TMI Tax Updates - e-Newsletter
September 14, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Expiration of e- way bill and “minor negligence” will not amount to tax evasion

   By: Bimal jain

2. Are you ready for "Round 2" of TRAN-1/2?

   By: Navjot Singh

3. Advance ruling application can be admitted during inquiry or investigation as it is not a ‘proceedings’

   By: Bimal jain

4. SAT HAS MADE MOCKERY OF APPEALS – PATENTLY WRONG ORDERS OF THE SECURITIES APPELLATE TRIBUNAL MUMBAI (SAT) – DIRECTING APPELLANTS TO FILE SETTLEMENT APPLICATION WITHIN SHORT TIME THOUGH SCHEME PROVIDE LONGER TIME.

   By: DEVKUMAR KOTHARI and CA UMA KOTHARI

News

1. Auction for Sale (issue/re-issue) of (i) ‘6.69% GS 2024’, (ii) ‘7.10% GS 2029’, (iii) ‘7.26% GS 2032’ (iv) ‘New GS 2062’

Notifications

GST - States

1. 197155-FIN-CT1-TAX-0001/2022 - dated 5-8-2022 - Orissa SGST

Seeks to amend Notification No. 5327-FIN-CT1-TAX-0001-2022, dated the 7th March, 2022

2. 18423-FIN-CT1-TAX-0001/2022 - dated 21-7-2022 - Orissa SGST

Odisha Goods and Services Tax (Amendment) Rules, 2022

3. 18041-FIN-CT1-TAX-0001-2022 - dated 18-7-2022 - Orissa SGST

Notification to amend Notification No. 19869 dated 29.06.2017 bearing S.R.O. No. 305/2017 regarding rate of tax on services

4. 18033-FIN-CT1-TAX-0001-2022 - dated 18-7-2022 - Orissa SGST

Amendment in Notification No. 19873 dated 29.06.2017 bearing S.R.O. No. 306/2017 regarding exemption of tax on services

5. 18017-FIN-CT1-TAX-0001-2022 - dated 18-7-2022 - Orissa SGST

Rescinds Notification No. 33023 dated 14.11.2017 bearing SRO No. 551/2017

6. 18009-FIN-CT1-TAX-0001-2022 - dated 18-7-2022 - Orissa SGST

Amendment in Notification No. 8237 dated 07.03.2019 bearing S.R.O. No. 94/2019 regarding composition scheme for supplier of services

Circulars / Instructions / Orders

Income Tax

1. 18/2022 - dated 13-9-2022

Additional Guidelines for removal of difficulties under sub-section (2) of section 194R of the Income-tax Act, 1961

IBC

2. IBBI/PROS/53/2022 - dated 13-9-2022

Details of matters pending with Supreme Court of India and various High Courts

DGFT

3. 24/2015-20 - dated 12-9-2022

Inclusion of/ changes made in provisions in continuation to Public Notice No. 10/2015-20 dated 24.05.2022 and Public Notice No. 15/2015-20 dated 14.06.2022

Highlights / Catch Notes

GST

• High Court Grants Bail to Applicant in Fake Input Tax Credit Case; No Further Custody Needed, Trial Delayed.

  Case-Laws - HC : Seeking grant of Regular Bail - availing input tax credit by showing fake inward transactions - The department failed to point out the facts that the further custody of the applicant is necessary. The entire case is based on documentary evidence and same are in the custody of the department. After filing the complaint before the learned Metropolitan Magistrate Court, there is no chances to conclude the trial in a reasonable time. - Bail Granted - HC
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Income Tax

• Court Upholds Convictions for TDS Defaults; Compounding Rejected Due to Non-Disclosure of Prior Offenses u/s 276B.

  Case-Laws - HC : Compounding of offences punishable u/s 276B r.w.s.278B - non-disclosure of the prior conviction - repeated default in deposit of TDS - pending conviction orders with respect to FYs 2009-10, 2010-11 and 2011-12, which have been upheld by this Court on 15th October, 2018, until the said orders are set aside, there is no infirmity in the order of the authority in rejected the application for compounding - HC
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• Court Rules Section 148A Order Preliminary, Not Final; Section 148 Proceedings to Follow for Full Contest Opportunity.

  Case-Laws - HC : Reopening of assessment u/s 147 - validity of order u/s 148A - the Assessing Officer has passed an order u/s 148A of the Act which is not final adjudication but a preliminary order. The final proceedings are liable to be drawn under Section 148 of the Act, in which the petitioner will get the full opportunity to contest the matter. Writ Petition, being premature, is hereby dismissed. - HC
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• Senior Citizen's Tax Deduction Denial u/s 54 Overturned for Review on Property Acquisition Facts.

  Case-Laws - AT : Deduction u/s 54 - acquiring two separate properties or adjoining property - Sr. citizen - Recording my painful dissatisfaction and disappointment in the passing of orders of the authorities, I set aside the order for a factual verification on facts back to the file of the Assessing Officer. - AT
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• Liquidated damages not part of core shipping activities, excluded from Tonnage Tax Scheme's exempt income calculation.

  Case-Laws - AT : Exemption under Tonnage Tax Scheme - liquidated damages - disallowance of ‘other operating revenue’ claimed by the assessee as exempt income - liquidated damages cannot be held to be from the core activity of the shipping and does not form part for computation in tonnage tax. - AT
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• Penalty u/s 271(1)(c) Challenged: No Income Concealment Found; Assessment and Penalty Proceedings Are Distinct.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - It cannot be said that assessee has concealed the particular income with the meaning of section 271(1)(c) of the Act or there is not deep concealment for attaining as specified u/s. 271(1)(c) - assessment proceedings and penalty proceedings are distinct and findings given in the assessment proceedings though it constitutes good evidence cannot be conclusive in the penalty proceedings. - AT
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Customs

• Confiscation of Exported Iron Ore Fines Overturned; Penalty u/s 114 Invalid Due to Export Status.

  Case-Laws - AT : Confiscation of goods already exported - redemption fine in lieu of confiscation imposed - export of iron ore fines - Fe content of the iron ore fines - In a case where the goods have already been exported, it is impossible for the adjudicating authority to take possession of the confiscated goods. In other words, the officer cannot discharge his responsibility under section 126(2) of the Act. Even for this reason, the confiscation under section 113 and the consequential penalty under section 114 cannot be sustained in this case. - AT
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IBC

• Deed of Hypothecation: Not a Financial Debt, Cannot Classify Parties as Financial Creditors in Insolvency Cases.

  Case-Laws - AT : CIRP - Financial Creditors - The ‘Deed of Hypothecation’ is merely creation of security interest and a mere security of interest created by hypothecation or mortgage does not constitute a financial debt. From our commercial understanding ‘Deed of Hypothecation’ is not a ‘Deed of Guarantee’ - The ‘Deed of Hypothecation’ cannot be a basis to declare the parties as financial creditors - AT
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SEBI

• SEBI Act Enquiries Demand Broader Scope Than Income Tax Acts, Wider Grounds u/s 11C for Effective Oversight.

  Case-Laws - HC : Offence under SEBI - reasonable grounds to believe - Any enquiry that may be required to be made under the SEBI Act, 1992, would be of a broader compass than that of an enquiry to be made under the Income Tax Act either of 1922 or 1961. Correspondingly, the requirement of having a reasonable ground to believe for initiating an enquiry under Section 11C of the SEBI Act, 1992 would also have to be on the basis of a broader spectrum as regards the activities that the SEBI is required to regulate, promote or develop. - HC
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Service Tax

• High Court Rules "Work Contract Services" for Krishi Utpadan Mandi Samiti Exempt from Service Tax.

