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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter May 5, 2023 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles SAC code in GST RECENT DEVELOPMENTS IN GST STATISTICS ON INCOME TAX COLLECTION AND COST OF COLLECTION News India-U.S. partnership is the defining moment of the 21st century: Sh. Goyal CCI approves acquisition by Mr. Sanjay Chamria (SC) of certain equity shares of Jaguar Advisory Services Private Limited (Jaguar), resulting in an indirect acquisition of certain equity shares of Magma HDI General Insurance Company Limited (Magma HDI) by SC. CCI approves acquisition of shareholding of Tower Vision India Private Limited by Ascend Telecom Infrastructure Private Limited and GIP EM Ascend 2 Pte. Ltd. Notifications GST - States 09/2023-State Tax - dated 10-4-2023 - Himachal Pradesh SGST Amendment of notification no. 13/2022-State Tax, dated the 22nd July, 2022, for extension of limitation under section 168A under the HPGST Act, 2017 07/2023-State Tax - dated 10-4-2023 - Himachal Pradesh SGST State Government, recommendations of the Council, waives the amount of late fee referred to in section 47 of the HPGST Act S.R.O. No. 520/2023 - dated 27-4-2023 - Kerala SGST Amendment in Notification No. 74/2017/TAXES, dated 30th June, 2017 S.R.O. No. 519/2023 - dated 27-4-2023 - Kerala SGST Amendment in Notification No. 73/2017/TAXES. dated 30th June, 2017 Income Tax 24/2023 - dated 3-5-2023 - IT India-Chile DTAA - Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Money Laundering S.O. 2036 (E) - dated 3-5-2023 - PMLA Reporting entity - Person carrying on a designated business or profession - Certain activities undertaken by Practicing CA, CS and CWA on behalf of the clients, notified Circulars / Instructions / Orders GST - States Trade Circular 10 T of 2023 - dated 3-5-2023 Generation and quoting of Document Reference Number (RFN) on communication/document pertaining to search and inspection issued by the officers of the State Goods and Services Tax Department. Highlights / Catch Notes GST Scrutiny of GST Return - Validity of notices calling for explanation of the petitioner with regard to the discrepancies found in respect of the returns - the two impugned notices suffer the vice of lack of authorization by the Proper Officer i.e., Chief Commissioner. Therefore, the impugned notices are liable to be set aside. However, that will not preclude the Chief Commissioner or the officer authorized by him to issue fresh notices under Rule 99 of the APGST Rules r/w Section 61 of the APGST Act. - HC Visit to Get Source Denial of ITC - R1 accepted the genuineness of transaction - R3 observed that, Input Tax Credit (ITC) had been availed allegedly, fraudulently - The mere fact that an order has been passed under Rule 86A(2) will not stand in the way of the assessing officer making an assessment or curtailing his powers in any way, in such an exercise. - Since the question of 'movement of goods' is one of the fact and the impugned order proceeds on the basis that the facts required to adjudicate this aspect were not provided by the petitioner, the impugned order is confirmed. - HC Visit to Get Source Income Tax Penalty u/s 271D - penalty order as passed on the deceased person - Any proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of death of the deceased. Therefore, when the penalty order was passed in the name of the assessee, he had already died. Hence, the penalty order is invalid. - AT Visit to Get Source Non Granting the refund of TDS credit - TDS which was not claimed in the return of income - belated claim of refund of the TDS - Power to condone the delay u/s 119(2)(b) - the assessee should not be deprived of the benefit of the TDS credit which was inadvertently not claimed in the return of income. - AT Visit to Get Source Immunity from Income Tax - Article 289(1) of the Constitution - Maharashtra State Board of Technical Education - “state” or “Body Corporate” - the assessee is falling within the meaning of “state” under Article 12 of the Constitution of India and, hence, will have the benefit of immunity from taxation of its income under the provision of Income Tax Act. - AT Visit to Get Source TDS u/s 195 - Payment chargeable to tax in India or not DTAA with USA - DRP held that the services provided by the non-residents were received and utilised by the assessee in connection with its business operations in India - AO directed to decide whether the payment made by the assessee to the aforesaid non-resident entities is taxable in India - AT Visit to Get Source Deduction u/s 80IB(4) - manufacturing activity or not - profit earned out of Jammu & Kashmir Unit - The plea that there was no research and development expenditure at Jammu Unit has no relevance in the context of present case since carrying out research activities is not essential ingredient of manufacturing. - The assessee is mixing various raw materials to manufacture different commodity which fall under separate excise tariff heading. - Benefit of exemption allowed - AT Visit to Get Source TP Adjustment - payment of management fee - In the absence of prerequisites for application of CUP method, it was not open for the ld. TPO to disregard TNMM employed by the assessee as MAM. No defects have been pointed out in application or relevance of TNMM in this case. Under these circumstances, impugned action of ld. TPO does not meet our judicial approval. - AT Visit to Get Source TP Adjustment - Issuance of the corporate guarantee in favor of subsidiary - To be treated as a shareholders' activity or not - non-charging of corporate guarantee commission - Not every transaction with a subsidiary can be called a shareholder's activity unless reasons are demonstrated with credible facts. - when Guarantee is covered in clause 92B (2)(1)(C) specifically and it is a capital financing transaction specifically included there in, it is unnecessary to stretch it to bring in to clause (d) of ' Provision of services'. - AT Visit to Get Source Customs Change of classification of the goods imported by the appellant - Paddle of canoes - Combined reading of Chapter 1(p) of Chapter 95 and 1(p) of Chapter 44 clearly implies that means of propulsions of sports crafts such as canoes and skiffs would be excluded from Chapter 95 and would fall under the Chapter relevant to the material of which the same are made of. - The goods are correctly classifiable under Chapter Heading 68151090 - AT Visit to Get Source Smuggling - recovery of Gold - foreign origin - The gold of Indian origin is generally of 916 purity (22 carat) - None of the appellants have placed on record any evidence showing as to how the gold recovered from them was having 999 purity - there are no reason to differ with the findings of the adjudicating authority below that all the appellants had full knowledge of the impugned gold to be the gold of foreign origin and knowingly they were dealing with the same for monetary benefits. Their act gets definitely covered under Section 111 of the Act making the recovered gold liable for confiscation. - AT Visit to Get Source Interpretation of statute - Section 2(26) of Customs Act - Scope of the term Importer - High Sea Sale - Adjudicating authority treated the appellant neither the importer not the owner - department cannot self assign to itself the duty of declaring bad in law the certificate issued to the importer by Ministry of Renewable Energy or decide title of the goods, even when no one is disputing ownership. And existence or otherwise of High Sea Sales Agreement makes no difference under Section 2 (26) of the Customs Act, 1962 regarding documented and claimed “Importer”. - AT Visit to Get Source Seeking provisional release of seized goods - As no reasons are forthcoming for enhancing the value of the imported goods over and above the value belonging by the Chartered Engineer. We are of the view that the order prescribing conditions of provisional release is too harsh, taking note of the fact that on the assessed value appellant has already paid duty - The conditions in the order of provisional release modified - AT Visit to Get Source Indian Laws Right of the auction purchaser - Validity of Auction of properties of borrower by the Bank - Borrower sold the property subject to decision of DRT before auction by Bank - decree for specific performance of the agreement to sale - Even at the time when the respondent no.1 entered into the agreement to sale/MoU he was aware about the proceedings pending before the DRT which is apparent from Clause 4 of the MoU. Therefore, respondent no.1 and/or his heirs cannot be permitted to get the benefit of his own wrong and cannot be permitted to get the benefit of a void transaction - Decided in favor of auction purchaser - SC Visit to Get Source IBC Constitutional Validity of Section 327(7) of the Companies Act, 2013 - statutory claims of the “workmen’s dues” - Overriding effect of the provisions of IBC - As sub-section (7) of Section 327 of the Act, 2013 provides that Sections 326 and 327 of the Act, 2013 shall not be applicable in the event of liquidation under the IBC, which has been necessitated in view of the enactment of IBC and it applies with respect to the liquidation of a company under the IBC, Section 327(7) of the Act, 2013 cannot be said to be arbitrary and/or violative of Article 21 of the Constitution of India - SC Visit to Get Source Initiation of CIRP - NCLT admitted the application - NPA - the plea of the Appellant regarding violation of the RBI Guidelines on Priority Sector Landing cannot be allowed to affect the fate of the application filed under Section 7 of the Code. It is for the Appellant to seek necessary remedies, if any and if required against the Respondent No. 1 for violation of Master Circular of RBI regarding Priority Sector Landing at appropriate forum in accordance with the law. - AT Visit to Get Source Service Tax Availing Cenvat Credit on works contract service - Value to be determined under Rule 2A or under Composition Scheme - as per the Scheme of the Act the determination of value of service portion in the execution of the works contract is to be made as per Rule 2A, however with an option to the assessee to avail the benefit of Composition Scheme. Therefore, either the assessee has to go for Composition Scheme or go for Determination of Value as per Rule 2A and the assessee has to pay service tax on the service element and can claim CENVAT Credit on the said amount only. - Credit of duty paid on goods cannot be allowed - SC Visit to Get Source Central Excise Refund of unutilized Cenvat credit - Other than Rule 5 of Cenvat Credit Rules, there is no other provision either in Cenvat Credit Rules, 2004 or in Central Excise Rules, 2002 for giving cash refund of the accumulated Cenvat credit. Even Section 11B of Central Excise Act is only for the refund of duty paid either through cash or through Cenvat credit or for the Cenvat credit wrongly reversed. Hence, this section cannot be invoked in cash refund of the unutilized Cenvat credit lying in the Cenvat account of the manufacturer at the time of closure of the factory. - AT Visit to Get Source Levy of Equal amount of penalty under Section 11AC of the Central Excise Act, 1944 - It can be seen that it was categorically held that since there is no suppression of fact, demand of extended period is not sustainable. The penalty imposed in the impugned order was held to be not warranted accordingly, the same was set aside. - AT Visit to Get Source CENVAT Credit - input service - free warranty services - The service is provided free of cost by the dealers during the warranty period but the appellant makes payment to the dealers for the services they provide to the customers. The repair and maintenance services are, therefore, linked to the sale. The services are, therefore, used indirectly in relation to the manufacture of final products - credit allowed - AT Visit to Get Source Case Laws: GST 2023 (5) TMI 174 Input Tax Credit (ITC) - GST on the supplied items has already been paid by the suppliers - Challenging the validity of Section 16(2)(aa), Section 16(2)(c) of Central Goods and Service Tax Act, 2017 and Rule 36(4) of the Central Goods and Service Tax Rules, 2017 - HELD THAT:- At this stage, learned counsel for the petitioner has submitted that he does not want to press the reliefs prayed for declaring Section 16(2)(aa), 16(2)(c) of the Act of 2017 and Rule 36(4) of the Rules of 2017 as unconstitutional with a further prayer that the writ petition may be disposed of while quashing the impugned order dated 27.12.2021 with a direction to the respondent No.2 to pass a fresh order after providing opportunity of hearing to the petitioner. Since learned counsel for the petitioner is not pressing the reliefs for declaring the provisions of Section 16(2)(aa), 16(2)(c) of the Act of 2017 and Rule 36(4) of the Rules of 2017 as unconstitutional, the order dated 27.12.2021 (Annexure-3) passed by the respondent No.2 is quashed and set aside. The respondent No.2 is directed to pass a fresh order after providing opportunity of hearing to the petitioner. The writ petition is disposed of. 2023 (5) TMI 173 Seeking rectification in summary order - errors apparent on the face of record or not - seeking remand of case so as to avail the petitioner an opportunity of being heard - HELD THAT:- It appears that the petitioner has filed rectification application immediately after the said order on 20.8.2019 invoking the provisions of Section 161 of Goods and Services Tax Act. The said provision permits rectification of errors apparent on the face of the record, according to the petitioner, the discrepancy is only an error apparent which does not amount to illegality. Be as it may. Having considered the totality of facts and upon hearing learned advocates for both the sides, the court finds that the interest of justice would be sub-served if the application for rectification application filed by the petitioner on 20.8.2019 is directed to be decided by the competent authority within a time frame - The competent authority of the respondent is directed to decide the rectification application after opportunity to be given to both