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TMI Tax Updates - e-Newsletter
June 7, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Seeking release of the goods seized by the police on ‘Supardari’ - concealment of goods in the vehicles which were without any bill - Since, no person has come forward to stake his claim qua ownership of the said goods and on the other hand the transporter has come forward to seek possession of the goods on supardari, the application in this regard can be accepted and deserves to be accepted, subject to the conditions imposed - HC
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Levy of GST - duty free shops at various airports - Petitioner submitted that, they state that they are a subsidiary of a Malaysian company which has a long experience in running such shops throughout the world. The petitioner had taken on lease the premises within the precincts of the fourth respondent - No GST liability - HC
Income Tax
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Method of apportionment of common expenditure - in view of the seasonal nature of the business carried out by the assessee and the short shelf life of the seeds, Tribunal has held that it is imperative for the assessee to take into account the quantity of unsold seeds at the end of the year and the need to re-validate their further utility and to take them into stock for the next season. - Order of ITAT alloweing the claim of assessee sustained - HC
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Stay petition - garnishee proceeding - Notwithstanding wrong mentioning of the provision, we are of the view that since an application has been filed by the petitioner before the 4th respondent appellate authority, the said authority should consider the stay prayer of the petitioner one way or the other within a reasonable time. - HC
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Disallowance on account of extraordinary items written off - It is not in dispute that the assessee had indeed written off the said abandoned project expenditure in its books during the year and had reflected the same as ‘Extra-Ordinary Items Written Off’. Since this issue does not arise on a regular basis to the assessee, we find that the assessee had rightly shown this as ‘Extra Ordinary Items’ in accordance with Accounting Standard 5 issued by ICAI in its profit and loss account as a separate line item - Claim allowed - AT
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Validity of the notice issued u/s. 143(2) - statutory time limit to issue notice - the AO has issued notice u/s. 143(2) on 12/10/2020 after expiry of six months from the end of the financial year (FY 2019-20) in which the return is furnished. It therefore, in our considered view, attracts the proviso to section 143(2) in which case the assessment made based on such notice becomes void ab intio. - AT
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Addition made on the alleged entries in the seized material - AO simply added the amounts appearing in the diary as unexplained income of the assessee.AO also did not verify the contention of the assessee that these loose sheets did not pertain to the assessee or it is rough work for the site purposes - Additions deleted - AT
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Validity of Reopening of assessment - reason to belief - Bogus share transactions - AO, while recording the reasons, has not applied his mind and has not brought out any factual finding with regard to the impugned addition. It is also noticed that the assessee’s request with regard to the workings of the impugned addition and the statements recorded from the Broker was not shared with him by the lower authorities - the reopening u/s. 147 is not valid and accordingly, the addition made stands deleted. - AT
Customs
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Revocation of Customs Broker License - exporters could not be found at all physically at their registered premises - the appellant has collected the documents such as IEC, GSTIN etc. submitted by the exporter before processing their shipping bills. Later if they were not found to be existing in the said addresses, the appellant cannot be held responsible for their non existence at the address specified - the allegation against the appellant in the impugned order that they have violated Regulation 10 (n) is not sustainable. - AT
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Re-import of goods - Claim of exemption from customs duty - Whether the original export was under the claim of refund of IGST? - Appellant claimed that at the time of export, they had wrongly mentioned that the export is being made for refund of IGST, wherein there was no claim for refund made - It is an admitted fact that the appellant neither claimed refund at any point of time, nor any such refund was granted to them. This fact has also been confirmed by the Revenue - Benefit of exemption allowed - AT
Corporate Law
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Form CSR-2 shall be filed separately on or before 31st March, 2024 (for the financial year 2022-2023) - Companies (Accounts) Second Amendment Rules, 2023 - Notification
LLP
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LLP Form No. 3 modified regarding information with regard to LLP Agreement and changes, if any, made therein - Limited Liability Partnership (Amendment) Rules, 2023 - Notification
SEBI
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Offence under SEBI - person responsible for the commission of the offence - A company may have numerous Directors, however, it is apposite to state that to make each of these Directors accused persons simply by virtue of their position in the Company is not the true import of Section 27 of the SEBI Act. - There must be specific averments against the Accused Director detailing the manner in which the Director was responsible for the conduct of the business. - HC
Central Excise
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SSI Exemption - independent units or not - clubbing of clearances - four units have been created on paper without having proper manufacturing facilities - The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance, etc. has to be clubbed together. - AT
Case Laws:
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GST
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2023 (6) TMI 232
Seeking defreezing of Bank Account of petitioner - more than one year has already elapsed since the date of the letter (order of attachment) and therefore, in terms of Section 83(2) of the CGST Act, the said order has ceased to operate - HELD THAT:- The present petition is disposed of by declaring that the order pursuant to which the communication dated 10.03.2021 was issued, is no longer operative by virtue of Section 83(2) of the CGST Act. The concerned bank will not interdict the operation of the bank account of the petitioner on the basis of the communication dated 10.03.2021 - It is clarified that this order will not affect any other order(s) that may have been passed, which have not been placed on record. However, if there are any such orders, the same would be immediately communicated to the petitioner. Petition disposed off.
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2023 (6) TMI 231
Correction of mistakes in (FORM GSTR-3B) returns - erroneous typing of liability for tax under the Central Goods and Services Tax Act, 2017 as ₹32,33,36,855/- instead of ₹3,23,36,855/- - HELD THAT:- The petitioner clarified the reasons for the mismatch by a communication dated 18.01.2023. Thereafter respondents scheduled a personal hearing on 20.04.2023 and the petitioner was afforded a personal hearing on that date. The petitioner also filed an additional submission dated 27.04.2023 explaining the reasons for reversing the excess amount of ITC - Notwithstanding the explanation provided by the petitioner, respondent no. 1 issued a show cause notice dated 12.05.2023 raising an aggregate demand of ₹55,39,99,352/- as mentioned in the intimation dated 19.12.2022. Surely, if there is an inadvertent or typographical error that has crept in any returns, the taxpayer cannot be mulcted with the tax liability in excess of what is due and payable. It is apparent that the explanation provided by the petitioner has not been considered. It is considered apposite to direct the concerned authority to pass an appropriate order pursuant to the show cause notice considering the petitioner s responses to the show-cause notice as well as the averments made in this petition - List on 24.07.2023.
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2023 (6) TMI 230
Maintainability of petition - availability of alternative remedy of appeal - requirement of compliance with the pre-deposit - time limitation - HELD THAT:- The petitioner had filed the writ petition under Article 226 of the Constitution of India, in M/s Classic Decorators v. Assistant Commissioner, CGST Division Ors. [ 2023 (2) TMI 235 - DELHI HIGH COURT] , impugning the order in original passed by the Adjudicating Authority. The said petition was disposed of on 31.01.2023 on the ground that the petitioner has an equally efficacious alternate remedy. This Court had also observed that, prima facie, the petitioner s contention that the order-in-original is barred by limitation is merited. The amount of pre-deposit required is 7.5% of the total demand, which is not a large sum. There is no averment that the requirement of pre-deposit has rendered the appellate remedy illusory or that the petitioner is anyway impeded from availing the same. There are no ground to interfere with the impugned order - petition disposed off.
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2023 (6) TMI 229
Seeking release of the goods seized by the police on Supardari - concealment of goods in the vehicles which were without any bill - evasion of payment of tax in connivance with officials of Excise and Taxation Department - HELD THAT:- A perusal of the impugned order would show that the trial Court has accepted the application on the premises that the applicant claims himself to be the owner of the goods which in fact is an incorrect observation inasmuch as there is no specific averment as regards ownership of goods in the application made by the respondent for release of the articles on supardari. In any case, it goes without saying that the articles some of which would be of semi-perishable nature ought to be released on supardari lest the value of the same may be drastically diminished. Since, no person has come forward to stake his claim qua ownership of the said goods and on the other hand the transporter has come forward to seek possession of the goods on supardari, the application in this regard can be accepted and deserves to be accepted. This Court is of the opinion that some strict conditions need to be imposed for the purpose of releasing the said goods on supardari. As such, it is ordered that the goods be released on supardari to the respondent subject to the conditions imposed - application allowed.
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2023 (6) TMI 228
Levy of GST - duty free shops at various airports - Petitioner submitted that, they state that they are a subsidiary of a Malaysian company which has a long experience in running such shops throughout the world. The petitioner had taken on lease the premises within the precincts of the fourth respondent under an agreement dated 05.04.2017. - HELD THAT:- It is brought to the notice of this Court that the issue has been set at rest and is no longer res integra, in the light of the judgment of the Hon'ble Supreme Court in COMMISSIONER OF CGST AND CENTRAL EXCISE MUMBAI EAST VERSUS FLEMINGO TRAVEL RETAIL LTD [ 2023 (4) TMI 613 - SUPREME COURT] , wherein the Hon'ble Supreme Court has held that Duty Free Shops, whether in the arrival or departure terminals, being outside the customs frontiers of India, cannot be saddled with any indirect tax burden and any such levy would be unconstitutional. Therefore, if any tax is levied, the same cannot be retained and the Duty Free Shops would be entitled for refund of the same without raising any technical objection including that of limitation. Petition allowed.