  Case-Laws - HC : In light of the functions and duties of the Krishi Utpadan Mandi Samiti, it is evident that the "Work Contract Services" provided by the respondent contractor to Krishi Utpadan Mandi Samiti is exempted from levy of Service tax - HC
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Central Excise

• Assessee's Role in CENVAT Credit Limited; Officers Must Ensure Compliance and Prevent Fraud with Authority to Inspect Records.

  Case-Laws - AT : CENVAT Credit - duty paying documents - reliability of the statements - The assessee is not an inspector and has no powers to examine the records of all the operators in its supply chain. It is for the officers who registered various entities and who receive regular returns, who audit their records and who have power to summon, seek information, search, seize etc., to ensure that no fraud is committed at their end. - AT
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VAT

• High Court Rejects Revenue's Appeals Due to Excessive Delays; Cites Negligence and Inefficient File Management.

  Case-Laws - HC : Condonation of delay of 163 days, 207 days & 197 days in filing appeal by Revenue - A perusal of paragraphs 3 to 8 of the application of condonation of delay would indicate that a very cavalier and casual attitude has been shown by the revisionist in filing the instant revision inasmuch as file and papers/permissions have been shunted from one desk to the other. Even though the file has reached the "ultimate destination" for drafting of the revision i.e to the concerned learned counsel for drafting of the revision in August, 2019 yet it has taken more than four months for the revision to be drafted despite limitation period of three months being prescribed under the statute for filing of a revision. - Delay not condoned - HC
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• Petitioner Challenges Ex Parte Reassessment Order; Objections on ITC Claim and Jurisdiction Unaddressed, Matter Remanded for Reconsideration.

  Case-Laws - HC : Violation of the principles of natural justice - exparte reassessment order - the petitioner has given a categorical reply to the notice dated 02.03.2022 wherein various objections have been raised with regard to the claim of ITC made by the petitioner and the jurisdiction of the department to initiate reassessment proceedings. None of the objections have been considered by the department - Matter restored back - HC
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Case Laws:

• GST

• 2022 (9) TMI 556
  Jurisdiction of the Commercial Tax Officer to issue show cause notice - competence of the Assistant Commissioner (Mobile Squad), Etah about the action of the officer intercepting the vehicle - HELD THAT:- In none of the paragraphs of the writ petition, it is indicated that the petitioner has submitted any reply to the show cause notice raising objections which are being made here in the present petition. There is no reason to entertain the writ petition challenging the show cause notice dated 17.08.2022 - Petition dismissed.

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• 2022 (9) TMI 555
  Seeking grant of Regular Bail - availing input tax credit by showing fake inward transactions - creation of fictitious firms/companies - Sections 132(1)(A), 132(1)(B) and 132(1)(C) of the Gujarat Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017, ready with Section 21 and 120B of the IPC - HELD THAT:- The applicant is working for and on behalf of the principal accused Mr. A.A.Shah and was charging commission amount. In such circumstances, when principal accused Mr. A.A.Shah granted bail by this court, subject to deposition of Rs.2 crore, the present application also deserves consideration. The department failed to point out the facts that the further custody of the applicant is necessary. The entire case is based on documentary evidence and same are in the custody of the department. After filing the complaint before the learned Metropolitan Magistrate Court, there is no chances to conclude the trial in a reasonable time. The applicant is directed to be released on bail with a condition that the applicant shall deposit Rs.10 lacs before the Office of the respondent no. 2 i.e Assistant Commissioner of State Tax, Unit-5, 11th Floor, B-Block, Multi-storied Building, Lal Darwaja, Ahmedabad within a period of 6 months in equal six installments - bail application allowed subject to conditions imposed.

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• Income Tax

• 2022 (9) TMI 554
  Compounding of offences punishable u/s 276B r.w.s.278B - repeated default in deposit of TDS - Rejection of Application for compounding - HELD THAT:- The petitioner has repeatedly defaulted despite receipt of show cause notice in 2014 and institution of complaints in 2016 - petitioner has admittedly been convicted by the criminal Court for FYs 2009-10, 2010-11 and 2011-12 for which inexplicably no compounding has been sought. The non-disclosure of the prior conviction in the compounding application is also admitted on record. This Court in exercise of its power of judicial review, reviews the process adopted by the adjudicating authority and whether the decision suffers from error of jurisdiction. In the present case, it is noted that the competent authority has duly applied its mind to the petitioner s application. It also issued a show-cause notice to the petitioner to explain the circumstances in which the material information pertaining to prior conviction was not disclosed in the petition. After considering the reply filed by the petitioner, respondent No. 1 has passed a reasoned order rejecting the compounding application of the petitioner. No infirmity in the impugned order passed by respondent No. 1 in exercise of his jurisdiction. The petitioner has not disputed the binding nature of the CBDT Guidelines, 2019 and in fact, in the judgment of K.M. Mammen [ 2022 (6) TMI 30 - MADRAS HIGH COURT ] relied upon by the petitioner itself, the Court had noted that CBDT Guidelines, 2019 issued under Section 279 of the Act are strictly binding on the authorities. The Court therein observed that the 2019 Guidelines are in fact, intended to guide the officers to bring a closure of cases, where there are extenuating circumstances for compounding offences on application filed under Section 279 (2) - SeeSangeeta Exports (P.) Ltd. [ 2008 (4) TMI 307 - DELHI HIGH COURT ] The facts of the present case are similar to the case of Anil Batra [ 2011 (7) TMI 332 - DELHI HIGH COURT ] the petitioner in the said case i.e. the assessee was a repeat defaulter and had been successfully convicted in the complaints filed against him. In these circumstances, we hold that pending conviction orders with respect to FYs 2009-10, 2010-11 and 2011-12, which have been upheld by this Court on 15th October, 2018, until the said orders are set aside, there is no infirmity in the order of the respondent No. 1 in light of Para 8.1(iii) of the CBDT Guidelines 2019. We however, observe that in the event, the petitioner succeeds in the Special Leave Petition filed before the Supreme Court, the petitioner will be entitled to apply for compounding of the offences for the Financial Years 2013-14, 201415 and 2016-17 and the said application, as and when filed, shall be considered by the Commissioner in accordance with law.

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• 2022 (9) TMI 553
  Reopening of assessment u/s 147 - validity of proceeding and order issued u/s 148A - whether impugned notice issued u/s 148 shall be deemed to have been issued u/s148A as substituted by the Finance Act, 2021? - HELD THAT:- Notices under Section 148A (d) of the Act have been issued to Rajendra Kumar Verma and Smt. Jaya Jain for taking up the matter for issuance of notice under Section 148 - Income Tax Returns of present petitioner and other two Rajendra Kumar Verma and Smt. Jaya Jain is liable to be examined for the purpose of reassessment as income has escaped assessment during that relevant year to the tune of Rs.1,00,00,000/-. The cases of all the above three are also liable to be examined together under Section 147 of the Act. So far as the time limit of notice as provided under Section 149 of the Act is concerned, the same is in respect of Section 148 of the Act and not for Section 148A of the Act. The petitioner is free to raise an objection about limitation in a proceeding initiated under Section 148 of the Act. As on today, the authorities have found it a fit case for issuance of notice under Section 148 of the Act in compliance In sub-paragraph (iii), the Apex Court has held ASHISH AGARWAL [ 2022 (5) TMI 240 - SUPREME COURT] that the Assessing Officer shall thereafter pass an order in terms of Section 148A (d) in respect of all assessee; thereafter, after following the procedure as required under Section 148A of the Act may issue a notice u/s 148 (as substituted). It has also been observed that all the defences which may be available to the assessee including those available under Section 149 of the Act may be available to the concerned assessee and revenue under the Finance Act, 2021 shall continue to be available. Therefore, in compliance of the aforesaid order, the Assessing Officer has passed an order under Section 148A of the Act which is not final adjudication but a preliminary order. The final proceedings are liable to be drawn under Section 148 of the Act, in which the petitioner will get the full opportunity to contest the matter. Writ Petition, being premature, is hereby dismissed.

