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TMI Tax Updates - e-Newsletter June 8, 2023 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Articles SHOW CAUSE NOTICE AND ITS REPLY FOR ADJUDICATION Services rendered to holding company under an agreement does not make the service provider an intermediary RESOLUTION PROFESSIONAL IS A PUBLIC SERVANT LIABLE TO BE PROSECUTION UNDER THE PREVENTION OF CORRUPTION ACT, 1988 News CCI approves acquisition of additional stake in Acko Tech by General Atlantic Delhi Air Cargo (Exports) Customs incinerates over 69 kg drugs in fight against smugglers of Narcotics Drugs and Psychotropic Substances (NDPS) Circulars / Instructions / Orders FEMA 05 - dated 6-6-2023 Risk Management and Inter-Bank Dealings - Non-deliverable derivative contracts (NDDCs) Highlights / Catch Notes GST Seeking grant of Anticipatory bail - In fact he and his co-accused had set up a fictitious firm/companies and thereby cheated the government of crores of rupees. Thus, an offence is prima facie established against him. Even otherwise, recoveries of various documents are to be effected from the petitioner and the names of the real beneficiaries are to be revealed. Therefore, the custodial interrogation of the petitioner is certainly required. - HC Visit to Get Source Seeking grant of Anticipatory bail - running of fake firms based on forged and fictitious documents - An offence is prima facie established against him. Even otherwise, recoveries of various documents are to be effected from the petitioner and the names of the real beneficiaries are to be revealed. Therefore, the custodial interrogation of the petitioner is certainly required. - HC Visit to Get Source Income Tax Allowability of expenditure as revenue or capital - expenditure of Rs. 6.01 crores as amount paid to Madhya Pradesh Electricity Board (MEPB) for the line/bay charges - This expenditure has been rightly claimed by the assessee as per the provisions of the Income Tax Act. - HC Visit to Get Source Validity of reopening of assessment - jurisdiction of notice issuing authority - A jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction, an Assessee cannot confer upon any jurisdictional authority, something which he lacked inherently. Therefore the contention of DR regarding applicability of section 292BB also does not hold water in favour of the revenue. - AT Visit to Get Source Validity of assessment Order framed on Non quoting the mandatory document identification number (‘DIN’) - AO communicated the DIN after the expiry of 15 days - AO communicated the DIN after the expiry of 15 days - the communication issued manually in such circumstances must also state the reasons why communication is issued manually without a DIN and must also mention the date and number of written approval of the Chief Commissioner/Director General of Income-tax for issuing manual communication. - Assessment order quashed - AT Visit to Get Source TDS u/s 195 - Disallowance of reimbursement of mobilization and demobilization expenses - there was no legal obligation u/s 195(1) on the assessee to deduct tax at source under section 195(1) of the Act on the reimbursement of mobilization and demobilization cost to the holding company (VOAMC). - the disallowance made u/s 40(a)(i) unsustainable - AT Visit to Get Source Penalty u/s. 271(l)(c) - Voluntary disclosure of income or not - revised return of income in which the assessee disclosed details of sale of immovable properties - It is a well-settled principle of law that if the assessee has made disclosure in the return of income, without the Department having brought the fact of omission on part of the assessee to the notice of the assessee, then it cannot be inferred that the revised return was filed pursuant to the omission having been detected by the Department. - AT Visit to Get Source Validity of reopening of assessment u/s 147 - assessment beyond a period of 4 years - mandation of recording satisfaction - The satisfaction as contemplated u/s 151 of the Act is not an empty formality as the authorities have to apply their mind and record satisfaction. When the authorities were not oblivious to the date of proposal then it cannot be said that they have applied their mind or considered the proposal of the AO in its right earnest. - AT Visit to Get Source Exemption u/s 11 denied - grants received by the assessee - Such grants were not the donations or voluntary contribution u/s 12 - The grants received by the assessee for specific infrastructure projects which has also been utilized for those specific purposes only and since the assessee was not authorized to use the said grants for any other purpose and further that the unused funds have been returned to the Government, therefore, the aforesaid grants, in our view, do not constitute the income of the assessee. - AT Visit to Get Source Inflated agricultural production of grapes - The assessee has cultivated high quality grapes and sold the entire grapes to the company which has been verified from the record of raw material and consumption and no discrepancy was found in the stock of the company during the search and seizure action carried on the company. - CIT(A) rightly deleted the additions - AT Visit to Get Source Treatment to sale proceeds of land TDR - Method of accounting - in this case method of accounting followed by the assessee is completion of project and has offered the income received on sale of TDR in the subsequent assessment year and the same has been duly assessed. - Decided against the revenue - AT Visit to Get Source Customs Revocation of the Customs Broker License - import of of E-waste from Dubai to JNPT - mis-declaration of goods - There is no involvement of appellant in alleged smuggling activities. The omissions alleged against the Customs Broker are not sufficient enough to allege violation of the provisions of CBLR 2018 and to revoke the Customs Broker License. - AT Visit to Get Source FEMA Constitutional validity of Section 37A of FEMA Act - order of the Competent Authority affirming seizure by the Authorised Officer - seizure on the ground that the no agreement or legal basis was available for remitting the money by the petitioner. Royalty was not a part of the product cost - The challenge to the constitutional validity of Section 37A of the Act is rejected, as Section 37A does not suffer from any manifest arbitrariness on any ground whatsoever. - HC Visit to Get Source IBC Initiation of CIRP - pre-existing dispute - the dispute was neither raised before the issue of section 8 demand notice and also the notice under section 21 of the Arbitration and Conciliation Act, 1996 was not proven to be served on the operational creditor. In such a situation, the corporate debtor cannot claim ‘pre-existence of dispute’ in the adjudication of the section 9 application. - AT Visit to Get Source Initiation of CIRP - Period of limitation - Operational Creditors - the date of default is 60 days from 6.1.2020, which is the date of invoice. Counting 60 days from 6.1.2020, we find that the payment was due to be made by 5.3.2020. Thus, it is clear that the date of default is not covered in the period as stipulated in section 10-A of the IBC - NCLT rightly admitted the application - AT Visit to Get Source Service Tax Extended period of limitation - penalty - The material facts were unearthed by the Department and hence, non-furnishing of any facts would clearly amount to suppression of acts with an intention to evade tax within the meaning of Section 73(1) ibid. Hence, the Revenue is justified in invoking the larger period of limitation for this activity. So, the demand and penalty in respect of this activity are, therefore, required to be sustained. - AT Visit to Get Source Input service or not - dredging service - case of Revenue is that the dredging service is not required by the Appellant for providing the output service and consequently, there was no direct nexus between the dredging service and output port services. - the dredging services have been held as input service for providing the output port services. - Credit allowed - AT Visit to Get Source Central Excise Allegation of corruption against the revenue officer - Requirement of sanction u/s 197 from the Central Government before prosecuting the applicants for the offence punishable under Section 504 of the Indian Penal Code - Abetting the manufacturer in evasion of duty of excise - In view of the bar of Section 197 of the Cr.P.C, the trial Court could not have issued the process against the applicants without prior sanction of the authority and/or Union Government. Accordingly, the proceedings of the Criminal Case for the offence punishable under Section 504 of the Indian Penal Code is hereby quashed. - HC Visit to Get Source Transfer of Credit - Merger of two units - transfer of CENVAT credit which was lying in Plant – I, which was earlier an EOU unit to their merged DTA unit - the demand cannot sustain - transfer of credit allowed - AT Visit to Get Source Duty on Pan Masala Packing Machines - compounded levy - Board’s clarifications are very categorical and clear wherein it is stated that “Reading of proviso to Rule 7 to the Rule 9 of PPM (CDCD) Rules, 2008 makes it clear that the default for payment of duty for one month would not be treated as default for all the remaining part of the full financial year. However, the default would continue till the duty for the said month is paid”. Hence, in the instant case, the learned Commissioner has rightly demanded the differential duty along with interest for the available packing machines during the period of default. - AT Visit to Get Source VAT Interpretation of statute - term ‘gross turnover’ as contained in the Composition Scheme 2006 - Composition Scheme for Gem and Stones, 2006 - the assessee was rightly excluding the export sales form the gross turnover and was accordingly paying composition amount on gross turnover of local sales. - HC Visit to Get Source Case Laws: GST 2023 (6) TMI 290 Constitutional Validity of section 13(8)(b) and section 8(2) of the Integrated Goods and Services Tax Act, 2017 - Intra-state day - Export of services - Intermediary Services - Constitutional validity of provisions for determination of place of supply - Zero rated supply - HELD THAT:- The matters have been placed before us pursuant to an administrative order dated 19th May, 2023, of the then Hon ble The Acting Chief Justice in accordance with the Rules, for pronouncement of the final judgment for disposing of the matters. Considering the views taken by our learned brother Hon ble Shri. Justice G.S.Kulkarni and one of us (Abhay Ahuja, J.) [ 2023 (4) TMI 821 - BOMBAY HIGH COURT] , we hold the provisions of Section 13(8)(b) and Section 8(2) of the IGST to be legal, valid and constitutional. Petition dismissed. 2023 (6) TMI 289 Provisional attachment of Bank Accounts of petitioner - HELD THAT:- The petitioner has shown readiness and willingness to pay up the demand of Input Tax Credit raised by the authorities although without prejudice to the rights and contentions of the petitioner in the future adjudicatory proceedings, which may commence. According to learned Assistant Government Pleader and as stated above, summons under section 70(1) of the Central Goods and Services Tax Act, 2017 and under section 7091) of the Gujarat Goods and Services Tax Act, 2017, is issued. This aspect is fortified by the petitioner also. In view of the position arising where the petitioner would be paying within span of 15 equal monthly installments the tax demanded, order dated 30.11.2022 provisionally attaching Current Bank Account No. 045361900003074 of the petitioner held with the YES Bank Limited, is hereby set aside. As a consequence, the attachment of the abovementioned bank account shall be lifted forthwith. Petition disposed off as allowed in terms specified. 2023 (6) TMI 288 Availment of irregular input tax credit - fake invoices - opportunity of personal hearing was availed of or not - violation of principles of natural justice - HELD THAT:- A perusal of the impugned orders would indicate that the petitioner had been issued with notices and also reminders for personal hearing. The orders of the respondent would also indicate that the petitioner has neither filed a reply online nor submit a manual reply. Despite the fact that he was given several opportunities to put forth his objections, the opportunity of personal hearing which was afforded has not been availed off by the petitioner. The petitioner has failed to prove that they complied with the condition eligible to claim input tax credit as per Section 16(2) of the Act on the purchase made from M/s.Star Agencies. The impugned orders set out the fake invoices under which ITC has been passed on to the recipient. It is also seen that the address of M/s.Star Agencies is not a shop at a residential building and the enquires would further show that no business was being carried from the said premises and that the proprietor of Star Agency, Periyaya, had vacated the premises early a year ago. Despite which, it is claimed that the business is being transacted in the said address and the petitioner cannot now state that he has not been given an opportunity to put forth his case. The argument advanced by the petitioner is purely factual and on the basis of the records, all of which cannot be considered by a writ Court. Considering the fact that the petitioner has an effective appellate remedy, these Writ Petitions are dismissed directing the petitioner to file an appeal before the Deputy Commissioner (St). 2023 (6) TMI 287 Cancellation of GST registration of petitioner - non-filing of more than six consecutive return - HELD THAT:- Given the fact that the petitioner has already invoked the statutory remedy of appeal against the aforementioned impugned order of the State Tax Circle-Q Jammu and which appeal is still pending adjudication before the appellate authority of the Deputy Commissioner (Appeal) II Jammu, as has been disclosed in the said order dated 16.03.2023 of deciding the petitioner s representation, we are not inclined to grant indulgence on merits to the case of the petitioner in this writ petition. However, it is deemed proper to direct the appellate authority of the Deputy Commissioner (Appeal) II, Jammu to dispose of the petitioner s pending appeal without further loss of time. Said appellate authority are directed to hear and decide the petitioner s appeal within shortest possible time frame and expect the adjudication preferably within three weeks from the date of receipt of copy of this order to be delivered by the petitioner against a written receipt to the office of the appellate authority - petition disposed off. 2023 (6) TMI 248 Seeking grant of Anticipatory bail - running of fake firms based on forged and fictitious documents - HELD THAT:- The Hon ble Supreme Court in the case of SUMITHA PRADEEP VERSUS ARUN KUMAR C.K ANR. [ 2022 (10) TMI 1177 - SUPREME COURT] , held that merely because custodial interrogation was not required by itself could not be a ground to grant anticipatory bail. The first and the foremost thing the Court hearing the anticipatory bail application is to consider is the prima facie case against the accused. In the instant case, a perusal of the affidavits of the State dated 2.3.2023 and 27.03.2023 would show the manner in which the investigation was conducted and the specific role played by the petitioner. In fact he and his co-accused had set up a fictitious firm/companies and thereby cheated the government of crores of rupees. Thus, an offence is prima facie established against him. Even otherwise, recoveries of various documents are to be effected from the petitioner and the names of the real beneficiaries are to be revealed. Therefore, the custodial interrogation of the petitioner is certainly required. The present petition for grant of anticipatory bail stands dismissed. Income Tax 2023 (6) TMI 286 Reopening of assessment u/s 147 - non-independent application of mind by AO - information which has been provided to the petitioner under the Right to Information Act relied upon - claim of CSR expenses made by the petitioner - HELD THAT: Information which has been provided to the petitioner under the Right to Information Act and from the details which are provided it has been emerged that the AO (ACIT) circle 1(1) (1) has objected to the audit objections raised by the JCIT (Audit) on the issue of claim of CSR expenses for AY 2017-18 recording of reasons for Assessment Year 2016-17 for the same issue does not amount to application of an independent mind and therefore, also it cannot be said that any independent application of mind reflects in recording of reasons for Assessment Year 2016-17 when reasons for AY 2017-18 are held to be invalid by order of this Court in [ 2015 (5) TMI 216 - GUJARAT HIGH COURT] as indicated above and the said reasons were recorded on the very same day and this itself is a circumstance which indicates that in a routine manner re-opening is sought by the authority which is impermissible. Thus action of issuance of notice under Section 148 of the Act in the background of present facts as erroneous, reflects no subjective satisfaction nor any application of mind. Hence, this would be one of the relevant circumstance to arrive at a conclusion that a case is made out by the petitioner to call for interference. As per Adani Power Rajasthan Limited [ 1998 (12) TMI 51 - GUJARAT HIGH COURT] and in view of the conclusion which is arrived at in Special Civil Application[supra] we hold that very exercise of jurisdiction by the authority gets vitiated. Decided in favour of assessee. 