TMI Tax Updates - e-Newsletter
July 9, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. RECENT GST CLARIFICATIONS – PART 1

   By: Dr. Sanjiv Agarwal

2. ENTERTAINMENT OF WRIT PETITION AGAINST THE ORDER PASSED BY THE ORIGINAL AUTHORITY ON ONE DEFECT AMONG SIX DEFECTS POINTED OUT IN THE SHOT CAUSE NOTICE

   By: DR.MARIAPPAN GOVINDARAJAN

3. Recipient can claim ITC on exempt services where supplier has charged GST

   By: Bimal jain

News

1. Budget Session of Parliament to be Held from 22nd July to 12th August, 2024

2. Pre-Budget consultation meetings for the forthcoming Union Budget 2024-25 conclude in New Delhi

3. Government reopens application window for PLI Scheme for White Goods (ACs and LED Lights) for 90 days from 15th July, 2024

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2024/098 - dated 8-7-2024

Ease of doing business - Streamlining of prudential norm for passive schemes regarding exposure to securities of group companies of the sponsor of Mutual Funds

GST - States

2. Trade Circular No. 2T of 2024 - dated 4-7-2024

Reduction of Government Litigation — fixing monetary limits for filing appeals or applications by the Department before GSTAT, High Courts and Supreme Court

3. Trade Circular No. 3T of 2024 - dated 4-7-2024

Clarifications on various issues pertaining to special procedure for the manufacturers of the specified commodities as per Notification No. 04/2024 - State Tax dated 21.02.2024

4. Trade Circular No. 4T of 2024 - dated 4-7-2024

Clarification on the provisions of clause (ca) of Section 10 (1) of the Integrated Goods and Service Tax Act, 2017 relating to place of supply of goods to unregistered persons

FEMA

5. 14 - dated 8-7-2024

Export-Import Bank of India’s GOI-supported Line of Credit of USD 2.50 mn to the Government of Co-operative Republic of Guyana, for installation of Solar Photo Voltaic Power Plant at Cheddi Jagan International Airport

Customs

6. PUBLIC NOTICE No. 08 / 2024 - dated 27-6-2024

Launch of Exchange Rate Automation Module (ERAM) -reg.

7. PUBLIC NOTICE NO. 28 / 2024 - dated 26-6-2024

Sub : Renewal of Custodianship under Regulation 13 of Handling of Cargo in Customs Areas Regulations, 2009 in respect of Multi cargo Terminal M/s Ennore Bulk Terminal Pvt. Ltd.(formerly known as M/s. Chettinad International Bulk Terminal Pvt. Ltd.,) Kamarajar Port, Ennore - Regrding.

Highlights / Catch Notes

GST

• Genuine issues in manual refund application merit liberal approach. Avoid undue technicalities & litigation. Foster assessee-friendly system.

  Case-Laws - HC : Regarding processing of manual refund application, it is held that when genuine issues arise, the Department should adopt a liberal approach, particularly considering that no party would intentionally delay or fail to file refund application in the portal when substantial refund amount is due. The Department should avoid unwarranted litigation on such issues and make the system more assessee-friendly, fostering Revenue's interest in tax collection. In the given case, technicalities should not impede the assessee. The petition is disposed of.
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• Notices ignored, order quashed. Case remitted for fresh decision on recovered amounts. Order treated as addendum to show cause.

  Case-Laws - HC : Principles of natural justice violated as petitioner unaware of notices preceding impugned order. Court granted partial relief, quashed impugned order, and remitted case to respondent for fresh orders considering amounts recovered pursuant to attachment. Impugned order treated as addendum to show cause notices. Petition allowed.
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• Fusible interlining fabric of cotton not classifiable under Heading 5903; visible plastic coating pattern disqualifies it.

  Case-Laws - HC : The fusible interlining fabric of cotton is not correctly classifiable under Heading 5903 of Chapter 59 of the Customs Tariff Act, 1975. The Heading 5903 applies only to fabrics where impregnation, coating, or covering cannot be seen with the naked eye. The fabric manufactured by the petitioner is partially coated, and the plastic coated pattern is visible on one side. As per the Atira's test report and Chapter Note 2(a)(4) of Chapter 59, such partially covered fabrics fall under Chapters 50 to 55, 58, or 60, not Chapter 59 Heading 5903. The impugned order classifying the product under Heading 5903 is quashed, and the petition is allowed, classifying the product under Chapters 50 to 55, 58, or 60 of the GST Tariff.
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• High Court: Petitioners entitled to refund of unutilized ITC on zero-rated supplies despite delayed approval of CENVAT credit carry forward.

  Case-Laws - HC : The High Court held that the petitioners were entitled to refund of unutilized input tax credit (ITC) on zero-rated supplies. The only ground for denying refund by the appellate authority was that no balance was available in the electronic credit ledger when the petitioners became entitled to the refund, as the carried forward CENVAT credit from the earlier regime was approved later. This would be contrary to Section 140(1) of the CGST Act. Consequently, the orders denying refund were quashed, and the appeal was allowed.
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• Transitional credit denial notice lacked details. Reply disregarded for manual submission. Order treated as show cause. Dept to issue reasons, allow rebuttal.

  Case-Laws - HC : Show cause notice lacked necessary details for denying transitional credit of Rs.14,05,211/-. Petitioner's reply not considered as it was submitted manually, not uploaded on portal, violating principles of natural justice. Impugned order treated as show cause notice. Respondent directed to issue supplementary reasons for denying transitional credit within two weeks, providing petitioner opportunity to contest tax demand. Petition disposed of.
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Income Tax

• Reopening assessment invalid if assessee's objections not disposed. Deduction u/s 24(a) disallowed. Objections mandatory per GKN case. Orders quashed, remanded.

  Case-Laws - HC : Validity of reopening assessment challenged due to non-disposal of objections raised by assessee against reassessment. Deduction u/s 24(a) proposed to be disallowed. Court held that as per GKN DRIVESHAFTS (INDIA) LTD. [2002 (11) TMI 7 - SUPREME COURT], it is mandatory for Assessing Officer to dispose of objections filed by assessee for reopening assessment. Without entering merits, impugned assessment orders quashed and matters remanded to Assessing Officer to dispose of objections raised by assessee for reopening assessment.
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• Failure to file Form 10/10B before due date not fatal for exemption u/s 11(2) if available when CPC passed intimation u/s 143(1).

  Case-Laws - AT : Failure to file Form 10/10B before due date prescribed u/s 139(1) cannot be fatal to deny exemption u/s 11(2), especially when Form 10/10B was available on record when intimation was passed by CPC u/s 143(1). Following binding precedents of Gujarat High Court, other High Courts, and Supreme Court, since Form 10 was available when CPC passed intimation, disallowance of assessee's claim u/s 11(2) is improper. AO directed to consider Form 10 and pass appropriate orders. Assessee's appeal allowed.
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• Refund claim allowed u/s 240 for Rs. 27,04,767/- despite late filing, overriding AO & CIT(A) orders.

  Case-Laws - AT : Refund claim denied u/s 239(2)(c) as assessee filed return after one year from last date of relevant assessment year. Assessee contended case covered u/s 240 as refund consequent to appellate order. Held, Section 239 applies to refund by self-assessment, Section 240 covers refund pursuant to appellate order. ACIT passed order u/ss 251/154/147/143(3) determining refund. Assessee's case covered u/s 240, not Section 239. Orders of AO and CIT(A) set aside, assessee entitled to refund of Rs. 27,04,767/-. Appeal allowed.
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• CIT Oversteps: Revises Reassessment Order Beyond Jurisdiction, Invalidating Action Favoring Assessee Under Sec. 263.

  Case-Laws - AT : u/s 263, the AO had not made any addition regarding cash deposits in the assessee company's bank account and unsecured loan received during the year under consideration, which was the basis for reopening the case u/s 147. The AO was divested of jurisdiction to make further independent additions/disallowances. The CIT could not hold the reassessment order erroneous for failing to verify independent issues. The CIT's jurisdiction u/s 263 is limited to the subject matter of reassessment. If distinct, the limitation period for section 263 starts from the original assessment order date. The CIT exceeded jurisdiction by revising the order regarding share capital/premium and unsecured loans, as these did not form the reassessment subject matter u/s 147. Hence, the CIT's revision order u/s 263 was struck down, favoring the assessee.
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• TDS Credit Granted Post-Amalgamation: Transferee Company Can Claim Despite Certificates in Transferor's Name.

  Case-Laws - AT : Denial of TDS credit post amalgamation and merger proceedings - scheme of arrangement approved by NCLT - assessee contended that due to the scheme of arrangement, the operations and income of the amalgamated and merged company continued until the date of the NCLT order, while processing the return, the CPC considered the income but did not grant the corresponding TDS credit - HELD THAT:- The resulting company in a demerger and the transferee company in a transfer are eligible to claim TDS credit even if the TDS certificates are in the name of the demerged/transferor company. As noted that the assessee itself is Deductor and Deductee company is a merged entity. Therefore, the Ld.CIT(A) should have decided on the facts and merits of the case. Thus, we set aside the order of the Ld.CIT(A) and direct the AO to allow the TDS credit to the assessee, after verifying that the relevant income has been assessed in this year. Assessee appeal allowed.
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• Taxpayer's Cash Deposits During Demonetization Period Deemed Explained, Avoids Additional Tax u/s 69A.

  Case-Laws - AT : Addition u/s 69A - unexplained income - cash deposits made into bank account during demonetization period - assessee neither furnished stock summary nor bills/vouchers for purchases - cash deposits recorded in books of account, audited, tax audit report furnished - assessee explained cash deposits of Rs. 69.25 lakhs, Rs. 13 lakhs from sales to party, remaining from cash sales during Diwali before demonetization - AO did not reject books of accounts - assessee's contention of receiving Rs. 13.95 lakhs cash from party not disputed - no cash collection by assessee after demonetization - coordinate Bench ruling that when audited books not rejected and sales not disturbed, no addition u/s 68 for cash deposits during demonetization - no addition u/s 69A for cash deposits as unexplained income - CIT(A)'s findings reversed, addition deleted.
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• Under-reported tuition fees led to penalty u/s 270A. But lack of specificity in notice prevented assessee's response. Following precedent, penalty deleted.

  Case-Laws - AT : Penalty u/s 270A for under-reporting income due to misreporting tuition fees - penalty notice did not specify subsection or clause, preventing assessee from responding - relying on Shashikant Sukdeo Ambekar case, penalty u/s 270A deleted in favor of assessee as Income Tax Appellate Tribunal could not determine specific provision invoked.
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• Interest Adjustment Upheld; TP Adjustment for Guarantee Fee Limited; R&D Deduction Allowed; Interest-Free Advances Disallowed.

  Case-Laws - AT : TP adjustment of interest - CIT(A) confirmed upward adjustment towards interest by adopting rupee loan rate instead of LIBOR linked rate in respect of foreign currency loans advanced to subsidiary. Adjustment in respect of Corporation Bank interest and Allahabad Bank interest deleted as amount was not advanced to AE for entire period. Loan granted to AE out of own funds - matter remitted to AO for readjudication of adjustment of interest. Deduction u/s 35(2AB) - claim for weighted deduction on gross R&D expenditure allowed without reducing contract research income. TP adjustment of corporate guarantee fee - adjustment restricted at 0.5% on guarantee amount. Disallowance u/s 36(1)(iii) - interest free advance - disallowance deleted due to sufficient interest free funds. Excess claim u/s 35(2AB) over DSIR approval - deduction allowed on actual expenditure prior to amendment. Additional claim of weighted deduction u/s 35(2AB) on clinical trial expenses - matter remitted back.
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• Dispute Over Tax Valuation of Work-in-Progress: Court Rules Against Estimated Costs, Upholds Proper Accounting Procedures.