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Income Tax
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2023 (6) TMI 227
Method of apportionment of common expenditure - AO s computation of income from agricultural activity and income from trading activity was modified - Tribunal justification in holding that common expenditure for own production and sale of seeds and trading in other seeds can be apportioned between both on the basis of Cost of Goods Sold (CoGS) as against the turnover of each for arriving at profits - HELD THAT:- According to the Tribunal, view taken by CIT(A) was a reasonable one and cannot be termed as perverse. More so, in view of the seasonal nature of the business carried out by the assessee and the short shelf life of the seeds, Tribunal has held that it is imperative for the assessee to take into account the quantity of unsold seeds at the end of the year and the need to re-validate their further utility and to take them into stock for the next season. Therefore, it cannot be said that the provision for sales returns is unascertained or unreasonable. Affirming the findings written by CIT(A), Tribunal dismissed the appeal of the revenue.No error or infirmity in the view taken by the Tribunal. No substantial question of law.
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2023 (6) TMI 226
Assessment u/s 153A - Assessee claimed that the AO had not given copies of the seized materials extracted from the hard disk and the pen drive - violation of the principles of natural justice - ITAT has noted in the impugned order that the AO has simply reproduced the appraisal report and has not undertaken any analysis of the seized materials. Even the hard disk with the working copy was not seen by the AO. The seized material had neither been opened nor examined. The expert report also failed to point out that the software was hardware specific . HELD THAT:- In the impugned order the ITAT has concluded that the CIT(A) was right in holding that the additions made in the all three AYs was in total violation of the principles of natural justice and that the additions have been made clearly on estimate basis. With there being concurrent findings on fact by the both the CIT(A) and ITAT and there being clear violations of the legal requirements by the AO, this Court is unable to find any error committed by the CIT (A) or the ITAT in disagreeing with the AO and setting aside the assessment order. No substantial question of law arises.
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2023 (6) TMI 225
Stay petition - garnishee proceeding - two appeals have been preferred by the petitioner, one against the intimation u/s 143(1) and the second one against the order passed u/s 154 - petitioner has not paid the outstanding dues as per the intimation as rectified - HELD THAT:- From Stay petition, we find that the same has been filed u/s 220(6) of the Act, as per which provision such a petition is required to be filed before the assessing officer. An appellate authority which is competent to hear an appeal has also the power to grant interim relief relatable to the appeal. Power to grant stay is incidental and ancillary to the power to entertain an appeal. Notwithstanding wrong mentioning of the provision, we are of the view that since an application has been filed by the petitioner before the 4th respondent appellate authority, the said authority should consider the stay prayer of the petitioner one way or the other within a reasonable time. We direct the 4th respondent to consider the stay prayer of the petitioner dated 31.01.2023 after giving an opportunity of hearing to the petitioner and thereafter pass an appropriate order in accordance with law. We make it clear that the garnishee notice dated 17.11.2022, as modified on 12.12.2022, will be subject to such order that may be passed by the 4th respondent on the stay petition of the petitioner.
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2023 (6) TMI 224
Addition on account of low GP rate - GP rate in year under consideration[ 2015 - 16] was 0.41% as compared to GP rate of 8.59% in A. Y. 2014 - 15 - sole ground/allegation taken by AO for enhancing GP rate from 0.41% to 1% of turnover is that there was significant rise in the turnover of jewellery segment but the GP rate was reduced abnormally - HELD THAT:- It is a well accepted principle tax jurisprudence that the Assessing Officer cannot sit on the arm chair of a businessman assessee to replace his business strategy by his own whims and fancies. When the assessee took decision to reduce GP rate with an intention to fetch high turnover resulting into increase in the total net profit and under this strategy the assessee under took turnover of 34 times in comparison to the immediately preceding year taking sky high increase in the turnover which resulted into reduction of GP rate to 0.41%. From the copy of the three years comparative chart with breakup of jewellery segment, bullion segment and Job work segment it is clear that when the turnover of assessee was less than the GP rate was 8.59% and when the assessee under business strategy increase the turnover to 34 times to Rs 292.13 crore then the GP rate was reduce to 0.41% the GP rate of other segments such as artificial jewellery, semi precious stones and job work also faced marginal changes but the AO only noted abnormal fall in GP rate of jewellery without pointing out any defects or discrepancies in the audited books of accounts of assessee and this approach without any other positive material or evidence, only on standalone basis is not correct and justified. CIT(A) was right in deleting addition made by the Assessing Officer without any justified reasoning and cogent basis - Decided against revenue.
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2023 (6) TMI 223
Validity of re-assessment - as argued notice u/s 143(2) was not issued by the AO - whether curable u/s 292BB? - HELD THAT:- From the contents of the Assessment Order, it appears that the show cause notice was represented and the assessee s case was validly assessed though mentioning of the Section 143(2) was not there on record. Yet, opportunity of representing the assessee was given during the assessment proceedings. Prima facie, from the assessment order, it appears that notice u/s 143(2) of the Act was issued to the assessee and the observations of the CIT(A) needs no interference. Hence, ground no.1 is dismissed. Cash seized during the course of search - onus to prove - HELD THAT:- AO has not doubted the books of accounts which was produced before the AO on 18.12.2013 during the course of assessment proceedings. On the contrary, in paragraph no.6 the observations are related to the evidence regarding books of accounts maintained on date of search was taken into account. At no point of time AO has doubted the books of accounts produced during the assessment proceedings and, therefore, the observation made by the AO in conclusion is not justifiable. Assessee has furnished the name address and PAN of the persons from whom assessee firm has transported the cash for which income has been shown by the assessee and, therefore, the onus casts upon the assessee to prove identify, creditworthiness and genuineness of the transaction was discharged fully by the assessee in respect of cash seized Therefore, the addition made by the AO was not justifiable. Decided partly in favor of assessee.
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2023 (6) TMI 222
Delay in filing the Misc. Applications by 887 days - HELD THAT:- Though the Hon ble Supreme Court has extended the period of limitation till 28.02.2022, the Ld. DR could not explain the delay from 14.09.2019 till 15.03.2020 (date from which Covid-19 restrictions were imposed) and from 28.02.2022 till the filing of present Misc. Applications which is 05.08.2022. Despite the extension granted by the Hon ble Supreme Court, the Revenue has filed the Misc. Application after five months from the period of extension granted and also six months after the original order dated 14.09.2019 was passed. Therefore, the delay in present Misc. Applications cannot be condoned.
