TMI Tax Updates - e-Newsletter
June 28, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. An attempt to understand sub section (1) of section 73/74 under GST

   By: Sunil Vengaldas

2. SEBI INVESTOR PROTECTION AND EDUCATION FUND

   By: DR.MARIAPPAN GOVINDARAJAN

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

4. The Vital Role of Internal Audit for SMEs: Ensuring Efficiency, Compliance, and Growth

   By: Sundaran Damodaran

5. Setting up of the GST Appellate Tribunal: Are We Ready

   By: Bimal jain

6. Tips for Mutual Funds Investment in India for NRIs

   By: services 2nri

7. Utilization of CENVAT Credit within the same entity does not cause loss to the Exchequer

   By: Bimal jain

News

1. Officials of DGGI, Jaipur, bust syndicate operating in 14 States through 569 fake firms fraudulently claiming ITC of Rs 1,047 crore, 1 held

2. Startup20 Engagement Group to celebrate a successful inception year with final summit in Gurugram

3. 10x growth in procurement from Government e-Marketplace in last 3 years: Union Commerce and Industry Minister Shri Piyush Goyal

Notifications

GST - States

1. S. R. O. No. 717/2023 - dated 26-6-2023 - Kerala SGST

Amendment in Notification No. 66/2020/TAXES. dated 14th May, 2020

2. S. R. O. No. 716/2023 - dated 26-6-2023 - Kerala SGST

Amendment in Notification No.72/2017/TAXES dated 30th June, 2017

3. G.O. Ms. No. 7 - dated 19-5-2023 - Puducherry SGST

Extension of limitation under Section 168A of Puducherry Goods and Services Tax Act, 2017

4. G.O. Ms. No. 60 - dated 30-5-2023 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Third Amendment) Rules, 2023

Income Tax

5. 46/2023 - dated 26-6-2023 - IT

Computation of arm's length price - tolerance limit of 1% in case of wholesale trading and 3% in other cases notified - U/s 92C(2) of IT Act 1961.

Circulars / Instructions / Orders

Service Tax

1. Order No. 09/2023 - dated 26-6-2023

Appointment of Common Adjudicating Authority in respect of SCNs issued to units of M/s Vishnu Pouch Packaging Pvt. Ltd

SEBI

2. SEBI/HO/DDHS/PoD2/P/CIR/2023/107 - dated 27-6-2023

Manner of achieving minimum public unitholding - InvITs

3. SEBI/HO/DDHS/PoD2/P/CIR/2023/106 - dated 27-6-2023

Manner of achieving minimum public unitholding - REITs

4. SEBI/HO/DDHS/DDHS-POD2/P/CIR/2023/ 105 - dated 27-6-2023

Disclosure of Information on Issuers Not Cooperating (INC) with CRAs

Customs

5. PUBLIC NOTICE NO. 03/2023-24 - dated 31-5-2023

Launch of ‘Online Payment’ functionality on CBLMS – Reg.

6. PUBLIC NOTICE NO. - 10/2023- Customs - dated 29-5-2023

Launch of ‘Manage CB Profile’ functionality of CBLMS to add OPS details by Nodal Officers in wrongly filed and validated CB profiles – Reg.

7. PUBLIC NOTICE - 9/2023-Customs - dated 4-5-2023

Changes introduced vide Finance Act 2023 in the Customs Tariff w.e.f 01.05.2023 - Reg.

8. PUBLIC NOTICE NO. 08/2023-Customs - dated 24-4-2023

Launch of SMTP (Email) services on Customs Brokers Licensing Management System (CBLMS) – Reg.

Companies Law

9. NF-25013/2/2023 - dated 26-6-2023

Statutory Auditors’ Responsibilities in relation to Fraud in a Company

Highlights / Catch Notes

GST

• Food Costs for Workers Included in Manpower Service Taxable Value u/s 15, GST Applied at 18% Rate.

  Case-Laws - AAR : Valuation of supply - Rate of tax - Amount received by applicant from manpower service recipient towards food supply to workers, who are employees of applicant, shall be a consideration includible in the taxable value for supply of manpower under Section 15 of the Act and GST shall be paid at the rate of 18%, as applicable to supply of manpower service. - AAR
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Income Tax

• Payments to Milk Suppliers Classified as Business Expenditure, Not Profit Appropriation; Claims Rightly Allowed.

  Case-Laws - SC : Appropriation of profit or Business Expenditure - amount paid to the respective milk suppliers for the quantity of milk supplied and in terms of the quality supplied - In the facts and circumstances of the case, the amount paid to the milk suppliers and also to non-members cannot be said to be appropriation of profit. - Claim was rightly allowed as business expenditure - SC
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• Reopening Tax Assessment u/s 147 Invalid Without Independent Reason, Petitioner's Challenge Succeeds Due to Improper Application.

  Case-Laws - HC : Validity of Reopening of assessment u/s 147 - independent' v/s 'borrowed' or 'dictated' satisfaction - The authority is sufficiently couched with the power of revision u/s 263 and as such when the authority has resorted to Section 147 is appearing to be impermissible especially when there appears to be no subjective satisfaction independently arrived at that any income chargeable to tax has escaped the assessment for any assessment year. This reason to belief contemplated u/s 147 of the Act requires proper application before initiating the step which here appearing to be missing and as such we are quite satisfied that case is made out by the petitioner to call for any interference. - HC
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• Court Rules on Tax Recovery from Deceased Director: Burden Shifts Only if Company's Dues Are Irrecoverable (Sec 179(1.

  Case-Laws - HC : Recovery of tax dues of the company from the Director u/s 179(1) - Director is now no more (deceased) - Before passing an order u/s 179, the Assessing Officer should have made out a case as required under Section 179(1) of the Act that the tax dues from the company cannot be recovered. Only after the first requirement is satisfied would the onus shift on any Director to prove that non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. - HC
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• High Court Condones 21-Second Delay in Filing After Software Rejection for Automatic Midnight Closure.

  Case-Laws - HC : Return uploaded with a delay of 21 seconds - delay of few seconds only - The defence is that there is nothing wrong in the rejection of the return, since the software is so programmed to automatically close the portal at midnight. This may well be right. The request for condonation has been considered not by a machine but a human being, who, in my view, could well have considered the request in proper perspective, condoning the delay of 21 seconds - The impugned orders are set aside and the delay is condoned - HC
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• Court Rules Revenue Can't Demand Deficit TDS from Petitioner; Must Credit TDS Already Deducted by Deductor.

  Case-Laws - HC : Claiming full amount of TDS - Deductor has deducted the TDS but only small portion of the amount of TDS was deposited with the revenue - Bar against direct demand on assessee - While respondent/revenue cannot recover the deficit tax at source from the petitioner, which was deducted and pocketed by CAL, and they cannot also refuse to grant credit for the same. - HC
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• Reassessment Invalid: Late Tax Return Filed on October 6, 2015, u/s 139(4); Reopening Notice u/s 148 Unnecessary.

  Case-Laws - AT : Validity of reassessment proceedings - As the return filed by the assessee on 06.10.2015 is a return filed belatedly u/s 139(4) of the Act. Nothing prevented the learned Assessing Officer to select this return for scrutiny and frame the assessment in accordance with law. When this provision is available with the learned Assessing Officer, where is the need for him to issue reopening notice that too before the end of the assessment year itself. Hence the reopening notice issued u/s 148 of the Act in the instant case is to be declared premature. - AT
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• Taxpayer Entitled to TDS Credit for Income Declared in Earlier Year; AO to Verify and Grant Credit.

  Case-Laws - AT : Credit of TDS - Deductor deducted the TDS in the subsequent year - Income was shown in the ITR for the earlier year - since the assessee has shown income, the assessee has every right to get credit of TDS - AO directed to verify the claim and allow credit of TDS if the income is shown in the year under consideration. - AT
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• Interest on Partner Capital Allowed as Deduction to Avoid Double Taxation u/s 40(b) of Income Tax Act.

  Case-Laws - AT : Interest on capital paid to the partner - payment of interest by the two partnership firms towards use of partners’ capital - Expenditure incurred on account of commercial expediency or not? - Since the amount has been taxed in the hands of partners u/s 28(v) of the Act same to be allowed in the hands of the assessee u/s 40(b) of the Act, otherwise it amounts to double taxation - AO directed to allow the deduction to the extent of limit prescribed in section 40(b) - AT
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Customs

• Supreme Court Emphasizes Need for Reasoned Orders in Classification of Imported Scrap Goods, Citing Natural Justice Principles.

  Case-Laws - SC : Classification of imported goods - re-rollable plate & pipes material scrap - Non-reasoned order in appeal - violation of principles of natural justice - Tribunal accepted the contention of the Importer - The Appellate Tribunal is a final fact-finding body and therefore, should have examined the facts as well as the legal position before pronouncing the final outcome. - SC
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• Customs broker license reinstated after 8-year suspension; judicial opinions differ on late enquiry report acceptance.

  Case-Laws - HC : Revocation of Customs Broker License - The licence of the respondent was suspended eight years ago and such suspension is continuing. Even if the respondent is adjudged guilty of illegal exportation of contraceptives to Bangladesh, eight years’ suspension of licence has been proportionate punishment - Order of Tribunal restoring the CB license sustained - However, on the issue of accepting enquiry report beyond 90 days, Judges have expressed different opinion - HC
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• Application to Appeal Anti-Dumping Duty on Melamine Imports Denied; No Legal Injury Found by High Court.

  Case-Laws - HC : Rejection of application seeking leave to file appeal - Levy of ADD - import of Melamine - by any stretch of imagination the applicant cannot be treated to be a person aggrieved, who has suffered a legal injury by the direction of learned Single Bench to disclose the numerical values from the complaint filed by the applicant to the competent authority - HC
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• E-Rickshaw Parts Import: Classification Under Customs Tariff Heading 87089900 for Non-Fully Functional Components.

  Case-Laws - AT : Classification of imported goods - Parts of tricycle (E-Rickshaw) not in CKD conditions - The goods as imported by the Appellants together are not in complete nature and require a manufacturing process in order to obtain a fully finished vehicle. As per the definition of the vehicle, any imported components cannot be said to be fully functional unless they achieve the basic characteristic of the said appliance/instrument. - The goods are rightly classsifiable under CTH 87089900 - AT
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• Revocation of Inland Container Depot Approvals for Violating Natural Justice Principles under Customs Act Sections 8 & 45.

  Case-Laws - AT : Violation of principles of natural justice - Handling of Cargo in Customs Areas - Setting up of ICD - Revocation of approvals granted u/s 8, Section 45 of Customs Act,1962 read with Regulation 10 of (HCCAR, 2009) - The argument of the Revenue is that there would be some GST implications if both the DTA unit as well as Customs notified area are situated in the same premises. It is also seen from the records that such apprehensions have not been spelt out in the order. - Department are directed to issue a notice and adjudicate the issue after getting reply - AT
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• Customs Valuation: Imported goods' value can't rely on conflicting 'Public Ledger' prices under Customs Act, 1962, Section 14.

  Case-Laws - AT : Valuation of imported goods - The specific discarding of resort to ‘Public Ledger’ prices for reason of discord with the prescriptions of the Rules framed under section 14 of Customs Act, 1962 is no less applicable here. There is no allegation that the prices declared do not reflect the contractual consideration. There is no allegation of misdeclaration of description of the goods. - Conditions of valuations rules have not been duly discharged to validate shifting the burden of proof to the importer. - AT
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Corporate Law

• Court Rules Interest from Escrow Must Be Deposited into IEPF u/s 125, Not Retained by Petitioners.

  Case-Laws - HC : Interest earned on the aggregate escrowed amount - Liability of the petitioners to deposit to the Investor Education Protection Fund (IEPF) under Section 125 of the Companies Act, 2013 - The purpose of the creation of the IEPF would itself be defeated if the petitioner is permitted to usurp the said interest. Hence, it cannot be said that the petitioner is entitled to such interest in any manner. - HC
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Service Tax

• CENVAT Credit Denial Overturned: Insufficient Grounds and No Collusion Alleged in Show Cause Notice.

  Case-Laws - AT : CENVAT Credit - denial on the ground that the service providers could not be traced during the visit by the Department officers - no allegation in the SCN has been made that there was any connivance between appellant and the service providers so as to facilitate availment of irregular or wrong credit - the allegation to deny credit is based on assumptions and conjectures which cannot be the reason to deprive the assessee from availing credit. Hence, the order for recovery of credit cannot be legally sustained. - AT
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• Appellant's services qualify as export, not intermediary; service tax refund granted u/r 6A, Service Tax Rules, 1994.

  Case-Laws - AT : Refund of Service Tax erroneously paid - intermediary service or not - place of supply of services - The appellant is not said to be acting as an intermediary i.e., the services were performed by the appellant on a principal-to-principal basis and at arm’s length basis - As all the conditions prescribed under Rule 6A of the Service Tax Rules, 1994 are satisfied, the services of the appellant are to be treated as export of services. - AT
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• Compensation Exceeding Property Purchase Price Not a Declared Service u/s 66E(e) of Finance Act.

  Case-Laws - AT : Receipt of compensation in lieu of nonperformance or part performance of obligation - Declared Service or not - amount received by the Appellant in excess of the purchase price paid for the immovable property, subsequent to cancellation of the agreement to Sale of the said property - the receipt of compensation cannot, by any stretch of imagination, fall under the provisions of Declared Service under Section 66E(e) of the Finance Act. - AT
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• Service Tax Audit Precludes Extended Limitation for DGGI Investigation; No Suppression Alleged During Audit Period.

  Case-Laws - AT : Extended period of limitation - Since there had been service tax audit conducted prior to the DGGI investigation covering the period under dispute, the suppression cannot be alleged by the department for income reconciliation of books and ST 3 returns as no such allegation was raised during department audit. Hence, extended period of limitation also cannot be invoked to raise any demand. - AT
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• Service Tax Not Applicable on IPL Sponsorship Expenses; No Actual Service Provision Met Tax Conditions.

  Case-Laws - AT : Scope/levy of Taxable Service - sponsorship services - the provisions made in the books of account by the appellant as per the GAAP towards sharing the expenditure on account of receipt of sponsorship services cannot be subjected to tax as the ingredients for levy of tax are not fulfilled in the absence of any provision of service and when payments were made only in relation to sponsorship of the IPL Cricket tournament. - AT
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• Court Rules No Employer-Employee Link in Cane Cutting Labor; Manpower Supply Demand Not Maintainable.

  Case-Laws - AT : Classification of services - manpower recruitment or supply agency service or not - There is nothing on record to suggest that the cane cutting labourers are the employees of the appellant. No employer and employee relationship exists between the appellants and the Kankhanis / Gang Leaders. The labourers are not supplied on per hour or per day basis. Cane harvesting charges are reportedly negotiated with the Kankhanis / Gang Leaders by the farmers themselves. Reportedly, some farmers are not utilizing the services of the appellant for obtaining the labourers. As such, the demand raised on the appellant under manpower supply is not maintainable. - AT
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Central Excise

• Duty Exemption for Power Project Goods Valid Despite Initial Certificate Error; Later Rectification Confirmed Eligibility.

  Case-Laws - AT : Clandestine Removal - Supply of goods against ICB - sub-contractor of the main contractor - When the goods have been found to have been cleared towards the power project under ‘International Competitive Bidding’ which was eligible for duty exemption, the LOI and PO for the supply were addressed to IGP’s HO and there is no allegation of clandestine clearance etc, duty exemption benefit cannot be denied merely because the initial PAC was in the name of Kottivakkam unit and not in the name of Sembakkam unit on the date of clearance when the PAC was also rectified later. - AT
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• Duty Demand on Goods Conversion from EOU to DTA Dismissed; No Justification for Disallowing Credit u/s 3(1).

  Case-Laws - AT : Conversion to DTA from EOU - The duty demand raised on the semi-finished goods and finished goods cannot be sustained for the reason that the goods have already been exported and that too on payment of duty under Section 3(1) of Central Excise Act, 1944. As the differential duty demand by applying proviso to Section 3(1) without availing the benefit of notification has been set aside, there are no reason to uphold the disallowance of credit. - AT
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• Appellant Not Liable for Duty u/r 8 of Central Excise Valuation Rules Due to Revenue Neutrality Principle.

  Case-Laws - AT : Interest on Differential duty - appellant paid duty on the strength of supplementary invoices - stock transfers - sale of goods to the independent buyers as well as to their sister units - CENVAT Credit - Revenue Neutrality - the appellant was not liable to pay duty in terms of Rule 8 of Central Excise Valuation Rules, 2000 - AT
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• Court Rules UN Goods Exemption Not Retroactive; Duty Demand Overturned for Nine Tippers in Completed Project.

  Case-Laws - AT : Exemption to goods supplied to the United Nations or an international organisation - The Explanation-2 was inserted with effect from 1.3.2008. Revenue sought to apply the said Notification retrospectively and demanded duty from the appellants alleging that after completion of the project, if the 9 nos. tippers which were used in the completion of project, later if withdrawn, even after completion of the project, they would not be eligible to the benefit of the said Notification. - The said notification would have prospective operation - Demand set aside - AT
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• Appeals Not Maintainable for Claims Under Rs. 1 Crore as Per CBEC Circulars; Binding on Revenue Authorities.

