TMI Tax Updates - e-Newsletter
May 9, 2023

Case Laws in this Newsletter:

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

Articles

1. Indian Union Budget 2023 - Doubling of tax on Royalty and Fees for Technical Services

   By: Dinesh Singhal

2. GST for Freelancers

   By: Ishita Ramani

3. COMPENSATION FOR WRONG HAIR CUTTING UNDER CONSUMER PROTECTION ACT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Advisory: Deferment of Implementation of Time Limit on Reporting Old e-Invoices

2. Auction for Sale (re-issue) of (i) ‘6.99% GS 2026’, (ii) ‘7.17% GS 2030’, (iii) ‘7.41% GS 2036’ and (iv) ‘7.40% GS 2062’

3. Union Finance Minister Smt. Nirmala Sitharaman chairs the 27th Meeting of the Financial Stability and Development Council (FSDC)

4. Sh. Piyush Goyal to visit Canada for the 6th India- Canada Ministerial Dialogue on Trade and Investment

Notifications

DGFT

1. 05/2023 - dated 8-5-2023 - FTP

Amendment in import policy condition of Apples under ITC (HS) 08081000 of Chapter-08 of ITC (HS), 2022, Schedule-I (Import Policy)

GST - States

2. G.O.Ms. No. 96 - dated 6-3-2023 - Andhra Pradesh SGST

Certain Amendments to Go.Ms. No. 258, Revenue (CT-II) Department, dated 29.06.2017

3. G.O. Ms. No.94 - dated 6-3-2023 - Andhra Pradesh SGST

Certain Amendments to Go.Ms.No.588, Revenue (CT-II) Department, dated 12.12.2017

4. G.O. Ms. No. 95 - dated 6-3-2023 - Andhra Pradesh SGST

Certain Amendments to Go. Ms. No. 256, Revenue (CT-II) Department, dated 29.06.2017

Circulars / Instructions / Orders

Central Excise

1. Order No. 07 /2023 - dated 4-5-2023

Appointment of Common Adjudicating Authority in respect of SCNs issued to M/s A.K. Construction Co.

2. Order No. 06 /2023 - dated 4-5-2023

Appointment of Common Adjudicating Authority in respect of SCNs issued to M/s Hi-tech Equipment Services

3. Order No. 05/2023 - dated 4-5-2023

Appointment of Common Adjudicating Authority in respect of SCNs issued to M/s Subhash Earthmovers

Highlights / Catch Notes

Income Tax

• Tribunal Upholds AO's Decision to Disallow 25% of Expenses Due to Missing Vouchers; Assessee's Appeal Dismissed.

  Case-Laws - HC : Disallowance of expenses - Tribunal has observed that the AO has disallowed 25% of the expenses claimed under the heads consumables, power/fuel, packing, freight, miscellaneous, telephone, conveyance, travelling etc. as no vouchers were produced for expenditure claimed - Tribunal has rightly dismissed the appeal(s) of the assessee - HC
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• Assessment Reopening Invalid: AO Relied Solely on External Info Without Independent Verification u/ss 147 & 148 of IT Act.

  Case-Laws - AT : Reopening of assessment u/s 147 - AO has acted only on the basis of information received from Investigation Wing without any exercise it has own level and only on the basis of borrowed satisfaction, he initiated the reopening of assessment u/s 147 and issued notice u/s 148 of the Act, which are invalid being bad in law and liable to be quashed. - AT
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• Penalty Imposed for 'Undisclosed Income' Found in Search, Even if Declared and Included in Return Under Sec 271AAB(1A.

  Case-Laws - AT : Penalty u/s 271AAB(1A) - once the document which has the characteristics of ‘undisclosed income’ found and recovered during the course of search and based on such document, the assessee made the declaration and thereafter, filed return of income, then in that eventuality, in our view, the said income would partake the characteristics of ‘undisclosed income’. - Levy of penalty confirmed - AT
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• Assessee Granted Exemption u/ss 11 and 12 Despite Late Filing of Audit Report (Form No. 10B.

  Case-Laws - AT : Exemption u/s 11/12 - audit-report (Form No. 10B) was filed belatedly after processing of return u/s 143(1) - the assessee can’t be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report. - AT
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• Non-Resident Long-Term Capital Gains on Unlisted Indian Shares: Impact of Section 112(1)(c)(iii) and Section 48 Provisos Explained.

  Case-Laws - AT : Computation of capital gains - Non-resident - Long term capital Gain / loss on share transactions - Benefit of indexation - it cannot be disputed that if as per section 112(1)(c)(iii), the 1st and 2nd proviso to section 48 of the Act are not given effect, the assessee will have a long-term capital gains from the sale of unlisted shares of the Indian company. - Additions confirmed - AT
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Customs

• Customs Broker License Revoked: Appellant Liable for Employee Actions in Undeclared Goods Case.

  Case-Laws - AT : Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - the appellant is responsible for the use of Customs Broker License by its employees and presence of printed baggage declaration list of items containing unaccompanied baggage having the logo and the name of the appellant indicates involvement of the appellant in dealing with the goods which were found undeclared in the accompanied baggage. - AT
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• Importer Maintains Control Over Machinery, No Breach of Exemption Conditions Found in Seizure Case.

  Case-Laws - AT : Benefit of exemption - import of machine for construction of roads - diversion of goods - it appears that though at the time of seizure the goods were in custody of other person than the importer, however Revenue has not established that the goods were disposed off to other person forever and importer did not have any control over the goods. Further, the control was with the appellant that is why the installments were being paid for the finance raised by the appellant. Above discussion establishes that the importer company has not violated the specified conditions of exemption notification - AT
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IBC

• Secured Creditors Assert Rights on Pledged Shares Without Advancing Funds, Referencing Sections 52 & 53 of Insolvency Code.

  Case-Laws - SC : Claim of secured creditor - right on the basis of the pledged shares - appellants not having advanced any money to the Corporate Debtor - The appellant no.1 – M/s. Vistra ITCL (India) Limited would be treated as a secured creditor, who would be entitled to all rights and obligations as applicable to a secured creditor in terms of Sections 52 and 53 of the Code, and in accordance with the pledge agreement - SC
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PMLA

• Chartered Accountants, Company Secretaries, and Cost Accountants Now Reporting Entities Under PMLA to Combat Money Laundering.

  Notes : PMLA - Reporting entity - Practicing CA, CS & CWA included in the list
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Service Tax

• Penal charges from separate actions not subject to service tax; not considered 'consideration' under Finance Act.

  Case-Laws - AT : Non payment of service tax - Banking and other financial services - f penal charges arises on account of a separate cause of action which is independent of lending services rendered by the appellant. - the amounts collected as penalty/penal charges penal charges are not chargeable to service tax as the same are not ‘consideration’ under the finance Act, - AT
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• Subcontracting Isn't Intermediary Service; Impacts CENVAT Credit Refund Eligibility for Export Services Under Tax Rules.

  Case-Laws - AT : Refund of unutilized CENVAT credit - Export of services - intermediary service - place of provision of service - Sub-contracting for a service is also not an intermediary service. The supplier of main service may decide to outsource the supply of main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof and does not merely arrange or facilitate the main supply between the principal supplier and his customers and therefore clearly not an intermediary. - AT
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Central Excise

• Zymegold Plus and Dripzyme classified as fertilizers; department's argument using Fertilizer Control Order, 1985, dismissed.

  Case-Laws - AT : Classification of goods - Zymegold Plus - Dripzyme - The department has taken resort to the definition of ‘fertilizer’ as provided in Fertilizer Control Order, 1985 for changing the classification which, according to us, could not have been done as the definition provided in other statutes, totally unrelated to statute in issue, cannot be made the basis for changing the classification. - the products in issue are fertilizers - AT
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• Correct Classification of 'Alternators' Under Excise Rules: No Need for Alternative Sections if Chapter Notes Met.

  Case-Laws - AT : Classification of goods - product ‘alternators - General Rules for Interpretation - The ‘General Rules’ come into play only if classification and assessment of ‘excisable goods’ are involved. ‘General Rules’ cannot cloth an activity as manufacture of goods on the lines contemplated by Section 2(f) of Central Excise Act, 1944. - Once the classification of ‘alternators’ has been discovered within a Chapter and it satisfies the Section/ Chapter Notes, it is not required to further look into Section/ Chapter notes of other Sections to find a probable classification elsewhere - AT
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• Revenue's Appeal Dismissed: Tribunal's Decision on Newsprint-in-Reels Classification Stands, Benefit Extended to Respondent.

  Case-Laws - AT : Classification of goods - Newprint-in-reels - Since, the Revenue has not filed any appeal against the decision of the Tribunal whereby the benefit of the notification was extended to the respondent and keeping in view that for the subsequent period, the Additional Commissioner has also given the benefit of the said notification to the respondent, there are no merit in the appeal filed by the Revenue and the same is dismissed. - AT
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VAT

• Legislative Intent Classifies Medicated Talcum Powder as Cosmetic, Not Medicine, for Tax Purposes; Clears Interpretive Ambiguity.