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• 2022 (9) TMI 552
  Deduction u/s 54 - disallowance of claim of deduction holding that the proceeds have been applied to acquiring two separate properties - assessee has pleaded that these were adjoining properties and may be treated as a single unit in terms of various decisions available - HELD THAT:- CIT(A) has completely ignored the facts pleaded on record. It is evident that that assessee, no doubt has purchased two separate residential houses, however, it is also a fact that consistently the assessee who is a senior citizen has pleaded in writing on record that these were adjoining residential houses, hence, constituted a single unit. It is seen that no finding has been given by the Tax Authorities on this claim. It is seen that the legal position on two adjoining flats, if constituting a single residential unit is well settled. Recording my painful dissatisfaction and disappointment in the passing of orders of the authorities, I set aside the order for a factual verification on facts back to the file of the Assessing Officer. The prayer of the ld. Sr.DR is accepted to the extent that matter needs verification at the end of the AO. Accordingly, the impugned order is set aside back to the file of the AO with a direction to pass a speaking order in accordance with law. Needless to say that in case the assessee s prayer on facts is not to be accepted, a reasonable opportunity of being heard is to be granted putting the issue to the notice of the assessee. - Matter restored back.

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• 2022 (9) TMI 551
  Revision u/s 263 by CIT - as per CIT assessment order has been passed by Ld. AO without making inquiries or verification - Lack of inquiry v/s inadequate inquiry - HELD THAT:- An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Ao. It is Assessing Officer s prerogative to make inquiry to the extent he feels proper. Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon ble High Courts in this regard. Delhi High Court in the case of CIT Vs. Sunbeam Auto [ 2009 (9) TMI 633 - DELHI HIGH COURT ] made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. the phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. As in the case of the assessee, the AO during the course of assessment proceedings, made enquiries on the issues as discussed above and after consideration of written submissions filed by the assessee and documents / evidence placed on record, and then framed the assessment under section 143(3) accepting the return of income. This fact can be verified from the notice issued under section 142(1) of the Act by the AO and the reply of the assessee against such notice. Thus it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of matters objected by the Ld. PCIT. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. We find, in the instant set of facts, that the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 - PCIT has not invoked the explanation 2 of section 263 of the Act in show cause notice dated 17 January 2022 about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the re-course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act. - Decided in favour of assessee.

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• 2022 (9) TMI 550
  Exemption under Tonnage Tax Scheme - disallowance of other operating revenue claimed by the assessee as exempt income - Scope of core activity or incidental activity of shipping - AO observed that the assessee company had clubbed the other operating revenue earned with the revenue from Core Dredging Services and claimed exemption as per the provisions of Tonnage Tax Scheme - HELD THAT:- The income received and claimed by the assessee as exempt income, do not fall under the purview of Tonnage Tax either in core activity or incidental activity of shipping as per the provisions of Chapter XII-G and the same is to be added as income from non-core activity of dredging operations. As regards the liquidated damages the source of such income is payment for failure to execute the contract works within the stipulated time and not the shipping activity either core or incidental. Though the liquidated damages may be incidental business income but the same is not the profit from core activities or incidental activities which have been defined in the Act. They are not directly received from the shipping activity but are compensatory in nature collected from the contractors for failure to execute contract. Therefore, liquidated damages cannot be held to be from the core activity of the shipping and does not form part for computation in tonnage tax. No infirmity in the orders passed by the lower authorities and respectfully following the decision laid down by the Hon ble Tribunal in assessee s own case for the previous relevant assessment years [ 2018 (10) TMI 497 - ITAT VISAKHAPATNAM] we uphold the order of the lower authorities and dismiss the appeal of the assessee on this ground. Nature of receipts - receipts on account of sale of scrap, sale of empties, sale of waste oil, exchange difference and machinery scrap sales - AO treated the receipts from the above activities as non core receipts and accordingly brought to tax - HELD THAT:- It is evident that the Tribunal in assessee s own case [ 2018 (10) TMI 497 - ITAT VISAKHAPATNAM] decided the issue against the revenue on the same issue stating that D.R did not controvert or bring any other order to support that the income was from non core activity. Therefore we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.

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• 2022 (9) TMI 549
  Revision u/s 263 by CIT - AO failed to make enquiry with regard to pendency of application before AAR on the question of TDS u/s 40(a)(i) of the Act in respect of payments made to More Ideas, UAE - As argued under the provisions of section 245R(2)(i) it is only the question raised in an application before the AAR that cannot be decided by an income tax authority, when the question is pending for consideration before the AAR - HELD THAT:- Under the provisions of section 153 explanation 1, clause ix of the Act, the period commencing from the date on which the application is made before the AAR and ending with a date on which the AAR pronounces its ruling and such ruling is received by the PCIT or CIT shall not be counted for the purpose of computing limitation for the purpose of passing an Order of Assessment. It is thus clear from a combined reading of the provisions of section 245R(2)(i) and the provisions of section 153 explanation 1 (ix) that the Order of Assessment will not become void as argued by the parties before us. To the extent that it relates to the payments made to More Ideas, UAE, the AO should not have decided the issue at all. For this reason, the entire Order of Assessment cannot be said to be void. Payments made to More Ideas, UAE, AO has already disallowed the payment and added the same to the total income of the assessee and the assessee is in appeal before the CIT(A). In these circumstances, it cannot be said that the Order passed by the AO was prejudicial to the interest of the Revenue. The fact that in the proceedings before the first appellate, the addition will be attacked on the ground that the addition has been made contrary to the provisions of section 245R(2)(i) of the Act and therefore void, cannot be the basis to say that the interest of the Revenue is prejudiced, at this stage. Thus twin conditions have to be satisfied for exercising of powers under section 263 of the Act viz., (i) the Order sought to be revised must be erroneous and (ii) prejudicial to the interest of the Revenue. Since the payments made to More Indeas, UAE has already been added by the AO in the order of Assessment, there is no prejudice to the interest of the Revenue. In the facts and circumstances of the present case, we are of the view that PCIT fell into an error in passing the impugned order. The impugned order is therefore liable to be quashed on this ground and is accordingly quashed. Appeal of the assessee is allowed.

