Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 30, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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Petitioner's challenge to GST demand on unbilled revenue upheld. Adjudicating Authority's rejection without reasons violated natural justice. Order set aside, matter remanded for fresh consideration.
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Bank account provisionally attached for wrongful ITC claim due to fake supplies. Commissioner's action justified to protect revenue.
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Petitioner denied access to relied upon docs, alleged nat justice violation. Held: Ample hearing opp, avail remedy u/s 107.
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Cancelled supplier invoices - ITC denied without specifying required docs. Appellate order verbatim copy, non-application of mind. Remanded to reconsider goods movement & indicate docs needed.
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Order passed sans reasons based on audit report; violates natural justice. Lacks analysis on GST returns vs bank entries mismatch. Contentious issues unaddressed. Remanded.
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GST cancellation notice lacked details, violating natural justice. Reasoning absent in order. Show cause notice must state allegations clearly. :
Income Tax
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Delay in TDS deposit (31-214 days) due to COVID-19 held reasonable cause. Sanction order mechanically passed, vitiated.
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Structured courses, fees & CSR funds for skilling students qualified as educational despite virtual mode. Formal education doesn't mandate affiliation.
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Faceless assessment notice by jurisdictional officer invalid. Bombay HC quashes reassessment order & penalties, upholds Hexaware & Vikram Developers.
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Assessee deducted TDS on share purchase from non-residents, but AO recharacterized it unlawfully. Court upheld assessee's stance.
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CIT(A) to conduct preliminary inquiry into assessee's claim of additional evidence before admitting appeal u/s 249(4)(b) proviso for advance tax deposit exemption.
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Excise duty inclusion in turnover u/s 145A differs from rate determination based on turnover. Debatable issue can't be resolved via 143(1) intimation.
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Transfer pricing adjustment for corporate guarantee commission at 0.50%. Interest on receivables beyond 60-240 days for non-AEs allowed for AEs. LIBOR+200 interest rate on forex receivables/advances accepted.
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Reopening assessment on alleged benefit from share purchase unjustified. All facts furnished earlier. Invoking Sec 28(iv) incorrect as shares held as investment, not trading. Mere change of opinion impermissible.
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Assessee's appeal allowed on interest disallowance u/s 14A. ESOP expenses allowed as business expenditure u/s 37, following Biocon case.
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Loss due to employee theft allowed. Bogus purchases: Only profit added, not entire amount. Partial relief granted.
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Validity of assessment order sans DIN upheld. No presumption of mechanical approval. Arguments on satisfaction note rejected. Unaccounted money addition invalid. Reliance on statement sans cross-examination violates principles.
Customs
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Iron ore exporter's provisional assessment of Rs. 30+ crores quashed. Matter remanded for fresh decision based on test reports.
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Declared F.O.B. value rejected, penalty imposed u/ss 114(iii), 114AA upheld. Market enquiry conducted, appellant accepted re-calculated value. /s113
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Appellate Tribunal accepts exporter's explanation on goods-invoice mismatch. No willful mis-declaration found. Redemption fine & penalty quashed. Confiscation order set aside.
FEMA
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Adjudicating authority must explain alleged contraventions & reasons for opinion. Rules 4(3) & 4(4) ensure fair opportunity, not violating natural justice. Procedures must be followed.
Corporate Law
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Property transfer pre-winding up valid commercial transaction. No mala fide intent. Subject property can't vest with liquidated firm.
Bill
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Disallowing deduction for settlement amounts paid for contraventions as business expenses to widen tax base & promote anti-avoidance.
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Budget: The amendment plugs a gap in computing cost of acquisition for equity shares transferred via OFS in IPOs. For unlisted shares on 31/1/18, the cost is calculated by applying Cost Inflation Index for FY 2017-18 to acquisition cost.
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Budget: Introducing Direct Tax Vivad se Vishwas Scheme 2024 for settling tax disputes, reducing litigation cost-effectively.
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2% equalisation levy on e-commerce operators' consideration ends 1/8/2024. E-commerce income from 1/4/2020-31/7/2024 tax-exempt.
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Budget: No penalties for not disclosing foreign assets (excl. property) up to Rs. 20L in ITRs. Effective 1st Oct 2024. :
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Budget: No prosecution for TDS non-payment if paid by statement filing due date. Decriminalizes offence from Oct 2024.
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Budget: Amendments set 6-year time limit for tax default orders, 2 years from correction statement, for resident & non-resident payees u/s 201 & 206C. Effective Apr 1, 2025.
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Budget: Income Tax Act amended to process statements like Form 26QF from entities other than deductors. Scheme to be formulated by Board.
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Budget: Proposed amendments to sections 197, 194Q, 206C(9), and 206C(1H) aim to ease business & reduce compliance burden for large transactions. :
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Budget: Exempt entities like non-profits face hurdles due to TCS on transactions. Govt can notify exemptions/lower TCS rates for them. Effective Oct '24.
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Budget: TDS/TCS correction statements restricted after 6 years from original filing year. Aimed at certainty & curbing misuse. Effective Apr 1, 2025.
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Budget: No penalty if TDS/TCS paid with fees & interest within 1 month of due date, not 1 year. Better compliance from 1/4/2025.
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Budget: Non-resident liaison offices in India must file annual statements or face penalties up to Rs. 1 lakh after 3 months. Effective 01/04/2025.
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Budget: TPO can determine arm's length price for unreported domestic transactions. Sections 92CA amended to enable this from AY 2025-26.
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Budget: Quoting Aadhaar Enrolment ID for PAN/ITR discontinued from Oct 1, 2024. Provide Aadhaar number to avoid PAN duplication/misuse.
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Budget: Pending applications before BAR can be withdrawn by Oct 31, 2024, if no order passed. BAR may reject by Dec 31, 2024. Effective Oct 1, 2024.
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Budget: If taxpayer unresponsive, Commissioner can set aside assessment order for fresh assessment. Time limit for disposal of such cases amended.
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Budget: Amendments clarify penalties for inaccurate info/non-compliance with due diligence under AEoI. Rs. 50K fine for errors/failures. Defense allowed.
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Budget: Tax clearance certificate now mandatory for outstanding liabilities under Black Money Act before leaving India.
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Budget: Streamlining tax assessment timelines: new limits for assessment orders, reassessments & recomputation.
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Proposed amendment allows tax deduction for donations to National Sports Development Fund from 2025-26.
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Clause 15 removes National Housing Bank from Section 43D on income of housing finance entities, as regulation shifts to RBI from 2025-26.
Indian Laws
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Home buyer allowed to approach multiple forums after losing savings to defective houses built by state body. Refund + 12% interest & Rs. 5L compensation ordered.
IBC
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Resolution plan extinguished all claims, including statutory dues. Creditor's inaction signifies acceptance. IBC prioritizes revival, binding stakeholders.
Service Tax
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Exemption upheld despite delayed EXP-3 & invoices non-submission. Equity condition inapplicable. Timely EXP-4 with export evidence suffices. Technical lapses condoned.
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Service tax refund admissible for SEZ units as per SEZ Act, overriding Finance Act notification conditions. Non-compliance irrelevant.
Central Excise
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Duty demand of Rs.15,19,610/- upheld. Clandestine removals denied notification benefit. Duty payable on waste/scrap. Partial relief granted.
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Discounts to dealers not trade discounts if end-user doesn't receive them. No suppression/mis-declaration, larger limitation period can't apply. Demand barred by limitation. :
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Surgical glove inner wrap classified as packing paper, not 'wallet' under 4817. Reasonable grounds, no suppression. Demand limited, penalty set aside.
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Classification dispute: Agro Shed Net - 'fabric' or plastic? Petitioner aggrieved over ignoring HC decision. Reply to show-cause notice permitted.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (7) TMI 1388
Seeking permission to withdraw the Special Leave Petition with liberty to file a statutory appeal before the Appellate Authority within a period of one month from today - HELD THAT:- The Special Leave Petition is dismissed as withdrawn reserving liberty to the petitioner to file a statutory appeal before the Appellate Authority within a period of one month from today.
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2024 (7) TMI 1387
Levy of GST - Creation of additional demand on unbilled revenue - no reason for rejecting the petitioner s explanation - violation of principles of natural justice - HELD THAT:- The impugned order does not indicate any reason for rejecting the petitioner s explanation. It merely states that the reply of the petitioner was received, however same is not acceptable being incomplete/not duly supported by adequate documents / without proper justification and thus unable to clarify the issue - It is apparent that the Adjudicating Authority has not considered the petitioner s reply to the impugned SCN and at any rate not provided any reason for rejecting the same. The impugned order is set aside and matter remanded back to the Adjudicating Authority for consideration afresh - petition allowed by way of remand.
