TMI Tax Updates - e-Newsletter
June 19, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Law of Competition PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Writ cannot be entertained when alternate remedy is available

   By: Bimal jain

2. Suspicion can trigger seizure where seizure order is after application of mind... Karnataka High Court upholds Sec 37A of FEMA

   By: Vivek Jalan

3. SUMMONS CANNOT BE ISSUED TO CUSTOMER OF REGISTERED PERSON TO STOP PAYMENTS TO THE REGISTERED PERSON

   By: DR.MARIAPPAN GOVINDARAJAN

4. Refund of payment made during search available as refund when no DRC-04 or Notice

   By: Bimal jain

5. Section 13(8)(b) and Section 8(2) of the IGST Act are constitutionally valid but cannot levy tax under CGST and MGST Acts

   By: Bimal jain

News

1. Advisory: Update on Enablement Status for Taxpayers for e-Invoicing

2. Sovereign Gold Bond Scheme 2023-24 (Series I) – Issue Price

Notifications

IBC

1. S.O. 2660 (E) - dated 14-6-2023 - IBC

CIRP - Power to declare moratorium for prohibiting - Provisions of Section 14(1) shall not apply in respect of the Production Sharing Contracts, Revenue Sharing Contracts, Exploration Licenses and Mining Leases made under the Oilfields (Regulation and Development) Act, 1948 (53 of 1948) and rules made thereunder - Insolvency and Bankruptcy Code, 2016

Indian Laws

2. G.S.R. 438 (E) - dated 14-6-2023 - Indian Law

Sovereign Gold Bond Scheme 2023-24

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/LAD1/LAD1_DoP3/P/CIR/2023/88 - dated 13-6-2023

Amendment to Circular on issue of Certified copies of Orders and Circulars

Highlights / Catch Notes

GST

• Sale of Duty Credit e-Scrips Excluded from Turnover in ITC Refunds for Exporters under CGST Rule 89(4B.

  Case-Laws - AAR : Refund - Zero rated supplies - Computation of Turnover - sale of duty credit e-Scrips - Rule 42, Rule 89(4) and Rule 89(4B) of the CGST Act - The relevancy of the turnover pertaining to the sale of ‘Duty credit scrips’ does not arise in the computation of the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods by a person who has availed the benefit of the notifications mentioned in Rule 89(4B) of the CGST Rules, 2017 - AAR
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Income Tax

• Court Dismisses Petition on 3-Year Delay in Tax Return Filing; CBDT Rejection Upheld u/s 119.

  Case-Laws - HC : Delay in filing of return - Condonation of delay of 3 years, 2 months and 6 days in filing the original return - CBDT rejected the application u/s 119 - Even a declaration of loss would require assessment so that only the genuine loss is recognised and which would be available for carry forward to be set off against future income or to claim refund. Accepting petitioner’s request for such a huge delay would amount to re-opening the assessment of AY-1998-1999 in AY-2023-2024. - Petition dismissed - HC
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• Import for Re-export in SEZs Classified as "Service" u/s 10AA, Eligible for Tax Deductions on Profits.

  Case-Laws - AT : Deduction u/s. 10AA - Trading activity - In the nature of "services" or not? - Activities of import of goods for re-export - The above clarification given by the Ministry of Commerce & Industries leaves no element of doubt that the activity of import of goods for the purpose of export falls within the meaning of services. Activities carried out by the assessee falls within the ambit of “services”, the expression used in section 10AA and the profits and gains derived from such services rendered from SEZ would be eligible for deduction u/s.10AA of the Act. - AT
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• Tax Authorities Err in Denying Claim, Misclassifying Expenses as Pre-Operative; Business Was "Set Up" in Relevant Year.

  Case-Laws - AT : Denial of claim of loss or to categorize certain expenses as pre-operative expenses - commencement of business during the year - assessee’s business was ‘set up’ or not - The research and development expenses were towards samples of products/ accessories for testing purpose before placing a purchase order and all this are intricate to the nature of business activity of the assessee. - Tax Authorities below fallen in error in concluding that assessee’s business was not ‘set up’ during previous year, to deny the claim of loss or to categorize certain expenses as pre-operative expenses. - AT
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• Payments to US Sister Concern Not Subject to TDS: No Income Element u/s 9(1)(vii) of Income Tax Act.

  Case-Laws - AT : TDS u/s 195 - Addition u/s 40(a)(ia) - remittance made towards fee for technical services chargeable to tax u/s.9 (1)(vii) or not - in the alleged payments made by the assessee to its sister concern TASE USA, there is no element of income and it is purely reimbursement of expenses - obligation to deduct tax at source u/s 195 does not arise at the moment the payment is made to a non-resident but arises only when such remittances is a sum chargeable to Income Tax u/s 4, 5 and 9 - AT
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• Tax Authorities' Decision Flawed: Ignored Assessee's FMV Report, Failed to Consult District Valuation Officer as Required by Law.

  Case-Laws - AT : Capital gain computation - FMV determination - The opinion of an expert cannot be brushed aside in a whimsical manner. Specially when law mandates the evidence of an expert to be admissible for proving specific question of fact as in the present case, the fair market value of the property. Thus, at one hand having failed to take opportunity and mandate under law to call for a DVO report and on the other hand having discredited the valuation report of the assessee without substantial reasons makes the order of Tax Authorites Below erroneous and not sustainable under law. - AT
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• Court Upholds Notice Issuance u/s 153A, But Deletes Income Additions Post-Search at Employer's Premises.

  Case-Laws - AT : Assessment u/s 153A - The keys of the locker were found from the residential premises of the assessee during the course of search on employers residence of the assessee. Search was initiated as well as conducted on the assessee and therefore it is mandatory to issue notice u/s 153A of the act on the assessee. We find no infirmity in the order of the learned CIT-A in upholding the same. - However, on merit of the case, additions deleted - AT
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• CIT(A) Cannot Convert Section 69 Additions to Section 69C; Action Deemed Invalid and Unsustainable.

  Case-Laws - AT : Addition u/s 69 - CIT confirmed the additions by Changing the section to section 69C - Addition made by the AO u/s 69 of the Act cannot be converted into Sec. 69C of the Act by the Ld.CIT(A) while upholding the addition. Action of the Ld.CIT(A) in this regard cannot be held as valid and sustainable being bad in law. - AT
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• Company Directors Face Legal Action for Not Filing Tax Returns, Minimum Sentence Imposed u/s 276CC.

  Case-Laws - DSC : Offence u/s 276­CC r.w.s 278­E - Prosecution proceedings against the company and its directors - Failure to file to ITR - Section 276­CC of the Act prescribes rigorous imprisonment up to seven years and minimum punishment of six months. However, considering the circumstances of the case and request of the accused and their advocate, a minimum punishment will suffice the purpose. Therefore, the accused are liable for said minimum punishment along with fine. - DSC
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Customs

• Court Rules No Legal Duty to Grant Maximum Informer Reward; Dismisses Petition Due to Lack of Entitlement Evidence.

  Case-Laws - HC : Quantum of final reward payable to the informer / petitioner - prayer to sanction the maximum limit of the final award to the petitioner - In the absence of anything showing a statutory requirement that imposes a legal duty, the writ compelling the authorities to do something cannot be issued. - In the absence of any material to show the entitlement of the petitioner to more than what was already paid to him, the writ petition should necessarily fail, and accordingly, the same is dismissed. - HC
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• Customs Authorities Cannot Contradict Joint Director of Foreign Trade in EPCG Scheme Machine Misuse Case.

  Case-Laws - HC : Violation of EPCG Scheme - machines given on hire - installation certificate is issued without verification and appellant has diverted some machines imported to other mines - once the issue is examined by the Joint Director of Foreign Trade, it not open to the Customs Authorities to take a different stand. - HC
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• Valuation Committee's Export Goods Evaluation Questioned: Rule 8 Non-Compliance and Lack of Independent Experts Raise Conflict Concerns.

  Case-Laws - AT : Over-Valuation of export goods - Referring the matter to the Valuation Committee for re-fixing of the transaction - Without following the mandate of Rule 8, the officer has referred to the Valuation Committee and it is not the case of the Revenue that the Valuation Committee comprised experts in the field, but the said committee comprised only the departmental officers who are naturally interested. - AT
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• Revenue Department's Appeal to Increase Fines on Used Clothing Imports Dismissed; Original Penalties Stand at 19.5% and 7.8.

  Case-Laws - AT : Quantum of redemption fine and penalty - Adjudicating Authority has imposed redemption fine and penalty at the rate of 19.5% & 7.8% of the assessed value respectively - Revenue seeks to enhance the levy of redemption fine and penalty - import of old and used worn clothing articles - Appeal of the revenue dismissed - AT
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• Request to Exclude Colour Coated Aluminium Coils from Anti-Dumping Duties Dismissed; Previous Directions Apply.

  Case-Laws - AT : Levy of ADD - Seeking to exclude the product ‘colour coated aluminium coils’ from imposition of anti-dumping duty - Similar issue raised in M/S. MAHLE ANAND THERMAL SYSTEMS PRIVATE LIMITED [2023 (5) TMI 613 - CESTAT NEW DELHI] - Directions issued therein will be applicable to present applicant also - The appeal, consequently, stands dismissed. - AT
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Corporate Law

• Supreme Court Rules Competition Act Applies to Coal India Limited Despite Statutory Monopoly Status Under Nationalisation Act.

  Case-Laws - SC : Anti-Competitive Agreements - Monopoly - abuse of dominant position - principal bone of contention of the appellants is that Coal India Limited, the first appellant (CIL) being a monopoly created by a statute and duty bound to achieve the objects declared in Article 39(b) of the Constitution of India - bound by the Competition Act, 2002 or not - there is no merit in the contention of the appellants that the Act will not apply to the appellants for the reason that the appellants are governed by the Nationalisation Act and that Nationalisation Act cannot be reconciled with the Act. - SC
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• Paid-up capital increased to Rs.2 crores; allegations of fraudulent share allotment prompt audit for fund siphoning claims.

  Case-Laws - SC : Oppression and Mismanagement - increase in the paid-up capital from Rs.1 crore to Rs.2 crores in the Extraordinary General Body Meeting - Allegation of fraudulent allotment of shares in respect of the increased share capital against the appellant. - The procedure of allotment of shares found as correct - However, directions issued for conducting audit against allegation of siphoning of funds maintained - SC
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Indian Laws

• Bribery Case: Investigation Procedural Error as FIR Filed After Cash Seizure, Impacting Legitimacy of Proceedings.

  Case-Laws - HC : Bribe - bribing the public servant, having abetted P.W. 1 for commission of the offence - if it is a definite case that the accused came and gave money as it is cognizable offence, then registering FIR is mandatory and then the investigation officer could have seized the cash under the panchanama, but P.W. 5 seized the cash and started investigation prior to the registering the FIR. Therefore, the very foundation of the prosecution commencing the investigation and thereafter registering the FIR vitiates the entire investigation and proceedings. - HC
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PMLA

• High Court Orders CBI to Investigate Massive Recruitment Scam in Education and Municipality Sectors, Dismissing Jurisdictional Challenges.

  Case-Laws - HC : Jurisdiction - Power of the HC to direct the Central Bureau of Investigation (CBI) to carry on investigation in the municipality recruitment scam - In the present case, the subject matter is a scam of extraordinary dimension and the money trail and exchange of monetary considerations for giving appointments have extended to selection process of education as well as municipality. Such investigation cannot be scuttled on a purported plea that the learned Court had no jurisdiction to direct CBI investigation in recruitment of municipality since it was having determination over Group-II matters. - HC
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Service Tax

• High Court Reviews Duty Quantification Deadline Under SVLDRS; Interpretation of Section 125(f) in Focus.

  Case-Laws - HC : SVLDRS - requirement that the quantification of duty should have been done prior to 30.06.2019 - The argument of the respondent is that had it been the intention of legislature that 30.06.2019 be adopted for the purposes of Section 125(f), it would have so stipulated in that clause itself. This is certainly a possible argument. In cases involving the interpretation of a beneficial scheme/exemption notification, the accepted Rule is that the scheme be interpreted strictly in line with the avowed and stated intention thereof. - HC
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• Appellant's Role as "Co-Loader" Unclear Due to Missing Agreements and Payment Terms; Services Involve Sending Parcels Abroad.

  Case-Laws - AT : Classification of services - a co-loader / courier agency - Whatever the evidence placed on record indicate that the appellant has rendered services to other courier agencies and was not involved in the in-transit movement of courier parcels to be called a “co-loader”. According to the appellant, courier parcels were collected from various customers in its jurisdiction which were reportedly sent abroad through M/s. United Business Xpress India Pvt. Ltd., New Delhi. It is not possible, in the absence of any documentary evidence i.e., any agreement / contract / terms of payment for rendering these services, to determine that its services are that of a co-loader. - AT
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• Inconsistent Service Classification by Department Challenges Extended Limitation Period for Tax Show Cause Notices.

  Case-Laws - AT : Extended period of limitation - SCN issued for two times for different period classifying the services differently - The department had earlier raised the demand as Intellectual Property Service which could not sustain and in the impugned period has tried classifying the same under Consulting Engineer Service. This seems to be inconsistent view of the department itself and cannot be attributed as intent to evade on the part of the assessee. - AT
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Central Excise

• Show Cause Notices from 1994-1997 Invalidated Due to 27-Year Delay; Cases Kept Unjustifiably in Call Book.

  Case-Laws - HC : Validity of respective show cause notices (SCN) of the year 1994 to 1997 and the respective notices of personal hearing issued in the year 2022, i.e., after a lapse of about 27 to 29 years - In the present case, since the issue did attain finality in 2004 itself, there was absolutely no justification in keeping the show cause notices pending thereafter. The file notings show that though the Commissioner was apprised in 2007 that the issue had attained a finality, still a decision was taken by him on 26.10.2007 to keep the cases in the call book. - In such circumstances, the SCN and the OIO cannot be countenanced. - HC
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• Deputy General Manager's Penalty Reduced from Rs. 10 Lacs to Rs. 1 Lac under Central Excise Rule 26.

  Case-Laws - AT : Levy of personal penalty of Rs. 10 lacs u/r 26 of CER, on appellant being DGM-Finance of the company - The appellant being worked as DGM Finance ultimately all the transactions are finally booked in the books of accounts and for which the appellant is responsible as he was aware with the transaction made without payment of duty - However, the appellant deserves for leniency therefore, penalty reduced from Rs. 10 lacs to Rs. 1 lac. - AT
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• Court Grants Duty Remission After Insurance Payout for Fire-Destroyed Goods Exceeds Duty Amount.

