TMI Tax Updates - e-Newsletter
September 10, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Benefits under GST and anti-profiteering provision

   By: Ganeshan Kalyani

News

1. India is working on clean energy mission with a collective mindset: Shri Piyush Goyal

2. General order for extension of time to hold AGM for FY 2019-20

Notifications

GST - States

1. 5/2020 - State Tax - dated 7-8-2020 - Chhattisgarh SGST

Seeks to appoint Revisional Authority under Chhattisgarh Goods and Services Tax Act, 2017

2. 61/2020 - State Tax - dated 6-8-2020 - Chhattisgarh SGST

Seeks to amendment in Notification No. 13/2020-State Tax, F-10-35/2020/CT/V(37) dated 31st March, 2020

3. 60/2020-State Tax - dated 6-8-2020 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Ninth Amendment) Rules, 2020

4. 59/2020 - State Tax - dated 6-8-2020 - Chhattisgarh SGST

Seeks to amend Notification No. 21/2019-State Tax, No. F-10-19/2019/CT/V(46), Chhattisgarh Commercial Tax Department Dated 23rd April, 2019

5. 58/2020 - State Tax - dated 21-7-2020 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Eighth Amendment) Rules, 2020

6. 64/2020-State Tax - dated 8-9-2020 - Maharashtra SGST

Seeks to extend the due date for filing FORM GSTR-4 for financial year 2019-2020 to 31.10.2020

Income Tax

7. 72/2020 - dated 8-9-2020 - IT

Under Section 80-IA, Sub-clause (iii) of sub-section (4) of the Income-tax Act, 1961 Central Government notifies M/s Softzone Tech Park Ltd., as an industrial park with terms and condition

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DF1/CIR/P/2020/169 - dated 9-9-2020

Operating Guidelines for Portfolio Managers in International Financial Services Centre (IFSC)

2. SEBI/HO/ISD/ISD/CIR/P/2020/168 - dated 9-9-2020

Automation of Continual Disclosures under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015 - System driven disclosures.

GST - States

3. 13/2020-TNGST - dated 17-8-2020

Clarification in respect of various measures announced by the Government for providing relief to the taxpayers in view of spread of Novel Corona Virus (COVID-19)

Highlights / Catch Notes

GST

• Applicant Eligible for Input Tax Credit on Equipment and Supplies for Diagnostics, Subject to CGST Act Section 17(2) Restrictions.

  Case-Laws - AAR : GST Input credit - supply of various reagents/ medical consumables (goods) in addition to provision of diagnostic services - the applicant is eligible for input tax credit on the tax paid on the purchases of goods, i.e. equipments, furniture, etc. which are purchased for this project and also on the reagents / consumables which are used for performing the test, subject to the restriction of the same in terms of Section 17 (2) of the CGST Act 2017. - AAR
  Visit to Get Source

  ---

Income Tax

• Assessing Officer Challenges Cash Payments for Temp Workers; Memorandum of Settlement Holds Binding Authority.

  Case-Laws - HC : Genuineness of expenditure - payment in cash for temporary employees - Due credence should be given to the Memorandum of Settlement recorded in the presence of the Labour Officer. If according to the Assessing Officer, this statement is also a bogus document, then he ought to have recorded such a finding. However, law prohibits him from doing so because of the binding effect of the settlement on the management and the workmen. Therefore, in our considered view, the settlement could not have been brushed aside. - HC
  Visit to Get Source

  ---

• Tribunal Rules Overvaluation of Depreciated Windmills Invalid When Depreciation Exceeds Original Cost.

  Case-Laws - HC : Fixation of the value of the second-hand windmill - Depreciation on windmill - Tribunal observed that valuations may be relevant in ordinary circumstances, but when cumulative depreciation claimed was far in excess of the cost, the valuation report of the approved valuer becomes insignificant. - HC
  Visit to Get Source

  ---

• High Court Confirms Disallowance of Security Transaction Tax Deduction u/s 43B Due to Non-Compliance by Petitioner.

  Case-Laws - HC : Disallowance u/s 43B - Deduction of Security Transaction Tax (STT) against the transaction of trading - Undisputedly, petitioner had not deposited the amount deducted as STT with the authorities, and it is not his case that the same stood paid back/returned to the person from whom it stood deducted. It is the admitted case of the petitioner that since the petitioner was adopting the mercantile system of accounting; he was not supposed to take any action - Additions confirmed - HC
  Visit to Get Source

  ---

• Keyman Insurance Policy Maturity Proceeds Not Exempt u/s 10(10D), Taxed as Salary or Other Income Sources.

  Case-Laws - AT : Amount received by the assessee on maturity of the Keyman Insurance Policy - not eligible to claim exemption u/s 10(10D) - Legislature in its own wisdom never intended that sum received on maturity of Keyman Insurance Policy is to be assessed under the head income from capital gain. Had it been the case, as the assessee wants us to believe, the legislature would not have restricted the assessability of the amount received under Keyman Insurance Policy to the three heads viz. salary, income from business and profession and income from other sources. - AT
  Visit to Get Source

  ---

• Disallowing 10% of vehicle, conveyance, and telephone expenses needs evidence of personal use; assumptions aren't enough.

  Case-Laws - AT : Personal expenses - Disallowance of vehicle, conveyance and telephone expenses @ 10% - without establishing the fact that a part of the expenditure incurred by the assessee is towards personal use, no disallowance can be made purely on presumption and surmises. - AT
  Visit to Get Source

  ---

• TDS Credit Disallowance u/s 143(1) Requires Clear Reasons to Avoid Hardship and Ensure Legal Reviewability.

  Case-Laws - AT : Disallowance of credit of TDS under intimation u/s 143(1 ) - no reasons are assigned for a disallowance - It is only reasons that infuse life into the action of any public authority, and such reasons allow the higher forums to appreciate the legal sustainability of such an action, without which not only the party affected by such an action suffers, but the higher forums would be handicapped either to confirm or to set it aside. - AT
  Visit to Get Source

  ---

• Court Disallows Sub-Contract Payments; Assessee Provided Accommodation Entries, Commission Income Estimated at 4.

  Case-Laws - AT : Disallowance of sub-contract payments for land development expenses - accommodation entries for income and expenditure both - Assessee have not executed any work except providing accommodation entries, we consider that looking to the meager income shown by the assessee it will be reasonable to estimate the commission income earned by the assessee @ 4% - AT
  Visit to Get Source

  ---

• Assessee's 50% Depreciation Claim on Tankers u/s 32 Justified; No New Asset from Renovation.

  Case-Laws - AT : Depreciation on vehicles u/s 32 - @30% or 50% - special rate of depreciation - assessee has claimed depreciation @ 50% i.e. on tankers - Since the assessing officer has treated such expenditure as capital expenditure, therefore, we consider that no new asset has been created on renovation of the commercial vehicle. Therefore, the claim of the assessee for depreciation @ 50% applicable to the particular block of assets is justified. - AT
  Visit to Get Source

  ---

Customs

• Customs broker cleared of penalties u/ss 114 and 114AA for alleged false drawback claims due to reasonable explanation.

  Case-Laws - AT : Levy of penalty on Customs Broker u/s 114 and 114AA of the Customs Act, 1962 - allegation that appellant had helped in claiming false drawback by misdeclaration - - appellant have not done any act or omission nor knowingly used any document for the clearance knowing to be false. The appellant have given cogent explanation as regards the undervaluation, that the samples shown to them were of good quality and hence on such reasonable belief they have undertaken the clearance work. - Penalty deleted - AT
  Visit to Get Source

  ---

• High Court Invalidates 2011 Customs Show Cause Notice for Delays, Citing Unreasonable Limitation Period by Department.

  Case-Laws - HC : Validity of Show cause notice issued in 2011 - long pending issue - Reasonable period of limitation for adjudication of case - The fact that the petitioner has challenged the SCN only now, in 2020, only indicates to me that the petitioner fully intended to comply with and respond to notices and participate in adjudication proceedings only repeatedly requesting for relied upon and other materials - This is a matter where the Customs Department has clearly been remiss in not proceeding with the enquiry and completing the adjudication in time, missing the bus altogether. The impugned show cause notice dated 22.12.2011 is quashed - HC
  Visit to Get Source

  ---

• Court Finds No Justification in Denying Demurrage cum Detention Waiver Certificate Request; Lower Authority Absence Not Valid Reason.

  Case-Laws - HC : Request for issuance of 'Demurrage cum Detention Waiver Certificate' (DDWC) - There are no justification on the part of the Appellate Authority in deferring to consider the petitioner's request for the certificate, on the ground that there was no such prayer before the lower Authority. - HC
  Visit to Get Source

  ---

Corporate Law

• Court Refuses to Use Article 226 for Family Dispute Over Board Member Disqualification Allegations of Fund Misappropriation.

  Case-Laws - HC : Qualification/disqualification of some of the independent Board of Directors - misappropriation of funds - infact the dispute is a family dispute. The Board of Directors comprises of petitioner's father, his uncle, nephew etc. and viewed from that angle it appears that the platform under Article 226 of the Constitution of India is sought to be used for settling the family scores. Therefore also this court would not exercise the extra ordinary jurisdiction for the purpose. - HC
  Visit to Get Source

  ---

Indian Laws

• High Court upholds trial court's order for 20% cheque deposit u/s 143-A of Negotiable Instruments Act.

  Case-Laws - HC : Direction to deposit 20% of the cheque amount in terms of Sec. 143-A of the Negotiable Instruments Act - the trial court was fully justified in invoking the said provision and passing the impugned discretionary order even without there being an application made in that regard by the complainant - HC
  Visit to Get Source

  ---

IBC

• Corporate Debtor moves to liquidation; Promoter may propose revival under Companies Act Section 230 if eligible.

  Case-Laws - AT : Liquidation of Corporate Debtor - no resolution plan was received during the CIRP proceedings - The Adjudicating Authority has rightly observed that even after pushing the Corporate Debtor into liquidation, Promoter/Ex-Director of the Corporate Debtor can take recourse to Section 230 of the Companies Act, 2013 by submitting a scheme for revival of the Corporate Debtor, subject of course to eligibility of the applicant. - AT
  Visit to Get Source

  ---

Central Excise

• CENVAT Credit Transfer Requires Authority Approval After Delhi Unit Closure and Merger with Baddi Unit u/r 10 CCR.