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2024 (7) TMI 1386
Cancellation of petitioner's registration - non-service of SCN - adjudication proceedings was ex-parte - Principles of natural justice - HELD THAT:- Reliance placed in M/S CHEMSILK COMMERCE PVT LTD VERSUS STATE OF U.P. AND ANOTHER [ 2024 (4) TMI 463 - ALLAHABAD HIGH COURT] where it was held that ' Since essential requirement of rules of natural justice has remained to be fulfilled, we set aside the order dated 31.12.2023. The petitioner may treat the said order itself to be the notice and submit its final reply thereto within a period of four weeks from today.' For reason of exact similarity of facts, the present writ petition is also disposed of on the same terms.
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2024 (7) TMI 1385
Provisional attachment of bank account u/s 83 of the Central Goods and Services Tax Act, 2017 - wrongful claim of ITC - fake supplies - HELD THAT:- The Commissioner has considered it apposite to provisionally attach the petitioner s bank account, to the extent of ₹ 26.91 lacs being the amount of ITC claimed in respect of allegedly fake supplies. It cannot be accepted that the exercise of power by the Commissioner is unwarranted. The facts clearly indicate the Commissioner had found it necessary to provisionally attach the petitioner s bank account to protect the interest of the revenue. The facts as obtaining in this case clearly indicate that material available with the Commissioner has a live nexus with his opinion. And, the impugned order cannot be faulted. The petition is unmerited and accordingly dismissed.
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2024 (7) TMI 1384
Challenge to order u/s 74(9) of the Central Goods and Service Tax Act, 2017 - petitioner has not been provided with the relied upon documents though asked by the petitioner from the authority - violation of principles of natural justice - HELD THAT:- In view of the decision of the Hon ble Apex Court in case of THE ASSISTANT COMMISSIONER OF STATE TAX AND OTHERS VERSUS M/S COMMERCIAL STEEL LIMITED [ 2021 (9) TMI 480 - SUPREME COURT ], the petitioner has tried to submit that this petition may be entertained as there is breach of principle of natural justice. However, on perusal of the impugned order, it appears that the respondent-authority has already given ample opportunity of hearing to the petitioner, as prayed for. Therefore, in view of the decision of the Hon ble Apex Court, the petitioner is relegated to avail the alternative efficacious remedy under section 107 of the Act. The petition is disposed of with liberty to the petitioner to initiate appropriate proceedings in accordance with law before the appropriate authority.
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2024 (7) TMI 1383
Challenge to impugned order and demand notices - impugned order was passed pursuant to the SCN based on a Special Audit Report - no reasons for passing impugned order - violation of principles of natural justice - HELD THAT:- It is apparent from the reading of the impugned order that the issue regarding mismatch between the GST returns filed by the petitioner and the credit entries in its bank account is the basis of majority of the demand. However, the impugned order does not refer to any of the contentious issues and respondent no.2 s analysis on the same. It merely mentions that the demand raised in the SCN is confirmed. The impugned order is bereft of any reasons. It is also apparent that the Adjudicating Authority/respondent no.2 has failed to consider the contentious issues. The matter is remanded to the Adjudicating Authority for considering afresh - Petition allowed by way of remand.
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2024 (7) TMI 1382
Cancellation of GST registration of petitioner - SCN does not clearly reflect the reasons for proposing the adverse action of cancellation of the GST registration of the petitioner - Violation of principles of natural justice - HELD THAT:- The purpose of a show cause notice is to enable the noticee to respond to the allegations on the basis of which the adverse action is proposed. It is, thus, necessary that the show cause notice must clearly specify the allegations along with necessary details for eliciting a meaningful response. Bereft of any details, the noticee is left clueless as to the case, which he is required to meet. In the event the petitioner desires to contest the notice, the only response that he could give is that he has not violated the provisions of Section 16 of the CGST Act/ DGST Act. Plainly, that would be of little assistance to the respondent. The impugned order also does not provide any reason for cancelling the petitioner s GST registration except to say that it is in reference to the impugned SCN - It is apparent that the impugned order has been passed in violation of the principles of natural justice. The impugned SCN and the impugned order are set aside. The petitioner s GST registration is directed to be restored forthwith - the petition is disposed off.
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2024 (7) TMI 1378
Inadmissible Input Tax Credit (ITC) utilization from cancelled suppliers - this writ petition is confined to the supplies allegedly made by Dhiraj Kumar Sharma to the petitioner no. 1 in respect of the tax period from September 2017 to October 2017 - HELD THAT:- The petitioner no. 1, in the appeal filed therefrom, which is confined to the supplies allegedly effected by Dhiraj Kumar Sharma had disclosed and produced documents which included four inward tax supply invoices mentioned in Table A of the order, party ledger for the period from 1st April, 2017 to 31st March, 2018, bank statements and copy of the GSTR- 2A. Admittedly, in this case the petitioner no.1 s supplier had filed returns for the relevant tax period. It is also noticed that the relevant e waybills had also been disclosed by the petitioner no.1 which, inter alia, include the name of the transporter. Though the petitioner no. 1 had discharged its initial burden of proof, the appellate authority had, by glossing over the same without indicating the documents required to be disclosed by the petitioner no. 1, arrived at a finding that the petitioner no. 1 is not eligible for ITC. In this context, it may be noted that the finding returned by the appellate authority that the petitioner no.1 is not eligible for ITC in absence of transport and other documents, appears to be verbatim reproduction of the observations made by the adjudicating authority/ proper officer, in the order dated 13th April 2022. The aforesaid order suffers from non-application of mind and is perverse. The appellate authority ought to have indicated and specified as to what other documents the petitioner no.1 was required to be disclosed to establish the genuinity of the transaction. Although, in page 198 of instant writ petition it appears that the appellate authority had recorded that the petitioner no. 1 could not establish that the goods had been moved and had failed to produce and substantiate the same by disclosure of documents like loading expenses, transportation expenses, unloading expenses and other vouchers. The matter is remanded back to the appellate authority. The appellate authority in the facts of the case is directed to reconsider the matter with respect to the issue of movement of goods - Petition allowed by way of remand.
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Income Tax
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2024 (7) TMI 1381
Offence punishable u/s 276B - delay in depositing the TDS amount in the account of the Opposite Party (Complainant) ranging from 31 days to 214 days - COVID-19 Pandemic Effects - Reasonable and sufficient cause - As decided by HC [ 2023 (11) TMI 447 - ORISSA HIGH COURT] present complaint is vitiated as the failure on the part of the Petitioners to comply within the provision of law as to deposit of the deducted TDS was on account of the reasonable causes for the prevalence of COVID-19 Pandemic standing on their way. The order of sanction thus being found to have been passed without due application of mind and in a mechanical manner even putting the blame upon the Petitioners for not filing any exemption/ relaxation notifications / circulars, the same stands vitiated. The Court below in the facts and circumstances ought not to have taken cognizance of the offence u/s 279B, section 2(35) and 278(B) of the I.T. Act when even the latter two are no penal provisions and as such is bad in law and liable to be set aside.Revision is allowed - HELD THAT:- Delay condoned. We are not inclined to interfere with the impugned judgment and order of the High Court. The Special Leave Petition is, accordingly, dismissed.
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2024 (7) TMI 1380
Assessment of trust - Charitable Activity - assessee's activities were commercial due to the receipt of fees and corporate donations - As argued activities undertaken by the respondent/assessee clearly fall within the broad principles which came to be propounded by the Supreme Court in Lok Shikshana Trust [ 1975 (8) TMI 1 - SUPREME COURT] - whether Tribunal has correctly come to the conclusion that the activities undertaken by the assessee would fall within the sweep of the expression education as appearing in Section 2 (15)? - HELD THAT:- As is manifest from the record of facts appearing in that paragraph, the assessee in the concerned AY was found to have essentially undertaken educational activities spread across various subjects and streams, providing opportunities to underprivileged youth and others and essentially skilling them for the purpose of future employment. It is also stated to have undertaken various digital literacy initiatives spread across as many as ten States of the country. The instruction was imparted at either NIIT-run centers or NGO-partnered establishments. Its revenue stream was disclosed to flow from tuition fees and other educational services provided by it. The fee structure was asserted to be heavily subsidized and discounted. It is the aforesaid facts which appear to have weighed upon the AO to characterize the activities undertaken by the assessee as being charitable and falling within the meaning of the word education and which falls within the six principal activities spoken of in Section 2 (15). Tribunal came to the firm conclusion that the activities undertaken by the respondent/assessee were systematic and proceeded along well-defined lines based on curated courses all of which were designed to skill and educate the students who had been enrolled. On facts, the assessee was also able to establish beyond a measure of doubt that the courses run by it were informed by a fixed curriculum and attendance criteria and thus fulfilling all essential ingredients of formal education. The Tribunal also found that the corporate receipts were mainly flowing from the CSR obligations of the concerned business houses and could not possibly be viewed or characterized as aimed at profiteering. Those corporate donations were asserted to have been utilized solely for the purposes of the educational activities which were undertaken by the assessee. It becomes pertinent to note that the veracity of the facts noticed above was not contested by the respondents before us. Tribunal, in our considered opinion, correctly found in favour of the assessee when it held that affiliation with and recognition by a regulatory authority are not essential attributes of education under Section 2 (15). This clearly flows from the principles enunciated by the Supreme Court in both Lok Shikshana Trust and New Noble Educational Society. This, of course, was in addition to it having been duly established that the centers of the respondent/assessee had been duly approved by the NSDC, which undoubtedly is a nodal agency concerned with vocational and technical training. We ultimately bear in mind the precept formulated by the Supreme Court in Lok Shikshana Trust [ 1975 (8) TMI 1 - SUPREME COURT] and where it explained Section 2 (15) as being concerned with training and developing knowledge, skill, mind and character by formal schooling. These tests, in our considered opinion, were clearly met by the assessee. We also find merit in the Tribunal s conclusion that the mode and manner in which education is imparted would be a concept which would have to necessarily be evaluated bearing in mind the march of technology and the myriad modes of imparting instruction which now exist and have enabled institutions to overcome barriers of distance and time. Imparting of education through a virtual mode or by the adoption of new technologies would not detract from the said activity, otherwise fulfilling the requirements of structured education. The test, as propounded by Lok Shikshana Trust, essentially requires us to evaluate whether a formal and systematic process of imparting education had been adhered to. We thus find no merit in the challenge which stands raised to the order of the Tribunal. Considering the conclusions that we have arrived at on the principal issue of Section 2 (15), the question with respect to whether the CIT (E) was justified in invoking its powers conferred by Section 263 of the Act pales into insignificance and need not be answered. Decided in favour of the assessee.