2023 (6) TMI 285 Assessment u/s 144B - petitioner's claim is that they have not been served with the prior notice and have been prevented them from putting forth their case - HELD THAT:- This statement appears to be incorrect in the light of the proof of mail communications submitted by the learned counsel for the respondent where every proceedings has been communicated under the cover of a letter/e- mail, to which the orders were attached. Therefore, prima facie, the contention of the appellant appears to be incorrect. As per petitioner they have not been served with the provisions of Section 144 (B) (7) relating to the real time alert - Section 144 (B) (10) defining a real time alert. Therefore, the real time alerts could be in the form of a SMS or an update on the mobile app or by way of an E-Mail to the registered e-mail address. In the instant case, the documents filed on the side of the respondents relating to the proof of mail communication would show substantial compliance of this rule. Be that as it may, as pointed out by the learned Senior Standing Counsel appearing on behalf of the respondents, the petitioner has an alternative remedy in the form of an appeal u/s 246(A) of the Income Tax Act. A reading of the impugned order would show that it is a detailed speaking order and the petitioner has to only challenge the same by way of an appeal and not by invoking an extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. Present writ petition stands dismissed with a direction to the petition to approach the appellate authority. 2023 (6) TMI 284 Maintainability of appeal - assessment completed as per Section 143(3) - alternate remedy in the form of an appeal u/s 246A - During the search, certain incriminating materials relating to the petitioner firm and other dealers were seized by the respondent and based on this search, it was found that the group had been using a customized software, called 'J PACK' solely for the purpose of recording the unaccounted gold and cash transactions - HELD THAT:- As rightly pointed out by respondent, a mere perusal of the impugned assessment order would clearly show that the authority below has taken into consideration the defenses raised by the petitioner herein and on a comparison of the ledger of the petitioner with the ledger maintained by M/S.Mohanlal Jewelers (P) Ltd, the nexus between the two has been set out in the tabulated statement in paragraph No.8.1 of the impugned order. The impugned order also goes on to state that some of the entries in the 'J PACK' does not find place in the ledger of the petitioner. The respondent has considered each of the submissions made, particularly, the defense with reference to the plea for cross-examination and had passed the order. Therefore, it cannot be stated that the order is a non-speaking one. The petitioner has also appeared for an enquiry before the concerned authority. Therefore, in all fairness and relying upon the judgment of the Hon'ble Supreme Court in PIRAI CHOODI [ 2010 (11) TMI 26 - SC ORDER ] , interests of justice require that the petitioner invokes the alternate remedy available to him, which is an effective alternative remedy. All the contentions raised now before this Court can very well be agitated by the petitioner before the appellate authority. WP dismissed. 2023 (6) TMI 283 Reopening of assessment u/s 147 - Allowability of expenditure as revenue or capital - expenditure of Rs. 6.01 crores as amount paid to Madhya Pradesh Electricity Board (MEPB) for the line/bay charges - AO was of the view that the expenditure incurred was for the creation of capital assets - CIT(A) allowed the claim as revenue expenditure - HELD THAT:- This Court is of the view that the amount paid by the assessee to the Madhya Pradesh Electricity Board for bay lines has been rightly taken to be the revenue expenditure. Similar benefit had been extended to the assessee for the assessment year 1992-1993 and 2004-2005. This expenditure has been rightly claimed by the assessee as per the provisions of the Income Tax Act. There was no reason for re-opening and initiating proceedings under Section 147/148 of the Act. The Tribunal has rightly allowed the appeal of the assessee by appreciating the facts in the right perspective. Decided against revenue. 2023 (6) TMI 282 Foreign Tax Credit (FTC) - claim denied due to delay in filing of Form No.67 beyond the prescribed time limit u/s 139(1) - assessee had filed his US Income Return and paid the taxes accordingly. While filing the Indian Income Tax Return, the assessee disclosed the above aforementioned foreign income and claimed Foreign Tax Credit which was paid in USA - HELD THAT:- We find an identical issue had come in the case of Baburao Atluri [ 2022 (12) TMI 525 - ITAT HYDERABAD] while deciding the issue in favour of the assessee held requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67. Since the facts of the instant case are identical to the facts of the case already decided by the Tribunal cited (Supra), respectfully following the said decision, we direct the AO to allow the FTC after due verification. Appeal filed by the assessee is allowed. 2023 (6) TMI 281 Misc. income earned - estimation of 10% of the total Misc. receipts as normal business income and not as shipping income u/s. 115 VI - HELD THAT:- There is no material available on record to hold that the misc. income earned by the assessee is also from the core activity of the shipping business. The misc. receipts generated on the activities carried out by the assessee on shore repairs of tugs with the help of qualifying ships, transport of bunkers, charter, etc. were not dredging activities which form the core activity of the assessee company as well as these activities could not be taken us incidental activity as prescribed in Rule 11 R of the Income Tax Rules. No other option than to confirm the order passed by the Ld. CIT(A) who has fairly estimated 10% of the misc. receipts as taxable income of the assessee. Thus the findings arrived by the Ld. CIT(A) does not require any interference and the ground raised by the Assessee is hereby rejected. Unexplained cash credit u/s. 68 - HELD THAT: Here also the assessee has not provided any documentary evidence that the loan creditor is a NRI and the bank details of the NRI and repayment details by the assessee. Thus the assessee failed to prove the identity of the creditor itself, we have no hesitation in confirming the addition made by the CIT(A). The ground raised by the Assessee is devoid of merit and the same is dismissed. 2023 (6) TMI 280 Allowability of expenses of selling expenses as revenue expenditure - contention of the assessee that such expenditure is not connected with the construction, hence allowable as revenue expenditure in terms of AS-7 - HELD THAT:- As relying on PUMA REALTORS PVT. LTD. [ 2018 (11) TMI 1618 - ITAT DELHI] and Pragnya Crest Properties (P) Ltd [ 2020 (4) TMI 224 - ITAT BANGALORE] as held the action of the Revenue Authorities in rejecting the assessee's accounting method, without assigning any reason is not justified. The accounting method followed by the assessee and thereby excluding the indirect expenses such as office employees salary, administrative expenses and marketing selling expenses is as per the recognized principles of accountings and as such the claim of the assessee deserves to be allowed. We hold accordingly. The additions made by the lower authorities on this issue are hereby ordered to be deleted. Thus we hereby direct the AO to delete the impugned additions. Decided in favour of assessee. 2023 (6) TMI 279 Unexplained cash deposit to his bank account - HELD THAT:- We are unable to see any logic or valid basis to deny said cash flow statement which is supported by the financial and books of accounts of earlier as well as present financial period under consideration. The basis taken by the ld. CIT(A) for upholding the part addition of Rs. 12,40,000/- is not sustainable and justified as when an authority is taking care of average withdrawals of Rs. 4.5 lakh per month then the withdrawal Rs. 38 lakh gets supports as the total withdrawals during eight months and ten days comes to 37.5 lakh which is near to the claimed amount. The assessee is also found to be fair enough in showing the sufficient drawings of Rs. 26,35,980/- and Rs. 2,46,122/- during the period from the 01.04.2016 to 30.12.2016 leaving cash balance of Rs. 5,18,559/- therefore there is no scope of any addition in the hands of assessee on account of cash deposit to his bank account. Accordingly, grounds of assessee are allowed. 2023 (6) TMI 278 Validity of assessment order passed u/s 143(3) - status of assessee - AO had issued notice as a Local Authority and the assessment has been framed in the name of Artificial Juridical person - HELD THAT:- The assessee has filed various written submissions. The submissions of the assessee are that the assessee is a local authority. The case of the assessee was picked up for scrutiny assessment. The objections of the assessee are that as per the provisions of U.P. Sugar Cane (Regulation of Supply Purchase) Act, 1953, the assessee is neither authorized to do any business/profession or any other activity with profit motive, nor it is doing any such activity as contemplated u/s 28 of the I.T. Act. The assessee had filed its return of income as a Local Authority . Assessment was framed in the status of Artificial Juridical person . The assessee has placed reliance on the judgment of M/s N.S. Committee [ 2012 (3) TMI 713 - ITAT DELHI] wherein the Tribunal had cancelled the assessment on the basis that the AO had framed assessment in a different status. It is the case of the assessee that in the present case also the AO had issued notice as a Local Authority and the assessment has been framed in the name of Artificial Juridical person . The AO could not have changed the status from Local Authority to Artificial Juridical person and therefore the assessment framed by the AO is liable to be cancelled. There is no denying the fact that for the assessment year in question the assessee filed its return of income in the status of Local Authority and the Assessing Officer framed the assessment in the status of Artificial Juridical person . Assessee appeal allowed. From the order of the AO it is clear that it had issued notice u/s 143(2) of the Act to the assessee in the status of Local Authority as the notice is addressed to the President/Secretary of the assessee. Therefore, we hereby annul the impugned assessment order being bad in law. 2023 (6) TMI 277 Validity of reopening of assessment - jurisdiction of notice issuing authority - whether notice wrongly issued by DCIT, Circle 3(1), Haridwar, whereas, the jurisdiction of the assessee lies with ITO, Ward-2(2), Muzaffarnagar? - HELD THAT:- As following the proposition rendered in the case of PCIT vs. Mohd. Rizwan[ 2017 (3) TMI 1792 - ALLAHABAD HIGH COURT] no hesitation to held that the AO having jurisdiction over the assessee is only validly entitle to initiate reassessment proceeding u/s. 147 of the Act and to issue notice u/s. 148 of the Act and consequent thereof is eligible to pass reassessment order on conclusion of proceedings. Since in the present case AO who is issued notice u/s. 148 was not having jurisdiction over the assessee and the AO having jurisdiction over the assessee i.e. ITO Ward 2(2) Muzaffarnagar not issued any notice u/s. 148 of the Act. It is also pertinent to mention that their Lordship also considered the provision of section 292BB of the Act and held that the said section is not applicable in favour of the assessee as the lack of valid jurisdiction cannot be cured and it is well settled that a jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction, an Assessee cannot confer upon any jurisdictional authority, something which he lacked inherently. Therefore the contention of DR regarding applicability of section 292BB also does not hold water in favour of the revenue. Thus impugned reassessment order u/s. 143(3)/147 is not validly sustainable in absence of a valid notice u/s. 148 by the Assessing Officer having jurisdiction over the assessee therefore the same deserves to be quashed being bad in law - Decided in favour of assessee. 2023 (6) TMI 276 Scrutiny assessment - Disallowance of expenses - assessment beyond the issue for which the case was selected for scrutiny - submissions of assessee that the case of the assessee was taken for limited scrutiny and the AO traversed beyond its jurisdiction - HELD THAT:- There is no dispute with regard to the fact that the case of the assessee was selected for limited scrutiny assessment in respect of issue of remuneration paid by the firm. AO while framing the assessment disallowed the expenses claimed by the assessee. It is the case of the assessee that while disallowing the expenses the Assessing Authority traversed beyond its jurisdiction. DR could not controvert the fact that the case was selected for scrutiny in respect of remuneration paid by the firm and it was not to verify the correctness of the claim related to the expenses. Therefore, without approval by the Competent Authority for making assessment beyond the issue for which the case was selected for scrutiny, is beyond jurisdiction of the learned Assessing Authority. Hence, the addition made by the Assessing Authority is hereby deleted. Decided in favour of assessee. 