  Case-Laws - AT : Valuation by DVO - addition based on estimated cost disregarding actual cost as per books - applicability of section 142A before amendment - non-rejection of books - AO alleged WIP suppressed and engineer's certificate unreliable - referred to DVO for valuation - held that AO must first express dissatisfaction with books before referring valuation - rejection of books requires specific reasons and evidence of discrepancies - addition based on estimated value without contradicting actual cost is unjustified - estimation exercise based on average gross profit rate is improper without rejecting books - AO must adhere to section 145(3) before assessment u/s 144 - valuer clarified not withdrawing certificate, not considered by AO/CIT(A) - addition based on estimated cost without discrediting actual cost is not justifiable - assessee's appeal allowed.
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• Penalty for Cash Payments Not Imposed Due to Reasonable Cause and Revenue's Delay in Initiation; Assessee Favored.

  Case-Laws - AT : Penalty u/s 271D not leviable as the assessee had reasonable cause for accepting cash payments from buyers unable to pay by account payee cheque or demand draft due to restricted banking hours. The penalty was not initiated by the revenue within reasonable time after processing the return. Considering the complexity of income tax laws and this being the first year after the amendment's introduction, coupled with buyers' inability to arrange demand drafts, the assessee's explanation was treated as bona fide. Section 273B categorically excludes the operation of Section 271D. The revenue cannot adopt tactics of pick and choose while assessing citizens, violating Article 14 of the Constitution. The penalty levied was deleted, and the decision was in favor of the assessee.
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• Order Validity Challenged Over Section 144B Non-Compliance; TP Adjustments and Loss Set-Offs Addressed.

  Case-Laws - AT : Validity of order passed by jurisdictional AO not in compliance with section 144B discussed; technical glitches faced by revenue leading to transfer by PCIT to jurisdictional AO not reflected on ITBA portal; circular dated 06.09.2021 and letter dated 01.08.2023 clarified order transfer with CBDT approval. TP adjustment - comparable selection - deselection of comparables for turnover exceeding 200 crores against assessee's 14.53 crores in ITeS segment. Deselection of Manipal Digital Systems Pvt. Ltd. for lacking segmental service details. Working capital adjustment allowed following Coordinate Bench decision in Huawei Technologies India case. Non-granting of set-off of brought forward losses against final adjustment erroneous; AO directed to grant set-off. ITAT = Appellate Tribunal.
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• Shares issued at premium based on DCF valuation. AO erred in rejecting report sans flaws. Arm's length subscription by reputed group.

  Case-Laws - AT : Shares allotted at premium based on valuation report following DCF method. AO rejected report without pointing errors. ITAT held valuation not an exact science, cannot be done with arithmetic precision. Shares subscribed by outside investor, a reputed corporate group, not a related party. Hence, no infirmity in CIT(A) order deleting addition u/s 56(2)(viib). Disallowance u/s 36(1)(iii) on interest expenditure deleted by CIT(A) as zero coupon debentures were consideration for transfer of assets, not investment. ITAT upheld CIT(A)'s view. Interest-free deposit given had sufficient own funds, no disallowance u/s 36(1)(iii) warranted as per Bombay High Court ruling. Assessee's appeal allowed on this issue.
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Customs

• Custodianship renewal granted to Ennore Bulk Terminal Pvt. Ltd. for Multi cargo Terminal at Kamarajar Port until 19.06.2029.

  Circulars : Renewal of custodianship granted to M/s. Ennore Bulk Terminal Pvt. Ltd. (formerly M/s. Chettinad International Bulk Terminal Pvt. Ltd.) under Regulation 13 of Handling of Cargo in Customs Areas Regulations, 2009 for Multi cargo Terminal at Kamarajar Port, Ennore. Custodianship extended for 5 years until 19.06.2029, subject to compliance with conditions, responsibilities laid down in Regulations, and payment of cost recovery charges.
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• India Automates Exchange Rate Publication, Ends Notifications from July 2024; Access via ICEGATE and CBIC Websites.

  Circulars : Automated process introduced for publishing exchange rates by integrating data from State Bank of India with Indian Customs EDI System. Exchange rates adjusted to nearest five paise to be published on ICEGATE website at 6 PM on designated days, effective from midnight following day. Contingency plan with nodal officers for monitoring and manual intervention in case of technical issues. Existing system of notifying rates through notifications dispensed with effect from 4th July 2024. Link on CBIC website to access published rates on ICEGATE. Standing order for Mangaluru Customs officers and staff.
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• Duty demand quashed, Tribunal overstepped by relying on proviso unraised. Remanded to CESTAT for fresh decision by 31.12.2024 for 09/2008-05/2009.

  Case-Laws - HC : Impugned order quashing demand of duty foregone on raw materials used in manufacture of finished goods cleared into DTA by debiting SFIS scrips without payment of duty, as Tribunal traveled beyond scope of dispute by relying on proviso to Section 5A not raised by Department. Matter remanded to CESTAT for fresh decision by 31.12.2024, pertaining to period 09/2008 to 05/2009.
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• Revision plea rejected for lack of proof linking goods cleared & exported. Authority rightly dismissed petitioner's certificate. Petition meritless.

  Case-Laws - HC : Petitioner's revision application u/s 35EE of Central Excise Act against Commissioner (Appeals) order rejecting benefit of export under LUT was dismissed. Petitioner failed to prove nexus between goods cleared and goods exported by another entity. Authority rightly rejected certificate relied upon by petitioner to justify discrepancies. Petition lacked merit.
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FEMA

• India Grants $2.5M Credit to Guyana for Solar Plant, 75% Sourcing Mandate from India, Effective June 2024.

  Circulars : Export-Import Bank of India provided Government of India supported Line of Credit (LoC) of USD 2.50 million to Government of Co-operative Republic of Guyana for installation of Solar Photo Voltaic Power Plant at Cheddi Jagan International Airport. Export of eligible goods and services from India allowed, subject to Foreign Trade Policy. At least 75% contract value to be supplied from India, remaining 25% may be procured from outside India. LoC effective from June 24, 2024, with 48 months disbursement period after project completion. Exports under LoC to be declared as per RBI instructions. No agency commission payable, but exporter may use own resources for commission payment after export realization. Authorised Dealer banks to advise exporters accordingly.
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IBC

• Corporate Debtor's Appeal Dismissed; CIRP Initiated for Unpaid Rent Under IBC, No Pre-Existing Dispute Found.

  Case-Laws - AT : Corporate Debtor failed to repay operational debt of rent to Operational Creditor as per lease deed. Operational Creditor consistently pressed for outstanding dues without objection from Corporate Debtor prior to Section 8 notice. Rent for business premises qualifies as operational debt under IBC. Corporate Debtor's contention of Operational Creditor's omission not tenable. Legal notice post Section 9 application cannot establish pre-existing dispute. Mediation application and civil suits do not constitute pre-existing disputes. Corporate Debtor defaulted on undisputed operational debt exceeding threshold. No error by Adjudicating Authority in admitting Section 9 application and initiating CIRP. Interim stay on CIRP vacated. Appeal dismissed.
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• Corporate guarantee survives IBC resolution plan for principal borrower. SC affirms guarantor's liability. NCLAT upholds admission against guarantor.

  Case-Laws - AT : Corporate guarantee not discharged by approval of resolution plan for principal borrower under IBC. Supreme Court judgments in Lalit Kumar Jain, Maitreya Doshi, and Ajay Goenka affirm guarantor's liability survives resolution plan approval. NCLAT upholds admission of section 7 application against corporate guarantor despite resolution plan for principal borrower, finding no infirmity. Appeal against admission dismissed as guarantor's submission of guarantee termination rejected given substantial unpaid debt and inadequate upfront cash payment under resolution plan.
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• Court Dismisses Appeal: No Novation in Settlement Agreement, Original Debt and Default Confirmed Under Insolvency Code.

  Case-Laws - AT : Corporate insolvency resolution process initiated under IBC due to debt or default by corporate debtor. Unilateral cancellation of settlement agreement alleged. Court examined prerequisites for novation, finding no specific clauses for extinguishing old obligations or superseding old contract. Settlement agreement only pertained to disposal of mortgaged properties. Court relied on precedent where subsequent agreement after breach did not constitute novation, with original contract remaining valid. Existing loans sanctioned decades ago and assigned to respondent creditor established debt and default. Unusual delay in recovery process noted. Appeal dismissed, finding no merit.
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• Adequate notice given, appellant's absence unjustified. Debt & default proven per IBC. No violation of natural justice. Rightful CIRP initiation.

  Case-Laws - AT : Adequate notice provided to appellant, failed to appear despite multiple opportunities. Demise explanation lacks merit, directors could have pursued matter. No violation of natural justice principles. Debt and default established as per Section 7 IBC requirements. Default amount exceeded Rs. 1 crore threshold u/s 4. Adjudicating Authority rightly admitted Section 7 application, initiated CIRP. No error in impugned order. Appeal dismissed.
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• NCLAT Rules Purchaser Not Liable for Past Electricity Dues of Corporate Debtor; New Connection Requires Only Statutory Dues.

  Case-Laws - AT : Appellant, as purchaser of asset, not liable for past electricity dues of Corporate Debtor (CD). New electricity connection obtainable on payment of statutory dues, excluding past dues. NCLAT reiterated past dues cannot be claimed for new connection grant. Sale certificate issued on 'as is where is' basis. Question framed: Can CD's electricity dues be insisted upon Successful Resolution Applicant/Auction Purchaser? Telangana case distinguished; view taken that when CD sold in liquidation, it cannot be burdened with past unpaid liabilities. Adjudicating Authority's dismissal of appellant's application erroneous. Appeal allowed, impugned order set aside without costs.
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Service Tax

• Impugned show cause notice for service tax shortfall quashed as ultra vires. Rules can't include reimbursables in taxable value before 2015 amendment.

  Case-Laws - HC : Impugned show cause notice for shortfall in service tax payment based on Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 quashed as ultra vires Section 67 of Finance Act, 1994. Supreme Court held Rule 5 and Rule 2(c) of Rules, 2006 cannot include reimbursable expenses in taxable value prior to amendment of Section 67 by Finance Act, 2015 with effect from May 14, 2015. Show cause notice pertaining to period before May 13, 2015 contrary to Supreme Court decision, hence quashed being without jurisdiction.
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Central Excise

• Refund claim for PLA deposit allowed, not subject to time limit u/s 11B. Modipon Ltd. case misinterpreted. Impugned order set aside.

  Case-Laws - AT : Refund claim for amount deposited in PLA, whether duty or not, subject to time limitation u/s 11B of Central Excise Act, 1944. Held that Apex court in Modipon Ltd. case did not consider PLA amount as central excise duty, but a deposit utilizable for duty payment. Provisions of Section 11B inapplicable for PLA deposit refund. Commissioner's misinterpretation of Modipon Ltd. case rejected. Impugned order set aside, refund allowed, appeal allowed. CESTAT refers to Appellate Tribunal.
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• Tribunal upheld CENVAT credit on inputs from ship breakers despite Revenue's objections based on inadmissible statements.

  Case-Laws - AT : Appellants availed CENVAT credit on inputs allegedly received from ship breakers without proper documentation. Revenue alleged non-receipt of inputs based on statements. CESTAT held statements inadmissible without cross-examination u/s 9(D). No other evidence to prove non-receipt of inputs used in manufacturing final products. Appellant's records showed receipt of duty-paid inputs. Allegation of returning cash to suppliers unsubstantiated. In an identical case, Tribunal dismissed Revenue's appeal upholding adjudication order setting aside demand. Following that ratio, CESTAT held Revenue failed to establish non-receipt of inputs beyond doubt. Impugned order set aside, appeal allowed.
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• Court Rules Rule 4 Prevails Over Rule 8 for Partial Sales; Duty Demand Unsustainable Due to Lack of Evidence.

  Case-Laws - AT : Undervaluation of goods - FOS and Sucralose when cleared to related parties and M/s Surya Herbals by not following CAS-4 valuation method as provided u/r 8 of Central Excise Valuation Rules, 2000. Held that Rule 8 would apply only where entire production of a commodity is captively consumed. Rule 8 provisions will not apply where some parts are sold to independent buyers. In situations where both Rule 4 and Rule 8 apply, by sequential order, Rule 4 takes precedence over Rule 8 for determination consistent with Section 4(8) Central Excise Act, 1944. No evidence of cost comparison or comparable market price provided to show undervaluation. Demand of duty cannot sustain and requires to be set aside. Impugned order set aside. Appeal allowed.
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• Cenvat Credit Approved for Spare Parts as Capital Goods; Refund Granted Under CGST Act, Previous Rejection Overturned.

