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TMI Tax Updates - e-Newsletter
July 22, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Arrest of professional working as tax consultant - repeated summons - in a case where the very basis leading to arrest on 23.03.2022 has not been challenged by the Petitioner, the Court is precluded to hold that the Corpus- Respondent No. 6 has been illegally detained merely because repeated summons were issued. - the date of petition of habeas corpus and the date of his production after his arrest being 23.03.2022, admittedly, if any prejudice could have been caused to the Corpus the substantive remedy was available and could have been resorted to. - the petition filed under Article 226 of the Constitution of India seeking a writ of habeas corpus need not be entertained in the facts and circumstances of the case. - HC
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Validity of show cause notice (SCN) - blocking credit ledger Availment of ineligible credit of input tax - fake invoices - When the respondent-Department has duly accepted all the contentions of the petitioner and found the e-way bills and computer generated measurement slip to be correct and genuine documents and the sole reason for initiating the proceedings against this petitioner and passing of the impugned adjudication orders was due to his transaction with M/s Jai Jawan Kastha Bhandar and M/s. Priti Enterprises and when the cases of those assesses have been remanded to the adjudicating authority to pass fresh order in accordance with law; interest of justice demands that the case of this petitioner should also be remitted back to the adjudicating authority, inasmuch as, the sole cause of action does not survives. - HC
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Seeking opening of portal for filing of Form TRAN-1 - Crystallization of input tax credit - vested right - Keeping the underlying principle in mind if the matter is examined then we are inclined to lean in favour of the writ petitioners and affirm the directions issued by the learned Single Judge - the substantial part of the order and the directions issued by the learned writ Court as well as reasoning given merits acceptance - The writ petitions are disposed of by granting liberty to the petitioners to file individual tax credit in GSTR-3b forms for the month of June, 2022 to be filed in the month of July, 2022 subject to verification of genuineness of the claim of the petitioner in all these cases. - HC
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Rate of GST - product Solar HT/LT XLPE Cables to be used in the manufacture of Solar Power Generating System/ Solar Power Generator - The product in question viz. Solar LT/HT XLPE Cables supplied for Solar Power Generating System, classified under Chapter 85, forms integral part of Solar Power Generating System is eligible for benefit of entry at Sr.No. 234 appearing under Schedule-I to Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed @ 5% GST upto 30.09.2021. - AAAR
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Classification of goods - Poly Propylene Non-Woven Bags - the product in question in above case (reliedupon case of apex court) viz. dryer felts is made from cotton and wollen which is covered in the ambit of 'textile' and in present case Non-woven bags are made from polypropylene which is a type of plastic and on this ground alone it can be said that the above case law relied by appellant is not applicable in present case. - he product in question viz. Polypropylene Non-woven bags merits classification under Chapter Heading 3923 of the HSN/Customs Tariff Act, 1975. - AAAR
Income Tax
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Adjustment of refund against outstanding demand - non fulfillment of conditions of prior intimation u/s 245 - it can be seen that the allegation that there was no prior intimation under section 245 of the Act has remained unrebutted as no proof of any such prior intimation was placed on record by the Revenue - thus the impugned action of respondent No.2 in making, adjustments of the amount for assessment year 2008-09 against the alleged outstanding, demands for assessment years 2014-15 and 2015-16 is bad and illegal and is accordingly quashed. - HC
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TP adjustment - application of the Resale Price Method (RPM) as the Most Appropriate Method (‘MAM’) - trading activity - The decision of Supreme Court in Kedarnath Jute Manufacturing Co. Ltd.[1965 (4) TMI 91 - SUPREME COURT] is an authority for the proposition that tax authorities and adjudications as well as assessee are not precluded by the positions taken in returns, documents or accounts and have the duty (and a corresponding right) to apply the correct legal principle. Thus, the use of one method in a transfer pricing report does not estop the assessee from later claiming that another method is the most appropriate one, provided that is indeed the correct position. - HC
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Addition u/s 68 - unexplained cash credit - since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. - ITAT rightly deleted the additions - HC
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Exemption right u/s 11 & 12 - assessee society is registered u/s 12A - Addition u/s 69 - undisclosed income/Investment - it is an admitted fact that the assessee society is registered u/s 12A of the I.T. Act and the benefit of deduction u/s 11 denied by the Assessing Officer has been restored by the CIT (A) by holding that the assessee has spent more than 85% of its gross receipts towards its object and is entitled to the benefit of exemption u/s 11 and the Revenue is not in appeal before the Tribunal. Therefore, once the assessee society is eligible for benefit u/s 11 no addition u/s 68 & 69 can be made since additional income will be treated as deemed income entitled to exemption u/s 11/12/12A of the I.T. Act. - AT
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Addition u/s 68 - share application money with premium was received in cash - The grave doubt entertained by the learned Assessing Officer in the assessee issuing the shares on rights basis without informing and offering the same to the existing shareholders is not at all addressed on behalf of the assessee. The facts recorded by the learned Assessing Officer as to the discrepancies in the share application forms produced on various occasions are beyond any dispute. Further the discussion made as to the capacity of the eight persons in the remand reports also remains unimpeached. - order of CIT(A) deleting the additions set aside - AT
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Addition for the Term Loan taken waiver of secured loan - when the assessee had not claimed deduction under Section 36(1)(iii) of the Act for interest on loan and loan was taken for acquiring capital asset then the waiver was on account of liability other than trading liability and thus provisions of Section 41(1) does not apply in such cases. Section 28(iv) will not be applicable in the present assessee’s case as the receipts are in the nature of cash or money. The waiver of loan amounts to cessation of liability other than trading liability, thus, the said amount cannot fall under Section 28(iv) will not be applicable. - AT
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TP adjustment - notional interest - short term advances made by the assessee to its associated enterprises - The assessee being unable to establish with evidence the parity of facts as noted by the ITAT in the said case, of the advance being in the nature of quasi capital given to safeguards the business interest of the assessee, the said decision is of no assistance to the assessee. The advances therefore we hold are in the nature of loans and since no interest has been charged by the assessee on the same, the transfer pricing adjustment made by charging interest applying LIBOR is, we hold, justified. - AT
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LTCG on sale of agricultural land - Nature of land sold - As the question of distance of the land sold from the outer limit of the Municipal Corporation and other 13 test laid down in the case of the Sarifabibi (supra), which goes to the root of the question whether the land of the assessee is agricultural land, beyond the outer limit of the multiple Corporation, were not raised specifically by the lower authorities, matter restored back - AT
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Addition u/s 68 - unexplained deposits in Dubai bank account - CIT(A) has observed that taxability of sum in Dubai Bank account is beyond the jurisdiction of Indian tax authorities as the assessee is an NRI. Once it is clear and accepted by the Assessing Officer also that sums were sent to India from assessee’s (an NRI) foreign bank account in Dubai the provisions of DTAA are attracted. Hence, the reasoning of the learned CIT(A) that sum in Dubai bank account are subject matter of taxation in Dubai and not in India is correct. - AT
Customs
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Smuggling - Gold Bars - reason to believe that the Gold Bars are of Foreign Origin - Absolute Confiscation - The Magistrate ought to have ordered custody of the smuggled gold to the absolute custody of the petitioner herein, vesting the right to dispose it off under Section 110 of the Customs Act, 1962, facilitating further action under the said Act. Hence, this Court is inclined to set aside the order dated 22.09.2021. The attested Mahazar copy can be used as document to prove the case in Crime No.437 of 2021. The foreign sealed gold bar are the property to be retained and disposal by the DRI / Customs The order of the lower Court, in imposing the condition to return back 9 Kgs of gold bar, is not proper. - HC
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Seeking provisional release of goods - Betel Nuts - The petitioner shall furnish the Least Developed Countries Certificate at the time of assessment and the same shall be considered by the Assessing Officer at the time of assessment. The Department shall continue their adjudication process and conclude the same without delay. - HC
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Maintainability of appeal before the Commissioner (Appeals) - reassessment of bill of entry - if an assessee wants to challenge the assessment of bill of entry, he should file appeal before the learned Commissioner (Appeals) as the assessment of bill of entry is appealable order therefore, the learned Commissioner (Appeals) should not have rejected the appeal on the ground that the reassessment is not possible, he should have passed the order on merit. - AT
PMLA
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Provisional order of attachment - Money Laundering - Conspiracy - scheduled offences - proceeds of crime - It is the gains that may be obtained from criminal activity which are concealed or projected to be untainted that can form the subject matter of the offense under the Act. The allocation of a coal block in itself did not give rise to any monetary gains. It was only when the same was utilized that the question of illegal gains would have arisen. - HC
VAT
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Attachment of Overdraft Bank Accounts - garnishee proceedings - the appellate authority cannot entertain the appeal without hearing and without the appellant complying with the mandatory pre-deposit condition as contemplated under the provisions of the W.B.VAT Act. That apart, no useful purpose would be served by attaching an overdraft account by way of garnishee proceedings.Therefore, in our view, such attachment needs to be lifted however, subject to the condition that the appellant pays the mandatory pre-deposit payable in terms of the relevant provisions of the W.B.VAT Act. - HC
Case Laws:
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GST
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2022 (7) TMI 915
Arrest of professional working as tax consultant - repeated summons - Seeking the directions of issuance of writ of habeas corpus for the respondent no.6 brother of the present petitioner - valid grounds present for detention or not - illegal confinement or otherwise - infringement of fundamental rights guaranteed under Articles 21 and 22 of the Constitution of India - challenge to arrest on the ground of violation of Section 69 of the GST Act, 2017 - HELD THAT:- It is evincible that the arrest has taken place after this Court issued the notice in a habeas corpus petition preferred by the brother of the respondent no.6. The respondent no.6 is not disputed to have been called for inquiry since 18.03.2022 and at no point of time he was allowed to go to his residence even after the period of 24 hours. We also reiterate and appreciate the fairness on the part of learned Public Prosecutor and also the learned Assistant Public Prosecutor who have not attempted to shield the action of the officers when specifically a query was raised by this Court. It is also admitted that although in case of Vimal Yashwantgiri Goswami [ 2020 (11) TMI 40 - GUJARAT HIGH COURT ] the Court had emphasized the need for the guidelines to be prepared in case of GST matters and the GST department is directed to prepare and prescribe the standardized guidelines and format for inquiry and arrest etc., nothing has been done so far. The family of the respondent no.6 also had not been intimated except as detailed in the affidavit-in-reply. The fact remains that neither the family member nor the lawyer has been permitted to meet him or to see him even after a period of 24 hours which is in a clear violation of the mandate provided under Article 22 of the Constitution of India. Article 21 of the Constitution of India mandates that no person shall be deprived of his life and liberty without the authority of law and Article 22 ensures that the procedure prescribed under the law shall need to be followed while the substantive law takes its course. It is noticed from the arrest memorandum that during the search proceedings conducted under Section 67(2) of the Gujarat Goods and Service Tax Act, 2017 and Central Goods and Service Tax Act, 2017 at the business place of M/s. J.K. Traders engaged in the business of trading of forest waste and scrap, remelting scrap, ingot of iron or steel. There were serious lapses noticed in relation to the input tax credit. The huge amount of incriminating documents, material, electronic device etc. had been seized. The statement recorded of Mr. Bharat Gordhan bhai Patel had revealed the name of Mr. Hitesh Mukeshbhai Patel. Therefore the search proceedings came to be also conducted at his residence from where the mobile phones, electronic devises etc. had been seized. This had revealed the goods and service tax evasion scam by the alleged syndicate firm by Mr. Hitesh Mukeshbhai Patel, Mr. Bharat Gordhanbhai Patel along with other co-conspirators and it is alleged that more than 131 bogus firms were created or operated in which input tax credit to the tune of Rs. 291 crores was claimed and availed and Rs. 340 crores was passed on. It is noticed that soon after this Court issued the notice with a lightning speed, the authority has acted. It is only to cover-up their action of continuously keeping him under their custody without allowing any outsider to meet him and even without observing the timeline which is also prescribed by the Cr.P.C. for the criminals involved in the heinous crime. This requires also a serious consideration at the hands of the Court because although this Court had not taken any view of the detention being illegal, the day on which he was produced before the Metropolitan Magistrate, the fact still remains that the issuance of notice itself is the reason for the Court to be convinced prima facie of a need to know the truth and therefore, this prompt action on the part of the authority, soon after the Court issued the notice, to ensure that no scrutiny of its action is undertaken by the Court also will need to be viewed seriously. We are conscious of the fact that the persons who are allegedly involved in such serious crimes need to be dealt with with all seriousness. Undoubtedly, the corpus accused was submitted to the competent and jurisdictional Court however, the timings cannot be missed by this Court. Being conscious that the dummy firms are around 131 presently, the figure has gone to 274 and involving in the scam of GST running into 5,122 crores as alleged by the officers that number by itself will not permit any authority to evade adopting to the required procedure prescribed under the law. It is a time-tested law where emphatically every Court has mandated the need for the same to be scrupulously followed, particularly when arrest is effected without warrant and period of interrogation exceed 24 hours - What is provided by way of the Constitutional mandate shall need to guide one and all. Rule of law prevails when emanating from those protective mandates, vital pronouncements made like in case of D.K.Basu [ 1996 (12) TMI 350 - SUPREME COURT ] and other such are followed by the State and all State instrumentalities and the GST officials are no exceptions. Acknowledging the zeal to unearth the scam as pressingly urged before us, we cannot be persuaded to overlook the basics to shake the edifice. The petition is not entertained permitting the corpus to approach the appropriate and competent authority/Court for the purpose of agitating all his grievances.