2023 (6) TMI 275 TP Adjustment - TO after applying the Profit Split Method had made the upward addition to the income of the assessee - Interest on delayed trade receivables - international transaction referred by the assessee in form 3CB was only linear agency services with Maxicon containers line Pte Ltd for which the assessee had shown the revenue - HELD THAT:- When though the assessee was carrying the composite business and the profit of the linear agency services and the corresponding expenditure can be worked out with precision, then it is easy for the lower authority to compare the prices charged by the assessee from its AE, with the other comparable company carrying the same/similarly situated activities with the unrelated parties. The above-mentioned aspect has not been considered by both the lower authorities. In the light of the above we are of the considered opinion that the matter is required to be sent back to the file of the Ld. TPO for fresh adjudication after affording opportunity of hearing to the assessee. While exercising the de novo assessment, the Ld. TPO shall keep in mind the profile and business activities of the assessee, the international transaction entered into by the assessee as mentioned in form 3CB. The above said exercise shall be carried out by the TPO, after following the due process of law and after affording opportunity of hearing to the assessee. TPO may apply any method as may be applicable in the facts of the present case after affording opportunity of hearing to the assessee as provided under Rule 10B of Income Tax Rules . As we are remanding back the TP adjustment to the file of the Ld. transfer pricing officer, we also deem it appropriate to remand back the addition on account of trade receivable to the file of the Ld. transfer of pricing Officer, with the direction to recompute the trade receivables in the light of our decision in the case of Apache Footwear India Pvt [ 2023 (4) TMI 521 - ITAT HYDERABAD] . We direct the AO to determine the ALP and compute the same by adding notional interest @ 6% on the receivable beyond a period of 60 days. This ground is partly allowed. 2023 (6) TMI 274 Validity of reopening of assessment - taxability of the receipts from the transfer of the development rights - validity of second assessment order - HELD THAT:- The assessee in its appeal against the first assessment order passed u/s 147 r.w.s. 143(3) had challenged the taxability of the receipts from the transfer of the development rights before the learned CIT(A). Assessee also challenged the reference to DVO to determine the actual sale consideration of properties. Therefore, the second assessment order passed under section 147 r.w.s. 143(3) is clearly in contravention of the provisions of the aforesaid proviso to section 147 since it reassesses the income which was the subject matter of the appeal before CIT(A). We find that the Hon ble jurisdictional High Court in ICICI Bank Ltd [ 2011 (11) TMI 304 - BOMBAY HIGH COURT] held that the power to re-open an assessment cannot be exercised to re-open issues that formed the subject matter of an appeal to Commissioner (Appeals). Therefore, we affirm the conclusion reached in the impugned order that the second assessment order dated 31/08/2017, passed under section 147 read with section 143(3) of the Act is null and void ab-initio being contrary to provisions of the Act. As the second assessment order is quashed for this short reason, we see no need to deal with other issues raised by the Revenue in the present appeal. 2023 (6) TMI 273 Disallowance of the pre operative expenses - assessee being a limited liability partnership firm incorporated on 08.12.2017 for which the trading operation commenced from 01.01.2018 - assessee is said to have carried out its business only for 3 months and had filed its return of income declaring loss during the impugned year - HELD THAT:- No deviation in the business carried out by the assessee firm which is akin to that of the earlier firms which name has been changed to that of the assessee s. The lower authorities have not disputed the fact that there was no change in the business subsequent to the name change. The impugned expenses claimed by the assessee pertains to the business expenses and not the preoperative expenses alleged by the lower authorities. As decided in case of Maruti Insurance Pvt. Ltd. [ 2021 (4) TMI 875 - DELHI HIGH COURT ] wherein it was held that the expenses incurred when the entity is ready to do business and when business is conducted cannot be capitalized as in the present case. The present case in hand is in a better footing than the above mentioned case where the business was carried on much prior to the impugned year and there was only a name change subsequently. No justification in holding the impugned expenses as per operative expenses - delete the impugned addition - Ground of assessee allowed. Disallowance of interest paid on late payment - A.O. had disallowed the interest paid on late payment of TDS debited in the profit and loss account - HELD THAT:- CIT(A) correctly confirmed the said disallowance by relying on the decision of Chennai Properties Investments Ltd. [ 1998 (4) TMI 89 - MADRAS HIGH COURT ] which held that the disallowance of interest expenditure paid u/s. 201(1A) of the Act on late payment of TDS is penal in nature and not compensatory - CIT(A) further held that the same is not business expenditure and cannot be termed as compensatory in nature as alleged by the assessee. Decided against assessee. 2023 (6) TMI 272 Penalty u/s. 271B - penalty imposed for failure to get accounts audited and to furnish a report of such audit as required u/s. 44AB - Scope of reasonable cause for the failure as provided u/s. 273B - HELD THAT:- As submitted that assessee is dealing in retail trading of building material on commission basis. The impugned year is the first year wherein his gross receipts/turnover exceeded the threshold prescribed u/s. 44AB of the Act and was under a bonafide belief that there was no requirement of any audit in this respect. Subsequently, assessee got the accounts audited in respect of his share transaction and obtained the report as required u/s. 44AB - assessee has furnished an affidavit to state that he was not in the knowledge of the share transactions in his name as the same was done by his broker. Considering a reasonable cause as envisaged u/s. 273B of the Act, we hold that impugned penalty is not sustainable and is hereby deleted. Grounds taken by the assessee are allowed. 2023 (6) TMI 271 Penalty u/s. 271(1)(c) - defective notice u/s 274 - scope of vagueness - HELD THAT:- Vagueness regarding the charge for which penalty is to be levied continued to be there in the mind of Assessing Officer right through from recording of satisfaction to levy of penalty. In penal proceedings there is no scope of vagueness. The assessee against whom penalty proceedings are initiated has to be made aware in absolute terms the charges for which the penalty proceedings are initiated. The notice vide which charges for levy of penalty are communicated to the assessee should be unambiguous. As decided in the case of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT ] has held that mere defect in the notice would vitiate penalty proceedings. In the instant case, vagueness of charge is not only confined to the notice, even in the order passed u/s. 271(1)(c) of the Act vagueness is reflected writ large. Thus, notice issued u/s. 274 r.w.s. 271(1)(c) of the Act is defective. Consequently, the subsequent proceedings arising therefrom are vitiated. Appeal of the assessee is allowed. 2023 (6) TMI 270 Validity of assessment Order framed on Non quoting the mandatory document identification number ( DIN ) - AO communicated the DIN after the expiry of 15 days - Whether, the subsequent communication issued by the Assessing Officer generating the DIN in respect of the assessment order will satisfy the conditions of CBDT Circular No. 19/2019 dated 14.08.2019 and cure the deficiency in issuing the assessment order manually without generating the DIN ? - HELD THAT:- Paragraph 3 of the circular carves out certain exceptions to paragraph 2 by providing that under certain exceptional circumstances, enumerated in clause (i) to (v) of paragraph 3, the communication may be issued manually but only after recording reasons in writing not only in the file and with prior written approval of the Chief Commissioner/Director General of Income-tax, but, the communication issued manually in such circumstances must also state the reasons why communication is issued manually without a DIN and must also mention the date and number of written approval of the Chief Commissioner/Director General of Income-tax for issuing manual communication. In the facts of the present appeal, admittedly, the assessment order issued manually by the Assessing Officer without generating DIN does not contain any reasons recorded by the Assessing Officer for issuing the order manually without DIN and the number date of the approval granted by the CCIT. Thus, there cannot be any manner of doubt that the Assessing Officer has issued the assessment order without complying with the conditions enshrined in paragraph No. 2 3 of CBDT Circular, referred to above. That being the factual position, in terms of paragraph No. 4 of the said Circular, the assessment order has to be declared as invalid and shall be deemed to have never been issued. As relying on case of CIT vs. Brandix Mauritius Holdings Ltd. [ 2023 (4) TMI 579 - DELHI HIGH COURT ] we have no hesitation in holding that the impugned assessment order is invalid and shall be deemed to have never been issued. Accordingly, we quash the impugned assessment order. Decided in favour of assessee. 2023 (6) TMI 269 Validity of reopening of assessment - notice issued in name of deceased assessee - whether curable defect u/s 292BB? - HELD THAT:- Where notice seeking to reopen assessment was issued in name of deceased assessee, since she could not have participated in reassessment proceedings, provisions of section 292BB were not applicable to assessee s case and as a consequence, impugned reassessment proceedings deserved to be quashed. It is pertinent to mention that in said judgement their Lordship speaking for Hon ble jurisdictional High Court referred to its earlier judgement in the case of Vipin Walia [ 2016 (2) TMI 524 - DELHI HIGH COURT] held that the provision of section 292BB of the Act does not come in to play to rescue the reassessment proceedings in favour of the revenue. Decided in favour of assessee. 2023 (6) TMI 268 TDS u/s 195 - Disallowance of reimbursement of mobilization and demobilization expenses - HELD THAT:- Delhi High Court [ 2010 (3) TMI 167 - DELHI HIGH COURT] has clearly and categorically held that the assessee was not liable to deduct tax at source u/s 195(1) in respect of mobilization and demobilization costs reimbursed to the holding company, hence, cannot be treated as assessee in default. Further observations of the Delhi High Court - The assessment proceedings in VOAMC are reopened and the final view taken is that the VOAMC is assessable to tax, the assessee herein would also be treated as assessee in default , which would attract the consequence provided under section 40(a)(i). has been quashed and set aside by the Hon ble Supreme Court [ 2023 (5) TMI 586 - SC ORDER] while deciding the SLP filed by the assessee.. Thus, as on date, in view of the observations of Hon ble Delhi High Court and Hon ble Supreme Court, there was no legal obligation u/s 195(1) on the assessee to deduct tax at source under section 195(1) of the Act on the reimbursement of mobilization and demobilization cost to the holding company (VOAMC). That being the case, the disallowance made under section 40(a)(i) being unsustainable, is hereby deleted. Decided in favour of assessee. 2023 (6) TMI 267 Revision u/s 263 - validity of AO's order accepting the cash sales and resultant declaration of profits under the PMGKY Scheme - HELD THAT:- Matter relating to cash sales has been duly enquired into by the AO, specific queries has been raised from time to time, and after taking into consideration the submissions of the assessee, specific show-cause has been issued by the AO which shows due verification and application of mind by the AO, and thereafter, taking into considerations the directions of the Additional CIT who has again applied his mind and issued specific directions u/s 144A which takes into consideration the declaration of profits on cash sales and payment of taxes under the PMGKY Scheme besides other things, the assessment order has been passed by the AO. We therefore find that the matter has been thoroughly examined by the AO during the course of assessment proceedings and the ld PCIT has not stated as to how the findings so recorded by the AO accepting the cash sales and resultant declaration of profits under the PMGKY Scheme are erroneous in so far as prejudicial to the interest of the Revenue. The order of the ld PCIT is accordingly set-aside and that of the AO is sustained. Appeal of the assessee is allowed. 2023 (6) TMI 266 Disallowance of expenses of diesel charges and loading unloading charges - as argued these expenses are properly supported by bills and vouchers and such expenses are allowed in earlier years - HELD THAT:- Assessee has made a statement before the lower authority that these expenses are incurred during the course of business and considering the nature of the business of the assessee, he could not substantiate the said expenses with supporting evidences. AO has disallowed the expenses from the first day of financial year to the date of survey for the reason that the expenses have been subsequently booked post the date of survey but the expenses for the rest of the year have been allowed by the AO. We re unable to appreciate the view taken by the Assessing Officer that no expenses / the expenses incurred from first day of financial year to the date of survey are bogus when the expenses of similar nature that are booked post the date of survey are genuine and allowable according. Assessee is doing regular business throughout the year and there cannot a situation where no expenses are incurred from the first of the financial year till the date of search - Thus expenses booked by the assessee upto the date of survey cannot be treated as bogus only for the reason that the same are accounted in the books of account subsequent to the date of search - delete the disallowances made by assessee - Decided in favour of the assessee. 2023 (6) TMI 265 TDS u/s 194H - non deduction of TDS on consultancy fees, commission payment and payment to HUF - HELD THAT:- The recipients have shown these receipts as their income. AO not disputed about the nature of expenses and their incurrence for the purpose of their business, his only grievance was that the assessee has not deducted the TDS while making the payments. All these payments are covered by the decision of the Hon ble Supreme Court in the case of Hindustan Cocacola [ 2007 (8) TMI 12 - SUPREME COURT] therefore, we allow the appeals of the assessee in both the years and delete the disallowances. Decided in favour of assessee. 