TMI Tax Updates - e-Newsletter
June 26, 2019

Case Laws in this Newsletter:

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

TMI SMS

• TDS u/s 194A on interest - payment exceeded the basic limit of taxation - in the absence of certificate u/s 197, the bank is obliged for TDS

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• TDS u/s 194IA - assessee had purchased the land on piece meal basis - in each sale deed is less than ₹ 50 lakhs - No TDS liability

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Articles

1. REFERENCE TO CRIMINAL PROCEDURE CODE UNDER CENTRAL GOODS AND SERVICES TAX ACT, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

2. GIST OF RECENT PRONOUNCEMENTS ON GST (PART-XXII)

   By: Dr. Sanjiv Agarwal

News

1. Surjit Bhalla Committee on Trade and Policy

2. Extradition of Economic Offenders

3. Atal Pension Yojan

4. India signs Loan Agreement with the World Bank for USD 31.58 Million for Uttarakhand Public Financial Management Strengthening Project; Project to help improve the State’s ability to manage its Financial Systems and lead to Better Utilization of Development Resources

5. APEDA Organizes Buyers - Sellers Meet in Manipur

6. Efforts by Ministry of Commerce & Industry for convergence of interests of E-Commerce & Physical Retailers

7. Payroll Reporting in India – A Formal Employment Perspective

8. The Fifteenth Finance Commission holds meeting with the Government of Karnataka

9. Bank NPA

10. Bank Loan to Farmers

11. Sovereign Gold Bonds

12. E-filing of Income Tax

Notifications

Customs

1. 26/2019 - dated 24-6-2019 - ADD

Seeks to extend levy of anti-dumping duty till 09.07.2019, on imports of " Paracetamol" originating in or exported from china PR, extended vide notification No. 39/2018 Customs (ADD), dated the 20th August, 2018, in pursuance of order of Hon'ble High Court of Gujarat in the matter of SCA 5278/2019.

2. 46/2019 - dated 25-6-2019 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver

3. 1/2019-Customs (CVD) - dated 24-6-2019 - CVD

Seeks to impose definitive countervailling duty on "New/Unused pneumatic radial tyres with or without tubes and/or flap of rubber (including tubeless tyres), having nominal rim dia code above 16" used in buses and lorries/trucks” originating in or exported from, People’s Republic of China

Circulars / Instructions / Orders

Income Tax

1. 13/2019 - dated 24-6-2019

Exemption of service element and disability element of disability pension granted to disabled personnel of armed forces who have been invalided on account of disability attributable to or aggravated by such service

Central Excise

2. 1070/3/2019 - dated 24-6-2019

Implementation of CBIC (ICEGATE) E-payment portal from 1st July, 2019– Revised procedure for making e-payment of Central Excise and Service Tax arrears under the new CBIC-GST Integrated portalhttps://cbic-gst.gov.in

Highlights / Catch Notes

GST

• Railway ticket printing using applicant-provided paper incurs a 6% Central Goods and Services Tax (CGST).

  Case-Laws - AAR : Printing of Railway Tickets - in case of railway Tickets where the applicant uses their own physical input i.e. paper, then the same is taxable at 6% CGST
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• Printing Cheques with Client's Paper Classified as Printing Services, Subject to 2.5% CGST.

  Case-Laws - AAR : Printing services - In a situation where the applicant does printing of cheques where physical input i.e. paper is supplied by the client, then the same will also be considered as a supply of printing services - Liable to CGST @2.5%
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• Turnkey Projects for Relay & Protection Panels with SAS Classified as Goods, Taxed at 18% GST Rate.

  Case-Laws - AAR : Works contract services or Composite supply? - turnkey projects for supply, installation, testing and commissioning of Relay & Protection Panels with Substation Automation System (SAS) compatible to IEC 61850 protocol, at their various sites/ locations - Held as Supply of Goods - Taxable @ 18% as GST
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Income Tax

• ITAT Upholds CIT(A) Decision, Dismisses Revenue's Appeal on Rectification u/s 254, No Errors Found.

  Case-Laws - AT : Rectification u/s 254 - in the earlier years same issue had been sent back to the A.O. for verification and adjudication in the light of the findings of the Hon'ble High Court - since CIT(A) himself made verification in accordance with the findings of the Hon'ble High Court in presnt appeal, ITAT dismissed the appeal of revenue - no error in the order of the I.T.A.T.
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• Grant-in-Aid to Schools Allowable u/s 37(1); Not Affected by Section 40A(9) as Business Expense.

  Case-Laws - HC : Expenditure toward the grant-in-aid to the school/institution - allowable u/s 37(1) as expenditure have been incurred for the purpose of business of the assessee i.e and was not towards contribution to any fund hence not hit by Section 40A(9) - allowable expenses
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• No MAT exemption for assessee u/s 115JB(6); not qualifying as SEZ entrepreneur or developer.

  Case-Laws - AT : MAT - scope and interpretation of section 115JB(6) - assessee is not eligible for exemption from payment of MAT as per the provisions of section 115JB(6), since, admittedly, it does not qualify as a business or services rendered by an entrepreneur or developer in a unit or SEZ as per definition of the said terms in the SEZ Act.
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• Asset Transfer in Demerger: Value Determined by Written Down Value per Section 43(1), Explanation-6.

  Case-Laws - AT : Determination of value of assets transferred on Demerger / Succession - actual cost of the transferee company on the date of transfer is indicated in Section 43(1), explanation-6, is the written down value of the holding company.
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• Penalty u/s 271AAB Requires Undisclosed Income in Statement; Not Mandatory Without Meeting Conditions.

  Case-Laws - AT : Penalty u/s 271AAB - disclosure of income in his statement u/s 132(4) - Unless and until income offered to tax by an assessee comes within the mischief of undisclosed income and that too of the specified previous year it is not open for the AO to invoke provisions of Section 271AAB - if penalty was mandatory and automatic then the right of appeal u/s 246A would not have been provided
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• Refractory Company Secures Tax Allowance for Business Loss Due to Supplier Insolvency Write-Off.

  Case-Laws - AT : Allowability of business loss - Advance given for supply of refractory materials in the normal course of its business of trading and manufacturing of refractories and written off as irrecoverable as company became sick - allowable as business loss
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• Section 56(2)(vii)(b) does not apply to shares applied for in FY 2012-13 despite allotment in FY 2013-14.

  Case-Laws - AT : Addition u/s 56(2)(vii)(b) - issues of shares at a price more than the FMV - from the year of application or allotment - Section was inserted vide Finance Act, 2013 w.e.f 01.04.2013 - since shares were applied in FY 2012-13 as per the terms and conditions settled, the provision u/s 56(2)(viib) cannot be applied merely on the basis that shares were allotted in FY 2013-14
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• Bank Found Defaulting for Not Deducting TDS on Payments Above Limit, Lacks Section 197 Certificate, Demand Upheld.

  Case-Laws - AT : Non deduction of TDS u/s 194A - payment exceeded the basic limit of taxation - in the absence of certificate u/s 197, the bank is obliged to deduct the TDS - AO has rightly treated the assessee as assessee in default failure to deduct the TDS and remit to the Government account - demand raised u/s 201/201(1A) in this case sustained
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• Pr.CIT's Section 263 Review of Partner's Capital Introduction Overruled; AO's Acceptance Upheld; Revision Quashed.

  Case-Laws - AT : Revision u/s 263 - acceptance of capital introduction from the partner on the evidence placed on record by the AO is a possible view - exercised of power by Pr.CIT to examine the source of source of partner which is not permissible in the eyes of law - Revision quashed
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• High Court Appeals Restricted: Only Substantial Legal Questions Allowed Under Income Tax Act, Section 260A.

  Case-Laws - HC : Scope of Section 260A - in the absence of demonstrated perversity that findings recorded by the Tribunal are based on no evidence and or while arriving at a said finding relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence or the evidence has been misread - no substantial question of law arises
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• Taxpayer's Excess Disallowance u/s 14A Exceeds Dividend Income; Assessing Officer's Additional Disallowance Overturned.

  Case-Laws - AT : Disallowance u/s 14A - voluntarily disallowance made was more than dividend income received - further disallowance made by the AO and confirmed by CIT(A)is not warranted in the facts and circumstances
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• Penalty Upheld for Unaccounted Stock Shortage; Classified as "Undisclosed Income" u/s 271AAB, Conditions Met for Enforcement.

  Case-Laws - AT : Penalty u/s 271AAB - discrepancy in stock - condition of Explanation(c) below section 271AAB(3) fulfilled - shortage of stock not accounted for by the assessee has been rightly qualify as “undisclosed income” as per the definition u/s 271AAB - penalty upheld
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• Penalty u/s 271(1)(c) Overturned Due to Lack of Evidence for Inaccurate Income Details in Old Vehicle Sales.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition of peak cash credit - sale and purchase of old vehicles - addition confirmed by the CIT(A) on the basis of estimation/preponderance of possibilities of introducing some unaccounted income into the bank account - there was no reliable or un-rebutted evidences on the file to prove that the assessee had actually furnished inaccurate particulars of income or concealed particulars of his income - no penalty
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Customs

• Respondents' Unusual Amendments to Section 149 on Duty Drawback Prompt Unnecessary Judicial Intervention by Petitioners.

  Case-Laws - HC : Duty Drawback - respondents’ action for seeking amendment and holding out the provisions of Section 149 was nothing but uncanny attempt to avoid the eventualities, which unfortunately compelled the petitioners to approach this Court for no reasons.
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• Restricted Item Import Classification Must Be Unified; 'Scrap' Goods Exempt from Licensing Under Foreign Trade Policy.

  Case-Laws - AT : Import of restricted item - There cannot be two distinct determination of classification for the purpose of recourse to the general restrictions in the Foreign Trade Policy. - There is no option but to consider the goods as ‘scrap’ and import of scrap requires no licence.
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PMLA

• Court Overturns Property Attachment Order as RIICO and Bank Not Involved in Borrowers' Alleged Crimes.

  Case-Laws - AT : Provisional order of attachment of properties mortgaged with the Appellant RIICO - The Appellant has nothing to do and has no connection with the allegation of crime committed by the borrowers. Bank is not involved for the offences of money-laundering. - Order set aside.
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• Attachment of Bank Accounts Invalid Without Clear Justification; Mere Repetition of Legal Terms Insufficient.

  Case-Laws - AT : Attachment of Bank Accounts - Without assigning any reason for the attachment of properties of the Respondent, the attachment cannot be permitted mere repetition of language of Section in the last paras after recording the allegation and facts are no valid reason to belief.
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Service Tax

• Service Agreement Interpretation: Consumer Must Reimburse Service Tax to Provider, Who Pays it to Government Unless Specified Otherwise.

  Case-Laws - HC : Interpretation of clauses of agreement - reimbursement of service tax - who is liable to bear the service tax - unless contracted to the contrary, the consumer of service is liable to refund the said tax to the service provider who in turn is liable to pay to the government.
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• Reverse Charge Mechanism Rule 2(1)(d) of Service Tax Rules 1994 Ruled Unconstitutional for 2002-05 Period.

  Case-Laws - HC : Reverse Charge (RCM) - Constitutional validity of the provision of sub-Clause (iv) of Rule 2 (1)(d) of Service Tax Rules, 1994 - Period from 2002-03 to 2004-05 - Rule 2 (1)(d)(iv) of Service Tax Rules, 1994 is ultra vires the provisions of the Act and the Constitution and is accordingly declared bad in law.
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• Real Estate Contract Lacks Defined Consideration, No Service Tax Liability Due to Undefined Agent-Principal Relationship.

  Case-Laws - AT : Real estate agent service - contract between parties is of principal to principal relationship or agent to principal - There is no consideration defined and/or provided for the alleged service. In absence of any defined consideration for service, there is no contract for service. - No service tax liability.
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Central Excise

• Appellants' Refund Claim Denied Due to Lack of Evidence on Unjust Enrichment; No Proof Duty Burden Wasn't Transferred.

  Case-Laws - AT : Refund claim - unjust enrichment - except for putting forth arguments theoretically, the appellants have not put forth any incontrovertible evidence to prove that the burden of duty has not been passed on to their customers - Neither from the sample invoices nor from certificate by cost accountant able to prove that test of unjust enrichment has passed.
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VAT

• Tribunal's Classification of 'Halls' as Non-Ayurvedic Medicine Contested; Recognized as Ayurvedic in Five Northern States.

  Case-Laws - HC : Classification of goods - different flavours of ‘Halls’ - whether could not be treated as proprietary Ayurvedic medicine - Tribunal failed to examine that the very same product ‘Halls’ has been treated as an Ayurvedic medicine in the five States of Northern India.
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• Tribunal's VAT and Sales Tax Order Criticized for Length, Emphasizing Need for Concise Legal Writing.

