mention of the materials in possession on the basis of which the said belief was formed. It is apposite to observe that merely reiterating the language of the statute sans without recording the basis on what materials, the belief was formed in writing, would not be in consonance with the provisions of Section 5(1) as well as the second proviso to Section 5(1) of the Act of 2002. Under such circumstances, in the opinion of this Court, the condition precedent being not satisfied, the Respondent No.2 could not have issued the impugned order under the second proviso to Section 5(1) of the Act of 2002 or even under the less stringent Section 5(1) of the Act of 2002. Consequently, the impugned order is contrary to Section 5(1) as well as also to the second proviso to Section 5(1) of the Act of 2002 for which the said impugned order is required to be interfered with. As this Court is of the opinion that the impugned order is required to be interfered with, the consequential effect thereof would be that the adjudication proceedings so initiated on the basis of the complaint filed under Section 5(5) of the Act of 2002 has also to fail inasmuch as without there being a valid provisional attachment order, the adjudicating authority does not get jurisdiction to exercise its powers in terms with Section 8 of the Act of 2002. Petition disposed off.

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• Service Tax

• 2024 (4) TMI 401
  Rejection of appellants challenge to Summons, summoning the appellants to appear before the Second respondent - principles of natural justice - Whether impugned order of the learned Single Judge as well as Summons at this stage requires interference? - HELD THAT:- The answer to the above point would be in the Negative. Normally, show cause notice would not give raise to any cause of action to challenge the same, unless it is shown that such show cause notice is a nullity and such show cause notice is issued without jurisdiction. Show cause notice would not infringe any of the rights of the party. Even if it is alleged that the Authority which issues show cause notice has no jurisdiction, objection regarding jurisdiction also could be raised before the Authority. In the event of an adverse decision, it would certainly be open to challenge the same either in appeal or as the case may be in appropriate cases by invoking jurisdiction under Article 226 of the Constitution of India. Thus, it is settled law that writ petition normally not be entertained against mere issuance of show cause notice. In the instant case, though summons was issued by second respondent, show cause notice makes it abundantly clear that petitioner is required to show cause to the Commissioner of Central Excise and Service Tax 1, Commissionerate, Bengaluru which is the Competent Authority to determine the service tax liability of the appellants/petitioners. Therefore, in the facts and circumstances of the present case, there is no reason to interfere with the learned Single Judge s order insofar as jurisdiction is concerned. Thus, no ground is made out to interfere with the order of learned Single Judge and accordingly writ petition stands rejected - petition dismissed.

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• 2024 (4) TMI 400
  Eligibility to exemption under Notification No. 25/2012 ST which is available evidently under Serial No. 1 and 2 read with Serial No. 25(a) of the exemption notification - emergency response Services of Dial 108, 102 and 104 - services were provided to Government by way of public health in terms of Notification No. 25/2012 ST dated 20.06.2012 - Extended period of limitation - interest - penalty - HELD THAT:- It is found that the Learned Commissioner in the Adjudication Order have rightly held eligibility to exemption under Notification No. 25/2012 ST which is available evidently under Serial No. 1 and 2 read with Serial No. 25(a) of the exemption notification. Further the eligibility to exemption has further been clarified by the Board vide its Circular dated 30.05.2018. It is further found that the ground raised by Learned Special Counsel for Revenue regarding bifurcation of bundled service in respect of comprehensive contract where police/fire response system was also in bundle, is only minuscule, being less than 5% and hence did not call for any bifurcations in terms of Section 66F(3)(a) of the Finance Act 1994. Admittedly Appellant have been providing services to the State Governments under written agreements. All the receipts are through the banking channel. Admittedly, Appellant have maintained proper books of accounts and records of the transactions. Appellant was also registered with the Service Tax Department and they were filing their returns and paying the admitted taxes. The Appellant assessee was under bonafide belief that the services being related to public health under NHM they are entitled to exemption under Notification No. 25/2012 ST. The assessee was also under bonafide belief that the service relating to emergency response service including for police/fire was also exempted being provided to the Government - Further evidently the Appellant on being so advised, during the course of investigation/enquiry, deposited the service tax where the receipts are under separate contract for the Police/fire services under Project 100. The Appellant have maintained proper books of accounts and records of their transactions. Services are provided to the State Government under agreements and all the receipts were through the banking channel. The Appellant is a non-profit organisation registered under Section 12AA of the Income Tax Act 1961. It is further found that the Appellant had taken suo-moto registration and were making compliance and depositing the admitted taxes. It is further found that the appellant was under bonafide belief that their services with respect to emergency response service under NHM, which is the major part of their services is exempt and has been rightly found to be exempted - under the comprehensive contracts, the Dial 100 Project police/fire was only minuscule element less than 5%. Further, admittedly the appellant have deposited the service tax where they found the same to be payable before issue of SCN along with applicable interest, for which there was proposal in the SCN itself was made for appropriation. Extended period of Limitation - penalty u/s 78 of FA - HELD THAT:- The extended period of limitation is not available to revenue and accordingly the demand is confined to the normal period of limitation. The penalty under Section 78 of the Act is set aside. Appeal of assessee allowed.