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2024 (7) TMI 1379
Validity of Faceless assessment of income escaping assessment - Challenge to notice u/s 148 as non-compliance with Section 151A of the Act - notices issued by JAO instead of FAO - HELD THAT:- Similar issue came up for consideration before a Division Bench of Bombay High Court in Hexaware Technology Ltd.( 2024 (5) TMI 302 - BOMBAY HIGH COURT] discussed the issue at length and held that notice under Section 148 after introduction of Finance Act, 2021, cannot be issued by Jurisdictional Assessing Officer. Considering the fact that the impugned notice issued by the JAO was itself defective and without authority of law and the same was contrary to the provisions of Section 151A read with the Scheme dated 29 March, 2022 issued thereunder, the Petitioner having filed an Appeal ought not distract this Court s attention. Consistent with the view taken in Vikram Developers [ 2024 (5) TMI 1453 - BOMBAY HIGH COURT] and since there is no dispute that the JAO had no jurisdiction to issue the impugned notice, the Writ Petition is accordingly allowed and the impugned notice as well as the reassessment order are hereby quashed and set aside. So also, consequential demand notices or penalty notices will also stand quashed and set aside.
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2024 (7) TMI 1377
TDS u/s 195 - default u/s. 201(1)/201(1)(A) - assessee at the time of payment of consideration for purchase of shares deducted tax at source@10% plus applicable surcharge and education cess on total consideration paid - action of the TDS Officer in re-characterizing the nature of transaction from sale of shares to sale of assets - HELD THAT:- As an undisputed fact that the assessee has deducted tax at source on the payments made for purchase of shares from the non-resident sellers. A perusal of order passed u/s. 201(1)/201(1A) of the Act shows that the AO has passed an order purely on surmises and conjectures changing the nature of transaction of sale of shares to sale of assets . AO in proceedings u/s. 201 of the Act has gone beyond his jurisdiction in re- characterizing nature of transaction. Further it is an undisputed fact that the assessee has deducted tax at source @10% plus surcharge on consideration paid for purchase of shares and has deposited the TDS to the Government exchequer. Thus, in light of undisputed facts the assessee cannot be held as assessee in default . We find no infirmity in the impugned order; hence, the same is upheld. Decided against revenue.
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2024 (7) TMI 1376
Addition u/s 14A - Addition of interest expenditure - Admissibility of deduction of expenditure incurred in earning exempt income - HELD THAT:- CIT(A) as well the assessing authority has not brought any material suggesting that the interest free funds were diverted for earning of tax free income. Under these facts, the disallowance made in respect of interest expenditure is not justified. Moreover, the AO and Ld. CIT(A) did not advert to the submissions of the assessee that bank charges and bank guarantee charges do not partake character of interest and had been wrongly included as interest while making disallowance u/s 14A of the Act. We therefore, respectfully following the judgement of Godrej Boyce Mfg. Company Ltd [ 2017 (5) TMI 403 - SUPREME COURT ] hereby delete the impugned disallowance made u/s 14A of the Act in respect of interest expenditure. Thus, grounds of the assessee s appeal are allowed.
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2024 (7) TMI 1375
CIT(A) requesting for exemption from depositing of advance tax as is contemplated u/s 249(4)(b) - non appearance/non compliance before the AO by the assessee during reassessment proceedings - HELD THAT:- Sufficient reasons for non appearance/non compliance before the AO by the assessee during reassessment proceedings , are also demonstrated by the assessee. Now, we set aside the appellate order passed by CIT(A) and direct the CIT(A) to make necessary preliminary enquiry as to the assessee s claim to have filed additional evidences before ld. CIT(A) by way of Land Records 7/12 and 8A, evidence of agricultural income etc., and if that be found to be prima-facie true, then CIT(A) shall admit the appeal as good and reasonable cause as are stipulated under proviso to Section 249(4)(b) is shown by the assessee to seek exemption from deposit of advance tax, before filing appeal with ld. CIT(A). CIT(A) shall give finding in writing on the claim of the assessee w.r.t. admission of appeal keeping in view provisions of Section 249(4)(b) read with proviso to Section 249(4)(b), by passing a reasoned and speaking order on this issue. If the ld. CIT(A) decides to admit the appeal of the assessee keeping in view provisions of Section 249(4)(b) read with proviso, then the CIT(A) shall proceed to adjudicate the appeal of the assessee, on merits in accordance with law, by passing a speaking and reasoned order, keeping in view provisions of Section 250(6) - CIT(A) shall admit the additional evidences filed by the assessee, while adjudicating the appeal of the assessee. As per section 250(6), CIT(A) has to state the points for determination, decision thereof and reasoning thereof. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (7) TMI 1374
Turnover as provided u/s 145A - Determination of turnover declared by the assessee whether it should be inclusive of excise duty or not? - Taxability of income at a higher tax slab of 30% despite turnover not exceeding INR 250 Crores. - whether such adjustment can be raised by the CPC in the intimation while processing the return of income u/s 143(1) of the Act so as to find the rate of tax in pursuance to First schedule of Finance (No. 2) Act 2019 - HELD THAT:- The purpose of including the excise duty in the amount of the turnover under the provisions of section 145A of the Act was different as evident from the object for which it was brought under the statute which is reproduced in the preceding paragraph. Thus, we are of the opinion that the meaning of the turnover as provided under section 145A of the Act cannot be adopted while determining the rate of tax in pursuance to First schedule of Finance (No. 2) Act 2019 based on turnover. However, we keep this issue open and are not inclined to adjudicate at this juncture whether to include or exclude the amount of excise duty from the amount of turnover on the issue on hand. Similarly, the ICAI does not mandate to include the amount of excise duty in the value of sales which has already been observed in this preceding paragraph. Likewise, it is also important to note that the assessee is collecting the excise duty from the customers in the capacity of an agent only and does not give any rise to the income to the assessee. The judgement in the case of CIT vs. Lakshmi Machine Works [ 2007 (4) TMI 202 - SUPREME COURT] has directed to exclude the excise duty from the amount of turnover. However, the judgment was in the context of deduction under section 80HHC of the Act. Excise duty is leviable on manufacturing of the goods and the rate of the same varies based on different goods being manufactured. There can be a situation where a company manufactures goods subject to excise duty at the rate of 5% whereas another company manufacturing other goods and excise duty is applicable on the same at the rate of 25% of the sales. Thus, in a situation where both the companies having exact amount of sales but because of different rate of excise duty their turnover can be of different amount and consequentially both the companies may fall under different tax bracket i.e. 25% or 30% as the case may be which does not appear to be in consonance with the intent of Article 14 of Constitution of India. Based on the above discussion, it is transpired that the issue whether to include or exclude the excise from the amount of turnover for determining the rate of tax in pursuance to First schedule of Finance (No. 2) Act 2019 is a debatable issue which cannot be resolved in the intimation processed u/s 143(1) of the Act. Whether to include excise duty as a part of the turnover while applying the tax rate is a debatable issue and the same cannot be resolved while processing the return of income under section 143(1)? - CIT-A while adjudicating the issue discussed above has not made any reference to the turnover for the financial year 2016-17 which was required to be considered for working out the applicable tax rate. As such the Ld. CIT(A) has adopted the turnover of the assessee for the year under consideration for working out the tax rate applicable to the assessee. We are of considered opinion that the adjustment made by the revenue while processing the return of income under section 143(1) of the Act in the given facts and circumstances is not sustainable being an issue of debatable nature. Hence, we set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is hereby allowed.