  Case-Laws - AT : Cenvat credit claims on spare parts considered as capital goods were rejected u/ss 11B and 12B of the Cenvat Excise Act. As per the definition of "Inputs" in Rule 2(k) of Cenvat Credit Rules, capital goods up to Rs.10,000/- are included, but not excluded from the definition of "Capital Goods". Spare parts of capital goods are covered under capital goods. The assessee has the option to claim Cenvat credit on such spare parts as capital goods or inputs. When two benefits are available, the more beneficial provision should be extended, as per the Supreme Court's judgment in SHARE MEDICAL CARE VS UNION OF INDIA. In the present case, the appellant claimed Cenvat credit on spare parts under capital goods, which is valid. The appellant is entitled to Notification No. 30/2004-CE and Cenvat credit on spare parts as capital goods. The appellant is also entitled to cash refund u/s 142(3) of CGST Act read with Section 11B. The impugned order is set aside, and the appeal is allowed.
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VAT

• Excess tax paid on natural gas purchase to be refunded with interest within 12 weeks after verifying C-Forms for 2017-18 & 2018-19.

  Case-Laws - HC : This Court directed the respondents to process the petitioner's refund claims and grant a refund of the excess tax amount collected from the petitioner and deposited by the seller, in accordance with the law within twelve weeks. The Court held that the petitioner is entitled to a refund of the excess tax paid, being the difference between 15% tax paid and 2% tax liable after furnishing the C-Form for purchasing natural gas, along with interest paid on delayed tax payment. The respondents were directed to consider the petitioner's refund application for 2017-18 and 2018-19, pass an order for the refund amount and interest claimed after verifying the C-Forms, and pay statutory interest under the CST Act.
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Case Laws:

• GST

• 2024 (7) TMI 421
  Violation of principles of natural justice - petitioner was not provided a personal hearing - impugned order was issued without providing a personal hearing to the petitioner - HELD THAT:- On examining the impugned order, it appears that a personal hearing was not offered because the petitioner did not request for a personal hearing. As per sub-section (4) of Section 75 of applicable GST enactments, a personal hearing is required to be provided either if requested for or if an order adverse to the tax payer is proposed to be issued. For such reason, the matter requires reconsideration. By taking into account the fact that the petitioner accepted the liability as regards SGST and CGST components of the confirmed tax demand, remand is required only with regard to the IGST component. The impugned order dated 27.04.2024 is partly set aside subject to the petitioner remitting a sum of Rs. 75,000/- within 15 days from the date of receipt of a copy of this order only in so far as the confirmed tax demand, interest and penalty relating to the IGST component is concerned. As a consequence, the matter is remanded for reconsideration - petition disposed off.

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• 2024 (7) TMI 420
  Cancellation of GST registration - seeking revocation of the cancellation order - HELD THAT:- The petitioner is directed to file returns for the period prior to the cancellation of registration, if not filed, together with tax dues along with interest thereon and the fee fixed for belated filing of returns within a period of forty five (45) days from the date of receipt of a copy of this order. Petition disposed off.

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• 2024 (7) TMI 419
  Seeking mandamus for additional GST payment from U.P. Expressways Industrial Development Authority - petitioner has already made a detailed representation before respondent No. 4 but till date, the representation of the petitioner has not been addressed by the authority - violation of principles of natural justice - HELD THAT:- The respondents states that he has no objection if the court relegates the matter to respondent No. 4 - Joint Commissioner, O/o the Commissioner CGST and Central Excise, to examine the matter as per law. The writ petition is disposed off with an observation that if the petitioner moves a fresh representation within a week s time before respondent No. 4 - Joint Commissioner, O/o the Commissioner CGST and Central Excise.

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• 2024 (7) TMI 418
  Cancellation of registration of the petitioner - impugned SCN does not mention any reason for cancelling the petitioner s GSTIN with retrospective effect - violation of principles of natural justice - HELD THAT:- A plain reading of the impugned SCN indicates that it does not meet the requisite standard of a show cause notice. Whilst it is alleged that the petitioner has not complied with the specified provisions of the GST Act or the Rules made thereunder , the impugned SCN is not clear as to which provisions of the GST Act or Rules have been violated - The purpose of issuance of a show cause notice is to enable the noticee to respond to the allegations. The impugned SCN indicates that it is incapable of eliciting any meaningful response to the alleged violation. The impugned order is also bereft of any reasoning apart from stating no reply has been received to the impugned SCN, it does not indicate any reason for cancelling the GSTIN of petitioner - the impugned order is set aside - appeal allowed.

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• 2024 (7) TMI 417
  Maintainability of petition - validiy of SCN and adjudication order - HELD THAT:- Looking to the fact of availability of an efficacious alternative remedy, it is not deemed proper to entertain this petition. Since the petition is not maintainable, the question of interim stay of the impugned order does not arises. However, petitioner would be at liberty to avail the alternative remedy by filing an appeal under Section 107 of GST Act, 2017 alongwith application for stay in accordance with law, if so advised. This writ petition being bereft of merit and substance, is hereby, dismissed.

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• 2024 (7) TMI 416
  Processing of manual refund application - HELD THAT:- It is noted that when there are genuine issues, the Department should be more liberal particularly in view of the fact that no party will intentionally delay filing the refund application or not file the refund application in the portal when it has to receive a substantial amount as refund. The Department needs to avoid unwarranted litigation on such issues and make the system more assessee friendly. Such approach would also foster the interest of Revenue in collection of taxes. In the facts and circumstances of this case, technicalities ought not to come in the way of the assessee. Petition disposed off.

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• 2024 (7) TMI 415
  Violation of principles of natural justice - petitioner did not have a reasonable opportunity to contest the tax demand on merits - mismatch between the petitioner s GSTR 3B returns and the auto populated GSTR 2A - HELD THAT:- On examining the impugned assessment order, it is clear that the tax proposal, which related to a mismatch between the petitioner s GSTR 3B returns and the auto populated GSTR 2A, was confirmed on the ground that the petitioner did not reply to the show cause notice. Although the respondent has placed on record proof of service of the show cause notice on the petitioner, the fact remains that the petitioner was not heard before the tax proposal was confirmed. The petitioner asserts that he is in a position to establish that only eligible Input Tax Credit was claimed. Upon putting the petitioner on terms, re-consideration is warranted in the interest of justice. The impugned order dated 05.12.2023 is set aside on condition that the petitioner remits a sum of Rs. 1,00,000/- towards the disputed tax demand. Such remittance shall be made within three weeks from the date of receipt of a copy of this order - petition is disposed off.

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• 2024 (7) TMI 414
  Cancellation of GST Registration of petitioner - failure to file returns - HELD THAT:- It is apparent from the above, the action for cancellation of the petitioner s GSTIN registration is founded on its failure to file the returns after 31.03.2023. The petitioner s reason for not doing so is that it had already applied for the cancellation of its GSTIN registration. It is considered apposite to set aside the order dated 22.04.2024 passed by the respondent rejecting the application for cancellation of the GSTIN registration - the petitioner is further directed to appear before the concerned officer on 10.07.2024 at 11.30 AM. Petition disposed off.

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• 2024 (7) TMI 413
  Violation of principles of natural justice - petitioner was unaware of the notices that preceded the impugned order - HELD THAT:- Considering the fact that the amounts have been recovered on 06.03.2024 and 19.03.2024, pursuant to the attachment made on 13.02.2024, this Court is inclined to grant partial relief to the petitioner as the discretion is exercised in favour of the petitioner. Hence, the impugned order is quashed and the case is remitted back to the respondent to pass fresh orders. The impugned order, which stands quashed, shall be treated as addendum to the show cause notices that preceded the impugned order - Petition allowed.

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• 2024 (7) TMI 412
  Violation of principles of natural justice - petitioner was unaware of the personal hearing - HELD THAT:- This Court is of the view that the petitioner can be given fresh opportunity subject to the terms the petitioner shall deposit 20% of the disputed tax as a condition for the respondent to take back the case afresh - This amount shall be paid by the petitioner from its Electronic Cash Register within 30 days from the date of receipt of a copy of this order. Since the reply filed by the petitioner is also not in detail, the petitioner shall file detailed reply within 30 days from the date of receipt of a copy of this order along with aforesaid deposit. The impugned order, which stands quashed, shall be treated as addendum to the show cause notices that preceded the impugned order - Petition disposed off.

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• 2024 (7) TMI 411
  Challenge to assessment order - petitioner s reply was not taken into consideration - wrongful availment of Input Tax Credit (ITC) - violation of principles of natural justice - HELD THAT:- The petitioner has placed on record the reply dated 10.10.2023. Such reply appears to have been uploaded on the portal along with attachments thereto. In the impugned order, it is recorded that the petitioner did not file any objections to the DRC-01 notice or any documentary evidence. Such finding is contrary to the documents on record. Consequently, the impugned order cannot be sustained. The impugned order dated 26.12.2023 is set aside and the matter is remanded for reconsideration. After providing a reasonable opportunity to the petitioner, including a personal hearing, the respondent is directed to issue a fresh order within a period of three 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 410
  Challenge to recovery action based on the impugned order - tax proposal was confirmed entirely on account of not appreciating the inadvertent error committed by the petitioner - HELD THAT:- The petitioner has placed on record the GSTR 3B return for January in the assessment period 2018-2019. The GSTR 1 statement purportedly for July in the assessment period 2019-2020 is also on record. The outward taxable value pertaining to IGST in these two documents tallies. The petitioner also placed on record the tax liability comparison report from the GST portal. This document also indicates an excess in liability when the GSTR 3B and GSTR 1 statement are compared. Such excess is Rs. 4,17,577/-. In these circumstances, a prima facie case is made out for consideration of the rectification petition. Since such petition is pending, it is just and appropriate that the same be disposed of expeditiously. The petition is disposed of without any order as to costs by directing the respondent to consider and dispose of the rectification petition.

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• 2024 (7) TMI 409
  Classification of goods - fusible inter lining fabric of cotton - correctly classifiable under Heading 5903 of Chapter 59 to the First Schedule to the Custom Tariff Act, 1975 or not - HELD THAT:- The Heading 5903 would apply only to the fabrics in which impregnation coating or covering cannot be seen with the naked eye. The comparison made by the appellate authority of the criteria prescribed under the Chapter Note 2(a) of Chapter 59 of the Custom Tariff Act, 1965 and the corresponding test result as per the Atira s test report is concerned, Criteria 1 which provides that film coating is visible with naked eye as per test report however, Chapter note 2(a) does not refer to the film coating but it refers to the coating and covering which cannot be seen with naked eye. As per the test report of the Atira, the fabric manufactured by the petitioner was partially coated and once the fabric is partially coated, the same would not fall in Chapter 59 but the same would fall under Chapters 52 to 55 as per the exclusion clause as mentioned in Serial No. 125 Chapter Note 2(a) of Chapter 59. On going through the Chapter Note 2(a)(4) of the Chapter Heading 5903 and as per the test report of Atira the specimen fabric i.e. Polyester plus cotton interlining woven fabrics being partially covered with plastic and bearing design resulting from this treatment which leads to the plastic coated pattern which is visible on one side of the fabric will fall under Chapters 502, 55 58 or 60 as per Chapter Note 2(a)(4) of the relevant Chapter 59 of the GST Tariff and not under Chapter 59 Heading 5903 as held by the impugned orders. Impugned order dated order dated 08.04.2021 passed by the Gujarat Appellate Authority for Advance Ruling Goods and Service Tax is quashed and set aide and the product manufactured by the petitioner being partially covered with plastic coated pattern i.e. visible on one side of the fabric and the same will fall under Chapters 50 to 55 58 or 60 GST Tariff and not under Chapter 59 of Chapter Note 5903 as held by the impugned order. Petition allowed.