2023 (6) TMI 264 Disallowance of deduction u/s 80P - assessee filed return of income belatedly for beyond prescribed time limit - HELD THAT:- As decided in Veerappampalayam Primary Agricultural Cooperative Credit Society Limited case [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] the date of filing of the return of income would be apparent on the face of return and upon a perusal thereof, it would be clear as to whether the return is a valid return, having been filed within the statutory time limit, or a belated one. This is mechanical exercise and one that can be carried out by the CPC, very much within the scope of Section 143(1)(a)(ii) of the Act. AR submitted that Section 143(1)(a)(v) which was introduced on 01.04.2021 cannot be applicable in A.Y. 2019-20 in the present assessee s case as the AO does not have power related to Chapter-VIA Part-C wherein deduction under Section 80P has to be claimed - assessee has admitted that returns were filed belatedly. The assessee should have filed the return within the extended period of due date but the assessee failed to do so. The Assessing Officer thereby issued intimation under Section 143(1) of the Act and has categorically disallowed the deduction under Section 80P of the Act on the ground of belated returns. It appears in Part-A, Schedule 6A of the intimation that return is not within the due date but the fact remains that on merit also the assessee has not taken cognisance of its claim. As assessee filed return belatedly and Section 80AC(ii) of the Act is inapplicable in present case. The CIT(A) was right in denying the claim of assessee that of deduction under Section 80P - Decided against assessee. 2023 (6) TMI 263 Disallowance of car expenses - Expenses incurred by a Private Limited company towards personal use by the two Directors - HELD THAT:- As decided in DCIT vs. Haryana Oxygen Ltd. [ 1999 (12) TMI 107 - ITAT DELHI-D] the use of cars by directors-employees of a company cannot be characterized as user for non-business purpose and, hence, no part of such car expenses can be disallowed. As in Sayaji Iron and Engineering Company [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] has held that once the directors of the assessee company are entitled to use the vehicles of the company for personal use as per the terms and conditions of their appointment, it cannot be said that there was a personal use of cars. Also further held that such user of vehicles by the employees of the company cannot even be considered as non-business user . There are innumerable judgments on this point holding that there can be no disallowance of depreciation or other expenses on maintenance of the vehicles used by the directors/employees by treating it as personal user or non-business user of the company. We fail to see any rationale in disallowing the expenses incurred on cars as for personal use, when admittedly these have been provided to director-employees. A company is a separate legal entity distinct from its directors or employees. As such, there can be no question of treating the use of vehicles by the directors/employees as a personal use by the company - Therefore, order for the deletion of disallowance of expenses incurred on vehicles. Assessee appeal allowed. 2023 (6) TMI 262 Penalty u/s. 271(l)(c) - revised return of income in which the assessee disclosed details of sale of immovable properties - Whether revised return was filed pursuant to notice under section 143(2) issued by the Department ? - HELD THAT:- The revised return of income, in which the assessee disclosed details of sale of immovable properties was not in pursuance to notice issued by the Department u/s 143(2) as on perusal of notices issued by the Department, it is seen that the query regarding the sale of immovable properties was enquired into for the first time by the Department vide notice dated 30-06-2016, whereas the assessee had already filed revised return of income on 31-10-2015. Also in the notice dated 31-08-2015, there is no mention regarding sale of immovable properties by the assessee, and hence, it cannot be inferred that the assessee made a declaration regarding the sale of immovable properties pursuant to the aforesaid notice. Department has not been able to bring forth any communication/information/evidence to show that it was within the knowledge of the assessee, that the assessment proceedings had been initiated to enquire into the aspect of sale of immovable properties by the assessee. Contention that the revised return of income was filed beyond the due prescribed date, it has been brought to our attention that the return of income was filed online and the same was accepted by the Department website and accordingly the same has been validated by the Department. It is a well-settled principle of law that if the assessee has made disclosure in the return of income, without the Department having brought the fact of omission on part of the assessee to the notice of the assessee, then it cannot be inferred that the revised return was filed pursuant to the omission having been detected by the Department. we are of the considered view that nothing has been brought forth by the Department to substantiate that the revised return of income was filed in pursuance to information contained in notice under section 143(2) of the Act. Accordingly, looking into the instant facts, we are hereby deleting the penalty imposed under section u/s 271(1)(c) of the Act. Decided in favour of assessee. 2023 (6) TMI 261 Validity of reopening of assessment u/s 147 - assessment beyond a period of 4 years - mandation of recording satisfaction - HELD THAT:- From a reading of the reasons for belief of escaping the income and reopening of the assessment which are reproduced hereinabove, it is not possible for us to decipher that the AO has recorded that there was any failure on the part of the assessee to disclose fully and truly all the material facts. AO is conspicuously silent on the above said aspect. Once the AO has not mentioned that the assessee has failed to disclose fully and truly all material facts, necessary for completion of the assessment, the re-opening cannot be made in the eyes of law and we are in agreement with the decision cited by AR in the case of Bhor Industries [ 2003 (2) TMI 8 - BOMBAY HIGH COURT] and PCIT Vs. Lanco Hills[ 2022 (12) TMI 802 - TELANGANA HIGH COURT] Thus reopening made by the AO is not in accordance with the law and the consequential assessment made by the AO is also bad in law. A conclusion may be drawn that the reopening was made beyond a period of 4 years without recording satisfaction by the CIT. The satisfaction/approval reproduced hereinabove have been accorded by the authorities in a mechanical manner on 19.03.2011, without looking into the proposal dt. 26.03.2011 by the ACIT and without considering the proposal of the AO dt.19.03.2012. Firstly, there was no reason for the ACIT to recommend the case of the AO for reopening u/s 147 - CIT was duty bound to independently apply his mind and come to the satisfaction that the said case was a fit case for reopening of the assessment beyond a period of 4 years. The satisfaction as contemplated u/s 151 of the Act is not an empty formality as the authorities have to apply their mind and record satisfaction. When the authorities were not oblivious to the date of proposal then it cannot be said that they have applied their mind or considered the proposal of the AO in its right earnest. In our view, if the officers have not even seen the date when it was proposed by the AO, the question of examining other record at the time of recording the satisfaction does not arise and hence, we can safely presume that the CIT has not applied his mind to the proposal of the AO while recording the satisfaction - Decided in favour of assessee. 2023 (6) TMI 260 Revision u/s 263 - determination of ALP of transactions to TPO - non reference of matter of determination of ALP to the TPO by AO - HELD THAT:- In the instant case, we notice that the Instruction no.3/16 issued by CBDT mandates that the AO should refer the matter of determination of ALP of international transactions to TPO. As per paragraph 3.2 of the Instruction, the AO is required to refer the matter of determination of ALP of international transactions to the TPO after obtaining approval from PCIT/CIT, if the return of income of the assessee has been selected under T.P risk parameter. AO, in the instant case, did not refer the matter of determination of ALP to the TPO as per the mandatory requirement of Instruction No.3/2016. As per clause (c) of Explanation 2 to sec. 263, the order passed without complying with the instruction etc., issued by CBDT u/s 119 of the Act would render the order erroneous and prejudicial to the interests of revenue. Since Explanation 2 is a deeming provision, the same has to be read strictly and in the instant case, in our view, clause (c) of Explanation 2 shall squarely apply to the facts of the present case. Decided against assessee. 2023 (6) TMI 259 Exemption u/s 11 denied - grants received by the assessee - HELD THAT:- Grants were given to the assessee for implementation of various infrastructure schemes. That the grants received by the assessee/state agency did not belong to the assessee. The grants did not form corpus of the assessee nor it was income of the assessee u/s 11 of the Act. Such grants were not the donations or voluntary contribution u/s 12 of the Act. It has also been held time and again that the entries in the books of accounts do not decide the nature of the receipts. The assessee was not authorized to utilize the said grants for any other purposes other than for which such grants were received by the assessee. The unutilized grants have been refunded back by the assessee to the Government. The assessee has also furnished the details of the funds received by the assessee for specific infrastructure projects, the details of utilization of such funds for those specific infrastructure projects. The grants received by the assessee for specific infrastructure projects which has also been utilized for those specific purposes only and since the assessee was not authorized to use the said grants for any other purpose and further that the unused funds have been returned to the Government, therefore, the aforesaid grants, in our view, do not constitute the income of the assessee. Decided in favour of assessee. 2023 (6) TMI 258 TP adjustment - global/regional management overhead allocation fee - HELD THAT:- Considering the similarity of the issue and view taken in the earlier assessment years [ 2021 (10) TMI 1382 - ITAT HYDERABAD] and [ 2022 (12) TMI 457 - ITAT HYDERABAD] by a Co-ordinate Bench, we are of the considered opinion that the interest of justice would be met by restoring this issue to the file of the learned Assessing Officer in view of the need for the assessee to file the additional documentary evidence in support of their claim. Interest on trade receivable - Ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points. We direct the AO / learned TPO to adopt the same. Grounds are partly allowed accordingly. 2023 (6) TMI 257 Unexplained money u/s 69A - cash deposits during demonetisation period by invoking the provisions of section 115BBE - HELD THAT:- Since the addition made u/s 69A of the Act has already been deleted by the ld. CIT(Appeals), wherein AO has wrongly invoked the provisions of section 115BB therefore, Grounds become infructuous as already decided in favour of the assessee by the ld. CIT(Appeals). Miscellaneous income - AO confronted the assessee to explain the nature of the said miscellaneous income, but could not get satisfactory reply, as a result of which, treated it as income from other sources - HELD THAT:- Miscellaneous income mainly constitutes grant received from the West Bengal Government for various activities as per its registered bye-laws. No reason to treat any of the element of miscellaneous income enumerated above as income from other sources. Since the alleged sum is the income earned by the Society for the purpose of its objects, the same is eligible for deduction under section 80P - Decided in favour of assessee. 2023 (6) TMI 256 Inflated agricultural production of grapes - CIT(A) deleted addition - whether CIT-A has failed to consider the draft plan which showed that there was inflation of agricultural income by the assessee? - HELD THAT:- As during the course of search proceedings a list of 30 parties were found from M/s Nana Shelke (General manager of Vineyard operation) wherein it was alleged that the grapes were purchased at inflated rates from these 30 parties. Assessee s name has not been mentioned anywhere in the list. The assessee explained during the course of assessment proceedings that he had cultivated high quality of grapes where were used in manufacturing of high premium wines. In their respective statement the both the employees as discussed supra had provided the data available with them without considering the fact that the new plantation of grapes were planted every year and at the same time there was certain grapes plantation which gets old or infected due to some disease or pest attacks and this leads to uprooting of the infected plantation after which new plantation was done. The assessee has cultivated high quality grapes and sold the entire grapes to the company which has been verified from the record of raw material and consumption and no discrepancy was found in the stock of the company during the search and seizure action carried on the company. During the course of appellate proceeding before us the Counsel has also referred the copy of Income Tax Settlement Commission order dated 27.09.2019 adjudicated in the case of M/s Sula Vineyard Pvt. Ltd. wherein they had finally come to the conclusion that inflation was to be restricted to approximately 6% and the company had accordingly offered the same to tax. The Settlement Commission has treated the statement of Mr. Raman Bhawar and Vinayak Nehe as not reliable for the purpose of calculating inflating grapes purchases. Further in the list of parties from whom the company used to purchase grapes at inflated rate, the assessee s name was not at all present there. - Decided against revenue. 2023 (6) TMI 255 Treatment to sale proceeds of land TDR - whether be apart of the project undertaken or be treated independently of the total project for the computation of the income? - HELD THAT:- As assessee has entered into an agreement to develop the slum rehabilitation scheme as per which assessee has acquired the land from M/s. Bombay Industrial Corporation and entered into multipartite agreement with SRA and different tenements. No doubt assessee has transferred the land to SRA and surrendered all the rights over the property.Assessee had a basic obligation to construct the building and receive TDR on the portion of land on which the construction is completed in the ratio of 1:1 on TDR and construction TDR in the ratio of 1:1.33. It is fact on record that the construction agreement received by the assessee is to construct the building as per the agreed terms only when assessee completes the constructions assessee gets the rights of TDR, that means assessee gets the TDR rights only when it completes the construction. We observed that assessee is following the project completion method which is recognized method of accounting. CIT(A) came to the conclusion that the sale proceeds of land TDR is part of the project undertaken and cannot be treated independently of the total project for the computation of the income by relying on the decision of the CIT v. Chembur Trading Corporation [ 2011 (9) TMI 1241 - BOMBAY HIGH COURT] - Accordingly, he gave a direction to the Assessing Officer to accept the method of accounting followed by the assessee. As observed in the case of CIT v. Chembur Trading Corporation (supra) has held that in this case method of accounting followed by the assessee is completion of project and has offered the income received on sale of TDR in the subsequent assessment year and the same has been duly assessed. In these circumstances sustaining the addition in the assessment year in question does not arise. We are inclined to accept the findings of the Ld.CIT(A) and accordingly, grounds raised by the revenue is dismissed. Proposed addition of notional interest - As assessee has utilized the total interest bearing funds only for the purpose of business purposes which is more than interest bearing funds borrowed by the assessee. When there is a mixed funds available to the assessee, there is legal presumption that the assessee has utilized the interest free funds for the purpose of financing non business activities as held in the case of CIT v. