Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 13, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Penalty order u/s 129(1)(b) of the GST Act, 2017 - Proof of ownership of goods - The E-way Bills being the documents of title to the goods were accompanying the goods hence, the conclusion of the revenue that the petitioner was not the owner of the goods is patently erroneous. - HC
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Validity of SCN - Error in posting in the dashboard (Web Portal) - The problem has arisen on account of the complex architecture of the web portal. It has been designed to facilitate easy access of informations. It has however resulted in the petitioner failing to notice the notice that was issued to the petitioner prior to the impugned order on 20.03.2023. It went unnoticed by the petitioner - Matter restored back - HC
Income Tax
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Penalty u/s 271(1)(c) - defective notice - not striking off irrelevant matter - If without being sure as to what was the basis on which he was planning to impose the penalty on assessee, such a notice, in our view, would indicate non-application of mind and the notice would be not valid. - HC
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Rectification u/s 154 - Unexplained cash - When the Assessing Officer has accepted the contention of assessee while framing the regular assessment, there is no mistake apparent on record as rightly held by both CIT(A) and the Tribunal and therefore we are of the opinion that no question of law much less any substantial question of law arises from the impugned order passed by the Tribunal. - HC
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Refund of amount wrongly deducted or paid to the Revenue Authorities - withholding of tax - It is indisputable that for the past over 13 years neither Kvaerner nor DAVY has claimed any amount from the Revenue Authorities under the issue at hand. Moreover, Kvaerner, who is the successor-in-interest of DAVY has also addressed its ‘no objection’ to Respondent No. 1 conveying that the amount can be returned or refunded to Petitioner. - In our view, the refusal of the Department to return the amount and retaining the same is unauthorized by law and would only amount to unjust enrichment by the Department on technical grounds. - HC
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TDS u/s 195 - withholding tax deducted at source (TDS) - Considering that the nature of these proceedings is confined to withholding of tax, and that the financial year 2022-23 is already over, this Court had suggested to the parties that without prejudice to their rights and contentions regarding the chargeability of AWS USA’s income under the Act, a total of 10% be withheld (less 2% Equalisation Levy that has already been paid) as withholding tax. - HC
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Reopening of assessment u/s 147 - change of opinion - It was not as if the AO did not address his mind to various facets of the ROI. Clearly, the route chosen by the respondent/revenue was not the correct course of action. During scrutiny assessment, as noticed above, a specific query was raised vis-à-vis unsecured loan which was answered; whereupon it was closed, presumably on ground that it was indeed a genuine transaction as claimed by the petitioner. - Notice issued u/s 148 quashed - HC
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Disallowance of depreciation on Edible Oil Brand - NIL value at the time of merger - Assessee can transfer a unit or a division of an undertaking or a business activity and has rightly transferred the edible oil brand independently to the transfer of edible oil undertaking. But since the book value of edible oil brand on the date of the merger was NIL, therefore, any subsequent change in its value has to be ignored. Therefore, the claim of depreciation is not justified on the facts of the case r.w. relevant provisions of the Act. - AT
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Income taxable in India - screening and investigation services provided by the assessee to its customers in India - Royalty or Fees for Technical Services (FTS) - The assessee does not provide access to any database to its clients but only access to reports requisition by the client in electronic form. Provision of online access of the report to its client is limited to providing access to the specific report providing relevant facts for the concerned candidates captured during the course of validation. - Not taxable as royalty or FTS - AT
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Deduction u/s 80G - donations which formed part of the spend towards CSR - The irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. - AT
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Claim of Depreciation - Determination of cost of Acquistion - Reduction of amount of entertainment tax subsidy - As entertainment tax subsidy granted by the State Government is not for the purpose of utilizing on any particular or specified assets. That being the factual position emerging on record, the reasoning of the assessing officer that such subsidy would go to reduce the cost of assets is unacceptable. - AT
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Estimation of income - Bogus purchases - Reliability of statement of third party - merely the third person stated that he is involved in issuing accommodation bill, the book results declared by the assessee which is higher then the industry norms prescribed by the board the action of the assessing officer in estimating the profit over and above the books results confirmed by the ld. CIT(A) is not in accordance with the law. - AT
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Revision u/s 263 - Scope of the affidavit relief upon by the AO - It is not self serving affidavit of the assessee but of concerned party from whom allegedly the assessee had benefited. There is no finding of Ld. PCIT as to which matter from the survey was contradicting the affidavit. The aforesaid narration of relevant queries made during re-assessment and replies of the assessee are sufficient to show that Ld. AO has asked for the affidavit, only to reaffirm that replies are supported with on oath deposition too. - AT
Customs
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ontinued and prolonged suspension - Disciplinary proceedings against the Revenue office (Deputy Commissioner) - Case of involvement in fraudulent duty drawback case - Charge sheet is yet to be filed - Considering the serious nature of charges, which have remained under investigation by various agencies against the petitioner and public interest, the contention raised by learned counsel for the petitioner cannot be accepted, that since the petitioner has not been responsible for delay in conduct of investigation or other proceedings, he deserves to be reinstated. - HC
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Clearance of Capital goods from SEZ to DTA under EPCG - Switchover thus from one scheme to another of capital goods needs to be construed strictly through specific mandate of the legislature and not liberally - E.P.C.G. till exit from SEZ unit is not available, nor has appellant produced any such mandate or opinion from administrative authorities like Dev. Commissioners approving such availment by customs - AT
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Demand of interest on differential duty - wrongful claim of exemption - the assessee has not paid any duty on clearance of the impugned equipment - the fact is also noted that DGFT authority has permitted amendment of the EPCG authorisation issued providing for debit of differential duty demanded. As such, the interest is not demandable. So, the appeal filed by the Revenue is rejected. - AT
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Levy of Social Welfare Surcharge (SWS) - Since, the effective rate of the customs duty is ‘NIL’ or ‘Zero’, the rate of SWS would automatically become ‘zero’, inasmuch as SWS is to be calculated not on the value of the goods, but on the duty of customs levied on the imported goods, which is evident from sub-section (3) of Section 110 of the Finance Act, 2018. - AT
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Preferential rate of duty - certificate of origin - Imports of ‘gold jewellery’/ ‘diamond studded gold jewellery’ effected from Thailand - There are no justification for discarding of the ‘certificates of origin’ by the adjudicating authority - impugned order set aside - AT
Indian Laws
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Dishonour of Cheque - jurisdiction - The word ‘delivered’ used in Section 142(2)(a) of the NI Act has no significance and significance must be given to the text ‘for collection through an account’. That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the said place is decisive to determine the question of jurisdiction. - HC
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Dishonour of Cheque - Period of limitation - Admittedly, the date of loan as emerged on record is 15.12.1998 and by applying the prescribed period of three years, as per Article 19 of the Limitation Act, would come to an end on 15.12.2001, whereas the disputed cheque bears the date 31.12.2004. In absence of any document being brought on record by the complainant that the debt was acknowledged during the prescribed period of limitation, the cheque was time barred. - HC
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Dishonour of Cheque - insufficient funds - notice not served upon to the applicants / Directors of the company - Deemed service of notice - in spite of the notices issued to accused No. 2 to 5 addressed on same postal address of accused No. 1 Company, returned unserved to the accused No. 2 to accused no.5 by the postal department with an endorsement "Not Delivered Unclaimed" - no case is made out to quash the criminal proceedings at this stage - HC
IBC
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Interpretation of statute - Scope of the term "OR" - The word ‘or’ in the said sub-regulation should be read as ‘in addition to’ and not ‘to the exclusion of’. This means that the resolution professional may, if envisaged in the request of the resolution plan, can allow under the said sub-regulation, modification of the resolution plan received, albeit only once. - SC
Service Tax
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Refund of CENVAT Credit - The services rendered by the Appellant are defined as taxable services under 65(105) of the Finance Act, 1994 but for the purpose of export only they were allowed to export the same without payment of Service Tax but that by itself would not put the services under the category of unentitled service, so as to deny CENVAT Credit and consequential refund to the Appellant. - AT
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Valuation - inclusion of value of free supply of material like steel pipes and valves - It is clear from the above that the service tax is to be levied in respect of ‘taxable services’ and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added. - AT
Central Excise
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Rebate / Refund of duty paid on Export Goods - Recovery of alleged excess grant of rebate - As far as availability of rebate is concerned, the notification providing for rebate talks of “duty paid” rather than “duty payable” and as such a manufacturer-exporter has a choice to pay the duty as per the basic rate or after availing the partial exemption and rebate shall be granted on the “duty paid”. - AT
Case Laws:
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GST
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2023 (9) TMI 509
Condonation of delay of 132 days in filing the appeal against the Assessment Order - COVID Lockdown situation - HELD THAT:- These Assessment Orders were passed by the second respondent at the time when the country was in partial lock down on account of second wave of Covid-19 pandemic. Taking note of the situation prevailing, the Hon'ble Supreme Court by its order dated 21.03.2021 had earlier extended the period of limitation for filing the appeal. A further extension was thereafter given by the Hon'ble Supreme Court in its order dated 10.01.2022 in Cognizance for extension of limitation IN RE [ 2022 (1) TMI 385 - SC ORDER] - As per paragraph 5.3 of the said decision in case where limitation would have expired during the period between 15.03.2020 till 28.02.2022, all persons were given further time of ninety (90) days from 01.03.2022 to file an appeal. Thus, the petitioner was required ought to have filed an appeal latest by 31.05.2022 as per the decision of the Hon'ble Supreme Court. Considering the fact that the order that was impugned before the Appellate Commissioner of the second respondent is also a detailed order, this Court is unable to come to rescue the petitioner as the limitation has expired not only under the Act but also in terms of the extended period given by the Hon'ble Supreme Court by its order in Cognizance for extension of limitation. Petition dismissed.
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2023 (9) TMI 506
Blocking of credit - Permission to petitioner to debit the amount from its electronic credit ledger as shown in the said ledger on 15.02.2020. It is submitted by the learned counsel for the Respondents that the challenge relates to blocking of credit vide order dated 15.02.2020 from 01.10.2019 till the date of blocking in the petitioner's credit ledger. It is the further submission of the learned counsel for the Respondents that it was automatically unblocked on 04.05.2023 and thus nothing survives in the writ petition. HELD THAT:- Recording the submission made by the learned counsel for the Respondents, the writ petition stands closed.
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2023 (9) TMI 505
Penalty order u/s 129(1)(b) of the Goods and Services Tax Act, 2017 by not treating the petitioner to be the owner of goods - intent to evade present or not - HELD THAT:- The E-way Bills being the documents of title to the goods were accompanying the goods hence, the conclusion of the revenue that the petitioner was not the owner of the goods is patently erroneous. Consequently, the penalty proceedings were liable to be initiated under Section 129(1)(a) and not 129(1)(b) as has been done in the present case. Strong reliance has been placed upon the decision of this Court in M/s Sahil Traders Vs. State of U.P. [ 2023 (6) TMI 360 - ALLAHABAD HIGH COURT ] which applies squarely to the case at hand, where reliance placed in coordinate bench in M/s Margo Brush India [ 2023 (1) TMI 1237 - ALLAHABAD HIGH COURT ] where it was held that levy of penalty under Section 129(1)(b) of the Act was not called for and could not be justified as Section 129(1)(a) of the Act provides that where owner of the goods comes forward for payment of penalty, the amount has to be two hundred per cent of the tax payable, whereas, in the case in hand, the penalty has been levied to the tune of hundred per cent of the value of the goods. The impugned penalty order dated 5.8.2023 passed in Form MOV-09 under Section 129(1)(b) of the Goods and Services Tax Act, 2017 set aside - petition allowed.
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2023 (9) TMI 504
Refund claim - according to petitioner, determination has been made erroneously and unreasonably and as such the revenue authorities have no expertise to determinate the proportion of cement used for production of fly ash brick, other than relying on the recommendation made by the DIC - HELD THAT:- Since this matter requires consideration, issue notice to the opposite parties. As an interim measure, the opposite parties are directed to refund the admitted amount as has been calculated to the tune of Rs. 1,71,824.20, without prejudice to the rights and contentions made in the writ petition, which is to be decided after giving opportunity of hearing to the opposite parties.
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2023 (9) TMI 503
Cancellation of registration of the petitioner with retrospective effect - HELD THAT:- The benefit of Notification No.03/2023 Central Tax bearing reference G.S.R.246(E) dated 31.03.2023, as extended by Notification No.23/2023 Central Tax dated 17.07.2023 was conferred to an assessees/registrants was cancelled prior to 31.12.2022 - there are no reason to differ. The benefit which has been conferred under Notification No.03/23 Central Tax bearing reference G.S.R.246(E) dated 31.03.2023 which was extended by Notification No.23/2023 Central Tax dated 17.07.2023 can be extended to the petitioner. The benefit has been now extended upto 31.08.2023. This writ petition is therefore disposed of by directing the petitioner to work out the remedy in terms of the above mentioned Notification as amended by G.O.Ms.No.03/2023 Central Tax dated 31.03.2023.
