Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 14, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Refund - Period of limitation - relevant date - date of removal of deficiencies in the application for return - If the application filed is not deficient in material particulars, it cannot be treated as non est. If it is accompanied by the “documentary evidences” as mentioned in Rule 89(2) of the Rules, it cannot be ignored for the purposes of limitation. The limitation would necessarily stop on filing the said application. - HC
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Transitional Credit - Revision of return on MVAT for June 2017 - the order should be self-speaking. It cannot be that the Authority passes an order without reasons, and then arguments are advanced in a writ jurisdiction at the first instance. Furthermore, the Petitioner before us is not the one who is delaying the payment of taxes. Remand is also necessary to highlight the need to give a reasoned order. The learned Counsel for the parties jointly state that the exercise of power under section 25 of the MVAT Act of 2002 in respect of the order in question would be within the period of limitation. - Matter restored back - HC
Income Tax
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Undisclosed investment in stock and property - when the assessee himself had disclosed higher stock, question of taking a view that assessee had suppressed sales for making investment towards purchase of goods which is reflected in the higher stock figures does not appear to be reasonable. - HC
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Reversal of TDS by the employer on salary foregone by the employee (after termination) as per the settlement agreement - the foregone salary may after its accrual be chargeable to tax in the hands of appellant, but the appellant cannot claim that his employer should have deducted tax on the basis of accrual. - AT
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Levying penalty u/s 272A(1) - non-compliance of the notice - Nonappearance of the assessee in response to the initial notice under section 142(1) of the Act was not deliberate. The year 2019 being the initial year of shift towards digital and electronic mode, the mistake appears to be bonafide. The assessee has been able to show reasonable cause for the failure to comply with statutory notice u/s. 142(1). - No penalty - AT
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Deduction u/s. 80P(2)(d) - interest income - the income by way of interest earned by the assessee co-operative society during the Assessment Years 2007-2008 to 2011-12 on the investments made in the co-operative bank are not eligible for deductions under Section 80P(2)(d) - AT
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TDS u/s 194A - the impugned payment is nothing but compensation/damages paid by the assessee to its allottees which cannot be tagged as interest u/s. 2(28A) - TDS provision of section 194A of the Act is not applicable towards such payment. - AT
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Addition u/s 43CA - stamp duty valuation - when the valuation towards actual sale consideration and the value adopted for stamp duty in the present case varies between 5% to 7%, i.e., within the tolerance limit of upto 10%, therefore, pursuant to the amendment made available on the statute vide Finance Act, 2019 that is applicable w.e.f. A.Y.2014- 15, no adverse inferences could have been drawn u/s.43CA - AT
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Capital gain - deduction of expenditure incurred in relation to the transfer of the property - the other works carried out by the solicitor firm for which bill has been raised by them on the assessee , cannot be construed as expenditure incurred wholly and exclusively in relation to the transfer of the subject mentioned property. - AT
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Penalty u/s 217B - not getting the books audited - once the penalty is levied for non-maintenance of book of accounts (u/s 44AA), there cannot be further default for not getting the same audited as required u/s 44AB of the Act and therefore, the penalty levied u/s 271B is not justified and thus vacated - AT
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Penalty u/s 271B - violation of provisions of section 44AB - When assessee did not maintain regular books of accounts, then the question of getting the books of account audited does not arise at all - since there is a violation of provisions of section 44AA of the Act and the said violation cannot be extended to section 44AB of the Act. - AT
Customs
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Violation of principles of principles of natural justice - The department cannot confirm the demand on the basis of assumption and presumptions. The allegations raised in the SCN have to be established by evidence. The noticee has a right to get the copies of documents. Department has to record reasons for denying the request for cross examination. - AT
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Levy of penalty u/s 114AA of the Customs Act, 1962 - fraudulent obtaining DEPB certificates - the appellant had filed the Shipping Bills in good faith based on the documents provided to it and in such circumstances, set aside the penalty. In this case, the DEPB certificates obtained based on forged bank realization certificates were sold by the appellant to the importer and thereby caused the importer to make incorrect declarations in the Bills of Entry. - Penalty confirmed - AT
Corporate Law
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Oppression and Mismanagement - This Appellate Tribunal further finds it surprising that although the Appellants is claiming to hold 94.8% of Share Capital of the 1st Respondent Company, yet they did not bother to take over the management and control of the 1st Respondent Company. It is natural and established commercial prudence that person holding the majority of share will have dominating position in composition of Board of Directors of the Company - AT
Indian Laws
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GST Council Meetings and Decisions
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Foreign Trade Policy, 2023 and procedures
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Finance Act, 2023 + Union Budget 2023-24
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Rejection of application for condonation of delay in preferring the application u/s 34 of the Arbitration and Conciliation Act - No application for setting aside the arbitral award was made before elapse of three months from the receipt thereof. Three months from the date of receipt of the award expired on 26.11.2003. The District Court had Christmas vacation for the period from 25.12.2003 to 01.01.2004. On reopening of the Court i.e. on 02.01.2004, the appellants made application for setting aside the award under Section 34 of the Arbitration Act. - benefit of exclusion of period during which the Court is closed shall be available when the application for setting aside award is filed within “prescribed period of limitation” and shall not be available in respect of period extendable by Court in exercise of its discretion. - Delay not condoned - SC
IBC
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Appointment of a debenture trustee - financial creditors or not - a conjoint reading of the Debenture Trust Deed and Deed of Guarantee clearly establishes that the amount claimed in demand certificate is to be paid directly to the Debenture Holders by Respondent No. 3, who is the Corporate Debtor within the provisions of the IBC. - The Adjudicating Authority has not committed any error in admitting the section 7 application filed by the respondents - AT
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CIRP - Period of limitation - in terms of the Section 128 of the Indian Contract Act, 1872 the liability of the Respondent was always co-extensive with debt of Principal Borrower and therefore the acknowledgment of debt by various OTS proposals, were also deemed acknowledgements by the Respondent herein of the liability as guarantors on behalf of the Principal Borrowers. - AT
Service Tax
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Lavy of service tax - Hair Transplantation - 'Cosmetic Surgery and Plastic Surgery' service - exception of surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma‟ - The Hair Transplant is a cosmetic surgery and liable to the service tax levy - AT
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Reverse Charge - Renting services provided by the Directors in the capacity of Individual - Land owners are providing service of renting of immovable property as Directors of the appellant, whereas they are providing the said service in their individual capacity as owners of the premises and not as Directors of the appellant - AT
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Reversal of CENVAT Credit - electrical energy is not an excisable goods nor it is exempted goods as defined in rule 2(d) of the Credit Rules. Thus, as electricity is not excisable goods under section 2(d) of the Central Excise Act, 1944, rule 6 of the Credit Rules would not be applicable. - AT
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Extended Period of Limitation - wilful suppression of facts with an intent to evade payment of service tax, or not - The appellant is a government company and, therefore, there is a rebuttable presumption regarding non-existence of any of the ingredients mentioned in the proviso to section 73(1) of the Finance Act. The show cause notice does not rebut the presumption - In such circumstances, the extended period of limitation could not have been invoked. - AT
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CENVAT Credit - input services - the appellant is not entitled to avail Cenvat credit on the services received from Chhtrapati Engineering and Sai Engineering Works because the said the service is excluded from the definition of input service as provided under Rule 2 (l) of Cenvat Credit Rules, 2004 - AT
Central Excise
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CENVAT Credit - Cement, MS angles, Channels, Beams, Bars, etc. used for foundation of plant and machinery - it clearly appears that all the goods were used for capital goods in the factory of the appellant. On the basis of the Chartered Engineer’s Certificate, there are no reason why the CENVAT credit should not be allowed. - AT
Case Laws:
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GST
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2023 (4) TMI 497
Search and seizure - input tax credit - contention of the petitioner is that the search and seizure memo was not in accordance with law, however, the said issue is not agitated before this Court and no relief to that extent has been sought. HELD THAT:- In terms of the provisions of the GST Act, the tax is leviable on the supply of goods as specified under Section 7 and the said tax is to be paid at the time of supply of goods, which is clarified under Chapter IV of the UPGST Act. The value on which the tax is to be levied flows from Section 15 of the Act, which mandates the manner in which the value of the taxable supply is to be done. Chapter IX of the said Act prescribes for filing of the returns by the assessee and Chapter X mandates the payment of tax, interest, penalty and other amounts on the basis of the returns filed as prescribed under Chapter IX of the said Act. Chapter XIV of the Act confers the power on the authorized officers with regard to the inspection, search, seizure and arrest and Chapter XV prescribes for demands and recovery in respect of the tax not paid or short paid or erroneously refunded or input tax credit wrongly availed - It is clear in the present case that department has taken recourse to Section 74 for assessing the demand of tax and penalty leviable. For taking recourse to Section 74, it is essential that along with search and seizure report, certain specific averment is made with regard to the supply of goods and the non-payment of tax coupled with the fact that the same should be by reasons of fraud, willful misstatement or suppression of facts and an intent to evade the tax. The adjudicating authority clearly erred in assessing and quantifying the demand and levying the penalty by taking recourse to some guidelines issued by the Income Tax Authorities which is impermissible while determining the tax liability under Section 74. The order of the appellate authority is even further bad in law as it discloses no reason, whatsoever for assessing the tax and quantifying the liability. While on the one hand, the appellate authority disapproved the manner in which the adjudicating authority had assessed and quantified the demand of tax and penalty, in the same breath, he proceeds to quantify the tax and imposed penalty without disclosing any reasons whatsoever. On the perusal of the adjudicating authority s order as well as the appellate order, the manner in which the demand has been raised and quantified is not in consonance with the mandate of Section 74 and thus on the ground alone, impugned appellate orders as well as the adjudicating authority s orders are liable to be quashed. Petition allowed.
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2023 (4) TMI 496
Seeking grant of bail - Input tax credit - whether economic offender should be dealt as a general offender? - HELD THAT:- It is an admitted position that petitioner had evaded the tax and got the benefit of input tax credit of nearing Rs.88.33 Crores. Hon ble Apex Court in various pronouncement observed that economic offender should not be dealt as a general offender and in circumstances while granting bail to Vinay Kant Ameta directed him to deposit Rs.200 Crores. Taking into account the facts and circumstances of the case and without expressing any opinion on the merits of the case, this court deems it just and proper to enlarge the petitioner on bail with a condition to deposit Rs.5 Crores by the petitioner before the respondent Department under protest - the bail application under Section 439 Cr.P.C. is allowed and it is ordered that the accused-petitioner Shri Mohammed Ali Akram Khan Son Of Mohammed Iqbal Khan be enlarged on bail provided he furnishes a personal bond in the sum of Rs.50,000/- with two sureties of Rs.25,000/- each to the satisfaction of the learned trial court with the stipulation that he will appear before the trial court on all subsequent dates of hearing and as and when called upon to do so. Bail application allowed.
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2023 (4) TMI 495
Seeking refund of the excess payment of tax - time limitation - petitioner s application was rejected on the ground that the same was beyond the period of limitation - HELD THAT:- It is pointed out that the Adjudicating Authority had proceeded on the basis that it had communicated the deficiencies in Form GST RFD 03 on 31.01.2020 electronically and the said deficiency was resolved after the expiry of two years as stipulated in Section 54 of the CGST Act. The Adjudicating Authority had referred to Rule 90(3) of the Rules and had proceeded on the basis that the said Rule provides for filing of a fresh refund application after rectification of deficiencies. And, the date for filing the fresh application was required to be considered for the purpose of limitation - Rule 90(3) cannot be applied in the manner as sought to be done by the Adjudicating Authority. Merely because certain other documents or clarifications are sought by way of issuing a Deficiency Memo, the same will not render the application filed by a taxpayer as non est. If the application filed is not deficient in material particulars, it cannot be treated as non est. If it is accompanied by the documentary evidences as mentioned in Rule 89(2) of the Rules, it cannot be ignored for the purposes of limitation. The limitation would necessarily stop on filing the said application. This is not to say that the information disclosed may not warrant further clarification, however, that by itself cannot lead to the conclusion that the application is required to be treated as non est for the purposes of Section 54 of the CGST Act. It is erroneous to assume that the application, which is accompanied by the documents as specified under Rule 89(2) of the Rules, is required to be treated as complete only after the taxpayer furnishes the clarification of further documents as may be required by the proper officer and that too from the date such clarification is issued. The petitioner does not seek to press and challenge the validity of Rule 89(2) and Rule 90(3) of the Rules - the matter is remanded to the Adjudicating Authority to consider afresh in the light of the observations made by this Court.
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2023 (4) TMI 494
Rejection of application filed by the Petitioner on the ground of delay - September 2018 to October 2019 - Rule 89(2)(c) of the Central Goods and Services Tax (CGST) Rules, 2017 - HELD THAT:- The arguments of the Petitioner, as reflected in the impugned order, are based on the general situation brought about by the Covid-19 pandemic. The implications of the orders passed by the Hon ble Supreme Court is not considered while calculating the limitation period. The appropriate course of action therefore would be to set aside the impugned order, restore the appeal filed by the Petitioner in respect of the refund which has not been granted and direct the Appellate Authority to examine the aspect of limitation on merits afresh in the light of the decision/order passed by the Hon ble Supreme Court in the Suo Motu Writ Petition. The impugned order dated 29 October 2021 by the Appellate Authority is quashed and set aside, and the Appeal filed by the Petitioner stands restored to file.
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2023 (4) TMI 493
Transitional Credit - Revision of return on MVAT for June 2017 - Petitioner noticed a discrepancy in the return filed in June 2017, and the Petitioner filed a revised return for the period June 2017 under section 20(4)(a) of the Maharashtra Value Added Tax (MVAT) Act, 2002 - HELD THAT:- As regards the notice dated 18 September 2019 issued under Rule 142(1) of the Central Goods and Services Tax (CGST) Rules, 2017 is concerned, the learned Special Counsel for the Respondents points out that show cause notice dated 18 September 2019 was not taken further, and the relevant notice is one dated 21 June 2022 issued under Rule 30 of the Maharashtra Value Added Tax (MVAT) Rules, 2005 in Form 309 upon which the impugned order is passed. In view of this clarification, it is not necessary to set aside notice dated 18 September 2019 and the same has been abandoned. There are no discussion in the impugned order as to whether the Petitioner is entitled to the term set of the transitional credit. The learned Special Counsel for the Respondents sought to argue that apart from the Circular, the statute would demonstrate that the Petitioner is not entitled to set of. The learned Counsel for the Petitioner contends that the statutory scheme would show that the Petitioner is entitled to set of and that this statute as it stands does not make any distinction between the regular return and revised return, and the circular being beyond the scope of the statute should not be relied upon apart from the reliance on the Circular No. 35A - It cannot be that the Authority passes an order without reasons, and then arguments are advanced in a writ jurisdiction at the first instance. If the Respondents proceed to exercise power under section 25 of the MVAT Act of 2002, will issue notice to the Petitioner as per law and pass necessary orders - petition disposed off.
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2023 (4) TMI 492
Appealable order or not - validity of notice issued under Section 130 of the Central GST Act/Punjab GST Act, 2017 - HELD THAT:- A perusal of the order shows that by imposing tax and penalty, demand of Rs.6,09,296/- has been made - Learned counsel for the petitioner states that the petitioner will deposit the bank guarantee with respect to the above said amount and thereafter, the goods may be released. This petition is disposed of by giving direction to the competent authority that in case, the petitioner deposits the bank guarantee of Rs.6,09,296/-, the goods in question be released provisionally.