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• 2024 (7) TMI 408
  Refund of unutilized ITC of zero rated supplies of the petitioners - transitional credit - HELD THAT:- The issue arising in these petitions pertaining to the refund of unutilized ITC of zero rated supplies of the petitioners is already considered and decided by the order of even date in Special Civil Application No. 12712 of 2019 [ 2019 (7) TMI 1383 - GUJARAT HIGH COURT] wherein it is held that It is not in dispute that the petitioner was entitled to the refund on the zero rated supplies and only ground for allowing the appeal of the department by the CIT appeals is that no balance was available in electronic credit ledger as on the date on which the petitioner was entitled to get refund i.e. end of the month i.e. July, 2017 and August, 2017 because the carried forward of CENVAT credit erstwhile regime was approved by the authority in the month of September, 2017. In such circumstances, the petitioner would never be available to utilize the carried forward of CENVAT credit, which would contrary to the provisions of Section 140 (1) of the CGST Act. The order dated 07.03.2019 passed by the Commissioner (Appeals), show cause notice dated 02.12.2020 and orders in original for recovery dated 16.02.2021 and 07.03.2019 are hereby quashed and set aside - appeal allowed.

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• 2024 (7) TMI 407
  Denial of transitional credit - absence of necessary particulars in the SCN - violation of principles of natural justice - HELD THAT:- It is unclear as to the reason for issuing such show cause notice with regard to the allegedly ineligible ITC of about Rs.14,05,211/-. The impugned order confirms the tax demand primarily because the petitioner did not submit documents or appear for a personal hearing. In effect, it appears that the petitioner s reply dated 07.11.2023 was not taken into account probably because such reply was submitted manually and not uploaded in the portal. In these circumstances, it is just and necessary to provide the petitioner an opportunity to contest the tax demand. The impugned order shall be treated as a show cause notice. The respondent is directed to issue a supplement setting out the reasons for denying transitional credit to the petitioner. Such supplement shall be issued within a maximum 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 406
  Condonation of delay in filing the revocation application - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. The petition is disposed off.

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• Income Tax

• 2024 (7) TMI 405
  Validity of Reopening of assessment - non disposal of objections raised by assessee against reassessment - deduction u/s 24 (a) proposed to be disallowed - HELD THAT:- Having considered the facts of the case it is not in dispute that the respondent Assessing Officer has not passed any order disposing of the objections raised by the petitioner pursuant to the reasons recorded for issuance of the notice for reopening provided to the petitioner. As relying on GKN DRIVESHAFTS (INDIA) LTD. [ 2002 (11) TMI 7 - SUPREME COURT] it is mandatory on part of the AO to dispose of the objections for reopening of the assessment filed by the petitioner on 08.06.2020 in all the three Assessment Years under consideration. Therefore, without entering into the merits of the matter, the impugned assessment orders passed by AO are hereby quashed and matters are remanded back to the respondent Assessing Officer to dispose of the objections raised by the petitioner for reopening of the assessment.

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• 2024 (7) TMI 404
  Denial of exemption u/s 11 - failure in filing Form 10/10B - HELD THAT:- As requirement of filing Form 10/10B is merely directory in nature and failure to furnish Form 10/10B before the due date prescribed u/s 139(1) of the Act cannot be so fatal as to deny the claim of exemption u/s 11(2) of the Act, especially when Form 10/10B was available on record when the intimation was passed by CPC u/s 143(1) of the Act. In reaching such a conclusion the Bench considered the binding precedents rendered by the Hon ble Gujarat High Court and other high courts and also the Hon ble Supreme Court. Respectfully following the same thus hold that since the Form 10 was available when the CPC passed the intimation in this case, disallowance of the claim of the assessee u/s 11(2) of the Act is not proper. AO is, therefore, is directed to consider Form 10 available on record and to pass appropriate orders. Appeal of the assessee is allowed.

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• 2024 (7) TMI 403
  Denial of refund claim u/s 239(2)(c) - assessee filed its return of income in response to the notice u/s 148 after one year from the last date of the relevant assessment year, thus refund claim denied - only contention of assessee is that his case is covered u/s 240 of the Act as refund is made consequent to the order passed in appeal - HELD THAT:- Provisions of Section 239 of the Act are applicable to an assessee claiming the refund by self-assessment whereas the cases where the refund is computed in pursuance of an order in appeal for other proceedings under the Act are covered by the provisions of Section 240 of the Act. No denying to this fact as an order u/s 251/154/147/143(3) of the Act has been passed by ACIT, Circle-8(2), Kolkata determining the refund of the assessee As we have already discussed in the preceding paragraphs that ACIT, Circle-8(2), Kolkata 31.01.2018 determines the refund of the assessee at the rate of Rs. 27,04,767/- hence, in our view the claim of the point of the assessee is covered u/s 240 of the Act and not u/s 239 of the Act as held by the AO and confirmed by the CIT(A). Accordingly, the case of the assessee is hereby allowed by setting aside the orders of ld. AO and ld. CIT(A) and the assessee is entitled to get the refund amount of Rs. 27,04,767/-. Appeal filed by the assessee is allowed.

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• 2024 (7) TMI 402
  Revision u/s 263 - AO had not made any addition with respect to the cash deposits made in the bank account and unsecured loan received of the assessee company during the year under consideration, i.e. the issue, based on which, its case was reopened by him u/s. 147 - HELD THAT:- When the A.O had not made any addition with respect to the cash deposits made in the bank account of the assessee company during the year under consideration, i.e. the issue, based on which, its case was reopened by him u/s. 147 of the Act, and thus, was divested of his jurisdiction from making any further independent addition /disallowance, therefore, the Pr. CIT could not have held the re-assessment order so passed by him as erroneous for the reason that he had failed to carry out verification on such independent issues. It is only in a case where the issues before the Commissioner at the time of exercising powers under Section 263 of the Act relate to the subject matter of re-assessment, the same would bring the order of reassessment within the realm of the jurisdiction of the Commissioner u/s. 263 of the Act. Also, the period of limitation for exercising jurisdiction u/s. 263 of the Act would start from the date of the re-assessment order. However, if the subject matter of the re-assessment is distinct and different, as in the present case before us, then in that case the relevant date for the purpose of determination of period of limitation for exercising powers under Section 263 of the Act would be the date of the original assessment order. We, thus, are of the view that the Pr. CIT had exceeded the jurisdiction vested with him u/s. 263 of the Act with respect to the aforesaid two issues, viz. (i) sum received by the assessee company as share capital/premium AND (ii) sum received by the assessee company as unsecured loans from three persons, as the same did not form the subject matter of the reassessment order passed the A.O u/s. 147 r.w.s. 143(3). Accordingly, the revision of the order passed by the A.O u/s. 147 r.w.s. 143(3) by the Pr. CIT u/s. 263 of the Act being not as per the mandate of law cannot be sustained and is liable to be struck down. Decided in favour of assessee.

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• 2024 (7) TMI 401
  Deduction u/s. 80P(2)(a)(i) - deduction on interest received on investment with banks and co-operative banks - HELD THAT:- Coordinate bench in the case of Basaveshwaranagara Co-opera society case [ 2024 (4) TMI 1141 - ITAT BANGALORE] has restored the matter to the file of the AO for considering the purport of the decision of Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] Coordinate Bench has held that If the assessee earns interest / dividend income out of investments with co-operative society, as observed by Hon ble Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. [ 2023 (9) TMI 761 - SUPREME COURT] , the same is entitled to deduction u/s 80P(2)(d) of the I.T . Act. Lastly the Coordinate Bench has also held that in case interest income to be charged as Income from Other sources then cost of funds to the assessee would have to considered as expenses in term of section 57 of the Act. Thus, we remit the matter back to the file of the AO for examining the issue afresh in the light of the above view of the Coordinate Bench. And also direct the AO that he should decided the allowance of cost of funds to the assessee u/s 57 of the Act in accordance with law. AO will provide meaningful opportunities to the assessee in fresh proceedings and assessee will also file necessary details with AO. Appeal filed by the assessee is allowed for statistical purposes.

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• 2024 (7) TMI 400
  Denial of TDS credit post amalgamation and merger proceedings - scheme of arrangement approved by NCLT - assessee contended that due to the scheme of arrangement, the operations and income of the amalgamated and merged company continued until the date of the NCLT order, while processing the return, the CPC considered the income but did not grant the corresponding TDS credit - HELD THAT:- The resulting company in a demerger and the transferee company in a transfer are eligible to claim TDS credit even if the TDS certificates are in the name of the demerged/transferor company. See ADANI GAS LTD. [ 2016 (1) TMI 940 - ITAT AHMEDABAD] and ULTRATECH CEMENT LTD. [ 2022 (1) TMI 923 - ITAT MUMBAI] As noted that the assessee itself is Deductor and Deductee company is a merged entity. Therefore, the Ld.CIT(A) should have decided on the facts and merits of the case. Thus, we set aside the order of the Ld.CIT(A) and direct the AO to allow the TDS credit to the assessee, after verifying that the relevant income has been assessed in this year. Assessee appeal allowed.

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• 2024 (7) TMI 399
  Addition u/s 69A - unexplained income - cash deposits made into bank account during demonetization period - assessee neither furnish the stock summary nor furnished the bill and voucher in support of purchases - as assessee recorded the cash deposits made into bank account in its books of account and the same were audited and tax audit report was also furnished - HELD THAT:- In the case on hand, the assessee made cash deposits into the bank account which is reflected in its balance sheet, the books were audited, the assessee has furnished the tax audit report and it was also the explanation of the assessee that out of cash deposit of Rs. 69,25,000/-, Rs. 13 lakhs was from out of the sales made to Zergar Gas and the other cash receipts were out of the cash sales during Diwali which happened to be on 30.10.2016 just a week before the demonetization which happened on 09.11.2016. Therefore, in our opinion this addition is liable to be deleted on this legal ground alone. AO did not reject the books of accounts of the assessee. The contention of the assessee that it had received cash of Rs. 13,95,000/- from Zegar Gas out of sales invoices of Rs. 32,62,011/- raised from 13.06.2016 to 26.10.2016 was not disputed. It is not even the case of the authorities below that the assessee has received cash after the demonetization on 09.11.2016. Whatever released by the assessee through sales was recorded in the cash book and the amount of cash deposited was the collections made till 07.11.2016 which fact was also admitted by the Ld.CIT(A) in his order and there has been no amount of cash collection by the assessee after demonetization period. It is not in dispute that the assessee is into the business of trading in fire crackers. Coordinate bench of the Tribunal in the case of M/s Shivam Industries Pvt. Ltd. [ 2024 (2) TMI 1399 - ITAT DELHI] held that when the audited books of account were not rejected and the sales of the assessee have not been disturbed the Revenue authorities are precluded from making any addition u/s 68 of the Act in respect of the cash deposits made into bank account during demonetization period. .We are of the considered view that there cannot be any addition u/s 69A of the Act in respect of cash deposits made by the assessee into its bank account as unexplained income in the case of the assessee. Therefore, we reverse the findings of the Ld.CIT(A) and direct the AO to delete the addition made u/s 69A of the Act. Grounds raised by the assessee are allowed.

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• 2024 (7) TMI 398
  Penalty u/s 270A - under-reporting in consequence of mis-reporting of income - difference which arises due to disallowance of other charges paid to school but claimed as tuition fee - HELD THAT:- From penalty notice it clearly appears that no sub-section or particular clause/ limb was mentioned on the PENALTY NOTICE which was issued u/s 270A of the IT Act therefore it was not possible for the assessee to reply about the particular sub-section/ clause/ limb under which the penalty u/s 270A was initiated later imposed. See Shashikant Sukdeo Ambekar [ 2023 (7) TMI 1430 - ITAT PUNE] - Thus we delete the penalty imposed u/s 270A - Decided in favour of assessee.