  Case-Laws - AT : Rejection of remission of duty in respect of the goods lost in fire - once insurance company has granted the insurance claim for the principal amount of the goods destroyed which is much more than the duty implication in the goods destroyed. It can be conveniently inferred that the insurance company has scrutinized minutely each and every aspect of the accident of fire taken place and only thereafter the insurance claim was granted. - Remission granted - AT
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• CENVAT Credit Distribution via Head Office Complies with Legal Standards; No Breach of Conditions Found.

  Case-Laws - AT : CENVAT Credit - input service distribution (ISD) - it is seen that there is no allegation of the conditions prescribed having been breached in any manner in determination of distribution of credit by ‘input service distributor’ which the head office was. The availment of the entirety of credit, so accrued, at the Peenya facility is not inconsistent with the law. - AT
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Case Laws:

• GST

• 2023 (6) TMI 750
  Detention of goods alongwith vehicle - expired E-way bill - extension of the e-way bill sought within the time permitted, last day being national holiday - HELD THAT:- The issue as to whether the authority were justified in imposing tax and penalty on the ground that at the time of interception, the validity period of the e-way bill stood expired and came up for consideration before the Coordinate Bench of this Court in the case of M/S. HANUMAN GANGA HYDROPROJECTS PRIVATE LIMITED. VERSUS JOINT COMMISSIONER, STATE TAX AUTHORITY, SILIGURI CIRCLE ANR. [ 2022 (7) TMI 603 - CALCUTTA HIGH COURT] . It was held by the Coordinate Bench of this Court that since it is not a case of willful attempt on the part of the writ petitioner to evade payment of tax, the orders passed by the Appellate Authority and the penalty were all set aside and quashed. In the present case also the e-way bill was valid up to May 2, 2022 and the vehicle of the petitioner reached Silliguri on May 2, 2022 before the expiry of e-way bill but due to national holiday on May 3, 2022, the stockyard was closed and in the early morning May 4, 2022 at 3:20 AM, the vehicle was intercepted at Bakuabari which is about 16/17 kilometers from the destination. There is no other allegation against the petitioner. Considering the peculiar facts of the case, this Court finds that there is no lack of bona fide on the part of the petitioner to state that there was wilful misconduct committed by the petitioner while transporting the goods. The order of the Appellate Authority dated January 31, 2023 and the order passed by the adjudicating authority dated May 12, 2022 are set aside and quashed - petitioner paid the penalty, is entitled to apply for refund, which shall be considered by the appropriate authority within a period of 15 days from the date on which such application is made and refund be effected, if there are no other legal impediment. Application allowed.

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• 2023 (6) TMI 749
  Confiscation order - non-deposit of 10% of the tax amount as required under Section 107(6) of the Act of 2017 - HELD THAT:- This writ petition can be disposed off permitting the petitioner to comply the requirements of the endorsement at Annexure-L, dated 28.03.2023 within a time frame and in the event of such compliance, the Joint Commissioner shall consider the statutory appeal filed by the petitioner on merits and dispose off the same in accordance with law. Till then, the respondents shall not take any action to dispose off the confiscated goods belonging to the petitioner. The endorsement at Annexure-B, dated 28.04.2023, issued by the first respondent is quashed - Petition allowed in part.

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• 2023 (6) TMI 747
  Cancellation of GST registration of petitioner - it is alleged that registration obtained by means of fraud, wilful misstatement or suppression of facts - HELD THAT:- The Show Cause Notice is bereft of any specific reasons that could be addressed by the petitioner - It is well-settled that the Show Cause Notice is required to set out the relevant material in order to enable the noticee to meaningfully respond to the same. In the present case, the Show Cause Notice was short of necessary requirements of the Show Cause Notice as it did not contain any specific allegation that could be addressed with a meaningful response from the petitioner - the impugned Show Cause Notice is set aside. The order suspending the petitioner s GST registration also stands quashed - Application disposed off.

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• 2023 (6) TMI 746
  Seeking grant of bail - recovery and seizure of 62,080 nos. of Eskuf Cough Syrup bottles (Codeine Phosphate Chloropheniramine Maleate Syrup) of 100 ml. each - HELD THAT:- The investigation reveals that the seized cough syrup bottles were meant for sale in the western part of India, meaning thereby not for sale in the North-eastern region. Having heard the learned counsel of both sides and consideration of the averments made in the application supported by all relevant documents along with the materials on the case diary and despite the bar in Section 37 of the N.D.P.S. Act, this Court is of the considered opinion that subject to final outcome in investigation, for ends of justice further continuation of detention in judicial custody of the accused petitioners in the interest of the ongoing investigation may not be warranted. Accordingly, it is provided that each of the accused petitioners, named above, shall be released on bail of Rs. 1,00,000/- only with two sureties of like amount to the satisfaction of the learned Special Judge (NDPS), Dhubri subject to the conditions imposed - appeal allowed.

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• 2023 (6) TMI 745
  Refund of accumulated input tax credit - export of services by operation - revenue department is in process of issuing a notice under Section 74(1) of the CGST Act. HELD THAT:- This very issue has been examined by this Court in Ditwakar Enterprises Pvt. Ltd. s case [ 2023 (4) TMI 207 - PUNJAB AND HARYANA HIGH COURT ] and Modern Insecticides Ltd s case [ 2023 (4) TMI 1184 - PUNJAB AND HARYANA HIGH COURT ]. In these cases, this Court while relying upon the judgment passed by the Delhi High Court in case titled as Vallabh Textiles vs. Senior Intelligence Officer and others, [ 2022 (12) TMI 1038 - DELHI HIGH COURT ] and judgment passed by the Karnataka High Court in case titled as Union of India and others vs. Bundl Technologies Pvt. Ltd and Others [ 2022 (3) TMI 625 - KARNATAKA HIGH COURT ], has observed that any amount deposited voluntarily by the petitioner during search would not amount to collection of tax under Article 265 of the Constitution and an amount collected without authority of law, would not amount to collection of tax and the same would amount to depriving a person of his property without any authority of law and would infringe his rights under Article 300A of the Constitution of India as well. Since, the respondents have failed to place any material on record to show that they got deposited amount of Rs.83,89,196/- from the petitioners with any authority of law, therefore, we hereby, allow this petition and a direction is being given to the respondents to refund the amount of Rs.83,89,196/- along with the interest @ 6% from the date of filing of this petition, within a period of 30 days after the receipt of certified copy of this order. Application disposed off.

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• 2023 (6) TMI 744
  Refund - Zero rated supplies - Computation of Turnover - sale of duty credit e-Scrips - Interpretation of Statute - Rule 42, Rule 89(4) and Rule 89(4B) of the CGST Act - Whether sale of duty credit e-Scrips is only other income and not form part of Turnover? - HELD THAT:- A Duty Credit Scrip is a certificate (or scrip), is an export promotion benefit, offered by Government of India under the Foreign trade policy, which can be used for the payment of Customs Duty. These scrips, which are issued to both the exporters of goods as well to exporters of services under the various schemes mentioned in the Foreign Trade Policy, can be transferred to others if they cannot be utilised by the taxpayer for various reasons - The Notification no. 02/2017- Central Tax (Rate) dated 28.06.2017 which provided list of goods which were exempted from payment of GST was amended vide Notification No. 35/2017- Central Tax (Rate) dated 13.10.2017 to include a new entry of Duty Credit Scrips under the HSN 4907 at Serial No. 122A. Thus the Duty credit scrips , which are classified under the category of goods, are exempted from payment of Goods and Service tax vide the notification No. 35/2017- Central Tax (Rate) dated 13.10.2017. The sale of Duty credit scrips , which are classified under the category of goods, are exempted from payment of Goods and Service tax vide the Notification No. 35/2017- Central Tax (Rate) dated 13.10.2017 after amendment of the Notification no. 02/2017- Central Tax (Rate) dated 28.06.2017 which provided the list of goods which were exempted from payment of GST. Sale of Duty credit scrips in Domestic tariff area is classified as exempted supply as per the above Notification dated 13.10.2017. Therefore it is pertinent to note that the turnover pertaining to sale of Duty credit scrips should be reduced from the total turnover in the state as defined under clause (112) of section 2 for computation of the Adjusted Total Turnover as per Rule 89(4) of CGST Rules 2017. As per Rule 89(4B) of the CGST Rules 2017 Where the person claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax has received supplies on which he has availed the benefit of the notification No. 40/2017-Central Tax (Rate) dated 23rd October, 2017 or notification No. 41/2017- Integrated Tax (Rate) dated 23rd October, 2017 or availed the benefit of notification No. 78/2017-Customs, dated 13th October, 2017 the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted. This mandates to compute the amount of refund of input tax credit pertaining to only those inputs received under the said notifications and other inputs or input services, only, to the extent used in making such export of goods - the relevancy of the turnover pertaining to the sale of Duty credit scrips does not arise in the computation of the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods.

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• Income Tax

• 2023 (6) TMI 743
  Delay filing return - Condonation of delay of 3 years, 2 months and 6 days in filing the original return - CBDT rejected the application u/s 119 - seeking to carry forward loss rejected - this application for condonation of delay has been filed after 16 years from the end of the assessment year, for which claim was filed - HELD THAT:- CBDT in its Circular 9/2015 (F.No. 312/22/2015-OT) dated 9th June 2014 issued u/s 119(2)(b) has itself directed the officers to whom authority was granted not to entertain any condonation application for claim of refund/loss beyond 6 years from the end of assessment year for which such application / claim is made. Even if there was some hardship to petitioner and the delay upto 27th December 2000 could be attributed due to reasons beyond the control of petitioner due to books of accounts and other documents required for preparing return of income not being available, as noted earlier, the special audit and audit u/s 44AB got over on 27th December 2000 and 28th December 2001, respectively and return of income was filed on 5th February 2002 but strangely the condonation of delay application itself has been filed only on 26th February 2018 and, therefore, the CBDT has decided not to entertain the condonation of delay application. In a similar matter, this court in Ganesh Sahakari Bank Ltd. Vs. Government of India [ 2019 (4) TMI 107 - BOMBAY HIGH COURT] held that apart from delay in filing the return, petitioner also has to demonstrate why application for condonation of delay could not be filed. In that case, the delay was only of 6 years, whereas in the case at hand the delay appears to be in excess of 16 years. Even a declaration of loss would require assessment so that only the genuine loss is recognised and which would be available for carry forward to be set off against future income or to claim refund. Accepting petitioner s request for such a huge delay would amount to re-opening the assessment of AY-1998-1999 in AY-2023-2024.

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• 2023 (6) TMI 742
  Substantial question of law - retrospectivity of the amendment made to Section 23(b) of the Finance Act, 2017, the ground of deduction of overdue interest qua the ideal guidelines has not been considered by the Tribunal in its true perspective - HELD THAT:- The facts reveal that the Tribunal was seized of three set of appeals filed by the Revenue and two pro-subjections by the assessee in respect of three assessment years i.e. 2009-2010, 2013-2014 and 2014- 2015. The aspect regarding retrospectivity was not of Section 43-D of the Finance Act, 2017, it seems from the record that the Tribunal has applied its mind to the ground raised by the appellants while the other ground of deduction of overdue interest qua RBI guidelines is also discussed. Tribunal has taken care to discuss all the issues raised before it and has rendered findings which is based primarily on facts. References may have been made of certain legal provisions but the adjudication and rendering of findings are essentially facts-centric. It is settled principle of law that an appeal before this Court u/s 260-A of the Act can be entertained only and any substantial question of law as involved which does not appears to be the case herein.

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• 2023 (6) TMI 741
  Income taxable in India - sale of shares by the petitioner of an Indian company - benefit of Tax Residency Certificate (TRC) - petitioner takes the stand, that since it has been issued a TRC under the laws of Mauritius, it is entitled to take benefit of the provisions of Article 13 of the India-Mauritius DTAA obtaining between India and Mauritius - AO ruled, that the TRC issued to the petitioner was not conclusive evidence, which would establish its residential status, consequently making the petitioner eligible for treaty benefits. HELD THAT:- AO has attributed an intent to the assessee- which is that it would indulge in tax evasion inter alia, by treaty shopping, without any material or information of such kind being put to it. We are of the view, that unless relevant information, if any, which is available with the AO, is put to the petitioner, which leads to a conclusion that the TRC obtained by the petitioner is not legally valid and/or viable, the impugned order passed by the AO cannot be sustained. Without expressing any final view in the matter, in our opinion, the best way forward would be to set aside the order, and direct the AO to confront the petitioner with material or information, which according to her, would have her arrive at a conclusion that the TRC on which the petitioner seeks to place reliance deserves to be rejected. AO, who has called for the relevant information, will furnish the same to the petitioner, as soon as the same is made available.

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• 2023 (6) TMI 740
  Reopening of assessment - evasion of Value Added Tax (VAT) - variation in income - bogus documents used in this context - petitioner sought accommodation on the ground that he would require time to gather and/or collate the relevant material - HELD THAT:- As is evident, AO without dealing with the request of the petitioner for accommodation, has passed the impugned assessment order u/s 147 r.w.s. 144B. There was clearly a violation of principles of natural justice. The petitioner was entitled to know whether or not his request for accommodation was being entertained. Having regard to the aforesaid circumstances, the impugned assessment order is set aside. The AO is, however, given liberty to pass a fresh order, if deemed necessary, albeit in accordance with the law.

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• 2023 (6) TMI 739
  Validity of reopening of assessment - Period of limitation - notice under the new regime - HELD THAT:- We are in agreement with respondent that the notice dated 23.05.2022 issued un/s 148A(b) cannot be declared as being untenable in law, since even according to Petitioner the limitation qua AY 2019-20 would have expired only on 31.03.2023. Merely because there is a reference to the judgment of Ashish Aggarwal s case[ 2022 (5) TMI 240 - SUPREME COURT] which according to Petitioner would not apply qua the AY in issue, it would not render the notice untenable, as it is the common case of counsel for parties that after 01.04.2021, notices could have been issued only under the new regime. Petitioner cannot but accept that the notice dated 23.05.2022 has been issued under the new regime, i.e., under Section 148A(b) of the Act. Since proceedings on the very same aspects have been dropped in other AYs, that aspect required attention of the AO - Since according to Petitioner assessment order has not been passed, it would be best, if the AO were to advert to the record concerning the earlier AYs before passing the assessment order. It is ordered accordingly. Rule of res-judicata does not apply, i.e., that each AY is different. That said, if the reasons for reopening are consistently similar or the same, the AO needs to apply the principle of consistency, before passing the assessment order. [See Radhasaomi Satsang [ 1991 (11) TMI 2 - SUPREME COURT] AO will, thus, accord personal hearing to the authorized representative of the petitioner before he proceeds further.