  Case-Laws - HC : Maintainability of appeal - monetary limit involved in the appeal - It is thus clear from the CBEC circulars which are binding on the revenue that the monetary limit for the revenue to approach this Court in an appeal would be when the claim amount is of Rs. 1 Crore and above. Thus in respect of a claim for an amount involving Rs. 1 Crore and below would not be maintainable as per the said circulars. - HC
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Case Laws:

• GST

• 2023 (6) TMI 1147
  Valuation of supply - pure agent or not - Rate of tax on amount recovered from employees - scope of supply envisaged in the Manpower Supply Agreement - Composite supply or mixed supply - naturally bundled services or not - Output tax on food supply - Input tax on food supply - Electricity charges of hostel premises taken on rent - Diesel charges for back up gensets at hostel premises - Input tax on Rent, Security services and Housekeeping services. HELD THAT:- The Manpower Supply Agreement, inter alia, provides that Manpower means male or female personnel of applicant aged not less than 18 years being engaged by applicant as casual labourers, permanent employees, contract employees, consultants or engaged in any other capacity by applicant and sent by applicant to M/s Rising Stars Mobile Private Limited (RSM), the service recipient, to undertake the task for RSM. RSM would provide task schedule as deemed fit by RSM and applicant shall supply Manpower to meet 100% of the needs of RSM based upon the said task schedule and applicant shall ensure that the Manpower has completed task assigned by RSM on a timely manner - Manpower shall exclusively be engaged by applicant; under no circumstances shall the relationship of employer and employee deem to arise between RSM and Manpower. Manpower arrangements made by applicant shall strictly be under the supervision of applicant. The applicant shall make payment to ESI, PF and other relevant authorities. RSM shall pay applicant certain expenses which includes Security Deposit, Rent, Food cost, Maintenance and Security charges, etc, with effect from 01.10.2020 to 30.09.2022. If the Factory is not in operation or operating with the very lean work force, the service charges shall be reduced proportionately by RSM. If RSM is not in a position to utilize the services of applicant due to force majeure condition including epidemic diseases or due to reasons attributed to applicant, RSM shall have no obligation to pay for the services ordered but not utilized and also if the RSM is of the opinion that the possibility of the usage of the services of applicant is difficult to determine, RSM has the option to terminate this agreement at a shorter written notice of seven days. From the invoices given by vendor to applicant for food supply, it is ascertained that the applicant is engaging more than 100 workers and therefore, the provisions of Section 16 of the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act) read with Rules 42 to 50 of The Tamil Nadu Contract Labour (Regulation and Abolition) Rules, 1995 stipulates that labour contractor shall provide the canteen facility to the labour employed by the contractor. Thus, there is a mandate to the applicant to provide canteen facility to the contractual worker. We find that ITC on foods, beverages, outdoor catering is not blocked, provided it is obligatory for an employer to provide the same to its employees under any law for the time being in force as per proviso to Section 17 (5) (b) after its substitution with effect from 01.12.2019 based on the recommendations of GST Council in its 28th meeting and clarified by CBIC Circular No. 172/04/2022-GST dated 06.07.2022 - Section 17 (5) allows ITC on food, beverages and outdoor catering only in case it is obligatory under any law for the time being in force. Thus, applicant is eligible for ITC on the food supplied by food vendor to contractual worker and is not blocked under Section 17(5) (b) of the Act. Similarly, the applicant is receiving, invoices with GST @ 18%, from vendors for supply of various other services, viz, Security service, Renting of Immovable Property for hostel accommodation, Building maintenance service, Housekeeping and maintenance service and consumed for supply of manpower service. As the input services are used by the applicant for supply of taxable service, the GST paid on such invoices qualify for claim of ITC subject to eligibility and conditions stipulated under Section 16 of the Act.

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• Income Tax

• 2023 (6) TMI 1146
  Validity of Revision order u/s 263 - scope of exercise of power u/s 263 - as per HC revisional order, to the extent that it did not provide any pre-decisional opportunity to address the issues it dealt with, could not be sustained and ITAT has granted relief of a limited nature on that score - Also not agreed that those issues were incapable of consideration as they were gone into by the AO. Accordingly, the CIT, in exercise of his power under Section 263 will proceed to consider the assessee s submissions only on those two aspects, before making his order. HELD THAT:- We are not inclined to interfere with the impugned judgment. However, we would like to clarify that the petitioner will be entitled to raise all pleas and contentions, including the contention that the preconditions for invoking jurisdiction under Section 263 of the Income Tax Act, 1961 are not satisfied before the Commissioner of Income Tax. We also clarify that while we have upheld the direction for remand for fresh hearing and decision, we have not made any observations/comments on the merits of the case. SLP dismissed.

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• 2023 (6) TMI 1145
  Waiver of interest charged u/s 220 (2A) rejected - as per HC no justification interference by this Court in this writ petition in exercise of jurisdiction under Article 226 of Constitution of India - HELD THAT:- No good ground and reason to interfere with the impugned judgment and hence, the special leave petition is dismissed. At this stage, counsel appearing for the petitioner states that the petitioner may approach the authorities to pay the tax amount in installments. We make no comments in this regard.

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• 2023 (6) TMI 1144
  Entitlement to deduction u/s 80P(2)(a) and (d) - Whether assessee, a co-operative credit society and is not a bank for the purpose of Section 80P(4) ? - HELD THAT:- Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under Section 80(P)(2) In view of the order passed by this Court in M/S. ANNASAHEB PATIL MATHADI KAMGAR SAHAKARI PATHPEDI LIMITED [ 2023 (5) TMI 372 - SC ORDER] by which the issue involved in the present petition is held to be against the Revenue and in favour of the Assessee, the present Special Leave Petition deserves to be dismissed and is accordingly dismissed. Pending applications shall stand disposed of.

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• 2023 (6) TMI 1143
  Appropriation of profit or Business Expenditure - amount paid to the respective milk suppliers for the quantity of milk supplied and in terms of the quality supplied - Finding recorded by the ITAT as well as the High Court that the amount was paid, may be, at the end of the previous year only to the milk suppliers, which was for the quantity of milk supplied and in terms of the quality supplied and the amount was not paid to all the shareholders and not paid out of the profits ascertained at the Annual General Meeting, both the ITAT as well as the High Court have rightly deleted the addition made by the AO - HELD THAT:- In the facts and circumstances of the case, the amount paid to the milk suppliers and also to non-members cannot be said to be appropriation of profit. Therefore, no error has been committed by the High Court. We are in complete agreement with the view taken by the High Court taking into consideration the finding recorded by the ITAT as well as the High Court and the observations made by the High Court in para 14 of the impugned judgment and order. In view of the above and for the reasons stated above, the present Appeal deserves to be dismissed

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• 2023 (6) TMI 1142
  Exemption u/s 10(22) denied - misutilisation of funds - remuneration paid to the wife and children of the managing trustee of the trust and the electricity bills towards his residence - As per HC Tribunal incorrectly held that exemption u/s 10(22) cannot be denied on the basis of the provisions of section 13(2B)(sic) of the Act and documentary evidence would clearly go to show that the receipts which are in the name of the trust and donation collected amounts to profit-making motive and it cannot be the object or the purpose of running a charitable educational institution HELD THAT:- No good ground and reason to interfere with the impugned judgment and hence, the present appeal is dismissed.

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• 2023 (6) TMI 1141
  Validity of Assessment u/s 153C - whether proceedings initiated by issuance of notice u/s 153C are with or without jurisdiction? - As per HC very initiation of proceedings u/s 153C [ 2019 (6) TMI 746 - GUJARAT HIGH COURT] was without jurisdiction - HELD THAT:- As a batch of appeals were preferred before this Court and the very impugned common judgment has been set aside by this Court in Vikram Sujitkumar Bhatia [ 2023 (4) TMI 296 - SUPREME COURT] - Thus, the issue involved in the present appeals is squarely covered against the Assessee and in favour of the Revenue in view of the aforesaid decision of this Court. Assessee has fairly conceded before this Court that the issue involved in the present appeals is squarely covered against the Assessee and in favour of the Revenue in view of the aforesaid decision of this Court. In view of the above and for the reasons stated above and for the reasons stated in the decision of this Court in Vikram Sujitkumar Bhatia (supra), the present appeals are allowed. The impugned common judgment and order passed by the High Court is hereby quashed and set aside.

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• 2023 (6) TMI 1140
  Validity of Reopening of assessment u/s 147 - new tangible material for initiating reopening - independent v/s borrowed or dictated satisfaction - whether income has escaped the assessment or not? - Exemption claimed on land compulsory acquired - HELD THAT:- There is no independent application of mind by respondent authority and a bare perusal of the reasons recorded would clearly indicate that the main and substantial ground is that in respect of other co-owners in proceedings u/s 263 of the Act a different view is taken but then the authority while examining the issue about exemption as prayed for ought to have gone into the specific provisions alongwith the CBDT circular and ought to have applied its mind to the effect that contours of Sections 147 and 263 of the Act are altogether different and as such without analyzing this view is taken, which tentamounts to be a borrowed satisfaction and reflects no independent application of mind. At the best, the authority could have initiated Section 263 proceedings but that having not been done and after unreasonable period trying to reopen the assessment is not step which may be recognized in law. If we peruse the reasons which are recorded it reflects no independent application of mind and as such we do not recognize this routine exercise of reopening of assessment and thereto after a period of almost two years. The authority is sufficiently couched with the power of revision u/s 263 and as such when the authority has resorted to Section 147 is appearing to be impermissible especially when there appears to be no subjective satisfaction independently arrived at that any income chargeable to tax has escaped the assessment for any assessment year. This reason to belief contemplated u/s 147 of the Act requires proper application before initiating the step which here appearing to be missing and as such we are quite satisfied that case is made out by the petitioner to call for any interference. The conclusion of an authority on the issue as to whether income is escaped from the assessment is also not so cogent enough upon which we may permit the authority to reopen the assessment in view of the settled position of law. Here also the land appears to be compulsory acquired and the income is rightly claimed as exempted and therefore, the conclusion of an authority that income has escaped assessment, appears to be erroneous. At this stage, learned advocate appearing for the petitioner has pointed out that co-owners Poonamben Modi whose assessment was also sought to be reopened under Section 148 of the Act for very same reasons and thereafter, an order was passed by revenue under Section 143(3) read with Section 147 order while accepting the submission of the assessee did not make any addition. So when that be so, it is ill-founded that in case of present petitioner reopening is justified. Decided in favour of assessee.

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• 2023 (6) TMI 1139
  Reopening of assessment u/s 147 - respondent no.3 Jurisdiction to issue notice in lieu of transfer of case u/s 127 - HELD THAT:- Admittedly, the order under Section 127(2) of the Act was passed by respondent no.1 transferring to respondent no.4 at New Delhi, the power to assess the petitioner, which was with respondent no.3 (ITO, Ward No.1, Shimla). It was clearly mentioned therein that the said order would come into effect immediately with effect from 12.03.2022. Therefore, with effect from 12.03.2022, the jurisdiction of respondent no.3 to make an assessment under Section 148 of the Act, qua the petitioner, got extinguished. When respondent no.3 had issued notice under Clause (b) of Section 148A of the Act to the petitioner on 22.03.2022, the petitioner had brought this fact to the notice of respondent no.3 in his response on the Portal given on 28.03.2022. It was further stated that the order dt. 15.03.2022 issued under Section 127(2) of the Act that respondent no.1 was also available on the Income Tax Portal and a copy of the same was also attached to respondent no.3; and the specific plea was raised that notice dt. 22.03.2022 under Section 148 A (b) of the Act issued by respondent no.3 to the petitioner, was without jurisdiction. Ignoring the same, the impugned notice under Section 148 of the Act was issued on 01.04.2022 by respondent no.3. The fact that respondent no.3 had issued notice dt. 22.03.2022 under Section 148A(b) of the Act to the petitioner, would not be relevant because the said provision i.e., Section 148A of the Act deals with conduct of enquiry before issuance of notice under Section 148 of the Act, as rightly contended by the learned counsel for the petitioner. Had the transfer of jurisdiction happened after the issuance of notice of Sec.148 of the Act, the situation would have been otherwise. In the very order dt. 15.03.2022 passed under Section 127(2) of the Act it was mentioned specifically that respondent no.3 should get the PAN as well as relevant records transferred to respondent no.4. Without obeying the said directive of respondent no.1 and without transferring the PAN of petitioner and the relevant records to respondent no.4, respondent no.3 cannot take advantage of his own wrong and take the pretext that since the transfer of the PAN had not happened, he has the jurisdiction to issue the notice under Section 148 of the Act also. No prejudice is caused to the respondents since the limitation for initiating action under Section 148 of the Act, in view of the amended Section 149 of the Act, is ten years, if the alleged income escaping assessment is more than Rs.50.00 lacs and since such period for the assessment year 2015-16 would only end on 31.03.2026. Accordingly, the Writ petition is allowed; the notice issued u/s 148 by respondent no.3 is quashed and respondent no.3 is prohibited from taking any action pursuant thereto.

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• 2023 (6) TMI 1138
  Revision u/s 264 - Rejection of application - Recovery of tax dues of the company from the Director u/s 179(1) - Director is now no more (deceased) - Petitioners are two out of the four legal heirs of one late assessee who was a Director of the company - HELD THAT:- We will have to proceed on the basis that no letter or notice was sent to the deceased before the order dated 7th May 2018 came to be passed. There is also nothing to indicate what steps were taken to trace the assets of the company. Moreover, the order dated 7th May 2018 passed u/s 179 of the Act does not satisfy any of the ingredients required to be met. Before passing an order under Section 179 of the Act, the Assessing Officer should have made out a case as required under Section 179(1) of the Act that the tax dues from the company cannot be recovered. Only after the first requirement is satisfied would the onus shift on any Director to prove that non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. The order impugned passed by respondent no. 1 u/s 264 of the Act is a very brief order in the sense that the only ground on which the application u/s 264 came to be rejected is contained in paragraph 4.2 of the impugned order. Respondent no. 1, without considering any of the submissions made by petitioners, has simply rejected the application under Section 264 of the Act noting that notice of the death of the deceased was not brought to the Assessing Officer by anybody and before the order under Section 179 of the Act was signed by the Assessing Officer and, therefore, as on the date of the passing of the order, there was nothing invalid. In our view, not only this order but also the order passed u/s 179 require to be quashed and set aside. Considering the order there is no ground made out in the order for even commencing proceedings under Section 179.

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• 2023 (6) TMI 1137
  Return uploaded with a delay of 21 seconds - Condonation of delay in filing of ITR - HELD THAT:- Undoubtedly, the petitioner ought not to have undertaken the exercise of filing of the return literally at the last second, but in our considered view, the 21 seconds delay could be considered to be a human error and condoned, bearing in mind the dictates of substantial justice. Even as per the affidavit filed in support of the Writ Petition, the return had been filed only at 11.59 p.m. on 15.02.2021. The petitioner, being a company, ought to have ensured that the filing of return was sufficiently in time factoring in possible glitches or technical difficulties. The defence is that there is nothing wrong in the rejection of the return, since the software is so programmed to automatically close the portal at midnight. This may well be right. The request for condonation has been considered not by a machine but a human being, who, in my view, could well have considered the request in proper perspective, condoning the delay of 21 seconds. The impugned orders are set aside and the delay is condoned. The return of the petitioner for assessment year 2020-2021 shall be taken to have been filed in time with all consequences thereof.

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• 2023 (6) TMI 1136
  Validity of Reopening of assessment - validity of order passed u/s 148A(d) as different form notice issued u/s 148A(b) - HELD THAT:- A perusal of the said notice shows that it is alleged that income chargeable to tax had escaped assessment, on account of transaction referred to therein. The transaction, which is referred to in the said notice, concerns the purchase of shares by the petitioner, involving a company going by the name, Lendingkart Technologies Pvt. Ltd. A perusal of the order u/s 148A(d) would show that the petitioner s explanation with regard to the source of investment was accepted. This is evident upon a plain reading of paragraph 5 of the said order. What went against the petitioner is that it had not submitted the following documents: a copy of the share subscription agreement, a copy of the share certificate issued by LTPL and copy of valuation report on the date of purchase of share. AO, thus, concluded, in our view erroneously, that in the absence of the valuation report, it could not be determined whether shares were purchased at fair market value, as per the provisions of Section 50CA of the Act, or not. Undoubtedly, this aspect of the matter was never put to the petitioner in the notice issued u/s 148A(b) of the Act. Since even according to the respondent/revenue, this was a case where an investment was made and not a transaction involving the transfer of shares, facially, the provisions of Section 50CA perhaps, were not applicable. Accordingly, in our view, the best way forward would be to set aside the impugned order passed u/s 148A(d).