the sides, within a period of eight weeks from the date of receipt of the order. Until the rectification application is decided, the impugned order dated 14.8.2019 shall not be enforced, subject to outcome of the decision of the rectification application. Petition disposed off. 2023 (5) TMI 172 Seeking restoration of registration of petitioner - case of Revenue is that petitioner may be relegated before the proper officer/respondent No.3 to offer his reply and if so directed, an appropriate decision would be taken by the proper officer within a stipulated time period - HELD THAT:- Without delving into the merits of the case of the parties, it may, however, be observed that the show-cause notice lacks in any detail of the alleged contravention, i.e. the tax period, the amount of tax or interest unpaid by the petitioner for any definite tax period. However, the petitioner has also stated that on the date fixed, i.e. on 28.02.2023 on his appearance no details have been provided and as such, no adjudication order has been passed on the impugned show-cause notice till date which has caused continuous sufferance of the business of the petitioner since 21.02.2023. It is opined that at the first instance, the petitioner should appear before the proper officer/respondent No.3 with his reply taking all available grounds of fact and law, if any, on 06.05.2023 at 10.30 a.m. The proper officer/respondent No.3 would, on appearance of the petitioner and submission of his reply to the impugned show-cause notice take a decision in accordance with law after giving an opportunity to the petitioner for personal hearing, if any adverse order is to be passed. The writ petition is disposed off. 2023 (5) TMI 171 Refusal to grant any interim order while entertaining the writ petition - short payment of tax - rate of tac - 12% or 18% - assessee did not produce any document before the assessing officer to establish that he was a registered government contractor - delay of 297 days in filing the appeal - HELD THAT:- There is a delay of 297 days in filing the appeal. After extending the benefit of the order passed by the Hon ble Supreme Court, yet there was a delay of 114 days. Obviously, the appellate authority is not empowered to condone the delay beyond a period of three months as there is a statutory embargo in terms of Section 107(1) of the GST Act, 2017. Therefore, the appeal was rightly dismissed. In this situation, it has to be seen as to what remedy the assessee would be entitled to. It is noticed that the assessee had already paid tax at the rate of 12% on the ground that he is a government contractor, but the demand has been raised by computing the tax as 18% for the reason that the assessee did not produce any document before the assessing officer to establish that he was a registered government contractor - the assessee having paid tax at the rate of 12% at the time of filing returns and also paid the 10% of the disputed tax as pre-deposit at the time of filing the appeal, we are of the view that one more opportunity can be granted to the assessee to produce proof to show that he is a registered government contractor. However, this opportunity shall be subject to condition. The appeal and the writ petition are disposed of by setting aside the orders passed by the appellate authority and remanding the matter back to the original authority, namely, the Assistant Commissioner, SGST, Siliguri Charge, Siliguri with a condition that the appellant shall pay a further sum of Rs.1 lakh and upon such payment, the said assessing officer shall consider the documents which the assessee may produce and examine as to whether the assessee was right in computing the tax at 12% and after considering all the documents and affording an opportunity of personal hearing of the assessee, the assessing officer is directed to pass fresh orders on merits and in accordance with law. 2023 (5) TMI 170 Scrutiny of GST Return - Validity of notices calling for explanation of the petitioner with regard to the discrepancies found in respect of the returns - Notices in Form GST ASMT-10 dated 28.02.2023 issued by 2nd respondent under Rule 99 of the A.P. Goods and Service Tax Rules, 2017 r/w Section 61 of the A.P. Goods and Service Tax Act, 2017 Whether the 2nd respondent has no statutory authority to inspect the premises of the petitioner and forward alert note to the 3rd respondent regarding the suppression of sales turnover and other deficiencies and 3rd respondent cannot act upon the said alert note and issue impugned notices dated 28.02.2023 to the petitioner? - HELD THAT:- It is true that when the Chief Commissioner requires the assistance of any other class of officers other than those mentioned in sub-section (1), he may require such assistance and the Government may issue notification in that regard. However, apart from that, the Government with an avowed object constituted V E Department under G.O.Ms.No.269 and assigned certain functions, one of which is to safeguard the revenue due to the Government. In that context, the officers of the said department can share the relevant information with the Commercial Tax Department and assist them without any prior requisition. The powers conferred under G.O.Ms.Nos.269 and 504 are independent and exclusive and they are in aid to the Tax department but not in derogation to Section 72(2) and there is no conflict between the powers and functions of the V E Department and the power of Chief Commissioner to make requisition to the Government under Section 72(2) of the APGST Act. Whether the impugned notices are unsustainable in law for want of authorization from the Proper Officer under Section 67 of the APGST Act and hence liable to be set aside? - HELD THAT:- The 3rd respondent who issued the impugned notices is the Deputy Commissioner (ST) but not the Chief Commissioner. Therefore, in order to issue the impugned notices, the 3rd respondent requires the authorization of the Chief Commissioner assigning the task of issuing notices under Rule 99 r/w Section 61 of the Act. In the impugned notices, neither any reference is made about such authorization nor it was filed separately in the Court - the two impugned notices suffer the vice of lack of authorization by the Proper Officer i.e., Chief Commissioner. Therefore, the impugned notices are liable to be set aside. However, that will not preclude the Chief Commissioner or the officer authorized by him to issue fresh notices under Rule 99 of the APGST Rules r/w Section 61 of the APGST Act. These Writ Petitions are allowed and the impugned notices dated 28.02.2023 are set aside with an observation that the respondent authorities are at liberty to issue fresh notices under Rule 99 of the APGST Rules r/w Section 61 of the APGST Act either through the Chief Commissioner or any other Officer of the State Tax authorized by the Chief Commissioner in that regard. 2023 (5) TMI 169 Alleged short payment of output tax qua supply of construction services - supply of construction services involving the transfer of property in land or undivided interest in land - Applicability of N/N. 11/2017-Central Tax (Rate) dated 28.06.2017 - assessing authority concludes that the Notification does not permit distinguishing of sale of land and supply of construction services and in cases of composite construction, a 70:30 formula is liable to be adopted. HELD THAT:- The Notification dated 28.06.2017 would be applicable only in cases where the assessee is unable to supply the bifurcation of the construction as relatable to construction services or sale of land - The methodology set out under the Notification as relatable to construction services, is for bifurcation of the total consideration by way of a deeming fiction, to arrive at the deemed amount attributable to construction services and land costs. The deeming fiction would not apply in cases where the assessee is in a position to supply the actual amount of the consideration received towards construction services and land cost. In the present case, it is its consistent stand that such evidences are available with it, though, as learned Standing Counsel points out, such particulars do not appear to have been actually produced before the authority. The officer could well have sought such particulars instead of proceeding on the basis that the Notification would be applicable in all cases of property development as he has done - in an event where the officer is of the view that the attribution adopted by an assessee is unsupported by hard evidences or the documents produced do not satisfies him that the attribution has been made in an appropriate manner commensurate with business practices and costs in that particular area, he is alway at liberty to seek more particulars or to apply the deeming fiction as per the Notification, rejecting the attribution made by the assessee. However, pending writ petitions, returns have been filed by the petitioners and my attention is thus drawn to Notification No.6 of 2023 dated 31.03.2023, which is a beneficial notification providing that if returns were filed on or before 30.06.2023, orders of assessment passed under Section 62(1) shall be deemed to have been withdrawn - Petition allowed. 2023 (5) TMI 168 Rejection of appeal - writ petition is being entertained only because the Second Appellate Tribunal has not yet been constituted - contravention to sub-sections (1) (4) of Section 107 of the GST Act - HELD THAT:- Issue notice to the opposite parties. Since Mr. Sunil Mishra, learned Addl. Standing counsel for the Department accepts notice for the Opposite parties, let required number of copies of the writ petition be served on him within three working days. Reply be filed within two weeks and rejoinder thereto, if any, be filed before the next date - Since the petitioner wants to avail the remedy under the provisions of law by approaching 2nd appellate tribunal, which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of fifteen days from today, the rest of the demand shall remain stayed during the pendency of the writ petition. Application disposed off. 2023 (5) TMI 167 Denial of ITC - R1 accepted the genuineness of transaction - R3 observed that, Input Tax Credit (ITC) had been availed allegedly, fraudulently - Rule 86A of the Tamil Nadu Goods and Services Tax Rules, 2017 - HELD THAT:- True, R3 ought to have made reference to order of R1 dated 16.07.2021 and undoubtedly, this is a flaw in the assessment order. However, it is not a fatal flaw. The power of an assessing officer under Section 73/74 is wide and proceedings for assessment may be initiated in any circumstance where it appears to the proper officer that the claim of ITC by an assessee is incorrect - The mere fact that an order has been passed under Rule 86A(2) will not stand in the way of the assessing officer making an assessment or curtailing his powers in any way, in such an exercise. Since the question of 'movement of goods' is one of the fact and the impugned order proceeds on the basis that the facts required to adjudicate this aspect were not provided by the petitioner, the impugned order is confirmed. This writ petition is dismissed. Income Tax 2023 (5) TMI 166 Validity of assessment order - Shorter period to reply to SCN - violation of principles of natural justice - The adjournment application submitted by the petitioner on 25.03.2023 in the portal was rejected on the ground that time for completion of assessment is barred on 31.03.2023. - HELD THAT:- Admittedly, the second show cause notice was issued to the petitioner on 27.03.2023 at 19.10.33 p.m. and the petitioner was given time to reply till 9.00a.m. on 28.03.2023, which is clear violation of principles of natural justice. The impugned order passed by the first respondent is set aside and the matter is remanded back to the respondents for fresh consideration. Respondents shall pass appropriate orders, within a period of four weeks from the date of receipt of a copy of this order. WP allowed. 2023 (5) TMI 165 Reopening of assessment - power u/s 148A invoked - Assessee raised fake invoices in executing circular transactions - petitioner argued that reopening of the assessment in respect of assessment year 2018- 2019 is illegal, without jurisdiction and void ab initio - HELD THAT:- The authority recorded that as the petitioner-assessee has not produced any satisfactory documentary evidence in support of executing the sub-contracts made between the petitioner M/s. Chetak Enterprises Limited and M/s. APCO Infratech Private Limited, the assessee having also failed to produce bills and vouchers with regard to transactions with M/s. APCO Infotech Private Limited, a case of reopening of assessment is made out. We, thus, find that the material information collected by the respondent was made a basis to arrive at the reason to believe that the petitioner is engaged in raising fake invoices in executing circular transactions with M/s. APCO Infratech Private Limited. On such detailed consideration that income chargeable to tax to the tune of Rs.75 crores has escaped assessment for the assessment year 2018-2019, within the meaning of Section 147 of the Act, the authority considered the present case to be a fit case for issuance of notice under Section 148 of the Act for the assessment year 2018-2019. In the present case, the petitioner was given due opportunity of hearing by giving notice under Section 148A(b) of the Act, to which he gave a detailed reply and thereafter detailed order under Section 148A(d) has been passed. Recently, a Division Bench of this Court in the case of Laxmi Meena vs. Union of India Ors. [ 2023 (2) TMI 1134 - RAJASTHAN HIGH COURT] held that in the matter of challenge to order passed u/s 148A followed by issuing notice u/s148 of the Act, the petitioner had not alleged any procedural impropriety, irregularity or violation of statutory provisions in the matter of initiation of proceedings or passing of any order under Section 148A(d) - Division Bench taking into consideration the settled legal position, dismissed the petition giving liberty to the writ petitioner to avail the remedy in the proceedings subsequent to notice under Section 148 of the Act. Thus no case is made out for interference at this stage. The writ petition is, therefore, dismissed, however, reserving liberty to the petitioner to raise all the objections at the subsequent stages after issuance of notice under Section 148 of the Act and re-assessment proceedings. 