  Case-Laws - HC : The brevity is an art of writing judgements and the manner in which the Tribunal has penned its order is in clear violation of the often propounded theory of brevity.
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Case Laws:

• GST

• 2019 (6) TMI 1172
  Classification of supply of services - rate of tax - Printing of Pre-examination items - Printing of Post-examination items - Scanning and processing of results of examinations - exempt supply or not - business of providing the services of printing of security documents to various clients like Government Authorities and agencies, Banks, Educational Boards / Institutions and Private Companies. Supply of service of Printing of examination items like question papers OMR sheets (Optical Mark Reading), Answer booklets for conducting of an examination by the educational boards or institutions - exempt services or not - N/N. 12/2017 - CT (Rate), dated 28th June, 2017 as amended - Circular No. 11/11/2017-GST dated 20.10.2017 - HELD THAT:- As per under Entry No. 66 of the Notification No. 122017 - C T (Rate), dated 28th June, 2017 as amended, services provided to an educational institution, by way of Services relating to admission to, or conduct of examination by, such institution falls under Heading 9992 (Education Services and exempted from payment of GST. Such services are exempted only if they are, in the subject case, related to conduct of examination by such institution. The question papers, OMR sheets (Optical Mark Reading), answer booklets are very essential and necessary requirements to conduct any examination. To print question papers the content i.e. the questions will be provided by the institution conducting the examination. The contents of the OMR sheets and answer sheets will also be provided accordingly by the institution - in the subject case there is a supply of services and since the same are provided to educational institutions, the same shall be classified under Heading 9992 and will be exempted from payment of GST vide Entry No. 66 of the Notification No. 12/2017 - Central Tax (Rate), dated 28th June, 2017 as amended. Whether supply of service of Printing of Post examination items like marks card, grade card, certificates to educational boards (up to Higher Secondary) after scanning of OMR Sheets and processing of data are also exempted under the said Notification? - HELD THAT:- Conduct of any examination by an educational Institute includes both pre examination works, actual conduct of the exams and post-examination works. Hence for reasons mentioned in para no. 5.4 above we hold that such supply is also a supply of services and classifiable under Heading 9992 and will be exempted from payment of GST vide Entry No. 66 of the Notification No. 122017 - Central Tax (Rate), dated 28 th June, 2017 as amended. We do not agree with the jurisdictional officer who has opined that the said supply is a supply of goods and not services. What would be the classification and the GST rate, for the supply of services in the nature of printing of Railway Tickets where (i) the physical inputs of paper belongs to the applicant and (ii) the physical inputs of paper belongs to the Railways? - HELD THAT:- GST is applicable to all the supplies of goods and services made through the railways, including passenger tickets, commercial transports and catering services. The applicant is claiming exemption on its supply considering the same as Railway Tickets . In a situation where the applicant does printing for Railway Tickets and uses their own physical input i.e. paper, in such a case it is very clear that the case is covered under Heading 9989 of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 as amended which covers Services by way of printing of all goods falling under Chapter 48 or 49 [including newspapers, books physical inputs (including Braille books), journals (goods) owned and periodicals], which attract by others) CGST@ 6 per cent., or 2.5% per cent, or Nil, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printed and is taxable at 12% GST - In a situation where the applicant does printing for Railway Tickets and uses physical input i.e. paper supplied by the Railways then the same will be considered as a supply of printing services. This scenario will attract the services under Heading 9988 (iia) i.e. Services by way of ant treatment or process on goods belonging to another person, in relation to printing of all goods falling under Chapter 48 or 49, which attract CGST@ 6% . What would be the classification and the GST rate, for the supply of services in the nature of printing of cheques for their clients (i) the physical inputs of paper belongs to the applicant and (ii) the physical inputs of paper belongs to the concerned Banks? - HELD THAT:- The cheques, lose or in book form, are covered under Chapter Heading 4907 00 90 and are subject to Nil rate vide Notification No. 2/2017-C.T. (Rate) dated 28.06.2017 - In a situation where the applicant does printing of cheques and uses their own physical input i.e. paper, in such a case it is very clear that the case is covered under under Heading 9989 (i) of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017. In a situation where the applicant does printing of cheques where physical input i.e. paper is supplied by the client, then the same will also be considered as a supply of printing services. This scenario will attract the services under Heading 9988 (ii) (c) i.e. Services by way of ant treatment or process on goods belonging to another person, in relation to printing of all goods falling under Chapter 48 or 49, which attract CGST@ 2.5% or Nil and will be taxable @ 2.5% CGST.

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• 2019 (6) TMI 1171
  Works contract services or Composite supply? - turnkey projects for supply, installation, testing and commissioning of Relay Protection Panels with Substation Automation System (SAS) compatible to IEC 61850 protocol, at their various sites/ locations - Naturally bundled services - supply of goods or not - classified under the HSN Code 995461 or otherwise? - rate of tax - HELD THAT:- Works contract will be treated as service and tax would be charged accordingly. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract - what we need to find out is whether the applicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract. For items listed in Sr. No. 1 to 16 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 17 and 18 of the Schedule included services tax. Thus the PO also has clearly bifurcated the contract into a supply of goods and supply of services. Further clause no. 11 of the PO deals with TERMS OF PAYMENTS. The PO envisages separate payment for supply of works and for supply of materials/equipments. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - For items listed in Sr. No. 1 to 21 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 22 and 23 of the Schedule included services tax. Further clause no. 11 of the PO deals with TERMS OF PAYMENTS. The PO envisages separate payment for supply of works and for supply of materials/ equipments. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - For items listed in Sr. No. 1 to 17 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 18 of the Schedule included services tax. Here too, the PO envisages separate payment for supply of works and for supply of materials/equipments and there appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - Thus we find from all the three POs that the contracts are considering a clear demarcation of goods and services to be provided by the applicant but such supplies are naturally bundled and in conjunction with each other. In all the three POs submitted by the applicant the major part of the contract is supply of goods. These goods are sold to the client by the applicant and they receive separate payment for such goods sold. Further we find that the goods that are supplied are used by the applicant to provide services installation, testing and commissioning of the substations. Without these goods the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods - Thus, there is a composite supply in the subject case since in the subject case there is no building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract. Thus, there is no works contract involved in the subject case and the supply is nothing but a composite supply with supply of goods being the principal supply. Whether their transaction would be treated a supply of goods if their transaction is not considered a works contract and if yes, what would be the HSN code and rate of tax? - HELD THAT:- The goods supplied by them are in the form of Boards, Panels, etc equipped with 2 or more apparatus of heading 8535 or 8536 like fuses, switches, etc, for electric control and distribution of electricity. Hence the principal supply in their composite supply being goods as described under heading 8537, the applicant is liable to pay GST on the whole contract @ 18%.

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• 2019 (6) TMI 1170
  Profiteering - City Park Township - benefit of Input Tax Credit (ITC) not passed on - contravention of the provisions of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- It is clear from the plain reading of Section 171 (1) that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax hence this issue is not relevant in this case. Benefit of ITC in the post-GST era - HELD THAT:- It has been revealed by the DGAP s report that the benefit of additional ITC of 9.68% of the taxable turnover during the period w.e.f. 01-07-2017 to 30-06-2018 the amount of ITC as on 30-06-2018, has accrued to the respondent and the same is required to be passed on the above applicant and the other flat buyers. The DGAP has calculated the amount of ITC as Rs. 74,36,865/- which was availed by the respondent vide Table-D on the basis of the information supplied by the respondent and hence the calculation done by him can be relied upon. The amount of profiteering in terms of Rule 133(1) of the CGST Rules, 2017 is determined as Rs. 81,67,546/- including GST @ 12% on the base profiteered amount - it is ordered that the respondent shall reduce price to be realized from the buyers of the flats commensurate with the benefit of ITC availed by him. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the Applicants as well as the rest 36 purchasers of flats in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than what he was entitled to charge and has also compelled them to pay more GST than what they were required to pay by issuing incorrect tax invoices and hence he has committed offence under section 122 (1) (i) of the CGST Act, 2017 and therefore, he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 - keeping in view the principles of natural justice it would be appropriate to issue fresh notice asking him to explain why penalty should not be imposed on him for the above offence. Application disposed off.

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• Income Tax

• 2019 (6) TMI 1169
  Non-consideration of representation at Ext.P2 - The petitioner is concerned with a complaint filed by the 3rd respondent as to the petitioner having cheated the 3rd respondent of Rs. 45 crores - HELD THAT:- The statement as made by Mr. Hariharan is referred and recorded. By granting the liberty as prayed for, the writ petition is dismissed. While dismissing the writ petition, it is made clear that, this Court has not examined the merits of grievance canvassed by the writ petitioner or other objections raised by Sri. G. Sreekumar, the learned counsel appearing for R3. It is for the department to look into the issue , in the manner provided by law and decide accordingly.

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• 2019 (6) TMI 1168
  Power of CIT to cancel registration u/s 12A with retrospective effect - registration order cancelled with retrospective effect - scope of amendment to section 12A - Commissioner concluded that the activity conducted by the assessee was clearly in the nature of trade and business - according to the Tribunal, the Commissioner could not have cancelled such registration w.e.f. A.Y. 2009-10 as that would refer to a date prior to the date when the power to cancel the registration (granted under Section 12-A(1) of the Act) was first conferred on the Commissioner - HELD THAT:- Delay condoned. Leave granted.

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• 2019 (6) TMI 1167
  Depreciation on leased assets - Deduction as payment towards scientific research assistance - Reduction of exemption claimed by the Appellant u/s 10 and in this regard relying upon the provisions of section 14A - HELD THAT:- Appeal is admitted for consideration of following substantial questions of law:- i. Whether the Tribunal erred in holding that the Appellant is not entitled to depreciation of Rs. 93,75,63,113/- on leased assets? ii. Whether the Tribunal ought to have allowed the Appellant s claim for deduction of Rs. 27,52,444/- as payment towards scientific research assistance? iii. Whether the Tribunal erred in upholding the reduction of exemption claimed by the Appellant under section 10 of the Act and in this regard relying upon the provisions of section 14A of the Act?

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• 2019 (6) TMI 1166
  Deduction u/s 80IA - whether assessee is contractor or developer ? - HELD THAT:- Appeals admitted for consideration of following substantial question of law:- Whether the respondent - assessee fulfills the requirement stipulated in Section 80-IA(4) of the Income Tax Act, 1961 once the conclusion reached is that it is contractor and not developer as stated in the sub-section? Proportionate disallowance of interest on diversion and advance of funds for non-business purposes and investment in non-business activities - whether all the funds are in common hotchpotch and it cannot be distinguished / proved whether such advances are out of own funds or out of interest bearing borrowed funds? - HELD THAT:- Before the CIT(A) assessee supplied a statement showing the amount paid, bills adjusted and the balance payable in respect of sub-contractors for whom the job workers were doing the work. CIT(A) accepted such explanation and deleted disallowance. Revenue carried the matter in appeal. Tribunal dismissed the Revenue s appeal inter alia accepting CIT(A) s observation that the assessee had his own sufficient interest free funds which were much higher than the advances made by the assessee. Thus, no interest bearing funds were utilized by the assessee for such purpose. Essentially, this is a question of facts concurrently held by the CIT(A) as well as Tribunal in favour of the assessee. No question of law arises in this respect.

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• 2019 (6) TMI 1165
  Short deduction of TDS - TDS u/s 194C OR 194J - payment of outsourcing expenses such as processing charges and business services etc. - whether nature of services received by the assessee requires certain parameters of technical / managerial skill of highly specialized competency? - HELD THAT:- As decided in own case [2019 (6) TMI 547 - BOMBAY HIGH COURT] CIT (Appeals) and the Tribunal examined the nature of expenditure and came to the conclusion that the assessee had hired the services for various works such as storage of data, scanning of documents, processing charges, call centre operations etc. Looking to the nature of services outsourced, it was held that the same were basically clerical services of repetitive nature of work and payments were therefore, neither for managerial nor for technical services. Having perused the documents on record and looking to the nature of services described, we do not find that the Tribunal has committed any error. The work outsourced was in the nature of clerical work Charges of the event management paid by the assessee CIT (Appeals) and the Tribunal noted that the assessee had arranged conference at Agra. The payments were essentially for domestic ticketing, reimbursing hotel expenses, tour leaders expenses. Such services were essentially in the nature of travel agent who had arranged the ticket booking and hotel facilities. The Tribunal therefore held that payments were not for any technical services availed by the assessee. - Decided against revenue.

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• 2019 (6) TMI 1128
  Addition u/s 68 - unexplained cash credits - Tribunal deleted addition - whether the evidence furnished by the assessee in support of (i) identify (ii) genuineness of transaction and (iii) creditworthiness of each of the creditors on facts of the case as per records is sufficient evidence to uphold the cash credits in all cases to be genuine u/s. 68? - HELD THAT:- No error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. We are of the view that there is no substantial question of law involved in the present tax appeal. The Tribunal having gone through the materials on record and after due comparison of the two accounts ultimately, held in favour of the assessee. The appeal is more on factual aspects rather than on any substantial question of law. We would not like to disturb the findings recorded by the Tribunal. In the result, this appeal fails and is hereby dismissed.

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• 2019 (6) TMI 1127
  Disallowance of expenses - assessee has not produce any books of accounts and therefore, any claim made by the assessee remain unexplained - HELD THAT:- CIT(A) accepted all the contentions of the assessee and noted that the accounts maintained by the assessee in accordance with the method consistently followed and accepted by the Department for the last seven years and the same could not be rejected without there being any material change in the facts. When no specific defect or discrepancy has been pointed out by the authorities below in the audited books of accounts of the assessee then, no disallowance or 30% of total claim of expenses without any basis cannot be disallowed therefore, entire claim of the assessee may kindly be allowed Addition on account of bogus Sundry Creditors - HELD THAT:- AO has not brought on record any adverse finding or allegation to show that the impugned depositors/sundry creditors, in fact, did not represent the sale proceeds and represents the unaccounted income of the assessee shown in the balance sheet in the garb of sundry creditors on account of booking or allotment or sales of units/flats. Therefore, CIT(A) was right in holding that without any concrete material or evidence showing unexplained or unaccounted income of the assessee introduced in the cover of sundry creditors, the addition made by the AO merely on the basis of suspicion, presumption and assumption cannot be held as sustainable - addition/disallowance made on the basis of presumption and assumption is not sustainable and correct in view of the absence of concrete and sustainable allegation and evidence or adverse material against the assessee. Unexplained bank deposit - HELD THAT:- The amounts added and assessed as unexplained sundry creditors includes the impugned amount which was deposited to the three bank accounts of the assessee therefore, the same cannot be treated as unexplained bank deposits in absence of any adverse or positive incriminating evidence or material. Thus, we are inclined to hold that the findings recorded by the CIT(A) are quite correct and we are unable to see any valid reason to interfere with the same and hence, we uphold the same. No substantial question of law.