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• 2023 (6) TMI 1135
  Claiming full amount of TDS - Deductor has deducted the TDS but only small portion of the amount of TDS was deposited with the revenue - Bar against direct demand on assessee - petitioner avers that instead of being granted credit for the tax deducted at source by CAL, a demand was raised against it - HELD THAT:- While respondent/revenue cannot recover the deficit tax at source from the petitioner, which was deducted and pocketed by CAL, and they cannot also refuse to grant credit for the same. The rationale being what the appellant/revenue cannot do directly, it is impermissible for it to reach the same end indirectly. Given this position, the prayer made in the writ petition is allowed. Revenue will refund to the petitioner, as prayed.

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• 2023 (6) TMI 1134
  Reopening of assessment - validity of order u/s 148A(d) - as argued since limitation had not expired at the relevant point in time, the notice issued u/s 148A(b) is sustainable, notwithstanding reference, as contended by to the judgment of the Supreme Court in Ashish Aggarwal s case[ 2022 (5) TMI 240 - SUPREME COURT] HELD THAT:- As notice issued u/s 148A(b) cannot be declared as being untenable in law, since even according to Mr. Jain, the limitation qua AY 2019-20 would have expired only on 31.03.2023. Merely because there is a reference to the judgment of Supreme Court in Ashish Aggarwal s case, which according to Mr Jain would not apply qua the AY in issue, would have render the notice untenable, as it is common case of counsel for parties that after 01.04.2021, notices could have issued only under the new regime. Petitioner cannot but accept that the notice dated 23.05.2022 has been issued under the new regime, i.e., under Section 148A(b) of the Act. However Petitioner argument carry weight insofar as the second aspect is concerned, i.e., that since proceedings on the very same aspects have been dropped in other AYs, that aspect required attention of the AO. Since according to Petitioner assessment order has not been passed, the assessing officer will advert to the record of the earlier assessment years before passing the assessment order. As rule of res-judicata does not apply, i.e., that each assessment year is different. That being said, if the reasons for reopening are consistently similar or same, the assessing officer needs to apply the principle of consistency before passing the assessment order. [See Radhasaomi Satsang v CIT ( 1991 (11) TMI 2 - SUPREME COURT )] AO will issue a notice to the petitioner which would indicate the date and time of the hearing. AO will pass a speaking assessment order wherein the aforementioned aspect would be dealt with, i.e., that assertion that assessments have been completed for the AYs 2018-19 and 2020-21, involving aspects which are subject matter of the AY in issue.

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• 2023 (6) TMI 1133
  Revision u/s 263 by CIT - under-assessment by virtue of the fact that the valuation that had been placed by the concerned authority for affixation of stamp duty was higher - HELD THAT:- As the value for the purpose of stamping was pegged at Rs. 387,64,76,000/- The record, thus, reveals that it was not the respondent/assessee who effectuated the sale of the subject land. The subject land was sold by the secured lenders to recover from dues owed by the respondent/assessee. Tribunal concluded that the PCIT had failed to notice the underlying facts, while invoking his powers under Section 263 of the Act. Tribunal correctly appreciated the law on the subject, which is that for invoking powers under Section 263 of the Act, two conditions have to be met, i.e., not only the order should be erroneous, but it should also be prejudicial to the interest of the revenue. Twin conditions were not met. The Tribunal has correctly interdicted the view taken by the PCIT. Given the facts obtaining in the instant case, we are in agreement with the Tribunal, that the power under Section 263 of the Act was wrongly exercised by the PCIT. No substantial question of law.

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• 2023 (6) TMI 1132
  Correct head of income - gains received on sale of property - business income or capital gains - whether the assessee is eligible for claim of deduction u/s 54F of the Act in respect of reinvestment made in residential property? - HELD THAT:- We find that the assessee had bought the properties from financial year 2008-09 till assessment year 2010-11 in the capacity of investor, which has been accepted by learned Assessing Officer. Part of these assets were sold by the assessee in assessment years 2011-12 and 2012-13. The capital gains arising out of such sale has duly been disclosed by the assessee in assessment year 2011-12 and accepted as such by the revenue, though u/s 143(1) of the Act. For the purpose of arriving at the capital gains in respect of sale of property in assessment year 2012-13, we find that the assessee had indeed considered the sale price as determined by the Stamp Valuation Authority in terms of section 50C of the Act as the actual sale consideration was less than the circle rate. This clearly shows the intention of the assessee that she always wanted to remain only as an investor and never intended to carry on any business on the property. Thus we are of the considered view that the gains arising on the sale of the property to the assessee has to be taxed only as capital gains and not as income from business. Consequently, the assessee would be eligible for deduction u/s 54F of the Act in respect of reinvestment of capital gains made in the house property.

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• 2023 (6) TMI 1131
  Revision u/s 263 in the case of deceased person - HELD THAT:- As no power has been vested on the PCIT u/s 263 of the Act for passing order in the hands of the L/R after the death of the person [assessee] as there is no reference to section 263 in the afore-mentioned provisions of the Act. Thus, in light of the decision of the Hon ble Gujarat High Court in the case of Late Bhupendra Bhikalal Desai, through his L/H Shri Raju Bhupendra Desai [ 2021 (3) TMI 892 - GUJARAT HIGH COURT ] it can be said that the action of the PCIT by passing order u/s 263 of the Act in the hands of the deceased is outside the scope of law provided u/s 159 of the Act. We set aside the order framed u/s 263 by the PCIT in the name of a deceased person as bad in law. Appeal of assessee allowed.

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• 2023 (6) TMI 1130
  Clubbing of business income of trading of bidis of husband and wife - business income of the wife of the assessee by clubbing it with the assessee s income - HELD THAT:- Accounts of the assessee have been duly subjected to tax audit in terms of section 44AB of the Act. When the assessee s wife is independently assessed to income tax, having separate sales tax registration number and conducting the trading of bidis business at totally different addresses with that of the assessee and more especially when she had offered the business income from trading of bidis in her individual capacity in her income tax returns, it would be unfair to club her income with that of the business income of the assessee. We find that the assessee is already in high tax bracket and there is no need for him to split the profits between him and his wife. Hence, there is absolutely mala fide [sic] on the part of assessee. No contrary evidence to this fact has been brought on record by the Revenue, except relying on statement recorded during survey proceedings. Thus action of the lower authorities in clubbing the business income of assessee s wife with that of the assessee is dismissed. Decided in favour of assessee.

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• 2023 (6) TMI 1129
  Cash deposits during the demonetization period - CIT-A confirmed part addition - Sale of car - HELD THAT:- It is not in dispute that the assessee owns a car which was sold during the year on 05.06.2016. This sale has happened 5 months prior to the announcement of the demonetization by the Government. The assessee sold his car and that sum is available as a cash source for the assessee explaining the cash deposit. Sale of Poplar Trees - whether the assessee had sold Poplar trees or not? - Assessee claimed that he had sold 727 Poplar trees to Sh. Prakash for Rs. 6 lakhs for which photocopy of the receipt was filed before AO. Assessee had indeed sold poplar trees. Merely because the assessee is not able to produce Sh. Prakash (buyer of the Popular trees), transaction carried out by the assessee cannot be disputed or suspected. It is a fact that the assessee has declared 9,50,000/- as agricultural income in the return of income and these are also reflected in the affidavit furnished by him before the CIT(A). Hence, the cash source disclosed by the assessee for the sum of Rs. 6 lakhs towards sale of poplar trees is to be accepted as the source available for explaining the cash deposit. Sale proceeds of Crop sold in October 2016 - As on a conservative basis, even if this sum of Rs. 2 lakhs is taken together with the aforesaid two receipts of on sale of car and sale of Poplar trees, this would explain the entire cash deposits made by the assessee, which is the subject matter of dispute. Old Personal Savings - The assessee claimed old personal savings of Rs. 1,17,500/- as a cash source available for explaining the cash deposit, which was accepted by learned CIT(A) to the extent of Rs. 1 lakh. Even, this is taken together with the aforesaid three receipts it would explain the entire cash deposits by the assessee during the demonetization period. Hence, on merits, the entire cash deposits stands proved with proper source. Thus preponderance of probability theory would go in favour of the assessee in the instant case. The predominant income available with the assessee is only the agricultural income. No other source of income is brought on record by AO and it is not in dispute that the assessee is not engaged in any business or profession. The source of income in any manner whatsoever could only emanate from agricultural income. We direct the learned Assessing Officer to delete the addition made in respect of cash deposits made during the demonetization period in demonetized currency - Decided in favour of assessee.

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• 2023 (6) TMI 1128
  Addition on account of cash deposit in the bank account - income from undisclosed sources u/s 69 - HELD THAT:- As the assessee who has failed to appear before the A.O. after filing the present Appeal has not appeared even single occasion and produced any document to refute the findings of the CIT(A). The assessee has failed to give any explanation regarding cash found to be credited in the bank accounts of the Assessee, further we do not find any infirmity in the addition made by the A.O. which has been sustained by the CIT(A). Thus, we find no merit in grounds of appeal of the assessee accordingly, the Ground No. 1 to 9 of the assessee are dismissed.

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• 2023 (6) TMI 1127
  Validity of reassessment proceedings - reopening notice, being issued before the end of the assessment year - belated return of income filed - DR argued that since the assessee had not filed the original return of income u/s 139(1) the AO was duly justified in reopening the assessment u/s 147 - HELD THAT:- When the return of income is not filed within the due date prescribed u/s 139(1) AO is entitled as per the statute to issue notice under section 142(1) of the Act calling for the return of income. Without resorting to this statutory provision, the learned AO cannot directly proceed to reopen the assessment. In any case, when the due date for filing the return of income is available in terms of section 139(4) to the assessee, how there could be any satisfaction on the part of the AO to conclude that the income of the assessee has escaped assessment. Hence, the very basis of reopening deserves to be quashed for want of any satisfaction that could be legally recorded. The reopening made by learned AO deserves to be quashed on this count also. As the return filed by the assessee on 06.10.2015 is a return filed belatedly u/s 139(4) of the Act. Nothing prevented the learned Assessing Officer to select this return for scrutiny and frame the assessment in accordance with law. When this provision is available with the learned Assessing Officer, where is the need for him to issue reopening notice that too before the end of the assessment year itself. Hence the reopening notice issued u/s 148 of the Act in the instant case is to be declared premature. Revenue cannot resort to reopening proceedings merely because a particular return is not selected for scrutiny. Reopening of an assessment cannot be resorted to as an alternative for not selecting a case for scrutiny. There should be conscious formation of belief based on tangible information that income of an assessee had escaped assessment. No hesitation to quash the reassessment proceedings framed by learned AO as void ab-initio - Decided in favour of assessee.

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• 2023 (6) TMI 1126
  Addition u/s 68 - receipt of loan unexplained - lender had confirmed the fact of advancing the loan to the assessee - HELD THAT:- As the assessee had discharged its primary onus of fulfilling the three ingredients of Sec.68. The lender, in sworn statement, admitted the fact of granting of loan and thus, the assessee stood discharged. The onus was now on revenue to make further enquiries from the lenders to ascertain their financial capacity to lend the loans. Turnover alone could not be considered as source of loan as advanced to the assessee. In the absence of such a fact based-finding to prove that assessee s own money was routed through banking channels in the garb of loan, the impugned addition could not be sustained in law. The assessee was not expected to prove the source of source as held by Hon ble Supreme Court in the case of M/s Lovely Exports (P.) Ltd.[ 2008 (1) TMI 575 - SC ORDER] - Therefore, we direct Ld. AO to delete the impugned addition. The assessee s appeal stand allowed accordingly. Validity of reassessment proceedings - absence of any tangible material - HELD THAT:- We find that the original return of income was scrutinized u/s 143(3). The case was reopened within 4 years. The perusal of assessment order would show that Ld. AO has not referred to any tangible material coming into his possession which would lead to formation of a belief that certain income escaped assessment in the hands of the assessee. Apparently, reassessment has been initiated on the same set of material as available before Ld. AO during original assessment proceedings. This being so, the reassessment proceedings would be nothing would review of the order which is impermissible. In absence of any new tangible material, the case could not be reopened on mere change of opinion - See M/S. KELVINATOR OF INDIA LIMITED [ 2010 (1) TMI 11 - SUPREME COURT] - Reassessment proceedings are bad in law and hence, liable to be quashed - Decided in favour of assessee.

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• 2023 (6) TMI 1125
  Addition of long term capital gain - Addition made by AO on sale of undisputedly rural agricultural land u/s 2(14) - difference between the rural agricultural land u/s 2(14) and urban agricultural land subjected u/s 54B - HELD THAT:- AO misdirected himself in applying provision of section 54B of the Act which are applicable on urban agricultural land claiming deduction u/s 54B of the Act and not agricultural activity in showing in agricultural land carried out agricultural land activity thereon obtaining crops therefore, therefrom and thereafter in the same status rural agricultural land she sold land to 3rd party then such transaction of sale does not fall within the meaning of section 2(14) read with section 54B of the Act attracting levy of tax on account long term capital gain. Therefore, grounds of assessee are allowed and AO is directed to delete the addition. Decided in favour of assessee.

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• 2023 (6) TMI 1124
  Income deemed to accrue or arise in India - amount received by the assessee towards provision of Management Support Services to be in the nature of Fees for Technical Services [FTS] under Article 12 of the India Singapore DTAA - whether services provided by the assessee do not make available any technical knowledge, skill, know-how to the recipient ? HELD THAT:- As in A.Ys 2013-14 and 2014-15 [ 2023 (3) TMI 1187 - ITAT DELHI] , with respect to taxability of Management Support cost, under Article 12(4)(b) of the DTAA held as facts show that the agreements for user of brand name and for Management Support Services are independent of each other, hence, not connected or dependent upon each other. It is also relevant to observe, while the license agreements for user of brand name are with various third party hotels in India, the agreement for provision of Management Support Services is with the Indian subsidiary. Therefore, it cannot be said that the amount received from provision of Management Support Services is ancillary and subsidiary to the license agreement. A threadbare analysis of Management Support Services Agreement and the fee received under various heads in pursuance to such agreement, in assessee s own case in assessment year 2012-13 [ 2021 (10) TMI 443 - ITAT DELHI] has given a categorical finding that it does not come under Article 12(4) of India-Singapore DTAA. The decision of the Co-ordinate Bench as aforesaid, will also apply mutatis-mutandis to this appeal. Thus we direct the Assessing Officer to delete the impugned addition. Short credit of TDS - The assessee is entitled for credit of TDS as per provisions of section 199 of the Act r.w.r 37BA(2) of the Rules. We, therefore, direct the Assessing Officer to grant credit of TDS as per relevant provisions of the law and rules.

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• 2023 (6) TMI 1123
  Estimation of income - Unexplained expenditure on bogus purchases u/s. 69C - addition of 2% of said amount on account of commission paid for obtaining accommodation entry - main contention of assessee is that the AO have not rejected books of accounts of assessee and therefore no addition can be made on estimation basis, Also even if the purchases are treated as bogus as the assessee did not sold the stock purchased during relevant period and same was shown as including in the closing stock as on 31.03.2010 - HELD THAT:- When the purchases have been shown in the books of accounts and the stock/goods purchases was remained unsold in the end of financial period thus including in the closing stock then no profit was flowing from such transaction if it is gathered that the Assessing Officer alleged the same as bogus purchases. When the goods is physically available and shown in the stock register of assessee and even the assessee did not pay any sale consideration during the relevant financial period, in such a situation we are unable to see any accruing of any benefit or profit to the assessee which may attract charging provisions of tax. To cover up all possible leakage of revenue we find it appropriate to follow the preposition rendered in the case of PCIT vs. Mohd. Hazi Adam [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] and restrict the addition to the element of profit embedded therein. Restrict the addition to the tune of 8% of total impugned sales which is sufficient to cover all possible leakage of revenue. Accordingly, additions upheld by the CIT(A) are substituted by the 8% of total alleged purchases. Accordingly, the grounds of assessee are partly allowed.

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• 2023 (6) TMI 1122
  Estimation of income - bogus purchase - CIT(A) restricted the disallowance by estimating at 10% - HELD THAT:- As decided in case of Simit Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assessee s income and as such no question of law arose in such estimation While arriving at the above conclusion, also relied on the decision in the case of Vijay M. Mistry Construction Ltd [ 2011 (1) TMI 1164 - GUJARAT HIGH COURT] and further approved the decision of Vijay Proteins [ 1996 (1) TMI 144 - ITAT AHMEDABAD-C] Also in the case of CIT-II vs Gujarat Ambuja Exports Ltd. [ 2014 (3) TMI 147 - GUJARAT HIGH COURT] wherein, the addition of 5% of the bogus purchase confirmed by the Tribunal was upheld. No hesitation in confirming the addition to the extent of 10% on account of alleged bogus purchase. Thus the grounds raised by the Revenue is devoid of merit and the same is hereby dismissed

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• 2023 (6) TMI 1121
  Credit of TDS - Diductor deducted the TDS in the subsequent year - Income was shown in the ITR for the earlier year - CPC cannot grant credit of TDS appearing in Form 26AS for the earlier/subsequent A.Y unless the return has been correctly filed and TDS has been correctly shown - HELD THAT:- As assessee has shown revenue from the invoice as income during the year under consideration itself. The deductor may have deducted tax in subsequent A.Ys, but the fact of the matter is that since the assessee has shown income, the assessee has every right to get credit of TDS - we direct the AO to verify the claim and allow credit of TDS if the income is shown in the year under consideration. Income taxable in India - taxability of receipts from sale of software - We direct the Assessing Officer to consider the claim of the assessee in light of the decision of the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt Ltd [ 2021 (3) TMI 138 - SUPREME COURT] . We hold accordingly.