2023 (5) TMI 164 Addition u/s. 56(2)(viib) - method of determination of fair market value of unquoted shares - Premium received in respect of the issue of shares - AO valued the share of the company using Net Asset Value Method both under asset approach as well as under liability approach - AO determined the fair market value of the share of the assessee company @Rs.14 as against the issue price of 17.50 per share, hence the excess portion as added by the ld. AO as income u/s. 56(2)(viib) HELD THAT:- Rule 11UA of the Income Tax Rules which prescribes the method of determination of fair market value of unquoted shares does not prohibit inclusion of share premium as part of reserves and surplus. Even if the recipient company does not justify receipt of share premium, still the fact of share premium being reflected in the balance sheet cannot be ignored by the ld. AO as the taxation of the same is only by way of deeming fiction. Share premium would be included in the reserves and surplus even as per Rule 11UA of Income Tax Rules. While this is so, it is completely wrong on the part of the ld. AO to ignore the same while valuing the shares of the assessee company both under liability approach and considering the same as a liability under asset approach . Accordingly, the value determined by the ld. AO is totally flawed and since no mistake is found by us in the valuation adopted by the assessee, we hold that addition made by the ld. AO would have no legs to stand. In any case, NAV method adopted by the assessee is one of the recognized methods provided in rule 11UA of the Rules. Addition made by the ld. AO u/s. 56(2)(viib) of the Act, is hereby directed to be deleted. Ground raised by the assessee are allowed. 2023 (5) TMI 163 Penalty u/s 271D - penalty order as passed on the deceased person - HELD THAT:-As per section 159(2) of the Act, mere initiation of penalty proceeding correctly is not sufficient, but it ought to have been completed also in accordance with the said provisions. Any proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of death of the deceased. Therefore, when the penalty order was passed in the name of the assessee, he had already died. Hence, the penalty order is invalid. Decided in favour of assessee. 2023 (5) TMI 162 Non Granting the refund of TDS credit - TDS which was not claimed in the return of income - application u/s 119(2)(b) rejected before the ld. PCIT-for allowing the belated claim of refund of the TDS as case of the assessee was not covered under the provision of section 119(2)(b) - HELD THAT:- The income of the assessee should not be over assessed even if there is a mistake of the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. As decided in the case of Vareli textile industry [ 2006 (2) TMI 102 - GUJARAT HIGH COURT] . The onus is greater. One of the propositions of settled legal position is to ensure that a meritorious case is not thrown out on the ground of limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits. Thus we note that the assessee should not be deprived of the benefit of the TDS credit which was inadvertently not claimed in the return of income. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to allow the benefit of the TDS credit as per the provisions of law. Hence the ground of appeal of the assessee is allowed. 2023 (5) TMI 161 Deduction u/s 80P - interest derived from deposits made in various cooperative other banks during the course of scrutiny - HELD THAT:- We find merit in assessee s arguments in light of this tribunal s recent order in Lokmangal Nagri Sahakari Path Sanstha Maryadit, Solapur [ 2022 (12) TMI 355 - ITAT PUNE ] wherein as admittedly held that the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited [ 2021 (12) TMI 1259 - ITAT PUNE ] Decided in favour of assessee. 2023 (5) TMI 160 Rectification proceedings u/s 154 - raising interest demand u/s 234A - Whether defective return filled by assessee? - HELD THAT:- This tribunal s recent coordinate bench s order in assessee s co-owner Mrs. Sawari Sameer Shinde, Pune vs. ITO [ 2023 (3) TMI 922 - ITAT PUNE] rejected the Revenue s very contentions assessee s above as former return could not have been treated as a defective one so as to trigger applicability of sec.234A interest herein levied in sec.154 rectification proceedings in issue. Both the learned lower authorities action to this effect stands reversed therefore. The assessee s arguments stands accepted in very terms. Applicability of sec.139(9) Explanation (c) (i) still gets attracted in the instant case since the taxpayer before us namely Shri Siddhant Machindra Mhaske had nowhere claimed to have paid self-assessment tax at the time of his earlier return. We thus reject Revenue s arguments supporting both the learned lower authorities identical action raising sec.234A interest demand - Decided in favour of assessee. 2023 (5) TMI 159 Late fee u/s 234E levied for F.Y. 2014-15 - intimation u/s 200A - HELD THAT:- Respectfully following the above decision of MEDICAL SUPERINTENDENT RURAL HOSPITAL DODI BK AND JUNAGADE HEALTHCARE PVT. LTD [ 2018 (10) TMI 1587 - ITAT PUNE] , we hold that levy of late fee u/s. 234E of the Act for Q-4 of F.Y. 2014-15 is bad in law as it is prior to 01/06/2015. Therefore, the Assessing Officer is directed to delete the said late fee. Accordingly, the appeals of the assessee are allowed. 2023 (5) TMI 158 Maharashtra State Board of Technical Education - state or Body Corporate - Whether be treated as State as immune from taxation as provided under Article 289(1) of the Constitution? - Revenue contended that the alleged receipts of payments are not related to imparting education and the same will not be covered under the objectives of the Board and the surplus amount of the Board was through commercial activity - as per revenue he assessee board will not come under the purview of state and was only a Body Corporate which will come under the purview of artificial juridical person - HELD THAT:- The objectives of the assessee board are evident to categories it to be a state under Article 12 of the Constitution of India and also from the criteria laid down by the Hon'ble Supreme Court SOM PRAKASH REKHI VERSUS UNION OF INDIA [ 1980 (11) TMI 113 - SUPREME COURT] no doubt assessee would fall within the term state when the assessee is controlled by either the Central or State Government completely then they become instrumentality of the Government. As there has been a consistent view on this, we find no justification to hold it otherwise when there are no changes in facts. We are inclined to hold the assessee within the meaning of state under Article 12 of the Constitution of India and, hence, will have the benefit of immunity from taxation of its income under the provision of Income Tax Act. We find no infirmity in the order of the ld. CIT(A) and, hence, the appeal filed by the Revenue is dismissed. 2023 (5) TMI 157 TDS u/s 195 - Payment chargeable to tax in India or not DTAA with USA - Payment made to non-residents u/s 40(a)(i) - DRP held that the services provided by the non-residents were received and utilised by the assessee in connection with its business operations in India - AR submitted that the payment made to the non-residents in lieu of the services rendered by them is not chargeable to tax in India and therefore, no TDS was deducted u/s 195 - HELD THAT:- We are of the considered opinion that for disallowance u/s 40(a)(i) of the Act the AO has to establish that the sums remitted outside India come within the purview of interest, Royalty, Fees for Technical Services or other sums chargeable under this Act, which exercise in the present case has not been undertaken by the any of the lower authorities. We find that in GE India Technology Centre Private Ltd [ 2010 (9) TMI 7 - SUPREME COURT ] remitted the case to the Hon ble High Court for de novo consideration on merits and fresh adjudication on the issue of whether the amount paid give rise to any income taxable in India. Thus, in view of the aforesaid findings, we deem it appropriate to remand the matter to the file of the AO to decide whether the payment made by the assessee to the aforesaid non-resident entities is taxable in India. It is only thereafter the issue of deduction of tax at source under section 195 of the Act and disallowance under section 40(a)(i) of the Act arises. Decided in favour of assessee for statistical purposes. Short grant of credit of TDS - This issue is restored to the file of the AO with the direction to grant TDS credit, in accordance with the law, after conducting the necessary verification 2023 (5) TMI 156 TP Adjustment on account of management service charges paid by the assessee to its AE - assessee benchmarked the transactions on aggregate basis by applying TNMM method - HELD THAT:- We concur with the observations of Ld. TPO that unless the transactions are closely linked to each other and the same belong to particular class of transactions, aggregation approach could be discarded and the transactions could be benchmarked separately. It could also be seen that the assessee has applied TNMM method for certain transactions, CUP method for another set of transactions and other method for certain transactions. The same would show that all the transactions have not been benchmarked under one method by the assessee himself rather the assessee has applied more than one method to benchmark the various transactions in its TP study report. Therefore, Ld. TPO was quite justified in rejecting the aggregation approach and proceed to bench-mark the impugned transactions separately under CUP method. No fault could be found in the impugned order, to that extent. The corresponding grounds raised by the assessee stand rejected. Complete onus, in this regard, was on assessee to demonstrate that the actual services were rendered and received by it. The assessee, in our opinion, has failed to demonstrate the same. In such a scenario, the determination of ALP by Ld. TPO as Nil could not be faulted with. On the given facts, Ld. TPO would be left with no option but to determine the ALP as Nil since in the absence of receipt of services, there would be no necessity for the assessee to pay for such services and the question of application of any prescribed method to determine the ALP would not arise at all. Assessee has failed to establish the receipt of the services which would justify revenue s stand that there was no need for the assessee to pay for such services. Case to be followed Akzo Noble India Ltd. [ 2022 (2) TMI 1301 - ITAT DELHI ] - Decided against assessee. Deduction u/s 80IB(4) - manufacturing activity or not - profit earned out of Jammu Kashmir Unit - claim denied as there was no transformation of the object. The raw material as well as finished product was flavors only. The assessee only adds certain chemicals to maintain longevity of the product and also to give some taste but there is no transformation of raw material into an entirely new and distinct product - HELD THAT:- As upon perusal of assessment order, we find that the whole case of revenue is that the activity carried out by the assessee would not amount to manufacture. We are of the considered opinion that the deduction could not be denied merely on the basis of suspicion without rendering any concrete finding in the assessment order. The plea that there was no research and development expenditure at Jammu Unit has no relevance in the context of present case since carrying out research activities is not essential ingredient of manufacturing. The finding of DRP that the essential elements giving rise to various flavours were produced outside Jammu units in places like Chennai and Chittoor and their ingredients are mixed or blended in Jammu unit based on the requirement of the customer and the same were not prepared directly but purchased by the assessee, would also not be of much relevance since nowhere it is a condition that the raw material should also be produced by the assessee before it could be said to be engaged in manufacturing. The assessee is mixing various raw materials to manufacture different commodity which fall under separate excise tariff heading. - Decided in favour of assessee. Depreciation on UPS - higher depreciation of 60% on uninterrupted power supply (UPS) equipment - HELD THAT:- We are of the opinion that UPS, if used along with computer system, would be integral part of computer system and would be eligible for same rate of depreciation as applicable to that block. If the UPS are used otherwise, the rate as applicable to electrical installations would apply. AO is directed to rework the same accordingly. The corresponding grounds stand allowed for statistical purposes. Depreciation on electrical installation - assessee claimed depreciation on electrical installations @15% - Treating the same as electrical fittings, Ld. AO allowed depreciation of 10% and added the differential depreciation of Rs.0.05 Lacs to the income of the assessee - HELD THAT:- We are of the view that electrical installations are part of electrical fittings and do not constitute Plant Machinery. Therefore, the corresponding grounds raised by the assessee stand dismissed. 