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2023 (9) TMI 502
Cancellation of GST registration of petitioner - difference between the turn over disclosed in GSTR-01 and the ITC claimed in GSTR-3B - HELD THAT:- The impugned Assessment Order dated 21.06.2022 does not bear any discussion as neither reply was filed by the petitioner before the respondent prior to passing of the impugned order nor the petitioner appeared before the respondent. Failure of the petitioner to file reply on account of closure of the business can be attributed to the negligence of the petitioner. However, on that score alone, the impugned order cannot be sustained. Petitioner deserves a chance to explain the case as there is a possibility of the petitioner establishing that credit was available for being set off against the tax liability of the petitioner for the period in dispute - The petitioner shall deposit a sum of Rs. 20,00,000/. This amount to be deposited by the petitioner shall be either appropriate or refunded to the petitioner subject to the final outcome of the proceedings pursuant to this order. The case is remitted back to the respondent to redo the exercise subject to the petitioner depositing the aforesaid sum of Rs. 20,00,000/- within a period of four weeks from today - Petition disposed off.
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2023 (9) TMI 501
Validity of SCN - Error in posting in the dashboard (Web Portal) - the impugned orders were hosted in the Dashboard of the petitioner meant for 'Additional Notices and Orders' whereas, the notices should have been hosted by the respondent in the Dash Board for 'View Notices and Orders' - HELD THAT:- The problem has arisen on account of the complex architecture of the web portal. It has been designed to facilitate easy access of informations. It has however resulted in the petitioner failing to notice the notice that was issued to the petitioner prior to the impugned order on 20.03.2023. It went unnoticed by the petitioner, as a result of which, the impugned orders have been passed on 29.04.2023. The impugned orders are quashed and the case is remitted back to the respondent to pass a fresh order within a period of 60 days from the date of receipt of a copy of this order - Petition allowed.
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Income Tax
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2023 (9) TMI 508
Assessment completed u/s. 144 - protective addition on account of fictitious sale - bogus transactions and inflation of purchases by the main group - HELD THAT:- As substantive addition in the hands of M/s Fortune Creation Pvt. Ltd[main group] has already been made by the assessing officer, which was confirmed by ld CIT(A) also. Since the substantive addition has been sustained hence there is no loss to the Revenue. As main group has accepted the impugned transaction as their income, therefore, protective addition in the hands of the assessee needs to be deleted. Based on this factual position, delete the protective addition in the hands of the assessee. Penalty u/s 271(1)(c) imposed on the fictitious sale - HELD THAT:- As AO deleted the entire addition made by the Assessing Officer, therefore the penalty imposed by the Assessing Officer, on the quantum addition needs to be deleted. Also Penalty under section 271(1)(c) of the Act, should not be imposed on protective addition. See case of Bhailal Manilal Patel [ 2014 (10) TMI 621 - GUJARAT HIGH COURT] . Penalty u/s 271(1)(b) - Once the foundation fails, the superstructure also fails i.e. the addition also is to be deleted. In this regard, I rely on the legal maxim Sublato fundamento cadit opus (meaning thereby that foundation being removed, structure /work falls). Hence the initial action of the Revenue itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. Therefore delete the penalty imposed by the Assessing Officer under section 271(1)(b) - Assessee appeal allowed.
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2023 (9) TMI 507
Income attributed to PE in India - whether the assessee had a Permanent Establishment (PE) either in the nature of a fixed place PE or Supervisory PE under Article 5 of Indian-Japan Double Taxation Avoidance Agreement (DTAA)? - Assessee is a non-resident corporate entity incorporated in Japan - HELD THAT: it is very much clear that the factual position qua the disputed issue is identical to the earlier assessment years. As already discussed in foregoing paragraphs, this is a legacy issue continuing from assessment year 2014-15 onwards. In the latest order passed for assessment year 2017-18 [ 2023 (2) TMI 1107 - ITAT DELHI] hold that the assessee had no PE in India in any form whatsoever. Therefore, the addition made by attributing a part of the income of the assessee to the alleged PE has to be deleted. Thus we hold that the assessee had no PE in India, either fixed place or supervisory, to which the profit from revenue earned from sale of raw-material and finished capital goods can be attributed. Accordingly, we delete the addition made by the Assessing Officer. Grounds are allowed
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2023 (9) TMI 500
Estimation of income - bogus purchases - disallowance to 12.5% of unproven purchases - ITAT modified the order of CIT(A) to adopt the gross profit level, but retain the addition to the extent of 12.50% of the value of alleged bogus purchases - HELD THAT:- There are innumerable judgments of this Court and other High Courts where the Courts have held that the ITAT was correct in restricting the addition limited to the extent of bringing the gross profit rate on purchases and not the entire amount paid. Since both the authorities, i.e., the CIT(A) and the ITAT have held that it is not the entire sales consideration which is to be brought to tax, but only the profit attributable on the total sales consideration which alone can be subject to income-tax, the view taken by the authorities, in our view, is a reasonable and possible view. Therefore, Appeals dismissed.
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2023 (9) TMI 499
Penalty u/s 271(1)(c) - defective notice - not striking off irrelevant matter - Whether mere defect would vitiate penalty proceedings? - HELD THAT:- As if one of the irrelevant matters is not struck off, it would mean that AO himself was not sure while issuing the show-cause notice whether he had proceeded on the basis that assessee had concealed his income or he had furnished inaccurate particulars. If without being sure as to what was the basis on which he was planning to impose the penalty on assessee, such a notice, in our view, would indicate non-application of mind and the notice would be not valid. See M/S. GANGA IRON STEEL TRADING CO., NAGPUR. case [ 2021 (12) TMI 1094 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2023 (9) TMI 498
Rectification u/s 154 - Unexplained cash - disclosure of cash was neither accepted nor was any explanation/clarification furnished by the concerned firm M/s. M.K. Ceramics during the course of assessment proceedings - Tribunal held that the provision of Section 154 of the Act can be invoked when there is a mistake which is apparent from record and about the same two views are not possible and AO has committed an error by passing the order for rectification of the assessment order under the provisions of Section 154 - HELD THAT:- We have perused the orders passed by the CIT(A) as well as the Tribunal who have arrived at concurrent findings of fact to the effect that there is no mistake apparent on record and when there are two views possible on the same facts, the Assessing Officer could not have invoked the provisions under Section 154 of the Act. When the Assessing Officer has accepted the contention of assessee while framing the regular assessment, there is no mistake apparent on record as rightly held by both CIT(A) and the Tribunal and therefore we are of the opinion that no question of law much less any substantial question of law arises from the impugned order passed by the Tribunal.
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2023 (9) TMI 497
Reopening of assessment u/s 147 - assessment beyond a period of four years - Reason to believe - as per revenue assessee claimed excess depreciation against allowable depreciation - petitioner is not entitled to get the remaining additional depreciation on new plant and machineries put to use for less than 180 days in the preceding previous year - HELD THAT:- On perusal of reasons to believe indicate that on verification of Annexure F of the Tax Audit Report and the notes thereto, it was found that the assessee had not quantified the amount of additional depreciation @ 10% on the eligible assets purchased in the preceding year and had made passing remarks without substantiating its claim. What is evident is that the claim for reopening the assessment has been based on the very annexure of the audit report which was available to the revenue in the exercise that was carried out during the scrutiny assessment. The reason to believe therefore cannot be said to be based on any new of fresh tangible material and cannot therefore be used as a tool to reopen the assessment proceedings. What is also evident from the exercise of the scrutiny assessment carried out in the case of the petitioner is that the assessee has been claiming additional depreciation at the rate of 20% on the eligible plant and machinery by virtue of the provisions of Section 32(1(iia). The assessment has been reopened beyond a period of four years and it is not a case where it can be said that the assessee has failed to disclose fully and truly all material facts necessary for his assessment. The tax audit report specifically stated that the balance of additional depreciation pertaining to eligible assets has been claimed and a schedule was annexed. A detailed questionnaire was sent to the petitioner which was answered including the question on the claim of depreciation. A specific query was raised into the claim made by the petitioner on higher depreciation on motor vehicle under section 32 of the Act. All these lead to a circumstance to suggest that during the course of original proceedings, the claim of the depreciation allowance as made by the Assessing Officer was examined and after considering the Return of Income, Tax Audit Report and other submissions to the questionnaire that the Assessing Officer had restricted his exercise only to the issue of allowability of higher depreciation on motor vehicle. Moreover, if in the perception of the Assessing Officer, the report was wanting for details then information could have been called for but couldn't have been taken as a cue for exercise of jurisdiction under Section 148 - Decided in favour of assessee.
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2023 (9) TMI 496
Maintainability of appeal in High Court - low tax effect - matter arising out of the order under Section-263 - HELD THAT:- When any order is passed u/s 263 of the Act, the same would also be the order under the Income Tax Act, 1961. The Circular No. 5 of 2019 do not distinguish the order passed under Section-263 or any other Section of the Act, 1961, but it refers the monetary limits prescribed in the circulars itself and if any appeal is filed, which is not a writ-matter, then the monetary limits prescribed under the circular would apply and the Department is bound by such monetary limits and accordingly, the Department cannot pursue the matter, if the monetary limit prescribed in the circular is adhered-to. Even if, we take consolidated tax effect in the appeal, it would not exceed the monetary limits prescribed in the Circular No. 17 of 2019, dated 8th August, 2019. Therefore, this appeal is dismissed due to low tax effect.
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2023 (9) TMI 495
Refund of amount wrongly deducted or paid to the Revenue Authorities - withholding of tax - Petitioner had set up a Gas-based Sponge Iron Plant in India for which it entered into a Foreign Technical Collaboration Agreement with one company DAVY [as agreed to render to Petitioner outside India certain engineering and other related services in relation to the project] - petitioner as requested for issuance of a No Objection Certificate it was the ACIT, Central Circle-I, who insisted that no objection would be issued only if Petitioner deposited 30% of the amount to be remitted to DAVY - as argued Technically, even though the amount deposited by Petitioner would be called as tax deductible at source , what Petitioner paid was an ad hoc amount not technically a TDS amount . Moreover, since it is also confirmed by this Court that the amount paid to DAVY was not chargeable to tax in India, Respondents insistence on Petitioner paying that amount was not in accordance with law and the amount so paid over must be refunded to Petitioner. HELD THAT:- Once the appellant succeeds in the Appeal, the Revenue Authorities must proceed on the basis that the Appellant did not have any obligation to make the payment. Thus the amount wrongly deducted or paid to the Revenue Authorities where it was not required to be paid would become refundable to Appellant. Of course, that is subject to the condition that the person receiving the payment has not claimed credit for the same or is not claiming credit for the same. It is indisputable that for the past over 13 years neither Kvaerner nor DAVY has claimed any amount from the Revenue Authorities under the issue at hand. Moreover, Kvaerner, who is the successor-in-interest of DAVY has also addressed its no objection to Respondent No. 1 conveying that the amount can be returned or refunded to Petitioner. As in appropriate cases Revenue Authorities must grant refund and/or return the sums collected without lawful authority, independent of the provisions of the Act. The Central Board of Direct Taxes ( CBDT ) issued a Circular No. 7 of 2007 dated 23rd October 2007 highlighting further problems regarding procedure for refund of tax deducted at source. Based on representation received from tax payers to take into account situations where genuine claim for refund arises to the person deducting tax at source from payment to the non-resident, the CBDT amended Circular No. 709 dated 20th April 2000. The Circular states that where no income has accrued to the non-resident due to cancellation of contract or where income has accrued but no tax is due on that income or tax is due at a lesser rate the amount deposited to the credit of government to that extent under Section 195 cannot be said to be tax . The Circular further states that this amount can be refunded with prior approval of the Chief Commissioner of Income Tax or the Director General of Income Tax concerned, to the persons who deducted it from the payment to the non-resident under Section 195 of the Act. In our view, the refusal of the Department to return the amount and retaining the same is unauthorized by law and would only amount to unjust enrichment by the Department on technical grounds. The amounts having been deposited with Prothonotary and Senior Master, High Court, Bombay, the Prothonotary and Senior Master shall foreclose the fixed deposit and pay over the amount including interest to Petitioner. The statement of Mr. Mistri on instructions that Petitioner shall pay the entire income tax on the interest earned in the Financial Year in which the amount is received is accepted as an undertaking to this Court. Petitioner will, of course, be entitled to credit of any TDS that the bank would have deducted and also to the TDS that Respondents had deducted while depositing the amounts with the Prothonotary and Senior Master, High Court, Bombay as per the figures mentioned above in the same financial year when the tax is being paid. Petitioner statement on instructions that if there is any claim made by DAVY or Kvaerner, its successor-in-interest, Petitioner will indemnify and keep indemnified the Department harmless including legal fees, if any, is accepted as an undertaking to this Court.