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• 2022 (9) TMI 548
  Excess cane price paid to members/non members as well as sale of sugar at concessional rate - HELD THAT:- Issues are no more res-integra as the tribunal s coordinate bench s recent order in The Malegaon Sahakari Sakhar Karkhana Ltd. [ 2021 (10) TMI 1357 - ITAT PUNE] has restored the same back to the Assessing Officer for his afresh appropriate adjudication. Ordered accordingly. This assessee s former twin substantive ground Nos. 1 2 are allowed for statistical purposes on the very terms. Addition u/s 40(A)(3) - cash payment disallowance made by the assessee to it s employees - HELD THAT:- As case law Anupam Teleservices Ltd. [ 2014 (2) TMI 30 - GUJARAT HIGH COURT] has dealt with the similar question of regular continuing relationship between payer and payee to conclude that such an overwhelming genuine instance of cash payment does not attract Section 40A(3) of the Act. We thus conclude that both the lower authorities have erred in law and on facts in disallowing assessee s impugned salary payments under Section 40A(3) of the Act. The same is directed to be deleted. Addition of Bigar Pavati Kharch expenses - As argued that the assessee could not file even basic supportive documents and expenditure vouchers in support of the impugned claim - HELD THAT:- This assessee is running a sugar factory procuring sugarcane from remote rural areas involving various overhead expenses. That being the case, such cash expenditure cannot be altogether ruled out. We also deem it appropriate to observe that it was indeed imperative for the assessee as well to file at least some supportive documentary evidence. Faced with this situation, we hold that a lump sum disallowance @ 20% of the assessee s impugned claim would be just and proper with a rider that the same will not be treated as a precedent. Ordered accordingly. The assessee partly succeeds in the instant substantive ground. Cattle camps/fodder depot income made in the course of assessment - HELD THAT:- All Revenue s arguments failed to evoke our concurrence. It has come on record that the impugned surplus had come to the assessee from the fodder grants received from the state government without any clear cut indication about the income element embedded therein. We thus quote Chaiunrup Sampatram [ 1953 (10) TMI 2 - SUPREME COURT] that the principles of conservative accountancy indeed permit an assessee to recognise the anticipatory losses at the first sign of reasonable probability but the same principle does not apply regarding anticipated profits which have to be booked at the first sign of reasonable certainty only. Faced with this situation, we conclude that both the lower authorities have erred in law and on facts in making the impugned cattle camps/fodder depot addition in assessee s hands. The same is directed to be deleted.

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• 2022 (9) TMI 547
  Penalty u/s. 271(1)(c) - Addition of sundry creditors - As submitted transactions were made by assessee through brokers - HELD THAT:- As levy of penalty in present circumstances of case required some more evidence to prove that money had been flowed from the assessee to the creditor for such transactions and such money credited by the assessee in his books of accounts belongs to him. However, in this case those facts are absent and mere surrender of the amount by the assessee did not constitute that assessee wanted to evade tax by concealment of his income. It cannot be said that assessee has concealed the particular income with the meaning of section 271(1)(c) of the Act or there is not deep concealment for attaining as specified u/s. 271(1)(c) - assessment proceedings and penalty proceedings are distinct and findings given in the assessment proceedings though it constitutes good evidence cannot be conclusive in the penalty proceedings. In the penalty proceedings, the entire evidence in case has to undergo a reappraisal in order to establish the guilt of the assessee to prove that there was mensrea in the mind of assessee and to sustained penalty u/s. 271(1)(c) of the Act, the ingredients must be present as we discussed above. We after considering the facts and circumstances of the case we opined that it is not a fit case to levy penalty. Accordingly impugned order passed by the authority below is not in accordance with law and accordingly cancelled. Appeal filed by the assessee is allowed.

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• 2022 (9) TMI 546
  Unexplained cash - cash found during the course of search proceeding - AO was not satisfied with the contention of the assessee on the reasoning that the assessee has taken different stand that during the search proceedings viz a viz assessment proceedings - HELD THAT:- On perusal of the order of CIT-A, we note that the order passed by him is well speaking and reason. Indeed, the assessee in the statement of facts filed along the memo of appeal has made various submissions but the same were not supported by the documentary evidence. Therefore, in the absence of necessary information, we find difficult get convinced with the submission of the assessee filed along with the statement of facts. As such, there was no information/materials brought on record contrary to the finding of the learned CIT(A). Accordingly, we do not find any reason to interfere in the order of the learned CIT(A). Hence, the ground of appeal of the assessee is hereby dismissed.

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• Customs

• 2022 (9) TMI 545
  Recovery of Differential duty - export of iron ore fines which are subject to export duty at Rs.300 per MT - Fe content of the iron ore fines less than 62% - mis-declaration to invoke the proviso to section 28(1) of Customs Act - confiscation - redemption fine - penalty - HELD THAT:- It is not in dispute that the appellant was exporting Iron ore fines which are chargeable to export duty at Rs.300 per MT if the Fe content is more than 62%. The first question which must be answered is whether this testing has to be done on dry basis or on wet basis. There will be a difference between the two. If 100 gm of sample (wet weight) has 60 gm of Fe and 10 gm of moisture and 30 gm of other substances, the Fe content will be 60% of the total weight on wet weight. If on the other hand, only dry weight is considered, the Fe content will be 60 gm of Fe in 90 gm of dry weight or 66.6%. Since the entire demand is based on test report on dry MT basis, which is contrary to the judgment of the Supreme Court in the case of Gangadhar Narsingdas Aggarwal [ 1995 (8) TMI 73 - SUPREME COURT] and also contrary to the CBEC Circular No.04/2012 dated 17.02.2012, we find the entire basis of demand is not sustainable. Levy of redemption fine - HELD THAT:- In view of the provisions, if the person does not opt for redemption within a period of 150 days, such option becomes void as per sub-section 3 of section 125 unless an appeal is pending against such order. In other words, the confiscation becomes absolute. In this case, where the goods have already left the country, the person has no reason to opt to pay redemption fine. Redemption cannot be forced on the person. There is another reason why only goods which are attempted to be exported can be confiscated under section 113 and not goods which are already exported. As per Section 126, on confiscation, unless the goods are redeemed on payment of redemption fine, the property vests with the Central Government and it is the responsibility of the officer, adjudging the confiscation, to take and hold possession of the confiscated goods. In a case where the goods have already been exported, it is impossible for the adjudicating authority to take possession of the confiscated goods. In other words, the officer cannot discharge his responsibility under section 126(2) of the Act. Even for this reason, the confiscation under section 113 and the consequential penalty under section 114 cannot be sustained in this case. Levy of penalty u/s 114A - HELD THAT:- Section 114A provides for imposing a penalty for short levy or non levy of duty by reason of collusion or any wilful misstatement or suppression of facts by the person who is liable to pay the duty or interest. In this case, we do not find any collusion or wilful misstatement or suppression of facts or even any duty liability because the entire demand has been made only by applying the test reports which are on dry MT basis instead of test reports on wet MT basis in violation of the law. The impugned order is set aside - Appeal allowed.