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2024 (7) TMI 1373
Addition u/s 68 - assessee could not furnish supporting documents to prove the sources that recovery has been made from debtors besides not substantiating the cash withdrawals from bank with supporting evidence - HELD THAT:- The assessment order as well as impugned order that against the notice issued by the AO assessee furnished the details of cash deposits in various bank accounts, recovery from debtors, cash book, etc. and no further notice has been issued by the AO seeking further details. Since the AR prayed to afford an opportunity to furnish complete details as may be required by the AO to prosecute his case, we deem it proper in the interest of justice to remand the matter back to the file of the AO for his consideration afresh. Assessee is at liberty to file evidence in support of his claim and the AO shall conduct the assessment proceedings de novo. Thus, grounds raised by the assessee are allowed for statistical purposes.
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2024 (7) TMI 1372
TP Adjustment - Corporate Guarantee commission - HELD THAT:- Coordinate Bench of this Tribunal in assessee s own case for the assessment year 2018-19 [ 2023 (4) TMI 1254 - ITAT HYDERABAD] considered this issue in extenso and held that ALP on account of corporate guarantee at the 0.50% on the amount guaranteed is proper commission. We direct AO/TPO to adopt the same at 0.50% on the guaranteed amount. Relevant grounds are answered accordingly. Interest on receivables - We are of the considered opinion that when the assessee is extending the credit period between 60 days and 240 days to the non-AEs, and basing on this the learned DRP in the assessment year 2018-19 took a view that the credit period as agreed between the parties shall be respected and followed and such a finding of the learned DRP has become final without the Revenue challenging the same, the credit period which is extended to the non-AEs by the assessee shall be extended to the AEs also. On this reasoning we do not find any illegality or irregularity in the findings returned by the CIT(A) that the interest shall be record beyond the credit period as agreed between the parties. Rate of interest - We are of the considered opinion that the ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points. We direct the AO / TPO to adopt the same. Grounds are partly allowed accordingly. Disallowance of weighted deduction claimed u/s 35(2AB) - HELD THAT:- The issue has clearly been covered by the decision of Cadila healthcare Ltd [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] referred to and followed in the case of M/s Sun Pharmaceuticals Industries Limited [ 2020 (3) TMI 345 - GUJARAT HIGH COURT] A coordinate Bench of this Tribunal in assessee s own case for the assessment year 2018-19 having noticed the judicial review on this aspect, including the argument advanced in that case, and basing on CIT vs. Vegetable Products Ltd [ 1973 (1) TMI 1 - SUPREME COURT] reached a conclusion that when once the clinical trial expenses incurred outside the approved R D facilities, were approved by the prescribed authority the assessee is entitled to claim deduction u/s 35(2AB) of the Act. We hold the issue in favour of the assessee and allow weighted deduction in respect of the expenses incurred on clinical trials.
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2024 (7) TMI 1371
Reopening of assessment - reason to believe - Notice after the expiry of period of four years - Disallowance u/s 14A - transaction of purchase of shares of HHML questioned - HELD THAT:- The share agreement and reconciliation of investments capturing quantity and value of opening investment, investment purchased and sold during the year were provided to the AO during assessment and infact AO made a incorrect observation while disposing the objections to the reopening that agreement was not provided. There is also substance in the contention of ld. Sr. Counsel that when AO was examining disallowances for purpose of Section 14A of the Act, certainly AO had material before him to also examine the prices of acquisition of investments and any hidden cost or advantages. We further find that the Assistant Director of Income-tax (Investigations) had raised queries on the basis of reliable sources about 26% stake acquired by the assessee @ Rs. 739/- per share and this was replied by the assessee by letter dated 24.03.2011 informing that this matter is already under inquiry by International Taxation Division of the Income-tax Department by issuance of a notice u/s 133(6) of the Act and, therefore, request was made that to avoid multiplicity of proceedings, the proceedings be dropped by Assistant Director of Income-tax (Inv.), Unit-5(3), New Delhi. The instances of disclosures to various government and statutory authorities and tax authorities sufficiently establish that the assessee was not acting in any surreptitious manner in regard to the share purchase transaction. Rather, as it appears to be a case where an Indian enterprise was not selling its stake to a foreign enterprise, but, purchasing the stake of a foreign enterprise of the stature of Honda. Which certainly must be looked upon as a sign of growing and strengthening of India as a emerging economy, for which, Hero group must have been eager to take credit and thus the information was not kept close to heart but shared at large. So much so that based on media reports only a notice dated 09/03/2011 was issued to the assessee by Director of Income Tax (International Taxation)-1, New Delhi, to examine the purchase of 26% stake in Hero Honda Motors Ltd. by Hero Investment Pvt. Ltd. from Honda Moto Company Ltd., Japan, and information u/s 133(6). As we conclude that there was no failure on the part of the assessee to furnish full and true material facts at the time of assessment and the content and information in the return of income, annual report, books of accounts, specific queries raised, and replies filed etc., as discussed in detail above, were quite supposedly examined by AO while completing the assessment u/s 143(3) of the Act, thus making the same set of information as basis of recording of reasons u/s 148 of the Act, is merely change of opinion. Thus by merely mentioning in the reasons recorded that certain fresh information was received from the office of Pr. CIT regarding alleged benefit received by the appellant in transaction of purchase of shares of HHML from Honda, which was not disclosed by the appellant during the original assessment proceedings, the AO cannot come out of the rigour of law, which mandates that re-opening can only be on the basis of fresh tangible material. Whether the impugned discount on the transaction can be treated as benefit or perquisite of the business? - As considering the agreements and MOU executed between the Honda and Hero groups of companies, the acquisition of shares by Honda is only strategic investment to consolidate the holding in JV. Thus, we find substance in the submissions that provisions of section 28(iv) per se does not apply to the disputed transaction, as the assessee has held such shares in the capacity of promoter shareholder and not for the purpose of trading and has been consistently showing it as long term capital investment in the books of accounts and balance sheet. It is established that assessee has held the shares of HHML since inception for more than 25 years as long-term investments and not a single share has been sold by the assessee during those 25 years. The Circular No.6/2016 dated 29.02.2016, expressly lays down that where the taxpayer treats shares as investment in the books of accounts, then, profit on sale of listed shares held for more than twelve months should be taxed as long-term capital gains. Thus, any benefit, if there is any, may fall within capital field. Then, when we consider the order dated 29.01.2014 of the CIT(A), Ludhiana in appeal against original assessment order dated 29.01.2014 available at pages 204-229 of the paper book. We find that the CIT(A) has rejected AO s conclusion of assessment u/s 143(3) that assessee was earning business income from sale and purchase of shares, etc., and CIT(A) concluded that shares were held as investments giving rise to capital gains only. Infact by reopening vide notice u/s 148 AO has tried to undo the findings of CIT(A) order dated 29.1.2014 where in it was categorically held that income from sale and purchase of shares was to be treated as capital gains and not business income. Thus when there was no business income from the selling shares held as investments, certainly provision of section 28(iv) of the Act could not have been invoked. Thus bringing the difference in the price of acquisition of shares with market price as benefit arising from business u/s 28(4) of the Act was in a way again holding that sale and purchase of shares gives rise to business income - we are of firm view that AO had fallen in error to invoke provision of section 28(iv) of the Act. Decided in favour of the assessee.
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2024 (7) TMI 1370
Disallowance of interest component u/s 14A r.w.r. 8D - HELD THAT:- As going through the contents of order passed by ITAT in the assessee s own case for assessment year 2010-11 we observe that the Tribunal has categorically given relief to the assessee on this issue on the ground that the assessee s own funds are far in excess of the investments made in funds yielding exempt income. Accordingly, so far as disallowance of interest u/s 14A of the Act is concerned, no disallowance is called for u/s 14A of the Act. Assessee appeal allowed. Disallowance of ESOP expenses - allowable business expenses or not? - CIT(A) deleted addition - HELD THAT:- The law on the subject, is unanimous as various tribunals by following the decision of Biocon Ltd. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT ] have decided the issue in favour of the assessee. Secondly, we observe that the ESOP scheme under consideration was part of the Annual Report of the assessee and further the specific details of ESOP benefit granted to its employees had been duly disclosed to the assessing officer during the course of assessment proceedings, being the difference between the market price of shares at the time of grant of option to these employees and the market price of such shares as on the date of exercise by employees of the assessee company. Therefore, even from this perspective, the expenses so claim were not contingent the nature, since the assessee had claimed the ESOP expenses at the time of actual exercise of option by its employees, during the year under consideration. Sssessee had reflected such ESOP expenses as perquisites in the hands of its employees and TDS at appropriate rate had also been deducted by the assessee company at the time of grant of ESOP benefits to its employees. ESOP expenses are allowable in the hands of assessees under Section 37 of the Act and looking into the facts of the assessee s case, as highlighted above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in deciding this issue in favour of the assessee.