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• 2024 (4) TMI 399
  Taxability - research projects - educational programs - fees charged to students in the post graduate student status program (PGSSP) offered by the appellant - externally funded research projects - suppression of facts or not - Extended period of limitation - penalties. Taxability of the fees collected from students in the PGSSP - HELD THAT:- As far as PGSSP is concerned, IIIT does not fall under the definition of educational institution as the said course is not meant for obtaining any qualification or degree recognised by law - this interpretation of the notification/negative list cannot be agreed upon. It is settled law that a notification must be read in its plain terms. IIIT-H undisputedly offers recognised degree programs also recognised by UGC as a deemed to be university, hence it is an educational institution: its services to its students, including permitting PGSSP students to attend regular degree courses, are held exempted. Whether research funding was taxable? - HELD THAT:- The focus on nexus between the funds and activity funded is not conclusive to establish that a service was provided. As regards the finding of shared IP, it is noted that the appellant s contention, supported by annexures in its appeals that, though IP was shared as per agreements, in fact it was placed in the public domain by publication by the appellant s scholars, remains unrefuted by Revenue - a single factor is not determinative of service . Considering the facts and circumstances in which the appellant carries out its research activity, and the objectives thereof, it is found that the appellant s objectives and focus are on its academic activity which is carried out through conventional classroom teaching as well as through participation of students in the research projects that form part of academic engagement in this institution. These facts have not been disputed by Revenue - service in terms of section 65B(44) of the Finance Act 1994 was not provided by the appellant to its funders for research projects - the demands of service tax made under the orders impugned in the two appeals set aside. Extended period of limitation - Suppression of facts or not - penalty u/s 78 of FA - HELD THAT:- There was no suppression of facts - Hence neither extended period of limitation nor penalties under section 78 were justifiable. All penalties are set aside. The impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 398
  Classification of services - Cargo Handling Services or Works Contract Services - whether the air cargo building constructed by the assessee/Appellant can be considered as part of the airport or not? - HELD THAT:- The air cargo agent building is admittedly constructed as an annexee building to the air cargo terminal and the same is necessary for the smooth functioning of the air cargo terminal. It is admitted fact that both incoming and outgoing cargo is partly processed by the air cargo agents facilitating the main processing and clearance for export/import, in the air cargo terminal. In the facts and circumstances, it is held that the air cargo agent building constructed by the Appellant forms part of the airport/Aerodrome and accordingly the said activity stands excluded under the exclusion clause in the definition of works contract service. The impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 397
  CENVAT Credit - Eligibility for benefit of Cenvat Credit on 16 specified services when they availed benefit of Notification No. 1/2006-ST dated 01.03.2006 - HELD THAT:- In the precedent orders passed by the Co-ordinate Bench (Hyderabad) of this Tribunal, in M/S LEMON TREE HOTEL (CYBER HILLS DEVELOPERS PVT. LTD.) , M/S FLEUR HOTELS PVT. LTD. VERSUS CC, CE, HYDERABAD-IV [ 2017 (7) TMI 799 - CESTAT HYDERABAD] where it was held that the issue availment of Cenvat credit on the input services which are used for bringing into existence of immovable property are also eligible for availment of Cenvat credit. In view of the facts placed on record and the precedent orders in appellant s own case, there are no reason to entertain a different view and are in agreement with the submissions made by the learned Counsel for the Appellant - the impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 396
  Levy of Service tax - activity of imparting education as per the Intermediate curriculum, with intensive preparation for competitive exams - negative listed service or not - HELD THAT:- Admittedly, the facts of the case are similar to the case of SRI CHAITANYA EDUCATIONAL COMMITTEE VERSUS COMMISSIONER OF CUS, CE ST GUNTUR (VICE-VERSA) [ 2018 (4) TMI 664 - CESTAT HYDERABAD] , wherein for the period 2011-12 to 2014-15, it was held that the demand is not sustainable as post 2011, there is change in legal provisions and the only requirement is that the coaching or training should lead to grant of a certificate, but it is not necessary that the institute itself shall award such certificate. For the period post 30.06.12-negative list also, the Tribunal extended the benefit of negative list entry under Sec 66D and set aside the demand. The issue is squarely covered in favour of the Appellant in the precedent orders of the Tribunal - there are no reason to take a different view in this matter - the impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 395
  CENVAT Credit - manufacture or trading of set top boxes - common input services availed - violation of Rule 4 Rule 9 of CCR - HELD THAT:- The appellant has maintained proper books of accounts in the ordinary course of business in electronic form (tally software), which is permissible under the Service Tax Rules read with Board Circular aforementioned. It is further found that appellants have regularly got their books of accounts audited by a Chartered Accountant and they have regularly filed Audit Reports along with Balance Sheet and Profit Loss Account before Income Tax department. The appellant has regularly taken Cenvat credit of input service tax in their books of accounts after making payment to the service providers. Such aggregate input service tax, including cess, reflected in the trial balance, being debit balance as on 31st March under the re-grouped account head duties and taxes . Thus, it appeared that due to reflection of input tax credit under the head duties and taxes , has created confusion to the Revenue. Accordingly, appellant has taken service tax credit regularly within the prescribed period from the date of invoice as prescribed under Rule 4 read with Rule 9 of CCR, 2004 - there is no dispute raised by the appellant with respect to output tax. The impugned order set aside - appeal allowed.