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2022 (7) TMI 914
Validity of show cause notice (SCN) - blocking credit ledger Availment of ineligible credit of input tax - fake invoices - bill trading/circular trading without physical movement of goods - mismatch of input tax credit - initiation of proceedings u/s 73(1) of the JGST Act and straightaway issuance of SCN, without issuing DRC-01A under Section 73(5) of the Act - HELD THAT:- The respondent No.4 had admitted that upon re-verification, it was found that e-way bills and computer generated measurement slip are true and genuine documents and the petitioner in the past has duly discharged its liability towards any mismatch in ITC. It is relevant to mention here that the said M/s. Jai Jawan Kastha Bhandar and M/s. Priti Enterprises with whom it was alleged that the petitioner was having transactions had filed writ application before this Court in M/S JAI JAWAN KASTHA BHANDAR, M/S PRITI ENTERPRISES, M/S NISHA ENTERPRISES, M/S MAHAVEER STEEL INDUSTRIES VERSUS THE STATE OF JHARKHAND. [ 2022 (7) TMI 814 - JHARKHAND HIGH COURT] for the respective two assessment years and those writ applications were partly allowed by this court and the respective impugned show cause notices, the adjudication orders and the summary of the order/demand notices in DRC-07 in the case of those petitioners were set aside and the matter was remitted back to the concerned authority/adjudicating officer to proceed with the matter in accordance with law vide order dated 21.06.2021. When the respondent-Department has duly accepted all the contentions of the petitioner and found the e-way bills and computer generated measurement slip to be correct and genuine documents and the sole reason for initiating the proceedings against this petitioner and passing of the impugned adjudication orders was due to his transaction with M/s Jai Jawan Kastha Bhandar and M/s. Priti Enterprises and when the cases of those assesses have been remanded to the adjudicating authority to pass fresh order in accordance with law; interest of justice demands that the case of this petitioner should also be remitted back to the adjudicating authority, inasmuch as, the sole cause of action does not survives. The application issued under section 73(1) and Rule 142(1) of the Jharkhand Goods and Services Taxes, (JGST) Act and also the adjudication orders issued under section 73(9) of the JGST Act and DRC-07 are hereby quashed and set-aside - application disposed off.
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2022 (7) TMI 913
Seeking withdrawal of petition - availability of statutory remedy of appeal under Section 107 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The writ petition stands dismissed as withdrawn and the Petitioner may pursue already filed appeal under the OGST Act/the CGST Act. In order to enable the petitioner to comply with the requirement of Rule 108(3) of the CGST/OGST Rules, registry is directed to return the impugned order at Annexure-1 by substituting with photocopy of the same.
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2022 (7) TMI 912
Violation of principles of natural justice - appellant was not granted adequate opportunity of putting forth their submissions as the full text of the show cause notice was not given - service of SCN - HELD THAT:- It is found that the case of the appellant stands substantiated. The appellant has been served with the summary of show cause notice and not the full text of the show cause notice. On receipt of the summary of the show cause notice, the appellant sent a representation dated 7th January, 2022 in which he had pointed out that the summary alone has been received and that he had simultaneously denied the allegation as contained in the summary of the show cause notice. Though there may be adequate glitches in uploading the order or furnishing the copies of the full text of the notice, yet the department should ensure that an opportunity granted to the assessee is not reduced to mere formality and the opportunity should be an effective opportunity so that the principles of fairness is complied with - it is satisfying that the principles of natural justice had been violated even at the stage of commencement of the proceeding, the order of the learned Single Bench is inclined to be interfered. The matter is remanded to the appropriate respondent with a direction to issue fresh show cause notice containing full text of the allegation against the appellant and the appellant be granted reasonable time to submit his reply to the show cause notice after providing an opportunity of personal physical or virtual hearing and fresh orders be passed on merit and in accordance with law - Appeal allowed by way of remand.
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2022 (7) TMI 911
Seeking opening of portal for filing of Form TRAN-1 - Crystallization of input tax credit - vested right - Form TRAN-1 could not be uploaded in time or in appropriate form - transition to GST regime - HELD THAT:- In the bunch of writ petitions the facts may be slightly different in the sense that each of the writ petition may have a peculiar problem but the common feature in all the writ petitions is that on account of a technical glitch or on account of the assesses not being felt sensitized with the system or on account of other connectivity issues or when the assesses/dealers are located in remote corners of the State Form TRAN-1 could not be uploaded in time or in appropriate form - the other common but most important feature in all these cases is the entitlement of the writ petitioners to the input credit has crystallized. This crystallized right, which ripened into the vested right, is now being denied to the writ petitioners on account of procedural problem. In this factual background, it is required to examine as to whether the order or direction passed by the learned Single Judge was appropriate or otherwise. Keeping the underlying principle in mind if the matter is examined then we are inclined to lean in favour of the writ petitioners and affirm the directions issued by the learned Single Judge - the substantial part of the order and the directions issued by the learned writ Court as well as reasoning given merits acceptance. The writ petitions are disposed of by granting liberty to the petitioners to file individual tax credit in GSTR-3b forms for the month of June, 2022 to be filed in the month of July, 2022 subject to verification of genuineness of the claim of the petitioner in all these cases.
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2022 (7) TMI 910
Liability to GST - product Solar DC Cables to be used in the manufacture of Solar Power Generating System/ Solar Power Generator - Eligibility for benefit of Entry at Sr.No. 234 under Schedule-I of Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 or not - HELD THAT:- Section 10 of Chapter II of Indian Contract Act, 1872, as referred by appellant, says that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. The purchase orders submitted by appellant may be treated as contract if they follow conditions prescribed under Indian Contract Act. 1872 i.e. they are made for lawful consideration and with a lawful object and made by the free consent of both parties. The Entry No. 234 appearing under Schedule-I to the Notification No.01/2017-IT (Rate) dated 28.06.2017 which provides applicable rate of GST at 5% on supplies of renewable energy devices parts for their manufacture viz. Solar power generating system, falling under Chapter 84.85 or 94, was omitted vide Notification No. 8/2021-IT (Rate) dated 30.09.2021. The description of goods covered under Entry No.234 now appears at Entry No.201A under Schedule-II to the Notification No. 01/2017-IT(Rate) dated 28.06.2017, amended vide Notification No. 8/2021-IT (Rate) dated 30.09.2021 w.e.f. 1.10.2021, which provides for applicable rate of GST at 12%. The description of renewable energy devices parts for their manufacture viz. 'Solar power generating system' appearing at entry No. 234 of schedule-I now stands amended as 'Solar power generator' under Entry No. 201A of schedule-II. The product in question viz. Solar DC Cables supplied for Solar Power Generating System, classified under Chapter 85. forms integral part of Solar Power Generating System is eligible for benefit of entry at Sr.No. 234 appearing under Schedule-I to Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed @ 5% GST upto 30.09.2021. Thereafter the same will be covered under entry Sr.No. 201A appearing under Schedule-II to the Notification No.01/2017-IT (Rate) dated 28.06.2017 amended vide Notification No. 08/2021-IT (Rate) dated 30.09.2021 and liable to be taxed @ 12% GST w.e.f. 01.10.2021.
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2022 (7) TMI 909
Rate of GST - product Solar HT/LT XLPE Cables to be used in the manufacture of Solar Power Generating System/ Solar Power Generator - whether the benefit of concessional rate of GST in terms of Sr. No. 234 of Schedule-I to Notification No. 1/2017-IT (Rate) dated 28.06.2017 will be applicable to the HT/LT XLPE Cables designed, manufactured and supplied by the appellant for use as parts in the manufacture of Solar Power Generating System/ Solar Power Projects? HELD THAT:- Section 10 of Chapter II of Indian Contract Act, 1872, as referred by appellant, says that all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. The purchase orders submitted by appellant may be treated as contract if they follow conditions prescribed under Indian Contract Act, 1872 i.e. they are made for lawful consideration and with a lawful object and made by the free consent of both parties. After conjoint reading of observation of GAAR, provisions under Indian Contract Act, 1872, and Board's Circular dated 6.8.2013, it can be said that purchase orders, submitted by appellant would amount to a valid contract and hence appellant fulfills the condition prescribed in Board Circular No. 80/54/2018-GST dated 31.12.2018 for availing benefit under entry 234. On perusal of Circular No. 80/54/2018-GST dated 31.12.2018, it is clearly expressed that (i) GST is self assessed which means if a taxpayer is claiming exemption/concession under any notification issued under GST Act. he has to satisfy himself that he fulfills the mandatory conditions for claiming the same, onus to prove that he is eligible for such exemption/concession lies on that taxpayer, and (ii) the words used in above para of circular need to satisfy himself with the requisite document from a buyer such as supply contracts/order provides examples, using word 'such as', of documents required from buyer, for satisfaction of taxpayer that goods arc indeed used in WTEP - it is found that meaning of above para cannot be construed to include only 'supply contracts/order' but it will include all such documents which can satisfy the supplier regarding usage of their goods by their buyers. In the present case we find that appellant has received purchase order No. 4500293305 dated 25.12.2018 from M/s. Adani Green Energy Ltd., for supply of XLPE Cables. They have accepted the said purchase order and as discussed above the said purchase orders are a valid contract based on which the appellant can claim exemption/concession for their supplies under referred entry no.234. The amendment made to Sr.234 of Notification No. 01/2017-Integrated Tax (Rate) vide Notification No. 25/2018- Integrated Tax (Rate) dated 31.12.2018 and Notification No. 28/2018-Integrated Tax (Rate) dated 31.12.2018, for deciding value of services and rate of GST thereon, will not be applicable as there is no provision of service supplied by the appellant with respect to Solar Power Generating System The product in question viz. Solar LT/HT XLPE Cables supplied for Solar Power Generating System, classified under Chapter 85, forms integral part of Solar Power Generating System is eligible for benefit of entry at Sr.No. 234 appearing under Schedule-I to Notification No.01/2017- Integrated Tax (Rate) dated 28.06.2017 and liable to be taxed @ 5% GST upto 30.09.2021. Thereafter the same will be covered under entry Sr.No. 201A appearing under Schedule-II to the Notification No.01/2017-IT (Rate) dated 28.06.2017 amended vide Notification No. 08/2021-IT (Rate) dated 30.09.2021 and liable to be taxed @12% GST w.e.f. 01.10.2021.