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2023 (6) TMI 221
Disallowance of prior period expenses - CIT-A allowed claim - HELD THAT:- We find that the ld. AO had not doubted the genuineness of prior period expenditure and prior period income while making the disallowance on net basis. There is no change in tax rates in the year under consideration and earlier year. Further, we find that the assessee has been incurring continuously huge losses. Hence it would not make any difference with regard to allowability of expenditure in one year or the other. See National Cooperative Consumers Federation of India Ltd case [ 2012 (9) TMI 433 - ITAT, DELHI] - No infirmity in the order of the ld. CIT(A) granting relief to the assessee. Decided against revenue. Disallowance on account of extraordinary items written off - expenditure incurred on abandoned project - CIT(A) granted relief to the assessee by stating that there would be absolutely no enduring benefit that would accrue to the assessee by retaining these expenditures incurred on project which stood abandoned, in its balance sheet - HELD THAT:- Expenses incurred by the assessee corporation for Korba Project, as mandated to be closed down by the Government of India and by orders of BIFR. Once the project is abandoned either by the assessee or at the behest of the Government, all the expenditures incurred towards such project (be it capital or revenue) would fetch no value to the assessee and the same had to be written off by the assessee. It is not in dispute that the assessee had indeed written off the said abandoned project expenditure in its books during the year and had reflected the same as Extra-Ordinary Items Written Off . Since this issue does not arise on a regular basis to the assessee, we find that the assessee had rightly shown this as Extra Ordinary Items in accordance with Accounting Standard 5 issued by ICAI in its profit and loss account as a separate line item We hold that the extra ordinary expenses written off in respect of expenditure incurred on abandoned project, would be allowable as deduction. Accordingly, the Ground No.2 raised by the revenue is dismissed. Disallowance of miscellaneous expenses written off - deduction had been claimed by the assessee company towards abandoned project expenditure - HELD THAT:- The feasibility study report obtained was for a project for improving the operational efficiency of the existing plant and in any case the said project was abandoned. Hence the aforesaid expenditure incurred upto the year 1991-92 which were retained as a Balance Sheet item by the assessee corporation, was sought to be written off as abandoned project expenditure during the year. This in our considered opinion, would be an allowable expenditure. This issue is no longer res integra in view of the decision of Binani Cement Ltd [ 2015 (3) TMI 849 - CALCUTTA HIGH COURT] wherein it was held that expenditure incurred for construction/acquisition of new facility which was subsequently abandoned at work-in-progress stage was allowable in year of write off as incurred wholly and exclusively for purpose of assessee's business. No infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, the Ground No 3 raised by the revenue is dismissed. Disallowance on account of interest / penal interest on Government of India Loans - CIT-A allowed the claim - HELD THAT:- We find that the provisions of section 43B of the Act covers only interest payable on loans taken from Public Financial Institution or a State Financial Corporation or a State Industrial Investment Corporation or a Scheduled Bank. It does not cover interest payable on loans taken from Government of India. There is no dispute in the instant case that the sum of Rs 831.58 crores represent interest payable on loans from Government of India only. Hence in our considered opinion , it is outside the ambit of provisions of section 43B -We are in agreement with the observations of the ld. CIT(A) that there is no scope to intend something more or less than what is written in the plain language of the statute. Neither anything extra can be read into it which is not there in the statute, nor anything less can be read from what is written in the statute. No infirmity in the order of ld. CIT(A) granting relief in this regard. Accordingly, the Ground No. 4 raised by the revenue is dismissed. Disallowance of depreciation - As per revenue as no manufacturing activity was carried out by the assessee during the year and accordingly, the depreciation would not be allowable - HELD THAT:- We find that the concept of block of assets was introduced from 1.4.1988 in the statute and once the asset enters the block, its identity is lost and thereafter in subsequent years, the same would not be identifiable individually. As per the Income Tax Act, the depreciation is allowed on the block of assets and not on any individual assets. The plant and machinery for manufacture of fertilizers was kept in ready to use condition by the assessee company. As the asset loses its identity once it enters the block of assets. Hence there is no way for disallowing the depreciation on block of assets and the same would be taken care at the time of disposal of the assets in the block while computing short term capital gains u/s 50 of the Act on deeming fiction. Decided against revenue. Disallowance on account of employees contribution to PF and ESI - Delayed payment - HELD THAT:- this issue is no longer res integra in view of the decision of the Hon ble Supreme court in the case of Checkmate Services Pvt. Ltd [ 2022 (10) TMI 617 - SUPREME COURT] - It is not in dispute that the employee s contribution to PF and ESI were deposited by the assessee to the Government account beyond the due dates prescribed under the respective acts but well before the due date of filing of return of income u/s. 139(1) of the Act. We find that the recent decision of the Hon ble Supreme Court had settled the entire dispute to rest by deciding it in favour of the Revenue. Thus claim of deduction towards employee s contribution to PF ESI made by the assessee becomes an incorrect claim warranting primafacie adjustment u/s.143(1) - Decided in favour of assessee.
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2023 (6) TMI 220
Validity of the notice issued u/s. 143(2) - statutory time limit to issue notice - notice after expiry of six months from the end of the financial year - HELD THAT:- As per the proviso to section 143(2), no notice shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. In the present case, the assessee has filed his return of income for the AY 2019-20 (FY-2018-19) on 18/08/2019 and the notice U/s. 143(2) ought to have been served on or before 30/09/2020. Whereas the AO has issued notice u/s. 143(2) on 12/10/2020 after expiry of six months from the end of the financial year (FY 2019-20) in which the return is furnished. It therefore, in our considered view, attracts the proviso to section 143(2) in which case the assessment made based on such notice becomes void ab intio. As relying on Harman Singh Dhingra [ 2021 (11) TMI 854 - ITAT DELHI ] since the notice U/s. 143(2) was not issued within the statutory time limit, the assessment order passed by the Ld. AO itself becomes null and void ab initio. Decided in favor of assessee.
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2023 (6) TMI 219
Revision u/s 263 - long term capital gains returned by the assessee with a direction to AO to re-do the same by referring to the valuation of the property to DVO and also to reclassify the income as business income instead of long term capital gains as returned by the assessee and after giving an opportunity of hearing to the assessee - HELD THAT:- In the instant case, the assessee has not disputed the value of the estate as per the Stamp Valuation Authority but has preferred to adopt sale consideration actually received at Rs. 6,34,23,000/- as against the value of the Stamp Valuation Authority for the purpose of computing Capital gains. It is also admitted that the AO has not looked into these aspects while framing the assessment u/s. 143(3) r.w.s 144C(3) of the Act. Since the Ld. AO has failed to cause any enquiry on the above issues before passing the assessment order, Pr. CIT has held that the order of the Ld. AO passed u/s.143(3) r.w.s 144C(3) of the Act is not only erroneous but also prejudicial to the interest of the Revenue and accordingly, we are of the considered view the jurisdiction exercised by the Ld. Pr. CIT U/s. 263 of the Act is valid in law. Treatment of the income as capital gains or business income arising out of the sale of the industrial land by the assessee by converting it into various parts - From the plain reading of the 3rd proviso to section 50C(1) of the Act, we find that the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten percent [110%] of the consideration received or accruing as a result of the transfer. Accordingly, the consideration received shall be deemed to be the full value of consideration for the purposes of section 48 of the Act. In the instant case, the Ld. DVO has valued the property at Rs. 6,96,36,350/- which is less than 110% of the value of sale consideration received by the assessee as declared in the sale deeds. Since the character of the land has not been recategorized and has been sold as a fixed asset by the assessee, we hereby direct the Ld. AO to compute the income of arising out of the sale of the parts of the industrial land as capital gains of the assessee by considering the actual consideration received by the assessee. Thus, the grounds raised by the assessee are allowed.
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2023 (6) TMI 218
Disallowing 50% of depreciation on vehicle - vehicle was registered in the second half of the relevant previous year - HELD THAT:- We find force in the argument of AR that since the assessee had paid for the entire purchase cost and had vehicle in its possession before 30.09.2014 and simply because the registration was done on 22.11.2014, the assessee cannot be denied the benefit of depreciation for the full year. We find support in the decision of National Thermal Power Corporation Ltd. [ 2012 (10) TMI 720 - DELHI HIGH COURT ] wherein as held that used or the purposes of the business would include the asset which is kept ready for use but actually not put to use. Before us, Revenue has not pointed to any contrary binding decision in its support. In such a situation, we hold that assessee is entitled for deprecation for entire year. Direct the AO to allow the claim of depreciation for the entire year. Thus the ground of assessee is allowed.
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2023 (6) TMI 217
Penalty u/s. 271(1)(c) - cash payment in excess of Rs. 20,000 u/s 40A - payment in cash was made for hospital bills as the hospitals did not accept payment through cheques - HELD THAT:- AO was not correct and justified in holding that the assessee has not furnished accurate particulars of income and hence, concealed particulars of income and liable to be imposition of penalty u/s. 271(1)(c) of the Act on account of furnishing of inaccurate particular of income particularly in a peculiar situation in the present case that the assessee has disclosed and recorded entire amount of claim incurred on medical emergencies under commercial expediency in the books of accounts of assessee. As decided in Reliance Petroproducts (P) Ltd [ 2010 (3) TMI 80 - SUPREME COURT] merely because the claim of assessee was not accepted for not found to be acceptable by the revenue authorities the penalty u/s. 271(1)(c) of the Act, cannot be levied on the assessee. AO dismissed claim of expenditure of assessee on account of violation of section 40A(3) of the Act, without raising any other allegation or ground of dismissal and hence, when the assessee disclosed and recorded entire claim on medical emergencies in its books of accounts then neither it can be alleged that assessee has furnished inaccurate particulars of income or has concealed particular of its income. Decided in favour of assessee.
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2023 (6) TMI 216
Addition u/s 14A r.w.r. 8D - HELD THAT:- No hesitation in confirming the order passed by the Ld. CIT(A) who deleted the addition of interest expenditure u/s 8D(2)(ii). Administrative expenses under Rule 8D (2)(iii) - Disallowance made under Rule 8D(2)(iii) at 0.5% of the average value of investments made by the assessee, which earned only exempt income is liable to be disallowed u/s. 14A after excluding the investments which earned taxable income. Thus the disallowance to be made under Rule 8D(2)(iii) works out to Rs. 7,53,382/- only, however the assessee already disallowed a sum of Rs. 28,78,876/-, therefore no further disallowance is to be made on this account. Disallowance u/s. 14A read with Rule 8D while computing book profit under section 115JB - HELD THAT:- Recently, the Supreme Court of India in the case of Atria Power Corporation Ltd. [ 2022 (8) TMI 1322 - SC ORDER] dismissed the SLP filed by the Department against High Court s ruling that disallowance made under section 14A could not be added in assessee-company's income for purpose of computation of income under section 115JB of the Act. Karnataka High Court in the case of J.J. Glastronics (P.) Ltd. [ 2022 (4) TMI 1187 - KARNATAKA HIGH COURT] held that amounts disallowed under section 14A could not be added to net profit while computing book profit under section 115JB of the Act. The ITAT Ahmedabad in the case of Vishal Export Overseas Ltd [ 2022 (8) TMI 88 - ITAT AHMEDABAD] held that disallowances made under section 14A read with rule 8D could not be applied to provision of section 115JB. Decided against revnue.