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• 2024 (7) TMI 397
  TP adjustment of interest - CIT(A) confirming upward adjustment towards interest by adopting rupee loan rate instead of LIBOR linked rate in respect of foreign currency loans advanced to subsidiary - contention of the assessee is that interest was charged from the AE at a rate of 7.08% as against average 12 months GBP LIBOR rate of 1.685% during the year and therefore, no further TP adjustment was required - HELD THAT:- There is no dispute to the fact that the loan of Rs. 45 crores from Corporation Bank and Rs. 10 crores from Allahabad Bank taken by the assessee was utilized for providing short term financial assistance to its AE. In the course of the proceedings before the TPO, it was submitted by the assessee that the entire interest charge incurred on the borrowings made from Allahabad Bank and Corporation bank was recovered in full. The interest on short term loan from Corporation Bank was Rs. 2,16,72,580/- whereas the interest of STL from Allahabad Bank was Rs. 40,06,764/-. This interest was worked out on the basis of the actual lending period for which the amount was advanced to the AE. The TPO in his working has, however, considered the entire period of 180 days to work out the ALP interest. The interest from the AE can be charged only for the period for which the amount was actually advanced. The assessee might have obtained the loan from the banks for the entire 180 days period but the loan was advanced to the AE in installments. Therefore, the period for which the loan amount was lying with the assessee, no interest could have been charged from the AE. Hence, the adjustment in respect of Corporation Bank interest and in respect of Allahabad Bank interest is not found correct as the amount was not advanced to the AE for entire 180 days period. Therefore, the TP adjustment in respect of interest is deleted. Loan granted to its AE out of its own funds - TPO considered six months LIBOR (which was 0.79% for this year) + 4.75% as the comparable uncontrolled price for this transaction and had accordingly worked out the interest required to be charged by the assessee from its AE - HELD THAT:- It is found from the order of the Ld. CIT(A) that he had confirmed the upward adjustment to the interest charged by the assessee to its AE in respect of loans obtained from Corporation Bank and Allahabad Bank. However, the adjustment of Rs. 11,62,069/-, the working of which was reproduced at Page No.7 of his order, had not been adjudicated. Therefore, the matter is set aside to the file of the AO for read-judication of adjustment of Rs. 11,62,069/- in respect of interest on loan advanced to the AE ought of its own fund, on the basis of the principle as enunciated in Para 4.5 of this order. Deduction u/s 35(2AB) - additional claim of assessee for weighted deduction u/s 35(2AB) on gross research and development (R D) expenditure, without reducing contract research income from eligible R D expense - HELD THAT:- It is found that the ld. CIT(A) has not examined the claim of the assessee on merits. As per the provision of section 35(2AB) of the Act any expenditure on scientific research (other than cost of land and building) on in-house research and development facility as approved by the prescribed authority is eligible for weighted deduction. Therefore, the assessee was eligible for deduction of its entire expenditure on scientific expenditure without adjusting the income earned, if any, from such scientific research development activity. As explained by the assessee, the income from contract research work was reduced from the amount of expense eligible for deduction u/s. 35(2AB) - AO is directed to verify this fact and thereafter allow deduction u/s. 35(2AB) of the Act on the gross expenditure on scientific research in accordance with the provisions of the Act. It is seen that this issue was also involved in the assessee s own case for A.Y. 2009-10 which was decided in favour of the assessee by the Coordinate Bench of this Tribunal in [ 2024 (4) TMI 1140 - ITAT AHMEDABAD] - The ground taken by the assessee is, therefore, allowed. TP adjustment of corporate guarantee fee - assessee had provided corporate guarantee to its AE but no guarantee fee was charged - HELD THAT:- The adjustment of corporate guarantee has to be done in accordance with the guarantee fee paid in respect of third-party transaction and a fair yardstick for such adjustment would be what the assessee would have paid as guarantee commission, if the guarantee was obtained from a bank. Accordingly, the rate of commission charged by the Bank should be applied to determine the ALP. In the case of Rubamin Ltd. [ 2021 (10) TMI 506 - ITAT AHMEDABAD] the rate of 0.5% of guarantee commission was on the basis of average rate of commission charged by the Banks. Accordingly, we direct that guarantee commission adjustment in this case may be restricted @ 0.5% on the corporate guarantee amount - The grounds of Revenue are allowed in part. Disallowance u/s 36(1)(iii) - interest free advance - disallowance was made in respect of loans and advances given to all associated companies of the assessee - HELD THAT:- AO had made the disallowance of interest on the assumption that interest bearing funds were utilized for advancing interest free amounts to sister concern. However, no material has been brought on record to establish this nexus. On the other hand, the assessee has contended that it had sufficient interest free funds which were utilized for making advances to its sister concerns. No merit in the addition as made by the AO. An identical issue was involved in the A.Y. 2011-12, [ 2017 (9) TMI 727 - ITAT AHMEDABAD] which was decided against the Revenue by the Co-ordinate Bench of this Tribunal as already referred earlier. We, therefore, do not find any reason to interfere with the order of Ld. CIT(A) deleting the disallowance of interest under Section 36(1)(iii). Excess claim u/s 35(2AB) over the amount approved by the DSIR - HELD THAT:-There was no requirement of law that R D expenditure should be approved by the DSIR. The provision of section 35(2AB) was amended w.e.f. 01.04.2016 whereby the quantum of eligible expenditure incurred on in-house research and development facility was required to be quantified by the prescribed authority i.e. DSIR. Prior to 01-04-2016, there was no such requirement for quantification of the eligible expenditure by the DSIR for claiming the deduction. Merely because DSIR had quantified such expenditure in the current year, which is prior to 01-04-2016, the same was not binding on the revenue authorities. Therefore Revenue was not correct in restricting the deduction u/s. 35(2AB) of the Act on the basis of the amount quantified by the DSIR in their approval. The disallowance as made by the AO was not in accordance with the provisions of the Act. Thus no wrong with the order of Ld. CIT(A) deleting this addition. Additional claim of weighted deduction u/s 35(2AB) in respect of expenses towards clinical trials carried - HELD THAT:- We do not find anything wrong with the order of the Ld. CIT(A) allowing this claim in this year. The only issue is about verification of actual expenses towards clinical trials carried out outside R D facility. This issue is not found discussed by the AO in the assessment order and verification of this expense doesn t appear to have been made. Therefore, the matter is set aside to the file of the AO for limited purpose of verification of actual expense incurred on clinical trials carried out outside R D facility. On verification, the claim of the assessee should be allowed as directed above. The ground is treated as dismissed for statistical purpose. Weighted deduction u/s 35(2AB) of the Act @150% on expenditure - HELD THAT:- There is no dispute with the fact that the assessee was entitled to weighted deduction of 150% under Section 35(2AB) of the Act in respect of expenses on account of R D. The finding of the CIT(A) that the AO had committed an error in granting this deduction @ 100% only is found to be correct. In computation of income, the AO had considered deduction under Section 35(2AB) of the Act at Rs. 25,99,42,442/- only, which was 100% of R D expenses, whereas, the claim made by the assessee was Rs. 38,99,13,663/- @ 150% of the expense. Therefore, the Ld. CIT(A) had rightly directed the AO to allow weighted deduction @ 150% of the expense of R D. We do not find anything wrong with the direction of the Ld. CIT(A). Therefore, the ground taken by the Revenue is dismissed. Depreciation on R D Assets - entire cost of these assets was originally claimed as 100% deduction but was offered as income in the year in which it was removed from R D facility, thus the assessee was eligible to claim proportionate depreciation on these assets - HELD THAT:- The facts regarding this claim are not coming out clearly from the assessment order and from the order of the Ld. CIT(A). The contention of the assessee is that the entire cost of machinery taken out from R D facility Rs. 10,53,64,250/- was offered as income in the A.Y. 2009-10. The AO is directed to verify this fact from the records of A.Y. 2009-10. If the claim of the assessee is found to be correct, then the assessee is entitled to depreciation on this amount and accordingly depreciation on opening WDV of this asset should be allowed to the assessee in this year. Disallowance of depreciation - If the assets were not taken to block of assets, then the depreciation on this asset could not have been part of the depreciation claim in the return of income. The AO may also verify as the how the claim of this additional depreciation was made by the assessee. There is no dispute that if the assets were not capitalized to block of assets, the assessee is entitled for separate claim of depreciation on these assets which should be worked out on the reduced WDV for this year. The AO should carry out the verifications as directed above and should allow the claim of the assessee, if found correct. The grounds are allowed for statistical purposes. Nature of expenses - Product Registration Expense - revenue or capital expenditure - HELD THAT:- We find that the Co-ordinate Bench of this Tribunal in the assessee s own case for AY 2008-09 2009-10 [ 2024 (4) TMI 1140 - ITAT AHMEDABAD] and also in A.Y.2011-12 (supra) [ 2017 (9) TMI 727 - ITAT AHMEDABAD] had upheld the findings of the Ld. CIT(A) that product registration expense was a revenue expenditure. In fact, appeal of the Revenue on this issue was also dismissed by the Hon ble High Court [ 2018 (4) TMI 1985 - GUJARAT HIGH COURT] , [ 2018 (4) TMI 1984 - GUJARAT HIGH COURT] - We, therefore, do not find any reason to interfere with the order of the Ld. CIT(A) deleting the disallowance of product registration expenses. Disallowance u/s 14A - CIT(A) has restricted the disallowance equal to the exempt income earned during the year - HELD THAT:- No reason to interfere with the order of the Ld. CIT(A) restricting the disallowance u/s 14A of the Act to the extent of exempt income earned by the assessee following the decision of the Co-ordinate Bench of this Tribunal on this issue in the earlier years. The ground raised by the Revenue is dismissed. TDS u/s 195 - Disallowance u/s 40(a)(ia) - payments to non-residents, which was in the nature of fees for technical services (FTS) and on which TDS was not deducted - HELD THAT:- Identical issue was involved in the assessee s own case in A.Y. 2008-09 and the Coordinate Bench of this Tribunal in [ 2024 (4) TMI 1140 - ITAT AHMEDABAD] wherein found no reason to interfere in the order of the ld. CIT(A) deleting the disallowance made under section 40(a)(i) pertaining to legal and professional services rendered from entities based in USA with respect to the fact of services rendered not involving any transfer of technical knowledge, skill or know-how etc. as also with respect to Article 12 of the DTAA between India and USA restricting the scope of FTS such services which made available technical knowledge, skill or know-how etc. - Decided against revenue. Foreign Currency Loss - treated as speculation loss - HELD THAT:- The nature of transactions in the current year was exactly similar to the nature of transaction as considered in the A.Y. 2011-12 [ 2017 (9) TMI 727 - ITAT AHMEDABAD] Therefore, the contention of the Revenue that there was a difference in the material fact cannot be accepted. Since, the findings of the Co-ordinate Bench of this Tribunal in A.Y. 2011-12 has been upheld by the Hon ble High Court, we do not find any reason to interfere with the order of the Ld. CIT(A) on this issue. Therefore, the ground taken by the Revenue is dismissed to hold losses arising from similar foreign exchange contracts to be business losses than speculative ones. Their lordships conclude that such exchange transactions are hedging transactions instead of being speculative transactions in nature. Forward contracts in the nature of hedging transactions in course of normal import export activities to cover up losses on account of foreign exchange valuation difference results in business losses and not speculative one. Adjustment u/s 115JB for addition u/s 14A - HELD THAT:- Since, the addition under Section 14A of the Act has been deleted as discussed earlier, there cannot be any question of adjustment under Section 115JB of the Act.

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• 2024 (7) TMI 396
  Valuation by the DVO - Addition on the basis of estimated cost setting aside actual cost as per books - applicability of section 142A of the Act to the valuation of WIP prior to its amendment - Non-Rejection of books of accounts - as per AO work-in-progress (WIP) is suppressed by the assessee and the certificate issued by civil engineer is not reliable - AO referred the case to the District Value Officer (DVO) to ascertain the fair market value of the work-in-progress. As alleged work-in-progress (WIP) is suppressed by the assessee and the certificate issued by civil engineer is not reliable - difference in the value of work-in-progress and passed an order under section 144 r.w.s. 142A - HELD THAT:- AO must first express dissatisfaction with the books of accounts before referring the valuation. The judicial precedent in the case of Sargam Cinema [ 2009 (10) TMI 569 - SC ORDER] supports this interpretation. The rejection of books of accounts by the Assessing Officer refers to the process, where the AO determines that the books of accounts maintained by the taxpayer are not reliable, accurate, or complete enough to assess the true income of the taxpayer. This rejection must be based on specific reasons and evidence that indicate discrepancies or inadequacies in the books of accounts including deviations from standard accounting practices. In our considered opinion, the AO has not provided detailed reasons and documentation to justify the rejection of the books of accounts. The addition is made on the estimated value, without substantial evidence to contradict the actual cost recorded by the assessee, which is not justifiable. Estimation exercise based on the average rate of Gross Profit for the whole project - While the Ld.CIT(A) provided partial relief, the recalculation of estimation does not rectify the fundamental issue of the improper application of section 142A of the Act without rejecting the books of accounts and without recording proper reason of assuming that the value of work-in-progress is suppressed. The AO must adhere to the provisions of sub-section (3) of the section 145 of the Act, before making an assessment in the manner provided in section 144 of the Act. The Ld.CIT(A) has not considered this before going ahead with his own estimation rejecting DVO s valuation. We also note that the Valuer (Shri A.Y. Chipa) has submitted the letter clarifying that he has not withdrawn the Certificate and its correctness should not be doubted. Both the Assessing Officer and the Ld.CIT(A) have not taken into consideration this letter by Valuer which is a basis for referring the Valuation to DVO. Based on the above analysis, we conclude that the addition based on the estimated cost, without discrediting the actual costs recorded, is not justifiable. Assessee appeal allowed.