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2022 (7) TMI 908
Classification of goods - Non-woven Bags - the bags are manufactured through the intermediate product, Non-Woven Fabrics classifiable under Heading No. 5603 - whether the bags are properly classifiable under Heading No.6305 or under Heading 3923? - eligibility for exemption under Notification No.01/2017-CT (Rate) and 01/2017-IT(Rate) dated 28.06.2017, as amended. HELD THAT:- In the present case, Non-woven bags are made from polypropylene granules which is also a type of plastics made from polymerization of propylene. As mentioned in General Notes to Chapter Heading 39 of Custom Tariff Act, 1975, Plastics include materials which are capable of polymerization at some stage and therefore, in view of findings of Madhya Pradesh High Court in RAJ PACK WELL LTD. VERSUS UNION OF INDIA [ 1989 (9) TMI 120 - MADHYA PRADESH HIGH COURT] , fabric made from polypropylene, by no stretch of imagination construed as textile but merits classification as plastic or article of plastic under Chapter Heading No. 3923. From perusal of findings of Supreme Court in PORRITTS SPENCER (ASIA) LTD. VERSUS STATE OF HARYANA [ 1978 (9) TMI 72 - SUPREME COURT] , it is found that it is very clear that the product in question in above case viz. dryer felts is made from cotton and wollen which is covered in the ambit of 'textile' and in present case Non-woven bags are made from polypropylene which is a type of plastic and on this ground alone it can be said that the above case law relied by appellant is not applicable in present case. Thus, the product in question viz. Polypropylene Non-woven bags merits classification under Chapter Heading 3923 of the HSN/Customs Tariff Act, 1975.
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2022 (7) TMI 907
Classification of goods - Poly Propylene Non-Woven Bags - the bags are manufactured from intermediate product i.e. Poly Propylene Non-Woven fabrics which in turn is manufactured from Fiber grade poly propylene granules by adopting the Spun Bond technology - classifiable under Heading No. 5603 or under Heading No.6305 or under Heading 3923? - eligibility for exemption under Notification No.01/2017-CT(Rate) and 01/2017-1T(Rate) dated 28.06.2017, as amended - HELD THAT:- In the present case, Non-woven bags are made from polypropylene granules which is also a type of plastics made from polymerization of propylene. As mentioned in General Notes to Chapter Heading 39 of Custom Tariff Act, 1975, Plastics include materials which are capable of polymerization at some stage and therefore, in view of findings of Madhya Pradesh High Court in RAJ PACK WELL LTD. VERSUS UNION OF INDIA [ 1989 (9) TMI 120 - MADHYA PRADESH HIGH COURT] , fabric made from polypropylene, by no stretch of imagination construed as textile but merits classification as plastic or article of plastic under Chapter Heading No. 3923. From perusal of findings of Supreme Court in PORRITTS SPENCER (ASIA) LTD. VERSUS STATE OF HARYANA [ 1978 (9) TMI 72 - SUPREME COURT] , it is very clear that the product in question in above case viz. dryer felts is made from cotton and wollen which is covered in the ambit of 'textile' and in present case Non-woven bags are made from polypropylene which is a type of plastic and on this ground alone it can be said that the above case law relied by appellant is not applicable in present case. Thus, the product in question viz. Polypropylene Non-woven bags merits classification under Chapter Heading 3923 of the HSN/Customs Tariff Act, 1975. Appeal dismissed.
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Income Tax
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2022 (7) TMI 906
Validly of faceless Assessment Scheme - Penalty proceedings u/s 270A - non considering replies preferred by the Petitioner - HELD THAT:- As this Court is of the view that as per Section 144B(1) (xxiv) of the Act, the assessment order is to be passed only after considering the reply of the assessee. Since in the present case, the replies preferred by the Petitioner, though on record, were not considered before passing the impugned assessment order, there is a violation of the mandatory procedure prescribed in Faceless Assessment Scheme and stipulated in Section 144B of the Act. Keeping in view of law, the impugned assessment order dated 19th April, 2021 as well as the notice of demand and penalty proceedings for the Assessment Year 2018-19 are set aside and the matter is remanded back to the Assessing Officer, who shall consider the replies/objections of the Petitioner and thereafter pass a reasoned order.
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2022 (7) TMI 905
Adjustment of refund against outstanding demand - mandation of prior intimation under section 245 - HELD THAT:- Section 245 of the Act, 1961 envisages that when a refund is found to be due to any person under any of the provisions of the Act, 1961, the Revenue can set off/adjust the amount to be refunded or any part of that amount, against the sum which remains payable under the Act, 1961 by the person to whom the refund is due, after giving, an intimation in writing, to such person of the action proposed to be taken under this section. In the present case, it can be seen that the allegation that there was no prior intimation under section 245 of the Act has remained unrebutted as no proof of any such prior intimation was placed on record by the Revenue - thus the impugned action of respondent No.2 in making, adjustments of the amount for assessment year 2008-09 against the alleged outstanding, demands for assessment years 2014-15 and 2015-16 is bad and illegal and is accordingly quashed. Notwithstanding, what has been observed hereinabove, it would be open to respondent No.2 to exercise its discretion of making, an adjustment in terms of section 245 after giving, prior intimation and considering, all the issues and objections which the petitioner may raise pursuant to such an intimation. Needful may be done in eight weeks failing, which the case of the petitioner will be processed for ,rant of refund as determined for the assessment year 2008-09.
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2022 (7) TMI 904
TP adjustment - application of the Resale Price Method (RPM) as the Most Appropriate Method ( MAM ) - authorities below have found that 95% of the business of the assessee involves trading activity - HELD THAT:- As the mere fact that the assessee had relied on TNMM in its transfer pricing report would not in any way preclude the ITAT from adopting the RPM as the MAM under Section 92C of the Act, if it so finds in the circumstances of the case. The decision of Supreme Court in Kedarnath Jute Manufacturing Co. Ltd.[ 1965 (4) TMI 91 - SUPREME COURT] is an authority for the proposition that tax authorities and adjudications as well as assessee are not precluded by the positions taken in returns, documents or accounts and have the duty (and a corresponding right) to apply the correct legal principle. Thus, the use of one method in a transfer pricing report does not estop the assessee from later claiming that another method is the most appropriate one, provided that is indeed the correct position. See MATRIX CELLULAR INTERNATIONAL SERVICES (P.) LTD., [ 2017 (11) TMI 1655 - DELHI HIGH COURT] held that use of one method in a transfer pricing report does not estop the assessee from later claiming that another method is the most appropriate one, provided that is indeed the correct position. No substantial question of law.
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2022 (7) TMI 903
Exemption u/s 11 - Assessee cannot be treated to be engaged in charitable activities - assessee gets grant from Central and State Government and also donation from the various organization like, 'Gate foundation' etc. - ITAT upheld the decision of the CIT(A) holding that the assessee is not engaged in any trade, commerce or business and thus proviso of section 2(15) is not attracted to the case of the assessee - HELD THAT:- This Court in the case of Institute of Chartered Accountants of India and Anr. Vs. Director General of Income Tax (Exemptions), Delhi [ 2013 (7) TMI 205 - DELHI HIGH COURT] with reference to State of Andhra Pradesh Vs. H Abdul Barhi Bros [ 1964 (4) TMI 75 - SUPREME COURT ] has observed that merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. Also in the case of PCIT vs Servants of People Society [ 2021 (11) TMI 684 - DELHI HIGH COURT] held that assessee/society does not carry on any business, trade or commerce with the intent of earning and distributing profit. - Decided in favour of assessee.
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2022 (7) TMI 902
Addition u/s 68 - unexplained cash credit - whether the Appellate Tribunal has committed an ex-facie perverse error in deleting the said addition? - HELD THAT:- While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine. Learned advocate for the appellant attempted to emphasize that for the purpose of application of Section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied. As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. No substantial question of law.
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2022 (7) TMI 901
Nature of expenditure - revenue or capital expenditure - sum paid for termination of Hotel Operator Agreement - HELD THAT:- There has been no addition of capital asset of enduring nature in the hands of the respondent-assessee. In fact, after payment of Rs.30.86 crores there has been no change in the capital structure of the respondent-assessee. It had paid Rs.30.86 crores to get back the possession of its own asset which had been given on license basis under the Hotel Operator Agreement. The Assessee has not acquired something that it did not already own or possess. This Court is of the view that the respondent-assessee spent Rs.30.86 crores to facilitate its business and trading operations. Accordingly, the test of capital expenditure as stipulated in Empire Jute Co. Ltd. 1980 (5) TMI 1 - SUPREME COURT] , MADRAS AUTO SERVICE PVT. LIMITED [ 1998 (8) TMI 1 - SUPREME COURT] , ASSOCIATED CEMENT COMPANIES LIMITED [ 1988 (5) TMI 2 - SUPREME COURT] , BHARAT ALUMINIUM COMPANY LTD. [ 2010 (8) TMI 26 - DELHI HIGH COURT] AND HINDUSTAN TIMES LIMITED VERSUS COMMISSIONER OF INCOME-TAX, NEW DELHI [ 1979 (11) TMI 86 - DELHI HIGH COURT] is not satisfied in the present case. Consequently, this Court is of the view that the compensation paid had arisen out of business necessity and is revenue expenditure. Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed.
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2022 (7) TMI 900
LTCG - FMV determination as on 01.04.1981 - grievance of the assessee is that Registered Valuer has valued the property at Rs.60 per sq. meter, therefore, the same should be adopted to determine the fair market value as on 01.04.1981, as against the fair market value (FMV) at the rate of Rs.53 per sq. meter adopted by DVO - HELD THAT:- As perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that main dispute between the Assessee and Revenue is that assessee wants that his Registered Valuer report, wherein he valued @ Rs.60 per sq.Meter may be adopted to determine the fair market value on 01.04.1981 and Revenue wants that fair market value (FMV) at the rate of Rs.53 per sq. meter, as determined by the DVO should be considered. The difference is Rs.7/- (Rs.60 per sq.Meter- Rs.53 per sq. meter). We note that the Valuation Report received from the Department Valuer, wherein he has taken the FMV at Rs. 53 per Sq. meter, appears quite reasonable. We note that there is no day and night difference between assessee`s Valuer`s report and Department Valuer`s report hence assessee does not deserve further relief, therefore, we are of the view that the order of CIT(A) is just and proper and calls for no interference. Decided against assessee.
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2022 (7) TMI 899
Eligibility of deduction u/s 80P - disallowance of interest and dividend income received from co-operative bank - HELD THAT:- Tribunal in the case of Bardoli Vibhag Gram Vikas Co.Op. Credit Society Ltd. [ 2018 (12) TMI 1912 - ITAT SURAT] whereby the issue relating to deduction u/s 80P(2)(d) of the Act has been adjudicated in favour of assessee that is, interest received from co-operative bank is eligible for deduction u/s 80P(2)(d) - Appeal of assessee allowed.
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2022 (7) TMI 898
Disallowance u/s 14A r.w.r. 8D - CIT-A deleted the addition - HELD THAT:- We find the learned CIT (A) deleted the addition the reasons of which are already reproduced in the preceding paragraphs. We find the Finance Act 2022 has drastically amended the provisions of section 14A and a Coordinate Bench of the Tribunal has held the amendment to be retrospective in nature i.e. w.e.f. 1.4.1962. We, therefore, in the interest of justice deem it fit and proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue afresh in the light of the amendments to the provisions of section 14A by the Finance Act, 2022 and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes. Addition u/s 2(22)(e) - inter corporate deposit (ICD) from its subsidiary company - CIT (A) has directed the Assessing Officer to delete the deemed dividend u/s 2(22)(e) - HELD THAT:- Although the submission of the assessee is that it is a typographical error, however, we find neither the assessee nor the Assessing Officer moved any rectification application u/s 154 of the I.T. Act before the learned CIT (A) for rectification of the typographic error. We deem it fit and proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue afresh in the light of the CBDT Circular No.19/07 dated 12.06.2017 and as per fact and law. Needless to say the Assessing Officer while deciding the issue shall give due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds raised by the Revenue on this issue are accordingly allowed for statistical purposes.