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2023 (6) TMI 215
Bogus purchases - reason for treating the purchases as non-genuine is the assessee has not produced PAN number, no address proof, no counter-signed ledger account - HELD THAT:- The assessee in fact filed copy of TIN of the supplier to prove the identity and existence of business concern. Therefore, in our view simply because the assessee has not filed PAN, copy of ITR, these purchases cannot be treated as non-genuine. In the case of Shri Kalyan Singh the only ground on which the addition was sustained by the ld. CIT (Appeals) was that the assessee has not deducted the TDS, even though the assessee has furnished copy of ledger account in the books of the assessee company, copy of vouchers and bank statements, copy of ledger for the financial year 2010-11, copy of vouchers and ledger details in respect of the work done by the vendors. Non-deduction of TDS cannot be a ground for treating the purchases as non-genuine. Similarly in the case of Sirazuddin Gitti Supplier the addition was sustained by the ld. CIT (Appeals) for the reason that the assessee has not mentioned any TIN, did not file copy of ITR, PAN, confirmation ignoring the copy of bank statement, copy of ledger account in the books of assessee company, copy of invoices, purchase orders. The vendor here had supplied stone dust, a construction material with weigh bridge challans and invoices. Thus there is no justification in sustaining the additions by the ld. CIT (Appeals) in respect of purchases/expenses from the above parties. Thus, we direct the Assessing Officer to delete the addition/disallowance - Decided in favour of assessee. Addition made on the alleged entries in the seized material - assessee has not explained the entries with regular books of accounts and also could not provide the identity of the parties - HELD THAT:- To find out whether the entries appearing in the diary reflects either the assessee has received the payments or made the payments. AO did not bring any material or evidence to corroborate that these expenses were incurred by the assessee. AO has not made any effort whatsoever to make any investigation even though names of persons clearly mentioned in the entries made in the loose sheets. There was no statement recorded from the assessee during the course of search vis- -vis the impugned seized material. AO simply added the amounts appearing in the diary as unexplained income of the assessee.AO also did not verify the contention of the assessee that these loose sheets did not pertain to the assessee or it is rough work for the site purposes. Therefore, since the AO has not made any efforts to make any sort of enquiries or investigation on the entries made, we are of the view that this issue has to go back to the AO for further examination and investigation.
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2023 (6) TMI 214
Disallowance u/s 14A r.w. Rule 8D - whether assessee has not earned any exempt income? - HELD THAT:- AO has clearly stated that the assessee has not earned from equity investments which would yield exempt dividend income and the dividend income earned by the assessee is NIL. Thus, it is clear that the assessee has not earned any exempt income in the relevant assessment year under appeal against the investments. As relying on M/S CHETTINAD LOGISTICS PVT. LTD. [ 2018 (7) TMI 567 - SC ORDER] held that when there was no dividend income earned in the relevant assessment year, the disallowance made by the Assessing Officer in view of the provisions of section 14A r.w.r. 8D was completely contrary to the provisions of that section as Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of total income of the assessee. Also confirmed by SC [ 2018 (7) TMI 567 - SC ORDER] - Decided against revenue.
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2023 (6) TMI 213
Disallowance of provision for warranty created in excess of 2.14% of the sales - HELD THAT:- As relying on assessee own case [ 2023 (4) TMI 1053 - KARNATAKA HIGH COURT] we direct the AO to grant deduction of provision for warranty as claimed in the return of income. It is ordered accordingly.
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2023 (6) TMI 212
Disallowance of reversal of amount received as bank guarantees and interest for earlier years - HELD THAT:- There is no dispute to the fact that the assessee is carrying on Government of India mission working on behalf of the Government of India. The contracts have been executed under the policy in directions of Government of India. The assessee being custodian of the Government money such money into the hands of assessee cannot be termed as income at any stage. CIT(A) was not in error in giving the finding that appellant is merely custodian of the money received from encashment of bank guarantee and that the assessee has rightly treated the amount receive on encashment of bank guarantee during financial year as a liability along with the interest is liability. However, he failed to appreciate that the directions of the ministry being clarificatory in nature and also carrying a mandate of compliance by the assessee cannot be prospective only. The administrative directions in financial matter of Government entities have to be taken to be retrospective to time to which controversy relates unless specifically directed to be prospective. Accordingly, Ld. CIT(A) erred in disallowing the reversal of amount received as bank guarantees and interest for earlier years - Decided in favour of the assessee. Addition of prior period expenses towards superannuation benefits - HELD THAT:- The Bench is of the considered view that the settled provisions of law is that if any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability have been actually claimed and paid in the latter previous years it cannot be disallowed as deduction nearly on the basis that the accounts are maintained on mercantile basis and that it can relate to transactions of the previous years. Reliance can be placed on the judgement Saurashtra Cement and Chemical Industries Ltd [ 1994 (10) TMI 30 - GUJARAT HIGH COURT ] Since the change and accounting and computation is outcome of binding nature of department of Public Enterprises Guidelines, the assessee had no option but to comply and accordingly the liability is to be considered to be crystallized during the year under consideration. The binding nature of instructions on assessee to make provision as per the instructions in itself is justification for making debit in the accounts, which Ld. CIT(A) failed to appreciate. Even otherwise the business of assessee is ongoing and rates of taxes have not change, thus, making disallowance revenue neutral.- Decided in favour of the assessee. Disallowance of expenses incurred on Corporate Social Responsibility - HELD THAT:- It can be appreciated that the assessee is supposed to follow the guidelines of department of Public Enterprises. The CSR expenses have been incurred by the assessee voluntarily taking as responsibility under the mandate of CSR guidelines of the DPE. Ld. CIT(A) has fallen in error to apply strict principles of Act that expenditure should be wholly and exclusively for the purpose of business to the assesee which is a public enterprises. The nexus theory with the objectives of CSR expenditure qua the objectives have to be considered in case of public enterprises on different footing as they also have wider horizon of benefit of society than their objectives alone and Ld. CIT(A) has failed to appreciate same. As decided in M/s. HLL Life Care limited [ 2018 (6) TMI 552 - ITAT COCHIN] assessee had incurred CSR expenses to comply with the directions of Govt. of India, thus, the expenditure incurred is incidental to the assessee's business and ought to be allowed as deduction u/s 37 - Decided in favour of assessee.
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2023 (6) TMI 211
Correct head of income - lease rental income received from letting out of school building along with infrastructure and other amenities - income from other source or income from house property - HELD THAT:- The issue involved in this appeal is, the assessee declared the income earned from letting of school building with amenities under the Head income from House Properties from A.Y. 2009-10. This issue was decided by the Ld.CIT(A) and ITAT in favour of the assessee till A.Y.2012-13. We decidethe issue of taxability of income under the Head Income from House property .
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2023 (6) TMI 210
TP adjustment - quantum of adjustments made in respect of corporate guarantee - HELD THAT:- Respectfully following the decision of the Tribunal in assessees s own case [ 2021 (3) TMI 1162 - ITAT PUNE ] we set-aside the order of the lower authorities and direct the AO/TPO for computing the ALP transactions of corporate guarantee by adopting 0.5% of the corporate guarantee as guarantee fees plus actual expenditure incurred in furnishing such guarantee. Considering Performance Guarantee and Corporate Guarantee separately - HELD THAT:- This issue is covered by the decision of this Tribunal in assessee s own case for assessment year 2015-16 [ 2023 (2) TMI 568 - ITAT PUNE ] as well as earlier years also, wherein, this Tribunal following the earlier order of this Tribunal in assessee s own case for the assessment years 2013-14 [ 2021 (11) TMI 140 - ITAT PUNE ] and 2014-15 [ 2021 (3) TMI 1162 - ITAT PUNE ] had reversed the decision of the ld. CIT(A) that the performance guarantee should be excluded and further proceeded to hold that the performance guarantee should be benchmarked on par with financial guarantee. Thus this issue is set-aside to the TPO on the similar lines indicated in the order of the Tribunal supra. Selection of MAM - CIT(A) directing AO/TPO to adopt the internal TNMM as the most appropriate method for the purpose of benchmarking the international transactions of purchase and sale of pharma products from its AEs - HELD THAT:- Respectfully following the decision of this Tribunal in assessee s own case for earlier assessment year 2015-16 [ 2023 (2) TMI 568 - ITAT PUNE ] we remand the matter to the file of the AO/TPO to adopt external TNMM as the most appropriate method for the purpose of benchmarking the international transactions of purchase and sale of pharma products from its AEs. Thus, the ground of appeal partly allowed for statistical purposes. Determination and carry forward of loss arising on sale of shares sold to its another wholly owned subsidiary foreign company holding the same to be non-genuine - HELD THAT:- We find that the reasons assigned for disallowing the claim for determination and carry forward of long term capital loss on the sale of shares of Bilcare Singapore PTE Ltd. held by the assessee sold to its another wholly owned foreign subsidiary company Bilcare Packaging Ltd. (Mauritius Entity) cannot be sustained in the eyes of law. Though the order of the CIT(A) is bereft of detailed discussion on facts and law, we are in agreement with the conclusion reached by the CIT(A) that loss arising on sale of BSPL shares is allowable as Long term capital loss - Decided against revenue. Depreciation on the assets which are ceased to exist in the Block of assets - decision of CIT(A) in directing AO not to deduct sum from the value of opening Written Down Value (WDV) from the Block of Assets under which the assets leased to Bilcare Singapore PTE Ltd. falls - appellant had not received any sale consideration on cessation of the asset is not in dispute - HELD THAT:- Admittedly, in the present case, under wrong notion, the assessee company had reduced the WDV of the assets leased to BSPL from the opening value of the block of assets under which it falls. However, during the course of assessment proceedings, it sought to rectify this mistake by claiming the higher depreciation without such reduction. The CBDT vide Circular No.14/1995 had clarified that while computing the taxable income of an assessee should be computed in accordance with the provisions of law, even a fresh claim made during the course of assessment proceedings in the absence of any statutory bar should be considered by the AO. CIT(A) is correct in allowing the claim of assessee. We do not find any perversity or illegality in the findings of CIT(A). We do not find any merits in grounds of appeal filed by the Revenue, hence dismissed.