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2023 (4) TMI 491
Seeking release of Bank Guarantee - suppression in either invoices or bill of the supply of delivery challan in transit - double imposition of tax and penalty upon the shipment, which has already paid proper tax - HELD THAT:- This instant writ petition is disposed of with a liberty to the petitioner herein to file an appeal against the impugned action of the respondents. The Appellate Authority before deciding the appeal shall consider the matter in its entirety including the issue that is pending before the Hon ble Supreme Court. Further, till the appeal is decided, the Bank Guarantee that is furnished by the petitioner shall continue. This instant writ petition is disposed of.
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Income Tax
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2023 (4) TMI 490
Assessment u/s 153A OR 153C - abatement of proceedings - proceedings commenced for scrutiny would stand abated in view of the provisions of Section 153A - whether the proceedings against the petitioner would abate will be dependent on what would be the effective date? - HELD THAT:- It is obvious from the aforesaid submissions that a prima facie opinion on abatement would be relevant for the purposes of considering the question of stay. This Court must opine that the first respondent, instead of just making a statement, while deciding on the merits of the petitioner's application for stay, should have examined the question of abatement mentioning the mentioning the necessary details, and expressed a prima facie opinion on whether the relevant date would be the date of search [10.10.2019] or the date of receipt of books of account or requisitioning the assets seized, if any in the search on 10.10.2019 -these questions must necessarily be addressed in the light of the undisputed fact that the petitioner is not just the Secretary of the aforesaid Trust but also an Assessee with his own income who has filed his returns. First respondent could justifiably prima facie opine that the provisions of Section 153C of the IT Act would apply or not and whether there would be abatement or not, he should have considered accordingly moderating the terms to be imposed while granting stay. In the absence of due consideration of these aspects by the first respondent, this Court must interfere with the impugned order and restore the proceedings for reconsideration directing the first respondent to consider the petitioner's petition for stay in the light of this Court's observations. Hence the following: ORDER - The petition is allowed in part, and the impugned order dated 17.02.2023 [Annexure-A] is quashed restoring the proceedings to the first respondent for reconsideration in the light of this Court's observation as aforesaid. The petitioner to avail opportunity of due hearing, shall appear before the first respondent, without further Notice on 27.03.2023.
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2023 (4) TMI 489
Undisclosed investment in stock and property - HELD THAT:- As according to CIT(A), assessee had shown higher value for the closing stock than the value arrived at by the AO meaning thereby, that assessee had admitted more income in the return of income filed by him by admitting more closing stock. That being the position, CIT(A) was of the opinion that addition made by the assessing officer was not justified and accordingly, the same was deleted. When the matter reached the Tribunal, a view was taken by the Tribunal that the only conclusion possible was that assessee had suppressed sales which was utilized for making investment towards purchase of goods reflected in the closing stock as on 31.03.1996. We are afraid, there was no material on record to support such a conclusion reached by the Tribunal. As pointed out by the CIT(A), when the assessee himself had disclosed higher stock, question of taking a view that assessee had suppressed sales for making investment towards purchase of goods which is reflected in the higher stock figures does not appear to be reasonable. As we have noted above, the quantum of closing stock was reflected in the books of account of the assessee. When such closing stock is reflected in the books of account, assessing officer was not justified in holding that assessee had made investments, which are not recorded in the books of account. There is no material on record to justify such a finding. The closing stock disclosed by the assessee cannot be said to be investment of the assessee in the form of closing stock not reflected in the books of account. Therefore, such addition made by the assessing officer and affirmed by the Tribunal cannot be sustained. Investment in house property- Before the CIT(A), assessing officer did not produce any valuation report. As a matter of fact, CIT(A) had observed that assessing officer could very well had obtained a report from the departmental valuation cell to arrive at the correct figure of investment in house property. Before the Tribunal, the departmental representative filed extracts from the valuation report. From a reading of the order of the Tribunal, it is not discernible as to how such extracts could have been filed before the Tribunal that too without furnishing copy to the assessee. In our view, placing reliance on the extracts from the valuation report was not at all justified by the Tribunal. CIT(A) had clearly mentioned that assessee had obtained loan from the Bank to the tune of Rs.3.5 lakhs. In addition, Tribunal itself gave credit for a sum of Rs.3 lakhs on account of VDIS. That apart, Tribunal also gave credit for disclosing income of Rs.84,962.00. If the three figures are added i.e., Rs.3.5 lakhs+Rs.3 lakhs+Rs.84,962.00, the total figure is much higher than the alleged unexplained investment figure of Rs.6,50,734.00. That being the position, we set aside the aforesaid finding of the Tribunal as well. Substantial questions are answered in favour of the appellant/assessee.
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2023 (4) TMI 488
Reversal of TDS by the employer on salary foregone by the employee (after termination) as per the settlement agreement - Appellant (employee) seeking release of TDS amount - obligation of the employer to deduct TDS on salary foregone after accrual of salary but not paid - HELD THAT:- The Bench is of considered view that the foregone salary may after its accrual be chargeable to tax in the hands of appellant, but the appellant cannot claim that his employer should have deducted tax on the basis of accrual. The grounds raised have no substance. Maintainability of appeal in pursuance of order of Hon ble High Court - Liability of employer to deductTDS u/s 192 - HELD THAT:- As observed this appeal is maintainable by an assessee , however, the aforesaid discussion establish that appellant is neither assessee nor assessee in default . Therefore, the appeal preferred by him, against the order dated 07.01.2021, mentioned in form 36 as review order u./s 263 of the Income Tax Act, 1961 is not maintainable. Even otherwise on merits it can be observed that section 192 of the Act provides deduction of tax at the time of payment . However, in the case in hand admittedly there was no payment of the salary etc, which was foregone as per terms of settlement in the mediation proceedings. Consequently, the appeal is dismissed.
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2023 (4) TMI 487
Assessment u/s 153A - valid and requisite mandatory statutory approval under section 153D - HELD THAT:- As in assessee s own case [ 2022 (5) TMI 279 - ITAT DELHI] on the basis of same approval, ITAT has found that approval is not in accordance with section 153D and has quashed the assessment. Moreover, it is not the case that the above said orders of ITAT have been reversed by the Hon ble jurisdictional High Court. In such circumstances, adhering to the principle of stair decisis, we follow the aforesaid Tribunal orders and hold that the above 153D approval is not in accordance with law and same is liable to be dismissed. Accordingly, the assessment framed in this case is quashed for legal infirmities in 153D approval. Decided in favour of assessee.
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2023 (4) TMI 486
Levying penalty u/s 272A(1) - non-compliance of the notice issued under section. 142(1) - HELD THAT:- It is not disputed that the assessee has participated in the assessment proceedings and ultimately the order has been passed u/s 143(3) of the Act. The only notice with the remained uncompiled which is on account of the fact that the assessee is a lady not accustomed and has to depend on the others. As decided in Triumph International Finance Ltd [ 2022 (3) TMI 713 - ITAT MUMBAI] case assessee has explained that about ongoing assessment proceedings the assessee came to know only on receipt of order u/s 272A(1)(d) of the Act and demand notice. The explanation furnished by the assessee before the CIT(A) and before the Tribunal is consistent. We are satisfied that nonappearance of the assessee in response to the initial notice under section 142(1) of the Act was not deliberate. The year 2019 being the initial year of shift towards digital and electronic mode, the mistake appears to be bonafide. The assessee has been able to show reasonable cause for the failure to comply with statutory notice u/s. 142(1). Thus considering the following finding of the Co-ordinate Bench in the case as relied upon, we delete the levy of penalty - Appeal of the assessee is allowed.
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2023 (4) TMI 485
Rectification petition u/s 154 seeking to annul the addition made during the course of sec.143(3) - HELD THAT:- We hardly see any merit in assessee s instant arguments vis- -vis applicability of sec.154 rectification proceedings in principle. Hon ble apex court s landmark decision in TS Balram, ITO vs. Volkart Bros. [ 1971 (8) TMI 3 - SUPREME COURT ] has settled the law long back that sec.154 rectification proceedings are not meant to enter in roving inquiries in the case records. We uphold the learned lower authorities identical action rejecting the assessee s impugned sec.154 rectification with a rider that the taxpayer herein shall be very much at liberty to take recourse to regular appeal proceedings and the corresponding delay would stand condoned as he has been pursuing the instant sec.154 remedy based on an erroneous belief. Assessee appeal dismissed.
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2023 (4) TMI 484
Rectification u/s 154 - Capital gain computation - rectification claiming correct computation of his long term capital gains after adopting cost of acquisition itself as the fair market value FMV - HELD THAT:- Learned counsel first of all referred to this tribunal s coordinate bench s order in Atul C. Shah [ 2022 (1) TMI 535 - ITAT AHMEDABAD] that such a correct cost of indexation and its appropriate computation indeed forms subject matter of section 154 rectification. Learned counsel also sought to highlight the fact that the assessee s co-owner s capital gains had been computed after determining the very cost of acquisition/indexation which has been denied in the impugned sec.154 proceedings. Faced with the situation, we deem it appropriate to reverse the learned lower authorities action declining the assessee s instant rectification petition as not maintainable and leave it open for the learned Assessing Officer to decide the same afresh as per law. Assessee s appeal is allowed for statistical purposes.
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2023 (4) TMI 483
Penalty u/s 271(1)(c) - Defective notice u/s 274 - As argued notice was issued for both the limbs without strike off irrelevant limb and specifying the charge for which the notice was issued - HELD THAT:- On perusal of the notices issued u/s 274 read with section 271(1)(c) of the Act we observe that the notice was issued stereotyped and the AO has not specified any limb or charge for which the notice was issued i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income. It can be seen from the notice issued u/s 274 read with section 271(1)(c) of the Act, AO did not strike off irrelevant limb in the notice specifying the charge for which notice was issued. As could be seen from case of Mr. Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Thus notice u/s. 274 r.w.s. 271(l)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus penalty order passed u/s. 271(l)(c) of the Act by the Assessing Officer is bad in law - Decided in favour of assessee.
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2023 (4) TMI 482
Revisionary proceedings belatedly beyond prescribed time limit - time limit for issuance of notice u/s. 263 - HELD THAT:- Initiation of reassessment proceedings to revise assessment order dated 11.02.2011 would reckoned from said dated would and on 31.03.2013 and beyond this period revisionary proceedings u/s. 236 of the Act is not permissible as being barred by limitation. Thus we reach a conclusion that the Ld. PCIT was not validly entitled to assume revisionary jurisdictional u/s. 263 of the Act to issue notice and to pass impugned order for alleging the same as erroneous and prejudicial to the interest of revenue. Addition u/s 68 - When the AO enlarging the scope of reassessment proceedings from two entities to all entities and after considering and verifying the documentary evidences filed by the assessee has taken a causable view u/s. 68 taxing the entire amount received by the assessee from two entities and accepting that the assessee has discharged onus as per requirement of section 68 of the Act, pertaining to other entities. In such a situation the learned PCIT is not empowered to invoke revisionary proceedings u/s. 263 of the Act, merely because he is not agree with the view taken by the AO thus, the assessment cannot be treated as erroneous and prejudicial to the interest of revenue unless he establishes that view taken by the AO is unsustainable in law. Therefore impugned revisionary notice, revisionary order u/s. 263 of the Act is hereby quashed being bad in law.
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2023 (4) TMI 481
Deduction u/s 80P(2)(a)(i) - interest derived by the assessee on the deposits in the Andhra Bank and the Indian Bank on the credit balance available therein - Scope of expressions, namely, derived from or directly attributable to - HELD THAT:- In the case on hand, undisputedly, the interest arose on the credit balances with reference to the regular course of business of the assessee. As decided in Vavveru Co-operative Rural Bank Ltd.[ 2017 (4) TMI 663 - ANDHRA PRADESH ] if the original source of the investments made by the petitioners in nationalized banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a), then the character of such income may not be lost, especially when the statute uses the expression attributable to and not any one of the two expressions, namely, derived from or directly attributable to . It, therefore, goes without saying that the interest credited by the Andhra Bank and the Indian Bank to the account of the assessee on the credit balances does not lose its character as the income derived from the activities of the assessee covered by 80P(2)(a)(i) - thus disallowed interest in this matter, as a matter of fact is eligible for deduction under section 80P(2)(a)(i) - AO will accordingly delete the disallowance. Decided in favour of assessee.
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2023 (4) TMI 480
Deduction u/s. 80P(2)(d) - interest income earned from two Bank - CIT(Appeals) observed that u/s. 80P(2)(d) interest income earned from investments with any other co-operative society is eligible for deduction and not from co-operative/nationalized banks - as observed by the AO that the surplus funds were invested in Fixed Deposits as investments in Co-operative Bank Nationalised Bank - HELD THAT: - As in Totagars Co-operative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] has decided in the issue observing substantial questions of law framed above are thus answered in favour of the Revenue and against the assessee and it is held that the income by way of interest earned by the assessee co-operative society during the Assessment Years 2007-2008 to 2011-12 on the investments made in the co-operative bank are not eligible for deductions under Section 80P(2)(d) -Thus the appeal of the assessee is dismissed.
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2023 (4) TMI 475
Rectification u/s 154 - two different opinions possible - enhancing the income of the assessee on the ground that there was an error in computation of the MAT during the course of proceedings u/s. 143(3) on the quantum amount as claimed by the assessee as deduction u/s. 80IB of the Act on the surrendered income during the course of search/survey - HELD THAT:- On going through the order of the CIT(Appeals), we note that there is no basis on the material available on record so that it could be said that there was a mistake apparent from the record and if there are two possible opinions, the same cannot be subject of rectification u/s. 154 of the Act. The case law relied on by the ld. DR is not applicable to the facts of the present case. Issue decided in favour of assessee as decided in assessee own case [ 2022 (10) TMI 340 - ITAT BENGALURU] as held that invoking section 154 would be untenable when the matter requires adjudication upon the issue which is debatable issue - AO is not correct in enhancing the book profits u/s.115JC by passing an order under Section 154 - Decided against revenue.
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2023 (4) TMI 474
Validity of order u/s 92CA (3) as beyond the prescribed time limit - HELD THAT:- In the present case, the learned Transfer Pricing Officer for A.Y. 2011-12 has passed the order u/s 92CA(3) of the Act on 30th January, 2015. Admittedly, in this case, the time limit for passing the order under section 153 was to expire on 31 March 2015. The time limit for passing of the order u/s 92CA (3) of the Act expires before 30 January 2015. Therefore, naturally the order passed by the learned Transfer Pricing Officer is passed beyond the time limit. As respectfully following the decision of Pfizer Healthcare India (P.) Ltd. [ 2021 (2) TMI 1152 - MADRAS HIGH COURT] , we hold that the order passed by the learned Transfer Pricing Officer under Section 92CA (3) of the Act is passed beyond the prescribed time limit. Therefore, such order of TPO is not sustainable. Mere pendency of writ petition before the honourable Supreme Court does not help the case of the revenue. If the order passed by TPO is held to be passed beyond prescribed time limit, the assessee does not remain an ' eligible assessee' as per section 144C(15) (b) a nd hence the extended time of 12 months is also not available ? - Even the regular assessment order passed by AO u/s 143(3) under challenge in this appeal also becomes barred by limitation. This is held by the decision of the co-ordinate bench in ATOS India Pvt. Ltd. [ 2023 (2) TMI 1112 - ITAT MUMBAI] we hold that the assessment order passed by the learned Assessing Officer under Section 143(3) read with section 144C (13) of the Act dated 15th February, 2016 is also not sustainable. Assessee appeal allowed.