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• 2024 (4) TMI 394
  Levy of service tax - renting of immovable property service - manufacture/ processing of alcoholic beverages under job-work basis, for or on behalf of their clients, under manufacturing agreements - supply agency services - Extended period of limitation - HELD THAT:- A careful perusal of the agreements entered into by the appellant and particularly to the clauses extracted above would clearly establish that in terms of the manufacturing agreement the Appellant is responsible for the manufacture/producing IMFL under the brands belonging to CML in their own distillery, using their own manpower, skilled or un-skilled required for the manufacture of IMFL and also the cost of running the unit including the costs of overheads. Further it is also very clear from clause 13(a) of the manufacturing agreement, the consideration received by the Appellant is based on the goods manufactured and not for the manpower supplied. This clearly establishes that the services are for contract manufacturing of IMFL and not for manpower supply services as held in the impugned order. No adverse inference can be drawn for the reimbursement of expenses received by the appellant from the brand owner - there are no merit in the impugned order to demand Service tax on the manufacturing services provided by the Appellant under Manpower Recruitment and Supply service and accordingly, the demand under the same is liable to be set aside, as held. Renting of immovable property during the period 2008-2009 - HELD THAT:- During the relevant period, the issue was disputed before various High Courts and finally ended up before the Supreme Court. Finally, the issue was put to rest by way of a retrospective amendment. This, itself, shows that there was lot of confusion on levy of tax on renting of immovable property service during the material period involved in this case. The normal period of limitation for the raising demand for non-payment of service tax as per Section 73 of the Finance Act during the impugned period is one year from the relevant date. The demand in this case is for the period from 01.04.2008 to 31.03.2009 and therefore the relevant date is the due date of filing of return i.e., 25.04.2009. Accordingly, the normal period of limitation will expire on 25.04.2010 and the show cause notice came to be issued on 21.10.2011. Thus, the entire demand of tax for the period 01.04.2008 to 31.03.2009 is barred by limitation - the demand of tax set aside. The impugned order and demand of tax on both Manpower Recruitment and Supply Service and Renting of Immovable Property Services set aside - all penalties are set aside - appeal allowed.

