Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 12, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Violation of the principles of natural justice - Validity of GST assessment order - it is the case of increase in GST from 12% to 18% for works contract executed for the government department and local bodies. Even though the petitioner is liable to pay GST, but ultimately it is the Government and the Local Bodies has to pay the GST and the petitioner is entitled to pay and recover from the government. Hence, the ultimate sufferer is the Government. - Matter restored back - HC
Income Tax
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Validity of order u/s 92CA(3) making upward adjustment - Reference to dispute resolution panel u/s 144C - 'the failure to pass a draft assessment order under Section 144C(1) of the Act would result in rendering the final assessment as one without jurisdiction. - HC
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Revision u/s 263 - Since the return filed by the assessee was selected for limited scrutiny, inter-alia, regarding deduction against income from other sources, the AO was required to examine not only the details and proof of payment of such expenditure but also its nexus with the interest income chargeable under the head “income from other sources” as per section 57. - AO failed to examine this aspect - Revision order sustained - AT
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Conversion of ‘limited scrutiny’ into ‘complete scrutiny’ - to cover the aspect of remuneration to partners - As the ld. CCIT did not make out any case of converting ‘limited scrutiny’ into ‘complete scrutiny’ as a ground for revision, we are afraid that the contention of the ld. DR on this score cannot be entertained. - AT
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Exemption u/s. 10(23C)(iiiab) - As per the CBDT circualr, the benefit of Sections 11/12 of the Act would be available to an assessee for a period prior to the year of registration despite the fact that no application for registration for the said period had been filed. - However, the said circualr is not applicable in respect of exemption u/s 10(23C)(iiiab) - AT
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Penalty u/s. 271E - violation of the provisions of Section 269T - Repayment of monthly instalment in cash to Tata Finance Corporation - as the assessee had not only failed to comply with the provisions of section 269T of the Act, which therein had rendered her liable for imposition of penalty u/s. 271E but had also failed to come forth with any reasonable cause which had prevented her from making repayment of the monthly installments of her outstanding loans in a manner prescribed under the law - Penalty confirmed - AT
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Deduction u/s 54B - reinvestment of the sale proceeds of the agricultural land - The fact that the agricultural lands were situated within the 8 kilometres from the Municipal Corporation of Pune remain uncontroverted. In the circumstances, the order of the NFAC cannot be sustained in the eyes of law. Thus, the respondent-assessee had failed to discharge the onus of proving that the lands sold were agricultural lands. - Additions made by AO restored - AT
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Additions towards Credit card expenditure - when the income of the assessee has been taxed, he has the source of such expenditure available and therefore, making the addition of the above sum once again, is taxing sources and application of income both, and also amounts to double addition in the hands of the assessee. - Additions deleted - AT
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Rectification of mistake - Levy penalty u/s 271AAC or u/s 270 - No proceedings are pending before the CIT(A) - CIT (A) was not right in passing order of rectification by directing to initiate the penalty proceedings u/s 270A in place of penalty proceedings u/s 271AAC when admittedly vide her initial order dated 28.02.2022 has categorically held that addition made on account of alleged unaccounted sale u/s 68 is totally unjustified and consequently not covered u/s 115BBE of the Act and there was no income chargeable to tax under section 115BBE. - AT
Customs
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Refund of the excess duty paid - Change in value - revised invoice generated - There are no evidences produced till date with regard to the revised transactions as to how the differential amounts reflect in the books of accounts of the supplier as well as the appellant. In view of the above, the question of considering change in value as mere amendment as per Section 14 read with Section 149 is ruled out. Therefore, the Commissioner (A) was right in rejecting these changes and in disallowing reassessment of the imported goods. - Refund was rightly rejected - AT
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Revocation of CB license - first time export goods -The appellants CB in this case cannot be held responsible in cases where they have verified the identity of the exporter through prescribed records. Further, in the present case the appellants have also obtained the first time export verification of the exporters conducted by the appropriate customs authorities and a specific approval has been given by the Competent Authority and the same has been communicated by the Deputy Commissioner of Customs, DC - Decided in favor of Customs Broker with imposing penalty of Rs. 50,000 - AT
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Import of goods - failure to comply with the statutory requirement under Legal Metrology (Packaged Commodities) Rules, 2011 - Once the appellant had expressed their willingness to comply with the rules before clearance of the goods by affixing declaration on the packets that ‘not for retail sale’, the Lower Authority ought to have extended an opportunity for affixing the same before its release for home consumption. - AT
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Classification of imported goods - In case of heading 2106, the government has chosen to deviate from the prescription of the HSN by introducing Supplementary Notes to Chapter 21 which specifically classify the impugned products under ‘Heading 2106’. In these circumstances the HSN notes to the Chapter heading, and amendments made therein, which are in conflict with the supplementary notes to the Chapter, are to be ignored. - AT
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Benefit of concessional rate of duty - the appellant has not manufactured Switches in their Coimbatore unit, but, only parts of Switches / sub-assemblies / components which were entirely cleared to their unit at Una, Himachal Pradesh on payment of applicable Central Excise duties - There are no merit in the appellant’s contentions that they have complied with the conditions of the Notification read with the Customs Rules, 1996 - AT
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Service of SCN - Smuggling - Gold - foreign origin goods or not - The whole proceedings are vitiated as the SCN has not been issued and served within six months as required under Sec 124(a) read with Sec 110(2) of the Act. - AT
Indian Laws
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Dishonour of Cheque - quantum of fine - the courts can impose double the cheque amount as fine or lesser sum, by adding interest thereof, or to compensate the complainant otherwise, by quantifying the amount, but on any contingency the fine amount shall not exceed twice the cheque amount - HC
IBC
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E-auction of assets corporate debtors - who can participate - Scope of the term related party / relative - The expressions ‘related party’ and ‘relative’ contained in the definition sections must be read noscitur a sociis with the categories of person mentioned in Explanation I. So read, it would include only persons who are connected with the business activity of the resolution applicant. - it is clearly manifest that the disqualification sought to be attached to the appellant is without any substance as the related party had ceased to be in the helm of affairs of the corporate debtor more than a decade ago. - SC
Service Tax
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Effective date of a Circular issued by the CBEC - It is not possible to accept the contention advanced on behalf of the department that the circular dated 23.08.2007 is retrospective in nature. The said Circular supersedes all the past Circulars, clarifications and communications on all technical issues. - the Circular dated 23.08.2007 is oppressive in nature and it is a settled principal of law that an oppressive Circular should be given only prospective effect. - AT
Case Laws:
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GST
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2023 (9) TMI 439
Violation of the principles of natural justice - direction to re-do the assessment after considering the reply - seeking sufficient opportunity for personal hearing to the petitioner - HELD THAT:- On perusing the impugned order, it is seen that the respondent has recorded that the dealer did not file any reply so far. The said fact is incorrect. The petitioner has submitted a reply on 24.07.2023. However, the learned Government Advocate appearing for the respondent submitted that the petitioner was granted three personal hearings and the petitioner did not appear and has not submitted any reply on the said three days. Even though the petitioner has not appeared for the said three personal hearings, subsequently, he has filed a reply on 24.07.2023, before passing the impugned order dated 25.07.2023 and the respondents are bound to consider the reply. Therefore, the assessment order is passed violating the principles of natural justice. Moreover, it is the case of increase in GST from 12% to 18% for works contract executed for the government department and local bodies. Even though the petitioner is liable to pay GST, but ultimately it is the Government and the Local Bodies has to pay the GST and the petitioner is entitled to pay and recover from the government. Hence, the ultimate sufferer is the Government. The respondents are directed to grant one more personal hearing to the petitioner and the petitioner shall cooperate with the enquiry. Thereafter, the respondent shall pass a speaking order - the impugned order ought to be quashed - Petition allowed.
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Income Tax
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2023 (9) TMI 438
Validity of order u/s 92CA(3) making upward adjustment - Reference to dispute resolution panel u/s 144C - failure to pass a draft assessment order u/s 144C(1) - HELD THAT:- AO shall, in the first instance, forward a draft of the proposed order of assessment to the eligible assessee if he proposes to make any variation is prejudicial to the interest of such assessee. Certainly there is a variation in the assessment order different from what was filed in the return of income and since it is by way of an addition made, the variation is prejudicial to the interest of Petitioner. In Andrew Telecommunications Private Limited [ 2018 (8) TMI 575 - BOMBAY HIGH COURT ] also the facts were identical. The Court relying on the judgments in the case of International Air Transport Association [ 2016 (2) TMI 897 - BOMBAY HIGH COURT ] has held that 'the failure to pass a draft assessment order under Section 144C(1) of the Act would result in rendering the final assessment as one without jurisdiction. Decided in favour of assessee.