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2022 (7) TMI 897
Unsecured loan receipts u/s 68 - assessee company was found to provide the layer of two companies before actually transferring it back to Maitri group and retained commission/charge - HELD THAT:- Assessee has given a finding that assessee is a registered NBFC and the assessee had borrowed money from the 03 companies and disbursed the borrowed money which is the activity undertaken by the assessee in the normal course of business being a NBFC. A.O. held that difference between the amount received as loan from Maitri Group aggregating to Rs.103,34,91,422/- and the amount advanced amounting to Rs.100,77,66,969/- to M/s. Shrill Investment Ltd., as facilitation fee and brought it to tax. We find the Ld. CIT(A) while deleting the addition has also noted that A.O. has not pointed to any provisions of Income Tax Act under which the aforesaid amount could have been treated as income. We find that Ld. CIT(A) by a well reasoned order deleted the addition made by A.O. Before us, Revenue has not pointed any fallacy in the findings of the Ld. CIT(A) and in such a situation, we find no reason to interfere with the order of the Ld. CIT(A) on this aspect and thus, Ground No.1 of the appeal of the Revenue is dismissed. Addition u/s 68 - assessee had shown the receipt of unsecured loans - CIT-A deleted the addition - HELD THAT:- We find that CIT(A) while deleting the addition has noted that the transaction had taken place more than three years back i.e., in F.Y. 2014-15 and the amount was also returned back in F.Y. 2014-15 and that assessee had established the identity by furnishing the confirmation copy, audited balance sheet, copy of ITR acknowledgment, PAN and the bank statement of the lender company. The aforesaid finding of Ld. CIT(A) has not been controverted by Revenue. Further considering the fact that the case of the assessee was reopened under section 147/148 on the same issue i.e., receipt of Rs.28 lakhs, but, in the re-assessment order passed on 09.02.2022 no addition has been made. Considering the totality of the facts and circumstances of the case and in the absence of any contrary material brought on record, we find no infirmity in the order of the Ld. CIT(A) in deleting the addition of Rs.28 lakhs in the hands of assessee. Accordingly, Grounds of appeal No.2 of the Revenue is dismissed.
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2022 (7) TMI 896
Exemption right u/s 11 12 - assessee society is registered u/s 12A - Addition u/s 69 - undisclosed income/Investment - AO in the order passed u/s 143(3) made an addition on the ground that the assessee failed to apply 85% of its income towards charitable purposes as mandated by section 11 - HELD THAT:- We find the in the case of DIT (E) vs. Raunaq Education Foundation [ 2007 (4) TMI 61 - HIGH COURT, DELHI] has decided somewhat similar issue as to whether the assessee who is entitled to exemption u/s 10(22) can claim the benefit thereof for the purpose of income deemed to be chargeable to tax u/s 68 - In that case, the Assessing Officer held that the undisclosed income could not be exempted u/s 10(22) of the Act and the CIT (A) upheld the view taken by the AO. Tribunal considered the provisions of section 4 5 of the Act r.w.s. 2(24) and 2(45) as well as section 10(22) of the Act and came to the conclusion that the use of word income in sub-section (22) of section 10 of the Act is wide enough to include deemed income u/s 68. Since the revised balance sheet, duly signed by the auditors filed by the assessee has not been rejected and the balance sheet shows loans given to inter societies and the ledger a/c clearly shows the amount as advance for Nandigama land, therefore, addition of the same u/s 69 in our opinion, cannot be made. It has been held in various decisions that section 69 of the I.T. Act does not apply to transactions recorded in the books of account. The various decisions relied on by the learned Counsel for the assessee to the above proposition support his case. We therefore, hold that the addition u/s 69 cannot be made since the amount is already recorded in the books of account. Even otherwise also, it is an admitted fact that the assessee society is registered u/s 12A of the I.T. Act and the benefit of deduction u/s 11 denied by the Assessing Officer has been restored by the CIT (A) by holding that the assessee has spent more than 85% of its gross receipts towards its object and is entitled to the benefit of exemption u/s 11 and the Revenue is not in appeal before the Tribunal. Therefore, once the assessee society is eligible for benefit u/s 11 no addition u/s 68 69 can be made since additional income will be treated as deemed income entitled to exemption u/s 11/12/12A of the I.T. Act. We find the Hon'ble Delhi High Court in the case of DIT (E) vs. Raunaq Education Foundation [ 2007 (4) TMI 61 - HIGH COURT, DELHI] has decided somewhat similar issue as to whether the assessee who is entitled to exemption u/s 10(22) of the I.T. Act, 1961 can claim the benefit thereof for the purpose of income deemed to be chargeable to tax u/s 68 - In that case, the AO held that the undisclosed income could not be exempted u/s 10(22) and the CIT (A) upheld the view taken by the AO. Tribunal considered the provisions of section 4 5 of the Act rws 2(24) and 2(45) as well as section 10(22) of the Act and came to the conclusion that the use of word income in sub-section (22) of section 10 of the Act is wide enough to include deemed income u/s 68. Addition u/s 68 and 69 will be treated as deemed income eligible for benefit u/s 11 of the I.T. Act. In this view of the matter, the learned CIT (A), in our opinion, is not justified in sustaining the addition made by the Assessing Officer u/s 69 of the I.T. Act as unexplained investment in Nandigama land by invoking the provisions of section 69 of the I.T. Act. Accordingly, the order of the learned CIT (A) is set aside and the Assessing Officer is directed to delete the addition. The grounds raised by the assessee are accordingly allowed.
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2022 (7) TMI 895
Addition on account of share premium received in excess of fair market value u/s 56(2)(vii)(b) - addition by applying the provisions of Section 56(2)(viib) by rejecting the DCF method followed by the assessee and applied the fair market value for the share application money and made the addition - HELD THAT:- AO has not brought any adverse evidence or report of another expert on record and merely brushed aside the DCF method followed by the assessee. He has further given a finding that in this case the provisions of section 56(2)(viib) are not applicable as the share application money was received in the FY 2010-11. CIT(A) further noted that since there was no provision of section 56(2)(viib) in statute at the time of receiving the share application money in FY 2010-11, the said provision cannot be applied in any manner and no addition can be made invoking the said provision. To arrive to such conclusion, CIT(A) has taken support of various orders of Hon ble Supreme Court, High Courts and Tribunal which have been reproduced in the preceding paragraph. CIT(A), therefore, held that the provisions of Section 56(2)(viib) of the Act could not be attracted on the share application money received in the FY 2010-11 i.e. prior to the insertion of the said provision and deleted the impugned addition made by the A.O. Before us, no fallacy in the findings of CIT(A) has been pointed-out by the Revenue. In such a situation, we find no reason to interfere with the order of the CIT(A). We, therefore, confirm the order of the Ld. CIT(A) on this issue and dismiss Ground of appeal No.1 of the appeal of the Revenue.
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2022 (7) TMI 894
Denial of exemption u/s 54 - A.O. held that the assessee has not made any investment in residential property for claiming exemption u/s 54 - HELD THAT:- The assessee has made advances to the developer, which has culminated in a purchase of a new residential house, sourced by the developer to fulfill his obligation of providing a residential house, which is also evidenced by the recitals in the sale deed, wherein he has affirmed the receipt of the advance and also paid for the new asset. The reliance placed by the assessee on the decision in the case of Sambandam Uday Kumar [ 2012 (3) TMI 80 - KARNATAKA HIGH COURT] of the Jurisdictional High Court, is also relevant to facts of instant case. The Hon ble jurisdictional High Court had held that amounts paid within the period of three years, would be eligible to the claim of deduction u/s 54 though the house was not registered within the period of three years or two years, considering the fact that the payment for the new asset was paid off within the specified time. It is also pretend to place reliance on the judgment in CIT Vs. Shakuntala Devi [ 2016 (10) TMI 60 - KARNATAKA HIGH COURT] , which has held that the investment in property if made within the time specified, the registration of the property though entered into beyond the period of three years. the assessee would be eligible for the claim of deduction u/s 54. As utilisation of the capital gains within the time specified would entitle the assessee to the claim of deduction under section 54 of the Act, notwithstanding the fact that the new asset was registered beyond the period specified under the I.T.Act, which according to the assessee was beyond her control and was to be liberally construed. It is held by various Hon ble Courts that application of beneficial provisions must be liberal to accommodate the rules laid down broadly to verify compliance and must not be interpreted literally, unlike charging sections which are to be construed strictly. In support of this proposition, we place reliance on the judgments of Bajaj Tempo Ltd. [ 1992 (4) TMI 4 - SUPREME COURT] and CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. [ 1992 (4) TMI 3 - SUPREME COURT] As observed by us that the bonafides of the assessee cannot be doubted, since the assessee has made deposits into the capital gains scheme immediately and thereupon made payments to the developer to acquire the new house property. The assessee was also prevented by reasonable cause since the funds had already been utilized and was forced to acquire an asset due to the reason beyond her control. The section 54 being benevolent in nature, it should be liberal in interpreting the provisions of section 54 considering the fact that the new house was eventually acquired, out of the same capital gains utilized, which has been brought on record and not in dispute. For the aforesaid reasoning, we hold that the assessee is entitled to the claim of deduction and direct the A.O. to allow the claim u/s 54 to the said extent. Since we have held that the assessee is entitled to exemption u/s 54 of the I.T.Act in the peculiar set of facts, we do not deem it appropriate to adjudicate other grounds raised by the assessee in this appeal.
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2022 (7) TMI 893
Revision u/s 263 by CIT - claim of deduction u/s 80P(2)(a)(i) of the interest income earned by the assessee - whether the leave encashment and audit fee are ascertained liabilities and that the interest on income tax refund to be brought to tax under the head Income from Other Sources? - HELD THAT:- We notice that the coordinate bench of the Tribunal in the case of Kakkabe VSSN Bank Ltd [ 2022 (2) TMI 1230 - ITAT BANGALORE] has dealt with the similar issue, where the Hon ble Tribunal has remanded the issue back to the file of the AO for de novo assessment. We remand the case back to the AO to carry out de novo verification on the issues considered by the PCIT in the impugned order in the light of the principles laid down in the case of Mavilayi Services Cooperative Bank Ltd., [ 2021 (1) TMI 488 - SUPREME COURT] and provide reasonable opportunity of being heard to the assessee. The assessee is directed to file the required documents before the AO and extend full cooperation to the AO. Appeal by the assessee is allowed for statistical purpose.