  Case-Laws - SC : Classification of goods - medicated talcum powder - the clear legislative intent, of inserting a carefully worded entry, which was a “hybrid” one, i.e. describing an article that contained medicinal ingredients, as well as those used for cosmetics, and yet placing such a creature (“neither beast nor fowl” so to say) in the category of cosmetics, ruled out altogether any interpretive scope of classifying it as a medicinal preparation, or drug or medicine. - SC
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Case Laws:

• GST

• 2023 (5) TMI 320
  Rejection of refund claim - rejection on the ground that the petitioner had not provided the relevant documents and had not appeared before the concerned officer - documents filed as required under Rule 89 of the Central Goods and Services Tax Rules, 2017 - Applicability of Circular No. 125/44/2019 GST dated 18.11.2019 - HELD THAT:- Undeniably, if an application for refund is accompanied by all relevant documents as prescribed under Rule 89 of the Rules, the said application cannot be rejected as incomplete and is required to be processed. However, that does not preclude the concerned officer from calling upon the applicant to furnish any other relevant documents that he considers necessary for processing the application for refund. Considering that the petitioner had provided most of the relevant documents as also the fact that if the Appellate Tribunal was constituted, the petitioner would be entitled to seek an opportunity to furnish the relevant documents before the Tribunal; this Court considers it apposite to set aside the impugned order and remand the matter to the Proper Officer to adjudicate the petitioner s claim for refund afresh - the petitioner shall furnish all documents available with the petitioner, as sought for by the Proper Officer, within a period of three weeks from today. Petition disposed off.

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• Income Tax

• 2023 (5) TMI 319
  Deduction u/s 80JJA - discrepancy in the stock - HELD THAT:- While filing return of income in respect of manufacturing items, deduction qua the stock of Hindustan Sanitary Plaza could not be given under Section 80JJA of the Act. Tribunal has rightly rejected the claim of the appellant on this ground as well as on the ground of non-disclosure of the closing stock. Disallowance of expenses - Tribunal has observed that the AO has disallowed 25% of the expenses claimed under the heads consumables, power/fuel, packing, freight, miscellaneous, telephone, conveyance, travelling etc. as no vouchers were produced for expenditure claimed as Rs. 47 lacs. AO had given full opportunity to the assessee, who could submit evidence of expenditure of about Rs. 8 lakhs out of his claim of Rs. 54.92 lakhs. The Tribunal has further held that the disallowance was rightly restricted to 1/10th of the expenditure, which had not been substantiated by the assessee, which comes to about Rs. 4,70,000/-. After going through the impugned judgment, this Court is of the view that in this case, the Tribunal has rightly dismissed the appeal(s) of the assessee by appreciating the evidence in the right perspective. Appellant-assessee has not led any cogent and convincing evidence to prove his case. No substantial question of law arises for consideration in these appeals.

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• 2023 (5) TMI 318
  Unexplained cash credit u/s 68 - Assessee had made large cash deposits in bank accounts - HELD THAT:- The books, bills and vouchers, etc., were produced before the AO and were test checked, as noted in the assessment order itself. The books of account are, undisputedly, audited books of account and the Chartered Accountants have certified to have checked the books of account with the support of the bills and vouchers. No defect therein has been pointed out by the Auditors. And not only this, the AO has also admitted that the goods were supplied to the customers, against which, the advances were received, and there was only a small amount of advances which remained outstanding and adjusted at the end of the year. Even the AO himself has not doubted that the Assessee had conducted its business in a regular manner, from day to day, as described by the Assessee. AO has, thus, made the addition in question on the basis of mutually intrinsically contradictory observations made in the assessment order, which observations are not at all sustainable in the eye of law. CIT(A) too has not considered the controversy in its proper perspective in the light of the afore-discussed facts and circumstances. The contradiction in the assessment order is also clear from the fact that whereas on the one hand, the AO observed that the Assessee had no money in hand to make the deposits in its bank accounts and deposits were made out of the advances received from the customers, to the contrary, he states that the entire amount of advances received by the Assessee from its customers were unexplained cash credits. Even the amounts confirmed to have been paid as advances, were not considered as genuine advance receipt of goods. Not even an attempt has been made to establish the source of the money to make the deposits, in the absence of succeeding to refute the receipts of the amounts as trade advances. The Department, thus, has miserably failed to prove that the apparent is not the real, as required by CIT Vs. Daulat Ram Rawatmull [ 1972 (9) TMI 9 - SUPREME COURT] The order under appeal is a result of mere conjectures and surmises - Addition u/s 68 cancelled - Decided in favour of assessee.

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• 2023 (5) TMI 317
  Disallowance u/s 14A read with Rule 8D - HELD THAT:- Disallowance u/s 14A read with Rule 8D was deleted by the Tribunal in assessee s own case for the subsequent assessment years [ 2021 (10) TMI 1105 - ITAT DELHI] holding that the share of profit from the partnership is mere distribution of income and is already been taxed, hence provisions under section 14A are not attracted in such cases. We observe that the Tribunal also held that if there is no exempt income no disallowance is called for under section 14A and finally the Tribunal directed the AO to re-compute the disallowance keeping in view the guidelines mentioned therein. Following the judgement of the Tribunal we direct the Assessing Officer to re-compute the disallowance, if any, under section 14A read with Rule 8D of the I.T. Rules keeping in view the guide-lines set out by the Tribunal in the order for the assessment years 2011-12 to 2014-15. This ground is partly allowed. Disallowance of write off of bad debts - AO held that the amount written off by the assessee was not allowable as deduction u/s 36 since the same was not part of profit and loss account and was in the nature of trade advances - HELD THAT:- We hold that since the assessee had advanced the loan to its employee on account of business interest and due to shut down of the operations entity the loan become irrecoverable and was written off by the assessee along with the imprest lying with the employee who was looking after day-to-day business and the same is allowable as business loss u/s 28 of the Act. As regards the Sundry advances written off, we observe that the same was provided as advances to various parties for entering into a new business of supply of packaged food items and since the business could not be materialized the assessee had written off the sundry advances given to various parties. Mumbai Tribunal in the case of DCIT Vs. M/s. Edelweiss Capital Ltd. [ 2011 (2) TMI 284 - ITAT MUMBAI] held that the moneys advanced for development of web site of the assessee which was written off subsequently for the reason that the web site did not materialize and the advances became irrecoverable the write off claim by the assessee is a loss incidental to the business and, therefore, allowable as business loss in terms of the provisions of section 28 - Therefore, sundry advances written off by the assessee are allowable as deduction under section 28 of the Act as business loss. We direct the AO to delete the disallowance made out of bad debts. This ground is allowed. TP Adjustment in respect of receipt of receivables from AE - HELD THAT:- As following the order of the co-ordinate bench in the case of L.T. Foods Ltd. ( 2022 (4) TMI 1499 - ITAT DELHI] we direct the Assessing Officer to delete the transfer pricing adjustment made on account of receivables from AE. This ground is allowed. Deduction u/s 80IB(11A) - Denial of deduction as assessee was engaged in manufacture and sale-purchase of rice and not storage handling transportation of food grains as provided under that section - HELD THAT:- On perusal of the order of the Tribunal in assessee s own case for the assessment year 2009-10 [ 2021 (6) TMI 258 - ITAT DELHI] we observe that the issue in appeal has been decided by the Tribunal in assessee s favour holding that the deduction u/s 80IB(11A) of the Act is allowable in the case of the assessee as it fulfills the parameters of the exemption clauses specified under this section.

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• 2023 (5) TMI 316
  Rectification of mistake u/s 254 - Scope of rectification order - allow correcting the errors of law or re-appreciating the factual findings - Tribunal quashed the intimation passed u/s. 143(1) passed by CPC, without affording an opportunity to the assessee to make out the adjustment either in writing or in electronic mode as per the 1st proviso to Section 143(1) of the Act - HELD THAT:- As seen from the Tribunal order, the ld. D.R. could not contravent that any notice was sent by CPC as per first proviso to Section 143(1)(a) during the course of the hearing of the appeal. There is no further reference to the so called notice dated 03.09.2019 issued by CPC to the assessee for the proposed adjustment to be made in the 143(1) intimation order. Thus the Revenue failed to produce the required documents before the Tribunal and by this Misc. Application producing the new document that too from the office record of the Revenue and requesting to recall the order, which is not permissible u/s. 254(2) of the Act. The present Misc. Application filed by the Revenue is to review the earlier order/decision of the Tribunal which is not permissible u/s. 254(2) - Further as per Rule 18(6) of the ITAT Rules the so called notice dated 03.09.2019 is not part of the record of the Tribunal while passing the order. Thus the tribunal has not committed any mistake or error, therefore the present M.A. is devoid of merits and the same is liable to be dismissed. Misc. Application filed by the Revenue stands dismissed.

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• 2023 (5) TMI 315
  Reopening of assessment u/s 147 - receipt of accommodation entries - reasons to believe - reopening based on information received from Investigation Wing - HELD THAT:- On logical analysis the reasons recorded by the AO as clearly noted that the AO has merely reproduced the information and modus operandi of accommodation entries provider thereafter he noted a detailed chart containing five entries and below the chart he noted that it is a fresh information regarding the fact that the assessee is a beneficiary of bogus accommodation entries which represents undisclosed income/ income from other sources even upto this stage the AO was not characterize the entry found by the Investigation Wing. Even in the last para he clearly stated that on the basis of information received from Investigation Wing he has reason to believe that income has escaped income. No exercise has been undertaken of the AO to ensure as what were the character of entries and what is basis of which he has reason to believe that income as escaped assessment. No hesitation to hold that from the reasons recorded we are unable to see any exercise done by the AO to ensure what is the character of alleged accommodation entries and no exercise has been undertaken by him regarding impugned five entries tabulated in the reasons recorded. In the last operative part he again reiterated that on the basis of information received from Investigation Wing he has reason to believe that income as escaped assessment. Therefore, it is clear that AO has acted only on the basis of information received from Investigation Wing without any exercise it has own level and only on the basis of borrowed satisfaction, he initiated the reopening of assessment u/s 147 and issued notice u/s 148 of the Act, which are invalid being bad in law and liable to be quashed.