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2023 (6) TMI 209
Revision u/s 263 - as per CIT large share premium received against allotment of shares have not been enquired into on the touchstone of Section 56(2)(viib) by AO - HELD THAT:- The chargeability of deemed income arising from transactions between holding and subsidiary or vice versa militates against the solemn object of Section 56(2)(viib) - the extent of inquiry on the purported credibility of premium charged does not really matter as no prejudice can possibly result from the outcome of such inquiry. Thus, the condition for applicability of Section 263 for inquiry into the transactions between to interwoven holding and subsidiary company is of no consequence. We also affirmatively note the decision of SMC Bench in the case of KBC India Pvt. Ltd. ..[ 2022 (11) TMI 1362 - ITAT DELHI] where it was observed that Section 56(2)(viib) could not be applied in the case of transaction between holding company and wholly owned subsidiary in the absence of any benefit occurring to any outsider. Preliminary enquiry, if undertaken, by Pr.CIT would have thus possibly changed the discourse in the present case. Inquiry on the parameters of Section 68 - On an enquiry from the Bench,counsel placed the assessment order passed by the AO in pursuance of the impugned revisional order and submitted that the additions has been carried out u/s 56(2)(viib) by re-determining the Fair Market Value. Assessee thus contends that the Assessing Officer was thus also satisfied with the parameters of Section 68 towards such nature and source of such credits in the post revisional proceedings. A revisional action of the Pr.CIT in the context of the facts of the case thus appears to be wholly unjustified and without meeting the jurisdictional requirement of Section 263 - We find wholesome merit in the plea of the assessee for cancellation of the revisional order and restoration of the order of the Assessing Officer. Decided in favour of assessee.
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2023 (6) TMI 208
Short deduction of TDS - TDS at 10% u/s 194I or at 2% u/s 194C - Common Area Maintenance charges (CAM) paid - HELD THAT:- CAM charges paid by the assessee or not for land used or area allotted simplicitor. These are the charges for various common services provided to various lessees. As relying on CONNAUGHT PLAZA RESTAURANTS P. LTD. case [ 2022 (1) TMI 409 - ITAT DELHI] and M/S AERO CLUB [ 2023 (3) TMI 101 - ITAT DELHI] CAM charges paid by the assessee are liable for TDS only at 2% u/s 194C of the Act and not at 10% u/s 194I of the Act. Grounds raised by the assessee on this issue are allowed.
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2023 (6) TMI 207
Validity of Reopening of assessment - reason to belief - Bogus share transactions - independent application of mind by AO v/s borrowed satisfaction - certain information from Investigation Cell where statement of President Anand Rathi Commodities recorded there were client code modifications of transactions in which there was no physical delivery of the goods on NSEL platform and that the said scam was investigated by DDIT(Inv) - HELD THAT:- The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded reason and there should be a link or close nexus between material obtained and formation of belief. From the perusal of the reasons recorded by the Assessing Officer, it is noticed that the Assessing Officer though, has given a detailed description of information received from DDIT(Inv), he has not recorded any finding with respect to the alleged transactions entered into by the assessee and the basis on which the income of Rs. 17,40,120/- is found to be undisclosed. AO has described the overall nature of the fraud committed but failed to record how the same to be related to the assessee. On perusal of records, it is noticed that there is a gap in understanding of facts with regard to the speculative losses incurred by the assessee, which, according to the AO, cannot be set off against the normal business income. A perusal of the P L Account evidences that the assessee had only income from non speculative business and does not have any speculative loss which he has set off against any income. Therefore, we see merit in the contention of AO while recording the reasons, has not applied his mind and has not brought out any factual finding with regard to the impugned addition. It is also noticed that the assessee s request with regard to the workings of the impugned addition and the statements recorded from President Anand Rathi Commodities was not shared with him by the lower authorities. Reopening u/s 147 has been done without recording any specific reasons pertaining to the assessee and without linking the information received from DDIT (Inv) specifically to the assessee - Decided in favour of assessee.
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2023 (6) TMI 206
TP adjustment - IT and Management Support Charges - HELD THAT:- Tribunal in assessee s own case for AY 2014-15 [ 2022 (3) TMI 1528 - ITAT BANGALORE] had restored an identical issue to the TPO to determine the ALP of the IT and Management support charges. Payment of IT support services and management support services are pertaining to the agreement and is binding for AY 2014-15 and also for the relevant assessment year. Restore this issue to the file of the TPO so that consistency can be maintained. TPO is directed to examine the issue afresh by taking into account the evidences filed by the assessee in support of its contention that it was in receipt of services from it AEs for making the above said IT and management support services payments. Ground allowed for statistical purposes.
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2023 (6) TMI 205
Penalty u/s 271(1)(c) - TP adjustment for US and non US transactions - HELD THAT:- As rightly observed by Commissioner (Appeals), the entire TP adjustment was due to change in filter and comparables by the TPO. There cannot be any doubt that application of filters and selection of comparables are highly debatable issues. Therefore, in respect of additions made on such issues, the assessee cannot be accused of furnishing inaccurate particulars of income or concealing income. Therefore,Commissioner (Appeals) was justified in deleting the penalty imposed in respect of addition made on account of TP adjustment. Disallowance of provision of doubtful debts - On perusing the computation of income filed by the assessee along with return of income, prima facie, we are convinced that the assessee has itself disallowed the amount in dispute while computing its income. In any case of the matter, after the order of the Tribunal, the addition as on date, doesn t survive. Thus, in our view, learned Commissioner (Appeals) was justified in deleting the penalty imposed under Section 271(1)(c) of the Act. Assessee appeal allowed.
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2023 (6) TMI 204
Business expenditure u/s 37(1) - effect of treatment of expenditure by the assessee in its books of accounts - HELD THAT:- AO has nowhere denied that expenditure in question has been incurred for the purpose of the business. He has also not denied that those expenses are routine in nature and same would generally be classified as revenue Expenditure as per the provisions of the Act. The business of the assessee has already been set up and assessee has commenced providing digital services to its customers. The revenue from the same as also been recognised in books of accounts and offered for the tax. In such circumstances, the expenses which are incurred for running the business are revenue expenditure for the purpose of income tax irrespective of the treatment of the same by the assessee in its books of accounts. DR could not substantiate as how the expenses incurred for day-to-day business are for upgradation of the asset and of enduring benefit. Though the assessee has treated those expenses in its books of accounts as capital expenditure following the Indian accounting standard, but these expenses, list of which has been reproduced above have been incurred in relation to services provided to existing customers, and therefore same being incurred wholly and exclusively for the purpose of the business, deserve to be allowed in terms of section 37(1) - Decided against revenue.
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2023 (6) TMI 203
Disallowance towards Debenture Redemption Premium paid to HDFC AMC and included in Work-in-Progress of Aurora Project - Whether the premium on redemption of debentures, which is akin to payment of interest is eligible for capitalization in work-in-progress? - HELD THAT:- It is not disputed by the Revenue that the loan from Central Bank of India and other group concerns were taken specifically for Aurora Project . The fresh loan taken for repayment of the earlier loans which were undisputedly for the purpose of business, would for all intent and purpose be considered as loan for the purpose of business to the extent they are utilized for repayment of earlier loans or infused as fresh funds for the current business of the assessee. We deem it appropriate to restore this issue back to the file of AO for the limited purpose to examine the extent of OCDs utilized for payment of the earlier loans (including loan from the bank and other group concerns) taken for the Aurora Project . To the extent OCDs are used for repayment of old loans taken for the purpose of assessee s business, premium on redemption of debentures is to be allowed for capitalization in work-in-progress.