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• 2023 (6) TMI 1120
  Exemption u/s 11/12 as claimed in the return of income - Delayed audit-report (Form No. 10B) was filed after filing of return but before processing u/s 143(1) - HELD THAT:- As relying on Savitri Foundation [ 2022 (8) TMI 1372 - ITAT MUMBAI ] where following the decision of Mumbai Metropolitan Regional Iron Steel Market Committee [ 2015 (4) TMI 512 - BOMBAY HIGH COURT ] are of the view that in the present case, the assessee can t be denied the benefit of exemption u/s 11 as claimed in the return of income for mere delay in filing of audit-report. Remand this matter back to the file of AO for a fresh assessment after considering the audit-report filed by assessee, in accordance with law. The assessee succeeds in this appeal.

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• 2023 (6) TMI 1119
  TP Adjustment - transaction of purchase of electricity by appellant company from Captive Power Plant (CPP) of the group company - HELD THAT:- As decided in own case [ 2015 (4) TMI 884 - ITAT AHMEDABAD ] addition of Transfer Pricing adjustment need to be deleted as done by TPO. Thus the grounds raised by the assessee are hereby allowed.

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• 2023 (6) TMI 1118
  Capitalisation of Salaries and Wages - HELD THAT:- As respectfully following the above judgment in assessee s own case for the AY 2015-16 [ 2022 (5) TMI 1560 - ITAT BANGALORE] in which the expenses incurred by the assessee have been held that these expenses are revenue in nature, the question of allowability of depreciation or the question of allowing it u/s 35(1)(iv) as Scientific research expenses shall become academic and we are not adjudicating them . Accordingly we partly allow the ground raised by the assessee. TP adjustment - addition made to the software development segment ( SWD ) - HELD THAT:- We deem it fit and proper to restore this issue to the TPO / AO with a direction to the TPO / AO to re-compute the TP adjustment, if any, to the assessee s SWD segment after including CG Vak Software and Exports Ltd. and RS Software (India) Ltd. in the final list of comparables to this segment. TP adjustment to its SWD segment is that while computing the ALP of the SWD services segment, the TPO has not considered the segmental date pertaining to the SWD segment - We note from the order passed by the TPO on this application u/s. 154 that the said request for recomputing the TP adjustment has not been considered by the TPO. We deem it fit and proper to restore this issue to the TPO / AO with a direction to the TPO / AO to recompute the TP adjustment, if any, to the Assessee s SWD segment after taking into consideration only the amounts pertaining to the Assessee s SWD segment and not to take into account the entity-level data as has mistakenly been done in the TP order. Adjustment for interest on advances given to overseas subsidiaries and Adjustment made for Corporate guarantee commission - HELD THAT:- We dispose of the grounds raised in this appeal pertaining to two international transactions above by directing the TPO / AO to pass an order in terms of the above provisions modifying the total income of the Appellant in terms of the aforesaid APA subject to the Appellant having filed a modified return of income as is required in law. TP adjustment on interest on delayed receivables to Overseas subsidiaries - HELD THAT:- As we think it will be appropriate to grant credit period of 45 days and interest is to be calculated using LIBOR 6 months+350 basis points. Accordingly this is sent back to TPO/AO to recalculate the interest on delayed receivables afresh following the LIBOR 6 months+350 basis points. This ground is allowed for statistical purpose. Disallowance of expenses u/s 14A against exempt income - HELD THAT:- Since Rule 8D has been amended, the AO has to follow the amended Rule 8D. This ground is allowed for statistical purpose. Taxability of Marked to Market income on reinstatement of forward contracts - HELD THAT:- As relying in the assessee s own case in AY 2009-10 to 2015-16 [ 2020 (10) TMI 605 - ITAT BANGALORE] ,[ 2022 (5) TMI 1560 - ITAT BANGALORE] we restore this issue to the file of AO with similar directions. The assessee is directed to furnish relevant details to prove that the value of underlying assets is more than the value of outstanding forward contracts as on the balance sheet date. Accordingly this ground is allowed for statistical purpose. Disallowance of Setting off the loss arising from SEZ units against income earned by non-tax holiday units - HELD THAT:- As relying assessee s own case in AY 2009-10 to 2015-16 [ 2020 (10) TMI 605 - ITAT BANGALORE] , [ 2022 (5) TMI 1560 - ITAT BANGALORE] we hold that the loss arising in eligible SEZ/STPI undertakings are not required to be adjusted against the profits arising from other SEZ/STPI undertakings and the said loss can be adjusted against profits arising from non-SEZ/non-STPI units this issue is decided in favour of the assessee. Taxability of profits from development centers located outside India - HELD THAT:- As CIT(A) has not recorded a finding that such goods or services have been transferred at the market value. In absence of such a finding, it is not possible to uphold the finding of the learned CIT(A). This issue is required to be remitted back to the assessing officer and the assessee will be required to file the relevant details as required by the assessing officer so that the assessing officer can ascertain the market value of such goods or services transferred by arriving at the profit of the eligible business. Exclusion of other income for the purpose of computing deduction u/s 10AA - HELD THAT:- As the income generated on sale of scrap/newspaper should be included in the profits of the undertaking eligible for deduction u/s 10AA - In this year also, the break-up details of Other income are not available. Accordingly, we restore this issue to the file of AO with the direction to examine the break-up details of other income which were debited into the profit loss account in earlier years and decide the issue in accordance with the discussions made supra. Accordingly this issue is partly allowed for statistical purpose. Rejection of claim for deduction u/s 10AA of the Act in respect of interest income earned by the assessee - HELD THAT:- During the year under consideration, the assessee had earned interest income on short term deposits made out of PCFC Loan and also from Surplus funds. After deducting the interest expenses, there was net surplus of 2.19 crores. AO held that the same is not eligible for deduction u/s 10AA of the Act by observing that there is no relation of interest income with the Software Development Activity of the units claiming deduction u/s 10AA. It is also not akin to investment of surpluses earned and generated from Software Development Activity, which may be regarded as profits and gains of the undertaking to the extent they are held for working capital purpose of the undertaking or units distributed to the shareholders of the company. - As per assessee own case we restore this issue to the file of AO for examining it afresh with similar directions. This ground is allowed for statistical purpose. Eligibility of the assessee to claim deduction u/s 10AA for deemed exports, i.e., sales made to own units located in SEZs and Indian subsidiaries of Foreign MNCs - claim of the assessee was rejected by the AO by observing that only turnover pertaining to sales outside India is being taken as export sales - HELD THAT:- As relying on Tata Elxsi [ 2015 (10) TMI 634 - KARNATAKA HIGH COURT] we direct the AO to include deemed exports to SEZ as part of turnover while computing deduction u/s 10AA of the Act. Accordingly this ground is allowed. Deduction u/s 10AA - whether reimbursements received by the assessee are required to be excluded from the export turnover for the purpose of computing deduction? - HELD THAT:- We restore this issue to the file of AO with the direction to examined the break-up details of reimbursements and follow the directions given in AY 2009-10 to 2014-15 for computing deduction u/s 10AA of the Act. Accordingly, the grounds raised by the assessee is allowed for statistical purpose. Deduction u/s 10AA - whether the expenditure incurred in foreign currency is required to be deducted from the export turnover while computing deduction - HELD THAT:- We observe that the expenditure incurred outside India for onsite development of computer software is not to be deducted from export turnover. Only the expenditure on telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any incurred in foreign currency in providing technical services outside India also are required to be excluded from the export turnover. Further , if any amount excluded from the export turnover is required to be deducted from total turnover. An identical issue was examined by the coordinate bench in the assessee s own case in AY 2009-10 to 2014-15 [ 2020 (10) TMI 605 - ITAT BANGALORE] Thus we set aside the order passed by AO on this issue and direct him to compute deduction u/s 10AA. Eligibility of the assessee to claim deduction u/s 10AA of the Act in case of Delayed collections of export proceeds - A.O. rejected the claim of the assessee on the reasoning that mere submission of application by the assessee to RBI is not sufficient to infer that RBI has allowed extension of time for realizing sale proceeds in foreign exchange - HELD THAT:- Since this issue has been decided as stated above for the AY 2015-16 in assessee s own case [ 2022 (5) TMI 1560 - ITAT BANGALORE] accordingly, we direct the AO to allow the foreign tax State Tax paid by the assessee, to the extent not allowed as tax credit u/s 90 91 of the Act, as deduction from the business income of the assessee from the respective units. TDS u/s 195 - disallowance of payment made to M/s. Gartner Group u/s 40(a)(i) for non-deduction of tax at source - assessee submitted that it is covered under exclusion clause of royalty as per section 9(1)(vi) wherein royalty paid for the purpose of business or profession carried outside India or for the purpose of making or earning any income from any source outside India is not regarded as royalty - HELD THAT:- As decided in assessee own case this issue requires fresh examination at the end of AO. If the AO comes to the conclusion that the decision rendered in the case of Engineering Analysis Centre of Excellence P Ltd [ 2021 (3) TMI 138 - SUPREME COURT] is applicable to the payments made to Gartner group and there is no requirement to deduct tax at source, then there is no requirement of making any disallowance u/s 40(a)(i) - if the AO comes to the conclusion that the above said decision of Hon ble Supreme Court is not applicable and the assessee is liable to deduct tax at source, then the AO shall grant enhanced deduction u/s 10A/10AA/10B of the Act by increasing the profits of undertaking by the amount of disallowance so made. The assessee is given liberty to raise all contentions in this regard before the AO. Disallowance of interest expenditure incurred on investment in Foreign Subsidiary u/s 115BBD - HELD THAT:- We are of the view that the A.O. was not justified in invoking the provisions of sec.115BBD for making the impugned disallowance, accordingly, we direct the AO to delete the disallowance u/s 115BBD of the Act, if the assessee has not received any dividend during the year under consideration. Claim for deduction of Education Cess as expenditure - HELD THAT:- This ground is liable to rejected in view of the amendment brought in by Finance Act 2022 inserting specific provision in the Income tax Act providing for disallowance of Education Cess. A similar issue has been decided against the assessee by the co-ordinate bench of the Tribunal in assessee s own case - dismiss the ground raised by the assessee. AO not following the directions issued by the DRP vide its Directions - assessee is contending that although the DRP directed that the deduction u/s 10AA ought to be recomputed by adding back the disallowance of wages capitalized, the AO did not give effect to the said direction - HELD THAT:- On examining the DRP s directions, we find that such a direction was in fact issued by the DRP. However, we find that while computing the deduction allowable under S.10AA, the said direction of the DRP has not been given effect to. We, therefore, direct the AO to comply with the aforesaid direction of the DRP of the directions and to, accordingly, recompute the deduction allowable to the assessee u/s10AA of the Act. DRP s direction that foreign taxes in the nature of VAT or GST have not been added back to the Export Turnover while computing the deduction under S.10AA which has however not been given effect to by the AO in the final assessment order - On examining the DRP s directions, we find that such a direction was in fact issued by the DRP, we find that while computing the deduction allowable under S.10AA, the said direction of the DRP has not been given effect to. We, therefore, direct the AO to comply with the aforesaid direction of the DRP and to, accordingly, recompute the deduction allowable to the assessee under S.10AA of the Act. Credit of TDS credit on the basis of additional TDS certificates - AO denied grant TDS credit on the reasoning that the said TDS amount were not reflected in Form 26AS and the ld. DRP has also rejected the objection filed before them - HELD THAT:- If the deductor of TDS has filed the Statement of TDS with the Income tax department, then the said TDS will automatically reflect in Form 26AS. If there is failure on the part of the deductor to file statement of TDS, then it will not be reflected in Form 26AS. In our considered view, the assessee cannot be penalised for the fault of the TDS deductor in not filing statement of TDS. It is also possible that the deductor of TDS would have filed the statement of TDS belatedly - This issue requires verification at the end of AO - we restore this issue to the file of AO with the direction to examine the claim of the assessee and allow TDS credit in accordance with law. Denial of grant MAT credit of brought forward losses from the previous years when the tax liability was determined under the normal provisions of the Act - HELD THAT:- We find that when this issue was raised before the DRP, the DRP did not examine the Assessee s claim on the ground that it did not amount to a variation made by the AO to the returned income and that, therefore, it could not adjudicate upon the same. Without going into the merits of the matter, we find that this is an issue that requires to be examined by the AO afresh - restore this issue to the file of AO with the direction to verify the claim of the assessee and accordingly grant MAT credit in accordance with law.

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• 2023 (6) TMI 1117
  Fresh claim by filing revised return of income - Disallowance of unamortized brokerage expenses - HELD THAT:- As per the decision rendered in the case of Goetze (India) P Ltd [ 2006 (3) TMI 75 - SUPREME COURT] the assessee can make fresh claim by filing revised return of income. Even if the revised return of income is not filed, Tribunal can admit any fresh claim. In the instant case, the assessee has claimed the deduction of unamortized brokerage expenses through revised return of income. Hence, we are of the view that the said claim was rightly made by the assessee. Whether the assessee can make a claim, which is against the accounting policy followed by the assessee in the books of account? - In the instant case, there is no dispute that the upfront brokerage expenses were incurred during the year under consideration and it was revenue expenditure. Hence, the assessee could claim entire expenditure as deduction in the current year itself. Since the assessee was following a particular method of accounting in the books of accounts with regard to the above said expenditure, it has been claiming deduction in that method in the return of income also. As per the decision rendered in the case of Taparia Tools Ltd [ 2015 (3) TMI 853 - SUPREME COURT] the same would not preclude the assessee from claiming entire expenditure in the current year itself. CIT(A) was correct in law in deleting this disallowance and accordingly, we uphold the decision rendered by CIT(A) on this issue. Disallowance of ESOP expenses - HELD THAT:- As the assessee is actually incurring expenses in purchasing shares of M/s Deutsche Bank AG. This is purchased as per the employee welfare scheme as per the agreement entered with the concerned employee. The deduction is claimed when the right is vested upon the employee. It is held in the case of Biocon Ltd [ 2013 (8) TMI 629 - ITAT BANGALORE] that deduction can be claimed in the year of vesting. It can be noticed that it is a staff welfare expenditure incurred by the assessee and further, it is stated that the assessee has deducted TDS also thereon. No impediment in allowing this expenditure as deduction. Accordingly, we uphold the decision rendered by Ld CIT(A) on this issue.

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• 2023 (6) TMI 1116
  Addition u/s 68 - addition of notional commission (2% of the accommodation entry) - HELD THAT:- Respectfully following the decision in the case of Sohanraj Uttamchand [ 2018 (2) TMI 2087 - ITAT CHENNAI ] in which it was held that since the transaction of scrips of M/s. PFL Infotech Ltd took place in recognized stock-exchange which is not under the control of assessee; [viz the shares were purchased and sold in Bombay Stock Exchange in the open market from unknown and unconnected persons;] and the transactions are supported by contract notes and consideration has passed through the banking channel, merely based on the abnormal ups and down in the share market of this scrip cannot be a ground to disallow the LTCG claim of the assessee. Therefore, the impugned action of the Ld. CIT(A) is set aside and the addition made by the AO u/s 68 and 69C of the Act are directed to be deleted. Decided in favour of assessee.

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• 2023 (6) TMI 1115
  Disallowance u/s.14A - Addition as against the exempt income which is out of the dividend income earned by the assessee - HELD THAT:- This issue before us is no longer res integra as various courts including the Hon ble Apex Court has held that disallowance u/s.14A read with rule 8D should not exceed the exempt income earned by the assessee. As decided in the case of Chalet Hotels Ltd. [ 2021 (1) TMI 1134 - ITAT MUMBAI] wherein on similar facts where the assessee had made suo moto disallowance more than that of the exempt income earned for that year, it was held that the disallowance should be only to the extent of the exempt income earned and not more than that. We are of the considered view that disallowances u/s.14A r.w.r. 8D is to be restricted only to the extent of the exempt income earned by the assessee during the impugned year. We, therefore, direct the A.O. to recompute the income of the assessee accordingly. Hence, the ground raised by the assessee is allowed.