  Case-Laws - AT : Transfer of CENVAT Credit - closure of Delhi unit & merger with its Baddi unit - Rule 10 of CCR - prima-facie with respect to claim of the appellant or request for transfer of cenvat credit from Delhi unit to Baddi unit requires that a finding to be recorded by the Central Excise Authority having jurisdiction over the Baddi unit to record the finding of transfer / shifting of Delhi unit to Baddi and to record a further finding in regard to transfer of inputs or capital goods etc. and proper accountal of the same. - AT
  Visit to Get Source

  ---

• CENVAT Credit Refund Ordered: Allegations of Fake Purchases Deemed Unsubstantiated Under CGST Act Transitory Provisions.

  Case-Laws - AT : CENVAT Credit - Allegation of fake purchases - The allegation of Revenue are vague and are proved wrong - Adjudicating Authority is directed to grant the refund of disputed cenvat credit in cash along with interest as per Transitory Provisions under CGST Act - AT
  Visit to Get Source

  ---

Case Laws:

• GST

• 2020 (9) TMI 337
  GST Input credit - purchase of equipments, furniture etc. - purchase of reagents/ consumables for performing the tests as the reagents / consumables - Healthcare services or not - Clinical establishment or not - whether the diagnostic services being supplied by the applicant to the aforesaid hospital are covered under Entry no. 74 of Notification No.12/2017- Central Tax (Rate) dated 28.06.2017? Healthcare services - HELD THAT:- In the instant case the services provided by the applicant are by way of diagnosis of an illness and hence the same are covered under health care services . Clinical establishment or not - HELD THAT:- In the instant case the applicant established a medical diagnostic laboratory to carry out diagnostic or investigative services of diseases. Thus the applicant qualities to be a clinical establishment. Exempt service or not - HELD THAT:- The services provided by the applicant are covered under clause (a) of Entry no. 74 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and hence is exempt from tax under the CGST Act 2017. Similarly, they are also exempted from tax under the KGST Act, 2017 and also under the Integrated Goods and Services Tax Act, 2017. The applicant is involved in taxable as well as exempted supplies. Therefore the applicant need to restrict the credit to the amount attributable to taxable supplies including zero rated supplies in the case of both capital goods as well as reagents/consumables or drugs. Further if the applicant claims depreciation on the tax component of capital goods and plant machinery, under Income Tax Act 1961, the input tax credit on the said tax component shall not be allowed, in terms of Section 16(3) of the CGST Act 2017 - thus, the applicant is eligible for input tax credit on the tax paid on the purchases of goods, i.e. equipments, furniture, etc. which are purchased for this project and also on the reagents / consumables which are used for performing the test, subject to the restriction of the same in terms of Section 17 (2) of the CGST Act 2017.

  ---

• Income Tax

• 2020 (9) TMI 336
  Genuineness of expenditure - Allegation of Bogus expenditure claimed towards service charges and towards employees contribution to Provident Fund and ESI remitted beyond the due date - AO held that the assessee had resorted to this modus operandi for inflation expenditure by showing the same under the head service charges and the transaction was disbelieved - HELD THAT:- AO should not have used the expression modus operandi to mean that the assessee had adopted dubious tactics to inflate its expenditure. We have come to such conclusion because of the nature of material placed by the assessee before the AO, CIT(A) and in the paper book filed before the Tribunal. AO while rejecting the assessee s contention has not disbelieved any of these documents. The payments effected in cash were sought to be substantiated by the assessee by producing vouchers. If the AO was of the view that the vouchers are fabricated documents, then all of such employees should have been examined and statements should have been recorded and if the same was done, the assessee is entitled to an opportunity of cross examination. This having not been done, the assessment order is flawed on this aspect. AO has referred to statements of four persons and on reading of selected portions of the statement, as extracted in the assessment order, does not lead to the inference that the entire transaction is bogus. The assessee s explanation is that tips were being given to the room boys and they alone were benefited and the other employees/workers raised objection and the matter was discussed in several meetings and ultimately, a settlement was arrived at between the employees union and the assessee management. Due credence should be given to the Memorandum of Settlement dated 02.08.2012 recorded in the presence of the Labour Officer. If according to the Assessing Officer, this statement is also a bogus document, then he ought to have recorded such a finding. However, law prohibits him from doing so because of the binding effect of the settlement on the management and the workmen. Therefore, in our considered view, the settlement could not have been brushed aside. CIT(A), though accepts the documents produced by the assessee, holds that there is no justification for payment in cash for temporary employees. In our view, this finding is not sufficient because vouchers have been produced, register has been produced, where the concerned temporary employees have signed. Therefore, to out rightly reject these vouchers and register, is incorrect. Tribunal erred in observing that the orders of the CIT(A) to the extent it grants relief to the assessee are on presumption. This finding is incorrect because the relief granted by the CIT(A) was in respect of payments, which were verifiable. Tribunal ought not to have interfered with the relief granted by the CIT(A) and the CIT(A) ought to have interfered with the orders passed by the Assessing Officer in its entirety and not restricted the same to a partial relief. - Decided in favour of assessee.

  ---

• 2020 (9) TMI 335
  Fixation of the value of the second-hand windmill - Depreciation on windmill - valuation method adopted by the assessing officer to determine the cost of the windmill - Consideration of valuation report given by an approved government valuer of the Canara Bank - Whether the actual purchase price of a second-hand asset can be ignored by purported recourse to Explanation 3 to Section 43(1) of the Income Tax Act, 1961 ? HELD THAT:- CIT[A], in our considered view, while partly allowing the assessee s appeal, proceeded to make a adopt estimations of the value and fixed the sum at Rs. 1,50,00,000/-. We find that there is no scientific basis for such fixation of the value of the second-hand windmill and such fixation has been done based on the personal opinion of the CIT[A]. Tribunal was fully justified in allowing the Revenue s appeal. With regard to the assessee s appeal, the Tribunal re-appreciated the factual position and in particular, noted that the manufacture of the windmill has certified that the windmill, which was sold to the assessee is no more in the market value and the technology has become obsolete. The Tribunal also considered as to what would be the effect of a report of the government valuer and noted Explanation III to Section 43(1), which requires the AO to arrive at an objective satisfaction. Tribunal observed that valuations may be relevant in ordinary circumstances, but when cumulative depreciation claimed was far in excess of the cost, the valuation report of the approved valuer becomes insignificant. Tribunal has reappreciated the factual position and come to a conclusion that the order passed by the assessing officer requires no interference. No substantial question of law.

  ---

• 2020 (9) TMI 334
  Deduction u/s 10A - Tribunal directed not to set off carry forward business losses of STPI unit and current year loss of non STPI unit against the profits of the business before allowing deduction - HELD THAT:- Substantial question of law No.1 in both the appeals is covered by a decision of this Court in YOKOGAWA INDIA LTD. Vs. CIT AND ORS. [ 2011 (8) TMI 845 - KARNATAKA HIGH COURT] affirmed by the Supreme Court in CIT AND ORS. Vs. YOKOGAWA INDIA LTD. [ 2016 (12) TMI 881 - SUPREME COURT] . Whether Tribunal was justified in law in holding that the reimbursement of expenditure towards telecommunication expenses and foreign travel expenses incurred in foreign currency are to be excluded from total turnover as well as for computation of deduction under Section 10A ? - Second substantial question of law in both the appeals is also covered by a decision of this Court rendered in COMMISSIONER OF INCOME-TAX Vs. TATA ELXI LTD. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] and the aforesaid view has been affirmed by the Supreme Court in COMMISSIONER OF INCOME-TAX, CENTRAL-III Vs. HCL TECHNOLOGIES LTD. [ 2018 (5) TMI 357 - SUPREME COURT] . Substantial questions of law framed in these appeals are answered against the revenue and in favour of the assessee.

  ---

• 2020 (9) TMI 333
  Validity of Reopening of assessment u/s 147 - Petitioner asked for supply of reasons along with copy of sanction letter but the same have not been supplied to her till date - non passing of speaking order - HELD THAT:- As decided in GKN Driveshafts (India) Ltd [ 2002 (11) TMI 7 - SUPREME COURT] when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In view of the above, this writ petition is disposed of with a direction to the Assessing Officer to supply the reasons to the petitioner pursuant to her representation dated 3.4.2020 (Annex.-6) within a period of one week from the date of receipt of certified copy of this order. On receipt of reasons, the petitioner may file her objections within a period of one week thereafter to issuance of notice dated 26.2.2020 and the Assessing Officer shall consider those objections and dispose of the same by passing a speaking order within a reasonable time.

  ---

• 2020 (9) TMI 332
  Disallowance u/s 43B - Deduction of Security Transaction Tax (STT) against the transaction of trading - AO found the said amount of STT not to be deposited with the authorities, and as such provisions of Section 43 - HELD THAT:- The said Section is an exception to the mercantile system of accounting. It is explicitly added to correct the mischief of claiming deductions without payment of taxes due even at a later stage. The expression used is same is actually paid by him. In any event, we find the issue is no longer res Integra for Constitutional validity of Section 43B, more particularly Clause (f) thereof, stands affirmed by the Hon ble Apex Court in Union of India Ors. Exide Industries Limited Anr. [2020 (4) TMI 792 - SUPREME COURT] . Undisputedly, petitioner had not deposited the amount deducted as STT with the authorities, and it is not his case that the same stood paid back/returned to the person from whom it stood deducted. It is the admitted case of the petitioner that since the petitioner was adopting the mercantile system of accounting; he was not supposed to take any action. Even on this count, given law discussed above, more so Exide Industries Limited (supra). (supra) and Mcdowell [ 2009 (5) TMI 28 - SUPREME COURT] the orders cannot be said to be perverse and illegal warranting interference by this Court. WP dismissed.

  ---

• 2020 (9) TMI 331
  Deduction u/s 80 IB(10) - assessee did not give the breakup details of the size of the land in which the apartment complex is developed AND did not furnish the details of survey number and filed few details without the purchasers address and copy of some documents - HELD THAT:- Undisputed fact is that the land on which the project was developed, measured an extent of 3.46 acres in which the assessee has constructed two blocks and made a claim for deduction. It is an admitted case that the development has taken place in an extent of 1.65 acres. AO has failed to note the effect of a Completion Certificate which certifies that the developer has completed the project in accordance with the approved Building Plan as approved by the CMDA. The assessee also specifically states that the built-up area is maximum built-up area and not carpet area or super built-up area and this fact has been considered by the CIT(A) as well as by the Tribunal and the assessee has been granted relief - No Substantial Questions of Law arises for consideration in this appeal.

