Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 8, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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HC allowed GST credit to appellant based on IOCL's declaration of discharging GST under RCM, set aside orders & remanded matter.
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Order: File statutory appeal within 30 days, pre-deposit amount. Appellate Authority to dispose within 5 months, consider on merits.
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Petitioner's fake invoices & tax credits led to provisional attachment of movable assets to secure Rs. 76cr+ revenue interest. Court dismissed petition.
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Minor error in e-way bill vehicle number, goods detained citing invalid e-way bill. HC: Detention unjustified, permits penalty for minor errors. Rs. 18.75L tax & penalty demand quashed.
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Un-denatured Extra Neutral Alcohol faced GST levy. Show-cause notice issued, but petitioner approached court without explanation.
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Advance ruling on GST levy on electricity network charges, cross-subsidy surcharge, etc. not admitted for services under Sec 98(2). Applicant's argument rejected.
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Reverse osmosis reduces dissolved solids from 7932 to 148 mg/l for dyeing industry. Retains salts for zero liquid discharge. Taxable under CTH 2201.
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In case of upward price revision, supplementary invoice/debit note must be issued within 30 days. Increased rent is treated as supply under GST.
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Advance Ruling: GST on "Deposit Contribution Works" limited to "Establishment & Supervision Charges" for self-execution schemes. No tax on third-party works.
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Healthcare IT/ITeS provider eligible for input tax credit on contract staffing services. Not barred by Sec 17(5), can claim u/s 16(1) of GST Act.
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AAR: Construction services for residential units <60 sq.m & commercial area <15% qualify for 8% GST after land value deduction.
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AAR: Health insurance services for TNSG & reinsurance from abroad are GST exempt. ITC reversal follows Sec 17(2) & Rule 42.
Income Tax
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Reassessment solely on audit objection sans new material is impermissible. Mere opinion change can't trigger reassessment, as it's a prohibited review.
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Contract for sharing profits from RBI supply; no evidence found during search; agreement terminated in 2012; assessee became NRI later; ITAT rightly deleted additions.
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Capitation fees undeclared, exemption denied. 'Wholly' in Sec 11 means 'solely' charitable. ITAT erred, HC favored Revenue.
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Income Tax Settlement Commission can go beyond application, consider all aspects for finality. Not regular assessment.
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Provision for loss on investment is a capital expense, ineligible for deduction u/s 37(1) or depreciation. Allowing it fails the test.
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Expenditure disallowance on exempt income from partnership profits upheld. AO's computation valid under amended rules. CIT(A) erred in deleting disallowance. MAT adjustment partly allowed.
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Assessee eligible for deduction on regular members' income. AO to verify bye-laws. Interest from co-op banks taxable. Expenditure for earning interest allowed after cost determination.
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Delay in filing appeal condonable if reasonable cause exists. Substantial justice trumps technicalities. TDS computation remitted for re-examination. Update contact details & cooperate.
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Penalty u/s 271(1)(c) cannot be levied due to ambiguity in assessment year for unaccounted cash payment made for land purchase. Tribunal allows new pleas during penalty proceedings.
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Trust's capital gains from permitted investments are exempt if utilized for immovable property. Interest income from fixed deposits & savings accounts is deductible.
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Assessee's 1008-day delay in filing appeal before CIT(A) not condoned due to insufficient reasons like COVID impact & staff changes. Appeal dismissed.
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Tribunal upheld deduction u/s 80P(2)(d) on interest from cooperative banks, overruling disallowance via intimation u/s 143(1).
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Late filing of Form 67 for Foreign Tax Credit allowed if before assessment order. Provision directory, not mandatory. Tax authority's rejection improper.
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DRP directions without valid DIN are invalid. CBDT Circular applies to DRP, irrespective of communication mode. Non-DIN invalidates orders.
Customs
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New CBLMS portal features allow data correction in Customs Brokers' profiles. Submit change requests via Annexure-B to policy sections.
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Transitional SCMTR extended till Aug'24 for transparency, predictability & expedited Customs clearance. New manifest formats, parallel filing allowed. Amendments permitted. DGoS to issue guidelines.
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Duty-free gold bullion misused for local market instead of export. Pre-notice consultation exempted. Show cause notices allow explanation. Limitation period applicable.
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Royalty payments for tech transfer & know-how, not linked to imported goods, are non-addable to transaction value. Tribunal upholds BREMBO case.
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Appellant's (Commission Agent) close ties with kingpin, facilitated export conspiracy as middleman for monetary gain. Knowingly associated with key conspirator. Penalties reduced.
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Royalty of 1.75% on yeast made in India using foreign knowhow not part of customs value if not conditional sale. Precedent followed.
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Imported garments wrongly classified as girls' trousers. Expert opinion subjective, contrary to evidence. Classification a quasi-judicial decision, not experts'. No misdeclaration proved.
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Imported Artemia Cysts rightly classified under CTH 0511.99; penalties set aside. Tribunal upholds classification despite 2003 modification.
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Double duty paid at Mumbai & Kolkata due to system error. Importer provided proof. After verification, refund ordered for erroneous payment.
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Red Sanders logs deemed prohibited goods. Exporter not penalized due to lack of evidence of involvement in smuggling. Sealed containers under excise officers' supervision.
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Customs broker license revocation & penalty unjustified. Alleged violations unproven. Acted as facilitator, verified exporter's IEC. Exporter admitted export. Order set aside.
DGFT
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Potato import from Bhutan under ITC code 07019000 allowed freely till 30/06/2027 as per DGFT amendment. Duty-free import period extended.
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Export of rice to EU & some European nations needs Certificate of Inspection. Exemption for other European countries for 6 months.
Corporate Law
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Public cos can file Form PAS-7 on MCA portal for share warrants pre-2013 Act without fees till 5 Aug 2024 as per new Rules.
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Bid-rigging cartel in UP soil testing tenders busted. Toyfort, Austere Systems & Fimo Info Solutions penalized for violating Competition Act.
State GST
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Spectrum allocation with deferred instalments is a continuous service supply. GST due when instalments paid/due, whichever is earlier.
Indian Laws
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Notice u/s 138 NI Act is prerequisite for complaint. Allows drawer 15 days to pay & avoid penalty. Serving notice on director who signed cheque is valid service.
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Dishonour of Cheque: Trial court overstepped remand scope, erred in allowing new evidence beyond limited mandate. Reopening settled issues impermissible.
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Contract inclusive of tax upheld. Award can be set aside only if illegality goes to root, not for erroneous law/evidence.
IBC
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Dishonored bills/cheques=financial debt under IBC. Respondent=financial creditor. Interest not mandatory for Section 7. Procedural defects don't invalidate claim.
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Pre-existing dispute over machine defects & delays before demand notice upheld dismissal of application, rendering arguments immaterial. Appeal dismissed.
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Section 7 application rejected due to Section 10A bar on filing for COVID defaults. Amending pleadings allowed, but changing default date sans justification prohibited.
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Corporate debtor defaulted on operational dues, triggering CIRP. Winding-up petition didn't halt limitation sans govt consent.
Service Tax
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High Court quashes service tax notice over Rs. 50 lakh due to lack of pre-notice consultation. Dept. directed to follow proper procedure.
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Manpower supply classified, limitation extended. Rs. 1.12cr demand upheld. Overseas IT service excluded from Business Auxiliary Service. Partial remand.
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Appellants wrongly claimed excess Cenvat credit, failed to maintain separate accounts for exempted services in 2008-10. 20% cap breached. Recalculation ordered.
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Clients had effective control over rented equipment. Appellants paid taxes. Not a 'Supply of Tangible Goods for Use' service. Service tax demands unsustainable.
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Appellants' film music promotion not 'Business Auxiliary Service' under tax laws. Rights transfer, not service to clients.
Central Excise
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Refund interest computed from refund application date/ appellate order date. Rate as notified u/s 11BB, per Supreme Court. Tribunal can't decide other rate.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (7) TMI 374
Levy of penalty u/s 74 of the West Bengal Goods and Services Tax, 2017 - whether the appellant authority namely Joint Commissioner of State Tax, Berhampore Circle had considered all the issues which have been raised by the appellant in their appeal petition? - filing of declaration by the Indian Oil Corporation Limited that they have availed GTA services from the appellant filed - HELD THAT:- Considering the fact that this declaration has been issued by the Indian Oil Corporation Ltd., the appellant would be entitled to take advantage of the same for as the declaration clearly mentions that the GST liability on Reverse Charge Mechanism (RCM) has been discharged by the Indian Oil Corporation Limited on the services availed from the appellant/writ petitioner. Therefore, the matter should go back to the original authority for re-adjudication of the matter considering the subsequent developments. It is pointed out that by the learned Advocate for the appellant/writ petitioner that while issuing show-cause notice, the Assessing Officer had relied upon a decision of the Advance Ruling Authority, Goa wherein it appears that the Advance Ruling Authority at Goa held that the activity of issuance of pollution under the control certificate for the vehicle issued by the applicant therein is not covered under SAC 9991 and is covered under residue entry and hence should be taxed at 18%. The order passed by the Appellate Authority and the Original Authority/Assessing Officer are set aside and the matter stands remanded to the Assessing Officer - Petition allowed by way of remand.
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2024 (7) TMI 373
Violation of principles of natural justice - petitioner has not participated in the proceedings, as the petitioner was unaware of the notices that preceded the impugned notice - HELD THAT:- This Court is inclined to grant partial relief to the petitioner by quashing the impugned order subject to the petitioner depositing 25% of the disputed tax through Electronic Cash Register within a period of 30 days from the date of receipt of a copy of this order and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law within a period of 3 months thereafter. Petition allowed.
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2024 (7) TMI 372
Wrong credit entry during the month of April, 2019 - It is submitted that the mistake was rectified by the petitioner in the returns filed by the petitioner in GSTR 3B for the month of May, 2019 - HELD THAT:- The petitioner may have a case for proper explanation before the Appellate Commissioner under Section 107 of the TNGST Act, 2017. Therefore, the Appellate Authority, namely, the Appellate Deputy Commissioner (Appeals), Tirunelveli, is suo motu impleaded as third respondent. The petitioner is directed to file a statutory appeal under Section 107 of the TNGST Act, 2017 before the third respondent within a period of 30 days from the date of receipt of a copy of this order. The third respondent shall consider and dispose of the appeal to be filed by the petitioner within such period without reference to the limitation on merits and in accordance with law within a period of 5 months thereafter. It is needless to state that the petitioner shall pre-deposit the amount as per Section 107 of the TNGST Act, 2017. Petition dismissed.
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2024 (7) TMI 371
Provisional attachment of properties - availment of fake input tax credit - bogus billing have generated fake sale invoices to petitioner and fraudulently transferred input tax credit - HELD THAT:- Prima facie it is apparent from the facts that the petitioner has indulged in to bogus billing and therefore without considering the veracity of the same as investigation/inquiry is undergoing, it is necessary to find out as to whether there is any basis to pass the provisional attachment of the movable property in addition to the immovable properties already attached by the respondent Department while invoking provisions of Section 83 of the Act. On perusal of the impugned order read with satisfaction note, the respondent authority has come to the conclusion that the immovable property of the petitioner is not sufficient to protect the interest of the revenue, which is further fortified from the averments made in the affidavit-in-reply to the effect that the petitioner has indulged into bogus billing by availing the ITC of more than Rs. 76 crore. Therefore, considering such facts, it cannot be said that the Commissioner has failed to form an opinion on the basis of tangible material that the petitioner is likely to be subject to demand which would be more than the value of the immovable properties and therefore it is necessary so to do for the purpose of protecting the interest of the Government revenue, provisional attachment of the movable property was also required. It cannot be said that the respondents have committed breach of provision of Section 83 of the Act which is intended to safeguard the interest of the revenue which cannot be said to any harassment to the petitioner as tried to be demonstrated. In the facts of the case, it cannot be said that the respondents have issued provisional attachment order over the movable properties with a view to harass the petitioner. The petitioner in the facts of the case appears to have indulged in the transaction of the fraudulent invoices resulting into loss of revenue by utilizing the ITC of more than Rs. 76 crore. Thus, no interference is called for in the impugned order of provisional attachment so far as the attachment over the movable properties of the petitioner during the pendency of the investigation as respondent authority has rightly formed an opinion as required under Section 83 of the Act so as to protect the interest of revenue, and hence the provisional attachment over the movable and immovable properties of the petitioner is required to be continued. Petition dismissed.
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2024 (7) TMI 370
Detention of goods u/s 129 - correct number of the vehicle was not mentioned in part-B of the e-way bill, for which the petitioner has explained that the truck number of the vehicle, which is mentioned in the e-way bill was suffered breakdown and therefore, the goods were being transported in another truck - HELD THAT:- The statement in Form made by the driver in Form GST MOV-01 also refers to the transportation of the goods from Ahmedabad to Surat only with regard to the carrying out the temporary arrangement made to reach upto Surat so as to ship the cars being transported in the vehicle whose number is mentioned in the e-way bill. It is also not in dispute that the goods were stopped transfer from Ahmedabad to the branch of the petitioner at Thane in Maharashtra and does not involve any transaction or sale of purchase. In view of Circular no. 64/38/18, it is clear that the minor errors, which are of its some examples are given in para-5 are required to be dealt with by imposing penalty of Rs. 500/- under Section 125 of the GST Act and Rs. 1,000/- under the IGST Act. The respondent no. 2 has not disputed the fact that the chassis number of the vehicle is different than that of what is mentioned in the invoice and the e-way bill number. Even the transport receipt number is also mentioned in e-way bill is also the same. In the facts of the present case, the impugned order of demanding tax and penalty in Form GST MOV-09 is without jurisdiction as the respondent no. 2 could not have detained vehicle on the ground of invalid e-way bill. The impugned order dated 14.01.2020 demanding the total tax of Rs. 18,74,972/- and total penalty of the equal amount under clause (a) of sub-Section (1) of Section 129 of the GST Act is hereby quashed and set aside. Appeal allowed.
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2024 (7) TMI 369
Violation of principles of natural justice - petitioner's business was discontinued - SCN and impugned order were uploaded on the GST portal but not communicated to the petitioner through any other mode - mismatch between the petitioner's GSTR 3B returns and the auto populated GSTR 2A - HELD THAT:- The tax proposal was confirmed because the petitioner did not reply to the show cause notice or attend the personal hearing. Since it is asserted that the petitioner could not reply on account of being aware of proceedings, the interest of justice warrants that the petitioner be provided an opportunity to contest the tax demand on merits, albeit by putting the petitioner on terms. The impugned order dated 22.03.2024 is set aside on condition that the petitioner remits 10% of the disputed tax demand in cash within a period of two weeks from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit a reply to the show cause notice - petition disposed off.
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2024 (7) TMI 368
Violation of principles of natural justice - service of SCN - petitioner was unaware of proceedings culminating in the impugned order because the show cause notice and other communications were uploaded in the GST portal but not communicated to the petitioner through any other mode - HELD THAT:- It is evident that the tax proposal was confirmed because the petitioner failed to reply. Since the petitioner asserts that he was unable to participate on account of being unaware of proceedings, the interest of justice warrants that an opportunity be provided to the petitioner albeit by putting the petitioner on terms. The impugned order dated 22.06.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand in cash within a period of two weeks from the date of receipt of a copy of this order - petition disposed off.
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2024 (7) TMI 367
Violation of principles of natural justice - non-service of SCN - Notices went unnoticed, as they were hosted in the GST common portal - HELD THAT;- The impugned orders are set aside and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law as expeditiously as possible, preferably within a period of 6 months from the date of receipt of a copy of this order subject to the petitioner filing a reply to the respective notices and subject to the petitioner depositing 10% of the disputed amount without prejudice to its right in the aforesaid proceeding. The impugned orders, which stands quashed, shall be treated as addendum to the show cause notices issued to the petitioner. Petition allowed. by way of remand.
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2024 (7) TMI 366
Violation of principles of natural justice - case of petitioner is that both the impugned orders and the notices, that preceded to the impugned orders, were not noticed by the petitioner as they were uploaded in the web portal and that the petitioner, being a small operator, failed to notice the same - HELD THAT:- The petitioner is willing to deposit 10% of the disputed tax, this Court is inclined to remit the case back to the respondent to pass fresh orders on merits. The impugned orders, which stand quashed, shall be treated as addendum to the show cause notices dated 22.07.2023. Petition disposed off by way of remand.
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2024 (7) TMI 365
Levy of GST on royalty paid to the Government - HELD THAT:- In this case, the petitioner has come after the impugned order was passed. Considering the same, this Writ Petition is disposed of by directing the respondent to keep the recovery abeyance, pending further orders of the Hon ble Supreme Court - In case, the levy is upheld, the respondents are at liberty to proceed against the petitioner to recover tax. In case, the issue is answered against the revenue by the Hon ble Supreme Court, the impugned order shall deemed to have been quashed with effect from the date of the order the Hon ble Supreme Court. Petition disposed off.
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2024 (7) TMI 364
Seeking a direction to the respondent to cancel GST registration - closure of business - HELD THAT:- Since petitioner has already replied to the notice issued by the department and has requested for cancellation of GST registration w.e.f. 18.09.2023, this petition is disposed of directing the Proper Officer to dispose of the application seeking cancellation of GST registration expeditiously within a period of four weeks from today. Petition disposed off.