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2023 (9) TMI 494
Rectification application not been disposed of - timeline fixed u/s 154(a) and 154(8) of the Income Tax Act, 1961 is six (6) months - HELD THAT:- The period involved goes way beyond the statutory timeline fixed for the disposal of a rectification application. This is also the position that obtains as per Instruction No. 1 of 2016 dated 15.02.2016. That said, we find it difficult to understand why the petitioner did not approach the Court within a reasonable period. Repeated representations to the Assessing Officer (AO) and grievances sought cannot explain, in our view, the delay and laches in approaching the Court. The period involved is more than seven (7) years. Therefore, we dispose of the writ petition with the following directions: (i) The concerned officer will dispose of the rectification application within four (4) weeks of receipt of a copy of the judgment. (ii) The AO will bear in mind that the first representation to the respondent was made on 09.10.2019. We are therefore, of the opinion that interest between the period after the expiry of six (6) months from when the rectification application was filed and 09.10.2019 in the facts of this case, ought not to be paid to the petitioner.
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2023 (9) TMI 493
TDS u/s 195 - withholding tax deducted at source (TDS) - AWS India s obligation to withhold and deposit the tax in respect of payments to AWS USA - PE in India or not? - HELD THAT:- We are, prima facie, unable to accept that the entire amount payable by AWS India to AWS USA can be considered as revenue attributable to AWS s PE (if any) in India and that no part of it is attributable towards entities overseas. The exercise conducted by the AO of determining the revenue attributable to a PE, which also requires allowance for deduction of material expenses to be made is clearly flawed. It is also settled law that the proceedings u/s 195(2) are only for the purpose of determining the proportion of income chargeable to tax for the limited purpose of determining the withholding of tax. The determination under Section 195(2) of the Act does not constrain the Revenue in any manner from correctly assessing the payee s income chargeable to tax in accordance with the law. It would, prima facie, follow that if there is already a determination in the payee s own case; the AO would normally give due consideration to the same, in considering the application under Section 195(2) - in this case it appears that the AO has proceeded on the exercise of a de novo assessment in proceedings, completely disregarding the orders of the ITAT arising from the assessment proceedings relating to AWS USA s. We also find merit in the Revenue s contention that AWS India had not provided AWS USA s financial information for the preceding years, which may be essential in determining the application under Section 195(2) of the Act. We are unable to appreciate AWS India s response that the entire information related to AWS USA is available on the portal of the Department and thus could be retrieved by the AO. For the purpose of Section 195(2) of the Act, the applicant is required to provide the necessary information. It would not be open for the applicant to refrain from providing the same on the ground that AO may be able to access the same otherwise. Revenue has already issued notices u/s 148 of the Act for re-opening the assessments of AWS USA. As noted ASG has stated that there is substantial information available with the Revenue to assess AWS USA s income as chargeable to tax under the Act. He had also contended that AWS USA had withheld vital information in the assessment proceedings. Revenue now seeks to re-look at AWS USA s assessment and chargeability of its income to tax in India. Considering that the nature of these proceedings is confined to withholding of tax, and that the financial year 2022-23 is already over, this Court had suggested to the parties that without prejudice to their rights and contentions regarding the chargeability of AWS USA s income under the Act, a total of 10% be withheld (less 2% Equalisation Levy that has already been paid) as withholding tax. The impugned order is modified to the aforesaid extent. AWS India shall withhold 8% of payments, payable or paid to AWS USA, for the period in question and deposit the same with the Revenue authorities.
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2023 (9) TMI 492
Reopening of assessment u/s 147 - unsecured loan obtained by the petitioner - reasons to believe - HELD THAT:- As reasons to believe are not aligned with what is stated by the respondent/revenue in their counter-affidavit. In the reasons to believe, there is no reference to the report of SFIO; what is referred to is that some information has been received from DDIT (Inv), Unit-5(4), Delhi.There is also no reference to the fact that Mr Surendra Kumar Jain had rotated funds through eleven (11) bank accounts. The counter-affidavit, as noted above, referred to aspects which did not find mention in the document in which reasons to believe stood embedded. Clearly, if there was information available, the same was not independently analysed by the AO. The information should have been processed to indicate, at the very least, a prima facie as to how the loan transaction, which the petitioner claims to have entered into with RKG, was an accommodation entry. AO, has merely labelled the transaction as an accommodation entry, without demonstrating as to how the material on record furnished reasons for him to form a belief that the income chargeable to tax had escaped assessment. What is absent in the reasons to believe framed by the AO is the live link between the material available with him and the formation of the belief that income chargeable to tax had escaped assessment. On the other hand, the record shows that a specific query was raised with regard to the unsecured loan of Rs. 2 crores that the petitioner received from RKG. The record also shows that the petitioner placed on record the relevant material to show that the loan taken was genuine. Thus, it was not as if the AO did not address his mind to various facets of the ROI. Clearly, the route chosen by the respondent/revenue was not the correct course of action. During scrutiny assessment, as noticed above, a specific query was raised vis- -vis unsecured loan which was answered; whereupon it was closed, presumably on ground that it was indeed a genuine transaction as claimed by the petitioner. A relook, without analysing the information received from the investigation wing and connecting the dots, lends credence to the submission that this is case of change of opinion. According to us, the reasons to believe as recorded by the AO failed to establish that it was a fit case to initiate reassessment proceedings against the petitioner. It is important to bear in mind that it is the material which the AO has in his possession when he forms the belief and not what he gathers thereafter, that is relevant to test the tenability of the reassessment proceedings - Decided in favour of assessee.
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2023 (9) TMI 491
Block assessment - deceased assessee had an undisclosed income - petitioner as a Legal Heir/Representative filled appeal before ITAT for the block assessment period as allowed on the ground that there was violation principles of natural justice - ITAT remitted the case back to the AO to pass fresh order, mean while, the property on the name of the deceased assessee were attached by an order - HELD THAT:- Income Tax Officer (HQ) (preventive), the first respondent has addressed a letter dated 12.06.2023 to the Deputy Commissioner of Income Tax, Circle-1, Vellore the fourth respondent for taking necessary action as whether any orders have been passed pursuant to the intimation notice dated 01.12.2008 as same was not ascertainable. Respondents are directed to consider the petitioner's representation/reply dated 16.05.2023 and 29.05.2023 and dispose the same on merits and in accordance with law within a period of four weeks from the date of receipt of a copy of this order. The de novo proceeding which ordered by the Income Tax Appellate Tribunal (ITAT) is also directed to completed.Writ Petition stands disposed of with the above observations.
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2023 (9) TMI 490
Notice u/s 154 against a dead person - as argued notice has been issued by the assessing officer in spite of having prior information about the death of the noticee - as respondents on instruction based on record submits that the department had on record the information about the death of the noticee prior to issuance of the aforesaid impugned notice. HELD THAT:- Considering the facts and circumstances of the case as appears from record and submissions of the parties, this writ petition is disposed of by quashing the aforesaid impugned notice under Section 154 of the Act against dead person. However, quashing of the notice will not be a bar on the part of the respondent Income Tax Authority concerned to issue any fresh notice in future in accordance with law.
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2023 (9) TMI 489
Scope and power vested upon the CIT(A) u/s 251(1)(a) - Power to remand back the case instead of adjudicating the issue himself - additions made in respect of the sundry creditors deleted - ITAT also did not consider the specific issue raised by the appellant (Assessee) - HELD THAT:- Commissioner could not have remanded the matter back to the AO after having decided the case in favour of the assessee in its entirety. Mmere use of the word prima facie could not make prima facie view as CIT(A) has discussed the matter elaborately taking into the consideration the factual position. Before Tribunal, the assessee had specifically raised the ground that the CIT(A) exceeded the limits of powers statutorily bestowed as per Section 251(1)(a) and grossly erred in law in restoring the case to the assessing officer for action in terms of the order dated 23.11.2011 passed by the CIT(A). Though, such a specific ground raised by the appellant before the Tribunal and noted by the Tribunal in paragraph 3 of the impugned order, this aspect has not been dealt with by the learned Tribunal. Admittedly, the revenue had not challenged the findings rendered by the CIT(A) which was in favour of the assessee. Substantial question of law decided in favor of assessee. - Decided in favour of assessee.
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2023 (9) TMI 488
Validity of order u/s 148A(d) - violation of principle of natural justice - AO has relied on statements and documents relating to cash, loan and transactions which were never indicated and with regard to those transactions no show cause notices were issued and there are no indications in this regard in the annexure to the notice u/s 148A(b) - HELD THAT:- As respondent is not in a position to deny the aforesaid allegation that the relevant material relating to transactions, at any stage before passing the order under Section 148A(b) of the Act were supplied and furnished to the petitioner to enable the petitioner to meet the same. This writ petition is disposed of by setting aside the impugned order u/s 148A(d) and directing the petitioner to file reply/response to the aforesaid impugned order under Section 148A(d) by treating the allegations in the same as a show cause notice, within a period of four weeks from date and the assessing officer shall consider and dispose of the said reply/response to be filed within the time stipulated herein.
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2023 (9) TMI 487
Non-consideration and sitting over repeated representations for updation of challans against the outstanding taxes in question - HELD THAT:- Considering the facts and circumstances of the case and submissions of the parties, the respondent Income Tax Officer, Ward-6(1), Kolkata is directed to consider and dispose of the pending representations in question in accordance with law for updation of the challans in question within a period of four weeks from date and to intimate such action to the petitioner within a week from the date of taking such action.
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2023 (9) TMI 486
Deduction u/s 80P(2)(a)(i) - Income earned by co-operative Bank on deposits of its non SLR deposits (i.e. funds other than those advanced as loans and the banking reserves) - HELD THAT:- The substantial questions of law raised by the revenue have been answered in favour of the assessee and against the revenue in the case of Commissioner of Income Tax vs. Karnataka State Co-operative Apex Bank [ 2001 (8) TMI 9 - SUPREME COURT] and Mehsana District Central Co-operative Bank Ltd. [ 2001 (8) TMI 15 - SUPREME COURT] . In the said decision, it has been held that interest arising from investment made, in compliance with statutory provisions to enable the co-operative society to carry on banking business, out of reserve fund by such society engaged in banking business, is exempt under Section 80P(2)(a)(i) - placement of such funds being imperative for the purpose of carrying on banking business the income therefrom would be income from the assessee s business. Therefore, it was held that the assessee/co-operative society was entitled to deduction under Section 80P(2)(a)(i) of the Act in respect of interest earned from funds utilised for such statutory reserves. Decided against the revenue.
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2023 (9) TMI 485
Validity of passed u/s 143(3) r.w.s. 144B - violation of principles of Natural Justice by denying to participate in the proceeding for hearing in the impugned assessment proceeding - HELD THAT:- It appears from record that notice of hearing through video conference was fixed at 12.30 p.m. on 22nd December, 2022 and a link was sent on 22nd December, 2022, to the petitioner. But inspite of fixing the time of hearing and providing the link by the Department, no access could be made for video conference and in support of such allegation by the petitioner, petitioner has annexed screenshot copies from his computer showing the blank screen at the time of hearing. Considering the facts and circumstances of the case, as appears from record that admittedly petitioner could not participate in the hearing for the assessment in question for no fault of him, in the interest of Justice, aforesaid impugned order is set aside and the matter is remanded back to the assessing officer concerned to pass a fresh speaking order after giving opportunity of hearing to the petitioner or his authorised representative. It is clarified that this Court is setting aside the impugned order only on the ground of violation of principle of Natural Justice without going into the merit of the impugned assessment order which shall be reconsidered by the assessing officer strictly in accordance with law.
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2023 (9) TMI 484
Condonation of delay - delay of 879 days in filing the appeal before HC - HELD THAT:- On perusal of the relevant dates we find that the delay between 4.4.2019 and 5.3.2020, the date on which the learned advocate for the department had drafted the appeal petition has not been explained, the delay of more than 110 days. Thereafter for a period of 11 months there was lockdown. Subsequently, after a period of about seven and half months the Ministry of Law had send the papers to the Income Tax Department. As stated that prior to that there was change of jurisdiction in the Income Tax Department during August, 2020 and this also contributed to the delay of another 16 and half months - the original certified copy of the order passed by the learned tribunal was misplaced. There is no explanation as to where the original certificate copy got misplaced or steps taken by the department to trace the original certified copy. As submitted assessee has made inquiry with the registry of the tribunal and they have been informed that not only the department is served with the true copy of the certified copy of the order but also the Commissioner of Income Tax [Appeals] as well as the assessing officer. Therefore, it is clear that the department was not diligent in taking effective steps to file the appeal. Thereafter, it appears that the department applied for a fresh certified copy of the order on 17.3.2021 after a period of six and half months and the certified copy was made ready by the registry of the tribunal on 9.4.2021. However, it took three months for the department to collect the certified copy from the registry of the tribunal and after about nearly a delay of two months the appeal was preferred on 7.9.2021. Thus, we find that there is no proper explanation given for the inordinate delay for us to exercise any discretion in favour of the appellant/revenue. Application for condonation of delay is dismissed.