2023 (5) TMI 155 TP Adjustment - international transaction of payment of management fee - TPO to disregard TNMM employed by the assessee - whether services are received as claimed and consequent benefits availed by the assessee from these services and the rate at which uncontrolled parties would have transacted for similar nature of services following CUP method? - HELD THAT:- Benefit test does not have too much relevance in the arm's length price ascertainment. When evaluating the ALP of a service, it is wholly irrelevant as to whether the assessee benefits from it or not; the real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. Assessee has benchmarked the transaction on TNMM basis, and unless the revenue authorities can demonstrate that some other method of ascertaining the arm's length price on the facts of this case will be more appropriate method of ascertaining the arm's length price, the TNMM cannot be discarded. Assessee has established the arm's length nature of the management fee transaction by benchmarking its OP/OC by taking TNMM as the MAM against average industry mark-up of eight independent comparable companies. On this benchmarking exercise of the assessee duly furnished before the ld. TPO, he has not pointed out any defect in the said benchmarking exercise forming part of the Transfer Pricing document. TPO resorted to CUP method without applying the process of arriving at the same as the most appropriate method by showing any independent comparable transaction in order to apply CUP. As per the Rule 10B(1)(a), while applying the CUP Method, as a starting point, price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, has to be identified. TPO has not identified any such similar transactions while resorting to CUP method. We do not ascribe to such an adhoc approach adopted by the ld. TPO in the present case which is not in accordance with the prescribed regulations. No justification by the ld. TPO has been provided based on comparable data analysis to discard the TNMM arrived at by the assessee as MAM for benchmarking its international transaction with AE and adopt CUP method based on comparable data. One of the very basic pre-conditions for use of CUP method is availability of the price of the same product and service in uncontrolled conditions. In the absence of prerequisites for application of CUP method, it was not open for the ld. TPO to disregard TNMM employed by the assessee as MAM. No defects have been pointed out in application or relevance of TNMM in this case. Under these circumstances, impugned action of ld. TPO does not meet our judicial approval. As also noted that management fee expense @ 2.5% of Gross Operating Revenue paid by the assessee to AHEL under the same tripartite agreement has been accepted by the Department during the year for the similar nature of services received from AHEL - As also on record that claim of management fee expenses has been accepted by the Department and no addition has been made for the same in AY 2014-15 and AY 2015-16. On the requirement by the ld. TPO of brand valuation report, we note that it is of no consequence in arriving at the ALP of international transaction entered into by the assessee, hence irrelevant. No reason to interfere with the finding given by the ld. CIT(A) and uphold the arm s length price determination of the brand/management fee expenses paid by the assessee to its AE, GMSPL under the provisions of section 92CA of the Act and delete the addition/disallowance so made by the ld. AO in this respect. Accordingly, grounds taken by the Department in this respect are dismissed. Disallowance u/s 14A - HELD THAT:- CIT(A) has deleted the disallowance by taking note of fact that investments made by the assessee are such which do not yield exempt income as assessee had invested in debt mutual funds. More so, the income so earned on these investments had already been offered to tax by the assessee which was accepted in the assessment. There is no exempt income earned by the assessee during the year. Thus finding given by the ld. CIT(A) on which nothing was brought on record to controvert the same by the ld. CIT(DR) in the course of hearing before us, we do not find any reason to interfere with the same - Decided against revenue. 2023 (5) TMI 154 Rectification of mistake - scope of section 254(2) - rectification of mistake apparent from record itself or rectification in error of judgment - Misc. application filed against another Misc. application - HELD THAT:- We find that on identical facts and circumstances and issues, the Pune Tribunal in the case of Mercedes Benz Education Academy, Pune [ 2019 (5) TMI 1976 - ITAT PUNE] has categorically held that there is no provision in the Act to allow filing of Misc. application against the order passed by the Tribunal in another Misc. application. Thus Misc. application cannot be filed against another Misc. application and the Tribunal has no power to adjudicate upon subsequent application u/s 254(2) of the Act. In view of the aforestated discussion, we find no force in the Misc. application filed by the Revenue which is rejected and dismissed. 2023 (5) TMI 153 Short credit of TDS - HELD THAT:- We direct the ld AO to grant credit to the assessee of prepaid taxes in accordance with the law. MAT computation u/s 115JB on disallowance u/s 14A - HELD THAT:- Increase of book profit by the addition u/s 14 A of the Act is not correct, hence ld AO is directed to delete it. See J.J. GLASTRONICS PVT. LTD., [ 2022 (4) TMI 1187 - KARNATAKA HIGH COURT] TP Adjustment - corporate guarantee given to its associated enterprises - international transaction or not? - whether it does not affect the profit/loss or assets of liabilities of the company? - Claim of the assessee is that provision of corporate guarantee to the associated concerns is not an international transaction and further it is a shareholder activity and therefore, assessee is not required to be remunerated - HELD THAT:- We find that the first argument that Corporate Guarantee is not an international Transaction is no more valid in view of the decision of Honourable Madras High court in case of PCIT V Redington [ 2020 (12) TMI 516 - MADRAS HIGH COURT] - Argument of AR that corporate guarantee issued by the assessee to its associated enterprises is not an international transaction is not acceptable. Issuance of the corporate guarantee in favor of subsidiary - To be treated as a shareholders' activity or not - non-charging of corporate guarantee commission - Guarantee was issued for the business of the fellow subsidiary. Further when Guarantee is covered in clause 92B (2)(1)(C) specifically and it is a capital financing transaction specifically included there in, it is unnecessary to stretch it to bring in to clause (d) of ' Provision of services'. Immediate benefit to subsidiary is demonstrated by the assessee as well as ld TPO by showing substantial interest savings due to guarantee which both the parties accrued that to both the contracting parties. AR heavily relied on decision of Coordinate bench [ 2015 (12) TMI 143 - ITAT AHMEDABAD] for AY 2006-07. However, he could not show us a single paragraph on facts to show that what are the compelling factors existing to call it as shareholders' activity. Not every transaction with a subsidiary can be called a shareholder's activity unless reasons are demonstrated with credible facts. Thus, we reject the argument that it is a shareholder's activity. Therefore, this argument is also rejected. Quantum of the guarantee commission - Whether Guarantee commission upheld by the learned Dispute Resolution Panel at the rate of 0.5% is not correct? - We uphold the benchmarking of the assessee of the guarantee commission based on yield approach, which is derived after the proper credit rating of associated enterprises, on Deals Scan database, determining the appropriate interest saving and thereafter attributing it between the two parties. It is also to be noted that the arm's-length price of the guarantee commission by yield method would be the maximum rate. Therefore, we uphold the alternative benchmarking provided by the assessee of the guarantee commission at the rate of 0.35%. Accordingly, ground number 1 of the appeal is partly allowed. Disallowance u/s 14 A - manadation of earning exempt income - HELD THAT:- As assessee has not earned any exempt income during the year, the disallowance under section 14 A of the act is not warranted. We find that this issue is squarely covered in favour of the assessee by the decision of the honourable [ 2022 (7) TMI 1093 - DELHI HIGH COURT] wherein it has been held that the explanation inserted in section 14 A of the act by the finance act 2022 with effect from 1/4/2022 is prospective in nature. Accordingly, ground number 2 of the appeal of the assessee is allowed and the learned AO is directed to delete the disallowance under section 14 A the act. Nature of expenses - foreign exchange gain incurred on purchase of material claimed by the assessee - revenue or capital expenditure - HELD THAT:- The foreign exchange gain or loss arising on settlement of dues of sundry creditors does not have any correlation with the cost of inventory or putting 88 the present location. Hence, it is not required to be included in the cost of project/cost of inventory. The accounting treatment of the assessee is supported by the authoritative pronouncement of the Institute of chartered accountants of India as well as the Ministry of corporate affairs. No substance in the findings of the lower authority that foreign exchange loss on purchase of material should be included in the cost of project. Accordingly, the foreign exchange loss incurred by the assessee is revenue expenditure and cannot be included in the cost of project. Accordingly, we allow ground of the appeal of the assessee. Addition by invoking the provisions of section 43CA - difference between the sale consideration and stamp duty value is merely 0.43% - HELD THAT:- The difference between the stamp duty value of a stock in trade and the transaction value covered by the provisions of section 43CA is less than 10% even prior to 1/4/2021, does not warrant any addition in the hands of the assessee. Accordingly, we direct the learned assessing officer to delete the addition made under section 43CA of the act. Ground number 4 of the appeal of the assessee is allowed. TDS u/s 195 - disallowance u/s 40 (a) (i) - amount paid to non-resident without deduction of the tax - contention of the assessee of applicability of article 12 of the India Singapore double taxation avoidance agreement only if the technical knowledge, experience, skill, know-how or process is made available to the non-resident - HELD THAT:- The claim of the revenue is that those services fall under article 12 (4) (b) and it has been made available to the assessee, which is unfounded, we hold that the services do not satisfy the make available condition and therefore are not chargeable to tax as per the double taxation avoidance agreement. Thus, assessee was not obliged to deduct tax at source on such payment. Consequently, no disallowance can be made u/s 40 (a) (i) of the act. In the result we direct the AO to delete the disallowance. Disallowance of loan processing fee - HELD THAT:- As respectfully following the decision of CALICO DYEING AND PRINTING WORKS [ 1958 (3) TMI 59 - BOMBAY HIGH COURT] we direct the learned assessing officer to allow the deduction of loan processing fee as expenditure allowable under section 36 (1) (iii) of the act. Addition u/s 43CA - sale consideration declared by the assessee with respect to its stock in trade is less than the amount of stamp duty value of those properties - HELD THAT:- For the reasons given by us in ground number 4 of the appeal for assessment year 2017-18, we direct the learned assessing officer to compute the disallowance afresh after granting the benefit of tolerance band of 10% to the assessee for this year. Provisions of section 50C(2)/ (3) Applicability for determination of the value adopted or assessed or assessable u/s. 43CA(1) - We do not find any justification for rejecting the claim of the assessee by holding that the assessee failed to substantiate that valuation of stamp duty authority is not challenged/disputed. It is not the duty of the assessee. The duty of the assessee to make a claim as per 50 C (2) (a) of the act before the AO that stamp duty valuation exceeds the fair market value of the property. For fair market value, assessee has given the reasons, substantiated it with a valuation report and raised a specific claim before the AO to refer the matter to the valuation cell. Accordingly, we do not find any justification in the direction of the learned dispute resolution panel. In fact the learned DRP should have directed the learned AO to refer the matter to the valuation cell in terms of provisions of section 43CA (2) read with section 50 C (2) of the act. Apparently, the learned AO has failed to carry out the mandate of the law of referring valuation of those properties to the valuation cell for valuing those properties. Thus where the law mandates the learned assessing officer to do the things in a particular manner, if he fails to do so as per the provisions of the law, we do not have any other alternative but to delete the addition. Such a view has been taken even in case of violation of procedures; we are dealing with the substantive addition in the hands of the assessee. Grant of minimum alternative tax credit to the assessee of merged entities - Whether there is any provision in the act itself to grant any such credit under section 115JAA? - HELD THAT:- When the effective date of merger is 1/4/2017 whereby 11 companies merged with the assessee company by the order of the National company law Tribunal. We direct the learned assessing officer to allow the minimum alternative tax credit available in the hence of those 11 companies to the assessee after proper verification. Accordingly, ground number 7 of the appeal is allowed. Short granting of tax deduction at source credit including the tax credit of merged entities - HELD THAT:- We direct the learned assessing officer to grant credit of such sort deduction of tax at source of the assessee as well as of merged entities after proper examination. 2023 (5) TMI 152 Penalty u/s 271(1)(C) - addition of GP rate on bogus purchases - Addition on certain information received from Sales Tax authorities that assessee had made purchases from various suspicious parties - HELD THAT:- We find that the assessee had filed all the details of purchases and corresponding sales had not been doubted. The sources of purchases are from the books and overall trading results have been accepted. Only allegation is that assessee has taken accommodation bills for the purchase of items to suppress the profits. Once, the addition has been made on adhoc and estimate which has been reduced by the Tribunal, then it cannot be held that there is any concealment of income so as to warrant any penalty u/s 271(1)(c), Accordingly, on merits the penalty is deleted. Decided in favour of assessee. 