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• 2023 (6) TMI 1114
  Depreciation claimed in respect of fixed assets denied - onus of establishing that the assets were put to use for the purpose of business - HELD THAT:- CIT(Appeals) has rightly disallowed the depreciation on the assets by observing that the assessee was unable to prove that the assets were used for business purpose with cogent evidence. AR relied on many case laws which are distinguishable on the facts of the present case. Decided against assessee. Liability written off - whether liability written off in respect of depreciable asset (i.e., software tool) falls under section 43(6)(c)(i)(B) and not under section 28(iv)? - HELD THAT:- In case of Commissioner v. Mahindra Mahindra Ltd [ 2018 (5) TMI 358 - SUPREME COURT] had observed that the assessee had received a loan, a part of which was later on waived off. Under the circumstances, the Supreme Court held that the assessee had received cash or money and as such the same was not covered by section 28(iv) of the Income Tax Act. But in the case on hand, the assessee had purchased assets and created liability and later on it found that the assets were not suitable for the business and the assets were returned to the vendor. Therefore the case law relied on by the ld. AR of Mahindra Mahindra Ltd. [ 2018 (5) TMI 358 - SUPREME COURT] is distinguishable on facts of the case on hand. CIT(A) has passed a good and reasoned order and find no reason to interfere with his order. Accordingly the grounds of the assessee are rejected. Computation of revised profits as per the section 10A if disallowance of the depreciation on assets and liability written off is upheld - HELD THAT:- Since we have upheld the order of the CIT(A) treating the disallowance made as business income and the issue has not been examined in the light of section 10A, therefore considering the documents submitted by the assessee, remit this issue to the AO for examination in light of section 10A of the Act and decision in accordance with law, after providing opportunity of being heard to the assessee. The assessee is directed not to seek unnecessary adjournments and cooperate in early disposal of the case. This ground is allowed for statistical purposes.

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• 2023 (6) TMI 1113
  Bogus share trading loss - capital gains/loss in penny stock companies - HELD THAT:- The company in which the assessee traded was also held to be a penny stock company. AO has noted that the above scrip of ASHIKACR in which the assessee traded appeared in the list of 84 scrip involved in dubious transaction identified by the Investigation Wing. The said report of the Investigation Wing has been duly taken note by the Hon ble Calcutta High Court. The issue is squarely covered by the decision of the Calcutta High Court in the case of Swati Bajaj [ 2022 (6) TMI 670 - CALCUTTA HIGH COURT] against the assessee and in favour of the revenue.

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• 2023 (6) TMI 1112
  Addition u/s 68 - unexplained cash credit - as per DR investor company had source of investment from sale of its investment in various private limited companies and it is not proved on the file that the above source was from sale of shares of genuine companies, thus source of the source was not verified - HELD THAT:- AO has categorically mentioned in the assessment order that notices u/s 143(2) and 142(1) were issued and duly served upon the assessee, but there was no compliance. AO has also mentioned that the assessee was required to furnish the various details as noted above but there was no mention in the assessment order that such details were ever filed by the assessee before the Assessing Officer. Though as pointed out by the ld. counsel, some details might have been filed by the assessee before the Assessing Officer but as noted by the AO, all the requisite details as called for by the AO have not been filed. Notice issued u/s 131 along with questionnaire have not been complied with. Even, there is no discussion in the impugned order of the CIT(A) regarding the aforesaid points raised by the assessee. There was no submission of the assessee before any of the lower authorities that the subscribing company was a group company of the assessee. Though, it has been contended before us that the source of the investor company was from sale proceeds of shares, however, no such details have been filed before any of the lower authorities. The case was selected for scrutiny of large share premium and the assessee has not justified about the same by way of either submission or furnishing requisite details. In our view, the entire issue is required to be examined afresh at the end of the AO - We, accordingly, set aside the impugned order of the CIT(A) and restore the issue to the file of the Assessing Officer for de novo assessment. Appeal of the assessee is treated as allowed for statistical purposes.

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• 2023 (6) TMI 1111
  Undisclosed sale receipts/ on money Receipt - HELD THAT:- The entire basis of the AO was based on the presumption and conjectures, and the addition therefore was not justified more particularly, when no incriminating material in relation to undisclosed sale was found during the search. Therefore, we completely agree with the ld.CIT(A) that the addition made on account of undisclosed sale receipts was totally unjustified. The deletion of addition made by the ld.CIT(A) therefore on account of undisclosed sale receipts is accordingly upheld. Unsecured Loans Interest on Unsecured Loans - CIT- A deleted the addition - HELD THAT:- Clearly the very basis with the Department of unsecured loans being bogus accommodation entry for unaccounted sales of the assessee no longer survives, on the addition made of unaccounted sales being deleted by us above. And added to it the fact that no material was found during search evidencing the Revenues stand. The finding of the AO that the unsecured loans were bogus accommodation entries is based merely on surmises and conjectures and is not sustainable more particularly when the assessee has been found by the Ld.CIT(A) to discharge its onus of proving the genuineness of the transactions. CIT(A), we find, noted that the assessee had filed all evidences to prove genuineness of the transaction. With regard to the unsecured loans taken by the assessee in Asst. Year 2014-15 from Vansh Glass P. Ltd. The ld.CIT(A) has recorded a categorical finding of the fact that this amount was offered for settlement by Param Enterprise, an entity of the group searched. The above factual finding of the ld.CIT(A) have not been controverted by the ld.DR before us. Therefore we are in complete agreement with the Ld.CIT(A) that there was no basis or material with the AO for treating the unsecured loans of the assessee as being accommodation entries. Decided in favour of the assessee. Net Profit estimation - addition by CIT-A by estimating net profit earned by the assessee at the rate of 17.5% as against 16% declared by the assessee on the basis of disclosure made by other group concerns in their Settlement Application filed - HELD THAT:- An estimated net profit rate was applicable only in the circumstances where books of accounts of the assessee were found to be not reliable and rejected by the Department. In the present case, both the ld.CIT(A) and even ITAT have found no infirmity in the books of accounts of the assessee. As no infirmity found in the books of accounts of the assessee. In the absence of any infirmity there is no reason to reject book results and estimate net profit rate. Accordingly, net profit applied at the rate of 17.5% of the turnover disclosed in the books of the assessee, is held to be untenable in law, and addition made on account of the same is directed to be deleted in both the years. The assessee s appeal in both the years is accordingly allowed.

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• 2023 (6) TMI 1110
  Interest on capital paid to the partner - payment of interest by the two partnership firms towards use of partners capital - Expenditure incurred on account of commercial expediency or not? - whether is in the nature of expenditure or not for the purpose of section 36(1)(iii) read with section 40(b) or whether interest payment is allowable under the provisions of the Income Tax Act? - As argued if at all any disallowance has to be made in the hands of the firm, the same cannot be taxed in the hands of concerned partners - HELD THAT:- When the partnership firm and its partners are seen holistically and in combined manner, the payment of interest to partners and its allowability in the hands of the partners does not lead to deriving of any additional advantage by a firm since the same interest is taxable in the hands of the partners simultaneously. Being so, in our opinion, the interest payment to partners by these firms to be allowed as a deduction while computing the income of these firms. However, the same shall be limited to the extent of allowability u/s 40(b) of the Act. in the present case, in the assessment years 2011-12, 2012-13, 2016-17 and 2017-18 has been allowed. The same cannot be questioned in the assessment years 2013-14 to 2015-16. Similarly, in the case of M/s. Century Silicon City it has been allowed in the assessment years 2012-13, 2016-17 2017-18. Hence, it cannot be questioned in the assessment years 2013-14 to 2015-16 and the revenue cannot be allowed to take different view in different assessment year as the judicial discipline requires consistency in these proceedings. On this count also, this disallowance is not justified. From the proviso to section 28 (v) of the Act, it is seen that if there is any disallowance of interest in the hands of the firm due to clause (b) of section 40, income in the hands of the partner has to be adjusted to the extent of the amount not so allowed to be deducted in the hands of the firm. Hence, it is seen that the operation of the proviso to section 28(v) of the Act will come into play only if there is some disallowance in the hands of the firm under clause (b) of section 40 of the Act. In our opinion, the argument of the ld. A.R. is justified. Therefore, on this count we are of the opinion that since the amount has been taxed in the hands of partners u/s 28(v) of the Act same to be allowed in the hands of the assessee u/s 40(b) of the Act, otherwise it amounts to double taxation. In the present case, it is not the case of either of the parties interest payment is not exceeding the limit provided in section 40(b) - Hence, we direct the AO to allow the deduction to the extent of limit prescribed in section 40(b) of the Act. It is needless to mention herein that what is allowed in the hands of these assessees u/s 40(b)(iv) of the Act as a deduction, same to be taxed in the hands of the respective partners u/s 28(v) of the Act. In view of the above, we allow the grounds of appeals raised by both the assessees.

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• Customs

• 2023 (6) TMI 1109
  Seeking permission for withdrawal of petition - demand for pre-deposit within the meaning of Section 129E of the Customs Act, 1962 - HELD THAT:- Learned senior counsel for the petitioner seeks permission to withdraw the special leave petition and liberty to file a review. The special leave petition is dismissed as withdrawn with liberty to file a review but limited only to the aspect about the alleged violation of the principle of law laid down in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] . SLP dismissed as withdrawn.

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• 2023 (6) TMI 1108
  Seeking grant of bail - Smuggling - prohibited goods - Bharath Jeera Goli Candy Mukh - prohibited goods or not - HELD THAT:- At this stage, it is noted that the petitioner has already spent nearly three years in custody. From the charge sheet it is noted that around 14 witnesses are to be examined among whom only two have so far been examined. Hence, the trial also is not likely to conclude immediately. Keeping all these aspects in view, it is deemed appropriate to grant bail to the petitioner. The petitioner shall be released on bail subject to the conditions to be imposed by the Trial Court - SLP disposed off.

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• 2023 (6) TMI 1097
  Classification of imported goods - re-rollable plate pipes material scrap - Non-reasoned order in appeal - violation of principles of natural justice - Tribunal accepted the contention of the Importer - HELD THAT:- Conclusion is not equivalent to logical articulation required for arriving at the conclusion. The Appellate Tribunal is a final fact-finding body and therefore, should have examined the facts as well as the legal position before pronouncing the final outcome. The impugned order [ 2018 (4) TMI 1953 - CESTAT AHMEDABAD] is set aside with an order to remit to the Appellate Tribunal to decide the same in accordance with law - appeal disposed off.

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• 2023 (6) TMI 1096
  Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - time limitation for submission of Enquiry report - enquiry report dated 7th December 2015 had been submitted on 16th December 2015 before the relevant authority, much beyond time - Section 130 of the Customs Act, 1962. JUDGEMENT PER: I. P. MUKERJI, J. (Oral), (08/06/2023):- HELD THAT:- Section 130 of the Customs Act, 1962 empowers this Court to hear an appeal from the above order passed by the tribunal only if a substantial question of law is involved. On the question whether the time period of 90 days granted to the enquiry officer to submit his report is directory or mandatory, there are, as brought to our notice, innumerable decisions of the High Courts, some opining that the direction is mandatory, as in M/S. KTR LOGISTICS SOLUTIONS PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS, THE INQUIRY OFFICER/DEPUTY COMMISSIONER OF CUSTOMS [ 2019 (12) TMI 22 - MADRAS HIGH COURT ] and others which include a pronouncement of our court in ASIAN FREIGHT (UNIT OF ESAN FREIGHT TRAVEL PVT. LTD.) AND ORS. VERSUS THE PRINCIPAL COMMISSIONER OF CUSTOMS (AIRPORT ADMINISTRATION) , CUSTOMS HOUSE AND ORS. [ 2016 (8) TMI 1362 - CALCUTTA HIGH COURT ] which lay down that the stipulation is directory. The first thing to be noticed in this stipulation is that there is no consequence for breach of the time limit prescribed. The regulation does not say that if a report is not furnished within 90 days, no notice is to be taken of the enquiry report. Neither is there any procedure prescribed for extension of time to file the report if it is not filed within time - the only intention that can be ascribed to the makers of the regulation is that it is supposed to be an administrative instruction to the enquiry officer to complete the investigation or enquiry within a stipulated time period. If the enquiry report is delayed, that would not affect the proceedings but steps may be taken against the officer for breach of the administrative instruction. Whether the tribunal was right in not accepting the enquiry report filed beyond time? - HELD THAT:- The requirement to file the report within 90 days was not mandatory at all. Even if filed on 21st December 2015 well beyond 90 days, it had been taken on record by the adjudicating authority - However, it was the discretion of the tribunal as to what weight it would put on the enquiry report. The tribunal, presided over by a retired High Court Judge, had on consideration of the conduct of the appellant and the manner in which the enquiry had been conducted including the time taken to submit it, decided not to attach any weight to it at all, and rejected it. The licence of the respondent was suspended eight years ago and such suspension is continuing. Even if the respondent is adjudged guilty of illegal exportation of contraceptives to Bangladesh, eight years suspension of licence has been proportionate punishment - This appeal is dismissed. JUDGMENT PER : BISWAROOP CHOWDHURY, J. (23/06/2023):- The charge of violation of Regulation 11(e) comes into operation when information is given by Customs Broker to his client and there is allegation that the information given is false. When there is allegation that the Customs Broker did not advise the client to comply the provisions of the Act there is no question of giving information to client which is not true, when there is no allegation by the client/exporter. Thus there is no breach of the said provision - the findings of the enquiry officer cannot be sustained as it is based on the statement of sole witness Bappa Biswas who could not be cross examined and the enquiry officer did not put questions to obtain material particulars with regard to his statement and the facts of the case, and relied fully on the statement of Shri Biswas before Assistant Commissioner of Customs. As the respondent could not cross examine the witness nor he could adduce evidence it was incumbent upon the Licensing Authority to consider the materials on record including representation to the show cause notice issued upon the respondent. It appears that Pr. Commissioner of Customs (Airport and Admin) without taking into consideration the representation made by the respondent explaining different facts relating to the show cause notice, issued Order of revocation - It is well settled principle of law that when a report comes to an Authority who has granted license to a Customs broker regarding Commission of an offence under the Customs Act by an exporter and an allegation of breach of negligence by the Customs broker the licensing authority while proceeding against the Customs broker should proceed independently in accordance with law without being influenced by the report and finding of the investigating Authority regarding alleged offence. The findings of the enquiry officer and decision of the Pr Commissioner of Customs (Airport and Admin) with regard Article of Charge-I, and Article of Charge-II are perverse and the same are set aside. However with regard to charge III the allegation of misconduct against the director of respondent of not appearing upon receipt of the summons, there was some negligence on the part of the director of the respondent in not appearing personally before Commissioner of Customs(p) which ought to have been done - However as security deposit amount of respondent is already confiscated by the Appellant and the respondent has suffered suspension for about 8 years no further penalty is required to be passed at this stage. Appeal disposed off.

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• 2023 (6) TMI 1095
  Rejection of application seeking leave to file appeal - Levy of ADD - import of Melamine - legal right flows in favour of the domestic industry (applicant herein) so as to implead it as a party in the writ proceedings - Applicant is aggrieved person or not - HELD THAT:- The applicant may have provided the information which led to the initiation of the enquiry for determination of the ADD, but merely the fact that the information provided by the applicant led to initiation of the proceeding for imposition of ADD by itself would not imply that the applicant is a person aggrieved in this case - Hon ble Supreme Court in AYAAUBKHAN NOORKHAN PATHAN VERSUS THE STATE OF MAHARASHTRA OTHERS [ 2013 (8) TMI 563 - SUPREME COURT ] has taken an affirmative view that a stranger cannot be permitted to meddle in any judicial proceedings unless the court is satisfied that such person/entity falls within the category of aggrieved person , who has suffered legal injury and is entitled to challenge the effect/action of the order in the court of law. It was further observed that the court can enforce the performance of a statutory duty by a public body, using its writ jurisdiction at the behest of a person, provided that such person satisfies the court that he has a legal right to insist on such performance. In view of observations of the Hon ble Supreme Court in the case of Ayaaubkhan Noorkhan Pathan, it is opined that by any stretch of imagination the applicant cannot be treated to be a person aggrieved, who has suffered a legal injury by the direction of learned Single Bench to disclose the numerical values from the complaint filed by the applicant to the competent authority - accepting the instant application seeking leave to file appeal would tantamount to granting more leverage to the applicant than what was allowed in the original writ proceedings which is absolutely unwarranted. The instant application seeking leave to file appeal is devoid of merit and, hence the same is dismissed.