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2023 (9) TMI 483
Disallowance of depreciation on Edible Oil Brand - AO observed that no edible oil brands were shown in the books of accounts of the demerged company - As value of edible oil brands just before the merger was NIL. Therefore, there is no block of intangible assets in the balance sheet - Assessee explained that the transfer of edible oil brands and the demerger of edible oil undertaking were two separate and independent transactions duly approved by the Hon'ble High Court - HELD THAT:- As the meaning of the term demerger is not to be construed as per the scheme of arrangement worked out by the assessee company. It is true that as per Explanation 1, undertaking can be a part of an undertaking or a unit or division of an undertaking or even a business activity. Therefore, the contention of the assessee that transfer of edible oil brands is independent to the transfer of edible oil undertaking is accepted. It is true that the brand was transferred prior to the transfer of undertakings and it is equally true that separate considerations have been determined and paid in respect of transfer of brands and transfer of undertaking we find that on the date of transfer of brand, its value in the books of transferor company was NIL The assessee has determined the brand value at Rs. 7.24 crores to be paid to the transferor company. This consideration was discharged by the assessee by way of issue of 1640037 equity shares of Rs. 10/- each fully paid up at a premium of 34.20 totaling to Rs. 7,24,98,000/-. This value has been put subsequent to the demerger of edible oil brand. Explanation 3 to section 2(19AA) clearly says that for determining the value of property, any change in the value of assets, consequent to their revaluation shall be ignored. Therefore, since the value of edible oil brand in the books of transferor company was NIL, any change in its value subsequently, has to be ignored. Assessee can transfer a unit or a division of an undertaking or a business activity and has rightly transferred the edible oil brand independently to the transfer of edible oil undertaking. But since the book value of edible oil brand on the date of the merger was NIL, therefore, any subsequent change in its value has to be ignored. Therefore, the claim of depreciation is not justified on the facts of the case r.w. relevant provisions of the Act. Findings of the ld. CIT(A) are erroneous and deserve to be set aside and that of the Assessing Officer are restored. Ground Nos 1 to 5 taken together or allowed. Disallowance of royalty paid on brand Gagan - since there was a total merger of Amrit Corp Ltd, brand Gagan also stood transferred to the assessee and, therefore, there is no question of paying royalty to itself - HELD THAT:- A perusal of the scheme of arrangement shows that while edible oil brands and edible oil undertaking were transfered on the merger, Gagan brand was retained by Amrit Corp Ltd and this retention of brand by the transferor company was part of scheme of the merger. Assessing Officer has not disputed the fact that Gagan brand was used by the assessee. No error in payment of royalty by the assessee for use of Gagan brand. We decline to interfere with the findings of the ld. CIT(A). Ground Nos. 6 and 7 stand dismissed. Addition made on account of G.P. rate - fall in GP rate for the year under consideration by below 0.44% as compared to the immediately preceding A.Y. - AO has rejected the books of accounts on the basis of allegations alleged by the Special Auditor - HELD THAT:- The assessee has explained each and every step / stage from bargaining/receipt of material till the dispatch of finished goods is fully recorded in the books of account. The assessee has also successfully explained the basis on which manufacturing data is fed into the SAP accounting system of the assessee. Actual quantity manufactured is fed in SAP. Thus, monitoring of production and consumption is inbuilt into the accounting system being followed. Complete details of valuation of closing stock were furnished and such data was also prepared from exhaustive accounting of the assessee. The observations of the AO were very general in nature and are purely based on assumptions and surmises without bringing any comparable case on record. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Ground No. 8 is accordingly dismissed.
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2023 (9) TMI 482
Addition u/s 40(a)(ia) - HELD THAT:- As assessee produced the relevant certificate, covering a sum of Rs. 26,84,153/-, and there is no dispute as on this aspect. We, therefore, modify the order of CIT(A) and direct the AO to delete the amount - In respect of the other sums, in the absence of any further evidence, we find it difficult to disturb the findings of the authorities below. Addition u/s 40A(3) - no ledger account regarding such expense was produced and the certificate issued by Santosh Service Station is not an authenticated one - HELD THAT:- The substance of the judicial opinion is that the terms of section 40A(3) of the Act are not absolute and though certain circumstances are contemplated under rule 6DD of the Rules, they are not exhaustive. One such exception approved by the Hon ble Madras High Court [ 2020 (9) TMI 543 - MADRAS HIGH COURT] is the incapacity of the assessee to make the payment through banking channel due to freezing of the bank account by order of Governmental agency, in that case, the ESI department. Assessee produced the copies of such attachments issued by the Income Tax Department by way of notice dated 12/08/2013, u/s 226(3) of the Act and prohibitory order dated 25/11/2013 by the Employee Provident Fund Organization. The view taken ATTAR SINGH GURMUKH SINGH VERSUS INCOME-TAX OFFICER, LUDHIANA [ 1991 (8) TMI 5 - SUPREME COURT] and the Hon ble Madras High Court in the cases referred to above is applicable to the facts of the case. We are of the considered opinion that the addition under section 40A(3) of the Act is not sustainable. Consequently, we direct AO to delete the same. Appeal of the assessee is allowed in part.
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2023 (9) TMI 481
Validity of Reopening of assessment - Long term capital gain - whether reopening of the concluded assessment based on a mere change of opinion ? - HELD THAT:- As reasons to believe that had formed the basis for reopening the assessee s case u/s. 147 of the Act, it transpires that the same as stated by the Ld. AR and, rightly so, is based on a mere change of opinion of the A.O, on the same set of facts as were there before his predecessor while framing the original assessment u/s. 143(3) Reopening a concluded assessment based on the same set of facts as were available on record during the original assessment is not permissible under law. The aforesaid view is supported by the judgment of Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT] Thus,we concur with the contention advanced by the Ld. AR that as the case of the assessee had been reopened based on a mere change of opinion , therefore, the A.O had wrongly assumed jurisdiction and framed the impugned assessment u/s. 143(3) r.w.s 147. Assessee had disclosed fully and truly all the material facts; therefore, by no means could she have been saddled with any failure to disclose fully and truly all material facts that were necessary for framing her assessment, which would have otherwise justified bringing her case within the realm of the extended period contemplated in the 1st proviso of section 147 of the Act for validly reopening the same. Thus A.O had wrongly assumed jurisdiction and reopened the concluded assessment of the assessee, which was earlier framed by his predecessor vide order passed u/s. 143(3) therefore, quash the consequential assessment order passed by him u/s. 143(3) r.w.s. 147 - Assessee appeal allowed.
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2023 (9) TMI 480
Penalty u/s 271(l)(c) - appellant had filed return of income disclosing the short-term capital gain - HELD THAT:- The assessee while computing the income and filing revised income was under bonafide mistake/bonafide belief that the assessee can claim the entire charges of amount paid to the AUDA as Capital Gain as deduction under Capital Gain. The said standard belief or mistake cannot be termed as furnishing of inaccurate particulars or concealment of income. The decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Limited, [ 2010 (3) TMI 80 - SUPREME COURT] is applicable in assessee s case. Therefore, the penalty does not survive. Appeal of the assessee is allowed.
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2023 (9) TMI 479
TP Adjustment - Adjustment to Arm Length Price (ALP) u/s 92C - MAM - Import of men's wear for resale made by the Appellant from its Associated Enterprises (AE) - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case in M/s.Celio Future Fashion Private Limited v/s ACIT [ 2019 (3) TMI 1696 - ITAT MUMBAI ] while deciding a similar issue held that RPM is the most appropriate method for benchmarking the international transaction of import of men s wear for resale . Thus the contention of the assessee in applying RPM as the most appropriate method is upheld. Accordingly, the order passed by the TPO/AO on this issue is set aside and the TPO/AO is directed to de novo benchmark the international transaction pertaining to import of men s wear for resale by applying RPM as the most appropriate method. As a result, ground no.1, raised in assessee s appeal is allowed for statistical purposes. Addition u/s 69C - treating loans and advances as unexplained - DRP held that the proposed addition is not called for, however, directed the AO to make certain verifications, such as advances have been made through banking channels, advances are recorded in the books of accounts and the details are reconciled with the increasing advances during the year - HELD THAT:- As per section 144C(8) of the Act, the DRP can confirm, reduce, or enhance the variation(s) proposed in the draft assessment order, while issuing the directions under section 144C(5) - DRP is not empowered to set aside any proposed variation or issue any direction for further enquiry and passing the assessment order, as was done in the present case. Therefore, we are of the considered view that the various directions issued by the learned DRP in respect of verification on various aspects are completely contrary to the provisions of section 144C(8) of the Act and the final assessment order passed by the AO in conformity with these directions on this issue are not legally sustainable. Accordingly, the addition made by the AO pursuant to the directions of the learned DRP on this issue is deleted. Treating the outstanding balance of sundry creditors as unexplained and taxing the same as income u/s 115BBE - DRP held that the addition proposed by the AO is not justified, however, directed the AO to verify that the addition to creditors is on account of trade creditors and the character of royalty - HELD THAT:- As we find that in respect of this issue also the learned DRP issued directions to the AO to verify certain aspects as noted in directions, which are contrary to the provisions of section 144C(8) of the Act as the same specifically prohibits issuing any direction for further enquiry. Therefore, we are of the considered view that these directions and the final assessment order passed by the AO in conformity with the same on this issue are not legally sustainable. Accordingly, the addition made by the AO pursuant to the directions of the learned DRP on this issue is deleted.
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2023 (9) TMI 478
Income taxable in India - screening and investigation services provided by the assessee to its customers in India - Royalty or Fees for Technical Services ( FTS ) - whether such income chargeable to tax in India under the provisions of Article 13 of the India-UK DTAA? - HELD THAT:- It is an undisputed fact that the assessee is a tax resident of UK and does not have a PE in India and hence it has opted to be governed by the provisions of the India-UK DTAA being more beneficial to the assessee. As gone through the relevant extracts of the said agreement and are convinced with the contention of the Ld. AR that the assessee s role is restricted to verification of the information concerning various candidates proposed to be hired by its clients (viz. educational qualifications, past employment details etc.) and providing the clients the relevant facts captured by the assessee during the course of validation. It is also evident that the assessee physically verifies the information/data in relation for screening services. The reports generated thereof are delivered to the clients in physical mode and/or through online access. The assessee does not provide any advice/analysis/recommendation on hiring of the employees by its client and does not assume any responsibility with regard to hiring decisions taken by its clients on the basis the assessee s report. The information collected by the assessee is not protected by any copyright but its circulation is regulated under the UK and other local laws. Considering the nature of the business of the assessee, it has to comply with the local laws wherein a duty is cast upon the assessee to ensure the confidentiality of reports which contains details of the applicants. Further the assessee does not provide access to any database to its clients but only access to reports requisition by the client in electronic form. Provision of online access of the report to its client is limited to providing access to the specific report providing relevant facts for the concerned candidates captured during the course of validation. Nothing has been brought on record by the Revenue to refute the aforesaid claim of the assessee. Thus online access to background screening results cannot be construed as providing access to database maintained by the assessee. The screening report which is issued does not involve any transfer of commercial experience to the client or getting the right to use the experience. There is also no transfer of any skill or knowledge of assessee to the customers in the issuance of screening reports, as the client is only given access to findings of the assessee in the form of a report which contains factual information but nowhere the assessee imparts its experience, skill of carrying out background screening services to its client. It is thus clear that there is no imparting of information concerning industrial, commercial or scientific experience by assessee when it issues the reports to its clients. Characterisation of impugned receipts as FTS, in our view, the services rendered by the assessee do not involve any technical skill/knowledge or consultancy or make available any technical knowledge, experience, skill, know-how or processes to the clients. Assessee's role is restricted to the verification of information provided by various candidates proposed to be hired by its clients. It involves seeking information from various sources that is accessible on specific requests and no advice/guidance on the credentials of the candidate is provided by the Assessee to its client. The role of the assessee is limited to validation of data provided by the candidate and provide relevant facts captured during the course of validation. The clients make an independent decision to hire the candidate. Hence, in our view the services should not be considered as FTS under Article 13(4) of the India-UK DTAA. Accordingly, ground No. 1 to 2.3 are decided in favour of the assessee.
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2023 (9) TMI 477
Penalty u/s. 271D - acceptance of cash loan in contravention of provisions of section 269SS - HELD THAT:- It is pertinent to note that since the assessee was an agriculturist and deriving income related to agricultural activities, as on salary there was no regular assessment in assessee s case. The Assessing Officer at no point of time disputed the bank statement of the assessee wherein the amount of Rs. 1,42,000/- was transferred in The Berna Gamni Seva Sahakari Mandali Ltd. and the same was shown in the bank statement dated 26-03-2011. The transaction as well as the ledger along with the certificate was not doubted and in fact the contention of the ld. Departmental Representative that it was mismatching appears to be not correct and thus there was no cash involved in the present transaction. Therefore, section 269SS will not be applicable in the present case and the penalty levied u/s. 271D does not survive. CIT(A) as well as the AO was not correct in levying the penalty u/s. 271D - Appeal of the assessee is allowed.