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• 2023 (5) TMI 314
  Penalty u/s 271AAB(1A) - amount disclosed by the appellant during the search - HELD THAT:- Once the income was found to be undisclosed income within the meaning of clause (c) of the Explanation, then the AO is required to impose penalty as provided under section 271AAB(1)(a) of the Act. In the present case, the search and seizure action was carried out in the premises of group of M/s. Moksha Infracon Pvt. Ltd and M/s. Kaveri Erstwhile M/s. K V R Rail Infra Projects Pvt. Ltd on 09.08.2019 and notice u/s 153A was issued and in response to the notice, the assessee had admitted an income AO had mentioned that the assessee in the sworn statement had admitted an amount of Rs.1 crore as undisclosed income for various assessment years and the above said aspect was accepted by the assessee in the affidavit filed on 27.08.2019. The above said fact of admitting the undisclosed income of various assessment years was not a stand alone admission of income but the admission of income was supported by the loose sheets etc., which were found during the course of search. Admittedly, once the document which has the characteristics of undisclosed income found and recovered during the course of search and based on such document, the assessee made the declaration and thereafter, filed return of income, then in that eventuality, in our view, the said income would partake the characteristics of undisclosed income . Hence, the action on the part of the Assessing Officer imposing penalty under section 271AAB(1A) and thereafter, confirming by the ld.CIT(A) cannot be faulted with. Accordingly, the appeal of the assessee is dismissed.

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• 2023 (5) TMI 313
  Condonation of delay of 107 days filling appeal before CIT-A - CIT-A not condoning the delay in filing first-appeal before him - Rectification u/s 154 - HELD THAT:- From a reading of section 154(8) that the AO was having a time-limit of 6 months to pass order on such application of assessee. Assessee was justified in waiting for about 5 months and certain days for the outcome of rectification and thereafter filing first-appeal when there was no response from AO. Thus, there was certainly a reasonable cause on the part of assessee in filing-appeal belatedly. DR does not have any reason to negate/contradict this. Although the CIT(A) has taken a view to dismiss the first appeal of assessee; but in the very same order he has also decided the first appeal on merit at length. Assessee has a strong case for condonation of delay in filing first-appeal before Ld. CIT(A). We accept assessee s submissions and reverse the decision of dismissal taken by Ld. CIT(A). The assessee succeeds in this ground. Exemption u/s 11/12 - Entitlement of exemption as claimed in the return of income, when the audit-report (Form No. 10B) was filed belatedly after processing of return u/s 143(1)? - HELD THAT:- We are convinced that the controversy is directly settled in favour of assessee by decision in Savitri Foundation [ 2022 (8) TMI 1372 - ITAT MUMBAI] where as following the decision of Mumbai Metropolitan Regional Iron Steel Market Committee[ 2015 (4) TMI 512 - BOMBAY HIGH COURT] held that late filing of required documents would not disentitle the assessee from availing benefit of section 11 of the Act. We are of the view that in the present case, the assessee can t be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report. We, therefore, deem it fit to remand this matter back to the file of AO for a fresh assessment after considering the audit-report filed by assessee, in accordance with law. These grounds are accordingly allowed.

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• 2023 (5) TMI 312
  Unexplained/unaccounted investment u/s. 69A - assessee had made investment in a SRA project of Sadabahar CHS at Dharavi and the evidences related to the said project was seized during the course of the search/survey as loose paper - HELD THAT:- It is pertinent to point out that the assessee has not complied with the notices neither before the A.O. nor before the first appellate authority. The assessee has also failed to furnish any documentary evidences in support of his claim, nor has the assessee contradicted the statement of Shri Jiva Rathinam by any supporting evidences. It is also observed that the assessee was given several opportunities before the A.O. and also before the ld. CIT(A) during which the assessee has failed to bring any evidences to contradict the said fact. The assessee has also failed to furnish any documentary evidences in support of its claim even before us. In the absence of any contradictory facts, we hold that the addition made u/s. 69 of the Act is to be sustained. Ground raised by the assessee is dismissed. Addition as unexplained, unaccounted investment u/s. 69 - HELD THAT:- The assessee during the assessment proceeding has consented that the tenancy rights were acquired and pay orders for the same was obtained by four parties namely Shakti Traders, Saurabh Enterprises, Prince Sons and Omkar Trading and that the power of attorney was executed by these parties in favour of the assessee. As observed that the assessee has failed to furnish any confirmation from the said parties that the pay orders had been obtained from them. Assessee has merely produced an unregistered power of attorney and nothing more to contradict the said fact. The assessee has failed to substantiate the payments received and paid to the said parties before the lower authorities. Assessee has also failed to furnish any documentary evidences to prove that the impugned amount was not unaccounted investment before us. For this reason, we hereby confirm the said addition made u/s. 69 . Addition u/s.69 - unexplained /unaccounted investment related to the payments made to Shri Milan Dalal - HELD THAT:- As observed that the statement of Shri Dilip Patel was not rebutted by the assessee and also the fact that the assessee has not produced any documentary evidences to rebut the stand of the A.O. that the impugned amount is unexplained and unaccounted investment made by the assessee as per section 69 of the Act. The assessee has failed to substantiate his contention by way of any supporting evidences even during the second appellate proceeding. Hence, we are inclined to dismiss ground raised by the assessee. Unexplained income relating to unsecured loans taken from various parties - HELD THAT:- As evident that the assessee has not discharged his onus by proving the identity, genuineness and creditworthiness of the creditors which is mandated under the provisions of the law. The assessee has not filed any additional evidences before us to substantiate her claim. We hereby confirm the said addition on the ground that the assessee has failed to prove the genuineness of the loans, identity and creditworthiness of the creditors. Hence, ground raised by the assessee is dismissed. Addition u/s. 69 as unexplained and unaccounted investment - HELD THAT:- It is pertinent to point out that the assessee has failed to furnish any confirmation letter from the alleged parties whom according to the assessee had made the impugned payment. The assessee has failed to substantiate both the payments amounting to Rs.17,10,000/- each, thereby confirming the same to be as unexplained and unaccounted income as per section 69 of the Act and hence the impugned addition is to be added as unexplained and unaccounted investment u/s. 69 of the Act. Hence, ground is dismissed. Undisclosed and unexplained investment as cash payment made - HELD THAT:- Even before us, the assessee has failed to furnish documentary evidences to show that the impugned amount was out of the advance received from M/s. Genelec Ltd. Since the assessee has failed to substantiate his claim, we hereby confirm the impugned addition. Hence, ground raised by the assessee is hereby dismissed. Addition as unaccounted, undisclosed income on the basis of the seized loose papers - HELD THAT:- It is observed that the assessee has failed to explain the sources of payment to the above mentioned parties neither before the lower authorities nor before us. Hence, we find no infirmity in the order of the lower authorities in upholding the impugned addition. Hence, ground raised by the assessee is dismissed. Cash payment made as per the loose papers seized from the business premises of the assessee - HELD THAT:- It is pertinent to point out that the assessee has failed to substantiate the fact that the impugned payment was made on behalf of M/s. Genelec Ltd. to Shri Milan Dalal for providing consultancy services. The assessee has also failed to corroborate the fact that the said payment was made from the advance received from the M/s. Genelec Ltd. We do not find any infirmity in the order of the ld. CIT(A) in upholding the impugned addition. Hence, ground raised by the assessee is dismissed. Unexplained investment on account of bogus loans - HELD THAT:- On perusal of the records, it is observed that the assessee has not furnished the original copies of the loan confirmations and even otherwise the confirmation letters were filed without the address and PAN of the creditors. Since the assessee has failed to prove the loan transaction to the satisfaction of the A.O., the same was added as unexplained income in the hands of the assessee. Assessee has also failed to furnish the relevant documentary evidences neither before the first appellate authority nor before us and, hence, we do not find any infirmity in the order of the ld. CIT(A). We hereby dismiss this ground of appeal raised by the assessee. Unexplained investment on account of bogus loans - HELD THAT:- On perusal of the records, it is observed that the assessee has not furnished the original copies of the loan confirmations and even otherwise the confirmation letters were filed without the address and PAN of the creditors. Since the assessee has failed to prove the loan transaction to the satisfaction of the A.O., the same was added as unexplained income in the hands of the assessee. The assessee has also failed to furnish the relevant documentary evidences neither before the first appellate authority nor before us and, hence, we do not find any infirmity in the order of the ld. CIT(A). We hereby dismiss this ground of appeal raised by the assessee. Addition as additional business income - HELD THAT:- The primary onus is casted upon the assessee who in the present case has failed to discharge his onus by contradicting the facts found during search proceedings and it is also pertinent to point out that the said facts found in the loose papers was also corroborated by the statement of the assessee though was retracted after a period of 2 years 8 months. From the above, we are of the considered opinion that the assessee has failed to substantiate his claim neither before the lower authorities nor before us inspite of several opportunities being rendered to the assessee.