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2024 (7) TMI 1369
Loss in respect of embezzlement of stock by an employee - loss of jewellery/ stock - HELD THAT:- The assessee has not only been able to substantiate its claim, but has also filed all the relevant evidences to prove that there was an actual embezzlement. All these explanation and material on record proves beyond doubt the loss of jewellery/ stock claimed by the assessee and we reject the finding and the reasoning given by the authorities below. Accordingly, we hold that the loss claimed by the assessee during the year on account of embezzlement of stock is allowed and disallowance made by the AO is deleted. Accordingly, the appeal of the assessee is allowed. Estimation of income - Bogus purchases - report based on information on portal of Maharashtra VAT department about few dealers providing bogus bills, deduced that the assessee has taken accommodation entries - HELD THAT:- As in case Ashwin Purshotam Bajaj [ 2023 (8) TMI 770 - BOMBAY HIGH COURT ] held that section 69 is not applicable to such bogus purchases and only profit has to be added and their Lordships have also held that, once the sales have not been doubted against the said purchases and there is no dispute regarding the quantitative details of stock as per books then the ld. A.O. cannot add the entire purchase and only GP rate is to be applied. Similar view has also been taken in the case Rishabhdev Technocable Ltd. [ 2020 (2) TMI 662 - BOMBAY HIGH COURT ] Moreover, we find that in case of the assessee for A.Y. 2007-08, 2008-09 and 2009-10, this Tribunal had applied GP rate of 3% over and above the GP rate declared by the assessee. Accordingly, in the facts and circumstances of the case, the gross profit of 3% is applied over and above the GP rate declared by the assessee on the bogus purchase. Accordingly, the assessee gets part relief.
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2024 (7) TMI 1368
Validity of assessment order without quoting DIN - HELD THAT:- As the assessment order does not contain the DIN but as evident from the remand report, which submitted by AO to CIT (A), DIN was duly generated and intimated to the assessee vide letter dated 28.12.2019 and duly been delivered to the registered email of the assessee. Hon ble Supreme Court of India in the case of CIT V/s Brandix Maurititus Holdings Ltd. [ 2024 (1) TMI 276 - SC ORDER ] has granted stay on this issue, therefore the argument of the assessee regarding the validity of assessment order, without mentioning of DIN in the body of assessment, though the same was duly generated and separately intimated to the assessee, is not found to be acceptable and hence the same is rejected. Approval of draft assessment order u/s 153D - We find that the fact of giving approval is duly mentioned in the body of assessment order itself, therefore there is nothing on record to presume that the approval was given in mechanical manner. Regarding non generating and mentioning the DIN on the approval granted by ACIT we have given the elaborated finding on the issue of DIN in para above and the same is mutatis mutandis applied here also. The other arguments raised by the assessee is regarding satisfaction note being not proper, assessment based on surmises conjecture and cross examination etc. and also the principal of natural justice, are interlink interconnected to the addition made by AO, which is challenged in ground No. 2 of appeal, therefore the same are being dealt with while adjudicating the ground No. 2 of the appeal and for the sake of brevity the same are not being adjudicating here. Unaccounted money by the assessee on sales of flats at Royal Imperia Apartment - material placed on record, it is apparent that during the course of search at Shri Upendra Kumar Soni a document was found seized - HELD THAT:- Addition so made the AO relied on the document found from the possession of Shri Upendra Kumar Soni and also on some extracted statement, though in such statement he nowhere admitted to pass on/receiving any cash amount by the appellant. We found that there is a noting of cash over the seized from the possession of Shri Upendra Kumar Soni and to this effect the AO neither examined to Shri Upendra Kumar Soni nor provided his cross examination to the assessee. CIT (A), directed to Ld. A.O. to provide the cross examination of Shri Upendra Kumar Soni to the assessee, which is basic principle of natural justice and it is not a mere formality. AO has not made any effective efforts to enforce the attendance of Shri Upendra Kumar Soni by issuing of summons u/s 131 of the Act. It was incumbent on the AO to enforce the attendance of shri Upendra Kumar Soni and to record his statement on the disputed issues. Therefore, without confrontation of fact of receiving of on money by the appellant from Shri Upendra Kumar Soni and without allowing the cross examination, the addition made by AO in absence of corroborative evidence is not sustainable in the eyes of law. The Hon ble Supreme Court in the case of Andaman Timber Industries vs. CCE [ 2015 (10) TMI 442 - SUPREME COURT ] while dealing with the issue of violation of principles of natural justice for not providing the opportunity of cross examination of the witnesses whose statements were relied on by the AO has held if the testimony of the two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show-cause notice. When person has not stated anything about the assessee in his statement recorded u/s 132(4) of the Act during search operation which has a evidentiary value in the eyes of law then any further statement recorded u/s 131 of the Act that too after Hon ble ITSC order, it shall not be sufficient to make addition in the assessee s case. We hold that the Id. CIT(A) has erred in confirming the addition. Thus we set aside the order passed by CIT(A)-2, and direct the AO to delete the entire addition. Assessee appeal allowed.
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Customs
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2024 (7) TMI 1367
Challenge to final assessment orders - Jurisdiction of the Assistant Commissioner in passing final assessment orders - no opportunity of hearing was given to the petitioner - non-compliance with the principles of natural justice - HELD THAT:- This Court finds that the petitioner was provisionally assessed under PD Bond No.77/2023 dated 02.06.2023 for an amount of Rs. 30,79,13,411/- executed by the exporter. As per the contract reference dated 18.05.2023, the overseas buyer was M/s. Caravel Metallurgical Limited, Hong Kong. The price of Iron Ore Calibrated Lumps was USD 82.00 per DMKT CFR FO One Main Port North China based on 56.50% Fe fraction prorate. As per the Fixture Note dated 26.05.2023, the Freight rate was USD 10.70. On the relevant date the exchange rate of USD 1.00 was Rs.81.70. The aforesaid Shipping Bill was assessed provisionally under Section 18 of the Customs Act, 1962 under cover of P.D. Bond No.77/2023 dated 02.06.2023, for an amount of Rs.30,79,13,411/- executed by the exporter, for want of Final Invoice, Test analysis Reports, e-BRC etc. Paragraph 5.0-Test Reports of the impugned assessment order dated 24.04.2024 under Annexure-1 shows that CRCL Re-Test Report at Sl. No.4 in respect of CRCL, Pusa, New Delhi has been accepted and other four test reports in respect of SGS India Pvt. Ltd., SGS India Pvt. Ltd., CRCL, Visakhapatnam and CCIC have been rejected without assigning any reasons. Therefore, it is contended that acceptance and rejection of such reports, without assigning any reason, cannot be sustained in the eye of law. The impugned assessment orders dated 24.04.2024 and 18.05.2024 passed by opposite party no. 1-Assistant Commissioner, Gopalpur Customs Division, Ganjam under Annexures-1 2 respectively are quashed - matter is remitted to the authority concerned with a direction to hear it afresh and pass appropriate order in accordance with law. Petition allowed by way of remand.
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2024 (7) TMI 1366
Rejection of the declared F.O.B. value along with imposition of penalty under Section 114(iii) and 114AA of the Customs Act, 1962 - manner of conducting the market enquiry on the basis of the wholesale market of Delhi, whereas gooda are purchased from the impugned goods from Ludhiana - HELD THAT:- From the records of the case, it is apparent that the market enquiry was conducted in the presence of the Shri Sunil Bhandari, the Authorised Representative of the appellant company alongwith three independent sellers. The re-calculated F.O.B. value was duly explained to Shri Sunil Bhandari and he, categorically accepted the same. Moreover, as pointed out by the learned Authorised Representative for the respondent, the Authorised Representative of the appellant company in his statement recorded statement under Section 108 of the Act admitted and agreed to the value arrived at during the market enquiry. Thus, when the exporter himself has participated in the market enquiry, along with independent sellers and has agreed to the value arrived in his presence, nothing survives to challenge further. The reliance placed by the learned Authorised Representative on the decision of the Tribunal in CC (IMPORT) , ICD, TKD, NEW DELHI VERSUS M/S SODAGAR KNITWEAR [ 2018 (5) TMI 686 - CESTAT NEW DELHI] on the principle that the admitted facts need not be proved, rejected the challenge to the calculation of the assessable value as the Manager of the appellant admitted in his statement that he agreed with the manner of calculating the assessable value. Since there was misdeclaration as to the quantity and the value of the goods, the goods were rightly held to be liable for confiscation under sub-sections (i),(ia) and (ja) of Section 113 of the Act. Consequently, the imposition of penalty under Section 114 of the Act is upheld as there was overvaluation of goods of around 2.8 times - the exporter has intentionally mis-declared the value and quantity of the goods to be exported and for that they submitted false documents or information so as to avail undue export benefits, i.e. Drawback and ROSCTIL on the goods. Therefore, the imposition of penalty under Section 114AA of the Act is justified and is affirmed. There are no reason to interfere with the impugned order and hence the same is affirmed - appeal dismissed.