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2023 (9) TMI 476
Reopening of assessment u/s 147 - addition made on account of penny stock transaction - Bogus LTCG - HELD THAT:- It is pertinent to note that from the Assessment Order the AO has not categorically mentioned as to how VAS Infrastructure Limited script itself was blacklisted from SEBI report or not. Besides this, the Assessing Officer has also not given the details as to how the assessee is involved in manipulation of the bogus Long Term Capital Gain/bogus Short Term Capital Loss/bogus Business Loss entries. AO failed to give the description as to how the assessee is involved in anything related to wrongly calming the Short Term Capital Loss or Long Term Capital Gains. The CIT(A) also failed to give the reasons as to how the transactions of the assessee while dealing with VAS Infrastructure Limited in the present case is a bogus Long Term Capital Gain/bogus Short Term Capital Loss/bogus Business Loss. AO has also not mentioned as to under which provision of Income Tax Statute the addition has been made. Thus, the Assessing Officer was not justified in making the addition - Thus, the appeal of the assessee is allowed.
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2023 (9) TMI 475
Revision u/s 263 - specific evidence of cash payment and payments through two third party cheques - information in the Insight Portal regarding cash payments was downloaded and kept in the assessment record and CIT concluded that despite having access to this information, the AO failed to get an explanation from the assessee on the issue and did not bring to tax this unaccounted income - HELD THAT:- As contended by Ld. AR that issue was examined thoroughly by Ld. AO has no substance. It is not a case of AO holding one of the views, here is a case where false and contradictory stand of the assessee was left out of examination. The findings of Ld. PCIT with regard to directions issued to ld. AO to tax the amount representing the cash utilities for discharge of credit card bills and being cheques issued by third parties in favour of the assessee s credit card bills, being one from unexplained sources chargeable to tax u/s 68 r.w.s.115BBE of the Act, requires no interference. Disallowance of LTCG on sale of shares - Merely raising the queries during assessment in a general manner and getting replies of the same cannot give rise to presumption of application of due diligence and a judicious examination of issue by the ld. AO as not a word in regard to issue is reflected in the assessment order. The conclusion of no enquiry drawn by Ld. PrCIT requires no interference. The Assessing Officer had fallen in duty to show that the inquiry which was initiated by raising queries was taken to a reasonable end so as to draw a conclusive inference in favour of the assessee. The findings of Ld. PCIT of LTCG claim being one liable to brought under tax u/s 68 r.w.s 115BBE requires no interference. Whether Section 263 does not give powers to the PrCIT to enhance the assessment and to pass an order of assessment itself? - In the case in hand although the queries were raised by ld. AO and which were responded by the assessee, the assessment order though does not show any reason for not making the addition but Ld. PrCIT has duly examined both the issues to establish, that additions should have been made. Thus, Ld. PCIT was in its right to modify the conclusion of ld. AO qua not making the additions in the assessment by making the additions. The power of modifying the assessment has in its ambit making or correcting any additions, left out or not made by the AO, though ought to be made in the assessment proceedings. The same may or may not be by way of enhancement. It is not a case of two views, as the assessment order does not reflect any view of the Assessing Officer. There can be a presumption of an official act to have been done in due course and to justify the view but the same is rebuttable by establishing the non application of mind, as done by Ld. Pr CIT. The grounds raised have no substance and the appeal of assessee is dismissed.
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2023 (9) TMI 474
Deduction u/s 80G - donations which formed part of the spend towards CSR - assessee is not claiming the contribution to the trust as business expenditure and suomoto disallowed the same, but claiming this expenditure as deduction under section 80G of the same, such a claim cannot be denied - HELD THAT:- Section 80G(2)(iiihk) and (iiihl) of the Act expressly provide that such sums donated for Swatch Bharath Kosh and Clean Ganga Fund shall be the amounts other than the sums spent by the assessee in pursuance of CSR, meaning thereby the donations made towards Swatch Bharath Kosh and Clean Ganga Fund spent as a part of CSR are not qualified for deduction under section 80G of the Act. Out of so many entries under section 80G(2) of the Act, only donations in respect of two entries are restricted if such payments were towards the discharge of the CSR. The Legislature could have put a similar embargo in respect of the other entries also, but such a restriction is conspicuously absent for other entries. The irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. As stated above, clue can be had from the restrictions by way of section 80G(2)(iiihk) and (iiihl) of the Act. See JMS Mining (P.) Ltd [ 2021 (7) TMI 907 - ITAT KOLKATA] . Appeal of assessee is allowed.
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2023 (9) TMI 473
Nature of receipt - Taxability of entertainment tax subsidy received by the assessee - capital or revenue receipt - HELD THAT:- As decided in assessee own case [ 2022 (10) TMI 124 - ITAT DELHI] this issue of entertainment subsidy in case of multiplexes and theaters has been dealt by the jurisdictional High Court after analyzing the object and the purpose of the subsidy and came to the conclusion that it is a capital receipt. Also see Chaphalkar Bros [ 2017 (12) TMI 816 - SUPREME COURT] . Claim of Depreciation - Determination of cost of Acquistion - As entertainment tax subsidy granted by the State Government is not for the purpose of utilizing on any particular or specified assets. That being the factual position emerging on record, the reasoning of the assessing officer that such subsidy would go to reduce the cost of assets is unacceptable. More so, when the revenue has failed to bring any material on record to demonstrate that the subsidy has actually gone to reduce the cost of any specified assets on which the assessee claimed depreciation. That being the factual position, no part of the subsidy can be reduced from the written down value to compute depreciation. Payment of service tax - whether provision of service tax is an allowable deduction? - AO disallowed the claim of the assessee on the ground that liability being contingent and dependent on the outcome of the verdict of the Hon ble Supreme Court on this issue - HELD THAT:- AO erred in treating the liability being contingent. It is undisputed fact that amount of liability is clear, since 50% of such liability was directed to be paid in three equal installments by the Hon ble Supreme Court and for balance 50%, surety was required to be furnished. Therefore, we do not see any good reason for interfering into well reasoned finding of the learned CIT(Appeals), same is hereby affirmed. Ground of appeal is dismissed.
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2023 (9) TMI 472
Undisclosed income - Addition on basis of income appearing in Form 26AS - assessee is unable to furnish evidence to establish that no transaction was entered into with Sunway Construction during the financial year 2010-11 - HELD THAT:- Merely on the basis of AIR information regarding details in Form 26AS of M/s Sargon Geosynthetics Ltd. made the impugned addition. Therefore, we deem it appropriate to restore the matter to the file of the AO for de novo adjudication after necessary examination of all the details furnished by the assessee including the details in Form 26AS of the assessee for the year under consideration. The assessee may also make necessary endeavour to obtain the information from Sunway Construction regarding its transaction with M/s Sargon Geosynthetics Ltd. and the period for which the impugned payment was made to M/s Sargon Geosynthetics Ltd. Also grounds pertaining to the computation of book profit under section 115JB of the Act is also restored to the file of AO for de novo adjudication.Grounds raised by the assessee are allowed for statistical purposes. Allowability of payment of gratuity - CIT(A) has passed the order ex-parte due to the non-appearance of/on behalf of the assessee - HELD THAT:- Now in appeal before us, the assessee is duly represented by the learned Authorised Representative ( learned AR ) and wishes to pursue the litigation against the addition made by the AO. The assessee has also filed the paper book enclosing the proof of payment of gratuity. We find that the assessee also filed a rectification application dated 16/03/2090 before the AO enclosing the payment receipt of the premium paid. As evident from the record that all these details were neither furnished during the assessment proceedings nor furnished before the learned CIT(A). Therefore, we deem it appropriate to restore the issue of allowability of payment of gratuity to the file of the AO for de novo adjudication after consideration of all the details/submissions as filed by the assessee. The impugned order is set aside and the grounds raised by the assessee are allowed for statistical purposes.
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2023 (9) TMI 471
Valuation of closing stock - AO took the view that the assessee did not provide any basis for revaluing the stock and the revaluation has been done on the whims of the assessee - HELD THAT:- Valuing the closing stock at cost or market value is a recognized accounting principle. There is one more principle, i.e., the Principle of Prudence, as per which, all known losses should be provided for, even if it is not actually incurred. In our view, the wisdom of the assessee in reducing the value of closing stock (work in progress) could be covered under the Principle of Prudence also and the said action of the assessee stands vindicated by the future events. When the arbitration award is not expected to be fully favourable to the assessee, then it is the duty of the assessee to provide for known loss and in our view, the action of the assessee in reducing the value of closing work in progress may be substantiated under this principle also. If the assessee receives any money in excess of the value of WIP, the same shall be taxable in the year of receipt. Accordingly, in the facts and circumstances of the case, we are of the view that there is no reason to disbelieve the value of closing work in progress disclosed by the assessee. We are of the view that the tax authorities are not justified in making the impugned addition - we direct the AO accept the value of closing work in progress declared by the assessee and delete the consequential addition made. Appeal filed by the assessee is allowed.
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2023 (9) TMI 470
Reliability of statement of third party - Estimation of income - Bogus purchases - AO rejected the books of the assessee and estimated 25 % of the purchase claimed as income of the assessee - HELD THAT:- On going through the overall facts, instruction of CBDT and the fact that the quantity of purchase and sales is not doubted, the books were not found defective and the order is passed u/s. 143(3) of the Act we are of the considered view that the assessee has duly discharged its burden of proving the genuineness of book results. The assessing officer has not done any independent and proper investigation. He simply relied upon he statement of third party who also stated that he is involve in the diamond business though the modus operadi is different. Thus, merely the third person stated that he is involved in issuing accommodation bill, the book results declared by the assessee which is higher then the industry norms prescribed by the board the action of the assessing officer in estimating the profit over and above the books results confirmed by the ld. CIT(A) is not in accordance with the law. Appeal of assessee allowed.
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2023 (9) TMI 469
Revision u/s. 263 - CIT setting aside the assessment framed u/s. 143(3) on the issue of non-verification of sundry creditors - HELD THAT:- We noted that the AO has not made any enquiry regarding the cash credits as pointed out by the PCIT in his order. Admittedly, there are cash credits as on 31.03.2015 and assessee has filed names only. The assessee has not filed address, assessment details, PAN number or the source of deposit. Hence, we find no infirmity in the revision order passed by PCIT with direction to AO to verify these sundry creditors according to law. Therefore, we affirm the revision order passed by the PCIT and dismissed the appeal of assessee.
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2023 (9) TMI 468
Revision u/s 263 - Scope of the affidavit relief upon by the AO - As per CIT assessee-company paid cash to M/s Cardio Technovention for the purpose of taking reversal of entry as commission received through proper banking channel and this issue was not thoroughly examined while completing the assessment - HELD THAT:- As affidavit was filed on the directions of Ld. AO for which he had powers to call for filing an affidavit to prove the fact that cash was not received by M/s Cardio Technovention. The same could not have been left aside and inferences drawn on the basis of documents which otherwise did not have anything explicit and patent to hold different opinion. It is not self serving affidavit of the assessee but of concerned party from whom allegedly the assessee had benefited. There is no finding of Ld. PCIT as to which matter from the survey was contradicting the affidavit. The aforesaid narration of relevant queries made during re-assessment and replies of the assessee are sufficient to show that Ld. AO has asked for the affidavit, only to reaffirm that replies are supported with on oath deposition too. Ld. Pr.CIT has thus fallen in error to exercise powers u/s 263 to hold AO wrongly relied the affidavit from M/s Cardio Technovention. The impugned order u/s 263 of the Act is quashed. Decided in favour of assessee.
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2023 (9) TMI 441
Unexplained investment - AO was of the view that the seized document reveals that the assessee had entered into cash transaction related to purchase and sale of flat - CIT(A) treating the incriminating documents seized during the search action u/s. 132 oas dumb document and deleted the addition - HELD THAT:- CIT-DR for the revenue raised additional plea before us that Param Property, on whom search action was carried out has accepted all the transaction in the Petition filed before Income Tax Settlement Commission (ITSC) including on the transaction mentioned in the MOU found during search. We find that in PCIT Vs Mukesh Keshav Lal Patel [ 2020 (3) TMI 129 - GUJARAT HIGH COURT] while relying on the decision of Vineeta Gupta [ 2014 (5) TMI 543 - DELHI HIGH COURT] held that declaration made by another party before ITSC is not binding upon the assessee, therefore, no addition can be made in absence of independent material. Thus, we do not find any infirmity or illegality in the order passed by ld CIT(A), which we affirm with our aforesaid observation. In the result, ground No. 1 of the appeal of revenue is dismissed. Addition on substantive basis and on protective basis - CIT(A) was of the view that it is an undisputed fact that the documents relied upon for making additions were found from the third party. Such documents are not signed by any one, not in the writing of assessee, thus deleted both the additions - HELD THAT:- We find merit in the submissions of assessee that the Assessing Officer made addition on the basis of guess work. There is no direct evidence against the assessee to connect the assessee with the investment made for purchase of flat No. A-501 and G-901. We find that search party recorded statement of Aagam Vadecha on 30/09/2015 in post search proceedings and Aagam Vadecha has not identified the assessee. In the course of assessment, the assessee asked for cross examination of Aagam Vadecha but he neither attended the proceedings nor sent any reply on his behalf. No independent investigation was carried out by Investigation Wing or by the Assessing Officer about the investment in Enn Enn Corporation about the purchase of flat No. A-501 or G-901. There is no evidence on record that the assessee has not purchased any such flat hence there is no occasion for making such investment with Enn Enn Corporation. Thus, we do not find any justification to interfere with the findings of the ld CIT(A), which we affirm. In the result, ground No. 2 3 of the appeal is dismissed.