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2024 (7) TMI 363
Levy of GST - un-denatured Extra Neutral Alcohol - HELD THAT:- As rightly contended by the respondents, it is only a show-cause notice issued by respondent No. 1 calling upon the petitioner to submit his explanation. An option was also given to seek personal hearing. Even though, there is no explanation by the petitioner for the reasons best known to him, the petitioner has rushed to this court seeking to quash the show-cause notice on several grounds and such grounds could have been raised by the petitioner in his written explanation as to why said show-cause notice could not have been issued. The Apex Court in UNION OF INDIA OTHERS VERSUS COASTAL CONTAINER TRANSPORTERS ASSOCIATION OTHERS [ 2019 (2) TMI 1497 - SUPREME COURT] frowned upon the practice of approaching this Court on issuance of show-cause notice, without giving written explanation to enable the authority to consider his defence and to pass appropriate orders. Therefore, the petitioner has rushed to this court to challenge the show-cause notice without availing the opportunity given to him to submit his written explanation. Therefore, the writ petition is not maintainable. Petition dismissed.
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2024 (7) TMI 362
Violation of principles of natural justice - it is submitted that the petitioner was provided multiple opportunities to respond to the audit observations and to the show cause notice - HELD THAT:- On examining documents on record, it is evident that the petitioner did not participate in proceedings culminating in the impugned order. Such non-participation was on account of the petitioner's negligence in responding to notices received. Since the petitioner did not contest the tax demand on merits, it is just and appropriate to provide the petitioner an opportunity to do so by putting the petitioner on terms. The impugned order dated 2812.2023 is set aside and the matter is remanded to the respondent for reconsideration subject to the condition that the petitioner remits 10% of the disputed tax demand within two months from the date of receipt of a copy of this order - Petition disposed off by way of remand.
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2024 (7) TMI 361
Seeking a direction to permit cross-examination of the third and fourth respondents - HELD THAT:- By orders dated 20.10.2023 in relation to each assessment period, the State GST authorities were directed to provide legible copies of the analysis reports and permit the petitioner to cross-examine respondents 4 and 5 therein, who are the third and fourth respondents in the present writ petitions. In view of the fact that a hearing was scheduled on 19.03.2024 after providing legible copies of the analysis reports on 16.03.2024, the present writ petitions were filed. The petitioner has no further cause for concern that cross-examination would not be provided. Accordingly, by taking note of the submission of learned Government Advocate that the petitioner would be permitted to cross-examine the third and fourth respondents before assessment orders are issued, these writ petitions are disposed of without any order as to costs.
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2024 (7) TMI 360
Violation of principles of natural justice - order challenged on the ground that the petitioner did not have a reasonable opportunity - HELD THAT:- On perusal of the impugned order, it is evident that the confirmed tax demand relates to the discrepancies between the Input Tax Credit (ITC) claimed by the petitioner in Form GSTR 3B on comparison with the GSTR 2B. Such tax demand was confirmed without the petitioner being heard. The petitioner has also agreed to the payment of 10% of the disputed tax demand as a condition for remand. In these circumstances, it is just and necessary that the petitioner be provided an opportunity. The impugned order is set aside on condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order - Petition disposed off.
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2024 (7) TMI 359
Maintainability of Advance Ruling application - levy of GST - network/wheeling charges - cross-subsidy surcharge - additional surcharge for electricity distribution - fees and charges related to electricity distribution services. Supply of services of distribution of electricity - HELD THAT:- The Application for Advance Ruling filed by appellantis not admitted under Section 98 (2) of the CGST/TNGST Act, 2017, in so far as it relates to the taxability of services, and the impugned ruling is modified to that extent - there are no force in the applicant's argument inasmuch as the term applicant means any person registered under this Act and it could be best interpreted that the legislative intent in its wisdom is to draft the relevant proviso to empower the Authority to reject the application in the cases where there is repeated filing of the application before the Authority on the same issue which is either pending for decision or already decided. It is clarified here that transferring cases to 'call book', is an internal mechanism adopted by the Department where cases could not be decided owing to specified reasons. Further, as the term 'Call Book', or the procedures relating to the same have not been provided for under the CGST/TNGST Act, 2017 or the rules made thereunder, no comments are required to be made in this regard. Notwithstanding the same, we would like to clarify that in the instant case of the applicant, the case is neither transferred to 'Call Book', nor the decision on the same is kept pending; instead the application is actually being disposed of, by way of not admitting the application, as provided under Section 98 (2) of the CGST Act, 2017, in so far as it relates to the services in question.
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2024 (7) TMI 358
Classification of output - supply of goods or not - classification of Water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavored (other than drinking water packed in 20 litre bottles) under heading 2201 or not. Classification as to whether Supply of Outputs as sale of Goods is Correct - HELD THAT:- The modus of operation as purchase of effluent and sale of output is applicable only if all the elements cited in the Section and judgement cited are present. If that is the case, then the classification of supply of treated water, salt and other products, as sale of goods is correct. However, it is emphasized that the mode of operation intended by the applicant i.e. purchase of raw effluent, treating the same and selling the resultant products, can be classified as sale of goods, if and only if, the applicant follows the procedures envisaged in the Sale of Goods Act - If such is the case, the proposed mode of purchase of raw effluent, treat it on own account and supply of output, can be treated as 'sale of goods' and consequently the first question is answered in the affirmative. Classification of Treated Water - HELD THAT:- It is well known that as a universal solvent, Water is capable of dissolving huge number of substances than any other solvent and hence, prone to contamination and thereby gets mineralized easily. This unique property of the Water necessitated evolving techniques for removal of minerals to make it fit for drinking, Laboratory and Industrial uses. There are different techniques for de-mineralisation viz, distillation, ion-exchange and Reverse osmosis to remove the dissolved minerals, salts and to obtain de-mineralised water. Whether the R.O. permeate is to be treated on par with the treated sewage water and qualify for the Nil rate of tax? - HELD THAT:- The total dissolved salts or constituent chemicals/ minerals which was originally present in the raw effluent water have been substantially reduced to meagre quantity or non-detectable limit. In other words, the effluent water is demineralized to certain extent by three step Reverse Osmosis Units, leaving behind certain quantity of minute mineral/salts. It is noted from the statement of facts furnished by the Applicant that retention of meagre quantity of chemicals is with the intention of making the Permeate fit for usage in the dyeing industry, whereby the dissolved solids are reduced from 7932 mg/1 to 148 mg/1. As the treated water obtained by the process of reverse osmosis is sold for specific usage in the dyeing industry, it is inferred that they have customized the process of demineralization to meet out the specific requirement of treated water to make it fit for the dyeing purposes and also meet the compliance of Zero Liquid Discharge - the treated water obtained from CETP which is 'demineralized water' is not eligible for exemption under Serial No. 99 of Notification No. 2/2017-CT (Rate) dated 28-6-2017, as amended. Whether the R.O. permeate falls under the heading 2853 90 10 - Other Inorganic Compounds and classifiable under this residuary head, comparable products like distilled water, conductivity water? - HELD THAT:- Though the raw water consisting of total dissolved solids at the range of 5700 mg/L to 7900 mg/L, the treated water contains the total dissolved solids at the range of 90 to 150 mg/L, which reveals that the treatment process adopted by the applicant removed substantial quantity of minerals and salts, but meagre amount of salts are retained in the Treated water sold for reuse by the dyeing industry. Hence, the said R.O permeate are not classifiable under the category of 'distilled water or conductivity water and water of similar purity' - the R.O permeate is not falling under any of the exclusion clause - The word including used in the entry reveals that the legislature doesn't intend to restrict the entry. It makes the entry enumerative but not exhaustive and the term water retains its ordinary meaning and its scope will be extended to bring the de-mineralized water of the applicant's case, within its ambit. The de-mmeralised water obtained as R.O permeate in the Common Effluent Treatment Plant run by the Applicant is classifiable under CTH 2201 and gets covered under the entry No. of the Schedule-III of N/N. 01/2017-CT (Rate) dated 28.6.2017.
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2024 (7) TMI 357
Supply or not - Price escalation clause - collection of increased rents for the period - liability to pay differential amount plus GST to the applicant upon submission of supplementary invoices - HELD THAT:- In case of upward price revision, a registered person will issue a supplementary invoice or debit notes within 30 days from the date of revision and such revision shall be treated as supply under GST Act and tax is payable under this Act. In the instant case, it is found that the applicant had entered into contract for provision of renting of immovable property services as seen from the lease agreement submitted by the applicant and now intends to revise the price upwards and issue supplementary invoices for the said supply for the upward revision of rent. Hence, in the instant case collection of increased rents for the past period i.e. 01.09.2005 to 30.06.2017 shall also be treated as supply under Goods and Services Tax and the entire increased rent amount of Rs. 1,60,42,203/-, as submitted by the applicant for the period from 01.09.2005 to 31.08.2022, shall be liable to Goods and Services Tax. The collection of increased rents for the past period shall be treated as supply under the CGST / TNGST Acts, 2017 - the entire increased rent amount of Rs. 1,60,42,203/-, as submitted by the applicant for the period from 01.09.2005 to 31.08.2022, shall be liable to GST, under CGST/TNGST Acts, 2017.
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2024 (7) TMI 356
Determination of value - value of the Deposit Contribution Works that must be adopted by this Applicant on the Self Execution Schemes for the purposes of paying applicable taxes - value adopted by the Applicant for Deposit Contribution Works for the purpose of discharging applicable Goods Services Tax be restricted to the Establishment and Supervision Charges other charges if applicable that the Applicant charges for and receives in the case of the self-execution scheme or not. Determination of the value of Deposit Contribution Works (DCW) - HELD THAT:- It is seen that TANGEDCO is neither the supplier nor the recipient of service, ..and, .the works contract service involved in the demolition, shifting, construction, and installation of the service line is provided by a thirty party contractor and is received by the customer under whose request the service line gets shifted. Once no goods or service is supplied by TANGEDCO to any person, except for the 'Supervision Services', the question of inclusion of value of all other services for which TANGEDCO is not a privity to the contract, does not arise. Further, when the TANGEDCO is not a supplier in so far as it relates to shifting of infrastructure, the question of covering the same under 'composite supply' also does not arise. Whether value adopted by the Applicant for Deposit Contribution Works for the purpose of discharging applicable Goods Services Tax be restricted to the Establishment and Supervision Charges other charges if applicable that the Applicant charges for and receives in the case of the self-execution scheme? - HELD THAT:- MWNL is not a supplier of goods or services in relation to shifting of transmission lines and other assets which are required to be shifted during construction or widening of roads, the work, being undertaken by NHAI itself. Hence, there is no relationship between NHAI and MWNL which can be categorized as that of supplier and recipient except for the services of supervising the whole operation for which NHAI is paying consideration along with GST leviable thereon. The supplier' in the instant operation is the contractor who is undertaking the work of shifting transmission lines and not the MWNL who are just supplying services of supervision and not that of construction or replacement of transmission lines.
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2024 (7) TMI 355
Input tax credit - Contract Staffing Services received by the Applicant - HELD THAT:- In as much as the transaction under question does not fall under any of the above-mentioned categories the availment of ITC on the transaction under question is not blocked by Section 17 (5) of the CGST Act, 2017. In as much as the applicant is engaged in the business of providing Information (IT) and Information Enabled Services (ITeS) for healthcare sector and intends to avail the contract staffing services in the course or furtherance of business, the applicant is eligible to avail the input tax credit on the said contract staffing services subject to the fulfilment of conditions specified under section 16 of the CGST Act, 2017 for availment of input tax credit. The applicant is eligible to avail the input tax credit on contract staffing services under section 16 (1) of GST Act, 2017 subject to the fulfilment of conditions specified under the said section.
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2024 (7) TMI 354
Levy and discharge of output tax on services provided - construction services - effective rate 8% (12% less 1/3rd value deducted on account of land) under entry number 3 (ie) of Notification no. 11/2017-Central Tax (rate) dated 28.06.2017 as amended by Notification 03/2019-central tax (rate) dated 29.03.2019 - HELD THAT:- In the instant case the applicant has stated that all the units are below 60 square metres and has submitted the project plans and Unit configuration of 'Block 7' in support of the same. It is also found that the applicant has stated that the area of Commercial unit is less than 15% of the total area of the project. From a reading of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended, the clarification issued by Government of India Ministry of Finance Department of Revenue (TRU), the submissions of the taxpayer and the facts on record it is found that the item i.e. of SL no 3 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended, is applicable to the applicant as the applicant's case falls under the scheme specified at sub-item (da) of item (v) in case of construction of residential units of less than 60sq mts and not for commercial units. The sub item 'da' of item V mentioned in item 'ie' of SL No 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended is applicable to the applicant and the rates as mentioned against the said item 'ie' which is 12% shall be applicable to the applicant. Further in case of supply of services involving transfer of land or undivided share of land the value of supply shall be reduced by one third making the effective rate 8%.
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2024 (7) TMI 353
Exemption from GST - health insurance services provided by the Applicant to Tamil Nadu State Government (TNSG) - Serial Number 40 of the N/N. 12/2017-Central Tax (Rate) dated 28th June 2017 and corresponding TNGST Notification - Insurance services - Serial No. 36A of the Notification 12/2017 - Input tax credit. Does the health insurance services provided by the Applicant Tamil Nadu State Government (TNSG) is exempted from GST under the SI.No. 40 of Notification No, 12/2017 Central Tax (Rate) dated 28th June, 2017 and corresponding TNGST Notification? - HELD THAT:- On perusal of the agenda notes, minutes of the meeting and clarification issued, clearly establishes that the intention of the GST Council is to grant exemption on the general insurance services provided to the State Government, where total premium is paid by the Government and also in respect service provided by the State Government by way of general insurance (managed by Government) to employees of the State Government/ Police Personnel, employees of electricity department or students. While the former fall under SI. No. 40 and the latter under Sl. No. 6 of the Notification No. 12 /2017-Central Tax (Rate) - In the case of applicant, the supply of insurance is made only to the Government of Tamil Nadu for which total premium is paid by the Government and therefore it would be eligible for exemption under SI. No. 40 of the Notification No. 12/2017-Central Tax (Rate). It may be not relevant to the issue raised by tire applicant but it is to be recorded here that Government of Tamil Nadu is managing the insurance scheme called New Health Insurance Scheme and therefore, the recovery made by the Government from employees/ pensioner would also be exempt, in terms of entry 6 of Notification No. 12/2017-Central Tax (Rate). Exemption status of reinsurance of the health insurance policy - HELD THAT:- The supply of goods or services is not being undertaken or proposed to be undertaken by the applicant as the applicant is the recipient of reinsurance service and the supply is being undertaken or proposed to be undertaken by the suppliers of reinsurance service providers, located in India - with respect to receipt of re-insurance service from re-insurers located outside India, as the liability to pay tax lies with the applicant, this is answered and which is answered in affirmative in terms of exemption provided under SI No. 36A of Notification No. 12/2017 Central Tax (Rate), dated 28-06-2017, as the supply of insurance service to Tamil Nadu State Government falls under entry 40 of Notification No. 12/2017 Central Tax (Rate), dated 28-06-2017. Reversal of ITC - HELD THAT:- The applicant has not provided any detailed explanations on the circumstances under which reversal of input tax credit is warranted. However, as the CGST Act, 2017 itself provides for vivid answer in the provisions of sub-section (2) of section 17 of the CGST Act, 2017 and also in Rule 42 of the CGST Rules, 2017 the applicant can follow these provisions for reversal of input tax credit and no ruling is required therein.
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Income Tax
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2024 (7) TMI 352
Validity of reassessment proceedings - reason provided in the corrigendum can be considered as a new tangible material sufficient for initiating reassessment proceedings or not? - HEKD THAT:- Since the reassessment proceedings before the issuance of corrigendum were initiated on the basis of a report furnished by the Audit Party, it is pertinent to examine the scope and extent of such information constituting fresh tangible material. In the case of Indian Eastern Newspaper Society [ 1979 (8) TMI 1 - SUPREME COURT ] has held that an audit by the Comptroller and Auditor General of India is principally intended for the purposes of satisfying itself with regard to the sufficiency of the rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. The relevant Internal Audit Manuals and Circulars indicate that Audit Department should not in any way substitute itself for the Revenue authorities in the performance of their statutory duties. It remains established that tangible material or factual information can be received from various external sources and the objections raised by an Audit Party is not absolutely barred. In Transworld International Inc.[ 2004 (9) TMI 26 - DELHI HIGH COURT] this Court has observed that factual information can come from various sources including an audit objection. But a blanket reliance should not be placed on such objection to initiate reassessment proceedings and the AO must apply its own mind. Reverting to the facts of the present case, undisputedly, the proceedings dated 30 July 2022 were firstly closed by the respondents upon being satisfied after a perusal of the audited final accounts filed by the petitioner indicating that there was no immovable property held by the petitioner as on 01 April 2016 and therefore, there was no sale undertaken by it.However, on 30 July 2022 itself i.e., hours after terminating the reassessment proceedings, the respondents again issued a corrigendum initiating the reassessment proceedings. Corrigendum issued to the order u/s 148A(d) - It is palpably observed from the extract of the impugned corrigendum that no new material has been found by the Revenue which would warrant reopening the assessment. A reading of the aforesaid two notices would crystallize the fact that the corrigendum has been issued merely on the basis of a change of opinion as two different conclusions are being drawn on the basis of same material i.e., audited final accounts of the petitioner. Thus, the AO has apparently reviewed its own decision, which is not permissible as per the settled law. It is trite that under the guise of power vested in the Revenue to reassess an income which had escaped assessment upon production of fresh tangible material, it cannot be allowed to exercise the power of review. It is apposite to refer to the decision of the Supreme Court CIT v. Techspan India (P) Ltd. [ 2018 (4) TMI 1376 - SUPREME COURT] Thus, we are of the opinion that the impugned proceedings are unsustainable and deserve to be quashed. Decided in favour of assessee.