  ---

• 2020 (9) TMI 330
  Revision u/s 263 - TDS u/s 194H - disallowance of incentive and commission for SIM cards u/s.40(a)(ia) - requirement to be Audited u/s. 44AB - HELD THAT:- If the books of account was not audited u/s.44AB of the Act in the immediately preceding financial year then this provision will not applied in the current financial year in case of individual or HUF. From the computation of income filed by the assessee the turnover of the assessee is below Rs. 60 lakhs which was not required to be audited u/s.44AB of the Act. This fact has not been examined by any of the authorities below. Therefore, the assessee has not fulfilled the first condition and therefore, he is out of the purview of Section 194H for making deduction on payments made to the retailers as a commission or discount of more than Rs. 5000/-. The assessee is an Individual. The assessee has got audited his books of account in the financial year 2011-2012 relevant to the assessment year 2012-2013, which is under dispute for making TDS. In view of the above provisions of Section 194H of the Act, the assessee is not required to make TDS. Therefore, the order passed by the AO is not erroneous and prejudicial to the interest of Revenue. - Decided in favour of assessee.

  ---

• 2020 (9) TMI 329
  Exemption u/s 11 - Donation received treated as unexplained cash credit u/s 68 - assessee is a society registered u/s.12A and also enjoying the registration u/s.80G - AO issued notices u/s.133(6) to 49 persons which were either not served or remained unresponded - as submitted assessee was not allowed adequate time to prove the genuineness of the donors - HELD THAT:- Show cause notice was issued on 11-12-2018 requiring the assessee to prove the claim of having received donations from identifiable persons. The assessee submitted reply on 24-12-2018 requiring some more time. Since the assessment was getting time barred on 31-12-2018, the assessee was not allowed the time and the order was passed on 24- 12-2018 itself. CIT(A) upheld the action of the AO in the impugned order taxing the amount u/s 115BBC of the Act. In addition, he further directed the AO to consider the applicability of section 68 of the Act read with section 115BBE of the Act. Under these circumstances, we are of the considered opinion that the ends of justice would meet adequately if the impugned order is set-aside and the matter is restored to the file of AO. We order accordingly and direct him to examine the case afresh. AR has undertaken to extend all possible cooperation by producing necessary evidence/donors as the AO may desire. Assessee appeal is allowed for statistical purposes.

  ---

• 2020 (9) TMI 328
  Levying fee u/s 234E - statement processed u/s 200A - Scope of amendment - HELD THAT:- As regards the fate of fees levied u/s 234E of the Act for the returns filed and processed before 1.6.15 we after considering the judicial pronouncements have taken a consistent view that the amendment brought in Finance Act, 2015 w.e.f. 1.6.2015 under Section 200A (clause (c )] of the Act is prospective in nature thereby empowering the revenue authorities to charge fee u/s 234E of the Act only after 1.6.2015. Various judgments referred and relied by Ld. Counsel for the assessee also lays down common ratio that since the amendment brought in by Finance Act 2015 u/s 200A(c ) of the Act w.e.f. 1.6.2015 is prospective in nature, therefore revenue authorities are not empowered to levy the fees u/s 234E in the processing completed before 1.6.2015. In the instant case both the date of filing the quarterly return as well as the date of processing by CPC is after 1.6.2015, so in these given facts whether the revenue authorities were justified in levying fee u/s 234E of the Act. Assessee is eligible for partial relief to the extent of deletion of fee levied u/s 234E of the Act for the delay up to 1.6.2015 and the remaining amount i.e. the fees levied for default committed after 1.6.2015 needs to be confirmed. - Decided partly in favour of assessee.

  ---

• 2020 (9) TMI 327
  Revision u/s 263 - as per CIT AO has dropped the penalty proceedings without proper verification - Assessee not produce the original challans in respect of payment of VAT and CST - as during the penalty proceedings, the assessee had clearly explained to the AO that the addition was agreed only to avoid unwarranted litigation - HELD THAT:- As during the assessment proceedings on issuance of a notice u/s 133(6) to the CTO Bodhan, the CTO had stated that there was a scam in their office due to which the records were not traceable and sought further time to verify the challans forwarded by the ITO. Thus, there is no adverse comment by the CTO or even any implication that challan submitted by assessee may be false or bogus or fake .Assessee had agreed for the disallowance. During the penalty proceedings, assessee had given its explanation which has been accepted by the AO. Since AO has accepted the contentions of the assessee which have not been proved to be incorrect, the said dropping of penalty proceedings by the AO cannot be said to be erroneous. Where the assessee s explanation has been found to be satisfactory by the AO, and there is no adverse finding by the concerned authorities, then the view taken by the AO is one of the possible views and cannot be said to be erroneous. Since the order of CIT does not satisfy the twin conditions of the order being erroneous and prejudicial to the interest of revenue, we are of the opinion that the order u/s 263 of the Act is not sustainable. - Decided in favour of assessee.

  ---

• 2020 (9) TMI 326
  Disallowance of interest paid on borrowed capital @ 12% - Addition on an estimated basis in respect of amount alleged to be diverted as interest free advances to sister concern - HELD THAT:- As on 01/04/2012, the assessee had sufficient interest free own funds in its kitty in order to make interest free advances to its group concerns. We also find that the own funds available with the assessee are much more than the interest free advances given to the group concerns. Hence, it can be safely presumed that interest free advances given to the group concerns were only out of own funds of the assessee and not out of borrowed funds. See case of Reliance Utilities Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and in HDFC Ltd. reported in [2014 (8) TMI 119 - BOMBAY HIGH COURT] . Respectfully following the ratio decidendi of the same decision, we hold that there cannot be any disallowance of interest on borrowed capital in the facts and circumstances of the case. Delayed Employees contribution to PF and ESI - contribution remitted beyond the due date prescribed under the respective statutes but, the same had been remitted before the due date of filing of return u/s 139(1) - HELD THAT:- Respectfully following the said decision in the case of VBC Industries [ 2015 (6) TMI 1 - ITAT HYDERABAD] we hold that there cannot be any addition towards employees contribution to PF ESI when the said contributions were duly remitted before the due date of filing of return of income u/s 139(1) of the Act. The grounds raised in this regard are allowed.

  ---

• 2020 (9) TMI 325
  TP Adjustment - determination of the ALP of the international transactions - computation of mark up - Re-characterizing the Distribution activities of Appellant to a Service Provider - HELD THAT:- As decided in own case [ 2018 (4) TMI 636 - ITAT HYDERABAD] since the assessee had no revenue left after reducing the operating cost/expenses, the AE was not paid any percentage. The revenue generated by selling the goods is retained by the assessee. The TPO has instead computed the mark up on the operating cost of the assessee to determine the ALP and brought the notional income to tax which is not justified. Therefore, the additional grounds of appeal are allowed. As regards the applicability of the provisions of section 92(3) AO/TPO is directed to conduct fresh TP analysis by treating the assessee s transaction as a distribution agreement and by determining the most appropriate method afresh and after allowing the necessary adjustments. If the loss declared by the assessee is increased by such TP study, then no TP adjustment can be made as provided in section 92(3) of the Act. - Decided partly in favour of assessee for statistical purposes.

  ---

• 2020 (9) TMI 324
  TP Adjustment - Comparable Uncontrolled Price (CUP) method as applied by the assessee to be the most appropriate method - HELD THAT:- On a perusal of the material placed before us, we find that while deciding identical issue in assessee s own case in assessment year 2004 05 [2012 (4) TMI 260 - ITAT MUMBAI ] the Tribunal has accepted the benchmarking done by the assessee under CUP method and has also held that the profit sharing ratio of 50:50 is prevalent both in respect of agreement entered into between group companies with unrelated parties as well as the assessee. - Decided in favour of assessee. Addition made to the Low gross profit - after rejecting the books of account, the Assessing Officer computed the gross profit rate and proposed additions - HELD THAT:- There is a specific finding by learned DRP that neither the Assessing Officer has made any adverse remark alleging non furnishing of any details by the assessee nor regarding the maintenance of regular books of account by the assessee. It also appears from record, the Assessing Officer has examined the books of account and the materials furnished before him and has not made any adverse remark regarding the correctness or completeness of the accounts. Simply relying upon a statement recorded from the Vice President of the company, the Assessing Officer has concluded that the assessee might have manipulated its profit. Thus, as could be seen from the material on record, there is no contrary evidence brought on record by the Assessing Officer to establish that the books of account maintained by the assessee are unreliable or the assessee has manipulated them. It is also a fact on record that the parties with whom the assessee has entered into transactions are not related parties. None of the factual finding rendered by learned DRP has been controverted before us with corroborative evidences. Thus, it is very much clear, the additions on account of low gross profit has been made purely on conjecture and surmises without any supporting evidence. That being the case, we do not find any reason to interfere with the decision of learned DRP on the issue

  ---

• 2020 (9) TMI 323
  Exemption u/s 10(10D) - amount received by the assessee on maturity of the Keyman Insurance Policy - As per AO to be assessed under the head salary as against the long term capital gain claimed by the assessee - HELD THAT:- As decided in PRASHANT J. AGARWAL [ 2016 (9) TMI 1294 - BOMBAY HIGH COURT] any sum received under the assigned Keyman Insurance Policy prior to assessment year 2014 15, would be eligible for exemption under section 10(10D) of the Act, as the amendment in Explanation 1 would apply only from 1st April 2014. The aforesaid observations of the Hon ble Jurisdictional High Court rather supports the case of the Revenue as in the present case, the Keyman Insurance Policy has matured in November 2014. Assessee received the amount on maturity of Keyman Insurance Policy after coming into effect of the amended Explanation 1 to section 10(10D) of the Act. The decision of the Hon ble Supreme Court in case of CIT V/s. Vatika Township [ 2014 (9) TMI 576 - SUPREME COURT] may not be of any help to the assessee as there is no retrospective application of the provision. In this view of the matter, in our considered opinion, the assessee is not eligible to claim exemption under section 10(10D) of the Act on the maturity value of the Keyman Insurance Policy. Legislature in its own wisdom never intended that sum received on maturity of Keyman Insurance Policy is to be assessed under the head income from capital gain. Had it been the case, as the assessee wants us to believe, the legislature would not have restricted the assessability of the amount received under Keyman Insurance Policy to the three heads viz. salary, income from business and profession and income from other sources. In the facts of the present case, undisputedly, the sum received on maturity of Keyman Insurance Policy cannot be assessed either under the head salary or income from business and profession. Thus, the only other head under which it can be assessed is income from other sources as per section 56(2)(iv) of the Act and the Assessing Officer has assessed such income in accordance with the statutory provisions. Grounds raised by the assessee are dismissed.