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2022 (7) TMI 892
Addition u/s 68 - share application money with premium was received in cash - As per AO creditworthiness of the share applicants and genuineness of the transactions not proved - primary onus of establishing the identity, genuineness and creditworthiness of the investors - CIT-A deleted the addition - HELD THAT:- A comprehensive understanding of the remand reports clearly establish that through the second remand report, the learned AO did not dispute the identity of the parties - their creditworthiness and genuineness of the transaction were still under fire. AO did not mince many words to say that the creditworthiness of the share applicants and genuineness of the transactions were far from being established. At no place did the AO say that any of the share applicants had any sufficient means to make such huge investments. Althrough his contention has been that neither all the share applicants were produced nor the books of accounts are available for his perusal. He dealt with the creditworthiness of S/Shri S.V.Kishore Reddy, Y. Venkatrami Reddy, Y. Surendra Kumar Reddy, S. Rama Krishna Reddy and Smt. Pushpa Latha, Y. Preethi Reddy, Manasa Reddy and Asha in extenso. With facts and figures, learned Assessing Officer disputed their financial capacity to make the investments. Absolutely there is no acceptable explanation from the assessee as to why the share application money with premium was received in cash. It is also not in dispute that Shri Y. Venkat Rami Reddy was a former member of Union Public Service Commission and it is not open for the learned AR to canvas that these people do not know that such huge amounts cannot be received in cash. Further, there is no dispute that the prospectus issued inviting the shares mandates the payment of share application money through banking channels. The grave doubt entertained by the learned Assessing Officer in the assessee issuing the shares on rights basis without informing and offering the same to the existing shareholders is not at all addressed on behalf of the assessee. The facts recorded by the learned Assessing Officer as to the discrepancies in the share application forms produced on various occasions are beyond any dispute. Further the discussion made as to the capacity of the eight persons in the remand reports also remains unimpeached. On the face of this voluminous material against the assessee, we find it difficult to agree with the Ld. CIT(A) in his observations that the assessee had discharged its primary onus of establishing the identity, genuineness and creditworthiness of the investors. Such a finding has no basis in the facts. Absolutely there is no clinching evidence from any independent source in this matter to show that the alleged share applicants were the persons who really contributed for the share application money or that the alleged payments were made on the dates on which they are said to have been made. On the face of the discrepancies and the inherent contradictions pointed out by the learned Assessing Officer, the plea set up by the assessee has no legs to stand. Case of the assessee did not pass through the scrutiny laid in the decisions reported in PCIT vs. NRA Iron and Steel (P) Ltd [ 2019 (3) TMI 323 - SUPREME COURT ] and CIT Vs. NR Portfolio Private Limited [ 2012 (12) TMI 762 - DELHI HIGH COURT ] In these circumstances, the irresistible conclusion that flows from the investigation made in this matter is that the assessee miserably failed to bring home the creditworthiness of the share applicants or the genuineness of the transaction. So also in respect of the short term borrowings and trade payables. Appreciation of the material made available before the Ld. CIT(A) is not at all satisfactory and the findings consequently reached by the Ld. CIT(A) do not inspire confidence in our mind to accept the same. Since there is no material on record to disturb the findings and the consequent additions made by the learned Assessing Officer, we are of the considered opinion that the same cannot be interfered with. We, accordingly, set aside the orders of the Ld. CIT(A) and uphold the findings of the learned Assessing Officer. - Decided in favour of revenue.
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2022 (7) TMI 891
Revision u/s 263 - As per CIT Assessee has claimed depreciation and also claimed capital expenditure and thereby violated the provisions of Section 11(6) of the Act - As argued that the assessee has claimed depreciation on only such assets which have not been claimed as application - HELD THAT:- A perusal of the audit report along with the utilisation chart towards asset creation clearly shows that the assessee has not claimed depreciation in respect of the assets in respect of which the claim of application has been made. It is also noticed that this has categorically been mentioned in the reply filed before the CIT(E), Hyderabad CIT(E), however, did not consider the reply of the assessee nor he has done any verification but has simply proceeded to direct the AO to examine the issue afresh. As the ld. CIT(E) has not considered the explanation given by the assessee and as it is noticed that the assessee has not claimed the depreciation on the items on which the assessee has claimed application, we are of the view that there is no violation of provisions of Section 11(6) in the case of the assessee for both the assessment years under consideration. Consequently, the order passed by the ld. CIT(E) in both the appeals under consideration are hereby quashed. Appeals of the assessee are allowed.
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2022 (7) TMI 890
Addition for the Term Loan taken waiver of secured loan from ICICI Bank which was credited to the Capital Reserve Account - addition on account of Loan settlement with ICICI Bank by invoking the provisions under section 28(i) r.w.s. 2(24) and even rejected the assessee contention that loan are used for capital Goods and not for other business activity - HELD THAT:- It is pertinent to note that the assessee has used the loan amount for capital assets and this fact was never disputed by the Revenue. The waiver of principal amount of loan which was made by the Bank has been deducted by the assessee from the outstanding loan and credited to reserves surplus. CIT(A) has relied upon the decision in the case of TV Sundaram Iyengar Sons ( 1996 (9) TMI 1 - SUPREME COURT] and decision in case of Ramniyam Homes Pvt. Ltd.[ 2016 (4) TMI 954 - MADRAS HIGH COURT] It is seen that in case of TV Sundaram Iyengar (supra) money was received by the said assesse for carrying on trading activities. But in the present assessee s case the loan was utilized only for the purpose of obtaining capital assets. Thus, the decision of the Hon ble Apex Court in case of Mahindra Mahindra (supra) is applicable in the present case as in the said case it was categorically held that when the assessee had not claimed deduction under Section 36(1)(iii) of the Act for interest on loan and loan was taken for acquiring capital asset then the waiver was on account of liability other than trading liability and thus provisions of Section 41(1) does not apply in such cases. Section 28(iv) will not be applicable in the present assessee s case as the receipts are in the nature of cash or money. The waiver of loan amounts to cessation of liability other than trading liability, thus, the said amount cannot fall under Section 28(iv) will not be applicable. Therefore, the Assessing Officer as well as the CIT(A) was not right in making the said addition and confirming the same. Hence, appeal of the assessee is allowed.
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2022 (7) TMI 889
Delayed employee contribution towards PF/ESI - amount deposited before the due date for filing of return of income or not? - scope of amendment in statute made by Finance Act, 2021 in Section 36(1)(va) and 43B - HELD THAT:- As in the instant appeal for ay: 2018-19, if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s. 139(1) of the 1961 Act, then the assessee shall be entitled for deduction u/s. 36(1)(va) of the 1961 Act. The assessee's counsel has neither filed tax-audit report nor filed challans, before the tribunal. Thus for limited purposes, we are directing AO to verify the challans evidencing deposit of aforesaid employee share of PF/ESI and that it was deposited before the due date prescribed for filing of return of income u/s. 139(1), before allowing claim of deduction u/s. 36(1)(va) of the 1961 Act. The assessee is directed to file before AO complete details/bifurcation of employees share of PF/ESI which was added to income of the assessee u/s. 36(1)(va) read with Section 2(24)(x) along with relevant paid challans, for verification. While passing the above order, we also note that several Division Benches of ITAT across Country have now passed appellate orders, even after considering the amendments made to Section 36(1)(va) and 43B of the 1961 Act by Finance Act, 2021, holding that if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s. 139(1) of the 1961 Act, then the tax-payer shall be entitled for deduction u/s. 36(1)(va) of the 1961 Act. The assessee succeeds in this appeal.
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2022 (7) TMI 888
TP adjustment - short term advances made by the assessee to its associated enterprises levying notional interest - evidence as to how the loan given in the present case would qualify as quasi capital and or given for commercial expediency of the assessee - HELD THAT:- Counsel was unable to convincingly demonstrate the same except for reiterating his contention before the A.O., that the advances were given to its wholly owned subsidiary newly formed for the purpose of procuring work/business of the assessee in the respective countries where they were set up i.e. Mauritius and Nigeria respectively. The main argument of the assessee against the transfer pricing adjustment made on account of the short term advances given to its subsidiaries in Mauritius and Nigeria, fails. The assessee being unable to demonstrate that the advances were not in the nature of loan/advance but were quasi capital in nature and for commercially expedient purposes of the assessee and hence the LIBOR rate could not be applied to them for the purposes of making ALP adjustment on the interest to be charged, the decision of the Ahmedabad Bench in the case of Micro Inks Ltd. [ 2013 (8) TMI 332 - ITAT AHMEDABAD] is not applicable to the assessee. The assessee being unable to establish with evidence the parity of facts as noted by the ITAT in the said case, of the advance being in the nature of quasi capital given to safeguards the business interest of the assessee, the said decision is of no assistance to the assessee. The advances therefore we hold are in the nature of loans and since no interest has been charged by the assessee on the same, the transfer pricing adjustment made by charging interest applying LIBOR is, we hold, justified. No reason to interfere in the order passed of the Ld. CIT(A) upholding the transfer pricing adjustment. - Decided against assessee. Disallowance of expenses made for the purposes of earning exempt income as per the provisions of Section 14A r.w.r.8D - CIT(A) deleted the disallowance of expenses in relation to investments made by the assessee in foreign subsidiary companies, noting that the dividend income earned therefrom were not exempt, while the rest of the disallowance was upheld - HELD THAT:- What is relevant is the explanation of the assessee before the A.O. for the disallowances made by it. Any explanation given to the CIT(A) is of no relevance and as noted above since the assessee had given no plausible explanation for making a suo moto disallowance of Rs. 60,000/- and considering the huge investments made by the assessee averaging Rs. 40 crores and huge dividend income earned by the assessee during the year of approximately 8 crores and also noting the substantial activity in the investments made, moving from Rs. 39 crores to Rs. 40 crores from the beginning to the end of the year, the A.O. had rightly recorded his non satisfaction with the reply of the assessee. Therefore even considering the decision of the Hon'ble Apex Court in the case of Godrej Boyce Manufacturing Co. Ltd. [ 2017 (5) TMI 403 - SUPREME COURT] .pointed out by the assessee before us, we hold that there was valid satisfaction of the A.O. for rejecting the explanation of the assessee. The argument of the Ld. Counsel for the assessee therefore that the A.O. had recorded no satisfaction before proceeding to apply Rule 8D for calculating the disallowance to be made u/s. 14A, is therefore dismissed. Investment in SPVs and those investments which did not earn any dividend income during the year should not be considered for the purpose of applying Rule 8D - We find no merit in the contention raised by the Ld. counsel for the assessee for reducing Strategic Investments made while computing disallowance as per Rule 8D of the Rules. As rightly pointed out by the Ld. DR the Hon'ble apex court in the case of Maxopp [ 2018 (3) TMI 805 - SUPREME COURT] has in very clear terms upheld the theory of apportionment of expenses between taxable and exempt income 'categorically rejecting the dominant purpose theory' as per which the dominant purpose of the investment made would determine the applicability of section 14A. Meaning thereby that whether investments have been made for trading purpose or controlling purposes (strategic investment), it would make no difference to the applicability of section 14A as long as such investments earn exempt dividend income. The theory of apportionment would come into play in such cases and expenses incurred in relation to earning exempt income needs to be disallowed. In view of the same the argument of the Ld. counsel for the assessee seeking exclusion of strategic investments while computing disallowance as per Rule 8D of the Rules is dismissed. Upward adjustment made u/s. 92CA - Arm's Length Price adjustment made to the Success fees paid by the assessee to its subsidiary Kalpataru Power Transmission, USA, for its services in identifying projects in the US market - CIT-A deleted the addition - HELD THAT:- CIT(A) noted the nature of activities conducted by the AE for the assessee as being identifying projects, collecting project data and technical specification and transmitting the same to India for analysis. He noted that a success fee of 3% was agreed to be paid to the AE for securing orders and during the impugned year had paid the fee for securing order from Isoluv Ingenieria, SA. He noted that the assessee had benchmarked the transaction using US Census Bureau published annual data relating to sales made by agents on behalf of others and commission earned by such agents as part of annual economic census. He noted that as per the data such agents derived 4.1% commission while the AE had charged only 3%. He found the benchmarking done by the assessee to be correct noting that the Census report relied upon by the assessee was relating to electronics market commission agents and contained actual data and not estimates. He further noted that the comparable selected by the TPO was functionally different from the assessee, being a pharmaceutical company while the assessee was in the business of establishing transmission network. That the CUP method did not approve such functionally distinct comparable to be used for bench marking. Accordingly the Ld. CIT(A) has rejected the bench marking of the A.O. and held that of the assessee to be justified. DR was unable to point out any infirmity in the findings of the Ld. CIT(A) nor do we find any. We therefore uphold the order of the Ld. CIT(A) deleting the adjustment made to the liaison fee on account of Arm's Length Price adjustment made u/s. 92CA(3) of the Act. Addition made on profit on sale of carbon credit - taxability of Carbon Credit i.e. CER certificate (Carbon Credits) issued to the assessee for saving emission of carbon - assessee had two biomass based power generation plant using agricultural waste as fuel at Padampur and Tonk in Rajasthan State - CIT(A) deleted the addition agreeing with the assessee's contention that it was a capital receipt - HELD THAT:- CIT(A) relied on a plethora of decisions both of the ITAT and the Hon'ble High Courts of Karnataka and Andhra Pradesh holding CER receipts as capital in nature and income earned there from also being capital receipt. The Ld. D.R. unable to distinguish the case laws - we see no reason to interfere in the order passed by the Ld. CIT(A) deleting the addition made on profit of sale of Carbon Credits. Additional depreciation - Claim of additional depreciation @ 50% of the rate applicable which was allowed in the preceding year on account of the fact that the asset so qualifying was purchased and put to use for less than 180 days and the balance was accordingly claimed by the assessee in the impugned year, which was disallowed by the A.O. but allowed by the Ld. CIT(A) - HELD THAT:- CIT(A) has correctly appreciated the facts and loan in perspective and has rightfully came to a conclusion that assessee was entitled to remaining part of 50% of the claim of the additional depreciation eligible under s. 32(1)(iia) of the Act in the subsequent assessment year adopting purposive approach to the issue. We thus find no infirmity in the view taken by the CIT(A) and therefore decline to interfere. Ground No. 3 of Revenue's appeal is accordingly dismissed. Disallowance made u/s. 14A rws Rule 8D - CIT(A) deleting the disallowance of expenses pertaining to foreign investment made by the assessee - HELD THAT:- We see no reason to interfere in the order passed by the Ld. CIT(A) deleting the disallowance made u/s. 14A read with Rule 8D of the Rules with respect to foreign investment made by the assessee.