2023 (5) TMI 151 Denial of foreign tax credit - assessee has not filed a statement in Form-67 on or before the due date specified for filing the return of income u/s. 139(1) - Extension of due date for filling returns due to COVID outbreak - AR argued that the assessee filed its original return of income on 15/2/2021 which is the extended due date allowed by the Central Board of Direct Taxes [CBDT] due to Covid-19 - HELD THAT:- Admittedly, the foreign tax credit is claimed by the assessee by filing the statement in Form-67 on 31/3/2021. We find that as argued by the Ld. AR, THE TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISIONS) ACT, 2020 allows any statement to be filed on or before 31/3/2021. As per Sl.No.4(b) of the Press Release for extension of time limits dated 30/12/2020, the period has been extended for filing the return of income upto 15/2/2021. We therefore find that the assessee has rightly filed the return of income on or before the due date for filing the return of income and also the statement in Form-67 within the extended due date of 31/3/2021. As in the present case the assessee has filed the return of income and the statement in Form-67 within the respective due dates as extended by the Ministry of Finance, Government of India. We are therefore of the considered view that the foreign tax credit shall be allowed to the assessee. Decided in favour of assessee. 2023 (5) TMI 150 Reopening of assessment u/s 147 - Cash deposited in the bank account - HELD THAT:- Only information in the possession of the AO for assuming jurisdiction to reopen the case of the assessee was that of cash deposited in the bank account of the assessee, and this information has been held in various decisions of the ITAT cited by assessee before us, is not sufficient for formation of belief of escapement of income. There is no information on record that on receipt of this information by the AO any inquiry or investigation was conducted by him so as to gather information regarding source of cash deposits either from the assessee or from any other source. In the absence of the same, mere information of cash deposits could not have lead to formation of belief of escapement of income. The issue is squarely covered by the decision of the ITAT in the cases Mariyam Ismail Rajwani and Bir Bahadur Singh Sijwali [ 2016 (8) TMI 1472 - ITAT AHMEDABAD] We hold that jurisdiction assumed by the AO to reopen the case of the assessee was not in accordance with law in the absence of formation of belief of escapement of income by the AO. The assessment order so framed is therefore not sustainable in law, and is set aside as invalid. Appeal of assessee allowed. Customs 2023 (5) TMI 149 Smuggling - two gold chains and two gold bars - concealing in the shoes - baggage rules - Absolute Confiscation - HELD THAT:- The confiscation of goods is dealt with in Chapter-XIV of the Customs Act. Section 125 deals with an option to pay fine in lieu of confiscation. Under section 125 whenever confiscation of any goods is authorized under the Act, the Adjudicating Authority may give to the owner of the goods an option to pay in lieu of confiscation such fine as the Adjudicating Authority thinks fit. There is, therefore, a discretion vested in the Adjudicating Authority whether to adopt this course of action or not. The Additional Commissioner acting on first instance had exercised the discretion not to give the option to the Petitioner and reasons in support of use of this discretion recorded found in the order-in-original. The Additional Commissioner referred to inconsistent submissions and the fact that there is serious doubt about the ownership of the goods and held that the manner in which the incident has occurred gives rise to strong impression that the Petitioner was carrying goods for monetary consideration. On this grounds, the Additional Commissioner refused to give option of redemption of goods to the Petitioner. The Revisional Authority has done an analysis of facts and found that the quantity is large, it was consciously concealed which revealed the intention of the Petitioner and considering the overall circumstances, the Revisional Authority restored the order-in-original of absolute confiscation of goods and penalty. The parameters of the writ jurisdiction should be kept mindful. The petition arises from use of discretion. The Revisional Authority has considered all the facts necessary for exercise of discretion. All relevant facts have been taken into consideration. Judicial precedents are analysed and tests therein are applied. Petition dismissed. 2023 (5) TMI 148 Change of classification of the goods imported by the appellant - Paddle of canoes - to be classified under the heading 95062900 or under the heading 95062900/heading 68151090 - HELD THAT:- The appellant have imported paddles of canoes made of carbon fibres. Canoes are classifiable under heading 89039910. Chapter note 1(p) of Chapter 95 excludes means of propulsion from Chapter 95 and puts it in chapter 44, if they are made of wood. Chapter Note 1(p) to Chapter 44 excludes toys, games, sports requisites from chapter 44 and places them in chapter 95 - Combined reading of Chapter 1(p) of Chapter 95 and 1(p) of Chapter 44 clearly implies that means of propulsions of sports crafts such as canoes and skiffs would be excluded from Chapter 95 and would fall under the Chapter relevant to the material of which the same are made of. It also becomes apparent that the paddles (means of propulsion) do not get covered by the description toys, games and sports requisites appearing in above mentions Chapter Notes. The goods are correctly classifiable under Chapter Heading 68151090 - Appeal dismissed. 2023 (5) TMI 147 Smuggling - recovery of Gold - foreign origin - illegally imported into Indian Territory or not - invocation of burden to prove u/s 123 of the Customs Act, 1962 - Confiscation - penalty Whether Section 123 of the Customs Act, 1962 is invocable in the given set of circumstances? - HELD THAT:- The burden of proof shifts under Section 123, when (a) there must be goods to which the section appliers; (b) the goods must have been seized; and (c) the seizure must be under a reasonable belief that they are smuggled goods. Reverting to the facts of the present case, it is observed that at the time of interception and preparing of Panchanama about recovery of gold from Shri Gudipati Subba Reddy and Shri Pathan Jaffar Sadik, they both in their statement as was recorded under Section 108 of Customs Act, 1962, admitted that the gold in their possession was actually a gold of foreign origin, however, it got remelted for erasing the foreign markings but 99.9% purity mark was still got embossed thereupon. They also admitted to have no documents for proving that they were legally possessing that quantity of gold in several number of uneven pieces. These particular admissions, are sufficient to invoke the theory of reverse burden of proof i.e. the burden of proof that the gold recovered is not the smuggled on lies upon Gudipati Subba Reddy and Pathan Jaffar Sadik in terms of Section 123 of Customs Act, 1962. The statement got recorded by customs officer is the material piece of evidence which can be used as substantive evidence connecting the deponent with the contravention of the customs act - there are no reason to reject the statement of both the appellants from whose possession the gold in question was recovered about admitting the gold to be a foreign origin - the findings arrived at by the adjudicating authorities below that Section 123 Customs Act, 1962 has rightly been invoked, is accepted - thus it is held that Section 123 of the Customs Act, 1962 has rightly been invoked by the department. Whether the gold recovered in question was actually the gold of foreign origin illegally imported into Indian Territory and thus is liable for confiscation? - HELD THAT:- There appears no evidence to prove the gold recovered from Shri Gudipati Subba Reddy is the gold which got melted by Shri Shaik Imtiyaz. This observation receives corroboration from the statement of Shri Shaik Imtiyaz that shape of remelted gold given to Shri Gudipati Subba Reddy was always used to be uniform in one shape and the pieces were never used to be uneven broken or cut. He even stated that he cannot remember that he had melted a large quantity as that of 2000 grams of gold on 06.10.2020. Similarly Shri Jadhav Duryodhan also acknowledged melting gold for Shri Pathan Jaffar Sadik but he also has emphasized that he always used to return the melted gold into one piece of uniform shape instead of those being into several pieces of cut and uneven shape - Apparently and admittedly the gold recovered from the possession of Shri Gudipati Subba Reddy was in the form of two gold bars and six small uneven and cut pieces and the one recovered from Shri Pathan Jaffar Sadik was in the shape of one bar and three small uneven cut pieces of gold. These observations are sufficient for me to hold that even the retracted version receives no cogent proof rather it is highly insufficient to prove that the recovered gold was actually of Indian origin or was being traded by legal means. The only document which has come up on record is in the form of two invoices, one issued by M/s. Penava Gold and another from M/s. Badradri Bullion Jewelers. But the description of gold in those invoices does not match to the description of the gold recovered - Perusal thereof shows that each piece has some embossed inscription as contrary to the statement of the appellants that the impugned gold was FT gold out of old ornaments. None of the statement recorded during investigation has any explanation about those embossed inscriptions on the recovered gold pieces. Nor there is any evidence to justify the 999 purity marka thereupon. The gold of Indian origin is generally of 916 purity (22 carat). Bureau of Indian standards has certified BIS 916 22 carat, BIS 958 23 carat, BIS 750 18 carat, the 999 quality is the 24 carat gold. It is 22 carat gold which is used in ornaments. Hence for India, the most popular quality of gold is BIS 916 instead of 999. Admittedly the recovered gold was of 999 quality. Apparently the melters of the gold have acknowledged that FT gold that is the gold received after melting the ornaments is generally of 95 to 99.5 purity. One of the melter has apparently gone to the extent of admitting that FT gold can never have 999 purity. None of the appellants have placed on record any evidence showing as to how the gold recovered from them was having 999 purity - there are no reason to differ with the findings of the adjudicating authority below that all the appellants had full knowledge of the impugned gold to be the gold of foreign origin and knowingly they were dealing with the same for monetary benefits. Their act gets definitely covered under Section 111 of the Act making the recovered gold liable for confiscation. It is accordingly held that confiscation of recovered/seized gold is rightly ordered. Whether appellants are liable for penalty? - HELD THAT:- It is clear that the appellants in this case had acquired possession of such gold which they could not prove to be of India origin. There has been no denial that they were purchasing the gold at the cheaper rate which rather corroborates that they were in possession of smuggled gold. Section 112(b) of the Act is wide enough to penalise even a person acquiring possession or in anyway dealing with the goods which he knows or has reason to believe are liable for confiscation under Section 111. Thus it is held that the appellants had rendered them liable for imposition of penalty. Three of the questions of adjudication as framed earlier stands decided in favour of the Revenue and against the appellant - Appeal dismissed. 2023 (5) TMI 146 Interpretation of statute - Section 2(26) of Customs Act - Scope of the term Importer - High Sea Sale - Adjudicating authority treated the appellant neither the importer not the owner - Exemption on items of Machinery apparatus required for setting up of a Solar Power Generation Project, when imported into India - applicability of N/N. 01/20-Cus dated 06.01.2011 - High Sea Agreement were genuine agreements or not - HELD THAT:- In the course of the findings of the Commissioner there has been no discussion as to whether the person who holds himself as importer and whom the Ministry Of Renewable Energy also accepted as an importer can at the time of import, be prevented from availing benefit of Exemption Notification No. 01/2011-Cus., dated 06.01.2011 - It is to be noted that conditions (1) (2) of the exemption notification refers to 'importer and condition (2) refers to post import condition of 'used for the purpose and not of self-use or use in own project etc. Department is not making any case of breach of post import condition in the present instance. It is a fact that there is no claim to the contrary in this matter by M/s. MEIL or PESL, that they were the owners of the goods and hence importer. Department has of its own after clearance of the goods gone on to say that High Sea Sales Agreement being in genuine, the persons whoheld out himself as an importer is not so. The department it appears is proceeding on incorrect basis that only owner alone can be importer for Sec2(26) and not the person holding itself as an importer. Once this notion is discarded and person holding itself as an importer taken as included in purview of Section 2(26), all high sea sales agreement or their authenticity is relegated to irrelevance. Further, there being no dispute to the title of the goods or claim to the contrary, rather shows that there was consensus or not disagreement between the parties, which clearly points out that everything actually happened with some understanding or agreement, oral or otherwise. It is clear from the observation that between the person causing the import or the owner, the choice of filing Bill of Entry has to be exercised by coming forward and filing Bill of Entry and once that exercise is done, then no one can subsequently resile from the consequences, which flow from such choice/election - It is therefore found that that terming of import as improper, even when there is no contest to the ownership, and the person claiming to be importer continues to hold himself as an importer and the Ministry issuing certificate continues to treat the appellant as the importer, is not maintainable. Reliance also placed in the decision of the Hon ble Bombay High Court in HAMID FAHIM ANSARI VERSUS COMMR. OF CUS. (IMPORT), NHAVA SHEVA [ 2009 (5) TMI 84 - BOMBAY HIGH COURT] where it was held that In so far as respondents/Customs Authorities is (sic) concerned, they have not pointed out to us any provision under the Customs Act or any Rule or Regulation framed thereunder by which the person having valid IEC Number and having paid the custom duty is prevented from importing goods. At the highest, if the petitioner has obtained IEC number by misrepresenting the Ministry of Commerce and Industry and Director General of Foreign Trade, it is for that body to take action . It is thus abundantly clear that department cannot self assign to itself the duty of declaring bad in law the certificate issued to the importer by Ministry of Renewable Energy or decide title of the goods, even when no one is disputing ownership. And existence or otherwise of High Sea Sales Agreement makes no difference under Section 2 (26) of the Customs Act, 1962 regarding documented and claimed Importer . In the face of irrelevance of high sea sales agreements in view of requirements of Section 2(26), Frustra probatur quod probatum non relevant (that what is proved in vain when proved is not relevant) applies in the instant case. The finding to the contrary, by the learned Commissioner is accordingly set aside with consequential relief in penalty - appeal allowed. 