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• 2023 (6) TMI 738
  Addition on account of sale of rice - no stock was maintained by the assessee quality wise and quality of different quality of rice produce from milling of paddy could not be ascertained - HELD THAT:- As the income has to be computed in accordance with the method of accountancy followed by an assessee i.e cash or mercantile. Such method has to be followed keeping in view the accounting standard notified by the Central Government from time to time. In the absence of qualitative details, it is quite difficult to examine the sales of the assessee. The higher quality of a rice can be shown as sold at a lower rate in the bills. There was flaw in the maintenance of the details. Thus, the addition on account of sale of rice has rightly been made. Assessee appeal dismissed.

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• 2023 (6) TMI 737
  Disallowance of commission on sales - HELD THAT:- After considering the facts in totality and finding that the disallowance has been made on adhoc basis, as a percentage of gross profit, we are of the considered view that such disallowance is baseless and the ld. CIT(A) has rightly deleted the same, which calls for no interference. Common grounds in both the appeals of the Revenue are dismissed. Disallowance of difference in sales as per VAT Return and Sales as per the profit and loss account - HELD THAT:- Assessee has furnished the details under Schedule 11 of the Financial Statements and had the Assessing Officer gone through the said Financial Statements, he would have seen that there is no such difference in the alleged turnover. It is not the case of the AO that the assessee has made sales outside its books of accounts. We find that rectification is available in the audited financial statement itself. Therefore, we do not find any error or infirmity in the findings of the ld. CIT(A). This ground is also dismissed. Credit appearing in the books of accounts which has not been accounted in the books of account of the assessee - HELD THAT:- Explanation of the assessee that when the assessee does not receive any goods, it does not pass any entry and the other party, i.e. Reebok India Co. Ltd, having debited the assessee, passes credit entry in their books of account and, therefore, there is no difference. No error in such accounting treatment and, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). This ground is also dismissed.

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• 2023 (6) TMI 736
  Deduction u/s. 10AA - Trading activity - In the nature of services or not - activities of import of goods for re-export - HELD THAT:- As from the conjoint reading of the definition of service and Rule 76 it is unambiguously clear that activity of trading falls within the meaning of services as defined under section 2(z) of SEZ Act. The letter dated 20/06/2011 from the office Development Commissioner, SEEPZ SEZ has further clarified that In terms of explanation to Rule-76 of the SEZ Rules, 2006, the expression trading for the purpose of the Second schedule of the SEZ Act, 2005 shall mean import for the purpose of re-export . The above clarification given by the Ministry of Commerce Industries leaves no element of doubt that the activity of import of goods for the purpose of export falls within the meaning of services. Activities carried out by the assessee falls within the ambit of services , the expression used in section 10AA and the profits and gains derived from such services rendered from SEZ would be eligible for deduction u/s.10AA of the Act. As decided in Goenka Diamond Jewellers Ltd [ 2012 (3) TMI 258 - ITAT JAIPUR] word services as mentioned in Section 10AA cannot be construed in-consistently with the definition of services given in the SEZ Act. Under the SEZ act, the trading is included in the services provided the trading is export of imported goods. We therefore, feel that the assessee is entitled to deduction u/s 10AA of the Act and therefore, the Ld. CIT(A) was justified in allowing the exemption - Decided against revenue.

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• 2023 (6) TMI 735
  Deduction u/s 80P - interest income derived from Nationalized Bank - as per DR assessee is only entitled for eligible for deduction of interest income earned from co-operative society only and not interest income earned from Nationalized Bank - HELD THAT:- As no tax be levied or collected without authority of law as has been mandated by Article 265 of Constitution of India, similarly the assessee should not suffer prejudice, due to the ignorance of specific provisions in the Income Tax Act, if the assessee is otherwise eligible for such deduction. Therefore, the ground of appeal raised by the assessee is dismissed at this stage. However, by invoking inherent power of appellate authority, the appeal is restored back to the file of assessing officer to examine the claim of deduction of interest income earned from Nationalised Bank under section 80P(2)(a)(i). Needless to direct that before passing the order afresh the AO shall grant opportunity of hearing to the assessee. The assessee is also directed to substantiate its claim by filing appropriate submissions and evidences.Appeal of the assessee is partly allowed.

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• 2023 (6) TMI 734
  Reopening of assessment u/s 147 - Reopening beyond period of four years - establishment of failure of the assessee to disclose fully and truly all material facts - disallowance of cash payment u/s. 40A(3) - HELD THAT:- We find that the reasons recorded for reopening of assessment clearly establishes failure of the assessee to disclose fully and truly all material facts necessary for assessment and thus, in our considered view the proviso to section 147 does not apply to the case of the assessee. Audit objection - As we find that although the basis for reopening of assessment may be audit objection, but on perusal of reasons recorded for reopening of assessment, it is very clear that the AO has established escapement of income and there is a live link between reasons and escapement of income and thus, we reject second ground of the assessee. Reopening of assessment in the given facts and circumstances of this case is on valid grounds and thus, the grounds of appeal taken by the assessee challenging validity of reopening of assessment are dismissed. Additions towards disallowance of cash payment in excess of prescribed limit - AO has disallowed 10% of cash expenses on the ground that the assessee could not furnish necessary books of accounts and other evidence to justify cash payment made in respect of purchase of milk - HELD THAT:- Although the assessee claims to have earned less than 1% net profit, but could not justify said profit with necessary evidence. Since, both the parties failed to prove their case with necessary evidence and reasons, in our considered view to settle dispute between the assessee and the Assessing Officer, a reasonable amount of disallowance needs to be estimated. Assessee is a distributor for milk product and also in this line of business, the percentage of profit is very less, we deem it appropriate to direct the Assessing Officer to disallow 4% of cash expenses. Accordingly, the AO is directed to disallow 4% on total cash expenses in excess of prescribed limit. CIT(A) in directing AO to verify the applicability of provisions of Rules 6DD(e) of the I.T. Rules, 1962, on the ground that the CIT(A) does not have any power to set aside the appeal to the AO - We find that the ld. CIT(A) in principal, approved the findings of the Assessing Officer on disallowance of cash expenditure in excess of prescribed limit u/s. 40A(3) of the Act, however set aside the issue for the limited purpose of verification of claim of the assessee in light of provisions of Rules 6DD(b) of the I.T. Rules, 1962 on the ground that M/s. Tamilnadu Co-operative Milk Producers Federation Limited is a Government entity or not. In our considered view, there is no error in the reasons given by the CIT(A) to give directions to the Assessing Officer to verify the claim of the assessee in light of relevant provisions of I.T. Rules, 1962 and thus, we reject the ground taken by the revenue and dismiss appeal filed by the revenue.

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• 2023 (6) TMI 733
  Reopening of assessment - Addition u/s 68 - accommodation entries receipt - purchases made from M/s Danodia Impex Pvt. Ltd. to be accommodation entries - HELD THAT:- Name of the firm M/s Danodia Impex Pvt. Ltd appeared not from the reasons but reply of assessee but assessee was then not show caused to explain how the transaction with firm M/s Danodia Impex Pvt. Ltd. was related to Jain Brothers. AO, unilaterally being dissatisfied with the explanation of assessee had passed the impugned order considering the purchases made from M/s Danodia Impex Pvt. Ltd. to be accommodation entries. Such action of Ld. AO is not sustainable in law. As in Ranbaxy Laboratories Ltd [ 2011 (6) TMI 4 - DELHI HIGH COURT] and Jet Airways Other [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] where it is held that Ld. AO has jurisdiction to re-assesss issues other than the issues in respect of which proceedings are initiated but AO has to show cause the assessee for the same. AO has failed to take into consideration the fact that the assessee was engaged in the business of Trading of computer parts and component. Purchases were not made from M/s Danodia Impex Pvt. Ltd. only but purchases were also made from other parties as reflected in the purchase account made - sales account made reveals that sales were made to various parties and it included sales made to the Office of Labour Commissioner - The trading account as made available which also reflects various expenditure inconsonance with nature of business of assessee. AO was not justified to discredit whole of the business activity of assessee for want of certain expenditure and that too without specifically rejecting the books of assessee, to discredit the purchases and make addition. Appeal of assessee allowed.

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• 2023 (6) TMI 732
  Denial of claim of loss or to categorize certain expenses as pre-operative expenses - commencement of business during the year - assessee s business was set up or not - HELD THAT:- The brokerage and commission expenses were paid to property consultants for taking apartment on lease for the director or recruitment of employees. Business promotion expenses were towards vendor selection and development. While the vehicle running expenses are in the nature of fuel and maintenance of the vehicles own by the appellant company and use for the business purpose. The research and development expenses were towards samples of products/ accessories for testing purpose before placing a purchase order and all this are intricate to the nature of business activity of the assessee. Thus, the bench is of considered opinion that Tax Authorities below fallen in error in concluding that assessee s business was not set up during previous year, to deny the claim of loss or to categorize certain expenses as pre-operative expenses. The appeal of assessee is allowed.

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• 2023 (6) TMI 731
  TDS u/s 195 - Addition u/s 40(a)(ia) - remittance made towards fee for technical services chargeable to tax u/s.9(1)(vii) - assessee has debited an expenditure paid to sister concerns under the head HS Pure Power Programme on which tax was not deducted at source - HELD THAT:- The Indian facility of the assessee company was not established in its full strength during the period and it was necessary to get the hardware parts as specified in the agreement. In order to get this work done, the assessee company approached its sister concern TASE India, which was well equipped with the necessary facilities for carrying out the manufacturing work. The invoices were raised by the TASE USA and then re-imbursement of first phase expense of Pure Power Project was made. Thereafter, certain costs were incurred by TASE USA on the said project but subsequently, when the contract got terminated by Hamilton Sundstrand Corporation in the year 2011, the balance amount lying with TASE USA was refunded to the assessee. Looking into these transactions with the angle of the application of Section 195 we notice that in the alleged payments made by the assessee to its sister concern TASE USA, there is no element of income and it is purely reimbursement of expenses and as held in the case of GE India Technologies Pvt. Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] obligation to deduct tax at source u/s 195 does not arise at the moment the payment is made to a non-resident but arises only when such remittances is a sum chargeable to Income Tax u/s 4, 5 and 9 the same ratio applies on the facts of the instant case and, therefore, no tax was deductible by the assessee company on the alleged payments. CIT(A) was justified in deleting the addition/disallowance made - Appeal of the revenue is dismissed.

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• 2023 (6) TMI 730
  Interest u/s. 244A on self assessment tax paid - Assessee claiming refund - HELD THAT:- As in the present case, the assessee is not claiming interest on interest but claiming the refund and the date on which the refund was granted and received up till that period the interest which the trust is entitled to. The contentions of the assessee was not taken into account fully and the calculation which has been done by the assessee as per Section 244A has not been taken into account either by the AO as well as by the CIT(A). Remand back this matter to the file of the Assessing Officer for proper verification and calculation which was placed by the assessee before the Revenue authorities in consonance with Section 244A of the Act. The contentions of the assessee that the interest component should be taken first and thereafter the principal amount needs verification and the same should be verified by the Assessing Officer.

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• 2023 (6) TMI 729
  Deduction u/s. 80P(2)(a) - receipt of interest income from the Pump Division of Mandali - HELD THAT:- As admitted position that the Pump Division of the assessee society is not carrying out the activities beneficial to its farmer members. The activities carried out by the Pump Division are fully taxable and not coming under the purview of Section 80P. Therefore, the present assessee s case in respect of Pump Division has been rightly denied the deduction claimed under Section 80P of the Act by the Assessing Officer as well as by the CIT(A). Therefore, appeal of the assessee is dismissed.

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• 2023 (6) TMI 728
  Reopening of assessment u/s 147 - cash deposit in bank - Reasons to believe - HELD THAT:- There is nothing on record to show that on receipt of the information, the AO had carried out any inquiry or investigation so as to demonstrate the source of the impugned cash deposits in the bank, which according to the AO was income escaped from the assessment so as to attract initiation of proceedings u/s 147. Assumption of jurisdiction by the AO to reopen the case of the assessee merely on the basis in formation of cash deposit in bank was not in accordance with law, and therefore, the impugned assessment order passed by the ld.CIT(A) is set aside and the assessment order passed under section 147 of the Act quashed. Decided in favour of assessee.

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• 2023 (6) TMI 727
  Nature of expenses - Addition on account of production development expenses - revenue or capital expenditure - HELD THAT:- As relying on assessee own case for the AY 2013-14 [ 2021 (8) TMI 690 - ITAT AHMEDABAD] appellant has treated the capitalized R D expenses as revenue expenses and at the same time it has added back the amortized amount debited to P L Account resulting into income as it appears from the record. As in the earlier Assessment Years the identical claim of product development expenses was allowed as revenue expenses. Therefore, taking into consideration the entire aspect of the matter the of such addition on account of capital expenditure as made by the AO has been rightly done by the CIT(A) without any ambiguity so as to warrant interference. Appeal filed by the revenue is dismissed.

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• 2023 (6) TMI 726
  Deduction u/s 80HHC - whether to be computed on the residual profits remaining after allowing deduction u/s 80IA of the Act in terms of section 80IA(9) ? - HELD THAT:- Since assessee has fairly conceded that the reference to the Larger Bench of the Supreme Court on this issue in the case of Micro Lab [ 2015 (12) TMI 708 - SUPREME COURT ] has been dismissed and Hon ble jurisdictional High Court has decided the issue against the assessee in the case of Atul Intermediates [ 2014 (4) TMI 676 - GUJARAT HIGH COURT ] the grounds raised by the assessee merits no consideration and are dismissed. Appeal of the assessee, is therefore, dismissed. Allowance of claim of deduction u/s 80HHC - Misc. income such as sale of scrap, stores etc; and Income in the nature of contract compensation - HELD THAT:- With regard to allowance of deduction u/s 80HHC on the sale of scrap and parts, Revenue cannot be in any grievance since as per the AO itself, it is allowable to the assessee. Contract compensation received, considering the uncontroverted facts relating to the nature of the receipt, we agree with theCIT(A) that it has arisen from the business of the assessee, and therefore, the CIT(A) has rightly held that the assessee is entitled to claim deduction u/s 80HHC. Grounds raised by the Revenue are accordingly dismissed.