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• 2023 (6) TMI 1094
  Classification of imported goods - Parts of tricycle (E-Rickshaw) not in CKD condition - to be classified under CTH 87089900 of the First schedule of the Customs Tariff Act, 1975 or under CTH 87038040? - penalty u/s 114A /114AA of CA - Confiscation - redemption fine - dropping of the demand on the value enhancement. HELD THAT:- The Appellants have not imported many vital parts of the Tricycle. In the impugned order the adjudicating authority concluded that some parts which were not imported by either of the Appellants were minor parts . From the description of the parts not imported mentioned above, we observe that they are essential parts without which a fully finished Tricycle will nor come into existence. The adjudicating authority has not provided any evidence in the impugned order that the goods imported by the appellants together has the essential characteristic of e-rickshaw - The goods imported by the appellants together if assembled will not provide the basic function of propulsion as required for the classification under CTH 870 3.So, without the battery, the Tricycle cannot be operated and hence it is one of the essential parts. Similarly, the other parts not imported are also essential to make a fully finished Tricycle. Hence, the findings of the adjudicating authority that the goods imported by the appellants together has the essential characteristic of erickshaw/ Tricycle, cannot be agreed upon. The goods as imported by the Appellants together are not in complete nature and require a manufacturing process in order to obtain a fully finished vehicle. As per the definition of the vehicle, any imported components cannot be said to be fully functional unless they achieve the basic characteristic of the said appliance/instrument. Since, the Appellants together has not imported the complete kit required for a fully finished Tricycle falling under CTH 8703, it is held that the imported spare parts together cannot be classified under 8703. Accordingly duty cannot be demanded @ 30% by applying Sl.No.526(1)(b) of Notification 50.2017. The Notice proposes to adopt the value of Rs 33,000 per Tricycle as per the assessable value available for fully finished tricycle in NIDB data. There is no evidence available to establish that the goods for which value is available in NIDB and the impugned goods imported by the Appellants together are similar goods. Hence, the adjudicating authority has rightly rejected the value of 33,000 proposed in the Notice. Accordingly, the department s appeal for value enhancement is liable for rejection. The goods imported by both the Appellants cannot be clubbed for classification purpose. The goods imported by the appellants were not in CKD condition and therefore goods cannot be classified under Customs Tariff Heading 87038040. The goods are rightly classsifiable under CTH 87089900 - Regarding penalty imposed in the impugened order, we hold that Notice was not issued under Section 28(4) of the Customs Act and therefore penalty under Section 114A and under Section 114 AA are not applicable.provisionally assessed bill of entry could not be covered under Section 28 and 114 A of the Customs Act, 1962 and therefore imposition of penalty of Rs.18,91,596/- was erroneous inasmuch as 114A was not liable in the subject case - goods were not liable for confiscation under Section 111(m) and 111(o) of the Customs Act and the order of confiscation not sustainable.order of imposition of redemption fine of Rs.2 Lac not sustainable and is liable to be set aside - departments appeal for value enhancement is rejected. Appeal allowed.

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• 2023 (6) TMI 1093
  Maintainability of appeal - failure to comply with the requirement of pre-deposit - Classification of imported goods - HDPE Pipes - to be classified under CTH 89051000 or under CTH 391721? - HELD THAT:- The first appellate authority having directed the appellant to make a pre-deposit which was not met by the importer, the Commissioner (Appeals) has simply rejected the appeal in limine , without going into the merits of the case. Both the Ld. Advocate and the Ld. Departmental Representative agree that there was no discussion on merits by the first appellate authority in the impugned order. It is deemed appropriate to remand the matter back to the file of the Commissioner (Appeals) for disposing of the appeal on merits. Though both the counsel have made respective submissions on merits and reference was also made to judicial pronouncements, it is felt improper to discuss anything on the same since, admittedly, the lower appellate authority has not given any findings on the merits of the case. The first appellate authority directed to comply with the principles of natural justice by hearing the appellant and thereafter, pass a speaking order on merits, in accordance with law - appeal allowed by way of remand.

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• 2023 (6) TMI 1092
  Violation of principles of natural justice - Handling of Cargo in Customs Areas- Setting up of ICD - Implication of having DTA unit and Customs Area both within the same premises - Revocation of approvals granted u/s 8, Section 45 of Customs Act,1962 read with Regulation 10 of (HCCAR, 2009) - verification report relied upon by the Commissioner post survey dt. 08/02/2023 was not made available to the appellant - procedure prescribed under Regulation 12 of HCCAR, 2009 not followed before such revocation - HELD THAT:- After prolonged verification and inspection of the proposed ICD premises commencing from the year 2016 by the Customs Department and taking note of necessary rectifications carried out by the appellant from time to time on the objections raised during the course of inspection, Notification No.01/2022(NT) dt. 24/01/2022 was issued, specifying the Customs area of ICD for the purpose of loading of export goods and unloading of imported goods; also permission was granted under Section 45 of the Customs Act, 1962 read with Regulation 10 of HCCAR, 2009 for a period of two years w.e.f. 24/01/2022 - The ICD could not come into operation immediately after issuance of the said Notification due to non-allotment of location code by the competent authority. Correspondences have been exchanged between the appellant and the Department from time to time in this regard but no positive result has emerged. The appellant was, however, intimated through order dt. 16/02/2023 about the revocation of the permission granted earlier on 24/01/2022 pursuant to a survey conducted on 08.2.2023. It is the contention of the Revenue that subsequent to the examination of the permission granted while issuing location code, difficulties that would be encountered once the said area becomes operational, came to the knowledge of the Department pursuant to the survey conducted on 08.2.2023 and accordingly, the permission was withdrawn with a liberty to the Appellant to re-apply after compliance with the observation mentioned in the said Order. We do not find emergence of any new facts after the Notification was issued on 24.01.2022 that has spelt out in the revocation order; the existence of the manufacturing unit in the basement of the Customs notified area has been raised in the inspection reports. Consequent to the observation in the letter dated 21.3.2021 it was sterilised and artificially separated from the proposed customs notified area to enable the department to declare it the premises as Customs Notified area. Now, the argument of the Revenue is that there would be some GST implications if both the DTA unit as well as Customs notified area are situated in the same premises. It is also seen from the records that such apprehensions have not been spelt out in the order. It is indicated by the Revenue that there could be some misuse and complications in the implementation of GST laws if both the manufacturing unit as well as customs operations under the Customs notified area are allowed simultaneously. However, it is found from the records that the said apprehension and other objections have not been communicated to the appellant by way of issuance of a show-cause notice and response from the appellant in this regard in complete disregard and blatant violation of Regulation 12 of HCCAR, 2009 - the appellant be given a reasonable opportunity, by way of issuance of a show-cause notice and reply thereof, to explain the apprehensions now raised by the Department on the basis of a survey report dated 08.2.2023(not issued to the Appellant), even after modifications/alternation carried out by the Appellant from time to time. To meet the ends of justice, and taking note of the fact that the Appellant has made huge investment in this regard, and the ICD could not be made operational even though the necessary infrastructure is in place since 2017, the Department are directed to issue a notice to the appellant within a week s time from the date of receipt of this order raising all issues clearly stating the grounds for proposed action. Also, copy of the survey report dated 08.2.2023 be issued to the Appellant, if not delivered. The learned advocate for the appellant undertakes to file their reply within one week from the date of receipt of notice even though the time limit for filing reply prescribed under the said Regulation 12 of HCCAR, 2009 is thirty days. On receipt of the reply to the Notice and after affording an opportunity of hearing to the appellant, the learned Commissioner should decide the issue maximum within a fortnight thereafter - appeal allowed by way of remand.

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• 2023 (6) TMI 1091
  Confiscation - imposition of redemption fine and penalty - Import of old and used worn clothing, completely fumigated - restricted item or not - classifiable under Tariff Item No.63090000 of the First Schedule of the Act or not - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI] , wherein this Tribunal has observed the failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. The redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice. Therefore, the redemption fine and penalty confirmed by the adjudicating authority are upheld - there are no infirmity in the impugned order and the same are upheld = appeal of Revenue dismissed.

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• 2023 (6) TMI 1090
  Valuation of imported goods - white poppy seeds 99% purity - rejection of transaction value - enhancement of assessable value on consignments - trigger of rule 10A/rule 12 and in deployment of ammunition in rule 8/ rule 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988/ Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - HELD THAT:- In the amended context of rule 4(2) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 that applies to most of the impugned consignments, it does not suffice for those limiting factors to be drawn upon without proffering evidence of existence of such defined circumstances; mere whims or fancies cannot take the hue of revealed truth or oracular exclamation. The lack of factual evidence in the findings to sustain the contention of cartel operations impedes the consequence of rejection of declared value. Even if some suspicion of cartelization did cross the minds of customs authorities, the assessments were provisional and ample time was available for appropriate inquiry into facts to be incorporated in the notice preceding finalization of assessment. The situation obtaining in proviso to rule 3(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 has not retained that special consideration for being resorted to in consignments imported after 10th October 2007. The rejection of declared value is, thus, without authority of law. Turning to the adoption of prices from Public Ledger , a survey of the several alternatives in Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 do not admit to such option. Rule 8 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, titled as the residual method , envisages determination using reasonable means consistent with the principles and general provisions of the Rules and is further qualified by restriction on adoption of a value on the basis of, inter alia, price of goods for export to country other than India which the Public Ledger makes no pretence of not being. The specific discarding of resort to Public Ledger prices for reason of discord with the prescriptions of the Rules framed under section 14 of Customs Act, 1962 is no less applicable here. There is no allegation that the prices declared do not reflect the contractual consideration. There is no allegation of misdeclaration of description of the goods. The conditions precedent to invoking of rule 10A of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 or rule 12 of 4(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 have not been duly discharged to validate shifting the burden of proof to the importer. The proceedings of the lower authorities have been undertaken on erroneous premise of law which does not even have the saving grace of proper resort to the relevant method of valuation and requires the impugned orders to be set aside - Appeal allowed.

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• 2023 (6) TMI 1089
  Valuation of goods imported from few related parties of the appellant - whether the loading of the amounts of royalty paid to their different entities in terms of 10 agreements in the Bills of Entry, as per the SVB Mumbai order dated 19.6.2008 is in order? - HELD THAT:- The SVB order dated 19.6.2008 has been set aside and the present issue has now been settled in their favour by the Tribunal s Final Order [ 2012 (11) TMI 571 - CESTAT MUMBAI] . The present issue in the impugned order deals with the 10 agreements based on which the value has been loaded. Since the original Mumbai SVB order dated 19.6.2008 itself stands set aside all orders based on that will have to be set aside. Appeal allowed.

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• 2023 (6) TMI 1088
  100% EOU - diversion of goods - import as well as procured indigenously capital goods, raw materials, packing material and consumables free of duty vide Notification No.52/2003-Cus. and No.22/2003-C. Ex. both dated 31.03.2003 - said goods not used for intended purpose - HELD THAT:- There is no dispute that the conditions of the notifications, were violated and the appellant had contravened the provisions of section 71 of the Customs Act 1962. Accordingly, the entire duty demanded was paid and the appropriation of the duty payment has been confirmed by the learned Commissioner vide paragraph (iv) and (v) in the findings portion of his Order. The commissioner has demanded interest on the duty demanded and imposed penalty equivalent to the duty demanded in terms of proviso to Section 114A of the Customs Act 1962. The fact that the goods were diverted to DTA from their bonded warehouse is not disputed and this fact has come to the notice of the department only after investigation, is also not contested. The only plea made by the appellants is that it was done on account of their inefficiency of the staff and there was no intention to evade duty. Based on the investigations the Commissioner has rightly held the appellant had wilfully suppressed and mis-declared the fact that the goods were used within the bonded warehouse. Therefore, the appellants were liable for penalty under Section 114A. The Commissioner has given an option to pay interest along with 25% of duty within 30 days from the date of receipt of his order in terms of Proviso to Section 114A of the Act - Appeal dismissed.

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• 2023 (6) TMI 1087
  Confiscation of imported goods - redemption fine imposed on the condition that the goods should be re-exported - While moving from USA, the Appellant has bought several items in open auction under proper invoices and imported the same to India - HELD THAT:- The Commissioner (Appeals) has fairly handled the litigation and has classified the goods under 5 different categories and remanded the issue in respect of 4 categories of goods to the Adjudicating Authority but in respect of category (iii) the Commissioner (Appeals) has directly came to a conclusion and dismissed the Appellant s appeal. In the interest of justice, the appellant should have been given an opportunity to present all their documentary evidence including the Chartered Engineer s Certificate and citing all statutory provisions before the Adjudicating Authority even in respect of category (iii) goods. The very fact that the Adjudicating Authority in the Denovo proceedings has relied on the Chartered Engineer certificate so as to complete the valuation proceedings, speaks of the veracity of the Chartered Engineer s certificate - matter remanded to the Adjudicating Authority in respect of category (iii) goods wherein absolute confiscation and redemption fine was imposed on the appellant. He will follow the principles of natural justice and allow the appellant to produce all the documentary evidence before a considered Order is passed. Appeal disposed off by way of remand.

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• Corporate Laws

• 2023 (6) TMI 1086
  Interest earned on the aggregate escrowed amount - Liability of the petitioners to deposit to the Investor Education Protection Fund (IEPF) under Section 125 of the Companies Act, 2013 - whether the petitioner no. 1-Company is liable to transfer the interest earned on the aggregate escrowed amount (including the principal and the accrued interest thereon) also to the IEPF? - Doctrine of estoppel against statute - HELD THAT:- A close examination of Section 205C and Section 125 of the 1956 and 2013 Acts shows that the said provisions do not have any direct conflict with Chapter IIIB of the RBI Act. Whereas the provisions of the said two Companies Acts govern all companies generally, Chapter IIIB of the RBI Act pertains to certain provisions specifically relating to non-banking institutions receiving deposits and to financial institutions, insofar as such disputes are concerned. The Peerless, that is, the petitioner, is squarely covered under the said definition and, as such, Chapter IIIB governs the functioning of the petitioner s company as well - Chapter IIIB operates in particular spheres. Whereas a variety of functioning of NBFCs is covered by the directions contemplated in Chapter IIIB, very few of the same are pertinent in the present context. As for example, Section 45 IA pertains primarily to requirement of registration and net owned fund, Section 45 IB to maintenance of percentage of assets and 45 IC to reserve fund. Section 45 ID deals with the power of the bank to remove directors from office and Section 45 IE with supersession of Board of Directors of NBFCs other than Government Companies. Section 45 J pertains to regulation or prohibition of issue of prospectus of advertisement soliciting deposits of money. It is relevant to mention here that the Escrow Account was created in terms of the order of Court and specifically to deposit the amount which was the subject-matter of the present lis. Hence, the said deposits were sub judice and it was de hors the authority of the RBI to dictate the fate of the same. Moreover, as discussed above, nothing in Chapter IIIB pertains to interest on Escrow Accounts in cases such as the present one. Even if the RBI advised the petitioner that any interest received by the Company on investment in FDs/government securities would be available to the company, the same pertained only to interest received by the company . However, the interest which accumulated on the deposits in the Escrow Account in the present case, under no stretch of imagination, could be said to be received by the Company. The said amounts were sub judice and were subject to the outcome of the present writ petition. Hence, the argument that the directives of the RBI prompted the petitioner to use such interest is neither here nor there. The entire entitlement of the deposits in the Escrow Account, on which the interest was accrued, belongs to the IEPF. The interest accrued in the Escrow Account in the present case was not a component of the usufructs of the petitioner s functions in any manner but, all along, belonged to the IEPF, which is an entity constituted statutorily for specified purposes. The purpose of the creation of the IEPF would itself be defeated if the petitioner is permitted to usurp the said interest. Hence, it cannot be said that the petitioner is entitled to such interest in any manner. Doctrine of estoppel against statute - Power of RBI to issue instructions under the Companies Acts, 1956 or 2013 - NBFC - HELD THAT:- The same need not be invoked in the present case since, the RBI did not give any specific direction to the petitioner, nor did the petitioner construe any such direction so as to defeat the right of the IEPF conferred under a different statute that is the 2013 Act and, thereinbefore, by the 1956 Act. Petition allowed.

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• Service Tax

• 2023 (6) TMI 1085
  Levy of Service Tax - Goods Transport Agency services - scope of SCN - denial of Cenvat credit on input services - penalty u/s 78 of FA, 1994. Scope of SCN - Ld. Commissioner while adjudicating the matter has clearly travelled beyond the allegations made in the SCN - only allegation that was made in the SCN that the appellant has not made payment of service tax on the expenditure incurred by them on lorry hire charges / freight charges, which were booked under the broad head operational expenses - Demand of Service Tax on GTA Services - HELD THAT:- Rule 2(1)(d)(v) of the Service Tax Rules was invoked to propose demand under RCM since the appellant is a private limited company. However, in the impugned order, the demand has been confirmed on a different basis altogether that the appellant has earned freight income from its client and since the appellant has not issued consignment notes which they were statutorily required to do so, the appellant cannot claim any relief by not paying service tax - the impugned order has travelled beyond the scope of SCN, which is the very foundation in the matter of levy and recovery of duty and the authorities are required to restrict to the allegations what has been set out in the notice. Non-compliance with the said principles vitiates the entire proceedings which is legally not permissible. In any case, it is found that even the Ld. Commissioner has accepted in the order that the lorry suppliers were not required to issue consignment notes. Once the same is duly accepted, it cannot be said the appellant has received any GTA services from the lorry suppliers. In that case, Rule 2(1)(d)(v) prescribing liability under RCM cannot be invoked. Hence, the demand under GTA services cannot be sustained and thus set aside. CENVAT Credit - denial on the ground that the service providers could not be traced during the visit by the Department officers - HELD THAT:- It is not known when such visits were made, what steps have been taken to ascertain whether tax amount has been ultimately deposited by the service providers. Both SCN and the impugned order are completely silent on the enquiry report has not been made available at any stage of the proceedings. Moreover, no allegation in the SCN has been made that there was any connivance between appellant and the service providers so as to facilitate availment of irregular or wrong credit - the allegation to deny credit is based on assumptions and conjectures which cannot be the reason to deprive the assessee from availing credit. Hence, the order for recovery of credit cannot be legally sustained. The impugned adjudication order is set aside - Appeal allowed.

