Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 9, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of issuance of show cause notice on Form GST DRC-01 in place of Form GST DRC-01A - in the context of the present facts, that objection appears to be hyper technical and not real. - No such firm demand has been created. Recitals contained in the notice clearly indicate, at present, the petitioner has been required to show cause, why such demand may not be created. Mere mention of wrong form number, without anything more, may not be fatal to the proceedings. - HC
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Levy of penalty at the rate of 200% - expired E-way bill - it is appropriate, that the appellate authority look into the matter, specifically the genuineness of the explanation put forth by the petitioner in regard to the on-road delay allegedly suffered by the consignment, and take a considered view, after taking into account all applicable facts and circumstances as well as the Circulars issued, as applicable and in accordance with law. - HC
Income Tax
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Condonation of delay in filing refund claim and claim of carry forward of losses - Power delegated to PCCIT, PCIT, CCIT, CIT based on monetary limits for acceptance or rejection of application - Directions issued u/s 119(2)(b) of the Income-tax Act, 1961 - Circular
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Reopening of assessment - notice u/s 148A(b) to wrong Email ID - notices are sent to (i) email ids that are no longer in use (ii) email ids of staff/accountants/chartered accountants who have created the profile of the assessee/file the income tax return and who are no longer in the employ/service of the assessee - The petitioner has not presented the facts in proper colour and has sought to take advantage of a technical mistake in the impugned order. This is wholly unappreciated and deprecated. - Petition dismissed with cost of Rs. One Lakh - HC
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Assessment u/s 153C - necessity of recording satisfaction by AO of the searched person - ITAT followed various judgments of including the SC, HC and tribunal itself to hold that the notice issued by the AO u/s 153-C of the IT Act deserves to be quashed and accordingly had proceeded to quash the assessment orders framed by the AO u/s 153-C read with Section 143(3) of the Income Tax Act. Accordingly, the additional ground was allowed in all the seven years. - Order of ITAT sustained - HC
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Prosecution proceedings u/s 276CC and 277 - variation in the tax payments - The conduct of the petitioners in filing revised returns immediately after noticing error on their part indicate that it was a case of delayed payment of tax or deferred payment. - The petitioners have substantiated their contention by giving cogent and convincing reasons for submitting original tax returns with some errors. - Such delay in the payment will not amount to willful attempt to evade tax. - HC
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Denial of claim of Foreign Tax Credit (FTC) - Delay in filing of ITR - Rule 128 is only a procedural provision and not a mandatory provision and cannot override the provisions of the Act or the DTAA - Delay in filing the return and Form No.67 (i.e., beyond period under section 139(1) of the Act) is not fatal to the claim of FTC - AT
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TP adjustment - ALP determination - Selection or change in Most Appropriate Method (MAM) - “Other Method" v/s "CUP Method" - Assessee can resile from the most appropriate method as was adopted in its transfer pricing study report - However, the MAM to benchmark the international transaction in question is the ‘Other Method’ and not the ‘CUP Method’ as per the assessee - Determination of ALP of the international transaction in question by adopting ‘Other Method’ confirmed. - AT
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Income deemed to accrue or arise in India - The centralised services income, by a reasonable measure, outstrips the royalty income. Thus, rather than centralised service income being ancillary and incidental to royalty income, in reality, it is a reverse situation. In such a scenario, it cannot be said that centralised service income, being ancillary and incidental to royalty income, would fall under Article 12(4)(a) of the Tax Treaty. - Additions deleted - AT
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TP adjustment - Determining the arms’ length value for sale of steam at Rs. “nil” - scope of the quotation obtained by the assessee from SSPL - the quotation obtained by the assessee is not backed by any analysis of the evaluation of the price so quoted and the said quotation is not supported by any supporting evidences. - Since appropriate exercise has not been conducted by the assessee to justify the arms length price of steam supplied to its associated enterprise, this issue is restored to the file of AO - AT
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Valuation of shares at a premium u/s 56(2)(viib) - Keeping in view that DCF is correct method of determining the FMV of the unquoted shares, the assessee has option to determine the method of valuation and the AO has no power to reject the method resorted by the assessee, the results in the instant case of the holding company have exceed the projections, as no infraction of methodology has been brought out by the AO and non-payment of advance tax cannot be a collateral reason to reject the DCF method, order of CIT(A) sustained - AT
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Nature of receipts due to settlement in the court - Right of Preemptive/right of first priority of purchase of the premises - assessee has claimed it as non-taxable and has credited directly to the capital accounts of the partners of the firm in their respective profit sharing ratio - The receipt may have any other incidence of taxability, but certainly not a Capital Gains. - AT
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Penalty u/s 271D - contravention of provisions of Section 269SS - Cash transaction between the Company and its Director - a. cash utilized for purchase of stamps - b. cash deposited in the bank account of the compnay by the Director - It could not be shown as to why the transactions could not be undertaken in compliance with the prescribed modes u/s 269SS. - Levy of penalty confirmed - AT
Customs
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Detention and seizure of betel nuts - goods of foreign origin and unfit for human consumption - There is nothing on record, to even have a prima-facie view that the goods were of foreign origin, more particularly for the reason that the goods were seized within Indian Territory and there is nothing including any foreign markings on the bags to even remotely suggest that the goods seized were of foreign origin. There is also no credible expert opinion regarding the origin of the goods. - order of tribunal for releasing of the goods with consequential relief maintained - HC
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Criminal conspiracy in order to get ineligible Duty Entitlement Pass Book - showing realization of Foreign Exchange against export of coloured water and mis-declared the customs as high quality printing ink for refilling catridges - the prosecution proved its case beyond reasonable doubt that the petitioner/A1 has committed the charged offences. - HC
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Classification of imported goods - Low Aromatic While Spirit/Hydro Carbon Solvent and other Petroleum Class A,B and C grades - There is a vast difference between the minimum IFB and maximum FBP fixed as per IS standard 1745 and the result received for the impugned goods. - the impugned goods cannot be classified under chapter sub heading 27101920, on the basis of the parameters available in the CRCL, Test Report - AT
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Revocation of Customs Broker License - export of cut and polished diamonds - alleged misuse of several persons to secure importer exporter code (IEC) numbers - As the case revolves around beneficiary exporter, operating under the cover of entities existing on paper’ and evidence of existence of such operator being hearsay, it was behoved the licensing authority to allow cross-examination rather than deny solely on the ground that the statements had not been retracted - The impugned order is set aside - AT
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Classification of imported goods - Mitsubishi brand Air Conditioner-Outdoor units and Air Conditioner-Indoor units of more than two ton capacity - to be classified under CTH 84159000 as parts of Air-conditioners or not - CMVRF, when imported and presented together in unassembled/ disassembled condition on a single Bill of Entry for supply against a unique project would be classified under heading 84151010 (pre-2013) and when presented separately as part against different bill of entries filed over a period of time shall be classified as parts under heading 84159000. - AT
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Classification of imported goods - Waxsol series of products such as Waxsol-A, Waxsol 9-11A, Waxsol-911B and Waksol-B etc - A detailed examination about the nature of product, its usage and its proper classification based upon exclusion clauses of HSN explanatory note is warranted including of consideration of chapter 2712. - In view of claim of product being in the nature of Slag wax, same needs elaborate discussion and findings from the authority below. - AT
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Levy of penalty u/s 112(a) and u/s 114AA of the Customs Act, 1962 - allegation of abetment in undervaluation - evasion of Customs Duty by several syndicates of crane importers - no clear-cut findings against the appellant - The interest of justice will be met if penalty imposed on the appellant under Section 112(a) is reduced from Rs.50,000/- to Rs.1,000/- only and that under 114AA from Rs.1,00,000/- to Rs.5,000/- - AT
Indian Laws
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Dishonour of Cheque - insufficient funds - The complainant by leading cogent evidence that the accused had issued a cheque against a liability to the complainant, which on presentation to the bank of the accused was dishonored for insufficient funds and despite issuance of legal notice; accused failed to make the payment, has proved the ingredients of the offence punishable U/S 138 of N.I. Act. - HC
IBC
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Initiation of CIRP - Proof of debts - raising an Invoice, is a precondition, in all cases, for admission of a Section 9 Petition under the I & B Code, 2016 or not - Appellant / Petitioner / Operational Creditor, in the instant case, has not proved, to the satisfaction of this Tribunal, as to the Aspect of Debt and Default, committed by the Respondent / Corporate Debtor - NCLT rightly dismissed the application - AT
Service Tax
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Refund of Service Tax amount - Period of limitation - advance amount returned/ refunded to the buyer - Once the buyer cancelled the booking and the consideration for service was returned, the service contract got terminated and once it is established that no service is provided, then refund of tax for such service become admissible. - Refund granted, even for the period beyond the normal period of limitation - AT
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Classification of services - Support Services of Business or Commerce or renting of immovable property - royalty / concession fee / lease charges received by the Port from KPPL represents consideration for providing services relatable to the taxable service - the arrangements between the parties was one of public-private partnership and was in the nature of a joint venture where two parties have got together to carry out a specific economic venture on a revenue sharing basis and there is no service rendered by Mormugao Port which can be taxed. - AT
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Business Auxiliary Service - appellant is individual or a commercial concern? - commercial concern covers individuals also when they are into a business and to this extent,the appellant’s arguments are not acceptable. The appellants are liable to pay service tax on the services rendered by them - AT
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Classification of services - single work order for carrying out the services - Trucking, loading and unloading of dolomite boulders from mines to crusher plant - Haulage of Dolomite from stock-pile/washery through trucks - Loading of dolomite into all types of railway wagons by machine/manual labour - there must be no doubt in holding that the primary and predominant service which gives the essential character to this composite service is the service of transportation. - AT
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Levy of Service Tax - Commercial Training or Coaching Services - income from NIIT for imparting computer coaching services - The category of ‘Commercial Coaching or Training Services’ covers the practical training classes also. There are no ground to set aside the demand under this category. - AT
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Levy of Service Tax - GTA Services - goods are transported by rail - Merely because the appellant had to use the rail transportation in certain occasions, it cannot be said that they have provided services of transportation of goods by rail. - AT
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Jurisdiction of Commissioner (Appeals) to issue fresh Show Cause Noice (SCN) or to raise demand on new ground - The power to issue a notice is specifically provided for in section 73(1) of the Finance Act. Once it is specifically so provided, it cannot be urged that this power to issue the notice would also be available under sub-section (4) of section 85 of the Finance Act to a Commissioner (Appeals) when he is hearing an appeal, merely because of the use of the expression 'pass such orders, as he thinks fit'. - AT
Central Excise
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100% EOU - extended period of limitation - while demanding duty was not sure of the provision of law under which the same had to be demanded and even the penalty has been imposed under Section 112 of Customs Act, 1962, whereas the duty should have been demanded under Central Excise Act and penalty imposed under Central Excise Act/ Rules only. - The demand can be sustained only for the normal period of limitation - AT
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Validity of order beyond the scope of show cause notice (SCN) - it is found that the Adjudicating Authority has gone beyond the scope of the Show Cause Notice. In case the learned Commissioner was to reject the claim totally, he should have put the appellants to proper notice in terms of principles of natural justice. As the proposal and final order are contrary to each other, in the instance case, the principles of natural justice have been grossly violated. - AT
Case Laws:
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GST
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2023 (6) TMI 362
Validity of issuance of show cause notice on Form GST DRC-01 in place of Form GST DRC-01A - Levy of penalty u/s 142(1A), 142 (3) (a) and (d) of CGST Act - case of petitioner is that present notice has been issued prematurely, before any regular show cause notice may have been issued in any adjudication proceedings - opportunity of hearing denied - violation of principles of natural justice - HELD THAT:- Clearly, the petitioner does not admit any fact allegations being levelled against him. Therefore, the requirement of preliminary notice has largely been rendered formal. If issuance of such notice would not have served any benefit to the assessee, it would be futile on the part of the writ-Court to enforce on the revenue authorities fulfilment of that condition, in the present case, at this stage. No real prejudice has been caused to the petitioner. There is a material fact distinction in Agrometal Vendibles Private Limited [ 2022 (4) TMI 823 - GUJARAT HIGH COURT] and the present case. There, not only the first notice had been issued on Form GST DRC-01 but the authority chose to create a firm demand of tax and penalty. That has been duly extracted in the order of the Gujarat High Court. There exists no doubt as to its absence in the present case. No such firm demand has been created. Recitals contained in the notice clearly indicate, at present, the petitioner has been required to show cause, why such demand may not be created. Mere mention of wrong form number, without anything more, may not be fatal to the proceedings. Thus, no good ground is made out to offer any interference on merits, in exercise of extra-ordinary jurisdiction under Article 226 of the Constitution of India. Thus, prayer made in the writ petition is declined .
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2023 (6) TMI 361
Allotment of quota for Haj pilgrimage 2023 - Default in payment of GST - Authority of Ministry of Minority Affairs reject the application on the ground of non payment of GST - HELD THAT:- So long as the HGOs have a GST registration and have an explanation for the manner in which they have calculated and deposited GST prior to them filing of the application for allotment of quotas, disqualifying them would be unjust. The Ministry of Minority Affairs is not the competent authority to deal with these issues, though an attempt has been made to explain that the eligible HGOs have made full GST deposits. Allotment of quota for Haj pilgrimage 2023 - petition filed by HGOs which were rendered ineligible or whose names were not found in the declared list on the ground that the reasons for declaring the Petitioners ineligible were not communicated by the Ministry - HELD THAT:- The reasons for ineligibility are stated to have been communicated by the Ministry to various ineligible HGOs who were given time till 12th May, 2023 to remove the deficiencies. However, even thereafter a large number of HGOs have been declared ineligible, which has led to the filing of the present writ petitions. The said petitions have also been heard by this Court along with the previously filed petitions over the last three hearings. W.P.(C) 6495/2023 CM APPLs. 27734-35/2023 - W.P.(C) 6496/2023 CM APPLs. 27738-39/2023 Deficiency leading to the Petitioners being rendered ineligible, is that the original hard copy of the FDR and the demand draft have not been submitted in terms of the Policy - HELD THAT:- It is clear that the hard copy of the FDR has been handed over to the Ministry along with demand draft. In both these matters, this fact is confirmed by the officials who are present in Court - let the quota be allocated to Petitioners- Harmain Tour and Travel and Hasnain Tours and Travels in terms of the Haj Policy 2023 - Petition disposed off. W.P.(C) 7120/2023 CM APPLs. 27750-52/2023 Allotment of quota has been rejected by the Ministry on 19th May, 2023 on the ground that the earlier proprietor of the Petitioner firm has passed away, the existing experience of the Petitioner firm cannot be taken into account for the allocation of quota as per the Haj Policy, 2023 - HELD THAT:- It is noticed that the Petitioner was found to be one of the eligible HGOs selected for Haj 2022 vide a list issued by the Ministry in May 2022. Considering the fact that the Petitioner was declared as eligible HGO last year, the submission of the Ministry that the existing experience of the Petitioner cannot be taken into account would no longer be tenable for disqualifying the Al Muqaddas Tours and Travels - the writ petition is allowed. The Petitioner shall be allotted the quota as per the Policy. W.P.(C) 7255/2023 CM APPLs. 28247/2023, 28248/2023 Seeking issuance of directions to the Ministry of Minority Affairs (Haj Division) to issue the list of allocation of Haj quota to HGOs for Haj-2023 - HELD THAT:- Since the said list of allocation of quota has already been declared in terms of the order dated 24th May, 2023 passed by this Court, the present petition is infructuous and is accordingly disposed of. All pending applications are also disposed of. In respect of quota allocation, the following directions are issued: a) The Ministry shall first allot quotas to Al Muqaddas Tours and Travels, Harmain Tours and Travels and Hasnain Tours and Travels for Haj- 2023 as their writ petitions have been allowed, as directed above. b) Thereafter, insofar as the remaining quota is concerned, the same shall be dealt with in terms of the Haj policy, 2023 and shall be distributed among Category-1 and Category-2 HGOs. c) Today, the Court has been informed that there is an enquiry which is being conducted by the Ministry qua 17 HGOs who have already been declared eligible and were allocated quotas for Haj 2023. It is directed that if any quota becomes available, post the enquiry, the same shall be distributed in accordance with the Policy with a minimum of 50/100 seats as per their category to the HGOs which are listed above at paragraph number 27. d) Any quota which may be left over, thereafter, shall be dealt with in accordance with the Haj Policy, 2023. The present petitions are disposed of.
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2023 (6) TMI 360
Recovery of penalty under Section 129(1)(b) of the UPGST Act, 2012 - detention order - doubt as to the genuineness of the consignee - applicability of Circular dated 31.12.2018 issued by Government of India - HELD THAT:- While the revenue seeks to raise disputes based on its ex parte enquiries and other circumstance, upon query made, learned Standing Counsel could not dispute that at present the revenue has not formed any opinion to falsify the genuineness of the tax invoice and the E-way bill claimed by the petitioner. It also does not dispute that those documents were found present on the vehicle in question at the time of its first detention. It is further not in dispute that the present petitioner claims to be the owner of the goods. Accordingly, petitioner may remain liable to pay security in terms of Section 129(1)(a) of the Act. The coordinate bench in M/s Margo Brush India [ 2023 (1) TMI 1237 - ALLAHABAD HIGH COURT ] held that levy of penalty under Section 129(1)(b) of the Act was not called for and could not be justified as Section 129(1)(a) of the Act provides that where owner of the goods comes forward for payment of penalty, the amount has to be two hundred per cent of the tax payable, whereas, in the case in hand, the penalty has been levied to the tune of hundred per cent of the value of the goods. The impugned order MOV-09 dated 16.1.2023 is set aside. Matter is remitted to the respondent No. 2 to pass fresh order within a period of two weeks from today treating the petitioner to be eligible to the benefit of Section 129(1)(a) of the Act - petition allowed.