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2022 (7) TMI 887
LTCG on sale of agricultural land - Nature of land sold - agricultural land or capital asset u/s 2(14) - whether the land sold by the assessee was in the nature of the agricultural land exempted from the definition of the capital asset liable for long-term capital gain? - HELD THAT:- One of the conditions for excluding the land from the definition of the capital asset is that said land should be agriculture land in India not being land situated within prescribed limit from the municipal Corporation as per section 2(14)(iii) of the Act. During relevant time said distance was prescribed at 8kms from the outer limit of the municipal Corporation . The term agriculture has not been defined in the Act and various courts from time to time has explained as what constitutes agriculture . The Hon ble Supreme Court in the case of Smt. Sarifabibi Mohmed Ibrahim ( 1993 (9) TMI 10 - SUPREME COURT] has approved the decision of a division Bench of the Hon ble Gujrat High Court in the case of CIT Vs Siddharth J Desai ( 1981 (9) TMI 48 - GUJARAT HIGH COURT] and has led down 13 test or factors which are required to be considered and upon consideration of which, the question whether the land is agricultural or not, has got to be decided or answered. We find that before the lower authorities, the assessee has not filed any evidence in support for justifying whether the land was situated beyond the 8 km from the outer limits of the municipal Corporation or satisfies the test laid down in the case of Sarifabibi (supra). As the question of distance of the land sold from the outer limit of the Municipal Corporation and other 13 test laid down in the case of the Sarifabibi (supra), which goes to the root of the question whether the land of the assessee is agricultural land, beyond the outer limit of the multiple Corporation, were not raised specifically by the lower authorities, therefore in the fact and circumstances of the case and in the interest of substantial justice, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh - Appeal of the assessee is allowed for statistical purposes.
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2022 (7) TMI 886
Addition u/s 68 - unexplained deposits in Dubai bank account - specific information that the assessee entered into shares transactions and the bank account revealed that during the period from 01.04.2008 to 08.12.2008 there are huge debits and huge credits in the bank account were immediately Transferred to M/s. Ventura Securities - HELD THAT:- As assessee has business in Dubai. It is undisputed that the assessee is NRI. The impugned sums have been transferred from his Dubai account to account in India. In these circumstances the assessee has duly discharged its onus. This has been duly accepted by the Assessing Officer in the remand report. AO has observed that the source of assessee s fund in Dubai was not examined by him being out of courty s transaction. We note that the assessee has discharged its onus and addition under section 68 of the Act is not at all sustainable in as much as identity, creditworthiness and genuineness of the transaction has been duly explained. CIT(A) has observed that taxability of sum in Dubai Bank account is beyond the jurisdiction of Indian tax authorities as the assessee is an NRI. Once it is clear and accepted by the Assessing Officer also that sums were sent to India from assessee s (an NRI) foreign bank account in Dubai the provisions of DTAA are attracted. Hence, the reasoning of the learned CIT(A) that sum in Dubai bank account are subject matter of taxation in Dubai and not in India is correct. Accordingly, we do not find any infirmity in the order of learned CIT(A). Hence, we uphold the same. - Decided against revenue.
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Customs
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2022 (7) TMI 885
Time Limitation - Refund of Special Additional Duty of Customs (SAD) - HELD THAT:- The issue stands decided in the case of SONY INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS [ 2014 (4) TMI 870 - DELHI HIGH COURT] where it was held that In the absence of specific provision of Section 27 being made applicable in the said notification, the time-limit prescribed in this section would not be automatically applicable to refunds under the notification - With the introduction of the circular and then amended notification (No. 93), the Customs authorities started insisting that such limitation period which was prescribed w.e.f. 01.08.2008 by notification became applicable. The impugned order dated 18.08.2021 passed by Customs, Excise and Service Tax Appellate Tribunal is set aside - Appeal disposed off.
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2022 (7) TMI 884
Smuggling - Gold Bars - reason to believe that the Gold Bars are of Foreign Origin - Absolute Confiscation - Section 110 of the Customs Act, 1962 - How the Inspector of Police, even after coming to know that the property is the smuggled gold, from a restricted customs area, he continue with the investigation, that too, without informing to the Customs Authorities? - On what basis the Assistant Public Prosecutor, attached to the Judicial Magistrate No.II, Alandur, raised objection for returning the property to the Directorate of Revenue Intelligence Officer, Chennai? - HELD THAT:- On the very first day, the 1st respondent Police was very much aware that the gold bars are with foreign origin and the assessor had given a report about the purity of the gold confirming that it is smuggled gold. The right thing should have been done by the 1st respondent Police Officer is that he has to inform the customs/DRI authorities, but it has not done. Even the superior officers with whom the Inspector of Police/1st respondent Police had regular communication about the case, for the reasons best known, kept quite. Only after the DRI authorities facing resistance and sensing some mischiefs, had informed the Commissioner of Police about the entire episode and whatever tracking and information they could collect. Thereafter, the local police upto the Joint Commissioner level had started giving information. On the query of the Commissioner of Police, the case gained momentum everything was informed to the Court. Thereafter, the DRI's query was responded and the petition was filed before the lower Court. It is also seen that the Police had acted in alacrity, but nothing was forwarded to the Court then and there immediately. It is certain that the Inspector of Police Mr.Ravi would not have conducted the investigation without the aid and support of his superior officials like the Deputy Commissioner and the Joint Commissioner and others. For what reason, the collected evidence was withheld and why there was so much resistance in handing over the gold bars is not known. This needs a probe to clear the mystery. Hence, this Court leave it to the wisdom of the Director General of Police, Chennai to take appropriate action against the erring officials in this regard. It is seen from the investigation that the property viz., 9 Kgs of Foreign origin gold, appeared to have been smuggled into India, through Chennai Airport, by Qatar Airways Flight, from Qatar, on 23.08.2021, engaging the services of Flight cleaning staff and Flight Catering Staff, with the active involvement of the 2nd Respondent and others. On investigation, the smuggled gold produced before the jurisdictional Court - The Magistrate ought to have ordered custody of the smuggled gold to the absolute custody of the petitioner herein, vesting the right to dispose it off under Section 110 of the Customs Act, 1962, facilitating further action under the said Act. Hence, this Court is inclined to set aside the order dated 22.09.2021. The attested Mahazar copy can be used as document to prove the case in Crime No.437 of 2021. The foreign sealed gold bar are the property to be retained and disposal by the DRI / Customs The order of the lower Court, in imposing the condition to return back 9 Kgs of gold bar, is not proper. This Criminal Original Petition stands allowed.
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2022 (7) TMI 883
Seeking provisional release of goods - Betel Nuts - petitioner submitted that in identical situations, the goods have been released in all major ports and ICDs, namely, Bangalore, Mundra, Nhavaseva and other places - Section 110-A of the Customs Act - HELD THAT:- It is the consistent view of this Court that in case of provisional assessment, provisional release is permissible - Hence, this Court permits the petitioner to make an application for provisional release under Section 110-A, on such application, when received, shall be disposed of by the Adjudicating Authority, after hearing the petitioner and simultaneous with a prima facie determination of the classification of the commodity, within a period of two (2) weeks from the date of receipt of the application. The Commissioner of Customs (Imports) is hereby directed to release the cargo covered under Bill of Entry No.7101263, dated 16.01.2022, provisionally subject to furnishing of PD bond for full value of the goods and furnishing of bank guarantee at 50% of the differential duty considering, Duty Free Tariff Preference Scheme for Least Developed Countries (LDC) benefit. The petitioner shall furnish the Least Developed Countries Certificate at the time of assessment and the same shall be considered by the Assessing Officer at the time of assessment. The Department shall continue their adjudication process and conclude the same without delay. The entire exercise shall be completed within a period of three (3) weeks from the date of receipt of a copy of this order. Petition allowed.
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2022 (7) TMI 882
Maintainability of appeal - appeal rejected on the ground that once the reassessment of bill of entry is finalized they cannot file appeal before the Commissioner (Appeals) - HELD THAT:- The learned Commissioner (Appeals) has not given any finding on merit on the ground that reassessment is not possible once the bill of entry is self assessed. In view of the above Hon'ble Supreme Court judgment in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] , it is mandatory that if an assessee wants to challenge the assessment of bill of entry, he should file appeal before the learned Commissioner (Appeals) as the assessment of bill of entry is appealable order therefore, the learned Commissioner (Appeals) should not have rejected the appeal on the ground that the reassessment is not possible, he should have passed the order on merit. The appeals are allowed by way of remand to the learned Commissioner (Appeals) to pass afresh order on merit.
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Insolvency & Bankruptcy
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2022 (7) TMI 881
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Even though the Corporate Debtor has tried to convince this Adjudicating Authority as regards some pre-existing disputes and has raised certain frivolous grounds of defence but we are not convinced with any of the grounds of defence taken by the Corporate Debtor. Moreover, the Corporate Debtor has neither filed any evidence that they had duly served the notice of termination upon the Operational Creditor nor has raised any dispute prior to the filing of this proceedings nor replied to the statutory noticed sent by the Operational Creditor. The application filed by the Operational Creditor under Section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, is hereby admitted - Moratorium declared.
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2022 (7) TMI 880
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - whether the demand notice in Form 3 dated 11.11.2020 was properly served? - HELD THAT:- The petitioner has placed a written acknowledgement duly received by Corporate Debtor and through the email as well whereunder it was stated that the demand notice was delivered. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- It is to be noted that the respondent-corporate debtor already proceeded ex parte. Moreover, the petitioner has appended affidavit u/s 9(3)(b) vide Diary No.5362/5 dated 12.05.2022 stating that corporate debtor has not issued any notice or raised any dispute regarding the debt for which the present petition has been filed by the operational creditor. Whether this application is filed within limitation? - HELD THAT:- This application was filed on 19.04.2021 vide Diary No.00526. Whereas the date of default i.e. 01.09.2018. Therefore, this Adjudicating Authority finds that this application has been filed within limitation. The contents of the application filed in the Form 5 and find the same to be complete - there is a total unpaid operational debt Rs.2,60,97,973/- consisting of a principal of INR 1,73,09,110/- coupled with interest of Rs.87,88,863/- calculated from 01.09.2018 till 15.02.2021. The operational creditor has supplied materials to the corporate debtor and raised invoices attached as Annexure-4. Accordingly, the petitioner proved the debt and the default which is more than Rupees one crore by the respondent-corporate debtor - It is noted that the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. Thus, the conditions under Section 9 of the Code stand satisfied. Accordingly, the petitioner proved the debt and the default, which is above the threshold limit. It is seen that the petition preferred by the petitioner is complete in all respects. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, we admit the petition for initiation of the CIR Process - Petition admitted - moratorium declared.