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• 2019 (6) TMI 1126
  Disallowance of expenses incurred towards fertility improvement programme - nature of expenditure - revenue or capital expenditure - HELD THAT:- Question raised are no longer res integra in view of the decision of this Court in the case of Pr. CIT vs. Gujarat Cop, Op. Milk Marketing Fedaration Ltd. . [ 2018 (10) TMI 1385 - GUJARAT HIGH COURT] as part of the programme, the GCMMF would address the typical reasons for infertility such as improper practice in calf rearing, low body weight of animals, lack of nutrition/mineral, poor health condition, lack of awareness amongst farmers about improved breeding practices etc. In furtherance of such objectives, the GCMMF would hold camps for village awareness, in select villages would carry out tagging and registration of animals, would hold fertility camps, would carry out mass deworming programmes, would distribute mineral mixture, carry out vaccination at mass scale, provide balanced cattle feed etc. Thus seen that the expenditure was general in nature and aimed at improving the practices for better fertility amongst milk animals by addressing the issues which caused infertility. The expenditure therefore was for the purpose of its business and would not be corelatable to any tangible returns which can be expected out of such expenditure. Also confirmed by SC. [ 2019 (6) TMI 1104 - SC ORDER ] - Decided in favour of assessee.

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• 2019 (6) TMI 1125
  Scope of appeal u/s 260A - Disallowance of loss on sale of securities - Whether transaction in securities has no nexus and corelation with the deal in land transaction? - as per CIT-A assessee had entered the transactions to reduce the taxable income and thereby artificial loss had been created which cannot be allowed to be set off against the land deal income - as per AO admitted that he was engaged in providing accommodation entries to a number of persons/entities in the form of LTCG unsecured loans, bogus purchases etc. vide his statement on oath given by him before the DDIT - ITAT allowed the appeals of the assessee holding that although the Assessing Officer entertained a serious doubt as regards the genuineness of the transactions, yet such doubt was not fortified with some concrete materials to take the view that the transactions were bogus - HELD THAT:- We are of the view that substantially, the submissions canvassed on behalf of the Revenue, while criticizing the order passed by the Appellate Tribunal, are based on facts rather than on any question of law much less a substantial question of law. The scope of appeal under Section 260A before the High Court is limited. The Appellate Tribunal took notice of something very important. It took notice of the fact that the loss in trading of the lands had occurred much before the assessee earned profit on the sale of land. The Appellate Tribunal took notice of the fact that the loss in trading of lands was suffered by the assessee on 1st January 2013, whereas he derived profit on the sale of land on 24th January 2013. In such circumstances, there was no good reason for the C.I.T. (A) to doubt the bona fide of the assessee and take the view that the transactions were not fair and genuine. In the instant case, there is no substantial question of law which could be said to be arising from the order of the Tribunal. It cannot be argued on behalf of the Tribunal that the findings recorded by the Tribunal are based on no evidence and or while arriving at a said finding relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence or the evidence has been misread. Supreme Court in the case of Commissioner of Income Tax, West Bengal vs. Calcutta Discount Co. Ltd [ 1973 (4) TMI 6 - SUPREME COURT] wherein taken the view that if a trader transfers his goods to another trader at a price less than the market price and the transaction is otherwise found to be bona fide , the Taxing Authority cannot take into account the market price of those goods ignoring the real price fetched to ascertain the profit from the transaction. We are of the opinion that on a conspectus of the factual scenario, noted above, the conclusion of the Tribunal that the Assessing Officer had raised number of doubts about the genuineness of the transactions without any supporting substantial question of law. The Tribunal, being a final fact finding authority, in the absence of demonstrated perversity in its finding, the interference therewith by this Court is not warranted. - Decided against revenue

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• 2019 (6) TMI 1124
  TDS u/s 194A - Non-deduction/short deduction of TDS - TDS not deducted on the basis of Form No.15G/15H - interest u/s 201(1A) - HELD THAT:- First such situation is where the beneficiaries(deductees)have filed the return of income AR argued that in such situation raising the demand u/s 201 is not permissible in view of the Hon ble Apex Court s decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT [ 2007 (8) TMI 12 - SUPREME COURT]. We remit the matter back to the file of the AO to verify the correctness of the returns filed by all the deductees and restrict the demand to the extent of 201(1A). Deductees not filed Form 15G/15H - There is no evidence to show that Form 15G/15H was collected before the due date. In the absence of any evidence to establish that the assessee had collected the forms before the due date and even failed to furnish Form 15G/15H before the concerned Pr.CIT before the due date, we do not find any reason to disagree with the CIT(A) that production of Form 15G/15H before the CIT(A) is nothing but an afterthought. Accordingly, we uphold the order of the Ld.CIT(A) relating to the deductees of Form 15G/15H cases and confirm the demand raised by the AO. Accordingly, the appeal of the assessee relating to deductees in whose case the Forms 15G/15H were not produced by the deductor is dismissed. Regard to Form15G/H with wrong PAN or without PAN - For the Financial year 2013-14 the deductor has furnished Form-15G in the case of TKD Prasad without having PAN. Though Form- 15G without PAN is invalid, in this case the amount involved was only Rs. 2098/- and the assessee has furnished the photo copy of the PAN card in page No.63 of the paper book. Therefore, we direct the AO to delete the demand raised u/s 201/201(1A) in the case of TKD Prasad. For the Financial year 2014-15 the deductor has furnished Form-15G in the case of M.Sambasiva Rao and the AO raised the demand for furnishing Form 15G/15H without PAN or wrong PAN. The assessee has furnished the copy of PAN card and the interest payment exceeds the taxable limit. Therefore, the deductee required to obtain no deduction certificate u/s 197 r.w.rule 29 and not Form 15G. Therefore, we hold that the AO has rightly treated the assessee as assessee in default and raised the demand. Accordingly we uphold the order of the CIT(A) and dismiss the appeal of the assessee on this issue. Financial year 2014-15 the AO has raised the demand in respect of Vasundhara Devi for not furnishing the PAN number. The assessee has furnished the photo copy of the PAN card. Since the assessee has furnished the Form 15G/15H and the amount of interest paid was only Rs. 11,088/-, we hold that the deductee has complied with the rules, accordingly, we direct the AO to delete the demand raised u/s 201/201(1A) in the case of Smt. Vasundhara Devi. Non deduction of TDS in case of amount of payment exceeded the basic limit of taxation - For the Financial year 2014-15 the AO has also raised the demand in respect Suman Pinnamaneni Veeragandham, the amount of interest paid to the deductee was Rs. 4,29,702/- which exceeds the taxable amount. For non deduction of tax at source, the deductee is required to obtain no tax deduction certificate from the AO u/s 197 r.w.rule 29. GPA holder of the deducteee has filed a letter addressed to Branch Manager, Lakshmi Vilas Bank on 26.09.17 which constitute additional evidence and not placed before the AO. The assessee has not filed any petition for admission of additional grounds. Even otherwise, since the amount exceeded the basic limit of taxation, in the absence of certificate u/s 197, the bank is obliged to deduct the tax at source. Having failed to deduct the tax at source and remit to the Government account, the AO has rightly treated the assessee as assessee in default. We do not see any reason to interfere with the order of the Ld.CIT(A). Accordingly, the appeal of the assessee on this issue is dismissed.

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• 2019 (6) TMI 1123
  Claim of depreciation on assets given on lease - HELD THAT:- even in cases of financial leases , the depreciation allowance contemplated under Section 32(1) of the Act is allowable to the lessor. It has not been shown by the Ld. CIT-DR that any of such precedents in assessee s own case has been altered by any higher authority. Therefore, so far as this aspect of the matter is concerned, we do not find any hesitation in directing the Assessing Officer to allow the claim of depreciation on lease of assets where it involves financial lease . Subsequent to the setting aside of the matter by the Tribunal on this aspect for Assessment YeaRs. 1994-95 to 1996-97, no further order has been passed by the AO till date. Considering the aforesaid, we deem it fit and proper to direct the AO to decide about the admissibility of depreciation of Rs. 2,09,04,638/- pertaining to the aforesaid seven lease arrangements in the light of decision in the earlier years following the order of Tribunal dated 29.10.2014 [ 2015 (1) TMI 516 - ITAT MUMBAI] . AO shall allow the assessee a reasonable opportunity of being heard and thereafter recompute the depreciation allowable to the assessee keeping in mind the directions of the Tribunal in the earlier years, and as per law. Disallowance of interest expenditure by invoking Sec. 36(1)(iii) - HELD THAT:- A pertinent point which has been brought out by LR is that the interest income earned by the assessee on such Central and State Government securities have all along been assessed as business income and, therefore, there was no justification for disallowing the corresponding interest expenditure on the plea that that the investments are for non- business purpose. Even in the instant assessment year, a reference has been made to the assessment order to point out that the interest income from such securities is lying assessed as business income . Considering the aforesaid aspect, as also the fact that IDBI General Regulations, 1994 prescribe for making investments in securities of Central and State Governments, we do not find any reason to uphold the stand of the income-tax authorities that such investments are not in the course of assessee s business. In fact, there is an apparent contradiction in the stand of the assessing authority inasmuch as the interest yielded by such investments is assessed as business income whereas the interest expenditure attributable to such investments has been sought to be treated as a non-business expenditure. Considering the aforesaid, we deem it fit and proper to set-aside the order of CIT(A) on this aspect and direct the Assessing Officer to allow the claim made by the assessee. Thus, on this aspect, assessee succeeds. In the result this ground of appeal is allowed. Disallowance of deduction under section 80M - HELD THAT:- As relying on assessee s own case [ 2015 (1) TMI 516 - ITAT MUMBAI] we direct the Assessing Officer to restrict the disallowance under section 80M to 1% of the dividend income. In the result, the assessee succeeded on this ground of appeal. Correct head of income - profit on sale of investment - capital gain or Business Income - assessee submits that the A.O. has assessed the income from sale of shares of Joint Stock Company as Capital Gains for all the years i.e. AY 1997-98 to AY 2012-13 - HELD THAT:- Assessee vehemently submitted that the A.O. taxed the income from sale of Joint Stock Company under the head Capital Gain. However, the ld. CIT(A) has treated the profit on sale of Joint Stock Company as Business Profit. As further noted that the department has accepted the similar profit on sale of investment as a Capital Gain from A.Y. 2002-03 to 2012-13 as the same has not been disputed by ld. DR while making his submission. Considering the fact that similar profit is accepted as Capital Gain from the year 2002-03 till 2012-13, therefore, the revenue should follow the consistency when there is no variance in the facts. Hence, we direct the A.O. to treat the profit on sale on investment as Capital Gain as has been accepted from A.Y. 2002-03 onwards. Therefore, the assessee also succeeded on this ground. Exemption u/s 10(23G) - assessee has claimed income exempt on gross basis in the return of income furnished by assessee - HELD THAT:- The co-ordinate bench of Tribunal in ADIT vs. Credit Agricole Indosuez [ 2013 (9) TMI 364 - ITAT MUMBAI] also held that it is an undisputed proposition that exemption under section 10(15) on the gross interest and not on net interest. The co-ordinate bench followed the decision Dresdner Bank Ag [ 2006 (10) TMI 175 - ITAT BOMBAY-F] and JCIT vs. American Express Bank Ltd. [ 2012 (8) TMI 371 - ITAT MUMBAI] . Considering the decision of coordinate bench of Tribunal, we direct the A.O. to allow the deduction on gross basis, of cource after deducting the direct expenses attributable to earning such income. In the result, the assessee also succeeded on this ground.

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• 2019 (6) TMI 1122
  Revision u/s 263 by CIT - A.O. has not framed the impugned order u/s 143(3) after making proper enquiry - capital account of a partner need to brought to tax as income of the assessee u/s 68 - HELD THAT:- PCIT has essentially exercised revisionary power u/s 263 of the Act to examine the source of source of partner which is not permissible in the eyes of law. In fact during the course of hearing before us, it was brought to our notice that notice u/s 148 of the Act has been issued in case of Shri Shaleen Vajpayee and, therefore, revenue is otherwise not without any legal recourse of examining such investment in the firm. Acceptance of capital introduction from the partner on the evidence placed on record by the Assessing Officer is a possible view and, not an unsustainable view and, therefore, even otherwise invocation of section 263 is not in accordance with law. In CIT vs. DLF Ltd. [ 2012 (9) TMI 626 - DELHI HIGH COURT] applying the mandate of Malabar Industrial Co. Ltd. vs. CIT [ 2000 (2) TMI 10 - SUPREME COURT] and CIT vs. Max India Ltd. [ 2007 (11) TMI 12 - SUPREME COURT] has held that it is not mere prejudicial to revenue or a mere erroneous view which can be revised but there must be an element of unsustainability which clothes the Commissioner with the jurisdiction u/s 263 of the Act. Also in the case of ITO vs. D.G. Housing Project Ltd [ 2012 (3) TMI 227 - DELHI HIGH COURT] held that in case of inadequate enquiry it is incumbent for the Commissioner to conduct enquiry and not merely remit the matter to the Assessing Officer without conducting any verification/enquiry. Also DELHI AIRPORT METRO EXPRESS PVT. LTD. [ 2017 (9) TMI 529 - DELHI HIGH COURT] . We have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of the Act and we have no option but to quash the same. - Decided in favour of assessee.