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• 2023 (6) TMI 725
  Conversion of Limited Scrutiny into Complete Scrutiny - TP adjustment representing transaction of purchase of goods/spares - HELD THAT:- The entire issue should have been limited to the extent of the dispute raised in the notice issued u/s 143(2) for the limited scrutiny but the AO in the present case has exceeded his jurisdiction as discussed - Thus, we hold the addition made by the AO on account TP adjustment is without having valid jurisdiction therefore the same cannot be sustained. Hence, the ground of appeal of the assessee in this regard is hereby allowed. Addition u/s 68 - receipt of share application money from Shri Ramesh Vardhan - HELD THAT:- The redemption of such mutual fund and utilization of same cannot be doubted. In effect, the assessee is able justify the source of investment on account of salary, commission income and opening bank balance from explained sources and amount of credit on account of redemptions of mutual funds which is sufficient enough to justify the source of share capital received by the assessee from the director. Assessee company has duly explained the sources of fund in the hand of Shri Ramesh Vardhan. The revenue authority also accepted the partial amount but not accepted source of the other amount only based on surmises and conjecture. Thus, we hold that the assessee has discharged the onus cast u/s 68 of the Act with respect to receipt of share application money from Shri Ramesh Vardhan. Decided in favour of assessee.

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• 2023 (6) TMI 724
  Capital gain computation - FMV determination - Scope and validity of Expert Opinion - AO determined the FMV using Compounded Annual Growth Rate Method (CAGR) which AO considered more rational and reasonable method for calculating fair market value - HELD THAT:- Act specifically provides that if the AO is not satisfied with the fair market value of the capital asset then reference can be made to DVO for the valuation. That is the only way with the Ld. AO to shift the onus on the assessee to justify any other valuation adopted by the assessee. Tribunal Mumbai Bench in Macrotech Developers Ltd. [ 2023 (5) TMI 153 - ITAT MUMBAI ] has deleted addition made u/s 43CA on the ground that revenue failed to follow the mandate of Section 43 CA(2) r.w.s. 50C(2) by not referring valuation of property sold to Valuation Officer. The opinion of an expert cannot be brushed aside in a whimsical manner. Specially when law mandates the evidence of an expert to be admissible for proving specific question of fact as in the present case, the fair market value of the property. Thus, at one hand having failed to take opportunity and mandate under law to call for a DVO report and on the other hand having discredited the valuation report of the assessee without substantial reasons makes the order of Tax Authorites Below erroneous and not sustainable under law. The factual submissions made on behalf of the assessee with regard to the fact that actual saleable land was two third itself makes the fair market value of property arrived at Rs. 38 by AO to be not sustainable. The substantial expenses also indicate that the market value of the land had to be taken on a more reasonable basis. Acceptance of market in the subsequent years also benefits the assessee as the same shows that in the present AY the Tax Authorities, while passing the impugned orders, did not appreciate the facts in correct perspective. Appeal of assessee is allowed.

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• 2023 (6) TMI 723
  Penalty us 271D - Payment of Cash on behalf of Directors - Transactions are in the nature of loan or not? - contravention of the provisions of section 269SS - CIT-A deleted addition - HELD THAT:- Penalty was imposed by ignoring the fund flow statement submitted before income tax settlement commission by the M/s. Spaze Towers Pvt. Ltd., which has provided cash fund to the assessee and the ld. CIT(A) considered the same on the right prospective and by considering the order of M/s. K S Chawla Sons [ 2019 (8) TMI 1413 - ITAT DELHI] and therefore the same may kindly be upheld.has categorically held that the order of Tribunal in other group cases on similar facts persuaded him to delete the penalty. CIT(DR) has not shown any contrary order or judgment by co-ordinate bench of Tribunal or Hon ble High which may lead us to take a different view to support the penalty order. Hence we are inclined to hold that there is no ambiguity perversity or any valid reason to interfere with the findings arrived by the ld. CIT(A) and, thus, we uphold the same. Accordingly, grounds of revenue are dismissed.

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• 2023 (6) TMI 722
  Adjustments u/s 143(1)(a) - adjustment u/s 50C by adopting Stamp Duty Valuation as Full Value of Consideration - CPC Bangalore disallowed the benefit of deduction claimed by the Assessee of investment in RECL Bonds - HELD THAT:- As relying on Sudesh Sachdev [ 2022 (11) TMI 1368 - ITAT DELHI] we hold that the provisions of Section 50C(2) as an inbuilt provision for adhering to principles of natural justice which has not been observed while making adjustments u/s 143(1)(a) of the Act and hence, the action of the revenue is not sustainable.

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• 2023 (6) TMI 721
  Assessment u/s 153A - search action not undertaken on the appellant but was undertaken on his employer - HELD THAT:- As decided in case of JM trading Corporation [ 2007 (9) TMI 447 - ITAT MUMBAI ] wherein it has been held that is a condition precedent to be satisfied before start of any proceedings against the assessee the search only should not have been merely initiated but conducted. Tribunal is required to verify whether the jurisdictional facts exist before notice can be issued u/s 158BC. In the present case, we find that search warrant is issued in the name of the assessee while opening the locker. The keys of the locker were found from the residential premises of the assessee during the course of search on employers residence of the assessee. Search was initiated as well as conducted on the assessee and therefore it is mandatory to issue notice u/s 153A of the act on the assessee. We find no infirmity in the order of the learned CIT A in upholding the same. Bogus long-term capital gain - addition in hands of employer v/s employee - No details of the exit providers to the assessee as well as accommodation entry providers with respect to purchase of shares is available in the assessment order. We found that the CIT A has made an addition u/s 69C as well as u/s 68 of the act in the hands of emploer [Mr Kishan Khaderia] therefore, even if the above long-term capital gain is held to be bogus based on the material available in the mobile phone of the assessee, this addition also cannot be made in the hands of the assessee but has to be made if at all to be made in the hence of Mr Kishen Khaderia. This is the finding of the CIT A. Therefore, even otherwise, if this addition is required to be made it should be made in the hands of the employer of the assessee and not this assessee. Decided in favour of assessee.

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• 2023 (6) TMI 720
  Estimation of income - bogus purchases - HELD THAT:- Due to complete lack of response from the seller, the authenticity of source of purchase could not be fully established, however, it can be said that assessee might have purchased the goods from unverified source to suppress its profit. The entire purchase cannot be treated as income of the assessee but only the profit element embedded in such purchases can be considered for addition. Direct AO to restrict the addition by estimating profit at 7% of the alleged bogus purchase - Decided partly in favour of assessee.

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• 2023 (6) TMI 719
  Addition u/s 69 - CIT confirmed the additions by Changing the section to section 69C - undisclosed investments - conversion of addition as made by AO under any wrong section - HELD THAT:- As identical controversy was adjudicated by the Tribunal in the case of M/s Toffee Agricultural Farms P. Ltd. [ 2022 (4) TMI 869 - ITAT DELHI] principle of casus omissus becomes applicable in a situation like this. What is not included by legislature and rather specifically excluded, cannot be interpreted by the Court through the process of interpretation. The only remedy is to amend the provision. It is not the function of the Court to legislate or to plug the loopholes in the law. In the light of the above binding precedent the action of the learned CIT(Appeals) in treating the addition made by the Assessing Officer u/s 69C as have been made u/s 69B is contrary to the law. From the reading of sub-section (1) of Sec. 142A of the Act, it is clear that the legislature referred to the provisions of Sec. 69, 69A and 69B of the Act but specifically excluded the provisions of Sec. 69C of the Act. In such a situation the well known principle of casus omissus becomes applicable. In my humble understanding what is not included by the legislature in its wisdom and rather specifically excluded as per legislative intention, the only remedy is to amend the provision. Addition made by the AO u/s 69 of the Act cannot be converted into Sec. 69C of the Act by the Ld.CIT(A) while upholding the addition. Action of the Ld.CIT(A) in this regard cannot be held as valid and sustainable being bad in law.

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• 2023 (6) TMI 718
  Unexplained investment u/s. 69 - undisclosed income - reliance on evidence found during the course of search at the business premises - HELD THAT:- AO had not justified for making such an addition in the hands of the assessee with relevant seized materials and by supplying the same to the assessee, thus no addition can be made in the hands of the assessee as held by various judicial precedents. AO has not provided cross examination of Shri Chirag H. Patel although the same was specifically demanded by the assessee. It is also seen that the replies filed by the assessee are completely ignored by the AO which manifests the capricious, vindictive arbitrary attitude of the AO. CIT-A correctly deleted the addition made by the A.O - there is no corroborative evidence collected by the AO and no field enquiry was conducted before making such a huge addition in the hands of the assessee. Decided against revenue.

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• 2023 (6) TMI 717
  Offence u/s 276 CC r.w.s 278 E - Prosecution proceedings against the company and its directors - Failure to file to ITR - Directors responsibility of paying taxing of company - accused was having taxable income but they did not file return of income though every company is liable to file a return of income for an assessment year by the due date - accused nos. 02 and 03 being directors are responsible for paying tax. HELD THAT:- The accused have failed to discharge burden that they have not committed willful default in filing of return. Therefore, the ratio of the authority of S. Sunderam Pillai V/s. V.R. Pattabiraman, [ 1985 (1) TMI 306 - SUPREME COURT] will not be applicable here. Accused have failed to file return of A.Y. 2014 2015 in time. Accused nos. 02 and 03 are directors of accused no. 1 company. They have not denied their directorship. Therefore, they are responsible for the defaults made by accused no. 1. Hence, it can safely concluded that the complainant has proved the guilt of accused under section 276 CC read with Sec. 278 E of the Act beyond reasonable doubt. In the result, answer point No. 01 in the affirmative. Section 276 CC of the Act prescribes rigorous imprisonment up to seven years and minimum punishment of six months. Considering the circumstances of the case and request of the accused and their advocate, a minimum punishment will suffice the purpose. Therefore, the accused are liable for said minimum punishment along with fine. ORDER i) Accused No. 1 M/s. Saloni Jewellers Pvt.Ltd. is convicted under section 248 (2) of the Code of Criminal Procedure for the offence punishable under section 276CC of The Income Tax Act, 1961 and sentenced to pay the fine of Rs. 5,000/ (Rs. Five Thousand only). ii) The accused No. 2. Jitendra Fatechand Jain and accused No. 3 Kiran Fatechand Jain are convicted under section 248 (2) of the Code of Criminal Procedure for the offence punishable under section 276CC of The Income Tax Act and sentenced to suffer rigorous imprisonment for a period of six months each and to pay the fine of Rs. 5,000/ (Rs. Five Thousand only) each in default of payment of fine, the accused No. 2 and 3 shall undergo simple imprisonment for a period of 30 days.

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• Customs

• 2023 (6) TMI 716
  Seeking release of two crude gold bars seized from the petitioner - foreign origin gold bars under Section 111(a),111 (d) and 111(i) of Customs Act - HELD THAT:- No mandamus directing respondent to implement order dated 14.11.2019 passed by the first appellate authority can be issued now. Instead, what the Court can consider and in fact does direct, is that the sole respondent, Principal Commissioner of Customs (Preventive), consider the representation of the petitioner dated 30.04.2023 seeking furnishing of security in lieu of the gold bars. The petitioner will appear before the respondent on 19.06.2023 at 10.30 a.m. along with all materials in support of his contention without expecting any further notice in this regard. After hearing the petitioner, the respondent shall dispose representation dated 30.04.2023 within a period of two (2) weeks from date of personal hearing, in accordance with law. This Writ Petition is disposed off.

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• 2023 (6) TMI 715
  Quantum of final reward payable to the informer / petitioner - prayer to sanction the maximum limit of the final award to the petitioner - HELD THAT:- Supreme Court in UNION OF INDIA VERSUS C. KRISHNA REDDY [ 2003 (12) TMI 55 - SUPREME COURT ] the contentions on behalf of the petitioner cannot be accepted - The Supreme Court, in the said judgment, clearly held that by the very nature of things, no one has a legal right to claim a reward. The scheme itself shows that it is purely an exgratia payment subject to guidelines and may be granted at the absolute discretion of the competent authority, and no one can claim the same as a matter of right. In such circumstances, a writ of mandamus cannot be issued as it applies only in a case where there is a statutory duty imposed upon the officer concerned, and there is a failure on the officer s part to discharge that obligation. In the absence of anything showing a statutory requirement that imposes a legal duty, the writ compelling the authorities to do something cannot be issued. In the absence of any material to show the entitlement of the petitioner to more than what was already paid to him, the writ petition should necessarily fail, and accordingly, the same is dismissed.

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• 2023 (6) TMI 714
  Violation of EPCG Scheme - machines given on hire - installation certificate is issued without verification and appellant has diverted some machines imported to other mines - HELD THAT:- In the case of ADITYA BIRLA NUVO LTD. [ 2021 (2) TMI 93 - KARNATAKA HIGH COURT] it was held that, Once the issue is examined by the Joint Director of Foreign Trade, it not open to the Customs Authorities to take a different stand. With regard to the first authority in COMMISSIONER OF CUSTOMS, CALCUTTA VERSUS INDIAN RAYON INDUSTRIES LTD. [ 2008 (7) TMI 401 - SUPREME COURT] Case, it was argued by Shri. Shivadass that the Supreme Court was examining as to whether the assessee therein could shift his stand after failing to reexport the goods. We may record that the assessee therein had initially claimed the benefit of notification No. 158/95-Cus. The goods were rejected by the foreign buyer. The assessee could not re-export the goods. At that point of time assessee sought to claim benefit under Notification No. 94/96-Cus. In those circumstances the Apex Court has held that assessee cannot approbate and reprobate. Hence on facts, the said authority does not support Revenue s case. With regard to the second authority in COMMISSIONER OF CUSTOMS, HYDERABAD VERSUS M/S. PENNAR INDUSTRIES LTD. ANOTHER [ 2015 (8) TMI 56 - SUPREME COURT] , Shri. Shivadass urged that appellant does not deny the power of the customs authority to initiate action. However, once at the instance of the customs authority, the Licensing authority initiates action, examines the factual position and holds the issue in favour of appellant; such finding is binding on the Customs authorities. Further, in the case of Pennar Industries, the goods were raw material and not capital goods. Hence, the ratio of the said authority is applicable to the facts of this case. We have followed the decision of this Court in COMMISSIONER OF CUSTOMS VERSUS M/S. ADITYA BIRLA NUVO LTD., (FORMARLY KNOWN AS M/S. MADURA COATS LTD. / M/S. INDIAN RAYON INDUSTRIES LTD.,) [ 2021 (2) TMI 93 - KARNATAKA HIGH COURT] and held that the decision of ADGFT is final. Therefore, the authority relied upon by the Revenue does not support its contention. With regard to the third authority in SHESHANK SEA FOODS PVT. LTD. VERSUS UNION OF INDIA [ 1996 (11) TMI 67 - SUPREME COURT] , it is held that the provisions of import-export policy do not take away the power of Customs Authority. In that case, the assessee had approached this Court seeking a Writ of Prohibition restraining the Customs Authorities from proceeding with search and seizure operations. The writ petition was dismissed by the Hon ble Single Judge and the writ appeal by the Division Bench. In such circumstances, the Apex Court has held as aforesaid. In contradistinction, in the case on hand the ADGFT has adjudicated the matter and allowed the appeal. Therefore, the said authority does not support Revenue s case in any manner. Assessee s appeal merits consideration - Appeal allowed.