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2023 (6) TMI 359
Levy of penalty at the rate of 200% - expired E-way bill - applicability of Circular No.10/2019 dated 31.05.2019 - HELD THAT:- Circular dated 24.02.23 has amended paragraph 9 of Circular dated 31.05.2019 and sets out the position prescribed and prevailing as on date in regard to circumstances where nil/reduced penalty of Rs. 500 may be levied for violations committed in transit of consignments. Paragraph number 10 of Circular No.10 of 2019 has been left untouched and would thus still be available in those specific circumstances - However, in this case, there is one distinguishing and supervening factor. The impugned order refers to a supporting document provided by the transporter and placed at page 101 of the compilation accompanying the writ affidavit containing the date 06.03.2023 in the column 'njjp'. However, the same document has been produced by the Department wherein the field 'njjp' is blank. The petitioner has no explanation to offer in regard to this discrepancy. The above position also constitutes a question of fact and it is thus appropriate, that the appellate authority look into the matter, specifically the genuineness of the explanation put forth by the petitioner in regard to the on-road delay allegedly suffered by the consignment, and take a considered view, after taking into account all applicable facts and circumstances as well as the Circulars issued, as applicable and in accordance with law. In TVL. THIRUVANNAMALAIYAR TRANSPORT REP. BY ITS PROPRIETOR SR. V. KESAVAN VERSUS THE DEPUTY STATE TAX OFFICER, STATE TAX OFFICE I (INT) , VELLORE. [ 2022 (12) TMI 710 - MADRAS HIGH COURT ], a learned Judge of this Court has allowed that writ petition, proceeding on the basis of paragraph 10 of Circular No.10 dated 31.10.19, on the facts and circumstances of that case. In light of the factual distinctions noticed in the paragraphs supra, this decision is of no avail to the petitioner in the present case. The writ petition is dismissed with liberty granted to the petitioner to work out its remedy in accordance with law.
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Income Tax
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2023 (6) TMI 358
Addition u/s 14A r.w.r. 8D - According to the Tribunal, no exempt income has been earned by assessee during the period under consideration, and therefore, disallowance u/s 14A was not warranted - HELD THAT:- There is no dispute, that this issue is covered by a judgment of Cheminvest Limited [ 2015 (9) TMI 238 - DELHI HIGH COURT] and judgment passed in Commissioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd [ 2017 (4) TMI 298 - MADRAS HIGH COURT] . One of us i.e., Rajiv Shakdher, J., was part of the bench in Commissioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd [ 2017 (4) TMI 298 - MADRAS HIGH COURT] . Revenue does not dispute the fact, that the special leave petition preferred against the said judgment was dismissed by the Supreme Court [ 2018 (7) TMI 567 - SC ORDER] No substantial question of law arises for our consideration.
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2023 (6) TMI 357
Transfer of case u/s 127 - transferring the Income Tax File of the petitioner from Kolkata to Lucknow - As argued transfer is done without providing any material to the petitioner on the basis of which such decision of transferring the file of the petitioner has been taken and without giving any opportunity of personal hearing in spite of his representation - HELD THAT:- Neither the materials as asked for by the petitioner nor opportunity of personal hearing was provided to the petitioner though in this case a show-cause-notice was issued to the petitioner to file objection to the impugned action of transfer of the petitioner s file but it is the case of the petitioner that he is not able to file any effective objection in view of non-providing of any materials for taking such action of transfer against the petitioner. Considering the facts and circumstances of the case and the decision of Nouvelle Advisory Services Private Limited [ 2023 (2) TMI 866 - CALCUTTA HIGH COURT] this writ petition is disposed of by directing the respondent authority concerned to provide relevant documents to the petitioner indicating the basis for taking such order of transfer of the petitioner s file and to provide opportunity to file further objection, if such material is supplied and also to give opportunity of personal hearing to the petitioner, within eight weeks from the date of communication of this order. In case the petitioner is able to satisfy the respondent authority concerned, in course of personal hearing, in that event the respondent authority concerned shall revoke its order of transfer u/s 127 of the Income Tax Act, 1961.
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2023 (6) TMI 356
Reopening of assessment - notice u/s 148A(b) to wrong Email ID - violation of principles of natural justice - notices are sent to (i) email ids that are no longer in use (ii) email ids of staff/accountants/chartered accountants who have created the profile of the assessee/file the income tax return and who are no longer in the employ/service of the assessee - HELD THAT:- The causality is principles of natural justice as proper opportunity is often denied simply because notices are sent to (i) email ids that are no longer in use (ii) email ids of staff/accountants/chartered accountants who have created the profile of the assessee/file the income tax return and who are no longer in the employ/service of the assessee. It is high time that assessees as well as the officials of the department devote attention to this aspect of the matter. In the present case, this Court is of the considered view that the petitioner has not presented the facts in proper colour and has sought to take advantage of a technical mistake in the impugned order. This is wholly unappreciated and deprecated. The petitioner is hence put to terms and will remit a sum of Rupees One Lakh (Rs.1,00,000/-) to the Cancer Institute, Adayar, Chennai.
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2023 (6) TMI 355
Revenue recognition - assessee used the percentage completion method for recognising revenue - Inclusion of operation and maintenance expenditure be added to the costs of contract - whether the operation and maintenance expenditure should be added to the costs of contract, while recognising revenue? - HELD THAT:- Assessee has adopted the percentage completion method, as per Accounting Standard 7, framed by the Institute of Chartered Accountants of India (ICAI). As is evident from a perusal of the impugned order, the rationale for not including operation and maintenance expenditure given by the Tribunal was, that these expenses were incurred after the construction activity is completed. We find no difficulty in accepting this rationale. Having regard to the aforesaid, we are of the view that no substantial question of law arises for our consideration.
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2023 (6) TMI 354
Assessment u/s 153A - necessity of recording satisfaction by AO of the searched person - HELD THAT:-No satisfaction was recorded by the AO of the searched persons and therefore, the order of the Tribunal in Smt. G. Lakshmi Aruna [ 2016 (10) TMI 1378 - ITAT BANGALORE ] and the judgments of M/s. Gopi Apartment [ 2014 (5) TMI 158 - ALLAHABAD HIGH COURT ] and in the case of Calcutta Knitwears [ 2014 (4) TMI 33 - SUPREME COURT ] and Manish Maheshwari [ 2007 (2) TMI 148 - SUPREME COURT ] are applicable to the given facts and circumstances of the case. These judgments were followed by the Income Tax Appellate Tribunal to hold that the notice issued by the AO u/s 153-C of the IT Act deserves to be quashed and accordingly had proceeded to quash the assessment orders framed by the AO u/s 153-C read with Section 143(3) of the Income Tax Act. Accordingly, the additional ground was allowed in all the seven years.
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2023 (6) TMI 353
Prosecution proceedings u/s 276CC and 277 - variation in the tax payments - assessee claimed in the return of income that total self assessment tax was paid more than payments as per challan details available in the OLTAS database - HELD THAT:- Before noticing that there was a mistake in submission of appropriate tax returns, the petitioners have immediately filed revised returns on 01.02.2018 i.e., prior to issuing of show cause notice or even prior to lodging of complaint. Thus, there are bonafides on the part of petitioners in submitting revised tax returns after noticing that there is a bonafide omission/mistake. It is not the case, wherein a deliberate attempt is made by the petitioners to evade tax. The conduct of the petitioners in filing revised returns immediately after noticing error on their part indicate that it was a case of delayed payment of tax or deferred payment. The subsequent tax amount paid by the petitioners was accepted by the Department without any reservations. Such delay in the payment will not amount to willful attempt to evade tax. The petitioners have substantiated their contention by giving cogent and convincing reasons for submitting original tax returns with some errors. Thus, it cannot be inferred from the facts of the present case that a deliberate attempt was made by the petitioners to evade the tax. There is no material to arrive to a conclusion that there is false statement of verification or filing of false return and thereby penal provisions are not attracted. Continuation of the proceedings against the petitioners would amount to abuse of process of the Court and thereby it is a fit case to quash the proceedings against the petitioners on the file of Special Judge for Economic Offences at Hyderabad.
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2023 (6) TMI 352
Denial of claim of Foreign Tax Credit (FTC) - assessee has not filed the return of income within the time prescribed u/s 139(1) - procedural provision v/s mandatory provision - HELD THAT:- There is a delay of 10 days in filing the return of income - In the case of Sanjiv Gopal Vs. ACIT [ 2022 (10) TMI 1033 - ITAT BANGALORE] was considering a case where both return and Form No.67 was filed belatedly decided the issue in favour of the assessee and held that Rule 128 is only a procedural provision and not a mandatory provision and cannot override the provisions of the Act or the DTAA. Delay in filing the return and Form No.67 (i.e., beyond period under section 139(1) of the Act) is not fatal to the claim of FTC, we hold that CIT(A) is not justified in not granting the benefit of FTC on this count. FTC is available only in respect of income taxable in India and received outside India for the amount of taxes paid outside India. This aspect of the matter needs to be examined by the AO. It is not clear from the records whether the entire part of the salary income has been earned in India or outside India. To the extent of salary earned outside India which assessee had offered to tax in India, the assessee would be entitled to the claim of FTC on the same. Therefore, we restore the matter to the file of the AO for denovo consideration - Appeal filed by the assessee is allowed for statistical purposes.
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2023 (6) TMI 351
Applicability of section 44BB - mandation of existence of PE in India - India-UK DTAA - whether section 44BB will apply in absence of PE? - HELD THAT:- Section 44BB provides that notwithstanding anything contained in sections 28 to 41 and section 43 43A, 10% of the gross receipt of a non-resident engaged in the business of providing services or facilities or supplying plant machinery on hire which is used in prospecting for or extraction of mineral oils shall be deemed to be the profits gains of business. Thus, this section has rightly been contended by ld. Counsel of the assessee that it is a computation provision. Thus, this section provides a presumptive taxation rate for computation of profits but does not override provision of sections 5, 9 or section 90 of the Income-tax Act, 1961. Case law referred by assessee in this regard i.e. Sedco Forex International [ 2017 (11) TMI 78 - SUPREME COURT] fully supports this proposition as expounded that sections 4, 5 9 are to be kept in mind, where assessment is done u/s 44BB. It is settled proposition that unless Revenue is able to prove that the assessee has a PE in India, its business profits cannot be subject to tax in India. This view is supported by decision of R B Falcon Offshore Ltd [ 2010 (9) TMI 741 - ITAT, DELHI] In this case, ITAT clearly held that in absence of a PE, section 44BB has no application. As referred in Hon ble Supreme Court decision in the case of ADIT vs. E-Funds [ 2017 (10) TMI 1011 - SUPREME COURT] burden of proving the existence of PE lies on the Revenue which has not been discharged. In this view of the matter, assessee succeeds that there is no finding of PE in this case, hence section 44BB will not apply. Decided in favour of assessee.
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2023 (6) TMI 350
TP adjustment - international transaction of receipt of intragroup services with its AEs alleging that it does not satisfy the arm's length principle envisaged under the Act and thereby making an adjustment - HELD HAT:- The taxpayer in its TP analysis characterized itself as a routine manufacturer assuming normal risks associated with such operation. We note that the assessee has furnished enormous evidences which point out that intra group services have in fact been received by the assessee. Moreover, the agreement is a composite one and authorities below have allowed part of the same and treated part of the same not allowable. On similar facts, ITAT has deleted the adjustment for several years and the Revenue s appeal against them has been dismissed by Hon ble High Court. As decided in AY 2009-10 [ 2021 (10) TMI 909 - ITAT DELHI ] agreement is an intrinsic one and that it is wrong to split the same and hold that some services are at arm's length and some services are not.When there is an agreement for services and certain services out of a bundle of services are undisputedly rendered, the entire agreement has to be viewed as a whole. Whether the services have actually resulted in a benefit to the assessee or not is not material. The conclusion of the Ld. TPO that the services have not resulted in any benefit and no independent entity would have made such a payment is in the realm of surmised and conjunctures and not backed by any material. Thus, the ALP determined by the assessee company is accepted and the TPO adjustment is deleted. Also in the Assessee s case for AY 2008-09 [ 2016 (1) TMI 933 - ITAT DELHI ] held that OECD guidelines end an aggregated benchmarking approach in a situation, where the underline transactions are closely linked to the core business operations We find that the above order applies on all fours to the present appeals. Here also from the composite agreement, some have been accepted at arm s length price and some have been treated as not acceptable at arm s length price. Huge details of intra-group services have been furnished by the assessee. Respectfully following the precedent from the ITAT and Hon ble High Court [ 2016 (9) TMI 244 - DELHI HIGH COURT ] we uphold the contention of the assessee and delete the TP adjustment. Decided in favour of assessee.
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2023 (6) TMI 349
Reopening of assessment u/s 147 - share application money and share premium which has escaped assessment - HELD THAT:- Having gone through the reasons to believe recorded by the Ld. AO, income escaping assessment has been alleged to be in respect of the share application money and share premium whereas in the assessment order, there is no whisper in this respect but a show cause notice was issued seeking explanation for unsecured loans from two parties for which the addition has been made while completing the assessment. In the assessment completed, there is no addition in respect of the income escaping assessment alleged by the Ld. AO. We hold that the impugned assessment order passed u/s. 143(3) r.w.s.147 of the Act is bad in law. When the very foundation of reopening is knocked out, further proceedings undertaken would not survive. Accordingly, the additional ground taken by the assessee is allowed.
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2023 (6) TMI 348
TP adjustment - ALP determination - Selection or change in Most Appropriate Method (MAM) - Other Method v/s CUP Method - Option to resile / disagree with the Transfer Pricing Study Report (TPSR) - Special bench [SB] / Three Member Bench decision by Majority - international transaction of acquiring Bundle of Sport Broadcasting Rights - Is assessee entitled to switch over to a new method, different from the one taken in TPSR, as the most appropriate method? - HELD THAT:- As decided by R.S. SYAL, VP assessee, in principle, can resile from the most appropriate method as was adopted in its transfer pricing study report. As decided by PRASHANT MAHARISHI, AM - It is always possible that during the journey of determining Arm s length price , MAM already considered is not appropriate , one can resile from the most appropriate method adopted in its transfer pricing study report with a caveat that provided the earlier method selected by the assessee or for that matter any assessing authority or appellate authority, does not fulfil the requirement of rule 10 C (2) of the rules and new MAM selected fulfils it. There is no bar to any of the parties in concluding the most appropriate method by reselling the earlier method selected by it, if it is confirming to the requirement of rule 10C (2) of The Income Tax Rules. Thus, to that extent agree with the view expressed of VP. As decided by Shri Aby T. Varkey (J.M.) - As find in agreement with both learned brothers [VP and AM] that the assessee, in principle, can resile from the most appropriate method as was adopted in the TPSR, provided that the new method confirms to the requirement of Rule 10C(2) of the Income tax Rules, 1962. Moreover, this Tribunal being the last fact finding authority is duty bound to ascertain the correct facts, nature class of transactions, the FAR analysis, reliability of data and thereafter arrive at the Most Appropriate Method to benchmark the impugned international transaction, which may resile from the Method adopted by the assessee in the TPSR. What is most appropriate MAM in the transaction under consideration? - other method v/s CUP method - As decided by R.S. SYAL, VP data required for the application of the CUP exists and is on record. We, ergo, hold that the CUP is the most appropriate method in the facts and circumstances of the case. As decided by PRASHANT MAHARISHI, AM - Most Appropriate Method to determine the arm s-length price of the international transaction of sale of bundle of rights is the other method , the ALP of this international transaction is to be determined applying other method . As decided by Shri Aby T. Varkey (J.M.) find in agreement with the Ld. AM that the MAM to benchmark the international transaction in question is the Other Method and not CUP Method . Before us, since no arguments were put forth regarding the manner of application of Other Method and the deficiencies in the valuation report as pointed out by Ld. TPO, the instant appeal may be placed before the Division Bench on the issue of determination of ALP of the international transaction in question by adopting Other Method . Conclusion:- Assessee can resile from the most appropriate method as was adopted in its transfer pricing study report and determination of ALP of the international transaction in question by adopting Other Method confirmed. Matter restored back to Division Bench.