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2023 (9) TMI 437
Reopening of assessment u/s 147 - Notice issued after the expiry of four years - gain on sale of land - treating the land in question as stock in trade or capital asset - Petitioner had misrepresented the facts by treating the land as stock in trade in her books of accounts instead of treating it as a capital asset within the meaning of Section 2(47) - HELD THAT:- As during the assessment proceedings a query had been raised by the AO and Petitioner had submitted copy of agreement relating to joint development at Chikhloli vide its Chartered Account s letter dated 17th March 2016. By a further undated letter, Petitioner, after referring to the ongoing scrutiny assessment proceedings and referring to the query that was raised during the assessment proceedings as to why the Development Agreement entered into by Petitioner with Sai Ashray should not be treated as transfer of land and taxed accordingly, explained in detail as to why there was no transfer of land . Thus the issue as to whether there was a transfer of land or otherwise was the subject of consideration before the AO during the assessment proceedings. As seen in Aroni Commercials Ltd. 2014 (2) TMI 659 - BOMBAY HIGH COURT] once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was the subject of consideration of the AO while computing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. This would also indicate that there was no failure to disclose any material fact. On that ground alone the notice issued under Section 148 of the Act has to be quashed and set side.
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2023 (9) TMI 436
Revision u/s 263 - nexus between the interest income and interest expenditure was not established by the assessee while claiming benefit of section 57 of the Act - HELD THAT:- As u/s 57(iii) of the Act, any expenditure which is not in the nature of capital expenditure and has been expended wholly and exclusively for the purpose of earning income chargeable under the head income from other sources is allowable as a deduction. In the present case, there is no dispute regarding the nature of the expenditure and the only claim of the learned PCIT is that the nexus between the interest expenditure and interest income is not examined by the AO during the assessment proceedings. We find that in response to the notice issued under section 263 of the Act, the assessee made a claim that all the borrowed funds have been invested mostly in the land and in repaying the previous loans from various persons, therefore the interest payment has been made to earn interest income only and it is directly related to each other. In support of the aforesaid submission, the assessee furnished various charts, forming part of the paper book to show the nexus between the interest income and interest expenditure claimed under section 57 of the Act. As evident from the record that neither the aforesaid submission/the details regarding the nexus of the interest expenditure with interest income was sought by the AO during the assessment proceedings nor the same was furnished by the assessee. As noted above during the assessment proceedings, the AO only sought the details of expenditure claimed u/s 57, ledgers of all such expenditures, and supporting documents/proof of payment made. Thus, there was no examination of the nexus between interest income and interest expenditure. As noted above under section 57(iii) of the Act the expenditure claimed as a deduction, while charging the income under the head income from other sources , should be expended wholly and exclusively for the purpose of making or earning such income. Since the return filed by the assessee was selected for limited scrutiny, inter-alia, regarding deduction against income from other sources, the AO was required to examine not only the details and proof of payment of such expenditure but also its nexus with the interest income chargeable under the head income from other sources as per section 57. Since there is no material available on record to show that this aspect was examined during the assessment proceedings, we find no infirmity in the revision order passed by the learned PCIT under section 263 of the Act, whereby the assessment order passed under section 143(3) of the Act was set aside and the AO was directed to reframe the assessment after examining the allowability of interest expenses as per section 57 of the Act. Accordingly, the impugned order passed u/s 263 of the Act is upheld and the grounds raised by the assessee are dismissed.
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2023 (9) TMI 435
Income under the head Capital gains by considering the cost of acquisition of debentures - HELD THAT:- It is during the year under consideration, namely, financial year ending 31-03-2016, that the assessee sold the debentures and reduced the amount of investments shown in the balance sheet at Rs. 56.00 crore from the full amount of consideration for computing the amount of long term capital gain. It is ostensible that the assessee never claimed deduction towards interest of Rs. 6.00 crore in the past, but capitalized it to the value of investment initially acquired at Rs. 50.00 crore. Naturally, when the debentures were sold in the year under consideration, the amount of interest capitalized along with the purchase cost, was also liable to be deducted from the full value of consideration for computing the amount of long term capital gain. It is this principle of law which was followed by the AO in the computation of capital gain. In fact, the interest cost was capitalized in an earlier year and represented a part of the opening balance of debentures for the year under consideration. Ergo, the opinion canvassed by the ld. CCIT that the interest of Rs. 6.00 crore could not have been added to the cost of debentures, in our considered opinion, is not tenable. We, therefore, set-aside the impugned order on this score. Deduction towards remuneration to partners with reference to Long term capital gain offered on sale of debentures, which was not allowable in terms of section 40(b)(v) of the Act - assessee was selected for Limited scrutiny (CASS) and the reason assigned for such scrutiny, as u/s. 143(2) by the AO, is: Whether capital gains/loss is genuine and has been correctly shown in the return of income - As entire focus has been on the grant of deduction towards remuneration to partners at Rs. 22.50 crore, which, in his opinion, was not deductible in view of income under the head Profits and gains of business or profession being Nil. Reasons for Limited scrutiny (CASS) - case of converting limited scrutiny into complete scrutiny - DR argued that the AO ought to have converted limited scrutiny into complete scrutiny to cover the aspect of remuneration to partners and this act of non-conversion per se made the assessment order erroneous and prejudicial to the interest of the Revenue - The scope of arguments by the DR is restricted to the issues decided in the impugned order. He cannot travel beyond such issues and step into the shoes of the authority(ies) which passed the order(s). Coming to the revision, the DR cannot characterize the assessment order to be erroneous and prejudicial to the interest of the Revenue on a new count other than those taken note of in the revisionary order. Such an attempt, if allowed, would clothe the DR with the power of revision, which obviously, is not feasible. As the ld. CCIT did not make out any case of converting limited scrutiny into complete scrutiny as a ground for revision, we are afraid that the contention of the ld. DR on this score cannot be entertained. It is, therefore, held that the ld. CCIT was not justified in branding the assessment order erroneous and prejudicial to the interest of the Revenue on this ground as well.
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2023 (9) TMI 434
Exemption u/s. 10(23C)(iiiab) - Claim of exemption with retrospective effect - Applicability of CBDT circular issued by CBDT for the purpose of exemption u/s 11 - assessee society was not in receipt of any government grants during the year under consideration - triggering the 2nd proviso to Section 12A - AR submitted that the assessee society had before the framing of assessment in its case for the year under consideration, applied for registration u/s. 12AA of the Act in Form 10A on 31.10.2018 - CIT-DR submitted that the 2nd proviso to Section 12A(2) of the Act could not be pressed into service by the assessee society in the course of hearing of the present appeal wherein the issue involved was confined to declining of its claim of exemption u/s. 10(23C)(iiiab) - HELD THAT:- Admittedly, the 2nd proviso to sub-section (2) of Section 12A of the Act contemplates that where registration had been granted to the trust or institution u/s.12AA of the Act, then the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the A.O as on the date of such registration, though subject to the condition that the objects and activities of such trust or institution remain the same for such preceding assessment year. CBDT Circular No.01/2015 dated 21.05.2015 (applicable w.e.f. 01.10.2014) in order to remove hardships to charitable organizations due to non-application for registration for the period prior to the year of registration had come to the rescue of such assessee s for the years preceding the year of registration. As per the aforesaid CBDT Circular No.01/2015 (supra), the benefit of Sections 11/12 of the Act would be available to an assessee for a period prior to the year of registration despite the fact that no application for registration for the said period had been filed. The only rider/pre-condition that is required to be satisfied for bringing a case within the realm of the CBDT Circular No.01/2015 (supra) is that the assessment proceedings for the said preceding assessment year is pending before the A.O on the date of registration u/s. 12AA of the Act. Claim of the Ld. AR that the A.O be directed as per the provisions of sub section (2) to Section 12A of the Act to allow exemption u/s. 11 12 of the Act and exclude the income of the assessee society from the scope of its total taxable income for the year under consideration does not merit acceptance. In our considered view, the Ld. AR has on the basis of premature observations misconceived and wrongly construed the concession contemplated in the 1st proviso to Section 12A(2) of the Act, and sought a direction to the said effect in the present appeal which challenges the declining of its claim of exemption u/s. 10(23C)(iiiab) of the Act. Although the claim raised on the basis of additional ground of appeal by the assessee society for relief/concession contemplated in the 2nd proviso to Section 12A(2) of the Act does not emanate from the orders of the lower authorities, but as the same involves purely a question of law based on the facts available on record, therefore, the same is admitted. As the assessee society had been granted registration u/s. 12AA of the Act by the CIT(Exemption), Bhopal vide his order dated 14.07.2023, on which date its assessment for the year under consideration, i.e. A.Y.2016-17 was not pending before the A.O, as the same had culminated vide an order passed by him u/s. 143(3) of the Act, dated 12.12.2018, therefore the sine-qua-non for triggering the 2nd proviso to Section 12A of the Act, i.e. assessment proceedings are pending before the Assessing Officer as on the date of such registration is not found to be satisfied. Accordingly, in absence of satisfaction of the pre-condition contemplated in the 2nd proviso to Section 12A(2) of the Act and CBDT Circular No.01/2015, the assessee society is not found to be entitled to avail the concession/relief therein provided. As the assessee in the aforesaid case, had assailed the declining of the benefits under Sections 11/12 of the Act before the Tribunal, therefore, the facts therein involved are distinguishable as against those of the present assessee trust, wherein the declining of its claim for exemption u/s 10(23C)(iiiab) has been assailed before us. Apropos the claim of the AR that the AO/CIT(Exemption) remained under a statutory obligation to have guided the assessee society, which admittedly not being wholly and substantially financed by the government, was disentitled from raising a claim for exemption u/s. 10(23C)(iiiab) of the Act, to have applied for registration and raised a claim of exemption u/s. 10(23C)(vi) we are of the considered view that as the said issue does not emanate from the orders of the lower authorities, therefore, we refrain from dealing with the same. Thus, the additional ground of appeal raised by the assessee society being devoid and bereft of any merit is dismissed in terms of our observations above.