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Customs
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2023 (6) TMI 202
Seeking condonation of delay in filing the appeal - Sufficient reasons for delay was given or not - appeal was returned as defective - valuation of the goods imported by the respondent from related foreign suppliers - HELD THAT:- The impugned order indicates that the learned Tribunal examined the explanation provided by the Revenue and found the delay to be unjustified - Much of the reasons for the delay were attributed to inter-departmental communication. Further, part of the delay was also sought to be explained on the ground that the Revenue had written letters to the Registry of the learned CESTAT attempting to ascertain the status of the appeal. The learned CESTAT, after examining the said letters found, on the basis of the communications dated 23.11.2020 and 17.12.2020, that the Deputy Commissioner of Customs (Review) had admitted that on verbal enquiries, information was provided that the appeal papers had been returned back to that office by the Registry of the CESTAT - The learned CESTAT held that once the Deputy Commissioner of Customs (Review) had become aware that the appeal had been returned back, at least at that stage, he could have taken steps for filing a fresh appeal, however, the appeal was filed much belatedly on 10.02.2022. The learned CESTAT has, accordingly, concluded that there were no justifiable reasons for the delay in filing the appeal after the same was returned as defective. The impugned order is well reasoned and cannot be faulted - no substantial questions of law arise in the present appeal - Appeal dismissed.
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2023 (6) TMI 201
Revocation of Customs Broker License - forfeiture of Security Deposit - levy of penalty - IGST refund frauds - exporters could not be found at all physically at their registered premises - untraceable exporters - violation of Regulation 10(n) of CBLR, 2018 - HELD THAT:- The Tribunal has examined the scope of these obligations in the case of M/S Anax Air Services Pvt Limited vs Commissioner of Customs, (Airport and General), New Delhi [ 2022 (1) TMI 115 - CESTAT NEW DELHI ] - It is found that physical verification of the business premises is not an obligation cast upon the CB, under Rule 10(n) of CBLR, 2018. The Tribunal in the above said Order further examined the reliability of these documents issued by various Government agencies and analyzed the scope of the Custom Broker in relying on these documents to fulfill their obligations under CBLR 2018 and held that In view of the customs RMS letting 80% to 95% of the exports without either assessing the documents or examining the records, there is a very high probability of any fraudster successfully exporting the goods (or even empty containers) and claiming the export incentives and profiting from it. It is found that the ratio of the above said order of the Tribunal is squarely applicable in this case. In the present case also, the appellant has collected the documents such as IEC, GSTIN etc. submitted by the exporter before processing their shipping bills. Later if they were not found to be existing in the said addresses, the appellant cannot be held responsible for their non existence at the address specified, as held by the Tribunal in the case of Anax Air Services - the allegation against the appellant in the impugned order that they have violated Regulation 10 (n) is not sustainable. The impugned order cannot be sustained and is set aside and the appeal is allowed.
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2023 (6) TMI 200
Classification of imported goods - Ultrasonic Cleaner - misdeclaration of description and value of the goods - change of classification from declared CTH 84239020 to CTH 90610010 - rejection of declared value - HELD THAT:- No reason has been given in the Impugned order for rejecting the transaction value except stating that the goods were miss-classified. It is settled law that miss classification of the goods cannot be the reason for rejection of the declared value which is determine on the transaction value between the supplier of the goods and the receiver in the course of international trade. Hon'ble Supreme Court has consistently held that the proper reason for rejection of the transaction value needs to be recorded. It is not even the case that these Ultrasonic Cleaners were not complete or sold in the market for addition of some other value. Hence the deducted value as per Rule 7 of Custom Valuation Rules method applied by the revenue without rejecting the transaction value cannot be justified. Appellant does not dispute any other part of the order. Reassessment order as per the impugned order should be done on the basis of the transaction value declared by the appellant at the time of assessment. With the notification impugned order is upheld. Appeal partly allowed.
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2023 (6) TMI 199
Re-import of goods - Claim of exemption from customs duty - Whether the original export was under the claim of refund of IGST - Benefit of Notification No.45/2017-Cus dated 30.06.2017 - contravention of the provisions of Sections 12, 17 and 46 of the Customs Act or not - It is the case of the appellant that at the time of export, they had wrongly mentioned that the export is being made for refund of IGST, wherein there was no claim for refund made - HELD THAT:- It is an admitted fact that the appellant neither claimed refund at any point of time, nor any such refund was granted to them. This fact has also been confirmed by the Revenue. There is no basis for issue of show cause notice dated 22.08.2019, wherein, it was alleged that the goods were exported under claim for refund of Integrated G.S. tax paid on export goods. Hence, under Sl.No.1 (c) of the said notification, the appellant was entitled to exemption for customs duty, save and except the amount of refund of IGST at the time of export. There is no mistake on the part of the appellant at the time of re-import of the goods, wherein, they claimed exemption under Sl.No.5 of Notification No.45/2017-Cus. - Appeal allowed.
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Corporate Laws
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2023 (6) TMI 196
Sanction of scheme of Amalgamation - Section 230-232 of Companies Act - HELD THAT:- As per Section 230(9) of the Companies Act, 2013, the Tribunal may dispense with the calling of a meeting of creditors or class of creditors, where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. As the Appellant/Transferor Company No-1 is a closely held family company and sole unsecured creditor, had conceded to the scheme of Amalgamation by way of affidavit, therefore, in terms of section 230(9) of the Companies Act, 2013 the meeting of sole unsecured creditor of Appellant/Transferor Company Appellant No-1 could have been dispensed with by the Tribunal and as such, there are merit in the averments of the Appellant . It is noted that Transferee company did not obtain the NoC/consent from its secured and unsecured creditors. Therefore, the directions were sought by Transferee Company from the Tribunal to convene the meetings of its secured and unsecured creditors - As per Explanation to Rule 5(d) of the Companies (Compromises, Arrangements and Amalgamation Rules,) 2016 the Chairman, inter-alia shall, at the general meeting, at the end of discussions on the resolutions on which voting is to be held, allow voting by use of electronic voting system for all those members who are present at the general meeting but have not cast their votes by availing the remote e-voting facility. Hence, by not allowing to vote in other modes other than in person in meeting of secured and unsecured creditor of Transferee company as permitted as per Companies Act, 2013 and rules made thereunder to vote on resolution is not sustainable and the Tribunal erred on this account. The impugned order deserves to be set aside with direction to look into all these issues in accordance with the law - Appeal allowed.
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Securities / SEBI
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2023 (6) TMI 195
Offence under SEBI - person responsible for the commission of the offence - person responsible for the carrying out the business - liability of director - allegation of Fraudulent and Unfair Trade Practices - Additional Session Judge set aside the summoning order qua the Respondent No. 1 while observing that the Complaint filed did not contain any material to suggest that the Respondent No. 1 herein was responsible for the carrying out the business of IHIL - HELD THAT:- It is now trite law that a Director cannot ipso facto, simply by virtue of being the director of a Company, be arraigned as an Accused by the SEBI [Refer to: SEBI v. Gaurav Varshney [ 2016 (7) TMI 642 - SUPREME COURT] . By virtue of being a juristic person the acts attributed to a Company are attributed to the officers at the helm of affairs. Every person responsible for the commission of the offence or with the knowledge of whom the offence was committed, is liable for the offence. There is now burgeoning jurisprudence both under the SEBI Act, and under the Negotiable Instruments Act, 1881 which suggests that the liability is fastened upon an individual by virtue of being in charge, and being responsible when the offence was committed, and not merely on the basis of holding a designation or office in the company. Even an individual not holding a particular designation in the Company, but who was at the helm of affairs at the relevant time can be held liable. Hence, such vicarious criminality is not attributed to individuals simply by virtue of the position held by them in the company. The Director or officer of the company needs to have played a role in the functioning of the Company or in the commission of the offence, as recorded in the Complaint, to be arraigned as an Accused. There must be specific averments against the Accused Director detailing the manner in which the Director was responsible for the conduct of the business. A company may have numerous Directors, however, it is apposite to state that to make each of these Directors accused persons simply by virtue of their position in the Company is not the true import of Section 27 of the SEBI Act. As stated, there is not even a bald cursory averment which ties Respondent No. 1 to the allegations of price manipulation of IHILs stock. It appears that the Respondent No. 1 has been arraigned as an Accused solely by virtue of him being a Director in IHIL. On the contrary, the statements of Accused Nos. 16 and 10, categorically stated that the day to day affairs of IHIL were being handled by Mr. Prakash Gupta, Accused No. 16, Shri L.R. Maurya, Accused No. 10 and Shri. Shririam Maurya, Accused No. 11. It must also be noted that the Summoning Order dated 29.03.2000 was quashed qua similarly placed Accused Persons i.e., Mr. Vinod Kumar, also a Director of IHIL, Accused No. 12 and Mr. Pankaj Goel, Accused No. 20. In light of this, this Court does not find any reason to interfere with the order dated 24.03.2009 passed by the Learned Additional Session Judge in Revision Petition.