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2023 (6) TMI 347
Addition u/s 68 - unsecured loan - addition being made for the reason that the assessee was unable to discharge the onus of proving the genuineness of the transactions in terms of section 68 - CIT-A deleted the addition - HELD THAT:- Assessee furnished address of the said party, as also PAN of the said party. CIT(A) further noted that the AO had found no infirmity in the above details submitted by the assessee i.e. in the information filed by the assessee or the details of the said party filed by the assessee, as also, the details of transaction of unsecured loans taken by the assessee. On the contrary, he noted that the despite all information in the possession of the AO, he chose not to make any further inquiries regarding genuineness of the transaction. He noted that the AO frivolously emphasised the fact of non-reporting of this transaction by the tax auditor in the audit report. CIT(A) found this fact of the impugned transaction not being reported by the tax auditor as of no consequence, because the transaction, he noted was duly reflected in the financial statement of the assessee i.e. balance sheet of the assessee, which was also audited by the same auditor, who had conducted tax audit. Therefore, non-reporting of the transaction in the tax audit report could be an error and had no implication on the fact of receipt of unsecured loans by the assessee from the aforesaid party, he held. DR was unable to controvert the factual finding of the CIT(A) before us, nor was he able to demonstrate as to when all the relevant documents, as noted by the assessee being confirmation, copy of bank statement of the assessee, PAN of the party giving unsecured loans, were all filed by the assessee and no infirmity was found in the same by the AO, why the transaction still be held to be not genuine . We see no reason to interfere in the order of the ld.CIT(A) deleting the addition u/s 68 of the Act being unsecured loans taken by the assessee from one M/s.Pushparaj Corporation. Addition as deemed dividend u/s 2(22)(e) - whether the amount would be taxable in the hands of the assessee-concern which surely is not a shareholder in two entities which had granted loans advances? - HELD THAT:- The assessee who had received advances from the said two concerns, was not a shareholder of these concerns, therefore, even though the advances qualified as deemed dividend in terms of section 2(22)(e) of the Act, they cannot be taxed in the hands of the assessee. Thus, order of the CIT(A) deleting the addition made on account of deemed dividend is accordingly upheld. Disallowance of Expenses relating to labour and transportation charges - CIT-A deleted the addition - HELD THAT:- CIT(A) as passed a detailed speaking order on the issue and has gone through bills and vouchers of expenses and verified that most of the payments were made through cheques and TDS also deducted therein. He also noted that the AO had not pointed out any specific infirmity in the documents submitted by the assessee but had only made general observations. DR was unable to controvert the factual finding of the ld.CIT(A) as above - we are not inclined to interfere in the order of the CIT(A) deleting the disallowance. Addition of short term capital gain/loss - HELD THAT:- The order of the CIT(A) reveals that during appellate proceedings, the assessee submitted copy of the sale deed and the AO s comments were sought on the same, to which, we find, the CIT(A) has noted that the AO made no adverse comment with respect to the sale deed in his remand report, but only raised apprehension as to why the assessee incurred loss in such a deal in one month. CIT(A), we find, has also noted that both the purchases and sales were made on values more than the jantri value and the details of seller and purchaser were available in the purchase and sale deed, but the AO did not verify the transaction. CIT(A) held that the disallowance made by the AO was not sustainable since all documentary evidences substantiating the transaction were furnished by the assessee, which were not doubted by the AO and the disallowance made by the AO was a mere adhoc disallowance - no reason to interfere in the order of the ld.CIT(A) deleting the addition on account of short term capital gains. Disallowance of labour and transportation charges - HELD THAT:- Assessee has been unable to controvert the finding of the CIT(A) and we therefore, we hold that the CIT(A) has been fair enough to restrict the disallowance to 10% of unsubstantiated labour and transportation charges, and there is no merit in the ground no.2 raised by the assessee before us.
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2023 (6) TMI 346
Validity of assessment order u/s 143(3) r.w.s. 144C(13) - DRP held that once the final order has been passed u/s 143(3) same cannot be annulled/modified/amended at a subsequent date on the ground that the same order passed inadvertently - HELD THAT:- Surprisingly, while implementing the directions of DRP in terms of section 144C(13) AO has virtually replicated the draft assessment order, which is contrary to the statutory mandate of section 144C(13) , hence, in excess of jurisdiction or wholly without jurisdiction. Once, DRP has held that after passing of the assessment order u/s 143(3) the same cannot be annulled, modified, amended at a subsequent date, the only course left open to the AO was to implement the directions of DRP in letter and spirit and drop the assessment proceedings and nothing else. As per the scheme of the Act, once an assessment order has been passed under Section 143(3) of the Act in respect of any assessment year, the Assessing Officer cannot tinker with that assessment. The statue does not confer any powers on the AO to either withdraw or modify or substitute the assessment order passed u/s 143(3) of the Act with another assessment order. Thus the impugned assessment order passed, being wholly without jurisdiction or in excess of jurisdiction, is unsustainable, hence, deserves to be set aside - Appeal of assessee allowed.
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2023 (6) TMI 345
Taxability of reimbursement of various expenses - ' reimbursements' from various entities on account of the provision of facilities and services of seismic data acquisition, planning and carrying out of presurvey studies, taking marine data and confirming prospects, maintenance/upgradation/support of software licences, etc. ('services') - taxable u/s 44DA or u/s 44BB - Difference of opinion between the Learned AM and Learned JM of ITAT, C Bench, New Delhi - matter referred third member of ITAT for consideration and disposal u/s. 255(4) - Assessee is a non-resident company having permanent establishment in India. Third member concluded that revenue received by the assessee-company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation/support of software licences, etc., is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation 2 to section 9(1)(vii) of the Act being consideration received for mining or like projects and the same, therefore, is not taxable under section 44DA and revenue received for the same accordingly is taxable under section 44BB of the Act. And amount received by the assessee as reimbursement of service tax is not includible in gross turnover for the purpose of computing taxable income under section 44BB of the Act. HELD THAT:- As decided by Learned third member revenue received by the assessee company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation / support of software licenses, etc, is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation (2) to Section 9 (1) (vii) of the Act being consideration received for mining or like projects and the same, therefore, is not taxable under Section 44DA of the Act. The said services or facilities provided by the assessee actually are inextricably connected with prospecting for, or extraction or production of, mineral oils as held in the case of ONGC [ 2017 (10) TMI 322 - SUPREME COURT] under the similar facts and circumstances and the revenue received for the same accordingly is taxable under Section 44BB of the Act. Whether, the amount received as reimbursement of service tax includible in gross turnover for the purpose of computing taxable income u/s 44BB ? - This issue is squarely covered in favour of the assessee by the decision of the Hon ble Uttarakhand High Court in the case of Director of Income-tax International Taxation Vs. Schlumberger Asia Services Ltd. [ 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] wherein it was held that the amount reimbursed to assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by assessee to Government of India, not being an amount paid to assessee on account of providing services and facilities in connection with prospecting for, or extraction or production of, mineral oils in India, would not form part of aggregate amount referred to in clauses (a) and (b) of sub-section (2) of Section 44BB of the Act. Thus amount received by the assessee in the present case as reimbursement of service tax is not including in the gross turnover for the purpose of computing taxable income u/s 44BB. In the light of the decision of the learned third member the captioned cross appeals are decided in favour of the assessee.
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2023 (6) TMI 344
Income deemed to accrue or arise in India - taxability or otherwise of the fee received from Indian franchise hotels towards centralized services as fees for technical services (FTS)/fees for included services (FIS) under Article 12(4)(a) of India-USA DTAA - Assessee is a non-resident corporate entities incorporated in USA in the business of operating, managing and franchising hotels and resorts in countries across the globe - HELD THAT:- Revenue Authorities have treated the fees received from provision of centralised services as FTS/FIS under Article 12(4)(a) of India-USA treaty on the reasoning that the services rendered are ancillary and incidental to license to use brand name/trademark, resulting in royalty income. If we examine the relevant facts, it will be demonstrable that the income earned from centralised services far exceeds the royalty income. The centralised services income, by a reasonable measure, outstrips the royalty income. Thus, rather than centralised service income being ancillary and incidental to royalty income, in reality, it is a reverse situation. In such a scenario, it cannot be said that centralised service income, being ancillary and incidental to royalty income, would fall under Article 12(4)(a) of the Tax Treaty. We hold that the receipts from centralised service income are not taxable as FTS/FIS under Article 12(4)(a) of India-USA DTAA. Accordingly, we direct the AO to delete the additions.Appeal of assessee allowed.
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2023 (6) TMI 343
Revision u/s 263 - addition made u/s 68 of the Act in respect of unsecured loan received which is pending before ld CIT(A) - HELD THAT:- In the assessee`s case under consideration, Ld. PCIT has mainly exercised his jurisdiction u/s 263 for enhancement of the addition, which can be enhanced by ld CIT(A) u/s 251 of the Act. Since the assessee has filed the appeal before ld CIT(A) against the addition u/s 68 and ld CIT(A) by exercising his power u/s 251 of the Act may enhance the assessment. Hence, PCIT by exercising his jurisdiction u/s 263 need not to enhance the assessment especially when the appeal of assessee is pending for adjudication before ld CIT(A). Therefore, respectfully following the above legal precedents, the order of ld PCIT u/s 263 of the Act should be quashed. As from the assessee`s facts, it is abundantly clear that during the assessment stage, the AO asked the assessee to furnish the details and documents. In response, the assessee submitted reply with evidences before AO. Thus, all the documents, details and the explanations required by the AO were submitted by the assessee. Just because the AO does not bring these documents and details in his assessment order does not mean that AO has not conducted proper enquiry during the assessment stage. In fact, AO has applied his mind. Assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . As in the assessee`s case, it cannot be said that it is a case of 'lack of inquiry'. In view of the facts of the case and judicial pronouncements relied upon, it is well established that the impugned assessment order passed u/s. 143(3) dated 11.02.2021, was passed by AO after calling for relevant information and after detailed examination of the same. PCIT s finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Decided in favour of assessee.
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2023 (6) TMI 342
Interest earned from FDRs during preoperative period - income from other sources or capital receipts - - whether the interest earned by the assessee from the short term fixed deposits with scheduled banks is liable to be credited in pre-operative expenses, treating the same being a capital receipt, thereby, reducing it from project cost? - HELD THAT:- The assessee company claims that during financial year it was in the process of setting up of a fertilizer manufacturing unit at Kanpur by revamping and renovating a sick industrial unit taken over under a Rehabilitation Scheme. For revamping and renovating of sick industrial unit, it arranged funds in the form of share holder s and debt funds. These FDRs were kept as margin money for the project implementation, hence for business expediency. Thus, the interest being inextricably linked to project is a capital receipt that goes to reduce the cost of project and accordingly, the assessee correctly reduced the same from the cost of expenditure on the project. The fact that FDRs were utilized as margin money against bank guarantee, that was given to Indian Oil Corporation and other State entities, is not rebutted by the learned DR. Thus, the issue is squarely covered by the decision of Indian Oil Panipat Powers Consortium Ltd. [ 2009 (2) TMI 32 - DELHI HIGH COURT] . Assessee appeal allowed.
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2023 (6) TMI 341
Allowable Business/revenue expenses - directors education expenses - whether are wholly and exclusively incurred for the purpose of business? - assessee is a company and is engaged in the business as importer and exporter of bearings and components - HELD THAT:- The assessee is not involved in any manufacturing activity. There is no material available on record that the assessee has any presence outside India. Director was claimed to be already a graduate in management at the time of his appointment as Director of the assessee company. Therefore, when the assessee s business is merely in the nature of a trader with no presence outside India and its Director was already a graduate in management, no sufficient basis has been brought on record to show how the financial support provided by the assessee to its Director to pursue MSc in International Business Management is wholly and exclusively for the assessee s business purpose and has a direct relationship with the assessee s business activity. Since, in the present case, the assessee has failed to substantiate that the expenditure was incurred wholly and exclusively for the purpose of business, therefore, we find no infirmity in the impugned order affirming the disallowance of the Director s education expenditure u/s 37(1) - Appeal by the assessee is dismissed.
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2023 (6) TMI 340
Correct head of income - maintenance income received by the assessee - treated as income from house property or income from business or profession - HELD THAT:- The maintenance charges are no way connected to the rental income. Rather, they are for certain additional facilities provided to the tenants, which are unconnected to leasing out the tenanted premises. These facilities, even, could have been provided by a third party. Therefore, in our view, the maintenance charges has no connection with the rental income, hence, cannot be considered to be a part of rental income to treat it as income from house property. The decisions relied upon by assessee support this view. As per assessee that this is the only year, in which, the AO has assessed the maintenance income under the head income from house property . We hold that the maintenance income received by the assessee has to be treated as income from business. Since, the departmental authorities have not raised any doubt regarding expenses incurred against maintenance charges, the same has to be allowed - Decided in favour of the assessee.
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2023 (6) TMI 339
Unexplained investment in property - Addition u/s 69 - HELD THAT:- As u/s 69 of the Act, all that is required, is to explain the source of investment and the source of investment in the impugned property is the Euros received from Ms. Diana Perrone. No substance in the observations of the revenue authorities that the assessee has failed to explain the source of investment. AO is, accordingly, directed to delete the impugned addition - This ground is, accordingly allowed. Disallowance of 20% business expenses - CIT(A) enhancing addition to 100% receipts as unexplained income - HELD THAT:- Whenever the question of taxability of income from new source of income is concerned, which had not been considered by the Assessing Officer, jurisdiction to deal with the same in appropriate cases may be dealt with u/s 147/148 of the Act and u/s 263. It is unconceivable that in the presence of such specific provisions a similar power is available to the first appellate authority - we do not find any merit in the addition made by the ld. CIT(A) and the same is directed to be deleted. This Ground is allowed
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2023 (6) TMI 338
TP Adjustment - adjustment made by the TPO towards technical know-how fees despite accepting the entity level margins - HELD THAT:- On facts of the present case, it would be impractical and also inappropriate to evaluate payment of technical know-how fee on an individual or on a stand-alone basis (dehors the segment to which a benefit from such services accrues). For the year under consideration, the net profit margin of the assessee is 12.34% which is higher than the net profit margin of the comparable companies arrived at 9.23%. It is undisputed that the TPO had accepted the benchmarking analysis of the assessee for all transactions except for the payment of technical know-how fee to AE. This in our view would mean that the TPO has accepted the entity level margins earned by the assessee but proceeded to make TP adjustment on payment towards technical know-how. The Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications India (P.) Ltd. [ 2015 (3) TMI 580 - DELHI HIGH COURT] held that once the revenue accepts the entity level margins as per the most appropriate method, it would be inappropriate to treat a particular expenditure as a separate international transaction. It was held that such an exercise would lead to unusual and absurd results. Also in Lenovo (India) (P.) Ltd. case [ 2023 (1) TMI 1242 - ITAT BANGALORE] held that if margins of assessee with respect to its trading segment were accepted to be at arm's length by TPO, then no separate adjustment of AMP expenses could be made by treating it as an international transaction. Thus adjustment made by the TPO towards technical know-how fees despite accepting the entity level margins, is hereby deleted. Adjustment invoking the provisions of section 40(a)(i) - we note that the assessee could not establish whether or not the tax had been deducted at source on the impugned payment due to absence of historical records. Irrespective of such fact, in our view, the action of the CIT(A) to invoke section 40(a)(i) of the Act is misplaced. As noted above, the payment towards technical know-how was capitalized in the books of the assessee and depreciation on the same was claimed. We note that in Nector Beverages (P.) Ltd. [ 2009 (7) TMI 5 - SUPREME COURT] in the context of section 41, held that depreciation, by its very nature, is neither a loss, nor an expenditure, nor a trading liability. On this count, invoking section 40(a)(i) of the Act which prohibits claim of revenue expenditure, is incorrect. Thus alternative proposal to disallow the impugned expense u/s 40(a)(i) of the Act made by the CIT(A), is not sustainable.
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2023 (6) TMI 337
TP adjustment of specified domestic transaction of sale of power by eligible unit to the manufacturing unit - HELD THAT:- As in the instant facts, it is a well settled principle that where an assessee, being a captive power plant provided electricity to its associated enterprises and claimed deduction u/s. 80-IA, then for the purpose of deduction, market value of power, supplied by the assessee to its associated enterprises should be computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers. In the case of Shree Rayalaseema Hi Strength Hypo Ltd. [ 2023 (1) TMI 1115 - ITAT HYDERABAD] held that where assessee, a captive thermal power plant, provided electricity to its AEs and claimed deduction under section 80-IA in respect of profits arising out of such activity, for purpose of such deduction market value of power supplied by assessee to its AEs should be computed considering rate of power charged by State Electricity Board for supply of electricity to industrial consumers and thus, assessee was justified in adopting ALP of electricity supply to its AEs at rate charged by State Electricity Board and Revenue was not justified in excluding certain heads of charges out of it Accordingly we are of the considered view that the assessee has rightly computed the ALP by adopting the rate of Rs. 6.5 per unit as the arms length rate. Accordingly ground no. 2 of assessee s appeal is allowed. Determining the arms length value for sale of steam at Rs. nil - steam generated by captive power plant of the assessee is transmitted to the plant which manufactures chemicals as well as further processed to generate power - assessee has adopted other method in transfer pricing documentation for benchmarking SDT on transfer of steam, wherein quotation was obtained by MOL from independent supplier and such quotation has been considered by the assessee as the benchmark rate - HELD THAT:- While we are in agreement with assessee that the ALP of steam cannot be determined at Rs. nil , however, at the same time, we are also in agreement with the observations made by the Hon ble DRP that the quotation obtained by the assessee from SSPL also cannot be taken as the basis for benchmarking the ALP of steam supplied by the CPP of the assessee. DRP, has correctly pointed out certain infirmities in the quotation obtained by the assessee and has specifically observed that the quotation obtained by the assessee is not backed by any analysis of the evaluation of the price so quoted and the said quotation is not supported by any supporting evidences. Since appropriate exercise has not been conducted by the assessee to justify the arms length price of steam supplied to its associated enterprise, this issue is restored to the file of AO wherein the assessee may furnish supporting documents in order to justify arms length price of the steam supplied by its captive power plant to its Associated Enterprise. Accordingly, this issue is being restored to the file of AO with the above directions.
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2023 (6) TMI 336
Disallowance u/s 14A - CIT(A) made the enhancement of disallowance u/s 14A - HELD THAT:- When the appeal is filed before the Tribunal by the assessee himself against the orders of the lower authorities, it is expected that the assessee may put forth some documentary evidences in support of his contentions to decide the appeal as it is the duty of the assessee to lead evidence in support of its claim and for the adjudicating authority to decide upon the sustainability of the claim on the basis of the evidence led by the parties before it. Assessee did not appear before the Tribunal despite numerous adjournments allowed and notices issued through RPAD. No material has been placed by assessee to controvert the findings of lower authorities nor has pointed to any fallacy in the findings of lower authorities - no reason to interfere with the order of CIT(A) and thus we dismiss the grounds of the assessee.