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2023 (4) TMI 473
TDS u/s 194A - default as per Sec 201(1)/201(1A) - Non deduction of TDS on payment by the builder/developer for delayed allotment of plot of land or other property - HELD THAT:- As decided in the case of West Bengal Housing Infrastructure Development Corporation [ 2018 (9) TMI 114 - CALCUTTA HIGH COURT] wherein held that the payment for delayed allotment of plot of land by the builder/developer is not interest u/s. 2(28A) since there was neither any borrowings of money nor was there incurring of debt on part of assessee therefore TDS provision of section 194A of the Act cannot applied to such a situation to treat the assessee as assessee in default alleging the non-compliance. Also see case of Delhi Development Authority [ 1995 (1) TMI 126 - ITAT DELHI] [ Thus we reach to a logical conclusion that the impugned payment is nothing but compensation/damages paid by the assessee to its allottees which cannot be tagged as interest u/s. 2(28A) - TDS provision of section 194A of the Act is not applicable towards such payment. Assessee cannot be treated as assessee in default for noncompliance of TDS provisions on account of such payments. Appeal of the assessee is allowed.
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2023 (4) TMI 472
Income taxable in India - royalty or FTS - Income from providing Information Technology ('IT') Support Services and Management Services - whether the receipts of assessee can be termed as royalty or FTS? - HELD THAT:- As perused the lead order on this issue whether the receipts of assessee can be termed as royalty or FTS which is addressed in A.Y. 2011-12 in assessee s own case [ 2019 (7) TMI 402 - ITAT PUNE] and therein the nature of services rendered by the assessee to Faurecia India has been mentioned and it is in terms of service agreement dated 3-1-2011. The same agreement continues even for the present assessment year before us. We have also perused the termination clause where the agreement continues until and unless either of the parties wishes to terminate the agreement. Therefore, the genesis of entire transaction relating to the services is based on the same service agreement dated 3-1-2011. The Tribunal has given relief to the assessee for A.Y. 2011-12. Similarly, in assessee s own case for A.Y. 2012-13 [ 2019 (7) TMI 534 - ITAT PUNE] following the earlier order of the Tribunal for A.Y. 2011-12 [ 2019 (7) TMI 402 - ITAT PUNE] the appeal of the Revenue was dismissed. Thus such income is neither royalty nor FTS and therefore, not taxable either within the Act or within DTAA. D.R has not submitted any documents/evidences on record to suggest something contrary to the facts already on record - Decided in favour of assessee.
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2023 (4) TMI 471
TP Adjustment - Intra Group services received by the assessee - HELD THAT:- The Co-ordinate Bench of the Tribunal in Assessee s own case for the Assessment Year 2009-10 [ 2021 (10) TMI 909 - ITAT DELHI ] held that these services are intrinsically linked to the core business operations of the assessee and cannot be analysed in isolation. The agreement is an intrinsic one and that it is wrong to split the same and hold that some services are at arm's length and some services are not.TPO analysis of the assessee using TNMM as the MAM has to be accepted. When there is an agreement for services and certain services out of a bundle of services are undisputedly rendered, the entire agreement has to be viewed as a whole. Whether the services have actually resulted in a benefit to the assessee or not is not material. The conclusion of the Ld. TPO that the services have not resulted in any benefit and no independent entity would have made such a payment is in the realm of surmised and conjunctures and not backed by any material. Thus, the ALP determined by the assessee company is accepted and the TPO adjustment is deleted. Thus we uphold the contention of the assessee and delete the TP Adjustment.Appeal of the assessee is allowed.
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2023 (4) TMI 470
Addition u/s 43CA - Claim for deduction of the stamp duty and registration charges by the assessee company - whether allowable as a deduction within the meaning of Section 37(1)? - CIT-A deleted the addition - HELD THAT:- We are of a strong conviction that the A.O had grossly erred in law and facts of the case in declining the assessee s claim for deduction of stamp duty and registration expenses, which being in the nature of an expenditure having been incurred wholly and exclusively for the purpose of its business were clearly allowable as a deduction within the meaning of Section 37(1). We concur with the view taken by the CIT(Appeals) that the A.O misconceiving the scope and gamut of the provisions of Section 43CA had wrongly applied the same to the case of the present assessee before us AS the assessee had sold the properties/units at the market value determined by the Stamp Valuation Authority and had received the sale consideration as mentioned in the registered sale deed, therefore, the provisions of Section 43CA of the Act by no means could have been invoked in its case. Also, as the A.O had failed to point out a single instance wherein the sale consideration received on the sale of the properties/units by the assessee was lower than the value adopted or assessed or assessable by any authority of the state government for the purpose of payment of stamp duty in respect of transfer of the same, therefore, there was no justification for him to have triggered the provisions of Section 43CA of the Act. Alternatively, we are also in agreement with the CIT(Appeals) that even otherwise, now when the valuation towards actual sale consideration and the value adopted for stamp duty in the present case varies between 5% to 7%, i.e., within the tolerance limit of upto 10%, therefore, pursuant to the amendment made available on the statute vide Finance Act, 2019 that is applicable w.e.f. A.Y.2014- 15, no adverse inferences could have been drawn u/s.43CA - We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(Appeals) uphold his order. Decided against revenue.
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2023 (4) TMI 469
Reopening of assessment u/s 147 - unexplained cash deposits - HELD THAT:- It is a settled position of law that the quality of the reasons to believe cannot be assailed by an assessee. As the reasons to believe recorded by the A.O for initiating proceedings u/s.147 clearly reveals a bonafide belief that was arrived at by him on the basis of the material available before him that the income of the assessee chargeable to tax of Rs.10.70 lac had escaped assessment, therefore, the claim of the Ld. AR therein alleging that the reasons to believe are not as per the mandate of law do not merit acceptance. Thus Ground of appeal raised by the assessee are dismissed. Cash deposits in bank account - Claim of the Ld. AR that the amount of cash deposits of Rs.10.70 lac (supra) were sourced out of the assessee s trading turnover, the income corresponding to which had been disclosed u/s.44AD of the Act, would require necessary verification, therefore, the matter requires to be revisited by the A.O. Thus we restore the matter to the file of the A.O who shall verify the maintainability of the aforesaid claim of the assessee by calling for the supporting documentary evidences, i.e., purchase/sales bills which would substantiate the assessee s claim that the cash deposits in question were sourced out of the turnover of his aforesaid trade. Ground allowed for statistical purposes.
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2023 (4) TMI 468
Nature of expenditure - revenue or capital expenditure - Amount deposited by assessee to department of mines for taking contract of royalty recovery HELD THAT:- Assessee submitted the copy of the challans paid to the mining department. The head under which the money paid is neither refundable to the assessee nor adjustable against the future receipt to the assessee. Even the mining department has confirmed the receipt of the payment challan by the assessee and this information was collected by the AO u/s. 133(6). CIT(A) has contended that the expenditure incurred by the assessee is capital expenditure. The observation so arrived is without any basis or reasoning by the CIT(A). The term capital expenditures are typically one-time large purchases of fixed assets that will be used for revenue generation over a longer period or expenditure incurred for enduring benefit to the assessee. Whereas Revenue expenditures are typically referred to as ongoing operating expenses, which are short-term expenses that are used in running the daily business operations. Thus, based on these basic difference of expenditure and on careful examination of the challans placed on record we are of the considered view that the expenditure incurred by the assessee are not in nature of any enduring benefit to the assessee but in fact days to day routine expenditure in the nature of revenue expenditure - we vacate the addition - Decided in favour of assessee.
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2023 (4) TMI 467
Capital gain - Entitlement for indexed cost of acquisition benefit - capital gains arising of transfer of capital asset acquired by the assessee under the will - HELD THAT:- We find that the issue in dispute is squarely covered by the decision of the Hon ble Jurisdictional High Court Manjula J Shah [ 2011 (10) TMI 406 - BOMBAY HIGH COURT] wherein after due consideration of CBDT Circular No.636 had held that while computing capital gains arising of transfer of capital asset acquired by the assessee under the will, the indexed cost of acquisition has to be computed with respect to the year in which the previous owner first held the asset and not in the year in which assessee became the owner of the asset. Respectfully following the said decision, we hold that assessee would be entitled for indexed cost of acquisition benefit from F.Y.1981-82 on the cost. Accordingly, the ground No.1 raised by the Revenue is dismissed. Eligibility of the assessee to claim deduction of brokerage, solicitor s fees and amounts paid to tenant for vacating the premises while computing capital gains on transfer of above mentioned property - HELD THAT:- For claim of deduction on account of brokerage expenses the said brokerage has been paid to Mr. Hirji N Nagarwala only in connection with the sale of this subject mentioned property. The assessee had submitted that Mr. Hirji N Nagarwala and other agents involved had arranged and coordinated the meetings with respective Attorneys of buyers and had also contributed effectively for negotiating final sale consideration. The said confirmation also states that Mr. Hirji N Nagarwalla have attended over a dozen meetings on behalf of the sellers with the purchasers attorney Mr. Markand Gandhi and Mr. Hormaz Dyar Vakil (Attorney of the sellers) to fine tune the sale deed and other documents required to be executed by the sellers. In view of the above, we have no hesitation to hold that the brokerage amount of Rs.42,36,500/- paid by the assessee to Mr. Hiraj N Nagarwalla would be allowable in full as the deduction while computing capital gains of the assessee as against the sum of Rs.15,31,290/- allowed by the ld. AO towards brokerage on transfer of the subject mentioned property. Solicitor s fees - AO had already allowed a sum of Rs.18,07,258/- on account of Solicitor fees, which in our considered opinion, is very reasonable, considering the fact that invoice raised by the solicitor for professional services rendered from the years 2008 to 30/12/2015. Hence, we direct the ld. AO to allow only a sum of Rs.18,07,258/- on account of solicitor fees as deduction while computing capital gains. We hold that the other works carried out by the solicitor firm for which bill has been raised by them on the assessee , cannot be construed as expenditure incurred wholly and exclusively in relation to the transfer of the subject mentioned property. Payments made to tenant for vacating the property - Compensation was paid so as to get the premises vacated by the licensee before the lock in period of 12 months and thus to comply with one of the conditions of the sale of the property. These facts are further confirmed by the solicitor letter dated 02/12/2015 addressed to Mr. Stefano Funari which is enclosed in pages 95-96 and 99-100 of the paper book filed before us. The leave and license agreement is enclosed in pages 52-94 of the paper book. In our considered opinion, this payment would certainly be construed as an expenditure incurred in relation to the transfer of the property and therefore, allowable as deduction. Hence, we direct the ld. AO to allow the compensation paid to the tenant for vacating premises as an allowable deduction while computing capital gains as against Rs.3,61,452/- allowed by the ld. AO. Appeal of the Revenue is partly allowed.
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2023 (4) TMI 466
Addition u/s. 68 - accommodation entry taken from investor company - Addition based on Investigation Wing Report - not allowing opportunity of cross-examination to assessee - HELD THAT:- Assessee filed copies of bank statement of the assessee along with bank statement of Investor Company, confirmation issued it, ITR acknowledgement and assessment order wherein no addition has been made by the AO in the hands of investor company. DR has also not controverted that the assessee filed objection letter wherein the assessee requested to provide documents and statements relied on by the Investigation Wing and the AO. Further, from the copies of the letter noted that the assessee again requested to provide copies of the documents and statements and to provide opportunity of cross-examination, but, unable to see any action by the AO on the said consecutive three requests of the assessee. Respectfully note that their Lordships, in the case of Pradeep Kumar Gupta [ 2006 (11) TMI 184 - DELHI HIGH COURT] held that the assessment proceedings on the basis of deposition of third party without allowing opportunity of cross-examination of the said party to the assessee despite specific demand was not valid. Thus addition made by the AO and upheld by the ld.CIT(A) is not valid and sustainable - Decided in favour of assessee.
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2023 (4) TMI 465
Penalty u/s. 271(1)(c) - Defective notice u/s 274 - Initiation of penalty on one of the limb and imposing the same on another limb of section 271(1)(c) - HELD THAT:- Admittedly, in this case penalty proceedings was initiated in the assessment order for the latter limb namely furnishing inaccurate particulars of such income . Further, the notice u/s. 274 r.w.s. 271(1)(c) of the Act ( notice dated 30.12.2019) was issued for furnishing inaccurate particulars of such income . However, we noticed the penalty has been imposed vide order dated 10.02.2022 by referring to the first limb of section 271(1)(c) of the Act namely concealment particulars of income . As in the case of A.M.Shah Company [ 1998 (8) TMI 607 - GUJARAT HIGH COURT] had held that if very basis for penalty proceedings initiated by the AO disappears, then the penalty imposed on a different footing altogether cannot be sustained. Initiating the penalty in one limb and imposing the same on another limb does not satisfy the requirement of the law - The levy of penalty has to be clear as to the limb for which it is imposed and the position in the instant case is unclear, hence, the penalty is not sustainable. Therefore, when the AO proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Not only that the penalty should be imposed under the same limb. Decided in favour of assessee.
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2023 (4) TMI 464
Assessment u/s 153A - Addition on account of unsecured loans taken during the years under section 68 - HELD THAT:- Addition made was devoid of any incriminating material found and seized during the search. The date of search was 10.01.2012. The due date for issue of notice u/s 143(3) for the A.Y. 2011-12 has not expired. No appeal by the revenue for the A.Y. 2011-12. With regard to the earlier assessment years, the due date for issue of notice has been expired. Completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Hence, we decline to interfere with the order of the ld. CIT(A) and the appeal of the Revenue on the issue of addition u/s 68 for the Assessment Years 2007-08 to 2010-11 stands dismissed. Addition on account of alleged plots buy back, sale and interest earned - Addition based on noting in loose papers found during search - Revenue made the addition holding that the assessee could not file any evidence to substantiate the claim that the loose papers do not belong to him - HELD THAT:- The contents reveal that there has been a house which has been sold and also purchased 16 plots. The revenue has not even proved that the notings on the loose papers found, were written by the assessee nor his handwriting has been tested for. Further, inspite of conducting a search, no documents pertaining to purchase of the said house or sale of said house and purchase of 16 plots were found. Even in the post search inquiries none of the 17 properties could be traced out. There was no evidence in any of the bank statement with regard to the dealings. The inferences drawn were not backed by any tangible evidences or corroborative evidences. The revenue failed to establish the person to whom these documents belong, name or details of the persons from whom the alleged income was earned, any type of correlation with the business of the assessee. The statement recorded u/s 132(4) on the date of search has also not pointed to any reasonable evidence to come to a conclusion that the figures mentioned on the loose sheets infact constitute income of the assessee. In the instant case, the documents do not meet any of the criteria envisaged in Section 292C. Hence, we hold that an assessment carried out in pursuance of search, no addition can be made simply on the basis of uncorroborated noting in loose papers found during search because the addition on account of alleged receipts made simply on the basis of uncorroborated noting on loose papers made by some unidentified person and having no evidentiary value, is unsustainable. With regard to the interest earned, in the absence of any corroborative material and in the absence of non-taxing of the principle amount, the same is directed to be deleted. Addition u/s 68 - HELD THAT:- Before us, as submitted that the ITR, balance sheet has been submitted, the loan was confirmed by the lender, audited financial statement for the concerned year was filed which duly reflected the advance given to Shri Gurmeet Singh of Rs.50,00,000/-. The lender has a capital of Rs.77.53 crores and total advances given were to the tune of Rs.1.72 crores. The said amount has been lent from the regular account of Corporation Bank A/c - The confirmation is also on record and the revenue has not disputed the fact that this said account was not an undisclosed account. Hence we hold that no addition is called for on this account. As owing to the proof of identity, genuineness and creditworthiness of the loan party and the confirmation, the same stands deleted. Assessee appeal allowed.