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• 2024 (4) TMI 393
  Non-payment of service tax - Construction of Residential Complex Services - Works Contract Services - activity of development and construction of flats and villas - Extended period of Limitation - HELD THAT:- It is satisfying in view of the explanation introduced in section 65(105)(zzzh) w.e.f. 01.07.2010 and clarification issued by the Board vide Circular No. 151/2/2012-ST dt.10.02.2012 that there is no tax liability to service tax for the construction activity of residential nature prior to 01.07.2010. Even otherwise, it is found that the land owner and the appellant, as developer, have worked on principal to principal basis and there is no relation of service provider and service recipient between them. The impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 392
  Mis-classification of ongoing construction of complex service under the head WCS - Non-payment of service tax under the head WCS on land owner s share - Short payment of service tax due to non-inclusion of amounts received prior to execution of sale deed - Non-payment of service tax in respect of Management Consultancy service allegedly received from outside India under the reverse charge mechanism - Demand of interest on proportionate Cenvat credit reversed under Rule 6(3) of CCR, although with some delay - penalties u/s 76, 77 and 78 of FA. Mis-classification of ongoing construction of complex service under the head WCS - HELD THAT:- Admittedly, the work/service done by the Appellant involves both transfer of material and transfer of labour cum services. Thus, these are complex contracts. It has been held by the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] that prior to 01.06.2007, complex contracts involving supply of labour and material are not taxable, as there was no mandate under law to bifurcate the complex contract and subject the service element to tax - the classification of the work cum service involved, done by the Appellant, in the nature of construction of residential complex, etc., is rightly classifiable under the head WCS - the issue is allowed in favour of the Appellant and against the Revenue. Non-payment of service tax under the head WCS on land owner s share - HELD THAT:- The Appellant, on the basis of Joint Development Agreement cum Power of Attorney executed jointly with the land owner, develops the property on the land belonging to the land owner and further, as per the agreed ratio of sharing, they share the constructed area. Thus, the activity is in the nature of a Joint Venture/ Partnership on Principal to Principal basis. There is no relation of service provider and service receiver between the land owner and the Appellant/ builder - this issue stands decided in favour of the Appellant in the precedent order of this VASANTHA GREEN PROJECTS VERSUS CCT, RANGAREDDY GST [ 2018 (5) TMI 889 - CESTAT HYDERABAD] . Similar view has been expressed by the CBEC vide Circular No. 151/2/2012-ST dt.10.02.2012 read with Circular No. 108/2/2009- ST dt.29.01.2009. Short payment of service tax due to non-inclusion of amounts received prior to execution of sale deed - HELD THAT:- The Appellant pays service tax only on the value agreed upon and received as per the construction agreement towards the construction/finishing of the dwelling unit. Appellant is not discharging service tax on the amount received till the date of execution of sale deed. It is found that till the date of execution of sale deed, there was no right available to the prospective buyer to the dwelling unit and hence, whatever work was done till the date of execution of the sale deed, was by way of self-service. It is only under the construction agreement, post execution of sale deed, that the relation of service provider and service receiver takes place - the appellant is justified and correct in not paying service tax on the value of sale deed for transfer of undivided share in land and the value of semi-finished construction. Even if any amount is received by way of advance from the prospective buyer, in absence of any contract/agreement for sale or execution of sale deed, the same is only by way of deposit and cannot be considered as an amount received towards any intended service. Such advance amount is not towards any taxable service but for an immovable property and as such, does not come under the scope of section 67 of the Finance Act 1994 - when the semi-finished flat/dwelling unit is sold to buyer, it is a sale of immovable property and outside the purview of Finance Act 1994 for levy of service tax. Such sale transaction is subjected to appropriate Stamp duty and VAT, as applicable - appeal allowed in favour of the Appellant and against the Revenue. Non-payment of service tax in respect of Management Consultancy service allegedly received from outside India under the reverse charge mechanism - HELD THAT:- The Appellant has filed a copy of the ledger extract annexed to the appeal paper book. It is found that as admittedly Appellant has not received any service from the said M/s GJOS and have further written off the amount in their Books of Accounts as bad debts , thus, admittedly, Appellant has not received any service nor there is any chance of receiving service and the said amount has already been written off as bad debts . Accordingly, in absence of receipt of any service, no service tax is payable under the reverse charge mechanism. Accordingly, this ground also allowed in favour of the Appellant and against the Revenue. Demand of interest on proportionate Cenvat credit reversed under Rule 6(3) of CCR, although with some delay - HELD THAT:- The non-reversal of proportionate credit was, according to the Appellant/Assessee, an inadvertent mistake and not with any deliberate or contumacious conduct for evading tax. Admittedly, Appellant has reversed an amount of Rs.1,43,27,894/- on 31.12.2013 prior to issue of SCN. Under such admitted fact, Revenue has not demanded reversal of any amount under Rule 6(3) but has demanded interest on the same under Rule 14(ii) of CCR, which provides where the Cenvat credit has been taken and utilised wrongly or has been erroneously refunded, the same shall be recovered along with interest from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A and 11AA of the Excise Act or section 73 and 75 of the Finance Act 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries - the appellant is not liable to pay interest as they have admittedly not utilized the amount of credit, which was to be reversed under Rule 6(3) - this ground allowed in favour of the appellant and against the Revenue. Penalties u/s 76, 77 or 78 of the Finance Act - HELD THAT:- The penalties imposed under all the sections set aside. The impugned order set aside - appeal allowed.