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2024 (7) TMI 1365
Confiscation of export goods - imposition of redemption fine and penalty - intentional mis-declaration on export goods with intent to avail higher rate of drawback, or not - HELD THAT:- Only few goods were found to be mismatched with the invoice and packing list. It is further found that the Appellant had given cogent explanation based on the statement and clarification of the shipper, via letter, clarifying that due to a large variety of goods being packed, the error occurred at the time of preparing the invoice, resulting in some mismatch which is not deliberate. Thus, there is no case of any deliberate mis-declaration on the part of the Appellant (exporter) who had filed the Bill of Entry declaring the goods under export as per the invoice and packing list. Accordingly, the allegation of mis-classification mis-declaration on the part of the Appellant is set aside. Since there is no willful mis-classification or mis-declaration on the part of the Appellant, the order for confiscation of the goods and imposition of redemption fine is not sustainable in law. The confiscation of the export goods cannot sustain and it is hereby set aside. Penalty imposed on the Appellant is unwarranted - the impugned order is set aside - Appeal allowed.
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Corporate Laws
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2024 (7) TMI 1364
Seeking permission to withdraw application - Application on behalf of the substituted LRs of Defenant No. 3, to file a Written Statement - absolute new defence is sought to be taken by filing a Written Statement by the Defendants who have stepped into the shoes of the deceased Defendant - HELD THAT:- The application is permitted to be withdrawn with the liberty as prayed for. Seeking dismissal of the Suit as infructuous - Section 248 read with Section 250 of the Companies Act, 2013 and Order XXII Rule 8 CPC - HELD THAT:- At present, the Company has been made active to enable the filing of annual returns - the conditions imposed by the NCLAT stand complied with. At this stage, it cannot be said that the Company is dead and the Suit stand abated - application is without merit and is hereby dismissed.
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2024 (7) TMI 1363
De-sealing and handing over of the physical, vacant and peaceful possession of the property - Rules 6 9 of the Companies (Court) Rules, 1959 - removal of the security guards deputed by the Official Liquidator from the property - HELD THAT:- The manner in which the sale agreement dated 16.04.2013 was executed, towards the transfer of shareholding of SJSPL, as also the pattern of payments pursuant to the same, which events took place prior to the winding up petition being entertained by this Court, raise an inference that such disposition had been done in the ordinary course of business. The transfer of shareholding was a purely commercial decision taken in the ordinary course of business and was obviously based on certain conditions prevailing in the real estate market. The management of SJSPL pursued its remedies against the respondent company in good faith, in the process laying claim over the subject property subsequent to the adverse action taken by the Noida Authority. Since it is evident that the right to the shareholding of the applicant company/SJSPL did not fructify in favour of the respondent/ company (in liquidation), it is difficult to discern that there has been any lack of bonafides or diligence on the part of the applicant/SJSPL and for that matter, on the part of the Ex-directors of the company (in liquidation). It is also difficult to discern any element of collusiveness or conspiracy between the two parties, soon before or after commencement of the winding up petition vide order dated 23.02.2016. In such a scenario, there could be no two opinions but to hold that the subject property cannot be made available to the Official Liquidator for the purposes of the winding up proceedings. The benefit of vesting the subject property in favour of the company (in liquidation) so as to enhance its assets cannot be sustained. Lastly, merely because some schemes for revival of the company (in liquidation) have been proposed by the stakeholders and are pending for consideration before this Court, the same would not warrant vesting the subject property in favour of the company (in liquidation), particularly when, apart for bhumipujan at the site, no construction work ever commenced at the subject property. The instant application moved by the applicant-SJSPL is hereby allowed and the Official Liquidator is directed to de-seal the subject property viz. Plot No.1, Sector 154, Noida- 201301 and hand over its peaceful and vacant possession to the applicant-company. Application allowed.
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Insolvency & Bankruptcy
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2024 (7) TMI 1362
Notice issued without commenting on the maintainability of the petition under Article 136 of the Constitution of India - HELD THAT:- The notice is issued without commenting on the question of maintainability of the petition under Article 136 of the Constitution of India, as a legal issue is sought to be raised relying upon the Explanation to Section 14 of the Insolvency and Bankruptcy Code, 2016. A copy of the license deed, including the terms and conditions on which it was granted, along with the statement of accounts will be filed by the petitioner, Department of Town and Country Planning, Haryana, in this Court within a period of four weeks from today. Rejoinder affidavit may be filed within three weeks after service of the reply.
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2024 (7) TMI 1361
Disqualification from participating in coal mine auctions - debarment is premised on certain outstanding unsettled dues attributable to the Petitioner s erstwhile management - whether the Petitioner is liable for the alleged dues, thereby ascertaining their eligibility to participate in the coal mine auctions? - HELD THAT:- With the approval of the resolution plan by the NCLT on 20th March, 2023, the claims that were not submitted in the required manner or were rejected by the Resolution Professional, are deemed extinguished. This extinguishment includes all dues, including statutory dues owed to the Central Government that were not incorporated in the resolution plan. The Respondent s inaction in contesting the categorization of their claims by the Resolution Professional, or challenging the resolution plan signifies their acceptance of the resolution process. Moreover, even if we were to hypothetically consider the financial impact of the PBG claim, had it been recognized as valid operational debt, the actual financial benefit to the Respondent would have been minimal - there exists no legal basis for the Respondent to obstruct the Successful Resolution Applicant s participation in the auction process. The finality and decisiveness of an approved resolution plan is recognized under the IBC s framework. The resolution process, as endorsed by the NCLT, aims to free the corporate debtor from past liabilities and enable a fresh operational start, unhampered by unresolved and extinguished debts - The mandate of Section 31 (1) of the IBC underscores that once a resolution plan is approved by the Adjudicating Authority, it is binding not only on the corporate debtor, but also on all stakeholders, including Central and State Governments, as well as any local authorities to whom debts are due under any current laws. This binding nature extends to all statutory dues owed to these authorities. In COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] the Supreme Court has elaborated on the treatment of claims post-approval of a resolution plan. The Apex Court emphasized that a Resolution Applicant should not be encumbered by sudden and unforeseen claims. Such occurrences would not only disrupt the financial calculations and expectations that underpinned the resolution plan, but also undermine the very purpose of the IBC, which aims to streamline and stabilize the process of corporate revival - the introducing claims that were not part of the list of assessed and finalized claims in CIRP post the approval of resolution plan, contravenes the established legal framework and the Supreme Court s holding. This ruling importantly guards against the hydra head phenomenon, where unexpected financial liabilities emerge post the CIRP, potentially destabilizing the newly revived corporate debtor and deterring future investment and participation in the insolvency resolution processes. The IBC facilitates economic rehabilitation of the corporate debtor, enabling it to service its debts, thereby enhancing the reliability of the credit market. Importantly, the Code prioritizes the interests of all stakeholders, including the corporate debtor, by shielding it from its past management and potential liquidation threats. This focus on revitalization over mere credit recovery segregates the debtor s interests from those of its previous promoters or managers, underscoring the IBC s object as a protective, not adversarial, mechanism in the resolution process. This legislative framework is designed to return the corporate debtor to viability, benefiting the broader economic ecosystem - the Court remains unconvinced with the Respondent s construal of the observations of the NCLT in deciding concessions to the corporate debtor in respect of their obligations to the Respondent. The resolution framework intends to balance the interests of all stakeholders, including creditors, by ensuring that they are bound by the finalized resolution plan. As such, the Respondent, who is a creditor within its context, is obligated to adhere to the stipulations of the resolution plan as approved on 20th March, 2023, which mandates an interpretation and application of the IBC as per its intent and statutory mandate. By holding the Petitioner accountable for liabilities that have been legally extinguished, the Respondent has failed to adhere to the statutory mandate of the IBC and the broader objectives of insolvency resolutions. The insistence on clearing past dues contradicts the rehabilitative intent and purpose of the IBC, calls for judicial intervention. The impugned decision dated 22nd May, 2024, issued by the Respondent, stipulating that the Petitioner remains ineligible to participate in coal mine auctions until outstanding dues to the Petitioner are cleared, cannot sustain - the present writ petition is allowed and the impugned decision dated 22nd May, 2024 is set aside.