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2023 (6) TMI 335
Valuation of shares at a premium u/s 56(2)(viib) - FMV determined under DCF method of the unquoted shares - Whether AO is correct in rejecting the DCF method and the FMV determined under DCF method by comparing the actual performance figures with the projections used under the DCF method? - HELD THAT:- CIT(A) concluded correctly that in the instant case there is no merit in rejecting the DCF method on the ground of mismatch between the projections adopted in DCF method and those achieved during the first two years post-valuation date. Whether the AO can change the method of valuation of unquoted shares under Rule 11UA of I.T. Rules 1962? - Rule 11UA(2) prescribes two methods - Book Value method and DCF method. However, the said rule also provides that the method to be adopted is left to the choice of the assessee. The option to choose the method to be adopted to determine the FMV of unquoted shares is not with the AO but with the assessee. In the instant case the assessee opted for the DCF method and the AO could not have switched the method from DCF to Book Value method for determining the FMV of the unquoted shares. Whether the AO erred in rejecting the DCF method because the Valuer failed to furnish the documents called for by him? - It is noted here that there is merit in the AO' s observation that the valuation report is very brief. However, in the absence of any prescribed format or size, one cannot reject the valuation merely on that ground. Further, the AO has not pointed out any specific deficiency in the Valuation Report itself - Hence, it would be incorrect to reject the DCF method solely on that ground. Keeping in view that DCF is correct method of determining the FMV of the unquoted shares, the assessee has option to determine the method of valuation and the AO has no power to reject the method resorted by the assessee, the results in the instant case of the holding company have exceed the projections, as no infraction of methodology has been brought out by the AO and non-payment of advance tax cannot be a collateral reason to reject the DCF method, we decline to interfere with the well reasoned order of the ld. CIT(A). Decided against revenue.
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2023 (6) TMI 334
Nature of receipts due to settlement in the court - Right of Preemptive/right of first priority of purchase of the premises - capital gain - transfer u/s 2(47) - assessee has claimed it as non-taxable and has credited directly to the capital accounts of the partners of the firm in their respective profit sharing ratio - whether falls under the definition of Capital Asset u/s 2(14)? - AO considered the date of lease deed 19.04.2004 to be the date of acquisition of capital asset, as there was no cost of acquisition of the right of pre-emption the cost of acquisition of the capital asset was taken as Nil. HELD THAT:- As right of assessee to have the offer for purchase cannot be considered to be a Capital asset for the purpose of Section 2(14) - This right arising out of covenant in the lease deed has no semblance of a property as its alienation, transfer or relinquishment was not possible independently at the will of assessee. It was incidental to prospective sale by the lessor. It was merely contingent right. AO has fallen in error in concluding that when assessee entered into the settlement with the purchaser there was a relinquishment of the asset. Relinquishment under law does not merely mean withdraw from, desert, abandon, to cease to hold, adhere to , as assumed by Ld. AO. The judgment he has relied to understand the term relinquishment in CIT vs. Rasiklal Maniklal (HUF) [ 1989 (3) TMI 3 - SUPREME COURT] was in regard to the question where the assessee in the case had received certain shares of the company upon amalgamation. While we are dealing with rights in regard to the transactions concerning immovable properties. Relinquishment in case of immovable property is a way of enlargement of the share or shares of the co-owners of the same rights. Despite the definition of expression capital asset in the widest possible terms in section 2(14), right to a capital asset must fall within the expression property of any kind in the context of transferability. Relinquishment of the asset or the extinguishment of any rights therein of a right in regard immovable property, to fall under definition of Transfer u/s clauses (i) or (ii) of Section 2(47) of the Act, should be of a right or an interest which is alienable and otherwise which can be monetized. In any case such a right for specific performance of the covenant to have priority of purchase is a mere right to sue. It is not a property and it cannot be transferred. Section 6(e) of the Transfer of Property Act specifically makes it a exception to types of transfer. As a matter fact what is reflected in the preface to the settlement arrived in mediation is that the amount received by the assessee under the settlement was to make the premises free of litigation and avoid costs of protracted civil litigation. Once the assessee had already parted with the possession of premises in favour of purchaser, in furtherance of the orders of Hon ble High Court, in the suit filed by the purchaser then any cloud over the title and rights of purchaser due to pending two suits made the property loose its prospective value. Aforesaid consideration in the mind of purchaser to buy peace and make the property clean on cost to pay Rs. 20,40,00,000/- may have any other incidence of taxability, but certainly not a Capital Gains. AO himself has considered the cost of acquisition of the so called right of pre-emption to be Nil. Thus, the computation provisions fail, therefore, capital gains could not have been calculated. This too establish that a mere right to sue in regard to immovable property cannot be subject to Income Tax under the head Capital Gains as restricted by Section 6(e) of the Transfer of Property Act 1882, laying that a mere right to sue cannot be transferred. Decided in favour of assessee.
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2023 (6) TMI 333
CIT-A Jurisdictional Issue - CIT(A), Ghaziabad or Noida - HELD THAT:- This Tribunal [ 2021 (3) TMI 22 - ITAT DELHI] has extensively discussed the impugned issues and has restored the appeals to the respective jurisdictional CIT(A), Ghaziabad. Hon ble Supreme Court in case of Fatma Bibi Ahmed Patel Anrs [ 2008 (5) TMI 691 - SUPREME COURT] held that jurisdictional issue goes to the root of the matter and the entire proceedings having been initiated illegally and without jurisdiction, and thus are nullities. Thus as following the decisions of Fatima Bibi [ 2008 (5) TMI 691 - SUPREME COURT] , United Commercial Bank [ 1951 (4) TMI 25 - SUPREME COURT] and Kanwar Singh Saini [ 2011 (9) TMI 960 - SUPREME COURT] without entering into the merits of the captioned appeals, we are of the considered view that the impugned orders suffer from jurisdictional defect which is not curable having been passed by CIT(A)-1 and 2 Noida after his compulsory retirements with effect from 11.06.2019, when he was functus officio, are not sustainable in the eyes of law. hence, nullities. We set aside the captioned appeals to the files of the CIT(A) having jurisdiction over the captioned assessee s and decide the issue afresh expediously after affording a reasonable opportunity of being heard to the assessee.
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2023 (6) TMI 332
Penalty u/s 271D - contravention of provisions of Section 269SS - Cash transaction between the Company and its Director - a. cash utilized for purchase of stamps - b. cash deposited in the bank account of the compnay by the Director - challenging the categorization of transaction as loan or deposit when there is no element of any interest - HELD THAT:- No reasonable cause or urgency is shown by the assessee for having accepted cash on different occasions from the Director. It could not be shown as to why the transactions could not be undertaken in compliance with the prescribed modes u/s 269SS. Further, the Private Limited company and Director are altogether different person under the provisions of Section 2(31), and there could not be two view on this. CIT-DR has rightly relied upon judicial precedents to support his contentions, which we have reproduced in preceding para s of this order, and the same are not repeated again. Thus, keeping in view our aforesaid discussions as above, we uphold the penalty levied by ld. JCIT and as upheld by ld.CIT(A). The appeal filed by the assessee stand dismissed.
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Customs
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2023 (6) TMI 328
Confiscation - Detention and seizure of betel nuts - goods of foreign origin and unfit for human consumption - Discharge of burden of prove - standard of proof as envisaged under Section 123 of the Customs Act, 1962 is the best beyond reasonable doubt - seized goods were found to be unfit for human consumption as per test report of Export Inspection Agency, Kolkata, under Food and Standard (Food Products Standards and Food Additive) Regulations, 2022. HELD THAT:- Section 123 of the Act, 1962 provides that where any goods included under Sub-section 2 of Section 123 are seized under the provision of the Act, 1962, on the basis of reasonable belief that the same are smuggled goods, then the burden of proving that they are not smuggled goods, shall lie upon the person from whose possession such goods have been seized and in a case, when another person claims to be owner thereof though such goods have not been seized from his possession, upon such claimant and in other cases on the person, who claims to be owner of the goods so seized - the condition precedent is that the revenue authority must have a reasonable belief that goods seized were smuggled goods and fall under the category of goods enumerated or notified under Subsection 2 of Section 123 of the Custom Act, 1962. In the case in hand it is undisputed that on the basis of a specific intelligence report the search was conducted in a Thermal Power godown at Bairabi but nothing was found. The In-charge of the godown in his recorded statement clearly declared that the godown belongs to the Thermal Power Department and no smuggled goods were stored therein - There is nothing on record to satisfy that the revenue officers had material before them to have satisfaction that the goods were of foreign origin and imported to India without due procedure. There is nothing on record, to even have a prima-facie view that the goods were of foreign origin, more particularly for the reason that the goods were seized within Indian Territory and there is nothing including any foreign markings on the bags to even remotely suggest that the goods seized were of foreign origin. There is also no credible expert opinion regarding the origin of the goods. Therefore, only on the ground that different authorities in Northeast had made seizures of betel nuts in large quantities, it cannot be concluded in every individual case that such betel nuts are also of the foreign origin, without any tangible material being available with the authorities - in the considered opinion of this court the learned Tribunal has rightly come to the conclusion based on apropos appreciation of material available on record. Therefore, the decision of the learned Tribunal cannot be treated as perverse. Accordingly, the substantial question of law framed as regards perversity is also answered against the appellant and in favour of the respondents. Quality of the seized betel nuts - HELD THAT:- It is reflected from record that immediately after the seizure, on examination by scientific expert, the goods were found to be fit for human consumption. However, in the second test conducted after almost seven months, the same goods were found to be not fit for human consumption. If that be so, it cannot be a concern of the Customs Authority to assail the decision of the Tribunal on the ground that the Tribunal ought not to have set aside the order of confiscation inasmuch as from the record itself it is established that the goods seized became unfit for human consumption during the period they were under seizure. If the confiscated goods are used for human consumption after its release, the same will give a different cause of action for different authorities to take action against those persons in accordance with law and it cannot be within the jurisdiction and concern of the Customs authority. Accordingly, this substantial question of law is also answered against the appellant and in favour of the respondents - Appeal dismissed.
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2023 (6) TMI 327
Criminal conspiracy in order to get ineligible Duty Entitlement Pass Book - showing realization of Foreign Exchange against export of coloured water and mis-declared the customs as high quality printing ink for refilling catridges - offences punishable under Sections 120B r/w 420, 467, 468, 471 IPC and Sections 132 and 135 of the Customs Act, 1962 and under Sections 468, 467 r/w 471 and 420 IPC and Sections 132 and 135 of CS Act. HELD THAT:- The sum and substance of the case of the prosecution is that the accused fabricated the BRC's in the name of M/s.Prime Stones and Monuments, M/s.Sri Mahalakshmi Iron and Steel and M/s.Seven Star Global Logistics as if the same were issued by the Bank of Saurashtra, George Town, Chennai and Dhanalakshmi Bank, George Town, Chennai and also involved in affixing the fabricated rubber stamp of the Bank. By using the said BRC's they have submitted shipping bills by way of getting ineligible DEPB licence. The further allegation is that the accused have exported coloured water and made a false declaration that they exported high quality ''PRINTING INK FOR REFILLING CARTRIDGES''. Further, A1 to A3 have sold the said licence to various persons for monetary consideration and thereby, enable the bonafide purchaser to use the fraudulent DEPB licence and cause wrongful loss to tune of Rs.33,49,718/- to the Government. P.W.20 clearly deposed that he was working as Chief Manager of Dhanalakshmi Bank, George Town, Chennai from October 2002 to 2004. At that time, A5 was working as an Assistant Manager in the said Bank. A5 was working under him for about nine months and he was well versed with his handwriting, signatures and initials that the current account opening Form of M/s.Sevenstar Global Logistics which is introduced by A1. He further deposed that either the said branch or A5 is not empowered to issue BRC. Therefore, the BRC's issued by A5 to the accused are forged and fabricated one. The learned Senior Counsel appearing for the revision petitioner/A1 contended that CBI has no authority to register and investigate the case, whereas, to investigate into the contraventions under the customs Act power is given only to the officers of Customs. However, the learned Special Public Prosecutor produced a Letter.No.SC/23a5-4/91 Home (SC) Department, dated 22.07.1992, in which, it is stated that CBI has got jurisdiction to register and investigate the cases involving financial or other interests of the Central Government or Public Sector undertaking under the Central Government. In the case on hand, the prosecution proved that the accused entered into a conspiracy with the other accused and in pursuance of the conspiracy they availed illeligible DEPB by producing the forged BRC and causing loss to the Government. Therefore, the contention raised by the petitioner that Customs Authority can only proceed with the offence under the Customs Act is not acceptable. The scope of revision is very limited. The Trial Court and the Appellate Court had already appreciated and re-appreciated the entire evidence and also given findings and while exercising the revisional jurisdiction, this Court cannot sit in the arm chair of the Appellate Court and re-appreciate the evidence. However, while deciding the revision, this Court has to see whether there is any perversity in appreciation of evidence by the Courts below. On a perusal of the entire records this Court finds that from the evidence of 23, 35, 39, 47, 48 the prosecution proved its case beyond reasonable doubt that the petitioner/A1 has committed the charged offences. Further, it is not in dispute that A5 was working as Assistant Manager in the Dhanalakshmi Bank, George Town, Chennai and from the evidence of P.Ws.20 and 21 the prosecution proved that BRC issued by A5 are not genuine one and he was not authorised to issue such BRC and that too in the name of the Branch which is not empowered to issue such BRC and he has issued for the sole reason to get illegal benefits along with A1 and A2. The trial Court rightly found that A1 and A5 has committed the charged offences and convicted and sentenced them, which was confirmed by the lower Appellate Court. This Court does not find any merit in the revision and there is no perversity in appreciation of evidence by the both Courts below. Hence, these revision cases are liable to be dismissed - The conviction and sentences passed by the Courts below as against A1 and A5 are confirmed - revision dismissed.
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2023 (6) TMI 326
Seeking provisional release of goods - import of used rubber tyre cut in two pieces - restriction in the import of used tyres except those which have a cut in the bead wire or not - petitioner was not afforded personal hearing, since the notice was not served upon him - violation of principles of natural justice - HELD THAT:- As pointed out by the learned Senior Standing Counsel for the respondents, the petitioner, who now claims that he has all the documents and seeks one more indulgence to submit the documents to the respondents, has not complied with the earlier order in its letter and spirit. This Court had clearly and categorically directed the petitioner to submit all documents which they rely upon and it was for this reason, the impugned order was quashed and the matter was remitted back. The first respondent was directed to pass orders within a period of three months. The petitioner was given the concession of relying on any document and collateral as evidence available with them and the first respondent was directed to pass orders after perusing the same and by applying the principles of preponderance of probability. However, the petitioner has not complied with the said direction. Further, the petitioner has an appellate remedy which he has not availed. A reading of the impugned order would clearly set out the fact that the petitioner has not filed a copy of the GST registration certificate at Rajasthan and though the first respondent has called upon the petitioner to produce the documents to substantiate their case, the petitioner has not cared to supply the details. The impugned order can be appealed before the Commissioner of Appeals within a period of 60 days. Considering the fact that this period has come to an end, the time taken in prosecuting this writ petition shall be waived and shall not be taken into account for calculating the period of limitation. This Writ Petition is dismissed.
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2023 (6) TMI 325
Classification of imported goods - Low Aromatic While Spirit/Hydro Carbon Solvent and other Petroleum Class A,B and C grades - classifiable under sub-heading 27101920 or under the sub heading 27101990? - violation of provisions of Import Policy - Revenue has reclassified the goods mainly on the basis of the Test Report received from CRCL, Kolkata - whether the Test report findings indicate that the impugned goods meets the specifications required for categorizing it as solvent 125/240, as per IS 1745:2018? HELD THAT:- The Respondent stated that when the Test Reports differs from the standards prescribed, the goods cannot be held to satisfy the requirements under IS 1745 standards meant for CTH 2710. Hence the impugned goods cannot be categorized as Light Oils and Preparations as per the CRCL Test report - there are merit in the argument of the Respondent. None of the above said parameters are matching with the minimum or maximum standards fixed as per IS 1745 standards. There is a vast difference between the minimum IFB and maximum FBP fixed as per IS standard 1745 and the result received for the impugned goods. Hence, the impugned goods cannot be classified under chapter sub heading 27101920, on the basis of the parameters available in the CRCL, Test Report dated 26.11.2020. Revenue has relied upon the Note 4 to Chapter 27 for classifying the impugned goods under the CTH 27101920 - the condition as prescribed in Note 4 has not been verified in the CRCL report. It is the primary condition required to be tested for classifying any goods under CTH 27101920. From the said Note, it is evident that for the purpose of sub heading 27101920, the light oils and preparations are those of which 90% or more by volume (including losses) distil at 210 degree Celsius, but the test report is silent about it. As per the Test Report, the FBP is 218, which means 100% of the goods will evaporate at 218 degree Celsius itself whereas for classification of the goods as solvent 125/240 under CTH 27101920, the requirement as per Note 4 is that only a maximum of 90% should evaporate at 240 degree celsius. Since the entire 100% of the goods evaporate at 218 degree celsius itself, the goods are not meeting the requirements as specified under Chapter Note 4 of Chapter 27, accordingly the impugned goods cannot be classified under CTH 27101920as claimed by the Revenue. Violation against PESO Licence - HELD THAT:- It is observed that the PESO License No.P/HQ/WB/15/2530(p-206171) dated 22.11.2019 available with the Respondent valid up to 31.12.2024, allows them to import 84,000 litres of Class B of the Petroleum Product. The impugned import constitutes of 97,280 Kgs (1,19,611 Litres , when worked out based on the density of 0.8133) . However, the Respondents submitted that they have applied for enhancement of the quantity which has since been approved. Therefore, section 111(d) of the Customs Act, 1962 is not applicable as far as the impugned goods are concerned and confiscation is not warranted on this count. The impugned order upheld - appeal filed by the Department (Appellant) rejected.