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• 2024 (4) TMI 391
  Valuation of service - Security Agency Service - non-inclusion of value of certain facilities extended by M/s. Reliance Industries Limited such as charges for accommodation, medical expenses, vehicle running and maintenance, telephone, dog squad etc. in assessable value - HELD THAT:- The matter is no longer res-integra as this Tribunal in the case of M/S BHARAT COKING COAL LTD. VERSUS COMMR. OF CENTRAL EXCISE S. TAX, DHANBAD [ 2021 (9) TMI 23 - CESTAT KOLKATA] has decided the same issue pertaining to the appellant and held that The Allahabad Bench of the Tribunal in the case of CENTRAL INDUSTRIAL SECURITY FORCE VERSUS COMMISSIONER OF CUSTOMS, C.E. S.T., ALLAHABAD [ 2019 (1) TMI 1661 - CESTAT ALLAHABAD ], has already settled the issue in favour of the appellant to hold that expenses incurred towards medical Services, vehicles, expenditure on Dog Squad, stationery expenses, telephone charges, expenditure incurred by the service recipient for accommodation provided to CISF etc are not includible. The impugned order-in-original is without any merit therefore, set aside - appeal allowed.

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• 2024 (4) TMI 373
  Levy of service tax - Sales of goods or service - transactions with end users for supply of license code/keys of Kaspersky Antivirus Software in retail packs - HELD THAT:- In QUICK HEAL TECHNOLOGIES LIMITED VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2020 (1) TMI 430 - CESTAT NEW DELHI] , a Division Bench of this Tribunal examined a similar controversy. The show cause notice that was issued to the appellant therein alleged that the appellant had supplied Quick Heal brand Antivirus Software key/codes to the end users through dealers/distributors without discharging the service tax liability on such transactions. It was further stated that the end user was provided with a temporary/ non-exclusive right to use the Antivirus Software as per the conditions contained in the End User License Agreement and would, therefore, not be treated as deemed sale under article 366(29A) of the Constitution. Thus, the supply of packed Antivirus Software to the end user by charging license fee would amount to a provision of service and would not be a sale. Thus, as a similar End User Licence Agreement was executed in the present case, the decisions of the Tribunal and the Supreme Court in Quick Heal Technologies would apply to the facts of the present appeal. The adjudicating authority was not justified in requiring the appellant to discharge service tax liability on transactions with end users for supply of license code/keys of Kaspersky Antivirus Software in retail packs under section 65(105)(zzzze) of the Finance Act. In view of the decision of the Tribunal and the Supreme Court in Quick Heal Technologies, the order dated 29.02.2016 passed by the Additional Director General deserves to set aside and is set aside - Appeal allowed.

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• Central Excise

• 2024 (4) TMI 372