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FEMA
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2024 (7) TMI 1360
Validity of the notice of hearing - Adherence to Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - HELD THAT:- The adjudicating authority is duty bound to explain to the person proceeded against or his legal practitioners about the contraventions alleged to have been committed. Communicating the formation of opinion and the reasons will be informed to the person or his legal representative by the adjudicating authority under Rule 4(4) of the Rule. On receipt of such materials from the adjudicating authority on the hearing date the person concerned is at liberty to defend their case by following the procedures as contemplated under Rule 4(5) to 4(12) of the Rules. When Rule 4(4) unambiguously contemplates that the reason for proceeding with the adjudication must be informed to the persons or to the legal practitioners or to the Chartered Accountants, and the such information should be provided along with the allegations and the provisions of the Act and Rules. The said rules contemplates providing of information to the persons and therefore, Rule 4(3) cannot be construed as violating the Rules of Natural Justice or contravening any of the provisions of law. Rule 4(3) and Rule 4(4) should be read constructively so as to understand that a fair opportunity has been provided. Communicating the opinion of the adjudicating authority under Rule 4(3) may not be required since the adjudicating authority is bound to provide all such information along with the provisions under Rule 4(4) of the Rules. Therefore, Rule 4(3) cannot be read in isolation and it is to be read along with Rule 4(4) for constructively interpreting the procedures so as ensure that fair opportunity has been provided under the Rules and the Rules of Natural Justice has been complied with. Though this Court had an opportunity to consider the Bombay High Court Judgement, relied on by the Delhi High Court and the Kolkata High Court, the later judgement of the Division Bench of the Madras High Court is more relevant with reference to the spirit of Rule 4 in entirety including Rule 4(3). The scope of rules/procedures cannot be expanded by the High Court in exercise of the powers of the judicial review under Article 226 of the Constitution of India. The procedures, as contemplated under the Rules, are to be read as it is and any expansion providing additional opportunity, would undoubtedly cause prejudice to any one of the parties and would provide further cause for the purpose of prolonging and protracting the proceedings. The practice of prolonging and protracting the enquiry proceedings by approaching the High Court at each stage cannot be appreciated. Once the proceedings are commenced, the adjudicating authorities are expected to follow the procedures scrupulously and the persons concerned are bound to cooperate and defend their case by availing the opportunities to be provided in accordance with the Rules in force. In view of the fact that the judgement of the Division Bench of the Madras High Court, in the case of India Cements Limited [ 2018 (6) TMI 389 - MADRAS HIGH COURT] is the latest judgement wherein the interpretation of Rule 4(3) offered by the Bombay High Court was considered, this Court is bound by the decision of the Division Bench of High Court of Madras. WP dismissed.
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Service Tax
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2024 (7) TMI 1359
Denial of benefit of exemption from payment of service tax under the N/N. 42/2012 ST dated 29.06.2012 on account of delayed furnishing of Form EXP 3 - non-submission of the invoice of the service provider with half yearly return. Non-suited for grant of exemption is violation of the Condition No.3 of the notification - HELD THAT:- The Authorities below have misconstrued the provisions of Condition No.3 in as much as the exemption is prohibited in the event the Indian partner has an equity participation in an overseas joint venture or wholly owned subsidiary whereas in contra 69.62% shares of the appellant company are held by the Dutch US holding B.V. Netherlands. Therefore, the said condition is not really applicable in the facts of the share holding pattern - there is no violation of the said condition to dis-entitle the appellant to claim the exemption under the notification. The next ground is that EXP 3 Form, which was an intimation to the Department of intending to avail the benefit of the notification was filed by the appellant belatedly - HELD THAT:- The learned counsel for the appellant is agreed upon that this is just a procedural lapse as the half yearly return in EXP 4 that they have availed the exemption was filed within the time limit prescribed with all the requisite documents, which clearly shows that the goods have been exported. The intimation to avail exemption under Form EXP 3 was merely a procedural condition and strict compliance thereof is not required so as to deny the exemption to the appellant. The next issue raised is that the invoices issued by the foreign commission agents were not submitted to the Department - HELD THAT:- The submission on behalf of the appellant is that the commission amount has been paid as per the agency agreement through HDFC bank to the agents bank account after receipt of payments of exported goods from the customers. The details of the export invoices number and date, name of agents, shipping bills, number and date with bank reference number, F.O.B. value and amount of commission paid with copies of HDFC bank and debit advices were filed with the Department. Since the commission was paid on the basis of percentage of FOB, as mentioned in the agreement itself, there was no requirement of raising any invoice by the agent and accordingly, the same has not been raised - The export of goods is evidenced by the shipping bill and the amount of compensation as per the agreement is evident from the payment advice of the bank. The lapse, if any, is not very fatal so as to dis-entitle the appellant to claim the exemption. Similarly, the learned Single Member in M/S RADIANT TEXTILES LTD. VERSUS CCE, CHANDIGARH-II [ 2016 (10) TMI 242 - CESTAT CHANDIGARH ] considered the decisions of the High Court of Bombay in UNION OF INDIA VERSUS FARHEEN TEXTURISERS AND OTHERS [ 2010 (7) TMI 982 - BOMBAY HIGH COURT ] and of the Allahabad High Court in COMMR. OF CUS. C. EX. VERSUS J.S. GUPTA AND SONS [ 2015 (7) TMI 379 - ALLAHABAD HIGH COURT ] to conclude that the basic requirement of the notification has not been disputed by the Revenue, therefore substantive benefit cannot be denied on account of technical lapse. The appellant had complied with all the conditions of the notification and is, therefore, entitle to avail the benefit thereof. Since the issue has been decided on merits, the invocation of extended period of limitation or the interest and penalty does not require any consideration. The impugned order is unsustainable and is hereby set aside - Appeal allowed.
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2024 (7) TMI 1358
Admissibility of refund claims filed by a SEZ unit for the service tax paid on input services in terms of the notifications issued under the Finance Act, 1994 - N/N. 40/2012 ST dated 20.06.2012 and under N/N. 12/2013 ST dated 1.07.2013 - denial on the ground that the conditions specified in the notification, in particular condition number 2 (c), 3 (e) and 3 (f) were not complied with - HELD THAT:- The law is well settled that benefit of exemption granted under the notifications issued under the Finance Act are of general nature being available to any one and not necessarily confined to a unit in SEZ, which is peculiar in the case of section 26 of SEZ Act being a special power of exemption under a special enactment for a unit in a special economic zone. Therefore, notification issued under section 93 of the Finance Act 1994 cannot be pressed into service for finding out whether a unit in SEZ qualifies for exemption or not. It is found that it is an admitted position that the respondents are holders of letter of approval issued by the Development Commissioner for the manufacture of pharmaceutical products within the Special Economic Zone, Pithampur, Indore. They have availed various services for setting up their unit in the SEZ, which have been used in relation to the operations of the unit - the services rendered by the appellant are fully exempted from service tax in terms of the provisions of the SEZ Act, the condition of exemption by way of refund imposed by virtue of the notifications issued under the provisions of the Finance Act are inconsistent with the provisions of the SEZ Act and hence the provisions thereof cannot be imposed on the respondent to deny the refund. The view taken in the impugned order is in accordance with the decisions of the High Court as well as by various Benches of the Tribunal and hence no interference is called for. There are no merits in the appeals filed by the revenue - the appeals are dismissed.
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Central Excise
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2024 (7) TMI 1357
Classification of goods - Agro Shed Net manufactured by the petitioner - to be classified as fabric or as plastic - main grievance raised by the petitioner is that the respondent-authority has ignored the decision of this Court rendered in case of MESSERS CTM TECHNICAL TEXTILES LTD VERSUS UNION OF INDIA [ 2020 (12) TMI 1100 - GUJARAT HIGH COURT] and issued the impugned show-cause notice. HELD THAT:- The petitioner can raise all the contentions which are raised in this petition in reply to the impugned show-cause notice which can be adjudicated by the respondent-authority. The petition is a premature petition and there are no doubt about the capacity of the respondent-authority to adjudicate the show-cause notice after considering the contentions which may be raised by the petitioner including the decision of this Court in case of CTM Textiles Technical Ltd vs Union of India. Without entering into the merits of the matter, the petition is disposed of with a liberty to the petitioner to file reply to the impugned show-cause notice.
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2024 (7) TMI 1356
Constitutional Validity of Rule 8(3A) of the Central Excise Rules, 2002 - compliance with the provisions of Rule 8(1) read with Rule 8(3) of the Central Excise Rules, 2002 - stay granted in the case of Indsur Global Ltd. [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] by the Hon ble Supreme Court is binding upon the Learned Tribunal or not? - HELD THAT:- It cannot be disputed that the decision in the case of Indsur Global was challenged before the Hon ble Supreme Court in [ 2014 (11) TMI 1101 - SC ORDER] and by order dated 24th September, 2015 the Hon ble Supreme Court has stayed the judgment of the High Court of Gujarat. The decision of this Court in Goyal MG Gases [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT] appears to have been rendered taking note of the decision of the High Court of Gujarat in the case of Indsur Global. When similar appeal came up before this Court on earlier occasion, the Court has set aside the order of the learned Tribunal and remanded the matter back to the Tribunal to be kept pending before the Tribunal to be taken up for decision after the judgment is rendered by the Hon ble Supreme Court. The order passed by the learned Tribunal is set aside and the appeal is restored to the file of the learned Tribunal and the matter shall be kept pending and taken up after the judgment of the Hon ble Supreme Court in Special Leave to Appeal No.16523/2015 and other connected matters. Appeal retsored.