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• 2023 (6) TMI 713
  Seeking grant of Anticipatory Bail - offence punishable under Sections 132,133,135,135A or Section 136 of the Customs Act, 1962 - it is submitted that for affecting arrest of anybody for offences punishable under the Customs Act, 1962, a written approval of the competent authority i.e., Commissioner of Customs/Principal/Additional Director, DRI is required which has not been obtained till date in the present case - HELD THAT:- In the instant case, a bare perusal of the reply filed by the DRI/respondent shows that the ingredients of Section 438 Cr.P.C. are not attracted. As far as the contention of learned counsel for the petitioner that two summons were issued to the petitioner dated 22.08.2022 and 12.09.2022, as an accused is concerned, it is opined that summons have been issued only for the inquiry purposes as a witness and not as an accused. Keeping in view the totality of the facts, submissions made and the reply filed by learned senior standing counsel for the respondent/DRI and also relying on the order dated 06.04.2021 passed by the co-ordinate Bench of this Court, the present bail application is pre mature and, accordingly, dismissed as not maintainable.

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• 2023 (6) TMI 712
  Over-Valuation of goods - Referring the matter to the Valuation Committee for re-fixing of the transaction -export of 100% Cotton Woven / Knitted T-Shirts under duty drawback scheme - value declared at higher transaction value - re-determination of the transaction value by by the Valuation Committee in terms of Rule 4 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 - HELD THAT:- There are no justifiable reasons, in the first place, for the rejection of transaction value by the Revenue. When, admittedly, the transaction value is not rejected specifically, then it is for the Revenue to justify for not accepting the transaction value which is declared and secondly, what prompted the Revenue to refer to the Valuation Committee to refix the transaction value is also not forthcoming from the orders of the lower authorities - the mandate of Rule 8 is not a mere formality i.e., the rejection of declared value is not a mechanical process and the proper officer should have reason to doubt the truth or accuracy of the declared value. If he entertains any doubt, then the immediate follow-up action, as prescribed under Rule 8, is to put across the same to the exporter asking it to furnish further information including documents or other evidence . Without following the mandate of Rule 8, the officer has referred to the Valuation Committee and it is not the case of the Revenue that the Valuation Committee comprised experts in the field, but the said committee comprised only the departmental officers who are naturally interested. There is also no finding by the lower authority that the parties are related in any way and hence, the adjudicating authority should have looked into Section 14 ibid., which is also not done - there are nothing in either of the orders of lower authorities that on what basis did they arrive at the conclusion that the transaction value declared was abnormal or very much high. Mere allegation would not suffice the requirement of law, what is essential is some semblance of evidence to justify such allegation. The action of the authorities in referring to the Valuation Committee for re-fixing of the transaction value is without basis and the denial of appropriate duty drawback to the appellant was also not in accordance with the principles of law - Appeal allowed.

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• 2023 (6) TMI 711
  Quantum of redemption fine and penalty - Adjudicating Authority has imposed redemption fine and penalty at the rate of 19.5% 7.8% of the assessed value respectively - Revenue seeks to enhance the levy of redemption fine and penalty - old and used worn clothing articles are classifiable under Tariff Item No.63090000 of the First Schedule of the Act - restricted goods or not - enhancement of value - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI ], wherein this Tribunal has observed The failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. The redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice. Therefore, the redemption fine and penalty confirmed by the adjudicating authority are upheld - there are no infirmity in the impugned order and the same are upheld - appeal of Revenue dismissed.

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• 2023 (6) TMI 710
  Valuation of imported goods - mix lot of Polyester Knitted Fabrics - revision of assessable value by rejecting the declared assessable value - HELD THAT:- It is noticed that identical issue has been decided by Tribunal in the case of SEDNA IMPEX INDIA P LTD, GARG IMPEX AND SOIR INTERNATIONAL VERSUS C.C. -MUNDRA [ 2023 (3) TMI 1080 - CESTAT AHMEDABAD ], wherein Tribunal has observed that In the present case, the adjudicating authority enhanced the value as the declared value appears to be low compared to value available in NIDB data, otherwise, there is no material available. The Tribunal consistently observed that the declared value cannot be enhanced merely on the basis of NIDB data. It is seen that the aforesaid decision in the case of M/s. Sedna Impex India P. Ltd., covers the issue raised in instant dispute. Consequently following the decision in the case of M/s. Sedna Impex India P. Ltd, the appeal is allowed.

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• 2023 (6) TMI 709
  Levy of penalty of Rs. 4 lakhs each under Section 112 (a) and Section 114AA of Customs Act, 1962 - mis-declaration of description of goods - personal responsibility for any omission or commission - HELD THAT:- For imposition of personal penalty, contravention of the provisions of law on by a person is required. The original authority has given the finding that the present appellant has not transacted any business. That itself establishes that the present appellant was not responsible for any omission or commission. Therefore, imposition of personal penalties on the present appellant are untenable. The personal penalties of Rs. 4 lakhs each under Sections 112(a) and 114AA of Customs Act, 1962 are set aside - the appeal is allowed.

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• 2023 (6) TMI 708
  Levy of ADD - Seeking to exclude the product colour coated aluminium coils from imposition of anti-dumping duty - seeking consequential Customs Notification 06.12.2021 issued by the Central Government to exclude colour coated aluminium coils from imposition of anti-dumping duty retrospectively w.e.f. 06.12.2021 - seeking refund of the excess/additional duty so collected on the import of colour coated aluminium coils w.e.f. 06.12.2021. HELD THAT:- Similar issue raised in M/S. MAHLE ANAND THERMAL SYSTEMS PRIVATE LIMITED VERSUS DESIGNATED AUTHORITY, DIRECTORATE GENERAL OF TRADE REMEDIES AND OTHERS [ 2023 (5) TMI 613 - CESTAT NEW DELHI ] as have been raised in the present appeal, it would not be necessary to decide the application or the appeal because relief, if any, granted to M/s. Mahle Anand Thermal Systems Private Limited would also enure to the benefit of the appellant - it was held in the said case that It is not possible to hold that clad with compatible non-clad aluminium foil should not be excluded from the scope of product under consideration as has been contended by learned counsel for some of the respondents for the reason that the imported article is a like article under investigation or that Hindalco has the capability and has produced and sold clad with compatible non-clad aluminium foil - clad with compatible non-clad aluminium foil has to be excluded from the product under consideration and, accordingly, the customs notification dated 06.12.2021 is modified to exclude clad with compatible non-clad aluminium foil from the scope of product under consideration. The application would have to be rejected and is rejected - Appeal dismissed.

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• Law of Competition

• 2023 (6) TMI 707
  Anti-Competitive Agreements - Monopoly - abuse of dominant position - principal bone of contention of the appellants is that Coal India Limited, the first appellant (CIL) being a monopoly created by a statute and duty bound to achieve the objects declared in Article 39(b) of the Constitution of India - bound by the Competition Act, 2002 or not - HELD THAT:- Section 19(4)(l). It declares the relative advantage by way of contribution to economic development having or likely to have an appreciable effect on competition to be a relevant factor. What we have deliberately omitted and now supply are the following words to be found in Section 19(4)(l). They are the words by the enterprise enjoying the dominant position . Therefore, being found in a dominant position under Section 19(4)(g) is only one of the factors. We do not intend to elaborate further on the scope and impact of the other factors. It would all depend upon the facts of the individual case. Equally, we may only indicate, that, in particular, countervailing buying power would be a relevant factor. Section 26 provides for the procedure for holding the inquiry employing the methods declared in Section 19(4) to find the presence or absence of dominant position. Section 26 contemplates that, in such conditions, if the CCI forms an opinion that a prima facie case exists, then, it should direct the Director General to cause an investigation into the matter. Under Section 26(2), the CCI may close the matter, if it finds that there exists no prima facie case. The Director General is obliged to submit a report on his findings. The CCI is to forward the report to the parties. The Director General may recommend that there is no contravention of the Act. In such an eventuality, the CCI is obliged to invite objections or suggestions on the said report - The orders which may be passed include a direction to discontinue abuse of dominant position as found in the case of abuse of dominant position. The CCI may impose penalty as provided therein. It can direct modification of the agreement. It can also direct the enterprise to abide by the orders that the CCI may pass. It has a residuary power to pass any other order as is deemed fit. Section 28, no doubt, contemplates a division. Section 31 deals with orders that may be passed on certain combinations. Chapter V deals with the duty of the Director General. The Director General is provided with powers available to the CCI under Section 36(2). There must be an enterprise as defined or a group as provided under Section 5. Once it is so found, then, it must be inquired as to whether the said enterprise or group enjoys a dominant position - The Act overrides all laws to the extent of their inconsistency with the Act. It is also contended that as far as the question relating to compliance with Presidential Directives is concerned, if there is a bona fide adherence to Presidential Directives, it may pass muster. The expression common good in Article 39(b) in a Benthamite sense involves achieving the highest good of the maximum number of people. The meaning of the words common good may depend upon the times, the felt necessities, the direction that the Nation wishes to take in the future, the socio-economic condition of the different classes, the legal and Fundamental Rights and also the Directive Principles themselves - Disinvestment done in a proper manner was perceived as a solution. However, sans disinvestment, State Monopolies, Public Sector Companies and Government Companies were expected to imbibe the new economic philosophy. The novel idea, which permeates the Act, would stand frustrated, in fact, if State monopolies, Government Companies and Public Sector Units are left free to contravene the Act. Now that the Nation was more than 50 years old after it became a Republic and it no longer was the infant it was, Parliament which best knows the needs of its people, felt that the time was ripe for ushering in the wholesome idea of fair competition. Distribution of coal is intended to subserve common good holds this Court in SAMATHA VERSUS STATE OF AP [ 1997 (7) TMI 600 - SUPREME COURT ]. The content of common good is itself not a static concept. It may take its hue from the context and the times in which the matter falls for consideration by the Court. If Parliament has intended that State monopolies even if it be in the matter of distribution must come under the anvil of the new economic regime, it cannot be found flawed by the Court on the ground that subjecting the State monopoly would detract from the common good which the earlier Nationalisation Act when it was enacted, undoubtedly, succeeded in subserving. We see no reason to hold that a State Monopoly being run through the medium of a Government Company, even for attaining the goals in the Directive Principles, will go outside the purview of the Act. It is true that the actions of the appellants can be challenged in proceedings in judicial review as contended by the appellants. Equally, the appellants are justified in pointing out as a matter of fact that there may be forums other than the CCI such as the Controller of Coal whereunder redress may be sought against action of the appellants. But that by itself, cannot result in denial of access to a party complaining of contravention of a law which is otherwise applicable. It must also be remembered that action can also be taken by the CCI suo motu. Such is the width of the power vouchsafed for the authority under the Act. The appellants cannot resist the imposition of standards of fairness and the duty to avoid discriminatory practices when a specialized forum has been created by Parliament under the Act where also apart from the CCI being an expert body, it can seek and receive valuable inputs from experts and what is more, the matter is preceded by the report of Director General of Investigation. Section 54 of the Act gives power to the Central Government to exempt from the application of the Act or any provision and for any period, which is specified in the Notification. The ground for exemption can be security of the State or even public interest. It is not as if the appellants, if there was a genuine case made out for being taken outside the purview of the Act in public interest, the Government would be powerless - there is no merit in the contention of the appellants that the Act will not apply to the appellants for the reason that the appellants are governed by the Nationalisation Act and that Nationalisation Act cannot be reconciled with the Act. This is subject to the appellants having all the rights to defend their actions under the law and as indicated hereinbefore. The transferred cases shall be sent back so that they may be dealt with on their own merits. Application disposed off.

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• Corporate Laws

• 2023 (6) TMI 706
  Oppression and Mismanagement - increase in the paid-up capital from Rs.1 crore to Rs.2 crores in the Extraordinary General Body Meeting - Allegation of fraudulent allotment of shares in respect of the increased share capital against the appellant. - NCLT issued direction for re-issue of shares to existing shareholders - Further directions issued for conducting audit against allegation of siphoning of funds. HELD THAT:- The shareholders from the V.P. Patel Group and the Sheth Group, admittedly, did not apply seizing the opportunity given to them. They did not participate in the Extraordinary General Body Meeting held on 27.01.2010 by which the Authorised Capital was increased. Though there is some controversy sought to be raised that the shareholders were not sent any intimation by way of reminder of their right to apply for the shares, we are inclined to hold that the communication was indeed sent in keeping with the decision taken by the Board of Directors, following the Extraordinary General Body Meeting held on 27.01.2010. The members of the appellants Group, on the other hand, applied for shares. Since, it was contemplated that shareholders could apply not only in the ratio of 1:1 but for larger number of shares, apparently, the members of the appellants Group, applied for more number of shares. Thus, though the wife of the first appellant may have been entitled to only 20 shares, if the rights issue was limited to ratio 1:1, since it was decided to give an opportunity to shareholders to apply for more shares than they held and as, apparently, shares were available to be allotted in numbers far greater than what the shareholders were actually holding, the wife of the first appellant, apparently, came to be allotted the seemingly disproportionate number of shares. As regards the last complaint, the appellants would point out that actually all that happened was repayment of money brought in earlier by appellant-Group, which was parked with the Company and in connection with the marriage of a family member, the amount was returned. It must be noticed that the allegations and responses from both sides are the subject matter of the audit. We cannot be deflected by the same in ruling on the defect or alleged illegality in the matter of allotment of the shares. There is no case, that there was any impediment for the respondents to apply, once it is found that they were informed and aware of their right to apply. In certain situations, a single act could found a case of oppression. This is not a case where allotment of additional shares was made to anyone other than the existing shareholders. This is a case where the terms were applied equally to all the existing shareholders. The change in shareholding, in that the appellants shareholding grew from 30.80% to 63.58% is the result of the respondents refusal to apply despite being given the opportunity. One of the complaints of the respondents is that the purported reason for the increase in the authorized capital and the allotment of the shares also was to infuse fresh funds - HELD THAT:- A perusal of Section 81(1) indicates that it dealt with a proposal to increase the subscribed capital of the company by allotment of further shares . Section 105-C of the Companies Act, 1913, used the words where the Directors decide to increase the capital of the company by issue of further shares . In Section 81 of the Companies Act, 1956, the words used are it is proposed to increase the subscribed capital of the company by allotment of further shares . The Authorised Capital cannot be increased by the Board of Directors. It is out of the Authorised Capital that a company issues shares. It then becomes the Issued Capital. Whatever is issued, need not be subscribed to. Whatever is subscribed to, would become the Subscribed Capital. Paid-up Capital is defined in Section 2(32) of the Companies Act, 1956 as including capital credited as paid-up. The Subscribed Capital may be wholly or partly paid-up. An increase in the Authorised Capital does not fall within the powers of the Board, as contemplated in Section 291 of the Act. In Nanalal Zaver (supra), this Court was essentially dealing with the question, as to whether the obligation to offer the shares upon there being a further issue of shares, must be made in conformity with Section 105-C of the earlier Act, which, as we have noticed is essentially the regime continued under Section 81 of the 1956 Act. It is in the said context that the Court held that the Directors could at their own initiative only increase the shares from out of the existing Authorised Capital, but the increase in Authorised Capital could be done only by the company in a meeting of its shareholders. It has been further held that once the Authorised Capital is increased, the Board of Directors would be bound to act under Section 105-C of the Act - The position under the Companies Act, 1956, under Section 81, remained the same in that it is only the company, in its General Body Meeting, which could increase the Authorised Capital. The position still continued that call it increase in Subscribed Capital, it must be within the limits of the Authorised Capital. As far as the aspect that, the purported object was shown as generating fresh funds but in place of Rs.90 lakhs only Rs.21 lakhs was brought in goes, the fact that the paid-up capital was apparently shown as credited by cancelling loans due by the company to the appellants group, should not prevent this Court from overlooking the fact that the debt-equity ratio has undoubtedly been improved. It must be borne in mind that the whole idea was to get funds from the Bank for the expansion of the company. The case of the respondents that there were loans due to them also may not advance their case. It would have been different if the respondents had applied and sought adjustment of the consideration by cancelling loans given by them to the company and it was rejected. The appellants cannot be described as having acted in a defective or in an unfair manner, in the matter of allotment of further shares particularly when the contention of the respondents about the bona fides of the decision to increase the authorised capital has been found in favour of the appellants - Appeal allowed in part.