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2023 (9) TMI 433
Cash deposited as unexplained cash - DR submitted that the cash received was not mentioned in the books - HELD THAT:- It is pertinent to note that no books were rejected in assessee s case and in fact the cash books as well as cash deposited during the demonetisation period was on the basis of heavy cash sales during those days. The contention of the Ld. AR that due to heavy cash sales on those days, it was not practicable for the Accountant to enter the cash entries immediately in the books of accounts. The cash received from the debtors were deposited in the bank account on the same date, but the entries for the same were made on combined basis. This has led to negative cash balance in the books of accounts for 2-3 days but the assessee had sufficient cash balance to deposit cash of Rs. 6,56,000/- on 16.11.2019 as cash sales on that day itself was of Rs. 7,16,325/- and, therefore, the difference was explained to the AO as well as the CIT(A) which was totally ignored by both the Authorities. Thus, the addition made by the AO u/s 69A of the Act does not survive. Hence, appeal of the assessee is allowed.
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2023 (9) TMI 432
Penalty u/s. 271E - violation of the provisions of Section 269T- Repayment of monthly instalment in cash to Tata Finance Corporation - HELD THAT:- We are of the considered view that even if the financers, on account of the poor track record of the assessee, were not ready and willing to receive the monthly installments towards repayment of loans from her through cheques, then she could have safely made the said repayments by way of account payee bank drafts or electronic clearing system through her bank account or any other prescribed electronic mode as provided in Rule 6ABBA of the I.T. Rules, 1962. We are unable to persuade ourselves to subscribe to the explanation of the assessee that as the financers were not ready to receive the repayment of loans from her vide account payee cheques, therefore, for the said reason, she was compelled to make the said payments in cash. We do not find any substance in the assessee's claim that she was unaware of the provisions of section 269T of the Act. It is a matter of fact borne from the record that the assessee was availing the services of a Chartered Accountant and had got her accounts for the year under consideration audited from him. Assessee cannot be allowed to plead ignorance of the law, we are even otherwise of the considered view that there is no substance and merit in the claim of the assessee that she was oblivion of the modes and manner for repayment of loans as prescribed u/s 269T. Apropos the support drawn by the assessee from the fact that a similar penalty that was imposed in the case of her nephew, viz Shri Ajay Gill, had been vacated by the CIT(A), NFAC, we are of a firm conviction that as the facts involved in every case stand on their independent footing, therefore, her claim above would be of no assistance. We are of the considered view that as the assessee had not only failed to comply with the provisions of section 269T of the Act, which therein had rendered her liable for imposition of penalty u/s. 271E but had also failed to come forth with any reasonable cause which had prevented her from making repayment of the monthly installments of her outstanding loans in a manner prescribed under the law, therefore, finding no infirmity in the imposition of penalty u/s 271E by the JCIT, we uphold the same. - Decided against assessee.
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2023 (9) TMI 431
Deduction u/s 54B - reinvestment of the sale proceeds of the agricultural land and capital gain deposits scheme - NFAC extracted the contention of the assessee and accepted it allowing claim of deduction - requirement of passing a reasoned order by an authority whether administrative, quasi judicial or judicial - AO used Google Satellite Images of the land, concluded that the land was not used for agricultural purposes for last preceding 2 years, accordingly, denied the claim for deduction - HELD THAT:- The order passed by the NFAC does not meet the requirements of being a reasoned order as enunciated by the Hon ble Supreme Court in PANKAJ GARG VERSUS MEENU GARG ANR. [ 2013 (2) TMI 924 - SUPREME COURT] and cannot be sustained in the eyes of law. NFAC had not met the reasoning of the AO and there is no material brought before the NFAC or before us controverting the findings of the AO that the respondent-assessee had filed fabricated/forged documents of 7/12 extracts. There is material on record in the form of the statement on oath of Talhati that no agricultural operation was carried on. The finding of the Assessing Officer that the land was purchased by the respondent-assessee not with the intention of carrying out any agricultural activities, but with the intention of development of properties remains uncontroverted. There is no cogent material brought on record in support of retracting the statement of the respondent-assessee withdrawing the claim for deduction u/s 54B during the course of assessment proceedings. The fact that the agricultural lands were situated within the 8 kilometres from the Municipal Corporation of Pune remain uncontroverted. In the circumstances, the order of the NFAC cannot be sustained in the eyes of law. Thus, the respondent-assessee had failed to discharge the onus of proving that the lands sold were agricultural lands. Therefore, the order of the NFAC is reversed and the addition made by the AO is restored. Thus, the grounds of appeal filed by the Revenue stand allowed.
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2023 (9) TMI 430
Disallowance u/s. 14A r.w. Rule 8D - DR submitted that the disallowance made by the AO is correct and he has recorded satisfaction that the assessee has incurred interest/indirect expenditure, therefore it cannot be said that the loan funds have not been utilized by the assessee - scope of amendment made to section 14A - HELD THAT:- The assessee has incurred interest expenditure and made investments towards earning exempt income. The assessee itself disallowed a sum suomoto as expenses attributable to investments which has yielded exempt income during the year. The investments were made long back to the firm, M/s. Laxmi Estate and investment were made in other companies. We note from the submissions made before the CIT(Appeals) as well as AO that the assessee has not utilized borrowed funds during the impugned assessment year. Assessee has not incurred any expenditure in order to earn exempt income. Admittedly, there is no nexus between the investment in the firm of M/s Lakshmi Estates and the borrowed funds. The AO in the order of the earlier years has also given a categorical finding that the investment in M/s Lakshmi Estates has been made out of assessee's own interest free funds. Therefore, the interest paid on borrowed funds is not attributable to the investment the firm. We do not find any infirmity in the order of the CIT(Appeals), he has passed a good and reasoned order. Also in assessee s own case for AY 2013-14 [ 2020 (2) TMI 1703 - ITAT BENGALURU ] similar issue has been decided in favour of the assessee - We note that the amendment made to section 14A by Finance Act, 2022 has prospective effect which is settled in the case of PCIT v. Era Infrastructure (India) Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT ] Therefore we dismiss the appeal of the revenue.
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2023 (9) TMI 429
Unexplained investment - CIT(A) deleted addition treating the MOU in question as dumb document - as submitted by assessee documents of MOU is seized from the third party, is unsigned MOU/partnership deed - HELD THAT:- The Hon ble Delhi High Court in CIT Vs Gian Chand Gupta [ 2014 (5) TMI 443 - DELHI HIGH COURT] held that no addition can be made on account of unexplained investment if MOU for purchase of land as well as receipt was given by seller found during the survey was unsigned documents and the transaction was not materialised. Thus in view of the above discussions, we do not find any infirmity in the order passed by ld CIT(A). In the result, ground of No. 1 of appeal is dismissed. Addition u/s 69C - unexplained cash payment - addition based on loose paper/document from Param Properties wherein some word M.C. was recorded - AO considered such document as a cash book for keeping the record of unaccounted cash transaction by Param Properties which was used by them for making various bookings in each project - HELD THAT:- On the observation of AO with regard to back up of I-Phone of Shri Agam V. Vadecha, the ld. CIT(A) held that storing the assessee s phone number and other persons mobile number cannot be the basis for making addition, particularly even after taking backup of I-Phone, no communication was found which remotely indicate that the assessee has undertaken such transaction recorded in the seized material. AO s finding in treating the abbreviation M.C. pertaining to the assessee is not justified and deleted the entire addition. We also find that the AO has not made any independent investigation nor brought any adverse material on record to connect with the assessee with the seized material. Once, the person whose possession, such document, on the basis of which the Assessing Officer has drawn his belief has not taken the name of assessee while explaining M.C. as Mahendra C. Mehta rather explained it Manojbhai, the Assessing Officer was not justified in drawing conclusion that MC means Mahendra C. Mehta. In view of the aforesaid factual discussion, we do not find any justification for making addition. Therefore, we affirm the order of ld. CIT(A) in deleting the addition - In the result ground No. 2 of the appeal raised by the revenue is dismissed. Reliance on loose papers and documents found from third party - The Hon ble Supreme Court in Common Cause Vs Union of India ( 2017 (1) TMI 1164 - SUPREME COURT ) held that the loose sheets of papers are wholly irrelevant as evidence not being admissible under section 34 of Evidence Act, so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. It was also held that there should be some relevant and admissible evidence and some cogent reason, which is prima facia reliable that too, supported by some other circumstances pointing out that particular third person against, whom the allegation has been levelled was in fact involved in the matter or has done some act during that period, which may have correlation with random entries. As decided in ANIL KHANDELWAL [ 2015 (5) TMI 86 - DELHI HIGH COURT] in absence of any corroborative evidence found during course of search at the premises of assessee, no adverse inference can be drawn against the assessee merely on the basis of seized material from the premises of third party. And that the revenue was not justified in resting its case just on loose papers and documents found from third party if such documents contained narration of transaction with assessee. Appeal of revenue is dismissed.