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2024 (7) TMI 351
Assessment u/s 153A - Addition of undisclosed income - assessee entered into a contract with a non-resident entity [ CMF ] for sharing of profits in lieu of services to CMF on supply of currency paper by CMF to Reserve Bank of India [ RBI ] including its subsidiaries - incriminating material found during the search and seizure operation or not? - AO observed that assessee continued to receive commissions from CMF through other foreign entities of CMF s parent group and since CMF does not have any other agent in India for supply of currency notes, therefore, the said amount was received pursuant to that agreement only HELD THAT:- It is imperative to point out that the agreement between the assessee and the CMF was terminated on 31.12.2012 and since AY 2015-16 onwards, the assessee has become a non-resident. It is also pertinent to iterate that as per the dictum laid down by this Court in Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] it is a settled position of law that the Revenue cannot be permitted to sustain any addition in the absence of any incriminating material for that relevant AY. Undeniably, it becomes evident from a perusal of the factual matrix of the case that all the receipts with respect to transactions with foreign entities pertain to AYs 2016-17 and 2017-18. Thus, the ITAT has rightly deleted the additions pertaining to AYs 2012-13 to 2015-16 based on the settled legal position as enunciated above. Regarding incriminating material unearthed during the course of the search operation, it is apposite to elucidate that the agreement between the assessee and CMF was already in the knowledge of the Revenue and the commission received by the assessee pursuant to that agreement was duly reflected in his ITR. Additionally, the ITAT has rightly concluded that on the conspectus of the replies furnished by the assessee and the factual matrix of the case, the Revenue was not able to show any indelible link that the payments received from the foreign entities were in relation to the agreement between CMF and the assessee for supply of banknote paper in India. The aforementioned rationale also finds mention in the ITAT order, which was impugned before us. We come to the conclusion that the instant appeals do not raise any substantial questions of law which would merit consideration and thus, we find no reason to interfere with the judgement rendered by the ITAT.
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2024 (7) TMI 350
Reopening of assessment u/s 147 - amount of fees which was left undeclared in the ITR - ITAT has invalidated the reassessment proceedings on the basis of difference in quantum of capitation fee collected by the assessee - HELD THAT:- AO had sufficient cogent reasons to initiate reassessment proceedings and the ITAT has erred in holding that the said proceedings were bad in law. It cannot be gainsaid that the difference in the quantum of capitation fee could not be a valid reason for setting aside the reassessment proceedings at the juncture of issuance of notice under Section 148 of the Act. Undeniably, the material seized by the Revenue and the admission made by P. Mahalingam, as already noted above, would constitute fresh tangible material which would warrant reassessment of the income of the assessee. Thus, the reopening of assessment ought not to have been interdicted by the ITAT vide the impugned order. Exemption u/s 11 - A salient aspect which emanates from Section 11 of the Act is that the usage of the phrase wholly relates to the purposes and not to the property of the trust. The word wholly is strikingly different from the word mainly . Rather, the former should be understood to be closely akin to the phrase solely . Put otherwise, there is no scope for the purposes being partially public or religious in nature. It would not be sufficient if some of the objects are charitable or religious in nature. In the present case undisputedly, the assessee has engaged itself in charging capitation fee which is dehors the objective of the charitable trust. Therefore, the claim of the assessee for exemption as per Section 11 and 12 of the Act does not hold any water. In view of the aforenoted pronouncements of law, the ITAT has wrongly sustained the exemption claimed by the assessee. Lastly, it is seen that the ITAT has placed reliance on the decision of the ITSC in the assessee s own case for the other AYs for computing the excess of income over the expenditure. It is however trite that the order of the ITSC is final and conclusive for a particular AY for which the application has been filed. Accordingly, in view of the aforesaid, the impugned order passed by the ITAT is hereby set aside. The substantial questions of law raised in the instant appeal are answered in favour of the Revenue.
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2024 (7) TMI 349
Addition made by the ITSC on account of commission and margin money - Whether no infirmity in the order of the ITAT as the petitioner had failed to make a true and full disclosure of additional income before the ITSC pertaining to commission and margin money on off-market transactions? - HELD THAT:- The power of the ITSC to pass an order is not limited only to the aspects covered by the application for settlement preferred by the assessee, rather the ITSC is empowered to render a decision on such issues which find mention in the report of the Commissioner or Principal Commissioner. On this aspect, it is apposite to refer to a decision of this Court in the case of M/S Trent East West LPG Bottling Ltd. [ 2024 (4) TMI 464 - DELHI HIGH COURT] wherein, while adopting a similar view, it had been held that the ITSC has the authority to consider all aspects which arise from the application in order to extend finality to all the disputes. A Coordinate Bench of this Court in Agson Global [ 2016 (1) TMI 256 - DELHI HIGH COURT] struck a distinction between regular assessment and order passed by the ITSC. It has been held that the ITSC does not wield an authority to engage itself in the process of regular assessment, rather it passes an order on the basis of settlement between parties containing the terms of settlement. Thus the settlement provision is an enabling provision to resolve the disputes between the parties based upon a mutual consensus. However, in the said process, the ITSC cannot usurp the original power of the AO to make an assessment strictly according to the provisions of the Act as the same would be contrary to the pith and substance of the scheme of the Act to settle the disputes. In essence, the primary objective of the incorporation of the settlement provisions is to entrust upon ITSC the mandate to compromise with the errant taxpayers, which is strikingly different from the power of regular assessment employed by the AO in order to put an end to the protracted litigations. It is relevant to note that the ITSC has thwarted the argument that Raj Kumar Kedia would not have charged commission money on the basis of his statement dated 13.06.2014, whereby, he had categorically stated to have received 5 to 6 percent commission on the net bogus pre-arrange long term capital gains provided to Dhanuka Agritech Group promoters. Evidently, the said statement was corroborated with the statement of Ghansyam Das Gupta, working as a consultant in Dhanuka Agritech Ltd., who asserted that commission of around 5 percent in cash form was paid to Raj Kumar Kedia for carrying out transactions of Dhanuka Group companies. Therefore, a salient fact which comes to the fore is that the contested additions were not made only on the basis of assumptions, conjectures or surmises, rather it was done after a careful perusal of the report submitted to the ITSC. In the facts of the case at hand and bearing in mind the plenitude of powers assigned to the ITSC, it cannot be said that the ITSC lacked jurisdiction to make such an addition, which has also been duly recorded in the terms of settlement, to put a quietus to the litigation. Afterall, the objective of the settlement provisions is to strike a balance between the voluntary disclosure of income by the assessee and the income escaping assessment in order to expedite the closure of tax disputes. On the overall conspectus of the discussion hereinabove, under the facts of the present case, we do not find any force in the argument of the petitioner that addition on account of commission and margin money militates against the provisions of the Act, particularly with Section 153A. It is well settled that an applicant cannot assert an indefeasible right to accept the income disclosed by him. We, therefore, find ourselves unable to hold that the said addition made by the ITSC is manifestly erroneous as the ITSC has meticulously exercised its power taking into consideration the underlying intent of the settlement process.
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2024 (7) TMI 348
Rejection of registration of assessee trust u/s 12A - assessee is not registered under the Rajasthan Public Trust Act, 1959 - HELD THAT:- Assessee submitted that the assessee trust is duly registered with Sub Registrar, Jaipur under the Rajasthan Public Trust Act, 1959 vide Registration Endorsement issued by the Sub Registrar of Trust under the State Government of Rajasthan Jaipur. Thus, in the interest of justice assessee submitted that the assessee be given a chance to defend this merit before the ld. CIT(E) and this mistake of the fact is curable in nature we considered the prayer of the assessee for registration of the trust u/s. 12AB of the Act and the 80G recognition application was rejected only on the ground that the assessee is not eligible for approval under clause (ii) of first proviso to sub-section (5) of section 80G of the Act since it was not already approved under clause (i) or (iii) of first proviso to sub-section(5) of section 80G. We also deem it fit to set aside the order of the ld. CIT(E) for recognition of the trust u/s. 80G of the Act and ld. CIT(E) should decide both the application a fresh. Appeal allowed for statistical purposes.
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2024 (7) TMI 347
Condonation of delay in filing appeal before ITAT - there is a delay of around 379 days, in filing of the present appeal - Assessee argued that the order of the CIT(A) was not served on the assessee on the email ID which was mentioned in the prescribed Colum of Form 35, therefore, the assessee was not able to file the appeal before the ITAT with in the period of limitation. HELD THAT:- The Finance Head (FH) has stated that he is a 70 year old person and not very much conversant with the operations of computer/email ID. FH, has further clarified that the order of the CIT(A) could have been gone to the spam folder and hence he was unable to see the same in due course - CIT(A) has dismissed the appeal of the assessee without dealing with the merits of the case. Section 250(6) of the Act provides that the Ld CIT(A) is bound to decide an appeal on merits. Considering the facts and circumstances of the case we hereby condoned the delay of 399 days for the reasons mentioned by the FH in the application for condonation of delay supported by duly sworn affidavit. As as held by Apex Court in the case of Collector of Land Acquisition Vs Katiji and others [ 1987 (2) TMI 61 - SUPREME COURT] wherein it is held that when technical consideration and substantial justice pitted against each other, cause of substantial justice would be given credence. Therefore, we restore the matter to the file of the ld. CIT(A) and direct him to decide the matter afresh in accordance with law after providing reasonable and meaningful opportunity to the assessee. We also direct the assessee to appear before the CIT(A) and file necessary details failure to do so, will be construed adversely against the assessee without any leniency. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (7) TMI 346
Rectification of mistake u/s 154 - disallowing provision for loss in investment while assessing the income is a mistake apparent on record - whether disallowance of provision for loss in investment is a debatable issue? - whether non-disallowance of such provision is apparent on the face of the record so has to fall within the ambit of section 154? - HELD THAT:- Item of provision for loss in investment is not a revenue obligation incurred for the year under consideration and therefore finds no place in the list of deductions enumerated u/c IV-D of the Act. Secondly, since the investment by and large is capital in nature but not falling within the ambit of block of asset as defined by section 2(11) of the Act so does also not entitle for deduction in the form of depreciation. And lastly, impugned item not an expenditure deductible under general deduction 37(1) of the Act for the vanilla reasons that such provision fails to pass the litmus test prescribed therein. Once it so then there is no provision in the law conferring any discretion to tax authorities to allow deduction. On the contrary, impugned item calls for disallowance in-limine without requiring any examination. By application of stricter interpretation of law in view of the ratio laid down in CoC Vs Dilip Kumar Co [ 2018 (7) TMI 1826 - SUPREME COURT] the impugned item provision for loss in investment representing portion of investment held by the assessee being not falling any of the deduction enumerated u/c IV-D of the Act and further not eligible for deduction u/s 37(1) of the Act does not in our considered view is debatable under the Act. Hence there is much less reason to countenanced the view of Ld. first appellate authority. The impugned item i.e. provision for loss in investment was appearing glaringly on the face of financial statement which travelled to computation of income - AO however lost sight of impugned item while framing the assessment u/s 143(3) of the Act. The audit objection notified the mistake of allowing the impugned item which was obvious patent and not something which can be established by a long-drawn process of reasoning on points on which there may be two opinions. In the event after following the due process according reasonable opportunity to the assessee, Ld. AO reversed the impugned allowance by an order passed u/s 154 of the Act. In the event of effective failure on the part of assessee to dislodge the authority and jurisdiction of Ld. AO, the impugned rectification was carried out. It is well settled law that any item of allowance/deduction or disallowance which requires no examination or verification of facts falls within the ambit of mistake apparent on record for the purpose of section 154 of the Act. The obvious mistake glaring or appearing on the face of the record and requiring no examination or verification whatsoever by long-drawn process can be rectified in view of the ratio laid down in TS Balram (ITO) Vs M/s Volkart Bros. [ 1971 (8) TMI 3 - SUPREME COURT] We find no fault in reversing the inadvertent allowance of impugned item provision for loss in investment by way of rectification u/s 154 of the Act by the Ld. AO - The impugned order tearing down the rectification cannot continue to stand; thus, set-aside and the order of rectification is restored.
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2024 (7) TMI 345
Denial of Foreign Tax Credit on delayed filling Form no. 67 - Filing of form 67 is a directory OR mandatory requirement - As submitted tax was paid overseas and Form 67 was filed before the end of the assessment year - HELD THAT:- As decided in VAIBHAV SINGHAL case [ 2024 (5) TMI 1441 - ITAT DELHI] CIT (A) has primarily taken adverse inference on the ground that necessary claim was not pressed before the AO but the claim was very much before the AO. In the interest of justice and exercising our discretion as spelt out in the case of Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] , we admit this claim of the assessee in the light of the submissions above and case laws cited. We remit the issue to the file of AO. AO shall duly consider the claim of the assessee in the light of the documents already submitted and decide as per law on this claim duly admitted. We find that facts in the present case are identical to the aforesaid case. Accordingly, we follow the aforesaid order and remit the issue to the file of AO with similar directions. Appeal of the assessee is allowed for statistical purposes.
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2024 (7) TMI 344
Exemption u/s 14A r.w.r. 8D - disallowance as expenditure attributable to the exempt income in respect of profits earned by the assessee from investments made in the partnership firms - HELD THAT:- Profit from the partnership firm is taxable in the hands of the firm and it is excluded from the total income of partners u/s. 10(2A) of the Act. AO has rightly invoked section 14A of the Act and computed the expenditure on assessee s exempt income by resorting to rule 8D of the rules after prudently recording his dissatisfaction, which is sine qua non before invoking rule 8D(2) of the rules, In Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT] has held that the objective of holding the investment are immaterial and disallowance has to be applied in all cases irrespective of the fact whether the same was held as stock in trade or as an investment. The figures taken by the AO from the accounts of the assessee company, in making computation as provided under aforesaid rule 8D(2) are in consonance with the details submitted by assessee in his paper book as stated above. This computation mechanism has been brought into the Act by IT (14th amendment) Rules 2016. with effect from 02.06.2016 and is attracted in the instant case which relates to the A.Y. 2017-18. AO has thus rightly worked out disallowance as expenses incurred on profit from the partnership firm, claimed by the assessee as exempt from tax u/s. 10(2A) of the Act after the aforesaid adjustment of suo moto disallowances made by the assessee. CIT(A) has partly erred in passing impugned order to the extent of deleting aforesaid disallowance made by AO. Revenue s referred ground is answered accordingly. The first point is thus determined in favour of the revenue and against the assessee. MAT adjustment u/s 115JB with regard to addition u/s 14A - HELD THAT:- In view of the decisions rendered by special bench in Vireet [ 2017 (6) TMI 1124 - ITAT DELHI] and Radha Madhav [ 2018 (7) TMI 1849 - ITAT MUMBAI] we hold that learned CIT(A) was partly right in holding that the adjustment of disallowance u/s. 14A of the Act r/w rule 8D of the rules was not required to be made in the book profit for MAT liability by resorting to section 115JB of the Act.
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2024 (7) TMI 343
Deduction u/s 80P(2)(a)(i)/80P(2)(d) - interest received on its investments with Cooperative Banks and Scheduled Banks - AO held that principle of mutuality is missing in assessee s case, therefore denied deduction u/s. 80P(2)(a)(i) - claim of expenditure towards earning of interest income u/s 57 of the Act on the interest income on its investments - HELD THAT:- The ratio of Hon ble Apex Court in the case of Mavilayi Service Cooperative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] is very much applicable for computing the income attributable to the business of the assessee among the members and non-members. The assessee is governed by Karnataka Co-operative Societies Act, 1959 and assessee has to follow section 18 (amended) Act of 2014 and bye-laws of the society. AO as observed that nominal members do not have a right in share of profits of the assessee. The AO has to examine with the by-laws of the Society in regard to classification of members, their rights, sharing of profits of the society among the members (Regular/Nominal). In the event it is found that thee nominal/associate members are not members and they are not entitled from share of profits earned by the assessee, then the proportionate deduction u/s 80P(2)(a)(i) to be granted in terms of the judgment of Mavilayi Service Co-operative Bank Ltd., (supra) on such income. The assessee is directed to produce the quantum of interest income received from all the categories of members for AO to carry out necessary verification - Accordingly this issue is partly allowed for statistical purpose. Deduction u/s 80P(2)(d) - Section 80P(2)(d) describes that if the assessee has received interest/dividend from the co-operative society, then the assessee is eligible for claim of deduction on such interest/dividend, however we note that the assessee has received interest from co-operative bank but it is not clear whether the interest payer (co-operative bank) is a bank and registered with Reserve Bank of India and holding licence from RBI for carrying out banking business as per RBI Act. In addition, the judgment of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. KSCARDB [ 2023 (9) TMI 761 - SUPREME COURT] in which it has been discussed in detail the definition of co-operative banks and co-operative society. If the payer bank falls under the definition of co-operative bank in the light of the judgment of Hon ble Apex Court then the assessee is not eligible to get deduction u/s. 80P(2)(d) on such interest income received from cooperative banks, therefore this issue is also remitted back to the AO for verification of interest received from co-operative bank in above terms. If AO finds that the co-operative bank is carrying its banking business activities in the light of the above judgment, the deduction u/s. 80P(2)(d) on such interest income should not be granted. Claim of expenditure towards earning of interest income u/s 57 - While calculating the income, the net income should be considered as taxable income after reducing the expenditure incurred towards earning of such income. Therefore relying on the judgment of Totgars Cooperative Sales Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] (Karnataka), the assessee is eligible for claim of its cost of funds on the interest income received from banks. Reliance is also placed on the judgment of The West Coast Paper Mill Employees Souharda Credit Co-op. Ltd. [ 2023 (8) TMI 1110 - ITAT BANGALORE] Accordingly, the assessee is directed to provide the details of cost of funds before the assessing officer. Therefore for allowing cost of funds, we are remitting this issue to the assessing officer for determining the cost of funds for earning entire interest income from bank (co-operative bank and scheduled bank). Appeal of the assessee is partly allowed for statistical purposes.