  ---

• 2020 (9) TMI 322
  Addition u/s 40A (3) - expenditure in cash exceeding permissible limit - HELD THAT:- What the expression means is expenditure incurred exceeding the particular amount in rupee terms. Therefore, even if the expenditure is incurred in cash and in foreign currency, still the provision of section 40A(3) would be applicable if it exceeds the specified quantum in rupee term. Merely because the expression rupee has been mentioned in section 40A(3) it would not debar applicability of the provision to the expenditure incurred in cash in foreign currency. Undisputedly, the expenditure incurred in cash has been booked in India by debiting to the profit and loss account, that too, in rupee terms. AO has all the powers to examine the allowability of such expenditure under the provisions of the Act while making assessment of the assessee. That being the case, it cannot be said that the provisions of section 40A(3) would not be applicable. Contention of AR regarding the applicability of rule 6DD, we find the same to be totally misplaced. On a reading of rule 6DD we do not find any specific clause therein which can come to the aid of the assessee. Even, accepting that the assessee could not have issued a cheque to the payee, however, there are many other ways open to the assessee for making the payment through proper banking channel. Since, the assessee has failed to do so, the provisions of section 40A(3) of the Act is clearly attracted and the expenditure incurred in cash deserves to be disallowed. The decisions relied upon by the learned counsel for the assessee, on careful examination, were found to be of no help to the assessee. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue while dismissing the ground raised by the assessee. Disallowance of vehicle, conveyance and telephone expenses @ 10% - HELD THAT:- AO has disallowed 10% of the expenditure claimed by the assessee purely on ad hoc basis assuming personal use. However, what is the nature of enquiry conducted by the Assessing Officer to establish personal use is not forthcoming from the assessment order. It is also not clear whether the Assessing Officer has called upon the assessee to furnish evidence that there is no personal element involved in the expenditure. Learned Commissioner (Appeals) has also confirmed the addition purely on the basis of the observations made by the Assessing Officer. In our view, without establishing the fact that a part of the expenditure incurred by the assessee is towards personal use, no disallowance can be made purely on presumption and surmises. - Decided in favour of assessee.

  ---

• 2020 (9) TMI 321
  Disallowance on account of SAP implementation charges - HELD THAT:- Issue squarely covered in favour of the assessee inter-alia by the decision of CIT Vs. M/s. KSB Pumps Ltd. [ 2016 (10) TMI 548 - BOMBAY HIGH COURT] wherein a similar issue was decided in favour of the assessee wherein allowing the claim of assessee for deduction on account of expenditure incurred on SAP implementation - Decided in favour of assessee. Depreciation on the expenditure incurred on SAP implementation / package - HELD THAT:- As we have upheld the order of ld. CIT(Appeals) allowing the claim of the assessee of deduction on account of the entire expenditure incurred by the assessee on SAP implementation / package by treating the same of revenue in nature, depreciation on the same cannot be allowed to the assessee. - Decided against assessee. Addition of provision for warranty expenses and provision for after sales cost respectively - HELD THAT:- The issues relating to assessee s claim for deduction on account of provision for warranty and provision for after sales cost thus are squarely covered in favour of the assessee by the various decisions of the Tribunal passed in assessee s own case for the earlier years [ 2018 (9) TMI 1990 - ITAT PUNE] and respectfully following the same, we uphold the impugned order of ld. CIT(Appeals) allowing the claim of the assessee for deductions on account of provision for warranty and provision for after sales cost. - Decided against revenue.

  ---

• 2020 (9) TMI 320
  Validity of reopening of the assessment u/s 147 - HELD THAT:- Assessee has not filed any application for admission of additional ground/plea. Assessee even has not filed the reasons recorded by the A.O. and in absence of the reasons recorded, this issue raised by the assessee cannot be decided. Assessee except raising this ground, has not pointed out as to how the reopening of the assessment is invalid - assessee has never objected to the validity of the reopening either before the A.O. or before the ld. CIT(A) and has not sought any leave of this Tribunal to raise such a fresh plea/ground first time, therefore, we reject grounds No. 1 and 2 of the appeal raised by the assessee. Addition on account of long term capital gain - FMV determination - A.O. received information regarding sale of immovable property by the assessee alongwith two other co-owners - HELD THAT:- When the property in question as assessed by the Stamp Value Authority as non-agricultural land then the fair market value as on 01/04/1981 should have been considered for non-agricultural land instead of agricultural land. No substance in this contention of the assessee because the land being an agricultural land is not in dispute. Due to development of the area over the period, the land is no more exempted u/s 2(14) of the Act and the assessee has accepted this fact by declaring the long term capital gain on sale of this land. Even otherwise, the assessee has not disputed the location of the land which is one of the most important factors for determining the fair market value at the time of sale. Since this land in question has been inherited by the assessee alongwith two other legal heirs, therefore, the fair market value as on 01/04/1981 would be taken as per the status of the land on that date. Subsequent change in the surrounding circumstances would not alter the status of the land as on 01/04/1981. A.O. has rightly taken the fair market value as on 01/04/1981 by taking a comparative sale instance. The second objection raised by the assessee is against determination of the fair market value by the DVO U/s 50C(2) though, the assessee has contended that the value of the land should have been taken as it is mentioned in the sale deed. However, the fair market value determined by the DVO has not been questioned by the assessee by bringing any material or facts contrary to the said valuation. - Decided against assessee.

  ---

• 2020 (9) TMI 319
  TP Adjustment - addition on account of AMP expenditure incurred by the taxpayer in a trading segment as well as network segment - TPO used the intensity approach by comparing the VAE (Value Added Expenditure)/Sales ratio of each comparable with that of the taxpayer - HELD THAT:- We are of the considered view that merely by applying the BLT method which has no legal existence and merely on the basis of MDF agreement vide which taxpayer has received part reimbursement of the AMP expenses incurred by it duly disclosed this expenditure in Form 3CEB and in TP study, so called excessive AMP expenditure of the taxpayer cannot be treated as international transactions u/s 92B of the Act. So, we cannot infer the existence of international transactions qua AMP expenses between taxpayer and AE beyond the reimbursement already made by the AE under MDF Agreement. TPO by adopting the intensity approach qua trading segment and network segment proceeded to make alternative benchmarking as a substantive adjustment. In AY 2012-13, similar adjustment was made by the ld. TPO by adopting the intensity approach which was held not to be sustainable by the coordinate Bench of the Tribunal for AY 2012-13 order [ 2020 (1) TMI 404 - ITAT DELHI] in taxpayer s own case by following the order passed by the coordinate Bench of the Tribunal in taxpayer s own case in earlier years. Scope and value of the international transactions cannot be extended to the so-called excessive expenditure incurred by the taxpayer on account of nonroutine AMP beyond the reimbursement already received by the taxpayer under MDF agreement and as such, adjustment made by the TPO on account of AMP expenses is not sustainable in the eyes of law, hence ordered to be deleted. Comparable selection - Functional dissimilarity - HELD THAT:- OTS E-Solutions Private Ltd. (OTSE) is a routine distributor/supply chain shows that the functions performed, risk assumed and expected reward is not comparable to the taxpayer. The taxpayer is also performing critical functions such as quality control and post sale/warranty support as a routine distributor whereas OTSE being an aggregator provides a platform for sale of electronic products of multiple brands and as such having a different business model vis- -vis taxpayer having routine buy-sell model. So, in these circumstances, we are of the considered view that OTSE is not a suitable comparable vis- -vis the taxpayer hence ordered to be excluded. Exclusion of Sataytej as a comparable on ground of different business profile as well as on the ground that the TPO has resorted to cherry picking by using Sataytej and at the same time, rejected other comparables, namely, ADS Diagnostics Ltd., Advanced Micronic Devices Ltd. and Frontline Electro Medical Ltd. on the same reasoning that these comparables are engaged in sale of medical equipments - Sataytej is into the sale of surgical and medical equipment which is not comparable to taxpayer. Even otherwise, when the taxpayer has himself rejected other 3 comparables on the ground that those comparables are engaged in sale of medical equipments which is not comparable to the business of the taxpayer, he is required to adopt the principle of consistency. However, since it is a factual issue the same must be reexamined by the TPO. So, this comparable is remitted back to the TPO to examine afresh after providing an opportunity of being heard to the taxpayer. Spice Mobility Ltd - DRP have rejected this comparable on the ground that it fails different financial year ended filter. We are of the considered view that no comparable can be rejected merely on the ground that its financial year is different particularly when result can be extrapolated using quarterly results. This position of law has not been disputed by the ld. DR for the Revenue. So, in these circumstances, this comparable is also remitted back to the ld. TPO to decide afresh by proving an opportunity of being heard to the taxpayer and shall provide necessary data to extrapolate the results by using quarterly results. Incorrect Margin computation by taxpayer of comparables - Since this is a factual aspect and taxpayer s computation stated to be consistent throughout in the earlier years and accepted by the ld. TPO, the issue is remitted back to the TPO to decide afresh after providing an opportunity of being heard to the taxpayer. Working capital adjustment - DRP allowed the working capital adjustment to the taxpayer but TPO at the time of giving effect to the ld. DRP order has failed to grant the working capital adjustment. The taxpayer has already given the detailed working capital calculation before the TPO as well as DRP, as is evident, during the TP as well as DRP proceedings. Working capital adjustment was also granted to the taxpayer consistently from AYs 2005-06 to 2011-12. So, in these circumstances, TPO is directed to grant the working capital adjustment to the taxpayer after due verification. Adjustment made to the proportion of international transactions with AE - HELD THAT:- Since this is a factual issue not controverted by the ld. DR for the Revenue the issue is remitted back to the TPO to make correct computation of proportionate adjustment of international transactions of the taxpayer with its AE after providing an opportunity of being heard to the taxpayer. Disallowance of salary expenditure paid to the expatriate employee of SEC, Korea u/s 37(1) - HELD THAT:- This issue is covered in case of taxpayer s parent company, SEC, Korea [ 2018 (3) TMI 1206 - ITAT DELHI] . In these circumstances, disallowance made by the AO and accepted by the ld. CIT (A) is ordered to be deleted.

  ---

• 2020 (9) TMI 318
  Validity of reopening of assessment u/s 147 - assessments were reopened by the AO on the basis of information received by him regarding the bank accounts allegedly maintained by both the assessees with HSBC Bank, Switzerland but finally no addition was made by him to the total income of the assessees on the said issue in the assessments completed u/s 147/143(3) of the Act wherein additions were made on altogether different issues such as capital gain etc. which did not form the basis of reopening of assessments - HELD THAT:- As decided in M/s. Infinity Infotech Parks Ltd. [2014 (9) TMI 1142 - CALCUTTA HIGH COURT] During reassessment when the AO finds that the item on the basis of which he reopened does not survive, then the reasons recorded to reopen loses its significance and the fall out is that the AO s jurisdiction to reassess is without jurisdiction and therefore is illegal and fragile in the eyes of law; and thereafter he should have dropped the reassessment proceeding there only as discussed supra. After having no jurisdiction to reassess his further action of a new fact finding in the absence of any item specified in the reasons recorded which is the foundation on which he reopens when no longer subsists, the AO s action is hit being Quarum non-judice and, therefore, the impugned addition is non-est in the eyes of law and so it has to necessarily go. Therefore, the appeal of the Revenue is devoid of any merits - Decided in favour of assessee.