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2023 (6) TMI 324
Seeking change in Classification - Shower head of steel - to be classified under CTH 84248990 or CTH 73242900 - Shower head/Hand shower of plastic - to be classified under CTH 84248900 or under CTH 39249010? - Shower panel - to be classified under CTH 84818010 or under CTH 94060099 - Shower head of Chrome plated brass - to be classified under CTH 84248900 or under CTH74182010 - Sensor Faucet - to be classified under CTH 84818010 or under CTH 74182010 - discharge of burden to prove. HELD THAT:- It is seen that the ground of appeal contains no argument whatsoever to counter the arguments given by the Commissioner (Appeals) except to assert that the case law cited does not apply. The onus of giving evidence of change of classification is on revenue. Revenue has failed to discharge the onus. The arguments given in the impugned order have not been countered in the grounds of appeal. The appeal has been filed without any reasonable grounds to challenge the arguments given in the order in Commissioner (Appeals) - the grounds given by the Commissioner (Appeals) in his order are reasonable and justified - appeal dismissed.
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2023 (6) TMI 323
Confiscation - Reduction in quantum of redemption fine and penalty - import of old and used worn clothing, completely fumigated - restricted item or not - to be classified under Tariff Item No.63090000 of the First Schedule of the Act or not - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI] , wherein this Tribunal has observed that The failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. The redemption fine and penalty imposed on the respondent to the tune of 10% 5% respectively on the assessed value is sufficient - there are no infirmity in the impugned order and the same is upheld - appeals filed by the Revenue are dismissed.
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2023 (6) TMI 322
Revocation of Customs Broker License - export of cut and polished diamonds - alleged misuse of several persons to secure importer exporter code (IEC) numbers - adherence to time-lines and denial of opportunity to cross-examine persons whose testimony was relied upon - regulation 17 of Customs House Broker Licensing Regulations, 2018. HELD THAT:- The Hon ble Supreme Court, in PR. COMMISSIONER OF CUSTOMS VERSUS SHASTA FREIGHT SERVICE PVT. LTD. [ 2022 (10) TMI 473 - SC ORDER] , had dismissed special leave petition (SLP) against order of the Hon ble High Court of Telengana only owing to stated disinclination of appellant to pursue the dispute and that the Hon ble High Court of Telangana had held that the Enquiry Officer could not have violated the mandate of law. It would have been a different matter if the Enquiry Officer had chosen not to rely upon the statements of those two witnesses, but to proceed only on the basis of other available documents. But in more than one place, the Enquiry Officer affirmed his reliance upon the statements of witnesses, among other things. Therefore, the impugned order based upon such an enquiry report is contrary to the procedure prescribed by Regulation 20(4) and clearly in violation of the principles of natural justice. The proceedings under the Customs Act, 1962 emanated from alleged conspiracy to export cut and polished diamonds through entities existing only on paper for the sole purpose of receiving proceedings for evading oversight and control by the agencies of the State. There is no dispute that the exports did occur; non-receipt of remittance in foreign exchange fall outside the obligation devolving customs brokers whose functioning, under the Regulations, is limited to filing of shipping bills and securing of let export orders before outward transmission beyond customs area. In such circumstances, the sole responsibility that may be laid at the door of customs broker pertains to ascertainment of identity of the exporters. The want of diligence in doing so has been held against the customs broker herein by relying upon the admissions of several of the importer-exporter code (IEC) holders that denied connection with the export consignments and, more particularly, on that of an employee of the appellant on the specifics of the verification undertaken by the customs broker. As the case revolves around beneficiary exporter, operating under the cover of entities existing on paper and evidence of existence of such operator being hearsay, it was behoved the licensing authority to allow cross-examination rather than deny solely on the ground that the statements had not been retracted - Failure to place the request in this perspective discredits the denial of cross-examination on the part of the licensing authority. The impugned order is clearly bereft of such finding. Learned Authorised Representative has contended that the delay occurred owing to insistence on notice insisting upon cross-examination of their employee; an assertion of right to defence in proceedings is, of itself, not dilatory and, especially, in the light of our finding that no justifiable cause for rejection of cross-examination is available on record - the decision of the Hon ble High Court of Bombay in THE PRINCIPAL COMMISSIONER OF CUSTOMS (GENERAL) MUMBAI VERSUS UNISON CLEARING PVT. LTD., AND OTHERS. [ 2018 (4) TMI 1053 - BOMBAY HIGH COURT] does not come to the assistance of the licencing authority. It is clear that the time-lines specified in regulation 17 of Customs House Broker Licensing Regulations, 2018 had not been adhered to. No purpose would be served by directing cross-examination now because that will only approve non-adherence to timelines; we cannot condone that which is not condonable. It is not found necessary to delve further into the deviation from the specificity, warranted in show cause notice, by the arrangement of obligations in regulation 10 of Customs Broker Licencing Regulations, 2018. The impugned order is set aside - appeal allowed.
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2023 (6) TMI 321
Re-negotiation of price of Ship Breaking - number of items either replaced or not found as per the understanding arrived with the seller - prices in general had come down during the period of delay - prices had come down by 10 to 15% in international market - HELD THAT:- The re-negotiation of price was done. Matter remanded back to the Commissioner (Appeals) to look into various aspects. Specially, the evidence of international market prices having come down during the relevant period. The date of entry will be relevant but also whether the re negotiated transaction value was correct and final in terms of re-negotiated contract, it is also to be seen whether same was in consonance with the terms of original agreement, which allowed them to examine the ship in Indian waters. The matter remanded back.
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2023 (6) TMI 320
Confiscation - Reduction in quantum of redemption fine and penalty - import of old and used worn clothing, completely fumigated - restricted item or not - to be classified under Tariff Item No.63090000 of the First Schedule of the Act or not - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI] , wherein this Tribunal has observed that The failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. The redemption fine and penalty imposed on the respondent to the tune of 10% 5% respectively on the assessed value is sufficient - there are no infirmity in the impugned order and the same is upheld - appeals filed by the Revenue are dismissed.
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2023 (6) TMI 319
Classification of imported goods - Mitsubishi brand Air Conditioner-Outdoor units and Air Conditioner-Indoor units of more than two ton capacity - to be classified under CTH 84159000 as parts of Air-conditioners or not - applicability of FTA Notification No.46/2011 Sl.No.1103 (I) - power of DRI to issue SCN - HELD THAT:- The show cause notice is issued by D.R.I. The appellant has filed an affidavit stating that the issue whether the SCN issued by D.R.I is proper and valid is not contested by the appellant before this Tribunal and do not intend to contest the said issue in any other forum in regard to this appeal. The very same goods were imported by the appellant and the Tribunal in M/S. AV GLOBAL CORPORATION PVT. LTD., M/S. MITSUBISHI ELECTRIC ASIA PTE LIMITED, M/S. MITSUBISHI ELECTRIC INDIA PVT. LTD., SHRI MANORANJAN NAYAK, SHRI RAJEEV SHARMA, SHRI HIROAKI ASHIZAWA AND SHRI SHINJI YAMABE VERSUS ADDITIONAL DIRECTOR GENERAL (ADJUDICATION) , MUMBAI AND COMMISSIONER OF CUSTOMS, NHAVA SHEVA-I [ 2022 (5) TMI 1319 - CESTAT MUMBAI] has considered the issue as to the classification of the impugned goods and it was held that CMVRF, when imported and presented together in unassembled/ disassembled condition on a single Bill of Entry for supply against a unique project would be classified under heading 84151010 (pre-2013) and when presented separately as part against different bill of entries filed over a period of time shall be classified as parts under heading 84159000. Thus, the impugned goods are classifiable under CTH 84159000 as Parts of Air-Conditioners . The appellant is thus eligible for the benefit of Notification No.46/2011 Sl.No.1103 (I). The impugned order is set aside - Appeal allowed.
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2023 (6) TMI 318
Refund of SAD - delay in passing the review order by the reviewing authority - It is submitted that the date of communication of the Order-in-Original ought to have been taken by the Commissioner (Appeals) for computing the period of limitation of three months whereas, the Commissioner (Appeals) computed the limitation from the date of passing the Order-in-Original. HELD THAT:- The learned AR has submitted that the Commissioner (Appeals) has erroneously dismissed the appeal as time barred. Similar matter had come up before the Tribunal wherein the Commissioner (Appeals) had taken the date of passing the Order-in-Original for computing the period of limitation. In the present case, in para 5 6 of the impugned order the Commissioner (Appeals) has discussed in detail that even after repeated requests the Department had not provided the details of the date on which the Order-in-Original was received by the reviewing authority. In similar matter, in COMMISSIONER OF CUSTOMS (EXPORTS) , CHENNAI VERSUS M/S. NAGAPPA EXPORTS, M/S. AMARA RAJA BATTERIES LTD. AND M/S. NORITSU KOKI CO. LTD. [ 2023 (3) TMI 1216 - CESTAT CHENNAI] the Tribunal had considered such appeal and dismissed holding that As there is no evidence to substantiate the contention of the Department that the Order-in-Original was received on such dates by the Review Cell and as there is no reason to dis-believe the findings of the Commissioner (Appeals) that there was no evidence as to the date on which Order-in-Original was received by the Reviewing Authority, the strong inference that can be drawn is that there is a delay in passing the review orders in these appeals. The Department has not been able to establish why they had not furnished the date of communication of order before the Commissioner (Appeals) - there are no grounds to take a different view in this case - appeal dismissed.
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2023 (6) TMI 317
Classification of imported goods - Waxsol series of products such as Waxsol-A, Waxsol 9-11A, Waxsol-911B and Waksol-B etc - to be classified under CTH 27101990 of Customs Act, 1925 or under Customs Tariff Heading No. 34052000? - competence of proper officer for D.R.I. Officers to issue show cause notice for entire bunch - period involved of imports is from June, 2014 to April 2019. HELD THAT:- The appellants initially claimed goods under Tariff Heading 2710 as classification of the product in their Bills of Entry, but after being confronted with various evidence during investigation by DRI made alternate submissions for the product to be appropriately classified under Tariff Heading 2712, on the ground that the product cannot be classified under Tariff Heading 3405. We find that TH 3405, pertains to various end products and excludes waxes of heading 3404. Also the product is an Industrial Raw Material for manufacturer of another Industrial Raw Material i.e. Chlorinated Paraffin Wax and cannot be covered under Tariff Heading 3405 and that even explanatory notes to CTH 3405 (2017 edition) as well as the finding of the learned adjudicating authority, in para 45.2 point to the effect that Waksol 911-A, Waksol 911-B, is not exclusively used for Chlorination and can also be used for other purposes like Polishes, cream and similar preparations for the maintenance of wooden furniture, floors for other wooden work. The findings therefore only show the possibility and do not conclusively decide the nature of the product or its classification as the product literature and material on record shows that Waksol products are used in Chlorination and therefore do not appears in the nature of product of Tariff Heading 3045. The department has to conclusively bring on record the predominant usage of the product with evidence to discharge burden of classification. Further, in view of the trite law, learned adjudicating authority should have given his own findings on the classification sought and not relied on one given by the Chemical analyst. To justify classification under 3405 department will need to show that the product imported was not essentially in the nature of intermediate product or raw material and was not, often 'Put up for retail sale' as is the requirement laid down in HSN explanatory notes to CTH 3405 (2017 edition referred). The argument of the appellant that classification under chapter 3404 cannot be justified as the Fisher/Tropsch Technology was used and which excluded its classification under 3404 is a mutually accepted position and needs no discussion. A detailed examination about the nature of product, its usage and its proper classification based upon exclusion clauses of HSN explanatory note is warranted including of consideration of chapter 2712. In view of claim of product being in the nature of Slag wax, same needs elaborate discussion and findings from the authority below - appeal remanded directing the adjudicating authority to determine the exact nature and usage of the product imported. Appeal allowed by way of remand.
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2023 (6) TMI 316
Levy of penalty u/s 112(a) and u/s 114AA of the Customs Act, 1962 - allegation of abetment in undervaluation - evasion of Customs Duty by several syndicates of crane importers - procuring invoices of notional value of Rs.28/- to Rs.40/- per kg. of the weight as against the actual transaction value of the cranes which was higher - suppression of freight charges paid to the shipping lines - HELD THAT:- From the impugned order there are no discussion on the role played by the appellant in facilitating the charges of suppression of value. The entire discussion is based in respect of one co-noticee i.e. Shri Madan Lalwani. The only finding recorded in the impugned order is in para 35 onwards. Nothing recorded with regard to evidence leading to finding of such discussion - The fact that the show cause notice as contended by the appellant counsel has been issued on 02.07.2012 in respect of the imports made during the period 2005 to 2007. In absence of any clear-cut finding against the appellant, the penalty imposed on the appellant is excessive. Further the fact is also noted that the appellant was involved in the case of M/s. KCH (noticee No.2) on whom finally penalty has been imposed by the Settlement Commission to the extent of Rs.10,000/- only and on Shri Bajranglal Agarwal, partner in the said firm, penalty of Rs.5,000/- has been imposed. The interest of justice will be met if penalty imposed on the appellant under Section 112(a) is reduced from Rs.50,000/- to Rs.1,000/- only and that under 114AA from Rs.1,00,000/- to Rs.5,000/- - appeal allowed in part.
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Securities / SEBI
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2023 (6) TMI 331
Fraudulent activities under SEBI - issue of 80,800 false share certificates, forging signatures of genuine investors on the transfer documents and verifying fake share certificate and forging signatures and approving fraudulent transfer etc . - as per SAT[Mumbai] WTM passed ex-parte ad-interim order correctly in terms of Section 11 in the interest of the investors - HELD THAT:- No good ground and reason to interfere with the impugned judgment and hence, the present appeals are dismissed. Pending application(s), if any, shall stand disposed of.
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Insolvency & Bankruptcy
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2023 (6) TMI 330
Seeking appointment of an Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - respondent has approached the NCLT under the provisions of the IB Code - time limitation - whether the provisions of the IB Code interdict the appointment of an arbitrator by invoking Section 11(6) of the A C Act? - HELD THAT:- At the outset, it is necessary to note that there is no provision in the A C Act, giving the provisions of the Act an overriding effect as is contemplated by Section 238 of the I B Code. However, it is equally trite that the A C Act, is a special Statute, governing the field of Arbitration, and all other Statutes governing the filed earlier thereto, stood repealed in view of Section 85 of the A C Act. Whether there is anything inconsistent in the A C Act, to what has been provided for in Section 7 to 9 of the IB Code, so that it can be said that Section 7 to 9 of the I B Code would prevail? - HELD THAT:- The admission of an application after recording its satisfaction as contemplated by Section 7(5) of the IB Code would be the starting point where the bar under Section 238 of the IB Code can be said to be capable of being invoked and the mere filing of an application under Section 7(1) of the IB Code cannot be said to be enough to invoke the bar - What is also material to note is that Section 7(5)(b) of the IB Code permits the Adjudicating Authority to reject the application where it is of the opinion that default has not occurred, thereby indicating that the mere filing of an application under Section 7(1) of the I B Code, would not act as a bar to any proceedings under other statutes, until and unless the satisfaction as contemplated by Section 7(4) r/w Section 7(5)(a) of the IB Code is recorded by the Adjudicating Authority and the application is admitted. It would also be material to note that there does not appear to be anything inconsistent between the provisions of the A C Act and the IB Code, inasmuch as the provisions of Section 238 of the IB Code would come into play only upon an order having been passed by the Adjudicating Authority under Section 7(5) of the IB Code and therefore an application under Section 11(6) of the A C Act, till such time cannot be said to be not maintainable - In case the Adjudicating Authority comes to a conclusion that there was a default then the position would squarely be governed by Section 238 of the IB Code, however, till such time it is so done, the entertaining of an application under Section 11 (6) of the A C Act, would not stand prevented. Time Limitation - HELD THAT:- The arbitration clause was invoked only in the reply dated 15/09/2020 by the applicant, in pursuance to which, the present application has been filed on 23/10/2020, considering which, it cannot be said that the application is beyond time. A plea that the dispute/claim itself would be beyond time, is one which will have to be considered by the Arbitrator. In view of what has been held in Indus Biotech (supra) that, the triggering of a petition under Section 7 of the IB Code to consider the same as a proceeding in rem, it is necessary that the Adjudicating Authority ought to have applied its mind, recorded a finding of default and admitted the petition, GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. [ 2021 (3) TMI 340 - SUPREME COURT ] are of no assistance, for a contrary argument, to be acceptable. The application is, therefore, allowed and Mr. Justice Z. A. Haq, Former Judge of this Court, is hereby appointed as an Arbitrator, to adjudicate the disputes between the parties hereto. The parties shall appear before him on 12/06/2023 at 11:00 a.m. The processing charges shall be paid as a condition precedent.