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2024 (7) TMI 342
Condonation delay filling appeal before CIT(A) - Delay of about 1000 to 2000 days - HELD THAT:- As decided in case of People Education Economic Development Society [ 2006 (1) TMI 215 - ITAT MADRAS-C] when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay. Whether delay was excessive or inordinate? - There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not able to file the appeals within the period of limitation. The cause for the delay therefore deserves to be considered, when there exist a reasonable cause, and therefore the period of delay may not be relevant factor. We rely on the decision of K.S.P. Shanmugavel Nadai and Ors. ( 1984 (4) TMI 24 - MADRAS HIGH COURT] considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Hon'ble Madras High Court thus condoned nearly 21 years of delay in filing the appeal. As compared to 21 years, delay of about 1000 to 2000 days cannot be considered to be inordinate or excessive. TDS u/s 194C - payments made as set out in the assessment orders and picked out from the Receipt Payment account of the assessee - assessee is a Gram Panchayat (Town Municipal Corporation), a State Govt. Organization, carrying out the main functions of Government Schemes like Ashraya Scheme, Indira Awas Yojana, etc. - AR submitted that some of these payments are not covered by provisions of section 194C and the amount considered by the AO is the year ending figure - HELD THAT:- AO has computed TDS u/s. 194C on the year end figure from Receipt Payment account of assessee which is not correct. He should have examined each and every payment whether it is covered under TDS provisions or not. In the interest of justice, we remit the common issue in both the appeals to the AO for fresh consideration and decision as per law. The assessee is directed to update its email id, communication address and other details and file necessary documents that would be essential and required for substantiating its case and for proper adjudication by the revenue authorities. Needless to say that reasonable opportunity of being heard be given to the assessee. The assessee is directed to cooperate with the proceedings and in case of further default, the assessee shall not be entitled to any leniency. Appeals by the assessee are allowed for statistical purposes.
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2024 (7) TMI 341
Penalty u/s 271(1)(c) - payment of cash on account of purchase of Baner land on the ground that the assessee has not explained the source of such unaccounted cash paid to Tapadiya family members - HELD THAT:- The seized paper is dated 07.10.2010 which is the basis for making addition and the statements recorded from Ajay Tapadiya, the key person of Tapadiya group does not specifically mention as to in which year or date the cash was received by them from the assessee, there is ambiguity relating to the assessment year involved for levying penalty for the payment of unaccounted cash. It is the settled principle of law that the assessment proceedings and penalty proceedings are separate and distinct and the assessee can always make a new plea during penalty proceedings although addition has been sustained in quantum proceedings. We are of the considered opinion that although it may be a case for making addition u/a 69B of the Act, however, penalty cannot be levied because of the ambiguity i.e. the assessment year involved. In this view of the matter, we are of the considered opinion that the CIT(A) / NFAC is not justified in sustaining the penalty levied by AO u/s 271(1)(c) - Decided in favour of assessee.
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2024 (7) TMI 340
Addition u/s 69A - Unexplained income - cash deposits made in Specified Bank Notes during the demonetization period - assessee is a cooperative credit society engaged in the business of providing loans and advances to its members and also in trading activities in fertilizers and allied products - HELD THAT:- The assessee has duly explained the source of deposits, which has also been accepted by the AO. The only contention of the AO is that the assessee has violated the notification of the Central Government dated 08.11.2016 and accepted the Specified Bank Notes in lieu of sales made. For that, it is for the competent authority who may take action against the assessee as may be provided/applicable in relevant law. However, for the purpose of either section 68 or 69 of the Act, the said deposits cannot be treated as unexplained income of the assessee. Our above view is fortified by the decision of the Coordinate Bangalore Bench of the Tribunal in the case of Sri BhageerathaPattinaSahakara Sangha Niyamitha [ 2022 (2) TMI 1243 - ITAT BANGALORE ] Thus the addition made/confirmed by the lower authorities in the case of the assessee on this issue is not sustained and the same is accordingly ordered to be deleted. Appeal of the assessee stands allowed.
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2024 (7) TMI 339
Assessment of trust - Exemption u/s 11 - Computation of Capital Gain - Application of Income / Utilization of Gain in Investment - AO noted assessee has computed the income under the head capital gain by applying provisions of Section 45 to 49 of the Act - HELD THAT:- We find that Calcutta High Court in CIT Vs East India Charitable Trust [ 1992 (1) TMI 21 - CALCUTTA HIGH COURT] held that investment or deposit in public sector company is first an asset and, secondly, a capital asset and thirdly a permitted capital asset under the special law relating to the assessment of charitable or public religious trust. Therefore, the contention of the revenue that the investment by way of deposit in the public sector company could not be treated as a new asset acquired with the net consideration in terms of section 11(1A) was not tenable. The investment or deposit in any public sector undertaking appears as one of the permitted forms or modes of investment or deposit. According to section 2(14), capital asset includes property of any kind held by an assessee. 'Deposits or investments' are a kind of property and do not fall in the exclusionary limb of the said section. By reason of the option exercised under the Explanation to section 11(1) the assessee was entitled to the benefit under section 11(1A) inasmuch as the definition of income as contained in section 2(24) includes capital gains as one of the species of income. As in view of the factual and legal position the assessee qualify of exemption u/s 11(1A). However, we find that the assessee for the first time before Tribunal disclosed that entire amount of capital again was utilized for purchasing other immovable property in FY 2022-23 and 2023-24, therefore, the jurisdictional AO is directed to verify said facts and allow relief to the assessee. With these directions the ground No. 1 of the appeal is allowed. Disallowance of application of interest income - deduction-exemption on account of deemed application of income under clause (2) of Explanation 1 to sub-section (1) of Section 11 in respect of accrued bank interest on FD while computing taxable income of the appellant trust - HELD THAT:- We find that no separate disallowance of this income was made by Assessing Officer while passing the assessment order. Further, we find that while making such separate disallowance by ld CIT(A), no specific show cause notice was issued to the assessee. CIT(A) while passing impugned order directed the Assessing Officer to treat such income from interest under the head other sources . Before us, the ld AR for the assessee vehemently submitted that major income is from FDs and savings bank account. Entire interest incomes were kept in UCO bank savings account, copy of bank statement is placed on record. On verification we find that such interest income is duly reflected in audited balance sheet . Further, the investment in bank is one of the mode specified under Section 11(5) of the Act. Considering the submissions of ld AR of the assessee we find merit in his submissions that the assessee is eligible for deduction under Section 11(1) of the Act. In the result, ground No. 2 of the appeal is allowed.
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2024 (7) TMI 338
Eligibility for deduction u/s 80P - interest income earned from investments held by the assessee with banks, specifically co-operative banks - assessee is a society registered under the provisions of Society Registration Act, 1860 and engaged in providing fertilizers pesticides etc., to its members - HELD THAT:- Following the direction of Hon ble Apex Court, the remanded matter by a consolidate order [ 2022 (9) TMI 1597 - ITAT LUCKNOW] we set-aside the impugned orders of first appellate authority and remand the matter back to the file of Ld. AO with a direction to deal with these two bullet issues (1) proportionate deduction of management expense interest paid against the gross interest earned and (2) deduction of interest u/s 80P(2)(d) of the Act and decide the same in accordance with law in the light of judicial precedents referred herein above. Needless to state that the appellant shall be given three effective opportunities of being heard in each these cases separately. Ground stands allowed for statistical purposes.
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2024 (7) TMI 337
Delay in filing the appeal before the CIT(A) by 1008 days - as submitted that there was change in administrative staff and the management roles, post covid, hence, there was a delay in following up the statutory proceedings - HELD THAT:- Covid pandemic pacified in March, 2022 and the assessee preferred appeal before the CIT(A) in November 2022, which means the assessee did not prefer appeal for eight months even after covid. The assessee has not given any valid reasons for non filing of the appeal even after covid pandemic for about eight months. AR simply submitted before me that due to illness of one of the partners and other administrative problems, the assessee did not prefer appeal in time and has not given any valid reasons before me. Moreover, according to section 9 of the Limitation Act, where once time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. Therefore, the limitation in the present case on hand has started on 02.09.2019 and the delay in filing the appeal in this case before the Ld.CIT(A) is 1008 days. I find that the assessee has not established any sufficient cause to condone the delay of 1008 days to prevent him to prefer appeal before the Ld.CIT(A) belatedly. Apart from this, even after covid pandemic also, there is huge delay of 8 more months. Appeal of the assessee is dismissed.
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2024 (7) TMI 336
Deduction u/s 80P(2)(d) - intimation u/s 143 (1) denying deduction on interest income earned by the assessee from the cooperative banks - HELD THAT:-Neither the claim of the assessee under section 80P was inconsistent with another entry, the deduction also did not exceed the specified statutory limit. Therefore, it is apparent that even was not an incorrect claim. Thus it is clear that disallowance of deduction under section 80P(2)(d) is not permitted u/s 143 (1) of the act. Even otherwise on the merits, the amount of interest is earned from cooperative banks. According to section 2 (19) of the act cooperative societies means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies. Under the Maharashtra cooperative societies act section 2 (10) defines Co-operative bank means a Co-operative society which is doing the business of banking as defined in clause (b) of sub-sections (1) of section 5 of the Banking Companies Act, 1949 and includes any society which is functioning or is to function as an Agricultural and Rural Development Bank under Chapter XI - Therefore, it is apparent that cooperative banks are cooperative societies who are doing the banking business. Thus, it cannot be said that all these four entities are not cooperative societies. It is not the case of the AO that the amount of deposit either in fixed deposit scheme or in savings bank account scheme of these cooperative banks is not an investment. Thus, the assessee satisfies all the conditions provided u/s 80P(2)(d) of the act. Thus, according to us the assessee is entitled to the deduction under section 80P(2)(d) of the act with respect to the amount of interest income earned from cooperative banks - Decided in favour of assessee.
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2024 (7) TMI 335
Allowability of deduction u/s 80P - interest income from cooperative societies and public sector undertaking banks - HELD THAT:- We wish to make it clear first of all that case law Karnataka State Souharda Federal Co-operative Ltd [ 2022 (1) TMI 540 - KARNATAKA HIGH COURT] has already held that Souhardha society is indeed a cooperative society within the meaning of sec.2(19) of the Act. Their lordships in Mavilayi Service Co-operative Bank Ltd [ 2021 (1) TMI 488 - SUPREME COURT] also held that such a distinction of nominal/associate members would not bar an assessee from claiming sec.80P deduction. So far as the Revenue s endeavour to highlight the assessee s interest income derived from the foregoing institutions is concerned, this tribunal in The Hukkeri Taluk Agri Produce Co-operative Marketing Society Ltd., Dist. Belagavi [ 2021 (11) TMI 1198 - ITAT PANAJI] has already settled the issue regarding interest income(s) derived from investment(s) made in former category of cooperative institution(s) in assessee s favour and against the department. The outcome would hardly any different regarding interest income derived from nationalized bank(s) in light of The Vaveru Co-operative Rural Bank Ltd.[ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] has already rejected the Revenue s very stand.- Decided in favour of assessee.
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2024 (7) TMI 334
Denial of Foreign Tax Credit (FTC) u/s 90/90A due to late filing of Form 67 - as per DR Form 67 should be filed along with the original return of income filed under section 139(1) - mandatory v/s directory provision - HELD THAT:- As similar issue decided in Duraiswamy Kumaraswamy [ 2023 (11) TMI 1000 - MADRAS HIGH COURT] returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of Rule 128 is only directory in nature. The rule is only for implementation of the provisions of the Act and it will always be directory in nature. This is what the Hon ble Supreme Court in G.M. Knitting Industries (P) Ltd [ 2015 (11) TMI 397 - SC ORDER] had held in the above case when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of the assessment order. As FTC was filed before intimation under section 143 (1) the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the Respondent, which is not proper and the same is not in accordance with law. Decided in favour of assessee.
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2024 (7) TMI 333
Order passed by the DRP without a valid computer-generated DIN - considering DRP directions as internal communication - Applicability of CBDT Circular No.19/2019 to DRP orders - Revenue filed certain evidences to argue that subsequently on same day or next day, a valid DIN has been generated and communicated to the assessee along with separate intimation Directions issued by the DRP is an internal communication and non-generation of DIN and is duly quoted in the body of said order would not invalidate the assessment order passed by the AO - HELD THAT:- Assuming for a moment, the directions issued by the DRP are internal document within the Income-tax Department, the impugned circular would still be applicable and DIN must be allotted and quoted on the body of the directions as held in the case of Ashok Commercial Enterprises [ 2023 (9) TMI 335 - BOMBAY HIGH COURT] wherein held that the circular issued by the CBDT is applicable even to a satisfaction note prepared by the AO for invoking the provisions of section 153C of the Act. In this regard, it is relevant to consider the decision of B.V.G. India Ltd [ 2024 (1) TMI 17 - ITAT PUNE] where it has been held that approval granted by the Addl.CIT u/s.153D of the Act, cannot be said to be an internal document and hence, the requirement of DIN has to be complied with in respect of such approval. Therefore, we are of the considered view that the arguments of ld.DR that DRP communication is an internal communication is devoid of merit and thus, rejected. Revenue claimed that DRP is not an income-tax authority defined under the Act and circular issued by the CBDT is not applicable to DRP proceedings - DRP is an income-tax authority and consequently, the panel would be bound to follow the circular issued by the CBDT. Assuming for a moment, the DRP is not an income-tax authority, still it is bound to follow the circular issued by the CBDT u/s.119 of the Act for the simple reason that instructions and directions issued by the CBDT are required to be observed and followed by every income-tax authority and all other persons employed in the execution of this Act. In our considered view, DRP would certainly fall within the purview of all other persons employed in the execution of this Act as envisaged u/s.119 of the Act and consequently, the impugned circular would also be required to be followed by the DRP. Circular issued by the CBDT does not apply to the orders communicated electronically - The field officers of the Income-tax Department were equipped to allot and quote DIN on the body of any communication issued to the assessee s irrespective of whether the impugned order was generated online on the AST/ITD applications or manually. This fact is further strengthened by the fact that the ld.counsel for the assessee Shri M.P. Lohia appearing for the assessee, M/s. Lakshmi Machine Works, has filed few sample copies of order passed by the DRP, Mumbai which contains a bar coded computer generated DIN allotted and is duly quoted in the body of the order. From the above it is undoubtedly clear that the systems provide for generation of computer based DIN. Therefore, we are of the considered view that there is no merit in the argument of the Revenue that there is no integration between ITBA portal and DRP module and because of this, DRP is unable to generate DIN numbers when the order was passed. Accordingly, we reject the argument of the Revenue. DRP order cannot be challenged before ITAT and consequently non- generation/quoting of DIN in the body of the order does not in any way invalidate such order - What is challenged before ITAT is final assessment order, which is passed in pursuant to the directions of the DRP. If there is no valid DRP direction, the assessment order passed by the AO becomes time barred once the order of DRP has been held to be non-est. The AO gets extended time u/s.144C(13) of the Act, for passing final assessment order pursuant to the direction of the DRP. But for want of DIN, there is no valid DRP order, the extended time limit u/s.144C(13) of the Act for passing the final assessment order under the first proviso to section 153(2) of the Act, would not be applicable and consequently, the final assessment order passed by the AO is barred by limitation. Thus, in our considered view the argument of the revenue that DRP order is not appealable is incorrect and devoid of merit. Present appeal filed before the Tribunal is not maintainable, because when the assessee argued that order of the DRP is non-est, the final assessment order cannot be said to be the one passed pursuant to the direction of the DRP - We do not find any merit in the arguments of the Revenue for the simple reason that, it is a well settled principle of law that an illegal order would be in operation till it is vacated or set aside by the competent court in appeal. Such an illegal order can be corrected in appeal, but so long as it is not set aside in appeal, it remains an order having its own statutory force. This principle is supported by the decision of Bhikajee Dadabhai Co. [ 1956 (10) TMI 41 - HYDERABAD HIGH COURT] Further, the Hon ble supreme court has upheld the legal position canvassed by the Hon ble High Court of Andhra Pradesh in the case of Bhikajee Dadabhai Co. [ 1956 (10) TMI 41 - HYDERABAD HIGH COURT] Therefore, we are of the considered view that impugned orders passed by the AO/DRP would be in operation having its own statutory force till it is vacated or set aside in appeal. Thus, we reject the arguments of the Revenue. Thus we are of the considered view that orders passed by the DRP/AO without a valid computer-generated Document Identification Number has been allotted and duly quoted in the body of such order is invalid, non-est and shall be deemed to have never been issued. However, as per section 144C(13) of the Act, the AO has to pass the final assessment order in conformity with the directions issued by the DRP within one month from the end of the month in which such direction is received. In all these cases, the DRP directions are held as invalid and deemed to have never been issued, being in violation of Circular No.19/2019. Once the DRP directions are deemed to have never been issued, the ld.AO could not have passed the final assessment orders u/s.144C of the Act, in pursuance to such non-est directions. Thus, final assessment orders passed u/s.144C(13) r.w.s. 143(3) of the Act in pursuant to invalid, non-est DRP directions is bad in law, void ab-initio and accordingly liable to be quashed.