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• 2024 (7) TMI 395
  Penalty u/s 271D - Reasonable time to initiate penalty proceedings - accepting the payments in cash from the buyers, who were unable to pay by way of account payee cheque or demand draft - HELD THAT:- Assessee has filed return of income on 07/08/2017 and this return was processed by the Department on 8/9/2017, impugned penalty notice dated 6/7/2021 was issued by department. Ld DR also failed to point out anything contrary to the facts of the case. Therefore, we are of the view that the penalty was not initiated by the revenue in reasonable time. Scope of introduction of amendment - Income Tax Laws are very complex laws, every year amendments have come, and sometime even professional commit many mistakes. Therefore having regard to the fact that this is the first year immediately after the introduction of amendment, coupled with the fact that the persons from whom payments were to be made could not be able to arrange the Demand Drafts, due to closing of banking hours. The assessee has also filed confirmations from the buyers who confirmed that they could not be able to get the Demand Draft due to restricted banking hours. Therefore, we are of the view that there was reasonable cause and explanation of the assessee would be treated as bonafide, hence in this case, no penalty is leviable as section 273B. Section 273B categorically excludes the operations of section 271D. We observe that other persons have also received the cash in this very same transaction. However, they have been spared by the department without any plausible reasons. It is settled position of law that revenue cannot adopt the tactics of pick and choose while assessing the citizens of India, as it would be violative of Article 14 of the constitution. Reference can be made to the decision of Kaumudini Narayan Dayal [ 2000 (12) TMI 101 - SC ORDER] . Delete penalty levied - Decided in favour of assessee.

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• 2024 (7) TMI 394
  TP Adjustments - Validity of order passed by the jurisdictional AO not in compliance with the provisions of section 144B - as per Assessee AO did not have the jurisdiction or validity to pass the same as the impugned order should have been passed by NFAC[ National e-Assessment Centre] - HELD THAT:- Apparently there was technical glitches faced by the revenue to which the transfer by PCIT to the jurisdictional AO could not have been reflected on the ITBA portal. It is categorically clear from the circular dated 06.09.2021 reproduced hereinabove. In the letter dated 01.08.2023 issued by the DCIT, Circle 7(1)(1) reproduced hereinabove, in para 4, the order sheet entry transferring the case to the jurisdictional Assessing Officer has been recorded which was with the approval of CBDT. TP Adjustment - comparable selection - deselection of comparables for having turnover more than 200 crores, as against the assessee having a turnover of only Rs. 14.53 crores under the ITeS segment. Microland Ltd., AGS Health Pvt. Ltd., Infosys BPM Services Pvt. Ltd., Access Healthcare Services Pvt. Ltd., Eclerx Services Ltd. and MPS Ltd. for failing turnover filter Deselection comparables for having different functional and risk profile as compared to the assessee - Manipal Digital Systems Pvt. Ltd.- As there are no segmental details available in respect of the various services rendered, we direct the Ld.AO/TPO to exclude this comparable from the final list. Working capital adjustment - We are of the opinion that this issue is no longer resintegra as this issue is covered by the decision of Coordinate Bench of this Tribunal in case of Huawei Technologies India (P.) Ltd. [ 2018 (10) TMI 1796 - ITAT BANGALORE] held there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore, in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the assessee should be allowed. Non-granting of set off of the brought forward losses against the final adjustment - AO in his final assessment order dated July 19, 2022 and rectification order dated September 12, 2022 has erred in law by not setting off the bought forward losses with the income/adjustments proposed to the income. We therefore direct the Ld.AO/TPO to grant the set off of brought forward losses to the assessee against the final adjustment.

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• 2024 (7) TMI 393
  Disallowance u/s 56(2)(viib) - shares have been allotted on premium on the basis of valuation report which was not supported by the documentary evidences -assessee opted for valuation as per the DCF method and the auditor arrived at the fair market value of Rs. 735 per share - CIT(A) deleted addition - HELD THAT:- As per the provisions of section 56(2)(viib) of the Act, if the consideration received for the issue of shares of a company in which the public is not substantially interested exceeds the fair value of such shares, the aggregate consideration as exceeds the fair market value shall be chargeable to income tax under the head income from other sources . AO neither accepted the valuation report as furnished by the assessee to arrive at the fair market value of the shares on the basis of the DCF method nor pointed out any mistake in the valuation report so furnished by the assessee. Rather, in the present case, the AO treated the value of the premium on the shares at Rs. Nil without following any of the methods prescribed under the relevant Rules. It is evident from the record that the AO by comparing the financials of the assessee and Projected Summarised Financials in the valuation report noted that the assessee has in fact incurred loss during the assessment year 2018-19. As decided in Cinestaan Entertainment Pvt. Ltd., [ 2021 (3) TMI 239 - DELHI HIGH COURT] that the valuer makes a forecast of approximation based on the potential value of business, while the underline facts and assumptions can undergo change over a period of time. The Hon ble High Court further held that valuation is not an exact science, and therefore cannot be done with arithmetic precision. Undoubtedly, section 56(2)(viib) of the Act is an anti-abuse provision brought in the statute to prevent the practice of transferring shares of specified company for no or inadequate consideration. As pertinent to note that in the present case, the shares of the assessee were subscribed not by a sister concern or any closely related person but by an outside investor. Further, as noted by the learned CIT(A), by no less than a corporate giant called Shapoorji Pallonji group, whose identity, creditworthiness, and genuineness are not doubted by the Revenue. Therefore, we find no infirmity in the impugned order passed by CIT(A) on this issue deleting the addition as share premium under section 56(2)(viib) of the Act. Accordingly, grounds raised in Revenue s appeal are dismissed. Disallowance made u/s 36(1)(iii) on a pro-rata basis - assessee has made new investments in subsidiary company and an investment in zero coupon redeemable non-convertible secured debentures of PNP Infra Projects Private Limited - As per the AO, the total interest-bearing funds constitute 79% of the total funds available with the assessee - HELD THAT:- As per the assessee, it has recognised the profit arising out of the said transfer agreement in the statement of profit and loss account. From the perusal of the financial statement of the assessee, we find that the assessee made the declaration in respect of transfer of assets and liabilities to PNP Infra Projects Pvt. Ltd. It is evident from the record that after considering the declaration in financial statement of the assessee, the learned CIT(A) deleted the disallowance of interest expenditure under section 36(1)(iii) of the Act in respect of zero coupon debentures - we find no infirmity in the aforesaid findings of the CIT(A) as zero coupon debentures are not an investment by the assessee instead the same is a consideration for the transfer of assets and liabilities to PNP Infra Projects Pvt. Ltd. Accordingly, grounds raised in Revenue s appeal are dismissed. Interest-free deposit - Since zero coupon debenture received from PNP Infra Projects Pvt. Ltd. has already been found to be sale consideration instead of investment as claimed by the Revenue, therefore it is evident that the assessee had sufficient own funds for giving interest-free deposit to M/s Dharmatar Infrastructure Private Limited. We find that in CIT v/s Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] held that if funds are available with the assessee, which are sufficient to meet the investment, then presumption would arise that the investment is made out of funds so available with the assessee and, therefore, no disallowance under section 36(1)(iii) can be made. In view of the above, respectfully following the aforesaid decision, we direct the AO to delete the disallowance made under section 36(1)(iii) of the Act in respect of interest-free advances given to M/s Dharmatar Infrastructure Private Limited. Accordingly, grounds no. 1-3 raised in assessee s appeal are allowed.

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• Customs

• 2024 (7) TMI 392
  Scope of SCN - Demand of duty foregone on raw materials (imported as well as indigenously procured) used in the manufacture of the finish goods cleared into Domestic Tariff Area (DTA) by debiting credit scrips issued under the Served From India Scheme (SFIS) without payment of duty in terms of N/N. 34/2006-CE - whether debiting of duty credit scrips issued under the SFIS on clearance of finish goods from EOU to DTA would amount to payment of duty or will amount to availment of exemption benefit in terms of Notification No. 34/2006-CE? HELD THAT:- The Tribunal has traveled beyond the scope of dispute and has upheld duty demand by relying upon proviso to Section 5A of the Central Excise Act, 1944, which was never raised by the Department either in the show cause notice or the orders passed by the lower authorities. It is settled law that the Tribunal shall not travel beyond the scope of relief and the case made out in the show cause notice. This is a fit case to interfere. The impugned order dated 10th February 2022 to the extent it opposed the demands of duty along with applicable interest is quashed and set aside and remanded to the CESTAT to decide afresh. Since the issue involved pertains to period of September 2008 to May 2009, the Tribunal is requested to dispose the matter before 31st December 2024.

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• 2024 (7) TMI 391
  Benefit of Export - Export of goods under self-sealing and self-certification procedure under Letter of Undertaking (LUT) - The shipping bills were filed by another entity without petitioner s name - Rejection of petitioner s revision application filed under Section 35EE of the Central Excise Act, 1944 against an order-in-appeal passed by the Commissioner (Appeals), Central Excise - failure to prove the nexus between goods cleared by petitioner and goods exported by Toyop - HELD THAT:- The petitioner tried to justify the discrepancies by relying on a certificate issued by Toyop stating that they had purchased buckets from petitioner as they had received an order from UNHCR for supply of plastic bucket of 16 L and 15 L capacity to Africa for UNHCR relief work - the Authority is justified in not accepting the said certificate. There are no merit in the petition. Petition dismissed.

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• 2024 (7) TMI 390
  Valuation - Application for staying the operation of Order-in-Appeal - Legality of order of the ld. Commissioner (Appeals) - HELD THAT:- On similar facts and circumstances of the case, this Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT) , KOLKATA VERSUS M/S. PROFILE OVERSEAS [ 2023 (10) TMI 1400 - CESTAT KOLKATA] , has held we find that the Department has not made any attempt to follow the procedure given under the Valuation (Determination of Value of Importers Goods) Rules 2007 and has simply adopted the NIDB data and selectively enhanced value. As discussed above, the Commissioner (Appeals), has given a detailed finding along with reasons while setting aside the Order-in-Original. There are no reason to interfere with the impugned order - appeal of Revenue dismissed.

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• Insolvency & Bankruptcy

• 2024 (7) TMI 389
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - rent to the Operational Creditor/Respondent No. 1 as per lease deed - operational debt - whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable and whether the said operational debt exceeds an amount of Rs. 1 lakh and is an undisputed debt? HELD THAT:- The Operational Creditor had been consistently pressing for release of their outstanding amount while there is nothing on record to show that the Corporate Debtor objected or controverted the claims raised by the Operational Creditor prior to the issue of Section 8 Demand Notice. Respondent No.1 agreed upon that in accordance with the judgement of this Tribunal in Jaipur Trade Expo Centre [ 2022 (7) TMI 241 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] , it is well settled that payment of license fee for use of leased premises for business purposes is clearly an operational debt. A conjoint reading of Sections 5(20) and 5(21) of IBC also clearly establishes that tenancy and lease rent dues fall in the category of operational debt as defined under Section 5(21) of IBC. It was the sole responsibility of the Lessee to pay the conversion charges. In view of the above, the contention of the Corporate Debtor that in their email of 18.01.2018 they had raised the omission committed on the part of the Operational Creditor does not stand to reason. There are no cogent reasons to disagree with the Adjudicating Authority that this email constitutes a feeble ground to establish a pre-existing dispute - prima facie it is an undisputed fact that the legal notice dated 22.10.2019 was served after the filing of the Section 9 application and therefore cannot qualify as a pre-existing dispute. This lends credence to the contention of the Operational Creditor that this legal notice was served as an after-thought with mala fide intention to raise a spurious defence to evade the liability to clear the outstanding rentals. Pre-existing dispute or not - HELD THAT:- Since the matter became a Non-Starter , the mediation application stood closed. In such circumstances, the claim made by the Corporate Debtor that the commercial civil suit was pending in the Tis Hazari Court lacks foundation. Furthermore, when HFPL on their own accord refused to participate in the mediation process, it cannot now embark on the argument that the mediation application signifies pre-existing dispute. Therefore, neither of the two commercial suits can be construed to be a pre-existing dispute. The Corporate Debtor has defaulted in the payment of operational debt above the prescribed threshold level which amount had clearly become due and payable, and further in the absence of any pre-existing dispute, it is found that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP. The interim stay on the CIRP process granted by this Tribunal on 16.03.2023 stands vacated. There is no merit in the appeal - appeal dismissed.