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Insolvency & Bankruptcy
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2023 (6) TMI 194
Fraudulent/wrongful trading - related party transaction of not - Lands sold at a Higher Amount than at which, the same was purchased - intent of defrauding its Creditors - HELD THAT:- The expression Party to the carrying on business, indicates taking positive steps, in carrying on company s business, in a fraudulent manner. The intent to defraud, is to be judged, by its effect on a Person, who is the object of conduct, in question - A preponderance of probability suffices, but the degree of probability must be such that the Tribunal, is satisfied and further that under Section 66 of the I B Code, 2016, it is not essential to attract that there ought to be a Debtor and a Creditor relationship. It must be borne in mind that for proving a Fraudulent Trading needs meeting the High Standard of Proof, which is attached to a Fraudulent Intent. A Director, of a Company, may be proceeded against for a Wrongful Trading, because of the reason of Negligent Failure of Management. Besides this, a person, knowingly a Party to a Fraudulent Trading, by the Company concerned, may be subject to the proceedings - The Appellant has a duty, to establish to the satisfaction of this Tribunal, that a person, is knowingly carrying on the business with the Corporate Debtor, with an dishonest intention, to defraud, the Creditors. For a Fraudulent Trading / Wrongful Trading, necessary materials are to be pleaded by a Litigant / Stakeholder, by furnishing Requisite Facts, so as to come within the purview of the ingredients of Section 66 of the I B Code, 2016. Suffice it, for this Tribunal, to pertinently point out that the ingredients of Section 66 (1) and 66 (2) of the I B Code, 2016, operate in a different arena. It is crystalline clear that the transaction of Transfer of Assets, among / within the Group Companies, ex-facie, will not come within the umbrage of the Fraudulent Trading, as per Section 66 (1) of the Code, as opined by this Tribunal. Furthermore, in the instant case, the Appellant / Applicant, has made an fervent endeavour, to converse the transactions, allegedly made by the Respondents, as per Section 66 of the Code. On a careful consideration of the contentions, advanced on behalf of the Appellant, and keeping in mind of the facts and circumstances of the case, in an integral manner, and also on going through the impugned order of dismissal, passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai), comes to a conclusion that the Appellant / Applicant, had not established the Aspect of Fraud or Dishonest Intent, on the Respondents side, to the subjective satisfaction of this Tribunal. As such, the view taken by the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai), preferred by the Appellant / Applicant, in dismissing the application is free from any legal errors. Consequently, the Appeal, fails. Appeal dismissed.
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Service Tax
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2023 (6) TMI 193
Recovery of service tax alongwith interest and penalty - suppression of value of freight paid, hire charges, warranty charges and site formation and clearance services - benefit of exemption under Notification No. 17/2005-S.T. dated 07.06.2005 - extended period of limitation under Section 73(1) of the Finance Act, 1994 - HELD THAT:- There cannot be any dispute that the first Show Cause Notice, which was issued based on the audit objections, did consider all the relevant facts and thus, the concerned authority of the Department was very much aware of the relevant facts. Hence, while issuing the second Show Cause Notice, the very same facts could not be held as suppression of facts by the appellant as these facts were very much in the possession / knowledge of the authorities. The decision of the Hon ble Apex Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] is apt - It was held the said case that Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. Thus there was no suppression of facts on the part of the assessee/appellant - the above ruling squarely applies to the facts of the case on hand. It is also a fact borne on record that other than the audit observations, no other material facts have been brought on record by the Revenue. Hence, the allegation of suppression of facts made by the Revenue should fail and therefore, the impugned orders cannot sustain. Merits of the case - HELD THAT:- The initial work essentially required the formation of service roads, which was essential for carrying the men and material / equipment and other accessories to the site of work and only thereafter could the clearance of jungle in and around the GTS level get started - the appellant did construct road, which was clearly essential in order to reach the place of work. Further, we also note that the contract belonged to a unit of the Government i.e., the Indian Navy, the scope of work was awarded initially to another Government Organization i.e., ECIL, and hence, the service of site formation and clearance, excavation and earth moving and demolition and other similar activities, were rendered to a Government organization, which is also exempt from the purview of Service Tax. The appellant has claimed, rightly so, that it did construct roads as well as provide site formation and clearance, excavation and earth moving and demolition service and has thus, claimed the benefit of Notification No. 17/2005 ibid - the appellant is entitled to the benefit of the exemption Notification No. 17/2005 ibid. The impugned demand cannot sustain for the reasons i.e., (i) the service was rendered to a Government organization and (ii) the same is also covered under the exemption Notification No. 17/2005 ibid., and therefore, the impugned demand cannot sustain. The impugned orders on both the counts set aside - appeal allowed.
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Central Excise
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2023 (6) TMI 198
Classification of goods - printed graphics with pictures, printed plastic and PVC sheets, printed graphics, injected graphics, screen graphics with printed pictures, printed on plastic films with logo design brand etc. - to be classifiable under Chapter Heading 4901 of Central Excise Tariff Act, 1985 or not - HELD THAT:- The adjudicating authority has examined the issue on classification and has observed that the Products of Printing Industry excepting the glow sign items would properly be classifiable under Chapter subheading No. 4901.90 in terms of Note 2 of Section VII of CET and also in terms of Note 2 of Chapter 49 of Central Excise Tariff. The Tariff rate was Nil during 2001-02 and 2002-03, for the products under Chapter sub-heading No. 4901.90. Therefore, the printing of logo and designs on plastics by the noticee (excepting the Glow sign products) will appropriately fall under Chapter subheading No. 4901.90. The Adjudicating Authority has also held that the correct classification is 4901.90. The Revenue has not disputed the fact that the observations made by the Adjudicating Authority, are not correct and the product is not classifiable under Chapter Sub-heading No.4901.90. The appeal field by the Revenue, deserves no merit - Appeal dismissed.
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2023 (6) TMI 197
Refund claim - refund rejected as filed beyond the period of limitation - present refund has been filed by the appellant claiming that they have debited the amount for which they have filed the refund claim as directed by the Superintendent - HELD THAT:- Both the authorities have held that the refund claim is barred by limitation. The view expressed by the authorities is in line with the decision of the Hon ble Apex Court in case of Sansera Engineering Pvt Ltd [ 2022 (12) TMI 49 - SUPREME COURT ] where it was held that In the present case, as the respective claims were beyond the period of limitation of one year from the relevant date, the same are rightly rejected by the appropriate authority and the same are rightly confirmed by the High Court. We see no reason to interfere with the impugned judgment and order passed by the High Court. There are no merits in the appeal filed by the appellant - appeal dismissed.
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2023 (6) TMI 192
Area Based Exemption - conclusion as reached is perverse for non-consideration of the evidence or not - CESTAT has taken into consideration the materials available on record or not - power of the High Court, to interfere with an order passed by an Appellate Tribunal - section 35G of Act, 1944. HELD THAT:- It is well settled that the power of the High Court under section 35G of Act, 1944 to interfere with an order passed by an Appellate Tribunal is very limited and the same can be done, only when the Court is satisfied that the case involves substantial questions of law - Finding of facts reached by an Appellate Tribunal cannot be interfered or reversed in an appeal under section 35G of the Act 1944 without coming to a conclusion that the said finding of fact is either perverse or not based on materials on record. The word Perverse in the legal parlance is defined to mean against the weight of evidence . It is equally well settled that even when from the evidence two inferences are possible, then the one drawn by the Tribunal below should be opted. Such finding of facts and decision can only be interfered in an appeal under section 35G of the Act 1944, when such decision is based on inadmissible evidence or arrived at without evidence or recorded based on misreading of materials on record and documents. In the case in hand, from the show cause notice as well as from the order of the Commissioner dated 29.07.2008, it is clear that the order of exemption granted to the respondent on 10.12.2002 is not disputed - the conclusion of the Appellate Tribunal in discarding the Investigation report on ground that the investigation was done in the year 2005 and not immediately after the exemption was granted, cannot be faulted with. Therefore, the course of action adopted by the appellate authority in placing reliance on the recorded facts in the order dated 10.12.2002 granting exemption cannot be said to be perverse. The allegations levelled in the show cause notice dated 29.10.2007 and confirmed in Commissioners order dated 30.11.2007 are based on the foundation that no purchase of plants and machinery was made as claimed by the assessee and such allegations has been established through the statement of the vendors from whom the machineries were purchased and also from the statement of the alleged transporters. However, these statements were recorded in the year 2005 whereas the exemption order was issued on 10.12.2002 and further such statements are also not supported by any tangible material including documents which would show the transactions done by the vendors during the aforesaid period of supply - The fact also remains that there is no whisper by the authority/department that the findings recorded by the competent authority in order dated 10.12.2002, while granting exemption are incorrect or that no verification was made by the authority before granting such exemption. That being the position, the conclusion of the learned Appellate Tribunal as discussed and summarised, cannot be said to be perverse. The substantial questions of law formulated are answered against the appellant and in favour of the assessee - Appeal dismissed.