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2023 (9) TMI 440
Penalty levied u/s 271D - contravention of Section 269SS - assessee did not substantiated the loan from the balance that the said loan was not in cash - HELD THAT:- As there was no regular assessment done in assessee s case as the assessee is an agriculturist. Further, AO as well as the CIT(A) has not doubted the bank statement of the assessee wherein the amount which was transferred from The Berna Gamni Seva Sahkari Mandali Ltd. was shown - The transactions as well as the ledger alongwith the certificate issued by The Berna Gamni Seva Sahkari Mandali Ltd. was not doubted by the revenue authorities. Thus, the loan was accepted through banking channel and there was no cash involved in the present transactions. Therefore, Section 269SS does not attract. Thus, the penalty levied under Section 271D does not sustain. Appeal of assessee allowed.
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Customs
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2023 (9) TMI 467
Disciplinary proceedings against the Revenue office (Deputy Commissioner) - Case of involvement in fraudulent duty drawback case - Charge sheet is yet to be filed - Continued and prolonged suspension of petitioner for more than five and a half years is arbitrary - violative of Articles 14 and 21 of the Constitution of India - HELD THAT:- It is well settled that even though suspension is not specified under Rule 11 of Central Civil Services (Classification, Control Appeal) Rules, 1965, as a punishment, an order of suspension affects a government servant injuriously in case departmental inquiry is not concluded within a reasonable time. In that sense, the continued suspension in a pending departmental inquiry becomes punitive in nature and as such if any employee is kept under suspension for unreasonably long period, the same may be unjustified. Reverting back to the facts of the present case, it may be noticed that petitioner faces serious and grave charge for aiding in smuggling and committing drawback frauds and other anti-departmental activities, for which sanction also stands granted for prosecution in respect of four out of five cases. Penalty also stands imposed in the proceedings under Section 112(a) 112(b) and under Section 114AA of the Customs Act, 1962. Further, proceedings also stand initiated against the petitioner under Prevention of Corruption Act, apart from departmental proceedings. The continuation of investigation by various agencies after the earlier round of litigation, appears to be the sole reason for non-issuing of charge-sheet to the petitioner and also resulted in continued suspension. Considering the serious nature of charges, which have remained under investigation by various agencies against the petitioner and public interest, the contention raised by learned counsel for the petitioner cannot be accepted, that since the petitioner has not been responsible for delay in conduct of investigation or other proceedings, he deserves to be reinstated. The revocation of suspension and reinstatement of the petitioner, in the peculiar circumstances cannot be directed merely because the charge-sheet could not be issued to the petitioner - Petition dismissed.
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2023 (9) TMI 466
Clearance of Capital goods from SEZ to DTA under EPCG - appellant not exited from Special Economic Zone - eligible for clearing the capital goods under the prevailing Export Promotion Capital Goods Scheme or not - Rule 74(4) of the SEZ Rules, 2006 - HELD THAT:- Under the provisions in which SEZ Scheme operates, under Section 30 of the SEZ Act, 2005, terms of removal of goods from SEZ to DTA on payment of Customs duties on the rate of duty and tariff valuation on the date of removal has been provided. Further, under Rules made to carry out the provisions of SEZ Act, 2005 i.e. S.E.Z Rules, 2006, under Rule 34 there is a prescription available that goods admitted in SEZ shall be used only for approved operations i.e. which is permitted through LOP by the Unit Approval Committee under Rule 49(1) of the SEZ Rules, 2006. Capital goods are allowed to be removed in DTA after use in a Special Economic Zone on payment of duty and depreciated value counted from the date commencement of production Rule 74 (4) SEZ rule, 2006. When the legislature has made a special provision by mentioning a particular export promotion Scheme to be availed only at the time of exit, same cannot be allowed to be freely availed at any time under a provision in which there is no prescription of capital goods to be cleared under EPCG Scheme is available. In this context, we are fortified in interpreting the provision of statute by the trite law that when a method has been laid down, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed, and thus, the prohibition in other provision not being mentioned specifically will not apply. In the present instance, stipulation of one time availment of EPCG Scheme at the time of exit cannot be read as permitting availment of EPCG Scheme under Rule 34 of SEZ Rules, 2006. Particularly under expression on license appearing in that Rule. Further the Export Promotion schemes since 1994 after existence of W.T.O are being made by member countries as compliant to the W.T.O provisions requiring no element of subsidy to be allowed even entering through procedural mechanism. Switchover thus from one scheme to another of capital goods needs to be construed strictly through specific mandate of the legislature and not liberally - E.P.C.G. till exit from SEZ unit is not available, nor has appellant produced any such mandate or opinion from administrative authorities like Dev. Commissioners approving such availment by customs - the order of Commissioner (Appeals) upheld. There are no merit in the appeal - appeal dismissed.
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2023 (9) TMI 465
Valuation of imported goods - old and used worn clothing, completely fumigated - restricted item or not - enhancement of value - 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%. Against the confirmed duties and the penalties the Redemption Fine imposed by the Adjudicating Authority, the Respondent has not filed any appeal. The redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice. Therefore, the redemption fine and penalty confirmed by the adjudicating authority are upheld - there are no infirmity in the impugned order and the same are upheld - appeal filed by the Revenue is dismissed.
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2023 (9) TMI 464
Demand of interest on differential duty - One Set of True Beam Linear Accelerator - Disputre were related to classification under CTH 90229030 or under 90221490? - wrongful availment of exemption under Customs Notification Nos. 021/2012 Sl.No. 473 and 021/2012 Sl.No. 95 - HELD THAT:- There is no contravention of provisions of Section 111 (m) of the Customs Act, 1962 as the assessee has declared all the details and the value of the imported goods in the Bill of Entry filed. As such, the confiscation of the imported goods is not justified, and so, set aside. Consequently, the fine imposed is also ordered to be set aside. Regarding Department s appeal for not confirming the demand of interest under Section 47 (2) of the Customs Act, 1962, the lower adjudicating authority has not given any reasons for such waiver. The only reason that can be inferred is that the imports of the goods were cleared under Zero Duty EPCG Scheme. The assessee has also referred to the decision of the Hon ble Apex Court in the case of PRATIBHA PROCESSORS VERSUS UNION OF INDIA [ 1996 (10) TMI 88 - SUPREME COURT] wherein it was held that when goods at the time of removal from warehouse are wholly exempted from payment of duty the liability to pay interest is solely dependent upon the exigibility or actual liability to pay duty. Though the above decision was rendered on the issue of demand of interest in respect of warehouse goods, same analogy can be drawn to resolve the issue in the present appeal as the assessee has not paid any duty on clearance of the impugned equipment - the fact is also noted that DGFT authority has permitted amendment of the EPCG authorisation issued providing for debit of differential duty demanded. As such, the interest is not demandable. So, the appeal filed by the Revenue is rejected. The confiscation of impugned goods is not justified and so redemption fine and penalty imposed are set aside. The appeal of the assessee is allowed and the Revenue s appeal on demand of interest on the differential duty arisen due to revision of classification is rejected.
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2023 (9) TMI 463
Levy of Social Welfare Surcharge (SWS) - Determination of SWS where basic customs duty is NIL - Appellant claimed exemption from customs duty provided under N/N. 24/2015-Cus. dated 08.04.2015 by producing Merchandise Export from India Scheme (MEIS) scrips - Case of Revenue is that since the customs duty was paid by the appellant through MEIS scrip, it was liable to pay 10% of the amount of BCD, representing the SWS - HELD THAT:- The benefit under MEIS scheme will be restricted upto Rs.1 lakh, which is commensurate to the volume of export achieved by the scrip holder. To ensure that the benefit under the MEIS is subject to achievement of the export obligation, though the Central Government has exempted the goods, vide notification dated 08.04.2015 - Relevance of the condition is to the effect that, though the goods imported under MEIS scrip are exempted from payment of customs duty, but to ensure that the incentive is within the permissible limit, the devise of maintaining the records have been prescribed therein. Such maintenance of records is in context with the Foreign Trade Policy, which have to be monitored by the agencies empowered under such policy i.e., the Ministry of Commerce, through the Director General of Foreign Trade. In the present case, it is not in dispute that the licensing authority has raised any objection with regard to non-observance or nonfulfillment of the conditions mentioned in the notification dated 08.04.2015. Thus, it would not be proper on the part of the authorities to say that debit of customs duty in the MEIS scrip would disentitle the imported goods from the claim of the benefit of Zero rate SWS. Since, the effective rate of the customs duty is NIL or Zero , by virtue of the notification dated 08.04.2015, the rate of SWS would automatically become zero , inasmuch as SWS is to be calculated not on the value of the goods, but on the duty of customs levied on the imported goods, which is evident from sub-section (3) of Section 110 of the Finance Act, 2018. The said statue has mandated that SWS levied under Sub-section (1) of Section 110, shall be calculated at the rate of 10% on the customs duty levied and collected by the Central Government. In the present case, since no customs duty is leviable in terms of notification dated 08.04.2015, there is no question of payment of SWS. On account of the BCD having been wholly exempted vide notification dated 08.04.2015, the calculation of SWS @ 10% of the basic customs duty would also be zero only. Thus, in effect, it is clarified that there is no SWS which needs to be paid by the importer-appellant. Review Petitions against the judgement of the Hon ble Bombay High Court it the case of LA TIM SOURCING (INDIA) PVT. LTD., LA TIM LIFESTYLE RESORTS LTD., GOPANI IRON POWER (INDIA) PVT. LTD. VERSUS THE UNION OF INDIA AND OTHERS [ 2019 (10) TMI 506 - BOMBAY HIGH COURT] and LA TIM METAL INDUSTRIES LIMITED VERSUS THE UNION OF INDIA AND ORS. [ 2022 (11) TMI 1099 - BOMBAY HIGH COURT] - No satisfactory explanation was furnished by the learned AR. Further, it is also found that though he has submitted that the Review Petitions have been filed before the Hon ble Court, but no copy of such petitions were placed before the Bench. Since, the said judgements are in operation, this Tribunal is bound to follow the ratio decided therein. There are no merits in the impugned orders passed by the learned Commissioner (Appeals) - impugned orders set aside - appeal allowed.
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2023 (9) TMI 462
Preferential rate of duty - Imports of gold jewellery / diamond studded gold jewellery effected from Thailand - Benefit under notification no. 85/2004-Cus dated 31st August 2004 claimed - collusive arrangement of buyer and seller - validity of certificates of origin - HELD THAT:- Preferential rates are accorded through deliberate policy making and from bilateral/multilateral engagement; these deviations from standard rates are usually attended by comprehensive means of ascertainment and verification. Assigning of rates of duties chargeable on imported goods is a legislative function of the State. As the custodian of ways and means , it is the government that is responsible and accountable for dilution of such rates in public interest which reflects tax policy or exigency of international cooperation and the latter emerging from calibrated negotiations culminating in trade and economic agreements. In the present case, the issue is restricted to the rate chargeable under the authority of section 12 of Customs Act, 1962 without foraying at all into the classification and valuation aspects. It is of essence that, in such determination, the usual presumptions built into the assessment system are eschewed for strict adherence to the scheme of preferential rate else policy formulation at the governmental level will be held to ransom by the statics of administration of tax which is averted to the application of rules for classification incorporated in Customs Tariff Act, 1975 and that for valuation in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Operational Certification Procedure is not only elaborate but also sets out details that can lead to rejection of certificate for non-conformity. It is not the case of Revenue that these are a remote possibility. Rule 15 of Interim Rules of Origin is unambiguous about the procedure for retroactive check of the certificates and the circumstances prompting the same - turning to the response of the Department of Foreign Trade, Thailand dated 31st July 2014 that has been referred to in the arguments of Learned Authorized Representative, It appears that a different construction has been placed on the report supra by First Secretary (Economic Commerce) in communication of Embassy of India, Bangkok dated 13th August 2014 restricting the authentication to 59 of the certificates while a plain reading of the parent report appears to authenticate all the certificates while advising on apparent ineligibility of these 59 certificates for some non-compliance. This misinterpretation by the overseas mission appears to have informed the proceedings culminating in the impugned order. That, however, does not suffice to negate the entirety of the certificates or even the 59 in the absence of details for computation of the local value added content in rule 6 of Interim Rules of Origin. In M/S R.S. INDUSTRIES (ROLLING MILLS) LTD., SHRI R.S. PATODIA, DIRECTOR AND SHRI MAHESH CHAND GUPTA, M.D. VERSUS CCE, JAIPUR I [ 2017 (11) TMI 1256 - CESTAT NEW DELHI] , it has been held that in the presence of valid certificates of origin issued by Competent Authority, the assessing authorities in India are not right in denying the benefit of exemption notification. There are no justification for discarding of the certificates of origin by the adjudicating authority - impugned order set aside - appeal allowed.