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2023 (4) TMI 463
Penalty u/s 217B - not getting the books audited - assessee did not maintain any books of accounts - HELD THAT:- The bench has noted from the paper book of the assessee that in the case of the assessee there has been a levy of penalty for non-maintenance of books of accounts u/s. 271A of the Act and the ld. DR did not controvert the fact the same is not deleted. So once it has been held the assessee has not maintained the books of account and consequent there upon the penalty has also been levied the separate penalty for not getting the books of account audited cannot be fastened. The penalty u/s. 271B can be levied while the assessee maintain the books and not get them audited but once it is been not disputed that the assessee has not maintained the books how the penalty for not getting the books audited be levied. Thus we are of the view that once the penalty is levied for non-maintenance of book of accounts, there cannot be further default for not getting the same audited as required u/s 44AB of the Act and therefore, the penalty levied u/s 271B is not justified and thus vacated. Appeal of the assessee is allowed.
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2023 (4) TMI 462
Late filing fee u/s 234E - intimation u/s 200A - whether late fee and consequential interest could be levied in respect of the TDS statements relating to the period prior to 01/06/2015? - HELD THAT:- We find that the said issue has been adjudicated in the case of Fatheraj Singhvi Ors vs. Union of India [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] wherein as explained the position of charging of late filing fees under section 234E of the Act and the mechanism for computation of fees and failure for payment of fees under section 200A of the Act in the light of amendment w.e.f. 01/06/2015, and held such amendment to be prospective in nature and, therefore, notices issued under section 200A of the Act for computation and intimation for payment of late filing fees under section 234E of the Act relating to the period of tax deduction prior to 01/06/2015 were not maintainable. The same were accordingly quashed. Co-ordinate Bench of this Tribunal in the case of Nirmala Infra Projects India (P) Ltd [ 2022 (12) TMI 1395 - ITAT HYDERABAD] while noticing the above decisions, reached a conclusion that the levy of late fee and the interest in respect of the TDS statements prior to 01/06/2015 cannot be sustained. Appeal of assessee allowed.
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2023 (4) TMI 461
Exemption u/s 54F - investment made in residential house - two residential flats - Whether CIT(A) has erred in granting exemption u/sec 54F of the Act in respect of two residential flats irrespective of amendment which has come into effect from 01.04.2015 and is applicable to the assessee for investment in one residential house in India? - HELD THAT:- Assessee has invested in one residential property. AR has substantiated with the copy of structural plan and the society letter dated 8-04-2019 that it is only one residential unit. Whereas, the provisions of sec 54F of the Act are beneficial provisions and are to be construed liberally. DR could not controvert the finding of the CIT(A) with new cogent material information or evidence and the CIT(A) has passed a reasoned and logical order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
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2023 (4) TMI 460
Revision u/s 263 - additions towards disallowance of advances written off and capital loss - As per CIT AO has failed to make a complete verification with respect to loss on investment debited to P L A/c in right perspective of law, although, the said loss is in the nature of capital loss, which cannot be allowed as deduction while computing profits and gains from business or profession - HELD THAT:- In this case, there is no dispute with regard to the fact that one of the objectives of the assessee s company is to lend and advance money to its subsidiary, group and associate and sister concerns and in line with its objects, the assessee has made investment in the shares of group companies to augment its business. Thus investment made by the assessee in the group companies is in the nature of loans and advances, although, the said investment has been classified as capital, but the real character of the transaction was those akin to loans in a normal course of the business, and thus, any loss on sale of said investment should be treated as business loss but not capital loss and this view is supported by the decision of Electronic Corporation of Tamil Nadu Ltd.[ 2018 (12) TMI 47 - MADRAS HIGH COURT] where it has been clearly held that where Revenue authorities held that claim of loss accruing or assigning as a result on sale of shares was a capital loss not eligible for deduction in computation of business income Amount advanced by the assessee to various industries were towards working capital and real character of transaction was those akin to loan and not equity investment, impugned order deserved to be set aside. In this case, as held by us, it is not a case of lack of enquiry, but it can be at best considered as inadequate enquiry and for this purpose, the powers u/s.263 cannot be exercised. Therefore, assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue and thus, we quashed the order passed by the PCIT u/s.263 - Decided in favour of assessee.
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2023 (4) TMI 459
Penalty u/s 271B - violation of provisions of section 44AB and 44AA - assessee has failed to produce books of accounts and bills/vouchers for verification of purchases and other expenditures claimed in the Profit Loss account - assessee was not found to have maintained the books of account - HELD THAT:- Assessee from the day one had been submitting before the Revenue authorities that the assessee had suffered huge losses and was booked in various cases under RBI Act for cheque dishonor and since the assessee could not settle his liabilities in due time, therefore, he was absconding from Jaipur and in this regard an FIR has already been registered against the assessee. Apart from this, assessee also had categorically mentioned that he was not maintaining any books of accounts and even the Tax Consultants of the assessee filed his ITR by collecting information available with him i.e. sales, purchases and bank book. But the said Tax Consultants has refused to sign the Tax Audit Report mainly on the ground that no books of accounts were maintained by the assessee. When assessee did not maintain regular books of accounts, then the question of getting the books of account audited does not arise at all - since there is a violation of provisions of section 44AA of the Act and the said violation cannot be extended to section 44AB of the Act. The provisions of section 44AB of the Act can only be invoked when the assessee had first complied with the provisions of section 44AA of the Act. Therefore, in my view the violation of section 44AA of the Act cannot continue because once it is found that assessee did not maintain the regular books of account then the said violation cannot travel beyond the provisions of section 44AA and hence cannot be held as further violation of section 44AB - See case of CIT vs. Bisauli Tractors [ 2007 (5) TMI 181 - ALLAHABAD HIGH COURT] As decided in the case of Suraj Mal Parasuram Todi [ 1996 (8) TMI 102 - GAUHATI HIGH COURT] wherein it was held that where no books of account are maintained, penalty should be imposed for non maintenance of books of account u/s 271A of the Act and in such circumstances no penalty can be imposed under section 271B for violation of section 44AB of the Act - Appeal of the assessee is allowed.
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2023 (4) TMI 458
Unexplained deposits in bank accounts - income from undisclosed source - assessee submitted that the transactions of sale of jewellery by his father and handing over the same to the assessee by his father - HELD THAT:- As considering the documents submitted by assessee coupled with affidavits filed before the ld. CIT(A), the Bench is of the view that documentary evidences as to the source of the funds of the father and contentions of the assessee deserves to be accepted. It is also noteworthy to mention that the documents in the shape of affidavit presented before the Bench were not rebutted by the Revenue Authorities and the affidavits earlier placed on record before the ld. CIT(A) were also not rebutted or contradicted by the Department. Taking into consideration the above facts, circumstances of the case and the affidavits mentioned hereinabove as well as the decision of M/s. Mehta Parikh Co. [ 1956 (5) TMI 4 - SUPREME COURT] the Bench does not concur with the findings of the ld. CIT(A) on the issue in question. Hence, the appeal of the assessee is allowed.
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2023 (4) TMI 457
Cessation of remission of liability - directions of the CIT(A) in restoring the matter to the file of the Assessing Officer for further investigation in respect of three parties - main argument of the ld. counsel for the assessee has been that since the CIT(A) had deleted the addition made by the AO, therefore, further action of the CIT(A) in directing AO to make further enquiries was not sustainable - HELD THAT:- We are unable to accept the aforesaid contentions of the ld. AR as in respect of one party i.e M/s Goodwill Corporation, earlier the said party had stated that it had done no transaction with the assessee, but later on, though, accepted that there were business transactions but denied any outstanding credit towards the assessee. Under the circumstances, when the creditor himself has stated that the assessee did not owe any liability to him, there seems no liability remaining of the assessee towards said party. CIT(A), to give fair chance to the assessee, has directed the Assessing Officer to make enquiries in respect of said liability shown by the assessee as noted above. Similarly, in respect of other two parties, the notices sent to them were received back unserved. The ld. CIT(A), under the circumstances, though at the first instance, deleted the additions made by the Assessing Officer but thereafter directed the Assessing Officer to make further enquiries in this respect as reproduced in earlier part of this order. No infirmity in the order of the CIT(A) in directing the Assessing Officer to make further enquiries. There is no merit in the appeal of the assessee and the same is accordingly hereby dismissed.
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2023 (4) TMI 456
TP adjustment in relation to import of fixed assets - TPO determined ALP of the old machineries at NIL - assessee has purchased various fixed asset from different AEs - HELD THAT:- TPO has asked the assessee to produce invoices/bills, date of purchase by AE and utilization of the machineries, etc. and the assessee has not filed any details before the TPO. No details were brought on record either before the ld. DRP or even before the Tribunal. Therefore,we are of the considered opinion that the TPO has rightly came to a conclusion that the ALP of the old machineries at NIL, which was confirmed by the ld. DRP. We find no infirmity in the order passed by the ld. DRP/Assessing Officer. Accordingly, the ground raised by the assessee is dismissed.
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2023 (4) TMI 455
TP Adjustment - ALP adjustment of international transactions with overseas Associated Enterprises pertaining to manufacturing segment - internal rejection of assessee s comparables - HELD THAT:- We make it clear that we are dealing with the assessee s Transactional Net Margin Method [ TNMM ] having profit level indicator than exact product similarly as held in Gemstone Glass (P.) Ltd. [ 2015 (11) TMI 185 - ITAT AHMEDABAD] . Faced with the situation, we adopt judicial consistency qua the instant sole surviving issue and leave it open for the learned Transfer Pricing Officer [in short TPO ] to compute the assessee s ALP in light of its internal comparables as per law in very terms.
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Customs
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2023 (4) TMI 454
Violation of principles of principles of natural justice - non-supplying the copies of relevant RUD as well as not allowing the cross examination of the witnesses even after the request made by the appellant - main contention raised by the appellant is that they have not been supplied with copy of 162 shipping bills which is alleged to have been manipulated by the appellant - demand based on assumption and presumptions - HELD THAT:- The position is that the relied upon documents (RUD) have not been served to them. Undisputedly, only copies of 8 originals and 4 duplicate shipping bills have been supplied to the appellants. Though it is alleged that all the 162 shipping bills were manipulated and the entire duty forgone has been confirmed, the department has not been able to furnish these documents to the appellant. Needless to say that appellant has to be furnished with all documents relied by department so that they are put to notice to know about the allegation and they are given a fair chance to defend the case. Further evidence relied by the department are statements of few third party exporters. Though the appellant requested for cross examination of these witnesses, the department has not acceded to the request. It is seen that there is complete violation of the principles of natural justice by not supplying the copies of relevant RUD as well as not allowing the cross examination of the witnesses even after the request made by the appellant. The department cannot confirm the demand on the basis of assumption and presumptions. The allegations raised in the SCN have to be established by evidence. The noticee has a right to get the copies of documents. Department has to record reasons for denying the request for cross examination. The cross examination cannot be denied stating that no purpose will be achieved. The department has not been to establish the allegations raised in the SCN and further there is blatant violation of principles of natural justice - the demand cannot sustain and requires to be set aside. Appeal allowed.
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2023 (4) TMI 453
Levy of penalty u/s 114AA of the Customs Act, 1962 - fraudulent obtaining DEPB certificates - creation of forged Bank Realisation Certificates against exports and submitted them to DGFT and obtained DEPB licences and sold them - HELD THAT:- It is undisputed that the appellant had sold these DEPB licences to M/s. Whirlpool India and these licences were obtained from DGFT by submitting forged documents. In his statement dated 7.1.2013, the appellant admitted to having sold these DEPB licences but said that he was not aware that they were obtained based on forged Bank Realisation Certificates. He also said that he kept no record of the licences which he sold and received commission in cash. In the subsequent statement dated 10.4.2014, he agreed that he had prepared/created forged Bank Realisation Certificates against exports and submitted them to DGFT and obtained DEPB licences and sold them. Evidently, the appellant has, by his role discussed above, caused fraudulently obtained DEPB certificates to be used in the Bills of Entry filed by the importer which, in our considered view, falls squarely within the scope of Section 114AA - The judgment of the Hon ble High Court of Gujarat in COMMISSIONER OF CUSTOMS VERSUS SANJAY AGARWAL [ 2010 (4) TMI 781 - GUJARAT HIGH COURT] relied upon by the appellant was in the context of penalty under section 112 and not under section 114AA. At the time the SCN was issued in that case (on 24.9.2001), section 114AA did not even exist. Section 114AA was introduced with effect from 13.7.2006. Therefore, this case law does not carry the case of the appellant any further. On examination by DRI, it was found that the containers had Red Sanders whose export is prohibited. An SCN was issued and after adjudication, penalty was imposed under Section 114AA on the Customs broker. The Tribunal found that the appellant had filed the Shipping Bills in good faith based on the documents provided to it and in such circumstances, set aside the penalty. In this case, the DEPB certificates obtained based on forged bank realization certificates were sold by the appellant to the importer and thereby caused the importer to make incorrect declarations in the Bills of Entry. Impugned order upheld - Appeal dismissed.
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2023 (4) TMI 452
Refund of SAD in terms of N/N.102/2007-Cus dated 14/09/2007 - Time Limitation - Review Authority has passed Review Order only on 12.10.2020 which is beyond the period of three months as required under Sub Section (3) of Section 129D of Customs Act, 1962 - HELD THAT:- On perusal of the Order-in-Original it is seen hand written on the first page of the Order-in-Original that the date of receipt of the order by the Review Cell is 14.07.2010. The Commissioner (Appeals) has discussed in the impugned order that even after repeated requests the Department did not furnish the date on which the original order was received by the Reviewing Authority. The very same facts and issue came up for consideration before this Tribunal in COMMISSIONER OF CUSTOMS (EXPORTS) , CHENNAI VERSUS M/S. NAGAPPA EXPORTS, M/S. AMARA RAJA BATTERIES LTD. AND M/S. NORITSU KOKI CO. LTD. [ 2023 (3) TMI 1216 - CESTAT CHENNAI] where it was held that It cannot be understood what prevented the Department from submitting before the Commissioner (Appeals) that the Order-in-Original was received by the Review Cell on the respective dates on which they have stated in the grounds of appeal. As there is no evidence to substantiate the contention of the Department that the Order-in-Original was received on such dates by the Review Cell and as there is no reason to dis-believe the findings of the Commissioner (Appeals) that there was no evidence as to the date on which Order-in-Original was received by the Reviewing Authority, the strong inference that can be drawn is that there is a delay in passing the review orders in these appeals. There are no ground to take a different view. The impugned order sustained - appeal of Revenue dismissed.