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• 2019 (6) TMI 1121
  Levy of penalty u/s 271AAB - surrender of income in the statement recorded u/s 132(4) - discrepancy in stock as well as purchase/sale/issue/receipt/approval and other discrepancies as per various annexures prepared during the search - HELD THAT:- AO has levied penalty @10% of the surrendered/undisclosed income thus accepting that the assessee s case qualified for penalty as per clause(a) of section 271AAB as per which the assessee fulfilled the conditions of admitting to the undisclosed income in the statement recorded u/s 132(4) of the Act, specified the manner in which the income was derived, substantiated the same also and paid all taxes alongwith the interest on the same. The sole reason for levy of penalty therefore is that the surrendered income was in the nature of undisclosed income as defined in the section. Admittedly, the surrender had been made on account of discrepancy/shortage in stock. Clearly, this short stock had not been accounted for by the assessee. The same therefore, we hold, has been rightly held to qualify as undisclosed income as per the definition of the same in section 271AAB of the Act. Moreover the issue is squarely covered by case of M/s SEL Textiles Limited [ 2019 (4) TMI 1719 - ITAT CHANDIGARH] wherein identical surrender made on account of the discrepancy in stock was held by the ITAT to qualify as undisclosed income liable to penalty u/s 271AAB of the Act. We uphold the order of the CI T(A) confirming the levy of penalty u/s 271AAB of the Act. - Decided against assessee

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• 2019 (6) TMI 1120
  Addition u/s 56(2)(vii) (b) - issues of shares at a price more than the FMV - effective date of amendment - from the year of application (receipt of money) or allotment of shares - HELD THAT:- We find since shares were applied in AY 2012-13 as per the terms and conditions settled in AY 2012-13, the provision u/s 56(2)(viib) introduced from AY 2013-14 which is year under consideration in the present case and, therefore, cannot be applied merely on the basis that shares were allotted in AY 2013-14. Thus, we find the reasons recorded by the CIT(A) in the impugned order specifically at para 4.2 is justified in terms of applicability of provision u/s 56(2)(viib) of the Act. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, Ground No.1 raised by the Revenue is dismissed. TDS u/s 194C - non deduction of tds on clearing and forwarding charges - addition u/s 40(a)(ia) - HELD THAT:- All the details regarding the list of payments indicating the address, names of the shipping clearing agencies were before the two lower authorities for their consideration. We find that the AO did not accept the submissions of the assessee that no evidence brought on record to show the shipping and export expenses were reimbursed. However, it is seen in the assessment order itself that the AO mentioned that on perusal of the details field by the assessee and written submissions dated 28.01.2016, the AO mentioned only that the assessee failed to give bifurcation expenses relating to the impugned amount. CIT(A) in his impugned order clearly said that all the details as submitted by the assessee before him as well as in the assessment proceedings clearly shows that the payments were made to clearing shipping agencies and are in the nature of reimbursement. On such payments, we find which were paid on behalf of the assessee to different parties including the government authorities. - Decided against revenue.

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• 2019 (6) TMI 1119
  Allowability of business loss - Advance given for supply of refractory materials in the normal course of its business of trading and manufacturing of refractories and written off as irrecoverable as company became sick - HELD THAT:- We note that the loss of Rs. 10,55,360/-must be held to arise out of the carrying on of business and to be incidental to it and that is how it would be dealt with according to ordinary commercial principles of trading, hence it is an allowable business loss. Judgment of the Hon ble Supreme Court in the case of CIT vs. Nainital Bank Ltd. [ 1964 (9) TMI 11 - SUPREME COURT] wherein it was held that under section 10(1) of Indian Income Tax Act, 1922 (which is similar / identical to section 28 of the 1961 Act), the trading loss of a business is deductible in computing the profits earned by a business. However, every loss is not deductible unless it is incurred in carrying out the operation of a business and is incidental to the operation. We note that on the similar facts in the case of Ram Chander Shiv Narayan vs. CIT [ 1977 (11) TMI 2 - SUPREME COURT] has held that loss is deductible where there is a direct and proximate nexus between the operation and the loss or where the loss is incidental to it, as, without the business operation and doing all that is incidental to it, no profit can be earned. Therefore, based on the facts and circumstances of the case, as narrated above, we delete addition and allow ground No. 1 raised by the assessee. Addition u/s 14A read with Rule 8D - interest -free funds - assessee has not made any disallowances u/s 14A in its computation - HELD THAT:- Investment made in the earlier years has been carried forward during the impugned F.Y 2011-12, as it is evident from the aforesaid particulars where the balance at the end of the year shows the same investment as appearing in the earlier year(s). Accordingly, it may safely be deduced that during the year under consideration, no interest bearing funds were deployed for making any exempt income bearing investments. Assessee company had sufficient interest -free funds to meet its investments. Therefore, it may be safely deduced that investments in shares were financed out of the interest free funds available with the Assessee. Accordingly, no disallowance is called for u/s 14A. We delete the addition under Rule 8D(2) (ii) of the Rules. Disallowance under Rule 8D (2) (iii) we note that AO has disallowed Rs. 6,665/-. We note that the AO has not taken into account the dividend bearing securities for the purpose of computing average investment.

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• 2019 (6) TMI 1118
  Levy of penalty u/s 271(1)(c) - defective show-cause notice - non specification of charge - defective notice - HELD THAT:- Notice issued by the AO u/s 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2019 (6) TMI 1117
  TP Adjustment - comparable selection - functional comparability - HELD THAT:- Hindustan Housing Co. Ltd. assessee company is engaged in providing pre-sales support and post-sales support services primarily to the customers of Comverse Network Systems Ltd., Tel Aviv and also to the Indian customers of Verint Systems Inc (another subsidiary of the holding company) which are the Associated Enterprises (AE). On the other hand, Hindustan Housing Co. Ltd. undertakes a wider variety of activities like providing air conditioning, lift and intercom services which typically included operating and service maintenance services thereof. Thus, although providing post sales services is a part of the activities of Hindustan Housing Co. Ltd., its spectrum includes providing air conditioning, lifts and intercoms also. Thus, it cannot be considered as a company which is functionally comparable to the assessee company. Also, the company fails the Related Party Transaction filter. Rightly excluded by CIT(A). Choksi Laboratories Ltd. - A perusal of the Directors Report and the Annual Financial Statements shows that the contentions of the Ld. AR are correct on both the counts. We also note that the TPO himself has observed that the core activity of this company was providing analytical and testing services. We also note that this company had a significantly high proportion of testing instruments which was approximately 58% of its total net assets which implies that the functions performed by the company are capital intensive in nature and there is no similarity with the functions of a service provider. Rightly excluded by CIT(A). Vimta Labs Ltd. - A perusal of the Directors Report and the Annual Financial Statements shows that the contentions of the Ld. AR are correct on both the counts. We also note that this company had incurred huge expenditure on testing and analysis whereas the assessee company did not incur any expenditure on testing services. We also note that the assets employed by the assessee in terms of plant and machinery were approximately 70% of its total net assets which implies that the functions performed by this company were more capital intensive than the assessee company which was a mere service provider. Thus, it can be safely concluded that this company is not a good comparable to the assessee company. Rightly excluded by CIT(A). Scal Services Ltd. and Isgec Coverma Ltd. , whose exclusion by the Ld. CIT (A) was being challenged, the Ld. AR has submitted that the assessee had no objection if these two comparables were included in the final set of comparables. Accordingly, we direct the TPO/AO to include these two companies in the final set of comparables. Disallowance of club expenses - HELD THAT:- Hon ble Bombay High Court in the case of C.I.T. vs. Lubrizol India Ltd. [ 2015 (8) TMI 134 - BOMBAY HIGH COURT] has held that entrance fee for membership of a club is to be considered as revenue expenditure. Although entrance fee does have an enduring benefit, it was not considered to be capital in nature by the Hon ble Bombay High Court as no asset was created. Applying the same analogy, membership fee would also necessarily have to be regarded as revenue in nature. The nature of expenditure is not in doubt here. The Assessing Officer also has not brought out any fact which would justify the disallowance - dismiss ground no. 2 of the department s appeal. Admitting additional evidence - approval letter of gratuity fund - HELD THAT:- CIT(A) has not admitted any evidence which could be taken as being in the nature of additional evidence. The approval letter pertaining to the gratuity fund is a matter of record and we find no infirmity in the action of the CIT (Appeals) in taking cognizance of this approval letter while deleting the related disallowance. Thus, ground no. 3 also stands dismissed. Allowability of Provision of gratuity and leave encashment u/s 115JB - ascertained liability - HELD THAT:- As against accumulated provision of Rs. 8,55,136/-, a payment of Rs. 8,50,000/- has been made against the gratuity and, thus it is not an estimate as inferred by the Assessing Officer but is based on actual payment. As far as the provision for leave encashment is concerned, it is undisputed that it is based on actuarial valuation of the assessee s liability in this regard. The same has been duly disclosed by way of a note in the notes on accounts annexed to the annual financial statement of the assessee company. We also find support in the case of C.I.T. vs. Echjay Forgings (P) Ltd. [ 2001 (2) TMI 56 - BOMBAY HIGH COURT] wherein held that provision for doubtful debts, gratuity etc. on the basis of actuarial valuation would have to be excluded from the net profit for computing the book profit u/s 115JB

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• 2019 (6) TMI 1116
  Allowability of deduction u/s 36(1)(va) on the employees contribution towards EPF - HELD THAT:- This issue is squarely covered against the assessee by the judgment of the Jurisdictional High Court in the case of Popular Vehicles and Services Pvt. Ltd. vs. CIT [ 2018 (8) TMI 133 - KERALA HIGH COURT] since the employees contribution was collected from the employees as a deduction in their salary itself it would in effect be income of the assesses, as had been indicated in the definition of income under section 2(24)(x). The employees contribution towards the funds was regulated by sub-clause (x) of section 2(24) and clause (va) of section 36(1) and would not be affected by section 43B. The non obstante clause of section 43B had no effect in so far as the employees contribution which was specifically covered by clause (va) of section 36(1). By virtue of the Explanation below clause (va), no deduction could be claimed if the contribution had not been paid after collection from the employees by way of deduction from their salaries, within the due date under the labour welfare Acts. The deletion of a proviso under section 43B could not render otiose the Explanation under section 36(1)(va) - Decided against assessee.

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• 2019 (6) TMI 1115
  Rejection of books of accounts - trading addition - suppression of yield by the assessee - blank delivery challan books were found from the premises of the assessee which were susceptible to manipulation - different ink was used to fill the weight in the delivery challans - HELD THAT:- There in not even an iota of submission that raw material was not supplied to the assessee. The payments to all the suppliers were made by the assessee through banking channels. No discrepancies have been found in the ledger statements of these suppliers. Nothing has been brought on record to establish that any cash got exchanged between the assessee and these suppliers on account of alleged bogus supplies. The allegations that these suppliers were in collusion with the assessee is not supported by any material. No discrepancy has been pointed out by survey team in physical stock of raw material or finished goods on the date of survey. No evidence of suppressed sales, unaccounted cash / investments / sales have been brought on record. No defect has been pointed out either in cash or in stock during survey. The revenue is unable to point out that except for statements, any incriminating material was found during the course of survey proceedings. Pitied against the same was the fact that the assessee was a corporate entity and its books were duly audited as per law over the years. The auditors have not made any adverse comment on quantitative details being maintained by the assessee. So far as the rejection of books of accounts is concerned , we find that no specific discrepancy or defects have been pointed out by AO in the books of accounts. In fact, the addition has been made by Ld. AO merely by disturbing the figures of purchase of raw material without disturbing any other component of books of accounts. We find that the assessee s books were subjected to Audit under Income Tax Act as well as under The Companies Act and the same could not be rejected in a light manner. This Tribunal rendered in ITO V/s M/s Eternity Jewels [ 2019 (2) TMI 1649 - ITAT MUMBAI] wherein it has been observed that AO could not reject the books merely on the basis of surmises and conjectures without pointing out any defect in the books of accounts. Also see TIME SPACE HAULERS [ 2018 (7) TMI 1997 - BOMBAY HIGH COURT] as held that without pointing any particular defect in the audited accounts, it was not correct to reject the books u/s 145(3) - Thus the given factual matrix does not inspire us to sustain the stand of Ld. AO in rejecting the assessee s books of accounts. Veracity of statement recorded u/s 133A - suppression of yield by the assessee - contradictory statement by employee of the assessee and MD of the assessee - AO followed the statement of employee adopted an arbitrary yield of 87% as against the yield of around 83% - HELD THAT:- It is settled law that statements recorded during survey proceedings would have no evidentiary value unless corroborated with circumstantial evidences or cogent material to substantiate the same. See S. KHADAR KHAN SONS [ 2007 (7) TMI 182 - MADRAS HIGH COURT] We find that the assessee was reflecting yield in the range of 80% to 81% from AYs 2004-05 to 2011-12. Thereafter, the yield has shown improvement which stood explained by the fact that there were additions in the Plant Machinery from 01/04/2010 onwards which further corroborates assessee s stand. CIT(A) was justified in deleting the quantum additions as made by Ld. AO on account of alleged suppression of yield. By confirming the same, we dismiss the appeal. - Decided in favour of assessee.

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• 2019 (6) TMI 1114
  Levy of penalty u/s 271 (1)(c) - addition in respect of peak cash credit - HELD THAT:- Assessee has explained that the assessee was engaged in the activity of sale and purchase of old vehicles and that the customers used to deposit certain amounts with the assessee so that the assessee may immediately book / purchase vehicles of their choice as and when the same are found available for purchase. The above contention of the assessee has not been totally rejected by the Revenue, that is why the AO apart from making the addition s on peak cash credit also estimated the unaccounted profits on the deposits found in the bank account of the assessee If the AO was of the view that such deposits were out of unaccounted income of the assessee, there was no reason with the AO to estimate profits on such deposits on the basis of the turnover. CIT(A) has also given relief to the assessee observing that the assessee himself has also declared certain profits in respect of its activities of sale / purchase of vehicles. It is apparent that the impugned additions have been made by the lower authorities on estimation basis. However, there was no reliable or un-rebutted evidences on the file to prove that the assessee had actually furnished inaccurate particulars of income or concealed particulars of his income. Though, the additions have been made by the AO and further confirmed by the CIT(A) on the basis of estimation / preponderance of possibilities of introducing some unaccounted income into the bank account of the assessee - Appeal of the assessee treated as allowed.

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• 2019 (6) TMI 1113
  Disallowance u/s 14A - disallowance voluntarily made was more than dividend income received- HELD THAT:- There is merit in the contentions of the assessee. During the course of hearing the ld AR also submitted that the assessee had received dividend from only one company named M/s Mind Tree Ltd. Further the amount of disallowance made by the assessee Rs. 3023.29 lakhs is more than the dividend amount of Rs. 205.44 lakhs. Hence, we are of the view that the disallowance voluntarily made by the assessee would meet the requirements of sec.14A . Accordingly, we are of the view that further disallowance made by the AO and confirmed by CIT(A) is not warranted in the facts and circumstances of the case. Accordingly we set aside the order passed by ld CIT(A) on this issue and direct the AO to delete further addition made by him u/s 14A - Decided in favour of assessee.