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2023 (9) TMI 428
Assessee seeking recall of the order passed by this Tribunal - matter was posted for hearing on 15.02.2023, but it is submitted that on 13.01.2023, the ld. AR had wrongly noted the next date of hearing as 15.03.2023 - the assessee could not cause the appearance before this Tribunal and as submitted that the appellant could not appear for the reasons beyond his control HELD THAT:- As Sr. DR has no objection for recalling the matter. In the circumstances, we are satisfied that the petitioner is prevented by sufficient and reasonable cause from causing the appearance before the Tribunal. Therefore, the order passed by this Tribunal [ 2023 (3) TMI 45 - ITAT PUNE] is recalled. Miscellaneous Application filed by the assessee stands allowed.
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2023 (9) TMI 427
Bogus long term capital gains - exemption u/s 10 (38) - adoption of the rate of 3% as commission income of the assessee - assessee as per his own admission has stated that he used to earn commission income at the rate of 2% to 3 % and AO computed the income of the assessee at the rate of 3% on the above sum. Ld CIT (A) confirmed it - HELD THAT:- No infirmity in the order of the lower authorities so far as the adoption of the rate of 3% as commission income of the assessee. Thus, grounds are dismissed. Credit card expenditure - We find that when the income of the assessee has been taxed, he has the source of such expenditure available and therefore, making the addition of the above sum once again, is taxing sources and application of income both, and also amounts to double addition in the hands of the assessee. Accordingly, we direct the learned assessing officer to delete the addition made in the hands of the assessee as unexplained expenditure under section 69C of the Act. Ground of the appeal is allowed.
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2023 (9) TMI 426
Income from house property - notional income u/s 22 - income arising from the stock-in-trade of the Appellant - ALV determination - why the deemed rent on unsold stock of completed units as shown in the balance-sheet should not be taxed under the head Income from house property ? - HELD THAT:- We hold that the assessing officer has correctly charged notional rent on the unsold flats held as stock in Trade. We also notice that case of Inorbit Malls Pvt Ltd [ 2022 (10) TMI 1150 - ITAT MUMBAI] while upholding the decision of the assessing officer to levy notional rent, has given certain riders and directions and one such direction is to hold that the assessing officer is not justified in estimating the income at the rate of 8.5% of investment as ALV and that the AO should ascertain the municipal valuation for computing notional rent. In assessee's case also, we notice that the assessing officer has computed the ALV by applying the rate of 8.5% on the cost of construction i.e. investment. We direct the AO to recompute the notional rent by ascertaining the Municipal rentable value. Appeal of the assessee is dismissed.
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2023 (9) TMI 425
TDS u/s 194H - discount allowed to retailers by the assessee dealer/distributors on sale of prepaid sim cards/mobile recharge cards - whether the lower authorities were justified in making disallowance u/s 40(a)(ia) on account of non-deduction of TDs on such discount given by the assessee to the retailers on sale of sim card/recharge coupons - HELD THAT:- The issue is squarely covered by the recent decision of the Hon ble Bombay High Court in the case of Commissioner of Income Tax (TDS), (Pune) v. Idea Cellular Ltd. [ 2020 (1) TMI 1652 - BOMBAY HIGH COURT] wherein held when the transaction was between two persons on principal-to-principal basis, deduction of tax at source as per section 194H of the Act, would not be made since the payment was not for commission or brokerage. The case of the assessee is on better footing. In the above referred to the decision, Idea Cellular Company owned the sim cards which were further sold to the distributors. However, in the case in hand, the assessee is a distributors/dealer and has sold the sim card on discounted rate to the retailers and the relationship between the assessee and retailers was not of principle agent, rather, the same was principle to principle basis. In view of the above decision of the Bombay High Court in the case of owner company itself, this issue is decided in favour of the assessee. Disallowance made by the lower authorities on this issue is ordered to be deleted. Decided in favour of assessee.
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2023 (9) TMI 424
Rectification of mistake - Levy penalty u/s 271AAC or u/s 270 - addition applying the GP rate of 26.63% on the declared turnover as against the GP rate of 25.38% declared by the assessee - HELD THAT:- CIT (A) has no power to issue direction in case where no proceedings are pending before him and thus in this way pendency of proceedings of proceedings is a sine quo non for passing any order by ld. CIT (A). Therefore, in view of the above legal provision, the action of the ld. CIT (A) for initiation of penalty proceedings under section 270A of the Act is not a rectification of order but a revision of appeal order earlier passed by his predecessor CIT (A) which is not permissible under the provisions of the IT Act. Therefore, the directions given by ld. CIT (A) for initiation of penalty proceedings u/s 270A of the Act and in this regard order passed under section 154 of the Act is palpably wrong, invalid and bad in law and without jurisdiction. There is a difference between rectification of an order and revision of an order. The rectification of any mistake can only be passed in order to put something right. However, revision means, the changing of something in order to correct or improve it. Thus, in our view, any change in the order can only be done by invoking the powers of revision and not by passing order of rectification u/s 154 of the Act. Since in the present case no proceedings are pending before the CIT (A), therefore, the ld. CIT (A) was not right in passing order of rectification by directing to initiate the penalty proceedings under section 270A of the IT Act in place of penalty proceedings u/s 271AAC of the Act when admittedly vide her initial order dated 28.02.2022 has categorically held that addition made on account of alleged unaccounted sale under section 68 is totally unjustified and consequently not covered u/s 115BBE of the Act and there was no income chargeable to tax under section 115BBE. After culmination of proceedings, the ld. CIT (A) was not within jurisdiction to order initiation of penalty proceedings under section 270A of the IT Act by passing rectification order under section 154 of the Act as the said action of CIT (A) is without jurisdiction and out of purview of the provisions of section 154 of the Act. Therefore, the same deserves to be quashed and set aside. Consequently, the appeal filed by the assessee stands allowed.
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2023 (9) TMI 423
Condonation of delay - HELD THAT:- In the present case the report of the AO relied by the DR shows that the physical copy of orders was returned back by the postal authorities and the soft copy was send to the email address which was not provided by the assessee to the Department and the same was also not mentioned as email address for communication in Form No. 35. As per assessee the orders came to his notice on 03.09.2022 and he filed appeals on 14.09.2022. It is a settled law that in matters of condonation of delay, a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities. Application for admission of additional grounds - As these are legal grounds based on the provisions of the Act and prepositions rendered by Hon ble Supreme Court, Hon ble jurisdictional High Court of Delhi and coordinate benches of the Tribunal. Therefore in the totality of the facts and circumstances additional grounds are admitted for hearing. Applications are allowed. Reopening of assessment u/s 147 or 153C - Assessments were completed/unabated on the date of receipt of information from the Investigation Wing on 12.03.2013 and documents/material was found and seized during the course of search and seizure operation therefore the only action to be taken by the AO was available u/s. 153C of the Act and he was not entitled to invoke provisions of section 147/148 to initiate reassessment proceedings on the basis of material found and seized during the course of search and seizure operation on the third person. Therefore, there was no justification for the A.O. to have been initiated proceedings w/s. 147 / 148 of the I.T. Act. The correct course of action would have been to proceed against the assessee under section 153C. Approval u/s. 151(2) - AO initiated reassessment proceedings and issued notice u/s. 148 of the Act by mentioning applicable section as 147(b)which was not in existence in the book of statue at the time of recording reasons and the ld. PCIT also granted approval u/s. 151 on the said proposal of AO. Therefore as safely hold that the authorities below have proceeded to initiate reassessment proceedings and notice u/s. 148 and also granting approval u/s. 151 of the Act, without application of mind and by mentioning in applicable and non-existent provision of the Act. Therefore initiation of reassessment proceedings and all consequent proceedings and orders including impugned reassessment order u/s. 143(3)/147 of the Act is invalid being bad in law and thus I quash the same. Accordingly, additional ground no. 2 of assessee is also allowed.