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• 2024 (7) TMI 388
  Maintainability of section 7 application - effect of approval of Resolution Plan in the CIRP of the Principal Borrower on the guarantee which was given by the Corporate Debtor to ICICI Bank - HELD THAT:- In the present case are concerned with claim of discharge of a Guarantor consequent to approval of Resolution Plan under the I B Code. It is to be noted that the judgment of the Hon ble Supreme Court in Lalit Kumar Jain [ 2021 (5) TMI 743 - SUPREME COURT] has also been subsequently relied and reiterated by the Hon ble Supreme Court. Reference made to judgment of Hon ble Supreme Court in Maitreya Doshi vs. Anand Rathi Global Finance Ltd. Anr. [ 2022 (9) TMI 1012 - SUPREME COURT] wherein in Hon ble Supreme Court has quoted the judgment of Lalit Kumar Jain vs. Union of India [ 2021 (5) TMI 743 - SUPREME COURT] holding that the approval of a resolution plan in relation to a Corporate Debtor does not discharge the guarantor of the Corporate Debtor. In recent judgment of Hon ble Supreme Court in Ajay Kumar Radheyshyam Goenka vs. Tourism Finance Corporation India Ltd [ 2023 (3) TMI 686 - SUPREME COURT] where question arose for consideration as to whether for approval of Resolution Plan by virtue of Section 31 process Section 138 of NI Act cannot be continued. From the facts brought on the record, it is clear that when Corporate Guarantee was invoked by the ICCI Bank on 16.10.2017 debt of more than Rs.218 Crore was due on the Principal Borrower. Initiation of proceeding against the Principal Borrower for admitted claim of Rs.294,51,35, 655/- itself proves that debt of the Principal Borrower was more than Rs.218 Crores. According to own case of the Appellant, upfront cash has been proposed of only Rs.2,06,00,000/- and rest amount of Rs.273,38,49,866/- was to be paid in preference shares - the submission of the Appellant that the guarantee dated 10.08.2016 stood terminated and unenforceable, cannot be accepted - there are no substance in this submission. The Adjudicating Authority after considering all relevant aspects of the matter has admitted the Section 7 application against the Corporate Guarantor, in which there are no infirmity - there is no merit in the appeal - appeal dismissed.

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• 2024 (7) TMI 387
  Initiation of CIRP u/s of IBC - debt or default on the part of the Corporate Debtor - unilateral suo-moto cancellation of the settlement agreement - winding up of the Corporate Debtor u/s 433 (e) and 433 (f) and Section 434 r/w Section 439 of Companies Act, 1956 - HELD THAT:- It is noted that the requisites of a novation may include elements like an agreement of all the parties to a new contract, the extinguishment of the old obligations, and the validity in supersession of old contract by the new contract, however, in the present case no such specific clauses exist. We also note that the Settlement Agreement dated 27.08.2019 was only with regard to disposal of the mortgaged properties of the Corporate Debtor. It is understood that if the contract is altered in material particulars to change its essential character, the modified contract must be read as doing away with the original contract but if the modified contract has no independent contractual force, no new contract comes into play. There are no such wording in settlement agreement dated 27.08.2019. It is found that in case of Manohur Koyal vs. Thakur Das Naskar [ 1888 (1) TMI 2 - CALCUTTA HIGH COURT ], the plaintiff sued the defendant to recover Rs. 1100 due on a bond and after the due date of the bond, the plaintiff agreed to accept from the defendant, in satisfaction of the bond, Rs. 400/- in cash and a fresh bond for Rs. 700/-. The defendant failed to pay the Rs. 400 and to give the fresh bond of Rs. 700/-. In a suit by the plaintiff to recover the amount of original bond, the defendant contended that the subsequent agreement was a novation. It was held that Section 62 did not apply, as the subsequent agreement was made after the breach of the original contract, and that the defendant having failed to perform satisfactorily which he had promised to give, remained liable on the original, contract. This case is similar to facts of the present appeal and is found to be applicable. It is found that the existing rupee term loan as well as foreign currency loan assigned by registered assignment deeds remain valid which are relevant documents to establish debt and default - the loans were sanctioned somewhere in 1996 i.e., almost 28 years back and the last assignment deed was signed in favour of the Respondent No. 1 on 16.04.2008 i.e., 16 years back and even after decades, the litigation has been continuing and no recovery could be affected by the original financial creditors or the present Respondent No. 1 in whose favour the assignment deed was signed almost 16 years back. This state of affair is found to be unusual and alarming. There are no merit in the appeal. The appeal deserved to be dismissed and stand dismissed.

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• 2024 (7) TMI 386
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - debt and default by the Corporate Debtor qua the Respondent No.1 - whether the default amount crossed the prescribed threshold limit of Rs. 1 cr under Section 4 of IBC? - violation of principles of natural justice - HELD THAT:- It goes without saying that real and effective opportunity to hear is one of the critical quotients of the tenets of natural justice. On seeing material on record, we find that the Appellant did not appear before the Adjudicating Authority on multiple occasions, following which the Adjudicating Authority had directed paper publication of the notice so that the contesting party is put on notice. The notice was duly published in two newspapers on 01.04.2022 but in spite of that, the Appellant failed to remain present before the Adjudicating Authority until the matter was set exparte and reserved for orders. In the given facts of the case, it is satisfying that adequate notice was given to the Appellant to appear before the Adjudicating Authority to present their case. The justification proffered now by the Appellant to explain their absence is that there was a demise in the family. Even if we give the benefit of this explanation to the Appellant, this ground cannot hold good for having been absent on 18 occasions each time when the matter was fixed for appearance and hearing - there is force in the contention of the Respondent no. 1 that when the Corporate Debtor also had other Directors on the Company, it is left unexplained why the others could not have pursued the matter before the Adjudicating Authority. Thus, this story of demise of a close relative to explain their absence from appearing before the Adjudicating Authority at a time when the matter was listed for hearing on 18 occasions lacks merit and is an eyewash which deserves scant regard. When the Appellant failed to participate in the proceedings before the Adjudicating Authority despite reasonable opportunity having been afforded to the Appellant, the impugned order cannot be said to have been vitiated on grounds of violation of the principles of natural justice. This brings to the basic question of debt and default and at the outset it is referred to the guiding principles propounded by the Hon ble Apex Court in the case of Innoventive Industries Limited v. ICICI Bank [ 2017 (9) TMI 58 - SUPREME COURT ] on admission or rejection of an application filed under Section 7 of the IBC. It is well settled that under the ambit of Section 7 of the IBC, the Adjudicating Authority is to only determine whether a default has occurred and whether the debt, which may still be disputed, was due and remained unpaid. The moment the Adjudicating Authority is satisfied that a default has occurred and the amount of default is more than the prescribed amount under Section 4 of the IBC, the application is to be admitted unless it is incomplete. It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and if there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. Once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor and the Section 7 application is complete in all respects, the Adjudicating Authority in the exercise of summary jurisdiction has to admit the Section 7 application. On the question as to whether debt and default was adequately demonstrated before the Adjudicating Authority, basis the records made available before it, the Adjudicating Authority has rightly concluded that it was satisfied with the evidence and material produced before it by the Respondent no.1 to prove that a debt had arisen; that a default has occurred and the default is above the threshold limit of Rs. 1 crore. This is a case where all the pre-requisites for filing a Section 7 stood fulfilled and the Adjudicating Authority cannot be held to have committed an error in admitting the Corporate Debtor into CIRP for having defaulted in repaying a financial debt which was above the threshold limit. The Adjudicating Authority did not commit any error in admitting the Section 7 application and bringing the Corporate Debtor into the fold of CIRP. The impugned order does not warrant any interference. There is no merit in the Appeal - Appeal is dismissed.

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• 2024 (7) TMI 385
  CIRP - Liability of appellant, being the purchaser of the asset, for past dues of the electricity of the Corporate Debtor (CD) - obtaining a new electricity connection on payment of statutory dues except for the past dues - HELD THAT:- In the case of Paschimanchal Vidyut Vitram Nigam Ltd. [ 2023 (12) TMI 256 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ], this Court has reiterated its view that the past dues cannot be claimed for the purpose of grant of new electricity connection. It is pertinent to mention that this Court in the case of Paschimanchal has also made a reference to the same clause of due diligence which is there in the sale certificate issued to the Appellant because in that also the property was sold on as is where is, as is what is, whatever there is and without recourse basis and framed the question that electricity dues of the CD who underwent insolvency resolution process/liquidation process can still be insisted against the Successful Resolution Applicant/Successful Auction Purchaser is not res integra? . The decision in the case of Telangana State Southern Power Distribution Company Ltd. Anr. Vs. Srigdhaa Beverages [ 2020 (6) TMI 37 - SUPREME COURT ], has also been distinguished in this case and also observed that This Tribunal took view that when the Corporate Debtor is sold in the liquidation proceeding, Corporate Debtor cannot be burdened by any past or remaining unpaid outstanding liabilities. There is a patent error in the approach of the Adjudicating Authority in dismissing the application of the Appellant, therefore, the present appeal succeeds and the impugned order is hereby set aside though without any order as to costs - Petition allowed.

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• Service Tax

• 2024 (7) TMI 384
  Shortfall for payment of the service tax on the basis of the Rule 5 (1) of the Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - HELD THAT:- It is not in dispute that the show cause notice refers to differential value or amount of taxable service of Rs. 165,82,77,786/- pertaining to unbilled revenue of expenses or additional expenses incurred by the petitioner assessee which was treated as part of consideration as per Rule 5 and Rule 2 (c) of the Rules read with Section 67 of the Finance Act, 1994. The Hon ble Supreme Court. in the case of Intercontinental Consultants and Technocrates Pvt Ltd [ 2018 (3) TMI 357 - SUPREME COURT] , referring to the provisions of Rule 5 of the Rules 2006, Rule 2(c) of the Rules, 2006 and Section 67 of the Finance Act, 1994, has held Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with consideration is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the learned counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. The impugned show cause notice would not be tenable in law as the same is without jurisdiction. Therefore, the contention raised on behalf of the respondent No. 3 relying upon the decision of the Hon ble Supreme Court that the impugned show cause notice issued by the respondent No. 3 is within jurisdiction and therefore, this petition is not maintainable under Article 226 of the Constitution of India, cannot be accepted - In the facts of the case, as the impugned show cause notice is contrary to the law laid down by the Hon ble Supreme Court, by holding Rule 5 of the Rules 2006 as ultra vires to Section 67 of the Finance Act 1994 and admittedly, the period involved in the impugned show cause notice is prior to 13th May 2015 and therefore, the decision of the Hon ble Supreme Court would be squarely applicable in the facts of the present case. The impugned show cause notice dated 31st October 2017 is hereby quashed and set aside - petition allowed.