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• PMLA

• 2023 (6) TMI 705
  Jurisdiction - power of learned Single Judge to direct the Central Bureau of Investigation (CBI) to carry on investigation in the municipality recruitment scam - illegalities perpetrated in a selection process conducted for appointment to the posts of teachers in primary schools and in which the Department of Urban Development and Municipal Affairs was not even arrayed as a party respondent. HELD THAT:- In view of disposal of the SLP granting an interim order and permitting the petitioner to move a petition by way of review before the High Court with an observation that in the interest of justice, it would be appropriate if the State of West Bengal is heard afresh by the High Court on the issue as to whether the investigation should be initiated by the CBI , the appellant may not be debarred a hearing on merit moreso when the assignee Court had dismissed the review. Corruption is a reprehensible crime in a society and it is an assault on the faith of the common people upon officers and Ministers and people s representatives. It defiles and degrades and shakes the confidence of the people at large upon the Government. It causes psychological harm to the society at large leaving upon it indelible marks. The allegations in the instant case are neither skirmishes nor bald, but speak of overt acts indicating complicity among the Ministers and high placed government officials. During investigation a mammoth amount of Rs. 111 crores and gold and jewellery valued at Rs. 5.08 crores had already been seized and attached - It is well known that a slight distinction in fact or an additional fact may make a lot of difference in decision making process. The judgments delivered in the case of Sampat Lal and Others [ 1984 (12) TMI 328 - SUPREME COURT ] and Divine Retreat Centre vs- State of Kerala and Others [ 2008 (3) TMI 734 - SUPREME COURT ] were taken into consideration by the Hon ble Supreme Court in the SLP preferred in connection with the present writ petition and the direction upon CBI to investigate was not stalled. In the present case, the subject matter is a scam of extraordinary dimension and the money trail and exchange of monetary considerations for giving appointments have extended to selection process of education as well as municipality. Such investigation cannot be scuttled on a purported plea that the learned Court had no jurisdiction to direct CBI investigation in recruitment of municipality since it was having determination over Group-II matters. The wide language of Article 226 of the Indian Constitution has conferred upon High Courts, ample power to reach injustice wherever found. Instead of being astute to discover reasons for not applying the constitutional remedy, the same needs to be applied in every case to which, by any reasonable construction, it can be made applicable - The collective suffering of those who have been wronged by the malevolent activities of morally debased individuals, necessitates urgency in action. An uninterrupted and conclusive investigation into the connected schemes of corruption is the only means by which the perpetrators can be brought to justice. The order impugned dated 21st April, 2023 need not be interfered - appeal dismissed.

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• Service Tax

• 2023 (6) TMI 704
  SVLDRS - Rejection of application under Sabkha Vishwas (Legacy Dispute Resolution) Scheme, 2019 - requirement that the quantification of duty should have been done prior to 30.06.2019 - interpretation of Section 125 of the Scheme as per which certain persons have been declared to be ineligible for availing the Scheme - HELD THAT:- In the present case, the petitioner was in receipt of letter dated 10.10.2019 calling upon the petitioner to submit various particulars on the basis of an allegation that there was a mis-match between the income tax and service tax returns for the year 2016. It is this letter that is cited by the respondent to stand in the way of acceptance of petitioner s eligibility under the Scheme in terms of Section 125(f) which states that any assessee which has been subjected to enquiry or investigation or audit would not be eligible to make a declaration under the Scheme. A perusal of the entire Scheme, indicates the following. (i) the Scheme was introduced by the Finance Act,2019 (ii) It has come into force on 01.09.2019, being the effective date. (iii) Section 121 (c)(iii) refers to filing a return of by the declarant under indirect tax enactment on or before 30.06.2019 (iv) Section 123, defining tax dues mentions in sub-clauses (i) (ii) (b) (c), the date 30.06.2019 as being the cut-off date for computation of tax dues, (v) Section 124, being, relief available under the Scheme clauses (a) (d) refers to the cut-off date being 30.06.2019 and (vi) Section 125 refers to 30.06.2019 in clauses (a) (c) and (e) thereof. The argument of the respondent is that had it been the intention of legislature that 30.06.2019 be adopted for the purposes of Section 125(f), it would have so stipulated in that clause itself. This is certainly a possible argument. In cases involving the interpretation of a beneficial scheme/exemption notification, the accepted Rule is that the scheme be interpreted strictly in line with the avowed and stated intention thereof. Seen in the light, clause 125(f) of the scheme must be read as is, without the addition of the date, 30.06.2019. However, this is not to be, as the interpretation of the Income Tax Department is itself contrary to that position. This writ petition is allowed.

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• 2023 (6) TMI 703
  Classification of services - services rendered by the appellant are that of a co-loader / courier agency - to be classified under support services of business or commerce or otherwise? - principal courier/s have discharged the Service Tax on the portion sub-contracted to the appellant or not - services rendered by the appellant could be treated as export of service or not - Extended period of limitation. HELD THAT:- The appellant has placed reliance on the Board Circular F. No.341/43/96-TRU dated 31.10.1996 to argue that their services are to be classified as a co-loader to other couriers and since the principal courier has discharged the Service Tax and the charges are collected from their customers, the co-loaders are not required to pay any Service Tax and this was the argument they put forth before the Tribunal in the first round of litigation, who had directed the adjudicating authority to examine the party s claim relating to the charge of Service Tax on the sub-contracted portion in de novo proceedings. Whereas in the present proceedings, the appellant has taken a contrary stand stating that all the couriers were exported and delivered on cash on delivery (COD) basis and their services are required to be treated as export of service - A perusal of the above Circular reveals that the co-loader activities are not chargeable to Service Tax only on the condition that the principal courier discharges the Service Tax on the courier charges collected from their customers. Though the appellant has taken the plea initially that they were acting as a co-loader to other courier agencies who discharged Service Tax, but in the de novo proceedings it was submitted by the appellant that the courier parcels were exported abroad and as such, no tax is payable; whereas the contention of the Revenue is that the services were rendered to service recipients located in India, the service charges were received in Rupees, the conditions for treating the services as export of services were not satisfied and so, the tax liability needs to be fastened on to the appellant. The appellant has entered into an agreement, which is termed as Expense Reimbursement Agreement , with M/s. EZ Worldwide Express, New Jersey, USA. In terms of the above agreement, the appellant would be reimbursed all reasonable out of pocket expenses incurred by the dispatcher of documents in connection with the collection and dispatch of documents from the various clients of the company located in India. It has also been stated therein that since it is only a reimbursement of expenses incurred in connection with the service, there is no Service Tax or Tax Deduction at Source on the said expenses. Nothing has been brought on record relating to the rendering of any service or receipt of payment from M/s. EZ Worldwide Express. Though an agreement has been entered into between M/s. U.B. Xpress (South) Pvt. Ltd. (the appellant herein) and the overseas courier company M/s. EZ Worldwide Express, New Jersey, the appellant has failed to produce any record relating to the transactions and so, the purpose of bringing this agreement on record is not clearly understood. On the issue of classification of the services rendered by the appellant, the finding of the learned adjudicating authority is correct and in accordance with the statutory provisions. Whatever the evidence placed on record indicate that the appellant has rendered services to other courier agencies and was not involved in the in-transit movement of courier parcels to be called a co-loader . According to the appellant, courier parcels were collected from various customers in its jurisdiction which were reportedly sent abroad through M/s. United Business Xpress India Pvt. Ltd., New Delhi. It is not possible, in the absence of any documentary evidence i.e., any agreement / contract / terms of payment for rendering these services, to determine that its services are that of a co-loader. At paragraph 16 of the C.B.E.C. Circular F. No. 341/43/96-TRU dated 31.10.1996, the Board has clarified that the co-loaders provide service to the courier agency and they do not provide any service directly to the customer. With regard to the value of taxable service it is clarified that it is the gross amount charged by the courier agency from the customer on which the Service Tax was to be computed. The above clarification was issued after observing that charges of the co-loaders to the courier agency for in-transit movement of goods, documents or articles are in any case ultimately recovered by the courier agency from the customer and these charges are included in the gross amount charged by the courier agencies from customers. Whether any invoice/(s) were raised for the services rendered to these courier companies is also not known since no such documents have been placed on record. Its reasonable belief that it was rendering the services of a co-loader only, is lacking any merit since, as a courier agency, the appellant should be / would be aware that courier services are chargeable to tax and it has not discharged the responsibility that the principal courier has paid the Service Tax on the charges that were collected from the customers. Extended period of limitation - HELD THAT:- The entire investigation started only as the appellant had accounted certain income in its trial balance as Courier Income Non-Tax . The appellant has not produced any evidence that either the appellant or the principal courier had made any correspondence with the Department regarding the taxability or otherwise of the income shown in the financial statements. The appellant thus has failed to substantiate its claim as to non-taxability and as to the belief entertained by it that the principal courier must have paid the tax. As such, the extended period of limitation is rightly invoked in the present case. The appeal is dismissed as being devoid of any merits.

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• 2023 (6) TMI 702
  Short-payment of service tax - Classification of service - utilization of Cenvat credit for payment of service tax under reverse charge mechanism (RCM) - payments made by the appellant to their foreign service engineers conducted by their associated enterprise and other remittances by the appellant - extended period of limitation - HELD THAT:- On examination of primary objection raised by the appellant that the show cause notice does not disclose the classification of the service it seeks to demand service tax on. It is found that this plea of the appellant is not disputed. However, its Revenue s submission that mere non-quoting of the category does not vitiate the proceedings in the matter. She relied on the decision of the Tribunal in the case of GEEDEELON TEXO-TWIST P. LTD. VERSUS COMMR. OF C. EX. CUS., SURAT-II [ 2009 (3) TMI 111 - CESTAT, AHMEDABAD ]. The case relates to imported Polyester Filament Yarns found in excess in the factory compared to the last stock balance recorded in the statutory records, where the appellant unit admitted that they had purchased the said goods on cash payment, without having duty paying documents. The present case depends upon the interpretation of law. The exigibility to tax will depend on determining the correct classification of the services. Hence the judgment is distinguished. One of the disputes between the department and appellant in this case relates to the classification of the taxable service related to the deputation of Foreign Service Engineers (FSE) by Mando Korea to their factory premises. Further the appellant states that neither the SCN nor the OIO has specified the category/classification under which tax on technical know-how fees are to be levied - Natural justice requires that the noticee knows the specific charge against him and the reason for it, on the basis of which a decision is proposed to be taken by the proper authority. Hon ble Supreme Court in the case of Commissioner of Central Excise Vs Brindavan Beverages Ltd [ 2007 (6) TMI 4 - SUPREME COURT ] has held that the SCN is the foundation on which the department has to build its case and if allegations in the notice are not specific, lack detail etc it would be sufficient to hold that the notice was not given proper opportunity to meet the allegations. It is held that the demand for service tax under RCM must fail on the grounds of natural justice, since the appellant has not been put to notice on the service classification headings under which tax is demanded. Eligibility of the appellant to utilise CENVAT credit for payment of Service Tax under RCM - HELD THAT:- Reliance placed upon the Bombay High Court judgment in THE COMMISSIONER OF CGST AND CENTRAL EXCISE VERSUS M/S. U.S.V. LIMITED [ 2019 (7) TMI 567 - BOMBAY HIGH COURT] wherein it was held that for period prior to 20/06/2012 (presumably referring to the date of the notification No 28/2012 CE (NT) inserting the explanation ), there was no restriction to utilise CENVAT credit for payment of tax under RCM. The explanation to Rule 3(4)(e) of CENVAT Credit Rules, 2004, clarifying that CENVAT credit cannot be used for payment of tax when the person liable to pay tax is the recipient, was inserted by Notification No 28/2012 CE (NT) dated 20/06/2012, effective from 01/07/2012. Hon ble Constitution Bench of the Supreme Court in A.V Fernandez v. State of Kerala [ 1957 (4) TMI 46 - SUPREME COURT ], elucidated the principle of strict interpretation in construing a taxing statue - The Apex Court had held that the provisions of a taxing statute must be construed as they stand, adopting the plain and grammatical meaning of the words used. In the present case there was no express provision under the CENVAT Credit Rules, 2004 restricting the usage of CENVAT credit for payment of service tax liability under the reverse charge mechanism until 01/07/2012. Consequently, the appellant was eligible to pay service tax using CENVAT credit till 30/06/2012. Although the issue has been discussed in the impugned order and an amount of Rs. 11,46,058/- is found liable for recovery it has not been confirmed and demanded in the Order . Thus, the issue fails on merits and also because it has not been confirmed and demanded in the impugned order. Extended period of limitation - HELD THAT:- As regards invoking the extended period of time / limitation and the imposition of penalties etc, since the demand is found to be unsustainable, the question of time limit or penalties does not arise. Appeal allowed.