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• 2019 (6) TMI 1112
  Determination of value of assets transferred on Demerger / Succession - distribution of assets between 5 companies - WDV of block of assets transferred is available - AO sought the value / cost of individual assets and there physical existence - HELD THAT:- The Hon ble Delhi High Court in the case of Dalmia Ceramic Industries Ltd. Vs. CIT [ 2004 (10) TMI 72 - DELHI HIGH COURT] has held that actual cost of the transferee company on the date of transfer is indicated in Section 43(1), explanation-6, is the written down value of the holding company. When the assessee has received these assets being transferred from RSEB at written down value and therefore, when the existence of these assets were not in dispute at the hand of the RSEB as part of the balance sheet of the Board then the assets transferred under the statutory transfer scheme to the assessee at the written down value under the block of assets were eligible for depreciation in the hands of the successor/transferee. Accordingly, we set aside the order of the authority below on this issue and allow the claim of the assessee. Determination of actual cost of acquisition - consideration partly paid by the consumers and some part has been paid by the State Government as subsidy - Disallowance of depreciation by invoking the provisions of Section 43(1) r.w. explanation 10 - HELD THAT:- As regards the deduction received from the consumers, we find that the said amount is nothing but reimbursed of the cost of acquisition of the asset which is used by the assessee for providing the supply to the consumer and therefore, to that extent the provision of Section 43(1) r.w. explanation 10 are application hence, to that extent the order of the authorities below are upheld. It is pertinent to note that if the subsidy is given by the State Government or Central Government in respect of a particular expenditure laid out for acquisition of the assets then the same would be falling in the explanation 10 of Section 43(1) of the Act and required to be reduced from the actual cost of the assets. However if the subsidy is not a specific expenditure or expenses of distribution line or providing supply in a particular case then the same cannot be considered as directly or indirectly meeting the cost of asset or reimbursement of cost of the asset. - Matter restored before AO for verification of facts accordingly. Applicability of provisions of Section 115JB for the purpose of MAT - electricity company - scope and applicability of Ruling of AAR - HELD THAT:- Assessee was required to obtain the licence U/s 80 of the Electricity (Supply) Act, 1948 and therefore, the function of the assessees are governed by Electricity (Supply) Act as well as Rules framed thereunder. As per the Electricity (Supply) Annual Accounts Rules, 1985 and Account Instructions the annual statements of the distribution company are defined as it is prepared as per Rule-5(1) of the Rules. The assessee is not required to maintain the books of accounts as per schedule VI of the Companies Act but the accounts are to be maintained as per Electricity (Supply) Annual Accounts Rules, 1985 and Account Instructions. There is no dispute that the account of the assessee are audited through CAG and hence, even as per audit report the accounts of the assessee were examined in light of the Electricity (Supply) Act and Rules. Further, when the authority of advance ruling has already decided this issue in the matter of Jodhpur Vidyut Vitaran Nigam Limited then the provisions of Section 115JB for the purpose of MAT are not applicable in the case of the assessee. Revenue was not brought any record before us to show that the ruling of Authority for Advance Ruling (Income Tax), New Delhi has been either reversed or set aside. Accordingly, in the facts and circumstances of the case we hold that the provisions of Section 115JB as existed at the relevant point of time for the years under consideration prior to the amendment by Finance Act, 2012 are not applicable in the case of the assessee. Disallowance of prior period expenses - HELD THAT:- As relying on assessee own case [ 2017 (5) TMI 1682 - RAJASTHAN HIGH COURT] decided in favour of assessee.

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• 2019 (6) TMI 1111
  Assessment of partners v/s partnership firms - search u/s 132 - whether the profit would have been taxed in the hands of the partners if the partners would have collected the money out of their sources? - HELD THAT:- The issue raised by the assessee stands covered in his favor by the order of this tribunal in the case of Bhagwan bhai Karmanbhai Ajara [ 2017 (4) TMI 1450 - ITAT AHMEDABAD] in the given facts and circumstances of the case and on the basis of seized records, investment in Samarpan Scheme was made by USCKP from the funds receivecd from its members and therefore, the impugned addition is uncalled for in the assessee s hands. In the result, no interference is called for in the order of ld. CIT(A) who has rightly deleted the impugned addition. If the money would have been collected from the five individual partners out of their own resources then the profit arising from the sale would, have to be taxed in their individual hands in not in the hands of the firm. It is a fact that the Assessing Officer has assessed the income on sale of the land in the hands of the firm where the partners are not sharing the profits equally. The addition made by the Assessing Officer has not on sound footing. The same is hence deleted. - Decided in favour of assessee.

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• 2019 (6) TMI 1110
  MAT - applicability of Section 115JB(6) - claim of deduction / exemption from Book Profit - scope and interpretation of section 115JB(6) - applicability of provision of section section 80IB (10) to determine eligible unit - entrepreneurs and developers as defined under the SEZ Act, situated in units or Special Economic Zone - HELD THAT:- Reading section 115JB(6) of the Act with the definition provided of the terms used in the SEZ Act as above, we find that the exemption from the payment of MAT is provided only to the units set up in a SEZ or Offshore banking unit or in an International Finance Service Centre in relation to the business or tradable services as eligible under the SEZ Act by the persons, who have been granted Letter of Approvals under the said Act. No merit in the contention of the assessee that sub-section (6) is to be interpreted independently, thus making the assessee eligible for exemption from payment of MAT also, since it is a developer of housing projects, and dismiss all arguments made by the Ld. Counsel for the assessee in this regard. We, therefore, hold that the assessee is not eligible for exemption from payment of MAT as per the provisions of section 115JB(6), since, admittedly, it does not qualify as a business or services rendered by an entrepreneur or developer in a unit or SEZ as per definition of the said terms in the SEZ Act. We find that the Ld. Counsel for the assessee for this purpose has relied heavily on the provisions of section 115JB(5) , pointing out that as per the said sub-section, all other provisions of the Act would apply to the assessee and, therefore, the provisions of section 80IB (10) would also apply to it requiring it to be deducted /reduced for arriving at the taxable book profits. We do not find any merit in this contention of the Ld. Counsel for the assessee also. Deduction under section 80IB(10) is provided against the gross total income of an assessee, while section 115JB levies taxes on the book profits . Both the sections clearly operate in different spheres. Therefore sub-section (5) of section 115JB cannot be interpreted so as to provide deduction under section 80IB(10) from the book profits of the assessee. The Hon ble High Court of Uttarakhand ruled out the allowability of deduction u/s 80IC for the purposes of paying tax u/s 115JB, in the case of SIDCUL Industrial Association vs State of Uttarakhand Others [ 2010 (11) TMI 671 - UTTARKHAND HIGH COURT] We dismiss the contentions of the assessee that deduction provided u/s 80IB (10) is to be made from the book profits of the assessee for the purpose of payment of MAT. The decision of the ITAT, Mumbai Bench, relied upon by the assessee in the case of Neha Builders [ 2018 (4) TMI 860 - ITAT MUMBAI] is of no assistance to the assessee in view of the decisions of High Courts taken note of above by us. Decided against the assessee.

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• 2019 (6) TMI 1109
  Disallowance u/s.14A - as argued by assessee that the dividend was not earned in respect of investment in shares but the dividend was earned in respect of those shares which were held by the assessee in course of assessee s business of dealing in shares and therefore, section 14A is not applicable in the present case - HELD THAT:- Respectfully following the judgment of Hon ble Apex Court rendered in the case of Maxopp Investment Vs. CIT [ 2018 (3) TMI 805 - SUPREME COURT] we reject this argument of ld. AR of assessee that no disallowance should be made u/s. 14A because the dividend income was earned in respect of those shares which were held by assessee in course of business and not as investment. Disallowance should not exceed the amount of exempt income in each of these 3 years, we find force in this alternative submission because the same is supported by various judicial pronouncements. As relying on M/S. WAY2WEALTH SECURITIES (P) LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7 (1) (2) , BANGALORE. [ 2018 (6) TMI 1627 - ITAT BANGALORE] we direct the AO to restrict the disallowance u/s. 14A in each of these three years to the extent of exempt income earned by the assessee in each of these 3 years and such total disallowance to be made to the extent of exempt income should be inclusive of disallowance made by the assessee suo moto. On this issue, the ground of assessee is partly allowed for statistical purposes. Disallowance of professional charges - allowable business expenditure - HELD THAT:- Categorical finding is given by CIT(A) that assessee is not able to substantiate the claim made and demonstrate that these payments were indeed made for the purpose of business. In spite of this categorical finding of CIT (A), nothing has been brought on record before us to establish that these payments were made for the purpose of business. As per the assessment order for Assessment Year 2009-10, it is seen that it is noted by the AO that year that AR was asked to specifically explain the actual services rendered by these parties and also provide necessary evidence to prove that the services rendered by these parties is of relevance to the business of trading. But assessee failed to explain the same despite giving sufficient opportunities. - Ground of the assessee s appeal for Assessment Year 2009-10 is rejected. Assessment Year 2011-12 - Disallowance of professional charges - the amount in question of Rs. 4.68 Crores paid by assessee to M/s. KKR Holdings Mauritius was for the purpose of arranging investments in M/s. Coffee Day Resorts (P) Ltd. by way of equity, preference and Debentures and therefore, by no stretch of imagination, it can be accepted that this expenditure is business expenditure for the present assessee. Hence, on this issue also, we find no reason to interfere in the order of CIT (A). Accordingly ground no. 11 in Assessment Year 2011-12 is also rejected. - Decided against assessee.

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• Customs

• 2019 (6) TMI 1164
  Jurisdiction - valuation of imported goods - It is submitted that in view of Section 130 of the Act, this Court would not have jurisdiction to entertain this appeal as the issues raised herein relate to valuation of imported goods for the purpose of assessment - HELD THAT:- It is evident from the SCN that before the Revenue could come to the conclusion that there has been a misdeclaration of value in terms of Section 111(m) of the Act, the valuation of the imported goods as declared in the bill of entry has to be redetermined in terms of Customs Valuation Rules, 2007. It is only on this redetermination of the valuation of imported goods which involves assessment of goods for the purposes of duty (which would include nil rate of duty) that the occasion to proceed further to allege that the valuation declared in the bill of entry did not correspond with the valuation of the imported goods - Thus, before Section 111(m) could be invoked, the exercise to be carried out by the Revenue would be to redetermine the value of the goods declared by the respondents in the bill of entry - Thus, Section 130 of the Act ousts the jurisdiction of this Court with regard to any order relating to amongst other things to determination of any question having relation to the rate of duty of the custom or to the valuation of goods for the purpose of assessment. Valuation of goods for the purpose of assessment - HELD THAT:- The provisions of Section 14 of the Act, which was relied upon by the appellant does not negate the prohibition of this Court exercising jurisdiction under Section 130 of the Act. The basis of the entire proceedings is redetermination of the valuation of the imported goods from that declared by the respondents and accepted by the Revenue. Thus, the correct valuation of the imported goods as declared in the bill of entry for the purpose of assessment is an issue that directly arising in this case. Appeal disposed of as not maintainable.

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• 2019 (6) TMI 1163
  Arrival of unaccompanied baggage within the jurisdiction of the respondent at Kochi - no adjudication could be done inspite of the earnest efforts of the petitioner - HELD THAT:- This writ petition is disposed of directing the respondent to finalize the proceedings at the earliest possible and at any rate within two months from the date of receipt of a copy of this judgment. If the petitioner makes any application for any intervening arrangements, it shall also be considered in accordance with law, after affording an opportunity of being heard to the parties in this writ petition. Petition disposed off.

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• 2019 (6) TMI 1162
  Provisional release of goods - import of old and used digital multifunctional devices - prohibited item or not - Section 110 of Customs Act - HELD THAT:- The matter is remitted to the Joint Commissioner of Customs, Inland Container Depot, Gateway Rail Freight Link, Sahnewal, Ludhiana i.e. respondent No. 3 to pass a fresh order in respect of provisional release of the goods after affording an opportunity of hearing to the authorised representative of the petitioner-Firm and by passing a speaking order in accordance with law - appeal allowed by way of remand.

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• 2019 (6) TMI 1161
  Duty Drawback - amendment of shipping bill - rejection of Drawback on the ground that duty was paid in DEPB Scrip - HELD THAT:- The Court did not elaborately dwell upon their contention qua the effect of incorrect mentioning of scheme code, as in the instant case, the same was wholly uncalled for. The respondent department could not have resurrected such a ground for denying the Drawback claim when the order at page Nos. 56 to 62 were passed after due verification of all the documents by the Competent Authority pursuant to order of this Court and adjudication of the matter in form of order dated 6-5-2016, rendered by this Court in Special Civil Application No. 8025 of 2015. The respondents were left with no option but to release the Drawback. In light thereof the respondents action for seeking amendment and holding out the provisions of Section 149, in our view was nothing but uncanny attempt to avoid the eventualities, which unfortunately compelled the petitioners to approach this Court for no reasons, as had the authorities acted in accordance with law and processed the Drawback claim after the order at page Nos. 56 to 62 was passed, the petitioners consternation could have been avoided. We are of the considered view that this petition is required to be allowed and respondents are therefore, directed to process the Drawback claim based upon the order at page Nos. 56 to 62 without any further delay and insistence upon rectifying the entry, as in our view it hardly matters, so far as clearance of Drawback claim is concerned. Petition allowed.

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• 2019 (6) TMI 1160
  Grant of regular bail - misdeclaration of importing High Speed Diesel (HSD) in the name of Base Oil SN 50 - prohibited goods or not - smuggled goods or not - HELD THAT:- Considering the fact that the offence under the Customs Act is compoundable and the maximum sentence is of 7 years, the Court is inclined to consider the case for bail on certain conditions - It is also found that during the course of investigation, remand of the applicant was not sought and entire investigation is now based on documents. Therefore, no useful purpose would be served to further detain the applicant in custody. The applicant is aged 50 years. In the facts and circumstances of the case and considering the nature of the allegations made against the applicant in the FIR, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail. The applicant is ordered to be released on regular bail for the alleged offences under the Customs Act, on executing a personal bond of Rs. 10,000/- with one surety of the like amount to the satisfaction of the trial Court and subject to the conditions imposed - application allowed.