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• 2024 (7) TMI 383
  CENVAT Credit - common input services used for the dutiable and traded goods - contravention of sub-rules (1), (2) and (3) of Rule 6 of CENVAT Credit Rules, 2004 - HELD THAT:- It is found that a pure question of law for which no enquiry or proof is required can be raised at any stage. The Hon ble Apex Court in STATE OF MADRAS AND ANOTHER VERSUS K.M. RAJAGOPALAN [ 1955 (9) TMI 71 - SUPREME COURT] , had recognized that a pure question of law can be urged at any point of time before any forum provided it does not require any further adjudication of any disputed fact. Moreover the Tax Research Unit of the Ministry of Finance s letter, D.O.F. No 334/1/2012-TRU Dated: March 16, 2012 by Jt. Secretary (TRU), states that Rule 6(6A) of the Cenvat Credit rules, introduced vide Notification 3/2011-CE (NT), dated 01/03/2011, is being given effect from February 10, 2006. This being so Cenvat Credit was not required to be reversed for the supply of taxable service without payment of tax to SEZ. The letter itself states that retrospective effect was meant to neutralize the investigations or demands for reversal of credits in respect of services provided to SEZs for the past. A benefit which is being given from a retrospective date to remove some lacunae that has crept in must be given effect to when claimed. The Ld. Commissioner Appeals erred in this regard. The impugned order which upheld the order of the Lower Authority hence merits to be set aside - the impugned order set aside - appeal allowed.

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• 2024 (7) TMI 382
  Recovery of the service tax under reverse charge mechanism for the services availed during the period 01.01.2003 to September 2007 - refund of the service tax paid was rejected on the ground that the appeal is pending before this tribunal and the amount of credit confirmed by the adjudicating is one and the same - HELD THAT:- The amount of Rs.4,81,43,943/- which was availed as credit, on the service tax paid being part of the amount included in the said demand, on conclusion of the proceeding, the appellant filed refund claim for Rs.4,81,43,943/-, which was rejected on the ground of pendency of the present appeal before this Tribunal. The appellant filed appeal against the said order of rejection of refund and it is now pending before the learned Commissioner(Appeals) as stated by the learned advocate for the appellant. Since the amount of cenvat credit availed and later reversed by the appellant on 31.08.2010, is also claimed as refund pursuant to the de novo order, the present appeal becomes infructuous. Appeal disposed off.

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• Central Excise

• 2024 (7) TMI 381
  Refund claim - amount deposited in PLA is duty or not - time limitation - Section 11B of Central Excise Act, 1944 - HELD THAT:- Hon ble Apex court in the case of Modipon Ltd. [ 2017 (11) TMI 1429 - SUPREME COURT ] has not held that any amount lying pending in PLA is a central excise duty. In fact, the Hon ble Apex Court itself has held that same is a deposit which can be utilized later on for payment of Central Excise Duty. As the learned Commissioner (Appeals) has misinterpreted the decision of the Hon ble Apex Court in the Modipon Ltd, therefore the said decision is not applicable to the facts of this case. The provisions of Section 11B are not applicable for deposit lying in PLA account for refund and same is to be treated as deposit. The impugned order set aside - refund allowed - appeal allowed.

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• 2024 (7) TMI 380
  CENVAT Credit - Receipt of unaccounted inputs without documents for compensating the inputs covered under CENVAT invoices purchased from ship breakers based in Alang and Sosiya - Availment of CENVAT Credit without actual receipt of inputs. HELD THAT:- In the present case by not allowing the cross examination of witnesses in terms of Section 9(D), the said statements cannot be relied upon while adjudicating the case. In the present case except various statements, there is no other documentary evidence to establish that the appellant have not received the inputs and not used in the manufacture of the final product. As per the documentary evidence available with the appellant, it is clear that they have received inputs covered under the duty paying invoices, they have recorded the same in their books of accounts - Though, investigating agency presumes that against such payment the appellant have returned the money to ship breaking unit but to support this allegation, there is not a single evidence to show that the appellant has returned the money in cash to the supplier as this allegation is not substantiated by the investigation. It is found that under a common investigation relying on the same evidences and statements under the common alleged modus operandi show cause notices were issued to various other firms whose cases are on the same pedestal as the same present appellants. It is found that under a common investigation relying on the same evidences and statements under the common alleged modus operandi show cause notices were issued to various other firms whose cases are on the same pedestal as the same present appellants. In one of the case of C.C.E S.T. Silvasa vs. Vishal Casteels [ 2024 (1) TMI 881 - CESTAT AHMEDABAD] this Tribunal has dismissed the Revenue s appeal, upholding the adjudication order whereby, in an identical case demand was set aside. It can be seen that in the present case as well as the case above a common investigation was conducted and same evidences were relied upon such as statements of brokers, transporters and ship breakers. Therefore, the ratio of the above decision is directly applicable in the facts of the present case. Considering the finding of the above decision and also the facts and circumstances of the present case, the Revenue could not establish the case of non-receipt of inputs beyond doubt. Therefore, the demand of Cenvat Credit is not sustained. The impugned order is not sustainable, hence, we set aside the same - Appeal allowed.

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• 2024 (7) TMI 379
  Undervaluation of goods - FOS and Sucralose when cleared to their related parties as well as to M/s Surya Herbals by not following CAS-4 valuation method as provided under Rule 8 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 - HELD THAT:- The Larger Bench of the Tribunal in the case of ISPAT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD [ 2007 (2) TMI 5 - CESTAT, MUMBAI-LB] considered the issue of application of Rule 4 vis-a-vis Rule 8 and held that Rule 8 would apply only in case where it s entire production of a particular commodity is captively consumed - the Larger Bench has held that the provisions of Rule 8 will not apply in a case where some parts of the production are sold to independent buyers. So also in a situation where both Rule 4 and Rule 8 would apply, by sequential order, Rule 4 would take precedence over Rule, 8 for determination to the consistent with Section 4 (8) Central Excise Act, 1944. It also requires to be stated that though it is alleged by department that appellant has undervalued the good by not adopting Rule 8, there is no evidence in the nature of cost comparison or details of comparable market price put towards to show that the goods have been undervalued. After appreciating the facts, and following the decisions above we hold that the demand of duty cannot sustain and requires to be set aside. The impugned order is set aside - The appeal is allowed.

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• 2024 (7) TMI 378
  Refund claims in respect of Cenvat Credit on spare parts considering the same as capital goods - Input versus Capital Goods - Refund rejected under the provisions of Section 11B and 12B of the Cenvat Excise Act, 1944 - HELD THAT:- As per the insertion of sub clause (v) in the definition of Inputs given in Rule 2(k) of Cenvat Credit Rules, all capital goods having a value upto Rs.10,000/- are included in the definition of Inputs . However, there is no exclusion of these goods from the definition of Capital Goods . The spare parts of the capital goods are also covered under the capital goods. Therefore, it is the option of the assessee either to claim Cenvat Credit in respect of capital goods having a value upto Rs.10,000/- per piece either as capital goods or inputs. It is settled law that when simultaneously two benefits are available to the assessee at a time then the more beneficial provisions should be extended to the assessee. In this regard, support of the Hon ble Supreme Court judgment in the case of SHARE MEDICAL CARE VERSUS UNION OF INDIA [ 2007 (2) TMI 2 - SUPREME COURT] taken, in the said judgment the appellant s claim of Notification No. 64/88-Cus., dated March 1, 1988 was denied. However, during the relevant period the goods of the assessee was also covered under para 3 of the table of exemption. The Hon ble APEX Court held that if the benefit of para 2 of exemption is not available then assessee should be given the benefit under para 3. Accordingly, when two benefits are available it is the option to the assessee to chose the more beneficial. In the present case, appellant have claimed the Cenvat Credit in respect of such spare parts under capital goods which is in order. In the present case the appellant has option to avoid the Cenvat Credit on spare parts either under capital goods or under input. When this be so then condition of the notification No.30/2004-CE does not get violated. Accordingly, the appellants are entitled for the exemption notification No 30/2004-CE and simultaneously, they are also entitled for the Cenvat Credit on the spare parts even though, the value thereof is upto Rs.10,000/- under the category of capital goods - the appellants are legally entitled for the Cenvat Credit. As regard the submission of the appellant that in the event of eligibility of the Cenvat Credit on the parts of the capital goods in the present case they are entitled for the cash refund in terms of Section 142(3) of CGST Act read with Section 11B. The impugned order is set aside - appeal allowed.

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• 2024 (7) TMI 377
  Denial of CENVAT Credit - denial on the basis that address of the appellant is not mentioned in the document against which they have taken the Cenvat credit - HELD THAT:- As the only allegation against three of these invoices that address of the appellant is not mentioned correctly which has been rectified and certified by the supplier, therefore, it is held that on these three invoices appellant is entitled to take Cenvat credit and they have taken Cenvat credit correctly. Denial of Cenvat credit on Bills of Entry, out of three Bills of Entry, two Bills of Entry has been rectified by the customs authorities themselves and correct address has been mentioned. The same has been verified and seen that the same has been rectified by the customs authorities. Therefore, on these two Bills of Entry which has been rectified by the customs authorities, the appellant is entitled to take Cenvat credit. With regard to last Bill of Entry No. 683232 dated 29.01.2014, the name of the Head Office is mentioned. It is a case of the appellant that Head Office has not taken Cenvat credit. The said fact is required to verify by the adjudicating authority. If Head Office has not taken the Cenvat credit on the said Bill of Entry, than the appellant is entitled to take Cenvat credit. The appellant is entitled to take Cenvat credit on invoices in the show cause notice dated 28.01.2019 - the matter back to the adjudicating authority - no penalty is imposable on the appellant - appeal disposed off by way of remand.

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• 2024 (7) TMI 376
  Recovery of CENVAT Credit - capital goods - reversals under Rule 3(5), (5A) (5B) of CENVAT Credit Rules, 2004 prior to amendment carried out by Notification No. 03/2012-CE(NT) dated 01.03.2013 - revenue neutrality - extended period of limitation. HELD THAT:- The present appeal can be disposed of only on the issue of time bar without going into merit of the case. The period involved in the present case is 2009-10 and the show cause notice was issued on 24.06.2013. The fact is not undisputed that the appellant have cleared the capital goods as such on payment of excise duty at the rate prevailing at the time of removal. The said transaction was reflected in their ER-1 return. Therefore, the only dispute was the amount of Cenvat credit to be paid by the appellant which was very much known to the department when the appellant cleared it on the invoice and reflected in ER-1 return. It is also fact on record that this issue was raised by the Audit party in 2010 despite that the show cause notice was not issued within the normal period. It is also noted that whatever short paid duty as per the department was available as a Cenvat credit to their own recipient unit of capital goods. Therefore, the present case is also involved revenue neutrality. This also shows that there is no mala fide intention on the part of the appellant for short payment of duty on removal of capital goods. There is no suppression of fact or mis-declaration with intent to evade payment of duty on the part of the appellant. Therefore, demand is clearly hit by limitation, as the entire period involved is under extended period of limitation. The demand is set aside on the ground of time bar itself without going into the merit of the case - the impugned order is set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (7) TMI 375
  Refund of excess tax paid - non-issuance of C-Form declarations - belated issuance of C-Form declarations - HELD THAT:- This Court in case of J.K. CEMENT LTD. VERSUS STATE OF GUJARAT [ 2020 (3) TMI 140 - GUJARAT HIGH COURT] has held The respondents are directed to forthwith process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller in accordance with law within a period of twelve weeks of the receipt of a copy of this judgment. The aforesaid decision of this Court was upheld by the Hon ble Supreme Court in STATE OF GUJARAT ANR. VERSUS J.K. CEMENT LTD. [ 2021 (2) TMI 1228 - SC ORDER] . It is held that the petitioner is entitled to the refund of the excess payment of tax i.e. difference between 15% tax paid by the petitioner and 2% tax liable to be paid by the petitioner on furnishing of C-Form by the petitioner for purchase of natural gas from the Bharat Petroleum Corporation together with interest of Rs. 1,13,86,862/- paid by the Bharat Petroleum Corporation on behalf of the petitioner on the delayed payment of tax in view of the decision of this Court in case of J.K. Cement Limited which is upheld by the Hon ble Supreme Court. The respondents are therefore, directed to consider the refund application filed by the petitioner for the period 2017-18 and 2018-19 filed on 11.09.2023 to pass an order for amount of refund and interest claimed by the petitioner after verification of the C-Forms submitted by the petitioners with statutory interest payable under the provisions of the CST Act - Petition allowed.

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