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Corporate Laws
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2023 (4) TMI 451
Impleadment to an oppression and mismanagement petition - allegation of misconduct against the Appellant - violation of principles of natural justice by not affording an opportunity of hearing to the Appellant - HELD THAT:- Corporate governance can be a complex matter, especially when it comes to the appointment of directors. Disputes can arise when a nominee director s appointment is subsequently withdrawn by the nominating group. The issue at hand is whether a nominee director, who no longer has the support of the nominating group, should be allowed to join a petition seeking relief against oppression and mismanagement against other members/ shareholder groups of the company. DKJ group's interests hold precedence - HELD THAT:- According to the AoA of Respondent No. 3, the DKJ Group is entitled to an equal number of directors on Respondent No. 3 s Board, as the SKG Group. The Appellant was a nominee of DKJ Group. Following Mr. D.K. Jain's demise, the Appellant began acting against the interests of her nominating group. Despite DKJ Group's request to SKG Group to not accept Appellant as their nominee director, she continued to act as a nominee director. Due to her lack of cooperation, the DKJ Group intimated CLB that her nomination had been withdrawn and in her place, a new director had been appointed - In such circumstances, when DKJ approached the CLB for interim directions, it was held that SKG Group was under obligation to uphold the interest of DKJ Group and thus, suspended Appellant s directorship. This was only to ensure that DKJ Group s interests are not jeopardised, pending final adjudication of the proceedings in the company petition. Appellant has contrary interests to DKJ Group and past association with the group is of no consequence - HELD THAT:- The Court finds the Appellant s past relationship with DKJ Group to be irrelevant to the matter at hand. Her assertion that she continues to be a nominee director is misconceived as the AoA stipulates that a nominee director can continue to serve on the Board of Directors only if they have the support of the nominating group. The pleadings on record show that the Appellant no longer has the backing of the DKJ Group, which is essential for a nominee director's continuation. Appellant was to further the interests of DKJ group, but since she was not acting in their interests, she risked losing their support and being removed from the board. No sufficient cause u/s 405 of the Act - whether the presence of the Appellant is essential for adjudicating the issues arising in the company petition? - HELD THAT:- In the instant case, since the Appellant no longer has the support of the DKJ Group, she has no right to participate in the proceedings. The Court agrees with the CLB's decision that Appellant has failed to show sufficient cause under Section 405 of the Act to join the proceedings. Appellant's shareholding stands conclusively transferred - HELD THAT:- Since Appellant has transferred her entire shareholding in Respondent No. 3 to Ms. Usha Jain, her plea premised on the basis of shareholding is of no consequence. It is clear that the Appellant does not enjoy the support of DKJ Group. Appellant s shareholding in Respondent No. 3 stands transferred which underscores DKJ Group s right to make decisions which are in their best interests. There is no valid cause to implead the Appellant in a dispute that involves DKJ Group's pursuit to defend their representation rights in Respondent No. 3. Application dismissed.
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2023 (4) TMI 450
Oppression and Mismanagement - Time Limitation - Transfer of shares - Petition was filed on 09.11.2018 which is beyond three years as per Article 113 of the Limitation Act, 1963 - locus standi to file application - HELD THAT:- First of all, the money has not been transferred by the Appellants in favour of the Respondents. Secondly, as admitted in the averments as well as recorded clearly in the impugned order that, Mr. Linganameni Ramesh gave Rs. 14,67,41,557/- and took back Rs. 9 Crores from the Respondents as such prima-facie this does not seem to be a clear transaction of payment of money towards acquisition of shares and consequently allotment of shares in favour of the Appellants is also not established. Time Limitation - HELD THAT:- The Tribunal has held that alleged transfer of shares in favour of the Appellant herein was claimed to be on 18.04.2015, whereas, the Petition was filed before the Tribunal on 09.11.2018 which is beyond three years and as per Article 113 of the Limitation Act, 1963 the limitation period is only three years. This Appellate Tribunal do not find any error in the impugned order. This Appellate Tribunal also do not find any material which can substantiate that all the procedures laid down in the companies Act, 2013 as well as the Article of Association were followed by the Appellants herein. The photocopies of the share capital as a form have already been denied to be true by the Respondents and the same has been held by the Tribunal as tannable averments from the Respondents herein. This Appellate Tribunal also observes that the Tribunal had discussed this aspect in detail in the impugned order and recorded that no concrete evidence or documentary proof could be furnished by the Appellants herein to proof their claims of genuine certificates. In fact, the Tribunal held that the alleged Share Certificate submitted by the Appellants herein to be fabricated and fraudulent as there were lot of discrepancies, in the forms and substance, of the Shares Certificate vis- -vis the original certificates held by the Respondents. This Appellate Tribunal also observed that there is no communication between the Appellant herein and the Respondent herein during the relevant period of alleged dates of transfer of shares in the year 2015 and immediately thereafter and in absence of any concrete trail of suitable communications between the various parties involved, it is difficult to believe that indeed such transaction took place which establishes the right to claim said shares by the Appellants. This Appellate Tribunal further finds it surprising that although the Appellants is claiming to hold 94.8% of Share Capital of the 1st Respondent Company, yet they did not bother to take over the management and control of the 1st Respondent Company. It is natural and established commercial prudence that person holding the majority of share will have dominating position in composition of Board of Directors of the Company - this Appellate Tribunal also does not find convincing that the Appellants did not get any notice of the meeting including that of AGM or have not received any documents/ minutes/circular/ agenda/ annual financial statement/ statutory audit report and yet did not seek any remedy thereafter in the entire period. The case of Oppression and Mismanagement, claimed by the Appellants, under Section 241 r/w Section 242 of the Companies Act, 2013, the Appellants/ Claimants, has to cross the first hurdle of Locus. The Oppression and Mismanagement, is available only to a person who is aggrieved and who is also a Member / Shareholder, of the Company - the Appellants could not establish regarding their entitlement to receive Transfer Shares, from the Respondents, neither could prove that the payment, was indeed made by the Appellants to the Respondent for consideration of said shares. It is, therefore, establishes that the Appellants, did not have any share in their names and were therefore not members / shareholders, of the 1st Respondent Company and therefore, the Appellants, do not have any Locus, to file an application, under Section 241, r/w Section 242 of the Companies Act, 2013. This Appellate Tribunal, do not find any error in the impugned order - Appeal is dismissed.
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Insolvency & Bankruptcy
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2023 (4) TMI 449
Disciplinary Proceedings - interim order of injunction restraining the respondents, their servants or agents or any other person from taking any coercive action against the petitioner on account of the orders impugned in the Writ Petition - HELD THAT:- The interim order of this Court, dated 26.02.2021, is an interim order of injunction restraining the respondents, their servants or agents or any other person from taking any coercive action against the petitioner on account of the orders impugned in the Writ Petition and therefore, if an action, taken pursuant to disciplinary action, alone will be violative of the injunction order and in this case, the application is filed on allegations of disclosing the valuation report etc., and therefore, will not fall within the prohibition granted by this Court. This finding is prima facie rendered because the same is cited as an extra-ordinary reason to entertain the Writ Petition under Article 226 of the Constitution of India. As otherwise, it is clear that when an appeal from an order passed by the NCLAT under Section 61 of the IBC lies before the Hon ble Supreme Court of India as per Section 62 of the IBC , the Writ Petition before this Court cannot be entertained. Petition dismissed.
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2023 (4) TMI 448
Appointment of a debenture trustee - financial creditors or not - Whether the Debenture Holders, namely, the Respondents No. 1 and 2 are Financial Creditors in the light of the provisions of the IBC and the Debenture Trust Deed and Deed of Irrevocable and Unconditional Guarantee? - Whether the Debenture Holders can claim the repayment on account of Event of Default under Section 5(8) of the IBC and the Appellant is a Corporate Debtor under the provisions of the IBC? HELD THAT:- The appointment of a debenture trustee is a requirement of the relevant rules for protecting the interest of the debenture holders - on looking at the definition of Financial Creditor in Section 5(7) of the IBC, which lays down that Financial Creditor is a person to whom a financial debt is owed and also includes a person to whom such debt has been legally assigned or transferred to. Whether the Debenture Holders can be considered Financial Creditor as defined under the IBC? - HELD THAT:- The DTD is entered into between various parties viz. LDRPL (Issuer Company), Mr. Rustom Darius Bharucha, Mr. Zubin Darius Bharucha, Bharucha Motivala Infrastructure Pvt. Ltd. and PRA Realty (India) Pvt. Ltd. and Vistra ITCL (India) Limited (The Debenture Trustee). Out of these parties, Bharucha Motivala Infrastructure Pvt. Ltd. and PRA Realty (India) Pvt. Ltd. are the Guarantors and Co-Obligors of the issued NCDs as is laid down in the Debenture Trust Deed. It is clear from clause 3.4 that the Debenture Holders shall pay the amount of subscription for the NCDs and from clause 8.12(a) that all due payments shall be made to the Debenture Holders. Significantly, clause 8.6(d) stipulates that Debenture Holders and the Debenture Trustee shall be entitled to exercise any of their rights as set out in the Transaction Documents and the Security shall be enforceable in the manner set out in the Transaction Documents. Thus the rights as set out in Transaction Documents are separately available for enforcement to the Debenture Holders and Debenture Trustee. Clause 18.1(c) lays down that the rights given to the Debenture Trustee are available to the Debenture Holders for enforcing the Securities. Significantly, the Corporate Debtor is a Co-obligor too, and it undertakes all the obligations that are falling on the Issuer Company of the NCDs. An Event of Default notice was first sent by the Debenture Holders on 02.01.2019 and another Event of Default notice was sent on 21.02.2019 where after the Demand Certificate dated 14.05.2019 was issued by the Debenture Trustee to B M Infra which was the Respondent No. 3 in the Section 7 petition invoking the Guarantee dated 06.10.2016 and calling upon B M Infra to pay to the Debenture Holders an amount of Rs. 37,51,64,939/- - in accordance with clause (i) of Section 5(8), B M Infra is liable to pay the amount claimed as Financial Debt on account of the Deed of Guarantee given by it both as a Guarantor and Co-obligor. Therefore, inescapable conclusion is arrived at that B M Infra (R-3) is the Corporate Debtor with regard to the Section 7 application filed by the R-1 and R-2 as Financial Creditors - the Debenture Holders, namely, Respondents No. 1 and 2 are the Financial Creditors of the Corporate Debtor - B M Infra in the light of the provisions of the IBC. Further, the issue whether the Debenture Holders can claim repayment with regard to the amount mentioned in the demand certificate as a Financial Debt is squarely answered in Clause 4 of the Deed of Irrevocable and Unconditional Guarantee of which B M Infra and Vistra ITCL are co-signees since the demand certificate has been issued by the Debenture Trustee on 14.05.2019, a conjoint reading of the Debenture Trust Deed and Deed of Guarantee clearly establishes that the amount claimed in demand certificate is to be paid directly to the Debenture Holders by Respondent No. 3, who is the Corporate Debtor within the provisions of the IBC. The Adjudicating Authority has not committed any error in admitting the section 7 application filed by the respondents - There are no reason to interfere with the Impugned Order - appeal dismissed.
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2023 (4) TMI 447
Correctness, validity and Legality of the Impugned Order of Dismissal - Proper and Correct address, as found in the Adjudicating Authority s/ Tribunal s Records and also in the Ministry of Corporate Affair s Records - HELD THAT:- A Cursory Perusal of the Impugned Order passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench, Court No II) indicates that the Adjudicating Authority/ National Company Law Tribunal, Hyderabad Bench, Court - II had not spelt out anything about the Contents of the Memo preferred by the Petitioner/ Appellant and also not considered the aspect of Angina, the possibility of the Cardiologist, likely to rule out the possibility of any Thrombosis and advised to rest for Two Days. In this connection, this Tribunal, pertinently points out that the Adjudicating Authority/ Tribunal in the Impugned Order, had not said anything expressly or impliedly about the Prolonged Angina, of the Learned Counsel for the Appellant s/ Petitioner s Medical suffering. This Tribunal is of the considered view that the Impugned Order is bereft of Qualitative and Quantitative reasons, thereby leading to the miscarriage of Justice. Furthermore, it is the Prime Duty of an Adjudicating Authority/ Appellate Tribunal/ Competent Court of Law, whenever, it deals with an Application and at the time of passing of an Order, it has to evaluate the Pros and Cons of the respective Contentions advanced and also to assign reasons for arriving at a Proper and Just Conclusion, of course, by adverting to the Memo projected, dated 28/04/2022 and it is quite evident that the Memo speaks for itself, in respect of the Medical Emergency/ Inconvenience/ Suffering, of the Learned Counsel for the Petitioner/ Appellant. A reasoned Order will be the Heart and Soul of any Order to be passed in a Prudent and Rightful manner by an Adjudicating Authority/ Tribunal/ Competent Court of Law. This Tribunal is perforced to interfere with the Impugned Order, and sets aside the same, in the interest of Justice, subject to the condition that the Appellant, shall pay a Cost of Rs. 50,000/- (Fifty Thousand Rupees Only), to the Hon ble Prime Minister s National Relief Fund, of course, within a period of 8 Weeks, from Today and to produce the Copy of the receipt, before the Deputy Registrar, of the Adjudicating Authority/ National Company Law Tribunal, Hyderabad Bench, without Fail. Appeal disposed off.