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] . Therefore, we are inclined to accept the findings of the Ld.CIT(A) in deleting the proposed addition of notional interest. Accordingly, the ground raised by the revenue is dismissed. Customs 2023 (6) TMI 254 Revocation of the Customs Broker License - forfeiture of security deposit - levy of penalty - Detention of goods - Smuggling - import of of E-waste from Dubai to JNPT - mis-declaration of goods as Electric Arc Welding Machines Bill of Entry covering import had been presented in the name of importer without actual knowledge of the proprietor of the firm - violation of the Regulations of CBLR, 2018 - HELD THAT:- Though it is an admitted fact that someone had imported e-waste by mis-declaring the goods as Electric Arc Welding Machines, the Department has not made any allegation that the Customs Broker or any of their staff were aware about the mis-declaration at any point of time till it was brought to their notice during investigation and due to that reason, no show-cause notice was issued under Section 124 of the Customs Act, 1962. Violation of Regulations 10(a) and (n) of CBLR, 2018 - HELD THAT:- The regulation casts responsibility on the Customs Broker to obtain authorization and in the present case they have obtained the authorization and produced the same during investigation. The issue regarding revocation of Customs Broker license was considered by Principal Bench in the matter of M/S PERFECT CARGO AND LOGISTICS VERSUS COMMISSIONER OF CUSTOMS (AIRPORT GENERAL) [ 2020 (12) TMI 649 - CESTAT NEW DELHI] and categorically held that there is no binding on the Customs Broker to verify the address of the importer/exporter by physically visiting the premises as per the document furnished by the importer and such verification can be done by verifying the details at declared address by using reliable, independent, authentic documents, data or information. Violation of Regulation 10(d) and (e) - HELD THAT:- Though the actual goods imported by the importer is e-waste and prohibited to import, the appellant was not aware about the import of such goods till it was disclosed by the investigating agency. Thus, as a Customs Broker, appellants had no opportunity to advice the importer regarding the violation of statutory requirements for importing such goods. There is no evidence to substantiate that the appellant was aware about the mis-declaration of the goods by the importer. The issue was considered by the Hon ble High Court of New Delhi in the matter of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI [ 2017 (3) TMI 1494 - DELHI HIGH COURT] wherein it was held that There is nothing on record to show that the appellant had knowledge that the goods mentioned in the shipping bills did not reflect the truth of the consignment sought to be exported. In the absence of such knowledge, there cannot be any mens rea attributed to the appellant or its proprietor. There is no involvement of appellant in alleged smuggling activities. The omissions alleged against the Customs Broker are not sufficient enough to allege violation of the provisions of CBLR 2018 and to revoke the Customs Broker License. Moreover, in the present case, the appellant s license has been suspended on 03.08.2020 and his livelihood has been affected for more than two years, this in itself amounts to severe punishment. Appeal allowed. 2023 (6) TMI 253 Classification of imported goods - Precision Agri Spray Equipment, Charger and Smart Battery - to be classifiable under Customs Tariff Item 8424 8200 or under CTH 8804? - HELD THAT:- The department has not considered the submissions made by the appellant in the appeal memorandum filed before the Tribunal. Further, it is surprising that how can a Shed Officer posted in the port of import without a detailed examination of goods, either by taking the assistance of technical expert or chartered engineer, can certify about a product and on the basis of such certification, the department will proceed against the importer for confirmation of duty demand or for confiscation of the goods. Since the issue requires a detailed examination by an expert or specialist in the concerned field, the appeal is required to be allowed by way of remand to the original authority for carrying out an effective and meaningful adjudication. The appeal allowed by way of remand to the original authority for fresh fact finding on the issue involved in this appeal. Insolvency & Bankruptcy 2023 (6) TMI 252 Insufficient stamped agreement - reference of matter to arbitration - non-joinder of the Special Purpose Vehicle (SPV), namely Orissa Steel Expressway Private Limited, which a party to the Option Agreement containing the arbitration clause - Corporate Insolvency Resolution Process (CIRP) commenced on March 30, 2017, that is, after the Option Right accrued in favour of the petitioner on January 13, 2017 - exercise of option - HELD THAT:- From the definitions as provided in the Option Agreement itself, there cannot be any doubt that the agreement, under Clause 10(a), was to be effective from the date of execution and was to remain in full force and effect until the earlier of three contingencies. It is undisputed that out of the three contingencies, the first, being expiration of the Option Period, was the earliest, since there was no settlement date or mutual termination - the Option Period, as per Clause 1.1.26, means the period starting from the Option Start Date and ending immediately after the completion of the Concession Period. The notice dated July 29, 2011, on which the petitioner seeks to rely, was long before the Option Period. As such, the same cannot count, by any stretch imagination, as the exercise of Option under the Option Agreement. In the present case, the petitioner having admittedly not done so, the question of applicability of Clause 10(b) does not arise at all. Hence, the argument of the petitioner, that upon service of the notice on July 29, 2011 the obligations under the Agreement crystallised and were to continue in force until fulfilment even though such obligations may fall beyond the Option Period, falls flat. In the absence of any notice being served within the time as contemplated in the agreement, there did not arise any question at any point of time for the obligations under the agreement to continue. Hence, the petitioner s argument of its rights having crystallised with the notice dated July 29, 2011 is not tenable in the eye of law and in the context of the agreement. Such unilateral notice of the petitioner did not even constitute any agreement between the parties to give rise to obligations on the part of the respondent. Following the principles in Vidya Drolia [ 2020 (12) TMI 1227 - SUPREME COURT ], the dispute sought to be raised by the petitioner is not maintainable and, hence, non-arbitrable. Even by limiting the interference of Court under Section 11 to a prima facie review of the dispute, the dispute sought to be referred is patently deadwood and non-arbitrable. Thus, a reference to arbitration of such a dispute, which is ex facie not maintainable, would merely be a futile exercise. Insofar as the non-impleadment of the SPV, Orissa Steel Expressway Private Limited is concerned, the same could be termed as a curable defect. Although the SPV was a signatory to the Option Agreement and a proper party to the present application, the question of curing such defect became infructuous ab initio in view of the application under Section 11 not being maintainable. The present application under Section 11 of the Arbitration and Conciliation Act, 1996 is not maintainable in law and in terms of the Option Agreement itself, as amended - Application dismissed. 2023 (6) TMI 251 Initiation of CIRP - Period of limitation - Operational Creditors - date of default in payment of the dues for supply of Isobutanol by the operational creditor to the corporate debtor - period specified under section 10-A of the IBC or not - pre-existing dispute regarding the poor quality of the material supplied to the corporate debtor - dishonouring of the LC discounting by the South Indian Bank - negligence of the corporate debtor. Whether the date of default in payment of the dues for supply of Isobutanol by the operational creditor to the corporate debtor is in the period specified under section 10-A of the IBC? - HELD THAT:- The HSS Agreement, which was signed on 15.1.2020 after the creation of LC on 13.1.2020, says that the date of payment would be as given in the invoice. Further, the invoice (attached at pg. 102 of appeal paperbook, Vol.I) clearly states that the credit days are 060-LC collectable in 60 days . It is thus clear that the HSS Agreement, which is the last final contract signed between the parties, clearly specifies that the payment against invoice is to be made by LC which is collectable within 60 days . Hon ble Supreme Court in the matter of M/S BAWA PAULINS PVT. LTD. VERSUS UPS FREIGHT SERVICES (INDIA) PVT. LTD. AND ANOTHER [ 2022 (11) TMI 1361 - SUPREME COURT] , which is cited in support by the Learned Senior counsel for Appellant, held that a letter of credit is independent of and unqualified by the contract of sale or underlying transactions. The autonomy of an irrevocable LOC is entitled to protection and as a rule, courts refrain from interfering with that autonomy. If courts interfere in such transactions, it would be prone to misuse by the applicant party to gain undue advantage leaving the issuing bank at peril in the international financial market. The above judgment places autonomy on an irrevocable LC which is held to be entitled to protection. In the present case, we note that after the opening of LC, a HSS Agreement was entered into between the two parties, which when seen in conjunction with the sales invoice, notes that the payment is to be made through a LC within 60 days from the date of issue of invoice, which is 6.1.2020. This judgment therefore, is distinguishable on the facts of the present case, wherein an explicit HSS Agreement has been signed between the parties since the sale of Isobutanol was on high seas. It is thus clear that the date of default is 60 days from 6.1.2020, which is the date of invoice. Counting 60 days from 6.1.2020, we find that the payment was due to be made by 5.3.2020. Thus, it is clear that the date of default is not covered in the period as stipulated in section 10-A of the IBC, and therefore, section 9 application does not suffer from bar as specified in section 10-A regarding its admission and initiation of CIRP. Whether there was a pre-existing dispute regarding the poor quality of the material supplied to the corporate debtor as defined in law? - HELD THAT:- While it is claimed by the Appellant that section 21 notice under the Arbitration and Conciliation Act, 1996 for invoking the arbitration clause under the HSS Agreement was sent through Blue Dart courier, the contents letter dated 10.6.2021 as mentioned above, very clearly show that such a document did not travel in the Blue Dart Express Ltd. network and therefore, no such notice was ever served on the operational creditor. The law propounded by the Hon ble Supreme Court in the matter of Mobilox Innovations Private Ltd. vs. Kirusa Software Private Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT ], that the pre-existing dispute has to be real and genuine one, and not an illusory or hypothetical dispute, is followed - In the present case, the dispute was neither raised before the issue of section 8 demand notice and also the notice under section 21 of the Arbitration and Conciliation Act, 1996 was not proven to be served on the operational creditor. In such a situation, the corporate debtor cannot claim pre-existence of dispute in the adjudication of the section 9 application. Whether the dishonouring of the LC discounting by the South Indian Bank was on account of negligence of the corporate debtor? - HELD THAT:- The operational debt should have been paid through LC facility within 60 days from 15.1.2020, and since it could not done due to discrepancies in submission of documents to the South Indian Bank, it was the responsibility of the corporate debtor to make the payments, more so when it was being repeatedly asked to do so by the operational creditor - HSS Agreement was executed on 15.1.2020 and under the General Conditions of Sale included in the HSS Agreement, the payment was to be made with 60 days from the date of bill of lading, which would be date of default and which would not be covered in the period stipulated in Section 10-A of the IBC. The Impugned Order does not suffer from any infirmity and it does not require any interference - Appeal dismissed. FEMA 2023 (6) TMI 250 Constitutional validity of Section 37A of FEMA Act - order of the Competent Authority affirming seizure by the Authorised Officer - Seeking consequential prayers of quashment of seizure order u/s 37A(1) and confirmation order of such seizure under Section 37A(3) of the Act - reason for seizure was on the ground that the respondent/Directorate of Enforcement found during the course of investigation that no agreement or legal basis was available for remitting the money by the petitioner. Royalty was not a part of the product cost. No work order or purchase order was placed. No intellectual property rights were received. Based upon the impugned seizure, seizure order was passed on 29th April 2022 invoking Section 37A(1) of the Act. Whether the writ petition would be maintainable on the prayer that is sought i.e., to hold Section 37A of the Act to be unconstitutional on the ground that it is manifestly arbitrary and violative of Article 14 of the Constitution of India? - HELD THAT:- Article 19 would not be available to any person, who is not a citizen of this country. Same goes with the Division Bench judgment of Allahabad High Court where at para-14 it is clearly held that Article 19(1)(d) and (e) are unavailable to foreigners because these rights are conferred only on the citizens. Rights under Article 19 are withheld expressly to foreigners. The Division Bench also holds that it is of the opinion that foreigners enjoy some fundamental rights of this country but the same are confined to Article 21 of the Constitution of India which deals with life and liberty and does not include the rights guaranteed under Article 19 of the Constitution. The question therein was right to free trade under Article 19(1)(g) and, therefore, held that it was available only to Indian citizens and not to foreigners. On a coalesce of the judgments rendered by the Apex Court and that of different constitutional Courts what would unmistakably emerge is that Articles 14 and 21 of the Constitution of India, the nation s Grundnorm would be available to every person and they are not restricted to the citizens of the country only. However, Articles 15, 16 and 19 are restricted only to citizens of this country. The challenge in the case at hand is on the ground that the provision is unreasonable or manifestly arbitrary, both of which would come within the ambit of Article 14 of the Constitution of India and the petition challenging the constitutional validity on the ground that it is manifestly arbitrary and violative of Article 14 or unreasonable, again being violative of Article 14, are all maintainable contentions