2023 (5) TMI 145 Seeking provisional release of seized goods - Imposition of harsh conditions for release of goods - used machinery items/ capital goods - goods cleared on the basis of the assessed value on the payment of assessed duty - HELD THAT:- In the present case the goods seized were assessed by the appraising group on the basis of the procedure prescribed as per the circular dated 05.02.2020. The charge of under valuation cannot be established without challenging the assessment made by the assessing group as per the procedure prescribed. It is not the case where the goods where being cleared on the basis of the declared value but were being cleared on the basis of the assessed value on the payment of assessed duty. However, these questions of undervaluation need to be investigated and we are not concerned with those in the present proceedings. As no reasons are forthcoming for enhancing the value of the imported goods over and above the value belonging by the Chartered Engineer. We are of the view that the order prescribing conditions of provisional release is too harsh, taking note of the fact that on the assessed value appellant has already paid duty amounting to Rs. 1,18,94,536/- . Taking into account, the fact that issue is in respect of the redetermination of assessed value, the bond should not be more than the deferential value. Commissioner (Appeal) has in fact modified the order in respect of the security deposit to be made without amending the value of the bond - taking into account of the fact of the case the value of the bond and security needs to be re-determined in interest of justice protecting interest of both revenue and the appellant. The conditions in the order of provisional release modified, stating that used equipment (Capital goods) imported by the appellant and seized under the seizure memo no. 107/2022 dated 4/11/2022 can be released on execution of indemnity bond of Rs. 4,00,00,000/- along with it bank guarantee of Rs. 50,00,000/-. The appeal is allowed modifying the Impugned order. Corporate Laws 2023 (5) TMI 144 Seeking grant of Regular Bail - Criminal conspiracy and cheating by diverting funds - siphoning off of funds - receiving money back into personal bank accounts from some 65 companies/entities through dubious transactions, which money he then showed as promoter contribution towards the CDR process - round-tripping funds - twin-conditions in section 212(6) of the 2013 Act, satisfied or not. HELD THAT:- Since in the course of deciding a bail petition, this court is not required to render any finding in relation to the allegations in the complaint and is required to decide the matter on broad probabilities , this court refrains from deliberating further upon the facts as propounded in the complaint. The petitioner began working as an officer of ESL from 01.11.2013 as Senior Vice President (Finance) and thereafter, became the CFO from 26.05.2014 to 24.02.2018. Though it is alleged that he was advising ESL in his professional capacity as a Chartered Accountant/financial consultant even before that, at that time the petitioner was clearly not an officer of the company and could not, therefore, have been a key managerial personnel or an officer in default - Even as Senior Vice President (Finance), the petitioner could not have been the final deciding authority in relation to the financial affairs of ESL. Out of the Rs.240 crores alleged to have been siphoned-off from ESL, Rs.235 crores were siphoned-off before 31.03.2015, between FY 2012-13 and FY 2014-15; but the petitioner became CFO only w.e.f. 26.05.2014. The principal promoters and Whole-time Directors of ESL have never suffered any custody, since they were granted interim protective orders by a Co-ordinate Bench of this court. Other senior officers, such as the Procurement Head and others, have not even been named as accused. Only 02 out of the 55 accused persons were ever arrested one, the petitioner; and the other, the CTO/Dr. Bindu Rana. Dr. Bindu Rana has been admitted to regular bail by a Co-ordinate Bench of this court on 20.01.2023. The bail has been granted not under the special dispensation for women contained in the proviso to section 212 (6) of the 2013 Act but on the merits of her case. In the circumstances, for the limited purpose of the bail plea, this court is satisfied that there are reasonable grounds for believing that the petitioner is not guilty of the offence charged under the 2013 Act. Furthermore, considering that the investigation is complete and the prosecution complaint has been filed before the learned Special Judge, this court is also satisfied that the petitioner is not likely to commit any offence while on bail. The petitioner is admitted to regular bail, subject to the conditions imposed - petition allowed. Insolvency & Bankruptcy 2023 (5) TMI 143 Constitutional Validity of Section 327(7) of the Companies Act, 2013 - statutory claims of the workmen s dues out of the purview of waterfall mechanism under Section 53 of the Insolvency and Bankruptcy Code, 2016 or not - purposive interpretation to Section 53 of the IBC. Constitutional Validity of Clause 19(a) of the Eleventh Schedule of the IBC pursuant Section 255 of the IBC - violative of Article 14 of the Constitution of India,or not, as Clause 19(a) of the Eleventh Schedule of the IBC inserts sub-section (7) in Section 327 of the Companies Act, 2013, which puts statutory bar on the application of Sections 326 and 327 of the Companies Act, 2013, to the liquidation proceedings under the IBC - HELD THAT:- As per Section 327(7), Sections 326 and 327 of the Act, 2013 shall not be applicable in the event of liquidation under the IBC. Sections 326 and 327 of the Act, 2013 provide for preferential payments in a winding up under the provisions of the Act, 2013. However, in view of the introduction of new regime under the IBC, in case of liquidation under IBC, distribution is to be made as per Section 53 of IBC. At this stage, it is required to be noted that IBC has been enacted w.e.f. 28.05.2016 and as per Section 53 of the IBC, the distribution of assets in case of liquidation under the IBC is required to be made - In view of the enactment of IBC and Section 53 of the IBC, it necessitated to amend the Act, 2013. As per Sub-Section (7) of Section 327, Sections 326 and 327 shall not be applicable in the event of liquidation under the IBC. The object and purpose of amending the Act, 2013 and to exclude Sections 326 and 327 in the event of liquidation under the IBC seems to be that there may not be two different provisions with respect to winding up/liquidation of a company. Therefore, in view of the enactment of IBC, it necessitated to exclude the applicability of Sections 326 and 327 of the Act, 2013 which cannot be said to be arbitrary as contended on behalf of the petitioner. Merely because under the earlier regime and in case of winding up of a company under the Act, 1956/2013, the dues of the workmen may have pari passu with that of the secured creditor, the petitioner cannot claim the same benefit in case of winding up/liquidation of the company under IBC. The parties shall be governed by the provisions of the IBC in case of liquidation of a company under the provisions of the IBC - the Companies Act, 2013 does not deal with insolvency and bankruptcy when the companies are unable to pay their debts or the aspects relating to the revival and rehabilitation of the companies and their winding up if revival and rehabilitation is not possible. In principle, it cannot be doubted that the cases of revival or winding up of the company on the ground of insolvency and inability to pay debts are different from cases where companies are wound up under Section 271 of the Companies Act 2013. The two situations are not identical. Under Section 271 of the Companies Act, 2013, even a running and financially sound company can also be wound up for the reasons in clauses (a) to (e). The reasons and grounds for winding up under Section 271 of the Companies Act, 2013 are vastly different from the reasons and grounds for the revival and rehabilitation scheme as envisaged under the Code. In case of insolvent companies, for the sake of survival and regeneration, everyone, including the secured creditors and the Central and State Government, are required to make sacrifices. The workmen also have a stake and benefit from the revival of the company, and therefore unless it is found that the sacrifices envisaged for the workmen, which certainly form a separate class, are onerous and burdensome so as to be manifestly unjust and arbitrary, we will not set aside the legislation, solely on the ground that some or marginal sacrifice is to be made by the workers. Difference in the waterfall mechanism provided in the Companies Act, 2013 and the Code - HELD THAT:- As per Section 324 of the Companies Act, 2013, all debts payable on a contingency, or all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, are admissible to proof against the company. A just estimate can be made so far as possible in respect of value of such debts or claims as may be subject to any contingency, damages, etc. and do not bear a certain value. Section 326 7 of the Companies Act, 2013 deals with overriding preferential payments which have to be paid in priority to all other debts. These include the workmen debts, and dues of the secured creditor where the secured creditor has realised the secured asset but could not realise the entire amount, or the amount of workmen s portion in his security payable under the law, whichever is less, pari passu with the workmen s dues - the aggregate amount due towards workmen s dues and the amount of debts due to the secured creditors is Rs. 4 lakhs. In this background, when the value of the security of the secured creditors is Rs. 1 lakh, one-fourth of the value of the security, i.e. Rs.25,000/- would be the workmen s portion. To this extent, there is no difficulty or dispute. As noticed below there is hardly any difference in the said hierarchy and the waterfall mechanism under the Code. What is clear from the provision is that the proviso applies in case of winding up of a company to the sums referred to in sub-clauses (i) and (ii) of clause (b) of the Explanation to Section 326 of the Companies Act, 2013 which are payable for a period of two years preceding the winding up order or such other period as may be prescribed - this period of two years is with reference to the date of the winding up order, and not with reference to the date earlier in point of time, that is, when a winding up petition is filed. This restricts the period for which payment under sub-clauses (i) and (ii) to clause (b) of the Explanation to Section 326 of the Companies Act, 2013 would apply. Entire unpaid dues are not covered by the proviso to subsection (1) to Section 326 of the Companies Act, 2013. To protect the interest of the workmen where the secured creditor does not relinquish its security interest to fall under Section 53 of the Code, Regulation 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 has been enacted, and it requires that the secured creditor, who opts to realise its security interest as per section 52 of the Code, has to pay as much towards the amount payable under the clause (a) and sub-clause (i) to clause (b) of sub-section (1) to Section 53 of the Code to the liquidator within the time and the manner stipulated therein. The workmen s dues, even when the secured creditor opts to proceed under Section 52 of the Code, are therefore protected in terms of sub-clause (b) of sub-section (1) to Section 53 of the Code. The Code is based on the organic evolution of law and is a product of an extensive consultative process to meet the requirements of the Code governing liquidation. It introduced a comprehensive and time-bound framework to maximise the value of assets of all persons and balance the interest of the stakeholders. The guiding principle for the Code in setting the priority of payments in liquidation was to bring the practices in India in line with global practices. In the waterfall mechanism, after the costs of the insolvency resolution process and liquidation, secured creditors share the highest priority along with a defined period of dues of the workmen - The Code balances the rights of the secured creditors, who are financial institutions in which the general public has invested money, and also ensures that the economic activity and revival of a viable company is not hindered because it has suffered or fallen into a financial crisis. The Code focuses on bringing additional gains to both the economy and the exchequer through efficiency enhancement and consequent greater value capture. In economic matters, a wider latitude is given to the lawmaker and the Court allows for experimentation in such legislations based on practical experiences and other problems seen by the law-makers. In a challenge to such legislation, the Court does not adopt a doctrinaire approach. Some sacrifices have to be always made for the greater good, and unless such sacrifices are prima facie apparent and ex facie harsh and unequitable as to classify as manifestly arbitrary, these would be interfered with by the court. As sub-section (7) of Section 327 of the Act, 2013 provides that Sections 326 and 327 of the Act, 2013 shall not be applicable in the event of liquidation under the IBC, which has been necessitated in view of the enactment of IBC and it applies with respect to the liquidation of a company under the IBC, Section 327(7) of the Act, 2013 cannot be said to be arbitrary and/or violative of Article 21 of the Constitution of India. In case of the liquidation of a company under the IBC, the distribution of the assets shall have to be made as per Section 53 of the IBC subject to Section 36(4) of the IBC, in case of liquidation of company under IBC. The writ petition(s) lack merits and the same deserve to be dismissed and are accordingly dismissed. 