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• 2023 (6) TMI 1084
  Refund of Service Tax erroneously paid - business auxiliary service or intermediary service - facilitated procurement and supply of goods to M/s. Primark, Dublin, Ireland from various persons - applicability of POPOS rules - export of service or not - assertion of the Revenue is that the appellant had acted as an intermediary between M/s. Primark, Ireland and various suppliers for a certain consideration and as such, liable to pay Service Tax on the consideration received as in the case of intermediary services. HELD THAT:- The appellant is providing a comprehensive bouquet of services, like designing and product development, including creating new patterns and graphics that are shared with the vendors and arrangement of pre-production samples to the foreign client for approval, evaluation of vendor facilities in terms of its capabilities to provide the merchandise required, quality monitoring and also providing logistics and operational assistance for export of cargo till it reaches the destination. Consideration / remuneration for the above services is computed as a percentage of the value of merchandise exported to the client by the vendors developed by the appellant, which is received in convertible foreign exchange. There is no agreement entered into by the appellant with any of the vendors, either on their behalf or on behalf of the foreign client. The appropriate classification of these services would be support services of business or commerce rather than business auxiliary service . Business auxiliary services are general in nature as compared to support services of business or commerce. The appellant s services are not limited to being a commission agent / buying agent since their services are not limited to only procurement and dispatch, but includes a wide range of services from the stage of designing to testing and quality monitoring and getting the goods manufactured till the final export is made, including assisting in the transportation and dispatch of the goods. The decision rendered in the case of FIFTH AVENUE VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2009 (3) TMI 133 - CESTAT, CHENNAI] is applicable wherein the appellant rendering services such as evaluation of prospective customers, processing of purchase orders, customer management, processing of transactions, information and tracking of delivery schedules, operational assistance for marketing, formulation of customer service and pricing policies, managing distribution and logistics, etc., were held to be classifiable under support services of business or commerce and not under business auxiliary service. The ratio in the case of M/S GECAS SERVICES INDIA PVT LTD VERSUS COMMISSIONER OF SERVICE TAX [ 2014 (7) TMI 410 - CESTAT NEW DELHI ], also relevant for taking a decision for classifying the services rendered by the appellant as support services of business or commerce. Whether the appellant can be treated as an intermediary ? - HELD THAT:- An intermediary is generally meant to be a person who arranges or facilitates supply of goods or provision of service, or both, between two persons without any material alteration/processing. In this case, the appellant is found to be providing services of design and product development essentially for its foreign client to keep track of updates in fashion trends in knitted goods, evaluation and development of vendors, including quality monitoring and logistics and operational assistance. The appellant has not engaged any other service provider for the process of procuring the specific goods to be exported as per the requirement of his foreign client. All these services are rendered only to M/s. Primark, Dublin, Ireland on his own account and he is receiving the consideration for the services as a percentage of FOB value of the merchandise exported. There is no evidence on record to show that he is receiving any consideration from the vendors developed by him and as such, the services could not be termed as falling under the category of intermediary . The decision in the case of In M/S GODADDY INDIA WEB SERVICES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI-IV [ 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS ] is relevant to understand the term intermediary in its correct perspective, wherein it was observed that applicant is providing business support service such as marketing and other allied services like oversight of quality of third party customer care centre operated in India and payment processing services, on behalf of GoDaddy US. Therefore, these services provided by the applicant to GoDaddy US cannot be categorized as intermediary or services, as intermediary service. - The above is applicable to decide the issue in this appeal as the facts obtaining in these two cases are similar. Whether the services provided by the appellant could be treated as export of service or not? - HELD THAT:- In the present case, there is no dispute that the provider of service is located in the taxable territory and the recipient is located abroad/outside India. The services rendered are not specified in Section 66D of the Finance Act. The payment for the said services has also been received by the appellant in convertible foreign exchange. Therefore, the only condition that is required to be satisfied is whether the place of provision of service is outside India or not. The activities of the appellant will be coming under business support services and also would not be falling under intermediary services, the place of provision of the services applicable to the appellant, is the location of the service recipient, in terms of Rule 3 of the Place of Provision of Services Rules, 2012. Rule 9 is not applicable to the appellant as the services rendered by him in relation to procurement of goods to the foreign client are on his own account. The appellant is not said to be acting as an intermediary i.e., the services were performed by the appellant on a principal-to-principal basis and at arm s length basis - As all the conditions prescribed under Rule 6A of the Service Tax Rules, 1994 are satisfied, the services of the appellant are to be treated as export of services. The impugned order is not sustainable and is accordingly set aside - appeal allowed.

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• 2023 (6) TMI 1083
  Levy of Service Tax - Declared Service or not - amount received by the Appellant in excess of the purchase price paid for the immovable property, subsequent to cancellation of the agreement to Sale of the said property - HELD THAT:- The provisions contained in Section 66E(e) has been elaborately dealt by the co-ordinate Bench of the Tribunal in the case of M/S MADHYA PRADESH POORVA KSHETRA VIDYUT VITARAN COMPANY LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, MADHYA PRADESH [ 2022 (4) TMI 773 - CESTAT NEW DELHI] , wherein the judgment in the case of M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] was relied by the Tribunal. It has been observed therein that there is a distinction between a consideration under a contract and the compensation for failure to fulfill the contract . It has also been held that while the consideration is paid for doing something by one party at the desire of the other party and is thus the result of the performance of the contract whereas, on the other hand, compensation or damages is paid when one party fails to perform his part and is thus the result of frustration of contract and/or not performing the contract. In the present case, the appellant had paid the entire purchase price to the sellers who were in turn duty bound to carry out the development of the property within a reasonable period of time and immediately thereafter execute the Sale Deed in favour of the appellant. However, they failed to perform their part of the obligation - The appellant agreed to cancel the two agreements for a lump-sum payment, a portion of which was compensation, which can at best be said to be for the damages/compensation of loss of interest on funds invested solely due to the non-fulfilment on the part of the seller and its associates. The entire case of the Department for raising demand is that the appellant has received compensation by way of cancellation of the subject agreement, which fact is on record and not in dispute. In view of the decision of the Tribunal in the case of Madhya Pradesh Poorva Kshetra Vidyut Vitaran Company Limited, which is squarely applicable to the facts of the present case, the receipt of compensation cannot, by any stretch of imagination, fall under the provisions of Declared Service under Section 66E(e) of the Finance Act. The impugned order cannot be legally sustained and hence, set aside - Appeal allowed.

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• 2023 (6) TMI 1082
  Non/short payment of service tax - incentives/discounts received from MSIL on various promotional schemes implemented for promoting the sales of Maruti vehicles - short declaration of taxable value in the ST-3 return in comparison to the books of accounts for the impugned period - extended period of limitation. Demand of service tax on incentives and other discounts received from MSIL by the Appellant - HELD THAT:- The issue is no longer res integraand is squarely covered by the judgment of the Tribunal in the case of BM AUTOLINK VERSUS C.C.E. -KUTCH (GANDHIDHAM) [ 2022 (12) TMI 12 - CESTAT AHMEDABAD] , wherein the Tribunal had referred to the judgement of M/S ROSHAN MOTORS PVT. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, CENTRAL GOODS AND SERVICE TAX, JAIPUR, RAJASTHAN [ 2022 (8) TMI 1254 - CESTAT NEW DELHI] and held that The vehicle manufacturer M/s. Maruti Suzuki India Ltd. on the basis of yearly performance of sale grants the discount to the dealer, this discount is nothing but a discount in the sale value of the vehicle sold throughout the year therefore, these sales discount in the course of transaction of sale and purchase of the vehicles hence, the same cannot be considered as service for levy of service tax - thus, the demand of service tax of Rs.3,86,36,400/- cannot survive and is set aside. Demand of service tax on the basis of difference in ledgers of income and value shown in ST 3 for such services rendered - HELD THAT:- The Appellant has produced a CA certificate being the statutory auditor of the Appellant and the main reason for such difference was because the department has only taken the credit side of income by ignoring the debit entries for reversal etc. and hence the value as per ledger is inflated. Extended period of limitation - HELD THAT:- Since there had been service tax audit conducted prior to the DGGI investigation covering the period under dispute, the suppression cannot be alleged by the department for income reconciliation of books and ST 3 returns as no such allegation was raised during department audit. Hence, extended period of limitation also cannot be invoked to raise any demand. The entire demand of service tax has to go and the order of the Ld. Adjudicating authority is set aside - Appeal allowed.

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• 2023 (6) TMI 1081
  Scope/levy of Taxable Service - sponsorship services - amount paid by the appellant towards sponsorship of cricket tournaments namely, ICC Cricket World Cup and Indian Premier League (IPL) - provisions created as well as the taxability of certain portions of services received in view of the provisions of Section 65(105)(zzzn) of the Act, prior to 01.07.2010 - penalty u/s 77 and 78 of FA, 1994 - extended period of limitation. Whether the sponsorship received is relating to sponsorship of sports events or not? - HELD THAT:- The appellant has sponsored IPL Cricket tournament and ICC Cricket World Cup during the impugned period. Thus, whether sponsoring of IPL and ICC Cricket World Cup can be equated with sponsoring of sports events or not is the issue involved for resolution of dispute in this appeal - the issue is no longer res integra and is settled in favour of the appellant. In many decisions of the Tribunal, it has been held that no Service Tax is payable on sponsorship of IPL and ICC cricket tournaments during the impugned period. In the case of M/S HERO MOTOCORP LTD VERSUS COMMISSIONER OF SERVICE TAX, DELHI [ 2013 (6) TMI 447 - CESTAT NEW DELHI] , the Tribunal, Delhi has held that the expression in relation to has a very wide connotation and the assessee s activity of sponsorship was in relation to sports events and so, not liable to Service Tax. The above decision has been affirmed by the Hon ble Supreme court vide its order in COMMISSIONER VERSUS HERO MOTOCORP LIMITED [ 2015 (7) TMI 1163 - SC ORDER] and subsequently, followed by the Tribunal, Mumbai in VODAFONE CELLULAR LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2017 (2) TMI 1152 - CESTAT MUMBAI] wherein it has been held that, for the period under dispute, no Service Tax demand on sponsorship of sports events can be fastened on the appellant. Thus, the issue in dispute in this appeal is squarely covered by the decisions discussed, the impugned order ordered to be set aside - the provisions made in the books of account by the appellant as per the GAAP towards sharing the expenditure on account of receipt of sponsorship services cannot be subjected to tax as the ingredients for levy of tax are not fulfilled in the absence of any provision of service and when payments were made only in relation to sponsorship of the IPL Cricket tournament. Extended period of limitation - penalties - HELD THAT:- As the appeal succeeds on merits, there is no need to examine the issue of invoking the extended period or imposition of penalties. Appeal allowed.

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• 2023 (6) TMI 1080
  Classification of services - manpower recruitment or supply agency service or not - cane harvesting labourers and execution of the agreement and other related work. Allotting certain agricultural areas for procurement of sugar cane cultivated by the agriculturists within the said jurisdiction - farmers within the earmarked areas who intend to cultivate sugar cane shall sell their sugar cane to the above factory only - Wherever harvesting labourers were arranged by the factory, the cane cutting charges will be recovered from the cost of the sugar cane supplied. HELD THAT:- The facts indicate that Kankhanis / Gang Leaders who supervise the work of cane harvesting labourers are registered with the appellant and it is seen that as per the requirements of the farmers, the services were made available for cane harvesting. However, utilisation of these services of the Kankhanis / Gang Leaders is optional as all the sugar cane farmers though registered with the factory for supply of sugar cane, have not utilized the services of the Kankhanis / Gang Leaders for cane harvesting. Even the service charges that are payable to these cane harvesting labourers is determined by the farmers in negotiation with the Kankhanis / Gang Leaders. There is nothing on record to suggest that the cane cutting labourers are the employees of the appellant. No employer and employee relationship exists between the appellants and the Kankhanis / Gang Leaders. The labourers are not supplied on per hour or per day basis. Cane harvesting charges are reportedly negotiated with the Kankhanis / Gang Leaders by the farmers themselves. Reportedly, some farmers are not utilizing the services of the appellant for obtaining the labourers. As such, the demand raised on the appellant under manpower supply is not maintainable. In a catena of decisions rendered by the Tribunal Chennai, the issue was decided in favour of the appellants holding that the supply of cane harvesting labourers, in similar facts, would not be falling under the manpower recruitment or supply agency service - reliance can be placed in M/S. ARIGNAR ANNA SUGAR MILLS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, TRICHY [ 2018 (9) TMI 387 - CESTAT CHENNAI] where it was held that Being a Government undertaking, it can be seen that all appointments are to be made in the muster roll of the sugar mill. From the facts on record, it cannot be said that the appellants have provided harvesting labourers to the sugarcane growers for harvesting the sugarcane. The services of the appellant would not be classifiable under manpower recruitment or supply agency service - Appeal allowed.

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• Central Excise

• 2023 (6) TMI 1107
  Clandestine Removal - Supply of goods against ICB - sub-contractor of the main contractor for a power project awarded by M/s. Cairn Energy India Pty. Ltd. under International Competitive Bidding - Denial of benefit of N/N. 6/2006 CE dated 1.3.2006, on the ground that the Project Authority Certificate (PAC) was issued by M/s. Cairn Energy India Pvt. Ltd. to the IGP unit situated at Kottivakkam and not to the appellant unit, which is situated at Sembakkam - HELD THAT:- The gaskets under the above invoice have been cleared to M/s. Cairn Energy India Pty. Ltd. A/c L T Ltd, Northern Area Development Project, Rajasthan as mentioned in purchase order dated 25.3.2009 issued by L T. We also find that the LOI and PO were addressed to IGP s HO, it was only the PAC which mentioned the unit situated at Kottivakkam. The said PAC has subsequently been amended to rectify and the reflect the actual clearances made to the same project. Annexure I to the split PAC s Nos. 188 189 certified by the main contractor also mentions the LOI/PO number and date. When the goods have been found to have been cleared towards the power project under International Competitive Bidding which was eligible for duty exemption, the LOI and PO for the supply were addressed to IGP s HO and there is no allegation of clandestine clearance etc, duty exemption benefit cannot be denied merely because the initial PAC was in the name of Kottivakkam unit and not in the name of Sembakkam unit on the date of clearance when the PAC was also rectified later. The appellant is eligible for availing exemption from duty under Notification No. 6/2006 CE dated 1.3.2006 for the impugned goods. This being so demand for interest and penalty do not survive - Appeal allowed.

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• 2023 (6) TMI 1106
  Conversion to DTA from EOU - Alleged incorrect payment of duty on semi-finished goods and finished goods at the time of de-bonding into a DTA unit - failure to adopt Rule 14 of Customs Act, 1962 - whether the assesse is liable to pay the demand of differential duty on the semi-finished goods and finished goods at the time of de-bonding? HELD THAT:- The issue with regard to the liability to pay duty on semi-finished goods was considered by the Tribunal in the case of Jubilant Life Sciences Ltd. [ 2018 (5) TMI 466 - CESTAT ALLAHABAD] . The Tribunal observed that the duty demand is on the goods that had not come into existence (that have not completed the manufacturing stages) and therefore not sustainable. Moreover, these goods have been further processed into finished goods and the assesse has exported these goods - In the case of Tirumala Seung Han Textiles Ltd. Vs. CCE (A) Hyderabad [ 2008 (9) TMI 252 - CESTAT BANGALORE] , the Tribunal set aside the demand observing that there is no mention of semi-finished goods in Para 6.18 of the Foreign Trade Policy and the demand for duty on such goods is not sustainable. The duty demand on finished goods was defended by the learned Counsel by submitting that the goods having been exported the demand cannot sustain. It is an admitted fact, in the Show Cause Notice as well as the OIO that these goods have been exported. At the time of such export assessee has paid duty as per provisions of Section 3(1) of the Central Excise Act, 1944 on the export clearances - The Tribunal in the case of M/S BHATI AND COMPANY VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2019 (9) TMI 1500 - CESTAT NEW DELHI ] had set aside the demand of duty raised invoking proviso to Section 3(1) of the Central Excise Act without availment of Notification No. 23/2003. It was observed therein that the finished goods having been exported the duty demand cannot sustain. In the present case, there are no grounds to take a different view - at the time of de-bonding, the assesse has to pay duty as per Section 3(1) of Central Excise Act. The appellant has paid duty on the goods for the second time at the time of export as per Section 3(1) of Central Excise Act, 1944. The goods having been exported we hold that the demand cannot sustain. The duty demand raised on the semi-finished goods and finished goods cannot be sustained for the reason that the goods have already been exported and that too on payment of duty under Section 3(1) of Central Excise Act, 1944. As the differential duty demand by applying proviso to Section 3(1) without availing the benefit of notification has been set aside, there are no reason to uphold the disallowance of credit. The appellant is eligible to avail credit of duty paid on finished goods and semi-finished goods. Appeal allowed in part.