before the constitutional Courts of the country as they are person centric and not citizen centric . Therefore the first issue that has arisen for consideration qua maintainability is answered in favour of the petitioner holding the petition to be maintainable qua the challenge. Whether Section 37A of the Act gives uncanalised and unguided power on it suffering from absence of safeguards ? - On a coalesce of the judgments relied on by the petitioner and others that are quoted hereinabove, as also the reasons rendered by this Court, what would unmistakably emerge is that Section 37A of the Act does not suffer from any manifest arbitrariness for this Court to strike it down on any of the grounds urged by the petitioner. The purpose behind the amendment is already quoted, and checks and balances available, under Section 37A are also quoted and analysed. Therefore, the second point that arose for consideration is answered against the petitioner. Whether the order passed by the authorized officer suffers from non-application of mind? - The only reason that is projected by the petitioners to knock at the doors of this Court despite the remedy of filing an appeal before the Appellate Tribunal being appealable under subsection (5) of Section 37A of the Act is that the order of the Competent Authority affirming seizure by the Authorised Officer does not bear application of mind. It is trite law that application of mind is discernible from any order, if the order contains reasons for passing one, it would have been an altogether different circumstance if there were no reasons recorded in writing by the Competent Authority for this Court to hold that the order suffered from non-application of mind. The order is neither cryptic nor perfunctory. It is in great detail. It runs into more than 250 pages. It is not the number of pages that matters, but the content in those pages which clearly indicate application of mind. We decline to accept the submission that the order suffers from non-application of mind on perusal of the entire content in the order. Every submission of the petitioner is noted, considered threadbare and answered by the Competent Authority. The Competent Authority has not left any wood on the tree. Therefore, the order does not suffer from nonapplication of mind, as is sought to be projected and contended by the petitioner. Therefore, the only circumstance which the petitioner projects apart from challenging the constitutional validity for entertainment of the subject writ petition tumbles down, as the order of the Competent Authority does bear the stamp of application of mind through the order. Therefore, it is for the petitioner to avail of the remedy of filing an appeal before the Appellate Tribunal. SUMMARY : (i) The challenge to the constitutional validity of Section 37A of the Act by the petitioner is held to be maintainable and entertainable, on the fulcrum of the allegation that it is violative of Article 14 of the Constitution of India, as Article 14 is person centric, whereas fundamental rights under Articles 15, 16, 19 and 25 are citizen centric. Wherefore, a non-citizen can challenge certain laws of the nation on the ground that it is violative of Article 14 of the Constitution of India and the challenge would be restrictable only to the tenets of Article 14 of the Constitution of India. (ii) The challenge to the constitutional validity of Section 37A of the Act is rejected, as Section 37A does not suffer from any manifest arbitrariness on any ground whatsoever. (iii) The petitioner is at liberty to avail of the statutory remedy of filing an appeal before the Tribunal under sub-section (5) of Section 37A of the FEMA. 2023 (6) TMI 249 Offence under FEMA - Investigation initiated under FEMA Act initiated - maintainability of the present writ petitions - complainant and Adjudicating Authority being officers of the same rank - As alleged that the Petitioners received foreign direct investment from three foreign companies and one Non-Resident Indian as consideration for issuance of shares in exchange for such investment in M/s Teleonto Tecnologies Pvt. Ltd. - HELD THAT:- Supreme Court has time and again reiterated that a writ petition is not maintainable when an efficacious alternative remedy is available. It is only in certain limited circumstances that a writ petition can be entertained, despite there being an alternative remedy. Petitioners have raised only two issues which need consideration by this Court to decide the maintainability of the writ petition. It was contended that the impugned order is violative of principles of natural justice as the same authority which filed the complaint also passed the impugned order. Therefore, the principle of no one can be a judge in his own case is violated. Whether the impugned order was passed in violation of principles of natural justice on account of the complainant and Adjudicating Authority being officers of the same rank/designation? - The maxim nemo judex in causa sua states that a person who has interest either personal or pecuniary in an outcome of a particular lis, he/she shall not act as an adjudicator in the said lis. In other words, a person authorized to decide a dispute between the parties shall refuse decide such dispute, if he/she is connected to any of the party to such dispute either professionally, personally or monetarily. The connection should give rise to strong probable apprehension of bias in favour of one party. Whether the maxim nemo judex in causa sua is violated in the present case merely because the complainant and the Adjudicating Authority happen to be the same ranked officials/authority ? - Merely because an officer is also the complainant, he/she will not be barred from performing other duties as prescribed under a statute. Bias cannot be presumed and a party alleging or attributing bias shall establish reasonable grounds for apprehension for such bias. In the present case, merely because the complaint was lodged by an officer of the rank of Deputy Director of Enforcement and subsequently the impugned order was also passed by the same rank officer, bias cannot be presumed in the absence of any material attributing such bias to the officer. As stated above, though of the same rank, both the officers i.e., one who filed the complaint and one who passed the impugned order were different. Therefore, the maxim nemo judex in causa sua does not apply in cases where the designation/rank of the authority is the same but members heading them are different. Therefore, Issue No.1 is decided by holding that the impugned order was not passed in violation of principles of natural justice. Whether the Deputy Director of Enforcement had jurisdiction to pass the impugned order in light of the contention that the case before the Adjudicating Authority involved an amount more than Rs. 10,00,00,000/-? - A case involving an amount between Rs. 10,00,00,000/- and Rs. 25,00,00,000/- can only be decided by an Additional Director of Enforcement. Further, cases involving an amount between Rs. 2,00,00,000/- and Rs. 5,00,00,000/- have to be decided by the Deputy Director of Enforcement. Petitioner s reliance of the alleged value of shares worth Rs. 8,46,90,000/- to calculate the monetary limit cannot be accepted for the simple reason that the said transfer was done in lieu of a loan arrangement worth Rs. 2,70,00,000/- The alleged amount violative of the pricing guidelines is Rs. 2,70,00,000/- Therefore, the amount involved in the case is the sum of Rs. 1,32,38,364/, Rs. 85,45,184/- and Rs. 2,70,00,000/- which comes down to Rs. 4,87,83,548/-. Therefore, Issue No.2 is decided by holding that the Deputy Director of Enforcement was competent to pass the impugned order as the amount involved in the case was Rs. 4,87,83,548/-. Maintainability of appeal - This Court holds that the present writ petitions are not maintainable as the impugned order dated 05.09.2022 was passed in compliance with the principles of natural justice and within the jurisdiction prescribed under the Act, 1999. Petitioners have raised other contentions regarding forged and fabricated documents, the issue of delay in filing the complaint and the issue of quantum of penalty. This Court being bound by the decision in M/S COMMERCIAL STEEL LIMITED [ 2021 (9) TMI 480 - SUPREME COURT] holds that the said issues cannot be decided by this Court in view of an efficacious alternative remedy available under Section 17(2) of the Act, 1999. Present writ petitions are liable to be dismissed and are accordingly dismissed. Liberty is granted to the Petitioners in both the writ petitions to raise all their grounds in appeal under Section 17(2) of the Act, 1999, if any preferred. PMLA 2023 (6) TMI 247 Remand application - Money Laundering - operation of the large scale Havala racket in international cricket betting through U.K. based website - HELD THAT:- The grounds as observed for rejection of remand application is noting the medical condition of the accused on record, as was perused of the medical check up certificate issued by the Medical Officer of VS hospital, Ahmedabad and accordingly, it was observed that the blood pressure of the accused was very high. No other medical condition was noted to suggest any imminent danger to the life of the respondent. No such ailment or illness has been noted which would not permit the respondent to face the custodial interrogation. The only observation is of the applicant suffering from blood pressure which is noted to be high. However that medical condition of the respondent could be taken care of by providing medicine to control his blood pressure and it may be possible that the respondent himself may be under such medication. However, if necessary, the respondent can always take the assistance of the medical doctor during the course of interrogation as it would be the duty of the applicant as provided under Section 55A of the Cr.P.C. to take reasonable care of the health and safety of the accused. In view of the provision of Section 55A of the Cr.P.C., the applicant would be under duty to take all reasonable care to see that the health and safety of the accused is protected. So any apprehension raised by the respondent about his life is unfounded as investigating officer of Directorate of Enforcement would have to ensure about the safety of the accused. The order order dated 8.4.2023 passed by the learned Special Designated Judge (PMLA), Ahmedabad (Rural) at Mirzapur is quashed and set aside and the applicant is granted the remand of the respondent accused for 4 (four) days - Application allowed. Service Tax 2023 (6) TMI 246 Classification of services - construction of residential houses - to be classified as Construction of Complex Services or not - abatement under the Notification No. 1/2006-ST dated 01.03.2006 - extended period of limitation. HELD THAT:- The Hon ble Apex court in the case of CCE vs. Larsen Toubro Limited [ 2015 (8) TMI 749 - SUPREME COURT] has settled the issue relating to works contract service which includes supply of material and labour for consideration and the same is taxable only from 01.06.2007 - even for the period after 01.006.2007, various decisions of the Tribunal have consistently held that the composite contract or works contract service even after 01.06.2007 cannot be taxed under Construction of Complex Service under Section 65 (105) (zzh) read with Section 65 (30a) of the Finance Act, 1994. Similarly, in the case of Srishti Construction vs. Commissioner of Central Excise ST, Ludhiana [ 2017 (12) TMI 172 - CESTAT CHANDIGARH] , the Division Bench of this Tribunal has also set-aside the demand of service tax under Works Contract Service and has also held that the extended period of limitation is not invokable and allowed the appeal of the appellant with consequential relief, if any, as per law. The impugned orders are set aside - appeal allowed. 2023 (6) TMI 245 Levy of Service Tax - Commercial Training or Coaching Service or not - training courses in the field of Hotel and Catering Management and are awarding certificates to the trainees on completion of said courses - levy of service tax on Arts and Craft course imparted by the appellant - HELD THAT:- The appellant though contends that they are not imparting the course of Hotel and Catering Management has not been able to adduce any evidence as to the income shown in the table is derived from business other than commercial training and coaching services. The details of document as to whether the fees is collected by the appellant or the Arts Science College is not clear. So also it is argued by the appellant that SRM Deemed University was formed and some of the institutions including the appellant, are now under the aegis of the Deemed University. It is not clear as to whether appellant is now part of the Deemed University and is imparting any course or providing any facility of internship only. The facts as to how the demand has been raised on the income of the appellant is not clear. We are therefore of the considered opinion that the matter requires to be remanded. The very same issue was considered by the Tribunal in the appellant's own case for the previous period from July 2003 to March 2008 in M/S. SRM INSTITUTE OF HOTEL MANAGEMENT VERSUS CCE ST, CHENNAI-III (VICE-VERSA) [ 2018 (4) TMI 1501 - CESTAT CHENNAI ] and the matter was remanded due to lack of clarity. We are not able to understand whether separate fees are collected from students for this course. The order is not clear as to the details of demand in regard to this course. The appellant has not been able to show as to what portion of the demand is covered by the fees collected for the course approved by the Industries Department. We find that this issue also requires to be remanded. Matter remanded to the adjudicating authority for denovo consideration - the appeal is allowed by way of remand. 2023 (6) TMI 244 Seeking withdrawal of appeal - Refund of unutilized cenvat credit of service tax paid - input services received and entirely used in the export of ITS Services under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 27/2012-CE (NT) dated 18.06.2012 - Rejection on the ground that since refund includes rebate of duty, the rebate claims have to be filed within a period of one year as per under Section 11B of Central Excise Act, 1944 read with Section 83 of Finance Act, 1994. HELD THAT:- From the bare reading of provision of first proviso to Section 86(1) of Finance Act, 1994, it appeared that the appeal in respect of the orders passed by the FAA shall lie before the Central Government (Revisional Authority) in the form of a revision application and not before the Hon ble Appellate Tribunal. However, appellant stated that they have noted the Tribunal s order in the case of AXA BUSINESS SERVICES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH [ 2019 (7) TMI 398 - CESTAT BANGALORE] wherein similar issue on rebate of Swachh Bharat Cess has been decided in favour of the assessee In view of the above, the appellant states that there is ambiguity as to whether the order passed by the Commissioner (Appeals) is appealable to this Tribunal or to the Central Government (Revisional Authority). The appellant submitted that the revision applications were filed subsequent to the filing of the above 6(six) appeals before this Tribunal as a precautionary measure owing to the ambiguity regarding correct jurisdiction for the second appeal in the matter. The appellant has prayed to condone the filing of second appeal before two different appellate forums and to allow them to withdraw the above appeals filed before this Tribunal. The request of the appellant for the withdrawal of the appeals is allowed and the 6(six) appeals filed are dismissed as withdrawn. 