  ---

• 2020 (9) TMI 317
  Revision u/s 263 - TDS u/s 194A - Addition u/s.40(a)(ia) - non deduction of tds on payment of interest to M/s. Magma Financial Corporation by the assessee during the relevant financial period - HELD THAT:- Ld counsel could not controvert the fact that recipient of impugned interest is a company incorporated under the Companies Act, 1956 and thus, the provisions of section 194A(3)(iii)(b) of the Act is not applicable to the facts and circumstances of the case. It is also not in dispute that the assessee has not complied with the provisions of Rule 31CAB read with first proviso to section 201(1) of the Act and has not submitted Form 26A as mandated under Rule 31ACB of the I.T.Rules. No hesitation to uphold the order of the PCIT, holding the assessment order is erroneous and prejudicial to the interest of the revenue and directing the AO to modify the assessment order by disallowing a sum u/s.40(a)(ia) of the Act and adding the same to the total income of the assessee. Hence, we confirm the order of the ld PCIT. - Decided against assessee.

  ---

• 2020 (9) TMI 316
  Condonation of delay - delay in preferring the appeal before tribunal - eligible reasons for delay - HELD THAT:- It is not a case of the Revenue that there are any mala fides on the part of the assessee in preferring the appeal with any delay. Obviously, assessee does not stand to gain by preferring the appeal with delay. When the technicalities are pitted against the substantial justice, the former must give way to the latter. There is no reason not to accept the explanation offered by the assessee that it is only due to bona fide mistaken impression the delay occurred in preferring the appeal. Revenue does not plead any rights to have been crystallized due to efflux of time. By condoning the delay, the highest that would happen is that a cause could be decided on merits, which would go in the interest of justice. Delay in preferring the appeal could have been condoned. We, therefore, find it difficult to sustain the impugned order of the Ld. CIT(A). Disallowance of credit of TDS under intimation under section 143(1 ) - no reasons are assigned for a disallowance - HELD THAT:- For want of reasons by way of speaking order, not only the assessee does not know the reason for disallowance, but at the same time we are also unable to appreciate the legality otherwise of such an act of disallowance. It is only reasons that infuse life into the action of any public authority, and such reasons allow the higher forums to appreciate the legal sustainability of such an action, without which not only the party affected by such an action suffers, but the higher forums would be handicapped either to confirm or to set it aside. It is, therefore, clear that the impugned action of disallowance of the credit of TDS is unsustainable, in the manner it is presently manifested in the impugned order. Disallowance of credit of TDS under intimation under section 143(1) of the Act suffers legal irregularity and cannot be sustained as it is, it goes without saying that the matter requires reconsideration by the learned Assessing Officer to pass a speaking order with the reasons.

  ---

• 2020 (9) TMI 315
  Disallowance of sub-contract payments for land development expenses - accommodation entries for income and expenditure both - AO completed the assessment u/s. 144 and the amount of land development expenses was added to the total income of the assessee - HELD THAT:- CIT(A) is unjustified in treating the entire contract receipt as a taxable income of the assessee without disproving the material fact that assessee was indulged in facilitating accommodation entries. Assessee has not carried out any development work for the PACL Ltd. and provided accommodation entries to PACL Ltd. and on similar basis accommodation entries were provided by the subcontractor to the assessee. The assessee has failed to furnish the description of the land and other details where the land development work was carried out and the sub-contractors have also admitted in their statements and the affidavits they have only provided accommodation entries. Assessee have not executed any work except providing accommodation entries, we consider that looking to the meager income shown by the assessee it will be reasonable to estimate the commission income earned by the assessee @ 4% of Rs. 1,02,04,082/- to the amount of Rs. 4,08,165/-. - Decided partly in favour of assessee.

  ---

• 2020 (9) TMI 314
  TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Assessee company is engaged in the business of Design Engineering Services in the field of refineries, petrochemicals, cements, fertilizers power plants. The assessee company is also, engaged in the business of detailed engineering of EPC projects mainly with respect to terminals, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Addition of undisclosed receipt - AO called upon the assessee to submit reconciliation of TDS and income offered to tax, on the basis of TDS claim made as per Form- 26AS - HELD THAT:- In light of averments made by the assessee that income from TDS deducted on account of additional design engineering service provided by IOT Mabagas Limited, was already offered tax in the Asst.Year 2009-10, we set aside the issue to the file of the Ld. AO and direct him to cause necessary verification and in case income was already offered to tax for Asst.Year 2009-10, then the Ld. AO is directed to delete additions for the year under consideration. Disallowances of professional fees for non deduction of TDS - HELD THAT:- We deem it appropriate to set aside the issue to the file of the Ld. AO and direct him to cause necessary enquiries, in light of claim of the assessee that said amount pertains to bad debts written off. In case, the Ld. AO found that the amount of disallowances is not pertains to professional fees on which tax is required to be deducted, and then the same may be considered in accordance with law, as applicable to write off of bad debts. Value of the TP adjustment - Whether value of the TP adjustment needs to be made to the value of the international transactions instead of making the adjustments at entity level? - HELD THAT:- Limit the adjustment only to the AE transactions by following the decision of Hon ble Bombay High court, in the case of Ratilal Becharlal Sons [ 2015 (11) TMI 1524 - BOMBAY HIGH COURT] where it was categorically held that TP Adjustment needs to be made at transactions level and not at entity level.

  ---

• 2020 (9) TMI 313
  Depreciation on vehicles u/s 32 - @30% or 50% - assessee has claimed depreciation @ 50% i.e. on tankers - AO restricted the claim of depreciation @ 30% in respect of addition made to such commercial vehicles - HELD THAT:- Commercial vehicles were purchased by the assessee during F.Y. 2008-09 and 2009-10 which were eligible to special rate of depreciation @ 50%. It is noticed that no new vehicle has been purchased by the assessee during the year under consideration. It is observed that no depreciation can be claimed for individual assets under income tax act because of concept of block of assets. Depreciation in the case of the assessee is eligible as per the block of asset otherwise if such expenditure are put in the category of repair/revenue expenditure then the full claim of such expenditure are to be allowed. Since the assessing officer has treated such expenditure as capital expenditure, therefore, we consider that no new asset has been created on renovation of the commercial vehicle. Therefore, the claim of the assessee for depreciation @ 50% applicable to the particular block of assets is justified. Appeal of the assessee is allowed.

  ---

• Customs

• 2020 (9) TMI 312
  Classification of imported goods - BIRD SCARE DEVICE - classified under CTH84362900 or under CTH93040000? - restricted goods or not - rejection of self assessment - request for issuance of DDWC - HELD THAT:- The de-novo proceedings itself is a continuation of the original proceedings commencing from the petitioner s self-assessed bill of entry for clearance of goods, the consequential show-cause notice, as well as the reply of the petitioner. Therefore, the proceedings of the second respondent which culminated into the order dated 17.03.2017, cannot be termed as de-novo proceedings at all, but a continuation of the original proceedings. As such, the second respondent ought to have considered the request made by the petitioner for issuance of DDWC. The first respondent herein while passing orders in the appeal, had remarked that there was no mention of the request of DDWC before the lower Authority and that the Appellate Authority cannot entertain a prayer on which no decision or order has been passed by the lower Authority. Such a statement cannot be sustained for two reasons. Firstly, there was a request made by the petitioner before the second respondent in the reply to the show-cause notice. No doubt, such a request could have been given by way of a separate application and not in a reply - Secondly, the first respondent was of the view that the appeal cannot be entertained on a prayer in which no decision or order has been passed by the lower Authority. As a matter of fact, the grievance of the petitioner before the first respondent in the appeal is that though they had made a specific plea for issuance of DDWC, the plea was disregarded and such a disregard was the basis for filing the appeal. There are no justification on the part of the Appellate Authority in deferring to consider the petitioner s request for the certificate, on the ground that there was no such prayer before the lower Authority. The goods are rightly classified under CTH93039000 - Insofar as the issuance of Demurrage cum Detention Waiver Certificate is concerned, the petitioner is granted liberty to make a fresh application to the second respondent herein and on receipt of the same, the second respondent herein shall take into consideration all the observations made in this order and accordingly pass appropriate orders in accordance with law. Petition disposed off.

  ---

• 2020 (9) TMI 311
  Validity of Show cause notice issued in 2011 - long pending issue - Reasonable period of limitation for adjudication of case - Mis-declaration of imported goods - imported consignment was found to contain undeclared as well as short declared goods - Section 28(4) of the Customs Act, 1962 - determination of duty or interest under Section 28(8) has not been done within six months or one year as stipulated under Section 28(9) (a) or (b). Whether it would have been possible for the respondents to complete such determination within the time frame fixed or whether they had been prevented from doing so by reason of an impediment or bar, justifying the elapse of time from 22.12.2011 till date excluding the period 31.10.2012 to 25.07.2013, that is, eight (8) years, nine (9) months and counting? HELD THAT:- Admittedly, there is no bar, legal or otherwise that stood in the way of completion of adjudication. The interim injunction granted in W.P.No.29833 of 2012 was in force between 31.10.2012 and 25.07.2013 only (268 days). In any event, the Miscellaneous Petitions had come to be dismissed and the injunction vacated on 25.07.2013 for the reason that no notice had been served upon the respondents by the petitioner, either privately or by service through Court. Thus the existence of the injunction between 31.10.2012 and 25.07.2013 was itself not within the knowledge of the respondents and they could well have proceed with the matter. The fact that the petitioner has challenged the SCN only now, in 2020, only indicates to me that the petitioner fully intended to comply with and respond to notices and participate in adjudication proceedings only repeatedly requesting for relied upon and other materials - It is unnecessary to state that an assessee is entitled to all documents, both relied upon as well as unrelied upon including those that were seized in the course of search, in order to enable it to respond to the show cause notice. This is not an unreasonable request. Thus the elapse of time from 2013 till January, 2020 when the show cause notice was challenged does not, in my view, indicate delay and there is no laches on the part of the petitioner to have filed the present Writ Petition challenging the show cause notice. Petition allowed - decided in favor of petitioner.