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2023 (4) TMI 446
CIRP - Period of limitation - application under Section 7 has been dismissed only on the ground of the limitation without considering the other relevant facts including One time settlement (OTS) proposal of the Respondent - what is the date of default and from what date law of limitation would start? - whether acknowledgment of debt should be considered from the date of OTS proposal submitted by the Respondent herein or from the date of acceptance of OTS proposal or from the date of cancellation of the sanctioned OTS proposal? HELD THAT:- There is no dispute that the default occurred on 31.05.2012 in respect of term loan facilities and in respect of working capital facilities on part of the Principal Borrower default occurred on 09.03.2012. This Appellate Tribunal has noticed from the submissions of the Appellant as well as from the Respondent along with documents made available that revival letter dated 01.06.2012 was executed by the Principal Borrower and the Respondent herein. It is also observed that various OTS proposal was furnished by the Principal Borrower w.e.f 13.03.2014 till 18.05.2016 and the liability being admitted by the Principal Borrower and hence the deemed acceptance by the Guarantor/ Respondent herein in terms of provision of Section 128 of the Indian Contract Act, 1872. In catena of the Judgments, it has been held that an application under I B Code, 2016 would not be barred by limitation if there was acknowledgment of debt before expiry of the period of limitation of three years and in such case the period of limitation would get extended by the further period of three years. This Appellate Tribunal notes that there are various acknowledgements of liability by the Corporate Debtor from time to time, total 13 OTS letters from the Respondent to the Appellant within the meaning by Section 18 of the Limitation Act, and there are also part payments by the Corporate Debtor, therefore, the period of limitation is extended in the light of Section 19 of the Limitation Act. By the OTS described in letters mentioned above, the Principal Borrower i.e. M/s Victory Electricals Ltd. had offered the payment of varying amounts to the Appellant herein for full and final settlement of their liability and thereby admitted the Jural Relationship of Debtor-Creditor or between them and the Bank/ Appellant herein. This Appellate Tribunal does not find any discussions by the Adjudicating Authority on these dates of OTS proposal of the Principal Borrowers in the finding/ decisions proceeding in the impugned order by the Adjudicating Authority and the reason for the same are also not available in the impugned order. In fact, the impugned order takes into account only on 06.10.2016 when the Principal Borrower gave its OTS proposal to the Appellant which was accepted by the Appellant herein issuing the sanction letter of Rs. 69.50 Crores - It is also established fact that the in terms of the Section 128 of the Indian Contract Act, 1872 the liability of the Respondent was always co-extensive with debt of Principal Borrower and therefore the acknowledgment of debt by various OTS proposals, were also deemed acknowledgements by the Respondent herein of the liability as guarantors on behalf of the Principal Borrowers. This Appellate Tribunal has no option, but to set aside the impugned order dated 06.01.2021 which is in contravention of I B Code, 2016 and the Limitation Act, 1963. The matter is remanded back to the Adjudicating Authority (NCLT, Chennai) and both the parties are required to appear before the Adjudicating Authority on 28.04.2023. This Tribunal, relevantly points out that it is not expressing its opinion on the merits or demerits of the case, and hence, remits back the case to the Adjudicating Authority (Tribunal), with directions to look into all factual and legal aspects and decide the Petition Denovo, on merits, by providing, an adequate opportunity of Hearing, to the respective Parties, and also, by adhering to the Principles of Natural Justice - Matter remitted back.
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2023 (4) TMI 445
Diminishing the possibility of implementation of the Resolution Plan, and in the absence of an Approval, from NHAI - despite its all possible endeavours NHAI, had declined to agree to a Terms of Resolution Plan - HELD THAT:- It is to be remembered that the Terms of Resolution Plan, being implemented, ofcourse, depends upon the contingent on execution of necessary documents, by NHAI (inclusive of the Supplementary Agreement) - In any event, the refusal on NHAI, in not accepting the Terms of Resolution Plan, cannot in any manner, be attributed, to the Appellant, which took all reasonable and commercially possible steps, to fulfil the Conditions Precedent. That apart, it cannot be brushed aside that the Appellant, had not claimed a relief of Cancellation of the Resolution Plan. Instead, it was sought for by the 1st Respondent, in its own commercial wisdom. This Tribunal, on an entire conspectus of the attendant facts and circumstances of the case, in a holistic fashion, to prevent an aberration of justice, and to secure the ends of justice, hereby Expunges, the Observations / Findings (including the aspect of Initiation of Proceedings, under Section 74 (3) of the I B Code, 2016), made by the Adjudicating Authority / Tribunal - Application disposed off.
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PMLA
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2023 (4) TMI 479
Money Laundering - scheduled offence - whether, it is mandatory for the PMLA authority to seek committal of the case related to the scheduled offence and in case such an option is exercised, if the Special court as a matter of course bound to allow it? - HELD THAT:- The legislative intent does not make the provision under Section 44(1)(c) of the PMLA obligatory on the authorized officer invariably to make an application for committal. Had it been so, there would have been no reason of any committal under Section 44(1)(c) of the PMLA which again depends on an application of the PMLA authority. If such was the object and purpose of the law, then it should have been expressly made clear about a joint trial of the offences under the PMLA and the Special Act. No doubt, Section 71 of the PMLA envisages an overriding effect which stipulates that the Act shall prevail upon anything which is inconsistent therewith contained in any other law for the time being force. However, on a closer reading of the provisions of the PMLA, it is clear and conspicuous that the scheme of the law beyond doubt does not contemplate an analogous trial of scheduled offences and the offence under the PMLA by the designated court in each and every case. In the case at hand, the authority under the PMLA has not moved the learned Special court at Bolangir for committal of the case in respect of the scheduled offence to the PMLA court at Bhubaneswar and therefore, it has been challenged by the petitioners since the PMLA court on receiving complaint has already summoned them. After having a detailed discussion, the conclusion is that if an application is moved by the competent authority under the PMLA after exercising its discretion for committal of a case in view of Section 44(1)(c) of the PMLA only in appropriate cases and in the interest of justice, in and under such circumstances, the Special court shall have to examine it and take a decision for committal of the case to the designated court under the PMLA and not otherwise. However, in the humble view of the Court, the PMLA authority should examine the plea of the petitioners applying its discretion and in the event found to be a fit case for committal may move the learned Special Judge, Vigilance, Bolangir for a judicious decision in terms of Section 44(1)(c) of the PMLA - Application disposed off.
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2023 (4) TMI 478
Seeking grant of Regular Bail - Money Laundering - scheduled offence - proceeds of crime - illegal mining activities and ferrying through ships/ferry in Sahebganj - income from legitimate source or not - HELD THAT:- There is a prima facie case about the large-scale illegal mining activities being carried out in the district of Sahebganj over the Rajmahal Hills. The scheduled offences are being investigated by the state police and in two of them, on the basis of which the ECIR registered, the petitioner has been absolved of the charges. Investigation in several other cases are in progress for offences of illegal mining loading charges under sections 414 of the IPC, Minor Mineral Concession Rule, 2004, Mines and Minerals(Development and Regulation) Act 1957, Jharkhand Mineral (Prevention of Illegal Mining Transportation and Storag) Rules 2017, Explosive Substance Act, 1908. Offences under sections 411 and 414 IPC along with the offences under sections 3, 4, 5 of the Explosive Substance Act,1908 into the matter of illegal mining are schedule offences under PMLA. Offence of money-laundering being continuous in nature, the curtain has not been rung down, with final form submitted in two of the cases, as the cases of illegal mining activities are still in the process of being investigated. The investigation is not confined to ₹ 83 lakhs so far seized in the account of the petitioner but it has revealed larger transactions that took place from his account and therefore the plea of bail for the crime proceeds being less than one crore under section 45(1) of PMLA is not sustainable in the eyes of law. With regard to the health condition of the petitioner the jail authorities are directed to provide medical facilities and treatment as per the Jail Manual. However, there does not exist any special ground for grant of bail on health grounds at this stage. The prayer for regular bail is rejected.
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2023 (4) TMI 444
Money Laundering - proceeds of crime - scheduled/predicate offence - monetary limit involved in the offence of money laundering - crux of the case is under Part-B of the Schedule under which the total value should be Rs. 1/- crore or more for the offence of money laundering to be brought against any person - issue in the case at hand as projected by the learned counsel for the petitioner is that, the Legislature has consciously introduced minimum value by amending the definition from time to time - HELD THAT:- A charge sheet comes to be filed in C.C. No. 15987 of 2012 against the petitioner and several others on 08.06.2012. If the charge sheet is taken note of, it is for the offences punishable under Sections 120B, 465, 468, 471, 477(a), 409 and 34 of the IPC. The attachment orders attaching the properties of the petitioner is confirmed by the Adjudicating Authority on the ground that they are proceeds of crime. Cognizance is taken by the Special Court on a private complaint so filed by the ED in P.C.R. No. 25 of 2020. It is not only against the petitioner but, it is against 66 Officers and the total amount involved against all those Officers put together is Rs. 9,03,89,803/-. Summons was issued to the petitioner on 07-05-2018 and 13.08.2018 and his voluntary statements were recorded under Section 50(3) of the Act on two dates i.e., on 24-05-2018 and 17-09-2018. It is his own statement that he has received an amount of Rs. 1,05,66,288/-. Therefore, the contention that the charge sheet in the predicate offence alleges that the petitioner is involved only in an offence to which the proceeds of crime indicates that it is Rs. 46,46,225/-is unacceptable as on questioning the petitioner, he himself has given the details about all the immovable properties possessed by him and the amount received in terms of the table given by him was Rs. 1,05,66,288/-. Therefore, it is well within the amount stipulated under Section 2(y) of the Act - there is no warrant of interference at this juncture particularly, in the teeth of the fact that further investigation against all others is pending consideration. In the event, the petitioner would get absolved of the allegations in the charge sheet, it would be an altogether different circumstance. There need not be any interpretation of definition of 'scheduled offence' and its threshold limit. That situation is yet to come about. Petition dismissed.
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Service Tax
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2023 (4) TMI 443
Refusal to condone the delay of 109 days in preferring the Appeal before the CESTAT - malafide intent or not - HELD THAT:- Considering the fact that there was a delay of only 109 days in preferring the Appeal and there does not appear to be any other mala fide intention on the part of the appellant in not preferring the appeal within the period of limitation and so as to enable the appellant to submit the case on merits rather than non-suiting the appellant on the ground of delay, the impugned order passed by the High Court as well as the order passed by the CESTAT in refusing to condone the delay are set aside. Appeal allowed.
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2023 (4) TMI 442
Refund of Service tax - service tax paid under protest - Cosmetic Surgery and Plastic Surgery service - Hair transplantation - surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma of the definition of 'Cosmetic And Plastic Surgery Services' provided under sub-clause(zzzzk) of clause(105) of Section 65 of the Finance Act, 1994 - HELD THAT:- It can be seen that Hair Transplant is neither undertaken to restore or reconstruct anatomy or its functions, nor the procedure of hair transplant restores developmental abnormalities degenerative diseases, injury or trauma. It is found that hair transplant is a medical procedure to improve outer look of the body for time being and it does in any way contributes to the anatomy or functions of human body. The medical procedure undertaken by the appellant is a process which is not opted by every person affected with hair loss, it is only a few affluent or self physical appearance conscious persons who undertake such surgery, the other persons affected by hair loss also live a normal life without any 'sub-normal' condition as claimed by learned Chartered Accountant. It is also normally seen that the Hospitals who undertake procedure of Hair Transplantation advertise/ display their activity not as a disease to be cured but they claim that the procedure taken by them enhances physical appearance. So, only diseases such as 'Congenital atrichia or 'hypotrichosis' which are unique conditions of hair loss which exhibit at birth or early stages during childhood could only be considered congenital defects for the purpose of exemption. The Hair Transplant is a cosmetic surgery and liable to the service tax levy - the impugned order upheld - appeal dismissed.
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2023 (4) TMI 441
Reverse Charge mechanism (RCM) - Renting services provided by the Directors in the capacity of Individual - Levy of service tax alongwith interest and penalty - rent paid to the landlord/owner of the premises and they happened to be, at the relevant time, Director of the appellant - HELD THAT:- The premises which were let out to the appellant are owned by Naveen Sawhney and D.K. Prashar in their individual capacity and it is not the case of the department that the properties were owned by them as Directors of the appellant. In such a situation, rent was collected by them in their individual capacity and merely because they also happen to be the Directors of the appellant would not mean that they had collected rent as Directors of the appellant. The Commissioner (Appeals) assumed that Naveen Sawhney and D.K. Prashar are providing service of renting of immovable property as Directors of the appellant, whereas they are providing the said service in their individual capacity as owners of the premises and not as Directors of the appellant - The appellant, in such a situation, could not have been asked to pay service tax on a reverse charge mechanism. What needs to be further noticed is that service tax had been deposited on the rent received by Naveen Sawhney and D.K. Prashar from the appellant. The order dated 07.05.2018 passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed.
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2023 (4) TMI 440
Reversal of CENVAT Credit - alleged improper documents on telephone bills, mobile bills etc. - CENVAT credit used exclusively in the manufacture of electricity - liability to pay 10%/6%/5% on the value of electricity, as common input services used both for taxable services and exempted goods - eligibility of CENVAT credit on certain ineligible input services - liability to pay service tax on annual accreditation charges, one-time accreditation charges and forfeiture of security deposit in relation BAS - Whether the appellant has filed a false declaration under the Voluntary 2013 Scheme? HELD THAT:- The first contention advanced by the learned counsel for the appellant is that as the entire CENVAT credit availed by the appellant stood reversed, it would amount to non availment of CENVAT credit. It needs to be noted that the appellant had through three challans paid in cash the amount of CENVAT credit earlier availed by it. The Supreme Court in CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR [ 1995 (12) TMI 72 - SUPREME COURT] held that if the credit has been reversed after availing the same, it would mean that credit had not been availed at all - it has to be held that when the entire CENVAT credit availed by the appellant had been reversed, it would amount to non availment of CENVAT credit and the demand for recovery of the CENVAT credit cannot be sustained. Applicability of rule 6 of the Credit Rules - demand on the ground that appellant was producing electricity, which is an exempted product and, therefore, the appellant could not have availed CENVAT credit on common services as the rigours of rule 6 of the Credit Rules would apply - HELD THAT:- When CENVAT credit has been reversed it would amount to non availment of CENVAT credit and, therefore, the confirmation of demand on ground that since the appellant had availed CENVAT credit on services without maintaining separate accounts it would be liable to pay 10%/5%/6% in terms of rule 6(3)(i) of the Credit Rules cannot sustain. The provisions of rule 6(3) of the Credit Rules would apply only when an assessee desires to avail and utilize CENVAT credit pertaining to common input services but as the appellant had reversed the entire CENVAT credit, the options contemplated in rule 6(3) of the Credit Rules would not be applicable. Electricity is an exempted and excisable good or not - demand on the ground that the appellant was manufacturing electricity which is an exempted good and, therefore, should have reversed 10%/6%/5% of the value of exempted goods i.e. electricity as the appellant had failed to follow the other options provided under rule 6 of the Credit Rules - HELD THAT:- 'Excisable goods' has been defined in section 2(d) of the Central Excise Act, 1944 to mean goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise. Thus, to be considered as excisable goods, the same must be specified in the First or Second Schedule as being subject to a duty of excise - Chapter Heading 2716 00 00 specifies electrical energy', but the same is not subject to any rate of duty, not even nil'. The rate of duty in the said Chapter Heading has been left blank and thus, electricity cannot be considered to have been specified in the First Schedule of the Act of 1985 as being subject to a duty of excise. In such a case, it cannot be considered as excisable goods. It would be useful to place reliance upon the decision of the Allahabad High Court in GULARIA CHINI MILLS AND OTHERS VERSUS UNION OF INDIA AND OTHERS [ 2013 (7) TMI 159 - ALLAHABAD HIGH COURT] . It was held that electrical energy is not an excisable goods nor it is exempted goods as defined in rule 2(d) of the Credit Rules. Thus, as electricity is not excisable goods under section 2(d) of the Central Excise Act, 1944, rule 6 of the Credit Rules would not be applicable. Service tax liability - no short-payment - HELD THAT:- The appellant received charges in the form of one time accreditation charges for accrediting the applicant for lifetime and in the form of annual accreditation charges for accrediting the applicant for one year. Where a party permitted by the appellant to set up power plants, does not set up the same within the prescribed time period, the security deposit made by such party is forfeited. This amount is shown as 'forfeiture of security deposit' in books of account of the appellant. However, where the project is successfully completed, the said deposit is returned back to the party. The amount collected towards forfeiture of security deposit is not towards any service and, therefore, no service tax is payable. Demand of service tax for the period till 30.6.2012 on the ground that such charges were received towards BAS rendered by the appellant - HELD THAT:- The definition of BAS under section 65(19) of the Finance Act includes a variety of activities, but the charges received by the appellant are not towards any of the activities specified is section 65(19) of the Finance Act. The appellant does not promote or market the goods produced or provided by the person paying the same. The appellant also does not promote or market the services rendered by the person paying the same. These charges are not towards any promotional or marketing activities carried out by the appellant. In such a case, these charges are not covered under section 65(19)(i) or 65(19)(ii) of the Finance Act. The appellant does not provide any customer care services on behalf of the person paying the said charges. The appellant does not engage itself in either production/ processing of goods on behalf of such persons or provision of services on their behalf. The appellant also does not procure any goods or services for these persons. In such a case, these charges cannot be said to be covered under sub-clauses (iii), (iv), (v) and (vi) of section 65(19) of the Finance Act - reliance can be placed on the decision of the Tribunal in MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION VERSUS CCE, NASIK [ 2014 (11) TMI 311 - CESTAT MUMBAI] . It was held that no service tax is payable on the fee collected by the appellant towards service charges collected for maintenance of roads, street lights etc, as against these charges the appellant was discharging statutory functions under the Maharashtra Industrial Development Act, 1961 and the Rules made thereunder. Thus, it would not be necessary to examine the contention raised by the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the case nor penalty and interest could have been invoked. The impugned order dated 22.01.2015 passed by the Commissioner confirming the demand of service tax proposed in the show cause notice dated 24.04.2014 cannot be sustained and is liable to be set aside - Appeal disposed off.