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• 2023 (5) TMI 311
  Computation of capital gains - Non-resident - Long term capital Gain / loss on share transactions - Benefit of indexation - applying the provisions of section 112(1)(c)(iii) instead of 1st proviso to section 48 of the Act - HELD THAT:- Section 112(1)(c)(iii) is a special provision for the computation of capital gains, in case of a non-resident, arising from the transfer of unlisted shares and securities. While, on the other hand, section 48 of the Act is a general provision, which deals with the mode of computation of capital gains in all the cases of transfer of capital assets. It is a well-settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim Generallia specialibus non derogant . It is also a well-settled rule of construction that when, in an enactment, two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, the effect should be given to both. Therefore, if the submission of the assessee that in the present case the income chargeable under the head capital gains is to be computed only as per section 48 of the Act is accepted, then the same would render the computation mechanism provided in section 112(1)(c)(iii) of the Act completely otiose and redundant. We also find no merits in the assessee s submission that if the case of the assessee is governed under two provisions of the Act, then it has the right to choose to be taxed under the provision which leaves him with a lesser tax burden. In the present case, the capital gains has to be computed only by reference to provisions of section 112(1)(c)(iii) of the Act. Further, it cannot be disputed that if as per section 112(1)(c)(iii), the 1st and 2nd proviso to section 48 of the Act are not given effect, the assessee will have a long-term capital gains from the sale of unlisted shares of the Indian company. Therefore, we find no infirmity in the orders passed by the lower authorities taxing the long-term capital gains as per section 112(1)(c)(iii) - As a result, grounds raised by the assessee are dismissed.

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• 2023 (5) TMI 310
  Disallowance of expenditure being the premium actually paid to LIC under the Group Gratuity-cum-Life Insurance Scheme u/s 36(l)(v) - HELD THAT:- We note that assessee is making payment to the LIC Department in the gratuity scheme which was approved earlier by Commissioner of Income Tax. However, the assessee has not produced the necessary certificate before the lower authorities as it would not available with him, therefore, deduction was denied. The said deduction has been claiming by assessee since a long, therefore by following the principle of consistency and considering the facts and circumstances of the case, deduction should be allowed to the assessee. Therefore, we direct the Assessing Officer to allow deduction. Appeal filed by the assessee is allowed.

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• 2023 (5) TMI 309
  TP Adjustment - ALP adjustment - royalty segment treated as an international transaction u/s 92B - HELD THAT:- This issue is no more res integra since learned co-ordinate bench s latest order in taxpayer s own case for A.Y. 2017-18 [ 2023 (1) TMI 1029 - ITAT PUNE] held that international transaction of payment of Royalty by the assessee for use of technical support cannot be clubbed with other international transactions under the Manufacturing segment. Both the parties are fair enough in not pinpointing any distinction on the relevant facts as well as law since the only exception taken is that of availability of relevant details for the purpose of computing the impugned adjustment.The fact remains that the foregoing co-ordinate bench has already decided the instant issue in principle. Faced with the situation, we adopt judicial consistency and direct the learned AO/TPO to frame the consequential computation as per law in very terms preferably within three effective opportunities of hearing. The assessee s instant former instant substantive ground succeeds for statistical purposes in very terms. Duty drawback addition - Assessee sole plea during the course of hearing is that the same already stands assessed in the succeeding assessment year 2019-20 i.e. the year of actual receipt - HELD THAT:- Faced with the situation, we deem it appropriate to restore the instant issue as well back to the Assessing Officer to ensure that there shall not be any double addition for the instant issue once this amount has already been assessed. He shall finalize the consequential factual verification of issue in very terms.

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• 2023 (5) TMI 308
  Unexplained cash credit u/s 68 - disallowance of brokerage commission and treated the same as unaccounted cash credit - assessee failed to provide sufficient documentary evidence; name and address of the parties from whom brokerage commission income was received - HELD THAT:- As decided in assessee s own case [ 2021 (4) TMI 801 - ITAT SURAT] assessee has shown commission income in original return of income. We find convincing force in the submissions of assessee that the assessee has already filed Return of Income under section 139 of the Act before the date of initiation of assessment proceeding and much less after completion of investigation carried out by Investigation Wing of Revenue, it could not in any way be termed as unexplained income, the addition of unexplained income is purely guess work of assessing officer - no justification in treating the commission income as unexplained cash credit, accordingly appeal of the assessee is allowed. Considering the decision of Tribunal on similar treatment of commission income as unexplained cash credit, we respectfully following the decision of Tribunal allowed ground No.1 of the assessee Estimation of income of assessee - HELD THAT:- We find that neither the assessee has shown his true source of income nor the assessing officer brought on record the evidence regarding source of income of assessee. The only evidence, on the basis of which the income of assessee is estimated in the school admission form. It is settled position under law that only real income accrued or earned by individual, can only be brought to tax. Considering the decision of Hon ble Supreme Court in Kishan Chand Chellaram [ 1980 (9) TMI 3 - SUPREME COURT] and Andaman Timber [ 2015 (10) TMI 442 - SUPREME COURT] there grounds of appeal is restored back to the file of assessing officer with the direction to grant opportunity to the assessee to explain the nature and relevance of school admission form and to lead any other evidence if so desired by the assessee to disprove the contents of such school admission form. It is made clear that as the copy of said school admission form is scanned by assessing officer in the assessment order the assessee shall not insist for supply of fresh copy thereof. Assessee ground allowed for statistical purpose.

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• Customs

• 2023 (5) TMI 307
  Valuation of imported goods - PU Coated Fabric - rejection of declared value - value appears at lower side as compared to the NIDB data of similar imports at other ports and also contemporaneous import at the same port - HELD THAT:- From the declaration given by appellant, it is apparent that the revised valuation has been accepted under duress just in order to save detention charge. It cannot be treated as a voluntary consent. In this circumstances the right of appellant challenge the assessment cannot be disputed. It is seen that the case law relied by the Commissioner (Appeal) in the impugned order is only in respect of cases where there was voluntary acceptance of the enhancements of value. From the impugned order, it is noticed that it has not examined the contemporaneous NIDB data, but relies solely on various letters of different authorities, like directorate of valuation, DRI or DC (SIIB). Such reports cannot be any basis of rejection of declared value in terms of rule 12 of the Customs Valuation Rules, 2007. The rejection can only be done on the basis of data of contemporaneous imports. Impugned order set aside - appeal allowed.

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• 2023 (5) TMI 306
  Refund of excess duty paid under sub-section (1) of Section 18 of Customs Act, 1962 - provision available under sub-section (2) of Section 18 ibid to reject refund of such excess duty paid, or not? - principles of unjust enrichment - certificate issued by the Chartered Accountant satisfy that the burden of duty has not been passed on third party or not - HELD THAT:- The assessment was initially done under sub-section (1) of Section 18 of the Customs Act, 1962. The said provision deals with provisional assessment of duty. Sub-section (2) of Section 18 deals with the actions to be taken on finalization of such provisional assessment. The provisions under sub-section (2) of Section 18 of Customs Act, 1962 provide for 2 situations. One situation is when the provisionally assessed duty is less than the finally assessed duty. That situation is not present in the case on hand. The other provision is about the action to be taken when provisionally assessed duty is higher than finally assessed duty. These provisions are applicable in the present case. The same sub-section (2) has provided that when the provisionally assessed duty is higher than the finally assessed duty then the original authority has two options. One is either to credit such refundable amount to consumer welfare fund when duty burden has not been borne solely by the importer and the other situation is that if it is establish that the importer has not passed on the incidence of such duty then the excess amount is to be refunded to the importer. The order is not in accordance with the provisions of sub-section (2) of Section 18 of Customs Act, 1962. The original authority has, for the reason of unjust enrichment, rejected the refund claim. When excess duty is paid under sub-section (1) of Section 18 of Customs Act, 1962, under sub-section (2) of Section 18 ibid there is no provision for rejection of refund of excess duty collected initially. Matter remanded back to the original authority with a direction to decide the case in accordance with the provisions of Customs Act, 1962. The appeal is allowed by way of remand.

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• 2023 (5) TMI 305
  Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - it is alleged that appellant is responsible for the use of Customs Broker License by its employees and presence of printed baggage declaration list of items containing unaccompanied baggage having the logo and the name of the appellant indicates involvement of the appellant in dealing with the goods which were found undeclared in the accompanied baggage - whether order was passed in total non-application of mind - violation of principles of natural justice. As Per : Anil G. Shakkarwar HELD THAT:- This Bench has carefully gone through the records of the case and the submissions made. This Bench has gone through the grounds of appeal as well as submissions made. This Bench has not found that the impugned order was passed without application of mind nor this Bench has found that the impugned order is unreasoned and arbitrary. This Bench, therefore, upholds the impugned order, does not interfere with the same and reject this appeal. As Per: Dr. Suvendu Kumar Pati HELD THAT:- As we have observed from the Daily Order sheet copy of the enquiry proceedings conducted by the Asst. Commissioner, CGST Audit II, Mumbai annexed to appeal memo at page 203 and 204, it is an undisputed fact that Mr. Pinakin A. Sodha was an employee of CHA firm and was in possession of customs pass that got renewed for the entire period of subsistence of licence. Therefore, such evidence recorded by the Assistant Commissioner during the enquiry proceedings is admissible evidence since the same cannot stand in the footing of statement recorded under 108 of Customs Act, 1962 and the same is in compliance with Regulation 17 of CBLR 2018 - custom broker is to be held responsible for acts and omissions of his employees during their employment in view of the operation of section 17(9) of the CBLR, 2013 for which we also confirm the order of revocation of CB licence of the appellant along with imposition of penalty of Rs. 50,000/- and forfeiture of its security deposit amount made under Regulation 18 of CBRL, 2013. At this juncture, it is also required to be mentioned here that cause of action in seeking relief through this appeal has already expired since 31.12.2017 even before the order of Commissioner Customs was passed, as appellant was granted licence to operate as customs broker up to that date and thereafter nothing is available on record to indicate that appellant had sought for renewal or obtained for a new licence to operate as customs broker after expiry of its existing licence under revocation, for which outcome of this appeal would have no resultant effect on the appellant s future entitlement - The appeal is not maintainable and same is liable to be dismissed. FINAL ORDER:- The appeal is dismissed and the order passed by the Principal Commissioner of Customs (General), Mumbai dated 09.01.2020 is hereby confirmed.