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Customs
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2023 (9) TMI 422
Refund of the excess duty paid - valuation of software - goods imported by the appellant were not examined at the time of import - revised purchase order and revised invoice generated at a later date by the supplier on the request of the appellant - HELD THAT:- For invoking Section 149, relevant documents should have been in existence at the time of import but in this case, obviously the invoice was revised based on the request of the appellant and the veracity of the genuineness of this invoice could not be verified since the goods were not examined at the time of import nor were available for examination. The Supreme Court in the case of ESCORTS LIMITED VERSUS UNION OF INDIA [ 1994 (2) TMI 74 - SUPREME COURT] observed that it may be noticed that the Act does not prescribe any particular form in which the order of assessment is to be made. In the very nature of things, no formal order of assessment can be expected when there is no dispute as to the classification or the rate of duty, no formal order can be expected in such a case, it is more like `across-the-counter affair. Section 149 amendments cannot be read in isolation making these sections with regard to classification or valuation redundant. Reassessment of any assessment cannot be equated with an amendment under Section 149. The legislature, in the interest of justice, has not laid down any time limit under Section 149, does not take away the fact that any changes in valuation should not be in tandem with the laws laid down for refund or demand or else there will be no end for amendments which will result in utter chaos and de-stabilize the entire gamut of the Customs Act, 1962. In the present case, first of all, no documents existed at the time of assessment and the documents produced for amendment were not available at the time of assessment, these surfaced at much later date. The goods were not examined and the invoice produced by the appellant at the time of import had no factual errors and therefore to change the value of the imported goods based on an amended purchase order and revised invoice will not be a simplicitor amendment envisaged under Section 149. Moreover, the Commissioner (A) has clearly observed that there is no evidence to indicate that this revised purchase order and the revised invoice related to the transaction already completed - There are no evidences produced till date with regard to the revised transactions as to how the differential amounts reflect in the books of accounts of the supplier as well as the appellant. In view of the above, the question of considering change in value as mere amendment as per Section 14 read with Section 149 is ruled out. Therefore, the Commissioner (A) was right in rejecting these changes and in disallowing reassessment of the imported goods. The appeal is rejected.
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2023 (9) TMI 421
Revocation of CB license - forfeiture of security deposit - levy of penalty - allegation is that the appellants have processed the shipping bills without proper antecedent verification of exporters by using any reliable means, even after knowing that the export goods belong to a third person, other than the exporter - HELD THAT:- The Regulations and the Board s circular provide that certain specific features of an importer/ exporter needs to be verified in terms of specified documents mentioned in Annexure to the said Circular dated 08.04.2010, in order to fulfill the obligations by a Customs Broker. In the present case, it is also on record that the export entities being proprietorship firms, the particulars regarding the legal name of the exporter firms and their addresses have been verified by the CB on the basis of specified documents. In this regard, we also refer to the Public Notice No.26/2019 dated 14.10.2019 issued by the Commissioner of Customs (Export), Air Cargo Complex informing the trade that the public notices issued in respect of verification of documents in respect of first time of import of goods is mutatis mutandis applicable to first time export goods also. The appellants CB in this case cannot be held responsible in cases where they have verified the identity of the exporter through prescribed records. Further, in the present case the appellants have also obtained the first time export verification of the exporters conducted by the appropriate customs authorities and a specific approval has been given by the Competent Authority and the same has been communicated by the Deputy Commissioner of Customs, DC, stating that the exporters/Customs Broker is allowed to initiate for the first time import/export through Precious Cargo Customs Clearance Centre having Customs-EDI port code INDPC4. Thus, the conclusion arrived at by the Principal Commissioner in the impugned order to the extent that the appellants have violated in not fulfilling the obligation cast on them under Sub-regulation 10(n) is not legally sustainable. There are no merits in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revoking the license of the appellants and directing them to surrender the original customs broker license as well as ordering for forfeiture of the entire security deposit furnished by the appellants customs broker - the impugned order is justifiable to the limited extent of imposition of penalty of Rs.50,000/- against them - appeal allowed in favour of the appellants.
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2023 (9) TMI 420
Absolute Confiscation of goods - levy of penalty u/s 112 of Customs Act, 1962 - failure to comply with the statutory requirement under Legal Metrology (Packaged Commodities) Rules, 2011 - goods sold to industrial users after doing processing - HELD THAT:- The Adjudication Authority admits that since goods are meant for industrial consumers, it is exempted from the provisions of the ibid Rules. The Adjudication Authority also admits that the clients to whom the goods imported under previous Bill of Entry sold by the appellant are doing manufacturing activity. However in present import, the benefit is denied to appellant on the ground that appellant failed to submit documentary evidence to prove that goods imported under present Bill of Entry is meant for sale to industrial consumers and for that reason they are not eligible for exemption under Rule 3B of the ibid Rules. The above finding is factually unsustainable. The importer had produced sufficient evidence regarding details of the clients to whom the goods are sold after its import earlier and once the Adjudication Authority is satisfied with the activity carried out by the importer, no further evidence can be produced at the time of import regarding the details of customers to whom the goods are being sold after clearance. From the impugned order it is evident that the proper officer at the time of physical examination of the goods has observed that the goods were in pre-packed condition and also does not bear the required labelling to mean that the imported Coated Paperboard Gloss are not for retail sale. Once the appellant had expressed their willingness to comply with the rules before clearance of the goods by affixing declaration on the packets that not for retail sale , the Lower Authority ought to have extended an opportunity for affixing the same before its release for home consumption. The respondent shall allow the appellant to affix not for retail sale labels on each packet and after confirming the same, shall allow clearance of the goods. Regarding the prayer of the appellant for detention certificate, the issue is not considered by the Adjudication/Appellate Authority. The impugned orders are set aside - appeal allowed.
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2023 (9) TMI 419
Classification of imported goods - BSN Syntha 6 Chocolate - BSN Truemass 1200 Chocolate - Isopure Low Carb Chocolate - Isopure Zero Carb Chocolate Mint - Optimum Nutrition 100% Casein-Chocolate Supreme - Optimum Nutrition 100% Whey Gold Standard- Chocolate - Optimum Nutrition 100% Whey Gold Standard- Chocolate Hazelnut - Optimum Nutrition 100% Whey Gold Standard- Chocolate Malt - Optimum Nutrition 100% Whey Gold Standard- Chocolate Mint - Optimum Nutrition 100% Whey Gold Standard- Chocolate Peanut Butter - Optimum Nutrition 100% Whey Gold Standard- Cookies and Cream - Optimum Nutrition 100% Whey Gold Standard- Double Rich Chocolate - Optimum Nutrition 100% Whey Gold Standard Isolate Chocolate - Optimum Nutrition 100% Whey Gold Standard Isolate Chocolate Bliss - Optimum Nutrition 100% Whey Gold Standard- Mocha Cappuccino - Optimum Nutrition 100% Whey Gold Standard- Rocky Road - Optimum Nutrition Serious Mass Chocolate - to be classified under CTH 21061000 as claimed by Revenue or under CTH 18069040 as claimed by appellant? AS PER RAJU, MEMBER (TECHNICAL) HELD THAT:- There is no argument made in the appeal memorandum or in the written submissions of the appellant as to why the Supplementary Note 5(a) should not be followed in the instant case. It is apparent from the above reading of supplementary note 5(a) to Chapter 21 and that the Protein Concentrate and Textured Protein Substances would fall under the heading 2106 . It is seen that the sub heading 21061000 of Customs Tariff (just like HSN) specifically covers Protein Concentrates and Textured Protein Substances , still a chapter supplementary note was introduced to place the Protein Concentrate and Textured Protein Substances under heading 2106 - It is seen that it clearly states that for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes . In the instant case Supplementary Note 5(a) clearly provides that Protein Concentrate and Textured Substances would be classified under Heading 2106 . In view of above in terms of interpretative Rule 1, the goods imported by the appellant would be classified under Heading 2106 in terms of Supplementary Note 5(a). Any other interpretation would make Supplementary Note 5(a) otiose. Since the goods are specifically classified under heading 2106 by virtue of Supplementary Note 5(a), there is no need to further go into interpretative Rule 2 to 6. It is apparent that the various international rulings are based on harmonized system of nomenclature and have ruled that the Protein Concentrates of the kind imported by the appellant are to be classified under heading 21061000 if the same do not contain cocoa. However same product, Protein Concentrates , if containing coco would be classifiable under 1806.90.90 of HTSUS - In most cases the HSN has been totally adopted in the Schedule to the Customs Tariff Act, 1975. However, in some cases, like in case of heading 2106, the government has chosen to deviate from the language and prescription of the HSN by introducing Supplementary Notes to Chapter 21. Since all international rulings are based on the HSN, which is different from the Customs Tariff in respect of Chapter Heading 2106, no reliance can be placed on these decisions. In case of heading 2106, the government has chosen to deviate from the prescription of the HSN by introducing Supplementary Notes to Chapter 21 which specifically classify the impugned products under Heading 2106 . In these circumstances the HSN notes to the Chapter heading, and amendments made therein, which are in conflict with the supplementary notes to the Chapter, are to be ignored. The impugned goods are rightly classifiable under Heading 2106, sub heading 2106 1000 of the Customs Tariff. The impugned order is upheld and the appeals are dismissed. AS PER SOMESH ARORA, MEMBER (JUDICIAL), It is thus clear that the HSN itself acknowledges and rather accepts the need for various member companies to make structural changes into their National Customs Tariff subject to guidance that Rule 1 to 5 of General Interpretative Rules (G.I. s )of the HSN shall applied mutatis mutandis to national sub-heading by virtue of General Interpretative Rule 6, thus clearly providing the leverage for the Member Nations to make suitable changes in their custom tariffs. This respects the sovereignty of member nations as well as their fiscal and statistical needs. The concept of providing need based suitable changes in HSN is therefore, in tandem with Indian Constitution as well as he structural provisions of HSN. - This has been aptly pointed out by learned brother in course of the decision on chapter 21 of India Custom Tarff Act, 1975 (specially the heading 2106) with related supplementary notes. These supplementary notes have been in existence since inception of HSN based Custom Tariff of India. Similar changes have also been made by not only India but various other Countries beyond Chapter 97 which were originally not part of the HSN. Chapter 98 is again outcome of India s need, as is manifested in its own Custom Tariff. Chapter note, which is by way of supplementary note 5 seeks to define the scope and limits of heading 2106. It is thus clear that the expression Food preparation not elsewhere specified or included figuring in tariff heading 2106 when expanded by virtue of chapter note 5 (supplementary note) makes heading 2106 to specifically include Protein Concentrates and Textured Protein Substances therefore the legislature has clearly expanded the scope of tariff heading 2106 by virtue of supplementary notes 5 as brought out above. All this exercise makes even Heading 2106 also as specific in relation to Protein Concentrates and textured proteins, and other items mentioned in Chapter note 5 - net effect of supplementary note 5 in TH 2106 in Indian Custom Tariff Act is that the heading description 2106 i.e. Food preparation not elsewhere specified or included ceases to be a residuary head, in relation to those products which are included in heading 2106, specifically (even if by virtue of any supplementary note). Given above, it is clear that till the product has dominance of Protein Concentrates and Textured Protein Substances (sold as whey protein in the present instance) ,which is undisputed in this case as other similar Whey Protein with different flavours, have been included by the party itself in this head. In instant case classification in favor of 2106 can be decided without resort to Explanatory Notes which in any case do not part of the legal provisions of the harmonized system. Matter can be decided with the help of statutory provisions of Indian Customs Tariff Act, 1975. There is then no need to go further. The advocate for the appellant was at length that the resort should be taken to GI-3 specially Rule 3(a) and while so asserting it has been argued that specific description shall be preferred to general description. The fallacy of the notion has already been brought out in relation to TH to indicate that how the matter can be decided by section or chapter notes. The views of learned brother agreed upon - appeal dismissed.