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2022 (7) TMI 879
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - whether the demand notice in Form 3 dated 06.11.2018 was properly served? - HELD THAT:- The demand notice was duly served upon respondent as per tracking report mentioned at Page 143-144 of the main petition. Therefore, it can be said that the demand notice has been duly served - Moreover, the petition is signed by one of the partners which has been stated on affidavit filed vide Diary No. 00321/3 dated 04.05.2022, which satisfies the condition that demand notice and the petition was duly signed by the Authorized Signatory. Thus, the objection raised by the Ld. counsel for the respondent on this point is invalid. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The Learned counsel for respondent has failed to point out as to if there was some pre-existing dispute regarding supplied material being sub-standard in the quality then it was pending in any court of law or before any other authority. Thus, it can be safely inferred from affidavit (page 19 of petition) under Section 9(3) (b) of I B Code, 2016 that there is no pre-existing dispute in relation to the debt claimed as per Part IV of Form 5. Whether this petition is filed within limitation? - HELD THAT:- A demand notice dated 06.11.2018 in Form 3 attached as Annexure 8 was duly served on the corporate debtor through registered post. It is observed that neither any reply from the corporate debtor has been filed in lieu of the above stated demand notice nor any payment has been made. Therefore, the period of limitation would begin from the date of default i.e. 17.05.2018. This petition was filed on 07.01.2019 vide Diary No. 56. Therefore, this Adjudicating Authority finds that this petition was filed within limitation. It is seen that the petition preferred by the petitioner is complete in all respects. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner - Also, the petitioner proved the debt and the default, which is more than Rupees one lakh (prior to the amendment in threshold limit of one crore vide notification No. S.O.1205(E) dated 24.03.2020) by the respondent-corporate debtor. Petition admitted - moratorium declared.
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2022 (7) TMI 878
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- It is observed from the records that Corporate Debtor has been given multiple opportunities to appear before this Tribunal and plead his case. The Financial Creditor intimated the next date of hearing and filed his Affidavit of service on record on 22.11.2019. However, The Corporate Debtor chose not to appear and plead the case or file reply on record. Therefore, the Corporate Debtor was set ex-parte vide order dated 26.11.2021. Hence, the matter is taken on merits as is to be decided ex-parte. The Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ] upholding the Constitutional validity of IBC, the position is very clear that unlike Section 9, there is no scope of raising a dispute as far as Section 7 petition is concerned. As soon as a debt and default is proved, the adjudicating authority is bound to admit the petition. Upon perusal of records, this Bench is of the considered opinion that there is no dispute regarding the Corporate Debtor owes money to the Financial Creditor. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.
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2022 (7) TMI 870
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Last date of invoice is 01.02.2020 and the date of filing is 30.12.2020 and it is well within the Limitation. This Bench has jurisdiction to deal with this Company Petition. It is observed by the Bench that the Corporate Debtor had time and again by its letter, invoices and by making part payment acknowledged its liability. Therefore, the Petition made by the Operational Creditor is complete in all respects as required by law There is default by the Corporate Debtor in payment of debt amount. Therefore, it is a fit case for initiation of CIRP against the Corporate Debtor, and that the petition is filed within the limitation period. This Tribunal has jurisdiction to adjudicate the Company Petition filed by the Operational Creditor and that there is a Debt due payable by the Corporate Debtor. Therefore, the Application filed by the Operational Creditor is liable to be admitted. The application is complete and has been filed under the proper form. The debt amount is more than Rupees One Crore and default of the Corporate Debtor has been established and the application deserves to be admitted. Petition admitted - moratorium declared.
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PMLA
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2022 (7) TMI 877
Provisional order of attachment - Money Laundering - Conspiracy - scheduled offences - proceeds of crime - allocation of coal - allegation in the second chargesheet essentially is that PIL submitted false and forged documents in order to obtain the allocation of the coal block in question, misrepresented facts pertaining to proceedings pending before the Board for Industrial and Financial Reconstruction and thus fraudulently and dishonestly obtained the coal allocation - HELD THAT:- On an overall consideration of the issues, the Court comes to record the following conclusions:- A. When the offense of money laundering is described as a stand-alone offense, all that is sought to be conveyed is that it represents an independent offense and is to be tried separately in accordance with the procedure prescribed under the Act. The objective of the Act is to try charges of money laundering which entails proceeds of crime being acquired, possessed or used and/or projected as untainted property. Undisputedly, the offense of money laundering rests on the commission of a predicate offense which in turn may have resulted in a pecuniary benefit being obtained and derived. It fundamentally aims at confiscation of benefits that may be derived as a result of criminal activity and the commission of a scheduled offense. It is aimed at countering and penalising the malaise of wealth and assets acquired as a result of criminal activity B. It is evident from a reading of the Act that while the commission of a predicate offense is the precipitate step for initiation of proceedings under the Act, the offense of money laundering must be tried and established separately. It is also pertinent to observe that the predicate offense constitutes the very foundation of a charge of money laundering. The entire edifice of a charge of money laundering is raised on an allegation of a predicate offense having been committed, proceeds of crime generated from such activity and a projection of the tainted property as having been legitimately acquired. C. However, once it is found on merits that the accused had not indulged in any criminal activity, the property cannot legally be treated as proceeds of crime or be viewed as property derived or obtained from criminal activity. Since the offense of money laundering is itself premised and founded upon the commission of a crime created under an independent statute, it cannot possibly survive or subsist once the predicate offense is found to be not established and a declaration so made by a competent court. D. The description of the offense of money laundering as a stand-alone offense would not in itself infuse jurisdiction in proceedings that may be initiated under the Act even after a competent court has come to hold that no criminal offense stands committed or in situations where the accused is discharged of the offense or proceedings quashed. E. The allegation of money laundering is premised and dependent upon the commission of a criminal offence. Unless proceeds are found to have been derived or obtained from criminal activity, the question of money laundering would not arise. The Act is concerned with the commission of an offence which may have yielded revenues of profits which are then concealed and their source obfuscated. However, once the charge of commission of a scheduled offence itself comes to be annulled by virtue of a judicial declaration with a competent Court finding that an offence could not be set to have been committed it would be impermissible to assert that a person or entity has indulged in money laundering. F. Since the offence of money laundering is essentially aimed at depriving persons of the fruits and benefits that may have been derived or obtained from criminal activity, the charge is inextricably linked to criminal activity. However, once it is found that a criminal offence does not stand evidenced, the question of any property being derived or obtained therefrom or its confiscation or attachment would not arise at all and in any case, proceedings if initiated under the Act would be wholly without jurisdiction or authority. G. The Court finds that the expression proceeds of crime creates an inextricable link between criminal activity and the acquisition of property and assets as a result thereof. If the charge of criminal activity ceases to exist in law, a charge of money laundering would neither sustain nor survive. The Court thus reiterates the conclusions as drawn and recorded in Rajeev Chanana [ 2014 (10) TMI 436 - DELHI HIGH COURT] and Gagandeep Singh [ 2021 (2) TMI 1262 - DELHI HIGH COURT] . Consequently it must be held that once it is found by a competent court, authority or tribunal that a predicate offence is either not evidenced or on facts it is held that no offence at all was committed, proceedings under the Act would necessarily have to fall or be brought to a close. H. Turning then to Section 3 of the Act, the Court finds that the said provision would come into play only if proceeds of crime are found to have been generated. As this Court reads Section 3 it finds that the offence of money laundering has an enduring and ineffaceable link to proceeds of crime. Absent the commission of a criminal offence, the foundation of proceedings initiated under the Act would undoubtedly fall and self-destruct. I. The Court further notes that not every criminal activity falls within the ambit of Section 3. While criminal activity may represent or evidence the commission of a predicate offence under the Penal Code, it is only activity relating to the laundering of proceeds of crime which can form the subject matter of proceedings under the Act. Absent the existence of criminal activity which may have resulted in proceeds of crime having been gained or obtained, a charge under Section 3 would not sustained. J. The Court also bears in mind the language of Section 3 of the Act which links the activities and processes of money laundering to proceeds of crime. Section 3 creates an indelible link between property derived or obtained and criminal activity relating to a scheduled offence. It is only when it is found that a person has derived property as a result of criminal activity that the offence of money laundering can be said to have been committed. Absent the element of criminal activity, the provisions of the Act itself would not be attracted. K. On a fundamental plane, Article 20(1) raises a constitutional injunction or bar in respect of penal action against a person for an act which was not an offense at the relevant time. It is to this extent that the provisions of penal statutes are constitutionally barred from operating retrospectively. The guiding expressions of Article 20(1) are violation of a law in force and at the time of the commission of the act charged . . The Constitution thus constructs a negative command against penal action and conviction except for an offense created by a law which was in force at the time of commission of the act. L. However, an equally well settled principle relating to the retroactive application of penal provisions is that merely because a requisite or facet for initiation of action pertains to a period prior to the enforcement of the statute, that would not be sufficient to characterize the statute as being retrospective. M. It must be borne in mind that the Act with which we are concerned, penalises acts of money laundering. It does not create a separate punishment for a crime chronicled or prescribed under the Penal Code. The Act does not penalise the predicate offense. That offense merely constitutes the substratum for a charge of money laundering being raised. Accordingly, while the commission of the predicate offense may be described as the sine qua non for an allegation of money laundering being laid against a person, it is an offense created independently owing its genesis to the Act which came to be promulgated on 01 July 2005. While the commission of a predicate offense may be a condition precedent for an allegation of money laundering being laid, it is the activities of money laundering alone which would determine the validity of proceedings initiated under the Act. N. The Court thus concludes that an offense of money laundering that may be committed post 01 July 2005 would still be subject to the rigours of the Act notwithstanding the predicate offense having been committed prior to that date. As noted hereinabove, Section 3 creates an offense for money laundering. Neither that provision nor the Act is concerned with the trial of the predicate offense. Thus, any activity or process that may be undertaken by a person post 01 July 2005 in terms of which proceeds of crime are acquired, possessed or used and/or projected as untainted property would still be subject to the provisions of the Act. O. The Court exposits and reiterates the legal position to be that it is the date of the commission of the offense of money laundering and not the date of commission of a scheduled offense which is relevant and determinative. The date of inclusion of a crime as a scheduled offense would also not be determinative and the issue would have to be decided bearing in mind whether an allegation of money laundering stood committed after the Act had come into force. P. The conflict between Axis Bank [ 2019 (4) TMI 250 - DELHI HIGH COURT] and Seema Garg [ 2020 (3) TMI 460 - PUNJAB HARYANA HIGH COURT] arises in the backdrop of the latter holding that the expression value of any other property would not empower the Directorate to proceed against properties which may have no direct or indirect link with the proceeds of crime. Both the aforenoted decisions have admittedly taken into consideration that Section 2(1)(u) comprises of 3 limbs. Axis Bank takes into consideration a situation where a property which may be said to have a direct or indirect link to proceeds to crime is untraceable. It is in that backdrop that it held that in such a situation, property equivalent in value may also be attached. Q. The Court has found that the expression value of any such property existed from the inception of the Act itself and this aspect must, therefore, be accorded due consideration. The concept of equivalent value came to be included in Section 2(1)(u) only subsequently and to deal with exigencies where proceeds of crime had been ferreted out of the country and were held overseas. There was and even today does exist a substantive distinction between the use of the expressions value of any such property and property equivalent in value as employed in Section 2(1)(u). R. The third limb of Section 2(1)(u) which deals with property equivalent in value was always connected with an exigency where property is taken or held outside the country. If the principle enunciated in Seema Garg were to be followed, it would clearly amount to reading Section 2(1)(u) absent the expression value of any such property . That would not only violate the well settled tenets of statutory