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• 2023 (5) TMI 304
  Benefit of exemption - import of machine for construction of roads - Violation of the condition of actual use - Serial No. 230 of Notification No. 21/2002-CUS dated 01.03.2002 - denial of benefit on the ground that the rigs were not even sent to NHAI site after importation and at the time of importation the appellant company had claimed that the appellant company was awarded with a road construction contract by NHAI and that the rigs were not found in the possession of the appellant company. Whether the imported goods were used for construction of roads? - Whether they were used for any other purpose than construction of roads? - Whether the imported goods were sold within a period of five years from the date of importation? - Whether the imported goods were otherwise disposed of? HELD THAT:- There is no dispute that the imported goods were used for construction of roads from March 2004 to October 2004. Though the goods were shifted to DMRC site there is no statement on record from any official of DMRC that the goods were utilize for any other purpose than construction of roads. Had the goods been used for any other purpose than construction of roads then it was possible for Revenue to lay their hands on such evidence. From the case records, such evidence is not forth coming. Therefore, it is not proved that the goods were used for any other purpose than construction of roads. Revenue has not established that the goods were sold by the appellants. The only issue remaining is whether the goods were otherwise disposed of by the appellants. From the case records, it appears that though at the time of seizure the goods were in custody of other person than the importer, however Revenue has not established that the goods were disposed off to other person forever and importer did not have any control over the goods. Further, the control was with the appellant that is why the installments were being paid for the finance raised by the appellant. Above discussion establishes that the importer company has not violated the specified conditions of exemption notification and therefore, the impugned order is not sustainable. Appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (5) TMI 303
  Claim of secured creditor - right on the basis of the pledged shares - financial debt under the IBC defined as Security Interest under Section 3(31) of the IBC - the NCLT observed that the appellants not having advanced any money to the Corporate Debtor as a financial debt would not be coming within the purview of financial creditor of the Corporate Debtor. Making above observations, the NCLAT has dismissed the appeal. HELD THAT:- The difficulty which arises in the present case is that, in terms of the decision of this Court in Anuj Jain [[ 2020 (2) TMI 1259 - SUPREME COURT] ] and Phoenix ARC [[ 2021 (2) TMI 121 - SUPREME COURT] ], Appellant No. 1 Vistra is to be treated as a secured creditor, but would not fall under the category of financial creditors or operational creditors. Therefore, they would be denied the benefit of the amendments to Section 30(2) of the Code made vide Act No. 26 of 2019, or for that matter Act No. 26 of 2018. Consequently, a very odd and a peculiar situation is created where a secured creditor is denied the benefit of the secured interest i.e., the right to exercise the sale of the secured interest, yet not be treated as either a financial creditor or an operational creditor. In terms of Section 52 of the Code, a secured creditor in liquidation proceedings has the right to relinquish its security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator in the manner specified under Section 53 of the Code. The second option given to the secured creditor is to realise the security interest in the manner specified in aforesaid Section. Rule 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Liquidation Process Regulations deals with the presumption of security interest, which we need not elaborate for the present decision. If the secured creditor relinquishes the security interest, it is then entitled to priority in payment under clause (b) to subsection (1) to Section 53 of the Code. The debts owed to the secured creditor in such event, rank pari passu with the workmen s dues for the period 24 months preceding the liquidation commencement date. As per Section 52(9) of the Code, where the proceeds on realisation of secured assets are not adequate to repay the debts due to the secured creditors who have exercised the option to realise the security interest, the unpaid dues of such secured creditors are to be paid by the liquidator in terms of clause (e) of subsection (1) of Section 53 of the Code. Appellant No.1 Vistra, a secured creditor, is being denied the rights under Section 52 as well as Section 53 of the Code in respect of the pledged shares, whereas, the intent of the amended Section 30(2) read with Section 31 of the Code is too contrary, as it recognises and protects the interests of other creditors who are outside the purview of the CoC - the answer to this tricky problem is twofold. First is to treat the secured creditor as a financial creditor of the Corporate Debtor to the extent of the estimated value of the pledged share on the date of commencement of the CIRP. This would make it a member of the CoC and give it voting rights, equivalent to the estimated value of the pledged shares. However, this may require reconsideration of the dictum and ratio of Anuj Jain and Phoenix ARC, which would entail reference to a larger bench. In the context of the present case, the said solution may not be viable as the resolution plan has already been approved by the CoC without Appellant No. 1 - Vistra being a member of the CoC. Therefore, we would opt for the second option. The second option is to treat the Appellant No. 1 Vistra as a secured creditor in terms of Section 52 read with Section 53 of the Code. In other words, we give the option to the successful resolution applicant DVI (Deccan Value Investors) to treat the Appellant No.1 Vistra as a secured creditor, who will be entitled to retain the security interest in the pledged shares, and in terms thereof, would be entitled to retain the security proceeds on the sale of the said pledged shares under Section 52 of the Code read with Rule 21A of the Liquidation Process Regulations. The second recourse available, would be almost equivalent in monetary terms for the Appellant No. 1 Vistra, who is treated it as a secured creditor and is held entitled to all rights and obligations as applicable to a secured creditor under Section 52 and 53 of the Code. This to our mind would be a fair and just solution to the legal conundrum and issue highlighted. The submission is that the Appellant No. 1 Vistra had not objected to the resolution plan submitted by the erstwhile resolution applicant LHG and, as a sequitur, its non-classification as a financial creditor in the CoC of the Corporate Debtor Amtek. Though this argument had appealed and had weighed with the NCLAT, in our opinion is untenable since the resolution plan submitted by erstwhile resolution applicant LHG did not in any way affect the rights or interests of the Appellant No. 1 Vistra as a secured creditor in respect of the pledged shares. Appellant No. 1 Vistra has elaborately explained that LHG etc. were in negotiations with them so as to redeem the pledge and acquire the shares. The impugned judgment of the NCLAT affirming the view taken by the NCLT is partly modified in terms of our directions holding that appellant no.1 M/s. Vistra ITCL (India) Limited would be treated as a secured creditor, who would be entitled to all rights and obligations as applicable to a secured creditor in terms of Sections 52 and 53 of the Code, and in accordance with the pledge agreement dated 05.07.2016. Appeal disposed off.

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• Service Tax

• 2023 (5) TMI 302
  Non payment of service tax - Banking and other financial services - foreclosure charges - penal charges - insurance administration fees - period from 01.07.2003 to 30.03.2008 - Invocation of extended period of limitation - suppression of facts or not - interest - penalty. Whether the foreclosure charges charged by the banks and non-banking financial companies on premature termination of loan is subject to levy of service tax under BOFS as defined under section 65 (12) of the Finance Act, 1994? - HELD THAT:- The larger bench of the Tribunal in the case of COMMISSIONER OF SERVICE TAX, CHENNAI VERSUS M/S REPCO HOME FINANCE LTD. [ 2020 (7) TMI 472 - CESTAT CHENNAI] has considered the issue and has held that such charges are not liable to service tax - the demand on foreclosure charges cannot sustain. Service tax on penal charges, which are recovered from the customers when the customer defaults in making timely payment of the sums as agreed in the loan agreement and in the case of dishonor of cheque by the customer - HELD THAT:- The collection of penal charges arises on account of a separate cause of action which is independent of lending services rendered by the appellant. Here, decision in the case of M/S. ROHAN MOTORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, DEHRADUN [ 2020 (12) TMI 1014 - CESTAT NEW DELHI] referred, wherein it has been held by the Tribunal that the demand of service tax on the amount collected on account of bouncing of cheques is not sustainable as such amount is penal in nature and is not towards consideration for any service. In the following cases, the Tribunal has held that the amounts collected as penalty/penal charges penal charges are not chargeable to service tax as the same are not consideration under the finance Act, NORTHERN COALFIELDS LTD. VERSUS COMMISSIONER CGST, CE CUSTOMS - JABALPUR [ 2023 (1) TMI 934 - CESTAT NEW DELHI] and M/S MAGMA FINCORP LTD VERSUS COMMISSIONER OF SERVICE TAX, KOLKATA, COMMISSIONER OF SERVICE TAX VERSUS M/S. MAGMA SHARCHI FINANCE LTD [ 2015 (6) TMI 442 - CESTAT KOLKATA] - thus the demand of service tax on penal charges is not sustainable in law and is set aside. Demand of service tax on insurance administration fees under the category of business auxiliary service - HELD THAT:- For a transaction to be covered under the taxable category of BAS, the service rendered must be auxiliary to some business activity of the service recipient has held by this Tribunal in the case of SUKHMANI SOCIETY FOR CITIZEN SERVICES VERSUS C.C.E S.T., CHANDIGARH [ 2016 (9) TMI 588 - CESTAT CHANDIGARH] wherein it has been held that business auxiliary services would become chargeable to service tax only if the service is rendered in relation to business of recipient. Further, it is found that in the present case the borrowers are individuals who are availing personal loans and these loans have not been availed for any business or commercial purpose and hence the service provided by the appellant is not classifiable under business auxiliary service. This issue is also decided against the Revenue and in favour of the appellant. Invocation of extended period of limitation - HELD THAT:- Since there were divergent views of the Tribunal and the issue was referred to the larger bench for final disposal clearly shows that the issue involves interpretation of law and hence extended period cannot be invoked - Reliance placed upon the decision in the case of M/S. BHARTI AIRTEL LTD VERSUS C.C.E. -BANGALORE-I [ 2021 (4) TMI 306 - CESTAT BANGALORE] - Besides this the department could not establish any fraud, collusion, willful misstatement or suppression of facts on the part of the appellant to invoke extended period of limitation. Interest - Penalty - HELD THAT:- Demand of interest is not maintainable since the demand of tax itself is not sustainable. Similarly, the penalty is also not imposable when the tax demand is not sustainable. Appeal allowed.