  ---

• 2020 (9) TMI 310
  Absolute Confiscation - Gold Bars - Baggage Rules - allegation that appellant has kept on changing his stand and that too, without any supporting evidence - HELD THAT:- There is no dispute that the appellant tried to smuggle the gold, ie., he tried to bring the above gold bars from Singapore into India without payment of applicable duties and without even declaring the same when he was duty bound to do so. The purchase of the same and the final destination/usage may not be of any significance when such an act of smuggling is carried out, since what is important is primarily the declaration, followed by the payment of applicable duties/taxes. Further, the appellant has also pleaded that he was a law abiding citizen but when the law mandates a minimum declaration which has not been complied with here in the case on hand, the above plea of the appellant would also not going to help the appellant. Moreover, the serious dispute as to the dates on invoices with consecutive numbers is alone an incriminating factor not at all explained by the appellant. Appeal dismissed - decided against appellant.

  ---

• 2020 (9) TMI 309
  Levy of penalty on Customs Broker u/s 114 and 114AA of the Customs Act, 1962 - allegation that appellant had helped in claiming false drawback by misdeclaration - Section 138A of Customs Act, 1962 - HELD THAT:- There are two middleman between the exporter M/s Ayaan International and the appellant CHA, namely Shri Rohit Sharma a forwarder and Shri Rakesh Sagar. Further, the allegation against the appellant CHA of their having received Rs. 1 lakh per consignment is not substantiated, over and above the usual charges. Shri Rakesh Sagar have stated that he was to receive Rs. 4,000/- on bill and remaining amount of Rs. 1 lakh in cash, is not the representative of the CHA firm, and is an outsider. Thus, receipt of Rs. 1 lakh by Shri Rohit Sharma or Shri Rakesh Sagar is not the amount received by the appellant CHA. Further, it is found that the Prop. of the exporter firm and its Authorised Signatory have nowhere stated that they have paid any amount over and above usual charges to the appellant CHA. Further, there is no allegation of any flow back of ill gotton draw back money to the appellant CHA - Further, it has nowhere come on record that CHA was present at the time of packing and stuffing of container for shipping. Further, there is no allegation that CHA has cooked or concocted any document for presenting it to the Customs, knowing it to be false. Penalty - Section 113 and 114 of CA - HELD THAT:- Appellant have not done any act of omission or commission leading to violation of any of the provisions mentioned in Section 113 of the Customs Act - Also, appellant have not done any act or omission nor knowingly used any document for the clearance knowing to be false. The appellant have given cogent explanation as regards the undervaluation, that the samples shown to them were of good quality and hence on such reasonable belief they have undertaken the clearance work. No case is made out that the appellant knowingly filed the shipping bills that the goods are overvalued - penalty under Section 114AA is also not imposable. Appeal allowed - decided in favor of appellant.

  ---

• Corporate Laws

• 2020 (9) TMI 308
  Qualification/disqualification of some of the independent Board of Directors and one or more agenda scheduled on 17.08.2020 - misappropriation of funds - Section 422 of the Companies Act, 2013 - HELD THAT:- Pertinently the legislature being aware of the hard pressed situation where the judicial manpower is disproportionately way far lower than the quantum of the litigation has used the expression shall make an endevour in Section 422 while binding the Tribunal to a time frame and thus the Tribunal, and for that matter all judicial forums being hard pressed with the cases on its file can only make an endevour for expeditious hearings with the limited manpower and infrastructure. Under such situation, the petition can be entertained with the aforesaid grievance only and only when the default on the part of the Tribunal is explicitly demonstrated by the cogent facts. No such explicit material is placed on record; in absence whereof, it will be inappropriate to issue the direction which may result into expediting the case at the cost of other cases requiring hearing expeditious than the case on hand. That apart, it appears that except in one case where the directions were sought from the National Company Law Appellate Tribunal for expeditious hearing of the case, the petitioner does not seem to have moved any application with the Tribunal itself for the purpose. Therefore there would be no question of mandamus in absence of representation to the Tribunal itself and the related failure of the Tribunal in discharging its duties. There is no rebuttal to the submission of the learned senior counsel shri Soparkar that infact the dispute is a family dispute. The Board of Directors comprises of petitioner s father, his uncle, nephew etc. and viewed from that angle it appears that the platform under Article 226 of the Constitution of India is sought to be used for settling the family scores. Therefore also this court would not exercise the extra ordinary jurisdiction for the purpose. Petition dismissed.

  ---

• 2020 (9) TMI 307
  Maintainability of petition - Oppression and Mismanagement - Stay of the Extra Ordinary General Meeting - HELD THAT:- A separate Interlocutory Application (C.A. No. 218/2018) was filed before NCLT, Chennai Bench, to dismiss the petition as it is not maintainable. However, the Respondents have not pressed for its hearing even though, they made it a point in their arguments. In order to find out whether the Petitioners were successful in making out a case for interference by this Tribunal by invoking Section 241 and 242 of the Companies Act, 2013 (Corresponding to Sections 397 and 398 of Old Act), we should examine in detail the provisions of these Sections as laid down in the Act. Section 397 deals with relief in case of oppression and Section 398 deals with relief in case of mismanagement and Section 399 states about the right to apply. The Petitioners in the present case was purporting to file the petition on behalf of and for the benefit of all the minority shareholders, where 31 persons who figured in the annexure have filed their consent in writing along with their share certificates. From this it necessarily follows that the said 31 shareholders know what exactly the Petitioners were doing and that they were acting for the benefit of the minority shareholders. It also requires that the consent should be obtained prior to the filing of the petition. If this was proved as a fact, the requirement of filing the consents in writing along with the petition should not render the petition itself not maintainable. We therefore, cannot agree with the Respondent s contention that the consent given was of general nature without applying mind. Therefore, we are of the view that the consent made by the 31 shareholders are an intelligent consent, in the sense, a consent given for the purpose of making allegations in the petition and for the purpose of claiming reliefs therein and therefore it cannot be considered as a blanket consent, but a valid one as contemplated under Section 399(3) of the Old Act - the petition is maintainable. Whether there was any case of oppression of the member or attempt to materially change in the management or control over the company to the detriment of the company? - H ELD THAT:- As per the Petitioners, Respondent No. 5 is the king pin of the entire operation of removing the Petitioners No. 1 and 2, who are the original promoters of the Respondent company and took control of the Company and running it as his fiefdom with active support and connivance of Respondent No. 2 to 4. The Respondent No. 5 started this entire operation after entry into the company at a later stage. The Respondent No. 5 started creeping acquisition of shares by gaining the confidence of the original promoters, hiding his real intentions of taking over the company. In the process, the Policy Guidelines of the MIB was also been violated by Respondent No. 5. We also observed from the records that the Petitioner No. 2 has advised Respondent No. 5 to reduce his shareholding to comply with the MIB Guidelines in this regard. It appears that this advice of the Petitioners has triggered the chain of events that led to their removal from the directorship by the Respondent No. 5 and his group - the timing of Board of Directors meeting also indicate the evil design of the Respondent No. 5 and his group in orchestrating the removal of Petitioner No. 1 and 2 from the Directorship of the Company to perpetuate the control and effect their change in the management. Respondent No. 5 and his cohorts had taken advantage of the absence of Petitioner No. 2 from the country, who was holding the position of the Chairman, and called for the illegal Board Meeting. There was no explanation why a Board Meeting was called urgently on 11.10.2012 that too immediately after the validly conducted Annual General Meeting on 29.09.2012. No traces of any allegations were raised on the Company Secretary in that AGM nor any discussion took place on this point. Removal of Company Secretary does not warrant such a hastily called Board Meeting. This gives credence to Petitioners allegations. Thus, the Respondents have indulged in oppression of minority shareholders and effected change in the control and management of Respondent Company, by their financial clout, muscle power and by adopting dubious methods to achieve their ends. Whether the Respondents in their Capacity as Directors of the Company had failed in complying with the fiduciary duty towards the shareholders? - HELD THAT:- Prior to the enactment of the Indian Companies Act 2013, the codified law with regard to the fiduciary duties of directors was largely silent on the said aspect, except for Section 291 which contained the provision dealing with general powers of the board of directors. Duties of directors, hitherto, were largely laid down by courts by looking at common law principles - A close reading of the present section lead us to conclude that it is motley of easily identifiable elements like shareholders and employees along with vague groups like the community. Thus, it would provide a cause of action to any person from the society giving rise to a problematic and absurd scenario. Whether the director is expected to act in good faith for the promotion of the objects of the company or should it also encompass other groups in the sub-section? - HELD THAT:- While acting in the best interest, a director must carefully weigh commercial interests of the company on one hand while also taking into account the safeguarding of the interests of the stakeholders, on the other. While doing so, the director must ensure that his actions conform to the standards of those of a reasonably prudent person. The duty of good faith sets a higher standard than the best interest criterion. Harmony must be sought to be struck between commercial considerations of the company and the interests of stakeholders. The allotment of shares was done to achieve different purposes, i.e., to increase the number of members of their group in the company and conversion of loan amount as share application money, is to increase their shareholding and to maintain the control over the company. It is well settled that if the Directors exercise their powers for the purposes other than those for which they were conferred, it may be said that they have exceeded their authority. It is evident that the mala fide intention of the Respondents 2 to 4 at the behest of Respondents 5 to 8 to remove the Petitioners from the Company has been done with undue haste for the purpose of grabbing power in the Respondent No. 1 Company. This clearly depicts that the Respondent 2 to 4 were hand-in-glove and supporting the actions of the Respondent No. 5 and gives credence to the allegations of the Petitioners - Thus, the Respondents group led by Respondent No. 5 are acting against the interest of Respondent Company and minority shareholders, for making material changes in the management of the Respondent company. Whether the discrepancies in the accounts pointed out by the Auditor as per the Annual Report of 2012-13 and 2013-14 amounts to mismanagement of affairs of the 1st Respondent company as alleged in the petition? - HELD THAT:- One of the shareholders and the Petitioner s proxies request for poll that was rudely turned down by 2nd Respondent. In the counter the Respondents contended that the authorization was absent in the proxy form submitted by Fr. Geo Kadavi who has been represented as the proxy of 1st and 4th Petitioners. We have gone through the proxy forms submitted by the Petitioners and found out that in Document No. 79 the 1st Petitioner has duly authorized Fr Geo Kadavi as his proxy by signing the proxy form. As such, the argument made by the Respondent doesn t hold any water. The attitude of the Respondents as derived from the records that they are not ready to share any information with shareholders who are not belonging to their groups and also trying to suppress the voices raised against them. This itself recognised to be an act of oppression against minority shareholders, besides hiding the discrepancies in the financial statements and refusing any semblance of discussions on the discrepancies pointed out - The request for poll was refused and the AGM was conducted with scant regard for law and Articles of Association. We are not willing to go with the argument submitted by Respondents in this regard. Further, we are also convinced with the averments made by the Petitioners that the entire acts of the Respondents are mala fide and with ulterior motives. Section 397 gives a right to members of the Company who comply with the conditions of Section 399 to apply to the court for relief under Section 402 of the act or such other relief as may be suitable in the facts and circumstances of the case. In the instant case, it cannot be disputed that the conditions of Section 399 are complied with. There is no substance in the contention that the Petitioners are not entitled to make the application, as the Petitioners do not constitute 10% shareholding in total. However, the tribunal can exercise its powers, the tribunal must be satisfied that the requirements of the Section 397 are fulfilled and the said requirements are that on an application under Section 397 of a member who has right to apply in virtue of Section 399. There was an effort made by both the groups to come to an amicable settlement of the matter and several adjournments were taken indicating that the talks are going on. However, the efforts of the parties have not fructified to arrive at an amicable settlement. During the course of arguments and in their written submission, the counsel for the Petitioners has indicated that the Petitioners group is ready to purchase the shares of the Respondents to protect the interest of the company and the minority shareholders. However, we also observe that the Respondents are not interested in the said proposal by the Petitioner. This Tribunal is of the considered view that the Company s affairs in relation to the Petitioners have been conducted in an oppressive manner by the Respondents and the facts would render that it is just and equitable to wind up the Company. The following order passed to meet the ends of justice: i. We hereby declare that the board meetings dated 11.10.2012, 23.10.2012 and the Extra Ordinary General Meeting dated 12.11.2012 are held illegal and invalid and consequently held as null and void. All the resolutions passed and decisions taken at the said meetings are hereby set aside. The actions taken pursuant to the said meetings are also set aside and not binding on the Company. Any forms filed with the Registrar of Companies, Kochi pursuant to the decisions taken in the said meetings shall also stand cancelled. ii. As regards to the strength of the Board this Tribunal restores the position ante as on the date of the last validly held Annual General Meeting on 29.09.2012. Henceforth, the Respondent Company is directed to conduct all Board Meetings in accordance with Article 108 of the Articles of Association of the Company. The Company Secretary and the Auditor who were with the company as on 29.09.2012 are reinstated. The Extra Ordinary General Meeting proposed to be held as per this order should decide on the continuation of the services or otherwise of the reinstated Company Secretary and Auditor. iii. The reinstated Board of Directors should proceed to appoint Directors in proportion to and representative of shareholding as at 31.03.2012 and also in compliance with the policy guidelines issued by the Ministry of Information and Broadcasting. This process should be completed within three weeks from the date of this order. iv. Consequently, the duly reconstituted Board as per point No. iii, should hold an Extra Ordinary General Meeting within a period of 12 weeks from the date of this order for electing new Board of Directors by following due process as laid down in the Companies Act, 2013. The proceedings of the said EoGM should be video graphed. v. We hereby declare that all the Board Meetings as well as the Annual General Meetings of the 1st Respondent Company held after 29.09.2012 as null and void and consequently the resolutions passed and decisions taken therein are set aside. vi. At this juncture, we also propose to give an exit option to the Respondents by considering the proposal made by the Petitioners to purchase their shareholdings at a fair value as decided by an independent valuer appointed by the reconstituted Board as per point No. (iii). vii. An Independent Auditor shall be appointed by the reconstituted Board as per point No. iii, within a month from the date of this order, to audit the accounts of the 1st Respondent Company along with its subsidiary companies for the Financial Years 2012-2013 and 2013-2014 and submit a report to the Respondent Company within 60 days from the date of appointment. The Respondent Company should place the report of the independent auditor for the information of the shareholders in the proposed Extra ordinary General Meeting, which is to be held as per point No. iv. viii. We hereby direct the Regional Director, Ministry of Corporate Affairs, 5th floor Shastri Bhawan 26, Haddows Road, Chennai - 600006 to investigate into the affairs of the 1st Respondent Company under Sections 235 and 237 Companies Act, 1956 (corresponding to Sections 210 and 213 of the Companies Act, 2013) of Companies Act, 1956 and also to investigate the acquisition of shares by the Respondent No. 5 in violation of the norms prescribed in the MIB policy guidelines. The findings should be furnished to the Respondent Company to initiate corrective steps within 60 days from the date of receipt of this order, so as to enable it to put the findings as well as the action taken report before the shareholders in the proposed Extra-ordinary General Meeting, which is to be conducted as per point No. iv. ix. The Registry is directed to forward this order to the Registrar of Companies, Kochi, to immediately effect necessary changes as per this order in their records.