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• 2023 (6) TMI 701
  CENVAT Credit - trading activity - proportionate input credit attributable to the trading activity of the appellant, confirmed under Rule 14 of the CENVAT Credit Rules (CCR), 2004 read with Section 73 (1) of the Finance Act, 1994 - whether the demand raised by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chennai, is in order? - HELD THAT:- The stand of the Revenue is volatile, that is to say, from the findings of the Commissioner in the impugned order, the proposed demand in the Show Cause Notice did not have any legal sanctity as the same, apparently, was not as per the law as prevalent during the period in dispute. Moreover, there is a mention about the claim of the appellant to have maintained separate accounts in respect of input services utilized for taxable and exempted services. There is also an admission as to the appellant maintaining separate accounts at paragraph 13.1 of the impugned order, which is also extracted above as ready reference, but however, for something happened in the earlier years, for which the adjudicating authority is clearly functus officio, he concludes to hold that the appellant are not maintaining separate books of accounts for taxable and exempted services - The authority should have gone strictly by the facts and documents as available, since it is well understood that each year is independent and the facts may vary. Hence, it cannot be accepted that the above conclusion of not maintaining separate accounts which is a baseless allegation made without proper application of mind. The demand proposed in the Show Cause Notice and that which was confirmed in the impugned order, are not sustainable, for which reason the same deserves to be set aside - Appeal allowed.

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• 2023 (6) TMI 700
  CENVAT Credit - inputs - Cement and Steel used in the output service i.e. Commercial and Industrial Construction Services - denial of the Cenvat is solely on the basis of amendment in explanation-2 to definition of Input by Notification No. 16/2009-CE (NT) - HELD THAT:- The explanation-2 is exclusively applicable to manufacturer and not to service provider. Therefore, the entire case based on the amendment in explanation-2 cannot sustain. Further, as regards the admissible inputs for the purpose of Cenvat credit, it falls under clause-(ii) of the definition of inputs according to which the Input includes all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles used for providing any output service. A plain reading of clause(ii) of definition read with explanation-2, it is absolutely clear that the exclusion provided in explanation-2 is applicable to manufacturer and as regard the service provider in terms of clause(ii) of definition Input the service provider is entitled for Cenvat credit of inputs which are used for providing output service. In the present case, the appellant provided output service viz. Commercial and Industrial Construction Service and for that Cement and Steel are vital input without which output service cannot be provided. Therefore, there is no doubt that appellant is legally entitled for the Cenvat credit on Cement and Steel used for providing output service i.e. Commercial and Industrial Construction Services. The judgments cited by learned Counsel in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS [ 2015 (5) TMI 663 - GUJARAT HIGH COURT] , the credit of Cement and Steel was allowed against the output service of Port Service. Even though cement and steel was directly used for output service for construction of jetty and then jetty was used for services, credit was allowed. On the face of judgment, the case of the appellant is on much better footing as in the present case the cement and steel was directly used in Commercial and Industrial Construction Services. There are no hesitation to hold that appellant is legally entitled for Cenvat credit on Cement and Steel used for providing output service - appeal allowed.

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• 2023 (6) TMI 699
  Levy of Service Tax - manpower Recruitment and Supply Services - production of bellows on Job work basis for the principal manufacturer Flexican Bellows Hoses Pvt. Limited in the premises of the Principal manufacturer - HELD THAT:- On perusal of the sample copy of bills and agreement entered into by the appellant with M/s Flexicon Bellows Hoses Pvt. Ltd., it is seen that the amount being paid to the Appellant for the activity of Job works. M/s Flexicon Bellows Hoses Pvt. Ltd. has entered into agreement with the appellant for manufacture of Flexicon Bellow on job-work basis. The appellant was paid for carrying out such activities. The workmen deployed by the appellant for carrying out such activities were under the supervision and control of the appellant. The ultimate manufacturer, who entrusted the job to the appellant was no way concerned with the workmen deployed by the appellant. It is also noticed that over and above paying the amount for manufacturing activities undertaken by the appellant on job-work basis, the said service receiver had not paid any specific price to the workmen/ Labour deployed by the appellant. Thus, under such circumstances, it cannot be said that the appellant had provided the Manpower Recruitment and Supply Agency Service. The documents submitted by the appellant indicate a lump sum charge for the work undertaken by them. There is no evidence of supply of manpower with details of number and nature of manpower, duration and other conditions for such supply. In absence of such evidence, the job work charges cannot be taxed under Manpower Recruitment and Supply Agency Service - the adjudged demand confirmed on the appellant cannot be sustained. There are merits in the impugned order - appeal allowed.

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• 2023 (6) TMI 698
  Taxability - Business auxiliary service - extended warranty service - finance documentation charges - commission on insurance policies sold to customers - registration of cars during the period in dispute. Extended Warranty Service - HELD THAT:- There is no dispute that though the scheme is marketed by the appellant, the entire proceeds are remitted to the principal, M/s Maruti Udyog Ltd, and no part of the payment was being retained by the appellant; neither was the appellant in receipt of any payment for performance of additional servicing on cars purchased by customers. Tax on consideration for business auxiliary service , as defined in section 65(19) of Finance Act, 1994, is predicated upon rendering of service on behalf of client who becomes obliged to recompense provider of the service and absence of even one element in the intermeshed transaction precludes coverage thereunder. That the appellant undertakes any warranty-related handling of vehicles at the instance of M/s Maruti Udyog Ltd will not, of itself, establish that taxable service under section 65(105)(zzb) of Finance Act, 1994 had been rendered. Hon ble Supreme Court in COMMISSIONER OF CGST AND CENTRAL EXCISE VERSUS M/S EDELWEISS FINANCIAL SERVICES LTD. [ 2023 (4) TMI 170 - SC ORDER] approved that a transaction involving the purchaser of car, as recipient of extended warranty , making payment to the principal of the appellant without any part thereof flowing to the appellant, is not intended to be taxed. Consequently, pass through of charges extended warranty service is not consideration for taxable service. Car registration charges - HELD THAT:- The decision of the Tribunal in TOYOTA LAKOZY AUTO PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX/CENTRAL EXCISE MUMBAI -II / MUMBAI - V [ 2016 (12) TMI 541 - CESTAT MUMBAI] , on similar set of facts held that the Service Tax liability confirmed under Business Auxiliary Service for the amount of RTO registration fees is set aside. Furthermore, registration of vehicles is a sovereign responsibility devolving on state governments and the authority to tax such amount, either in full or part, under section 65(105)(zzb) is predicated upon such agency function being entrusted to them by the motor vehicles department. There is no evidence of either such contract or of authorization to undertake responsibility for registration; it is nothing more than a facilitation offered by the appellant to vehicle purchaser which does not suffice for resort to tax under section 65(105)(zzb) of Finance Act, 1994. Amount received as commission for securing insurance policies of vehicles sold by appellant - HELD THAT:- The policies are issued by insurance companies to purchaser of cars and, from the records, it appears that it is neither M/s Maruti Udyog Limited, whose dealer the appellant is, nor the appellant who offers such service. There is also no evidence of ostensible arrangement of appellant with the insurance company or of any direct payment to the appellant for sale of such policies. That M/s Maruti Udyog Limited, who may have had an arrangement with the insurance company and chose to part with some of the commission received therefrom to dealers, did incentivize sale of policies by the appellant does not, in the absence of contractual agreement between insurer and dealer, justify the finding of taxable service , envisaged by section 65(105)(zzb) of Finance Act, 1994, having been rendered. All the three components of the demand, as upheld by first appellate authority, suffers from infirmity of not being consistent with definition of taxable service and, accordingly, set aside the impugned order to allow the appeal - Appeal allowed.

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• 2023 (6) TMI 697
  Time Limitation - Validity of Show Cause Notice - SCN issued for two times, initially with the view that the service involved of Intellectual Property Service and subsequently treating the service as Consulting Engineering Service - period Covered by both SCN were different - HELD THAT:- The contract was same on the basis of which demand was raised earlier and was dropped, therefore, the department was in knowledge of the contract and all its conditions and its contents. The department had earlier raised the demand as Intellectual Property Service which could not sustain and in the impugned period has tried classifying the same under Consulting Engineer Service. This seems to be inconsistent view of the department itself and cannot be attributed as intent to evade on the part of the assessee. Even otherwise on merits, the view as propounded by the learned Advocate agreed upon, that technical knowhow service provided did not make the service Consulting Engineering Service . Same was also covered by Government specifically w.e.f. 10.09.2004 as Intellectual Property Service , thus even on merits demand under Consulting Engineering Service cannot sustain. The contract already having been in the knowledge of the department and department having applied its mind differently in two show cause notices, the extended period of limitation too cannot sustain. Appeal allowed.

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• Central Excise

• 2023 (6) TMI 748
  Validity of respective show cause notices (SCN) of the year 1994 to 1997 and the respective notices of personal hearing issued in the year 2022, i.e., after a lapse of about 27 to 29 years - Manufacture - Marketability - Intermediate goods - HELD THAT:- The issue involved in these cases is squarely covered by decision in the case of TATA STEEL LTD. (GROWTH SHOP) , FORMERLY TATA IRON AND STEEL COMPANY LTD (GROWTH SHOP) , JAMSHEDPUR VERSUS UNION OF INDIA THROUGH THE COMMISSIONER, CENTRAL GST AND CENTRAL EXCISE, JAMSHEDPUR, ASSISTANT COLLECTOR, CENTRAL EXCISE DIVISION 1, JAMSHEDPUR, SUPERINTENDENT, CENTRAL EXCISE, ADITYAPUR, RANGE III, SUPERINTENDENT (ADJUDICATION) , CENTRAL GST AND CENTRAL EXCISE, JAMSHEDPUR [ 2023 (2) TMI 893 - JHARKHAND HIGH COURT ] where it was held that The respondents had kept the impugned show cause notice and ten other SCNs as indicated in the chart above in the call book on the ground that the matter was sub-judice. However, from the pleadings on record and also from the averments made in the counter affidavit, it appears that none of the conditions as enumerated in the CBIC circular / guidelines relied upon by the respondents and also by the petitioner stood satisfied for transferring the matter to the call book. After going through the aforesaid judgment, it clearly transpires that in paragraph No. 9, the show cause notices involved in all these writ applications have been mentioned in tabular form and this Court has taken note of the pendency of show cause notices and/or the writ petition pending for adjudication. It further transpires that was disposed of on 14.02.2023 in presence of the parties and in the open Court but for the reason best known to the respondent-Department just after couple of days on 17.02.2023, they passed the common order in original (OIO) affirming the demand as made in the 10 show cause notices. This action of the Respondent Commissioner is against the settled principles of law which demands that the Revenue Officers are bound by the decisions of the appellate authorities and that the principle of judicial discipline requires that the orders of the higher appellate authorities are followed unreservedly by the subordinate authorities. As a matter of fact, the Commissioner has not acted in a bonafide manner and has attempted to make the present writ petitions infructuous. When the show cause notices were kept pending for 26 -27 years; there was no reason to proceed with such great speed in passing the impugned order. In this regard reference may be made to the case of PARLE INTERNATIONAL LIMITED VERSUS UNION OF INDIA AND OTHERS [ 2020 (11) TMI 842 - BOMBAY HIGH COURT ] wherein the Hon ble Court has held we have no hesitation to hold that respondents were not justified in commencing adjudication proceeding 13 years after issuance of the show-cause notices dated 01.06.2006 and 28.11.2006. Such adjudication proceeding is therefore, held to be invalid. In the present case, since the issue did attain finality in 2004 itself, there was absolutely no justification in keeping the show cause notices pending thereafter. The file notings show that though the Commissioner was apprised in 2007 that the issue had attained a finality, still a decision was taken by him on 26.10.2007 to keep the cases in the call book. Mere pendency of another matter before the Tribunal when the issue had attained a finality by the Hon ble Apex Court, cannot be a reason to keep the SCN in the call book. A lapse of 18 years from 2004 to 2022 remains unexplained. Neither is there an explanation for any change of circumstances for taking out the notices from the call book in November 2022. In such circumstances, the SCN and the OIO cannot be countenanced. Application allowed.

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• 2023 (6) TMI 696
  Clandestine manufacture and removal - copper wire - trading the goods without bringing to their factory - basis of the allegation is that the descriptions of the goods given in the respective purchase invoices do not tally with the description of the goods mentioned in the sales invoices. HELD THAT:- On going through the purchase and sales invoices, it is found that though there are some apparent discrepancies/contradictions in the description of the goods; also contradictions in the statements of the Transporter and Director vis- -vis invoices, however, such contradictions cannot itself establish that the appellant had received the purchased goods in their factory, processed and converted into finished goods cleared without payment of duty. At best it can raise a suspicion about the genuineness of the transaction and be ground for further investigation. The Department has not carried out thorough investigation of the matter even though the investigation took two years after the audit objection. The intimation letters written by the appellant to the Range Superintendent from time to time informing the invoice no, vendor s name, quantity of material purchased and received in transporter s premises viz. Kamal Roadways duly acknowledged by the Inspector of the Range Office, being not contradicted by the Revenue about its genuineness, weighs in favour of the appellant. No investigation was carried out after intimation letters were received in the Range office even though these were addressed from time to time, much before the audit objection, no verification was carried out. Therefore, it is difficult to accept the allegation of the department that the quantity of goods as shown in the purchase invoices were brought into the factory, processed, converted into finished goods and removed clandestinely without payment of duty. The impugned order is set aside and the appeal is allowed.

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• 2023 (6) TMI 695
  Exemption from Excise Duty or not - manufacture of Ready Mix Concrete - whether RMC can be considered as Concrete Mix and the exemption as per Notification No.4/1997-CE dated 01.03.1997 would be available? - extended period of limitation - HELD THAT:- The issue on merits stands covered against the assessee by the decision in the case of M/S LARSEN TOUBRO LTD. ANOTHER, ECC CONSTRUCTION GROUP VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [ 2015 (10) TMI 612 - SUPREME COURT] - It has been categorically held by the Hon ble Apex Court that Notification No.4/1997-CE dated 01.03.1997 exempts only Concrete Mix (CM) and that the said exemption is not available to Readymade Mix Concrete (RMC) manufactured at site and that RMC and concrete mix are not one and the same. The issue on merits is therefore held against the assessee and in favour of the Revenue. Time Limitation - HELD THAT:- From the dates and events of the litigation, it is established that the issue as to whether RMC is also eligible for the Exemption Notification No.4/97-CE, other notifications and whether RMC and concrete mix are one and the same was under confusion and was under litigation before various forums. Also the department has not been able to establish with cogent evidence that there is any positive act of suppression on the part of the appellant with intent to evade payment of duty. The details for demand of duty has been derived from the accounts and documents furnished by the appellant. In the case of M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I [ 2007 (8) TMI 11 - SUPREME COURT] the Hon ble Apex Court allowed the plea of the assessee that the SCN is time barred as there were no grounds to invoke extended period and also because there were doubts as to whether RMC is a dutiable product. Thus, SCNs issued invoking the extended period in these appeals are time-barred and therefore cannot sustain. The impugned orders are set aside on the ground of limitation. Appellants succeed on the ground of limitation.