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• Securities / SEBI

• 2022 (9) TMI 544
  Offence under SEBI - reasonable grounds to believe - Whether the grounds to believe which is a condition precedent of initiating an investigation under section 11C did exist in the facts and circumstance of the present case? - whether the two expressions i.e. has reasonable ground to believe as appearing in Section 11C of the SEBI Act, 1992 and has reason to believe as appearing in Section 34 (1) (a) of the Income Tax Act, 1922 have the same meaning? - HELD THAT:- Reasonable ground is understood to mean the information that establishes sufficient articulable fact that gives a reasonable basis to believe. In other words, to be a reasonable ground, it would have to be based on certain information that establishes sufficient articulable fact to make it a basis to believe whereas existence of cause, explanation or justification would be sufficient in order to constitute a reason. Accordingly, we have to understand that to have a reason to believe, the basis for the belief may be any cause, explanation or justification whereas for having a reasonable ground to believe the basis for the belief would have to be the information, in other words, comparable to knowledge. Knowledge is defined in the Blacks Law Dictionary to be an awareness or understanding of a fact or circumstance; a state of mind in which the person has no substantial doubt about the existence of a fact. Belief is regarding the existence of something which is likely or relatively certain whereas knowledge is the absence of any substantial doubt in the mind of the person about its existence. In other words, in order to be knowledge, the element of unlikely or uncertainty of the existence of the fact is absent and there would remain no substantial doubt about its existence. Supreme Court in its pronouncement in Collector of Customs, New Delhi v. Ahmadalieva Nodira [ 2004 (3) TMI 70 - SUPREME COURT] had held that the expression reasonable grounds mean something more than prima facie grounds and it contemplates substantial probable causes for believing. Accordingly, we will have to understand that the test of certainty to arrive at a reasonable ground to believe , of there being material available on record, would comparably be more than the test of certainty that would be required for arriving at has reasons to believe . Any enquiry that may be required to be made under the SEBI Act, 1992, would be of a broader compass than that of an enquiry to be made under the Income Tax Act either of 1922 or 1961. Correspondingly, the requirement of having a reasonable ground to believe for initiating an enquiry under Section 11C of the SEBI Act, 1992 would also have to be on the basis of a broader spectrum as regards the activities that the SEBI is required to regulate, promote or develop. As the enquiry may be in respect of a broader spectrum of the circumstances and activities, the element of higher certainty required for having a reasonable ground to believe under Section 11C would also have to be based on a broader spectrum of activities that are required to be regulated or promoted. If we proceed on the aforesaid premises, the materials produced by the respondents in the SEBI by referring to the interim order dated 20.08.2015 to form a view that a detailed investigation of the entire scheme as regards the reversal trades and illiquid stocks options where the involvement of more number of persons in such reversal trades and illiquid stocks options cannot be ruled out, we are of the view that it cannot be said that there was no reasonable ground to believe that an enquiry is required to be conducted under Section 11C of the SEBI Act, 1992. Whether the opinion to be formed under Rule 3 of the PR-1995 is an individual opinion in respect of the person specific against whom the notices under Rule 4(1) are to be issued and if yes, whether any such individual opinion had been formed? - We have perused the records produced by the respondent SEBI in respect of the opinion required to be formed under Rule 3 of the PR-1995. The records produced contain materials which may be a basis to form an opinion, but the records do not indicate the formation of any such opinion by the respondent SEBI. Whether Notices under Rule 4(1) of the PR-1995 can be assailed in a proceedins under Article 226 of Constitution of India?- We are of the view that the question on the procedural aberration of Rule 4(1) raised in these writ petitions can also be adjudicated in a proceeding under Article 226 of the Constitution of India rather than requiring the noticee to give a wholesome and composite reply to all such allegations that may be made in the notice and thereafter take a decision as to whether the procedural requirements were duly followed. From such point of view, we reject the objections raised by the respondents SEBI as regards the maintainability of the writ petition on the ground that the issues raised could also have been answered by the writ petitioner noticees in the proceeding before the adjudicating officer itself. Whether notices impugned have been issued by authorities other than a person in the rank of a Division Chief and nor such Division Chiefs have been appointed by the Board to be the adjudicating officers? - A reading of the materials produced and the statements made by the petitioners and the authorities in the SEBI, in respect of the writ petitioner Ankita Didwania, it can be noticed that the notices under Rule 4(1) of the PR- 1995 had been issued by the Division Chief. Instead of venturing into examining the factual aspect as to whether in respect of the other writ petitions, the authorities issuing notices under Rule 4(1) of the PR-1995 are Division Chief or not, in the light of the analysis made hereinabove, the Executive Director of the SEBI is required to look into the individual notices and arrive at his own satisfaction as to whether the respective authorities who have issued the notices do satisfy the requirement of being the Division Chiefs. If the Executive Director upon examining the records arrive at any conclusion that the authorities who have issued the notice would be not a Division Chief of the Division which had issued the notices, appropriate steps be taken to ensure that only the person who would be the Division Chief of the Division issuing the notices be appointed as the adjudicating officer. In such event, the notices that may have been issued, if any, by an authority otherwise than that of a Division Chief be recalled and necessary corrective measures be taken. Appointments of an Officer not below rank of a Division Chief to be an adjudicating officer for holding an enquiry in the prescribed manner - We are in agreement with Dr. Ashok Saraf, learned senior counsel of the petitioners to that extent that the authorities in the SEBI while undertaking the process of appointing the adjudicating officers had not meticulously followed the procedure as suggested by the petitioners, but going by the steps adopted as per the note-sheet as well as the order dated 06.07.2021, we are of the view that there is a substantial compliance of the requirement of the Board through its delegated authority in appointing the Division Chiefs as adjudicating officers in view of the conclusion which has been arrived hereinbefore. In order to avoid such issues, it is the suggestion by Dr. Ashok Saraf, the learned senior counsel for the writ petitioners, that the ED (law)/ED-EFD may be more careful in exercising his powers. Individual opinions formed against the person specific with reference to RULE 3 OF THE PR-1995 - Board is of the opinion that there are grounds for adjudging under any of the provisions of Chapter VIA of the SEBI Act of 1992, it may appoint any of its officers not below the rank of Division Chiefs to be an adjudicating officer - The opinion to be formed under Rule 3 of the PR-1995 against the person specific is in the nature of a disclosure of an investigation report. Therefore, from the point of view of fulfilling the larger institutional purpose of fair trial and transparency, as enunciated by the Supreme Court in T Takano [ 2022 (2) TMI 907 - SUPREME COURT] , we are of the view that there would be a requirement for the respondents in the SEBI to provide the noticees the opinion formed against the individual noticee under Rule 3 of PR-1995 along with any such notice that may be issued under Rule 4(1) of the PR-1995. Notice u/r 4(1) of procedural rules of 1995 can be composite notice requiring the notice to respond as to whether an enquiry should be held u/r 4(1) - why the penalties prescribed under section 15HA should not be inflicted? - As notice under Rule 4(1) of the PR-1995 would be a notice only for the purpose as to whether an enquiry should be held and such notice cannot embark into an actual adjudication being made which ultimately may lead to any of the penalties under sections 15A to 15HB. Only upon forming such opinion that an enquiry is required to be held, the subsequent process of fixing a date of appearance for explaining the person concerned as to the alleged offence that had been committed by indicating the provisions of the Acts, Rules or Regulations that were contravened, can be carried forward. When we examine the impugned notice in respect of the writ petitioner noticee Ankita Didwania it is noticed that the noticee is called upon to show cause not only as to why an enquiry should not be held against her under Rule 4, but also why penalty should not be imposed under the provisions of Section 15HA of the SEBI Act, 1992 in terms of Rule 5 of the PR-1995. In other words, the notice dated 19.09.2021 in respect of petitioner noticee Ankita Didwania is a composite notice comprising of a notice as to why an enquiry should not be held and also why the adjudication proceeding be not carried forward and brought to its end by referring to the penalty. Accordingly, we are to arrive at a conclusion that the impugned notice dated 17.09.2021 in respect of petitioner noticee Ankita Didwania is a notice defective in form, although we may not have had arrived at any conclusion nor expressed any view on the substance of the notice dated 17.09.2021. Had the appropriate procedure of separating the two stages would have been followed by issuing the notice under Rule 4(1) of PR-1995 by confining it on the issue as to whether an enquiry should be held or not, the noticees would have had the opportunity not to give any reply with regard to the further issue on the penalty which would be a part of the subsequent stage of the proceeding. Therefore, it cannot be wholly agreed upon that no prejudice of any kind was caused to the petitioner noticees because of the composite notice of requiring to show cause both against as to why an enquiry should not be held and also on the adjudication proceedings which may result in the penalty to be imposed. By following the propositions laid down in Natwar Singh [ 2010 (10) TMI 156 - SUPREME COURT] and T. Takano [ 2022 (2) TMI 907 - SUPREME COURT] as well as taking note of the procedural requirements of Rule 4 of the PR-1995, we are of the view that the impugned notice dated 17.09.2021 in respect of the petitioner noticee Ankita Didwania in WP and other similar notices in respect of the petitioner noticees of the other writ petitions would not be sustainable in the present form and accordingly, they are all set aside. As we have interfered with the notices issued by the adjudicating officers of the respondent SEBI on the technical ground of it not conforming to the requirements of the Rule 4 of PR-1995, we further provide that the delegated authority of the Board who is required to form the opinion before appointing the adjudicating officer to look into the records on the opinion being formed against the persons specific against whom the adjudication process is sought to be initiated and ensure that the required opinion referred under Rule 3 of PR-1995 is duly formed. The opinion to be formed under Rule 3 of the PR-1995, which would have to be person specific to the individual noticees, be also served on the noticees along with the de-novo notice that may be issued under Rule 4(1) of the PR-1995.