  Reversal of CENVAT Credit - inputs consumed/utilized for production, at the work-in-progress stage, were destroyed in fire in the factory - HELD THAT:- Under the Cenvat Credit Rules, Rule 3(5) provides when inputs or capital goods on which credit has been taken are removed as such from the factory or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice. Further rule 3(5C) of CCR provides where any goods manufactured or produced by the assessee, the payment of duty is ordered to be remitted under Rule 21 of Central Excise Rules 2002, the Cenvat credit taken on inputs used in the manufacture or production of said goods and the Cenvat credit taken on input services used in or in relation to the manufacture or production of said goods, shall be reversed. Under the facts and circumstances, it is an admitted fact that the work in progress or semi-finished goods are no longer inputs. Thus, no case is made out of inputs removed as such from the factory on the destruction of WIP or semi-finished goods. In case of destruction of goods/inputs, the liability is restricted to reversal of Cenvat credit on such inputs only. The appellant is not required to reverse Cenvat credit on the inputs already issued for production forming part of WIP or semi-finished goods. The impugned order set aside - It is clarified that the appellant is not required to reverse the Cenvat credit of Rs.76,88,124/- with respect to inputs forming part of work in progress/semi-finished goods destroyed in fire - appeal allowed.

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• 2024 (4) TMI 371
  Process amounting to manufacture - buying tubes (stainless steel pipes) and then undertaking certain processes thereon, such as, upsetting, heat treatment, inspection, testing, threading and external coating, so that the pipes can be used for the purposes of oil drilling - period April 2007 to March 2012 - Change of opinion - Extended period of limitation - HELD THAT:- The present SCN has been issued by the Revenue due to change of opinion and/or interpretation after introduction of the 8 digit tariff. The only case of Revenue is that under the 8 digit tariff, due to processes undertaken by the appellant, the green pipe also falls under Chapter 73 and the processed pipe also falls under Chapter 73, although under different sub-headings and thus, it amounts to manufacture, due to change of the sub-heading. This issue is no longer res integra. Under similar facts and circumstances, the Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, NEW DELHI-I VERSUS S.R. TISSUES PVT. LTD. [ 2005 (8) TMI 111 - SUPREME COURT] , on the issue of whether the process of unwinding, cutting and slitting to sizes of jumbo rolls of tissue paper would amount to manufacture on the first principles or under Sec 2(f) of the Act, it was held that the activity of slitting and cutting of jumbo rolls of plain tissue paper/aluminium foil into smaller size does not amount to manufacture as character and end-use did not undergo any change on account of winding, cutting/slitting and packing - The aforementioned ruling of the Apex Court covers the issue herein on all fours. Extended period of Limitation - HELD THAT:- The SCN is bad as extended period of limitation is not available to Revenue under the admitted fact that all the facts were in the knowledge of the Revenue, as is evident from the earlier SCNs issued either for demand of Excise duty or for demand of service tax. Admittedly, appellant had maintained proper books of accounts and records and have been regularly filing their statutory returns. Even from the list of relied upon documents, these facts are evident as relied upon documents are nothing but the documents maintained by the appellant in the ordinary course of business. The impugned order set aside - appeal allowed.