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2023 (9) TMI 418
Benefit of concessional rate of duty under Notification No. 25/99-Cus dated 28.02.1999 - part of manufacturing activity was undertaken in a premises/factory not declared in the Registration Certificate obtained under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - confiscation for non-compliance to the condition of the Notification ibid read with the Customs Rules, 1996 or not - levy of redemption fine and penalty - HELD THAT:- No dispute is there and it is an admitted fact that the appellant has not manufactured Switches in their Coimbatore unit, but, only parts of Switches / sub-assemblies / components which were entirely cleared to their unit at Una, Himachal Pradesh on payment of applicable Central Excise duties. A perusal of the records will clearly indicate that the appellant has not intimated the jurisdictional Central Excise and Customs authorities in Coimbatore regarding clearance of parts of Switches to Una unit till the time of the audit of unit took place - The Notification No. 21/2002-Cus. dated 01.03.2002 allows the benefit of concessional rate of duty only if the imported goods are used for the manufacture of Switches, Relays and Connectors. Whereas the manufacture of Switches not done in the Coimbatore unit but only the parts and sub-assembly of Switches. Reference made to the decision of the Apex Court in the case MIHIR TEXTILES LTD. VERSUS COLLECTOR OF CUSTOMS, BOMBAY [ 1997 (4) TMI 75 - SUPREME COURT ], wherein it was held that when concessional relief of duty is made dependent of satisfaction of certain conditions, the relief cannot be granted in the absence of satisfaction of the conditions even if the conditions are only directory. Any Notification has to be interpreted strictly and the benefit of the Notification is not extendable when the conditions are not complied with. In the case of CCE VERSUS M/S HARI CHAND SHRI GOPAL [ 2010 (11) TMI 13 - SUPREME COURT ], the Hon ble Apex Court has held that in respect of exemption notification, the conditions of the notification have to be complied with if exemption is available on compliance with conditions. The mandatory requirement of such requirement must be obeyed or fulfilled exactly. In the case of FDC Ltd. [ 2016 (12) TMI 1270 - CESTAT MUMBAI ], the imported goods were sent to the job worker and the ownership of the goods remained with the appellant right from import of goods till their utilization in the manufacture of the final product and it is held that end use condition was satisfied. Whereas in this case, semi-finished parts were cleared to their unit at Una, Himachal Pradesh on payment of duty, both the units have functioned independently. There are no merit in the appellant s contentions that they have complied with the conditions of the Notification read with the Customs Rules, 1996 - it is also noted that the lower original authority s observation that the appellant s unit at Una, Himachal Pradesh have sold parts of switches as could be seen from the sale invoices given as Annexure B2 to the Order-in-Original No. 01/2013-ADC dated 21.03.2013. On consideration of the appellant s contentions that all the components/sub-assemblies/parts of Switches were cleared to their unit at Una, Himachal Pradesh where these were reportedly utilized for the manufacture of the Switches and that too when the goods are not available for confiscation adopting a liberal approach and relying on the decision rendered by the Tribunal in the case of SHIV KRIPA ISPAT PVT. LTD. VERSUS COMMISSIONER OF C. EX. CUS., NASIK [ 2009 (1) TMI 124 - CESTAT MUMBAI] wherein it was held that the goods cannot be confiscated and the redemption fine not to be imposed when they are not available for confiscation, we order to set aside the confiscation and consequently, the fine imposed - imposition of penalty under Section 112 (a)(ii) of the Customs Act, 1962 for contravening the provisions of the Notification No. 21/2002-Cus. dated 01.03.2002 read with the Customs Rules, 1966 is justified but the same is reduced to Rs.3,60,000/-. Appeal allowed in part.
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2023 (9) TMI 417
Valuation of imported goods - imported old and used worn clothing, completely fumigated - restricted item or not - classified under Tariff Item No.63090000 or not - enhancement of value - confiscation - redemption fine - penalty - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [ 2018 (11) TMI 625 - CESTAT MUMBAI ], wherein this Tribunal has observed the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. In the light of the admitted failure to comply with the licensing requirements, we uphold the confiscation of the goods under Section 111(d) of Customs Act, 1962. However, it is our opinion that the ends of justice would be served by reducing the redemption fine to 10% of the ascertained value and penalty to 5%. The redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice - there are no infirmity in the impugned order and the same is sustained - appeal of Revenue dismissed.
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2023 (9) TMI 415
Service of SCN within stipulated time - Smuggling - Gold - foreign origin goods or not - entire case based on the confessional statement of Babu Ram - discharge of onus of proof by Revenue or not - HELD THAT:- The Appellant had filed Affidavit in support of the contention regarding non-service of SCN prior to 28.11.2018. Learned AR in response, informed that he has written to the concerned Adjudicating Authority, and the DRI/DZU on 11.5.2023 itself. However, the compliance was awaited. Accordingly, some more time was prayed and by way of last opportunity, time was allowed and the date of further Hearing was fixed on 02.06.2023. On 2.6.2023, learned AR stated that he has not received any reply or instructions in the matter. Accordingly, the Appeal was heard and Order was reserved. Even after conclusion of the Hearing till date, there is no submission on behalf of the Revenue as regards the service of SCN within the stipulated time. It is found from the facts and circumstances and the evidence led by the Appellant (owner of goods) that he has discharged the onus under Sec 123 of the Act by leading sufficient documentary evidence like (i) copy of challan, (ii) copy of tax invoice, (iii) copy of stock ledger and (iv) copy of bank statement. The Bank statement further certifies that the payment has been made for the purchase of the gold in question through banking channel. Further the tax invoice reflects that GST has been deposited on the transaction - the Appellant has discharged the onus under Sec 123 of the Act - allegations of Revenue are based on assumptions and presumptions as the evidence led by the Appellants have not been found to be incorrect or false. The whole proceedings are vitiated as the SCN has not been issued and served within six months as required under Sec 124(a) read with Sec 110(2) of the Act. The Revenue are directed to return the seized/confiscated goods forthwith to the Appellant, Mr. Neeraj Aggarwal - the Impugned Orders are set aside - appeal allowed.