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2023 (4) TMI 439
Classification of services - Scientific or technical consultancy Service - intellectual property right service - whether the patent and other technical know-how transferred to M/s SSIPL under sales purchase agreement as a going concern would fall within the ambit of taxable service of 'Scientific or technical consultancy Service' and 'intellectual property right service' as defined under Section 65 (92) and 65 (55b) of Finance Act, 1994 and liable for payment of service tax? HELD THAT:- The impugned show cause notice alleged that transfer activity of its Polymer Division to M/s SSIPL is covered under the service category of 'Intellectual Property Service' and transfer activity of technical know-how provided by the unit during transfer of its Polymer Division to M/s SSIPL is covered under the service category of 'Scientific Technical Consultancy Service'; which are taxable service with effect from 10.09.2004 and 16.07.2001 respectively. However from the definition of 'scientific or technical consultancy service', it is found that there should be an advice, consultancy, or scientific or technical assistant given by person or an institution to another person. In the present matter it has not been brought out by the revenue as to what advice, consultancy or scientific or technical assistant has been given by the seller to the buyer. Providing of intellectual property service - HELD THAT:- From the definition of said service it is clear that there is rendering of service only if there is temporary transfer of some intellectual property or permitting its use. In the present matter from the facts of the case there does not seem to be any temporary transfer of intellectual property. In the present case whole Polymer division itself was sold by the Appellant to M/s SSIPL as going concern. The disputed transaction of appellant will not fall within the definition of 'Scientific and Technical Consultancy Service' and 'Intellectual Property Service' as stated in Section 65(92) and Section 65(55b) of Finance Act, 1994. The slump sale has been one of the widely used ways of business acquisition. The concept of Slump sale was incorporated in the Income Tax Act 1961 by the Finance Act, 1999 when Section 2(42C) was inserted defining the term slump sale - Hence in the present matter all such transfer including the transfer of technical know-how and patent etc. are in pursuance to the slump sale and not by way providing the service. Therefore in our view demand of service tax not sustainable on such type of transactions. The impugned order is set aside - Appeal allowed.
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2023 (4) TMI 438
Levy of Service Tax - construction service provided by the appellant to Surat Municipal Corporation for construction of residential complex under Jawaharlal Nehru National Urban Renewal Mission (JnNURM) and construction service provided to Gujarat State Police Housing Corporation Limited (GSPHCL) - HELD THAT:- The issue of levy of service tax on the construction service in respect of above categories have been categorically held as non taxable. In the case of M/S JETHANAND ARJUNDAS SONS VERSUS CCE ST. INDORE [ 2018 (11) TMI 757 - CESTAT NEW DELHI] , the Tribunal held that The construction of Vishwavidyalay for M. P. Laghu Udyog is also for public welfare and not for commercial purpose, hence not taxable in terms of Circular No.80/2004 dt 17.09.2004. In respect of construction service provided to the service recipient M/s. GSPHCL and Surat Municipal Corporation under Jawaharlal Nehru National Urban Renewal Mission are non-taxable - the demand in the present case is not sustainable. Appeal allowed.
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2023 (4) TMI 437
Valuation of services - Port Services - it was alleged that taxable value has not been worked out properly as the amount of rebate has not been included in the taxable value as per Section 67 of the Finance Act, 1994 read with Rule 3 (a) of Service tax (Determination of Value) Rules, 2006 - alleged suppression, willful misstatement on the part of the Appellant with an intent to evade service tax or not - extended period of limitation - HELD THAT:- The Appellant has mainly relied upon the judgment of this tribunal passed in the matter of C.C.E. S.T. -SURAT-II VERSUS ESSAR BULK TERMINAL LIMITED [ 2022 (1) TMI 317 - CESTAT AHMEDABAD ] wherein the issue to be decided before the tribunal is that when GMB charged wharfage charges at the rate of 20% of the notified rate to M/s Essar Bulk Terminal Limited (M/s EBTL) and the same was charged on actual by M/s EBTL to M/s ESTL, the EBTL on the transaction between EBTL and ESTL required to charge the service tax on 100% of the notified rate including 80% rebate given by GMB to EBTL or on the 20% of the notified rate on which the service tax was discharged is correct or otherwise. However the said matter was decided by the tribunal on 06.01.2022 whereas impugned orders were passed on 14.12.2012, 15.10.2012 and 31.12.2015. Since the issue involved is mixed question of fact and law and in the change circumstances of the law on the issue in hand, it is opined that the matter needs reconsideration by the Learned Commissioner to decide the matter after considering the judgment of M/s Essar Bulk Terminal Ltd. and corresponding facts of the case. Matter remanded to the Adjudicating authority for fresh consideration after granting reasonable opportunity of hearing to both sides and after taking into account the decision of the tribunal in the case M/s Essar Bulk Terminal Ltd. - appeal allowed by way of remand.
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2023 (4) TMI 436
Liability of service tax - consultancy services (by deploying its engineers to the contractors for assisting them) - liquidated damages (damages/ penalties recovered by the appellant from the contractors where the terms and conditions of the contract were breached) - manpower recruitment services (short payment of service tax) - legal services (short payment of service tax) - period 2013-2014 to 2016-2017 - appellant is a public sector undertaking established by the Government of Madhya Pradesh for transmission of electricity within the city of Jabalpur and is a successor company of the State Electricity Board. Consultancy Services - HELD THAT:- The appellant provides consultancy services to contractors and power DISCOMS while laying the power or electricity transmission lines, erection of electricity poles and construction of electricity sub-stations. The appellant collects the amount for consultation services which are incidental to the transmission activities as the appellant has the expertise in power transmission. If the poles, lines or sub-stations are not erected or constructed as per the specifications, it will not be possible to transmit electricity. The issue that arises for consideration is as to whether service tax could be levied on the amount collected by the appellant towards consultancy charges. This issue was examined by a Division Bench of the Tribunal in MADHYA PRADESH POORVA KSHETRA VIDYUT VITRAN CO. LTD. VERSUS PRINCIPAL COMMISSIONER CGST AND CENTRAL EXCISE BHOPAL [ 2021 (2) TMI 155 - CESTAT NEW DELHI] and after placing reliance upon the decision of the Gujarat High Court in TORRENT POWER LTD. VERSUS UNION OF INDIA [ 2019 (1) TMI 1092 - GUJARAT HIGH COURT] , where it was held that all services related to transmission and distribution of electricity are bundled services, as contemplated under section 66F(3) of the Finance Act, and are required to be treated as a provision of a single service of transmission and distribution of electricity, which service is exempted from payment of service tax. In the present case the amount collected towards consultation services is in connection with services which are incidental to the transmission activities carried out by the appellant - The demand, therefore, cannot be sustained. Liquidated Damages - amount collected by the appellant towards liquidated damages or penalty - HELD THAT:- This issue was also examined by the Division Bench of the Tribunal in M/S MADHYA PRADESH POORVA KSHETRA VIDYUT VITARAN COMPANY LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, MADHYA PRADESH [ 2022 (4) TMI 773 - CESTAT NEW DELHI] and after referring to the decision of the Tribunal in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] which decision has been accepted by the Board, observed that no service tax can be levied on the amount collected towards liquidated damages or penalty for breach of any of the terms of the contract. Manpower Recruitment Services - HELD THAT:- The contention of the appellant that most of the service providers were public limited or private limited who discharge their own liabilities was not accepted as the appellant could not substantiate this contention with documents. Learned counsel for the appellant has also not placed any material to substantiate this contention. There is, therefore, no error in the order passed by the Commissioner confirming the demand on service tax under manpower supply services. Legal Services - HELD THAT:- In regard to confirmation of service tax proposed in the show cause notice towards legal services, the appellant has not also been able to substantiate that certain amount towards stamp duty was included. Such being the position the confirmation of demand under legal service is justified. The confirmation of demand on the amount collected on account of consultancy charges or liquidated damages cannot be sustained and is set aside - the confirmation of demand under manpower supply services and legal services is upheld - Appeal allowed in part.
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2023 (4) TMI 435
Levy of Service tax - business support service (BSS) - online information and database access or retrieval service (OIDARS) - fees received by the appellant from banks/financial institutions for registration of transactions of securitization, asset reconstruction and security deposits - it is contended that service tax cannot be proposed and confirmed under two different heads of service for one single activity - extended period of limitation. Extended Period of Limitation - wilful suppression of facts with an intent to evade payment of service tax, or not - appellant is Government company - rebuttal of presumption - HELD THAT:- It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be wilful since wilful precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression wilful before suppression of facts under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be wilful and there should also be an intent to evade payment of service tax. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since suppression of facts has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. This issue was examined by a Division Bench of the Tribunal in M/S. KRISHI UPAJ MANDI SAMITI AND OTHERS VERSUS CCE ST, JAIPUR I JAIPUR II [ 2017 (5) TMI 1465 - CESTAT NEW DELHI] . It was held that since Krishi Upaj Mandi Samiti was a government organisation and its functions were regulated by the Act and the Rules made thereunder, there will be a rebuttable presumption regarding non-existence of any of the ingredients mentioned in the proviso to section 73(1) of the Finance Act. The show cause notice merely alleges that by not disclosing the entire facts in the ST3 returns, the assessee had an intention to evade payment of service tax and this is what has also been recorded by the Commissioner while adjudicating the show cause. The appellant is a government company and, therefore, there is a rebuttable presumption regarding non-existence of any of the ingredients mentioned in the proviso to section 73(1) of the Finance Act. The show cause notice does not rebut the presumption - In such circumstances, the extended period of limitation could not have been invoked. As the entire demand that has been confirmed is for the extended period of limitation, the order confirming the demand cannot be sustained. Demand of service tax on the fees received from banks/financial institutions for registration of transactions under the category of BSS and also OIDARS - HELD THAT:- A Division Bench of the Tribunal in M/S ESS GEE REAL ESTATE DEVELOPERS PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE [ 2019 (6) TMI 633 - CESTAT NEW DELHI] , after placing reliance upon the decision of the Tribunal in M/S. CMS (INDIA) OPERATIONS MAINTENANCE CO. (P) LTD. VERSUS CCE, PUDUCHERRY [ 2017 (2) TMI 65 - CESTAT CHENNAI] , observed that It is very difficult to really cull out from the show cause notice as to which particular category of service was intended to be taxed. The show cause notice should have clearly indicated whether the service of real estate agent or site formation was leviable to tax, for this is the requirement of section 65A of the Act. This confusion is maintained in the impugned order. T he impugned order cannot be sustained - Appeal allowed.
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2023 (4) TMI 434
CENVAT Credit - input services - sludge/waste removal service - invoices not bearing registered address of the appellant and only having the address of the head office at Kolkata - actual use certificate not produced (for services received from Chhtrapati Engineering and Sai Engineering Works) - demand of service tax - tax paid under reverse charge mechanism (Sai Enterprises collected service tax on the 100% value and deposited the same to the government exchequer/double taxation) - expenses incurred on fee paid to various government department - suppression of facts or not - extended period of limitation. Denial of Cenvat credit on sludge/waste removal service - HELD THAT:- The disposal of waste generated out of manufacturing is a statutory obligation of the appellant and violation of the same would attract penal consequences. This service has been held to be input service by the Tribunal in the case of COMMISSIONER OF C. EX. SERVICE TAX (LTU) VERSUS LUPIN LTD. [ 2012 (4) TMI 499 - CESTAT, MUMBAI] wherein the Tribunal has held that transportation and clearance of waste is an activity of the appellant s manufacturing business. The service availed by the appellant is an integral part of the manufacturing process and hence the appellant is eligible for Cenvat credit. CENVAT Credit denial on the ground that the invoices not bearing registered address of the appellant and only having the address of the head office at Kolkata - HELD THAT:- The services were availed in Baddi but inadvertently address of the head office was mentioned in the invoice. The Tribunal has been consistently holding that the Cenvat credit/substantial benefit cannot be denied on technical/procedural lapse as held by the Tribunal in the case of M/S RAJENDER KUMAR ASSOCIATESS VERSUS COMMISSIONER OF SERVICE TAX, DELHI-II [ 2020 (11) TMI 621 - CESTAT NEW DELHI] and M/S ADBUR PRIVATE LIMITED VERSUS CST, DELHI [ 2017 (5) TMI 101 - CESTAT NEW DELHI] - thus, the appellant is entitled to Cenvat credit on the input service received from D.K.Chajjar Co. Denial of CENVAT Credit - stand of the department is that the said activity was used for building structure whereas the stand of the appellant is that these services were availed with regard to repair and maintenance of plant and machinery - HELD THAT:- The appellant has not given any material to show or the certificate from the chartered engineer regarding the actual use of these services. Hence, the appellant is not entitled to avail Cenvat credit on the services received from Chhtrapati Engineering and Sai Engineering Works because the said the service is excluded from the definition of input service as provided under Rule 2 (l) of Cenvat Credit Rules, 2004 - Credit denied. Service availed from Sai Enterprises - Sai Enterprises collected service tax on the 100% value and deposited the same to the government exchequer - double taxation - HELD THAT:- This issue has also been considered by the Tribunal in the case of M/S. MAHANADI COALFIELDS LIMITED VERSUS COMMISSIONER OF CGST CX, ROURKELA COMMISSIONERATE [ 2020 (9) TMI 477 - CESTAT KOLKATA] and MANDEV TUBES VERSUS COMMISSIONER OF CENTRAL EXCISE, VAPI [ 2009 (5) TMI 102 - CESTAT, AHMEDABAD] wherein it has been held that even if the tax is liable to be paid under RCM but the same is paid by the service provider, it was not open to the department to demand the same again from the assessee - demanding service tax from the appellant under reverse charge mechanism is not sustainable in law. Demand of service tax paid to legal consultancy services - HELD THAT:- The same has been accepted by the appellant and amount of Rs.7,155/- has already been paid along with interest and penalty and the same has been appropriated by the original authority in their order. Demand of service tax under reverse charge mechanism on the expenses incurred on fee paid to various government department - HELD THAT:- The issue is covered by the circular No.192/02/2016-ST dated 13.4.2016 and as per this circular the appellant is liable to service tax on this service. Moreover, the appellant has failed to explain as to why the fee was paid to the government department if not for some activity in return, as claimed by the appellant. Extended period of Limitation - HELD THAT:- There is force in the appellant s contention and in view of law laid down by the Apex Court in the case of M/S. UNIWORTH TEXTILES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE. RAIPUR [ 2013 (1) TMI 616 - SUPREME COURT] - In absence of positive action, suppression of facts, wilful misstatement with intent to evade duty, the extended period cannot be invoked. The demand is confirmed is restricted to normal period only in the case of input service received from Chhtrapati Engineering and Sai Engineering Works used for building structure and also expenses incurred on fee to Govt. department. In the circumstances, penalty under section 78 and 77 of Finance Act, 1994 are dropped. Appeal is allowed by way of remand.