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2023 (6) TMI 329
Initiation of CIRP - Proof of debts - raising an Invoice, is a precondition, in all cases, for admission of a Section 9 Petition under the I B Code, 2016 or not - strict proof of debt and default present or not - According to the Appellant / Petitioner / Operational Creditor, the Respondent / Corporate Debtor, is required to pay an advance Sum of Rs,2,28,62,374.63, but the Respondent / Corporate Debtor, is denying / disputing its Liability, to pay an Advance Sum. HELD THAT:- The Proceedings under the I B Code, 2016, are summary in character and a trial is not conducted, like that of Civil matter, before the Competent Civil Court. It cannot be forgotten that an Application under Section 9 of the Code, requires a strict proof of Debt and Default. An existence of a Pre-existing Dispute, is a bar to the initiation of the Corporate Insolvency Resolution Process, at the instance of an Operational Creditor. If there is a Pre-existing Dispute, between the Parties, the main CP (IB) No.49 / BB /2021, under Section 9 of the Code, against the Respondent / Corporate Debtor (filed by the Appellant / Petitioner / Operational Creditor), per se is not maintainable. On a careful consideration of the contentions advanced on either side and when the Appellant / Petitioner / Operational Creditor, in the instant case, has not proved, to the satisfaction of this Tribunal, as to the Aspect of Debt and Default, committed by the Respondent / Corporate Debtor (ofcourse, based on the facts and circumstances of the instant case, which float on the surface), the conclusion, arrived at by the Adjudicating Authority (NCLT, Bengaluru Bench), in dismissing CP (IB) No. 49 / BB / 2021 (preferred by the Appellant / Petitioner / Operational Creditor), is free from any legal infirmities. Consequently, the instant Appeal fails. Appeal dismissed.
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2023 (6) TMI 315
Seeking Liquidation of the Corporate Debtor Company - HELD THAT:- M/s. Cantors Fitzgerald is ready and willing to fund any settlement even during the Liquidation Process. In the event, any such settlement is able to be executed, with funds infused, keeping in view the spirit and intent of the Code, the Adjudicating Authority shall proceed in accordance with law giving 14 days time peremptorily, of course from the date of this Order failing which, this Tribunal does not find any tangible ground(s) to interfere with the Order of Liquidation as more than sufficient time was granted by the Adjudicating Authority/Tribunal to the Appellant herein to settle the matter. Appeal disposed off.
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Service Tax
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2023 (6) TMI 314
Levy of service tax - Business Auxiliary Service - consulting engineer service received from parent company during the period from April 2008 to March 2009 - reverse charge mechanism - suppression of facts - extended period of limitation - HELD THAT:- In similar circumstances when the Indian company procure orders for foreign company, purely on sales commission basis and received sales commission in convertible foreign exchange then for the period after 26.02.2010, this Tribunal has held that the said activity should be treated as export of service - in para 17 of the show-cause notice dated 22.10.2012, it is stated that the respondent has suppressed the information. The said show-cause notice did not elaborate as to which information was required, in which provision of law and how it was suppressed. Therefore, in the circumstances of the case, allegation of suppression is totally presumptive. The extended period can be invoked if there is suppression with an intention to evade duty. Revenue has not established as to how there was intention to evade duty. Till the pronouncement of Final Order on 17.05.2019 it was debatable as to whether prior to 26.02.2010 under similar circumstances service tax was payable. Therefore, before 17.05.2019 if the respondent did not pay service tax till 26.02.2010 under similar circumstances it cannot be established that there was intention to evade duty. Therefore, this was not a case for invocation of provisions for extension of limitation period - the show-cause notice was issued on 22.10.2012 and during the relevant period, normal period for raising the demand was 18 months. Therefore, the demand for the period after 22.04.2012 would have been for normal period. The period before 26.06.2010 in the present proceedings is barred by limitation, therefore, Revenue has no case in the present circumstances to demand duty under the Business Auxiliary Service. The impugned order upheld - appeal filed by Revenue dismissed.
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2023 (6) TMI 313
Levy of penalty u/s 78 of FA - entire service tax demanded along with interests paid before issue of the Notice - suppression. of facts or not - requirement to issue SCN as per section 73(3) of the Finance Act, 1994 - HELD THAT:- The Appellant has not paid the service tax on their own. The tax was paid only after initiation of investigation by the department. During the course of investigation, the Appellant has not cooperated with the department. They have furnished wrong information to the investigating authorities on various occasions. The findings of the adjudicating authority indicate that the Appellant tried to mislead the investigation .The Appellant has been receiving money from their client for the services rendered, but failed to pay service tax. From the statements recorded, it is evident that the Appellant was aware of the service tax liability on the services rendered by them. Thus, there was an intention to evade payment of service tax on the part of the appellant. Accordingly, penalty has been rightly imposed by the adjudicating authority under Section 78 of the Finance Act. Since the entire tax confirmed in the impugned order has already been paid, the adjudicating authority has given the option of payment of 25% of the tax amount as penalty. The appellant had already paid the 25% of the duty as penalty, albeit under protest . Thus, they have complied with the payment of duty and penalty as determined in the impugned order. The impugned order passed by the adjudicating authority upheld - appeal dismissed.
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2023 (6) TMI 312
Classification of services - construction of Jiribam Municipal Corporation building, staff quarter building, Guest House building, overhead tank and R. wall etc. for meeting social needs of the state of Manipur and for upliftment of needy people of the state in terms of the contract awarded by NBCC on behalf of the Ministry of Urban Employment and Poverty Alleviation, Govt. of India - to be classified under Commercial Or Industrial Construction Services or Works Contract Service? - taxability under the category of Works Contract Service has not been proposed in the impugned Show Cause Notice - time limitation. HELD THAT:- It is noted that the contract is inclusive of supply of goods. The Ld. Commissioner while taking note of the fact that the construction service is inclusive of supply of goods has extended the benefits of abatement to exclude the value of goods so as to arrive at the assessable value for raising demand of service tax. The issue has already been examined in detail by the Tribunal in the case of URC Construction (P) Ltd. [ 2017 (1) TMI 1363 - CESTAT CHENNAI ] has observed that In view of this specific decision and the admitted claim of the appellant that they are not providers of commercial or industrial construction service but of works contract service , no tax is liable on construction contracts executed prior to 1st June, 2007. Since the issue is no longer res-integra, the instant demand of service tax under the category of Commercial or Industrial Construction cannot be sustained and hence, set aside. Since the appeal is being decided on merits for the reasons stated above, we refrain from making any observation on the issue of limitation. Appeal allowed.
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2023 (6) TMI 311
Refund of Cenvat credit - Business Support Services - export of output service - denial of refund on the ground that Rule 14 of Cenvat Credit Rules, 2004 has not been invoked while rejecting the refund claim - HELD THAT:- In the matter of BNP Paribas India Solution Pvt. Ltd. [ 2021 (12) TMI 676 - CESTAT MUMBAI] this Tribunal while allowing the appeal of the assessee therein allowed the refund claim u/s. 5 ibid by holding that since the provisions of Rule 14 ibid has not been invoked, the refund of Cenvat credit as claimed by the Appellant under Rule 5 ibid cannot be denied. It is settled legal position that in absence of any notice for recovery as provided by Rule 14 ibid the refund claimed by the assessee under Rule 5 cannot be denied. The decision of the Tribunal in the matter of Qualcomm India Pvt. Ltd. [ 2019 (8) TMI 1645 - CESTAT HYDERABAD] has been affirmed by the Hon ble High Court of Hyderabad in [ 2021 (11) TMI 72 - TELANGANA HIGH COURT] by dismissing the appeals filed by the revenue against the aforesaid decision of Tribunal. The authorities below have erred in rejecting the refund claim of the appellant. Accordingly the impugned orders are set aside and the appeals filed by the appellant are allowed.
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2023 (6) TMI 310
Levy of Service Tax - Mining Services - service tax registration till 01.06.2007 not taken - Cargo Handing Service - Business Auxiliary Service - Site Formation and Clearance, excavation and Earth Moving and Demolition services - applicability of Board CBEC Circular F. No. 232/2/2006-Cx.4 dated 12.11.2007 - extended period of limitation - penalty - HELD THAT:- The Appellant has got a composite contract for undertaking mining activities . From the work orders, it is evident that the activities were to be performed entirely within the mining area, for a lump sum price. The Department has artificially bifurcated the services under the categories of Cargo Handling Services, Site Formation services and Business Auxiliary Services and demanded service tax. In fact there is no separate charges payable to such services as per the work orders. In the Notice, the taxable value under each category of service has been arrived at artificially without any basis. CBEC has issued Circular F. No. 232/2/2006Cx.4 dated 12.11.2007, which categorically states that no service tax leviable on mining activities prior to 01.06.2007. However, the adjudicating authority failed to appreciate the clarification and went ahead to confirm the demand made in the Notice. In the case of CCE Vs. Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT ], the Hon ble Supreme Court has held that when a particular levy was introduced for certain activities with effect from a particular date, it is to be construed that such activities were not liable to service tax prior to that date. In the present case mining services were brought under service tax only with effect from 01/06/2017. Hence, for the period prior to 01/06/2007, there was no liability of service tax on mining services . The Board has issued a Circular in F. No. 232/2/2006 Cx.4 dated 12.11.2007 clarifying the issue. The Circular cited above categorically clarifies that mining services were not leviable to service tax prior to 01/06/2007. Accordingly the artificial bifurcation of the services rendered by the Appellant into Cargo Handling Service, Site Formation Service and Business Auxiliary Service and demanding service tax in the impugned order is not sustainable and hence it is liable to be set aside. Time Limitation - HELD THAT:- There is no evidence brought on record to establish that the Appellant has intentionally evaded service tax. Since mining services were liable for service tax only with effect from 01/06/2017, demand of service tax by invoking extended period is not sustainable. Accordingly, the demands confirmed in the impugned orders are liable to be set aside on the ground of limitation also. Penalty - HELD THAT:- The demands confirmed in the impugned are are not sustainable. When the demand itself is not sustainable on merit as well as on limitation, the question of imposing penalty does not arise. The impugned order set aside - appeal allowed.
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2023 (6) TMI 309
Refund of Service Tax amount - advance amount returned/ refunded to the buyer, upon the cancellation of the flats booked by the said buyer - HELD THAT:- The first principle of service tax is that tax is to be paid only on the services which are taxable under the said statute and for that purpose there has to have some service . Unless service is there no service tax can be imposed. If any service has been provided which is taxable as specified in the Finance Act, 1994 as amended from time to time then certainly the assessee is liable to pay, but when no such service has been provided then the assessee cannot be saddled with any such liability and in that case the amount deposited by the assessee with the exchequer will be considered as deposit only and keeping the said amount by the department is violative of Article 265 of the Constitution of India which specifically provides that No tax shall be levied or collected except by authority of law. It is not the case of the department that the appellant is raising a fake claim. The only ground of rejection is section 11B ibid. When no service has been provided, as the booking has been cancelled, then how the tax on it can be retained by the exchequer and in what capacity? This amount has been paid by the customers and when they have cancelled the booking they want to get refund of their entire amount including the amount of service tax paid by them separately, which they are entitled to. Since Service Tax in issue, is not backed by any authority of law, the department has no authority to retain the same. Buyer booked the flat with the appellant and paid some consideration. The appellant as a law-abiding citizen entered the same in their books of accounts and paid the applicable service tax on it after collecting it from the buyer. But once the said bookings have been cancelled, where is the question of providing any service by the appellant to those customers. If there is no service then question of paying any tax on it does not arise and the department can t keep it with them as service tax. Once the buyer cancelled the booking and the consideration for service was returned, the service contract got terminated and once it is established that no service is provided, then refund of tax for such service become admissible. In view of the peculiar facts of this case, the appellant cannot be said to be liable to pay service tax as no service has been provided and the amount paid by them would not take the character of tax. The provisions of Section 11B ibid would, therefore, not be applicable to such applications and the question of applying the limitation prescribed u/s.11B ibid would not arise. The appellant is entitled for the refunds as claimed by them. Accordingly the appeals filed by them are allowed, with consequential relief, as per law.
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2023 (6) TMI 308
Refund of Service Tax - time limitation - case of Revenue is that refund claim was made after the period of one year from the date of deposit therefore the same is not eligible for refund - Section 11B of the Central Excise Act, 1944 - HELD THAT:- The heading of Section 11B ibid is claim for refund of duty and interest, if any, paid on such duty . From the language of the heading of the said section it is clear that if there is any claim for refund of duty and interest on such duty then it has to be filed within the period prescribed therein. But the instant case is not about refund of duty as the duty has already been paid by the appellant on 5.10.2016, it is about the refund of the amount inadvertently paid by them again for the very same period i.e. July, 2016 to September, 2016 alongwith interest. It is not the case that the claim is fake or is not supported by any evidence. The department is admitting the double payment but denying the refund claim being beyond the period prescribed by Section 11B ibid. The Hon ble High Court of Judicature at Bombay in the matter of M/S PARIJAT CONSTRUCTION, M/S GIRIRAJ CONSTRUCTION VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2017 (10) TMI 659 - BOMBAY HIGH COURT ] has held that the limitation prescribed u/s. 11B ibid is not applicable to refund claims for Service tax paid under mistake of law. In the present case although there is no mistake of law but it has been paid by mistake as they have already discharged the duty and paid the same again with interest although they were not liable to pay. The Hon ble High Court of Judicature at Madras in the matter of M/S. 3E INFOTECH VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, COMMISSIONER OF CENTRAL EXCISE (APPEALS-I) [ 2018 (7) TMI 276 - MADRAS HIGH COURT ] has also taken a similar view and held that when service tax is paid by mistake, a claim for refund cannot be barred by limitation merely because the period of limitation has expired. On similar lines, this Tribunal also in the matter of M/S SHRI JAVED AKHTAR VERSUS CCGST, MUMBAI WEST [ 2021 (11) TMI 281 - CESTAT MUMBAI ] has held that retention of any amount by the department which was paid by the appellant therein without any liability or in excess of the liability violates Article 265 of the Constitution of India. The appellant is entitled for refund of the amount of service tax paid by them totalling Rs. 95,978/- as the same has been deposited without any liability as the duty has already been discharged by the appellant - Appeal allowed - decided in favour of appellant.
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2023 (6) TMI 307
Classification of services - Support Services of Business or Commerce or renting of immovable property - royalty / concession fee / lease charges received by the Port from KPPL represents consideration for providing services relatable to the taxable service - notice is time barred or not. Revenue is of the opinion that the entire activities carried out under the concession agreement are in the nature of composite services, which consists of a combination of different taxable service and therefore it should be classified as if it consisted of a service which gives the essential character in accordance with Section 65A of Finance Act, 1994. HELD THAT:- By the Concession agreement, the Appellant has entrusted upon KPPL the rights to develop / operate / maintain the Port including project facilities on a BOT basis. The expression infrastructural support services given under Section 65(104C), includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security. None of these services are being provided or to be provided, to KPPL by the Port Department. KPPL has developed the land, built a Port and are offering services to the trading community on the basis of fees fixed by KPPL. This contractual permission by the Port Department to KPPL for setting up and running port facilities cannot be termed as support services of business or commerce, to be taxed at the Port Departments hands. The concession fee paid by KPPL to the Puducherry Port as a percentage of gross revenue generated by the concessionaire each year is also not a payment for any support services of business or commerce given by the Port Department to KPPL. It is basically a payment for the rights to develop / operate / maintain the Port including project facilities - the impugned order has erred in classifying the activity of the BOT contract under sec. 65(105)(zzzq) of the Finance Act, 1994 and that the levy must fail. The Appellant has relied upon the judgment in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GOA VERSUS MORMUGAO PORT TRUST AND VICE-VERSA [ 2015 (10) TMI 1736 - CESTAT MUMBAI ]. The facts of the case are that M/s Mormugao Port Trust is rendering Port Services and is duly registered for this purpose with the service tax authorities. The Assessee had entered into an agreement with M/s. South West Port Ltd., Mormugao, (SWPL) under which it had leased out/rented out pieces or parcels of land which were situated in the operational area of the harbour to SWPL on which the latter had constructed a jetty which was used for loading and unloading of cargo from ocean going vessels, in lieu of which it received license fee and royalty from SWPL. Considering the facts of that case the Hon ble Tribunal felt that the arrangements between the parties was one of public-private partnership and was in the nature of a joint venture where two parties have got together to carry out a specific economic venture on a revenue sharing basis and there is no service rendered by Mormugao Port which can be taxed. Another stand taken by the appellant is that the activity in question is covered under the scope and ambit of renting of immovable property and the legislature has excluded leasing out of vacant land from the definition of immovable property for purposes of taxation, whereas the above judgment in the Mormugao Port Trust case rules out the classification of the service under renting of immovable property. The appeal having being decided on merits in favour of the appellant, the issue of the show cause notice invoking the extended period of time does not survive. The impugned order is set aside and the appeal is allowed.
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2023 (6) TMI 306
Levy of Service Tax - Business Auxiliary Service - appellant is individual or a commercial concern? - whether the appellants who rendered Business Auxiliary Services as a proprietor can be treated to be a commercial concern before 01.06.2005 also? - extended period of limitation - penalties - HELD THAT:- Tribunal in the case of MR. CHARANJEET SINGH KHANUJA AND OTHERS VERSUS CST, INDORE/LUCKNOW/JAIPUR/LUDHIANA AND OTHERS [ 2015 (6) TMI 585 - CESTAT NEW DELHI ] has held that When an individual engages himself in a commercial activity, he has to be treated as business or commercial concern. Therefore, notwithstanding the fact that w.e.f. 1-5-2006 the term, 'commercial concern' in Section 65(105)(zzb) was replaced by any person', we are of the view that even during the period prior to 1-5-2006, the Business Auxiliary Service, even if provided by an Individual to a client, was taxable. Thus, commercial concern covers individuals also when they are into a business and to this extent,t the appellant s arguments are not acceptable. The appellants are liable to pay service tax on the services rendered by them to M/s Forever Living Products Pvt. Ltd. before and after 01.06.2005. Extended period of limitation - HELD THAT:- In the facts and circumstances of the case that the appellants have not obtained any registration and have not paid the applicable service tax. The appellants have not disclosed the material facts of providing taxable service under the category of Business Auxiliary Service to M/s Forever Living Products Pvt. Ltd. on their own and the Department came to know about the activity only after conducting certain inquiries. Therefore, there is suppression of material fact on the part of the appellants. Therefore, extended period is rightly invokable. Imposition of penalties under Section 76 and Section 78 - HELD THAT:- Hon ble High Court of Punjab Haryana in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. PANNU PROPERTY DEALERS, LUDHIANA [ 2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT ] observed that simultaneous penalty cannot be imposed under Section 76 and Section 78 - Moreover, in the instant case, the appellants have paid the duty along with interest and 25% of value as penalty on 06.05.2010 and looking into the provisions of Section 80 of the Finance Act, the penalties imposed can be waived in the facts and circumstances of the case. Appeal allowed in part.