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Insolvency & Bankruptcy
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2023 (9) TMI 414
E-auction of assets corporate debtors - who can participate - Scope of the term related party / relative - Sale of asset of the corporate debtorin favour of a related party of the corporate debtor - bar under Section 29A of I B Code - HELD THAT:- The Liquidator virtually steps into the shoes of the management of the corporate debtor and oversees the liquidation process. In this process, he holds the liquidation estate of the corporate debtor as a fiduciary for the benefit of all the creditors. While overseeing the liquidation process, he has the mandate to sell all movable and immovable properties and actionable claims of the corporate debtor in liquidation by way of either public auction or by private contract, though he cannot sell such property or claims to any person who is not eligible to be a resolution applicant. Furnishing of reasons presupposes application of mind to the relevant factors and consideration by the concerned authority before passing an order. Absence of reasons may be a good reason to draw inference that the decision making process was arbitrary. Therefore, what para 1(11A) has done is to give statutory recognition to the requirement for furnishing reasons, if the Liquidator wishes to reject the bid of the highest bidder. Furnishing of reasons, which is an integral facet of the principles of natural justice, is embedded in a provision or action, whereby the highest bid is rejected by the Liquidator. Thus, what para 1(11A) has done is to give statutory recognition to this well-established principle. It has made explicit what was implicit. After a careful analysis, this Court opined that the expressions related party and relative contained in the definition sections must be read noscitur a sociis with the categories of person mentioned in Explanation I. So read, it would include only persons who are connected with the business activity of the resolution applicant. This Court further clarified that the expression connected person would also cover a person who is in management or control of the business of the corporate debtor during the implementation of a resolution plan. In PHOENIX ARC PRIVATE LIMITED VERSUS SPADE FINANCIAL SERVICES LIMITED OTHERS [ 2021 (2) TMI 91 - SUPREME COURT] , this Court noted that the expression related party is defined in Section 5(24) in relation to a corporate debtor and Section 5(24A) provides a corresponding definition in relation to an individual. Thereafter, it has been observed An issue of interpretation in relation to the first proviso of Section 21(2) is whether the disqualification under the proviso would attach to a financial creditor only in praesenti, or if the disqualification also extends to those financial creditors who were related to the corporate debtor at the time of acquiring the debt. Thus, the disqualification sought to be attached to the appellant is without any substance as the related party had ceased to be in the helm of affairs of the corporate debtor more than a decade ago. He was not in charge of the company or an influential member of the company i.e., the corporate debtor when the appellant had made its bid pursuant to the auction sale notice. There are no hesitation in coming to the conclusion that Appellate Tribunal was not justified in setting aside the order of the Tribunal dated 12.08.2021 - appeal allowed.
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Service Tax
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2023 (9) TMI 416
Refund of unutilised CENVAT credit of the Service Tax paid on the input services - non-submission of original record/documents based on which credit was taken by the ISD - HELD THAT:- The admissibility of credit is not in dispute, certain verifications had to be done before finalising the refund claims and the Commissioner (A) at para (20) of the impugned order has rightly directed the respondent to file necessary documents before the original authority for verification and sanction of the refund. There are no infirmity in this order and also there is no substance in the grounds of appeal or the submissions of the Revenue to dispute the facts discussed by the Commissioner (A) in the impugned order. The appeal is dismissed.
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2023 (9) TMI 413
Non-payment of service tax - NSDL and CSDL fee paid to Depositories - tax on reverse charges basis on the expenses reimbursed to the representative liaison offices located outside India - delayed payment charges - services rendered to Jammu and Kashmir clients through its sub brokers in Jammu and Kashmir - Inadmissible CENVAT Credit on account of medical insurance of the employees of the respondent - HELD THAT:- It is true that the issue involved has been decided by the Tribunal in the aforesaid decisions and it has been held that the statutory charges such as NSDL and CSDL fee collected by the Depository Participants from customers and deposited with the Depositories (NSDL and CSDL) are not susceptible to service tax. These charges have a nexus or connection with the depository services and the respondent is not benefited out of collection of such fees as such fees are collected and deposited with the depositories. This is what has been held by the Tribunal in SAURIN INVESTMENTS PRIVATE LIMITED VERSUS C.S.T. -SERVICE TAX AHMEDABAD [ 2023 (1) TMI 454 - CESTAT AHMEDABAD] and LSE SECURITIES LTD. VERSUS CCE [ 2012 (6) TMI 364 - CESTAT, NEW DELHI] . It is not possible to accept the contention advanced on behalf of the department that the circular dated 23.08.2007 is retrospective in nature. The said Circular supersedes all the past Circulars, clarifications and communications on all technical issues. The said Circular brought certain transaction within the ambit of the service tax - the Circular dated 23.08.2007 is oppressive in nature and it is a settled principal of law that an oppressive Circular should be given only prospective effect. Reimbursement of the expenses incurred by the representative offices located outside India - HELD THAT:- The reimbursement of the expenses incurred by the representative offices located outside India with respect to rent, professional services, salaries of employees can by no stretch of imagination be equated as consideration to any service rendered to the respondent by the representative offices. Therefore, the reimbursements made to representative offices located outside India is not leviable to service tax. The Commissioner has relied upon the decision of the Tribunal in M/S TECH MAHINDRA LTD., MILIND KULKARNI VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE - I [ 2016 (9) TMI 191 - CESTAT MUMBAI] to drop the demand. It is not the contention of the department that the said decision does not cover this issue and all that has been contended is that it should not have been relied upon by the Commissioner since notice has been issued by the Supreme Court in the Civil Appeal filed by the department. This contention of the learned authorized representative of the department cannot be accepted. There is no merit in the appeal. It is, accordingly, dismissed.
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2023 (9) TMI 412
Levy of Service Tax - management maintenance or repair services - Exempt by N/N. 24/2009 dated 26.07.2009 or not - extended period of limitation - HELD THAT:- An amendment was brought in Finance Act, 2012, by section 97(1) and the said amendment is applicable from 16.06.2005 onwards and by the said amendment, the services in relation to management, maintenance or repairs of roads during the period 16.06.2005 to 26.07.2009 are exempted from payment of service tax and in this case the period is 16.06.2005 to 26.07.2009, therefore, the activity undertaken by the appellant for management, maintenance or repair of road is exempt in terms of section 97(1) of the Finance Act, 2012. Same view was taken by this Tribunal in the cases of JK. CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI [ 2012 (10) TMI 519 - CESTAT, CHENNAI] where it was held that In view of the amendment by Finance Act, 2012, No Service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive). There are no merits in the impugned order - appeal allowed.
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Central Excise
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2023 (9) TMI 411
Refund claim - payment of amount equivalent to the CENVATE credit attributable to inputs and input services used in relation to the manufacture of exempted clearance of petroleum product namely Liquefied Petroleum Gas (LPG) - HELD THAT:- The Co-ordinate Bench of this Court in THE PRINCIPAL COMMISSIONER, CENTRAL GST AND CENTRAL EXCISE VERSUS M/S RELIANCE INDUSTRIES LTD. JAMNAGAR [ 2023 (8) TMI 121 - GUJARAT HIGH COURT ] while dismissing the Tax Appeal held that no question of law much less any substantial question of law can be said to be arising. Appeal stands dismissed.
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2023 (9) TMI 410
Liability of Excise duty - waste and scrap generated at the facility of the job worker - HELD THAT:- The order of the Tribunal in their own appeal M/S. VE COMMERCIAL VEHICLES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE-I [ 2023 (3) TMI 1401 - CESTAT MUMBAI] pertains to the immediate preceding period where reliance placed in COMMISSIONER OF CGST BHIWANDI VERSUS VE COMMERCIAL VEHICLES LTD [ 2018 (5) TMI 1050 - CESTAT MUMBAI] where it was held that in case of the sister unit of the appellant tribunal held that the appellants were not liable to discharge duty on waste and scrap generated at job worker's end. The order impugned does not survive which is set aside to allow the appeal.
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2023 (9) TMI 409
CENVAT Credit - inputs - raw materials like MS plates, MS bars for manufacture of finished goods known as MS Fish Plates and Metal Liner which are supplied to Indian Railways - chartered accountants certificate not considered - period 2005 to May 2006 - Extended period of limitation - HELD THAT:- The appellant has provided proper evidence in the form of Chartered Engineer s Certificate wherein by way of a flow chart, the Chartered Engineer has specified as to where and how the goods in question have been used within the factory premises of the appellants. The Adjudicating authority has not given proper consideration to such documentary evidence provided by the appellant. When the appellant produced the Certificate from a qualified professional, the Adjudicating Authority is bound to consider and pass a proper order. If the certificate issued is not found to be acceptable, the same is required to be rebutted by the Adjudicating Authority which has not been done in this case. The High Court of Kerala in the case of CADBURY INDIA LIMITED VERSUS UNION OF INDIA AND COMMISSIONER OF CUSTOMS, [ 2014 (12) TMI 403 - KERALA HIGH COURT] has held While a certificate issued by a Chartered Accountant or a Cost Accountant would normally suffice to discharge that burden, if the revenue authorities have any doubt with regard to the genuineness of the certificate or the correctness of it, it is for them to insist on further documents from the claimant to support the certificate issued by the Chartered Accountant or the Cost Accountant. The Department has not rebutted the documentary evidences brought in by the appellant - Appeal allowed on merits. Extended period of limitation - HELD THAT:- All the details of Cenvat credit taken by them have been properly disclosed in the ER-1 Returns. There is no allegation that the goods in question were not received in the premises of the appellant. Hence, the question of alleging suppression with intent to evade payment excise duty will not arise. Accordingly, demand in respect of the extended period set aside - appeal allowed even on time bar. Appeal disposed off.