2023 (6) TMI 243 Levy of Service Tax - Business Auxiliary Services - reimbursement of advertisement charges from M/s. Maruti Udyog Ltd, and M/s. Sundaram Finance Ltd, for various promotional activities - HELD THAT:- The very same issue was analysed by the Tribunal in the case of M/S. ROHAN MOTORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, DEHRADUN [ 2020 (12) TMI 1014 - CESTAT NEW DELHI] where it was held that the appellant purchases vehicles form MUL and sells the same to the buyers. It is clear from the agreement that the appellant works on a principal to principal basis and not as an agent of MUL. This is for the reason that the agreement itself provides that the appellant has to undertake certain sales promotion activities as well. The carrying out of such activities by the appellant is for the mutual benefit of the business of the appellant as well as the business of MUL. The amount of incentives received on such account cannot, therefore, be treated as consideration for any service. The incentives received by the appellant cannot, therefore, leviable to service tax. Following the above decision which is squarely applicable to the facts of the case, it is held that the incentives received by the appellant cannot be subject to levy of service tax under the category of Business Auxiliary Services. Business Auxiliary Services - reimbursable expenses received by the appellant from M/s. Maruti Udyog Ltd. and M/s. Sundaram Finance Ltd. - HELD THAT:- As per the annexure to the Show Cause Notice is seen that these are nothing but reimbursement of expense for advertisement. The Honourable Supreme Court in the case of Intercontinental Technocrats Ltd. [ 2018 (3) TMI 357 - SUPREME COURT] has held that the reimbursable expenses cannot be subject to levy of service tax. The decision relied by the Ld. AR for the Department has not considered the decision of the Hon ble Apex Court and hence not applicable. The demand cannot sustain and requires to be set aside - Appeal allowed. 2023 (6) TMI 242 CENVAT Credit - input services - Appellant has taken credit for services used in their Visakhapatnam Plant - Appellant has utilized this Cenvat Credit by transferring the Cenvat Credit by way of ISD challans mainly to their Bhilai unit and also to some other units - principle of prorata distribution of Cenvat Credit followed or not. Whether the Appellant is eligible for Cenvat credit taken by them for the input services received by them in their Visakhapatnam unit which has ultimately resulted in coming into existence of their immovable property? - HELD THAT:- The issue is no more res integra. The Hon ble High Court of Punjab Haryana in the case of COMMISSIONER CENTRAL EXCISE COMMISSIONERATE, DELHI-III VERSUS M/S BELLSONICA AUTO COMPONENTS INDIA P. LTD. [ 2015 (7) TMI 930 - PUNJAB HARYANA HIGH COURT] has held that The land was taken on lease to construct the factory. The factory was constructed to manufacture the final product. The land and the factory were required directly and in any event indirectly in or in relation to the manufacture of the final product and for the clearance thereof up to the place of removal. But for the factory the final product could not have been manufactured and the factory needed to be constructed on land. The land and the factory are used by the manufacturer in any event indirectly in or in relation to the manufacture of the final product, namely, metal-sheets. The respondents case, therefore, falls within the first part of Rule 2(l) aptly referred to by Mr. Amrinder Singh as the means part. The Tribunal and Hon ble High Courts have been consistently holding that Cenvat credit is eligible for the services used even for the immovable property when the period on dispute is prior to 01.04.2011. In the present case, the period of dispute is from 2006-07 to 31.03.2011. Therefore, respectfully following the above decisions, we hold that the Appellant is eligible for Cenvat credit of Rs.4,18,68,904/-. In respect of input service distributed by the Appellant to their other units, it is found that the Board vide their Circular dt.16.02.2018 have considered in detail the judgments of Hon ble High Court of Gujarat in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [ 2016 (2) TMI 183 - GUJARAT HIGH COURT] and Hon ble High Court of Rajasthan in the case of COMMISSIONER CENTRAL EXCISE COMMISSIONERATE, JAIPUR VERSUS NATIONAL ENGINEERING INDUSTRIES LTD. [ 2016 (5) TMI 12 - RAJASTHAN HIGH COURT] and they accepted these decisions - it was held in DASHION LTD has held that The first objection of the Department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without prorata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. In fact, the Tribunal has seen entire situation as a Revenue neutral, since as pointed out by the assessee, it had availed only 20% of the credit for payment of service tax and the balance was paid in cash. After going through the judgments of the Hon ble High Courts as well as Board Circular, it is clear that the matter is no more res integra. As the Department has already accepted the decisions of these Hon ble High courts and no further Appeals have been filed and the Circular dated 16.02.2018 has been issued to the Department to follow the same in their future proceedings, there is no error on the part of the Appellant in distributing the Service Tax to any of the units, during the period under dispute (2006 to 2011). Appeal allowed. 2023 (6) TMI 241 Levy of Service tax - Banking and Other Financial Services or not - fees paid to foreign banks for the External Commercial borrowings under the Reverse Charge mechanism - HELD THAT:- In the show cause notice, it is alleged that such banks and financial institutions do not have an office or permanent establishment in India. The respondent has given detailed break up of the demand raised in SCN as well as the table in the grounds of appeal. The table which is reproduced in para 7 above will demonstrate that such financial institutions have a permanent establishment in India. Some amounts relate to the period prior to 18.04.2006 which is before the introduction of Section 66A of the Finance Act, 1994 and therefore not taxable under reverse charge mechanism. From the details furnished by the Ld. Counsel in the synopsis it is found that department has failed to adduce any evidence that the figures of Rs.51,75, 733/- is subject to service tax and these banks and financial institutions do not have permanent establishment in India. In the result, we do not find any grounds to interfere with the impugned order passed by the original authority. Impugned order is sustained. Appeal filed by department is dismissed. 2023 (6) TMI 240 Levy of service tax - management, maintenance or repair service - site formation and clearance, excavation and earthmoving and demolition service - extended period for demand of tax - imposition of penalty. Management, maintenance or repair service - HELD THAT:- It is found that the Commissioner of Service Tax, Chennai has exempted all the Services provided in relation to repair of roads carried out for various Government Departments and local authorities, but relying on the decision of the Tribunal in the case of LARSEN TOUBRO LTD. (ECC DIVISION) VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [ 2009 (12) TMI 461 - CESTAT, BANGALORE] ], it has been held that exemption from payment of Service Tax under maintenance or repair service (MRS) is available only for repair / re-laying of public roads and infrastructure facilities are public goods and only infrastructure items of public utility or civic amenity are covered under the excluded category. The question as to whether the N/N. 25/2012-S.T. dated 20.06.2012, would have a retrospective effect for the period from 2005 to 2009 was also answered by the Notification No. 24/2009-S.T. dated 27.07.2009 which was issued under Section 93 of the Finance Act. The special provision for exemption in certain cases relating to Service Tax on repair of roads was made in Section 97 of the Finance Act, 2012. Notification No. 24/2009-S.T. states that the exemption has been extended even for the earlier period from 16.06.2005 to 26.07.2009 - the notification states that In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service, referred to in sub-clause (zzg) of clause (105) of section 65 of the Finance Act,1994, provided to any person by any other person in relation to management, maintenance or repair of roads, from the whole of the service tax leviable thereon under section 66 of the said Finance Act. The Mumbai Bench of the CESTAT in the case of COMMR. OF C. EX. CUS., AURANGABAD VERSUS RAJDEEP BUILDCON PVT. LTD. [ 2015 (12) TMI 326 - CESTAT MUMBAI] has held first appellate authority while setting aside such demands has also not given any reasoning which could be appreciated by us. In the absence of any reasoning by the lower authorities, we find that this particular issue of eligibility to avail Cenvat credit on the various services, which are consumed by the appellant for providing taxable output services, needs reconsideration by the adjudicating authority. Thus, the demand pertaining to maintenance and repair service in respect of roads is not sustainable in view of the exemption under Section 97 of the Finance Act, which has retrospective effect for the period from 16.06.2005 to 26.07.2009. For according exemption, no distinction needs to be made between private and public roads. Demandability of Service Tax for the consideration received towards hiring of JCB and Tipper - HELD THAT:- The supply of tangible goods under Section 65(105)(zzzzj) of the Finance Act, as a separate category, came into effect from 16.05.2008 whereas the demand was raised under maintenance or repair service against the appellant for the period from 2005-06 to 2007-08 - Even if it is assumed that the hire charges on account of JCB and Tippers are separately accounted for in the financial statements of the appellant, the demand is not sustainable as the services were provided prior to the introduction of supply of tangible goods as a separate category under Section 65(105)(zzzzj). The above demand was raised in this appeal under maintenance or repair service as these were reportedly hired to those customers / service providers for repair / maintenance of the roads. However, the main service of these agreements / contracts is maintenance or repair service of roads, which itself was exempted with retrospective effect from 2005 to 2009. As such, the demand of Service Tax on hiring of JCBs, Tippers, etc., is not maintainable. Extended period of limitation - penalty - HELD THAT:- As there was considerable confusion during the said period relating to the taxability under maintenance or repair service in respect of roads for infrastructure projects, it is found that invoking the extended period is not justified. So, the penalties imposed under Sections 77 and 78 of the Finance Act, 1994 set aside. Site formation and clearance, excavation and earthmoving and demolition service - extended period of limitation - HELD THAT:- The demand is raised in respect of site formation and clearance, excavation and earthmoving and demolition service on the basis of TDS Certificate issued by the Executive Engineer, SIDCO wherein it was mentioned that the assessee undertook filling-up of the low-lying area in eastern side of SIDCO Industrial Estate. The assessee s contention that the site formation service has been undertaken in connection with any laying or repair of road is not acceptable in the absence of any evidence. Even during the hearing before us, the appellant has never produced any evidence relating to the above activity. The finding of the lower authority upheld that the activity undertaken by the appellant squarely falls under the scope of site formation and clearance, excavation and earthmoving and demolition under Section 65(97a) of the Finance Act, 1994 and we hold that the assessee is liable to pay Service Tax of Rs.6,73,598/-, as confirmed by the learned Adjudicating Authority along with penalty under Section 78 of the Finance Act, 1994. The material facts were unearthed by the Department and hence, non-furnishing of any facts would clearly amount to suppression of acts with an intention to evade tax within the meaning of Section 73(1) ibid. Hence, the Revenue is justified in invoking the larger period of limitation for this activity. So, the demand and penalty in respect of this activity are, therefore, required to be sustained. The demand and penalty insofar as it relates to the maintenance or repair service undertaken by the appellant are set aside. However, the demand and penalty in respect of site formation and clearance, excavation and earthmoving and demolition service are sustained - Appeal allowed in part. 2023 (6) TMI 239 Recovery of CENVAT Credit wrongly availed alongwith interest and penalty - input service or not - dredging service - case of Revenue is that the dredging service is not required by the Appellant for providing the output service and consequently, there was no direct nexus between the dredging service and output port services. HELD THAT:- In case of Adani Port SEZ Ltd. [ 2015 (12) TMI 1060 - CESTAT AHMEDABAD ], it was held that any service used by a service provider for providing Port Service in any manner, is eligible for credit. The definition of input service by way of means and includes also amplify the scope of the same. Further, the definition also mentions certain specific services. The definition also includes services used in relation to activities relating to business . These further enlarge the scope of the input services. The net result of such a wide definition as rightly held by the High Courts and Tribunal, is that any input service which has any nexus or is in relation to the output services in any manner whatsoever, or is in relation to the activities relating to business would be eligible for credit. Therefore, the appellants would be eligible to take credit on the input services where they are able to satisfy the above criteria. In case of Essar Bulk Terminal Ltd. [ 2021 (9) TMI 816 - CESTAT AHMEDABAD ], it was held that in the present case also as regard the service provision of dredging service there is a direct contract between the service provider viz M/s. Van Oard Dredging and Marine Contractor and M/s. Van Oard India Pvt. Ltd. and the appellant. The said service providers rendered the service to the appellant only and not to the Gujarat Maritime Board. Therefore, the appellant being the sole recipient of the service entitled for the Cenvat credit. It also not disputed that the entire service charges along with service tax there on for dredging of navigation channel was paid by the appellant to the aforesaid contractors who carried out the dredging services. In this undisputed fact the appellant is the service recipient for dredging service which is undisputedly used for providing Port Services and cargo handling services, hence, the appellant is entitled for taking Cenvat credit on dredging services. From the above decisions, it is evident that the dredging services have been held as input service for providing the output port services. It has been held in the case of Essar that it is the person namely the appellant who has received the said services to provide the output service to his clients and not the Government under whose license/ lease agreement the service provider is from the port area. Since both the issues on which the credit has been sought to be denied have been decided in the favour of the appellant by