construction but would clearly amount to the Court re-writing the provision itself in a manner that it stands deprived of vital and purposive content. S. The Court while reiterating the principles laid down in Axis Bank also takes into consideration the nature of the malaise or mischief against which the Act purports to operate. It consequently finds no justification to read Section 2(1)(u) in a manner which may whittle down its apparent legislative intent and the extent of the power which it seeks to confer on the Directorate. T. Axis Bank also culled out various salutary and significant safeguards insofar as third-party interests, secured or unsecured, that may come to exist in property and thus balancing competing interests. Those safeguards clearly confer protection on a bona fide third-party interest that may come to exist in property acquired upon payment of due consideration. It also recognized the right of such a person to establish before the Adjudicating Authority that the acquisition of the interest was not intended to defeat the objectives of the Act and was a transfer validly made upon payment of due consideration. U. Axis Bank further held that in order to uphold action that the Directorate may take against alternative attachable property was one which established a nexus or link between such properties on the one hand and the person accused of money laundering. It further propounded the test that in such a case it would have to be found that the person accused of money laundering had an interest in such property at least till the time of engagement in the proscribed criminal activity from which a pecuniary interest had been derived or obtained. It also held that the date or period of commission of criminal activity would be liable to be treated and recognized as the cut off. V. These tests as spelt out in Axis Bank adequately safeguard third party interests. Seema Garg while proceeding to hold to the contrary appears to have brushed aside and downplay the imperative of a fair balance being struck and thus ignoring the need and criticality of empowering the Directorate to proceed against other properties in a situation where tainted property is untraceable. For the reasons recorded in the body of this judgment, the Court finds itself unable to agree with the reasoning assigned in Seema Garg. The principles articulated in Axis Bank are reiterated. W. An allocation of coal cannot possibly be viewed as amounting to proceeds of crime per se. That document at best enabled the holder thereof to obtain a mining lease. Viewed in that backdrop it cannot be said that the allocation of coal is property as contemplated under the Act. It is pertinent to note that the Act essentially seeks to confiscate properties and assets that may be derived or obtained from criminal activity and which may then be concealed. It is thus evident that it is only gains that may have been obtained by the utilization of the allocation which could have possibly been viewed as proceeds of crime. X. It is the gains that may be obtained from criminal activity which are concealed or projected to be untainted that can form the subject matter of the offense under the Act. The allocation of a coal block in itself did not give rise to any monetary gains. It was only when the same was utilized that the question of illegal gains would have arisen. Y. The impugned proceedings rest on the second chargesheet which bids us to restrict scrutiny upto 04 September 2003 when the allocation came to be made. The proceedings under the Act thus cannot travel beyond the gamut of that chargesheet. The allegations of money laundering would thus have to be cabined and fenced in upto that date. This since the offense is stated to have been committed and completed on 04 September 2003. Thus, any event or offense that may have been allegedly committed post that date would clearly fall beyond the pale of scrutiny for the purposes of adjudging the validity of the impugned proceedings. Z. This aspect represents a critical pinion in this case since the criminal activity on which the allegation of money laundering is constructed and raised is the allocation of the coal block. As noted above, there is no allegation that any illegal monetary gains were derived or obtained as on 04 September 2003. This coupled with the fact that the allocation itself would not represent proceeds of crime leads the Court to the unescapable conclusion that the impugned proceedings are rendered patently illegal. AA. The Court has additionally taken into consideration the fact that the first chargesheet and which dealt with allegations of the allocation having been utilized for the purposes of extracting coal, the diversion of the mined mineral for unlawful gain, the acquisition of properties from the profits so earned and other related allegations already stands quashed. As long as that judicial declaration holds the field, the Court would have to necessarily acknowledge that no criminal activity was indulged in. BB. The show cause notice and the provisional orders of attachment proceed on the basis that the profits derived from criminal activities post 04 September 2003 and the properties acquired directly as a result thereof are liable to be attached under the Act. However, and as this Court has found activities post 04 September 2003, cannot form the foundation for the initiation of proceedings under the Act since the chargesheet itself stands restricted to events which occurred up to the date of allocation only. Since for reasons recorded in the body of the judgment, it has already found that the allocation would not constitute proceeds of crime and that in light of the decision of the Court of 05 September 2014, it cannot be said that the petitioner indulged in any criminal activity, the attachment is rendered unsustainable. CC. The argument based on possession of property and the right of the Directorate to consequently attach the same is clearly rendered unsustainable when viewed in light of the fact that those properties are not treated as untainted or permissibly attachable property constituting property equivalent in value to any such tainted properties. The allegations in the show cause notice are that these properties constitute proceeds of crime in themselves and are thus tainted property. As has been found in the judgment since the chargesheet bids us to restrict scrutiny of events only up to 04 September 2003, the impugned action could have been sustained if it had been found that proceeds of crime had been derived upto that date. That is clearly not the allegation leveled. Insofar as acquisitions made post that date and the coming into force of the Act is concerned, it is faced with the specter of the first chargesheet having already been quashed. The judgment of the Court quashing those proceedings compels and constrains the Court to acknowledge that no criminal activity was indulged in. Viewed from that perspective also, the Court comes to the conclusion that the submissions advanced by the respondents based on the aspect of continued possession is also liable to negatived. Petition allowed.
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Service Tax
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2022 (7) TMI 876
GTA service - service of transportation of goods by road - demand of differential tax arising from the benefit of notification no. 35/2004-ST dated 3rd December 2004 available to providers of transport of goods by road service - HELD THAT:- This Court is of the opinion that in the facts of the case, no interference is called for. The Civil Appeals are, accordingly, dismissed.
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2022 (7) TMI 875
Time Limitation - belated demand of service tax - manufacture of S.S. Utensils which are dutiable - suppression of facts or not - revenue neutrality - recovery of service tax alongwith interest and penalty - reverse charge mechanism - HELD THAT:- Admittedly, the transaction, on which the service tax was demanded belatedly, was found on record in the books of account. Further, the service tax has been demanded under Reverse Charge Mechanism. The appellant, being a manufacturer of dutiable goods, is entitled to Cenvat credit of such service tax. Thus, situation is wholly revenue neutral. In this view of the matter, it is held that there is no case of any suppression of facts, misstatement or contumacious conduct on the part of the appellant. Accordingly, the extended period of limitation is not available to Revenue. Appeal allowed - decided in favor of appellant.
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Central Excise
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2022 (7) TMI 874
Demand of Differential Duty - clearance of acoustic enclosures from their factory - period from 1.4.2000 to 24.6.2002 - HELD THAT:- It is seriously taken note of the submission, but since the order passed by the Tribunal is a cryptic one, there are no option but to set aside the same. The Tribunal has not gone into the merits of the case, nor the grounds raised in the Appeal Memorandum of the appellant. The finding entered by the Tribunal cannot be sustainable in law. No reasoning is stated for dismissing the appeal. In view of the matter, it is opined that the final order of the Tribunal has to be interfered with. The matter is remitted to the Tribunal, for reconsideration afresh - appeal allowed.
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CST, VAT & Sales Tax
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2022 (7) TMI 873
Time Limitation - Validity of deemed assessment order - validity of total and taxable turnover reported through their returns - G.O.Ms.No.82 effective from 19.06.2012 - whether the notice has been sent through registered post as per Rule 19(c) and whether Section 27 has been complied with? - HELD THAT:- As could be seen, for the assessment year 2010-2011, it should have been done within a period of five years of filing. In this case, the five years' period gets over on 30.06.2018. The first notice, which is said to have sent on 27.02.2018, is by ordinary post. Hence, no cognizance can be taken. Thereafter, the subsequent notices dated 14.12.2020 and 16.02.2021 had been sent by RPAD. This service of notice is beyond the period of limitation as contemplated under Section 27 of the Act. Therefore, the respondent cannot reopen the case beyond the period of five years stipulated under Section 27 and no orders can been passed thereafter. In view of the same, the impugned orders are quashed. The Writ Petitions are allowed.
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2022 (7) TMI 872
Maintainability of appeal - requirement of mandatory pre-deposit - Attachment of Overdraft Bank Accounts - garnishee proceedings - HELD THAT:- The defect, which was stated to have occurred while filing the appeal online appears to have been rectified and the appellate authority is in seisin over the matter. However, the appellate authority cannot entertain the appeal without hearing and without the appellant complying with the mandatory pre-deposit condition as contemplated under the provisions of the W.B.VAT Act. That apart, no useful purpose would be served by attaching an overdraft account by way of garnishee proceedings.Therefore, in our view, such attachment needs to be lifted however, subject to the condition that the appellant pays the mandatory pre-deposit payable in terms of the relevant provisions of the W.B.VAT Act. The appellant is directed to comply with the mandatory predeposit condition within a period of two weeks from the date of receipt of the server copy of this judgment and order - Petition disposed off.
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Indian Laws
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2022 (7) TMI 871
Grant of post-arrest bail - illegal selling and purchasing the said tablets and capsules - restricted goods or not - retraction of statements - Section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985 - HELD THAT:- It is evident from a plain reading of the non-obstante clause inserted in sub-section (1) and the conditions imposed in sub-section (2) of Section 37 that there are certain restrictions placed on the power of the Court when granting bail to a person accused of having committed an offence under the NDPS Act. Not only are the limitations imposed under Section 439 of the Code of Criminal Procedure, 1973 to be kept in mind, the restrictions placed under clause (b) of sub-section (1) of Section 37 are also to be factored in. The conditions imposed in subsection (1) of Section 37 is that (i) the Public Prosecutor ought to be given an opportunity to oppose the application moved by an accused person for release and (ii) if such an application is opposed, then the Court must be satisfied that there are reasonable grounds for believing that the person accused is not guilty of such an offence. Additionally, the Court must be satisfied that the accused person is unlikely to commit any offence while on bail - The expression reasonable grounds used in clause (b) of Sub-Section (1) of Section 37 would mean credible, plausible and grounds for the Court to believe that the accused person is not guilty of the alleged offence. For arriving at any such conclusion, such facts and circumstances must exist in a case that can persuade the Court to believe that the accused person would not have committed such an offence. Dove-tailed with the aforesaid satisfaction is an additional consideration that the accused person is unlikely to commit any offence while on bail. Coming back to the facts of the instant case, the learned Single Judge of the High Court cannot be faulted for holding that the appellant- NCB could not have relied on the confessional statements of the respondent and the other co-accused recorded under Section 67 of the NDPS Act in the light of law laid down by a Three Judges Bench of this Court in TOFAN SINGH VERSUS STATE OF TAMIL NADU [ 2020 (11) TMI 55 - SUPREME COURT] , wherein as per the majority decision, a confessional statement recorded under Section 67 of the NDPS Act has been held to be inadmissible in the trial of an offence under the NDPS Act. Therefore, the admissions made by the respondent while in custody to the effect that he had illegally traded in narcotic drugs, will have to be kept aside. However, this was not the only material that the appellant- NCB had relied on to oppose the bail application filed by the respondent. Even dehors the confessional statement of the respondent and the other co-accused recorded under Section 67 of the NDPS Act, which were subsequently retracted by them, the other circumstantial evidence brought on record by the appellant-NCB ought to have dissuaded the High Court from exercising its discretion in favour of the respondent and concluding that there were reasonable grounds to justify that he was not guilty of such an offence under the NDPS Act - the narrow parameters of bail available under Section 37 of the Act, have not been satisfied in the facts of the instant case. At this stage, it is not safe to conclude that the respondent has successfully demonstrated that there are reasonable grounds to believe that he is not guilty of the offence alleged against him, for him to have been admitted to bail. The length of the period of his custody or the fact that the charge-sheet has been filed and the trial has commenced are by themselves not considerations that can be treated as persuasive grounds for granting relief to the respondent under Section 37 of the NDPS Act. The impugned order releasing the respondent on post-arrest bail, is quashed and set aside - Appeal allowed.
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