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• 2024 (4) TMI 370
  SSI Exemption - value of clearances - error in calculation in SCN - clubbing of clearances - submission of appellant is that after excluding the value of clearances for export and the value of traded goods the value of clearances will be only Rs 1.41 crores which is well within the exemption limit as provided by the N/N. 8/2003-CE. HELD THAT:- The appellant-I is engaged in the manufacture and clearance of plastics caps closures for bottles falling under Chapter No. 39235010 and trading of plastic bottles falling under Chapter sub-heading 39233090 of first schedule to the Central Excise Tariff Act, 1985. Undisputedly the issue involved in the matter is for the financial year 2013-14 and 2014-15 (upto November 2014). It is also not in dispute that the M/s L S Plastics started the production in the year 2014-15 only and hence the issue of the clubbing of clearances of the Appellant I with the clearances of M/s L S Plastics is only relevant for that period. Value of Clearances - HELD THAT:- Appellants have before Commissioner (Appeals), not challenged the basis of demand as per para 14.4 of the Show Cause Notice they have only stated that they have submitted the copy the ledgers duly certified by the Chartered Accountant. Appellant could have pointed out from sale invoice wise chart, made in Annexure A1, Annexure A2 Annexure A3 as to which were the export sales included in the value of clearances for making this demand. Even, except for referring to the table in para 14.1, there is no other submission made by the appellant. As we find that the basis of demand is para 14.4 read with Annexure A1, Annexure A2 Annexure A3, which has not been challenged there are no merits in the submissions made by the appellant in this regards. Clubbing of Clearances - HELD THAT:- There is no dispute that the beneficiary of all the activities undertaken by Appellant-I and M/s L S plastic is same family. Appellant 3 who is proprietor of M/s L S plastics is drawing remuneration of Rs 2,00,000/- and partnership interest to the extent of 10% in the partnership firm. It is also well established and not disputed appellant-II who enjoys partnership interest of 70% in the partnership firm and remuneration of Rs 4,00,000/- actually controls all the operation of M/s L S Plastic. In MCDOWELL AND CO. LIMITED VERSUS COMMERCIAL TAX OFFICER [ 1985 (4) TMI 64 - SUPREME COURT] , this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a splendid work by a wise man but has to be condemned and punished with severest of penalties. As appellant-II and appellant-III were the persons responsible for planning for evasion of duty, penalties imposable under Rule 26 of the Central Excise Rules 2002. The fact is noted that penalty equivalent to the duty evaded has been imposed on the partnership firm in which appellant-II and appellant-III are partners. Penalty on appellant-II may be reduced to Rs. 50,000/- only and on appellant-III it reduced to Rs. 75,000/-. With above modification impugned order is upheld. Appeal of appellant-I is dismissed and the appeals by appellant-II and appellant-III are partly allowed to the extent of reducing penalties imposed on them - appeal allowed in part.