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• 2019 (6) TMI 1159
  Principles of natural justice - the petitioner s grievance is that the Commissioner of Customs, who adjudicated the various show cause notices, refused and omitted to provide an opportunity of cross-examining four individuals, two of whom were named in the show cause notices - HELD THAT:- This Court is of the opinion that the petitioner, who has an alternative remedy, may invoke it, if so advised. At the same time, in the event the appeal is filed before the CESTAT, it would consider the same on merits and remand the matter for appropriate provision of opportunity of cross-examining the concerned witnesses. This remand is only for the purposes of providing opportunity of cross-examination to the petitioner (in other words, the appropriate remit order to record the cross-examination of witnesses only shall be made). This Court is also informed that the requirements in the statute of pre-deposit in all the cases involving the petition would work out a substantial amount of about Rs. 1.4 crores. The CESTAT shall entertain and adjudicate on the merits of the appeal - including the remand provided the petitioner deposits 1% of the penalty amount in each case levied by the order-in-original within a time stipulated by the CESTAT. After receiving a report with respect to the proceedings of the Commissioner vis- -vis the cross-examination of the witnesses and in the light of it, the CESTAT shall proceed to hear the appeal on its merits and decide it in accordance with law. Petition disposed off.

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• 2019 (6) TMI 1158
  Parcel post - non-compliance with the requirements of parcel post - prohibited item or not - HELD THAT:- The original authority has erred in concluding that, in post parcel, the importer was required to declare himself to be so. Under the law relating to postal articles, the postal authorities are custodians till delivery at the address. Until that authority made efforts to deliver the parcel but were unable to do so, the presumption of there being no importer does not arise. It was, therefore, improper to deny the option to redemption by the person to whom the parcel was addressed and would be the recipient. There is no justification for absolute confiscation as inability to identify of an importer does not suffice. The inability to deliver would automatically have rendered the confiscation absolute as option to redeem could not have been exercised. Matter remanded back to the original authority for a fresh adjudication after giving due notice to the importer and to pass orders in accordance with the provisions of Customs Act, 1962 - appeal allowed by way of remand.

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• 2019 (6) TMI 1157
  Import of restricted item - brass scrap engel comprising of 2 nos. pipes of over 19 feet length and thickness of 22 inches - requirement of specific items to import such goods or not? - HELD THAT:- The goods were declared as scrap and it is on record that this is not in dispute. It has been held by the lower authorities that the ultimate usage is of no relevance to assessment. Scrap, by its definition, cannot but be old and used and, therefore, the provisions of Foreign Trade Policy pertaining to licensing will not apply. The restrictive provisions in the Policy would be applicable to goods, other than scrap , identifiable as such. It was, therefore, incumbent on the lower authorities to first reclassify the goods under the appropriate heading on the First Schedule to the Customs Tariff Act, 1975. In the absence of such an exercise, the goods cannot be anything other than scrap which is a separate heading in the First Schedule to the Customs Tariff Act, 1975. There cannot be two distinct determination of classification for the purpose of recourse to the general restrictions in the Foreign Trade Policy. There is no option but to consider the goods as scrap and import of scrap requires no licence - Confiscation fails - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 1156
  Misdeclaration of imported goods - L2 corded 20 scrubber - classification of the goods - whether classified under Heading No. 8479 8999 of First Schedule to the Customs Tariff Act, 1975 or under Heading No. 8508 6000 of the First Schedule to the Customs Tariff Act, 1975? - HELD THAT:- It is clear that the goods, operating as a vacuum cleaner, is equipped with electric motor. It, therefore, cannot be fitted within the description sought by the customs authorities. It is also clear that subsequent consignments have been assessed without any objection to the classification declared by the appellant. These were not altered then or challenged subsequently. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2019 (6) TMI 1155
  Winding up - proof of debt - Evidence Act - HELD THAT:- Where the company (in liquidation) is said to have admitted a debt owing to applicant, Official Liquidator is not included as a person with regard to such admission made a by party in the winding up action. Official Liquidator came in upon order of winding up. Admission by the company (in liquidation), relied upon by Court to direct winding up, therefore, is not available as proof required by the office. This is so because the office, not being a party, had not made the admission but is requiring proof of debt. The office, if can be said to be a person, has derived interest from a party in the winding up proceeding under the statute but that situation is not provided for in Evidence Act, with regard to admissions. The office has before it Court s satisfaction to direct winding up. Applicant will furnish proof of money transfer to the company (in liquidation). Official Liquidator might then consider whether this is sufficient, as a special case, since this Court will not make a direction dispensing with proof altogether. Application disposed off.

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• Insolvency & Bankruptcy

• 2019 (6) TMI 1154
  Initiation of Corporate Insolvency Resolution Process - Section 7 of Insolvency and Bankruptcy Code, 2016 - Default in repayment of loans - agreement with Foreign Countries - HELD THAT:- Section 234-235 of IBC, 2016 deals with the matter regarding the agreement with foreign countries and the letter of request to a country outside India in the insolvency Resolution Process where the assets of the corporate debtor exist outside India - The above provision of IB Code is yet to be notified hence not enforceable. Therefore, we as the Adjudicating Authority are not empowered to entertain the order passed by the foreign jurisdiction in the case, where the registered office of the Corporate Debtor company is situated in India, and the jurisdiction specifically lies with this court. Therefore, we cannot pass any order to withhold the Insolvency proceedings pending in our court based on the order of insolvency passed by any other jurisdiction, which is not authorised to pass order for the company, which is registered in India and the jurisdiction solely lies with this court. In this case, the Indian Government has no such reciprocal arrangement with the Government of Netherland. Therefore, none of the courts has any jurisdiction to pass an order under IBC, where the assets and properties of the Corporate Debtor are situated in a country outside their country. This petition filed under Section 7 of I B Code, 2016, filed by State Bank of India , Financial Creditor / Petitioner, under section 7 of I B Code against Jet Airways (India) Limited , Corporate Debtor for initiating corporate insolvency resolution process at this moment admitted - Moratorium declared. List this matter on 5th July 2019.

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• 2019 (6) TMI 1153
  Initiation of CIRP - Corporate Debtor - Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as Code) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Service of notice - whether the demand notice in Form No. 3 dated 26.12.2018 was properly served? - HELD THAT:- The demand notice was sent at the address as per the master data at Page 71 of the petition in which the registered office shown as 2937, Ground Floor, Ganesh Nagar, Link Road, Ludhiana. The demand notice was sent by speed post. The tracking report filed at Page No.39 of the petition shows delivery on 31.12.2018 (Consignment No. EP367302765N). Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The demand notice in Form No. 3 is stated to be issued on 26.12.2018 and served by speed post on the Corporate Debtor on 31.12.2018. We have also discussed above that Shri Vinod Kumar, Sole Proprietor of the financial creditor has filed an affidavit dated 04.02.2018 stating that the petitioner has neither received any notice from the Corporate Debtor relating to a dispute of the unpaid operational debt nor it has received any payment against the outstanding amount. Therefore, any dispute with regard to the operational debt is not proved. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, the petition is admitted for CIRP - moratorium declared.

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• 2019 (6) TMI 1152
  Approval of Resolution Plan - HELD THAT:- Requirements under Section 31(1) of the Code are satisfied in the present case. In para No.3 of Form H (supra) the resolution plan has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force except to the extent already discussed above. Resolution Professional has also certified that the resolution applicant Kundan Care Products Ltd. has submitted affidavit dated 29.06.2018 pursuant to Section 30(1) of the Code confirming its eligibility under Section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order. The resolution professional has submitted that the resolution plan has been approved by the CoC with 100% voting share in accordance with the provisions of the Code and CIRP Regulations made thereunder and after considering the feasibility and viability and other requirements specified by the CIRP Regulations. The final consideration payable by the resolution applicant M/s. Kundan Care Products Ltd. is up front payment of Rs. 45.12 crores towards insolvency resolution process costs and secured financial creditors and Rs. 50,00,000/- for the operational creditors within a period and for the purpose discussed above. The members of the CoC were given an opportunity of being heard and have stated that all the three financial creditors have approved the plan and no objections are to be filed. We have already pointed out above that the consideration of Rs. 45.12 crores plus Rs. 50,00,000/- is more than that of the fair value of Rs. 25.90 crores and liquidation value of Rs. 15.38 crores (para 2 of Form H) . Above that CA was filed by the ex-Director of the suspended Board of Directors Shri Rajit Mehra and his plea for impleadment was not accepted but in the interest of justice, the objections raised by the learned counsel have been considered above. We may add here that an application (CA No.442/2018) under Sections 43, 44, 66 and 67 read with Section 69 of the Code has been filed by the resolution professional in respect of preferential transactions and fraudulent trading and those matters are still pending. The resolution plan submitted by M/s. Kundan Care Products Ltd. as approved by the CoC under Section 30 (4) of the Code is approved and the same shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan, with the following further directions to the Resolution Applicant:- (i) that the Resolution Applicant shall be bound by the directions, judgements, orders, interim orders or otherwise, subject to the right to challenge these orders in respect of the assets/properties of the corporate debtor. (ii) that the Resolution Applicant shall deposit an additional amount of Rs. 50,00,000 (Rupees fifty lacs only) over and above the bid amount of Rs. 45.12 crores within seven days of the receipt of copy of this order in a separate account in consultation with the monitoring agency for payment to operational creditors as explained at page 9 of the resolution plan and in case the amount is still unutilized, the same would be disbursed to operational creditors on pro rata basis. Under the provisions of Section 31 (3) of the Code, we also direct as under:- (a) The moratorium order passed by the Adjudicating Authority under Section 14 of the Code on 25.01.2018 shall cease to have effect; and (b) The resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database.

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• PMLA

• 2019 (6) TMI 1151
  Provisional attachment of Bank Accounts - there is a reasonable belief that certain properties are derived out of proceeds of crime - invocation of provisions of sections 120-B read with sections 420, 467, 468 and 471 of IPC - scheduled offence or not - section 3 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- It is evident that the fraud is perpetrated on the Wakf Board by the Bank by transferring the funds credited to its account for the purpose of securing a Fixed Deposit in the name of CEO, Wakf Board. The funds credited to the account of Vijaya Bank, Chintamani Branch could not have been transferred by the Branch based on a letter stated to have been signed by the Chief Accounts Officer when the Cheque issued by the CEO has an endorsement that the amount is credited to the Branch for opening of Fixed Deposit in his name - The instruction purported to have been given by the Chief Accounts Officer in a letter is not by the authority who has signed the cheque. The instruction which is stated to have been issued to the Bank was not also verified by the Branch Officials and have been acted upon fraudulently. As per record, it is clear that the CEO of the Wakf Board having signed the cheques for the purpose of securing Fixed Deposit from Chintamani Branch has also specifically endorsed on the cheque that the instrument is drawn on Vijaya Bank, Chintamani Branch as towards Fixed Deposit to be issued in favour of CEO, KSBW. The transfer of the amount credited to third parties was without the authority of law and therefore there arise no obligation on the part of the CEO to comply as there could not have been any other outcome but to secure the Fixed Deposit in the name of CEO, Wakf Board. The investigating authority has not recorded any finding on the fraud perpetrated by the Bank exceeding its authority and by also transferring huge sums of money without even verifying the veracity of the letter which is not a banking document to transfer funds to third parties. These transactions are effected by the Bank exceeding the direction provided to the Bank. Admittedly there is no specific allegation in the Complaint against the CEO of Wakf Board to array the office of the CEO as one of the defendants in the complaint filed by the Respondent Authority. The respondent authority only states that the CEO of the Board accepts placing the money in Fixed Deposit with a Bank on the same day the proposal was mooted by the First Division Assistant, which was verified by the Chief Accounts Officer and the file was forwarded to the CEO who accepted to opening of Fixed Deposit at Vijaya Bank (which is a Nationalised Bank), Chintamani Branch - Admittedly the Chief Executive Officer, Karnataka State WAKF, Bangalore initiated the criminal proceedings against the Manager of Vijaya Bank, Assistant Branch Manager, Vijaya Bank, Chintamani Branch and also Shri Siraj Ahmed the First Division Assistant and Cashier of Karnataka State Board of WAKFs, Bangalore. There being no allegation by the investigating authority on the Chief Executive Officer representing Karnataka State Board of WAKF who had to secure the deposit from the Bank, the question of therefore arraying him as a Defendant in the proceedings was unnecessary. The Board is not in possession of any proceeds of crime under section 5 of the Prevention of Money Laundering Act, 2002 as the office of the Board has taken immediate action and recovery steps by filing an FIR in the Jurisdictional Police Station. The CEO of the Board has noted on the file that the money was not intended for any other person or for transferring it to any other account. The cheques were also endorsed on the back to state that the intention was to open an FD with the Bank. The fraud perpetrated on the Board was not known to the CEO of the Board as nothing contrary has come on record. The appellant is not involved in money laundering. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 1150
  Provisional order of attachment of properties mortgaged with the Appellant RIICO - Nexus with the crime committed by the borrowers - reasons to believe - offences under section 120 B, 420, 467, 468, 471, 472 and 474 of IPC and section 13(2) r/w 13(1) (d) of PC Act by CBI, BS FC - HELD THAT:- This Tribunal possesses the requisite jurisdiction in terms with the Act as the court of first appeal, to adjudicate upon the pleas of the Appellant and determine the bonafides and legitimacy of its claims as well as the legality of the Provisional Attachment Order. Upon an argument being raised by the Enforcement Directorate that claims of third parties are to be solely adjudicated by the Special Court before whom trial is pending, the Hon ble High Court of Delhi in the Axis Bank Decision has held that the claim of a party asserting a bonafide and legitimate claim would be inquired into by the Special Court only if the order confirming the attachment has attained finality . An order cannot be said to have attained finality until and unless all the remedies under the Act have been exhausted. No doubt, the bank and financial institutions are always at liberty to approach the Special Court (if so desired) in order to invoke the amended provision of sub section 8 of Section 8, however, it is wrong to suggest that the bank and financial institutions are not entitled to challenged the order of attachment because this tribunal is only exclusively having jurisdiction to examine the validity of attachment and to decide the same under section 26 of the Act as to whether attachment was valid or not. The bank and financial institution are entitled to take the remedy before the Special Court after the decision of appeal or during the pendency of appeals. The Appellant has nothing to do and has no connection with the allegation of crime committed by the borrowers. Bank is not involved for the offences of money-laundering. The mortgage properties are admittedly not derived from criminal activities or proceed of crime. The scope of the PMLA is to punish the accused person and not to punish a innocent person who is not involved in the crime within the meaning of Section 2 (u) read with Section 3 of the Act. The appellants are not charge sheeted nor any prosecution complaint has been filed against the appellants - There is no nexus whatsoever, between the alleged crime and the appellants who are mortgagee of the properties and is a victim of the fraud and is innocent party. The definition of proceed of crime as per Section (u) of the Act comprises of the property which is derived or obtained as a result of criminal activities. The mortgaged properties are not acquired from proceed of crime. The Appellant is a Government Company and attachment of these properties would deprive the Appellant from recovering the due amount, which in turn would be a loss of public money. In the appeal filed by Gangwal Real Estate LLP, he said party through its counsel has made the statement to deposit the entire alleged proceed of crime i.e. Rs. 7.37 crores with the respondent without prejudice. The impugned order is set-aside with regard to attachment of properties mortgaged with the appellant - rest of the attachment shall continue - appeal allowed.