2023 (5) TMI 142 Maintainability of Section 9 application - Petition under Section 9 of the IBC would have lied against the entity not in existence, or not? - application dismissed on the ground that the name of the Corporate Debtor from the Register of the Registrar of Companies had already been struck off - HELD THAT:- The Application under Section 9 was not maintainable and was dismissed on 29.01.2019, because it had been filed against the Corporate Debtor whose name was struck off by the RoC in terms of Section 248 of the Act on 09.08.2018 i.e., much before the Application under Section 9 was filed on 10.12.2018. Since, there was no Order passed on merits, therefore, the Appeal was not filed rather an Application under Section 252(3) was filed by the Operational Creditor for the Restoration of the name of the Corporate Debtor Company to the Register maintained by the RoC and the said Application was allowed on 02.03.2021. Thereafter, the Application has rightly been filed for the purpose of revival of the main Petition filed under Section 9 because the eclipse caused because of the fact that the name of the Corporate Debtor Company was struck off from the Register of RoC on 09.08.2018 was removed by Order dated 02.03.2021 and thus there was no hinderance in the way of the Operational Creditor to maintain and proceed with the Application filed under Section 9 to get a decision on it on merits. There are no error in the well-considered Order of the Tribunal - appeal dismissed. 2023 (5) TMI 141 Initiation of CIRP - NCLT admitted the application - NPA - charging exorbitant interest rate @13% against the stipulated rates of RBI - instead of charging interest on annual basis, the Respondent No. 1 charge interest on monthly basis - huge margin money - The Appellant denied that there was any default on 31.12.2013, however for argument s sake, even it is presumed that default occurred on 31.12.2013 as claimed by the Respondent No. 1 , loan account was renewed on 25.02.2014, hence there could not be any default. The Appellant further submitted that the Respondent No. 1 relied upon Balance-Sheets for the Financial Year 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18, whereas the Appellant has not accepted the outstanding dues but merely stipulated the credit facilities obtained. HELD THAT:- From reading Section 7 of the Code, it is therefore clear that it lays down the procedure for initiation of the CIRP by a Financial Creditor who can file an application before the Adjudicating Authority along with proof of default and name of Resolution Professional proposed to act as Interim Resolution Professional. The Adjudicating Authority is required to ascertain the existence of default within 14 days from the date of receipt of the application. It is further noted that once the Adjudicating Authority is satisfied regarding existence of default and that the application is complete and no disciplinary proceeding is pending against the proposed Interim Resolution Professional, the Adjudicating Authority is required to admit the application and is not required to look into any other criteria for the admission of the application. It is nobody s case to cause delay in admission of CIRP on miscellaneous grounds. This Appellate Tribunal also notes that the Hon ble Supreme Court of India as well as this Appellate Tribunal itself has, held in catena of judgments that there is no scope for judicial interventions and over reach by the Adjudicating Authority or the Appellate Tribunal to interpret any further, if the existence of due and subsequent default is established. In view of these provisions, the plea of the Appellant regarding violation of the RBI Guidelines on Priority Sector Landing cannot be allowed to affect the fate of the application filed under Section 7 of the Code. It is for the Appellant to seek necessary remedies, if any and if required against the Respondent No. 1 for violation of Master Circular of RBI regarding Priority Sector Landing at appropriate forum in accordance with the law. Hence, on this account we do not find any error in the impugned order. As regards, the debiting the amount by the Respondent No. 1 from the cash credit and adjusted towards term loan without consent of the Appellant, this Appellate Tribunal notes that this is matter of execution and monitoring of various credit facilities between the Financial Creditor and the Corporate Debtor and the same is supposed to be done as per extent banking practices. Hence, this plea in no way effects the outcome of the application filed under Section 7 of the Code. This Appellate Tribunal do not find any error in the impugned order. This Appellate Tribunal is also conscious of the fact that the Insolvency Bankruptcy Code, 2016 is a self-contained Code and its proceeding are summary in nature - Appeal dismissed. 2023 (5) TMI 140 Initiation of CIRP - NCLT admitted the application - Non-performing assets - Financial Creditors - despite valid service of notice on corporate debtor, the corporate debtor preferred not to appear before the NCLT - HELD THAT:- The fact remains that the appellant despite service of notice preferred not to participate before the NCLT and as such the order impugned was passed ex-parte. It is also reflected from the material on record that on the date of filing of the application under Section 7 there was total debt of an aggregate amount of Rs. 15,81,63,867/-. The loan was sanctioned to the appellant since the month of August, 2015 and said facility continued up to 31.03.2018. However, since the account of the appellant was irregular in the month of May 2019, the account was declared NPA and within the prescribed period of limitation the application under Section 7 of the Code was filed - The financial creditor in view of none clearance of the debt amount was constrained to file application under Section 7 of the Code in which notice was issued to the Corporate Debtor. However, despite valid service of notice, the appellant preferred not to participate in the proceeding before the NCLT. In such view of the matter the NCLT was left with no option but to pass order on the basis of materials available on record. Before the NCLT, the debt was not disputed and the application was filed within the period of limitation and as such the Ld. NCLT has rightly passed the order for initiation of the CIRP - There are no apparent error in the impugned order warranting interference, however since the appellant is making submission that they are still ready to settle the dispute, liberty can be granted to the appellant to approach the financial creditor for settling the dispute. The appeal stands disposed of. 2023 (5) TMI 139 Seeking Revival of petition which was earlier withdrawn by the appellant on the plea that outside settlement had already been taken place - Operational Creditors - Dishonour of Cheque - HELD THAT:- Fact remains that initially the appellant herein had filed application under Section 9 of Code before the NCLT. It is also a fact that the application filed under Section 9 was not even admitted and before its admission the applicant withdrew petition. Before the NCLT it was submitted that applicant and corporate debtor had arrived at a settlement and thereafter a prayer was made for withdrawal of the application. The prayer for withdrawal of application was allowed. However, while recording disposal the Ld. Tribunal also granted liberty to revive in case of violation of settlement condition. The said order was passed long back on 21.01.2019. It is also not in dispute that after about expiry of three and half years, the appellant herein approached the NCLT for revival of the application filed under Section 9 of the Code. Section 9 application was filed claiming Operational debt of Rs. 1,34,18,197/-. Without application being admitted on the plea that applicant and corporate debtor had settled the dispute the applicant withdrew the application. Since the Applicant before the NCLT voluntarily withdrew the application, there was no reason for revival of the case. However, the NCLT had granted liberty to revive the same. It is admitted position that last alleged dishonour of cheque had occurred on 24.12.2020. If the appellant was serious to pursue the matter then in that event immediately he would had approached the NCLT but he preferred to slumber over his right for several years and suddenly in the month of June, 2022 he approached the NCLT with a prayer to revive his application which was already withdrawn 21.01.2019. In such situation, it would be a futile exercise to entertain the present application. Appeal dismissed. Service Tax 2023 (5) TMI 138 Availing Cenvat Credit on works contract service - Value to be determined under Rule 2A or under Composition Scheme - Section 67 of the Finance Act, 1994 - entitlement to take the total contract value which includes both goods and services and remit service tax on the entire value as works contract service and in the process also entitled to avail the CENVAT Credit - Tribunal allowed the credit of duty paid on goods also. HELD THAT:- It is required to be noted that thereafter the service elements have found a statutory recognition as part of Rule 2A of the Service Tax (Determination of Value) Rules, 2006 w.e.f. 01.06.2007. The applicability of Rule 2A has been dealt with and considered by this Court in extenso in the case of Larsen and Toubro (supra). Therefore, as per the law laid down by this Court in the case of works contract service an assessee is liable to pay the service tax on the service element/value of the service rendered and the sales tax/tax on the element of goods transferred pursuant to the contract. Whether despite Rule 2A of the Service Tax (Determination of Value) Rules, 2006 and the Composite Scheme still the assessee is entitled to take the total contract value which includes both goods and services in terms of Section 67 of the Act, 1994 and remit service tax on the entire value as works contract service and the assessee is also entitled to avail CENVAT Credit? - HELD THAT:- Rule 2A applicable prior to 01.07.2012 is reproduced hereinabove. It is to be noted that Rule 2A is the specific provision for determination of value of taxable service in relation to services involved in the execution of a works contact shall be determined by the service provider in the manner provided under Rule 2A(1)(i) i.e. value of works contract service determined shall be equivalent to the gross amount charged for the works contract. As per explanation to Rule 2A gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the works contract. The position is made more clear post 01.07.2012. Post 01.07.2012 as per Rule 2A value of service portion in the execution of a works contract shall be determined taking into consideration the value of service portion in the execution of a works contract equivalent to the gross amount charged for the works contract less the value of property of goods transferred in the execution of the said works contract. However, as per the Composition Scheme vide notification 32/2007 ST dated 22.04.2007 by which works contract (Composition Scheme for payment of Service Tax) Rules, 2007 came to be introduced, as per Rule 3(1) and notwithstanding anything contained in Section 67 of the Act and Rule 2A of the Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge the service tax at the rate specified in Section 67 of the Act, by paying an amount equivalent to 2% of the gross amount charged for the works contract - it is required to be noted that post 01.07.2012 Rule 2A specifically provides that the taxable service shall not take CENVAT Credit of duty or cess paid on inputs used in or in relation to said works contract, under the provisions of CENVAT Credit Rules, 2004. With respect to the works contract service and/or the Composition Works Contract the valuation has to be made as per Rule 2A of the Valuation Rules, 2006. Even as per the Composition Scheme vide Notification 32/2007 dated 22.04.2007 an assessee has an option to discharge the service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in Section 66 of the Act by paying equivalent to 2% of the gross amount charged for the works contract - as per the Scheme of the Act the determination of value of service portion in the execution of the works contract is to be made as per Rule 2A, however with an option to the assessee to avail the benefit of Composition Scheme. Therefore, either the assessee has to go for Composition Scheme or go for Determination of Value as per Rule 2A and the assessee has to pay service tax on the service element and can claim CENVAT Credit on the said amount only. The impugned judgment and order passed by the CESTAT is hereby quashed and set aside and it is held that the assessee is not entitled to take the total contract value which includes both goods and services and remit service tax on the value as works contract service and, in the process, also entitled to avail the CENVAT Credit on the entire amount - now the service tax needs to be computed in terms of Rule 2A of the (Determination of Value) Rules, 2006 and as the assessee has not opted for the composition scheme, the matter is remitted back to the CESTAT for re-computation of the demands in terms of Rule 2A. Appeal allowed in favor of Revenue. However, matter remitted back to the CESTAT for re-computation of value and determination of issue of Extended Period of limitation. 