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• 2023 (5) TMI 301
  Maintainability of appeal - non-payment of required pre-deposit amount in cash - imposition of Service tax on the basis of turnover shown in the Income tax returns of 2013-14 - rejection of Appellant s appeal filed before the Commissioner (Appeals) challenging such order - HELD THAT:- The appeal should not be admitted for hearing by the Commissioner (Appeals) in the event of non-compliance of the provisions mentioned above but ones appeal is admitted for hearing Commissioner (Appeals) has to follow the dictates of law provided under Section 35A(iv) and dispose of the appeal stating the points for determination and the decision thereon with reasons for such decision and he should not have disposed of the appeal after hearing the appeal only for non-compliance of pre-deposit provisions in view of the wordings available in the text underlined above, namely shall not entertain any appeal and appeal filed by the Appellant is liable for rejection . To put it otherwise, there is a difference between dismissal of appeal and rejection of the same. Having regard to the fact that Appellant had removed the defects and paid the entire pre-deposit amount of 10% in cash through Challan for filing appeal before the CESTAT, as has been noted in order dated 28.02.2023 for admitting the appeal, it is considered proper to remind the appeal back to the Commissioner (Appeals) for determination of issues and his finding on the same as contemplated in Section 35A(iv). Appeal allowed by way of remand.

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• 2023 (5) TMI 300
  Refund of unutilized CENVAT credit - Export of services - intermediary service - place of provision of service - to be decided under Rule 3 or Rule 8 9 of Place of Provision of Services Rules, 2012 or not - HELD THAT:- A plain reading of the definition of intermediary as defined under Rule 2(f) of Place of Provision of Services Rules, 2012, makes it clear that to attract the said definition there should be two or more persons besides the service provider. In other words an intermediary is someone who arranges or facilitates the supplies of goods or services or securities between two or more persons. It is thus necessary that the arrangement requires a minimum of three parties, two of them transacting in the supply of goods or services or securities (main supply) and one arranging or facilitating the said main supply. Therefore, an activity between only two parties cannot be considered as an intermediary service. Sub-contracting for a service is also not an intermediary service. The supplier of main service may decide to outsource the supply of main service, either fully or partly, to one or more sub-contractors. Such sub-contractor provides the main supply, either fully or a part thereof and does not merely arrange or facilitate the main supply between the principal supplier and his customers and therefore clearly not an intermediary. Who is an intermediary and what is intermediary service has been clarified by Central Board of Indirect Taxes and Customs (CBIC) vide Guidance Note dated 20.06.2012 and under GST regime also a clarification has been issued by CBIC on 20.09.2021 both of which are in line with the discussions made hereinabove about intermediary . On perusal of the agreements as well as submission of the learned Chartered Accountant for appellants, it is found that the Product development Services in relation to creation of new generic drug is limited to the performing of various services by the appellant on Formulation development, Bio-Chemical research, Bio-study research, Bio-equivalent study, clinical study and Active Pharmaceutical Ingredient (API) development as detailed in the agreement dated 02.02.2008 and 10.8.2012, and that too as a backend process - There is nothing on record to show that the appellant is liasioning or acting as intermediary between the foreign service recipient and any other person. Therefore, the finding of the Commissioner (Appeal) that the appellants are an intermediary is misplaced. In view of the facts involved herein, it is found that the appellants cannot be termed as an intermediary and their services provided to Foreign Service recipient cannot be termed as intermediary services . If the Revenue is not in agreement with the claims of the appellants and if, according to Revenue, the services in issue do not fall within the ambit of export of service then the Revenue ought to have initiated the proceedings against the appellants for demanding the Service Tax in respect of taxable service provided by the appellants. Admittedly no such proceedings have been initiated by the Revenue as borne out from the records of the case and therefore in a way Revenue itself has allowed this taxable service provided by appellants as export of service. There are force in the submission of learned Chartered Accountant about applicability of Rule 3 of Place of Provision of Services Rules, 2012 which provides that generally the place of provision of service is the location of service recipient. Since in the instant case the location of service receiver having its principal place of business at England, UK therefore the place of provision of service is outside India and hence the services provided in this issue qualify as export of services in terms of Rule 6A of Service Tax Rules, 1994. The impugned order of Commissioner (Appeals) denying refund of CENVAT credit on impugned services are not sustainable in law and therefore the appeals filed by the appellants deserve to be allowed - Appeal allowed.

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• Central Excise

• 2023 (5) TMI 299
  Classification of goods - Zymegold Plus - Dripzyme - classifiable under CTH 3808 as Plant Growth Regulator or under CTH 3101 as Fertilizer? - HELD THAT:- Presence of micronutrients in the products in issue has been taken against the appellants by the learned commissioner. It is interesting to note that plant growth regulators are grouped under CETH 38.08 alongwith other insecticides, fungicides, herbicides and disinfectants, all of which are intended to destroy pathogenic germs, insects, mosses and moulds, weeds, pests to achieve their results. They even considered as pesticides in some parts of the world whereas micronutrients are promoting only growth and health of the plant. A co-ordinate Bench of the Tribunal in the matter of CCE vs. M/s. Aries Agrovet Industries Ltd.[[ 2017 (7) TMI 289 - CESTAT HYDERABAD] ], while taking note of the job etc. of micronutrients has come to the conclusion that micronutrients cannot modify inhibit retard the growth of plants like plant growth regulators and they only promote normal growth - therefore, the presence of micronutrients in the products in issue before us does not make them plant growth regulator. It is also found support on this from the decision of this Tribunal in the matter of COMMISSIONER OF CENTRAL EXCISE MUMBAI II VERSUS ARIES AGRO VET INDUSTRIES LTD [ 2018 (6) TMI 1070 - CESTAT MUMBAI ] in which it has been held that micronutrients and macronutrients are required for agriculture as fertilizers and micronutrients are not plant growth regulators. The department has taken resort to the definition of fertilizer as provided in Fertilizer Control Order, 1985 for changing the classification which, according to us, could not have been done as the definition provided in other statutes, totally unrelated to statute in issue, cannot be made the basis for changing the classification. If the appellants are not complying with or are in violation of any provision of the said order, then it is for the authority mentioned therein to take necessary steps but on that basis the classification cannot be changed at all as the Excise Act is a complete code in itself and the authorities herein have to act within the four corners of the said statute. The impugned order is liable to be set aside as the products in issue are fertilizers and therefore the appellants have rightly classified their products - Appeal allowed.