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Customs
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2024 (7) TMI 332
Seeking provisional release of seized Gold - burden of proof - petitioner contended that though the petitioners intended to declare the same whereas even before they could reach to the counter where submission of declaration forms are accepted, the petitioners were intercepted by the Officers of the Customs Department - Section 110 of the Customs Act - HELD THAT:- In terms of the provisions of Sub-Section (1A) of Section 110, the Central Government has issued a notification, viz., Notification No.31/1986, dated 05th February, 1986, drawing up a list of Schedule of goods of perishable or hazardous nature, depreciation in the value with the passage of time, constraints of storage space and valuable nature of the goods. In the said appendix of Schedule at Serial No.4A, it is mentioned that gold in all forms including bullion, ingot, coin, ornament, crude jewelry , can be disposed of immediately on its seizure. There does not seem to be any strong case made out by the learned counsel for the petitioners to doubt the action on the part of the respondents so far as arresting the petitioners on the ground that they were trying to smuggle the gold into India from Bangkok. The petitioners in the two writ petitions have, in very categorical terms, stated that they have purchased the gold en route to India - Both the petitioners were carrying gold worth more than Rs.1 crore each as its cost price. The mode of payment made at the time of purchase was not disclosed. The petitioners did not carry / produce any authentic document in respect of the price of the gold. The petitioners did not even produce any declaration form in respect of they carrying any dutiable goods. In the instant case, the declaration of the subject gold being brought into India was not available with the petitioners. The fact that the gold was being brought into the territory of India without proper documents and also in violation of the provisions of the Customs Act, there can be no doubt that the goods are liable for confiscation and it was for this reason the subject gold bars were seized. This Bench also does not have any doubt in holding that the contention of the learned counsel for the petitioners that the item gold is not a prohibited good , cannot be accepted, for the simple reason that there are certain conditions which have to be mandatorily and statutorily followed in the event of import being made. Further, if such statutory and mandatory requirements are not complied with, the said goods when tried to be smuggled into the country would squarely falls within the definition of prohibited goods under Section 2(33) of the Customs Act - taking into consideration the stand that the two petitioners took in the course of the interrogation wherein they have specifically stated that the gold was not purchased by them and it was given to them by some unknown persons at Bangkok and to be handed over to some unknown person at Hyderabad after coming out of the airport, gives a clear picture of the intention of the petitioners to smuggle the gold into India from Bangkok. There are no hesitation in reaching to the conclusion that the action initiated by the respondent- Department cannot be found fault with, nor can the same to be held as arbitrary or in contravention of the provisions of the Customs Act - petition dismissed.
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2024 (7) TMI 331
Misappropriation of duty free gold bullion received by the petitioners under the Special Economic Zone Scheme for manufacture and export of studded gold jewellery - fraudulent diversion into the local market for delivery at the shops in Hyderabad - HELD THAT:- A plain reading of the clause 5.0 of the circular dated 10.03.2017 clearly envisages that the conditions stipulated in the said master circular would be an exemption to a proceeding drawn by way of preventive or in matters related to an offence under the Customs Act. The said clause clearly says that pre show cause notice consultation is mandatory except for preventive/offence related show cause notices. This, in other words also means that where the proceeding is preventive and offence related, pre show cause notice consultation would not be mandatorily required to be followed, rather it would stand excluded. The contents of the show cause notices by no stretch of imagination can be termed to conclusive or determinative in nature. On the contrary, if the petitioners are able to give a plausible and satisfactory explanation with cogent proof in support of their explanation and reasoning, there is no reason to believe that the authorities concerned would not appreciate the same and take appropriate steps and measures based upon the response so to be given by the petitioners. Explanation 1 to Section 28 of the Act deals with the relevant date in connection with the said Section. In the instant case, the relevant date as per the documents enclosed along with the show cause notices i.e. the worksheet, shows the date to be 24.11.2017 i.e. the date of the bill of entry. Therefore, for all practical purposes, the limitation would be five (05) years from the relevant date, and hence, the show cause notices in the two writ petitions are within the extended period of limitation as envisaged under Section 28(4) of the Act. Moreover, even the aspect of limitation is one which could be factual as also legal which can also be looked into by appropriate authority basing upon the objections and reply that the petitioner would be raising to the show cause notices. The said cannot be determined in exercise of the writ jurisdiction of this Court even before the petitioners responding to the show cause notices. It has been repeatedly reiterated by the Hon ble Supreme Court that ordinarily a writ Court may not exercise its discretionary jurisdiction in entertaining writ petitions questioning a show cause notice unlessinter alia the show cause notice being without jurisdiction or in excess of jurisdiction - In the instant writ petitions also, it is not the case of the petitioners that the authority who has issues the show cause notices lacks jurisdiction, neither is the show cause notices under challenge on violations of the principles of natural justice which are primarily two grounds available for a writ Court to entertain a writ petition so far as the challenge to a show cause notice is concerned. On this ground also, we do not find any case made out by the petitioners calling for an interference. Petition dismissed.
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2024 (7) TMI 330
Valuation - royalty payments to arrive at the transaction value of imported goods - Licence and Technical Assistance Agreement for the period from 2012-2013 to 2014-2015 - Rule 10(1)(c) of Customs Valuation Rules, 2007 - nexus between royalty and imported goods - HELD THAT:- The Agreement provides a detailed framework for transfer of technology for the manufacture of their products under Article 2 of the Agreement. The said agreement was to be in force for a period of 10 years and the royalty is payable on Net Sales Value. In this context, Net Sales Value means ex-factory sales price of the Licensed Products manufactured by the Respondent-Assessee as paid by their customers, excluding the cost of imported components, cost of standard bought out components, packing charges, and statutory levies like excise duty, sales tax and VAT. The Royalty is payable at 4% on Half Bearings, Bushes and thrust washers manufactured by the Respondent-Assessee. M/s. Daido Metal Company, Japan is required to inspect the plants and other facilities of the Respondent-Assessee in India in order to ensure the quality of products being manufactured. The Respondent-Assessee is permitted to use the brand and trademarks for manufacture and sale of such licensed products. It is essential to examine whether the payment of royalty is anyway linked to the import of raw materials and whether sale of raw materials is a pre-condition in the present appeal. A reading of various clauses of Agreement indicate that the royalty is payable at 4% of the annual net sales of the products sold by the Respondent-Assessee. There is a clear formula regarding the method to arrive at the above net sales value of the products sold - The royalty payment covers transfer and use of technology providing information of technical knowledge, design formula, technical know-how, procedures for manufacturing and secret and confidential information which have been developed or acquired by M/s. Daido Metal Company, Japan which are used for the manufacture of the products viz., Half Bearings, Thrust Washers, PTFE Bearings and PTFE bimetal. In the case of BREMBO BRAKE INDIA PVT. LTD. VERSUS COMMR. OF CUS. (IMPORTS), MUMBAI [ 2014 (11) TMI 22 - CESTAT MUMBAI] , it was held that royalty and other charges are not includible in assessable value if payment of royalty and other charges are not for imported goods and not a condition of sale of goods. Even if royalty is calculated including the value of imported raw-materials, the same is not addable to the transaction value of imported goods as there is no such condition that is evident from the Licence and Technical Assistance Agreement mandating payment of royalty as a pre-condition for sale of imported materials. The royalty payments made are not addable to the transaction value of imported goods for the period from 2012-13 to 2014-15 in this appeal, in terms of provisions of Section 14 of the Customs Act, 1962 read with Rule 10(1)(c) of the Customs Valuation Rules, 2007 - appeal filed by Revenue rejected.
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2024 (7) TMI 329
Levy of penalty u/s 114 (i) of the Customs Act, 1962 - complicity in the export of red sanders - prohibited goods - Role of appellant (Commission Agent) in Export of prohibited goods - HELD THAT:- The appellant had a close business relationship with the kingpin/mastermind of the case, that his testimony regarding working as a commission agent is not borne out of records, that the appellant had himself admitted before the authorities that he was an employee of Bose Enterprises CHA firm in the case. It is admitted by the appellant that he had worked for Sujan Sharma in the past as well, facilitated seeking of an office for him, had visited his residence at least on two occasions in the past, had known his other business contacts like Vinod Gupta etc.. All this is reflective of the close business nexus between the appellant and the prime accused - there is direct corroboration between the assertions of Shrikant Adhikari vis- -vis that of some of the other co-accused and investigations undertaken by the department. It is thus borne out from records that the appellant was in direct touch with the key conspirator Sujan Sharma and had knowingly associated with him in the facilitation and smooth clearance of the subject attempted export. The plea of the appellant that he was mainly acting as a commission agent actually does not hold any substance and is not borne out with evidence. In any case it is a recorded fact and an admitted position by the appellant that he had procured the consignment and handed over the consignment documents to the Customs Broker for onward clearance. It is an admitted fact that the appellant was not only in constant touch with the mastermind who remained unreachable for the authorities but also known common associates like Vinod Gupta working at Indo-Nepal border. The complicity and nexus of the appellant is undisputed. It is obvious that the appellant for certain monetary considerations has played the role of a middleman between the actual operators and perpetrators of the crime and the exporters. The role of the proprietor of M/s. Arihant Logistic Sushant Sharma has been well documented in the show cause notice and thoroughly analysed by the adjudicating authority in the order. The appellant has been rightly subjected to penal proceedings under the Customs Act. However, it is noted that the penalties imposed on the appellant are not commensurate and in proportion to the role and involvement of the appellant in the attempted export of red sanders wood logs - under the facts and circumstances of the case and our findings above, a penalty of Rs.1,00,000 would meet the ends of justice. Appeal allowed in part.
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2024 (7) TMI 328
Method of valuation - Levy of Countervailing Duty (CVD) on the transaction value in terms of Section 4 of the Central Excise Act, 1944 (CEA) or under Section 4A of the Central Excise Act - industrial consumers or institutional consumer - Extended period of limitation. Extended period of limitation - HELD THAT:- The law is settled that for invoking the extended period of limitation, there must be a fraud or suppression of fact for evasion of duty. Since the respondent had accepted the finding of the Adjudication Authority on the very same issue for the previous period, there is no justification to invoke the extended period of limitation. Amended provision under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 from 14.01.2007 has got no relevance in appellant s case. Method of valuation - HELD THAT:- It is an admitted fact that goods imported by the appellant is falling under the category of goods under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011. However, as per Rule 6 exemption is given to importers who are importing the goods for institutional or industrial consumers - Moreover, even after selling the product to various customers over a period of time without affixing MRP, the Authority entrusted under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to ensure compliance of the said provision of law has not raised any objection. Thus, the goods sold by the appellant cannot be considered as goods falling under Legal Metrology (Packaged Commodity) Rules (LMPCR), 2011 to adopt method of valuation as per Section 4A of the CEA, 1944 as held by Adjudication/Appellant Authority. Appeal allowed.
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2024 (7) TMI 327
Valuation - royalty of 1.75 % paid on the yeast manufactured in India and sold using the technical knowhow provided by the foreign supplier (AB Mauri Technology Pty Ltd, Australia) is includable in the value of imported yeast culture in terms of Rule 10 (1)(c) of the Customs Valuation Rules 2007 for payment of Customs duty or not - HELD THAT:- The technical knowhow agreement entered between the appellate and the foreign supplier is furnished. On perusal of the said agreement, it is found that the royalty is payable on net sales of the products sold by the licensee. In other words, after manufacturing the finished products using the technical knowhow only if the products are sold, the royalty is payable by the appellant to the foreign supplier. So also, there is no condition that the goods have to be imported only from the foreign supplier. The Tribunal in the case of M/S. VALEO FRICTION MATERIALS INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI [ 2024 (6) TMI 61 - CESTAT CHENNAI] had occasion to consider the very same issue. In the detailed order after considering the facts and the relevant precedents it was observed that unless it is established that the royalty is paid as a condition of sale it cannot be included in the assesable value. The order passed by the Commissioner (Appeals) that royalty is to be included in the assessable value cannot sustain and requires to be set aside - the impugned order is set aside - Appeal allowed.
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2024 (7) TMI 326
Classification of imported goods - girls trousers or girls pyjamas - determination of classification of the goods under the Customs Tariff by expert - Import of readymade garments - Importer classified them as Polyester knitted Girl s/kids leggings - confiscation - penalties. Pyjamas or trousers and what is the correct classification? - HELD THAT:- The disputed garments were not girls trousers according to the import documents, invoices, etc. There is nothing on record to show that any investigation was conducted to ascertain how those goods were sold by the importer after import. The packings of individual garments as per the samples presented by both sides also do not indicate anywhere that they are girls trousers . Thus, the they are not being sold as girls trousers to the ultimate consumers. Thus, they are not girls trousers as per trade parlance. As per the original test reports also, this parameter could not be determined. It is only the additional test reports submitted on the basis of the same samples which were already destroyed during testing, that the expert from the Textile Committee formed an opinion that they were girls trousers . The finding in the impugned order that that the garments in question were girls trousers cannot be sustained and needs to be set aside as it is primarily based on the revised subjective opinion of an expert contrary to the overwhelming documentary evidence and the packing of individual garments, none of which call them trousers. Classification under Customs Tariff Heading and who is competent to decide it - HELD THAT:- Classification is an appealable, quasi-judicial decision by the officers or authorities empowered to determine it. Either party aggrieved by the classification can appeal to the higher authority. An expert s opinion, is just his opinion and it is not an appealable order. If classification of the goods is left to experts, it will cause utter chaos and confusion. One expert may classify the goods under one head and another expert may give a contrary opinion. Even otherwise, if there is anyone who really has the expertise in classifying goods, it will be the appraising officer and Assistant/Deputy Commissioner dealing with the group in the Custom House who deal with classification of similar goods everyday. In this case, DRI sought the opinion of the Textile Committee regarding the HS classification of the goods who initially declined to given their opinion because the samples were destroyed during testing and after some days gave their opinion based on the samples which were already destroyed. Clearly, their opinion is irrelevant to classification of the goods which must be as per the GRI provided in the Customs Tariff - the department has not made out a case to re-classify the goods. Confiscation under section 111(m) - imposition of redemption fines - HELD THAT:- The entire case was built against the importers on the basis of intelligence received by DRI and the unsubstantiated subjective opinion of the experts from the Textile Committee that they were girls trousers. Therefore, it cannot also be said that the nature of the goods was mis-declared and hence they were liable for confiscation under section 111(m) - the confiscation of the goods under section 111(m) is not sustainable and needs to be set aside. The option of redeeming the goods on payment of redemption fines is redundant. Penalties - HELD THAT:- There is not even a single piece of evidence that they were known as or were being sold as girls trousers . The goods imported under the Bills of Entry were cleared at least in some cases after examination. The Textile Committee reports nowhere indicate as to why they were not girls pyjamas or girls leggings as evidenced from the documents but were girls trousers . Thus, these are not cases of false declarations but merely cases where DRI and the Textile Committee hold a different opinion. Penalty under section 114AA cannot be imposed because the importers declarations do not match with the subsequent opinions of DRI and the Textile Committee - As the issue is held in favour of the importers on merits regarding the declaration of the nature of the goods and their classification, there is no non-payment or short payment of duty. Consequently, no penalty can be imposed under section 114A. The impugned order is set aside - Appeal disposed off.
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2024 (7) TMI 325
Classification of imported goods - Artemia Cysts (Brine Shrimp Eggs) - to be classified under Customs Tariff Heading 2309.90 being Preparations of a Kind Used in Animal Feeding - Other or classifiable under Customs Tariff Heading 0511.99 pertaining to Animal Products Not Elsewhere Specified or Included; Dead Animals of Chapter 1 or 3, Unfit for Human Consumption Other . HELD THAT:- The relevant Chapter Heading 0511 is perused and it is found that when the Six Digits classification was modified to Eight Digits with effect from 20th January, 2003, Artemia Cyst was brought under 0511.99.11. This would again go on to show that prior to the onset of the eight-digit classification under CTH, under the earlier six digits, this product would fall under 0511.99, as has already been held in the earlier decision of the Tribunal as well as by the present adjudicating authority. The Chapter Notes and descriptions of the goods would clarify that it is beyond doubt that the goods in question would fall under CTH 0511.99 during the period under dispute - the classification of the impugned goods under CTH 0511.99 upheld. Penalty imposed on the appellant-company under Section 114A of the Act and the penalty of Rs.3,00,000/- imposed on Shri Vickram Jaitha under Section 112(a) of the Act - HELD THAT:- The penalties imposed on the appellant company in terms of Section 114A of the Customs Act, 1962 and on Shri Vickram Jaitha in terms of Section 112(a) of the Act, set aside. Appeal allowed in part.
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2024 (7) TMI 324
Refund of the duty paid for the said consignment twice i.e. both at Mumbai (from where the cargo was cleared) and at Calcutta airport air cargo (where the consignment did not even arrive and duty was erroneously paid) - HELD THAT:- The department instead of seeking report from their other section like Appraising/Docks etc. have entered into correspondence with the importer asking them to obtain a report/certificate from the concerned appraising group regarding cancellation of the Bill of Entry. It is a fact on record that the EDI system automatically purges those Bills of Entry where no cargo is arrived. Thus, in this case too the said Bill of Entry ought to have been automatically got cancelled through the system. It is also noted that the appellant had also furnished to the department copy of the bank certificate by way of proof of payment of duty at Kolkata, along with documentary evidence evidencing the duty payment and clearance of imported goods at Mumbai. On the next date of hearing the Ld.Jt.CDR after having enquired and verified from the Customs Docks at Kolkata brought to our notice that it is a fact on record that the goods have not arrived as there was no examination report and no IGM number was assigned to the subject Bill of Entry. An EDI print out dated 20.06.2024 of the Bill of Entry which has been presented before us at the time of hearing was also tendered, leaving no doubt that no import has taken place against the subject Bill of Entry and that no Cargo has arrived thereto and that an amount of Rs.12,00,014.1/-, was paid thereto. This amount is certainly not due to the government and has been wrongly paid on 24.06.2013. The order of the lower authority is set aside and the appeal filed by the appellant is allowed.