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Insolvency & Bankruptcy
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2023 (9) TMI 461
Interpretation of statute - Scope of the term OR - Regulation 39(1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - whether the word or in the said sub-regulation should be read as in addition to and not to the exclusion of ? - HELD THAT:- NCLAT is right in observing that, the word or in the said sub-regulation should be read as in addition to and not to the exclusion of . This means that the resolution professional may, if envisaged in the request of the resolution plan, can allow under the said sub-regulation, modification of the resolution plan received, albeit only once. However, this will not have any effect on and bar recourse to the challenge mechanism when adopted by the Committee of Creditors to enable resolution applicants to improve/better their plans. Appeal dismissed.
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2023 (9) TMI 460
Condonation of delay of 200 days in preferring the present appeal - HELD THAT:- The delay is beyond the condonable period. Hence, the appeal is dismissed on the ground of delay. The impugned judgment and the delay in filing of the appeal shows that the time lines prescribed under the Insolvency and Bankruptcy Code, 2016 are not being followed and adhered to by the State of Karnataka. Corrective steps must be taken in this regard.
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2023 (9) TMI 459
Direction to Resolution Professional to submit documents in a sealed cover without e-filing - whether there exists provisions in the Code in which the shareholders can ask for such documents from Resolution Professional? - HELD THAT:- Resolution Plan with regard to Corporate Debtor has already been approved by the Adjudicating Authority on 01st August, 2023 in which plan the Adjudicating Authority has already observed that it has looked into the documents and materials provided by the Resolution Professional. In the facts of the present case where Resolution Plan has already been approved the Order which was passed by the Adjudicating Authority on 05th June, 2023 has outlived its purpose. The Adjudicating Authority is fully empowered to issue any direction to Resolution Professional or any other party to give any information or evidence. The Resolution Professional has complied the Order dated 05th June, 2023 and filed the relevant evidence. At this stage, where Resolution Plan has already been approved, the issues raised by the Appellant has become academic and needs no further consideration in this Appeal. There are no reason to interfere with the Order dated 05th June, 2023 - appeal dismissed.
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Service Tax
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2023 (9) TMI 458
Maintainability of petition - petitioner has filed voluminous records before this Court to substantiate that the impugned order that has been passed by the respondent is liable to be set aside - HELD THAT:- There are several disputed questions of fact involved in the writ petition, which cannot be adjudicated in the writ proceedings. The petitioner has filed as many as 22 volumes of documents. These documents pertain to the accounts maintained by the petitioner vis-a-vis the final statements of the petitioner with the Bank. Therefore, this Writ Petition cannot be entertained. Ordinarily, as against the impugned order, the petitioner should have filed a statutory appeal before the Customs Excise and Service Tax Appellate Tribunal (CESTAT) within a stipulated period under Section 86(1) of the Finance Act, 1994. However, the period for filing the appeal has expired by the time when the present writ petition was filed on 07.06.2023 - the CESTAT has powers to condone the delay under Section 86(5) of the Finance Act, 1994. Therefore, this Writ Petition is dismissed by giving liberty to the petitioner to file a statutory appeal before the CESTAT within in a period of thirty days from the date of receipt of a copy of this order.
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2023 (9) TMI 457
Valuation - inclusion of value of free supply of material like steel pipes and valves supplied by M/s. GSPC Gas Company Limited to the appellants in the gross amount charged for the purpose of discharging service tax liability under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 as amended by Notification No. 23/2009-ST dated 07.07.2009 - HELD THAT:- As per the provisions of Section 67 of Finance Act, 1994 for the valuation of service on which service tax is to be charged, any consideration flown from the service recipient to the service provider either in the monetary form or in any other form which is not ascertainable such benefit which flow back to the service provider need to be included in the gross amount charged for levy of service tax - the consideration which is not received by the service provider shall not form part of taxable value under the term gross amount charged under Section 67 for levy of service tax. The issue is no longer res-integra as the matter has already been decided by Hon ble Apex Court in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [ 2018 (2) TMI 1325 - SUPREME COURT ], where it was held that The value of the goods/materials cannot be added for the purpose of aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005. It is clear from the above that the service tax is to be levied in respect of taxable services and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added. The impugned order-in-original set aside - appeal allowed.
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2023 (9) TMI 456
Classification of services - Auctioneering services or not - conducting sale of goods by tender - HELD THAT:- The issue stand decided in the case M/S. THE SALEM STARCH SAGO MANUFACTURERS SERVICE INDUSTRIAL CO-OPERATIVE SOCIETY LTD. VERSUS CCE ST, SALEM [ 2018 (3) TMI 192 - CESTAT CHENNAI] , where the Tribunal observed while both sale by tender and sale by auction may have a common intendment of selling the goods, the modalities and the processes involved in each are very different and the impugned activities will be leviable to service tax under the scope of Auctioneer Service, cannot sustain. The demand cannot sustain and requires to be set aside - appeal allowed.
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2023 (9) TMI 455
Refund of CENVAT Credit - Information Technology Software Services (ITSS) and Business Support Services (BSS) - export of taxable services - rejection on the ground that it was not providing any taxable service for which they are not eligible for refund of CENVAT Credit allegedly used for export of non-taxable services - HELD THAT:- The said two services namely ITSS and BSS which are reflected in the ST-3 returns including sample returns annexed at page 109 and 112 of the appeal memo are taxable services and only because of the benefits of Notification No. 09/2005-ST was availed by the Appellant that provided exemption for export of services, Service Tax was not payable - However, it was held by Hon'ble Karnataka High Court in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT] that CENVAT Credit is available though the export of service is not a taxable service. Further, the findings of the Commissioner (Appeals) that Appellant s case fits into the ratio of LALLY AUTOMOBILES PVT. LTD. VERSUS COMMISSIONER (ADJUDICATION) , CENTRAL EXCISE [ 2018 (7) TMI 1679 - DELHI HIGH COURT] is untenable since it was passed in respect of trading which is not at all a service as per Article 366(29A) of the Constitution of India and, therefore, considered as exempted from Service Tax purview. The other ground of rejection of refunds relates to the description contained in the invoices which are admittedly in short forms which is not at all tenable for the reason that neither any query was made during personal hearing to find out the full forms of those descriptions given in the invoices nor the kind of services rendered in the service agreement was tallied with to ascertain the truth - Be that as it may, it is a settled position of law after pronouncement of the mPortal India Wireless Solution Private Limited judgment that export of software services even if not considered as taxable services, the exporter shall be entitled to get refund of CENVAT Credit which cannot even be denied on limitation ground apart from the fact that attempt for re-classification at the time of deciding on the refund application without a show-cause notice demanding duty followed by a proper adjudication process is untenable in law. The services rendered by the Appellant are defined as taxable services under 65(105) of the Finance Act, 1994 but for the purpose of export only they were allowed to export the same without payment of Service Tax but that by itself would not put the services under the category of unentitled service, so as to deny CENVAT Credit and consequential refund to the Appellant. Appellants are entitled to get refund of Rs.6,84,91,885/- + Rs.13,00,32,070/- with applicable interest and the Respondent-Department is directed to pay the same within three months of receipt of this order - Appeal allowed.
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2023 (9) TMI 454
Levy of Service Tax - works contract service - activity for railway tracks and other support structures etc. for NTPC, Bihar State Power Generation Company Limited (BSPGCL), Kanti Bijli Utpadan Nigam Limited (KBUNL), BTPS and SAIL - exemption N/N.17/2005-ST dated 07.06.2005 and under Clause 14 (a) of exemption N/N. 25/2012-ST dated 20.06.2012 - HELD THAT:- The same issue came up before this Tribunal in the case of Konkan Railway Corporation Limited [ 2023 (2) TMI 1175 - CESTAT MUMBAI] , wherein this Tribunal has observed that The Railways Act, 1989 was enacted to authorize Government of India to operate the railway network of the country; it also affords a framework for administration of the railway services and jurisdictional monopoly. The taxable service in Finance Act, 1994 excluding railways from the ambit of the service did not place any restriction on benefit going to private railways. The statute, 10 ST/86191/2021 too, did not consider it necessary to fall back on the definition of railways in another statute for determination of taxability and it is not open to the adjudicating authority to arrogate that privilege in an executive capacity. The intent of exclusion prior to 1st July 2012, and exemption for the period, thereafter, is abundantly clear. The issue is no more res-integra and the appellant is entitled for benefit of Notification No.17/2005-ST dated 07.06.2005 prior to 01.07.2012 and under Notification No.25/2012-ST dated 20.06.2012 for the period post 01.07.2012. There are no merit in the impugned order and the same is set aside - appeal allowed.
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Central Excise
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2023 (9) TMI 453
Levy of Additional Excise Duty under Additional Duties Of Excise (Textiles And Textile Articles) Act, 1978 - date of manufacture of goods is decisive in determination of levy in case of Excise Duty - HELD THAT:- Both the lower authorities upheld the demand relying upon the decision in the matter of COLLECTOR OF C. EX., HYDERABAD VERSUS VAZIR SULTAN TOBACCO CO. LTD. [ 1996 (2) TMI 138 - SUPREME COURT] in which it was held that even if goods were manufactured prior to the date of the same becoming dutiable, but were cleared later, the same become subject of levy of duty from the date of levy and such goods shall not be leviable to Excise Duty, if produced earlier. In short, the Hon ble Supreme Court held that it is point and date of levy which is important and not the point or date of clearance of the goods to determine, if the goods manufactured were dutiable or not - The Hon ble Apex Court also held the recovery of duty according to the date of removal does not make removal to be the taxable event for Central Excise. While it is true from the analysis of aforesaid decisions that the impugned goods i.e. Yarn in this instance were taxable as on the date they were manufactured as levy was subsisting. On the date of clearance, on withdrawal of levy, the applicable rate of A.E.D had become Nil . Therefore as, on the date of clearance Nil rate of A.E.D. shall be applied to the goods cleared. The demand does not sustain. Appeal is therefore allowed.
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2023 (9) TMI 452
Recovery of alleged excess grant of rebate - in terms of Notification No.02/2011-CE dated 01.03.2011, Excise Duty in excess of 5% was exempted whereas the appellants paid duty at the rate of 10% - HELD THAT:- A conjoint reading of the provisions of Section 5 and the notification cited above reveals that the impugned goods are partially exempted; a manufacturer has no choice to pay duty when it is wholly exempted; however, when the item is partially exempted and that there is no prescription that the manufacturer shall not pay duty at the higher rate. Further, as submitted by the learned Counsel for the appellant, Notification No.19/2004 provides for the payment of rebate of duty paid and not the duty payable . Therefore, it is found that there is no reason as to why the contention of the appellants should not be accepted - the issue of availability of choice, of not opting for an exemption notification, to the manufacturer has been decided by the Tribunal in many cases. Tribunal in the case of BOMBAY DYEING MANUFACTURING CO. LTD. VERSUS CCE., MUMBAI-IV [ 2000 (6) TMI 98 - CEGAT, MUMBAI] held that It is settled law that an exemption has to be claimed and that the burden of proving that he falls within the exemption falls upon the person who claims it. In such cases therefore we must independently of our earlier reasoning come to the conclusion that there is always an element of choice in availing of an exemption notification. As far as availability of rebate is concerned, the notification providing for rebate talks of duty paid rather than duty payable and as such a manufacturer-exporter has a choice to pay the duty as per the basic rate or after availing the partial exemption and rebate shall be granted on the duty paid . We find that this issue was settled by the Tribunal in the case of AJANTA MANUFACTURING LTD. VERSUS COMMISSIONER OF C. EX. CUS., RAJKOT [ 2009 (4) TMI 655 - CESTAT, AHMEDABAD] which was upheld by the Hon ble Supreme Court in COMMISSIONER VERSUS AJANTA MANUFACTURING LTD. [ 2011 (4) TMI 1394 - SC ORDER] - Tribunal observed that The very fact that no provision has been made in Section 5A while amending the same to prohibit manufacturer from paying duty in case of unconditional partial exemption at higher rate, the appellant cannot be found fault with for having paid higher rate of duty. Further it is to be observed that having advised the appellant to reclassify the product under a different heading holding the same ineligible for a partial exemption, the departmental officers should not have rejected the refund claim. Thus, the appellants are eligible for the rebate of the duty paid irrespective of the fact as to whether a partial exemption was applicable to the impugned goods. The appellants further contended that the Department has not appealed against the rebate order and no higher authority has set aside the same; therefore, the rebate alleged to have been erroneously granted cannot be demanded by way of a show-cause notice issued under Section 11A of the Central Excise Act, 1944. We find that the Tribunal in the case of SHREE NATH INDUSTRIES VERSUS C.C.E., JAMMU [ 2018 (5) TMI 195 - CESTAT CHANDIGARH] held that In this case, it is the case of the Revenue itself that they were not required to pay duty, therefore, the excess amount paid by the appellant is merely a deposit not a duty. Hence, the provisions of Section 11A of the Act, is not applicable to the case. In that circumstances, the appellant is not required to pay the excess refund claimed by them. The appellants have already paid duty at the rate of 10%. In case, they are to pay back the additional 5% rebate, Department requires to credit the excess 5% duty paid into CENVAT account. Since, CENVAT account is no more in existence; it is a foregone conclusion that the refund, if any, requires to be paid in cash - no purpose will be served if the rebate, alleged to have claimed and sanctioned in excess, is recovered and the 5% of excess duty paid is refunded by way of cash refund. Such an act would be not only revenue neutral but would be a futile academic exercise. Appeal allowed.