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• Insolvency & Bankruptcy

• 2022 (9) TMI 543
  Seeking recognition of R-2 to R-5 as Financial Creditors - the decision of the Resolution Professional of classifying the indirect lenders as the Financial Creditor of the Corporate Debtor is correct or not - considering the Respondents based on Deed of Hypothecation (DOH) as Financial Creditor, is valid or not - HELD THAT:- What has come under appeal is that the Adjudicating Authority has considered the R- 2 to R- 5 as Financial Creditors of the Corporate Debtor. The basis of consideration is the Deed of Hypothecation only for considering the R-2 to R-5 as Financial Creditors of the Corporate Debtor. The Appellant No. 1 has critically sought that R-2 to R-5 should be derecognized/deleted as Financial Creditors of the Corporate Debtor - It is an admitted position that the Corporate Debtor hypothecated its asset in favor of R-2 to R- 5 under the Deed of Hypothecation to secure the loans disbursed by them to the Reliance Communication Entities. It is also an admitted position that R-2 to R-5 have not disbursed money to Corporate Debtor. Section 5(8) of the Code is exhaustive and mere Deed of Hypothecation does not fall within its ambit. RP has considered DOH as a Deed of Guarantee which is a misconception of the obligations - The Security Interest created under the DOH shall be continuing security and shall remain enforce until all the obligations have been discharged by the borrowers under the respective facility documents. Hence, it can be construed that the clauses of DOH cannot be construed to be a Covenant of Guarantee or Contract of Guarantee . Hypothecation Deed is a legal document and it establishes contractual relations between the parties where the lender agrees to grant a loan to the borrower in return for movable assets provided as security. Hypothecation of a moveable assets does not involve giving up ownership rights like title or possession. The Hypothecation Deed ensures that the parties are aware of their rights and liabilities and have a document which can be enforced in a court of law. It also grants the lender a right to cease the asset when the borrower fails to meet the terms of the Hypothecation Deed. The Deed of Hypothecation is merely creation of security interest and a mere security of interest created by hypothecation or mortgage does not constitute a financial debt. From our commercial understanding Deed of Hypothecation is not a Deed of Guarantee . The Deed of Hypothecation discharges the liabilities of other borrowers upon their default and is limited to the realization value of those hypothecated assets and hence it cannot be construed as a contract of guarantee - Deed of Hypothecation is a regular boilerplate clause in any standard draft of a Deed of Hypothecation . The instrument which covers hypothecation or guarantee is specifically specified in the initial part or object of the agreement or preamble and not somewhere some wordings are mentioned in the agreement. The Deed of Hypothecation cannot be a basis to declare the parties as financial creditors as these Respondents are not even party to the DOH i.e. Deed of Hypothecation - matter remanded back to the Adjudicating Authority for taking all consequential actions resulting from de-recognizing R-2 to R-5 as Financial Creditors . Petition disposed off.

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• 2022 (9) TMI 542
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - time limitation - whether the demand notice in Form 3 dated 15.09.2020 was properly served? - HELD THAT:- The demand notice was sent through e-mail (Annexure G) on 17.09.2020 at the registered e-mail address of the corporate debtor as available on the master data of the MCA. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The petitioner/operational creditor has filed an affidavit under Section 9(3)(b) of the Code, wherein it has been deposed that the no notice was given by the corporate debtor relating to a dispute of the unpaid operational debt at any point in time. Thus, it can be inferred that there is no preexisting dispute between the parties. Whether this application was filed within limitation? - HELD THAT:- A perusal of the case file shows that the application was filed vide Diary No.00259 on 18.02.2021 (refiled on 16.08.2021), whereas the date of default is 23.03.2020, therefore, this Adjudicating Authority finds that this application has been filed within limitation. There is a total unpaid operational debt (in default) of Rs.2,20,28,662/-. The operational creditor has provided the details of the debt due and has also annexed with the petition copy of ledger account statement, statement of accounts along with invoices and credit notes. Accordingly, the petitioner/operational creditor has established the debt and the default, which is more than Rupees one lakh i.e. the threshold limit (pre-revised) - It is noted that the corporate debtor has failed to make payment of the amount due as mentioned in the statutory notice till date. Thus, the conditions under Section 9 of the Code stand satisfied. It is evident from the above-mentioned facts that the liability of the corporate debtor is undisputed. Accordingly, the petitioner proved the debt and the default which is above threshold limit. There is no rebuttal to the claim filed by the petitioner as respondent/corporate debtor chose not to appear. In the present petition, all the aforesaid requirements have been satisfied. It is seen that the petition preferred by the petitioner is complete in all respects. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, the petition is admitted. Petition admitted - moratorium declared.

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• 2022 (9) TMI 541
  Liquidation of Corporate Debtor - Section 33(1) (a) and 34(1) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is observed from the minutes of the 6th CoC meeting dated 12.03.2021 that the COC has, with 100% majority, decided to liquidate the Corporate Debtor and relying on the settled principle of law regarding the Commercial Wisdom of the COC. That the Corporate Debtor to be liquidated in the manner as laid down in the Chapter by issuing Public Notice stating that the Corporate Debtor is in liquidation with a direction to the Liquidator to send this order to the ROC under which this Company has been registered - this liquidation order shall be deemed to be a notice of discharge to the officers, employees and workmen of the Corporate Debtor except to the extent of the business of the Corporate Debtor continued during the liquidation process by the Liquidator - application disposed off. Seeking change of Resolution Professional as Liquidator - Section 60(5) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- This Bench is therefore of the considered view that the provisions of Section 34(4) are mandatory in nature and if not complied with, another Liquidator cannot be appointed. Hence, the Resolution Professional in the matter has to be appointed as Liquidator in liquidation process as the COC in its meeting has given no reasons in writing for the replacement of a resolution professional as required by Section 34(4)(b) - Application disposed off.

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• 2022 (9) TMI 540
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - acceptance of OTS proposal - time limitation - HELD THAT:- The corporate Debtor has admitted the liability and also the default committed by them in the affidavit in reply as well as through various letters addressed to the Bank requesting them for considering their OTS proposal. The Corporate Debtor did not raise any substantial legal pleas in opposing the Company Petition. Similarly, this Bench has no power to issue any directions to the Financial Creditor to accept the OTS proposal submitted by the Corporate Debtor. Since, the Corporate Debtor is admitting the liability and the default, this Bench has no option except to admit the Petition. The Financial Creditor has also suggested the name of the proposed Interim Resolution Professional in part-3 of the Petition along with his consent letter in Form-2. The Company Petition is also within limitation and thus satisfies all the necessary requirement for admission. Petition admitted - moratorium declared.