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2024 (7) TMI 323
Levy of penalty u/s 114(i) of the Customs Act - smuggling - attempted/export of Red Sanders wood logs - prohibited goods or not - HELD THAT:- There is nothing to state that the containers after having left the exporters premises were still under their control, or that the exporters assisted the loading of Red Sanders onto the container or the containers were tampered by them or had any knowledge about the loading of Red Sanders onto the containers duly loaded and sealed under the supervision of Central Excise officers. The Tribunal in a slew of cases in the absence of evidence directly implicating the appellants has held as unjustifiable to impose penalty on the exporting firm. It is settled law that conjectures and loose circumstances cannot replace the need for a cogent proof, suspicion if any is required to be duly corroborated with independent evidence, which in the present facts and circumstances on record is non-existent. The department has thus failed to establish any knowledge on part of the exporter of the fact of replacing the High Alumina Refractories Fire Bricks with red sanders wood logs and camouflaging them behind a layer of High Alumina Refractories Fire Bricks. The appellant cannot be proceeded against merely on assumption and made a victim of circumstances holding them liable for contraband found to be stuffed inside the container. This is all the more so, as the goods were stuffed under supervision of Central Excise officers and seals were found to be intact and untampered at the time of examination of cargo. The order of the lower authority cannot therefore be sustained. Appeal disposed off.
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2024 (7) TMI 322
Revocation of Custome Broker License - levy of penalty - violation of Regulation 10(a), 10(b), 10(d) 10(n) of CBLR, 2018 - re-determination of value - confiscation of the goods meant for export - rejection of Drawback claim - imposition of penalty upon the exporter. Violation of Regulation 10(a) of the CBLR 2018 - HELD THAT:- The CB is under obligation to obtain an authorization from exporter/importer. The regulation does not suggest that the CB is required to verity the signature of the exporter/importer in the said Authorization - In the present case, Mr. Mohammed Ifran, Proprietor of M/s. Sameera Overseas i.e. the exporter, has admitted that he has provided all the documents to the CB. It is observed that the issuance of Authorization and supply of the export documents by the exporter is not in dispute. Accordingly, the violation of Regulation 10(a) of CBLR, 2018, as alleged in the impugned order is not established. Violation of Regulation 10(b) of CBLR, 2018 - HELD THAT:- The job has been undertaken by Shri Aniruddha Mukherjee, who is an employee of the appellant company. There is no dispute on this. Thus, it is held that it cannot be presumed that the CB had undertaken the job of clearance through any unauthorized person. Accordingly, it is held that there is no violation of Regulation 10(b) of CBLR, 2018. Violation of Regulation 10(d) of CBLR, 2018 - HELD THAT:- The CB works as a mere facilitator and files such documents, as provided by the exporter, before the Customs Authority who are supposed to examine the same before completion of assessment. In this case, the exporter, during investigation, admitted the fact of providing export documents by himself. The value of the goods cannot be expected be determined by the CB at any circumstance. Accordingly, it is held that the violation of Regulation 10(d) of CBLR, 2018 on the part of the appellant CB is not established. Violation of Regulation 10(n) of CBLR, 2018 - HELD THAT:- In the present case, it is observed that the IEC of the exporter is valid and the same was verified by the CB from the DGFT website, which is reliable, independent and authentic data and information. Further, in this case, the exporter had duly joined the investigation and admitted his act of export. As such, identity and functioning of the exporter is not in dispute. Hence, there is no violation of Regulation 10(n) of CBLR, 2018 on the part of the appellant CB. The allegation in the impugned order that the CB has violated Regulation 10(a), 10(b), 10(d) 10(n) of CBLR, 2018, is not substantiated with evidence. Accordingly, it is held that the impugned order revoking the CB licence of the appellant on the ground of violation of the above said Regulations is not sustainable. Accordingly, the penalty imposed on the appellant CB is also not sustainable. The impugned order set aside - appeal allowed.
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Corporate Laws
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2024 (7) TMI 321
Bid-rigging in tenders invited by the Department of Agriculture, Government of Uttar Pradesh for soil sample testing - contravention of provisions of Section 3 (1) r/w Section 3 (3) (d) of Competition Act 2022 - HELD THAT:- M/s Toyfort along with other bidders namely M/s Austere System Pvt. Ltd. and M/s Fimo Info Solutions Pvt. Ltd., colluded to rig bids in the 2017 soil testing tenders of Meerut and Jhansi Divisions. It has also been established beyond doubt that the submission of bids by M/s Toyfort in the 2017 soil testing tenders of Meerut and Jhansi divisions were the cover bids in support of M/s Austere System Pvt. Ltd., so that the tender is not cancelled due to lack of participation. Had they not participated these bids would have been cancelled due to insufficient participation in tenders, as there were only 3 bids for Jhansi and 4 bids for Meerut. In the present case, the appellant was acting as a member of the cartel and was providing cover bid for the successful bidder Austere Systems. In view of peculiar facts and circumstances of the present case, where almost all bidders for soil testing are first time bidders and relevant turnover of firms from the aforesaid business is NIL, the concept of relevant turnover in such cases would not be correct, as it would lead to NIL penalty and allow the parties involved to go scot-free. Hence, the Commission s approach of taking the total turnover for computation and imposition of penalty is agreed upon. At the same time considering the fact that the Appellant was in a supporting role in this cartel, by providing the cover bids, the penalty in such cases should be less than for those in the main role. The order of the Commission in respect of holding the appellant guilty under Section 3(3)(c) and 3(3)(d) read with section 3(1) and order passed under Section 27(a) regarding cease-and-desist order are upheld - the penalty under Section 27 (b) is reduced to 3% of average annual turnover for last 3 years, instead of 5% as imposed by the commission. Application disposed off.
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Insolvency & Bankruptcy
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2024 (7) TMI 320
Nature of debt - financial debt or not - Financial Creditor or not - whether the decree from the Hon ble Bombay High Court qualifies as a financial debt under Sections 5(7) and 5(8) of the IBC in the facts of the instant case?. Nature of debt - HELD THAT:- The IBC defines financial debt as a debt along with interest, if any, with disbursement against consideration for the time value of money - the Hon ble Supreme Court's decision in M/s Orator Marketing Pvt. Ltd. Vs. M/s Samtex Desinz Pvt. Ltd. [ 2021 (8) TMI 314 - SUPREME COURT ] has also clarified that interest is not a necessary component for a debt to be considered financial, broadening the interpretation of financial debt. It was held that stipulation of the payment of interest is not a condition precedent to qualify as a financial debt. The threshold for initiating Section 7 proceedings exists even if interest is not considered as noted in Hon ble Supreme Court's decision in M/s Orator Marketing Pvt. Ltd. Vs. M/s Samtex Desinz Pvt. Ltd. (supra) wherein it was held that interest is not a necessary component for a debt, and therefore the Appellant doesn t have grounds on this count. In the instant case the Respondent is a decree holder and as per the definition of financial debt and legal precedents we cannot ignore it to be interest. The arguments of the Appellant that the Respondent has not produced any agreement for the amount claimed by it, which is a sine qua non for falling under Section 5(8) of the IBC, 2016 as the amount paid by the Applicant was not borrowed against the payment of interest nor the claim of the Applicant comes within the meaning of Section 5(8)(d) of the said IBC, 2016, cannot stand the scrutiny of the definition of debt and also the legal precedents. Procedural and Formal Defects - HELD THAT:- The Appellant has also raised concerns about procedural defects, including incorrect forms and disclosures by the IRP. However, such procedural issues do not fundamentally alter the nature of the debt or the status of the creditor. The decree from the Bombay High Court, supported by the underlying transaction involving bills of exchange and dishonoured cheques, constitutes a financial debt under the IBC - Respondent No. 1 qualifies as a Financial Creditor - The procedural defects cited by the Appellant do not significantly undermine the validity of the claim under Section 7. Appeal dismissed.
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2024 (7) TMI 319
Dismissal of application of the Appellant under Section 9 of the Code - pre-existing dispute regarding the machine's performance before service of demand notice - Supplier's breach of contract - delayed delivery and defective machine. Whether a pre-existing dispute, as argued by the Respondent, existed between the parties before the demand notice was served; basis which the NCLT dismissed the application under Section 9 of the IBC? HELD THAT:- The Respondent has provided sufficient evidence of this dispute, including documented communication with the Supplier about the machine's defects and delayed delivery. The documented communication between the Respondent and the Supplier shows that the Respondent had consistently raised concerns about the machine s performance well before the Appellant served the demand notice. It is clear that there was in fact a genuine and bona-fide pre-existing dispute before the (defective/improper) service of the demand notice dated 19.05.2021. The existence of these disputes is substantiated by emails, requests for returns, and settlement discussions. Significant weight is put on the documented communication between the Respondent and the Supplier concerning the machine's performance issues. These communications, predating the demand notice, demonstrate a genuine dispute regarding the functionality of the machine. In light of the documented pre-existing dispute concerning the machine's performance, the Adjudicating Authority's decision to dismiss the application is upheld. The Appellant's arguments regarding service of the demand notice and the arbitration clause are immaterial given the presence of a pre-existing dispute. Appeal dismissed.
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2024 (7) TMI 318
Rejection of section 7 application - Section 7 application filed by Appellant rejected as barred by Section 10A of the IBC - HELD THAT:- The Hon ble Supreme Court in C Shivkumar Reddy v. Dena Bank [ 2021 (8) TMI 315 - SUPREME COURT ] held that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents. There cannot be no quarrel to the above preposition of law laid down by the Hon ble Supreme Court in the above case. Present is a case where application which was filed by the appellant and date of default mentioned therein clearly fell in Section 10A period and no satisfactory explanation was given by the appellant to permit amendment in the date of default in the application. The present is not a case where any clarification or explanation is sought to be offered for date of default 05.09.2020 mentioned in Section 7 application. The date of default in itself is sought to be changed as 01.04.2021 without there being any reason or cause. Section 10A is a beneficial provision to extend certain protection to the corporate debtor during the COVID period. The said benefit cannot be allowed to be taken away indirectly, in event the appellant is permitted to amend the date of default which amendment is not supported by any justifiable cause or reason. Adjudicating Authority did not commit any error in rejecting the application of the appellant for change in date of default. After rejection of application of amendment, the Adjudicating Authority did not commit any error in rejecting Section 7 application as barred by Section 10A - Section 10A clearly mandated that no application can ever be filed with regard to default which has committed during 10A period. Counsel for the Appellant further sought to contend that default is a continuous default and hence, application under Section 7 could not have been said to be barred by Section 10A. The Adjudicating Authority has after considering all the aspects of the matter has rightly refused the amendment application and rejected Section 7 application filed by the appellant - there is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 317
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operatioal Creditors - time limitation - Effect of winding up petition. Whether limitation would come to a hold on account of the order passed on 29.03.2016 by the Hon ble High Court of Calcutta in a petition under Section 433 and 434 of the Act, 1965 filed by the Appellant on 19.02.2016 and it would start to run again on account of order passed by the Hon ble Supreme Court on 04.10.2019 in the case of Duncans Industries Limited [ 2019 (10) TMI 301 - SUPREME COURT] ? - HELD THAT:- In the earlier part of this order, while referring to the facts of this case, that the petition for winding up was disposed of by the Hon ble High Court vide its order dated 29.03.2016 only on the ground that by virtue of notification dated 28.01.2016 which came prior to the filing of petition under Section 433 and 434 of the Act, 1956 on 19.02.2016, it was required that in order to take any legal action against the Respondent, the consent of the central government was necessary. However, despite the order dated 29.03.2016 in which the liberty was granted to the Appellant to take recourse in accordance with law, no such application was filed by the Appellant to the Central Government for the purpose of taking its consent to pursue its remedy or recovery of the debt against the Respondent. The Respondent has solely relied upon a decision of the Hon ble Supreme Court in the case of Duncans Industries Ltd. in which the Appellant and the Respondent were not a party, therefore, it has no bearing at all. There is hardly any error in the impugned order for the purpose of interference because the Adjudicating Authority has also held that there was ample time with the Appellant to seek prior consent of the Central Government for the purpose of taking action against the Respondent in accordance with law. There are no error in the impugned order which requires any interference - the present appeal is held to be without any merit and the same is hereby dismissed.
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Service Tax
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2024 (7) TMI 316
Validity of SCN - mandatory requirement of the pre-notice consultation - recovery of service tax. It is the case of the petitioner that before issuance of the show cause notice for the demand exceeding Rs. 50,00,000/-, the respondent Department is in breach of mandatory condition of pre-notice consultation laid down by the Government vide para No. 5 of the Master Circular dated 10th March, 2017. HELD THAT:- It is noticed that during pendency of this petition, the order dated 14.03.2024 is clear to the effect that the respondent authorities were directed to undergo the process of the pre consultation keeping the impugned show cause notice in abeyance on record before the next date of hearing meaning thereby that the respondent authorities were supposed to pass an order on or before 18.04.2024. Despite above, order passed by this Court on 14.03.2024, respondent authorities fixed the hearing 03.04.2024 beyond the time period granted by this Court to complete the pre-notice consultation on or before 18.04.2024 and considering the fact that the hearing is fixed on 23.4.2024, this Court granted an indulgence to adjourn the matter for two months. However, till today, no such order is passed by the respondent authority. The impugned show cause notice is hereby quashed and set aside with liberty to the respondent authority to pass appropriate order within the pre-notice consultation conducted on 23.04.2024, and thereafter, may initiate the proceedings if required if the same is within the period of limitation. Petition disposed off.
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2024 (7) TMI 315
Constitutional validity of N/N. 15/2017 Service Tax dated 13.4.2017 and N/N. 16/2017 Service Tax dated 13.4.2017 - lack of legislative competency - HELD THAT:- This Court, in case of MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA [ 2019 (9) TMI 1315 - GUJARAT HIGH COURT] where it was held that ' The Notification Nos. 15/2017-ST and 16/2017-ST making Rule 2 (1) (d) (EEC) charge Notification No. 30/2012-ST is struck down as ultra vires Sections 64, 66B, 67 and 94 of the Finance Act, 1994; and consequently the proceedings initiated against the writ applicants by way of show cause notice and inquiries for collecting service tax from them as importers on sea transportation service in CIF contracts are hereby quashed and set aside.' The judgment delivered by this Court is binding upon the sub-ordinate authority, more particularly, when the same is not stayed by the higher authority inspite of the fact that the judgment of this Court is pending before the Apex Court for adjudication. The respondents are directed to pay service tax already paid by the pursuant to the Notification 15/2017, which is declared ultra vires as observed in case of Sai Steel Ltd. - The respondent to refund the service tax at the earliest and not later 12 weeks from the date of receipt of this order along with interest as per the law - petition allowed.
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2024 (7) TMI 314
Levy of service tax - Non-inclusion of value of such goods for determination of service tax which were sold under invoices and on which VAT was paid - HELD THAT:- During the relevant period, sub-section (4A) of Section 73 of Finance Act, 1994 was operational and the said provision has provided for payment of service tax by the service tax assessee voluntarily. It is noted that Right Resources have paid the said amounts which were not paid before issue of show cause notices along with interest. Therefore, there are no infirmity in the order passed by learned original authority insofar as it has not confirmed the demand in respect of all the show cause notices where the service tax amounts were already paid by Right Resources before adjudication. Insofar as the appeal filed by Right Resources is concerned which is against the confirmation of demand of Rs.19,42,737/-, it is noted from para 15 and 16 of show cause notice dated 09.10.2012 that the said demand is a part of the demand raised on such value which represents sale of consumables to the clients and it is satisfying that such value is exempted from payment of service tax through Notification No.12/2003-ST dated 20.06.2003. The appeal filed by M/s. Right Resources Corporate Support Services Pvt. Ltd. is allowed.
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2024 (7) TMI 313
Issuance of SCN u/s 73 of the Finance Act 1994 - reverse charge on commission paid to foreign agents - service tax was paid with interest prior to issuance of SCN and for 2011-12 to 2014-15 - service was duly disclosed in the ST-3 returns and pursuant thereto service tax was paid with interest prior to SCN - intent to evade service tax on reverse charge since the same is available to the Appellant as Cenvat Credit - HELD THAT:- The issue is no more res-Integra and once the duty and interest is paid by the party during the course of audit, it cannot be further faulted with for its conduct to penalise them. Payments of duty with interest remove the stains of delay from the conduct of the party and bring back sparkles of bonafide conduct. This Court taking note of the same having been done before issuance of show cause notice and as part of audit and before any enforcement/penal action, allows the appeal of the party. Appeal is allowed.
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2024 (7) TMI 312
Classification of services - Manpower Recruitment or Supply Agency Service or Business Auxiliary Service? - deputation of employees to other companies on monthly payment basis - services provided by an overseas service provider in terms of the Selling Agreement and Master Agreement - Business Auxiliary Service or not - extended period of limitation. Extended period of limitation - HELD THAT:- The appellant was very well aware that the two projects Fixed Price Project and Time Materials Projects are two different projects under different parameters while one being on the information technology service rendered and other being purely on personnel which has already been discussed above. The department came to know of these details only after DGCEI investigated and got to know about these Agreements and the payment terms. Therefore, the invocation of extended period has been rightly invoked in view of the fact that certain agreements and invoices were not brought to the knowledge of the department - the demand for Rs. 1,12,86,898/- on man power services for the period June 2005 to March 2007 is confirmed along with appropriate interest. The equal amount of penalty under Section 78 of the Finance Act is also upheld. All other penalties are set aside. Business auxiliary service or not - services provided by an overseas service provider in terms of the Selling Agreement and Master Agreement - HELD THAT:- As per the Master Agreement the company is engaged in the business of providing software and technology relating services to entities within and outside India. And with regard to payments, it is stated that the company shall pay fees for services provided by the service provider based on the actual cost incurred by the service provider in providing the services plus service fee. As per the Selling Agreement placed on record, the company is engaged in the business of providing software and technology related services to entities within and outside India. As per the payment terms, it is stated that for the selling services the company shall pay the agent the actual cost/expenses incurred by the agent in providing he services plus a service commission/fee which shall be computed at 10% of the aggregate actual cost/expenses incurred by the agent, in providing the services - the demand for the period 1.04.2001 to 17.04.2006 cannot be sustained. The appellant has not denied that the services have been received from their overseas company but only submits that for the period prior to 17.04.2006 they are not liable to pay duty - since the demand from 18.04.2006 to March 2007 is within the normal period, the same is remanded to the Commissioner to redetermine the tax liability after taking into consideration the submissions of the appellant that the Business Auxiliary Service excludes information technology service. The demand amounting to Rs.1,12,86,898/- for Manpower Recruitment and Supply Agency Service along with equal amount of penalty under Section 78 of the Finance Act is confirmed - demand on Business Auxiliary Service for the period July 2003 to 17.04.2006 is set aside along with interest and all other penalties. For the period 18.04.2006 to March 2007 the matter is remanded to the Commissioner only for redetermination of service tax on Business Auxiliary after affording the appellant a reasonable opportunity of being heard. Appeal disposed off by way of remand.