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• CST, VAT & Sales Tax

• 2024 (4) TMI 369
  Levy of tax - turnover of old machinery and equipment after the closure of business - scope of Business as contained in Clause (iv) of Section 2(e) of the U.P. VAT Act, 2008 - liability of payment of interest on the admitted turnover in terms of Sub-section (2) of the Section 33 of the U.P. VAT Act, 2008 - HELD THAT:- Upon a perusal of the orders passed by the Assessing Officer, First Appellate Authority and the Tribunal, one is able to decipher that the Tribunal has categorically come to the finding that the items that were sold after the closure of the business amounting to Rs. 1,33,20,839/- are in the nature of plant and machinery falling under capital goods. In light of the same, the Tribunal came to the finding that these goods would not fall within the definition of Section 2(e)(iv) of the Act - The finding of the Tribunal and the First Appellate Authority that the particular goods were in nature of capital goods and not the goods under Section 2(m) of the Act is not a perverse finding. This Court in its revisional jurisdiction would not enter into the findings of the Tribunal unless the same are factually unbelievable and perverse. The Tribunal being the last fact finding authority, its findings are paramount and should not be interfered with by this Court unless the same are patently illegal and perverse. It is to be noted that the amended definition of Section 2(e) of the Act only includes the sale of goods acquired during the period in which the business was carried out. This definition pre-supposes that the goods were acquired during the period in which the business was carried out and were subsequently sold after the closure of the business. The definition could very well have been amended to include all kinds of goods including capital goods. The legislature has limited itself to only sale of goods , and therefore, the definition of goods as per the Section 2(m) of the Act has to be taken into account and not the goods which fall under the definition of capital goods in Section 2(f). There is no requirement to interfere with the impugned order passed by the Tribunal. The revision petition is, accordingly, dismissed.

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• Indian Laws

• 2024 (4) TMI 368
  Dishonour of Cheque - seek production of documents in order to discover or to obtain proper proof of the relevant facts - Section 311 of the Cr. P.C. - HELD THAT:- The petitioner seeks to place on record the pleadings of the parties in the Petition filed by the respondents before this Court. The said petition had culminated in the judgment and Order dated 18.02.2019 of this Court. It is thereafter, that the Notice under Section 251 of the Cr. P.C. was framed against the respondents, on 08.04.2019. On 16.09.2019, the petitioner, by way of an application filed under Section 311 of the Cr. P.C., sought to bring on record the documents that are now being sought to be brought on record by way of the application in question. The said application was withdrawn by the petitioner on 23.10.2019. The petitioner has not sought to explain the reason for withdrawing the said application, nor submitted any change in circumstances that would justify a new application with the same prayer to be filed afresh. The judgment of the High Court of Bombay in U.T. OF DADRA AND HAVELI AND ORS. VERSUS FATEHSINH MOHANSINH CHAUHAN [ 2006 (8) TMI 684 - SUPREME COURT] cannot come to the aid of the petitioner, as in the said case, the earlier application under Section 311 of the Cr. P.C. seeking recall of PW2 therein, had been filed by the complainant therein. However, the same was withdrawn by the complainant. Within four days thereof, the prosecution filed an application seeking recall of four witnesses, including PW2, contending that these witnesses had earlier deposed due to threats received by them from the accused. It was in those peculiar facts, that the High Court of Bombay upheld the Order of the learned Trial Court therein allowing the application of the prosecution. The application in question in the present case has been, admittedly, filed at a belated stage. It appears to be an afterthought. It only makes vague averments, and is also bereft of any explanation with regard to such delay. The learned Trial Court has also correctly observed that the petitioner has failed to file such documents with the complaint(s) itself or at an earlier and appropriate stage, even after being in possession of the said documents. There is also no explanation in the application in question with regard to the withdrawal of the earlier application seeking similar relief. The learned Trial Court has, therefore, rightly rejected the application in question by the Impugned Order and has also given detailed and cogent reasons while dealing with the same. Therefore, the Impugned Order does not warrant any interference by this Court. There are no merit in the present petitions. The same are, accordingly, dismissed.

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