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2023 (6) TMI 305
Classification of services - coaching and training services in Foreign Trade and Business Management - Department alleged that the coaching and training services provided by the Appellant did not fall under the category of Vocational Training and accordingly, the Appellant cannot be classified as vocational training institute - N/N. 09/2003-ST dt.20.06.2003 - period July, 2003 to September, 2005. HELD THAT:- It is observed that the very issue as to whether any coaching and training given in respect of business management studies would call for Service Tax payment, has been gone into by the Tribunal in the case of Ashu Export Promoters (P) Ltd [ 2011 (11) TMI 387 - CESTAT, NEW DELHI ] and the Tribunal has held In relation to education and training it gives the meaning directed at a particular occupation or its skill . When engagement in occupation or employment becomes outcome of vocational training, pedantic approach as that is made by Revenue is undesirable. On Appeal against this Tribunal s Order, the Hon ble High Court of Delhi [ 2014 (3) TMI 863 - DELHI HIGH COURT ] has held that It is evident that the term vocational training institute included the commercial training or coaching centers which provide vocational coaching or training meant to impart skills to enable the trainees to seek employment or to have self employment directly after such training or coaching . The notion of such training institute having been recognized or accredited to nowhere emerges from such a broad definition. The further Notification of 2010 substitutes the existing explanation to the term vocational training institute and narrowing it to those institutes affiliated to National Council for Vocational Training offering courses in designated trade in fact supports the assessee. Had the intention been to exempt only such class or category of institutions, the appropriate authority would have designed such a condition in the original Notification of 2003 and Notification No.10 of 2004 which had been relied upon in this case. The Appeal filed by the Revenue against this Tribunal s Order was dismissed by the Hon ble Supreme Court [ 2018 (8) TMI 826 - SC ORDER ] holding that It was further held that the order of the Tribunal passed in remand direction of the Supreme Court cannot be set aside by the Tribunal on the ground that the same was contrary to its earlier order passed on the basis of same set of facts and in the same matter, particularly when such order was under consideration before the Supreme Court and no stay thereagainst had been granted. The confirmed demand for the period July, 2003 to 27.02.2010 is required to be set aside. Accordingly, the Appeal to this extent is allowed - The confirmed demand of Rs.43,01,656/- is being remanded to the Adjudicating Authority to go through the details of the demand and verify the submissions of the Appellant that the services pertain to coaching and training given by them to the students leading to issuance of proper diplomas/ degrees by JNTU. The Appellant is directed to provide all the necessary data that would be sought by the Adjudicating Authority while disposing of the Denovo proceedings. Appeal disposed off.
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2023 (6) TMI 304
Classification of services - single work order for carrying out the services - Trucking, loading and unloading of dolomite boulders from mines to crusher plant - Haulage of Dolomite from stock-pile/washery through trucks - Loading of dolomite into all types of railway wagons by machine/manual labour, with separate rate for each activity, was entered between the appellant and M/s TISCO - to be classified under the category of transportation within mines as contended by the Appellant or cargo handling services as alleged by the Revenue? HELD THAT:- The essence of the service to be provided by the Appellant is of transportation of dolomite within various locations in the mining area and its final loading into railway wagon which is evident from the scope of services. This constitutes a single taxable service for transportation of dolomite within different locations of the mining area involving incidental loading and unloading and finally loading the same at the railway siding. It is certainly not a case that five separate taxable services have been provided under a single work order. The scope of the work order has to be read and interpreted in the context in which it has been awarded and the specification of separate rates for each sub-activity would not render each sub-activity to be a different taxable service. Therefore, separate rates for the various intermediate activities for carrying out this composite service have been provided in the work order - stand of the Revenue is flawed in treating each sub-service/activity as a separate taxable service, based on separate rates for each of them, without ascertaining the essence of the contract. Essential character of this composite service involving transportation and loading - HELD THAT:- Once it is found that the services are composite and has elements fitting into the definitions of both the services, recourse is to be taken to Section 65A.We note that Sub-section (2) clause (b) is relevant considering the facts of the case which provides that in case of composite service consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable - there must be no doubt in holding that the primary and predominant service which gives the essential character to this composite service is the service of transportation. The Ld. Chartered Accountant for the Appellant has relied on the judgment of the co-ordinate Bench of this Tribunal in the case of COMMISSIONER OF SERVICE TAX, KOLKATA VERSUS M/S. TYCOONS INDUSTRIES (P) LTD. VICE-VERSA [ 2019 (4) TMI 1418 - CESTAT KOLKATA] which is on identical facts as the Appellant in that case had been providing identical services within mines of TISCO and the demand was confirmed under the service category of cargo handling. The Co-ordinate Bench in Para 11 of its order, after examining the terms of agreement held that the essence of the contract is one for transportation of mineral within mining area and thereafter determined the classification of service in accordance with provisions of Section 65A of the Finance Act 1994. Time Limitation - HELD THAT:- The show cause notice was issued beyond the normal period of limitation which was one year at that relevant point of time. The issue in the present appeal is one involving interpretation of law. It is further noted that the issue of classification between the services of transportation and cargo handling was a vexed and disputable issue. It is a settled law that invocation of extended period cannot be sustained in such cases. Thus, the demand is not sustainable on the ground of limitation also. The appeal filed by the appellant is allowed on merits as well as on limitation.
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2023 (6) TMI 303
Levy of Service Tax - Business Support Service - Manpower Recruitment and Supply Agency Service - Commercial Coaching Training Services - providing infrastructure facilities like computer systems, refreshments, lunch etc. to their corporate clients - supply of employees as per the requirement of their client - period April 2007 to March 2008 - time limitation - validity of SCN. HELD THAT:- In the SCN dated 28.1.2008 in paras 4 to 7 along with Annexure-A to the SCN, the details of income received by the appellant and as to how these amounts would be subject to levy of service tax under the category of BSS and MRSS are explained. It is found that the argument of the appellant that SCN does not furnish required details for the appellant to rebut or defend the allegation is without any substance - The SCN cannot be too hyper-technical so as to make it highly confusing and too hard for an assessee to comprehend. When the details of the income (along with Annexure) which is subject to service tax is furnished in the SCN, and the category of services is also given along with its definition, the assessee should be sufficiently able to understand the allegations and defend the notice. The argument put forward by the Ld. Counsel that SCN is bereft of details and therefore appellant did not get reasonable opportunity to defend the case and therefore SCN is itself invalid, does not find favour. Business Support Service - HELD THAT:- The argument put forward before us is that appellant has given the premises on rent along with its infrastructure facilities to NIIT. However, the appellant has not been able to establish this argument with supporting evidence in the nature of lease / licence deed or rent receipts. The said contention of the appellant is neither tenable nor acceptable. Thus the demand under BSS is sustained. Manpower Recruitment or Supply Agency Service - HELD THAT:- The very same issue was considered by the Tribunal in the appellant s own case and vide Final Order No.40679/2020 dated 03.03.2020 [ 2020 (3) TMI 315 - CESTAT CHENNAI] , the Tribunal has upheld the demand. The various clauses in the agreement executed between the appellant (BA) and M/s. WTI on the analysed and appreciated by the Tribunal. The Tribunal relied upon the decision in the case of M/s. Future Focus Infotech India (P) Ltd. Vs CST Chennai [ 2010 (3) TMI 190 - CESTAT, CHENNAI] . It is submitted by the Ld. A.R that the appeal filed by the party before the Hon ble Apex Court against such decision has been dismissed as withdrawn. Following the decision of the Tribunal in the appellant s own case, it is held that the demand is legal and the same is sustained. Commercial Training or Coaching Services - HELD THAT:- The appellant has received income from NIIT for imparting computer coaching services. It is not denied that appellant is a franchise of M/s.NIIT for providing such classes. The classes provided may be theory classes or practical training classes. The category of Commercial Coaching or Training Services covers the practical training classes also. There are no ground to set aside the demand under this category. Time Limitation - HELD THAT:- It has to be pointed out that Business Associate Agreement entered between the appellant and M/s.WTI clearly shows that the employees are deputed to work for M/s.WTI and its clients and the consideration is paid on monthly basis. The terms agreed thereupon stipulate that employees deputed to WTI are not eligible for overtime charges. The conditions with regard to number of holidays that can be availed by the employees is also stipulated. When the agreement was so clear, the appellant ought to have discharged service tax under the MRSS. There are no ground to hold that SCN is barred by limitation. Appeal dismissed.
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2023 (6) TMI 302
Levy of Service Tax - GTA Services - goods are transported by rail - liability of appellant to pay tax on Freight Charges - consignor has discharged service tax on freight charges - applicability of Reverse Charge Mechanism - period 1.6.2006 to 16.8.2006 - Extended period of limitation - demand of service tax with interest and equal penalty under section 78 of the Finance Act, 1994 - HELD THAT:- The appellant has collected freight charges only for transportation of goods by road from the service recipient. They had to opt for transportation of goods by rail due to unforeseen circumstances such as unavailability of lorries. The intention between the parties, namely service recipient and service provider, was not to provide transportation of goods by rail. From the invoices issued by the appellant to the service recipient namely M/s. Sterlite Industries (India) Ltd., it is seen that the appellant has collected only freight charges for transportation by road as agreed between the parties. It is also seen mentioned in the invoices that the service tax is payable by consignor. Undisputedly, the consignor, namely, M/s. Sterlite Industries (India) Ltd. has discharged the service tax on the freight charges for transportation of goods by road. Merely because the appellant had to use the rail transportation in certain occasions, it cannot be said that they have provided services of transportation of goods by rail. Further, the service tax on the rail freight charges also has been discharged. For these reasons, it is found that there is no legal basis for the demand raised in the Show Cause Notice - the demand cannot sustain and requires to be set aside. Appeal allowed.
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2023 (6) TMI 301
Jurisdiction of Commissioner (Appeals) to issue fresh Show Cause Noice (SCN) or to raise demand on new ground - Exercise of powers under the second proviso to section 35A(3) of the Excise Act - Reversal of CENVAT Credit - manufacturing excisable goods as well as trading of goods - exempted service - HELD THAT:- Chapter V of the Finance Act deals with Service Tax and contains sections from 64 to 96. Section83 of the Finance Act provides that certain sections of the Excise Act shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise. Section 35A of the Excise Act is not a section mentioned in section 83 of the Finance Act - It would be seen that sub-section (4) of section 85 of the Finance Act provides that the Commissioner (Appeals) shall hear and determine the appeal and pass such orders as he thinks fit and such orders may include an order enhancing the service tax, interest or penalty. Sub-section (5) of section 85 of the Finance Act provides that subject to the provisions of Chapter V of the Finance Act, in hearing the appeals and making order under section 85, the Commissioner (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act. Whether the powers conferred upon the Commissioner (Appeals) under the second proviso to section 35A(3) of the Excise Act could have been exercised by the Commissioner (Appeals), while hearing an appeal under section 85 of the Finance Act against an order confirming the demand of service tax proposed in the show cause notice, to issue a fresh notice to the appellant under section 73 of the Finance Act? - HELD THAT:- It is section 35(A) of the Excise Act that deals with procedure of appeals before the Commissioner (Appeals). Sub-section (3) of section 35A of the Excise Act provides that the Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against but an order enhancing any penalty or fine in lieu of confiscation or reducing the amount of refund shall not be passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed order. The second proviso to section 35A(3), however, further provides that where the Commissioner (Appeals) is of the opinion that any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, no order requiring the appellant to pay any duty not levied or paid, short-levied or short-paid or erroneously refunded shall be passed unless the appellant is given notice within the time-limit specified in section 11A to show cause against the proposed order. Section 85(4) of the Finance Act provides that the Commissioner (Appeal) shall hear and determine the appeal and pass such orders as he can thinks fit and such order may include an order enhancing the service tax, interest or penalty. It is no doubt true that the Commissioner (Appeals) has wide powers because of the use of the phrase 'pass such orders as he can thinks fit', particularly when it is contrasted with the provisions of sub-section (3) of section 35A of the Excise Act which provides that the Commissioner (Appeals) shall pass such order, as he can thinks just and proper, confirming, modifying or annulling the decision or order appealed against. In the latter case, the powers of the Commissioner (Appeals) under section 35A of the Excise Act to pass such orders, as he can thinks just and proper, would be confined to confirming, modifying or annulling the decision or order appealed against. In COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD [ 2007 (8) TMI 10 - SUPREME COURT ], the Supreme Court observed that it is well settled that a show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if Rule 7 of the Valuation Rules, 1975 was not invoked in the show cause notice, it would not be open to the Commissioner to invoke the said Rule. The power to issue a notice is specifically provided for in section 73(1) of the Finance Act. Once it is specifically so provided, it cannot be urged that this power to issue the notice would also be available under sub-section (4) of section 85 of the Finance Act to a Commissioner (Appeals) when he is hearing an appeal, merely because of the use of the expression 'pass such orders, as he thinks fit'. The Commissioner (Appeals) cannot assume to himself all the powers conferred under various sections of the Finance Act, only for the reason that he can 'pass such order, as he thinks fit'. The Gujarat High Court in COMMISSIONER OF SERVICE TAX VERSUS VERSUS ASSOCIATED HOTELS LIMITED [ 2014 (4) TMI 406 - GUJARAT HIGH COURT ] examined the provisions of sub-sections (4) an (5) of the Finance Act as also sub-section (3) of section 35A of the Excise Act and observed that though sub-section (5) of section 85 of the Finance Act may require the Commissioner (Appeals) to follow the same procedure and exercise the same powers in making orders under section 85(4) of the Finance Act as under the Excise Act in appeals, but as sub-section (5) starts with the expression subject to the provision of this Chapter and sub-section (4) of section 85 of the Finance Act itself contains the width of the powers of the Commissioner (Appeals) in hearing the appeal under section 85, the scope of such power cannot be curtailed by reference to section 85(5) of the Finance Act. The Commissioner (Appeals) did not have the power to issue the notice under section 73(1) of the Finance Act. The notice dated 29.12.2020, therefore, that was issued by the Commissioner (Appeals) under section 73(1) of the Finance Act was without jurisdiction and consequently the order passed by the Commissioner (Appeals) confirming the demand proposed in the said notice would also be without jurisdiction. The order dated 31.03.2021 passed by the Commissioner (Appeals), therefore, deserves to be set aside on this ground alone. It transpires from the order dated 31.03.2021 that the Commissioner (Appeals) has confined the order to the notice dated 29.12.2020 that was issued by him and has confirmed the proposed demand. The confirmation of the proposed demand, raised in the show cause notice dated 07.09.2017 by the Additional Commissioner has not been considered at all by the Commissioner (Appeals). The matter would, therefore, have to be remitted to the Commissioner (Appeals) to pass a fresh order by confining his decision to the order dated 19.03.2018 passed by the Additional Commissioner confirming the demand raised in the show cause notice dated 07.09.2017. The matter is remitted to the Commissioner (Appeals) to pass a fresh order by restricting his decision to the order dated 19.03.2018 passed by the Additional Commissioner confirming the demand proposed in the show cause notice dated 07.09.2017 - Appeal allowed by way of remand.
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Central Excise
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2023 (6) TMI 300
Fixation of special rate of refund of duty - Area Based Exemption - Order beyond the scope of show cause notice (SCN) - value addition at the rate of 62.65% (if the sale value is considered at MRP) or 58.60% (if the actual sale value is considered) - Benefit of Notification No.56/2002-CE as, amended - whether the Adjudicating Authority was correct in rejecting the appellant s claim for value addition? - HELD THAT:- On an application, dated 29.09.2009, made by the appellants, Commissioner vide letter dated 20.04.2010 informed the appellants that the value addition comes to 45.73% as against the claim of 58.6% or 62.65% by the appellants. The appellants have submitted a detailed written reply and a Statutory Auditor s certificate to establish their claim. On-going through the records, it is found that the learned commissioner, vide letter dated 20.04.2010, which is a show cause notice for the purposes of the impugned case, proposes to fix the value addition at the rate of 45.73% and vide final order totally rejects the claim of the appellant. Thus, it is found that the Adjudicating Authority has gone beyond the scope of the Show Cause Notice. In case the learned Commissioner was to reject the claim totally, he should have put the appellants to proper notice in terms of principles of natural justice. As the proposal and final order are contrary to each other, in the instance case, the principles of natural justice have been grossly violated. Moreover, the Adjudicating Authority has not given any finding, whatsoever, on the Statutory Auditor s certificate, rebutting the certificate on the basis of cogent and reliable data and reasoning. The only finding that the Adjudicating Authority gives is that whereas the application is dated 29.09.2009, the Statutory Auditor s report is dated 30.09.2009 and therefore, it cannot be relied upon. Having held that the rejection of the appellant s claim in the impugned order is incorrect, it is required to fix the percentage of value addition. It is found that the appellants vide application dated 29.09.2009 and during the course of personal hearing on 11.05.2010, submitted that the value addition as applicable to them would be 58.60%, if actual sale value is taken or 62.65%, if sale value is taken on MRP basis. The findings of the Adjudicating Authority is agreed upon that MRP is a notional value and such value cannot be considered for the purposes of arriving at Sale Value in terms of the Notification No.56/2002-CE dated 14.11.2002. The actual sale value is to be considered. Looking into the records of the case and the application dated 29.09.2009 submitted by the appellants and the Statutory Auditor s report, it is found that the appellants are eligible for special rate of 58.60% as against the rate of 36% provided in the table of the said notification. The appeal is allowed fixing the special rate at 58.60%.