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2024 (7) TMI 311
Wrongful availment of Cenvat Credit in excess of caps prescribed under the relevant provisions of Cenvat Credit Rules. 2004 - non-maintenance of separate accounts for the common inputs or input services used in or in relation to the provision of both taxable and exempted output service - period 2008-09 to 2009-10 - extended period of limitation - interest - penalty. Whether appellant has rightly utilised more than 20% of the credit availed towards payment of service tax or otherwise? - HELD THAT:- There is a cap on the utilisation of the credit attributable to exempted goods or services. The extent rules, during the period prior to 01.04.2008, provided for a situation where, interalia, provider of output service opting not to maintain separate account, which is not a disputed fact in this case, could have followed various options. As per option 3C, the provider of output service was required to utilise credit only to the extent of an amount not extending 20% of the amount of service tax payable of taxable output service. Any credit utilised in excess of 20% would not be admissible in view of the cap prescribed in the rules and therefore to that extent it will be an inadmissible credit for the purpose of discharging service tax liability. However, what is being disputed is that whether there was any restriction in both availment and utilisation of credit or it was only for the purpose of utilisation. Also, whether the remaining surplus credit over and above the cap was otherwise available to them for utilisation in accordance with the CCR - the existence or otherwise of the circular is inconsequential. However, it is not clear as to why Madurai Commissionerate has issued such a Trade Notice based on the Circular and as to whether the same was withdrawn subsequently. However, it is found that the appellants claim to the unutilised credit is correct on merits, there are no reason to go into the circular. The amount which will not lapse has to be utilised only to the extent and in accordance with what is provided within the CCR and since that issue is not before us in the present appeal, it would not be desirable to pass any order regarding the manner in which or the extent to which, such credit could have been utilised subsequently or otherwise. This aspect, however, may require further quantification at the end of Adjudicating Authority to come to the conclusion whether the credit which were not otherwise available for utilisation could have been paid towards the demand or for discharge of any other service tax liability in accordance with the permissible rules. Whether an amount of Rs. 6,20,97,026/- being 8% on the value of exempted services rendered during the period from 2008-09 to 2009-10 is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994? - HELD THAT:- A plain reading of the provisions under Rule 6(3) of the CCR, effective from 01.03.2008, upto 31.01.2011 would indicate that in the event of service provider not opting to maintain separate account, he can follow either of the two options. Therefore, option to avail is with the service provider and no option can be forced on the service provider by the Department. In so far as not having followed the conditions and procedures specified under sub-rule 3A, we find that Rule 3A provides for determination and payment of amount payable under Clause 2 of Sub-rule 3 and detailed procedure has been prescribed, which essentially requires prior intimation to the Department and payment of an amount equivalent to the Cenvat Credit attributable to inputs and input service. Therefore, while there is a specific formula and method by which the amount needs to be calculated, a mere failure to opt for this method in the beginning would not take away the substantive right for claiming the same option at a later stage. There is merit in the argument of the appellant that he is entitled to opt for payment of an amount equivalent to the Cenvat Credit attributable to, interalia, input services used in or in relation to, provision of exempted services. The calculation of the amount, however, has to be in accordance with the provision envisaged under sub-Rule 3A of Rule 6(3). This recalculation of the amount has to be done. The appellants have submitted certain calculation, however, a detailed verification is required in respect of the credit claimed and the provision of utilisation etc., and therefore the Adjudicating Authority would have to go through the documents and accounts submitted by the appellant to work out the amount of credit which is required to be recovered from the appellant in respect of availment of input credit despite providing both exempted and dutiable services and admittedly not maintaining any separate account. Interest - HELD THAT:- The first two issues namely utilisation in excess of 20% would not lead to lapsing of the remaining availed credit and also in respect of the option available for calculating the proportionate credit under Rule 6(3)(ii), the interest amount would also have to be re-calculated after ascertaining the exact date of payment of service tax, as also interest paid already, if any. Extended period of limitation - penalty - HELD THAT:- Having provided both exempted and dutiable services, they had not maintained any separate account nor availed various options. Rule 6 of CCR is quite clear that one cannot take Cenvat Credit on such quantity of input or input service, which is used in the manufacture of exempted goods or for provision of exempted services. Therefore, despite being aware that they were not at all entitled for availing the credit in respect of the exempted services, they still continued to avail the same and had also not exercised their options which were otherwise available for people who were not opting to maintaining separate account of exempted and dutiable service. Thus, the appellants have deliberately choosen not to disclose their having not maintaining any separate account. Therefore, there is no infirmity in the order of the Commissioner in upholding the invokation of extended period in the facts of the case. Similarly, in the case of penalty also, it is found that they are liable to penalty under Section 78 in respect of non-payment of service tax payable. However, the quantum of penalty u/s 78 would again have to be re-determined for re-calculating the liability by extending the option. The entire order is required to be remanded back for re-determination of the amount of credit liable to be recovered from the appellant in view of observations made in foregoing paras and also for re-determination of the amount of interest payable for the failure to pay the service tax or the amount, as is required under the CCR. The appellants would provide all the documents and detailed calculation sheet to the Original Adjudicating Authority. Appeal allowed in part by way of remand.
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2024 (7) TMI 310
Invocation of Extended period of Limitation - appellant was registered with service tax but not filing ST-3 returns - HELD THAT:- In this case the vital question to decide that extended period of limitation is invocable or not, is the investigation conducted against the appellant in the Year 2016 itself wherein certain communications were exchanged between the appellant and the department for asking certain documents and why they are not paying service tax on their activity. But thereafter, no action has been taken against the appellant within time bound period and only after 4 years a show cause notice has been issued to the appellant. Further, a clarification was also sought which was answered that on the activity undertaken, no service tax is payable. Further, the issue involved in this case, whether they are liable to pay service tax or not was also referred to the third member to deciding the issue. As there is a difference of opinion between the members of this Tribunal, whether the activity undertaken by the appellant is taxable or not. As the activity undertaken by the appellant itself under doubt whether it is taxable or not and investigation was conducted against the appellant in 2016 itself. The extended period of limitation is not invocable - SCN issued to the appellant is barred by limitation - the impugned order is set aside - appeal allowed.
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2024 (7) TMI 309
Taxability - Supply of Tangible Goods for Use (STGU) services or not - activities performed or services provided by the appellants - determination of service tax liability on the appellants, by treating the activities undertaken by them as STGU - liability for payment of penalty as determined by learned Commissioner in the impugned orders dated 18.11.2016 and 27.12.2018. HELD THAT:- There is no dispute in relation to the above first two conditions inasmuch as the generating set/equipment is physically supplied to various clients by the appellants and there is a sale by the appellants to their clients by way of hire purchase/lease agreement to this effect. The dispute is related only to the third condition, that is whether the transaction between the appellants and its customers would involve the transfer of right of possession and effective control or a transfer of right to use. To examine this issue, it would be appropriate to refer to the instructions issued by the Ministry of Finance at the time of introduction of service tax levy on STGU and the various terms and conditions of agreement entered into between the appellant and its clients. The labour employed in such manner is working directly under the control and supervision of their clients and performing the operation of the equipment as per the directions of their clients. The contractual obligations also provide that procurement and availability of fuel for operations of equipment was always rest with their clients. From the above nature of the transactions entered into by the appellants with their clients, prima facie, we find that the activities undertaken by the appellants is in the nature of supply of generating sets/ equipment on rental basis or lease basis, for a specified period as agreed upon by both the parties i.e., appellants and their clients. In undertaking such act, the appellants have also paid the applicable VAT/Sales Tax as per the local State laws. The factual matrix indicate that the generating set/equipment are used to provide the electrical power required for undertaking the activities of the clients. These generating set/ equipment are installed at the premises of the client and for regulatory purpose of State Electricity authorities, the license/registration is taken by the clients. Further, in no manner the equipment is used by the appellants without taking permission from the clients; and even for routine repair and maintenance, specific prior permission of the client is required to be taken to access the said equipment - on the facts of the case and on detailed examination of the services provided by the appellants as per the agreement entered into by the appellants, prima facie we do not find it feasible to categorise the activities undertaken by the appellants as Supply of Tangible Goods for use in order to subject the transaction for levy of service tax under Section 65(105)(zzzzj) ibid. It is seen from the agreement that there is no dispute as to the fact that the goods are in the possession of the lessee (Owner) and is being used by him for the intended purpose without any interference or hurdle from the appellants once it is commissioned - the transaction of appellants does not satisfy the condition of without transferring right of possession and the effective control of such machinery, equipment and appliances. Hence the activity does not fall under the definition of Supply of tangible goods for use service as claimed by the Revenue. The services rendered by the appellants does not fall under the category of sub-clause (zzzzj) of Section 65(105) of the Finance Act, 1994 as Supply of Tangible Goods for Use without transfer of right of possession and effective control, for the period prior to 01.07.2012 - such services are also not covered under the scope of clause (f) of declared services under Section 66E ibid, for the period post 01.07.2012 - the adjudged service tax demands confirmed by the impugned orders dated 18.11.2016 and 27.12.2018, does not stand the legal scrutiny. The said order is equally unsustainable for demand of interest and imposition of penalties on the part of appellants - there are no merits in the impugned orders, in so far as the adjudged demands were confirmed on the appellants - appeal allowed.
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2024 (7) TMI 308
Levy of service tax - Business Auxiliary services - promotion and marketing of the film produced by the FPC - scope of definition of service - extended period of limitation. Whether the services provided by the appellants are leviable to service tax under the taxable category of Business Auxiliary Service (BAS) or not, in terms of Section 65 (105)(zzb) of the Finance Act, 1994, for the period prior to 01.07.2012? - HELD THAT:- The various charges incurred in promotion of the music and song video rights acquired by the appellants are purely in the nature of promoting the rights acquired by them, for commercial exploitation in terms of the contractual arrangements made between them and FPCs. These activities in no way can be termed as business auxiliary service provided by the appellants to the FPC, as their client. Further, where ever service tax liabilities have arisen it is stated by the appellants that they have duly discharged the same and the same has not been disputed by the Revenue. The agreement entered into by the appellant, it transpires that the said arrangement is between the appellants and Film Producer Companies (FPCs) for a specified period, and the scope of activities or work to be performed by the appellant is provided in the Article 2 Assignment of Rights and Article 5 Reserved Rights, clearly brings out the rights that have been offered to the appellants as defined under clause 1.17, as said works relate to only songs and song videos of the film; whereas the rights retained by FPCs include all other rights in exploiting the film for various purposes including merchandising, gaming, animation films, remaking etc.; Intellectual Property Rights (IPR) including copyrights of the producer in the film. Thus, the basis for treating the rights obtained by the appellants in the agreement and marketing of music and song video as the activity of marketing and promotion of films, in the impugned order is factually incorrect and is not based on any evidence - From the various clauses of the agreement and the number of activities carried out by the appellants, it could be clearly concluded that the appellants are carrying out the permitted activities in respect of the assigned rights of music and song videos for certain consideration detailed therein and is not providing any service for the FPCs, in any manner, and more specifically for marketing of film - such activities of the appellants cannot be considered as Business Auxiliary Service rendered for the FPCs, as their clients. Whether the services provided by the appellant is leviable to service tax under Section 66B ibid read with the definition of service under Section 65B(44) ibid from 01.07.2012 or not? - HELD THAT:- The dispute in respect of the services provided by the appellants as taxable under Business Auxiliary services, has been decided by the Co-ordinate Bench of the Tribunal in the case of MCDONALDS INDIA PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF SERVICE TAX DELHI-I [ 2019 (9) TMI 1141 - CESTAT NEW DELHI] , by holding that the amount incurred by franchisees towards advertisement expenses cannot be said to be consideration paid by the franchisee to the McDonalds, as it is the franchisee themselves who are benefitting out of such expenses and not the McDonalds. Further, Hon ble Supreme Court, in the case of PHILIPS INDIA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, PUNE [ 1997 (2) TMI 120 - SUPREME COURT] had held that the provisions of contract between a manufacturer and its distributor relating to advertising and the like were in furtherance of the desire on the part of both the manufacturer and distributor and in no way affected the real nature of the transaction which appeared to be of sale on principal to principal basis. Accordingly, the Hon ble Supreme Court had held that advertisement expenses incurred by dealer/distributor at its own cost, half of it borne by the manufacturer, does not call for deduction out of the trade discount and it is uncalled for. The above orders of the higher judicial forum clearly provide that the activities undertaken by the appellants with the FPCs under a contract such as marketing and promotion of music and song videos of film under a temporary transfer arrangement are not liable to service tax as Business Auxiliary Service - it is not found that sharing of part of the consideration alone under the contractual obligations would tantamount to provision of service towards Business Auxiliary Services, provided by appellants by treating the rights owner as their clients. Whether the adjudged demands and penalties imposed by the Commissioner of CGST, Mumbai West is legally sustainable or not, under the Finance Act, 1994? - HELD THAT:- there was no suppression of any information, inasmuch as the appellant have provided complete details in respect of the audited accounts and the balance sheets for the disputed period. It is found from the factual details that the entire data having been provided to the investigation officers of the DGGI, there is no justification to claim suppression of facts in such a situation. Further, it is found that there is no evidence or any document to indicate that the appellants in any manner had attempted to evade service tax - invocation of extended period for demand of service tax in the present cases is not sustainable. Consequent to this, it is also found that the penalty imposed on the appellants under Section 78 ibid also does not survive on the above grounds. The activities undertaken by the appellant in the present set of facts is not liable to service tax under the taxable category Business Auxiliary service - the impugned order dated 27.02.2021 is liable to be set aside to the extent it had confirmed the adjudged demands proposed in the SCN - appeal allowed.
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2024 (7) TMI 307
Levy of service tax - Commercial Construction Service/Works Contract Service - demand made solely on the ground that the Appellant has not submitted their option latter for switching over form Construction of Commercial Complex Service to Works Contract Service - HELD THAT:- This issue is no more res integra. The very issue came up for consideration before the Tribunal in the case of M/S. ABL INFRASTRUCTURE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASHIK [ 2015 (2) TMI 801 - CESTAT MUMBAI] , wherein the Bench has held ' the fact of paying Service Tax at the composition rate in the returns filed by them, is enough indication to show that they have opted for payment under the Works Contract Composition Scheme.' The Adjudicating authority is directed to first verify as to whether the Appellants have paid Rs.58.88 Lakhs as claimed by them for which the Appellant would be given an opportunity to file the documentary evidence. Further, if Rs.60.00 Lakhs is taken as payable and Rs.58.88 Lakhs is taken as paid, the balance Rs.1.12 Lakhs also is required to be paid, along with interest. In respect of Rs.22,92,514/-, which is short paid as per the Order-in-Original, the Ld.C.A. has submitted C.A. s Certificate. The Adjudicating authority is directed to verify the same along other documentary evidence to be placed by the Ld.C.A. The Appeal is partly allowed and partly remanded.
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Central Excise
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2024 (7) TMI 306
Rejection of rebate claim u/r 18 of the Central Excise Rules, 2002 read with relevant Notifications issued thereunder - rejection on the ground that the petitioner had wrongly availed Cenvat Credit on Stainless Steel Casting and Non-Alloyed Steel under the Cenvat Credit Rules, 2004 and therefore, the petitioner was not entitled to utilize the Cenvat Credit wrongly availed for discharging duty liability on the exported goods to claim rebate under Rule 18 of the Central Excise Rules, 2002 read with relevant Notifications. HELD THAT:- The issue relating to Cenvat Credit availed by the petitioner on Stainless Steel Casting and Non-Alloyed Steel stands confirmed in favour of the petitioner in view of the orders passed by the Division Bench of this Court in W.A.(MD) No.339 of 2014 on 30.04.2014 [ 2014 (4) TMI 1093 - MADRAS HIGH COURT ] and in W.A.(MD) No.1151 of 2014 on 17.11.2022 [ 2022 (11) TMI 860 - MADRAS HIGH COURT ]. Thus, the rebate of Cenvat Credit utilized on exports made by the petitioner cannot be denied as the Cenvat Credit that was availed by the petitioner is deemed to be validly availed and utilized for discharging excise duty lability on the exports covered by various rebate claims. These Writ Petitions deserve to be allowed. Thus, the impugned orders of the first respondent seeking to deny rebate claims of the petitioner are quashed - the rejection of rebate claims cannot be sustained.