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• 2023 (6) TMI 694
  Levy of penalty of Rs. 10 lacs u/r 26 of CER, on appellant being DGM-Finance of the company - clandestine removal - case of Revenue is that appellant is recording sales of the goods in the books of accounts therefore, he is very well aware of the overall affairs of the company - HELD THAT:- There is a force in the counsel s submission that from the record it appears that the major work related to removal of goods is looked after by one Shri S.G. Pathak and the appellant s personal statement was not recorded. The statements which he has given to the investigating officer is on behalf of the Director accordingly, such statement can be used against the Director only and not anyone else. However, the appellant being worked as DGM Finance ultimately all the transactions are finally booked in the books of accounts and for which the appellant is responsible as he was aware with the transaction made without payment of duty. As regard the duty, the same has been admitted by the company therefore the evasion of duty is not under dispute - As regard the judgment cited by both the sides, as regard the penalty under Rule 26 each case has to be dealt with in its fact therefore, without relying to any judgment considering the involvement of the appellant, the appellant deserves for leniency therefore, penalty reduced from Rs. 10 lacs to Rs. 1 lac. The impugned order in respect of the present appellant is modified to the above extent. The appeal is partly allowed

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• 2023 (6) TMI 693
  Rejection of remission of duty in respect of the goods lost in fire - failure to inform the department in due time - not taking necessary precautions to safeguard the goods - non-insurance of the goods - failure to claim in any proper pro-forma, claim was filed in proper pro-forma only on 01.07.2011 i.e. after almost one year after the fire accident on 07.06.2010 - HELD THAT:- There is no dispute that the fire has occurred accidentally in the factory of the appellant and the goods were destroyed. The appellant has intimated to the range officer who visited the factory and drawn the panchnama. In the panchnama, there is no whisper about any mischief done by the appellant for the fire accident took place in the factory of the appellant therefore, nothing is on record that the fire accident has taken place not accidental but intentional by the act of the appellant. In this position, without any evidence the allegation of the lower authorities that the appellant have not taken precaution has no basis. It is further found that the appellant have filed an insurance claim with the National Insurance Company Ltd. against the goods lost in fire and the appellant have been granted the insurance claim in the survey report for the purpose of insurance, it is nowhere coming out that the fire has not occurred accidental but due to lack of precaution by the appellant or any mischief of the appellant therefore, the allegation made by the lower authorities for rejection of remission claim is based on assumption and presumption. It is pertinent to note that the revenue s stack is very minuscule as against the stack of insurance company. Therefore, once insurance company has granted the insurance claim for the principal amount of the goods destroyed which is much more than the duty implication in the goods destroyed. It can be conveniently inferred that the insurance company has scrutinized minutely each and every aspect of the accident of fire taken place and only thereafter the insurance claim was granted. It is also to be considered that the appellant as against the duty involvement of Rs. 1,38,233/- have reversed the cenvat credit involved in the destroyed goods amounting to Rs. 92061/- therefore, appellant have made out a fit case for remission of duty which could not have been rejected by the lower authorities accordingly, the impugned order is set aside. Appeal allowed.

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• 2023 (6) TMI 692
  Seeking dropping of penalty imposed under Rule 26 of the Central Excise Rules, 2002 - under-valuation of the goods supplied to the Appellants - non-inclusion of value of drawing design supplied by the Appellants free of cost - HELD THAT:- Similar issue has come up before this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE JAMSHEDPUR VERSUS TATA MOTORS [ 2008 (12) TMI 129 - CESTAT KOLKATA] where penalty imposed on the supplier of drawing and design free of cost to the job-worker under Rule 26 was set aside - It was held in the case that the escapement of the additional duty for the impugned period was not on account of suppression, misstatement etc., but on account of a mistake of law on the part of the assesses as well as Departmental Authorities. Hence, while holding that the cost of drawings and designs @0.085%, as provided by M/s. Tata Motors, is includible in the assessable value of the components, we hold that the demand for the same can only be sustained for the normal period of limitation. Therefore, following the decision of this Tribunal in the case of Tata Motors Ltd, it is held that penalty under Rule 26 is not imposable on the Appellant. Accordingly, the impugned orders qua imposing penalties on the Appellants are set aside - Appeal allowed.

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• 2023 (6) TMI 691
  Levy of Differential Duty - price variation clause - Determination of assessable value of stock transferred parts to their sister concern by the Appellant - adjustment of excess paid duty with the duty short paid - period involved in all the Appeals is 2005-06 to 2009-10 - applicability of Rule 8 of the Central Excise Valuation Rules - Revenue Neutrality - HELD THAT:- Similar issue came up before this Tribunal in the case of M/S. HINDALCO INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, BHUBANESWAR-II [ 2023 (5) TMI 720 - CESTAT KOLKATA ], wherein this Tribunal has observed When excess paid duty is adjusted against the short payment that net result is that there is no short payment by the Appellant. The Adjudicating Authority failed to do this adjustment. Demanding duty onlu on the short payment, ignoring the excess payment is bad in law. In this case also the Appellant has paid excess duty which was required to be adjusted against the short-payment. Moreover, it is a situation of revenue neutral as whatever duty they pay their sister unit get CENVAT Credit of the same. Therefore, it is the revenue neutral situation. The demand of duty is not sustainable against the Appellant. Accordingly, the impugned order is set aside and the appeals are allowed.

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• 2023 (6) TMI 690
  CENVAT Credit - input service distribution - services used in common for manufacturing, as well as for trading activities - recovery sought under rule 14 of CENVAT Credit Rules, 2004 - invocation of extended period of limitation - HELD THAT:- There is no dispute that the appellant had taken the credit as assigned to them by head office, registered as input service distributor , in accordance with rule 7 of CENVAT Credit Rules, 2004. Several conditions are enumerated in the said rule and it is the contention on behalf of the appellant that none of these restrict distribution in the manner presumed by the adjudicating authority in the impugned order. As the entirety of the dispute pertains to credit availed between April 2006 and March 2009 which predates the deeming of trading as an exempted activity by notification no. 13/2011-CE dated 31.03.2011 and it is claimed by the appellant that denial of credit on this score has been held to be inappropriate in a catena of decisions of the Tribunal, in the first instance, it is to be ascertained if the decision in ROCA BATHROOM PRODUCTS PVT. LTD. VERSUS C.C.C., JAIPUR [ 2016 (12) TMI 223 - CESTAT NEW DELHI] , relied upon by Learned Authorised Representative, serves to discard the claim. It is seen that the primary issue agitated before the Tribunal in that dispute was the jurisdictional competence of central excise authorities having control of the recipient of credit to raise demand for recovery under CENVAT Credit Rules, 2004 and the order impugned therein was upheld by discarding that claim without examining applicability of the retrospectivity issue decided in earlier orders of the Tribunal; this is not surprising as such a plea had not been made in that proceeding. From the records, it is seen that there is no allegation of the conditions prescribed having been breached in any manner in determination of distribution of credit by input service distributor which the head office was. The availment of the entirety of credit, so accrued, at the Peenya facility is not inconsistent with the law. The sole counter of Learned Authorised Representative to this ruling is a portion of the decision of the Tribunal in Roca Bathroom Products Pvt Ltd which is nothing more than recording of the findings in the order impugned therein with no further evaluation of that finding. Indeed, only the jurisdiction issue was before the Tribunal in that dispute. Therefore, there are no reason to discard the submission of Learned Counsel that assignable credit would have to be proportionately restricted to the extent of trading turnover only with effect from 1.04.2011. The impugned order lacks authority of law and, consequently, set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (6) TMI 689
  Maintainability of appeal - failure to file appeal within time (delay of 83 days) - sufficient reason for delay given or not - main contention of the petitioner is that he accounted for the alleged deficit of stock of 11,179 bags of cement but the same was not considered properly by the concerned authorities - HELD THAT:- Since the said aspect is a pure question of fact which can well be appreciated by AP VAT Appellate Tribunal if an appeal were to be filed before the Tribunal, the delay in filing the appeal can be condoned and liberty can be given to the petitioner to file appeal on suitable terms. The impugned order dated 12.11.2021 shows that an appeal can be filed before AP VAT Appellate Tribunal at Visakhapatnam within sixty days. The said period of sixty days should be reckoned from the date of receipt of a copy of the order. However, the said order was served on petitioner s GST Counsel who died on 20.11.2021 without disclosing the said fact. Therefore, the petitioner s knowledge can be reckoned from the date of receipt of notice dated 20.01.2023 issued by the 3rd respondent. The appeal has to be filed within sixty days from 20.01.2023. However appeal was not filed till date. Hence there is a delay of 83 days. The writ petition is disposed of giving liberty to the petitioner to file appeal against the impugned revision order dated 12.11.2021 passed by the 5th respondent and consequent demand notice dated 20.01.2023 issued by the 3rd respondent before AP VAT Appellate Tribunal, Visakhapatnam on the condition of petitioner depositing 25% of the demanded tax within three weeks from the date of receipt of copy of the order.

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• Indian Laws

• 2023 (6) TMI 688
  Dishonour of Cheque - entitlement for Interim Compensation - main contention of the petitioner is that the petitioner was not given a hearing by the court - principles of Natural Justice - HELD THAT:- The views of the Hon ble Supreme Court in G.J. RAJA VERSUS TEJRAJ SURANA [ 2019 (8) TMI 91 - SUPREME COURT ] though on the point of Section 143 N.I. Act being prospective, is relevant to a certain extent in the present case. It was held in the case that It is thus clear that in case an accused, against whom an order to pay interim compensation under Section 143A of the Act is passed, fails or is unable to pay the amount of interim compensation, the process under Section 421 can be taken resort to which may inter alia result in coercive action of recovery of the amount of interim compensation as if the amount represented the arrears of land revenue. The extent and rigor of the procedure prescribed for such recovery may vary from State to State but invariably, such procedure may visit the person concerned with coercive methods. The Supreme Court in NOOR MOHAMMED VERSUS KHURRAM PASHA [ 2022 (8) TMI 924 - SUPREME COURT ] held that The remedy for failure to pay interim compensation as directed by the Court is thus provided for by the Legislature. The method and modality of recovery of interim compensation is clearly delineated by the Legislature. It is well known principle that if a statute prescribes a method or modality for exercise of power, by necessary implication, the other methods of performance are not acceptable. Thus, in view of the present position of law as laid down, the order under revision being in accordance with law and causing no prejudice to the petitioner/accused, requires no interference by this court - Revision application dismissed.

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• 2023 (6) TMI 687
  Bribe - bribing the public servant, having abetted P.W. 1 for commission of the offence Punishable Under Section 7 of P.C. Act - conviction of appellant under Section 12 of Prevention of Corruption Act (PC Act) - sentence to undergo one year rigorous imprisonment and fine of Rs. 10,000/- - burden to prove - benefit of doubt when two views are present - error in accepting the evidence of the prosecution witnesses - HELD THAT:- On perusal of the guidelines issued by the Hon ble Supreme Court in the Lalitha Kumari s case [ 2013 (11) TMI 1520 - SUPREME COURT] when P.W. 1 informed DCP Venugopal and in turn, the DCP informed P.W. 5 police inspector to go the house of P.W. 1. The cash handed over by the accused to P.W. 2 becomes cognizable offence under the provisions of the P.C. Act. Immediately, P.W. 5 could have informed the police station for making an entry in SHD regarding commission of offence and receipt of the complaint at 8.30 p.m., but he has seized the cash at 8.30 p.m. and thereafter he went to the police station and registered FIR only after 9.15 p.m. by showing the name of the accused. Therefore, when the accused was not present on the spot and the chit left by him along with the cash was not handed over to P.W. 5, then it was the case required for preliminary enquiry before registering the FIR. Even otherwise, if it is a definite case that the accused came and gave money as it is cognizable offence, then registering FIR is mandatory and then the investigation officer could have seized the cash under the panchanama, but P.W. 5 seized the cash and started investigation prior to the registering the FIR. Therefore, the very foundation of the prosecution commencing the investigation and thereafter registering the FIR vitiates the entire investigation and proceedings. That apart, P.W. 3 who is the colleague of P.W. 1, definitely used to support P.W. 1 and he has not seen the accused. The prosecution tried to connect the accused with the crime on the ground that the accused had a case before the P.W. 4-Assistant Commissioner and this P.W. 1 being joint commissioner compounded the offence and they received the tax amount from the accused. Such being the case, the work of the accused with P.W. 1 or P.W. 4 has been completed. The question of the accused bribing the complainant after completion of work cannot be acceptable as there is no working pending with P.W. 1. When the accused came to the house of P.W. 1 and at the same time, P.W. 3 might have come to the house and witnessed the cash left by the accused. Then there is every chance of P.W. 1 or P.W. 2 informing the police for registering the case. Otherwise, how the accused could come to the house of P.W. 1, who had given the address to the accused in order to bring money. As rightly contended by the learned counsel for the appellant, the accused might be the victim and P.W. 1 might have demanded money for having done favourable work to the accused. Therefore, when there are two views are possible, one, the accused might brought the money for bribing P.W. 1 for having done his work and compounding the offence, or second, P.W. 1 might have demanded bribe from the accused for completion of the work of the accused by compounding the case and then the amount brought by the accused was witnessed by P.W. 3. In order to avoid filing of the complaint by the accused before the Lokayuktha police, they have not touched the same and on the other hand, P.W. 1 lodged the complaint to the local police against the accused. If two views are possible, the view which is favourable to the accused shall be accepted. That apart, suppressing the chit left on the spot, mentioning the phone number and name of the accused by the prosecution witnesses creates serious doubt in the mind of the Court. In addition, no call detail records are collected and produced to show as to whether the accused telephoned P.W. 1 or contacted P.Ws. 1 or 4 through his mobile phone, prior to the alleged incident or whether the police or P.W. 1 tried to contact the accused through mobile phone, are not forthcoming. Therefore, the benefit of doubt shall be extended to the accused. The trial Court has committed an error in accepting the evidence of the prosecution witnesses and it has ignored the total serious lapse on the part of investigation officer, commencement of investigation without registering the FIR, which was fatal to the prosecution case. Therefore, the judgment of conviction and sentence passed by the trial Court is liable to be set aside. The judgment of conviction and sentence passed by Special Judge, Prevention of Corruption Act, Benglauru Urban District is hereby set aside - The appellant is acquitted of the offence punishable under Section 12 of P.C. Act and his bail bond stands cancelled - The criminal appeal is allowed.

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