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• 2019 (6) TMI 1149
  Attachment of Bank Accounts - reasonable belief - proceeds of crime - It is alleged on behalf of respondents that despite of several follow-ups, the Respondent received a reply from HDFC Bank after eight months on 06.03.2019 that the release of the properties of the Respondent had been declined based on the directions of the Appellant to not release the attached bank accounts of the Respondent - HELD THAT:- No reasonable belief was formed by the Appellant against the Respondent in the Provisional Attachment Order dated 03.01.2018 passed under section 5(1) of the Prevention of Money Laundering Act, 2002 - No criminal liability of the transferor company can be transferred to an entity formed by amalgamation of the transferor and transferee company, by virtue whereof the Respondent was incorporated in the instant matter. There is no force in the contention of the Appellant that the Respondent paid Income Tax on such income to give it corporate colour. It is clarified by the respondents that M/s CHIDCO Limited is a company constituted as a special purpose vehicle for the purpose of completing the project and any amount given to M/s CHIDCO Ltd. was for the purpose of implementing the project. The entire transaction has been declared and the requisite taxes have also been paid as per the case of the respondents. It appears from the impugned order that the Adjudicating Authority has held that no proceeds of crime are available with the Respondents and as such no property of the Respondents is involved in money laundering based on the facts and materials placed before the Adjudicating Authority. It is also held by the Adjudicating Authority that the business transactions were fair, and in the normal course thereof did M/s Dynasty Developers Pvt. Ltd. and M/s Embassy Realtors Pvt. Ltd. had made profits, as is discernible from the above quoted excerpts of the impugned order. The Appellant has failed to establish any nexus whatsoever of the Respondent Company even remotely being linked to the alleged offences, and neither has the Appellant produced even a single document. It is a settled principle of law that upon amalgamation between two Companies the transferor Company dies a civil death which is akin to death of an individual. Where after, the criminal proceedings if any stands abetted - the transferee Company can no longer be prosecuted or cannot be held to be liable for the criminal acts of the transferor company. The Adjudicating Authority has correctly noted that the Appellant did not adduce any reason for attaching the properties of the Respondent, which was admittedly not the recipient of any proceeds of crime whatsoever. For attaching the properties of the Respondents was essential for the Appellant to form and express the reasonable belief as to why the properties of the Respondent herein are being attached as value of the proceeds of crime. No valid reason to belief were recorded by the Joint Director as it was a very casual approach. The said valid opinion has not formed on the basis of settled law by the Supreme Court and various High Court. There is no reasonable belief formed with regard to the separate existence of the entities involved and as to reasons why such individual corporate existence of each of the entities is acknowledged, though the said entities are legally, independent, and separate entities. Without assigning any reason for the attachment of properties of the Respondent, the attachment cannot be permitted mere repetition of language of Section in the last paras after recording the allegation and facts are no valid reason to belief. No separate reason to believe were recorded. Appeal dismissed.

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• Service Tax

• 2019 (6) TMI 1148
  Interpretation of clauses of agreement - reimbursement of service tax - who is liable to bear the service tax - Section 83 of the Finance Act 2007 - HELD THAT:- As a legislation by reference sub-Section (2) of Section 64A of the Sales of Goods Act making applicable sub-Section (1) of Section 64A to any duty of Customs or Excise on goods and as a legislation by incorporation Section 83 of the Finance Act making applicable Section 12B of the Central Excise Act to Service Act, Section 64A(1) is applicable to Service Tax - From the provisions as noted and the decisions of the larger benches it is evident that a service tax is a VAT which in turn is a destination based consumption tax and is to be borne by the consumer of goods. Further, unless contracted to the contrary, the consumer of service is liable to refund the said tax to the service provider who in turn is liable to pay to the government. In the instant case, the clause in question does not fix liability on the contractor to pay service tax that apart from, the clause required interpretation and in view of the aforenoted Judgments regarding the interpretation of the contract, view taken by the learned Arbitrator cannot be faulted. Appeal dismissed.

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• 2019 (6) TMI 1147
  Reverse Charge (RCM) - Constitutional validity of the provision of sub-Clause (iv) of Rule 2 (1)(d) of Service Tax Rules, 1994 - Period from 2002-03 to 2004-05 - Consulting Engineer service - Liability of service tax - service tax in respect of the value of the said engineering plans, drawings and designs imported by it from M/s. Loesche GmbH of Germany for rendering services under the heading of Consulting engineering Service - HELD THAT:- The service tax makes the person, who is providing the service, liable to pay. As such the Rules, more particularly Rule 2 (1)(d)(iv) of Service Tax Rules, 1994 (for short the 1994 Rules ) cannot be held to be in conformity with the provisions of the Act and the Constitution of India. Article 265 of the Constitution of India lays down that no tax shall be levied or collected except by authority of law. As such, the impugned notification and amendment is ultra vires the Constitution and is liable to be set aside. All taxable services are defined in Section 65 of the Finance Act which include only three types of services namely, any service provided to an investor by a stock-broker, to a subscriber by telegraph authority and to a policy holder by a insurer carrying on general insurance business. Section 68 of the Act requires every person providing the taxable service to collect service tax at the specified rate. Section 69 of the Act provides that registration of a person responsible for collecting service tax. Sub-section 2 of Section 5 of the Act indicates that it was the provider of the service, who is responsible for collecting the tax and obliged to get itself registered. Thus, on a conspectus of Section 65, 66, 68 and 69 of the Act make it abundantly clear that no tax for rendering service can be collected from the recipient of service. The rule empowering the authorities to collect service tax from the recipient of services cannot be held to be valid and in conformity with law - Rule 2 (1)(d)(iv) of Service Tax Rules, 1994 is ultra vires the provisions of the Act and the Constitution and is accordingly declared bad in law. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 1146
  Real estate agent service - absence of consideration - contract between parties is of principal to principal relationship or agent to principal - Liability of service tax - Suppression of facts or not - extended period of limitation - imposition of penalties. - Valuation - Inclusion of Cost of land, which has been acquired and transferred to the Sahara India. HELD THAT:- There is no consideration defined and/or provided for the alleged service. In absence of any defined consideration for service, there is no contract for service. Under the facts and circumstances, we find that the appellant entered into an agreement of trading in land, wherein they agreed to transfer, a measurement or area of land, in a particular area in favour of the Sahara India. Such land was to be arranged by them by way of procurement from the land owners. The appellant was also obligated to examine the title of the prospective land owner and to further ensure the availability of land owner at the office of the Registrar for execution of the sale deed. In fact Sahara India instead of paying the price directly to the land owner, paid lump sum amount to the appellant. From the perusal of Memorandum of Understanding (MoU) between the appellants and M/s Sahara India Ltd. It is very obvious that MoU is not only for providing purely service for acquisition of the land, but involves many other function such as verification of the title deeds of the persons from whom the lands are to be acquired and obtaining necessary rights for development of the land from the Competent Authority. The remuneration or payment for providing this activity, has actually not being quantified in the MoU. The MoU provides that, the difference, if any, of the amount being actually paid to the owner of the land and the average rate shall be payable to the second party (appellant) . It is very clear from the provision of the MoU that the amount payable to the appellant is not quantified and it is more of in the nature of margin (profit/loss). We hold that for levy of service tax, a specific amount (consideration for service) has to be agreed between the service recipient and the service provider. As no fixed amount has been agreed in the MoU which have been signed between the parties, the amount of the remuneration for service, if any, is not clear in this case. Since the specific remuneration has not been fixed in the deal for acquisition of the land, we are of the view that both the parties have worked more as a principals in the deal, rather than as an agent and the principal. Extended period of limitation - penalty - HELD THAT:- The issue relates to interpretation, and there is no malafide on the part of the appellant. The transaction is through banking channel and duly recorded in the books of accounts maintained by the appellant(s). Further there is no suppression of information from the revenue. Accordingly, the extended period of limitation is not applicable. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (6) TMI 1145
  Condonation of delay in filing appeal - service of order - non-communication of the impugned order to the trustee - sufficient cause for condonation of delay or not - HELD THAT:- Taking into consideration the circumstance that the delay is of only 102 days and such delay has been sufficiently explained in the affidavit of appellant s Trustee in support of the application for condonation of delay, we are of the opinion that the delay in institution of the appeal was required to be condoned in the facts of the present case. It does appear that there was a serious communication gap. Besides, as noted earlier, the appellant is a Charitable Trust. Upon cumulative consideration of all these factors coupled with the fact that the delay was of only 102 days, a case had been made out for condonation of delay. The delay of 102 days in instituting the appeal before the Tribunal was required to be condoned in the interests of justice by accepting the cause shown by the appellant as sufficient cause - COD application allowed - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 1144
  CENVAT Credit - input services - insurance policy when the policy covers the employees and family members of the employees - Scope of SCN - HELD THAT:- The impugned order of the Tribunal on facts was not called upon to deal with the issue of taking of Cenvat credit of service tax paid on insurance policy for the family members of the employees. In fact, the Commissioner Service Tax who passed the order in original dated 17th September, 2014 after considering the show-cause notice and the respondent s reply to the same, renders a finding of fact that respondent is taking Cenvat credit of service tax paid on insurance policy covering the health of its employees. The Revenue accepted this finding of fact. This is evident as it neither had filed any appeal nor did they filed any cross-objection to the appeal filed by the respondent. Whether under the facts and circumstances of the case, was it justified to hold that Cenvat Credit of service tax paid on insurance policy is admissible when the policy covers the employees? - HELD THAT:- The aforesaid question which arises from the order of the Tribunal does not give rise to any substantial question of law as the issue stands concluded in favour of the respondent assessee and against the Revenue by the decision of this Court in THE COMMISSIONER OF CENTRAL TAX CENTRAL EXCISE, MUMBAI CENTRAL COMMISSIONERATE VERSUS AXIX BANK LTD., (AXIS) [ 2018 (12) TMI 1479 - BOMBAY HIGH COURT] - the question as arises from the impugned order of the Tribunal does not give rise to any substantial question of law. Thus, not entertained. Appeal dismissed.

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• 2019 (6) TMI 1143
  Extended period of Limitation - Section 11A(1) of Central Excise Act - denial of benefit of the CENVAT when the appellant has accepted the demand - HELD THAT:- The finding on facts as found by the Tribunal the appellant has not paid excise duty on the goods cleared for home consumption for the period of 3 years nor followed any excise procedures. The non-payment of excise duty and not following of excise procedures came to light only because of intelligence received by the Revenue and subsequent visit to the respondent s factory. It is to be noted that the appellant has not disputed duty liability and interest - the occasion to consider the issue of demand being barred by time does not arise. Penalty - HELD THAT:- The plea of ignorance of law is the only defense / submission for non imposition of penalty. The appellant is a limited company and is in the business of manufacturing of jaggery and jaggery powder. The plea of ignorance of law cannot be accepted as stated in the well known maxim Ignorantia Juris Non Excusct i.e. ignorance of law is no excuse. The questions proposed in these facts, do not give rise to any substantial question of law - appeal dismissed.

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• 2019 (6) TMI 1142
  Interest on delayed refund - time imitation - Section 11BB of Central Excise Act - HELD THAT:- It is an undisputed position that the refund has to be granted under Section 11BB of the Act within a period of 3 months from the date of the application for refund, if the refund is not paid during the stipulated 3 months period, the interest start running. In terms of Section 11BB of the Act, the Revenue was obliged to give interest along with principal amount in terms of Section 11BB of the Act. The fact that the principal amount of Rs. 49.17 lakhs was refunded to the respondent is in appeal before the Hon ble Supreme Court would not detract from the obligation of the Revenue to comply with the provisions of Section 11BB of the Act in the absence of any stay to the order dated 24th March, 2011 of the Hon ble Gujarat High Court by the Apex Court. The liability of interest commences after 3 months of the refund application, if the refund is not made within 3 months from the date of application for refund. Thus, it runs along with the principal amount Mere pendency of the appeal before the Apex Court would not justify the Revenue ignoring the statutory provisions of the Act namely Section 11BB of the Act. This it has to comply - It is selfevident position on reading of Section 11BB of the Act that the interest has to be granted if the refund is not made within a period of 3 months from the date of application for refund. The question as proposed does not give rise to any substantial question of law. Thus, not entertained - appeal dismissed.