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2024 (7) TMI 305
Appropriation of the rebate claim towards tax liability of the petitioner - Section 11B of the Central Excise Act, 1944 r/w Rule 18 of the Central Excise Rules, 2002 - HELD THAT:- As far as the Order in Original is concerned, the Tribunal had set aside the order passed by the Appellate Commissioner. Pursuant to the aforesaid order in E/734/2010, the petitioner opted to settle the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019. The petitioner has discharged the liability under the aforesaid Scheme and therefore, the petitioner seeks direction to refund the amount of Rs. 5,26,662/- appropriated towards part of the liability confirmed vide Order in Original No. 1669 of 2009 dated 11.11.2009 - As far as the appropriation of amount of Rs. 51,972/- towards tax liability of Rs. 1,63,778/- vide Order in Original No.8 of 2011-ST is concerned, the petitioner had preferred an appeal before the Appellate Commissioner vide Order in Appeal No.152 of 2010 dated 26.08.2010. Thus, the Tribunal had remanded the case back to the Original Authority and that the petitioner has settled the dispute under the SVLDRS Scheme, 2019 and discharge certificate in Form-4 has also been issued to the petitioner by the Designated Authority on 29.01.2021. Thus, the liability of the petitioner has been either dropped or squared up under the SVLDRS Scheme. Therefore, the appropriation made pursuant to the aforesaid order is liable to be set aside. The respondents are directed to refund the amount that was sanctioned by the Rebate Sanctioning Authority together with applicable interest under Section 11(b) of the Central Excise Act, 1944 to the petitioner - petition allowed.
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2024 (7) TMI 304
Clandestine removal - Oxygen - HELD THAT:- Tribunal has given the finding that ' Without prima-facie, establishing the fact that there has been a clandestine removal (if not with an arithmetical precision), such an allegation, will not survive. It is seen that not even a statement of the person, who managed the production/consumption of oxygen or the person who has maintained the statistical report, has been recorded by the Revenue. Without such bare a minimum enquiry, the charge of clandestine removal, cannot be sustained.' The findings recorded by the Tribunal are findings of fact based on consideration of relevant documentary and other evidences on record. Therefore, no substantial question of law is involved - Appeal dismissed.
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2024 (7) TMI 303
Grant of interest from the date of deposit till the date of allowance of refund alongwith appropriate interest on the amount deposited during investigation - HELD THAT:- The issue is no longer res integra and it has been held by Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] , wherein this Tribunal have held that interest on refund of amount deposited during investigation or deposited during pendency of appeal is allowable under Section 35EE of the Act and has to be paid from the date of deposit till the date of refund. The Appellant is entitled to interest on the refundable amount of Rs.50,00,000/- from the date of deposit (03.06.2006) till the date of refund being 02.01.2020, @ 12% per annum - Appeal allowed.
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2024 (7) TMI 302
Valuation - physician samples (P or P Medicaments) clearing to the distributor - to be assessed under Section 4 (1) (a) or 4 (1) (b) of Central Excise Act 1944 - period from July 2010 to December 2010 - HELD THAT:- The issue stands covered as per the decision of the Tribunal in the appellant s own case M/S. FOURRTS (INDIA) LABORATORIES P. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2023 (9) TMI 56 - CESTAT CHENNAI] where it was held that ' the case would be covered by the provisions of Section 4(1)(a) of the Act and in view thereof Rule 6(b)(ii) of the Rules would not apply.' The demand cannot sustain. The impugned orders are set aside. The appeals are allowed.
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2024 (7) TMI 301
CENVAT Credit - denial to avail credit of the import duties as the original documents (Bills of Entry) were lost - HELD THAT:- Rule 9 of CENVAT Credit Rules 2004 provides for the documents on which credit can be availed. The Proviso to sub-rule (2) of Rule 9 states that if the document does not contain full particulars, the Deputy Commissioner or Assistant Commissioner may cause verification and if satisfied, allow the credit. In the present case, there is no dispute that goods have been imported and received at the factory of the appellant. So also there is no dispute that the duty has been paid. The photocopies of the Bills of Entry are supported by certificate issued by Inspector of Police for loss of original as well as certificate issued by customs authorities for payment of duty. It is not a case of availment of credit on mere photocopies. It is held that disallowing the credit alleging that original documents have not been produced is too harsh on the assessee and would result in denying substantive benefit of credit. The appellant is eligible for credit. The impugned order is set aside - appeal allowed.
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2024 (7) TMI 300
100% EOU - relevant date for computing interest on deposit of amounts made against an audit objection - from the date of payment under protest or as per provisions of Section 11BB, whereby the relevant date would be 3 months from the date of filing the refund application - appropriate rate of interest for a delayed refund - jurisdiction - Tribunal is competent to decide the effective rate of interest other than that notified under sec. 11BB, for a delayed refund under the Act or not. What is the relevant date for computing interest as per the facts of this case? - HELD THAT:- This is a case where the duty has becomes refundable as a consequence of the judgment of an Appellate Authority. Explanation B to Clause (5) of Section 11B of the Act defines Relevant Date . Sub-clause (ec) thereof clarifies that where the duty becomes refundable as a consequence of a judgement decree order or direction of appellate authority Appellate Tribunal or any Court, the date of such judgement decree, order or direction shall be the relevant date. Explanation to section 11BB also states that where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any Court against an order of the Assistant Commissioner of Central Excise, under sub-section (2) of section 11B, the order passed by the Commissioner (Appeals), Appellate Tribunal or, as the case may be, by the Court shall be deemed to be an order passed under the said sub-section (2) for the purposes of this section. Hence the relevant date for calculating the interest rate in terms of section 11BB would be three months from the date immediately after the expiry of three months from 23.08.2018, the date of the order of the Commissioner (Appeals). What is the appropriate rate of interest for a delayed refund, of an advance payment made towards an audit objection? - HELD THAT:- It has been categorically held by the Hon ble Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] and discussed elaborately above, that notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or in any law for the time being in force, no refund shall be made except as provided in Section 11B of CEA 1944. The Hon ble Court went on to repeat that so long as Section 11B is constitutionally valid, it has to be followed and given effect to. The appellant would only be eligible for interest at the effective rate as per the notification issued under section 11BB of Central Excise Act, 1944 and not at any higher rate. Competence of the Tribunal to fix a higher rate of interest than prescribed under Section 11BB of the Central Excise Act, 1944 - Having come to a conclusion on both the issues raised by the appellant within the framework of sec. 11B and 11BB of the CEA 1944, it is not felt necessary to attempt an answer to the this question. The appellant is eligible for consequential relief - appeal disposed off.
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2024 (7) TMI 299
Reversal of CENVAT Credit - common credits on inputs and input services availed on taxable as well as exempt goods - Rule 6(3A)(a) of the CCR - HELD THAT:- It is a fact on record that the appellant is neither taking CENVAT credit attributable to exempted goods or have reversed proportionate standard credit attributable to exempted goods. The said fact has been examined during the course of audit. Moreover, the appellant has periodically intimated to the Department to that effect. The impugned proceedings are not sustainable against the appellant. In view of this, there are no merit in the impugned orders which have been passed in gross violation of judicial pronouncements. Therefore, as appellant has not taken CENVAT Credit of input services which have been used for manufacturing of the final exempted goods, therefore, appellant are not required to pay an amount equivalent to 5/6/7% of the value of exempted goods. As no demand is sustainable against the appellant, no penalty can be imposed on the appellant. The impugned order set aside - appeal allowed.
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CST, VAT & Sales Tax
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2024 (7) TMI 298
Credit of advance tax paid under Circular No.50/2006 to any amount paid in excess of 4% - stock-transfer of timber from one branch to another - HELD THAT:- A reading of the Circular will clearly indicate that the Circular was intended to ensure that there is no evasion of tax in respect of the goods specified in that Circular by collecting an advance tax at different rates for different goods as specified in the Circular at the Border Check Posts. It is thus clear that the tax collected in terms of the Circular is only an advance tax, which could be adjusted against the actual tax payable by a dealer while completing the assessment for the particular year. In the facts of the present case, it is not disputed that there was no taxable transaction entered into by the petitioner, and the goods in question had only been stock transferred to the Branch Office of the petitioner at Pollachi. Section 13 of the KVAT Act deals with the refund of input tax credit in the case of export or inter-State sale. A combined reading of the provisions of Circular No. 50/2006 and the definition of input tax in Section 2 (xxiii) of the KVAT Act indicates that the tax paid in terms of Circular No. 50/2006 cannot assume the character of input tax. Therefore, the provisions of Section 13 of the KVAT Act, on which the reliance was placed by the Officer to deny the claim for credit of the entire tax paid by the petitioner in respect of goods brought into the State and thereafter stock-transferred to Pollachi, will not apply in the facts and circumstances of the case. Ext. P3 order, to the extent it denies credit to the entirety of the tax paid by the petitioner in terms of Circular No. 50/2006 and in respect of goods stock-transferred to Pollachi, cannot be sustained in law. It is declared that the petitioner will be entitled to the credit for the entire amount paid in terms of Circular No. 50/2006 for the goods in question which were stock- transferred to its Branch Office in Pollachi. Petition allowed.
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2024 (7) TMI 297
Levy of luxury tax - charges received by the assessee from its customers out of the amounts paid to the Ayurveda Centre functioning in the premises of the hotel operated by it - charges received by the assessee from its customers out of the amounts paid to a Beauty Parlour functioning in the premises of the hotel operated by it - charges collected by the assessee from clients/customers for the use by the latter of the Convention Centre operated by it. Levy of service tax on charges received by the assessee from its customers out of the amounts paid to the Ayurveda Centre functioning in the premises of the hotel operated by it - HELD THAT:- The invoices raised on the customers, for the services provided by the independent third persons, also show that the services were provided by them and not by the assessee hotel. No doubt, the petitioner has a case that there was an agreement between the assessee hotel and the independent third persons who were providing the service to customers, for sharing of the revenue earned by the latter - As rightly found by the Appellate Tribunal, the revenue sharing arrangement, between the assessee on the one hand and the independent third persons on the other, had to be seen as an arrangement providing for the receipt of rent by the assessee for letting out space within its hotel premises for the business activities of the independent third persons - it is found against the petitioner on the said issues by confirming the impugned order of the Tribunal. Levy of luxury tax on the amounts received by the assessee for the use of the Convention Centre - HELD THAT:- There are force in the submission of the learned Senior Counsel for the assessee that prior to the amendment of Section 4(2)(c) of the Act, there was no levy envisaged for charges collected in connection with the use of a Convention Centre. The levy was introduced for the first time only through the amendment brought in through the Kerala Finance Act, 2006 with effect from 01.07.2006. Being an amendment to a substantive provision that introduced a new levy, the levy can operate only prospectively and not retrospectively - it is found against the petitioner-State on the issue of levy of luxury tax on the amounts received for use of the Convention Centre in the assessment years 2004-05 and 2005-06. There are no reason to interfere with the orders of the Appellate Tribunal that are impugned in these Original Petitions - petition dismissed.
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Indian Laws
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2024 (7) TMI 296
Dishonour of Cheque - complete service of notice - whether service of notice of demand under Section 138 of the NI Act will be deemed to be complete if the said notice of demand was served only on the director of the accused company and not on the accused company itself? - HELD THAT:- A reading of proviso (b) to Section 138 of the NI Act shows that issuing a notice of demand to the drawer of the cheque is a pre-requisite for filing a complaint under Section 138 of the NI Act. However, the objective of issuing a notice of demand under proviso (b) is to give an opportunity to the drawer to pay the cheque amount within 15 days of service of notice and thereby free himself from the penal consequences of Section 138 of the NI Act. The discussion in C.C. Alavi Haji [ 2007 (5) TMI 335 - SUPREME COURT] makes it abundantly clear that the objective of serving a demand notice to the person accused of an offence under Section 138 of the NI Act is to give an opportunity to the drawer to pay the cheque amount within 15 days of service of notice and thereby free himself from the penal consequences of Section 138 of the NI Act. In fact, the Supreme Court goes on to hold that a person who does not pay within 15 days of receipt of the summons from the court along with the copy of the complaint under Section 138 of the NI Act, cannot contend that there was no proper service of notice as required under Section 138 of the NI Act. The cheques in question are signed by the petitioner no. 2 for and on behalf of the petitioner no. 1. Petitioner no. 2 is stated to be the Chairman of not only the petitioner no. 1-Company, but also of the Group of Companies, including IBooks. The cheques in question are claimed to have been issued in discharge of one common liability, where not only the cheques of petitioner no. 1 but also IBooks were issued by the petitioner no. 2 - In spite of service of the notice, the petitioner no. 2, instead of making the payment of the cheque amount, raised a dispute on the liability to pay the same and also stated that the cheques were not issued by IBooks, the addressee no. 1 in the notice. The defence that the notice was wrongly addressed to IBooks instead of the petitioner no. 1, therefore, cannot come to the aid of the petitioners, especially where the complaints in question are rightly filed making the petitioner no. 1-company as an accused. In ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. [ 2012 (5) TMI 83 - SUPREME COURT] ), the Supreme Court has held that an authorised signatory of a company becomes a drawer as he has been authorised to do so in respect of the account maintained by the Company. Therefore, even testing on this standard, the notice was duly addressed to the drawer of the cheques in question. There are no merit in the present petitions. The same are, accordingly, dismissed.
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2024 (7) TMI 295
Dishonour of Cheque - entitled to file the complaint for the commission of an offence punishable under Section 138 of the NI Act - not legally wedded wife of the deceased - evidence of testamentary disposition - HELD THAT:- It is apparent from the order passed by this Court that this Court had directed the learned Magistrate to receive the evidence of testamentary disposition executed by Shobha Ram vis- -vis Kiran Thakur, permit the accused to adduce evidence in rebuttal thereto and thereafter make a fresh decision on the complaint. Thus, the learned Magistrate was only required to take evidence regarding the testamentary disposition from the complainant and any rebuttal evidence from the accused. It was laid down by the Rajasthan High Court in Chote Lal [ 1986 (4) TMI 371 - RAJASTHAN HIGH COURT ] that where the Court had ordered that the sale deed would be taken in evidence and parties would be permitted to lead evidence in support and rebuttal thereof, it was not a case of open remand but a limited remand. It is not permissible for the learned Trial Court to allow the parties to reopen other matters and accept another document. A similar view was taken by the Madhya Pradesh High Court in Ramabai [ 1996 (1) TMI 486 - MADHYA PRADESH HIGH COURT ], wherein it was held that the learned Trial Court had limited jurisdiction in terms of the remand order. It can decide the matter only as per the directions issued by the Appellate Court. The jurisdiction of the Trial Court in case of remand depends upon the order of the remand. The Trial Court cannot enlarge its jurisdiction by allowing the parties to reopen the matters which are not remanded to it. In the present case, the question whether the cheque was issued in discharge of the legal liability or not was never remanded to the learned Trial Court and no evidence could have been admitted on this aspect - the scope of Section 311 of Cr.P.C. is misplaced because the Court is not concerned with the scope of Section 311 Cr.P.C. but the jurisdiction of the Trial Court after the order of the remand. Once the jurisdiction was restricted by the remand order it could not have been enlarged by referring to the provisions of Section 311 of Cr.P.C. The learned Trial Court exercised the jurisdiction not vested in it under the law by going beyond the scope of the remand order. Hence, the present petition is allowed and the order dated 11.9.2023, passed by learned Judicial Magistrate First Class (JMFC) is set aside. The application filed under Section 311 of Cr.P.C. shall stand dismissed.
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2024 (7) TMI 294
Challenge to Arbitral Award - challenge to the impugned Award passed by the Arbitral Tribunal is primarily on the ground that the Arbitral Tribunal has rewritten the contract by awarding tax component even though the contract were inclusive of tax - HELD THAT:- The Hon'ble Supreme Court in Ssangyong Engineering and Construction Co. Ltd. Vs. National Highway Authority of India [ 2019 (5) TMI 1879 - SUPREME COURT] , has held that an Award can be set aside on the ground of patent illegality under Section 34(2-A) of the Arbitration And Conciliation Act, 1996 only where the illegality in the Award goes to the root of the matter. It is further held that finding of erroneous application of law by an Arbitral Tribunal or the re-appreciation of evidence by the Court under Section 34(2-A) of the Arbitration and Conciliation Act, 1996 is not available. The Hon'ble Supreme Court further held that the above ground is available only where the view taken by the Arbitral Tribunal is plausible while construing the Contract between the parties or where the Award of the Tribunal lacks justifiable reasons. The Hon'ble Supreme Court further held that an Award can be set aside only if an Arbitrator/Arbitral Tribunal decides the question beyond the Contract or beyond the terms of reference or if the finding arrived by the Arbitral Tribunal is based on no evidence or ignoring vital evidence or is based on documents taken as evidence without notice to the other side. This view is applicable to the facts of the case. In South East Asia Marine Engineering and Constructions Limited (SEAMEC Limited) Vs. Oil India Limited [ 2020 (5) TMI 242 - SUPREME COURT] , the Hon'ble Supreme Court has reiterated that if the interpretation of Contract by Arbitral Tribunal is perverse and is not a possible interpretation, the Award passed by the Arbitral Tribunal, is liable to be set aside. The facts on record indicate that the total value of contract inclusive of other miscellaneous expenses incurred by the respondent-claimant was Rs. 21,74,95,091/-. Out of the aforesaid amount, the petitioner had earlier paid a sum of Rs. 6,94,36,884/- to the respondent-claimant - The respondent-claimant claimed the balance Rs. 14,80,58,207/- [Rs. 11,19,22,870/- +Rs. 3,61,35,337/-]. An amount of Rs. 3,61,35,337/- allegedly borne by the respondent-claimant towards miscellaneous expenses incurred by the respondent-claimant during supply and execution of the contracts signed between the petitioner and the respondent-claimant - The Arbitral Tribunal after considering the overall facts and circumstances of the case allowed only a sum of Rs. 11,19,22,870/- to the respondent-claimant and has rejected the counter-claim of the petitioner for a sum of Rs. 2,61,35,337/-. The counter-claim of the petitioner was towards the amount paid by the petitioner to the respondent's subcontractor( s)/vendors and towards alleged damage suffered by the petitioner. It cannot be stated that there was any error committed by the learned Arbitrator while awarding the amounts claimed. Therefore, on this account it cannot be stated that the Award passed by the learned Arbitrator was perverse or amounts to any patent illegality to warrant interference. This Arbitration Original Petition is dismissed.
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