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2023 (6) TMI 191
SSI Exemption - independent units or not - clubbing of clearances - four units have been created on paper without having proper manufacturing facilities - units manufacturing Gears, Gear Boxes and parts thereof - evasion of duty - N/N. 8/2003-CE dated 01.03.2003 - HELD THAT:- The proprietor of the above said four units are related to each by blood i.e they are blood relatives as admitted by them in their respective statements recorded by the department. Further it is also admitted facts on records that out of four units, three units did not have all the machines required to manufacture of Gears, Gear Boxes and Parts thereof. Whereas, the fourth unit i.e M/s Omkar Technolgies did not have any machinery installed in his shed. These facts have also been admitted by the proprietor of the above said four units as well as Shri Suresh J. Patel, Authorized person of M/s Orkey Gears in their statements. He also admitted the facts that seven workers on the pay roll of M/s Omkar Technolgies as Shed No. 43 were being utilized commonly by the above four units. Further during the investigation the department also found that one room situated at shed No. 42 and 43 which is common premises where the spares of all the above four units were stored. The proprietor of the above said four units, in their respective statements have admitted that in case of necessity in business they lend money to each other without any condition as they are all members of the one family, they also agreed with the contents of the Panchnama dated 07.02.2007 as well as with the statement dated 07.02.2007 of Shri Suresh Patel. We find that the above facts are not disputed by the Appellants during the entire proceedings. The manufacture and clearances made by the said four units availing the benefit of Notification No. 8/2003-CE have to be clubbed together as we hold that these units are one and the same, when their operations are under common management/family members and financial control and have mutuality of financial interest with each other - The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance, etc. has to be clubbed together. In the present matter, it is also found that appellants have not been able to show that all the four units were functioning independently and were capable of functioning independently. Considering the above facts there are no reason to interfere with the impugned orders. Appeal dismissed.
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2023 (6) TMI 190
Classification of goods - Bituminized Hessain Tape - Rot-proofed Bituminized Hessian Cloth mixed with Copper Napthalate, Bituminized Cotton Tape - to be classified under the sub-heading 5909 of Central Excise Tariff Act, 1985 or under Chapter Heading 5906.90? - applicability of N/N. 175/86 dated 01/03/86 - Suppression of facts - time limitation - HELD THAT:- The issue is no more Resintegra. On similar facts and circumstances, the Hon ble Supreme Court in CCE., NAVI MUMBAI VERSUS AMAR BITUMEN ALLIED PRODUCTS PVT. LTD. [ 2006 (8) TMI 187 - SUPREME COURT ] has upheld the classification of the impugned goods under the chapter heading 5909 . Consequently, the benefit of Notification No.175/86 dated 01.03.1986 was also allowed. In the present case also the goods are exclusively used for industrial purpose and accordingly the goods are rightly classifiable under the chapter heading 5909. Consequently, the benefit of Notification 175/86 dated 01/03.86 was also available to them. Time Limitation - HELD THAT:- The entire issue was known to the department and there was no suppression fact involved in this case. Hence, the Notice issued beyond the period of one year was hit by limitation and liable to be set aside on this ground also. However, since on merits itself the demand is not sustainable, there is no need to set aside the demand on the ground of limitation. The said goods are rightly classifiable under chapter heading 5909 and the Appellants are eligible for the benefit Notification No. 175/86 dated 01.03.1986. Accordingly, the Appeal filed by the Appellant is allowed.
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2023 (6) TMI 189
Applicability of Rule 8 (3A) of Central Excise Rules, 2002 - demand of duty which has already been paid by the appellant by way of utilizing CENVAT Credit at the time of clearance of the goods in the prescribed manner - HELD THAT:- The issue is no longer Res Integra and Hon ble Gujrat High Court as in the case of Indsur Globe [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] quashed the said rule, holding that Condition contained in sub-rule (3A) of rule 8 for payment of duty without utilizing the cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the portion without utilizing the cenvat credit of sub-rule (3A) of rule 8 of the Central Excise Rules, 2002, shall be rendered invalid. Hon ble Bombay High Court has in the case of TWENTY FIRST CENTURY WIRES RODS LTD., AND M/S. SEJAL GLASS LTD. [ 2019 (6) TMI 683 - BOMBAY HIGH COURT] has held Once Rule 8(3A) of the said Rules has been declared as unconstitutional to the extent it prohibited utilizing Cenvat credit, the discharge of payment of duty on the final products, the said provision to the above extent ceases to apply. The Act and the said Rules being all India in its application, the decision rendering a part of it as unconstitutional would equally apply within the State of Maharashtra, in the absence of any contrary view or the appellant showing that the view of the Gujarat High Court in Indsur Global Ltd. is ex-facie unsustainable. In view of the above decisions of Hon ble High Court there are no merits in the impugned orders and the same is set aside - appeal allowed.
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CST, VAT & Sales Tax
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2023 (6) TMI 188
Availment of irregular Input Tax Credit (ITC) - evasion of tax - forged and fabricated invoices against bogus purchases to credit bogus ITC - grant of registration certificate only for resale of nuts and bolts and HR sheets but illegal trading in iron and steel also done - HELD THAT:- Section 57 of the Act provides for imposition of penalty for issuance of false invoice. Section 58 of the Act provides for imposition of penalty for using a false registration number. A perusal of both the above provisions leaves no manner of doubt that the allegations levelled in the FIR in question are squarely covered and fall under the exclusive purview of the Act - It would be pertinent to note here that the Act is a complete Code in itself and there is no provision provided in the Act for the registration of an FIR. The Act only provides for imposition of penalty in case there is any contravention of its provisions. Since the Act is a special law, principle of generalia specialibus non derogant would apply, meaning thereby, it would operate in exclusion to the general law i.e. the IPC. A Coordinate Bench of this Court in Pritpal Singh Vs. State of Punjab [ 2012 (3) TMI 576 - PUNJAB AND HARYANA HIGH COURT ], while relying upon a judgment of Hon'ble Supreme Court in Dilawar Singh's case [ 2005 (11) TMI 502 - SUPREME COURT ] held that the provision of the Act are sufficient and equipped to deal with the matter where an attempt is made to evade the Tax and the registration of FIR in such like matter is totally an abuse of the process of law. This Court has no hesitation to hold that continuation of criminal proceedings arising out of the FIR would be nothing but an abuse of process of the process of law - Petition allowed.
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2023 (6) TMI 187
Validity of assessment order - impugned order passed by the first respondent, as barred by limitation and the same came to be passed without giving any opportunity to the petitioner - principles of natural justice - HELD THAT:- A Full Bench of the Composite High Court for the State of Telangana and the State of Andhra Pradesh in ECIL, after referring to the judgments of (i) The Kerala Education Bill, 1957 [ 1958 (5) TMI 47 - SUPREME COURT ]; (ii) Minerva Mills vs. Union of India [ 1980 (7) TMI 262 - SUPREME COURT ]; and (iii) L. Chandra Kumar vs. Union of India [ 1997 (3) TMI 90 - SUPREME COURT ], held that writ jurisdiction conferred upon the High Court under Article 226 of the Constitution of India is part of the inviolable basic structure of the Constitution and any law which seeks to take away or restrict the jurisdiction of the High Court under Article 226 of the Constitution of India must be held to be void . From the judgment of Apex Court in Glaxo Smith Kline [ 2020 (5) TMI 149 - SUPREME COURT ], it is very clear that the request of the Petitioner therein came to be rejected mainly on the ground of inability to file an appeal within the prescribed time was not properly substantiated or explained. Further, the Court also observed that the Order of the High Court does not indicate violation of principles of natural justice or non-compliance of statutory requirements in any manner. The Court also held that the Order of assessment does not get merged with the order rejecting the request to condone the delay. In the instant case, the Appellate Authority as well as VAT Tribunal, categorically held that there was sufficient cause for preferring the appeal with delay, but, as they have no power to extend the period of limitation, rejected the appeals. Apart from that, it is also urged that, the assessment order came to be passed without giving an opportunity of hearing and there is no material to show that the show-cause notice was served on the Petitioner. Since, the delay in filing the appeals was explained and the reason given by the Petitioner was accepted, but the delay was not condoned due to limitation prescribed under the Act and as the Assessment Order is said to have passed without giving an opportunity of hearing, more particularly, the non-service of show-cause notice, it is felt a fit case where the matter requires reconsideration. The Writ Petitions are disposed of setting aside the Orders under challenge, in both the writ petitions and the matters are remanded back to the Assessing Authority to deal with the same afresh in accordance with law.
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