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• 2023 (5) TMI 298
  Clandestine removal - product alternators manufactured at Unit I is a distinct excisable product or not - alternator in question is classifiable under CETH No. 8501 or 8803 / 8710 of the Schedule to CETA - Unit I is eligible for the exemptions claimed by the appellant or not - method adopted for determining the assessable value is correct or not - Department s contention is that manufacture of excisable goods i.e. complete alternators was being done at Unit I which was being cleared to Unit II without payment of duty during the period May 2003 to February 2008 and July 2008 to March 2009 - suppression of facts or not - extended period of limitation. Whether alternators are finally manufactured excisable goods when cleared from Unit I to Unit II? - HELD THAT:- By invoking Rule 2(a) of the General Rules for Interpretation of the Schedule to the CETA, 1985, to determine the exigiblity of incomplete or unfinished goods even before deciding whether they are marketable, the learned Commissioner has put the cart before the horse. To determine whether the goods are exigible to Central Excise duties, it is first necessary to determine whether manufacture of excisable goods as defined under Section 2(d) of Central Excise Act, 1944, has taken place. Thereafter assessment for duty purposes is to be done and not the other way round. The General Rules come into play only if classification and assessment of excisable goods are involved. General Rules cannot cloth an activity as manufacture of goods on the lines contemplated by Section 2(f) of Central Excise Act, 1944. The said Rule would be of use in determining the classification of incomplete/ unfinished goods, for assessment purposes, when they satisfy the criteria for excisable goods including the fact that they are also marketable in that condition - the lower authority has failed to demonstrate that a distinct marketable commodity known as alternator has been manufactured and come into being at Unit I, to be exigible to Central Excise duties. Classification of goods - HELD THAT:- As regards the classification and rate of duty applicable on alternators if they had been found manufactured at Unit I, it should not make any difference. The appellant states that they have established the sole and principal use of GPU is for servicing of aircrafts. The classification of GPU was decided under CETH 8803 by the Tribunal in the appellant s own case MAK CONTROLS VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE [ 1998 (6) TMI 563 - CESTAT CHENNAI] by relying on Note 3. The Revenue s appeal in the case was also dismissed by the Hon ble Supreme Court. Similarly, the sole and principal use of APU is in armored vehicles and the classification is CETH 8710. Therefore, alternators of APU are also classified under CETH 8710. Whether there are any Section/ Chapter Notes that would take it out of the said classification heading? - HELD THAT:- It is seen that Note 2 of Section XVI contains three rules, dealing with three different categories of parts. (a) Parts which are goods included in any of the headings of Chapter 84 or 85 (b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading and (c) All other parts. From the scheme of the said rules each of these rules has to be applied sequentially as it moves from a specific product to a general product. Alternator gets covered by the first rule as parts which are goods included in any of the headings of Chapter 84 or 85 and hence falls in the category of goods which in all cases are to be classified in their respective headings - Having found a suitable classification, the other two rules of Note 2 of Section XVI, are not relevant in this case. Once the classification of alternators has been discovered within a Chapter and it satisfies the Section/ Chapter Notes, it is not required to further look into Section/ Chapter notes of other Sections to find a probable classification elsewhere - the classification of alternators if it had been found to be manufactured by Unit I would fall under CETH 8501.00 up to 27.2.2005 and under CETH 85016100 / 85016200 with effect from 28.2.2005, as decided in the impugned order and not under CETH 8803/ 8710 as claimed by the appellants. Whether the alternators of Unit I were eligible for the exemption claimed by the appellant? - HELD THAT:- The impugned order has discussed the ineligibility of alternators for exemption under notification 67/95 CE dated16/03/1995 which provides for duty exemption on inputs used within the factory of production in or in relation to the manufacture of the final products. The impugned order reject the claim for exemption on two grounds (a) the goods are not manufactured in the same unit. Unit I and Unit II have different premises and different Central Excise Registration Certificates and hence the alternators are not consumed within the factory. (b) the second condition of the notification is that the final products should suffer duty, which is not so in this case - the appellant was not eligible for the said exemption on alternators during the period covered by the SCN. Claim for exemption under notification 214/86 dated 25/03/1986 - HELD THAT:- This is a procedural issue and in the light of our finding that no manufacture was involved a sympathetic view can be taken and the matter be laid to rest without having to go into the issue in-depth. Value of alternators - HELD THAT:- It is seen that the appellant are amenable to the valuation of alternators, when captively consumed in Unit II, if arrived at as per Rule 8 of the Central Excise Valuation Rules 2000. Their only contention was that if goods from Unit I are to be valued for the purpose of Central Excise duty assessment, then the value based on costing principles should be determined based on the data pertaining to Unit I and not that of Unit II. The same is agreed upon. Extended period of limitation - HELD THAT:- This question would have been relevant only if a demand for duty was involved. Further the question is not pertaining to the core issue of whether the impugned goods are exigible to duty and is also not related to their assessment. Hence the question loses relevance at this stage. Appeal disposed off.

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• 2023 (5) TMI 297
  CENVAT Credit - input services - sales incentives paid by them are in the nature of sales commission or not - Consulting Engineer service - Telecommunication service - Stockbroker service - Company Secretary/Chartered Accountant Services - Insurance Services - Courier service - denial on the ground of nexus with output - Annual Maintenance of Xerox machines - Car rentals - Renting of Immovable property - Tour operating services - Credit denied for not adducing evidence - Renting of office building - Billing in the name of units/service provided to other units - Credit taken twice - Service Tax Registration No. not mentioned in the invoice - Bills in the name of other companies - Without Specified documents - Without documents. Sales incentives paid by them are in the nature of sales commission or not - HELD THAT:- Whether the services rendered by Veljan are in the nature of Sales Promotion as claimed by the Appellant or are in the nature of mere sales on which commission was paid, as claimed by the Revenue, under both the cases the Cenvat Credit cannot be denied to the Appellant - Order procurement itself means that they are canvassing and promoting the products of the Appellant. It is seen that the Adjudicating Authority has relied on the case law of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. [ 2013 (1) TMI 304 - GUJARAT HIGH COURT] - Adjudicating Authority has taken the view that since the incentive is paid @ 10% of the total sales, this incentive is paid only Sales Commission ignoring the fact that without canvassing and procuring the order the sales could not have taken place. Therefore the decision of Cadila Healthcare Ltd actually supports the case of the Appellant. The subsequent clarification given under Circular No. 943/4/2011-CX dt.29.04.2011 and addition of Explanation to the definition of BAS vide Notification No. 02/2016 dt.03.02.2016 shows the legislative intent that the assessee should not be deprived of the Cenvat Credit even when mere sales commission is paid where sales promotion may not be involved. The amended notification, in effect means that the Cenvat Credit would be eligible not only for the sales promotion services per se but also for commission paid on pure sales - In any view of the matter as to whether the services rendered by Veljan are in the nature of Sales Promotion as claimed by the Appellant or are in the nature of mere sales on which commission was paid, as claimed by the Revenue, under both the cases the Cenvat Credit cannot be denied to the Appellant. CENVAT credit denied on account of credit taken for various services like consulting engineer, stock broker, etc. - HELD THAT:- The factual details are required to be verified by the Adjudicating Authority to come to a conclusion as to whether the Appellant is eligible for CENVAT credit or not. This exercise cannot be taken up at the Tribunal level - matter remanded to the Adjudicating Authority for confirmation of such demands - The Adjudicating Authority may pass an Order after due verification of all documentary evidence produced before him for the present appellant. Since the issue pertains to 2006-08, the Adjudicating Authority is directed to pass a suitable order within Four months from the date of receipt of this order. Cenvat Credit taken on Incentives paid, credit allowed, Appeal allowed. Cenvat Credit in respect of various services, Matter remanded to the Adjudicating Authority. Appeal disposed off.

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• 2023 (5) TMI 296
  Chargeability of interest under rule 14 of CENVAT Credit Rules, 2004 - period from June 2012 to December 2016 - erasure of demand was finalised - appellant contended that it is settled law that with demand set aside, there is no scope for charging of interest thereof - HELD THAT:- In terms of rule 14 of CENVAT Credit Rules, 2004, interest liability arises only upon credit taken and utilized wrongly. Furthermore, rule 3 and rule 4 of CENVAT Credit Rules, 2004 make it abundantly clear that credit is to be taken upon receipt of the invoice for the service procured. In this particular instance, tax liability arose by deeming the recipient of the service to be the provider and having discharged the tax liability that accrued on receipt of service, credit would be available from such date irrespective of payment not being made immediately to the actual provider of service - It is also to be noted that with the original authority having been held to have travelled beyond the show cause notice, the first appellate authority was also bound within the framework of that finding. Instead, the impugned order has based its outcome on an order which had already been set aside during the first round of litigation and relied upon non-existent material to confirm the leviability of interest. Appeal allowed.

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• 2023 (5) TMI 295
  Utilizing Cenvat Credit - assessee in default in payment of duty - Constitutional validity of Rule 8(3A) of CER - Penalty under Rule 25 of the Central Excise Rules, 2002 - removal of goods without payment of duty - HELD THAT:- The issue is squarely covered by the decisions of various High Courts. Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] quashed the provisions of Rule 8(3A) of the Central Excise Rules, 2002 itself, holding the condition contained in sub-rule (3A) of Rule 8 for payment of duty without utilizing the Cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion without utilizing the Cenvat credit of sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002, shall be rendered invalid. This decision has been followed by Hon ble Bombay High Court and Hon ble Punjab Haryana High Court and various other High Courts. There are no merits in the present appeal - appeal of Revenue dismissed.

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• 2023 (5) TMI 294
  Valuation - inclusion of differential amount - it is alleged that appellant had collected insurance premium from their customers which was more than the actual premium paid to the insurance company - HELD THAT:- The issue involved is in respect of addition of certain amounts to the assessable value determined in the light of the decision of Hon ble Supreme Court in the case of UJAGAR PRINTS, ETC. ETC. VERSUS UNION OF INDIA AND OTHERS [ 1988 (11) TMI 106 - SUPREME COURT ], i.e. on the basis of cost of raw materials + job charges. Revenue has proceeded against the appellant without adducing any evidence to the effect that the transaction between the job worker and the merchant manufacturer was not on arm s length. Without disputing the job charges, certain figures have been filled up from the accounts of the appellant under the head of insurance premium collected from the customers and premium paid to the insurance company. It has not even been pointed out as to what was collected from a particular customer in this regard. Further, Revenue has not even disputed in the show cause notice that the job charges recovered by the appellant were suppressed in any manner for making the demand. In the case of BARODA ELECTRIC METERS LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1997 (7) TMI 126 - SC ORDER ], Hon ble Supreme Court has held that It was clearly held in INDIAN OXYGEN LTD. VERSUS COLLECTOR OF CE. [ 1988 (7) TMI 58 - SUPREME COURT ] , that the duty of excise is a tax on the manufacturer and not a tax on the profits made by a dealer on transportation. The decisions relied upon by the learned AR are distinguishable as in the case of PHARMASIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [ 2004 (7) TMI 170 - CESTAT, BANGALORE ], the issue was in regard to addition of amounts collected under the category of other work overheads , the fact which was admitted by the assessee in their statements. Hon ble Supreme Court order is only limited to the issue of suppression etc. for invoking period of limitation. The appeal is allowed.