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2023 (9) TMI 408
Irregular availment of credit on MS plates - Process amounting to manufacture - processes undertaken by the appellant on MS plates - violation of Rule3(1) read with Rule 2(k) of the Cenvat Credit Rules 2004 - HELD THAT:- It is a settled position in law that if Cenvat Credit is availed on goods (inputs) that are subjected to certain processes, that do not amount to manufacture, and if such goods are cleared on payment of excise duty, then there is no requirement for reversal of Cenvat Credit availed on the inputs. It is also the appellants contention that even if it is assumed that the processes undertaken viz cleaning, cutting and drilling of MS plates do not amount to manufacture, Cenvat Credit on the inputs is essentially available to them. The fact of clearance of such goods to their sister unit on payment of excise duty is evident from records - it is also noted that the amount of duty paid by the appellant is higher than the amount of credit availed. The Hon ble Bombay High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES [ 2012 (7) TMI 141 - BOMBAY HIGH COURT] , had upheld the Tribunal order, wherein an identical contention in the context of decoiled HR/CR coils cut into specific size was concerned with and the Tribunal had upheld the availment of CENVAT credit on HR/CR coils and its utilization for payment of duty on decoiled HR/CR coils cleared. As the question of law as in the impugned appeal is no more res integra and has been settled, by the decision of the Hon ble Gujarat High Court, in the case of COMMISSIONER OF CENTRAL EX. CUS., SURAT-III VERSUS CREATIVE ENTERPRISES [ 2008 (7) TMI 311 - GUJARAT HIGH COURT] , there can be no question of levy of duty and if duty is levied, the Cenvat Credit cannot be denied to the manufacturer. There is no merit in the adjudication order passed by the learned Commissioner and it being bereft of merit needs to be set aside - Impugned order set aside - appeal allowed.
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Indian Laws
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2023 (9) TMI 407
Whether, by enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997? - Non-inclusion within its scope, the activity of the appellants in providing gratis transport facilities for their employees and their children, as the charging provision contained therein, namely, Section 3 (1) and the Explanation thereto were couched in very ambiguous terms - legislative competence of the Himachal Pradesh Legislative Assembly to enact the Act of 1955 and the Amendment and Validation Act of 1997. Taxability under Section 3(1-A) of the Amendment and Validation Act of 1997 - activity of the appellants of providing gratis transport facilities for their employees and their children. HELD THAT:- The power of a legislature to legislate within its field, both prospectively and to a permissible extent, retrospectively, cannot be interfered with by Courts provided it is in accordance with the Constitution. It would be permissible for the legislature to remove a defect in an earlier legislation, as pointed out by a constitutional court in exercise of its powers by way of judicial review. This defect can be removed both prospectively and retrospectively by a legislative process and previous actions can also be validated. However, where a legislature merely seeks to validate the acts carried out under a previous legislation which has been struck down or rendered inoperative by a Court, by a subsequent legislation without curing the defects in such legislation, the subsequent legislation would also be ultra-vires. Such instances would amount to an attempt to legislatively overrule a Court s judgment by a legislative fiat, and would therefore be illegal and a colourable legislation. Separation of powers, as crystalised under the Indian Constitution, is characterised by division of power and functions between the legislature, executive and the judiciary, which are the three co-equal organs of the State. The doctrine also necessarily postulates that each institution has some power to regulate the functions of the others; this is in the form of the ancillary principle of checks and balances. The role of the judiciary in galvanising our constitutional machinery characterised by institutional checks and balances, lies in recognising that while due deference must be shown to the powers and actions of the other two branches of the government, the power of judicial review may be exercised to restrain unconstitutional and arbitrary exercise of power by the legislature and executive organs - Simply setting at naught a decision of a court without removing the defects pointed out in the said decision, would sound the death knell for the rule of law. The rule of law would cease to have any meaning if the legislature is at liberty to defy a judgment of a court by simply passing a validating legislation, without removing the defects forming the substratum of the judgment by use of a non-obstante clause as a technique to do so. Thus, by enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997. Legislative competence of the Himachal Pradesh Legislative Assembly to enact the Act of 1955 and the Amendment and Validation Act of 1997, which are stated to be enacted on the strength of Article 246, read with Entry 56 of List II of the Seventh Schedule of the Constitution of India - HELD THAT:- This argument appears to be a formal one as the High Court did not have an occasion to consider the aspect of legislative competence vis- -vis the impugned Act - The import of the Act of 1955, as amended by the Amendment and Validation Act of 1997, could be gathered from the Preamble which provides that it has been enacted to provide for levying a tax on passengers and goods carried by road in motor vehicles. It is therefore clear that tax is sought to be imposed on passengers and goods, carried by road in motor vehicles. It is a no brainer that such a tax falls within the legislative field governed by Entry 56 of List II of the Seventh Schedule of the Constitution, which pertains to taxes on goods and passengers carried by road and inland water ways. Simply for the reason that notices have been issued to the owners or assessment orders have been passed against the owners of the vehicles, it cannot be said that the tax is levied on the motor vehicles. If the persons carried happen to be employees of the owners of the buses, such employees should pay the tax - there are no substance in the contention of the appellants that the tax was sought to be imposed on motor vehicles and therefore, the same is outside the legislative competence of the State Legislature for Himachal Pradesh. It is clarified that the tax is on passengers and goods and the same has to be paid by the owners of the motor vehicles whose responsibility it is to pay. Therefore, there is no substance in the argument concerning legislative competence of the State Legislature in enacting the Act of 1955 or the Amendment and Validation Act of 1997. Appeal dismissed.
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2023 (9) TMI 406
Dishonour of Cheque - quantum of fine - whether courts can impose more than twice the cheque amount, as fine, by way of interest or otherwise, for the offence punishable under Section 138 of the NI Act? - HELD THAT:- Going by the statutory restriction, the maximum sentence that can be imposed for commission of offence under Section 138 of the N.I.Act is imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque or with both. The trial court imposed double the cheque amount as fine, taking note of the fact that cheque was issued during 2015, the same cannot be held as excessive and the said reason is justifiable. But as far as grant of interest at the rate of 9% to double the cheque amount from the date of judgment on failure to pay the fine amount ordered not paid within sixty days, is not legally permissible since the statute permits imposition of fine which may extend to twice the cheque amount and not beyond double the cheque amount. To put it correctly, no amount in excess of double the cheque amount could be imposed as fine. Thus, it appears that the learned Magistrate exceeded the statutory limit and granted 9% interest to the fine amount as in the case of a civil court decree, thereby the amount of fine exceeded the statutory limit, by imposing default clause. However, it is made clear that the courts can impose double the cheque amount as fine or lesser sum, by adding interest thereof, or to compensate the complainant otherwise, by quantifying the amount, but on any contingency the fine amount shall not exceed twice the cheque amount. Therefore, the sentence is modified, so as to maintain the same within the statutory limit. The conviction stands confirmed and the sentence stands modified, whereby the accused/revision petitioner is sentenced to undergo imprisonment for a day till rising of the court and to pay a fine of Rs.2,05,220/- and the said amount shall be given as compensation to the complainant under Section 357(1)(b) of the Cr.P.C. In default of payment of fine, the accused shall undergo imprisonment for a period of four months - this revision petition is allowed in part.
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2023 (9) TMI 405
Dishonour of Cheque - suppression of material facts - details of the transaction are not stated either in the notice or in the compliant - HELD THAT:- The law is clear on the point that the whole purpose of the revisional jurisdiction is to preserve power in the court to do justice in accordance with the principles of criminal jurisprudence and, therefore, it would not be appropriate for the High Court to re-appreciate the evidence and come to its own conclusion on the same when the evidence had already been appreciated by the Magistrate as well as the Sessions Judge in appeal, unless any glaring feature is brought to the notice of the court which would otherwise tantamount to gross miscarriage of justice. To put it otherwise, if there is nonconsideration of any relevant materials, which would go to the root of the matter or any fundamental violation of the principle of law, then only the power of revision would be made available. In fact, nothing substantiated in this revision petition to interfere with the concurrent findings of conviction. However, the sentence requires modification to ensure payment of the cheque amount. The conviction imposed by the Courts below stands confirmed. Consequently, the accused is sentenced to undergo simple imprisonment for a day till raising of the Court and to pay fine of Rs.10,00,000/-. Fine, if realized, the same shall be given as compensation to the complainant under Section 357(1)(b) of Cr.P.C. In default of payment of fine, the accused shall undergo default imprisonment for a period of eight months - this revision petition succeeds in part and is accordingly allowed in part by modifying the sentence.
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