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• 2019 (6) TMI 1141
  Maintainability of appeal - alternative efficacious remedy - availability of exemption under Notification No. 9/2003-ST, dated 20.06.2003 and Notification No. 24/2004-ST, dated 10.09.2004 - HELD THAT:- The issue which arises in this appeal is one relating to the rate of duty, as if the above Notification apply then exemption from service tax is available to the respondent. In view of Section 83 of the Finance Act, 1994 read with Section 35G of the Central Excise Act, 1944 an appeal relating to determination of any question having relation to the rate of duty of excise and / or service tax is outside the jurisdiction of this Court. The remedy, if any, under Section 35L of the Central Excise Act would be an appeal to the Hon ble Supreme Court. Appeal dismissed being not maintainable.

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• 2019 (6) TMI 1140
  Condonation of delay in filing appeal - Time Limitation - appeal was instituted beyond period of 90 days, i.e., beyond the period of maximum extendable period by the Appellate Authority - HELD THAT:- The petitioner, delayed the institution of appeal and therefore, cannot expect that the this Court converts itself into an appeal court whilst exercising powers of judicial review under Article 226 of the Constitution of India. The contention as raised would require reevaluation and re-appreciation of factual position. Such an exercise cannot be undertaken in the exercise of limited jurisdiction of judicial review. The order-in-original was made on 3rd August 2015 by the Assistant Commissioner of Central Excise. Even the final order was made by the Tribunal on 6th October 2017. This petition was however, instituted only on 29th September 2018. There is absolutely no explanation for inordinate delay in the institution of the petition. The averment in the petition is that there is no delay or laches in instituting this petition. Therefore, the petitioner, far from acknowledging the delay and explaining the same, does not even admit that there is any delay or laches. This is an additional ground for dismissing this petition. Petition dismissed.

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• 2019 (6) TMI 1139
  Refund claim - finalization of provisional assessment - unjust enrichment - passing of incidence of duty to its customers - whether the refund claim is hit by unjust enrichment and as to whether the appellants have shown enough evidence so as to satisfy that the incidence of duty has been borne by them and has not been passed on to the customers? - HELD THAT:- Various judgments of the Hon ble Supreme Court, High Courts and Tribunal have settled the issue of presumption under Section 12B of Central Excise Act, 1944. Such a presumption requires to be negated by sufficient evidence by the person who is claiming refund. IN the instant case, except for putting forth arguments theoretically, the appellants have not put forth any incontrovertible evidence to prove that the burden of duty has not been passed on to their customers. Neither from the sample invoices nor from certificate by cost accountant, it cannot be inferred that the incidence of duty has not been passed on. We find that the lower authorities have shown due diligence in adhering to the orders of the Hon ble High Court of Bombay in this regard, have verified the evidence made available to them by appellants and have come to the conclusion rightly that the appellants could not prove that the incidence of duty has not been passed on to the buyers and was borne by them. Appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2019 (6) TMI 1138
  Reversal of ITC - Section 27(2) of TNVAT Act - Deemed assessment - HELD THAT:- The place of business of the writ petitioner was audited by the Enforcement Wing and certain defects were pointed out. Defects pointed out fall under two categories. Though both pertain to reversal of Input Tax Credit ( ITC for brevity), first reversal of ITC is based on difference in purchase turnover i.e., between balance sheet and monthly returns and second reversal of ITC is based on mismatch i.e., comparison of Annexure -I (purchase details of assessee) and Annexure II (sales details of assessee s sellers). While it is the case of the writ petitioner that first of the SCNs dated 30.11.2016 was not served on the writ petitioner, it is fairly submitted by writ petitioner s counsel that second SCN dated 01.10.2018 was served on the writ petitioner, but it was served as part of a batch pertaining to certain writ petitions which are pending and hence, the writ petitioner could not respond to the second SCN. This explanation is hardly acceptable. This Court is remitting the matter back to the second respondent on the sole ground of not adhering to M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [ 2017 (3) TMI 536 - MADRAS HIGH COURT] . The impugned order is set aside solely on the ground of non-adherence to JKM Graphics principle - petition disposed off.

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• 2019 (6) TMI 1137
  Validity of assessment order - principles of natural justice - alternative remedy - corrigendum to Form WW - HELD THAT:- It is nobody s case that the Authority has passed the impugned orders without jurisdiction. With regard to NJP, it is revealed that personal hearing has admittedly been granted to the writ petitioner. It is also nobody s case that alternate remedy is ineffective, ineffectual or not efficacious. Corrigendum to Form WW - the issue shall be looked into by Appellate Authority as Appellate Authority is also an Authority on facts - HELD THAT:- This Course is being adopted by this Court based on the submissions made to the effect that this matter turns heavily on facts and supporting documents. Impugned orders are not interfered with and all questions on merits are left open. Impugned orders are not interfered with on the ground of availability of effective and efficacious alternate remedy - Petition disposed off.

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• 2019 (6) TMI 1136
  Concessional rate of tax at 2% - C forms - purchase of High Speed Diesel Oil for use in generation and distribution of electricity and other forms of power - HELD THAT:- There is no dispute or disagreement that the instant writ petition falls clearly within the four corners of M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where it was held that The respondents are directed to permit these petitioners to download C forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of C declaration forms. This matter has taken at the admission stage, it follows as a natural sequitur that the instant writ petition stands allowed - Petition allowed.

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• 2019 (6) TMI 1135
  Validity of assessment order - principles of natural justice - according to petitioner the passing of the impugned assessment orders, without granting an opportunity of personal hearing, vitiates the impugned assessment orders - HELD THAT:- It follows as a inevitable sequitur that the principles laid down by a Honourable Division Bench of this Court in SRC PROJECTS PRIVATE LIMITED VERSUS COMMISSIONER OF COMMERCIAL TAXES, CHENNAI AND ANOTHER [ 2008 (9) TMI 914 - MADRAS HIGH COURT] will apply in all force to the case on hand, where it was held that The impugned order by way of revision of assessment should not have been passed without giving the assessee an opportunity of personal hearing. The assessment orders are set aside solely on the ground of violation of NJP (not acceding to the request for personal hearing), without expressing any opinion whatsoever on merits - petition allowed.

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• 2019 (6) TMI 1134
  Penalty u/s 47(6) of the KVAT Act - release of consignment with vehicle - sub-sections (2) and (6) of Section 47 of the KVAT Act - opportunity of being heard - HELD THAT:- The Enquiry Officer had failed to conduct a proper enquiry in the matter and the findings arrived by him that there has been an attempt to evade payment of tax, is based on no legal and acceptable materials. Consequently, confirmation of the order imposing penalty, by the Appellate Authorities, are also not sustainable. Therefore the above revision is liable to be allowed. Revision petition allowed.

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• 2019 (6) TMI 1133
  Time limitation - validity of assessment order - HELD THAT:- The provision under subsection (6) of Section 42 of the OVAT Act including the proviso, it can be safely said that the notice period had already expired when the extension for time to complete the assessment was sought for. The same was done much after six months of expiry of the period of limitation in January, 2008 but the extension is sought for in June, 2008. The notice is without jurisdiction - petition allowed.

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• 2019 (6) TMI 1132
  Classification of goods - different flavours of Halls - whether could not be treated as proprietary Ayurvedic medicine so as to fall within the category of drugs, medicine and pharmaceutical preparations etc. enumerated under Items No.41 of Schedule II (B) of the Act? - HELD THAT:- Manufacture of Halls under an Ayurvedic Drug licence, issued by the competent authority, is one of the factors to show that the said product is an Ayurvedic medicine. The common parlance test is yet another factor. The main criterion, to determine whether the product is an Ayurvedic medicine, is if all the ingredients of the said product find mention in authoritative books of Ayurvedic medicine, though the formula for preparation of the medicament is not in accordance with the formula in those text books. In the light of the law declared by the Supreme Court in Naturalle Health Products (P) Limited Vs. C.C.E., [ 2003 (11) TMI 69 - SUPREME COURT ] as long as the active agents of the product Halls find mention in the Ayurvedic Texts, referred to in the First Schedule to the Act, it would suffice to bring it within the ambit of an Ayurvedic medicine. While the assessee has, no doubt, been remiss in not drawing the attention of the Tribunal to the authorized texts referred to in the first schedule to the Act, to show that the active agents of Halls are referred to therein, the Tribunal has also failed to examine the petitioner s contention that the very same product Halls has been treated as an Ayurvedic medicine in the five States of Northern India (Jammu Kashmir, Punjab Haryana, Uttar Pradesh, Rajasthan and Himachal Pradesh) - appeals remanded back to the Tribunal for its re-examination in accordance with law. Revision allowed by way of remand.

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• 2019 (6) TMI 1131
  Valuation - inclusion of freight charges borne by the head office of the petitioner at Delhi - gross profit attributed at 15% on freight charges, correct or not - HELD THAT:- The brevity is an art of writing judgements and the manner in which the Tribunal has penned its order is in clear violation of the often propounded theory of brevity. All that the tribunal was required to do is to examine the correctness of the decision taken by the First Appellate Authority, while allowing the appeal after verification of documentary evidence produced by the dealer - Unfortunately, the Tribunal did not do so and did not give any specific finding that the documents produced by the assessee did not reflect what was stated by the dealer before the Appellate Authority. In the absence of any such specific finding to discredit the finding of the First Appellate Authority which was rendered after verification of the documents cannot be a reason for allowing the Revenue s appeal. The documents produced by the dealer, verified by the First Appellate Authority shows that the freight was bound by the Head Office at Delhi and shown in the books of account. In fact, the Tribunal does not deny the nature of the transactions and it records that there is no dispute that the goods were brought into the State by the petitioner/dealer from their Head Office at Delhi and utilised in execution of works contract within the state and the goods brought in by the dealer were incorporated into the works contract executed in the State. The substantial questions of law are answered in favour of the petitioner - petition allowed.

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• Indian Laws

• 2019 (6) TMI 1130
  Dishonor of Cheque - cross-examination of witnesses - Complainant filed an application to recall the witness (CW1) and allow the complainant to produce the relevant documents through its witness - HELD THAT:- This Court has clearly observed that the documents of acknowledgement or delivery now cannot be proved from the complainant who is already cross examined, and on this point the person from M/s. BMG Chemicals is the correct witness and is required to be examined in order to find out the truth. In my view, it is in the context of the aforesaid observations, this Court though dismissed the Writ Petitions, has granted liberty to the Complainant to file appropriate applications. The cross examination of the witness of the complainant is over and the matter is closed for arguments. Now the complainant wants to bring on record certain documents which, according to the complainant, would go to the root of the matter. The accused had placed orders for goods with the complainant and the cheques issued as against the said orders when represented to the bankers were returned with remark Payment Stopped . The present complaints are under Section 138 of the Negotiable Instruments Act. The complainant wants to bring on record certain documents, which according to the complainant, are relevant to the transaction between the complainant and the accused and go to the root of the matter - The accused would get an opportunity to cross examine the witnesses at length and no prejudice would be caused to the accused if the documents relating to the transaction are allowed to be produced on record, which would help the trial Court to decide the matter correctly. Section 311 of the Criminal Procedure Code - HELD THAT:- This Court does not prevent the Court to summon or even recall the witness. In this context a useful reference could be made to the judgment of the Apex Court in the matter of Mohan Lal Shamji Soni V/s. Union of India ors. [ 1991 (2) TMI 142 - SUPREME COURT ] wherein the Apex Court had considered the scope of Section 540 of the Criminal Procedure Code which is similar to Section 311 of the Code. The Apex Court observed that it is a cardinal rule in the law of evidence that the best available evidence should be brought before the Court to prove a fact or the points in issue. Petition dismissed.

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• 2019 (6) TMI 1129
  Delay in the matter of initiation of disciplinary proceedings - whether there is inordinate delay and if so, whether the official respondents offered explanation for the delay? - HELD THAT:- The time taken for identifying the delinquent and then arriving at a prima facie conclusion regarding the nature of his involvement cannot be taken as vital and fatal so as to cause prejudice to the delinquent employee or to hold that despite such situation the delay should be taken as sufficient to stifle the proceedings abruptly. In short, in such circumstances and taking into account the period of alleged delay the explanation cannot be said to be unsatisfactory and in fact, in the circumstances obtained in this case, it cannot be taken that there occurred inordinate delay. We do not find any reason to hold that the authorities were not serious in initiating disciplinary proceedings or in pursuing with the charges against the petitioner. The delay occurring in the matter of conduct of disciplinary proceedings since the filing of the Original Application cannot be a reason available to the petitioner to contend against the continuation of the disciplinary proceedings initiated under Annexure- A1. In short, on the ground of delay the disciplinary proceedings initiated against the petitioner invite no interference. Whether the disciplinary proceedings based on Annexure-A1 invites interference and an abrupt termination on any other ground? - HELD THAT:- We do not find any reason to disagree with the conclusions arrived at by the Tribunal that they are nothing but imputations, the verity or otherwise of it could be proved only at the final enquiry. At any rate, merely because the imputations are couched in such a manner in paragraph 23, that by itself cannot be a reason to terminate the proceedings abruptly. Still, as an abundant caution we make it clear that those extracted recital shall not be taken as conclusions against the petitioner and they shall be regarded only as prima facie view for the purpose of initiation of disciplinary proceedings and sought to be proved against the petitioner at the enquiry. The charges levelled against the petitioner are very serious. It is taking note of the fact that they pertain to leakage of information regarding the identity of the informant as also the details of the information passed on by the informant to the assessee from a higher officer of the department coupled with the case of the complainant- informant that the leakage of such aspects led to threat to his life that we opined that the charges levelled against the petitioner are very serious. We have no hesitation to hold that the Tribunal had very rightly held that it would be too early, in other words premature, to go into such aspects and essentially, the hollowness or otherwise of the allegations could be found out only in appropriately conducted disciplinary proceedings. At any rate, based on the said fact the petitioner cannot claim for quashment of Annexure-A1 memorandum of charges. We do not find any compelling reason to interfere with the order passed by the Tribunal in O.A.No.726 of 2015 and to bring about an abrupt termination of disciplinary proceedings by setting aside Annexure-A1 and incidental proceedings. At the same time, we are of the view that no further delay can be brooked in the matter of disciplinary proceedings initiated under Annexure-A1 and hence, it shall be concluded as expeditiously as possible, within a period of six months from the date of receipt of a copy of this judgment. Petition dismissed.

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