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• 2023 (5) TMI 293
  Time Limitation for payment of Interest - whether the interest needs to be paid after three months from the date of filing the refund application or from the date of deposit of duty? - Section 11BB of the Central Excise Act - HELD THAT:- From the plain reading of the above section it is evident that the interest in case of delayed refund is payable only for the period of delay beyond three months from the date of filing the application. Hon ble Supreme Court has in the case of RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. [ 2011 (10) TMI 16 - SUPREME COURT ] has held that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. Reliance also placed upon the decision in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT ]. On going through the judgment we find that the issue under consideration before the Hon ble Apex Court as per para 16 was in respect of interpretation of Sections 237, 240, 243 and 244 of the Income Tax Act, 1961 - On perusal of the said sections and section 11BB of Central Excise Act, we do not find that these sections are in pari materia. Accordingly the reliance placed by the counsel on the above referred decision of Hon ble Supreme Court would not be proper. There are merits in the appeal of the Revenue. The interest under Section 11BB of the Central Excise Act is required to be paid to the respondent for any delay beyond three months from the date of filing the refund claims viz. 23.06.1997 and 03.07.1997 - appeal allowed.

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• 2023 (5) TMI 292
  SSI Exemption - use of brand name of others (defunct company) - affixing the brand name NUCOR WELD and KEMTRODE to the manufactured welding electrodes - ineligible for benefit of exemption Notification No.8/99-CE dated 28.2.1999 - HELD THAT:- A plain reading of the Notification makes it crystal clear that the brand name or trade name need not be registered one but use of such symbol, monogram, label, signature or invented word or writing prescribed under the said explanation be with an objective to indicate a connection in the course of trade between such specified goods and some person using such names or mark with or without indication of the identity of that person - In the present case, is it an undisputed fact that the companies which were using the trade mark NUCOR WELD and KEMTRODE since 1987 became defunct in 1997 and by way of MoU and Deed of Assignment, authorised the present appellants to use the brand name for which the appellant also made an application for registration of the said brand name in their favour with the trade mark authorities in the year 1999 before using the same brand mark. The trade mark authority ultimately registered the brand name NUCOR WELD and KEMTRODE in their favour subsequently in the year 2004 and 2006. The parties to the brand name never contested about Assignment Deed nor signing of the MoU in favour of the appellant for use of the said brand name. Following the ratio of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE VERSUS M/S. OTTO BILZ (INDIA) PVT. LTD. [ 2015 (10) TMI 2149 - SUPREME COURT] and COMMNR. OF CENTRAL EXCISE, HYDERABAD IV VERSUS M/S. STANGEN IMMUNO DIAGNOSTICS [ 2015 (6) TMI 155 - SUPREME COURT] ; brand name NUCOR WELD and KEMTRODE used by the appellant cannot be said to have been belonging to others establishing the connection of trade, thereby make them ineligible to the benefit of the said Notification No.8/99-CE. Appeal allowed.

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• 2023 (5) TMI 291
  Classification of goods - Newprint-in-reels - to be classified under chapter sub-heading No. 4801.00 or under Tariff heading No. 48.23? - benefit of Notification No. 23/98-CE dated 1.8.1998 availed by suppression of material facts, or not - HELD THAT:- The Revenue has challenged the decision of the Ld. Commissioner (Appeals) on the ground that the Newsprint in question can be classified under chapter heading No. 4823.90 only rather than chapter heading No. 4801.00. The other ground for challenging the decision of the Ld. Commissioner (Appeals) is that the earlier decision of the Ld. Commissioner (Appeals) giving the benefit of notification to the respondent is under challenge before this Tribunal. But both the grounds are not sustainable in law - The earlier decision of the Ld. Commissioner (Appeals) whereby he classified the impugned items under sub heading No. 4801.00 was upheld by the Tribunal by dismissing the appeal of the Revenue in COMMISSIONER OF C. EX., CHANDIGARH VERSUS NACHIKETA PAPER LTD. [ 2009 (2) TMI 559 - CESTAT, NEW DELHI] . It is noted that for the subsequent period also the Additional Commissioner has given the benefit to the respondent of Notification No. 23/98-CE dated 1.8.1998. Since, the Revenue has not filed any appeal against the decision of the Tribunal whereby the benefit of the notification was extended to the respondent and keeping in view that for the subsequent period, the Additional Commissioner has also given the benefit of the said notification to the respondent, there are no merit in the appeal filed by the Revenue and the same is dismissed. Appeal of Revenue dismissed.

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• CST, VAT & Sales Tax

• 2023 (5) TMI 290
  Classification of goods - medicated talcum powder - classifiable under Entry 79 of the First Schedule to Kerala General Sales Tax Act, 1963 or not - whether medicated talcum powder is medicine or drug, or a cosmetic, or in terms of the statutes in question, medicated talcum powder? - HELD THAT:- In the present case, the clear legislative intent, of inserting a carefully worded entry, which was a hybrid one, i.e. describing an article that contained medicinal ingredients, as well as those used for cosmetics, and yet placing such a creature ( neither beast nor fowl so to say) in the category of cosmetics, ruled out altogether any interpretive scope of classifying it as a medicinal preparation, or drug or medicine. Therefore, this court cannot fault the High Court for drawing the conclusion that it did. Tamil Nadu case [[ 2014 (5) TMI 413 - MADRAS HIGH COURT] ] - HELD THAT:- The legislative history of the entry is telling. Talcum powder, lipsticks, lip salve, nail polish, nail varnishes, nail brushes, toilet powders, baby powders, talcum powders, powder pads, etc. clearly showed that all manner of talcum powder fell within Entry, i.e. Item 1. After the amendment, with effect from 01.04.1994, the explanation was added. The explanation specifically stated that items listed above even if medicated or as defined in Section 3 (of the Drugs Act) or manufactured on the license issued under the said Act will fall under this item . The explanation included, in Item 1, Part F medicated talcum powder, regardless that the license to manufacture it, was under the Drugs Act. The pointed reference to toilet powders, baby powders, talcum powders, powder pads, along with the additional words even if medicated again, like in the Kerala case, is decisive. In the present case, the TNGST was consciously amended to include talcum powder, whether or not medicated in the specific entry or class of entries, enumerating cosmetics. Hence, like in the Kerala case [[ 2008 (9) TMI 845 - KERALA HIGH COURT] ], the plain meaning of that taxation head or entry had to be given, as there was no ambiguity. Consequently, the findings recorded by the High Courts are justified. This court is of the view that both sets of appeals have to fail - Appeal dismissed.

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• Indian Laws

• 2023 (5) TMI 321
  Seeking grant of Interim Bail - right to speedy trial of offenders facing criminal charges is implicit in the broad sweep and content of Article 21 as interpreted by this Court - HELD THAT:- When provisions of law curtail the right of an accused to secure bail, and correspondingly fetter judicial discretion (like Section 37 of the NDPS Act, in the present case), this court has upheld them for conflating two competing values, i.e., the right of the accused to enjoy freedom, based on the presumption of innocence, and societal interest as observed in VAMAN NARAIN GHIYA VERSUS STATE OF RAJASTHAN [ 2008 (12) TMI 446 - SUPREME COURT ] ( the concept of bail emerges from the conflict between the police power to restrict liberty of a man who is alleged to have committed a crime, and presumption of innocence in favour of the alleged criminal ). They are, at the same time, upheld on the condition that the trial is concluded expeditiously. The Constitution Bench in KARTAR SINGH VERSUS STATE OF PUNJAB [ 1994 (3) TMI 379 - SUPREME COURT ] made observations to this effect. In Shaheen Welfare Association v. Union of India [[ 1996 (2) TMI 597 - SUPREME COURT] ] again, this court expressed the same sentiment, namely that when stringent provisions are enacted, curtailing the provisions of bail, and restricting judicial discretion, it is on the basis that investigation and trials would be concluded swiftly. The conditions which courts have to be cognizant of are that there are reasonable grounds for believing that the accused is not guilty of such offence and that he is not likely to commit any offence while on bail. What is meant by not guilty when all the evidence is not before the court? It can only be a prima facie determination - Given the mandate of the general law on bails (Sections 436, 437 and 439, CrPC) which classify offences based on their gravity, and instruct that certain serious crimes have to be dealt with differently while considering bail applications, the additional condition that the court should be satisfied that the accused (who is in law presumed to be innocent) is not guilty, has to be interpreted reasonably. Further the classification of offences under Special Acts (NDPS Act, etc.), which apply over and above the ordinary bail conditions required to be assessed by courts, require that the court records its satisfaction that the accused might not be guilty of the offence and that upon release, they are not likely to commit any offence. These two conditions have the effect of overshadowing other conditions. In cases where bail is sought, the court assesses the material on record such as the nature of the offence, likelihood of the accused co-operating with the investigation, not fleeing from justice: even in serious offences like murder, kidnapping, rape, etc. On the other hand, the court in these cases under such special Acts, have to address itself principally on two facts: likely guilt of the accused and the likelihood of them not committing any offence upon release. Incarceration has further deleterious effects - where the accused belongs to the weakest economic strata: immediate loss of livelihood, and in several cases, scattering of families as well as loss of family bonds and alienation from society. The courts therefore, have to be sensitive to these aspects (because in the event of an acquittal, the loss to the accused is irreparable), and ensure that trials especially in cases, where special laws enact stringent provisions, are taken up and concluded speedily. The appellant is directed to be enlarged on bail, subject to such conditions as the trial court may impose - Appeal allowed.

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