the CESTAT we do not find any merits in the impugned order denying the credit. Appeal allowed. Central Excise 2023 (6) TMI 238 Requirement of sanction u/s 197 from the Central Government before prosecuting the applicants for the offence punishable under Section 504 of the Indian Penal Code - Allegation of corruption against the revenue officer - Abetting the manufacturer in evasion of duty of excise - HELD THAT:- A bare reading of Section 197 lays down that, no court can take cognizance of any offence alleged to have been committed by a person who is or was a Judge, or Magistrate or a Public Servant not removable of his office save by or with the sanction of the government, while acting or purporting to act in the discharge of his official duty, except with the previous sanction of the appropriate Union or the State Government - In order to avail the benefit of Section 197, it is required to be established that the offence mentioned therein must be committed by public servant and the public servant employed in connection with the affairs of the Union or State is not removable from his office, save by and sanction of the appropriate government. The protection is available only when the alleged act done by the public servant is reasonably connected with the discharge of his official duty and is not merely a clock for doing the objectionable act. The object of sanction of prosecution as provided under Section 197 is to protect the public servants discharging official duties and functions from harassment by initiation of frivolous retaliatory criminal proceedings. The Apex Court in the case of D. Devraja [ 2020 (6) TMI 802 - SUPREME COURT ], discussed the settled law relating to the requirement of sanction to entertain and/or take cognizance of an offence, allegedly committed by public servant and held that the High Court clearly erred in law in refusing to exercise its jurisdiction Under Section 482 of the Code of Criminal Procedure to set aside the order of the Magistrate impugned taking cognizance of the complaint, after having held that it was a recognized principle of law that sanction was a legal requirement which empowers the Court to take Cognizance. In light of the settled law propounded by the Apex Court and applying the same to the facts of present case, this court is of the considered opinion that, before the learned trial Court sufficient material placed by the applicants to demonstrate that the offence complained of was committed by the applicants while discharging their official duty. The documents referred by the trial Court clearly established that, the applicants were appointed by the President of India and their parent department is Revenue, Ministry of Finance - based on the power of delegation and procedure of channel of submission, time to time framed by the Union Government and considering the applicable service rules, it prima-facie, established that, at relevant time, applicants were public servants, employed by the Union, not removable from their office with the sanction of the Central Government. Reverting to the facts of the present case, the applicants had raided the mill premises for preventive checks and act of raid was the part of their official duty and therefore, during the search, the allegations as alleged in the FIR leveled by the respondent no. 2 that he was insulted with intent to provoke the peace. In such circumstances, it cannot be said that, the alleged act done by the applicants is not directly connected with the discharge of their official duty. The facts of the FIR lodged by the applicants against the private respondent in discharging the public duty and subsequent private complaint under the Excise Act, would show that the alleged offence under Section 504 and official duty are so inter-related that it would be difficult to separate them and in that view of the matter, the protection as provided under Section 197 is required to be extended to the public servants i.e. present applicants. This Court is of the considered opinion that, the findings recorded by the trial Court are without applying the principles of law correctly and to prevent the failure of justice - In view of the bar of Section 197 of the Cr.P.C, the trial Court could not have issued the process against the applicants without prior sanction of the authority and/or Union Government. Accordingly, the proceedings of the Criminal Case for the offence punishable under Section 504 of the Indian Penal Code is hereby quashed. Petition allowed. 2023 (6) TMI 237 Transfer of Credit - Merger of two units - transfer of CENVAT credit which was lying in Plant I, which was earlier an EOU unit to their merged DTA unit - Department alleged that as there is no transfer of capital goods / inputs as required under the sub-rule (3) of Rule 10 and the CENVAT credit lying unutilized in the accounts of the earlier EOU cannot be transferred to the merged DTA Unit - Rule 10 of CENVAT Credit Rules, 2004 - HELD THAT:- There are nothing in Rule 10 which disallows transfer of CENVAT credit in the manner alleged by department. So also there is no dispute that the credit availed by the EOU which has been transferred is ineligible. The very same issue was considered by the Tribunal in the case of Technocraft Industries [ 2018 (12) TMI 8 - CESTAT MUMBAI ] where it was held that denial of carry forward of accumulated Cenvat credit to assessees debonding from the 100% Exported Oriented Unit scheme to continue operations without the privileges is not correct in law and is set aside. In the case of Sun Pharmaceuticals [ 2009 (5) TMI 849 - CESTAT CHENNAI ], the Tribunal held that at the material time the CER or CCR did not contain any provision barring the 100% EOUs from availing cenvat credit or utilizing the same for payment of duty on excisable goods removed to the DTA or for payment of duty on goods exported under claim for rebate. Also there exists no bar for a DTA unit carrying over inputs and the cenvat credit balance in its accounts when it got converted into an EOU. Following the ratio laid down by the judgments above, which is squarely applicable to the facts of the case, it is held that the demand cannot sustain. The impugned order is set aside - appeal allowed. 2023 (6) TMI 236 CENVAT Credit - inputs - TMT Cutting, Square Cobble, MRM Rolls Spoils, Misrolls End cutting, Scrap Melting Scrap - manufacture of their final products MS Flat/Bar, MS Channel, MS Round, MS Angle, MS Ribbed Bar etc - Department s contention is that the Appellant is only a Rolling Mill and does not have furnace for melting of such waste and scrap and hence they could not have used these scrap as inputs to manufacture their finished goods namely hot rolled products - suppression of facts - extended period of limitation. HELD THAT:- As per Rule 3 of Cenvat Credit Rules 2004, any manufacturer can avail credit of duty paid on any goods (excepting light diesel oil, high speed diesel oil and motor spirit) treating the same as input if those goods are used in or in relation to manufacture of their final products. Thus for the purpose of availment of credit on such items, it has to be established that the same were used in the manufacture of final products. Rule 3(1) of the Cenvat Credit Rules, 2004 clearly states that a manufacturer or producer of final products and a provider of output service shall be allowed to take credit of the duty paid on eligible inputs or services. It means that cenvat credit can be availed by manufacturer or producer of final products who uses the inputs in or in relation to manufacture of final products. Rule 2(k)(i) of the Cenvat Credit Rules, 2004 which defines iputs for manufacturer states that these should be used in the factory . In the instant case, there is no evidence brought on record to show that the impugned goods purchased by the Appellant from IISCO and other manufacturers on payment of duty has not been used in the factory. Only an allegation has been made without any evidence that the scrap were not used in the factory as they were not capable to be used in the manufacture of Billets or Ingots. The Appellant stated that the goods so purchased from SAIL and others have been subjected to heating, straightening to make suitable for rolling and sometimes cut to sizes and then rerolled to manufacture their final products - the Appellants are eligible for the CENVAT credit availed on the inputs used in the manufacture of their final products namely, Rerolled products, MS Flat/Bar, MS Angle, MS Channel, MS Round etc and hence the demands made in the impugned order is not sustainable. Extended period of limitation - suppression of tacts - HELD THAT:- When a show cause notice was already issued and the facts are in the knowledge of the authorities, then another notice cannot be issued on the same facts alleging suppression of facts. Thus, the Notice dated 23/04/205 issued on the same ground and the impugned order confirming the demands made in the Notice are not sustainable on the ground of limitation also. Thus, the demands made in the impugned orders along with the demand of interest and penalties are not sustainable on merit as well as on the ground of limitation. The impugned orders set aside - appeal allowed. 2023 (6) TMI 235 Demand of differential duty in terms of 7th Proviso to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - compounded levy - differential duty has to be paid only during the period of default on the highest number of machines installed/operated based on the amended provisions or as contended by the Revenue to be calculated in terms of proviso 7 of Rule 9 of PPM (CDCD) Rules, 2008 for the entire financial year as it stood prior to 27.2.2010? HELD THAT:- The learned Commissioner vide para 24.4 of the impugned order has categorically referred to Board Clarifications, and has calculated differential duty at para 26 taking into consideration the PPM (CDCD) Rules, 2008 as amended and the Board s clarification given vide letter F.No.341/109/2008-TRU dated 27.7.2009 and Letter No.81/17/2007-CX3 dated 20.04.2010. Board s clarifications are very categorical and clear wherein it is stated that Reading of proviso to Rule 7 to the Rule 9 of PPM (CDCD) Rules, 2008 makes it clear that the default for payment of duty for one month would not be treated as default for all the remaining part of the full financial year. However, the default would continue till the duty for the said month is paid . Hence, in the instant case, the learned Commissioner has rightly demanded the differential duty along with interest for the available packing machines during the period of default. In the case of S.M. Perfumes vs. CCE, the Hon ble High Court of Karnataka at Bangalore PRINCIPAL COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. S.M. PERFUMERS PVT. LTD., [ 2017 (2) TMI 666 - KARNATAKA HIGH COURT] has considered these Rules and relevant provisos and has rejected the Revenue s plea that the 7th Proviso would operate independently for the whole year. In view of the above observations and clarifications issued by the Board, there is found no substance in the Revenue s appeal and there is absolutely no ground to set aside the Commissioner s order - the Commissioner s order, wherein he has redetermined the differential duty taking into account the specific clarifications given by the Board is upheld - appeal of Revenue dismissed. CST, VAT & Sales Tax 2023 (6) TMI 234 Interpretation of statute - term gross turnover as contained in the Composition Scheme 2006 - Composition Scheme for Gem and Stones, 2006 - exclusion of export amount from gross turnover for calculation of Composition Amount - N/N. F.12(63)FD/Tax/2005-37 dated 06.05.2006. HELD THAT:- From the conjoint reading of notification dated 06.05.2006 and Section 5 of RVAT Act, it is abundantly clear that the composition amount as envisaged under the Composition Scheme 2006 is levied so that assessee can discharge his/her tax liability by paying a lump sum amount / composition amount. The Composition Scheme 2006 was introduced with a beneficial purpose with the objective to streamline/simplify the tax paying process and to reduce the otherwise rigorous and complex compliance with respect to tax return. Thus, composition amount paid by the assessee, essentially to discharge his/her tax liability, retains its characteristic of tax even though the same is called composition amount . As per Article 265 (Taxes not to be imposed save by authority of law) of Constitution of India, no tax can be levied or collected except by authority of law. Further, as per Article 286 (Restrictions as to imposition of tax on the sale or purchase of goods) of Constitution of India, no State law can impose tax on supply of goods or services outside the State or in the course of import or export of goods or services outside the territory of India. In these circumstances, the contention of the Revenue that gross turnover would include export sale as well cannot be accepted as that would tantamount to permitting State to collect tax on exports, which is constitutionally impermissible. This Court is of the view that the assessee was rightly excluding the export sales form the gross turnover and was accordingly paying composition amount on gross turnover of local sales. Therefore, the question of law framed hereinabove is answered in favour of the assessee and against the revenue. Revision dismissed. 2023 (6) TMI 233 Penalty under Section 76(9) of the RVAT Act - Contrary views for same offence - in the case of the petitioner against whom the demand has been restored while in case of the driver, the appeal filed by the Department has been dismissed for the same offence - production of VAT 47, an afterthought - HELD THAT:- It is undisputed that for the same offence, the penalty imposed upon the driver under Section 76(9) of the RVAT Act has been set aside. Further, as per settled position of law, penalty is not to be applied automatically in each case. To invoke penal provision, the Revenue has to necessarily conduct investigation, afford opportunity of defence/hearing to the assessee and inspect/analyse the documents. The same are sine qua non for imposition of penalty. Imposition of penalty can never be said to be automatic or per se. The foundational facts and premises for the imposition of such penalty and for upholding such penalty have to be established by the Revenue and the burden of the same also lies upon the Revenue. In the case in hand, the learned Tax Board had erroneously reached the conclusion that the production of VAT 47 subsequently was merely an afterthought as the VAT 47 was produced the same day and the reference of the particular VAT 47 was also reflected in the invoice dated 29.08.2012, which was produced on the spot of inspection. The imposition of penalty would have been valid if the declaration forms later produced were found to be false or fabricated but since that is not the case, the penalty was wrongly imposed by the Assessing Officer and wrongly upheld by the learned Tax Board. The lis in question is also squarely covered by the judgment of Apex Court in case of D.P. Metals [ 2001 (10) TMI 881 - SUPREME COURT] , where it was held that The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the Legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes article 19, courts would naturally be circumspect and cautious as such there cannot, in the present case, be any valid challenge to the rate of penalty provided for in section 78(5) of the Act. The question of law framed hereinabove is answered in favour of the petitioner-assessee and against the respondent-revenue - Revision allowed.
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