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2023 (4) TMI 433
Interest on refund claim - from which date the interest is payable in the case of the amount deposited during investigation - from the date of deposit till its realization with 12% interest or not - HELD THAT:- This issue has been considered by the Tribunal in various cases and it has been consistently held that the assessee is entitled to claim interest from the date of deposit till the date of payment at the rate of 12%. Further, this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, PANCHKULA VERSUS M/S RIBA TEXTILES LIMITED [ 2022 (3) TMI 693 - PUNJAB HARYANA HIGH COURT] after considering the various decisions held that the assessee is entitled to claim interest from the date of payment of initial amount till the date of its refund and further the Tribunal relied upon the decision of Kerala High Court as well as the decision of the Ahmadabad Tribunal and thereafter granted the interest of 12% per annum. The arguments of the Revenue that M/S PARLE AGRO PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA [ 2017 (2) TMI 984 - CESTAT ALLAHABAD] has been challenged before the Hon ble Allahabad High Court and the appeal has been admitted will not help the Revenue in any way as no stay has been granted against the said decision. Further, the main thrust of the argument of the Ld. DR that in the present case the duty has been deposited voluntarily and not under protest also does not have any force because consistently it has been held that any amount that is deposited during pendency of the adjudication proceedings or investigation is in the nature of deposit made under protest as held by the 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] ,COMMISSIONER, CENTRAL EXCISE 7-A, ASHOK MARG, LUCKNOW VERSUS M/S EVEREADY INDUSTRIES INDIA LTD. [ 2017 (2) TMI 197 - ALLAHABAD HIGH COURT] and GUJARAT ENGINEERING WORKS VERSUS COMMR. OF C. EX., AHMEDABAD-II [ 2013 (5) TMI 599 - CESTAT AHMEDABAD] . The appellant is entitled to claim interest on delayed refund from the date of deposit till the date of payment at the rate of 12% per annum - Appeal allowed.
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2023 (4) TMI 432
Classification of services - works contract service or construction services? - joint development agreement for the construction of residential complexes consisting of 176 units / flats, contractor was engaged - period from October 2007 to April 2010 - HELD THAT:- On going through the orders of the various CESTAT Benches which have been considered by the Hyderabad Bench of the CESTAT in COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, VISAKHAPATNAM - I VERSUS M/S PRAGATI EDIFICE PVT LTD (VICE-VERSA) [ 2019 (9) TMI 792 - CESTAT HYDERABAD] , it has been categorically held that no Service Tax could be levied on construction of residential complexes prior to 01.07.2010 even when the service is rendered either as service simpliciter or as a works contract - Admittedly, the period of dispute, as noted, in the first paragraph, is from October 2007 to April 2010 and hence, the above ruling is squarely applicable to the present case. In view of the fact that no distinguishing / contrary order is placed on record, the demand raised in the impugned order cannot sustain - Appeal allowed.
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2023 (4) TMI 431
Time barred demand - Demand of differential amount of service tax - works contract service - demand on the ground that the appellant has availed in-eligible benefit of notification by discharging the service tax liability by availing abatement of 67% and paid service tax only on the 33% of the gross amount of the bills - HELD THAT:- Appellant had been filing the ST-3 returns regularly to the Jurisdictional Range officers. It is on record that the said Service tax returns were scrutinized by the Jurisdictional officer on 17.01.2008 and he pointed out that there is short payment of service tax of Rs. 87,740/- - the fact that the appellant were charging service tax on 33% value after availing abatement on their services till 31st May 2007 and w.e.f. 01.06.2007 they have charged service tax on gross amount of contract @2% was in the knowledge of the Revenue itself from ST-3 returns. However show cause notice to the Appellant was issued on 02.03.2010. Inasmuch as the entire information was in the knowledge of the Revenue, the longer period of limitation is not available. In view of the facts the show cause notice should have been issued within the normal period of one year as prescribed under Section 73(1), whereas the show cause notice for the period 16.06.2005 to 30.09.2007 was issued on 02-03-2010 i.e. after prescribed limit of one year - there is no suppression of fact on the part of the appellant. Therefore, the demand raised in the show cause notice is clearly time-barred. Appeal allowed - decided in favour of appellant-assessee.
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Central Excise
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2023 (4) TMI 430
CENVAT Credit - common input services - non-maintenance of separate accounts for receipt, consumption and inventory of input and input services meant for use in the manufacture of dutiable and exempted goods or services - whether the respondent has fulfilled his obligation under Rule 6(2) of the Cenvat Credit Rules, 2004 by taking only 85% of the credit on the common input service? - HELD THAT:- The learned Tribunal has made an elaborate exercise examining the effect of Rule 6 of the Cenval Credit Rules, post and pre-amendment, such an exercise may not be required in these appeals - Thus, the first question would be whether the assessee had fulfilled its obligation under Rule 6(2) of the Rules by taking only 85% of the credit on the common input services. This being fully factual issue, the order passed by the Tribunal is referred. The Tribunal after noting the provisions of the Rules, took note of the circular issued by the Board in Circular No.868/6/2008-CX dated 9th May, 2008 which gives an opportunity to a manufacturer to furnish a certificate from the cost accountant/chartered accountant giving details of quantity of input used in the manufacture of exempted goods value thereof and Cenvat Credit taken on this inputs to be submitted at the end of the year. It is not in dispute that the assessee had submitted a chartered accountant s certificate dated 15th November, 2010. The Commissioner while examining the said certificate found that the certificate shows the financial year wise/month wise percentage of cenvat credit paid both on input and input services vis- -vis the percentage of duty paid, clearance and non-duty paid clearance covering the period from 2006-07 to 2009-10 which include the duty paid bonded and NRD dispatches - the Commissioner held that non-availing of Cenvat credit upto 15% could be equated as availing of 100% credit on all the common inputs and payment of duty upto 15% of the value of the common inputs which could be attributable to having been used for the manufacture of exempted products. Further, it was held that payment of 15% duty was made within the due date. The question of payment of interest does not arise and hence, it could be concluded that the assessee has complied with the amended provisions of Rule 6 of the Cenvat Credit Rules, 2004 brought about by the Finance Act, 2010. Further, after taking note of the certificates, the Commissioner noted that the percentage of credit not availed or forgone is always more than or equal to the percentage of non-duty paid clearance and in view of the said factual position, opined that there has been sufficient compliance by the assessee as far as maintenance of separate account or for that matter they have followed Rule 6(2) of the said Rules. Taking note of the evidence produced by the assessee, the Tribunal held that the assessee has more than fully met the requirement of Rule 6(2). Further, they found fault with the revenue by pointing out that the revenue has not placed any evidence to show that proportionate amount of Cenvat credit was reversed/not taken by the assessee, was calculated wrongly. Furthermore, the revenue has not produced any alternative calculations to show how much could have been reversed/not taken. Therefore, in the absence of any other evidence, the Tribunal examined the Chartered Accountant s certificate produced by the assessee and held that the assessee had sufficiently met the requirements of maintenance of separate accounts under Rule 6(2) and, therefore, upheld the order passed by the Commissioner who had dropped all the demands raised against the assessee. The Department having issued such communication, it goes without saying that they have now embarked upon an exercise to examine the contents of the Chartered Accountant s certificate. This would indirectly mean that the contest which was made before the Tribunal with regard to the Chartered Accountant s certificate does not any longer survive and it is only the contents thereof, sufficiency or insufficiency of the material contained in the certificate which is now being pursued by the Department. The appeals filed by the revenue are dismissed.
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2023 (4) TMI 429
Levy of Excise Duty - scrap generated during the course of manufacture - appellant cleared scrap generated in the course of final product during the period 01.03.2006 to 31.12.2010 without payment of central excise duty - conversion work was undertaken in terms of Notification No.214/86-CE dated 25.03.1986 - HELD THAT:- The issue is whether the scrap generated during the process of manufacture if liable to excise duty stands decided by the decision of the Hon ble Bombay High Court in the case of HINDALCO INDUSTRIES LIMITED VERSUS THE UNION OF INDIA, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2014 (12) TMI 657 - BOMBAY HIGH COURT] . The said decision was maintained by the Hon ble Apex Court in UNION OF INDIA VERSUS HINDALCO INDUSTRIES LIMITED [ 2019 (3) TMI 1933 - SC ORDER] by dismissing the appeal filed by the Department. In view thereof, the demand of duty cannot sustain. Appeal allowed.
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2023 (4) TMI 428
CENVAT Credit - Cement, MS angles, Channels, Beams, Bars, etc. used for foundation of plant and machinery in the factory of the appellant - disallowance of CENVAT credit on the ground that there is a difference between the Chartered Engineer s Certificate submitted earlier and the revised Chartered Engineer s Certificate submitted at the time of adjudication - It is his submission that in fact the revised Chartered Engineer s Certificate is more elaborated and on the basis of which the cenvat could not have been denied. HELD THAT:- It is clear that in principle the tribunal has not objected the CENVAT credit on the goods such as Cement, MS angles, Channels, Beams, Bars, etc. for the construction of Silos which are used for storing of the goods. The tribunal has only remanded the matter to the appellate authority only to address the Chartered Engineer s certificate regarding consumption of the material for the fabrication of the Silos. It is found that the appellant have submitted the revised Chartered Engineer s certificate which is more elaborated based on the actual location where the goods were consumed. From the above certificate and enclosed annexure, clearly shows that how much material was used for what purpose according to said certificate, plant and machinery wise quantification of the material was provided from which it clearly appears that all the goods were used for capital goods in the factory of the appellant. On the basis of the Chartered Engineer s Certificate, there are no reason why the CENVAT credit should not be allowed. Appeal allowed.
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Indian Laws
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2023 (4) TMI 477
Rejection of application for condonation of delay caused in preferring the application under Section 34 of the Arbitration and Conciliation Act, 1996 - time limitation for preferring an application under Section 34 of the Arbitration Act against the arbitral award - whether when the last day of condonable period of 30 days (under Section 34(3) of the Arbitration Act) falls on holiday or during the Court vacation, would the benefit of Section 10 of the General Clauses Act, 1897 be available? HELD THAT:- Section 34(3) of the Arbitration Act and Sections 2(j) and 4 of the Limitation Act, 1963 fell for consideration before this Court in the case of ASSAM URBAN WATER SUPPLY AND SEW. BOARD VERSUS SUBASH PROJECTS AND MARKETING LTD. [ 2012 (1) TMI 412 - SUPREME COURT] . Even the very issue raised in the present appeal fell for consideration before this Court in the case of Assam Urban. In the aforesaid decision, this Court interpreted the aforesaid provisions and has specifically observed and held that the benefit of exclusion of period during which Court is closed is available only when application for setting aside the award is filed within prescribed period of limitation and it is not available in respect of period extendable by the Court in exercise of its discretion. No application for setting aside the arbitral award was made before elapse of three months from the receipt thereof. Three months from the date of receipt of the award expired on 26.11.2003. The District Court had Christmas vacation for the period from 25.12.2003 to 01.01.2004. On reopening of the Court i.e. on 02.01.2004, the appellants made application for setting aside the award under Section 34 of the Arbitration Act. Now, so far as reliance placed upon Section 10 of the General Clauses Act, 1897 on behalf of the appellant is concerned, at the outset it is required to be noted that such a contention is untenable in light of the proviso to Section 10 of the General Clauses Act, 1897, which specifically excludes the application of Section 10 of the General Clauses Act, 1897 to any act or proceeding to which the Indian Limitation Act, 1877 applies. Reference to 1877 Act will now have to be read as reference to Limitation Act, 1963 in view of Section 8 of the General Clauses Act, 1897. Therefore, in light of the application of Limitation Act, 1963 to the proceedings under the Arbitration Act and when Section 10 of the General Clauses Act, 1897 specifically excludes the applicability of Section 10 to any act or proceeding to which Indian Limitation Act, 1963 applies and in light of the definition of period of limitation as defined under Section 2(j) read with Section 4 of the Limitation Act. Thus, it cannot be said that the High Court and the learned III Additional District Sessions Judge, Vijaypur have committed any error in refusing to condone the delay caused in preferring application under Section 34 of the Arbitration and Conciliation Act, 1996 which was beyond the period prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996 - appeal dismissed.
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2023 (4) TMI 476
Suit for declaration and permanent injunction and for recovery of possession - rejection of plaint under Order VII, Rule 11 of the Code of Civil Procedure - HELD THAT:- Order VII Rule 7 denotes relief to be specifically stated in the plaint. Accordingly, every plaint shall specifically state the relief which plaintiff claims, either simply or alternatively, and it shall not be necessary to ask for general or other relief which may always be given at the Court, just to the same extent as if it had been asked for, and the same rule shall apply to any relief claimed by the defendant in his written statement. Rule 9 speaks about procedure on admitting the plaint , Rule 10 stipulates return of plaint . Thus, Rule 11 contemplates rejection of plaint . Once the plaint is not in compliance with the other rules contemplated under Order VII, then such claims are to be rejected under Rule 11 of CPC. If it is rejected on the ground stipulated under Rule 11, then the plaintiff is entitled to institute a fresh suit, setting out the corrections or cause of action as the case may be and proceed with the suit. No other ground on which the plaint can be rejected, other than those mentioned under Rule 11 can be saved under Rule 13, except when the suit was instituted afresh, correcting the cause of action or mistakes or otherwise. Holistic reading of the Order VII would clarify that no plaint is to be rejected on merits. The Trial Court cannot adjudicate the merits in an Interlocutory Application filed under Order VII Rule 11 of the Code of Civil Procedure. Even if the cause of action is improperly set out, the plaint as a whole must be read and merely on the basis of the facts in one paragraph or in the cause of action paragraph, plaint need not be rejected under Order VII Rule 11 of the Code of Civil Procedure. This exactly is the reason why this Court has to emphasise that the power under Order VII Rule 11 has to be exercised sparingly and even if the plaint is rejected on the ground stipulated under Rule 11, then the plaintiff is entitled to institute a fresh suit by setting out the correct cause of action or correcting the mistakes on which the plaint was rejected, or otherwise. The intention of the Court is not to deprive a person to get relief on the adjudication of the facts on merits. The spirit of the code in this aspect is to be borne in mind by the Courts while dealing with the Interlocutory Applications filed under Order VII Rule 11 of CPC. Appeal allowed.
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