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• 2022 (9) TMI 539
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not, prior to sending of demand notice - HELD THAT:- The amount claimed by the Operational Creditor being Rs.9,34,114/- is on account of nine invoices not including the above-mentioned disputed invoices. In the instant petition, the Operational Creditor has made no claim with respect to the said disputed invoices. As such, the defence of the Corporate Debtor regarding pre-existing disputes does not extend to the other nine invoices i.e subject matter of the instant petition and therefore is untenable - it is clear that while the Corporate Debtor has right to claim damages against Invoices WB/19-20/0036 and WB/19-20/009, the same cannot be used to set off its existing debt to the Operational Creditor under the other nine invoices. The debt due under the said nine invoices have not been disputed by the Corporate Debtor, thereby acquiescing the same. In the instant petition, the Demand Notice under section 8 has been accompanied by a postal receipt and acknowledgment. The Corporate Debtor has received the Demand Notice. Further, the Corporate Debtor has replied to the said demand notice. The purpose of the said demand notice has been fulfilled in this case and therefore, the same stands admitted - the present petition made by the Operational Creditor is complete in all respect as required by law. The petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4(1) of the Code at the relevant time, i.e., Rupees one lakh. Petition admitted - moratorium declared.

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• 2022 (9) TMI 538
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing disputes or not - HELD THAT:- The Corporate Debtor has produced on records letters dated 2nd March 2017, 2nd June 2017 and 20.06.2018 which clearly show that the Corporate Debtor had raised the said issues regarding the quality of goods supplied much prior to the issuance of the demand notice dated 19th December 2018 by the Operational Creditors. The Corporate Debtor has also notified the Operational Creditors of the pre-existing disputes vis a vis the abovementioned letters in his reply dated 1st January 2019 to the said Demand. In the reply to the second demand notice dated 8th March 2019, the Corporate Debtor has referred to its earlier reply being reply dated 1st January 2019, which mentions such disputes. In the instant matter, not only has the Corporate Debtor established that there were pre-existing disputes and that the Operational Creditors had notice of such disputes, but also, the chain of emails between the parties concerned as produced between pages 551 to 563 of the petition indicates that there was no consensus between the parties regarding the quantum of the debt owed to the Operational Creditors and the losses suffered by the Corporate Debtor on account of poor quality of supplies and multiple attempts were made to resolve the said issues. The correspondence between the parties along with the three letters issued by the Corporate Debtor further indicate that the said disputes were not mere feeble legal arguments or assertions of fact unsupported by evidence. The Operational Creditors, in order to recover its dues from the Corporate Debtor, has already filed a civil suit and thereafter execution proceedings for the decree awarded therein - this Adjudicating Authority is satisfied that the instant petition is liable to be rejected. Petition dismissed.

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• 2022 (9) TMI 537
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - service of demand notice - whether the demand notice in Form 3 dated 23.04.2019 was properly served? - HELD THAT:- The petitioner has placed a copy of the registered postal receipts, proof of email which was delivered to the corporate debtor. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- It is to be noted that none appeared on behalf of the corporate debtor despite repeated service and has been set ex parte vide order dated 16.03.2022. Moreover, the petitioner has appended affidavit u/s 9(3)(b) stating that there is no reply to the demand notice, the corporate debtor has not cleared the outstanding dues and the corporate debtor has not raised any dispute regarding the amount due. Thus, there is no pre-existing dispute between the parties. Whether this application is filed within limitation? - HELD THAT:- This application was filed on 21.08.2019 vide Diary No.4242. Whereas the date of default is 10.11.2017, therefore, this Adjudicating Authority finds that this application has been filed within limitation. It is noted that the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. Thus, the conditions under Section 9 of the Code stand satisfied. It is evident from the above-mentioned facts that the liability of the corporate debtor is undisputed. Accordingly, the petitioner proved the debt and the default which is above threshold limit. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the petitioner. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, the petition is liable to be admitted - petition admitted - moratorium declared.

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• 2022 (9) TMI 536
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor herein is the whole-time Director and Shareholder of the Corporate Debtor - Financial Creditor infused interest free unsecured loan amount in the account of the Corporate Debtor from period March, 2015 to February, 2021 - Financial Debt or not - HELD THAT:- The Hon ble NCLT, Mumbai Bench in Anchor Leasing Pvt. Ltd. v. Euro Ceramics Ltd. [ 2019 (2) TMI 1762 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI] wherein it was observed and held that IBC nowhere prescribed the compulsory existence of an express agreement to prove the loan and its disbursement. The statement of accounts produced on record were held enough to prove the disbursement of loan amount. - the unsecured loan given by the Director of the Company is treated as a Financial Debt under Section 5 (8) of the Insolvency and Bankruptcy Code, 2016. The transactions of providing the unsecured loan amount claimed by the Applicant is shown in the HDFC Bank account of the Applicant and entries of the unsecured loan amount infused by the Applicant in the Company is also reflected in the audited balance sheet of the Corporate Debtor as on 31.03.2021. Therefore, the Applicant has placed sufficient documents on record to show that the money has been infused in the Corporate Debtor. The registry is directed to issue notice to SMID Infrastructure Private Limited, being the Corporate Debtor. Also, the Corporate Debtor is directed to file reply within two weeks from the date of receipt of the notice.

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• Service Tax

• 2022 (9) TMI 535
  Exemption from Service Tax - work contract services - construction of boundary wall, godown, shops, toilets, roads, sanitation, water reservoir, drinking water supply, sewage treatment plant etc - whether respondent contractor is covered under Clauses-12 and 13 of the Mega Exemption Notification no.12/2012-ST dated 20.06.2012? - HELD THAT:- The Krishi Utpadan Mandi Samiti, a body corporate created under Section 12 of U.P Krishi Utpadan Mandi Adhiniyam 1964 is covered in the definition of Government Authority under Clause 2(s) of the Mega Exemption Notification - Clause-12 of the Mega Exemption Notification clearly provides that any service provided to the Government, a local authority or a government authority relating to construction work which is not for commercial or business purposes is exempted and such services be not taxable for the service tax. The construction of markets in the Mandi area can not be termed as business activity. The renting/leasing of the shops, market sheds etc for consideration is another method of regulation of the Mandi area. By leasing/renting of market sheds, the activities of Samiti cannot be categorized as commercial/business activity. In M/S BHARAT BHUSHAN GUPTA AND COMPANY VERSUS STATE OF HARYANA AND OTHERS [ 2016 (8) TMI 722 - PUNJAB AND HARYANA HIGH COURT ] wherein contract was awarded for construction of flats for BPL category to the Board created under Haryana Housing Board Act, relying upon SHAPOORJI PALOONJI COMPANY PVT. LTD. VERSUS COMMISSIONER, CUSTOMS CENTRAL EXCISE AND SERVICE TAX AND OTHERS [ 2016 (3) TMI 832 - PATNA HIGH COURT ], it was held that the Board being a statutory Government Body, it shall be entitled to the benefit of exemption, as was provided to Shapoorji Paloonji and Company Pvt Ltd for construction for Indian Institute of Technology. In light of the functions and duties of the Krishi Utpadan Mandi Samiti, it is evident that the Work Contract Services provided by the respondent contractor to Krishi Utpadan Mandi Samiti is exempted from levy of Service tax in view of the exemption notification no.12/2012-ST. - the arguments of the learned counsel for the appellant revenue about the activity of letting/renting of Krishi Utpadan Samiti being commercial has no basis. Appeal dismissed.