2023 (5) TMI 137 Exemption from payment of Service tax - commission received by the respondent-scheduled Banks in the Reserve Bank of India, for rendering banking or financial services - applicability of N/N 22/2006-ST dated 31.03.2006 - HELD THAT:- The tribunal referred the issue to a larger Bench in view of differing opinions rendered by various Benches. By the impugned orders, the Tribunal concluded that the services rendered by the Scheduled Banks as statutory agent under Section 45 of the Reserve Bank of India Act, 1934 and also the other activities of the Scheduled Banks involving statutory functions on behalf of the Reserve Bank of India, were not taxable with regard to the terms of the notification. The opinion of the findings of the CESTAT are in accordance with the judgment of this Court in STATE OF MADRAS VERSUS THE CEMENT ALLOCATION AND CO-ORDINATING ORGANISATION [ 1971 (9) TMI 161 - SUPREME COURT] . The Court had said on that occasion that the acts of the agent are also attributable to the principal. This principle is also embodied in Section 65 (7) of the Finance Act, 1994. This Court is of the opinion that the reasoning of the tribunal with respect to the activities of the scheduled Banks, so far as scheduled banks perform activities as statutory agent of the Reserve Bank of India under Section 45 of the Reserve Bank of India Act, 1934 are concerned do not call for any interference. The appeals are accordingly dismissed. Central Excise 2023 (5) TMI 136 Refund of unutilized Cenvat credit - rejection on the ground that Rule 5 of Cenvat Credit Rules is not available for the purpose of refund that too after the closure of the factory - rejection also on the ground that post introduction of CGST Act the appellant has failed to transfer the closing balance of Cenvat credit through Trans-1 as was mandatory in terms of Section 140 of CGST Act 2017. HELD THAT:- The perusal of provision of Rule 5, shows that the clause where for any reason such adjustment has not been possible of erstwhile Rule 5 stands deleted. This means that after the amendment, the Cenvat credit if could not be utilized for being considered towards payment of duty/service tax for any reason the refund thereof is no more possible. It is also observed that Rule 5 of the Cenvat credit permits cash refund of accumulated Cenvat credit only in the following circumstances :- (1) The Cenvat credit which has accumulated and whose cash refund is sought is in respect of input/input service used in the manufacture of finished goods which have been exported out of India under bond or letter of undertaking or used in intermediate products cleared for export. (2) The assessee is not in a position to utilize the Cenvat credit for payment of duty on finished goods cleared for home consumption or cleared for export under rebate claim. (3) The exports have not been made by claiming draw-back or input duty rebate. Though the appellant had relied upon the decision of Karnataka High Court in UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [ 2006 (7) TMI 9 - KARNATAKA HIGH COURT] which was also confirmed by the Hon ble Supreme Court but the said case declared that refund claims of Cenvat cannot be subjected to limitation of time irrespective. The period involved is prior or post amendment. In the present case, since the refund claim was filed under Rule 5 of Cenvat Credit Rules, 2004 and after it got amended after April 2012. The amended Rule 5 does not permit refund of such Cenvat credit which could not be utilized for any possible reason. Other than Rule 5 of Cenvat Credit Rules, there is no other provision either in Cenvat Credit Rules, 2004 or in Central Excise Rules, 2002 for giving cash refund of the accumulated Cenvat credit. Even Section 11B of Central Excise Act is only for the refund of duty paid either through cash or through Cenvat credit or for the Cenvat credit wrongly reversed. Hence, this section cannot be invoked in cash refund of the unutilized Cenvat credit lying in the Cenvat account of the manufacturer at the time of closure of the factory. This Tribunal in MODIPON LTD. (FORMERLY KNOWN AS MODIPON FIBRES CO.) VERSUS CCE, GHAZIABAD [ 2015 (2) TMI 301 - CESTAT NEW DELHI] has held that when a factory closes down the Cenvat credit lying unutilized in its Cenvat credit account shall lapse unless the factory resumes production - In the present case, it becomes clear that none of the condition as enumerated above for invoking Rule 5 gets satisfied. In addition, when admittedly, the appellant while registering into new GST regime has not filed Tran-1 showing the impugned unutilized Cenvat credit Section 140 of CGST Act resultantly cannot be invoked. The question of giving cash refund for unutilized lying Cenvat credit does not at all arises. The Adjudicating Authority has not committed any error while holding that Rule 5 of Cenvat Credit Rules, 2004 cannot be invoked to sanction the refund of unutilized Cenvat credit lying with the appellant much prior to April, 2017 that too in cash as per Section 140 of CGST Act, 2017 - Appeal dismissed. 2023 (5) TMI 135 Levy of Equal amount of penalty under Section 11AC of the Central Excise Act, 1944 - Extended period of Limitation - HELD THAT:- The issue decided in the case of M/S QUIPPO ENERGY PRIVATE LTD, SHRI MONTU PATWA VERSUS COMMISSIONER, CENTRAL EXCISE SERVICE TAX, AHMEDABAD [ 2015 (10) TMI 1726 - CESTAT AHMEDABAD ] where it was held that the activities undertaken by the Appellant would amount to manufacture and Power Pack also known as Containerized Gensets would be classifiable under sub-heading No. 8502.2090 of the Schedule to the Central Excise Tariff Act, 1985 and the demand of duty alongwith interest for the normal period is upheld. It can be seen that it was categorically held that since there is no suppression of fact, demand of extended period is not sustainable. The penalty imposed in the impugned order was held to be not warranted accordingly, the same was set aside. When the penalty imposed under Section 11AC was set aside, the revenue s appeal cannot be sustained - the revenue s appeal is dismissed. 2023 (5) TMI 134 Reversal of credit and payment of interest - adjustment from the payment of Rs. 2 lacs already made by the appellant - adjustment Partial exemption under notification no. 5/2006-CE dated 01.03.2006 - ceramic roller on which the credit was availed is an input used in the manufacture of capital goods i.e. kiln - violation of condition no.7 of the notification No.5/2006-CE dated 01.03.2006 - HELD THAT:- The Tribunal/Court in HELLO MINERALS WATER (P) LTD. VERSUS UNION OF INDIA [ 2004 (7) TMI 98 - ALLAHABAD HIGH COURT] and COMMISSIONER OF CENTRAL EXCISE VERSUS ASHIMA DYECOT LTD. [ 2008 (9) TMI 87 - HIGH COURT GUJARAT] held that even if the assessee agreeing to reverse the cenvat credit availed at the stage of appeal before the tribunal, then also the condition of the notification which prescribes that no cenvat credit should be availed on the input will stand complied with accordingly, this case can be decided on the submission of the appellant that they are prepared for payment of cenvat credit along with interest and the same can be adjusted against the amount of cenvat credit and interest thereon. And if it is found that the amount of cenvat credit availed by the appellant along with interest is adjusted within the amount of Rs. 2 lacs paid by the appellant then the case can be decided on that basis. The matter remanded to the adjudicating authority for passing afresh - appeal allowed by way of remand. 2023 (5) TMI 133 CENVAT Credit - input service - free warranty services - place of removal - service tax paid by the appellant on repair and maintenance services provided by the dealers for fulfilling the warranty obligations of the appellant has been denied for good and valid reasons or not - suppression of material facts - extended period of limitation - HELD THAT:- Input service either prior to 01.04.2011 or w.e.f. 01.04.2011 means any service used by the manufacturer, whether directly or indirectly, or in relation to the manufacture of final products. The appellant is under an obligation to provide after sale service on the final products manufactured by it. The dealers provide the services and the appellant pays service tax on the amount paid by it to the dealers. The service is provided free of cost by the dealers during the warranty period but the appellant makes payment to the dealers for the services they provide to the customers. The repair and maintenance services are, therefore, linked to the sale. The services are, therefore, used indirectly in relation to the manufacture of final products. The appellant has correctly availed cenvat credit on the amount of service tax paid for the services provided by the dealers to the customers on behalf of the appellant for fulfilling the warranty obligations of the appellant. Extended period of limitation - Suppression of facts - HELD THAT:- There does not exists any reason for invoking the extended period of limitation as the issue involved in the present case has already been decided in favour of the appellant. Moreover, the department did not bring any material on record to show that the appellant has suppressed the material facts with intend to evade payment of service tax. Besides this, the audit of the record of the appellant was conducted in February/March 2007 whereas the show cause notice was issued in 2009 after the expiry of two and half years which makes the substantial demand beyond the period of limitation. The impugned orders are set aside - Appeal allowed. CST, VAT & Sales Tax 2023 (5) TMI 132 Stay on Interest on the amount of refund - HELD THAT:- Learned counsel appearing on behalf of the appellant-Revenue has stated at the Bar that the order of refund has been passed pursuant to the directions issued by the High Court and the officer of the Revenue Department was called in the Court by the High Court and the order of refund was passed by the Department. The aforesaid aspect shall be considered at the stage of final hearing. To be heard with Civil Appeal No. 242 of 2018. Indian Laws 2023 (5) TMI 131 Right of the auction purchaser - Validity of Auction of properties of borrower by the Bank - decree for specific performance of the agreement to sale - Section 13(4) of the SARFAESI Act - an agreement to sale was executed between the bank and the borrower for a sale of Flat No.6401 on 16.06.2016. At this stage, it is required to be noted that the said agreement to sale was executed by the borrower without informing/obtaining any consent from the DRT as well as the Bank and the permission, if any, given to the borrower earlier obtained only to the seven flats which were already recognized by the DRT on 25.02.2016. - Thereafter, the said property was auctioned by the bank following the due procedure. HELD THAT:- It is required to be noted that in the MoU dated 10.04.2016 between the borrower and the respondent no.1 in Clause No.4 it was specifically provided that first the party should obtain clearance of sale from DRT/SBH so that they can process with further agreement to sale. Thus, as such respondent no.1 at the relevant time was aware about the pending DRT proceedings. Still the respondent no.1 entered into the agreement to sale with the borrower on 16.06.2016. At this stage, it is pertinent to note that thereafter when the Bank issued a public notice on 28.07.2016 for auctioning the properties of the borrower. Before the date of auction, on 24.08.2016 the borrower filed an application before the DRT praying for stay of all proceedings of the Bank pursuant to the auction notice dated 28.07.2016. Calculatively the respondent no.1 filed the writ petition before the High Court challenging the e-auction notice and that too after conducting of the e-auction on 31.08.2016 and the sale in favour of the appellant was confirmed. The aforesaid facts were pointed out before the High Court and despite the same the High Court has allowed the writ petition which is not sustainable at all. By the impugned order the respondent no.1 has got the relief which as such the borrower failed to get from the DRT. On the aforesaid grounds the impugned judgment and order passed by the High Court is unsustainable. Even at the time when the respondent no.1 entered into the agreement to sale/MoU he was aware about the proceedings pending before the DRT which is apparent from Clause 4 of the MoU. Therefore, respondent no.1 and/or his heirs cannot be permitted to get the benefit of his own wrong and cannot be permitted to get the benefit of a void transaction - It is directed that on the full payment of the auction sale consideration by the appellant (after deducting the 25% of the amount already deposited earlier) with 9% interest from the date of auction till the actual amount is paid, to be paid within a period of four weeks from today, the sale certificate be issued in favour of the appellant with respect to Flat No.6401. Whatever the amount is already deposited by the respondent no.1/his heirs shall be returned to the respondent no.1 (now his heirs) with the interest at 9% from the date of such deposit till the actual date of return which shall be returned within a period of four weeks from today. The impugned judgment and order passed by the High Court is hereby quashed and set aside - Appeal allowed.
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