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2023 (9) TMI 451
Inoperability of CENVAT credit in relation to job work - coverage by scheme for discharge duties of central excise at the final stage of manufacture by the principal as set out in notification no. 214/86-CE dated 25th March 1986 - Exempt goods or not - HELD THAT:- The Larger Bench of the Tribunal has, in STERLITE INDUSTRIES (I) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2004 (12) TMI 108 - CESTAT, MUMBAI] , held that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. The impugned order is contrary to settled law and must be set aside - Appeal allowed.
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2023 (9) TMI 450
Classification of goods - construction chemicals - impugned products are classifiable under Chapter Sub-Heading 3824 40 10 or under Chapter Sub-Heading 3824 90 90 - products are required to be assessed/valued under the provisions of Section 4 or 4A of the Central Excise Act, 1944? - HELD THAT:- Appellants in their written submissions dated 1.7.2013 have stated that Dr. R. Sundaravadivelu, FNAE, Professor of Department of Ocean Engineering, IIT Madras had certified regarding the characteristics of each product and there is also letter dated 28.6.2013 from Dr. R. Nagendra, Technical Director from Civil-Aid Technoclinic Pvt. Ltd. wherein technical opinion is given in some of the products - Therefore, the adjudicating authority are directed to consider all the test reports/technical opinions placed on record by the appellant along with the opinion given by IIT, Madras before concluding the classification of the above products. Since the valuation under Section 4A of the Central Excise Act, 1944 depends on the classification of the products, the same may be considered after redetermining the classification based on the technical reports. Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2023 (9) TMI 449
Condonation of delay of 322 days in filing and 149 days in re-filing the Special Leave Petition - HELD THAT:- The delay is also exorbitant. Hence, the Special Leave Petition is dismissed both on the ground of delay as well as on merits.
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2023 (9) TMI 448
Seeking restoration of the statutory appeal before the appellate authority - application for restoration was dismissed on the ground that he had not raised any valid ground for seeking restoration of the appeal - unsuccessful in availing the benefit under the Amnesty scheme - HELD THAT:- The appellate authority as well as the High Court ought to have permitted the appellant herein to seek restoration of his appeal before the appellate authority so that the same could have been heard on merits. After all, the appellate authority was seized of the appeal which was in the nature of a statutory appeal and if the appellant was unsuccessful therein he had further remedies in law. In view of the application filed by the appellant being rejected, neither the appeal has been restored nor has he been heard on merits and further remedies have also been foreclosed. On that short ground alone, the orders of the High Court as well as the appellate authority on the application filed by the appellant herein are set aside. The appeal before the KVATA No.174/2019 which was pending before the Joint Commissioner of Appeals is restored on the file of the said authority. Appeal allowed.
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2023 (9) TMI 447
Demand on pre-deposit even though it is accepted that no sales were made by the Appellant - demand of pre-deposit even though it is not in dispute that the fraudulent refund was pocketed by the consultant Mr. Sunil Shah through fraudulent bank account - demand of huge pre-deposit even though it was specifically pointed out that the business of the appellant is closed and it is facing financial crisis - HELD THAT:- The matter is remanded back to the first appellate authority so as to decide the appeal filed by the appellant within a period of four weeks from the date of fulfilling of the aforesaid conditions. The appeal is, accordingly disposed of.
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2023 (9) TMI 446
Benefit of Vera Samadhan Yojana-2019 - Short payment of tax - after filing of the return, it was noticed that there was an error in tax computation - HELD THAT:- Considering the material on record it is not in dispute that the petitioner has paid the entire amount of the outstanding dues as per the corrected intimation and assessment order prior to the date prescribed under the Vera Samadhan Yojna-2019 i.e. 31.08.2021. The petitioner has also deposited Rs. 1,31,643/- on 5th March, 2021 after the assessment order was passed on 31.12.2020. Thus, the petitioner has deposited the entire amount as per the assessment order. The petitioner is entitled to the benefit of the Vera Samadhan Yojana- 2019 and merely because the respondent No. 3 has changed the figure of payment to be made by the petitioner in the intimation as the figure shown in the in the intimation was erroneous, cannot come in way of the petitioner in the facts of the case to deny the benefit of the Vera Samadhan Yojna-2019 Scheme which is a benevolent scheme for the assessees floated by the State of Gujarat so as to see that the principal amount of tax is recovered on waiver of interest and penalty, if any, so as to reduce the future litigation. The impugned communication dated 20.07.2022 is hereby quashed and set aside - Petition allowed.
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2023 (9) TMI 445
Disallowance of ITC - various inputs purchased locally and interstate and used by the petitioner in the manufacture of PVC pipes - Case of petitioner is that the input tax credit was availed only in respect of the raw materials purchased locally and the said raw materials were entirely consumed in the manufacture of that quantity of PVC pipes that were sold within the State - HELD THAT:- As rightly pointed out by the learned Government Pleader, the consistent finding of the First Appellate Authority and the Tribunal is that no records/accounts were produced by the petitioner before them to substantiate the contention that no input tax credit was availed on the tax paid on raw materials/inputs purchased from outside the State and further that the said inputs were used exclusively for the manufacture of that quantity of PVC pipes which were eventually stock transferred outside the State. In the absence of a clear bifurcation in the accounts between the two streams of supply of PVC pipes, namely, (1) through stock transfer outside the State and (2) through sale within the State, the authorities below cannot be faulted for having disallowed input tax credit proportionate to the quantity of PVC pipes that were stock transferred to outside the State. The O.T.Revisions are therefore disposed by answering the questions of law raised in favour of the revenue and against the assessee.
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Indian Laws
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2023 (9) TMI 444
Dishonour of Cheque - jurisdiction to entertain a complaint - cheque was presented for collection through State Bank of India, Chennithala branch, Alappuzha District, within the jurisdiction of Judicial First Class Magistrate Court-1, Chengannur - complainant at present residing within the jurisdiction of Chengannur Court - Section 142(2)(a) or (b) of the NI Act. When the payee or holder in due course presents a cheque through an account maintained by the payee or holder in due course in a bank within the jurisdiction of a court, whether the court, where the cheque was presented for collection, has jurisdiction to entertain the complaint, alleging commission of offence under Section 138 of the NI Act? HELD THAT:- As per the decision in Dashrath Rupsingh Rathod v. State of Maharashtra and Anr. reported in [ 2014 (8) TMI 417 - SUPREME COURT ], the Apex Court, while overruling the ratio of the decision in K.Bhaskaran v. Sankaran Vaidhyan Balan reported in [ 1999 (9) TMI 941 - SUPREME COURT ], held An interpretation should not be imparted to S.138 which will render it as a device of harassment i.e. by sending notices from a place which has no casual connection with the transaction itself, and/or by presenting the cheque(s) at any of the banks where the payee may have an account. Indubitably, Section 142 of the NI Act was amended and Section 142-A was introduced with effect from 15.06.2015, to clarify the jurisdictional issue and to address the crisis of transfer of cases as per the ratio in Dashrath Rupsingh s case [ 2014 (8) TMI 417 - SUPREME COURT ]. The word delivered used in Section 142(2)(a) of the NI Act has no significance and significance must be given to the text for collection through an account . That is to say, delivery of the cheque takes place where the cheque was issued and presentation of the cheque will be through the account of the payee or holder in due course, and the said place is decisive to determine the question of jurisdiction. Therefore, challenge raised by the learned counsel for the petitioners referring definition of the word delivered contemplated under Section 46 of the NI Act could not succeed. This petition is found to be meritless and is accordingly dismissed.
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2023 (9) TMI 443
Dishonour of Cheque - security cheque or not - acquittal of accused - holder of cheque on the date of presentation viz. 31.12.2004. Security cheque or not? - Whether the learned Magistrate committed error in recording finding that the complainant was having custody of the cheque on the date when the transaction was entered upon between the parties? - HELD THAT:- On evaluation of the cross-examination of the complainant, it has come on record that the date, amount and name in disputed cheque was entered by the accused. Such admission of part of complainant indicate the date 31.12.2004 being entered by accused - Even otherwise, if one looks at provisions of Section 138(a) of the Act, it prescribes the date inscribed on cheque as the date on which cheque was drawn. The same is provided for the purpose of determining validity of the cheque. However, the fact remains that the issuance of cheque in light of the aforesaid provisions shows as 31.12.2004 . Period of limitation - Whether the complainant be treated as holder of cheque on the date of presentation viz. 31.12.2004, to attract the offence under Section 138 of the N.I. Act? - HELD THAT:- In the present case, at no stage, evidence has been adduced by the complainant to show that within the prescribed period of limitation, the debt was acknowledged by the accused in writing, which is required under Sub-Section (3) of Section 25 of the Indian Contract Act. The period of limitation of three years is to be computed as provided under Article 19 of the Limitation Act, which provides for the money payable within three years from the date of loan. The date on which loan was advanced, makes the present transaction time barred as on 31.12.2004. Admittedly, the date of loan as emerged on record is 15.12.1998 and by applying the prescribed period of three years, as per Article 19 of the Limitation Act, would come to an end on 15.12.2001, whereas the disputed cheque bears the date 31.12.2004. In absence of any document being brought on record by the complainant that the debt was acknowledged during the prescribed period of limitation, the cheque was time barred. In light of the decision of the Hon ble Supreme Court in the case of Sasseriyil Joseph [ 2001 (9) TMI 1177 - SC ORDER] , the same cannot be treated as legally enforceable debt or other liability as appeared in the Explanation attached to Section 138 of the N.I. Act. The appeal is found to be devoid of any merit and hence, the same stands dismissed.
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2023 (9) TMI 442
Dishonour of Cheque - insufficient funds - notice not served upon to the applicants / Directors of the company - HELD THAT:- It appears that complainant issued demand notice and the same was served to the accused no.1 Company on 29/11/2018. However, in spite of the notices issued to accused No. 2 to 5 addressed on same postal address of accused No. 1 Company, returned unserved to the accused No. 2 to accused no.5 by the postal department with an endorsement Not Delivered Unclaimed on 29/11/2018, hence the legal demand notice to accused No. 2 to 5 may be considered as deemed service under Section 22 of General Clauses Act. All the accused failed to clear their cheque value and neglected to make the payments to the Complainant. It appears from the record that the cheque has been dishonoured with remarks of Funds Insufficient and the accused have not complied with the legal demand notice. At this stage, in a recent decision of the Hon ble Supreme Court in case of Neeharika Infrastructure Pvt. Ltd. Vs. State of Maharashtra and Ors., [ 2021 (4) TMI 1244 - SUPREME COURT] , is required to be referred to. After taking into consideration the earlier decision on exercising the powers under Section 482 of the Code of Criminal Procedure including the decision of State of Haryana V. Bhanaj Lal, [ 1990 (11) TMI 386 - SUPREME COURT] - In view of the finding given by the Apex Court in case of Neeharika Infrastructure Pvt. Ltd., it transpires that the power of quashing of criminal proceedings should be exercised very sparingly and with circumspection and that too in rarest of the rare cases and it was not justified for the Court in embarking upon an inquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the inherent powers do not confer any arbitrary jurisdiction on the Court to act according to its whims and fancies. It appears from the order of issuance of summons passed by learned trial court on 04.09.2019 that under the court inquiry under Section 202 of the Code of Criminal Procedure, the complainant has been heard wherein he has stated that when the offence was committed by the accused no.2 to 5, at that time time they were responsible Directors and involved in the day to day affairs of the company, therefore, offence is made out against them and requested to issue process against them under Section 141 of the NI Act and while considering the complaint as well as documentary evidences produced during the inquiry under Section 202 of the Code, the learned trial court has passed order of issuing process against the accused no.1 to 5. Thus, no case is made out to quash the criminal proceedings at this stage while exercising the powers under Section 482 of the Code of Criminal Procedure. No interference is required in the order passed by learned trial court vide order dated 04.09.2019 regarding issuance of process against the accused no.1 to 5 and accordingly, present application stands rejected.
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