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2024 (7) TMI 1355
Approved 100% EOU under EHTP scheme - demand of duty - eligibility for the benefit of exemption N/N. 2/95-CE dated 04.01.1995 - reducing the penalty under Section 11AC of CEA. Whether the duty demanded by the Commissioner in the impugned order for Rs.15,19,610/- is liable to be confirmed or the original demand of Rs.2,54,01,776/- is to be confirmed as claimed by the Revenue in their appeal? - HELD THAT:- With regard to Annexures II, the observations of the Commissioner have not been countered with any evidences by the appellant except to produce the same document that was placed before the Commissioner which has been disputed - the Commissioner observed that the Range Superintendent vide his letter dated 14.07.2008 had reported that no documents were produced by the assessee to show that the items were duty-paid. It is also stated that in respect of other clearances, the same has been admitted. In view of the above, the submissions of the learned counsel that subsequently duty was paid cannot be accepted. It is a settled issue that waste and scrap are liable to duty even if it is generated out of duty-paid raw material. In view of the above, the confirmation of the demand of Rs. 11,78,778/- is upheld. With regard to the amount confirmed under Annexure III, the learned counsel has argued that the report placed by the Superintendent only states that connected invoices duly verified but invoice date (date of removal) does not tally with the dispatch date - The assessee could not put forward any evidence to prove that the goods were properly accounted and duty was paid on clearing the same. In view of the above, there are no reason to disagree with the Commissioner. Coming to the demand at Annexure VI, it is very clear that the Commissioner had accepted the report dated 31.03.2009 from the Range Officer which states that duty was paid for Serial No.1,2,6 to 10 while for Serial No. 4 and 5 duty was not paid, hence duty was confirmed only for Serial No. 4 and 5. Therefore, this demand needs to be sustained. Whether the appellant-assessee is eligible for the benefit of exemption Notification No.2/95-CE dated 04.01.1995? - HELD THAT:- Since the clandestine removals are beyond permissible limits by the Development Commissioner, the question of extending the benefit of Notification No.2/1995-CE does not arise. Hence, the entire demand of Rs.30,39,220/- is confirmed. Departmental appeal is partially allowed only to the extent of denying the benefit of N/N. 2/1995-CE dated 04.01.1995 to the appellant and the matter stands remanded to the original authority for re-determining the duty and with regard to penalty, to extend the benefit of Section 11AC(d) if the duty along with interest and reduced penalty is paid within the stipulated time as per law. The Revenue s appeal stands remanded, needless to say that an opportunity of being heard may be given to the appellant.
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2024 (7) TMI 1354
Valuation - Admissibility of cross model utilisation of incentives/discounts - whether the incentive of discounts declared for small/mid segment cars be allowed to luxury model cars i.e., Fortuner, Innova and Corolla attracting higher rate of duty? - Extended period of limitation - suppression of facts. HELD THAT:- In Tata Motors Ltd. case [ 2014 (6) TMI 162 - CESTAT MUMBAI] , this Tribunal held that discounts passed on by the appellant to the dealers does not satisfy the requirement of a trade discount to qualify for deduction in as much as if the discount is declared for a particular model of car, the end-user is not receiving the discount and the discount is purely arbitrary; hence, not available as an abatement from the price of the goods. Invocation of extended period of limitation - suppression of facts or not - HELD THAT:- The appellant has been following the said mechanism of passing incentives/discount since 2008 and no objection has been raised by the department. The issue raised only after the judgment of the Tribunal in Tata Motors Ltd. s case by Central Excise Revenue Audit and the demand has been computed on the basis of available records; show-cause notice was issued to the appellant demanding differential duty proposing denial of said deduction from the price. Hence, there are no suppression or mis-declaration or mis-statement of facts on the part of the appellant. In absence of any suppression or mis-declaration of the facts, larger period of limitation cannot be invoked. Consequently, the demand is barred by limitation. The impugned order is modified and appeal is allowed on the ground of limitation only.
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2024 (7) TMI 1353
Classification of goods - process of printing, cutting and folding of a special paper and supplying the finished goods for use in the surgical glove industry - to be classified under Tariff headings 4823 9013 preferred by the department and 4817 3090 of CETA? - suppression of facts - extended period of limitation - HELD THAT:- The process of manufacture of the impugned product, is that special paper in reel form is fed into the machine where the product details and user instructions are printed on the paper and then it is cut to sizes and machine folded. The resultant end product is known as surgical glove inner wrap or surgical glove inner wallet by the trade. A single sheet of the inner wrap is used for wrapping both the left and right hand (pair), latex surgical / examination gloves and are marked / indicated on the exterior of the inner wrap. The appellant has sought to classify the product under heading 4817 as a wallet . Boxes, wallets and writing compendiums, of paper or paper board, containing an assortment of paper stationery mentioned under heading 4817 of CETA, 1985 and relied upon by the appellant, are basically in the nature of goods used to store or carry smaller items. The appellant has stated that the Merriam-Webster Dictionary defines wallet as a bag for carrying miscellaneous articles while travelling, a container that resembles a money wallet such as an usually flexible holding case fitted for carrying specific items. Therefore, a wallet is defined to be any article which is used to carry or hold any item. Since there is no definition for the term 'wallet' in the tariff, reliance can be placed on the dictionary meaning of the said word. Therefore, the product in question is clearly a wallet. The nature and purpose of the inner wrap is to provide a sterile cover to the surgical gloves and is designed to facilitate the easy and uncontaminated wearing of the gloves by the users, who are generally in the medical profession. It is not designed to store and carry goods by hand and is open from three sides - The inner wrap is hence used as a packing and wrapping paper for surgical gloves and is appropriately classification under tariff heading 4823 9013 of CETA as determined by revenue. This being so the classification of the goods under heading 4817 3090 has correctly been rejected. Extended period of limitation - suppression of facts or not - HELD THAT:- The issue involves the classification of a product known in the trade as surgical glove inner wrap or surgical glove inner wallet . Wallet figures under tariff heading 481730 of CETA, 1985. Even though, it is found that the classification of the product under the said heading is not correct due to its characteristics, the appellant could not be blamed for having thought otherwise. There is no suppression of fact that has been brought out by revenue, nor is an intention to evade payment of duty discernable. Hence the demand under the extended period of time has to fail along with the imposition of penalty. The classification of the goods under tariff heading 4823 9013 of CETA 1985, as determined in the impugned order upheld, but the demand of duty limited to the normal period with appropriate interest - the penalty imposed is set aside - appeal allowed in part.
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CST, VAT & Sales Tax
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2024 (7) TMI 1352
Deemed sale or not - supply of 'goods' defined under Section 2(h) (iii) [should have been sub-clause (ii)] and 2(h) (iv) of the GST Act - it was held by High Court that 'it is found that no transfer of right to use the goods provided by the assessee to the contractors for constructing, erecting or laying out the power grids, sub-stations and transmission lines for the assessee.' - HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petitions are, accordingly, dismissed.
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Indian Laws
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2024 (7) TMI 1351
Forum shopping - direction to respondents to provide an alternate flat in vicinity as that of flat which was booked by the petitioners in their project namely NBCC Green view Apartments - direction to respondents to refund the amount paid by the petitioners with reciprocal interest @ 15% per annum and with compensation for mental torture, agony, and harassment; and to pay extra compensation - HELD THAT:- This is a classic case of extreme hardships suffered by a home buyer who has been made to run from pillar to post after having spent his entire life savings. It is unfortunate that a 'State' under Article 12 of the Constitution of India has raised this objection that the Petitioner is guilty of forum shopping. A helpless home buyer who has sunk his life savings has no other option but to knock door after door and hoping against hope that he ould be able to get his money back. In the present case, the Petitioner entered into the agreement way back in the year 2012. In five years, the Petitioner has pumped in over Rs. 76 lakhs. A 'No Dues Certificate' has been given to the Petitioner. Structural defects have been found out in the construction after certain persons started occupying the flats. Petitioners and several other persons have been left in lurch and have been forced to knock the doors of various forums. NBCC is an instrumentality of the State. It is well settled that the 'State' is duty bound to act reasonably and fairly. In NOIDA ENTREPRENEURS ASSOCIATION VERSUS NOIDA ORS. [ 2011 (5) TMI 1043 - SUPREME COURT ], the Apex Court held that the State or the public authority which holds the property of the public acts as a trustee, and therefore, has to act fairly and reasonably. The State or the instrumentality of the State is accountable to the people and it is supposed to act in public good promoting public interest. An action of a State or the instrumentality of the State stands vitiated if it lacks bonafides. Admittedly, the total consideration of the flat has been paid in 2017. Material on record indicates that there are structural defects in the buildings. In view of the fact that the Petitioner has been deprived of his money for the last 10 years, structurally defective houses have been constructed by the NBCC, the Petitioner has been left in complete lurch, the refusal of the Respondent which is a State to pay interest on the amounts which it held in trust of the Petitioners and the reluctance to ensure that the Petitioner is rehabilitated effectively, the Respondent should be dealt with severely. This Court is, therefore, inclined to allow the instant writ petition directing the Respondent/NBCC to return the entire amount of money paid by the Petitioners within a period of six weeks from today along with interest @ 12% from 30.01.2021 till today - In view of the fact that the Petitioner has been forced to shift accommodation and fend for himself in the last seven years and has been put to extreme mental agony, this Court is inclined to direct the NBCC to pay a sum of Rs.5 lakh to the Petitioner. Petition allowed.
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