  ---

• 2020 (9) TMI 306
  Deciding or approving the Liquidator s fees and for his payment within a period of thirty days from the date of approval of the Scheme - CIRP process - HELD THAT:- The Scheme as contemplated by the proponents of the Scheme in the instant case, cannot be considered as a transaction of sale falling within the ambit of Regulation 32 of Liquidation Process Regulations, 2016 as rightly pointed out by the Ld. Counsel for the Scheme proponents. However, even though the amended Regulation 4 of the Liquidation Process Regulations 2016 draws a distinction in this connection in the event of a scheme proposed and as well as in its absence as repeatedly brought forth in the earlier portion, no such distinction or for that matter no specific mention has been made in relation to a scheme and in relation to the fees payable to the Liquidator under the concerned Regulations pre-amendment. This Tribunal is required to only apply in relation to ascertaining the amount of fees payable to the Liquidator, the unamended Regulations i.e. the Regulation of Liquidation Process Regulations as it stood prior to 25.07.2019 and cannot apply the amended Regulations even as a guide in this regard as submitted by the Ld. Counsel for the Scheme proponents. The question of applicability of Regulation 39D of the IRCP Regulations, 2016 as amended from 25.07.2019 cannot also be applied under the circumstances. Thus being conscious that this Tribunal being a creature of the statute and is required to apply the provisions of IBC, 2016 and the Rules and Regulations framed thereunder as it is reflected fastidiously reference to Regulation 4 of the Liquidation Process Regulations, 2016 and closer scrutiny of the same discloses that the Liquidation fees of the Liquidator is required to be computed based on realisation, net of other Liquidation costs and of the amount distributed, and no where the said Regulations uses the term Realization of Sale assets . In the circumstances, the submissions made by the Ld. Counsel for the Scheme proponents that since the transaction cannot be brought under Regulations 32 contemplating various modes of Sale therein cannot hold much water. Applying Regulation 4 of Liquidation Process Regulations, 2016 as it stood prior to amendment made w.e.f. 25.07.2019, we find that the calculation as given by the Liquidator in the typed set filed along with the application which tabulation has also been extracted in para 22 supra is sustainable and in the absence of committee of creditors fixing the fees of the Liquidator or the Liquidation costs, is required to be hence allowed. The Liquidation process of the Corporate Debtor/Company in Liquidation stands revoked for the time being to enable the Corporate Debtor/Company in Liquidation to revive and reconstruct by implementing the Scheme sanctioned in terms of the order dated 10.01.2020 and carry forward its business activity/undertaking in terms of the Scheme by the Scheme proponents - application disposed off.

  ---

• Insolvency & Bankruptcy

• 2020 (9) TMI 305
  Liquidation of Corporate Debtor - no resolution plan was received during the Corporate Insolvency Resolution Process period and the promoter group had failed to provide concrete information about the prospective investor qua its plan for resolution/settlement - HELD THAT:- Admittedly, the proposed settlement would involve sale of assets of the Corporate Debtor which depended upon a variety of factors including sound financial position of the proposed Investor and its ability to raise the funds, more so, when operations of the Corporate Debtor were lying defunct. Besides, the settlement proposal cannot be thrust upon the Committee of Creditors as decision in regard to its viability and feasibility exclusively lies within the domain of commercial wisdom of Committee of Creditors. That apart, in absence of a resolution plan, the Committee of Creditors would have no option but to recommend liquidation of the Corporate Debtor. The law as enshrined in Section 33(2) only enjoins upon the Resolution Professional to intimate the Adjudicating Authority that the Committee of Creditors has, by requisite majority, decided to liquidate the Corporate Debtor, provided the Resolution Plan earlier approved by the Committee of Creditors has not been confirmed by the Adjudicating Authority. Thus, it is manifestly clear that even after recommending a Resolution Plan for approval of the Adjudicating Authority, the Committee of Creditors can retract it and withdraw the decision in regard to approval of such Resolution Plan by the Committee of Creditors - The Adjudicating Authority has rightly observed that even after pushing the Corporate Debtor into liquidation, Promoter/Ex-Director of the Corporate Debtor can take recourse to Section 230 of the Companies Act, 2013 by submitting a scheme for revival of the Corporate Debtor, subject of course to eligibility of the applicant. Appeal dismissed.

  ---

• 2020 (9) TMI 304
  Extension of CIRP period - extension of 90 days time period beyond 180 days and also exclusion of a period of 99 days lost due to various reasons - HELD THAT:- In this case, the commencement of CIRP was approved by this Adjudicating Authority and 180 days was completed on 31.03.2020. in view of the progress made in the CIRP and 97.5% voting shares of the CoC members in favour of the Resolution passed by the CoC in its 5th meeting held on 24.03.2020, this Adjudicating Authority hereby grants extension of CIRP period in the matter of M/s. KSK Mahanadi Power Company Limited beyond 180 days by further 90 days - It is further made clear that the computation of such extension of time period shall be computed in accordance with the Regulation 40C of IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020. This Adjudicating Authority deems it proper not to adjudicate upon the aspect of exclusion of period of 99 days at this point of time. However, Applicant/RP is at liberty to approach before this Adjudicating Authority at appropriate juncture of time, if desired so - Application disposed off.

  ---

• Central Excise

• 2020 (9) TMI 303
  Rectification of Mistake/Review of Order - non-compliance with the rules of natural justice - HELD THAT:- While it may be a fact that Ext.P5 communication was issued to the petitioner without hearing him on his Rectification of Mistake Application, that by itself may not justify an interference with Ext.P5 communication in these proceedings under Art.226 of the Constitution of India. A reading of Ext.P4 document clearly reveals that, although styled as a Rectification of Mistake Application, it is in effect an application seeking a review of Ext.P3 order of the Assistant Commissioner. Under the Statute in question, there is no express power of review conferred on the Assistant Commissioner. As a statutory authority, he cannot be seen as possessing any inherent power of review either. Ext.P5 communication of the Assistant Commissioner, that refuses to consider the application of the petitioner for a review of Ext.P3 order, albeit styled as a Rectification of Mistake Application, does not require any interference. Petition dismissed.