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2023 (6) TMI 299
100% EOU - extended period of limitation - demand of duty under the wrong provisions - import of raw-material Polypropylene from Singapore for use in manufacture for the final product - applicability of N/N. 5/94-CUS read with Notification No. 52/2003-CUS dated 31.03.2003 read with Section 9A (2A) (ii) of Customs Tariff Act, 1975 - penalty u/s 112 of Customs Act, 1962 - HELD THAT:- In view of specific amendment brought in 2008 in the statutory provisions, Anti Dumping Duty was clearly chargeable even if the impugned raw-material was contained in the finished goods cleared in DTA. Notwithstanding the decisions of the prior period, the Anti Dumping Duty was required to be paid by the appellant. It is found that though the show cause notice has not demanded duty under the provision of Central Excise Act particularly under section 3 and Notification No. 23/2003-CE dated 31.03.2003, but has still demanded the same as per calculations of aggregate Customs Duty which are the borrowed machinery provisions under section 3 of Central Excise Act, 1944. The lapse on the part of the department is not such which has denied any natural justice to the appellant. As they were aware of the nature of duty sought to be charged being under Section 3 of Central Excise Act, 1944 as is clear from their submissions made before the adjudicating authority, same therefore on merits is sustainable. However, on the point of limitation, the appellants had reflected all their transactions in their books of account only. Same could be detected on the basis of record by the visiting audit party. It is also found that the rejection of the plea relating to earlier periodic audits of the appellants by the adjudicating authority is not sustainable. Simply stating that audit does not check thoroughly but only on selected basis is nothing but exercise of undermining the purpose of departmental audit. It also does not bring on record as to what records were checked/not checked by the audit, while giving such findings. It is also found that department while demanding duty was not sure of the provision of law under which the same had to be demanded and even the penalty has been imposed under Section 112 of Customs Act, 1962, whereas the duty should have been demanded under Central Excise Act and penalty imposed under Central Excise Act/ Rules only. The demand can be sustained only for the normal period of limitation and that penalty under section 112 of Customs Act, 1962 does not sustain. Appeal is accordingly partly allowed.
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2023 (6) TMI 298
Recovery of inadmissible Cenvat Credit - Input Services - Capital Goods - denial on the premise that factory and COB Plant are having separate registration numbers and one cannot take credit of another - whether the CENVAT credit on services availed at the mines and capital goods installed at the COB Plant would be an eligible credit in the hands of the factory? HELD THAT:- The mines and COB Plant at Sukinda and factory at Balgopalpur are integral part of the same captive arrangement which is evident from Government of Odisha Order dated 22.05.2000, whereby mining lease was granted with a condition that it shall be exclusively used for captive purpose to ensure steady supply of Chrome Ore to the Ferro Chrome Plant. As it is seen from the submission of the Appellant that the services of mining, cargo handing etc. were used for excavation and transportation of ores to the factory. While the high grade Ores were directly transferred to the factory for use in manufacture of HCFC, the low grade Ores were first transferred to the COB Plant and after its beneficiation transferred to the factory. We find that low grade Ores cannot be used in the blast furnace directly and it needs to be beneficiated before it can be used in manufacture of HCFC. In both the cases, the services were used in relation to manufacture of dutiable final product on which appropriate excise duty was paid at the time of clearance of final product from the factory. Since, a clear nexus has been established between the services availed and goods manufactured at the factory, CENVAT credit on input services cannot be denied. Eligibility to avail CENVAT credit under captive arrangement with different registered factory - HELD THAT:- Karnataka High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S. MUKUND LTD. [ 2015 (4) TMI 696 - KARNATAKA HIGH COURT] held Cenvat cannot be deemed on the ground that credit is being availed by one factory and material inputs are used by three factories, because the Cenvatable input is being used for common share and continuous purpose of manufacturing dutiable goods. Though there are three separate units with separate registrations, the entire raw material is being converted into final dutiable product in continuous, interconnected and integrated process conforming to the definition of a single factory under Section 2(f) of the Central Excise Act - CENVAT credit of input service would be admissible in the hands of the factory. CENVAT Credit on capital goods - HELD THAT:- The department has not disputed the duty-paid nature of the capital goods, discharge of duty by the appellant, usage of capital goods for generation of electricity and consumption of such electricity by the appellant in the manufacture of dutiable final products. In these factual matrix, there are no justification to deny the credit on the capital goods availed by the appellant. Accordingly, the impugned order is set aside, the appeal is allowed. COB Plant is an integral part of the factory and it has no separate legal identity. We also observe that the invoices were issued in the name of the Appellant and credit was availed only once after payment of duty by the factory. Further, the department has not disputed the nature of goods being capital goods, its use in manufacture of concentrated Ores which are ultimately used in manufacture of dutiable final products i.e. HCFC - there are no justification to disallow the credit on capital goods availed by the Appellant. Denial of CENVAT credit on input services and capital goods is not sustainable - Appeal allowed.
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2023 (6) TMI 297
CENVAT Credit - inputs and input services received for construction of Coal Handling plant (CHP) - denial of credit on the ground that the input services received by the appellant does not constitute eligible input service in terms of the definition under Rule 2 (l) of the Credit Rules, under the exclusion clause - HELD THAT:- The present Show Cause Notice is by way of continuation as statement of demand have been issued with reference to earlier Show Cause Notice No.V(30)78/CEX/BCCL Govindpur/Adj/DNB(H)/2016/8705 dated 27.09.2016 for the period June 2013 to November 2015. On going through this Tribunal in M/S BHARAT COKING COAL LTD. VERSUS COMMR. OF CENTRAL EXCISE S. TAX, RANCHI [ 2021 (10) TMI 383 - CESTAT KOLKATA ], it is found that the very same issue had come up before a Division Bench of this Tribunal and the Division Bench have recorded that CENVAT Credit availed by the appellant for setting up of CHP, which is used for evacuation of coal by rapid loading process, cannot be legally denied. In view of the categorically findings of the Division Bench in favour of the appellant, it is found that the issue is no more res-integra and the appeal is allowed.
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2023 (6) TMI 296
Wrongful availment of CENVAT Credit - input services - Outdoor Catering service - Membership of Club - General Insurance services - Maintenance of ETP - input service credit related to other units on the basis of ISD invoice related to the period from September 2013 to February, 2014 i.e. prior to the Credit Rules, 2004 - HELD THAT:- Reverting to the facts of the present case it is observed that entire demand as proposed vide the Show Cause Notice denying the availment of Cenvat Credit was confirmed by the Original Adjudicating Authority. However, the services as were shown to have been utilized in relation to effluent treatment plant was held to be indirectly relevant for the manufacture of the Final Product. The demand of Rs.1,17,720/- on this ground was set aside by Commissioner (Appeals) after following the decision of Hon ble Supreme Court in the case of INDIAN FARMERS FERTILISER COOP. LTD. VERSUS CCE., AHMEDABAD [ 1996 (7) TMI 141 - SUPREME COURT] . Thus the only issue remains is as to whether the restaurant service /Membership of Club Service, General Insurance Service, FICCI Quality Awards, coating of floor, AC Service Charges can be called as the input services. From the discussion it is clear that anything which is used in or in relation to the manufacture of final product has to be qualified as input service. All the above services since were availed with respect to the place of manufacture of final product and with respect to the employees in general, of the manufacturer, the services gets covered under the wide notation directly or indirectly used in or in relation to the manufacture - The service of general insurance also do not relate to motor vehicle. Hence, are not specifically covered under the exclusion. The services of Membership of Club, Health Services also are not for the employees on vocation. Thus, are not primarily for personal use or consumption of any employee. As such, the plea of exclusion of the services from the definition of input is held to be incorrect. Extended period of limitation - HELD THAT:- Though the Adjudicating Authority has reflected the opinion that in the era of self assessment, it was the duty of the appellant to correctly avail the Cenvat Credit and to comply with the provisions of law, Commissioner (Appeals) has held that since the appellant has failed in that duty the extended period has rightly been invoked - extended period can be invoked if and only if there is an apparent and willful suppression of fact or misrepresentation or there is any element of fraud or collusion on part of the assess that too with an intent to evade the duty / tax liability. In the present case, there is no denial that appellant was regularly filing the returns. The factum of availment of Cenvat Credit with respect to impugned services was mentioned in those returns to the extent of the details permissible in the said format. It is not the case of the Department that appellants were never been audited earlier. No objection was ever raised with respect to those returns. Suppression cannot be alleged against the assessee. Hon ble Supreme Court in the case of COLLECTOR OF CENTRAL EXCISE VERSUS CHEMPHAR DRUGS LINIMENTS [ 1989 (2) TMI 116 - SUPREME COURT ], wherein it was held that extended period is applicable only when something positive other than mere inaction or failure on part of the assessee is proved. There has to be the evidence about conscious and deliberate withholding of information on part of assessee. It is observed that such evidence is missing in this case. The findings that extended period is rightly invoked are, therefore, not sustainable. It is held that extended period has wrongly been invoked while issuing the Show Cause Notice. Thus, the Show Cause Notice itself becomes barred by time. The findings in order under challenge are hereby set aside - the appeal stands allowed.
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2023 (6) TMI 295
CENVAT Credit - interim product/intermediate goods - rubberised textile fabric - requirement to pay 8% of the value of exempted goods as duty - HELD THAT:- The appellant had availed the credit in respect of input used in manufacturing of interim product i.e. rubberised textile fabric. The benefit of exemption was not admissible as the goods were liable to be charged at nil rate of duty. If no credit was taken moreover the said rubberised textile fabric being input used for manufacture of PSP which were cleared at nil rate of duty and consume for same purpose was not eligible for the benefit of exemption Notification No. 67/95-CE dated 16/03/1995. Therefore, the appellant was required to pay 8% of the value of PSP bed cleared by them without payment of duty. It is clear that the appellant has paid 8% of the value of the rubberized textile fabric which in turn in use for manufacture of PSP, therefore, as the appellant has paid 8% of the value of rubberized textile fabric, which means that appellant has not taken the Cenvat Credit of 8% of the value of rubberised textile fabric. The similar issue came up before Tribunal in the case of LIFE LONG APPLIANCES LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III [ 2000 (4) TMI 90 - CEGAT, COURT NO. II, NEW DELHI ] where it was held that the appellant had satisfied the requirement of not taking Modvat Credit on the inputs used in the manufacture of exempted goods. Their case is specifically covered by Rule 57CC as well as the decision of Supreme Court with regard to not availing of Modvat Credit on inputs in the Chandrapur Magnet Wires (P) Ltd. case. The impugned order is, therefore, clearly erroneous. The appellant has paid 8% of the value of the exempted goods on which no credit has been taken by the appellant. Therefore, the appellant is not required to pay 8% of the value of PSP bed cleared by them. Therefore, impugned order is set aside - Appeal allowed.
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2023 (6) TMI 294
Maintainability of appeal - time limitation - refund claim on account of value addition deductions for the period of June, July and September 2014 - HELD THAT:- The respondent has not been able to produce any material conclusively showing that the order dated 25.03.2019 was served on the same day i.e. 25.03.2019 itself. The dispatch register produced by the respondent only shows the dispatch and there is no material on record showing that the appellant was served the copy of the order on 25.03.2019 itself - Moreover, the authorized representative of the company Jugal Kishore Sharma has filed the affidavit stating that he got the copy of the said order by hand on 18.06.2019 and the same was communicated to the company on 22.06.2019 and thereafter admittedly the appeal was filed within the statutory period of limitation. The dismissal of the appeal on limitation is not sustainable in law - case remanded back to the Commissioner (Appeal) with the direction to decide the appeal on merits - appeal allowed by way of remand.
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2023 (6) TMI 293
Invocation of provisions of Rule 8(3A) of CCR - default in making monthly payment of duty or not - CENVAT Credit - wrong mentioning of assessee code number - whether the payment made mentioning the wrong assessee code number in the Central Excise account is not considered as any payment. HELD THAT:- It is found from the records that the Ld.Commissioner failed to appreciate that the Appellants had three units at Kolkata, Hyderabad and Faridabad. For the month of February the appellants were required to make payment with 6th March 2010 and while making such payment for the March 2010 for an amount of Rs.58,40,599/- from their Kolkata unit from PLA code number of Hyderabad unit was wrongly mentioned in the GAR-7 Challan and as a result the amount though deposited, but under a wrong assessee code number. It is the submission of the Appellants in their grounds of appeal that mentioning of the wrong code number was through inadvertence by the person, who was handling the e-payment matters. On detection of the mistake the Appellants brought the matter to the notice of the Deputy Commissoiner of Central Excise, Taratala-II Division intimating that the total amount of Rs. 58,40,599/- was paid against the GAR-7 Challan dated 05.03.2010 and 06.03.2010. The Tribunal in the case of GUALA CLOSURE (INDIA) PVT. LTD. VERSUS COMMISSIONER OF C. EX., DAMAN [ 2008 (5) TMI 50 - CESTAT, AHMEDABAD ] held that an amount deposited under different heads in TR-6 Challan of the cost accounting problem, but since admittedly the Appellants paid the duty under different code, will not be held liable for making the payment again and the entire exercise would be revenue neutral and accordingly the demand of interest and imposition of penalty is uncalled for. The facts and circumstances of the case, the Board s Circular and the decision of the Tribunal show that making the payment of duty quoting wrong code number cannot be considered as non-payment and in such a situation, the proceeding initiated by the Ld.Commissioner is unwarranted. The issue is no more res integra and is squarely covered by the judgement of the Hon ble Calcutta High Court in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT ], wherein it is categorically held that when Rule 8 (3A) is declared ultra vires by the different High Courts then the Revenue cannot take a different stand contrary to the said judgements. The Hon ble Court further declared Rule 8(3A) as invalid which is not stayed by the Hon ble Supreme Court. The Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT ] has declared the words without utilizing Cenvat Credit under Rule 8(3A) as ultra vires which means that the assessee can discharge duty by utilizing Cenvat Credit which is what exactly has been done in the instant case by the Appellant. In the instant case has been raised for contravention of Rule 8(3A) ibid restricting utilization of Cenvat credit during the period of default which provision has been declared ultra vires/invalid by Court, hence the demand cannot be sustained and the Appeal, thus, succeed on this count. Appeal allowed.
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CST, VAT & Sales Tax
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2023 (6) TMI 292
Violation of principles of Natural Justice (audi alterem partem) - no opportunity of personal hearing granted before passing the impugned order - HELD THAT:- In the impugned order dated 02.12.2022, it is seen that the notice has been given to the petitioner and the petitioner has also submitted his reply and thereafter enquiry has been conducted. The request of the dealer is seen to be not capable for consideration and that finding is recorded after considering the materials produced by the petitioner. Even if the petitioner is aggrieved due to any omission committed on the part of the respondent authority, there is an effective alternative remedy available to the petitioner to challenge the impugned orders by way of filing revision/ appeal before the competent authority. This is a fit case which should be considered for lack of opportunity in compliance of the principles of natural justice. Sufficient opportunity is given to the petitioner - petition disposed off.
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Indian Laws
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2023 (6) TMI 291
Dishonour of Cheque - insufficient funds - discharge of legally enforceable debt or liability or not - acquittal of the accused - rebuttal of statutory presumption - HELD THAT:- In the instant case, issuance of cheque in discharge of legally enforceable debt is admitted by the respondent. The presentation of cheque for clearance through banker and its dishonor is also proved. Service of notice is also not denied. The only defence projected by the respondent is that the loan against which the cheque in question was given as security to the appellant stands liquidated but he has not stated anything about demand to return the cheque and if refused what steps have been taken by him for recovery of the cheque. It has also come in the evidence that the vehicle against which the loan was got by the respondent in the year 1997 from the appellant was refinanced in the year 2001-2002. May be for this reason the respondent has not pressed for return of the cheque and agreed to keep the earlier cheque as security against the second loan also. From a bare reading of Section 139 of the N.I. Act, it becomes clear that unless the contrary is proved, it is to be presumed that the holder of the cheque received the cheque for the discharge, in whole or in part, of any debt or other liability. True it is that the presumption contemplated under Section 139 of the Negotiable Instrument Act is rebuttable presumption, however, onus of proving by cogent evidence that cheque was not in discharge of any debt or other liability is on the accused-respondent. The respondent has not taken a plea that he had not issued the cheque rather he had taken a stand it was just a security cheque and that he had repaid the loan and had not raised any subsequent loan. However, during the trial before the Trial Court he could not prove the facts raised by him in his defence as the same were required to be proved by him being onus on him due to presumptions under the Act. So far the issuance of cheque as security cheque is concerned, the same has been authoritatively decided by the Apex Court and also by the High Courts in the judgments referred hereinabove and the same is no defence available to the respondent as an accused - this court is of the opinion that the respondent had failed to raise a probably defence regarding existence of a legally enforceable debt or liability by leading cogent evidence. The complainant by leading cogent evidence that the accused had issued a cheque against a liability to the complainant, which on presentation to the bank of the accused was dishonored for insufficient funds and despite issuance of legal notice; accused failed to make the payment, has proved the ingredients of the offence punishable U/S 138 of N.I. Act. More so coupled with the statutory presumption as discussed hereinabove, which accused failed to repudiate. Thus, it is held that complainant has succeeded to prove against the accused the commission of offence punishable U/S 138 of N.I. Act. The Trial court has, thus, misdirected itself in appreciation of the evidence on record to record his acquittal. The impugned judgment is, thus, liable to be set aside being unsustainable - appeal allowed.
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