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• Central Excise

• 2022 (9) TMI 534
  CENVAT Credit - duty paying documents - reliability of the statements - statements made before the officers of Central Excise which were relied upon in the SCN were not put through the process under section 9D of the Central Excise Act,1944 - Revenue s case is that the trader Maruti Metals had issued invoices on the strength of which the respondent had availed the CENVAT credit but Maruti Metals could not have supplied the goods because it had recorded that it had received from SIPL who, in turn, had not supplied any goods to Maruti Metals. HELD THAT:- As per Section 9D, any statement made before any central excise officer is relevant only if it has gone through the process prescribed therein. In this appeal, revenue has asserted that the cross-examination of the persons who made the statements were not allowed by the authority due to some reasons. However, cross-examination will be necessary only if the statements made before the Central Excise Officers are, in the first place, relevant and they will be relevant only if the procedure prescribed under section 9D is followed. Since this procedure has not been followed, the statements are not relevant to prove anything in this case and consequently are also not admissible. Cross-examination, therefore, becomes unnecessary because the statements are not relevant or admissible in the first place. The Committee of Commissioners who passed the Review order in this case seems to be under a mistaken notion that the Revenue has the power to decide whether the Tribunal s order must be followed by the Commissioner (Appeals) or not. It is not disputed that Maruti Metals had issued the invoices and the respondents had availed the CENVAT credit on them. It is not in dispute that Maruti Metals is a dealer registered to issue such invoices. It has also been recorded in the impugned order that the appellants had purchased the goods after paying duty thereafter availed the CENVAT credit on such invoices. Even if Maruti Metals had committed some fraud in CENVAT credit which it had taken, that cannot be held against the respondent. The respondent assessee is responsible for receiving goods and accounting for them - There is nothing in the CCR which requires any assessee to conduct such an investigation through its entire supply chain. The assessee is not an inspector and has no powers to examine the records of all the operators in its supply chain. It is for the officers who registered various entities and who receive regular returns, who audit their records and who have power to summon, seek information, search, seize etc., to ensure that no fraud is committed at their end. On a mistaken notion that all statements recorded by a central excise officer are admissible as evidence even if the statutory requirement under section 9D of the Excise Act has not been followed and that cross-examination can be denied by the officers even when requested for by the assessee - On a mistaken notion that the assessee has the responsibility to investigate complete chain of supply of the goods which it had purchased and to ensure that every operator in the supply chain has been following all the requisite procedures and has not committed any fraud - Without any evidence that Maruti Metals has supplied only invoices to the respondent without supplying the goods. Appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2022 (9) TMI 533
  Condonation of delay of 163 days, 207 days 197 days in filing appeal - availability of statutory appellate remedy - time limitation - HELD THAT:- Having perused the reasons indicated in the application for condonation of delay it emerges that the order of the learned Tribunal is dated 23.04.2019. The revision itself has been filed after a delay of 163 days. The reasons have been indicated in paragraphs 3 to 8 of the said application by indicating that initially a proposal had been sent for filing of a revision petition and thereafter the documents were sent. Later, the permission was sought for filing of revision which was received from the law department vide sanction letter dated 15.07.2019 and a request subsequently was made in July, 2019 to the office of the learned Chief Standing counsel, High Court, Lucknow for filing of a revision. The file was allotted for drafting after a period of almost one month and it took the learned Standing counsel a period of almost four and half months to file the revision and hence the delayed filing of revision. A perusal of paragraphs 3 to 8 of the application of condonation of delay would indicate that a very cavalier and casual attitude has been shown by the revisionist in filing the instant revision inasmuch as file and papers/permissions have been shunted from one desk to the other. Even though the file has reached the ultimate destination for drafting of the revision i.e to the concerned learned counsel for drafting of the revision in August, 2019 yet it has taken more than four months for the revision to be drafted despite limitation period of three months being prescribed under the statute for filing of a revision. The application for condonation of delay in all the aforesaid revisions having been rejected, the revisions are dismissed.

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• 2022 (9) TMI 532
  Violation of the principles of natural justice - exparte reassessment order - illegal availment of Input Tax Credit - Section 29(7) of the U.P. Value Added Tax Act 2008 - HELD THAT:- A perusal of the reassessment order dated 30.03.2022 itself indicates that the respondent No.2 had proceeded to pass the reassessment order after getting sanction on 08.03.2022 from the respondent No.3, in a hurry that the case would become time barred after 31.03.2022. The reason for denial of time of 7 days sought by the petitioner vide adjournment application dated 25.03.2022 is recorded in the order impugned itself wherein it is stated that in case any adjournment was granted to the petitioner, the proceedings would become time barred and hence there was no option but to pass an exparte order - It is evident from the record that the respondent No.2 had concluded the entire matter within the month of March 2022 without granting adequate time to the petitioner to submit its reply to the reassessment notice dated 10.03.2022. Even otherwise, the order which has been passed exparte does not disclose the reason for the rejection of the objections of the petitioner that it is entitled to claim ITC for the work done by Azko Nobel as a job worker falling within the definition of manufacturer under Section 2(u) of the VAT Act. The reassessment order is simply a reiteration of the statement made in the notice dated 02.03.2022 seeking explanation of the petitioner and the sanction order dated 08.03.2022. It is evident from the record that the petitioner has given a categorical reply to the notice dated 02.03.2022 wherein various objections have been raised with regard to the claim of ITC made by the petitioner and the jurisdiction of the department to initiate reassessment proceedings. None of the objections have been considered by the respondent No.2 in the order impugned. Without entering into the merits of the claim, noticing that adequate opportunity of hearing has not been provided to the petitioner and the exparte order dated 30.03.2022 does not reflect the mind of the adjudicating authority, the reassessment order dated 30.03.2022 is being set aside being violative of the principle of natural justice, being a non-speaking order having been passed without considering the objections taken by the petitioner in its reply dated 08.03.2022 before the respondent No.2 - matter is relegated to the respondent No.2 namely Joint Commissioner, Corporate, Commercial Tax Department, Kanpur Zone 2, Kanpur from the stage of the reassessment notice dated 10.03.2022 to give opportunity to the petitioner to submit a reply. Petition allowed by way of remand.

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• 2022 (9) TMI 531
  Maintainability of petition - petitioner had remedy of filing an application before the Tribunal seeking reference of question(s) of law - HELD THAT:- The preliminary objection raised by the learned Advocate General, has to be sustained and the writ petition deserves to be dismissed on the ground of availability of an effective alternative remedy against the orders impugned in the writ petition. However, there are merit in the argument raised by Mr. Sameer Qayoom, learned counsel representing the petitioner on the issue that the period spent by the petitioner before this court be excluded for the purpose of calculation of limitation for filing the appropriate application before the Tribunal. Hence, it is directed that, in case the petitioner files the application(s) before the Tribunal seeking reference of question(s) of law arising out of the order passed by the Tribunal within 3 weeks from today, the period spent by the petitioner before this court in the present proceedings, shall be excluded, while calculating the period of limitation for the same. Petition disposed off.

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• Indian Laws

• 2022 (9) TMI 530
  Levy of Occupation charges - effect of the order passed by this Court, in case of non-payment of the charges - HELD THAT:- When an order has been passed by this Court, it has to be given effect in letter and spirit. An order passed by this Court cannot be permitted to be treated as a paper order. The spirit behind the order dated 23.08.2016 passed by this Court is clear that in the event the respondent fails to clear the arrears, he will not be permitted to defend her case and the trial will proceed without her defence. The learned trial Judge has permitted indirectly to do what has been prohibited directly by this Court vide order dated 23.08.2016 - the orders passed by the learned Civil Judge (Senior Division) dated 14.01.2022 and 08.04.2022 is modified and it is clarified that the respondent-defendant would be permitted only to cross-examine the plaintiff with regard to the documents produced by the plaintiff. The contempt petition is disposed off.

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