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• 2023 (6) TMI 1105
  Distribution of CENVAT credit - nexus between the invoices and utilisation of input service tax credit could not be established - Rule 9(1)(g) alongwith Rule 7 of CENVAT Credit Rules, 2004 - Banking service - construction service - extended period of limitation. Whether it is a case of transfer of credit by ISD or it is a case of taking of credit on the strength of invoice not having the name of the concerned unit/recipient? HELD THAT:- As per Rule 9(1), the cenvat credit can be taken by the manufacturer on the basis of certain documents like invoices, bill or challan etc. It can also be taken on the strength of invoice, bill, challan and issued by ISD (input service distributor) under Rule 4A of Service Tax Rules 1944. In this case, it is seen that while Department has claimed the Hyderabad office as head office and therefore in order to pass the credit, they should have taken ISD registration and should have also followed the statutory procedure for distribution, whereas the appellants are argues that documents like challan issued by banks are sufficient document under Rule 4A and hence on that strength that itself they can take credit. ISD can be any office, where the invoices issued under Rule 4A are received and distributed. The invoices under Rule 4A of STR provides for issuance of a specific invoice bill or challan giving certain details etc. In fact, in the case of a bank company an invoice, a bill or challan, as the case may be, also includes any document by whatever name called, whether or not serially numbered and whether or not containing address of the person receiving taxable services but it should contain other information in such documents as required under the said subrule. Whether the debit advice/invoice issued by the banks to their office in Hyderabad, can be considered as an eligible documents issued under the provisions of Rule 4A or otherwise? - HELD THAT:- It is a case where there is no need for any ISD distribution and the only issue which needs to be decided is whether the invoice/advise raised by the banks are sufficient to allow the Gumpam unit to take the credit - It is undisputed fact that such imports have taken place with reference to Gumpum unit only and the input service in issue is an eligible input service. It is also noted that in the case of provision of services by Bank etc, much latitude has been given regarding nature of documents which could be issued under Rule 4A. There is no allegation in the show cause notice that the raw materials were not received in the Gumpam unit. Therefore, nonmentioning of the name and address of the unit receiving such services despite having actually received and also have incurred expenses towards that, can not result in complete denial of credit. Thus, the challans/debit advice issued by bank, if correlatable to Bill of Entries in the name of Gumpum Unit, indicating payment of service tax, has to be as a treated as valid document for the purpose of taking credit under Rule 9(1) by the appellant. In the case of LAXMI ORGANIC INDUSTRIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD [ 2017 (5) TMI 665 - CESTAT MUMBAI] , the Tribunal held that credit cannot be denied on the ground that either the invoice is not in appellant s name but in the name of their Head office or that the Head office is not registered under the ISD. The provisions under CCR provides for clearance of input or capital goods as such by reversing the credit taken originally on such inputs or capital goods. It is admitted that this provision has not been adhered to in the instant case, as the inputs were being cleared on stock transfer basis on the payment of central excise duty even when there was no manufacture involved, which is different then the mechanism provided for clearance of inputs as such, on which the credit has been take under. Banking service - HELD THAT:- Here admittedly there has been stock transfer of such inputs on which they had taken credit initially and even though, they have paid central excise duty on the same, it cannot be considered as a method for reversing the credit for clearance of input as such. And to that extent, the inputs not used at Gumpum Unit cannot be considered to have been used in their factory - The co-relation of the invoice/challans issued by the bank and the Bill of Entries under which the inputs have been received by Gumpam unit needs to be done in detail as per the Appellants provide all the relevant documents to Original Authority. Thereafter, to the extent to which such inputs, not having been consumed in the Gumpam unit, the credit has to be denied on account of their having not been used in relation to the manufacture of the final product. The remaining credit is to be allowed. The interest and penalty applicable under section 15(2) of CCR 2004 read with Section 11AC (1)(c) of Central Excise Act 1944 would also be applicable on such ineligible credit. Construction Service - HELD THAT:- It is clearly not admissible and so to that extent the amount of Rs. 1,05,424/- out of total demand of Rs. 13,01,140/- as confirmed by the Original Authority and also upheld by Commissioner (Appeals) needs to be upheld. Thus, the extent of demand on account of credit of ineligible service i.e. construction service, the Order of Original Authority and Commissioner (Appeals) is upheld and for remaining amount of demand, the order is set aside for the purpose of redetermination of admissible credit. Extended period of limitation - HELD THAT:- Since the admitted fact is that they have not correctly followed the procedure for clearing inputs on which credit was taken, as also the fact that appellant have not come out clean before the Department with all the relevant facts before the audit, it is not found, that sufficient grounds have been brought on record by appellants so to interfere with the observations of Commissioner(Appeals) on this issue. Therefore, the extended period has been rightly invoked in the facts of the case. The appeal is partly allowed by way of remand for redetermination of amount of eligible credit out of total demand and for recovery of remaining amount, levy of interest applicable and imposition of penalty with reference to such ineligible credit, so determined.

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• 2023 (6) TMI 1104
  Denial of CENVAT Credit and order for recovery of same - denial of credit on the ground that credit taken was pertaining to the period prior to registration - denial also on the ground that the invoices issued by the ISD did not contain the particulars like name, address and registration number of the person providing the services - alleged also that CENVAT Credit distributed by the ISD was without excluding the credit attributable to the turnover of trading activities which is an exempted service - HELD THAT:- It is a little strange on the part of Revenue that while the appellant-ISD had distributed credit of Rs.44,78,255/- to its manufacturing unit at Pune and Rs.94,84,508/- to the appellant at Puducherry unit, the Revenue has accepted the distribution of above credit to its Pune unit. The Department has not accepted the distribution of credit by ISD in respect of the appellant s Puducherry unit. A perusal of both the Show Cause Notice and the impugned Order-in-Original do not reveal anything as to why the appellant s unit was cherry picked up just to deny credit. Certificate of registration dated 24.01.2011 - HELD THAT:- It is clear from the same that the addresses of business premises of the ISD and that of two manufacturing units to which credit on input services was distributed or intended to be distributed is clearly reflected. The Revenue, on the other hand, is not disputing the validity of this certificate of registration. Admittedly, transactions in the present case relate to the period prior to 01.09.2014 and therefore, the restriction which is applicable prospectively, cannot be applied retrospectively. In the case of Hon ble High Court THE COMMISSIONER OF CENTRAL EXCISE, O/O THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX VERSUS M/S. PRICOL LTD. [ 2021 (2) TMI 495 - MADRAS HIGH COURT] has categorically held, following the judgement of the Hon ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [ 2016 (2) TMI 183 - GUJARAT HIGH COURT] , that there is nothing in the said Rules of 2005 or Rules of 2004 which would automatically and without any additional reasons, disentitle an input service distributor from availing credit unless and until such registration was applied and granted - Interestingly, the ratio of the decision was followed by Hon ble Karnataka High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX AND CUSTOMS BANGALURU-II, VERSUS M/S. HINDUJA GLOBAL SOLUTIONS LTD., [ 2022 (4) TMI 71 - KARNATAKA HIGH COURT] and later by various judicial fora. Thus, the finding of the learned authority for denying credit on the ground that the credit taken was pertaining to the period prior to registration, cannot be approved. Credit denial also on the ground that invoices do not have the details of person who provided the service - HELD THAT:- The invoices placed on record clearly reflect the service provider challans and corresponding invoices issued by ISD for distribution of credit. Hence, merely because the above invoices do not have the details of person who provided the service, the same is not a valid ground to deny the benefit of credit. The supporting documents placed on record by the Revenue with regard to the allegations that are made in the Show Cause Notice as to the trading units, but it is also unfortunate that the adjudicating authority has also made a very vague observation in this regard. But it is also equally true that what is referred to in Show Cause Notice is trading unit and not trading activities. Hence, in the absence of any specific trading activity by the appellant, the finding of the authority that the IPR services and management, consultancy services are important component of trading activities, appears to be vague and baseless - consequent action of denying credit is clearly therefore illogical and unsustainable in the eye of law. The denial of credit is clearly unwarranted - Appeal allowed.

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• 2023 (6) TMI 1103
  Wrongful availment of CENVAT Credit - manufacture of Emulsion Matrix (bulk explosive) - whether the disputed goods had been used for the purposes of manufacturing of BMD Vehicles and the Storage Tanks, without which, the Bulk Explosive cannot be prepared? - HELD THAT:- It is seen from the Appeal Paper Book that the Appellant has submitted copy of the Chartered Engineer s Certificate specifying the usage of the inputs/capital goods in question. This Tribunal, in the Appellant s own case M/S PRASAD EXPLOSIVE CHEMICALS VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, RANCHI [ 2022 (10) TMI 514 - CESTAT KOLKATA ] for the demand made for the period January 2013 to December 2013 has gone through the issue and dealt in detailed manner and has held I find that the ld.Adjudicating Authority has relied upon the Larger Bench decision of the Tribunal in the case of [ 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] for dis-allowance of cenvat credit as claimed by the Appellant, which is not at all applicable to the facts of the present case. I further find that the Hon ble Chhattisgarh High Court M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] has distinguished the decision of the Larger Bench of the Tribunal on the findings that it is not a good law and various other High Courts have also expressed similar views. Since the issue is identical pertaining to the same Appellant, respectfully following the decision of this Bench, the present Appeal is allowed.

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• 2023 (6) TMI 1102
  Interest on Differential duty - appellant paid duty on the strength of supplementary invoices - stock transfers - sale of goods to the independent buyers as well as to their sister units - CENVAT Credit - Revenue Neutrality - HELD THAT:- The answer is that appellant is not liable to pay duty in terms of Rule 8 of Central Excise Valuation Rules, 2000. As differential duty was not payable in appeal mentioned at Sl.No.1, the question arises whether interest is payable by the appellant or not - similar issue was examined by the Hon ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE CUSTOMS, VADODARA-II VERSUS M/S GUJARAT NARMADA FERTILIZERS CO LTD [ 2012 (4) TMI 309 - GUJARAT HIGH COURT] , wherein the Hon ble High Court held The recovery of the unpaid or short paid duty would become time-barred. If the manufacturer does not pay it voluntarily, it would not be possible for the Department to recover the same. But if he does it voluntarily despite completion of period of limitation, he would, further be saddled with the liability to pay statutory interest. Surely, this was not the intention of the Legislature while sub-section (2B) was introduced in Section 11A of the Act. As it is already held that as the appellant was not liable to pay duty in terms of Rule 8 of Central Excise Valuation Rules, 2000, therefore, no interest is payable by the appellant in view of the decision of the Hon ble High Court in the case of CCE C, Vadodara-II v. Gujarat Narmada Fertilizers Co.Ltd. CENVAT Credit - revenue neutrality - HELD THAT:- It is the revenue neutral situation, no duty is payable by the appellant therefore whatever duty paid by the appellant Cenvat credit of the same has been availed by the sister unit, question of payment of interest does not arise. Therefore, the impugned order is set aside and the appeal is allowed with consequential relief.

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• 2023 (6) TMI 1101
  Exemption to goods supplied to the United Nations or an international organisation for their official use or supplied to the projects financed by the said United Nations or an international organisation and approved by the Government of India - Benefit of Notification No.108/95-CE dated 28.8.95 - retrospective amendment of notification or not - time limitation - HELD THAT:- In accordance with the said Notification, on the basis of the project certificate issued mentioning the name of the contractor M/s Ketan Constructions Ltd., undisputedly 9 Nos. of tippers were cleared by the Appellant to the said contractor to be used in a project funded by the World Bank. After completion of the said project, on enquiry from the contractor about the use of said Tippers in other such eligible project, when denied, demand notice was issued to the appellant on the basis of insertion of Explanation-2 to the Notification No.13/2008-CE dated 1.3.2008 - The Explanation-2 was inserted with effect from 1.3.2008. Revenue sought to apply the said Notification retrospectively and demanded duty from the appellants alleging that after completion of the project, if the 9 nos. tippers which were used in the completion of project, later if withdrawn, even after completion of the project, they would not be eligible to the benefit of the said Notification. The issue of retrospective applicability of Explanation-2 to the Notification was considered by this Tribunal in the case of L T Komatsu Ltd. [ 2016 (7) TMI 290 - CESTAT BANGALORE ] holding amendment to the original Notification No.108/95-CE dated 28.8.1995 made by Notification No.13/2008-CE dated 1.3.2008 would have prospective operation and the demand against the appellants can be sustained only for one year period which is within the period of limitation. Time Limitation - HELD THAT:- The appellant availed the exemption under Notification No.108/95-CE dated 28.8.95 on the basis of Certificates issued by the Project Authority from time to time and the clearance of tippers by availing the benefit of Notification declared in their monthly ER-1 returns, hence no fact was suppressed from the knowledge of the department - It is held by the Hon ble Supreme Court in J.K. SPINNING AND WEAVING MILLS LTD. AND ANOTHER Vs. UNION OF INDIA AND OTHERS [ 1987 (10) TMI 51 - SUPREME COURT ] and followed in a series of judgments that extended period of limitation cannot be invoked in demanding duty on the basis of applying an amendment retrospectively, which is squarely applicable to the facts of the present case. The impugned order is not sustainable, consequently, the same is set aside - Appeal allowed.

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• 2023 (6) TMI 1079
  Deletion of penalty - failure to appreciate Rule 15(1) of CCR, 2004 which clearly states that it is a mandatory penalty thereunder to be imposed whenever CENVAT Credit is availed wrongly - requirement of any malafide or mens-rea required to be proved for invoking the said Rule or not - HELD THAT:- Reliance placed in the decision of a Larger Bench of the Tribunal in the case of M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX-CALICUT [ 2020 (6) TMI 278 - CESTAT BANGALORE] . In such order, this Court observed that in view of the decision rendered by the Larger Bench of the Tribunal, the order as impugned in the appeals filed by the assessees, (being the very same order as impugned in the present proceedings) could not be sustained and the same was required to be set aside, with a further direction that the appeals of the assessees on remand be decided afresh in the light of the decision rendered by the larger bench of the Tribunal in South Indian Bank. It is not in dispute that on the appeals filed by the respondents/assessees, similar orders were passed by a coordinate Bench of this Court. The principal order subject matter of challenge in the present proceedings itself is set aside in the assessee s appeals and that such appeals are remanded to the Tribunal and are subject matter of reconsideration before the Tribunal - Appeal disposed off.

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• 2023 (6) TMI 1078
  Maintainability of appeal - monetary limit involved in the appeal - Interpretation of statute - Validity of sub-section 7(A) of Section 11 A of the Central Excise Act, 1944 - demand for a particular period for which Show Cause Notice was issued and not for the subsequent period - HELD THAT:- Paragraph 3 of the circular dated 17 August, 2011 states that adverse judgments relating to the following should be contested irrespective of the amount involved: (a) Where the constitutional validity of the provisions of an Act or Rule is under challenge. (b) Where Notification/ Instruction/Order or Circular has been held illegal or ultra vires. It is thus clear from the above circulars which are binding on the revenue that the monetary limit for the revenue to approach this Court in an appeal would be when the claim amount is of Rs. 1 Crore and above. Thus in respect of a claim for an amount involving Rs. 1 Crore and below would not be maintainable as per the said circulars. The appeal would not deserve adjudication and/or is not maintainable - Appeal dismissed.

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• CST, VAT & Sales Tax

• 2023 (6) TMI 1100
  Maintainability of Review petition - error apparent on the face of the record - HELD THAT:- There is no error apparent on the face of the record, warranting reconsideration of the order impugned. The Review Petitions are, accordingly, dismissed.

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• 2023 (6) TMI 1099
  Exemption from U.P. Trade Tax Act - PVC coated cotton fabrics - to be included in Entry 53 or under Chapter 59.03? - HELD THAT:- This Court has independently considered the reasoning of the High Court and concurs with it. The reliance placed by the appellant on the classification in the Central Excise Tariff, is of little consequence since the terminology used in Chapter 59 under the relevant heading is different. Chapter 59 is far more nuanced than Entry 53 of the U.P. Trade Tax Act. In these circumstances, having regard to the express terms of Item 53 which is in question in the present case, this Court is of the opinion that no cause for interference has been shown. SLP dismissed.

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• 2023 (6) TMI 1098
  Amount of penalty for compounding the offence - grant of right to the applicant to be treated as registered dealer eligible to claim input tax credit and/or collect tax on sales - Section 53 of the Goa Value Added Tax Act, 2005 - HELD THAT:- The grievance of the petitioner with regard to penalty of Rs. 1,00,000/- being imposed by the impugned order would be required to be accepted being ex facie contrary to the provisions of the Act. Even assuming as to what has been stated on behalf of the Revenue that a penalty of Rs. 25,000/- would be maximum penalty under Section 44 of the Act or even if the petitioner is right in his contention that the maximum amount of penalty would be Rs. 10,000/- under notification dated 2 February, 2012 issued by the State Government on either of the Counts, the impugned order which orders a penalty of Rs. 1,00,000/- cannot be sustained. Insofar as the petitioner s grievance with regard to the wording of the operative part of the order as noted above, the grievance raised by the petitioner is quite correct, although such observation may be clarificatory in nature, it has some consequence, more particularly when the substantive appeal itself is pending before the Appellate Authority assailing the Assessment Order. It would be in the interest of justice that the impugned order dated 30 July, 2021 is required to be set aside. It is accordingly set aside directing the Commissioner of State Tax to hear the petitioner afresh on the issue of penalty and de hors pass a fresh order in accordance with law - Petition disposed off.

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