  ---

• 2020 (9) TMI 302
  CENVAT Credit - fake purchases - It was alleged that M/s.Abhay Chemicals, Jammu had not purchased raw materials from their stated suppliers and therefore they could not have manufactured any finished goods in the absence of procurement of raw materials, with the sole intent to facilitate undue cenvat credit to their buyers - HELD THAT:- The allegations in the show cause notice of taking irregular cenvat credit is based on a communication dated 30.02.2012 received from the Additional Commissioner, Customs Central Excise, J K, Jammu, stating that the several units in their jurisdiction located in Jammu Kashmir appear to be not actually engaged in the manufacturing activities - Further, it is found that the appellants have led evidence that they have received the inputs along with duty paying documents. Further, the appellants have made payments for receipt of inputs by cheque. Further, the appellants have manufactured finished products from the inputs and cleared the same on payment of duty, which is an admitted fact. Further, Revenue has not identified any alternate source of receipt of raw materials clandestinely. The allegation of Revenue are vague and are proved wrong - Adjudicating Authority is directed to grant the refund of disputed cenvat credit in cash along with interest as per Transitory Provisions under CGST Act - Appeal allowed - decided in favor of appellant.

  ---

• 2020 (9) TMI 301
  Transfer of CENVAT Credit - closure of Delhi unit merger with its Baddi unit - Rule 10 of CCR - HELD THAT:- Admittedly appellant have maintained proper record of their transactions including taking of cenvat credit on the eligible inputs. Appellant have claimed transfer/ shifting of their Delhi unit to their Baddi unit. But from the finding of the Court below, it is found that no finding have been recorded with respect to the claim of shifting of Delhi unit to Baddi unit and its consequent merger with the Baddi unit. Shifting of a factory to another site is the primary condition under Rule 10(1) alongwith liabilities of the Delhi unit, if any, and Rule 10(3) provides for additional condition that such transfer/ unit or factory should include transfer of stock of input as such or in process, or the capital goods to the new site and such transferred goods are duly accounted for to the satisfaction of the Central Excise Authority. Thus, prima-facie with respect to claim of the appellant or request for transfer of cenvat credit from Delhi unit to Baddi unit requires that a finding to be recorded by the Central Excise Authority having jurisdiction over the Baddi unit to record the finding of transfer / shifting of Delhi unit to Baddi and to record a further finding in regard to transfer of inputs or capital goods etc. and proper accountal of the same. For such purpose, the Adjudicating Authority of the Baddi unit can call for proper report from the jurisdictional Central Excise Authority of the Delhi unit - If the conditions are satisfied, the appellant is entitled to the transfer of cenvat credit to their Baddi unit. Matter remanded to the adjudicating authority to pass a denovo order recording finding on the two aspects and thereafter pass consequential order - appeal allowed by way of remand.

  ---

• 2020 (9) TMI 300
  CENVAT Credit - Iron Steel, G.I. Flat, MS Beam, MS channel, Flats, Joist, old and used plates, New MS Plates, PPGI profiles sheets etc. used in erection of EOT crane (during the gestation period) for the new factory - steel structures, nut and bolt, electrical items, 122 KV, Gantry column, 132 KV Isolator, earthing wire, etc. utilised in fabrication of the power house station - rejection of cenvat credit on the ground that these items are falling under chapter heading 72 and 73, and thus not specified under Rule 2A(a) of Cenvat Credit rules. HELD THAT:- It is admitted fact that the items have been utilised in the factory of production for erection of new machinery, of EOT crane, utilised in fabrication of the power house station, which are capital goods and are essential for setting up of the factory which manufactures dutiable goods - Although, the appellant has taken credit on these items as capital goods, but actually these are inputs which have been utilised in fabrication of capital goods, including the support structures for erection of machinery. This issue has been settled in favour of the appellant-assessee by the decision of Madras High Court in the case of M/S. INDIA CEMENTS LTD. VERSUS THE CUSTOM, EXCISE AND SERVICE TAX THE COMMISSIONER OF CENTRAL EXCISE, [ 2015 (3) TMI 661 - MADRAS HIGH COURT] and also by the Hon ble Gujarat High Court in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS [ 2015 (5) TMI 663 - GUJARAT HIGH COURT] wherein it has been held that inputs and input service used in the fabrication of capital goods are eligible inputs for the purpose of cenvat credit - The appellant is held entitled for the cenvat credit. Refund claim - case of appellant is that they have debited the cenvat credit under dispute under protest, at the time of investigation and the said fact is also witnessed in the order-in-original, that credit was reversed amounting to Rs. 71,94,972/- - HELD THAT:- The respondent Department is directed to refund the amount of cenvat credit under dispute in cash, in terms of Section 142(5) of CGST Act, 2007. Appeal allowed - decided in favor of appellant.

  ---

• CST, VAT & Sales Tax

• 2020 (9) TMI 299
  Input Tax Credit - restriction of the amount of Input Tax Credit claimed in Form W for the months of December 2013 to May 2014 - Prior sufferance of Taxes - ITC on reversal on wastage - Ineligible claim of ITC on goods. Restriction of the amount for prior sufferance of taxes - HELD THAT:- This issue has been dealt with in the case of Assistant Commissioner (CT), presently ASSISTANT COMMISSIONER (CT) , PRESENTLY THIRUVERKADU ASSESSMENT CIRCLE, KOLATHUR, CHENNAI VERSUS INFINITI WHOLESALE LTD. [ 2016 (9) TMI 1431 - MADRAS HIGH COURT ] , wherein it has held that Input Tax Credit cannot be disallowed on the ground that the seller has not paid tax to the Government, when the purchaser is able to prove that the seller has collected tax and issued invoices to the purchaser. As such, restriction of the amount of Input Tax Credit on this ground, cannot be sustained and requires re-consideration. Restriction of Input Tax Credit claim wastages - HELD THAT:- This Court in the case of M/S. SHRI RANGANATHAR VALVES PRIVATE LIMITED VERSUS THE ASSISTANT COMMISSIONER (CT) [ 2016 (12) TMI 510 - MADRAS HIGH COURT ] has held that To ascertain as to whether there are quantum of loss of goods, which were purchased, on which, tax was paid, the Assessing Officer has to conduct an exercise, by which, he has to ascertain as to what would be the loss and uniform or ad hoc percentage cannot be adopted. To do so, it would be necessary for the Assessing Officer to conduct an inspection of the place of business of the petitioner to acquaint himself with the manufacturing process. However, since the respondent has adopted a uniform percentage, the same calls for interference - Thus, it is open to the Assessing Officer to issue a show cause notice to the petitioner calling for his objections with regard to Input Tax Credit on reversal on wastage and Ineligible claim of ITC on goods are concerned. The issue with regard to restriction of the amount of Input Tax Credit for prior sufferance of taxes is remanded back to the Assessing Officer for fresh consideration - Petition disposed off.

  ---

• 2020 (9) TMI 298
  Recovery of tax alongwith Interest - allegation that the defendant has failed in paying the tax collected from the plaintiff and so also, the defendant has not filed VAT- 100 Returns - cause of action for the plaintiff to file the suit, present or not. Whether the Trial Court has committed an error in dismissing the suit in coming to the conclusion that there is no cause of action for the plaintiff to sue the defendant? - HELD THAT:- The Trial Court has not committed any error in coming to the conclusion that mere demand made by the Department against the plaintiff cannot raise any cause of action to institute the suit against the defendant. It is also pertinent to note that in Exs.P1 and P3, the Department while passing the order made an observation that the purchase made by the assessee- Company paid the tax, but such of those purchase transactions are bogus and not genuine business transactions. The same goes against the assessee- Company and further observed that the details of input tax availed by the assessee-Company is incorrect and when such an observation has been made and when the assessee-Company has not placed any semblance of material before this Court for having again paid the tax which has not been paid by the defendant, no cause of action arises for the plaintiff to recover the same from the defendant. This Court has already observed that in terms of Exs.P2 and P4, there was a demand and having paid the tax again in terms of Exs.P2 and P4 insofar as non-payment of the tax by the defendant, if any payment is made, then automatically, the plaintiff would get the cause of action to institute the suit against the defendant and no such material is placed for having paid the amount in terms of demand made as per Exs.P2 and P4. When such being the case, there are no error committed by the Trial Judge in appreciating the material available on record. The appeal is dismissed.

  ---

• Indian Laws

• 2020 (9) TMI 297
  Dishonor of Cheque - the accused neither responded to the notice nor paid the demanded cheque amount - offence punishable under Section 138 of the Negotiable Instruments Act, 1881 - whether the Judgment of conviction and Order on sentence passed by the Trial Court and confirmed by the Session Judge s Court is incorrect and suffers with any illegality or perversity, warranting interference at the hands of this Court? HELD THAT:- Section 138 of the N.I. Act mandates giving of a legal notice but it does not mandate that the said legal notice must be actually and physically placed in the hands of the accused. When a legal notice has been sent with the correct, complete and full address of the accused with appropriate postage and when the said notice was tendered to the accused, if the accused fails to accept the notice and thus fails to claim the notice sent to him under registered post, there is deemed service of notice upon him. In addition to the same, in the case on hand, the complainant has also sent notice through certificate of posting as could be seen at Ex.P5. Therefore there is valid service of legal notice upon the accused. Thus, the last phase of argument canvassed by the learned amicus curiae for the petitioner alleging non service of notice upon the accused is also not acceptable. The impugned Judgment of conviction and Order on sentence does not warrant any interference at the hands of this Court - Revision Petition dismissed.

  ---

• 2020 (9) TMI 296
  Direction to deposit 20% of the cheque amount in terms of Sec. 143-A of the Negotiable Instruments Act - offences punishable u/s 138 of the N.I. Act - discharge of legally enforceable debt due from the accused to the complainant - HELD THAT:- While it is true that there is no compulsion for the accused to plead/prove his defence or rebut the aforesaid presumption at the present stage of the proceedings, in the face of the aforesaid material on record and in the absence of any material to indicate the defence of the accused or that he has rebutted the presumption arising under Section 139 of the N.I Act, in the facts of the case on hand, it can not be said that the trial court exercised its discretion erroneously or improperly by passing the impugned order warranting interference by this Court under Section 482 Cr.P.C. The contention of the petitioner that in the absence of an application filed under Section 143-A of the N.I Act by the complainant, it was not open for the trial court to invoke the said provision is misconceived and untenable. A plain reading of the said provision coupled with the very object/intendment of the legislature in introducing the said provision by way of amendment is sufficient to indicate that the trial court was fully justified in invoking the said provision and passing the impugned discretionary order even without there being an application made in that regard by the complainant. As such, even this contention urged on behalf of the accused deserves to be rejected. The petitioner-accused is granted a further period of 60 days from this day to deposit 20% of the cheque amount before the trial Court - It is directed that upon such deposit being made, the trial Court shall invest the same in fixed deposit in any nationalized bank immediately till disposal of the case in the trial Court. Petition dismissed.

  ---